CITY BUDGET/CAPITAL IMPROVEMENT PROGRAM (CIP)

The exception to the above basis includes General Fund advances to other funds of the City. General Fund advances to other funds are budgeted as expenditures in the General Fund and as revenue in the funds receiving the advances. Repayment of advances is budgeted as revenue in the General Fund and as expenditures in the funds repaying the advance.

The City of Yucaipa is a member of the Public Agency Risk Sharing Authority of California. This is a Joint Powers Authority for Liability and Worker’s Compensation Insurance. Fund budgets are not adopted at the City level for the Authority. Effective budgetary control is alternatively achieved through the Authority’s Board of Directors, of which the City has staff representation.

Budget Process
The annual budget process begins in late February of each year. The Administrative Services Department distributes various budget instructions to each department. Requested departmental budgets are then submitted to the Administrative Services Department by early April. During the month of April, The Administrative Services Officer and City Manager review the Adopted preliminary budget, including revenue assumptions and expenditure requests, and meet with each department head to determine the appropriate level of funding for each service provided. During this time, all capital projects are considered to determine the funding priorities.

Upon completion of the preliminary budget, the City Manager and Administrative Services Officer meet with the Finance Committee to review the document prior to presenting the Adopted budget to the City Council. Subsequent to distribution of the preliminary budget, the budget is discussed with the City Council/RDA Board of Directors at one or more public meetings. The operating and capital portions of the budget are adopted by resolution typically in June of each year.

The seven year Capital Improvement Program (CIP) budget is prepared and presented separately to the City Council. The projects identified for years two through seven of the CIP are tentative and subject to future change. Appropriations are only formally adopted for the first year of the seven-year CIP.

Budget Adjustments
During the fiscal year, the City Council/Board of Directors may, at their discretion, authorize amendments to budgeted revenues and expenditures and the amendments are input to the automated budget accounting system. In February, staff presents a mid-year budget analysis to the Council to review the budget status. In addition, staff may present items that may potentially impact the various funds that may have been unforeseen at the time of the original budget adoption process. This provides the opportunity for adjustments, if needed, to budgeted revenues and expenditures based on actual results during the first half of the fiscal year.

In addition to Council adjustments as identified above, the Purchasing Policies and Procedures allow for each department head to make operational adjustments within his or her respective budgets so long as the adjustments do not increase the total amount of divisional appropriations authorized by the City Council. In addition, department heads are only allowed to adjust their budgets within major object classifications. These include Salaries and Benefits, Operating Expenses and Capital Outlay. As a result, appropriations for Salaries and Benefits may not be adjusted by transferring these funds to Operating Expenses.

The City Manager is authorized to make adjustments, as necessary, between major object classifications so long as the total budget, as authorized by the City Council, is not exceeded. The City Council /Board of Directors approves all other charges.

Summary of Key Revenue Assumptions
One of the key analytical tools used during the budget process is a comprehensive seven-year financial forecast for the General Fund. This forecast considers key revenue and expenditure projection factors such as population, increases in the consumer price index (CPI) and other growth factors. The trending of these key factors and their effect on revenues and expenditures for the past ten years provides a historical basis for the seven-year financial forecast.

As part of the mid-year budget review process, the revenue assumptions included in the forecast are comprehensively reexamined based on actuals for the prior year, as well as emerging trends at the mid-point of the year. Accordingly, with a few notable exceptions, the revenue projections reflected in the Budget rely heavily on the projections made as part of the seven-year forecast.

Sources used in developing these revised projections include economic trends as reported in the national media, forecast data for San Bernardino County, economic and fiscal information developed by the State Legislative Analyst and the State Department of Finance, and materials prepared by the League of California Cities and State Controller's Office. Ultimately, however, the revenue projections reflect the staff's best judgment about the performance of the local economy over the next two years and how it will effect City revenues.

The following provides a brief description of the City's top general revenue sources along with the general assumptions used in preparing revenue projections. These sources account for over 80% of total general revenues.

General Property Taxes
Under Proposition 13 (adopted in June of 1978) property taxes for general purposes may not exceed 1% of market value. Property tax assessment, collection and apportionment are performed by the County. The City receives approximately 20%-25% of the levy within its limits. Assessment increases to reflect current market value are allowed when property ownership changes or when improvements are made; otherwise, increases in assessed value are limited to 2% annually.

Sales and Use Tax
The City receives 1% from all taxable retail sales occurring in its limits. This is collected for the City by the State of California, along with their component of the sales tax (5.75% for the State General Fund and .75% for local transportation purposes, for a total sales tax rate in San Bernardino County of 7.5%).

Franchise Fees
Franchise Fees are levied by the City on a variety of utilities at various rates. The State sets franchise fees for utilities regulated by them (most notably gas and electricity): 1% of gross sales or 2% of revenues attributable to their investment in infrastructure, whichever is greater. The City sets rates on a gross receipts basis for the following utilities: cable television (5%), and solid waste collections (10%).

Motor Vehicle In-Lieu
The State Revenue and Taxation code imposes an annual license fee of 2% of the market value of motor vehicles in lieu of a local motor vehicle property tax. Cities and counties equally share 81.25% of the total tax collected statewide; the State then distributes this revenue to cities and counties on a per capita basis. Motor Vehicle In-Lieu taxes have increased over the last several years, but were reduced during 2000/01 due to the calculation method imposed by the State to utilize actual population estimates. During 2003-04 the City experienced a decrease in VLF by the State as a bailout measure employed by the State in the amount of approximately $550,000. An additional hit is expected in both 2004-05 and 2005-06 in the amount of approximately $330,000 per year. This reduction is anticipated by the inclusion of one-time funds.

Development Related Fees
Development related fees recover costs for planning, building and safety, engineering, and fire plan check services. Cost recovery for these services is generally set at 100% of total costs. The key exceptions are fees for planning and engineering services, which have typically been recovered at the rate of 40%-45%.

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