Title
A. QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDING SEPTEMBER 30, 2017
B. RESOLUTION NO. 2017-208 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING VARIOUS AMENDMENTS TO THE FISCAL YEAR 2017/18 BUDGET TO ADJUST FOR VARIANCES AND APPROPRIATING FUNDS THEREFOR (4/5 VOTE REQUIRED)
Body
RECOMMENDED ACTION
Recommended Action
Council accept the report and adopt the resolution.
Body
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. It also provides the opportunity to review and update Measure P funding status and the long-term financial plan.
In preparing the quarterly financial projections, staff has identified various budget changes that are needed to 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.
Two new sections have been added to the attached Quarterly Financial Report. The report now includes an update on Measure P actual revenues and expenditure to date and an updated Long Term Financial Plan, reflecting all Council approved items since the adoption of the Fiscal Year 2017/18 budget in June.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
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.
Body
Environmental Determination
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. There is also a brief discussion of Measure P and the long-term financial plan.
The following chart summarizes the projections for the first quarter of fiscal year 2017/18 for the City’s General Fund. The amended budget column includes all Council approved changes to the fiscal year 2017/18 adopted budget that have taken place through the end of the first quarter ending September 30, 2017. The proposed column lists the amended budget along with proposed adjustments for revenues and expenditures as of June 30, 2018. The third column includes projected revenues which are being watched for possible adjustment at a later date. The following table reflects the unaudited General Fund reserves as of July 1, 2017 (beginning fund balance) as well as the projected General Fund reserves for June 30, 2018 (projected ending fund balance).
Note 1 -The Original 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 2017/18 budget. These expenditure impacts are already reflected in the estimated fund balance as of July 1, 2017 and are therefore not included in the above table.
The voter approved, temporary ½ cent sales tax measure is allowing the City to make progress toward replacing and repairing failing City assets. Out of the $169,588,935 proposed allocations, the City has expended approximately $3,584,790 through September 30, 2017. Expenditures include bond sale costs of $46,843, Fire Services expenses of $642,269, Police Services expenditures of $2,345,622 and Infrastructure improvements of $550,055. Several projects are in the procurement/bidding process and will be moving forward in the next quarter.
Staff is recommending budget adjustments as summarized in the following tables.
General Fund Adjustments
At the conclusion of the first quarter of the 2018 fiscal year, most of the proposed adjustments are minor inter- and intra-Department transfers or are appropriations associated with offsetting revenue. The most noteworthy adjustment to the General Fund budget is the shift of the $200,000 Small Business Loan Program, which is currently budgeted in the Economic Development Department. This program will now be shown in a separate and new Enterprise Fund. The current year funding for the program will be transferred out of the Non-Departmental Division to the new fund and the Economic Development budget will be reduced by the same amount. The new fund is displayed below among the list of funds in the Other Funds chart.
There is no net cost associated with the proposed first quarter adjustments because all of the proposed expenditure appropriations are offset with budgetary savings elsewhere within the General Fund or by specific offsetting revenues.
At this stage of the year, the Departments are on track with their personnel budgets. The Police and Fire Departments, where overtime costs can easily result in unplanned budget overages, are on target. Given the ongoing fires in the State, it is anticipated that the second quarter will see significant costs associated with providing mutual aid support. Because of the Governor’s declared State of Emergency the costs associated with the mutual aid response will largely be covered by State Office of Emergency Services reimbursement.
Other Funds Adjustments
Outside of the General Fund, there are changes in sixteen cost centers within fourteen different funds. The proposed adjustments, displayed in the chart above, have a net cost of $2,719,895, which are entirely funded with fund balances or current year available revenue. A brief discussion follows on the major adjustments are below.
An appropriation of $217,992 from from the Fire Equipment Lease Fund balance will allow the Fire Department to purchase three auto pulses, monitors and batteries. The revenue supporting this appropriation was received in Fiscal Year 2016-17.
The Supplemental Local Law Enforcement Fund appropriation in the amount of $200,000 will provide funding for the Taser International body-worn cameras and other maintenance/software contracts.
A reduction in revenue of $624,632 for CFD 18M VIL3OR is a correction to the district assessments amount anticipated for the current fiscal year.
As previously discussed in the General Fund section above, the budget for the Small Business Loan Program, previously included in the Economic Development Department, is being moved from the General Fund to a new enterprise fund to be called the Small Business Loan Program Fund (404). The new fund’s budget includes a Transfer In from the General Fund and a corresponding expenditure budget of $200,000.
There are increases to the Development Services Fund of $250,000 in the Supplies & Services category for outside consultant support to help address current volumes and improve turnaround times for priority projects. The additional amount of $79,957 in the Personnel Services category is for the transfer of a Senior Landscape Inspector from the Public Works Department. The expenditures are expected to have revenue offsets resulting in a no net impact to the fund.
The reduction in the Fire Apparatus Lease Fund is due to the three Fire Engine leases that will be paid directly out of the Measure P Fund (see discussion in next section).
The appropriation of $351,600 to the Public Facilities DI Fund is for the purchase of five Police vehicles for the five new Peace Officer positions approved by Council.
In September 2017, the City called bonds for the Eastlake Greens II AD-94-1 Improvement Fund because of the availability of surplus funds. The appropriation from fund balance to the Other Expenses category will allow the payoff of the remaining principal balance in AD 94-1.
Measure P Fund Adjustments
Adjustments to the Measure P fund include adding the $27,124,008 net proceeds from the 2017 lease-revenue bonds as revenue and appropriating $8,445,000 to Supplies & Services and Other Expenses categories for miscellaneous bond related expenses and for the principal and interest payments. The other adjustments to the fund reflect the revision of paying for the approved new Fire apparatus directly from the Measure P fund, eliminating the $244,000 Transfer Out to the Fire Apparatus Fund. Category transfers to the Other Expenses category from the Capital and Supplies & Services categories are intended to record the vehicle and equipment acquisition as principal and interest payments ($137,949 from the Capital category for the new Tiller and $170,238 from the Supplies & Services category for the Computer Aided Dispatch (CAD) equipment).
Technical Corrections
The above items are proposed technical corrections to reverse a prior action on July 11, 2017, Resolution 2017-126. The above funds are debt service funds, where the accounting is different than an expenditure budget. In order for the authorizing documentation to be correct, the original requested budget adjustments will be reversed. This action does not change the authorized use of the funds, so there is no net fiscal impact to report.
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 to the General Fund associated with this action. Across the other funds, there is a net positive impact of $18.7 million, driven primarily by the addition of the Measure P bond proceeds and the new debt service associated with the bonds. Funds for which there are new appropriations being sought have either offsetting revenue or available and assigned fund balance. It is currently projected that fiscal year 2017/18 will remain balanced.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact related to this action for the General Fund. The 2017 Measure P Revenue Bonds will have ongoing debt service costs of $8.4 million per year, which is approximately half of the annual projected revenue. This cost impact was known at the time the bonds were sold, but because the issuance occurred after the Fiscal Year 2017-18 budget was finalized, its proceeds and debt service amounts were not included. The impacts related to actions approved by Council since the adoption of the budget in June 2017 are reflected in the Long Term Financial Plan section of the attached quarterly report.
Note: Includes funding for five new police officer positions and twelve new firefighter positions which are partially offset by SAFER grant funds.
ATTACHMENTS
1. FY2018 First Quarter Financial Report
Staff Contact: David Bilby, Finance Department