Agenda Item Wording:
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Surplus Policy - Review current General Fund surplus policy and consider making revisions to the policy.
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Prepared by: Renee Nagel, Finance & Technology Director 713-4475, renee.nagel@visalia.city Amee Swearingen, Budget Analyst 713-4170, amee.swearingen@visalia.city
Department Recommendation: Review current General Fund surplus policy and provide direction for revisions to the policy to be effective for FY 24/25, for future fiscal years, or to leave as is Council’s current policy.
Summary:
On June 16, 2025, staff presented to Council the Mid Cycle Budget report which included updated projections for FY 2024/25 and 2025/26 for the General Fund. During the presentation, staff reviewed the current surplus policy and was directed to come back to Council for further discussion on possible revisions to the surplus policy.
Background Discussion:
The current General Fund emergency reserve and surplus policy was amended in March 2024. The policy states that any revenues in excess of actual expenditures would first be deposited in the emergency reserve to maintain the reserve at a maximum of 30% of operating expenditures and then all remaining surplus is to be deposited into the Civic Center Reserve Fund. The surplus policy also states that all one-time monies and land sales not otherwise required to be allotted to specific funds, will be deposited in the Civic Center Fund.
On June 16th, the projected surplus for FY 2024/25 was $5.4 million. Council appropriated $2.6 million in capital projects that night, leaving the surplus to be $2.8 million. Based on the Mid-Year Budget projections, $2.1 million of the surplus will need to be transferred at year end keeping the reserves at 30% of operating expenditures. The $2.1 million transfer will bring the reserve balance to $25.8 million.
Surplus Policy:
Once the emergency reserve has been funded, any remaining surplus at year-end is to be deposited to the Civic Center/Public Safety Reserve Fund (003) per Council’s Surplus Policy. The year-end surplus is projected to be $0.7 million as shown in Table 1: GF FY 24/25 Projected Surplus. These numbers are projected; the amount transferred at year-end will depend upon the actual ending fund balance as of June 30, 2025. Based on revenues coming in a little higher, interest earnings being up and continued vacancies, staff is anticipating the surplus to be larger than the projected amount presented at mid-cycle (which was calculated using the first 6 months of actuals). Staff is estimating that the FY 24/25 GF surplus will be closer to $2.5 million.
Table 1
GF FY 24/25 Projected Surplus
(All Amounts in Millions)
The surplus policy can be changed at any time by Council, however, if Council desires to change it for the FY 24/25 surplus, this change will need to occur before September 1st. If no changes are made to the surplus policy for FY 24/25, the available balance in the Civic Center/Public Safety Reserve will be $7.9 million ($7.2 million currently available in the Civic Center Fund + $0.7 million FY 24/25 projected GF surplus). On May 5, 2025, Council appropriated $70.4 million for the Civic Center Phase II Project leaving $7.2 million in fund balance for project changes or to eventually begin design on the Civic Center.
Going forward, staff is looking to Council to provide direction on where they would like to deposit surplus funds. In the past, these funds have played a vital role in being able to purchase and develop the Riverway Sports Park, purchasing the East Regional Park land, Recreation Park Stadium Improvements,198 Open Space, and now constructing the Civic Center Phase II which includes a Council Chamber, Public Safety Building, Evidence Building, and infrastructure for the entire campus. The City has many more projects that are needed and have been deferred due to funding priorities. To name a few that have been mentioned over the years is constructing East Regional Park, Corp Yard expansion, a pool complex, purchasing land for the third regional park, a Convention Center refresh and expansion, public art, a multi-purpose recreation facility, and the final phase of the Civic Center including the Administration building and the Civic Center park. In addition, there are road projects, such as the extension of Santa Fe, that will need to be funded and do not qualify for impact fees.
Large projects are difficult to fund in any given year due to funding availability. A majority of the surplus is typically from vacancy savings which can be set aside to fund large projects. The surplus can be set-aside for one project or split amongst multiple by having a policy that assigns a percentage of the surplus to each project.
Fiscal Impact: None
Prior Council Action: N/A
Other: N/A
Alternatives: None
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to continue with the current surplus policy (fund Emergency Reserves and the Civic Center Fund) for FY 24/25 and future surpluses.
Or
I move to approve surplus policy as revised for FY 24/25 and future surpluses to include funding the Emergency Reserves to 30% and then (Council to insert priorities and percentages).
Or
I move to approve surplus policy as revised for future surpluses (after FY 24-25) to include funding the Emergency Reserves to 30% and then (Council to insert priorities and percentages).
Environmental Assessment Status: N/A
CEQA Review: N/A
Deadline for Action: 6/30/2025
Attachments: None