HomeMy WebLinkAbout02-05-2019 Item 16 - 2018-19 Mid-Year Budget Review Department Name: Finance
Cost Center: 2001
For Agenda of: February 5, 2019
Placement: Business
Estimated Time: 45 minutes
FROM: Derek Johnson, City Manager
Prepared by: Brigitte Elke, Finance Director
SUBJECT: 2018-19 MID-YEAR BUDGET REVIEW
RECOMMENDATION
1. Receive and discuss an update to changes in the financial position (Attachment A, Sections A
&B) based on revised projections for all funds for the 2018 -19 fiscal year.
2. Receive an update on the status of the current Major City Goals and Other Impor tant
Objectives (Attachment A, Section C); and
3. Approve the payment of $4.2 million from undesignated fund balance to pay-down CalPERS
unfunded liabilities; and
4. Authorize staff to release a Request for Proposal to the four vendors that offer 115 Pension
Trust funds.
5. Approve the use of $1.4 million of undesignated fund balance to be set aside in the 115
Pension Trust fund once established.
6. Approve a significant operating program change to allow the Police Department to change
the crime analyst position from a supplemental full-time to a regular full-time position.
DISCUSSION
The accompanying Mid-Year Budget report for 2018-19 provides a comprehensive overview of
the City’s financial condition at the mid-point of the fiscal year. The Transmittal Memorandum
(Attachment A - page A-1) summarizes current financial trends since the adoption of the 2018 -
19 Financial Plan Supplement in June 2018. The report’s main focus is on the General Fund;
however, updated information is also provided for each of the City’s enterprise funds. The report
includes the second of three annual updates to the Major City Goals and Other Important
Objective work program.
Background
The City’s budget policies require that the City Council review the City’s budget and financial
condition every six months. The mid-year review fulfills that purpose and allows for adjustments
to revenue and expenditure assumptions should the need arise. The report follows the City’s
completion of its comprehensive annual financial report (CAFR) and analyzes the forecast based
on prior fiscal year actuals. The report includes:
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1. Updated beginning fund balance projections based on actual results for the prior fiscal year
as confirmed in the audit and reported in the Comprehensive Annual Financial Report
(CAFR).
2. Analysis of revenue trends since adoption of the Financial Plan Supplement.
3. Identification of any areas of uncertainty or concern and recommendations for corrective
action if warranted.
4. The second update to the Major City Goals and Other Important Object ive work programs.
Report Organization
Section A: Transmittal Memorandum: Provides a narrative overview of the City’s current
financial condition based on the audited fund balance from fiscal year 2017 -18, the current
revenue and expenditures trends, and the recommendations for the use of one-time undesignated
fund balance.
Section B: Financial Condition Summaries: Provides an update to projected revenues and
expenditures based on 2017-18 audited financials and includes the significant operating program
change request.
Section C: Status of Goals and Objective: Provides the second of three updates to the
Major City Goals and Other Council Objective work program.
Section D: Financial reports: Provides the most recent quarterly financial report, quarterly
sales tax newsletter; and monthly Transient Occupancy Tax (TOT) report.
Summary of Mid-Year Budget Review Results
Overall, the City’s financial outlook remains stable and in line with budgeted assumptions
outlined in the 2018-19 Budget Supplement. Based on the first six months of the fiscal year, the
City’s three major revenue sources, sales, property, and transient occupancy tax, are in line with
budget projections.
With applications underway, it is expected that the first Cannabis related businesses will be
permitted by May 2019. The forecast now includes a modest revenue assumption in the current
fiscal year.
Due to an active fire season, the City received $485,000 in Mutual Aid Reimbursement revenue
through December 2018. Mutual Aid is not a budgeted revenue due to its nature and the
uncertainty of deployments for mutual aid.
The increase in revenue is partly offset by a downward trend in development review fees, Parks
& Recreation fees, and Police services fees that warranted mid -year adjustments based on current
revenue levels. As outlined in the fiscal impact section of the report, a few additional budget
adjustments related to grants received after the development of the 2018 -19 budget supplement
are requested.
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Significant Operating Program Change Request
The Police Department submitted a request to change the current temporary Crime Analyst to
become a regular full-time employee. Since bringing a Crime Analyst on board, the department
reduced crime the first year by 13%, and 2% in the second year. Having a full-time Crime
Analyst has helped in identifying trends as they emerge, not weeks or even months later. This
position also assists with intelligence analysis regarding special event planning, including
analysis of similar events in other cities. Utilizing this data allows the department to develop
effective deployment strategies and tactics. Interceding as soon as possible, preventing
victimization, reducing crime, and utilizing limited resources effectively, increases community
satisfact ion, and reduces inefficient and unnecessary personnel time.
The change is requested for this fiscal year, but additional funding of $49,802 is not requested
until the 2019-21 Financial Plan. The department will absorb any applicable cost for the current
fiscal year in its operating budget.
Enterprise Funds
Service charge revenues for the Water and Sewer Fund track with current budget assumptions.
However, as in the General Fund, the changes in fee and collection methodology in development
fee revenue in fluence the two funds and both are recommending downward adjustments to
budgeted assumptions.
Due to the delay of the parking kiosk in the City’s parking structures, parking fees are lagging
budget assumptions and an adjustment of $368,400 is requested based on year-to-date fee
collection.
Year-End Fund Balance
The City’s General Fund ended the previous fiscal year with a positive fund balance of $29.5
million. A large portion of this balance is allocated to restricted and committed purposes and the
20% operating reserve the City maintains per its financial policies. Of the remaining $9.7 million
in undesignated fund balance, the Council had previously directed $4.2 million to be used for
payment to CalPERS. The City Manager, as permitted by the City’s budget policies, approved
carryover funding to various department programs and efforts in the amount of $4.2 million. This
leaves $1.4 to be allocated as one-time funding. It is recommended that this amount be used to
provide initial funding for the 115 Pension Trust fund.
No requests to use undesignated working capital have been submitted from either of the four
enterprise funds. All enterprise funds have prepared to contribute to the pension trust fund in
their respective fund analysis.
Policy Context
Per the City’s adopted budget and fiscal policie s, section G, the Council will formally review the
City’s fiscal condition, and amend appropriations if necessary, six months after the beginning of
each fiscal year.
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Public Engagement
This report is published in advance of the public Council meeting and sent to interested parties
signed up for notifications. It will be heard at the Council meeting as a business item.
CONCURRENCE
The City’s internal Financial Plan Steering Committee concurs with the reco mmendations
included in this report.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act does not apply to the recommended action in this
report, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15 378.
FISCAL IMPACT
Budgeted: Yes Budget Year: 2018-19
Funding Identified: n/a
Fiscal Analysis
Funding
Sources
Total Budget
Available
Current Funding
Request
Remaining
Balance
Annual
Ongoing Cost
General Fund
State
Federal
Fees
Other:
Total
The attached mid-year report provides a detailed listing of the changes in financial positions in
revenue and expenditures for all City funds.
Overall, the General Fund is expected to see an increase in its revenue sources of approximately
$1.3 million based on current trends in sales, property, and transient occupancy tax and year-to-
date mutual aid reimbursements. The increases are partially offset by $277,000 in reductions in
certain service fees mostly in development fee revenue. This is not due to a slowing of
development activities, but a change in fee and collection methodology. While Staff is proposing
an adjustment to budgeted revenue, it is recommended that the Council not appropriate any of
the forecasted additional revenue at this time and postpone any spending until such revenues are
actually realized. Lastly, staff will continue to recommend that any additional revenue be applied
to unfunded pension liabilities.
No changes to the appropriated expenditure budgets are recommended at th is point. The
significant operating program change requested by the Police department has no fiscal impact in
2018-19 but will increase the staffing budget in the future by approximately $50,000.
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ALTERNATIVES
Modify the proposed Mid-Year adjustments.
The Council could direct staff to not implement the proposed budget change recommendations.
Should the adjustments not be approved, the budget will remain unchanged compared to the
adopted supplemental budget. Staff does not recommend an unchanged budget du e to updated
projections based on recent trend information and consultant updated projections.
Attachments:
a - Council Reading File 2018-19 Mid-Year Report
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