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HomeMy WebLinkAbout10 1997-98 MIDYR BUDGET 2-17-98NO. 10 2-17-98 Inter-Com DATE' February 11, 1998 TO: FROM: SUBJECT: William &. Huston, City Manager Ronald A. Nault, Finance Director 1997-98 MIDYEAR BUDGET REVIEW RECOMMENDATION: 1. Transfer an additional $500,000 from the General Fund to the Liability Fund to fund the minimum acceptable reserves of $750,000 as required by the Orange County cities Risk Management Authority. Total 1997-98 transfer will be $1 mil. 2. Transfer $1.5 mil from the Unappropriated Reserves of the General Fund to the Capital Improvement Fund to accumulate reserves for the proposed Seven Year Capital Program. 3. Transfer $500,'000 from the Unappropriated Fund Balance of the General Fund to the Park Development Fund. 4. Appropriate $260,000 for the East Tustin Landscape Replacement Program. 5. Appropriate $200,000 from the Unappropriated Fund Balance of the Measure "M" Turnback Fund for preliminary work on the Edinger Widening Project, Red Hill to Jamboree Road. DISCUSSION: The attached Midyear Budget Review follows the format of the summary proposed 1997-98 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 1997-98 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 the review process. 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 6-30-97 was $1,075,000 more than the projected number used for the 1997-98 budget preparation. Actual revenues for 1996-97 were approximately $1.5 mil greater than originally estimated. Significant increases were realized in Sales Tax, $702,000; East Tustin Building Permits issued, $209,000; additional PERS Credits, $271,000; Motor Vehicle In-Lieu fees, $232,000; and accrued Federal Grants booked, $128,000. These increased revenues were offset by an increase in actual operating expenditures of $449,000. The net result of these changes was an increase in the General Fund balance at 6-30-97. The Fund Balance Projections that appear on page 1 have been adjusted to reflect audited balances as of 6-30-97 and the actions as recommended earlier in this report. The 6-30-98 Projected Fund Balance is 16.16% of projected expenses. Revenues Projected General Fund Revenues for the year are $28,745,000. This is $1,165,000 greater than the budget estimate. Sales Tax income is projected to be $1,180,000 over the original estimate. There are less significant adjustments in other sources including Property Taxes which are still lagging and'projected to come in $140,000 below budget. Overall General Fund Revenues are projected to be $1.2 million over the original budget. -2- The City Council recently discussed the impact that Sales Tax income has on total General Fund Revenues when they reviewed the Audit Committee's report on the city's Reserve Policy. Projected 1997-98 Sales Tax revenues are fifty three percent of total projected General Fund Revenues of $28,744,560. Expenditures General Fund Projected Expenditures are $29,653,000, $906,000 below the amended budget of $30,559,000. The projected expenditures are within three percent of the budget and very consistent with prior years expenditure projections. 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. capital Projects Fund The Combined Fund Balance for the Capital Projects Fund at year end is prOjected to be $5,577,000. Construction in Progress is $1.5 mil and Reserved but Undesignated is $3.6 mil. 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. COmmUnity Development Block Grants The revenue detail shows projected CDBG revenues of $908,000, $632,000 below the 1997-98 budget figure of $1.5 mil. The receipt of these funds is based on reimbursement. The variance is merely timing as opposed to a loss of funds. The 1997-98 allocation is carried over in future years. Measure "M" Funds Measure "M" Funds include both the annual Turnback Revenues and Competitive Funds. The significant Measure "M" projects undertaken 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 is due to our original expectation that we would receive $5.5 mil for the Jamboree/Edinger project all in this year. We will actually receive it over a period of two, perhaps three, years depending on the final construction schedule. -3- Park Development Fund The major activity in the Park Development Fund for this year evolves around the Cedar Grove and Heritage Way Park Projects. Both prOjects are scheduled for substantial completion prior to the end of the fiscal year. The revenue variance indicated on page 5 is an adjustment to reflect .a.change in the fund where Project Management will take place. We will be managing the Park Projects out of the Capital Projects Fund but will transfer expenses from the Park Development Fund after the final reconciliation. Water Enterprise The Water Enterprise Operating Fund is within one percent of budget. This is the second full year of operations for the new 17th Street Desalter Plant, but the first year that we will make a lease payment to the Orange County Water District for the plant construction loan. The projected 6-30-98 Operations Fund Balance is well within Council's current Reserve Policy. Water Capital Improvements have focused on improvements to the distribution system, $1.1 mil, and reserves, $.46 mil. Total Water Improvements projected for 1997-98 are $2.3 mil. Construction in Progress and New Projects for 1998-99 are presently estimated to be $3.4 mil. Risk Management Funds The Risk Management Funds 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; the first $275,000 of each Worker's Compensation claim; and we are 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 struggled over the past years to maintain adequate reserves. Our claims activity has taken a significant amount of claims management and legal review which has been in excess of our transfers. 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 analyis, underwriter input and fiscal modeling. The transfers reflected in this report will provide adequate reserves to the Liability Fund to attain the appropriate reserve level prescribed for the City of Tustin. -4- Conclusion The overall financial condition of the City is healthy. Reserve Policies for the General and Water Enterprise Funds are being m~t 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 mil. 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 mil. These and other issues must be kept in mind as we prepare future budgets and prioritize the City's goals and objectives. Ronald A. 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