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Home My WebLink About7.4 Determine Surplus Designation~~o~D°~.~ CITY CLERK ,1 File # ^®~~'~~ C~, ~> s~ ~~ ~'~ AGENDA STATEMENT ~~LIFOR~1~ CITY COUNCIL MEETING DATE: March 17, 2009 SUBJECT: Determination of How The Fiscal Year 2007-2008 General Fund Surplus Should Be Designated Report Prepared by Joni Pattillo, City Manager ATTACHMENTS: None RECOMMENDATIO Determine how the 2007-2008 year end General Fund surplus should be designated and direct Staff to record the items in the City Financial records. FINANCIAL STATEMENT: See Staff Report. DESCRIPTION: At the City Council meeting of February 17, 2009 the City Council received the final financial statements for the period ending June 30, 2008. The financial statements were part of the Comprehensive Annual Financial Report (CAFR). Typically with the acceptance of the report the City Council also makes determinations on any specific designations to be recorded in the General Fund reserves as a result of additional surplus funds derived as a result of revenues in Fiscal Year 2007/2008 exceeding General Fund expenditures. Staff delayed the presentation and discussion of this item in order to consolidate the discussion with an evaluation of Mid-Year Budget adjustments. DESIGNATIONS OF FUND BALANCES One part of the closing entries recorded on the financial statements is the designation of funds for specified uses. A "Reservation" implies that there is a strong legal basis which restricts the discretion of the City Council to use the funds for any desired purpose. A "Designation" is less restrictive and subject to policy decisions by the City Council. The discussion of the Fiscal Year 2007/2008 General Fund Surplus will be in the context of a "Designation" -that is, none of the funds are recommended to be programmed for uses which would have a legal restriction. PRELIMINARY PROJECTS IDENTIFIED FOR RESERVE DESIGNATIONS IN JUNE 2008 At the close of the Fiscal Year any surplus is allocated to a Designation noted as "Designated For Authorized Expenditures". The City Council in recent years has identified specific uses for any increase in this designation, such as the allocation of reserves to construct Shannon Center, allocations for the construction of Phase 1 Heritage Park, etc. In December 2008 the City Council authorized an appropriation from the General Authorized Expenditure Reserve in order to complete the acquisition of a site for a Maintenance Facility. As part of the adoption of the Fiscal Year 2008/2009 Budget the City Council considered potential recommendations for the designation of revenues in excess of expenditures, once the Fiscal Year 2007/2008 books were closed. It was noted that the priorities were established based COPY TO: Page 1 of 3 ITEM NO. G:\Audit\FY 07-08 Annual Audit\Agenda Statements\Fund Balance Designation\DesignationofFundBalanceAgStmt.doc on projections and that the final allocation of these funds would not be until the precise amount was known after the preparation of the Comprehensive Annual Financial Report. TABLE 1 Potential Programming Of Reserves Recommended By City Manager In The Budget Message And As Tentatively Annroved By the Citv Council on June 26, 2008 ~ o,~cct I Cup r Zur _ Project Fun du~~ Requirecl cnc j Recan emendation j Emerald Glen _ $ 6,300,000 None $ 2,500,000 (Indoor Portion) of (Est. In 2007 Dollars) A uatic Center Establish A Reserve City Share of Alameda County Fire Dept $500,000 $ 500,000 For Fire Dept Unfunded Liability is currently being Retiree Medical calculated. City share of Dougherty Obligation Regional Fire Authority unfunded obligation was calculated to be $1,444,000 as o June 30, 2007 East Bay (System under development. City share of None $ 450,000 Emergency cost is unknown. Cost estimated for non- Communications public safety radios, estimated at $500, 000. TOTAL $ 3,450,000 Undated General Fund Surplus Calculation For Year Ending June 30, 2008 As shown in the following Table based upon the final financial statements for Fiscal Year 2007/2008, the surplus exceeded the amount originally projected. TABLE 2 -Calculation Of June 30, 2008 General Fund Reserve SOURCE OF FUNDS Revenue (page 79 6/30/08 CAFR) $54,662,114 Adjustment /Reduction For Unrealized Investment Gain (1,508,906) (Page 78 6/30/08 CAFR) 2007/08 Planned Use Of Reserves - Shannon Center Reconstruction (Portion) 2,356,353 - Tri-Valley Community Television Equipment 10,000 - Permit System (Capital Project Carryover) 7,852 TOTAL ADJUSTED SOURCE OF FUNDS $55,527,413 USE OF FUNllS Operating Expenditures (Pgs 80-81 6/30/08 CAFR) $44,497,39 Capital Project Expenditures (Pgs 80-81 6/30/08 CAFR) 5,123,08 TOTAL USE OF FUNDS $49,620,48 GROSS AMOUNT FiJNllS EMCEED USE (Source of Funds minlts Use of Funds) $5,906,92 Adjustment -Funds Transferred Into General Fund 70,92 Adjustment -Carry Over Funds To 200812009 (1,317,714 ADDITION TO RESERVES The total surplus available is $4.6 million and past practice has been to refrain from using General Fund Reserves for on-going operating costs. With the Fiscal Year 2008/2009 budget there were several Capital Page 2 of 3 Projects that were proposed to be funded from current year revenues. Given the deterioration of economic conditions Staff expects that General Fund revenue will under perform .the level required to fund both operating costs, and the Capital Projects proposed to be funded from current year revenues (See separate Report: "Fiscal Year 2008-2009 Mid-Year Budget Report and December 2008 Monthly Report of Financial Activities"). To the extent that the use of surplus funds represent aone-time funding source it is prudent to program use of such funds for specific uses (i.e. capital projects; as a set-aside towards a future project; special one-time funding needs; reserves for catastrophic events; etc.) REVISED CITY MANAGER RECOMMENDATION The following Table represents the revised City Manager recommendation which places an emphasis on the designation of reserves to allow the City to address what has become a rapidly developing deterioration of major revenue sources in Fiscal Year 2008/2009 and what is expected to continue in Fiscal Year 2009/2010. ~ IZESe~-~~e Cite ti~Ianager T ltoT llcscr~~e~ Proposed :~s of Recorrunendation (Selected Dcsi nation - Dcscription__ _ - 6/3Q/2008 - ~~1arc1~ 2U09 - Catt~oi•ies) - Increase the A portion of this reserve Economic ($2,319,856 -Based Upon Mid- Uncertainty Year Report) will be used to Reserve address General Fund imbalance in $2,970,722 $3,200,000 $6,170,722 Fiscal Year 2008/2009. Additional funding will be available in the event that year end figures continue to get worse for Fiscal Year 2009/2010. In addition to responding to economic conditions this is the primary reserve in the event of a catastro hic loss. Emerald Glen (Indoor Portion) of $ 6,300,000 None $ 1,000,000 $1,000,000 A uatic Center (Est. In 2007 Dollars) Reserve For Fire City Share of Alameda County Fire Dept Retiree Dept Unfunded Liability is Medical currently being calculated. City $500,000 $ 250,000 $ 750,000 Obligation share of Dougherty Regional Fire Authority unfunded obligation was calculated to be $1,444,000 as of June 30, 2007 East Bay (System under development. City None $ 210,000 $ 210,000 Emergency share of cost is unknown. Cost Communications estimated for non-public safety radios, estimated at $500,000.) TOTAL $ 4,660,000 These designations will not fully fund the entire projects in the short-run, as this was intended to be a long term approach using the surplus funds to assist in funding projects over time. These designations would appear in the Fiscal Year 2008/2009 Comprehensive Annual Financial Report. RECOMMENDATION Staff recommends that the City Council adopt the City Manager recommendation for the designation of the 2007-2008 year end General Fund surplus and direct Staff to record the items in the City Financial Records. Page 3 of 3