20 mid-year budget adjustments
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City Hall
] 0300 Torre Avenue
Cupertino, CA 950]4-3255
Telephone: (408) 777-3220
FAX: (408) 777-3366
CITY OF
CUPEIQ1NO
ADMINISTRATIVE SERVICES DEPARTMENT
SUMMARY
Agenda Item No. lÒ
Meeting Date: February 27, 2006
SUBJECT AND ISSUE
Approve year-end budget adjustments for fiscal 2004/05 and mid-year budget
adjustments for fiscal year 2005/06.
BACKGROUND
During the year staff reviews the budget and compares it to actual revenues and
expenditures. Staff has also completed the year-end financial report of the prior fiscal year
and has determined the final fund balances that carry over into this year. As a result staff
proposes year-end and mid-year budget adjustments to reflect accurately the status of
operating and capital project accounts.
Year-End 2004/05 Budget Adjustments
Because of one-time revenues, program cuts and a hiring neeze, the General Fund ended
the previous fiscal year 2004/05 with nearly $22.2 million in reserved and unreserved
fund balance, an increase of $5.6 million !Tom the year before. This increase is only $0.6
million after removing one-time revenues, budget carryovers, savings !Tom vacancies,
and deferred maintenance and vehicle replacement. The fund balance gain, however,
provides an opportunity to reserve funds for future rises in retirement costs and to
establish a reserve for maintenance of City innastructure.
The following year-end 2004/05 budget adjustments which increase General Fund reserves,
are proposed for the City Council's authorization:
a) Increase the Retiree Healthcare Costs Reserve by $1,170,000 for 2004/05.
b) Increase the PERS Reserve by $400,000, restoring it back to $1,000,000.
c) Establish an in!Tastructure sinking fund reserve of$500,000.
In 2004-05, the City set aside a first annual installment of $1,151,000 toward future
retiree healthcare costs, as determined by an actuarial study done in 2003. The
$1,170,000 proposed above would be the second installment recommended by the study.
The third annual installment is recommended as a 2005/06 budget adjustment below.
Î--o~1
Printed on Recycled Paper
Due to PERS cost increases, the City used $400,000 of the $1 million PERS reserve to
balance this year's budget. Because of improved investment returns, PERS retirement
costs for fiscal 2006-07 will actually decrease by an estimated $75,000, As past history
shows, these costs can increase or decrease year-to-year based on PERS' investment
performance, and the Council established the $1 million reserve level goal in 2004 as a
hedge against cost increases. Staff recommends re-establishing the reserve at $1 million
by adding back the $400,000 this year.
At the Council's fiscal strategic plan study session on January 30, 2006, staff and the
Council presented the idea of establishing a sinking fund reserve for major maintenance
of City in!Tastructure. Staff estimates that nearly a million dollars of maintenance was
deferred in 2004/05 alone. As discussed below, staff proposes to augment the current
fiscal year General Fund budget by $500,000 to start addressing the deferred maintenance
backlog. However, the year-end results present an opportunity to proactively setup a
long-term reserve, on top of this current expenditure, for future facility, street and park
maintenance needs. Staff proposes initially establishing this reserve at $500,000.
Mid-Year 2005/06 Budget Adjustments
The General Fund is forecasted to end fiscal year 2005-06 with $2.7 million more in
revenues than the adopted budget, led by the sale of the Oak Valley properties, healthy sales
taxes in the business-to-business electronic sector, robust building permit and plan check
income, more property taxes nom increased land values, and rising transient occupancy
taxes nom an improving hotel industry. Franchise fees, fines, forfeitures, and interest
receipts are lower. Two million of the increase however is one-time money. The property
sale, unusually heavy development activity, and blistering sales of one company's media
products makes dependence on this revenue level for ongoing expenditures imprudent.
The Public Works, Community Development and Community Service departments are
experiencing a large demand on their services and because of the recent economic downturn
these departments have deferred maintenance and have operated with reduced staff levels.
The upturn in revenues provides an opportunity to address the deferred maintenance
backlog, to better service the volume of development activity, and to improve community
programrrllng.
Accordingly, the Council is requested to authorize the following mid-year fiscal 2005/06
budget adjustments to the General Fund:
Sale of property increase ( one-time)
Charges for services increase ( one-time)
Permit revenue increase (one-time)
Sales tax increase (business-to-business)
Property tax increase
Revenue
$923,000
400,000
400,000
500,000
100,000
}...ð ---1-
Transient occupancy tax increase
Intergovernmental revenue increase
(property taxes that backfill VLF, $205k
of it being one-time)
Franchise fee decrease
Fines and forfeiture decrease
Interest revenue decrease
Transfer decrease
Mary A venue bicycle footbridge cost
escalation contingency
Partial funding of deferred maintenance
Increase plan review contract services
Fund two vacant building inspector
positions that are not in the current budget
(prorated cost)
Upgrade Traffic Technician position to
Associate/Senior Engineer (prorated cost)
Government Channel programming
Cupertino Scene improvements
Handicap Ramp - Portal Park
Building fee study
Paper folding machine replacement
Custodial service for Sunday library hours
Move $759,000 of below-market rate
housing expenses and $818,000 of
reserves to separate fund
Increase retiree healthcare cost reserve for
2005/06 by $1,168,000
Revenue Expenditure
100,000
590,000
-100,000
-100,000
-100,000
-390,000
$500,000
500,000
500,000
107,000
30,000
50,000
30,000
8,000
20,000
15,000
11,000
-759,000
To address persistent traffic concems in the City and reduce bottlenecks in the building
application process caused by the periodic unavailability of outside traffic consultants, staff
recommends re-establishing the in-house traffic engineering position in Public Works by
upgrading the vacant Traffic Technician position to Associate/Senior Engineer. Increasing
Government Channel programming and improving the Cupertino Scene are proposed. The
cost of construction materials continues to escalate and a contingency for this needs to be
established for the new Mary A venue bicycle footbridge. One-time transfer decreases
related to completed capital projects and the moving of the morion to City Hall needs to be
done. The cost basis of building fees needs to be reviewed. The new Sunday opening of the
library necessitates an increase in contract custodial service. Finally, staff proposes moving
the budget and reserves for below market rate (BMR) housing out of the General Fund to a
separate special revenue fund.
2-0.--3
FISCAL IMPACT
General Fund budgeted revenues and expenditures will increase $2,713,000 and $512,000
respectively and net transfers into the fund will decrease by $390,000. At the new budget
levels, the General Fund will have a reduced net loss of $434,000 for the current fiscal
year, representing carryovers of the budget surplus nom the previous fiscal year. Fund
balance reserved for specific purposes are increased by $3,238,000.
RECOMMENDATION
It is recommended that the City Council approve the year-end 2004/05 budget
adjustments and mid-year 2005/06 budget adjustments as described above.
Submitted by:
Approved for submission:
~é
David W. Knapp
City Manager
Ä~~
David R. Woo
Finance Director
Reviewed by:
~ O,{]Ju~
Carol A. Atwood
Director of Administrative Services
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Revenue Comparison
5,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
o
2
4
6
9
II
12
7
8
10
3
,
Expenditure Comparison
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,00{)
1,500,(}(}()
1,000,000
500,000
0
2 3 4 5 6 7
I Sales Tax
2 Property Tax
3 Transcient Occupancy
4 Utility Tax
5 Franchise Fees
6 Other Taxes
7 Licenses & pennits
8 U.se of Money &
Prop"",
9 Intergovernmental
IOChllf"gcsforServices
II Fines & Forfeitures
12 Other Revenue
13 Sale of Property
13
1 Administrative
2 Law Enforcement
3 Community Service
4 AdmÎDÎatrative Service
5 Recreation Service
6 Community Development
7 Public Works
.2- ð --io
Sales Tax Fiscal YearMTo-Date 2005-06
$5,000
$4.000
· $3,000
¡
a
·
i $2.000
>
$1.000
$0
7/05 8/05
9/05
10/05
Month
-
...... Projected
____Actual
11/05
12/05
Property Tax Fiscal Year-Ta-Date 2005-06
~ $2.500
·
, $2.000
0
<
,
· -+ Projected
· $1,500 ~Actual
·
~
< $1,000
·
~
$500
$0
9/05
--
10/05
Month
11/05
12/05
Transient Occupancy Tax Fiscal Year-Ta-Date 2005-06
· $1.000
·
·
¡
~ $800
"
. $600
¡
~
: $400
>
$200 --
$0
7/05 8/05
9/05
10/05
Month
--
--
......-Projected
___Actual
11/05
12/05
J..ò-7
Planning, Building & Engineering Fees Fiscal Year-to-Date 2005-06
· $3,000
·
,
=
·
·
..
$2.000
.
I
> $1,000
[-+ Projected
~Actual
-.....
-+
--
---+-
-....
--
-....
-
....-
$0
7/05
8/05
9/05
10/05
11105
12/05
Month
General Fund Expenditures Fiscal Year-to-Date 2005-06
· $20,000
~
c
·
·
,
0
~ $15.000
~
M
!
·
q $10.000
~
"
·
·
>-
$5,000
-
$0
7/05 8/05
-
...,
-
9/05
10/05
11/05
12/05
Month
2-0-g