ITEM TITLE:
#17-34 - Amending the 2017 Budget by Transferring $150,000 from Capital Projects Contingency to Leave Liability Reserve.
SUBMITTED BY: Brian Carlson, Finance Director
FISCAL NOTES:
Expenditure Required: $150,000
Unencumbered Balance: $727,000
Funding Source: Project Contingency Reserve; 310.0200.58200
RECOMMENDATION:
Approve; schedule future review of related policies.
SUMMARY STATEMENT:
The City has exhausted the funds available to pay for “cash outs” of accrued leave-time and comp-time. This resolution proposes replenishing the account used for such payments.
BACKGROUND:
The City appropriates funds each year to the Leave Liability Reserve account in an amount reflecting an annual average of the prior three years of cash payments for accrued leave time and comp time. Actual utilization of this reserve is unknown until the resignations and/or requests are made known, and so accurate budgeting is a matter of guesswork.
Payment parameters are articulated in sections Five and Six of the personnel regulations, and can be characterized as follows:
Obligatory: accrued, unused comp/leave time for terminated employees;
annual payments for accruals in excess of authorized limits
Optional: requests from current employees for cash in lieu of leave time or comp time; subject to available funds and City Manager authorization
Though current-employee requests are “optional”, convention and precedent have been to pay all such requests, and to postpone but not deny payment whenever available funds are insufficient.
Staff proposes a transfer of funds from Project Contingency. This is a fund-level contingency, above-and-beyond specific project contingencies embedded in project budgets. This convention was introduced with the 2016 budget by the Interim Manager, and will be evaluated as we prepare the 2018 budget. Staff will return with a budget resolution on September 5th which will “clean up” the many concluded project budgets. Current estimates are $900,000 in the Capital Facilities Fund, and $1.4MM in the Major Maintenance Reserve.
ANALYSIS
Utilization of the Leave Liability Reserve has been historically high during 2016 and 2017, owing in large part to staff turnover, which triggers an obligatory payment. See the attached Leave Liability Reserve Report.
The reserve balance acts much like the health insurance reserve; in high “claims” years, the reserve balance will fall. Over time, the convention of budgeting by average will replenish the reserve balance.
While this averaging addresses the budgeting impact, it does not address the underlying overtime, leave-time, and comp-time policies. Finance Staff will prepare an in-depth analysis of these aspects of personnel costs, for discussion in the weeks leading up to Council budget hearings.
ATTACHMENTS:
Personnel Regulations (excerpts)
Leave Liability Reserve, 2014-2017