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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: DIRECTOR OF FINANCE AND INFORMATION TECHNOLOGY DATE: FEBRUARY 15, 2005 SUBJECT: FY04-05 MIDYEAR FINANCIAL REPORT Staff Coordinator: Kathryn Downs, Accounting Manager RECOMMENDATION 1) Receive and file the midyear financial report; and 2) ADOPT RESOLUTION NO. 2005- , AMENDING RESOLUTION NO. 2004-45, THE BUDGET APPROPRIATION FOR FY04-05, TO ADJUST APPROPRIATIONS IN THE GENERAL FUND, STREET MAINTENANCE FUND, SUBREGION 1 FUND AND EMPLOYEE BENEFITS FUND. EXECUTIVE SUMMARY Based upon Staff’s analysis of the City’s financial activities during the first half of FY04-05, it appears that revenues and expenditures will generally approximate the budget, except as described otherwise in this report. Except as noted below, fund balances as of June 30, 2005 are expected to approximate estimated fund balances presented with the FY04-05 budget. Total estimated General fund revenue is expected to exceed the FY04-05 budget by $127,556. Unlike previous years, expected favorable General fund revenue variances may be significantly less then the last several years. Accordingly, no General fund revenue budget adjustments are recommended at this time. If the City Council approves the recommended General fund expenditure budget adjustments, revised estimated June 30, 2005 General fund reserves will be $13,211,584. INTRODUCTION The Municipal Code of the City of Rancho Palos Verdes requires that a midyear review of the annual budget be presented to the City Council. Based upon Staff’s analysis of the City’s financial activities during the first half of FY04-05, it appears that revenues and expenditures will generally approximate the budget, except as described otherwise in this report. The Summary Schedule of General Fund Revenue is presented below. Discussion regarding revenue projections for several other funds of the City has been included later in the report. It is important to understand that these revenue projections are based upon Staff's analysis using trend comparisons with previous years, reports provided by state, county and local agencies, as well as direct conversations with these agencies. It should be noted that future economic activity, legislation and policy decisions, as well as any other unforeseen circumstances could affect the City's revenue stream for the remainder of FY04-05. The midyear financial report also includes discussion and analysis of anticipated expenditures, the status of major projects not yet completed, and other relevant developments related to the FY04-05 budget. If the activity of a particular fund, department or program is not discussed, there is nothing significant to report and revenues and expenditures are not expected to materially deviate from the amounts budgeted. Throughout the midyear financial report, Staff has recommended several budget adjustments necessary to assure budgetary compliance. FINANCIAL REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS Staff has included the "FY04-05 Combined Summary of Funds - Midyear Financial Report" (Attachment A) to summarize the estimated FY04-05 activity and ending fund balances for all funds within the City. The schedule includes revised revenue and expenditure projections. GENERAL FUND General Fund Revenue It is difficult to estimate future revenue from sources such as utility users taxes and permit fees. These types of revenues are predicated on conditions outside the City’s control. As an example, planning and building permit revenues will fluctuate with the economy, as well as other conditions such as the weather. Additionally, several significant franchise tax revenues are received annually after preparation of the midyear report. For these revenues, Staff has either reported FY04-05 estimated revenues as the budgeted amount or a conservative figure based on the amount of information currently available. SUMMARY SCHEDULE OF GENERAL FUND REVENUE:
Discussion and analysis regarding General fund revenues is presented below. If a particular revenue source is not discussed, there is nothing significant to report and anticipated revenues are not expected to materially deviate from the FY04-05 budget. Property Taxes Based upon projection information provided by the County, property tax revenues are expected to reach $4,332,502 during FY04-05. This represents a $230,372 increase over the amount budgeted for FY04-05 and a 2% increase over the actual amount received in FY03-04. The expected favorable variance can be attributed to the steady increase in the property tax base over the past several years due to continued strength in the local real estate market. Planning Permits – View Restoration Since the inception of the mediation process, fewer view cases have advanced past the mediation process. Staff expects to receive approximately $10,000 of the $84,000 budgeted for view restoration fees. Rental & Fee Revenue Recreation Staff anticipated a 2004 re-opening of Point Vicente Interpretive Center (PVIC) when preparing the original budget document in Spring 2003, and included $121,450 in the FY04-05 rental and fee revenue budget for PVIC. Staff does not expect to receive PVIC rental and fee revenue during FY04-05, as the anticipated re-opening date is now scheduled during FY05-06. General Fund Expenditures Based on a historical analysis of prior years, total General fund expenditures for the first six months of the fiscal year should not exceed a range between 42% and 45% of budgeted appropriations in order to track within budgeted limits. Total General fund expenditures through December 31, 2004 were approximately 37% of budget; therefore, it appears estimated expenditures for FY04-05 will be within the total General fund budget. However, there are a few individual programs that are expected to vary from budget, as discussed below. City Manager Program On March 2, 2004, City Council authorized a lot line adjustment for the property located at 2809 San Ramon Drive. On July 6, 2004, the City Council authorized a lot line adjustment for the property located at 2803 San Ramon Drive. The total cost of the two lot line adjustments was $30,500. Staff requests a budget increase of $30,500 to accommodate the cost of these authorized adjustments. Sheriff Program Since 1999, the City has funded three Community Resource (CORE) deputies to supplement regular law enforcement services provided by the Los Angeles County Sheriff’s Department. Until FY02-03, these positions were funded entirely by state and federal grants. However, due to declining federal grant revenues, the City was required to backfill the funding for this program using General fund money beginning in FY02-03. The City Council decided to reduce the number of CORE deputies from three to two with the adoption of the FY03-04 budget, the first year of the two-year budget cycle. Based on public testimony received at the June 17 and July 1, 2003 meetings, City Council approved an additional $61,500 appropriation to fund the third CORE deputy position in FY03-04. Staff requests a budget increase of $63,500 to maintain the current service level of three CORE deputies during FY04-05. Traffic Management The FY04-05 budget for traffic engineering services is $70,000. Staff anticipates a need for additional traffic engineering services due to greater public participation in traffic related issues such as traffic calming. Staff requests an increase of $40,000 for a total traffic-engineering budget of $110,000. Storm Water Quality The County Sanitation District began performing offshore water quality monitoring in December 2004. Previously, the City’s consultant performed the monitoring. As these consulting services are no longer be required, staff requests a budget decrease of $30,000, from $61,800 to $31,800. Parks, Trails & Open Space Maintenance The maintenance budget includes a $21,000 provision for repairs and extraordinary maintenance. Most of the budget allocation has been consumed to clear weeds and shrubs at the PVIC storm drain line to insure proper coastal drainage. Staff requests a budget increase of $10,000 to facilitate other repairs and extraordinary maintenance needed for the remainder of the fiscal year. Estimated General Fund Balance, June 30, 2005
The FY04-05 budget estimate of the June 30, 2005 unreserved General fund balance was approximately $9.64 million. The $3.56 million estimated favorable variance is primarily comprised of the following:
If the City Council authorizes the budgeted adjustments described in the General fund expenditure section of this report, the June 30, 2005 estimated General unreserved fund balance would be $13,211,584 ($13,325,584 less $114,000 of requested additional expenditure appropriations). The estimated unreserved General fund balance is greater than the City Council’s reserve policy level, currently calculated as $7,226,267 or 50% of $14,452,533 estimated General fund revenue. CAPITAL IMPROVEMENT PROGRAMS Capital Improvement Projects (CIP) Fund Revenue and Transfers In Certain project construction costs are reimbursed with grant funds or transfers from restricted funds of the City (e.g. Proposition C and Quimby funds). The amount of FY04-05 grant revenue or transfers from other funds depends upon the percentage of project completion at fiscal year-end. Current year grant revenue and transfers-in will be less than budget, proportionate to the estimated decrease in year-end project expenditures. Such grant revenue and transfers-in will likely be carried over and re-budgeted to FY04-05 to match the period in which actual project expenditures will be incurred. CIP Fund Expenditures Sixteen projects, with total costs of approximately $10.3 Million, are budgeted for FY04-05. Historically, many projects are not completed prior to fiscal year-end and need to be re-budgeted or carried over as a continuing appropriation to the next fiscal year. Staff expects that this is also true for FY04-05. An update of major projects is included below. PVIC Expansion (FY04-05 budget of 5,076,015, lifetime budget of $5,974,164) Staff anticipates the project will be completed on or about October 1, 2005 within budget. A continuing appropriation will be requested at fiscal year-end for the remaining work to be completed in FY05-06. Annual Residential Overlay (FY04-05 budget of $1,653,100) This project was completed in October 2004 within budget. Annual Arterial Overlay (FY04-05 budget of $1,071,500) Staff expects to review proposals for design and engineering during February 2005, and present the construction contract to City Council in August 2005. Construction should start in September 2005 and be completed by November 2005. A continuing appropriation will be requested at fiscal year end for this project. Open Space Acquisition (FY04-05 budget of $1,000,000) The City’s contribution to purchase about 700 acres of open space related to the City’s NCCP is not likely to occur during FY04-05. Staff will request to carry forward this appropriation to FY05-06. Storm Drain Lining (FY04-05 budget of $500,000) Staff anticipates the entire budget appropriation will be expended during FY04-05. Western/Delasonde Storm Drain Rehabilitation (FY04-05 budget of $350,000) This emergency project will be completed during February 2005. Staff expects that total costs will approximate $700,000, and continue to be funded by the City until reimbursement is received from the City of Los Angeles and Caltrans. Public Works Staff expects to report to City Council in March and request an additional appropriation at that time. In the meantime, Public Works Staff will continue to provide project updates to the City Council in the Friday Report. Forrestal Open Space Improvements (FY04-05 budget of $300,000) Staff anticipates completing this project by the end of the fiscal year within budget. Estimated CIP Fund Balance, June 30, 2005
The FY04-05 budget estimate of the June 30, 2005 CIP fund balance was $598,488. The $11,283 favorable variance is primarily due to additional interest earnings during FY03-04. Community Development Block Grant (CDBG) Fund Revenue CDBG fund revenue is received from the Community Development Commission (CDC) as reimbursement for eligible expenditures approved by the CDC. As discussed in the CDBG Fund Expenditures section, not all of the budgeted projects will be completed by June 30, 2005. Therefore, estimated revenue from CDC reimbursements will be less than budget and proportionate to the decrease in actual expenditures. CDBG Fund Expenditures City Hall Elevator ($564,500 budgeted) Staff anticipates completing this project during February 2005 within budget. Home Improvement Program ($150,000 budgeted) Currently there are four Home Improvement Program projects in the pre-construction phase and five projects in the bid phase. Staff expects to expend the entire budget during FY 04-05 for administrative and rehabilitation costs. Estimated CDBG Fund Balance, June 30, 2005 The CDBG program is managed assuming that all costs incurred will be approved and reimbursed by the CDC. Therefore, the CDBG fund is operated with annual revenues equal to annual expenditures. This management practice results in beginning and ending fund balances of zero. Estimated Development Impact Mitigation (Environmental Excise Tax or EET) Revenue The FY04-05 budget for EET revenue is $188,000. Staff expects to receive about $100,000. When preparing the FY04-05 budget, Planning Staff expected to receive EET for the Trump National housing development (formerly Ocean Trails). The majority of the housing development has not yet entered the building permit phase. EET is paid to the City when building permits are issued. EET Fund Balance, June 30, 2005
The FY04-05 budget estimate of the June 30, 2005 EET fund balance was $613,953. The difference of $425,967 is primarily attributable to the following two factors:
Roadway Beautification Fund Balance, June 30, 2005
The FY04-05 budget estimate of the June 30, 2005 Roadway Beautification fund balance was $423,531. The difference of $349,323 is primarily attributable to the supplemental PVIC funding transfer of $347,228, authorized by City Council on July 6, 2004. SPECIAL REVENUE FUNDS Street Maintenance Fund Expenditures Street Maintenance – Non-Pavement The street maintenance budget includes a $165,000 allocation for roadside repairs and maintenance (e.g. guardrail repairs). Repairs to roadside guardrails have increased due to a higher number of traffic accidents in the public right of way. Staff requests a $20,000 increase to the budget for additional guardrail repairs.
The street maintenance budget also includes a $128,000 allocation for tree trimming. Due to an increased number of emergency tree trimmings to maintain public safety, the budget is not adequate to perform routine scheduled tree trimming. Staff requests an increase of $50,000 for the additional trimming activities. Estimated Street Maintenance Fund Balance, June 30, 2005
The FY04-05 budget estimate for the June 30, 2005 Street Maintenance fund balance was $399,092. The difference of $133,859 was primarily due to City Council action on July 6, 2004. Due to the available balance in the Street Maintenance fund, the City Council redirected a $150,000 General fund transfer (originally budgeted for the Street Maintenance fund) to the CIP fund for PVIC funding. If the City Council authorizes the budgeted adjustments described above, the June 30, 2005 revised estimated Street Maintenance fund balance would be $195,233. Subregion 1 Maintenance Fund Expenditures Expenditures in the Subregion 1 Maintenance fund include landscape maintenance and water usage. The water usage budget prepared in Spring 2003 is approximately $6,000. Staff anticipates that actual water usage will cost approximate $18,000. Staff requests a budget increase of $12,000 during FY04-05 to accommodate the additional water usage expenditures. Subregion 1 Maintenance Fund Balance, June 30, 2005
The FY04-05 budget estimate for the June 30, 2005 Subregion 1 Maintenance fund balance was $815,860. The difference of $6,942 was attributable to additional FY03-04 water usage expenditures. If the City Council authorizes the budgeted adjustment described above, the June 30, 2005 revised estimated Subregion 1 Maintenance fund balance would be $796,918. 1911 Act Fund Balance, June 30, 2005
The FY04-05 budget estimate for the June 30, 2005 1911 Act fund balance was $969,954. The difference of $157,458 was primarily attributable to FY03-04 operating expenditure savings. Waste Reduction Fund Balance, June 30, 2005
The FY04-05 budget estimate for the June 30, 2005 Waste Reduction fund balance was $538,806. The difference of $93,560 is primarily attributable to the $50,000 PVIC funding transfer authorized by City Council on July 6, 2004 and unfavorable FY03-04 revenue variances.
Proposition C Fund Balance, June 30, 2005
The FY04-05 budget estimate for the June 30, 2005 Proposition C fund balance was $204,796. The difference of $110,195 is primarily attributable to savings experienced during the Crest Road overlay project. INTERNAL SERVICE FUNDS Employee Benefits Fund Expenditures The City was required to make a FY04-05 rolling retro payment for actual past years’ workers compensation claims in the amount of $16,830. The budget allocation of $68,000 is for the FY04-05 annual contribution in the amount of $69,727. Staff requests a budget adjustment of $19,000 for the additional expense. Employee Benefits Fund Balance, June 30, 2005
The FY04-05 budget estimate for the June 30, 2005 Employee Benefits fund balance was $129,580. The difference of $60,555 is primarily attributable to FY03-04 expenditure savings of health insurance costs. If the City Council authorizes the budgeted adjustment described above, the June 30, 2005 revised estimated Employee Benefits fund balance would be $171,135. Estimated Equipment Replacement Fund Balance, June 30, 2005
The FY04-05 budget estimate of the June 30, 2005 Equipment Replacement fund balance was $1,726,601. The favorable difference of $285,136 is primarily due to FY03-04 expenditure savings for computer equipment, as well as furniture and other equipment. RECOMMENDED BUDGET ADJUSTMENTS Staff recommends the following budget adjustments, as noted within this report. General Fund Expenditure Adjustments: City Manager #101-1002-411-71-00 Lot Line Adjustments $30,500 Sheriff #101-1021-421-32-00 CORE Deputy Funding $63,500 Traffic Mgt #101-3006-431-32-00 Traffic Engineering $40,000 Storm Water Qlty #101-3007-431-32-00 Offshore Monitoring ($30,000) Parks/Trails/OS Mnt#101-3009-431-43-00 Extraordinary Repairs $10,000 Street Maintenance Fund Expenditure Adjustment: St Maint-Non Pvmt #202-3003-431-43-00 Guardrails & Tree Trim $70,000 Subregion 1 Fund Expenditure Adjustment: Subregion 1 #223-3023-431-43-00 Water Usage $12,000 Employee Benefits Fund Expenditure Adjustment: Employee Benefits #685-1015-499-52-00 Workers Comp Retro $19,000 CONCLUSION Except as discussed above, estimated revenues and expenditures are expected to approximate the budget in all funds of the City for FY04-05. Respectfully submitted, Dennis McLean Director of Finance and Information Technology Reviewed, Les Evans City Manager RESOLUTION NO. 2005- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES, AMENDING RESOLUTION 2004-45, THE BUDGET APPROPRIATION FOR FY04-05, FOR BUDGET ADJUSTMENTS TO THE CITY'S GENERAL FUND, STREET MAINTENANCE FUND, SUBREGION 1 MAINTENANCE FUND AND EMPLOYEE BENEFITS FUND WHEREAS, Section 3.32 of the Rancho Palos Verdes Municipal Code provides that all expenditures in excess of budgeted allocations must be by supplemental appropriation of the City Council: and WHEREAS, on June 1, 2004, the City Council of the City of Rancho Palos Verdes adopted Resolution 2004-45, approving a spending plan and authorizing a budget appropriation for FY04-05: and WHEREAS, certain FY04-05 program and/or department expenditures, as described below, are expected to exceed the amount budgeted; and WHEREAS, the City Council desires that the FY04-05 budget appropriation for certain expenditures be increased. BE IT, THEREFORE, RESOLVED BY THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES: The following adjustments be made to the FY04-05 budget: Adjust the General Fund budget as follows: City Manager #101-1002-411-71-00 Lot Line Adjustments $30,500 Sheriff #101-1021-421-32-00 CORE Deputy Funding $63,500 Traffic Mgt #101-3006-431-32-00 Traffic Engineering $40,000 Storm Water Qlty #101-3007-431-32-00 Offshore Monitoring ($30,000) Parks/Trails/OS Mnt #101-3009-431-43-00 Extraordinary Repairs $10,000 Adjust the Street Maintenance Fund budget as follows: St Maint-Non Pvmt #202-3003-431-43-00 Guardrails & Tree Trim $70,000 Adjust the Subregion 1 Maintenance Fund budget as follows: Subregion 1 #223-3023-431-43-00 Water Usage $12,000 Adjust the Employee Benefits Fund budget as follows: Employee Benefits #685-1015-499-52-00 Workers Comp Retro $19,000 PASSED, APPROVED, AND ADOPTED THE 15TH DAY OF FEBRUARY 2005. ___________________________ MAYOR ATTEST: ______________________ CITY CLERK State of California ) County of Los Angeles )ss City of Rancho Palos Verdes ) I, CAROLYNN PETRU, City Clerk of The City of Rancho Palos Verdes, hereby certify that the above Resolution No. 2005- was duly and regularly passed and adopted by the said City Council at regular meeting thereof held on February 15, 2005. _____________________________ CITY CLERK CITY OF RANCHO PALOS VERDES |
