07.01 Financial Status Report FY 18 and FY 19 �� ,_
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FY 2018
ESTIMATE FY 2018
GENERAL FUND (JUNE 2018) ACTUAL DIFFERENCE
Sales Tax $ 42,160,000 $ 41 ,316,133 $ (843,867)
Property Tax 40,089,377 40,433,320 343,943
TOT (Hotel Tax) 5,400,500 5,476,167 75,667
Fees for Services 4,961 ,124 5,275,587 314,463
Licenses & Permits 4,674,070 4,807,461 133,391
Other Revenues 1 1 ,867,705 13,643,682 1 ,775,977
TOTAL REVENUES $ 109,152,776 $ 110,952,350 $ 1 ,799,574
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FY 2018 FY 2018
GENERAL FUND FINAL BUDGET ACTUAL SAVINGS
Salaries & Benefits $ 90,766,084 $ 88,932,993 $ 1 ,833,091
Contractual Services 14,303,393 12,519,707 1 ,783,686
Materials & Supplies 2,213,439 1 ,969,006 244,433
Miscellaneous 612,499 280,566 331 ,933
Small Capital 168,950 126,612 42,338
Internal Costs 2,846,372 2,846,372 0
TOTAL REVENUES $ 110,910,737 $ 106,675,256 $ 4,235,481
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FY 2018 FY 2018
ADOPTED ESTIMATE FY 2018
GENERAL FUND BUDGET (JUNE 2018) ACTUAL
Beg. Fund Balance $ 8,652,665 $ 1 1 ,679,347 $ 1 1 ,679,347
Revenues 107,855,086 109,152,776 1 10,952,350
Expenditures (107,750,188) (108,122,281 ) (106,781 ,007)
Transfers (3,900,000) (4,100,000) (4,100,000)
Catastrophic Reserve (500,000) (500,000) (500,000)
End Fund Balance $ 4,357,563 $ 8,109,842 $ 11 ,250,690
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FY 2019 FY 2019
ADOPTED UPDATED
GENERAL FUND BUDGET ESTIMATE
Beg. Fund Balance $ 8, 109,842 $ 1 1 ,250,690
Revenues 111 ,763,853 112,786,816
Expenditures (1 1 1 ,631 , 193) (1 1 1 ,631 ,193)
Carryovers 0 (1 ,286,541 )
Transfers (4,250,000) (4,250,000)
End Fund Balance $ 4,043,951 $ 6,869,772
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PROPOSED
TRANSFERS
Business Investment Fund $ 1 ,000,000
Capital Projects Fund 1 ,500,000
Computer Replacement Fund 400,000
IT Maintenance Fund 100,000
Total Proposed Transfers $ 3,000,000
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FY 2018 N ET
ACTUAL CARRYOVERS AVAILABLE
Catastrophic Reserve $ 20,067,960 $ 20,067,960
PERS Set-Aside 6,243,000 6,243,000
Business Investment Fund 2,498,885 2,498,885
Capital Projects Fund 10,012,677 $ (3,040,453) 6,972,224
Internal Service Funds 10,546,683 (4,392,037) 6,154,646
General Fund Unreserved 1 1 ,250,690 (1 ,286,541 ) 9,964, 149
Total Reserves $ 60,619,895 $ (8,719,031) $ 51 ,900,864
*���°��c* AGENDA ITEM
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�R�.,A�a,�.;.:� October 9, 2018
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Reviewed/Verifie
TO: Honorable Mayor and City Manager �
Members of the City Council Finance Director r/�'�
� To Be Presented By: Will Kolbow
THRU: Rick Otto
City Manager Cons Calendar _ City Mgr Rpts
Council Reports Legal Affairs
FROM: William M. Kolbow ,�/`� Boards/Cmtes Public Hrgs
Administrative Services Director X Admin Reports Plan/Environ
1. SUBJECT
Financial status update for Fiscal Years 2018 and 2019.
2. SUMMARY
This report provides a summary of the City's General Fund year-end for Fiscal Year 2017-18
(FY18) and a status update for Fiscal Year 2018-19 (FY19).
3. RECOMMENDATION .
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.
ITEM � • � 1 10/9/18 .
7. DISCUSSION and BACKGROUND
FY18 General Fund Revenues
Revenue results presented a positive indicator of continued economic growth as the General
Fund concluded the year with total revenues of $111.0 million, $1.8 million more than was
expected in June 2018 when the FY 19 budget was adopted ($3.1 million more than the adopted
FY 18 budget). Several key indicators of economic activity, including property tax, transient
occupancy tax, licenses and permits, and fees for services, ended the year above budget. Sales tax
revenue closed at $41.3 million, $1.0 million less than the budget of$42.3 million,primarily due
to reporting issues with the State's new collection system. Multiple sales tax remittances were
not processed on time, and some payments were only partially reported. Despite delayed and
missing payments, sales tax revenue is positively impacted by rising fuel prices and continued
strong dernand on building and construction activity. Staff expects to receive make-up revenue in
the months to come when the payment issues axe resolved by the State.
Property tax closed at $40.4 million, $658,000 above budget. We received higher than
anticipated property tax revenue due to more properly tax increment distributed from the County
of Orange for the Successor Agency. Transient Occupancy Tax exceeded budget of$5.4 million
as we collected $5.5 million due to more business and leisure travel. Licenses and permits were
$196,000 more than budgeted, mainly the result of increases in building related permits
(building, electrical, plumbing, etc.). Revenues from Other Agencies and Fees for Services were
also above budget. Miscellaneous Revenues of $3.2 million were $2.5 million over budget of
$662,000. A majority of this increase was due to reimbursements from the Office of Emergency
Services for costs incurred by the City while fighting fires on behalf of other agencies.
FY18 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, FY18 General Fund operating expenditures ended the fiscal year at
$106.7 million, about $1.1 million less than what was estimated in June 2018 when the FY19
budget was adopted, and $4.2 million less than the adopted FY18 budget. Several departments
reflected significant savings including the Police Department with year-end expenditures $13
million under budget, Public Works at $984,000 under budget, Community Services $825,000
under budget, and Community Developmerit $348,000 under budget. Major portions 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: FY18 Final Budget FY 18 Actual Savings
Salaries $90,766,084 $88,932,993 $1,833,091
Contractual Services 14,303,393 12,519,707 1,783,686
Miscellaneous 612,499 280,566 331,933
Materials/Supplies 2,213,439 1,969,006 244,433
Capital 168,950 126,612 42,338
Internal Costs 2,846,372 2,846,372 -
$110,910,737 *$106,675,256 $4,235,481
*Total amount does not include$105,751 expenditures for debt service and allocations.
ITEM 2 10/9/18
FY18 Fund Balance
During the FY18 budget preparation, the General Fund was projected to end FY18 with an $8.2
million unreserved fund balance available (FBA) and with an estimated $3.9 million FBA at the
conclusion of FY19. After the final numbers were calculated, FY18 performed better than
expected with revenues of about $111.0 million and expenditures of$106.8 million resulting in a
revised FY18 ending FBA of$11.3 million. The following is a comparative illustration:
Adopted Original Year-End
FY18 Budget for Estimate for Actual for
FY 18 FY 18 FY 18
(June 2017) (June 2018) (October 2018)
Beg. Fund Balance for FY18 $8,652,665* $11,679,347 $11,679,347
Revenues 107,855,086 109,152,776 110,952,350
Expenditures (107,750,188) (108,122,281) (106,781,007)
Transfers (3,900,000) (4,100,000) (4,100,000)
Catastrophic Reserve (500,000) (500,000) (500,000)
FY18 Ending Fund Balance $4,357,563 $8,109,842 $11,250,690
*Amount does not reflect operating carry-forwards and final year-end results.
With the adoption of the FY19 budget, $4.25 million was approved to be transferred to the
following funds:
Business Investment Fund(115) $1,500,000
Equipment Replacement Fund (720) 1,000,000
Computer Replacement Fund (790) 900,000
Capital Projects Fund(500) 500,000
Liability Fund (740) 350,000
Total Transfers $4,250,000
The increase in fund balance for FY19 yields a recommendation for a mid-year budget
adjustment of $3 million in additional transfers, which will reduce the unreserved year-end
estimated FBA for FY19 to about $4 million. Specifically, staff plans to recommend to City
Council a mid-year unreserved fund transfer to the following:
Business Investment Fund(115) $1,000,000
Capital Projects Fund(500) 1,500,000
Computer Replacement Fund(790) 400,000
IT Maintenance Fund (780) 100,000
Total Transfers $3,000,000
These transfers will provide funding to those areas having either limited resources and/or a
specific need in the immediate future. The proposed transfers totaling $500,000 to the Computer
Replacement Fund and IT Maintenance Fund are to keep those fund balances current to meet
anticipated expenditures in FY19 and FY20. The proposed transfer to the Business Investment
Fund anticipates upcoming economic development and new business activities in the City for
FY19. Lastly, the proposed transfer of$1.5 million to the Capital Improvement Projects Fund is
ITEM 3 10/9/18
consistent with the City Council's practice to invest in the City's aging infrastructure, and to
maintain at least $8.5 million in the fund balance. Also, a full report of the FY18 revenues and
expenditures will be included as part of the presentation of the Comprehensive Annual Financial
Report(CAFR) at a future council meeting.
FY19 Status Update
As the economy and stock market continue to grow, revenues are currently trending as projected
at $111.8 million. We continue to monitor closely the impact of the updated Master Fee Schedule
on revenues. Since the update was only approved this past June, it is too early to assess the fiscal
effect of that change; however, we have discovered a few anomalies pertaining to special events
fees, fees on building permits, and planning applications. Our intent is to address any anomalies
with the updated Master Fee Schedule as part of the adoption of the FY20 budget in June.
Expenditures are also tracking as anticipated at $111.6 million, and as recent experience has
proved, staff expects continued savings in this area. It should be noted however that since the
Operational Budget Reduction strategy reduced salaries and benefits by 2.5% and maintenance
and operations by 5.0%, savings across departments will most likely not be a source of available
funds in FY 19 as they have been in past. Staff will continue to monitor our fiscal situation to
determine if any mid-year adjustments will be necessary.
8. ATTACHMENTS
None.
ITEM 4 10/9/18
CITY COUNCIL MINUTES OCTOBER 9, 2018
5. REPORTS FROM COUNCILMEMBERS
5.1 Councilmember Alvarez: Audit of the Orange International Street Fair.
Councilmember Alvarez reported that he would like to recommend that Council direct staff
to contract with a third party to conduct an audit of the Orange International Street Fair
before the Fiscal Year 2019 agreement is executed.
City Manager Otto provided Council with a brief staff report. The results of the audit will
be brought back to Council at the January or February meeting. It is estimated that the cost
of the audit using an outside firm would be $20,000.
Public Speaker:
Carole Walters—spoke in support of an audit being done every year.
It was Council consensus to have staff move forward with the audit of the Orange
International Street Fair.
6. REPORTS FROM BOARDS, COMMITTEES,AND COMMISSIONS
6.1 Report from City Council Ad Hoc Committees related to Homelessness:
Community Communications
Councilmember Alvarez reported that he was re-appointed by Supervisor Spitzer to represent the
third district on the Orange County Housing and Authority Development Commission. He
described the California Department of Housing and Community Development's "No Place Like
Home" program which dedicates bond proceeds for counties to invest in the development of
permanent supportive housing.
Cities and Non-profit Collaboration
Mayor Smith and Councilmember Nichols had nothing to report.
County En�agement
Councilmember Whitaker provided an update on the Housing Trust fund and what the governance
of that fund will be. It is critical that cities maintain local control of the programs being proposed.
Mayor pro tem Murphy added that there are ongoing discussions regarding facility based solutions.
City Manager Otto provided a brief update on the North Service Plan Area.
7. ADMINISTRATIVE REPORTS
7.1 Financial status update for Fiscal Year 2018 and 2019. (C2500.J.1.1)
Administrative Services Director Will Kolbow provided a financial status update utilizing
a PowerPoint Presentation.
MOTION —Murphy
SECOND —Alvarez
AYES —Alvarez, Whitaker, Smith, Murphy,Nichols
Moved to receive and file.
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