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SR - - SECOND STUDY SESSION FY 2017-18 PROPOSED BUDGET G~��°�°� AGENDA ITEM '�a� �0��Cct� *: �:* ��• �� May 2, 2017 ��.. q a cA�;oamai,es',.�4 UN'I'y 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% .� � "„<��� �y�A�� v,,"`�"��< Charges to Other Funds�; � � �4�'� �� 2,101,000 ( ``"� ' . .�'+.+f;sn°i�v siCQ ao 1.95% ��} »'�„� �'k�. Franchises� "F��,� �� � ��, . $2,542,619 2.36% i� 'a Property Taxes ` -� 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