Fort Walton Beach Council agenda — 08-22-2007 special agenda — reading text

pension benefits for future hires based on a target contribution rate. One of the benefits of this option over option ( 3) is the absence of the administrative difficulties associated with starting a new plan. There may, however be recruiting issues associated with two levels of pension benefits in one plan, and increasing pressure over time from the new hires to equalize benefits. 15 Page 37  Attaclunent 4 MelDo frolD run - Unn Pension Attorney Be Budget Transfers 8/ 8/ 07  c LEWIS, LONGMAN & WALKER, P.A. 1 r .! \ 0.: "-..,: f \. ~ ;,. r I '. \ \.. REPLY To: TALLAHASSEE MEMORANDUM TO: Lisa Absher, Finance Director City of Fort Walton Beach FROM: Jim Linn CC: Joyce Shanahan, City Manager DATE: August 8, 2007 RE: Budget Transfers This responds to your email of July 30, 2007, in which you question whether the opinions expressed by City Auditor Angela Balent and me concerning City budget transfers are consistent with section 166. 241, Florida Statutes. Specifically, Ms. Balent, in her July 25, 2007 letter ( at page 9), stated: The level of budgetary control ( that is the level at which expenditures cannot legally exceed appropriations) has been established by the City at the fund level. The City Manager and Finance Director are authorized to transfer budgeted amounts within departments of a fund and between departments of a fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. In my July 30, 2007 " Report on City of Fort Walton Beach General Employees' Retirement Fund" ( at page 6) I stated: Every budget ordinance adopted by the City Council contains the following ( or substantially similar) language: Helping Shape Florida' s Future@) BRADENTON JACKSONVILLE TALLAHASSEE WEST PALM BEACH 1 1700 Palm Beac.h Lakes Blvd. lO( H 3" Avenue West 245 Riverside Avenue Post Office Box 10788 ( 32302) Suite 670 Strite 150 125 South Gadsden Street. Suite 300 Suite 1000 Bradenton. FL 34205 Jacksonville. FL 32202 Tallahassee, FL 32301 West Palm Beach, FL 33401 941) 708- 4040 904) 353- 6410 850) 222- 5702 561) 640- 0820 Fax: ( 941) 708- 4024 Fax: ( 904) 353- 7619 Fax: ( 850) 224- 9242 Fax: ( 561) 640- 8202 1' www. llw- law. col11 Page 38 August 8, 2007 Page 2 Appropriations may be transferred for the purpose of equalization when needed by a budget transfer with the approval of the Finance Director and/or the City Manager as necessary. This action will not change the total dollar amount of the budget." The above language expressly authorizes budget transfers that are approved by the Finance Director or City Manager, as long as the total dollar amount of the budget is not changed. City Council approval is not required, unless there is a change to the total dollar amount of the budget. Section 166. 241( 3), Florida Statutes, which was enacted in 2004, provides: 3) The governing body of each municipality at any time within a fiscal year or within up to 60 days following the end of the fiscal year may amend a budget for that year as follows: a)Appropriations for expenditures within a fund may be decreased or increased by motion recorded in the minutes, provided that the total of the appropriations of the fund is not changed. b) The governing body may establish procedures by which the designated budget officer may authorize certain budget amendments within a department, provided that the total of the appropriations of the department is not changed. c) If a budget amendment is required for a purpose not specifically authorized in paragraph ( a) or paragraph ( b), the budget amendment must be adopted in the same manner as the original budget unless otherwise specified in the charter of the respective municipality. The Fort Walton Beach City Charter does not contain any general budget procedures, other than requiringthat the City Manager " prepare and submit to the Council the annual budget estimate." Sec. 17, Fort Walton Beach City Charter. As noted above, it has been the City' s practice to include in each annual budget ordinance a provision specifically authorizing the Finance Director or City Manger to approve " budget transfers" as longas the total amount of the budget is not changed. The City Auditor states that the authority to make budget transfers without City Council approval is limited to transfers within departments of a fund and between departments of a fund." Section 166. 012( 3)( a) states that appropriations " within a fund" may be increased or decreased upon motion of the City Council. And section l66.012( 3)( b) makes it clear that the City Council can establish procedures within a by which the designated budget officer may authorize certain budget amendments department." However, Chapter 166 does not define the terms " fund", " department" or " budget Page 39 August 8, 2007 Page 3 amendment." There are no published court decisions, Attorney General opinions or rules that shed light on the meaning of these tenns as they are used in Chapter 166. Until 2004, section 166.241 did not contain the present subsection ( 3). This subsection was added, according to the legislative staff analysis, to clarify the budget amendment process for cities where the charter is silent on budget amendments, because cities had expressed confusion as to whether and how their budgets might be amended. The tenn " budget amendment" appears to have a meaning in the context of the statute which might not ordinarily carry to those involved in the municipal budget process. In the context of section 166. 241, " amendment" appears to mean any change in the budget, including transfers within and between certain budget categories. Section 166. 241 provides that a city budget may be " amended" at any time within the fiscal year or up tosixty ( 60) days following the end of the fiscal year. The statute addresses three types of budget amendments: a) budget amendments that increase or decrease the appropriations within a fund, but do not change the total fund appropriation; b)budget amendments within a department, which do not change the total appropriation of the department; and c) other types of amendments not addressed in (a) or (b) above. As we understand the budgetary procedures the City has followed for many years, all three types of changesoccur. " Type c" changes are effected by resolution of the City Council, in accordance with the annual budget ordinance. In the case of "type a" and " type b" changes, the changes are made under the authority of the following language in the annual budget ordinance: Appropriations may be transferred for the purpose of equalization when needed by a budget transfer with the approval of the Finance Director and/or the City Manager as necessary." While the ordinance language does not specifically use the words " fund" or " department," it appears to meet the minimum requirements of statute. It is ourunderstanding that the City budget is organized on a " fund" basis, and not by department. Each " fund" reflected in the City budget includes expenditures for more than one department. Whether departmental transfers within these funds are " type a" or " type b" changes would be a matter of conjecture, but under the present circumstances need not be decided. The City budget ordinance itself must be moved, seconded and adopted by the City Council; therefore the budget ordinance meets the reasonable definition of a " motion." There is no motion or that the motion express requirement that each " type a" change be approved by separate must be before or after implementation of the change. Thus, the City Council has authorized, through the express language of the budget ordinance, transfers within a fund that are approved by the Finance Director and/or City Manager. The budget ordinance also specifies that any Page 40 August 8, 2007 Page 4 transfer between funds must be accomplished by a resolution adopted by the City Council. Although the statute provides that such " type c" amendments be implemented " in the same manner as the original budget unless otherwise specified in the charter...", the City' s procedure conforms to the spirit if not the letter of the law. Transfers within a department (" type b") amendments may be authorized by a " designated budget officer" in accordance with procedures established by the City Council. The City Council has established a basic procedure for " type b" transfers in the budget ordinance, that is, the transfer must be for " equalization" and approved by the City Manager and/or Finance Director. It is significant that the annual audits of the City budget required by law have not noted any irregularities in the City' s budget transfer and amendment procedures. Conclusion: There is no specific guidance in the form of court decisions, Attorney general opinions or rules as to what constitutes a " safe harbor" under section 166. 241( 3), Florida Statutes, for city budget transfers. The statute provides that the City Council can establish a procedure for transfers within a department which are authorized by designated budget officers. Appropriations within a " fund" may be increased or decreased " by motion." However, the statute does not define " department" or " fund." For many years the City Council has authorized, in its annual budget ordinance, transfers within and between departments, but within a fund, as approved by the Finance Director and/or City Manager. Although the ordinance does not specifically use the words " fund" or " department," the city' s procedure appears to meet the basic intent ofthe