SR - - FINANCIAL STATUS UPDATE FOR FISCAL YEARS 2017 AND 20181. SUBJECT
Financial status update for Fiscal Years 2017 and 2018.
2. SUMMARY
This report provides a summary of the City's General Fund year -end for Fiscal Year 2016 -17
(FY17) and a status update for Fiscal Year 2017 -18 (FY18).
3. RECOMMENDATION
Receive and file.
4. FISCAL IMPACT
None.
5. STRATEGIC PLAN GO
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
FY17 General Fund Revenues
FY17 revenue receipts reflect continued positive economic growth as the General Fund
concluded the year with total revenues of $112.7 million, $1.3 million more than was expected in
June 2017 when the FY 18 budget was adopted ($6.3 million more than the final FY 17 budget).
Several key indicators of economic activity, including transient occupancy tax, licenses and
permits, and fees for services, ended the year above budget. However, sales tax revenue closed
at $42.4 million, $884,000 less than the budget of $43.3 million, primarily due to continued low
fuel prices. The decrease in fuel sales was partially offset by higher receipts from auto
dealerships, building and construction, and the business and industry sectors. Transient
Occupancy Tax exceeded budget of $5.3 million by $100,000, due to more business and leisure
travel. Licenses and permits were $658,000 above budget as a result of the increase in building
related permits (building, electrical, plumbing, etc.). Revenues from Other Agencies and Fees
for Services were also above budget. Miscellaneous Revenues were $5.5 million over budget of
$769,000, which totals to $6.3 million in collections. A majority of this increase was due to the
$4.2 million generated from the sale of surplus properties (the sale of $6.5 million of the
Chapman Avenue remnant parcel, of which $3.5 million was deposited to the General Fund, and
sales of $720,000 in city facilities), and reimbursements from the Office of Emergency Services
for costs incurred by the City while fighting fires on behalf of other agencies.
FY17 General Fund Expenditures
The expenditure side of the ledger showed another year of savings, the result of departments
continuing their efforts to maintain and seek out cost - saving measures, while sustaining optimal
service levels. As such, FY17 General Fund expenditures ended the fiscal year at $103 million,
$2.1 million less than was estimated in June 2017 when the FY18 budget was adopted ($6.5
million less than the final FY17 budget). Several departments reflected significant savings
including the Police Department with year -end expenditures $2.7 million under budget,
Community Services $1.1 million under budget, Community Development $522,000 under
budget, and Public Works at $510,000 under budget. A major portion of these savings are due to
controlling costs associated with maintenance and contract expenses, as well as position
vacancies. Itemized savings in each category are noted below:
Category:
FY17 Budget
FY 17 Actual
Savings
Salaries
$88,871,445
$84,889,551
$3,981,894
Contractual Services
13,126,085
11,493,532
1,632,553
Miscellaneous
952,728
472,542
480,186
Materials /Supplies
2,230,403
1,946,304
284,099
Capital
216,225
132,898
83,327
Internal Costs
4,121,970
4,121,970
-
$109,518,856
$103,056,797
$6,462,059
FY17 Fund Balance
During the FY18 budget preparation, the General Fund was projected to end FY17 with an $8.7
million unreserved fund balance available (FBA) and with an estimated $4.4 million FBA at the
conclusion of FY18. After the final numbers are calculated, FY17 performed better than
ITEM 2 10/24/17
expected with revenues of $112.7 million and expenditures of $103.1 million resulting in a
revised FY 17 ending FBA of $12 million. The following is a comparative illustration for FY 17:
FY17
Beg. Fund Balance for FYI 7
Revenues
Adopted
Budget for FY 17
(June 2016)
$5,686,647*
106,3 89,537
111,342,631
Year -End
Actual for FY 17
(October 2017)
$11,791,474
112,660,593
Expenditures (106,277,581) (105,116,180) (103,056,797)
Transfers (2,600,000) (8,865,260) (8,865,260)
Catastrophic Reserve Contribution (500,000) (500,000) (500,000)
FY17 Ending Fund Balance $2,698,603 $8,652,665 $12,030,010
*Amount does not reflect operating carry-forwards and final year -end results.
The FY17 FBA of $12 million is reduced by $1.2 million to $10.8 million, due to carryovers
approved by City Council at the time of the FY18 budget adoption and encumbrances for
contracts in effect prior to the closing of FY17.
With the adoption of the FY18 budget, $3.9 million in transfers were approved to be made to the
following funds:
Equipment Replacement Fund (720)
Computer Replacement Fund (790)
Liability Fund (740)
Business Investment Fund (115)
Capital Projects Fund (500)
Total Transfers
$800,000
500,000
600,000
1,000,000
1,000,000
$3,900,000
Staff is developing a reserve plan to present during our mid -year budget report. Based on current
projections, as well as the future structure of the reserve policy, staff is not recommending any
additional transfers at this time. The cost of lump -sum payments to employees, which will be
recommended for appropriation out of available fund balance at mid -year, is approximately
$335,000. The following is an illustration of the adjusted ending fund balance for FY 18:
FY18
Adjusted Beg. Fund Balance for FY17 $10,862,728
Transfers (3,900,000)
Lump -sum payment to employees (335,000)
FY18 Adjusted Ending Fund Balance $6,627,728
FY18 Status Update
As the post - election economy and stock market continue to grow at a steady pace, revenues are
currently trending as projected at $107.9 million. Expenditures are tracking as anticipated at
$107.8 million. As recent experience has proved, staff expects continued savings in this area.
However, it should be noted that the salary savings in the Police Department will not be a source
Original Estimate
for FY 17
(June 2017)
$11,791,474
ITEM 3 10/24/17
of available funds in FY 18 as it has been in past years due to near full staffing in the department.
Additionally, the cost of negotiated pay and benefits adds approximately $940,000 in recurring
expenditure figures. Therefore, as it currently stands, expenditure would exceed revenue at year
end. Staff will continue to monitor our fiscal situation to determine if any mid -year adjustments
will be necessary. The estimates do not reflect the impact of any other future budget adjustments
such as mid -year budget adjustments, which will likely increase the FYI expenditure amounts.
8. ATTACHMENTS
None.
ITEM 4 10/24/17
CITY COUNCIL MINUTES OCTOBER 24, 2017
7. ADMINISTRATIVE REPORTS
7.1 Award of contract for Turf Replacement and Landscape Renovation for Santiago
Hills Assessment District at Skylark Place (Bid No. 167 -46). (A2100.0; AGR -6505)
NOTE: Councilmember Nichols recorded an abstention due to a potential conflict with a
nearby property interest and left the dais at 7:34 p.m.
City Manager Otto introduced the item, and Assistant Community Services Director
Barbara Messick provided the staff report. The Community Services Department held a
meeting in August to discuss the proposed Skylark project and gather feedback from the
community. The Skylark landscape renovation project is expected to begin in November
and will be completed in February, weather permitting. The Trails End project will be
placed on hold until the project can be rebid.
Public Speakers:
Char Davis — spoke in support of what is being proposed.
Marshall Krupp — spoke in support of what is being proposed and thanked staff.
Ed Knight — spoke in support of what is being proposed and thanked staff.
MOTION — Murphy
SECOND — Alvarez
AYES — Alvarez, Whitaker, Smith, Murphy, Nichols
ABSTAIN — Nichols
Moved to: 1) Authorize the appropriation of $108,940 from Fund 291 unreserved fund
balance to expenditure account number 291.7024.56015.20255 (Santiago Hills LAD
General Renovations); and 2) Approve contract with Nieves Landscape, Inc. for an amount
not -to- exceed $133,908 and authorize the Mayor and City Clerk to execute on behalf of
the City.
Councilmember Nichols returned to the dais at 7:50 p.m.
7.2 Financial status update for Fiscal Years 2017 and 2018. (C2500.J.1.1)
City Manager Otto introduced the item, and Finance Director Will Kolbow provided the
staff report. The City of Orange is in a stable financial condition; however, Ca1PERS costs
and other demands will make adopting a balanced budget a challenge in the future.
MOTION — Murphy
SECOND — Smith
AYES — Alvarez, Whitaker, Smith, Murphy, Nichols
Moved to receive and file.
PAGE 12