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FISCAL YEAR 2013/14 ANNUAL FINANCIAL STATUS REPORT
RESOLUTION NO. 2014-192 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING THE CATEGORIZATION OF $3.6 MILLION IN THE ECONOMIC CONTINGENCY RESERVE AS A COMMITTED FUND BALANCE FOR FISCAL YEAR 2013/14, IN ACCORDANCE WITH GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 54 AND COUNCIL POLICY 159-04
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RECOMMENDED ACTION
Recommended Action
Council accept the report and adopt the resolution.
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SUMMARY
This report is provided in order to meet the City Charter requirement of publishing the City's Combined Statement of Revenues, Expenditures and Changes in Fund Equity (Schedule D) in the local newspaper within 120 days of the close of the fiscal year. The statement was published in the October 24th issue of The Star News, which is the City's adjudicated newspaper of general circulation.
The Economic Contingency Reserve is classified as a "Committed Fund Balance" for financial statement reporting purposes. The City Council must pass a formal resolution to reserve a portion of fund balance as "Committed Fund Balance" in an amount equal to the Economic Contingency Reserve balance of $3.6 million; and to be in compliance with Governmental Accounting Standards Board Statement 54 and Council Policy 159-04.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a "Project" in accordance with Section 15378(b)(4) of the State CEQA because it involves only acceptance of the fiscal year 2013/14 annual financial status report and a commitment of fund balance, therefore it is governmental fiscal activity which does not involve any commitment to any specific project that will not result in a potentially significant physical impact on the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary
BOARD/COMMISSION RECOMMENDATION
Not Applicable
DISCUSSION
Annual Financial Status Report
This report is provided in order to meet the City Charter requirement of publishing the City's Combined Statement of Revenues, Expenditures and Changes in Fund Equity (Schedule D) in the local newspaper within 120 days of the close of the fiscal year. The statement was published in the October 24th issue of The Star News, which is the City's adjudicated newspaper of general circulation.
We will provide the Council with a complete report of fiscal year 2013/14 financial data upon presentation of the City's audited Comprehensive Annual Financial Report.
For the General Fund, actual Expenditures and Transfers-Out for the year amounted to $138.4 million, supported by Actual Revenues and Transfers-In of $141.9 million. The actual revenue and expenditures are subject to audit adjustments. The audited figures and the actual change in General Fund reserves will be presented when the audit is completed. Schedules A and B are summary statements of actual revenues and expenditures for fiscal year 2013/14. Schedule C provides a complete listing of all budget amendments approved for the 2013/14 fiscal year.
Schedule D is an unaudited Summary Report of Revenue, Expenditures, and Changes in Fund Equity (excluding Trust Funds and the Public Financing Authority) for the fiscal year ended June 30, 2014. Please note that the column titled "General Funds" includes not only the General Fund, but the Fire Equipment Lease fund and the Telecommunications Utility Tax fund (TUT Settlement money) and Public Liability Trust fund, which are combined with the General Fund for financial reporting purposes. A full analysis of the City's various funds will be provided in the Management's Discussion and Analysis section of the Comprehensive Annual Financial Report. As required by Charter Section 504(f), this statement will be published in the local newspaper as discussed above.
The detailed data supporting this information is quite voluminous, but is available at your request. The published Comprehensive Annual Financial Report (CAFR) including the opinion of the independent auditors should also be available within the next 60 days and will be provided to City Council.
Schedule E provides a complete listing of all budget adjustments between summary accounts approved by the City Manager in accordance with Council Policy 220-02 "Financial Reporting and Transfer Authority" during fiscal year 2013/14.
Economic Contingency Reserve
The Economic Contingency Reserve (ECR) or "rainy day fund" provides the General Fund with the financial resiliency to weather economic downturns. The ECR represents funds set aside to assist in stabilizing fluctuations in the City's discretionary revenue streams. Several of the City's major revenue sources, such as Sales Tax, Property Tax, Motor Vehicle License Fees and Transient Occupancy Tax are sensitive to the economic climate of the region. As seen by the Great Recession, the volatility of these revenue streams had a significant impact on the City's ability to maintain service levels for essential City services. The ECR will assist in minimizing impacts to service levels during a significant downturn in the economy by backfilling significant revenue shortfalls in the General Fund.
City Council Policy 220-03 recommends an ECR minimum level of 5% of the General Fund operating budget. Committing $3.6 million will bring the ECR to 2.7% of fiscal year 2014/15 General Fund operating budget and will provide progress towards meeting the 5% goal.
The funding of the Economic Contingency Reserve is considered a commitment of fund balance and therefore requires City Council action to approve the designation in accordance with GASB 54 and Council Policy 159-04. The approval of the resolution will enable the classification of the ECR balance of $3.6 million to Committed Fund Balance for the City's fiscal year 2013-14 audited financial statements.
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 section 18704.2(a)(1), is not applicable to this decision. Staff is not independently aware, and has not been informed by any 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. The filing of the Annual Financial Status Report and Publishing of the Financial Statement in The Star News supports the goal of operational excellence by meeting the requirements of the City Charter. The commitment of $3.6 million to the Economic Contingency Reserve supports the goal of Economic Vitality because this reserve will be used to assist the City in maintaining service levels during severe economic downturn.
CURRENT YEAR FISCAL IMPACT
There is no fiscal impact resulting from accepting the Annual Financial Status Report. The funding for the increase in the Economic Contingency Reserve is due to unanticipated revenues received in fiscal year 2013/14.
ONGOING FISCAL IMPACT
During future economic downturns, the Economic Contingency Reserve would be used to mitigate significant revenue shortfalls that may impact City-provided service levels to the public.
ATTACHMENTS
1. Schedule A - General Fund Revenues by Department
2. Schedule B - General Fund Expenditures by Department
3. Schedule C - General Fund Budget Amendments
4. Schedule D - Combined Statement of Revenues, Expenditures and Changes in Fund Equity
5. Schedule E - General Fund Budget Transfers
6. City Council Policy 159-04"Fund Balance Policy for Governmental Funds"
Staff Contact: Phillip Davis, Assistant Director, Finance Department