COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

DATE:

July 16, 2008

BOARD MEETING DATE:

August 5, 2008

SPECIAL HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

James Porter, Director of Public Works

SUBJECT:

LOAN OF FUNDS FROM THE SOLID WASTE FUND TO THE TOWER ROAD CONSTRUCTION FUND AND REPAYMENT PLAN

RECOMMENDATIONS:

Adopt a Resolution:

1. Authorizing a loan of $850,000 from the Solid Waste Fund to the Tower Road Construction Fund; and

2. Approving a plan for the repayment of the borrowed funds.

VISION ALIGNMENT:

Commitments: Responsive, Effective and Collaborative Government.

Goal20: Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain.

This action will enable the Crafts Services Section, which operates under the Tower Road Construction Fund, to continue to provide cost effective construction and remodeling services for various County departments.

BACKGROUND:

The Crafts Services Section of Public Works was established to perform fee for service work for County departments, cities, and special districts. In addition to various construction jobs and remodeling work, the Section also maintains street lights for various special districts, maintains certain electrical systems throughout County facilities, does graffiti abatement for cities and other work that requires workers skilled in building trades and crafts, and is not generally considered building maintenance that is normally included under rental agreements.

DISCUSSION:

The Tower Road Construction Fund experienced a negative cash balance of $850,000 as of June 30, 2008. The Fund occasionally experiences negative cash balances because the Fund is not always reimbursed for actual expenses incurred until the construction project is fully completed. The situation is compounded by the receipt of funding for projects in a different fiscal year than when the actual work was performed.

The Countywide year-end Appropriation Transfer Request that will be presented to the Board on September 9, 2008 includes a request to establish an appropriation in the Solid Waste Fund so that it can provide a loan of $850,000 to the Tower Road Construction Fund in order to resolve the above-referenced negative cash balance.

The Public Works Department has developed a plan to ensure that this problem does not reoccur and to make sure that the cash loan from the Solid Waste Fund is repaid during the first quarter of Fiscal Year 2008-09. This timeframe for repayment will ensure that scheduled Solid Waste Fund projects such as construction related to the closure of the Pescadero and Half Moon Bay landfill sites, will not be impacted.

The repayment plan will include the following elements:

1. On or about July 16, 2008, $612,800 of funds received as a rebate for the installation of the co-generation facility at the Youth Services Center, will be transferred to the Solid Waste Fund.

2. On or about July 31, 2008, $237,200 from the proceeds of work completed by the Crafts Services Section will be transferred to the Solid Waste Fund in full repayment of the loan.

3. Beginning in FY 08-09 and continuing for four years, transfers of $153,200 per year from the Crafts Services Section will be made to repay the energy rebate funds identified in 1. above, for a full repayment of the $612,800 by the end of FY 11-12. The repayments will come from the proceeds of work completed by the Craft Services Section during that year.

The Public Works Department has also put in place the following procedures to ensure that future cash shortfalls do not occur:

1. No advance payments will be accepted at the end of a Fiscal Year unless there is a corresponding increase in the fund balance carried forward to the following Fiscal Year to cover the advance.

2. A set overhead budget will be established for the Crafts Services Section and will be monitored monthly. Authorization from the Facilities Deputy Director will be required for any expenditure exceeding the budget.

3. Each month the revenue, expenses and cash for Crafts Services Section, including a 1/12th accrual of the annual $153,200 repayment to the energy rebate, will be reviewed to ensure that expenses (including the accrual) do not exceed revenues. If expenses exceed revenue, one month will be allowed to resolve it. If it is not resolved at that time a meeting will convened with the County Manager’s Office to determine whether other actions should be taken.

County Counsel has reviewed the Resolution as to form and content.

FISCAL IMPACT:

This action will approve a loan of $850,000 from the Solid Waste Fund that will be repaid in full by July 31, 2008. This will enable the Tower Road Construction Fund to end Fiscal Year 2007-08 without having a negative cash balance. Crafts Services will also be allowed to repay $612,800 of the energy rebate funds over a four-year period. It is also proposed that no interest be charged on these repayments. The impact on the Solid Waste Fund will be minimal because the bulk of the loan ($612,800) will be repaid within two weeks and the balance within one month. The anticipated loss of interest revenue to the Solid Waste Fund will be $1,361. These actions will not have a net County cost impact.