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HomeMy WebLinkAboutE-09 Staff Report - 1st Quarter Financial ReportCONSENT ITEM E-9 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: DON PENMAN, INTERIM CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR OF FINANCE DATE: NOVEMBER 6, 2017 SUBJECT: FIRST QUARTER FINANCIAL REPORT ENDING SEPTEMBER 30, 2017 SUMMARY: In an effort to be more transparent and to provide an opportunity to evaluate the City's fiscal health, the Finance Department has prepared a quarterly financial report. This report summarizes first quarter budget-to-actual analysis for the City’s General Fund, Gas Tax, Fire Safety Special Revenue funds, the Sewer Enterprise fund, and major Internal Services funds including Risk Management/Liability and Information Technology. The proposed action consists of receiving, reviewing and filing the quarterly financial report. RECOMMENDATION: Staff recommends the City Council take the following action: 1) Receive, review, and file the first quarter financial report ending September 30, 2017. DISCUSSION: The Finance Department has prepared a quarterly financial report for the major non-utility funds to provide the City Council and public an update on the City’s financial position. Included in the report are the statuses of the General Fund, Gas Tax, Fire Safety Special Revenue Funds, Sewer Enterprise Fund, and Risk Management/Liability and Information Technology Internal Services funds. General Fund Summary: Through the first quarter (Q1) ended September 30, 2017, the General Fund received a total of $5.4M in revenues which represent approximately 12.8% of the estimated revenues for FY 17/18. When comparing the Q1 FY 1718 revenues with the same period last year, it is $774K lower primarily due to the timing of property sale proceeds received in FY 15/16 compared to the current year. General Fund expenditures are on target at 25.4% or $10.5M of the adjusted budget of $41.2M. When comparing the Q1 FY 1718 expenditures with the same period last year, it is $2.8M higher due to the APPROVED COUNCIL MEETING 11/6/2017 1st Qtr Financial Report November 6, 2017 Page 2 timing of lump-sum payments made to CalPERS and one-time special assessment payment made to the City’s former insurance provider. Major Special Revenue, Sewer and Internal Services Funds Summary: Gas Tax revenues and expenditures are pacing at 13.4% and 25.8% of the FY 2017/18 first quarter adjusted budget, respectively. Fire Safety Fund’s revenues and expenditures are pacing at 29.1% and 28.9% of the FY 2017/18 first quarter adjusted budget, respectively. Sewer Fund revenues and expenditures are pacing at 20.2% and 17.5% of the FY 2017/18 first quarter adjusted budget, respectively. Risk Management/Liability Fund revenues and expenditures are pacing at 6.3% and 76.6% of the FY 2017/18 first quarter adjusted budget, respectively. Information Technology Fund revenues and expenditures are pacing at 0.1% and 30.1% of the FY 2017/18 first quarter adjusted budget, respectively. Details of the first quarter budget-to-actual results are highlighted in the attached report (Attachment 1). FISCAL IMPACT: Overall, the City’s financial position is stable and there was no material budget adjustments during the first quarter of FY 17/18. Revenue forecasts increased slightly by $0.03M, and expenditure appropriations increased by $0.10M with a net decrease of $0.07M to the General Fund ’s projected fund balance. Details of the revenue and expenditure budget adjustments are outlined in the attached quarterly financial report. Staff will continue to closely monitor the fiscal impact, and if necessary, recommend revisions to the City Council as appropriate. Reviewed and Approved: Reviewed and Approved: Talika M. Johnson Louie F. Lacasella Director of Finance Senior Management Analyst Reviewed and Approved: Don Penman Interim City Manager Attachment: 1) Quarterly Financial Report – 1st Quarter, Ending September 30, 2017 FY 2017-18 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2017 Page 1 of 5 2017/18 Quarterly Financial Report, 1st Quarter, Ending September 30, 2017 OVERVIEW This financial report summarizes the City’s General Fund’s position for the 1st quarter of Fiscal Year 2017/18 (July 1, 2017 through September 30, 2017). Also, included are the major Special Revenue Funds: Gas Tax and Fire Safety; the Sewer Fund; and the major Internal Services Funds: Risk Management/Liability and Information Technology. The purpose of this report is to provide the City Council, City Management, and the Azusa community with an update on the City’s fiscal status based on the most recent financial information available. GENERAL FUND SUMMARY With the 1st quarter’s data, the projection through the end of the fiscal year for total sources (revenues and transfers-in) are estimated to $42,270,266, which is slightly higher than the adopted revenue budget of $42,245,316. The minor increase of $24,950 is related to slightly higher building fees. Total uses (expenditures and transfers-out) are estimated to be $99,940 higher than the adopted expenditure budget. Table 1 shows the adjusted budget figures: The variance in uses of $99,940 was due to: a one-time FY 2016/17 carry forward of the West Wing Attic Rehab CIP project ($19,990); the increase of the CSG contract which was increased with City Council approval on the August 11, 2017 ($50,000); addition of the microfiche conversion project ($24,950), and the increased Commission meeting expenses ($5,000). The available fund balance shown in Table 1 is the estimated unaudited fund balance by the end of June 30, 2018, and this estimate may change once the FY 2016/17 audit has been completed. A B C Adopted Budget 2017-18 Revised Budget 2017-18 Variance (B - A) Beginning Estimated Fund Balance $ 8.05 $ 8.05 * $ - Plus Revenues 40.68 40.71 ** 0.03 Transfers In 1.56 1.56 - Total 2017-18 Sources 42.25 42.27 0.03 Less Expenditures 34.50 34.60 ** 0.10 Transfers Out 6.27 6.27 - Total FY 2017-18 Uses 40.77 40.87 0.10 Revenues in excess/(below) Expenditures 1.48 1.41 (0.07) Available Fund Balance $ 9.52 $ 9.45 $ (0.07) *Unaudited **Financial Data as of 9/30/17 Table 1 Budget vs. Estimated Actual (in millions) Attachment 1 FY 2017-18 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2017 Page 2 of 5 While slight growth in revenue sources is anticipated, the 1st quarter’s revenues provided limited meaningful data that can identify trends for the full year projection. As we progress further into the 2017/18 fiscal year, revenues and expenditures will be closely monitored and an update will be provided midway through the year with more data on the full year forecast and trend analysis. GENERAL FUND REVENUES Table 2 shows actual collections for the major revenue sources and the percent collected compared to the adjusted budget. Table 3 shows that revenues are trending $773,634 lower than the same period last year. Revenue Collection by Source as of 9/30/17 Chart 1 Revenues Collected by Source Quarter Ending: 9/30/16 vs. 9/30/17 2017-18 Actual % of REVENUE Adjusted Budget YTD 9/30/17 Adj. Budget Property Tax 10,356,205$ -$ 0.0% Sales Tax 5,594,532 405,156 7.2% UUT Tax 2,934,274 619,584 21.1% Other Taxes 9,014,867 1,639,575 18.2% Charges for Services 3,107,335 986,484 31.7% Cost Reimbursement 2,320,265 443,258 19.1% Fines & Penalties 1,117,850 225,239 20.1% License & Permits 2,989,400 752,396 25.2% Miscellaneous 2,922,500 19,119 0.7% Money & Property Use 1,913,038 317,765 16.6% Total Revenues 42,270,266$ 5,408,576$ 12.8% Table 2: YTD % of Budget Actual Actual Increase/ REVENUE YTD 9/30/16 YTD 9/30/17 (Decrease) Property Tax -$ -$ -$ Sales Tax 380,300 405,156 24,856 Utility User Tax 683,359 619,584 (63,775) Other Taxes 1,367,477 1,639,575 272,098 Charges for Services 399,237 986,484 587,247 Cost Reimb.71,865 443,258 371,393 Fines & Penalties 173,474 225,239 51,765 License & Permits 669,880 752,396 82,516 Miscellaneous 1,987,111 19,119 (1,967,992) Money & Property Use 449,507 317,765 (131,742) Total Revenues 6,182,210$ 5,408,576$ (773,634)$ Table 3: Year-to-Year Comparison FY 2017-18 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2017 Page 3 of 5 Property Tax collections are zero and it is normal due to the timing of the revenue allocation by the County of Los Angeles Auditor Controller Tax Division. The majority of the property tax collections are received in four payments in December, January, April and May each year. Sales Tax collections are at 7.2% of the adjusted budget. The main reason for the low rate of collections is due to the timing of when the revenues are available. The City will not receive the August and September tax revenues from the State of California Board of Equalization until October and November 2017, respectively. Utility User’s Tax collections are at 21.1% of the adjusted budget. This percentage is reflective of the consumption of utility services such as gas, electric and water. UUT collection is a percentage of the City’s utility retail rates, and in the current year is lower than the same period last year due to lower power cost adjustment pass through rates in the Electric Utility as a result of lowered power supply costs. Other T axes collections are at 18.2% of the adjusted budget. Other taxes is comprised mainly of franchise, land excavation, material recovery facility, and hazardous waste fees. Timing of the payments is the reason for the low rate. Most revenues are collected after the 1st quarter. Charges for Services collections are at 31.7% of the adjusted budget. Revenues are collected as services are rendered. Cost reimbursement collections are at 19.1% of the adjusted budget. Revenues are collected based on various grant reimbursement agreements and are primarily collected later in the fiscal year. Fines and Penalties collections are at 20.1% of the adjusted budget. The 1st quarter revenues are pacing low primarily due to staffing constraints. With priority focused on public safety, parking enforcement and motor vehicle ticketing activities have decreased. Finance staff will continue to monitor the fiscal impact during the rest of the fiscal year. License and Permits collections are at 25.2% of the adjusted budget. Miscellaneous fees for Planning, Building Permits and Public Works fees collected are on par with first quarter projections, and the timing of various development projects played a role in the percentage collected. Miscellaneous collections are at 0.7% of the adjusted budget. The 1st quarter revenues are pacing low primarily due to pending property sales. When comparing the current quarter to the first quarter of FY 2016- 17, revenues were much higher last year due to the $2,000,000 the City received for the sale of the parking easement to the Metro Gold Line Foothill Extension Construction Authority. Money and Property Use collections are at 16.6% of the adjusted budget. The 1st quarter revenues are pacing low due to the timing of receipt of cell tower lease revenues and interest income allocation postings. As the year progresses, the revenue should pace fairly close to the budget target. GENERAL FUND EXPENDITURES General Fund expenditures are tracking close to the anticipated 25% 1st quarter mark. Expenditures by Category as of 9/30/17 Table 4: % of Budget Table 5: Year-to Year Comparison The expenditures outlined in Table 4 are on par with the 1st quarter budget. The personnel category in Tables 4 and 5 was higher than budget and prior year primarily due to lump-sum payments made to California Public FY 17-18 Actual % of EXPENDITURE Working Budget YTD 9/30/17 Adopted Personnel 23,799,790$ 7,643,039$ 32.1% Operating 17,424,158 2,814,771 16.2% Total Expenditures 41,223,948$ 10,457,810$ 25.4% Actual Actual Increase/ EXPENDITURE YTD 9/30/16 YTD 9/30/17 (Decrease) Personnel 6,343,675$ 7,643,039$ 1,299,364$ Operating 1,352,109 2,814,771 1,462,662 Total Expenditures 7,695,784$ 10,457,810$ 2,762,026$ FY 2017-18 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2017 Page 4 of 5 Employee Retirement System (“CalPERS”) for the unfunded liability portions of the City’s portfolio. The payment for the pooled Public Safety fund was $1,406,211, an increase of $224,297 over prior year, and $1,698,464 to the Miscellaneous fund, which is new this year. The 1st quarter variance was offset by lower normal cost contributions to CalPERS and vacant positions. The 1st quarter operating expenditures in Table 5 compared to the same period last year was higher primarily due to a one-time special assessment from the City’s former insurance provider, ICRMA, of $1.6M ($500K allocated to Enterprise Funds). As the fiscal year progresses, variances from period-to-period should smooth out since significant outlays occur early in the year. DEPARTMENT EXPENDITURES At the end of the 1st quarter, most departments are tracking close to the 25% 1st quarter mark or below the adjusted budget. Some expenses are paid in the beginning of the year such as Recreation seasonal staff and the lump-sum CalPERS payment for Public Safety as mentioned earlier, and thus, are pacing slightly higher than budget. The Administration department is over budget for the 1st quarter due to payouts for staff separations. Table 6 Chart 2 Expenditures by Department % of Budget by Department as of 9/30/17 as of 9/30/17 MAJOR SPECIAL REVENUE, SEWER AND INTERNAL SERVICES FUNDS SUMMARY The major Special Revenue funds including the Gas Tax, Fire Safety fund, Sewer Fund, and the major Internal Services funds such as Risk Management/Liability and Information Technology funds are reflected below. Table 7: Major Special Revenue and Internal Services Fund Revenues Table 8: Major Special Revenue and Internal Service Fund Expenditures 2017/18 Actual EXPENDITURE Adj. Budget YTD 9/30/17 % of Budget Council 132,310$ 31,674$ 23.9% City Clerk 647,815 164,229 25.4% City Attorney 250,000 40,287 16.1% City Treasurer 182,430 35,097 19.2% Administration 561,620 219,335 39.1% Finance 1,383,520 395,358 28.6% Economic & Comm. Dev.2,342,805 517,042 22.1% Human Resources 421,460 94,158 22.3% Library 1,251,870 292,909 23.4% Public Safety 18,950,447 5,646,873 29.8% Public Works 781,770 152,408 19.5% Recreation & Fam. Serv.3,565,414 1,053,149 29.5% City-Wide 10,752,487 1,815,291 16.9% Total Expenditure 41,223,948$ 10,457,810$ 25.4% 2017-18 Actual % of REVENUE Adjusted Budget YTD 9/30/17 Adj. Budget Gas Tax Fund 1,419,973$ 190,434$ 13.4% Fire Safety 4,985,541 1,449,860 29.1% Sewer Fund 2,999,120 604,593 20.2% Risk Mgmt/Liab Fund 3,780,799 239,179 6.3% IT Fund 1,611,498 1,680 0.1% Total Revenues 14,796,931$ 2,485,747$ 16.8% 2017-18 Actual % of EXPENDITURE Adjusted Budget YTD 9/30/17 Adj. Budget Gas Tax Fund 1,496,095$ 386,143$ 25.8% Fire Safety 4,905,541 1,419,678 28.9% Sewer Fund 2,563,784 449,548 17.5% Risk Mgmt/Liab Fund 4,889,134 3,745,814 76.6% IT Fund 1,652,448 496,611 30.1% Total Expenditures 15,507,002$ 6,497,794$ 41.9% FY 2017-18 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2017 Page 5 of 5 Chart 3 Major Special Revenue & Internal Services Funds Revenues by Funds Ending 9/30/2017 Chart 4 Major Special Revenue & Internal Services Funds Expenditures by Funds Ending 9/30/2017 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% Gas Tax Fund Fire Safety Sewer Fund Risk Mgmt/Liab Fund IT Fund 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% Gas Tax Fund Fire Safety Sewer Fund Risk Mgmt/Liab Fund IT Fund Gas Tax Fund Gas Tax revenues are pacing at 13.4% of the 1st quarter FY2017/18 adjusted budget due to the timing of when the State Controller’s Office distributes the revenues to the City, and the expenditures are on par with budget 25.8%. Fire Safety Fund Fire Safety Fund’s operating revenues are minimal due to the timing of the transfer revenues. The expenditures are pacing at 28.9% for the 1st quarter. The first two monthly payments for July and August were slightly higher, but as the year progresses, the full year costs will be smoothed out and consistent with the FY17/18 budget amount. Sewer Fund Sewer year-to-date operating revenues are 20.2% of estimated budget. Expenditures are slightly lower than the 25% quarter end mark at 17.5% primarily due to vacant positions. Risk Management Fund The revenues for the Risk Management Fund are low at 6.3% due to the timing of its allocations to the Enterprise Funds, which are recorded in December and June. The expenditures are at 76.6% of the adjusted budget due to the annual liability and worker’s compensation premiums paid in the 1st quarter. Information Technology Fund The Information Technology Fund revenues in the 1st quarter are not indicative of its collections. Its allocations are recorded twice a year, in December and June. The expenditures are pacing at 30.1% due to the timing of IT projects.