Title
A. QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDING DECEMBER 30, 2013 AND CONSIDERATION OF AMENDMENTS TO THE FISCAL YEAR 2013/14 BUDGET
B. RESOLUTION NO. 2014-040 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING VARIOUS AMENDMENTS TO THE FISCAL YEAR 2013/14 BUDGET TO ADJUST FOR VARIANCES AND APPROPRIATING FUNDS THEREFOR (4/5 VOTE REQUIRED)
C. RESOLUTION NO. 2014-002 OF THE SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA AMENDING THE RDA 2008 TARBS PROJECT FUND -SA BUDGET AND APPROVING AN APPROPRIATION OF $158,165 (4/5 VOTE REQUIRED)
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RECOMMENDED ACTION
Recommended Action
Council accept the report and adopt Resolution B, and Agency adopt Resolution C.
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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 is recommending in the current year General Fund as well as various other funds.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity, appropriating funds per settlement terms, for compliance with the California Environmental Quality Act (CEQA) and has determined that this activity 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.
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.
General Fund Summary
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 based on expenditures and revenues through the second quarter of fiscal year 2013/14 for the City’s General Fund. The amended budget column includes all Council approved changes to the fiscal year 2013/14 adopted budget through December 31, 2013 (the end of the second quarter). The projected column lists the estimated revenues and expenditures for June 30, 2014, the end of fiscal year 2013/14. The table also reflects the projected impact to the City’s reserves.
|
General Fund Reserve |
Amended Budget |
Projected (millions) |
|
Reserves - July 1, 2013 (audited) |
$10.9 |
$10.9 |
|
Revenues & Transfers In |
$129.1 |
$128.3 |
|
Expenditures & Transfers Out |
($129.3) |
($128.8) |
|
Projected Surplus/Deficit |
($0.2) |
($0.5) |
|
Projected Available Fund Balance for June 30, 2014 |
$10.7 |
$10.4 |
Notes:
1. The Amended Budget and projections reflected in this table do not include prior year appropriations for capital improvement projects and other encumbrances that were carried forward into the fiscal year 2013/14 budget. These expenditure impacts are already reflected in the estimated fund balance as of July 1, 2013 and are therefore not included in the above table.
The table above reflects projected revenue shortfall of $0.8 million in the General Fund. This shortfall is a combination of various changes across revenue categories but primarily reflects lower than anticipated program and grant revenues. General Fund expenditures are projected to be under budget by $0.5 million, primarily due to salary savings resulting from vacant positions. The net projected impact to the City’s General Fund Reserve as a result of these projections is a negative $0.5 million for the fiscal year ending June 30, 2014.
Staff will continue to monitor this projected shortfall in an effort to mitigate any adverse impact on the City’s reserves.
General Fund Revenues
As discussed in the First Quarter Financial Report, discretionary General Fund revenue projections for fiscal year 2013/14 were updated to reflect a modestly improving economic trend. As a result, budgeted discretionary General Fund revenues such as property taxes, franchise fees and motor vehicle license fee revenues were increased reflecting revised projections for these revenues. In the second quarter, the projections for property tax, sales tax in lieu, transient occupancy tax, other local tax and motor vehicle license fee revenues have been increased by $0.8 million reflecting the current economic trend for these revenues. These projected increases, however, are offset by a $0.7 million estimated decrease in sales tax revenues. The projected decrease in sales tax revenue is a new development as of the second quarter. The revised sales tax projection is based on information provided by the City’s sales tax consultant. The fiscal year 2013/14 Council adopted budget anticipated a 4.0% increase in sales tax when compared to fiscal year 2013, sales tax trends indicate that this increase was optimistic. Sales tax is projected to increase by 1.2%. In total, the projected change in discretionary revenues is less than $0.1 million.
Program revenues are projected to fall short of budget by approximately $0.9 million. This shortfall is largely reflected in Revenue from Other Agencies, which is projected to have a $0.7 million shortfall. This is primarily due to Police related grant and task force reimbursement revenues that will not be realized. As previously reported in the First Quarter Financial Report, this projected revenue shortfall is due to decreased participation in reimbursed task force activities. The reduction of participation in grant funded task forces is due to the reassignment of staff to duties performed by positions that were vacant. In addition, department revenues also reflect a shortfall in revenues due to vacancies. These revenue shortfalls are projected to be offset from salary savings that will be generated from vacant positions within the Police Department. Expenditures savings generated from salary savings are expected to decrease as the fiscal year progresses as vacant positions are filled.
General Fund Expenditures
Based on expenditure trends through the end of the second quarter, General Fund expenditures are projected to be under budget by an estimated $0.5 million. This estimated expenditure savings consists of the following:
• Personnel Services - A $0.9 million projected savings in personnel services due to vacant positions in various City departments. These savings are offset by higher than anticipated overtime costs in the Fire Department, which may require an additional appropriation.
• Supplies and Services - A $0.4 million projected deficit in the supplies and services expense category due to projected overages in various supplies and services object accounts. As of the end of the second quarter, the Police and Fire departments account for the majority of the projected supplies and services deficit. The Police Department will address its projected deficit through a transfer from projected salary savings. The Fire department will offset the deficit through reimbursement and donation revenues.
• Capital - A projected $0.3 million savings in capital expenses resulting from a swap in funding source for the HVAC project at the South Chula Vista Library.
• Utilities - This category reflect $0.2 million projected deficit primarily from water costs for City parks.
Development Services Fund
The Development Services Department Enterprise fund consists of Land Development, Development Planning, the DSF Front Counter and the Building Department. The Development Services Fund ended its first two fiscal years with revenues that fell short expenditures. Every year since, revenues have exceeded expenditures. This is due in large part to increased building permits. Currently, revenues are not tracking where they had been for the past three years; staff is conservatively projecting a total shortfall of approximately $550,000. However, Development Services is processing more entitlements then at any time in the Department’s history and processing more plan checks then the last three years.
If projects currently in plan check, approximately 1,600 residential units, pull their building permits before the end of the fiscal year the fund will have adequate revenues to cover expenditures. However, as the City does not control the timing of permits, staff is being conservative in the estimates. It is important to note that the nature of the work in the enterprise fund is beginning to change from one of processing planning documents to one of processing building and improvement plans. This change in activity may require modification to the existing composition of staff in Development Services Enterprise Fund in order to remain responsive to the work being received.
The table below compares the budgeted revenue and expenditures to the projected revenues and expenditures for June 30, 2014. As noted above, expenditures are currently on trend to exceed revenues. Staff will continue to monitor this projected shortfall in an effort to mitigate any adverse impact to the Development Services Fund’s reserves.
|
Development Services Fund Reserve |
Amended Budget |
Projected |
|
Reserves - July 1, 2013 (audited) |
$147,475 |
$147,475 |
|
Revenues & Transfers In |
$7,097,193 |
$6,825,730 |
|
Expenditures & Transfers Out |
($7,237,537) |
($6,917,035) |
|
Projected Surplus/Deficit |
($140,344) |
($91,305) |
|
Projected Fund Balance for June 30, 2014 |
$7,131 |
$56,170 |
BUDGET AMENDMENTS
General Fund Amendments
Staff is recommending budget amendments in Police, Public Works, Library, City Clerk, Fire, Recreation and Non-Departmental. These amendments are as follows:
Police -The Police Department is requesting a transfer of $260,000 to the supplies and services expense category to address various operational needs. This transfer is being requested in order to fund protective vests that are due for replacement. These funds will also be used for additional training and ammunitions costs that will be required for the training of new recruits in the Police Academy. Funding will also be increased to enhance recruiting efforts through nationwide advertising and increasing job fair attendance. The Police Department will also use a portion of these appropriations to convert a sober cell to a holding cell in order to help maximize the usage of the Police Jail facility. This transfer will be offset by increased salary savings to be generated with the Police Department budget as a result of vacant positions.
The Police department is also requesting a correction of $30,000 in budgeted revenue to be placed in the correct line-item object accounts. This change will allow for the accurate reporting of these funds in the City’s accounting and financial systems and does will result in any fiscal impact
Public Works - A transfer of $210,000 from the Capital expense category to the Utilities category is requested to address a projected short-fall in water expenses for City parks. The appropriations from the Capital expense category were approved by Council to repair an HVAC system in the Library Department. However alternative funding was identified. These utility expenditure short-falls were identified in the First Quarter Financial Report with the intention that they would be addressed as additional data became available.
The Public Works Department is also requesting a transfer of $34,000 from the Capital expense category to the Supplies and Services category in order to pay for the following facility related expenses.
• A structural analysis to assess cracks that have appeared in the foundation of the Public Works Operation Center.
• An emergency plumbing repair at the Civic Center Library resulting from a leak in a fitting to a 3” water main that was in an inaccessible area. Repairs and restoration to the women's downstairs restroom, the children's area, restrooms and the children's reading room were required. In an effort to prevent further flooding of the Library and additional structural damage this work was performed on an emergency basis by Construction and Repair staff and outside expertise in plumbing and restoration.
Library - The Library Department received a donation of $47,000 from the Friends of the Library. $45,000 of the donation is being appropriated to the General Fund and $2,000 in being appropriated to the Other Grants Fund. The appropriation of $45,000 will be used to purchase books and library materials.
The Library Department also received a donation of $1,000 from the San Diego Ballpark Funding LLC. The appropriation of $1,000 will also be used to purchase books and library materials.
City Clerk - The City Clerk received grants totaling $625 from City Clerk’s Association of California (CCAC) and the Southern California City Clerk’s Association (SCCCA) to assist in the tuition for the City Clerk to attend the Advanced Leadership Institute training. The City Clerk is requesting an appropriation of $625 to the Supplies and Services expense category to offset these training costs.
Fire - The Fire Department is requesting an appropriation of $159,248 to offset reimbursed overtime expenditures that have been incurred as a result of Chula Vista Fire Department strike team deployments for mutual aid agreements to assist in statewide firefighting efforts. A $109,248 appropriation will be made to the Personnel Services expense category in the Fire Department to offset overtime and $50,000 will be appropriated to the Capital expense category in order to install washer and dryer equipment at various fire stations. This appropriation is offset by revenues received from the State of California Office of Emergency Services.
The Fire Department is also requesting additional appropriations of $55,288 to the Supplies and Services expense category based on donations and grants that have been received. The sources and intended use of these appropriations are as follows:
• The Fire Department received a grant from SDG&E of $2,500 to support the Fire Department’s Community Emergency Response Team (CERT) Program. These funds will be used for training of CERT Volunteers. Staff is requesting Council accept the donation of $2,500 and amend the fiscal year 2013/14 Fire Department budget for Emergency Management.
• The Fire Department received a contribution from the Stephen & Mary Birch Foundation, Inc. of $52,488 to be used exclusively for the purchase of two (2) pair of single layer fire resistant pants per firefighter (120) and one class “B” dress shirt for each. Staff is requesting Council accept this contribution of $52,488 from Stephen & Mary Birch Foundation and amend the fiscal year 2013/14 Fire Department budget for Fire Suppression.
• The Fire Department received donation of $300 from Wal-Mart to support the Fire Department’s Annual Open House held at the Training Division. Staff is requesting Council accept the donation and amend the fiscal year 2013/14 Fire Department budget for Fire Training.
Recreation - An appropriation of $12,524 to the supplies and services expense category in the Recreation Department is requested for expenses incurred on behalf of the Mobile Recreation Program. These appropriations will be reimbursed by State of California Department of Parks and Recreation grant revenues to be received by the City’s Recreation Department.
Non-Departmental - The requested adjustments to the Non-Departmental budget unit are as follows:
• An appropriation of $123,355 to the Transfers-Out Category to reimburse the Public Liability Expense Trust Fund. During a prior fiscal year, expenditures for the City’s contracted attorney’s services related to the Telephone Users Tax (TUT) lawsuit were charged to the Public Liability Expense Trust Fund. These expenditures should have been charged to the General Fund. A transfer from the General Fund to the Public Liability Trust Fund is requested in order to reimburse the Public Liability Trust Fund for these expenditures. TUT revenues received in the current fiscal year will offset this appropriation resulting in no net fiscal impact to the General Fund.
• During fiscal year 2013, the General Fund incurred expenses related to the TUT lawsuit. These costs are for settlement claims administration and are part of the final settlement. Since these expenditures occurred in a prior fiscal year, staff is requesting a transfer of $82,293 from the TUT Common Fund to the General Fund to reimburse the General Fund for these costs. This transfer will result in a positive fiscal impact to the General Fund and is in compliance with the settlement agreement.
• An appropriation of $200,000 for legal expenses and compliance with the settlement terms of the TUT class-action lawsuit. This appropriation will be funded from TUT revenues received in the current fiscal year.
• An increase in the Transfers In revenue category of $26,500 in the Non-Departmental budget is requested. The amount is to reimburse the General Fund from the Energy Conservation Fund for consulting services expenses that were incurred in fiscal year 2012-13 for a business cluster analysis identifying job creation and retention. This project was eligible for reimbursement from SDG&E grant funds. However, the reimbursement process was not completed in fiscal year 2012-13 due to the timing of the receipt of the grant funds.
• An appropriation of $5,060 to the supplies and services expense category of the Non-Departmental budget is requested for the purchase of flag pole brackets as part of the Third Avenue Streetscape Project. The flag brackets will be placed on the street light poles initiating the design for the new historic monument sign pedestals. The cost of this purchase is offset by a contribution from the Third Avenue Village Association (TAVA).
Amendments to Other Funds
Staff is recommending budget amendments to the following other funds:
RDA 2008 TARBS Project Fund - The Successor Agency to the Redevelopment Agency received its Finding of Completion from the California Department of Finance (DOF) in May 2013. The Finding of Completion means that the Successor Agency has successfully completed the financial reviews conducted by the DOF and therefore is able to spend bond proceeds for its originally intended purpose. The Third Avenue Streetscape project was identified to receive partial funding from the bond proceeds of the 2008 Tax Allocation Bonds. Project costs of $158,165 were incurred, but have not yet been reimbursed due to the DOF prohibition on the use of bond proceeds. An appropriation of $158,165 is requested in the Other Expenses category of the RDA 2008 TARBS Project Fund for expenses incurred during phase one work on the project.
Central Garage Fund - The fiscal year 2013/14 budget includes $384,348 in an account that was established to track compressed natural gas (CNG) purchases. The City has transitioned to operating its own CNG producing station that runs on electrical power. A transfer of these funds is requested to reflect these costs as electricity expenses used in the operation of the CNG station.
Energy Conservation Fund - An appropriation of $26,500 to the Transfers Out expense category of the Energy Conservation Fund is requested in order to reimburse the General Fund for consulting services expenses that were incurred in fiscal year 2012-13 for a business cluster analysis identifying job creation and retention. This project was eligible for reimbursement from SDG&E grant funds. However, the reimbursement process was not completed in fiscal year 2012-13 due to the timing of the receipt of the grant funds. The appropriation for the Transfers Out expense will be made from the available supplies and services budget of the Energy Conservation Fund.
States Grant Fund - An appropriation of $13,850 to the Personnel Services expense category is requested for the Literacy Program in the State Fund to provide literacy programming. This appropriation is funded from a grant from the California Library Literacy Services (CLLS) fund.
Public Liability Trust Fund - As discussed previously, the Public Liability incurred attorney services costs related to the TUT lawsuit on behalf of the General Fund. The transfer from the General Fund to the Public Liability Trust fund will reimburse this fund for these prior year expenditures. This transfer results in a positive fiscal impact of $123,355 to the Public Liability Trust Fund.
TUT Common Fund - During fiscal year 2013, the General Fund incurred settlement claims administration costs related to the TUT lawsuit which per the settlement agreement should be reflected in the TUT Common Fund. Since these expenditures occurred in a prior fiscal year, staff is requesting a reimbursement of $82,923 from the TUT Common Fund to the General Fund.
The resolution approved by Council on February 18, 2014 on the TUT included and estimated settlement payment for claimants. The final settlement amount has subsequently increased by $1,190 above the original estimate. An additional appropriation of $1,190 in the TUT Common Fund is requested in order to fund the final settlement payment to claimants in the City’s TUT lawsuit. This appropriation will be made from the available balance of the TUT Common Fund.
Other Grants Fund - As discussed previously, the Library Department received a donation of $47,000 from the Friends of the Library. $45,000 of the donation is being appropriated to the General Fund and $2,000 in being appropriated to the Other Grants Fund. The appropriation of $2,000 represents matching funds that the Friends of Chula Vista Library pledged as part of the “Paths to Civic Engagement” grant awarded to the Chula Vista Public Library by the Chula Vista Charitable Foundation. These funds are intended for books and materials on civic engagement, social issues and current affairs, per the terms of the grant.
Federal Grants Fund - An appropriation of $7,231 is requested for the Federal Grants Fund in order to reflect the correct grant amount for the Emergency Management Performance Grant program (EMPG). This grant was previously approved by Council on October 7, 2013 for $52,226. However, the correct grant amount is $59,457. The appropriations will be made to the Personnel Services expense category of the EMPG program and will be used for emergency planning activities.
DECISION-MAKER CONFLICT
Resolution A: Staff has reviewed the City Council member property holdings and has determined that Council member Salas has property holdings within 500 feet of the boundaries of the Third Avenue Streetscape project. Although this could create a conflict for the Councilmember, the decision contemplated by this action with respect to the Third Avenue Streetscape project solely concerns the repair, replacement or maintenance of existing streets, sewer, storm drainage or similar facilities and, as such, the financial effect of the decision on real property is presumed not to be material, pursuant to California Code of Regulations Title 2, sections 18704.2(b)(2) and 18705.2.
With respect to the remaining decisions contemplated by this action, each decision either: (i) does not involve real property within 500 feet of any City Council member properties; or (ii) is not site-specific and, consequently, the 500-foot rule found in California Code of Regulations section 18704.2(a)(1), is not applicable. Staff is not independently aware, and has not been informed by any City Council member of any other fact that may constitute a basis for a decision maker conflict of interest in this matter. Consequently, these decisions do not present conflicts under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Resolution B: Staff has reviewed the Successor Agency member property holdings and has determined that Successor Agency member Salas has property holdings within 500 feet of the boundaries of the Third Avenue Streetscape project. Although this could create a conflict for the Councilmember, the decision contemplated by this action with respect to the Third Avenue Streetscape project is an implementation decision which does not independently create a conflict of interest, and is ministerial in nature, not requiring the City Councilmember to make or participate in making a governmental decision, pursuant to California Code of Regulations Title 2, section 18702.4(a).
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. Approval of the resolution amending the fiscal year 2013/14 budget will result in the following appropriations. The resulting fiscal impacts to various funds are also listed in the following table.
Summary of Budget Appropriations and Amendments by Department and/or Fund
Approval of the resolution results in no net fiscal impact to the following funds: Other Grants, Federal Grants, State Grant, Energy Conservation, and Central Garage.
Projected impacts to the remaining funds are as follows:
• The changes in the General Fund will result in a positive impact of approximately $108,700 which will assist in reducing the projected deficit.
• The changes to the Public Liability Trust Fund will result in a positive impact of approximately $123,355.
• The appropriation of $1,190 in the TUT Common Fund will be made from available settlement funds.
• The appropriation of $158,165 in the RDA 2008 TARBS Project Fund will be made from the available fund balance of this fund.
ONGOING FISCAL IMPACT
There are no ongoing fiscal impacts resulting from the budget amendments described above.
ATTACHMENT:
Second Quarter Financial Report