HomeMy WebLinkAboutStaff Report 5358
City of Palo Alto (ID # 5358)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/16/2014
City of Palo Alto Page 1
Summary Title: 1st Quarter FY 2015 Financial Results
Title: First Quarter Fiscal Year 2015 Financial Results
From: City Manager
Lead Department: Administrative Services
Motion
Staff recommends that Finance Committee review and approve the first (1st) Quarter financial
report.
Background
The purpose of this report is to provide the Council with information on the financial condition
of the City’s General Fund and Enterprise Funds as of the end of the 1st quarter of fiscal year
(FY) 2015.
Discussion
The FY 2015 1st quarter ended on September 30, and this report summarizes the actual
financial activity of the General and Enterprise Funds for the three months then ended, and
compares those amounts to the same period of the prior fiscal year and to the FY 2015 and FY
2014 Adjusted Budgets.
Attachment A provides a breakdown of revenues by source and expenses by function, with
separate columns for Adopted Budget and Adjusted Budget. The Adjusted Budget column
includes prior year commitments that were carried forward into this fiscal year and Budget
Amendment Ordinances (BAOs) through September 30. Encumbrances and actual expenses for
the three month period are also reported.
Compared to the same time last year, General Fund revenue (excluding Operating Transfers,
Encumbrances and Reappropriations, and other Sources) for the 1st quarter is $24.8 million, or
3.6 percent higher than the prior year. As of the end of the 1st quarter, the General Fund has
received 16 percent of the current year Adjusted Revenue Budget. In comparison to the same
quarter in prior year, actual revenue received was 17 percent of the Adjusted Budget. To date,
Sales Tax is currently trending downward from prior year due to lower receipts from a
particular vendor in comparison to the previous year and is expected to end the year higher
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than the currently budgeted amount. This downward trend in Sales Tax is offset by an
improvement in Charges for Services, Permits and Licenses, and Rental Income. These revenue
improvements are discussed later in this report.
General Fund department expenses (including commitments) for 1st quarter are tracking at 28.4
percent of Adjusted Budget. Compared to the same quarter prior year, this is slightly higher
than prior year which was 29 percent.
Following is a detailed discussion of the most significant revenue and expense items.
Revenue Highlights for 1st Quarter FY 2015
Following is a table which highlights the City’s major revenue sources for the 1 st Quarter,
compared to the 1st Quarter of the prior year. Each quarter’s revenue is expressed as a
percentage of the Adjusted Budget for each year.
FY 2015 FY 2014 % change FY 2015 %FY 2014 %
Sales tax 3,624$ 5,421$ 33%25,957$ 14%23,846$ 23%
Property tax 69 43 60%31,927 0%29,613 0%
Transient occupancy tax 2,276 1,977 15%14,156 16%11,545 17%
Utility users tax 2,473 2,614 (5%)11,285 22%11,013 24%
Documentary transfer tax 1,302 1,602 (19%)7,514 17%5,699 28%
Charges for services 6,027 3,253 85%24,314 25%24,379 13%
Permits and licences 1,896 1,323 43%7,804 24%8,346 16%
All other revenue sources 7,121 7,667 (7%)29,218 24%28,681 27%
Total Revenue 24,788$ 23,900$ 4%152,175$ 16%143,122$ 17%
1st Quarter Actuals Adjusted Budget
City of Palo Alto
General Fund Revenue
FY 2015 1st Quarter
(000's)
Sales tax revenue for the 1st quarter has decreased $1.8 million, or 33 percent, from the same
period last year. The quarter over quarter decline is due to a single vendor whose receipts
temporarily spiked last year. First quarter receipts are at 14 percent of the full year budgeted
amount of $26 million. Typically, receipts in the 1st quarter trend lower because of the timing
of the “Triple Flip” quarter cent tax payment which is received in January and May. Based on
the preliminary activity to date and local economic trends, staff is expecting receipts to be
higher than the budgeted amount of $26 million.
Property tax revenue in the 1st quarter of the fiscal year is typically only a nominal amount as
property tax receipts are paid by the County beginning in the month of November and then
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again beginning in March. FY 2014 actual property tax revenue was $30.6 million. The FY 201 5
budgeted amount is $31.9 million, 4.4 percent higher than the prior year’s actual revenue.
Transient occupancy tax (TOT) revenue of $2.3 million represents about two months of
collections and is trending at 16 percent of the FY 2015 budgeted amount of $14.2 million.
Daily rates increased 15 percent from prior year – $191 per day to $220 per day – while
occupancy rates remained flat at 84 percent. The total number of rooms available increased by
86, or 5 percent, in March 2014 with the opening of the Ep iphany Hotel. In November 2014,
Palo Alto voters approved Measure B which increases TOT by 2 percent and staff will bring
forward a recommendation as part of the Fiscal Year 2015 Midyear Budget Review to revise
TOT revenue upward.
Documentary transfer tax receipts total $1.3 million, or 17 percent of the FY 2015 Adopted
Budget. This is $300,000, or 19 percent, lower than prior year receipts for the same period.
Prior year receipts were exceptionally high due to robust real estate activity. Budgeted amo unt
for the current year may be reduced at mid-year if receipts continue to track lower.
Charges for services revenue is up $2.8 million, or 85 percent, from the same quarter last year.
This increase is due to a combination of the following items:
Stanford fire service revenue for the 1st quarter of FY 2015 was $2.0 million. This is $2.0
million more than prior year because the prior year 1 st quarter billing was delayed until
the 2nd quarter. This variance of $2.0 million will be neutralized in 2 nd quarter.
Paramedic service fees have increased $309,000 over the same period last year due to
more service calls in the quarter and a higher average amount billed per service call. 1st
quarter revenue of $1.0 million is 31 percent of the Adopted Budget.
Plan check fees for the 1st quarter have increased by $241,000, or 25 percent, from prior
year’s 1st quarter. 1st quarter revenue of $1.2 million represents 21 percent of the
annual budgeted amount.
Permits and licenses revenue is up $573 thousand, or 43 percent, primarily due to an increase
in new construction permit revenue.
Expense Highlights for 1st Quarter FY 2015
Following is a table which highlights the City’s expenses by function for the 1 st quarter,
compared to 1st quarter of the prior year. Each quarter’s expense is expressed as a percentage
of the Adjusted Budget for each year.
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City of Palo Alto
General Fund Expenses
FY 2015 1st Quarter
(000's)
FY 2015 FY 2014 % change FY 2015 %FY 2014 %
inc (dec)
Administrative services 1,651$ 1,629$ (1%)7,326$ 23%7,363$ 22%
Community services 5,895 5,767 2%24,115 24%23,888 24%
Development services 1,977 0 --10,772 18%0 --
Library 1,708 1,678 2%8,253 21%8,254 20%
Planning and community env 1,616 2,606 (38%)8,839 18%15,150 17%
Public safety 14,546 14,599 (0%)62,997 23%63,628 23%
Public works 3,191 3,272 (2%)14,315 22%14,380 23%
All other departments 4,781 4,955 (4%)26,091 18%19,447 25%
Total Expenses 35,365$ 34,506$ 2%162,708$ 22%152,110$ 23%
1st Quarter Actuals Adjusted Budget
Total General Fund department expenses (including commitments) for the 1st quarter of the
fiscal year are relatively flat compared to the sam e quarter last year, and trend at 28.4 percent
of the Adjusted Budget.
As approved in the Fiscal Year 2015 Adopted Budget, effective July 1, 2014, Development
Services was split out into its own department so that development partners could work
together more comprehensively and provide a higher quality of service. Salary and non -salary
expenses were identified and transferred out of the Planning, Fire, Information Technology , and
Public Works departments. The largest expense transfer was from the Planning Department.
Public Safety represents 41 percent of total General Fund actual expenditures for the 1st
quarter, which is comparable to the prior year. Following is a table which highlights some
Public Safety expenses and statistics for the 1st quarter.
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Public Safety
Salaries and Overtime Expense
FY 2015 1st Quarter
(000's)
FY 2015 FY 2014 % change FY 2015 %FY 2014 %
Inc (Dec)
Police - Overtime 465 540 (14%)1,500 31%1,500 36%
Police - # vacancies 8 14
Police - # disability 5 4
Fire - Overtime 780 718 9%1,424 55%1,424 50%
Fire - # vacancies 8 7
Fire - # disability 4 8
1st Quarter Actuals Adjusted Budget
Police:
The Police Department has used $465,000 or 31 percent of its annual overtime budget through
September 2014 compared to $540,000 during the same period in the prior year. The decrease
is attributable to the absence of several events that increa sed overtime spending in the 1st
quarter last year, such as extra staffing at Cubberley Community Center, staffing assistance to
Mountain View for a special event, training 12 new police officers over the summer period,
training related to re-starting the Traffic Team during the summer period, and backfilling for
military leave, family leave and injuries that compounded a severe staffing shortage in the 1 st
quarter of last year. While 1st quarter FY 2015 overtime decreased from prior year, it is still
higher than normal due to a sizable increase in the Communications Division overtime in our
dispatch center due to staff vacancies. 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.
Fire:
The Fire Department has used $780,000 or 55 percent of its annual overtime budget, compared
to $718,000 or 50 percent for the same period in the prior year. The primary drivers of
overtime were vacant positions, workers' compensation (light duty/full disability), succession
planning, sick leave, vacation, other leaves (military, bereavement, jury duty), special events
(Stanford Football, Senior Games and Earthquake’s Soccer), seasonal fire station coverage and
multiple mutual aid responses to wild land fires and fire station cover assignments throughout
Northern California.
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A lack of qualified firefighter paramedic candidates in the recent entry level hiring and several
retirements in the last two quarters of Fiscal Year 2014 created eight vacancies. Palo Alto
competes in a very challenging hiring environment where there are limited qualified and
experienced paramedics. Paramedics are essential in order to sustain Council approved
emergency medical service levels that mandate first responders arrive in 8 minutes or less 90
percent of the time and ambulances arrive in 12 minutes or less 99 percent of the time.
Community expectations identified in the Fire Department’s Community Driven Strategic Plan
identified prompt emergency medical services as the number one service priority.
As noted in the department’s performance and workforce planning report, 40 percent of the
department is eligible to retire in five years or less. The department invested in overtime to
support succession planning and career development in anticipation of seve ral key leadership
promotions in the current fiscal year. Specifically, the Department has been training personnel
to work out of class in the Apparatus Operator, Captain, and Battalion Chief positions and
moved a frontline employee to provide assistance in the Training Division which also created a
need for backfill overtime. In addition, the department continues training Battalion Chiefs,
Captains and Acting Captains in a nationally recognized command and control system which has
created a temporary need for additional overtime.
The Fire Department staffed the seasonal Fire Station #8 with overtime to support the Palo Alto
Foothills communities during wild land fire season and the Community Services’ youth summer
programs held at Foothills Park. Due to the extremely dry vegetation caused by the drought,
the department opened the Station earlier than usual, extended some hours due to high fire
danger and closed the station on October 31.
Overtime expenses are reimbursed through the Stanford Fire agreement at a rate of 30.3
percent and reported as department revenue. The mutual aid Strike Team responses to the
Lodge and King Fires, Humboldt Unit Cover (Cal Fire) and Santa Clara Unit Cover (Cal Fire) will
be reimbursed through the State of California Office of Emergency Services.
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General Fund Budget Stabilization Reserve (BSR) Balance
As reported to the Finance Committee on December 2, FY 2014 ended with an $8.7 million
surplus and a Budget Stabilization Reserve of $35.1 million on an accounting basis. Af ter
adjusting for the unrealized gain on investment of $285,000, the Budget Stabilization Reserve
ended at $34.8 million on a budgetary basis. The FY 2015 Adopted Budget assumes a $1.7
million contribution from the BSR to fund one -time items. Therefore, the BSR balance at the
beginning of Fiscal Year 2015 was $33.1 million. As detailed in the table below, as of
September 30, Council approved six Budget Amendment Ordinances, which reduced the BSR
balance by $367,000 from $33.1 million to $32.7 million or 19% of the Fiscal Year 2015 Adopted
Operating Expenditure Budget.
Description Date Amount
BSR % of
Total Use of
Funds
Budgetary BSR balance, 6/30/14 $ 34,798 20.3%
BSR Contribution (Adopted Budget) (1,732)
Budgetary BSR balance, 7/1/14 33,066 19.3%
BAOs Authorized by Council:
Shuttle Contract, EPA Contribution 6/23/14 0
Golf Course Operating Budget 6/23/14 0
Transportation Management Authority 8/4/14 (30)
Sustainability and Climate Action Plan 8/18/14 (137)
Airport Fund loan for legal counsel 9/22/14 (200)
Golf Course Operating Loss Reserve 9/22/14 0
Total BAOs Authorized by Council (367)
Ending Budgetary BSR Balance,
9/30/14 $32,699 19.0%
Enterprise Funds
Following is a summary of change in net position for each of the Enterprise Funds for the three
months ended September 30, 2015, including a comparison of results from the same period last
year.
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City of Palo Alto
Enterprise Funds Change in Net Position
FY 2015 1st Quarter
1st Qtr 1st Qtr Increase
FY 2015 FY 2014 (Decrease)% Change
Water 5,074 6,053 (979)(16%)
Electric (1,160)4,319 (5,479)(127%)
Fiber Optic 433 464 (31)(7%)
Gas 249 615 (366)(60%)
Wastewater collection 442 336 106 32%
Wastewater treatment 579 828 (249)(30%)
Refuse 2,369 1,870 499 27%
Storm Drainage 795 793 2 0%
Airport 14 1 13 N/A
Total Change in Net Position 8,795$ 15,279$ (6,484)$ (42%)
Water Fund 1st quarter net position decreased $1.0 million from prior year due to reduced
operating revenues as a result of the 10 percent voluntary reduction in water consumption
requested by San Francisco Public Utilities Commission.
Electric Fund 1st quarter declined $5.5 million from prior year. $1.3 million was due to less
revenue due to decreased consumption as a result of less construction activity. Connection
charges in prior year were extraordinarily high. Other contributing factors are corrections
made for prior year meter malfunctions and the new Hewlett Packard solar installation. Utilit y
purchase costs were $4.4 million higher than prior year due to higher market purchases as a
result of less hydroelectric power due to the drought.
Gas Fund decreased $0.4 million from prior year due to increased utility purchase costs and
program fees for behavioral energy efficiency programs.
Refuse Fund change in net position increased $0.5 million due to reduced contract services
expense and reduced indirect and cost plan charges.
Pension Update
The City implemented a second tier pension formula in 2011 (2% @ 60 for Miscellaneous and
3% @ 55 for Safety) as a measure to control the cost of future pension expense. In addition,
the California Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated a third tier
pension formula effective January 1, 2013 (2% @ 62 for Miscellaneous and 2.7% @ 57 for
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Safety). Following is a table which shows the employee count in each of the Miscellaneous
Plans as of November 2014 compared to May 2013, and the Safety Plans as of November 2014
compared to October 2013.
Change Change
11/10/2014 5/20/2013 Inc (Dec)11/10/2014 10/28/2013 Inc (Dec)
Tier 1 7 8 Tier 1 85 101
Tier 2 2 2 Tier 2 6 0
Tier 3 1 1 Tier 3 6 0
Sub-total 10 11 (1)Sub-total 97 101 (4)
Tier 1 1 1 Tier 1 67 69
Tier 2 0 0 Tier 2 3 2
Tier 3 0 0 Tier 3 11 7
Sub-total 1 1 0 Sub-total 81 78 3
Tier 1 119 137 Tier 1 8 8
Tier 2 37 34 Tier 2 0 0
Tier 3 26 1 Tier 3 0 0
Sub-total 182 172 10 Sub-total 8 8 0
Tier 1 385 442
Tier 2 74 84
Tier 3 73 8
Sub-total 532 534 (2)
Tier 1 43 40
Tier 2 0 1
Tier 3 1 0
Sub-total 44 41 3
Tier 1 555 628 (73)Tier 1 160 178 (18)
Tier 2 113 121 (8)Tier 2 9 2 7
Tier 3 101 10 91 Tier 3 17 7 10
Grand Total Misc Plans 769 759 Grand Total Safety Plans 186 187
Tier 1 72%83%(11%)Tier 1 86%95%(9%)
Tier 2 15%16%(1%)Tier 2 5%1%4%
Tier 3 13%1%12%Tier 3 9%4%5%
Tier 1 Tier 1
Tier 2 Tier 2
Tier 3 Tier 3
2.7% @ 55
2% @ 60
%%
Management and
Professional
Service Employees
International Union
Utilities Management
# of Employees
Total
Employee Group
2.7% @ 57
Miscellaneous Plans Safety Plans
Total
3% @ 50
3% @ 55
Employee Group
# of Employees
IAFF
PAPOA
Police Management
2% @ 62
City Council and
Council Appointed
Officers
Fire Chiefs Association
(non-sworn)
Baylands Interpretive Center
At the December 2 Finance Committee meeting the Committee discussed the status of the
capital improvement project for the Baylands Interpretive Center and Boardwalk, as well as the
future operations of the Center. It was agreed that more discussion was needed on the future
options for operating the Center as well as whether to repair or replace the Center. The City
Manager suggested that the discussion come before the Policy and Services Committee. The
City Manager recommended that the Finance Committee discuss the item as part of the 1st
Quarter financial report during the December 16, Finance Committee meeting.
Attachments:
Attachment A: FY 2015 1st Qtr Financial Report General Fund (XLSX)
ATTACHMENT ACITY OF PALO ALTO
GENERAL FUND FIRST QUARTER FINANCIAL REPORT
FISCAL YEAR ENDING JUNE 30, 2015
(in thousands)
BUDGET ACTUALS (as of 9/30/14)
Adopted Adjusted Pre % of Adj
Categories Budget Budget Encumbr Encumbr Actual Budget*
Revenues & Other Sources
Sales Tax 25,957 25,957 - - 3,624 14.0%
Property Tax 31,927 31,927 - - 69 0.2%
Transient Occupancy Tax 14,156 14,156 - - 2,276 16.1%
Documentary Transfer Tax 7,514 7,514 - - 1,302 17.3%
Utility Users Tax 11,285 11,285 - - 2,473 21.9%
Motor Vehicle Tax, Penalties & Fines 2,164 2,164 - - 375 17.3%
Charges for Services 23,013 24,130 - - 6,027 25.0%
Permits & Licenses 7,804 7,738 - - 1,896 24.5%
Return on Investment 685 685 - - 6 0.9%
Rental Income 14,254 14,230 - - 3,711 26.1%
From Other Agencies 453 453 - - 53 11.7%
Charges To Other Funds 10,647 10,647 - - 2,653 24.9%
Other Revenues 1,060 1,289 - - 323 25.1%
Total Revenues 150,919 152,175 - - 24,788 16.3%
Operating Transfers-In 18,433 18,528 - - 4,402 23.8%
Encumbrances and Reappropriation 6,355 - - - 0.0%
Contribution from Budget Stabilization Reserve
As Assumed in the Adopted Budget 1,732 1,732 - - - 0.0%
Total Sources of Funds 171,084 178,790 - - 29,190 16.9%
Expenditures & Other Uses
City Attorney 2,578 3,129 25 516 542 34.6%
City Auditor 1,065 1,075 - 150 229 35.3%
City Clerk 1,276 1,286 50 27 284 28.1%
City Council 432 517 - 71 86 30.4%
City Manager 2,728 2,980 75 180 455 23.8%
Administrative Services 7,175 7,326 42 140 1,651 25.0%
Community Services 22,764 24,095 329 3,180 5,895 39.0%
Development Services 10,535 10,522 - 287 1,977 21.5%
Library 7,521 8,253 35 931 1,708 32.4%
Office of Sustainability 272 479 50 39 54 29.9%
People Strategy and Operations 3,264 3,757 259 216 717 31.7%
Planning and Community Environment 7,015 8,839 313 1,245 1,616 35.9%
Public Safety 62,054 62,996 276 1,203 14,546 25.4%
Public Works 13,397 14,315 239 903 3,191 30.3%
Non-Departmental 13,272 13,139 - - 2,414 18.4%
Total Expenditures 155,348 162,708 1,693 9,088 35,365 28.4%
Operating Transfers-Out 2,077 2,276 - - 519 22.8%
Transfer to Infrastructure 13,659 13,659 - - 3,415 25.0%
Total Use of Funds 171,084 178,643 1,693 9,088 39,299 28.0%
Net Change to BSR - 147
Budget Amendments Authorized by Council thru 9/30/14:* Including reappropriations and prior year encumbrances
Shuttle Contract, EPA Contribution (6/23/14)-
Golf Course Operating Budget (6/23/14)-
Transportation Management Authority (8/4/14)(30)
Sustainability and Climate Action Plan (8/18/14)(137)
Increase Airport Fund loan for legal counsel (9/22/14)(200)
Golf Course Operating Loss Reserve (9/22/14)-
Total Budget Amendments Authorized by Council - (367)
Net Change to BSR Excluding BAOs - (220)
BSR Balance 33,066 32,699
BSR % of Total Use of Funds, excluding
Prior year reappropriations & encumbrances 19.3%19.0%
Earmarked Reserves, 9/30/14:
Shuttle Service Reserve 1,000 1,000
Transportation Management Authority 150 -
Human Services Resource Allocation Process (HSRAP)50 50
Golf Course Operating Loss - 540
1,200 1,590
12/9/2014