Chapter 2.28 — FISCAL PROCEDURES

• Editor's Note: Prior ordinance history: Ordinance Nos. 3951, 3546, 3514, 3507, 3414, 3348, 2977, 2695, 2635, §§ 5, 6, 7; 2452 § 6; 2389; 2335, 2332 and 2146; prior code §§ 2.401-2.408.4, 2.408.7-2.412, 2.421 and 2.450.

The fiscal year of the city shall begin on the first day of July each year and end on the last day of June of the subsequent year.

(Ord. 4274 § 2 (part), 1995)

A one-year budget cycle refers to the twelve month budget period covering one fiscal year.

(Ord. 4274 § 2 (part), 1995)

The "two-year budget cycle" shall mean two consecutive fiscal years for which the council adopts and appropriates a budget for the first of such fiscal years and adopts a spending plan for the second fiscal year. In years where a two-year budget is submitted, the council shall adopt and appropriate a budget for the second fiscal year of such cycle as provided in this chapter; provided, however, the city manager may submit a one- year budget when the manager determines that it is efficient or otherwise beneficial to the city.

(Ord. 4274 § 2 (part), 1995)

On or about May 15th of the first year of each two-year budget cycle, the city manager shall submit to the council a proposed budget for the ensuing budget cycle, along with an accompanying message. When a two-year budget is proposed, only the budget for the first year shall be voted on and formally appropriated by the council as provided in Section 2.28.070. The budget for the second year shall be a spending plan and the council shall approve it only in concept. On or about May 15th of the second year of a two-year budget cycle, the city manager shall submit to the council the proposed changes to the spending plan the council previously adopted in concept. The council shall then vote on and formally appropriate the amended spending plan as the budget for the second year as provided in Section 2.28.070.

(Ord. 4274 § 2 (part), 1995)

The city manager's message shall, in summary form, narrate the budget both in financial terms and proposed programs as they relate to city plans, policies and objectives.

(Ord. 4274 § 2 (part), 1995)

The budget document shall provide a clear and complete financial plan for all city activities proposed for the ensuing budget cycle. In accordance with Article III, Section 12 of the Charter, except for trust funds, the budget document shall project all the expenditures and estimated receipts for all funds and departments in such form and detail as required by the director of administrative services, under the direction of the city manager. The budget shall contain:

(a) An overall financial summary;

(b) A schedule of estimated general revenue detailed by source, and reserve balances available to finance the general governmental

expenditures of the city. The schedule shall include an estimate of the proposed property tax revenues and the proposed transfers from city-owned utilities;

(c) Proposed expenditures for general governmental administration, services and operations set forth by each office, or department identified in Chapter 2.08 of this code. Proposed expenditures shall be detailed by department and category of expenditure, and by service. Comparisons shall be made between the previous year's actual spending, the current year's budget, the proposed first year appropriation and the proposed plan for the second year appropriation, if a two-year budget is submitted. The budget for each department or office shall be accompanied by supporting narrative relating expenditures to particular services, objectives and responsibilities of the unit. There shall also be included a listing by position classification of regular personnel, currently authorized and proposed, and the person-years represented thereby together with the person-years of temporary or nonpermanent personnel;

(d) Proposed capital expenditures for governmental facilities and other public works, detailed by project and their proposed method of financing, including grants from other agencies;

(e) In accordance with Article VII, Section 2 of the Charter, the estimated revenue of each utility owned or operated by the city and the proposed disposition thereof. Proposed expenditures, current and capitalized, shall be detailed in terms of category and shown in the appropriate comparative format. The budget for each utility shall be accompanied by supporting narrative and statistics. There shall also be included a listing by position classification of regular personnel assigned to the department of utilities, authorized and proposed. The person-years represented thereby together with the person-years of temporary or nonpermanent personnel shall be allocated to each utility;

(f) A budget for scheduled amounts required to be made available for retirement of the city's general and special obligation bond debt and the sources from which such amounts shall be obtained;

(g) Pursuant to his or her powers under Section1.08.110 of this code, the city manager may also in his or her discretion include in the proposed budget or in subsidiary documents a schedule of any proposed amendments to the municipal fee schedule;

(h) The budget adopted in the second year of a two-year budget cycle may be an abbreviated document, and shall include, at a minimum: summaries by fund and by department by categories of expenditure, a narrative message from the city manager, a listing of regular personnel by person-years by department, and an incorporation by reference of all other information required by this section as set forth in the adopted budget from the first year of the two-year budget cycle.

(Ord. 4274 § 2 (part), 1995)

The categories of expenditure proposed in the budget document for each fund or organization unit shall be detailed within the following classifications:

(a) Direct expenditures by department for:

(1) Salaries and benefits paid to or on behalf of employees;

(2) Nonsalary costs, as a group;

(3) Allocated costs, representing charges made to one department from another city department, including administrative overhead charges;

(4) Utility commodity and commodity transmission services purchased for resale;

(5) Debt service expense;

(6) Expenses not otherwise classified herein.

(b) The transfer of net revenue or fund balance between said funds.

(Ord. 4274 § 2 (part), 1995)

The budget for the operating funds may contain a contingent account. Upon written authorization of the city manager, the appropriation for this account or a portion thereof may be assigned to a department or project to cover unanticipated expenditures within that particular fund.

(Ord. 4274 § 2 (part), 1995)

(a) Notice and Hearing. In each budget cycle, the clerk shall publish in an official newspaper of the city a notice stating:

(1) That a public hearing will be held on the budget;

(2) The time and place of the hearing, which shall not be less than five days following the date of publication;

(3) The places where copies of the proposed budget are available for inspection by the public;

(4) Any other such noticing as may be required by state law for the adoption of the municipal fee schedule.

(b) First-Year Amendment and Adoption. After the public hearing before the adoption of the budget for the first year of a two-year budget cycle, the council may adopt and appropriate the budget for the first year by ordinance with or without amendment, provided that no amendment shall increase authorized expenditures to an amount greater than the total of estimated receipts and available funds, including reserve funds. If a two- year budget cycle is utilized, the budget for the second year shall be a spending plan and the council shall approve it only in concept.

(c) Second-Year Amendment and Adoption. After the public hearing before the adoption of the budget for the second year of the two-year budget cycle, the council may adopt and appropriate the budget for the second year by ordinance with or without amendment, provided that no amendment shall increase authorized expenditures to an amount greater than the total of estimated receipts and available funds, including reserve funds.

(Ord. 4274 § 2 (part), 1995)

During the fiscal year, the city manager shall amend the budgetary accounts of the city to reflect the following:

(a) Additional Appropriations. By a two-thirds vote, the council may make additional appropriations of receipts that are in excess of the total estimated receipts and appropriations contained in the adopted budget.

(b) Additional Positions. By a majority vote, the council may add positions to the table of organization.

(c) Transfer of Appropriations.

(1) By a majority vote, the council may transfer part or all of the unencumbered balance of any appropriation from one fund, department, office, or capital project to another;

(2) By written authorization, the city manager may direct the redistribution, within any department or office, of the unencumbered balance of appropriations within the departments or offices, provided that he or she shall not make transfers from the classification of utilities purchased for resale to any other object or make transfers between funds or transfers between departments without the affirmative vote of a majority of the council;

(3) By written authorization, the city manager may authorize a transfer of appropriation from the unallocated balance of the contingent account to any department, office or capital project. Funds shall not be transferred between the general fund and the enterprise funds, nor between operating and capital funds.

(d) Transfer of Positions. By written authorization, the city manager may transfer positions or assign personnel from any department or office under the control of the city manager to another in accordance with Article IV, Section 6(n) of the Charter.

(e) Inter-fund Transactions. In the event that appropriations and equivalent offsetting credits for allocated inter-fund services or transfers are affected by amendments to appropriations for direct expenditures or estimated revenue, the city manager may make corresponding adjustments to the inter-fund accounts so affected.

(f) Salaries and Benefits. Amendments to the Employee Classification and Compensation Plan adopted by the council pursuant to Article III, Sections 12, 18, and 21 of the Charter.

(g) Prior year Encumbrances. Appropriations that were encumbered by properly executed, but uncompleted, purchase orders or contracts at the close of the previous fiscal year may be carried forward and incorporated with appropriations of the current year.

(h) Municipal Fee Schedule. By a majority vote, the council may, by ordinance, add or change fees in the municipal fee schedule.

(Ord. 5360 § 1, 2015: Ord. 4274 § 2 (part), 1995)

The unencumbered balance of appropriations shall lapse at the close of the fiscal year. Reappropriations may be authorized by majority vote of the city council from the unencumbered balance of appropriations of one fiscal year to the next fiscal year before the approval of the budget closing ordinance as long as the Director of Administrative Services certifies that sufficient funds are available to be carried forward to the next fiscal year.

(Ord. 5274 § 1, 2014; Ord. 4274 § 2 (part), 1995)

(a) Submission to Council. The city manager shall prepare and submit a five-year capital plan to the council once every two years. This shall occur on or about two months prior to the final date for submission of a two-year proposed budget. In the second year of a two-year budget cycle, the city manager shall prepare and submit to the council only proposed changes to the capital plan that the council adopted in concept the previous year.

(b) The first year capital plan shall include:

(1) A message from the city manager;

(2) An overall financial summary;

(3) A list of all general governmental and utilities capital improvements which are proposed to be undertaken or continued during the ensuing five fiscal years, with appropriate supporting information as to the necessity for such improvements. Cost estimates, method of financing and recommended time schedules for each such improvement and the estimated annual cost of operating and maintaining the general governmental and utilities facilities to be constructed or acquired.

(Ord. 4274 § 2 (part), 1995)

(a) In accordance with Article III, Section 12 of the Charter, all expenditures made on behalf of the city directly or through any agency, except those required to be made by state law, must be made in accordance with the authorization contained in the appropriation ordinance and amendments thereto.

(b) No purchase or commitment therefor shall be made without the approval of the city manager as provided in Article IV, Section 6 of the Charter.

(c) No disbursement of city moneys shall be made except by warrant or check drawn on the city treasury and signed by the city manager or director of administrative services, except that the city manager or designee may approve in advance by voucher purchases from petty cash and the purchase of investment securities from banks by direct charge to the city's account.

(d) No disbursement of city moneys shall be made unless the obligation is supported by accounting evidence in proper form as required by the city manager and sufficient money is available. If such disbursement is from budget appropriations, there must be an adequate unencumbered balance in the fund, organization unit or project for the expenditure object described.

(e) No disbursement shall be made to or on account of employees for expenses incurred in the course of city business unless the municipal purpose served by such expenses is in conformity with rules and regulations established by the city manager.

(f) No disbursement shall be made to or on account of employees of the city for personal use or benefit except as provided in the compensation plan adopted by the council.

(Ord. 4274 § 2 (part), 1995)

(a) Revenue of known amounts due the city from specified sources will be accrued on bills prepared by the director of administrative services. Such bills and other revenue and receipts, including interest earnings, shall be collected when due by the director of administrative services and promptly deposited in designated banks.

(b) All city money collected or received by any other department or agency of the city shall be deposited promptly with the finance director or in designated banks. The city manager shall establish written procedures for the proper handling and safekeeping of cash by city employees.

(c) All checks or other bills of exchange payable to the city shall be endorsed by the director of administrative services "for deposit only" to the demand bank account of the city.

(Ord. 4274 § 2 (part), 1995)

(a) The city manager may cancel an account receivable, provided that bills which are or may become a lien on property or bills that represent legal claims by the city shall require the additional approval of the city attorney before they may be canceled.

(b) The city manager may refund overpayments or erroneous payments. Account guarantee deposits collected from utilities customers may be refunded by the city manager.

(Ord. 4274 § 2 (part), 1995)

(a) In accordance with the Government Code, the director of administrative services shall designate banks for the deposit and, upon proper warrant from the city manager, the disbursement of city moneys.

(b) After taking into account the amounts necessary to meet the current and pending cash requirements of the city, the director of administrative services may arrange for term deposits, or investment in securities authorized by law, of the treasury balance.

(c) All securities shall be placed in and maintained under safekeeping agreement with a state or national bank designated by the director of administrative services. No officer or employee of the city shall take delivery or otherwise have access thereto other than by specific authorization of the council approved by the city manager.

(Ord. 4274 § 2 (part), 1995)

The council shall provide from time to time by resolution for authorized signatures to negotiable instruments drawn in the name of the city and may authorize facsimile as well as actual signatures.

(Ord. 4274 § 2 (part), 1995)

Pursuant to Article III, Section 21 of the Charter the director of administrative services shall obtain fidelity bonds covering the honesty of all city employees and the faithful performance of its principal officers and department heads.

(Ord. 4274 § 2 (part), 1995)

The city manager shall obtain and maintain in force such policies and contracts of insurance or fidelity bonds as are necessary to protect the city from severe financial or property loss subject to the following policy:

(a) The city may assume the risk of loss when:

(1) In the judgment of the city manager, insurance coverage is not obtainable at a reasonable premium;

(2) In the judgment of the city manager, the estimated amount of a potential single property loss from a particular risk is less than $100,000.00;

(3) Deductible or excess coverage is obtainable provided that the total dollar amount of loss retention annually or per occurrence for all policies in force shall not exceed $5 million.

(b) The city may obtain full or partial insurance coverage for its exposure to all liability claims other than those arising from workers compensation; provided, however, such liability coverage includes the cost of claims investigation and litigation when such costs are not anticipated in the city budget.

(c) When coverage is obtained through a licensed agent or broker or association thereof, such procurement and other services shall be governed by a written agreement with the city.

(d) Placement of insurance coverage shall be limited to companies which maintain policyholder reserves in excess of $12 million and are rated B+ or better in "Bests" published ratings of insurance companies.

(Ord. 4274 § 2 (part), 1995)

In accordance with Article III, Section 12 and Article IV, Section 12 of the Charter, the city manager shall have full charge of all accounting and billing in all departments. The form in which the budget is adopted shall be recommended by the city manager and shall determine the method to be followed in all accounting by all representatives and administrative agents of the city. The system of accounts, financial procedures and controls so established or maintained shall conform to generally accepted principles of municipal and utilities accounting and shall be in such detail as will

provide for proper management of the city's resources and complete information on its financial affairs and shall be readily susceptible to audit.

In accordance with Article VII, Section 2 of the Charter, in addition to the general fund, separate funds or accounting entities shall be maintained for each city-owned public utility. Separate funds shall also be maintained as required to comply with the direction of the Government Accounting Standards Board or any other applicable accounting standards. The system of accounts shall clearly reflect the resources, obligations, reserves and unappropriated balance of each fund.

(Ord. 4274 § 2 (part), 1995)

Each fiscal year the city council may transfer from the natural gas utility to the general fund an amount equal to 18% of the gross revenues of the gas utility received during the fiscal year two fiscal years before the fiscal year of the transfer. At its discretion, the city council may decide to transfer a lesser amount. The projected cost of the transfer shall be included in the city’s retail natural gas rates as part of the cost of providing gas service.

(Ord. 5582 § 1, 2022)

The council shall provide for an independent, annual audit or more frequent audits as it deems necessary of the transactions and accounts of all officers and employees having the authority to collect, disburse, have custody of or otherwise manage public money, records or property. Such audits shall be made by a nonresident, certified public accountant or firm of such accountants who have no personal interest, direct or indirect, in the affairs of the city government.

(Ord. 4274 § 2 (part), 1995)

In accordance with Article III, Section 16 of the Charter, the council shall publish annually a financial report of the city prepared by the city manager.

(Ord. 4274 § 2 (part), 1995)

Pursuant to the provisions of the Charter and of Article 2, Chapter 2 and Article 1, Chapter 4, both of Part 2, Division 1, Title 5 of the Government Code of the State of California, certain duties of city officers are transferred to officers of the county of Santa Clara, state of California, as follows:

(a) Officers of the county of Santa Clara who perform duties relating to the assessment of property for county taxes, the equalization and correction of the assessment, the collection, payment and enforcement of the taxes, including delinquent taxes and interest and penalties, and the redemption of property from sale or other penalty for nonpayment of county taxes, shall perform such duties as applied to city taxes;

(b) County officers shall levy, collect and enforce for the city its special assessments in connection with special improvement districts, sidewalk repairs and the abatement of nuisances, including the enforcement of their payment, the collection of penalties and interest, and the sale of property for nonpayment and the redemption of property from sale;

(c) City officers shall perform all duties relative to the collection of city taxes levied prior to the fiscal year 1969-70, including the enforcement of their payment, the sale of property for nonpayment and redemption from sale.

(Ord. 4274 § 2 (part), 1995)

(a) Authority. The ordinance codified in this section is enacted pursuant to Section 935 of the California Government Code.

(b) Statement of Purpose. This ordinance is intended to apply the requirements of Article XIII, Section 32 of the California Constitution to disputes involving taxes, fees and other charges imposed by the city. These requirements include the "pay first, litigate later" rule that requires those who dispute their taxes, fees and other charges to pay them before suing for a refund. In the absence of such a rule, any taxpayer could impose significant hardship on the city and undermine its ability to predict its revenues and manage its resources for the benefit of the public it serves. The absence of such a rule could result in the city's loss of substantial revenue due to a taxpayer's withholding payment due to spurious or unfounded refund claims.

(c) Claims Required. All claims against the city for money or damages not otherwise governed by the Government Claims Act, California Government Code Sections 900 et seq., or another state law (hereinafter in this ordinance, "claims") shall be presented within one year, and in the manner prescribed by Part 3 of Division 3.6 of Title 1 of the California Government Code (commencing with Section 900 thereof) for the claims to which that part applies by its own terms, as those provisions now exist or shall hereafter be amended, and as further provided by this chapter.

(d) Form of Claim. All claims shall be made in writing and filed with the City Clerk. All claims shall state under penalty of perjury the specific grounds under which the claim is founded, and shall include written records establishing the claimant's entitlement to the amount claimed. All claims shall be verified by the claimant or by his or her guardian, conservator, executor or administrator. No claim may be filed on behalf of a class of persons unless verified by every member of that class as required by this section. In addition, all claims shall contain the information required by California Government Code Section 910.

(e) Claim Prerequisite to Suit. In accordance with California Government Code Sections 935(b) and 945.6, all claims shall be presented as provided in this section and acted upon by the city prior to the filing of any action on such claims and no such action may be maintained by a person who has not complied with the requirements of subdivision (c) of this section.

(f) Exhaustion of Administrative Remedies. Prior to seeking judicial relief with respect to a dispute regarding a tax, fee or other charge imposed by the city, an aggrieved taxpayer, fee payer or any other person must: (i) exhaust any administrative remedies specified by any other provision of this code or other applicable law, (ii) pay the full amount owed, including applicable penalties and interest, and (iii) present a claim for refund as required by any or all of: section 2.28.230 of this code; the Government Claims Act, Government Code Section 910et seq.; and other applicable law.

(g) Suit. Any action brought against the city upon any claim or demand shall conform to the requirements of Sections 940 - 949 of the California Government Code. Any action brought against any employee of the city shall conform with the requirements of Section 950 - 951 of the California Government Code.

(Ord. 5078 § 2, 2010: Ord. 4930 § 1, 2007: Ord. 4274 § 2 (part), 1995)

As provided in Section 935.4 of the Government Code of California, the city attorney is designated to perform the functions of the city council relative to claims and actions against the city or any of its officers or employees under the provisions of Division 3.6 of the Government Code, as follows:

(a) Where the city has insured itself against liability for the claimed injury, the city attorney shall forward to the insurance carrier without prior council approval a written recommendation as to acceptance, settlement, or rejection of such claim, provided that the amount of any recommended allowance, compromise or settlement does not exceed $35,000.00;

(b) Where the city is uninsured, the city attorney shall be authorized to accept, settle or reject without prior approval of the council, claims against the city, provided that no allowance, compromise or settlement shall exceed $35,000.00. Upon the written order from the city attorney, the director of administrative services shall cause to be issued a warrant upon the treasury of the city in the amount for which a claim has been allowed, compromised or settled;

(c) The city attorney is further authorized to compromise or settle, without prior approval of the council, except on a matter of policy, any actions which the city is either plaintiff or defendant and which are not covered by insurance, provided that the amount of such compromise or settlement shall not exceed $35,000.00;

(d) The city attorney shall make biannual reports to the council on action taken on claims and actions against the city;

(e) A recommendation under subsection (a) above shall constitute "action" upon such claim within the meaning of Government Code Section 945.4.

(Ord. 5023 § 2, 2008: Ord. 4274 § 2 (part), 1995)

The solicitation and collection of all money made in the name of or for the use of units of city government by nongovernmental agencies or agents shall be governed by the following procedure:

(a) The purpose for which money is to be solicited or collected shall be referred to the city council;

(b) Obtain approval of the city council to enter into such activities on behalf of units of the city government;

(c) Obtain approval of the city council on the manner and technique by which the money is to be solicited and/or collected;

(d) Establish with the city council prior to the time of solicitation and/or collection the conditions under which the money is to be given to the city of Palo Alto;

(e) Report to the city council the total amount of money collected and such costs as were incident to the solicitation and collection of said money within thirty days after collection.

(Ord. 4274 § 2 (part), 1995)