title
ACCEPT FISCAL YEAR 2017-18 FOURTH QUARTER BUDGET STATUS UPDATE, AUTHORIZE BUDGET AMENDMENTS, AND MAKE ALLOCATIONS TO GENERAL FUND RESERVES
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Accept this budget status report on the unaudited results of the fourth quarter of Fiscal Year (FY) 2017-18.
2. Authorize two budget appropriation carryovers from FY 2017-18 to FY 2018-19 in the following General Fund departments and amounts:
a. Fire Department for additional Training Academy expenses of $50,000,
b. City Auditor for audit activities related to FY 2017-18 not yet completed in the amount of $111,000
3. Authorize four FY 2017-18 budget amendments for the following General Fund departments:
a. City Attorney’s Office for additional Council directed code enforcement expenses incurred in excess of the budget of $76,000,
b. Public Works Department to cover increased water costs of $144,000,
c. Office of Violence Prevention to cover salary expenses for grant funding expected but not received in the amount of $170,000, and
d. Allocate vacancy savings budget from Non-departmental - Other Administration category as shown below:
Department Amount
City Clerk $109,000
City Manager $19,000
Economic Development $11,338
Administrative Services $111,000
Total $250,338
4. Authorize a $24,100 increase to the FY 2017-18 Annual Budget in the Separation Pay Fund from the fund balance for greater than anticipated separation payouts.
5. Modify appropriations for two Municipal Utilities Capital Projects as listed below:
a. Increase allocation for American Legion Park Pump Station Roof Repair Project (Project Number M13026) by $53,000
b. Change funding source of Newcastle Road and South Airport Way Water Transmission Main, Phase 2 (Project Number M18053) and Water Well #10 (Project No. M17002) from bond proceeds to Water Utility fund balance
6. Allocate available fund balance to reserve categories consistent with the Council Reserve and Fund Balance Policy - General Fund Policy. The net increase in fund balance will be added to the current reserve levels, as displayed in Table 4, to achieve the total reserve amounts as follows:
Priority 1 Reserves
Working Capital $36,777,000
Known Contingency $37,240,000
Priority 2 Reserves
Risk-Based Reserves $ 4,983,000
It is further recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of the resolution.
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Summary
Staff reviewed the City’s unaudited fourth quarter FY 2017-18 financial activity in the General Fund with the revised revenue and expenditure estimates detailed in Attachment A. The estimated General Fund ending available balance is currently projected to be $53.1 million at the end of the fiscal year. This amount is $5.6 million more than the ending balance projection in the Third Quarter Budget Report and $12.9 million greater than the Approved Budget.
The following table summarizes the results of the Fourth Quarter/Year-end review of General Fund results compared to the Approved Budget.
Table 1 - Year-End Projection vs. Approved Budget
|
(Dollars in millions) |
Approved Budget |
Q4 Year-end Projection |
Variance from |
Budget |
|
Beginning Balance |
$ 36.18 |
$ 36.18 |
|
|
|
Revenues |
222.80 |
231.23 |
8.43 |
( +3.8%) |
|
Expenditures |
(251.38) |
(246.24) |
(5.14) |
( +2.0%) |
|
Adjustment |
32.57 |
31.94 |
(0.63) |
|
|
Ending Balance |
$ 40.17 |
$ 53.11 |
12.94 |
(+32.2%) |
The table below summarizes the change since the Third Quarter Budget Report presented to Council in July 2018.
Table 2 - Year-End Projection vs. Third Quarter Budget Report
|
(Dollars in millions) |
Q3 Year-end Projection |
Q4 Year-end Projection |
Variance from |
Q3 Projection |
|
Beginning Balance |
$ 36.18 |
$ 36.18 |
|
|
|
Revenues |
226.55 |
231.23 |
4.68 |
(+2.0%) |
|
Expenditures |
(247.69) |
(246.24) |
(1.45) |
(+0.6%) |
|
Reserve Adjustment |
32.57 |
31.94 |
(0.63) |
|
|
Ending Balance |
$ 47.61 |
$ 53.11 |
5.50 |
(+11.5%) |
The $53.1 million General Fund balance will be combined with prior year reserve funds of $25.9 million for a total of $79.0 million available to fund reserves (see calculation in Table 4). The prior year reserves approved by Council consist of $48.2 million for Known Contingencies and $5.0 million for Risk-Based Reserves. In FY 2017-18, the City used $8.8 million of the Known Contingency reserve on the Waterfront Office Towers purchase. An additional $18.6 million was committed for the PARS Public Agencies Post-Employment Trust and is restricted for pension costs. On November 11, 2017, City Council established this Internal Revenue Code section 115 Trust to provide greater local control, stabilize the City’s future pension contributions, provide investment flexibility, and lower the City’s net pension liability on its financial statements. Funds will be held under this Trust until such time that the City’s annual operating revenues can no longer meets its annual pension obligations and needs the funds to remain solvent.
Staff reviewed all other City funds to determine any significant budget variances and did not identify other significant issues. This review, however, revealed some budget amendments that are necessary and included in the proposed Council resolution.
DISCUSSION
Background
One of the strategic initiatives staff developed to support the City Council’s “Fiscal Sustainability - Getting our Fiscal House in Order” goal was to provide regular analysis and reporting of the City’s financial status. During the year, Council and the public should anticipate quarterly reports within 90 days after the quarter. The City has a 90-day accrual period after the end of each fiscal year on June 30th for the proper recording of revenues and expenditures to comply with governmental accounting standards, and staff prepared this year-end report following the 90-day accrual period.
Council adopted the FY 2017-18 Annual Budget of $626.4 million ($217.1 million General Fund) on June 20, 2017. The General Fund budget was later amended by Council to include an additional $27.3 million ($8.8 million for the new City Hall purchase and $18.6 million for a contribution to the Retirement Trust). With the rollover of prior year encumbrances and mid-year budget adjustments, the FY 2017-18 General Fund expenditure budget is now $251.4 million.
To achieve long-term fiscal sustainability, the City recognized the need to establish and maintain adequate reserves. The City Council adopted the Reserve and Fund Balance Policy - General Fund on March 29, 2016, that establishes reserves for known contingencies, unforeseen revenue changes, infrastructure failures, and catastrophic events in addition to the operating reserve. Staff recommendations for funding the reserves are consistent with the Council reserve policy.
Present Situation
General Fund
Staff analyzed General Fund expenditure and revenue results for the full 12 months of FY 2017-18 fiscal year as shown in Attachments A and B. The results described have not been subject to the annual audit process and are subject to change.
The FY 2017-18 Approved Budget projected an ending available General Fund balance of $40.2 million. Staff’s review of the unaudited fourth quarter results in projected revenue increases of $8.4 million and expenditure decreases of $5.1 million. As a result of revenue and expenditure variances along with changes for restricted items ($633,000), the ending fund balance is now estimated to be approximately $53.1 million, or 21.2 percent of budgeted expenditures.
As part of the FY 2018-19 Budget adoption, Council approved carryover of $392,000 in appropriations for projects including:
• Summer Youth Employment program $100,000
• Stockton is Home 25,000
• Audit Findings Response 40,000
• Council District Project Funds 70,000
• Mayor Special Project Funds 22,000
• Fire Department Capital Purchases 60,000
• FirstWatch Software 25,000
• Fire Administration Strategic Plan 50,000
Staff recommends a $161,000 appropriation be carried over for the fire academy and financial audit. The total FY 2017-18 appropriation carried over is $553,000 which is reflected on Attachment A as an adjustment to the fund balance, and is taken into consideration before arriving at the available fund balance of $53.1 million.
As presented above in Tables 2 & 3, General Fund revenues were projected to exceed the Approved Budget by $4.3 million as of the end of the third quarter. Revenues are now projected to be above the Approved Budget by $8.4 million (3.8 percent). General Fund expenditures are projected to be $1.5 million lower than the Third Quarter Budget Report and $5.1 million, or 2.0 percent, less than the Approved Budget. Most of the variance from the Third Quarter Budget Report is from $1.8 million in unspent contingency funds.
The reasons for these variances from the Approved Budget and the Third Quarter Budget Report are described in detail below.
General Fund Revenues
Current information indicates General Fund revenues are likely to end the fiscal year approximately $8.4 million or 3.8 percent greater than the Approved Budget total of $222.8 million. This amount (as shown in Attachment B) is $4.7 million higher than projected in the Third Quarter Budget Report. The largest element of that variance comes from increased Sales Tax revenues, interest earnings, and Program Revenues.
General Fund Revenue Summary
|
Approved Budget |
Q3 Year-End Projection |
Q4 Year-End Projection |
Variance from Budget |
|
$222.8 million |
$226.6 million |
$231.2 million |
$8.4 million |
Collections from Sales Tax, the General Fund’s largest revenue source, are expected to come in $2.0 million (2.6 percent) higher than the budgeted level of $78.3 million, which is an increase of approximately $1.4 million from the Third Quarter Budget Report. All industry categories achieved higher revenues than originally budgeted. Sales tax revenues in the Building and Construction, Business and Industry, and Fuel and Service Station categories all experienced double-digit increases not anticipated in the budget estimate. Sales tax revenues booked in FY 2017-18 represent receipts received by the State through September 2018 for activity through June 2018. Late and missing payments impacted the last two quarters. The late and missing payments are the result of a new software and reporting system implemented by the California Department of Tax and Fee Administration. The FY 2017-18 sales tax receipts may be understated if payments from major retailers had not been received and processed by the September due date. These receipts will be received and posted in the next fiscal year.
The year-end Property Tax revenue estimate is up $165,000, or 0.3 percent compared the Approved Budget. Property tax revenue growth is attributable to increasing home values, commercial and industrial construction, and a Consumer Price Index inflation rate of 2 percent under Proposition 13.
The City collects Utility Users Tax (UUT) revenues in four categories totaling $34.3 million in the Approved Budget: Water, Electricity and Gas, Cable TV, and Telecommunications. Based on an examination of year-end receipts, Water collections will exceed the $4.1 million budget by approximately $647,000. Electricity and Gas proceeds are up $319,000 from the budget stemming from utility company rate increases. Cable TV tax proceeds are up compared to the budgeted level by $330,000 or 14.3 percent. As reported in the Second and Third Quarter Budget Reports, Telecommunication (Telecom) tax proceeds are running below the budgeted level of $6.9 million, and are now under budget by $214,000, which represents an improvement of $240,000 compared to the Third Quarter Budget Report. Telecom UUT proceeds declined for several years, primarily as the result of cable operators offering wireless services and the consolidation of carriers and media content providers. The downward trend will likely continue with ongoing competitive pressures between media and wireless providers, subscriber stagnation and cable companies offering wireless services.
Franchise Tax revenues ended the year $603,000 higher than the Approved Budget. The City receives receipts in three categories: PG&E, Cable/Video, and Waste Haulers. All three categories are projected to end the year above budget and are up $269,000 from the Third Quarter Budget Report. The largest positive variance is in the Waste Hauler revenues primarily due to improvement in the commercial and industrial sector.
Business License Taxes, budgeted at $11.8 million, ended the year approximately $78,000 over budget. Year-end revenues are $363,000 higher than the Third Quarter Budget Report projection. Approximately 50 percent of business license collections occur in the last three months of the fiscal year, and this timing contributes to the volatility of year-end revenue projections in quarterly reports.
Hotel/Motel Taxes and Document Transfer Tax continue to perform above budget, as projected in the earlier reports. The strong performance of the Hotel/Motel Tax reflects improvement in the local economy and its associated impact on hotel and occupancy rates. Growth in tourism and business travel continue to perform above projections, and revenues exceeded the $3.0 million budget by approximately $203,000. This result is up slightly ($76,000) from the Third Quarter Budget Report. The increase in the Document Transfer tax is reflective of both the number of properties being sold and the value of those properties.
The Interest category includes two revenue components that total $2.4 million in interest earnings. Consistent with the Second and Third Quarter Budget Reports, the Interest category reflects the benefit of paying the full year of CalPERS employer contributions in July rather than twice a month throughout the year. Debt restructuring and prior year savings provided the General Fund the cash needed to prepay CalPERS and receive a $893,000 credit. Also, the General Fund earned approximately $1.5 million from the investment of cash throughout the year. The City’s interest earnings are growing as the General Fund cash balance improves and interest rates increase.
The Program Revenues category exceeded the budget estimate by $2.5 million, most of which the Third Quarter Budget Report anticipated. Overall year-end revenues are $841,000 more than previously projected.
• The Code Enforcement category exceeded budget by $418,000 due primarily to an increase in the volume of rental properties in the active Rental Inspection quadrant that resulted in additional self-certification application fees revenue. Numerous properties sold resulting in unanticipated receipts for delinquent code enforcement fees and fines from the San Joaquin County Tax Collector.
• The Charges for Services category exceeded the budget by $380,000 mainly due to $182,000 for the animal control and shelter agreement with San Joaquin County. The number of County animals sheltered was higher-than-expected, resulting in increased operating costs at the shelter which are offset by the additional revenues. Also, Police Department fees for false alarms, impound vehicle releases, and annual permit inspections came in higher-than-expected.
• Revenues from other Agencies ended the year up by $1.1 million due to an increase in the City’s share of Redevelopment Property Tax Trust Fund monies. The final total was up approximately $690,000 from the estimate included in the Third Quarter Budget Report. Also, the Redevelopment Area Pass Through payment and the POST Reimbursements came in higher-than-budgeted.
• The City sold eight surplus properties that generated revenues of approximately $810,000 under the Sale of Fixed Assets category.
The Indirect Cost Allocation category is above the $4.4 million budget by $437,000 primarily due to the City’s use of a new Full Cost Allocation Plan during FY 2017-18. The Refunds and Reimbursements category ended the year approximately $179,000 above budget and $172,000 greater than the estimate included in the Third Quarter Budget Report. The City realized over $200,000 in reimbursements from the State for mandated activities in FY 2017-18. The timing and value of state reimbursements are difficult to project.
General Fund Expenditures
Staff reviewed year-end General Fund expenditure data as reported in Attachment A. Most departments ended the year close to or just below expectations, with the exceptions of Public Works, the Office of Violence Prevention, and Office of City Attorney.
Overall General Fund expenditure savings are now projected to be $5.1 million, in line with the Third Quarter Budget Report. In general, and as discussed in previous reports, General Fund expenditures ran under budgeted levels primarily due to vacancy savings.
The chart below summarizes the spending levels of all departments and programs as a percent of their total budget compared with third quarter projections.
The FY 2017-18 Adopted Budget included a total of $8.4 million in anticipated salary savings. The Budget divided this amount into two areas: $6.1 million in the non-Marshall Plan portion of the General Fund, and $2.3 million in the Marshall Plan. Through the end of the fiscal year, actual General Fund vacancy savings excluding Marshall Plan were $8.4 million, which is approximately $2.3 million greater than the total budgeted vacancy savings. Departments with greater-than-anticipated vacancy savings include the City Clerk’s Office, Administrative Services, Human Resources, and Economic Development. Although the Police Department exceeded Marshall Plan hiring expectations, overall General Fund salary savings were $1.7 million. Overall, the Police Department achieved their budgeted vacancy savings with Marshall Plan hiring exceeding expectations built into the original budget. An administrative budget amendment was processed to re-allocate the Police Department salary budgets within the General Fund to cover the Marshall Plan staffing. In total the General Fund realized salary savings of $1.7 million more than budgeted.
Departments vacancy savings below anticipated levels include Office of Violence Prevention and Public Works. The Office of Violence Prevention was unable to meet its vacancy savings target due to receiving lower-than-planned grant funding and will require an increase in allocation as discussed later in the report. The Public Works Department had higher than budgeted salary and benefit expenses as the result of redirecting administrative staff to the General Fund with reimbursement of the additional cost through Indirect Cost Allocation revenues shown on Attachment B.
As discussed in the Third Quarter Budget Report, actual savings from vacancies do not always align with the budgeted savings. Staff recommends allocating the vacancy savings budget from the Non-departmental - Other Administration budget category to specific departments that achieved these savings. The allocation will be to City Clerk’s Office, City Manager’s Office, Economic Development, and Administrative Services departments.
Below is a summary of vacancy savings results achieved for the fiscal year.
Table 3 - Vacancy Savings
The Police Department continues to hire sworn officers to meet its Marshall Plan goals. Although the department hired 70 new officers throughout the fiscal year, the department lost 45 officers (14 retired, 18 resigned, seven released during probation, two terminated, and four left to other agencies). Twenty-five of the 70 officers gained were in the fourth quarter. At the end of the fourth quarter of FY 2017-18, the Police Department had 470 sworn staff positions filled out of the authorized 485 positions.
The Police Department spent 99.6 percent of its budget by the end of the fiscal year. As stated above, the department has been successful in its recruitment efforts and was therefore unable to achieve the Marshall Plan budget vacancy savings goal. However, other General Fund vacancy savings were higher-than-budgeted. Staff adjusted the budgets by increasing the Vacancy Savings line item in the General Fund by $660,000 and reducing the same amount in the Marshall Plan Vacancy Saving line. These adjustments have a net zero effect on the total department budget. However, due to the higher rate of officers hired and retained in FY 2017-18, vacancy savings will need to be monitored closely starting in FY 2018-19. Staff will continue to update Council if the historical salary saving rates decline as a result of recruitment and retention efforts and adjustments are required to mitigate the issue.
The Fire Department spent 98.9 percent of its budget by the end of the fiscal year. As discussed in the Third Quarter Budget Report, the department responded to over 40 State requests for emergency wildland fire assistance during the summer and fall of 2017. This additional work was reimbursed by the State and federal government. The department achieved its Vacancy Savings target due to higher-than-anticipated attrition. Currently, the department is in the process of conducting a Fire Academy to train between fourteen and twenty firefighters. The FY 2017-18 Fire Academy was smaller than normal, so costs came in under budget, while costs for FY 2018-19 are anticipated to be higher than the budgeted amount. It is recommended $50,000 be rolled to FY 2018-19 to cover the additional anticipated academy cost in this fiscal year.
The Public Works Department overspent its General Fund budget by $144,000, which is down from the $663,000 overage projected in the Third Quarter Budget Report. Increased water costs for City parks caused the overage, and staff recommends an increase in allocation to cover the overage.
The Office of Violence Prevention General Fund expenses, excluding those funded by Measure A, were over budget by approximately by $170,000. The annual budget assumes approximately $200,000 in grant-funded expenditures. However, the actual grants awarded to the department were lower than planned. Staff recommends an increase in allocation to cover the overages. The expenses under Marshall Plan realized $137,000 in savings causing a net overage in the program of $32,000.
In the Non-departmental - Tax Collection & Elections category, the $566,000 savings was a result of fewer ballot measures in the June 2018 primary elections than originally anticipated during FY 2017-18 budget development.
The Office of City Auditor ended the year spending 71.5% of the annual budget. However, the official financial audit for the FY 2017-18 is underway, and an additional $111,000 is anticipated in expenses yet to be incurred. Staff recommends to carryover this amount to FY 2018-19 to complete the year-end audit activities.
The Office of the City Attorney, as directed by Council made significant efforts related to code enforcement-related activities. In the Third Quarter Budget Report, staff projected legal costs related to these activities would create an overage of $178,000, and a budget allocation was proposed for the same amount. However, due to an increase in activities, the department ended the year with an additional $76,000 in legal costs related to the code enforcement activities. Staff recommends an increase in allocation to cover the overage.
Other departments were within their budgets with no significant items. These departments include City Manager, Economic Development, Administrative Services, and Human Resources Department.
All elements of the Program Support for Other Funds category ended the year at or below budgeted levels as anticipated in the Third Quarter Budget Report, so no additional subsidies were necessary. Of the $300,000 budgeted to leverage grant funds, the City only utilized $118,000 in FY 2017-18.
Unspent Contingency funds make up the largest portion of the variance between the Third Quarter Budget Report and the year-end projections. Contingency funding was originally budgeted at $2 million in FY 2017-18, but prior Council actions authorized $228,000 of the contingency to be allocated for funding shortfalls and unanticipated needs in various General Fund programs. The Third Quarter Budget Report projected the remaining balance would be spent by year end, but no additional funds were needed in the fourth quarter.
Fund Balance and Reserves
As directed by the Reserve and Fund Balance Policy - General Fund, most of the projected increase in the General Fund available fund balance is to be allocated towards reserves. The calculation for June 30, 2018, is shown in the chart below along with the Reserve Targets established with the FY 2017-18 Budget and the June 30, 2017, funded reserves.
Table 4 - FY 2017-18 General Fund Reserve Calculation (dollars in thousands)
The reserve calculation methodology begins with the amount of fund balance shown as available in Attachment A ($53.1 million). The prior year unspent reserves of $25.9 million are added to that amount for a total General Fund reserve of $79.0 million. The prior year reserves include $20.9 million for Known Contingencies and $5.0 million for Risk-Based Reserves as approved by Council action as part of the FY 2016-17 Fourth Quarter Budget Update.
Per the City Council reserve policy, the first priority for the ending available fund balance is to fund the Working Capital reserve of approximately $36.8 million.
The next priority is the Known Contingency reserve, which is recommended to be funded at $37.2 million based on the change in available fund balance. In FY 2017-18, the City utilized $8.8 million of the $48.2 million Known Contingencies reserves for the Waterfront Towers purchase and $18.6 million was committed for the PARS Public Agencies Post-Employment Trust. While not expended, the funds in the trust are no longer available for general use. An investment made under a Section 115 trust is an irrevocable decision and the City does not have the option of using funds for other purposes.
These actions reduced the Known Contingency balance to $20.9 million. Per the policy, the available year-end balance ($16.3 million) after funding the Working Capital should be put in the Known Contingency reserves mainly to fund retirement and other emerging needs, leaving the balance of the Risk-Based Reserves at the same level as FY 2016-17. Additionally, $3.7 million of the Known Contingencies reserve will be used to offset the discounted 400 E. Main lease prepayment.
Long-Range Financial Plan
The City’s updated Long-Range Financial Plan (L-RFP) incorporates the revised year-end financial projections. As described above, the projected increase in the General Fund available fund balance will fund reserves that are essential to keeping the fund balance above the 5 percent warning level over the next 15 years.
The graph below illustrates the short and long-term impact on the General Fund available balance forecast compared to the 17 percent Working Capital reserve and the 5 percent warning level. The bars depict the General Fund ending available fund balance at each fiscal year end beginning with actual balances for FY 2016-17 through FY 2017-18 and continuing forward based on forecasts. The blue bars include available funds and the Working Capital reserve. The green bars represent the remainder of funds not available for ongoing operating expenses which are part of the Known Contingency and Risk-Based reserves. The L-RFP does not assume additional funds will be available in future years to add to the Known Contingency or Risk-Based reserves.
As can be seen in the graph, the available balance is at the 17 percent goal at the end of FY 2017-18, and then the balance without restricted reserves is expected to drop below the goal between 2025 and 2036 before stabilizing again at the 17 percent goal level. The Available Balance bar in FY 2017-18 is $36.8 million representing the Working Capital Reserve. The green bars represent funded reserves including Known Contingency, Risk-based and fund in the PARS Public Agencies Post-Employment Trust. Including funds committed to the trust, FY 2017-18 General Fund Balance and Reserves total $97.6 million. The chart above assumes the effect of Council’s approving the proposed reserves as demonstrated in Table 4 above.
Other Funds
Attachment C summarizes the FY 2017-18 unaudited year-end results for other major City funds. Staff identified the need for FY 2017-18 budget amendments in the Separation Pay Internal Service Fund (ISF) and two Municipal Utilities Department capital projects in the year-end review of other funds. All other funds were under the authorized budget appropriation.
Recommended Budget Amendments
Staff reviewed all City funds as part of the preparation of this report and have identified the following budget amendments that require authorization.
General Fund Budget Amendments
1. Authorize two budget appropriation carryovers from FY 2017-18 to FY 2018-19 totaling $161,000:
a. The Fire Department’s Training Division ended the fiscal year with a savings of approximately $246,000, which was mainly a result of the small class size of Fire Training Academy held in FY 2017-18. The academy the City conducted in the summer of 2017 trained candidates to fill existing vacancies at that time and graduated seven new firefighters. The Fire Department experienced additional separations; and by the end of the fourth quarter of FY 2017-18, the department had 13 new sworn vacancies. Approximately 18 percent of sworn Fire personnel are eligible for retirement within a year, and the Fire Department anticipates a large class size for the upcoming Fire Academy. The annual budget allocation for the academy requires an additional $50,000 to cover the costs of a much larger class size, which is currently estimated to be 18. Staff recommends budget allocation carryover from FY 2017-18 to FY 2018-19 for additional Training Academy expenses of $50,000.
b. The annual financial audit for the FY 2017-18 is underway and an additional $111,000 is anticipated in expenses yet to be incurred. Staff recommends to carryover this amount from FY 2017-18 to FY 2018-19 to complete the year-end audit activities.
2. Authorize four budget amendments for FY 2017-18 for the following General Fund departments and amounts:
a. $76,000 to the City Attorney’s Office for additional Council directed code enforcement expenses in excess of the budget,
b. $144,000 to the Public Works department for increased water costs,
c. $170,000 to the Office of Violence Prevention to cover salary expenses for planned grant funding that did not materialize,
d. Allocate vacancy savings budget from Non-departmental - Other Administration category as shown below:
|
Department |
Amount |
|
City Clerk |
109,000 |
|
City Manager |
19,000 |
|
Economic Development |
11,338 |
|
Administrative Services |
111,000 |
|
Total |
250,338 |
Separation Pay Fund
1. Authorize an increase of $24,100 to the FY 2017-18 Annual Budget in the Separation Pay Fund from the fund balance for greater than anticipated separation costs. Employee separations are difficult to predict as they are based on many variables. This fiscal year the City has seen a slightly larger number of separation than recent trends.
Municipal Utilities - Capital Improvement Projects
1. Additional funding of $52,715 is needed for the Stormwater Utility American Legion Park Pump Station Roof Repair Project No. M13026. The construction bid came in higher than the engineer’s estimate which provided little room for contingencies. During the construction, unforeseen items were discovered that necessitate additional work. Other structural members were rotted, and the roof and the ceiling insulation will need to be replaced. Staff determined that issuing this work to the current contractor as a contract change order is the most economical and efficient approach for the City. The additional funding will be transferred from a Capital Improvement Program (CIP) project, Charter Way & Walnut Plant Storm Drain Pump Station Improvements Project No. M16002. That project is currently on hold for further assessment which will be addressed as part of future capital program budgeting.
2. The Newcastle Road and South Airport Way Water Transmission Main, Phase 2 Project No. M18053 and Water Well #10 Project No. M17002 were originally funded with bond proceeds from a bond issued in 2005. Unused bond proceeds were used to prepay the bonded debt and are no longer available for the project. Water utility revenues will be used instead of bond proceeds. Water Utility capital appropriations will be $3,145,677 for Newcastle Road and South Airport Way Water Transmission Main, Phase 2 and $300,000 for Water Well #10.
FINANCIAL SUMMARY
This report provides an analysis of FY 2017-18 fourth quarter budget status results. The review of the unaudited 12-month period indicates General Fund revenue increases and expenditure savings are estimated to result in a year-end balance that can fully fund the Working Capital Reserve and partially fund the Known Contingency Reserve. No additional funding is available for Priority II - Risk-Based Reserves.
Following are the budget amendments needed to complete the recommended actions:
1. Authorize budget appropriation carryover from FY 2017-18 to FY 2018-19 in the following General Fund departments and amounts:
a. Fire Department - Training Academy 010-2650-530 $50,000
b. City Auditor - FY 2017-18 Financial Audit 010-1901-510 $111,000
2. Authorize four budget amendments for FY 2017-18 for the following General Fund departments and amounts:
a. City Attorney’s Office - Legal Services 010-1401-510 $76,000
b. Public Works - Water Costs 010-3070-590 $144,000
c. Office of Violence Prevention - Salary Costs 010-0138-530 $170,000
d. Allocate vacancy savings from Non-Departmental to other departments:
Increase Expenditure Budget:
Non-departmental 010-0131-510 $250,338
Reduce Expenditure Budget:
City Clerk 010-1101-510 $109,000
City Manager 010-1211-510 $ 19,000
Economic Development 010-1750-510 $ 11,338
Administrative Services 010-1320-510 $111,000
3. Authorize an increase of budget appropriation to the FY 2017-18 Annual Budget in the Separation Pay Fund:
Employee Separation Pay 562-5960-571 $24,100
4. Authorize budget amendments and transfers for Municipal Utilities Capital Projects as listed below:
a. American Legion Park Pump Station Roof Repair Project No. M13026:
American Legion Park Pump Station Roof Repair (M13026)
Increase 447-7783-670 $53,000
Charter Way & Walnut Plant Pump Station (M16002)
Decrease 447-7783-670 $53,000
b. Revise the funding source for Newcastle Road and South Airport Way Water Transmission Main, Phase 2 Project No. M18053 and Water Well #10 Project No. M17002 from bond proceeds to Water Utility fund balance:
Newcastle Road and South Airport Way Water Transmission Main, Phase 2 (M18053)
Increase 427-7623-670 $3,145,677
Decrease 423-7623-670 $3,145,677
Water Well #10 (M17002)
Increase 427-7618-670 $300,000
Decrease 423-7618-670 $300,000
Attachment A - FY 2017-18 Budget Update - Fourth Quarter General Fund Summary
Attachment B - FY 2017-18 Year End General Fund Revenue Summary
Attachment C - FY 2017-18 Year End Results in Other Major Funds