Title
Recommendation to Accept the First Quarter Financial Report for the Period Ending September 30, 2015. [City Council and SACIC] (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Accept the First Quarter Financial Report for the Period Ending September 30, 2015
BACKGROUND
The first quarter’s financial report on all City’s funds is based upon actual revenues and expenditures through September 30, 2015. The Quarterly Financial Report attached as Exhibit 1 to this document includes the following:
• General Fund actual revenues by major category through September 30, 2015;
• General Fund actual expenditures by major department through September 30, 2015;
• Actual expenditures for the City’s capital and maintenance projects through September 30, 2015; and
• All Funds revenues, expenditures and changes in current available fund balances as of September 30, 2015.
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. Any budget amendments that have been approved as of September 30, 2015 by the City Council have been included in this report.
General Fund
The Fiscal Year (FY) 2015-16 annual budget for the General Fund projected revenues is $81.9 million. Actual revenues as of September 30, 2015 were about $10.1 million, or 12% of the FY 2015-16 budget. The FY 2015-16 appropriations for the General Fund are $80.7 million. As of September 30, 2015, actual expenses total approximately $17.3 million, or 21% of the FY 2015-16 budget.
General Fund major revenue categories are summarized on Page 1 of Exhibit 1. The City derives a significant portion of its General Fund revenues from economically sensitive sources such as property taxes, sales taxes (Bradley Burns), 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.
With the increases in assessed valuation and turnover in property ownership, the property tax revenues for FY 2015-16 are projected to increase over FY 2014-15. As of September 30, 2015, the City received close to $1.3 million in property tax revenue, which is almost a 7% increase over the same time period for FY 2014-15. The majority of this revenue is unsecured property taxes at over $1.2 million that are generally collected in the first quarter of the fiscal year. The City will receive the first installment of secured property taxes in December of this year. Revenues from Sales Taxes at September 30, 2015 was $378,700, which is 4% of the FY 2015-16 budget. This amount is an advance on estimated sales taxes earned in the 3rd quarter of 2015 from the Board of Equalization.
Transfer taxes received for the first quarter of FY 2015-16 are over $1.9 million, which is 28% of the budget. This is a 92% increase over transfer taxes received during the same time period of FY 2014-15. The increase is due to a larger number of transactions as well as sales of large properties to Alameda Center LLC and Taycon Properties LLC that occurred in July and August 2015.
Business license revenue was over $1.8 million, or 92% of the FY 2015-16 budget, at September 30, 2015. This was a 4% reduction over the same time period during FY 2014-15. The term of business licenses correspond with the City’s fiscal year, so business license renewals are due at the beginning of the fiscal year. Therefore, the majority of the business license tax revenue is received during the first quarter of the fiscal year. Transient Occupancy taxes for FY 2015-16 have increase by 46% over the same time period of FY 2014-15. As of September 30, the City has received over $392,000 in transient occupancy taxes, which is almost 24% of the FY 2015-16 budget. As the economy continues to improve and gas prices remain low, consumers are more likely to travel.
The FY 2015-16 budget for the General Fund expenditures is $80.7 million as summarized on Page 2 or Exhibit 1. As of September 30, actual expenditure was over $17.2 million, or 21% of the annual budget. These expenditures include General Fund transfers to compensated absences liabilities, the Police/Fire pensions, and Library and Recreation funds. The expenditures of most of the departments in the General Fund range from 18% to 22% of their annual budgets for the first quarter of the fiscal year.
Special Revenue Funds
The Special Revenue Funds group includes funds accounting for the City’s community development activities, streets improvements, library operations, recreation operations, and various assessment districts. The FY 2015-16 actual receipts at September 30, 2015 for all the funds in this fund group totaled over $8.4 million (19% of budget). The actual expenses for the same time period was over $6.4 million (68% of budget). The fund with the single largest actual revenues and expenditures during the period was the Alameda Reuse and Redevelopment Fund. The fund received over $3 million in revenues from leases and had over $2 million in expenditures mostly for professional services.
These funds are driven by grants or other specific finding sources and are used for specific purposes, such as transportation, public safety and library related programs. Such funding sources require revenues and expenditures to be tracked differently from the City’s main operating fund, the General Fund. There is sufficient funding for the completion of current projects or programs but the addition of any new programs or projects are dependent on availability of future funding sources.
Capital Project Funds
The Capital Projects Funds 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 an aggregate actual revenue of $297,000 and expenditures of over $3 million at September 30, 2015. The largest expenditures for the first quarter consisted of $280,000 for City building renovations, $971,000 for the Pavement Management Program, and $462,000 for land development and permit review. Many funds derive their revenues from the collection of impact fees from new development, which generate revenues and expenditures in different patterns from the City’s other operating funds.
Debt Service Funds
The Debt Service Funds group accounts for the long-term debt of the City, including Base Reuse. As of September 30, 2015, the available fund balances of all debt service funds was approximately $1 million. Additional funds are transferred in 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 Funds 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 10 of Exhibit 1 includes the available balances (excluding fixed assets and related long-term debt) for the sewer fund. The aggregate available balance at September 30, for the Sewer Fund was almost $29 million, which includes over $1.5 million of unspent bond proceeds (contained in fund 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 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 administrative (cost recovery) charges to other funds, primarily the General Fund. The working capital balance of the Internal Service Funds group was over $24 million at September 30, 2015.
The working capital balance does not reflect the long-term liabilities for workers’ compensation claims (approximately $6.9 million at 6/30/2015), risk management claims (approximately $2 million at 6/30/2015) and the unfunded portion of Other Post Employment Benefits (OPEB), which was valued at $91 million as of January 1, 2013.
Trust and Agency Funds
The Trust and Agency Funds group includes bond funds for several bond issues that are not obligations of the City, and a fund established for the payment of the City’s 1079 and 1082 Pension Plans. The available balance for these funds group was over $4.3 million at September 30, 2015.
Successor Agency
The Successor Agency is an entity separate from the City and is accounted for in special trust funds that track the tax increment monies received and payment 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 a part of these funds. The deficit balance at September 30, 2015 was almost $55 million. This reflects bonded debt outstanding of $59 million to be paid from future Redevelopment Property Tax Trust Fund (RPTTF) revenue.
FINANCIAL IMPACT
The FY 2015-16 first quarter report includes information detailing the variances between budgets and actuals for revenues, expenditures, capital and maintenance projects, as well as changes in fund balances through September 30, 2015. Exhibit 1 was created to present the City’s actual results and status of available reserves for each fund through the first quarter of the fiscal year.
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 first 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 first quarter Financial Report for the period ending September 30, 2015.
Respectfully submitted,
Elena Adair, Finance Director
Exhibit:
1. First Quarter Financial Report.