City Council Agenda and Packet 2017 09 26 SP

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SUBJECT: 2018 RECOMMENDED BUDGET AND 2018-2021 LONG-TERM PLAN DATE: SEPTEMBER 26, 2017 PAGE 11 OF 24 Capital Budget includes a $500,000 transfer from the General Fund to the Open Space & Parks Fund. However, due to the year-to-year fluctuations in the level of capital within the Open Space & Parks Fund, the ongoing future transfers from the General Fund will also fluctuate and be difficult to project. This limits the General Fund's financial flexibility and inhibits the use of General Fund resources for recurring expenditures used in providing general government services. For example, capital such as open space acquisition will compete directly with general government services, such as police protection. The Long -Term Financial Plan uses an alternative method of supporting the Open Space & Parks Fund with transfers from both the General Fund and the Capital Projects Fund: Beginning in 2019, the General Fund will make an annual transfer to the Open Space & Parks Fund calculated as total Open Space & Parks Fund operational expenditures, less all sales and use tax revenue, and less all other non -capital, recurring revenue (exclusive of interest earning). This will result in an ongoing transfer that will not fluctuate significantly and will be easy to project. It will also eliminate the competition between capital projects and operational services. Beginning in 2019, the Capital Project Fund will make an annual transfer to the Open Space & Parks Fund calculated as total Open Space & Parks Fund capital expenditures less all capital -related revenue, such as one-time grants, contributions, and land dedication fees, and less any transfers from the Impact Fee Fund. This will put capital projects in competition with capital projects. These transfers will keep the Open Space & Parks Fund reserves in compliance with the adopted policy on minimum fund balance, but not targeted fund balance. This is discussed later in the document as well as an alternative funding scenario/reserve policy consideration provided to address annual transfers to the Open Space and Parks Fund. The Finance Committee asked that this scenario be calculated and considered along with staff's recommendations. FUND FINANCIAL FORECASTS: Staff has incorporated the revenue projections, the operating expenditure targets, the interfund transfer projections, and the updated C -I -P projections outlined in the preceding discussion, along with some other operational adjustments and budget corrections, to create new financial forecasts for all funds. The forecasts contain five years (2017 and 2021) of projected revenue, expenditures, and ending reserves. A City-wide summary of projected revenue, expenditures, and ending reserves for the Recommended 2018 Operating & Capital Budget is shown in the following table. CITY COUNCIL COMMUNICATION 12