TITLE
Recommendation to direct City Manager to work with the Fire and Police Departments to absorb the projected Fiscal Year 2010 Proposition H Fund shortfall within existing Fiscal Year 2010 Police and Fire Departments General Fund budgets to ensure a year-end balance in the Proposition H Fund. (Citywide)
DISCUSSION
On March 9, 2010, the City Auditor presented the annual financial audit of the Police and Fire Public Safety Oil Production Tax, approved by Long Beach voters as Proposition H (Prop H) on May 1, 2007. The City Auditor's report identified a $449,459 General Fund subsidy of Prop H expenses. In addition, on March 16, 2010, the Department of Financial Management provided a report on the performance of the Prop H Fund to the Budget Oversight Committee (BOC) highlighting the structural deficit that currently exists in the Fund due to increasing labor costs and reduced oil revenue resulting from declining oil production. Please also note that since the date of the BOC meeting, the second quarter of Prop H revenue was received by the City from the oil producers, which reflected a further decline in production than experienced in the first quarter, thereby increasing the projected current-year Fund deficit to $735,692. The information below presents updated expenditure- and revenue projections in the Prop H Fund, reflecting actual revenue performance to date.
Oil production in Long Beach has been declining since the passage of Prop H in 2007. On January 26, 2009, the Department of Gas and Oil submitted to the BOC a report indicating the current and projected decline in oil production and the potential impact on Prop H funding. As noted in the City Auditor's report, from June 2007 through December 2009, quarterly oil production in Long Beach declined by 9.5 percent, thereby reducing the amount of Prop H revenue to the City. Table 1 below demonstrates the annual decline in oil production since FY 06, including estimated continued declines for FY 10 and FY ...
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