TITLE
Recommendation to receive and file the Second Budget Performance Report for Fiscal Year 2015. (Citywide)
DISCUSSION
This report includes information on the City's Fiscal Year 2015 (FY 15) budget performance through May 31,2015, for all funds.
Summary
As of May 31,2015, no significant concerns have been identified with any City fund, and any funds that are showing year-end estimates that exceed budgeted appropriations will be resolved with planned budget adjustments that will be presented to the City Council later in FY 15. The General Fund is also on track to end the year with the adopted surplus of $3.1 million that will be reserved, as previously directed by the City Council, for the CalPERS Stabilization Fund. The balance of the report summarizes the General Fund performance and provides additional details on the status of other funds.
General Fund and Uplands Oil Fund Overview
Based on current estimates as of May 31, 2015, it is anticipated that the General Fund and Uplands Oil Fund will end FY 15 with an ending funds available of approximately $0.6 million and $0.2 million, respectively. This is consistent with the information presented in the Proposed FY 16 Budget for FY 15 projected actuals and reflects the recommended balances needed to start FY 16 year. The estimated FY 15 sources and uses are summarized in the table below and described in further detail in the subsequent sections.
Revenues
As of May 31, 2015, the overall trend in General Fund revenue actuals has been higher than expected growth. In particular, the City is experiencing growth in property tax, electricityrelated revenues, such as utility users' tax, and franchise fees and transient occupancy tax. Property tax, which declined during the economic downturn, is still experiencing a rebound. Additionally, property taxes related to the dissolution of the Redevelopment Agency (RDA) will continue to experience fluctuations as the methodologies for distribution of funds and allocation to various City obligations are made. While many of the major revenues are stable or experiencing growth, others, such as telephone utility users' tax (TUUT) and emergency ambulance revenue, natural gas utility users' tax and business license fees, have not experienced a turnaround. In addition, since the beginning of the fiscal year, oil-related revenue sources have been significantly impacted by the worldwide decline in the price of oil. The higher than expected revenue in FY 15 has been preliminarily allocated for strategic investments in the FY 16 Proposed Budget, further described below in the section on Other Uses. Additionally, wherever prudent, FY 15 actual revenue performance was used to inform the structural revenue assumptions in the FY 16 Proposed Budget. While growth in citywide revenues has been able to mitigate the Uplands Oil revenue shortfall and provide for onetime revenue in the FY 16 Proposed Budget, it is difficult to say when or if underperforming revenues will rebound, or for how much longer strong revenue performance for some revenues will continue.
Other Sources
A key source of funds for the FY 15 Adopted Budget was revenue received in FY 14 and carried over to be a "release of reserves" in FY 15. These sources were from the Uplands Oil revenue over $70/bbl and revenues above projected levels in FY 14. In addition to these over $70/bbl Uplands revenue recognized in the FY 15 Adopted Budget for one-time uses, FY 14 year-end surplus was also reserved and programmed by the City Council as part of the Budget Adjustments on February 10, 2015. The total of these two actions comprises the Other Sources category. These previously set-aside funds will be released in FY 15 and used for their previously approved purposes, which includes funds for the FY 15 Police Academy, replacement Fire engines, the CalPERS Stabilization Fund, the General Fund portion of the 2009 furlough pay-out and Chittick Field costs, among others.
General Fund - Uses of Funds
Expenditures by Department
Citywide estimates are currently projecting the General Fund to come in under the FY 15 Adjusted Budget by $985,123, mainly due to planned savings in the Police Department.
The Police Department is currently estimating to come in under budget by $2.9 million. A portion of this savings was anticipated when the FY 15 Budget was adopted to fund the Police Academy costs that cross over into FY 16. The anticipated costs of the Academy incurring in FY 16 of $1.5 million has been reserved and will be appropriated as part of the FY 16 Adopted Budget. The other $1.4 million in savings is attributable to vacancy savings and costs being transferred out to grants. These funds will be reserved for Police Department obligations such as the Body Camera Pilot Project. While it is possible these funds will be expended by FY 15 year-end, PD may need to return to Council to reappropriate them in FY 16.
All other Departments are estimating to end the year within their General Fund FY 15 Adjusted Budget, with the exception of the Fire and Public Works Departments. The Fire Department's projected overage is attributable to a larger than budgeted Fire Academy class, additional training requirements, as well as sending current Firefighters to Paramedic school to fill current and future Paramedic vacancies. The Department will continue to monitor its spending levels to minimize the overage by the end of the fiscal year. For the Public Works Department, overages are due to higher than expected maintenance and repair costs for the Department's street sweeper fleet. The Department will be receiving new street sweepers in FY 16, which will result in lower maintenance and repair costs moving forward. Currently, the Citywide Activities Department is showing year-end estimates higher than the FY 15 adjusted budget, but will be under appropriation at year-end with a pending budget adjustment to cover the increased costs for the 2009 furlough litigation in FY 15. The Citywide Activities Department's year-end estimates also include a $2.0 million transfer for the new Civic Center project, offset by lower than projected contractual obligations in other programs.
Other Uses
The Other Uses category represents assignments of funds available to be reserved. In FY 15, the sources of Other Uses is revenue above budgeted levels that are being reserved for appropriation as one-time strategic investments in the FY 16 Budget. These proposed expenditures include the FY 16 Police overtime costs, the FY16 City election, the State courthouse demolition, sidewalk and street repair, sidewalk plan and its implementation, fire facility modernization, and signage costs for the citywide rerouting of street sweeping. Also, as mentioned in the section above, funds have been reserved for Police Academy costs and various policing needs.
FY 15 Revenues - All Other Funds
Uplands and Tidelands Operating Funds
The City's oil revenues continue to be impacted by both price declines. The current price and production drop has led to a dramatic reduction in both Uplands revenue, which covers General Fund operations and one-time investments, and in Tidelands revenue, which funds both operations and capital investment in the Tidelands area. The Uplands Oil transfer to the General Fund is projected to be under budget by $3.6 million and Tidelands oil revenue is projected to be $14.6 million under budget. Current projections do not include any additional one-times for FY 16. Depending on oil prices and related technical factors, some one-time funds may be available at FY 15 year-end.
Airport Fund
Airport Fund revenues are directly impacted by the number of enplanements at the Long Beach Airport. Declining enplanement numbers over the past few years have negatively impacted revenues. In response, the Airport increased fees charged to airlines, pursued options to increase revenues from parking operations, and aggressively implemented cost containment strategies. As a result, the Airport minimized the impact from lower enplanement levels and continues to maintain a healthy reserve. The Airport will continue to improve operations through innovations and efficiencies and stay competitive in the market. There are no other revenue concerns related to all other funds to report at this time.
FY 15 Expenditures - All Other Funds
Overall, there are no funds where significant issues are projected. The Water Fund is showing year-end estimates that are over the appropriation limit. The majority of the Water Fund's projected overage is due to unbudgeted costs for water purchases for the Seawater Barrier and water purchases in-lieu of pumping from the aquifer. These costs are fully offset by reduced pumping-related costs and reimbursement revenue from the Water Replenishment District
Tidelands Operating Fund
Tidelands Operating Fund revenues are dependent to a significant degree on oil operations in the Tidelands area. Over the past six months, the price of Wilmington oil has fluctuated around $40 to $60 per barrel. On June 16, 2015, City Council approved a new list of Tidelands capital projects to fund projects as new resources become available. For the current oil situation, this strategy represents a substantial improvement over standard budget practices in the Tidelands Operating Fund due to its ability to take into account the current extraordinary uncertainty of oil funding. Tidelands Operating Fund revenue projections and projects will be reviewed and updated during each annual budget process, or more often as appropriate. The City expects to use all of the oil revenue for operations. Depending on oil prices and related technical factors, some one-time funds may be available at FY 15 yearend.
Police & Fire Public Safety Oil Production Act (Proposition H)
This fund continues to be closely monitored in FY 15 since oil production is impacted by the price of oil and will, therefore, impact Proposition H revenue. While estimated revenue is below budget, expenditure savings are expected to offset the reduced revenue.
TIMING CONSIDERATIONS
City Council action on this matter is requested on August 11, 2015.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER