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HomeMy WebLinkAboutItem 06 - 2019-20 First Quarter Financial Report Department Name: Finance Cost Center: 2002 For Agenda of: November 19, 2019 Placement: Consent Estimated Time: N/A FROM: Brigitte Elke, Finance Director Prepared By: Natalie Harnett, Interim Budget Analyst SUBJECT: 2019-20 FIRST QUARTER FINANCIAL REPORT RECOMMENDATION Receive an update on the status of the current financial position, Major City Goals, and CIP projects for the first quarter of Fiscal Year 2019-20. The City’s Financial Reporting and Budget Administration policy for interim reporting requires that staff prepare and issue a formal quarterly report to the Council. DISCUSSION The accompanying First Quarter Financial Report for 2019-20 (Attachment A) provides a high- level overview of the City’s Financial condition as of September 30, 2019. The report summarizes revenue and expenditure actuals for the first three months of the quarter. It also includes an update on Major City Goals tasks that were expected to be completed during the first quarter. The report includes a Capital Improvement Project update and highlights milestones from the first quarter. The report’s focus is on the General Fund; however, updated information is also provided for each of the City’s enterprise funds. Background One of the City’s Fiscal Sustainability and Responsibility Major City Goal tasks is to implement quarterly financial reports to monitor fiscal performance including performance measures. The purpose of reporting on financial position more regularly is to address economic development and fiscal health sooner, thus allowing the city to find new ways of doing business and increase efficiency. Report Contents Section A: General Fund Update: Overall, the General Fund revenues and expenditures are on track with the budget. Cannabis businesses are expected to open later than originally forecasted so tax revenues will also lag. The City will propose a lower revenue projection at mid -year. Another notable variance is in Development Services revenue, which has already reached over 50% of it’s revenue projection for the year. Most of this over realization is due to several big developments completing the planning process ahead of schedule, but some is due to general growth in development activity. The Community Development Department’s original projections Item 6 Packet Page 19 were conservative and will be reassessed at mid-year. Section B: Enterprise Funds Update: Enterprise fund revenue showed no variance from projections. Collectively, the funds have reached 22% of the year’s revenue projection. None of the funds show signs of over or underspending thus far. Section C: Major City Goals Update: Of the twelve Major City Goal tasks that had a scheduled completion date during the first quarter, four were completed. Task completion dates were updated for the remaining tasks. A status report on all Major City Goal tasks will be provided and needed adjustments recommended at mid-year. Section D: Capital Improvement Plan Update: Public Works CIP Engineering and Management staff have delivered numerous projects in the first quarter of FY20. A couple highlights are the completed South Broad Street Pavement Improvements and the installation and opening of the first permanent Pickleball Courts (three) at French Park and relocated basketball court. Section E: CalPERS and Debt Schedule Update: The City made its annual CalPERS unfunded liability payment in July in the amount of $10.2 million. It also made all its debt payments due for the first quarter, totaling just under $1 million. Section F: Outlook for Next Quarter: Staff forecasts that Sales Tax revenue will remain high through the holiday season, but Transient Occupancy Tax Revenue will begin to slow down. There are eight Major City Goal Tasks expected to be completed next quarter along with several CIP projects. The City will be launching its new budget system over the next quarter in addition to a new quarterly Transient Occupancy Tax report that will published on the city’s website in late November. Policy Context Fiscal Health Major City Goal task 4 is to implement quarterly financial reports to monitor fiscal performance, including performance measures. Budget policy F, Goal Status Reports of major program objectives, will be formally reported to the Council on an ongoing, periodic basis. Public Engagement Public comment on the item can be provided to the City Council through written correspondence prior to the meeting and through public testimony at the meeting. First Quarter Financial Report for 2019-20 (Attachment A)will also be posted on the City’s website for public review. CONCURRENCE Operating departments were provided with the first quarter financial results before the preparation of this report. The respective fiscal officers reviewed the numbers and will be making budget amendment requests at mid-year if needed. Item 6 Packet Page 20 ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15378. FISCAL IMPACT Budgeted: Yes Budget Year: 2019-20 Funding Identified: Yes Fiscal Analysis: Funding Sources Current FY Cost Annualized On-going Cost Total Project Cost General Fund N/A N/A N/A State Federal Fees Other: Total N/A N/A N/A As part of the City’s Fiscal Sustainability and Responsibility Major City Goal, $10,000 was allocated for the ongoing staffing expenses involved with implementing quarterly financial reports. The attached first quarter report provides a high-level overview of the City’s financial position after the first three months of the year. No changes to the budget will be made at this time. ALTERNATIVES Not receive an update on the status of the current financial position, Major City Goals, and CIP projects for the first quarter of Fiscal Year 19-20. Attachments: a - FY20 First Quarter Report Item 6 Packet Page 21 Fiscal Year 2019-20 Prepared by: Natalie Harnett, Principal Budget Analyst First Quarter Report Item 6 Packet Page 22 First Quarter Financial Report Fiscal Year 19-20 First Quarter Financial Report Fiscal Year 2019-20 Introduction This financial report provides an overview of the City’s financial position through the first quarter of fiscal year 2019-20 (July 1, 2019-September 30, 2019) for the General Fund and major enterprise operating funds. It also provides an update on the stat us of the City’s Capital Improvement Program projects (CIP) and Major City Goals. Notable milestones or trends within the first quarter are addressed. This report is broken down into the following sections: SECTION A General Fund: Operating Revenues The following table includes first quarter revenue comparisons for FY19 and FY20 and a revenue budget to actual comparison for FY19. FY19 FY20 $ Variance % Variance FY20 % of budget Tax & Franchise Revenue Sales & Use Tax 3,451,275 3,360,627 (90,648) -3% 18,060,000 19% Local Revenue Measure G 1,725,638 1,671,117 (54,520) -3% 7,840,000 21% Property Tax 123,611 132,909 9,298 8%17,921,000 1% Transient Occupancy Tax 2,316,381 2,334,589 18,208 1%8,033,000 29% Utility User Tax 1,189,307 1,187,531 (1,776) 0%5,854,000 20% Franchise Fees 67,567 77,798 10,231 15%1,558,000 5% Business Tax 2,550,720 2,862,835 312,115 12%2,942,000 97% Gas Tax 267,746 393,091 125,345 47%1,783,000 22% Cannabis Tax - - - 0%650,000 0% Total Tax/Franchise 11,692,244 12,020,497 328,253 3%64,641,000 19% Fees for Service Police Services 108,290 108,157 (133) 0%742,202 15% Fire Services 322,519 325,975 3,456 1%1,399,793 23% Development Review 1,123,099 2,854,728 1,731,628 154%5,333,000 54% Parks and Recreation 413,291 392,278 (21,014) -5% 1,914,645 20% Total General Government 282,794 425,035 142,240 50%560,000 76% Cannabis - 7,676 7,676 0%400,000 2% Other Revenues 161,877 1,891,083 1,729,206 1068%2,262,000 84% Subventions & Grants 21,430 18,897 (2,533) -12% 900,000 2% Total Fees & Other 2,433,302 6,023,828 3,590,527 148%24,830,973 24% Total Revenue 14,125,546 18,044,325 3,918,780 28%89,471,973 20% First Quarter Actual Comparison Budget to Actual Comparison Key: No Variance Variance Significant Variance Section A: General Fund Update Section B: Enterprise Funds Update Section C: Major City Goals Update Section D: Capital Improvement Plan Update Section E: CalPERS and Debt Schedule Update Section F: Outlook and Conclusion Item 6 Packet Page 23 First Quarter Financial Report Fiscal Year 19-20 The following factors should be taken into consideration when analyzing first quarter revenue data: • Property tax revenue has not yet been received . • Only two months of Sales Tax has been received. • Most franchise fees are collected annually in April. • Some departmental revenues are seasonal. • Subventions and Grants are awarded in large amounts and at varying times of the year. • The significant increase in “Other Revenues” is due to one-time funding from SB1090 (Diablo Canyon Power Plant closure). Overall, General Fund operating revenues are ahead of FY19 revenues during the same time period. Although revenues are only at 20% percent of the budget through the first quarter, this is primarily due to the timing associated with the city’s largest revenue sources, sales tax and property tax. The majority of property tax funding is received in the third and fourth quarters of the fiscal year. Sales Tax: Only two months of sales tax has been received during the first quarter due to the timing of disbursements from the California Department of Tax and Fee Administration (CDTFA). From the two months that have been collected, Sales Tax revenue is only slightly lower than FY19, but because of true-up that happens in later months, this amount is likely to increase. July 2019 marked ten years of continuous economic growth which is the largest period of U.S economic expansion on record. Staff expects sales tax revenue growth to slow over the next year and will continue to closely monitor this revenue stream and provide an update at the FY20 mid-year review. Transient Occupancy Tax (TOT): Year to date revenues are slightly higher than one year ago. Staff forecasted growth in TOT due to three new hotels opening in 2019 and the expansion of homestay rentals. TOT is discussed in detail in the new quarterly TOT report that will be published in late November. Business Tax: The renewal cycle for business tax occurs during the first quarter of the fiscal year; therefore, most of the anticipated revenue for the year has been collected. The City had higher revenue during the first quarter of this year compared to FY19 for two reasons. The City opened the business license renewal period earlier and encouraged online submittals. Overall, more 3.064.18$4.02 $4.94 $4.44 FY 15 -16 FY 16 -17 FY 17 -18 FY 18 -19 FY 19 -20 (FORECAST) SALES TAX (MILLIONS) QTR 1 FIVE YEAR COMPARISON Item 6 Packet Page 24 First Quarter Financial Report Fiscal Year 19-20 businesses complied early and fewer administrative citations were sent in October. The City has also increased business license enforcement as part of the Fiscal Health Response Plan. Cannabis Tax: The City is currently doing background checks for the cannabis businesses that applied in January 2019. The process is taking longer due to unexpected hurdles during backgrounding of applicants. One non-retail business has been approved and is scheduled to open during the winter of FY20. Staff will adjust Cannabis revenue assumptions at mid-year when opening dates will be known for two of the three anticipated retailers. Development Review: When taking a closer look at development review revenue, there are three main fee types that are contributing to the notably high revenues for the first quarter. Development review revenues are particularly difficult to forecast because there are so many external factors that could impact development activity. “Plan Check Fees” and “Building Permits” are fees that indicate the overall health of construction activit y within the community. The high actuals associated with the three fee types highlighted above are directly related to several specific, yet large development projects moving through the planning process ahead of schedule. The Community Development Department conservatively projected revenues because of overall uncertainty in the economy. The department is critically evaluating these revenue streams and will adjust the budget accordingly at mid-year. The year over year revenue graph below helps illustrate the variance. Development Services revenue has already reached over 50% of the total revenue received in the entire year of FY19. FY19 FY20 $ Variance % Variance FY20 % of budget Planning & Zoning Fee 120,616 203,395 82,779 69%480,000 42% Development Review Fees 24,741 110,064 85,323 345%166,000 66% Building Permits 428,940 884,060 455,120 106%2,263,000 39% Code Enforcement Fees 30,353 19,806 (10,547) -35% 82,000 24% Plan Check Fees 187,878 259,790 71,912 38%994,000 26% Infrastructure Plan Check 228,645 1,210,853 982,208 430%923,000 131% Encroachment Permits 66,032 69,719 3,687 6%305,000 23% Engineering Dev Rev Fees 22,900 40,462 17,561 77%120,000 34% First Quarter Actual Comparison Budget to Actual Development Review Fees Item 6 Packet Page 25 First Quarter Financial Report Fiscal Year 19-20 General Fund: Department Operating Expenditures The following table include first quarter staffing consumption for FY20 compared to the budget. First quarter staffing expenditures are exactly on track. The City assumes a 2% salary savings at the end of the year to account for vacancies and fluctuations in employee pay grades. The following table include first quarter non-staffing consumption for FY20 compared to the budget. Department operating expenditures are generally on target. In a linear fashion, expenditures should track at 25% at quarter end, but this is often not the case for non-staffing expenses. One of the largest line item expenses in the operating budget is Contract Services and contracts are paid at varying times of the year. For example, a department budget could go from 5% expended to 60% expended after one large annual contractual obligation. Staffing General Fund Budget Actual YTD % of budget Administration & IT 4,270,520 804,856 19% City Attorney 779,577 163,125 21% Community Development 4,625,003 902,672 20% Finance 1,684,061 351,355 21% Fire 12,298,808 2,649,803 22% Human Resources 1,074,645 212,094 20% Parks & Recreation 3,517,812 863,114 25% Police 16,882,738 3,566,837 21% Public Works 8,977,704 1,894,053 21% Grand Total 54,110,869 11,407,908 21% Budget to Actual Comparison Non-Staffing General Fund Budget (incl. FY19 encumbrances) Actual YTD % of budget Administration & IT 4,634,253 631,148 14% City Attorney 270,148 63,706 24% Community Development 1,074,906 287,277 27% Finance 805,830 158,390 20% Fire 810,916 135,090 17% Human Resources 518,584 22,315 4% Parks & Recreation 1,080,337 176,229 16% Police 1,282,269 252,603 20% Public Works 5,237,803 985,075 19% Solid Waste 46,510 451 1% Grand Total 15,761,557 2,712,285 17% Budget to Actual Comparison Item 6 Packet Page 26 First Quarter Financial Report Fiscal Year 19-20 SECTION B Enterprise Funds: Operating Revenue The table below includes first quarter actual revenue comparisons for FY19 and FY20 and a revenue budget to actual comparison for FY20 for the Enterprise Funds. Water & Sewer: Revenues are on track and very comparable to where they were during the first quarter of last year. Parking: Parking revenues were artificially low in FY19 due to change in the financial system and parking meter revenues being entered in the following quarter. This revenue stream typically adds about $100K-$150K per month. Considering the discrepancy, FY20 revenue are only slightly higher than the prior year. Transit: Most of the Transit Fund revenue is from State and Federal grants that are received at the end of the fiscal year; therefore, having received only 5% of the forecasted revenue at this point is completely normal. Enterprise Funds: Operating Expenditures The following tables include first quarter staffing followed by non-staffing consumption for FY20 compared to the budget. Like the trend in the general fund, operating expenditures for the City’s enterprise funds are tracking lower than 25% for the first quarter. Very similar trends were seen in FY19 but spending usually increases during later quarters in the year. The Water fund has spent 62% of the budget because it makes a large annual Nacimiento water payment in July. FY19 FY20 $ Variance % Variance FY20 % of budget Water 5,941,218 6,282,288 341,070 5.74% 27,066,000 23% Sewer 4,139,331 4,176,662 37,331 0.90% 17,432,427 24% Parking 875,111 1,206,485 331,375 37.87% 5,343,000 23% Transit 594,512 213,274 (381,238) -64.13% 4,116,000 5% Total Revenue 11,550,172 11,878,709 328,537 2.84% 53,957,427 22% First Quarter Actual Comparison Enterprise Funds Budget to Actual Comparison Staffing Enterprise Funds Budget Actual YTD % of budget Parking 1,287,835 302,812 24% Sewer 4,335,683 843,834 19% Transit 342,360 74,495 22% Water 4,137,825 821,332 20% Grand Total 10,103,703 2,042,474 20% Budget to Actual Comparison Non-Staffing Enterprise Fund Budget (incl. FY19 encumbrances) Actual YTD % of budget Parking 1,343,911 180,372 13% Sewer 2,447,295 590,241 24% Transit 3,774,565 298,856 8% Water 12,675,448 7,858,195 62% Grand Total 20,241,220 3,090,565 15% Budget to Actual Comparison Item 6 Packet Page 27 First Quarter Financial Report Fiscal Year 19-20 SECTION C Major City Goals Update Of the twelve tasks that were scheduled to be completed during the first quarter of FY20, four were fully completed. The others are in progress and the updated completion dates are included in the table below: Completed (Yes/No)Task Update Updated Completion Date (If applicable) Fiscal Health Negotiate labor agreements consistent with Fiscal Health Response Plan objectives with the San Luis Obispo City Employees' Association and the San Luis Obispo Police Staff Officers' Association. 8/30/2019 No The Human Resources Department has successfully negotiated a labor agreement with the San Luis Obispo Police Staff Officers Association consistent with Fiscal Health Response Plan objectives. Negotiations with the San Luis Obispo City Employees' Association is in progress and we are hopeful to come to agreement in early 2020. Winter/Spring 2020 Fund new Cannabis Detective Position using Cannabis Fees Jul-19 Yes The Cannabis Detective is actively working on applications and background investigations to sucessfully integrate cannabis industry in San Luis Obispo. Purchase specific equipment related to Cannabis Detective Jul-19 No Some equipment has been purchased such as a ID card machine Ongoing through FY20 Climate Action Support SLO Green Business Network and Certify City Hall as a Green Business Jul-19 No The $10,000 in support was disbursed to the SLO Green Business Network, which has certified 20 local businesses. The City will engage with the SLO Green Business Network to certify City Hall as a Green Business by March 2020. 1st Quarter 2020 Sustainable Transportation Construct Anholm Greenway Phase 1 & 2 (Grants, SB1, & GF) 2019 No Anholm Greenway Phase 1A (Foothill/Ferrini Crossing) is under construction and will be completed in November 2019. Phase 1B (Foothill to Broad) and Phase 2 (Broad to Downtown) are in design with plans to start construction by mid-year 2020. Phase 1A - Nov 2019 Phase 1B - Nov 2020 Phase 2 - Nov 2020 Complete Prado Creek Bridge Environmental Review & Construction Documents (Traffic Impact Fees & Grants) 2019 No Environmental review underway, with CEQA/NEPA documents submitted for internal review and planned for submittal to Caltrans by end of 2019. Anticipated completion of Environmental, Right-of-Way Aquisition, and Construction Documents by end of 2020. 4th Quarter 2020 Housing Complete an Affordable Housing Nexus Study in alignment with HE 2.15 and HE 4.6* Fall 2019 No Nexus study is underway and on schedule. Staff anticiaptes a final report with policy recommendations from the consultant in mid-December. 2nd Quarter FY20 Continue the Affordable Housing Monitoring Program* Fall 2019 No Montioring progam is underway and staff anticipates completion of this item in mid-December. Depending on findings, completion of all follow-up actions associated with this work effort may take additional time and coordination with the City Attorney's Office. 2nd Quarter FY20 Downtown Vitality Fund Police Field Service Technician and a Downtown Sergeant with land lease revenues Jul-19 Yes Both positions have been hired. Install security cameras in Mission Plaza Sept-19 No In progress. Staff working with contractor to start project. Construction to begin January 2020 Work with Downtown SLO to update downtown tile maps Aug-19 Yes The design and installation of the new tile maps at Monterey/Chorro, Marsh/Chorro and Higuera/Broad was completed in July 2019. Support the implementation of a Property- Based Business Improvement District (also included in Fiscal Health and Sustainability Major City Goal) Sep-19 Yes With the withdrawl of the petition for the PBID by Downtown SLO, the City amended its existing agreement with DSLO to fund a one-year pilot program that will add an additional downtown ambassador to their Clean and Safe Program. Downtown SLO hired a new ambasssador and they began work on October 25, 2019. Tertiary MCG Priorites* PROGRAMS/PROJECTS 2019-20 Major Task Completion Date Status Update (as of Sept 30, 2019) Item 6 Packet Page 28 First Quarter Financial Report Fiscal Year 19-20 SECTION D CIP Update Public Works CIP Engineering and Management staff have delivered numerous projects within the first quarter of the fiscal year as listed in the below table. These projects include South Broad Street Pavement Improvements, which in addition to new asphalt pavement, included Americans with Disabilities Act (ADA) ramp upgrades and wider and safer bike lanes with striped buffers. Public Works staff also designed and implemented Utilities projects that maintained or replaced existing sanitary sewer and potable water systems, ensuring continued health and welfare of the public. Other notable projects include installation of the first permanent Pickleball Courts at French Park and maintenance of the Therapy Pool at the SLO Swim Center. Project Proponent Department Status LRM Funding Approx. Construction Budget South Broad Street Pavement Improvements Public Works Completed in October Yes $2,270,500 Casa/Murray Waterline Replacements Utilities Awarded. Construction to start November No $2,055,000 Stafford-Kentucky-Taft Sewer Replacement Utilities Ongoing. Completion targeted November No $1,230,000 Osos-Leff-Santa Barbara Sewer Replacement Utilities Completed in September No $1,103,000 Sewer Lining 2016 Utilities Substantially Completed in August No $524,000 Foothill Pipe Bursting Utilities Ongoing. Completion targeted November No $304,000 Sewer Lining 2019 Utilities Completed in October No $228,000 Water Treatment Plant Wash Water Tank Recoat Utilities Ongoing. Completion targeted December No $168,000 Pickleball Courts Parks and Recreation Completed in September No $167,000 Dispatch HVAC Replacement Police / Fire / PW Completed in October Yes $151,000 El Capitan Bridge Replacement Public Works Ongoing. Completion targeted November No $108,000 Silt Removal 2019 Public Works / Administration Completed in October No $97,000 Swim Center Therapy Pool Re- Plaster Public Works / Parks and Recreation Completed in September Yes $96,000 Fire Station 4 Emergency Backup Generator Fire Completed in September Yes $94,000 City Hall Painting Public Works Completed in September Yes $40,000 Fire Station 3 Painting Public Works Completed in August Yes $10,000 $8,645,500 Total Budget for Active Projects in FY 2019 Q1 Item 6 Packet Page 29 First Quarter Financial Report Fiscal Year 19-20 SECTION E Update on CalPERS Unfunded Liability Payment: The CalPERS unfunded liability payment was made in July 2019 in the amount of $10,218,495. When the city prepays the unfunded liability, it saves a significant amount in interest as opposed to paying the amount due monthly. For FY20, the City saved $368,924 by prepaying the unfunded liability. Debt Schedule: Below is a table of all debts that had maturity dates during the first quarter and the associated payments. SECTION F Outlook for Next Quarter The second quarter of FY20 will provide City staff with a clearer picture of revenue and expenditure trends. Transient Occupancy Tax revenue typically begins to slow down in the second quarter due to lower travel activity during the Winter months. Historically, Sales Tax revenues for San Luis Obispo remain strong through the holiday season and drop after the second quarter. Sales Tax revenues for the second quarter for FY20 are forecasted to be about $4.7 million, or about $300K higher than forecasted for the first quarter. Including the first quarter Major City Goal tasks that were extended, there are eight MCG work tasks that are scheduled to be completed next quarter. The City will also be launching the Oracle budget module over the next three months. This system will help the departments improve forecasting and easily generate real time revenue and expenditure information. By January, FY19 financials will be audited and finalized, giving staff a clear picture of fund balances and overall ending position of FY19. Depending on the amount of savings, departments may request to increase budgets for projects or programs based on City priorities. Conclusion Except for identified variances, revenue and expenditures are tracking as expected. Staff will continue to monitor these variances and report to City Council in February with the mid-year review and proposed budget changes. Based on first quarter results, the major changes will be to lower Cannabis related revenue projections, possibly offset by an increase in development services. City staff will be attending the annual Central Coast Economic Forecast on November 8, 2019 and will be providing a comprehensive economic update at mid-year review. Fund Item Principal Payment Premium/ Discount Interest Payment Total Final Year General 2018 Lease Fire Truck 31,934 4,599 36,533 2024 General 2015 Lease Mobil Data Equipment Lease 44,291 172 44,463 2020 General 2014 Lease Copiers 5,324 23 5,347 2020 General 2010 Lease Fire Truck (Apparatus)1,869 1,869 2020 Water 2004 State Water Resource Control Board 453,100 72,357 525,457 2025 Parking 2001 State Infrastructure Bank (CIEDB) Loan Marsh St 275,580 12,968 66,354 354,902 2032 TOTAL 810,229 85,325 73,017 968,571 Item 6 Packet Page 30