HomeMy WebLinkAboutAgenda Packet - February 3, 1995 - CC Z /3 4$
ex./41115GMEN3 0 OF AZUSA
Finance Department • 213 E. Foothill Blvd. • P.O. Box 1395 • Azusa, CA 91702-1395
(818)334-5125
AGENDA ITEM
TO: HONORABLE MAYOR AND MEMBERS OF
THE CITY COUNCIL
FROM: GEOFF CRAIG, DIRECTOR OF FINANCE
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VIA: HENRY GARCIA, CITY ADMINISTRATOR I
DATE: FEBRUARY 13, 1995
SUBJECT: MID-YEAR FINANCIAL REVIEW FY 1994-95
Background
This report presents for Council's review the analysis of the revenues and expenditures of the City of
Azusa's major funds as at December 31, 1994. The General Fund, and most of the City's other
"governmental"fund types, are out of balance primarily due to unexpectedly low receipts of property
tax, sales tax, gas tax and fire assessment fees. However, staff projects that, with significant
adjustments to the budget, and by prudent exercise of fiscal restraint, by June 30, the affected funds
will regain their balanced status. Staff recommends that Council receive this written report and staffs
oral presentation at the public meeting on February 13, approve the Mid-Year Review and pass the
attached budget transfer resolution.
Findings
The accounts and funds of the City of Azusa are organized into major groups according to the
Generally Accepted Accounting Principles of the Governmental Accounting Standards Board. The
format of the financial tables that follow is similar to that of the Comprehensive Annual Financial
Report.
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The remainder of this report is a detailed analysis that compares budgeted revenues and expenditures
to actual figures at December 31. Budgetary amendments are recommended as listed on the attached
resolution, additional amendments will be forthcoming.
I. General Fund
The General Fund is important enough to be considered by itself.
A. Estimated Revenues
1. Taxes
This category is a compilation of property, sales, business license,
franchise and other taxes, and it represents 62 percent of the total
estimated revenue of the General Fund. By the end of December, the
City had received 45 percent of total budgeted taxes. Staff projects
that,with adjustments,by the end of the fiscal year 100 percent of the
estimated tax revenues will be received.
"Current Secured" property tax is one of the largest elements of this
category. Since the passage of Proposition 13, property taxes are
assessed and collected on a County-wide basis throughout California.
Every December,the County of Los Angeles pays its Cities 40 percent
of their respective shares of the "Current Secured" property tax
assessment. The County pays out the balance of the installments from
January to August. When the City of Azusa has received its final 60
percent, actual property tax receipts should be nearly equal to the
original revenue projections.
Sales tax is the largest element of the taxes category but this object
was only 39 percent collected by December 31. Azusa's financial and
redevelopment staff track sales and property tax collections very
closely and have a track record of very accurate predictions. The
lower-than-expected sales tax receipts demonstrates that economic
recovery is not taking place in Azusa although it is beginning to take
hold in Los Angeles County and in California as a whole. It will be
necessary to reduce this account by$350,000.
As will be mentioned below,Azusa utility receipts are up,thus causing
utility franchise taxes to be generated at a somewhat greater rate than
that budgeted. This trend is expected to continue into fiscal 1995-96.
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2. Licenses and Permits
This category includes building, plumbing, electrical, sewer and all
other construction-related permits,and animal licenses. This category
makes up only one percent of total General Fund estimated revenues.
Licenses and Permits are within acceptable budget variances, and it
will not be necessary to adjust this budget category.
3. Fines and Forfeitures
This category is comprised of Vehicle Code Fines, Other Court Fines,
Library Fines and Miscellaneous Penalties. This category is less than
one percent of the total General Fund estimated revenues. Revenues
in this category are slightly behind budget projections; the Vehicle
Code Fines account is the largest contributor to this category. It is
about 12 percent under-collected and will need to be adjusted
downward by $30,000.
4. Interest Income
Income from the City Treasurer's investment of idle cash is accounted
for here. The investments consist primarily of Insured Certificates of
Deposit and investments with Los Angeles County and the State of
California pooled accounts. The City of Azusa has never invested
with the County of Orange. Safety takes priority over return on
investment, accordingly, interest earnings are less than might be
expected from a riskier portfolio that might yield a greater return on
investment but have a potential fund loss. This City has never lost on
an investment. This category is somewhat ahead of budget at the time
of this review and the extra revenues will be very helpful in
counterbalancing the revenue underruns mentioned above.
5. Intergovernmental Revenue
Included in this category are Motor Vehicle In-lieu Tax, various
grants-in-aid and off-highway license fees. At the end of the first half
of the fiscal year this category was about five percent under-collected
but this category does not require adjustment. This trend will not
continue into the second half of the fiscal year because the State grant
for playground equipment and the County reimbursement for the
aquatic center will have been funded.
6. Charges for Services
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This category accounts for revenue from Cost Reimbursements such
as Public Nuisance Abatement Fees, Police User Fees, Community
Development Fees, Community Services Fees, Refuse Collection
Fees, Fire Safety Fees and other miscellaneous fees. This category
reflects the entrepreneurial efforts of the Public Works Department in
generating contract street sweeping fees that are running about 29
percent above the budgeted amount.
As Council will recall, the City has been in a leadership position with
regard to administering its assessment "fees" and its utility tax. The
system of exemptions and discounts that the Utility Department offers
have gone a long way to lessen the impact of the "fees" and the tax on
City residents and businesses that might find it difficult. However, it
is important to note here that the Fire Safety"Fees" revenue account
now needs to be reduced by $225,000. Fortunately, overall, this
category is within normal limits for this time of year.
7. Sale of Property
This category consists of accounts that report the sale of real and
personal property. The Purchasing Officer is planning his annual
March auction sale of surplus vehicles and equipment which, in turn,
will provide revenue for this account.
8. Miscellaneous
This category reports small cash receipts for the sale of maps, charges
for NSF checks,donations,etc. Analysis of this category indicates the
need to reduce the estimated revenue by $40,000 because the City is
receiving fewer Community Services Donations and other various
miscellaneous revenues.
B. Expenditures
1. General Government
Expenditures of the City Administration Department, Finance
Department, City Clerk and the Library are accounted for in this
category. The overall variance between budget and actual is within
acceptable limits and it will be unnecessary to adjust the
appropriations for these divisions.
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2. Public Safety
This category accounts for Police Department, the City's share of the
expenses of the Consolidated Fire Protection District of Los Angeles
County and humane services provided by the San Gabriel Valley
Humane Association. The variance in this account is within
acceptable limits; there will be no appropriation adjustments in this
category.
3. Urban Development
Planning,Engineering and Code Enforcement are accounted for in this
category. Expenditures for preparation of the newly-amended Zoning
Code will not be paid until the second half of the year, thus, no
appropriations adjustments will be needed for this category.
4. Highways and Streets
This category accounts for the City's Civil Engineering, Contract
Maintenance and Street Maintenance expenditures. At the end of
each fiscal year, auditors from the State Controller's Office examine
the City's expenditures in these categories and approve the transfer of
an equivalent amount of Gasoline Tax receipts into the General Fund
to cover them. However,it appears that the Gas Tax receipts will be
approximately $150,000 less than the budget level recommended by
the State Controller's Office and the League of California Cities when
the budget was prepared last year. Unfortunately, since the City is
dependent on the Gas Tax to cover street maintenance expenditures,
the$150,000 loss will have to be reflected in "deferred" maintenance
within the right-of-way.
5. Culture and Recreation
This category reports expenditures for Recreation and Park
Maintenance. The unfavorable variance is caused by recreation
expenditures which are highly seasonal and more than half of which
fall within the first half of the fiscal year. This creates an artificial
variance in the first half of the year that will level out in the second
half of the year. For this reason, appropriations will not be adjusted
at this time in this category.
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6. Health and Welfare
Refuse collection is accounted for here. The variance is within
acceptable limits and the appropriations for this category will not be
adjusted.
C. Summary.
With significant budget adjustments, suspension of recruitment, staff reduction
through attrition, "holds" on capital outlay and a citywide spending reduction, Council
can expect the General Fund to be in normal balance by the end of the fiscal year.
II. Other Governmental "Fund Types"
Other governmental"fund types"include the special revenue funds that account for the City's receipt
and expenditure of Gasoline Taxes, Propositions A and C sales taxes, administrative grants-in-aid,
etc. These funds are only marginally balanced: the state has not remitted gasoline tax revenues in
the amounts anticipated by the State Controller's Office(see below) and Propositions A and C sales
tax receipts are below budget as well.
III. Enterprise Funds
The enterprise"fund types"include the City's Utility Funds—Electric, Sewer, Water and Azusa Valley
Water--and are accounted for in a manner that is very similar to standard Financial (commercial)
Accounting. With the exception of the Light Fund,the Enterprise Funds are in balance. The variance
in the Light Fund is to be expected: by the end of the fiscal year, as the City completes the
construction of the new Light and Water Utility building and capitalizes the costs of its construction,
operating revenue/expense margins are expected to return to normal.
A. Water Fund
The Water Fund revenue variance is high. Revenues are slightly higher than expected
rate and expenses are lower than projected. The net effect is a higher-than-planned
revenue/expense ratio. This can be explained by seasonal high water use during the
summer months and prudent spending policies by staff. It is expected that
revenue/expense ratios will approximate budgeted margins by June 30.
B. Light Fund
The Light Fund is reporting unfavorably at December 31, primarily because
construction costs of the new Utility office building depleting cash reserves.
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Additionally, payments of Purchased Power do not necessarily coincide with the
accounting periods; after remittances to that account in the second half of the fiscal
year its total will more closely agree with its appropriation. By the end of fiscal 1995,
when construction costs will be capitalized, it is expected that revenues and expenses
will be within normal budgetary variances. In the meantime, Council can value the
sense of pride that comes from the knowledge that this city is building a multi-million-
dollar utility building that will accommodate the City's Light and Water Departments
and cash paying tenants while other cities are struggling to pay their utilities in the
first place.
C. Sewer Fund
This fund has a very significant positive variance in expenses. Labor and supplies
have been spent at a rate well below appropriation levels allowable at the mid-year
point. Staff is analyzing this variance and expects that some payroll accounting
reclassifications will be needed to adjust this fund to more closely match
appropriations. (These will benefit the General Fund.) Therefore there will be no
adjustments to any budget items.
D. Azusa Valley Water Fund
This fund's revenue/expense ratio is almost one-third greater than projected for the
mid-year point. As with the City Water Fund,revenues are greater than projected and
expenses are less than appropriations. Revenues here also are skewed by high
seasonal use during the summer months. It will be unnecessary to adjust budget
accounts in this fund.
This is an opportunity to remind Council that, as part of stipulations of acquiring the
Azusa Valley Water Company, the City agreed to forego some or all of the utility
franchise tax charged to AVWC. The purpose of this is to ensure that the City will
be able to demonstrate to the bond rating agencies that the City is maintaining the
extra 25% of debt service coverage (for a total of 125%) as stipulated by the bond
issue Official Statement and to thus maintain a favorable rating from the various
investment services, such as Moody and Standard and Poor.
IV. Summary
Clearly, there is a storm on the seas of government finances in California, particularly at the local
level. And,once again,this city is riding its tempestuous waves. However,this city is a ship guided
by a captain and crew who,together,have decades of governmental navigational experience and who,
with Council's continued direction, will succeed in guiding this community to its safe and placid
harbor. Indeed,it is a compliment to Council that,by following Council's direction and policies, staff
is presenting a mid-year review that describes a General Fund in a nearly-balanced condition with a
plan to fully achieve it. All of this is despite a sluggish economic recovery, and is without layoff of
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any full-time permanent staff However, it is imperative to the City's future financial health to find
new sources of sales tax revenues and to maintain the existing ones.
Recommendation
Staff recommends that Council approve the Mid-Year Review and pass the attached budget transfer
Resolution.
GJC:SLB:pap
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City of Azusa
Interim Combined Statement of Revenues and Expenditures
as of December 1994
General Fund Special Revenue Funds Capital Projects Funds
Six Variance- Six Variance- Six Variance-
Month Favorable Month Favorable Month Favorable
Budget Actual (Unfavorable) Budget Actual (Unfavorable) Budget Actual (Unfavorable)
Revenues:
Taxes $5,905,768 $5,299,229 ($606,539) $380,475 $251,424 ($129,051) $12,500 $0 ($12,500)
Licenses and permits 108,925 103,209 (5,716) 0 0 0 0 0 0
Fines and forfeitures 117,322 99,963 (17,359) 0 0 0 0 0 0
Interest Income 200,000 360,057 160,057 22,549 0 (22,549) 613 0 (613)
Intergovernmental 1,402,368 1,327,780 (74,587) 1,506,862 665,155 (841,707) 0 0 0
Charges for Services 1,774,324 1,667,060 (107,264) 21,250 17,146 (4,104) 0 0 0
Sale of property 0 0 0 0 0 0 0 0 0
Miscellaneous 83,408 42,747 (40,661) 49,841 31,901 (17,940) 0 0 0
Total revenues 9,592,114 8,900,044 (692,069) 1,980,976 965,625 (1,015,351) 13,113 0 (13,113)
Expenditures:
General government 2,124,310 1,791,728 332,581 4,138 2,505 1,633 0 0 0
Public safety 5,295,701 5,324,743 (29,042) 1,544 3,087 (1,543) 0 0 0
Urban development 561,461 431,511 129,950 497,730 395,022 102,708 4,300 0 4,300
Highways and streets 1,334,220 1,178,464 155,756 0 0 0 0 0 0
Culture and recreation 803,411 854,431 (51,020) 2,500 0 2,500 0 0 0
Health and welfare 40,802 20,682 20,119 1,246,400 689,923 556,477 0 0 0
Capital Projects 0 0 0 0 0 0 7,201,263 3,077,146 4,124,117
Total expenditures 10,159,904 9,601,559 558,345 1,752,311 1,090,537 661,774 7,205,563 3,077,146 4,128,417
Other financing sources (uses):
Operating transfers in 1,374,353 1,183,309 (191,044) 56,623 0 (56,623) 7,076,034 3,059,277 (4,016,757)
Operating transfers out (985,175) (517,707) 467,467 (375,000) (373,656) 1,344 (37,838) 0 37,838
Total Other financing sources(uses): 389,179 665,601 276,423 (318,378) (373,656) (55,279) 7,038,196 3,059,277 (3,978,919)
Excess(deficiency)of revenues and
other financeing sources over(under)
expenditures and other financing uses ($178,612) ($35,913) $142,698 ($89,713) ($498,567) ($408,855) ($154;254) ($17,869) $136,386
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City of Azusa
Interim Statement of Revenues and Expenses
as of December 1994
Water Fund Light Fund Sewer Fund Azusa Valley Water Fund
Six Variance- Six Variance- Six Variance- Six Variance-
Month Favorable Month Favorable Month Favorable Month Favorable
Budget Actual (Unfavorable) Budget Actual (Unfavorable) Budget Actual (Unfavorable) Budget Actual (Unfavorable)
Operating Revenues:
Charges for Services $2,032,375 $2,399,060 $366,685 $9,309,955 $12,081,112 $2,771,157 $446,160 $461,970 $15,810 $2,028,540 $2,445,111 $416,571
Other Charges 0 0 0 75,000 2,638 (72,362) 0 0 0 5,500 0 (5,500)
Total operating revenues 2,032,375 2,399,060 366,685 9,384,955 12,083,750 2,698,796 446,160 461,970 15,810 2,034,040 2,445,111 411,071
Operating Expenses:
Salaries and benefits 408,825 434,291 (25,466) 844,331 755,939 88,391 90,328 32,164 58,164 314,577 306,807 7,770
Contracted services 30,000 15,942 14,058 50,000 22,565 27,435 6,000 905 5,095 11,000 15,343 (4,343)
General and administrative 15,195 15,426 (231) 37,318 29,026 8,291 1,000 (200) 1,200 24,395 8,840 15,555
Customer accounting 304,380 175,002 129,378 456,570 525,000 (68,431) 0 0 0 268,189 175,002 93,187
Purchased power 120,750 0 120,750 6,320,500 8,396,269 (2,075,769) 0 0 0 130,000 120,897 9,103
Supplies and maintenance 421,750 590,630 (168,880) 303,708 147,634 156,074 25,620 1,014 24,605 521,200 272,850 248,3500
Depreciation 275,000 259,674 15,326 0 194,520 (194,520) 125,000 123,666 1,334 0 0
Special franchise fee 153,680 0 153,680 764,000 0 764,000 0 0 0 69,906 0 69,906
Utility in-lieu tax 38,420 0 38,420 186,000 0 186,000 7,500 0 7,500 25,295 0 25,295
Total operating expenses: 1,768,000 1,490,965 277,034 8,962,425 10,070,953 (1,108,528) 255,448 157,549 97,898 1,364,561 899,738 464,823
Non-operating revenue(expenses):
Interest revenue 64,255 0 (64,255) 331,727 226,758 (104,968) 28,372 0 (28,372) 0 0 0
Principal expense (36,423) (37,382) (959) 0 0 0 0 0 0 (153,577) (157,619) (4,042)
Interest expense (105,245) (93,323) 11,922 0 0 0 0 0 0 (443,763) (393,308) 50,455
Other 1,000 0 (1,000) 0 0 0 0 0 0 0 0 0
Total non-operating revenues(expenses) (76,414) (130,704) (54,291) 331,727 226,758 (104,968) 28,372 0 (28,372) (597,340) (550,927) 46,413
Operating transfers: 0
Operating transfers in 0 0 0 0 0 0 0 0 0 0 0
Operating transfers out (611,525) (155,699) 455,826 (3,632,475) (2,654,707) 977,768 (1,183,442) (33,012) 1,150,430 (749,880) (2,597) 747,283
Total operating transfers (611,525) (155,699) 455,826 (3,632,475) (2,654,707) 977,768 (1,183,442) (33,012) 1,150,430 (749,880) (2,597) 747,283
Net Income ($423,563) $621,692 $1,045,254 ($2,878,219) ($415,152) $2,463,067 ($964,358) $271,409 $1,235,766 ($677,741) $991,849 $1,669,590