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2019 06 05 FAC Special MeetingNOTICE OF SPECIAL MEETING OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION TO THE COMMISSIONERS OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION: NOTICE IS HEREBY GIVEN that a special meeting of the La Quinta Financial Advisory Commission is hereby called to be held on Wednesday, June 5, at 4:00 p.m. at La Quinta City Hall located at 78495 Calle Tampico, La Quinta, CA 92253 for the following purpose: CONSENT CALENDAR 1.APPROVE MINUTES DATED MAY 15, 2019 2.RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED APRIL 30, 2019 BUSINESS SESSION 1.APPROVE WRITE-OFF OF OUTSTANDING INTERFUND LOANS STUDY SESSION 1.DISCUSS FISCAL YEAR 2018/19 FOURTH QUARTER BUDGET REPORT 2.DISCUSS PROPOSED FISCAL YEAR 2019/20 BUDGET DEPARTMENT REPORTS 1.AWARD FOR EXCELLENCE IN GOVERNMENT FINANCE 2.VERBAL UPDATE ON BANKING AND MERCHANT SERVICES 3.VERBAL UPDATE ON THE INVESTMENT STRATEGY SUB-COMMITTEE FOR PUBLIC AGENCY RETIREMENT SERVICE TRUST 4.VERBAL UPDATE ON REQUEST FOR INFORMATION FOR INVESTMENT BROKERS Dated: May 30, 2019 /s/ W. Richard Mills W. RICHARD MILLS, Chairperson Attest: JESSICA DELGADO, Management Assistant DECLARATION OF POSTING I, Jessica Delgado, Management Assistant, do hereby declare that the foregoing notice for the La Quinta Financial Advisory Commission special meeting of June 5, 2019 was posted on the City’s website, near the entrance to the Council Chamber at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and at 51-321 Avenida Bermudas, on May 30, 2019. Jessica Delgado, Management Assistant FINANCIAL ADVISORY COMMISSION AGENDA 1 JUNE 5, 2019 SPECIAL MEETING FINANCIAL ADVISORY COMMISSION AGENDA CITY HALL STUDY SESSION ROOM 78-495 Calle Tampico, La Quinta SPECIAL MEETING ON WEDNESDAY, JUNE 5, 2019 AT 4:00 P.M. Roll Call: Commissioners: Batavick, Hunter, Lopez, Rosen, Turbow, Twohey and Chairperson Mills PLEDGE OF ALLEGIANCE PUBLIC COMMENT At this time members of the public may address the Commission on any matter not listed on the agenda. Please complete a “Request to Speak” form and limit your comments to three minutes. The Financial Advisory Commission values your comments; however, in accordance with State law, no action shall be taken on any item not appearing on the agenda unless it is an emergency item authorized by GC 54954.2(b). CONFIRMATION OF AGENDA ANNOUNCEMENTS, PRESENTATIONS AND WRITTEN COMMUNICATIONS – None CONSENT CALENDAR 1.Approve Minutes Dated May 15, 2019 2.Receive and File Revenue and Expenditure Report Dated April 30, 2019 BUSINESS SESSION 1.Approve Write-Off of Outstanding Interfund Loans STUDY SESSION 1.Discuss Fiscal Year 2018/19 Fourth Quarter Budget Report 2.Discuss Proposed Fiscal Year 2019/20 Budget DEPARTMENTAL REPORTS 1.Award for Excellence in Government Finance Financial Advisory Commission agendas and staff reports are now available on the City’s web page: www.laquintaca.gov FINANCIAL ADVISORY COMMISSION AGENDA 2 JUNE 5, 2019 SPECIAL MEETING 2. Verbal Update on Banking and Merchant Services 3. Verbal Update on the Investment Strategy Sub-Committee for Public Agency Retirement Service Trust 4. Verbal Update on Request for Information for Investment Brokers COMMISSIONERS’ ITEMS ADJOURNMENT The La Quinta Financial Advisory Commission will hold a special meeting on August 7, 2019 and the next regular quarterly meeting of the La Quinta Financial Advisory Commission will be held on November 13, 2019. Both meetings will be held at the La Quinta Study Session Room, 78-495 Calle Tampico, La Quinta, CA 92253 and commencing at 4:00 p.m. DECLARATION OF POSTING I, Jessica Delgado, Management Assistant, of the City of La Quinta, do hereby declare that the foregoing Agenda for the La Quinta Financial Advisory Commission special meeting was posted on the City’s website, near the entrance to the Council Chamber at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and 51-321 Avenida Bermudas, on May 30, 2019. DATED: May 30, 2019 Jessica Delgado, Management Assistant City of La Quinta, California Public Notices The La Quinta City Study Session Room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the City Clerk’s office at (760) 777-7092, twenty- four (24) hours in advance of the meeting and accommodations will be made. If special electronic equipment is needed to make presentations to the Financial Advisory Commission, arrangements should be made in advance by contacting the City Clerk’s office at (760) 777-7092. A one (1) week notice is required. If background material is to be presented to the Financial Advisory Commission (FAC) during a special FAC meeting, please be advised that eight (8) copies of all documents, exhibits, etc., must be supplied to the Management Assistant for distribution. It is requested that this take place prior to the beginning of the meeting. Any Writings or documents provided to a majority of the Financial Advisory Commission regarding any item(s) on the agenda will be made available for public inspection at the Community Development counter at City Hall located at 78-495 Calle Tampico, La Quinta, California, 92253, during normal business hours. FINANCIAL ADVISORY COMMISSION MINUTES 1 MAY 15, 2019 REGULAR QUARTERLY MEETING FINANCIAL ADVISORY COMMISSION MINUTES WEDNESDAY, MAY 15, 2019 CALL TO ORDER A regular quarterly meeting of the La Quinta Financial Advisory Commission (Commission) was called to order at 4:00 p.m. by Vice-Chair Twohey. PRESENT: Commissioners: Batavick, Hunter, Lopez, Rosen, Turbow, and Vice- Chair Twohey ABSENT: Chairperson Mills PLEDGE OF ALLEGIANCE Commissioner Lopez led the audience in the Pledge of Allegiance. PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA – None CONFIRMATION OF AGENDA – Confirmed ANNOUNCEMENTS, PRESENTATIONS, AND WRITTEN COMMUNICATIONS 1.HIGHWAY 111 CORRIDOR AREA PLAN Senior Planner Flores gave a brief presentation on the 3-day charrette related to the Highway 111 Corridor Area Plan that was held on April 24, 25, and 26. He explained and gave details to the commission regarding the different sessions that took place. CONSENT CALENDAR ITEMS 1.APPROVE FINANCIAL ADVISORY COMMISSION MINUTES DATED April 10, 2019 2.RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED MARCH 31, 2019 3.RECEIVE AND FILE THIRD QUARTER 2018/19 TREASURY REPORTS FOR JANUARY, FEBRUARY, AND MARCH 2019 Motion – A motion was made and seconded by Commissioners Rosen/Batavick to approve the Consent Calendar, as submitted. Motion passed: ayes 6, noes 0, absent 1 (Mills). BUSINESS SESSION 1.REVIEW AND APPROVE RECOMMENDED CHANGES TO SURPLUS PROPERTY AND EQUIPMENT POLICY CONSENT CALENDAR ITEM NO. 1 FINANCIAL ADVISORY COMMISSION MINUTES 2 MAY 15, 2019 REGULAR QUARTERLY MEETING Finance Director Campos presented the staff report, which is on file in the Finance Department. The Commission and staff discussed the different procedures pertaining to surplus property with estimated value of $500 or less and the recommended time frame for policy review by the Finance Director. The Commission inquired on disposition of surplus property by individual employees. Staff replied that section IV (4) states the personal scrapping, recycling and disposal that is unauthorized by individual employees. Motion – A motion was made and seconded by Commissioners Lopez/Hunter to recommend Council approval for changes to surplus property and equipment policy. Motion passed: ayes 6, noes 0, absent 1 (Mills). 2.REVIEW AND APPROVE RECOMMENDED CHANGES TO PURCHASING AND CONTRACTING POLICY Account Technician Armendariz presented the staff report, which is on file in the Finance Department. Account Technician Armendariz provided the Commission with an overview of all changes recommended for the Purchasing and Contracting Policy (Policy). Staff provided the Commission with the process of expending and reporting to Council expenditures between $15,000 to $50,000. The Commission inquired and requested clarification to what a “responsible bidder” was that’s stated in section III (6) of the Policy. City Attorney, Ihrke explained that the Policy is set forth by law and legal guidelines and provided a brief explanation on the difference between a responsive and responsible bidder. The Commission recommended the following changes: •Adding that expenditures from $15,000 to $50,000 are reviewed quarterly by City Council. Motion – A motion was made and seconded by Commissioners Rosen/Lopez to recommend Council approval for changes to the Purchasing and Contracting Policy. Motion passed: ayes 6, noes 0, absent 1 (Mills). 3.REVIEW AND APPROVE THE FISCAL YEAR 2019/20 MEETING DATES Financial Service Analyst Hallick presented the staff report, which is on file in the Finance Department. Motion – A motion was made and seconded by Commissioners Lopez/Hunter to approve the fiscal year 2019/20 meeting dates, as submitted. Motion passed: ayes 6, noes 0, absent 1 (Mills). 4.APPROVE FISCAL YEAR 2019/20 INVESTMENT POLICY Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. FINANCIAL ADVISORY COMMISSION MINUTES 3 MAY 15, 2019 REGULAR QUARTERLY MEETING General discussion followed on scope of changes; state code restrictions; and additional recommended changes by the Commission. Motion – A motion was made and seconded by Commissioners Lopez/Rosen to recommend Council approval for the fiscal year 2019/20 Investment Policy. Motion passed: ayes 6, noes 0, absent 1 (Mills). STUDY SESSION 1.DISCUSS INTERFUND LOAN REPAYMENT OPTIONS Finance Director Campos presented the staff report, which is on file in the Finance Department. The Commission and staff discussed the outstanding loans for the SilverRock Resort Fund, the different types of Development Impact Fee (DIF) loans, the history and overview of the outstanding loans due to the General Fund, and the options available for repayment of the DIF Fund loans. The Commission inquired how the City would write-off these types of loans. Staff explained that the loans are disclosed annually in the City’s financial statements, a write- off would be disclosed as an extraordinary expense, it would remove the receivable completely because it’s not collectable and there’s no cash value to the accounting journal entry, and it would drop the total Reserves Fund balance. The Commission requested Staff prepare a draft financial statement note disclosure for the write-off and provide examples of financial statement impacts. Staff agreed to bring back the requests at a special meeting on June 5, 2019. 2.FISCAL YEAR 2019/20 PRELIMINARY PROPOSED BUDGET Finance Director Campos presented the staff report, which is on file in the Finance Department. The Commission and staff discussed the General Fund Summary for budgeted surplus request; revenue projections; the General Fund expenses for capital improvements; Art in Public Places Fund and other Special Funds for the proposed budget that will be presented at the next Council meeting on June 4; and Internal Service Fund expenses. 3.DISCUSS BANKING AND MERCHANT SERVICES Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. COMMISSIONER ROSEN LEFT THE DAIS AT 5:43 P.M The Commission and staff discussed the process and possible fees associated with the City’s transfer from one bank to another and the Selection Committee’s recommended choice from the top two banks that were given a second interview. FINANCIAL ADVISORY COMMISSION MINUTES 4 MAY 15, 2019 REGULAR QUARTERLY MEETING Commission Batavick complimented staff on the effort put forth during the interviews and selection process. He provided his perspective of the second interview and the overall selection process for banking and merchant services. Finance Director Campos provided the Commission with her recommended timeline for issuing another request for proposal for banking and merchant services in the future. Commissioner Batavick motioned to support the selection committee and staff’s recommendation of Bank of the West for banking and merchant services for Council approval. Motion – A motion was made and seconded by Commissioners Batavick/Turbow to recommend Council approval for new banking and merchant services with Bank of the West. Motion passed: ayes 5, noes 0, absent 2 (Mills and Rosen). DEPARTMENTAL REPORTS All departmental reports are on file in the Finance Department. 1.ANNUAL BOARD AND COMMISSION RECRUITMENTS Staff provided the Commission with the annual board and commission recruitment process and timeline. They also mentioned the other vacancies for all of the City of La Quinta’s board and commissions. 2.FOURTH QUARTER 2018 (OCTOBER – DECEMBER 2018) SALES TAX UPDATE FOR THE CITY OF LA QUINTA Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. Staff and Commission discussed the timing for sales tax disbursements. COMMISSIONERS’ ITEMS – None ADJOURNMENT There being no further business, it was moved and seconded by Commissioners Turbow/Lopez to adjourn this meeting at 6:08 p.m. Motion passed: ayes 5, noes 0, absent 2 (Mills and Rosen). Respectfully submitted, Jessica Delgado, Management Assistant City of La Quinta, California City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: June 5, 2019 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED APRIL 30, 2019 RECOMMENDATION Receive and file revenue and expenditure report dated April 30, 2019. EXECUTIVE SUMMARY •The report summarizes the City’s year-to-date (YTD) revenues and period expenditures for April 2019 (Attachment 1). •The revenue and expenditure reports are also reviewed by the City Council. FISCAL IMPACT - None BACKGROUND/ANALYSIS Below is a summary of the column headers used on the Revenue and Expenditure Summary Reports: Original Total Budget – represents revenue and expenditure budgets the Council adopted in June 2018 for fiscal year 2018/19. Current Total Budget – represents original adopted budgets plus any carryovers (typically associated with long-term Capital Improvement Projects (CIP) from the prior fiscal year) and any Council approved budget amendments from throughout the year. Period Activity – represents actual revenues received and expenditures outlaid in the reporting month. Fiscal Activity – represents actual revenues received and expenditures outlaid YTD. Variance Favorable/ (Unfavorable) - represents the dollar difference between YTD collections/expenditures and the current budgeted amount. Percent Used – represents the percentage activity as compared to budget YTD. CONSENT CALENDAR ITEM NO. 2 The revenue report includes revenues and transfers into funds from other funds (income items). Revenues are not received uniformly throughout the year, resulting in peaks and valleys. For example, large property tax payments are usually received in December and May. Similarly, Redevelopment Property Tax Trust Fund payments are typically received in January and June. Any timing imbalance of revenue receipts versus expenditures is funded from the City’s cash flow reserve. The expenditure report includes expenditures and transfers out to other funds. Unlike revenues, expenditures are more likely to be consistent from month to month. However, large debt service payments or CIP expenditures can cause swings. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Karla Romero, Finance Director Attachment: 1. Revenue and Expenditure Report for April 30, 2019 MTD YTD YTD Percent of Budget General Fund 4,955,122$ 38,187,190$ 68.55% All Funds 7,308,174$ 65,214,353$ 41.48% MTD YTD YTD Percent of Budget General Fund 2,325,401$ 29,529,446$ 43.65% Payroll - General Fund 644,109$ 7,319,589$ 43.72% All Funds 3,577,899$ 73,368,481$ 40.80% April Expenditures April Revenues General Fund Non-General Fund Transient Occupancy (Hotel) Tax 1,632,726$ County Government Revenue -Library/Museum 708,540$ Measure G Sales Tax 1,110,612$ Interest Earned on Investments 481,644$ Sales Tax 1,002,229$ SilverRock Greens Fees 410,368$ Property Tax 670,363$ Gas Tax 205,193$ Franchise Fees- SoCal Gas 133,519$ Rebate Revenue(1)199,186$ General Fund Non-General Fund Sheriff Contract (January)1,235,244$ Capital Improvement Program (CIP)- Construction(2)360,194$ Greater Palm Springs Convention Bureau 60,322$ SilverRock Maintenance 142,867$ Contract Legal Services 36,922$ CIP - Design (3)90,146$ Parks Landscape Maintenance 35,851$ Museum Operations 50,250$ Marketing and Tourism Promotions 34,568$ Lighting and Landscape District Maintenance 45,654$ Top Five Revenue/Income Sources for April Top Five Expenditures/Outlays for April (1) Rebate revenue received from Coachella Valley Water District associated with the CIP landscape (turf) conversion projects. (2) CIP Construction: Expenses associated with Highway Safety Improvement Program (HSIP) intersection improvements and utility relocation for Dune Palms Road widening . (3) CIP Design: Multiple CIP projects including Village Complete Streets; SilverRock Event Site; Dune Palms Road widening and bridge; and traffic safety study (Systemic Safety Analysis). For Fiscal: 2018/19 Period Ending: 04/30/2019 Page 1 of 2 Revenue Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 38,187,1904,955,12252,297,400 55,710,250 -17,523,060 68.55 % 201 - GAS TAX FUND 1,521,974205,1931,965,500 1,965,500 -443,526 77.43 % 202 - LIBRARY & MUSEUM FUND 2,220,190708,9032,333,000 2,313,000 -92,810 95.99 % 203 - PUBLIC SAFETY FUND (MEASURE G)204,7930200,000 203,000 1,793 100.88 % 210 - FEDERAL ASSISTANCE FUND 0072,000 66,226 -66,226 0.00 % 212 - SLESA (COPS) FUND 108,6008,333100,100 100,100 8,500 108.49 % 213 - JAG FUND 26800213 55 125.88 % 215 - LIGHTING & LANDSCAPING FUND 1,138,39801,586,100 1,586,100 -447,702 71.77 % 217 - DEVELOPMENT AGREEMENT 1560030,800 -30,644 0.51 % 220 - QUIMBY FUND 50,7380367,000 383,000 -332,262 13.25 % 221 - AB 939 - CALRECYCLE FUND 43,3513,00663,700 66,200 -22,849 65.48 % 223 - MEASURE A FUND 566,79668,516971,708 974,708 -407,912 58.15 % 224 - TUMF FUND 278000 278 0.00 % 225 - INFRASTRUCTURE FUND 2780100100 178 277.70 % 226 - EMERGENCY MANAGEMENT PERFORMANCE GRANT (EMPG)830012,000 -11,917 0.69 % 227 - STATE HOMELAND SECURITY PROGRAMS (SHSP)0006,000 -6,000 0.00 % 230 - CASp FUND, AB 1379 17,8391,5264,000 10,000 7,839 178.39 % 231 - SUCCESSOR AGCY PA 1 RORF 7,568,9122020,482,627 -12,913,715 36.95 % 235 - SO COAST AIR QUALITY FUND 14,272051,500 51,500 -37,228 27.71 % 237 - SUCCESSOR AGCY PA 1 ADMIN 3,9290012,005 -8,076 32.73 % 241 - HOUSING AUTHORITY 593,56577315,000 543,000 50,565 109.31 % 243 - RDA Low-Mod Housing Fund 18,68208,000 18,000 682 103.79 % 248 - SA 2004 LO/MOD BOND FUND (Refinanced in 2014)00010,000 -10,000 0.00 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)310,534102,00830,000 170,000 140,534 182.67 % 250 - TRANSPORTATION DIF FUND 392,14036,946369,000 379,000 13,140 103.47 % 251 - PARKS & REC DIF FUND 292,17726,624508,200 512,200 -220,023 57.04 % 252 - CIVIC CENTER DIF FUND 107,35912,246110,000 110,000 -2,641 97.60 % 253 - LIBRARY DEVELOPMENT DIF 46,7844,47230,000 30,000 16,784 155.95 % 254 - COMMUNITY CENTER DIF 19,3701,67715,400 15,400 3,970 125.78 % 255 - STREET FACILITY DIF FUND 18,4661,50815,000 15,000 3,466 123.10 % 256 - PARK FACILITY DIF FUND 5,4415204,000 4,000 1,441 136.03 % 257 - FIRE PROTECTION DIF 49,3705,62940,000 40,000 9,370 123.43 % 270 - ART IN PUBLIC PLACES FUND 57,76344588,500 88,500 -30,737 65.27 % 275 - LQ PUBLIC SAFETY OFFICER 2,49402,100 2,100 394 118.75 % 299 - INTEREST ALLOCATION FUND 481,644481,64400 481,644 0.00 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 668,8610671,600 671,600 -2,739 99.59 % 401 - CAPITAL IMPROVEMENT PROGRAMS 4,091,360199,18611,955,941 55,803,794 -51,712,433 7.33 % 405 - SA PA 1 CAPITAL IMPRV FUND 77,103000 77,103 0.00 % 501 - FACILITY & FLEET REPLACEMENT 741,2930923,700 938,700 -197,407 78.97 % 502 - INFORMATION TECHNOLOGY 841,1775,6271,189,800 1,496,800 -655,623 56.20 % 503 - PARK EQUIP & FACILITY FUND 529,3760675,000 690,000 -160,624 76.72 % 504 - INSURANCE FUND 691,1720923,600 923,600 -232,428 74.83 % 601 - SILVERROCK RESORT 3,324,570478,9654,092,800 4,147,800 -823,230 80.15 % 602 - SILVERROCK GOLF RESERVE 6,156070,000 70,000 -63,844 8.79 % 735 - 97-1 AGENCY REDEMPTION FUND 339000 339 0.00 % 740 - 2000-1 AGENCY REDEMPTION 144,348000 144,348 0.00 % 760 - SUPPLEMENTAL PENSION PLAN 1,20400800 404 150.47 % 761 - CERBT OPEB TRUST 53,5610020,000 33,561 267.81 % 762 - PARS PENSION TRUST 0006,540,000 -6,540,000 0.00 % Report Total:7,308,174 65,214,35382,049,749 157,213,623 -91,999,270 41.48 % ATTACHMENT 1 Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. For Fiscal: 2018/19 Period Ending: 04/30/2019 Page 2 of 2 Expense Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 29,529,4462,325,40151,153,413 67,657,441 38,127,996 43.65 % 201 - GAS TAX FUND 1,296,99362,5311,959,900 2,010,829 713,836 64.50 % 202 - LIBRARY & MUSEUM FUND 1,092,768117,3971,628,200 1,793,400 700,632 60.93 % 210 - FEDERAL ASSISTANCE FUND 0072,000 66,226 66,226 0.00 % 212 - SLESA (COPS) FUND 32,2150100,000 100,000 67,785 32.22 % 215 - LIGHTING & LANDSCAPING FUND 1,100,38183,6901,582,700 1,785,400 685,019 61.63 % 217 - DEVELOPMENT AGREEMENT 77,741067,000 97,000 19,259 80.15 % 220 - QUIMBY FUND 615,08503,956,000 5,748,488 5,133,403 10.70 % 221 - AB 939 - CALRECYCLE FUND 50,1816,78535,000 95,000 44,819 52.82 % 223 - MEASURE A FUND 312,9190961,708 4,733,403 4,420,484 6.61 % 225 - INFRASTRUCTURE FUND 2,7331,138028,571 25,838 9.56 % 226 - EMERGENCY MANAGEMENT PERFORMANCE GRANT (EMPG)00012,000 12,000 0.00 % 227 - STATE HOMELAND SECURITY PROGRAMS (SHSP)3,013006,000 2,987 50.22 % 230 - CASp FUND, AB 1379 1,26804,000 5,500 4,232 23.06 % 231 - SUCCESSOR AGCY PA 1 RORF 17,368,060009,339,728 -8,028,332 185.96 % 235 - SO COAST AIR QUALITY FUND 20,94329554,000 54,000 33,057 38.78 % 237 - SUCCESSOR AGCY PA 1 ADMIN 17,1813,881012,005 -5,176 143.12 % 241 - HOUSING AUTHORITY 370,44121,528604,000 602,500 232,059 61.48 % 243 - RDA Low-Mod Housing Fund 00250,000 267,667 267,667 0.00 % 248 - SA 2004 LO/MOD BOND FUND (Refinanced in 2014)963,17435,88001,451,947 488,773 66.34 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)7,376,024007,416,000 39,976 99.46 % 250 - TRANSPORTATION DIF FUND 412,8901,138400,000 2,557,460 2,144,571 16.14 % 251 - PARKS & REC DIF FUND 2,7321,13702,405,952 2,403,220 0.11 % 252 - CIVIC CENTER DIF FUND 99,4281,137110,000 115,952 16,524 85.75 % 253 - LIBRARY DEVELOPMENT DIF 24,1011,13730,000 35,952 11,851 67.04 % 254 - COMMUNITY CENTER DIF 2,7321,1370107,591 104,859 2.54 % 255 - STREET FACILITY DIF FUND 28,6381,13715,000 20,952 -7,686 136.68 % 256 - PARK FACILITY DIF FUND 6,6981,1374,000 9,952 3,254 67.30 % 257 - FIRE PROTECTION DIF 9,2331,13740,000 45,952 36,719 20.09 % 270 - ART IN PUBLIC PLACES FUND 72,9241,689322,000 722,000 649,076 10.10 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 669,0380671,600 671,600 2,563 99.62 % 401 - CAPITAL IMPROVEMENT PROGRAMS 5,592,451488,40211,955,941 55,814,801 50,222,350 10.02 % 405 - SA PA 1 CAPITAL IMPRV FUND 9,016005,343,052 5,334,037 0.17 % 501 - FACILITY & FLEET REPLACEMENT 740,73929,840923,700 1,005,784 265,045 73.65 % 502 - INFORMATION TECHNOLOGY 758,43551,3201,090,700 1,574,200 815,765 48.18 % 503 - PARK EQUIP & FACILITY FUND 195,7570705,000 775,000 579,243 25.26 % 504 - INSURANCE FUND 794,3323,998921,100 918,500 124,168 86.48 % 601 - SILVERROCK RESORT 3,511,431335,0234,090,800 4,146,000 634,569 84.69 % 602 - SILVERROCK GOLF RESERVE 50,200050,200 105,200 55,000 47.72 % 740 - 2000-1 AGENCY REDEMPTION 144,30800144,309 1 100.00 % 760 - SUPPLEMENTAL PENSION PLAN 12,8330012,850 17 99.87 % Report Total:3,577,899 73,368,48183,757,962 179,816,165 106,447,684 40.80 % Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: June 5, 2019 STAFF REPORT AGENDA TITLE: APPROVE WRITE-OFF OF OUSTANDING INTERFUND LOANS RECOMMENDATION Approve the write-off of outstanding interfund loans and recommend review and approval by City Council. EXECUTIVE SUMMARY •The city has four outstanding interfund loans which total $15,017,126 as of March 31, 2019. •Development impact fee revenues used to pay back loans have declined and are not expected to increase as the City is nearby built out. •SilverRock Golf Resort is anticipated to transfer ownership in late 2020 and the City will begin receiving sales, property, and transient occupancy taxes from this development. •The Financial Advisory Commission (FAC) and Staff reviewed these loans on May 15, 2019. As a result, it was recommended the loans be considered uncollectible and written off. FISCAL IMPACT None. However, for transparency, the following would be recorded in the City’s Annual Financial Statements: •Special Gain/Loss Note Disclosure would be added for fiscal year 2018/19 (Attachment 2) •Outstanding Interfund Receivables and Payables Note would be removed (Attachment 3) •Special Gain to the Development Impact Fee (DIF) Funds and SilverRock; Special Loss to the General Fund (Attachment 4) •Balance Sheet of Government Funds would remove Advances to Other Funds in the General Fund and Advances from Other Funds in the four Special Funds (Attachments 5 and 6). BUSINESS SESSION ITEM NO. 1 BACKGROUND/ANALYSIS On May 15, 2019 the FAC was provided an overview of the outstanding loans due to the General Fund. Staff discussed options to retire the Fire/Civic/Corporate Yard Phase 1 and SilverRock Golf Course loans. Attachment 1 provides a summary of the four outstanding interfund loans. There are three Development Impact Fee (DIF) outstanding loans as follows: 1.Fire Protection DIF. The City loaned the Fire DIF $1,350,131 in 2003 for Fire Station 39; the outstanding balance on March 31, 2019 was $455,197. Using an average of the annual Fire DIF revenue over the past three years ($54,000), if the City continued to charge interest the loan would be repaid in 10 years or by 2029.If interest was not charged and the annual Fire DIF income remained the same, the loan would be repaid in 9 years or by 2028. 2.Civic Center DIF. The City loaned this DIF $9,615,094 in 2006 to fund the City Hall expansion. The outstanding balance on March 31, 2019 was $7,106,231. Using an average of the annual Civic Center DIF revenue over the past three years ($117,700), if the City continued to charge interest the loan would never be repaid.If interest was not charged and the annual DIF income ($117,700) remained the same, the loan would be repaid in 60 years or by 2079. 3.Street Facility DIF. The City loaned this DIF $2,075,412 in 2009 to build the Phase 1 Corporation Yard improvements. The outstanding balance on March 31, 2019 was $1,902,137. Using an average of the annual Civic Center DIF revenue over the past three years ($22,900), if the City continued to charge interest the loan would never be repaid. If interest was not charged and the annual DIF income remained the same, the loan would be repaid in 83 years or by 2102. A SilverRock Resort Enterprise interfund loan makes up the forth outstanding loan due to the General Fund. 4.SilverRock Resort Fund. From 2004 to 2016 the City advanced this fund $5,134,031 to cover the differences in annual operational expenses versus annual revenue. After 2016, interfund contributions were not added to the outstanding loan balance. Repayment terms in excess of the lifecycle of the improvement is perceived as an uncollectible receivable. In addition, development impact fees are not anticipated to increase as the City is nearby built out. After an extensive discussion, the following was determined: 1) The loans are uncollectible based on current revenue projections. 2) The loans should be written-off. 3) Staff should work with the City’s auditing firm to prepare a draft Financial Statement Note Disclosure and to provide examples of other financial statement impacts for the FAC’s review and final approval prior to formal action by the City Council. Using the City’s 2017/18 Comprehensive Annual Financial Report, Staff prepared draft a note disclosure and financial reports, which were reviewed by Phil White, Certified Public Accountant and Partner with Vavrinek, Trine, Day & Co. LLP. If written-off (removed from the balance sheet), the result would be a one-time Special Gain to the Development Impact Fee (DIF) Funds and SilverRock; Special Loss to the General Fund. In return, revenues generated by DIF fees would be eligible for future capital expenses and result in lower General Fund capital contributions. ALTERNATIVES The Commission may wish to request further information regarding specific items prior to approval. Prepared by: Karla Romero, Finance Director Attachments: 1.Summary of Outstanding Interfund Loans due to the General Fund 2. Special Gain/Loss Note Disclosure 3. Interfund Receivables and Payables Note from 2017/18 4. Budgetary Comparison Schedule by Department General Fund from 2017/18 5.Balance Sheet Governmental Funds from 2017/18 6. Balance Sheet Governmental Funds Example of Write-Off using 2017/18 Summary of Outstanding Interfund Loans due to the General Fund As of March 31, 2019. Fire Protection DIF Original Loan: $1,350,131 Outstanding Loan: $455,197 Annual Revenue: $54,000 ($46,500 to principal) Annual Interest: $7,500 Repayment Dates: 10 Years or 2029 (with interest) 9 years or 2028 (no interest) Fund Uses: Fire stations Fire equipment Civic Center DIF Original Loan: $9,615,094 Outstanding Loan: $7,106,231 Annual Revenue: $117,700 (none to principal) Annual Interest: $154,800 Repayment Dates: Never (with interest) 60 years or 2079 (no interest) Fund Uses: City Hall building improvements Facility furniture, fixtures and equipment Parking lot and landscaping upgrades Street Facility DIF Original Loan: $2,075,412 Outstanding Loan: $1,902,137 Annual Revenue: $22,900 (none to principal) Annual Interest: $25,400 Repayment Dates: Never (with interest) 83 years or 2102 (no interest) Park Facility Fund is also being used to repay this loan. Fund Uses: Corporate yard facility Neighborhood and community park upgrades - landscaping, irrigation, picnic facilities, playgrounds, and sports fields. SilverRock Resort Fund Original Loan: $5,134,031 Outstanding Loan: $5,553,562 Annual Revenue: $10,000 (none to principal) Annual Interest: $95,000 Repayment Dates: Never (with interest) 513 years or 2532 (no interest) Estimated Sources of Repayment (annually): Property Tax Revenue: $10,000 (golf course only) Sales Tax Revenue: $300,000 Annual Revenue: $310,000 (with property and sales tax) Annual Interest: $95,000 Repayment Dates: 24 years or 2043 (with interest) 16.5 years or 2034 (no interest) ATTACHMENT 1 ATTACHMENT 2 SPECIAL GAIN/LOSS NOTE DISCLOSURE: The City had four outstanding interfund loans, totaling $15,017,127. These interfund loans were established from 2003 to 2009 and are irregular and non-recurring. They were established to supplement the construction costs associated with the development of major infrastructure which could have been funded with restricted DIF funds, should they have been available at the time. Since inception, the City has reported the outstanding loan balances in annual financial statements as Advances from Other Funds. The repayment terms and collectability of these loans were evaluated by Staff and confirmed with the City’s 2019 Development Impact Fee analysis. Results were presented to the Financial Advisory Commission who in conjunction with Staff recommended City Council approve the early retirement of these interfund loans resulting in a Special Item (Special Gain to the Development Impact Fee (DIF) Funds and SilverRock; Special Loss to the General Fund). The forgiveness of these loans 1) recognizes the reduction of development impact fees based on current and projected development capacity, as the City is nearly built out, 2) does not impact operations as future revenues would continue to be collected, remain in the DIF Funds and be subject to restricted DIF uses, and 3) are unusual, infrequent and not considered part of normal business operations thereby are reported separately to ensure transparency of financial reporting. A summary of the uncollectable loans is presented as follows: Uncollectable Interfund Advances Civic Center Non-Major Advances from Other Funds Fund Golf Course Governmental Total General Fund $7,106,231 $5,553,562 $2,357,334 $15,017,127 CITY OF LA QUINTA, CALIFORNIA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2018 55 NOTE 6: INTERFUND RECEIVABLES AND PAYABLES (CONTINUED) The composition of non-current interfund receivable and payable balances as of June 30, 2018, is as follows: Civic Center Non-Major Advances to Other Funds Fund Golf Course Governmental Total General Fund 7,103,053$ 5,468,718$ 2,382,315$ 14,954,086$ Advances from Other Funds a)In September 2006, an advance up to $9,615,094 for the City Hall expansion from the General Fund to the Civic Center Developer Impact Fee Fund was approved. The Civic Center expansion has been completed and the amount of the advance outstanding as of June 30, 2018 was $7,103,053. The advance accrues interest based on the rate earned by the City investment pool average. b)As of June 30, 2018, the General Fund has advanced to the Golf Course fund $5,468,718. The advance accrues interest at the City’s investment pool rate and is to be repaid by the golf course out of future profits. c)In October 2009, an advance up to $2,033,687 for the Phase 1 of the Corporate Yard project from the General Fund to the Street and Park Maintenance Facility Funds was approved. As of June 30, 2018, the amount of the outstanding advance was $1,891,472. The advance accrues interest at the earnings rate of the City’s investment pool. d)In February 2003, the Redevelopment Agency Capital Projects PA No. 2 Fund advanced $1,350,131 to the Fire Facility Fund to provide funding for development of the City’s north fire station. On March 1, 2012 the outstanding advance of $925,192 was transferred from the former redevelopment agency to the General Fund with the former redevelopment agency receiving $925,192 in cash for the outstanding balance. The advance accrues interest at the earnings rate of the City’s investment pool funds. As of June 30, 2018, the remaining balance of the advance was $490,843. This note disclosure woud be removed from future financial statements. ATTACHMENT 3 CITY OF LA QUINTA, CALIFORNIA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE BY DEPARTMENT GENERAL FUND USING YEAR ENDED JUNE 30, 2018 AS AN EXAMPLE See accompanying note to the required supplementary information. 75 Variance with Final Budget Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 107,462,473$ 107,462,473$ 107,462,473$ -$ Resources (Inflows): Taxes 37,364,100 41,264,100 44,116,002 2,851,902 Licenses and permits 1,257,700 1,347,700 1,394,820 47,120 Intergovernmental 7,215,000 7,265,000 7,467,753 202,753 Charges for services 1,258,200 1,312,100 1,279,864 (32,236) Use of money and property 530,000 400,000 643,171 243,171 Fines and forfeitures 246,000 266,000 375,390 109,390 Miscellaneous 490,200 508,200 1,033,808 525,608 Extraordinary Item - - 2,899,296 2,899,296 Transfer In 190,400 - 38,048 38,048 Amounts Available for Appropriations 156,014,073 159,825,573 166,710,625 6,885,052 Charges to Appropriation (Outflows): General government Legislative 324,000 324,000 259,964 64,036 City manager 769,000 807,460 783,671 23,789 City attorney 460,000 460,000 420,511 39,489 Marketing 1,170,400 1,173,350 1,074,172 99,178 Human resources 462,900 516,590 474,561 42,029 City clerk 552,200 583,340 527,550 55,790 Fiscal services 1,123,200 1,159,860 1,033,895 125,965 Central services 1,266,300 2,549,380 2,393,228 156,152 The Hub Customer Services 786,300 809,160 766,425 42,735 Public safety Police 15,879,100 15,879,100 15,083,365 795,735 Public buildings 1,578,354 1,613,650 1,639,767 (26,117) Code compliance 1,134,500 1,143,080 1,018,033 125,047 Building & safety 917,200 925,650 686,220 239,430 Fire 6,715,000 6,715,000 6,531,244 183,756 Planning and development Current planning 524,700 554,760 482,189 72,571 Parks and recreation Community services admin 703,500 728,650 631,998 96,652 Wellness center 679,300 661,420 581,478 79,942 Recreation Programs/Special Events 365,000 366,640 310,586 56,054 Park maintenance 1,582,300 1,635,700 1,732,772 (97,072) Public works Administration 1,205,500 1,206,870 786,361 420,509 Development services 595,200 628,330 493,811 134,519 Maintenance/operations - street 8,600 8,600 10,459 (1,859) Engineering services 1,299,400 1,410,620 1,340,230 70,390 Capital outlay 37,746 2,015,000 - 2,015,000 Transfers out 8,041,000 13,242,453 5,824,567 7,417,886 Total Charges to Appropriations 48,180,700 57,118,663 44,887,058 12,231,605 Budgetary Fund Balance, June 30 107,833,373$ 102,706,910$ 121,823,567$ 19,116,657$ Budget Amounts Special Loss would be a seperate outflow (expense) line item on this page. ATTACHMENT 4 CITY OF LA QUINTA, CALIFORNIA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2018 See accompanying notes to basic financial statements. 20 Housing Capital General Authority Improvement Civic Center Assets: Pooled cash and investments 74,640,227$ 12,080,017$ 1,448,073$ -$ Receivables: Accounts 707,510 155,486 44,800 - Taxes 2,684,368 - - - Notes and loans - 23,013,023 - - Accrued interest 147,881 3,758,290 - - Prepaid costs 90,657 - - - Due from other governments 31,169,018 7,402,927 448,702 - Due from other funds 364,115 - - - Advances to other funds 14,954,085 - - - Land held for resale 8,320,000 - - - Total Assets 133,077,861$ 46,409,743$ 1,941,575$ -$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable 2,511,587$ 16,553$ 438,249$ -$ Accrued liabilities 188,383 2,490 - - Unearned revenues 39,101 - 1,721,995 - Deposits payable 7,812,959 22,508 - - Due to other governments 78,419 - - - Due to other funds - - - - Advances from other funds - - - 7,103,053 Total Liabilities 10,630,449 41,551 2,160,244 7,103,053 Deferred Inflows of Resources: Unavailable revenue 623,845 24,678,005 128,893 - Fund Balances: Nonspendable: Prepaid costs 90,657 - - - Land held for resale 8,320,000 - - - Advances to other funds 14,954,085 - - - Due from other governments 29,611,707 - - - Restricted for: Planning and development projects - 21,690,187 - - Public safety - - - - Community services - - - - Public works - - - - Capital projects - - - - Committed to: Natural Disaster Reserve 7,400,000 - - - Economic Disaster Reserve 8,140,000 - - - Cash Flow Reserve 5,000,000 - - - Capital Replacement Reserve 5,000,000 - - - Pension Trust 2,000,000 - - - Carryovers 2,186,500 - - - Assigned for: Public safety (Note 13b)9,754,327 - - - Sales Tax Reserve 5,169,970 - - - Capital projects (Note 13b)4,996,815 - - - Unassigned 19,199,506 - (347,562) (7,103,053) Total Fund Balance 121,823,567 21,690,187 (347,562) (7,103,053) Total Liabilities, Deferred Inflows of Resources and Fund Balances 133,077,861$ 46,409,743$ 1,941,575$ -$ Special Revenue Funds Capital Projects Funds ATTACHMENT 5 CITY OF LA QUINTA, CALIFORNIA BALANCE SHEET GOVERNMENTAL FUNDS USING JUNE 30, 2018 AS AN EXAMPLE See accompanying notes to basic financial statements. 20 Housing Capital General Authority Improvement Civic Center Assets: Pooled cash and investments 74,640,227$ 12,080,017$ 1,448,073$ -$ Receivables: Accounts 707,510 155,486 44,800 - Taxes 2,684,368 - - - Notes and loans - 23,013,023 - - Accrued interest 147,881 3,758,290 - - Prepaid costs 90,657 - - - Due from other governments 31,169,018 7,402,927 448,702 - Due from other funds 364,115 - - - Advances to other funds - - - Land held for resale 8,320,000 - - - Total Assets 46,409,743$ 118,123,776 $ 1,941,575$ -$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable 2,511,587$ 16,553$ 438,249$ -$ Accrued liabilities 188,383 2,490 - - Unearned revenues 39,101 - 1,721,995 - Deposits payable 7,812,959 22,508 - - Due to other governments 78,419 - - - Due to other funds - - - - Advances from other funds - - - Total Liabilities 10,630,449 41,551 2,160,244 Deferred Inflows of Resources: Unavailable revenue 623,845 24,678,005 128,893 - Fund Balances: Nonspendable: Prepaid costs 90,657 - - - Land held for resale 8,320,000 - - - Advances to other funds - - - Due from other governments 29,611,707 - - - Restricted for: Planning and development projects - 21,690,187 - - Public safety - - - - Community services - - - - Public works - - - - Capital projects - - - - Committed to: Natural Disaster Reserve 7,400,000 - - - Economic Disaster Reserve 8,140,000 - - - Cash Flow Reserve 5,000,000 - - - Capital Replacement Reserve 5,000,000 - - - Pension Trust 2,000,000 - - - Carryovers 2,186,500 - - - Assigned for: Public safety (Note 13b)9,754,327 - - - Sales Tax Reserve 5,169,970 - - - Capital projects (Note 13b)4,996,815 - - - Unassigned 19,199,506 - (347,562) Total Fund Balance 106,869,482 21,690,187 (347,562) Total Liabilities, Deferred Inflows of Resources and Fund Balances 46,409,743$ 118,123,776 $ 1,941,575$ -$ Special Revenue Funds Capital Projects Funds ATTACHMENT 6 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: June 5, 2019 STAFF REPORT AGENDA TITLE: DISCUSS FISCAL YEAR 2018/19 FOURTH QUARTER BUDGET REPORT RECOMMENDATION Discuss fiscal year 2018/19 Fourth Quarter Budget Report. EXECUTIVE SUMMARY •The 2018/19 Fourth Quarter Budget Report (Attachment 1) provides an update of the City’s fiscal activities from July 2018 to May 2019. •Quarterly, a budget report is prepared to assess the budget and incorporate adjustments based on current economic conditions and operational requirements. •City Council may consider additional adjustments prior to June 30, 2019. FISCAL IMPACT Staff recommended adjustments to funds as outlined below: BACKGROUND/ANALYSIS Throughout the fiscal year each Department monitors their budget and proposes adjustments to reflect current conditions and ongoing operational needs. Requests are reviewed and discussed by the City Manager, Finance Director and Executive Team before presenting recommendations for Council consideration. City Funds with no adjustments are excluded. Additional adjustments may be presented to City Council for approval prior to June 30, 2019. STUDY SESSION ITEM NO. 1 Fund Revenues Expenses General Fund (101)120,800$ 190,000$ Economic Development Fund (247)2,981,600 - Public Safety Fund (203)650,000 Facility & Fleet Fund (501)150,000 150,000 TOTAL ADJUSTMENTS 3,902,400$ 340,000$ 2018/19 Fourth Quarter Adjustment Requests (All Funds) ALTERNTIVES No alternatives are recommended. Actions on budget reports are approved by City Council. Prepared by: Karla Romero, Finance Director Attachment: 1. 2018/19 Fourth Quarter Budget Report June 5, 2019 2018/19 Fourth Quarter Budget Report GENERAL FUND Proposed budget adjustments are detailed in Exhibits 1 and 2. A summary of the General Fund is provided below. Adjustments are based on current year-to-date activity, updated forecasts, and provide resources to implement anticipated operational needs to end the fiscal year. REVENUES License and Permit Fee adjustments recognize unanticipated revenues from increased short-term vacation rental compliance and new inspections on certain rental permits, the lack of cannabis delivery licenses, and other specialized permit and planning fees. Combined these revenue adjustments total $79,800. False Alarm fees were established in October 2017 with the goal of educating the community and reducing the number of Police and Fire false alarms. False alarms are being internally tracked and billed by City Staff. The City anticipates these fees will be reduced in the upcoming fiscal year as community awareness increases. The revised 2018/19 False Alarm revenue budgets after these proposed adjustments would be $23,000 for Police and $10,000 for Fire False Alarms, respectively. Ambulance reimbursements are anticipated to end the year at $26,000 (including the proposed reimbursement of $11,000). Late response fees to American Medical Response (AMR) are assessed and collected by Riverside County then remitted to the City per the AMR Ambulance Agreement. EXPENSES An expenditure adjustment of $40,000 to Fire Non-Reimbursable Expenses recognizes the use of ambulance reimbursement funds used to improve the Emergency Management System. The remaining $14,000 of expenses is paid from the General Fund. Budgetary savings of $228,500 from 2017/18 for building repairs were not carried over to 2018/19. Since this did not occur the current Facility and Fleet Fund budget is overspent by $50,000 due to unanticipated 2018/19 expenses for a computer Revenue Adjustments Various License and Permit Fees 79,800$ False Alarm Fees 30,000 Ambulance Reimbursement 11,000 Total 120,800$ Expense Adjustments Fire Expenses 40,000$ Wellness Center Enhancements 150,000 Total 190,000$ GENERAL FUND SUMMARY server room fire suppression system, extending the vehicle security gate at City Hall, and City Hall exterior painting. The original 2018/19 budget ($225,000) included $100,000 to upgrade the Wellness Center’s multi-purpose room, which now requires additional funding due to the aforementioned unanticipated 2018/19 expenses. A proposed adjustment of $150,000 from the General Fund to the Facility and Fleet Fund would cover the $50,000 over expenditure and provide funding for the Wellness Center upgrades. Two additional interfund transfers with no net effect on the General Fund are recommended. These expenses are summarized as follows. The Land Acquisition fund balance ($1,592,000) was carried over from 2017/18 to 2018/19. $2,000,000 was appropriated in 2017/18 to fund the auction purchase of the former Sam’s Club property, which did not occur; the Council subsequently appropriated $400,000 of this amount for the SilverRock Event Center building and $8,000 has been expended for SilverRock canal easement reconciliation which included title search and land surveying. Staff recommends transferring the remaining funds to the Economic Development Fund, which currently has no fund balance and is intended to promote economic development and generate ongoing General Fund revenues. The land sale proceeds from the 2.9-acre City owned parcel on Highway 111 ($1,389,600 from the Residence Inn developer) will also be deposited into this Fund when escrow closes (early June). The second interfund transfer recommendation recognizes anticipated savings from the current police services contract ($650,000) and allocates these funds to the Public Safety Fund; the Public Safety Fund could be used for future cost increases or unanticipated overages in public safety costs. Anticipated savings are a result of lower than anticipated contractual cost increases for 2018/19 (2.1% versus the 2018/19 budget assumption of 7.1%). The current fund balance is $506,500; this deposit would increase the balance to $1,156,500. Expenditures in 2018/19 are not proposed for these interfund transfers. If budgets remain unused at fiscal year-end they are recognized as an increase to Unassigned Reserves in the General Fund. Land Acquisition (1,592,000)$ Transfer Out to Economic Development Fund 1,592,000$ Police Contract Savings (650,000)$ Transfer Out to Public Safety Fund 650,000$ City of La Quinta FY 2018/19 Recommended Fourth Quarter Budget Adjustments Exhibit 2 Account No. Description Revenues Expenses Finance 101-0000-41415 Short-Term Vacation Rental Registrations 32,000 101-0000-41411 Short-Term Rental Inspection Fee 9,000 101-0000-41601 Cannabis Delivery License (1,000) 101-0000-42404 Miscellaneous Permits 20,000 101-0000-42443 Zone Changes 10,000 101-0000-42446 General Plan Amendments 4,800 101-0000-42451 Special Plan Amendments 5,000 101-0000-42709 False Alarm Fees, Police 20,000 101-0000-42710 False Alarm Fees, Fire 10,000 101-0000-41504 AMR Compliance 11,000 Total Revenue Adjustments 120,800$ City Manager 101-1007-74010 Land Acquisition (1,592,000) 101-1007-99900 Transfer Out to Economic Development Fund 1,592,000 Community Resources 101-2001-60161 Police Contract Savings (650,000) 101-1007-99900 Transfer Out to Public Safety Fund 650,000 101-2002-60445 Fire Non-Reimburseable Misc. Expenses 40,000 Facilities 101-1007-99900 Transfer Out to Facility & Fleet Fund 150,000 TOTAL GENERAL FUND 120,800$ 190,000$ General Fund (Fund 101) City of La Quinta FY 2018/19 Recommended Fourth Quarter Budget Adjustments Exhibit 2 Account No. Description Revenues Expenses 247-0000-49500 Transfer In from the General Fund 1,592,000 - 247-0000-45000 Sale of Assets 1,389,600 Account No. Description Revenues Expenses 203-0000-49500 Transfer In from the General Fund 650,000 - Account No. Description Revenues Expenses 501-0000-49500 Transfer In from the General Fund 150,000 501-0000-71103 Building Repairs 150,000 TOTAL ALL OTHER FUNDS 3,781,600 150,000 Economic Development Fund (247) Public Safety Fund (203) Facility & Fleet Fund (501) City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: June 5, 2019 STAFF REPORT AGENDA TITLE: DISCUSS PROPOSED FISCAL YEAR 2019/20 BUDGET RECOMMENDATION As this is a study session item, no action is recommended. EXECUTIVE SUMMARY •The May 15 budget study session focused on the General Fund, Internal Service Funds, Special Revenue Funds, Capital Funds, and Enterprise Funds of the City and included a verbal update of Council recommendations. •This study session provides an update to the General Fund and presents unfunded requests which Council considered on June 4. There are no updates for other Funds. •Final budget adoption is scheduled for June 18, 2019. FISCAL IMPACT The updated General Fund budget projects a surplus of $428,496, a $149,800 decrease from the previous study session. BACKGROUND/ANALYSIS The goal of the June 5 study session is to report all final recommended adjustments by the Council. Based on the Council study session from June 4, staff will prepare and present a comprehensive budget for all Funds on June 18 for adoption. Attachment 1 provides a narrative for General Fund updates. Line item details for revenues and expenses are in documents presented during the first and second Council study sessions on May 7 and May 21. ALTERNATIVES The FAC may inquire on any expenditure or revenue projection. Per State law, the City must adopt a budget by June 30. Prepared by: Karla Romero, Finance Director Attachment: 1. Fiscal Year 2019/20 Proposed Budget Overview STUDY SESSION ITEM NO. 2 June 5, 2019 2019/20 BUDGET STUDY SESSION OVERVIEW The third budget study session provides an update for the General Fund based on the first two budget study sessions and incorporates an unfunded request for consideration. There are no adjustments to the other Funds. The budget is scheduled for adoption on June 18. GENERAL FUND UPDATE Since the last budget study session, the following adjustments have been incorporated into the General Fund budget resulting in an expense increase of $149,800 as follows: •Funding 50% of the cost of a School Resource Officer (going from one to two Officers) for an anticipated increase of $91,000; Desert Sands Unified School District will fund the other 50%. •Funding the purchase of a Citizens on Patrol golf cart at $7,500. •The employee medical insurance expense in the Human Resources budget was corrected to add the required budget of $51,300. UNFUNDED PROPOSAL FOR CONSIDERATION After these adjustments the amended budget surplus is anticipated to be $428,496 which is available for unfunded considerations. Currently, Staff has one unfunded request of $90,300 to add an additional Code Enforcement Officer II. The City has experienced an increased number of code related requests during the weekends and early mornings. If approved, the Code Officer would be available to monitor trails, short- term vacation rentals, and provide support for property maintenance. The summary to the right provides all adjustments since the first budget study session, including the unfunded request for consideration. Revenues 57,345,620$ Less Operating/CIP Expenses (54,805,040) Preliminary Budget Surplus 2,540,580 Less Measure G Reserves (1,916,384) PRELIMINARY BUDGET SURPLUS 624,196$ Fire Reserve Fund Revenue for CIP (501,600) Transfers Out for Fire Station CIP 500,000 Landscape District Contract 54,000 Fritz Burns Pool Operations 44,000 SilverRock Golf Course Operations 35,200 Fire Station Landscape Contract 1,600 Gas Tax Fund Operations (40,000) State Unemployment Insurance (25,000) Parks Landscape Contract (22,300) Total Adjustments 45,900$ AMENDED BUDGET SURPLUS 578,296$ School Resource Officer 91,000 Citizens on Patrol - Golf Cart, Training 7,500 Employee Medical Insurance, HR Budget 51,300 149,800$ Available for Considerations 428,496$ Code Enforcement Officer 90,300 AMENDED BUDGET SURPLUS 338,196$ GENERAL FUND AS OF 5/7/19 GENERAL FUND AS OF 5/21/19 GENERAL FUND AS OF 6/4/19 For Consideration ATTACHMENT 1 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING DEPARTMENT REPORT TO: Financial Advisory Commissioners FROM: Rosemary Hallick, Financial Services Analyst DATE: June 5, 2019 SUBJECT: Award for Excellence in Government Finance The City of La Quinta (City) won an Award for Excellence in Government Finance from the Government Finance Officer Association (GFOA) for the City’s General Fund Balance and Reserves Policy. GFOA's Awards for Excellence in Government Finance recognize innovative programs and contributions to the practice of government finance that exemplify outstanding financial management. The awards stress practical, documented work that offers leadership to the profession and promotes improved public finance. Criteria examined when considering an application for the award include: local significance and value, technical significance, transferability, documentation, the cost/benefit analysis, efficiency, originality, and durability. This award recognizes that the City’s policy demonstrates an exceptionally well implemented GFOA best practice which in turn reflects the City’s dedication to sound financial management and transparency. Staff would like to thank the Financial Advisory Commission for their collaboration and research that resulted in this policy. ATTACHMENT 1: GFOA Awards for Excellence summary sheet DEPARTMENTAL REPORT ITEM NO. 1 Government Finance Officers Association’s (GFOA) Awards for Excellence in Government Finance recognize innovative programs and contributions to the practice of government finance that exemplify outstanding financial management. The awards stress practical, documented work that offers leadership to the profession and promotes improved public finance. 2019 Winner for Exceptionally Well Implemented GFOA Best Practice: The City of La Quinta embarked on a nine-month journey to study its financial situation and create policy recommendations for its reserve levels. After several months of research and soliciting input from stakeholders, city staff created a long- range outlook of the city’s financial stability. La Quinta is in a resort area and relies heavily on discretionary income spending at its hotels, restaurants, and shops. The city is also near a large fault line, and the threat of a major earthquake is always a worry. Rapidly rising pension costs are another concern. The new reserves policy addresses all of these factors, improving the city’s ability to face the future. To create its general fund balance and reserves policy, La Quinta benchmarked its policies against those of other cities and performed a historical analysis of its current reserve amounts. The city also worked with the city clerk’s risk management office, which conducted a full analysis of city assets and insurance coverage to determine natural disaster needs. City staff also used resources including GFOA publications and best practices. GFOA recommends that governments establish a formal policy for the level of unrestricted fund balance that should be maintained in the general fund for generally accepted accounting practice and budgetary purposes. The guideline should articulate a framework and process for how the government would increase or decrease the level of unrestricted fund balance over a specific time period. In particular, governments should provide broad guidance in the policy for how resources will be directed to replenish the fund balance if it falls below the prescribed level. See www.gfoa.org/ awardsforexcellence for more information on the award and other winners GFOA BEST PRACTICE: Fund Balance Guidelines for the General Fund CITY OF LA QUINTA, CALIFORNIA GENERAL FUND BALANCE AND RESERVES POLICY ATTACHMENT 1 POWER POINTS FAC SPECIAL MEETING June 5, 2019 6/5/2019 1 Financial Advisory Commission Special Meeting June 5, 2019 Financial Advisory Commission Special Meeting June 5, 2019 B1 – Approve Write-Off of Outstanding Interfund Loans 6/5/2019 2 2019/20 Budget FUND #FUND NAME ESTIMATED REVENUES ESTIMATED EXPENDITURES Surplus/ (Deficit) 252** CIVIC CENTER DIF 110,000 130,000 (20,000) 255** STREET FACILITY DIF 23,000 30,000 (7,000) 256** PARK FACILITY DIF 7,000 6,000 1,000 257** FIRE PROTECTION DIF 55,000 7,500 47,500 601** SILVERROCK RESORT FUND 4,105,600 4,185,700 (80,100) 4,300,600 4,359,200 (58,600) 2019/20 SUMMARY OF SPECIAL FUND EXPENDITURES BY FUND GRAND TOTAL For Repayment of Principal •General Fund annual revenue $110,00 •General Fund CIP supplement $785,013 •Village Art Plaza •Corporate Yard Improvements •Cove Restroom 6/5/2019 3 Category General Fund All Other Funds Total Gov’t Funds Non‐spendable $ 52,976,449 $ ‐ $ 52,976,449 Restricted ‐ 39,263,604 39,263,604 Committed 29,726,500 ‐ 29,726,500 Assigned 19,921,112 ‐ 19,921,112 Unassigned 19,199,506 (11,405,877) 7,793,629 Total $ 121,823,567 $ 27,857,727 $ 149,681,294 Fire Tax Credit $ 9,754,327 Capital Projects 4,996,815 Measure G 5,169,970 GOVERNMENTAL FUND BALANCES •Housing Authority •Civic Center Fund •Capital Improvement Fund •19 Special Revenue Funds Non‐Spendable & Negative Unassigned From Fund Due to General Fund Civic Center $ 7,103,053 Street Facility DIF 1,891,472 Fire DIF 490,843 SilverRock 5,468,718 Total Receivable $ 14,954,085 Category Balance Prepaid Costs $ 90,657 Land Held for Resale 8,320,000 Advances from Other Funds 14,954,085 Due from Other Gov’t (RDA) 29,611,707 Total Non‐Spendable $ 52,976,449 •Advances from Other Funds •Reviewing Spring 2019 •RDA Loan Repayment •80% General Fund •Final Payment in 2030 6/5/2019 4 DIF Fund Options Option 1 ‐ Stop charging interest on all loans and only repay the principal (9 – 83 years) Option 2 ‐ Write‐off all DIF loans and declare an extra‐ordinary expense in the CAFR ($9,463,564) •Both options would require City Council approval SilverRock Loan Options •Assuming future property and sales taxes are used to reduce the outstanding loan Option 1 ‐ Stop charging interest on the loan and only repay the principal (16.5 years) Option 2 ‐ Write‐off the loan and declare an extra‐ordinary expense in the CAFR ($5,553,562) 6/5/2019 5 Findings/Recommendations •Loans are uncollectable based on revenues •Loans should be written off in full •Prepare draft Financial Note Disclosure –Remove Note 6, Interfund Receivables –Add New Note, Special Grain/Loss •Prepare draft Financial Statements –General Fund Budgetary Comparison –Fund Balance on Balance Sheet •Upon FAC approval recommend for City Council approval Reserve/Fund Balance As of June 30, 2018 Example Non-Spendable Prepaid Costs 90,657 90,657 Land Held for Resale 8,320,000 8,320,000 Advances to Other Funds 14,954,085 - Due from Other Governments 29,611,707 29,611,707 Total Non-Spendable 52,976,449 38,022,364 Committed Carryovers 2,186,500 2,186,500 Cash Flow Reserve 5,000,000 5,000,000 Natural Disaster Reserve 7,400,000 7,400,000 Economic Disaster 8,140,000 8,140,000 Capital Replacement Reserve 5,000,000 5,000,000 Pension Trust Benefits 2,000,000 2,000,000 Total Committed 29,726,500 29,726,500 Assigned Public Safety Fire Services 9,754,327 9,754,327 Measure G Sales Tax 5,169,970 5,169,970 Capital Projects 4,996,815 4,996,815 Total Assigned 19,921,112 19,921,112 Unassigned 19,199,505 19,199,505 TOTAL FUND BALANCE 121,823,566 106,869,481 6/5/2019 6 Thank You Financial Advisory Commission Special Meeting June 5, 2019 S1 – Discuss Fiscal Year 2018/19 Fourth Quarter Budget Report 6/5/2019 7 Summary of Recommendations •Revenue adjustments ‐ $120,800 –License & permits, false alarms, reimbursements •Expenditures adjustments ‐ $190,000 –Interfund transfer of $150,000 –Fire Expenses $40,000 •Three Interfund Transfers $2,392,000 •Recognize sale of Highway 111 property Interfund Transfers General Fund Economic Development $1,592,000 Public Safety $650,000 Facility & Fleet $150,000 Savings Reallocated Savings Reallocated New Expense 6/5/2019 8 Discussion & Questions Financial Advisory Commission Special Meeting June 5, 2019 S2 – Discuss Proposed Fiscal Year 2019/20 Budget 6/5/2019 9 Today’s Discussion •Update on General Fund •Unfunded requests •Received final direction from City Council to complete the budget process General Fund Update AMENDED BUDGET SURPLUS 578,296$ School Resource Officer 91,000 Citizens on Patrol - Golf Cart, Training 7,500 Employee Medical Insurance, HR Budget 51,300 149,800$ Available for Considerations 428,496$ Code Enforcement Officer 90,300 AMENDED BUDGET SURPLUS 338,196$ GENERAL FUND AS OF 5/21/19 GENERAL FUND AS OF 6/4/19 For Consideration 6/5/2019 10 Discussion and Questions Final Budget on 6/18/19 Financial Advisory Commission Special Meeting June 5, 2019 D1 –Award for Excellence in Government Finance 6/5/2019 11 Thank You FAC •General Fund Balance Policy •Best Practice •Outstanding Financial Management •Practical & Documented Work •Promote Improved Public Finance Financial Advisory Commission A Special Meeting will be held on August 7, 2019