2012 2:00:00 PM

Monday, January 9, 2012 2:00 PM
Sparks Council Chambers, 745 4th Street, Sparks, NV 89431

General Business: 6.4

Title: Fiscal year 2011-2012 midyear review of General Fund personnel costs.

Petitioner/Presenter: Jeff Cronk, CPA, Financial Services Director/Jeff Cronk, CPA, Financial Services Director

Recommendation: Not applicable as this agenda item is intended for information purposes only.

Financial Impact: None - this is a mid-year review of General Fund personnel costs and whether they are being projected to finish the year within budget authority.

Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.

Agenda Item Brief: To review whether General Fund personnel costs are projected to remain within budget parameters based on actual results midway through fiscal year 2011-2012.

Background: City Council has requested mid-year information regarding the current fiscal year 2011-2012 personnel costs and whether they are expected to end the year within budget authority.

Analysis: The current fiscal year 2011-2012 budget provided flexibility in obtaining budget savings due to the fact that on-going negotiations with key personnel bargaining groups were not completed at the time the budget needed to be filed with the State Department of Taxation. This flexibility included allowing the City Manager to freeze vacant positions, reduce the budgeted transfer from the General Fund to the Capital Projects Fund, and/or implement additional wage and benefit concessions including the possibility of implementing a new high deductible health benefits plan. The conclusion of the negotiations resulted in wage and benefit concessions from the Department Head and Management groups to split the PERS rate increase equating to a 1.125% salary decrease, and from the Operating Engineers and Operating Engineers Supervisor groups who agreed to also split the PERS rate increase in addition to a 6.0% salary decrease. The proposal by the City to implement a new high deductible health plan was rejected, and in lieu of seeking further wage and benefit concessions to make up for the lost budget savings that were expected to be realized from a new health plan, the General Fund contributions to the Health Insurance Fund will be reduced by approximately $300,000 in fiscal year 2011-2012. This will potentially reduce the fund balance of the Health Insurance Fund depending upon how expenses end up. However, the Health Insurance Fund ended the previous fiscal year 2010-2011 with a healthy ending fund balance of just over $3.8 million, with an asset to liability coverage ratio of about 4.9 times. Additionally, the City Manager has utilized his authority to freeze several vacant positions, but has not needed to reduce the planned transfer to the Capital Projects Fund in order to meet budgetary commitments. For fiscal year 2011-2012, the General Fund’s budgeted personnel costs amount to approximately $40.1 million. The Financial Services Department has analyzed costs that have been incurred through December 15, and has concluded that total personnel costs are on track to equal approximately $40.0 million based upon current postings and expected outcomes for the rest of the year. In other words, projected personnel costs for the current fiscal year are expected to be very close to or under budget based upon the data available at this time. The biggest budgetary pressure so far this year has been public safety overtime costs. Based on what is being posted through the first half of the fiscal year, overtime costs are on pace to exceed budget by about $540k within the Police Department (from a budget of about $1.1M), and by about $60k within the Fire Department (from a budget of about $1.0M). Included in this number is about $92k that the Police Department has incurred attributable to their response on those days in which a state of emergency was declared during the Street Vibrations event.

Alternatives: Budget Management Options: Should these projections not come to fruition due to higher expenditures unforeseen at this time (for example, should overtime costs continue to run even higher than expected), the City Council has the option of authorizing the City Manager to utilize the Contingency budget which was set at $550k within the General Fund budget for the current fiscal year 2011-2012. NRS also authorizes the City Manager the discretion to transfer budget appropriation authority within General Fund functions as long as it does not increase the total appropriation authority for the Fund. For example, the City Manager is able to move budget authority from Services and Supplies to Salaries and Benefits within the Police Department budget (or even from the Police Department budget to the Fire Department budget since both fall under the Public Safety function) should the need arise. The City Manager may also transfer budget appropriation authority between General Fund functions and programs (for example, from General Government functions to Public Safety functions) as long as the City Council is notified and such actions are recorded in the minutes of a City Council meeting. In practice, budget adjustments between functions are routinely presented to the City Council as part of the regular claims and bills reports. Additionally, the City Council has the ability to authorize augmenting (i.e., increasing) the General Fund appropriation budget due to having more resources available than what was originally expected and budgeted. For example, the General Fund beginning fund balance (i.e., the ending fund balance from the previous fiscal year) was budgeted to equal $5.5 million for fiscal year 2011-2012. However, the actual beginning fund balance ended up equaling $6.8 million, or $1.3 million more than what was included in the final budget document filed with the State. Thus, the City Council has the ability to augment the General Fund fiscal year 2011-2012 budget by an amount not to exceed $1.3 million, thus, “spending down” the General Fund’s fund balance by an amount up to the excess achieved during the prior fiscal year, should the need arise. Per NRS rules, such an augmentation must be done by Council vote on a resolution no less than three days following a publication in the newspaper of the intended resolution vote.

Recommended Motion: No motion is requested or recommended as this agenda item was created for information purposes only.

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