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Home My WebLink About2002-12-17 City Council (2)TO: ATTENTION: HONORABLE CITY COUNCIL FINANCE COMMITTEE 10 FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE SERVICES DATE: SUBJECT: DECEMBER 17, 2002 CMR: 464:02 ORDINANCE CLOSING THE 2001-02 FISCAL YEAR, INCLUDING TRANSMISSION OF THE CITY’ S COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR), REAPPROPRIATION REQUESTS, COMPLETED CAPITAL IMPROVEMENT PROJECTS, AND AMENDMENT OF THE GENERAL FUND RESERVE POLICY RECOMMENDATION Staff recommends that the Finance Committee review, recommend and forward the attached ordinance (Attachment A) and associated exhibits to the City Council for its approval to: close the 2001-02 Budget and authorize re-appropriation of 2001-02 funds into the 2002-03 Budget (Exhibit A & B); close completed capital improvement projects (Exhibit C); transfer remaining balances to the appropriate reserves (Exhibits D & E for General Fund and Exhibits F & G for Enterprise Funds); and amend the General Fund reserve policy (Attachment B). In addition staff is transmitting the City’s CAFR for review and approval (Attachment C). BACKGROUND In June 1999, the Governmental Accounting Standards Board (GASB) - which sets financial reporting rules for all state and local governments - established a new framework for f’mancial reports. The new financial reporting requirements represent the single and most significant change in the history of governmental accounting. The most important changes required by GASB 34 are: Addition of Citywide Reporting Statement. This is a consolidated financial statement for all of the City’s operations. This statement was not required in previous CAFRs and is designed to provide a complete picture of the City’s financial status. It shows and then sums Governmental Activities: General Fund, Capital Fund, Debt Service CMR:464:02 Page 1 of 6 Funds, Special Revenue Funds; and Business-type Activities: Enterprise Funds. In past CAFRs, Governmental and Business or Proprietary funds were reported separately and not totaled. The full accrual basis of accounting is used for the consolidated financial statement. In order to construct the consolidated statement, inter-fund transactions and balances were eliminated and Internal Service Funds were allocated to the Governmental and Business-type Activities and then merged. A detailed reconciliation between the citywide statement and the statements presented on a fund basis is included in the CAFR. o o Addition of a Management Discussion and Analysis (MD&A). The MD&A is a narrative similar to the transmittal letter format in the CAFR, but With an increased focus on citywide statements and scope. The purpose of the MD&A is to provide an overview for users to interpret the basic financial statements. In addition, the MD&A highlights key data and financial performance citywide and at the fund level. A transmittal letter is still required but is reduced in scope given the MD&A requirement. Exl~ansion of Budgetary Reporting. Both the originally adopted and the final adjusted budget are presented for the General Fund in the Fund Financial Statements section of the CAFR. Previously, only the final adjusted budget was presented for the General Fund in the Fund Financial Statements. Reporting and Infrastructure as Capital Assets. Prior to GASB 34, the costs of infrastructure assets such as roadways, street trees, pavement, curbs, gutters, sidewalks, parking lots, traffic signage, bridges, medians, islands and planters, park facilities, park trails and bike paths were not reported in the tSnancial statements. GASB 34 requires capitalization, including General Fund infrastructure assets, in the financial statements .at historical cost or estimated historical cost. Furthermore, this requirement applies retroactively to major general infrastructure assets that were acquired in fiscal years beginning after June 15, 1980, or that received major renovations, restorations, or improvements since that date Depreciation for All Capital Assets. Prior to GASB 34, depreciation was not recorded for General Fund capital assets. The new model requires depreciation of all capital assets, including General Fund infrastructure assets, in the citywide financial statements. The City calculates depreciation using the straight-line mid-year convention method of depreciation. This method is consistent with the depreciation method used by the City’s business-type activities. ¯ Notes to Financial Statements. To ensure that a complete picture is presented in the financial statements, GASB 34 requires various disclosures. These disclosures are presented as a set of notes following the citywide and fund financial statements. For example, one of the notes discusses capital assets. CMR:464:02 Page 2 of 6 The effective date of implementation and compliance with GASB 34 reporting requirements is dependent upon the total revenues of an agency. Agencies with total revenues of $100 million or more are required to implement in the first year, fiscal year 2001-02. Based on this reporting requirement, the 2001-02 City financials are reported under the new GASB 34 model. DISCUSSION The basic financial statements provide two different views of the City’s financial position. As discussed above, the first view is of governmental and business-type activities shown separately and then totaled for a cit?~ide picture. This view is on the ful! accrual basis of accounting, which takes into account all the City’s transactions, regardless of whether or when cash changes hands. The second view is fund financial statements that show the City’s operations in more detail. Go.vernmental funds are presented using the modified-accrual basis of accounting. Under this method, revenues are recognized when measurable and available and expenditures are recorded when the related fund liability is incurred. Business-type funds continue to be reported on the full accrual basis, as they have in the past. Financial highlights are discussed at the citywide and at the fund level. Where possible, fiscal year 2000-01 data was restated in the GASB 34 format for comparative purposes. There are several necessary year-end adjustments to the 2001-02 budget. Specific transactions are detailed in Exhibit A of the budget-closing ordinance. Exhibit D and Exhibit F summarize financial results for fiscal year 2001-02 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 Council throughout the fiscal year. The result of net operations is explained in terms of changes to the various fund reserves authorized by Council. View 1: Citywide The new- Statement of Net Assets reports the difference between the City’s total assets and the City’s total liabilities. This includes all the City’s capital assets and all its long- term debt. Compared to 2000-01, the City’s net assets increased by $64.7 million, to total $909.4 million in 2001-02. Net assets in Governmental activities increased $51.1 million for a total of $426.1 million. The $51.1 million is comprised mainly from $35.3 million of bond proceeds for the downtown parking structure and $6.0 million in capital assets net of related debt. The $426.1 million includes $252.2 million of capital assets net of related debt and including $12.0 million from Internal Service Funds; $21.1 million restricted for special revenue progams; $33.6 million restricted for capital projects; $2.1 million restricted for debt service; and $117.1 unrestricted net assets, which include $34.0 million from Internal Service Funds. CMR:464:02 Page 3 of 6 Net assets in business-type activities increased $13.7 million for a total of $483.4 million. The $483.4 million includes $270.6 million of capital assets net of related debt; $1.7 million restricted for debt service; and $211.1 million of unrestricted net assets. During fiscal year 2001-02, $12.8 million in capital assets, net of related debt was added. View 2: By Fund General Fund At fiscal year end, the City’s financial position is sound, but revenue growth has slowed compared to prior years as a result of weak economic conditions. The General Fund shows a net operating surplus of $2.4 million compared to $4.7 million in the prior year. This result includes recognition of the unrealized gain on investments of $1.5 million that is required by GASB 31. The surplus also includes a $0.6 million transfer from the Electric Fund and a $0.2 million from the Gas Fund to establish the Equity Transfer Stabilization Reserve. The Equity Transfer Stabilization Reserve was established in the. event that the Gas and/or Electric Enterprise funds were unable to make their required equity transfers. At midyear, the City made necessary budget adjustments to balance its budget as a result of the weak economic environment. This included adjusting revenues downward by $6.3 million and reducing expenditures by $5.5 million. At fiscal year-end, the fund balance for the General Fund totaled $63.4 million. This was comprised of: $7.8 million reserved for encumbrances, notes and inventory; $22.7 million for the Budget Stabilization Reserve; $30.1 million for the Infrastructure Reserve; $1.5 million for Unrealized Gain on Investments; $0.8 million for Equity Transfer Stabilization and $0.5 million for Reappropriations. Capital Projects Fund For fiscal year 2001-02, the Capi.tal Projects Fund reported $16.7 million for expenditures mad other uses, which is an increase of $9.1 million from the prior year. The increase resulted from the rehabilitation and maintenance of the City’s General Fund infrastructure, as well as the downtoWn parking structure project, library master planning efforts, the Homer Avenue Undercrossing project. The Capital Projects Fund Balance totaled $53.3 million, an increase of $32.2 million from the prior year. This primarily resulted from the receipt of bond proceeds for the downtown parking structures. Enterprise Funds The Rate Stabilization Reserves (RSRs) for the combined Enterprise Funds combined increased by a net $2.9 million. Major changes include a $12.3 million increase from the Gas Fund and a $9.2 million decrease from the Electric Fund. RESOURCE IMPACT Adoption of the attached budget-closing ordinance (Attachment A) allows for the reappropriation and carryover of funding from the 200!-02 budget so that specific operating progams and capital projects can be completed in the current fiscal year CMR:464:02 Page 4 of 6 (Exhibit B). In addition, by closing completed capital improvement projects, balances (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 prior year Council policy of 18.5 percent of budgeted expenditures, and shows a closing balance of $22.7 million, a decrease of $1.8 million from the prior year. The decrease is a reflection of reducing the percentage cap from 20 percent to 18.5 percent. The Reserve for Emergencies of $6.8 million was moved to the Infrastructure Reserve. The remaining surplus of $4.6 million was utilized to fund the Infrastructure Reserve, which has a closing balance of $30.2 million. The Reserve for Equity Transfer Stabilization was established with a transfer from Enterprise Funds of $0.8 million. Budget transactions included in the attached Ordinance increase General Fund Reserves by $1.0 million (Exhibit A). Exhibit G provides the balance changes for all reserve categories for the Enterprise Funds. The change was a net increase of $1.3 million for all funds. Highlights for this change include: Transactions in the attached ordinance increase Electric Fund reserves by $0.1 million and decrease Gas Fund reserves by $0.2 million as detailed in Exhibit A. Reduction in the retained earnings in the Vehicle Replacement and Maintenance Fund of $20,000 as detailed in Exhibit A. The impact of implementation and compliance with GASB 34 on staff required 1000 hours to prepare and train and an additional 200 hours to prepare the CAFR. POLICY IMPLICATIONS This recommendation is consistent with existing City policies. ENVIRONMENTAL REVIEW The action recommended is not Environmental Quality Act. a project for the purposes of the California CMR:464:02 Page 5 of 6 ATTACHMENT Attachment A: Budget Closing Ordinance body text Exhibit A - Detailed Changes to the Adjusted Budget Exhibit B - 2001-02 Re-Appropriation Requests Exhibit C - Capital Improvement Projects Closed in 2001-02 Exhibit D - General Fund Summary Exhibit E - General Fund Reserve Summary Exhibit F - Enterprise Summaries Exhibit G - Enterprise Reserve Summary Attachment B: Amendment of General Fund Reserve Policy Attachment C: CAFR Accou~nistrative Services Assistant Director, Administrative Services DEPARTMENT HEAD APPROVAL: CARL Director/Administrative Services CITY MANAGER APPROVAL: SON Assistant City Manager CMR:464:02 Page 6 of 6 Attachment A ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ~TO AUTHORIZING CLOSING OF THE BUDGET FOR FISCAL YEAR 2001-02 WHEREAS, pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto and as set forth in Section 2.28.070 of the Pa!o Alto Municipal Code, the Counci! on June ii, 2001 did adopt a budget for fisca! year 2001-02; and WHEREAS, fiscal year 2001-02 has ended and the financial results, although subject to post-audit adjustment, are now available and are herewith reported in summarized financial Exhibits ~A" and ~B" and ~C" and ~D" and "E" and "F" and ~G" prepared by the Director, Administrative Services, which’ are attached hereto, and by reference made a part hereof; and WHEREAS, pursuant to Section 2.28.080 of the Palo Alto Municipal Code, the City Manager did amend the budgetary accounts of the City of Palo Alto to reflect: (A) Additional appropriations authorized by ordinance of the City Council. (B) Amendments to employee compensation plans adopted by the City Council. (C) Transfers of appropriations from the contingent account as authorized by the City Manager. (D) Redistribution of appropriations between functional areas major activities, and objects within various departments as authorized by the City Manager. (E) Fiscal year 2001-02 appropriations which on July i, 2002. were encumbered by properly executed, but uncompleted, purchase orders or contracts; and WHEREAS, the Council finds that adjustments to the fiscal year 2001-02 budget for certain Capital Improvement Projects and Fund Balancing Entries as shown on attached Exhibit ~A", which impact reserve balances, should be approved; and WHEREAS, the Council finds that fiscal year 2001-02 appropriations in certain departments and categories, as shown on the attached Exhibit "B", while not encumbered by purchase order or contract, at year end should nevertheless be reappropriated in the fiscal year 2002-03 budget. NOW, THEREFORE, the Council of the City of Palo Alto does ORDAIN as fol!ows: SECTION i. The fiscal year 2001-02 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 2002-03 budget. SECTION 2. The City manager is authorized and directed: (A) To close the fiscal year 2001-02 budget accounts in all funds and departments and, as required ~by the Charter of the City of Paio Alto, to make such interdepartmental transfers in the 2001- 02 budget as adopted or amended by ordinance of the Council; (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 (C) To effect the adjustments and additional appropriations to various Capital Improvement Projects as shown in Exhibit ~A"; (D) TO establish reserves as shown in Exhibits ’~E", ~F" and ’~G" for all Funds as necessary to provide for: (!) 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 fisca! year 2001-02 departmental expenditures, which were authorized to be carried forward pursuant to Section ! above; (2) Reserves for Advances to Other Funds and for Stores Inventory in accordance with ordinance and policy guidelines; (3) A reserve for general contingencies of such amount that the City Council has approved; and (4) Reserves for utilities plant replacement, rate stabilization, and other reserves in accordance with Charter and policy guidelines. (E) To fund the Budget Stabilization and Infrastructure Reserve in accordance with the General Fund Reserves-Policy adopted by the City Counci!; and (F) To fund the Equity Transfer Stabilization Reserve in accordance with the Genera! Fund Reserves Policy adopted by the City Council. SECTION 3. The sum of Forty-0ne Thousand Dollars ($41,000) is hereby transferred from the Capita! Improvement Project (CIP) 18918, Yacht Harbor Improvement to the General Fund Bmdget Stabilization Reserve, as described in Exhibit ~A". This transaction will reduce the amount appropriated to CIP Project 18918 from $156,104 to $115,104. SECTION 4. The sum of One Hundred Fifty Thousand Dollars ($150,000) is hereby transferred from the Capital Improvement Project (CIP) 10020, Office Space Renovation/Rea!location, to the General Fund Budget Stabilization Reserve as described in Exhibit ~A". This transaction will reduce the amount appropriated to CIP Project 10020 from $701,773 to $551,773. SECTION 5. The sum of Fifty Five Thousand Dollars ($55,000) is hereby transferred from the Specia! Revenue University Avenue Parking District Fund to the General Fund Infrastructure Reserve relating to Capital Improvement Project 10102, Civic Center Infrastructure Improvements, as described in Exhibit ~’A". This transaction reduces the balance in the University Avenue Parking District Fund from $679,643 to $624,643 and wil! increase the balance in the Genera! Fund Infrastructure Reserve from $30,359,000 to $30,4!4,000. SECTION 6. The sum of One Hundred Forty Four Thousand One Hundred Ten Dollars ($144,110) is hereby appropriated to the Capital Improvement Project (CIP) 8928, Services, Transformers, and Meters, from the Electric Distribution Rate Stabilization Reserve, as described in Exhibit "A". This transaction wil! reduce the balance in the Electric Distribution Rate Stabilization Reserve from $8,760,210 to $8,616,110. SECTION 7. The sum of Twenty Thousand Dollars ($20,000) is hereby reduced from Vehicle Replacement and Maintenance Fund and transferred to Capital Improvement Project (CIP) 81103, Golf Course Equipment Replacement as described in Exhibit ~A". This transfer will increase the amount appropriated to CIP 81103 from $60,000 to $80,000 and wil! reduce the balance in the Vehicle Replacement & Maintenance Reserve from $15,622,623 to $15,602,623. SECTION 8. The sum of Twenty Nine Thousand Twenty-Six Dollars ($29,026) is hereby transferred from the Special Revenue Local Law Enforcement Block Grant Fund (LLEBG) to the Recreation Services Functional Area for the Community Services Department as operating revenue as described in Exhibit "A". This transaction will reduce the balance in the Local Law Enforcement B!ock Grant Fund (LLEBG) from $77,788 to $48,762. SECTION 9. The sum of Fifteen Thousand Two Hundred Thirty- Five Dollars ($15,235) is hereby transferred from the Capital Fund Project Expenditure to the General Fund Budget Stabilization Reserve due to an administrative reduction in capital project expense as described in Exhibit ~A". This transaction will increase the balance in the Budget Stabilization Reserve from $22,658,765 to $22,674,000. SECTION !0. The General Fund Equity Transfer Stabilization Reserve is hereby created and is funded by the sum of Five Hundred Sixty-Five Thousand ($565,000) from the Electric Distribution Rate Stabilization Reserve and One Hundred Ninetys0ne Thousand ($191,000) from the Gas Distribution Rate Stabilization Reserve as described in Exhibit ~A". The transactions will reduce the Electric Distribution Rate Stabilization Reserve from $8,472,000 to $7,907,000 and the Gas Distribution Rate Stabilization Reserve from $6,855,000 to $6,664,000. SECTION i!. The Electric Supply Rate Stabilization Reserve is hereby reduced by the sum of Seven Hundred Thousand ($700,000), as described in Exhibit ~’A". This series of transactions will reduce the balance in- the Electric Supply Rate Stabilization Reserve from $48,611,000 to $47,911,000. SECTION 12. The Electric Fund Public Benefits Program Reserve is hereby increased by the sum of One Million Five Hundred Thousand Dollars ($1,500,000) to provide resources for the approved expenditures of the Electric Fund Public Benefits Program as described in Exhibit ~A". The Electric Fund Public Benefits Program Reserve will have an ending balance of $144,000. SECTION 13. Upon completion of the independent audit, detailed financial statements reflecting the changes made by Sections 1 through 14 of this ordinance, shall be published as part of the annual financia! report of the City as required by Article III, Section 16, of the Charter of the City of Pa!o Alto and in accordance with generally accepted accounting principles. SECTION 14. As specified in Section 2.28.080(a) of the Pa!o Alto Municipa! Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 15. The Council of the City of Pa!o Altohereby finds that the enactment of this ordinance is not a project under the California Environmental Quality. Act and, therefore, no environmental impact assessment is necessary. SECTION 16. As provided in Section 2.04.350 of the Pa!o Alto Municipal Code, this ordinance shal! become effective upon adoption. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST: City Clerk APPROVED AS TO FORM: Senior Asst. City Attorney APPROITED: Hayor City Manager Director of Services Administrative Exhibit A CITY OF PALO ALTO 2001-02 YEAREND BUDGET SUMMARY DETAIL CHANGES TO THE ADJUSTED BUDGET 02000000 2041 41,000 02000000 .2041 150,000 02000000 2052 565,00Q 02000000 2053 191,000 02818413 2011 29,026 Adjustment to return fund to General Fund Budget Stabilization Reserve from CIP18918 Adjustment to return fund to General Fund Budget Stabilization Reserve as a result of partial closure of CIP 10020 Adjustment represents initial funding for the General Fund Transfer Stabilizatior] Reserve. Approved by City Council per CMR 223:00. Adjustment represents initial funding for the General Fund Transfer Stabilization Reserve. Approved by City Council per CMR 223:00. Adjustment to transfer LLEBG grant to General Fund -Community Services 02000000 4041 02000000 4041 (15,235)Adjustment to reconcile general ledger with CIP job ledger (55,000)Adjustment to correct funding source for CIP 10102 02000000 3822 02000000 3849 02000000 3831 235,261 Budget Stabilization Reserve 55,000 Infrastructure Reserve 756,000 Transfer Stabilization Reserve 49000000 4011 29,026 36000000 4041 55,000 Adjustment to transfer LLEBG grant to General Fund -Community Services Adjustment to correct funding source for C P 10102 49000000 3850 (29,026) Other Fund Reserve Balance 36000000 3850 (55,000) Other Fund Reserve Balance 71000000 2011 71000000 ......2011 71O000OO 243,25 (15,235)Adjustment to reconcile general ledger with CIP job ledger (55,000)Adjustment to correct funding source for CIP 10102 55,000 Adjustment to correct funding source for CIP 10102 CIP18918 71000000 3879 (41,000)Adjustment to return fund to General Fund Budget Stabilization reserve from CIP18918 71000000 4011 150,000 Adjustment to retum fund to General Fund Budget Stabilization Reserve as a result of partial closure of CIP 10020 71000000 3879 (150,000)Adjustment to return fund to General Fund Budget Stabilization Reserve as a result of partial closure Of CIP 10020 71000000 3879 (15,235) Adjustment to reconcile general ledger with CIP job ledger Page 1 of 2 Exhibit A CITY OF PALO ALTO 2001-02 YEAREND BUDGET SUMMARY DETAIL CHANGES TO THE ADJUSTED BUDGET 13000000 13000000 23270200 1780 10,772,000 Adjustment to reflect excess capacity revenues 1782 4,368,000 Adjustment to reflect excess capacity revenues 2052 .1,500,000 Adjustment to transfer from electdc supply to electric distribution for the Public Benefits Program 13231160 13231160 13000000 23000000 23250780 3680 7,391,000 3613 6~949,000 4052 1,500,000 4011 565,000 3879 144,110 Adjustment to reflect excess capa6ity commodity purchases Adjustment to reflect long-term contract settlement agreement. This adjustment was included in the 200-03 budget but is transferred to the 2001-02 budget. Adjustment to reflect transfer from electric supply to electric distribution for the Public Benefits Program Adjustment represents initial funding for the General Fund Transfer Stabilization Reserve. Approved by City Council per CMR 223:00. Adjustment represents additional funding for Major Project Number 8928 13000000 23000000 23000000 3817 3816 3804 (700,000) Rate Stabilization Reserve 1,500,000 Public Benefits Program Reserve (709,1 !0) Rate Stabilization Reserve 24000000 4011 191,000 Adjustment represents initial funding for the General Fund Transfer Stabilization Reserve. Approved by City Council per CMR 223:00. 24000000 3804 (191,000) Rate Stabilization Reserve 81533790 3879 20,000 Adjustment represents funding for CIP 81103 which was inadvertently closed 81000000 3809 (20,000) Retained Earnings Page 2 of 2 Exhibit B 2001-02 REAPPROPRIATION REQUESTS Total Requests .....$502,057 ................ $ 767,364 Total Approved ............ $ So2,o57 ..... $ 541,000 Planning Department $40,000 Shuttle and Alternative Transportation Projects $24;000 Office of Traffic Safety Grant $71,264 Residential In-Lieu Housing fund: Oak Creek & Bayshore BMR Shuttle costs have been well managed, through route changes and in collaboration with the Stanford Marguerite. Reappropriation of these funds will enable staff to continue to pursue transportation alternatives, including the citywide transportation nexus study. Current routes are funded in the FY 2002-03 budget. Neither route changes nor nexus study are funded in FY 2002-03. The Office of Traffic Safety extended this grant in late fiscal year 2001-02. Both the revenue and expense should be reappropriated in fiscal year 2002-03, in order to utilize the gant funding for safety projects in the upcoming year. The balance left from BAO# 4735, adopted on Feb. 4, 2002 needs to be carried forward to the FY 2002-.03 budget. The original appropriation was $143,000 for property holding and other related costs of the Oak Court Housing Site in SOFA. Balance: $105,154 $14,000 was appropriated as a mid-year adjustment for holding costs of Bayshore Road BMR unit. This BMR unit is in escrow to be sold from the City to a BMR buyer, but the sale is not planned to close until early July. If there were any delays, the City would need the remaining funds to cover holding costs. Balance: $460 Approved $40,000. The requested funding exists. Part of"Top 5" - Alternative Transportation!Traffic Calming. Approved S24,000. The requested funding exists. Part of"Top 5" - Alternative Transportation!Traffic Calming. If the funds are not used, than the funds wil! be returned. Approved $71,264. The requested funding exists. Part of"Top 5" - Affordable/Attainable Housing. Planning Department $170,000 Zoning Ordinance Update The Zoning Ordinance Update project will span $113,636 $25,000 Downtown North Traffic Calming Trial (DTN) and Lytton Neighborhood Traffic Calming Study TDA Grant- Pedestrian Safety fiscal years 2001-02 and 2002-03, with funding allocated in both years. This reappropriation of project funds moves approved funds into the second year of a two-year budget, and is vital to meeting the project requirements as articulated by City Council. DTN & Lytton have been delayed due to disaweement over permeable barriers, a critical design component. Staff anticipates aweement on design by September 2002. Until this issue is resolved we cannot complete a scope of work for DTN. Ls~ton cannot begin until DTN, because traffic will likely be diverted to. the Ls,~on area during traffic calming trial, The pedestrian safety project to be funded by this want was funded in 2001-02 through public-private partnership with Roche. Thus the grant funds are still available for projects in 2002-03. The revenue and expense should be reappropriated in fiscal year 2002-03, in order to utilize the want funding for projects in the upcoming year. Approved $170,000. The requested funding exists. Part of"Top 5" - Land-Use Planning. Approved $113,636. The requested funding exists. Part of"Top 5" - Alternative Transportation/Traffic Calming. Approved $25,000. The requested funding exists. Part of"Top 5" - Alternative Transportation/Traffic Calming. If the funds are not used, than the funds will be returned. Police Department $58,157 COPS and CLEEP state grant monies Delay in County disbursement of revenues has resulted in the delay of the associated expenses. Approved $58,157. These funds are tied to grant revenues approved through budget amendments in 2001-02. These revenues wil! be lost if the funding is not carried forward into fiscal year 2002-03. Storm Drain age $106,364 San Francisquito Creek Levee Restoration Project and Stabilization and Revegetation Study Utilities $148,0o0 $175,000 Advertising, Communications and Public Relations Agency Electric Reliability Services to Major and Small Commercial Customers The two projects are under the direction of the San Francisquito Creek Joint Powers Authority. They are activities of regional benefit, and Palo Alto’s continued participation is critical to their success. The implementation schedule has slipped beyond the original due dates as a result of the complexities of coordination amongst multiple JPA member agencies. It is anticipated that the work will be completed in FY 2002-03. There are not sufficient funds in the FY 2002-03 budget to cover these expenses. This is our ftrst-ever departmental-wide RFP for advertising, communications and public relations services. This RFP was originally planned for completion in April, but workload priorities shifted and additional time was required in securing input and signoff from all participating divisions. The RFP packet went out to bidders on June 10, 2002, but the original bidder response date was extended until July 30, 2002. This was because of the magnitude of the project and requests by bidders to extend the deadline. Because this project was planned and budgeted for FY 2001-02, funds were not budgeted in FY 2002-03. Administrative review delays in 2002 eliminated the option to encumber existing funds before fiscal year end. Approved $100,000. There is sufficient balance in the budget for 2001-02 that can be reappropriated. The remaining balance, of $6,364 will be covered by the budget for 2002-03. Approved $68,000. This is the remaining balance of the budget in 2001-02 that can be reappropriated. If additional resources are needed, savings from 2002-03 will be used to cover this project. Approved $70,000. The life span of this project is until fiscal year 2004-05. The approved amount of $70,000 is the estimated cost for fiscal year 2002-03. The remaining balance needed for this project of $105,000 will be included in fiscal years 2003-04 and 2004-05. Utilities $213,000 $125,000 Fiber to the Home (FTTH) Business Case Analysis Provide security needs to different Utility Department locations as a result of 9/ll event. The FTTH trial and business case analyses are multi-year projects, however the funding for the business case analysis was allocated entirely to the 2001-02 budget. The Council needs a comprehensive study in order to make an informed decision about the potential $50 million investment. The study cannot be completed without the reappropriation. The 2002-03 budget does not have funding allocated for the FTTH analysis; the allocation was done entirely in the 01-02 budget. This project supports Utilities Strategy 4: Deliver products and services for competitive markets, H. Telecommunications Products. This contract will be covering more than one job site, which makes this project complex. This will be an on-going project throughout the year as security needs arise. Approved $213,000. There is sufficient balance in the 2001-02 budget to be reappropriated for this project. Approved $90,000. This is the existing balance available in the 2001-02 budget that can be reappropriated. This project is to cover the security needs of various Utilities Department facilities in response to the 9/11 event. Administrative Services- Technology Fund $350,0O0 Computer equipment and consulting services associated with the implementation of a new ERP system. This project has been delayed due to extensive negotiations with the ERP software and implementation vendor. The ERP project is scheduled for Council review and approval on July 22, 2002. Phase One of the implementation plan begins immediately after Council approval of the ERP contract. Approved $350,000. There is sufficient balance in the 2001-02 budget to cover this reappropriation. The ERP project is part of the Information Technology Strategic Plan that was approved by Council on October 5, 1999. 4 Public Works - Equipment Management $602,500 Purchase and install utility bodies and interiors for 27 City- owned trucks and vans. $462,500 Lease five Toyota RAV-4 electric vehicles. $125,000 Equipment Management continues to have above average project workload, due to the ongoing expansion of the fleet, several large capital projects, and a vehicle replacement backlog that has existed since the 1993-94 fiscal year. In addition, our major outfitting contractor, Altec Industries, is experiencing a backlog of their own that has added to the delays. The chassis for these replacement vehicles have already been purchased, and they all must be outfitted with utility bodies and other items prior to being placed into service. If funding is not reappropriated, we will have to complete these projects using 2002-03 funding, which will require deferring some 2002-03 projects. Approved $602,500. There is sufficient balance in the budget for 2001-02 that can be reappropriated. The leasing of the five Toyota RAV-4 electric vehicles falls under the Alternative Transportation /Traffic Calming Council "Top 5" Priority. Planning 19907 $104,567 San Mateo Drive Bridges Menlo Park is the lead agency on this project; the City ofPalo (CPA) is obligated for the cost-sharing portion of the funding. The current schedule reflects submittal of the bridge plans to Palo Alto for approval within the next few months followed by construction in 2002-03. Approved $104,567. There is sufficient balance in the budget for 2001-02 that can be reappropriated. This project supports the Council "Top 5"-Priority on Alternative Transportation!Traffic Calming. Planning 19524 $49,000 19704 $284,161 Bikeway System Improvements Traffic Control Safety Devices Project implementation was delayed pending completion and Council approval of the Bicycle Transportation Plan, which is currently being reviewed by the Planning and Transportation Commission. The plan will be presented to the City Council in September. This CIP will fund projects consistent with recommendations of the Bicycle Transportation Plan. Additional time was needed to review available products, prepare plans, and obtain permits from other agencies (SCVWD and Santa Clara County). Project provides an onooin~_~. ~ safety benefit. This project is not funded in future years, so unless reappropriated, funds will not be available for this work. Approved $49,000. There is sufficient balance in the budget for 2001-02 that can be reappropriated. This project supports the Council "Top 5" Priority on Alternative Transportation/Traffic Calming. Approved $284,161. There is sufficient balance in the budget for 2001-02 that can be reappropriated. This project supports the Council "Top 5" Priority, on Alternative Transportation/Traffic Calming. Exhibit C City. of Palo Alto CAPITALIMPROVEMENT PROGRAM PROJECTS Completed and Closed bz 2001-02 10025 10118 19311 19804 19817 19819 19920 19921 19915 10115 19807 19713 19407 19702 19623 19073 19708 10014 19903 10120 19625 .... Golf Course Equipment Replacement Sand Bagging Machine MSC Security Improvements Gunn,Library Utility Bill Processing Equipment Planning Office Space Downtown Parking Lot Lighting Level A Storage Communications Logging recorder Confined Space Rescue Vehicle, Trailer & Eq Communications Console Equipment Equipment Recycling Wash Rack Facilities Water backflow Device- Lucie Stern Courtyard & Walkway Lytton Neighborhood Traffic Study Major Intersection Imp. Foothill Expwy/Page Mill Wilkie Way Bicycle Bridge New Vehicles Johnson Park Lighting Cubberly Theatre Chiller Replacement Council Chambers Refurbishing 22,749 8 7,412 30,682 14,785 13,683 3,038 9,105 12,871 869 12,541 194 17,058 6,337 5,562 76,107 18,157 28,231 21,096 27,338 28,217 0009* Total $ 356,040 Total 400,000 $ 400,000 * Project was placed on hold. No expenditures were incurred. EXHIBIT D Revenues Property Taxes Sales Taxes Utility Users Tax Transiem Occupancy Tax Other Taxes, Fines & Penalties Charges for Services Permits & Licenses Charges to Other Funds Rental Income ’ Other Revenues : Add: Operating Transfers In Prior Year Encum & Reappr( Administrative Departments Community Services Fire Planning Police Public Works Non-Departmental ~School Site Operations Add: Operating Trans Out 2001-02 Adjusted Budget 12,836 21,046 6,278 7,056 7,777 16,401 3,033 10,794 12,011 10,240 14,941 5,381 21,278 24,518 18,012 9,594 21,105 14,032 11,502 2001-02 CAFR Basis Rev/Exp 13,231 20,084 , 6,457 6,615 8,407 16,670 2,901 12,516 11,355 14,531 2001-02 Allocated Charges 2001-02 Eneum+ Reapprop 2001-02 Budgetary Rev/Exp 9,584 i3Ja rda rda n!a rda rda rda rda rda n/a 13,231 20,084 6,457 6,615 8,407 16,670 2,901 9,584 12,516 11,355 5,381 nJa 14,531 5,381 18,238 838 1,391 20,467 19,496 2,931 515 22,942 16,722 976 173 17,87! 7,377 376 1,199 8,952 19,049 1,278 268 20,595 9,548 3,106 305 12,959 56 115 -171 11,683 11,683 C AFR’-R-e-c-o-n cilia t ion:Current year encumbrance/reappropriations Prior year encumbrance/reappropriations Current year stores adjustment Prior year stores adjustment CAFR Net Income 3,851 (5,381) 88 (S2) 2,394 2001-02 Variance 395 (962) 179 (441) 630 269 (131) (1,210) 505 !,115 (409) 81! 1,576 141 642 510 1,073 (171) (2,290) (181’. CAFR Fund Balance Less: Encumbrances Reappropriations Adjustment for Stores Operations Budget Stabilization Reserve Reserve For Infrastructure Improvements Notes Receivable Reserve Stores Inventory Reserve Unrealized Investment Gain/Loss Reserve Reserve For Equity Transfer Stablization Reserve For Emergencies Adjustment for Stores Operations Adjustment for Stores Inventory Encumbrance Adjustment for Stores Operations EXHIBIT E iGeneral Fund Balance @ 06/30/01 Funds Restated in GASB 34 Format @ 06/30/01 Net From Operations Balance @ 06/30/02 60,397 641 2,396 63,434 (4,916)(1,506)1,921 (4,501) (749)235 (514) 52 36 88 24,491 (875)(942) 18,788 1 ! ,401 1,140 152 2,226 (241) 1,309 10 203 0 756 6,777 (6,777) 52 36 241 (153) 22,674 30,189 1,292 1,985 1,522 756 0 88 Exhibit F ,i REVENUE Water sales Bond Proceeds Other revenues Bonded Reappro/Encum Restricted Bond Proceeds Reappropriations / Enc EXPENSES Purchases Other Expenses TOTAL OPERATING EXPENSES Capital Expenses 2000-01 Ac~Enc! Reapprop 15,441 1,625 5,969 9,051 15,020 6,228 2001-02 Act/End $ Variance Adjusted Reapprop Favorable Budget ActuallEnc (Unfavor.) 15,657 15,534 (123) 10,770 (10,770) 1,128 1,714 586 -3,378 3,378 -3,213 3,213 4,763 4,763 6,186 5,871 315 10,097 9,145 952 16,283 15,016 1,267 .10,616 11,346 (730~ REVENUE Electric r~tail sales Electric wholesale sales Other revenues Reappropriations / Enc EXPENSES Purchases NCPA & TANC Debt Svc Qther Expenses TOTAL OPERATING EXPENSES Capital Exper~ses 2000-01 AcfdEncl Reapprop 4,064 94,052 11,271 2001-02 Act/Enc!$ Variance Adjusted Reapprop Favorable Budget Actual/Enc (Unfavor.) 69,768 69,125 (643) 1,886 1,886 (0) 32,204 35,760 3,556 16,709 28,774 12,065 57,763 9,999 44,612 112,374 20,030 53,893 61,831 (7,938) 5,880 5,702 178 47,951 54,949 (6,999) 107,724 122,482 (14,758) 24,113 20,030 55 REVENUE Gas retail sales Gas wholesale sales Other revenues Bond Proceeds Bonded Reappro/Encum Restricted Bond Proceeds Reappropriati0ns / Enc EXPENSES Purchases Other Expenses TOTAL OPERATING EXPENSES Capital Expenses 2000-01 Ac~Enc/ Reapprop 22,519 7,808 1,254 20,627 14,249 34,876 6,142 2001-02 A~usted Budget 40,275 1,438 13,137 3,584 16,721 15,869 32,590 7,866 Ac#Enc/ Reapprop Actual/Enc 41,073 1,617 3,826 6,600 3,584 22,174 14,214 36,388 8,004 2000-01 Ac~Enc/ Reapprop REVENUE Revenues 11,420 Reappropriations / Enc 7,460 EXPENSES Sewer Treatment Exp. operating Expenses TOTAL OPERATING EXPENSES 4,974 6,570 !1,544 .Capital Expenses 9,230 PrincipalPayments - 2001-02 Adjusted Budget 11,304 7,872 5,463 3,627 9,090 11,098 44 AcdEnc/ Reapprop Actual/Enc 11,303 7,872 5,212 4,202 9,414 .9,230 $ Variance Favorable (Unfavor.) 798 179 (13,137) 3,826 6,600 (5,453) 1,655 (3,798) (138) (3,936) $ Variance Favorable - (Unfavor.) (1). 251 (575) (324) 1,868 (44) REVENUE Revenues Reappropriations / Enc EXPENSES Payments to PASCO Other Expenses TOTAL OPERATING EXPENSES Capital Expenses REVENUE Operating Revenues Restricted Bond Proceeds Reappropriations / Enc Bonded Reappro/Encum EXPENSES Operating Expenses TOTAL OPERATING EXPENSES Capital Expenses Principal Payments 2000-01 ActJEnc/ Reapprop 23,630 2001-02 Adjusted Budget Act/Enc/ Reapprop Actual/Enc $ Variance Favorable (Unfavor.) 2,182 7,699 13,581 21,280 2,967 22,860 23,231 371 2,319 2,319 7,982 7,774 (208 18,136 16,895 1,241 26,118 24,669 1,449 2ooo-0i AcfJEnc/ Reapprop. 14,735 1,815 2,451 3,710 11,570 11,570 6,307 262 2001-02 Adjusted Budget (951 15,139 162 2,570 136 Act/Eric/ Reapprop Actual/Eric 14,734 1,815 2,570 ¯ 136 12,885 12,885 4,041 282 14,200 14,200 3,692 315 $ Variance Favorable (Unfavor.) (405) 1,315 1,3i5 (349) (33) REVENUE Revenues Reappropriations / Eric Bonded Reappro/Encum Restricted Bond Proceeds EXPENSES Operating Expenses TOTAL OPERATING EXPENSES Capital Expenses Principal Payments REVENUE Revenues Reappropriations / Enc EXPENSES Operating Expenses TOTAL OPERATING EXPENSES Capital Expenses 2000-01 Ac#Enc/ Reapprop 3,197 423 426 935 2001-02 Act/Encl $ Variance Adjusted Reapprop Favorable Budget Actual/Enc (Unfavor.) 3,044 3,198 445 445 364 364 80 80 154 2,326 2,326 2,834 215 2,388 2,493 (105) 2,388 2,493 (105) 1A71 1,263 (92) 265 260 5 1999-00 Act/Enc/ Reapprop 2001-02 Act/Eric/$ Variance Adjusted Reapprop Favorable Budget Actual/Enc (Unfavor.) 726 385 (341) 537 537 353 353 184 184 Exhibit G :ISCAL YEAR 2001-02 Beginning Reserves To (From) Reserves Adj Budgeted Reserves % of Budgeted Reserves Water Electric Gas WWC WWT Refuse Storm Ext Svc $7,929 $135,576 $3,132 $7,209 $7,078 $11,692 $334 $0 2,240 (10,995)12,308 (1,590)394 (1,135)71 32 7,398 131,379 6,901 6,894 7,111 10,001 123 N/A 137%95%224%82%105%106%329%N/A Total $172,950 1,325 169,807 103% FZSCAL YEAR 2001-02 Rate Stabilization General RSR Supply RSR Distribution RSR Total RSR Emergency Plant Replace Calaveras Underground Loan Conservation Loan Water Resources Board Shasta rewind Loan Central Valley Proje~ Public Benefit Program External Service - YF External Service - HR Water Electric Gas WWC WWT Refuse Storm Ext Svc $9,190 $5,135 $5,929 $9,967 $405 $1 47,912 7,922 7,907 6,664 9,190 55,819 14,586 5,135 5,929 9,967 979 2,335 820 484 1,543 65,466 635 64 118 144 34 590 405 14 18 Total $30,627 55,834 14,571 101,031 6,161 65,466 635 34 59O 64 118 144 14 18 FISCALYEAR 2001-02 Water Electric Gas WWC WWT Refuse Storm Ext Svc Beginning RSR $7,025 $64,971 $2,315 $6,759 $5,623 $11,102 $334 $0 To(from) RSR 2,165 (9,152)12,271 (1,624)306 (1,135)70 1 RSR Maximum 9,329 44,885 18,345 5,388 4,188 3,725 211 N/A RSR % of Maximum 99%124%80% 95% 142%268%191% N/A Total $98,129 2,902 85,860 118% Attachment B GENERAL FUND RESERVE POLICY With Changes Highlighted Reserve Level Discussion Determination of the appropriate level of General Fund reserves is a policy decision. Some general guidelines have been suggested by the literature in the government finance field. The Government Finance Officers of America (GFOA) recommend that reserve levels be directly related to the degree of uncertainty the local government faces: the greater the uncertainty, the greater the financial resources necessary. Past experience should be used as a guide, with particular attention being paid to the following: Diversity of revenue base Volatility of revenue structure Volatility of political environment Consistent operating surpluses/occasional or frequent operation deficits Uneven cash flows, requiring short-term borrowing Diversity of Revenue Base: Palo Alto has a comparatively diverse revenue base: in 1999400 , almost half of the $9-1-N in million General Fund revenues came from non- tax sources. This means that in periods of economic recessions, Palo Alto is ~ ~ more resilient to revenue reductions than cities in which tax revenue makes up the overwhelming majority of their revenue base. (In contrast, for all cities in California ofPalo Alto’s size, taxes make up roughly two-thirds of total General Fund revenue.) Volatility of Revenue Structure: Tax revenues show the most volatility in terms of growth, althbugh Palo Alto’s revenues have been far more stable than other cities in Santa Clara County or the .Bay Area in general. Sales tax is spread broadly across consumer retail, business-to-business sales, and other sales (transportation, food products, and miscellaneous) In ......~ Dol~, A~S , .............r, ........;A~o~]~ ~,;1;.,.,,;÷,,~÷~..A~cc ........" ~ ........~-~o,~ .....they are less able to withst~d political vagaries., however. Political Volatility: While Palo Alto’s revenues have shown stren~h and resilience in relation to the general economy, considerable volatility has been introduced by the inability of the State government to deal with its own budget problems. In 1990-91, the State gave counties authority, through SB 2557, to charge cities for the cost of booking prisoners and for property tax administration; this action cost Palo Alto approximately halfa million dollars on an annual basis. In 1991-92, the State shifted 47 percent of cities’ cigarette tax away to fund trial courts. In addition, the State took half of all non-parking fmes and forfeitures attributable to cities. From 1992-94, the State reduced cities’ property tax revenues by almost 15 percent, eliminated the balance of cigarette tax revenues, and extended the definition of booking fees so that counties may potentially double or triple the charges they assess. In November 1996, voters passed Proposition 218, the Right to Vote on Taxes initiative. It further limits the City’s ability to raise new funds. Of all the factors to be considered in setting reserve levels, none appears more critical than political volatility in the current economic environment. Operating Surplus/Operating Deficit: The General Fund’s operating results have been favorable for the pastseveral years, Uneven Cash Flow: General Fund reserves are invested as part of a pool, which includes :idle cash in all City funds, including the Enterprise and the Special Revenue Funds. At December 3 i, "~ cma , the City’s cash and investment portfolio (excluding funds under the management of third party trustees) totaled g2984i million. Cash flow projections for the portfolio reflect no need for short-term borrowing, and the City has not experienced this need in the past. BudRet Stabilization Reserve In examining the key elements of setting adequate reserve levels, it is clear that the City has the most vulnerability in the area of political volatility. Events in recent years have left little doubt that the City’s budget planning can be completely negated by the actions of the State Legislature and the Governor in Sacramento. There is reason tobe concerned that the City may face a reduction in sales tax revenues in the next several years, if per capita allocation were to take the place of situs basis allocation. Consequently, a reserve level of no less than 15 percent of Fund ,enditures. to a of 20 shall be maintained. Infrastructure Reserve An infrastructure reserve in the General Fund shall be used to finance capital improvements that can’t othelavise be accommodated in the ongoing capital budget. The reserve would be used for: Priority projects of large dollar amounts, generally over $1.0 million each, and which are non-recurring in nature; Projects that are expressly identified as part of the infrastructure back log and which do not lend themselves as easily to debt financing, i.e., non-building projects; To the extent that sufficient funds accumulate in the infrastructure reserve, and no significant backlog of infrastructure existed, use of the reserve may be considered for all or part of the financing for a new facility as an alternative to full debt financing; In addition, the reserve could be used to finance large capital repairs of a non- emergency nature that come up during the year, but which are not practical or prudent to delay until the next budget year. Staff believes projects of an emergency nature would be more appropriately funded from the BSR. Finally, in years of fiscal strain, the City may use the reserve as a supplemental source of financing those capital improvements that might otherwise be proposed for reduction as part of a budget savings plan in an effort to stay within overall revenue constraints. Because this reserve is to be used for priority capital projects that will be reviewed by the Council, no maximum reserve level is recommended. Conversely, because of the discretionary nature of this reserve, no minimum balance is required. to