Loading...
HomeMy WebLinkAboutStaff Report: Fiscal Year 2013 4th Quarter Budget Review (Finance)//, Pre al City Council Staff Report November 19, 2013 ITEM Staff Report: Fiscal Year 2013 4th Quarter Budget Review BACKGROUND This report presents the fourth quarter budget report for Fiscal Year 2013 and a preview of the first quarter status for Fiscal Year 2014. Consistent with the Strategic Plan element of providing consistent financial reports, previous reports were delivered to City Council on October 16, 2012 and February 19, 2013, and on April 9, 2013, as part of the first Fiscal Year 2014 Budget and Strategic Planning presentation. DISCUSSION Fiscal Year -End 2013 One of the major activities following the end of the fiscal year has been the closing of the books in preparation for the annual audit of the City's financial records and completion of the Comprehensive Annual Financial Report ("CAFR"). This work includes such activities as processing final invoices for services and products provided by outside vendors prior to fiscal year-end; ensuring all revenues and expenditures have been appropriately accounted for; and comparing bank and investment account statements with general ledger balances, reconciling discrepancies, and posting adjusting (journal) entries as necessary. The City's General Fund reserves continue to grow, with estimated total fund balances increasing approximately $5.1 million to nearly $23.0 million from June 30, 2012 to June 30, 2013. Revenues plus transfers in during the year totalled just under $42.0 million, while expenditures and transfers out combined were approximately $36.9 million. (Totals are unaudited.) Revenues Actual revenues were less than the budgeted total by $513,000. However, the apparent shortfall includes a $2.7 million transfer from the Successor Agency to the General Fund to carry out the obligations of Recognized Obligation Payment Schedule ("ROPS") III. These funds were added to the budget total and recorded as deferred revenue which will be realized (as revenue) as expenses are incurred. Setting aside the $2.7 million, there is a positive variance of $2.2 million in all other accounts combined. Page 2 Staff Report — Fiscal Year 2013 4th Quarter Budget Review November 19, 2013 Fiscal Year -End Revenue Totals Revenue Source Adjusted Budget Actual (Estimated) Variance Sales Tax $ 10,567,101 $ 11,110,289 $ 543,188 Proposition D Tax 9,410,000 9,089,242 (320,758) Property Tax 1,537,243 2,088,940 551,697 Property Tax in Lieu of VLF 4,931,260 5,121,839 190,579 Property Tax in Lieu of Sales Tax 3,522,366 3,415,323 (107,043) Other Revenue 12,176,2751 10,805,713 (1,370,562) r Total $ 42,144,245 $ 41,631,346 $ (512,898) Total includes $2,7 million in revenues from the Successor Agency to carry out the obligations of Recognized Obligation Payment Schedule CROPS") III. In addition to higher sales tax revenues resulting from growth in retail sales, property taxes for Fiscal Year 2013 have increased in conjunction with a 3.86% increase in assessed valuations, instead of remaining flat, as was assumed in the budget. Property tax revenues were boosted by an unanticipated distribution of property tax revenues of $254,950 in January 2013, following the State's review of the Successor Agency's obligations for the January through June, 2013 period, which deemed a portion of the property tax balances in the Successor Agency's account to be residual. The $190,579 increase in Property Tax in Lieu of Vehicle License Fee ("VLF") revenues is tied directly to the change in assessed value. Proposition D (or "District") `faxes fell short of the budgeted estimate with the subsiding of out -of -district durable goods purchases. The City's Property Tax in Lieu of Sales Tax distribution, which is determined by the State Department of Finance, was lower than the estimate provided by the City's sales tax consultant during preparation of the budget. Finally, the negative variance in "Other Revenue" results from the aforementioned budgeted but unrealized $2.7 million revenue from the Successor Agency. Expenditures As of June 30, 2013, General Fund expenses totaled $35.4 million, nearly $6.1 million less than the $41.5 million budgeted. Of this variance, $3.4 million is due to cost savings, with the remaining $2.7 million attributable to expenses budgeted but not spent in relation to the ROPS III obligations to be carried out under the General Fund. Fiscal Year -End Expenditure Totals Expenditure Type Ad j ted Budget Actual (Estimated) Variance Personnel Services $ 25,787,278 $ 24,767,024 $ 1,020,254 Maintenance & Operations 4,214,505 2,960,980 1,253,526 Other Expenditures 11,480,518 7,677,203 3,803,315 Total $ 41,482,301 $ 35,405,207 $ 6,077,094 adopted budget total, phis budget amendments, encumbrances, & capital projects appropriations carried forward from previous fiscal year(s) Page 3 Staff Report — Fiscal Year 2013 4th Quarter Budget Review November 19, 2013 Personnel costs ended the year $1.0 million below budget, primarily due to vacant authorized positions. Maintenance & Operations savings occurred in various accounts, the most significant of which were in Professional Services, Contract Services, and Training, Travel and Subsistence. The variance in "Other Expenditures" results from budgeted but unspent appropriations for capital projects, including the $2.7 million for ROPS III projects. The unspent amounts for these projects will be carried forward to Fiscal Year 2014. Transfers In/Out While, technically, not revenues and expenditures (and, hence, not shown above), transfers in and out of the General Fund contribute to fund balance increases and decreases, respectively. Transfers out from the General Fund were less than budgeted by more than $543,500, representing a savings to the General Fund. The savings resulted from an increase in the property tax revenues allocated to the Library and Parks Maintenance funds, as well as lower than anticipated expenses in both, reducing the operating support necessary. Transfers in were $223,000 higher than planned, due to the closing of several inactive funds into the General Fund. Net Impact on Fund Balance Combining the above revenue and expenditure projections with expected transfers in and out results in an anticipated fund balance gain of $5,063,772, as compared to the budgeted usage of S1,267,075. Fund Balance Change — Budget vs Actual (istunatea} Actual (Estimated) Adjusted Budget Variance Revenues $ 41,631,346 $ 42,144,245 $ (512,898) Transfers In 343,727 120,612 223,115 Total Revenues & Transfers In $ 41,975,073 $ 42,264,857 $ (289,783) Expenditures $(35,405,207) $(41,482,301) $ 6,077,094 Transfers Out (1,506,094) (2,049,631) 543,537 Total Expenditures & Transfers Out $(36,911,301) $(43,531,932) $ 6,620,631 Fund Balance Retained/ sed) $ 5,063,772 $ (1,267,0751 Beginning Fund Balance $ 17,916,938 $ 17,916,938 - Ending Fund Balance $ 22,980,710 $ 16,649,863 Page 4 Staff Report — Fiscal Year 2013 4th Quarter Budget Review November 19, 2013 1" Quarter Fiscal Year 2014 The tables below compare fiscal -year-to-date totals of the City's major revenue sources and expenditure categories through September 30 for the current and prior fiscal years, Revenues 1st Quarter Revenue Comparison Revenue Source FY 13 FY 14 Sales Tax $ 1,107,159 $ 1,056,042 Proposition D Tax 764,187 869,303 Property Tax 40,223 60,149 Property Tax in Lieu of VLF - - Property Tax in Lieu of Sales Tax - - Other Revenue 1,348,366 1,757,052 Total $ 3,259,935 $ 3,742,547 Full analysis of revenues has not yet been performed for the first quarter; however, some facts are known. The largest portions of Property Tax revenues are typically received in December and April, corresponding to tax due dates; therefore, it is normal for this revenue total to be low at this point in the fiscal year, as evidenced by the Fiscal Year 2013 total. Additionally, having received information from the County and State regarding Fiscal Year 2014 distributions of Property Tax in Lieu of VLF and Property Tax in Lieu of Sales Tax, staff can report these revenues will be S5,364,774 and $4,006,058, respectively. Combined, these revenues will exceed their budgeted total by more than $92,000. These revenues are typically received in close proximity to the Property Tax distributions (i.e., April/May and December/January). Expenditures 1 "t Quarter Expenditure Comparison Expenditure Type FY 13 FY 143 Personnel Services $ 5,503,704 $ 5,855,845 Maintenance & Operations 550,587 494,430 Other Expenditures 1,943,207 1,552,198 Total $ 7,997,498 $ 7,902,473 Totals do not yet include all encumbrances & capital projects appropriations carried forward from previous fiscal year(s). As with revenues, staff has not yet fully analyzed expenditures; however, it appears apparent personnel cost savings are again likely in Fiscal Year 2014. Staff will perform additional analysis of both revenues and expenditures and return with more detailed information in the Mid -Year Budget Report. Page 5 Staff Report — Fiscal Year 2013 4th Quarter Budget Review November 19, 2013 CONCLUSION As discussed above, after adjusting for the $2.7 million dollar transfer from the Successor Agency the revenue totals for Fiscal Year 2013 were strong and significant cost savings were realized during the year, so although City Council had authorized a small use of reserve funds to balance the budget, reserves (i.e., fund balances), instead, grew significantly. Following the similarly strong results of Fiscal Year 2012, the City has been able to attain its minimum 25% Contingency Reserve (unassigned fund balance) goal with a balance of 25.34% as of June 30, 2013. Additionally, in accordance with the recommendation of the City's auditors, staff is in the process of closing several funds into the General Fund. This consolidation of funds is estimated to provide a possible net benefit of $1 million to the General Fund's fund balance. Other factors likely to affect fund balance in the future include the following: • Actuarial adjustments by the California Public Retirement System (Ca1PERS) are estimated to require increases in the City's employer contribution to employee pension funds into the foreseeable future. For Fiscal Year 2014, the City's contribution has increased over Fiscal Year 2013's by 1.663% of payroll to 22.9% for miscellaneous employees and by 1.793% to 39.8% for public safety employees. Contribution rates currently are estimated to reach 33% and 52% for miscellaneous employees and public safety employees, respectively, in Fiscal Year 2020. • By Council Policy, the City maintains a series of reserves. Staff is reviewing current reserve levels and the policies governing them, as well as the inventory of deferred maintenance and deferred equipment replacement, which may result in recommendations in these areas. • The Proposition D, District Sales Tax is set to expire in September 2016. As demonstrated by the revenue figures reflected in this report, the District Sales Tax continues to be vital in allowing the City to meet its financial obligations. As has been the case since the year of its inception, absent this tax, the City would not have met its obligations in Fiscal Year 2013 and would not do so in Fiscal Year 2014. That trend is expected to continue. As such, it is imperative to reserve any surplus in preparation for 2016. • Beginning this Fiscal Year 2014, the City must appropriate funds for costs associated with updating its stormwater programs in compliance with National Pollutant Discharge Elimination System ("NPDES") permit program compliance, This year's budget includes $100,000 for expenses related to updating the City's Jurisdictional Urban Runoff Management Plan ("JURMP"), Standard Urban Stormwater Mitigation Plan ("SUSMP"), Best Management Practices (BMPs) manual, and relevant ordinances, as well as costs for monitoring and for Watershed Plan Development. Other new or increased expenses are anticipated in relation to standard program costs (e.g., residential area inspection program implementation, education and enforcement of the stricter standards, etc.) but should be Page 6 Staff Report — Fiscal Year 2013 4th Quarter Budget Re4 iew November 19, 2013 offset — at Least in the initial years of the program — due to decreased costs resulting from performing fewer industrial, commercial, and municipal inspections and less detailed annual reporting requirements. RECOMMENDATIONS Accept this staff report.