HomeMy WebLinkAboutMid-Year Budget RH D
_G Staff Report
# ; City of San Bernardino
`o. Request for Council Action
ED IN�0
Date: February 21, 2017
To: Honorable Mayor and City Council Members
From: Mark Scott, City Manager A,5
By: Brent A. Mason, Director of Finance
Subject: Mid-Year Budget Analysis for Fiscal Year 2016117
and Budget Amendment
Recommendation
Review the Fiscal Year 2016/17 Mid-Year Budget analysis and adopt a Resolution
amending the Adopted Budget by making an adjustment of $450,000 for the
expenditures related to administering the properties formerly owned by the Economic
Development Agency.
Background
The City Council approved the Fiscal Year 2016/17 City of San Bernardino Operating
Budget on June 27, 2016. As adopted, the General Fund budget included a modest
surplus of $245,534. The budget has been amended by the Mayor and City Council for
supplemental items affecting the Police, Community Development, Public Works and
Parks & Recreation departments for a combined total of $351,950 leaving the approved
budget, as amended, in a small deficit position of $106,416. This small amount would
draw against an ending available reserve balance of $17 million (unaudited).
Finance staff monitors revenues and expenditures throughout the year, and annually
make a mid-year report to the Mayor and City Council regarding the current status of
that year's adopted budget. Revenue and expenditure data available through
December 31, 2016, are evaluated to prepare the mid-year forecast, as well as any
additional information that becomes available in January 2017. Staff also reviews the
City's other various special funds for any budgetary anomalies that merit action by the
Mayor and City Council on a mid-year basis.
Discussion
Fiscal Year 2016117 Revenue Update
The Adopted Fiscal Year 2016/17 General Fund Budget forecasted revenues totaling
$112.7 million. For the reasons outlined below, the current forecast is approximately
$3.1 million higher than budgeted at a level of $115.9 million, a positive variance of 2%.
The overall increase of approximately $3.1 million in General Fund revenues can be
primarily attributed to the following variances:
• Property Taxes — higher by $1.6 million largely due to the uncertainty of the
actual cash flows associated with the Fire Department annexation into the
County Fire District. The formula associated with the movement of dollars to
fund the annexation of the fire function is a very complicated item, with less
certainty about the related cash flows, a more conservative budget was adopted.
• Sales Taxes — higher by $0.8 million representing a 2% variance from the
budgeted Sales Tax projection, growth projected to be slightly better than
originally forecasted and is consistent with the projection of the sales tax
consultant which helps manage the sales tax revenues.
• Charges for Services — higher by $0.9 million primarily relate to collection of
multiple years' receipts from the State of California for state mandated
reimbursement costs in the amount of approximately $1 .0 million.
• All Other Revenues — net to a minor negative budget variance of $0.2 million.
UPDATE BUDGET FOR FISCAL YEAR 2016/17
Budget, Projected
Description of Revenue as Amended 6/30/2017 Variance
Property Taxes 11,270,000 12,900,000 1,630,000
Sales Taxes 33,335,000 34,100,000 765,000
Utility Users' Taxes 24,900,000 24,750,000 (150,000)
Business Licenses 7,600,000 7,600,000
Measure Z Sales Taxes 8,000,000 8,000,000 -
Charges for Services 3,598,322 4,450,000 851,678
Water Fund Payment 3,266,000 3,266,000 -
Licenses and Permits 2,010,980 2,200,000 189,020
Franchise Fees 8,215,000 8,300,000 85,000
Transient Occupancy Taxes 4,100,000 4,200,000 100,000
Transfers In 700,000 700,000 -
Other Governmental Revenues 900,000 500,000 (400,000)
Other Taxes 2,025,000 2,100,000 75,000
Fines and Forfeitures 1,527,900 1,350,000 (177,900)
Miscellaneous Revenues 547,300 575,000 27,700
Rental/Investment Income 765,000 900,000 135,000
Total Revenues $ 112,760,502 $ 115,891,000 $ 3,130,498
Overall, General Fund revenues have performed well in recent years. With removal of
the Fire function and the related property tax revenues that are being forfeited in that
transaction, the City is at a point of recalibrating its baseline General Fund revenues
and year-over-year comparisons are much less meaningful at this point. Going forward,
with Fiscal Year 16/17 as the new baseline, year-over-year comparisons will also be
provided.
Fiscal Year 2016117 Expenditure Update
The Adopted Fiscal Year 2016/17 General Fund Budget, together with minor
supplemental appropriations approved by the Mayor and City Council since adoption,
provide current spending authority for the General Fund in the amount of $112.8 million.
Current projected expenditures, as outlined below, are anticipated to be less than
budgeted by $3.8 million, or $109.0 million. Most of this savings is due to vacant
positions that have not yet been filled. Significant progress has been made this year in
filling vacant positions that provide important City services. This savings is anticipated
to continue to decrease until a more routine level of salary savings associated with
standard turnover rates is achieved.
The most material departmental savings is as expected, in the Police Department, with
a projected savings from adopted budget of nearly $3.3 million. Again, this is primarily
due to vacancy savings, but many positions have been filled this year and the current
level of staffing for sworn officers is 229 as compared to 207 at this time last year.
Additional items the Police Department is anticipating spending this fiscal year against
the savings they are generating is $210,000 for a street camera program and $150,000
for increased security costs. Each of these items will return to the Mayor and City
Council for individual approval, but the anticipated costs are currently included in the
projected budget.
The General Government Department accounts for expenditures that do not naturally fit
in a single other department. The anticipated savings is attributed to the start date for
the new debt service payment stream associated with the reduced pension bond
payments negotiated under the bankruptcy agreement. Payments do not begin until
Fiscal Year 2017/18. The first year payment was incorrectly included in the current
year's budget. This is partially offset however, by the bankruptcy administrative costs
anticipated to be $400,000 greater than originally budgeted primarily due to legal costs
being greater than anticipated. Additionally, during this year, staff has become aware of
an existing obligation associated with our shared ownership of the Santa Fe Train Depot
with San Bernardino County Transportation Commission. That obligation has not been
paid for the last two years and needs to be caught up to date to maintain the operation
and maintenance of the facility. Sufficient funds exist in the General Government
budget to absorb the roughly $200,000 of anticipated costs. Projections include this
amount to be spent in 2016/17.
The former Economic Development Agency assets, now owned and administered by
the City/General Fund, are incurring costs that were not budgeted for at the time of
budget adoption. These projected costs of $450,000 require a supplemental budget
adjustment, as the budget currently reflects no spending authority for these costs. A
portion of this cost is being recovered by related rental income. Both that revenue and
the costs to administer the properties are included in the 2016/17 projections.
Residual Fire Department operating costs of approximately $400,000 have been
incurred since July 151 of this fiscal year and are reflected below as an "over budget
condition." There was no budget anticipated for these costs when the 2016/17 budget
was prepared.
Other material budget variances are in the City Attorney's Office and the Finance
Department. The City Attorney has had a robust salary savings situation that will
generate budget savings for their office. This will not continue into the future as they
are filling current vacancies as quickly as possible. The Finance department has had
successful negotiations on audit contract fees as compared to previous years and is
experiencing savings in Professional Services.
UPDATE • -
Variance
Department Budget, Actual Projected Amended
as Amended Dec-16 June 2016 Budget
Mayor 699,312 336,726 690,920 8,392
Common Council 825,123 363,224 783,943 41,180
City Clerk 2,077,951 751,167 2,025,874 52,077
City Treasurer 268,286 129,519 273,913 (5,627)
City Attorney 3,320,992 1,329,712 3,060,217 260,775
City Manager 2,160,252 990,197 2,160,252 -
Finance 2,975,786 1,238,648 2,681,040 294,746
Human Resources 1,153,153 488,960 1,098.683 54,470
Civil Service 495,119 217,449 439,590 55,529
Community Development 5,051,672 2,430,347 5,049,892 1,780
Police 64,297,624 30,158,701 61,026,158 3,271,466
Fire (residual costs) - 406,781 406,781 (406,781)
Public Works 6,599,520 2,847,904 6,429,764 169,756
Parks, Recreatoin& Comm Svcs 7,662,985 3,234,057 7,662,985 -
Library 1,643,143 805,470 1,644,020 (877)
General Government 7,536,000 2,035,322 6,644,231 891,769
General Government- BK 5,000,000 2,890,616 5,400,000 (400,000)
Transfers Out 1,100,000 - 1,100,000
Former EDA - - 450,000 (450,000)
Total Expenditures $112,866,918 $ 50,654,800 $109,028,263 $ 3,838,655
Projected Fiscal Year 2016117 General Fund Available Reserve
Available Reserve, 7/1/16 (unaudited) $ 17,000,000
Projected Revenues 115,894,000
Projected Expenditures (109,028,263)
Projected Available Reserve, 6/30/17 $ 23,862,737
The General Fund Available Reserve reflects the amount of current resources within the
General Fund that are not committed to other purposes. Though generally equated with
"cash" because of the accounting procedures applied to the General Fund, a portion of
this balance is often tied up in short term receivables (typically 60 days or less) that
have not yet turned into cash. While this amount is considered "spendable," based on
the lack of commitments against it, the General Fund needs to have a healthy reserve
balance to address any unanticipated fiscal challenges faced by the City.
The unaudited available General Fund reserve is projected to be approximately $23.8
million at the end of this fiscal year. If achieved, that will represent a reserve balance in
excess of 20%. This is the magnitude of uncommitted reserves that the City's 20-year
plan anticipates at this point in time.
Non-General Funds Mid-Year Budget Status
Staff has reviewed all other funds (non-General Fund) for their mid-year budgetary
position. These are all the funds for which the related revenue stream is restricted to a
particular purpose. Most of these funds are capital project related such as Gas Tax,
Measure I, Sewer Line Maintenance Fund and the internal service funds — Worker's
Compensation, General Liability, and Information Technology). The mid-year budget
review of these funds indicates all are in a position where expenditures to date do not
present any threat of going over-budget by June 30, 2017
2017/18 Budget Process — Update
The development of the Fiscal Year 2017/18 Budget is well underway. Departments
have submitted their proposed departmental expenditures and formation of the revenue
projections is almost complete. Different from recent years, staff intends to return to the
Mayor and City Council on multiple occasions to review the proposed budget in
advance of a vote on its adoption. In the April/May timeframe we anticipate study
sessions to more thoroughly review departmental budgets. Staff will then have time to
make any adjustments that are required coming away from those sessions before the
final document is presented in June for final approval.
Fiscal Impact
As described above, the mid-year report requests one supplemental budgetary action
by the City Council, which is to establish a budget within the General Fund of $450,000
for the current expenditures associated with administering the properties formerly
owned by the Economic Development Agency, and now owned by the City/General
Fund.
Conclusion
Fiscal Year 2016/17 is anticipated to be a year of solid financial performance for the
City's General Fund. Revenues are projected to exceed budgeted amounts by $3.1
million while expenditures are planned to be less than the current amended budget by
$3.8 million for a projected addition to the General Fund's fund balance of nearly $7
million. Should the fiscal year conclude in this manner once staff closes the books for
this fiscal year, a report will be brought to the Mayor and City Council to discuss the final
results and present recommendations for the use of that balance as the City moves
forward with its exit from bankruptcy.
Attachments:
Attachment 1 - Resolution
Ward: Citywide
Synopsis of Previous Council Actions:
The Operating Budget for Fiscal Year 2016117 was approved by Cray Council on June 27, 2016