TO: HONORABLE MAYOR AND FROM: Jim Shannon
CITY COUNCIL
SUBJECT: SEE BELOW DATE: October 4, 2022
Approved Date
10/6/22
SUBJECT: ADOPTION OF AN ORDINANCE RATIFYING FINAL EXPENDITURES IN VARIOUS APPROPRIATIONS FOR 2021-2022 AND ADOPTION OF
THE ASSOCIATED APPROPRIATION ORDINANCE AND FUNDING
SOURCES RESOLUTION AMENDMENTS IN 2021-2022
RECOMMENDATION
(a) Adopt an ordinance ratifying final 2021-2022 expenditures in various appropriations as detailed in this report.
(b) Adopt the following 2021-2022 Appropriation Ordinance amendments in the Airport Maintenance and Operation Fund:
(1) Increase the Airline Reserve Funds Distribution appropriation by $7,595,809; and (2) Decrease the Master Trust Agreement Reserve by $7,595,809.
(c) Adopt the following 2021-2022 Appropriation Ordinance and Funding Sources Resolution amendments in the Construction Tax and Property Conveyance Tax Fund: Parks Purposes Central Fund:
(1) Increase the Construction and Conveyance Tax estimate by $2,853,873; (2) Increase the Needs-Based Allocation Transfer to District 1 by $235,078; (3) Increase the Needs-Based Allocation Transfer to District 2 by $103,459; (4) Increase the Needs-Based Allocation Transfer to District 3 by $95,650; (5) Increase the Needs-Based Allocation Transfer to District 4 by $76,392; (6) Increase the Needs-Based Allocation Transfer to District 5 by $247,386; (7) Increase the Needs-Based Allocation Transfer to District 6 by $227,550; (8) Increase the Needs-Based Allocation Transfer to District 7 by $219,694; (9) Increase the Needs-Based Allocation Transfer to District 8 by $155,142; (10) Increase the Needs-Based Allocation Transfer to District 9 by $180,085; (11) Increase the Needs-Based Allocation Transfer to District 10 by $76,860; (12) Increase the Transfer to the Parks City-Wide Construction and Conveyance Tax Fund appropriation by $808,646; and
(13) Increase the Transfer to the General Fund – Parks Eligible Maintenance Costs appropriation by $427,931.
COUNCIL AGENDA: 10/18/2022
FILE: 22-1519
ITEM: 2.7
HONORABLE MAYOR AND CITY COUNCIL
October 4, 2022
Subject: Ratification of Final 2021-2022 Expenditures in Various Appropriations
(d) Adopt the following 2021-2022 Appropriation Ordinance amendments in the Coronavirus Relief Fund:
(1) Establish the Communications and Translation Services appropriation to the City Manager’s Office in the amount of $177,987;
(2) Increase the COVID-19 Personal Services appropriation to the City Manager’s Office by $637,632;
(3) Decrease the Food and Necessities Distribution - Food Services appropriation to the City Manager’s Office by $435,503;
(4) Decrease the Consulting and Planning Support appropriation to the City Manager’s Office by $321,000; and,
(5) Decrease the Facilities Improvements appropriation to the City Manager’s Office by $59,116.
(e) Adopt the following 2021-2022 Appropriation Ordinance amendments in the South Bay Water Recycling Operating Fund:
(1) Increase the Personal Services appropriation to the Environmental Services Department by $466,654;
(2) Increase the SCVWD – Advanced Water Treatment appropriation by $278,098; and (3) Decrease the Ending Fund Balance by $744,752.
(f) Adopt the following 2021-2022 Appropriation Ordinance amendments in the Emergency Reserve Fund:
(1) Establish the PPE and Janitorial Services appropriation to the City Manager’s Office in the amount of $676,000;
(2) Decrease the Food and Necessities Distribution - Food Services appropriation to the Parks, Recreation, and Neighborhood Services Department by $676,000.
(g) Adopt the following 2021-2022 Appropriation Ordinance amendments in the General Fund:
(1) Increase the Workers’ Compensation Claims – Police appropriation by $359,839; (2) Decrease the Workers’ Compensation Claims – Fire appropriation by $185,839; (3) Decrease the Workers’ Compensation Claims – Other Departments appropriation by $174,000;
(4) Increase the Personal Services appropriation to the City Attorney’s Office by $57,692;
(5) Decrease the Non-Personal/Equipment appropriation to the City Attorney’s Office by $21,481; and
(6) Decrease the Personal Services appropriation to the City Manager’s Office by $36,211.
(h) Adopt the following 2021-2022 Appropriation Ordinance amendments in the Water Utility Fund:
(1) Increase the Personal Services appropriation to the Environmental Services Department by $185,362; and
(2) Decrease the Ending Fund Balance by $185,362.
HONORABLE MAYOR AND CITY COUNCIL
October 4, 2022
Subject: Ratification of Final 2021-2022 Expenditures in Various Appropriations
(i) Adopt the following 2021-2022 Appropriation Ordinance and Funding Sources Resolution amendments in the 1990 Gas Tax Maintenance and Construction Fund:
(1) Increase the Gas Tax estimate by $177,208; and
(2) Increase the Transfer to the General Fund for Street Maintenance by $177,208.
(j) Adopt the following 2021-2022 Appropriation Ordinance and Funding Sources Resolution amendments in the Neighborhood Security Bond Fund:
(1) Increase the Beginning Fund Balance estimate by $64,328; and (2) Increase the Fire Training Center Relocation appropriation by $64,328.
(k) Adopt the following 2021-2022 Appropriation Ordinance and Funding Sources Resolution amendments in the 1964 Gas Tax Maintenance and Construction Fund:
(1) Increase the Gas Tax estimate by $26,037; and
(2) Increase the Transfer to the General Fund for Street Maintenance by $26,037.
(l) Adopt the following 2021-2022 Appropriation Ordinance and Funding Sources Resolution amendments in the Construction Tax and Property Conveyance Tax Fund: Parks Maintenance Yards Purposes:
(1) Increase the Construction and Conveyance Tax estimate by $8,024; and (2) Increase the Transfer to the General Fund – Park Yards Operating and Maintenance Expenses appropriation by $8,024.
OUTCOME
The recommended actions account for unanticipated appropriation over-expenditures that occurred at the end of 2021-2022 and allow the final financial accounting for 2021-2022 to be completed.
BACKGROUND
As part of the process of completing the 2021-2022 fiscal year-end audit, final expenditures and encumbrances recorded by the Finance Department have been compared to the budget to determine whether the expenditures were within appropriation levels approved by the City Council. In this report, City Council approval is requested for a small number of appropriation increases necessitated because final 2021-2022 expenditure totals exceeded final modified appropriation levels.
HONORABLE MAYOR AND CITY COUNCIL
October 4, 2022
Subject: Ratification of Final 2021-2022 Expenditures in Various Appropriations
ANALYSIS
As part of the year-end closing process, certain expenses not previously anticipated are recorded and cause appropriations to be exceeded. Under the City's current practice, appropriation increases necessary to fund those expenses require City Council ratification action. The Administration makes every effort to limit the number of instances where after-the-fact ratification of over-expenditures must occur. As has been the practice in the past, year-end budget adjustments were prepared and brought to City Council by the City Manager’s Budget Office in June 2022 for the 2021-2022 fiscal year. A number of potential overruns were avoided as a result of the actions taken in that document.
The Administration manages approximately 1,500 appropriations allocated to over 138 City funds. In 2021-2022, appropriations were exceeded in ten City funds as described in Attachment A. The total amount for the 11 funds involved is $13.6 million and includes the following:
- Expenditure appropriations in the Airport Maintenance and Operation Fund that reconcile net remaining revenues due to the airlines under the Airline-Airport Lease and Operating Agreement ($7,595,809);
- Transfer appropriations in the Construction Tax and Property Conveyance Tax Fund:
Parks Purposes Central Fund ($2,853,873) and the Construction Tax and Property Conveyance Tax Fund: Parks Maintenance Yards Purposes ($8,024) that allocates excess Construction and Conveyance Tax receipts in accordance with the City Council-approved distribution formula;
- Expenditure appropriations in the Coronavirus Relief Fund related to COVID-19 Personal Services and Communications and Translation Services ($815,619) as part of actions to fully utilize remaining funds prior to final closeout; - Expenditure appropriations in the South Bay Water Recycling Operating Fund related to a Personal Services appropriation for the Environmental Services Department and SCVWD – Advanced Water Treatment ($744,752);
- Expenditure appropriations in the Emergency Reserve Fund related to PPE and Janitorial Services ($676,000) as part of actions to maximize eligible reimbursements from the Federal Emergency Management Agency (FEMA);
- Expenditure appropriations in the General Fund related to a Personal Services appropriation for the City Attorney’s Office and Workers’ Compensation Claims for the Police Department ($417,531);
- Expenditure appropriations in the Water Utility Fund related to a Personal Services appropriation for the Environmental Services Department ($185,362); - Transfer appropriations in the 1990 Gas Tax Maintenance and Construction Fund ($177,208) and the 1964 Gas Tax Maintenance and Construction Fund ($26,037); and - Expenditure appropriation in the Neighborhood Security Bond Fund related to the Fire Training Center Relocation project ($64,328).
HONORABLE MAYOR AND CITY COUNCIL
October 4, 2022
Subject: Ratification of Final 2021-2022 Expenditures in Various Appropriations
CONCLUSION
At the close of 2021-2022, a small number of appropriations exceeded their budget by year-end.
Approval of this memorandum will allow for the ratification of these final 2021-2022 expenditures, which are further described in Attachment A.
EVALUATION AND FOLLOW-UP
The ratification of exceeded appropriations will be incorporated into the City's Annual Comprehensive Financial Report for 2021-2022.
CLIMATE SMART SAN JOSE
The recommendation in this memorandum has no effect on Climate Smart San José energy, water, or mobility goals.
PUBLIC OUTREACH
This memorandum will be posted on the City's website for the October 18, 2022 City Council Agenda.
COORDINATION
This memorandum was coordinated with the Finance Department.
COMMISSION RECOMMENDATION/INPUT
No commission recommendation or input is associated with this action.
FISCAL/POLICY ALIGNMENT
The recommended budget actions align with the City's budget policy that dictates that the City will maintain the fiscal integrity of its operating, debt service, and capital improvement budgets.
COST SUMMARY/IMPLICATIONS
As discussed in the memorandum, additional revenue and expenditure savings are available to offset the exceeded appropriations for 2021-2022.
HONORABLE MAYOR AND CITY COUNCIL
October 4, 2022
Subject: Ratification of Final 2021-2022 Expenditures in Various Appropriations
CEQA
Not a Project, File No. PP17-004, Government Funding Mechanism or Fiscal Activity with no commitment to a specific project which may result in a potentially significant physical impact on the environment.
JIM SHANNON
Budget Director
I hereby certify that there was available for appropriation in the following funds in fiscal year 2021-2022 moneys in excess of those heretofore appropriated therefrom, said excess being at least the amounts as set forth below:
Construction Tax and Property Conveyance Tax Fund:
Parks Purposes Central Fund
$2,853,873
1990 Gas Tax Maintenance and Construction Fund
$177,208
Neighborhood Security Bond Fund $64,328
1964 Gas Tax Maintenance and Construction Fund
$26,037
Construction Tax and Property Conveyance Tax Fund:
Parks Maintenance Yards Purposes
$8,024
JIM SHANNON
Budget Director
For questions, please contact Jim Shannon, Budget Director, at (408) 535-8142.
Attachment A: 2021-2022 Ratification Descriptions
ATTACHMENT A
2021-2022 RATIFICATION DESCRIPTIONS
Airport Maintenance and Operation Fund $7,595,809
An adjustment in the Airport Maintenance and Operation Fund is necessary to ensure that the amount of net remaining revenue due to the airlines in 2021-2022 of $ 27,595,809, of which $20.0 million was allocated as part of the year -end budget adjustment memo approved by City Council in June for a remaining allocation of $7,595,809, is recorded as an expense in 2021- 2022, in compliance with the Airline-Airport Lease and Operating Agreement. In the Agreement, any net remaining revenue calculated will be paid to the signatory airlines in proportionate share of their enplaned passengers to total enplaned passengers.
Every year Airport will estimate any payment due to the air lines and will bring forward to City Council in June a recommendation for a year -end budget adjustment, as necessary . For 2021- 2022, Airport estimated a revenue sharing payment of $20.0 million to the airlines ; however, upon the final year -end reconciliation process, an additional $7,595,809 was due to the airlines based on greater than anticipated passenger activity levels.
Construction Tax and Property Conveyance Tax Fund: Parks Purposes Central Fund $2,853,873 As a result of higher than anticipated revenues, a technical adjustment is necessary to account for over -expenditures that occurred in the Transfer appropriations in the Construction and Conveyance Tax Fund – Parks Purposes Central Fund that is allocated for parks and community faci lities development. The Construction and Conveyance Tax revenue is received in the Construction and Conveyance Tax Fund – Parks Purposes Central Fund and then distributed to other various Parks - related Construction and Conveyance Tax Funds (i.e., City- Wid e and Council
District Funds) as well as the General Fund based on the City Council -approved distribution formula. Because Construction and Conveyance Tax Fund revenue ended the year above the estimated level, the transfer appropriations that were used to distribute this revenue to the other funds were also exceeded. Funding allocated for these ratification actions is offset by additional Parks Construction and Conveyance Tax Fund revenue.
Coronavirus Relief Fund $815,619
An adjustment is necessary in the Coronavirus Relief Fund to account for over - expenditures related to two appropriations; COVID- 19 Personal Services ($637,632) and Communications and Translation Services ($177,987).
Additional expenditures for COVID -19 Personal Services and Communications and Translation Services resulted from the reclassification of expenses incurred in support of these COVID-19 response and recovery initiatives from the period of July 1, 2021 through December 21, 2021. Following an inter nal review of the timing and nature of the expenses , and corresponding documentation, a total of $815,619 was determined to be eligible for Coronavirus Aid, Relief, and Economic Security Act funding and therefore reclassified to corresponding appropriations in the Coronavirus Relief Fund. The offsetting adjustments to these over-expenditures include a decrease to the Food and Necessities Distribution – Food Services appropriation, Consulting and Planning Support appropriation, and Facilities Improvements appropriation.
ATTACHMENT A
2021-2022 RATIFICATION DESCRIPTIONS
South Bay Water Recycling Operating Fund $744,752
An adjustment is necessary in the South Bay Water Recycling Operating Fund to account for over-expenditures related to two appropriations; Personal Services – Environmental Services Department ($466,654) and SCVWD – Advanced Water Treatment ($278,098).
The Environmental Services Department’s Personal Services appropriation ended the year above budgeted levels primarily due to an incorrect projection of year- end expenditure levels. The year-end clean -up actions approved by the City Council in June 2022 included an increase of $3.7 million to the SCVWD – Advanced Water Treatment payment in accordance with a cost-sharing agreement to Valley Water (formerly Santa Clara Valley Water District), offset by reductions to the Environmental Services Department’s Personal Services ($1.9 million) and Non-Personal/Equipment appropriation ($1.8 million). However, the level of available savings within the Personal Services appropriation was understated, and it did not have enough remaining capacity to pay all personnel - related costs
through the end of the fiscal year. The offsetting adjustment to the over - expenditure is a decrease to the Ending Fund Balance.
Expenditures for SCVWD - Advanced Water Treatment appropriation exceeded projected levels – above the adjustments made at year-end – due to the contractual obligation to accrue a substantial annual payment to Valley Water as part of a cost-sharing agreement. The offsetting adjustment to the over -expenditure is a decrease to the Ending Fund Balance.
Emergency Reserve Fund $676,000
An adjustment is necessary in the Emergency Reserve Fund to account for over - expenditures related to the PPE and Janitorial Services appropriation ($676,000) as part of actions to maximize eligible reimbursements from FEMA.
Additional expenditures for PPE and Janitorial Services resulted from the reclassification of expenses incurred in support of these COVID-19 response and recovery initiatives. Following an internal review of the nature of the expenses and corresponding documentation, a total of $676,000
was determined to be
eligible for FEMA-reimbursement and therefore reclassified to the corresponding appropriation in the Emergency Reserve Fund. The offsetting adjustment to these over-expenditures is a decrease to the Food and Necessities Distribution - Food Services appropriation.
ATTACHMENT A
2021-2022 RATIFICATION DESCRIPTIONS
General Fund $417,531
An adjustment is necessary in the General Fund to account for over-expenditures related to two appropriations; Workers’ Compensation Claims – Police ($359,839) and Personal Services – City Attorney’s Office ($57,692).
Expenditures for Workers’ Compensation claims in the Police Department exceeded projected levels due to one-time settlements to close out old claims and existing claims with medical costs. The offsetting adjustment to these over - expenditures is a decrease to other Workers’ Compensation Claims appropriations in the General Fund.
The Personal Services – City Attorney’s Office ended the year above budgeted levels due to vacation payouts for staff that had retired during the fiscal year and higher than budgeted salary and benefit costs. The offsetting adjustment to the over-expenditure is a decrease to the Non-Personal/Equipment – City Attorney’s Office and the Personal Services – City Manager’s Office appropriations.
Water Utility Fund
An adjustment is necessary in the Water Utility Fund to account for an over - expenditure in the Personal Services appropriation ($185,362). This appropriation, which was budgeted at $8.4 million, ended the year with a negative balance following unanticipated charges for compensated absence liabilities.
1990 Gas Tax Maintenance and Construction Fund
$185,362
$177,208
As a result of higher than anticipated revenues, a technical adjustment is necessary to account for the over -expenditures that occurred in the Transfer to the General Fund for Street Maintenance appropriation in the 1990 Gas Tax Maintenance and Construction Fund. Expenditures are to be used exclusively for the acquisition of real property or the construction, maintenance, or improvement of streets or
highways, other than state highways. Through City Council resolution, the transfer of funds to the General Fund reimburses expenditures related to projects qualified to use special gas tax improvement funds such as traffic signal maintenance, street lighting maintenance, and signs and marking maintenance.
The funding allocated for the ratification action is offset by the additional Gas Tax revenue from the State of California under the provisions of the Street and Highways code.
ATTACHMENT A
2021-2022 RATIFICATION DESCRIPTIONS
1964 Gas Tax Maintenance and Construction Fund $26,037 As a result of higher than anticipated revenues, a technical adjustment is necessary to account for the over -expenditures that occurred in the Transfer to the General Fund for Street Maintenance appropriation in the 1964 Gas Tax Maintenance and Construction Fund. Expenditures are to be used exclusively for the acquisition of real property or the construction, maintenance, or improvement of streets or highways, other than state highways. Through City Council resolution, the transfer of funds to the General Fund reimburses expenditures related to projects qualified to use special gas tax improvement funds such as traffic signal maintenance, street lighting maintenance, and signs and marking maintenance.
The funding allocated for the ratification action is offset by the additional Gas Tax revenue from the State of California under the provisions of the Street and Highways code.
Neighborhood Security Bond Fund $64,328
An adjustment is necessary in the Neighborhood Securities Bond Fund to account for an over -expenditure in the Fire Training Center Relocation project. As the bond program is completing, final expenditures have been made so the fund can be closed. As part of the year -end close process, an encumbrance from a prior fiscal year totaling $64,328 was liquidated, which is now available as Beginning Fund Balance for this fund. Actions approved as part of this memorandum increase the Beginning Fund Balance and approve the related expenditure in the Fire Training Center Relocation project, which would have otherwise be charged against the General Fund.
Construction Tax and Property Conveyance Tax Fund: Parks Maintenance Yards Purposes
$8,024
As a result of higher than anticipated revenues, a technical adjustment is necessary to account for the over-expenditure that occurred in the Transfer appropriation in the Construction and Conveyance Tax Fund – Parks Maintenance Yards Fund.
Based on the City Council -approved distribution formula, a total of 15% of the revenue received in the Construction and Conveyance Tax Fund – Parks Maintenance Yards Fund is transferred to the General Fund for park maintenance operating and maintenance costs. Because Construction and Conveyance Tax Fund revenue ended the year above the estimated level, the transfer appropriation that was used to distribute this revenue to the General Fund was also exceeded.
The funding allocated for the ratification action is offset by the additional Construction and Conveyance Tax Fund revenue.
TOTAL $13,564,543