Budget Committee September 05, 2023   9/5/2023

Good afternoon.

My name is Emily Koski and I'm the chair of the Budget Committee.

Councilmember Payne.

Present.

Wonsley.

Present.

Rainville.

Present.

Ellison.

Here.

Osman is absent.

Goodman is absent.

Jenkins is absent.

Chavez.

Present.

Chugtai.

Present.

Johnson.

Let the record reflect that we have a quorum.

Colleagues, we have two items on today's agenda, one of which is slated for discussion.

I will note that we have a hard stop for our meeting today at 1 25 as we have Congresswoman Omar scheduled to present at today's Committee of the Whole meeting at 1 30.

If we're not yet finished with our discussion, we will continue the discussion at our September 19th Budget Committee meeting.

So we will begin with item number one, which is a resolution authorizing the transfer of temporary American Rescue Plan Act funding for the Community Relations Specialist position supporting the Green Cost Share project from the Regulatory Service Department to the Health Department.

I'll move approval of this item and ask if there are any questions or discussion on this item.

I am not seeing any on this motion to approve all those in favor say aye.

Aye those opposed say who pose say nay.

Item number two on our agenda today is a status report from our Finance and Property Services Department on the results of select city funds for the second quarter.

I will again invite Lyle Hodges to give that presentation.

Chair Koski, Vice Chair Baumosano, members of the committee, thank you for having me.

As noted, I'm here to present the financial status report as of second quarter 2023.

This is for the period through June 30th of 2023.

To start off with, we have an overview.

A few positive notes for the city's financial status.

Just last month in August, we were upgraded from AA plus to AAA by the Fitch rating agency.

And we were also confirmed to AAA by Standard and Poor's.

We now hold the highest possible credit rating from both of those agencies.

And that is the first time since 2016.

We're also seeing a rebound in our parking revenues.

They are currently projected to finish the year above budget.

We also see that local taxes are projected to exceed the 2022 amounts and for the second year in a row will exceed budget as projected.

And then finally, we are spending our ARPA dollars as planned to support activities in response to both the public health and the economic impacts of the pandemic.

Continuing on with the overview, overall cash and investments as of June 30, 2023 is just over $1.1 billion.

It's a slight decrease of $29.5 million from where we were at June 30, 2022.

We do continue to meet both fund balance and cash reserve minimums in all but just a few funds.

You can see here the self-insurance fund is going to not meet its net position goal and that's due to long-term liabilities that we book

related to workers comp and liability claims as projected by the actuaries.

We do have a cash balance in that fund of $130.1 million as of June 30.

The parking fund, as I mentioned, we are recovering.

However, cash will not be restored to the target position that we'd like to see yet.

and then finally Property Services is planning to do some additional spending this year related to projects that have been delayed from previous years and that will bring them down to a cash balance that's less than we would target.

Moving into the General Fund, again, this is where we account for all financial resources except for those that are required to be accounted for elsewhere.

Our fund balance is projected to end 2023 at 177.2 million.

That's just a slight increase of 3.5 million from where we ended 2022.

That fund balance of $177.2 million does exceed our 17% minimum fund balance policy which would be equal to around $110 million based on the current mayor's proposed 2024 budget.

Originally we planned to spend about $4.8 million of fund balance out of the general fund.

We had the rollovers earlier this year of unspent appropriations and that increased the planned use of fund balance.

cash balance.

At the end of last year we had 195.4 million in cash in the general fund and as of June 30th that cash balance is about 54.7 million.

Looking at revenues by category, this bar chart on the top half shows the budget in solid blue there, and then the projected amount is the right-hand column.

You can see in most categories we are projecting to be around budget or slightly over budget.

bring our attention to the state AIDS line.

We can see here that there's a significant over collection projected and that's resulting from the legislative or the state legislature's one time public safety aid.

The city is currently projected to receive about $19 million at the end of 2023 related to that one time funding.

Elsewhere, permits are forecast to be about equal because of a mix of over and under budget on business and non-business related permits.

We do expect our investment earnings to exceed budget by about $5.9 million and we also expect franchise fees to come in about $3.4 million above the budget amount.

This next slide shows general fund revenue as a percent of budget compared to prior years.

We do expect to finish 2023 at about 104% of the budgeted amount, which would be slightly more than we see in the past three years.

We've seen about 100.2% of our collections.

And again, this is all due to that public safety aid, the one time funding from the state legislature.

Switching to expenditures, again this is actually the first quarter that we are presenting expenditures by this departmental categorization so this is the newly reorganized names and categories for our general fund expenditures and you can see

Many of the categories or many of the departments are projected to be under budget.

We do have a slight overage projected for public works.

That's often related to snow earlier in the season as well as our work for others projects which are also offset by some revenue.

Public safety is also projected to exceed budget by year end and that's related to both MPD and fire staffing costs.

and then finally that last line of the table below is other and in that category that's significantly under budget is our contingency funding which we currently don't project to spend by year end and then again we've got general fund expenditures the budget versus projected amounts for the current year comparing it to previous years

For 2023 we are projected to spend about ninety seven point two percent of the budget where historically we spend about ninety five percent of the budget The next few slides will group the different fund categories together

The first category of funds that we'll take a look at are the special revenue funds.

This is where we account for and report the proceeds of specific revenue sources.

I've got the significant special revenue funds listed there.

For year end 2023, we are projecting fund balance to end at $370.5 million, a slight increase compared to year end 2022.

We are projecting a decrease in cash in this group of funds, a total decrease of about $70 million

And that decrease is related to ARPA, so we received ARPA funding up front, we have the cash in hand, and as we get through the next couple of years we'll spend that down, so we'll see the cash balance drop in this group of funds due to that.

And this slide here shows us a fund by fund breakdown of fund balance and cash for 2022 versus 2023 projected.

You can see the increases and decreases by fund on this slide.

The next fund group are the Internal Service Funds.

As the name implies, we use these to account for goods and services provided internally to other city departments.

And we've got six primary Internal Service Funds listed there.

The total net position for this group of funds for year end 2023 is projected to decrease just slightly from where we were in 2022.

Total cash in this group of funds also projected to decrease just slightly from where we were in 2022.

again this group of funds provides services internally so we can manage their spending and services provided by looking at other departments budgets and as I mentioned before the Property Services Fund is planning to spend down some of their cash on delayed projects from previous years.

and then the next slide here shows us again a fund by fund breakdown comparing 2022 to 2023 projected for both cash and net position by fund.

And then finally, we have our enterprise funds.

So these are the business type activities of the city.

It includes all of our utility operations as well as the CPIT Enterprise Fund.

In this group of funds, we have a total net position projected at year end 2023 of about 1.1 billion, a slight increase from where we were at the end of 2022.

Projected cash at the end of the year is about 111.5 million, which is an almost $20 million decrease from where we were at the end of 2022.

In this fund group, cash is generally stable from year to year.

However, storm water and water are expected to draw down some cash to work on capital projects rather than use bond funding.

So that's where we see the largest decreases.

And this final slide shows us, again, a fund-by-fund breakdown, 2022 actual versus 2023 projected for cash and net position by fund in our enterprise funds.

Thank you, Mr. Hodges.

Are there any questions for Mr. Hodges?

Thank you Chair Koski.

Not necessarily a question for Mr. Hodges, but I did want to just acknowledge and shout out Director Dai and her team for our credit ratings.

I think that's a significant action for the city and just want to say job well done.

Thank you.

Thank you, Madam Chair.

For our staff here, can anybody look in the crystal ball and anticipate the value of the downtown skyscrapers as they sell for tens of millions of dollars lower?

And I know property tax kind of has a lag effect.

through the chair, Councilmember Rainville, it's really difficult to predict what the valuations will be.

This would be a good question for the city assessor to determine what

what she might predict for valuations.

But what I can say is that our property tax collections are generally in the 98 percentile for collections.

Thank you very much.

I'm wondering, Madam Chair, if to have a good discussion about our, not just this budget, but the future budget, we get some feedback from the assessors at one of these budget meetings about potential loss of value in these downtown skyscrapers.

Yes, Council Member Rainville, yep, we will put that on our list.

I think it's an excellent idea, so thank you.

Thank you, Chair Koski.

I had a couple of questions.

I don't know which staff might be appropriate for this, but on slide 3, under self-insurance, I just wanted to see if someone could explain what does the loan term actuarially determine liabilities, what that part means.

Sure, Chair Koski, Council Member Wonsley, so the liability that we book in any given year in the self-insurance fund is heavily determined by an actuarial study as you noted there and so they take a look at the population of claims and do some actuarial work to determine what they think may occur in the future and so that's what that comment is meant to represent that we we book an amount based on their determination

I can't remember proportionally what it was in the actual actuarial study.

Chair Koski, Council Member Wonsley, do you mean like the cumulative liability for all of them?

And I can also look back at the actuary report too, but wasn't sure if, yeah, wanted to make sure it was referring to that report in

the estimates that it had projected that I think in my meeting with Director Dye we might be coming under based off of our current budget.

Next question on slide four.

You shared that again, you know, projected towards the end of 2023, we'll have about 107

the $7 million in the fund balance, and our minimum balance is around $110 million, so that leaves about $67 million left.

Chair Koski, Councilmember Wonsley,

The short answer is it depends, unfortunately, on that.

I mean, obviously, as we work through the year and different things come up, we find other ways to commit dollars.

So, for example, with the Mayor's 2024 budget, some of those funds would have been committed in terms of, you know, use of fund balance in that plan, and then as you all make decisions, that number can change.

Okay, and just also getting clarity on this.

So the uncommitted whatever is left surplus wherever you want to frame it as that will go back into the general fund unless council allocates it otherwise during the first few months of 2024.

Yeah.

Yep.

So generally speaking, whatever we end up with at the end of the year in terms of unspent budget, we evaluate whether it can be rolled forward into a future year for for committed needs that were incurred in 2023.

And so that discussion happens in early 2024.

Gotcha.