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HomeMy WebLinkAboutE-20 Staff Report - Q3 FY2223 Quarterly ReviewCONSENT ITEM E-20 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR OF ADMINISTRATIVE SERVICES DATE: AUGUST 21, 2023 SUBJECT: FY 2022/23 THIRD QUARTER FINANCIAL REPORT ENDING MARCH 31, 2023 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, 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 2022/23 third quarter financial report ending March 31, 2023. 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 FY2022/23 financial report was provided to review the fiscal position of the City. Details of the revenue and expenditure budget adjustments are outlined in the attached quarterly financial report. Staff Approved City Council August 21, 2023 3rd Quarter Financial Report August 21, 2023 Page 2 will continue to closely monitor the fiscal impact, and if necessary, recommend revisions to the City Council as appropriate. Prepared By: Reviewed and Approved: Richard Lam Talika M. Johnson Budget & Revenue Manager Director of Administrative Services Reviewed and Approved: Sergio Gonzalez City Manager Attachment: 1. Quarterly Financial Report – 3rd Quarter, Ending March 31, 2023 FY 2022/23 Quarterly Financial Report 3rd Quarter, Ending March 31, 2023 OVERVIEW This financial report summarizes the City’s General Fund’s position for the 3rd quarter of Fiscal Year 2022/23 (July 1, 2022 through March 31, 2023). 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 3rd quarter’s revised revenue and expenditure budgets, total sources (revenues and transfers-in) through the end of the third quarter for are estimated to be $60.02M. The FY 2022-23 revenue budget is $4.45M less than the adopted budget primarily due to reduction of the Council approved mid-year adjustments of $5.97M in American Rescue Plan Act (ARPA) transfer since the revenue replacement funds were previously drawn down. Total uses (expenditures and transfers-out) are estimated to be $79.11M and $10.21M higher than the adopted budget primarily due to budget carryforwards such as the $2.76M for the Promenade property, and also the replenishment of the Self- Insurance Fund transfers of $5.3M approved by Council at the last mid-year review. A B C Adopted Budget 2022-23 Revised Budget 2022-23 Variance (B - A) Beginning Estimated Fund Balance $ 41.22 $ 41.22 * $ - Plus Revenues 62.45 57.83 ** (4.62) Transfers In 2.02 2.19 0.17 Total 2022-23 Sources 64.47 60.02 (4.45) Less Expenditures 61.98 66.83 ** 4.84 Transfers Out 6.74 12.28 5.54 Total FY 2022-23 Uses 68.72 79.11 10.39 Expenses in (excess)/below Exp-FY 2022-23 (4.25) (19.09) (14.84) Estimated Unassigned Fund balance before reserves 36.97 22.13 (14.84) Less: Internally Restricted Reserves Funds set aside for OPEB Trust 1.50 1.50 - ARPA funds set aside for Homelessness 1.96 1.96 Budget Stabilization & Catastrophic Reserve 16.56 16.56 *** - Capital & Infrastructure Replacement Reserve 2.00 2.00 *** - Insurance Reserve 2.50 2.50 *** - Retiree Benefits Reserve 2.00 2.00 *** - Available Fund Balance $ 10.45 $ (4.39) $ (14.84) *Unaudited **Financial Data as of 8/3/23 - Q3 FY2223 ***Revised General Fund Reserve Policy adopted by Resolution 2022-C46 of the City Council on June 20, 2022 Table 1 Budget vs. Estimated Actual (in millions) Attachment 1 FY 2022-23 Quarterly Financial Report Attachment 1 3 rd Quarter, Ending March 31, 2023 Page 2 of 6 The 3rd quarter’s revenues ended the year at the 67.2% mark. The charts and explanation below will go over each of the revenue categories in details. 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 came in at $3.4 Mil higher than the same period last year. Revenues are higher compared to the same period last year primarily due to increased economic activities resulting in higher sales tax, TUT, other taxes. Charge for services improved due to more request for design reviews, higher rental inspection fees due to performing a higher number of rental inspections, and the City also received higher than forecasted revenues from planning consultant revenue sharing agreement. UUT increased due to higher usage and higher winter gas prices. Money and Property use increased due to higher demand for facilities rentals including the senior center, woman’s club, aquatic facilities, and recreation facilities. In addition, the City received higher interest income as a result of the higher Federal Reserve Fund rate. Revenue Collection by Source As of 03/31/23 Chart 1 Revenues Collected by Source Quarter Ending: 03/31/22 vs. 03/31/23 FY 2022-23 Actual % of REVENUE Adjusted Budget YTD 03/31/23 Adj. Budget Property Tax $14,544,731 $8,298,153 57.1% Sales Tax 8,085,572 4,854,605 60.0% Transaction Use Tax 7,182,635 4,384,884 61.0% UUT Tax 3,000,000 2,942,044 98.1% Other Taxes 11,782,937 7,858,825 66.7% Charges for Services 6,020,965 4,670,064 77.6% Cost Reimbursement 2,252,713 1,878,093 83.4% Fines & Penalties 1,283,250 1,152,993 89.8% License & Permits 2,998,283 2,140,198 71.4% Miscellaneous 210,874 107,400 50.9% Money & Property Use 2,658,189 2,033,930 76.5% Total Revenues $60,020,149 $40,321,190 67.2% Table 2: YTD % of Budget Actual Actual Increase/ REVENUE YTD 03/31/2022 YTD 03/31/2023 (Decrease) Property Tax $7,881,648 $8,298,153 $416,506 Sales Tax 4,296,367 4,854,605 558,238 Transaction Use Tax 3,660,810 4,384,884 724,074 Utility User Tax 2,473,123 2,942,044 468,921 Other Taxes 6,901,766 7,858,825 957,059 Charges for Services 4,331,420 4,670,064 338,645 Cost Reimb.1,850,976 1,878,093 27,117 Fines & Penalties 1,234,775 1,152,993 (81,783) License & Permits 2,397,716 2,140,198 (257,518) Miscellaneous 191,212 107,400 (83,812) Money & Property Use 1,659,641 2,033,930 374,289 Total Revenues $36,879,454 $40,321,190 $3,441,736 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 03/31/2022 YTD 03/31/2023 FY 2022-23 Quarterly Financial Report Attachment 1 3 rd Quarter, Ending March 31, 2023 Page 3 of 6 Property Tax collections came in low in Q3 and it is normal due to the timing of when the revenues are allocated 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 60% of the adjusted budget. The reason for the low collections rate is due to the timing of when the revenues are available. The February and March 2023 sales tax will not be distributed by the California Department of Tax and Fee Administration until April and May of 2023. Sales Taxes are higher in comparison to the same period last year mainly due to an improved economy. Transaction Use Tax (TUT) collections are at 3 5.4% of the adjusted budget. Similar to the Sales Tax, the low collection rate is due to the timing of when revenues are available. The February and March 2023 TUT will not be distributed by the California Department of Tax and Fee Administration until April and May of 2023. TUT is higher in comparison to the same period last year mainly due to an improved economy. Utility User’s Tax collections are at 98.1% of the adjusted budget. This percentage is reflective of the consumption of utility services such as gas, electric and water. The UUT was also impacted by the higher commodity prices this past winter especially the uptick in Gas prices during the winter months. Other Taxes collections are at 66.7% 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 allowable increases in the enterprise agreements and higher hazardous waste tax. Charges for Services collections are at 77.6% of the adjusted budget. Revenues are collected as services are rendered and is on pace with the budget forecast. This revenue source was higher compared to the same period last year due to the timing of the development projects, and greater demand for government services. Cost reimbursement collections are at 83.4% of the adjusted budget. Revenues are collected based on various reimbursement agreements. Fines and Penalties collections are at 89.8% of the adjusted budget due to the timing of when the fines are collected. The fines are higher due to the timing of when the payouts were distributed. This revenue source was lower compared to the same period last year due to the uncollected fines incurred during the pandemic period and some of it was recovered during FY 2021-22. License and Permits collections are at 71.4% 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 50.9% of the adjusted budget. The miscellaneous revenues represent a small percentage of the general fund revenues and are dependent on items such as metal recycling and other miscellaneous sources that do not come in as a regular revenue stream. Money and Property Use collections are at 76.5% of the adjusted budget. The Q3 FY 2022-23 revenues are pacing slightly above target. The Q3 Revenues and when compared to the same period last year were pacing higher due to greater demand from facilities rentals including Women's Club, Senior Centers, recreation facilities, and Aquatic Facilities. In addition, the City received higher interest income as a result of the higher Federal Reserve Fund rate. FY 2022-23 Quarterly Financial Report Attachment 1 3 rd Quarter, Ending March 31, 2023 Page 4 of 6 GENERAL FUND EXPENDITURES Expenditures by Category As of 03/31/23 The expenditures outlined in Table 4 are pacing at 47.9% of the 3rd quarter budget. The personnel budget came in at 73.0% of the revised budget, and it is pacing very close to the budget. The Personnel costs were higher in Q3 of FY 2022-23 compared to the same period last year on table 5 primarily due to cola adjustments and higher benefits costs. Operating costs came in at 35.8% of the revised budget due to the timing of the various development projects. Operating costs was higher in Q3 of FY 2022-23 quarter compared to the same period last year in table 5 and is primarily due to higher transfers from internal services and self-insurance funds approved by Council at the last mid-year review. DEPARTMENT EXPENDITURES At the end of the 3rd quarter, actuals for some departments are tracking at or below the 75% mark of the adjusted budget. Some departments with CIP projects are pacing lower due to the timing of the projects including: $4M for the Senior Center remodel; $750K for the Women’s Club under Community Resources; $3M for Memorial Park improvement; $2M for the Library improvement; $1M for sidewalk improvements; $785K for Downtown improvements; $750K for the Dog Park; and $750K for the Northside Center/scout house under Public Works. Community Resources is also pacing lower due to timing of summer recruitments. Economic & Community Development is pacing low due to the timing of various development related initiatives, which typically span multiple fiscal years. Table 6 Chart 2 Expenditures by Department % of Budget by Department As of 03/31/23 as of 03/31/23 FY 2022-23 Actual % of EXPENDITURE Working Budget YTD 03/31/23 Adopted Personnel $25,704,687 $18,761,730 73.0% Operating 53,404,626 19,126,216 35.8% Total Expenditures $79,109,313 $37,887,945 47.9% Table 4: YTD % of Budget Actual Actual Increase/ EXPENDITURE YTD 03/31/22 YTD 03/31/23 (Decrease) Personnel $17,072,953 $18,761,730 $1,688,777 Operating 12,538,619 19,126,216 6,587,597 Total Expenditures $29,611,572 $37,887,945 $8,276,373 Table 5: Year-to-Year Comparison FY 2022-23 Actual EXPENDITURE Adj. Budget YTD 03/31/23 % of Budget Council $244,335 $125,330 51.3% City Clerk 669,430 354,983 53.0% City Attorney 372,160 195,265 52.5% City Treasurer 173,380 135,903 78.4% Administration 1,754,333 722,746 41.2% Finance 1,561,570 1,252,769 80.2% Economic & Comm. Dev.7,749,651 1,757,186 22.7% Human Resources 827,272 563,055 68.1% Library 3,465,560 953,216 27.5% Public Safety 22,142,585 13,814,296 62.4% Public Works 11,639,347 2,589,943 22.3% Community Resources 7,594,988 1,592,764 21.0% City-Wide 20,914,702 13,830,489 66.1% Total Expenditure $79,109,313 $37,887,945 47.9% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% FY 2022-23 Quarterly Financial Report Attachment 1 3 rd Quarter, Ending March 31, 2023 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 03/31/23 Chart 4 Major Special Revenue & Internal Services Funds Expenditures by Funds Ending 03/31/23 FY 2022-23 Actual % of REVENUE Adjusted Budget YTD 03/31/23 Adj. Budget Gas Tax Fund $1,434,234 $882,005 61.5% Fire Safety 6,340,707 4,755,530 75.0% Sewer Fund 3,075,000 2,509,986 81.6% Risk Mgmt/Liab Fund 9,032,386 3,385,412 37.5% IT Fund 2,311,265 1,723,684 74.6% Total Revenues $22,193,592 $13,256,616 59.7% Table 7: YTD % of Budget FY 2022-23 Actual % of EXPENDITURE Adjusted Budget YTD 03/31/23 Adj. Budget Gas Tax Fund $1,597,690 $1,244,558 77.9% Fire Safety 6,340,707 5,154,233 81.3% Sewer Fund 3,651,865 1,746,041 47.8% Risk Mgmt/Liab Fund 4,926,488 4,433,558 90.0% IT Fund 2,818,517 1,729,993 61.4% Total Expenditures $19,335,267 $14,308,383 74.0% Table 8: 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 2022-23 Quarterly Financial Report Attachment 1 3 rd Quarter, Ending March 31, 2023 Page 6 of 6 Gas Tax Fund Gas Tax revenues are pacing at 61.5% of the 3rd quarter FY 2022-23 adjusted budget, and the expenditures are tracking at 77.9%. Revenues are slightly lower due to the timing of when the revenues are distributed by the State and lower fuel prices. Fire Safety Fund Fire Safety Fund’s operating revenues are pacing at 75.0% of revenues. The expenditures are pacing at 81.3% for the 3rd quarter, and the costs are anticipated to smooth out for the full year and consistent with the budget. Sewer Fund Sewer year -to-date operating revenues are 81.6% of the adjusted budget. Expenditures are pacing slightly lower than the 3rd quarter end mark at 47.8% due to the timing of the various projects and debt service payments. Risk Management Fund The revenues for the Risk Management Funds are at 37.5%. The expenditures are at 90.0% 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 74.6%. Its allocations are recorded twice a year, in December and June. The expenditures are pacing at 61.4% and consistent with the timing of the various IT projects.