Title
Recommendation to Accept the Fourth Quarter Financial Report for the Period Ending June 30, 2020. [City Council and SACIC] (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
Accept the fourth-quarter financial report for the period ending June 30, 2020. This report provides budget to actual comparison for the General Fund, fiscal year-to-date revenue and expenditures/expenses for all City of Alameda (City) funds, and life-to-date budget and actual expenditures for active capital and maintenance projects. In this quarter the COVID-19 pandemic took hold and has resulted in a number of unprecedented actions, including shelter-in-place (SIP) orders. The economic and financial impacts of the COVID-19 pandemic are still unfolding and will continue through Fiscal Year (FY) 2020-21.
BACKGROUND
The City Charter Article XVII Sec. 17-10 requires presentation of a quarterly report to the Mayor and the City Council. The fourth quarter’s financial report on all City funds has been completed, based upon actual revenues and expenditures through June 30, 2020. This quarterly report, attached as Exhibit 1 includes financial information for all City funds as follows:
• General Fund actual revenues by major category through June 30, 2020;
• General Fund actual expenditures by the major department through June 30, 2020;
• Actual expenditures for the City’s capital and maintenance projects through June 30, 2020; and
• All Funds revenues, expenditures, and changes in fund balance as of June 30, 2020.
DISCUSSION
This quarterly report provides the City Council with updates on the financial status of the City’s funds by comparing budget projections for revenues and expenditures to actual receipts and expenses. Budget amendments previously approved by the City Council have been included in this report. The grouping of the funds matches the City’s Comprehensive Annual Financial Report (CAFR). In FY 2019-20, General Fund revenues totaled $110 million and expenditures totaled $98 million.
General Fund
The General Fund actual revenues as of June 30, 2020, were $110 million as compared to the projected revenues of $108 million, which is $2 million more or approximately 2% more revenue as compared to the budget.
The General Fund actual expenditures as of June 30, 2020 were $98 million as compared to the budgeted expenditures of $112 million, which is $14 million or 12.5% less than budgeted expenditures.
Major General Fund Revenues
The General Fund major revenue categories are summarized in Exhibit 1. The City derives a portion of its General Fund revenues from sales taxes (1% Bradley-Burns), transfer tax and transaction and use tax. When one or more of these key revenue sources deviates from projections, funding for future programs and services may be affected.
The majority of the City’s property taxes are received between December and April. The property taxes collected through June 30, 2020, which are the current year secured and unsecured taxes, were 9% higher compared to the same quarter last year. The City continues to realize stable property tax-related revenue growth as well as greater than expected distributions of supplemental assessments and residual distributions as a result of redevelopment dissolution.
Sales Tax and Transaction and Use Tax, the second largest revenue sources for the City’s General Fund, is remitted to the City from the State on an on-going basis. Sales and Use tax payments are paid by the State roughly 3 months in arrears, with the first 2 months of the quarter being estimated based on prior year activities, and the third month true-up based on actuals. Sales and Use Tax revenue increased 26% as compared to the same period last year since FY 2019-20 was the first full year of collections of Transaction and Use Tax., Sales Tax receipts dropped 12% from the same period in the prior year due to the COVID-19 pandemic, excluding the Transaction and Use Tax.
The revenue from Utility User Taxes was 3% lower as compared to the same period last year. The revenue from Franchise Fees was 4% lower as compared to the same period last year.
Year-to-date revenues from the Transient Occupancy Tax (TOT) is 15% lower compared to the same quarter of last fiscal year. As of June 30, 2020, the City collected $2.0 million in TOT, which was 93% of the TOT budget.
Transfer Taxes, charged at the point of property resale, were 11% lower as compared to the same period last year, due to a decrease in the volume of the transfers of title of real property in Alameda from a person or entity to another based on the property’s sale price.
Business License revenue was $2.5 million, or 101% of the FY 2019-20 budget as of June 30, 2020. The renewal of business licenses occurs during the first quarter of the fiscal year; therefore, most of the revenue anticipated for the year has been collected. This revenue source increased by 17% as compared to the same period last fiscal year.
The Departmental Revenues were $7.1 million, or 105% of the FY 2019-20 budget whereas the Interest, Rental Income and Other was $2.2 million of the budgeted $2.5 million. This revenue source increased by 16% as compared to last fiscal year.
The Transfers-In was $4.5 million, or 102% of the FY 2019-20 budget, a decrease of 4%.
General Fund Expenditures
The FY 2019-20 appropriations for the General Fund were $112 million. Actual expenditures as of June 30, 2020, were $98 million, or 88% of the budget, due to savings in the non-departmental budget. Excluding the accounting change related to how cost allocation to non-General Fund programs is being recorded, expenditures were 6% lower as compared to the same period last year. Operating expenditures in total, by category, and by the department were at approximately 88% of the annual budget through June 30, 2020.
Special Revenue Funds
The FY 2019-20 actual revenues at June 30, 2020, were $55 million or 91% of the annual budget and actual expenditures were $74 million or 77% of the annual budget. The Base Reuse Fund had the most substantial actual revenues and expenses during the period. For the fourth quarter of FY 2019-20, the Base Reuse fund received revenues of $17 million, mainly from the sale of city-owned properties and lease revenues. Expenditures of $38 million were expended on the development and implementation of community plans for revitalization and redevelopment of the base into a mixed-use, transit-oriented development.
The Special Revenue Funds are driven by grants or other specific funding sources and are used for specific purposes, such as Measure B and Measure BB, and grants, etc. Such funding sources are restricted in nature, either by law or by City policy, which requires revenues and expenditures to be recorded differently from the City’s primary operating fund, the General Fund.
Capital Improvement Project Funds
The Capital Improvement Projects Funds, which includes individual funds such as the Capital Improvement Projects (CIP), Construction Impact Fee, Streets and Transportation, Development Impact Fee, Maintenance Assessment Districts, and Urban Runoff, had an aggregate actual revenue of $75 million and expenditures of $51 million at June 30, 2020. The largest expenditures for the fourth quarter consisted of the following projects:
• Seaplane Lagoon Ferry Terminal (Projects #91814) for $17.7 million;
• Cross Alameda Trail (Project #91402) for $4.2 million; and
• Sewer Rehabilitation (Project #96003602) for $4.4 million.
These funds derive their revenues from a combination of fees from new development, Gas Tax and Regional Measure B/BB.
Debt Service Funds
The Debt Service Funds group accounts for the long-term debt of the City, including Base Reuse. As of June 30, 2020, the fund balance of all debt service funds was $1.5 million. Sufficient funds are transferred from a variety of sources to meet debt service obligations as they come due. The funding source is dependent upon the purpose of the debt.
Enterprise Fund
The Enterprise Fund group consists of the City’s Sewer Fund and requires proprietary fund balance reporting that includes cash, reserves, fixed assets, and related long-term debt. The fund balance on June 30, 2020, for the Sewer Fund, was $93 million. Sufficient reserves are maintained to ensure the completion of current projects and programs.
Internal Service Funds
The Internal Service Funds group includes those funds created for the accumulation of reserves for insurance claims, vehicles, technology and equipment replacement, facility maintenance, compensated absences, liabilities, and retiree medical and dental costs. Revenue for these funds is derived from charges to other funds, primarily the General Fund. The fund balance of the Internal Service Funds group was $39 million on June 30, 2020.
The fund balance reflects the long-term liabilities for workers’ compensation claims and risk management claims, but not the net unfunded portion of Other Post-Employment Benefits (OPEB), which was valued at $106 million as of the June 30, 2019, based on the actuarial report.
Fiduciary Funds
The Fiduciary Funds group includes bond funds for several bond issues that are not obligations of the City and a trust fund established for the Other Post-Employment Benefits (OPEB). The cumulative fund balance for this fund group was $18 million at June 30, 2020. The fund balance for the OPEB trust was $15 million.
Successor Agency
The Successor Agency is an entity separate from the City and accounted for in separate trust funds that are used to account for tax increment monies received and payments of items approved by the Oversight Board in the Required Obligation Payment Schedule (ROPS). Governmental accounting standards require that the full amount of debt outstanding be recorded as part of these funds. The deficit balance as of June 30, 2020, was approximately $42 million, which reflects bonded indebtedness to be paid from future Redevelopment Property Transfer Tax Fund (RPTTF) revenue.
ALTERNATIVES
• Accept and file the report as there is no further action being requested.
• Do not accept the report.
FINANCIAL IMPACT
The FY 2019-20 fourth-quarter report includes information detailing the variances between budgets and actual for revenues, expenditures, capital and maintenance projects, as well as changes in fund balances through June 30, 2020. Exhibit 1 was created to present the City’s actual results and fund balances for each fund through the end of the fourth quarter of FY 2019-20.
There is no fiscal impact to City funds from acceptance of the FY 2019-20 Quarterly Financial Report.
MUNICIPAL CODE/POLICY DOCUMENT CROSS-REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15378(b)(4) of the CEQA Guidelines because it involves governmental fiscal activities (acceptance of the fourth quarter financial report), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Accept the Fourth Quarter Financial Report for the Period Ending June 30, 2020.
CITY MANAGER RECOMMENDATION
The City Manager requests acceptance of the Fourth Quarter Financial Report for period ending June 30, 2020.
Respectfully submitted,
Annie To, Finance Director
Exhibit:
1. Fourth Quarter Financial Report
cc: Kevin R. Kearney, City Auditor