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Home My WebLink About08 MIDYR BUDG RVW 03-01-99DATE: March 1, 1999 Inter-Corn lqO. 8 3-1-99 TO: FROM: SUBJECT: · William A. Huston, City Manager Ronaid A. Nault, Finance Director 1998-99 MIDYEAR BUDGET REVIEW SUMMARY: A review of the City's first six months of operations under the adopted 1998-99 budget and projected revenues and expenditures through year end indicate that all operating funds are in balance and, where applicable, reserve requirements will be met. RECOMMENDATION: Approve amended General Fund Appropriations for fiscal year 1998-99 of $33,085,336 as recommended by the City Manager. . Authorize the transfer of $1.8 million from the projected Unappropriated Reserves of the General Fund to the Capital Improvement Fund to accumulate reserves for the proposed. Seven Year Capital Improvement Program. o Authorize the transfer of $500,000 from 'the projected Unappropriated Fund Balance of the General Fund to the Park Development Fund. DISCUSSION: The attached Midyear Budget Review follows the format of the proposed 1998-99 budget. Each department has reviewed their respective areas of responsibility and have provided the projections that are presented in the body of the report. The 1998-99 budget column reflects actions taken by the City Council since the budget adoption as well as the current recommendations made by the City Manager that are a result of this review process. The Fund Balance Projections that appear on page 1 have been adjusted to reflect audited balances as of 6-30-98. The 6-30-99 Projected Fund Balance is 15.4% of projected expenses. The following discussion will focus on the significant changes that have an impact on the various funds of the City. General Fund The ending fund balance at 6-30-98 was $5,285,399, $1,134,633 more than the projected number used for the 1998-99 budget preparation. Actual revenues for 1997-98 were approximately $1.1 mil greater than originally estimated. Significant increases were realized in Property Taxes, $290,000; Sales Tax, $563,000; East Tustin Building Fees, $435,000; Mot~)r Vehicle in-Lieu Fees, $200,000; and various other accounts of $553,000. These increased revenues were offset by an increase in actual operating expenditures of $616,000. The net result of these changes was an increase in the General Fund balance at 6-30-98 of $1.1 million. · 1998-99 Revenues Projected General Fund Revenues for the year are. $31,034,000.' This is $205,000 less than the budget estimate. Property Tax income is projected to be $249,000 over the original estimate and Sales Tax income is projected to come in at $171,000 above our original estimate. There are less significant adjustments in other revenue 'sources that we are projecting to come in below budget. Projected General Fund Revenues are within 0.7% of the original budget. The City Council has discussed the impact that Sales Tax income has on total General Fund Revenues when they reviewed the Aodit Committee's report on the City's Reserve Policy. Projected 1998-99 Sales Tax revenues are fifty two percent of total projected General Fund Revenues. The 1997-98 Actual Sales Tax Revenues were fifty three percent of total General Fund Revenues. 1998-99 Expenditures Projected General Fund Expenditures are $31,553,0001 $1,532,000 below the amended budget of $33,085,000. This projection is within 4.6 percent of the budget and very consistent with prior years' expenditures. We have been within three to five percent of budgeted expenditures over the last 5-10 years. The budgets and projections contained in this report reflect the City Manager's recommendations made at the beginning of the report. Salary and benefit savings from every department make up the majority.of the projected savings. Vacant positions existed for various periods during the year in Finance, Planning, Public Works, Police, and Parks and Recreation Services. The Police Department has had several disability retirements this year as well as regular retirements. There have been several disabilities during the year as well as turnover in support staff. In total the Police Department is projecting $1 million in salary and benefit savings for the year. This is only a temporary situation and is not expected to continue into the next year. The projections presented in this report have not been adjusted to reflect results of the current negotiations with the City's various bargaining units. -2- Capital Proiects Fund The Combined Fund BalanCe for the Capital Projects Fund at year end is projected to be $9,235,000.. Construction in Progress is $2.6 mil and Reserved but Undesignated is $6.6 mil. The City Manager's recommendation to transfer an additional $1.8 million to this fund accounts for the dramatic increase. in fund balance. The Undesignated Reserve is meant to address the capital improvement needs as detailed in the Seven Year Plan. Alternative funding resources are anticipated to be Secured to meet the extended plan but the City is expecting to have to provide a significant level of matching funds. We are also expected to meet current Maintenance of Effort requirements for our Measure "M" allocations from this fund. Community, Development Block Grants The revenue detail shows projected CDBG revenues of $1,408,000, only $13,000 below the 1998-99 budget figure of $1.42 mil. The receipt of these funds is based on reimbursement. The variance is. merely timing as opposed to a loss of funds. Balances in the 1998-99~ allocation are carried over in future years. Measure "M" Funds Measure "M" Funds include both the annual'Tumback Revenues and Competitive Funds. The significant Measure "M" projects continued during the current fiscal year include the new Commuter Rail Station and the grade separation at Jamboree and Edinger. The .significant revenue variance shown on page 5 for Measure "M" Competitive Funds relates to the Commuter Rail Project. Once we begin construction of this project we will be receiving significant Measure "M" revenues from various participating agencies. The Jamboree/Edinger Project is nearing completion as this report is written and the City will receive its $5.5 million proportionate share of the .costs from an OCTA Smart Streets Grant. Park Development Fund The major activity in the Park Development Fund for this year was the Heritage Way Park Project. The park was completed late 1998. The City Manager has recommended an additional $500,000 .be transferred to the Park Development Fund for futUre parks development. The City Council is scheduled to hold a workshop prior its March 1, i999 meeting to consider the Seven Year Plan for park' improvement projects. Water Enterprise The Water Enterprise Operating Fund balance is within the City Council's policy of six months reserves. Water Capital Improvements have focused on ,improvements to the distribution system with several projects currently underway at the Main Street site. The projected reserves of $10 million will provide sufficient resources to the Enterprise Fund to complete several projects in the Capital Improvement Plan without requiring the issuance of new bonds at this time. This will have a positive effect on future Water Rates. Total water improvements projected for 1998-99 are $2.8 mil. Construction in progress and new projects for 1999-2000 are presently estimated to be $4.9 mil. -3- Risk Mana~lement Funds The Risk Management Fund as represented in this report is a summary of the Liability, Worker's Compensation and Unemployment Funds. The City is. self insured for the first $250,000 of each Liability claim (this is referred to as a self insured retention) and the first $275,000 of each Worker's Cbmpensation claim. The City is fully self insured for all Unemployment claims. While the Worker's Compensation and Unemployment Funds have generally carried adequate reserves, the City's Liability Fund has required additional transfers over the past years to maintain sufficient reserves. Our claims activity has required an amount of claims management and legal review which has been in excess of our transfers. We transferred significant funds last year and are transferring an additional $500,000 from the General Fund this year to bring our reserves to appropriate levels. The City is a member of the Orange County Cities Risk Management Authority, a risk sharing pool made up of thirteen Orange County' Cities. The Authority has established a minimum Liability Reserve Policy of three times each City's self insured retention ($750,000 for Tustin). This policy was established based on actuarial analysis, underwriter input and fiscal modeling. Conclusion The overall financial condition of the City is healthy. Reserve Policies for the General and 'Water Enterprise Funds. are being met and we are transferring excess reserves to Capital Improvement Funds. There are several long term Capital Improvement issues that will need to be addressed in future budgets. The Seven Year Capital Improvement Plan for the City totals $112 million. Alternative financing sources will need to be secured if we hope to complete all projects listed. The City must also be cognizant of our annual Measure "M" Maintenance of Effort requirement of $1.2 million. These and other issues must be kept in mind as we prepare future budgets and prioritize the City's goals and objectives. We also need to be mindful of potential actions by the State that could have a negative impact on the City's financial condition in the future.. -' · Ron/~r~~C~~.~~ald~. Nault ~-' Finance Director RAN:ts Attachment B U DG&CAFR:MidYearReview1999.Agenda.doc -4- - 1.1.1 I I I I I I o o .~ 'un o ,, 0 o 0 0 0 I o o o. rtl rtl im-- rtl m