HomeMy WebLinkAbout17 - FY 2002-2003 Budget Preparation ParametersCITY OF NEWPORT BEACH
AGENDA ITEM NO. 17
TO: HONORABLE MAYOR AND MEMB THE CITY COUNCIL
FROM: Homer L. Bludau, City Manager / #>
DATE: February 12, 2002
SUBJECT: Council Review
Parameters from
(Information Only)
BACKGROUND:
of FY 2002 -2003 Budget Preparation
the City Manager to City Departments
Budget preparation for City departments normally begins in January of each
year. The process starts with the Administrative Services Department making
preliminary revenue estimates, then meeting with the City Manager for review.
Based on the anticipated revenue picture, budget parameters are issued to
departments, and budget preparations begin.
DISCUSSION:
Budget preparation parameters are based on estimated revenues, and for the upcoming
fiscal year, there are more unknowns in terms of revenue than in a long time. What will
the State budget do to us? Will the recent court decision affecting property tax "make-
ups" affect us? Will the local economy be stagnant, or rebound; if so, when? In dealing
with these questions, the following assumptions were made:
1. Reduce sales tax estimates from $20,497,000 to $19,419,842
2. Reduce TOT estimates from $8,425,000 to $7,840,000
3. Reduce our Vehicle License Fees we obtain from the State by $2.7 million
4. Fund airport expenses at $500,000
5. Fund the General Fund's CIP contribution at $4 million
City Hall • 3300 Newport Boulevard • Post Office Box 1768 • Newport Beach, California 92659 -1768
Council Review of FY 2002 -2003 Budget Preparation Parameters
Page 2
These assumptions translate into directions being given to departments to prepare a
status quo budget. Status quo means that all MOU, debt service, contract CIP and other
built -in requirements are met. After allowances have been made for these items,
department budgets are to be kept at current year amounts. Our preliminary estimates
show that given this budget direction, the budget will be out of balance $500,000. This
will be dealt with during budget reviews with the City Manager, and the proposed budget
given to the Council in May will be balanced. The closer we get to that date, the more
certain we should be of our revenue projections.
I am providing this information to the City Council so you will know in advance those
assumptions which are guiding budget preparation.
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SUBJECT:
BUDGET 101
ADMINISTRATIVE SERVICES DEPARTMENT
Accounting • Fiscal Services • MIS • Resource Management • Revenue
February 1, 2002
HOMER L. BLUDAU, CITY MANAGER
Dennis C. Danner, Administrative Services Director 0. 4&4
CITY COUNCIL NEWSLETTER
On Tuesday of this week we held our Fiscal Year 2002 -03 Budget Kickoff Meeting
for all department heads and interested staff members. This is the meeting where
we inform the departments of the fiscal outlook for the new year, provide budget
ceilings and guidelines, and distribute the budget instructions and worksheets. On
Wednesday, we conducted training on the new Pentamation budget module at the
Central Library.
Following is a summary of the information I distributed to each department on
Tuesday that I thought the City Council would find informative as we begin this
budget season. Because of the economy, the State budget crisis, and the potential
loss of VLF fees ($2.7 million) the theme of this budget is strictly status quo. I
would encourage the Council to give Dick or me a call if they have any questions
about this information.
BUDGET MEETING - JANUARY 29, 2002
Thanks to the State and the economic slowdown, this will be the tightest budget
year we have faced in several years. In addition, there are an unusually large
number of issues outside of our control that are still unresolved.
Following are the important facts and assumptions we used in putting together the
budget instructions for the 2002 -03 Fiscal Year Preliminary Budget. Preparing this
information took longer than usual due to the recent upgrade of our budgeting
software and the annualizing of the Newport Coast annexation budget amendment
adopted by the City Council in December.
Fiscal Year 2001 -02
• All additional expenditures approved since the original budget have been
factored in
• Sales Tax revenue estimate has been reduced by $1.0 million
• Transient Occupancy Tax revenue estimate has been reduced by $600,000
• Both of these reductions carry over to the new year revenue estimates
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February 1, 2002
Page 2
Fiscal Year 2002 -03
All of the following items have either been factored into the departmental ceilings or
funds have been set -aside in the fund balance estimates to account for them:
• All known and estimated MOU changes, including those for part time employees
• Overtime increases based on MOU changes
• Step increases for employees not on their top step
• The known PERS Safety rate change effective in July, 2002 and an estimate for
the benefit increase scheduled for December, 2002
• Payroll accrual
• Retiree Medical rate increase
• Postage increase
• Balboa Village Improvement Project
• Equipment Maintenance /Replacement rate increase
• Debt service payments
• Annexation charges for the full year
• Airport expenses funded at $500,000
• The CIP has been funded at $4.0 million
• Contract CPI increases
• All other ceiling adjustments requested by departments
The following items could not be included in the proposed budget because of
funding concerns:
• Proposed GL /WC /CA rate increases that would set aside funds totaling $650,000
• Assuming some action will be taken by the State that will reduce funding to
Cities, VLF Backfill, in the amount of $2.7 million, has been eliminated
• No "additional funds" were allocated to departments
With all of the above, the 2002 -03 Preliminary Budget is out of balance by
approximately $500,000. We thought it was prudent to eliminate the VLF backfill
from our revenue estimates pending further word from the State. We have not
factored in the potential $3.7 million refund nor the ongoing $1.7 million annual
property tax loss as a result of the Assessor's practice of recapturing assessments.
Typically, we like to begin the budget review with the departments and the City
Manager with funds available for unknown requests. We assume there will be
supplemental requests by departments but at this point there are no funds
available to fund these requests. Since we 'have already included all known
changes, departments should be able to at least maintain the status quo in all areas
while staying within their budget ceilings. At least at this point (unless we have
forgotten something major) we are not recommending any budget reductions.
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