November 11, 2003
SUBJECT: FY 2002/2003 PROJECT CARRYOVER REPORT AND BUDGET MODIFICATION NO. 12
REPORT IN BRIEF
Each year, as a part of the year-end closing process, it is necessary to adjust appropriations for projects and equipment. The FY 2002/2003 appropriations have lapsed at year-end and therefore need to be re-appropriated for the current fiscal year. Attachment A contains the proposed schedule of project, equipment and operating carryovers from FY 2002/2003 to FY 2003/2004 for all funds. Attachment B contains the proposed schedule of transfer carryovers for projects by fund, and a transfer matrix that shows the source and use of funds. Attachment C contains the proposed schedule of revenue carryovers for projects by fund. Staff recommends approval of Budget Modification No. 12 appropriating funds outlined in this report and detailed in Attachments A, B, and C. Funds not carried over will be returned to their respective fund balances.
BACKGROUND
The FY 2002/2003 project and equipment appropriations have lapsed at year-end and projects that are in progress with unspent funds need to be re-appropriated for the current fiscal year. This year, staff has included project transfer carryovers in Attachment B. The transfers are set up on a budgetary basis in the year the project is established while the actual fund transfers take place only when expenditures are incurred. Hence the transfers that were budgeted in FY 2002/2003 for projects that have yet to be completed need to be re-appropriated for the current fiscal year.
The year-end report based on the audited Comprehensive Annual Financial Report (CAFR) will be submitted to Council separately to present the final year-end results for all funds, taking into account revenues and operating expenditures as well as the project expenditures detailed here.
EXISTING POLICY
The following documents contain policy direction on this issue:
Planning and Management Element 7.1B: Maintain sound financial practices, which meet all applicable standards and direct the City’s financial resources toward meeting the City’s long term goals.
Fiscal Administration Article XIII, Section 1305 City Charter: From the effective date of the budget, the several amounts stated therein as proposed expenditures shall be and become appropriated to the several departments, offices, and agencies for the respective objects and purposes therein named. All appropriations shall lapse at the end of the fiscal year to the extent that they shall not have been expended or lawfully expended. At any meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative votes of at least four members so as to authorize the transfer of unused balances appropriated for one purpose, or to appropriate available revenue not included in the budget.
DISCUSSION
Project Carryovers to FY 2003/2004
To address the current budget crisis, City Council adopted a budget for FY 2003/2004 that included revisions to the FY 2002/2003 project budget and the FY 2003/2004 10-Year Capital Projects Plan. A total of 66 projects were defunded or appropriated with reduced funding. Associated operating expenses were reduced by $154,000. Together, this closed $1.8 million of the gap in the General Fund on an annualized basis.
As staff reviewed the expenditures and revenues associated with the City’s projects and equipment accounts for FY 2002/2003, the defunded and reduced projects were reconciled to the revisions contained in the FY 2003/2004 Adopted Budget. Attachment A of this report details the original budget, revised budget, and carryover amount for all projects.
Funds returning to fund balance were identified as either budgeted or additional savings. Based upon the carryover schedule, the total FY 2002/2003 funds to be returned to the General Fund are $3,526,722 from the General Fund and all related funds. This total includes $3,276,107 of savings that were anticipated in the FY 2003/2004 Adopted Budget and an additional one time savings of $250,615. The General Fund savings details are highlighted in Table 1 on the following page.
Table 1. FY 2002/2003 Carryover Impact on General Fund (pdf format)
Projects funded by transfers and external revenue sources require carryover of budgeted transfers and revenues. In some cases, the transfer budget was set up in FY 2001/2002. However, because actual expenditures and transfers did not take place in FY 2001/2002, the transfer was deferred to FY 2002/2003.
The details of the transfer budget, actual transfers, and carryover amount for all projects are included in Attachment B. A transfer matrix which outlines the source (transfer from) and use (transfer to) of funds is also included in Attachment B. The impact of anticipated versus received revenues is detailed in Attachment C.
Operating Carryovers to FY 2003/2004
Attachment A includes operating program carryovers for the General Fund, Housing Fund, and Community Development Block Grant Fund (CDBG). In the General Fund, the Transportation Operations and Roadside and Median Right-of-Way programs require operating carryovers of $26,210 for contracted tree pruning services and $66,484 for traffic calming equipment purchases that were incurred in FY 2002/2003 but not invoiced until after July 1, 2003. The State of the City operating carryover of $37,833 is for a special City event which is currently scheduled to take place on Nov. 17, 2003. Mayor Miller obtained Council consensus for the State of the City operating carryover at the April 8, 2003 Council Meeting.
The operating carryovers of $29,495 in the Housing Fund and $50,349 in the CDBG Fund are for HOME and CDBG grant funds appropriated by Housing and Urban Development (HUD) for program administration but not fully expended in FY 2002/2003. HUD allows such funds to be carried over into the current fiscal year for HUD eligible activities. Staff recommends the carryover of these funds and reappropriation into the following projects outlined in Table 2 below to best track grant expenditures from different allocation years:
|
Table 2. HOME and CDBG Carryover Reappropriation |
|
|
FY 2002/2003 Carryover |
|
Increase
(Decrease) |
|
Revised Budget |
|
Housing Fund / HOME Grant Sub-Fund |
|
Expenditures: |
|
|
|
Program 230 Housing and Human Services |
$29,495 |
|
($29,495) |
|
$0 |
|
|
|
|
|
|
|
|
823770 - HOME Projects |
$1,121,191 |
|
$29,495 |
|
$1,150,686 |
|
|
|
|
|
CDBG Fund / General Sub-Fund |
|
|
|
Expenditures: |
|
|
|
Program 230 Housing and Human Services |
$50,349 |
|
($50,349) |
|
$0 |
|
|
|
|
|
|
|
|
New Project – CDBG Admin. |
$0 |
|
$50,349 |
|
$50,349 |
FISCAL IMPACT
Budget modification No. 12 appropriates unspent funds to the projects, equipment and operating accounts as detailed in this report and Attachments A, B and C. Attachment A contains the proposed schedule of project, equipment and operating carryovers from FY 2002/2003 to FY 2003/2004 for all funds. Attachment B contains the proposed schedule of transfer carryovers for projects by fund, and a transfer matrix that shows the source and use of funds. Attachment C contains the proposed schedule of revenue carryovers for projects by fund.
Based upon this carryover schedule, the total FY 2002/2003 funds to be returned to the General Fund are $3,526,722 from the General Fund and all related funds. This total includes $3,276,107 of savings that were anticipated in the FY 2003/2004 Adopted Budget. An additional one time savings of $250,615 occurred because some projects have either completed under budget, ahead of schedule, or received higher than anticipated revenues. These funds will be available for future capital projects or other items in need of additional funding.
The City’s Utility Funds will receive a modest amount of unspent project funds as a result of this carryover process which will be returned to the fund balances of each fund.
In the General Services Fund, a total of $577,296 will be returned to fund balance due to modifications in the City's equipment schedules. This anticipated savings is associated with the adjustments and reductions in planned equipment purchases in conjunction with the City’s implementation of service level reductions. Because this was budgeted into the FY 2003/2004 Adopted Budget to help close the budget gap, these funds are not available for other purposes.
PUBLIC CONTACT
Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.
ALTERNATIVES
1. City Council approves Budget Modification No. 12 as follows:
A. Approve the carryovers as shown in Attachments A, B and C from FY 2002/2003 to FY 2003/2004.
B. Approve the HOME and CDBG reallocations as shown in Table 2 of this report.
2. Approve Alternative 1 with any Council-initiated changes.
3. Do not approve Budget Modification No. 12.
RECOMMENDATION
It is recommended that Council approve Alternative 1 and Budget Modification No. 12.
Prepared by:
Charlene Sun
Budget Analyst
Reviewed by:
Grace Kim
Budget Manager
Reviewed by: