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HomeMy WebLinkAboutItem 5d - Authorization for Finance Director to Approve Transfers from Operating to Capital Budgets for Job Order Contract Projects Item 5d Department: Public Works Cost Center: 9501 For Agenda of: 5/19/2026 Placement: Consent Estimated Time: N/A FROM: Aaron Floyd, Public Works & Utilities Director Prepared By: Madeline Kacsinta, Assistant Director of Public Works Brendan Pringle, Senior Business Analyst SUBJECT: AUTHORIZATION FOR FINANCE DIRECTOR TO APPROVE TRANSFERS FROM OPERATING TO CAPITAL BUDGETS FOR JOB ORDER CONTRACT PROJECTS RECOMMENDATION Adopt a Draft Resolution authorizing the Finance Director to Approve Transfers from Public Works Operating Budgets to Capital Budgets for Job Order Contract Projects (Attachment A). POLICY CONTEXT Section 3.24.145 of the Municipal Code provides that the City may perform maintenance- related construction projects, including repairs, remodeling, or other repetitive work, under a unit-price Job Order Contract. Such contracts are competitively procured; do not allow new construction; provide unit-price terms for all work performed under individual task orders; may establish limits on individual task orders or on minimum or maximum cumulative amounts of work; and include Council-established limits on the Finance Director’s authority to approve task orders. Section 415 of the Financial Management Manual defines Fixed Assets, for capitalization purposes, as long-lived tangible items costing $25,000 or more. These include infrastructure, buildings and structures, improvements other than buildings, computer equipment, vehicles, and equipment additions or improvements that significantly extend useful life or substantially increase operating efficiency. Accordingly, individual Job Order Contract projects totaling $25,000 or more must be capitalized and funded through the capital budget. Section 540 of the Financial Management Manual discusses amendments to the adopted budget and provides direction that requires Council approval for situations where transfers between operating and capital funds would occur. This is to ensure transparency, proper appropriation, and fiscal oversight. Page 41 of 415 Item 5d DISCUSSION Background Job Order Contracts (JOCs) provide an efficient mechanism to deliver small, time - sensitive projects compared to traditional procurement methods. These projects commonly include repairs within the public right-of-way, electrical repairs, storm damage response, and other priority maintenance activities. Unforeseen or urgent maintenance projects that arise throughout the year may be funded through either Public Works operating budgets or capital project accounts, depending on the nature and cost of the work. In practice, many of these projects are delivered using JOCs due to their flexibility and efficiency. The key distinction between funding sources is the $25,000 capitalization threshold. Projects below this threshold are typically funded and expensed through operating budgets, while projects that meet or exceed this threshold must be capitalized and recorded in the capital budget for accounting purposes, even when the work is maintenance in nature. In recent years, project costs have increased, and more routine maintenance activities are approaching or exceeding the capitalization threshold. As a result, projects that would historically be handled entirely within operating budgets now require capital budget treatment for accounting purposes. Under current policy, transferring funds from operating to capital budgets requires City Council approval. This requirement can delay project delivery for time-sensitive work. The proposed authorization establishes a streamlined process to address these situations while maintaining appropriate fiscal oversight. Proposed Authorization This action authorizes the Finance Director to approve transfers from operating to capital budgets for qualifying JOC projects exceeding $25,000, provided sufficient operating budget savings are available. This authority is intended for limited use in situations involving urgent or unanticipated maintenance needs that meet capitalization requirements. To ensure accountability and fiscal oversight, the following controls will apply: • Annual Cumulative Limit: Total transfers shall not exceed $100,000 per fiscal year. • Project Justification: Each transfer must include written justification from the Public Works & Utilities Director, or designee, confirming the urgent or time - sensitive nature of the work. • Finance Review: The Finance Director will verify funding availability and compliance with capitalization requirements prior to approval. Page 42 of 415 Item 5d • Council Reporting: A summary of all transfers will be provided to Council annually. This approach improves administrative efficiency, supports timely project delivery, and reduces the risk of cost escalation due to delays. It does not increase total spending authority, modify existing JOC approval thresholds, or authorize new appropriations. Public Engagement This item is a consent item for the May 19, 2026, City Council meeting and will follow all required noticing and posting requirements. The public will have an opportunity to comment on the item at or before the meeting. CONCURRENCE The Finance Department has reviewed the proposed policy and concurs. ENVIRONMENTAL REVIEW This action is not a project under the California Environmental Quality Act (CEQA) pursuant to Section 15378(b)(5) of the CEQA Guidelines, as it involves administrative and fiscal activities that will not result in a direct or indirect physical change to the environment. FISCAL IMPACT Budgeted: Yes Budget Year: 2025-26 Funding Identified: Yes Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost General Fund N/A N/A N/A N/A Enterprise Funds N/A N/A N/A N/A Total N/A N/A N/A N/A There is no direct fiscal impact associated with this action, and no new appropriations are requested. Any transfer would require identification of sufficient operating budget savings within the Public Works department and approval by the Finance Director. This action establishes a funding mechanism only and does not increase total expenditures. Page 43 of 415 Item 5d ALTERNATIVES 1. Council may elect not to authorize the Finance Director to approve transfers from operating to capital budgets for JOCs. In that case, each transfer would require separate Council action, which may extend timelines for implementation of certain time-sensitive improvement projects. 2. Council may direct changes to the draft resolution and its terms. Council may direct modifications to the proposed resolution, including changes to the thresholds, approval authority, or reporting requirements associated with the authorization for the Finance Director to approve transfers from Public Works operating budgets to capital budgets for Job Order Contract (JOC) projects. ATTACHMENTS A - Draft Resolution Authorizing the Finance Director to Approve Transfers from Public Works Operating Budgets to Capital Budgets for Job Order Contract Projects Page 44 of 415 R ______ RESOLUTION NO. _____ (2026 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AUTHORIZING THE FINANCE DIRECTOR TO APPROVE TRANSFERS FROM PUBLIC WORKS OPERATING BUDGETS TO CAPITAL BUDGETS FOR JOB ORDER CONTRACT PROJECTS WHEREAS, the City of San Luis Obispo utilizes Job Order Contracts (JOCs) to efficiently deliver small, time-sensitive maintenance and repair projects, including work within the public right-of-way, electrical repairs, storm damage response, and other priority maintenance activities; and WHEREAS, such projects may be funded through Public Works operating budgets or capital project accounts depending on the nature and cost of the work; and WHEREAS, projects with costs exceeding $25,000 must be capitalized and recorded in the City’s capital budget for accounting purposes in accordance with City financial policies; and WHEREAS, under current City policy, transfers between operating and capi tal budgets require City Council approval, which may delay the timely execution of eligible Job Order Contract projects; and WHEREAS, the City Council desires to improve administrative efficiency while maintaining appropriate fiscal oversight and budgetary control. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Action. The Finance Director is authorized to approve transfers from Public Works operating budgets to capital budgets for Job Order Contract (JOC) projects exceeding $25,000, in accordance with the provisions of this Resolution. SECTION 2. The cumulative amount of transfers approved under this authority shall be limited to One Hundred Thousand Dollars ($100,000) per fiscal year. SECTION 3. All transfers approved under this authority shall: a) Be supported by available operating budget within the Public Works Department; b) Include written justification from the Public Works & Utilities Director, or designee, confirming the urgent or time-sensitive nature of the work; and c) Be reviewed and approved by the Finance Director to ensure compliance with City financial policies and capitalization requirements. Page 45 of 415 Resolution No. _____ (2026 Series) Page 2 R ______ SECTION 4. A summary of all transfers executed under this authority shall be provided to the City Council on an annual basis. SECTION 5. This Resolution does not increase total spending authority, does not modify existing Job Order Contract approval thresholds, and does not authorize new appropriations. Upon motion of Council Member ___________, seconded by Council Member ___________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _______________ 20 26. ___________________________ Mayor Erica A. Stewart ATTEST: ______________________ Teresa Purrington City Clerk APPROVED AS TO FORM: ______________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________ Teresa Purrington City Clerk Page 46 of 415