CC SR 20200413 A - Mid-Year Financial ReportRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 04/13/2020
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA DESCRIPTION:
Consideration of the FY 19-20 Mid-year Financial Report and year-end estimates.
RECOMMENDED COUNCIL ACTION:
1) Receive and file the FY 19-20 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 which is tentatively
scheduled to be presented to the City Council on May 19, 2020.
Current Budget: Revenues: $31,423,400
Transfers In: $275,000
Expenditures: $28,638,409
Transfers Out: $4,116,900
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
REVIEWED BY: Trang Nguyen, Deputy Director of Finance
APPROVED BY: Ara Mihranian, City Manager
BACKGROUND AND DISCUSSION:
The Mid-year Financial Report serves two purposes. First, it compares revenues and
expenditures for the first half of the fiscal year relative to the same point in time last
year. This is completed while also identifying 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 amounts currently
budgeted. For this report, Staff has reviewed all revenues and expenditures at mid-year
for FY 19-20 (July 1 thru December 31), with an emphasis on the General Fund. A full
analysis and presentation will be given during Budget Workshop on the preliminary
budget. At the end of the third-quarter (March 31), Staff will conduct another review of
revenues and expenditures and update the year-end estimates. It should be noted that
the information provided in this report does not factor in the fiscal impacts associated
with the COVID-19 health crisis and is intended to brief the City Council on where the
City was financially on December 31, 2019.
Based on the first six months of activity, Staff was projecting that revenues will exceed
expenditures by roughly $500,000 at June 30, 2020. This excess includes all additional
appropriations, which totaled more than $2 million, approved by the City Council
through December 31, 2019. The estimated year-end fund balance for the General
Fund at June 30, 2020, was projected to reach almost $21.3 million with an estimated
excess reserve of over $7.6 million. A detailed analysis highlighting the major changes
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will be presented later in this report. A summary of the FY 19-20 Fund Balance
calculation is illustrated in Table 1 below.
Table 1: FY 19-20 General Fund Balance Summary
General Fund Revenue
Summary schedules for General Fund revenues are presented in Table 2 on the next
page. These revenue estimates are based on analysis completed by staff and
consultants using prior year trends and comparisons with previous years and reports
provided by state, county and local 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 streams for the remainder of FY 19-20.
19-20 Adopted Additional 19-20 Revised Year-end
Budget Appropriation Budget Estimates
at Mid-Year
Beginning Fund Balance - 7/1/19 20,788,547 - 20,788,547 20,788,547
Add: Revenues 31,423,400 - 31,423,400 31,621,100
Add: Transfers In 275,000 - 275,000 275,000
Total Revenues 31,698,400 - 31,698,400 31,896,100
Less: Expenditures (26,592,900) (2,045,509) (28,638,409) (27,278,669)
Less: Transfers Out CIP (3,976,900) - (3,976,900) (3,976,900)
Less: Transfers Out Misc.(140,000) - (140,000) (140,000)
Total Expenditures (30,709,800) (2,045,509) (32,755,309) (31,395,569)
Estimated Ending Fund Balance - 6/30/20 21,777,147 - 19,731,638 21,289,078
Reserve Policy (50% of budgeted
expenditures)13,296,450 - 14,319,205 13,639,335
Unrestricted Excess/(Deficit) Reserve 8,480,697 - 5,412,433 7,649,743
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Table 2: Mid-Year Revenues -- Current Year vs. Prior Year
At mid-year, General Fund revenues are approximately $1.3 million lower than at this
same time last fiscal year. However, this year-over-year decrease is attributed to the
timing of revenue received and the refinement of the accrual process.
Table 3: FY 19-20 Budget vs. Projected Year-end Revenues
FY 19-20 revenues were initially budgeted with an expectation of a 0.7% or $212,600
decrease when compared to FY 18-19 actuals. At mid-year, FY 19-20 revenues are
Property Tax 6,829,699$ 6,344,393$ (485,306)$
Transient Occupancy Tax 3,115,079 2,951,112 (163,967)
Sales Tax 1,346,299 1,019,390 (326,909)
Licenses & Permits 1,109,434 1,120,876 11,442
Franchise Tax 702,490 714,295 11,805
Utility User Taxes 962,306 929,083 (33,223)
Other Revenue 1,359,583 1,020,134 (339,449)
Total Revenues 15,424,890$ 14,099,283$ (1,325,607)$
Revenue Type
FY 2018-19
Mid-Year
FY 2019-20
Mid-Year Variance
Property Tax 13,567,136$ 13,975,500$ 13,991,100$ 0.1% 15,600$
Transient Occupancy Tax 5,645,497 5,541,300 5,541,300 0.0%-
Sales Tax 2,661,180 2,529,000 2,529,000 0.0%-
Licenses & Permits 2,204,606 2,167,800 2,243,100 3.5% 75,300
Franchise Tax 2,149,743 2,044,400 2,150,000 5.2% 105,600
Utility User Taxes 1,917,107 1,942,300 1,942,300 0.0%-
Other Revenue 3,545,779 3,223,100 3,224,300 0.0% 1,200
Subtotal 31,691,048 31,423,400 31,621,100 0.6% 197,700
Transfers In 220,000 275,000 275,000 0.0%-
Total Revenues 31,911,048$ 31,698,400$ 31,896,100$ 0.6% 197,700$
Revenue Type
FY 2018-19
Actual
FY 2019-20 YE
Estimates
FY 2019-20
Current Budget
FY 19-20 Budget
vs FY 19-20 YE
Estimates
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projected to end the year closer to FY 18-19 actuals with an estimated decrease of
0.05% or $15,000. FY 19-20 revenues are on pace to surpass budgeted amounts by
0.6% or $197,000. A detailed discussion and analysis regarding General Fund major
revenues is presented below.
Property Tax
Staff is projecting a slight increase of approximately $15,600 in property tax revenue
from the adopted budgeted amount of $13,975,500 to $13,991,100 or 0.1%. This
estimate includes a 1.5% adjustment to account for potential delinquencies. Despite this
slight adjustment, a 3.1% increase is expected over FY 18-19 actuals. Staff will continue
to monitor monthly receipts and update estimates during the third-quarter review.
Transient Occupancy Tax (TOT)
During the FY 19-20 budget process, revenue forecasts were decreased based on
revenue projections received from Terranea Resort’s Finance Department (Terranea
makes up over 96% of TOT revenue). Staff has noticed that revenue from Terranea is
trending higher than was originally budgeted and is on pace to match FY 18-19 revenue
levels. Despite this trend, year-end revenue estimates of $5,541,300 will be held at
budgeted levels and will be reevaluated during the third quarter review.
Sales Tax
Revenue analysis was completed by the City’s consultant, HdL and reviewed by staff.
The analysis showed that sales tax is projected to meet budget expectations of
$2,529,000. This represents a slight decrease of 5% from the previous year. This
decrease is primarily due to reductions in projected revenue from fuel & service
stations, food & drugs, and autos & transportation. Sales tax revenue will continue to
be monitored throughout the remainder of the year for signals that may indicate a
variance from estimates. FY 18-19 revenue exceeded estimates by over $82,000 due
to year-end corrections from the County that resulted in higher revenue for the City.
Licenses and Permits
The Community Development Department, which brings in over 93% of all license and
permit revenue, estimates that this revenue source will end the year over FY 19-20
budget by 3.5% or $75,300. This increase is primarily attributed to expected growth in
revenue from view restoration permits, geology permits, and planning permits.
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 5 fiscal years, revenues have only
shown a slight 1.07% upward trend and have remained relatively consistent since FY
13-14. FY 19-20 was budgeted with an expectation that revenue would stay flat and
consistent with FY 18-19 year-end projections of $2,044,400. However, revenue
exceeded expectations and came in at $2,149,743, $105,600 higher than budgeted. As
of December 2019, franchise tax revenue is on pace to equal FY 18-19 revenue levels
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therefore FY 19-20 year-end estimates have been updated to $2,150,000 to be in line
with FY 18-19 actual revenue.
Utility Users Tax (UUT)
Utility Users Tax revenue has been relatively flat since FY 14-15. 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 revenue is projected to come in on budget at approximately $3,224,300. This is a
9.1% decrease when compared to FY 18-19. Other revenue is comprised of business
license tax, rental/lease revenues, golf tax, interest earnings, and several other smaller
revenue sources.
FY 19-20 year-end estimates are expected to remain in line with the amount budgeted
at the start of the fiscal year; however, there are several changes to the distribution of
these revenues. Miscellaneous revenue is projected to see a drop of $138,000 due to
FY 19-20 being the year the final Green Hills settlement payment is scheduled to be
received, among other changes. This decrease in revenue is expected to be offset by
an increase in program/event revenue of $70,000, golf tax revenue of $33,000 , code
enforcement citations revenue of $20,000, and business license tax penalty revenue of
$18,000.
Revenue Summary
Overall, revenues pre-COVID-19 were expected to end the year approximately 0.6%
over what was budgeted at the start of the fiscal year. This increase was primarily the
result of a revision in franchise tax projections and an expected increase in permit
revenue.
General Fund Expenditures
Summary schedules for General Fund expenditures at mid-year are presented below.
The General Fund contains eleven (11) major departments. General Fund expenditures ,
excluding transfers out, exceeded the FY 18-19 mid-year by $2 million or 18%. The two
largest factors for this increase are the Sheriff Contract and the Public Works
Department. Timing of invoices was the main reason for the $1 million variance for the
Sheriff Contract at mid-year. The Public Works Department’s variance of $632,000 was
the result of the fuel modification program that was recently adopted by the City Council
in FY 19-20.
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Table 4: Mid-Year Comparison by Department
Year-End expenditures by Categories:
The General Fund is comprised of ten (10) major operating expenditure categories:
Salaries
Benefits
Legal Services
Sheriff’s Contract
Sheriff Preserve
Professional/Technical
Maintenance/Repairs
Supplies/Materials
Trainings/Conferences
Miscellaneous Expenses
General Fund expenditures, excluding transfers out, are currently estimated to end the
year approximately $1.3 million or 4.8% under budget.
Salaries and benefits are estimated to end the year about $521,000 or 4.9% under
budget due to unfilled vacancies in various City departments. Non-personnel costs,
excluding legal services and the Sheriff’s contract, are cumulatively estimated to end
the year roughly $1 million or 10.4% under budget. Legal services are projected to end
the year almost $200,000 or 21.8% over budget. This growth is primarily due to an
increase in litigation costs. However, the City Attorney is expecting a portion of these
costs to be recovered. All year-end estimates are provided in Table 5.
FY 18-19 Mid-
Year
FY 19-20 Mid-
Year
Mid-Year
Variances % of change
City Council 63,991 46,385 (17,606) -27.51%
Legal Services 454,539 545,317 90,778 19.97%
City Administration 1,603,249 1,726,812 123,563 7.71%
Finance 715,699 861,907 146,208 20.43%
Public Safety - Sheriff 2,716,818 3,742,604 1,025,786 37.76%
Public Safety - Preserve 243,432 154,750 (88,682) -36.43%
Public Works 1,903,468 2,535,426 631,958 33.20%
Community Development 1,518,181 1,482,447 (35,734) -2.35%
Recreation & Parks 1,343,030 1,321,124 (21,906) -1.63%
Park Rangers - 11,581 11,581 100.00%
Non-Departmental 525,391 663,697 138,306 26.32%
Subtotal 11,087,798 13,092,050 2,004,252 18.08%
Transfers Out 2,282,350 2,058,450 (223,900) -9.81%
Total Expenditures 13,370,148 15,150,500 1,780,352 13.32%
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Table 5: FY 19-20 Budget vs. Projected Year-end Expenditures by Major
Expenditure Categories
Salaries & Benefits
There will be an estimated $770,600 in savings in salaries and benefits from the
vacancies listed below despite the City’s continuous advertising of these positions.
Recreation Supervisor II – five months savings of about $57,100
(1) Senior Park Ranger and (3) Park Ranger – one month savings of about
$38,100
Deputy Director of Community Development – nine months savings of about
$163,900
Director of Community Development – three months savings of about $61,400
Associate Engineer – ten months savings of about $96,300
Project Manager – six months savings of about $73,000
Staff Assistant – six months savings of about $34,200
Senior Engineer – ten months savings of about $135,600
Deputy City Manager – six month savings of about $111,000
About $250,000 or 32% of these vacancies savings were used to augment professional
services and overtime throughout the fiscal year. This resulted in an almost $521,000 or
38% net savings in salaries and benefits. A breakdown of those augmentations are
presented below:
Professional services for the Director of Community Development – not to
exceed $66,000
Professional services for various Engineering vacancies – not to exceed
$122,000
Additional Staff over-time – about $61,500 based on mid-year estimates
FY 19-20 Current
Budget
FY 19-20 YE
Estimates
Variance to
Budget % of Change
Salaries 7,687,200 7,317,115 (370,085) -4.81%
Benefits 2,935,900 2,785,013 (150,887) -5.14%
Legal Services 905,000 1,101,916 196,916 21.76%
Sheriff Contract 6,820,500 6,820,500 - 0.00%
Sheriff Preserve 309,500 309,500 - 0.00%
Professional Technical 3,903,478 3,523,736 (379,742) -9.73%
Maintenance/Repairs 3,589,045 3,275,043 (314,002) -8.75%
Supplies/Materials 813,420 711,821 (101,599) -12.49%
Trainings/Conferences 396,500 334,475 (62,025) -15.64%
Misc. Expenses 1,277,866 1,099,550 (178,316) -13.95%
Operation Expenses 28,638,409 27,278,669 (1,359,740) -4.75%
Transfers Out 4,116,900 4,116,900 - 0.00%
Total General Fund Expenditures 32,755,309 31,395,569 (1,359,740) -4.15%
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Non-Personnel
Legal Services
Legal Services is expected to end the year at approximately $1.1 million, almost
$200,000 over budget. This is due to the increase in litigation costs during the year. The
City Attorney is expecting to recover a portion of these litigation costs; however, the
amount is unknown at this time. Staff will update the year-end estimates once we have
an estimate for this reimbursement.
Professional/Technical Services
Professional/Technical Services is expected to end the year approximately $380,000
under budget due to contracted services that staff anticipates will not be needed or
projects that will not begin this year. Staff will continue to monitor department needs and
update the year-end estimates, if needed, at the end of the third quarter. More than 95%
of the savings in Professional/Technical come from three departments:
City Administration Divisions for $110,600;
Public Works Department for $134,000;
Community Development Department for $117,800.
Training and Meetings
Training and Meetings is expected to end the year roughly $62,000 under budget due to
vacancies in several departments.
Repairs and Maintenance
Repairs and Maintenance is expected to end the year about $314,000 under budget
due to repairs that were not needed at mid-year. Staff will continue to monitor the needs
of the departments and update the year-end estimates, if needed, at the end of the third
quarter. More than 91%, or $288,200, of the savings for Repairs and Maintenance are
in the Public Works Department.
Supplies
Supplies is expected to end the year near $101,600 under budget due to office supplies,
materials, and small equipment not needed at this time. Staff will update the year-end
estimates, if needed, at the end of the third quarter. Currently, more than 86% of the
savings in supplies are from three departments:
City Administration for $26,500
Recreation and Parks Department for $29,500
Non-Department for $31,900
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Year-End Expenditures by Department
Below is a table showing General Fund expenditures, including expenditures at mid-
year, by Department. A key indicator at mid-year is the percent of budget spent six
months in to the fiscal year. The General Fund has expended about 46% of its budget
which is in line with the current budget.
Table 6: FY 2019-20 Budget vs. Projected Year-end Expenditures by Departments
Expenditure Summary
The projected year-end expenditures, minus transfers out, is approximate $1.3 million or
4.75% less than budget. The majority of the under-run is due to unfilled positions,
unused professional contracts, unused repair & maintenance, and unused
trainings/conferences. 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 pre-COVID-19 revenues and expenditures at mid-year for FY 19-
20, with an emphasis on the General Fund to determine if the current budget, at the
time, was on target with the actuals at mid-year and the year-end estimates. Staff
highlighted any areas that may end the fiscal year significantly above or below budget.
In summary, the mid-year expenditures were in line with the current budget at 46%. The
projected year-end General Fund revenues were on target compared to the budget,
tracking slightly higher than budget by approximately $197,700 or 0.6%. The projected
year-end General Fund expenditures were tracking lower than the current budget, at
approximately $1.3 million or 4.8% less than budget. In light of the COVID-19 health
crisis, Staff will continue to monitor revenues and expenditures and will most likely make
recommendation for budget adjustments, at the close of the third-quarter. Staff will be
FY 19-20
Current Budget
FY 19-20 Mid-
Year
% of Budget
Spent
FY 19-20 YE
Estimates
Variance to
Budget % of Change
City Council 123,200 46,385 37.65% 95,067 (28,133) -22.84%
Legal Services 925,000 545,317 58.95% 1,127,406 202,406 21.88%
City Administration 3,627,515 1,726,812 47.60% 3,461,820 (165,695) -4.57%
Finance 1,657,362 861,907 52.00% 1,709,032 51,670 3.12%
Public Safety - Sheriff 7,095,200 3,742,604 52.75% 7,058,530 (36,670) -0.52%
Public Safety - Preserve 309,500 154,750 50.00% 309,500 - 0.00%
Public Works 6,526,060 2,535,426 38.85% 6,247,120 (278,940) -4.27%
Community Development 3,814,848 1,482,447 38.86% 3,150,094 (664,754) -17.43%
Recreation & Parks 2,884,863 1,321,124 45.80% 2,766,547 (118,316) -4.10%
Park Rangers 173,800 11,581 6.66% 136,793 (37,007) -21.29%
Non-Departmental 1,501,061 663,697 44.22% 1,216,760 (284,301) -18.94%
Subtotal 28,638,409 13,092,050 45.72% 27,278,669 (1,359,740) -4.75%
Transfers Out 4,116,900 2,058,450 50.00% 4,116,900 - 0.00%
Total Expenditures 32,755,309 15,150,500 46.25% 31,395,569 (1,359,740) -4.15%
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prepared to discuss possible budget adjustments at the Budget Workshop as part of the
discussion item on the preliminary budget.
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.
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