Loading...
HomeMy WebLinkAbout06-10-2013 Item B1, Padilla (3)C0Un C1t MCMORAno city of san Luis owspo, finance and i.t. ()EpaRtmEnt DATE: May 30, 2013 TO: Mayor & Council Members VIA: Katie Lichtig, City Manager FROM: Wayne Padilla, Interim Director of Finance & IT SUBJECT: Responses to Questions about Fund Balance Requirements MAY 3 12013 911 Eh I< AGENDA CORRESPONDENCE Date�Item#-24-. In response to questions asked by a Council Member, I am pleased to provide information regarding the fund balance requirements of the General Fund, Enterprise Funds and the Capital Outlay Funds. The first part of the Councilmember's a question was asked whether the City Council will be given the chance to approve proposed policies before they become effective for the Information Technology Fund and the Major Facility Replacement Fund. The City Council adopts all Budget and Fiscal Policies before they are implemented. The Budget and Fiscal Policies can be found in the Preliminary Financial Plan on pages H-4 through H-28. As previously directed by the City Council the policy regarding the Information Technology Fund can be found on page H-15. There is a new policy related to the Major Facility Replacement Fund shown on page H-15 of the Preliminary Financial Plan. Provided along with this memorandum is a 2 -page attachment which contains the responses to the specific questions that were asked about the various funds and their reserve requirements. As always, I am happy to address any questions you may have once you've had the chance to review this information. Minimum Fund & Working Capital Balances: Question A: Current dollar value calculated for operating expenses to determine General Fund 20% reserve amount. For the 2 forecast years, the values used to make this calculation are taken from Page H-41 of the Preliminary Financial Plan as shown below: 2012-13 Total expenditures: $53,054,300 Operating Transfers In: ($ 1,395,500) MOA & Other Adjustments: ($ 540,900) Expenditure Savings: ($1,585,000) Net Amount: 49.532.900 20% Reserve Amount: $ 9,906,600 Question B: Current dollar value calculated for operating expenses to determine the water, sewer & parking enterprise funds 20% reserve dollars. Please refer to the pages shown below: Water Enterprise Fund (pg. H-59) 2012-13 Total Operating Programs: $15,296,200 20% Reserve Amount: $ 3,059,200 Sewer Enterprise Fund (pg. H-60) Total Operating Programs: $8,658,300 20% Reserve Amount: $1,731,700 Parking Enterprise Fund (pg. H-61) Total Operating Programs: $2,609,400 20% Reserve Amount: $ 521,900 Fleet Replacement Fund: Question A: Original purchase cost of items in this category used to calculate the balance threshold? The current purchase cost of the vehicles to be replaced by this fund is $9,760,800 20% of this amount is $1,952,200 Question B: Is the 20% minimum fund balance in place? Please see page H-56. At the end of 2012-13, the fund will have an estimated balance of $2,276,600. At the end of 2013-14 the balance is estimated at $1,616,900 and at the end of 2014-15 the balance is estimated to be $1,401,600. On page A-12 of the introduction to the Preliminary Financial Plan, the last paragraph states that the Fleet Replacement Fund will not be able to maintain the 2036; reserve balance level due to the amount of deferred maintenance that is being funded in 2013-15. Question C: Proposed investment in 2013-15 Financial Plan? Please see page H-56. In 2013-14 the proposed investment is $500,000 and in 2014-15 the proposed investment is $624,000. These amounts are shown as transfers -in, on the Changes in Financial Position document at page H-56. Information Technology Replacement Fund: Question A: Original purchase cost of assets used to calculate the reserve threshold? The original purchase cost of all hardware and software is $3,506,500 Question e: Prospective 20% reserve in dollars? The 20% reserve, based on the original purchase cost shown above would be $701,300 The Information Technology Replacement Fund, which was created in the current year, has a balance estimated at the end of 2012-13 of $200,000. As stated in item C shown on page H-15 of the Preliminary Financial Plan, the city intends to begin building the fund balance with the long term objective of maintaining a minimum fund balance in the IT Replacement Fund of at least 20% of the original purchase cost of the items accounted for in this fund. Please refer to page H-66 of the Preliminary Financial Plan to see the proposed financial results for this fund during 2013-15. On page A-12 of the introduction to the Preliminary Financial Plan, the last paragraph states that the Information Technology Replacement Fund will not be able to maintain the 20916 reserve balance level due to the fact that the fund has only been in existence for one year. Question C: Proposed investment in the 2013-15 Financial Plan? The proposed investment is $565,500 in 2013-14 and $967,100 in 2014-15. These amounts are shown as transfers -in, on the Changes in Financial Position document located on page H-66 of the Preliminary Financial Plan. Maior Facility replacement Fund Question A: What dollar amount would "fully fund the improvements included in the five-year Capital Improvement Fund" (as per Budget & Fiscal Policies description)? Please refer to page F-4 of the Preliminary Financial Plan. The amount needed to fully fund the 5 -year total of proposed projects is $2,809,100 Question B: Prospective 20% reserve in dollars? As shown on page H-15 of the Preliminary Financial Plan, the proposed policy related to the management of this fund does not require a fixed percentage of the asset value to determine the fund reserve but states... "The amount retained in this fund, coupled with annual contributions received by it from any source, shall be adequate to fully fund the improvements included in the five-year Capital Improvement Plan." As staff gains more experience with the scheduling of eligible projects, a policy recommendation will be developed and brought before the City Council to consider adopting a reserve requirement for this fund. Question C: Proposed investment in the 2013-15 Financial Plan? Please refer to page H-64 of the Preliminary Financial Plan. The proposed investment is $600,000 in 2013-14 and $573,600 in 2014-15 as shown by the transfers -in that are reported on that page. These amounts are equal to the proposed project costs for that same timeframe.