Loading...
02-09-2010 CC Rpt A07 COUNCIL AGENDA STAFF REPORT P Cff.tfcRE JE ONLY Meeting Date: February 9. 2010 ,r 2010 FEB `2 PM 1: 01 Public Hearing: 0 OFFICE OF CITY CLERK .:,7-z4,,,3‘ Discussion Item: CHINO HILLS �o...o �y;� Consent Item: February 2, 2010 TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: CITY MANAGER SUBJECT: MID YEAR BUDGET PROGRAM REVIEW RECOMMENDATION: 1. Receive, review, and file the quarterly budget review. 2. Approve the recommended changes in the Capital Improvement Program. 3. Approve the appropriation budget amendments described in the Background/Analysis and Fiscal Impact sections of this report. BACKGROUND/ANALYSIS: As part of the annual budget process, a quarterly review is performed to provide a status of the current financials. This is the mid year budget review for the fiscal year 2009-10. The Economy: Economists and market analysts believe that the nation is slowly emerging from the recession. Nationally the data is mixed as consumer spending declined with the end of the "Cash for Clunkers" program and new home sales declined in the last quarter of 2009. Conversely, inflation is expected to stay under control with the Gross Domestic Products continued growth expectation of 3% as well as the reduction in first time unemployment claims. The Federal Reserve appears to be happy with the rate of inflation and it is not expected to increase the prime interest rate of 3.25% over the next few months. California is believed to be one of the hardest hit states. It's housing market experienced a 56% drop in value but is slowly starting to reduce existing home inventories and new residential construction is believed to be set to resume during 2010, California lost more that one million jobs due to the recession which is nearly 14% of the national total. It is believed that unemployment will peak in California at around 13% in mid-2010. However, those that have held their jobs are now starting to see a rise in the earnings growth rate of approximately 5% which is the highest growth rate in a decade. The States fiscal challenges are projected to continue into this year and in FY 2010-11 g7 AGENDA DATE: JANUARY 26, 2010 SUBJECT: MID-YEAR BUDGET PROGRAM REVIEW PAGE TWO The Inland Empire continues to experience the economic pain of a slow recovery. The housing market will continue to have an impact on the pace of the recovery. The average prices of homes in the region appear to be leveling off. However, the continuing influx of home foreclosures coupled with the uncertainty of the fluctuating unemployment rate supports many analysts' reserved optimism in a slow and very fragile recovery. Through the first quarter of FY2009, the City of Chino Hills is ranked third in San Bernardino with regard to median existing home prices and median new home process. In addition — of the 42 out of 48 Inland Empire cities with populations over 20,000, the City of Chino Hills is ranked second behind only the City of Indian Wells with the highest median income. The economic recovery is fragile but is expected to continue to improve throughout 2010 and in 2011. Companies will be content with temporary hiring until confidence in the recovery is substantiated with renewed consumer and business demands. The current reduced housing prices and unemployment will likely keep consumers on a frugal spending path while they pay off debt and try to increase their savings. The State's budget constraints and the potential of higher state and local taxes could also have a continued impact on the local economy. Staff will continue to monitor the situation for indicators that will have a local impact. General Fund Revenues: Property Taxes: As of December 17, 2009, a total of $773,484 was received. The budget for FY09/10 anticipated a decline in development and property turn over. The current budget for property tax was built with a 5% decrease over the prior year budget. Since the City only has partial information on the first installment and no information on the impact of delinquent payments, it is recommended that property tax revenues not be adjusted until more information is available. Staff will continue to monitor for any changes due to the economy. Sales Tax: The September 2009 quarter allocations released were $1,428,363. Sales tax remittances are up 8% for year-to-date this year compared to prior year. The current budget for sales tax was built assuming a 9% decrease over prior year budget. Based on available information, it is anticipated the budgeted sales tax forecast will be on target. It is recommended that sales tax revenue not be adjusted. Staff will continue to monitor for any changes due to the economy. VLF for Property Tax Swap: It is recommended that the estimated revenue be decreased in the amount of $242,400 to account for the decrease in anticipated revenue based on updated information provided by the San Bernardino County Auditor-Controller's Office, The fiscal year 2009/10 original budget amount of $6,394,800 will now reflect the revised estimated revenue of $6,152,400. As of December 2009, the City has received no VLF for Property Tax Swap revenue. The first payment is expected in February 2010. AGENDA DATE: JANUARY 26, 2010 SUBJECT: MID YEAR BUDGET PROGRAM REVIEW PAGE THREE Building Permits: It is recommended that building permit revenue not be adjusted. As of December 31, 2009, the City has received $175,191 or 44% of the estimated revenue of $400,000. Building Services revenues are down primarily due to downturn in the local economy. It is not expected these revenues will return until new construction activity increases. Community Development User Fees: It is recommended that the Community Development User Fee Recovery Revenues not be adjusted at this time. As of December 31, 2009, a total of $109,921 was received or 58% of the estimated revenue budget of $189,800. Revenues to date appear to be on target. Building and Development Services that are reimbursed from trust deposits in general are down primarily due to downturn in the local economy. Engineering User Fees: It is recommended that the Engineering User Fee Recovery Revenues not be adjusted at this time. As of December 31, 2009, a total of $459,135 was received or 46% of the estimated revenue budget of $988,700. Revenues to date appear to be on target. Engineering revenues that are reimbursed from trust deposits are down primarily due to the downturn in the local economy. Interest Income: It is recommended that the interest income revenue be reduced by $422,300 for a total of a 20% reduction of interest income revenue over all funds. General Fund impact of the interest income reduction is $96,700. The FY2009-10 budget was based on a projected interest rate of 1.7%. The first six months of the fiscal year is projected to average a return of 1.4% and the last six months a return of 1.3%. Savings in Public Safety: With the exception of approximately $50,000, the decline in General Fund Revenue is offset by savings incurred in Public Safety. Staff will continue to monitor the situation and report to the Council any changes due to economic fluctuations. Gas Tax Revenue: It is recommended that Gas Tax Revenue not be adjusted. As of December 31, 2009, a total of $338,137 was received, or 24% of the estimated revenue budget of $1 ,401,100. The State is delaying payment of Gas Tax Revenues to cities. Based on lack of information on Gas Tax Revenue it is recommended that revenues not be adjusted. AGENDA DATE: JANUARY 26, 2010 SUBJECT: MID YEAR BUDGET PROGRAM REVIEW PAGE FOUR Measure I Revenues: It is recommended that Measure I Revenue be adjusted downward by $1,160,000. The adjustment will bring the FY09/10 estimated revenue to $987,600, the same amount received in prior fiscal year. As of December 31, 2009, a total of $286,268 was received, or 13% of the estimated revenue budget of $2,147,600. The Measure I revenue is derived from the sales tax in the County and then allocated to the cities based on population. The population for Chino Hills, in terms of --relation to all other cities in the County, appears stable. It is anticipated that sales tax collections for the County will continue to be on the decline or flat until the economy turns around. Expenditure Budaet Amendments: City Manager To ratify the action taken by the City Council during closed session held on November 24, 2009, an increase in budget appropriations is recommended in the amount of $150,000 from the Unreserved General Fund Balance to cover expenditures related to the Tehachapi Renewable Transmission Project. Additionally, at their Closed Session meeting held on December 8, 2009, the City Council authorized an appropriation of $40,000 to cover expenditures related to appealing the decision of the California Public Utilities Commission relating to the Tehachapi Renewable Transmission project. Engineering It is recommended that additional budget be appropriated from the Water Facilities Fee Unreserved Fund Balance in the amount of $25,000. In order to be in compliance with the State water regulations, the City needs to update, adopt and file an Urban Water Management Plan (UWMP) with the State Department of Water Resources in 2010. The cost to prepare the UWMP is estimated to be $25,000. The professional services cost was not included in the FY 2009/10 budget. CAPITAL IMPROVEMENT PROGRAM: The City currently has 48 projects designated in the Capital Improvement Program. As of December 31, 2009, there are 9 projects completed and 39 projects either in the design process or under construction. The completed projects are listed as follows: City Yard Building Painting Community Park Restroom Retrofit Emergency Generator Switch Ilex St. Water Pipeline Upgrade AGENDA DATE: JANUARY 26, 2010 SUBJECT: MID YEAR BUDGET PROGRAM REVIEW PAGE FIVE Library Enhancements Plant, Restoration, Irrigation & Upgrade FY 08/09 Rolling Ridge Phase II Pavement Rehabilitation Street Tree Improvement FY 08/09 Traffic Signal Controller Replacement Community Services: McCoy Enhancement Project — Project No, F10002: Appropriation: Increase by $820,400 General Fund Revenue Estimate: Increase by $1,000,000 General Fund Funding source: Mc Coy Trust Reason: To appropriate the remaining estimated cost and revenue associated with the McCoy enhancement project. On October 13, 2009, the City Council approved the McCoy Enhancement Project and accepted a donation from the McCoy Trust in the amount of $1,000,000. A budget adjustment was not requested at that time. On November 24, 2009, the Council approved an agreement with RJM Design Group, Inc. and a budget appropriation request in the amount of $179,600. It is being requested the remaining $820,400 in estimated costs be appropriated. REVIEW BY OTHERS: This agenda item has been reviewed by the City Engineer and the Community Development Director. FISCAL IMPACT: The recommended modifications to the budget will decrease the General Fund balance by $349,500. The following table indicates the financial impact to the fund reserves as a result of the recommended modifications: AGENDA DATE: JANUARY 26, 2010 SUBJECT: MID YEAR BUDGET PROGRAM REVIEW PAGE SIX Net Increase/(Decrease) General Fund (349,500) Water Facilities Fee Fund (25,000) Assessment District Funds (17,500) Community Facilities District Funds (78,600) Measure I Funds (1,160,000) Development Fees Funds (73,600) Water Utility Fund (47,800) Sewer Utility Fund (59,900) Landscape and Lighting District Funds (22,700) Other Funds (25,500) TOTAL $ (1,860,100) Respectfully submitted, Recommended by: J/ 4J jc Michael . Fleager,tity/lanage J ,y,'. "ncaster, Finance Director MF:JRL:BJS:dk