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    34.    
City Council Regular
Meeting Date: 06/13/2017  
Submitted By: Diana Keros, Administrative Assistant II

SUBJECT:
HEARING TO ADOPT THE 2017/18 FISCAL YEAR BUDGET; ESTABLISH THE 2017/18 FISCAL YEAR APPROPRIATION LIMITS; AND CONSIDER AMENDING USER FEES
RECOMMENDATION:
Conduct a public hearing, consider evidence, and adopt Resolutions entitled:
  1. A Resolution of the City Council of the City of Chino Hills, Adopting a Budget for Fiscal Year 2017/18;
     
  2. A Resolution of the City Council of the City of Chino Hills, Establishing the Fiscal Year 2017/18 Appropriation Limits for the City of Chino Hills and Community Facilities Districts;
     
  3. A Resolution of the City Council of the City of Chino Hills, Modifying the Master Schedule of Fees, and Superseding Resolution No. 2017R-011, and determining that the adoption of the fees is exempt from review under the California Environmental Quality Act.
BACKGROUND/ANALYSIS:
FISCAL YEAR (FY) 2017/18 BUDGET:
 
On April 28, 2017, the Preliminary Budget document for the FY 2017/18 was transmitted to the City Council and posted on the City's website.  On May 23, 2017, a Budget Workshop was held to discuss the preliminary budget for FY 2017/18.

Preliminary Budget 
In the Preliminary Budget, the City’s expenditures for FY 2017/18 totaled $185.1 million including General Fund expenditures of $38.5 million and restricted fund expenditures of $146.6 million.  The City’s estimated revenues for FY 2017/18 are $171.6 million.  General Fund revenues, which fund law enforcement and general services, total $42.3 million.  The remaining $129.3 million of the City’s revenues comes from restricted sources including special revenue funds, proprietary operations, internal service funds, and agency funds.
 
The Capital Improvement Program for FY 2017/18 includes expenditures in the amount of $34.0 million.  This total is comprised of $17.6 million in carryover projects and $16.4 million in new projects.

Personnel
In the Adopted FY 2016/17 Budget, 146 Full-Time positions were authorized. The changes during FY 2016/17 resulted in a net increase of two Full-Time positions. The proposed FY 2017/18 budget reflects the addition of two new positions and the deletion of one position bringing the FY 2017/18 Full-Time authorized position count to 149.
 
The Permanent Part-Time position count in the Adopted FY 2016/17 budget was nine. The changes during FY 2016/17 resulted in a net reduction of two Permanent Part-Time positions bringing the FY 2017/18 Permanent Part-Time positions count to seven.  In addition, the City employs Temporary Part-Time staff to augment its Full-Time staff.
 
Modifications to Preliminary Budget
Subsequent to the release of the Preliminary Budget, and as discussed at the May 23rd Budget Workshop, the following budget modifications in the Preliminary Budget are recommended for incorporation into the Proposed Budget.
 
Capital Improvement Program
It is recommended that the project for the installation of automated license plate readers be added to the Capital Improvement Program.  The $1 million project, to be funded from the General Fund – will add stationary cameras at key access points to create a virtual fence at the City’s borders. The system aims to capture the plates of every vehicle that enters and exits the City, and check the information against law-enforcement databases, searching for hits about stolen vehicles, missing persons and other police cases. The decision to implement the program was based in part on the increase in crime statistics that show that most property crimes such as thefts and burglaries are committed by people who come from outside the City, and the camera system can help deter that. The scanners can immediately identify a vehicle reported as stolen or on a wanted list, and send that information to dispatchers and officers, thus identifying a criminal before another crime is committed.

Proposed Budget
The Proposed budget includes expenditures for FY 2017/18 totaling $187.1 million including General Fund expenditures of $39.5 million and restricted fund expenditures of $147.6 million. The City's estimated revenues for FY 2017/18 are $172.6 million. General Fund revenues total $42.3 million. The remaining $130.3 million of the City's revenues comes from restricted sources including special revenue funds, proprietary operations, internal service funds, and agency funds. The City's General Fund is proposed to have an operating surplus of $823,600.
 
ESTABLISHING THE APPROPRIATION LIMIT FOR FY 2017/18:
 
Cities are required to establish an appropriation limit for a new fiscal year by June 30th of the current fiscal year in accordance with Article XIIIB of the California Constitution - Gann Initiative.  Each year, the appropriation limit is modified by two factors; one factor is a population-based factor; the second factor is an economic-based factor.  The population factor that may be selected is the greater of the percentage increase in the City's population or the County's population.  The economic factor that may be selected is either (a) the percentage change in the state's per capita personal income or (b) the percentage change in the City's assessed valuation caused by new non-residential construction.
 
The population factor selected for FY 2017/18 is the City’s growth factor, which is an increase factor of 2.38 percent (per the State Department of Finance). The appropriation limit for FY 2017/18 has been calculated using this factor of 2.38 percent.
 
The economic factor selected for the FY 2017/18 is the increase in the state's personal income per capita factor (3.69 percent) as this is the only economic factor available at this time.  The County does not release the factor for the change in the assessed valuation caused by new non-residential construction until July of a fiscal year.  Therefore, this factor is unknown at the time the City is required to adopt its appropriation limit. 
 
However, at the time the City adopts its appropriation limit in the next fiscal year, the City may revise the prior year's calculation if it is determined that the percentage change factor for the new non-residential construction assessed valuation is in the best interest of the City rather than the percentage change in the personal income per capita factor. 
 
The City's appropriation limit based on the above-mentioned growth factors for the FY 2017/18 is $269,900,699 (Attachment C).
 
Community Facilities District (CFD) No. 10 (Fairfield Ranch) and CFD No. 2015-1 (Vila Borba) require an annual appropriation limit be approved which has been included in the attached Resolution.  The appropriation limit based on the above-mentioned growth factors for FY 2017/18 is $287,369,947 for CFD No. 10 (Fairfield Ranch) (Attachment D) and $5,653,328 for CFD No. 2015-1 (Vila Borba) (Attachment E).
 
AMENDING USER FEES:
 
On June 14, 2016, the City Council reviewed the entire Master Schedule of Fees. On October 11, 2016, and March 14, 2017, the City Council added fees to the fee schedule setting the charge for electric vehicle charging at City-owned electric vehicle charging stations. The October 2016 action had set such fees based on a per hourly basis. The March 2017 action changed the fee to be per kilowatt hour consumed.
 
User fees are commonly charged in connection with participation in a program or activity, or for access to a government service. The user fees are based on a cost recovery concept meaning that the amount of the revenue generated from the fees may not exceed the estimated reasonable cost of providing the services.  The user fees are calculated by multiplying the blended hourly rates by the average time spent to provide the service directly related to the user fee.  The blended hourly rates consist of direct costs and indirect costs. The indirect costs are the Citywide overhead costs derived from the Cost Allocation Plan.
 
Cost Allocation Plan Update
The Cost Allocation Plan determines the cost of Citywide overhead charges necessary to reimburse the General Fund. City staff has updated the Cost Allocation Plan to calculate the distribution of the Citywide overhead.  The update process started with the FY 2016/17 Adopted Budget as the foundation for the cost allocation plan to determine overhead charges for FY 2017/18.
 
Staff conducted a detailed review of the costs for each function within each support department (City Council, City Attorney, Finance, City Manager, and City Clerk) and other divisions and programs such as Emergency Preparedness, Facilities Maintenance, and the Volunteer program.  The costs were distributed as Citywide overhead costs to the various benefiting cost centers. 
 
Attached is a Summary of the Citywide Overhead (Attachment G). The schedules containing all of the detailed information for the Cost Allocation Plan and the User Fee Cost Worksheets are available in the City Clerk’s office for the City Council and residents to review.  They are too large to include in the agenda packet, but they are submitted as supporting documentation for the City Council to consider in establishing these fees.
 
Annual Blended Hourly Rate Update
It is sound business practice to adjust fees and charges annually to reflect the current costs of doing business.  Fees should be adjusted to ensure that current fees are reflective of the current costs of doing business.  The blended hourly rates are calculated using the overall percentage increases to each relevant department's budget and applying this increase to existing fee levels. The blended hourly rates proposed reflect the changes from adopted budget for FY2015/16 to FY2016/17 for each of the respective department's budget. The justification for the blended hourly rates can be found on the FY 2017/18 blended hourly rate worksheets which are on file in the City Clerk’s office.
 
The proposed blended hourly rates for FY 2017/18 are as follows:
 
Department/Division Current Proposed
City Clerk $  79 $  85
City Manager - Code Enforcement $105 $119
Community Services – Recreation Full-Time Staff $  97 $109
Community Services – Recreation Part-Time Staff $  26 $  26
Community Development $207 $231
Finance $  77 $  88
Information Technology $122 $130
Engineering $197 $214
Public Works $113 $121
Community Relations $112 $134
 
Master Fee Schedule
The Master Fee Schedule is a compilation of user fees and charges of the City. The “red-line” version of the Master Fee Schedule (Attachment H) includes the services, description, current fee, and the proposed fee. The proposed fees are rounded for ease in implementation.  The fees being recommended are identified in Exhibit A to the attached Resolution.
 
There are also new fees being recommended.  These fees are identified in Exhibit A to the attached Resolution.  The documentation supporting the calculation of these fees is found in the FY 2017/18 User Fee Cost Worksheets on file in the City Clerk’s office.
 
New Fees:
New Ref. No. User Fee Category Fee Description Fee Amount  
Reason
7 City Clerk   Subpoena of Records $15 (A)
8 City Clerk   Subpoena of Personal Appearance $275 deposit (A)
19 Building Services Building Permits and Fees Window Change Outs – up to 10 windows $347 (B)
20 Building Services Building Permits and Fees Window Change Outs – over 10 windows $463 (B)
21 Building Services Building Permits and Fees Bathroom Remodel $463 (B)
22 Building Services Building Permits and Fees Kitchen Remodel $463 (B)
19 Development Services Development Permits Minor Pre-Entitlement Fee $1,388 Deposit (C)
32 Development Services Minor Permits Temporary Use Permits – Model Homes, including Temporary Sales Office/Trailer, Temporary Signs $3,700 (D)
Table 3 Community Center   Fees for Renting Game Room Group rates start at $390 - $700 per four hour rental (E)
   
(A)       Per Govt. Code §70627(c) a fee of $15 for a search of records or files conducted in response to a subpoena that requires more than 10 minutes and Govt. Code §68097.2(b) pursuant to subpoena requiring personnel appearance the party at whose request shall deposit $275 and reimburse the City for the full cost incurred for a City employee required appearance pursuant to a subpoena.         
  
(B)      A new flat fee based on the typical actual cost to render service.  The services were previously charged on a per square foot basis (see Table 1 – Building Use: R Occupancy – Additions).  Based on an analysis of building inspection records, it was determined that a flat fee would better reflect actual costs resulting in lower fees for these types of services.
   
(C)       This fee will allow staff to provide up to 6 hours of research for prospective applicants.
 
(D)       Staff has found that the time required to process TUPs for Model Homes, including Temporary Sales Offices/Trailers, etc. often differs from that of other types of Temporary Use Permits. TUPs for Model Homes require coordination with multiple departments and the applicant and inspections to ensure compliance with the approved permit and conditions.
 
(E)       A new weekend rental package is being proposed for the Community Center Game Room.  After evaluating the rentals of the Game Room, staff is proposing to eliminate the hourly rental fee on the weekends and require a minimum 4 hour rental plus a discounted hourly rate, if additional hours are needed.

Modification to Fees:
 
New Ref. No. User Fee Category Fee Current Proposed Reason
12 Community Services Military Banner Cost Recovery of flag $227 Set a dollar amount of cost of flag to be updated annually to ease administration of program.
2 Development Services Home Occupation Permits $91 $243 Fee increased to add additional staff time to perform service related tasks.
9 Development Services Design Review – Custom Homes $4,568 $6,244 Fee increased to add additional staff time to perform service related tasks.
46 Equestrian Overlay District Fees
 
Equestrian and Large Animal Business Permit (B) Existing Operations (Existing Prior to Ord. 270 effective 5/8/2014)
 
$91 $243 Fee was established by City Council to be consistent with Home Occupation Permit Fee for existing operations.
48 Equestrian Overlay District Fees
 
Equestrian and Large Animal Business Permit (N) - New Operations
 
$91 $243 Fee was established by City Council to be consistent with Home Occupation Permit Fee for existing operations.
49 Equestrian Overlay District Fees
 
Grazing Permit (GP)
 
$91 $243 Fee was established by City Council to be consistent with Home Occupation Permit Fee for existing operations.
6 Engineering Services Encroachment Permit $98 $214 Fee increased to add additional time to perform service related to tasks.
Table 2 Community Center Additional equipment – Stage area $300 $200 Adjustment in fee in response to market forces.
Table 3 Mc Coy Rentals   6 hour rental packages start at $200 to $2,020 6 hour rental packages start at $230 to $2,890 Adjust rates in response to market forces.
Table 3 Mc Coy Rentals   16 hour rental packages start at $290 to $5,100 16 hour rental packages start at $530 to $5,610 Adjust rates in response to market forces.
Table 3 Mc Coy Rentals Arena Show Rate per Day Start at $200 to $605 Start at $300 to $700 Adjust rates in response to market forces.
 
Deleted Fees
Old Ref. No. Use Fee Catetgory Fee Current Reason
Table 3 Mc Coy Rentals AV Equipment $50 The rental of the AV equipment was incorporated into the new proposed McCoy fees. 
 
 
Frequency of User Fee Cost Studies
City staff performs this internal review annually applying the blended hourly rate formula described above, with a comprehensive review of services and fees is to be performed every five years by an independent third party. The last independent third party review used the FY 2013/14 budget as the foundation for the review, therefore, the next independent third party review should be based on the FY 2018/19 budget.
 
A comprehensive review is a formal study to ensure that the methodology employed by the City provides a direct relationship between the costs of services provided and the fees charged.
 
 

Public Notice
A notice regarding the amending of fees was mailed to interested parties on May 30, 2017.  A public notice was published on June 3, 2017, and on June 10, 2017, in the Chino Hills Champion newspaper, and was made available for public review on June 2, 2017.  The notice included the proposed fee schedule, data indicating the amount of cost, or estimated cost, required to provide the service for which the fee or service charges are levied and the revenue sources anticipated to provide the services, including General Fund revenues.
 
Effective Date
The Government Code §66017 requires that certain fees shall be effective no sooner than 60 days following the adoption of the fee or charge or increase in the fee or charge.  It is recommended that the fees under consideration in the proposed Resolution be effective September 1, 2017.  This will enable staff sufficient time to update forms, applications, and computer software as necessary for the implementation of the fees.
ENVIRONMENTAL (CEQA) REVIEW:
This proposed action is exempt from review under the California Environmental Quality Act (California Public Resources Code §§ 21000, et seq; “CEQA”) and CEQA regulations (14 California Code Regulations §§15000, et seq.) because it does not involve any commitment to a specific project which could result in a potentially significant physical impact on the environment; and constitutes an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. Accordingly, this action does not constitute a “project” that requires environmental review (see specifically 14 CCR § 15378(b)(4-5)).
FISCAL IMPACT:
Budget Hearing
The Proposed Budget for FY 2017/18 includes expenditures totaling $187.1 million including General Fund expenditures of $39.5 million and restricted fund expenditures of $147.6 million. The City’s General Fund is proposed to have an operating surplus of $823,600.
 
Establishing the Appropriations Limit
There is no fiscal impact on the City since the City's FY 2017/18 appropriations subject to the limit of $22,760,887 is less than the FY 2017/18 appropriation limit.
 
There is no fiscal impact on CFD No. 10 (Fairfield Ranch) since the CFD’s FY 2017/18 appropriations subject to the limit of $102,600 is less than the FY 2017/18 appropriation limit. 
 
There is no fiscal impact on CFD 2015-1 (Vila Borba) since the CFD’s FY 2017/18 appropriations subject to the limit of $310,800 is less than the FY 2017/18 appropriation limit.    
 
Amending User Fee Schedule
Approval of the Resolution amending the Master Fee Schedule will increase revenues as applicable.








 
REVIEWED BY OTHERS:
This agenda item has been reviewed by all Department Directors and the City Attorney. 
 
Attachments
Attachment A - Budget Transmittal Letter
Attachment B - Resolution Adopting a Budget for Fiscal Year 2017/18
Attachment C - Appropriation Limit Calculations for the City
Attachment D - Appropriation Limit Calculations for CFD No. 10 (Fairfield Ranch)
Attachment E - Appropriation Limit Calculations for CFD No. 2015-1 (Vila Borba)
Attachment F - Resolution Establishing the 2017/18 Appropriation Limits
Attachment G - Summary of Citywide Overhead
Attachment H - Red-Line Version of the Master Schedule of Fees
Attachment I - Resolution Exhibit A Modifying the Master Schedule of Fees

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