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A. QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDING DECEMBER 31, 2014
B. RESOLUTION NO. 2015-040 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING VARIOUS AMENDMENTS TO THE FISCAL YEAR 2014/2015 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 the activity is not a "Project" in accordance with Section 15378(b)(4) of the State CEQA because it involves only acceptance of the quarterly fiscal report and various adjustments to the budget, therefore it is governmental fiscal activity which does not involve any commitment to any specific project and 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
General Fund Overview
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 based on revenue and expenditure trends through the second quarter of fiscal year 2014/15 for the City's General Fund. The Amended Budget column includes all Council approved changes to the fiscal year 2014/15 adopted budget that have taken place through the end of the second quarter ending December 31, 2014. The Projected column lists the fiscal year 2014/15 projections for revenues and expenditures as of June 30, 2015. The table also includes an appropriation of $1.8 million from reserves to establish a capital improvement project, Telegraph Canyon Road Erosion Repair and $0.3 million from reserves for the purchase of a commercial property along Third Avenue, which staff is recommending to the City Council. These appropriations are not reflected in the Amended Budget column as the appropriation occurred after the end of the Second Quarter and is outside of this reporting period. However, due to the projected impact to operating reserves it is included on this table to better reflect projected operating reserves as June 30, 2015.
Notes:
1. The Amended Budget and Projected totals do not include prior year appropriations for capital improvement projects and other encumbrances totaling $3.7 million that were carried forward into the fiscal year 2014/15 budget. These expenditure impacts are already reflected in the fund balance as of July 1, 2014 and are therefore not included in the above table.
2. The table includes a staff recommended appropriations of $1.8 million for the Telegraph Canyon Road Erosion Repair CIP and $0.3 million for the purchase of a commercial property along Third Avenue.
3. The revenues reflected in the Amended Budget column reflect revenues of $276,446 that should have been added to the budget as part of budget amendments approved by Council through 12/31/14 but due to an administrative error these revenues were not budgeted. In order to more accurately reflect the fiscal impact of the budget amendments through 12/31/14 these revenues are reflected in the Amended Budget column.
The City's financial outlook appears stable through the end of the second quarter. Staff is projecting revenues of $137.6 million and expenditures of $136.9 million, for a projected positive impact of $0.7 million. However, there has been one prior approved appropriation ($90,000 for two propositions included in the November 2014 election), Council will consider two other appropriations with fiscal negative impact in the current fiscal year ($1.8 million for the Telegraph Canyon Erosion Repair CIP and $0.3 million for the purchase of a commercial property along Third Avenue). Taking into consideration these appropriations, the General Fund is projected to end the current fiscal year with a decrease in fund balance of approximately $1.5 million. Staff will continue to evaluate revenue and expenditures to identify ways to mitigate the projected impact on General Fund reserves.
In total, General Fund revenues are tracking close to budget and are projected to increase by $0.3 million above the current amended budget. This projected increase reflects the net impact of various revenue increases and decreases in individual revenue categories. Most significantly, Franchise Fees, Other Revenues, and Transient Occupancy Taxes reflect higher than anticipated revenues of approximately $1.2 million. These increases are mitigated by revenue shortfalls of approximately $1.0 million reflected in Revenue from Other Agencies, Charges for Services, Sales Tax in Lieu, and Use of Money and Property.
General Fund expenditures are tracking slightly below budget and are projected to come in approximately $0.5 million below budget. Staff is projecting $0.5 million in savings for General Fund departments based on year to date expenditure trends. Most City departments are on track to end the year with expenditure savings. Details of projected General Fund revenues and expenditures can be found in Attachment 1 (Second Quarter Financial Report).
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 half of the year, staff is projecting to end the fiscal year with a projected deficit of $0.6 million for the current fiscal year, which would reduce the net position (reserves) of this fund to approximately $85,000. Projections for the same time last fiscal year indicated a similar trend.
The table below compares the budgeted revenue and expenditures to the projected revenues and expenditures for June 30, 2015. Expenditures are currently on trend to exceed revenues. Staff will continue to monitor this projected shortfall and will make adjustments in an effort to mitigate further impact to the Development Services Fund's reserves.
Development Services Fund Summary
Budget Amendments
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. The following section reflects the recommended budget amendments for the General Fund by Department, as well as other Funds by Fund.
General Fund Budget Amendments - Staff is recommending budget amendments in the following departments: Non-Departmental, Animal Care Facility, Recreation, Library, Fire, Police, Public Works, and Human Resources. These changes result in no net fiscal impact to the General Fund.
Non Departmental - Staff is requesting the following budget adjustments in the Non-Departmental budget:
· The Non-Departmental budget includes all General Fund discretionary revenues, including property tax, sales tax, franchise fees, and vehicle license fees. During the first half of the fiscal year, City Council approved a series of appropriations that reflected no net fiscal impact to the General Fund but due to an administrative error, the budget was not amended to reflect the offsetting revenues. In order to correct this oversight, staff is recommending the appropriation of $276,446 in Franchise Fee revenues. This change will balance these previous appropriations. In order to more accurately reflect the impact of the budget amendments through December 30, 2014, these appropriations are included in the Amended Budget column of the General Fund Summary table. This appropriation does not result in an additional fiscal impact to the General Fund.
· Over the last few years, office chairs have not been replaced in City facilities and are coming to the end of their useful life. Additionally, a wellness committee has been organized by employees to encourage the importance of health and wellness. Staff is requesting an appropriation of $50,000 to the Supplies and Services category for the replacement of chairs and in support of the employee wellness program for gym equipment. This appropriation would be offset by unanticipated revenue, resulting in no net impact to the General Fund.
Animal Care Facility (ACF) - The ACF has received donations/grants from various sources that include H.E.A.R.T. of Chula Vista, PetSmart Charities, PETCO Foundation, Rescue Organizations, and private donors. These unanticipated revenues total $86,500 and staff is requesting to appropriate these funds to address various operational needs. These funds will be used to replace one animal control truck ($41,000), replace two animal transport units and associated installation costs ($36,000), purchase and install four LED emergency vehicle light bars for safety reasons for all four animal control trucks ($3,000), and various repair costs for the animal control trucks ($6,500). Staff is requesting an appropriation of $71,000 be made to the Capital Expense category and $15,500 be appropriated to Supplies and Services for these expenses; these costs will be fully offset by the donations revenue. The requested appropriation results in no net fiscal impact.
Recreation - The Recreation Department is requesting a transfer of $9,804 from the Utilities expense category to the Supplies and Services category in order to pay for T-1 and T-3 data lines. This transfer is required as these expenses were re-categorized by the Finance Department as supplies and services. The requested transfer results in no net fiscal impact.
Library - The Library has received donations and grants from various sources totaling $24,575; these donations include: the Friends Executive Board ($15,000), the Civic Center Friends ($2,000), the Stanley/Stearns Fund at the San Diego Foundation ($5,000), The Selma Harris Family and Civic Center Friends ($550), the Chula Vista Women's Club ($400), Target Corporation ($1,000) and the Friends of the Heritage Museum ($625).
The donations from the Friends Executive Board, the Selma Harris Family and Civic Center Friends and the Woman's Club will be used to purchase various books and reading materials for teens and children. The donation from Civic Center Friends will be used to purchase contemporary teen furniture as part of a "Teen Focus" project. The Target Corporation grant will be used for the Kindergarten Boot Camp Program and the donation from the Friends of the Heritage Museum will be used for operating expenses at the Heritage Museum per their MOU agreement. Staff is requesting that $23,405 be appropriated to the Supplies and Services budget, $1,000 be appropriated to the Personnel Services budget, and that $170 be appropriated to the Utilities budget; these appropriations will be fully offset by unanticipated revenue resulting in no net fiscal impact.
Fire - The Fire Department is requesting a transfer of $33,600 from the Utilities Expense Category to the Services and Supplies Expense Category to cover costs associated with the data lines provided to the Fire Stations. These costs were included in the Utilities budget but it was subsequently determined that these costs should be paid from Supplies and Services.
Police - The Police Department is requesting the following budget adjustments:
· A transfer of $100,000 from the Capital category to the Supplies and Services category for costs associated with the body worn camera program. These costs were originally included in the Capital expense category but as the cameras do not meet the $10,000 capital threshold, the purchase of the body worn cameras was posted in the Supplies and Services category. This transfer will allow this equipment purchase to be accurately reflected within the City's financial system. There is no net fiscal impact as a result of this change.
· A transfer of $300,000 from Personnel Services to the Supplies and Services category for projected cost overages in uniforms, training, ammunition, ARJIS fees, and prisoner transport costs. There is no net fiscal impact as a result of this change.
· A transfer of $145,000 from Personnel Services to the Utilities expense category is also requested in order to offset higher than anticipated gas and electric costs. There is no net fiscal impact as a result of this transfer.
Public Works/Human Resources - An appropriation of $6,700 to the Supplies and Services expenditure category of the Public Works' budget is requested in order pay for the repair and replacement of the bollards that were damaged due to an accident that took place on Third Avenue. The requested Supplies and Services appropriations will be offset by unanticipated revenue received from the responsible insurance company that have been realized in the Human Resources Department. The Human Resources Department's budget will be amended to reflect this unanticipated revenue.
Public Works - An appropriation in the amount of $7,365 to the Public Works' Supplies and Services expenditure category is requested to fund a display that will showcase a laundry-to-landscape graywater system as a water conservation opportunity for city residents to consider. The display will provide relevant information such as potential water savings, municipal permitting requirements, and safety/health best practices regarding gray water treatment. Once completed, the display will be incorporated into the City of Chula Vista's South Bay Energy Roadshow Trailer. Funding for this project is provided by grant from the Sweetwater Authority.
Budget Amendments to 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:
Community Development Block Grant (CDBG) Fund - Staff is requesting an appropriation of $14,000 to the Neighborhood Stabilization Program in the CDBG Fund. These funds will be used to establish a property management budget for a city-owned affordable housing unit. These costs will be offset by revenue generated from rental payments received from the tenant as well as the County Housing Authority for Section 8 Program rental subsidies. This appropriation results in no net fiscal impact to the CDBG Fund.
HOME Program Fund - Staff is requesting a revenue offset appropriation of $65,000 in the HOME Program Fund. The proposed budget amendment in the Home Investment Partnerships Act Program will establish the property management budgets for five city-owned affordable housing units. These costs will be offset by revenue generated from rental payments received from the tenant as well as the County Housing Authority for Section 8 Program rental subsidies. This appropriation results in no net fiscal impact to the HOME Program Fund.
Development Services Fund - Development Services has experienced a sharp increase in the use of credit cards as a form of payment. As a result the Department has exceeded the budget for credit card transaction fees and is requesting a transfer of $21,100 from Personnel Services to the Other Expenses category for these increased expenditures. There is no net fiscal impact as a result of this transfer.
State Grants Fund - The City was awarded a $1.0 million grant from the State of California for a homebuyer program. Funds will be used for the implementation of the City's Homebuyer Assistance Program and all related costs associated with the administration of the program (staff time and Contracted Services). The appropriation of $1.0 million will be fully offset by the grant funds resulting in no net fiscal impact to the State Grants Fund.
Federal Grants Fund- Staff is requesting a transfer from the Supplies and Services category of $81,580 to the Other Expense category for the University Park and Research Center grant budget. The fiscal year 2015 budget included funding for contractual services (Supplies and Services); since the adoption of the budget, staff has determined that the project work will be performed through a combination of consultant's and City Staff. In order to reimburse the City staff time spent on this project, a transfer is needed to add funds for City Staff Charges (Other Expenses). There is no net fiscal impact as a result of this transfer.
Transportation Sales Tax (TransNet) Fund and Other Transportation Programs Fund - Capital Improvement Projects STL368, STL375 and STM377 were funded from the Highway Safety Improvements Program, Safe Route Program, and Bicycle Transportation Account grants respectively, within the Other Transportation Programs Fund. All eligible capital improvement costs for these projects (STL368, STL375, and STM377) have been incurred; however expenditures totaling $6,997 were posted to the TransNet Fund in error. Conversely, $543 in costs related to STL364 and TF368 should have been posted to the Other Transportation Programs Fund but were posted to the TransNet fund. Staff is requesting an appropriation in the amount of $6,454 from the available fund balance of the Other Transportation Programs Fund to reimburse the TransNet Fund for the net impact of these changes.
Traffic Signal Fund and Other Transportation Programs Fund - Capital Improvement Project TF376 was funded from the Highway Safety Improvements Program within the Other Transportation Programs Fund. All eligible capital improvement costs for TF376 have been incurred; however expenditures totaling $25,738 were posted to the Traffic Signal Fund in error. Staff is requesting that an appropriation in the amount of $25,738 from the available fund balance of the Other Transportation Programs Fund to the Transfers Out category and a matching appropriation to the Transfers In category of the Traffic Signal Fund be made to reimburse the Traffic Signal Fund for expenditures incurred in prior fiscal years.
Equipment Replacement Fund - the Police Department is requesting an appropriation of $37,079 to the Equipment Replacement Fund's Capital expense category for the purchase of a Police vehicle. This appropriation will be offset by revenue received in an insurance claim for the damaged Patrol vehicle. There is no net fiscal impact as a result of this appropriation.
Open Space, Maintenance and Community Facility Districts - An appropriation of $319,000 to the Utility expense category of various open space, maintenance and community facility districts is requested to address increased water expenses. An additional $25,000 appropriation to the Supplies and Services category is also requested for increased landscape contract costs. These appropriations will be funded from the available fund balance of each district. The Public Works Department programs the annual Open Space District and Community Facility District budgets based on anticipated activity. The maintenance costs associated with each District are borne by property owners within the Districts.
Central Garage Fund - The San Diego Metropolitan Transit System (MTS) has consolidated the Chula Vista Transit operations into their South Bay Yard operations and vacated the Public Works Center Yard. MTS has assumed all City transit fleet related-contracts associated with the maintenance and operation of transit facilities and the City's Central Garage Operations Fund has assumed the maintenance costs of the Compressed Natural Gas station estimated at $9,130 and the compressor repair cost estimated at $9,500. Staff is requesting an appropriation in the amount of $18,630 to Supplies and Services category of Central Garage budget from its available fund balance to account for these increased costs.
The Central Garage Fund's budget also includes reimbursements from Transit for Compressed Natural Gas fuel expenses. The Central Garage Fund will no longer incur these costs on behalf of Transit with the transition. As a result staff is recommending a reduction of $42,000 in the Supplies and Services category and a corresponding reduction of $42,000 in revenues to reflect this change.
DECISION-MAKER CONFLICT
Each of the decisions contemplated by this action either: (i) is not site specific; (ii) is ministerial, secretarial, manual, or clerical in nature, thus, not requiring the members to make or participate in making a governmental decision, pursuant to California Code of Regulations Title 2, section 18702.4(a); or (iii) 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 18705.2(c).
Staff is not independently aware, nor has staff been informed by any City Councilmember, 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 2014/15 budget will result in appropriations and budget amendments in the following departments: Non-Departmental, Human Resources, Animal Care Facility, Public Works, Library, Police, Fire, and Recreation. There is no net fiscal impact to the General Fund as a result of the proposed additional changes in the Second Quarter Report.
Summary of Budget Appropriations and Amendments by Department
Other Funds - Approval of the resolution amending the fiscal year 2014/15 budget will result in appropriations and budget amendments to various funds. The corresponding fiscal impact is included in the table below.
Summary of Budget Appropriations and Amendments by Fund
In addition to the appropriations included above, staff is also recommending a number of transfers between expenditure categories for various departments and funds. These changes result in no net fiscal impact.
Summary of Requested Transfers within Departments/Funds
There is no net fiscal impact to the following funds: Federal Grants Fund, States Grant Fund, Development Services Fund, Home Program Fund and the Community Development Block Grant Fund.
Projected impacts to the remaining funds are as follows:
· The amendments in the various Open Space Districts and Community Facility Districts result in a $344,000 net impact to these funds. The appropriations will be made from the available fund balances of these funds.
· The appropriation of $18,630 in the Central Garage Fund will be made from the available fund balance of this fund.
· The revenue adjustments to the Traffic Signal Fund ($25,738) and the Transportation Sales Tax Fund ($6,454) result in a positive impact to these funds.
· The appropriation of $32,192 in the Other Transportation Programs Fund will be made from it's the available 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. Second Quarter Financial Report
Staff Contact: Angelica Aguilar, Finance Department