City Council Report
June 21, 20161
DATE:JUNE21, 2016
TO:MAYOR AND COUNCIL MEMBERS
FROM:MICHELLE FITZER, CITY MANAGER
ANDREA MILLER, FINANCE DIRECTOR
SUBJECT:ADOPT THE CITY OF PINOLE PROPOSED FY 2016-17 BUDGET, EXCLUDING THE SEWER ENTERPRISE OPERATIONS BUDGET
RECOMMENDATION
- Adopt the Proposed FY 2016-17 Budget, excluding the Sewer Enterprise Operations Budget.
- Approve direction to allocate $25,000 from either the General Fund or Measure S 2014 fund balance to demolish the Fowler House.
- Approve direction to issue a Request for Proposal for website design.
- Approve direction to reallocate funding to complete new Fernandez Park restrooms.
BACKGROUND
As provided by Section 2.04.150 of Title 2 of the Pinole Municipal Code, the City Manager has compiled a Proposed Budget for the next fiscal year. The Proposed FY 2016-17 Budget is status quo for the most part, with exceptionshighlighted in the Review and Analysis.
This budget provides for maintaining the same level of service to our community as provided in the current year.
REVIEW AND ANALYSIS
The Finance Subcommittee reviewed the Proposed FY 2016-17 Budget at the meeting on May 25th. The City Council reviewed the Proposed FY 2016-17 Budget at a workshop held on May 31st.
A detailed analysis that provides information on the major changes in revenue and expenditures for the major operating fundsis provided in the Budget Overview section (pages A-5 through A-27) of the Proposed FY 2016-17 Budget and complemented by the City Manager’s Transmittal Letter (pages iv through v). Below are the highlights:
- General Fund
General Fund revenues are projected to be sufficient to meet anticipated expenditures in FY 2016-17.
The City is continuing to improve the General Fund’s financial condition with the established reserve of over $3 million as a result of one time revenues, mostly from the sale of property from the former Redevelopment Agency. The City is on its way to meeting the Council’sgoal of funding a $5.5 million Reserve by allocating an additional $200,000 from Measure S 2014 to the General Reserve in the Proposed Budget.
It is expected that revenues will continue to increase during the next fiscal year as the City recovers from the downturn in the economy,especially for Property Tax (5.5% increase) and Sales Tax (4.3% increase), which are our two largest General Fund revenue sources. Franchise Tax and Utility Users Tax are projected with modest increasesof 3% and 2.5% respectively. Other Taxes, which is comprised of Business License and Transient Occupancy Tax, are projecting 11% and 5% decreases respectively. This is largely due to the current year budget being projected too high based on prior year anomalies, which resulted in higher than average actual results in fiscal year 2014-15. Therefore, the FY 2016-17 projection has been reduced to more closely align with a 3-year actual average.
The ProposedFY 2016-17 Budget is balanced with positive net results projected of at least $610,000at fiscal year-end. As noted in the Budget Overview, this does not mean that the City has a surplus because there are pending unfunded liabilities with unknown fiscal impacts. These include, replacing depreciated vehicles and equipment, addressing deferred maintenance on City facilities, funding future retirement expenses such as Public Employees Retirement System (PERS), Other Post Employment Benefits (OPEB) and Compensated Absences and other special liabilities. Measure S 2014 only starts to address some of these liabilities.
- Measure S 2006
The Measure S 2006 FY 2016-17 budget is projecting a $67,115 use of fund balance. These funds continue to support Police and Fire operations. The remaining fund balance is projected to be $2,174,960 at June 30, 2017.
- Measure S 2014
FY 2016-17 marks the second full year the City receives the Use Taxes from Measure S 2014. Appropriations for year two of the Five Year Plan approved by City Council May 5, 2015, for the use of these funds has been incorporated into the Proposed FY 2016-17 Budget. The money is used to address some of the City’s operational and capital improvement needs. The Measure S 2014 budget is projecting a $193,334 use of fund balance, primarily for a one-time expenditure of additional $100,000 for the new Finance/HR software. Other considerable increases were due to the enhanced subsidy to the PCTV operation, and the full year of the Administrative Battalion Chief in the Fire Department. The remaining fund balance is projected to be $338,417 at June 30, 2017.
At the May 31st City Council Budget Workshop, Council requested staff to reallocate Measure S 2014 funding to complete new Fernandez Park restrooms in FY 2016-17 rather than FY 2017-18. Staff is proposing to fund this project by one of the following options:
- Option 1 – Appropriate $150,000 from Measure S 2014 fund balance in FY 2016-17. The Senior Center Roof and Arterial Streets projects were completed under budget in FY 2015-16, and those savings are not yet reflected in the projected fund balance as the fiscal year actuals have not been determined.
- Option 2 – Reduce the Residential/Arterial Street Maintenance Program FY 2016-17 funding by $150,000, reallocating it to the Fernandez Park Restroom Project. In FY 2017-18 the Street Maintenance Program allocation would be increased by $150,000, representing the prior funding allocation to the Restroom Project.
Other Council requests are included in the Budget Overview section (pages A-21 to A-22) of the budget document. Items for Council direction were outlined in the Recommendation section of this report.
- Wastewater Fund
The FY 2016-17Sewer Enterprise and Wastewater budgets are balanced. Revenues will continue to exceed expenditures as rates increase under the long term rate plan which is needed to fund the debt service on a loan from the State needed to fund the expansion of the Sewer Plant. At this time the Council will be adopting the Sewer Enterprise – Collections System budget only. Staff will return with the Sewer Enterprise – Operations budget at the July 19th meeting, following review by the Pinole/Hercules Wastewater Subcommittee on July 7th.
- Other Funds
Gas Tax Revenues have decreased due to the decrease in consumption due to more fuel efficient vehicles. However, the operating expenditures have decreased due to the re-allocation of staff costs based upon the expected use of staff time during the next fiscal year.
- Capital Funds
The City Council adopted a Five-Year Capital Improvement Program on September 1, 2015. Staff anticipates returning to City Council by the 1st quarter budget review with proposed updates to the Plan.
FISCAL IMPACT
The Proposed Budget is balanced for most funds with anticipated revenues projected to equal or exceed recommended expenditures. In some cases, fund balances are proposed to be used and additional information is provided. These funds will be evaluated over the next fiscal year to develop a strategy to return them to expenditures matching revenues.
ATTACHMENTS
The Proposed Budget is posted on the City’s website.
AResolution Adopting the Proposed FY 2016-17 Budget
BRevised Proposed FY 2016-17 Budget
CMay 31, 2016 PowerPoint Presentation
DJune 21, 2016 PowerPoint Presentation