Attachment 2 - Public Comments Received before Publishing the Staff ReportFrom:Phil Koen
To:Gitta Ungvari
Cc:Laurel Prevetti; Rick Tinsley; Maria Ristow; Rob Rennie
Subject:Excess liquidity available to be reprogrammed
Date:Wednesday, February 15, 2023 9:45:27 AM
Attachments:Excess liquidity (2).pdf
[EXTERNAL SENDER]
Hi Gitta,
I have been reflecting on the FC meeting and I recommend that the Staff provide more clarityto the Town Council on two questions - 1) how much of the ARPA money is currently
available, meaning unspent vs programmed to be spent; and 2) what is FY 23’s most likelyrange of operating surplus (revenues in excess of expenditures).
I have attached a couple of pages from the FC package where I have provided my view. Let
me lay out my thinking:
1. ARPA Funds
The Staff memo points out that there are $2,065,302 ARPA funds available in the GF reserveas of year end FY 22. Additionally the Town received the second ARPA payment of
$3,614,872 in July, 2022 and recorded the grant as revenue in FY 23. The schedule of SpecialRevenue Funds - ARPA on page 23 of item #5 shows those funds are still available and
unspent as of the end of Q2 FY 23. Therefore $5,680,174 is available.
I understand that because the TC passed a resolution which programmed the expenditure ofARPA funds in FY 23, the Staff views these “programmed” expenditures as “spent”. Applying
these future programmed expenditures totaling $681,428 to the current funds available of$5,680,174, leaves a balance of $4,998,746. This amount is available to the TC to reprogram
to new and better uses if the TC should so decide.
Since the updated forecast now reflects a surplus of $1,238,174 (more on this below) there isno need to program $1,645,281 as “balancing revenue and operating expenses” for FY 23.
Additionally the $2,900,000 for capital expenditures is a pool of funds that has not beenallocated to any specific capital project and should be freely available for redeployment if the
TC so decides. It should be pointed out that as of June 30, 2022 the Town had approximately$33 reserved for capital projects in total government funds. Of this $33m, only $8m is
restricted in its use, leaving $25m unrestricted. The $2.9m would be in addition to theunrestricted amount.
2. FY 23 probable operating surplus including mid-year adjustments
The schedule on page 28 of item #5 shows in the far right column an estimate for FY 23 which
reflects all proposed mid-year adjustments. The FY 23 net change to the General Fund isprojected to be a decrease of ($1,230,268). This net change is comprised of the FY 23
ATTACHMENT 2
operating surplus, plus transfers in, less transfers out from the General Fund balance. Fundtransfers are not an element of the current year’s operating surplus but do impact the change in
fund balance. Our interest is only the current year surplus for this analysis.
We need to expand the net change number into the component pieces to determine theestimated operating surplus for FY 23. I have shown my calculations on the attached which
computes $1,238,174 as the operating surplus. By comparison, in FY 22 the General Fundhad an operating surplus of $3,290,895.
It is very important to understand that no ARPA revenue nor expenses are included in the
projected $1,238,174 operating surplus for FY 23. That is because the ARPA money isaccounted for in a separate special revenue fund. Therefore to arrive at a total liquidity
available to the Town Council for reprogramming you need to add the funds available fromboth the General Fund’s operating surplus and the ARPA funds. That number is $6,236,920.
This is why I made the comment during the FC advising the Town Council that there issignificant amount of funds available for programming in FY 23. I stand by that
recommendation.
While I appreciate how the Staff has arrived at their estimate, it is important to realize there isa level of conservatism baked into these estimates. While that is a reasonable approach,
without having an idea of the degree of conservatism, it is difficult to judge the probabilityassociated with actual having a $1,238,174 operating surplus or even a greater surplus.
In doing a line item by line item review of both revenues and expenditures, taken as a whole, I
conclude it is highly likely total tax revenues will be $1,000,000 greater than the estimate,operating expenses primarily driven by vacancies and other savings will be $500,000 less and
interest income through better cash management of the Town’s $10m in demand deposits andreinvestment of low yield maturing securities could possibly be $200k higher.
Therefore the most likely range for the operating surplus is $1,238,174 up to $2,938,174.
Given the degree of conservatism baked into the forecast and mindful that there is only 4 and1/2 months left in FY 23, I do not see any likelihood that the operating surplus will be less
than the up dated estimate. There is far more upside than downside.
As the TC thinks about resource allocation the risks they must clearly understand is 1) the riskof not funding a worthy program because they relied on a too conservative forecast versus 2)
the risk of funding a worthy program and not having the funds available.
It is my recommendation that the more acceptable risk to assume is the second risk becausethe Town has significant General Fund reserves to tap in this event. Far better to fund worthy
programs and tap reserves (this is why reserves exist) than to not fund worthy programs andnot have necessary services provided to the Town’s residents.
In fact, the Town has been operating this way for some time. It is very common for the Town
Council to approve an unfunded incremental expenditure by tapping the Capital/SpecialProject reserve of the General Fund as a funding source. This reserve has historically been
used as the “shock absorber” for unfunded new needs. I might point out that there are moreappropriate ways to handle this situation, which we have discussed.
Please let me know if you have any questions. I have also copied our two Council Members on
ATTACHMENT 2
the FC so they can benefit from this analysis. To be clear this is my analysis and has not beenshared with entire FC because of the lack of time.
Phil
27
Council has already allocated all the $7.2 million proceeds for various priorities as illustrated in the below
table. Staff will bring back any residual balance not used for the original purpose after completing the
program for Council re-programming reconsideration
While the Town already recognized the full first tranche of the ARPA proceeds during FY 2020/21 and FY
2021/22, only $1,549,570 was utilized during those fiscal years, $2,065,302 is part of the General Fund
balance and tracked by staff to ensure that the proceeds are spent by Council adopted uses.
The FY 2022/23 budget was adopted prior to the simplified guideline so staff is proposing the following
budget adjustments to recognize the revenue and track the Council approved uses.
FY 2020/21 GRAND
BUDGET ADJ.
ACTUALS ESTIMATED ACTUALS BAL REMAINING ESTIMATED EST. MID-YEAR TOTAL
ARPA FUNDS REVENUE RECOGNIZED 200,911$ 3,413,961$ 3,614,872$ 7,229,744$
GOV SERVICES (WAIVERS,CUP&ADA,DIRECT GRANTS)200,911 200,911
REVENUE LOSS -GOV SERVICES (PUBLIC SAFETY)3,413,961 3,413,961 3,614,872 7,028,833
200,911$ 3,413,961$ 3,614,872$ 7,229,744$
GENERAL FUND ARPA REPLACEMENT REVENUES AVAILABLE 200,911$ 3,413,961$ 3,614,872$ 7,229,744$
LESS APPROVED USES TO BE BUDGETED:
PARKLETS (DOWNTOWN IMPVTS PROJECT)-$ 680,000$ 466,428$ 213,572$ 250,000$ -$ 930,000$
RENT WAIVERS 121,255 341,452 341,452 - 283,756 746,463
CUP/ADA FEE WAIVERS 19,656 27,672 27,672 - 27,672 75,000
DESTINATION MARKETING 55,000 55,000 - 55,000
K-RAILS (DOWNTOWN IMPVTS PROJECT)68,000 88,654 (20,654) 68,000
PROMENADES 80,000 69,855 10,145 120,000 90,628 200,000
DIRECT GRANTS 60,000 50,000 50,000 - 110,000
ENHANCED SENIOR SERVICES 500,000 249,597 250,403 500,000
CAPITAL IMPROVEMENT PROGRAM SUPPORT TRANSFERS 2,900,000 580,000 2,900,000
REQUIRED FOR GF BALANCING OF OPERATING REV_EXP 1,645,281 1,645,281
TOTAL ALLOCATIONS OF GENERAL FUND ARPA REPLACEMENT REVENUES 200,911$ 1,802,124$ 1,348,659$ 453,465$ 5,226,709$ 670,628$ 7,229,744$
AMERICAN RESCUE PLAN ACT (ARPA) SUMMARY WORKSHEET
FY 2022/23FY 2021/22
Fund Program Account
111 4301 48219 ARPA - Intergovernmental Revenue 3,614,872
111 5301 48219 ARPA - Intergovernmental Revenue 40,431
111 3201 48219 ARPA - Intergovernmental Revenue 27,672
111 2101 48219 ARPA - Intergovernmental Revenue 120,000
411 411-813-0235 48219 ARPA - Intergovernmental Revenue 250,000
633 5404 48219 ARPA - Intergovernmental Revenue 243,325
241 1241 43217 ARPA - Intergovernmental Revenue 2,310,176
6,606,476$
241 1241 68219 ARPA - Income Replacement Expense 2,310,176
111 1201 68219 ARPA - Income Replacement Expense 3,581,428
5,891,604$
American Rescue Plan Act (ARPA) Fund
FY 2022/23 MID-YEAR BUDGET ADJUSTMENT REQUESTS - ARPA RECLASSIFICATION
Page 258
Item 5.
O
Balance 2,065,302
and ARPA 318897Tavailable681,428Programmedspend
Net avail 4,998,711
28
GENERAL FUND FINANCIAL SUMMARIES AND ESTIMATES
The following table is the Schedule of General Fund Operating Revenues Versus Operating Expenditures
for the second quarter of FY 2022/23which includes comparison information from the prior year.
The FY 2022/23 Adjusted Budget column includes the adopted budget and items that Council approved
during the course of the first two quarters of the fiscal year, such as additional funding for legal services,
and miscellaneous carry over grants from prior fiscal year.
The FY 2022/23 Estimated column contains projections of final balances for the current fiscal year based
upon staff analysis, the early trends observed through the second quarter in sales tax and property tax
projections, and the proposed mid-year adjustments as listed in this report.
The FY 2022/23 Estimated figures also include analysis on potential salary and other expenditure
savings; however, budget adjustments are only recommended as identified in this Report.
Staff continues to fine tune the detailed analysis of the FY 2022/23 year-end estimated revenue and
expenditure numbers and an update will be provided with the presentation of the Proposed Fiscal Year
2023/24 Operating Budget.
The following table illustrates the summary of the General Fund balance status based on current
estimates and prior year result.
The table in the following page provides the details of the Revenues and Use of Reserve and Total
Expenditures and Reserve Allocations.
FY 2021/22 FY 2021/22
2Q % of
FY 2021/22
2Q % of
FY 2022/23 FY 2022/23 FY 2022/23 FY 2022/23
Actuals Q2 Actuals Adjusted
Budget
as of 12/31/2022
Q2 Adjusted
Budget
Year End Estimates
Including
Proposed
Mid-Year
Adjustments
Total Revenues & Transfers In 54,448,222$ 17,978,806$ 33%34%17,098,505$ 50,266,120$ 50,546,861$
Total Expenditures 51,466,052 21,155,306 41%40%21,105,947 52,886,926 51,777,130
Net Increase (Decrease)2,982,171$ (4,007,441)$ (2,620,805)$ (1,230,268)$
Beginning Fund Balance 23,914,618 26,896,789 26,896,789 26,896,789
Ending Fund Balance 26,896,789$ 22,889,348$ 24,275,983$ 25,666,521$
GENERAL FUND
SUMMARY OF REVENUES AND EXPENDITURES
Page 259
Item 5.
I open surplus 1,23044
opusurp 3,290,895 538,536
Tye Ah 4,047,313 Transfer In
Ty out 4,358,188 Trager out EÉNetchangenettchangzEI
what could the surplus
Really be in FY 23
Curr estimate 1,238 174
Revenues
1 0001000strongertax
vacancy savings 5001000
interest meine 2,338,717