FY 2017-18 Year End Adjustments 10-02-18

CITY OF CARMEL-BY-THE-SEA
CITY COUNCIL
Staff Report
October 2, 2018
ORDERS OF BUSINESS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Robin Scattini, Finance Manager
APPROVED BY: Chip Rerig, City Administrator
Resolution No. 2018-113, authorizing FY 2017/18 Year End Adjustments, and Receive an
Update on the FY17/18 Preliminary Fund Balance of the General Fund and Overview of the
SUBJECT:
FY18/19 Quarter 1 Expenses and Revenue.
RECOMMENDATION:
Receive an Update on the FY 17/18 General Fund Preliminary Fund Balance and Overview of the FY 18/19
Quarter 1 Expenses and Revenues and Adopt Resolution 2018-113 Authorizing Fiscal Year 2017/18 Final
Budget Adjustments
BACKGROUND/SUMMARY:
Fiscal Year (FY) 17/18 General Fund Balance: City staff are currently working with the contracted auditing firm,
Chavan & Associates, regarding completion of the FY 17/18 annual audit. At this time, the figures presented in
this report are considered preliminary and unaudited. The anticipated date to receive the finalized FY 17/18
Audited Financial Statements, inclusive of Final Fund Balance for the General Fund, is December 2018. Staff
and a representative from Chavan & Associates will give a comprehensive update once the finalized Financial
Statements are complete.
The estimated unrestricted Fund Balance for the General Fund is $2.07 million, excluding any additional fund
balance adjustments that may emerge due to the finalization of the FY 17/18 audit. Of note is that the value of
$2.07 million is the estimated unrestricted fund balance available after accounting for the following uses:
1) At the June 5 regular meeting, Council approved $1.92 million of prior years' General Fund balance
for use in the FY 18/19 Adopted Budget. Please recall that these funds were not derived from any
reserve accounts.
2) The Carmel Municipal Code requires 10% of the General Fund Operating Budget to be kept in
reserves. The reserve requirement for FY 18/19 is $2.01 million and was also included in the FY 18/19
Adopted Budget. Therefore, the City continues to meet the reserve requirement.
Again, the $2.07 million Fund Balance remains an estimate at this time and is subject to adjustment as part of
the FY 17/18 audit. Since there are a variety of factors that may influence the Fund Balance, such as FY 17/18
revenue and expenditure adjustments, transitioning to a different financial system during the fiscal year, and a
change in the City’s auditing firm, no action should be taken regarding the use of Fund Balance at this time.
Staff will present the audited fund balance to Council in the upcoming months and also present
recommendations regarding the use of Fund Balance and reserve requirements for Council’s consideration.
Information Specific to FY 17/18

General Fund revenues were estimated at $20.67 million for FY 17/18, or approximately $705,000 more than
budgeted. A snapshot of the City’s major three revenues indicate that secured property tax revenue appears to
have just met the budget target of $5.69 million. Transient occupancy tax is posed to finish the fiscal year at
$6.33 million, or about $117,000 over the adopted budget of $6.21 million. The City’s share of the statewide
sales tax is $2.58 million, or $218,000 over the FY 17/18 budget while local sales tax of Measure D is up
$55,000 compared to the budget target of $2.8 million. However, recent changes to the State’s reporting
system for sales and use taxes have resulted in jurisdictions receiving partial payments for the quarter. In
addition, the State provided advanced payments to agencies in June that are technically considered part of FY
18/19. Therefore, there may be adjustments regarding sales tax revenues as part of the FY 17/18 audit that
could affect revenues and the overall fiscal year-end fund balance. In addition, revenue received from charges
for services, particularly within the Community Planning and Building Department, have contributed to positive
revenue performance.
On the expenditure side of the ledger, General Fund expenditures were estimated at $18.77 million, or $1.66
million less than budgeted. This positive balance is largely attributed to one-time salary and benefit savings from
vacant positions. Of course, staff also exercised due diligence in responsibly and conservatively managing their
respective operating budgets.
Overall, FY 17/18 is anticipated to close in a positive financial position as referenced above.
FY 18/19 Quarter 1 Overview

The City's top three revenue sources are property taxes, sales and use taxes, and transient occupancy taxes.
Historically, those revenue sources start being received in the second quarter. The City receives its first tranche
of secured property tax in January as the first installment of property taxes for homeowners are due on
December 10 (the second installment is due by April 10 and the City receives this payment typically in late
May). Sales and use revenues are received on a quarterly basis while transient occupancy tax is received bi-
monthly. For example, transient occupancy taxes for the reporting period of July and August 2018 will be due by
September 30, 2018.
At a future Council meeting, Finance staff will provide a mid-year budget status report that will review the amount
of revenue received in comparison to both budgeted revenue and last year’s performance, as well as provide
discussion of any significant anticipated changes to budgeted revenue.
The City’s largest expenditure category is salaries and benefits, which account for 44% of the FY 18/19
operating budget. During the first quarter, cost savings have been realized due to position vacancies. As
vacancies continue to be filled, these short-term cost savings will be minimized. Other notable expenditures
incurred during the first quarter have been made for annualized payments such as the Workers’ Compensation
premium and liability insurance premium. Sizable payments were also made for the City’s budgeted Capital
Projects such as pavement rehabilitation and the fueling station decommissioning.
The mid-year budget status report will also review the amount of expenses incurred in comparison to budgeted
expenses, as well as provide discussion of any significant anticipated changes to budgeted expenses.
FISCAL IMPACT:
None at this time. When the final FY 17/18 Financial Statements and Fund Balance for the General Fund are
presented to Council, recommendations for uses of the fund balance, including additional reserve savings, will
be included in the staff report.
PRIOR CITY COUNCIL ACTION:

Council adopted the FY 18/19 budget at its June 5 regular meeting, inclusive of using $1.92 million from
General Fund prior years' fund balance.
ATTACHMENTS:
Resolution No. 2018-113, Authorizing FYE Adjustments

Attachment 1
CITY OF CARMEL-BY-THE-SEA
CITY COUNCIL
RESOLUTION NO. 2018- 113
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA AUTHORIZING FISCAL

YEAR 2017-2018 YEAR END ADJUSTMENTS
WHEREAS, the City Council adopted resolution 2017-062, approving the Fiscal Year 2017-2018
budget on June 6, 2017; and
WHEREAS, City staff are in the process of closing the fiscal year that ended on June 30, 2018; and
WHEREAS, while the Citywide approved appropriations have not been exceeded, adjustments are
likely to be needed as some departmental expenditures are over their adopted operating budgets and other
departments are under budget; and
WHEREAS, Carmel Municipal Code Section 3.06.030 requires all transfers of appropriations between
departments or in regards to capital items or projects to be approved by City Council.
NOW THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF CARMEL-BY-
THE-SEA DOES HEREBY FINDS AND ORDERS THE FOLLOWING:
Authorize the City Administrator to make any necessary final budget adjustments to balance the Fiscal
Year 2017-2018 Adopted Budget.
PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA this
2ND day of October, 2018 by the following roll call vote:
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: COUNCILMEMBERS:
ABSTAIN: COUNCILMEMBERS:
SIGNED: ATTEST:
___________________________________ _________________________
Steve G. Dallas, Mayor Thomas Graves, City Clerk

FY 2017-18 Year End Adjustments 10-02-18

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CITY OF CARMEL-BY-THE-SEA

TO: Honorable Mayor and City Council Members

SUBMITTED BY: Robin Scattini, Finance Manager

APPROVED BY: Chip Rerig, City Administrator

Information Specific to FY 17/18

Overall, FY 17/18 is anticipated to close in a positive financial position as referenced above.

FY 18/19 Quarter 1 Overview

PRIOR CITY COUNCIL ACTION:

Resolution No. 2018-113, Authorizing FYE Adjustments

RESOLUTION NO. 2018- 113

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA AUTHORIZING FISCAL

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