14. Mid-year budget adjustment No. 1ADMINISTRATIVE SERVICES DEPARTMENT
CITY HALL
'10300 TORRE AVENUE: - CUPERTINO, CA 95014-3255
C O P E RT I N O (408) 777-3220 • FAX (408) 777-3109.
SUMMARY
Agenda Item No. ~_
SUBJECT AND ISSUE
Meeting Date: November 3, 2008
Review and approve the 2008/09 mid-year budgc;t adjustment # 1.
BACKGROUND AND FISCAL IMPACT
At the October 21, 2008 council meeting, council continued this item to November 3 and
we have now provided additional information. 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-yeaz 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 past month has been unprecedented, and we
are already starting to see. affects on some of oLir key revenue sources. Sales tax is down
throughout the County and the State, interest ral.es 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-aways as early as January 2009.
To proactively plan for the upcoming recession 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 and state economy throughout the year and
will propose increases and/or decreases to our budget 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 Tax - -$500,000
Reflects state and local sales tax trends and Cupertino
annualized, first quarter business-to-business trends.
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Investment Earnings -$300,000
Represents decreased interest rates as a result of the
current mazket conditions and repositioning of our
portfolio to insured and liquid investments.
Charges for Services -$200,000
Reflects a decrease in projections for zoning 8~ planning
fees, engineering fees and building permit fees due to
the uncertainty of future development projects.
Total Gcneral Fund Revenue Adjustment -$1.000,000
Cupertino's policy is to pay our employees at midrange of the County whenever possible.
It has come to our attention that the Community Development Director's position is below
that range by approximately $6,000. We request an adjustment to the salary schedule to
increase this one position.
Salary and Benefit Adjustment
+$6.000
We have already heard rumors that there may be a second State hit on local revenues as
eazly 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
Public Safety -sheriff contract
Economic Uncertainty Reserve
RECOMMENDATION
-$815,000
-$100.000
+$915.000
Review and approve the 2008/09 mid-year budget adjustment #1.
Submitted by: Approved for submission:
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Carol Atwood David W. Knapp
Director of Administrative Services City Manager
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