Wednesday, February 07, 2007

79% of Fiscal Year 2005/06 Capital Improvement Program Funded from Capital Improvement Reserves

For the Fiscal Year 2005/06, the City Council of Carmel-by-the-Sea transferred approximately $612,000 from the Capital Improvement Reserves to the General Fund in order to fund a Capital Improvement Budget of $772,135. In other words, 79% of the funding for Capital Improvement Projects in FY 2005/06 was from the Capital Improvement Reserves. While the practice of transferring funds from reserves to the General Fund to fund projects in not unusual, it is atypical for a city to have 80% of its annual budget in reserves ($9.6 million reserves of a total $11.9 million budget).

Furthermore, in City Administrator Rich Guillen’s May 2006 Budget Message, he stated the following:

“Subsequent Fiscal Years 2007/2008 and 2008/2009 return to prior year funding levels or in the range of $600,000 to $700,000. The success of returning to this spending level for subsequent Fiscal Years will depend on how prudent expenditures are managed, whether revenues will continue to grow, and the availability of grant funding. The sale of non-working City assets, such as, Flanders Mansion, Rio Park and other City properties can also contribute to a successful reinvestment in Capital Improvement Projects.”

As background on Capital Improvements:
Actual Capital Improvements (FY 2004/05): $321,166
Revised Capital Improvements (FY 2005/06): $772,135
Proposed Capital Improvements (FY 2006/07): $69,594
Proposed Capital Improvements (FY 2007/08): $344,321
Proposed Capital Improvements (FY 2008/09): $394,000

While City Administrator Guillen claims that the city’s objective is to return to funding levels of $600,000 to $700,000, the proposed budget figures for FY 2007/08 and FY 2008/09 do not support this contention.

In city Administrator Guillen’s June 2006 Budget Questions & Answers, he stated:

"Staff agrees with the need to maintain and improve our infrastructure. However like many cities, capital outlays and capital improvements are deferred in place of providing public services. When revenues are generally flat as has been the case in recent years, the only capital projects and capital outlays that receive funding are typically through grant programs.”

And in City Administrator Guillen’s May 2006 Budget Message, he stated:

"The remainder of the Capital Outlays and Capital Improvements projects were deferred to future Fiscal Years, assuming that growth of revenues will fund those items. Based on the large capital demands for future years, the City will need some infusion of cash to fund these projects, such as from the sale of City properties or through some other special financing mechanism."

To reiterate, it is atypical for cities have reserves totaling 80% of the city’s annual budget. With the city’s millions and millions of dollars in deferred maintenance, it is fiscally imprudent to maintain the current level of reserves. Moreover, the City of Carmel-by-the-Sea has never publicly offered any rationale for the present fiscal situation.

And in City Administrator Guillen’s May 2006 Budget Questions & Answers, he stated:

“The Capital Improvement Reserve fund is a separate reserve fund established in 1988. It has no minimum funding requirement. The proposed transfers will add to the reserve fund to make up for some of the amounts transferred to the General Fund for FY 05-06’s capital improvement projects, including the Fire Department seismic retrofit.”

Again, the city’s reserve funds should be brought into conformance with other cities; that is, 10% -20% of annual budget in reserve funds. For FY 2006/07, this means using the surplus, not to reinfuse the reserves, but to use from the General Fund to fund deferred maintenance projects. Otherwise, the City of Carmel-by-the-Sea’s infrastructure and historical and cultural assets will continue to deteriorate and in the case of the Scout House and Flanders Mansion, not even be available to the public.

References:
CITY OF CARMEL-BY-THE-SEA CALIFORNIA
DRAFT BUDGET
FISCAL YEARS 2006/07 THROUGH 2008/09


CAPITAL IMPROVEMENTS PROGRAM

Funds are budgeted to provide for planning and construction of major capital improvements. The capital projects, submitted by departmental staff and their respective commissions or boards, are selected through an in-depth evaluation prioritization process and then reviewed and approved by the City’s Planning Commission as part of the City's Five-Year Capital Improvement Program.

Proposed Capital Improvements (2007/08)
4th Avenue Riparian Restoration $ 89,321
Parking lot-Sunset Center $ 50,000
Tennis Court Reconstruction $ 40,000
Repave Mission between 3rd & 4th $ 150,000
City Hall Carpeting (Admin area) $ 15,000
Subtotal $ 344,321

Capital Improvements (2008/09)
Parking lot-Del Mar $ 159,000
Underground Water Tank/Booster Pump $ 100,000
Pedestrian Path - S. Antonio bet 2nd & 4th $ 60,000
City Hall Carpeting (Bldg/Planning area) $ 25,000
Scout House ADA Upgrades (design work) $ 50,000
Subtotal $ 394,000

Proposed Capital Improvements (2006/07)
4th Avenue Riparian Restoration $ 44,594
Del Mar Restrooms $ 25,000
Subtotal $ 69,594

Revised Capital Improvements (2005/06)
$ 15,227 Professional fees-Sunset Ctr Roof
$ 12,707 Sunset Yoga Ctr Repairs
$ 577,285 Fire Dept Seismic Retrofit
$ 119,616 Resurface Beach Bluff Pathway
$ 9,300 4th Avenue Riparian Restoration
$ 8,000 Forest Hill Park Improvements
$ 18,000 Forest Theater Fire Sprinklers
$ 12,000 Sunset Ctr Roof/Fire System
$ 772,135 Subtotal

Actual Capital Improvements (2004/05)
$ 321,166


CITY COUNCIL AGENDAS (FY 2005/06)

Meeting Date: July 5, 2005
Prepared by: Mike Branson
City Council
Agenda Item Summary
Name: Consideration of a Resolution awarding a professional services agreement for preparation of a preliminary design for the Fourth Avenue Riparian Habitat Restoration project to Hall Landscape Design at a fee not-to-exceed $25,000 and authorizing a transfer of funds from Capital Improvement Reserves to the general fund Capital Improvement Account.

The Capital Improvement Reserve Fund will be reimbursed from the Grant Funds.

City Council Agenda
Regular Meeting
September 6, 2005

VII. Consent Calendar
C. Consideration Of A Resolution Authorizing The Transfer Of Funds In An Amount Of $12,707.06 From The Capital Improvement Reserve Account For Repairs To The Yoga Center Cottage At The Sunset Center.

City Council Agenda
Regular Meeting
October 4, 2005

VII. Consent Calendar
D. Consideration Of A Resolution Authorizing The Transfer Of Funds In An Amount Not To Exceed $12,000 From The Capital Improvement Reserve Account For The Erection Of A Roof Structure At The Sunset Center.

City Council Agenda
Regular Meeting
November 1, 2005

VII. Consent Calendar
E. Consideration of a Resolution authorizing the transfer of $68,046 from the Capital Improvement Reserve Account 01-24013 to cover costs associated with the temporary move of the Fire Department.

City Council Agenda
Regular Meeting
February 7, 2006

VII. Consent Calendar
C. Consideration of a Resolution authorizing the City Administrator to transfer funds in an amount not to exceed $493,907 from the Capital Improvement Reserve Fund to the General Fund for the Fire Station Seismic Retrofit and Remodel Project.

X. Resolutions
B. Consideration of a Resolution authorizing the transfer of the fiscal year 2004-05 year-end surplus to the Capital Improvement Reserve Fund.

Staff Recommendation: Approve the transfer of $493,907 from the Capital Improvement Reserve Fund to the General Fund. A portion of the costs, $280,000, was already budgeted as a capital improvement in the fiscal year 05-06 budget.

Important Considerations: Below is an accounting of the Capital Improvements Reserve Fund:
Balance July 1, 2005 $1,370,334
Projects approved per resolution since July (225,228)
Other budgeted projects, not yet started (100,600)
Subtotal $1,044,506
Amount needed to cover fire station retrofit (493,907)
Estimated balance at June 30, 2006 $ 550,599

3 comments:

Anonymous said...

It has been difficult for many people, who pay attention to what goes on in Carmel, to understand why the city council has been reluctant to spend reserve funds that actually exist to be spent when city income is down. It has also been difficult to understand why the city council insists on keeping reserves that are four to eight times as high as they need to be even in the best of times. Further, why does the city council refuse to consider realistic new sources of revenue when new revenue is sorely needed to keep Carmel from continuing down the road of physical deterioration and inadequate staffing and services?
Perhaps there is someone with an idea about what is motivating the mayor and city council who would be willing to explain it to the rest of us.

Anonymous said...

She who controls the purse strings has the power.

Anonymous said...

And those who vote for her sanction her mumbo jumbo and abuses of power!

For some of us, it has been distressing beyond belief to watch some Carmel voters vote over and over again for Sue when better candidates, like Barbara, Dick and even Dogman, run against her. Look in the mirror folks! It is the majority of voters who are somehow enthralled by her hocuspocus. Why is it that a city with affluent, supposedly well-educated residents give her the power?