CC - Item 7D - Quarterly Interim Financial Update for the Quarter Ended March 31, 2010ROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: JEFF ALLRED, CITY MANAGERCI(
DATE: APRIL 27, 2010 `1~"~
SUBJECT: QUARTERLY INTERIM FINANCIAL UPDATE FOR THE QUARTER
ENDED MARCH 31, 2010
SUMMARY
Attached is the City of Rosemead Quarterly Interim Financial Update for the Quarter
Ended March 31, 2010 for City Council review. Also, attached to the Quarterly Financial
Update is the Treasurer's Report of cash and investment balances at March 31, 2010.
Staff Recommendation:
It is recommended that the City Council receive and file the Quarterly Interim Financial
Update report (Attachment A) and the Treasurer's Report (Attachment B).
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Submitted by:
Steven Brisco
Finance Director
Attachment A: Quarterly Financial Update for the Quarter Ended March 31, 2010
3: Treasurer's Report for the period ended March 31, 2010
APPROVED FOR CITY COUNCIL AGENDA: ITEM NUMBER:
Attachment A
Q3 City of Rosemead
Quarterly Interim Financial Update
zoos-lo For the Quarter Ended 3/31/2010
With three quarters of the fiscal year complete
a clearer picture of the full year's finances is
beginning to come into focus. Adding three
more months of data is revealing more
pronounced trends since the mid-year review
and some adjustments may be necessary.
The Gas Company has notified the City that
their annual franchise fee, which is not due until
April, will be substantially lower this year due to
lower natural gas prices in 2009. It has also
become apparent that some intergovernmental
revenues are being delayed or reduced due to
tactics the State is using to balance their
budget. At the same time, State backfill
payments (triple flip) have been over-estimated
in FY 2009-10 but will be trued up (reduced)
next year. The economy, while starting to show
signs of life, is recovering from the current
recession very slowly and there is no consensus
among economists that there will not be
another economic dip. Fortunately, the City is
beginning to see small increases in some
revenues such as building permit revenue. At
the same time, expenditures are staying within
budget constraints. However, managing the
finances in this "moving target" climate
requires constant vigilance and the willingness
to adapt to changing financial conditions. As
the next budget is crafted, no stone can remain
unturned, new revenue sources are essential
and careful cost cutting cannot be avoided but
not to the extent that service levelsare
significantly compromised. The following
discussion will help crystallize the financial
picture of the City after three quarters of the
year have been completed.
Finances in Brief
Total General Fund revenues, through March
31, 2010, have declined 13.2% or $1.4 million
when compared with the same period last year.
However, FY 2008-09 had $1.4 million in
extraordinary revenue items, including a sizable
sales tax aberration. When extraordinary items
are factored out of FY 2008-09 revenue, for
comparison purposes, current year revenues
appear to be favorable.
Recent noteworthy revenue trends for the year
include a beginning uptick in building permit
revenue caused by increased building activity,
an increase in sales tax in-lieu and property tax
in-lieu revenue caused by faulty State
estimating procedures. The over-payment will
be trued up in FY 2010-11. There was a modest
decline in sales tax revenue and property tax
revenue is remaining neutral.
With 75% of the year completed, $12.3 million
or 71.4% of the budget has been spent, while
$13.7 million or 70.1% was spent by this time
last year. With the FY 2009-10 budget $2.1
million or 10.6% smaller than last year's budget,
it is becoming increasingly more challenging to
remain within the budget parameters.
Special revenue funds such as CDBG, HOME,
AQMD, Gas Tax (HUTA), Prop A, Prop C and
Measure R have received $2.7 million or 39.7%
of the annual budget of $6.8 million. The lack
of revenue at this point in the year is partially
caused by the State withholding November
through March Gas Tax remittances until April,
when they will be paid in full. The total delayed
payments are equal to approximately $400,000.
Street maintenance work is continuing, with the
bills being paid with prior year Gas Tax Fund
surpluses.
Page 1
Attachment A
Based on the first installment from the State,
the full payment will be $357 thousand more
than projected and will, therefore, offset under-
collections of TOT and Real Property Transfer
Tax.
Park grants had never been collected. Prior
period grant proceeds were collected in FY
2008-09 and the remaining grants are being
collected this fiscal year, though it is about half
the amount collected last year.
Licenses and Permits. At $48 thousand,
Business License fees are $4,103 more than
what was collected for the same period last
year. Building Permit revenue at $590
thousand is starting to increase in activity. In
spite of the increasing activity, it is doubtful
that building permit activity will catch up with
their budgeted estimates. As explained in a
previous Quarterly Interim Financial Update
report, Motor Vehicle License Fees (MVLF) are
down from last year due to:
1) Lower vehicle license fees collected by
the State
2) Higher administrative costs withheld
from City apportionments to pay for
Department of Motor Vehicle
administrative costs.
3) A provision in the Revenue and
Taxation Code that allows the
Legislature to set DMV charges as if the
VLF rate were still at 2%.
The League of California Cities is estimating
MVLF to be $150 thousand for the year and to
increase from $2.65 per capita to $4.00 per
capita in FY 2010-11.
Fines & Penalties. Receipts of Court Fines
revenue ($133.3 thousand) has declined from
the same period last year by 14.0% The
revenue loss is explained because fewer vehicle
code violation tickets are being written as well
as fewer impounded vehicles in the area
surrounding the auto auction, which ceased
operating in February 2009.
Other Revenue. Miscellaneous revenues
collected are about the same as last year but
reimbursements are $248 thousand lower than
FY 2008-09 due to receipt of proceeds of the
L.A. County Regional Park and Open Space
Grant last year. Previously uncollected Prop A
General Fund Revenues
$4,500 ($1,000's)
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
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0 3/31/2009 M 3/31/2010
Chart 1
General Fund Expenditures
General Fund salary and benefits as well as
maintenance and operations are fairly evenly
paid throughout the year and are tracking
within budgetary ranges through the third
quarter of this fiscal year. Capital outlay is for
large, one-time items and they do not track
evenly throughout the year. They are, primarily
accounted for in the capital projects fund and
do not rely heavily on the General Fund for
financing projects but, depending on each
individual project, are typically funded by Gas
Tax, Prop C and special grants such as the
American Recovery and Reinvestment Act of
2009 (ARRA). With expenditures equaling $7.7
million or 69.8% of the budget and in spite of
some revenue shortfalls, the finances appear to
remain optimistically on track to end the year in
balance.
Page 3
Attachment A
Rosemead Housing Development
As has been reported in previous Quarterly
Interim Financial Update's, the Garvey and
Angelus senior housing project finances remain
remarkably consistent each quarter. With
basically no vacancies and a list of people
waiting to move in when vacancies occur, the
revenues remain constant each quarter.
Ordinary operating and maintenance expenses
have increased 6% from this time last year. The
RHDC relies on an annual $250 thousand
subsidy from the Low/Mod Fund to keep rents
low but as can be seen in Chart 3 that is no
longer sufficient to maintain positive cash
balances. The following chart, of revenues,
expenses and accruals (Chart 3) summarizes the
quarter to date financial position of RHDC:
Rosemead Housing Development Corp.
Quarter Ended 3/31/2010
($1,000)
Angelus
Garvey
Rents
$ 120
$ 190
Low-Mod
transfer
94
94
Expenditures
(268)
(292)
Income
(loss)
$ (54)
$ (8)
potential signs of trouble, mostly originating
with the State's financial shortfall. Foremost is
the potential Supplemental Education Revenue
Augmentation Fund (SERAF) shift of Property
Tax Increment from the CDC of $1.4 million.
Due on May 10, 2010, half of the potential
obligation will be borrowed from the Low/Mod
Fund; the balance will come from Property Tax
Increment. The Community Redevelopment
Association (CRA) is suing the State to block the
SERAF payment on grounds that the transfer is
unconstitutional. A similar suit was filed last
year when the State first attempted this budget
balancing tactic but the Court ruled in favor of
CRA (and cities). Additionally, the State has
announced delays in apportionments, especially
gas tax payments and increased DMV
administration fees that are collected through a
reduction of motor vehicle license fees paid to
cities.
In spite of all the economic challenges facing
the City, the finances have shown a remarkable
resiliency. By carefully following the Strategic
Plan that has been adopted by the City Council
there is every reason to believe that Rosemead
will emerge from this economic calamity
perhaps bruised but not broken.
Chart 3
Outlook for the Future
In this recessionary economy Rosemead is
fairing extremely well. As neighboring cities are
contemplating deficits in the coming fiscal year
that are in the millions, Rosemead is nearing a
balanced budget. Sales tax declines are
projected to be less than the County losses and
property taxes are expected to remain almost
the same as this current year while much of
California is experiencing declines in property
tax revenues.
However, the City is not without its share of
Page 5
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Attachment A
CDBG and HOME funds are reimbursed by the
Housing and Urban Development Department
(HUD) for expenditures when they occur. At
the time of this report the CDBG Fund is owed
$69 thousand and the HOME Fund is owed $3
thousand. Because these funds are on a
reimbursement basis it is relatively
inconsequential that the actual revenue
collections lag behind budget estimates by $2.7
million. Additional expenditures are
forthcoming in the last quarter of the fiscal year
or programs will be continued into next fiscal
year.
Measure R is a new L..A. County transportation
tax passed by the voters in 2009. As of the date
of this report the City has received $206
thousand of $296 thousand expected to be
received this year. No expenditures are
planned for the year but in FY 2010-11, when
another $504 thousand will be added to the
fund for qualified transportation expenditures,
recommendations for using the money will be
presented for Council approval.
Community Development Commission (CDC)
funds have received $4.0 million with
expenditures totaling $3.6 million and no
extraordinary activity to report.
Rosemead Housing Development Corporation
(RHDC), which is the legal entity for the City's
low income senior housing apartments,
received revenues and transfers this quarter
totaling $103.7 thousand. Chart 3 below will
illustrate the details. FY 2007-08 revenues and
expenses for the same quarter were
approximately the same. The . trend of
underperforming revenues and excessive
expenditures continue to plague the RHDC.
Staff will be evaluating various options and will
present them at a future date.
Page 2
General Fund Revenues
Including accrued Transient Occupancy Tax of
$300 thousand, and Cable TV franchise fees of
$40 thousand, $9.5 million or 54.9% of
estimated General Fund revenues have been
accounted for by the third quarter (see Chart 1).
With 75% of the year completed and only 54.9%
of the revenue accounted for it would seem
that the City is headed for a huge deficit,
however, it must be remembered that
significant amounts of revenues, such as
franchise fees, property taxes and property tax
in-lieu payments will be received in the fourth
quarter. After further analysis, revenues are still
projected to meet budget expectations.
Taxes. Taxes include Sales Tax, Property Tax,
Real Estate Transfer Tax, Taxes In-lieu and hotel
Transient Occupancy Tax (TOT). Sales tax
collections through the third quarter of the
fiscal year are $1.9 million or 70.1% of their
estimated revenue. With year-end accruals,
sales tax is expected to exceed budgeted
amounts and the City's sales tax consultant
concurs. They project final receipts of $2.9
million versus budgeted sales tax of $2.7
million. Sales Tax In-lieu and Property Tax In-
lieu backfill (triple flip) payments of $3.1 million
will be received from the State in May and will
bring the revenues in line with budget
estimates. After three quarters, Property Tax
collections are 38.8% collected. This is not a
cause for alarm,.however, because property tax
remittances are not received in equal monthly
installments. They do not begin to arrive until
November and subsequent payments for some
months are much larger than others. The City's
property tax consultant has projected property
tax revenue for the year to be approximately
equal to last year's amount. Accrued Transient
Occupancy Tax collections are $892 thousand
for the quarter and are down $90 thousand
from the same period a year ago. Real Property
Transfer Tax is also lagging behind budget
projections by $28 thousand. Property Tax In-
lieu and Vehicle License Fees In-lieu are paid
twice per year by the State in January and May;
Attachment A
General Fund Expenditures (continued)
Salary and Benefits.. Expenditures for General
Fund salaries and benefits totaled $4.4 million
(71.6% of the approved budget for this
category) through the third quarter of FY 2009-
10 compared to $4.9 million for the same
period a year ago (see Chart 2). With 71.6% of
the budget for salaries and benefits expended
at this third quarter point in the fiscal year,
continued care in managing staffing levels will
assure that this category will end the year
under budget.
Maintenance and Operations. Maintenance
and operations consists of contract services,
materials and supplies. At the close of the third
quarter of FY 2009-10 $7.7 million or 69.8% of
the maintenance and operations budget has
been spent. At $4.0 million the largest single
expenditure in this category is for the Sherriffs
contracted services. At the current spending
pace, total maintenance and operating
expenditures for the year will remain well
within the budget plan.
Capital Outlay. This is another expenditure
category that is characterized by relatively
large, one-time expenditures rather than a
smooth even flow of expenditures throughout
the year. So far this year $94 thousand has
been spent to replace aging vehicles and $30
thousand was spent on building improvements.
General Fund Expenditures
($1,000's)
$10,000
$8,000
$6,000
$4,000
Y,
$2,000
Sal & Bnft Maint & Capital
Opn
s 3/31/2009 0 3/31/2010
Chart 2
Community Development Commission
The CDC has received $4.0 million of Property
Tax Increment (PTI) revenue through the end of
the third quarter.. PTI is estimated at $7.1
million for the year and like City property tax, it
is remitted to the CDC by the County in uneven
amounts throughout the year. The final two
remittances, which are received in July and
August, are actually accrued (counted) in the
previous June receipts. Because of accruals and
uneven payments, in spite of collecting only
56% of the estimated revenue, there is no
cause for concern. This revenue is being
received in line with budget expectations. CDC
expenditures include $1.7 million for debt
service, $907 thousand for pass-through
agreements and transfers to the Low and
Moderate Income Housing Fund (Low/Mod
Fund), $804 thousand for Salaries and Benefits
and $559 thousand for fire protection. The
Low/Mod Fund paid one half of its annual
subsidy ($125 thousand) to the Rosemead
Housing Development Corporation; the balance
will be paid in June.
Page 4