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HomeMy WebLinkAbout39-Finance o o o o j. e COUNCIL ACTION CORRESPONDENCE To Ray Schweitzer, City Administrator Subject Appropriated Reserve Amounts Warren Knudson, Finance Director Date September 23, 1986 Meeting Date Sent ember 22, 1986 Agenda Item No. New Business Action The City Administrator and Director of Finance were instructed to prepsre a renort for the Mayor and Common Council which will show the City's appropriated reserve amounts, potential income~ especially income that is not shown in the budget, potential liability that is not budgeted for, and all unused contingency funds. SC:pa cc: SHAUNA CLARK City Clerk ~r JIll ...L. . iii- _ . (CITY OF SAN BEIOJARDINOO- MEMORANDUQ To THE HONORABLE MAYOR AND COIt10N COUNCIL From WARREN A. KHUDSON Director Of Finance October 3, 1986 Subject Report On Appropriated Reserve Amounts Date Approved Date At the meeting of the Mayor and Common Council of September 22, 1986, the City Administrator and Director of Finance were instructed to prepare a report for the Mayor and Common Council which will show the City's appro- priated reserve amounts, potential income, especially income that is not shown in the budget, potential liability that is not budgeted for, and all unused contingency funds. Appropriated Reserve Amounts and Unused Contingency Funds: 1. The General Fund contains an Appropriated Reserve in the General Govern- ment section (001-092-53735) of $20,000. This to be used as designated by the Mayor and Common Council. 2. The Operating Contingency Fund started the fiscal year with a balance of approximately $1,300,000. During 1986-87 the following amounts have been transferred from the fund: Beginning Balance Renovate IRS Building Social Service Funding Charter 186 raises $1,300,000 (27,281) (15,000) oil,08o,344) 177 ,375 en C'\ :;g m (") 'T' o C'""J -, T1 .." 3. Other Funds: I Lv -""") The following funds have projected 1986-87 ending fund balances tha~ would be discretionary. During 1985-86 accumulated reserves in the~ funds were used to fund wage settlements. These fund balances depe~ upon actual 1986-87 expense experience and it is not recommended that they be designated fGr other uses at this time. Ending balances may also be needed for budget requirements in the next fiscal year. These funds have no other reserves and are being funded on a year-to- year basis from either the General Fund (Liability Insurance) or from changes to City departments (Workers Comp, and Unemployment). '-n -7:1 -,.- Liability Insurance Workers Compensation Unemployment Insurance $ 58,206 91,160 73,000 '$ 222,366 @ _ J2.1. is - - L _ c:> THE HONORABLE r~YOR AND CO~ COUNCIL MEMORANDUM OCTOBER 3, 19B6 PAGE - 2 o o An additional unobligated amount of approximately $90,765 is available in the Special Construction Projects Fund. These anticipated balances will be updated in the mid-year budget review. Potential Excess Income: Revenue Sharing: During 1985-86, $3,618,413 was received from this source. The 1986-87 Budget contains an estimate for one quarterly payment of $593,400. The quarterly payment received was $610,284, which is $16,884 over the estimate. We how have information to indicate that Revenue Sharing will not be renewed. Since early in the year we had been hopeful that Revenue Sharing in some form and in some amount would be approved to extend the program past September 30, 1986. Even though until last week we remained hopeful of a funding extension, the 1986/87 Budget does not include Revenue Sharing income past September 30, 1986. Any monies in addition to those budgeted ($593,400) would have been a windfall which could have been used to supplement existing programs, fund new programs, or add to our severely low reserves. Sales Tax: Second quarter sales tax revenues are up 5.8% from that periOd in the previous year. The sales tax estimate for 1986-87 is 8% over the 1985/86 figure. With only three months actual revenue available, it is difficult to make a more accurate estimate. Salary Savings: Salary savings are being accrued by positions being left vacant due to the continuing hiring freeze. Positions that are filled often have a delay in hiring which also adds to the savings. The Police Depart- ment has a "Vacancy Management" factor in their budget and therefore their salary savings is programmed into their budget. A monthly breakdown of salary savings information for the 1986-87 fiscal year is presented as follows: o 0 THE HONORABLE MAYOR AND CDMt10N COUNCIL MEMORANDUM OCTOBER 3, 1986 PAGE - 3 o o TOTAL TOTAL SALARY SAVINGS SALARY SAVINGS USED PURPOSE JULY $ 65,000 $ 65,000 Mall and Parking Garage AUG. 49,387 28,000 Building and Safety Inspector $114,287 ' $ 93,000 Potential Liabilities Not Budgeted For: Liability Insurance: The amount of $2,000,000 is budgeted for Liability claims for 1986-87. Approximately $800,000 of that amount is anticipated for normal claims and the balance would be used toward settling large claims that are being 1 i ti gated. Major claims against the City that are currently in litigation include: Potential Liability Case #1 Case #2 Case #3 Case #4 $100,000 to $500,000 $ 60,000 $200,000 $2,800,000 Specifics of these cases would be appropriately discussed in executive sess ion. Large settlements involving pay-outs during this fiscal year would necessitate borrowing money. Conclusion: Since the possibility of continued Revenue Sharing funds no longer exists, the City's reserve position is critically low. This situation is the combined result of increased costs in the areas of insurance, . o THE HONORABLE f-lAYOR AND cOMr9 COUNCIL MEMORANDUM OCTOBER 3, 1986 PAGE - 4 o o Workers Compensation, and wage and benefit settlements. Less than $300,000 outside of normal budgeted costs is available. Ideally a reserve amount of five percent or approximately $2.3 million should be available as a safeguard against Revenue shortfalls or natural disasters. Listed below is a summary of the potential activity of the, Liability, Workers Compensation, Special Construction, and Unemployment Funds: Estimated 1986/87 1986/87 1986/87 1986/87 Ending Fund Bal. FUND Beg. Fund Bal Budget Est. Potential Liability Using Budget Est. Liability Ins. $408,303 $3,344,809 $5,7l9,809.:!:. $58,206 Workers Compo $112,691 $1,122,918 $l,122,9l8.:!:. $91,160 Unemployment Ins. $ 73,000 $ 70,734 $ 70,734.:!:. $73,000 Special Const. Proj. $ 90,765 -0- $ -0- $90,765 IJ ....c::. J:, ( WARREN A. KNUDSON Director Of Finance WAK/vm