HomeMy WebLinkAboutStaff Report 276-10TO: HONORABLJl; CITY COUNCIL
ATTENTION: FINANCE COMMITTEE
FROM: CITY MANAGER
DATE: JUNE 15,2010
DEPARTMENT: ADMINISTRATIVE
SERVICES
CMR: 276:10
SUBJECT: Fiscal Year 2010 General Fund Budget to Actual Update as of May 26, 2010
RECOMMENDATION
Staff recommends the Finance Committee review and provide input on the General Fund budget
to aetual update for Fiscal Year (FY) 2010.
DISCUSSION
As of May 26, 20 I 0 General Fund operating revenues and expenditures are at 84 and 88 percent
of the adjusted budget respectively (Attachment A). Timing issues related to the collection oftax
revenues and recognition of contraet encumbrances result in expenditures exceeding revenues at
this point, which is typical. We anticipate this temporary situation to be resolved with fiscal year
end reporting.
At its June IS, 2009 Council meeting, the Council adopted a budget that closed a $10 million
budget gap. On AprilS, Council approved midyear budget adjustments for FY 2010
(CMR:189:10). The midyear budget adjustments included changes intended to bring the FY
2010 budget into balance based on a revised revenue projection that produced an additional
projected General Fund deficit of $6.2 million. The General Fund midyear budget-balancing
plan ealled for a decrease of $1.2 million in non-salary expenses and projected salary and
benefits savings of $1.7 million, together equaling $2.9 million. This amount combined with
$3.3 million in transfers back from the Capital budget into the General Fund eliminated the FY
2010 projected midyear deficit of $6.2 million. Staff projects that the year end salary and
benefits savings continue to be within the range of $1.7 million, a potential impact is the use of
overtime beyond the budget. Staff has updated the salary and benefit savings projection as of
May 26, 2010 as shown in Table 1. Depending on workers compensation and general liability,
claims cost adjustments (that are usually not finalized until after fiscal year-end); staff estimates
that the FY 20 I 0 midyear budget-balancing plan ean be realized.
Fiscal Year 2010 Financial Results To Date
On AprilS (CMR: 189:10), Council approved midyear adjustments to the FY 2010 Budget. In
terms of tax revenues, it appears that several revenue sources have stabilized and are not showing
the volatility experienced in prior quarters. These include sales, transient occupancy and
documentary transfer taxes. Property tax projections, however, arc at risk given recent
CMR:276:1O Page 1 of6
information from the County on residential re-assessments (downward) and future commercial
property adjustments based on a plethora of assessment appeals, More detail on each key
revenue source follows,
Revenue Performance in FY 2010
Sales Tax
This revenue source is expected to be in line with the $17.3 million projected in the Adjusted
Budget. Sales taxes in the 2009 calendar year (CY) 4th quarter were 1,2 percent above the prior
year 41h quarter revenue and, while the CY 1'1 quarter is the weakest performer among the four
quarters, staff anticipates sufficient revenues to achieve budget. Strength in the CY 41h quarter
principally came from the County use tax pool rather than from sales taxes generated within the
City's boundaries. Use taxes generally come from out-of-state vendors who sell goods in Santa
Clara County and send those taxes to the State of California, These taxes then go into the county
pool and not to the jurisdiction in which the goods were purchased, The pool amount allocation
is based on each jurisdictions percentage of direct sales taxes generation,
Sales taxes generated within Palo Alto for the CY 4th quarter were 5,2 percent below the prior
year quarter. Department store, auto, miscellaneous retail, and electronic store sales were
especially weak, It is hoped that general information about strengthening consumer spending
and confidence will lead to stabilization and growth in these sectors in the coming quarters, At
this time, and based on the view that the local economy is mending, staff believes the $18.2
million target in the FY 20 II Proposed Budget is achievable,
Property Taxes
Property taxes are beginning to weaken, For FY 2010 staff expects the adjusted budgeted
property receipts of $25,8 million to be some $0,25 million under budget due to recent
adjustments, A recent announcement from the County that there will be a $21.4 billion reduction
in assessed valuation for some 118,000 properties (mainly residential) in FY 20 II means that
proposed budget projections will need revision at mid-year, In the future, the City can expect
additional adjustments beyond those announced, There are a considerable number of
commercial property assessment appeals that the County has not processed. These will be
analyzed over the next two years and will affect City receipts, Unfortunately, the County cannot
provide estimates of impacts or how many commercial properties in the City have appealed.
As has been the case in the past, property tax performance tends to lag that of the more
economically sensitive revenue sources such as sales and transient occupancy taxes. Staff has
maintained relatively conservative estimates for property tax budgets, but the severe downturn in
values throughout the county has affected them negatively,
Transient Occupancy Tax (TOT)
Starting in November 2009, the rate of decline in monthly TOT revenues (compared to the prior
year) started to diminish. In February 2010, receipts were higher than those in February 2009
were and this upward trend has continued through March and into April (based on preliminary
April data). Staff' expects that the FY 20 I ° $6,6 million TOT adjusted budget will be realized at
year end, Occupancy rates in February 2010 (62 percent) and March 2010 (69 percent) have
improved by 4 and 7 percent over the prior year months respectively, Room rates through Mareh
20 I 0, however, were mainly below prior year months with the exception of the preliminary April
data, which shows an increase over the prior year. Based on this analysis, staff believes the $7,0
million in the FY 2011 Proposed Budget is realistic,
CMR:276:10 Page 2 of6
Utility Users Tax
The telephone utility users tax is performing well and is likely to exceed budget at year end. The
utility side of the ledger, however, is under budget due to continuing wet weather and a relatively
mild winter. The entire UUT is expected to fail shy of the adjusted budget by $0.1 million.
Documentary Transfer Taxes
Transfer taxes have turned in a sound perfonnanee to date. Through May they are cumulatively
27 percent above the same period last year. Although staff adjusted this revenue source at
midyear upward by $0.3 million to $3.3 million, it is likely year end revenues will exceed this
level by $0.2 to $0.3 million if current trends continue. As with sales and TOT revenues, the
$3.6 million in proposed transfer taxes for FY 2011 should be achieved. Based on the rising
number of transactions over the past months, the residential and commercial market in Palo Alto
appears to be gaining traction and upward momentum.
Investment Income
The Federal Open Market Committee's (FOMC) continuing accommodative monetary policy
and maintenance of "rock-bottom" interest rates has led to lower interest income than
anticipated. The City's portfolio yield continues to fail and staff projects that year end income
may fall as much as $0.2 million below the Adjusted Budget 0£$1.7 million.
Parking Violation Revenue
Parking Violation revenue projections were decreased $500 thousand at mid-year to realign the
revenue estimates with actual revenue trends over the three prior fiscal years. As of May 26,
parking violation revenue collections are below revenue estimates by an additional $219
thousand. $1.3 million in parking violation revenue has been collected year-to-date. Decreased
retail traffic throughout the commercial business district has contributed to this revenue decline
in FY 2010.
Pennits and Plan Checking Fees
Revenues for plan check and building pennit fees were decreased by $600 thousand as part of
the FY 2010 mid-year budget review. This adjustment reflected the downward trend in housing
starts and construction activity. During the third quarter, there was about a $150 thousand
increase in these two fee revenues on a year-over-year basis as compared to the third quarter of
fiscal year 2009 due to increased construction activity. Based on this increased activity, both
sources of revenue are expected to meet or exceed the FY 2010 adjusted revenue estimates of
$725 thousand for Plan Check Fee revenue and $2.7 million for Building Permit Fee revenue.
Class Registration Fees
The class program fee revenue estimates were reduced by $400 thousand to $1.9 million as part
of the FY 2010 mid-year budget review. This revenue adjustment was necessary due to the
decline in the number of participants registering for classes. CSD staff believes that the $1.9
million adjusted revenue estimate for FY 2010 is realistic and achievable by the close of the
fiscal year.
Golf Course Revenues
Included in the FY 2010 mid-year Budget adjustment is a reduction in the Golf Course revenue
estimates by $200 thousand to $2.9 million. The economic downturn and rainy weather this
spring has impacted the number of golf rounds played causing the projected number of rounds to
be played this fiscal year to be revised downward from 76,000 to 72,000. As of May 2010
(eleven months through the fiscal year) Golf revenues arc 6.3 percent below May 2009 on a
CMR:276:IO Page 30f6
year-over-year basis. Staff expects year end revenues to equal approximately $2.9 million which
is in-line with the projected revenue estimate inch,lded in the FY 2010 adjusted budget.
Expense Performance in FY 2010
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, with the exception of overtime, regular salary
expenses are in line with their budgeted levels.
Salary Savings
Table 1: General Fund Salary and Benefits Savings
General Fund Salary Savings
Salary ,avings
Benefits savings
Subtotal
W orkcrs1 Compensation Incurred but not
Reported (IBNR) Liability·
Net Savings After Adjustment,
Attrition Savings Assumed at Midyear
Net Overagel(Shortage)
Notes;
As of May 26,2010
(in thou.and,)
Overtime
Active Exceeding
Recruitments Budget
$3,476 ($18) ($1,942)
2,166 (3)
5,642 ($2lj ($I,942l
(764 l
$4,878
Net Savings
$1,516
2,163
3.679
(764)
2,915
(1,704)
$1,211
•• Projected citywide total Workcrs' Comp lBNR is $1. 14 million and 67 percent of this year-end liability is alloeated
to the Geneml fund.
There are 622.51 Full-Time Equivalents (PTE) budgeted in the General Fund, of which there are
currently 51.5 vacant FTE. Overtime costs armually exceeding budget will further reduce
anticipated salary savings by $1.9 million. Should the City maintain this vacancy rate and June
salary and benefits usage remains consistent with prior months, the $1.7 million in salary and
benefits savings presented to the Finance Committee on March 2, 2010 can be realized at the end
of the fiscal year.
Overtime Expenditures Compared to Adjusted Budget
General Fund Overtime Analysis:
The following table shows total overtime expenditures reaching 163 percent of the adjusted
budget in the General Fund. At the close of Fiscal Ycars 2007, 2008, and 2009, General Fund
overtime expense exceeded budget by 55 percent, 52 pereent, and 32 pereent, respectively. The
table below shows that Fire, Poliee, and Public Works Departments are the principal departments
CMR:276:IO Page4of6
exceeding their budgeted overtime.
Table 2: FY 2010 General Fund Overtime as of May 26
CITY OF PALO ALTO
FISCAL YEAR 2010 FINANCIAL REPORT
GENERAL FUND OVERTIME
(In thoulJltnd$ 'of dollars)
ACTVA~S
I Adopted I Adjusted I Pre % of
Categories Budget Budget Encumbr Enoumbr Actual Adj Budget
7 7 2
S S
Services 45 45 32
Sarvfees 105 105 78
58 58 52
1.018 1.Q16 2.384
Resources 4 4
and Community Environment 67 67
1.000 1.072
113 113
The Fire Department has used 234 percent of its annual overtime budget ($1,366,000 in excess
of budgeted overtime) through the end of May 2010. This is partly due to Station #8 staffing
($0.2 million) and Medic-I staffing ($0.3 million), and Strike Team deployment ($0.1 million).
The remaining $1.485 million in excess overtime expenditures resulted from backfill for
minimum staffing requirements due to sick leave (personal and family), vacations, other leaves
(military, bereavement, and jury duty), workers' compensation light duty assignments, and
workers' compensation for employees on full disability. The number of employees on full
disability has been high in FY 20 I O. The number of personnel on disability has reduced to six
currently from a high of I3 in February 2010. As of the beginning of June, there are two
employees on long-term disability, three employees on light or modified duty, and one employee
on unpaid leave. The two employees on long-term disability will be retired by the end of June
2010 and one is expected to return to full duty sometime in June 2010. The Fire Department
receives a 30.3 percent reimbursement from Stanford University for all operating costs.
The Police Department has used 121 percent of its annual overtime budget ($229,000 in excess
of budgeted overtime) but has reduced overtime spending by 12 pel'cent from the previous year.
The main factors contributing to overtime usage are staffing shortages due to disability leave,
vacancies in patrol and the 9-1-1 dispatch center, and academy and field training programs. In
addition, overtime was incurred in watching the train tracks prior to enlisting a private security
service. The Department receives partial reimbursement for overtime worked from Stanford and
the Utilities Department for dispatch services and from neighboring cities for animal control and
care services. Traffic control services at Stanford football games and other events are partially
offset by reimbursements from the University and other organizations. As of the beginning of
June, the Police Department has five Police Officers on disability recovering from work related
injuries and two Community Service Officers on modified duty.
The Public Works department has used 139 percent of its annual overtime budget ($43,000 in
CMR:276:1O Page 5 of6
excess of budgeted overtime). Due to vacancies, the department has had limited staffing in
custodial and facilities maintenance areas and has used overtime to maintain minimum staffing
levels. During the first nine months of FY 20 I 0, the department used limited hourly personnel to
assist with custodial and facilities maintenance services. Overtime costs are expected to rise
further as the temporary salary budget is exhausted and vacancies are left unfilled.
For historical and more detailed information on public safety overtime costs, see Attachment B.
RESOURCE IMPACT
Staff projects that the FY 2010 adjusted budget will end in a balanced budget. It is important to
note that overtime, workers compensation and general liability claims cost could result in the
need to draw froin the General Fund Budget Stabilization Reserve. Staff will have a better
understanding of the General Fund FY 2010 year-end projection in early October and will
present Council with an update at that time.
ENVIRONMENTAL REVIEW
This is not a project for the purposes of the California Environmental Quality Act.
PREPARED BY: ~~F~ TRUI)IKENBERRY
Accounting Manager, Administrative Services
DAVID RAMBERG
Assistant Director of Administrative Services
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
ATTACHMENTS
Attachment A: Fiscal Year 2010 General Fund Financial Report as of May 26,2010
Attachment B: Police and Fire Departments Overtime Analysis for Fiscal Years 2005 through
2009, with Fiscal Year 2010 Data through May 26, 2010
CMR:276:10 Page 6 of6
Attachment A
CITY OF PALO ALTO
FISCAL YEAR 2010 GENERAL FUND FINANCIAL REPORT
all of MAY 26,2010
(In #Wf#l4t1d$ of dolfars;
tJ:G ACTVALS (626
%of
Adoptod Midyear Adjusted Changes Pre Adjusted
Categories Budget Budget Budgot to Midyear Encumbr Encumbr Actual BUdget
Rev~!lYi! i Qtbl[ §2l!lI!!§I
S.les Ta. 19,650 17,313 17,313 14,975
Properly Tax 25,752 25,776 25,776 23,945
Transient Occupancy Tax 7,000 6,639 6,639 5,262
Ulility User. Tax 11,250 11,417 11,417 9,989
Other T axes and Fines 5,633 5,564 5,564 4,620
Charges for Servlces 20,236 19,017 19,017 15,995
Permits 8. Licens.s 5,056 4,511 4,511 4,126
Return on Investment 1,900 1,662 1,662 1,250
Rental Income 13,655 13,606 13,606 11,794
From Other Agencla. 92 324 324 245
To Olher Fund. 10,643 10,646 10,546 8,947
19,664 19,664 19,664 19,743
5,924 5,924
EXRIDyiW[l1 , QUu~r YI§1§
Cily Attorney 2,569 3,298 3,298 205 498 2,375
City Audllor 999 1,096 1,098 124 881
City Cieri< 1,512 1,519 1,608 89 3 21 1,300
City Counell 296 309 309 28 7 263
City Manager 2,395 2,631 2,831 5 45 1,988
Administrative services 6,761 6,859 6,889 124 5,944
Community Services 21,876 22,348 22,348 67 851 18,312
Fire 25,166 26,621 26,621 58 583 23,962
HUman Resources 2,837 2,906 2,906 39 56 2,474
Library 6,385 6,649 6,649 76 266 5,614
Planning and Community Environment 9,858 10,317 10,317 235 620 6,418
Police 29,998 30,219 30,219 37 283 26,333
Public Works 13,464 13,962 13,982 247 666 11,303
Encumbrances 3,659 3,659
Notes & loans 426 426
Interfund advances 1,100 1,100
Invenlo1)' of material & supplies 3,173 3,173
Prepaid Items 1,775 1,775
EquHy Transfer Stabilization 3,636 (3,636)
AttaGhm(mt 9
Police and Fire Departments
Overtime Anaiysle for FJscal Yea~ 2005 through 2009
With Fiscal Year 2010 Data Through May 26. 2010
Fiscal Year Endins JLlne SQ
2005 2006
POLICE DEPARTMENT
OVertime EKpone.
Original Budget $974,426 $981.862
CUrrent Budget 1,028,337 1,009,705
Net Qverllme Cost· see below 1,098,077 700,647
Remaining Budget $229,056
Overtlm$ .fiot OMt
--.-!1,229,851 Actual Expense $1,405,155
Leaa Ro!mbut1Jetnenle
Stanford Communjcatlons 30,941 30,937
Utilities Communlcatlons ReImbursement 17,404 11,402
Local Agencies (A) 32,617 34,665
Federal Grants
State Grants 19) 6,135 65,635
Police Serviee FeltS 37,168 49,165
Other 714S9
Total Relmbursemenls 133,174 197,924
Leee Oepartttlffrit Vacanelee 37$1 515 425,884
Net Overtime Cost $1,0$$,077 $780,~~?
Dspartmanl Vacancie, (number or days~ 1,642 1,73.3
FIRE OEPARTMENT
OY'srtlme El(pen~e
OrIgInal BUdget $982,874 $969,369
Currenl Budget 962,674 959,389
Net OvertIme Cost ~ S99 below 677,892 637,310
Remaining Budget $322.079
o"ertlme Net CO$t
Actual Expense $1,956,529 $1,582,656
Less Reimbursements
Slanford FIre S&~s (OJ 59:1,628 . 479,606
CaI-FlrelfEMA (strike Teams) 66,289
State Homeland Security
Grant Program (SHSGP) (O~ 17,203 72,254
Urban Afea Secuflty InItIative (UASI) 26,782
Tolal Reimbursements 644,911
Le!;!! Department Vacancl&s 468,606 3001637
Net Overt!«lEt Cost $877,892 $631,310
Department Vacanclee (number of daye) 1,960 1,23()
NOTES:
(A) Includes Animel Services contract with los Attos, Mounteln View and Los Altos Hils.
(B~ Stete Office of Trettic Safety a11d ABC grants,
(0; Included in the SHSGP and VASI reimbuf&ements i& a small amount of par diem relmbunOOlent.
2008
S1,Q15,S20 $1,008,815
1,Q14.399 1,071,005
1,025,716 1,096,S94
$46,861 ($25,869)
$1,785,~~7 $2100e l 642
39,342 65,()79
22,130 36,601
36,457 41,770
63,3.44 4,672
43,216 67,:)90
16,157
m,875
5431°01 575.973
$1,006.694
2,260 2,766
$1,032,674 $692,674
1,032,874 996,674
737,768 8531442
$294.900 $133,232
$1,800,157 $1 1744,076
563,609 526,455
85,531 140,224
40,697 10,164
690,231
432,752 200.641
$737,766
1,14Q 810
Relmbur&emenl from U.S. Department of Homeland Security for HaxMet Continuing Challenge Training Conference (Sap 20(9)
(0) Stanford reimburses 30.3% of Fire expenditures.
6126
2009 2010
$999,000 $999,900
1,018,000 1,071,682
S8S j 568 171,723
$299.93.9
$1,885,842 $1,300,725
42,100 53,312
23,716 29,967
31,41:! 29,038
10,006 55,241
63,612 76,809
18,982
164,080 ~'244,385
695,194 264 1617
$686,588
:""-"'---
$771,723
2,402 1,125
$1,017,674 $1,011,674
1,353,058 1,017,674
651 1148 1,222,266
$101,9:10 ($2()4.614} ..
$1,591,261 $2,394,137
462,162 722,394
453,619 64.76~
4,342 10,647
940,113
3641046
$651.146 $1,222,288
760 1,200