Background

As part of actively managing the budget, the second amendment typically occurs toward the end of the fiscal year, which allows the City to better estimate available net funding remaining in the current year. This method more clearly presents the activity that occurred on a budgetary basis in the prior year.

The City’s focus on resiliency and innovative constraint enables us to maintain our financial strength while continuing to provide high-quality services that are important to residents. Our tradition is to conservatively estimate revenue and ensure that adequate funds are available to meet service delivery needs. Accountability and transparency are key to this process - by managing the budget amendments using this process, we are able to maintain both.

FY22 Results Summary

The City ended FY22 above budgeted funding levels in all operating funds. In large part, this is due to the continued action and conservative strategies intentionally implemented by the City. The table below illustrates the results between FY22 unaudited results and the FY22 amended budget, as well as the impact on available funding after carry-overs.

Fund Balance Policy Requirement

The balances shown above include the funds that are required to be maintained in accordance with the City’s Financial Management Policy Statements. The General Fund must maintain an unassigned fund balance of at least 25% or 3 months of normal recurring operating costs based on current year budgeted expenditures.

A cash equivalent operating reserve is established and maintained for the Utility Fund at 25% of the current year’s budget appropriation for recurring operating costs, and the Airport Fund is also at 25%, excluding fuel for resale costs.

Carry-Over Requests

Carry-overs are expenditures that were budgeted in the prior year, but the receipt of those goods did not occur until the current fiscal year. Because appropriations lapse at fiscal year-end, and funds may not be spent unless they are appropriated, Council must formally re-authorize the expenditure of these funds. In all cases where carry-over funding is requested, the operating funds ended FY22 better than anticipated. The carry-over requests for each fund are outlined below.

 General Fund

The General Fund accounts for most of the City’s services and is funded primarily by sales tax (42%) and property taxes (35%). The annual budget maintains a policy minimum of 25% of recurring operating expenditures as a fund balance requirement.

The General Fund FY22 ending fund balance of $48.82M is $11.86M greater than the budgeted ending fund balance (net of sales tax accruals). Sales tax revenues came in $2.04M better than the projected revised budget, which is the combined result of conservative budgeting strategies and the inflationary impacts of prices of taxed goods. A total savings of $6.52 million was realized in departmental operating budgets, of which $6.75M is recommended for carry-over or as an additional appropriation.

Carry-over requests and additional funding strategies in the General Fund total $9,016,201 and are broken down as shown below.

During FY21, a budget amendment was approved by Council that established an Economic Reserve of $2M within the General Fund. The remaining expenditure budget totaling $1,417,722 is recommended for carry-over.

Additionally, as part of FY21’s strategies, an emergency reserve was set aside for potential needs resulting from the pandemic. The remaining balance of $863,247 is recommended for carry-over to maintain the organization’s flexibility in response to emergency funding needs and potential economic changes.

A total of $1,500,00 for Roof Rehabilitation was reallocated in the ARPA fund prior to the adoption of the FY23 budget to fund 3 additional ambulances at the start of the fiscal year, which better positioned the City to acquire these units with their available supply chain and deliver times. This reallocated funding is recommended to be reappropriated from the General fund balance to fund the originally planned Roof Rehabilitation.

Finally, a total of $1,045,000 was set aside in FY22 to support changes in compensation, including the structural changes and the addressment of compression within Public Safety. However, salary savings from vacancies in FY22 were able to offset these changes, and the funds were not needed. It is recommended that these be carried over into FY23 as a reserve to address any future compensation needs or potentially fund a non-public safety compensation study.

After the carry-overs and appropriation for financial strategies, the General Fund has a budgeted ending balance of $33,188,406, which maintains a 35% operating reserve and $9,437,757 in fund balance above the financial management policy requirement.

Utility Fund

At the end of FY22, the Utility Fund had an unaudited cash equivalents balance of $26.54 million which is $9.56 million higher than the budgeted ending balance. FY22 expenditures were $5.50 million less than budgeted and revenues were over budget by $4.06 million.

Carry-over requests totaling $942,428 are recommended for the fund. This results in a revised budgeted ending balance of $28.24 million for FY23, which is over the 25% policy requirement. 

Additionally, $1,500,000 is recommended for appropriation from fund balance to establish a capital resiliency reserve.  

The breakdown of utility carry-overs by division is shown below:

Airport Fund

The Airport Fund ended FY22 with unaudited cash equivalents of $7.65 million, which is $1.40 million higher than the budgeted ending balance. Operating carry-over requests in the Airport Fund total $267,300. Also recommended for amendment are the amounts related to the postponed bond issuance from FY22, which have since been sold. This includes $4,485,886 in expenditures and offsetting revenues. The revised budgeted ending balance for FY23 is $8.04 million after carry-overs and is over the policy requirement.

The breakdown of the Airport operating carry-overs by division is shown below:

Solid Waste Fund

The Solid Waste Fund has one item that needs re-appropriation in FY23, totaling $12,000 for the Solid Waste Transition Community Education efforts continuing from the prior fiscal year.

 Stormwater Fund

The Stormwater Compliance Fee Fund was established in FY23 to account for stormwater compliance activities and drainage-related maintenance and operations previously funded in the General Fund. A total of $20,967 is recommended for carry-over, which transfers funding for contracts not completed in FY22 from the General Fund’s prior divisions.  

 Fleet Replacement Fund

The Fleet Replacement Fund ended FY22 with a cash equivalent balance of $3.22 million which is $0.58 million higher than anticipated. A carry-over of $0.58 million is requested by the department, which includes $0.41 million for vehicles and equipment that was ordered and not received in FY22. Additional fleet facility equipment is in the process of being identified as needing replacement to maintain safety and minimize vehicle downtime. It is recommended that revenue brought in over the FY22 Revised Budget from vehicle auctions, totaling $171,112, be appropriated in the FY23 budget as one-time funding for these needs.

High Tech Replacement Fund

The Technology Replacement Fund ended FY22 with a cash equivalent balance of $1.76 million which is $0.44 million higher than anticipated. A carry-over of $525,244 is requested by the IT Department for equipment that was ordered but not received by year-end. The revised budgeted ending balance for FY23 will be $0.40M

Animal Shelter Donations Fund

At the end of FY22, the fund had received an additional $2,766 in additional revenues and had expenditure savings of $4,772. This total of $7,538 will be added to the FY23 budget, and results in a budgeted ending balance of zero.

 Public Education Grant (PEG) Fund

At the end of FY22, PEG funds totaling $379,438 were unspent and will be carried over. Additionally, a transfer of $203,637.77 was recommended in FY22 to correctly allocate revenue that has been brought in through cable franchise payments to the PEG fund from the General Fund, this transaction was not conducted in FY22; therefore, the budget is recommended for carry-over to take place in FY23. Revenues totaling $37,080 are also recognized for an insurance payment related to a totaled vehicle, whose replacement cost is also recommended at $45,555.60. The budgeted ending balance will be zero.

 Tourism Fund

The Tourism Fund ended FY22 with an unaudited ending balance of $1,208,262, which is $360,803 higher than the budgeted ending balance. The fund has four carry-overs totaling $59,102. The revised ending balance for FY23, after accounting for accrued HOT revenue, is $1,174,981.

 Public Art Fund

The Public Art Fund was established in FY23 to better track funding of projects from various sources. A total of $707,305 was identified within CIP funds as Public Art funding from the SL4B, and $13,993 was identified from Hotel Occupancy Taxes. Additionally, $150,000 from the remaining AllInForSLTX funds and $76,837 from the Economic Development operating budget, to fund the maintenance of projects, will be transferred from the General Fund. This results in a total increase of $948,135 to both the revenue and expenditure budget. The budgeted ending balance remains zero.

 Sugar Land Development Corporation

The SLDC Corporation ended FY22 with an available fund balance of $10.32 million, which is $2.49 million higher than the budgeted ending balance. The SLDC board approved a budget amendment on February 7th, 2023, to appropriate carry-overs totaling $120,388 in the FY23 budget.

 Other Budget Amendments

The approval of this ordinance also formally recognizes YTD budget amendments approved by the City Council since the start of FY23. The following amendments are reflected in the General Fund income statement.

State Seizure Fund

Also formalized through this ordinance is the $150,000 that was appropriated from fund balance in the State Seizures Fund on January 17th, 2023.

 Capital Projects 

The following amendments to CIP have also been previously approved by Council since the start of FY23 and are also formalized as part of this ordinance.

Recommendation

Staff recommends approval of Ordinance No. 2292 amending the FY23 budget to reflect carry-over funding from FY22 and Council-approved budget amendments as described above.