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Council Allocates $5 Million For Reserves Thanks To Top Revenue Generators, Oil Prices

By Tiffany Rider - Senior Writer

January 31, 2012 - With the positive performance of the largest General Fund revenue generators and the Long Beach City Council’s fiscal prudence – pushed by Mayor Bob Foster – the city ended fiscal year 2011 on a high note and allowed $5 million to be set aside in reserves.

The council allowed the set-aside of $5 million from FY11 – October 1, 2010, to September 30, 2011 – for future action, “allowing for greater flexibility in handling potential revenue shortfalls in the future,” according to staff reports. This $5 million is made up of funds from tax revenues, one-time revenues and higher-than-expected oil prices, according to Long Beach’s Director of Financial Management John Gross.

As of fiscal year-end, the city’s actual General Fund revenues plus one-time revenues reached $387.3 million. Those one-time revenues, totaling $6.4 million, were comprised of: $1.8 million from additional Upland Oil transferred to the General Fund to “adjust historic revenue shortfalls;” $1.9 million in deferred income from FY 10; $1 million in motor vehicle in-lieu tax revenue from the State of California that “had been erroneously withheld in the prior year;” and $634,342 in Asset Forfeiture funds received by the Long Beach Police Department, designated for public safety use only.

Sales tax jumped in FY11, due largely to growth in Edison Material and Supply. However, the $7.6 million increase over fiscal year 2010 was offset in large part by a rebate agreement with the city. Transient Occupancy Tax (TOT) ended $546,638 above budget and saw an increase of $1.2 million over FY10 actuals. “An increase in lodging demand, coupled with increases in occupancy rates and decreases in average daily room rates, led to an overall increase in TOT revenue,” according to staff reports. “Between January 2011 and September 2011, average revenue per available room in Long Beach increased by over 11 percent over the same period the previous year.”

In addition, oil prices and associated revenues were high in 2011, according to Gross. “For the stable $55 [per barrel] portion of the revenues, we were able to use that money to solve some permanent structural revenue issues,” he said. “For the money above $55 [per barrel], we were able to allocate those revenues. Council was able to allocate those revenues for one-time items and council increased emergency reserves.”

In conjunction with the approved mid-year adjustments, the city council also approved two technical year-end appropriation adjustments.

As part of the memorandum of understanding (MOU) with the city and the International Association of Machinists and Aerospace Workers (IAM), councilmembers approved a 1 percent retroactive salary increase. According to Gross, the city holds the monies for this MOU in one fund. This council action, mandated by the city charter, allows the monies to be disbursed to a variety of funds – managed by several different departments – for appropriation, based on the contract.

“This was technical authorization to move it from the holding account to the place where it was actually moved to. There was no change in policy or change in the total appropriation,” he said. The city council also allocated $1.2 million to the Long Beach Housing Authority to pay for housing assistance bills incurred, which were offset by grant revenues the authority received from the U.S. Department of Housing and Urban Development for the Veteran’s Affairs Supportive Housing program.

As the city closes its books on FY11, the financial management department will begin the process of looking at the FY12 year and making projections for FY13, according to Gross. “We anticipate staff to come back to council in early March,” he said.