CITY COUNCIL
SPECIAL MEETING WORKSHOP AGENDA
Tuesday, May 21, 2024
5:00 PM
City Council Chamber
200 Old Bernal Avenue
Pleasanton, CA 94566
The meeting will be held in-person, broadcast live on Channel 29 and at https://www.tri- valleytv.org and streamed at https://www.youtube.com/user/TheCityofPleasanton.
Public participation: It is requested that members of the public wishing to address the City Council submit a speaker card. When public comment is opened on an agenda item, individuals may speak once per agenda item.
To submit written public comment regarding an open session item on this meeting agenda visit https://forms.cityofpleasantonca.gov/f/writtenpubliccomment. Comments will be accepted by the City Clerk’s Office until 12:00 p.m. on the day of the Council meeting.
In Person at Council Chamber:
• Submit a physical speaker card to the City Clerk at the meeting. When your name is called, please provide comment at the podium.
CALL TO ORDER
• Roll Call
PUBLIC COMMENT - Comments are limited to three minutes and to only those items listed on the agenda.
WORKSHOP
1. Receive a report outlining a contingency menu of potential service reductions that would be discussed further as part of addressing the forecasted structural budget deficit
ADJOURNMENT
Notice
Under Government Code §54957.5, any writings/documents regarding an open session item on this agenda and items received by the City Clerk’s Office by 12:00 p.m. on the day of the meeting provided to a majority of the City Council after distribution of the agenda packet will be available for public inspection on the City’s
City Council Agenda Page 2 of 2 May 21, 2024
website https://www.cityofpleasantonca.gov/ and also at the Pleasanton Library located at 400 Old Bernal Ave., Pleasanton, CA 94566.
There is a 90-day limit for the filing of a challenge in the Superior Court to certain City administrative decisions and orders, which require a hearing by law, the receipt of evidence, and the exercise of discretion. The 90-day limit begins on the date the decision is final (Code of Civil Procedure § 1094.6). Further, if you challenge an action taken by the City Council in court, you may be limited, by California law, including but not limited to Government Code §65009, to raising only those issues you or someone else raised in the public hearing, or in written correspondence delivered to the City Council prior to or at the public hearing. The City Council may be requested to reconsider a decision if the request is made prior to the next City Council meeting, regardless of whether it is a regular or special meeting.
Accessible Public Meetings
The City of Pleasanton can provide special assistance for persons with disabilities to participate in public meetings. To make a request for a disability-related modification or accommodation (e.g., an assistive listening device), please contact the City Clerk’s Office at 123 Main Street, Pleasanton, CA 94566 or (925) 931-5027 at the earliest possible time. If you need sign language assistance, please provide at least two working days’ notice prior to the meeting date.
Item #1
CITY COUNCIL AGENDA REPORT
May 21, 2024
Finance
TITLE: RECEIVE A REPORT OUTLINING A CONTINGENCY MENU OF POTENTIAL
SERVICE REDUCTIONS THAT WOULD BE DISCUSSED FURTHER AS PART OF
ADDRESSING THE FORECASTED STRUCTURAL BUDGET DEFICIT
SUMMARY
The City is facing a severe and increasing structural deficit, meaning that expenses have and will continue to grow faster than revenues. Current forecasts indicate an average budget shortfall of approximately $13 million annually over the next eight years, which City staff have been working to address proactively with a combination of reduced costs and new revenue.
The City identified the structural deficit in early 2023, and since then staff has been containing costs while also working on a revenue measure feasibility project. After exploring several possible new revenue sources, including a potential infrastructure bond, the focus is now on a small ½ cent sales tax increase that would be placed on the November 5, 2024 ballot, if the City Council choose to put this option before the voters. If successful, the proposed sales tax increase would generate approximately $10 million per year, which would largely address the forecasted structural budget gap and allow the City to maintain most vital City services. Since approval of a sales tax increase is not ensured, staff has also developed a contingency menu of reductions if the ballot measure is not successful. This report outlines the menu of programs and services that could be eliminated or reduced as part of the next two-year budget, or sooner if significant new revenue is not secured.
RECOMMENDATION
Receive a report outlining a contingency menu of service reductions that would be discussed further as part of addressing the forecasted structural budget deficit if a small sales tax revenue measure is not placed on the November 2024 ballot, or voters do not approve a small sales tax increase in November 2024.
BACKGROUND
The reasons the City is facing a structural deficit go back many years and include factors that other cities across the state and country are also facing. Contributing factors include:
• Slowing real estate development activity
• Declining retail sales activity, including at the Stoneridge Shopping Center • Increasing insurance costs
• Increasing operating supplies and materials costs
• Increasing contract service costs
• Growing number of unfunded mandates from the State
• Rising personnel costs, including pensions
• Reduced hotel tax revenue (particularly during and post-pandemic).
In addition, much of the City’s infrastructure and facilities are aging. Pleasanton realized significant and rapid growth in the 1980s and 1990s, when buildings, parks, streets, and many other City assets were constructed. The City has contributed significant resources to maintain these assets over time, but many are reaching the end of their useful life and funds have not been set aside to replace or significantly rebuild infrastructure and facilities, including Fire Station #2 (on Stoneridge Mall Road), park irrigation systems, the Pleasanton Police station, the Delores Bengston Aquatic Center and many others.
The City has been historically prudent in managing its finances. In fact, Pleasanton was incorporated nearly 130 years ago. Unlike most other cities in Alameda County, Pleasanton has never asked local voters to consider a bond or tax to help support programs, services and/or capital needs.
As the City continues to transition from a growing city to a mature community, necessary revenue increases are no longer occurring. Over the years, the City has implemented cost- saving measures to improve operational efficiency and reduce costs, including merging departments and operations, offering less generous pension and retiree medical benefits to employees, implementing energy and water efficiency projects, and establishing a pension trust to pay down the City's unfunded liability. However, the City has also deferred critical infrastructure repair and replacement to balance the General Fund operating budget and to continue to support the delivery of services. Currently, there is not sufficient capital funding, nor is there sufficient operational funding, to continue to delivering services and programs at the level the Pleasanton community has come to expect.
To prepare for the future, the City must identify new and/or expanded revenue sources to keep pace with the growth of expenses, or significantly curtail expenses and reduce service levels to maintain the required balanced budget. Community input is critical to this process, and the community has been actively engaging in a revenue measure exploration process over the past year. As of early May, the City has received more than 3,100 responses to a community survey about budget priorities: it is clear that all City services included in the survey matter to our community, and that public safety and 911 response are highly valued.
While working with the community to assess revenue measure feasibility, the City has also been actively taking steps to reduce costs and developing a budget stabilization plan for further cost containment and limited revenue enhancement strategies primarily impacting the adopted FY 2024-25 budget. Staff will present this plan in more detail during upcoming mid- term budget discussions.
Municipalities have limited options for raising revenues, and many cities face similar challenges related to rising operating costs and deferred maintenance. Pleasanton is not alone in identifying options to address the financial challenges that are on the horizon. Staff is aware that several cities in Alameda County are also exploring revenues options including infrastructure bonds, sales tax, utility users’ tax, and hotel tax.
DISCUSSION
Budget Forecast
As part of the biennial budget development process, staff evaluates the City’s overall financial health in part by forecasting revenues and expenditures for several years beyond the current
two-year budget. Forecasting is a critical component of any prudent financial management practice. Based on useful assumptions, the most likely baseline scenario projects an annual deficit of as much as $11 million beginning in FY 2025-26, with peak years approaching a $16 million deficit. Beyond the current budget cycle, the cumulative deficit is projected to exceed $110 million over the next eight years. If there is an economic downturn, the average annual deficit is projected to exceed $22 million and the cumulative deficit is projected to exceed $180 million over the same period. The forecast was presented to the City Council and discussed publicly on March 19, 2024.
Immediate (Near-Term) Departmental Budget Reductions
To immediately mitigate the impacts of the fiscal deficit, the City Manager has required all departments to identify expenditure reductions that will be incorporated into the FY 2024-25 (mid-term) City budget. Cuts totaling about $2.5 million including non-personnel costs and personnel costs associated with vacant positions have been identified. Non-personnel costs include contract services, equipment, operating supplies, and materials. These cost reductions minimize community service impacts, but often have unintended consequences and indirectly alter service delivery and quality.
Contingency Menu (Longer-Term) of Potential Service Reductions While the City works on the revenue measure feasibility project, planning for more severe expenditure reductions in the future if the ballot measure is not successful remains prudent. To that end, staff has developed a contingency menu which consists of options for potential reductions to programs and services from every City department, with the goal of addressing the ongoing, structural nature of the deficit. For that reason, the menu is focused on larger reduction or elimination of ongoing programs and services rather than one-time spending (which is also being evaluated).
The contingency menu includes expenditure savings of up to $8.9 million and is designed to provide the City Council and the community with the magnitude of the service impacts that will have to be considered without significant new revenue. The City may not have to use the entire menu as other options to offset cost reductions would be available, including possible use of the Section 115 Pension Trust Fund, and potential reductions or modifications to existing labor contracts, subject to discussion with labor unions. However, those options alone would not be sufficient to close the budget gap and address the structural deficit if a revenue measure is not successful, and the City Council would have to also consider many of the options in the contingency menu.
Further, even with new revenue, it is likely that some programs and services will still have to be reduced or eliminated and the aforementioned near-term departmental budget reductions will remain in effect. While the City Council will ultimately have difficult decisions to make in the future if new revenue is not realized, input/direction is not requested at this time.
If significant new revenue is not secured, programs and services from the menu would be presented to the City Council for consideration at a future date. The City Council as policy makers for the City will make decisions about areas to cut or retain, informed by community input. For example, the City Council could decide to not reduce public safety expenditures, which would come at a cost to other departmental services and programs. Any impact to existing personnel would be preceded by discussion with impacted labor unions.
Alternatively, the City Council could consider one-time options, such as using more reserves; however, this option is not financially sustainable and could make the City vulnerable to future crises, as reserves are already at the minimum amount recommended. It is also critical to note that the structural deficit will not self-correct over time, such that even with new revenue, some adjustments will likely have to be made to program and services.
Attachment A shows the General Fund Citywide Contingency Menu of Potential Service Reductions. These proposed reductions were developed with input and analysis from every City department. Budget reduction strategies include the following:
• Reduce Parks, Trees, and Landscape Maintenance
• Reduce Streets and Facilities Maintenance
• Reduce Library Services
• Reduce Community Programming, Youth and Senior Programs, and Special Events • Reduce Plan Checking and Traffic Management Programs
• Reduce Sustainability Programming/Services
• Reduce Funding to Community Programs
• Reduce Economic Development Services
• Eliminate City-Funded School Crossing Guard Program
• Reduce Police Services
• Reduce Fire Services
• Reduce Critical Internal Service Functions
Actuarial Analysis Regarding the Use of Section 115 Pension Trust Funds To understand the most prudent and effective use of the City’s Section 115 Pension Trust funds, the City engaged an actuarial consultant, Foster & Foster, to develop scenarios for City Council consideration. The results will be presented to the City Council at its May 21, 2024 regular meeting. It should be noted that the use of pension trust funds will lower the overall funded status for the City’s pension plans. The City’s current funded status is in line with the state average when accounting for pension trust funds; without the pension trust funds, the City’s funding ratio is below state average. According to the City’s investment manager and actuarial consultant, they are not aware of any agencies that are withdrawing funds from their pension trust accounts since many agencies are still trying to build up the funds. While it is appropriate to use one-time funds to help balance the budget as a long-term solution is being developed, ongoing use of one-time money is not recommended.
EQUITY AND SUSTAINABILITY
This item is for information only at this time.
OUTREACH
Over the last several months, the City has been engaging the community through various channels such as surveys, meetings, and newsletters to assess the viability of a sales tax measure.
STRATEGIC PLAN ALIGNMENT
This item aligns with the ONE Pleasanton strategic plan goal of Funding Our Future that supports financial health and sound fiscal policies.
FISCAL IMPACT
Ongoing cost containment is occurring across the organization, and the City Council will see a detailed presentation at the May 21, 2024 regular City Council meeting, including the necessary use of the “rainy day” reserve to balance the FY 2024-25 budget to meet the needs of rising operating costs in the Livermore-Pleasanton Fire Department, Police Department, and other City services and programs.
Prepared by: Submitted by: Approved by:
Susan Hsieh, Director of
Finance
Susan Hsieh, Director of Finance
Gerry Beaudin, City
Manager
Attachments:
1. Contingency Menu
Attachment 1
1 City of Pleasanton
Contingency Menu
General Fund Citywide Potential Service Reductions
(Net of revenue reductions)
BUDGET
REDUCTION
STRATEGY
SPECIFIC REDUCTION AREAS BUDGET $
IMPACT
IMPACT OF REDUCTION
A Reduce
Parks, Trees,
and
Landscape
Maintenance
•Reduce maintenance in City parks,
medians, and streets
•Eliminate annual leaf pickup program
$450,000 •Decreased mowing of parks, particularly in neighborhood parks •Reduced trash collection at City parks, which will result in accumulated trash in between pick ups
•Closure of public restrooms in some City parks
•Decreased tree trimming throughout city, which could lead to higher safety risk during wind events
•Decreased vegetation maintenance on medians from once per week to once per month
•Lowered quality appearance of city parks, buildings, medians, streets, and other city/neighborhood areas
•Eliminate 8-week fall leaf pickup program
•Limits the City’s maintenance of storm drain system, creating potential for flooding
B Reduce
Streets and
Facilities
Maintenance
•Reduce trash collection and janitorial
services at City facilities and downtown
•Reduce sidewalk safety and ADA repairs
$800,000 •Lowered user experience and quicker degradation of facility infrastructure
•Reduced trash collection in downtown, which will result in accumulated trash in between pick ups
•Increased opportunity for injuries/lawsuits due to lack of maintenance at non-ADA compliant areas (sidewalks, ramps, etc.)
•Eliminate community banners displayed under the Pleasanton Arch C Reduce
Library
Services
•Reduce daily hours at the library from 62
hours to 40 hours to 11 a.m. - 7 p.m.
Tuesday – Saturday
•Close the library on Sundays and Mondays
$850,000 •Shorter service days impact all residents but particularly families, students, and shift workers by reducing access to services and internet/technology
•Longer wait times at service counters and delays in shelving materials
•Monday closure impacts students at Pleasanton Middle School who participate in the City/Library afterschool program and receive homework help, who may not be able to afford private tutoring otherwise
2 D Reduce
Community
Programming,
Youth and
Senior
Programs,
and Special
Events
•Eliminate City sponsored adult sports
leagues
•Reduce aquatic, youth, senior, and theater
programs
•Eliminate some special events
$1,100,000 •Reduced opportunities for low-cost community programs for all community members
•Eliminate City-sponsored adult softball, basketball, and bocce leagues
•Reduced lap swim and recreational swim hours, and eliminate all aquatics special events
•Eliminate teen programming including Leader in Training, Open Mic Nights and Ptown Web Team
•Reduced support for Friends of the Senior Center activities •Eliminate City use of Amador Theater
•Eliminate the Hometown Holiday Parade
E Reduced Plan
Checking and
Traffic
Management
Programs
•Reduce staffing and consultant contracts
for plan check, inspections, and long-range
planning
•Reduced in-person access to Permit
Center
•Eliminate neighborhood traffic
calming/speed lump program
$550,000 •Delays in the time it takes to have plans checked and permits approved, which leads to delayed turnaround times and slower approvals for development projects
•Closure of in-person Permit Center 2 days per week
•Reduced perception of roadway safety for residents
F Reduce
Sustainability
programming/
services
•Freeze Sustainability Manager position $150,000 •Delayed implementation of CAP 2.0 – which limits City’s ability to achieve strategies that meet reduced emissions goals
•Limits City’s capacity to search and apply for grants, and participate in regional partnerships and related financial funding opportunities for projects like EV chargers and other electrification efforts G Reduce
Funding to
Community
Programs
•Reduce funding by 50% to community grant
programs, including those for human
services and housing grants
•Reduce funding to community
programming, including eliminating subsidy
to Tri-Valley Community Television
$400,000 •Decreased funding for organizations that provide services to our most vulnerable populations, such as Tri-Valley Haven, Open Heart Kitchen, CityServe, Sunflower Hill, Hively, etc.
•Reduced funding by for recreation fee assistance eligible residents •Decreased funding for community-based organizations such as Pleasanton Partnerships in Education, Go Green Initiative, Museum on Main, and Pleasanton Cultural Arts Council
•Decreased access to view public meetings and receive City/public information through TV30 programming
H Reduce
Economic
Development
Services
•Reduce funding by 50% to programs that
encourage economic development
throughout Pleasanton
•Freeze Business License Specialist
position
$300,000 •Reduction of programs and services that support businesses and build a strong local economy including the Pleasanton Downtown Association, Pleasanton Chamber of Commerce, and Visit Tri-Valley •Less funding for business assistance programs
•Less funding to be used toward community activities designed to support downtown
3 •Delayed licensing for new and renewing businesses
I Eliminate City-
funded School
Crossing
Guard
Program
•Eliminate City support for all 23 City-funded
school crossing guards
$450,000 •Decreased perception of traffic/pedestrian safety during school hours J Reduced
Police
Services
•Eliminate specialty services including
School Resource Officer and K9 programs
•Eliminate Tobacco Education program
•Eliminate/reduce ARU program
•Freeze Police Evidence Technician position
•Eliminate part-time and temporary
employees in Records, Dispatch, and
Investigations
$1,350,000 •Extended response time for police for both emergency and non- emergency calls
•Increased incidents at school sites due to reduced on-campus SROs •Increased 5150 and 5585 holds
•Eliminate SCORE Officer that provides tobacco education in schools •Loss of K9s for apprehension and drug detection
•Reduced training for tactical team
•Eliminate Citizen Academy, Teen Academy
•Increased processing time for police records requests
K Reduced Fire
Services
•Close a fire station in Pleasanton $1,500,000 •Reduced emergency response and prevention services •Unable to staff a first alarm fire
•Response times in the affected district would likely more than double, leading to increased loss
•Increased cost of mutual aid responses from neighboring cities •Decreased access to healthcare via 911 for lower income residents •Likely increases to workers compensation costs
L Reduce
Critical
Internal
Service
Functions
•Freeze Chief Diversity Officer position
•Budget reduction for internal facing
departments such as Human Resources,
Information Technology, City Manager’s
Office, and Finance
•Reduction in professional development and
training opportunities
$950,000 •Delayed filling of vacant positions across all departments •Eliminate temporary positions that support departments •Reduced organizational efficiency
•Decreased employee morale and possible increase in employee turnover and vacancies
•Reduced use of technical assistance to support city plans and policies
•Eliminate external support for key issues, including airport monitoring and legislative advocacy
TOTAL $8,850,000