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Home My WebLink About02-21-2017 Item 11 2016-17 mId-Year Budget Review Meeting Date: 2/21/2017 FROM: Katie Lichtig, City Manager Xenia Bradford, Interim Finance Director Courtney Steck, Interim Budget Manager SUBJECT: 2016-17 MID-YEAR BUDGET REVIEW RECOMMENDATION 1. Receive and discuss an update of changes in the financial position (Attachment A, Sections A &B) based on revised projections for all funds for the 2016-17 fiscal year, and 2. Receive an update on Status of Major City Goals and Other Important Objectives (Attachment A, Section C); and DISCUSSION The accompanying Mid-Year Budget Review for 2016-17 provides a comprehensive overview of the City’s fiscal condition at the mid-point of the fiscal year. The Transmittal Memorandum (starting on page A-1) sets forth a concise summary of key General Fund revenue and expenditure trends since adoption of the 2016-17 Supplemental Budget to the 2015-17 Financial Plan in June 2016. The report’s focus is on the General Fund; however, staff provides updated information for each fund. The report also includes a comprehensive status of Major City Goals, Other Important Objectives, and Capital Improvement Plan (CIP) projects. Background The City’s two-year Financial Plan provides for the submittal of a report on 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. Additionally, focused reports are issued 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 broader look at the City’s financial picture, including: 1. Updating beginning fund balance projections based on actual results for the p rior fiscal year as confirmed in the audit and reported in the Comprehensive Annual Financial Report (CAFR). 2. Analyzing revenue trends since adoption of the Financial Plan, and revising revenues and ending fund balance projections accordingly. 3. Identifying and presenting any areas of uncertainty or concern, and recommending corrective action or additional funding if required. Packet Pg. 483 11 4. Presenting the status of major City goals, CIP projects and other important objectives. Report Organization Section A: Transmittal Memorandum: Provides a narrative overview of the City’s fiscal environment. Provides an update to 2016-17 fund balance projections with previous fiscal year audited fund balance results and the most recent revenue and expenditures trends. Provides a summary of administrative and previously adopted by Council budget adjustments since the adoption of 2016-17 Supplemental Budget. Provides with Mid-Year recommended budget adjustments for Council approval and recommendations for the use of surplus fund balance. Section B: Financial Condition Summaries: Provides comprehensive presentations and updates of projected revenues and expenditures based on staff’s best and most prudent professional judgment. Updates beginning fund/working capital balances b ased on actual audited 2015-16 results and projected ending balances for 2016-17 based on changes from original budget estimates. Section C: Status of Goals and Objectives: Provides a report on Major City Goals, Other Council Objectives, and the status of major Capital Improvement Plan (CIP). Section D: Recent financial and revenue reports: Provides the most recent Quarterly Financial Report, Quarterly Sales Tax Newsletter and Monthly TOT Report. Summary of Mid-Year Budget Review Results This Mid-Year review shows that the City continued to experience slow economic growth for the past six months. Sales tax revenue which is the most volatile source of revenue for the General Fund because it closely correlated with economic fluctuations and which amounts to 37% of total General Fund revenues, slowed down in growth (in other words, still growing but at a much slower pace than anticipated in the budget). Due to prudent expenditure management and more favorable than expected revenue trends in 2015-16, the City has one-time funds in the amount of $4.25 million; however, further draw on this fund balance is projected within this fiscal year due to decline in revenue. Unassigned fund balance for General fund including Local Revenue Measure sub-fund is projected at $3.35 million at the end of fiscal year 2016-17. Of this amount, no Local Revenue Measure funds are available to allocate for projects or services. This is due to precise accounting for the Local Revenue Measure funds in the sub-fund. Staff is recommending that the Council not allocate these one-time General Fund resources at this time and as part of the 2017-19 Financial Plan Budget. Staff believes this approach would give the City Council the best opportunity to understand the financial conditions, the needs of the Community and align allocation of these funds with Major City Goals and Other Important Objectives. Staff will make recommendations regarding these one-time funds when the Council considers providing Strategic Budget Direction on April 18, 2017 and will continue to monitor current year financial position and make recommendations as necessary. Fiscal Impact There are no mid-year expenditure adjustments recommended with this report. The report provides with revenue and expenditure projections based on the mid-year results and updates changes in financial position for each fund based on 2015-16 actuals and projections through the Packet Pg. 484 11 end of 2016-17 fiscal year. Staff will continue to monitor financial position and will make recommendations as necessary. Attachments: a - Council Reading File - 2016-17 Mid Year Final Packet Pg. 485 11 Page intentionally left blank. Packet Pg. 486 11 • tt? i CITY OF Sfill LUIS OBISPO " Financial Plan and Mid -Year Review is a presentation about the Financial state of the City. The Budget process is an ongiong financial planning and management process. Financiai neaitn OT the city snows continues organization -wide dedication of the City staff - to develop and manage the oganizational Financial Plan. CITY OF SHn LLIIS OBISPO Purpose of Mid -Year Review • Mid -Year Review is the financial status revort to Council • Produced at each mid -year of a fiscal year and is based on tssixlliy —ieresAlts ofthe lrnceiibcr j • Provides with check-in point and allows for corrective action if necessary based on revenue and expenditure trends • Provides an update on Major City Goal and Other Important Objective work programs for the current financial plan RECOMMENDATIONS 2/22/2017 2 Budget Process 2014-15 CAFR 2015-16 Mid -Year 2015-16 CAFR �_------_- 2016-17 Mid -Year -----= Budget Process: 2016-17 Mid -Year Review Incorporate 2015-16 Year -End Results Review revenue and expenditure trends for all funds Identify Budget Adjustments for Council approval Provide an update on Major City Goals/Other Important Objectives and Major Capital Improvement Projects 2/22/2017 3 2015-16 Year -End Results 2015-16 Year -End Actuals vs. Final Buffet* Revenue: $2.8 M over budget ■ Expenditure: $5.4M under budget *Includes budgeted expenditure savings of $1.4M *Totals include General Fund and Local Revenue Measure Fund 7 rd 2/22/2017 4 2015-16 Local Revenue Measure Uses ($4.9M) ❑ 1. Open Space Preservation r] 2. Bicycle and Pedestrian Improvements 0 3. Traffic Congestion Relief / Safety Improvements ® 4. Public Safety ❑ S. Neighborhood Street Paving (716. Code Enforcement ❑ 7. Flood Protection 0 8. Parks and Recreatior Programs and Facilities 2015-16 Year -End General Fund Balance $29.6 Million Fund Balance ($ in thousands) Restricted, 11 $475 $11,475 IIS` ' Committed ?. I $7.529 17119 One- lnassigned, $10,075 Revenue 1 Decline Reserve _ Requirement ■ Restricted ■ Committed ■ Unassigned Assigned~ ~ -Adjustment 9 Qhs 0- Time Funds (53.�5Mj 16117 Supplement Allocated One -Time Funds 10 2/22/2017 5 Sales Tax Revenue Trend: 2016-17 Revised Projections • General Sales Tax. Based on the latest forecast, provided by HdL, the City's sales tax advisor, general sales tax receipts will reflect a decrease of $713,000 compared to the original budget. • Local Sales Tax. Using the HdL forecast for Local Sales Tax revenue (Measure Y/G), mid -year revisions reflected a decrease of approximately $495,000 to anticipated receipts of Local Sales Tax revenue compared to original budget. .Ueiu�r- 2016-17 General Fund Operating Program Expenditures General Fund - The revised budget shows a $3.5 million increase in the General Fund operations. Of this amount: $2.7 million represents Year 2 Financial Plan Carryover from 2015-16; and $850,855 pertains to encumbrance roll-over for prior year commitments. Local Revenue Measure Sub -Fund - The revised budget shows a $4 million increase in the Local Revenue Measure Sub -Fund expenditure budget operations. Of this amount: • $3.6 million pertains to Capital Improvement Plan project carry forward; and • $344,727 was encumbrance roll-over for prior year commitments. 2/22/2017 R Other Funds Significant Impacts . for Fund Balance • Sewer Fund -� • $756,870 for the Jennifer Street Sewer Line Replacement. • $152,000 for the construction phase of the Margarita Lift Station Replacement project. • $38,500 for Legal Services related to California River Watch litigation. • Parking Fund - - $100,000 for Parking Supply and Demand Modeling. • Parkland Development Fund - - $900,000 to Parkland Development fund. This action has no impact on the 2016-17 analysis because it was included in the current year's budget. 2/22/2017 7 ► 3.7 miles of Trails constructed providing improved access to Cerro San Luis, the Irish Hills, Stenner Springs and Reservoir Canyon • Significant fire fuel reduction effort at Bishop Peak was completed in September • Calle Joaquin Agricultural Reserve wetland installation and bioswale were completed in late 2016 • Wadell Property 16 2/22/2017 E3 Railroad Safety Trail extension from Laurel to Orcutt design is complete and starting construction The City received an international award from the Institute of Transportation Engineers for the 2014 LUCE Update and Multimodal activities Council adopted the Short Range Transit Plan in September 2016 and service changes consistent with the plan will be implemented in summer 2017 • Since June 2016 over $900,000 in affordable housing in -lieu fees have been collected • Staff continues to work with non-profit developers on five upcoming affordable housing projects, and has been working closely with CAPSLO on the construction timing and financing requirements of 40 Prado • $850,000 Bishop Street Studios RM 17 18 2/22/2017 OJ 2/22/2017 10 Status of Major CIP Projects (as of 12/31/15) Under Study or Design Under Construction PUBLIC SAFETY Fire Station #2 Restroom & Dorms +lr I i, __ Margarita Lift Station Replacement ! r 5% "� Reservoir N2 Replacement 40 Johnson Waterline Public Utlltles Water Resource Recovery Facility Upgrade Broad Street Bike Boulevard Johnson Street Paving 2015 Neighborhood Paving 2016 Marsh Street Bridge Highland & Chorro Bike Improvements City Wayfinding Signs Los Osos Valley Road Interchange Storm Drain System Replacement 2015 Status of Major CIP Projects (as of 12/31/16) Under Study or Design • Under Construction Jack House Elevator Removal ® Laguna Lake Natural Reserve Accessible Trail Court Resurfacing Leisure, Cultural, Olympic Pool Replastering & Social Services Golf Course Restrootns Laguna Lake Dredging & Sediment Management Community Development a 2/22/2017 11 r r Status of Major Fleet & I.T. Replacements Purchased 16-17 New Equipment & Fleet (Purchased 15 of 24 vehicles) Police Audio Recording Upgrade Police 911 System Upgrade . I.T. - Citywide Window 7 Upgrade I.T.- City/County Parcel Project Recommendations 1. Receive and discuss an update of changes in financial position revised projections for all funds for the 2016-17 fiscal year, and 2. Receive an update on Status of Major City Goals and Other Important Objectives 2/22/2017 12