CC - Item 5E - Quarterly Interim Financial Update for the Quarter Ended March 31, 2012ROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: JEFF ALLRED, CITY MANAGER
DATE: MAY 8, 2012
SUBJECT: QUARTERLY INTERIM FINANCIAL UPDATE FOR THE QUARTER
ENDED MARCH 31, 2012
SUMMARY
Attached is the City of Rosemead Quarterly Financial Update for the Quarter Ended
March 31, 2012 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 March 31, 2012.
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
ITEM NUMBER: 6? -
Attachment A
Q3 City of Rosemead
Quarterly Interim Financial Update
2011 -12 For the Quarter Ended 3/31/12
With 75% of the fiscal year completed, the final
trends for the year are emerging and there do
not appear to be any material aberrations from
the budget estimates. However, as can be seen
on the "Top Ten Revenues" chart, collections
are somewhat sluggish, primarily attributable to
timing deviations. The budget variances will be
discussed in greater detail later in this report.
GENERAL FUND
General Fund Financial Condition: With 75% of
the year completed, 58% of estimated revenues
have been collected compared with 57% a year
ago. Annual revenues are expected to meet or
exceed expectations. By the end of this quarter
67% of total appropriations had been spent
compared with 74% by the third quarter of
2011 and expenditures are anticipated to be
less than appropriations. The following table
provides 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 a sense of the revenue picture for the year.
Because of the timing and frequency of certain
revenues, such as VLF Tax In -Lieu, Sales Tax In-
Lieu and Utility Franchise Fees it is important to
keep in mind that when taken literally they can
be misleading.
overall, these key revenues are performing as
expected for this time of the fiscal year.
Page 1
(Thousands)
(Thousands)
,.
• $16,285
.•
Revenues
51%
$9,415 58%
Expenditures
(16,122)
(10,776) 67%
Other Sources (Uses)
(1,536)
- -
Balance,StartofYear
Trans Occupancy Tax
15,319
Balance, Year -to -Date
($1,373)
$13,958
Top Ten Revenues. The top ten revenues
account for about 86% of total General Fund
Revenues. By focusing on these, we can quickly
get a sense of the revenue picture for the year.
Because of the timing and frequency of certain
revenues, such as VLF Tax In -Lieu, Sales Tax In-
Lieu and Utility Franchise Fees it is important to
keep in mind that when taken literally they can
be misleading.
overall, these key revenues are performing as
expected for this time of the fiscal year.
Page 1
(Thousands)
Property Tax In -Lieu of VLF. Property Tax In-
lieu of Vehicle License Fees, the City's number
one 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) was swapped for a like amount of
revenue from the State's portion of property
tax. It is paid in two equal installments, one in
January and one in May. As can be seen in the
chart, the first installment is slightly more than
50% of the amount budgeted. Therefore, once
the May payment-is received the total revenue
will be $118,000 more than the estimated
amount.
Sales & Use Tax. Sales & Use Tax is remitted to
the City in 12 unequal installments based on
actual taxes collected by the State. For
accounting purposes the first payment for the
fiscal year is received in September, two
months late and the final two months of fiscal
year taxes (May and June sales) are not
remitted to the City until July and August but
they are counted in the prior fiscal year which
ends on June 30 Therefore, Sales & Use Tax
receipts appear to be less than budget
projections until the final two payments are
received. With that explanation in mind, the
tax is on target for reaching the budget
estimate for the fiscal year.
,.
VLF Tax In -Lieu
$4,858
2,488
51%
Sales & Use Tax
2,949
1,996
68%
Property Tax
1,921
1,052
55%
Trans Occupancy Tax
1,220
998
82%
Building Permits
860
688
80%
Sales Tax In -Lieu
947
457
48%
Util Franchise Fees
603
102
17%
Interest Earnings
200
33
17%
Parking Citations
300
216
72%
Court Fines
203
127
63%
Total
$14,061
$8,157
58%
Property Tax In -Lieu of VLF. Property Tax In-
lieu of Vehicle License Fees, the City's number
one 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) was swapped for a like amount of
revenue from the State's portion of property
tax. It is paid in two equal installments, one in
January and one in May. As can be seen in the
chart, the first installment is slightly more than
50% of the amount budgeted. Therefore, once
the May payment-is received the total revenue
will be $118,000 more than the estimated
amount.
Sales & Use Tax. Sales & Use Tax is remitted to
the City in 12 unequal installments based on
actual taxes collected by the State. For
accounting purposes the first payment for the
fiscal year is received in September, two
months late and the final two months of fiscal
year taxes (May and June sales) are not
remitted to the City until July and August but
they are counted in the prior fiscal year which
ends on June 30 Therefore, Sales & Use Tax
receipts appear to be less than budget
projections until the final two payments are
received. With that explanation in mind, the
tax is on target for reaching the budget
estimate for the fiscal year.
Attachment A
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,
collections through March appear normal and
do not create cause for concern.
Transient Occupancy Tax. Accrued Transient
Occupancy Tax (TOT) revenues (earned and
reported through the third quarter but
collected in April and May) is being received at
a rate slightly ahead of projections, a sign of an
improving economy. With only 64% of the
hotels having paid their third quarter TOT at the
time this report was prepared, it was necessary
to estimate the remaining portion. Even
considering a margin for error it is expected
that by the end of the fiscal year TOT revenue
will exceed budget estimates.
Building Permits. At 80% of estimated revenue,
Building Permit sales is slightly more than what
is expected for this time of the fiscal year. This
is a reflection of increased construction activity;
staff is expecting to receive at least 100% of the
budgeted revenue.
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. By the end of March the first
of two equal payments has been received by
the City but this amount was lower than
expected. Staff is expecting this revenue to fall
$33,000 short of revenue estimates, the result
of over - estimating revenue for this line item.
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. While due in March most
payments are not received until April and will
appear in the fourth quarter update. Because
of the relatively stable nature of utility use this
revenue is expected to end the year on budget.
Page 2
Interest Earnings. Interest earnings is another
revenue that is not received in equal monthly
installments; LAIF interest, for example, is paid
quarterly in the month following the quarter
end and is not included in this report. Other
investments are earned during the quarter but
are not received until sometime following the
quarter end. Therefore, interest revenue listed
on the top ten revenue chart seems to be
lagging but will catch up as the fiscal year
progresses.
With interest rates extraordinarily low the most
productive form of investment has been FDIC
insured 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 them to take advantage of the higher interest
rates. 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 Treasury yields are substantially
below LAIF yields. In the last quarter interest
rates have increased and staff has taken
advantage of the improved investment market
by continuing to invest in CDs but it remains a
challenge to meet the budget expectations for
interest earnings.
Parking Citations /Court Fines. These fines are
collected at the Public Safety Center, through a
third party collection service and the courts. A
new contract with Data Ticket, a third party
collection service, is expected to substantially
increase the fines and penalties revenue
collections. As part of their service they actively
pursue collection of fines and penalties as
opposed to the former ticket administrator who
just received and administered fines voluntarily
paid by offenders. This revenue is projected to
meet or surpass revenue estimates.
Expenditures. General Fund expenditures are
67% of appropriations at the end of the third
Attachment A
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)
Staffing $5,430 $3,939 73%
Maint. & Operating 10,692 6,837 64%
Capital Outlay - - -
Other Sources (Uses) - - -
Total $16,122 $10,776 67%
SPECIAL REVENUE FUNDS
Often certain revenues are raised for a specific
purpose. When specific purpose revenues are
restricted as to their 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)
- :- .nm.au�amr
:r. -
..
Revenues
$1,793
$725 40%
Expenditures
(2,356)
(1,129) 48%
Other Sources (Uses)
-
- -
Balance,StartofYear
($368)
Balance, Year -to -Date
($563)
($772) .
(Thousands)
ROSEMEAD COMMUNITY DEVELOPMENT
COMMISSION (RCDC)
The following financial summary is for financial
activity from July 2011 through January 2012,
the last month of RCDC's existence as the City's
redevelopment agency. As of February 1, 2012
all assets of RCDC were transferred to the
Successor Agency, as required by law.
Noteworthy expenditures include $2.2 million
for debt service, $1.6 million for the Rosemead
pool construction Debt service, and $659
thousand for salaries and benefits.
(Thousands)
• $417
Revenues
$1,559 $1,230 80%
Expenditures
(893) (588) 66%
Other Sources (Uses)
- - -
Balance, Start ofYear
1,474
Balance, Year -to -Date
$666 $2,116
ROSEMEAD COMMUNITY DEVELOPMENT
COMMISSION (RCDC)
The following financial summary is for financial
activity from July 2011 through January 2012,
the last month of RCDC's existence as the City's
redevelopment agency. As of February 1, 2012
all assets of RCDC were transferred to the
Successor Agency, as required by law.
Noteworthy expenditures include $2.2 million
for debt service, $1.6 million for the Rosemead
pool construction Debt service, and $659
thousand for salaries and benefits.
(Thousands)
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 the Board approved rate increases for
new tenants but without the subsidy from the
now dissolved Low and Moderate Income
Housing Fund the form of future operations of
the senior apartment complexes is uncertain.
(Thousands)
• $417
� .
Revenues
$6,420
2,950 46%
Expenditures
(6,640)
(6,312) 95%
Other Sources (Uses)
(452)
(209) 46%
Balance, Start of Year
19,079
Balance, Year -to -Date
($672)
$15,508
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 the Board approved rate increases for
new tenants but without the subsidy from the
now dissolved Low and Moderate Income
Housing Fund the form of future operations of
the senior apartment complexes is uncertain.
(Thousands)
(Thousands)
• $417
� .
Revenues
$1,492
$1,206 26%
Expenditures
(1,565)
(1,385) 89%
Other Sources (Uses)
-
- -
Balance,Start ofYear
2,923
Balance, Year -to -Date
($73)
$2,744
(Thousands)
As can be seen in the following table, daily
operations for the three quarters of the fiscal
year are almost neutral. However it is
important to note that that was made possible
with a $209 thousand subsidy from the Low and
Moderate Income Housing Fund.
(Thousands)
I I I
• $417
� .
Revenues
$478
$391 82%
Expenditures
(121)
(146) 120%
Other Sources (Uses)
-
- -
Balance, Start of Year
759
Balance, Year -to -Date
$357
$1,004
As can be seen in the following table, daily
operations for the three quarters of the fiscal
year are almost neutral. However it is
important to note that that was made possible
with a $209 thousand subsidy from the Low and
Moderate Income Housing Fund.
(Thousands)
I I I
• $417
� .
Revenues
$279 67%
Expenditures
(855)
(504) 59%
Other Sources (Uses)
452
209 46%
Balance, Start of Year
46
Balance, Year -to -Date
$14
$30
Page 3
Attachment A
OUTLOOK FOR THE FUTURE
Ever so slowly the Rosemead economy is
showing signs of improvement. The most
recent report from the City's sales tax
consultant, HdL Companies, inc. reports an
overall increase in sales tax revenue of 6.3 %,
primarily in the general consumer, restaurant
and hotel and fuel and service station industry
groups. The City Building Department is
reporting an increase in local construction
activity as evidenced by above expected
revenue. Based on this year's Transient
Occupancy Tax revenue trend, hotel occupancy
is rising, a finding that seems to be supported
by HdL Companies' latest sales tax report as
well. However, the good news must be
tempered with the understanding that there is
a sales tax decline in the Autos and
Transportation industry group and of course the
dissolution by the State of the Community
Development Commission as well as
uncertainty surrounding the continuation of the
Housing Development Corporation in its current
form. By following the guidance provided in the
City's Strategic Plan and with prudent financial
planning and monitoring the City can thrive in
these current perilous financial times.
Page 4
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