Page 5 - FY 2021-22 Supporting Information

Budget Stabilization Fund
Pursuant to the Budget Stabilization Fund (BSF) policy, the Proposed Budget could include
a $2.4 million transfer from the BSF to the Budget. As this transfer is discretionary, the Proposed
Budget complies with the policy.

The BSF will begin the year with a fund balance of $118.0 million. The Reserve Fund, the
UB/Reserve for Mid-Year Adjustments, and the BSF, cumulatively, bring the City’s total General
Fund reserves in 2021-22 to $826.6 million or 11.27 percent of the General Fund. For the first time,
this achieves the goal set in the City’s Financial Polices of maintaining reserves at 10 percent of
General Fund Reserves.

Capital and Infrastructure Funding
The City’s Financial Policies state that the City shall make adequate investments to
maintain real property and equipment at appropriate levels. Further, the Capital and Technology
Infrastructure Funding Policy establishes a target spending level of 1.5 percent of General Fund
revenues on capital and technology investments.

Pursuant to the 1.5 percent standard, the Proposed Budget should include $110.1 million
for infrastructure expenditures. The Proposed Budget exceeds this target by $42.0
million, appropriating $152.1 million. The total represents 2.07 percent of General Fund
revenues.

One-time Revenue
It is the City’s policy to use one-time revenues for one-time, rather than ongoing,
expenditures. The Proposed Budget does not meet this policy. The Proposed Budget
recognizes $714.8 million in one-time revenues while appropriating $581.2 million for one-time
expenditures. Thus, $133.6 million of one-time revenues were used for ongoing expenditures.

This gap exacerbates the structural budget gap discussed below. The City could use
its healthy reserves in 2022-23 to offset the gap between ongoing expenditures and
ongoing revenues if it maintains them both in the Adopted Budget and throughout 2021-22.

Debt Policy
The City’s Debt Policy requires that the non voter-approved debt service level remain
below six percent of general revenues and that the combined non voter-approved and voter-
approved debt service level remain below 15 percent of general revenues. The Proposed
Budget complies with this policy with a non-voter approved debt service level of 3.45 percent and
a voter approved debt service level of 5.04 percent.

Structural Balance
The City’s Financial Policies include a goal of achieving and maintaining a
structurally balanced budget in which future costs are projected to be fully paid by future
revenues. In order to assess structural balance, my Office prepares the Four-Year Budget
Outlook (Outlook) that compares projected revenues to projected expenditures through
2025-26. The Outlook projects budget gaps of $138.3 million in 2022-23, and $2.6 million in
2023-24, and then surpluses of $95.8 million in 2024-25, and $308.6 million in 2025-26. By
Charter, the City will close any budget gaps as part of that year’s annual budget process.
Nonetheless, at this time the Outlook does not demonstrate structural balance. Preserving
the current healthy level of General Fund reserves could make it available in the next two
years if the City chooses to maintain service levels while revenues naturally grow in order to
sustain them on an ongoing basis.