Council Date: 1-25-05 Santa Monica, California

TO: Mayor and City Council

FROM: City Staff

SUBJECT: Review Mid- Fiscal Year 2004/05 Budget Status; Approve Associated Budget Changes; Adopt Resolution Establishing Various Classification and Salary Rates; Consider Status of Community Priorities and Results of Resident Survey and Provide Preliminary Direction on Preparation of Budgets for the Next Two Fiscal Years

INTRODUCTION

In preparation for development of the Fiscal Year (FY) 2005/06 budget and financial plan for FY2006/07, this report provides the mid-year status of the current budget, recommends associated changes including classification and compensation changes, provides an update on work efforts related to the key Community Priorities for the current year and reports the results of a survey of residents. The report proposes refinement of the budget preparation and adoption schedule and requests preliminary direction from Council to inform the development of the budget and work plan, including community priorities.

MID-TERM BUDGET REVIEW

Financial Review – General Fund

For the past several years, City Council has adopted General Fund operating and capital budgets that sought to bring projected expenditure and revenue growth in line with each other. Difficult choices and constrained project and program aspirations characterized the period. An annual emphasis on achieving expenditure savings and operating efficiencies and stronger than anticipated economic recovery this past year contributed to completing each year with positive General Fund positions.

Staff recommends that Council adopt mid-year expenditure changes. These include loan interest for the purchase of 1601 14^th Street ($160,000), hazard mitigation costs associated with capital construction ($1,393,869), Anticipated construction close out costs and other expenses, such as signage and furniture, for Virginia Avenue Park ($392,300), construction of streetscape and safety improvements for 20^th and Cloverfield Boulevard in the Pico Neighborhood ($540,000), payroll software improvements and fax/copier replacement ($200,000) and matching funds for a grant for a new Fire radio system ($224,100). Appropriations, totaling $299,066, of prior year unspent funds, funds that have been set-aside for implementation fo the Matrix study recommendation, and other adjustments bring the total General Fund appropriation to $3,209,335 million.

A summary of changes to the FY2004/05 Adopted Budget are detailed in the chart below (page 3). Descriptions of the proposed changes to revenues, expenditures and balance sheet transactions are shown on Exhibit A2. Exhibit A3 identifies budget changes requiring Council actions that transfer monies between departments but have no net impact on the adopted budget.

FY2004-05 MID-TERM BUDGET GENERAL FUND CHANGES (in millions)
	Revised Budget as of 12/31/03					Proposed Budget Changes		Revised Budget
Beginning Fund Balance	16.7					0.0		16.7
Revenues	170.8					4.5		175.3
Expenditures	(174.7)					(6.5)		(181.2)
Balance Sheet Transfers	4.3					0.0		4.3
Application of FY02/03 Savings to Offset Shortfall*	0.0					2.0		2.0
Ending Fund Balance	17.1					0.0		17.1
*Audited FY2002/03 saving of $5.7 million can be used to offfset budget changes
	Revised Budget as of 12/31/03					Proposed Budget Changes		Revised Budget
Beginning Fund Balance	16.7					5.7	*	22.4
Revenues	170.8					4.5		175.3
Expenditures	(174.7)					(6.5)		(181.2)
Balance Sheet Transfers	4.3					0.0		4.3
Ending Fund Balance	17.1					3.7		20.8
FY02/03 savings of $5.7
	Adopted Budget as of 7/1/04		Year-To- Date Changes 7/1/04 - 12/31/04		Total Budget as of 12/31/04	Proposed Midterm Budget Changes		Revised Budget
Beginning Fund Balance	32.5	^1	0.0		32.5	0.0		32.5
Revenues	192.4		0.0		192.4	2.0		194.4
Other Financing	0.0		27.1	^2	27.1	(0.0)		27.1