HomeMy WebLinkAbout02/17/2004, BUS1 - 2003-04 MID-YEAR BUDGET REVIEW 4 1
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CITY OF SAN LUI S OBISPO
FROM: . Ken Hampian,City Administrative Officer W �yq
Bill Statler,Director of Finance& Information Technology
Carolyn Dominguez,Finance Manager
SUBJECT: 2003-04 MID-YEAR BUDGET REVIEW
CAO RECOMMENDATION
1. Review and discuss the City's financial condition at the mid-point of 2003-04.
2. Approve revenue and expenditures changes presented in the accompanying Mid-Year Budget
Review document, including budget requests for operating programs and capital improvement
plan (CIP) projects totaling $307,100 in 2003-04 and $873,100 in 2004-05, summarized as
follows:
2003-04 200405
Operating Operating
Fund Programs CIP Total Programs CIP Total
Water Fund 5,000 5,000
Sewer Fund 226,800 226,800 217,800 217,800
Whale Rock Fund 15,300 15,300 15,300 15,300
,Capital Outlay Fund:Grants 60,000 60,000 640,000 640,000
Total $247,100 $607000 $307,100 _ $233,100 $640,000 $873,100
3. Confirm the previously planned occupancy of the office space currently under construction at
919 Palm Street by City staff from Community Development and Public Works, and authorize
staff to work on finalizing relocation plans.
4. Review and discuss the status of major City goals, other Council objectives and major CIP
projects; and approve "Action Plan" revisions, including an indefinite deferral of the 2001-03
objective of considering an expansion of the "Downtown Commercial Zone."
DISCUSSION
The accompanying Mid-Year Budget Review for 2003-04 provides a comprehensive overview of
the City's fiscal condition at the mid-point of the fiscal year. The Transmittal Memorandum (page
A-1) sets forth a concise summary of key General Fund revenue and expenditure trends since
adoption of the 2003-05 Financial Plan in June 2003. It also includes supporting documentation for
the recommended mid-year budget adjustments.
Overview: How Are We Doing?
Consistent with the comprehensive status report presented to Council in November 2003 and the
second quarter financial report issued in January 2004, revenue trends are down in several of our key
2003-04 Mid-Year Budget Review Page 2
sources, most notably sales tax, transient occupancy tax (TOT), investment earnings and vehicle
license fees (VLF). Downward revisions for these four sources alone total $2.2 million over the next
two years.
Fortunately, most of this is offset by improvements (albeit largely one-time) in other areas, most
notably beginning fund balance. However, even with these, our revised ending General Fund
balance projection at the end of 2003-05 is $717,600 lower
than the $7.1 million estimate in the 2003-05 Financial •
Plan; and reflects an ending fund balance that is 18% of At the end of the Transmittal
operating expenditures compared with our minimum fund Memorandum is a one-page
balance policy of 20%. overview of our projected ending
financial condition for the General
It is important to note that this revised ending fund balance Fund at June 30, 2005 that
projection assumes no further State takeaways. As summarizes"where we're up"
discussed in greater detail in the Transmittal and "where we're down'from our
Memorandum, this is a significant assumption in light of initial estimates in the 2003-05
the State's $14 billion budget shortfall in 2004.05, and the I
Financial Plan.
Governor's proposal to take $430,000 from the City's
General Fund on an ongoing basis beginning in 2004-05 as part of his budget-balancing solution.
Take Corrective Action with the 200405 Financial Plan Supplement. Given the many unknowns
facing us at this time, we are not recommending any specific corrective action as part of the Mid-
Year Budget Review. As we learn more about the performance of our key revenues later in the
Spring (most notably, Christmas quarter sales tax revenues) as well as possible changes in workers'
compensation costs and the likely impact of State budget balancing actions on the City, our situation
may improve or worsen. We will be better able to assess this, and make appropriate
recommendations tailored to the problem, as part of the 2004-05 Financial Plan Supplement, which
we will present to the Council in June 2004. However, because resource options are very limited at
this point, it is likely that addressing any significant shortfalls will have to come from further
expenditure reductions.
Background: Purpose of the Mid-Year Budget Review
The City's two-year Financial Plan provides for the submittal of a report on our financial status to the
Council every six months. For fiscal monitoring purposes, on-line access to up-to-date information
is available to all departments, financial reports are issued monthly to key staff members and
comprehensive quarterly financial reports are distributed to the Council and staff on an ongoing
basis. Additionally, we issue focused reports to the Council and staff on key revenues such as sales
tax,transient occupancy tax and investments, as well as ad hoc reports as needed.
However, the formal submittal of a review at the mid-point of the fiscal year provides an opportunity
to take a broader look at the City's financial picture,including:
1. Updating beginning fund balance projections based on actual results for the prior fiscal year.
2. Analyzing revenue trends since adoption of the Financial Plan, and revising revenues and
ending fund balance projections accordingly.
2003-04 Mid-Year Budget Review Page 3
3. Identifying and presenting any fiscal problem areas to the Council, and recommending
corrective action or additional funding if required.
4. Presenting the status of major City goals and other important objectives.
Report Organization
The accompanying Mid-Year Budget Review is organized into five main sections:
Section A: Transmittal Memorandum, which provides a concise review and analysis of the
City's financial position, and summarizes the need for the requested mid-year budget
adjustments.
Section B: Comprehensive presentations of projected revenues, expenditures and changes in
fund balance/working capital for each of the City's funds for 2003-05 compared with
original budget estimates and actual results from 2002-03.
Section C. Detailed supporting documentation for the requested mid-year budget adjustments.
Section D: Recent financial and revenue reports: Quarterly Financial Newsletter, Sales Tax
Newsletter and Monthly TOT Report.
Section E. Status reports on major City goals, other Council objectives and major CIP projects.
As noted above, this includes recommended"Action Plan"revisions, which are fully
discussed in the report.
ENCLOSURE
Mid-Year Budget Review for 2003-04
G:Budget Folders/Mid-Year Budget Reviews/Mid-Year Budget Review.2003-04/Council Agenda Report
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