To: Honorable Mayor and Members of City Council
From: Brian Cochran, Finance Director
Prepared By: Jessie Sauter, Finance Analyst
TITLE:
Title
City of Napa FY 2018/19 Mid-Cycle Budget Update
LABEL
RECOMMENDED ACTION:
Recommendation
1. Adopt a resolution approving and adopting amendments to the fiscal year 2018/19 Budget.
2. Adopt a resolution approving amendments to the City-Wide Position Staffing Plan.
Body
DISCUSSION:
The City’s two-year budget for fiscal years 2017/18 and 2018/19 was adopted by the City Council on June 20, 2017. The purpose of the Mid-Cycle review is to provide an update to the Council regarding revenue and expenditure trends, and to propose appropriate revisions to the FY 2018/19 appropriations.
The FY 2018/19 budget as originally adopted estimated general fund revenues of $96.9 million and expenditures of $95.4 million, resulting in a balanced general fund budget after transferring funds to reserves per the Council adopted fiscal policy. Adjustments are proposed both for administrative purposes (recalculation of CalPERS rates, corrections to original budget) and for Decision Packages that will enable departments to better meet public needs.
All the adjustments referenced in this Staff Report can be found in more detail in Attachment 3, FY 2018/19 Mid-Cycle Budget. Additionally, the requested adjustments for all funds are included as an Exhibit to the resolution for ease of reviewing all proposed adjustments in one document.
FY 2017/18
While FY 2017/18 has not yet closed, based upon information available as of this date it appears that General Fund operating revenues will total approximately $90.6 million for the fiscal year. General Fund operating expenditures are projected at this time to total $88.8 million, which is a $1.7 million (2%) savings from the revised appropriation.
Non-Recurring General Fund revenues are projected to be $3.0 million under budget, while expenditures are projected to be $6.2 million under budget. As non-recurring funds are allocated to one-time operating projects, the remaining budgets will be reviewed and potentially carried forward to FY 2018/19.
FY 2018/19
General Fund Revenues
The FY 2018/19 General Fund Budget, as adopted in June 2017, projected revenues of $96.9 million to fund expenditures totaling $95.4 million with the resulting $1.5 million surplus being used to fund incremental Operating, Emergency, and Contingency reserves and a projected additional $0.8 million transfer to the Capital Facilities Reserve per the Council adopted fiscal policy. Based upon information currently available, it is projected that General Fund operating revenues will total $96.8 million or $0.1 million less than originally projected.
Property Tax revenue is projected to be $0.7 million higher than originally budgeted based on current projected assessed values.
Sales Tax revenue is estimated to be $0.9 million higher than originally budgeted based on our consultant’s current projections, which take into account current spending activity and pending new retail and restaurant developments.
Transient Occupancy Tax projections are being revised downward by $1.4 million. This is primarily due to changing timelines for proposed new development.
Licenses and Permits revenue is being reduced by 8.5% based on FY 2017/18 activity and projections.
Investment Earnings revenue is projected to be $0.04 million higher than originally budgeted.
Transfers In revenue is reduced due to the closure of Central Stores ($53k) and the removal of the previously budgeted cost allocation from the CIP Fund for Current Projects ($72k).
General Fund Expenditures
The FY 2018/19 General Fund Budget, as adopted in June 2015, projected expenditures of $95.4 million. The Mid-Cycle Budget proposes increasing that budget by $17k across all departments, excluding Decision Packages. Major changes are listed below:
CalPERS Recalculation: CalPERS rates were recalculated, reducing the rate for most employees and increasing the employer contribution for sworn employees. This recalculation affected all departments and funds with full-time employees. The net effect to the General Fund is a reduction of expenditures of $196k.
Closure of Central Stores: Central Stores was closed in FY 2017/18, which necessitated the removal of all related budget items from FY 2018/19. The net effect to the General Fund is a reduction of expenditures of $13k.
Changes to Comply with Fiscal Policy: The compensated absences appropriation is being increased by $100k, and a budgeted transfer of $100k for General Plan Reserve is added. Both of these items were erroneously excluded from the original adopted budget.
Corrections to Original Budget: The Parks and Recreation budget is being reduced by $200k for an interdepartmental labor credit that was mistakenly not booked in the original adopted budget. This credit is for employee time that is assumed to be charged to other funds during the fiscal year based on work assignments.
Decision Packages
In addition to the above budget amendment requests, departments have submitted decision packages for new or expanded programs or new/significantly increased funding that are being requested for FY 2018/19.
Decision packages are used to request funds for new programs, to shift funds between existing programs and to request funds for non-recurring items that will exceed $30,000. For FY 2018/19, these decision packages include adding net 9 FTE (including 2 limited-term employees), reclassing 10 FTE, creating the new Utilities Department, and reorganizing Public Works and Parks and Recreation.
A summary of the decision packages is provided in appendix D of Attachment 3 (FY 2018/19 Mid-Cycle Budget Document).
Budget Adjustments - Other Funds
Adjustments to projected revenues and expenditures for other City funds are proposed as a result of changes which have occurred since the two-year budget was adopted in June 2017. Those adjustments, which do not impact the City’s General Fund and do not include Decision Package amounts, are summarized below.
Special Revenue Funds
Adjustments to the Special Revenue Funds are made on an individual basis, for total net reductions of $1.3 million in revenue adjustments and $0.4 million in expenditure adjustments. The revenue reduction is largely due to a downward adjustment to Measure T projected revenues; while we anticipate approximately $8 million in revenue each year, as FY 2018/19 is the first year of the tax we will only receive 75% of the expected revenue during the fiscal year, resulting in a budget of $6 million.
Capital Improvement Funds
A variety of administrative corrections for the Capital Improvement Funds result in revenue increasing by $0.2 million and expenditures decreasing by $1.2 million. Additionally, changes to the Capital Improvement Plan projects for FY 2018/19 reduce overall project revenue and expenditures by $0.4 million.
The revised CIP budgets use an additional $3.0 million of General Fund CIP reserves, including $1.0 million for Trower Stormdrain Improvements and $1.5 million for the Civic Center project.
Solid Waste & Recycling Enterprise Fund
The proposed adjustment to the Solid Waste and Materials Diversion Enterprise Fund for FY 2018/19 is a $30k decrease to operating expenditures due to the CalPERS recalculation.
Water Enterprise Fund
The proposed adjustments to the Water Enterprise Fund for FY 2018/19 result in an increase of revenue by $4.8 million and a decrease in operating expenditures of $350k. The revenue increase is based on the water rate increases that went into effect in December 2017.
Successor Agency to the Napa Community Redevelopment Agency (NCRA)
Successor Agency revenue is being reduced by $1.7 million due to the payoff of bonds.
Housing Fund
The proposed budget adjustments align revenues and expenditures based upon anticipated Federal and State funding levels within individual funds.
Staffing Adjustments
Proposed staffing adjustments are included in Appendix A of Attachment 3 and include a net impact of 9 additional FTE (6 General Fund and 3 Water Fund). These are in addition to the net 3 positions already added in the original budget adoption.
FINANCIAL IMPACTS:
The FY 2018/19 General Fund budget as adopted included $96.9 million in Revenues and $95.4 million in Expenditures, and $0.7 million in transfers to Reserves (in accordance with the fiscal policy) resulting in a balanced budget. The approval of both the proposed adjustments and proposed decision packages would bring the General Fund revenue budget to $96.9 million to cover $96.0 million in expenditures and $0.8 million in transfers to reserves resulting in a projected operating surplus of $157K.
The FY 2018/19 Non-Recurring General Fund as adopted included $1.7 million in Revenues and $2.0 million in Expenditures, resulting in a use of available fund balance of $0.3 million. The approval of both the proposed adjustments and proposed decision packages would bring the Non-Recurring revenue budget to $1.6 million and expenditure budget to $2.7 million, increasing the use of available fund balance to $1.1 million.
All proposed adjustments to the General Fund, Non-Recurring General Fund and all other funds are further detailed in Attachment 3.
CEQA:
The City Manager has determined that the Recommended Action described in this Agenda Report is not subject to CEQA, pursuant to CEQA Guidelines Section 15060(c).
DOCUMENTS ATTACHED:
ATCH 1 - Resolution adopting amendments to the Fiscal Year 2018/19 budget
EX A - Budget Amendments
EX B - Decision Packages
EX C - CIP Adjustments
ATCH 2 - Resolution approving the City-Wide Position Staffing Plan
EX A - Staffing Plan
ATCH 3 - Mid Cycle Budget Summary - FY 2016/17
NOTIFICATION:
None.