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Home My WebLink About2005-01-18 City Council (10)improvements, the economic recovery of the Silicon Valley has not materialized. In addition, the State's financial concerns have also reduced local revenue and may impact future local revenues. (MD&A pp. 13-15; Transmittal Letter p. v) Because of the continued, slow economic recovery and the uncertainty of possible future State actions, this is the fOUlih straight year the City has had to closely monitor revenues and expenditures and make adjustments to maintain a balanced budget without using reserves. For example, the City had a hiring freeze and voluntary furlough this past year. The City also eontinued to reduc.e expenditures v.lithout impacting services to the public; however, continued maintenance of service levels may be difficult. (MD&A pp. 13-15; Transmittal Letter p. v.) Infrastructure Even though the economy has been tepid, the City has been able to maintain its commitment to the Infrastructure Management Plan. In 2003-04, $2.5 million was added to the Infrastructure Reserve. The Plan focuses on the backlogged and highest priority projects to ensure that the City's critical infrastructure remains strong. Construction finished on the new downtown parking structures and has continued with the Homer Avenue undercrossing project. Additional efforts focused on streets, sidewalks, parks, open space, and City facilities. (MD&A pp. 15-18) DISCUSSION There are several necessary year-end adjustments to the 2003-04 budget. Specific transactions are detailed in Exhibit A of the budget-closing ordinance. Exhibits D and F summarize financial results for fiscal year 2003-04 for the General Fund and Enterprise Funds, respectively. They provide an analysis of the performance of these funds in comparison to the budget as adopted and adjusted by COUllcil. The result of net operations is explained in terms of changes to the various fund reserves authorized by Council. Results by Fund General Fund By fiscal year end, the City'S financial position remained sound in spite of a slow economic recovery. This is due to a proactive approach to align revenues and expenditures. The General Fund shows a net operating surplus of $0.5 million compared to $2.9 million in the prior year. This result includes recognition of an unrealized loss on investments of $3.6 million that is required by GASB 31 and a $0.8 million transfer from Utilities to the Equity Transfer Stabilization Reserve. At fiscal year-end, the fund balance for the General Fund totaled $66.8 million. This was comprised of: $6.7 million reserved for encumbrances, notes and inventory; $21.5 million for the Budget Stabilization Reserve; $35.9 million for the Infrastructure Reserve; $2.3 million for the Equity Transfer Stabilization and $0.4 million for Reappropriations. (MD&A pp.13-15) Capital Projects Fund For fiscal year 2003-04, the Capital Projects Fund reported $28.2 million in expenditures and other uses, which is a decrease of $5,0 million from the prior year. Prior year expenditures were higher due to construction for the parking garages of $18.4 million. Major expenditures in 2003- 04 for the Capital Projects· Fund included rehabilitation and maintenance of existing infrastructure, such as $4.3 million for streets and sidewalks, $8.6 million for continued construction on garages, and $2.5 million on the Homer Avenue undercrossing project. The CMR:502:04 . Page 2 of4 Capital Projects Fund Balance totaled $21.6 million, an increase of $0.6 million from the prior year. (MD&A p. 15) Enterprise Funds The Rate Stabilization Reserves (RSRs) for the combined Enterprise Funds decreased by a net $14.1 million. Major changes include a $5.2 million decrease from the Gas Fund, primarily due to a 15% rate decrease and a $4.2 million decrease from the Water Fund, primarily due to increases in wholesale rates and usage. (Exhibit G) RESOURCE IMPACT Adoption of the attached budget-closing ordinance (Attachment A) allows for the reappropriation and carryover of funding from the 2003-04 budget so that specific operating programs and capital projects can be completed in the current fiscal year (Exhibit B). In addition, by closing completed capital improvement projects, balan~es (Exhibit C) are returned to the original funding source for future appropriation. Exhibit E reflects the allocation to major reserves as follows: • The General Fund BSR has been capped in accordance with the Council policy of 18.5 percent of budgeted expenditures, and shows a closing balance of $21.5 million, an increase of $0.1 million from the prior year. • The Infrastructure Reserve was increased by $2.5 million and has a closing balance of $35.9 million. • The Reserve for Equity Transfer Stabilization was increased by $0.8 million for a closing balance of $2.3 million. This is the third of four transfers to reach a $3.0 million funding target. • Budget transactions included in the attached Ordinance increase General Fund Reserves by $3.8 million (Exhibit A). Exhibit G provides the balance changes for all reserve categories. for the Enterprise Funds. The net decrease in the funds was $9.2 million. Highlights for this change include: • Transactions in the attached ordinance decrease Electric Fund reserves qy $0.6 million, decrease Gas Fund reserves by $0.6 million as detailed in Exhibit A, primarily due to their funding the Equity Transfer Stabilization. • An increase in the Refuse Fund reserve by $1.3 million as detailed in Exhibit A, from a . return of CIP budget. POLICY IMPLICATIONS This recommendation is consistent with existing City policies. ENVIRONMENTAL REVIEW The action recommended is not a project for the purposes of the California Enviroill11ental Quality Act. CMR:502:04 Page 3 of 4 2004 were encumbered by properly executed, but uncompleted, purchase orders or contracts. SECTION 3. The Council hereby approves adjustments to the fiscal year 2003-04 budget for Fund Balancing Entries as shown on attached Exhibit "A SECTION 4. The Council hereby reappropriates fiscal year 2003-04 appropriations in certain departments and categories, as shown on the attached Exhibit "B", while not encumbered by purchase order or contract, at year end in the fiscal year 2004-05 budget. SECTION 5,. The fiscal year 2003-04 encumbered balances for the departments and categories shown on Exhibit "D" shall be carried forward and reappropriated to those same departments and categories in the fiscal year 2004-05 budget. SECTION 6. directed: The City Manager is authorized and A. To close the fiscal year 2003-04 budget accounts in all funds and departments and, as required by the Charter of the City of Palo Alto, to make such interdepartmental transfers in the 2003-04 budget as adopted or amended by ordinance of the Council; and B. To close various completed Capital Improvement Projects as shown in Exhibit "C" and move the balances into the respective reserve funds indicated in Exhibit "D"; and C. To establish reserves as shown in Exhibits "E", "F" and "G" for all Funds as necessary to provide for: (1) A reserve for encumbrances and reappropriations in the various funds, the purpose of which is to carry forward and continue in effect the unexpended balance of appropriations for fiscal year 2003-04 departmental ~xpenditures; and (2) Reserves for Advances to Other Funds and for Stores Inventory in accordance wi th ordinance and policy guidelines; and (3) A reserve for general contingencies of such 2 I.t~,":r' ,. ::,'i;~~ff!:J;~f;,~il'1ii'.:' r t, f ,j SECTION 9. The General Fund Equity Transfer Stabilization Reserve is hereby increased by the sum of Eight Hundred Three Thousand Dollars ($803,000) from the Stabilization Rate Reserves of the Utilities Department Funds as follow: utilities Fund Amount Electric Distribution $ 300,000 Electric Supply $ 300,000 Gas Distribution $ 101,500 Gas Supply $ 101,500 Total $ 803,000 The General Fund Equity Transfer Stabilization Reserve is increased to $2,338,000. SECTION 10. The General Fund Budget Stabilization Reserve is hereby increased by the sum of Three Million Twenty-Nine Thousand Ten Dollars ($3,029,010) as described in Exhibit "Aft. This transaction will increase the balance in the General Fund Budget Stabilization Reserve to $21,428,478. SECTION 11. The Electric Supply Rate Stabilization Reserve is hereby decreased by the sum of Three Hundred Thousand Dollars ($300,000), as described in Exhibit "A". This transaction will reduce the balance in the Electric Supply Rate Stabilization Reserve to $58,562,000. SECTION 12. The Electric Distribution Rate Stabilization Reserve is hereby decreased by the sum of Two Million Three Hundred Thousand Dollars ($2,300,000) as described in Exhibit "Aft. This transaction will reduce the Electric Distribution Rate Stabilization Reserve to $7,557,000. SECTION 13. The Electric Public Benefit Program Reserve is hereby increased by the sum of Two Million Dollars ( $ 2, ° 0 0 ,0 0 ° ) as described in Exhibit "Aft . This transaction will increase the Electric Public Benefit Program Reserve to $2,082,000. 4 '>