CC - Item 8G - Quarterly Interim Financial Update for the Quarter Ended September 30, 20111 ' : 1 61: 41
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: JEFF ALLRED, CITY MANAGER #A
DATE: DECEMBER 13, 2011
SUBJECT: QUARTERLY INTERIM FINANCIAL UPDATE FOR THE QUARTER
ENDED SEPTEMBER 30, 2011
SUMMARY
Attached is the City of Rosemead Quarterly Financial Update for the Quarter Ended
September 30, 2011 for City Council review. Also, attached are the Treasurer's Reports
of Cash and Investments for the City, Rosemead Community Development Commission
and the Rosemead Housing Development Corporation at September 30, 2010.
Staff Recommendation
Staff recommends that the City Council receive and file the Financial Update report
(Attachment A) and the Treasurer's Reports of Cash and Investments (Attachment B).
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Submitted by:
Steven Brisco
Director of Finance
Attachment A: Quarterly Financial Update for the Quarter Ended September 30, 2011
B: Treasurer's Report of Cash and Investments
APPROVED FOR CITY COUNCIL AGENDA: ITEM NUMBER:
Attachment A
City of Rosemead
2011 -12 Quarterly Interim Financial Update
For the Quarter Ended 9/30/11
With one quarter of the fiscal year completed, it
is too early to identify any major financial
trends. However, there do not appear to be
warning signs of any significant deviations from
historical revenue and expenditure patterns for
the first quarter when compared with the same
period a year ago. As additional data becomes
available a more in -depth analysis will be
presented in subsequent financial update
reports.
At this time the financial audit for the 2010 -11
fiscal year is not yet complete, however, staff
believes the information presented in this
report is reasonable and not likely to change
materially.
10 aZia:L1R1110 iC
General Fund Financial Condition: With 25% of
the year completed, just 9% of estimated
revenues has been collected compared with
11% a year ago, primarily due to extraordinarily
low interest rates restricting interest earnings
and very robust building permit revenue from
the Edison expansion in 2010 that will not occur
again. This quarter 17% of total appropriations
have been spent compared with 27% in the first
quarter of 2010 due to payment timing
variances. A few large invoices were not paid in
the first quarter but will be paid later in the
year.
The following tables provide expanded detail:
Top Ten Revenues. The top ten revenues
account for about 86% of total General Fund
Revenues. By focusing on these, we can quickly
get an clear understanding of the complete
revenue position.
Overall, these key revenues are performing as
expected for the first quarter of the fiscal year.
Some variances are expected for the first
quarter due to year -end accruals and planned
timing differences. These variances will be
discussed in greater detail below.
(Thousands)
Property Tax In -Lieu of VLF. Property Tax In-
lieu of Vehicle License Fees, the City's number 1
revenue source was the creation of the State's
2004 budget balancing Triple Flip scheme. In it
90% of the City's Vehicle License Fees (VLF)
were swapped for a like amount of revenue
from the State's portion of property tax. It is
paid in two equal payments, one in January and
one in May. There has been no indication that
the amount will vary from the revenue
estimate.
(Thousands)
• $16,296
Revenues
VLF Tax In -Lieu
$4,858
-
-
Sales & Use Tax
2,949
281
10%
Property Tax
1,921
56
3%
Trans Occupancy Tax
1,220
354
29%
Building Permits
860
224
24%
Sales Tax In -Lieu
947
-
-%
Util Franchise Fees
603
-
-
Interest Earnings
200
24
12%
Parking Citations
300
48
16%
Court Fines
203
54
27%
Total
$14 ,061
$1,041
7%
Property Tax In -Lieu of VLF. Property Tax In-
lieu of Vehicle License Fees, the City's number 1
revenue source was the creation of the State's
2004 budget balancing Triple Flip scheme. In it
90% of the City's Vehicle License Fees (VLF)
were swapped for a like amount of revenue
from the State's portion of property tax. It is
paid in two equal payments, one in January and
one in May. There has been no indication that
the amount will vary from the revenue
estimate.
(Thousands)
Sales & Use Tax. At first glance Sales & Use tax
appears to be under - collected in the first
quarter, that's because the first two monthly
payments (July and August) in the fiscal year are
accrued (counted) in June, the fiscal year in
which they were earned. As this accounting
Page 1
• $16,296
Revenues
$1,422 9%
Expenditures
(16,122)
(2,780) 17%
Other Sources (Uses)
(1,536)
- -
Balance, Start ofYear
15,784
16,523 -
Balance, Year -to -Date
$14,422
$15,165 -
Sales & Use Tax. At first glance Sales & Use tax
appears to be under - collected in the first
quarter, that's because the first two monthly
payments (July and August) in the fiscal year are
accrued (counted) in June, the fiscal year in
which they were earned. As this accounting
Page 1
Attachment A
treatment progresses throughout the fiscal year
actual revenue will "catch up" with budgeted
revenues, when all 12 monthly payments have
been received. In Fiscal year 2010 -11 Sales Tax
actually exceeded the revenue estimate.
Financial Aid /Low & No (Property Tax). This
revenue does not flow in 12 equal installments;
instead, about 85% of the revenue is collected
between December and May. Therefore, the
Minimal collection in the first quarter of the
fiscal year is normal and does not create cause
for concern.
Transient Occupancy Tax. Accrued Transient
Occupancy Tax (TOT) revenues (earned and
reported in the first quarter but collected in
October) are being collected at a rate slightly
ahead of projections. The jump in collections is
partially the result of a hotel becoming current
in their TOT remittances and a slight
improvement in the overall economy.
Building Permits. With the completion of the
Southern California Edison expansion, Building
Permit revenue is significantly lower than last
year ($716 thousand vs. $224 thousand)
however, at 24% of revenue estimates it is in
good health. Building permit revenue is subject
to the whims of the economy and with sluggish
economic growth it is not expected to exceed
revenue projections.
Interest Earnings. Interest earnings is revenue
that is accrued. With interest rates
extraordinarily low the most productive form of
investment has been FDIC guaranteed
certificates of deposit (CD) but, they are only
guaranteed to a maximum of $250,000 so it has
become necessary to buy a large number of
CDs. As can be seen on the Treasurer's Report
the Local Agency Investment Fund (LAIF)
interest rate is .38 %, considerably lower than
the average rate of 1.7% for CDs. Current rates
on U. S. Government Agencies have also fallen
to at or below the rates on CDs and U. S.
Government Treasuries are substantially below
LAIF rates. Unless yield dramatically turns
around it will be difficult to meet the budget
expectations for investments.
Parking Citations /Court Fines. These fines are
collected at the Public Safety Center, through a
third party collection service and the courts.
With 20% of estimated revenue collected
through the first quarter it would seem that
receipts are falling behind. However, with a
new contract with Data Ticket, substantially
more fines and penalties are expected to be
collected because included in their service is
revenue collection. As part of their service they
actively pursue collection of fines and penalties
as opposed to the former ticket administrator
who just receives and administers fines
voluntarily paid by offenders.
Property Tax In -Lieu of Sales Tax. Property Tax
In -Lieu of Sales Tax is another piece of the
State's Triple Flip legislation. This revenue is
the same type of revenue swap as Property Tax
In -Lieu of VLF. Please refer to Property Tax In-
Lieu of VLF for a full explanation of the State
revenue scheme.
Utility Franchise Fees. Utility Franchise Fees
are one of the top ten budgeted revenues but
they are paid annually in the third quarter of
the fiscal year. Therefore their balance is zero
for this first quarter of the fiscal year but is
expected to "catch up" later this year.
Expenditures. At 17 %, General Fund
expenditures are well within budget parameters
for the first quarter. However, as bills for law
enforcement, building inspections, property
insurance and liability insurance are received
and paid the percentage spent will begin to
normalize closer to appropriation levels. The
following table illustrates expenditures by
major category:
(Thousands)
IY
Staffing $5,430 $1,144 21%
Maint. & Operating 10,692 1,636 15%
Capital Outlay - - -
OtherSources(Uses) - - -
Total $16,122 $2,780 17%
Page 2
Attachment A
SPECIAL REVENUE FUNDS
Often certain revenues are raised for a specific
purpose. When specific purpose revenues are
restricted as to use they are usually accounted
for in special revenue funds such as the ones
below. The following tables summarize the
financial condition of the City's major special
revenue funds. They are all within budget
expectations:
(Thousands)
primarily for construction projects and debt
service.
Debt service, a significant expenditure in the
RCDC funds is due in the second and fourth
quarters of the fiscal year and is not reported in
this first quarter. The estimated beginning fund
balance, at $8.1 million was understated in the
budget and is correctly stated in the YTD Actual
column of the following table. The majority of
the expenditures ($1.5 million) are for
construction costs of the Rosemead pool.
•. • i::acasmaanumat_:9ael-3i1U1•
: I . 1 2 'a .
t•
Revenues
$1,793 $8 -%
Expenditures
(2,356) (303) 13%
Other Sources (Uses)
- - -
Balance, Start ofYear
563 (291) -
Balance, Year -to -Date
- $(586) -
(Thousands)
(Thousands)
: I . 1 2 'a .
t•
.
Revenues
$1,559
$404 26%
Expenditures
(893)
(130) 15%
Other Sources (Uses)
-
- -
Balance,StartofYear
2,494
1,570 -
Balance, Year -to -Date
$3,160
$1,844 -
(Thousands)
(Thousands)
..: a.a.:.0
: I . 1 2 'a .
t•
.
Revenues
$1,492
$387 26%
Expenditures
(1,565)
(271) 17%
Other Sources (Uses)
-
- -
Balance, Start of Year
3,527
2,923
Balance, Year-to-Date
$3,454
$3,039 -
(Thousands)
..: a.a.:.0
: I . 1 2 'a .
t•
.
Revenues
$478
$126 26%
Expenditures
(118)
(38) 32%
Other Sources (Uses)
-
- -
Balance, Start of Year
296
365 -
Balance, Year -to -Date
$682
$453 -
ROSEMEAD COMMUNITY DEVELOPMENT
COMMISSION (RCDC)
Nearly all of RCDC's revenue is received from
November through August. Revenue received
in July and August is accrued in June so for the
first quarter of the fiscal year there is usually
very little revenue to report. However, with the
uncertainty of the proposed State take away of
redevelopment assets, expenditures have been
limited to payment of existing contracts,
(Thousands)
•
.•-
Revenues
$6,420 - -
Expenditures
(6,640) (1,771) 27%
Other Sources (Uses)
(452) - -
Balance,StartofYear
8,100 19,089
Balance, Year -to -Date
$7,428 $17,318 -
ROSEMEAD HOUSING DEVELOPMENT
CORPORATION (RHDC)
As has been discussed in previous Quarterly
Financial Updates, the RHDC funds are
operating at non - sustainable levels without
some form of management intervention.
Recently, action has been taken to substantially
increase rents for future residents of the senior
housing complexes. As can be seen in the
following table, daily operations for the first
quarter are almost neutral but for the full year
further deficits are expected.
(Thousands)
•
.•-
Revenues
$417
$105 25%
Expenditures
(855)
(95) 11%
Other Sources(Uses)
452
- -
Balance,StartofYear
(149)
78 -
Balance,Year -to -Date
$(135)
OUTLOOK FOR THE FUTURE
As reported in the fall 2011 Sales Tax Update
prepared by the City's sales tax consultant, HdL
Companies,: "The good news is that the
economy is in recovery, the bad news is this
Page 3
Attachment A
may be as good as it gets..." Most economic
projections are for a long, slow recovery with
very slow recovery expected for industries
relying on low skill and low pay jobs. The bright
spot for Rosemead is a 5% increase in sales tax
for April, May and June, as reported in the same
newsletter, and there are new retail
establishments poised to break ground in the
City. The most recent property tax report
projected property tax revenue to remain flat,
not a great sign but in this declining market it is
a ray of hope.
With the threat of State confiscation of
redevelopment assets an ominous shadow
hangs over almost all California cities. If the
State carries out the draconian measure
thousands of projects relying on redevelopment
funding will have to be cancelled, including
some in Rosemead. Nevertheless, the City has a
vibrant new Strategic Plan that will point the
way for the City through 2014.
Page 4
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