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HomeMy WebLinkAboutCommunication received after the posting of the agenda (2) Robin Roberts From: Robert Goldberg <rgoldberg @live.com> Sent: Monday, October 17, 2016 2:22 PM To: Ellery A. Deaton; David Sloan; Mike Varipapa; Sandra Massa-Lavitt; Gary Miller Cc:. Jill.Ingram; Robin Roberts;Vikki Beatley; Bruce Bennett; Charles Kelly Subject: Three Additional Suggested Goals Attachments: Goal Recommendations.doc; Operating Surpluses Last 4 FY.xls; Costa Mesa Surplus.doc Dear Council Members and Staff, I would like to submit the following goals for consideration during Tuesday's workshop: Goal#1: Include reporting of the General Fund Operating Surplus for the prior Fiscal Year at the time of the Mid- Year Budget Review Goal #2: Maintain a General Fund Operating Surplus at a minimum of 2-3% of Total General Fund Revenues. Goal #3: Complete a fiscal analysis to determine whether a General Fund Operating Surplus in the range of 2-3% of Total General Fund Revenues is sufficient to ensure the City's long-term fiscal stability I have attached a_write-up of the rationale for each, aspreadsheet Table of Operating Surpluses from the prior four years, and a September 2016 press release from the City of Costa Mesa. • Thank you in advance for your consideration, Robert Goldberg 1 Goal #1:'Include,reportine of the:General Fund Operating Surplus for the prior Fiscal Year at the time of the Mid-Year Budget Review Rationale: General Fund revenues pay for the day-to-day operational expenses of the City such as salaries and benefits, building maintenance, vehicle replacement, and debt payments. Anything leftover is considered to be the General Fund operating surplus. This surplus can be added to the General Fund reserves or spent on capital improvement projects. Much emphasis and importance has been placed on adopting a "balanced budget" for the upcoming fiscal year every June. A budget is considered to be balanced when, at thetime of adoption, there is a projected General Fund operating surplus. Unfortunately,much can change over the course of a fiscal year. Revenue projections may turn out to be too high or too low. Budget amendments by Council may increase operating expenditures. Of course, staff is very much aware of this, with the City Manager stating in her most recent "Message" in the Recreation-Guide-that the City "makes adjustments to'its spending in order to ensure at the end of the year the budget is balanced." However, unlike at other cities (see attached press release from Costa Mesa), staff does not report to the Council or public the final,outcome of these "adjustments" after the fiscal year is over. In Costa Mesa, staff reported:in September that they have an estimated $11 million dollar surplus for the fiscal year that ended in June. We have no equivalent reportingin Seal Beach; neither in September, nor in Januaryiwith release of all of the final fiscal numbers in the Comprehensive Annual Financial Report, nor in February with our Mid-Year Budget Review. Last May, for the first time, the Proposed Budget did include a line on page 34 for total General Fund operating costs (see "Total Expenditures—Excludes CIP) for the prior year. This allows a reader to calculate the operating surplus (or deficit) by subtracting these expenditures from General Fund revenue. However, the public should not have-to do such a calculation to derive what is a critical barometer of City's fiscal health, and staff's management of spending. Moreover, this barometer should be provided to the-public no later than at the time of Mid-Year Budget Review, so that an informed and transparent decision can be made regarding how to allocate any surplus or respond to a prior year's deficit. This has been the standard procedure in Costa Mesa for the last two years. At the time of the Mid-Year Budget Review, staff makes recommendations regarding whether to use any surplus from the prior year to increase General Fund reserves, paying down pension debt or other debt obligations, as well as funding projects and enhancing various community priorities. The same discussion should happen in Seal Beach. Goal #1: Report the General Fund Operating Surplus for the prior Fiscal Year at Mid-Year Budget Review FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16-17 GF Operating Surplus in Adopted Budget $99,815 $523,000 $21,200 $48,200 $16,900 Actual GF Operating Surplus $1,260,800 $1,707,438 $725,831* $896,399 ???? Goal #2: Maintain a General Fund Operating Surplus at a minimum of 2-3% of Total General Fund Revenues. Goal #3: Complete a fiscal analysis to determine whether a General Fund Operating Surplus in the range of 2-3% of Total General Fund Revenues is sufficient to ensure the City's long-term fiscal stability 'FY 14-15 Operating Expense was decreased by the"contractor draw for invoices of$885,745"which was included in the lease payment of$944,318 for the Climatec Debt.Service Payment on page 159.The$885,745 was accounting entry required by auditors.Without this adjustment,FY 14-15 would show an Budget Deficit of$159.328. Costa Mesa reports budget surplus of more than $11 million from last fiscal year Costa MesaPress Release 9/15/16, http://cityofcostamesanews.com/city-reports-budget- surplus-of-more-than-1 l-million-from-last-fiscal-year/ A•combination of sound fiscal policy and a thriving retail environment, along with expenditures lower than anticipated for a variety of factors, has resulted in a significant budget surplus of an estimated $11 million for the City of Costa Mesa. At the end of the last fiscal year on June 30, 2016,the city's°revenues totaled more than $122.5 million while expenditures were $111.4 million. That surplus represents 9 percent of the total revenues. "We have made concerted efforts to keep our spending under control while still providing great customer service to our residents by rebuilding our older infrastructure, investing in new capital improvement projects and hiring top-level staffing in city departments," said Mayor Steve Mensinger. The mayor called this a proud moment for the City of Costa Mesa. "A significant amount of hard work; difficult decisions and favorable business conditions have resulted in this environment for success," he said. "Many people deserve thanks for their contributions, especially my fellow council colleagues, commissioners, city staff, the business community and Costa Mesa residents." Indeed, the City Council now has the opportunity to determine where to allocate the surplus money and could follow its established policy of using surplus funds to increase reserves, reduce pension debt and increase expenditures°on capital projects. The process for<the last two.years has been for staff to bring a recommendation to the City Council's Financial Advisory Committee around November or December and the City Council review the Committee's recommendation as part of the council's Mid-Year Budget Review in February. Based on the City Council's policy and based on prior budget discussions, staff will likely recommend that the committee increase the general fund reserves by $2.66 million, which will immediately allow the city to reach the Council's$55 million reserve goal. The council can also recommend a number of measures, including paying down pension debt and other debt obligations as well as funding projects and enhancing various community priorities. General Fund Operating Surpluses Over Last Four Years FY 12-13 ' FY 13-14 FY 14-15 FY 15-16*** Total GF Revenues* $31,053,660 $29,319,039 $29,106,232 $29,650,600 Total GF Expenditures* (Excluding CIP) $29,792,860 $27,611,601 $28,379,815^ $28,754,201 GF Operating Surplus at.End of Fiscal Year** $1,260,800 $1,707,438 $726,417 $896,399 Surplus as % of Revenue 4% 6% 2% 3% *Figures from Adopted FY 16-17 Budget, page 34 **Derived by subtracting Expenditures from Revenues. Note that Operating Surplus is not reported in the Budget document. *** Projected as of June 2016 ^A figure of is shown on page 34 of the FY 16-17 Budget. However, per email from staff, this expense total includes a:one-time accounting adjustment required by auditors. Specifically, a "contractor draw for invoices of$885,745" was added to the actual lease payment of$58,573 due on the Climatec Debt Service (see page 159). This causes the Total GE Expenditures (Excluding CIP) reported on page 34to be artificially inflated. Subtracting this accounting entry ($885,745) from real operating expenses, yeilds a reduced figure of$28,379,815 which is used above. Note that wiithout this adjustment, FY 14-15 would have an Operating Deficit of$159,328.