Title
A. QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2016
B. RESOLUTION NO. 2016-239 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING VARIOUS AMENDMENTS TO THE FISCAL YEAR 2016/17 BUDGET TO ADJUST FOR VARIANCES AND APPROPRIATING FUNDS THEREFOR (4/5 VOTE REQUIRED)
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RECOMMENDED ACTION
Recommended Action
Council accept the report and adopt the resolution.
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SUMMARY
The Finance Department prepares quarterly financial reports for the General Fund that reflect budget to actual comparisons, projected revenues and expenditures, and highlight major variances that may require additional action or changes. The quarterly financial reports are in compliance with Section 504 (f) of the City Charter, which requires that quarterly financial reports be filed by the Director of Finance through the City Manager.
In preparing the quarterly financial projections, staff has identified various budget changes that are needed to better reflect actual revenues and expenditures or address changes in budgetary needs. For government entities, a budget creates a legal framework for spending during the fiscal year. After the budget is approved there are circumstances, which arise that could require adjustments to the approved budget. Council Policy 220-02 “Financial Reporting and Transfer Authority” was established in January of 1996 and allows for budget transfers to be completed. This report discusses budget adjustments that staff recommends in the General Fund as well as various other funds.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that filing of the quarterly financial status report is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the actions proposed are not subject to CEQA.
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
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BOARD/COMMISSION RECOMMENDATION
Not applicable
DISCUSSION
The Finance Department prepares quarterly financial reports for the General Fund that reflect budget to actual comparisons, projected revenues and expenditures, and highlight major variances that may require additional action or changes. The quarterly financial reports are in compliance with Section 504 (f) of the City Charter, which requires that quarterly financial reports be filed by the Director of Finance through the City Manager.
Attachment A - Quarterly Financial Report provides the financial outlook for the General Fund for the current fiscal year and includes summary information for revenues and expenditures.
The following chart summarizes the projections for the first quarter of fiscal year 2016/17 for the City’s General Fund. The amended budget column includes all Council approved changes to the fiscal year 2016/17 adopted budget that have taken place through the end of the first quarter ending September 30, 2016. The projected column lists the fiscal year 2016/17 projections for revenues and expenditures as of June 30, 2017. The following table reflects the unaudited General Fund reserves as of July 1, 2016 (beginning fund balance) as well as the projected General Fund reserves for June 30, 2017 (projected ending fund balance).
Notes:
1. The FY2016/17 City Council Adopted budget was balanced and did not project an increase in fund balance for the General Fund. The minor surplus reflected in the Amended Budget column is a result of a mid-year Council approved budget amendment.
2. The Amended Budget and projections reflected in this table do not include prior year appropriations for capital improvement projects and other encumbrances totaling $5.7 million that were carried forward into the fiscal year 2016/17 budget. These expenditure impacts are already reflected in the estimated fund balance as of July 1, 2016 and are therefore not included in the above table.
The City’s financial outlook is tentative through the end of the first quarter. Although revenues are projected to increase modestly from the amended budget level, expenditures are trending higher and are projected to exceed the budget as of first quarter review. Major factors affecting expenditures are the personnel services and supplies and services expenses within the Police and Fire Departments.
Based on a review of previous fiscal year actuals and an analysis of actuals through September 30, 2016, the City’s General Fund discretionary revenues are in large part projected to meet their budgeted levels. Departmental program revenues are currently projected to exceed the amended budget. Overall, General Fund revenues are projected at $1.5 million above the current amended budget. This increase is in large part due to the pending appropriation of $1.2 million for Fire Strike Team reimbursements. Other changes include the following: (a) a projected increase of $0.3 million for higher anticipated Police Reimbursements, (b) a projected shortfall of $0.1 million in High Intensity Drug Trafficking Area (HIDTA) reimbursements, and (c) a $0.1 million projected increase in negligent vehicle impound fees and parking citation revenue.
Although small variances exist within the departmental projections, it is anticipated that a majority of departments will mitigate these impacts within their current amended budget. Therefore, through the first quarter, the majority of departmental expenditures are projected to be within the budget, with the exception of the Police and Fire Departments that are currently projected to exceed their amended budgets. Personnel Services are currently projected to end the fiscal year at a deficit of $1.8 million. This is due to an estimated overage in hourly expenditures in the Police Department as well as anticipated overages in overtime expenses in both the Police and Fire departments. Departmental expenditures for Supplies and Services are projected to increase by $0.6 million over the amended budget, with the Police and Fire Departments each anticipating deficits of $0.3 million. All other expenditure categories are projected to be within the amended budget.
The projected deficit within the Fire Department will be mitigated by the appropriation of revenues received as a result of Fire Strike Team reimbursements. The Police Department is proactively working on ways to help alleviate the structural deficit by implementing innovative changes including restructuring workloads, contracting out services and identifying key opportunities to reduce the need for overtime. However, these changes are not anticipated to eliminate the deficit completely. The department will revise the estimate in the second quarter.
Staff will continue to monitor General Fund expenses and look for potential cost saving measures in order to remain within budget.
Development Services Fund Overview
During the fiscal year 2016/17 budget development process, staff worked towards realigning resources and staffing to the change in workload activities within the Development Services Department. Based on fiscal year 2015/16 actuals and trends through the first quarter, staff is projecting to end the fiscal year within the Development Services Fund budgeted levels. Staff will monitor the Development Services Fund, and will make adjustments should they be necessary.
Budget Amendments
Staff is recommending budget adjustments as summarized in the following tables.
General Fund Adjustments
|
General Fund Department |
Description |
Expense |
Revenue |
Net Cost |
|
Finance |
Transfer $40,000 from Personnel Services to Supplies and Services for unanticipated contractual services. |
$ - |
$ - |
$ - |
|
Non-Departmental |
Transfer from Capital Improvement Project expenditures to Transfers Out ($9,757) for reimbursement to Sweetwater Authority for costs related to project STL400. |
$ - |
$ - |
$ - |
|
|
Appropriate $334,579 to Capital category for the financing of a capital lease acquisition of one (1) HME Ahrens - Fox 34D Type III Brush Engine. This will be offset by revenues from the secured lease financing of the brush engine. |
$ 334,579 |
$334,579 |
$ - |
|
|
Appropriate $27,347 to the Transfers Out category for expenditures posted to STL399 ($26,777) and OP228 ($570). |
$27,347 |
$ - |
$27,347 |
|
Animal Care Facility |
Transfer $35,000 from Personnel Services to Supplies and Services due to delayed recruitment of the Veterinary position generating the need for additional contractual expenses. |
$ - |
$ - |
$ - |
|
Fire |
Accept $5,000 SDG&E grant for Community Emergency Response Team (CERT) Program and appropriate the equivalent amount to the Supplies and Services category. |
$5,000 |
$5,000 |
$ - |
|
|
Appropriate $933,208 to Personnel Services, $251,615 to Supplies and Services, and $112 to Capital for expenses related to fire strike team deployments. These costs are fully offset by reimbursement from the State of California Office of Emergency Services (CalOES). |
$1,184,935 |
$1,184,935 |
$ - |
|
|
Appropriate $4,625 to Supplies and Services for costs related to specialized training classes. This is offset by tuition revenues received as part of holding the classes. |
$4,625 |
$4,625 |
$ - |
|
Public Works |
Reduction in Supplies and Services category to offset appropriation for expenditures posted to STL399 ($26,777) and OP228 ($570). |
($27,347) |
$ - |
($27,347) |
|
Library |
Appropriate $5,900 to the Personnel Services category for the Veterans Connect grant. |
$5,900 |
$5,900 |
$ - |
|
|
Appropriate $950 to the Supplies and Services category for book purchases based on donations received from various sources. |
$950 |
$950 |
$ - |
|
Recreation |
Budget realignment: Reallocate a net $38,167 from various sources in Personnel Svcs., Supplies and Svcs., Utilities to Other Expenses ($23,000) and Capital ($15,167). Align $5,673 in revenues from Use of Money and Property and Charges for Services Category to Other Revenue category. |
$ - |
$ - |
$ - |
|
TOTAL GENERAL FUND |
$1,535,989 |
$1,535,989 |
$ - |
Other Funds Adjustments
|
Fund |
Description |
Expense |
Revenue |
Net Cost |
|
Gas Tax |
Transfer from Capital Improvement Project expenditures to Transfers Out ($5,837) for reimbursement to Sweetwater Authority for costs related to project STL400. |
$ - |
$ - |
$ - |
|
State Grants Fund |
Appropriate $18,000 to the Personnel Services category of the Literacy Program based on funding from the California Library Literacy Service Grant. |
$18,000 |
$18,000 |
$ - |
|
Advanced Life Support (ALS) Program |
Appropriate $130,000 to Personnel Services and $20,771 to Supplies and Services for expenses related to the Advanced Life Support (ALS) program. These appropriations will come from the available balance of the fund. |
$150,771 |
$ - |
$150,771 |
|
California Library Services Act |
Appropriate $2,138 from the available balance of the State Library Act Fund to the Supplies and Services category. |
$2,138 |
$ - |
$2,138 |
|
Federal Grants Fund |
Transfer $42,190 from Supplies and Services to Capital to more accurately reflect the purchase of equipment. |
$ - |
$ - |
$ - |
|
|
Appropriate $18,800 to Supplies and Services and $90,164 to Capital for supplies and equipment for the training division. This appropriation will be offset by the Urban Areas Security Initiative (UASI) grant. |
$108,964 |
$108,964 |
$ - |
|
Bicycle Facilities Fund |
Reduce Supplies and Services by $13,214 to match grant allocation. |
($13,214) |
$ - |
($13,214) |
|
Other Transportation Programs |
Appropriate $2,377 from the available balance of this fund to the Transfers Out category to correct expenditures that were incorrectly posted for project STM377. Transfer will be reflected in the TransNet Fund. |
$2,377 |
$ - |
$2,377 |
|
|
Appropriate $4,025 from the available balance of this fund to the Transfers Out category to correct expenditures that were incorrectly posted for project TF369. Transfer will be reflected as revenue in the Traffic Signal Fund. |
$4,025 |
$ - |
$4,025 |
|
Transportation Sales Tax (TransNet) |
Transfer In from Other Transportation Programs Fund to correct for expenditures posted to Project STM377. |
$ - |
$2,377 |
($2,377) |
|
|
Transfer In from the General Fund to correct for expenditures posted to Project STL399 ($26,777) and OP228 ($570). |
$ - |
$27,347 |
($27,347) |
|
Traffic Signal |
Transfer In from Other Transportation Programs Fund to correct for expenditures posted from Project TF369. |
$ - |
$4,025 |
($4,025) |
|
Capital Improvement Fund |
Transfer $1,974 from Capital Improvement Project expenditures to Other Expenses and appropriate $15,594 to the Other Expenses category for reimbursement to Sweetwater Authority for costs related to project STL400. |
$15,594 |
$15,594 |
$ - |
|
TOTAL OTHER FUNDS |
$288,655 |
$176,307 |
$112,348 |
Furlough Adjustments
As part of the proposed budget adjustments, staff is recommending reducing the personnel services budgets of the following departments to account for the savings from the voluntary furlough program. These reductions will offset a reduction in budgeted salary savings in the various department budgets. These changes are reflected on the following table:
|
Department |
Salary Savings Adjustment |
Furlough Adjustment |
Net Personnel Services Adjustment |
|
City Council |
$ - |
($1,469) |
($1,469) |
|
City Attorney |
$13,285 |
($13,285) |
$ - |
|
Administration |
$ - |
($1,667) |
($1,667) |
|
Information Technology Srvcs |
$1,449 |
($1,449) |
$ - |
|
Human Resources |
$11,145 |
($11,145) |
$ - |
|
Finance |
$9,195 |
($9,195) |
$ - |
|
Economic Development |
$2,433 |
($2,433) |
$ - |
|
Development Services - GF |
$6,570 |
($6,570) |
$ - |
|
Police |
$38,201 |
($38,201) |
$ - |
|
Public Works |
$40,678 |
($40,678) |
$ - |
|
Recreation |
$5,257 |
($5,257) |
$ - |
|
Library |
$1,220 |
($1,220) |
$ - |
|
TOTAL GENERAL FUND |
$129,433 |
($132,569) |
($3,136) |
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council of the City of Chula Vista members and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property-related financial conflict of interest under California Code of Regulations Title 2, section 18702.2(a)(11), for purposes of the Political Reform Act (Cal. Gov’t Code §87100,et seq.).
Staff is not independently aware, and has not been informed by any City of Chula Vista City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. This action supports the Operational Excellence goal by communicating the City’s projected financial position for the current fiscal year in an open and transparent manner. This transparency supports City Initiative 1.3.1. - “Foster public trust through an open and ethical government.”
CURRENT YEAR FISCAL IMPACT
There is no fiscal impact resulting from accepting the Quarterly Financial Report.
General Fund - Approval of the resolution amending the fiscal year 2016/17 budget will result in a positive impact of $3,136 to the General Fund as a result of furlough adjustments. However, as stated in the report, overall the General Fund is projected to have a deficit of $0.9 million, which staff will continue to work with the departments in order to mitigate. The other requested changes have a no net impact to the General Fund as these changes are neutral as they are either revenue offset or reflect offsetting transfers between expenditure categories.
Net Impact - The recommended changes in the Other Funds result in a total of $0.3 million in appropriations to these funds that are partially offset by $0.2 million in revenues. The total net impact of these changes is $0.1 million to the Other Funds, which will be absorbed by the available fund balances of these funds.
ONGOING FISCAL IMPACT
Staff will continue to monitor and analyze revenue and expenditure trends and incorporate changes as necessary into future financial reports and/or budgets.
ATTACHMENTS
1. FY2017 First Quarter Financial Report
Staff Contact: Tessa Nguyen, Finance Department
David Bilby, Finance Department