Title
Recommendation to Accept the Second Quarter Financial Report for the Period Ending December 31, 2020. [City Council and SACIC] (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The second quarter financial report provides budgets to actuals comparison for the General Fund, fiscal year-to-date revenue and expenditures/expenses for all City of Alameda (City) funds, and inception-to-date budget and actual expenditures for active capital and maintenance projects. The economic and financial impacts from COVID-19 are still unfolding and the full impact of the COVID-19 for the Fiscal Year (FY) 2020-21 will not be known until the last quarter of 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 second quarter’s financial report on all City funds has been completed based upon actual revenues and expenditures through December 31, 2020. The second quarter report, attached as Exhibit 1, includes financial information for all City funds as follows:
• General Fund actual revenues by major category through December 31, 2020;
• General Fund actual expenditures by the major department through December 31, 2020;
• Actual expenditures for the City’s capital and maintenance projects through December 31, 2020; and
• All Funds revenues, expenditures, and changes in fund balance as of December 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 expenditures. Budget amendments previously approved by the City Council have been included in this report. The grouping of the funds matches the City’s Annual Comprehensive Financial Report (ACFR). As of December 31, 2020, General Fund revenues totaled $50 million and expenditures totaled $45 million.
General Fund
The General Fund actual revenues as of December 31, 2020 were $50 million as compared to the $46 million revenues collected for the same quarter last year, which represents a 8 percent increase in revenue collection as compared to last year. As of December 31, 2020, the City received $50 million in revenues, which is 48 percent of the $103 million revenue budget for FY 2020-21.
The FY 2020-21 General Fund actual expenditures as of December 31, 2020 were $45 million as compared to the $47 million expenditures for the same quarter last year, which represents a 4 percent decrease in actual expenditure as compared to last year.
As of December 31, 2020, the City incurred $45 million in expenditures, which is 43 percent of the budgeted $105 million expenditure budget for FY 2020-21.
Major General Fund Revenue Categories
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 percent 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 impacted.
The majority of the City’s property taxes are received between December and April. The property taxes collected through December 31, 2020 for the current year secured and unsecured taxes were 12 percent higher as 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.
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 sales tax in the second quarter of FY 2020-21, transfer taxes is now the second largest revenue source for the City’s General Fund. As of December 31, 2020, the City received $6.9 million in revenue, which is 58 percent of the $12 million that was budgeted for FY 2020-21. This represents a 48 percent increase as compared to the same period last fiscal year.
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 approximately three months in arrears, with the first two 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 39 percent of the $15 million budgeted for FY 2020-21, which represents a 7 percent increase as compared to last fiscal year.
The revenue from Utility User Taxes represents a 6 percent increase as compared to the same period last year. The revenue from Franchise Fees represents a 9 percent increase as compared to last fiscal year.
Due to COVID-19, the year-to-date revenues from the Business License Tax is 9 percent lower as compared to the same quarter of last fiscal year. As of December 31, 2020, the City has collected $2.2 million in Business License, which represents 100% 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 totaled $3.2 million, or 38 percent of the FY 2020-21 budget and the Transfers-In was $1.9 million, or 49 percent of the FY 2020-21 budget.
Special Revenue Funds
The FY 2020-21 actual revenues as of December 31, 2020 were $21 million, or 39 percent of the annual budget and actual expenditures were $22 million, or 37 percent of the annual budget.
The Base Reuse Fund had the most substantial actual revenues and expenses during the period. As of December 31, 2020, the Base Reuse fund has received revenues of $5 million. Expenditures of $4 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, Street and Transportation, Development Impact Fee, Maintenance Assessment Districts, and the Urban Runoff Storm Drain, had actual expenditures of $13 million and revenue of $3.4 million at December 31, 2020. The largest expenditures for the second quarter consisted of the following projects:
• Sewer Rehabilitation (Project #96003602) for $4.3 million
• Seaplane Lagoon Ferry Terminal (Project #91814) for $2.3 million;
• Pavement Management (Project #96010) for 2.2 million; and
These funds derive their revenues from a combination of fees from new development, grants, 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 December 31, 2020, the debt service funds received $1.2 million in revenue and $0.9 million in expenditure. 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 December 31, 2020, for the Sewer Fund was $92 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 $35 million on December 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 $117 million as of the 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 the Other Post-Employment Benefits (OPEB). The cumulative fund balance for this fund group was $20 million at December 31, 2020. The fund balance for the OPEB trust was $18 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, 2020, was approximately $47 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 second 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 December 31, 2020. Exhibit 1 was created to present the City’s actual results and fund balances for each fund through the end of the second quarter of FY 2020-21.
There is no financial impact from accepting the second 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 second 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 second quarter financial report for the period ending December 31, 2020.
CITY MANAGER RECOMMENDATION
The City Manager recommends acceptance of the second quarter financial report for the period ending December 31, 2020.
Respectfully submitted,
Annie To, Finance Director
Exhibit:
1. FY 2020-21 Second Quarter Financial Report