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HomeMy WebLinkAbout06-17-2014 PH2 Adoption of 2013-15 Financial Plan Supplement & 2014-15 Budget (2)City of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Katie Lichtig, City Manager Wayne Padilla, Director of Finance & Information Technology SUBJECT: ADOPTION OF THE 2013-15 FINANCIAL PLAN SUPPLEMENT AND 2014-15 BUDGET RECOMMENDATION 1. Adopt a resolution approving the 2013-15 Financial Plan Supplement and 2014-15 Budget. 2. Approve amendments to the 2013-14 budgets of various funds. 3. Adopt a resolution approving an amendment to the Financial Management Manual regarding the use of development review fees. DISCUSSION Consistent with the City's two year approach to the budgetary process, the 2014-15 budget presented for formal Council adoption at this time has been prepared using the 2013-15 Financial Plan as its primary foundation. It also incorporates the analysis presented to Council as part of the 2013-14 mid-year review on February 18, 2014, the enterprise fund rate reviews held on June 10, 2014, and other budget changes affecting the forecast of revenues and expenditures for the coming fiscal year. A comprehensive analysis of the budget assumptions used in preparing the revised 2014-15 budget along with descriptions of supplemental funding requests and proposed policy changes are included in the Introduction (under Budget Message and Financial Highlights) of the accompanying Proposed 2014-15 Budget. The theme of the 2013-15 Financial Plan Supplement is “Steady Progress.” Revenues have rebounded and, based on the continued development review activity, it appears there is renewed optimism about – and opportunity to invest in – our community. Moreover, the City has made progress to contain operating costs which in turn helps to improve our overall fiscal health. A few noteworthy examples of actions that support this fiscal health objective include paying off in a lump sum, the $2.065 million outstanding debt owed to the California Joint Powers Insurance for a retrospective charge; paying $935,000 to California Public Employees Retirement System (CalPERS) to pay down an unfunded liability in the public safety side fund; and reduction in retirement costs which were achieved through the City’s successful negotiations with its labor groups and the implementation of 2nd Tier retirement programs for employees hired after January 1, 2013. The proposed 2014-15 budget includes funding for a second CalPERS safety side fund liability prepayment in the amount of $300,000. The proposed 2014-15 budget is balanced. The General Fund is forecast to end 2014-15 with an ending reserve that exceeds the minimum policy level of 20% of operating expenses by $178,900. The budget proposes appropriations of $134.2 million as follows: PH2 - 1 Adoption of the Proposed 2014-15 Budget Page 2 Governmental Funds Enterprise Funds Total Operating Programs 55,625,86929,042,50884,668,377 CIP 31,553,7217,843,43039,397,151 Debt Service 5,576,8624,569,70010,146,562 Total $92,756,452$41,455,638$134,212,090 Appropriations for operating programs which provide the day-to-day delivery of services total $84.7 million for 2014-15 summarized as follows: Operating Programs: 2014-15 In summary, staff recommends approving one CIP project in the Water Fund and General Fund operating program changes with a net increase of $1,867,321 in 2014-15. The majority of the changes are for one-time expenses. Detailed supporting documentation of significant operating program changes is provided in the Expenditure Summaries part of Section C. As part of the Supplemental Budget review process, the City Council is being asked to consider an addition to the budget policies contained in the Financial Management Manual in order to address the needs of the Development Services program. The proposed policy is provided as an attachment to the second resolution that is provided with this report. The intent of the policy is to provide a means by which the on-going development fee revenues are compared to the existing budget during each fiscal year. It is staff’s assessment that significant development review revenues exceeding budget amounts represent a demand for future services that may need to be addressed through the use of additional contract or other temporary services. Accordingly, staff recommends adoption of the proposed budget policy, which would allow up to 75% of the projected revenue that exceeds the adopted budget to be utilized to engage additional resources necessary to process applications and project reviews in a timely manner, upon recommendation of the Community Development Director. The proposed policy provides the City Manager with the discretion to review a request from the Community Development Director when it is determined that additional resources are required and to authorize the appropriation of all or a part of the excess development fees in the current year budget. Any unused portion of the excess revenues would remain in a designated account for future use until such time as it was determined that it is no longer needed, based on the status of existing applications and demand for review and inspection services at that time. Governmental Enterprise FundsFunds Total Public Safety 24,430,510 24,430,510 Public Utilities 20,599,50020,599,500 Transportation 3,321,3004,984,3008,305,600 Leisure, Cultural & Social Services 7,486,400 7,486,400 Community Development 9,048,344 9,048,344 General Government 11,346,8153,451,20814,798,023 Total $55,633,369$29,035,008$84,668,377 PH2 - 2 Adoption of the Proposed 2014-15 Budget Page 3 Further, staff is requesting the City Council’s concurrence to utilize Traffic Impact Fees to reimburse the General Fund for the cost of the debt service on the Los Osos Valley Road/101 Interchange overpass borrowing in 2014-15 and at least one-half of the debt service cost for the next two years. These amounts are $250,000 in 2014-15 (interest only for part of the year) and $250,000 in the later years. This assumption is built into the proposed 2014-15 budget and also in the Five Year Fiscal Forecast. There is an adequate cash balance to provide this level of funding. ATTACHMENT 1. Resolution – Approval of the 2013-15 Financial Plan Supplement and Adoption of the 2014-15 Budget 2. Resolution - Amendment to the Financial Management Manual 3. Proposed 2013-15 Financial Plan Supplement and 2014-15 Budget T:\Council Agenda Reports\2014\2014-06-17\Adoption of Supplemental Budget (Padilla)\CAR 2014-15 Supplemental Budget Adoption.docx PH2 - 3 ATTACHMENT 1 RESOLUTION NO. (2014 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING THE 2013-15 FINANCIAL PLAN SUPPLEMENT AND ADOPTING THE 2014-15 BUDGET AND THE CARRYOVER OF CERTAIN UNSPENT APPROPRIATIONS ALONG WITH RECOMMENDED CHANGES TO THE 2013-14 BUDGETS OF VARIOUS FUNDS WHEREAS, the City Council adopted the 2013-15 Financial Plan on June 17, 2013, which established comprehensive financial and policy guidelines for fiscal years 2013-14 and 2014-15; and WHEREAS, the 2013-15 Financial Plan included appropriations for fiscal year 2013-14; and WHEREAS, the City Council has reviewed proposed changes to the 2013-15 Financial Plan to be effective for fiscal year 2014-15 after holding noticed public hearings; and WHEREAS, the City Manager submitted the 2013-15 Financial Plan Supplement and Revised 2014-15 Budget to the City Council for their review and consideration; and WHEREAS, the City’s Budget Policy provides for the carryover of unspent Capital Project appropriations, amounts encumbered at the end of each fiscal year and the carryover of non-staffing operating costs in the first year of each two year financial plan period; and WHEREAS, through the analysis used to develop current estimates reflected in the Revised 2014-15 Budget, staff identified a number of changes that are required for the 2013-14 budget in order to reflect current revenue and expenditure trends as shown in Exhibit A to this resolution, which is incorporated by reference herein; and WHEREAS, the cost of financing the Los Osos Valley Road/101 Interchange overpass is an eligible cost of the Traffic Impact Fee program while the total cost of the debt service will be borne initially by the General Fund. NOW, THEREFORE, BE IT RESOLVED that the Council of the City of San Luis Obispo hereby finds and directs: 1. That the above recitals are true and correct. 2. That the 2013-15 Financial Plan Supplement and the 2014-15 Budget is hereby adopted. 3. Public Art Funding shall be provided at the rate of 1% of eligible city-sponsored capital projects. 4. That the budget adjustments shown in Exhibit A, provided as an attachment to this resolution, are hereby approved for those funds. 5. That all unspent capital project appropriations, amounts encumbered as of June 30, 2014 and unspent non-staffing costs that are eligible to be carried forward into 2014- 15 in accordance with the City’s Budget Policy shall be reflected in the 2014-15 budget at the earliest opportunity and such amounts shall be reported to the City Council during the Mid-Year budget update. PH2 - 4 Resolution No. (2014 Series) Page 2 6. The Traffic Impact Fee Fund shall reimburse the General Fund for 100% of the cost of the debt service for the Los Osos Valley Road/101 Interchange overpass borrowing and up to 50% of the cost of the debt service in the following two years with future reimbursements subject to further review by the City Council. 7. That the Director of Finance shall take all necessary steps to implement these actions as soon as practical. Upon motion of ________________, seconded by _________________, and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted on June 17th , 2014. _____________________________ Mayor Jan Howell Marx ATTEST: ____________________________ Anthony Mejia, City Clerk APPROVED AS TO FORM: ____Christine Dietrick_______________ Christine Dietrick, City Attorney PH2 - 5 Resolution No. (2014 Series) Page 3 EXHIBIT A Water Enterprise Fund Increase/(Decrease) Revenues: Other Revenues $ 1,430 Expenses: Leave Payouts $ 70,200 CJPIA Retrospective Charge* $ 37,607 Sewer Enterprise Fund Revenues: Proceeds from Debt $7,249,000 This adjustment recognizes the amount borrowed in October for the construction of energy efficiency improvements at the Water Reclamation and Recovery Facility. Expenses: CJPIA Retrospective Charge* $ 38,653 Parking Enterprise Fund Expenses: CJPIA Retrospective Charge* $ 11,798 Transit Enterprise Fund Revenues: Capital Grant Sources $ (488,958) This adjustment lowers the amount of capital grant revenues based on new information received since the Mid-Year budget adjustments were prepared. Expenses: CJPIA Retrospective Charge* $ 2,616 Whale Rock Expenses: CJPIA Retrospective Charge* $ 4,709 CDBG Fund Other Sources (transfer-in) $ 2,200 This adjustment recognizes an increase to the General Fund’s transfer in amount which is needed to eliminate a fund deficit that arose in the prior year. Public Art Fund Revenues: In-Lieu Fees $ (20,000) This adjustment lowers the fee estimate to the expected value for the current year. PH2 - 6 Resolution No. (2014 Series) Page 4 *The CJPIA retrospective charge represents the allocated portion of the retrospective charge that was calculated by the California Joint Powers Insurance Authority as the result of their most recent review of the workers compensation and liability claims status through 2011-12. EXHIBIT A (CONTINUED) General Fund Other Uses (transfer out) $ 2,200 This adjustment recognizes an increase to the General Fund’s transfer out to the CDBG fund to match the transfer in shown above. PH2 - 7 ATTACHMENT 2 RESOLUTION NO. (2014 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING THE AMENDMENT OF THE FINANCIAL MANAGEMENT MANUAL TO REFLECT A POLICY CONCERNING THE REALLOCATION OF DEVELOPMENT FEES WHEREAS, the City Council adopted the 2013-15 Financial Plan on June 17, 2013, which established comprehensive financial and policy guidelines for fiscal years 2013-14 and 2014-15; and WHEREAS, the 2013-15 Financial Plan included appropriations and forecast revenues for both years of the 2 year plan; and WHEREAS, the City provides development services to the community to ensure that future development is designed in accordance with the City’s zoning and planning guidelines; and WHEREAS, the City has experienced substantial growth in the number of development applications that have been submitted for processing and the fees paid with these applications represent a prepayment for review, planning and inspection services that must be provided in accordance with statutory guidelines and time limits; and WHEREAS, development activity is inherently unpredictable and there are times when development review activity peaks and the City determines that it is necessary to augment the existing staff resources that are available to provide these services in order to ensure that they are accomplished within the timeframes set in state law; and WHEREAS, the Community Development Director recommends a policy that will allow for the timely identification and quantification of the additional costs associated with meeting the demand for development review services, while matching costs of necessary services with available revenues and has proposed a policy that will allow for this to occur, as set forth in Exhibit A to this resolution, which is incorporated by reference herein. NOW, THEREFORE, BE IT RESOLVED that the Council of the City of San Luis Obispo hereby finds and directs: 1. That the above recitals are true and correct. 2. That the proposed policy shown in Exhibit A is hereby adopted and made a part of the City of San Luis Obispo’s Financial Management Manual, at Section 550 A. 3. That the Director of Finance shall take all necessary steps to implement these actions as soon as practical. **************** PH2 - 8 Resolution No. (2014 Series) Page 2 Upon motion of ________________, seconded by _________________, and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted on June 17th , 2014. _____________________________ Mayor Jan Howell Marx ATTEST: ____________________________ Anthony Mejia, City Clerk APPROVED AS TO FORM: ____Christine Dietrick_______________ Christine Dietrick, City Attorney PH2 - 9 Resolution No. (2014 Series) Page 3 EXHIBIT A The City Manager may reallocate Development Services revenues for Development Services expenses that are projected to exceed the current revenue budget estimate to acquire temporary resources for the purpose of accomplishing the timely processing of development permit applications and perform other related permit processing activities while maintaining a balanced budget. In no case, shall the reallocation of revenues exceed 75% of the projected revenue that is estimated to exceed the current development fee revenue budget forecast. Any and all reallocated revenues shall be reported to the City Council on a semi-annual basis, as part of the Mid-Year and annual budget adoption presentations. The Finance Department shall review the justifications for the reallocations of these revenues and shall confirm the balance remaining in the Development Services Account. An account shall be established in the General Fund to solely account for the balance of development services fees received that may be reallocated for the purpose described above. PH2 - 10