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    31.    
City Council Regular
Meeting Date: 06/12/2018  

SUBJECT:
HEARING TO ADOPT THE 2018-19 FISCAL YEAR BUDGET; ESTABLISH THE 2018-19 FISCAL YEAR APPROPRIATIONS LIMIT; AND CONSIDER AMENDING FEES, FINES AND PENALTIES
RECOMMENDATION:
Conduct a public hearing, consider evidence, and adopt resolutions entitled:
 
1.  A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS, CALIFORNIA, ADOPTING A BUDGET FOR FISCAL YEAR 2018-19.
 
2.  A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS, CALIFORNIA, ESTABLISHING THE FISCAL YEAR 2018-19 APPROPRIATIONS LIMIT FOR THE CITY OF CHINO HILLS AND THE COMMUNITY FACILITIES DISTRICTS.  
 
3.  A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS, CALIFORNIA, APPROVING THE PROPOSED FEE REVISIONS AND ADOPTING THE MASTER SCHEDULE OF FEES, FINES AND PENALTIES, AND DETERMINING THAT THE ADOPTION OF THE FEES, FINES AND PENALTIES ARE EXEMPT FROM REVIEW UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT.
BACKGROUND/ANALYSIS:
On May 8, 2018, the Preliminary Budget document for the FY 2018-19 was transmitted to the City Council and subsequently posted on the City’s website.  On May 22, 2018, a Budget Workshop was held to discuss the proposed budget and fees for FY 2018-19.
 
FISCAL YEAR (FY) 2018-19 BUDGET: 
The proposed FY 2018-19 expenditures are projected to be $129.7 million including General Fund operating expenditures of $40.4 million. The City's revenues are estimated to be $129.3 million including General Fund operating revenues of $40.8 million. The Capital Improvement Program for FY 2018-19 includes expenditures in the amount of $10.2 million.
 
APPROPRIATIONS LIMIT FOR FY 2018-19: 
Cities are required to establish an appropriations limit for a new fiscal year by June 30 of the current fiscal year in accordance with Article XIIIB of the California Constitution - Gann Initiative.  Each year, the appropriations 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 2018-19 is the City’s growth factor, which is an increase factor of 4.61 percent (per the State Department of Finance). The economic factor selected for the FY 2018-19 is the increase in the state's personal income per capita factor (3.67 percent) as this is the only economic factor available at this time. 
 
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 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 appropriations limit. 
 
The City's appropriations limit based on the above-mentioned growth factors for the FY 2018-19 is $294,554,669.
 
Community Facilities District (CFD) No. 10 (Fairfield Ranch) and CFD No. 2015-1 (Vila Borba) require an annual appropriations limit be approved which has been included in the attached resolution.  The appropriations limit based on the above-mentioned growth factors for FY 2018-19 is $313,619,638 for CFD No. 10 (Fairfield Ranch) and $6,169,729 for CFD No. 2015-1 (Vila Borba).
 
MASTER SCHEDULE OF FEES, FINES & PENALTIES UPDATE: 
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 (CAP) determines the cost of Citywide overhead charges necessary to reimburse the General Fund.  There has been no change in the methodology of the CAP since it was developed by BPR Concepts in FY 2013-14, but staff updates the budget figures that the CAP is based on to determine the overhead charges on an annual basis.  The update process started with the FY 2017-18 Adopted Budget as the foundation for the CAP to determine overhead charges for FY 2018-19.  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 administrative overhead costs to the various benefiting cost centers. 
 
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 they are reflective of the current cost 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 for FY 2018-19 are incorporated as shown in the attached Fee Study.
 
Master Schedule of Fees, Fines & Penalties
The Master Schedule of Fees, Fines & Penalties is a compilation of user fees and charges of the City along with fines and penalties. The schedule of User Fees is calculated to reimburse the City for costs reasonably borne by the City in providing direct services to particular individuals or groups rather than to the general populace of the City of Chino Hills, except as to 1) fees charged as a market participant (such as fees for event rental space), 2) fines, 3) penalties, and 4) permits issued with no cost.  The attached Fee Study includes the description, current fee, time data (if applicable) and the proposed fee, fine or penalty. The Fee Study also identifies the new fees, change in fees and fees being removed.  Fines and penalties are established by applicable City ordinances but are included in the Master Schedule for ease of administration.  Article XIII C, Section 1(e)(5) excludes from Proposition 26’s definition of “tax” “[a] fine, penalty, or other monetary charge imposed by cities as a result of a violation of law.” Courts have held that penalties are distinguished from taxes in that they seek to regulate conduct rather than to generate revenue.
  
Public Notice
A notice regarding the amending of fees was mailed to interested parties on May 29, 2018.  A public notice was published on June 2, 2018, and on June 9, 2018, in the Chino Hills Champion newspaper, and 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, was made available for public review on June 1, 2018.
 
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, 2018.  This will enable staff sufficient time to update forms, applications, and computer software as necessary for the implementation of the fees.
ENVIRONMENTAL (CEQA) REVIEW:
These proposed actions are exempt from review under the CEQA (Cal. Pub. Res. Code § 21000, et seq.; “CEQA”) and CEQA regulations (Cal. Code Regs. Tit.§15000, et. seq.) because they establish, modify, structure, restructure, and approve rates and charges for meeting operating expenses; purchasing supplies, equipment, and materials; meeting financial requirement; and obtaining funds for capital projects needed to maintain services within existing service areas, so it is statutorily exempt from further CEQA review under Cal. Code Reg. Tit. 14, §15273.  Further, these actions do not constitute a “project” that requires environmental review because they are fiscal activities that do not involve any commitment to a specific project which could result in a potentially significant physical impact on the environment; and constitute an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. (See specifically 14 CCR § 15378(b)(4-5)).
FISCAL IMPACT:

Proposed Budget
The Proposed Operating and Capital Improvement Program Budget for Fiscal Year 2018-19 includes appropriations and transfers to other funds totaling $129,678,193.
 
Appropriations Limit
None.
 
Master Schedule of Fees, Fines & Penalties
Approval of the resolution amending the Master Schedule of Fees, Fines & Penalties will increase revenues as applicable.
REVIEWED BY OTHERS:
This agenda item has been reviewed by the City Attorney.
Attachments
Attachment A - Budget Resolution
Attachment B - FY 2018-19 Budget Document
Attachment C - Appropriations Limit and Exhibits
Attachment D - Master Schedule of Fees, Fines and Penalties Resolution and Exhibit A
Attachment E - Fee Study
Attachment F - Summary of Admin Overhead

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