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HomeMy WebLinkAboutE-11 Staff Report - First Quarter Financial Report FY18-19CONSENT ITEM E-11 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR OF FINANCE DATE: NOVEMBER 19, 2018 SUBJECT: FIRST QUARTER FINANCIAL REPORT ENDING SEPTEMBER 30, 2018 BACKGROUND: In an effort to be 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 transactions for the City’s General Fund, Gas Tax and 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 Fiscal Year 2018/19 first quarter financial report ending September 30, 2018. ANALYSIS: 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 and 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, 2018, the General Fund received a total of $5.9M in revenues which represents approximately 13.2% of the estimated revenues for FY 18/19. Q1 revenues compared to the same period last year were $475,838 higher primarily due to more collections in the Charges for Services and Utility User’s Tax categories. APPROVED CITY COUNCIL 11/19/2018 1st Qtr Financial Report November 19, 2018 Page 2 General Fund expenditures are pacing slightly higher at 27.6% or $11.7M of the adjusted budget of $42.2M. Q1 expenditures compared to the same period last year were $1.2M higher primarily due to lump-sum CalPERS payments made in July, and timing of the insurance and IT allocations and transfers posted to the general ledger. Major Special Revenue, Sewer, and Internal Services Funds Summary: Gas Tax revenues and expenditures are pacing at 7.6% and 23% of the FY 2018/19 first quarter adjusted budget, respectively. Fire Safety revenues and expenditures are pacing at 28.8% and 35.4% of the FY 2018/19 first quarter adjusted budget, respectively. Sewer revenues and expenditures are pacing at 26.2% and 33.1% of the FY 2018/19 first quarter adjusted budget, respectively. Risk Management/Liability revenues and expenditures are pacing at 72.1% and 61.9% of the FY 2018/19 first quarter adjusted budget, respectively. Information Technology revenues and expenditures are pacing at 25.1% and 25.9% of the FY 2018/19 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 were no material budget adjustments during the first quarter of FY 18/19. Revenue forecasts are on target and expenditure appropriations decreased by $203,410, resulting in an increase 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. Prepared By: Reviewed and Approved: Talika M. Johnson Sergio Gonzalez Director of Finance City Manager Attachment: 1) Quarterly Financial Report – 1st Quarter, Ending September 30, 2018 2018/19 Quarterly Financial Report, 1st Quarter, Ending September 30, 2018 OVERVIEW This financial report summarizes the City’s General Fund’s position for the 1st quarter of Fiscal Year 2018/19 (July 1, 2018 through September 30, 2018). 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 revised data, the projection through the end of the fiscal year for total sources (revenues and transfers-in) are estimated to be $44.43 million, consistent with the adopted revenue amount. Total uses (expenditures and transfers-out) are estimated to be $42.22 million, $203,410 lower than the adopted budget due to vehicle and machinery and equipment costs that are identified as non-general fund costs and were adjusted accordingly. Table 1 shows the adjusted budget figures: A B C Adopted Budget 2018-19 Revised Budget 2018-19 Variance (B - A) Beginning Fund Balance $ 10.64 $ 10.64 * $ - Plus Revenues 42.85 42.85 ** - Transfers In 1.59 1.59 - Total 2018-19 Sources 44.43 44.43 - Less Expenditures 34.86 34.65 ** (0.20) Transfers Out 7.57 7.57 - Total FY 2018-19 Uses 42.42 42.22 (0.20) Revenues in excess/(below) Exp-FY 2018-19 $ 2.01 $ 2.21 $ 0.20 Estimated Ending Fund Balance $ 12.65 $ 12.85 $ 0.20 Less: Internally Restricted Reserves Budget Stabilization & Catastrophic Events (6.37) (6.37) *** - Capital & Infrastructure Replacement (1.50) (1.50) *** - Insurance (1.00) (1.00) *** - Retiree Benefits (1.50) (1.50) *** - Estimated Fund Balance after Reserves $ 2.28 $ 2.48 $ 0.20 *Unaudited **Financial Data as of 9/30/18 ***Established Reserves per 6-18-18 Council Approval Table 1 Budget vs. Estimated Actual (in millions) Attachment 1 2018‐19 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2018 Page 2 of 5 The beginning fund balance shown in Table 1 is the estimated unaudited fund balance by the end of June 30, 2018, this estimate may change once the FY 2017/18 audit has been completed. While revenue sources are anticipated to be consistent with the forecast, the 1st quarter’s revenues provided limited meaningful data that can identify trends for the full year projection, primarily due to the timing of when revenues are received such as property and sales taxes. As we progress further into the 2018/19 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 by revenue category and the percent collected compared to the adjusted budget. Overall, revenues collections are at 13.2% of budget in the first quarter of FY 18/19. Table 3 shows that revenues are trending $0.476 million higher than the same period last year. Revenue Collection by Source as of 9/30/18 Chart 1 Revenues Collected by Source Quarter Ending: 9/30/17 vs. 9/30/18 2018-19 Actual % of REVENUE Adjusted Budget YTD 9/30/18 Adj. Budget Property Tax 11,123,805$ -$ 0.0% Sales Tax 5,887,645 479,867 8.2% UUT Tax 3,327,870 756,969 22.7% Other Taxes 8,750,385 1,544,543 17.7% Charges for Services 3,783,534 1,291,235 34.1% Cost Reimbursement 2,020,090 462,080 22.9% Fines & Penalties 1,217,925 120,655 9.9% License & Permits 2,971,785 737,145 24.8% Miscellaneous 3,194,500 13,880 0.4% Money & Property Use 2,156,190 478,040 22.2% Total Revenues 44,433,729$ 5,884,414$ 13.2% Table 2: YTD % of Budget Actual Actual Increase/ REVENUE YTD 9/30/17 YTD 9/30/18 (Decrease) Property Tax -$ -$ -$ Sales Tax 405,156 479,867 74,710 Utility User Tax 619,584 756,969 137,385 Other Taxes 1,639,575 1,544,543 (95,032) Charges for Services 986,484 1,291,235 304,751 Cost Reimb.443,258 462,080 18,822 Fines & Penalties 225,239 120,655 (104,584) License & Permits 752,396 737,145 (15,251) Miscellaneous 19,119 13,880 (5,239) Money & Property Use 317,765 478,040 160,275 Total Revenues 5,408,576$ 5,884,414$ 475,838$ Table 3: Year-to-Year Comparison 2018‐19 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2018 Page 3 of 5 Property Tax collections are zero 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 of each calendar year. Sales Tax collections are at 8.2% 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 of 2018, respectively. Utility User’s Tax collections are at 22.7% of the adjusted budget. This percentage is reflective of the consumption of utility services such as gas, electric, and water. First quarter collections in FY 18/19 are higher than the same period last year due to higher electric and water retail revenues received from customers. Other Taxes collections are at 17.7% of the adjusted budget. Other taxes are comprised mainly of franchise, land excavation, material recovery facility, and hazardous waste fees. Most revenues in this category are collected after the 1st quarter. Charges for Services collections are at 34.1% of the adjusted budget and pacing higher than the same quarter last year primarily due to plan check fees collected for development projects and an increase in allocable General Fund administrative costs. Revenues are collected as services are rendered. Cost reimbursement collections are at 22.9% of the adjusted budget. Revenues are collected based on various reimbursement agreements from the state and for law enforcement activities. Fines and Penalties collections are at 9.9% of the adjusted budget. Revenues in this category are expected to increase throughout the fiscal year mainly due to commencement of a new third-party parking enforcement contract. Staff will continue to monitor the fiscal impact during the rest of the fiscal year. License and Permits collections are at 24.8% 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 0.4% of the adjusted budget. Majority of this budget is comprised of $2.9 million in estimated property sales which has not been realized yet. Money and Property Use collections are at 22.2% of the adjusted budget and pacing higher than first quarter last year. The increase in revenues is primarily due to the increased value of water rights the City leases to the utility and increased interest earnings due to rising interest rates. GENERAL FUND EXPENDITURES General Fund expenditures are tracking close to the anticipated 25% first quarter mark. Expenditures by Category as of 9/30/18 FY 18-19 Actual % of EXPENDITURE Working Budget YTD 9/30/18 Adopted Personnel 25,158,574$ 7,910,830$ 31.4% Operating 17,061,298 $3,757,754 22.0% Total Expenditures 42,219,872$ 11,668,584$ 27.6% Table 4: % of Budget Actual Actual Increase/ EXPENDITURE YTD 9/30/17 YTD 9/30/18 (Decrease) Personnel 7,643,039$ 7,910,830$ 267,791$ Operating 2,814,771 3,757,754$ 942,983 Total Expenditures 10,457,810$ 11,668,584$ 1,210,774$ Table 5: Year-to-Year Comparison 2018‐19 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2018 Page 4 of 5 The expenditures outlined in Table 4 are pacing slightly higher than 1st quarter budget. The personnel category in Table 4 is higher primarily due to a lump-sum CalPERS payments made in July for the pooled Public Safety fund in the amount of $1.9 million and Miscellaneous fund of $0.6 million, offset by savings from vacant positions. The 1st quarter expenditures in Table 5 compared to the same period last year is higher primarily due to the timing of the Insurance and IT allocations and transfers posted to the General Ledger. DEPARTMENT EXPENDITURES At the end of the 1st quarter, most departments are tracking close to the 25% Q1 mark. Some expenses are paid in the beginning of the year such as Recreation seasonal staff and the lump-sum CalPERS payment for Public Safety as mentioned earlier. Table 6 Chart 2 Expenditures by Department % of Budget by Department as of 9/30/18 as of 9/30/18 MAJOR SPECIAL REVENUE, SEWER AND INTERNAL SERVICES FUNDS SUMMARY First Quarter revenues and expenditures for the major Special Revenue funds including Gas Tax, Fire Safety, Sewer, and the Internal Services funds such as Risk Management/Liability and Information Technology are reflected below. Table 7: Major Special Revenue and Internal Services Fund Revenues Table 8: Major Special and Internal Service Fund Expenditures 2018/19 Actual EXPENDITURE Adj. Budget YTD 9/30/18 % of Budget Council 143,105$ 38,253$ 26.7% City Clerk 595,892 171,642 28.8% City Attorney 250,000 64,525 25.8% City Treasurer 186,470 23,173 12.4% Administration 485,125 127,605 26.3% Finance 1,484,829 413,859 27.9% Economic & Comm. Dev.2,510,310 536,693 21.4% Human Resources 461,290 121,282 26.3% Library 1,262,505 325,288 25.8% Public Safety 19,235,518 5,995,136 31.2% Public Works 897,876 183,119 20.4% Recreation & Fam. Serv.3,786,526 1,101,249 29.1% City-Wide 10,920,426 2,566,760 23.5% Total Expenditure 42,219,872$ 11,668,584$ 27.6% 2018-19 Actual % of REVENUE Adjusted Budget YTD 9/30/18 Adj. Budget Gas Tax Fund 2,083,226$ 159,180$ 7.6% Fire Safety 4,981,890 1,436,338 28.8% Sewer Fund 3,091,148 809,408 26.2% Risk Mgmt/Liab Fund 2,888,090 2,082,486 72.1% IT Fund 1,769,271 443,238 25.1% Total Revenues 14,813,625$ 4,930,650$ 33.3% 2018-19 Actual % of EXPENDITURE Adjusted Budget YTD 9/30/18 Adj. Budget Gas Tax Fund 1,548,902$ 356,238$ 23.0% Fire Safety 4,901,890 1,735,299 35.4% Sewer Fund 2,401,711 794,778 33.1% Risk Mgmt/Liab Fund 3,226,855 1,997,276 61.9% IT Fund 1,766,809 456,954 25.9% Total Expenditures 13,846,167$ 5,340,545$ 38.6% 2018‐19 Quarterly Financial Report Attachment 1 1st Quarter, Ending September 30, 2018 Page 5 of 5 Chart 3 Major Special Revenue & Internal Services Funds Revenues by Funds Ending 9/30/2018 Chart 4 Major Special Revenue & Internal Services Funds Expenditures by Funds Ending 9/30/2018 Gas Tax Fund Gas Tax revenues are pacing at 7.6% of the 1st quarter FY2018/19 adjusted budget due to the timing of when the State Controller Office distribute the revenues to the City, and the expenditures are tracking slightly lower at 23% due to timing of the planned expenditures. Fire Safety Fund Fire Safety Fund’s operating revenues are at 28.8% of budget, slightly higher than anticipated for first quarter due to fire inspection fees received. The expenditures are pacing at 35.4% 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 FY 18/19 budget. Sewer Fund Sewer year-to-date operating revenues are 26.2% of estimated budget. Expenditures are higher than the 25% quarter end mark at 33.1% due to debt service payments made in the first quarter of the year. Risk Management Fund Revenues and expenditures for the Risk Management Fund are at 72.1% and 61.9% of the adjusted budget, respectively, due to the annual liability, property and worker’s compensation premiums that are due and payable in the 1st quarter. Information Technology Fund Revenues and expenditures for the Information Technology Fund are at 25.1% and 25.9% of the adjusted budget, respectively, and on pace with first quarter budget.