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Home My WebLink AboutS12 - Newport Coast Annexation BudgetITEM 512 TO: Members of the Newport Beach City Council FROM: Homer L. Bludau, City Manager SUBJECT: Newport Coast Annexation Budget RECOMMENDED Adopt a pre - annexation budget for the Newport Coast. ACTION: BACKGROUND: The Newport Coast is a 7,799 -acre region within Newport Beach's sphere of influence that lies immediately southeast of the city's limits at Corona del Mar, Harbor Ridge, and Bonita Canyon. When ultimately developed, it will contain up to 5,150 residential dwelling units, 2,150 resort accommodations, two retail commercial centers, and extensive open space dedicated for public use. The City Council directed staff to file an application to annex the Newport Coast in September, 2000. The City filed in March 2001. The Orange County Local Agency Formation Commission (LAFCO) approved the City's application (CA #01 -06) on September 12, 2001, and set a protest period of October 15 through November 16, 2001 for the approximately 3,400 registered voters in the Newport Coast to protest the City's application. We believe that the protest period ended without enough protest to cause an election. The City must amend its FY 2001 -02 Budget to include expenses for the Newport Coast services. This Item asks the Council to approve the budget amendment for Newport Coast services. ATTACHMENT: Budget Amendment for Annexation Memorandum CITY OF NEWPORT BEACH Office of the City Manager November 16, 2001 TO: HONORABLE MAYOR AND MEMBERS OF T OUNCIL FROM: HOMER BLUDAU, CITY MANAGER SUBJECT: BUDGET AMENDMENT FOR ANNEXATION RECOMMENDATION Approve the attached Budget Amendment accepting increased revenue projections by $18,579,720 and authorizing additional expenditures of $5,274,294 for the current fiscal year. All of these increases are directly connected with the City's annexation of Newport Coast. The proposed amendment is necessary to provide the resources necessary to provide services to the annexation area. If the annexation does not occur in early January, 2002 as scheduled, for whatever reason, a supplemental Budget Amendment will be prepared eliminating or otherwise modifying the figures contained herein, as appropriate. INFORMATION Because of the timing of the large initial payment expected from IRWD ($15 million), total projected revenues for the remainder of this year exceed proposed additional expenditures several times over. However, since the principal amount of this payment is committed to a fifteen -year program, it is unrealistic to consider it, or the first in the series of expenditures from it (appx. $1,236,000), in evaluating the real impact of the proposed budget amendment on our current year finances. As proposed (after deleting those items and adjusting for internal transfers), the projected net impact on the current year budget is a negative $260,085, including one -time costs. After our earlier projections regarding the short-term impact, I was pleased that we were able to keep the shortfall at this level the first year. We still expect a net positive fund balance impact to result from annexation related revenues and expenditures by FY 2003 -04 at the latest. Due to deadlines for grant funding, as well as the requirement to begin the process of adding public safety staff well ahead of the time they are actually needed, some expenditures related to the annexation area have already been approved by the City Council. Those have been included in the existing budget and they are not re- identified here. Some of the expenditures, such as the $129,000 for equipment procurement, are of a one -time (or infrequent) nature, but most of the additional funding will be needed on an annually recurring basis. Further, because our budgetary process emphasized the timing of additional costs, as explained below, I expect there to be increased operational funding requirements over the next couple of years. BACKGROUND The proposed annexation has been the subject of a great deal of staff work —and City Council attention —for an extended period. At this writing, it appears that the annexation will actually take place January 1, 2002. At that time, we expect to begin providing municipal services to the annexation area. With that in mind, staff has prepared budget submittal information and I have reviewed it in detail. Because of the magnitude of the project, the effort was almost as extensive as the annual budget process itself. My guidance to the Department Directors in preparing their submittals was that we would provide the same level of municipal services to the annexed area as to the rest of our City. On the other hand, this was not to be taken as an opportunity for their Departments to "get well" from an overall budget standpoint, and my detailed review of their proposed expenditures was conducted with those factors in mind. Wherever a reasonable level of uncertainty regarding additional expenditures remained, we opted to go with the lower number or leave it out altogether for this first go around. Since this amendment addresses only additional revenues and expenditures for the first six -month period, actual timing of the additional requirements was also a consideration. For example, you will notice that there are no additional general administrative expenditures proposed. We expect that there will eventually be at least some level of additional requirements in areas such as billing and cashiering, legal services, payables, and revenue administration, but we have not proposed any additional expenditures in those categories at this time. Approximately 90.9% of proposed additional expenditures are for Police, Fire, and General Services. The remainder is for Community Development, Community Services, and Public Works. Salary and Benefits comprise 54.11% of the new expenditures. Maintenance and Operations are 27.04 %, and Capital Expenditures (equipment and improvement projects) are 18.84 %. The specific dollar amounts for Salary and Benefits, Maintenance and Operations, and Capital Expenditures for each Department are shown in the table below. In addition, attached to the Budget Amendment itself is an account by account listing of the details of the proposed additional appropriation. It is presented in the same format as the table in the front of the Resource Allocation Plan, which is submitted to the City Council each year as part of the annual budget process. On the Revenue side, the detailed information contained in the attached Budget Amendment, and summarized in the table below, reflects our best projection of additional revenues that will be realized during the remainder of this fiscal year. This is a significant adjustment, as these are volatile times. Our degree of confidence in the precision of some of the numbers is higher than it is for others, but overall I believe we will be at least as close as we normally are for an annual budget. The specific breakdown of revenues by source is shown in the attachment. REVENUE SUMMARY General Fund $ 3,457,020 Newport Coast Annexation (IRWD) 15,036,000 Gas Tax 86,700 Total $ 18,579,720 EXPENDITURE SUMMARY Departments General Government C it), Council City Clerk City Manager C it), Attorney Human Resources Administrative Services Public Safety Police Fire Community Development Planning Building Newport Coast Acquisition Account Community Services Public Works General Services Public Works Utilities Internal Service Funds Insurance Reserve Equipment Maintenance Equipment Replacement CONCLUSION Capital Salary & Maintenance Capital Improvement Benefits Operation Outlay Projects Total - 158,747 158,747 1,250 3,500 - 4,750 - - 129,000 - 129,000 $ 2,185,304 $ 2,328,052 $ 450,938 $ 310.000 $ 5,274,294 As a result of what staff has done so far, I believe the attached proposal will cover the City's essential expenditures for the remainder of this fiscal year. However, it is appropriately lean and directed solely at annexation related services. At the City Council Meeting in which this amendment is agendized, I plan to have the Department Heads available for brief presentations if desired, and to answer any questions you may have regarding specific services being provided. Although staffing was discussed when the annual budget was adopted, and on other occasions, a comprehensive list of additional staffing for the annexation, whether funded within the existing budget or added by this amendment, will also be provided at the meeting. 1,339,884 168,766 50,488 - 1,559,138 659,404 144,198 256,850 250,000 1,310,452 10,668 - - - 10,668 32,305 4,140 4,000 40,445 - 1,236,000 - 1,236,000 4,079 55,916 - - 59,995 137,714 459,325 10,600 60,000 667,639 - 45,660 - - 45,660 51,800 51,800 - 158,747 158,747 1,250 3,500 - 4,750 - - 129,000 - 129,000 $ 2,185,304 $ 2,328,052 $ 450,938 $ 310.000 $ 5,274,294 As a result of what staff has done so far, I believe the attached proposal will cover the City's essential expenditures for the remainder of this fiscal year. However, it is appropriately lean and directed solely at annexation related services. At the City Council Meeting in which this amendment is agendized, I plan to have the Department Heads available for brief presentations if desired, and to answer any questions you may have regarding specific services being provided. Although staffing was discussed when the annual budget was adopted, and on other occasions, a comprehensive list of additional staffing for the annexation, whether funded within the existing budget or added by this amendment, will also be provided at the meeting. City of Newport Beach BUDGETAMENDMENT 2001 -02 EFFECT ON BUDGETARY FUND BALANCE: Increase Revenue Estimates X Increase Expenditure Appropriations Transfer Budget Appropriations SOURCE: from existing budget appropriations X from additional estimated revenues from unappropriated fund balance EXPLANATION: NO. BA- 023 AMOUNT: $s,z7a,zsa.00 Increase in Budgetary Fund Balance AND Decrease in Budgetary Fund Balance X e No effect on Budgetary Fund Balance This budget amendment is requested to provide for the following: To increase revenue estimates and expenditure appropriations related to annexation activities scheduled to occur in this fiscal vear. ACCOUNTING ENTRY: BUDGETARY FUND BALANCE Newport Coast Annexation Number Fund Account Description General & Gas Tax Funds 3605 Budgetary Fund Balance Newport Annexation 3605 Budgetary Fund Balance REVENUE ESTIMATES (3601) Fund /Division Account Description 010 Various General Fund 180 Various Gas Tax Fund 296 Various Newport Coast Annexation (IRWD) 600 Various Internal Service Funds EXPENDITURE APPROPRIATIONS (3603) Division Account Division Account Division Account Division Account Division Account Signed: Signed: Signed: Description Number General Fund - Various Number Various - See Attached Number Newport Coast Annexation Number Debt Service Number Internal Service Funds Number Various - See Attached Number Number Number Number Financial Approval: Administratiye�Services Director CifV Cnunnil Cnnmvel !`fhi Rluh Amount Debit Credit 260,085 $3.457,020 $86,700 $15,036,000 $234,489 13,800,000 $3,803,805 $1,236,000 $234,489 /,/ -ism O/ Date to n�fe CITY OF NEWPORT BEACH Fiscal Year 2001 -02 Budget Amendment for Annexation Revenues Fund Account Code Function /Activity Additional Amount 0610 40xx Property Tax from County 408,000 0610 40xx Property Tar from Fire Authority 1,400,000 0610 40xx Property Tax for Library 220,000 0610 4026 Property Transfer Tax 63,400 0610 4400 Sales and Use Tax 142,300 0640 4405 Transient Occupancy Tax 40,400 1820 4810 Police Officer Standards/Training 23,400 1820 4824 COPS 2000 Grant 150,000 1820 4825 COPS UHP 2001 Grant 170,000 1820 4825 COPS UHP 2002 Grant 110,000 1820 4811 Public Safety Augmentation 3,800 0640 4410 - Franchise Fees 83,300 0610 4800 Motor Vehicle License Fee 175,900 2340 5064 Paramedic Subscription Fee 10,800 2340 5065 Paramedic Service Fee 51,500 1820 5072 False Alarms 10,800 1820 5074 Alarm Application Fees 1,600 1820 5076 Alarm permit Renewal Fees 3,000 1820 5078 Alarm Monitoring Fees 5,400 0610 5400 Interest Income 383,420 Total General Fund $3,457,020 296 4858 IRWD Payment (Intergov. 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