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06-08-2010 CC Rpt A05 COUNCIL AGENDA STAFF REPORT CITY CLERK RECEIVE Meeting Date: Mav 25. 2010 =-, „ 2010 MY 18 AM 10: 27 „ � • ., Public Hearing: ❑ OFFICE OF CITY CLERK Discussion Item: ❑ CHINO FULLS mora; <Iipm,, Consent Item: rr� MAY 18, 2010 TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: CITY MANAGER SUBJECT: THIRD QUARTER 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 third-quarter budget review for the fiscal year 2009-10. Economic Update: Many economists believe that the recession is over but the nation will still face difficult times as the recovery process, from what experts believe to be the worst recession since the post World War II era, will be slow and arduous. Signs of recovery shows with the national unemployment rate, which fell from 10.1% in October 2009 to 9.7% during the first quarter of 2010 as well as the Federal Reserve continuing to hold the overnight federal funds rate at nearly zero (.17%) and 30-year home mortgage rates in April 2010 are holding at just over 5%. These indicators show positive movement in the manufacturing and retail industries and a reduction in the home foreclosure inventory. Locally the Inland Empire is benefiting from the positive progression in the manufacturing and the retail industries; however, one important economic indicator for our area not making improvements is the construction industry. Building permits have fallen in the Inland Empire by 82% during the past four years. This equates to an approximate drop of $10.3 billion dollars not entering the area's economy via the contractors. The lack of these monies in the Inland Empire has a ripple effect through the employees of the construction contractors, their suppliers, sub- contractors, escrow, finance and engineering groups as well. The Inland Empire's recovery will be aided by the projected increase in jobs of approximately 1% and the improvement in the retail and manufacturing sectors but will be slowed by the lack of funds reaching the construction industry and those associated with it. AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE TWO At the State level, legislation was passed and the Governor signed the delay of the gasoline tax revenue payments for FY09-10 and FY10-11 in order to manage the State cash flow concerns. The delay is not expected to impact local government budgets as the delayed payments will be received prior to the end of the fiscal year in which payments were delayed. Additionally, the Governor's current FY 2010-11 proposed budget is projecting a shortfall of approximately $20 billion. The Governor has stated that he is not looking to local government to cover the shortfall; however, staff will closely monitor the State budget process and report any changes that might impact us locally. General Fund Revenues: Property Taxes: The budget for FY 09/10 anticipated a decline in development and property turnover. The current budget for property tax was built with a 5% decrease over prior year budget. As of April 12, 2010, a total of $2,193,777 was received, or 58% of the total annual estimated revenue budget of $3,770,300. These receipts represent collections by the County through March 5, 2010, and only include partial collection of the property tax installment due to the County on April 10, 2010. Since the City has only partial information on the property tax payment for the first installment and we do not know the impact of delinquent payments, it is recommended that property tax revenues not be adjusted. Sales Tax: The current budget for sales tax was built assuming a 10% decrease over prior year budget. The sales tax remittances have increased by about 1% for year-to-date this fiscal year compared to the same period last fiscal year. 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 until more information is available. VLF for Property Tax Swap: As part of the State Budget Act of 2004, the legislature enacted the provision to swap vehicle license fee revenues for additional property tax revenues. The distribution to cities is made in two installments; January and May. The City has received $3,076,219 as of March 31, 2010, and is expecting the second payment of $3,076,219 in May 2010. It is recommended that the VLF for Property Tax Swap revenue not be adjusted because the revenue is expected to be realized at the budgeted amount of $6,152,400. VLF: As of April 6, 2010, a total of $86,404 was received, or 45% of the estimated revenue budget of $190,000. The last payment received was on March 11, 2010, for $11,023. The VLF revenue has been extremely volatile as a result of the economic downturn, and there is insufficient information to determine if an adjustment is warranted, therefore; it is recommended that the VLF revenue not be adjusted at this time. AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE THREE Transit Occupancy Tax: It is recommended that Transit Occupancy Tax revenue be decreased by $333,900. As of April 6, 2010, a total of $280,745 was received, or 37% of the estimated revenue budget of $761,100. The shortfall is attributed to Ayers overly optimistic expectation over revenue streams and construction delays on the Holiday Inn Express project resulting in zero revenue to date. Buildina Permits: As of April 6, 2010, the City has received $321,281 in flat fee and building permit revenue, or 80% of the estimated budget of$400,000. Building services revenues are down primarily due to downturn in the local economy. It is expected that these revenues will remain flat until new construction activity increases, therefore; it is recommended that Building Permit revenues not be adjusted. Community Development User Fees: As of April 6, 2010, the City has received $141,286, or 74% of the estimated budget of $189,800. Overall building and development services that are reimbursed from trust deposits are down primarily due to the downturn in the local economy. However, the revenues to date appear to be on target and it is recommended that the User Fee Recovery Revenues not be adjusted at this time. Enaineerina User Fees: As of April 6, 2010, the City has received $503,182, or 50% of the estimated budget of $988,700. Overall Engineering revenues that are reimbursed from trust deposits are down primarily due to the downturn in the local economy. The revenues to date appear to be slightly below target. However, it is recommended that the Engineering User Fee Revenues not be adjusted at this time. Big League Dreams Sports Park: It is recommended that the revenue from the sports park be decreased by $160,000. As of April 6, 2010, the City has received $64,854, or 10% of the estimated budget of $600,000. The decrease is attributed in the downturn in the economy. Gas Tax Revenues: As of April 6, 2010, the City has received $338,137, or 24% of the estimated budget of $1,401,100. The State is delaying payment of Gas Tax revenue to cities based on lack of information on Gas Tax revenues. The City received the catch-up payment in April 2010 for the period November 2009 through March 2010. It is recommended that the Gas Tax Revenues not be adjusted at this time. AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE FOUR Measure I Revenues: As of April 6, 2010, the City has received $524,587, or 24% of the estimated budget of $2,147,600. The current year's budget includes the additional Federal pass-through monies of $1,116,000. After elimination of the Federal funds, the amount received to date represents 50% of the budget for Measure I allocations. The Measure I revenue is derived from sales taxes in the County and then allocated to the cities based on population. The population for Chino Hills in relation to all other cities in the county appears stable. It is anticipated that the sales tax collections for the County will continue to be on the decline or flat until the economy turns around, therefore; it is recommended that the Measure I Revenues not be adjusted at this time. Justice Assistance Grant The City has been awarded and have received funds for an $11,100 ARRA Justice Assistant Grant to the Sheriff's Department to purchase surveillance equipment and to compensate for overtime to develop programs related to suppression and prevention of particular crime trends. It is recommended that the estimated grant revenues be increased by $11,100. San Bernardino Associated Governments (SANBAG) Miscellaneous Measure I Grant The City entered into a Project Advancement Agreement with SANBAG in 2006 for the Peyton Drive Widening Project # 800129 for a not-to-exceed reimbursement of $8,954,500 from the Measure 12010-2040 revenue. This funding source was not included in the project budget as the revenues from Measure 12010-2040 were not available until April 1, 2010. These are one time grant monies from SANBAG awarded outside the Measure I revenues the City receives on a monthly basis and will therefore be accounted for in the Miscellaneous Grant Fund. A transfer from the Miscellaneous Grant Fund will be made to reimburse the General Fund 2007 COP in the amount of $2,500,300 which has already been spent on the Peyton Drive Widening Project Phase I. The City is anticipating to start receiving reimbursement in FY10-11 with adjustments to be recommended accordingly. The remaining Measure I balance in the amount of $6,454,200 will be used for the Peyton Drive Widening Project Phase II and III. It is recommended that the estimated grant revenue be increased by $6,454,200. Federal Emergency Management The City has received funds for reimbursement of mutual aid costs from FEMA ($21,045) and from CaIEMA ($5,261) for services provided by the City of Chino police during the Freeway Complex fire. The City of Chino was not eligible to file for reimbursement directly so the City of Chino Hills filed on their behalf. In order for mutual aid to be reimbursable, the two cities had to enter into a Memorandum of Agreement (MOA) for the reimbursement of the mutual aid. On September 22, 2009, the City Council authorized the City Manager to enter into the MOA with the City of Chino. The agreement states that reimbursement for costs associated with the City of Chino law enforcement mutual aid during the Freeway Complex fire would be distributed to the City of Chino. If no reimbursement is received then no payment would be made and no amounts would be owed to the City of Chino for their services. The total cost of mutual aid police services provided by the City of Chino was $28,060.69. As of February 1, 2010, all of the AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE FIVE reimbursed monies ($26,306) were distributed to the City of Chino. It is recommended that the FEMA estimated revenues for project FIRE08 be increased by $26,400. Expenditure Budget Amendments: City Manager It is recommended that $11,100 be appropriated to Public Safety for the Sherriffs Department to purchase surveillance equipment ($8,000) that will provide additional evidence and aid in prosecutions, and to provide overtime compensation ($3,100) to execute specially developed programs for suppression and prevention of particular crime trends as they occur. There is no impact on the General Fund as the expenditures will be covered with the Justice Assistance Grant addressed in the revenue section above. Community Services It is recommended that $26,400 be appropriated to Community Services/Emergency Preparedness Division/Contractual Services to reimburse the City of Chino for FEMA and CaIEMA funds reimbursed to the City of Chino Hills for mutual aid given during the Freeway Complex fire. Expenditures will be covered with the reimbursed FEMA and CaIEMA monies received and addressed in the revenue section above. There is no impact on the General Fund. Public Works — Sanitation It is recommended that Public Works Sanitation budget for Regular Salaries be increased by $14,100. During the fiscal year, staff was promoted and various staff rotated between Water and Sewer utility functions. The resulting base pay and certification pay differences is the reason for the budget shortfall. Special Request It is recommended that the Sewer Fund loan the General Fund the amount of $1,517,300 to fund the repayment to the Existing Infrastructure Fee (EIF) Fund for monies used to pay the Lennar sales tax reimbursement agreement (A99-182) and that the funds be financed via an interest bearing loan. It has been determined that the Lennar sales tax agreement that had been paid from the EIF Fund is a General Fund obligation. Interest rate on the loan will be equal to the composite rate earned on the City's pooled investment fund. The inter-fund loan will be reimbursed when sufficient funds have been collected in the EIF Fund. CAPITAL IMPROVEMENT PROGRAM: The City currently has 49 projects designated in the Capital Improvement Program. As of March 31, 2010, there are 12 projects completed and 37 projects either in the design process or under construction. The completed projects are listed as follows: AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE SIX City Yard Building Painting Civic Center Reuse Project Community Park Restroom Retrofit Emergency Generator Switch Ilex St. Water Pipeline Upgrade Park Facilities Painting and Repairs FY 08/09 Park Improvement FY 08/09 Plant, Restoration, Irrigation & Upgrade FY 08/09 Rolling Ridge Phase II Pavement Rehabilitation Street Tree Improvement FY 08/09 Traffic Signal at Butterfield Ranch Road and State Drive Traffic Signal Controller Replacement Capital Proiect Budget Modification: Peyton Drive Widening — Project No. 800129 Appropriation: Increase by $9,254,500 Funding source: Miscellaneous Grants: $6,454,200 FHWA Grant: $2,500,300 Water Facilities Fee: $300,000 Reason: The City entered into a Project Advancement Agreement with San Bernardino Associated Governments (SANBAG) in 2006 for this project for a not-to-exceed reimbursement of$8,954,500 from the Measure 12010- 2040 revenue. This funding source was not included in the project budget as the revenues from Measure 12010-2040 were not available until April 1, 2010. SANBAG recently established a reimbursement process, so it is time to appropriate the Measure I funding into the project. These are one time grant monies from SANBAG awarded outside the Measure I revenues the City receives on a monthly basis and will therefore be accounted for in the Miscellaneous Grant Fund. A transfer from Miscellaneous Grant Fund will be made to reimburse the General Fund 2007 COP in the amount of $2,500,300 which has already been spent on Phase I, which the City is anticipating to start receiving reimbursement in FY10-11 with adjustments to be recommended accordingly upon receipt of funds from SANBAG. The remaining Measure I balance in the amount of $6,454,200 will be used for Phase II and III. The project also received a Federal Highway Administration (FHWA) grant in the amount of $4,754,800. Through previous budget adjustments, the FHWA grant was reduced to $2,254,500 and the remaining $2,500,300 was replaced by the same amount of 2007 COP as an interim financing mechanism due to the delay in availability of the FHWA funds. Since the 2007 COP in the amount of $2,500,300 will be reimbursed by SANBAG Measure I, the FHWA grant needs to be restored to its original level. AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE SEVEN Therefore, the budget appropriation needs to be increased by $2,500,300 for the FHWA grant. In addition, Water Facilities Fee funding in the amount of $300,000 is requested for the construction of recycled waterline in Peyton Drive. Los Serranos Infrastructure Phase II — Project No. 506002 Appropriation: Decrease General Fund by $116,200 Increase Measure I by $116,200 Reason: The project budget for Los Serranos Phase II included $116,200 in General Fund monies. Those funds may be substituted with Measure I monies from the FY 08-09 Street Improvement Project, which has project savings as a result of the use of Proposition 1B monies. Reclassify expenditures from General Fund to Measure I. FY 08-09 Street Improvement Program — Project No. 509003 Appropriation: Decrease by $116,200 Funding Source: Measure I Reason: It is recommended that project savings in the amount of$116,200 be transferred to Los Serranos Infrastructure Phase II — Project No.S06002 in lieu of using General Fund monies. Pine Avenue Extension — Project No. S08005 Appropriation: Decrease by $1,100 Funding source: Measure I Reason: This project has a small appropriation for staff time related to coordination with the City of Chino. All of the funds appropriated are not necessary at this time. Rolling Ridge Pavement Rehabilitation — Project No. 509011 Appropriation: Decrease by $6,500 Funding source: Proposition 1B Reason: It is recommended that project savings from Proposition 1B funds be transferred to FY 08-09 Street Improvement Program — Project No. S09003, which is also included in the state approved Proposition 1B spending plan. AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE EIGHT Traffic Signal at Butterfield Ranch Road — Project No. S09012 Appropriation: Decrease by $11,600 Funding source: Proposition 1B Reason: It is recommended that project savings from Proposition 1B funds be transferred to FY 08-09 Street Improvement Program — Project No. S09003, which is also included in the state approved Proposition 1B spending plan. FY 08-09 Street Improvement Program — Project No. S09003 Appropriation: Proposition 1B by $18,100 Decrease Measure I by $18,100 Reason: The City's Proposition 1B Spending Plan for FY 09/10 included the three subject projects. The first two projects were completed under budget, with some Proposition 1B money remaining. To maximize the use of the grant funds and still match the approved Proposition 1B spending plan, the balance of Proposition 1B funds from the first two projects needs to be transferred to remaining project, the Street Improvement Program — FY08/09. Proposition 1B project savings would replace the Measure I funding. After the budget transfer, expenditures in the amount of $18,100 also need to be re-classified from Measure Ito Proposition 1B accordingly. FY 09-10 Street Improvement Project— Project No. 510003 Appropriation: Decrease by $84,500 Funding source: Measure I Reason: Funding for this project needs to be reduced to reflect a potential decrease in projected Measure I Revenue. Government Center FFE — Project No. F09009 Appropriation: Decrease by $75,000 Funding source: General Fund (donation) Reason: The City received a donation in the amount of $75,000 from the Chino Hills Community Foundation for library enhancement. This donation has been deposited into the Government Center— FFE Project. In order to close out the Government Center— FFE project at the end of FY 09/10, the $75,000 donation needs to be transferred to Library Enhancement II (project No. F10004). AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE NINE Library Enhancement II — Project No. F10004 (New Project) Appropriation: Increase by $75,000 Funding source: General Fund (donation) Reason: A new project named "Library Enhancement II" needs to be added to the FY 09/10 CIP program, and the budget appropriation needs be to be increased by $75,000 to reflect the donation from the Chino Hills Community Foundation. City Entrance Monument Signs Phase II — Project No. F10001 Appropriation: Decrease by $152,000 Funding source: General Facilities Fee Fund Reason: The project budget appropriation needs to be reduced by $152,000 to reflect the funding limit for city entrance monument signs identified in the Keyser Marston Study. Supervisory Control and Data Acquisition System (SCADA) — Project No. 800162 Appropriation: Decrease by $477,200 Funding source: Decrease Water Facilities Fee Fund by $687,200 Increase Sewer Facilities Fee Fund by $210,000 Reason: The project budget appropriation needs to be reduced by a net of $477,200 due to a reduction in scope. The project is currently funded exclusively with Water Facilities Fee funds in the amount of $1,128,300. However, the project benefits both Water and Sewer Facilities. Therefore, the Water Facilities Fee appropriation needs to be reduced by $687,200 and the Sewer Facilities Fee needs to be increased by $210,000. Well 16 Connection Project— Project No. W08001 (name change to Well 16 ASR project) Reason: This project requires a name change to "Well 16 ASR Project" to reflect the changes of the project scope to include Aquifer Storage Recovery at Well 16. Well No.5 Water Softener— Project No. W09002 (name change to Well No. 5 Upgrade) Appropriation: Decrease by $292,100 Funding source: Water Utility Fund Reason: This project requires a name change to "Well No. 5 Upgrade" for clarification. The current project budget balance is $592,100, but the new cost estimate is only $300,000. Therefore, the project budget needs to be reduced by $292,100. AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE TEN High Zone Recycled Water System — Project No. W06001 Revenue: Decrease by $2,672,500 Appropriation: Decrease by $2,672,500 Funding source: Developer Contribution Reason: The project is partially funded by a developer's contribution which is based on 67% of the estimated construction cost. The developer's contribution amount needs to be recalculated based upon actual construction cost values and the credit for the public improvements that the developer put in the area. Since the City is still in the process of finalizing the developers' share, the developer's contribution need to be deleted from the funding source and the project will be funded solely by Water Facilities Fee Fund. However, the Water Facilities Fee Fund is anticipated to be reimbursed once the developer contribution is collected. Intermediate Zone Recycled Water Reservoir— Project No. W07002 Funding source: Decrease Grant Fund by $634,600 Increase Water Facilities Fee by $634,600 Reason: The City applied for grant funding through the State Water Resources Control Board. However, after more than a year of processing, the State converted the application to a low-cost loan which is not economically advantageous to the City. Therefore, the grant fund needs to be replaced by the Water Facilities Fee Fund. English Channel Improvement— Project No. 800360 Appropriation: Increase by $645,140 Funding source: Increase 2007 Certificates of Participation (COP) (General Fund) by $1,885,000 Decrease Grant Fund (SB Co. Flood Control District) by $1,236,200 Reason: Construction of English Channel is partially funded by the San Bernardino County Flood Control District (SBCFCD) in the amount of $2,185,000. Presently, $1,536,200 of these funds is appropriated in this fiscal year's CIP budget. Since only the first $300,000 of the $2,185,000 is immediately available for the City to withdraw upon, the total amount appropriated in the CIP budget needs to be reduced by $1,236,200 In addition, since the remaining SBCFCD grant amount of $1,885,000 is not available for the City to withdraw upon, it is recommended to appropriate $1,885,000 of the General Fund 2007 COP debt proceeds as an interim financing mechanism. It is anticipated that when SBCFCD appropriates the remaining grant funds the City will be able to submit for reimbursements and pay back the General Fund 2007 COP. AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE ELEVEN Springer Court Drainage Mitigation — Project No. D08005 Appropriation: Decrease by $22,000 Funding source: General Fund (Developer In Lieu Fee) Reason: The City withheld $22,000 in developer contribution for this project. The developer requested that the City refund such money and staff has determined that there is no nexus between the withheld money and the project. As a result, $22,000 was recently refunded to the developer and the project budget appropriation needs to be reduced accordingly. Demolition of Four Buildings at the Founders Recreation Site — Project No. F10003 Appropriation: Decrease by $46,000 (General Fund) Increase by $46,000 (Landscape and Lighting Admin Fund) Reason: It is recommended that appropriations of $46,000 be decreased in the General Fund and increased in the L&L District to cover the cost of the demolition of the Old Civic Center site that is now the Founders Recreation Center. On January 12, 2010, the City Council amended the Capital Improvement Program to include the Demolition of Four Buildings at the Founders Recreation Site project. On March 23, 2010, the City Council approved the appropriations transfer from several General Fund Projects to fund the demolition project. REVIEW BY OTHERS: This agenda item has been reviewed by the City Engineer, the Public Works Director, and the Community Services Director. FISCAL IMPACT: The recommended modifications to the budget will decrease the General Fund balance by $(2,194,700). The following table indicates the financial impact to the fund reserves as a result of the recommended modifications: AGENDA DATE: MAY 25, 2010 SUBJECT: THIRD QUARTER BUDGET PROGRAM REVIEW PAGE TWELVE Net Increase/(Decrease) General Fund $ (309,700) General Fund 2007 COP's (1,885,000) EIF Fund 1,517,300 General Facilities Fee Fund 152,000 Measure I Fund 103,700 Miscellaneous Grant Fund 1,870,800 Water Utility Fund 292,100 Sewer Utility Fund (1,531,400) Water Facility Fee Fund (247,400) Sewer Facility Fee Fund (210,000) Landscape & Lighting District Funds (46,000) TOTAL $ (293,600) Respectfull ubmitted, Recommended by: / Michael S. Fleagei ty Manager Jur N. L(caster, Finance Director MF:JRL:bjs:dk