Consideration and approval of first and final reading of Ordinance No. 2127 amending the FY18 budget as presented.

The City’s budget is adopted by one reading of an ordinance each year by City Council as stipulated by the City Charter. After the budget is adopted, additional appropriations that are needed require City Council approval through a budget ordinance. To streamline the process, the Budget Office consolidates amendment requests into a single budget ordinance and brings them forward on a semi-annual basis, or as needed. This budget amendment is for carry-overs from FY2017, and formalizes budget amendments and actions approved by City Council since October.

As part of actively managing the budget the second amendment typically occurs at or near the end of the last accounting period for the fiscal year, which allows the City to constrain its carry-overs to the available net funding remaining in the prior year. This method more clearly presents the activity that occurred on a budgetary basis in the prior year.

The agenda item illustrates the City’s commitment to financial resiliency, and highlights the importance of actions that management takes throughout the year to ensure a balanced budget. Throughout FY2017, the organization faced revenue and expenditure challenges, as well as a record setting natural disaster. The City recognized mid-way through FY2017 that sales tax revenue was beginning to decline, and the ability of the City to fully fund all budgeted expenditures would likely not be feasible. In order to ensure the City ended the year in the black, management turned to the Financial Management Policy Statements for guidance. This important set of statements provided direction to management on how declining revenues should be managed relative to expenditures. These statements directed that the action necessary to rebalance the budget was a reduction in the transfer to the Capital Projects Fund for rehabilitation work. As a result, the City reduced nearly two million dollars in sales tax revenue, and approximately the same amount in transfers out for rehabilitation work. These proactive responses are an indication of the importance of the Financial Management Policy statements and how critical they are in upholding the City's commitment to strong financial management.

This agenda item is divided into two major sections. The first section describes the carry-over funding that is included for each fund, and the next section describes the formalization of all previous council actions. The formalization of each previous action has either a full or nearly full revenue that supports the additional reappropriations. The table at the end of this agenda summarizes the variance to budget.

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 the year better than anticipated, largely due to these expenditures occurring in the next fiscal year. The carry-over requests for each fund are outlined below.

The General Fund FY17 unaudited ending budgetary fund balance of $21.96M is $2.59M greater than the budgeted ending fund balance. The variance within this fund is primarily the result of savings from non-departmental expenditures, such as salary savings and rebates and assignments, but it is also impacted by slightly higher net operating revenues.  

As part of this amendment Council will be reappropriating carry-over funding and formalizing other council approved items, which total $1.13M. As part of this process there is also the need to recognize $302K in additional revenue from grants, donations, and the additional transfers in from the debt reduction fund that support the annexation related carry-over expenditures.

Carry-over requests in the General Fund total $933,658 as shown below. The carry-over revenues total $113,911, of which $7,542 is from Bulletproof Vest Grant Funds and $106,369 is a transfer from the debt reduction funds to cover annexation related carry-over expenditures.  After carryovers and appropriations approved by City Council, the fund is $1.75M over the policy requirement for FY18, of which a portion of funds are restricted for traffic safety and public education communications (PEG funds).

Carry-overs in the General Fund include: 

The Sugar Land Development Corporation has an FY17 unaudited ending fund balance of $2.34M, which is $1.04M greater than the budgeted ending fund balance. Revenues were $94,302 lower than anticipated, and expenditures were $1.13M less than anticipated. Carry-Over requests in the Sugar Land Development Corporation total $408,468 and include $4,000 in operating expenses, and $404,468 in CIP project funding. This fund is $627,876 higher than budgeted, which includes savings from operations. All SLDC funds are restricted.

The Sugar Land 4B Corporation ended the year $2.80M higher than anticipated. The FY17 unaudited ending fund balance is $5.09M. Revenues were $104,012 lower than anticipated, and expenditures were $2.90M less than anticipated. Carry-Over requests in the Sugar Land 4B Corporation total $2.24M and include $66,623 for operating expenses, and $2.17M for ongoing capital improvement projects. This fund is $563,578 higher than budgeted, which includes savings from operations. All SL4B funds are restricted.

The Tourism Fund has an FY17 unaudited ending fund balance of $876,066, which is $357,392 greater than the budgeted ending fund balance. Revenues were $153,051 greater than anticipated, and expenditures were $204,341 less than anticipated. Carry-over requests in the Tourism Fund total $145,186 and includes funding for work on the visitor’s center, tourism & promotion, and events & sponsorship. This fund is $212,206 higher than budgeted, which includes savings from operations. All Tourism funds are restricted.

The CDBG Fund has $19,606 in revenues and expenditures that are restricted and need to carry-over to FY18. These funds will be added to the budget allocation for the current fiscal year, and support existing projects.

The Employee Benefits Fund has $14,685 in revenues and expenditures that need to carry-over to FY18. These funds will be added to the budget allocation for the current fiscal year, and are related to revenues received from Cigna that must be spent on wellness related activities.

The High Tech Replacement Fund ended the year better than anticipated with an unaudited ending fund balance of $2.16M. Revenues were $3,054 less than anticipated, and expenditures were $43,173 less than anticipated. The High Tech Replacement Fund includes $17,297 in carry-overs for 3 Tier Wireless parts, which were ordered but not received in FY17. This fund is $22,822 higher than budgeted.

The Utility Fund has an FY17 unaudited ending fund balance of $4.59M, which is $406,439 greater than anticipated. Revenues were $525,666 less than anticipated, and expenditures were $932,105 less than anticipated. The Utilities Fund has expenditures that require carry-over funding for items ordered, but not received within the current fiscal year, and for water quality management and improvements. Carry-over requests for the Utilities Fund total $156,400. This fund is $250,039 higher than budgeted.

The Surface Water Fund has an FY17 unaudited ending fund balance of $11.50M, which is $1,664,776 greater than anticipated. Revenues were $135,442 greater than anticipated, and expenditures were $1,529,334 less than anticipated. There is one Carry-over request for the Surface Water fund that totals $489,000 and is for the Integrated Water Resource Plan. The budget amendment for this work was approved late in FY17 and the work will be ongoing through FY18. After carryovers and adding the repayment of the inter-fund loan from the Airport ($1.04M), this fund is $2,219,173 higher than budgeted.

The Airport Fund has an FY17 unaudited ending fund balance of $5.69M, which is $814,342 greater than the budgeted ending fund balance. Revenues were $67,496 greater than anticipated, and expenditures were $746,846 less than anticipated. Carry-over requests total $33,240 and are for the Old Terminal renovation work not completed in FY17. This fund is expected to be $262,295 lower than budgeted, as a result of an additional appropriation for the repayment of the inter-fund load to the Surface Water Fund. This will be highlighted in the appropriations section of the agenda.

The Solid Waste Fund has an FY17 unaudited ending fund balance of $470,754, which is $76,353 greater than anticipated. Revenues were $632,877 less than anticipated, and expenditures were $709,230 less than anticipated. This variance is primarily associated with planned Hurricane Harvey debris removal that came in less than anticipated. Carry-over requests total $81,610 and include $5,111 in funding for the solid waste campaign in the annexed areas, $6,188 for Harvey related debris removal, and $70,311 for contractual services to remove contamination from an illicit discharge which was not completed in FY17. The illicit discharge will be reimbursed to City and the solid waste annexation campaign will be funded from debt reduction funds. This fund is $76,353 higher than budgeted.

The Annexation Debt Reduction Fund- Greatwood has an FY17 unaudited ending fund balance of $3.89M, which is $613,500 greater than the budgeted ending fund balance. Revenues were $15,243 greater than anticipated, and expenditures were $598,257 less than anticipated. The carry-over request of $55,740 is to cover 50% of General Fund and Solid Waste Fund annexation related carry over expenditures. This fund is $557,760 higher than budgeted.

The Annexation Debt Reduction Fund- New Territory has an FY17 unaudited ending fund balance of $4.29M, which is $623,039 greater than the budgeted ending fund balance. Revenues were $24,782 greater than anticipated, and expenditures were $598,257 less than anticipated. Carry-over request of $55,740 is to cover 50% of General Fund and Solid Waste Fund annexation related carry over expenditures. This fund is $567,300 higher than budgeted.

Formalized Budget Appropriations

In addition to the carry-overs included above, this ordinance will formalize certain actions that Council has approved. These items include the addition of both revenues and expenditures for grants, donations, and reimbursements.

The following table illustrates the General Fund items needing to be formalized through ordinance:

The State Seizures Fund includes the formalization of appropriations of $91,894 to purchase equipment for law enforcement use including a TCOLE Certified ID Card Machine, 20 SWAT Rifles, and other law enforcement equipment needed for the build-out of the new Mobile Command Post Vehicle. These funds are restricted and can only be used for certain law enforcement purchases.

The Surface Water Fund includes the formalization appropriations of $86.45M in revenues and expenditures for General Obligation Refunding Bonds, series 2017, and $1.04M in revenue for inter-fund loan repayment from the Airport Fund.

The Airport Fund includes appropriations of $1.04M in expenditures for inter-fund loan repayment from to Surface Water Fund in accordance with Resolution 16-19. Rather than waiting for TXDOT grant funding to repay the loan, staff recommends appropriating the funds to make the payment as it is shown in the resolution.

The CIP Fund requires that actions that have previously been taken by council be formalized through the ordinance process. The drainage items listed below are items utilizing funding set aside for Hurricane Harvey related studies and work. The water and wastewater projects have come in under budget, and will result in an increase in the CIP fund balance. The table below represents the changes to the CIP budget.

The table below illustrates the variance between unaudited actuals, and the budget, as well as the impact of this item.