SR - - SECOND STUDY SESSION FY 2017-18 PROPOSED BUDGET G~��°�°� AGENDA ITEM
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May 2, 2017
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TO: Honorable Mayor and Reviewed/Verified By:
Members of the City Council
City Manager _
Finance Director
FROM: Rick Otto To Be Presented By: Will Kolbow
City Manager _cons. calenaar X City Mgr. Reports
_Council Reports _Legal Affairs
_Boards/Cmtes. _Public Hearings
_Admin Reports _Plan/Environ.
1. SUBJECT
Second Study Session for the Proposed Fiscal Year 2017-18 Budget
2. SUMMARY
This is the second study session in support of the preparation of the FY 17-18 budget (FY 18).
This study session provides an updated analysis of the projected General Fund revenues and
expenditures for FY 18, as well as a status and analysis of the Special Revenue, Internal Service,
and Water Funds for FY 18.
3. RECOMMENDED ACTION
Receive report and provide policy direction.
4. FISCAL IMPACT
Fiscal impact will be determined with final budget adoption.
5. STRATEGIC PLAN GOALS
2. Be a fiscally healthy community: a) Expend fiscal resources responsibly; b) Analyze future
fiscal needs and potential revenue opportunities and c) Provide appropriate reserves.
4. Provide outstanding public service; b) Provide facilities and services to meet customer
expectations.
6. GENERAL PLAN IMPLEMENTATION
N/A
ITEM � � � 1 5/2/17
7. DISCUSSION and BACKGROUND
This is the second study session in support of the preparation of the City's FY 18 budget. This
study session is intended to focus on the following iCems:
• Providing an updated status of the current year budget;
• Providing an updated analysis of the projected General Fund revenues and expenditures
for FY 18; and
• Presenting a status and analysis of the Special Revenue, Internal Service, and Water Funds
for FY 18.
At this point, we are on target to present a proposed FY 18 budget to the City Council for review
and adoption at the June 2017 meeting.
Status of FY 17 General Fund Budget
As the end of FY 17 quickly approaches,General Fund revenues are expected to increase to$111.3
million,4.6% over budget. This amount is slightly more than the $ll 0.9 million revenue estimate
presented at the March 28th Study Session. Out of the total amount, $4.9 million are from one-
time revenue sources. Sales tax estimate for FY 17 is anticipated to be $1.4 million less than the
budget of$43.3 million. As gas prices continue to remain low, fuel tax revenue is below budget
expectations. We anticipate the decline in fuel sales will be partially offset by increases in sales
from auto dealerships,building and construction, and business and industry sectors. Other revenue
sources such as property tax, licenses and fees, and use of money and property, are expected to
have higher than budgeted receipts due to an improving economy. Revenue from other agencies
is expected to be above budget as well. Miscellaneous revenues are anticipated to be over budget
mainly due to one-time receipts from the sale of surplus properties. With an early estimate of$3.7
million in expected departmental savings, General Fund expenditures are anticipated to close at
$105.9 million. Should year-end revenues and expenditures hold steady, staff expects to end the
fiscal year with just over$5.4 million in revenues over expenditures. As such,the estimated ending
General Fund balance for FY 17 is expected to be $8.6 million.
It should be noted, as presented at the March 28th Study Session, that $3.5 million currently in the
General Fund (Fund 100) from the sale of surplus property at 3101 West Chapman Avenue is
anticipated to be used as a loan to the Water Fund (600) for the design and construction of a water
well on the site. Staff continues to work on the details of the loan to the Water Fund, and it is
anticipated that the loan will be presented to the City Council for consideration prior to the end of
the fiscal year. If the City Council approves the loan, the $8.6 million estimated ending General
Fund balance for FY 17 will be reduced to $5.1 million.
Projected General Fund Revenues for FY 18
Total General Fund revenues for FY 18 are projected to be $107.7 million. This represents a
decrease of$3.6 million or 3.2% below the estimated revenue for FY 17. However, this amount
is a 1.2%increase after the one-time revenue is removed from FY 17.The estimated FY 18 revenue
amount stays in line with the revenue projections presented at the March 28th Study Session.
Provided below is a summary of the General Fund revenue highlights for FY 18:
ITEM 2 5/2/17
__ .
• Sales Tax is the largest source of General Fund revenue. In FY 18 the City anticipates
receiving $42.3 million, $425,000 (1.0°10) above the FY 17 estimate. Low fuel prices
continue to have a sustained impact on sales tax revenue. On the positive side, we expect
the recently rebranded Kia dealership, new stores at the OLitlets of Orange, and the new
Target store will bring in more retail sales. In addition, we anticipate strong performance
in auto sales, building and construction activity, and the business-to-blisiness sector.
Further, we expect revenue related to fiiel sales will begin to slowly recover.
• Property Tax is the second largest source of General Fund revenue and is expected to be
$27.0 million, generating an additional $979,000, an increase of 3.8%. Reassessments for
homes and commercial properties sold at higher property values are anticipated to generate
more property tax receipts.
• Property Taxes in lieu of Motor Vehicle Fees are anticipated to increase$485,000(3.9°Io)
to $12.8 million in FY 18 as this revenue is tied to property tax growth.
• HoteVTransient Occupancy Tax receipts are projected to be $5.4 million, 2.0% above
the FY 17 estimate, based on current trends resulting from an increase in travel/tourism
industry.
Projected General Fund Revenues for FY 18
Transient Occupancy
Tax $5,355,500 SalesTax
Misc.Revenues 4.97%
$661,691 $42,347,000
0.61% 39.32% Other Taxes
$650,000
Use of Money& 0.60%
Property
$1,481,923
1.38%
Revenue from Other
Agencies
$1,558,510 '"`�`���`� � � �
1.45% .� �
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Charges to Other Funds�; � � �4�'�
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2,101,000 ( ``"� '
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1.95% ��}
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Franchises� "F��,�
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$2,542,619
2.36% i� 'a Property Taxes
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Fees for Services ` $26,957,377
$4,949,360 ��`w 25.03%
4.60%
Fines&Forfeitures Licenses&Permits Property Taxes in lieu
$1,820,000 $4,451,900 of Motor Vehicle Fees
1.69% 4.13% $12,818,206
11.91%
ITEM 3 5/2/17
Many of the key economic indicators continue to show signs of improvement, and our local
economy mirrors the effects of a steady growth trend. Job market conditions have improved, and
hourly wages continue to rise which should boost personal income growth and consumer spending.
According to many economists, the overall economic outlook is positive. However, it is essential
we continue an aggressive approach with economic development programs to attract and retain
major retailers and significant revenue generators to the City. Maintaining and enhancing the tax
base is critical to our ability to provide the highest level of services and programs to our residents
and businesses.
Estimated General Fund Expenditures for FY 18
The City continues to rely on its conservative spending practices which are responsive to the
priorities set by the City Council. This includes past implementation of significant departmental
operating budget reductions, underfunding internal service fund allocations, effecting a 5.0%
furlough for non-safety employees (ended 7/U14), and freezing vacant positions. The City
continues to maintain substantial savings with tight controls on operating expenses. With the
proposed FY 18 budget, the City will have approximately 43 full-time equivalent frozen positions,
saving over $4.3 million annually, including $4.1 million in the General Fund alone. As we
progress through this budget process and into next fiscal year, we will continue to evaluate vacant
and frozen positions.
The current projected General Fund expenditures for FY 18 are $107.5 million. This reflects a
slight increase of 1.5% in expenditures over the original adopted FY 17 budget. This increase is
primarily due to the continued growth in employee retirement (PERS) costs, an increase in
contractual obligations, a limited amount of department operating budget increases related to
maintaining levels of service to meet community needs, and assuming the cost of street sweeping
services. This estimated expenditure amount is consistent with the amount presented at the March
28 Study Session. Provided below are the significant conditions that are impacting the General
Fund budget for FY 18:
1. Ca1PERS (PERS) Cost Increase: Retirement costs continue to escalate due to Ca1PERS'
(PERS) attempts to reduce the system's unfunded liability. The normal cost rates for the
miscellaneous and safety plans will be 10.495% and 18.173% respectively. These rates are
similar to the prior year. The City's unfunded liability contributions far the miscellaneous
and safety plans will be $5,119,476 and $7,429,402, respectively, for a total of
$12,548,878. Of this unfunded liability payment, $10,869,144 will be paid by the General
Fund. In total, PERS costs will increase approximately $2.3 million Citywide, and $1.9
million in the General Fund.
2. Impact of Ongoing Labor Negotiations: The proposed FY 18 budget does not reflect
any increases to salaries and benefits due to ongoing labor negotiations. As the agreements
for all eight labor bargaining groups will expire effective June 30, 2017, labor negotiations
continue to proceed in earnest.
3. Sales Tax Cost Sharing: In the past, the City entered into sales tax cost sharing
agreements with certain businesses to attract and retain businesses. In FY 18, the General
Fund operating budget will contribute $125,000 towards payments to Stadium Nissan, a
decrease to the General Fund of$85,000 from FY 17. This is due to the sunset of the Ford
of Orange agreement, and the discontinued Volkswagen of Orange agreement. The
Business Investment Fund (115) will cover other anticipated payments of$2.9 million in
ITEM 4 5/2/17
FY 18. As part of the annual budget, staff is requesting a transfer of $1,000,000 to the
Business Investment Fund from General Fund Unreserved Fund Balance to cover payments
in future years.
4. Internal Service Fund (ISF)Allocations: Staff is proposing a total of$6.5 million in FY
18 allocations, $1.5 million less than the $8.0 million budgeted FY 17. This is primarily
due to the Equipment Maintenance fund sustaining a sufficient balance to warrant an
allocation of only $150,000. Allocations will be distributed to the following programs:
Worker's Compensation, Accrued Liability (for retirement costs), Vehicle Maintenance,
and Information Technology funds. The total Liability Fund (740) allocation of$800,000
will be funded by a current appropriation of$400,000 in General Fund expenditures, and
a $400,000 transfer from the General Fund Unreserved Fund Balance. As in FY 17, most
ISFs are budgeted as part of FY 18 operational costs, as opposed to being funded by
unreserved General Fund balance generated through prior year savings. Of the remaining
ISFs not included as part of operational costs, staff is requesting a transfer of$800,000 to
the Equipment Replacement Fund (720), $500,000 to the Computer Equipment
Replacement Fund(790), $1.0 million to the Capital Projects Fund (500), and$1.0 million
to the Business Investment Fund (ll5) from the General Fund Unreserved Fund Balance.
5. Contractual Obligations: While departments continue to manage contract agreements as
cost effectively as possible, a few contractual obligations are experiencing significant
increases. These contracts include agreements with: Orange County Animal Control;North
Net Fire Training; Metro Cities Fire Authority; technology software licensing; landscape
maintenance of City parks and recreation trails, and; contracts with private security firms
to provide after hours and special security services for certain City parks, the Metrolink
Depot, and the Main Library for a combined FY 18 General Fund impact of $990,249.
This is an increase of about $487,000 from the March 28 Study Session, primarily due to
the City's increased share of costs for Orange County Animal Control. This additional
amount reflects the FY 17 appropriation being less than the projected amount. The FY 18
animal control budget is in the process of being finalized. As such,the FY 18 appropriation
is in line with the projected annual costs for FY 17.
6. Department Operating Budgets: As addressed at the March 28 Study Session,
departments continue to hold the line with their budgets without making any significant
changes to their budgeted amounts from FY 17. However, this is getting more difficult
each successive year as there are programs and services that need budgetary increases,
including consultant services for zoning and development code changes, equipment
replacements in various department, additional training opportunities, and certain
maintenance needs. Despite the increased services levels being provided by nearly every
department, including calls far services in both the Police and Fire departments, higher
levels of planning and building applications, and increase capital and infrastructure
improvements, the proposed FY 18 budget does not include the addition of any new full-
time positions. An extended "hiring chill" for certain vacant positions has been
implemented as a cost saving measure, resulting in a proposed FY 18 budget of 637 full-
time positions. The City has 713 full-time equivalent (FTE) positions, which is inclusive
of all full-time and part-time positions. In addition, as part of the budget process each year,
the Budget Team works with the Departments in reviewing departmental budget requests.
As it is a priority to adopt a balanced General Fund budget, many worthy departmental
budget requests are not able to be included in the proposed budget as General Fund
revenues are limited. Departmental requests not included in the proposed FY 18 budget
ITEM 5 5/2/17
include: service agreements in regards to steam cleaning services for City facilities and
human resources related activities; consultant costs related to revisions to traffic analysis
models and certain zoning code changes; additional funds for repairs to equipment, and;
additional funds for supplies and equipment.
Provided below is the proposed FY 18 General Fund departmental budgets compared to the FY 17
adopted budget.
General Fund Expenditures— Comparison of FY 17 and FY 18
Department FY 17 Adonted FY 18 Proposed % Inc/(Dec)
City Attorney $1,043,289 1,030,821 (1.2%)
City Clerk 812,455 592,908 (37.0%)
City Council 9,326 9,196 (1.4%)
City Manager 1,378,840 1,405,295 1.9%
City Treasurer 95,910 90,572 (5.9°Io)
Community Development 4,532,047 4,302,611 (5.3%)
Community Services 8,946,299 9,095,388 1.6%
Finance 3,218,695 3,040,505 (5.9°Io)
Fire 27,069,602 27,258,580 0.7%
Human Resources 1,428,482 1,465,443 2.5%
Library 4,627,897 4,768,803 3.0%
Non-Departmental 1,783,496 2,113,146 15.6%
Police 43,623,463 44,028,923 1.0%
Public Works 7,707,780 8,257,962 6.7°Io
Totals: $106,277,581 $107,460,154 1.1%
The decrease to the majority of the department budgets is due to the first-time utilization of the
Cost Tree cost allocation software, which efficiently evaluated and balanced the annual funding
levels of the ISFs. A noteworthy variance is in the Ciry Clerk's office,where a significant decrease
of 37% was the result of de-funding the yearly allocation for election expenses. In anticipation of
future election years,the City Clerk's office will request monies towards election expenses through
the regular course of the budget process. Furthermore, Public Works will be increasing
expenditures by 6.7% due primarily to the cost of street sweeping being absorbed by the General
Fund. Lastly, Non-Departmental expenditures will be increasing 15.6% due to the contractual
obligation increase for Orange County Animal Control.
Summarizing the financial picture, the current proposed FY 18 expenditure budget is $107.5
million. With the FY 18 revenue amount projected to be $107.7 million, the General Fund budget
will be balanced and our revenues are expected to exceed expenditures by about $235,000.
Estimated General Fund Balance for FY 18
As mentioned earlier, the FY 18 projected beginning General Fund unreserved fund balance is
$8.6 million.With revenues exceeding expenditures in our FY 18 budget,the ending General Fund
unreserved fund balance is estimated to be $8.9 million.
Therefore, staff recommends the transfer of$4.2 million from the unreserved fund balance to the
following funds: $800,000 to the Equipment Replacement Fund; $500,000 to the Computer
Equipment Replacement Fund; $400,000 to the Liability Fund, $1.0 million to the Capital Projects
ITEM 6 5/2/17
Fund, and; $1.0 million to the Business Investment Fund. In addition, to continue with City
Council's previous direction, staff proposes the FY 18 budget include an additional transfer of
$500,000 to the Catastrophic Reserve, increasing the total amount to $20.1 million. With this
addition, the Catastrophic Reserve would increase to 18.7% of the General Fund budget. While
this reserve amount does not meet the target of 25.0%, the transfer of$500,000 is consistent with
Council's previous direction to increase the reserve commensurate with the increase in
expenditures. The result of the transfers and reserves is a FY 18 estimated ending General Fund
unreserved fund balance of$4.7 million.
FY 18 Estimated Available General Fund Balance
Unreserved Fund Balance Available @ 6/30/17 $8,635,293
FY 18 Estimated Revenues $107,695,086
FY 18 Estimated Expenditures (107,460,154)
Revenues over Expenditures 234,932
Unreserved Fund Balance Available @ 6/30/18 8,870,225
Transfers Out
Transfer to Equipment Replacement Fund (800,000)
Transfer to Computer Equipment Replacement Fund (500,000)
Transfer to Liability Fund (400,000)
Transfer to Capital Projects Fund (1,000,000)
Transfer to Business Investment Fund (1,000,000)
Transfer to Catastrophic Reserve (500,000)
Total Transfers Out (4,200,000)
Estimate Available Fund Balance Available @ 6/30/18 4,670,225
General Fund Catastrophic Reserve 20,067,960
Est. Reserved & Unreserved General Fund Balance @ 6/30/18 24.738.185
Review of Other Funds
Water Enterprise Fund (600):
The Water Enterprise Fund started FY 17 with a fund balance of $13.3 million. With estimated
revenues of $27.2 million and expenses of $35.1 million, including $6.6 million in carryover
projects, the anticipated FY 17 ending fund balance is approximately $5.3 million. Over the past
few years, the lingering drought and State mandated water conservation effort raised concerns
regarding potential negative impacts to the water revenue. However,with the rain and snow season
California received in early 2017, along with the easing of some water use restrictions, water
production is increasing and projected to end at the City's target water production of about 25,750
acre feet. Following unprecedented water conservation, Governor Brown ended the drought state
of emergency in most of California in April 2017.
Nevertheless, the impact of the drought is felt as general water consumption has decreased. The
FY 18 estimated beginning fund balance for the Water Enterprise Fund is $5.3 million. Estimated
ITEM 7 5/2/17
revenue is $27.6 million, with expenditures of $33.7 million, including $2.4 million in water
capital projects. As a result, FY 18 is expected to end with a fund balance of about $217,000. In
recognizing the need to meet these future increasing water costs, and a continuing increase in
projected water production, staff has undertaken a water rate study to review and provide potential
solutions to maintain the Water Enterprise Fund. Staff will be returning to City Council this
summer to present the results of the rate study and provide the City Council with strategies and
solutions for their consideration.
Sanitation Fund (220):
The Sanitation Fund began FY 17 with an available fund balance of$4.8 million. The budget for
FY 17 shows expected revenues of$4.6 million,expenses of$6.4 million, and new capital projects
of$650,000, resulting in an expected year end available fund balance of$2.3 million.
With FY 18 revenues projected at $4.5 million, expenditures at $4.8 million, and new capital
projects of $825,000, the estimated FY 18 ending fund balance is $1.1 million. The current
structure of the sanitation fee only allows for approximately$400,000 far sewer line replacements,
which is included in the FY 18 Five-Year Capital Improvement Plan budget proposal. As
mentioned in the Mid-Year Budget Report,expenditures have remained neutral for the past several
years,but revenues continue to decline due to water conservation efforts.
The Public Works Department is in the process of refining their sanitation rate study, and staff will
make recommendations of a rate structure that supports the necessary services for the various
sanitation components. The City currently has 312 miles of sewer pipe line, and to adequately
maintain this sewer facility, staff will be recommending a capital funding component as part of the
updated sanitation rate, tentatively scheduled for the June 13 City Council meeting.
Gas Tax Fund (270/271/272):
The Gas Tax Fund began FY 17 with an available fund balance of $6.3 million, with expected
revenues of $2.9 million and expenses of $8.2 million, which included operating and capital
improvement carryovers of$3.7 million and new capital projects of$1.2 million. The result is an
expected year end available fund balance of$1.0 million.
Initial FY 18 Gas Tax Fund revenue projections in February 2017 were $3.0 million. With the
recent development of California legislators approving SB-1 Transportation Funding, the City is
expecting to receive an additional $977,000 in FY 18 from the State, for a total revenue projection
of$3.9 million. At the March 28 Study Session, we reported that the City anticipated challenges
in funding the Pavement Management Program (PMP), and proposed no funding distribution in
FY 18 from Gas Tax. With the additional revenue, we propose to allocate the entire $977,000 to
PMP for the maintenance needs of the City's roadway system, thereby increasing that amount to
$4.5 million.
Equipment Replacement Fund (720):
As the economy continues to improve, we have been replacing more vehicles that are well past
their useful lives. In FY 17, City Council approved $1.8 million to fund equipment replacements.
Due to lengthy delivery times, an additional $3.5 million was carried over from the previous year,
along with other purchase order carryovers, for a total FY 17 expenditure budget of$6.1 million.
The FY 17 estimated year-end fund balance will be $4.9 million.
The FY 18 budget includes proposed revenue of$1.2 million,which includes an$800,000 General
Fund transfer. Staff is proposing vehicle replacements of$2.2 million, resulting in an estimated
ITEM 8 5/2/17
$3.9 million FY 18 ending fund balance. Included in the replacement schedule are: two vehicles
for Fire ($925,000), eleven vehicles for Police ($607,000), and nine vehicles for Public Warks
($562,000). Staff is proposing additional vehicle replacement of two electrical vehicles for the
Community Services and Library departments. The total of $69,000 will be funded by the Air
Pollution Reduction Fund (245). Finally, the OFD will be purchasing a Type III Brush Truck in
the amount of$425,000, which will be funded with one-time emergency response revenue that the
City will be receiving early FY 18.
Workers' Compensation Fund (730):
The Workers' Compensation Fund began FY 17 with an available budgetary fund balance of$8.6
million. With the continued successful pro-active approach to managing claims, staff is projecting
an ending fund balance of $8.5 million. With FY 18 revenues projected at $3.7 million and
expenditures of$4.0 million, the estimated ending budgetary fund balance is $8.2 million. Please
note that this not include a provision of incurred but not reported (IBNR) liabilities, which can
fluctuate greatly each year and currently has a balance of$9.8 million.
Liability Fund (740):
The Liability Fund began FY 17 with an available budgetary fund balance of $2.5 million. The
estimated ending FY 17 available fund balance is projected to be $1.4 million. In FY 18, staff is
proposing to allocate $1.5 million in revenue to cover proposed expenditures of $2.2 million,
resulting in an estimated FY 17 ending budgetary fund balance of a little over $634,000. Please
note that this not include a provision of incurred but not reparted (IBNR) liabilities, which can
fluctuate greatly each year and currently has balance of$2.1 million.
Employee Accrued Liability (PERS) Fund (760):
The Employee Accrued Liability Fund primarily accounts for accrued leave payouts to employees,
upon their termination or retirement. Its secondary function is to hold funds in anticipation of
increases to future PERS retirement costs.
To cover employee leave payouts,fund revenue is allocated through the payroll process. Budgeted
expenditures are based on estimated costs of potential FY 18 retirements, making it difficult to
calculate. Over the past four years, transfers for PERS costs have been made into this fund using
year-to-year savings from the General Fund, bringing the PERS reserve to a current balance of
$6.2 million. We estimate this fund will end FY 18 with an available total fund balance of$6.8
million.
Capital Projects Fund (500):
Several years ago, the City Council began to set-aside monies from the General Fund unreserved
fund balance in the Capital Projects Fund, to prepare for future improvements to City facilities and
infrastructure due to lack of other resources for renovations.
In FY 17, using prior year's General Fund savings, the City Council approved a transfer of$3.0
million to the Capital Projects Fund. An inter-fund loan of $2.8 million to the Proposition 172
Fund (120) was also approved, which reduced available fund balance. Finally, $3 million of the
sale of land to Chapman University was recorded in this fund. These transactions contributed to a
FY 17 estimated ending fund balance of$7.4 million.
Staff continues to make every effort to prolong much needed repairs and improvements to City
facilities and infrastructure. Repairs that cannot be postponed have been included in the Five-Year
Capital Improvement Plan. With a total of$2.4 million in capital projects proposed for FY 18,
ITEM 9 5/2/17
and the contract obligation share of$300,000 for the new County Animal Care Shelter, the ending
FY 18 fund balance is estimated at $6.1 million. As the books on FY 17 are finalized, we will
recommend additional General Fund savings be transferred into the Capital Improvement Fund.
As in past years, an end-of-year budget report will presented to the City Council in October 2017.
Proposed Reserve Policy
During staff's budget update to the City Council on October 11, 2016, staff indicated that we will
be coming back to Council with regards to an updated reserve policy. Staff has researched other
formal reserve policies from cities all around the state, including several from Orange County.
Most of these reserve policies are approved by Resolution, although a few are set by Ordinance
and codified in the municipal code.
Reserve policies vary greatly city to city, both in types of reserves as well as the targeted amounts
within the respective reserves. Likely this has to do with the characteristics of the revenues and
expenditures of each city, including a city's level of reliance on a certain revenue source or the
nature of services provided by the city. As such, as we have reviewed these various reserve
policies, we have also looked at them within the context of each of those cities' revenues and
expenditures.
Currently, the City only has a reserve policy addressing the Catastrophic Reserve, which has been
included in the budget. However, the City maintains several reserve accounts including a few that
have been in existence for only a few years. These include the Capital Projects Fund, Ca1PERS
Set-Aside, Business Investment Fund, and various Internal Service Funds.
During the Study Session, staff will be asking the City Council to consider a reserve policy that
covers the following areas:
• General Fund Catastrophic Reserve
• Capital Reserve
• Vehicle & Equipment Replacement Reserve
• Workers' Compensation Reserve
• General Liability Reserve
• Water Reserves
• Sanitation Reserves
Reserves in these areas will incorporate best practices in the industry and takes into account the
City's financial position, including its recurring costs and various revenue sources. The City's
diverse tax base and lack of general obligation debt leaves us in a solid financial position. This
allows for flexibility in setting both our types and levels of reserves. The goal of the reserve policy
is, first, to set minimum balances so that when reserves fall below minimum amount action is
required to carrect the shortage; and second, set sensible targets to assist in maintaining services
during uncertain economic times.
ITEM 10 5/2/17
Conclusion
Staff has further refined the budget projections for FY 18 since the March 28 Study Session.
Although the future looks encouraging, with revenues on a slow but steady upswing, the City still
faces some challenges. A growing economy also means growing expenses. Nevertheless, our
revenues for FY 18 exceed our expenditures and we anticipate ending FY 18 with an estimated
$4.7 million ending General Fund balance. Staff will continue to monitor trends and search out
cost saving measures to minimize budgetary impact.
ITEM 11 5/2/17