CC - Item 4D - Quarterly Interim Financial Update for the Quater End September 30, 2012ROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: JEFF ALLRED, CITY MANAGER
DATE: NOVEMBER 13, 2012
SUBJECT: QUARTERLY INTERIM FINANCIAL UPDATE FOR THE QUARTER
ENDED SEPTEMBER 30, 2012
SUMMARY
Attached is the City of Rosemead Quarterly Financial Update for the Quarter Ended
September 30, 2012 for City Council review. Also, attached are the Treasurer's Reports
of Cash and Investments for the City, the Rosemead Housing Development
Corporation, and the Rosemead Successor Agency at September 30, 2012. It should
also be noted that the reports for the Fiscal Year ended June 30, 2012 are currently
being prepared and reviewed by the City's auditor and should be available in early
December 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:
Matthew E. Hawkesworth
Assistant City Manager /Director of Finance
Attachment A: Quarterly Financial Update for the Quarter Ended September 30, 2012
B: Treasurer's Report of Cash and Investments
ITEM NUMBER: q I
Attachment A
Q1 City of Rosemead
2012 -13 Quarterly Interim Financial Update
For the Quarter Ended 9/30/12
With only 25% of the fiscal year completed,
major revenues generated from taxes (Property
Tax, Sales Tax and Property Tax In -Lieu) have
not yet been received. Additionaly, many
expenditures related to annual payments for
memberships or insurance are due in July so
expenditures in some categories may appear
higher than normal, but that is to be expected.
GENERAL FUND
General Fund Financial Condition: With only
25% of the year completed, 19% of estimated
revenues have been collected compared with
7% a year ago. This significant increase is due
to the receipt of the the up -front payment from
Consolidated for franchise fees, and the sale of
Prop. A Transit funds to the City of Industry. All
other categories appear to be on target and
annual revenues are expected to meet or
exceed expectations. By the end of this quarter
24% of total appropriations had been spent
compared with 17% in the first quarter of 2011.
This difference is primarily the result of making
payments for contract related expenditures in a
more timely manner this current year.
Top Ten Revenues. The top ten revenues
account for about 87% 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
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. There has been no
indication that the amount will vary from the
revenue estimate.
Sales & Use Tax. The first two monthly
payments (July and August) in the fiscal year are
accrued (counted) in June for the 2011 -12 Fiscal
Year. This is done because the sales tax
collected in these months are for sales
generated in the prior year. Since this
accounting is done the same each year, the
actual revenue will catch -up with the budgeted
revenues once all 12 monthly payments have
been received. Staff has met with our sales tax
consultant and the early sales tax trends appear
to be in -line with our budgeted figures.
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
year is normal and does not create cause for
concern.
(Thousands)
..
VLF Tax In -Lieu
$4,980
-
0%
Sales & Use Tax
3,059
270
9%
Property Tax
1,945
60
3%
Trans Occupancy Tax
1,220
-
0%
Building Permits
940
254
27%
Sales Tax In -Lieu
1,064
-
0%
Util Franchise Fees
1,391
800
58%
Interest Earnings
125
34
27%
Parking Citations
250
56
23%
Court Fines
200
36
18%
Total
$15,174
$1,510
30%
Page 1
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. There has been no
indication that the amount will vary from the
revenue estimate.
Sales & Use Tax. The first two monthly
payments (July and August) in the fiscal year are
accrued (counted) in June for the 2011 -12 Fiscal
Year. This is done because the sales tax
collected in these months are for sales
generated in the prior year. Since this
accounting is done the same each year, the
actual revenue will catch -up with the budgeted
revenues once all 12 monthly payments have
been received. Staff has met with our sales tax
consultant and the early sales tax trends appear
to be in -line with our budgeted figures.
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
year is normal and does not create cause for
concern.
Attachment A
Transient Occupancy Tax. Accrued Transient
Occupancy Tax (TOT) revenues (earned and
reported through the first quarter but collected
in October) are being collected at a rate slightly
ahead of last year and in -line with projections.
This is a positive sign that the travel industry is
continuing to improve and Rosemead's hotels
are continuing on a positive trend upward.
Additional increases in TOT can be expected
once the former Glendon Hotel and the
expansion at the Doubletree Hotel are
completed.
Building Permits. Building activity during the
first quarter of the year has been steady with a
solid mixture of commercial and residential
projects. The construction of new buildings at
Rosemead Place and the Montebello Town
Center along with residential infill development
should help continue this positive momentum
for the next several months. Since the building
indstury can be volatile, staff will continue to
closely monitor building activity.
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.
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. Along with the Utilities, the City now
receives a franchise payment from our waste
hauler. The $1.6 million upfront payment for
the new franchise agreement was received in
this quarter. Additional franchise payments will
not be received until after the new agreement
takes effect in August 2013.
Interest Earnings. Interest earnings is revenue
that is accrued based upon the period it is
earned. With interest rates continuing to be at
historic lows and the Local Agency Investment
Fund (LAIF) hovering around 0.35 %, much of
the City's investable cash has been transitioned
into FDIC insured Certificates of Deposit (CDs)
and Federal Securities and Agencies. While
these investment types are not paying large
sums, rates between 1% and 2% are far greater
than the LAIF rate. The current year's budget
was significantly reduced from the prior fiscal
year based upon this reduced earning potential
and after the first quarter interest returns are
in -line with budgeted projections.
Parking Citations /Court Fines. These fines are
collected at the Public Safety Center, through a
third party collection service and the courts.
Although this is only the first quarter of the
year, collections have remained consistent with
our new contract and revenues are trending
accurately with our budget.
Expenditures. At 24 %, General Fund
expenditures are within budget parameters.
Since certain large one -time payments such as
insurance premiums are made at the beginning
of the fiscal year along with increased part -time
personnel costs for summer programs and
aquatics, it's not uncommon to have first
quarter expenditures higher than 25 %. The
following table illustrates expenditures by
major category:
(Thousands)
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:
Page 2
Staffing
$5,767 $1,475 26%
Maint. & Operating
11,602 2,697 23%
Capital Outlay
- - -
Other Sources (Uses)
- - -
Total
$17,369 $4,172 24%
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:
Page 2
Attachment A
(Thousands)
Revenues $1,014 $455 459/
Expenditures (1,012) (190) 19%
Other Sources (Uses) - - -
Balance, Year -to -Date $2 $265
(Thousands)
Revenues $1,519 $312 21%
Expenditures (913) (203) 22%
Other Sources (Uses) - - -
Balance, Year -to -Date $606 $109
(Thousands)
Revenues $1,636 , $420 26%
Expenditures (1,501) (945) 63%
Other 5ources(Uses) - - -
Balance, Year -to -Date $135 ($525)
(Thousands)
Revenues $462 $84 18%
Expenditures (202) (50) 25%
Other Sources (Uses) - - -
Balance, Year -to -Date $260 $34
(Thousands)
Revenues $760 $24 3%
Expenditures (749) (105) 14%
Other Sources (Uses) - - -
Balance, Year -to -Date $11 ($81)
ROSEMEAD HOUSING DEVELOPMENT
CORPORATION (RHDC)
As has been discussed in previous Quarterly
Financial Updates, the RHDC funds are
operating at non - sustainable levels. Recently
the Department of Finance approved the
Operating and Assistance Agreement between
the RHDC and the Successor Agency as an
Enforceable Obligation which will provide
funding to offset the annual shortfall for the
near future. A long term plan for sustainable
operations will still need to be developed to
ensure ongoing operations of the two
complexes into the future.
(Thousands)
,•
Revenues $418 $70 17%
Expenditures (402) (69) 17%
Other Sources (Uses) - -
Balance, Year -to -Date $16 $1
OUTLOOK FOR THE FUTURE
Although the revenue increases are not
dramatic and we will likely never again see
annual sales tax or property tax growth of 5% to
10% as we did for a period several years ago,
the City's General Fund revenues appear to be
slowly trending in an upward direction. The
Glendon Hotel is under construction and the
Doubletree Hotel just initiated their expansion.
Along with these hotel expansions, commercial
construction for several new restaurants is
underway with expected openings to start as
early as Thanksgiving. The City's General Fund
is not out of the woods and the long term
growth of expenditures will still likely outpace
the growth in revenues. Prudent spending and
examining means to generate additional
revenue must continue to be pursed to ensure
the City remains in a positive financial position.
The State's dire financial position has still not
been resolved and we can expect the State to
continue looking at local government as a
means to balance their budget each year. Court
fees and other administrative costs passed
through to the City from the State and County
continue to eat away at revenues sources such
as traffic fines which are historically flat.
Additionally, the State has taken away the City's
Vehicle License Fees and Redevelopment Funds
and we should expect additional attacks,
especially if the November ballot measures do
not generate the revenues expected and
additional funds are necessary for education.
Page 3
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