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Recommendation to approve the Fiscal Year 2008 second quarter departmental and fund budget appropriation adjustments in accordance with existing City Council policy. (Citywide)
DISCUSSION
On September 11, 2007, the City Council adopted the Appropriations Ordinance governing the City's Adopted Budget for Fiscal Year 2008 (FY 08). Periodically, changes in revenue or operating conditions require appropriation adjustments. For example, in certain cases these adjustments enable departments to expend recently awarded grant revenue for which there is no existing appropriation. In addition, changes for multi-year grants/projects are necessary to bring appropriations in line with final grant/project award amounts. In accordance with the City's practice, these adjustments are presented quarterly to the City Council for consideration. Please see Attachment A for a Fund Balance Analysis of impacted City funds and Attachment B for a recap of FY 08 General Fund Budget Adjustments.
This letter was reviewed by Assistant City Attorney Heather A. Mahood on April 9, 2008.
TIMING CONSIDERATIONS
The following requests for adjustments to FY 08 departmental and fund appropriations are necessary to reflect changes in operating conditions. City Council action is requested on May 6, 2008 to enable the timely processing of payments.
FISCAL IMPACT
Community Development
The State Department of Housing and Community Development (HCD) awarded $1,000,000 in CalHome Mortgage Assistance funds to the Long Beach Housing Development Company (LBHDC). No City matching funds are required. An agreement between the State HCD and the LBHDC was executed on October 25, 2007 to use the funds to provide mortgage assistance loans to low-income first-time homebuyers. An appropriation increase is requested to enable LBHDC to provide the mortgage assistance funds.
. Increase appropriations in the Housing Development Fund (SR 135) in the
Department of Community Development (CD) by $1,000,000.
To more adequately account for internal City charges for property leasing and acquisition services provided by Community Development to other departments, charges to client departments will be recorded as expense transfers instead of revenue. This technical adjustment will reduce appropriations and revenue by the same amount, with no net impact to the General Fund.
• Decrease appropriations in the General Fund (GP) in the Department of Community
Development (CD) $750,907.
On March 3, 2008, the Redevelopment Agency Board authorized a contract with C. T. & F., Inc.
in an amount not to exceed $421,981 for installation and/or modification of traffic control signals at three intersections within the City. The contract will improve traffic circulation at the intersection of Pine/Ocean Boulevard in the Downtown project area, and the intersections of Atlantic/Cartagena Street and Atlantic/Marshall Place in the North Long Beach project area. An appropriation increase is required to expend funds for the contract, which will not have an impact on the General Fund.
• Increase appropriations in the Redevelopment Fund (RD 224) in the Department of
Community Development (CD) by $170,000.
• Increase appropriations in the Redevelopment Fund (RD 230) in the Department of
Community Development (CD) by $251,981.
On March 3, 2008, the Redevelopment Agency Board authorized a contract with Rincon Consultants, Inc. for $700,000 to prepare the CEQA documents necessary to implement the North Village Center and other proposed projects in the North Long Beach Redevelopment Project Area. An appropriation increase is required to expend funds for this contract, which will not have an impact on the General Fund.
• Increase appropriations in the Redevelopment Fund (RD 230) in the Department of
Community Development (CD) by $700,000.
Financial Management
The General Billing and Collections Program provides invoicing, customer service, payment processing, and debt recovery services to the residents of the City and City departments. The recent upgrade of the City's Cashiering System has resulted in unanticipated increased technical assistance and oversight of the new system. The Utility Customer Service Program is responsible for monthly billing of gas, water, sewer, refuse, and utility use tax totaling more than $200 million dollars per year. Maintenance for this 30-year-old Utility Billing System mainframe system, along with modifications required to facilitate up-to-date Internet and IVR options, and to keep current with changes in providing utility service, and United States Post Office regulations have combined to increase technology services costs. A budget adjustment of $658,000 is required to cover these costs. These General Fund costs will be fully offset by corresponding revenue received from client departments.
• Increase appropriations in the General Fund (GP) in the Department of Financial
Management (FM) by $658,000.
Fire
The Long Beach Fire Department provided assistance of up to 69 fire suppression employees each day during the unprecedented and numerous California fire events during October, November and December 2007. As the overtime expense for backfilling the firefighters who left fire stations to assist with the wild fires is unbudgeted, an appropriation increase is necessary. The appropriation increase will be fully reimbursed by the State Office of Emergency Services for a neutral fiscal impact.
• Increase appropriations in the General Fund (GP) in the Fire Department (FD) by
$905,000.
Library
The Friends of the Long Beach Public Library, a nonprofit organization, has provided donations to the Library Services Department totaling $27,500 for the purchase of books and material resources. To allow the Department to expend these funds, a budget adjustment is required.
. Increase appropriations in the General Grants Fund (SR 120) in the Department of
Library Services (LS) by $27,500.
Gas and Oil
The continuing rise of oil prices has raised the Wilmington oil prices to an average of $82.09/barrel as of February 2008. FY 08 approved budget reflected a conservative $45/barrel oil price.
Estimating a $90/barrel price of oil for the remainder of the fiscal year results in a combined annual average oil price of $87.14 per barrel for FY 2008. Total expenditures and transfers are forecasted to increase by $286.5 million in the Tideland Oil Revenue Fund (TORF) and $9.3 million in the Upland Oil Fund. The final transfer to the Tidelands Operating Fund is expected to be $23.2 million, or $15.8 million more than currently budgeted. The final transfer to the General Fund is expected to be $20.5 million, or $8.2 million more than originally budgeted. The additional transfers are already reflected in the estimates to close for the current fiscal year and will offset the negative impact of losses in other General Fund revenues due to the slowdown of the economy.
The Department is requesting additional appropriations in the amount of $286,537,838 in the Tideland Oil Revenue Fund (TORF) and $9,278,917 in the Upland Oil Fund. These are offset by the increase in net oil revenues of $286,470,986 in TORF and $9,731,752 in the Upland Oil Fund.
. Increase appropriations in the Tideland Oil Revenue Fund (NX 420) in the Department
of Gas & Oil (OP) by $286,537,838.
. Increase appropriations in the Upland Oil Fund (SR 134) in the Department of
Gas & Oil (OP) by $9,278,917.
Health
The City Council approves the acceptance of grants during the year for multi-year programs.
When grants are awarded, only the current fiscal year appropriation is generally budgeted. Both the Smile Bright and Role of Men programs were appropriated for one year only in FY 07.
Although the base grant funding is budgeted for these programs, additional grant funds awarded need to be appropriated for FY 08. This budget adjustment provides the appropriation necessary to expend grant funding in FY 08. There is no net impact to the General Fund.
• Increase appropriations in the Health Fund (SR 130) in the Department of Health and
Human Services (HE) by $184,872.
Parks, Recreation and Marine
On June 5, 2007, Parks, Recreation and Marine received an appropriation increase for the Scherer Park renovation project using Open Space Bond interest earnings. This funding is restricted to Community Development Block Grant (CDBG) areas only. Scherer Park is not located in a CDBG area and, therefore, not eligible for this funding source. This budget adjustment removes the original funding and the corresponding revenue for a neutral impact on the fund. The unencumbered- interest earnings will be available for CDBG-eligible park acquisition consistent with federal requirements. Proposed alternative funding for this project is Redevelopment funds and/or Park Impact Fees.
• Decrease appropriations in the Capital Projects Fund (CP) in the Department of Parks,
Recreation and Marine (PR) by $605,000.
Police
The Chief of Police authorized the use of $87,803 in Asset Forfeiture funds for frontline law enforcement investigative costs, the purchase of ammunition for officer firearms training and qualification, and for annual environmental lead cleanup of the Police Pistol range to ensure its safe operation. Asset Forfeiture funds are distributed by the Federal or State government to law enforcement agencies. The funds are the proceeds of selling assets that were illegally used or acquired related to convicted criminal activity. These costs will be fully supported by revenue from Asset Forfeiture funds, which are to be used solely to supplement law enforcement operations.
• Increase appropriations in the General Fund (GP) in the Police Department (PO) by
$87,803.
Public Works
An appropriation increase of $499,456 is required to cover a 12-month period of interest and principal lease payments to Sun Trust Leasing for 20 new LNG fueled Street Sweepers. In developing the FY 08 budget, it was anticipated that the lease payments would begin in April 2008 when the street sweepers would be placed in service. However, the lease agreement executed in September 2007 required the payments begin in October 2007; therefore, six months of interest and payments need to be appropriated. There are sufficient funds in the Fleet Services Fund to support this.
• Increase appropriations in the Fleet Fund (IS 386) and in the Department of Public
Works (PW) by $499,456.
General Fund expenditures incurred by Public Works for such services as maintenance of streetlights, storm drain cleaning, traffic pavement striping and street light and traffic control device power are eligible for Gas Tax funding. Currently $6,308,973 is budgeted in Public Works for an operating transfer to the Gas Tax Street Improvement Fund. A corresponding increase in the Gas Tax Street Improvement Fund is needed to provide the offset.
• Increase appropriations in the Gas Tax Street Improvement Fund (SR 181) and in the
Department of Public Works (PW) by $6,308.973.
On September 19, 2006, City' Council authorized the City Manager to execute a finance agreement with Banc of America Public Capital Corporation for the purchase of ambulances, fire rescue boats and a debris skimmer boat payable over a seven-year period. In the FY 08 Budget, the principal payments for this agreement are understated by $30,000. Therefore, an appropriation increase of $30,000 is required to cover the payment under the lease agreement.
• Increase appropriations in the Fleet Fund (IS 386) and in the Department of Public
Works (PW) by $30,000.
In an effort to increase student safety at the California State University Long Beach (CSULB) campus, the City has partnered with the University and Los Angeles County to install street light standards on Bellflower Boulevard and Palo Verde Avenue. An appropriation increase of $133,000 is needed to provide Community Development Block Grant funding for this lighting project. This appropriation represents one third of the total estimated cost for this project. At a later date, Council approval will be requested to appropriate and expend the funds provided by CSULB and Los Angeles County once received.
. Increase appropriation in the Capital Projects Fund (CP 201) in the Department of
Public Works (PW) by $133,000.
On August 15, 2006, the City Council approved a Memorandum of Understanding (MOU) with California State University Long Beach (CSULB) to construct a new traffic signal at Palo Verde Avenue and Rendina Street to mitigate traffic flow resulting from the additional traffic from the University's new parking structure. Based on the MOU agreement, CSULB provided $185,000 to the City for the expense of the new traffic signal. Since the project was completed under budget, an appropriation decrease of $27,729 is necessary to align the project budget with actual expenditures.
. Decrease appropriations in the Gas Tax Street Improvement Fund (SR 181) in the
Department of Public Works (PW) by $27,729.
Citywide
On April 25, 2000, the Council authorized a Location Agreement between the City of Long Beach and Edison Material Supply LLC (EMS), a retail Material Supply Company. Pursuant to Section 2(b) of the Location Agreement, the City receives the first $3 million per year in local sales tax revenue, with a 75 percent (EMS)/ 25 percent (City) sharing of local sales tax revenues above that amount during years 6 through 10 of the agreement. When the State Board of Equalization
(SBOE) in the following fiscal year remits the sales tax revenue to the City, the City must forward the EMS share of the sales tax to the company. The total sales tax generated by EMS in Fiscal Year 2007 was $6,928,103. Consequently, the current payment due to EMS in Fiscal Year 2008 is $2,946,077. Only $2 million was budgeted in FY 08 for the estimated payment; therefore, a budget adjustment is necessary to increase expenditure appropriation to support the actual payment to EMS pursuant to the contract.
• Increase appropriations in the General Fund (GP) in the Citywide Activities
Department (XC) by $946,077.
In 1998 and 1999, a total of $4,347,551 from the General Fund was set aside and transferred to the Capital Projects Fund to support the construction of a new Emergency Communications and Operations Center (ECOC). This project was subsequently funded with bond proceeds, leaving the cash advance unspent. The value of the cash advance, plus $1,778,296 in interest earnings, was designated to support the City Council's Adopted CIP budget. Appropriation currently exists to support this transaction within the CIP. As such, a decrease is requested in the General Fund as a technical correction to eliminate unnecessary duplicate appropriation authority.
• Decrease appropriations in the General Fund (GP) in the Citywide Department (XC)
by $6,125,847.
Mufti-Year Funds Carry-over
Each fiscal year, appropriation increases and decreases are necessary to make technical corrections related to grants and capital projects. Budget amounts not spent by the end of a fiscal year for multi-year grants are carried forward and re-appropriated in the existing fiscal year.
The FY 08 Adopted Budget contained estimated amounts of carry-over balance from FY 07. The necessary corrections represent the difference between the estimate and the actual carry-over amount. Attachment C lists the corrections that require City Council approval by fund and by department for FY 08. The net adjustment for the affected funds and departments is an appropriation increase of $110,270,989. All of the funds are grant or bond proceeds and therefore restricted to their related projects and do not impact the General Fund.
See "Attachment" section for Attachments A, B and C.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
Lori Ann Farrell
Director of Financial Management/CFO
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PATRICK H. WEST |
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CITY MANAGER |