TITLE
Recommendation to receive and file City Manager's report on Fiscal Year 2005 excess year-end revenue. (Citywide)
DISCUSSION
On October 18, 2005, Councilmember O'Donnell requested the City Manager to report on
any excess General Fund revenue remaining from Fiscal Year 2005 (FY 05), which ended
on September 30, 2005. The Councilmember suggested that any available resources be
considered to restore FY 06 Library cuts, specifically those related to operating hours and
materials.
Financial Management is in the midst of preparing the audited FY 05 financial statements,
but has completed preparation of unaudited statements. The General Fund unaudited
ending fund balance is $2.1 5 million more than previously projected department estimates-
to-close, though revised revenue and expenditure estimates for FY 06 indicate that these
one-time resources will be required to maintain a balanced budget during FY 06. The major
sources for this variation, which represents only five-tenths of one percent (0.57 percent)
difference from earlier year-end projections, include: approximately $750,000 in one-time,
Citywide department salary savings; and, $1.4 million in net revenue fluctuations. The
higher than anticipated revenue is primarily from parking citations, real property transfer tax,
reimbursements for Police Department contract services, and a Vehicle License Fee
payment from the State.
The higher-than-estimated year-end revenue will be used to create a level of stability in the
General Fund, due to several known changes in operating conditions for FY O6'and given
that there is still over $10 million of unsolved structural deficit to be addressed in FY 07. In
particular, the City recently received notice from the State Department of Finance that
$1,037,000 will be withheld from the City's expected FY 06 Property Tax In-lieu of Sales Tax
"Triple-Flip" payment due to a State miscalculation in FY 05. In addition, while oil prices
remain high and oil profits for the City will be more than in past years, increased costs for
fuel will outstrip the oil profit.
Another vital component of these discussions should be centered on the continuing
negotiations with labor unions, the additional desire to bolster the investment in street and
sidewalk repairs that are a high priority to the community, and the fact that the City's
Operating Reserve sits at only $600,000 compared to a General Fund operating budget of
$362 million (less than 2/1Oths of 1 percent). In addition, the General Fund has over 250
categories of revenue, many of which the City has no direct control over how much or how
little is generated, and often minimal information is available prior to actual receipt of the
revenue This is a reality for most local governments, and the unpredictability of revenue
streams coupled with small operating reserves should influence the discussions surrounding
spending "excess" revenue.
All of these elements considered, I recommend that approximately $500,000 of the one-time
revenue received during FY 05 be used to support additional one-time sidewalk repair work
during FY 06 through a 1'' Quarter Budget Adjustment. Any program restorations under
consideration should be deferred until after the structural deficit is solved. If any additional
unallocated recurring resources do become available, it will be recommended that they be
allocated toward eliminating the structural deficit and then to our current public safety needs,
in line with the City Council's stated priorities.
To this end, at the beginning of FY 06, the General Fund received $1.3 million in additional
unbudgeted revenue from the repayment of outstanding loans from the Central Project Area
to the General Fund. The City Council directed $905,000 of this structural revenue be used
to support police services in the downtown entertainment district. At that time I
recommended, and still do, that the remainder of this recurring revenue be used to reduce
the structural deficit.
For more detailed information on FY 05 year-end budget performance, please see the FY 05
Year-end Performance Report.
FISCAL IMPACT
There is no fiscal iimpact associated with this recommended action.
TIMING CONSIDERATIONS
City Council action on this item is not time critical.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
Michael Killebrew
DIRECTOR OF FINANCIAL MANAGEMENT