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Home My WebLink About2011/10/25 Item 05CITY COUNCIL AGENDA STATEMENT ~~~~~ CITY OF "'~`` CHULA VISTA 10/25/2011, Item 5 ITEM TITLE: QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2011 q SUBMITTED BY: DIRECTOR OF FINANCE/TREASURER/~~ I~ CITY MANAGER REVIEWED BY: ASSISTANT CITY MANAGER 4/STHS VOTE: YES ~ NO ~X SUMMARY Section 504 (f) of the City Charter requires quarterly financial reports to be filed by the Director of Finance through the City Manager. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that tiling of the quarterly financial status report is not a "Project" as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the actions proposed are not subject to CEQA. RECOMMENDATION That Council accepts the report. BOARDS/COMMISSION RECOMMENDATION Not Applicable DISCUSSION Attached for your consideration is the financial report for the first quarter of fiscal year 2011/12. The detailed financial report for the quarter ending September 30, 2011 (Attachment 1) discusses the financial outlook for the City's General Fund for fiscal year 2011/12. 5-1 October 25, 2011, Item S Page 2 of 3 The Finance Department is currently working to finalize the numbers for_ fiscal year 2010/11. For this reason the final audited numbers for the General Fund are not available at this time and therefore continue to reflect an available balance of $10.2 million in fiscal year 2011/12. The following chart summarizes the projections for the first quarter. General Fund Revenues -During the first quarter, the City's major revenue sources (property tax, sales tax, and vehicle license fees) are reflecting some minor variances when compared to budget but in total major revenue sources are projected to meet budget. The programmatic revenues, most notably parking citations and staff time reimbursements, are currently projected to come in short (below budget) by approximately $400,000 or .003% of total revenues. We anticipate that these revenues may be mitigated through the receipt of one time revenues received throughout the fiscal year. General Fund Expenditures -Based on the first quarter projections, expenditures are projected to exceed budget. In total, the projections indicate that if these trends continue the overall General Fund budget would be overspent by approximately $500,000. The over expenditures are occurring in the Fire Department's constant minimum staffing overtime category which is projected to go over budget by approximately $1.0 million by year end. The primary cause for the increase in overtime expenditures is due to significantly higher workers compensation claims and administrative leave which trended up in the first quarter. Based on preliminary second quarter workers compensation information, the projections are conservative as the trend appears to be reversing. Once additional information is available, the projections will be updated. Overall, the first quarter financial projections indicate some potential challenges as discussed previously. No budgetary adjustments are recommended at this time as potential savings from the elections budget and potential savings related to insurance would assist in mitigating any impacts to the General Fund reserves by year end. DECISION MAKER CONFLICT Staff has reviewed the decisions contemplated by this item and has determined that the actions contemplated are not site specific and, consequently, the 500-foot rule found in California Code of Regulations section 18704.2(a) is not applicable. 5-2 Note: The year-end closing process is underway and the beginning reserve level will be updated once the final audited numbers are available. October 25, 2011, Item 5 Page 3 of 3 CURRENT YEAR FISCAL IMPACT There is no fiscal impact resulting from accepting the Quarterly Financial Report. As stated above, a deficit of $0.9 million is currently projected for the General Fund. Based on recent trends, the projections may be conservative as workers compensation claims are trending down in the second quarter. Further analysis will be conducted and may result in improved projections. Staff will continue to monitor revenue and expenditure trends and make recommended adjustments as necessary in order to mitigate any projected shortfalls. The following table summarizes the projections for the first quarter. ON GOING FISCAL IMPACT There is no on going fiscal impact as a result accepting the First Quarter Financial report. ATTACHMENTS Attachment 1 -Quarterly Financial Report Prepared by: Phillip Davis, Assistant Director of Finance, Finance Department 5-3 Note: The year-end closing process is underway and the beginning reserve level will be updated once the final audited numbers are available. ~~rr~ ~~ " ~'~, CfiY OF CHULA VISfA OVERVIEW This financial report summarizes the City's General Fund financial position for the fiscal year through September 30, 2011 and projecting out to June 30, 2012. The purpose of this report is to provide the City Council, Management and the Citizens of Chula Vista an update on the City's fiscal status based on the most recent financial information available. ECONOMIC UPDATE In its third quarterly report of 2011, the UCLA Anderson Forecast's outlook for the nation is "far worse" than it was just three months ago. Considering the weak, revised data for the first half of the year, the forecast calls for average Gross Domestic Product growth of just 0.9% on average for the next five quarters and ending in the first quarter of 2012. However, the Forecast economists remain steadfast in their assertion that the United States is not currently in a recession, nor is there a recession in the forecast through 2013. In California, the UCLA Anderson Forecast sees a tale of two states, as Coastal California enjoys a recovery rooted in exports, innovation and knowledge communities, while Inland California continues to suffer from a glut of housing and a contraction in government spending. The USD Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators for San Diego County fell 1.0 percent in August. The downward move was led by sharp declines in local stock prices, consumer confidence, and building permits. These overwhelmed moderate increases in help wanted advertising and the outlook for the national economy and a smaller gain in initial claims for unemployment insurance to push the USD Index to its largest decline since March 2009. With the USD Index now having fallen for two of the last three months, there are serious questions about the near term outlook for the local economy. Economists usually look for three consecutive changes in a leading index in one direction to signal a turning point in an economy. While that threshold has not yet been met, the magnitude of the decrease is troubling. The two measures of sentiment in the Index, local t CCLA Anderson Forecast Press Release September ZQ 2011. Quarterly Financial Report First Quarter Ending September 30, 2011 October 25. 2011 stock prices and consumer confdence, collapsed in August, indicating that both investors and consumers have serious concerns about the economy. The economic and political situations have gotten people in an ugly and pessimistic a mood that has not been observed for a long time. Whether that translates into trouble for the economy remains to be seen. For now, the outlook remains for positive but slow growth in the local economy through the first part of 2012. What happens after that is up in the air, and more data will be needed in the coming months to clarify the situation.' GENERAL FUND SUMMARY City Council Policy No 22G-03 recommends the City maintain at least an 8 percent reserve level with a long- term goal of 15 percent. As of June 30, 2011, the General Fund reserve level was at 8.2 percent (unaudited). 2 University of San Diego School of Business Administration, USD Lndex of Lending Economic lndica[ors, September 27, 2011. 5-4 San Diego Index of Leading Economic Indicators QUARTERLY FINANCIAL REPORT FIRST QUARTER OF 2011/12 Page 2 of 5 v ~» ~ General Fund. Resetves~ » 'Amended Budge rge~cted mr(tioris)' Reserves -July 1, 2011 (unaudited) $ 10 2 $ 10.2 Revenues & Transfers In ~ 124.9 124.5 _ Ezpenditums & Transfers Out (124.9) (125.4) Projected Surplus/Deficit 0.0 (0.9) Projected Fund Balance -June 30, 2011 $ 10.2 $ 9.3 Percentage of Operating Budget 8.2% 7.4% The year-end independent audit is underway and final audited numbers for fiscal year 2010/11 will be presented to Council in 60 days. For this reason the final audited numbers for the General Fund are not available at this time and therefore continue to reflect an available balance of $10.2 million in fiscal year 2011 /12. During the first quarter, the City's major revenue sources (property tax, sales tax, and vehicle license fees) are reflecting some minor variances when compared to budget but in total, major revenue sources are projected to meet budget. The programmatic revenues, most notably parking citations and staff time reimbursements, are currently projected to come in short (below budget) by approximately $400,000 or 0.003% of total revenues. We anticipate that these revenues may be mitigated through the receipt of one time revenues received during the fiscal year. Based on the first quarter projections, expenditures are projected to exceed budget. In total, the projections indicate that if these trends continue the overall General Fund budget would be overspent by approximately $500,000. The over expenditures are occurring in the Fire Department's constant minimum staffing overtime category which is projected to go over budget by approximately $1.0 million by year end. The primary cause for the increase in overtime expenditures is due to significantly higher workers compensation claims and administrative leave which trended up in the first quarter. Based on preliminary calendar year second quarter workers compensation information, the projections are conservative as the trend appears to be reversing. Once additional information is available, the projections will be updated. Overall, the frst quarter financial projections indicate some potential challenges as discussed previously. No budgetary adjustments are recommended at this time as potential savings from the elections budget and potential savings related to insurance would assist in mitigating any impacts to the General Fund reserves by year end. Revenues Reflected in the table are discretionary and departmental programmatic revenues. The projections indicate that no adjustments to discretionary revenues are required at this time. Projections for Departmental programmatic revenues have been adjusted downwards by $0.4 million and are mostly related to parking citation revenue and staff time reimbursements. Property Tax _25,230 ~ 25,230 0 Sales Tax 19,837 19,837 _ 0 Sales Tax In Lieu (1/4%) 6,563 - 6,563 0 Motor Vehicle License Fee 17,201 17,201 0 Franchise Fees 7,533 7,533 0 - Utility Users Tax _ ~ 3,241 _ 3 241 _ _._. 0 _ Transient Occupancy T_ax _2,086 _2,086 - 0 __ Business License Tax 1,213 1,208 - (5) __ _ _ Real Property Transfer Tax 850 850 ~ _ 0 Licenses and Permits 826 808 (18; Fine, Forfeitures & Penalties 2,200 1,742 (458; __ - - Use of Money and Property 2,235 _ 2,255 . 21 Other Agency Revenue 2,668 2 715 _ __ 47 Charges for Sertice_ s ~ 6,712 _. 6,742 _.. 30 Other Revenues 13,974 14,022 48 __ Transfers From Other Funds 12,506 ~~ 12,472 (34', Property Taxes. The City of Chula Vista receives property tax revenue based upon a 1.0 percent levy on the assessed value of all real property. Property tax is the City's second largest revenue source, representing 20.2 percent of General Fund budgeted revenue in fiscal year 2011/12. The fiscal year 2011/12 Property Tax budget anticipated a 2.1 percent increase primarily due to prior year collections. Property tax projections for the fscal year indicate that nc change from budget is required at this time.. The chart below compares the City's assessed values with the assessed values of San Diego County overall. 5-5 QUARTERLY FINANCIAL REPORT FIRST QUARTER OF 2011/12 Page 3 of 5 m 530 t szs m S2o S15 s1o SS so zs% 20% 1s % 10% s% o% -s % -10 -1s% m Assessed Value -~-% Growth CV -r-%Growth County Sales Tax. Sales tax is the City's largest revenue source, representing 21.1 percent of fiscal year 2011/12 budgeted revenues. The sales tax budget for fiscal year 2011/12 anticipated an 11.7 percent increase over the prior year budget. The large increase was warranted based on fscal year 2010-11 actual collections of $26.7 million. City staff has received sales tax data from the City's sales tax consultant, HdL Companies. They report that the change in sales tax receipts between second quarter calendar year 2011 and second quarter calendar year 2010 increased by 9.7 percent Statewide, by 7.62 percent in San Diego County and 4.17 percent in Chula Vista. Sales tax projections for the fiscal year indicate that no change from budget is required at this time. The chart represents actual sales tax collections since fiscal year 2006/07 when sales tax collected in the City peaked at $28.8 million. Fiscal year 2011/12 is projected and does not reflect actual collections. Motor Vehicle License Fee (VLF). With the State Budget Act of 2004, the allocation of VLF revenues to cities and counties was substantially changed. For FY 2005/06 and beyond, the majority of VLF revenues for each city will grow essentially in proportion to the growth in the change in gross assessed valuation. Due to the new formula by the State, 96% of the City's VLF revenues fluctuate with changes in assessed values in the City. The other 3 percent of VLF revenues received by the City are based on a per capita formula. For the 2011-12 fscal year, the Governor signed S689. Provisions in SB89 shift hundreds of millions of Vehicle License Fee revenues to fund the state law enforcement grants beginning in FY2011-12. Statewide, S689 takes $130 million of city general revenue and shifts it to save state law enforcement grant programs. Less than $100 million of these police grant funds will go back to cities. The City of Chula Vista is estimated to lose approximately $687,029. This estimated loss will be offset by one-time VLF payments the City has received from the State for previous fiscal year amounts withheld by the State. VLF is budgeted at $17.2 million and it is projected that the City will attain that amount. This will impact the financial forecast for the General Fund which is currently being updated. Franchise Fees. Franchise fee revenues are generated from public utility sources such as San Diego Gas & Electric (2% on gas and 1.25% on electricity), trash collection franchises (9.05% fee), and cable franchises (5% fee) conducting business within City limits. SDG&E is the single largest generator of franchise fees and accounts for approximately 35% of the total franchise revenues. SDG&E collects the franchise fee from Chula Vista customers based on their usage of natural gas. Due to the volatility of the price of natural gas and fluctuation in usage, this component is difficult to project. Trash franchise fees and cable fees are more predictable due to the fixed rates charged and the monthly and quarterly receipt of the revenues respectively. The chart reflects the drop off in Franchise Fee revenues due in part to lower natural gas prices and the loss of revenue from the closure of the South Bay Power Plant. 5-6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 *Fiscal Year 11/12 is projected QUARTERLY FINANCIAL REPORT FIRST QUARTER OF 2011/12 Page 4 of 5 s1z.o i g 510.0 5e.o 56 0 sa.c 52.0 s- omzmcmm eeu,rrz:. coo ooeeueaz-cows aian `Fiscal Year 11/12 is projected Franchise Fee revenue projections for the fiscal year indicate that no change from budget is required at this time. Transient Occupancy Tax (TOT). The City receives 10 percent of hotel and motel room rates for stays less than 30 days. The current year budget contemplated a slight increase from the prior fiscal year revenues collected. r-__ 1soY 10.0% SOY 0 o^r> s.oY ~ -1 °.aY 1 s.cY -20.0% Above is a chart showing the percentage change in TOT revenues compared to prior years. TOT revenue projections for the fiscal year indicate that no change from budget is required at this time. Utility Users Tax (UUT). The City adopted its UUT in 1970. The City imposes a UUT on the use of telecommunications at the rate of 5% of gross receipts, which represents 63% of the total UUT revenues received. The UUT on natural gas services is $0.00919 per therm and $0.00250 per kilowatt on electricity services, which equates to approximately a 1% tax. Total projected revenues are anticipated to come in at budget. Expenditures Depa~ ent "'e`ded age rs~"Qu`aiter _ c a. ~~°~' '~ ;E1tp.. ded' City Council $ 1,267 $ 295 23.3% Boards/Commissions 40 i _ 1.8% - __ City Clerk 1,408 - 153 10.9% Cdy Attorney 2,255 386 17.1% Administration 1,732 355 20.5% Information Technology 2,869 804 28.0% Human Resources 2,084 474 22.7% - - Finance ~~~ -- 3,193 - 695 21.8% Non Departmental _ 11,811 ~ 3,981 33.7% Animal Care Facility 2,137 474 22.2% Planning & Bwlding 2,738 647 23 6% Police 41,907 9,401 22.4% --- Fue - - 21,686 _5,240 24.2% Public Works 23,454 4,899 _-~~ 20.9% .~- Recreabon - 2,872 727 25.3% ~~ Library - - 3,423 ~~~ 698 20.4% Tofals $ 124,876 $ 29,230 23.4% The General Fund's Amended Budget reflects the Council adopted budget of $124.6 million and all mid- year appropriations ($317,453) approved by City Council. Actual expenditures to date are reflected in the chart above. It indicates that Departments have expended 23.4 percent of the General Fund budget after 25 percent of the fiscal year has elapsed. The following table shows the General Fund departments' expenditure budgets and the projected expenditures for the fiscal year. The updated department projections anticipate going over budget by approximately $0.5 million. .~:~+.' ~D~eYpa'r6nen ..'~ a` Amended"" -. ,Bud eG: ~ Er"oje~cted 6130/12, _ ~ ~ i ., .Delta ~~" City Council $ 1,267 - $ 1,267 $ - Boards/Commissions 40 40 $ - CityClerk 1,408 1,408 $ - CityAttomey _.. 2,255 _ _ _. 2,140 $ (115) _ Administration 1,732 1,690 $ (42) Information Technology 2,869 - 2,835 - $ (34) _ _ __ Human Resources 2,084 2,084 $ - Finance- 3,193 3,184 $ (9) Non-Departmental 1.1,811 11,811 $ -_-- _ Animal Care Facility_ 2,137 2,137 $ - Planning-B ~Bwlding - - 2,738 2,738 ~~ ~ $ - - Pohce- 41,907 41,907 $ _- - Fire --- 21,686 -~ 22,713 $ 1,027 Publc Works 23,454 23 268 $ (186) - -- ~ Recreation- -2,872 -2,872 - $ - Library----- ~ - 3,423 _ 3,282 $ (141) Totals $ 124,876 $ 125,376 $ 500 5-7 FY06r07 FYO]I08 FV08I09 FY0910 FY10/11 FY11112' 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 QUARTERLY FINANCIAL REPORT FIRST QUARTER OF 2011/12 Page 5 of 5 Mid-Year Budget Amendments Mid-year appropriations for the first quarter totaled $317,453 with offsetting revenues of $317,453 for nc net impact to the General Fund. '~'~is"fP+~• Buutlget Amendments:. > ~ .... k Revenue * ~ en Lure .'Net"' K mpact~ Spence COnVd ASSl antl3 Latent Fngerprinl &amnerz $ 165,000 $ 165,000 ~ $ - Goodnch donation far Rohr Park Trash Bins __ $ 12,000 $ 72 000 $ - State E 911 reimbursement for CAD Interface $ 720,453 $ 120 453 $ - County Grant for Centennial History Walk ~ $ 20,000 $ 20,000 $ - TotalofislQuarterBUtlgetAmendments 317,653 71],d53 0 Total General Fund Budget Amendments $317,453 $317,453 $0 There were four budget amendments during the quarter. Details for the amendments follow: • The Police department added an Evidence Control Assistant and three hourly Latent Fingerprint Examiners from aone-time amount received from the County of San Diego of $165,000. • Goodrich Aerostructures donated $12,000 to the City for trash bins at Rohr Park • State of CA E-911 is reimbursing the City for the cost of CAD system interface upgrades to the Police dispatch system. The County of San Diego provided a $20,000 grant to assist in the City's Centennial Celebration. Budget Transfers There was one administrative budget transfer during the first quarter. '. Dept _ From lr.r Ta,"1 +s.F ""%7'Descn ti0rt ;3,rAY.4"Fw ~~Ainoririt. Non-Deot S&S Personnel Tmnsferfor MUdV wages 15000 ~ ~ Total lst Lluarter Budget Transfers $15,000 5-8