Title
Recommendation to Accept the First Quarter Financial Report for the Period Ending September 30, 2020. (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
Accept the first-quarter financial report for the period ending September 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 are still unfolding and the full impact of the COVID-19 will not be known until the last quarter in 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 first quarter’s financial report on all City funds has been completed, based upon actual revenues and expenditures through September 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 September 30, 2020;
• General Fund actual expenditures by the major departments through September 30, 2020;
• Actual expenditures for the City’s capital and maintenance projects through September 30, 2020; and
• All Funds revenues, expenditures, and changes in fund balance as of September 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 the first quarter of the FY 2020-21, General Fund revenues totaled $13 million and expenditures totaled $21 million.
General Fund
The General Fund actual revenues as of September 30, 2020, were $13 million as compared to the $11 million revenues for the same quarter in FY 2019-20, which is 17% more in revenue. The General Fund actual expenditures as of September 30, 2020 were $21 million as compared to the $22 million for the same quarter in FY 2019-2020, which is 3% less in 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 September 30, 2020, which are the current year secured and unsecured taxes, were 9% higher compared to the same quarter last year.
Due to an increase in the transfer of the title of real property from a person or entity to another within the jurisdiction based on the property’s sale tax in the first quarter of FY 2020-21, transfer taxes is now the largest revenue source for the City’s General Fund. The City received $3.1 million in revenue, which is 31% of the $10 million that was budgeted for the fiscal year. It is 134% higher compared to the same quarter in FY 2019-20.
Sales Taxes and Transaction and Use Tax, the third largest revenue source 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 and Transaction and Use Tax are 11% of the $13.8 million budgeted for FY 2020-21, and it is 33% higher as compared to the same period last year.
The revenue from Utility User Taxes was 30% higher as compared to the same period last year. The revenue from Franchise Fees was 2% higher as compared to the same period last year.
Due to COVID-19, the year-to-date revenues from the Business License Tax is 15% lower compared to the same quarter of the last fiscal year. As of September 30, 2020, the City collected $2 million in Business License, which was 92% of the budget. 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.
The Departmental Revenues was $1.3 million, or 15% of the FY 2020-21 budget whereas the Interest, Rental Income and Other Revenue was $0.6 million. This revenue source increased by 172% as compared to same quarter in the last fiscal year. The Transfers In was $0.5 million, or 12% of the FY 2020-21 budget.
General Fund Expenditures
The FY 2020-21 appropriations for the General Fund were $104 million. Actual expenditures as of September 30, 2020, were $21 million, or 20% of the budget. Excluding the accounting change related to how cost allocation to non-General Fund programs is being recorded, expenditures were 3% lower as compared to the same period last year. Operating expenditures in total, by category, and by the department were at approximately 20% of the annual budget through September 30, 2020.
Special Revenue Funds
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.
The FY 2020-21 actual revenues at September 30, 2020, were $10 million or 18% of the annual budget and actual expenditures were $6.4 million or 11% of the annual budget. The Base Reuse Fund had the most substantial actual revenues and expenses during the period. For the first quarter of FY 2020-21, the Base Reuse fund received revenues of $2.9 million. Expenditures of $0.8 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.
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 expenditures of $2.6 million at September 30, 2020. The revenue was a negative of $6.7 million due to FY 2019-20’s reversal accruals. The largest expenditures for the first quarter consisted of the following projects:
• Sewer Rehabilitation (Project #96003602) for $1.0 million;
• Seaplane Lagoon Ferry Terminal (Project #91814) for $0.6 million; and
• COVID-19 (Project #96027) for $0.2 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. As of September 30, 2020, the debt service funds received $0.4 million in revenue and $0.7 million in expenditure. There is a negative $0.3 million in fund balance because the transfer between Civic Center Garage to HUD Section 108 Loan will occur in second quarter of the fiscal year 2020-21. 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 September 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 $117 million as of June 30, 2020 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 OPEB. The cumulative fund balance for this fund group was $19 million at September 30, 2020. The fund balance for the OPEB trust was $16 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 September 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 2020-21 first-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 September 30, 2020. Exhibit 1 was created to present the City’s actual results and fund balances for each fund through the end of the first quarter of FY 2020-21.
There is no financial impact from accepting the first quarter 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 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.
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Accept the first quarter Financial Report for the period ending September 30, 2020.
CITY MANAGER RECOMMENDATION
The City Manager recommends acceptance of the first quarter Financial Report.
Respectfully submitted,
Annie To, Finance Director
Exhibit:
1. FY 2020-21 First Quarter Financial Report
cc: Eric Levitt, City Manager
Kevin R. Kearney, City Auditor