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HomeMy WebLinkAbout26-Finance CITY OF SAN BERNARDINO - REQUEST FOR COUNCLtiMMN AL From: Barbara Pachon, Finance Subject: Motion authorizing the Director Director of Finance to amend the FY 2009-2010 Budget to reflect lowered Dept: Finance revenues and to implement all budget balancing strategies as outlined in Council Date: December 21, 2009 staff report. Synopsis of Previous Council Action: August 17, 2009 Resolution 2009-305 adopted approving the City of San Bernardino's final budget for Fiscal Year 2009-2010 November 18th, 2009 Presented FY 2009-2010 1st Quarter Report, Preliminary FY 2008-2009 Year- End Report and FY 2008-2009 to FY 2009-2010 Budget Carryovers to Ways & Means Committee. December 9th, 2009 Ways & Means Committee recommended for approval all Budget Balancing items as presented with the exception of$61,300 reduction in Council carryovers and $11,100 reduction in Parks & Recreation carryovers. Recommended motion (s): WaVs & Means Committee Recommendation —Authorize the Director of Finance to amend the FY 2009- 2010 Budget as outlined in the staff report to reflect the lowered revenue projections and to implement all the proposed budget balancing strategies with the exception of a $61,300 reduction in Council Office carryovers and a $11,100 reduction in Parks & Recreation carryovers (combined total of$72,400); AND Staff Recommendation — Authorize the Director of Finance to take $27,700 from the General Fund Budget Reserve to cover the remaining shortfall. OR Staff Recommendation - Authorize the Director of Finance to amend the FY 2009-2010 Budget as outlined in the staff report to reflect the lowered revenue projections and to implement all of the proposed budget balancing strategies recommended by staff. Sign ture Contact person: Barbara Pachon, Director of Finance Phone: 5242 Supporting data attached: Staff Report Ward: All FUNDING REQUIREMENTS: Amount: See attached staff report Source: Finance: Council Notes: , 6 Agenda Item No. C ( 42 -c;Z/-Oy CITY OF SAN BERNARDINO -REQUEST FOR COUNCIL ACTION STAFF REPORT INTRODUCTION At the November 18th meeting of the Ways and Means Committee the Finance Director reported to the Committee that the Finance Department was projecting a net budget shortfall for the current fiscal year (FY 2009-2010) of $2,784,600. This shortfall (details outlined on Attachment "A") was caused primarily by major projected decreases in sales tax, "property tax in lieu of sales tax" and property tax revenues. In November the State Board of Equalization (BOE) notified the City that it had overpaid sales tax in-lieu of property tax to the City in the prior fiscal year by approximately $1.2 million. Based on this, the State was also decreasing its estimated sales tax in-lieu payment to the City this fiscal year by approximately $1.1 million. (Most cities received this news from the BOE). The remaining $484,600 decrease in sales tax revenue projections is the result of the general decline of sales in the City due to the poor economic conditions that are also being felt throughout the state and country. Additionally, the County Assessor is projecting a decrease in property tax values of approximately 17% (the City had already estimated a 6% decline, so property tax estimates have been lowered by another 11% in accordance with the Assessor's estimates). These reductions, combined with approximately $1 million in salary savings and a net increase in other revenues of $200,000 resulted in a projected shortfall of $2,784,600. In response to this updated information, at the November 18th Ways & Means Committee meeting, staff requested additional time to verify information regarding sales tax and to continue reviewing business license and TLT (Transient Lodging Tax) revenue. Staff also presented 7 budget strategies (see Attachment "A") and requested to bring back to the Ways & Means Committee on December 9th updated projections along with recommendations that were in line with the budget strategies. Accordingly, staff continued evaluating revenues and reviewing proposed budget balancing strategies. After the November 18th meeting, the City Clerk's Office was able to complete their analysis of Business Registration and TLT revenues. This review, unfortunately, added another $1.1 million to the deficit. Similar to sales tax, business registration and TLT revenue are also tied to the economy and because of the overall poor economy, these revenues are down. Additionally, during the review of all General Fund revenue sources, and after meeting with EDA staff, the Finance Department identified a $350,000 reduction in funds to be received from the Economic Development Agency (EDA). The General Fund budget assumptions included the transfer of revenues generated by the Shandin Hills Golf Course; however, the appropriation to the City's General Fund was not included in EDA's budget for FY 2009-2010. To avoid this situation in future budgets, Finance will only include those revenues in the City's budget from EDA that have been agreed to in writing between EDA and the City. 1 Further complicating matters was the receipt of another notification from the BOE advising the City that regular sales tax advance payments were reduced further due to the continued decline of the economy. Finance estimates the impact of the BOE action to result in an additional $675,000 loss of revenue. The combined result of all these elements is a revision to the General Fund projected deficit to $4,909,600. The Finance Department is currently in the process of its annual comprehensive mid- year review. However, because the current known decrease in revenues is so dramatic, the City Manager took action immediately to address this shortfall. At the December 9t" Ways & Means Committee meeting, staff updated the committee on the City's deficit and also presented a number of budget balancing recommendations based on previous strategies discussed with the Committee. Outlined below, based on direction from the Ways and Means Committee, are the budget balancing measures that are recommended for approval by the Mayor and Council. (A summary of the updated deficit and proposed budget reduction strategies is also included on "Attachment B." All of the items below were recommended for approval by the Ways and Means Committee except for those noted in item number 6.) PROPOSED BUDGET STRATEGIES (Items are categorized under the various strategies discussed by the Ways & Means Committee) 1.) Review of revenues — Total $513,300 $250,000 — Increased EMS collections. Recently the Mayor and Council approved a contract with a new billing company to invoice for City EMS fees. The increase in revenues resulting from this contract has been immediate. Insurance companies are billed in a timelier manner which expedites payment to the City. • $150,000 — Additional reimbursement for State mandated costs (per SB 90). Every year the City submits claims to the State that qualify for reimbursement. Because of the State's continual budget issues, reimbursement has been inconsistent over the last few years. However, the State recently paid the City for a number of old claims, so it is now projected that estimated SB 90 revenue will be approximately $150,000 higher than budgeted. • $23,300 - Arbitrage Rebate Savings. The City is required to perform this calculation every year (estimated payment is set aside in a liability account). Finance staff, with the help of a consultant, completed the arbitrage calculation for the prior year and the amount due from the City was $23,300 less than the amount set aside, resulting in additional revenue to the General Fund. • $90,000 - Additional administrative fee revenue to City from Water Department. Based on updated projections from the Water Department it appears that this revenue will be approximately $90,000 higher than expected. 2 2.) Continue with audits of various revenue sources — Total $221,500 $100,000 — Use available balance from booking fee trust. Based on the Police Department's analysis it appears that funding in the booking fee trust (after transferring out this $100,000) will still cover two years worth of booking fees at the current rate. • $121,500 — Use available balance from Development Services Bond/Deposit Trust. Periodically Development Services reviews outstanding balances in this trust to see if all funds still need to be held for depositors or if circumstances allow some of the forfeited deposits to revert to the General Fund. The most recent review of this account determined that $121,000 could be transferred. 3.) Ensure direct costs are allocated to appropriate funding source — Total $1,367,900. • $550,000 — Charge the IWM (Integrated Waste Management) and Sewer Funds for impacts to City streets from refuse and sewer heavy duty trucks. The Sewer fund is currently not paying the General Fund for the impact to City streets caused by Sewer's heavy duty trucks. IWM currently pays a minimal cost of $50,000 annually. There are currently 10 sewer trucks and each weigh about 60,000 lbs. The trucks are driven throughout the City Monday through Friday and for emergencies on weekends. IWM currently has 82 heavy duty trucks, each also weighing about 60,000 lbs. These trucks are also driven Monday through Saturday. In staff's estimation, the impact of 92 heavy duty trucks constantly on the City's roads is related to at least $550,000 in repair costs. • $100,000 - Charge the IWM (Integrated Waste Management) and Sewer Funds for tree trimming costs related to clearing right of way for IWM and Sewer trucks. With 92 high profile trucks on the road between Sewer and IWM, Public Services is often called to trim trees that are impeding the right of way for these vehicles. Currently neither Sewer nor IWM reimburses the General Fund for these costs. • $109,700 — Move directly related staff time to IWM. Staff has reviewed all personnel that directly works on IWM issues and recommends that $109,700 of these costs be charged directly to the IWM fund. Staff charges are from Public Services Administration, Finance, and the City Manager's Office. • $115,100 — Move eligible PD costs to increased COPS grant allocation. At the time the FY 2009-2010 Budget was prepared, it was estimated that the City would receive approximately $200,000 in COPS grant funds. This $200,000 was budgeted to offset the $498,141 costs of 4 existing Police Officer positions (as in prior years). However, the final award was approximately $115,100 higher than budgeted. So this additional funding will offset a greater portion of these 4 positions, thereby saving the General Fund $115,100. 3 k f • $58,400 — Move directly related hazmat staff to Sewer Fund. The Public Services Department has determined that the position of Hazmat Technician is directly related to the Sewer Fund and should be charged there rather than the General Fund. • $244,700 — Charge IWM for related graffiti program costs. Now that Public Services handles graffiti removal in-house, often times staff addresses other issues that they find in the field while dealing with graffiti removal, such as illegal dumping, and pick up of debris. A portion of the graffiti crews' time and materials is linked to these types of IWM functions. • $30,000 — Reduce charge to General Fund for street sweeping. Costs overall related to street sweeping have decreased; therefore the General Fund portion of costs should be reduced. After evaluating costs and functions related to street sweeping staff estimates that the General Fund's share of cost should be reduced by $30,000. $160,000 — Similar to adjustments that were made in FY 2008-09 to accommodate reductions to personnel, Fleet charges again need to be adjusted to accurately reflect the General Fund and IWM's shares. Because the City has made so many reductions in staff, Fleet's chargebacks were re-evaluated to reflect less costs from the General Fund and higher costs to the IWM, which had no personnel reductions. 4.) Evaluate all General Fund program expenditures for savings — Total $405,400. • $170,400 — Keep two recently added Animal Control positions vacant until July 1, 2010; defer $50,000 in improvements until next FY. Earlier in the year Animal Control extended their contracts to provide animal shelter services to the Cities of Fontana, Colton and Grand Terrace. The extension of these contracts added additional staffing and approximately $50,000 for shelter improvements. Staff is proposing the deferral of the $50,000 in improvements this FY. In FY 2009-2010, with a full year of increased contract revenue, Animal Control will have $150,000 for shelter improvements. $200,000 — Increase estimated expenditure savings by $200,000 (vacancy factor). Because so many positions were deleted in the FY 2009-2010 budget, the vacancy factor was kept at a relatively low level of $900,000. Although Finance is still in the process of evaluating departmental budgets as part of our mid-year analysis, a preliminary review of expenditures indicates that there will be at least $200,000 more in expenditure savings than budgeted. • $35,000 — Lower Print Shop costs. Based on a preliminary review of the Print Shop, it appears that costs will be approximately $35,000 lower than expected. This results in savings to the General Fund in the form reduced printing chargebacks. 4 5.) Review and evaluate use of available fund balances — Total $215,000. • $115,000 — Built into the chargebacks to the Telephone Fund is an amount toward repair and replacement of equipment in the future. The Telephone Fund has accumulated a balance of $115,000 that can be used to lower telephone chargebacks to the General Fund. • $100,000 — Through expenditure savings over the last few years the IT fund has accumulated a balance of $100,000 that can be used to offset IT chargebacks to the General Fund. 6.) Evaluate departmental requests for FY 2009 to FY 2010 budget carryovers — Total $580,200. • Staff has reviewed the carryover list and has recommended that the items listed in Attachment "C" be deleted from the carryover list. At the December 9t" Ways and Means Committee Meeting the Committee recommended for approval all of these recommendations with the exception of $61,300 in carryover travel funds and $11,100 in Parks and Recreation requests. The Committee's recommendation was to let the full Council discuss the Council carryovers. The Committee remarked that Parks and Recreation had already suffered deep cuts and did not want to cut another $11,100 if not absolutely necessary. 7.) Evaluate current General Fund pro-grams for funding opportunities from other sources. - Total$1,651,000. • $600,000 — Fund eligible CIP projects with EDA reimbursement and transfer resulting savings to General Fund to offset street lighting costs. City staff has worked closely with EDA staff over the last month to address the City's budget issues. EDA has identified $600,000 in Tax Increment funds that could cover select CIP projects in RDA project areas. Attached is Development Services suggested list of projects to fund with EDA funds (Attachment "D"). • $90,000 — Defer proposed parking meter project. Included in the FY 2009-2010 Air Quality Fund budget was $90,000 for estimated costs related to implementing a downtown parking meter program. After evaluating this proposed project in the overall context of city parking issues, staff feels these funds should be used now for alternative fuel costs (which will result in a savings to the General Fund) and parking issues/revenues overall should be reviewed as part of a larger parking plan. • $500,000 — City and EDA staff have discussed the possibility of selling City owned land, specifically the land on Third Street that the federal armory currently resides on. Staff will continue to work out the details but a preliminary review estimates the net income to the City could be approximately $500,000. In the 5 long-term EDA will eventually sell the land to a developer and the property will be put back on the tax rolls and generate property tax revenue. $216,000 — The Police Department has identified General Fund costs that could be funded on a one-time only basis by Asset Forfeiture this fiscal year. Most of the costs are related primarily to mandatory training. Costs related to motorcycle builds will also be transferred to Asset Forfeiture this fiscal year. $245,000 — In 2005 a lump sum of CDBG funds was allocated to Code Compliance for demolition costs. The intent was to fund demolitions for two to three years only, but currently there is still a balance of $425,000 in these 2005 CDBG demolition funds. Based on prior history it is estimated that Code will need approximately $180,000 for demolitions for the remainder of the fiscal year. Because these funds have been carried over since 2005, it would be preferable to spend them now on an eligible program and then allocate funds for Code demolitions in FY 2010-2011. EDA is proposing using the remaining $245,000 of 2005 CDBG demolition funds to offset the City's graffiti removal program costs this fiscal year. EDA would then recommend allocation of CDBG funds in FY 2010-2011 for Code demolitions. Staff is also recommending a one-time transfer of $50,000 from the Cultural Development Fund to the Library Fund. Because of the major cuts the Library has endured, our library, like many libraries throughout the state, did not meet the maintenance of effort (MOE) requirement to receive State Library Funds this fiscal year ($50,000 had been budgeted as expected State Library revenue). Next fiscal year the maintenance of effort requirement will be much lower. Finance staff, after discussing with the State Library, does not anticipate problems meeting the MOE in FY 2010-2011. FINANCIAL IMPACT As discussed above, the City is facing a projected General Fund budget shortfall of approximately $4,909,600. If all of the above budget-balancing recommendations are approved, there will be a surplus balance of $44,700. If the $72,400 in items not recommended for approval by the Ways and Means Committee are not approved by the Council (see item #6 for details), then there will be a General Fund shortfall of $27,700. Staff's recommendation is for Council to approve all items as recommended, including the $72,400 in reductions not recommended for approval by the Ways & Means Committee. The Finance Department is continuing to work with departments to complete our comprehensive mid-year review and plan to bring this back to the Mayor and Council in February. A budget workshop will be scheduled with the Council to review not only the Mid-Year Report but to also begin discussions regarding the FY 2010-2011 budget. 6 RECOMMENDATION Ways & Means Committee Recommendation — Authorize the Director of Finance to amend the FY 2009-2010 Budget as outlined in the staff report to reflect the lowered revenue projections and to implement all the proposed budget balancing strategies recommended by staff with the exception of a $61,300 reduction in Council Office carryovers and a $11,100 reduction in Parks & Recreation carryovers (combined total of $72,400); AND Staff Recommendation — Authorize the Director of Finance to take $27,700 from the General Fund Budget Reserve to cover the remaining budget shortfall. OR Staff Recommendation - Authorize the Director of Finance to amend the FY 2009-2010 Budget as outlined in the staff report to reflect the lowered revenue projections and to implement all of the proposed budget balancing strategies recommended by staff. 7 I I i Attachment "A" j CITY OF SAN BERNARDINO FISCAL YEAR 2009-2010 GENERALFUND `'Necessary Budget Adjustments Amount Propert Tax Budget Adjustments: Current Secured/Unsecured (950,000) Prior Taxes 200,000 Supplemental 100,000 Prop Tax In Lieu of VLF (1,070,300) Total Net Property Tax Adjustment (1,720,300) Sales Tax/Prop Tax In Lieu of Sales Tax (2,264,300) Business Registration/TOT (400,000) Various Revenue Increases 600,000 Salary Savings 1,000,000 Net FY 2009-2010 Budget Shortfall Is (2,784,600) Budget Balance Strategies Currently Under Review: 1. Review all current revenue estimates for additional collections 2. Initiate audits/reviews of various revenue sources like TOT, Business Registration, Utility Companies, etc. 3. Ensure all direct cost are allocated to appropriate funding sources like Refuse Gas Tax, Internal Service Funds, etc. 4. Evaluate all General Fund programs for savings including savings to Animal Control from newly approved contracts, etc. 5. Review and evaluate using available fund balances and reserves 6. Evaluate carryover requests for possible reductions and savings 7. Evaluate current General Fund programs for funding opportunities from other possible sources Attachment "B" CITY OF SAN BERNARDINO FISCAL YEAR 2009-2010 GENERAL FUND WAYS & MEANS COMMITTEE 12/9/09 SUMMARY OF FY 2009-2010 BUDGET SHORTFALL? Property Tax Changes:: Current Secured (950,000) Prior Taxes 200,000 Supplemental 100,000 Prop Tax In Lieu of VLF (1,070,300) Total Net Change Property Tax (1,720,300) Sales Tax/Prop Tax In Lieu of Sales Tax (2,264,300) Business Registration/TOT (400,000) Fines/Penalties /Various Revenues 600,000 Salary Savings 1,000,000 Net FY 09-10 Projected Shortfall 11/18/09 (2,784,600) Additional Changes to Projected Shortfall: Additional Sales Tax projected loss (revised notice from BOE) (675,000) Additional Business Registration loss (analysis complete by Clerk's Office) (1,100,000) Reduction in EDA reimbursement revenue 350,000 Net FY 09-10 Additional Changes to Projected Shortfall (2,125,000) Revised FY 09-10 Projected Budget Shortfall (4,909,600) PROPOSED BUDGET STRATEGIES (From 11/18/09 Ways & Means) 1 IReview all revenue accounts for additional collections EMS Billing Revenue-increased collections 250,000 Additional State Mandated Cost Reimb. 150,000 Arbitrage Rebate Savings 23,300 Additional revenue from Water Dept. admin fees to City 90,000 Total 513,300 2 linitiate audits/reviews of various revenue sources Use available balance from Booking Fee Trust 100,000 Use available balance from Dev. Svcs. Bond/Deposit Trust 121,500 Total 221,500 3 JEnsure direct costs are allocated to appropriate funding source Charge IWM & Sewer for impact to city streets from trucks 550,000 Charge IWM & Sewer for tree clearance for trucks 100,000 Move directly related staff time to IWM Fund 109,700 Move eligible PD costs to increased COPS grant allocation 115,100 Move directly related hazmat staff time to Sewer 58,400 Shift IWM related fleet charges to IWM based on usage 160,000 Charge IWM for related graffiti program costs 244,700 Lower GF transfer to IWM for street sweeping costs 30,000 Total 1,367,900 CITY OF SAN BERNARDINO FISCAL YEAR 2009-2010 GENERAL FUND WAYS & MEANS COMMITTEE 12/9/09 Attachment B 4 JEvaluate all General Fund Programs for savings Keep two recently added postions vacant (added with approval of new contracts to provide shelter services)/defer partial shelter maintenance. 170,400 Additional expenditure savings-primarily vacant positions 200,000 Savings in Print Shop based on estimated lower operating costs 35,000 Total 405,400 5 IReview and evaluate use of available fund balances From Telephone Fund-use available balance to pay phone charges 115,000 From IT Fund- use available balance 100,000 Total 215,000 6 JEvaluate requests for FY 09 to FY 10 budget carryovers Reduce carryovers 580,200 Total 580,200 7 JEvaluate current General Fund Programs for funding opportunities from other sources Fund eligible CIP projects with EDA reimbursement and transfer resulting Gas Tax savings to GF to offset street lighting costs. 600,000 Defer parking meter project in Air Quality Fund. Use savings for alternative fuel costs 90,000 Sale of City Property to EDA 500,000 Move eligible Police costs to Asset Forfeiture Fund 216,000 Re-budget 2005 CDBG funds and use for Graffiti Program 245,000 Total 1,651,000 Estimated FY 09/10 Budget (Deficit)/Excess with proposed strategies:1 $ 44,700 CITY OF SAN BERNARDINO FISCAL YEAR 2009-2010 GENERAL FUND WAYS & MEANS COMMITTEE 12/9/09 Attachment B CITY OF SAN BERNARDINO FISCAL YEAR 2009-2010 LIBRARY FUND FY 2009-2010 Budget Shortfall: Revenues: State Library Funding 50,000 Suggested Solution: Additional one-time funding from Cultural Dev. 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