Title
A. QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDING SEPTEMBER 30, 2015
B. RESOLUTION NO. 2015-267 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING VARIOUS AMENDMENTS TO THE FISCAL YEAR 2015/16 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 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.
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 2015/16 for the City’s General Fund. The amended budget column includes all Council approved changes to the fiscal year 2015/16 adopted budget that have taken place through the end of the first quarter ending September 30, 2015. The projected column lists the fiscal year 2015/16 projections for revenues and expenditures as of June 30, 2016. The following table reflects the unaudited General Fund reserves as of July 1, 2015 (beginning fund balance) as well as the projected General Fund reserves for June 30, 2016 (projected ending fund balance).
General Fund Summary
Notes:
1. The City Council Adopted budget was balanced and did not project an increase in fund balance for the General Fund. The budgeted surplus reflected in the Amended Budget column is a result of mid-year Council approved budget amendments that have resulted a minor surplus of revenues over expenditures.
2. The Amended Budget and projections reflected in this table do not include prior year appropriations for capital improvement projects and other encumbrances totaling $5.3 million that were carried forward into the fiscal year 2015/16 budget. These expenditure impacts are already reflected in the estimated fund balance as of July 1, 2015 and are therefore not included in the above table.
3. Pending appropriations reflect the personnel cost increases related to the negotiated wage settlement with the Chula Vista Mid-Managers and Professionals Association, Western Council of Engineers, and various unrepresented employees. The wage settlement agreement with the Chula Vista Employees Association is also included in this projection though Council will consider this action as part of a different action on today’s agenda. Accordingly, these costs are reflected in the amounts for pending appropriations. While these appropriations are outside of the reporting period, staff is including them in the report to better reflect projected expenditures for fiscal year 2016.
The City’s financial outlook appears stable through the end of the first quarter. Revenues are projected to increase modestly from the amended budget level based on updated assumptions based on fiscal year 2015 actuals and continuing positive trends in the first quarter. There are no projected variances in expenditures to report at this time. Based on activity through the end of the first quarter, the General Fund is projected to end the fiscal year with a small increase in fund balance ($0.27 million). As noted above, the City has yet to reach agreement with two of the City’s bargaining groups. The projected expenditures reflect the increased costs related to these pending agreements.
Overall, General Fund revenues are projected to increase by $0.85 million above the current amended budget. This increase is due to improved Property Tax, Motor Vehicle License Fee, Transient Occupancy Tax, Real Property Transfer Tax and Use of Money and Property revenues that are projected to increase by a combined $1.0 million over the current budgeted level. The projected increases for these revenues are based on revised assumptions that have improved since the adoption of the budget and a review of previous fiscal year actuals for these revenues. The projected increase in these revenues is partially offset by a projected decrease of $0.1 million in Other Revenue.
There are no variances to report for expenditures projected as of the end of the first quarter. Departmental expenditures are tracking within budgeted levels. Although departmental expenditures projected within budget levels, budgeted salary savings levels are not projected to be achieved based on the current trend. This is primarily due lower than anticipated employee attrition rates. Salary savings are currently budgeted at $2.0 million in the General Fund, which is reflects a 2% vacancy rate. Staff will continue to monitor salary savings levels and look for other potential cost saving measure in order to remain within budget.
The first quarter expenditure projection included above reflects $0.61 million in appropriations approved after the end of the First Quarter. These appropriations reflect the personnel cost increases related to a negotiated wage settlement with the Chula Vista Mid-Managers, the Professionals Association and various unrepresented employees. The City will have considered a wage settlement with WCE and will be considering a wage settlement agreement with CVEA at the time this report presented. Accordingly, these costs are reflected in the amounts for pending appropriations.
Staff is working with the City’s Sales Tax Consultant’s, HdL, to identify the revenues the City will receive as a result of the end of the triple flip. These revenues will help address expenditures for major projects that were not included in the fiscal year 2015-16 adopted budget, but will likely require funding in the current fiscal year. Staff will return to Council to identify the impact of the triple flip and make a recommendation on the allocation of those funds to address funding needs.
Development Services Fund Overview
The Development Services Department Enterprise fund consists of Land Development, Development Planning, the DSF Front Counter and the Building Division. Based on trends through the first quarter, staff is conservatively projecting to end the current fiscal year with a projected deficit. This projection is consistent with the previous fiscal year which indicated a similar trend. Staff will continue to monitor the Development Services Fund, and will make necessary adjustments in the current fiscal year to mitigate any impact to the fund.
General Fund - Budget Amendments
Staff is recommending budget amendments in the Library, Non-Departmental, Police, Fire and Public Works departments. These changes result in no net fiscal impact to the General Fund.
Library - The Library has received several donations totaling $48,060. The Friends of the Library, Civic Center Chapter donated $20,000 to help fund the renovations of the Civic Center Library Auditorium. The Chula Vista Public Library Foundation donated $10,000 to help fund staffing for expanded hours at the Otay Ranch Library; $5,000 for the renovations of the auditorium; and $5,000 for the relocation of the Heritage Museum. Donations were also received to continue support of two very popular programs: ‘1,000 Books Before Kindergarten’ and Kindergarten Boot Camp. The Friends of the Library, Executive Board donated $4,060.19 and the Altrusa Club of Chula Vista donated $4,000.
Staff is requesting that these donations (totaling $48,060) be appropriated as follows - $10,000 to the Personnel Services expenditure category, $13,060 to the Supplies and Services budget of the Library Department, and $25,000 to be appropriated to the Non-CIP Project Expenditure category of the Non-Departmental budget for the Auditorium project.
Non-Departmental/Various - The fiscal year 2015/16 budget includes $1.8 million in budgeted salary savings in the Non-Departmental budget. These savings are actually realized in the department budgets as turnover occurs. In order to reduce the amount of budgeted salary savings, staff recommends applying the known savings from the voluntary furlough program and medical premium savings. Staff is recommending the following adjustments:
1. The City continues to offer a voluntary furlough program where staff can elect to take unpaid leave. In the current fiscal year, this program will generate approximately $166,213 in salary savings in various departments. Staff recommends reducing the budgeted salary savings in the Non Departmental budget and recognizing the salary savings in the department budgets generated by the voluntary furlough program. There is no net fiscal impact to the General Fund as a result of this change.
2. The fiscal year 2015/16 budget assumed a 5% increase in medical and dental insurance premiums. The actual medical premium increase was lower than anticipated in the budget, resulting in a budget savings of approximately $260,448. Staff recommends recognizing the projected savings in health/flex benefits in the various department budgets and reducing the budgeted salary savings in the Non-Departmental budget by the same amount. There is no net fiscal impact to the General Fund as a result of this change.
As discussed above, staff is also requesting a $25,000 increase to the Non-CIP Project Expenditure category of the Non-Departmental budget to augment and existing project for improvements at the City Library auditorium. This increase will be offset by revenue a donation in to the Library budget resulting in no net impact.
Police Department - The Police department is requesting to transfer $62,128 from the Capital expenditure category to the Supplies and Services Category in order to align budget with actual expenditures related to building maintenance costs that were initially budgeted as capital expenditures. This transfer will enable this purchase to be correctly reflected in the City’s accounting and financial reporting systems. There is no net fiscal impact as a result of this change.
The Police Department is also requesting a change to the accounting for the 4% administrative fee the department receives for acting as the fiscal agent for the High Intensity Drug Trafficking Area (HIDTA) and Homeland Security Grant Program (HSGP). This change results in no net fiscal impact but will reclassify $100,928 in revenues from the Revenue from Other Agencies category to the Other Revenues category.
Fire Department - The Fire Department is expected to receive reimbursements in the amount of $862,235 from the State of California Office of Emergency Services (CalOES). These reimbursements are related to costs associated with staff time and travel for Chula Vista Fire Department strike team deployments for mutual aid agreements to assist in statewide firefighting efforts. Staff is requesting Council to amend the FY2016 Fire Department budget to appropriate $854,740 in the Strike Team Personnel Services category offset overtime costs and $7,495 in Supplies and Services expense category to offset travel costs.
The Fire Department has also received a grant from SDG&E in the amount of $5,000 to support the Fire Department’s Community Emergency Response Team (CERT) Program. These funds will be used for expenses related to the training of CERT volunteers. Staff is requesting Council to accept the donation in the amount of $5,000 from SDG&E and amend the FY2016 Fire Department budget to appropriate the funds in the Fire Department’s Services and Supplies expense category.
These changes result in no net fiscal impact to the General Fund.
Public Works - The Public Works department has received a $1,000 grant from the American Public Works Association (APWA) - San Diego & Imperial Counties Chapter for an 8 week internship program. The APWA contribution is an incentive to public-private engineering agencies to offer an engineering experience for engineering students. The total grant agreement is for $3,200 resulting in a $2,200 match responsibility to the City if this request is approved. Sufficient appropriations are available in the Public Works Department Personnel Services budget to offset the City’s portion of the grant agreement. The Public Works Department is requesting a $1,000 appropriation to the Personnel Services budget offset by the grant revenue.
Other Funds
In addition to the General Fund changes requested above, staff is also recommending a number of changes to other funds. These changes are as follows:
ALS Fund - Staff is requesting an appropriation of $110,406 in the Advance Life Support Program Fund to continue implementing the First responder Advance Life support Program (FRALS) per the agreement with AMR. This appropriation will be made from the available fund balance of the ALS Fund and will be appropriated as follows:
• $10,406 to the Supplies & Services expense category to purchase medical supplies.
• $100,000 to the Personnel Services expense category for overtime costs related to paramedic training.
Police Grants Fund - The Police Department is requesting to appropriate $160,843 to the Other Expenses category of the Police Grant Fund for the 4% administrative fee for acting as the fiscal agent of High Intensity Drug Trafficking Area (HIDTA) and Homeland Security Grant Program (HSGP) funding. This appropriation will allow for a more accurate accounting of the administrative costs incurred by the City to be reflected in the City’s financial reporting systems. The appropriation is fully offset by the grant funding received by HIDTA & HSGP.
Asset Seizure Fund - The Police Department is the fiduciary agent for the Southwest Border Anti-Money Laundering Alliance (SWBAMLA) task force. The task force performs operations that help prosecute money laundering, narcotics trafficking, human trafficking, commerce fraud, and other criminal ventures. Part of the outcome from the operations can be the recovery of assets. The Police Department, as the fiduciary agent for SWBAMLA task force, is requesting a $25,000 appropriation to the Supplies and Services expenditure category of the Asset Seizure Fund. The appropriation will be used to distribute equitable sharing of asset forfeitures to the participating agencies of the SWBAMLA task force.
Federal Grants Fund - On June 2, 2015, the City Council approved a sub-award agreement with Community Health Improvement Partners for the Racial and Ethnic Approaches to Community Health (REACH) Project. This project was approved for $30,000 in funding through the Center for Disease Control for staff time funding to develop policies and plans supporting healthy food access and active transportation. Due to the timing of the appropriation, staff did not expend the available funds in fiscal year 2015. Staff is requesting to appropriate the $30,000 REACH sub-award to the fiscal year 2015-16 Federal Grant Funds Other Expenses category to support City staff time associated with this grant. Approval of this resolution will result in no net fiscal impact to the Federal Grants Fund.
In addition, staff is requesting an appropriation of $1,391 in the Personnel Services Category of the Federal Grants Fund for emergency service expenses. On August 27, 2015 the Fire Department received notification of the FY2015 Emergency Management Performance Grant (EMPG) allocation amount. Council approved funds in the amount of $60,230 as part of the fiscal year 2016 budget process; however, the revised grant amount is $61,621. The appropriation is offset by grant funds resulting in no net fiscal impact to this fund.
State Grants Fund - An appropriation of $8,331 to the Supplies and Services in the States Grant Fund for Mobile Recreation Program is requested. These are residual funds from the previous fiscal year that were not carried forward in the fiscal year 2015-16 budget. This funding was initially received from the California Parks and Recreation Department to support the City’s Mobile Recreation Program.
Emergency Solutions Grant Fund - The City receives Emergency Solutions Grant funds from the U.S. Department of Housing and Urban Development for the purpose of providing services to persons who are homeless or are at risk of the becoming homeless. A portion of the funds are to cover City staff time associated with the administration of the grant program. Staff is requesting to appropriate $5,431 to the fiscal year 2015-16 Emergency Shelter Grant Program Other Expenses category for City Staff Services. These are residual funds that were unspent in the previous fiscal year and are available to be appropriated in the current fiscal year resulting in no net impact.
Staff is also requesting that $7,663 be transferred from the Rapid ReHousing Project (project 1021) to the Homeless Management Information System Project (project 1024) in order to comply with the new HUD regulations. In May 2015, the City entered into a contract with South Bay Community Services to provide HPRP services on the City’s behalf. The scope of services included maintenance of the HUD mandated Homeless Management Information System (HMIS), which collects data on homeless persons served. Subsequent to award of the contract, HUD issued regulations requiring all ESG activities to be monitored as separate projects. A new Non-CIP project, the Homeless Management Information System (project number 1024) has been created under ESG in order to distinguish and monitor separate from HPRP, in adherence to HUD regulations. Approval of this transfer will ensure that these funds are administered within HUD rules. There is no net fiscal impact as a result of this change.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the 500-foot rule found in California Code of Regulations Title 2, section 18702.2(a)(11), is not applicable to this decision for purposes of determining a disqualifying real property-related financial conflict of interest under 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 2015/16 budget will result in the following appropriations to the General Fund.
Summary of Budget Appropriations by Department
|
DEPT/FUND |
DESCRIPTION |
EXPENSE |
REVENUE |
NET |
|
GENERAL FUND |
|
|
|
|
|
Non-Departmental/Various* (see table below) |
Flexible Benefit & Work Furlough Savings to Offset Budgeted Salary Savings |
$0 |
$0 |
$0 |
|
|
Non-Departmental CIP for Library Remodel Project |
$25,000 |
$0 |
$25,000 |
|
Library |
Library Donations from various sources for literacy programs and Library remodel project |
$23,060 |
$48,060 |
($25,000) |
|
Police |
Reclassification of Police Grant Revenues |
$0 |
$0 |
$0 |
|
|
Transfer from Capital to Supplies and Services |
$0 |
$0 |
$0 |
|
Fire |
Fire Community Emergency Response Team (CERT) Donation from SDG&E Appropriation |
$5,000 |
$5,000 |
$0 |
|
|
Fire Strike Team Reimbursements for deployments to offset overtime and travel costs |
$862,235 |
$862,235 |
$0 |
|
Public Works |
Public Works APWA Internship Grant appropriation to Personnel Services |
$1,000 |
$1,000 |
$0 |
|
|
|
|
|
|
|
|
TOTAL GENERAL FUND |
$916,295 |
$916,295 |
$0 |
As part of the proposed budget amendments, staff is recommending reducing the personnel services budget of all departments to account for the savings from the voluntary furlough and the health/flex benefits. These reductions will offset a reduction in budgeted salary savings in the Non Departmental budget. These changes are reflected on the following table.
Summary of Changes to Departmental Personnel Service Budgets -
Flexible Benefits and Work Furlough Salary Adjustments
Net Impact - The changes in the General Fund are neutral and have no net fiscal impact. The recommended adjustments in the General Fund are either revenue offset or reflect offsetting transfers between expenditure categories.
Other Funds - Approval of the resolution amending the fiscal year 2015/16 budget will result in the following appropriations. The resulting fiscal impacts to various funds are also listed in the following table:
|
OTHER FUNDS |
DESCRIPTION |
EXPENSE |
REVENUE |
NET |
|
Advanced Life Support Program Fund |
ALS Fund Appropriation of Fund Balance for continued implementation of First Responder Advanced Life Support System (FRALS) program. |
$110,406 |
$0 |
$110,406 |
|
Police Grants Fund |
Fiduciary 4% admin. costs and other revenue for HIDTA ,HSGP-SDLECC, and RCFL Grant funds. |
$160,843 |
$160,843 |
$0 |
|
Asset Seizure Fund |
Appropriation of forfeiture revenues from the SWBA |
$25,000 |
$25,000 |
$0 |
|
Federal Grants Fund |
Appropriation of REACH funds to Federal Grants fund |
$30,000 |
$30,000 |
$0 |
|
|
EMPG Grant Adjustment for revised grant amount |
$1,391 |
$1,391 |
$0 |
|
State Grants Fund |
Mobile Recreation Program Re-budget of Supplies and Services |
$8,331 |
$0 |
$8,331 |
|
Emergency Solutions Grant Fund |
Reach Homeless program revenue and expense re-budget |
$5,431 |
$5,431 |
$0 |
|
|
Transfer of Rapid Rehousing Project funds to new Project number |
$0 |
$0 |
$0 |
|
|
|
|
|
|
|
|
TOTAL OTHER FUNDS |
$341,402$222,665$118,737 |
|
|
There is no net fiscal impact to the following funds: Police Grant Fund, Asset Seizure Fund, and Emergency Solutions Grant Fund.
Projected impacts to the remaining funds are as follows:
• The appropriation of $110,406 in the Advanced Life Support Fund will be made from the available balance of this fund.
• The appropriation of $8,331 in the States Grant Fund for the Mobile Recreation Program will be made from the available balance of this fund.
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.
ATTACHMENT
1. First Quarter Financial Report
Staff Contact: Angelica Aguilar, Finance Department