City of Modesto Fiscal Year 2012-13Budget Workshops Follow-UpMay 23, 2012

AgendaISF & Cost Allocation

Distribution of Costs (120 Day Review - Aug. – Dec., 2012)Overview Budget Picture

Public Works & UP&P$3.8 Million ShortfallMayor’s Reductions (Initial and Additional 3%)

Department Presentations (Service Enhancements, Reductions, Impacts and Revenue Enhancements)UP&P - Workload/Workflow of Capital Improvement Support FundMayor’s Closing CommentsFinance Committee Deliberations and Policy Considerations

GAAP Distribution of Costs

Internal Service

Fund (ISF)

Cost Allocation

Service Credits

Direct Billing

The City of Modesto utilizes 4 methods to distribute costs for services. These methods are industry standard and supported under Government Accepted Accounting Principles (GAAP)

Distribution of Cost Methods Defined

Internal Service Funds

• Funds used to account for goods or services provided by one dept to another dept on a cost reimbursement basis.

Cost Allocation Plan

• A method to identify and distribute indirect costs from support depts to those depts they serve.

Service Credits

• An signed agreement between depts to provide labor, equipment, supplies and material costs as agreed upon in advance.

Direct Invoices

• Invoices related to a service or charge provided or directed by another dept may be directly invoiced to the consumer dept.

Methods Used by DepartmentsDepartments ISF Cost

AllocationService Credits

Direct Billing Comments

City Clerk X XCity Attorney X X XCity Auditor XCity Council XCity Manager X XPRN X XHR X X XFinance X XIT X X XPolice X X

Addressing Distribution of Costs – Models Moving Forward

Complex allocation modelsNot 1 for 1 reductions – Costs savings are not specific to General Fund (i.e., 40% General Fund to 60% Enterprise Fund) Plan to address distribution of cost models (Aug. -Dec., 2012)City Manager will request the City Council direct the City Auditor to review and make recommendations to current allocation models.

Budget Picture

Continued challengesExpenditures still exceed revenuesService levels remain flat but needs are evidentWater & Wastewater stable - Future rate increases being proposedSalary & Benefits (contractual raises, increased pension costs, retiree health care costs projected to increase annually)MPOA – 2% August, 2012 – Estimated at $310,052MPMA – 2% August, 2012 – Estimated at $82,571MCFFA – 3% July, 2012 – Estimated at $460,898No furlough savings are currently budgetedObligations to JPA/MRFA

Modesto Regional Fire Authority(MRFA) – Additional Expenses

City of Modesto has received and is reviewing the preliminary MRFA budget for FY13.Capital equipment needs will need to be discussed and addressed.Larger increases include:

Pension Increase - $480,0003% Raises July, 2012 - $460,000Airport Staffing - $160,000

General Fund Overview – FY12/13Amount

Total Revenues $ 101,752,591

Total Expenditures: Department Budgets (102,644,318) Transfers Out (8,202,314)

(110,846,632)

Shortfall $ (9,094,041)

Notes: Revenues include Transfers In Transfers Out include: Debt Service - $3,400,801Surface Transportation MOE - $1,687,7154th Year of PD ARRA Grant - $986,000

Mayor's Recommended Reductions or Enhancements Are Not Included

Shortfall for 2012 / 13

AmountUse of FY11/12 Fund Balance $ 4,718,202 Mayor's Recommended Reduction List:

Initial Revenue Enhancements 337,868 Initial Expenditure Reductions 243,170

Total to Date $ 5,299,240

Remaining Reductions to be Made $ 3,794,801

Source of FY 11-12 Fund Balance Carryover

Amount Fund Balance Carryover - FY 10/11 $ 1,493,348Departmental Savings:

Police 859,668Parks, Recreation & Neighborhood 418,655Others 269,441

Unanticipated RevenuesPolice 595,393Business License 359,447Sales Tax 187,485Others 534,765

Total to Date $ 4,718,202

FY12/13 Proposed General Fund Expenditures

Police $ 48,755,502 44.1%Fire 24,458,566 22.1%PR&N 11,163,141 10.1%C&ED 5,848,656 5.3%Finance 4,911,584 4.4%City Attorney 2,394,476 2.2%City Manager 1,509,989 1.4%Human Resources 1,373,133 1.2%City Council 475,713 0.4%City Clerk 383,198 0.3%Office of the Auditor 163,756 0.1%Transfers Out 8,136,314 7.4%Non-Departmental 1,029,434 0.9%

$ 110,603,462 100%

Includes Initial Mayor's Recommendations

Mayor’s Reductions -Initial and additional 3%

Reduction Worksheets

Closing The Shortfall

Freezing of Vacant Positions (May-Sept)

Temporary Savings on EBF and WC (To fund shortfall temporarily

through negotiations)

Finance Committee Deliberations and Policy Considerations

Closing

Thank you & Questions