Town Council Regular Session


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  Item # 5.       
Meeting Date: 05/19/2016  
Requested by: Stacey Lemos Submitted By: Stacey Lemos, Finance
Department: Finance  

Information
SUBJECT:
DISCUSSION AND POSSIBLE ACTION TO AMEND THE FY 2015/16 ADOPTED BUDGET BY POSTPONING TO FY 2016/17 THE FIRST ANNUAL $120,000 REPAYMENT OF THE $1.2 MILLION IN GENERAL FUND CONTINGENCY RESERVES LOANED TO THE COMMUNITY CENTER FUND IN FY 2014/15
RECOMMENDATION:
Staff recommends approval.
EXECUTIVE SUMMARY:
Included in the adopted FY 2015/16 annual budget is a transfer of $120,000 from the Community Center Fund to the General Fund as the first of ten annual loan repayments totaling $1.2 million in General Fund contingency reserves that were transferred to fund capital improvements and provide operational subsidy for the Oro Valley Community Center after it was acquired by the Town on May 1, 2015. Town Council approved this transfer of General Fund contingency reserves at its March 4, 2015 regular Council meeting with the direction that the Community Center Fund repay this amount back to the General Fund over a 10-year period in $120,000 increments beginning in FY 2015/16.
 
In an April 19, 2016 report to Town Council proposing several cost savings measures in the Community Center Fund, staff recommended postponing the start of this 10-year loan repayment from the Community Center Fund to the General Fund until FY 2016/17, rather than beginning in FY 2015/16. This requires Town Council approval since this is an amendment to a budgeted, Council-directed loan repayment from one Town fund to another.
BACKGROUND OR DETAILED INFORMATION:
At the April 20, 2016 regular Town Council meeting, the February financial reports for the Troon-managed operations at the Oro Valley Community Center included updated year-end projections for FY 2015/16 illustrating a $2.3 million net loss  compared to previously-provided projections earlier in the fiscal year showing a net loss of approximately $2 million.

As a result, the year-end fund balance for FY 2015/16 in the Community Center Fund was revised to $128,000, compared to the previous estimate of $425,000, for a difference of approximately $300,000. This $425,000 fund balance was intended to be carried forward into next year's budget and allocated toward the $596,000 budget for capital improvements at the Community Center.

In an April 19, 2016 report to Town Council, staff proposed several cost saving measures impacting both this fiscal year and next fiscal year aimed at closing the estimated $300,000 shortfall in the fund balance. One of the significant measures included in this report was the suggestion to postpone to FY 2016/17 the start of the 10-year payback of the $1.2 million in upfront funds loaned from the General Fund contingency reserves to the Community Center Fund in FY 2014/15. These funds were used for funding capital improvements and providing operational subsidy after the Town acquired the facility on May 1, 2015. This $1.2 million loan from the General Fund was approved by Town Council at the March 4, 2015 regular Council meeting, and included the direction from Council that the Community Center Fund repay this amount in $120,000 increments over a 10-year period beginning in FY 2015/16.

Town Council authorization is needed to amend the FY 2015/16 adopted budget to eliminate this year's repayment amount of $120,000 from both the Community Center Fund and the General Fund and postpone the start of the repayment period to FY 2016/17.
FISCAL IMPACT:
Should Town Council approve this measure, an amount of $120,000 will be saved in the Community Center Fund in FY 2015/16, contributing significantly to the restoration of the estimated $300,000 shortfall in the fund balance. With this measure approved, in addition to the other measures recommended by staff, the estimated year-end fund balance in the Community Center Fund will be approximately $314,000.

In the General Fund, the estimated year-end fund balance will be reduced by $120,000 from $10,016,000 to $9,896,000, which is 31% of budgeted expenditures and is well above the Council policy of 25%.

The FY 2016/17 Tentative Budget includes the $120,000 loan repayment from the Community Center Fund to the General Fund.
SUGGESTED MOTION:
I MOVE to (approve or deny) amending the FY 2015/16 adopted budget by postponing to FY 2016/17 the first of 10 annual repayments of $120,000 in General Fund contingency reserves loaned to the Community Center Fund in FY 2014/15.

or

I MOVE...
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