title.Title
Recommendation to Accept the Second Quarter Financial Report for the Period Ending December 31, 2014. [City Council and SACIC] (Finance 2410)
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To: Honorable Mayor and Members of the City Council
From: John A. Russo, City Manager
Re: Recommendation to Accept the Second Quarter Financial Report for the Period Ending December 31, 2014
BACKGROUND
The second quarter's financial reports on all City funds have been completed, based upon actual unaudited revenues and expenditures through December 31, 2014. Quarterly reports include financial information for all City funds. The Exhibit includes the following:
· General Fund actual revenues by major category through December 31, 2014 and 2013;
· General Fund actual expenditures by major department through December 31, 2014 and 2013;
· Actual expenditures for the City's capital and maintenance projects through December 31, 2014;
· All Funds revenues, expenditures and changes in current available fund balance as of December 31, 2014.
DISCUSSION
Quarterly reports provide 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.
General Fund
General Fund actual revenues as of December 31, 2014, were $38 million, or 51% of the FY14-15 budget. Actual expenditures were $38.9 million, or 48% of the FY14-15 budget. General Fund revenues and expenses are in line with expectations for the current quarter. However, revenues trail expenditures, because some major tax revenues are not received until the fourth quarter. This is consistent with prior years.
General Fund major revenue categories are summarized on page 1 of the Exhibit. The City derives a significant portion of its General Fund revenues from economically sensitive sources such as property taxes, sales taxes (both the Bradley Burns and Public Safety portions), and utility users' taxes. When one or more of these key revenue sources deviates from projections, funding for future programs and services may be affected.
Property Taxes have increased due to increased valuation assessments and increasing sales taking place this year. Sales Taxes continue to climb and are significantly higher than the same period in the prior fiscal year due to the continued economic recovery.
Franchise Taxes are slightly behind last year due to timing of collected receipts. Transfer Taxes are higher over the prior year due to an increase in the number and valuation of residential sales transactions in the City; however, approximately $600,000 of the current receipts can be identified as one-time revenues.
Business License Tax revenues are ahead of projections resulting from new collection methods implemented by the Finance Department and a continued recovery in the economy. Departmental Revenues are higher than in the prior year due to increase in revenues received from the City's Basic Life Services Program, Ambulance Program and Traffic Citations. Transient Occupancy Taxes continue to increase as the economy improves and low fuel prices entice people to travel. Interest is higher than the prior year due to timing of interest payments and AMP's return on investment payments.
The FY14-15 annual budget for the General Fund total appropriations of approximately $81 million is summarized in the attached Exhibit. It includes actual expenditures at December 31, 2014, including General Fund transfers to Vacation liabilities, the Police/Fire Pension, the Library, and the Recreation Fund. Economic Development has been added to the expenditures graph to highlight the General Fund's contribution to this program and will be re-evaluated during the upcoming budget process.
During the current quarter, City Council approved an increase in Transfers Out of $2.9 million, based upon the audited General Fund balance for the fiscal year ending June 30, 2014 as follows:
Special Revenue Funds
The Special Revenue Fund group includes funds accounting for the City's community development activities, streets funds, library operations, various assessment districts, and a recreation fund. The FY14-15 actual receipts at December 31, 2014, for this fund group totaled $19.1 million (48% of budget); actual expenses totaled $17.6 million (36% of budget).
A number of these funds are grant or capital project driven funds, such as the transportation related and public safety grants funds, which generate revenues and expenditures in patterns different from the City's other operating funds. Sufficient reserve funds are maintained to ensure completion of current projects or programs.
Capital Project Funds
The Capital Project Fund Group, which includes such individual funds as the Capital Improvement Projects fund, Construction funds, Assessment Districts, Development Impact Fee funds and the Urban Runoff fund, had aggregate actual revenues of $8.6 million (20% of budget) and expenditures of $11.3 million (19% of budget) at December 31, 2014.
Many of these funds are project driven funds, or derive their revenues from the collection of impact fees from new development, which generate revenues and expenditures in patterns different from the City's other operating funds.
Debt Service Funds
The Debt Service Fund Group accounts for the long-term debt of the City, including Base Reuse, as of December 31, 2014. The available fund balances of all debt service funds was approximately $1 million as of December 31, 2014. Additional monies are transferred in from a variety of sources to meet the debt service requirements as they come due. The funding source is dependent upon the purpose of the bond issue.
Enterprise Funds
The Enterprise Fund Group, consisting of the City's Sewer Fund, requires proprietary fund balance reporting that includes cash, reserves, fixed assets and related long-term debt of the fund. Page 11 of the Exhibit includes the available reserves (excluding fixed assets and related long-term debt) for the sewer fund. The aggregate available reserve balance at December 31, 2014 for the Sewer Fund was $30.5 million, which includes $8.5 million of unspent bond proceeds (contained in fund 602.1 and 602.2) allocated for approved sewer improvement projects. Sufficient reserves are maintained to ensure completion of current projects and programs.
Internal Service Funds
The Internal Service Fund Group includes those funds created for the accumulation of reserves for insurance claims, vehicle, technology and equipment replacement, facility maintenance, vacation liabilities and for retiree health and dental costs. Revenues to these funds derive from administrative (cost recovery) charges to the other funds, primarily the General Fund. The working capital balance of this Internal Service Fund group was $22.4 million as December 31, 2014.
The working capital balance does not reflect the long term liabilities for Workers' Compensation claims (approximately $7.7 million), Risk Management Claims (approximately $2.2 million) and the unfunded portion of Other Post-Employment Benefits (OPEB) (valued at approximately $91 million as of January 1, 2013).
Trust and Agency Funds
The Trust and Agency Fund Group includes bond funds for several bond issues which are not the obligation of the City and funds established for the current year's payment of the City's historical pension obligations, (1079 and 1082 Pension Plans). The available balance for this fund group as of December 31, 2014 was $3.9 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 December 31, 2014 was approximately $64.2 million, which reflects bonded debt outstanding of approximately $69.4 million, to be paid from future tax increment revenue. The agency successfully issued refunding bonds for the 2003 Tax Allocation Bonds on December 23, 2014. The proceeds from this issuance will retire the 2003 Tax Allocation Bonds in the third quarter of this year.
FINANCIAL IMPACT
The FY14-15 unaudited second 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 December 31, 2014. The Exhibit was created to present a representation of the City's actual results and of available reserves for each fund through the end of the second quarter.
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.
RECOMMENDATION
Accept the Second Quarter Financial Report for the period ending December 31, 2014 and proposed budget adjustments. (City and City as Successor to the Community Improvement Commission).
Respectfully submitted,
Juelle-Ann Boyer, Interim Finance Director
By,
Brad Farmer, Finance Supervisor
Financial Impact section reviewed,
Juelle-Ann Boyer, Interim Finance Director
Exhibit:
1. Second Quarter Financial Report