Citizens Budget Committee 04-14-93 (2)CITIZENS' BUDGET COMMITTEE
APRIL 14, 1993
3:30 P.:M.
CONFERENCIr's ROOM A
10300 TORRE AVENUE
CUPERTII~fO, CA
MINU']CES
Committee members present:
Allan Bidwell (appointed by Bazbara Koppel)
Bazbaza Jones (appointed by Lauralee S~~rensen)
Robert Hendrickson (appointed by Marshall Goldman)
Roberta Hollimon (appointed by the Le~igue of Women Voters)
Stephanie Russell (appointed by Wally Dean)
Darwin Throne (appointed by Nick Szabo)
The committee members introduced themselves and gave some background information
Staff present:
City Manager Brown
Director of Finance Snyder
Also present:
Sam MacNeal
David Wheeler, appointed by the Chamber of Commerce, arrived.
City Manager Brown presented the committee with a financial recap, including historical
information and a review of the Five Yeaz Capital Improvement Program. He presented
cutbacks already initiated by the City and resultant savings, as well as actions taken to
increase revenues. An action considered was ~m increase in the documentary transfer tax;
however, at the time this was taken to Council, court cases were pending. Since that time,
the City of Los Angeles won its, documentary transfer tax case in court. This decision
appears to make the possibility of an increase in this tax legal. However, politically, the
air is still not clear.
Mr. Brown presented the City's fiscal forecast with a three yeaz delay in the Maintenance
of Effort (expenditure of General Fund on ro~~d projects) which helps the General Fund
expenditures. There is a possibility that the ]Maintenance of Effort will be permanently
eliminated. A review of figures shows that the City of Cupertino is in the top 2-3
percentile in economic strength in Santa Claza County.
Director of Finance Snyder reviewed the draft. budget, including a detail of revenues and
fund descriptions.
MINUTES OF THE CITIZENS' BUDGET COMMITTEE HELD ON APRIL 14, 1993
A committee member pointed out that in Cupertino, the pazk dedication fee is $14,000 per
house. In San Jose it is only $500. This appears to be a good source of revenue for the
City.
Discussion took place regazding the estimated fund balance and the expenditure of
Intermodal Surface Transportation Efficiency A.ct funds prior to their receipt. The City is
assured of receiving those funds. The wideni~lg of DeAnza Boulevazd where it bridges
280 is not coming out of Gas Tax funds, but the General Fund. This will be reimbursed
from ISTEA monies.
Mr. Snyder reviewed the tax equity sharing "low tax/no tax" status of Cupertino in the
property tax area. These revenues aze subject t~~ the State allowing them to continue. The
governor's budget could reduce estimates by an estimated amount of $200-350,000. That
possibility was not taken into consideration in the forecast. Mr. Snyder pointed out that
the heading of sales tax also includes use tax.. Any discussion of sales tax during this
process will also include use tax. Twenty-tw~~ percent of the sales tax is derived from
retail sales. There is a potential loss of almost $234,000 of sales tax from the aerospace
lawsuit. This is a payback of previously paid taxes on purchases which the court
determined to be a sale to the United States Government under contract. Therefore, sales
tax should not have been chazged. There is a bill pending that would allow the payback to
be spread over 10 years.
The committee discussed whether or not the construction tax may be optimistic. Mr.
Brown told them that there is a belief there maS~ be some construction in Vallco. The City
Manager stated that the revenues derived from. the utility tax are used to offset the debt
for purchase of Blackberry Farm and Fremont Older Elementary School. However, it is
not enough. There is some revenue coming in from Blackberry which also goes for debt
service. The balance is taken from the General Fund.
In regazd to the possibility of an amusement tax, particulazly applied to theaters, Mr.
Snyder said that the City cannot just tax theaters, but must do all amusements, including
Flint Center.
Mr. Brown cautioned the committee that such ~i tax must not be seen as taxing freedom of
speech or freedom of expression. It must be a broad tax.
Review of the business license tax shows that the newly enacted increase will be in full
effect next yeaz. The Finance Director is pr~~jecting little or no growth in investment
earnings. The State has looked at the motor vehicle license in-lieu fees for several years
and could take that money.
Mr. Brown explained that "in-lieu" is actually ~~ personal property tax that is collected by
the State via vehicle registration and is then returned to the City.
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MINUTES OF THE CITIZENS' BUDGET COMMITTEE HELD ON APRIL 14, 1993
Further review of revenues shows that the sch~~ol district is paying $640,000 to the City
for maintenance of school grounds. Aid in con:>truction estimates include $2.1 million for
ISTEA money. In the category of special revenues, the Gas Tax reflects the State's
subventions from Proposition 111 which grows over the next few years. Under Enterprise
Funds, Mr. Snyder pointed out that the Blackberry Farm golf merchandise is now
contracted out, so no merchandise sale funds a1•e reflected. The City does still receive the
greens fees. Under Library Funding, the Count•~ pays a minimum $120,000 per yeaz to the
City for remodeling debt service. Also, the City is reimbursed for certain maintenance that
City staff does.
At the next meeting of this committee, staflF will review trends and concerns. The
committee may question why spending is being; done in certain areas. Mr. Snyder stated
he will have more information regazding facility improvements for the committee next
week. For example, on page 189 of the draft budget, Facility Improvements lists $39,000
for Memorial Park. That $39,000 represents $14,000 for resurfacing tennis courts and
$25,000 for resurfacing pathways.
City Manager Brown said that the Apri128 muting is designed as a chance to have give
and take with staff; May 5 could be used for that also, but it is meant as a meeting for the
committee to prepaze its input for the City Council in something such as bullet format.
Mr. Hendrickson stated he had a problem meeting May 5. That is the date of the Chamber
trade show at Vallco.
The committee will meet Tuesday, May 4, instead.
Mr. Brown asked if staff can provide any particulaz information to the committee.
Mr. Throne said that with this budget there is no easy way to understand the City's fixed
obligations, what's sunsetting in regazd to debt service, and what trends there are in some
of these areas. He requested that the budget be broken down to show what things the
City absolutely has to do, what programs aze revenue sources. He said it seems to him the
projections the committee is looking at are pretty much business as usual. That's one of
the concerns some Council members have. He would like the figures split out to show
what's fixed, what's variable, and what's controllable.
Staff said that it could be broken down in summary form.
It was suggested that if revenues are not going; to be the same, maybe expectations need
to change.
Ms. Hollimon said that perhaps the breakdown could be what the City must do, should do,
likes to do; maybe even what's legally required to do.
MINUTES OF THE CITIZENS' BUDGET COMMITTEE HELD ON APRIL 14, 1993
Mr. Throne felt this was important to look at because the State probably won't get out of
trouble in this decade. Maybe people's expectations of what government will be able to do
has to change.
City Manager said that positions aze not bevng filled and he does not expect that to
change. The City is using faz more volunteers and there are more self-supporting
activities. Maybe staff could sepazate out what we must do, what is self-supporting, what
we should do and maybe should beself-supporting.
Mr. Snyder said that he believed that he could bring the information together in regard to
the General Fund. The City just refinanced a1:1 debt service issues since 1986 and saved
over $900,000 over the life of the issue.
Mr. Throne felt that for the committee to be eflFective, it should have some idea of what it
is they want to do.
City Manager said staff will try to do some sort of grouping of things. He believes that if
something is self-supporting, that's dictated by supply and demand and people pay if they
want it. Otherwise, they don't get it. Some things are necessary, i.e., people have to have
water and they have to pay for it.
Mr. Throne asked if there is a way the committee wants to approach this. Can it come up
with some sort of general direction of where it':, going?
There will be staff presentations at next week's meeting. Then the committee can look at
what it wants to do. Dave Wheeler stated it may give City Council several alternatives
ranging from the rosy side to liquidating assets if necessary.
Ms. Russell asked if there were any projection for business attrition because of high
business license taxes. Mr. Snyder replied th~it had been factored in. She then asked if
there were any information on how much it co:~ts to open a business in Cupertino and was
informed it varies per complexity. She then asked if a breakdown of fees in detail is
available. Mr. Snyder said there is a use fee schedule.
Following an inquiry regarding fees and cost of citations (fines) for such things as signs,
the City Manager replied that the City razely fines for illegal signs. There aze business
license fees and permit fees. These vary a great deal, however, there is a schedule.
Ms. Russell said she basically wanted to see what it would cost an average business (25-40
people) to move into Cupertino and what it co:,t the City to process something like that.
Mr. Throne asked for information regazding :revenues v. expenses. As an example, he
cited a company's profit and loss statement and asked if the City could do that in each
azea; where aze revenues coming from and goi~ig to.
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MINUTES OF THE CITIZENS' BUDGET COMMITTEE HELD ON APRIL 14, 1993
Mr. Snyder said that that could be done in some; areas.
Mr. Throne said he would be interested in seeing what it looks like. For example, in
Public Works, what is coming from the Gas T~ix, what is coming from the General Fund,
etc.
City Manager Brown said some things wild never bring in the money to support
themselves.
Mr. Bidwell requested that staff analyze it for the committee. He would like to see the
disposition of the General Fund so that the committee would know which elements of the
City require some part of that fund.
It seemed to Mr. Throne that the committee w;as supposed to look down the road. If the
members know what is today, they can hypothesize what is likely to happen and what
would have to be done if certain scenarios come up.
Mr. Bidwell said the City is embarking on a rationing program. The committee needs
relative cost and funding of things. It is riot fair to ration something that is self-
supporting.
The City Manager said staff could do this in "lazge chunks". They can take parts of
departmental budgets and say they are paid for from these revenue sources. Staff can also
say what's discretionary.
Mr. Throne said that in business there is a mea>urement and if something is not profitable,
you know it has to change. Government is a service. How do you measure if the services
aze needed? He expressed the opinion that government in general is out of whack.
The City Manager pointed out that there miry be a lot of things being done without
funding support, but we aze legally mandated to do them.
The committee stated they need to know those things.
The Director of Finance pointed out that some; things cost more to process than the City
gets in return. An example he used pertained to the utility tax--one agency is submitting
$1.00 a month in utility tax. This costs more to process than that $1.00.
The meeting adjourned at 5:45 p.m.
G/ r
City Jerk
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