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Cit~f San Bernar~o
INT~FFICE MEMO~UM
9011-1708
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TO: SRAUNA EDWINS, CITY ADMINISTRATOR
FROM: ANDREW GREEN, DIRECTOR OF FINANCE
SUBJECT: CITY'S DEFICIT PROBLEM
DATE: NOVEMBER 20, 1990
COPIES:
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The City has addressed the immediate problem concerning the
charge for County Jail Bookings/Property Tax Administration
and the estimated under budgeted fuel costs. The City
however must address the problem of deficit fund balances and
lack of reserves. Prudent fiscal policy dictates that some
plan of" action be established to address these deficits and
lack of reserves.
The fund deficits have evolved over multiple years and will
require multiple years to eliminate. However a plan is
necessary now to prevent a continuance of this unsound fiscal
policy. These deficits represent cash overdrafts of that
particular fund's portion of the City's pooled cash. The
City's pooled cash consists of the cash of the city, Water
and Sewer. Although the cash pool is adequate for now to
cover these deficits, I believe it is unwise, given the state
of the economy to allow these deficits to remain unchecked.
As I have stated previously approximately $270,000 per year
is currently being applied to the Combined Health Insurance
FUnd to reduce the deficit. I recommend that some action
similar to this be put into effect to reduce the other fund
deficits and build adequate reserves. This can only be
accomplished, considering our current financial condition, by
one of the following:
1. Incr.... revenues Substantially with no or very minimal
incr.ases in expenditures.
2. Decrease expenditures substantially.
3. A combination of '1 and '2.
The following is a listing of funds which
in a deficit position at June 30, 1991.
049 Public Facilities Renovation FUnd
106 Cemetery Fund
107 Cable Television FUnd
120 Emergency FUnd
are estimated to be
$ <590,106>
<88,329>
<117,496>
<183,913>
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INTEROFFICE MEMORANDUM09011-1708
CITY'S DEFICIT PROBLEM
November 19, 1990
paqe 2
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124
*249
629
675
676
678
679
An~l Control Fund
certificates Of Participation Fund
Liability Fund
Combined Health Insurance Fund
Self-Insured Health Plan
Workers Compensation Fund
Data Processinq Fund
TOTAL
<355,733>
<808,772>
<374,515>
<1,749,007>
<476,293>
<1,202,478>
<22.977>
$<5.969.619>
*This fund consists of debt service payments for the Computer
Aided Dispatch (C.A.D.) system, the Tri-City Fire station and
the City's in-house Telephone system. This deficit is
attributable to the General Fund $196,048, the 961 Assessment
District Fund $366,830, the Telephone Support Fund $245,894.
The above mentioned $5.9 million of estimated deficit fund
balances are expected by the end of 1990/91 for all funds.
The $11.8 million fund balance deficit reported in the
1988/89 audited financial statement dealt only with internal
service funds. These internal service funds were:
629 Liability Fund
630 Telephone Support Fund
675 Combined Health Insurance Fund (John Hancock)
676 Self-Insured Health Fund (Blue Cross)
677 Unemployment Fund
678 Worker's Compensation Fund
679 Data Processinq Fund
Approximately $7.2 million of the 1988/89 reported deficit of
$11.8 million consisted of auditor recommended reserves which
should be available to pay future liability and worker's
compensation claims aqainst the City.
Inclusion of this best quess amount of $7.2 million was
required by the City'S auditors to comply with qenerally
accepted accountinq principles. The actual deficit that the
city faced at the end of the 1988/89 fiscal year in the
internal ..rvice funds was $4.6 million. Approximately $3.8
million of the $4.6 million deficit pertained to the Combined
Health In.urance (675), Self-Insured Health Insurance (676)
and Workers Compensation (678) funds. This $3.8 million
amount is estimated to be reduced to approximately $3.4
million by the end of 1990/91.
Attached is a listinq of the General Fund and other related
funds which are or have been in a deficit from 1983/84 to the
latest audited financial report which is 1988/89.
The larqe decrease in the General Fund in 1987/88 was t~e
result of the buildinq moratorium and the renovation of City
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INTEROFFICE MEMORANDUM090ll-l708
CITY'S DEFICIT PROBLEM
November 19, 1990
Page 3
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Hall. In 1988/89 revenue shortfalls caused the continual
deer.... in the General Fund.
Efforts
process
Health
require
have been made where possible through the budget
to address fund deficits in addition to the Self
Insurance Fund. significant impacts however will
major revenue increases or expenditure cuts.
In my opinion heavier emphasis should be placed on fund
d.ficit. and the lack of re.erves at the mid-y.ar budget
r.vi.w. At that time a more accurate as.essment of the
financial outlook of the City can be made.
RecolUlendations should then be pres.nted to the Mayor and
Council to actually adjust the initial budg.t appropriations
as necessitated by the review at mid-year.
The City's financial position
taken soon the city's position
worst condition, which would
from the external auditors.
/" u \ y'\
~ )d,..u
Andrew Green
Director Of Finance
is bleak and if action
could det.riorate into
result in an adv.rse
is not
an .ven
opinion
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GENERAL FUND AND RELATED FUNDS
WITH DEFICIT FUND 8ALANCES
FUND FUND DESCRIPTION 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89
..__.e..___.________________._...__________...____....._._.____.._.__.__________________._____________..._.__.________._______
001 .ENERAL FUND l,l24,510 2,630,662 2,845,846 1,515,725 (ll5,l02) (1,140,560)
i06 mETERY FUND ('4,280)
107 CA8LE TY FUND (101,509)
120 EmmCY FUND (37,135) (96,998)
124 ANIMAL CONTROL FUND :, 41, ~q7j (50,039) (49,324) (57,955) (253,584) (298,461)
130 PRD-8ASEBALL FUND (503,258) (68,138) (25,416)
246 INDIAN 8INGD SETTLEMENT FUND (158,796)
249 CERTIFICATES OF PARTICIPATION FUNO (334,807)
630 TELEPHONE SUPPORT FUND (214,911) (439,718)
675-676 COM8INED HEALTH AND
SELF-INSURED HEALTH FUNDS (l23,715) (37,928) (554,955) (1,315,283) (2,295,968) (2,719,421)
678 RORKERS COMPENSATION FUNO (1,079,944) (1,631,242) (1,105,894)
6" OATA PROCESSING FUND (81,496) (174,907) (351,476)
-.-.........--...-.----.-------------------------------------------.----------
TOTAL 959,758 2,505,560 2,241,567 (1,681,007) (4,974,112) ~,665,540)
..--...--.-----..--...............'...............-----........---.....--..---..------..-.-
----......---.--.-----------.---..--......-..-----.--------------------------.
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