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HomeMy WebLinkAboutE-9 Staff Report - Q3 FY2122CONSENT ITEM E-9 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR OF ADMINISTRATIVE SERVICES DATE: JUNE 6, 2022 SUBJECT: FY 2021/22 THIRD QUARTER FINANCIAL REPORT ENDING MARCH 31, 2022 BACKGROUND: In an effort to be more transparent and to provide an opportunity to evaluate the City's fiscal health, the Administrative Services Department has prepared a quarterly financial report. This report summarizes the third quarter budget-to-actual analysis 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 FY 2021/22 third quarter financial report ending March 31, 2022. ANALYSIS: Attached is the 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. FISCAL IMPACT: The 3rd Quarter FY 2021/22 financial report is provided to review the fiscal position of the City. Revenues and expenditures received or spent to date, including any budget adjustments since adoption are outlined in the attached. APPROVED CITY COUNCIL 6/6/2022 3rd Quarter Financial Report June 6, 2022 Page 2 Staff will continue to closely monitor the City’s finances and budget impacts, and if necessary, recommend revisions to the City Council as appropriate. Prepared By: Reviewed By: Richard Lam Talika M. Johnson Budget Administrator Director of Administrative Services Reviewed and Approved: Sergio Gonzalez City Manager Attachment: 1) Quarterly Financial Report – 3rd Quarter, Ending March 31, 2022 FY 2021/22 Quarterly Financial Report 3rd Quarter, Ending March 31, 2022 OVERVIEW This financial report summarizes the City’s General Fund’s position for the 3rd quarter of Fiscal Year 2021/22 (July 1, 2021 through March 31, 2022). 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 Total sources (revenues and transfers-in) for 3rd quarter revised budget is $55.30 million, an increase of $3.09 million from the adopted revenues due to various mid-year revenue adjustments approved by Council on March 7. Total uses (expenditures and transfers-out) are estimated to be $55.97 million and $3.89 million higher than the adopted expenditures primarily due to $2.84 million in promenade tenant improvement budget approved by council on January 18, 2022 that will be reimbursed by MTA, $962,043 in budget carryforward for various city projects that were not been completed in FY2020-21, $50,000 for the suite 2B relocation for the Engineering Division, and $26,511 for the City Hall North renovation scope increase. Table 1 shows the adjusted budget figures: A B C Adopted Budget 2021-22 Revised Budget 2021-22 Variance (B - A) Beginning Estimated Fund Balance $ 28.14 $ 28.14 * $ - Plus Revenues 50.55 53.39 ** 2.83 Transfers In 1.66 1.91 - Total FY 2021-22 Sources 52.21 55.30 3.09 Less Expenditures 44.88 49.48 ** 4.60 Transfers Out 7.20 6.49 (0.71) Total FY 2021-22 Uses 52.08 55.97 3.89 Expenses in (excess)/below Exp-FY 2021-22 0.13 (0.67) (0.80) Estimated Unassigned Fund balance before reserves 28.27 27.47 (0.80) Less: Internally Restricted Reserves Budget Stabilization & Catastrophic Reserve 13.02 13.02 *** (0.00) Capital & Infrastructure Replacement Reserve 2.00 2.00 *** - Insurance Reserve 2.50 2.50 *** - Retiree Benefits Reserve 2.00 2.00 *** - Available Fund Balance $ 8.75 $ 7.95 $ (0.80) *Audited **Financial Data as of 05/02/22 - Q3 FY 21-22 ***Established Updated Reserves - Adopted 6/21/21 via Resolution 2021-029 Table 1 Budget vs. Estimated Actual (in millions) Attachment 1 FY 2021-22 Quarterly Financial Report Attachment 1 3rd Quarter, Ending March 31, 2022 Page 2 of 6 Third quarter revenue collections ended at the 66.7% mark. The charts and explanation below will go over each of the revenue categories in detail. 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 increased $4.07 million compared to the same period last year. This is primarily due the easing of Covid-19 restrictions that improved the economy and business activities, sales tax, transaction use tax, charges for services, other taxes, fines and penalties, and most revenues improved. Property tax revenues also improved due to a net taxable assessed value increase of 2.5%, Prop 13 inflation adjustments, more property sales in 2021, and more robust recovery of Prop 8 values by the Assessor than estimated. Miscellaneous revenues decreased primarily due to a one-time allocation of Corona Virus relief funds of $613,134 received through the Cares Act in FY 2021. Revenue Collection by Source As of 03/31/22 Chart 1 Revenues Collected by Source Quarter Ending: 03/31/21 vs. 03/31/22 Adjusted Budget Actual % of REVENUE FY 2021-22 YTD 03/31/22 Adj. Budget Property Tax $13,265,797 $7,881,648 59.4% Sales Tax 7,560,692 4,296,367 56.8% Transaction Use Tax 6,063,751 3,660,810 60.4% UUT Tax 3,259,463 2,473,123 75.9% Other Taxes 10,476,982 6,901,766 65.9% Charges for Services 5,621,170 4,331,420 77.1% Cost Reimbursement 2,243,278 1,850,976 82.5% Fines & Penalties 1,309,500 1,234,775 94.3% License & Permits 2,714,500 2,397,716 88.3% Miscellaneous 240,500 191,212 79.5% Money & Property Use 2,544,483 1,659,641 65.2% Total Revenues $55,300,116 $36,879,454 66.7% Table 2: YTD % of Budget Actual Actual Increase/ REVENUE YTD 03/31/2021 YTD 03/31/2022 (Decrease) Property Tax $7,541,112 $7,881,648 $340,536 Sales Tax 3,381,719 4,296,367 914,648 Transaction Use Tax 2,625,674 3,660,810 1,035,136 Utility User Tax 2,304,391 2,473,123 168,732 Other Taxes 6,753,032 6,901,766 148,734 Charges for Services 3,233,664 4,331,420 1,097,756 Cost Reimb.1,270,984 1,850,976 579,992 Fines & Penalties 886,266 1,234,775 348,509 License & Permits 2,199,736 2,397,716 197,980 Miscellaneous 930,570 191,212 (739,358) Money & Property Use 1,685,436 1,659,641 (25,795) Total Revenues $32,812,584 $36,879,454 $4,066,870 Table 3: Year-to-Year Comparison $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 YTD 03/31/2021 YTD 03/31/2022 FY 2021-22 Quarterly Financial Report Attachment 1 3rd Quarter, Ending March 31, 2022 Page 3 of 6 Property Tax collections came in low in Q3 at 59.4% and is due to the timing of revenue disbursements 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 56.8% of the adjusted budget. The reason for the low collections rate is due to the timing of when revenues are available. The February and March 2022 sales tax will not be distributed by the California Department of Tax and Fee Administration until April and May of 2022. Sales Tax is higher compared to the same period last year and is primarily due the easing of Covid-19 restrictions that improved the economy and business activities. Transaction Use Tax (TUT) collections are at 60.4% of the adjusted budget. Similar to Sales Tax, the low collection rate is due to the timing of when revenues are available. The February and March 2022 TUT will not be distributed by the California Department of Tax and Fee Administration until April and May of 2022. TUT is higher compared to the same period last year is primarily due the easing of Covid-19 restrictions that improved the economy and business activities. Utility User’s Tax collections are at 75.9% of the adjusted budget. This percentage is reflective of the consumption of utility services such as gas, electric and water. Other Taxes collections are at 65.9% of the adjusted budget. Other taxes are comprised mainly of transient occupancy tax (TOT), franchise/landfill, land excavation, material recovery facility, and hazardous waste fees. Other Taxes are higher in comparison to the same period last year mainly due to higher production from business enterprises resulting in higher franchise revenues. Charges for Services collections are at 77.1% of the adjusted budget. Revenues are collected as services are rendered. This revenue source was higher compared to the same quarter last year due to the timing of the development projects and timely collection of service charges. Cost reimbursement collections are at 82.5% of the adjusted budget. Revenues are collected based on various reimbursement agreements. The revenues were higher in Q3 FY 2021-22 due to greater demand for government services. Fines and Penalties collections are at 94.3% of the adjusted budget. The Q3 FY 2021-22 revenues were higher this quarter compared to the same period last year, and it is mainly due to easing of Covid-19 restrictions, the economy opening up and improving government and business activities. License and Permits collections are at 88.3% of the adjusted budget. This is mainly due to the timing of development activities and when the licenses and permit fees are issued. Miscellaneous collections are at 79.5% of the adjusted budget. Miscellaneous revenues represent a small percentage of general fund revenues and are dependent on items such as metal recycling and other miscellaneous sources that are not a regular revenue stream. Miscellaneous revenues were lower when compared to the same period last year, and it is primarily due to a one-time allocation of Corona Virus relief funds of $613,134 received through the Cares Act in FY 2021. Money and Property Use collections are at 65.2% of the adjusted budget. The Q3 FY 2021-22 revenues are pacing below target. Revenues were pacing lower primarily due to the delay of the Promenade lease by the LA County MTA, and the anticipated lease revenues will not be realized until January 2023 or Q3 of FY 2022-23. FY 2021-22 Quarterly Financial Report Attachment 1 3rd Quarter, Ending March 31, 2022 Page 4 of 6 GENERAL FUND EXPENDITURES General Fund expenditures are tracking at 52.9% of the third quarter’s budget. Expenditures by Category As of 03/31/22 The expenditures outlined in Table 4 are pacing at 52.9% of the 3rd quarter’s budget. The personnel budget came in at 65.8% of the revised budget, and is lower due to vacancies and the City did not have to pay the one-time lump sum PERS pension payment. The issuance of the pension obligation bond has made the expenditure more predictable. Operating costs were lower in Q3 FY 2021-22 due to the timing of various development projects. Third quarter total expenditures on Table 5 were lower compared to the same period last year As stated above, the lower costs were primarily due to lower personnel costs from vacancies and because the City did not have to make the one-time lump sum PERS pension payment. Those costs were amortized through the pension obligation bond. DEPARTMENT EXPENDITURES At the end of the 3rd quarter, actuals for most program departments are tracking lower than the 75% mark of the adjusted budget. The Economic and Community Development and Public Works department budgets are based on the timing of the development projects, and the Community Resources and Library Departments were impacted by Covid-19 restrictions during Q1 and part of Q2 and should pace upwards for the rest of the fiscal year. The City Clerk’s budget is pacing low due to the timing of the next election cycle. Finally, Public Safety is pacing low due to vacancies. Table 6 Chart 2 Expenditures by Department % of Budget by Department As of 03/31/22 as of 03/31/22 Working Budget Actual % of EXPENDITURE FY 2021-22 YTD 03/31/22 Adopted Personnel $25,935,697 $17,072,953 65.8% Operating 30,039,294 12,538,619 41.7% Total Expenditures $55,974,991 $29,611,572 52.9% Table 4: YTD % of Budget Actual Actual Increase/ EXPENDITURE YTD 03/31/21 YTD 03/31/22 (Decrease) Personnel $19,561,034 $17,072,953 ($2,488,081) Operating 11,777,550 12,538,619 761,069 Total Expenditures $31,338,584 $29,611,572 ($1,727,012) Table 5: Year-to-Year Comparison Adjusted Budget Actual EXPENDITURE FY 2021-22 YTD 03/31/22 % of Budget Council $158,950 $118,027 74.3% City Clerk 657,720 301,639 45.9% City Attorney 285,000 212,580 74.6% City Treasurer 136,915 104,318 76.2% Administration 563,886 374,442 66.4% Finance 1,518,280 1,018,193 67.1% Economic & Comm. Dev.7,327,954 1,616,707 22.1% Human Resources 733,665 459,620 62.6% Library 1,519,910 760,722 50.1% Public Safety 21,220,488 12,983,903 61.2% Public Works 4,262,523 2,274,539 53.4% Community Resources 2,685,056 1,076,826 40.1% City-Wide 14,904,644 8,310,055 55.8% Total Expenditure $55,974,991 $29,611,572 52.9% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% FY 2021-22 Quarterly Financial Report Attachment 1 3rd Quarter, Ending March 31, 2022 Page 5 of 6 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 and Internal Service Fund Expenditures Chart 3 Major Special Revenue & Internal Services Funds Revenues by Funds Ending 03/31/22 Chart 4 Major Special Revenue & Internal Services Funds Expenditures by Funds Ending 03/31/22 Adjusted Budget Actual % of REVENUE FY 2021-22 YTD 03/31/22 Adj. Budget Gas Tax Fund $1,188,842 $701,634 59.0% Fire Safety 6,424,309 4,818,232 75.0% Sewer Fund 3,248,928 2,524,326 77.7% Risk Mgmt/Liab Fund 3,346,377 3,078,774 92.0% IT Fund 2,223,330 592,581 26.7% Total Revenues $16,431,786 $11,715,547 71.3% YTD % of Budget Adjusted Budget Actual % of EXPENDITURE FY 2021-22 YTD 03/31/22 Adj. Budget Gas Tax Fund $1,800,510 $1,057,420 58.7% Fire Safety 6,424,309 4,907,829 76.4% Sewer Fund 2,938,483 1,327,036 45.2% Risk Mgmt/Liab Fund 4,699,308 3,693,923 78.6% IT Fund 2,330,531 1,433,325 61.5% Total Expenditures $18,193,141 $12,419,533 68.3% YTD % of Budget 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 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% 100.0% Gas Tax Fund Fire Safety Sewer Fund Risk Mgmt/Liab Fund IT Fund FY 2021-22 Quarterly Financial Report Attachment 1 3rd Quarter, Ending March 31, 2022 Page 6 of 6 Gas Tax Fund Gas Tax revenues are pacing at 59.0% of the 3rd quarter FY 2021-22 adjusted budget, and the expenditures are tracking at 58.7%. Fire Safety Fund Fire Safety Fund’s operating revenues are pacing at 75.0% of revenues. The expenditures are pacing at 76.4% for the 3rd quarter. Fire services expenditures are slightly higher, but are anticipated to be on target and will be within budget for FY 2021-22. Sewer Fund Sewer year-to-date operating revenues are 77.7% of the adjusted budget. Expenditures are lower than the 3rd quarter end mark at 45.2% due to the timing of the various projects. Risk Management Fund The revenues for the Risk Management Fund are at 92.0% due to the timing of its allocations. The expenditures are at 78.6% of the adjusted budget due to the timing of when claims are paid out. Information Technology Fund The Information Technology Fund revenues for the 3rd quarter are pacing at 26.7%. Its allocations are recorded twice a year, in December and June. Expenditures are pacing at 61.5% and consistent with the timing of the various IT projects.