Building Maintenance Worker Joe Duran received the Maintenance Employee of the Year Award. This award honors an employee who has performed his or her duties with excellence, integrity, and professionalism and has demonstrated courtesy, concern, responsiveness, and dedication both within and outside the industry. Mr. Duran was nominated by the Housing Department as a result of his strong work ethic during his 23-year tenure with the Department, his compassion and positive attitude when working with residents, and his willingness to go above and beyond the call of duty.

The Housing Department’s Section 8 Inspectors and Technical Services Section received the Innovative Program of the Year Award for the Public Housing Inspection Efficiencies Program. Through this program, the Housing Department implemented remote computing for its inspection staff and developed a computer program for Inspectors to easily navigate the housing system and enter their inspection results in real time. Due to these technology enhancements, Inspectors have seen a 25% increase in inspections from the previous year. Team members for the program include Angela Duncan, Mike Walgamotte, Linda Murrietta, Trish Jordan, and Richard Dominguez from Section 8 Housing and Joe Schaffner, Jeff Starr, Becky Savallisch, Mark Heitowit, and Kevin Igo from Technical Services.

Michael Davis, a public housing resident, received the Hero of Assisted Housing Award, which honors a resident who has demonstrated the qualities and character that make him or her a role model for others. As a resident at the Luke – Krohn Apartments, Mr. Davis served on the BlockWatch and Tenant Council. He has also volunteered at the Luke Krohn Senior Center and works as a Volunteer Income Tax Assistant (VITA) with the Public Housing VITA Sites Program. Serving in these roles, Mr. Davis is an inspiration to all.

Finally, Robert Williams, a Section 8 voucher recipient, received the Family Self Sufficiency (FSS) Program Participant of the Year Award. After being paralyzed in a motorcycle accident, Mr. Williams had difficulty obtaining employment. In addition, he lost food stamp and Medicaid benefits because the little income he received put him over the income guidelines for these programs. He entered FSS, which helps voucher families obtain employment and become self-sufficient. He enhanced his skills and knowledge, secured employment as a Customer Service Representative at E-Telecare, and graduated from FSS in May 2008 with a $4,000 escrow balance. He continues to progress in his job and is now working towards homeownership.

OTHER INFORMATION

AZNAHRO is a housing and community development organization that advocates for the provision of adequate, affordable housing and strong, viable communities. AZNAHRO members administer programs of the United States Department of Housing and Urban Development (HUD), including the Public Housing, Section 8, Community Development Block Grant (CDBG), and HOME Investment Partnerships (HOME) programs.

AHADA is an organization comprised of Housing Authority directors from across the State who discuss the issues faced when implementing HUD programs.

Annually, these organizations seek nominations across Arizona to encourage, support, and reward professionalism and integrity for those programs and individuals dedicated to developing, promoting, and administering community development and housing programs in Arizona.

RECOMMENDATION

This report is for information only.

There are several reports attached concerning the Budget item. They are:

1. Budget & Research Director Cathleen Gleason’s City Council Report “Zero Based Budget Review“.

2. The Zero Based Budget Report. This document identifies General Fund expenditures and includes the rating form which will be used by the City Council to identify potential budget cuts. A copy of this report is available by contacting the City Clerk Department at 602-262-6811 or at the City Clerk Counter on the 15th Floor of Phoenix City Hall, 200 West Washington.

3. City Manager Frank Fairbanks’ memo recommending Alternative 2 for allocating budget growth and shortfall. This memo makes a recommendation for City Council approval based on the following memo.

4. Budget & Research Director Cathleen Gleason’s City Council Report entitled “Allocating Budget Growth and Shortfall”. This memo identifies general alternatives for allocating cuts among the departments.

CITY COUNCIL REPORT
POLICY AGENDA
TO:	Frank Fairbanks City Manager	AGENDA DATE:		October 14, 2008
FROM:	Cathleen Gleason Budget And Research Director	ITEM:	3
SUBJECT:	ZERO BASED BUDGET REVIEW PACKAGE

This report transmits the Zero Based Budget Review of General Fund Programs and Services requested by the Mayor and Council. This is a new step in our process which was requested by City Council members.

THE ISSUE

The City’s General Fund supported programs and services are some of the most important provided to our residents. These programs and services include police and fire protection, parks and recreation programs, libraries, and street maintenance. Over the last several budgets, the City has had to make more than $200 million in reductions to General Fund programs and services.

OTHER INFORMATION

Last spring the Mayor and Council requested a zero based budget review of all general-funded programs and services. This review will provide a detailed list of budgeted expenditures for 2008-09 associated with all general-funded programs and services provided by each department. The review also includes a count of any associated positions, actual performance measures for 2007-08 and estimated performance measure results for 2008-09.

Staff from throughout the City have worked for several months to prepare this information. We believe it will provide you with a comprehensive review of City spending and an opportunity to shape the upcoming cuts to the City budget.

One of the challenges in preparing this process is deciding the level of detail. It is possible to provide you more than 1000 pages of worthwhile budget information, or we could sum it up in 15 pages. One path would create a confusing array of minute issues and the other would eliminate real choices. We tried to find a middle ground that allows meaningful decision making on real issues. If the City Council desires additional detail, we would be happy to provide it.

Many departments have programs completely supported by other funding sources. Those programs are not included in this review. Only programs funded in full or in part by the General Fund are included. In several programs, you will notice that the General Fund dollar amount shown is a negative number. A negative number means that the program charges other departments or capital projects for providing the service. In cases such as this, and many others, we have noted the gross costs associated with the program as a footnote.

Finally, all dollar amounts shown reflect budgeted expenditures only. Many programs generate revenue. Savings from reducing or eliminating those programs would have to be netted against any revenue produced.

RECOMMENDATION

We are not asking the Mayor and Council to provide final decisions at this time. We have included a rating sheet in order to collect your guidance on which programs should be considered for reduction or elimination. Your input will be used to help guide staff as we work to recommend an early balanced-budget proposal in January.

Please feel free to contact me if you need additional information, details or clarification.

The City Attorney has advised us that your completed rating sheet should be submitted at a public meeting. The adopted budget calendar calls for Mayor and Council rating sheets to be submitted at the October 28 Policy meeting.

CITY COUNCIL REPORT
POLICY AGENDA
TO:	Mayor and City Council	AGENDA DATE:		October 14, 2008
FROM:	Frank Fairbanks City Manager	ITEM:	3
SUBJECT:	ALLOCATING BUDGET GROWTH AND SHORTFALL

Attached is a report from the Budget & Research Department seeking your general guidance on budget growth and cost cutting among departments. This guidance will be combined with your input from the Zero Based Budget process and the cut back proposals we have received from the city departments to assemble a balanced budget proposal in January.

Budget & Research presents three alternatives for funding the public safety departments. The level of funding for the public safety departments will determine the level of budget cuts and service reductions for other general fund departments. Some of the potential cut levels are drastic.

The City Council has consistently funded the public safety departments at much higher levels than other departments. I therefore recommend Alternative 2 that would set aside $10 million to increase the public safety departments’ funding (Police, Fire, Courts, Prosecutor and Public Defender) for FY 2009-10. This will require heavy cuts in other departments, but the cuts are achievable.

The City is committed to fully and promptly implementing Proposition 1. We will use these funds to add new Officers throughout the budget period. We will hire as many Officers as Proposition 1 funds will cover.

This $10 million increase in public safety department budgets will not fund all of the budget growth that is normal for the public safety departments. We are working cooperatively with the Police Chief, Fire Chief and Presiding Judge, to identify ways to reduce budget growth without significantly reducing services. They believe that this level of funding is practical.

I believe that the allocation of funds in Alternative 2 gives the City the best opportunity of meeting the community’s needs with declining revenue.

CITY COUNCIL REPORT
POLICY AGENDA
TO:	Frank Fairbanks City Manager	AGENDA DATE:		October 14, 2008
FROM:	Cathleen Gleason Budget And Research Director	ITEM:	3
SUBJECT:	ALLOCATING BUDGET GROWTH AND SHORTFALL

The Mayor and City Council will kick off our efforts to balance the 2008-09 and 2009-10 budgets with their ratings of potential cut items using the Zero Based Budget Review. The City Council’s input will be a crucial element in developing the cuts necessary to balance the budget.

Another key element is the allocation of cuts among the various general fund departments. The Police Department, Fire Department, Municipal Court, City Prosecutor and Public Defender represent 68% of the General Fund budget. The Mayor and City Council have consistently given the very highest priority to funding the public safety departments. Since 2002, City civilian departments have been cut an average of 37.5% while the public safety departments have seen growth reductions of 10.5%.

Alternatives

As we start the budget process, we would like City Council guidance on the general approach to be used in allocating budget growth and cuts. We have developed three general scenarios, which could be modified. They are as follows:

1. Fully Fund Public Safety Budget Growth / Make Severe Civilian Department Cuts – In this option, spending would be allowed to expand unrestrained in the public safety departments (Police, Fire, Court, Prosecutor and Defender). All budget cuts would occur in the civilian departments. In addition to budget balancing cuts, civilian departments would be cut an additional amount to pay for public safety budget expansion. There would be no belt tightening in public safety, instead there would be very heavy cuts in all other departments.

2. Reduce Public Safety Growth / Make Most Cuts in Civilian Departments – The budgets of the public safety departments for 2009-10 would increase by a combined total of approximately $10 million over their current 2008-09 budgets. This would not allow full funding of all public safety department cost increases and inflation. The significant budget cuts would occur in the civilian departments. These cuts would be very difficult, but the civilian departments would not need to be cut as much in order to pay for full public safety cost increases.

3. Treat All General Fund Departments the Same – All departments would have the same percentage cuts. This option would evenly distribute budget cuts across all departments.

ESTIMATED BUDGET IMPACT

	Public Safety Budget Growth	All Other Department Budget Cuts
Alternative 1	+ $70 million	40 – 60%
Alternative 2	+ $10 million	25 – 45%
Alternative 3	– $80 million (cut)	15 – 20%

The final percentage for department budget cuts depends on upcoming revenue results, refined expenditures estimates and the potential for other deficit reducing financial transactions.

Action Requested

General City Council guidance is requested. It is also possible to develop variations of the alternatives shown.

CITY COUNCIL REPORT
POLICY AGENDA
TO:	Thomas E. Callow, P.E. Deputy City Manager	AGENDA DATE:		October 14, 2008
FROM:	Wylie Bearup, PE, PhD Interim Street Transportation Director	ITEM:	4
SUBJECT:	STREET TRANSPORTATION FUNDING OUTLOOK

This report is to provide information concerning the Street Transportation Department’s revenue projections and anticipated shortfalls for the Capital Improvement Program.

THE ISSUE

Over 53 percent of funding for Street Transportation’s Capital Improvement Program is received from the State of Arizona Highway User Revenue Fund (HURF). HURF revenues are collected from gasoline taxes, motor vehicle registration fees, vehicle license taxes, and miscellaneous fees. These revenues are distributed to cities, towns, counties, and the State Highway Fund. Remaining funding sources include bonds, federal aid, impact fees, and the Capital Construction Fund (CCF), which is generated by a utility tax on telecommunication services.

In FY 2007/08, HURF collections decreased 2.7 percent, which was 6.6 percent below the State’s estimate. This was the first year since 1981 that Arizona gas tax collections recorded negative growth. During the first two months of FY 2008/09, HURF revenues have again been below projections. In addition to the reduction in revenues, the State of Arizona has decreased the amount of HURF revenues shared with cites and towns in order to increase support to the Department of Public Safety. This meant $6.5 million less to the City of Phoenix. The 2010 census is also expected to decrease Phoenix’s share of HURF revenues by an estimated $5 million.

Last year, staff estimated that Street Transportation’s Five-Year Capital Improvement Program would total $859 million. Based on the new HURF revenue projections, the five-year program must be reduced to $731 million. This represents a 15 percent decrease in the budget and a $15 million shortfall in funding for the 2008/09 program. The projections show an estimated $95 million shortfall over the next five years.

OTHER INFORMATION

In addition to the recent loss of HURF revenues, the cost of materials needed for capital improvement projects has escalated dramatically. In the last five years, the cost of asphalt has risen 211 percent and the cost to install sidewalk has increased 500 percent. As costs have escalated, fewer new capital projects have been completed. Maintenance funding has remained level, so fewer miles of streets can be maintained. This trend could have major repercussions in the near future.

In the past, the City of Phoenix maintained a 30-year cycle for the overlay of roadways. This provided an acceptable time period between maintenance activities and insured streets had adequate rideablity ratings. Due to cost escalations, the Major/Collector Street Overlay Program is now budgeted at an 83-year cycle and the Residential Street Overlay Program is budgeted at a 78-year cycle. This level of maintenance will not keep existing roadways in adequate condition. Additional cost increases or budget reductions will further erode maintenance levels. For a 30-year Major/Collector Street Overlay cycle, an additional $11 million is needed each year and an additional $12 million is needed each year in the Residential Street Overlay budget. Additional funds must be added to the overlay budget every year to keep pace with cost escalations.

There are over 30 Street Transportation programs that are funded with HURF and Capital Construction Fund revenues. To assist in the reduction decisions, Street Transportation staff has analyzed the programs and created six general funding categories:

Category	Programs	FY 2008/09 Funding
Major Construction	Major Street Construction, RTP, Bridges, Landscape Retrofit, Streetlighting, Bikeways, Pedestrian Bridges	$51,400,000
Maintenance	Major Street Overlay, Residential Overlay, Concrete Repair, Crackseal, Slurry Seal, Microseal, Asphalt Repair, Signal Pole Painting, Curb/Crosswalk Painting, Freeway Landscaping, Wash Area Management	$20,800,000
Local/Residential Construction	Local Drainage, Street Modernization, Sidewalks, Screen Walls	$8,900,000
Signal Enhancement/ Management	Signal Modernization, Illuminated Signs, New Signals, Left-Turn Arrows, Signal System Upgrade, Fiber Optic	$6,200,000
Neighborhood Improvements	Mid-Block Streetlights, Traffic Calming, Speed Humps	$2,200,000
Compliance	Dam Inspection, Guard Rails/Barriers, Alley Dust Proofing, Dust Control, Environmental Support, ADA Compliance, School Safety, GIS	$3,800,000

Approximately $15 million must be reduced from the 2008/09 Capital Improvement Program. Further cuts totaling approximately $80 million will be needed for the next five years in order to bring the Capital Improvement Program in line with current revenue estimates. In addition, if maintenance levels are to be brought up to standards, funding must be diverted from existing programs.

1.	Council Information and Follow-up Requests/Consent Agenda/Call for E-Session
2.	AZNAHRO Awards for Outstanding Housing Department Residents and Employees
3.	Zero Based Budget Review Package
4.	Street Transportation Funding Outlook
5.	Increasing City Purchases from Phoenix Businesses

CITY COUNCIL REPORT
POLICY AGENDA
TO:	Ed Zuercher Deputy City Manager	AGENDA DATE:		October 14, 2008
FROM:	Kim Dorney Housing Director	ITEM:	2
SUBJECT:	AZNAHRO AWARDS FOR OUTSTANDING HOUSING DEPARTMENT RESIDENTS AND EMPLOYEES

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