Title
Adoption of Resolution Amending the Fiscal Year (FY) 2016-17 Operating and Capital Improvement Program Budget. (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Adopt a Resolution Amending the Fiscal Year 2016-17 Operating and Capital Improvement Program Budget
BACKGROUND
This report updates Fiscal Year (FY) 2016-17 financial projections for the General Fund and proposes current year budget amendments for various City funds to reflect and respond to the City’s evolving financial condition.
The discussion below is presented in the following sections:
I. General Fund Available Fund Balance Projection
II. General Fund Revenues
III. General Fund Expenditures
IV. Non-General Fund Programs
DISCUSSION
The City Council adopted FY 2016-17 Budget on June 7, 2016. Subsequently, the City Council approved amendments to the FY 2016-17 Budget to various funds in the City. At this time, staff is bringing forward an update on the General Fund performance and forecast through the end of the current Fiscal Year. Staff recommends approving adjustments to the FY 2016-17 Budget based on the updated projections. In addition, staff reviewed non-General Fund programs and is recommending approval of budget amendments for those programs as well.
I. General Fund Available Fund Balance Projection
Through the Mid-Cycle Budget Update in June 2016, staff revised the budgeted General Fund ending available balance for FY 2016-17 to 24%. Subsequently, the beginning General Fund available fund balance was revised for actual results from FY 2015-16 and the City Council took several actions to allocate available General Fund balance to various one-time uses mainly associated with funding of capital projects. With the approval of those budget changes in combination with the beginning fund balance update, the General Fund available balance was increased to 30%. As part of the mid-year review, staff evaluated revenues and expenditures for the Fund, which are discussed below. As reflected in Exhibit 1, if the Council approves changes proposed by staff, the updated projection for the General Fund available fund balance at the end of FY 2016-17 is estimated to grow from 30% to 33% based on the proposed revisions through this Mid-Year Budget Amendment.
II. General Fund Revenues
As shown in Exhibit 1, General Fund overall revenue collections in FY 2016-17 are projected to increase by $4.6 million to $88.6 million in total. This is 5.5% higher than budgeted. Changes are occurring in the following revenue types:
• Property tax is projected to be $1.4 million higher than anticipated primarily due to an increase in overall property values and supplemental assessments. A small increase of $0.1 million is also attributed to the residual property tax distribution (“waterfall funds”) as a result of redevelopment dissolution. The median home sales prices in the City went up to $914,000 in the third quarter of 2016 compared to $825,000 for the same quarter of 2015. However, the growth rate slowed with third quarter of 2016 increasing by just 0.22%.
• Motor Vehicle License Fee in-Lieu is $322,000 greater than expected. This revenue is allocated through property taxes and as such have a similar growth pattern.
• Property Transfer Tax is expected to increase by $0.25 million. Even though the property transfer tax is trending 4% higher than the budget revised at the Mid-Cycle Update, the actual tax collected compared for the same time period in prior year is 12% lower.
• Utility Users Tax is expected to increase by $485,000. This is likely a direct impact of the voters passing the Utility Modernization Act Measure in November 2016.
• Business License Tax collections are projected to be $252,000 higher than currently budgeted. Most of the current year business license renewals have been collected within the first two months of the fiscal year and revenue has been already recognized.
• Transient Occupancy Tax collections are expected to be $100,000 higher than budgeted.
• Franchise Fees are projected to be $425,000 greater than the current budget. The primary increases are realized from solid waste and cable TV franchises. The solid waste franchise fee revenue went up as a result of a rate increase that was approved by the City Council at June 21, 2016 meeting. Cable TV franchise revenue went up as a result of payments from AT&T that did not begin remitting these fees to the City until 2016.
Investment income revenue and other miscellaneous revenues are projected to be $135,000 greater than budgeted. Investment income increase is based on the recent rise of the federal funds rate and an anticipated increase that is supposed to limit the buildup of inflationary pressures.
In addition, the City received one-time proceeds from the sale of the Tidal Canal properties of $1.5 million dollars in February 2017.
• Departmental revenues collections in total are expected to be $205,000 lower than budgeted. Most of the decrease is in the Police Department with $200,000 attributed to the decline in parking ordinance violation fines. The Department has had difficulties in keeping the parking technician positions filled.
• City Clerk revenue budget is increased by $12,000 to reflect revenue collection from processing passport applications.
• The City Manager’s Office revenue budget is decreased by $17,000 due to reduced allocation of staff charges to the Alameda Municipal Power department.
General Fund Expenditures
Staff evaluated General Fund expenditures taking into account the salary and benefits increases that went in effect in January 2017. Although labor costs increased, they are still expected to stay within FY 2016-17 budgeted amounts. Some of the savings were a result of delayed hiring. These are one-time savings and cannot be relied on to re-occur. Outside of the costs related to the labor contracts, overall General Fund annual operating expenditures and transfers out are projected to increase by $2.4 million offset by $400,000 in salaries and benefits savings.
The Police Department expenditures budget is proposed to be reduced by net $200,000. This decrease is to recognize $400,000 of the labor savings due to continued difficulty in filling vacant positions created as a result of retirements and separations in the Department. Labor savings are offset by $200,000 appropriation to allocate funding for the Police Building locker facilities upgrade, which has not been updated since the building was constructed in 1978.
The Fire Department is requesting a total increase of $173,000 in the expenditures budget. The Department is experiencing a number of unforeseen outside vehicle repair costs that are a result of an aging fleet and deferred preventive maintenance.
Additional funding is proposed to be allocated to the Emergency Operations Center (EOC)/Fire Station (FS) 3 project from the unexpected Ground Emergency Medical Transportation (GEMT) reimbursement of $446,000 received in prior fiscal year and $500,000 from the available General Fund reserve. See additional discussion in the next section under EOC/FS 3 Fund.
Based on the City Council direction, proceeds from the sale of Tidal Canal properties less previous General Fund allocation to the project of $425,000 used to pay for costs necessary to prepare those parcels for transfer of ownership will be deposited to the capital improvement program project. The additional appropriations will be used for mapping the remaining six submerged parcels, improvements to the public access points and the disposition of the submerged property as well as potential construction of a public dock facility. Staff recommends to transfer close to $1.1 million to fund costs associated with these activities. Additionally, the City incurred $150,000 in outside legal counsel services during FY 2013-14 and 2014-15 that were charged to the General Fund City Attorney’s Department Budget. Staff does not propose to offset proceeds from the sale of Tidal Canal properties for repayment of these costs.
III. Non-General Fund Programs
The focus of this mid-year report has been the City’s General Fund. The following programs, however, do propose budget amendments. The detail of the proposed adjustments are presented on Exhibit 2.
Ø Base Reuse Fund - Increase appropriations by $750,000 to pay for real estate commission increases due to increased lease activity at Alameda Point, including Astra Space, Urban Legend Cellars and Williams/Sonoma leases.
Adjust the revenue by $195,000 and expenditures budget by $225,000 for continuing work on the Alameda Point Ferry Terminal. Most of the Ferry Terminal related expenditures are reimbursed by the Developer.
Ø Gas Tax Fund - Budget an additional funding of $63,000 for the Urban Forest Management program due to increased cost to treat street trees for pest and disease as wells as substantial after hours mitigation response due to this year’s storms.
Ø Measure B Fund - Provide partial funding of $78,000 for the 50% local match requirement for the Metropolitan Transportation Commission (MTC) Lifeline/JARC grant. The City utilizes this grant money to fund the Estuary Crossing Shuttle. Measure B funds will be reprogramed from the Pavement Management project. The City also apportions TSM/TDM funds for the local match requirement, which have been previously budgeted.
Ø Parking Meter Fund - Provide additional appropriations of $75,000 to cover the costs of credit cards merchant service charges associated with single space “smart” parking meters, which were installed in 2016.
Ø Various Assessment Districts Funds - Provide additional appropriations for a total of $46,900 for the enhanced administration and assessment districts audit necessary to improve the districts administration.
Ø Capital Improvement Projects Fund:
o Increase estimated revenue budget for Estuary Park project by $75,000 to recognize the Alameda Little League donation to help pay for the Challenger Field.
o Increase estimated revenue budget for Jean Sweeney Open Space Park by $100,000 to recognize contribution from Rotary Club of Alameda made toward funding construction of a group picnic pavilion.
o Reprogram $78,000 of funding from Pavement Management project to Estuary Crossing Shuttle project to partially pay for the 50% local match requirement for the Metropolitan Transportation Commission (MTC) Lifeline/JARC grant.
o Increase revenue and expenditures budget by $63,000 each for the Urban Forest Management project.
o Since the Police Administration building was built in 1978, the locker facilities have not been updated. The upgrade will provide for replacement of the locker storage with new, more space efficient lockers. The new lockers will have electrical power to each employee area to ensure required equipment can be effectively maintained and to provide ventilation for the drying of the body armor. Upgraded locker facilities will provide employees with more sanitary and efficient place for changing to prepare for their shift duties. It is recommended to set up budget for this project in an amount of $200,000 funded by General Fund from the vacancy savings in the Police Department.
o Increase Tidal Canal project revenue and expenditures budget by $1.1 million. The additional appropriations will be used for mapping of the remaining six submerged parcels, improvements to the public access points and the disposition of the submerged property as well as potential construction of a public dock facility. The costs associated with these activities will only be incurred after the City Council gives approval to proceed with Phases 2 and 3 of Tidal Canal project.
o Defund multiple projects in the total amount of $391,000 and reprogram these funds to pay for unexpected and unbudgeted EOC/FS 3 charges. The projects identified to be defunded and closed were set up many years ago and have either been completed and charged to a different account or the repairs were determined to be no longer needed. The original funding source for these projects is the General Fund.
Ø Emergency Operations Center/Fire Station 3 Fund - Staff is expecting a Notice of Completion for the Emergency Operations Center (EOC) and Fire Station (FS) 3 to be issued by May 2017. However, construction costs are higher than anticipated due to state fees for hazardous waste disposal, the number of rain days, and costs related to constructing two highly-specialized buildings in a tight, residential environment with complex utility coordination. Staff proposes to fund $391,660 of these costs from savings or redundancies on existing facilities improvement projects budgeted several years ago but not yet closed out, $52,600 from unanticipated revenue from the IBank loan proceeds and excess capitalized interest (for Fire Station #3), and $342,000 in General Fund reserves.
To open Fire Station 3 for service, the existing firefighters and their equipment must be relocated to the new fire station, additional furnishings purchased and installed. Doing so relieves the City from its lease of the current fire station. Staff proposes to use $217,000 from Fire Department’s unexpected GEMT reimbursement to cover the cost to open the new Fire Station #3.
EOCs are highly specialized communication centers with various, triply redundant technology. Prior to opening and to ensure this building is best ready for use in an emergency, the EOC requires control station radio equipment, additional wiring, an audio visual system that includes 6 large screen monitors for use in an emergency, 24 laptops, and other technology (e.g., routers, wireless service, etc.). The cost for this IT equipment is proposed to be covered by the Fire Department’s unexpected GEMT reimbursement of $229,000 and from General Fund reserves of $158,000.
FINANCIAL IMPACT
The proposed budget amendments to the FY 2016-17 Budget, as detailed on Exhibit 2, will increase General Fund revenue and transfers in by $4.6 million to $88.6 million, increase expenditures and transfers out by $2.0 million to $87.9 million. The General Fund available Fund balance is expected to grow to $28.6 million or 33% of total annual expenditures and transfers out by the end of the Fiscal Year.
The net impact of the proposed amendments on all other funds will increase revenues by $2.7 million and increase expenditures by $4.0 million.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378(b)(4) of the CEQA guidelines, because it involves governmental fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION
Adopt a Resolution Amending the Fiscal Year 2016-17 Budget
Respectfully submitted,
Elena Adair, Finance Director
Exhibits:
1. FY 2016-17 Mid-Year General Fund Budget Summary
2. FY 2016-17 Mid-Year Budget Amendments
3. Emergency Operations Center/Fire Station 3 Cost Recap