The City Council began preparation of Foster City’s Fiscal Year 2004/05 Budget Monday January 26th. You may have seen the meeting on Channel 27. The process will continue on Saturday February 7th. There will be additional meetings later in the first half of 2004.
These meetings will start with an examination of the mid-year status of the 2003/04 Budget. I will share with you my concerns and plans for evaluating our present situation, and the planning process that may be used to deal with the uncertainties of the State’s fiscal crisis.
First of all, it is my hope that the City Council will abide by the capital expenditures that were approved and are part of the 2003/04 Capital Improvement Projects. When the Council approved those projects, the Council committed funds to complete those Projects as part of the long-term investment in Foster City’s General Plan.
It is vital that we stick to our approved plan for each fiscal year unless we have overriding reason for change. In my opinion, there is no cause for change at this time. Therefore, I will work to follow our existing budget plan and complete all approved Capital Improvement Projects.
My reasoning for this approach is capital improvements are one-time investments. While it is true that these investments may carry a cost for future maintenance, the Council will have considered maintenance costs when the project was approved.
All other approved non-capital expenditures will be examined on a case by case basis. If we determine that the City’s Revenue is following the budget prediction, I will strongly support budgeted expenditures. If revenues do not follow the budget predictions, I will vote to reduce non-capital expenditures. By taking this type of action, the City Council can protect our General Fund Reserves.
As you know, Foster City’s Budget is the result of a Five Year Financial Plan. The Five Year Financial Plan is updated each year at this time. Foster City’s Five Year Financial Plan includes a scenario that is based on significantly reduced revenues. In that scenario, all expenditures, both capital and non-capital are examined and reduced. Police, Fire, and Public Works are essential and will be protected.
Other expenses will be reduced before Public Safety takes a hit. Without getting into great detail there are budget items that can be reduced or even eliminated in times of revenue short fall. Changes can be made in equipment replacement schedules, some personnel positions can be temporarily left vacant, and even Capital Improvement Projects can be eliminated or delayed.
I believe this City Council will make every effort to protect our General Fund Reserves and Capital Improvement Fund Reserves. The current policy is to never allow General Fund Reserves to fall below 25% of General Fund Expenditures, and never allow Capital Improvement Funds Reserves to fall below One Million Dollars.
Foster City Reserves are well above those minimum levels, but our projections show that in the next two years these minimums may be tested.
Two Propositions on the March 2004 ballot will test those minimums. Proposition 57 is the $15 Billion Fiscal Recovery Bond measure. Proposition 58 is the companion Spending Limitation measure. Both must pass together on March 2nd. The Bond cannot be issued without the Spending Limitation.
This fiscal year California has been using short term financing to pay State expenses. Short term borrowing in the form of RANs (Revenue Anticipation Notes) and RAWs (Revenue Anticipation Warrants) are due on 30 June 2004. Without the money from the Prop 57 Bond, I believe the State will make massive raids on our Reserves to pay their bills.
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