2006- 2007
Budget &
Financial Plan
FINAL BUDGET
City of Milpitas
CALIFORNIA
CALIFORNIACal
Midtown
2006- 2007
Final
Budget
Jose S. Esteves, Mayor
Armando Gomez, Vice- Mayor
Robert Livengood, Councilmember
Althea Polanski, Councilmember
Debra Giordano, Councilmember
Submitted By:
Charles Lawson, City Manager
Prepared By:
Finance Department
City of Milpitas, California 2006- 2007 Final Budget
TABLE OF CONTENTS
Letter of Transmittal
Budget Message. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Budget Guidelines and Fiscal Policies
Budget Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Budget Preparation Process and Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Fiscal Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Resolutions
Resolution Adopting the Appropriations Limit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Joint Resolution Adopting the Final Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Joint Resolution Making Findings for Use of RDA Funds. . . . . . . . . . . . . . . . . . . . . 36
Resolution Determining Use of Housing Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Resolution Authorizing Public Improvements Payments . . . . . . . . . . . . . . . . . . . . . 39
General Information
City History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Demographic Profile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Vicinity Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
City Council, Board and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Directory of Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Gann Limit Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Computation of Legal Bonded Debt Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Historical Staffing by Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Financial Information
Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
General Fund 5- Year Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Distribution of Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Distribution of Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Revenue Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
2006- 2007 Final Budget City of Milpitas, California
Revenues by Source ( Summary) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Revenues by Source ( Detail) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
History of Property Tax Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
History of Transient Occupancy Tax Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Property Tax, Comparison with Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . 75
Transient Occupancy Tax, Comparison with Other Jurisdiction . . . . . . . . . . . . . . . . 77
History of Sales Tax Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
History of License, Permit and Fine Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Sales Tax, Comparison with Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Building Permits, Comparison with Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . 83
History of Intergovernmental Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
History of " Other" Tax Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Franchise Fees, Comparison with Other Jursidictions . . . . . . . . . . . . . . . . . . . . . . . 87
Expenditures by Fund ( Summary) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Expenditures by Fund ( Detail) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Expenditures by Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Internal Cost Allocation Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Operating Transfers Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Budgets Narrative and Summary
City Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
City Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
City Clerk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
RDA & Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Building and Safety. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Recreation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Information Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
City Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Public Works. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Planning & Neighborhood Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Police . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Non- Departmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
City of Milpitas, California 2006- 2007 Final Budget
Capital Budget
Capital Improvement Program 2006- 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Community Improvement Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Park Improvement Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Street Improvement Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Water Improvement Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Sewer Improvement Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
Storm Drain Improvement Projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Redevelopment Agency
Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Appendix
Budget and Budgetary Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Fund Descriptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Revenue Descriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Expenditure Descriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
List of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
List of Departments/ Divisions/ Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202
List of Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
List of Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Glossary of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
2006- 2007 Final Budget City of Milpitas, California
City of Milpitas, California 1 2006- 2007 Final Budget
Budget Message
August 28, 2006
Honorable Mayor and City Council
City of Milpitas
Milpitas, California 95035
Members of the City Council:
Submitted for your review and approval is the Annual Budget for Fiscal Year 2006- 2007. This
budget includes the City’s operating and capital improvement budget, the Redevelopment
Agency’s activities and the City’s water and sewer utility operations.
This budget has been developed to assist the City Council in the achievement of its vision for
Milpitas and to ensure the delivery of quality, timely, and cost effective services to the community
while continuing to meet future fiscal challenges in the most professional and responsive
manner. Consequently, it is appropriate to begin this discussion of the budget with a review of
the City Council’s primary policies.
Policy Direction
The Fiscal Year 2006- 07 ( FY 06- 07) budget was developed to incorporate the following City
Council’s priorities and policy direction:
􀁑 Continue to improve and provide high level of vital public services to the community in the most
effective way
􀁑 Evaluate and review all City functions to eliminate duplications and achieve cost efficiencies
􀁑 Maintain a reserve policy for the General Fund and other major funds to ensure against economic
uncertainties
􀁑 Complete the design and construction of the new Library and Midtown parking garage
􀁑 Initiate economic development strategies that will recruit and retain businesses in the City
􀁑 Focus on Redevelopment projects that will provide for the economic stability of the community and
implementation of the Midtown Specific Plan
􀁑 Encourage commercial and residential development focused in the Midtown Specific Plan area
that will center on the new light rail system and the future BART system to alleviate traffic
congestion
The Budget Highlights section describes how staff has implemented the Council’s policy direction
through the budget. The City Council held a budget work session in March and directed City staff
to conduct public outreach meetings to prioritize various City programs.
CITY OF MILPITAS
455 EAST CALAVERAS BOULEVARD, MILPITAS, CALIFORNIA 95035- 5479 www. ci. milpitas. ca. gov
2006- 2007 Final Budget 2 City of Milpitas, California
Letter of Transmittal Budget Message
BUDGET HIGHTLIGHT
FY 06- 07 Operating Budget was developed conservatively to address the fiscal challenges faced
by the City with increase in General Fund expenditure continues to outpace revenue growth.
Although local economy continues to recover as indicated by increases in property tax revenue,
sale tax revenue and building permit fees, total General Fund revenue projected for FY 06- 07 is
still below what we received six years ago. Meanwhile, total expenditure has increased 35%
during the same time span. It is imperative that the City develops strategies to address FY 06- 07
and future years’ budget shortfalls. Limited by resources, the FY 06- 07 Operating and Capital
Budgets were prioritized to provide services that are most cost effective and beneficial to the
community and projects that will bring economic stability to the City. Some of the most significant
highlights from the budget are described below:
􀁑 Balance the General Fund budget without using any reserves by continuing financial strategies
such as funding 95% of the operating budget and judiciously reduce workforce through attrition.
All these cost saving measures will be applied in a manner that will least impact services to the
citizens and community.
􀁑 Continue the present hiring freeze in all but the most necessary positions to achieve cost savings
of more than $ 4 million.
􀁑 Limit temporary workforce to jobs that are truly temporary or seasonal in nature.
􀁑 Provide funding to maintain existing employment benefits while striving to negotiate in good faith
with the employee groups to consider prudent salary adjustments.
􀁑 Begin funding a portion of the outstanding retiree medical benefits liability by establishing an
irrevocable trust, in anticipation of the requirements of Government Accounting Standards Board
Statement No. 45.
􀁑 Careful evaluation of infrastructure and programming needs in the Five- year Capital Improvement
Program to fund and deliver the Council’s highest priority projects. These projects will include
construction of the new Library, a Midtown parking garage, and major infrastructure and street
improvement in Main Street and Abel Street. All these capital improvement projects, centered in
the Midtown area, are prioritized to encourage commercial and residential development that will
provide economic stability in that area.
􀁑 Complete Phase II of the Transit Sub- Area Land use Plan around the southern boundary of
Milpitas in order to focus on developments that will integrate with the light rail system and the
future BART system.
􀁑 Retain and recruit businesses in the City. The City began to see the results of the economic
development efforts by adding an Economic Development Manager position in FY 05- 06 and
adopting an Economic Strategic Action Plan. The City was successful in attracting a major car
dealership to locate in Milpitas. It is anticipated that the car dealership will begin operation in the
spring of 2007.
􀁑 Continue to stabilize the General Fund expenditure and revenue in order to maintain a high
general credit rating - Standard & Poor’s rated the City “ AA” in FY 05- 06.
BUDGET OVERVIEW
The total Annual Budget for FY 2006- 07 is $ 164,137,690. This is a 14.8% increase from the FY
2005- 06 Annual Budget. Excluding the City’s FY 06- 07 Capital Improvement Budget, the total
operating budget is $ 109,486,396, a 0.1% decrease from last year. The total budget includes the
City’s Water and Sewer Utility enterprise budgets of $ 11,446,545 and $ 17,400,700 respectively.
It also includes the City’s Redevelopment Agency ( RDA) budget of $ 60,134,501. The total
budget for capital improvements for FY 06- 07 is $ 54,651,294. A separate Capital Improvement
Program ( CIP) budget document is produced annually that provides a detailed description of
each project. The CIP document includes all projects for the budget year as well as profiling
City of Milpitas, California 3 2006- 2007 Final Budget
Letter of Transmittal Budget Message
anticipated community needs over the subsequent four years. A summary of each project
description and funding requirement can be found on pages 165 through 177 of this document.
The General Fund budget is $ 68,300,030, a 3.8% increase compared to FY 2005- 06. The
primary component of this increase is in the category of Salaries and Benefits. Salaries and
Benefits show a net increase of 3.7% from last year due to a combination of factors: anticipated
wage increases in accordance with the labor contracts under negotiation and increased medical
insurance premium.
Services and supplies increased by 5.4% compared to last year primarily due to increased
funding for the following: equipment and vehicle replacement in the form of amortization charge
to the user departments, citywide utility expenditures for electricity, gas and water, and repairs
and maintenance expenditures.
The budget anticipates an overall 8.8% General Fund revenue growth in FY 06- 07 compared to
FY 05- 06 original revenue estimate. However, the growth of the General Fund revenue is still not
sufficient to keep pace with the increased expenditures. In order to balance FY 06- 07 budget
without using any General Fund reserves, the budget includes cost saving measures as follows:
􀁑 Continue the present hiring freeze in all but the most necessary positions in FY 06- 07. The hiring
freeze has been a key element in helping the revenue shortfall in the last four years and is
projected to contribute more than $ 4 million savings for next year.
􀁑 Continue funding 95% of the operating budget. Historically, the City’s departments have rarely
expended 100% of their budget. To achieve approximately $ 3.6 million cost savings up front, each
department’s General Fund budget will only be funded at a 95% level. This budget strategy will
allow each department latitude in controlling each unit’s costs by prioritizing its expenditures in
such a manner that will least impact services to the public.
􀁑 Defer property acquisition payment from Redevelopment Agency from FY 05- 06 to FY 06- 07. The
Agency purchased several properties from the City two years ago. The City has the right to
demand payments when needed. In the FY 05- 06 budget, the Agency was scheduled to make
$ 6.1 million payment to the City’s General Fund. Revised projection for the General Fund
indicates that revenues will be more than original estimate, therefore only a portion of the payment
is needed in FY 05- 06. This strategy recommends deferring $ 5.1 million of the payment to FY 06-
07.
􀁑 Reduce workforce through attrition. While the City was able to use reserve balance to maintain a
high level of service in the past, the ways to provide these services need to be reviewed
comprehensively in times of prolonged budget deficits. Reducing workforce through attrition will
require each department to further streamline processes and re- assign job duties to accomplish
essential tasks. This strategy can reduce costs by about $ 700,000.
􀁑 FY 06- 07 Operating budget does not anticipate utilizing any of the General Fund reserve balance.
The remaining unreserved, undesignated fund balance will be approximately $ 11 million which at
16.1% of the FY 06- 07 budget appropriations is in compliance with the City’s budget policy of
maintaining a 15% reserve.
2006- 2007 Final Budget 4 City of Milpitas, California
Letter of Transmittal Budget Message
Economic Trends, Development and Profile
Milpitas is situated within the Silicon Valley region, known throughout the world as the home of
high technology, innovation and research. Milpitas, considered the “ Crossroads of Silicon
Valley,” with most of its 13.6 square miles of land situated between two major freeways, I- 680 and
I- 880, has experienced tremendous growth since its incorporation in 1954. Over the past 30
years, the population growth has increased from 26,561 in 1970 to 62,698 in 2000 ( latest
census). The Bay Area has experienced significant employment growth from 1992 through
2000, adding more than 170,000 jobs. However, in 2001, Santa Clara County experienced its
first negative job growth since 1992. Between 2001 and 2004, over 130,000 jobs were lost as a
result of the economic recession. This region is severely impacted due to concentration of the
high- tech industry and the shifting of some of these technology and manufacturing jobs
overseas. Consequently, while the nation and the rest of the State have begun to experience
economic growth, the Silicon Valley is still lagging. Milpitas is similarly impacted because of its
location and comparable economic mix.
There are approximately 1,790 acres or 2.9 square miles of land area in the City limits
designated for various industrial uses; about 271 acres are vacant and available in parcels
ranging in size from ½ acre to 75 acres. Included in this acreage total are eight industrial parks
and 550 manufacturing plants. An estimated 350 acres of land are dedicated to regional and
community retail centers supporting 3.5 million square feet of commercial shops. The Great Mall
of the Bay Area is the largest enclosed mall in Northern California, with approximately 1.1 million
square feet of leasable space for retail and entertainment operations. Several local shopping
centers serve regional needs for Asian- oriented retail and services.
City's Economic Trends
98 99 00 01 02 03 04 05 06 07
F i s c a l Y e a r s
Millions
Revenue Expenditures
Projected Budget
The following chart provides the historical trend of the General Fund revenues and
expenditures from FY 97- 98 through FY 05- 06, along with the budget projections for FY 06- 07.
City of Milpitas, California 5 2006- 2007 Final Budget
Letter of Transmittal Budget Message
The leading economic segments are restaurants, apparel stores and electronics equipment. The
five largest manufacturing employers are Cisco Systems, Inc., Lifescan Inc., LSI Logic
Corporation, Seagate Technology and Solectron Corporation. Other major employers are Palm
One, Linear Technology, KLA- Tencor. Several of these top employers make Milpitas their
corporate headquarters. The two largest non- manufacturing employers in Milpitas are The Great
Mall of the Bay Area and the Milpitas Unified School District.
Milpitas Redevelopment Agency ( RDA) is one of the top ten RDAs in the State. With the 2003
expansion of the RDA, Redevelopment Area 1 encompasses 2,230 acres or 26% of the City.
The Project area produces over $ 27 million in annual gross tax increment. In November 2003
the RDA issued $ 200 million in tax allocation bonds to generate funds for key City and Agency
projects including a new library, major infrastructure improvements and a new senior center.
Major Development Activities in the City
Midtown Specific Plan – The vision for this area includes high density housing within walking
distance to light rail and BART to support the public investment in mass transit, transforming
neighborhoods into an attractive and economically vital district with plazas and network of
pedestrian and bicycle trails, a vibrant streetscape along the north end of Main Street and a
mixture of housing, shopping, employment, entertainment, and cultural and recreational
opportunities. The implementation efforts began by several capital improvement projects such
as the new Library, parking garage, Main Street and Abel Street infrastructure improvements.
Other development activities that are being planned by outside agencies include the design and
construction of a County Health Center, parking garage and a 103- unit Senior Housing restricted
for low- income seniors.
Transit Sub- Area Land Use Plan – The City developed phase I of a Transit Sub- Area Land Use
Plan which provides development concept for the area surrounding the future Montague/ Capitol
BART station and two VTA Light Rail Stations. In FY 06- 07, the City will complete phase II of the
Plan which will include a general plan amendment, zoning changes, design guidelines, fiscal
impact study and environmental report. The intent of the Plan is to foster economic development
of the area, strengthen and expand retail uses to increase sales tax revenues, attract major
retailers and provide housing and amenities such as parks, schools, retail and restaurants.
Residential Development – Residential development activities remained relatively strong and
have shown signs of increased activities. Milpitas represents one of the more affordable
alternatives in Santa Clara County, with median home prices at $ 629,000, lower than the
County’s median home price of $ 675,000. Residential development approvals in progress
outside the Midtown area include Barry Swenson’s Twin Towers ( 181 condominium units), Aspen
Apartments ( 101 units), Town Center ( 65 housing units) and Baystone condominium ( 387 units).
Spurred by the high density potential of the Midtown Plan, residential and mixed use
developments that are in the planning stage include Apton Plaza ( 98 condominium units and
3,000 square feet of retail space, Centria ( 481 condominium units), and Oak Springs ( 147
condominium units). Residential development under construction includes 683 condominium
and townhouse units of the KB Homes project, of which 110 units will be deed restricted for
affordable housing.
2006- 2007 Final Budget 6 City of Milpitas, California
Letter of Transmittal Budget Message
Non- residential Development – Non- residential development includes redevelopment of existing
tenant spaces and buildings in the Town Center. A Super Safeway has been approved and
construction is in progress. Other commercial development activities include the development of
land adjacent to the KB Homes for three car dealerships. Piercy Toyota was recently approved
to construct a 70,000 square foot showroom and a 52- bay service area at that site.
Great Mall of the Bay Area - The Great Mall is the largest enclosed mall in Northern California,
with approximately 1.1 million square foot of leasable space. In 2003, Mills Corporation became
the new owner of the Great Mall and began its efforts to attract new anchor tenants. Kohl’s
Department became one of the major anchor tenants in 2005. Other new tenants that were
added include Nike, Anne Klein, Borders Book, and Abercrombie & Fitch. Other tenant
approvals in progress include a Neiman Marcus outlet.
Consumer Confidence Level
Despite recent fluctuations of the consumer confidence index, the overall consumers’
assessment of current economic conditions remains favorable, primarily due to improved job
outlook. The March 2006 index is near a four- year high. Consumers are more optimistic than
they were a year ago, which could lead to easing in consumer spending. This sentiment is
reflected by increased local sales tax revenue in recent months.
Consumer Confidence
40
50
60
70
80
90
100
110
120
130
Jan- 01 Jan- 0 2 Jan- 0 3 Jan- 04 Jan- 05 Jan- 06
Source: Consumer Conference Board
City of Milpitas, California 7 2006- 2007 Final Budget
Letter of Transmittal Budget Message
Revised General Fund Revenue Estimates for Current Fiscal Year 2005- 2006
Recent economic recovery in the Bay Area continued to improve the City’s revenue. The year-to-
date revenue was better than projected, primarily due to the improved economy and
secondarily due to receipt of one- time revenues. The revised revenue estimates for FY 2005-
06 assume that General Fund revenues will be $ 4.4 million ( 9.5%) more than budgeted.
Sales tax revenues are expected to be $ 0.2 million less than budget due to the delayed opening
of a major car dealership. Originally, that car dealership was anticipated to be in operation in the
spring of 2006 but the opening has been postponed to the spring of 2007. Other economic
segments were relatively stable in FY 2005- 06 with increases primarily coming from apparel
stores and restaurants. Building permit revenue is expected to be almost $ 1.8 million more than
originally estimated due to recent residential development activities in the Midtown area.
Transient Occupancy Tax ( TOT) revenue is expected to be less than original estimate by
$ 40,000. However, FY 05- 06 TOT still shows a moderate increase over FY 04- 05 revenue by
about $ 270,000 or 6.8%. Interest earnings on the City’s investment portfolio are expected to be
lower than the FY 2005- 06 original estimates by $ 250,000 due to lower interest earnings on the
investment portfolio as some of the higher yield securities matured.
City Sales Tax Revenues
Top 10 Economic Segments ($ 10.1 million)
7.0%
9.1%
8.1%
9.5%
3.9%
17.0%
10.1%
9.3%
11.5%
14.5%
Service Stations 7.0%
Bldg Mtrls- Retail 9.1%
Furn/ Appliance 8.1%
Misc Retail 9.3%
Dept Stores 9.5%
Apparel Stores 14.5%
Light Industry 3.9%
Restaurants 17.0%
Electronic Equip 11.5%
Office Equip 10.1%
Source: MBIA MuniServices Company
Top Ten Sales Tax Generators by Economic Segment
The chart below provides a snapshot of the City’s sales tax revenue by economic segment in
the last four quarters. Total amount of sales tax revenue for the latest benchmark year was
about $ 12.2 million, with the top ten economic segments generated about $ 10.1 million.
Sectors such as general retail, and food products lead the increases over a year ago.
2006- 2007 Final Budget 8 City of Milpitas, California
Letter of Transmittal Budget Message
Property tax is expected to be $ 0.6 million more than original estimate primarily due to increase
assessed valuation on secured properties. Due to the housing market bloom in the last two
years, a lot of the real properties have changed ownerships causing the assessed valuation to
increase by approximately 5%, much higher than the 2% permitted by Proposition 13.
FY 05- 06 motor vehicle license in- lieu tax revenue increased by approximately $ 960,000 more
than budgeted due to repayment of that tax revenue by the State. In FY 03- 04, the State
borrowed a portion of the Motor vehicle in- lieu tax from the local agencies and promised to repay
in August 2006. Due to unexpected increases in State revenues, the repayment was made early
in FY 05- 06 but is considered a one- time revenue.
Other revenues such as charges for services and miscellaneous revenue also show increases
over original estimates. The increase in charges for services of about $ 730,000 is primarily
related to reimbursement of staff’s services provided to private developers. The miscellaneous
revenue increase of about $ 680,000 is related to the return of the City’s equity share and profits
on the sale of a property. The increase in miscellaneous revenue is considered one- time.
Despite revenue increases experienced in several major revenue sources, the General Fund is
projected to close out the fiscal year using about $ 1 million of the operating transfer from
Redevelopment Agency. The FY 05- 06 budget anticipated a $ 6.1 million transfer from the
Redevelopment Agency Fund, for acquisition of several key City properties for redevelopment
purposes. Due to improved revenues in FY 05- 06, staff proposes to transfer only $ 1 million in FY
05- 06 and defer the remaining $ 5.1 million to FY 06- 07, as one of the strategies to balance FY
06- 07 budget.
REVENUES AND OTHER FINANCING SOURCES
Revenue detail is shown in the Financial Information section of the budget. A summary of
revenues, including transfers between funds, and the increase or use of fund balances for
various funds is shown on the following chart as a comparison between FY 05- 06 and FY 06-
07.
REVENUES AND OTHER FINANCING SOURCES
Fund FY 05- 06 FY 06- 07
Over ( Under)
Prior Year
General $ 65,819,064 $ 68,300,030 $ 2,480,966
Library 15,000 345,000 330,000
Special Revenue 4,080,748 3,805,675 ( 275,073)
Capital Project 2,605,813 2,705,239 99,426
Redevelopment 40,344,440 60,134,501 19,790,061
Water 10,877,713 11,446,545 568,832
Sewer 19,279,064 17,400,700 ( 1,878,366)
Total $ 143,021,842 $ 164,137,690 $ 21,115,848
City of Milpitas, California 9 2006- 2007 Final Budget
Letter of Transmittal Budget Message
Revenue Estimates for Fiscal Year 2006- 07
Total estimated revenue and other financing sources that include the use of reserves are
estimated to increase by $ 21.1 million compared to the FY 2005- 06 budget. In FY 2005- 06 the
General Fund revenue was originally estimated to be lower but was revised upward by $ 4.4
million to reflect the economic improvement experienced in the past year. In FY 06- 07, General
Fund revenues are expected to be approximately $ 320,000 lower than FY 05- 06’ s revised
revenue of $ 50.5 million due to one time revenues received in FY 05- 06 that are non- recurring in
FY 06- 07. The assumptions for projection and analysis of the major revenue sources are
discussed below.
General Fund Revenue Estimates
FY 2006- 07 estimated General Fund revenue assume a $ 4 million or 8.8% increase over FY 05-
06 budgeted revenue but 0.6% or $ 320,000 decrease from FY 05- 06 revised revenue projection.
Some of the changes include the following.
Sales tax revenues for FY 05- 06 are revised to be less than budget by $ 0.2 million. Although the
Association of Bay Area Governments ( ABAG)’ s forecast is 2.8% next year, our assumption for
FY 06- 07 sales tax revenue is a 5.5% increase over FY 05- 06 revised estimate. Total sales tax
revenue is estimated to be $ 16.2 million. The projection is based on continued economic
recovery and increased sales in the food products and general retail economic segments. The
Great Mall of the Bay Area shopping mall has added new anchor stores which generated
increased sales. In addition, a major car dealership is expected to open its operation in Milpitas
in late FY 06- 07.
Building permit revenue for FY 05- 06 is estimated to be $ 1.8 million more than budget due to
recent residential development activities in the Midtown. In FY 06- 07, building permit revenues
are projected to be approximately $ 3.7 million, approximately $ 630,000 less than FY 05- 06
revised revenue, based on the number of recent applications submitted and the size of the
projects. It is anticipated KB Homes will continue with their development activities and other
residential development projects such as Centria, Oak Springs and Town Center will commence.
Property tax revenues are estimated to be $ 0.6 million more than FY 05- 06 budget due to
addition of new residential developments on tax roll and recent number of transactions that allow
the County Assessor to re- assess properties at their market values. It is anticipated that property
tax revenue will increase by 10.5% based on a combination of factors. First of all, the County
Assessor provided report of growth on the assessed valuation at about 6%. Second, the voters
in California approved Proposition 1A which prevents the State from reducing local government’s
share of property tax except in the case of fiscal emergency. Starting in FY 06- 07, the State will
cease shifting local agencies’ property tax to the Education Revenue Augmentation Fund
( ERAF). The amount of the shift averages about $ 1 million per year in the last two fiscal years.
The restoration of property tax is included in the 10.5% projected increase for next year.
Hotel/ motel Transient Occupancy Tax ( TOT) revenue showed an increase of $ 30,000 over
budget in FY 05- 06 primarily because the revised projection for FY05- 06 is below target by about
$ 40,000. It is projected that that FY 06- 07 TOT will increase by a modest 2% to $ 4.3 million, in
2006- 2007 Final Budget 10 City of Milpitas, California
Letter of Transmittal Budget Message
anticipation of more business travel as the economy in this region continues to recover. Although
there is a correlation between business travel and increased sales activities, the projection for
TOT revenue is more conservative because of the ability of teleconferencing for many high- tech
companies.
Interest income is anticipated to decrease by $ 144,000 compared to the FY 05- 06 budget,
primarily due to lower investment earnings on the investment portfolio as some of the higher yield
securities matured. Projected interest income for FY 06- 07 is approximately $ 993,000. Interest
income for the General Fund is based on projected earnings from the current portfolio at an
assumed reinvestment rate of 4.7%, and allocation to General Fund based on projected cash
balance.
Other Financing Sources are operating transfers between funds primarily to allocate operating
costs from one fund to another. The rationale of cost allocation is to allocate central service
departments’ budgeted costs that are typically born by General fund to other funds based on
estimated staff and service support provided to each fund. The City does not have a
Redevelopment Department, or Water and Sewer Department. Consequently, a lot of staff and
resources from the General Fund are used to support these operations. A detailed Internal Cost
Allocation Schedule for FY 06- 07 can be found on pages 96 to 97.
.
The chart below provides an overview of the City’s General Fund revenue sources including
operating transfers from other funds.
General Fund Revenue Sources
( in Millions $)
15.61
0.99
7.96
0.06
16.25
4.28
0.69
18.11
0.81
3.56
Property Taxes $ 15.61M
Use of Money & Property $ 0.99M
Other Taxes $ 7.96M
Other Revenue $ 0.06M
Sales Tax $ 16.25M
License & Permits $ 4.28M
Intergov't $ 0.69M
Service Charges $ 3.56M
Other Financing Sources $ 18.11M
Fines & Forfeitures $ 0.81M
City of Milpitas, California 11 2006- 2007 Final Budget
Letter of Transmittal Budget Message
RDA Revenue Estimates
FY 05- 06 Redevelopment property tax increment was revised upward by $ 300,000 or 1.2% to
$ 26.9 million. While a number of commercial properties still experienced high vacancy rates,
assessed valuation on residential properties remained high and based on a recent report on
assessed valuation growth provided by the County Assessor, FY 06- 07 tax increment is expected
to increase by approximately 6%.
Utility Rates
A 6.7% water rate increase in FY 06- 07 was approved. The key factors affecting the water rates
are estimated increases in wholesale water costs from the Santa Clara Valley Water District, San
Francisco Public Utility Commission and increased capital improvement project costs. Water
rate increases are expected to occur for the next few years because wholesalers are projecting
further increases to meet new regulatory requirements. The current operating fund balance for
the Water fund is approximately $ 3 million. The rate increase is consistent with the Utility
Financial Master Plan adopted by the Council in FY 02- 03. The Plan identifies funding
mechanisms for anticipated capital projects and provides a 20- year projected financial framework
for water and wastewater rates.
The budget also includes a 9% sewer rate increase for single- family residential customers in FY
06- 07. The sewer fund currently has a $ 2.1 million operating fund balance and approximately
$ 5.3 million replacement fund balance. The Capital Improvement Program for FY 06- 07 includes
replacement of the Main Sewer Pump Station by issuing Sewer Revenue Bonds.
For FY 06- 07 the recycled water rate will increase by 6.7%, same as water rates, for most
categories in order to maintain irrigation rates at 80% of potable rates and industrial and inside
dual plumbing rates at 50% of potable rates. Sales are estimated to remain constant after a
recent expansion of the customer base.
2006- 2007 Final Budget 12 City of Milpitas, California
Letter of Transmittal Budget Message
EXPENDITURES
Total expenditures represent an overall 14.8% increase from FY 05- 06. Operating expenditures,
excluding capital improvement, decrease by 0.1% compared to last year. Following is a
summary of the changes in operating expenditures by category:
Salaries and benefits are expected to increase by 3.3%. The net increase to the General
Fund is $ 1.96 million ( 3.7%). The total citywide budget increase in this category is $ 1.93 million,
which is due to the following contributing factors:
First, the projected FY 06- 07 salary and wage increases reflect anticipated increases in
accordance with various Memoranda of Understanding that are currently under negotiation.
Health insurance premiums are anticipated to increase by approximately 8% in January 2007. In
FY 05- 06, the operating budget included $ 1.7 million anticipated savings from attrition as staff
retired or left the employment of the City. To date, the City was able to save approximately $ 1
million but is not expected to meet the goal of $ 1.7 million. The FY 06- 07 includes $ 700,000
salaries and wages savings from attrition.
Second, in accordance with the City Council’s direction, a number of vacant non- public safety
positions have been frozen since FY 01- 02 to save personnel costs. Beginning in FY 05- 06,
public safety positions were also included on the vacancy list to achieve 5% savings. In the FY
06- 07 Adopted Budget, a number of these positions will remain frozen for the entire year. The
hiring freeze, which has been factored in the salaries and benefits expenditure, will contribute no
less than $ 4 million in savings for next year.
A budget comparison of appropriations for all funds between FY 05- 06 ( Adopted Budget) and
FY 06- 07 ( Adopted Budget) is as follows:
Appropriations
Adopted
Budget
FY 05- 06
Adopted
Budget
FY 06- 07
Over ( Under)
Prior Year
Salaries & Benefits $ 58,953,441 $ 60,886,955 $ 1,933,514
Services & Supplies 28,497,237 30,072,691 1,575,454
Capital Outlay 1,184,095 550,750 ( 633,345)
Subtotal $ 88,634,773 $ 91,510,396 $ 2,875,623
Capital Improvement 33,402,713 54,651,294 21,248,581
Debt Service 20,984,356 17,976,000 ( 3,008,356)
Total Appropriations $ 143,021,842 $ 164,137,690 $ 21,115,848
City of Milpitas, California 13 2006- 2007 Final Budget
Letter of Transmittal Budget Message
Services and supplies are expected to increase by $ 1.57 million or 5.5% citywide, with
$ 614,000 ( 5.4%) increase in the General Fund. The services and supplies budget include
services that were provided by outside parties. Majority of the cost increase are beyond the
control of the City. For example, the City’s utility expenses are anticipated to increase by 11% or
$ 258,000. The costs of water purchased from San Francisco Public Utility Commission and
Santa Clara Valley Water District will increase by $ 308,000. The amount that the Sewer Fund
has to contribution to the San Jose/ Santa Clara Water Pollution Control Plant will also increase
by $ 536,000. General Fund is similarly impacted as it pays for majority of the gas and electricity
costs. Other increases include equipment replacement in the form of amortization charge to the
user departments and maintenance for City buildings.
Capital Outlay - This category includes new and scheduled vehicle and equipment
replacements. Total capital outlay request for FY 06- 07 is $ 550,000. Approximately $ 356,000 of
the equipment and vehicles will be fully funded by the Equipment Replacement Fund. Major
Capital outlay requests include the following: $ 12,000 for an artificial pre- lit Christmas tree,
$ 14,000 for a mail machine and electronic scale, $ 41,000 for an Asphalt Paver and Pavement
Marker, $ 22,000 for a riding mower, $ 31,000 for a hoist system to lift vehicles for maintenance,
and $ 201,000 for seven police vehicles for the Police Department.
Debt Service is projected to decrease $ 3 million in FY 06- 07 due to termination of ERAF shift
from the Redevelopment Fund. Included in the debt service category are payments for two
outstanding debt issues, the 2000 Certificates of Participation ( Technology COPS) and 2003
Redevelopment Agency Tax Allocation Bonds and a $ 4 million obligation to the County of Santa
Clara created by a Purchase and Sale Agreement between the County and the Redevelopment
Agency.
The following table shows the annual debt service requirements for the two outstanding debt
issues and the obligation created by the Purchase and Sale Agreement:
Year Ending
June 30
Total
Principal
Total
Interest
2007 $ 8,508,118 $ 9,642,257
2008 8,490,350 9,482,370
2009 8,480,810 9,463,786
2010 8,169,105 9,414,454
2011 8,224,862 9,377,847
2012- 2016 44,141,090 46,619,154
2017- 2021 51,470,973 43,994,567
2022- 2026 52,980,904 26,275,262
2027- 2031 45,410,000 7,321,520
2031- 2033 8,915,000 446,614
Total $ 244,791,212 $ 17,037,831
2006- 2007 Final Budget 14 City of Milpitas, California
Letter of Transmittal Budget Message
DEBT LIMIT
The City’s legal bonded debt limit, as established by the California Government Code, is
approximately $ 350 million. The City through the Milpitas Redevelopment Agency and the
Milpitas Public Financing Authority issued various bonds in the past. Currently, there are two
outstanding debt issues, the Technology Financing Phase I Certificates of Participation issued in
2000 with an outstanding balance of $ 3,540,000, and the Redevelopment Agency Tax Allocation
Bonds issued in 2003 with an outstanding balance of $ 190,780,000. Neither one of these
bonded debts is subject to the legal debt limit. The final payments on these two bonds will occur
between fiscal years 2010 and 2033.
The City’s debt policy includes a comprehensive, thorough review and analysis of the City’s long-term
capital project needs. Once project needs are established and prioritized, funding options
are reviewed. Depending on the funding requirements and available reserves, either existing
reserves are used or tax- exempt securities are issued.
CAPITAL IMPROVEMENTS
The total FY 06- 07 Adopted Capital Improvement Program ( CIP) funding is $ 21 million more than
the FY 05- 06 CIP, primarily due to funding requests for two major projects, $ 33.7 million for
construction of the New Library of which the design was funded in previous years, and $ 9.2
million for the replacement of a lift station at the Main Sewage Pump Station site. An extensive
prioritization of all CIP projects for consistency with available resources and future needs has
been performed to ensure that the selected projects can be accomplished. The FY 06- 07 CIP
has been developed to fund and deliver the Council’s highest priority projects.
The Capital Improvement Budget has been reviewed by the Planning Commission to determine
its conformance with the City’s General Plan. Park improvement projects for FY 06- 07 were also
reviewed by the Parks, Recreation and Cultural Arts Commission.
Although cost savings is one of the considerations in implementing the capital improvement
program, many projects are prioritized for reasons such as health and safety for the public,
replacement of deteriorated capital assets or systems, or enhancement of economic
development and quality of life for the citizens. New buildings tend to be more energy efficient
and replacing deteriorated capital assets tend to save repair costs in the long run. The actual
cost savings is difficult to quantify. On the other hand, some of these projects will increase
operating costs upon completion. These costs, to the extent that they can be estimated, are
The Capital Improvement Budget funding for FY 06- 07 by Project Category is as follows:
Project Category
Adoped
Budget
Percentage
of Total
Community Improvements $ 40,830,000 74.71%
Park Improvements 195,000 0.36%
Street Improvements 2,351,294 4.30%
Water Improvements 1,560,000 2.85%
Sewer Improvements 9,715,000 17.78%
Total $ 54,651,294 100.00%
City of Milpitas, California 15 2006- 2007 Final Budget
Letter of Transmittal Budget Message
identified in the Capital Budget section of this document. Total estimated maintenance costs is
approximately $ 100,000 annually.
The Capital Budget Section of this document also provides a brief description and status of the
projects to be funded in FY 06- 07. For further details on the capital improvement projects, a
separate Five Year Capital Improvement Program FY 2006- 2011 prepared by the Engineering
Division may be obtained at 455 E. Calaveras Blvd, Milpitas, CA 95035.
FUND BALANCES/ RETAINED EARNINGS
An important resource for a City is the funding that is available for future appropriations and
unexpected emergencies. A complete schedule of the Budget Summary of the Revenue,
Expenditures, Transfers, and Fund Balances is shown in the Financial Information section of the
Budget.
The projected percentage of the estimated unreserved, undesignated fund balance for the
General Fund is 16.1% which meets the Council’s policy of maintaining a minimum unreserved,
undesignated fund balance at 15% of the General Fund budget appropriations. It is also
projected that $ 5.4 million unreserved fund balance, designated for the PERS Rate Stabilization
Reserve will remain at the end of FY 06- 07.
The following schedule shows the estimated undesignated Fund Balance for the General Fund
and the percentage of the balance in relation to the Fund’s total appropriations. Also shown
are the total estimated fund balances for the Restricted Funds:
Fund
Budgeted
Expenditures
FY 06- 07
Estimated
Balance
6/ 30/ 06
% of Budgeted
Expenditures
Unreserved – Undesignated
General $ 68,300,030 $ 11,008,595 16.1%
Restricted
HCD 3,096,641
Street Improvement 7,781,911
General Government CIP 1,319,832
Park 7,273,623
Water 10,035,943
Sewer 22,199,868
Storm Drain 403,489
Redevelopment 103,098,320
Library 7,122,695
Other 5,312,610
2006- 2007 Final Budget 16 City of Milpitas, California
Letter of Transmittal Budget Message
The Restricted Funds listed on the previous page have legal restrictions on the way in which the
funds may be used. The estimated fund balances in the Restricted Funds include amounts that
have already been committed for projects or programs approved by the Council/ Agency. In
addition, the Restricted Funds fund balances include bond proceeds or anticipated bond
proceeds that have legal restrictions for their use as outlined in the bond documents.
FIVE YEAR GENERAL FUND FORECAST
Beginning with the FY 06- 07 budget, staff prepared and added a Five- year General Fund
Forecast to allow the Council and the community to assess the sustainability of City services in
the long term. The projection also identifies the type of commitments and resource demands in
the next five years. The Five Year General Fund Projection schedule can be found in the
Financial Information Section of this document, immediately behind the 2006- 07 Budget
Summary. The assumptions for FY 06- 07 General Fund revenues and expenditures were
discussed in detail in previous section of this Transmittal Letter. Therefore the following
discussion will focus on the major revenue sources and expenditures for FY 07- 08 and beyond.
Property tax revenues are expected to increase 5% in FY 07- 08 and 4% in subsequent years,
primarily due to new construction, change of ownerships and assessed valuation increase for
unsecured properties as local businesses continue to recover and add capital assets.
Sales tax revenues are projected to increase 11% in FY 07- 08, 7.8% in FY 08- 09, 6.6% in FY 09-
10, and 4% in FY 2010- 11. In addition to assuming the continued recovery of the economy, the
increases factored in the opening of a major car dealership in the spring of 2007 and subsequent
opening of two more car dealerships in FY 08- 09 and FY 09- 10. With the addition of residents as
some of residential developments are completed and occupied, it is anticipated that Milpitas
businesses will capture a portion of the consumers’ spending.
GF Unreserved, Undesignated Fund Balance
as a Percentage of GF Expenditures
0%
5%
10%
15%
20%
25%
30%
35%
' 98 ' 99 ' 00 01 02 03 04 05 06 07
F i s c a l Y e a r s
% of Expenditures
Budget
The chart below provides a historical perspective of the City’s General Fund unreserved,
undesignated fund balance as a percentage of General Fund expenditures
City of Milpitas, California 17 2006- 2007 Final Budget
Letter of Transmittal Budget Message
Hotel tax revenues are projected to increase 4% annually starting from FY 07- 08. It is assumed
that the hotel operators will increase room price by the average consumer price index which is
approximately 3% to recover costs. The remaining 1% is due to anticipated increased
occupancy.
Other Taxes include real estate transfer tax, franchise tax and business license tax. As
residential units are being developed and occupied, it is anticipated that the City will collect more
real estate transfer tax and franchise tax from utility and cable companies. The projection is 5%
increase in FY 07- 08, 4% increase in FY 08- 09, and tapering off to 3.5% increase in FY 09- 10
and FY 10- 11 respectively.
License and permits consist of building permits and fire permits which are primarily construction
related. Due to the number of applications submitted for Midtown and potential developments in
the Transit Sub- area, it is anticipated that these fees will remain at a high level for a few years.
The projection for FY 07- 08 and FY 08- 09 is 5% increase annually and 3.5% increase annually
for the subsequent years.
Charges for Services include charges for private development related services, engineering fees
and recreation services charges. It is anticipated that the increases will be similar to the
increases for license and permits. Therefore, the projection for FY 07- 08 and FY 08- 09 is 4.5%
increase annually and 3% increase annually for the subsequent years.
Operating transfers are mainly reimbursements from other funds for the staff support and
resources provided by General Fund. These transfers will increase in conjunction with operating
expenditure increases.
Salaries and benefits other than medical insurance are anticipated to increase by 3% annually.
The consumer price index ( CPI) increase in the San Francisco- Oakland- San Jose area averaged
around 3% in the last ten years. The projection for salary and benefits is based on historical
increase of the CPI. It is also assumed that employer contribution rates to the California Public
Employees Retirement System will remain stable. Medical insurance premiums will increase
faster than CPI and is estimated to be 8% annually. Beginning in FY 06- 07, the City will
contribute towards the unfunded retiree medical benefits liability pursuant to GASB 45. Based on
an actuarial study conducted in April 2005, the normal cost of the contribution is approximately
5% of the annual payroll. The Five- Year General Fund forecasts include the funding requirement
in the benefits category.
Services and Supplies costs are anticipated to increase by 3% annually, assuming an average
CPI increase of 3%.
Capital Outlay is negligible, as majority of the equipment replacement will come from the
Equipment Replacement Fund. The City established equipment replacement for capital assets
over $ 5,000 and the replacements costs are charged to the user departments as equipment
amortization expenditures.
Debt Service for the only General Fund debt will mature in FY 08- 09. The debt was issued to
fund the City’s technological equipment and system needs. In- lieu of issuing another debt, staff
will recommend to the Council to set- aside $ 250,000 annually beginning in FY 09- 10 to address
future technological needs and replacement.
2006- 2007 Final Budget 18 City of Milpitas, California
Letter of Transmittal Budget Message
ACKNOWLEDGEMENTS
We want to thank the Mayor and City Council for their guidance and integrity in directing the
financial affairs of the City in a most responsible and progressive manner. We also extend our
appreciation to the Finance Department staff who worked on the budget, along with all the
Division/ Department Heads and the Budget Liaisons for their hard work, assistance, and
cooperation in preparing this Budget.
The overall budget envisions an operating program that carefully considers the general economic
climate in conjunction with the many progressive projects and programs the City will be providing
to the citizens of Milpitas. The Budget establishes the projected resources to pay for all
requested appropriations. The City Council and members of the Redevelopment Agency have
guided the City of Milpitas to a very stable financial position that enables the City to undertake
new capital improvement projects while maintaining its high level of services for all Milpitas
citizens, even during difficult economic situations. The City Council’s approval of the FY 06- 07
Budget continues its commitment to excellence in citizen services and prudent financial
management.
Respectfully submitted,
Charles Lawson Emma C. Karlen, CPA
City Manager Director of Financial Services
City of Milpitas, California 19 2006- 2007 Final Budget
Budget Guidelines and Fiscal Policies Budget Guidelines
Budget Guidelines BUDGET GUIDELINES
The annual operating budget is the primary short- term financial plan for the City. The operating
budget shall serve as the policy document of the City Council for implementing Council goals and
objectives. It is used to set forth the City's estimates of resources available to fund services that
are consistent with the Council’s goals. Since no plan will prove to be an absolutely accurate
reflection of future events, management must have sufficient flexibility to make adjustments
during the year, provided these adjustments do not materially alter the general intent of the City
Council when adopting the budget. These guidelines are intended to provide that flexibility and to
establish adequate controls, through budget monitoring and periodic reporting, to ensure that the
overall distribution of resources achieves the results contemplated by the City Council.
Annually, the City Council establishes priorities regarding service levels to provide guidance to
management in preparing the recommended budget. Through its legislative authority, the
Council approves and adopts the budget by resolution.
The City Manager is responsible for proposing to the City Council a balanced budget which is
consistent with the Council’s service level priorities and sound business practices. Balanced
budget is defined as a budget where the anticipated operating revenues and other financing
resources including carryover of outstanding encumbrances from prior year are equal to or
exceed operating expenditures. The City Manager is also responsible for establishing a system
for the preparation, execution, and control of the budget which provides reasonable assurances
that the intent of Council policies are met.
The Director of Financial Services is responsible for providing periodic budget status reports to
the City Manager and the City Council and monthly budget reports to the Department Heads to
facilitate control and compliance with the budget.
The Department Heads are responsible for monitoring their respective budgets for compliance
with the intent of Council priorities and for insuring that appropriations of the aggregate total of
the department are not exceeded.
SUMMARY OF BUDGET GUIDELINES
1. General
These guidelines are intended to require that procedures be used in the development, review,
adoption, and monitoring of the budget, and to set forth the nature of those procedures. The
detailed procedures used are to be established by the City Manager.
2. Budget Calendar
A budget preparation calendar will be provided to the Department Heads and to the City Council
at the beginning of the budget process each year. The calendar will set forth, at a minimum,
dates for the following:
a. Review of service level priorities by the City Council at an annual City Council and City
Management Planning Workshop.
b. Presentation of the City Manager's proposed budget to the City Council, which shall be no
later than the second week in June.
2006- 2007 Final Budget 20 City of Milpitas, California
Budget Guidelines and Fiscal Policies Budget Guidelines
3. Form and Content of the City Manager's Proposed Budget
a. The City Manager's proposed budget, the Preliminary Budget and Financial Plan, shall be
presented in a form which is sufficient to allow the City Council to determine and review:
Provision of City Council priorities as established at the annual City Council and City
Management Planning Workshop;
􀁑 Provision of City Council priorities as established at the annual City Council and City
Management Planning Workshop;
􀁑 Projected revenues by major category;
􀁑 Operating expenditures by department or program, and by fund;
􀁑 Historical Staffing by Division;
􀁑 Service levels;
􀁑 Statements of objectives and accomplishments;
􀁑 Recommendations for policy changes and impact;
􀁑 Capital improvement appropriations by project.
b. Comparison with the preceding year's actual results and current year's projected results
will be provided for each category of revenue and expenditure shown in the budget.
c. A description of the service levels to be provided under the proposed budget will be
included.
d. A statement of the services reduced or eliminated and the services improved or added,
as compared to the current year, will be included.
e. A schedule showing General Fund Revenue and Expenditure projection for the next five
years.
4. Adoption of the Budget
The City Council will adopt the budget by resolution no later than June 30th of the previous fiscal
year, setting forth the amount of appropriations and authority of the City Manager to administer
the adopted budget.
5. Budget Authority of the City Manager
The City Manager shall have the authority to amend appropriations within the various
departments and projects within a fund, provided that the amount of the amended appropriation
is $ 20,000 or less. Interfund transfers or transfers of an appropriation amount within a fund
which in any single instance exceed $ 20,000 require prior approval of the City Council. No
expenditures may be made from any undesignated fund balances without an appropriation by
the City Council.
The City Manager shall have the authority to reasonably deviate from the budgeted personnel
allocation schedule provided that at no time will the number of permanent, full- time employees
authorized by the City Council be exceeded.
6. Budget Amendments by the City Council
The City Council may from time to time approve expenditures and identify funding sources not
provided for in the adopted budget including those expenditures funded through undesignated
fund balances. The Finance Subcommittee shall review any requests for budget amendments
prior to submitting to the City Council.
City of Milpitas, California 21 2006- 2007 Final Budget
Budget Guidelines and Fiscal Policies Budget Guidelines
7. Budget Transfers and Modification Procedures
Procedures to implement budget transfers or budget modifications are detailed in Standard
Procedure No. 21- 1, subject to any changes by the Budget Resolution.
8. Automatic Adjustments and Reappropriations
a. Outstanding encumbrances at prior fiscal year- end will automatically be carried over to
current year’s budgets.
b. Unspent appropriations that are authorized and funded by grant revenues from prior fiscal
year will automatically be carried over to current year’s budgets.
c. Incomplete multiple year project balances will automatically be reappropriated.
9. Budget Monitoring and Reporting
a. General Monthly Reports - The Director of Financial Services will prepare a monthly
budget report including actual expenditures and encumbrances for distribution to the City
Manager and Department Heads, to facilitate monitoring of the budget.
b. Periodic Budget Reports - The Director of Financial Services will periodically prepare a
budget status report for presentation to the City Council. At the minimum, the report shall
include the status of the General Fund revenues and expenditures, Water and Sewer
utility fund revenues, and Redevelopment Project fund revenues.
10. Reserves
Various unallocated reserves are desired in each of the City's funds to protect the City in
emergencies, economic uncertainties, and to finance unforeseen opportunities and/ or
requirements. Reserve policies for various funds are described in detail in the document entitled
“ City of Milpitas Fiscal Policies”.
2006- 2007 Final Budget 22 City of Milpitas, California
Budget Guidelines and Fiscal Policies Budget Preparation Process and Timeline
Budget Preparation Process and Timeline
City of Milpitas
2006- 2007 Budget Process
December 2005
Performance
Measures and
Accomplishments
Reports
March- April 2006
Budget Revisions, Reconciliations,
and Final Review
March 14, 2006 – Council Budget Worksessions
April 10, 2006 – Community Outreach Meetings
January- February 2006
Budget Preparation
􀁸 􀀃 Revenue and Expenditure Projections
􀁸 􀀃 Budget Requests for Personnel,
Services and Supplies, and Capital
Outlay
􀁸 􀀃 Proposed Capital Improvement
Program
May 9, 2006 – Public Hearing
June 6, 2006 – Adopt the 2006- 07 Budget and
the 2006- 2011 Capital Improvement Program
September 5, 2006 – Distribute the approved 2006- 07 Final Budget
and the 2006- 2011 Capital Improvement
Program
City of Milpitas, California 23 2006- 2007 Final Budget
Budget Guidelines and Fiscal Policies Budget Preparation Process and Timeline
BUDGET PREPARATION TIMELINE
2006- 2007 FINANCIAL PLAN
Id# DATE TASK RESPONSIBILITY
1 12/ 01/ 05 Issue request for Capital Improvement Program
( CIP) projects.
CIP Project Team,
CIP Staff
2 12/ 06/ 05 or
01/ 03/ 06
Meetings with Senior Staff to discuss programs,
service levels ( Accomplishments and Performance
Measures), position requests, capital outlay
requests, and budget process. Request
information for mid- year budget adjustments.
City Manager,
Director of Financial
Services
Senior Staff
3 12/ 30/ 05 New Capital Improvement Program ( CIP) projects
requests are due.
Budget Unit Heads
4 01/ 09/ 06 2006- 07 Budget Preparation “ Kick- Off” meeting
with Budget Liaisons.
Director of Financial
Services, Finance
Budget Team,
Budget Liaisons
5 01/ 09/ 06-
01/ 27/ 06
􀁸 􀀃 Budget data entry in BRASS providing detail
for temporary staff and benefits, supplies,
contractual services, meetings and
memberships, training and capital outlay.
􀁸 􀀃 Commission Staff Liaisons advise Board and
Commissions of Budget Preparation Guide-lines.
Budget Liaisons
6 01/ 12/ 06 Review the new CIP requests and consider the
financial impact.
City Manager,
Director of Financial
Services, Accounting
Manager, Economic
Development Manager,
CIP Team
7 01/ 13/ 06 􀁸 􀀃 Position Summary Corrections due to Finance.
􀁸 􀀃 Equipment Fund Inventory changes due to
Accounting ( Elena Chin).
Budget Liaisons
2006- 2007 Final Budget 24 City of Milpitas, California
Budget Guidelines and Fiscal Policies Budget Preparation Process and Timeline
2006- 2007 FINANCIAL PLAN
Id# DATE TASK RESPONSIBILITY
8 01/ 17/ 06-
01/ 23/ 06
Conduct Revenue discussions with budget units
( Department/ Divisions) and Special Fund
expenditure projections and fund balance.
Director of Financial
Services,
Admin Analysts
9 01/ 19/ 05 CIP Subcommittee: review requests for new and
proposed projects.
CIP Project Team
Director of Financial
Services
10 01/ 20/ 06 􀁸 􀀃 Requests for new positions, reclassifications
and reallocation of existing positions due to
Finance, with the City Manager’s initials.
􀁸 􀀃 Capital Outlay Requests due to Finance.
Budget Unit Heads
11 01/ 23/ 06-
02/ 17/ 06
Review Personnel Requests. HR Director
12 01/ 27/ 06 Provide fund balance numbers. Accounting Manager
13 01/ 27/ 06 􀁸 􀀃 Data entry in the BRASS is complete.
􀁸 􀀃 Explanation of enhancements or new
programs on one sheet is due to Finance.
􀁸 􀀃 Temporary Position Forms ( one form per
function) are due to Finance.
Budget Liaisons
14 01/ 27/ 06 Complete Non- Department Budget BRASS entry. Admin Analyst
15 01/ 30/ 06 Non- Department Budget Review. Director of Financial
Services,
Admin Analyst
16 02/ 02/ 06 Meeting to discuss Capital Outlay Requests. Accounting Services
Mgr, Purchasing Agent,
Veh Maint Suprv,
Admin Analyst
17 02/ 03/ 06 Print and distribute Budget Proformas to Budget
Units for review.
Finance Budget Team
City of Milpitas, California 25 2006- 2007 Final Budget
Budget Guidelines and Fiscal Policies Budget Preparation Process and Timeline
2006- 2007 FINANCIAL PLAN
Id# DATE TASK RESPONSIBILITY
18 02/ 07/ 06 􀁸 􀀃 Mid- year financial Status Report to Council.
􀁸 􀀃 Mid- year budget adjustments.
􀁸 􀀃 Set Budget Hearing Dates.
Director of Financial
Services
Admin Analyst
19 02/ 09/ 06 All budget preparation information due to Finance:
narratives, org charts, and mission statements.
Any changes on BRASS Proformas are due.
Budget Liaisons
20 02/ 10/ 06-
02/ 17/ 06
Narratives, org charts, mission statements and
changes on BRASS Budget Proformas entry by
Finance
Finance Budget Team
21 02/ 17/ 06 HR completes desk audit of new personnel
requests and provides those results to Finance.
HR Director
22 02/ 20/ 06-
02/ 24/ 06
Review Draft CIP document. CIP Staff, Finance
23 02/ 21/ 06-
02/ 24/ 06
Narratives, org charts, and mission statements
review by Finance.
Finance Budget Team
24 02/ 27/ 06-
03/ 03/ 06
Prepare budget reports and distribute to Council,
City Manager and Budget Units.
Finance Budget Team
25 03/ 01/ 06 No further changes to the amounts in the CIP
document by CIP Team.
CIP Project Team
26 03/ 06/ 06 Review Draft Parks projects in the CIP Budget PRCRC
2006- 2007 Final Budget 26 City of Milpitas, California
Budget Guidelines and Fiscal Policies Budget Preparation Process and Timeline
2006- 2007 FINANCIAL PLAN
Id# DATE TASK RESPONSIBILITY
27 03/ 06/ 06-
03/ 10/ 06
Budget Unit Worksessions - Review Operating
Budget requests with the respective budget unit
staff
􀁸 􀀃 City Council/ City Manager/
􀁸 􀀃 RDA- Econ Dev
􀁸 􀀃 City Clerk
􀁸 􀀃 Building
􀁸 􀀃 Recreation
􀁸 􀀃 Information Services
􀁸 􀀃 Human Resources
􀁸 􀀃 City Attorney
􀁸 􀀃 Finance
􀁸 􀀃 Public Works
􀁸 􀀃 Engineering
􀁸 􀀃 Planning and Neigh Services
􀁸 􀀃 Police
􀁸 􀀃 Fire
Budget Unit Heads,
City Manager,
Director of Financial
Services
28 03/ 06/ 06-
03/ 17/ 06
Review of Proposed CIP document by Finance. Director of Financial
Services, Accounting
Manager, CIP Accountant
29 03/ 13/ 06-
03/ 17/ 06
Utility Rates Subcommittee meeting. City Engineer,
Director of Financial
Services, Utility Princ.
Civil Engineer
30 03/ 13/ 06-
03/ 17/ 06
Follow- up meetings with Senior Staff, as needed,
to discuss feedback from Budget Unit
Worksession.
City Manager
Director of Financial
Services, Budget Unit
Heads
31 03/ 14/ 06 Council Budget Worksession for direction. Council
32 03/ 17/ 06 Distribute budget reports to Budget Units for final
review.
Finance Admin Staff
33 03/ 20/ 06-
03/ 24/ 06
Final review of budget unit operating budget. No
further changes for reconciliation process.
Budget Unit Heads,
Budget Liaisons
City of Milpitas, California 27 2006- 2007 Final Budget
Budget Guidelines and Fiscal Policies Budget Preparation Process and Timeline
2006- 2007 FINANCIAL PLAN
Id# DATE TASK RESPONSIBILITY
34 03/ 27/ 06-
04/ 07/ 06
Budget Reconciliation:
􀁸 􀀃 Finance: Operating budget and CIP
􀁸 􀀃 Utility Engineering: Water Rate Analysis
Finance Budget Team,
Utility Engineering
Team
35 03/ 28/ 06 Publish Draft 2006- 2011 Capital Improvement
Program and distribute ( Due: April 4, 2006)
CIP Program Manager
CIP Staff
36 04/ 06/ 06 Review proposed CIP document by CIP
Subcommittee.
CIP Project Team,
Director of Financial
Services
37 04/ 10/ 06 Community outreach meetings. City Manager,
Director of Financial
Services
38 04/ 10/ 06-
04/ 14/ 06
Final review of proposed budget. City Manager,
Director of Financial
Services, Finance
Budget Team
39 04/ 12/ 06 Review Draft CIP for information and General Plan
conformance findings.
Planning Commission,
CIP Program Manager
40 04/ 13/ 06-
04/ 17/ 06
Update PowerPoint slides on budget and staffing
changes. Distribute one presentation slide per
section ( budget changes, accomplishments and
objectives) to the Budget Units.
Finance Budget Team
41 04/ 18/ 06 Review the Draft 2006- 2011 Capital Improvement
Program.
City Council
42 04/ 18/ 06-
04/ 24/ 06
Budget Units update the presentation slides
( accomplishments and objectives) and review the
budget changes.
Budget Unit Heads,
Budget Liaisons
43 04/ 19/ 06 Publish notice of public hearings regarding the
Operating Budget and Capital Improvement
Program.
City Clerk
2006- 2007 Final Budget 28 City of Milpitas, California
Budget Guidelines and Fiscal Policies Budget Preparation Process and Timeline
2006- 2007 FINANCIAL PLAN
Id# DATE TASK RESPONSIBILITY
44 04/ 24/ 06 PowerPoint slides due to Finance. Budget Liaisons
45 04/ 25/ 06-
05/ 01/ 06
Incorporate the accomplishments and objectives to
the PowerPoint slides for all Budget Units.
Finance Budget Team
46 04/ 28/ 06 Distribute the Proposed 2006- 07 Operating Budget
and Financial Plan.
Director of Financial
Services
47 May Hold public hearing on the recommended water,
recycled water and sewer rates ( Sept. 6, 2005
utility rates approved for 2 years).
City Council
48 05/ 04/ 06
and
05/ 08/ 06
Presentation practice ( rehearsal) on the 2006-
2007 Proposed Budget and Financial Plan and the
2006- 2011 Capital Improvement Program.
Budget Unit Heads
49 05/ 09/ 06
and
05/ 11/ 06
Public hearing on the recommended 2006- 2007
Proposed Budget and Financial Plan and the
2006- 2011 Capital Improvement Program.
City Council,
Budget Unit Heads
50 06/ 06/ 06 􀁸 􀀃 Adopt the 2006- 07 Budget and the 2006- 2011
Capital Improvement Program.
􀁸 􀀃 ( Note: Water, recycled water and sewer rates
were approved on Sept. 6, 2005 for two years).
City Council
51 06/ 30/ 06 Load Approved Budget. Finance Budget Team
52 08/ 05/ 06 Receive final numbers from Finance and Publish
Final 2006- 2011 Capital Improvement Program.
Accounting Manager,
CIP Project Team
53 09/ 05/ 06 Distribute the approved 2006- 07 Final Budget and
2006- 2011 Capital Improvement Program.
Director of Financial
Services
City of Milpitas, California 29 2006- 2007 Final Budget
Budget Guidelines and Fiscal Policies Fiscal Policies
Fiscal Policies CITY OF MILPITAS FISCAL POLICIES
GENERAL FINANCIAL GOALS
1. To maintain a financially viable city that can maintain an adequate level of municipal services.
2. To maintain financial flexibility in order to be able to continually adapt to local and regional economic
change.
3. To maintain and enhance the sound fiscal condition of the City.
OPERATING BUDGET POLICIES
4. The City will adopt a balanced budget by June 30th of each year.
5. An annual base operating budget will be developed by accurately and realistically projecting revenues
and expenditures for the current and forthcoming fiscal year.
6. During the annual budget development process, the existing base budget will be thoroughly examined
to assure cost effectiveness of the services or programs provided.
7. Annual operating budgets will include the cost of operations of new capital projects.
8. The City will avoid balancing the current budget at the expense of future budgets, unless the use of
reserves is expressly authorized by the City Council.
9. The City‘ s operating budget will be prepared on a basis consistent with generally accepted accounting
principals ( GAAP) except that encumbrances are considered budgetary expenditures in the year of the
commitment to purchase and capital project expenditures are budgeted on a project length basis.
REVENUE POLICIES
10. The City will try to maintain a diversified and stable revenue system to avoid over- reliance on any one
revenue source.
11. Revenue estimates are to be accurate and realistic, sensitive to both local and regional economic
conditions.
12. The City will estimate its annual revenues by an objective, analytical process utilizing trend,
judgmental, and statistical analysis as appropriate.
13. User fees will be reviewed annually for potential adjustments to recover the full cost of services
provided, except when the City Council determines that a subsidy is in the public interest.
14. The City will actively pursue federal, state, and other grant opportunities when deemed appropriate.
Before accepting any grant, the City will thoroughly consider the implications in terms of ongoing
obligations that will be required in connection with acceptance of said grant.
15. One- time revenues will be used for one- time expenditures only, including capital outlay and reserves.
EXPENDITURE POLICIES
16. The City will maintain levels of service, as determined by the City Council, to provide for the public
well- being and safety of the residents of the community.
17. Employee benefits and salaries will be maintained at competitive levels.
18. Fixed assets will be maintained and replaced as necessary, minimizing deferred maintenance.
19. The City will develop and use technology and productivity enhancements that are cost effective in
reducing or avoiding increased personnel costs.
UTILITY RATES AND FEES
20. Water and sewer utility customer rates and fees will be reviewed and adjusted annually, if necessary.
2006- 2007 Final Budget 30 City of Milpitas, California
Budget Guidelines and Fiscal Policies Fiscal Policies
21. All utility enterprise funds will be operated in a manner similar to private enterprise. As such, the City
will set fees and user charges for each utility fund at a level that fully supports the total direct and
indirect cost of the activity, including depreciation of assets, overhead charges, and reserves for
unanticipated expenses and capital projects.
CAPITAL BUDGET POLICIES
22. The City will develop an annual Five- year Capital Improvement Program ( CIP) which is designed to
develop and maintain infrastructure to support existing residences and businesses and future
anticipated development.
23. The CIP will identify the estimated full cost of each project which includes administration, design,
development and implementation, and operating costs once the projects are completed.
24. The CIP will identify potential funding sources for each proposed capital project, prior to submitting
proposed projects to the City Council for approval. When appropriate, the CIP will seek other funding
sources such as State and Federal funds, private funds and leverage these funding sources with
public money to help meet the highest priority community needs.
25. The funding for the first year of the Five- year CIP will be legally appropriated as a component of the
annual operating budget. Funding for future projects identified in the five year has not been secured or
legally authorized and is therefore subject to change.
26. Each CIP project will be assigned to a Project Manager whose responsibilities are to monitor all
phases of the project to ensure timely completion of the project and compliance with the project budget
and all regulations and laws.
DEBT POLICIES
27. The City will limit long- term debt to only those capital improvements or long- term liabilities that cannot
be financed from current revenue sources.
28. The City will utilize debt financing for projects which have a useful life that can reasonably be expected
to exceed the period of debt service for the project.
29. The City will protect and enhance the City’s general credit rating of “ AA”.
30. The City may utilize interfund loans rather than outside debt to meet short- term cash flow needs.
31. The City will minimize costs and liabilities to the City when sponsoring debt financing for private
sectors.
RESERVE POLICIES
32. The City will periodically review and update reserve guidelines, to ensure that the City has sufficient
reserve balances to adequately provide for emergencies, economic uncertainties, unforeseen
operating or capital needs, economic development opportunities, and cash flow requirements.
33. The City will maintain unreserved, undesignated fund balance of at least 15% of the annual operating
expenditures in the General Fund for emergencies and unforeseen operating or capital needs.
34. The City will maintain in the General Fund a $ 5 million Public Employees Retirement Rate Stabilization
Reserve. This reserve may be drawn on if the required employer contribution rates exceed previous
year contribution rates by more than 3%. The City Council must approve utilization of this reserve at
the time of the budget hearing. This reserve will be replenished from the unreserved, undesignated
fund balance after the 15% requirement of the operating expenditures has been met.
35. The City will maintain a Storm Drain replacement reserve to replace and repair storm drain pump
stations. Beginning in FY 2009- 2010, the City will set- aside $ 1 million annually from the General Fund
reserve for this purpose.
36. The City will maintain a retiree medical benefits account established by an irrevocable trust. It is
anticipated that the City will begin funding the normal cost of the retiree medical benefits annually in
the operating budget.
City of Milpitas, California 31 2006- 2007 Final Budget
Budget Guidelines and Fiscal Policies Fiscal Policies
37. Other reserves designated in the General Fund for investment portfolio market gain, and sick leave
payable will be calculated and adjusted annually at appropriate levels.
38. The City will maintain working capital in the Water and Sewer utility enterprise funds to provide for
future capital projects and unanticipated emergencies, such as water main break repairs and pump
station repairs. The City will attempt to maintain a working capital reserve of approximately 30% of the
annual operating and maintenance expenses for Water utility fund and 25% of the annual operating
and maintenance expenses for Sewer utility fund.
39. In addition, the City will maintain Infrastructure Replacement funds for both Water and Sewer utilities.
The goal is to accumulate at least $ 2 million a year from each utility fund to set- aside for replacement
of infrastructure as the infrastructure reaches the end of its useful life.
40. The City will maintain at least $ 300,000 in the Recycled Water utility fund for the purpose of
infrastructure replacement and enhancement.
41. Reserve levels for Debt Service Funds will be established and maintained as prescribed by the bond
covenants authorized at the time of debt issuance.
42. A minimum 30% of the estimated annual Gas Tax revenues will be set- aside as a reserve in the Street
Fund to provide for street repair emergencies and other unanticipated traffic safety projects.
43. The City will maintain a capital reserve in an Equipment Replacement fund, set up as an internal
service fund, to enable the timely replacement of vehicles and depreciable equipment as cost. The
City will maintain a minimum fund balance of at least 30% of the replacement costs for equipment
accounted for in this fund.
44. In addition, the City will maintain an initial capital reserve of $ 700,000 in an Equipment Replacement
fund for technological equipment replacement. Upon the full payment of the Technology Certificates of
Participation debt service in FY 09- 10, an annual amount of $ 250,000 will be set- aside in this fund for
technological needs.
45. The City will maintain unreserved, undesignated fund balance of at least 15% of the annual operating
revenues in the Redevelopment Project Fund for unforeseen capital needs and economic
development opportunities such as land assemblage and developer assistance.
INVESTMENT POLICIES
46. The Finance Director/ City Treasurer will annually render an investment policy for City Council’s review
and modification as appropriate. The review will take place at a public meeting and the policy shall be
adopted by resolution of the City Council.
47. City funds and investment portfolio will be managed in a prudent and diligent manner with emphasis on
safety, liquidity, and yield, in that order.
48. Reports on the City’s investment portfolio and cash position shall be developed by the Finance
Director/ City Treasurer and reviewed by the City Council quarterly.
49. Generally Accepted Accounting Principles required that differences between the costs of the
investment portfolio and the fair value of the securities be recognized as income or losses in a
government’s annual financial report. These variances shall not be considered as budgetary resources
or uses of resources unless the securities are sold before maturity or the values of the investments are
permanently impaired.
ACCOUNTING, AUDITING, AND FINANCIAL REPORTING POLICIES
50. The City's accounting and financial reporting systems will be maintained in conformance with generally
accepted accounting principles as they apply to governmental accounting.
51. An annual audit will be performed by an independent public accounting firm with the subsequent
issuance of a Comprehensive Annual Financial Report, within six months of the close of the previous
fiscal year.
52. Periodic financial reports and status reports will be submitted to the City Council at the end of each
quarter and be made available to the public. The report will provide an analysis of budgeted versus
actual revenues and expenditures, on a year- to- date basis.
2006- 2007 Final Budget 32 City of Milpitas, California
Budget Guidelines and Fiscal Policies Fiscal Policies
City of Milpitas, California 33 2006- 2007 Final Budget
Resolutions Resolution Adopting the Appropriations Limit
Resolution Adopting the Appropriations Limit
2006- 2007 Final Budget 34 City of Milpitas, California
Resolutions Joint Resolution Adopting the Final Budget
Joint Resolution Adopting the Final Budget
City of Milpitas, California 35 2006- 2007 Final Budget
Resolutions Joint Resolution Adopting the Final Budget
2006- 2007 Final Budget 36 City of Milpitas, California
Resolutions Joint Resolution Making Findings for Use of RDA Funds
Joint Resolution Making Findings for Use of RDA Funds
City of Milpitas, California 37 2006- 2007 Final Budget
Resolutions Joint Resolution Making Findings for Use of RDA Funds
2006- 2007 Final Budget 38 City of Milpitas, California
Resolutions Resolution Determining Use of Housing Funds
Resolution Determining Use of Housing Funds
City of Milpitas, California 39 2006- 2007 Final Budget
Resolutions Resolution Authorizing Public Improvements Payments
Resolution Authorizing Public Improvements Payments
2006- 2007 Final Budget 40 City of Milpitas, California
Resolutions Resolution Authorizing Public Improvements Payments
City of Milpitas, California 41 2006- 2007 Final Budget
City History City History
Before roads were carved and houses were
built, Milpitas and its surrounding areas were
home to native Americans in the Costanoan
and Ohlone tribes. Living off the bounty of the
land around San Francisco Bay, the
Costanoans and the Ohlones prospered for
hundreds of years long before Mexican or
Spanish immigrants came to conquer the land.
In the 18th century, Spanish explorers surveyed
the land and were the first to give Milpitas its
name - milpa - or little cornfields. Three large
ranches began, and two families, the Alvisos
and the Higueras, built adobes in the mid-
1800’ s which still stand today
In 1850, the California Gold Rush began, and
“ American” settlers started taking over the
region. In 1852, a settler from Ireland, Michael
Hughes, built the first redwood- framed house in what is now Milpitas. Soon after, the first school
was built, and by 1857, Milpitas had a hotel, general store and a post office.
Fruit orchards began to spring up in the 1870s, and later the region was known for its hay
growing. The population continued to grow into the 1880s and settlers numbered over 1,500.
But by the turn of the century, only about a third of those people remained.
Populations would remain low until shortly after
World War II, when Western Pacific Railroad
bought a 300 acre industrial park within the city
and Ford Motor Company announced it would
shift its manufacturing plant from Richmond
( just north of Oakland) to Milpitas. The
population grew to 825. Sewer and water
service, and fire protection were set up shortly
after, as was one of the country’s first
integrated housing communities.
On January 26, 1954, the city was officially
incorporated, after fighting off annexation
attempts by neighboring San Jose. Ten years
later, populations grew to 7,000.
Following the computer firm boom of the 1980s
and the opening of one of the nation’s largest
malls in 1994, the city is now home to 62,698
residents.
History Courtesy of: The Milpitas Post
Photos Courtesy of: Eliren Pasion
Alviso Adobe
Higuera Adobe
2006- 2007 Final Budget 42 City of Milpitas, California
General Information Demographic Profile
Demographic Profile
A Demographic Profile of Milpitas
Once a small agricultural town and later a stopover point for travelers between Oakland and San
Jose, Milpitas has blossomed into one of the world’s premier computer and semiconductor
producers. Tenants of the burgeoning city of 62,698 are family- centered communities that
embrace cultural diversity, comprehensive schooling and preservation of the hills.
Incorporated in 1954 with 825 residents, Milpitas is located at the southern tip of the San
Francisco Bay. Milpitas covers 13.6 square miles, with grassy foothills and picturesque Mount
Hamilton to the east and the Santa Clara Valley Floor to the west. The city is located in Santa
Clara County, home to close to 1.68 million residents. To the north is the city of Fremont. To the
south lies San Jose, the third largest city in California.
Milpitas’ neighborhoods are dotted with close to 18,082 households and well- placed parks.
Milpitas’ average household income is $ 93,300. The percentage of households with incomes
more than $ 75,000 is close to 68 percent. About 42% of the households earn more than
$ 100,000 annually.
Close to 70 percent of Milpitans own their own home. Rental prices vary from $ 1,085 to $ 1,615
per month for renters with one and two bedroom apartments and duplexes. Rent for two and
three bedroom houses typically run $ 1,405 to $ 2,585. The median price of a home in Milpitas is
$ 695,000. There are 20 suburban residential areas.
About 7 percent of the city’s population are 5 years old or younger, the lowest in the county.
About 18 percent are between 5 and 18 years old. About 68 percent of the population are
between 18 and 64 years old. About 7 percent of residents are over 65, also the lowest in the
county.
Milpitas has the highest population of ethnicities in all Santa Clara County. According to the 2000
census, an estimated 52 percent of residents are Asian; 24 percent are Caucasian; 17 percent
are Hispanic or Latino; and 4 percent are Black or African- Americans.
At 20 feet above sea level, Milpitas’ mild climate averages 59 degrees, with gentle winds from the
northwest and little more than 13 inches of rain expected in a typical year.
The bustling general law city is
supervised by a council- manager
form of government. The Milpitas
City Council is the flagship
decision making body that
appoints members to many
commissions that serve in
advisory capacities. The
mayorship is an elected position,
as are all the council seats.
Mayors serve two- year terms;
council members have four- year
seats.
Ethnic Distribution
Asian 52%
Black 4%
Hispanic 17%
Other 3%
Caucasian
24%
City of Milpitas, California 43 2006- 2007 Final Budget
General Information Demographic Profile
The City Council makes the ultimate planning and policy decisions for residents, and oversees
the city’s $ 164 million budget. The five members carry out twice a month public meetings. At
these times, the public’s comments are usually heard, under the citizen’s forum. The Council’s
meetings are held the first and third Tuesdays of each month at 7: 00 p. m. in the Milpitas City Hall,
455 E. Calaveras Blvd.
There are 14 advisory commissions on which residents can participate - the Planning
Commission, Arts Commission, Youth Advisory Commission, Bicycle Transportation Advisory
Commission and Senior Advisory Commission, to name a few.
Issues challenging most commissions these days are development, quality of life and how to
streamline traffic bottlenecks that plague this area at commute times.
The City of Milpitas employs 495 permanent workers who earn salaries that are competitive with
any city of our size nationwide.
Courtesy of:
State of California, Department of Finance
The Milpitas Post
The City of Milpitas, Finance Department
City of Milpitas at a Glance
Date of Incorporation January 26, 1954 Water Utility
Form of Government Council- Manager Number of Customers:
Residential 13,720
Commercial 2,070
Population ( estimated 2005) 64,700 Recycled Water 141
Land Area ( Square Miles) 13.56 Average Daily Consumption
Miles of Streets 138 ( in gallons) 11,120,000
Number of Street Lights 4,350
Miles of Water Mains 203
Fire Protection
Number of Stations 4 Sewer Utility
Number of Firefighters 78 Miles of Sanitary Sewers 172.5
Fire Apparatus 13 Miles of Storm Drains 99
Number of Fire Hydrants 1,755
Public Schools Serving the Community
Police Protection Elementary Schools 9
Number of Stations 2 Middle Schools 2
Number of Sworn Officers 95 High Schools 2
Crossing Guard Posts 38
Number of Patrol Vehicles 30 Parks and Recreation
Acres of Parkland 171.6
Employees Number of Parks 24
Permanent 495 Number of Swimming Pools 3
Temporary ( FTE) 71.25 Number of Tennis Courts 18
2006- 2007 Final Budget 44 City of Milpitas, California
General Information Demographic Profile
Blank Page
City of Milpitas, California 45 2006- 2007 Final Budget
General Information Vicinity Map
Vicinity Map
Vicinity Map
The City of Milpitas is located near the southern tip of San Francisco Bay, forty- five miles south of
San Francisco. Milpitas is often called the “ Crossroads of Silicon Valley” with most of its 13.56
square miles of land situated between two major freeways ( I- 880 and I- 680), State Route 237,
and a county expressway. The light rail line opened for service in 2004 and an extension of
BART, with a major multi- modal station, is in the planning stages.
2006- 2007 Final Budget 46 City of Milpitas, California
General Information City Council, Board and Commissions
City Council, Board and Commissions
City Council
Mayor Jose S. Esteves
Vice Mayor Armando Gomez, Jr.
Councilmember Robert Livengood
Councilmember Althea Polanski
Councilmember Debra Giordano
Board, Commissions, and Committee
Arts Commission
Archana Aragon
Juniel Butler
Donine Ettinger
Bill Foulk
Robin Hays
Harriet McGuire
Mariele- Angy Ogle
Linda L Rabe
Public Art Committee
Julie Cherry
Elena Lawson
Carla Ann Moss
Larry Voellger
( Plus all Arts Commission Members)
Bicycle Transportation Advisory
Commission
Rene Briones
Cheryl Bunnell
Miljon Buquing
Kayci Nguyen
Bill Reisinger
Nawal Stanojevic
Fred Zeise
Citizen’s Emergency Preparedness
Advisory Commission
Clifford Baughn
Michael Berryhill
Lori Bersabe
Teresa Chaves
Russ Cherry
Tim Howard
Nancy Martinez
William Nolan
John Pilger
Brian Shreve
Donna Wynne
Community Advisory Commission
Joselito Abelardo
Reena Choudhury
Danny Fang
Chris Lee
Jenifer Lind
Nestor R. Luna, Sr.
Syed Mohsin
Heidi Han T. Pham
Marie Pham
Michael Queenan
Craig Ranker
Nelson Villegas
Oliver Wan
Economic Development Commission
Anastasia Sen Beals
Dhaval J. Brahmbhatt
Frank DeSmidt
Ray Maglalang
Zeya Mohsin
Minh Nguyen
Tomo Tuong Nguyen
Donald Peoples
Barbara Santos
Vince Songcayawon
Charlene Tsao
Library Advisory Commission
Trinidad Aoalin
Linda Arbaugh
Melinda Cervantes
Yu- Lan Chou
Lynne Estandarte
Elpidio Estioko
Ha Phan
Marilyn Hay
Carmen Montano
Margie Stephens
Sonny S. Wang
City of Milpitas, California 47 2006- 2007 Final Budget
General Information City Council, Board and Commissions
Board, Commissions, and Committee
Mobile Home Park Rental Review Board
Sandeep Chahal
Milan Dobro
Florence Romito
Open Government Commission
Dinnah Casibang
Jim Rabe
Parks, Recreation and Cultural
Resources Commission
Robert Burrill
Kathryn Gray
Frances Krommenhock
Henry Ku
Robert McGuire
Steve Munzel
Gurdev Sandhu
Raymond Serena
Edward Tuason
Planning Commission
Gunawan Ali- Santosa
Norman Azevedo
Lawrence Ciardella
Dr. Alexander Galang
Sudhir Mandal
Noella Tabladillo
Cliff Williams
Recycling and Source Reduction
Advisory Commission
Ed Blake, Jr.
Hong Chen
Romy Dizon
Donald Downey
John Ebneter
Eulalio Mercado
Keith Walker
Patrick Yung
Steve Ybarra
Senior Advisory Commission
Mary Banick
Ed Connor
Bal Daquigan
Joyce Dovlet
Barbara Ebright
Florentino Menor
Amanda Santos
Albert Wang
Joanne Wood
Denny Weisgerber
Sister Cities Commission
Massoud Arefi
Echo Arthur
Satnam Singh Chahal
Debra Garcia
Dennis Grilli
Beverly McCarter
Roselda Mateo
Arlyn W. Swiger
Telecommunications Commission
Albert Alcorn
Satish Kumar Bansal
Syed Afaq Ali Bilgrami
Aaron Ettinger
Dinesh Gupta
Niranjan Gupta
William Lam
Vishnu Mathur
M. Idrees Munir
Paul Peterson
Roger Shaw
Youth Advisory Commission
Nida Asif
Lorden Fok
Josephine Fong
Joseph Hall
Jay Kumar
Ha La
Roxane Lachance
Larry Lee
Jason Nguyen
Sareen Sandhu
Alex Tran
Aditya Ullal
Danielle Yee
2006- 2007 Final Budget 48 City of Milpitas, California
General Information City Council, Board and Commissions
Blank Page
City of Milpitas, California 49 2006- 2007 Final Budget
General Information Directory of Officials
Directory of Officials
DIRECTORY OF OFFICIALS
Fiscal Year 2006 – 2007
City Manager
Charles Lawson
Police Chief
Thomas Nishisaka
Director of Financial Services
Emma Karlen, CPA
Fire Chief
Clare Frank
City Clerk
Mary Lavelle
City Attorney
Myers, Nave, Riback, Wilson and Silver
Chief Information Officer
William Marion
Human Resources Director
Carmen Valdez
Public Works Director/ City Engineer
Greg Armendariz
Planning & Neighborhd Svc Director
Tom Williams
Chief Building Officer
Keyvan Irannejad
2006- 2007 Final Budget 50 City of Milpitas, California
General Information Gann Limit Analysis
Gann Limit Analysis GANN LIMIT ANALYSIS
Article XIIIB of the California State Constitution, more commonly referred to as the Gann Initiative
or Gann Limit, was approved by California voters in November 1979 and placed limits on the
amount of proceeds of taxes that state and local governmental agencies can receive and spend
each year. If an agency receives more revenue than the Appropriations Limit, the excess
revenue must be returned to the taxpayers through a tax reduction or refund within the next two
years. Alternatively, the agency can increase its Appropriations Limit through voters’ approval.
Each year’s limit is based on the amount of tax proceeds that were authorized to be spent in
Fiscal Year 1978- 79 in each agency, modified for changes in inflation and population in each
subsequent year. The City Council must adopt, by resolution, an Appropriations Limit for the
following year. Using the population and per capita personal income change factors provided by
the State of California, the City’s Appropriations Limit for FY2006- 07 has been computed to be
$ 56,673,996. Appropriations subject to the limitation in FY2006- 07 budget total $ 42,212,251 that
is $ 14,461,745 less than the computed limit.
The following chart shows the annual Appropriations Limit and the tax proceeds received since
Fiscal Year 1999- 2000. The City has not exceeded its annual Appropriations Limit in any single
fiscal year. Except for the extraordinary growth in tax proceeds experienced in Fiscal Year 2000-
01, the City has been under 90% of the limitation and should not be impacted by the
Appropriations Limit.
20
25
30
35
40
45
50
55
60
In Millions
99- 00 00- 01 01- 02 02- 03 03- 04 04- 05 05- 06 06- 07
Fiscal Years
City of Mipitas Annual Appropriations Limit
Limit Tax Proceeds
--- Estimated--
City of Milpitas, California 51 2006- 2007 Final Budget
General Information Computation of Legal Bonded Debt Margin
Computation of Legal Bonded Debt Margin
City of Milpitas
Computation of Legal Bonded Debt Margin
June 30, 2006
ASSESSED VALUATION:
Secured property assessed value, net of
exempt real property $ 9,960,540,427
BONDED DEBT LIMIT ( 3.75% OF ASSESSED VALUE) ( a) $ 373,520,266
AMOUNT OF DEBT SUBJECT TO LIMIT:
Total Bonded Debt $ 193,786,000
Less: Tax Allocation Bonds and Certificates of
Participation, not subject to limit 193,786,000
Amount of debt subject to limit - 0-
LEGAL BONDED DEBT MARGIN $ 373,520,266
( a) California Government Code, Section 43605 sets the debt limit at 15%.
The Code section was enacted prior to the change in basing assessed
value to full market value when it was previously 25% of market value.
Thus, the limit shown as 3.75% is one- fourth the limit to account for
the adjustment of showing assessed valuation at full cash value.
2006- 2007 Final Budget 52 City of Milpitas, California
General Information Historical Staffing by Division
Historical Staffing by Division
03 - 04
Approved
04 - 05
Approved
05- 06
Approved Change
06 - 07
Approved
Perm Temp Perm Temp Perm Temp Perm Temp Perm Temp
100 City Council 5.00 0.00 5.00 0.00 5.00 0.00 0.00 0.00 5.00 0.00
111 City Manager 5.00 0.00 5.25 0.00 5.00 0.00 ( 1.00) 0.00 4.00 0.00
114 City Clerk 10.00 0.00 10.00 0.00 10.00 0.50 0.00 ( 0.50) 10.00 0.00
116 RDA & Economic Dvp 1.00 0.00 1.00 0.00 1.00 0.00 0.00 0.00 1.00 0.00
410 Engineering 38.00 6.75 44.00 11.00 44.00 9.00 2.00 ( 3.00) 46.00 6.00
530 Building and Safety 23.00 0.00 23.00 0.00 23.00 1.00 0.00 0.00 23.00 1.00
450 Recreation 29.00 47.50 29.00 44.00 29.00 45.50 0.00 ( 3.75) 29.00 41.75
City Manager 111.00 54.25 117.25 55.00 117.00 56.00 1.00 ( 7.25) 118.00 48.75
112 Information Services 20.00 1.00 20.00 1.00 20.00 1.00 0.00 ( 0.50) 20.00 0.50
Information Systems 20.00 1.00 20.00 1.00 20.00 1.00 0.00 ( 0.50) 20.00 0.50
115 Human Resources 7.00 0.00 7.00 0.00 7.00 0.00 0.00 0.00 7.00 0.00
Human Resources 7.00 0.00 7.00 0.00 7.00 0.00 0.00 0.00 7.00 0.00
300 Finance Administration 7.00 0.50 7.00 0.50 7.00 0.25 0.00 ( 0.25) 7.00 0.00
310 Accounting Services 12.00 0.75 12.00 0.75 12.00 1.00 0.00 ( 0.50) 12.00 0.50
320 Fiscal Services 10.00 1.00 10.00 1.00 10.00 1.00 0.00 ( 0.75) 10.00 0.25
330 Purchasing 5.00 0.00 5.00 0.00 5.00 0.00 0.00 0.00 5.00 0.00
Finance 34.00 2.25 34.00 2.25 34.00 2.25 0.00 ( 1.50) 34.00 0.75
420 Public Works 95.00 9.75 94.75 9.25 95.00 9.00 0.00 ( 3.75) 95.00 5.25
Public Works 95.00 9.75 94.75 9.25 95.00 9.00 0.00 ( 3.75) 95.00 5.25
510 Planning & Nghbrhd 17.50 1.50 17.50 2.00 17.50 2.00 ( 1.00) 0.00 16.50 2.00
Planning & Neighborhood
Srves 17.50 1.50 17.50 2.00 17.50 2.00 ( 1.00) 0.00 16.50 2.00
700 Police Administration 3.00 0.00 3.00 0.00 3.00 0.00 0.00 0.00 3.00 0.00
710 Police Technical Services 31.50 2.50 31.50 2.50 31.50 2.50 0.00 ( 2.50) 31.50 0.00
720 Police Field Services 73.00 13.00 73.00 13.00 73.00 13.00 0.00 0.00 73.00 13.00
730 Special Operations 17.00 0.00 17.00 0.00 17.00 0.00 0.00 0.00 17.00 0.00
Police 124.50 15.50 124.50 15.50 124.50 15.50 0.00 ( 2.50) 124.50 13.00
800 Fire Administration 3.00 0.00 3.00 0.00 3.00 1.00 ( 1.00) 0.00 2.00 1.00
810 Response Division 66.00 1.00 66.00 1.00 66.00 1.00 0.00 ( 1.00) 66.00 0.00
820 Prevention Division 11.00 0.50 11.00 0.50 11.00 0.50 1.00 ( 0.50) 12.00 0.00
Fire 80.00 1.50 80.00 1.50 80.00 2.50 0.00 ( 1.50) 80.00 1.00
TOTAL 489.00 85.75 495.00 86.50 495.00 88.25 0.00 ( 17.00) 495.00 71.25
Budget Summary
2006- 2007 Final Budget 54 City of Milpitas, California
Financial Information Budget Summary
Grand Total General Fund ( 1) Library Fund
ESTIMATED REVENUES
PROPERTY TAXES 43,846,000 15,609,000 0
TAXES OTHER THAN PROPERTY 25,829,750 24,207,000 1,082,750
LICENSES AND PERMITS 4,278,000 4,278,000 0
FINES AND FORFEITS 812,000 812,000 0
USE OF MONEY AND PROPERTY 6,364,000 993,000 176,000
INTERGOVERNMENTAL 3,723,078 689,000 0
CHARGES FOR CURRENT SERVICES 28,097,000 3,556,000 0
OTHER REVENUE 13,255,800 63,000 0
sub- total 126,205,628 50,207,000 1,258,750
OTHER FINANCING SOURCES
( INCREASE) DECREASE IN FUND BALANCE 44,762,335 ( 22,552) ( 913,750)
( INCREASE) DECREASE IN CIP RSRV ( 1,499,675) 0 0
( INCREASE) DECREASE IN HOUSING RSRV ( 5,330,598) 0 0
OPERATING TRANSFERS IN 20,575,582 18,115,582 0
OPERATING TRANSFERS OUT ( 20,575,582) 0 0
sub- total 37,932,062 18,093,030 ( 913,750)
TOTAL 164,137,690 68,300,030 345,000
BUDGETED APPROPRIATIONS
PERSONNEL SERVICES 60,886,955 54,973,871 0
SUPPLIES & CONTRAC SVCS 30,072,691 12,045,759 345,000
CAPITAL OUTLAY 550,750 24,400 0
sub- total 91,510,396 67,044,030 345,000
CAPITAL IMPROVEMENTS 54,651,294 0 0
DEBT SERVICE 17,976,000 1,256,000 0
sub- total 72,627,294 1,256,000 0
TOTAL 164,137,690 68,300,030 345,000
FUND BALANCE
FUND BALANCE 7/ 1/ 06 230,143,472 24,543,926 6,208,945
NET CHANGES IN FUND BALANCE ( 37,932,062) 22,552 913,750
FUND BALANCE 6/ 30/ 07 192,211,410 24,566,478 7,122,695
RESERVED 46,895,593 1,200,000 0
UNRESERVED - DESIGNATED 14,080,578 6,957,883 7,122,695
UNRESERVED, DESIGNATED FOR CIP 56,074,867 0 0
UNRESERVED, DESIGNATED FOR PERS 5,400,000 5,400,000 0
UNRESERVED, DESIGNATED FOR HOUSING 31,036,678 0 0
UNRESERVED, UNDESIGNATED 38,723,694 11,008,595 0
TOTAL 192,211,410 24,566,478 7,122,695
( 1) General Fund balance includes accrued leave, and insurance liability accounts.
( 2) Special Revenue Funds include Public Art Fund, Gas Tax Fund, Light & Landscape Maintenance District Funds, Housing and Community Development Fund, Law
Enforcement Block Grant Funds, Abandon Vehicle Abatement Funds, Solid Waste Services Fund and Equipment Replacement Funds.
( 3) Capital Projects include Street Improvement Fund, Park Improvement Funds, General Government Capital Improvement Fund and Storm Drain Capital Improvement Fund.
City of Milpitas, California 55 2006- 2007 Final Budget
Financial Information Budget Summary
Special Revenue ( 2) Capital Projects ( 3) Redevelopment ( 4) Water Fund ( 5) Sewer Fund ( 6)
0 0 28,237,000 0 0
540,000 0 0 0 0
0 0 0 0 0
0 0 0 0 0
274,000 534,000 3,488,000 256,000 643,000
1,906,000 996,092 131,986 0 0
42,000 0 0 15,068,000 9,431,000
294,000 380,000 2,035,800 408,000 10,075,000
3,056,000 1,910,092 33,892,786 15,732,000 20,149,000
2,287,288 0 44,302,438 ( 904,926) 13,837
0 ( 420,675) 0 ( 431,000) ( 648,000)
0 0 ( 5,330,598) 0 0
0 2,270,000 190,000 0 0
( 1,537,613) ( 1,054,178) ( 12,920,125) ( 2,949,529) ( 2,114,137)
749,675 795,147 26,241,715 ( 4,285,455) ( 2,748,300)
3,805,675 2,705,239 60,134,501 11,446,545 17,400,700
1,178,765 0 1,457,821 2,103,828 1,172,670
2,212,960 138,945 1,146,680 7,670,317 6,513,030
413,950 0 0 112,400 0
3,805,675 138,945 2,604,501 9,886,545 7,685,700
0 2,566,294 40,810,000 1,560,000 9,715,000
0 0 16,720,000 0 0
0 2,566,294 57,530,000 1,560,000 9,715,000
3,805,675 2,705,239 60,134,501 11,446,545 17,400,700
10,696,539 16,358,180 142,070,160 8,700,017 21,565,705
( 2,287,288) 420,675 ( 38,971,840) 1,335,926 634,163
8,409,251 16,778,855 103,098,320 10,035,943 22,199,868
8,409,251 0 36,842,791 200,000 243,551
0 0 0 0 0
0 16,778,855 14,795,300 4,639,597 19,861,115
0 0 0 0 0
0 0 31,036,678 0 0
0 0 20,423,551 5,196,346 2,095,202
8,409,251 16,778,855 103,098,320 10,035,943 22,199,868
( 4) Redevelopment Agency Funds include Housing Reserve Fund, Redevelopment Project Fund and Tax Allocation Bond Fund.
( 5) Water Fund balances are working capital and include Water Fund, Water Fund CIP, Water Line Extension Fund and Recycled Water Fund.
( 6) Sewer Fund balances are working capital and include Sewer Fund, Sewer Fund CIP, Treatment Plant Construction Fund and South Bay Water Recycling Program Fund.
2006- 2007 Final Budget 56 City of Milpitas, California
Financial Information General Fund 5- Year Forecast
General Fund 5- Year Forecast
General Fund
Five Year Forecast - FY 2006- 07 to FY 2010- 11
FY06- 07 FY07- 08 FY08- 09 FY09- 10 FY10- 11
Estimated Revenues
Property Taxes 1 5,609,000 1 6,389,450 1 7,045,028 1 7,726,829 18,435,902
Sales & Use Tax 1 6,245,000 1 8,057,250 1 9,460,113 2 0,738,517 21,568,058
Hotel/ Motel Tax 4 ,331,000 4 ,504,240 4 ,684,410 4 ,871,786 5,066,657
Other Taxes 3 ,631,000 3 ,812,550 3 ,965,052 4 ,103,829 4,247,463
License & Permits 4 ,278,000 4 ,491,900 4 ,716,495 4 ,881,572 5,052,427
Fine & Forfeitures 8 12,000 8 28,240 8 44,805 8 61,701 878,935
Rents and Concessions 2 92,000 2 94,920 2 97,869 3 00,848 303,856
Interest Income 9 93,000 8 93,700 8 13,267 7 48,206 688,349
Motor Veh, in- lieu fees 4 04,000 4 12,080 4 24,442 4 37,176 450,291
Charges for Services 3 ,264,000 3 ,410,880 3 ,564,370 3 ,671,301 3,781,440
Other Revenues 3 48,000 3 58,440 3 69,193 3 80,269 391,677
Operating Transfers 1 8,115,582 1 3,803,674 1 4,259,195 1 4,729,748 15,230,560
Total Estimated Revenues and
Other Financing Sources 6 8,322,582 6 7,257,324 7 0,444,238 7 3,451,781 76,095,616
Estimated Expenditures
Subtotal 5 4,973,871 5 8,825,831 6 0,879,699 6 3,019,506 65,249,774
Services & Supplies 1 2,045,759 1 2,407,132 1 2,779,346 1 3,162,726 13,557,608
Capital Outlay 2 4,400 - - 2 50,000 250,000
Debt Service 1 ,256,000 1 ,260,000 1 ,260,000 - -
Subtotal 1 3,326,159 1 3,667,132 1 4,039,346 1 3,412,726 13,807,608
Total Estimated Expenditures 6 8,300,030 7 2,492,962 7 4,919,045 7 6,432,232 79,057,381
( Deficit) 2 2,552 ( 5,235,639) ( 4,474,807) ( 2,980,451) ( 2,961,766)
City of Milpitas, California 57 2006- 2007 Final Budget
Financial Information Distribution of Revenues
D I S T R I B U T I O N O F R E V E N U E S
2 0 0 6 - 2 0 0 7
( A l l F u n d s )
38%
8%
14%
4%
1%
5%
3%
24%
3% Property Taxes 38%
Other Taxes 8%
Sales Tax 14%
License & Permits 4%
Fines & Forfeitures 1%
Use of Money & Property 5%
Intergovernment 3%
Service Charges 24%
Other Revenue 3%
D I S T R I B U T I O N O F E X P E N D I T U R E S
2 0 0 6 - 2 0 0 7
( A l l F u n d s )
12%
1%
4%
4%
13% 2%
2%
22%
1%
2%
13% 2%
3%
19%
Policy Planning 2%
Public Works 12%
Human Res 1%
Engineering 4%
Recreation 4%
Police 19%
Bldg & Safety 2%
Fire 13%
Info Svcs 2%
Non Dept 22%
Finance 3%
City Attorney 1%
Planning 2%
Debt Svc 13%
2006- 2007 Final Budget 58 City of Milpitas, California
Financial Information Distribution of Expenditures
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City of Milpitas, California 59 2006- 2007 Final Budget
Financial Information Revenue Assumptions
Revenue Assumptions
FY 06- 07 General Fund Revenue Assumptions
Sales Tax Sales tax revenues for FY 05- 06 are projected to be $ 0.2 million ( 1.4%) less than budget.
FY 05- 06 sales tax revenue is projected to increase by 5.6% over FY 05- 06 revised
estimate based on continued economic recovery and increased sales in the food products
and general retail economic segments. The Great Mall of the Bay Area added new anchor
stores which increased sales. The City also anticipates sales tax revenue increase due to
opening of a major car dealership in late FY 06- 07.
Property Tax FY 05- 06 property tax revenues are estimated to be $ 0.6 million more than budget due to
addition of new residential developments on tax roll and re- assessment of properties due to
sales. For FY 06- 07, it is anticipated that property tax revenue will increase by 10.5% based
on report of assessed valuation growth of 6% provided by the County Assessor. The 10.5%
increase next year also includes the restoration of property tax revenue that was shifted to
the Education Augmentation Revenue Fund of about $ 1 million.
Transient
Occupancy Tax
( TOT)
It is projected that that FY 05- 06 TOT will increase by a modest 2% over FY 04- 05 revised
revenue, in anticipation of more business travel as the economy in this region continues to
recover. The projection for TOT revenue is more conservative because of the ability of
teleconferencing for many high- tech companies.
Franchise Fees Franchise fee is based on an agreed upon percentage of the gross revenue generated by
the gas and electric utility, garbage, and cable TV service providers in the City. The
projection for franchise fees take into consideration of rate increases and consumption
changes. Electric, gas franchise fees are projected to increase by 3% due to rate increase
while cable franchise fees are projected to increase by 6% next fiscal year over FY 05- 06
budget. Garbage franchise fee is projected to increase by 2%.
Building Permits FY 06- 07 building permit revenues are projected to be approximately $ 3.7 million based on
the number of anticipated applications and the size of the projects. It is anticipated KB
Homes will continue with their development activities and other residential development
projects such as Centria, Oak Springs and Town Center will commence.
$ 1.0
$ 3.0
$ 5.0
$ 7.0
$ 9.0
$ 11.0
$ 13.0
$ 15.0
$ 17.0
Sales Tax Property Tax TOT Franchise Fees Building Permits
Budgeted Revenues
FY 05- 06 and FY 06- 07
FY 05- 06 Budget FY 05- 06 Revised Projected FY 06- 07 Budget
Millions
2006- 2007 Final Budget 60 City of Milpitas, California
Financial Information Revenue Assumptions
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City of Milpitas, California 61 2006- 2007 Final Budget
Financial Information Revenues by Source ( Summary)
Revenues by Source ( Summary)
Actual
2003- 04
Actual
2004- 05
Budget
2005- 06
Approved
2006- 07
100 General Fund 50,899,919 59,071,483 65,843,892 68,322,582
102 Library Fund 1,073,858 1,129,644 1,212,250 1,258,750
211 H- Hetch Ground Lease 0 1,510,217 0 52,000
212 Public Art Fund 0 0 0 5,000
221 Gas Tax Fund ( 54,672) ( 81,413) 90,000 ( 300,000)
235 95- 1 Lighting/ Lscape Dist 237,443 251,885 243,000 265,000
236 98- 1 Lighting/ Lscape Dist 32,792 30,855 38,000 32,000
250 HCD Fund 1,106,182 568,903 724,000 631,000
251 HCD Loan 252,941 286,241 363,000 7,000
261 Supplemental Law Enforcement 109,949 99,761 36,000 3,000
262 State Asset Seizure 6,983 24,611 4,000 3,000
263 Federal Asset Seizure 484 446 0 0
264 Local Law Enforcmnt Block Grant 29,528 40,895 40,000 0
266 COPS in School 12,174 ( 493) 0 0
275 Abandon Veh Abatemnt 83,201 65,134 73,000 78,000
280 Solid Waste Services 230,352 283,946 324,410 262,387
281 Solid Waste Reduction 65,351 253,516 264,124 310,000
290 Housing Reserve Fund 5,525,284 4,440,961 4,923,624 5,267,054
291 Housing Reserve 97 TABS 6,171,243 8,556 179,000 185,000
310 Street Fund ( 2,915,223) 908,951 ( 1,314,000) ( 279,380)
311 Street CIP 8,893,585 3,543,376 2,218,713 2,351,294
320 Park Improvement Fund ( 749,857) 452,344 ( 633,000) 406,000
321 Park Improvement CIP 1,325,997 567,917 144,000 195,000
322 Midtown Park Fund 0 942,947 27,000 28,000
330 General Government 51,387 42,441 45,000 22,000
331 General Government CIP 646,513 550,731 10,000 20,000
332 Technology Certificates of Participation ( 1,085,848) ( 824,297) 4,000 2,000
340 Storm Drain Development CIP 39,076 1,197 321,000 381,000
390 RDA Project Fund 110,588,136 73,499,688 7,290,267 11,559,607
391 Redevelopment CIP 122,409 5,383,500 17,835,000 40,810,000
392 97 RDA TABs CIP ( 5,870,873) ( 187,937) 127,000 ( 4,465,000)
393 2000 RDA TABs CIP ( 166,796) 2,015 2,000 2,000
395 2003 RDA TABs CIP 115,729,580 ( 4,243,797) ( 11,965,000) ( 32,196,000)
400 Water M & O Fund 8,809,106 9,240,982 10,268,799 10,011,315
401 Water CIP ( 118,975) 662,951 1,160,000 1,560,000
402 Water Line Extension Fund 16,240 55,987 698,000 431,000
406 Recycled Water Fund 529,317 719,224 634,858 780,156
450 Sewer M & O Fund 5,362,928 6,114,338 4,555,826 7,643,863
451 Sewer CIP ( 1,444,329) 1,042,901 12,035,000 9,715,000
452 Treatment Plant Construction F 1,709,468 606,349 ( 4,779,500) 887,000
455 Sewer Infrastrture Replmnt 173,535 168,077 ( 116,000) ( 239,000)
456 South Bay Water Recycling Prgm 32,495 25,632 28,000 28,000
500 Equipment Mgnt Fund ( 199,018) 2,684,676 1,734,976 170,000
TOTAL 307,261,866 169,945,343 114,690,239 126,205,628
2006- 2007 Final Budget 62 City of Milpitas, California
Financial Information Revenues by Source ( Detail)
Revenues by Source ( Detail)
Description
Actual
2003- 04
Actual
2004- 05
Budget
2005- 06
Approved
2006- 07
GENERAL FUND ( 100)
PROPERTY TAXES
3010 Property Taxes, Current 9,549,605 12,377,455 12,827,000 14,881,000
3030 Property Taxes, Supplement 465,634 744,312 707,000 728,000
sub- total 10,015,238 13,121,767 13,534,000 15,609,000
TAXES OTHER THAN PROPERTY
3110 Sales and Use Tax 10,635,247 14,270,542 15,595,000 16,245,000
3120 Real Estate Transfer Tax 601,153 575,786 430,000 505,000
3131 Electric Franchise 1,098,431 1,045,522 1,130,000 1,115,000
3132 Gas Franchise 176,599 170,951 177,000 179,000
3133 Garbage Franchise- Commercial 618,761 766,705 758,000 729,000
3134 Garbage Franchise- NonCommercial 419,826 437,736 447,000 438,000
3137 Nitrogen Gas Franchise 31,057 34,522 33,000 35,000
3138 CATV Franchise 305,146 316,031 322,000 353,000
3140 Business License Tax 272,269 274,461 262,000 277,000
3150 Hotel/ Motel Tax 3,773,974 3,986,016 4,301,000 4,331,000
sub- total 17,932,461 21,878,273 23,455,000 24,207,000
LICENSES AND PERMITS
3210 Building Permits 1,460,360 2,876,211 2,475,000 3,688,000
3220 Fire Permits 356,307 445,882 282,000 408,000
3240 Life Safety Annual Permits 200,361 178,932 216,000 182,000
3250 Fire Inspections 574 982 0 0
sub- total 2,017,602 3,502,007 2,973,000 4,278,000
FINES AND FORFEITS
3301 Vehicle Code Fines 234,604 253,519 226,000 229,000
3302 Other Court Fines 598,323 405,915 400,000 428,000
3305 Booking Fees 26,657 36,679 30,000 24,000
3306 NBO Violation Fees 5,980 8,860 10,000 10,000
3307 Impound Fees 58,110 49,267 50,000 61,000
3308 Animal Violations 13,935 14,215 23,000 11,000
3309 False Alarm Fee 61,400 53,800 65,000 49,000
3310 Fire Administrative Citations 2,200 903 1,000 0
3311 Building Admin Citation 602 0 0 0
3312 Planning Admin Citation 200 2,500 1,000 0
sub- total 1,002,011 825,659 806,000 812,000
USE OF MONEY AND PROPERTY
3431 Pooled Investment- Interest 1,843,765 938,984 1,079,000 953,000
3432 Cash with Fiscal Agents 7,421 ( 7,421) 0 0
3433 Other Interest Income ( 3,814,397) ( 10,359) 58,000 40,000
sub- total ( 1,963,211) 921,204 1,137,000 993,000
INTERGOVERNMENTAL
3511 Motor Vehicle In Lieu Tax 2,969,225 420,823 534,000 404,000
3521 Homeowners Property Tax Relief 136,009 131,066 140,000 130,000
3532 Off- Highway Tax 2,126 859 1,000 2,000
3555 Federal Contributions- Eng & Planning 40,000 0 0 0
3556 Federal Contributions- Recreation 22,140 22,094 20,000 13,000
3557 Federal Contributions- Police 0 18,833 0 0
3558 Federal Contributions- Fire 26,857 70,296 44,000 0
City of Milpitas, California 63 2006- 2007 Final Budget
Financial Information Revenues by Source ( Detail)
3562 POST Grant 14,461 23,649 5,000 18,000
3565 State Contributions- Eng & Planning 3,000 0 0 0
3567 State Contributions- Police 0 1,921 0 0
3576 County Contributions- Recreation 55,207 61,111 35,000 72,000
3582 SB90 Grant 361 20,242 0 50,000
3585 Other Restricted Grants- Eng & Planning 15,817 0 0 0
3586 Other Restricted Grants- Recreation 0 2,639 0 0
3591 Misc Unrestricted Intergovernmental 198,194 198,194 198,000 0
sub- total 3,483,396 971,726 977,000 689,000
CHARGES FOR CURRENT SERVICES
3601 General Government Service Charges 362,958 428,639 150,000 137,000
3602 Sales of Maps and Documents- Gen Gov't 490 895 1,000 0
3603 Rents, Leases and Concessions- Gen Gov't 120,900 123,558 120,000 140,000
3611 PJ Overhead Charges 430,464 722,304 500,000 731,000
3612 PJ Labor Reimbursement 196,123 327,090 225,000 328,000
3613 PJ Vendor Reimbursement 102,201 31,267 32,000 73,000
3615 Engineering & Planning Services 41,499 19,243 21,000 14,000
3616 Engineering Plan Check Fee 0 3,374 0 5,000
3617 Planning Fees 26,762 17,265 15,000 15,000
3618 Sales of Maps & Documents- Eng & Pla 14,861 14,481 14,000 9,000
3619 Rents, Leases & Concessions- Eng & Pla 0 18,080 29,000 9,000
3633 Fire Cost Recovery 1,575 388 1,000 0
3634 Unwanted Alarms- Fire 300 1,700 2,000 0
3635 Fire Enforcement- Penalties 0 1,248 0 0
3636 Fire Enforcement- Training 0 2,742 1,000 0
3637 Fire Service Charges 205,374 256,248 200,000 200,000
3638 Sale of Maps & Documents- Fire 35 3 0 0
3641 Police Service Charges 237,325 266,088 278,000 284,000
3643 Fingerprints 22,410 6,222 5,000 2,000
3644 Sales of Maps & Documents- Police 13,919 14,105 14,000 12,000
3645 Police Cost Recovery 672 3,961 6,000 0
3646 Rents, Leases & Concessions- Police 7,280 2,010 3,000 0
3647 DUI- Police Cost Recovery 6,706 9,327 0 5,000
3651 Rents, Leases & Concessions- Recreation 148,804 112,004 148,000 143,000
3652 Recreation Fees 1,232,049 1,354,963 1,380,000 1,356,000
3653 Senior Nutrition Fees 10,001 12,726 10,000 13,000
3655 Sales of Merchandise Recreation 25 2,775 3,000 1,000
3661 Sales of Maps & Documents- Building 225 82 0 0
3662 Records Retention Fee 9,741 20,229 11,000 31,000
3663 Building Service Charges 6,300 1,350 2,000 12,000
3671 Public Works Service Charges 0 150 0 0
3672 Public Works Cost Recovery 39,338 30,282 40,000 36,000
sub- total 3,238,339 3,804,800 3,211,000 3,556,000
OTHER REVENUE
3710 Development 10,510 5,772 9,000 5,000
3740 Reimbursements 2,880 2,139 2,000 1,000
3750 Donations 12,900 24,760 0 0
3770 Sale of Property, Plant and Equipment 10,226 15,037 0 0
3790 Miscellaneous Other Revenue 49,860 115,528 50,000 57,000
Description
Actual
2003- 04
Actual
2004- 05
Budget
2005- 06
Approved
2006- 07
2006- 2007 Final Budget 64 City of Milpitas, California
Financial Information Revenues by Source ( Detail)
sub- total 86,375 163,236 61,000 63,000
OPERATING TRANSFERS IN
3806 Op Trfs in from Solid Waste Service 0 0 8,590 37,613
3807 Op Trfs in from Solid Waste Reduction 4,000 4,000 11,876 0
3808 Op Transfers in from Housing R 509,285 702,868 764,576 694,746
3809 Op Transfers in from Street Fu 780,000 780,000 1,000,000 844,178
3811 Op Transfers in from Redevelop 5,264,523 6,245,452 12,474,333 11,455,379
3812 Op Transfers in from Water M& O 2,782,909 2,990,241 3,114,201 2,913,685
3814 Op Transfers in from Recycled 50,181 51,680 54,142 30,844
3815 Op Transfers in from Sewer M& O 1,797,537 2,190,471 2,262,174 2,109,137
3817 Op Transfers in from Equipment 750,000 0 0 0
3819 Other Operating Transfers In 910 0 0 0
3821 Op Tfr in from RDA- Sales Tax 982,096 138,813 0 0
3822 Op Tfr in from General Gov't Fund 0 0 0 30,000
3841 Appn Transfers in from Redevel 1,230,000 713,000 0 0
3842 Appn Transfers in from Water M 0 26,000 0 0
3845 Appn Transfers in from Sewer M 0 26,000 0 0
3849 Other Appn Transfers In 292 1,166 0 0
3850 Appn Tfr in from Debt Pr 952,382 0 0 0
sub- total 15,104,115 13,869,691 19,689,892 18,115,582
OPERATING TRANSFERS OUT
3911 Op Trfs Out To the RDA Project Fund 0 ( 3,324) 0 0
3934 Appn Transfers out to H/ CD Fun ( 620) 0 0 0
3949 Other Appn Transfers Out ( 15,786) ( 1,557) 0 0
3999 Op Trfs Out To Subsidiary CIP fund 0 18,000 0 0
sub- total ( 16,406) 13,119 0 0
TOTAL ( 100) 50,899,919 59,071,483 65,843,892 68,322,582
LIBRARY FUND ( 102)
3150 Hotel/ Motel Tax 942,667 999,838 1,075,250 1,082,750
3431 Pooled Investment- Interest 131,191 147,806 137,000 176,000
3999 Op Trfs Out To Subsidiary CIP fund 0 ( 18,000) 0 0
TOTAL ( 102) 1,073,858 1,129,644 1,212,250 1,258,750
H- HETCH GROUND LEASE ( 211)
3431 Pooled Investment- Interest 0 10,217 0 52,000
3760 Developer Contribution 0 1,500,000 0 0
TOTAL ( 211) 0 1,510,217 0 52,000
PUBLIC ART FUND ( 212)
3431 Pooled Investment- Interest 0 0 0 5,000
TOTAL ( 212) 0 0 0 5,000
GAS TAX FUND ( 221)
3431 Pooled Investment- Interest 21,648 ( 1,885) 0 0
3545 Sec 2105- Gas Tax 403,364 404,570 428,000 400,000
3546 Sec 2106- Gas Tax 275,145 270,900 294,000 260,000
3547 Sec 2107- Gas Tax 537,671 537,502 568,000 540,000
3548 Sec 2107.5- Gas Tax 7,500 7,500 0 0
3909 Op Trfs Out To the Street Improvement Fund ( 1,300,000) ( 1,300,000) ( 1,200,000) ( 1,500,000)
Description
Actual
2003- 04
Actual
2004- 05
Budget
2005- 06
Approved
2006- 07
City of Milpitas, California 65 2006- 2007 Final Budget
Financial Information Revenues by Source ( Detail)
TOTAL ( 221) ( 54,672) ( 81,413) 90,000 ( 300,000)
95- 1 LIGH