City Council
MEETING DATE: 5/10/2017
TITLE:
Title
Adopting Resolutions for the Biennial Budget
End
FROM:
Tami E. Scott, Administrative Services Director
RECOMMENDATION:
Recommendation
Adopt the FY 2017/2018 and FY 2018/2019 biennial budget
Body
BACKGROUND:
After months of review and discussions, we are pleased to present the adopted Biennial Budget for Fiscal Years (FY) 2017-18 and 2018-19 for the City of Cathedral City (Operating Budget and Capital Improvement Project (CIP) Plan), the Successor Agency to the Cathedral City Redevelopment Agency (“Successor Agency”), the Housing Successor Agency and the Cathedral City Public Financing Authority.
This biennial budget was developed with a primary focus to accomplish City Council goals established in January 2017. Departments reviewed their past accomplishments and developed objectives focusing on achieving these overarching Council goals:
Economic & Community Development
Public Safety
Community Engagement & Community Relations
Infrastructure
Governance
Financial Solvency
In the past two years, we are happy to see the City of Cathedral City continuing to experience positive signs of an economic recovery. There continues to be increases in property values and decreases in unemployment rates. These indicators are translating into increased revenues for the City.
For the past eight years, balancing the budget has been a challenge. For the five successive years from FY 2007-08 through 2011-12, the City adopted general fund budgets with structural deficits. In order to achieve stabilization in balancing the budgets for the next five successive years, FY 2012-13 through FY 2016-17, difficult employee-related decisions, including layoffs and concessions, were necessary.
To illustrate, revenues remained flat from $33.982 million in FY 2009-10 to $33.876 million in FY 2012-13. With the economic downturn, it was necessary to generate a stable source of revenues to ensure the City’s ability to maintain financial solvency. This stability was achieved through the support of the Cathedral City residents to pass local revenues measures. The utility users’ tax (Measure L) was passed in 2008 and the transactions and use tax (Measure H) was passed in 2010 coupled with Measure B in 2014 eliminating the Measure H tax sunset resulting in a secure revenue source. In FY 2015-16, the City Council pursued diversifying the City’s tax revenue source through a Cannabis and Marijuana Tax (CMT) allowing this burgeoning business sector to establish dispensary, cultivation and manufacturing businesses in the City. During these next two budget years, we anticipate the growth of the new CMT revenue source.
DISCUSSION:
Over the past several months, department heads, in conjunction with the City Manager, have reviewed and addressed departmental needs and their ability to deliver an acceptable level of services to the community, while at the same time preparing a budget that incorporates the achievement of Council's adopted goals. In preparing this biennial budget document, the City Manager and staff used their best efforts to identify and estimate financial resources available to the community. This budget is a thoughtful attempt to balance the projected revenues and planned expenditures in a way that focuses on the community’s most critical needs and Council's priorities.
The budget process is an ongoing year round document whereby quarterly and mid-year reviews of revenues and expenditures are completed to determine and assess any changes that may be needed. Most recently, the formal biennial budget process for the next two-year cycle commenced at the beginning of January 2017 with City staff preparing department/division line item detail worksheets for dissemination and Departmental review/feedback. After City Management review in early March, a detailed line item budget workbook was provided to City Council and all departments on March 16th. City Council members reviewed the workbook and independently provided questions back to staff for clarification of expenditures and recommendations of changes. At the April 12th and 26th City Council study session meetings, City staff briefed City Council and the community on the General Fund, the Special Revenue and Internal Service Funds, and the Capital Improvement Project (CIP) Plan to discuss the allocations planned for the upcoming biennial budget. In addition, staff provided feedback to Council’s questions and had a detailed discussion about the budget to include, but not limited to, municipal debt, physical assets, retirement plans and other post-employment benefits (OPEB). The final proposed biennial budget also incorporated updated direction from the City Council to include an additional funded Capital Improvement Project at Dinah Shore and Date Palm Drive, (2) unfunded capital improvement projects pertaining to the future Landau and DaVall interchanges, additional funds for council travel to advocate for the city's interests, a reduction in funding for the dance program, funding for the CBA Strategic Economic Plan, funding for community assistance for the future homeless program, funding for the Parks and Events Commission and funding for future annexation areas into the city boundaries.
For FY 17/18, the budgeted revenues are $41.082 million and the budgeted expenditures are $43.022 million, resulting in a net deficit of $1.94 million. For FY 18/19, the budgeted revenues are $43.44 million and the budgeted expenditures are $44.95 million, resulting in a net deficit of $1.51 million. During both fiscal years, the budget will be balanced by utilizing fund balance reserves. With these projections, the General Fund should retain a fund balance of $16.336 million, which surpasses our policy of maintaining a minimum of 33% fund balance of budgeted expenditures ($14.834 million). This change in the General Fund is primarily due to rising costs attributable to labor-related expenditures, California Public Employees' Retirement System (CalPERS) reduction in investment return rates, and Other Post-Employment Benefits (OPEB) liability.
FISCAL IMPACT:
Utilization of fund balance reserves to balance the budget for each of the next two years as outlined above.
ATTACHMENTS:
Biennial Budget
Four (4) Resolutions