CC SR 20190219 Q - FY2018-19 Mid-Year Financial ReportRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 02/19/2019
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA DESCRIPTION:
Consideration regarding the FY 2018-19 Mid-year Financial Report and year-end
estimates.
RECOMMENDED COUNCIL ACTION:
1) Receive and file the FY 2018-19 Mid-year Financial Report.
FISCAL IMPACT: Year-end estimates will be updated at the close of the third-quarter
and budget adjustments will be recommended in that report.
Current Budget: Revenues: $30,923,100
Transfers In: $220,000
Expenditures: $28,542,500
Transfers Out: $4,564,700
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
REVIEWED BY: Deborah Cullen, Director of Finance
APPROVED BY: Doug Willmore, City Manager
BACKGROUND AND DISCUSSION:
The Mid-Year financial report serves two purposes. First, it compares revenue and
expenditures for the first half of the fiscal year relative to the same point in time last year
while at the same time identifies any variances that may require adjustments in the
future. Second, the report offers a first look at where the City projects its revenues and
expenditures will end the year compared to the current budget amount. For this report,
Staff has reviewed all revenues and expenditures at mid-year for FY 2018-19 (July 1st
thru December 31st), with an emphasis on the General Fund. At the end of the third-
quarter (March 31st), Staff will perform another review of revenues and expenditures
and update the year-end estimates. A full analysis and presentation will be given at the
budget Workshop on March 13th.
At this time, the estimated revenues exceeded the estimated expenditures by about
$3.8 million. However, there is a negative impact on the beginning fund balance by
about ($500,000) due to the transfer of TOT revenue to the Capital Improvement Fund
during the fiscal year. The year-end estimated fund balance for the General Fund
Reserves at June 30, 2019, is $17.6 million with an estimated excess reserve of
approximately $4 million. Detailed analysis highlighting the major changes are
presented later in this report. A summary of the FY18-19 Fund Balance calculation is
illustrated below:
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FY 2018-19 Year-end Estimates
FY 2018-19 General Fund Balance Summary
General Fund Revenue
The Summary Schedules for General Fund Revenue are presented below. These
revenue estimates are based on Staff and consultants’ analysis using trend
comparisons with previous years and reports provided by state, county and local
Year-end
Estimates
Revenues 31,000,279
Expenditures (27,162,488)
Excess (Deficiency) Revenues over
Expenditures 3,837,791
Transfers In 220,000
Transfers Out (4,564,700)
Net Change to Fund Balance (506,909)
Beginning Fund Balance - 7/1/18 18,078,960
Estimated Ending Fund Balance - 6/30/19 17,572,051
18-19 Adopted Additional 18-19 Revised Year-end
Budget Appropriation Budget Estimates
Beginning Fund Balance - 7/1/18 18,078,960 - 18,078,960 18,078,960
Add: Revenues 30,923,100 - 30,923,100 31,000,279
Add: Transfers In 220,000 - 220,000 220,000
Subtotal 49,222,060 - 49,222,060 49,299,239
Less: Expenditures (27,424,900) (1,117,600) (28,542,500) (27,162,488)
Less: Transfers Out CIP (4,519,700) - (4,519,700) (4,519,700)
Less: Transfers Out Misc.(45,000) - (45,000) (45,000)
Subtotal (31,989,600) (1,117,600) (33,107,200) (31,727,188)
Estimated Ending Fund Balance - 6/30/19 17,232,460 - 16,114,860 17,572,051
Reserve Policy (50% of budgeted
expenditures)13,712,450 - 14,271,250 13,581,244
Excess Reserve 3,520,010 - 1,843,610 3,990,807
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agencies. It should be noted that future economic activity, legislation and policy
decisions, as well as any other unforeseen circumstances could affect the City's
revenue stream for the remainder of FY 2018-19.
Mid-Year Revenues
Current Year vs. Prior Year
At mid-year, General Fund revenues are approximately $2.9 million higher than at this
same time last fiscal year. However, this year over year increase is mainly attributed to
the timing of revenue received and an improvement in the tracking and accrual of
December revenues. An emphasis was placed on accruing revenue in a timely manner
in order correctly view trends and timing of revenue payments.
In addition to an improvement in revenue tracking, a portion of this year-over-year
increase was due to a minimal growth in revenue for TOT, Golf Tax, Business License,
Rentals/Leases, and Interest Earnings. Revenues are currently estimated to end the
year approximately $77,000 over budget as shown below. The year-end estimates were
determined through Staff analysis, input from various departments, and City
consultants.
FY17-18 Mid-Year FY18-19 Mid-Year Variance $
Property Tax 5,574,952$ 6,829,699$ 1,254,747$
TOT 2,891,640 3,115,079 223,439
Sales Tax 1,043,749 1,346,299 302,550
Licenses and Permits 1,094,109 1,109,434 15,325
UUT 928,281 962,306 34,025
Franchise Tax 342,151 702,490 360,339
Charges for Services 21,959 228,964 207,005
Other Revenue 616,969 1,130,619 513,650
Total Revenues 12,513,810$ 15,424,890$ 2,911,080$
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FY 2018-19 Budget vs. Projected Year-end Revenues
FY18-19 revenues were expected to increase by 2.3% over the FY17-18 budgeted
amounts. After review at mid-year, FY18-19 revenues are projected to see a slight
increase of 0.2% over budgeted amounts. A detailed discussion and analysis regarding
General Fund major revenues is presented below.
Property Tax
Staff is projecting a minor decrease of approximately ($12,600) in property tax revenue
from the adopted budgeted amount of $13,439,000 to $13,426,000, or 0.1%. This new
estimate includes a 1.5% adjustment to account for potential delinquencies. Despite this
slight adjustment, a 3.1% increase is expected over FY17-18 actuals. Staff will continue
monitoring the monthly receipts and update estimates during the third-quarter review.
Transient Occupancy Tax (TOT)
During the adoption of the FY18-19 budget, Staff built its TOT estimate on the most
current industry information. Currently, based on the remittances collected through
December and revenue trends over the past three fiscal years, TOT is expected to end
the year 1.6% or $92,000 over budget. This updated year-end estimate is 5.3% higher
than revenue at the end of FY17-18. TOT revenue during FY17-18 experienced only
minor growth of 0.25% year-over-year. This was the lowest year-over-year growth since
Terranea opened during FY09-10. Based on current year receipts, it appears
Terranea’s performance has rebounded from this slight dip in revenues during FY 17-
18.
Sales Tax
Sales Tax is projected to come in just slightly higher than budget by $5,700.00 or 0.2%.
This analysis was completed by the City’s consultant, HdL and reviewed by staff. This
represents an increase of 1.9% from the previous year. Slight increases in revenue from
Property Tax 13,028,259$ 13,439,000$ 13,426,363$ (12,637)$
Transient Occupancy Tax 5,615,045 5,823,100 5,914,930 91,830
Sales Tax 2,520,067 2,561,300 2,567,000 5,700
Licenses and Permits 2,201,923 2,290,300 2,141,000 (149,300)
Franchise Tax 2,128,727 2,024,900 2,024,900 -
Utility User Taxes 1,837,689 1,921,600 1,921,600 -
Other Revenue 2,890,893 2,862,900 3,004,486 141,586
Subtotal 30,222,603 30,923,100 31,000,279 77,179
Transfers In 230,000 220,000 220,000 -
Total Revenues 30,452,603$ 31,143,100$ 31,220,279$ 77,179$
Revenue Type
FY17-18
Actual
FY18-19
Budget
FY18-19
Estimate
Estimate vs.
Budget
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state and county pools and restaurants and hotels was the main driver for this projected
increase in revenue.
Licenses and Permits
The Community Development Department, which brings in over 93% of all License and
Permit revenue, estimates that this revenue source will come in 6.5% or ($149,300)
under the FY18-19 budget projection. This decrease is primarily attributed to fees
collected in planning and geology. Application submittals have decreased and the
department has seen a change in the types of applications submitted. There has been a
drop in the submittal of discretionary applications which typically carry a higher fee. A
portion of the decrease in revenue is offset by an increase in building permit fees which
are trending higher at mid-year than the original adopted budget.
Franchise Tax
Franchise Tax is levied on the providers of utility, refuse and cable services in exchange
for use of the City’s rights-of-way. Over the past 3 fiscal years revenues have only
shown a slight 1.45% upward trend and have remained relatively consistent since
FY13-14. As of December 2018 there have been no noticeable trends or indications that
have prompted a change from the amount budgeted at the start of FY18-19. Staff will
continue to monitor this revenue category for the remainder of the fiscal year and
estimates will be updated, if necessary, during our 3rd quarter review.
Utility Users Tax (UUT)
Utility Users Tax revenue has been relatively flat since FY14-15. There has not been
any indication at mid-year that any adjustment to the adopted budget will be necessary.
This revenue source is driven primarily by weather conditions, utility rates and
consumption. Staff will continues to monitor the revenue trends for the remainder of the
fiscal year and modify the year-end estimate, if necessary, during our 3rd quarter review.
Other Revenue
Other revenues are projected to come in slightly over budget by 4.9% or $141,500. This
is a 3.9% increase over last year. The Other Revenue category contains business
license tax, golf tax, interest earnings, rental/lease revenues, and several other smaller
revenue sources.
Interest earnings is the largest contributor to the estimated increase with a projected
$126,500 increase in revenue over the adopted budget. Interest earnings has increased
by over $150,000 or 91% in the past two consecutive fiscal years. Beginning with a
$51,000 or 91.6% increase from FY15-16 to FY16-17 and a $99,000 or 91.8% increase
from FY16-17 to FY17-18. Two primary factors have contributed to this growth; first the
move to purchase more CDs (Certificates of Deposit) and laddering them in order to
increase liquidity and the opportunity to take advantage of rising interest rates.
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Second, there has been consistent growth in the rate of return received from our LAIF
account which holds approximately 50% of our invested funds.
As of 12/31/18 nearly 69% of funds managed by LAIF are invested in Treasuries and
CDs. Both of these investment vehicles have benefited from a steady increase in the
fed fund rate over the past few years.
During FY18-19 we are projecting 36% growth in Interest Earnings due to signals from
the Federal Reserve that rates should remain stable and the fact that the majority of the
City’s investments will not mature until FY19-20.
Revenue Summary
Overall, revenues are expected to end the year approximately 0.2% over what was
budgeted at the start of the fiscal year as illustrated in the table above.
LAIF Returns
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016 0.446 0.467 0.506 0.525 0.552 0.576 0.588 0.614 0.634 0.654 0.678 0.719
2017 0.751 0.777 0.821 0.884 0.925 0.978 1.051 1.084 1.111 1.143 1.172 1.239
2018 1.35 1.412 1.524 1.661 1.755 1.854 1.944 1.998 2.063 2.144 2.208 2.291
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General Fund Expenditures
The Summary Schedules for General Fund Expenditures are presented below. With
the implementation of Munis, the City’s new financial system, Staff now performs a
monthly hard-close of the City’s financials as well as recording accruals (expenditures
being recorded based on when services are performed and/or materials delivered).
Since this was not possible in the previous financial system, comparing mid-year
expenditures to the prior period does not yield a valuable analysis this fiscal year but will
next year and in future years. Therefore, expenditures compared to budget is the best
indicator for performance at mid-year.
Mid-Year Expenditures
Current Year vs. Prior Year
The General Fund has nine (9) major operating expenditure categories: salaries,
benefits, legal services, Sheriff’s contract, professional/technical, maintenance/repairs,
supplies/materials, trainings /conferences and miscellaneous expenses. Overall, the
General Fund expenditures are currently estimated to end the year approximately ($1.4)
million less than budget.
Salaries and benefits are estimated to end the year almost ($1.1) million under budget
due to nine (9) unfilled vacancies in various City departments. Non-Personnel costs
(excluding legal services and Sheriff’s contract), cumulatively are estimated to end the
year under budget by almost ($500,000). Legal Services is projected to end the year
almost $166,000 over budget, primarily due to increased litigation costs. All year-end
estimates provided in the chart below include actual expenses paid through December.
FY 17-18 FY 18-19 FY 2018 vs. FY 2019
Mid-year Mid-year Mid-year
Actual Actual Variance $% change
City Council $69,969 $63,991 -$5,978 -8.5%
City Attorney 758,092 $454,539 -$303,553 -40.0%
City Administration 1,974,796 $1,603,249 -$371,547 -18.8%
Finance 814,807 $715,699 -$99,108 -12.2%
Public Safety 3,026,893 $2,960,250 -66,643 -2.2%
Public Works 2,252,425 $1,903,468 -348,957 -15.5%
Community Development 1,576,817 $1,518,181 -58,636 -3.7%
Recreation & Parks 1,457,816 $1,343,030 -114,786 -7.9%
Non-Department 608,108 $525,391 -82,717 -13.6%
Subtotal 12,539,723 11,087,798 -1,451,925 -11.6%
Transfers Out 2,406,750 2,282,350 -124,400 -5.2%
Total Expenditures $14,946,473 $13,370,148 ($1,576,325)-10.55%
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FY 2018-19 Budget vs. Projected Year-end Expenditures
by Major Expenditure Categories
Salaries & Benefits
Overall, expenditures are expected to end the year with a savings of almost $1.1 million.
This is attributed to vacancies in various department throughout the fiscal year. These
positions are budgeted at the beginning of the fiscal year with the expectation that they
will be filled during the fiscal year. The City continually recruits and advertises these
vacancies however the positions below are still unfilled at mid-year.
Below is a summary of the existing vacancies and savings:
1. Associate Planners – savings of approximately $78,600 in salaries and $22,800
in benefits.
2. Deputy Director of Public Works – savings of about $133,000 in salaries and
$26,000 in benefits.
3. Staff Assistant – savings of about $39,800 in salaries and $17,100 in benefits.
Position was vacant in October of 2018. Saving is calculated for eight (8) months.
4. Building Inspector II - savings of about $52,000 in salaries and $15,400 in
benefits. Position was vacant in October of 2018. Saving is calculated for eight
(8) months.
5. Two (2) Senior Administrative Analyst – savings of about $105,000 in salaries
and $56,800 in benefits. Position was vacant in December of 2018. Saving is
calculated for six (6) months.
6. Human Resources Analyst – savings of about $35,000 in salaries and $7,100 in
benefits. Position was vacant in January of 2019. Saving is calculated for five (5)
months.
FY 18-19 FY 18-19 FY 18-19 YE $ Variance
Revised Budget Mid-Year Actuals Estimates to Budget
Salaries $8,010,350 $3,563,712 $7,173,945 ($836,405)
Benefits 2,918,100 1,366,991 2,702,404 (215,696)
Legal Services 925,000 454,539 1,090,894 165,894
Sheriff Contract 6,318,500 2,639,743 6,318,500 0
Sheriff Preserve 584,200 243,432 584,200 0
Professional/Technical 4,083,172 1,096,254 3,726,922 (356,250)
Maintenance/Repairs 2,341,460 815,209 2,336,460 (5,000)
Supplies/Materials 1,072,443 203,489 1,068,743 (3,700)
Trainings/Meetings/Conferences 362,500 98,968 381,700 19,200
Misc. Expenses 1,926,775 605,461 1,778,719 (148,056)
Operating Expenditures 28,542,500 11,087,798 27,162,487 (1,380,013)
Transfers Out 4,564,700 2,282,350 4,564,700 0
Total General Fund
Expenditures $33,107,200 $13,370,148 $31,727,187 ($1,380,013)
Expenditure Categories
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7. Human Resources Manager – savings of about $57,800 in salaries and $10,600
in benefits. Position was vacant in January of 2019. Saving is calculated for five
(5) months.
8. Building Official – savings of about $44,000 in salaries and $21,800 in benefits.
Position will be vacant in February of 2019. Saving is calculated for four (4)
months.
9. Administrative Analyst II – savings of about $48,100 in salaries and $14,000 in
benefits. Position became vacant in March of 2018 and has been backfilled with
a lower position in January of 2019.
10. Three (3) Associate Engineer – savings of $160,100 in salaries and $24,100 in
benefits. Two (2) of the three (3) positions have partial savings due to backfilling
with a lower position. Another vacancy was filled in November of 2018.
The total savings of salaries and benefits from the vacancies above is $969,100. The
remaining $83,000 of salaries and benefits savings are from a combination of a few
employees off of work without pay.
Non-Personnel
• Legal Services is expected to end the year at approximately $1.1 million or
$166,000 over budget. This is due to the increase in litigation during the year.
• Professional/Technical Services is expected to end the year approximately
($350,000) under budget. The savings are from professional contracts no longer
needed in various department.
• Training and Meetings are expected to end the year about $19,000 over budget
due to increases in training hours for new staff.
• Other miscellaneous non-personnel expenses is expected to end the year under
budget by almost ($150,000). The general liability and worker’s compensation
premium for FY 2018-19 was approximately $101,000 less than budget. This is
due to retrospective adjustment/credit from prior year. The remaining $49,000 is
from land and unemployment claim that was budgeted but no longer needed.
In total, the projected overrun in Legal Services is more than offset with projected
savings in salaries and benefits and non-personnel costs. Staff will continue monitoring
performance to budget and report any changes in the year-end estimates at the third-
quarter review.
Year-End expenditures by Department
Below is a chart showing General Fund expenditures by Department. A key indicator at
mid-year is the % of budget spent. With 50% of the year concluded the General Fund
has only expended about 40% of budget.
FY 2018-19 Budget vs. Projected Year-end Expenditures by Departments
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Expenditure Summary
The projected year-end expenditures is almost ($1.4) million less than budget. The
majority of the under-run is due to unfilled positions which is helping to offset the over
run in Legal Services. Staff will continue monitoring performance to budget and report
any changes in year-end estimates at the third-quarter review.
CONCLUSION
Staff has reviewed all revenues and expenditures at mid-year FY 2018-19, with an
emphasis on the General Fund to determine if all sources and uses are on target with
the budget and to highlight any areas that may end the fiscal year significantly above or
below budget.
In summary, the projected year-end General Fund revenues are tracking slightly higher
than budget by approximately $78,000 and expenditures are tracking approximately
($1.4) million below budget. Staff will recommend budget adjustments when the year-
end estimates are updated at the close of the third-quarter.
ALTERNATIVES:
In addition to the Staff recommendation, the following alternative action is available for
the City Council’s consideration:
1. Discuss and take other action related to this item.
FY 18-19 FY 18-19 % of FY 18-19 YE $ Variance
Revised Budget Mid-Year Actuals Budget Spent Estimate to Budget
City Council $161,100 $63,991 39.7%$151,250 ($9,850)
City Attorney 925,000 454,539 49.1%$1,090,894 165,894
City Administration 3,660,512 1,603,249 43.8%3,420,340 (240,172)
Finance 1,604,950 715,699 44.6%1,429,315 (175,635)
Public Safety 7,926,750 2,960,250 37.3%7,925,650 (1,100)
Public Works 6,139,977 1,903,468 31.0%5,582,240 (557,737)
Community Development 3,798,174 1,518,181 40.0%3,548,886 (249,288)
Recreation & Parks 2,895,000 1,343,030 46.4%2,879,388 (15,612)
Non-Department 1,431,037 525,391 36.7%1,134,525 (296,512)
Operating Expenditures 28,542,500 11,087,798 38.8%27,162,488 (1,380,012)
Transfer Out 4,564,700 2,282,350 50.0%4,564,700 0
Total Expenditures $33,107,200 $13,370,148 40.4%$31,727,188 ($1,380,012)
Department
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