city of Chula Vista

File #: 14-0598    Name:
Type: Consent Item Status: Passed
In control: City Council
On agenda: 11/4/2014 Final action: 11/4/2014
Title: QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDING SEPTEMBER 30, 2014 RESOLUTION NO. 2014-203 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING VARIOUS AMENDMENTS TO THE FISCAL YEAR 2014/15 BUDGET TO ADJUST FOR VARIANCES, AND APPROPRIATING FUNDS THEREFOR (4/5 VOTE REQUIRED)
Attachments: 1. Item 7 - FY2015 First Quarter Budget Amendments Reso, 2. Item 7 - Q1 FY15 Financial Report.pdf
Title
QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDING SEPTEMBER 30, 2014
 
RESOLUTION NO. 2014-203 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING VARIOUS AMENDMENTS TO THE FISCAL YEAR 2014/15 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.  
 
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 Environmental Review Coordinator 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.
 
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 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 first quarter ending September 30, 2014.  The projected column lists the fiscal year 2014/15 projections for revenues and expenditures as of June 30, 2015.  The following table reflects the unaudited General Fund reserves as of June 30, 2014 as well as the projected General Fund reserves for June 30, 2015.
 
General Fund Summary
 
 
Adopted
Amended
Projected
General Fund Reserve
Budget
Budget
(millions)
Reserves - July  1, 2014 (unaudited)
$12.73
$12.73
$12.73
Revenues & Transfers In1
$134.53
$135.67
$136.51
Expenditures & Transfers Out2
($134.53)
($134.73)
($135.47)
Pending Appropriations 3
$0.00
$0.00
($0.96)
Projected Surplus/Deficit
$0.00
$0.94
$0.09
Projected Fund Balance for
$12.73
$13.67
$12.82
June 30, 2015
 
 
 
Percentage of Operating Budget
9.46%
10.15%
9.46%
 
Notes:
1.      The City Council Adopted budget was balanced and did not project an increase in fund balance for the General Fund.  The Projected surplus reflected in the Amended Budget is a result of a greater than anticipated increase in assessed values.  After the adoption of the budget, the City received revised assessed values, which increased the projected amount for Property Tax and Vehicle License Fee revenues.  These revenues were recognized by the City Council as part of a mid-year budget amendment.  
 
2.      The Amended Budget and projections reflected in this table 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 estimated fund balance as of July 1, 2014 and are therefore not included in the above table.
 
3.      Pending appropriations are primarily for anticipated personnel cost increases related to negotiated wage settlements reached with the International Association of Firefighters (IAFF) and the Chula Vista Police Officers Association (CVPOA).
 
 
The City's financial outlook appears stable through the end of the first quarter. Although staff is projecting fiscal year-end variances in both revenues and expenditures, the variances are offsetting and are not anticipated to negatively impact the City's projected year-end fund balance. 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 ($0.09 million).  
 
Overall, General Fund revenues are projected to increase by $0.84 million above the current amended budget. This increase is due to improved Franchise Fee and Transient Occupancy Tax revenues that are projected to increase by a combined $1.45 million over the current budgeted level.  This increase is partially offset by a projected decrease of $0.49 million in Sales Tax and Sales Tax in Lieu revenues that have been revised to grow at 2% versus the 4% growth rate that was assumed in the budget.
 
Staff is projecting $0.74 million in overages for General Fund Departments based on expenditure trends that consist of the following:
 
·      A $400,000 increase in the Public Works utilities budget for water costs at City parks based on the previous fiscal year's actual water expenses, projected rate increases, and continuation of drought conditions.
 
·      A $300,000 reduction in salary savings in the Non-Departmental budget based on lower than anticipated turnover rate.
 
·      A $24,000 increase in utility expenses in the Non-Departmental budget for utility costs at the City owned property on Bay Boulevard.
 
·      A $15,000 increase in the City Clerk Department for election related expenses.
 
Staff is recommending budget amendments in order to address these issues.  The fiscal impact of these changes is reflected on the General Fund Summary table include on the previous page.
 
The first quarter expenditure projection also reflects $0.96 million in pending appropriations of which $0.82 million are for anticipated personnel costs related to negotiated wage settlements reached with the IAFF and CVPOA.  The CVPOA MOU and associated budget appropriations are scheduled for Council consideration in November 2014.  The IAFF MOU and associated budget appropriations will be brought to Council by year end.  While these appropriations were not made in the First Quarter, they are included in this report to more accurately reflect where staff anticipates ending the fiscal year.  The balance of the pending appropriations are for City Clerk clerical support costs, continuation and expansion of the citywide LEAN training program, and the City's cost share for maintenance of the Otay Valley Regional Park.  With the exception of the appropriations for the MOU agreements, these budget amendments are discussed in the following section.   
 
General Fund - Budget Amendments
Staff is recommending budget amendments in the Library, Non-Departmental, Animal Care Facility, City Clerk, Fire, Public Works and Recreation departments.  These changes result in no net fiscal impact to the General Fund.
 
Library - The Library has received donations and grants from various sources that include the Chula Vista Public Library Foundation ($50,000), the Friends of the Library ($15,000) and Target Corporation ($2,000).  The donations from the Chula Vista Public Library Foundation and the Friends of the Library will be used to purchase furnishings and pay for renovations at the new Otay Ranch community space known as the "The Hub".  The grant from Target Corporation will be used to continue the Kindergarten Boot Camp program at the South Chula Vista Branch Library. Staff is requesting that $66,040 be appropriated to the Supplies and Services budget and that $960 be appropriated to the Personnel Services category of the Library Department budget; these appropriations will be fully offset by unanticipated revenue.
 
Non-Departmental/Various - The fiscal year 2014/15 budget includes $1.4 million in budgeted salary savings in the Non-Departmental budget.  These savings are actually realized in the department budgets as turnover occurs.  Due to lower than anticipated turnover and the departments' requests to fill positions as they become vacant, staff is recommending a number of adjustments to the salary savings budget.
 
1.      The City continues to offer a voluntary furlough program where staff can elect to take a week of unpaid leave.  In the current fiscal year, this program will generate approximately $150,110 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 2014/15 budget assumed a 10% increase in medical and dental insurance premiums.  Actual premiums were lower than anticipated, resulting in a budget savings of approximately $130,134.  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.  
 
3.      Finally, staff recommends an additional reduction of $300,000 in budgeted salary savings in the Non-Departmental budget based on unanticipated revenues previously recognized by the City Council.  These changes combined will reduce the amount of budgeted salary savings in the Non-Departmental budget to $798,800; this reduction will allow the City to continue to fill positions as they become vacant and minimize service delivery impacts as a result of turnover.
 
Non-Departmental - Staff is requesting an appropriation of $24,000 to the Non-Departmental Utilities budget to pay for utilities for the City's property located on Bay Blvd.  These expenses were inadvertently excluded from the adopted budget.  This appropriation will be offset by unanticipated revenues previously recognized by the City Council.
 
Administration - The City of Chula Vista and the US Olympic Committee (USOC) have entered into a joint agreement to explore the transfer of ownership and operations of the Chula Vista Olympic Training Center to the City of Chula Vista.  The agreement includes the use of consultant JMI Sports to assist in evaluating operating models. The cost of the consultant is shared between the City and the USOC. The City's maximum share of the consultant cost is $35,000.  Funding for this cost will be offset by salary savings in the Administration Department budget. $15,000 has already been transferred for this purpose; staff is requesting that the remaining $20,000 be transferred from the Administration Personnel Services budget to the Supplies and Services budget for costs related to consultant costs for the Olympic Training Center analysis.
 
In addition, staff is also requesting a $40,000 appropriation for the Continuous Improvement (Lean) program for training for City employees.  The appropriation will be used to hire an instructor to continue to provide City employees training in the Lean Certificate program and also expand training opportunities by offering a Lean primer to City employees.  This appropriation will be offset by unanticipated revenues.
 
Animal Care Facility - In December 2012, the County of San Diego Animal Services contracted with the Chula Vista Animal Care Facility (CVACF) to perform two spay and neuter clinics at their County Animal Shelters.  In July 2014, the County of San Diego notified CVACF that they will be adding two more clinics a month effective immediately.  The additional revenues will be used to pay for medical supplies and hourly wages.  Staff is requesting an appropriation of $34,000 to the Personnel Services and $8,000 to the Supplies and Services categories of the Animal Care Facility, which will be fully offset by additional County revenues.
 
City Clerk - The fiscal year 2015 budget includes $219,000 for the November elections for the cost of two propositions and the Mayor, City Council and City Attorney elections.  This budget was established based on a preliminary estimate received from the San Diego County Registrar of Voters.  Based on the most recent cost estimate, staff is recommending an appropriation of $15,000 to the City Clerk's Services and Supplies budget for the costs associated with the November election. This appropriation will be offset by unanticipated revenues.
 
In addition, an appropriation of $20,000 to the Personnel Services budget of the City Clerk's Office is also requested to fund hourly wages.  The addition of an hourly wages budget will allow the City Clerk to hire clerical support for the balance of the current fiscal year.  The department will continue to evaluate the need for this position and will make a recommendation on the continuation of funding for clerical support as part of the development of the fiscal year 2015/16 budget.  The appropriation of $20,000 will be offset by unanticipated revenues.
 
Fire - The Fire Department is requesting a number of budget amendments that result in no net fiscal impact to the Department's budget.  These changes are described below:
 
·      The Fire Department received a grant from SDG&E in the amount of $2,500 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 that the City Council accept the $2,500 donation from SDG&E and appropriate these funds to the Department's Supplies and Services expense category.  
 
·      The Fire Department received a contribution from Las Primeras volunteer organization in the amount of $1,000 to support the City's Citizen's Adversity Support Team (CAST) volunteer program. These funds will be used to help with the purchase of training materials, booklets, printing needs, hotel costs, and other needs as required by the CAST volunteer program. Staff is requesting that the City Council accept the $1,000 donation from Las Primeras and appropriate these funds to the Department's Services and Supplies expense category.
 
·      The Fire Department's Training Division offers specialized training classes to other agencies. From August 13 through September 19, 2014, the Training Division provided a total of four training sections to two different agencies and received a total of $23,040 in unanticipated revenue. These funds will be used to offset costs related to the provision of training.  Staff is requesting to appropriate these revenues to offset appropriation of $2,330 to Personnel Services and $20,710 to Services and Supplies.
 
·      Staff is requesting a transfer of $16,800 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.
 
·      Staff is requesting an appropriation of $23,580 in Personnel Services to offset FLSA premium pay related to the Advance Life Support (ALS) program. This expense will be offset by a Transfer In from the Advance Life Support Program Fund in the amount of $23,580.
 
 
Public Works - Based on fiscal year 2014 actuals and expenditures through the first quarter, the Public Works Department is projected to exceed their budget for water expenses by approximately $400,000.  This overage reflects an increase in water rates and in water usage as a result of the drought conditions.  The Public Works budget includes the water costs for City parks.  Staff is recommending an appropriation of $400,000 to the Utilities expenses budget to address this projected overage.  
 
The Public Works Department has received $4,541 in unanticipated revenue from San Diego Gas & Electric's Business Energy Efficiency Incentive Program as a result of recent HVAC upgrades at the South Library.  Staff is requesting to appropriate this revenue to the Supplies and Services expense category in the Public Works budget. These funds will be used to repair an inoperable solar photovoltaic (pv) inverter at the Living Coast Discovery Center.  The new inverter will ensure that the Center's 6 kW renewable energy system is working at full capacity and helping to offset the facility's monthly utility costs, which are paid for by the City.  
 
The Public Works Department has also received $300 in donations to support the re-printing of the popular Bike Chula Vista map and resource guide. This donation will be appropriated to the Supplies and Service expense category of the Public Works Department budget for this purpose.  
 
Recreation - Staff is recommending an appropriation of $81,510 to the Recreation Department's Other Expenses budget category to pay the City and County of San Diego for management of the Otay Valley Regional Park.                   
 
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:
 
Police Grants Fund - Staff is requesting a reduction of $151,813 in Personnel Services and a $20,000 reduction in Supplies and Services in the Public Safety Realignment Program budgeted in the Police Grants Fund. A revenue reduction of $117,558 from Revenues from Other Agencies is also requested. These adjustments are necessary in order to align revenues and expenditures to the available balance available within this program.
 
Federal Grants Fund - Staff is requesting a transfer from the Supplies and Services category of $131,415 to the Other Expenses category for the University Park & 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 City staff time spent on this project, a transfer is needed add a budget for City Staff Charges (Other Expenses).  Staff is also requesting a revenue offset appropriation of $18,156 to the Other Expenses budget in order to fund the staff time.  This additional appropriation will allow the City to fully expend available grant resources.
   
State Grants Fund - An appropriation of $14,116 to Supplies and Services in the States Grant Fund for Mobile Recreation Program is requested. This appropriation is funded by revenues that were received from the California Parks and Recreation Department to support the City's Mobile Recreation Program.  
 
In addition, the Library Department has received $15,000 in State grant funding to support the Literacy Program.  The purpose of the grant from the California State Library, through the California Library Literacy Services, is to support adult literacy services in a library setting.  This enables the library to continue to provide literacy services in the Educational Services Wing at the South Chula Vista Library in partnership with a volunteer literacy organization, Laubach Literacy Council.  The Library Department is requesting to appropriate these funds to the Personnel Services expenditure category to fund hourly staff for the Literacy program.
 
There is no net fiscal impact as a result of these appropriations.
 
Otay Ranch Preserve - A revenue reduction of $200,000 in the Other Revenues category of the Otay Ranch Preserve fund is requested in order to balance budgeted expenditures and revenues.  This reduction was inadvertently left out of the fiscal year 2014/15 budget. The revenue reduction should have accompanied a $200,000 expenditure reduction that was a late amendment to the proposed budget and subsequently was approved by Council as part of the adoption of the fiscal year 2014/15 budget.  There is no actual fiscal impact as a result of this change.
 
Equipment Replacement Fund - A $21,727 appropriation to the Capital expenditures category of the Vehicle Equipment Replacement Fund is requested for the purchase of a replacement police motorcycle. This purchase will be funded from insurance revenue that was recovered by the City as a result of a motor officer involved traffic collision.  This revenue was received in the prior fiscal year; therefore, this appropriation will be made from the available fund balance of the Equipment Replacement Fund.  
 
DECISION-MAKER CONFLICT
Each decision contemplated by this action either: (i) is not site specific; or (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). Consequently, these decisions do not present conflicts under the Political Reform Act (Cal. Gov't Code § 87100, et seq.)
 
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 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
DEPT/FUND
DESCRIPTION
EXPENSE
REVENUE
NET
GENERAL FUND
 
 
 
 
City Clerk
City Clerk Additional Election Expenses
$15,000
$0
$15,000
 
City Clerk Hourly Wages
$20,000
$0
$20,000
Administration
Administration Continuous Improvement Program
$40,000
$0
$40,000
 
Administration Olympic Trng. Ctr. Consultant Agreement
$0
$0
$0
Non-Departmental
Utilities for City property at Bay Blvd.
$24,000
$0
$24,000
 
Salary Savings Reduction
$300,000
$0
$300,000
Non-Departmental/Various* (see table below)
Flexible Benefit & Work Furlough Savings Salary Adjustments
$0
$0
$0
Animal Care Facility
Animal Care Facility Clinic Contract
$42,000
$42,000
$0
Fire
FLSA Premium Pay for ALS Program
$23,580
$23,580
$0
 
Fire Las Primeras Donation
$1,000
$1,000
$0
 
Fire SDG&E Grant
$2,500
$2,500
$0
 
Training Reimbursement Revenue appropriations
$23,040
$23,040
$0
 
Utilities transfer to Services and Supplies
$0
$0
$0
Public Works
Donation for Bike Chula Vista Map
$300
$300
$0
 
Public Works Water Increase for Park Maintenance
$400,000
$0
$400,000
 
Nature Center Equipment Repair
$4,541
$4,541
$0
Recreation
Otay Valley Regional Park Management City Cost Share
$81,510
$0
$81,510
Library
Library Donations and Grants
$67,000
$67,000
$0
 
TOTAL GENERAL FUND
$1,044,471
$163,961
$880,510
 
 
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
 
DEPARTMENT
ADJUSTMENT
City Council
($3,280)
City Clerk
($618)
City Attorney
($16,742)
Administration
($5,626)
Information Technology Srvcs
($3,675)
Human Resources
($2,900)
Finance
($5,657)
Non-Departmental
$280,244
Animal Care Facility
($1,937)
Planning & Building Services
($13,280)
Police
($107,700)
Fire
($23,121)
Public Works
($84,204)
Recreation
($9,425)
Library
($2,079)
TOTAL
 $                       -   
 
 
Net Impact  - The changes in the General Fund will result in a negative impact of approximately $0.9 million, these appropriations will be offset by discretionary revenues recognized by a previous Council approved budget amendment.  With these changes budgeted General Fund revenues will exceed budgeted expenditures by approximately $62,000.  Essentially, the General Fund remains balanced.  The following table reflects these changes
 
Description
Revenues
Expenditures
Difference
Adopted Budget
 $         134,536,744
 $         134,536,744
 $                        -   
Council Approved Budget Amendments
 $            1,136,939
 $               194,361
 $               942,578
Amended Budget as of 9/30
 $         135,673,683
 $         134,731,105
 $               942,578
Proposed Budget Amendments
 $               163,961
 $            1,044,471
 $              (880,510)
Updated Amended Budget
 $         135,837,644
 $         135,775,576
 $                 62,068
 
 
Other Funds
Approval of the resolution amending the fiscal year 2014/15 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
Defibrillator Operating Supplies
$8,615
$0
$8,615
 
FLSA Premium Pay for ALS Program
$23,580
$0
$23,580
 
Paramedic Training Overtime Costs
$148,968
$0
$148,968
Police Dept Grants Fund
Budget Reduction
-$171,813
-$117,558
-$54,255
Federal Grants Fund
Federal Grants Fund Univ. Park Research  Project city staff services
$18,156
$18,156
$0
State Grants Fund
State Funding for Literacy Program
$15,000
$15,000
$0
 
Appropriations for Mobile Recreation Program
$14,116
$14,116
$0
 
EMPG Grant Adjustment
$1,173
$1,173
$0
Otay Ranch Preserve
Otay Ranch Preserve Rev. Adj.
$0
-$200,000
$200,000
Equipment Replacement
Police Motorcycle Purchase
$21,727
$0
$21,727
 
TOTAL OTHER FUNDS
$79,522
-$269,113
$348,635
 
There is no net fiscal impact to the following funds: State Grants Fund, Federal Grants Fund, and the Otay Ranch Preserve Fund.
 
Projected impacts to the remaining funds are as follows:
 
·      The amendments in the Police Grants fund reduce the budget for the Public Safety Realignment Program in order to align the budget with available grant funds.  These changes will result in a balanced budget for this grant resulting in no net fiscal impact.  
 
·      The appropriation of $21,727 in the Equipment Replacement Fund will be made from the available fund balance of this fund.  
 
·      The appropriation of $181,163 in the Advance Life Support Fund will be made from the available fund 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