Page 5 - FY 2021-22 Supporting Information
P. 5

Budget Stabilization Fund
                       Pursuant to the Budget Stabilization Fund (BSF) policy, the Proposed Budget could include
               a $2.4 million transfer from the BSF to the Budget. As this transfer is discretionary, the Proposed
               Budget complies with the policy.

                       The BSF will begin the year with a fund balance of $118.0 million. The Reserve Fund, the
               UB/Reserve for Mid-Year Adjustments, and the BSF, cumulatively, bring the City’s total General
               Fund reserves in 2021-22 to $826.6 million or 11.27 percent of the General Fund. For the first time,
               this achieves the goal set in the City’s Financial Polices of maintaining reserves at 10 percent of
               General Fund Reserves.

               Capital and Infrastructure Funding
                       The  City’s  Financial  Policies  state  that the  City  shall  make adequate investments  to
               maintain real property and equipment at appropriate levels. Further, the Capital and Technology
               Infrastructure Funding Policy establishes a target spending level of 1.5 percent of General Fund
               revenues on capital and technology investments.

                       Pursuant to the 1.5 percent standard, the Proposed Budget should include $110.1 million
               for infrastructure expenditures. The Proposed Budget exceeds this target by $42.0
               million,  appropriating  $152.1  million.  The  total  represents  2.07  percent  of  General  Fund
               revenues.


               One-time Revenue
                       It is the City’s policy to use one-time revenues for one-time, rather than ongoing,
               expenditures.  The  Proposed  Budget  does  not  meet  this  policy.    The  Proposed  Budget
               recognizes $714.8 million in one-time revenues while appropriating $581.2 million for one-time
               expenditures. Thus, $133.6 million of one-time revenues were used for ongoing expenditures.

                       This  gap  exacerbates  the  structural  budget  gap  discussed  below.  The  City  could  use
               its  healthy reserves in 2022-23 to offset the gap between ongoing expenditures and
               ongoing revenues if it maintains them both in the Adopted Budget and throughout 2021-22.

               Debt Policy
                       The  City’s  Debt  Policy  requires  that  the  non  voter-approved  debt  service  level  remain
               below six  percent  of  general  revenues  and  that  the  combined  non  voter-approved  and  voter-
               approved  debt  service  level  remain  below  15  percent  of  general  revenues.  The  Proposed
               Budget complies with this policy with a non-voter approved debt service level of 3.45 percent and
               a voter approved debt service level of 5.04 percent.


               Structural Balance
                       The City’s   Financial Policies include a goal of achieving and maintaining a
               structurally balanced  budget  in  which  future  costs  are  projected  to  be  fully  paid  by  future
               revenues. In order to assess  structural balance, my Office prepares the Four-Year Budget
               Outlook (Outlook)    that  compares  projected  revenues  to  projected  expenditures  through
               2025-26.  The  Outlook  projects  budget gaps of  $138.3  million  in  2022-23,  and  $2.6  million in
               2023-24,  and then surpluses of $95.8  million  in  2024-25,  and  $308.6  million  in  2025-26.  By
               Charter,  the  City  will  close  any  budget  gaps  as  part of that year’s annual budget process.
               Nonetheless, at this time the Outlook does not demonstrate structural balance. Preserving
               the current healthy level of General Fund reserves could  make  it  available  in  the  next  two
               years  if  the  City  chooses  to  maintain  service  levels  while  revenues naturally grow in order to
               sustain them on an ongoing basis.
   1   2   3   4   5   6   7   8   9   10