HomeMy WebLinkAboutItem 7.4 Determine Surplus Designation~~o~D°~.~ CITY CLERK
,1 File # ^®~~'~~
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~~ ~'~ 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:
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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
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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.
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