16. Mid-Year budget adjustmentADMINISTRATIVE SERVICES DEPARTMENT
CUPERTIND
CITY HALL
10300 TORRE AVENUI~ • CUPERTINO, CA 950143255
(408) 777-3220 • FAX 0308) 777-3109
SUMMARY
Agenda Item No. ~ {Q Meeting Date: October 21, 2008
SUBJECT AND ISSUE
Review and approve the 2008/09 mid-year budget adjustment #1.
BACKGROUND AND FISCAL IMPACT
During each fiscal year, staff periodically reviews the budget and compares it to actual
revenues and expenditures. As a result of this review process, mid-year budget adjustments
are presented to the City Council to adjust our original revenue projections and to reflect
changes in operating and capital project needs.
The turmoil in the financial markets over the p:~st month has been unprecedented, and we
are already starting to see affects on some of o~.ur key revenue sources. Sales tax is down
throughout the County and the State, interest rates have dramatically declined as investors
reposition to safe and liquid portfolios, and we anticipate a slowdown in development
projects as a result of the current credit market. In addition, there are rumors that the State
of California will propose a second wave of revenue take-sways as early as January 2009.
To proactively plan for the upcoming recessio~i and undertake a responsible approach to
evaluating ~ our risks, we have reviewed our areas of probable revenue declines and are
proposing the following revenue budget adjustments. We will continue to monitor our cash
flows and revenue trends along with the local z~nd state economy throughout the year and
will propose increases and/or decreases to our t~udget as necessary. If we do not see any
indications that these new projections will turn around over the next few months, we will
bring to you an expenditure reduction plan to balance the revenue declines presented at this
council meeting.
Sales taz -$ 500,004
Reflects state and local sales tax trends and (:upertino
annualized, first quarter business-to-business; trends.
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2008/09 Mid-Year Budget Adjustments
October 21, 2008
Page 2 of 2
Investment Earnings -$300,000
Represents decreased interest rates as a result of the
current market conditions and repositioning of our
portfolio to insured and liquid investments.
Charges for Services -$200,000
Reflects a decrease in projections for zoning & planning
fees, engineering fees and building permit fees due to
the uncertainty of future development projects.
Total General Fund Revenue Adjustment -$1,000,000
We have already heard rumors that there may be a second State hifi on local revenues as
early as January. During the 2008/09 budget, Cupertino appropriated $815,000 for a
possible "loan" to the State with a corresponding pay back with interest in FY 2011/12.
This amount was based on projected State budget shortfalls in May and, at one point, had
actually increased to a $1.7 million loan from Cupertino. As of 10/16/08, the State has
successfully sold $4.5 billion in Tax Revenue Anticipation Bonds to help them with their
liquidity problems, still leaving another $2.5 billion to balance their cash needs. Based on
these facts, we are proposing that the original $815,000 be placed in a separate economic
uncertainty reserve along with the $100,000 in COP's appropriations in case the State
proceeds with a second take away of local revenues.
State Take Away -$815,040
Public Safety -sheriff contract -$100,000
Economic Uncertainty Reserve + 915 000
RECOMMENDATION
Review and approve the 2008/09 mid-year budget adjustment #1.
Submitted by:
Carol Atwood
Director of Administrative Services
Approved for submission:
David W. Knapp
City Manager
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