Financial Vision - Where are we going? What Matters?

“If you don't know where you are going, any road will get you there.” Lewis Carroll

Mayor Barth cited this quote concluding the Jan. 9, 2013 council meeting presentation by City Manager Vina. He laid out a plan to open up the entire Budgeting methodology to the council, community and advisors / consultants for a fully transparent process. He also emphasised Strategic Planning as a tool that has been missing in the annual Encinitas financial planning and assessment. The council asked questions, deliberated, heard public speakers and came to the unanimous vote 5:0 to follow the CM's recommendation.

The following information was submitted in the agenda packet prior to the meeting. The complete slide series and introductory memo are included here for documented reference. The subject is too complex and this is merely a glimpse of what is to come.  This process will take half the year. Let this be communique number one. It sounds great, but we've matured I suspect after projecting our own dreams on hopey, changey phrases versus our actual experiences in past ideological strategies.  That said, it looks solid.

SUBJECT: Introduction of the development approach for the FY13/14 and FY14/15 Operating Budgets and FY13/14 to FY18/19 Capital Improvement Program; and Strategic Planning for Council discussion and possible direction.

BACKGROUND:
The City Council adopts a two year operating budget and six year financial plan and capital improvement program. The typical budget cycle begins with the preparation of the operating budget which includes projections and assumptions for both income and expenses anticipated for the two year period. Additionally, capital improvement projects are evaluated and funding sources identified in order to develop the multi-year capital improvement program. It has also been typical that goal setting sessions occur at City Council meetings in order to gain input from the public. These sessions usually occur in the January or February time frame. Following the goal setting process the Finance Department, in conjunction with all city departments, prepares the operating and capital budgets for City Council discussion and approval. The adoption of the two year operating budget and six-year capital budget typically occurs in May.

The management of the city's budget throughout the year is a very deliberate process, with the Finance Department holding quarterly budget meetings in order to monitor the budget plan and check in with departments on progress. This process has been very valuable and results in all departments managing within the resources allocated for the year. Additionally, staff prepares a mid-year report for City Council's information and direction that is presented in January or February each year. This midyear report also assists with overall management of the budget and provides for any adjustments that might be needed six months into the fiscal year and budgetary plan.

The City of Encinitas has practiced good fiscal management through the leadership of the City Councils fiscal policies. Prudent fiscal policies include having a balanced budget each fiscal year, monitoring of spending and income, management of debt, and establishment of reserves. The City continues to meet its reserve requirements and is financially stable.

Editor: Fair to say that many in the community distrust this assessment. There is the perception that voters have been lied to and there needs to be some acknowledgement. One could start with the extremely difficult process to get answers and a clear accounting. Clearly this is what this process is designed to do. 

DISCUSSION:
Staff is currently in the process of organizing for the development of the FY13/14 and FY14/15 Operating Budgets as well as the six-year Capital Improvement Program for FY13/14 through FY18/19. Before the budget hearings begin this year, staff will present a number of informational budget sessions to the City Council in order to provide updates and background on the operating and capital budgets. The informational sessions will include topics such as:

• The city's revenues and expenses, including assumptions and projections
• Two year budgeting process
• Six year fiscal planning
• Reserves and Debt Ratio
• Pension Reform, Unfunded Liabilities, and PERS costs and actuarial information
• Contracts for Services
• Capital Funding sources and programming processes

During the Moonlight Beach Improvements and Encinitas Community Park project workshop on July 11, 2012, the City Council identified $600,000 of available funding that can be allocated to future projects. Staff will present this opportunity during a capital improvement workshop as part of this year's budget process. Following the informational budget sessions, staff will be presenting the proposed budgets for City Council's consideration and adoption.

STRATEGIC PLANNING:
While the City's budget management and fiscal policies have served it well since incorporation, there is an opportunity to enhance this process with the use of strategic planning. Developing and pursuing long-term vision for Encinitas through strategic planning will provide a decision making model that will better connect resources with specific goals. A Strategic Plan would be the result of such an effort and can be used to better communicate with the community on the specific initiatives that are planned to continue providing great quality of life in Encinitas. The specific approach for developing a strategic plan has not yet been prepared. With City Council's direction to proceed with strategic planning, staff will come back with the implementation approach for City Council's discussion and further direction.

Generally, the strategic plan would include two years of specific initiatives approved by the City Council and would be consistent with the two year budget cycle currently in practice. Every year the City Council would have an opportunity to review and update the strategic plan as necessary. Strategic planning usually begins with a "visioning" exercise of the elected body that identifies quality of life elements. The visioning approach leads the organization and community towards specific goals that can be tied to the budget process to assure that resources are aligned with this vision. This same exercise and approach will assist with the updating of the City's General Plan as it would provide a policy framework from which to work towards an update of the existing general plan.

Strategic planning includes many components; however, essential to any strategic plan are: 1) the support and direction from the elected body with exercises that determine the vision for the future and addresses broad themes of common interest, 2) community outreach that is inclusive of all local community leaders, 3) decision making tools that assists with the evaluation of current programs and activities and help set priorities for the future, and 4) accountability through established measurable outcomes to ensure accomplishment of the goals.

(PowerPoint Presentation)

City of Encinitas
City Council Meeting
January 9, 2013
.
Budget Development
Strategic Planning

"Budget Basics"

The Budget Cycle
Budget Preparation and Management

• Revenues
• Expenses
• Two Year Budgeting
• Six Year Fiscal Planning

Reserves
Debt Ratio

Budget Development Approach

Informational Budget Sessions - February/March
Budget Hearings – March/April
Continuous Improvements - April
Strategic Planning Concept - April
Budget Adoption – May/June

Operating Budget

Personnel Costs

• Overview of costs
• Pension Reform
• Unfunded Liabilty
• PERS costs and actuarial

Contracts for Services

• Law Enforcement
• Park Maintenance
• Building Inspections

"On The Horizon" - challenges/opportunities

Capital Budget

Overview of Funding Sources
Programming of Funds processes
"In-progress" projects
"In the Pipeline" projects
Future projects

Capital Improvement Workshop

Council confirmation of current projects
Funding strategies for $600,000
Future Projects

Council Reports Back

Budget Preparation

• North County Economic Development council (? ed)
• Citizens Academy

Strategic Planning

• Environmental Risk Assessment study
• Special Case streets criteria
• Incremental development policies

Operating Budget FY13/14 and FY14/15

Base Budget
Projections and Assumptions
New Programs/Activities/Costs

Continuous Improvements

Department Efficiencies
Public Works/Engineering merger
Wastewater consolidation
Fire Management Services

Strategic Planning

What is Strategic Planning?
Why have a Strategic Plan?
Possible next steps for implementation.

Strategic Planning for Local Government

A decísion-making model

• A systematic way to present the relationship between available resources you have to operate your programs and activities AND the changes or results you hope to achieve.

A Community Communication Action Plan

• A tool that allows the local government agency, organizations, community leaders, and the public to participate in setting goals and identifying priorities.

Why Strategic Planning?

Introduces logic and decision matrix to budget process
Connects quality of life goals to funding decisions
Provides policy framework that supports the General Plan, annual budget, department work plans, etc.
Assists in setting priorities and understanding community needs

Why Strategic Planning?

Brings efficiencies to government
Improves customer service to the community
Provides a vision and focus through an "action plan"... .accountability
Clarity in policy intent and direction

Possible Next Steps

"Visioning" session(s) with Mayor and City Council
Collection of data
GAP analysis.... .does current effort support vision?
Design community outreach efforts
Identify and prioritize initiatives
Allocate resources
Assign Key Indicators
Develop Action Plan

Council Direction

1. Proceed with Strategic Planning?
2. Reorganize General Plan effort?

~ end of slide show ~

The Council Members discussed the General Plan Update reports scheduled for the three February meetings (Planning, GPAC & ERAC each scheduled for a separate week) and agreed that these should be kept as agendized presentations despite this evenings' vote to halt the General Plan update effort until the visioning, strategic planning is complete.