MIDYEAR BUDGET REVIEW 1996-97

Recommendation:

It is recommended that the City Council approve the revisions to estimated revenue, appropriations, budget transfers and fund balances as shown in the attached Budget Summary and Revenue Worksheet.

Background:

The City has conducted a Midyear Budget Review annually since fiscal year 1981-82. The review is a good tool to ensure that assumptions and estimates originally used to prepare the budget ten months earlier remain realistic.

Analysis:

Overview

The revenue changes recommended at midyear 1996-97 reflect a continuing improved economy and an enhanced revenue picture, evident, primarily in the tax and building or development revenue. Approval of midyear revisions results in an additional General Fund fund balance of $480,523, which transfers to the Compensated Absence, Insurance and Equipment Replacement funds, according to the method adopted last midyear. The analysis below will focus on revisions in the General Fund since that is the main operating fund of the City.

Revenue

(see Revenue Worksheet)

The net change in revenue in the General Fund is $639,846. Some of the most notable changes are mentioned below.

Taxes

Transient Occupancy Taxes (TOT) and Utility User Taxes (UUT) are being adjusted upward, based on first half revenue. Audits of the TOT and UUT and turnover in hotel management contributed to the first half increases.

Sales tax for the first two quarters is up 13% over 95-96. As reported at the last City Council meeting, sales tax was up 4% overall last year. Based on the first half performance, the estimate is being increased by $100,000.

The chart on the next page compares sales tax for the first half of this year to last year by the top ten categories.

Sales Tax

Comparison of First Half of 1996/97 to 1995/96

Top Ten Categories

	FIRST HALF	FIRST HALF	% OF CHANGE	RANK PREVIOUS
BUSINESS CLASS	1995-96	1996-97	PREVIOUS YEAR	YEAR
EATING/DRINKING PLACES	$175,258	$196,243	11.97%	1
AUTO DEALERS	$118,995	$158,357	33.08%	2
GROCERY STORES*	$99,274	$91,239	-8.09%	3
BUILDING MATERIALS	$40,808	$43,345	6.22%	4
SPORTING GOODS/BICYCLES	$35,393	$33,601	-5.06%	5
SERVICE STATIONS	$25,078	$29,449	17.43%	7
SPECIALTY STORES	$27,108	$29,539	8.97%	6
AUTO REPAIR SHOPS/GARAGES	$19,408	$19,252	-0.80%	9
WHOLESALE TEXTILES/FURNISHINGS	$19,773	$22,001	11.27%	8
HOUSE HOLD AND HOME/ FURNISHINGS	$9,972	$15,778	58.22%	13
*Skewed due to reporting aberration

Licenses And Permits, Service Charges

Growth in building permits and plan check fees comprise the largest increases in these categories. Building permit revenue increased 18% over the first half of last year and plan checks increased 69%.

Use Of Money And Property

The overall Interest estimate is remaining at $650,000, however, distribution of interest between funds is being revised to reflect changed cash balances. For example, payout of Parcel B funds decreases cash in the 4% UUT Fund, thereby decreasing interest earnings to that fund.

Additional Appropriations

The following additional appropriations are requested.

FUND/DEPARTMENT -------- AMOUNT -------- EXPLANATION

GENERAL FUND

Police

Equipment/More --------------------------- $5,000 -------------------- Police equipment.

than $1,000 --------------------------------------------------------This money was donated by:

-----------------------------------------------------------------Manhattan Ford, Manhattan Beach

-----------------------------------------------------------------------------------$2,500

-----------------------------------------------------------------Frank Scotto Towing, Torrance

-----------------------------------------------------------------------------------$2,500

Fire

Regular Overtime -----------------$56,250 -------------Overtime costs as a result of MOU

Community Development/Planning Division

Contract Services/Private ----------$6,500 -------------$500: Planning/traffic engineering

----------------------------------------------------------------------------------recommendations.

---------------------------------------------------------------$6,000: Fee for 300' noticing for -------------------------------------------------------------------doubled Planning caseload & City -----------------------------------------------------------------Council appeals; corresponds to -------------------------------------------------------------------revenue increase.

Office Operation Supplies----------- $4,000 -------------$2,000: Graphics, exhibits for ----------------------------------------------------------------------coastal permits and other ---------------------------------------------------------------------------development activity.

----------------------------------------------------------------$2,000: Sign handbook; project

-----------------------------------------------------------------completed for printing.

Community Development/Building Division

Contract Services/Private----------- $147,140 -----------$135,460: Additional plan check --------------------------------------------------------------------fees corresponding with increased -------------------------------------------------------------------revenue.

-----------------------------------------------------------------$8,000: Increased Building --------------------------------------------------------------------------Inspector hours due to continued -------------------------------------------------------------------heavy workload.

----------------------------------------------------------------$2,500: Microfiche 4,022 drawings

-------------------------------------------------------------$1,180; 1) Special inspections/studies, ----------------------------------------------------------------structural engineer for URM/other ----------------------------------------------------------------buildings. 2) Pacometer testing, -------------------------------------------------------------------Bijou, Hermosa Hotel, 321 Pier --------------------------------------------------------------------Avenue: $500.

Conference/Training -------------------$850 --------------Tuition reimbursement for summer -----------------------------------------------------------------school.

Community Resources

Maintenance Materials ---------------$1,800 --------------Donation from Manhattan Ford:

------------------------------------------------------------------volleyball nets.

CIP 622 --ADA requirements -----$162,163 -------------Appropriate funds from the Cable

----------------------------------------------------------------Television Franchise Transfer Fees.

TOTAL GENERAL FUND-------------------------------------- $383,703

LIGHTING AND LANDSCAPING FUND

CIP 182 -- Contract Services/Private -----$20,000 ------Utility undergrounding

CIP 183 -- Contract Services/Private -----$20,000 ------Utility undergrounding.

TOTAL LIGHTING AND LANDSCAPING FUND----------- $ 40,000

STATE GAS TAX FUND

CIP 160 Downtown Plan

Contract Services/Private ------------$7,010 -----------Appropriate TDA - Article 3 (Local)

---------------------------------------------------------------funds for handicap ramps.

TOTAL STATE GAS TAX FUND ----------------------------------$ 7,010

GRANT FUND

CIP 620 Pier Renovation

Contract Services/Private------------$90,000------------- Additional $90,000 from FEMA -------------------------------------------------------------------for Pier repair.

TOTAL GRANT FUNDS ---------------------------------------------$90,000

ASSET FORFEITURE FUND

Police Department

Equipment ----------------------------$30,676 ---------------Replacement of analog, reel-to-----------------------------------------------------------------------reel dictaphone with digital -------------------------------------------------------------------------cassette dictaphone for dispatch --------------------------------------------------------------------center; existing one 10 years old ---------------------------------------------------------------------and will be obsolete in a year.

TOTAL ASSET FORFEITURE FUND -------------------------------$30,676

Funding of Liabilities

Compensated Absences/Insurance Fund

Progress was made in both of these funds toward providing funding for long term liabilities. The allocation method for surplus funds from the General Fund and the retirement system, which was adopted last midyear review, produces estimated year end fund balances in the Compensated Absences Fund and Insurance Fund of $487,629 and $413,894, respectively. The actual fund balance will depend on compensated absence payouts in the Compensated Absence Fund and claims liabilities in the Insurance Fund.

Summary

Midyear recommendations reflect the City's continued progress toward a sustainable organization with adequate funding levels for current operations, long term liabilities and future needs.

Work on the 97-98 budget begins this month!