October 26, 2004

SUBJECT: FY 2003/2004 PROJECT & EQUIPMENT CARRYOVER REPORT AND BUDGET MODIFICATION NO. 11

Each year, as a part of the year-end closing process, it is necessary to adjust appropriations for projects and equipment accounts. By Charter, the FY 2003/2004 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 and equipment carryovers from FY 2003/2004 to FY 2004/2005 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. Attachment D contains the proposed operating carryovers for select funds. Staff recommends approval of Budget Modification No. 11 appropriating funds outlined in this report and detailed in Attachments A, B, C and D. Funds not carried over will be returned to their respective fund balances.

Each year, as a part of the year-end closing process, it is necessary to adjust appropriations for projects and equipment. The FY 2003/2004 appropriations have lapsed at year-end and projects that are ongoing or works in progress need to be re-appropriated for the current fiscal year. This carryover report outlines all projects that require carryovers of project costs, transfers, and/or revenues from FY 2003/2004 to FY 2004/2005.

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.

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.

Project Carryovers to FY 2004/2005

Staff has reviewed the expenditures and revenues associated with the City’s projects and equipment accounts for FY 2003/2004. As is the normal process, staff conducted a detailed analysis of all projects and equipment accounts to review their status and identify any funds available to return to fund balance.

As outlined in Table 1 below, a total of $754,053 of unencumbered funds will be available to return to the City’s General Fund. This total represents the fact that projects have either been completed under budget, ahead of schedule, received higher than anticipated revenues, or are no longer needed. These funds will be returned to the General Fund 20-Year Resource Allocation Plan Reserve.

The details of the proposed project and equipment carryovers for all funds are included in Attachment A. The items that warrant further discussion are highlighted below:

• In the General Fund, the Human Services Outside Group Funding Support project (819720) has a budget to actual variance of $22,822 for FY 2003/2004. This amount was set aside as "outside group contingency" by Council action on October 14, 2003 (RTC 03-354). Staff does not recommend carrying over the FY 2003/2004 contingency because a contingency in the amount of $23,050 has already been appropriated for FY 2004/2005.

• In the Capital Projects Fund, the Measure B Pavement Management Program (PMP) Subfund is not included in Attachment A because no carryover is required. All Measure B projects have been completed and funds fully expended as of July 31, 2004, the grant expenditure deadline. Measure B PMP monies were funded by the County of Santa Clara's Measure B Transportation Improvement Program, a November 1996 voter-approved ½ cent general sales tax dollar increment. Measure B PMP funds are restricted to pavement maintenance use only. Since program initiation in FY 2000/2001, a total of $8,017,524 in Measure B funds have been expended on street pavement projects in the City of Sunnyvale.

• Starting in FY 2004/2005, the utilities projects that were previously accounted for in the Capital Projects and Infrastructure Funds have been transferred back into their respective Utility Enterprise Funds. As a result of this accounting change, new project numbers will be assigned to these projects and the carryovers will be reflected in the new projects and the new Funds.

• In the General Services Fund/Sewer Equipment Subfund, approximately $3.3 million will be unencumbered and returned to the Wastewater Fund. It has been determined that the planned annual equipment rental rates are sufficient to cover the ongoing replacement costs. Hence it is not necessary to carry over the unexpended balance from prior years. The unencumbered funds will be returned to the Wastewater Fund and be available for future capital or infrastructure projects or other items in need of additional financing.

• In the Infrastructure Fund/General Fund Assets Subfund, the Public Safety Buildings-Roofs project was funded for the replacement of the roofs per building assessments conducted in 1998. In FY 2003/2004, $75,572 was utilized to patch and repair the roof underlayment in various areas to provide a short term fix. This fix allows the full replacement to be postponed until FY 2008/2009 at an estimated cost of $500,000. Staff proposes to set aside $500,000 in a special reserve account in the Infrastructure Fund for appropriation in FY 2008/2009 to fund the Public Safety Buildings roofs replacement.

Operating Carryovers to FY 2004/2005

Attachment D includes operating program carryovers for the General Fund, Housing Fund, Community Development Block Grant Fund (CDBG), and Employee Benefits Fund. In the General Fund, the Roadside and Median Right-of-Way program requires operating carryovers of $32,000 for final payment of the tree stumping services contract. The State of the City operating carryover of $12,000 is needed to pay costs associated with the State of the City event. At Council’s direction on May 4, 2004 (RTC 04-139), the FY 2003/2004 State of the City event was held on July 4, 2004. The carryover of FY 2003/2004 funds is needed since the event took place in FY 2004/2005 and the budget appropriation had lapsed at the end of FY 2003/2004. Council previously approved the carryover of unexpended State of the City funds at the May 4, 2004 meeting.

The Economic Prosperity program has a carryover of $2,620 for final payment of the brochure printing project. This project is funded by a $5,000 PG&E grant that the City received in FY 2003/2004. It should be noted that this carryover is in addition to the $12,000 operating carryover identified in the report to Council on the Update of Economic Development Program and Approval of the Economic Development Goals and Strategies and Budget Modification No. 8, which Council approved at its September 28, 2004 meeting (RTC 04-343).

The City Council travel budget carryover is per Council action made at the June 1, 2004 Council meeting, which allows "any Council Member to roll over any unused portion of their travel budget to the following year, or allow any Council Member to allocate all or a portion of their travel allowance to another Council Member." (RTC 04-198). The General Fund will also carry over $176,086 in operating savings from the Legal Services program for potential additional expenditures in FY 2004/2005.

The carryovers of $24,970 in the Housing Fund and $35,000 in the CDBG Fund are grant funds appropriated by Housing and Urban Development (HUD) for program administration and consolidated plan update. HUD allows such funds to be carried over into the current fiscal year for HUD eligible activities.

The carryovers of $93,150 in the Employee Benefits Fund are for the extension of military reservist benefits that Council had previously approved at its May 4, 2004 meeting (RTC 04-155).

Budget modification No. 11 appropriates unspent funds to the projects, equipment and operating accounts as detailed in this report and Attachments A, B, C and D. Attachment A contains the proposed schedule of project and equipment carryovers from FY 2003/2004 to FY 2004/2005 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. Attachment D contains the proposed operating carryovers for select funds.

Based upon this carryover schedule, the total FY 2003/2004 funds to be returned to the General Fund are $754,053. These funds will be returned to the 20 Year Resource Allocation Plan Reserve.

The Gas Tax Fund will receive unencumbered funds in the amount of $9,407 which will be returned to fund balance.

The Utility Funds will receive a modest amount of unencumbered funds which will be returned to fund balance. The Water Management Fund will receive $80,742, the Solid Waste Management Fund will receive $14,158, and the Wastewater Management Fund will receive $17,430 in unencumbered funds.

In the General Services Fund, a total of $4,682,982 will be returned to fund balance due to modifications in the City's equipment schedules. $3,359,828 of this is in the sewer equipment account, which will be returned to the Wastewater Management fund balance. As discussed above, the planned annual sewer equipment rental rates are sufficient to cover the ongoing replacement costs. Therefore, the prior year unexpended balances are now available to return to the Wastewater fund balance. The remaining funds will remain in their respective subfunds within the General Services Fund and be reviewed as part of the rental rate development process.

Staff recommends approval of Budget Modification No. 11 appropriating funds outlined in this report and detailed in Attachments A, B, C and D. Funds not carried over will be returned to their respective fund balances.

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.

1. Approve Budget Modification No. 11 appropriating funds outlined in this report and detailed in Attachments A, B, C and D.

2. Approve Alternative 1 with any Council-initiated changes.

3. Do not approve Budget Modification No. 11.

It is recommended that Council approve Alternative 1 and Budget Modification No. 11.

Prepared by:

Charlene Sun, Budget Analyst

Reviewed by:

Mary Bradley
Director, Finance

Approved by:

Amy Chan
City Manager

1. Project and Equipment Appropriations by Fund (.pdf format)
2. Project Transfers by Fund (.pdf format)
3. Project Revenues by Fund (.pdf format)
4. Operating Program Carryover (.pdf format)