Title
Ordinance No. 22-69 amending Ordinance No. 21-112 (2022 Appropriation Ordinance) for a Supplemental Appropriation to the Cemetery Enterprise Fund in the Amount of $1,026,546 to Fund Additional 2022 Operating Expenditures, and to the Cemetery Endowment Fund in the Amount of $368,968 for a Transfer to the Cemetery Enterprise Fund to Fund a Portion of Additional 2022 Operating Expenditures
Presenter:
Britt Haley, Acting Parks, Recreation and Cultural Services Director
Kim King, Recreation and Administration Manager
Chris Fiandaca, City Budget Manager
Body
Summary:
The Cemetery Enterprise is requesting a supplemental appropriation to the 2022 revenue and expenditure budgets in the amount of $1,026,546 to meet increased operational costs including a new mowing contract, increased water costs, and the purchase of a new columbarium. The increased operating costs also include a lease-purchase plan to begin replacing the Cemetery Enterprise’s antiquated vehicles and equipment. The Cemetery Enterprise is estimating revenue over budget of $217,578, $440,000 in capital lease proceeds, with the remaining $368,968 from the Cemetery Enterprise Endowment Fund (Fund 605) as a transfer into the Cemetery Enterprise Fund.
Background:
The City of Colorado Springs owns two cemeteries, Evergreen and Fairview. The cemeteries are enterprise operations and, as such, revenues must cover expenses and add to the Enterprise fund balance when feasible. As the cost of providing cemetery services and meeting perpetual care responsibilities increases over time, the Enterprise periodically adjusts fees and charges to continue to cover the costs of operations. City Council approved at its July 26, 2022, meeting new fees and charges to be implemented January 1, 2023.
While the Enterprise is planning for increased costs as well as increased revenues in 2023, a number of items have occurred in 2022 which have escalated expenses beyond the budgeted allocation as well as capital items that have reached a point of failure and must be addressed. These items include the following:
The Enterprise’s mowing contract expired and a new Request For Proposal (RFP) process was conducted in January 2022. Due to the timing of the budget process and RFP submittal, staff estimated mowing costs for 2022 at $245,000 which is similar to the 2021 level. However, RFP responses came in significantly higher with a total annual cost for 2022 of $397,000 resulting in a gap of $152,000.
With multiple wind storms and a significant spring snow storm just prior to Memorial Day, the Enterprise expended significant dollars to address dangerous tree limbs in order to open the cemeteries on their most important holiday of the year. These costs equaled approximately $32,000.
Based on current water usage through June and projected usage from July through December, the Enterprise will exceed the amount budgeted for water by an estimated $109,000.
Both irrigation and vehicle maintenance expenses have increased resulting in an additional expenditure estimated at $42,000. The irrigation system will be addressed through federal American Rescue Plan Act (ARPA) dollars and a plan is underway to begin replacing old vehicles, which will reduce the amount spent on annual maintenance.
With continued vandalism at the maintenance shop and safety concerns regarding customer interactions at the office, the Enterprise is working with City IT to install additional exterior cameras at the maintenance shop, chapel and office. An interior camera will also be added at the office. The estimated cost for the necessary infrastructure and camera systems is $24,846.
The cost of the polyguard vaults which the Enterprise has available for resale has increased this year resulting in an additional expense of $26,700.
Due to selling all available niches within Evergreen Cemetery, the Enterprise has purchased a new columbarium which is scheduled to be installed by the end of the year. The new two-sided granite columbarium, including installation, costs approximately $45,000. With 80 niches, the revenue generated over the next three to five years is estimated at $280,000.
The substantial degradation of the windows in the historic chapel has reached a point of failure. As a result, water damage is occurring along the interior walls resulting in further damage to paint and plaster as well as flooring. The chapel has an historic structure assessment in place which supports window repair/replacement. Thus, the Department will be submitting a grant to the State Historic Fund for this much needed repair with a proposed grant match amount of $60,000. Asbestos testing of the site prior to any work commencing, along with potential work at the Fairview office, will cost approximately $7,000.
City Fleet has completed a full analysis of all rolling stock owned by the Cemetery Enterprise. Based on their information, to replace all vehicles and equipment will cost approximately $995,000. The Enterprise will move forward with a phased lease- purchase plan that addresses the most antiquated and costly-to-maintain equipment first. To ensure we have the ability to place orders and replace 6 of the 14 pieces of equipment within the next year, we are adding in the first-year payment of approximately $88,000 to this supplemental request. The payments for subsequent years will be automatically included in future budgets.
In addition to budgeting for the first year’s lease payment amount, we are required to budget for an accounting transaction that addresses the acquisition of capital assets (fleet/equipment). As such, $440,000 will be recorded as revenue in the Cemetery Enterprise Fund, representing the proceeds from the bank related to the lease-purchase agreement. An offsetting $440,000 of expenditure will be recorded that represents the purchase of the capital assets, so that it can be tracked in our system for purposes of maintenance and depreciation. The revenue and expenditure offset each other, therefore there is no impact to the fund balance of the Cemetery Enterprise Fund. The true expense each year is the annual lease payment of approximately $88,000.
The combined expenditure increase for the Cemetery Enterprise is $1,026,546, which changes the total from $1,559,276 to $2,585,822.
The Enterprise has forecasted its 2022 year-end revenue to be $217,578 higher than the original estimate of $1,559,276. There will also be recorded revenue in the form of capital lease proceeds in the amount of $440,000 for the full cost of the fleet/equipment that will be replaced this year.
To partially cover the additional 2022 expenditures, $368,968 will be drawn from the Cemetery Endowment Fund. The requested supplemental expenditure appropriation includes the transfer from the Cemetery Endowment Fund.
Previous Council Action:
On December 14, 2021, City Council approved the 2022 Budget per Ordinance No. 21-112, which included the appropriation of the Cemetery Enterprise Fund and the Cemetery Endowment Fund.
Financial Implications:
There are three (3) parts to this supplemental appropriation:
- Supplemental appropriation to the expenditure budget of the Cemetery Enterprise Fund in the amount of $1,026,546 for expenditures in excess of budget, to include the capital costs of $440,000 for the fleet equipment purchase.
- Supplemental appropriation to the revenue budget of the Cemetery Enterprise Fund in the amount of $1,026,546 for the following:
** 2022 revenue projections in excess of budget in the amount of $217,578
** Capital lease proceeds of $440,000 related to the fleet equipment purchase
** $368,968 transfer in from the Cemetery Endowment Fund, transferred to the Cemetery Enterprise Fund as revenue.
- Supplemental appropriation to the expenditure budget of the Cemetery Endowment Fund in the amount of $368,968 for a transfer to the Cemetery Enterprise Fund for additional projected operating expenditures in 2022. The source of funds is the Cemetery Endowment Fund balance.
City Council Appointed Board/Commission/Committee Recommendation:
The supplemental appropriation was presented to the Parks, Recreation and Cultural Services Advisory Board at its September 8, 2022, meeting. This will be an action item at their October 13, 2022, meeting.
The request to draw an amount of $368,968 from the Cemetery Endowment Fund, to be transferred to the Cemetery Enterprise Fund, was discussed with the Investment Advisory Committee on August 16, 2022.
In addition, this request was presented to the City Council Budget Committee on September 13, 2022.
Stakeholder Process:
N/A
Alternatives:
N/A
Recommended Action
Proposed Motion:
Approve Ordinance No. 22-69 amending Ordinance No. 21-112 (2022 Appropriation Ordinance) for a Supplemental Appropriation to the Cemetery Enterprise Fund in the Amount of $1,026,546 to Fund Additional 2022 Operating Expenditures, and to the Cemetery Endowment Fund in the Amount of $368,968 for a Transfer to the Cemetery Enterprise Fund to Fund a Portion of Additional 2022 Operating Expenditures
Summary of Ordinance Language
An Ordinance Amending Ordinance No. 21-112 (2022 Appropriation Ordinance) for a Supplemental Appropriation to the Cemetery Enterprise Fund in the amount of $1,026,546 to fund additional 2022 operating expenditures, and to the Cemetery Endowment Fund in the amount of $368,968 for a transfer to the Cemetery Enterprise Fund to fund a portion of additional 2022 operating expenditures.