Loading...
HomeMy WebLinkAboutStaff Report1 i , City Council Staff Report October 16, 2012 ITEM Staff Report: First Quarter of Fiscal Year 2012/2013 Budget Update BACKGROUND On June 19, 2012, staff presented to the City Council the fiscal year 2012/2013 budget for adoption. As part of the discussion, staff committed to corning back with quarterly reports on the status of the budget. With this item, staff brings forth a report of significant financial activities as well as a summary of General Fund expenditures and revenues for the first quarter of the 2012/2013 fiscal year. DISCUSSION Close Out of Fiscal Year 2011/2012 One of the major activities in the first quarter of the fiscal year is the closing of the books for the prior fiscal year. This effort has been particularly challenging this fiscal year in light of the dissolution of redevelopment. Staff has analyzed both expenditures and revenues in an effort to ensure that all were properly booked to the former redevelopment agency, the current successor agency or a City fund as appropriate. This effort is particularly important given the State of California Department of Finance's (DoF) on -going reviews of successor agencies for the purpose of identifying balances that the DoF considers to be in excess of what is needed to complete the wind down on redevelopment. As such, it is essential to identify and properly record every transaction In staffs preliminary findings, the General Fund received 9.2% more in revenues than had been projected at the mid year point for fiscal year 2011 /2012 with total expenditures at 10% below what was projected. The figures presented herein are preliminary, subject to finalization by the City's external auditor. Final numbers, which may change based on directed transfers, will be presented in the form of the Comprehensive Annual Financial Report (CAFR) presented by the auditor in or around December, 2012. The closing balance of one fiscal year becomes the opening balance for the new year. These preliminary figures provide an interim refinement of the City's opening balance as presented at the June, 2012 budget adoption for fiscal year 2012/2013. Page 2 Staff Report — First Quarter of Fiscal Year 2012/2013 Budget Update October 16, 2012 FY 11/12 Revenues Budget Projected* Actual %Budget vs. Actual Sales Tax $ 9,449,369 $ 9,910,824 $ 10,065,431 6.5% Prop D Tax $ 8,499,000 $ 9,052,000 $ 9,253,304 8.8% Property Tax $ 1,457,243 $ 1,508,472 $ 2,162,493 4,8% Property Tax in lieu of VLF $ 4,872,739 $ 4,931,254 - $ 4,931,254 1,2% Property Tax in lieu of Sales Tax $ 3,235,456 $ 3,403,217 $ 3,403,217 5% Other Revenue $ 5,862,949 $ 6,807,779 $ 6,654,197 13,5% Total $ 33,376,756 $ 35,613,546 $ 36,469,896 9.2% *Based on mid -year projections While revenues were higher than projected in all of the major categories as outlined above, the most significant impact on revenues was a one-time distribution from the San Diego Unified Port District of $830,000 in support of the aquatics center project and $497,000 to the General Fund as a taxing entity from DoF. On July 12, 2012 the Successor Agency was required to remit to the state $4,272,832 determined to be a residual balance. The money was then distributed among taxing entities. In total, National City received $911,000 with $497,000 designated for the General Fund. Given that the City of National City and the Successor Agency are active participants in a law suit contesting the demand payment, Finance staffis holding the entire $911,000 taxing entity payment to National City pending the outcome. Thus, those funds are not available for use at this time. FY 11/12 Expenditures 2011-12 FY Budget Projected Year End Actual* Alai % of Budget vs. Actual Personnel Services $ 27,128,364 $ 24,496,333 $ 23,987,937 12% Maintenance & Operations $ 11,349,377 $ 10,325,372 $ 10,777,129 5% Total $ 38,477,741 $ 34,821,705 $ 34,765,066 10% 'Based on mid -year projections As noted in the table above, the most significant savings came from personnel costs. These savings resulted from City wide vacancies including vacancies in critical areas such as fire, police, and finance. These vacancies have either now been filled or in the process of being filled. As such, this level of salary savings is not projected to continue. Page 3 Star Report — First Quarter of Fiscal Year 2012/2013 Budget Update October 16, 2012 First Quarter Fiscal Year 2012/2013 The first quarter of the fiscal year covers the period July 1 through September 30. During that three month period of the current fiscal year, the General Fund received initial distributions from multiple funding streams, including primary sources such as sales tax and property tax. Having recorded the revenues and expenditures through the end of the quarter, staff has made a comparison of said revenues and expenditures to the first quarter of the prior fiscal year. First Quarter Revenue Comparison Revenue Source First Qtr. FY 11/12 First Qtr. FY 12/13 Sales Tax $ 881,530 $ 1,132,118 Pmp D Tax $ 829,376 $ 764,186 Property Tax $ 44,086 $ 40,223 Other Revenue $ 1,445,012 $ 587,236 Total $ 3,200,004 $ 2,523,763 As demonstrated in the table above, the most significant difference in comparing the first quarters of the current and prior fiscal year can be found in "other revenues". Consistent with the discussion above, that difference is attributed to the one-time revenue in the amount of $830,000 from the San Diego Unified Port District for the aquatics center project in the first quarter of the prior fiscal year. When the aquatics center funding is subtracted, the first quarter revenues for the current fiscal year actually exceed those of the prior year by $153,759. First Quarter Expenditure Comparison First Qtr. FY 11/12 First Qtr. FY 12/13 Percentage Personnel Services $ 5,332,741 $ 5,560,880 4% Maintenance & Operations $ 1,037,664 $ 828,350 (20%) Total $ 6,370,405 $ 6,389,230 In comparing first quarters, personnel expenses have increased slightly. The increase is attributed to multiple factors: contractually obligated cost of living adjustments, the filling of critical vacancies and the transfer of salaries from the former redevelopment agency to the general fund. Under the legislated terms of the dissolution of redevelopment, the successor agency is limited in the percentage of revenue that can be allocated for administrative expenses, including wages and benefits for support staff. The administrative allowance allocated for the National City Successor Agency is insufficient to cover the support staff wages and benefits previously attributed to the redevelopment agency. As such, those expenses are now included in the General Fund. CONCLUSION As discussed, the closing figures for fiscal year 2011/2012, while stronger than previously projected, these figures are subject to adjustment by the City's external auditor. In the meantime, Page 4 Staff Report — First Quarter of Fiscal Year 2012/2013 Budget Update October 16, 2012 at adoption of the fiscal year 2011/2012 budget, the City Council authorized staff to use up to $1.3 million in reserve funds to balance said budget. Based on the preliminary closing figures, the transfer has not been found to be necessary. Looking ahead through the end of fiscal year 2012/2013, while the opening balance appears to be positive as are the first quarter figures, it is too early in the year to project a surplus. Staff will return to City Council with a mid year report at which time there will be more data upon which to base a closing projection. If at such time a surplus is projected, staff will likely recommend applying any such surplus to reserves. Factors facing the City of National City that will lead to that likely recommendation include the following: • On March 14, 2012, the Ca1PERS Board of Administration approved a recommendation to lower the CaIPERS discount rate assumption from 7.75% to 7.5%. The result of the change in assumption will be an increase in employer contribution rates. The rate increase will be phased in. One-third of total amortization payment will be payable by public agency employers such as the City of National City in fiscal year 2013/2014. The remaining two-thirds will be paid over the remaining nineteen years of the twenty year amortization period. For fiscal year 2013/2014 the increase is estimated to be 0.65% of payroll for miscellaneous employees and 1% of payroll for fire and police safety employees. i By Council Policy, the City maintains a series of reserves. Because of on -going fiscal constraints in recent years, the full funding of reserves has been difficult. Staff will be reviewing current reserve levels as well as the inventory of deferred maintenance and deferred equipment replacement which may result in recommendations in these areas. • Discussions are still underway with the Unified Port District related to the Port's payment to the City for Fire and Police service on Port lands in National City. It is yet to be determined how the ultimate outcome of the discussions will impact the General Fund budget. • The County of San Diego is embarking on a project to upgrade the regional communication system network. The cost of the upgrade will be shared by the user agencies. The estimated cost to the City of National City is $2 million. Preliminary information indicates that the project could begin as early as this fiscal year or the next. • The Proposition D, District Sales Tax is set to expire in 2016. As demonstrated by the revenue figures contained in this report, the District Sales Tax continues to be vital in meeting the City's expenditures. Consistent with previous years, absent the District Sales Tax, the City would not have met its obligations in fiscal year 2011/2012. That trend is expected to continue. As such, it is imperative to reserve any surplus in preparation for 2016. Page 5 Staff Report — First Quarter of Fiscal Year 2012/2013 Budget Update October 16, 2012 RECOMMENDATION Accept the star report. FISCAL IMPACT There is no fiscal impact associated with this item.