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CC SR 20171219 1 - 1st Quarter Budget ReviewRANCHO PALOS VERDES CITY COUNCIL AGENDA REPORT AGENDA DESCRIPTION: MEETING DATE: 12/19/2017 AGENDA HEADING: Consent Calendar Consideration and possible action regarding the FY17-18 first quarter budget report. RECOMMENDED COUNCIL ACTION: Receive and File the FY 2017-18 first quarter budget report. FISCAL IMPACT: None Amount Budgeted: General Fund (including Transfers) Revenues: $30,437,300 Expenditures: $30,417,800 Additional Appropriation: N/A Account Number(s): Various ORIGINATED BY: Allan Kaufman, Senior Administrative Analyst REVIEWED BY: Deborah Cullen, Director of Finance APPROVED BY: Doug Willmore, City Manager.z",., BACKGROUND AND DISCUSSION: In the past, Finance has presented a series of budget reports to the City Council covering Mid -Year, Third Quarter and Year-end. Beginning this year, Staff is adding a First Quarter budget report. For this report, Staff has reviewed all FY17-18 revenues and expenditures through the end of the first quarter (July — September). This report will focus on the General Fund and, at this time, Staff expects revenues and expenditures to end the year on target with the budget amount. General Fund Revenue The summary table of major General Fund revenue categories is presented below. The General Fund Adopted Budget for FY17-18 revenues (including transfers) is $30,437,300 of which $3,162,899 or 10.4%, was received through September 30, 2017, compared to $3,227,387 or 11.2% in the prior year. This is in line with historical first- quarter revenues as many of our major revenues are received in the second and third quarter. The Adopted Budget represents the entire amount expected to be received by year-end. As of September 30, 2017, total revenues received are 2.0% lower than the same period last year. Most of this variance is due to the collection of quarterly franchise payments in FY17-18 that were not received until after the first quarter ended. 1 FY17-18 Budget to Actual Revenues Current vs. Prior Year Comparison Revenue Source Adopted Budget 2617-18 1st Qtr. Actuals (thru 9{36f 2617) % Received of Adopted Budget 2016-17 1st Qtr. Actuals (thru 9/36/ 2616) 1st Qtr. Comparison FY16-17 to FY17-18 $ variance % Change Property Tax $12,746,100 $351,591 2.8% $360,827 ($9,236) (2.6%) Sales Tax 2,580,200 250,242 9.7% 232,184 18,058 7.2% Transient Occupancy Tax (TOT) 5,740,000 1,106,934 19.3% 1,136,184 (29,250) (2.6%) Utility Users Tax (UUT) 1,871,100 322,879 17.3% 315,912 6,967 2.2% Planning, Building & Safety, and Other Permits 2,321,100 586,289 25.3% 599,168 (12,879) (2.2%) Other Revenue 4,948,800 487,464 9.9% 583,112 (95,648) (19.6%) Total General Fund Revenues Net of Transfers 30,207,300 3,105,399 10.3% 3,227,387 (121,988) (3.9%) Transfers In 230,000 57,500 25.0% 0 57,500 100.0% Total General Fund Revenues $30,437,30® $3,162,899 10.4% $3,227,387 ($64,488) (2.D%) Property Tax The City has received $351,591 in Property Tax in the first-quarter of the current fiscal year. This represents a -2.6% or $9,236 decrease compared to the same period last year. The majority of property taxes are not received until after December. At that time, Staff will continue to monitor and report any changes to this revenue source in the future. Sales Tax Sales Tax is the third largest revenue source in the City. In the first-quarter of FY17-18, the City has collected $250,242, which is 7.2% or $18,058 higher than the same period last fiscal year. Based on information from our sales tax consultant, the growth is in the food and beverage category. This revenue source is expected to meet the estimated revenue projection at year-end. Transient Occupancy Tax (TOT) The City has received $1,106,934 of TOT or 19.3% of budget this fiscal year, which is -2.6% or $29,250 less than the same period last year. At this time, Staff believes that TOT will meet its budget amount at year-end. Staff will continue to monitor this revenue source and report any changes to economic conditions that might impact TOT in this fiscal year. Utility Users Tax (UUT) UUT is based primarily on utility rates and consumption patterns. The City has received $322,879 in UUT, which is 17.3% of the budgeted amount. This represents a 2.2% 2 increase over the same period last year. Staff is projecting this revenue source will make budget at year-end. Licenses and Permits License and permits is approximately -2.2% or $12,879 below the same period last year, with 9.9% of budget received. The current decrease is primarily due to a large commercial project that was performed in the first quarter of FY16-17. Staff will continue to monitor and report any changes to construction costs, home improvement trends, and other economic conditions that might impact this revenue source in the future. Other Revenue Other revenues are comprised of a variety of revenue sources including: Franchise Tax, Business License Tax and Charges for Services to name a few. Other Revenues collected for the first-quarter of FY17-18 is -19.6% or $95,648 less than the same period last year. Most of this decrease is due to the franchise payments (previously stated) that were not received until after the first quarter ended. General Fund Expenditures The General Fund budget for FY17-18 expenditures (including transfers) is $30,417,800 of which $6,991,974 or 23.0% was expended through September 30, 2017. In comparing prior year expenditures at first quarter there is approximately a $2.9 million variance. The explanation for the quarter to quarter variance is detailed below. Expenditure Budget Current vs. Prior Year Comparison ,,, $35.0 o $30.0 $25.0 $20.0 $15.0 $5.0 $5A $ $0.0 Adopted 1st Qtr. Budget Actuals ■ FY2016-17 28,433,900 4,108,635 ■ FY2017-18 30,417,800 6,991,974 ■ FY2016-17 FY2017-18 3 The change in actuals of almost $2.9 million from first quarter FY16-17 to first quarter FY17-18 are attributed to: Professional and technical services increased by over $751,000 comparing the first quarter of FY17-18 to the first quarter in FY16-17 primarily due to: a. An increase of about $118,000 in temporary professional staff to cover job responsibilities for vacant positions and employees on an extended leave of absence. b. The Sherriff's Contract increased by about $228,000 to reflect the transition from the growth (introductory) rate to the standard rate. c. Legal charges increased by almost $198,000 because invoices for the first quarter of FY16-17 were not captured until after the 1St quarter had ended. d. Public Works received one-time reimbursements of over $207,000 from State grants and other agencies in FY16-17 for non -capital expenditures. 2. Salaries and benefits increased in the first quarter of FY17-18 by over $800,000 due to: a. Timing and reporting issue with FY16-17 first-quarter payroll run being attributed to the FY16-17 second quarter. The result is FY16-17 first quarter had four payroll cycles, while FY17-18 first quarter had six payroll cycles, resulting in the first quarter comparison variance of $739,000. This comparison will normalize by mid -year. b. Impact of the COLA increase totaling approximately $50,000. c. Increase in over -time to backfill positions due to retirements and existing vacancies of almost $11,000 in the first quarter. 3. Non -personnel increased by approximately $128,000 primarily due to an increase in the general liability insurance premium. 4. Transfers Out of $1.2 Million, mainly to the Capital Improvements Project (CIP) Fund, were not made in the first-quarter of FY16-17. This was due to a change in the accounting process that requires transfers to be allocated and reported quarterly. Prior practice was to record transfers at the year-end. El Below is the comparison of the major expenditure type to the adopted budget and the amount of budget expended through the first quarter. With the ending of the first quarter or 25% of the fiscal year completed, General Fund expenditures are tracking at 23% expended, right on target with the adopted budget. FY17-18 Budget to Actual by Major Expenditure Type Expenditure Type Adopted Budget 2017-18 1st Qtr. Actuals (thru 9/30/2017) % Spent of Adopted Budget Salaries $7,852,800 $1,795,659 22.9% Benefits 2,572,000 1,014,470 39.4% Professional /Technical Services 12,048,500 2,021,936 16.8% Supplies/Materials 1,654,900 241,896 14.6% Training/Meetings/Conferences 333,500 55,134 16.5% Miscellaneous 1,142,600 659,504 57.7% Total General Fund Expenditures 1,106,400 781,367 70.6% Net of Transfers 25,604,300 5,788,599 22.6% Transfers Out 4,813,500 1,203,375 25.0% Total General Fund Expenditures $30,417,800 $6,991,974 23.0% Below the comparison of the expenditures by department to the adopted budget and the amount of budget expended by department through the first quarter. FY17-18 Budget to Actual Expenditures by Department Expenditure by Department Adopted Budget 2017-18 1st Qtr. Actuals (thru 9/30/2017) % Spent of Adopted Budget Administration $4,701,500 $1,158,136 24.6% Finance 1,410,600 372,031 26.4% Public Works 5,184,100 865,908 16.7% Community Development 3,543,000 784,123 22.1% Recreation & Parks 2,698,000 711,221 26.4% Public Safety 6,960,700 1,115,813 16.0% Non -Departmental 1,106,400 781,367 70.6% Total General Fund Expenditures Net of Transfers 25,604,300 5,788,599 22.6% nsfers Out 4,813,500 1,203,375 25.0% :al General Fund Expenditures $30,417,800 $6,991,974 23.0% CONCLUSION Staff has reviewed all FY17-18 revenues and expenditures through the end of the first quarter (July — September). Through September 30, 2017, the City has received $3,162,899 or 10.4% of the FY17-18 revenue budget compared to $3,227,387 or 11.2% in the prior year. On the expenditure side, the City has spent 6,991,974 or 23.0% of the FY17-18 budget compared to $4,108,635 or 14.4% in the prior year. With 25% of the fiscal year completed, Staff expects revenues and expenditures to end the year on target with the budget amount. If it is determined that adjustments to the budget need to be made, Staff will present these adjustments when it presents its mid -year review of revenues and expenditures to the City Council later in the fiscal year. Al •