REPORT TO COUNCIL
SUBJECT
Title
Action on Monthly Financial Status and Investment Reports for February 2020 and Approve the Related Budget Amendments [Council Pillar: Enhance Community Engagement and Transparency]
Report
BACKGROUND
In compliance with the Charter of the City of Santa Clara and the adopted Investment Policy, the following reports for February 2020 are submitted for your information. The financial review as of February 29, 2020 provides a year-to-date financial update to the City Council for the current fiscal year. Analysis of the revenues collected and all expenditures through February 29, 2020 measures the level of adherence to the established resource allocation plan and allows the City to monitor and project revenues and expenditures throughout the year.
The Adopted Budget incorporates the estimated revenues and planned expenditures for all funds. The attached Financial Status Report provides the budget to actual revenue and expenditure summaries for the General Fund, Special Revenue Funds and Enterprise Operating Funds, as well as expenditure summary for Capital Improvement Funds and Fund Reserve Balances. Any significant variances are explained in the report.
In accordance with City Council Policy 051 - Donations to the City, included in this report is a monthly activity and annual summary of donations received by department. Although the requirement of the policy is to report quarterly, in its ongoing effort to streamline reporting, the City includes this information monthly in the financial status report.
DISCUSSION
Monthly Investment Report (Attachment 1)
All securities held by the City of Santa Clara as of February 29, 2020 were in compliance with the City’s Investment Policy Statement regarding current market strategy and long-term goals and objectives. All securities held are rated “A” or higher by two nationally recognized rating agencies. There is adequate cash flow and maturity of investments to meet the City’s needs for the next six months.
The City’s investment strategy for February 2020 was to invest funds not required to meet current obligations, in securities listed in the prevailing Investment Policy Statement, with maturities not to exceed five years form the date of purchase. This strategy ensures safety of the City’s funds, provides liquidity to meet the City’s cash needs, and earns a reasonable portfolio return of 1.97%.
Monthly Financial Status Report (Attachment 2)
The attached report summarizes the City’s financial performances as of February 29, 2020. Financial analysis for the report is provided for the General Fund, select Special Revenue Funds, Enterprise Operating Funds, and Capital Improvement Funds.
With eight months or 66.7% of the fiscal year complete, General Fund revenues are trending slightly below budget at 62.5%, largely due to the change in budgeting methodology, moving the City from a cash basis to a modified accrual basis. General Fund departmental expenditures are at 60.7% of budget which is within budgeted expectations. Total revenues for Enterprise Funds (Electric, Water, Sewer, Cemetery, Solid Waste, and Water Recycling) are at 53.4% while total expenses are at 57.8%.
In the month of February, the City received $150 in donations, bringing the year-to-date donations total to $123,359.
It should be noted that the COVID-19 response and the current economic downturn are expected to significantly impact the City’s revenue collections, particularly transient occupancy tax, sales tax, and fees for services and classes. On a national level, economic conditions have worsened in a very short period of time and many economists are now projecting one of the worst recessions in generations.
While there is very limited data available, the decline in revenues could result in a General Fund shortfall of approximately $8 million - $10 million in FY 2019/20 and over $20 million in FY 2020/21. In response to this projected drop in revenues, several cost savings/budget balancing measures were implemented April 1, 2020 to generate current year savings as well as ongoing savings that will be used in FY 2020/21 and in the development of the FY 2021/22 and FY 2022/23 Biennial Operating Budget. These actions include a hiring freeze and controls around overtime, as-needed staff, marketing, travel, technology and vehicle purchases.
While actions are being taken to reduce the General Fund impact in FY 2019/20, the General Fund may end the year in a negative position and, in that case, would have to draw on the Budget Stabilization Reserve to balance the budget in 2019/20. The City has $80 million in this reserve to address any negative balance. Further discussion is included in Attachment 2.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
FISCAL IMPACT
Approval of the FY 2019/20 Budget Amendments included in Attachment 3 is recommended in this report. From time to time, adjustments to the FY 2019/20 Adopted Budget are required to correct for budgets based on actual tracking, more appropriately align budgets with actual charges and correct for inadvertent errors. Attachment 3 details amendments trueing up various project costs in the capital funds and reconciling items in operating funds.
Also included in the budget amendments are appropriations for the food distribution program. The reallocation of funds from the City Manager’s Office ($70,000) and Non-Departmental ($550,000) operating budgets for the food distribution program is included to set aside funds to cover Food Distribution Program costs related to COVID-19 while the City seeks FEMA Reimbursements. The Food Distribution Program was conducted to ensure the health and safety of our residents who are at risk of needing meals in light of the COVID-19 pandemic. In addition, anticipated donations from the Mission City Community Fund is included for the food distribution program to cover costs not reimbursed by FEMA.
COORDINATION
This report has been coordinated with the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>.
RECOMMENDATION
Recommendation
Note and file the Monthly Financial Status and Investment Reports for February 2020 as presented and Approve Related Budget Amendments.
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Monthly Investment Report February 2020
2. Monthly Financial Status Report February 2020
3. FY 2019/20 Budget Amendments