1. Community Blue Ribbon Task Force on Fiscal Health Final Report to City Council November 15, 2011

2. The City of Walnut Creek continues to face major financial challenges.

3. The 15-member Task Force completed nearly one year of education, research, and deliberations in creating our report. Obtain sufficient understanding of the City’s operating and capital budgets Review documents, reports and studies to assist in learning City finances Produce a written report to the community and City Council Recommend next steps as appropriate The Charter included: Establishing the budget priorities Serving as a Budgetary or Financial Oversight Body Determining service delivery or resource allocation decisions Setting City policies The Charter did not include:

4. The City faces shortfalls in both operating and capital budgets. Table 4 Summary of Ten-Year (2010 – 2020) Capital Investment Program Costs 2 Funded ($ mil) Total Cost ($ mil) Unfunded ($ mil) Asset Management Projects $44.0$73.0$29.0 Discretionary Capital Projects $12.0$33.0$21.0 Total of 2010 – 2020 CIP $56.0$106.0$50.0 Table 3 General Fund Revenue and Expenditure Projections From Long Term Financial Plan 1 Revenues ($ mil) Expenditures ($ mil) Surplus/ (Shortfall) ($ mil) 2010 / 2011 $65.3$64.4$0.9 2011 / 2012 $64.6 $0.0 2012 / 2013 $64.1$64.8($0.7) 2013 / 2014 $65.7$67.3($1.6) 2014 / 2015 $67.4$68.5($1.2) 2015 / 2016 $69.1$69.9($0.8) 2016 / 2017 $70.8$71.3($0.4) 2017 / 2018 $72.6$72.9($0.2) 2018 / 2019 $74.5 $0.0 2019 / 2020 $76.3$74.2$2.12 2 Represents “Budget Scenario” with which Task Force is concerned about likelihood of achieving 1 Does not include a substantial amount of funds necessary for preserving and maintaining some of the City’s existing assets and infrastructure

5. To meet these financial challenges, the City must continue to be the economic center of Contra Costa County.

6. The Task Force presents its final report which includes 38 recommendations to help make sure we continue to thrive. The City Council should adopt a plan to ensure the timely implementation of these recommendations.

7. We first reviewed the background, context, and history of Walnut Creek and local government, in general.

8. Prop 13 (1978) Prop 62 (1986) Prop 218 (1996) Prop 1A (2004) Prop 22 and 26 (2010) There exists a complex relationship between State and local government. Property taxes not as prominent a funding source as in the past Ability to raise revenue limitedAny local tax must be voter approved The finances of any city linked to the general economy and legislature of State Levy, collection, and distribution of taxes is antiquated

9. Recent national, state, and regional trends have affected Walnut Creek. Source: Walnut Creek Budget Documents

10. Public safety is essential Quality schools and educational opportunities Value of arts, culture, open space, recreation Position as sales tax generator is necessary Economic development is critical The Task Force took into account the values and concerns of Walnut Creek residents in evaluating potential financial strategies.

11. Automotive shopping, retail, restaurant and cultural hub Major professional, financial, and real estate employment center Workforce boosts daytime population from 65,000 to 85,000+ Additional visitors shop, eat, and enjoy cultural amenities Walnut Creek has long been in a financially enviable position relative to other communities in the Bay Area.

12. Family-friendly environment for all ages Population growth of.5% to 1% per year Majority of new housing stock in downtown area Average household size of 2.1 smaller than average People over 65 years of age make up over 27% (and growing) of the population Demand for services will continue to evolve as generational progression continues In order to fully consider viable long- term financial approaches to the City’s future, the Task Force also looked into the changing demographics of the City.

13. Walnut Creek has long been high priority location for business Increased competition from other cities City Council and staff began discussing increasing and formalizing economic development in 2010 City recently created Economic Development Program with Economic Development Manager Economic development is the key to recovery

14. The City of Walnut Creek provides a large variety of services to residents supported by various revenue sources that have been impacted by the recent global recession.

15. Community Development Public ServicesPolice Arts, Recreation, and Community Services General Government Administrative Services The residents of Walnut Creek are accustomed to a broad spectrum of services and the high quality with which they have historically been provided.

16. Negotiated new labor agreements Reduced staffing levels Increased charges for services Deferred maintenance on some infrastructure and buildings Eliminated or reduced some programs and services During the past several years the City Council has implemented a variety of measures to reduce operating costs.

17. Despite its efforts, the City still has financial challenges ahead. Aging Infrastructure Inadequate funds to meet replacement and preservation requirements

18. Another significant financial challenge facing the City is its employee retirement benefit and health insurance obligations.

19. Revenue Enhancement Delivery of Services Capital Investment Program Demographics, Trends & Growth The Task Force has provided 38 recommendations, backed by 14 findings, which can bolster the City’s long-term financial health.

20. The City’s Long Term Financial Plan Important that City develop fully integrated financial management process Long Term Financial Plan Capital Investment Program

21. Expenditures – Capital Costs Preserve existing assets before adding new facilities Set aside sufficient funds Public participation in financing plan When considering new projects, include evaluations of future, long-term operating and maintenance costs Proper management of existing assets Concentrate on more efficient use of numerous City-owned facilities Consider sale and/or leasing of some facilities

22. Largest expenditure in operating budget is employee compensation Future labor contracts should provide for greater employee contributions to retirement funds City should participate with other cities towards statewide retirement reform City should quantify exposure and develop tools to mitigate future potential CalPERS liabilities Greater contribution to health care insurance from employees Remain competitive with labor marketplace to keep quality staff Expenditures – Operating Costs

23. City should vigorously support efforts to ensure success of Economic Development Program Closely monitor costs associated with providing services and programs to maximize financial recovery from direct beneficiaries Even after efforts to reduce costs, there will not be sufficient funds to cover near and longer term obligations Initiate efforts to place a ½ cent sales tax on ballot Revenue

24. Develop a plan to provide a smooth transition through future staff changes Continue to work with School Districts to support quality education Monitor the demand on police services created by downtown late-night establishments to ensure Walnut Creek remains a safe community Take steps to enhance communication with City residents Continue to adjust delivery of services in response to changing demographics Delivery of Services

25. Summary of Recommendations Develop integrated financial management process Set aside funds for replacement costs of aging capital assets Establish greater cost efficiencies in the use of City’s capital assets by consolidating facilities Only after implementation of cost reduction measures and other methods of increasing revenue, consider a ½ cent sales tax increase Support efforts of the Economic Development Program Reduce City’s operating expenses by implementing reductions in total payroll costs through changes in employee contributions to retirement and health insurance costs