HomeMy WebLinkAbout06 - General Fund Budget Surplus Utilization PolicyTO:
CITY OF
NEWPORT BEACH
City Council Staff Report
June 14, 2016
Agenda Item No. 6
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Dan Matusiewicz, Finance Director
dmatusiewicz(a�newportbeachca.gov
949-644-3126
PREPARED BY: Steve Montano, Deputy Finance Director
TITLE: General Fund Budget Surplus Utilization Policy
ABSTRACT:
Per the direction of the Finance Committee, staff developed a draft policy for the use of
surplus funds resulting from unrestricted General Fund annual revenues exceeding total
actual expenditures, encumbrances and commitments for that year. The policy was
recommended for City Council approval by the Finance Committee on April 28, 2016.
Roughly fifty percent of the budget surplus shall be used to address long-term
obligations such as pension liabilities, other post -employment benefits, bonded debt,
lease obligations and other long-term needs. The remaining surplus shall be used to
address infrastructure or neighborhood capital improvements, guided by a philosophy
that these expenditures improve the community's safety, aesthetics, transportation, or
quality of life.
RECOMMENDATION:
a) Determine that the action is exempt from the California Environmental Quality Act
(CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines
because it will not result in a physical change to the environment, directly or
indirectly; and
b) Adopt Resolution No. 2016-74, A Resolution of the City Council of the City of
Newport Beach, California, Establishing a General Fund Surplus Utilization Policy,
City Council Policy F-5.
FUNDING REQUIREMENTS:
There is no expenditure of funds related to this item.
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General Fund Budget Surplus Utilization Policy
June 14, 2016
Page 2
DISCUSSION:
Due to a variety of factors, such as economic expansion, frugal operations, or changes
to various projects and programs, the City may end the fiscal year with a surplus of
revenues over expenditures, encumbrances and commitments. Budget Surplus Funds
are those funds that result after closing the City's accounting records for the fiscal year.
This proposed policy shall designate surplus funds be used to fund City needs in the
manner described below, as approved by the City Council, at a public meeting.
One-time funds should be used for one-time expenditures; therefore, the City should not
use one-time and budget surplus funds in a way that creates new on-going expenditure
requirements unless it can be demonstrated that adequate resources exist to support
the on-going expenditure requirements.
Roughly fifty percent of the budget surplus shall be used to address long-term
obligations such as pension liabilities, other post -employment benefits, and bonded
debt, lease obligations and other long-term needs. Roughly fifty percent of the budget
surplus shall be used such to maintain a level of operations that reflects the
community's desire for an active, safe, and attractive community as well as investing in
the City's infrastructure.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A - Resolution
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ATTACHMENT A
RESOLUTION NO. 2016-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, ESTABLISHING A
GENERAL FUND SURPLUS UTILIZATION POLICY
WHEREAS, the City of Newport Beach ("City") may end the 2015-2016 fiscal
year and future fiscal years with a surplus of revenues over expenditures,
encumbrances and commitments due to a variety of factors, such as economic
expansion, frugal operations, or changes to various projects and programs;
WHEREAS, Budget Surplus Funds are those funds that result after closing the
City's accounting records for the fiscal year;
WHEREAS, the City desires to develop this policy to help guide the City Council
with the expenditure of Budget Surplus Funds; and
WHEREAS, from time to time, the City Manager shall recommend allocations to
the City Council on the use of Budget Surplus Funds consistent with the uses identified
in this policy.
NOW, THEREFORE, the City Council of the City of Newport Beach hereby
resolves as follows:
Section 1: City Council Policy F-5 General Fund Surplus Utilization, attached
hereto as Exhibit "A" and incorporated herein by reference is hereby approved and
adopted.
Section 2: All resolutions or parts thereof, in conflict with this resolution are
hereby repealed.
Section 3: The recitals provided above are true and correct and incorporated
into the operative part of this resolution.
Section 4: The City Council finds the adoption of this resolution is not subject to
the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the
activity will not result in a direct or reasonably foreseeable indirect physical change in
the environment) and 15060(c)(3) (the activity is not a project as defined in Section
15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3,
because it has no potential for resulting in physical change to the environment, directly
or indirectly.
Section 5: If any section, subsection, sentence, clause or phrase of this
resolution is, for any reason, held to be invalid or unconstitutional, such decision shall
not affect the validity or constitutionality of the remaining portions of this resolution. The
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City Council hereby declares that it would have passed this resolution, and each
section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any
one or more sections, subsections, sentences, clauses or phrases be declared invalid
or unconstitutional.
Section 6: This resolution and City Council Policy F-5 shall take effect
immediately upon its adoption by the City Council, and the City Clerk shall certify the
vote adopting the resolution.
ADOPTED this 14th day of June, 2016.
Diane B. Dixon,
Mayor
ATTEST:
Leilani I. Brown,
City Clerk
Attachment: Exhibit A - City Council Policy F-5
EXHIBIT A
GENERAL FUND SURPLUS UTILIZATION
I Its] ILOT90
F-5
To establish a City Council policy for the use of surplus funds resulting from
unrestricted General Fund annual revenues exceeding total actual expenditures,
encumbrances, and commitments for a given fiscal year.
BACKGROUND
Due to a variety of factors, such as economic expansion, frugal operations, or changes to
various projects and programs, the City of Newport Beach may end a fiscal year with a
surplus of revenues over expenditures, encumbrances and commitments. Budget
Surplus Funds are those surplus funds that result after closing the City's accounting
records for a fiscal year.
From time to time, the City Manager may recommend allocations to the City Council on
the use of Budget Surplus Funds consistent with the uses identified in this policy.
POLICY
A. One-time funds, such as grant proceeds, should be used for one-time expenditures;
therefore, the City Council should not use one-time and Budget Surplus Funds in a
way that creates new on-going expenditure requirements unless the City Council
can demonstrate that adequate resources exist to support the on-going expenditure
requirements.
B. After addressing approved budget amendments, reserve deficiencies and other
matters of fiscal concern, the City Manager or his/her designee may recommend
that Budget Surplus Funds be used to fund City needs in the manner described in
this policy, as approved by the City Council, at a public meeting.
C. Roughly fifty percent (50%) of the Budget Surplus Funds shall be used to address
long-term obligations such as pension liabilities, other post -employment benefits,
bonded debt, lease obligations and other long-term needs. Unlike ongoing needs
such as salaries, long-term needs do not require ongoing funding over an
indeterminable period of time.
D. Roughly fifty percent (50%) of the Budget Surplus Funds shall be used to address
infrastructure or neighborhood capital improvements, guided by a philosophy that
1
M
F-5
these expenditures should seek to improve the community's safety, aesthetics,
transportation, and/or quality of life.
Adopted - , 2016
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