SR - - FY 2016-17 FINANCIAL STATUS UPDATE1. SUBJECT
Financial status update for Fiscal Years 2016 and 2017.
2. SUMMARY
This report provides a summary of the City's General Fund year -end for Fiscal Year 2015 -16
(FY16) and a status update for Fiscal Year 2016 -17 (FY17).
3. RECOMMENDED ACTION
Receive and file.
4. FISCAL IMPACT
None.
5. STRATEGIC PLAN GOAL(S)
2 — Be a fiscally healthy community
2(b): Analyze future fiscal needs and potential revenue opportunities
6. GENERAL PLAN IMPLEMENTATION
None.
7. DISCUSSION and BACKGROUND
FY16 General Fund Revenues
FY16 revenue receipts reflect a continued positive economic growth as the General Fund
concluded the year with total revenues at $107.7 million, $500,000 more in revenue than
expected. Several key indicators of economic activity, including property tax, transient occupancy
tax, licenses and permits, and fees for services, ended the year above budget. However, sales tax
revenue closed at $42.1 million, $838,000 below budget. Higher receipts from auto dealerships
and restaurants were offset by the decrease in fuel sales revenue due to a significant decline in gas
prices. Property tax closed at $24.9 million, $833,000 more than budgeted. We received more
than anticipated property tax revenue due to higher assessed property values and more property
tax increment distributed from the County of Orange for the Successor Agency. Transient
Occupancy Tax exceeded budget of $4.2 million as we collected $5.2 million due to more business
and leisure travel. Licenses and permits were $1.1 million above budget mainly as a result of
increase in building related permits (building, electrical, plumbing, etc.). Miscellaneous Revenues
were budgeted at $755,000, while actual collections were $3.3 million. A majority of this increase
was due to the Yorba Park and Hambarian settlements, as well as reimbursements from the Office
of Emergency Services for costs incurred by the City while fighting fires on behalf of other
agencies.
FY16 General Fund Expenditures
The expenditure side of the ledger showed another year of savings. Citywide, the departments did
another exceptional job at keeping spending down while providing excellent customer service.
Departments continued their efforts to maintain and seek out cost - saving measures, while
sustaining optimal service levels. As such, FY16 General Fund expenditures ended the fiscal year
at $98.6 million, which was $5.5 million less than was estimated in June 2016 at the time of the
FY17 budget adoption ($7.3 million less than the final budget). Several departments reflected
significant savings including the Police Department with year -end expenditures $2.5 million under
budget, Community Services $1.3 million under budget, and Public Works at just over $800,000
under budget. A major portion of these savings are due to controlling costs associated with
maintenance and contract expenses as well as position vacancies that exist within these
departments. Itemized detail of savings in each category are noted below:
Category:
FY16 Budget
Actual
Savings
Salaries
$85,994,790
$81,289,177
$4,705,613
Contractual Services
12,238,954
10,337,882
1,901,072
Miscellaneous
1,122,522
800,339
322,183
Materials /Supplies
1,933,056
1,668,300
264,756
Capital
301,840
235,054
66,786
Internal Costs
4,293,166
4,293,166
0
$105,884,328
$98,623,918
$7,260,410
ITEM 2 10/11/16
FY16 Fund Balance
During the FY 17 budget preparation, it was anticipated the General Fund would end FY16 with
$5.7 million in unreserved fund balance available (FBA) and an estimated $2.7 million FBA at the
conclusion of FY17. This number included an estimated $1.7 million in citywide department
expenditure savings. After final numbers were calculated, FYI 6 performed better than expected
with revenues at $107.7 million and expenditures at $98.6 million, resulting in a revised FY16
ending FBA of $11.5 million. As mentioned earlier, the departments did a remarkable job at
managing their budgets and reducing expenses when possible which resulted in final expenditure
savings of $7.3 million, $5.5 million more than the original estimate of $1.8 million. The following
is a comparative illustration for FY16:
Adopted Original Estimate Year -End
Budget for FY 16 for FY 16 Actual for FY 16
FY16 (June 2015) (June 2016) (October 2016)
Beg Fund Balance for FY16 $4,665,200* $9,952,406 $9,952,466
Revenues 102,309,221 107,363,567 107,718,104
Expenditures
101,558,048
104,129,326
98,623,918
Transfers
3,000,000
7,000,000
7,000,000
Catastrophic Reserve
500,000
500,000
500,000
FY16 Ending Fund Balance
$1,916,37
$5,686,647
$11,546,652
* Amount does not reflect operating carry - forwards and final year -end results
The FYI 6 FBA of $11.5 million is reduced by $1.3 million to an estimated $10.2 million, due to
carryovers approved by City Council at the time of the FYI budget adoption and encumbrances
for contracts in effect prior to the closing of FY16.
With the adoption of the FYI budget, $2.6 million in transfers were approved to the following
funds:
$800,000 Equipment Replacement Fund (720)
$800,000 Computer Replacement Fund (790)
$1,000,000 Capital Projects Fund (500)
$2,600,000 Total Transfers
With the unanticipated increase in fund balance, staff will be recommending a mid -year budget
adjustment of $5.5 million in additional transfers which will reduce the unreserved year -end
estimated FBA for FY16 to $4.7 million. Specifically, staff plans to recommend to City Council a
mid -year unreserved fund transfer to the following funds:
$1,000,000 PERS — Accrued Liability Fund (760)
$2,000,000 Capital Improvement Projects Fund (500)
$2,500,000 Business Investment Fund (115)
$5,500,000 Total Transfers
ITEM 3 10/11/16
These transfers will provide funding to those areas having either limited resources and /or a specific
need in the immediate future. The proposed transfer of $1.0 million to the Accrued Liability Fund
is for PERS employee retirement benefits which could be used to help lower the City's PERS
underfunded liability amount. The proposed transfer of $2.0 million to the Capital Improvement
Projects (CIP) Fund is consistent with the City Council's practice to invest in the City's aging
infrastructure. Finally, the proposed transfer of $2.5 million to the Business Investment Fund is to
meet our future obligations related to sales tax cost sharing agreements that have been executed in
recent years to attract and retain businesses to Orange. As we anticipate fuel prices increasing in
FYI 7, our obligations will increase concurrently.
FY17 Status Update
As the economy continues to grow slowly, staff does not foresee any significant obstacles in the
near future related to our fiscal standing. There is still some uncertainty as to how the economy
and the stock market will respond to the election however, revenues are currently trending positive
and on track as projected at $106.4 million. Expenditures are tracking as anticipated at $106.3
million; however, as recent experience has proved, staff expects continued savings in this area. As
a result, it is anticipated that by year -end for FYI 7, revenues will exceed expenditures though it is
too early to determine how much that amount will be at this time. It should be noted that these
estimates do not reflect any impact of any future budget adjustments, which would likely increase
the FYI expenditure amounts.
In July, we made lump -sum payments to Ca1PERS for the City's FYI pension contributions, as
approved by the Council at budget adoption. The two payments (one for each pension plan) totaled
$18.9 million citywide. Beginning in FYI 8, Ca1PERS is changing the way cities and agencies
with agent (stand - alone) plans make their contributions. Up until this point, all contributions were
made as a percentage of payroll. However, the nature of the unfunded liability portion of our
payment has no connection to current payroll, as it is meant to be paid for past service. As such,
this amount will be presented as a fixed dollar amount, either payable in monthly installments or
as a discounted lump -sum payment. The discount will be calculated similarly to the lump -sum
payment we made for the City's FYI contributions. Normal costs, which are the costs associated
with benefits earned by employees in the fiscal year, will continue to be paid as a percentage of
payroll and will not be eligible for pre - payment. Staff will provide additional information on
pension costs as the FYI budget process progresses.
8. ATTACHMENTS
None.
ITEM 4 10/11/16
CITY COUNCIL MINUTES OCTOBER 11, 2016
7. ADMINISTRATIVE REPORTS
7.1 Financial status update for Fiscal Years 2016 and 2017. (C2500.J.1.1)
Finance Director Will Kolbow presented the staff report; and provided detailed information
regarding the PERS payments.
MOTION — Nichols
SECOND — Whitaker
AYES — Alvarez, Whitaker, Smith, Murphy, Nichols
Moved to receive and file.
7.2 Pre - Development Agreement between City of Orange and Milan REI X relating to a
109 acre site known as the Trails at Santiago Creek. (A2100.0; AGR 6402)
City Manager Rick Otto presented the staff report. Mr. Otto noted that staff is
recommending to change the word "securing" to "seeking" on Article 2, Section 2.03 (b)
of the agreement (top of page 6). In addition, a letter was submitted and distributed to
Council outlining concerns from the Homeowners Associations (HOA) of Orange Park,
Mabury Ranch, and the Reserve at Orange Park Acres.
Public Speakers:
Frank Elfend, applicant — spoke in favor of the project and the pre - development agreement,
and answered Council's questions.
Theresa Sears — spoke in favor of a pre - development agreement, however, has some
concerns addressed in the letter provided to Council.
Don Bradley, Orange Park Acres Association Vice President — spoke in favor of a pre -
development agreement; however the Orange Park Acres HOA Board has some issues with
the agreement as it is written.
Nick Lall, Mabury HOA — spoke in favor of a pre- development agreement; however, has
concerns addressed in the letter provided to Council.
Tom Davidson — spoke in favor of a pre - development agreement; however, has concerns
addressed in the letter provided to Council.
Stephanie Lesinski, Mabury HOA Vice President — spoke in favor of a pre - development
agreement; however, has concerns addressed in the letter provided to Council.
Addison Adams, The Reserve HOA President — spoke in favor of a pre - development
agreement; however, has concerns addressed in the letter provided to Council.
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