To: Honorable Mayor and Members of City Council
From: Bret Prebula, Finance Director
Prepared By: Jessie Gooch, Finance Analyst
TITLE:
Title
Fiscal Year 2019/20 Budget Adjustments and CIP Changes
LABEL
RECOMMENDED ACTION:
Recommendation
Adopt a resolution adjusting the Fiscal Year 2019/20 Budget by reducing the Civic Center project (FC15PW02) by $3,000,000 and the Dwight Murray Plaza project (PK15RA01GF) by $1,600,000, transferring $4,600,000 from the CIP Fund to the General Fund; reducing General Fund tax revenue by $10,500,000; and reducing General Fund expenditures by $829,000, as documented in Budget Adjustment No. BE2004502.
Body
DISCUSSION:
COVID-19 has affected numerous aspects of the financial and operational aspects of the City. From recent budget analysis of projected lost revenues, the City anticipates an approximately $10 million-dollar shortfall in the current fiscal year (2019/20) and if current trends continue into the early portion of fiscal year 2020/21, the net revenue reduction could be far greater. To provide some perspective, $10 million dollars equals 10% of the City’s total General Fund budget.
The Executive Team has been working to identify one-time and ongoing cost reductions to balance the fiscal year budget. Due to the lack of time remaining for FY 2019/20 swift action is required in order to balance the budget. At this point and time, the $10 million projected shortfall reflects a large decrease in TOT through the remainder of the fiscal year, coupled with significant reductions in sales tax. Since City TOT estimates have been dramatically reduced the risk is that other tangential business activity could decrease more than anticipated impacting sales tax at a greater rate. Due to the timing of revenue collection, there would be no time remaining in this fiscal year to make additional expense reductions, thus additional General Fund reserves would have to be utilized to balance the budget (beyond the $4 million in Non-Reoccurring General Fund Reserves being proposed today).
The current fiscal year’s budget is proposed to be balanced primarily through one-time cuts, limiting if not eliminating any flexibility in funding moving into the next fiscal year. The specific estimated reductions for FY 2019/20 are outlined in the financial section below. The cuts outline not only strategic reserves but the indefinite suspension of the Civic Center Project which has been a top priority for the council. These types of decisions were not made lightly but do reflect the gravity of the current fiscal situation.
Staff will return to council in late summer, when the fiscal year 2019/20 financial books are closed to identify any additional Reserves that would be required to balance the budget. The Executive team continues to work on other cost-saving measures that can be implemented in the fiscal year.
FINANCIAL IMPACTS:
This report impacts both the General Fund and the CIP Fund. In total, $4.6 million will be transferred from the CIP Fund to the General Fund, increasing General Fund available fund balance. General Fund sales tax revenue will be decreased by $2.2 million, and TOT revenue budgets will be decreased by $8.3 million. All General Fund departments, with the exception of General Government, will reduce their discretionary operating budgets by 5%, resulting in a savings of $829,000. Additionally, $4 million dollars will be used from the Non-Reoccurring General Fund reserves, along with other cost saving measures not requiring council approval to balance the budget. Staff will return to council when the fiscal year 2019/20 financial books are closed to identify the total amount of Reserves required, including the $4 million in Non-Reoccurring General Fund reserves and additional General Fund reserves, if required.
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
Ex A - Budget Adjustment No. BE2004502
NOTIFICATION:
None.