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HomeMy WebLinkAboutStaff Report 237-09TO: ATTENTION: FROM: DATE: SUBJECT: HONORABLE CITY COUNCIL FINANCE COMMITTEE CITY MANAGER MAY 12,2009 DEPARTMENT: ADMINISTRATIVE SERVICES CMR: 237:09 Third Quarter Fiscal Year 2009 Financial Results The purpose of this report is to provide the Council with information on the financial condition of the City'S General Fund (GF) as ofthe third quarter of Fiscal Year 2009. DISCUSSION At third quarter, the fiscal year is 75 percent complete, General Fund operating revenues and expenditures are at 69 and 78 percent of the adjusted budget respectively. Timing issues related to the collection of tax revenues and recognition of contract encumbrances result in expenditures exceeding revenues at his point. However, year-end, General Fund revenues are projected to exceed expenditures. Revenue Highlights for Third Quarter Fiscal Year 2009 Financial Results Attachment A shows third quarter year-to-date actual revenues as a percentage of the adjusted budget. General Fund revenues have weakened considerably in Fiscal Year 2009. Consumer and business confidence has eroded and economically sensitive revenue sources such as sales and transient occupancy taxes are retreating. Staff will continue to closely monitor these revenues for the remainder of the fiscal year. Sales Tax Sales taxes, as of the third quarter, are expected to drop by $2.1 million, or 9.5 percent, below the adopted budget at year end. Fourth quarter results for 2008, unadjusted for one-time events, showed a 14.9 percent decline. Department store, auto sales, recreation products, electronic equipment, light industry, and restaurants were noticeably weak while service stations, office equipment, building materials, and apparel stores turned in stronger performances. With the country in a deep recession and consumer confidence at its lowest point in decades, consumers are scalin~ back their spending plans for major purchases, resulting in substantial declines in this major revenue source. CMR: 237:09 Page I of 5 Property Tax Property taxes are expected to increase by $1.6 million, or 6.8 percent over the adopted budget. Although Palo Alto's assessed values remain healthy for the current fiscal year, data from the county shows growth in assessed values has significantly moderated. The Santa Clara Assessor said that the "assessment 1'011 contains clear evidence that Silicon Valley is not immune to the national recession and economic meltdown in the residential real estate market." Recent data shows that Palo Alto's assessment valuation has weathered the housing market value decline better than most cities in the County. Transient Occupancy Tax Compared to the adopted budget, Transient Occupancy Tax (TOT) revenues, which arc generated by hotel occupancy, are expected to decrease by $0.7 million to $7.7 million. Occupancy rates and daily rates began a steady descent after the first few months of the fiscal year due to the recession. For example, compared to thc prior year, from July 2008 to February 2009, occupied days dropped by 13,791 days and average occupancy rates declined from 75.2 perccnt to 58.01 percent. Documentary Transftr Tax Documentary transfer tax revenues, which are generated from property transactions, have declined significantly, with an expected year-end decline of $2.2 million. Starting in August 2008, documentary transfer taxes began a steady decline. Through mid-April, this revenue source was 45.2 percent below prior year levels. Property transactions have dropped dramatically due to the credit and housing markets. As in prior economic downturns, residential turnover has declined as homeowners choose to wait until market conditions improve rather than sell in a buyer's market. General Fund Reserves The Budget Amendment Ordinanee (BAO) processed through the 3ed quarter included thc following: • $3.4 million BAO for the Public Safety Building Design and $0.4 million Option Payment, this resulted in an increase to operating transfer-out. • $2.0 million BAO for City Manager Housing, this resulted in an increase to Administrative Services expenditures. 'In addition, the former Administrative Services Director paid-off his housing loan of $0.7 million. Thcse transactions resulted in a net draw from the Budget Stabilization Reserve of $5.1 million. Expense Highlights for Third Quarter Fiscal Year 2009 Financial Results In many areas, expenditures are cyclical in nature and a department's spending commitments could include items for the entire fiscal year. Given the nature of cyclical expenditures and possible commitments for the entire fiscal year, department budgets, as a whole, are within their expected target range. CMR:237:09 Page 2 of5 Overtime Expenditures Compared to Adjusted Budget General Fund Overtime Analysis: Attachment B shows total overtime expenditures reaching 99 percent of adjusted budget. Although most of the General Fund departments are below their overtime budgets, the Fire, Police, Planning and Public Works Departments are currently exceeding their budgets for the following reasons: • The Fire Department has used 88 percent of adopted budget for overtime (an increase of 19 percent from the second quarter). The primary factors contributing to overtime usage include Station #8 staffing ($0.2 million) and Medic-l staffing ($0.3 million), following Council direction to staff these functions using overtime. The remaining overtime costs ($0.8 million) resulted from backfill for the following: Contractual minimum staffing requirements, workers' compensation and light duty assignments, vacation, sick leave, military leave, bereavement leave, jury duty, and the bicycle safety program for PAUSD. Vacancies due to workers' compensation increased significantly between Q2 and Q3. Many were for surgeries of employees due to work related injurics and resulting in long term vacancies. An unprecedented amount of overtime was incurred for Strike Team assignments to State wild land events in 2008 for which the State will reimburse $437,000 to the City. The City has been reimbursed $335,000 to date and is awaiting the remainder. Given current reimbursement receipts, there is a high likelihood that the City will receive payment from the State for these expenses. • The Police Department is at 123 percent of it~ budget for overtime. Overtime usage for the 3rd quarter has decreased 45 percent from the previous quarter. The Department's overtime use can be attributed mainly to officers being held over due to busy shifts, case writing, investigations, training, court appearances on off days, on-call pay for animal services staff, staffing shortages due to disability leave, patrol and 9-1-1 dispatch center vacancies, and academy and field training programs ($950,000). In addition, incidents such as the investigation of a major homicide ($75,000), an attempted homicide ($29,000), and the response and investigation of street robberies ($105,000) added to the departmental overtime. Traffic control services at Stanford football games and other events ($90,000) are partially offset by reimbursements from the university and other sponsors. • It should be noted that vacancy savings in regular salaries for the Public Safety departments partially offset the increases in overtime. To help control expenditures, the budgeted dollars for overtime expenditures are not automatically adjusted when negotiated salary increases occur. This may change in future budgets. • The Planning & Community Environment Department (P&CE) is at 83 percent of the adopted budget for overtime primarily due to four factors. First, overtime for the Comprehensive Plan Amendment is necessary to ensure adequate community participation in keeping with Council expectations. Community workshops and Planning & Transportation COlnmission meetings to discuss the Comprehensive Plan are all scheduled in the evening to facilitate public participation. These will be ongoing through CMR:237:09 Page 3 of5 the two-year update process. Second, overtime for the Commute Coordinator was needed to develop the work program for Fiscal Ycar 2009 and to work with school groups prior to school opening in September. Previously, the Commute Coordinator was a management position but was converted to a SEIU position in Fiscal Year 2008. The position is half time but work demands fluctuate with increased workload at certain periods of the year. Third, the Planning & Transportation Commission agendas have required additional meetings that involve staff overtime. Finally, to help control expenditures the budgeted overtime amount for the department has remained at the same level since Fiscal Year 2004 and has not kept pace with salary adjustment increases. This may be addressed in future budgets. Planners and Senior Plarmers have many night meetings to attend and are included in the Serviee Employees' International Union (SEIU), requiring payment of overtime for night meeting attendance. The department is continuing to monitor the overtime budget and attempting to minimize the amount of overtime usage. • The Public Works Department is at 114 percent of the adopted budget for oveltime. The overage is primarily in Facilities and is due to overtime for emergency callouts, scheduled work that eannot be completed on straight time due to impact to the building'S occupants, meeting set-up and clean-up, and to backfill for vacancies and absences. With the Police, Fire, Plarming & Community Environment, and Public Works Departments removed from the overtime analysis, General Fund oveltime expenditures are at 63 percent of the adjusted budget as of the third quarter. ENVIRONMENTAL REVIEW This is not a project for the purposes of the California Environmental Quality Act. CMR:237:09 Page 4 of5 PREPARED BY: -1~E~~ ~ aJ}~!QQ Senior Accountant, Administrative Svcs. ~~~~~~~~ DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: ATTACHMENTS Senior Financial Analyst, A JAMES KEENE City Manager Attachment A: Fiscal Year 2009, Third Quarter Financial Report, General Fund Attachment B: Fiscal Year 2009, Third Quarter General Fund Overtime CMR:237:09 Page 5 of5 Attachment A CITY OF PALO ALTO FISCAL YEAR 2009 Q3 FINANCIAL REPORT GENERAL FUND (In thoussnds of do/1aFS) CTIJ, I Adopted I Adjusted Pre I I Budget Budget Encumbr Encumbr Categories ---B!lll!!n!!es & Other Sources Sales Tax 22,402 20,265 -- Property Tax 23,510 25,075 -- Transient Occupancy Tax 8,424 7,700 -- Utility Users Tax 10,783 11,024 -- Other Taxes and Fines 8,816 6,139 -- Charges for Services 20,849 19,762 -- Permits & Licenses 5,767 5,347 -- Return on Investment 2,348 1!'~~~ -- Rental Income 13,426 -- From Other Agencies 86 1n ~~~ -- Charges To Other Funds 10,952 -- Other R"'It",rill"'~ 1,531 1,559 -- Total .. 1?A AM 123,673 . .. - Operating Transfers-In 17,677 17,677 -- Eneu and n -4,459 -- Total nf F"n'ltI .. 146,571 .1.d1\ iln!l -- EXllendltures & Other Uses City Attorney 2,778 3,636 50 488 City Auditor 931 1,002 55 94 City Clerk 1,260 1,362 -29 City Council 315 361 -8 City Manager 2,231 2,227 58 89 Administrative Services 7,153 9,330 20 1 B6 Community Services 21,600 21,509 22 1,453 Fire 24,260 24,672 152 156 Human Resources 2,822 2,992 32 132 Library 6,570 6.598 37 299 Planning and Community Environment 10,419 10,710 86 736 Police 29.631 30.044 -335 Public Works 13,659 13,847 274 642 7.980 6,890 -- total IiWes .~? I'\nG .u ... n 786 I 4,647 I Operating Transfers-Out 13,299 15.817 -- I otal uses or 786 I 4,647 I Net: lu.mcnJ . 1,263 Adjust - NetTo! 1,263 r>. "II 439 26.100 ?""M 20,912 IIIiIiIiIiIIiII • Excludes encumbrances, ~appropriatlon and Infrastructure reserve I %of Actual Adjusted Budget 13,448 66% 16,159 64% 4,947 64% 8,814 80% 3,919 64% 14,867 75% 3,060 57% 1,213 64% 10,567 81% 137 17% 8,031 73% 1,752 112% 86,914 70% 13,271 75% -- 100,185 69% • 2,058 71% 640 79% 939 71% 214 61% 1,614 79% 5,917 66% 16,846 85% 19,506 80% 2,257 81% 5,088 82% 7,269 76% 23.616 60% 10.229 80% 5,664 82% 101,8671 79% 11.224 71% 113,081 I 78% Manager ministrative Services Services Resources Attachment B CITY OF PALO ALTO FISCAL YEAR 2009 Q3 FINANCIAL REPORT GENERAL FUND OVERTIME (In thousands of dollars) 7 7 3 3 45 38 185 138 58 58 1,018 1,353 4 4 ng and Community Environment 67 67 1,000 1,017 113 113 1 24 93 38 1,187 0 55 1,252 128