HomeMy WebLinkAboutStaff Report 407-10TO: HONORABLE CITY COUNCIL
ATTENTION: FINANCE COMMITTEE
FROM: CITY MANAGER
DATE: NOVEMBER 16, 2010 .
DEPARTMENT: ADMINISTRATIVE
SERVICES
CMR: 407:10
SUBJECT: First Quarter Fiscal Year 2011 Financial Results
The purpose of this report is to provide the Council with infonnation on the financial condition
of the City's General Fund as of the first quarter of Fiscal Year (FY) 2011.
DISCUSSION
The FY 2011 General Fund First Quarter Financial Report reflects the FY 2011 Adopted Budget
updated to include any budget adjustments to date. Attachment A shows Revenue & Other
Sources and Expenditnres & Other Uses as of September 30, 2010. Revenue and expense
highlights are discussed in this report. The adjusted budget column of Attachment A shows $4.0
million in encumbrances and reappropriations that is distributed to departments according to
obligations as of June 30. In addition to these encumbrances and reappropriations, the adjusted
budget also includes $0.6 million in Budget Amendment Ordinances (BAOs) that have been
adopted by Council this fiscal year. For a detailed listing of these BAOs, please refer to the
Budget Stabilization Drawdown seetion of this discussion.
"0'
Revenue Highlights for First Ouarter Fiseal Year 2010
Attachment A shows first quarter year-to-date actual revenues as a percentage of the annual
adjusted budget. The receipt of General Fund· revenues do fluctuate over the year so
extrapolating year-end results from first quarter data can be misleading. Factors' affecting
receipts include the timing of State and county tax payments and the seasonality of revenue
flows. It is only when the City "closes its books" at year-end that performance compared to
budget can be realistically assessed. Nevertheless, staff discusses variances that are at least S
percentage points below the 2S percent level and comments on whether the. budget revenue
targets are achievable.
Sales Tax receipts for the first quarter ofFY 2011 are at 20 percent of budget. The variance is
primarily caused by the timing of the "Triple Flip" quarter cent tax payment which is made in
January and May. Because one quarter of our sales tax cash earnings are delayed into 2 semi
annual payments, receipts in the first quarter are below budget.
CMR:407:JO Page 10f7
Based on perfonnance to date and a slowly recovering economy, it is likely the City will reach
its budget target of $18.2 million at year end. In the Calendar Year (CY) second quarter receipts,
however, electronic equipment, a top performer in recent quarters, tumbled 28 percent compared
to the prior CY 2nd quarter. Staff will monitor this area carefully to determine whether a trend is
developing.
Property Tax receipts are paid by the County beginning in the months of November and March
with half yearly reconciliations performed in January and July. Revenues, therefore, are uneven
during the year. This. explains the lack of revenues in the first quarter of FY 2011. Because of a
high number of appeals for reassessments by commercial properties, staff expects lower than
budgeted revenues for FY 2011. Staff will be making a negative adjustment of $350,000 at
midyear. Weak property taxes also are expected for FY 2012 given the County's substantial
backlog in processing commercial reassessment requests. Expected revenues for FY 20 II will
drop from $25.9 million to $25.5 million.
Transient Occupancy Tax (FOT) Transient occupancy taxes have been trending upward since
February 2010. Occupancy and daily room rates moved from 62 percent and $142 per day in
February 2010 to 75 percent and $142 per day in September 2010. If the current and healthy
level of occupancy rates continue, and daily rates begin to rise, the City should exceed its FY
2011, $7.0 million budget and offset some of the negative adjustment in property taxes.
Other Taxes and Fines Documentary transfer taxes performed well in FY 2010 generating $3.7
million or $0.4 million more than the $3.3 million budget. Performance to date shows transfer
tax revenues a slight 0.5 percent below prior year revenues during the same period. Staff is
hopeful that this tax will equal or exceed the $3.6 million budgeted for FY 2011 and partially
offset the negative, midyear adjustment for property taxes.
Included in the Other Taxes and Fines category is Parking Violation revenue. To date, the City
has collected $0.2 million or 16 percent of the $1.5 million budgeted in Parking Violations.
Another $0.1 million is expected from the State of California for first quarter parking violation
"revenue" and will be included in second quarter figures. The number of first quarter citations
issued is 3 percent lower than the same quarter in prior year due to staff vacancies (1.5 FTE) and
disability or workers' compensation leaves; the number of vehicles monitored has decreased 9
percent. Based on historical trends and revenue recognized in current year, year end parking
violation revenue is projected to be $1.3 million, or $0.2 million short of budget.
Charges for Services revenue is $3.7 million, or 16 percent of adjusted budget, as of the first
quarter. First quarter Stanford Fire and Communication Services in the amount of $2.0 million
was billed and will be included in the second quarter figures and increase Charges for Services
revenue to $5.3 million, or 26 percent of adjusted budget.
Rental Income falls below target at 17 percent of adjusted budget. The General Fund receives
$10.2 million in facilities rent from Utilities and Public Works Enterprise Funds for use of
General Fund facilities, of which $4.3 million is charged to the Refuse Fund. First quarter rent of
$1.4 million was not charged to the Refuse Fund due to impacts concerning State landfill closure
requirements and cash balance in the Refuse Fund. In previous years the rent was charged
CMR:407:10 Page2of7
monthly, however to ensure that the Refuse Fund has adequate cash flow the rent payment will
be recorded at Fiscal year-end. A more detailed discussion of the Refuse Fund can be found on
page 6 of this report.
Expense Highlights for First Quarter Fiscal Year 2011
In many areas, expenditures are cycli6al in nature and a department's 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.
Budget Stabilization Reserve Drawdown
The General Fund adopted budget reflects a $33 thousand addition to the BSR. As of September
30, BAQs totaling $662 thousand have adopted by City Council, which result in an adjusted
draw of $629 thousand from the BSR. Listed below are the BAQs that have been adopted thus
far:
Description
Beginning BSR Balance, as of 6/30/2010 (nnandited)
Adopted Budget -Net Surplus
Ord 5087 -Election costs for Palo Alto Professional Firefighters' Initiative
Ord 5091 -City Manager Home Capital Improvement
Ord 5093 -Firefighters' Charter Amendment and switch to even numbered
years Council Elections
Ord 5094 -Transfer to Refuse Fund (Loan)
Subtotal-Drawdown from BSR
Ending BSR Balance, as of 9/30/2010
BSR as a Percentage of Ad.insted Expenditures
Contingency Account Balances
City Council Contingency Account
Council
Action OOOs
Date Amount
$27,396
33
7/26110 (22)
8/2110 (I25)
9113110 (275)
9/20110 (240)
(629)
$26,767
19.1%
The begiuning balance of the City Council Contingency Account was $305 thousand, which
includes a $55 thousand budget carry forward from Fiscal Year 2010. As of the end of Qctober,
the balance of the Council Contingency Account is $6,500. Below is a listing of City Council
Contingency Account activity:
CMR:407:10 Page 3 oF?
City Cou\1cil's Contingency Beg; Bailjnce
City Council's Carry forwanl Balance
Planning Department for on-call engineering services related to High
Speed Rail
City Manager's Office to reimburse Contract Services for Legislative
Advocacy Service for Capital Advocates (CMR:357: 1 0)
Planning Department for additional months (until February 28,2011) for
Capital Advocates (CMR:357:1O)
City Clerk to pay for continued publication of City Council and Standing
Committees agenda in the newspaper (motion approved in 912711); to be
reimbursed in midyear
City Manager's Office to cover staffing cost of High Speed Rail (motion
approved in 06/07/10)
En!iing Balance as of 10125/10
City Manager'3 Contingency Account
$250;000,.00
55,000.00
(120,000.00)
(15,000.00)
(38,500.00)
(35,000.00)
(90,000.00)
$6,500.00
The beginning balance of the City Manager Contingency fund was $250 thousand. As of the end
of October, the City Manager's Contingency Aceount has a balance of $1 00,0 14. At midyear, the
City Manager's Office is seeking to draw down from the BSR a total of $71 thousand which is
comprised of $26 thousand related to High Speed Rail Property Value and Economic Analysis
and $45 thousand for the City's Ethics Program development.
Excess of Overtime Expenditures to Adjusted Budget
CITY OF PALO ALTO
FISCAL YEAR 2011 Q1 FINANCIAL REPORT
GENERAL FUND OVERTIME
(In thousands of dollars)
, I Adopted I Adjusted I % of
Categories Budget Budget Actual AdJ Budget
City Attorney 0%
City Auditor 0%
City Clerk 7 7 0 3%
City Council 0%
City Manager 3 3 3 100%
Administrative S6Ivices 36 36 8 23%
Community Services 105 105 28 27%
library 58 58 9 16%
Fire 1,018 1,018 668 66%
Human Resources 4 4 0 2%
Planning and Community Environment 67 67 15 22%
Police 968 968 353 36%
Public Works 113 113 47 42%
Total Overtime .2,376 . 2,376·1 1,1321 48%
CMR:407:10 Page 4of7
General Fund Overtime Analysis:
The table above shows total overtime expenditures reaching 48 percent of adjusted budget.
Overtime for the Community Services, Fire, Police and Public Works Departments as of the end
of the first quarter are explained below. For additional detail regarding the Police and Fire
Departments overtime eosts, please refer (0 Attachment B.
• The Community Serviees Department has used 27 percent of its annual overtime budget
primarily due to theatre staffing for the peak summer season, summer eamp staffing for
overnight sessions in Foothills Park, and Junior Museum and Zoo staffmg for animal care
on weekends and evenings.
• The Fire Department has used 66 percent of its annual overtime budget t1U'ough the end
of September 2010. This is due mainly to Station #8 staffing ($0.2 million), Medic 1
staffing ($0.1 million), and baekfill for minimum staffing for vacation ($0.2 million).
The remaining $0.2 million rcsulted from baekfill for minimum staffing requirements due
to sick leave (personal and family sick leave), other leaves (military, bereavement, jury
duty), special assignment (temporarily fill open positions, participate in promotional
testing and entry level hiring process), attend mandated/position· specific training, and
workers' compensation (light duty/full disability). Overtime usage is anticipated to slow
for the remainder of the fiscal year due to the seasonal closure of Station #8 in October,
slowdown of vaeation requests, and the anticipated hiring of five firefighters in January
20 II.
• The Police Department has used 36 percent of its annual overtime budget but has reduced
overtime spending by 3 percent from the previous year. The main factors contributing to
overtime usage this quarter were staffing shortages due to disability leave, vacancies in
patrol and the 9-1-1 dispatch center, and academy and field training programs as well as
traffic control services at Stanford football games and the Downtown Art and Wine
Festival. 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 reimbw'sements from the university and
organizations.
• The Public Works Department overtime is primarily in the Facilities division. Two
facilities mechanics positions were frozen due to budget initiatives last fiscal year and
were finally approved to be filled late this summer, however ongoing and necessary
maintenance continues for City facilities. The overtime will be offset by salary savings
from not only those two positions but a half time Administrative Associate position that
has been vacant since mid July. In addition, the Facilities manager retired effective mid
October and is currently slated to remain vacant for the next year. Since the position wi11
remain vacant, it is likely the overtime in these cost centers will continue as the two non
exempt Facilities Supervisors will be picking up the duties of the Division Manager's
position in addition to their own assignments.
Staff will continue to monitor overtime expenditures in the context of overall expenditures and
make appropriate adjustments as necessary at midyear.
CMR:407:IO Page j of?
Enterprise Funds
The majority of the Enterprise Funds are in good fiscal condition. The following provides an
update on funds that need explanation.
Refuse Fund
Staff continues to closely monitor the activities of the Refuse Fund. On September 20, 2010,
Council approved a rate increase and a budget amendment ordinance with other revenue
increases and expenditure decreases to narrow the FY 2011 operating deficit within the Refuse
Fund. This budget amendment ordinance also ensures that the Refuse Fund maintains an
adequate cash balance to remain in compliance with the State landfill closure funding
requirements.
At the beginning of FY 2011, the Rate Stabilization Reserve was in a negative position of
$4,936,329. The deficit position is primarily due to the recognition of the landfill post closure
liability as required by accounting rules, and operating losses incurred over the past two years. It
is anticipated that the Rate Stabilization Reserve will return to a positive balance in future years
under a subsequent rate structure to be determined after a cost of service study (currently in
progress) is conducted and an analysis of the refuse rate structure is completed.
On November 22, 2010, Council is scheduled to evaluate the Finance Committee's
recommendation that Council approve staffs recommendation to quickly fill the remaining
landfill capacity, while retaining existing composting operations and thereafter, converting the
area to parkland as fast as possible. The recommended actions are expected to reduce the
operational costs of the landfill and minimize the cost of processing curbside yard waste.
Finally, staff will return to Council in January, 2011, to discuss the cost of service study and
refuse rate structure.
ENVIRONMENTAL REVIEW
This is not a project for the purposes of the California Environmental Quality Act.
PREPARED BY:
CHRISTINE PARAS I
anager, Administrative Svcs.
~~ .r:e:
TARUN NARAYAN
Senior Finan . al Analyst, Administrative Svcs.
DEPARTMENT HEAD APPROVAL:
LALOPEREZ
Director, Administrative Services
CMR:407:10 Page 60f7
(, '.
CITY MANAGER APPROY AL:
ATTACHMENTS
Attachment A:
Attachment B: .
CMR:407:10
Fiscal Year 2011, Q 1 Financial Report, General Fund·
Police and Fire Departments' Overtime Analysis for Fiscal Years' 2006
through 20 I 0 with Fiscal Year 2011 Data through September 30, 2010
Page 70f1
,
I : ,
: Categories
Revenues & Other Sources
Sales Tax
Property Tax
Transient Occupancy Tax
Utility Users Tax
Other Taxes and Fines
Charges for Services
Permits & Licenses
Return on Investment
Rental Income
F rom Other Agencies
Charges To Other Funds
Other Revenues
Total Revenues
Operating Transfers-In
Encumbrances and Reappropriation
Total Sources of Funds
EXllenditures & Other Uses
City Attorney
City Auditor
City Clerk
City Council
City Manager
Administrative Services
Community Services
Fire
Human Resources
Library
Attachment A
CITY OF PALO ALTO
FISCAL YEAR 2011 Q1 FINANCIAL REPORT
GENERAL FUND
(In thousands of dollars)
ACTUALS
I
Adopted I Adjusted
Pre I I Budget Budget Encumbr Encumbr
18,218 18,218 --
25,907 25,907 - -
7,021 7,021 --
11,429 11,429 - -
5,943 5,943 --
20,008 20,008 --
4,593 4,593 --
1,646 1,646 - -
13,716 13,716 - -
155 155 --
10,622 10,622 - -
1,490 1,490 --
120,748 120,748 --
18,684 18,684 - -
-3,963 --
139,433 143,396 . .
2,369 3,002 32 582
982 1,081 -209
1,093 1,446 . 19
142 173 -8
2,178 2,235 5 40
6,293 6,593 74 122
20,032 20,371 216 2,525
27,007 27,454 113 537
2,817 2,888 -145
6,609 6,845 39 156
Planning and Community Environment 9,320 10,268 399 731
Police 30,579 30,810 8 775
Public Works 13,084 13,956 14 1,480
Non-Departmental 5,970 5,738 55 -
Total Expenditures 128,475 132,861 9541 7,3291
.
Operating Transfers-Out 10,924 11,164 -.
Total Uses of Funds 139,399 144,025 9541 7,3291
Net Surplus (Deficit) 33 (629
Adjust intra-fund reserve transfer -
Net To (From) Reserves 33 (629)
BeginninQ Reserves 27,396 27,396
Projected Ending Reserves 27,429 26,767
h d d9 3 I %of Actual Adjusted
Budget
3,586 2~~ 39
1,446 ;~~ 2,584
1,112 ~~~ . 3,252
1,126 ;;~ 373
2,316 ~~~ 59
2,800 ~~~ 494
19,186 111%
5,237 28%
--
24,423 17%
591 40%
210 39%
305 22%
45 31%
581 28%
1,474 25%
5,390 40%
6,953 28%
678 28%
1,549 25%
2,292 33%
7,756 28%
3,049 33%
1,720 31%
•• ~a'l 31%
2,721 24%
35,313 1 ~!
10/25/2010
Attachment 8
Police and Fire Departments'
Overtime Analysis for Fiscal Years 2006 through 2010
With Fiscal Year 2011 Data Through September 30,2010
2006 2007 2006
POLICE DEPARTMENT
Overtime Expenss
Original Budget $961.662 $1,015.620 $1.036,615
Current Budget 1,009,705 1,074,399 1,071,005
Net Overtime Cost -see below 760,647 1,025,na 1,096,694
Remaining Budget $229,056 $46,661 {$25,6B9~
Overtime Net Cost
Actual Expense $1,405,155 $1,765,657 $2,009,542
Less Reimbursements
Stanford Communications 30,937 39,342 65,079
Utilities Communications Reimbursement 17,402 22,130 36,607
Local Agencies (A) 34,565 36,457 41,770
State Grants (8) 65,635 63,344 4,672
Police Service Fees 49,185 43,216 67,390
Other 12,447 16,157
Totel Reimbursements 197,924 216,936 233,675
Less Department Vacencies 426,564 543,001 676,973
Net Overtime Cost $760 1647 $1,025,716 $1,096,694
Department Vacancies (number of days) 1,733 2,260 2,766
FIRE DEPARTMENT
Overtime Expense
Original Budget $959,369 $1,032,674 $692,674
Current Budget 959,369 1,032,674 996,674
Net Overtime Cost ~ see below 637,310 737,766 663,442
Remaining Budget $322,079 $294 1906 $133,232
Overtime Net Coat
Actual Expense $1,562,856 $1,660,757 $1,744,076
Less Reimbursements
Stanford Fire Services (D) 479,606 563,609 526,455
Cal·Fire/FEMA (Strike Teams) 66,269 65,531 140,224
State Homeland Security
Grant Progrem (SHSGP) (e) 72,254 40,697 10,164
Urban Area Security Initietive (UASI) 26,762 1,150
Total Reimbursements 644,911 690,237 679,993
Less Department Vacancies 300,637 432 1752 200,641
Net Overtime Cosl $637,310 $737,766 $663,442
Department Vacancies (number of days) 1,230 1,740 610
NOTES:
(A) Includes Animal Services contract with Los Alios, Mountain View and Los Altos Hills.
(8) State Office of Traffic Safety and ABC grants.
(e) Included in the SHSGP and UASI reimbursements is a small ameunt of per diem reimbursement.
2009
$999,900
1.016,90-0
666,566
$130,332
$1,665,642
42,160
23,715
37,413
10,996
53,612
15,962
164,060
595,194
$666,566
2,402
$1,017,674
1,353,056
651,146
$701,910
$1,591,261
462,152
453,619
4,342
940,113
$651,146
760
Reimbursement from U.S. Department ef Homeland Security for HazMat Continuing Challenge Training Conference (Sep 2009)
(D) Stanford reimburses 30.3% of Fire expenditures.
unaudited thru 9130
2010 2011
$999,900 $967,900
1,071,662 967,900
932,960 !1B,043~
$136,702 $965,943
$1,466,226 $353;255
56,070 16,396
33,242 9,369
33,930 10,499
22,308 33,226
42,066 31,012
3,830 16,539
193,463 117,061
339,603 254,237
$932,960 ($16 10431
1,366 942
$1,017,674 $1,017,674
>
1,017,674 1,017,674
1,334,452. 439 1965
($316,776} $577,669
$2,675,515 $666,153
610,661 202,450
64,760
10,647
666,066 202,450
454,975 26,716
$1,334,452 $439,965
1,455 360
10/25/2010