HomeMy WebLinkAboutStaff Report 3915 City of Palo Alto (ID # 3915)
City Council Informational Report
Report Type: Informational Report Meeting Date: 6/17/2013
June 17, 2013 Page 1 of 10
(ID # 3915)
Title: FY 2013 3rd Qtr Financial Report
Subject: Review of FY 2013 Third Quarter Financial Report
From: City Manager
Lead Department: Administrative Services
Background
The purpose of this report is to provide information on the financial status of the General Fund
and Enterprise Funds through the first nine months of fiscal year (FY) 2013.
The General Fund started the fiscal year with an Adopted Budget of $133.4 million in revenue
and $138.0 million in operating expenditures. After factoring in operating transfers in and out,
the net projected deficit for FY2013 was $0.4 million.
As reported earlier, through the first six months of FY2013, major tax revenue streams have
exceeded expectations. In particular, transient occupancy tax and documentary transfer tax
have surpassed previous years’ activity and are on track to set record revenue levels. As a
result, the mid-year budget changes included a $3.9 million upward adjustment in revenues, an
increase of 3.0 percent. Expenses were adjusted upward by $1.7 million and, after subtracting
Budget Amendments authorized by Council, the net projected surplus for the year stands at
$1.6 million.
Levels of activity in the 3rd quarter of the fiscal year continue to support the trends seen in the
first half of FY2013, and further validate the mid-year adjustments included in the FY2013
Adjusted Budget. Attachment A contains a detailed line by line report of revenues and
expenditures, as well as a comparison of FY2013 Adopted and Adjusted Budgets.
GENERAL FUND
Revenue Highlights for FY2013 3rd Quarter Year-to-Date (YTD)
Following is a table which highlights the City’s major revenue sources for the 3rd quarter YTD,
compared to the same period of the prior year in order to gauge how each line is trending. In
addition, YTD revenue is expressed as a percentage of the Adjusted Budget for each of the
years.
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FY 2013 FY 2012 %FY 2013 %FY 2012 %
inc (dec)
Property tax 18,320$ 16,913$ 8%27,912$ 66%25,989$ 65%
Sales tax 16,554 14,632 13%23,364 71%21,594 68%
Charges for services 16,221 16,083 1%23,616 69%22,576 71%
Utility user tax 7,760 7,830 (1%)10,825 72%10,677 73%
Transient occupancy tax 6,775 6,091 11%10,439 65%8,674 70%
Permits and licences 5,548 4,841 15%6,693 83%6,479 75%
Documentary transfer tax 4,916 2,818 74%6,800 72%4,769 59%
All other revenue sources 21,574 22,748 (5%)27,720 78%29,930 76%
Total Revenue 97,668$ 91,956$ 6%137,369$ 71%130,688$ 70%
3rd Quarter YTD Actuals Adjusted Budget
City of Palo Alto
General Fund Revenue
FY 2013 3rd Quarter YTD
(000's)
In total, revenue is up 6 percent, or $5.7 million, from prior year as of the end of the 3rd quarter,
almost half of which is driven by higher documentary transfer tax. In total, receipts are at 71
percent of Adjusted Budget, which is typical for the end of the 3rd quarter due to property tax
receipts which will spike in the last quarter of the fiscal year.
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The following graph demonstrates a three year trend for major sources of General Fund tax
revenue, comparing FY2011 and FY2012 actuals with FY2013 Adjusted Budget. The trend in all
cases shows revenues moving sharply upward from the prior year.
Property Tax Sales Tax Tr Occ Tax Doc Tsf Tax
FY 2011 Actual $25,688 $20,746 $8,082 $5,167
FY 2012 Actual $26,494 $22,132 $9,664 $4,821
FY 2013 Budget $27,912 $23,364 $10,439 $6,800
$0
$8,000
$16,000
$24,000
General Fund Revenues
FY2011 and 2012 Actuals Compared to FY2013 Adjusted Budget
(000's)
Property tax revenue at the close of FY2013 3rd quarter was $18.3 million, or 66 percent of the
Adjusted Budget. Property tax is received from the County of Santa Clara during the 2nd, 3rd and
4th quarters of the year, and we expect the remaining 34 percent of budgeted revenues will be
received in the 4th quarter. FY2013 Adopted Budget property tax revenue was increased by
$0.6 million due to better than expected receipts from unsecured property taxes and motor
vehicle in-lieu fees, as well as reduced county administrative fees. The City received a one-time
refund of $0.7 million from the County of Santa Clara for excess administrative fees charged
over the last six years. This was not included in the Adjusted Budget since it was received after
the mid-year report.
Sales tax revenue at the close of FY2013 3rd quarter was $16.5 million, or 71 percent of the
Adjusted Budget. Sales tax is received evenly throughout the year, with the exception of the
Triple Flip quarter cent tax payment which is received in January and April. We expect the
remaining 29 percent of revenue will be received in the 4th quarter. FY2013 Adopted Budget
sales tax revenue was increased by $0.8 million to $23.4 million, which is the highest level since
FY2001. The increase is due to robust performance in electronic equipment, apparel stores,
restaurants and service stations. Weak performers include furniture/appliance and business
services.
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Transient occupancy tax revenue at the close of FY2013 3rd quarter was $6.8 million, or 65
percent of the Adjusted Budget. The 65 percent level is because the second half of the 3rd
quarter payment was not received until the 4th quarter. The FY2013 Adopted Budget was
increased by $0.8 million to $10.4 million, which is a record. The previous highest amount was
$9.4 million in FY2001, which was prior to a 2 percent increase in the tax rate. The average
occupancy rate for the first eight months of FY2013 was 77.95 percent, compared to 77.14
percent for the same period last year, a slight increase of 1 percent. Average daily room rates
for the same period increased from $160.72 per day to $176.61, an increase of 10 percent.
Documentary transfer tax revenue at the close of FY2013 3rd quarter was $4.9 million, or 72
percent of the Adjusted Budget. The FY2013 Adopted Budget was increased by $1.7 million to
$6.8 million, which is a record. The previous highest amount was $5.8 million in FY2007. This
record setting forecast is due to a small number of commercial high value transactions.
Expense Highlights for FY2013 3rd Quarter YTD
Following is a table which highlights the City’s General Fund expenses by function for the 3rd
quarter, compared to the same period of the prior year. In addition, the YTD expense is
expressed as a percentage of the Adjusted Budget for each of the years.
City of Palo Alto
General Fund Expenses
FY 2013 3rd Quarter YTD
(000's)
FY 2013 FY 2012 %FY 2013 %FY 2012 %
inc (dec)
Police 22,954$ 24,170$ (5%)32,253$ 71%33,011$ 73%
Fire 19,828 21,025 (6%)28,458 70%30,016 70%
Community services 15,158 14,875 2%22,496 67%21,578 69%
Public works 9,394 9,351 0%14,545 65%14,419 65%
Planning and community env 7,388 7,132 4%12,294 60%12,479 57%
Library 4,798 5,026 (5%)7,662 63%7,815 64%
Administrative services 5,059 4,831 5%7,593 67%7,057 68%
All other departments 13,302 13,951 (5%)18,818 71%19,103 73%
Total Expenses 97,881$ 100,361$ (2%)144,119$ 68%145,478$ 69%
3rd Quarter YTD Actuals Adjusted Budget
Actual expenses for the 3rd quarter YTD of the fiscal year total $97.9 million, which is 68
percent of Adjusted Budget. Including encumbrances (as seen in Attachment A), expenses are
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72 percent of Adjusted Budget. Following is an analysis of the expenses for Police and Fire as
their departments are the primary factor in the year-over-year decrease of 2 percent.
Police expenses for the 3rd quarter YTD total $22.9 million which is $1.2 million, or 5 percent
less than the same period last year. The primary driver is salaries, as shown in the following
table:
Adjusted
Increase Budget
FY 2013 FY 2012 (Decrease)%FY 2013 %
Salaries 10,673$ 11,881$ (1,208)$ (10%)14,676$ 73%
Overtime 1,173 1,242 (69)(6%)970 121%
Benefits 7,578 7,240 338 5%11,404 66%
All other expenditures 3,530 3,807 (277)(7%)5,203 68%
Total Police Expenses 22,954$ 24,170$ (1,216)$ (5%)32,253 71%
3rd Quarter YTD
The decrease in salaries expense is a result of the following:
Negotiated pay reduction of 1.33 percent that took effect in May 2012;
Several large cash-outs were paid out in the 1st quarter of FY 2012;
Staffing reductions of 2.5 FTEs which were moved to the Fire Department.
Overtime expense has decreased 6 percent from the prior year due to fewer hours used to staff
communications. At the end of the nine month period actual overtime exceeds the Adjusted
Budget by $0.2 million as a result of staffing shortages due to vacancies, traffic control at
numerous special events, and increased burglary suppression efforts.
Fire expenses for the 3rd quarter YTD total $19.8 million, which is $1.2 million or 6 percent less
than the same period last year. The primary driver is overtime, as shown in the following table:
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Adjusted
Increase Budget
FY 2013 FY 2012 (Decrease)%FY 2013 %
Salaries 9,057$ 9,038$ 19$ 0%12,603$ 72%
Overtime 1,367 2,927 (1,560)(53%)1,624 84%
Benefits 6,505 6,364 141 2%8,990 72%
All other expenditures 2,899 2,696 203 8%5,241 55%
Total Fire Expenses 19,828$ 21,025$ (1,197)$ (6%)28,458 70%
3rd Quarter YTD
Overtime costs for the 3rd quarter YTD of FY 2013 were reduced $1.6 million, or 53 percent,
from the same period last year. This decrease is due to the elimination of minimum staffing
standards and the closure of Station 7. Also, implementation of operational changes such as
staffing of Medic 2 with regular time rather than overtime is contributing to a reduction of
overtime costs.
Budget Stabilization Reserve (BSR) Balance
The General Fund Adopted Budget reflected a deficit position of $0.4 million. As detailed in
Attachment A, after giving effect to Budget Amendments and adjustments during the mid-year
process, the projected surplus for the year is $1.6 million. This will result in an ending BSR
balance of $30.2 million, or 19.81 percent. Staff anticipates the surplus will end the year higher
as a result of 3rd quarter trends and other information. Depending on the level of 4th quarter
activity, the surplus for the year could be in the $3.0 million range.
ENTERPRISE FUNDS
Operating Revenue Highlights for FY 2013 3rd Quarter YTD
In total, Enterprise operating revenue is up 1 percent from the same period prior year, and has
reached 71 percent of the FY 2013 Midyear Budget. The following table shows the detail for
each of the Enterprise Funds.
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Midyear
Budget
FY 2013 FY 2012 Inc (Dec)%FY 2013 %
Water 27,637$ 22,521$ 5,116$ 23%37,909$ 73%
Electric 88,943 89,319 (376)0%131,923 67%
Fiber Optic 3,424 2,878 546 19%3,575 96%
Gas 27,161 32,916 (5,755)(17%)38,371 71%
Wastewater collection 11,819 11,284 535 5%16,066 74%
Wastewater treatment 16,206 15,280 926 6%22,048 74%
Refuse 22,790 22,520 270 1%30,379 75%
Storm Drainage 4,442 4,346 96 2%5,733 77%
Airport 0 0 0 N/A 310 N/A
Operating Revenue YTD 202,422$ 201,064$ 1,358$ 1%286,314$ 71%
Enterprise Funds Operating Revenue
3rd Quarter YTD
Water Fund FY 2013 3rd quarter YTD revenue increased $5.1 million, or 23 percent, from the
same period prior year due to rate increases in October 2011 and July 2012. Current year
revenue is at 73 percent of Midyear Budget.
Electric Fund FY 2013 3rd quarter YTD revenue includes $1.9 million from the new Carbon Cap
and Trade program, however this increased revenue was offset by a decline of $1.5 million in
surplus energy sales.
Fiber Optic Fund FY 2013 3rd quarter YTD revenue has increased significantly over the same
period prior year, and has already reached 96 percent of the Midyear Budget. The increase
over prior year is due to $0.4 million in increased sales, primarily Stanford University, and
recovery of a $0.2 million bad debt.
Gas Fund FY 2013 3rd quarter YTD revenue has decreased significantly from same period prior
year due to declining gas prices which result in lower customer billings. The decline is on track
with the budgeted amount.
Revenue for the other Enterprise Funds is tracking closely with the Midyear Budget.
Operating Expense Highlights for FY 2013 3rd Quarter YTD
Total operating expenses as of the end of the 3rd quarter are $139 million, which is 4 percent
less than the same period last year, and amounts to 60 percent of the current year Midyear
Budget. Operating expenses for each Fund are highlighted in the following table:
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Midyear
Budget
FY 2013 FY 2012 Inc (Dec)%FY 2013 %
Water 18,325$ 17,518$ 807$ 5%29,715$ 62%
Electric 61,829 63,235 (1,406)(2%)104,612 59%
Fiber Optic 843 877 (34)(4%)1,469 57%
Gas 16,044 18,920 (2,876)(15%)28,770 56%
Wastewater collection 8,974 8,562 412 5%13,566 66%
Wastewater treatment 12,280 12,764 (484)(4%)20,140 61%
Refuse 18,953 21,134 (2,181)(10%)29,398 64%
Storm Drainage 1,619 1,301 318 24%2,551 63%
Airport 127 139 (12)(9%)302 N/A
Operating Expense YTD 138,994$ 144,450$ (5,456)$ -4%230,523$ 60%
Enterprise Funds Operating Expense
3rd Quarter YTD
Electric Fund FY2013 3rd quarter operating expense is 2 percent lower than the same period last
year due to a decrease in surplus energy purchases.
Gas Fund FY 2013 3rd quarter operating expense is 15 percent lower than same period prior
year due to changing the gas procurement process from a laddering strategy to market based
pricing. Market prices have dropped significantly from prior year.
Refuse Fund FY 2013 3rd quarter operating expense is 10 percent lower than same period prior
year due to the following:
Salaries and benefits decreased $0.5 million due to elimination of two full-time
positions. One manager position remained vacant.
Vehicle replacement allocation was reduced by $0.7 million.
Rent expense decreased $1.2 million due to the change in Landfill Rent Schedule.
All Enterprise Funds are maintaining cost levels that are in line with the Midyear Budget.
Enterprise Fund Reserves
The Enterprise Funds are all on track to end the year with net income and a positive
contribution to their Rate Stabilization Reserves (RSR). All Funds have a positive RSR balance
except for Refuse Fund and Airport Fund.
At the end of FY2012, the Refuse Fund RSR balance was a negative $4.1 million. The negative
balance was created because of the accounting requirement to create a $5.2 million landfill
post closure liability. The RSR balance would be a positive $1.1 million without the post
closure liability adjustment. The projected net income for FY2013 is $1.2 million, which will
improve the RSR balance.
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The Airport Fund had a negative RSR balance of $0.2 million at the end of FY2012. Expenses are
funded by a loan from the General Fund, and the negative RSR balance will continue to increase
until such time as the operation generates net income.
Update on Third Pension Tier
The City implemented a second tier pension formula in 2011 (2% at 60) in an effort to bring
down future pension expense. In addition, the California Public Employees’ Pension Reform Act
of 2013 (PEPRA) mandated a third tier pension formula of 2% @ 62 effective January 1, 2013,
along with other provisions such as a cap on retirement benefits for new CalPERS members. As
employees leave the City and are replaced with new hires, the number of employees in the first
and second tiers will decrease. Below is a table showing the employee count in each of the
Miscellaneous plans as of May 20, 2013:
Change
FY13 FY12 Inc (Dec)
Tier 1 2 2
Tier 2 2 2
Tier 3 0 0
Sub-total 4 4 0
Tier 1 1 1
Tier 2 0 0
Tier 3 0 0
Sub-total 1 1 0
Tier 1 137 141
Tier 2 34 22
Tier 3 1 0
Sub-total 172 163 9
Tier 1 442 477
Tier 2 84 62
Tier 3 8 0
Sub-total 534 539 (5)
Tier 1 40 43
Tier 2 1 2
Tier 3 0 0
Sub-total 41 45 (4)
Tier 1 622 664 (42)
Tier 2 121 88 33
Tier 3 9 0 9
Grand Total 752 752
Tier 1
Tier 2
Tier 3
# of Employees
Total
Employee Group
2.7% @ 55
2% @ 60
2% @ 62
Council Appointed
Officers
Fire Chiefs
Association (non-
sworn)
Management and
Professional
Service Employees
International
Union
Utilities
Management
June 17, 2013 Page 10 of 10
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Attachments:
Attachment A: FY2013 Third Quarter Financial Report - General Fund (XLSX)
Attachment A
ACTUALS
Adopted Adjusted Pre % of
Categories
Budget Budget Encumbr Encumbr Actual Adjusted
Budget
Revenues & Other Sources
Sales Tax 22,545 23,364 - - 16,554 71%
Property Tax 27,306 27,912 - - 18,320 66%
Transient Occupancy Tax 9,591 10,439 - - 6,775 65%
Utility Users Tax 10,731 10,825 - - 7,760 72%
Documentary Transfer Tax 5,078 6,800 - - 4,916 72%
Other Taxes and Fines 2,058 2,058 - - 1,592 77%
Charges for Services 23,682 23,616 - - 16,221 69%
Permits & Licenses 6,614 6,693 - - 5,548 83%
Return on Investment 959 774 - - 671 87%
Rental Income 12,640 12,640 - - 9,637 76%
From Other Agencies 157 170 - - 49 29%
Charges To Other Funds 10,874 10,834 - - 8,232 76%
Other Revenues 1,188 1,244 - - 1,393 112%
Total Revenues 133,423 137,369 - - 97,668 71%
Operating Transfers-In 18,995 19,215 - - 14,246 74%
Encumbrances and Reappropriation 4,386 - - -
From Infrastructure Reserve -
Total Sources of Funds 152,418 160,970 - - 111,914 70%
Expenditures & Other Uses
City Attorney 2,436 2,791 40 288 1,651 71%
City Auditor 965 1,020 - 48 731 76%
City Clerk 1,558 1,609 - 10 979 61%
City Council 465 501 - 80 275 71%
City Manager 2,578 3,075 192 186 1,715 68%
Administrative Services 7,156 7,593 - 95 5,059 68%
Community Services 21,893 22,496 114 1,630 15,158 75%
Fire 27,582 28,458 391 452 19,828 73%
Human Resources 2,982 3,035 47 66 2,041 71%
Library 6,996 7,662 115 560 4,798 71%
Planning and Community Environment 11,111 12,294 74 667 7,388 66%
Police 32,332 32,253 44 359 22,954 72%
Public Works 13,947 14,545 8 1,058 9,394 72%
Non-Departmental (1,108) (346) - - 610 -176%
Cubberley Lease 7,133 7,133 - - 5,300 74%
Total Expenditures 138,026 144,119 1,025 5,499 97,881 72%
Operating Transfers-Out 14,782 14,696 - - 10,945 74%
Total Uses of Funds 152,808 158,815 1,025 5,499 108,826 73%
Net Surplus (Deficit) (390) 2,155
Budget Amendments Authorized by Council:
BAO 5163 - Development Center Furnishing 191
BAO 5174 - EKG monitors CIP (FD-12000)180
BAO 5177 - Infrastructure measuring polling 90
BAO 5186 - Infrastructure measure outreach 95
Total Augmentations Authorized by Council 556
Net To (From) Reserves (390) 1,599
Projected Ending Reserves 27,732 30,277
BSR % of Total Use of Funds 18.15%19.81%
(in thousands of dollars)
BUDGET (as of 03-31-13)
CITY OF PALO ALTO
FISCAL YEAR 2013 THIRD QUARTER FINANCIAL REPORT
GENERAL FUND
6/12/2013