HomeMy WebLinkAboutStaff Report 2175City of Palo Alto (ID # 2175)
Finance Committee Staff Report
Report Type:Meeting Date: 11/15/2011
November 15, 2011 Page 1 of 6
(ID # 2175)
Summary T itle: First Quarter F iscal Year 2012 F inancial Results
Title: First Quarter F iscal Year 2012 F inancial Results
From:City Manager
Lead Department: Administrative Services
The purpose of this report is to provide the Council with information on the financial condition
of the City’s General Fund as of the first quarter of Fiscal Year (FY) 2012.
DISCUSSION
The FY 2012 First Quarter Financial Report for the General Fund reflects the FY 2012 Adopted
Budget updated to include any budget adjustments to date. Overall, the General Fund budget is
on target with expenditures tracking as expected for the first quarter of the fiscal year. Staff
anticipates additional revenues beyond original projections and will return with more specific
recommendations based on revenue and expense trending information with the FY2012
midyear budget in the March timeframe.
Attachment A shows Revenue & Other Sources and Expenditures & Other Uses as of September
30, 2011. Revenue and expense highlights are discussed in this report. The adjusted budget
column of Attachment A shows $3.9 million in encumbrances and reappropriations (as a Source
of Funds) that is distributed to departments under expenditures according to obligations as of
June 30 for the prior fiscal year. In addition to these encumbrances and reappropriations, the
adjusted budget also includes $1.4 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 Reserve Transfer section of this discussion.
Revenue Highlights for First Quarter Fiscal Year 2012
Attachment A shows first quarter year-to-date actual revenues as a percentage of the annual
adjusted budget. Receipt of General Fund revenues fluctuate during the year so extrapolating
year-end results from first quarter data can be misleading. Factors affecting revenues 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, for significant line items staff discusses variances that are
at least 5 percentage points either above or below the 25 percent level and comments on
whether the budget revenue targets are achievable.
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Sales Tax receipts for the first quarter of FY 2012 are 17 percent of the adopted budget of $20.2
million. The variance is caused primarily by the timing of the “Triple Flip” 25 percent tax
payment which is made in January and May. Because one quarter of our sales tax revenue is
received in two semi-annual payments, receipts in the first quarter are below budget.
In FY 2011, sales tax receipts exceeded the adjusted budget by $1.2 million or 6.4 percent for a
total of $20.8 million. At this time, staff believes this year’s budget of $20.2 million will be
achieved and will likely be surpassed. It is important to note, however, that the Federal Open
Market Committee (FOMC) recently downgraded the country’s economic outlook and that the
stock market is extremely volatile. These factors may adversely affect consumer and business
spending and potentially reverse gains made to date. Staff will be monitoring this key General
Fund revenue source closely.
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 receipts in the first quarter.
Given the on-budget performance of property tax revenues in FY 2011, staff expects the FY
2012 budget of $26.1 million to be attained. There is concern about the potential negative
impact from the high number of commercial property assessment appeals that the County has
yet to resolve. Nevertheless, the commercial property market has stabilized and the vacancy
rate is dropping -signs that property taxes may improve in the near future. City projections are
in line with those of the Palo Alto School District and Santa Clara County.
Transient Occupancy Tax (TOT) revenue has been trending upward since July 2010. Recognizing
that July and August are robust months for hotel activity, the following table shows positive
trends and results for this revenue category.
FY 2011 FY 2012
Avg Daily Avg Occup Avg Daily Avg Occup
Rate __ %Rate _ %_
July $138 72%$153 79%
August $139 71%$159 84%
Although this economically sensitive revenue source can face the same headwinds cited in the
sales tax discussion, it is likely the $8.2 million budget for FY 2012 will be realized and possibly
exceeded. The strong results are primarily due to a strong local business environment.
Permits and Licenses revenue is 33 percent of current budget. The City has received $1.9 million
in permit and license revenue in the first quarter mainly due to a significant increase in major
projects with Stanford, Hewlett-Packard, and VMWare.
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Other Revenues include a $20.8 million payment from the Stanford University Medical Center
(SUMC) Development Agreement. The payment is for community health and safety ($4.0
million), pedestrian and bike improvements at El Camino Park and Quarry Road ($2.7 million),
infrastructure, housing, and sustainable neighborhoods ($7.7 million), climate change
sustainability ($4 million), and mitigation of fiscal impact from the project ($2.4 million). These
funds are segregated and are assigned the earned interest independently.
Expense Highlights for First Quarter Fiscal Year 2012
In many areas, expenditures are cyclical in nature and department 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 (BSR) Drawdown
The General Fund adopted budget reflects a $144 thousand addition to the BSR. As of
September 30, BAOs totaling $1.4 million have been adopted by City Council, which result in an
adjusted transfer of $1.3 million from the BSR. Listed below are the BAOs that have been
adopted thus far:
Description
Council
Action
Date
Amount
(000’s)
Beginning BSR Balance, as of 6/30/2011 (unaudited)$31,330
Adopted Budget -Net Surplus 144
Additional outside counsel costs for binding arbitration 9/19/11 (185)
Loan to Refuse Fund 9/19/11 (1,250)
Subtotal -Transfer from BSR (1,291)
Ending BSR Balance, as of 9/30/2011 $30,039
BSR as a Percentage of Adjusted Expenditures 21.4%
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Comparison of Overtime Expenditures to Adjusted Budget
CITY OF PALO ALTO
FISCAL YEAR 2012 Q1 FINANCIAL REPORT
GENERAL FUND OVERTIME
(in thousands of dollars)
(three months ended 9-30-11)
Adopted Adjusted % of
Categories Budget Budget Actual Adjusted Budget
City Attorney $ -$ -$ -0%
City Auditor - - -0%
City Clerk 7 7 1 11%
City Council - - -0%
City Manager 3 3 -0%
Administrative Services 34 34 13 38%
Community Services 92 92 26 28%
Library 54 54 13 24%
Fire 2,265 2,265 1,058 47%
Human Resources 4 4 -0%
Planning and Community Environment 67 67 13 20%
Police 968 968 380 39%
Public W orks 113 113 50 44%
Total Overtime $3,605 $3,605 $1,553 43%
General Fund Overtime Analysis:
The table above shows total overtime expenditures reaching 43 percent of adjusted budget.
Overtime for the Administrative Services, 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 Department overtime costs, please refer to Attachment B.
·Administrative Services has used 38 percent of its annual overtime budget, compared to
23 percent in the prior year. Overtime usage was driven by the Accounting and Revenue
Collection Departments, primarily as a result of covering for staff vacancies due to leave
and the changed FLSA designation of accountants who have moved from exempt to
non-exempt therefore earning overtime pay.
· Community Services has used 28 percent of their annual overtime budget, which is
comparable to the prior year’s 27 percent. The first quarter coincides with their peak
summer season. They have experienced increased park and open space usage as a result
of good weather, and their daytime summer camps, aquatics and youth activities are all
offered during the summer months. The Department’s annual Chili Cook-Off is also held
on the July 4th holiday, which necessitates holiday and overtime pay.
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· Fire Department has used 47 percent of their annual overtime budget, compared to 66
percent in the prior year. Overtime is due to Station #8 staffing ($165,000), Medic 1
staffing ($105,000), vacation ($201,000) and sick leave ($124,000). The remaining
$463,000 is due to backfilling of minimum staffing to cover other leave and disability.
The number of personnel on disability has reduced from a high of six in July 2011 to two
at present. There are currently 21 vacancies, with additional retirements anticipated.
Also, four employees are currently working in temporary assignments, which
necessitates backfilling their slots. The four positions are Deputy Chief of Operations,
Deputy Chief of Support Services, and two Fire Inspectors.
· Police Department has used 39 percent of their annual overtime budget, compared to
36 percent in the prior year. The main factors contributing to overtime were staffing
shortages due to disability leave, vacancies in patrol and the 9-1-1 dispatch center, and
providing traffic control at numerous special events. The Department receives partial
reimbursement 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.
· Public Works Department has used 44 percent of their annual overtime budget, which is
the same percentage as the prior year. Overtime is primarily in the Facilities and Trees
work groups. Because buildings are occupied during the day, some of Facilities
maintenance work is done after hours to maintain safety and minimize any disruption to
employees and the public. The Tree group has been dispatched after hours to remove
tree limbs that are broken, hanging on electrical lines or blocking sidewalks and streets.
Also, they have scheduled after hours watering for new plantings on California Avenue,
San Antonio Road, Mitchell Park and Pardee Park, and have also removed trees while
facilities are closed.
Staff will continue to monitor overtime expenditures in the context of overall expenditures and
make appropriate adjustments as necessary at midyear.
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 19, 2011
Council approved retaining the rate increases from FY 2010, and implemented an additional
monthly fixed fee for residential customers effective October 1, 2011.
The General Fund has provided a $1.25 million loan to the Refuse Fund in FY 2012 that will be
repaid with interest based on the investment portfolio earnings in FY 2013.
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At the beginning of FY 2012 the Rate Stabilization Reserve was in a negative position of $5.05
million due to the recognition in FY 2009 of the landfill post closure liability as required by
accounting rules. Without recognition of the $5.2 million post closure liability the Rate
Stabilization Reserve would be $0.15 million.It is anticipated that the Rate Stabilization Reserve
will return to a positive balance in future years under a subsequent rate structure to be
determined after a cost of service study is completed in November 2011.
ENVIRONMENTAL REVIEW
This is not a project for the purposes of the California Environmental Quality Act.
Attachments:
·-a:Attachment A: Fiscal Year 2012 Q1 Financial Report -General Fund (XLS)
·-b:Attachment B: Police and Fire Departments Overtime Analysis (XLS)
Prepared By:Laura Kuryk, Manager of Accounting
Department Head:Lalo Perez, Director
City Manager Approval: ____________________________________
James Keene, City Manager
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Attachment A
ACTUALS
% of
Categories
Adopted
Budget
Adjusted
Budget
Pre
Encumbr Encumbr Actual
Adjusted
Budget
Revenues & Other Sources
Sales Tax 20,246$ 20,246$ -$ -$ 3,422$ 17%
Property Tax 26,052 26,052 - - 148 1%
Transient Occupancy Tax 8,204 8,204 - - 1,543 19%
Utility Users Tax 10,859 10,859 - - 2,582 24%
Documentary Transfer Tax 4,269 4,269 - - 893 21%
Motor Vehicle Tax, Penalties & Fines 2,330 2,330 - - 521 22%
Charges for Services 21,841 21,841 - - 5,911 27%
Permits & Licenses 5,778 5,778 - - 1,898 33%
Return on Investment 1,318 1,318 - - 355 27%
Rental Income 13,914 13,914 - - 3,367 24%
From Other Agencies 155 155 - - 15 10%
Charges To Other Funds 10,505 10,505 - - 2,613 25%
Other Revenues (1)1,428 1,428 - - 21,281 1491%
Total Revenues (2)126,898 126,898 - - 44,550 35%
Operating Transfers-In 19,606 19,606 - - 4,756 24%
Encumbrances and Reappropriation - 3,887 - - - -
Total Sources of Funds 146,504 150,391 - - 49,306 33%
Expenditures & Other Uses
City Attorney 2,356 2,824 285 501 550 47%
City Auditor 1,006 1,140 2 136 268 36%
City Clerk 1,479 1,492 - 10 327 23%
City Council 319 328 16 9 69 28%
City Manager 2,512 2,718 94 78 606 29%
Administrative Services 6,514 6,694 69 142 1,562 26%
Community Services 20,711 21,176 1,271 2,052 5,547 42%
Fire 29,780 30,091 95 496 7,342 26%
Human Resources 2,919 3,013 75 79 618 26%
Library 6,944 7,157 0 125 1,625 24%
Planning and Community Environment 10,021 10,882 552 867 2,285 34%
Police 31,918 32,192 275 430 8,053 27%
Public W orks 13,007 13,737 106 1,413 3,149 34%
Non-Departmental 5,038 4,966 - - 2,072 42%
Total Expenditures 134,523 138,410 2,839 6,338 34,072 31%
Operating Transfers-Out 11,837 11,837 - - 2,957 25%
Total Uses of Funds 146,360 150,247 2,839$ 6,338$ 37,030$ 31%
BSR Contribution (Drawdown)144 144
Budget Amendments Authorized by Council:
ATT - Additional legal counsel (185)
NON-DEPT - Loan to Refuse Fund (1,250)
144 (1,291)
Beginning Reserves (Unaudited)31,330 31,330
Projected Ending Reserves 31,474$ 30,039$
(1) Actual includes payment of $20.8 million from Stanford University Medical Center (SUMC) Development Agreement.
(2) Total revenues excluding SUMC are $23.7 million, or 18.7 percent of adopted budget, compared to 16 percent in prior year.
BUDGET (three months ended 9-30-11)
CITY OF PALO ALTO
FISCAL YEAR 2012 Q1 FINANCIAL REPORT
GENERAL FUND
(in thousands of dollars)
11/9/2011
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Attachment B
Police and Fire Departments
Overtime Analysis for Fiscal Years 2007 through 2011
and Fiscal Year 2012 through September 30, 2011
unaudited thru 9/30
2007 2008 2009 2010 2011 2012
POLICE DEPARTMENT
Overtime Expense
Original Budget $1,015,620 $1,036,815 $999,900 $999,900 $967,900 $967,900
Current Budget 1,074,399 1,071,005 1,016,900 1,071,662 1,224,349 967,900
Net Overtime Cost - see below 1,025,718 1,096,894 886,568 932,960 314,790 74,971
Remaining Budget $48,681 ($25,889)$130,332 $138,702 $909,559 $892,929
Overtime Net Cost
Actual Expense $1,785,657 $2,009,542 $1,665,842 $1,466,226 $1,454,999 $379,599
Less Reimbursements
Stanford Communications 39,342 65,079 42,160 58,070 58,157 14,140
Utilities Communications Reimbursement 22,130 36,607 23,715 33,242 36,348 8,838
Local Agencies (A)36,457 41,770 37,413 33,930 31,230 8,008
State Grants (B)63,344 4,672 10,998 22,306 70,816 -
Police Service Fees 43,218 67,390 53,812 42,085 80,350 33,645
Other 12,447 18,157 15,982 3,830 32,517 11,017
Total Reimbursements 216,938 233,675 184,080 193,463 309,417 75,648
Less Department Vacancies 543,001 678,973 595,194 339,803 830,792 228,980
Net Overtime Cost $1,025,718 $1,096,894 $886,568 $932,960 $314,790 $74,971
Department Vacancies (number of days)2,280 2,766 2,402 1,368 3,222 942
FIRE DEPARTMENT
Overtime Expense
Original Budget $1,032,674 $892,674 $1,017,674 $1,017,674 $1,017,674 $2,265,074
Current Budget 1,032,674 996,674 1,353,058 1,017,674 1,627,674 2,265,074
Net Overtime Cost - see below 737,768 863,442 651,148 1,334,452 776,226 421,165
Remaining Budget $294,906 $133,232 $701,910 ($316,778)$851,448 $1,843,909
Overtime Net Cost
Actual Expense $1,860,757 $1,744,076 $1,591,261 $2,675,515 $2,237,356 $1,057,895
Less Reimbursements
Stanford Fire Services (C)563,809 528,455 482,152 810,681 677,919 320,542
Cal-Fire/FEMA (Strike Teams)85,531 140,224 453,619 64,760 - -
State Homeland Security
Grant Program (SHSGP) (D)40,897 10,164 4,342 10,647 5,968 11,722
Urban Area Security Initiative (UASI) 1,150 11,158 0
Fire Service Fees 55,055 12,322
Other 2,100 1,128
Total Reimbursements 690,237 679,993 940,113 886,088 752,200 345,714
Less Department Vacancies 432,752 200,641 454,975 708,930 291,016
Net Overtime Cost $737,768 $863,442 $651,148 $1,334,452 $776,226 $421,165
Department Vacancies (number of days)1,740 810 780 1,455 2,280 973
NOTES:
(A)Includes Animal Services contract with Los Altos, Mountain View and Los Altos Hills.
(B)State Office of Traffic Safety and ABC grants.
(C)Stanford reimburses 30.3% of Fire expenditures.
(D) Included in the SHSGP and UASI reimbursements is a small amount of per diem reimbursement.
11/9/2011
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