HomeMy WebLinkAbout55 - PH-2 - First Reading of the Capital Asset Needs - 9/1/2015CITY COUNCIL AGENDA REPORT
MEETING DATE: SEPTEMBER 1, 2015 ITEM NUMBER: PH -2
SUBJECT: FIRST READING OF THE CAPITAL ASSET NEEDS ORDINANCE
DATE: July 9, 2015
FROM: FINANCE DEPARTMENT
PRESENTATION BY: STEPHEN DUNIVENT, INTERIM FINANCE DIRECTOR
FOR FURTHER INFORMATION CONTACT: STEPHEN DUNIVENT, INTERIM FINANCE DIRECTOR,
(714) 754-5243
RECOMMENDED ACTIONS:
Introduce for first reading Ordinance 15 -XX, to be read by title only, and waive further
reading, regarding the Capital Asset Needs Ordinance.
BACKGROUND:
On March 3, 2015 the Council adopted updated Financial & Budget Policies. These
policies included a section regarding a percentage set aside for capital expenditures:
Percentage of General Fund Budget for Capital Expenditures: The City
will allocate a minimum of five percent (5%) of the General Fund budget to
capital expenditures and plan a goal of an additional one and one-half
percent (1.5%) dedicated to a Capital Facilities Account. This allocation
may be annually reviewed by the Finance Advisory Committee. During an
economic downturn or in the event of a disaster these allocated funds could
be used as a type of reserve for operations.
This ordinance would add Article 8 to Title II, Chapter V of the Costa Mesa Municipal
Code to establish the requirement for a minimum of 5% of annual General Fund revenue
to the Capital Expenditures account and a minimum of 1.5% to a Capital Facilities account
annually.
ANALYSIS:
The purpose of this ordinance is to ensure the annual budgeting of adequate capital
funds to meet the needs of the city. The needs are illustrated by the seven-year capital
improvement program that totals over $230 million.
The ordinance contains definitions to clarify the distinction between capital expenditures
and capital facilities; outlines the use of funds and includes an emergency exception for
circumstances in which the City need not comply with the ordinance.
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The Finance Advisory Committee reviewed a draft copy of this ordinance on May 26,
2015. Some Committee members expressed concerns about the loss of flexibility that the
ordinance would bring while others expressed that the ordinance represents added
financial discipline for the City. The Committee voted 4-2-1 in support of the ordinance.
ALTERNATIVES CONSIDERED:
The Council could choose to amend this ordinance or not adopt it and continue to use the
existing Financial & Budget Polices currently in place.
FISCAL REVIEW:
The impact of the 5% and 1.5% requirements is currently $5,587,335 and $1,676,201 of
General Fund resources annually dedicated to capital and is included in the FY 15-16
Adopted Operating & Capital Budget.
LEGAL REVIEW:
The City Attorney prepared a draft ordinance for consideration and has reviewed this
report.
CONCLUSION:
Adoption of this ordinance require the City to annually budget minimum amounts of
funds for capital improvements and capital facility projects.
Stephen Dunivent Thomas R. Hatch
Interim Finance Director City CEO
Thomas Duarte
City Attorney
Attachment:
1. Capital Asset Needs Ordinance
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