TITLE
Recommendation to adopt a motion approving the Financial Policies as recommended by the Budget Oversight Committee on September 5, 2017. (A-10)
DISCUSSION
On July 31, 2017, the City Manager’s Proposed Budget for Fiscal Year 2018 (FY 18) was delivered by Mayor Garcia to the City Council and community for consideration. Budget meetings were set for March 14, July 25, August 1, August 8, August 15, August 22, September 5, and September 12, along with six Budget Oversight Committee (BOC) meetings, and ten community meetings at which the FY 18 Proposed Budget was discussed. We are pleased to report that through the hearings, BOC and community meetings, there were 24 scheduled opportunities for public feedback, deliberation and input. In addition, this year, the City solicited input through the Long Beach Budget Priority Survey to obtain feedback on what the City’s General Fund priorities should be. The survey was promoted, along with OpenLB, which shows the budget visually, on the City’s website, through Twitter and Facebook, and at the community meetings.
At the conclusion of the hearing, the City Council will amend the proposed budget as it deems appropriate, and adopt the proposed budget as amended. Since the publication of the FY 18 Proposed Budget, updated estimates of revenue and expense, which primarily address technical corrections, are listed by fund and department in Attachments B, C and D to this letter. The reasons for the adjustments are discussed at the end of this letter.
There are three Ordinances in Attachment A. The first approves Resolution No. WD-1376 (A-3), which establishes the rates and charges for the water and sewer service. The second is the Appropriations Ordinance (A-17), which officially adopts the FY 18 budget and authorizes expenditures in conformance with the adopted budget. For these two Ordinances to become effective October 1, 2017, the City Council must first declare an emergency to exist before adopting each Ordinance (A-2 and A-16). The third Ordinance amends the Departmental Organization of the City (A-13).
There are also five Resolutions that provide for approval of the budget for the Harbor Department (A-1), the budget for the Water Department (A-4), the Master Fees and Charges Schedule (A-5), establish the Gann Appropriations Limit (A-9), and amend Salary Resolution (A-14). There are also motions that request approvals for the following: the FY 18 Capital Improvement Program (A-6); FY 18 Budget for the Long Beach Community Investment Company (A-7); the Harbor Revenue Fund Transfer (A-8); the revised Financial Policies as recommended by the BOC (A-10); the Mayor’s Recommendations (A-11); the BOC Recommendations (A-12); and, a motion amending the Proposed FY 18 Budget (A-15).
This matter was reviewed by Deputy City Attorney Richard F. Anthony on August 21, 2017.
TIMING CONSIDERATIONS
In accordance with the City Charter, the FY 18 budget must be adopted by September 15, 2017. Should the City Council fail to adopt the budget by that date, the City Manager’s FY 18 Proposed Budget will be deemed the budget for the 2018 Fiscal Year. The Mayor has five calendar days from City Council adoption of the budget to use his veto authority. The City Council would then have until September 30, 2017, to override veto action by the Mayor with a two-thirds supermajority vote (six Councilmembers).
FISCAL IMPACT
The City Charter requires that the Appropriations Ordinance shall govern and control the expenditure and commitment amounts stated therein relating to the City’s departments, offices and agencies during each fiscal year. The total Proposed FY 18 budget for all departments and funds is $3,071,784,105, which comprises $2,647,704,022 in new appropriation and $424,080,083 in estimated carry-over from FY 17 for multi-year grants and projects. Attachments B, C and D provide the financial overview by Fund, by Department and Citywide revenue by Fund.
The Appropriations Ordinance, included as Attachment A-17, totals $2,212,002,992 for all funds except Harbor, Sewer, and Water, and $2,218,005,775 for all departments except Harbor and Water. The $6,002,783 difference between funds and departments is due to general City indirect costs budgeted in the Financial Management Department, but charged to the Harbor, Water and Sewer funds, which are not included in the Appropriations Ordinance by fund.
The proposed Harbor, Water and Sewer fund budgets are in separate City Council Resolutions included as Attachment A-1 and A-4, respectively, and total $859,781,113. The Board of Harbor Commissioners adopted the budget for the Harbor Department by minute order on June 26, 2017. The Board of Water Commissioners adopted the budget for the Water Department by Resolution on June 15, 2017.
User fees and charges in the Master Fees and Charges Schedule, included as Attachment A-5, have been adjusted due to changes in service and other factors, including the City Cost Index adjustment. For details regarding these proposed new fees, deletions and adjustments, please see the List of Proposed Fees Adjustments for FY 18 that has been incorporated as Exhibits B and C to the Master Fees and Charges Resolution.
Other requested City Council actions include:
• Approving the FY 18 One-Year Capital Improvement Program (CIP) budget, included as Attachment A-6, which is contained in the Appropriations Ordinance. The Planning Commission, at its meeting of August 17, 2017, approved the CIP for FY 18 as conforming to the General Plan.
• Adopting a Resolution, included as Attachment A-9, establishing the Gann Appropriations Limit (Limit) for general purpose expenditures. In November 1979, the voters of the State of California (State) approved Proposition 4, also known as the Gann Initiative (Initiative). The Initiative places certain limits on the amount of tax revenue that can be appropriated each fiscal year. The Limit is based on actual appropriations during FY 79 and prevents overspending proceeds of taxes. Only those revenues which are considered as “proceeds of taxes” are subject to the Limit. The Limit is recalculated each fiscal year based on certain inflation and population factors provided by the State. The Proposed Budget includes tax revenue estimates that are at 39.75 percent of the 2017-2018 Appropriations Limit and, therefore, do not exceed the Limit. This calculation is reviewed by the City Auditor for conformance to the law.
• Adopting the Financial Policies for the City, included as Attachment A-10. These policies have been presented to the Budget Oversight Committee for consideration and review and now come to the full Council for deliberation. Among other changes, the Fund Balance Policy (Policy 7) is a preexisting financial policy that was previously separate from the other Financial Policies and is now incorporated into the main policy list. (A redline version of the changes is also provided.)
• Amending the Departmental Organization Ordinance, included as Attachment A-13. This amendment incorporates changes to departments, bureaus, and divisions for FY 18. These organizational changes are necessary to implement changes reflected in the Proposed FY 18 budget. (A redline version of the changes is also provided.)
Adopting the Salary Resolution, included as Attachment A-14.
After the City Manager delivered the FY 18 Proposed Budget to the Mayor, technical adjustments were made to the budget. These changes are generally not substantive and are shown in Attachments B, C and D. Changes of note include:
1. The Tidelands Operations Fund (TF 401) had an adjustment to increase the revenues by $888,850 to reflect the anticipated updated FY 18 operating transfer from Harbor Revenue Fund (HR 430).
2. The Gasoline Tax Street Improvement Fund (SR 181) had an increase of $794,943 in expense and $430,336 in revenues due to revisions to estimated local return revenue anticipated from the Road Maintenance and Rehabilitation Account (SB-1). Per draft requirements currently under review from the California Transportation Commission, all SB-1 revenues must be programmed and adopted in the City’s annual budget. The additional revenue has been programmed for residential street improvements.
3. The Transportation Fund (SR 182) had a technical adjustment to increase expense budget by $400,000 to reflect an increase in Measure R revenues eligible for administrative expenses.
4. Expenses were reduced in the Gas Fund (EF 301) by $500,000 to reflect a reduction in the annual transfer to the General Fund (GF).
The remaining changes were minor, technical adjustments made to various funds and departments to align budget with grants and/or revenues.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER