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Home My WebLink About2008/04/22 Item 13 CITY COUNCIL AGENDA STATEMENT ~~ CITY OF - :: - - - CHULA VISTA '-J 4/22/2008, Item~ ITEM TITLE: QUARTERlY FINANCIAL REPORT FOR THE QUARTER ENTIED MARCH 31, 2008 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AMENDING THE FISCAL YEAR 2007-2008 BUDGET, IN ACCORDA.NCE \\11TH THE BUDGET TRANSFER POLICY, BY TRANSFERRING $482,383 FROM THE FIRE DEPi\RTMENT PERSONNEL SERVICES CATEGORY TO ITS SUPPLIES AND SERVICES CATEGORY SUBMITTED BY: DIRECTOR OF FINA.NCE/TREASURER ~j!7'~ REVIEWED BY: CITY MANAGER 4/STHS VOTE: YES 0 NO D SUMMARY Section 504 (f) of the City Charter requires quarterly financial repOlts to be filed by the Director of Finance through the City Manager. The Fire Dep81tment is requesting the transfer of $482,3 83 from the personnel services budget category to the supplies and services budget category to fund the transfer of the Fire Communications Center. Council approved this transfer of Fire Communication services on December 11, 2007 as part of the Fire Department budget reduction proposals that were adopted. In the report, staff informed Council that it would be returning to seek approval for this transfer of funds ENVIRONMENTAL REVIEW Not Applicable RECOMMENDATION That Council accepts the report and approves the resolution. 13-1 April 22, 2008, Item_ BOARDS/COMMISSION RECOMMENDATION Not Applicable DISCUSSION Ouarterlv Fiscal Update Attached for your consideration is the financial report for the third qU81ier of fiscal year 2007-08. The detailed financial report for the quarter ending March 31, 2008 discusses the fmancial outlook for the City's General Fund for the remainder of fiscal year 2007-08. Budget Transfer Request A resolution requesting a budget transfer from the Fire Department personnel services budget category to the supplies and services budget category in the amount of $482,383 is necessary in order to process the final payments related to the transition of the Fire Communications Center to the City of San Diego. Council approved this transfer of Fire Communication services on December I L 2007 as part of the Fire Department budget reduction proposals that were adopted. In the report, staff informed Council that it would be returning to seek approval for this transfer of funds DECISION MAKER CONFLICT Staff has reviewed the decision contemplated by accepting this repo11 and has determined that it is not site specific and consequently the 500 foot rule found in the California Code of Regulations section 18704.2( a)( 1) is not applicable. FISCAL IMPACT Ouarterlv Fiscal Update For fiscal year 2007-08, due to the continued decline in the economy and housing m81'ket a General Fund deficit of $2.9 million is currently projected. A projected revenue shortfall of $15.1 million partially offset by estimated expenditure savings of $12.6 million account for $2.5 million of the deficit. The remaining amount is due to mid-year budget amendments of $1.0 million with offsetting revenues of $0.6 million for a net impact of $0.4 million. -:':.,'.:,: Gen'~fai FuridR.~s~l'1Ie Reserves - July 1, 2007 Projected Revenues & Transfers In Expenditures & Transfers Out Projected Deficit Amended '. . stief ef $ 10A 165.5 (1659 (OA) Fund Balance as of June 30, 2008 Percenta e of Operat!n Bud et $ 10.0 $ 7.5 4.8% 13-2 April 22, 2008, Item_ Due to the continued projected gap, a citywide administrative freeze has been placed on all discretionary spending such as traveL conferences, vehicle purchases, reference materials, contractual services etc. Based on current spending levels, savings trom the administrative freeze could generate additional savings in the current fiscal vear. - - . Budget Transfer Request There is no fiscal impact to the General Fund related to the transfer request. The cost of transferring the dispatch center to the City of San Diego was addressed as part of the mid-year budget reduction process. ATTACHMENTS Attachment 1 - Quarterly Financial Report 13-3 ~~~ :--A = ~ - -- ~~~;: CITY OF (HULA VISTA City of Chula Vista Quarterly Financial Report - General Fund Third Quarter Ending March 31, 2008 April 22, 2008 OVERVIEW This financial report summarizes the City's General Fund financial position for the fiscal year through March 31, 2008. 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 [n its first quarterly report of 2008, released March 11, the UCLA Anderson Forecast remains confident that the national economy was not in a recession through January 2008 and continues to forecast weak growth but no official recession in 2008. As in their recent forecasts, UCLA Anderson Forecast economists shed a negatIve light on the real estate sector, with problems there continuing to be a drag on the economy as a whole, particularly as the home mortgage crisis becomes a credit crisis In California, the economic outlook continues to mirror that of the nation, despite questions by some regarding the possibility of a state recession in the absence of a national recession. The Anderson Forecast concludes that California is too closely tied to the nation for such an occurrence, and the outlook appears much the same - slow growth as the fallout from the real estate sector slowly works its way out of the economy. The University of San Diego's Index of Leading Economic Indicators for San Diego County fell 1.1 percent in February after falling 1.2 percent in January. The biggest contributors to the decline were sharp drops in consumer confidence and help wanted advertising. Down more moderately were building permits, local stock prices, and the outlook for the national economy. The only positive component was initial claims for unemployment insurance, which reflects a large drop in claims for the month. With February's decrease, the USD Index has now fallen in 22 of the last 23 months, with the declines in the last five months being relatively severe. While there has not been a massive loss of jobs as was the case in the early 1990s, job growth has come to a virtual standstill, with only 300 more jobs countywide in February compared to the year before. The weak housing market remains the culprit, with more than 13,000 jobs lost in real estate-related sectors compared to a year ago. The continued sharp declin€s in the Leading Indicators indicate no turnaround in sight at the current time. San Diego Index of Leading Economic Indicators 150.0 1450 140,0 1350 130.0 125.0 120.0 1150 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 GENERAL FUND SUMMARY City Council Policy No 220-03 recommends the City maintain at least an 8% reserve level. As of June 30, 2007, the General Fund reserve level was 6.3%. Amended GeneialFund Reserve Budget Projected Reserves - July 1, 2007 $ 104 $ 104 Projected Revenues & Transfers In 165.5 1504 Expenditures & Transfers Out (16591 115331 Projected Deficit (04) (2.9) Fund Balance as of June 30, 2008 $ 10.0 $ 7.5 PercentaQ8 of Operating Budget 4.8% For fiscal year 2007-08, due to the continued decline in the economy and housing market a General Fund deficit of $2.9 million is currently projected compared to a second quarter estimate of $3.5 million. A projected revenue shortfall of $15.1 million partially offset by estimated expenditure savings of $12.6 million account for $2.5 million of the deficit The remaining amount is due to mid-year budget amendments of $1.0 million with offsetting revenues of $0.6 million resulting in an additional impact of $04 million. 13-4 QUARTERLY FINANCiAL REPORT THIRD QUARTER OF 2007-08 Page 2 of 4 in the second quarter, the City Manager authorized a citywide administrative freeze that was implemented on February 11th. The freeze was placed on all discretionary spending such as travel, conferences, vehicle purchases, reference materials, contractual services etc. Based on current spending levels, savings from the administrative freeze could generate additional savings in the current fiscal year. Revenues In the first quarter, several discretionary revenues were adjusted downward by $7.6 million. In the second quarter property and sales tax were adjusted down by $2.1 million. Per the most recent data available further adjustments to discretionary revenues are not necessary. . .. Adjusted 3rdQuarter . Discretionarv Revenues Budget Profected Delta Sales Tax $ 29.836 $ 29,096 ($740) Property Tax 30.250 29,085 (1165) Motor Vehicle License Fee 19,651 19,651 0 Franchise Fees 8,813 8,813 0 Utility Users Tax 7,052 7.052 0 Transient Occupancy Tax 2.672 2,672 0 Real Pronertv Transfer Tax 1,000 750 (250) Total $ 99,275 $ 97,119 1$2,155) In the chart below it can be seen that departmental programmatic revenues are being affected by continued declines In development related revenues, grant reductions, capital improvement project revenues and other fees for city services. Adjusted 3rd Quarter . Revenue Cateaoiv " Bud"e! Proiected Delta Development Revenue $12,502 $ 10,063 ($2,439) licenses and Permits 869 822 (46) Fine, Forfeitures & Penalties 1,771 1,347 (424) Police Grants 1,575 1,638 63 Other Agency Revenue 3,423 4,069 646 Charges for Services 6,928 6,750 (177) Interfund Reimbursements 11,919 11,326 (592) Transfers From Other Funds 10,487 10,529 42 Total $ 49,472 $ 46,545 1$2,928 Sales Tax, City staff met with the City's sales tax consultant, MuniServices, to review sales tax revenues though the end of calendar year 2007. Per the most recent reports, jurisdictions across California have 13-5 experienced slow downs or even declines in sales tax revenue during the fourth quarter of 2007. The City experienced same quarter over quarter growth of 5.2% compared to countywide change of -1.7%. The percentage change in other areas of California were 0.1 % statewide, 0.5% in Northern California and -0.2% in Southern California. The above chart refiects Chula Vista's sales tax with that Ci" ofChuIaVista-S,Z<lt.; .~ ,~ .~ ':"".. i.- i i ~ f , i , 1 !' ~ ! , , [ , ; r f , , i j of other jurisdictions in the County during the fourth quarter of the calendar year. Although the sales tax numbers are encouraging the Sales Tax $35 I ~ .Q $30 , :E $25 '20 $15 $10 $5 ,0 FY90 FY92 FY94 FY96 FY98 FY90 FY02 FY04 FY06 FY08 projections will remain at the same levels as identified in the second quarter report in order to maintain a conservative projection. Property Taxes. Property tax is the City's second largest revenue source, representing 18.3% of the total General Fund revenue in fiscal year 2006-07. The City's assessed value has increased at historical rates over the past seven years With the largest percent increase of QUARTERLY FI NANCIAL REPORT THIRD QUARTER OF 2007-08 Page 3 of 4 20% occurring in fiscal year 2005-06. Based on the June 2007 County Assessor's annual valuation report, the assessed values in Chula Vista grew by 14% resulting in a corresponding increase in the property tax roll for fiscal year 2007-08, Since the Assessor's report was issued, there has been a significant increase in the number of foreclosures in Chula Vista from the prior year. As reported in the second quarter report, per DataQuick Information Systems, notices of default (indicates the homeowner is 90 days late on their mortgage payment) increased from 1,018 in 2006 to 2,617 in 2007 an increase of 157%. Trustee sales (loss of home) went from 194 in 2006 to 1,060 in 2007 an increase of 446%. This is primarily due to the subprime mortgage issue that has resulted in the tightening of mortgage lending practices. Property Tax Projection Is Reduced By $1,2 Million Foreclosures are having an additional negative impact on property tax revenues in the city by depressing housing values. The drop in assessed values has triggered Proposition 8, a constitutional amendment passed in 1978 that allows a temporary reduction In assessed value when real property suffers a "decline- in-value". Therefore, as assessed values fall, homeowners can apply for a reassessment of their homes which wouid lead to a reduction of property taxes based on the lower assessment. Anticipating some level of impact to the city, the fiscal year 2007-08 property tax projections were adjusted in the second quarter report from the reported 14% increase in assessed value to 10%, The adjustment resulted in a reduction in projected property tax revenues of $1.2 million. Property tax projections will continue to be conservative in fiscal year 2008-09 based on the assumption that the housing market will not recover during this period. 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 FY05-06 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, Franchise Fees. An analysis of prior fiscal year Franchise Fees revealed that revenues were down by $1.2 million due to the reduced operation of the South Bay power plant. As a result, revenues for the current fiscal year were revised downward by $1,6 million in the first quarter report. $12.0 100% ~ z 1$~6 0 80% ~ $10.0 r- ~ , ~ 60% $8.0 'J$3.a' 1$2.B ]$1.6 1M DSO:'S:: I " 40% I '. - $2.1 $2.1 $2.1 $6.0 L-.: 20% $2.1 0% $4.0 -20% $2.0 -40% $0,0 -60% 2002 2003 2004 2005 2006 2007 2008 2009 -$2.0 -80% c:::J Trash/Cable Energy - Consumer c=:= Energy . Power Plant --::::...- % Change: Utility Users Tax (UUT). Revenues are projected to come in higher than budget by $368,877 due to higher actual revenues realized in the prior fiscal year and were adjusted in the first quarter report. Real Property Transfer Tax. This tax IS based on the sale of real property, A revision in the projected tax is warranted due to the current slowdown in the housing market. The tax is projected to be $0.8 million which is a significant reduction in revenue from the all time high of $24 million in fiscal year 2005. Plan Check Fees. The first quarter projection of $1.7 million reflects the change in the projected number of building permits to be issued from 1,200 to 600 for the current fiscal year. 4.000 ______.__.__._.____.___._._____n.______._n_..._'.,__..___'___" i 3.500 ~ il I i \, ! in I I I 'f" nr,I.!',- 'I 'I 11"2'dl ' : 3'''.1 ' II ,,2,929\ 'I 'r: __12,488!'2'22~ \ : 2,55; '12,216;1 , 'I'I II j, )140&;-' 11281 I ' II' i I 11 j(' I \,.,..,..-,.,." "'~"C~," q"~"'7"'1 500 "l II I ,I.' '1843 ,":.,"..O'l;~ti:rt-':,i,i,O& II if l.!1 }l il i! !. I ~))h~ ~~,,:r,:1 ~'.:,,-i' " '.. ,. I "" .. ','..:.'..."......""""".'." ~ : I- 3 000 ~ z ~ 2.500 < ~ 2.000 z ~ 1,500 ii11,OOO " o 97.9898.9999-0000-01 01-0202-0303--0404--0505-0606--0707--0808-0909.10 FISCAL YEAR Building Permits. The first quarter projection of $2.5 million refiects the revised projected number of building permits to be issued from 1,200 to 600 for the current fiscal year, Through the end of the third quarter 374 permits have been issued. Other Development Related Revenues. Development related revenues have dropped slightly from the second 13-6 QUARTERLY FINANCIAL REPORT THIRD QUARTER OF 2007-08 Page 4 of 4 quarter ($500,000) due to the continued deterioration of the housing market. Interfund Transfers/Reimbursements. Interfund Transfers and reimbursements are being reduced due to revised gas tax projections, loss of library grant funds, and reduced staff time reimbursements. Expenditures The General Fund's Amended Budget reflects the Council's adopted budget and all mid-year appropriations ($1,015,107) approved by City Council and prior year encumbrances ($880,631). The Adjusted Budget reflects the approved mid-year budget reduction plan of $9.2 million. As reflected in the chart Departmental operating costs are at 69.65% of Adjusted Budget at the close of the third quarter. This is lower in comparison to the prior year third quarter expenditures of 72.5%. Amended Adjusted YTO Percentage ExnA'nditures BUdn"t Budnet Actuals Exnended City Council $ 1,394 $ 1.312 $ 930 70.89% Boards and Commissions 15 15 7 45.50'% City Clerk 1,297 1,209 753 62.25% City Attorney 2,670 2,440 1,587 65.06% Administration 3,469 3,229 2,270 70.31% Information Technology 4,178 3,979 2.777 69.79% Human Resources 4.998 4,698 3.086 65.68% Finance 3.184 2,932 2,143 73.07% Non Departmental 4.038 4,038 3,533 87.48% General Services 11,172 9,916 7,399 74.62% Community Development 1,932 1,794 1,119 62.38% Planning and Building 9,752 9,664 6,471 66.96% Engineering 6,698 5,753 4,170 72.49% Public Works 18,103 16,153 11,659 72.18% Police 50,794 49,892 34,210 68.57% Fire 25019 23,909 16,710 69.89% Recreation 6.675 6,118 4,030 65.87% Library 9,963 9,203 6,038 6561% Nature Center 1,260 1.198 777 64.85% Total General Fund $166,612 $157454 $109,669 69.65% Mid-Year Budget Amendments Mid-year appropriations during the quarter totaled $557,548 with offsetting revenues of $165,729 for a net impact of ($391,819). The majority of the appropriations were for ballot measure expenditures and for an increase in public liability claim expenditures. Mid-year budget amendments for the fiscal year have a net impact to the General Fund of ($399,969). 13-7 Bud etAmendments Revenue Eimendlture Imcact Animal Care microchipping program 10,000 10,000 CFD 12-M funds for landscape maintenance 63.495 63,495 Donation to Animal Care Facility from TAVA 2,522 2,522 Scripps Health Community benefit grant 39,800 39,800 Stephen & Mary Birch donation to Fire Dept 28,515 28,515 Califomia Division of Recycling grant 5,000 5,000 Office of Traffic Sai~tv OUt Enforcement "rant 160,600 160,600 First Quarter Bud at Amendments $309,932 $ 241,437 , 68,495 Grant from Kaiser Foundation Hospitals for Kids 19,115 19,115 Emergency slope repair along the SR-125 76,645 (76,645) Office of Traffic Saf;t\~' OUI Enforcement aranl 120,362 120,362 Second Quar:er Bud et Amendments $139,477 $ 216,122 $ 176645 Signature verification for charter amendment 20,000 (20,000) Signature vertf"lcation for infliative petition . 12,000 (12,000) Cost for placement of initiative on ballot 54,000 (54,000) Energy conservation grant 78,502 49,321 29,181 Fire overtime reimb~~:~ent and donation 87,227 87.227 . Costs for Public Liabil" Claims . 335,000 (335,000 Third Quarter Bud et Amendments $165,729 I 557,548 $391,819 Year-to-Date Bud et Amendments $615,138 $1,015,107 $399,969 Budget Transfers There was one administrative budget transfer of $1,500 during the third quarter. The transfer from Administration Services and Supplies budget category to the Utilities category transferred some cell phone budget to the land lines budget RESOLUTION NO. 2008- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AMENDING THE FISCAL YEAR 2007-2008 BUDGET, IN ACCORDANCE WITH THE BUDGET TRANSFER POLICY, BY TRANSFERRING $482,383 FROM THE FIRE DEPARTMENT PERSONNEL SERVICES CATEGORY TO ITS SUPPLIES AND SERVICES CATEGORY WHEREAS, the Council Policy on Financial Reporting and Transfer Authority established in January 1996 indicates that transfers in excess of $15,000 require City Council approval; and WHEREAS, on December II, 2007, the City Council approved the tranSitIOn of Fire Communication services to the City of San Diego, as part of the Fire Department budget reduction; and WHEREAS, there will be savings realized in the Fire Department's Communication Center Personnel Services budget category because of the transition; and WHEREAS, a budget transfer from the Fire Department Personnel Services budget category to the Supplies and Services budget category in the amount of $482,383 is necessary in order to process the final payments related to the transition of the Fire Communications Center to the City of San Diego; and WHEREAS, the recommended transfer between the Personnel Services budget category and Supplies and Services budget category can be achieved within the Fire Di:::partment's existing budget. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista amends the City's fiscal year 2007-2008 budget, in accordance with the Council Policy on Financial Reporting and Transfer Authority, by transferring $482,383 from the Fire Department Personnel Services budget category to its Supplies and Services budget category. Presented by Approved as to form by ~~~~~\\, Ann Moore City Attorney Maria Kachadoorian Finance/Treasurer Director J:\AtlomeyIRESO\FINANCElAmend FY 07.08 r"ireTrJnsfer_04-22-U8-cleJn cc_doc 13-8