Fort Walton Beach Council agenda — 06-17-08 special agenda — reading text

172, 532 $ 242, 532 1998 Bond — Refinance Addt' I 9 Holes —year 10 of 13 $ 82, 500 $ 14, 517 $ 97, 017 281, 925 $ 218, 977 $ 500, 902 Transfers Out —Transfers to the General Fund are based on the City' s March 2003 Cost Allocation Plan and other proportionately shared expenses. The purpose of the Cost Allocation Plan is to provide reasonable and proportionate reimbursement to the General Fund for services such as accounting, human resources, information technology, public works, and purchasing. As a matter of budgetary policy, interfund transfers to the General Fund have been based on the Maximus study, adjusted for inflation, as well as other shared expenses that are not directly related to services provided by other funds, though nonetheless partly attributable to those funds, as well as new programs and services not in place at the time of the Cost Allocation Plan update. Examples include property and casualty insurance, employee morale, and postage. Adjusting the Cost Allocation Plan for inflation, the Golf Fund should reimburse the General Fund 400, 425 in FY 2007 -08. However, in April 2006 City Council endorsed the General Fund continuing to absorb the Golf Fund' s cost allocation expenses for the next three years ( after which time the issue would be reevaluated). Therefore, the Golf Fund only reimburses $ 62, 152 for shared expenses not included in the Cost Allocation Plan ( e. g. wellness program, benefit fair, property and casualty insurance, postage). The full calculation and narrative for interfund transfers is available on pages 389 -392 of the FY 2007 -08 Comprehensive Budget. Paae 8 of 59 8 of 23 Golf Fund Meeting POLICY DECISIONS Cost Allocation Plan 11 Clubhouse Debt Service 13 Equity in Pooled Cash 15 Membership Differential 17 Play Cards 19 Twilight Play 21 Multi -Year Rate Plan 22 The consensusof City Council on these issues will assist staff in developing a rate plan and FY 2008 -09 budget that meets Council' s objectives within available fiscal resources. Paae 9 of 59 9 of 23 Golf Fund Meeting 10 of 23 Golf Fund Meeting COST ALLOCATION PLAN Policy Decision Should the Golf Fund' s cost allocation plan transfer to the General Fund be forgiven? Background 1. The City's first Cost Allocation Study was completed in September 1998 by KPMG Consulting based on FY 1997 data. KPMG conducted an in -depth review of each General Fund department to determine the types of services provided and who benefited from those services; interviewed each department and completed time analyses to determine the time spent on services; and reviewed all accounting, purchasing, budgeting, and computer transactions to allocate costs to the appropriate division, department, and fund. Building and equipment use were allocated based on square footage and dollar value, respectively. Both actual financial and statistical data were used and the Cost Allocation Plan was prepared in accordance with full costing concepts, which incorporate all expenditures of the City except capital outlays, election expenses, and grants -in -aid. 2. In March 2003 DMG- Maximus issued an updated Cost Allocation Plan based on FY 2001 data. As a matter of budgetary policy, the annual interfund transfers to the General Fund for reimbursement of services provided have been based on the Maximus study, adjusted for inflation, as resources have allowed each year. 3. Certain expenses not considered during development of the Cost Allocation Plan or not in existence at the time are included in the interfund transfer amount on a proportionate basis. Examples include property and casualty insurance, employee morale activities, and postage. 4. In April 2006 City Council endorsed the General Fund continuing to absorb the Golf Fund' s cost allocation expenses for the next three years ( after which time the issue would be reevaluated). Discussion 1. Adjusting the results of the Maximus Cost Allocation Plan for inflation, the Golf Fund should reimburse the General Fund $ 416, 842 in FY 2008 -09. 2. The Golf Fund' s portion of shared expenses not included in the Cost Allocation Plan ( e. g. wellness program, benefit fair, property and casualty insurance, postage) totaled $ 62, 152 in FY 2007 -08 ( this amount has not yet been calculated for FY 2008 -09). 3. The total net assets of the Golf Fund have declined each year since FY 2003 with the exception of FY 2006, during which the fund incurred a net profit due to the trade -in for new golf carts and City Council' s forgiveness of $ 273K in debt to other funds. Total net assets as of 09/ 30/ 07 were 407K, including all capital assets. 4. Unrestricted net assets are a fund' s net available resources for use. The unrestricted net assets of the Golf Fund have been negative every fiscal year since FY 2003 and were negative $ 426K as of 09/ 30/ 07. 5. The Golf Fund' s share of the City's investment and checking accounts ( equity in pooled cash - EIPC) is currently negative $ 262K, meaning the Golf Fund is borrowing resources from the General Fund. Policy Impact 1. Staff has prepared a pro -forma ( see p. 43) for the Golf Fund, which translates revenues and expenses into the format of the audited financial statements. Net assets are on track to decrease 94K in FY 2008, despite reductions in personnel and operating expenses. 2. Current rates and levels of play cannot support an additional expense of over $ 400K to reimburse the General Fund for business -like support services provided to the Golf Fund. Recommendation Forgive the Golf Fund' s transfer to General Fund per Cost Allocation Plan for FY 2008 -09 and evaluate annually thereafter during the budget process. Paae 11 of 59 11 of 23 Golf Fund Meeting G 12 of 23 Golf Fund Meeting CLUBHOUSE DEBT SERVICE Policy Decision Should the General Fund compensate the Golf Fund for a portion of debt service? Background 1. In 1999 a 30 -year, $ 3. 4M bond was issued to finance construction of a new golf clubhouse, the Two Trees restaurant, and the Edwin Watts pro shop, as well as realign six holes and improve the driving range. Principal and interest payments total $ 245K annually. 2. Two Trees reimburses the City $ 32K per year and Edwin Watts reimburses the City $ 40K per year through lease agreements. 3. Members of the Golf Club Advisory Ad Hoc Committee expressed a desire to have the General Fund pay for the clubhouse debt service rather than increase rates to cover this expense during rate study discussions in 2004 and 2006. Not all golfers wanted the new clubhouse nor use the new clubhouse. Discussion 1. Unrestricted net assets are a fund' s net available resources for use. The unrestricted net assets of the Golf Fund have been negative every fiscal year since FY 2003 and were negative $ 426K as of 09/ 30/ 07. 2. The Golf Fund' s share of the City' s investment and checking accounts ( equity in pooled cash - EIPC) is currently negative $ 262K, meaning the Golf Fund is borrowing resources from the General Fund. 3. Based on the Cost Allocation Plan adjusted for inflation, the General Fund is currently absorbing over $ 400K of the Golf Fund' s cost of operations through forgiveness of the reimbursement granted in April 2006. Policy Impact 1. Transferring funds to the Golf Fund to offset clubhouse debt service would reduce the Golf Fund' s expenses by $ 245K annually and enable the Golf Fund to more quickly rebuild its net assets and equity in pooled cash. 2. General Fund departments have been requested to submit a budget that is 8% less than the current year due to decreases in ad valorem revenue, local option fuel tax, municipal revenue sharing, half -cent sales tax, and interest earnings. Decreases in service levels and staff reductions are already anticipated. Adding $ 245K in expense would necessitate further cuts or use of fund balance. Recommendation Do not budget a transfer from the General Fund to the Golf Fund for clubhouse debt service payments. Paae 13 of 59 13 of 23 Golf Fund Meeting uY Page 14 of 59 14 of 23 Golf Fund Meeting EQUITY IN POOLED CASH Policy Decision How should the Golf Fund' s negative equity in pooled cash be eliminated? Background 1. The City' s auditors have commented in the last three years' audits about the Golf Fund' s cash flow deficits and deficit unrestricted net assets. 2. The total net assets of the Golf Fund have declined each year since FY 2003 with the exception of FY 2006, during which the fund incurred a net profit due to the trade -in for new golf carts and City Council' s forgiveness of $ 273K in debt to other funds. Total net assets as of 09/ 30/ 07 were 407K, including all capital assets. 3. Unrestricted net assets are a fund' s net available resources for use. The unrestricted net assets of the Golf Fund have been negative every fiscal year since FY 2003 and were negative $ 426K as of 09/ 30/ 07. 4. The Golf Fund' s share of the City' s investment and checking accounts ( equity in pooled cash - EIPC) is currently negative $ 262K, meaning the Golf Fund is borrowing resources from the General Fund. Discussion 1. This negative EIPC shows as a liability on the Golf Fund' s statement of net assets and therefore causes the unrestricted net assets of the fund to be negative. As of September 30, 2007, the Golf Fund owed the General Fund $ 449K. Year -to -date through May 31, 2008 the Golf Fund' s revenues exceed expenses, so the current EIPC balance is negative $ 262K. 2. Staff has prepared a pro -forma ( see p. 43) for the Golf Fund, which translates revenues and expenses into the format of the audited financial statements. Net assets are on track to decrease 94K in FY 2008. Policy Impact 1. It is likely that the Golf