Title
Recommendation to Accept the Third Quarter Financial Report for the Period Ending March 31, 2020. [City Council and SACIC] (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
Accept the third-quarter financial report for the period ending March 31, 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 are still unfolding, but it is already clear that the City’s finances will be impacted.
BACKGROUND
The City Charter Article XVII Sec. 17-10 requires presentation of a quarterly report to the Mayor and the City Council. The third quarter’s financial report on all City funds has been completed, based upon actual revenues and expenditures through March 31, 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 March 31, 2020;
• General Fund actual expenditures by the major department through March 31, 2020;
• Actual expenditures for the City’s capital and maintenance projects through March 31, 2020; and
• All Funds revenues, expenditures, and changes in fund balance as of March 31, 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).
General Fund
The Fiscal Year (FY) 2019-20 annual budget for the General Fund projected revenues was $107 million. The General Fund actual revenues as of March 31, 2020, were $69 million, or 64% of the FY 2019-20 budget. The FY 2019-20 appropriations for the General Fund were $112 million. Actual expenditures as of March 31, 2020, were $71 million, or 63% of the FY 2019-20 budget. Excluding the accounting change related to how cost allocation to non-General Fund programs is being recorded, revenue for FY 2019-20 was 20% higher compared to the same quarter of prior year. The largest increase in revenue for FY 2019-2020 was transfer tax.
The General Fund major revenue categories are summarized on page 1 of the Exhibit. The City derives a portion of its General Fund revenues from economically sensitive sources such as sales taxes (1% Bradley-Burns), transfer tax and transaction and use tax (TUT). 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 March 31, 2020, which are the current year secured and unsecured taxes, were 11% 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 Taxes, 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 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. The Sales Tax/TUT revenue is similar to the same period of last year.
The revenue from Utility User Taxes was 2% lower compared to the same quarter of last year. The revenue from Franchise Fees was comparable to the same quarter of last year.
Transfer Taxes, charged at the point of property resale, were 89% higher compared to the same quarter of the prior year, due to an increase in the transfer of the title of real property from one person (or entity) to another within the jurisdiction based on the property’s sale price.
Business License revenue was $2.5 million, or 102% of the FY 2019-20 budget as of March 31, 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 13% compared to the same period last fiscal year.
Year-to-date revenues from the Transient Occupancy Tax (TOT) is similar compared to the same quarter of last fiscal year. As of March 31, 2020, the City collected $1.6 million in TOT, which was 74% of the FY 2019-20 budget.
The FY 2019-20 budget for the General Fund expenditures was $112 million, as summarized on Page 2 of Exhibit 1. Operating expenditures in total, by category, and by the department were at approximately 63% of the annual budget through March 31, 2020.
Special Revenue Funds
The FY 2019-20 actual revenues at March 31, 2020, were $40 million or 69% of the annual budget and actual expenditures were $27 million or 29% of the annual budget. The Base Reuse Fund had the most substantial actual revenues and expenses during the period. For the third quarter of FY 2019-20, the Base Reuse fund received revenues of $13 million, mainly from the sale of city-owned properties and lease revenues. Expenditures of $6 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 the Urban Runoff Storm Drain, had an aggregate actual revenue of $21 million for this quarter and expenditures of $36 million at March 31, 2020. The largest expenditures for the third quarter consisted of the following projects:
• Seaplane Lagoon Ferry Terminal (Projects #91814) for $12.8 million;
• Cross Alameda Trail (Project #91402) for $3.4 million; and
• Pavement Management (Projects #96010) for $3.5 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 March 31, 2020, the fund balances of all debt service funds were $2.5 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 March 31, 2020, for the Sewer Fund, was $88 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 March 31, 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, 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 $17 million at March 31, 2020. The fund balance for the OPEB trust was $13 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 Recognized 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 March 31, 2020, was approximately $44 million, which reflects bonded indebtedness to be paid from future Redevelopment Property Transfer Tax Fund (RPTTF) revenue.
ALTERNATIVES
• Accept the report due to no further action being requested.
• Do not accept the report.
FINANCIAL IMPACT
The FY 2019-20 third-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 March 31, 2020. Exhibit 1 was created to present the City’s actual results and fund balances for each fund through the end of the third 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 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 climate impacts from the acceptance of this report.
RECOMMENDATION
Accept the third quarter Financial Report for the period ending March 31, 2020.
CITY MANAGER RECOMMENDATION
The City Manager recommends acceptance of the third quarter Financial Report.
Respectfully submitted,
Nancy Bronstein, Interim Finance Director
Exhibit:
1. Third Quarter Financial Report
cc: Eric Levitt, City Manager
Gerry Beaudin, Assistant City Manager
Kevin R. Kearney, City Auditor