MEETING DATE:
FEBRUARY 24, 2015
SUBJECT:
Title
RESOLUTION NO. 2015-8034 - RECEIVE THE FISCAL YEAR 2014-2015 MID-YEAR BUDGET AMENDMENTS AND ADOPT A RESOLUTION AMENDING THE FISCAL YEAR 2014-2015 OPERATIONS & MAINTENANCE AND CAPITAL IMPROVEMENTS PROJECT BUDGET
Body
Recommendation
Recommendation
ADOPT a resolution amending the Fiscal Year 2014-2015 Operations & Maintenance Budget and Capital Improvement Projects Budget as needed.
Body
Board or Commission Action
Not Applicable
Relevant Council Strategic Theme
Good Governance
Relevant Department Goal
Not Applicable
Introduction
The City Council adopted the Fiscal Year 2014-2015 Budget at its June 10, 2014 meeting. At that time, a balanced budget was presented thus laying the framework for maintaining necessary levels of service to the residents of San Marcos. To date, the City’s conservative approach to revenue projections appears to be on target, and generally, normal expenditures are occurring at the expected pace. There have, however, been initiatives that have occurred or are expected to occur that were unknown at the time of budget. Therefore, staff is submitting mid-year budget amendments for City Council review and approval.
Discussion
The purpose of the Fiscal Year 2014-2015 Mid-Year Budget Amendment is to amend the base budget as adopted by the City Council for items unanticipated or unknown at the time of budget. The budgetary legal level of control resides at the departmental level (e.g. Public Safety, Public Works, Community Services, etc.). That is to say, a given department has the operational flexibility to reallocate appropriations within specified budgeted line-items, but cannot exceed the overall appropriation level as approved by the City Council.
At this time, staff has identified additional expenditures that would exceed the overall appropriation level originally approved by the City Council. Revenues appear to be on track, staff is anticipating some revenue increases and other cost savings that will offset a portion of the additional expenditures. Staff anticipates that state mandates, motor vehicle in lieu fees and revenues related to the Urban Villages will generate approximately $635,000 more in revenues than was originally budgeted. While some of the additional expenditures will need to be funded by reserves, notably the PERS item described below, the reserves are higher than anticipated due to the grant funding the City was able to secure for the Cocos Fire related expenses. The City Council may recall that staff had projected to spend $1 million in Fiscal Year 2013-2014 for the Cocos Fire expenses and in Fiscal Year 2014-2015 staff conservatively projected spending an additional $2.5 million from reserves for the post fire costs of slope stabilization, erosion control, and stormwater management. At this time, we now know that the City’s actual costs for all Cocos Fire related expenditures will be closer to $500,000. The remaining costs will be reimbursed.
Attached as Exhibit A for the City Council’s review are the mid-year budget amendments classified by fund and expenditure type. Expenditure types are identified as previously authorized, unanticipated, and discretionary. The previously authorized expenditure pertains to the City’s portion of the construction costs of the new Department of Motor Vehicle building. At its November 10, 2014 meeting, the City Council approved the use of one-time opportunity reserves for this purpose. The requested change in Exhibit A formally amends the budget to include this expenditure. Unanticipated expenditures are those items that were unknown at the time of budget adoption but the expenditure authority is needed prior to the end of the current fiscal year. Discretionary items are also items that were not requested as part of the FY 2014-2015 budget. Unlike the unanticipated expenditures, the requested discretionary expenditure would enhance services and generate additional revenue through fees charged for the enhanced service.
Following Exhibit A are revised capital improvement project worksheets for three capital projects. Staff is proposing to increase the budget for two projects and proposing to amend the third project budget to fully fund the project in the current fiscal year to allow contracts to be executed.
General Fund
The majority of the proposed amendments to the approved General Fund budget are unanticipated expenditures and relatively small dollar amounts concerning Public Works operations. There are however two significant items. The first item pertains to costs the City is incurring to retroactively enroll a number of employees into the Public Employees’ Retirement System (PERS). Through an audit of records, the City learned that a number of part-time employees should have been enrolled in PERS, in some cases many years ago, and is now taking the steps necessary to retroactively enroll these employees in PERS. The other significant item pertains to a settlement agreement the City entered into concerning a Gas Tax-funded local road repair project. Together with many other charter cities, the City historically did not bid Gas Tax-funded projects as prevailing wage jobs, because triggers for prevailing wage relative to state control over the project were not met and because those taxes were locally generated. Additionally Proposition 22 amended the California Constitution in 2010 to expressly prohibit the state from taking or borrowing funds designated for local transportation, including Gas Tax. The Department of Industrial Relations (DIR) reviewed the project and later issued its determination that the contract was subject to the payment of prevailing wage. In part because of the advent of SB 7 (which requires payment of prevailing wage for all public works projects irrespective of funding source beginning January 1, 2015), the City did not elect to challenge the DIR determination. The City thereafter participated in settlement discussions with the DIR and the contractor in question to reduce the resulting penalties to the budget amendment amount. The settlement made it unnecessary for the contractor to initiate litigation to secure its remedies, and saved all parties additional expense.
The remaining proposed mid-year amendments are more operational in nature and reflect items that were either unknown at the time of budget or the actual costs came in higher than the budgeted amount. There will be cost offsets for two of the items. The cost of the unanticipated repairs to the fuel island will be split equally with San Marcos Unified School District and the majority of the costs of repairs at Mission Sports Complex following a copper theft incident will be covered by the City’s insurance.
Community Services has submitted a discretionary expenditure request for the City Council’s consideration. They are requesting funds to purchase an inflatable obstacle course to be used at the Las Posas Pool. It is anticipated that this equipment will pay for itself over the course of the 2015 swim season. Staff plans to use this equipment to increase participation at special events, create new programs where it will be featured and make it available for a fee to individuals and groups reserving the pool for private functions. Community Services is requesting budget authority to purchase the item for several upcoming special events this spring and for the 2015 swim season which begins prior to the end of this fiscal year.
Community Facilities District (CFD) 98-02
Funds for two unanticipated expenditures are being requested by Public Works. The proposed increase in funds for replacing pedestrian lighting at Simmons Family Park is shared by both the General Fund as well as CFD 98-02.
Senior Nutrition Grant Fund
Staff is proposing to increase salary and benefit costs captured in the Senior Nutrition Grant Fund to more accurately capture the costs associated with the Senior Nutrition Program. Additionally staff is also proposing to decrease the transfer out of funds from the Senior Nutrition Grant Fund to the General Fund since all program costs going forward will be captured in the Senior Nutrition Grant Fund.
Cal Home Fund
Staff is proposing to amend the budget for this fund to allow the City the budget authority to expend funds to award a Down payment Assistance Program (DAP) loan and receive subsequent reimbursement for the loan along with administrative costs. This will utilize the remainder of the balance of a Cal Home Grant awarded in 2011. The City has been awarded a new grant for this program and plans to include new DAP loans in the Fiscal Year 2015-2016 budget.
Affordable Housing Fund
The proposed amendment to the Affordable Housing Fund does reduce personnel costs in the General Fund by moving the costs of two part-time employees currently budgeted in Real Property Services to the Affordable Housing Fund. This change is being requested due to the fact these two employees spend 100% of their time supporting the City-owned affordable housing units.
Gas Tax Fund
Based upon higher than anticipated revenues this fiscal year, staff is recommending that the Street Overlay budget within the Gas Tax Fund be increased to allow for additional work.
Facilities Replacement/Rehabilitation Fund
The changes being proposed to the Facilities Replacement/Rehabilitation include project savings, as well as the cancellation of two projects and the addition of a new project. The new project is a new boiler at the Community Center due to failed HVAC water lines. The project savings and cancellations will offset some of the costs of a new boiler, fund balance will cover the remaining costs of the project.
City Infrastructure/Rehabilitation Fund
At the time the Fiscal Year 2014-2015 budget was presented to the City Council for adoption, Public Works anticipated the costs of a required Storm Channel Maintenance Permit to be spread across two fiscal years. A portion of the costs were included in this fiscal year’s budget and the spending plan for Fiscal Year 2015-2016 included the projected remaining costs. Staff has since learned that the costs for the permit must be paid in full in this fiscal year. The proposed amendment adds the balance of the projected cost to this fiscal year’s budget. There will be no additional costs for this permit included in the Fiscal Year 2015-2016 budget.
Capital Improvement Project Program
Richland Elementary (CIP #88520)
Staff recommends amending the project budget to account for utility relocation expenses that are not reimbursed by the granting agency.
Armorlite Drive Smart Growth Corridor Enhancements (CIP #88539)
Staff recommends amending the project budget for CIP Project #88539 to account for unfunded construction costs per recent cost estimates. Construction cost estimates have increased as a result of required design adjustments, including signal modifications and additional storm water compliance components. Staff is proposing to use the Public Facilities Fee (PFF) Fund to pay for the majority of the cost increase. It should be noted that the developer contributions shown in the project worksheet only represent the existing developers and there is the potential for two future developers to contribute to the project. Any additional developer contributions will be used to reimburse the monies used from the PFF Fund for this project.
Citywide Corrugated Metal Pipe (CMP) Replacement (CIP #85001)
Staff recommends amending the budget to fully fund the project in the current fiscal year. The project has been bid for construction, necessitating the project be fully funded in this fiscal year. Should the City Council approve this change on February 24th, staff anticipates bringing forward the contract for City Council consideration on March 10, 2015.
Fiscal Impact
The fiscal impact of the City Council approving the General Fund mid-year budget amendments will increase the General Fund operating expenditure budget in Fiscal Year 2014-2015 by $8,930,005 for a total revised General Fund budget of $81,913,699. This revised number includes previously approved carry-over amounts from the Fiscal Year 2013-2014 budget and the use of one-time reserves approved for the purchase of the Lowe’s building and subsequent tenant improvements. Of the total new expenditures, $8,737,901 are one-time or non-operational expenditures (DMV construction costs, PERS retroactive enrollments, and the settlement agreement costs). The operational amendments total $192,104.
Staff estimates the operating revenues will exceed budget projections by approximately $635,000 (in the areas of state mandates, motor vehicle in lieu fees, and University Commons related revenues). The proposed budget amendments to both the Affordable Housing Fund and the Senior Nutrition Grant Fund will reduce General Fund costs. Staff has also identified a small amount of operational savings shown in Exhibit A, as well as the reimbursements the City will receive from SMUSD for their share of the fuel island repairs and from the City’s insurance provider for the repairs at Mission Sports Complex. The net General Fund impact of the proposed changes to expenditures is $7,907,530 or 12% of the original budgeted expenditures. The one-time, non-operational expenditures are the primary drivers of this number. The revisions to the operational expenditures total less than 1% of the original budgeted expenditures.
The fiscal impact of the City Council approving the proposed changes to CFD 98-02 will increase the fund’s operating expenditure budget in Fiscal Year 2014-2015 by $27,500 for a total of $5,554,278. The additional operating expenditures can be absorbed within the projected revenues for this fund.
The fiscal impact of the City Council approving the proposed changes to the Senior Nutrition Grant Fund will increase the fund’s operating expenditure budget in Fiscal Year 2014-2015 by $38,023. This fund is subsidized by the General Fund for any operational expenditures not eligible for grant reimbursement.
The fiscal impact of the City Council approving the proposed changes to the Cal Home Fund will establish an operating expenditure budget in Fiscal Year 2014-2015 in the amount of $42,000. The expenditure will be offset by adding grant reimbursement revenue in the amount of $45,000 to the fund.
The fiscal impact of the City Council approving the proposed changes to the Affordable Housing Fund will increase the fund’s operating expenditure budget in Fiscal Year 2014-2015 by $24,600. The additional operational expenditures will be funded by the rental revenue collected from the City owned affordable housing units.
The fiscal impact of the City Council approving the proposed changes to the Gas Tax fund will increase the fund’s operating expenditure budget in Fiscal Year 2014-2015 by $415,183. The additional operating expenditures will be funded by higher than budgeted Gas Tax revenues.
The fiscal impact of the City Council approving the proposed changes to the Facilities Replacement/Rehabilitation Fund will increase the fund’s operating expenditure budget in Fiscal Year 2014-2015 by $62,000. Staff is requesting the use of the fund’s reserves in the amount of $62,000 as a source of funds. The additional appropriations will bring the projected fund balance to $48,294 based on Fiscal Year 2013-2014 year end projections.
The fiscal impact of the City approving the proposed changes to the Infrastructure Replacement/Rehabilitation Fund will increase the fund’s operating expenditure budget in Fiscal Year 2014-2014 by $204,650. Staff is requesting the use of the fund’s reserves in the amount of $204,650 as a source of funds. The additional appropriations will bring the projected fund balance to $105,014 based on Fiscal Year 2013-2014 year end projections.
The fiscal impact of approving the proposed changes to Richland Elementary School Safe Routes to School Improvements (CIP #88520) will increase the project budget by $15,000 for a total project budget of $504,500. Staff is recommending the additional project funding come from Traffic Safety Fund 201.
The fiscal impact of approving the proposed changes to Armorlite Drive Smart Growth Corridor Enhancements (CIP #88539) will increase the project budget by $858,552 for a total project budget of $2,858,552. Staff is recommending the additional project funding come from the Public Facilities Fee Fund.
The fiscal impact of approving the proposed changes to the City-wide Corrugated Metal Pipe (CMP) Replacement (CIP #85001) does not impact the overall project budget. Staff is requesting to move the funds originally budgeted for Fiscal Year 2015-2016 into Fiscal Year 2014-2015 to allow the City to enter into a contract this fiscal year for the full project cost.
Attachment(s)
Exhibit A - Fiscal Year 2014-2015 Mid-Year Budget Amendments
Capital Improvement Program Project Worksheets (3)
Amended Budget Resolution
Prepared by: Wendy Kaserman, Assistant to the City Manager/Fiscal Services Manager
Reviewed by: Laura Rocha, Finance Director
Approved by: Jack Griffin, City Manager