The mid-year budget presentation (Attachment A) provides an opportunity to reflect on how the City's General Fund finished financially for the prior fiscal year (FY 2018-19), as well as provides an opportunity to highlight emerging financial/budgetary trends with the current fiscal year (FY 2019-20) and preliminary projections for the next five fiscal years (FY 2020-21 through FY 2024-25). Additionally, new for this year is a mid-year update of the City's Capital Improvement Program (CIP). The information below highlights the City's General Fund prior fiscal year results, the current fiscal year estimates to date and projections for the next five years.
Fiscal Year 2018-19 (Prior Fiscal Year)
Staff is pleased to report the City’s General Fund finished FY 2018-19 with revenues over expenditures of $6,034,578. At budget adoption on June 18, 2019, this number was estimated to be $3,871,565. The improvement of $2,163,013 is primarily attributed to increased sales tax revenues, as well as departments underspending their budgets due to unanticipated vacancies and keeping vacant positions open throughout the entire organization. The City Council already approved $2,453,903 to be carried to the current fiscal year to pay off the Energy Efficiency Loan which will result in total interest savings of $587,537 over the next eight years. In addition, $1,056,909 is needed to maintain the City's General Fund reserve policy level of 25 percent of the City's General Fund expenditures. The remaining revenues over expenditures balance is $2,523,766.
Fiscal Year 2019-20 (Current Fiscal Year)
At budget adoption on June 18, 2019, the General Fund for the current fiscal year was balanced with revenues over expenditures estimated to be $172,588. As a reminder, the current fiscal year includes the first year of the updated fire deployment proposal that would add one firefighter position at Station No. 1 and corresponding overtime.
For Fiscal Year 2019-20, the preliminary year end estimates result in revenues over expenditures of $2,509,567, mostly due to unanticipated sales tax revenues. Overall, these preliminary numbers (including 1st quarter budget adjustments) have a $2.3 million net positive impact on the City’s General Fund budget than was previously projected at budget adoption of $172,588. These figures will continue to be updated through the upcoming budget process.
FY 2020-21 through FY 2024-25 (Five Year Projection)
The preliminary projections being presented for FY 2020-21 through FY 20024-25, are staff's best projections based upon information known today and will be refined as we move through the budget process for FY 2020-21. With preliminary revenues and budget assumptions, the projected revenues over expenditures for future fiscal years are as follows:
| FY 2020-21 |
$1,697,772 |
| FY 2021-22 |
$1,794,090 |
| FY 2022-23 |
$1,957,528 |
| FY 2023-24 |
$1,596,210 |
| FY 2024-25 |
$1,090,542 |
These projections assume an overall two percent (2%) increase in all operating expenditures. Staff anticipates that certain operating and maintenance contracts may increase more than two percent; however as a whole, two percent overall growth is a reasonable assumption.
While these are improved projections over what was projected June 2019, staff cautions these projections do not take into consideration any recessionary impacts that may occur in the future. Additionally, it is important to note that these projections do not include department submittals for the upcoming fiscal year (FY 2020-21) and beyond which will change the projections presented tonight. Budget submittals from departments were due February 14, and are currently being evaluated by staff. Staff will provide an updated five year projection at the Council Budget Workshop in May.
Revenues over Expenditures for FY 2018-19
As part of the presentation, staff would also like direction on allocating prior year revenues over expenditures for the City's General Fund. As previously mentioned, the available prior year revenues over expenditures balance is $2,523,766. Based upon the City’s current fiscal policy, the $2,523,766 would be transferred as follows:
- 95% - Fixed Asset Replacement Fund (FARP)
- 5% - City’s Other Post Employment Benefit (OPEB) Fund
However at the FY 2019-20 Budget Workshop on May 21, 2019, the City Council expressed interest in establishing an Other Post Employment Benefit (OPEB) Trust Fund through PARS to assist in paying down the City's OPEB Unfunded Liability pending the results of FY 2018-19 year-end. The City’s total OPEB liability was $25.6 million as of June 30, 2019. Based upon the 2017 Actuarial Valuation Report for the City’s Retiree Healthcare Plan, the City's Annual Required Contribution (ARC) is approximately $2.56 million. The ARC covers the cost of the current retiree benefit obligations (“pay-as-you-go”), as well as pays down the City’s unfunded liability obligation.
Currently, the City's OPEB Fund (Fund 150) has approximately $155,000. Based on the City Council's comments during the previous budget process, staff is recommending that the $2,523,766 be set a side in a separate Other Post Employment Benefit (OPEB) Trust Fund along with the $155,000 with the intention to pay down the City’s unfunded OPEB liability. The pay down of the City's unfunded liability can be accomplished by paying the ARC amount annually versus the current "pay-as-you-go" method. Therefore, staff also recommends that the City's budget include a plan to increase the annual OPEB amount over the next ten to fifiteen years from the current "pay-as-you-go" funding amount (approximately $890,000) to the full ARC (approximately $2.5 million). Additionally, it is noted that the actuarial valuation and the ARC are re-calculated every two years, and the 2019 Actuarial Valuation Report is expected to be completed this year.
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