the city finance committee meeting for october th we have one item on our agenda the fiscal year two thousand and seventeen preliminary year end results and is there anyone in the audience you'd like to speak to anything not on our agenda seeing no one will seventeen and with a focus on the reserves our reserves and where we had at june thirty two thousand and seventeen so i do want to just remind you of some of the revenue performances how they came in same with previously on two occasions got over those and a lot of detail also wasn't planning on going into too much detail but certainly i'm here and they're here to answer any questions if you want to get to that detail at council today what we're gonna is going to be the same report so this is an opportunity you want to kind of refresh yourselves on some what happened with some of those revenues or expenditures we're certainly welcome welcome to discuss those or happened to discuss those so then we'll get into the urine results kind of a summary and then the reserves and then a question we'll be asking council today it has to do with how we allocate the year in surplus and we'll get into that but it's really in relation to our policy that we've had that we establish a number of years ago several years ago but where we've changed that temporarily in light of the fact that at some point at one point we were not fulfilling our reserve requirements so we had given been given direction to allocate twenty five percent of their reserves to capital versus fifty percent but we'll see how that plays out so the revenue performance looking at just taxes as a category highlighting that the key ones property taxes came in over budget by seven hundred and seventy two thousand dollars in terms of how relates to the prior year it's about a seven percent increase from prior year so it's been very strong in the last few years as property values and assessed values have gone up but in relation to budgets seven hundred seven hundred seventy two thousand dollars and we expect that this year we're going to see something similar in terms of its performing its we're expecting anywhere from a five to six percent growth it you know on least on the security unsecured we don't know where supplemental taxes will come in and things like that but for the most part we can count on a pretty strong growth this year sales taxes is where we've seen  poor performance we essentially came in flat relative to last year and below budget by almost a million dollars so it's a you know we've been impacted certainly by what's going on on on the retail sector restaurants and this is the car sales are doing okay the restaurants  doing actually very well but the retail sector is just not performing as you know with the closure of macy's and all that stuff that's really impacting our sales tax numbers on the tlt side our transient occupancy taxes you can see we're about half million dollars below budget  in terms of growth from prior you or about a three percent growth most of that most of that sort of lackluster growth and and the various for the budget has to do with the fact that we forecast and anticipate some loss in  vacation rentals but they just we started seeing that more of a bigger loss than we anticipated so that's really what's driving that lack of growth and the numbers this year and then lastly business license taxes we're actually doing a little bit better than budget by one hundred and seventy three but over just those numbers alone account for about five hundred twenty thousand dollars shortfall in our budget to actual some other revenues just to point out because there are fairly significant engineer work orders these are the revenues that we generate in the engineering division within the general fund for work that they perform on capitol projects they charge their time out just like a consultant would do so and they they assumed and budgeted about five one million public works department you'll see a pretty large variance on the expenditure side because of those vacancies it's not a one to one sort of relationship meaning that for every dollar of salaries that save you don't you actually lose about one point two percent one point two in revenues because of the way they those those people out the franchise fees this is just to point out that this is was a none budgeted item we had a favorable outcome or decision at the state supreme court which determined that the the case that was or the argument that the one fee itself isn't exorbitant relative to what the value that they're getting but we've been holding some of those revenues aside and not treated him as revenue until we got a better idea but with that decision we felt comfortable and recognizing are below budget by two hundred thousand dollars we talked a little bit about this before and it's because building permits come in in all shapes and sizes and you can have a lot of volume but if there are very small small building permits or or developments it's not going to generate as much as if you have a large large ones and that's what happened last year and and when we and budgeted we used as a basis for this year but we've seen just more volume smaller projects which caused that to be low people out budget by the end of the year so a little bit not quite intuitive but that's how it played out and then traffic violations these are the the moving violations that are issued by our motor officers if we see that we're below budget and this is primarily because of just down in staff on the police in general and how they managed and shifted people around they have not been fully staffed before the motor cops so we've seen a reduction in the number of citations that have been issued and they're short so the revenues go down accordingly mentioned about salary series i just pointed out that the five departments where we've seen the biggest impact from be from vacancies in the police department is the largest for sure they're about one eight million dollars below budget again primarily  vacancies i know there are a number of people in the academy that's starting in october and i think you know we've been doing a much better job in terms of the recruitment effort and all that but you know sometimes you have unexpected retirements that kind of affect that but you know we're on the turnover but in total just those five departments generated almost five point one million dollars in expenditure savings so from a budgetary perspective and reserve perspective good news in terms of being able deliver services and it in  operations and all that it's not necessarily a good news story so i'm gonna get into a summary schedule that shows kind of a canoeing combines revenues and expenditures how they perform and in two thousand and seventeen relative to budget but i wanted just to point out something so when we look at the current budget current amended budget for seventeen or i should say the final amended budget it did involve the or the budgeted user reserves and i wanted to kind of describe where that came from because as you know every year we adopt a balanced budget and during the year we have these amendments but i wanted to kind of give an accounting of some of those things one of the largest items that if that kind of carries over and shows the use of reserves are the encumbrances at the end of the year so in two thousand and and sixteen we had about a million almost a million one in encumbrances and in contracts that were carried over so those are purchase orders that have been executed contracts that have been executed and some discretionary carryover is that the to carry over when they get carried over in a minute immediately shows the use of reserves it doesn't affect what we kind of tell you what our reserve balances are relative to our policy because we sort of set those aside already but it does on a budgetary basis and when you look at the document it'll still show the use of reserves but we've already accounted for that one of the things that also shows as a use of reserves was a loan to the city tv they wanted to purchase some equipment some hd equipment and so we kind of advanced some of the month the money them the money this year  eighteen they're gonna pay that back and then it was because of the timing of the closing of the books and all that and getting final numbers that the direction to allocate twenty five percent of the surplus in sixteen into approved the transfer of some of that year in surplus is sixteen to fund a shortfall in fire equipment reserves you know with these big pieces of equipment the fire apparatus are costing more more money and we're tracking that and we're putting money aside every year but just because of the increasing costs relative to what we anticipated we were a little short so we we did move some of that year in surplus so one hundred and sixty into those reserves it primarily came from the fact that we had mutual aid revenues in sixteen that exceeded cost that help generate those surpluses so we thought it made sense to kind of trust and that to the fire equipment reserve and then during the year we had a special election measure deed for the marijuana excise tax that was that did require the use of reserves of one hundred twelve thousand dollars number and i show that to you because this is where you see kind of the overall summary of for the whole year of all revenues expenditures so i'm gonna kind of work vertically first so the amended budget revenues were budgeted at one hundred twenty nine and a half million dollars the expenditures were budgeted at one hundred thirty one point seven million dollars for a net of two point one which is that budgeted use of reserves that i just went over in terms of the details  practical purposes our final results for the year show brought in one hundred and twenty seven point six million dollars of revenues and one hundred twenty six point nine of expenditures so the net of those two is the which you would call guess a net gain or loss it was the nester plus in this case of six hundred sixty two thousand dollars and that's six sixty two is will fall to our reserve balances and that's really what we're gonna be asking you how much of that should we be allocating to policy reserves versus capital reserves our normal policy is we've been given direction to allocate that sort of differently for two three years but i wanted to show you it's kinda interesting when you look over to the right the variance between the actual results  budget you will recall that every year we have a what's called an anticipated year invariance number where we anticipate some expenditure savings and we budget for that and it's that is actually budgeted as a revenue adjusted these numbers to kind of reflect that so this looks so odd so even though expenditures came in somewhere around almost six million dollars under budget two point three of that two point three million was already anticipated so the true variance was three point nine so on a net basis the variance from budget is one point nine and and i've been asked this question well why is the one why don't we get to one point nine what does that go into our reserves why is it only the one two six sixty two and the one point nine is just a measure of performance you know budget versus actual we went from a two point two million dollar projected use of reserves to one point nine million dollars sort of only a six sixty two use of a surplus so that's the variance of one point nine so it's really not a number you can say that's going to fall the reserves it's just kind of a measure  considered yeah yeah yeah i don't think there is any top one or two so at the end of each year we always have purchase orders that have been executed but have not we have not received the services there were contracts and it's typically in about a million dollar range and it could be for anything and it's spread across all departments and it's yeah yeah they're not considered we can't count them in control yeah we can't count them because we haven't received the services that only when we receive services do we count omit expenditures but there are obligations and so we recognize them at year end and then we carry over the next year as obligations and by doing so it automatically sort of adds to the use of reserves june thirty two thousand and seventeen again based on preliminary numbers that we think are pretty final so as you know we have two pots of reserves one is the disaster reserve that is calculated as fifteen percent of the operating budget for the fiscal year so in this case nineteen million one hundred and sixty seven happens to be fifteen percent of the two thousand and eighteen adopted operating budget and then the contingency reserve is is ten percent of the in total our policy would say we needed thirty one almost thirty two million dollars in reserves and as you can see our actual balances we always keep the disaster reserves fully funded and in this case we have contingency reserves in excess of what our policy says to the tune of one point five six million dollars in your general report and then the attachment the the number that's shown here is one was closer to one eight one million seven something and i've adjusted for that because it was brought to my attention that two hundred thousand dollars roughly of grant revenues were received by the public works department to reimburse for a underground tank replacement project and so we thought is appropriate to kind of hold that money aside and sort of designated for future similar projects so we've reduced that one seven by the two hundred thousand dollars so it's one five but even with that adjustment that number is well above where we've been for years the last time we had anything this close anything you know near this number above policy was in two thousand and four the screw two thousand and four so since then we above but since then we went for a number of years nine years we were below policy until two thousand and fifteen and we've sort of stayed right at policy and in this current year we actually have some cushion there at one point five so the direction we're going to be getting from looking to get mccown so is this is this question i asked and when we were in back in two thousand and fifteen at the end fifteen when we weren't sure we're gonna get to policy reserves that council directed us to or any surplus is seventy five percent twenty five percent thirty five percent going to our policies or is to bet to give us a higher degree of a certainty that we'd actually get to policy reserves and that was a three year direction so fifteen sixteen and seventeen seventeen mean the last year but given that we are now well above policy reserves at a million five it just raises the question do we need to stick with that seventy five twenty five percent split or can we go back accomplished but my notion would be and we have of course as we know our our unfunded liabilities are massive so i would think the way to go for a good way to go f be to peel off the money that is over policy reserved what we want to have his policy reserves we don't i mean more money is always better than less but whatever this form these formulas of fifty percent and twenty five percent all that was because we were trying to get our reserves back up to policy we're there it's going to change year to year as as the budgets presumably increase but clearly the need for the capital for capital programs is there and so i hope that the committee consider taking everything above policy reserves is that what comprises normal reserves yes our reserves yes yes normal reserves or our policy reserves okay two pots that's the only which is to bring the reserves into full policy levels and that the additional revenue ought to go for capital expenditures that's clearly the pressing need i think the public understands that and i would agree with that recommendation to council anybody want to make a motion i'm just wondering hear from mister dominguez you have any comments on that okay then i would move that the the funds over our policy reserves be recommended to be allocated to our capital program