EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: May 2, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Tomohito Oku, Finance Director
Greg Henry, Senior Management Analyst
SUBJECT: Contract with Urban Futures, Inc to provide a 10-Year Financial Forecast Model Recommendation
Adopt a resolution authorizing the City Manager to negotiate and execute an agreement with Urban Futures, Inc (UFI) to provide a 10-Year Financial Forecast Model in an amount not to exceed Thirty-Five Thousand One Hundred Dollars ($35,100) and a term through December 31, 2023.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Ensure Our Financial and Organizational Health
Background
The City Council has had an ongoing priority for the City to develop a 10-Year Financial Forecast model. Specifically, the City desires a forecast model with a simple and clear income statement format. The forecast model should be Microsoft Excel-based, focusing on a ten-year projection of the General Fund’s revenues, expenses, cash flows and fund balance.
A municipal 10-year financial forecast is an essential tool that helps local governments plan and manage their finances effectively. The primary purpose of this forecast is to provide a long-term view of the City's financial health and stability. It allows the City to project expected revenue and expenses over a ten-year period and identify any potential financial challenges or opportunities that may arise. This will help the City Council make informed decisions on how to allocate resources and prioritize investments to meet the needs of the community.
One of the key benefits of a 10-year financial forecast is that it will enable the City Council to plan for future expenditures and investments with greater accuracy. By projecting financial resources over a longer period, the Council can make informed decisions about capital investments, such as infrastructure improvements and equipment purchases, without compromising their fiscal health. Additionally, the forecast helps identify areas where the City can review costs and identify areas ripe for increased efficiency, ensuring that they are making the most of available resources.
Another essential purpose of a municipal 10-year financial forecast is to provide transparency and accountability to the community. By publishing long-term financial projections, the City can demonstrate our commitment to responsible fiscal management and communicate its financial priorities to its constituents. This helps build trust and confidence among the community and ensures that the City remains accountable to its residents.
Overall, a 10-year financial forecast is a critical tool that helps local governments plan for the future, manage finances effectively, and maintain transparency and accountability with their communities.
On March 1, 2023, the City initiated a competitive Request for Proposals (RFP) to solicit bids/proposals for such a model. The original closing date was March 24, 2023. Following the initial end of the proposal period, the City had received only one bid which was rejected due to the bid not to exceed.
The bid period was then reopened with a new deadline of April 7, 2023 and the original bidder was offered the opportunity to rebid at a lower cost. In the end, only UFI provided a proposal and bid in the amended period.
Analysis
While UFI was the sole bidder, their proposal meets all of the City needs at a cost that staff finds reasonable. The forecast model which will be provided by UFI will include the following the features:
• Standardized Revenue & Expense Categories, Customized for the City; • Simplified integration of the City’s data;
• Tailored Forecasting Algorithms;
• Baseline Forecast with Fund Balance Allocation;
• Scenario Forecasts, including a building in recession module; • A Control Panel to allow ease in use for building specific scenarios; and • Dashboard which will summarize the projections with easy to interpret graphs.
UFI agrees with staff that the education process with City Council and other stakeholders can be as important as the technical analysis. UFI has a depth of experience presenting to City Councils, Finance Committees, and other stakeholder groups. Working with staff, UFI will present complex terms as digestible concepts so that the information from the forecast model helps decision makers with identifying critical unmet needs, developing options to close funding gaps for service and capital needs, and creating strategic plans to achieve the City’s objectives.
Of particular importance is that the model provided by UFI will be maintained and utilized by staff beyond the engagement with UFI. That is, UFI’s forecast model will be designed to be owned, manipulated and fully utilized by the City. Upon completion staff will meet for at least two online sessions on how to utilize and manipulate the forecast model to best meet the City’s needs.
Fiscal Impact
The professional services agreement with UFI is for Thirty-Five Thousand One Hundred Dollars ($35,100) and a term through December 31, 2023. This item was budgeted for Fiscal Year 2022-23 and there remains sufficient budget.
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo Co. Library located at 2415 University Avenue, East Palo Alto.
Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.
Attachments
1. Resolution to Award 10-Year Forecast Contract to UFI
2. Draft UFI 10-Year Forecast Contract