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Home My WebLink About3/21/2001 - STAFF REPORTS (25) DATE: March 21, 2001 TO: City Council FROM: Director of Finance &Treasurer BUDGET ADJUSTMENTS FOR ENERGY COSTS RECOMMENDATION: It is recommended that the City Council amend the Fiscal Year 2000-01 budget to appropriate an additional$666,000 from the reserves in various funds to cover the higher cost of natural gas. SUMMARY: The additional energy costs are expected to exceed the amount budgeted in the current year by $1,251,000. About half of that cost can be absorbed by the Energy Fund. The rest will need to come from the reserves of the following funds: General Fund $181,000 Airport 224,000 Motor Vehicle Replacement 20,000 Facility Maintenance 241,000 666 000 BACKGROUND: In the last few months, the cost of natural gas has soared. The City's co-generation plants,which produce most of the power and heatfor City Hall,Airport, Police Department, Maintenance Yard, Leisure Center and Library, run on natural gas. For most of last fiscal year, the price of natural gas was about$2.80 per decatherm. In January 2001, the City paid $16.32 per decatherm,(DT) an increase of 585%. To protect against even higher spikes (at one point, the spot market hit$52 per DT), the City entered into an 18 month contract starting March 1, 2001 at $7.97 per DT. At that rate, plus an estimate for transmission charge, the City will expend approximately $1.6 million for natural gas this year. The Energy Fund's original budget for FY00-01 would have produced a net profit of about $280,000, after debt service but before depreciation. The intent was to eventually build a reserve balance sufficient for the major equipment replacements or overhauls which will inevitably be necessary. The escalation of energy prices has turned a projected profit into a $928,000 loss. The Energy Fund's cash reserves can absorb a portion of the loss, and there may be some additional savings from conservation efforts,especially at the Airport. However, it appears that the balance of the additional cost, about$666,000 City-wide, will have to come from reserves. o? The recommended appropriation for the General Fund is $181.000. Of this, the Recreation Department would receive $101,000 and the Library, $80,000. It may be possible to cover this from current year operations, as General Fund revenues are running slightly ahead of projections. Overall,the Operating Funds(General Fund and Community Promotion Fund) should end the fiscal year with about$5 million in cash reserves. The recommended appropriations for the Airport Fund, Motor Vehicle Fund and Facility Maintenance Fund are all coming from Retained Earnings accumulated in prior years. An analysis of each fund's budget determined that there was insufficient savings in other budgeted line items to cover the additional cost of power. The recommended adjustments should take care of the energy problem through the end of this fiscal year. The budget for Fiscal Year 2001-02 will include energy estimates at their now higher level. A longer term solution will need to include conservation and/or new energy production. THOMAS M. KANARR Director of Finance &Treasurer APPROV D� ✓"J/ �" City Manager Attached: 1. 4 Resolutions oZ�l4? RESOLUTION NO. 20010 OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE BUDGET FOR THE 2000-01 FISCAL YEAR. WHEREAS Resolution 19817 approving the budget for the fiscal year 2000-01 was adopted on June 21, 2000; and WHEREAS the City Manager has recommended, and the City Council desires to approve,certain amendments to said budget; NOW THEREFORE BE IT RESOLVED that the Director of Finance is authorized to record inter- fund cash transfers as required in accordance with this Resolution, and that Resolution 19817, adopting the budget for the 2000-01 fiscal year is hereby amended as follows: SECTION 1. ADDITIONS Fund Activity Account Amount 001 2510 Recreation 42001 $101,000 001 2710 Library 42001 $80,000 General Fund Electricity Purpose: To provide additional funds for current year energy casts SECTION 2. SOURCE Fund Activity Account Amount 001 29301 $181,000 General Fund Balance Adopted this 21stday of March , 2001. AYES: Members Hodges, Jones, Oden, Reller—Spurgin and Mayor Rleindienst NOES: None ABSENT: None ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED AND APPROVED a3b RESOLUTION NO. 20011 OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE BUDGET FOR THE 2000-01 FISCAL YEAR. WHEREAS Resolution 19817 approving the budget for the fiscal year 2000-01 was adopted on June 21, 2000; and WHEREAS the City Manager has recommended, and the City Council desires to approve, certain amendments to said budget; NOW THEREFORE BE IT RESOLVED that the Director of Finance is authorized to record inter- fund cash transfers as required in accordance with this Resolution, and that Resolution 19817, adopting the budget for the 2000-01 fiscal year is hereby amended as follows: SECTION 1. ADDITIONS Fund Activity Account Amount 415 6050 Airside 42001 $10,000 Airport 6075 ARFF 42001 $7,000 6100 Landside 42001 $33,000 6200 Terminal 42001 Electricity $174,000 Purpose: To provide additional funds for current year energy costs SECTION 2. SOURCE Fund Activity Account Amount 415 29302 $224,000 Airport Retained Earnings Adopted this ?l st day of March , 2001. AYES: Members Hodges, Jones, Oden, Reller-Spurgin and Mayor %leindienst NOES: None ABSENT: None ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED AND APPROVED RESOLUTION NO. 20012 OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE BUDGET FOR THE 2000-01 FISCAL YEAR. WHEREAS Resolution 19817 approving the budget for the fiscal year 2000-01 was adopted on June 21, 2000; and WHEREAS the City Manager has recommended, and the City Council desires to approve, certain amendments to said budget; NOW THEREFORE BE IT RESOLVED that the Director of Finance is authorized to record inter- fund cash transfers as required in accordance with this Resolution, and that Resolution 19817, adopting the budget for the 2000-01 fiscal year is hereby amended as follows: SECTION 1. ADDITIONS Fund Activity Account Amount 510 5641 42001 $20,000 Motor Vehicle Fleet Operations Electricity Replacement Purpose: To provide additional funds for current year energy costs SECTION 2. SOURCE Fund Activity Account Amount 510 29302 $20,000 Motor Vehicle Retained Earnings Replacement Adopted this ?i Ctday of March , 2001. AYES: Members Hodges, Jones, Oden, Reller-Spurgin and Mayor Kleindienst NOES: None ABSENT: None ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED AND APPROVED a3a RESOLUTION NO. 20013 OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE BUDGET FOR THE 2000-01 FISCAL YEAR. WHEREAS Resolution 19817 approving the budget for the fiscal year 2000-01 was adopted on June 21, 2000; and WHEREAS the City Manager has recommended, and the City Council desires to approve, certain amendments to said budget; NOW THEREFORE BE IT RESOLVED that the Director of Finance is authorized to record inter- fund cash transfers as required in accordance with this Resolution, and that Resolution 19817, adopting the budget for the 2000-01 fiscal year is hereby amended as follows: SECTION 1. ADDITIONS Fund Activit Account jAmount 520 5641 42001 241,00. Facility Maintenance Far Maintenance Electricit Purpose: To provide additional funds for current year energy costs SECTION 2. SOURCE Fund Activity Account Amount 520 29302 $241,000 Facility Maintenance Retained Earnings Adopted this 7 i Ctday of Marcb , 2001. AYES: Members Hodges, Jones, Oden, Reller-Spurgin and Mayor Bleindienst NOES: None ABSENT: None ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED AND APPROVED 67310