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Finance Committee General Fund Update Review of Expenditures for 2009-10 May 18, 2010 The continuing negative news with respect to General Fund revenues is largely offset by additional cost savings measures which are being implemented for 2009-10. As can be seen in column (4) the General Fund is experiencing savings in the categories of Salaries and Benefits, Services and Supplies and the Fire Services Contract. The additional savings from the December Update is approximately $1.0 million. More specifically, staff implemented earlier this year a Golden Handshake program which closed October 31 of last year. A review of the Golden Handshake program indicates that the General Fund will save approximately $500,000 for the balance of 2009-10 and this cost reduction is reflected in both the December and March Update columns. In addition, a furlough of one day per month has been implemented for the second half of 2009-10. As a result, the continuing hiring freeze, open positions and the furlough are producing savings for 2009-2010. Staff estimates that this category will produce an additional savings of about $328,000 over the December Update. In addition to the Salaries and Benefits cost savings for 2009-10, the General Fund is reducing costs in the categories of Services and Supplies. Based on current expenditure trends and information from the various departments, staff estimates that the General Fund will save an additional $478,000 over the December Update. Also, and as indicated in the December Update, a review of the Capital Improvement Projects fund (CII') and the Gas Tax fund indicates that contributions could be reduced by $100,000 and $200,000 respectively. Schedule A reflects these adjustments. Finally, in connection with the December Update, the City Manager directed all Department Heads to review their General Fund budgets to see what additional savings might be realized during the balance of the year. Departments continue to pursue those savings and the results are being reflected in the estimates reported for the March Update. SUMMARY In brief, the City continues to weather significant revenue reductions. There is no guarantee that the downward trend will not continue. If the estimated revenues and expenditures as shown in the attached schedule come to pass, then the General Fund will sustain an operating loss of approximately $7.4 million for 2009-10. This deficit, coupled with the General Fund beginning fund balance of $10.1 million and loan payments of $1.1 million (which are credited directly to fund balance) will result in an ending Designated Fund balance of approximately $3.8 million. The estimated ending Designated Fund Balance of $3.8 million is of singular importance as this is the amount that is used in the Proposed 2010-11 Budget. If staff estimated that the ending balance would be significantly different from the estimate used in the Proposed 2010-11 Budget, then that could have a material impact (negative or positive) on Council's review of the proposed budget. Fortunately, the revenue declines noted above had been offset by continued cost savings. Impact to the Proposed 2010-11 Budget In reviewing the revenue adjustments noted above the question which immediately comes to mind is "are these adjustments factored into the Proposed 2010-11 Budget?". The answer is yes, for the most part. For example, for Property Taxes, staffls estimate is reduced from the $15.9 million expected this year (2009-10) to $15.3