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HomeMy WebLinkAboutRES 85-093 R E S O L U T I O N BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BEAUMONT: THAT the financial plan attached hereto as Exhibit "A" be, and the same is hereby , adopted. PASSED BY THE CITY COUNCIL of the City of Beaumont this the a�„ day of ` � , 1985. GOMM - Mayor - r March 19 , 1985 Council Memo 95 Honorable Mayor and Members of City Council Subject: Financial Plan for Adjustments to Budget This Council Memorandum will outline a financial plan which will be utilized for the adjustments to the 1985 and 1986 budgets of the City of Beaumont to reflect the possible absorption of a $20,000,000 extraordinary loss due to the current problems with recovering investments in our portfolio. In attempting to resolve this problem we have been examining the balances in the various funds of the city as of March 3 , 1985 when the problem with the investment portfolio came to light. We have separated the funds of the city into those which are held in a custodial/trust arrangement and those which are operating and capital funds . Any fund balances other than the funds noted were allocated to the operating funds on a pro rata basis depending upon the nature of the fund. The net cash balances as of March 3rd are shown below: Table I Net Cash Balances as of March 3rd Custodial/Trust Funds Balance General obligation Debt Service $ 5,666 ,040 Library & Fire Museum- Trust and Endowments 47,771 Retired Employee Insurance nrp'oyees t3ef.er.-ed. Cori.e- sa icn 73 . 113 :3eau..iont Tax Collectior Agericy /`� ,�93 Sub-Total 12, 686 $ 5 ,983 ,203 Operating & Capital Funds General Water Utilities $11,674 ,925 Transportation Improvement Program 6 ,156,732 Sub-Total 6 ►498 ,735 $24, 330,392 Total $30,313 , 595 Council Memo 95 March 19, 1985 Page 2 It is appropriate to hold the custodial and trust funds separate from the allocation of losses, if at all possible, since these funds are held in a trust relationship to either employees, general public donations to specific projects or debt service payments on general obligation bonds. As you can see the total amount of that custodial trust fund relationship is $5,983,203. The remaining $24,330,392 is generally allocable to the major three ( 3) funds of the city-General, Water Utilities and Transportation Improvement Program. In order to maximize the City' s flexibility for the future, it is recommended that the maximum loss be allocated against the Transportation Improvement Program and Water Utilities with the remaining unallocated losses assigned to the General Fund. Since the General Fund can transfer funds to the Water Utilities and TIP Funds but the Water Utilities and TIP Funds cannot transfer monies to the General Fund, this will maximize flexibility for dealing with this financial dilemma. For that reason, the following allocation of losses is recommended to the City Council: Table II Allocation of Losses of Investments General Fund $ 7,344,533 Water Utilities 6, 156 ,732 Transportation Improvement Program 6 ,498 ,735 Total $20,000 ,000 This would leave the General Fund with a cash balance, as of March 3 , 1985, of some $4 , 330,000. The City staff has been looking into proposals in how to absorb those losses by fund. In summary , the absorption of the loss would take place as presented in Table III. Table III Absorption of Losses by Fund General Funds Equipment Purchase Cancellations (See Exhibit A) General Revenue Sharing Reprogramming 1 ,000,000 General Improvements Reprogrammin g (See Exhibit B) 1 ,571 ,500 Facility) g (Fire Traning 225,000 Settlement of Bank Stock Case 1985 Fiscal Year Reductions from Hiring & Purchasing 1 ,248,0333 Freeze 1986 Fiscal Year Service/Revenue Adjustments 2,300,000 Total $7. 344 ,533 Council Memo 95 March 19 , 1985 Page 3 Table III Absorption of Losses by Fund (cont' d) Water Utilities Borrowing from Texas Water Development Board Reserve Balance $1 ,814,981 4 ,341 ,751 Total $_6, 156 ,732 Transportation Improvement Program Projects Deferred until 1987, 1988, 1989 $6 498 ,735 The list of equipment purchase cancellations are shown on Exhibit "A" . In 1985 the city had budgeted $2,500,000 worth of equipment purchases of which approximately $1 ,100,000 will be deferred into future years. Only that equipment shown on Exhibit "A" has actually been ordered and specifically planned on so far for this year. This will put us in a position of having equipment which is not in the best condition available. The general revenue sharing reprogramming of $1 ,571 ,500 can be dealt with through the elimination of many capital improvement projects as well as the elimination of programming General Revenue Sharing to the Sanitation Fund. Originally the Cit y anticipated a deficit in the Sanitation Fund even with this transfer of some $282,698 on September 30, 1985, With the very successful operations in the Sanitation Fund in the last fiscal year as well as encouraging results so far this year, it appears that we will be coming close to at least that deficit if not below that level by September 30, 1985 even with reallocating these General Revenue Sharing funds . The reprogramming of the g er,eral improvements money which was allocated for the fire will (felasj future projects at the fire �:snirag facility . The city anticipates a settlement in the bang stock case which has been panding for a number of years with at least a $1 ,000,000 benefit to the community. All of the above-mentioned items are specifically identified at this time. The fifth item mentioned of reductions in the 1985 Fiscal Year budget in the General Fund of $1 ,248 ,033 will come from the hiring freeze and purchasing freeze which we have imposed on all City operations. No monies will be expended which are not essential to our operation this year. We are will be able to save that level of ex enditureSOnf n th that we Fiscal Year, we are targeting service/revenue adjustmentslof6 $2 ,300,000. This is the original targeted amount of money which the Council adopted by resolution a few weeks ago to help reduce Council Memo 95 March 19 , 1985 Page 4 the property tax level in the community from $0.81 per one hundred dollars of assessed value to $0:72- per one hundred dollars of assessed value. This method of absorbing the losses in the General Fund would require us to maintain the same level of property tax next year but also putting into effect a program amounting to $2,300,000. The total General Fund absorption would then result in the losses allocated at $7,348 ,533. In the Water Utilities Fund, the city can make up the losses of $6,156,732 by two mechanisms. The first is the borrowing from the Texas Water [development Board of $1 ,814,981 of funds to complete projects which have already been underway in the city. The second is to allocate $4 ,341 ,751 against the reserve balance in the Water Fund. The Water Fund over the years has built up balances which can be utilized to absorb a large portion of this situation. The Transportation Improvement Program in the city is a bond issue which has been passed by the voters and sold in previous years. The total loss of those funds amounted to $6,498 ,735. The original bond issue allocation was a $33,000,000 bond issue. If this loss were totally absorbed, it would mean the elimination of projects in our Transportation Improvement program which includes such projects as College Street, Major Drive, Liberty/Laurel, Concord, Highland Avenue, Gladys Street, Washington Boulevard, Lucas Street and miscellaneous smaller projects. Only a portion of those would have to be eliminated in the event of the loss of the $6,500,000. However, it is proposed that the city only defer this $6,500,000 at this time and replace it from the 1987, 1988, and 1989 budgets of the City. Since the city will be making adjustments in the 1986 Fiscal Year services and revenues of $2 ,300,000, the property tax which was received to offset that situation can be reallocated in 1987, 1988 and 1989 to this purpose. This will allow the continuation of the TIP without elimination of that commitment to tho ;-it.izFTi :y . I the cit ' s in back into the Mond market in tfae very near future pfor tthe to get $20,000,000 worth of General Obligation Bonds which were to be sold on March 12, we will be able to continue this program virtually unaffected by this deferral of $6,500,000. The final elements of the TIP were not to be constructed until 1987 and 1988• We would move the funds which were to be expended in those years up to the current year and move these funds into the later years. The items listed above are means in which to allocate the losses which might be felt because of the investment portfolio problems . At this time it is impossible to determine exactly how much of that portfolio might be recovered either directly Council Memo 95 March 19 , 1985 Page 5 from the securities dealer or through litigation efforts recovery would be replaced back into these various items The currently reduced in the budget. In addition to worrying about the allocation of the losses, the need for continuation of cash flow in the city' s accounts is also a consideration. Due to the fact that the city is currently constructing projects which were to be included in' the March 12th bond issue, it is imperative that we be able to borrow those funds in the near future to offset the payment on those contracts. It is proposed that a bond issue be sold to the Texas Water Development Board in the amount of $7,400,000 for this purpose. $1 ,814,981 of that would be replacement of lost investments while the remaining $5,585,019 would be for the new projects as listed in Table IV. Table IV Proposed Bond Issue to Texas Water Development Board Replacement of Lost Investments Water Plant Completion E.P.A. Storm/Sanitary Separation $ 334 ,000 Sub-Total 1 ,480 , 981 $1 ,814 ,981 New Projects Funding Utility Relocation on College and Washington $ 750,000 Longfellow Interceptor 2,729 ,204 E.P.A. Storm/Sanitary Separation 2 , 105 ,815 Sub-Total 5,585,019 Total $7 , 400 ,000 These new projects include the Longfellow Interceptor, which is currently uncle; construction, and portions of the E .P .A. Sanitary= Sewer Separation Program, -which are also . J o n� construction. The utility o under y Washington Boulevard will providetfor our Clocal eshareeofathose funds. That effort would significantly enhance our cash flow situation in the city. In addition, it is proposed that the city pursue legislation which would provide legal authorization for the city to borrow funds in the 1985 Fiscal Year against 1986 revenues. This would provide for short-term operating cash to offset the $2 ,300,000 of deficit which would exist on September 30, 1985 to be absorbed in 1986. These actions by the city would resolve any Potential cash flow problems as well as eliminate any drastic Council Memo 95 March 19 , 1985- Page 6 effects on city services. City services would continue as currently ptovided "to- the citizens with no reduction in work hours or salary to city employees. In addition there will be no requirement for a property tax increase in the 1986 Fiscal Year other than the already programmed 3 cents increase for debt service purposes. The negatives of the program are that the city' s reserves would be essentially eliminated giving concerns in the event of any future fiscal problems during the next year and a half . In addition, significant deferrals of intra-structure improvements will be made. The deferral of equipment replacement will also have an impact potential on the delivery of city services. Finally, the adjustment in services and revenues for the 1986 budget will be made without the resultant tax rate decrease. While recognizing the significance of those actions, it is recommended that these total programs be pursued immediately . Karl Noll.enberger cc: Executive Team City Manager Exhibit "A" Equipment Purchase Cancellations Department Eg!4_ pment Total Sewer Maintenance_ , _ 3 3 Cu. yd . dump trucks 1 flatbed .4 wheel drive $ 43,396 .74 truck 12,591 .85 Parks 1 3/4 ton 6 pass. van 1 1/2 ton stakebody truck) 10,486 .85 1 2 ton stakebody truck ) 37 909 .00 Sanitation 1 1/2 ton pickup 2 1/2 ton pickups 8 , 368 .60 16► 231 . 16 1 3/4 ton pickup 1 bobtail trash truck 9,948 .00 37,725 .Q0 Water Reclamation 1 3/4 ton pickup 2 1/2 ton pickups 9, 278 ..68 16, 279 .5E Water Production 1 3/4 ton pickup 1 1/2 ton pickup 10, 322. 16 2 1/2 ton pickups 8 , 110.00 14,790 . 36 Drainage 2 6x6 dump trucks 6 14 cu. yd . dump trucks 135, 192.90 219 . 154 . 14 Street 1 14 cu. yd . dump truck 3 street sweepers 36 ,525 .69 170,985 .00 Water Distribution 5 1 ton pickups with Svc, 64,55Q.00 bodies 1 1 ton flatbed 3, 152.25 Health. 1 4 door sedan 8 ,295 . 10 Wa Ler Ccmme rcial G 4 door sedans 49, 70 .60 Fire 2 3/4 ton pickups 24, 444 .96 Police 1 van Sub -Total -16, 5- 5--5 . 00 Unpurchased Items 950►063 .60 Total 49 ,936 .40 $1 ,000,000 . 00 Exhibit "B" REVENUE SHARING REPROGRAMMING PROJECT AMOUNT TO BE REPROGRAMMED Julie Rogers Roof Replacement Health Center Renovation $ 70,000.00 Airport Improvements 39,100.00 Civic Center Roof Repair and Lighting 44,000.00 Caldwood Park Rehab 80,000.00 Recreation Trail 20,OOo.00 Best Years Center Roof and Miscellaneous 15,000.00 Fire Station Land 67,400.00 37,000.00 Lighting and Signals Street Rehabilitation 100,000.00 Intersection Improvements 420,000.o0 Rail Crossing Improvements 50,000.00 Asphalt Sea] Coat 10,000.00 200,000.00 Transfer to Sanitation Fund 419,000.00 TOTAL $1 ,571 ,Oo0.00