HomeMy WebLinkAboutStaff Report 422-06City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
ATTENTION:
FROM:
FINANCE COMMITTEE
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
DECEMBER 12, 2006 CMR: 422:06
FIRST QUARTER FISCAL YEAR 2006-07 FINANCIAL RESULTS
This is an informational report and no Council action is required. The purpose of this report is to
provide the Council with information on the financial condition of the City’s General Fund (GF)
as of the first quarter of 2006-07.
DISCUSSION
The resurgence of the California and the local economies after trailing the nation for the past
several years has resulted in robust growth in City revenues. The City’s unemployment rate is
2.7 percent while the nation and the state are in the 4 to 5 percent range. Economically sensitive
revenue sources such as sales and transient occupancy taxes have performed well and are
expected to continue to do so, but at a slower growth rate than 2005-06.
The cooling of the housing market, uncertainty of future energy prices, and competition from
neighboring cities for both retail sales and attempts to attract businesses such as automobile
dealerships to their cities pose risks to budgeted revenues.
Revenue Highlights for First Quarter Fiscal Year 2006-07 Financial Results
Attachment A shows first quarter year-to-date actual revenues as a percentage of the Adjusted
Budget.
Sales Tax receipts for the first quarter of fiscal year 2006-07 are at 17 percent of budget. This is
a consequence of the timing of the State’s "triple flip" biannual payments which are made in
January and June. Controlling for the timing difference, receipts are expected to be in line with
budget.
First quarter results, unadjusted for one-time events, showed a 7.0 percent or $0.35 million
increase over the first quarter of 2005-06. The economic segments displaying strength include
department and apparel stores, recreation products, restaurants, and auto sales.
CMR:422:06 Page 1 of 3
Property Tax payments from the county essentially begin in October and are fully paid for the
first half of the fiscal year in January. As a consequence, receipts during the first quarter are not
indicative of future results. Staff projects that property tax receipts will exceed the adopted
budget and that positive adjustments at midyear will occur.
Transient Occupancy Tax ~OT) revenues are expected to be close to budget at year end, with
first quarter receipts being up by 2.8 percent. Due to a timing difference in the receipt of August
and September 2006 payments, the 9 percent of budget statistic for the first quarter reflects only
one month’s receipt (July 2006). Occupancy and per diem rates in the first quarter have
improved over those in 2005-06. The strongest TOT months are April, May and June so staff is
optimistic that the $6.4 million target for 2006-07 will be realized.
Other Taxes and Fines well exceed the first quarter 25 percent guideline. Documentary transfer
tax represents 65 percent of this revenue source which is 11.4 percent above budget in the first
quarter. In the last few years, the transfer tax has exceeded expectations. The vigorous housing
market with rising residential prices, high sale volumes, coupled with the low interest rate
environment contributed to this performance. The transfer tax is a volatile revenue category that
is sensitive to transaction volume, the mix of residential and commercial transactions, and the
size of individual transactions. The budgeted amount has taken into consideration the softening
housing market so staff is optimistic the budget amount will be realized.
Expense Highlights for First Quarter Fiscal Year 2006-07 Financial Results
In many areas, expenditures are cyclical 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, departments are within their expected target range.
Excess of Overtime Expenditures to Adiusted Budget
General Fund Overtime Analysis:
Attachment B shows total overtime expenditures reaching 45 percent of adjusted budget.
Although most of the General Fund departments are below their overtime budgets, the Fire,
Community Services and Police Departments exceed their budgets for the following reasons:
The Fire Department is at 54 percent of adopted budget for overtime. The main factors
contributing to overtime usage are disability leave, staffing shortages and coverage due to
vacations which are highest during the summertime. Currently, there are eight personnel
on disability leave and a staffing shortage due to three retirements and two promotions.
The overtime will be partially offset with salary savings due to vacancies.
The Police Department is at 48 percent of the adopted budget for overtime. The main
factors contributing to overtime usage are staffing shortages due to vacancies and
disability leave and newly hired officers assigned to the academy and patrol program. In
addition, in response to increased crime, the City implemented "Operation Safe
Neighborhoods." This program placed additional police officers on the streets which
created an unanticipated increase in overtime. Overtime usage will be partially offset
with salary savings due to vacancies.
CMR:422:06 Page 2 of 3
The Community Services Department is at 29 percent of the adopted budget for overtime.
Overtime usage is cyclical and is due to summer programs and maintenance, holiday
usage and emergency needs. Staff anticipates that the department will remain within its
overtime budget for the year as a whole.
ENVIRONMENTAL REVIEW
This is not a project for the purposes of the California Environmental Quality Act.
PREPARED BY:
TRUDY EIKENBERRY
Accounting Manager, Administrative Services
D’elSUty;irector, Administrative Services
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
CARL
Director Services
ATTACHMENTS
Attachment A: 2006-07, First Quarter Financial Report, General Fund
Attachment B: 2006-07, First Quarter General Fund Overtime
CMR:422:06 Page 3 of 3
Attachment A
CITY OF PALO ALTO
2006-07 Q1 FINANCIAL REPORT
GENERAL FUND
(in thousands of dollars)
Revenues & Other Sources
Sales Tax 21 133 21,133 3.503 17%
Property Tax
Transient Occupancy Tax
Utility Users Tax
Other Taxes and Fines
Charges for Services
Permits & Licenses
Return on Investment
Rental Income
From Other Agencies
20 368
6 400
9 151
7 438
19 053
4218
2 048
12 951
81
20,368
6,400
9,151
7,438
19,053
4,218
2,048
12,951
81
Charges To Other Funds
Other Revenues
70 0%
590 9%
1,971 22%
1,936 26%
4,695 25%
1,256 30%
632 31%
3,376 26%
198 244%
9,084
1,292
Operating Transfers-In 15,781
Encumbrances and Reappropriation
Total Sourc:es of FUnds " " ~ 128,998
9,084
1,292
15,781
!28,998
Expenditures & Other Uses
City Attorney 2,643 2,643
City Auditor 837 837
City Clerk 932 932
City Council 179 179
City Manager 1,803 1,803
Administrative Services 6,770 6,770
Community Services 19,881 19,881
Fire 22,201 22,201
Human Resources 2,594 2 594
Library 5,800 5,800
Planning and Community Environment 8,762 8,762
Police 25,686 25,686
Public Works 12,412 12,412
Non-Departmental 9,770 9,770
2,231 25%
378 29%
3,945 25%
24,78!~19%
85 870 553 57%
105 253 43%
39 242 30%
29 44 41%
5O 75 5O4 35%
38 137 1,939 31%
19 3,397 5,511 45%
133 471 5,802 29%
15 303 713 40%
45 195 1,465 29%
67 684 2,398 36%
59 386 7,041 29%
297 874 3,125 35%
1,527 16%
Total-Expenditures
Operating Transfers-Out
Total Uses of Funds
Net surplus (Deficit)
Beginning Reserves
.1:20,270 120,270
7,439 7,854
127~709 128,124
1,289-874
22,570 22,731
23;605
* Excludes encumbrances, reappropriation and infrastructure reserve
Attachment B
CITY OF PALO ALTO
2006-07 Q1 FINANCIAL REPORT
GENERAL FUND OVERTIME
(in thousands of dollars)
City Attorney
City Auditor
City Clerk
City Council
City Manager:
Administrative Services
Community Services
Library
Fire
Human Resources
Planning and Community Environment
Police
Public Works
7 7
3 3
45 45
185 184
58 58
1033 1033
4 4
66 66
1016 1016
112 112
2
54
11
555
-10
486
19
0%
0%
0%
O%
O%
4%
29%
19%
54%
0%
15%
48%
17%