February 1, 2022
Finance Department
DATE: February 1, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Shasa Curl, Interim City Manager
Anil Comelo, Interim Deputy City Manager
Belinda Brown, Director of Finance
Antonio Banuelos, Accounting Manager
Subject:
Final Adjustments to Fiscal Year 2020-2021 Budget
FINANCIAL IMPACT: The full reduction of disallowed costs of the Richmond Housing Authority (RHA) receivables totaled $10.4
million, which was $4.3 million more than what was
originally approved by City Council. Based on U.S.
Department of Housing and Urban Development’s Public
Housing Authority Recovery and Sustainability (PHARS)
agreement with the City and CVR Associate’s report
regarding the RHA repayment plan, as well as the
recommendations from the City’s auditors, a decision
was made to fully reduce RHA’s receivables. The
financial impact of the change results in a reduction of $4.3 million set aside for City’s reserves balance. On
June 29, 2021, staff projected an ending reserve balance of 14.3 percent; however, the $4.3 million reduction will decrease the reserve balance to 12.5 percent.
PREVIOUS COUNCIL
ACTION:
June 29, 2021 and October 26, 2021
AGENDA
REPORT
February 1, 2022
STATEMENT OF THE
ISSUE:
Present City Council with the final updates to fiscal year 2020-2021 regarding the disposition of excess revenue.
RECOMMENDED ACTION:
RECEIVE an update on the Fiscal Year 2020-2021
budget – City Manager’s Office/Finance Department
(Shasa Curl/Anil Comelo/Belinda Brown/Antonio
Banuelos 510-620-6740).
DISCUSSION:
FY 2020-2021 Budget Update
On June 29, 2021, as part of the budget process, staff initially estimated Fiscal Year (FY) 2020-2021 would end with a surplus of $15.5 million. As the final numbers started to settle, the estimate increased to nearly $20.9 million as stated in the October 26, 2021 budget presentation. The $5.4 million increase in revenues over expenses is a combination of various items. On the revenue side, the main item is additional Transfer Tax received. The sale of three properties alone in the last quarter of FY 2020-2021 brought in nearly $5 million. On the expenditure side, the main reduction is the Professional Services expense category which was about $1 million less than the previous projection. The original forecast assumed the full amount of encumbrances would be expended, but when that did not happen, expenditures in this category reduced the forecasted amount.
FY2020-21 FY2020-21 FY2020-21 FY2020-21
ACCOUNTS FOR: MID-YEAR PROJECTION PROJECTION FINAL
GENERAL FUND BUDGET 6/29/2021 10/26/2021 BEFORE
USES
TOTAL REVENUES 175,814,340 183,467,774 188,099,774 188,406,360 TOTAL EXPENDITURES 171,653,539 167,919,885 167,222,535 167,495,696 NET SURPLUS/ (DEFICIT) 4,160,801 15,547,889 20,877,239 20,910,664
Proposed Uses of FY 2020-2021 Surplus
On June 29, 2021, as part of the adopted budget, City Council approved the various expenditures listed below to be funded by the original projected surplus:
February 1, 2022
Proposed Uses:
Reimagining Public Safety -1,300,000 Used in FY2021-22/Employment & Training Fund (E&T)
Community Facility
Improvements -1,700,000 Used in FY2021 -22/Capital Improvement Project (CIP) Fund
Staff Compensation – One
Time Payment -2,300,000 Used in FY2021-22
Maintain 14.3% Reserve
Level -4,219,567 To be used in FY2020-21
Reduce RHA liability -3,000,000 Set Aside to reduce R ichmond Housing Authority (RHA) liability in FY2020-21
Set aside for Reserves -3,000,000 To be used in FY2021-22 Total Approved Uses: -$15,519,567
On October 26, 2021, Finance staff provided an update to City Council regarding the FY 2020-2021 budget and shared that the ending surplus would increase by $5.35 million, from $15.5 million, to an estimated $20.87 million. City Council approved the following additional expenditures to be funded by the projected surplus:
Proposed Uses:
Set aside for possible
Measure U shortfall -2,000,000 Set aside in FY2020-21 to be used in FY2021-22 if needed
Additional GF Expenditures -229,000 Used in FY2021-22
Reduce RHA liability -3,128,968 Used in FY2020-21
Total Approved Uses: -$5,357,968
Actual Uses of FY 2020-2021 Surplus
Towards the end of the City’s annual fiscal audit, it was determined that $10.4 million of the RHA receivable was uncollectable. Once that determination was made, the additional receivable of $4.3 million had to be written off. It is important to note that the RHA write-off issue came from the City’s investments over numerous years to help support the maintenance and renovation of 783 public housing units, assist RHA in meeting obligations to program participants and HUD, and uplifting and supporting the health and safety of RHA’s residents.
The funding for the additional $4.3 million write-off will come from the City’s reserves. Of the $7.2 million originally projected for reserves, as shared during the June 29, 2021 City Council meeting, only $2.1 million will now be available to increase the City’s reserves.
Other appropriations of the surplus such as Reimagining Public Safety, Community Facilities Improvements, staff one time compensation, Measure U set aside, and additional expenses remained unchanged.
February 1, 2022
FY 2020-2021 GF Revenues Over Expenditures $20,910,664 Budgeted
Reduced RHA Liability -10,442,853
Appropriation Authority for Reimaging Public Safety -1,300,000 Appropriation Authority for Community Facilities Improvements -1,700,000 Appropriation Authority for Staff Compensation – One Time Payment -2,300,000
FY 2021-22 Set Aside for reserves -2,938,811
Measure U Set-Aside -2,000,000
FY 2021-22 Additional Expenses -229,000
Total Budget Adjustments -$20,910,664
Impact on the City’s Reserve Balance
Based upon communication with the Housing and Urban Development (HUD) and consistent with advice from the City’s auditors, staff allocated a total of $10.4 million toward the write off of Richmond Housing Authority (RHA) liability to the City. Despite the write off, as of June 30, 2021, the City’s reserves increased by $2.1 million to $22,477,829, or 12.5 percent of the FY 2021-2022 General Fund Expenditures (excluding Operating Transfers Out). Per current policy, the City’s goal is to maintain a year-end contingency reserve balance of a minimum of 15 percent of the next year’s budgeted General Fund expenditures. To meet the policy reserve level, the City would need to set aside an additional $4.5 million.
NEXT STEPS:
Staff will return in February to the City Council with budget updates for FY 2021-2022.
Please visit the City’s website at https://www.ci.richmond.ca.us/1427/Presentations for the most up-to-date budget information and presentations.
DOCUMENTS ATTACHED:
None