General Fund expenditure discussion
PERSONNEL
Personnel costs, inclusive of wages and fringe benefits, represent approximately 62.5 percent of total General Fund expenditures and total $36.04 million for fiscal year 2021–22, down 4.3 percent when compared to the amended budget for fiscal year 2020–21. This is inclusive of workers’ compensation and retiree medical internal service charges of $1.28 million, approximately 3.5 percent of total personnel costs. This amount also includes compensation increases as a result of negotiated agreements with three of the City’s labor units. A vacancy factor, previously removed due to uncertainty surrounding the pandemic, has been included again in the fiscal year 2021-22 proposed budget at 7 percent of variable personnel costs in anticipation that workers will reevaluate employment options as the economy returns to pre-pandemic levels of activity.
FULL-TIME EQUIVALENT (FTE) EMPLOYEES
The fiscal year 2020-21 adopted budget included 242.75 full-time equivalent (FTEs) employees, the vast majority funded directly or indirectly through the General Fund. The fiscal year 2021–22 proposed budget includes a net increase of 6 FTEs as a result of mid-year authorization for positions in Community Development and Library and Community Services and staffing required advance work on City Council priorities.
For comparability to the City's audited financial statements, General Administration is a department inclusive of the City Council, City Attorney's Office, City Manager's Office (including city clerk, public engagement, economic development, and sustainability), and Administrative Services (including finance, human resources, information technology, workers' compensation and general liability).
The substantial changes to staffing enacted at the start of fiscal year 2020-21 largely remain intact pending additional direction from City Council during the budget consideration process. Under consideration by the City Council are a number of substantial potential staffing options and inclusion of any will change the ultimate authorized staffing level.
Contract or temporary help, such as seasonal employees that work during certain times of year, are not included in the FTE count because they are not benefited positions. To calculate an FTE, a benefited employee’s regular scheduled annual hours are divided by the number of hours worked by a full-time employee, 2,080 hours. For example, a benefited employee who works 20 hours per week would divide 1,040 (52 weeks x 20 hours per week) by 2,080 to result in 0.50 FTE.
SALARIES & WAGES
In total, salaries and wages in fiscal year 2021–22 are budgeted at $24.61 million, a $0.46 million or a 1.8 percent decrease over the prior fiscal year’s amended budget, driven largely by more conservative estimates of costs associated with hiring new staff. This category includes base salary and all salary related compensation such as overtime and incentive pays. The significant decrease is primarily due to the reduction in number of authorized staff.
The City has negotiated agreements with three of its four labor units which include cost of living adjustments. The cost increases for these agreements have been incorporated into the proposed budget and the City continues negotiations with units whose agreements expire at the end of the fiscal year. Due to the timing of these negotiations, any subsequent costs will be incorporated into the budget through amendment if not known at the time of adoption.
Exhibit 1.15 Salaries and Wages (General Fund)
FRINGE BENEFITS
Total fringe benefits in fiscal year 2021–22 are budgeted at $11.43 million, a $1.17 million or a 9.3 percent decrease over the prior fiscal year’s amended budget. Included in the fringe benefits budget are three major benefits: retirement/pension, contributions to the City’s cafeteria plan through which employees purchase medical insurance, and internal service charges for workers’ compensation and retiree.
The difference in change between salaries and wages and fringe benefits is driven largely by two factors. First, the City's costs for administration of its retirement contract are increasing as a share of wages due to assumption changes made by CalPERS beginning in December 2016. Second, the City made supplemental payments to CalPERS in fiscal years 2019-20 and 2020-21 in order to reduce the long-term interest payments on unfunded retirement liabilities. A similar supplemental payment is not included in the fiscal year 2021-22 proposed budget, reducing the total fringe benefits.
Exhibit 1.16 Fringe Benefits (General Fund)
NON-PERSONNEL OPERATING COSTS
The remaining 37.5 percent, or $21.59 million, of the General Fund’s expenditures consists of non-personnel costs. These expenditures are broken down into a number of distinct categories: operating, utilities, services, fixed assets and capital outlay, travel, repairs and maintenance, special projects and transfers out. A brief description of the types of expenditures in each category is provided below.
Operating Expenditures
Operating expenditures, which total $6.57 million in fiscal year 2021–22, include spending on a wide variety of supplies, materials, and other items related to the operation of the City. The largest expenditure in this category, $2.47 million, is the General Fund’s share of the information technology internal service fund charge. As part of this structure, all operating and capital costs associated with information technology are centralized in a distinct fund resulting in allocation charges to operating departments. This mechanism provides for centralized purchasing and coordination of technologies to ensure that the City’s buying power across all departments is used to the fullest benefit.
Other significant expenditures include $0.68 million for the General Fund’s share of the City’s General Liability Internal Service Fund and $0.54 million for vehicle replacement costs.
Utilities
The budget for utilities, including gas, electricity, water and telecommunications, total $1.73 million in fiscal year 2021–22. Of the total, 50 percent goes toward gas and electricity, 43 percent to water and the remaining 7 percent for telecommunications.
Travel and Meetings
The travel and meetings category, budgeted at $0.07 million in fiscal year 2021–22, consists of travel and meeting costs related to training and seminars, including the cost for mileage reimbursements.
Special Projects
Expenditures in this category, $0.29 million in fiscal year 2021–22, are primarily for the Community Funding Grant Program, which provides funds to non-profit organizations which benefit the community with services and programs not offered by the City.
Services
Budgeted expenditures in this category total $8.07 million in fiscal year 2021–22 and cover a wide variety of service areas, including plan checking services, legal services, the annual financial audit, consultants for special studies, the median landscaping contract and street sweeping. The $8.07 million total in fiscal year 2021–22 is $08.0 million higher than the prior year's amended budget in recognition that increasing service levels also includes increased overall contracted costs.
Fixed assets and capital outlay
Budgeted expenditures for fiscal year 2021–22 are $0.34 million and consist of purchases of items such as office equipment and other specialized equipment required by the operating departments.
Repairs and maintenance
This category has budgeted expenditures of $1.03 million in fiscal year 2021–22, which covers a wide variety of repair and maintenance activity. Other significant expenditures include maintenance on the City’s communications equipment, vehicle maintenance and building repairs.
TRANSFERS TO OTHER FUNDS
The General Fund’s transfers to other funds is an important component of the City’s long-term fiscal health. In fiscal year 2020–21, the total transfers to other funds is $3.32 million. Of this amount, $3.05 million is a transfer to the General CIP Fund to provide funding for a number of projects discussed more fully in the Capital Improvement Plan section of this document. As with many cities on the peninsula, the City’s infrastructure is aging reflecting an ongoing maintenance and replacement schedule. The City must prioritize which projects are addressed each year to balance available funding with available staff resources necessary to manage the Capital Improvement Plan (CIP).