HomeMy WebLinkAboutStaff Report 241-07TO:HONORABLE CITY COUNCIL
ATTENTION:FINANCE COMMITTEE
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:MAY 22, 2007 CMR: 241:07
SUBJECT:THIRD QUARTER FISCAL YEAR 2006-07 GENERAL FUND
FINANCIAL RESULTS
This is an informational report and no Council action is required. The purpose of this report is to
provide the Council with insight into the financial condition of the City’s General Fund as of the
third quarter of fiscal year 2006-07.
DISCUSSION
At third quarter, General Fund operating revenues and expenditures are at 70 and 76 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. By year-end,
General Fund revenues are expected to exceed projected expenses.
The City continues to experience steady growth in most of its economically sensitive revenue
sources. Sales taxes, interest income, and documentary transfer taxes realized steady increases.
The weak housing market and slower U.S. economic growth, however, are of concern because of
the potential to slow growth in property and transient occupancy tax revenues, and in consumer
spending.
Revenue Highlights for Third Quarter Fiscal Year 2006-07 Financial Results
Attachment A shows third quarter year-to-date actual revenues as a percentage of the Adjusted
Budget.
Sales Tax: Receipts for the third quarter of fiscal year 2006-07 are at 70 percent of the adjusted
budget. This is a consequence of the timing of the State’s "triple flip" biannual payments which
are made in January and June. Sales tax receipts are expected to exceed budget at the end of the
fiscal year. On a quarter-to-quarter basis, the economic segments showing particular strength
were auto, department store, electronic equipment, drug stores, and business services sales.
Those showing decreases were furniture, appliances, food markets, office equipment, and light
industry.
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Property Taxes: Payments from the County for the second half of the fiscal year essentially
begin in March and are fully paid by June. As a result of the timing of payments, receipts show
at 61 percent of the adjusted budget at the end of the third quarter. This is not indicative of
expected year-end receipts and staff projects that property tax receipts will be consistent with the
adjusted budget.
Transient Occupancy Taxes (TOT): Again, due to the timing of remittances, revenues are at 62
percent of the adjusted budget. At this time, TOT revenues are anticipated to be slightly under
the adjusted budget at year-end. Rising occupancy rates since the beginning of the fiscal year
have leveled off during the past two months. Performance during the next three months, which
include the heaviest activity of the year, will be important.
Expense Highlights for Third Quarter Fiscal Year 2006-07
Expenditures are often cyclical in nature and a department’s commitments to-date could include
items for the entire fiscal year. Departments are expected, however, to conclude the year within
their adjusted budgets.
Excess Overtime Expenditures: Attachment B shows total overtime expenditures reaching ! 12
percent of the adjusted budget. Although most of the General Fund departments are below their ¯
overtime budget, the Fire and Police Departments are projected to exceed their budgets for the
following reasons:
The Fire Department is at 130 percent of adjusted budget for overtime. The main factors
contributing to overtime usage are disability leave, vacancies, staffing of Medic-1 (12
hour paramedic unit) and mandated training. Currently, there are 7 firefighters on
medical leave and 7 vacant positions, so overtime will be partially offset with salary
savings. In addition, a portion of overtime was spent for continuous education
certification training for paramedics.
The Police Department is at 121 percent of the adjusted budget for overtime. The main
factors contributing to overtime usage are staff’mg shortages due to vacancies, disability
leave, and academy and training programs. Also, overtime was incurred for the Palo Alto
Safe Neighborhoods program, a SWAT response and related investigation, and traffic
control services at Stanford football games (which is partially reimbursed by the
university). Overtime usage will be partially offset with salary savings.
With the Police and Fire Departments removed from the overtime analysis, General Fund
overtime expense is at 56 percent of adjusted budget as of the third quarter.
POLICY IMPLICATIONS
These recommendations are consistent with existing City policies.
ENVIRONMENTAL REVIEW
The action recommended is not a project for the purposes of the California Environmental
Quality Act.
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PREPARED BY~
ALLEN LEE
Senior Accountant, Administrative Services
TARUN NARAYAN
Senior Financial Analyst, Administrative Services
DEPARTMENT HEAD APPROVAL:
LALO PEREZ
Assistant Director, Administrative Services
CITY MANAGER APPROVAL:
EMILY HARRISON
Assistant City Manager
ATTACHMENT
Attachment A: 2006-07, Third Quarter Financial Report, General Fund
Attachment B: 2006-07, Third Quarter General Fund Overtime
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