CC SR 20170410 01 - Budget WorkshopRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 04/10/2017
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA DESCRIPTION:
Consideration and possible action regarding the General Fund FY 16-17 Year-end
projections and FY 17-18 Preliminary Budget.
RECOMMENDED COUNCIL ACTION:
(1) Provide Staff direction to develop the Fiscal Year 17-18 Preliminary Budget.
FISCAL IMPACT: None
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Allan Kaufman, Senior Administrative Analyst ,
REVIEWED BY: Deborah Cullen, Director of Finance Ll
APPROVED BY: Doug Willmore, City Manager
BACKGROUND AND DISCUSSION:
Staff has prepared FY 16-17 year-end projections for expenditures and revenues, with
an emphasis on the General Fund. During the review of the year-end estimates, Staff
identified areas above or below the budgeted amount. Additionally, this analysis will
assist in planning for resources and funding needed for FY 17-18.
In preparation of the FY 17-18 Preliminary Budget, meetings with City Department
Heads were held with the City Manager, Deputy City Manager and Director of Finance
to discuss service or program changes to the zero -based budget. Based on the
discussions from these meetings, Staff prepared this report and related presentation for
the Budget Workshop.
General Fund Revenues—Fiscal Year 16-17 Year -End Estimates
Currently, Staff is estimating that General Fund revenues will end the year 1.5% or
$436,368 over the revised budget. Below is a summary of the major revenue
categories:
Property Tax is currently 1.5% or $149,521 over the revised budget and compared to
the same period last year, property tax decreased 1.4% or $172,204 due to the "Triple
Flip" coming to an end. The "Triple Flip" was a mechanism where the City was receiving
an additional share of property tax in lieu of 25% of the City's sales tax apportionment.
Property Taxes
FY 2015-2016 Actual Revenue: $12,410,225
FY 2016-2017 Revised Budget: $12,088,500
FY 2016-2017 Year-end Estimate: $12,238,021
Transient Occupancy Tax (TOT) is currently estimated to end the year 2.5% or
$136,146 over the revised budget. Compared to the same period last year, TOT
increased by 8.4% or $434,159 due to higher than expected occupancy rate at
Terranea. Since opening its doors nearly 8 years ago, Terranea has shown positive
occupancy growth year -over -year during this period. This year-end estimate is based on
the latest industry information along with Staff's analysis. Staff will continue to monitor
TOT and will make any necessary adjustments after the third-quarter.
Transient Occupancy Tax
FY 2015-2016 Actual Revenue: $5,196,987
FY 2016-2017 Revised Budget: $5,495,000
FY 2016-2017 Year-end Estimate: $5,631,146
Utility User Tax (UUT) like Franchise Tax, is dependent on outside factors including:
weather conditions, consumption of utilities, the price of natural gas and rate increases,
all of which cannot be predicted over the long-term with certainty. Based on these
factors, Staff utilizes very conservative estimates and historical data. Staff has
assumed a 1.3% increase or $25,565 over the revised budget. Comparing to the same
period last year, UUT increased 7.6% or $141,783 more than FY 15-16 actuals.
UUT
FY 2015-2016 Actual Revenue: $1,865,682
FY 2016-2017 Revised Budget: $1,981,900
FY 2016-2017 Year-end Estimate: $2,007,465
License and Permit revenues are difficult to predict and can vary widely from year to
year. Permits are driven by the weather, economy, trends in home improvement,
lending rates, turnover rate of housing stock and the availability of contractors. License
and Permit revenues are projected to end the year approximately 3.9% or $87,100 over
the revised budget. Comparing to the same period last year, licenses and permits
decreased by 3.4% or $79,843.
Licenses and Permits
FY 2015-2016 Actual Revenue: $2,382,743
FY 2016-2017 Revised Budget: $2,215,800
FY 2016-2017 Year-end Estimate: $2,302,900
FY2017-18 General Fund Major Revenue Types
YE Estimates Compared to Revised Budget
2
Graph 1
$14.0
c
o $12.0
75
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
Estimated to end the year $436,400 over budget.
Property Tax Sales Tax Transient Utility User Licenses and Other
Occupancy Taxes Permits Revenue
Tax
IUIV FY 2016-17 & FY 2016-17
Revised Budget YE Estimates
General Fund Expenditures—Fiscal Year 16-17 Year -End Estimates
Currently, Staff is estimating that General Fund expenditures will end the year 3.6% or
$934,480 under the revised budget, excluding transfers. The chart and table below
outline year-end estimates for expenditures compared to the revised budget by
department.
FY2016-17 General Fund Expenditures
Graph 2 YE Estimates Compared to Revised Budget
V) $9.0
o $8.0
$7.0
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
Salary & Wages Benefits Prof / Tech Legal Services Other
111111 FY 2016-17 Revised Budget 111111 FY 2016-17 Year -End Estimates
FY 16-17 General Fund Expenditures
Revised Budget vs. Year-end Estimates
3
Table 1
Department
FY16-17
Revised Budget
FY 2017
Year -End Estimate
Variance
City Council
$126,500
$119,814
($6,686)
City Administration
5,894,252
5,578,262
(315,990)
Public Safety
7,565,430
7,472,230
93,200
Public Works
4,933,514
4,766,247
(167,267)
Community Development
3,166,125
2,887,992
(278,133)
Recreation & Parks
2,380,200
2,275,896
104,304
Non -Department
2,118,350
2,149,450
31,100
Operating Expenditures
26,184,371
25,249,891
(934,480)
Transfer Out
5,446,000
4,189,750
(1,256,250)
Total
$31,630,371
$29,439,641
($2,190,730)
The General Fund operating expenditures are estimated to come in under budget by
$934,000 and transfers out will come in under budget by $1,256,000. Combined, the
City is looking at a $2.2 million positive expenditure variance. Of the $934,000 in
operating expenditure savings, salaries and benefits are estimated to make up
$715,000 of this decrease due to seven City positions that were filled throughout the
year or are currently vacant. Below is the list of these positions, the departments they
reside in and their status:
�G[• r, 111IMT =-.6
o Executive Assistant (vacant)
o City Clerk (filled February 2017)
• Public Safety
o Administrative Analyst (filled January 2017)
• Community Development
o Deputy Director (filled April 2017)
o Building Inspector I (filled March 2017)
• Public Works
o 2 Senior Engineers (underfilled)
Additionally, services are expected to end the year under budget by $149,000 due to
savings from professional technical services and maintenance services in various
departments.
In addition to the positive operating expenditure variance, earlier this fiscal year, the City
Council approved several Proposition A exchange agreements with the Cities of
Diamond Bar, Montebello, and Rolling Hills whereby the City received $1,675,000 in
al
Proposition A funds in exchange for $1,256,250 of General Fund money. The
Proposition A money will be programmed to fund future capital projects as identified by
the Public Works Department. As a result of this exchange, the adopted budget for
General Fund transfer to the Capital Fund was reduced by $1.25 million.
General Fund—Fiscal Year 16-17 Estimated Ending Fund Balance
Below is the calculation for the estimated Unreserved/Undesignated General Fund
balance or excess surplus at the end of FY 16-17. This fund balance estimate is based
on year-end projections and will be undated after the third quarter reconciliation.
Currently, the estimated surplus is $2.2 million, which is net of the required 50% Policy
Reserve.
FY 16-17 General Fund Balance Summary
Less: 50% Policy Reserve
V 16
Unreserved/Undesignated Fund Balance $2.2 I
General Fund—Fiscal Year 17-18 Preliminary Budget
For the 17-18 preliminary budget, Staff has factored in several revenue and expenditure
assumptions to the modified zero -based budget as outlined below.
FY 17-18 Revenue Assumptions
Staff is expecting General Fund revenues to increase by 3% or $933,883 compared to
the FY16-17 revised budget. The majority of the projected increase is driven by higher
than expected property tax and TOT.
Below is a snapshot of the major revenue categories, and their projected amounts as
compared to the FY16-17 revised budget.
• Property Tax-- increase of 5.4% or $657,500
• Sales and Use Tax-- increase of 0.9% or $19,800
• Transient Occupancy Tax-- increase of 4.7% $261,000
• Utility User Tax-- decrease of 5.6% or $110,800
• Licenses and Permits-- increase of 4.8% or $105,300
5
• Other Revenues — increase of 0.2% or $1,000
The chart below has built in the revenue assumptions listed above and compares the
FY 16-17 revised budget to FY 16-17 year-end estimates and to the FY 17-18
preliminary budget estimates.
Graph 3
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
FY 17-18 Proposed General Fund Revenues
FY 16-17 Year-end estimates $29.2
FY 17-18 Proposed Budget $29.5
Property Sales Tax TOT UUT Licenses and Other
Tax Permits Revenue
HIS FY 16-17 Revised Budget FY 16-17 YE Estimates 1111111111 FY 17-18 Proposed
Property Tax is the largest and historically the most stable revenue source in the City.
Through Proposition 13, increases in assessed value are limited to an annual inflation
factor of no more than 2%. This revenue source makes up 43% of the total General
Fund revenue in the City. TOT and Sales Tax make up 27% of total revenues.
The pie chart below shows the General Revenues by type and their respective
contribution in percentage (%) terms to the overall total. Included in the Other Taxes
category are the Business License Tax, Franchise Tax, and Golf Tax.
0
FY 17-18 Proposed General Fund Revenues
FY 17-18 Expenditure Assumptions
Staff is estimating the following increases to General Fund expenditures in FY 17-18:
• CalPERS increase of 4% or $104,200
• Health Benefits increase of 10% or $75,000
• The Sheriff's Contract is expected to increase slightly more than 14% or
$775,407, as the positions added in FY15-16 shift from the growth rate (amount)
to the regular rate, along with annual increases in the regular rates and liability
trust fund.
• Additional Equipment Replacement funding of over 39% or $183,200. This
increase is based on an inventory count performed in FY16-17 of computers,
equipment, furniture and vehicles, which identified pieces of equipment not
accounted for in previous years.
The chart below has built in the expenditure assumptions listed above and compares
the FY 16-17 revised budget to FY 16-17 year-end estimates and to the FY 17-18
preliminary budget estimates.
7
Graph 5
$10.0
c
0
$8.0
$6.0
$4.0
$2.0
$0.0
Salaries & Wages Benefits Public Safety Non -Personnel
FY 2016-17 Revised Budget FY 2016-17 YE Estimates 2017-18 Proposed
FY 17-18 Proposed General Fund Expenditures
CONCLUSION
Currently, Staff is estimating that the General Fund will end FY 16-17 with an excess
surplus of $2.2 million. The FY 17-18 General Fund budget will be prepared with the
assumptions detailed in this report and direction from City Council. The Preliminary
Budget will be presented on May 16tH
0 •