HomeMy WebLinkAbout22 - Increase Revenue from Sale of OilCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 22
June 12, 2007
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Utilities
George Murdoch, Acting Utilities Director
949 - 718 -3400 or gmurdoch @city.newport - beach.ca.us
SUBJECT: BUDGET AMENDMENT TO INCREASE REVENUE FROM SALE OF
OIL AND APPROPRIATE ADDITIONAL FUNDS TO PAY OIL
ROYALITES AND REPAIRS TO WELLS
RECOMMENDATION:
Approve a Budget Amendment to increase revenue estimates by $406,000 in Account
2370 -5620, Tidelands Royalty — Petroleum, and increase maintenance and operation
expenditure estimates by $105,500 in Division 5400, Utilities Oil & Gas.
BACKGROUND:
The City through Surface and Subsurface Easement Agreements pays royalties to three
companies and approximately 200 residential parcels for the value of the oil and gas
that is sold from the City's Oil Fields.
DISCUSSION:
In the last several years the price per barrel has increased from $30.43 per barrel in
December 2004 to as high as $63.91 per barrel in July 2006. As the price of oil
increases so does the amount of royalty the City pays for surface and subsurface
easements, as the royalties are based on the amount of oil and gas sold. The account
that the royalties are paid from was not adjusted in FY 06107 and therefore, there is
inadequate funds to pay the royalties due. In addition, several of the wells have
needed substantial repairs to keep them running, which has resulted in exceeding the
funding originally estimated for maintenance and repairs.
Since the revenue from the sale of oil has increased 40.6% over what was estimated for
FY06 /07, there are adequate funds for this amendment. Staff is requesting approval of
a budget amendment to appropriate the funds to the Maintenance & Operations
expenditure accounts as follows:
Budget Amendment to Pay Oil Royalties
In Oil & Gas Division
June 12, 2007
Page 2
1. 5400 -8160 Maintenance and Repair - $16,000
2. 5400 -8250 Special Dept Expense - $89,500
Environmental Review:
This action requires no environmental review.
Funding Availability:
Increased revenue on oil sales is up 40.6% or $406,000 through April 2007 over what
was projected in FY06 /07. This will more than cover the $105,500 requested to pay oil
royalties.
Prepared by: Submitted by:
Cindy Ashe eor Mur och
Administrative Manager Acting Utilities Director
Attachment: Budget Amendment 2007-
City of Newport Beach NO. BA- 07BA -077
BUDGET AMENDMENT
2006 -07 AMOUNT: $406,000.00
EFFECT ON BUDGETARY FUND BALANCE:
X Increase Revenue Estimates X Increase in Budgetary Fund Balance
X Increase Expenditure Appropriations AND Decrease in Budgetary Fund Balance
Transfer Budget Appropriations No effect on Budgetary Fund Balance
SOURCE:
from existing budget appropriations
X from additional estimated revenues
from unappropriated fund balance
EXPLANATION:
This budget amendment is requested to provide for the following:
To increase revenue estimates and expenditure appropriations to reflect increases in the price per barrel of oil sold and
the resulting increases in oil royalty payments. Additional funds to pay for repairs to wells.
ACCOUNTING ENTRY:
BUDGETARY FUND BALANCE Amount
Fund Account Description Debit Credit
230 3605 Tidelands - Fund Balance $300,500
REVENUE ESTIMATES (3601)
Fund /Division Account Description
2370 5620 Tidelands - Sale of Oil $406,000.00
EXPENDITURE APPROPRIATIONS (3603)
Description
Division Number 5400 Utilities - Oil & Gas
Account Number 8160 Maintenance & Repair $16,000.00
Account Number 8250 Special Department Expense $89,500.00
Division Number
Account Number
Division Number
Account Number
Division Number
Account Number
Division Number
Account Number
` Automatic System Entry.
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Signed:
Finanbial Approval: Administrative S ices Director Date
Signed:
Administrative ApprovaK City Manager ate
Signed:
City Council Approval: City Clerk Date