CC - 2014-04 - Approving Various AppropriationsRESOLUTION NO. 2014 -04
A RESOLUTION OF THE CITY OF ROSEMEAD APPROVING VARIOUS
APPROPRIATIONS
WHEREAS, appropriations are the legal authority for a City to spend its funds; and
WHEREAS, from time to time it is necessary to amend the budget with additional
appropriations; and
WHEREAS, purchases charged to the line items requiring additional
appropriations have received prior City Council approval.
NOW THEREFORE, $42,000 is appropriated in the General Fund for Expenditures
as defined below:
Expenditures
$42,000 101 -1305 -5215 Accounting & Auditing
The Air Quality Management District (AQMD) Fund $25,000 (230- 3020 -5825) for the
acquisition of hybrid electric vehicles.
The additional appropriation is made a part of the approved FY 2013 -14 Budget as though
it were a part of the initial approved budget fully set forth and the' City Manager is
authorized and empowered to expend such sum for the purpose of such account, but with
no expenditure by any office or department for any item within an account shall exceed
the amount budgeted therefore without prior written approval of the City Manager.
PASSED, APPROVED and ADOPTED this 11th day of February 2014.
ATTEST:
Jl k oria Molleda
City Clerk
Polly L'ow, or
APPROVED AS TO FORM:
Rachel Richman
City Attorney
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS.
CITY OF ROSEMEAD )
I, Gloria Molleda, City Clerk of the City of Rosemead, do hereby certify that the foregoing
Resolution No. 2014 -04 being:
A RESOLUTION OF THE CITY OF ROSEMEAD
APPROVING VARIOUS APPROPRIATIONS
was duly and regularly approved and adopted by the Rosemead City Council on the 11th of
February, 2014, by the following vote to wit:
Yes: Alarcon, Armenta, Clark, Hall, Low
No: None
Absent: None
Abstain: None
' , "u, J
Gloria Molleda
City Clerk
ROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: JEFF ALLRED, CITY MANAGER 4A
DATE: FEBRUARY 11, 2014
SUBJECT: MID -YEAR BUDGET UPDATE AND 2014 -15 OUTLOOK
SUMMARY
The Council will be provided with a mid -year Budget update presentation regarding the current
2013 -14 fiscal year Budget along with a brief look towards the upcoming fiscal year. In terms of
the General Fund, revenues have proven to be stable and are generally in -line with budgeted
projections. Sales tax revenues are growing moderately as expected and property tax revenues
have been relatively stable. General fund expenditures are remaining in line with budgeted
figures and staff has implemented cost savings measures when available. It is important to point
out that the Budget includes the expenditure of reserves for certain capital improvement projects
such as the Garvey Gym renovation; therefore, expenditures are projected to exceed revenues
at the end of the fiscal year.
An early look at revenues for 2014 -15 show signs of stagnation due to flat inflation and the
consumer price index. The opening of all the new restaurants and businesses has been offset
somewhat by the closure of some retail outlets such as Office Depot, which will result in continued
slow growth of sales tax revenue. Property tax revenue increases will rely heavily on residential
sales as the Consumer Price Index (CPI) increase will be minimal.
Staff Recommendation
Receive and file the mid -year budget update report and approve Resolution 2014,04 authorizing
budget amendments for previously approved projects.
ANALYSIS
A detailed look into the City's General Fund revenues and expenditures for the first half of the
year is provided below.
Revenues
Sales Tax - Revenues are coming in according to the budget and early projections from our sale
tax consultant are that revenues may finish $75,000 to $100,000 above budgeted projections.
The City has received the payment from Macy's that was misallocated to another City last fiscal
year and was included in this year's Budget. The tempered gasoline prices and reduced
consumption along with the closing of Office Depot will hurt sales tax figures for the year, but
fortunately the newer restaurants are performing well and have helped to cover any losses of
revenue. For the most recent quarter of data (3rd quarter 2013), Casual Dining receipts are up
46.4% and Fast - Casual Dining receipts are up 217.0% for a total dollar increase of $41,600.
Overall, the City's gross receipts within the City were up 7.5% for the 2nd Quarter of 2013 and up
9.2% for the 3rd Quarter of 2013. Again, this growth is largely due to the new restaurants and
some related growth to the surrounding businesses in their area. News regarding the 4 1 Quarter,
APPROVED FOR CITY COUNCIC'AGENDA: ITEM NO.
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February 11, 2014
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also known as the Christmas quarter, has been tempered by lackluster numbers, but actual
figures will not be available for several more months.
Property Tax - Although early, property tax revenues are tracking in line with budgeted estimates.
Sales of residential properties in Rosemead is still strong and final selling prices have almost fully
recovered since before the recession. For the quarter ending December 31, 2013 the average
home price was $580,682 and the median price was $472.500. This positive news is tempered
by the release of the Consumer Price Index data that will be used for the 2014 -15 property taxes.
For the current 2013 -14 year the County Assessor imposed the full 2.0% CPI increase on property
taxes; however, for 2014 -15 the CPI increase will be less than 0.5 %. The five -year financial
outlook the City uses assumes a 2% annual increase overall, so the City will need to see
substantial growth from new development and existing sales to meet the estimate for next fiscal
year.
Transient Occupancy Tax (TOT) - First quarter TOT revenues were up $30,000 to $397,000.
As the Council may recall, at the start of the fiscal year the City began the project of auditing all
the hotels for the first time. Most of the audits have been completed and staff is pleased to report
that most of the hotels were operating in accordance with the City's Code. Knights Inn was found
to be significantly underreporting revenues and the result of the audit was an underpayment of
$56,313.51 to the City. Combined with penalties and interest, they remitted payment of
$70,816.64 in December. Although the 2nd Quarter fees are not collected until January and are
not reflected in the dollars of this report, the TOT reports for the majority of the operators continues
to be strong. One point of concern is the loss of the Holiday Inn Express franchise in the City.
This loss of the franchise will have a negative impact on tourism in Rosemead and the resulting
TOT revenues. Also included in the 13 -14 Budget was the opening of the diao Gardens Hotel.
Per lengthy discussions with the owner, the hotel was scheduled to open in November 2013. With
the delay in opening and the loss of the Holiday Inn Express franchise, TOT revenues may come
in as much as $100,000 less than Budget.
Business License - Business license revenues are up in comparison to last fiscal year as a result
of the new businesses opening in town, the licensing of contractors, and the improved
enforcement and outreach efforts by staff. The Budget for 2013 -14 was increased by $25,000 to
$150,000 and revenues are coming in to meet the increased projection. The integration of the
business license process into the one -stop shop approach of the Community Development
Department has certainly worked well and is continuing to show positive results.
Fines and Forfeitures - The collections of fines such as Administrative Citations, Court Fines
and Parking Tickets has remained stable. The budget for 2013 -14 was increased based on 2012-
13 actual collections, and current revenue is being collected at a rate to meet the budgeted
figures. The large increases experienced last fiscal were primarily the result of the collection of
the large delinquent balance from the previous 3rd party provider. Now that many of the delinquent
balances have been collected, collections have stabilized and large growth is not anticipated.
Parks and Recreation Related Fees - The budget for several categories related to facility rentals
and aquatic center use were significantly increased in the 2013 -14 fiscal year as a result of 2012-
13 actual revenues. While the large growth has not continued into 2013 -14, the stability of last
year's growth is being realized and revenues are tracking in -line with the increased projections.
Until fees are increased or the RCRC is re- opened and available for additional facility rentals and
contract classes, Recreation related fees will likely remain stable.
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Building Fees - Building Permit and Plan Check fees are up in comparison to the previous fiscal
year and is a sign of the improved construction industry in the community. A combination of
commercial development and residential infill has provided a boost to these revenues. It's
important to keep in mind that any revenue increases will be partially offset by increased costs for
the review and inspections of permits.
Expenditures
Generally speaking, expenditures in the General Fund are tracking in line with the budget. There
are a few individual items that have been requested for mid -year adjustments along with some
line items that staff will continue to track.
Legal fees related to City Attorney costs are still within the budget; however, due to defense costs
of the lawsuit against the City by Tammy Gong, a budget adjustment may be necessary before
the end of the fiscal year. The 2013 -14 Budget includes $150,000 for attorney fees and through
December the City has spent approximately $112,000. Of this amount, $45,000 is directly related
to the Gong lawsuit.
The expenditure account for audit related fees needs to be increased to cover the Transient
Occupancy Tax Audits. The additional taxes collected as a result of the audit will more than cover
the $42,000 cost of the audit.
On January 28, 2014 the City Council approved the acquisition of two electric hybrid vehicles from
AQMD Funds. A budget amendment of $25,000 is required to increase the original budget from
$50,000 to $75,000. There will still be approximately $100,000 remaining in AQMD funds after
this purchase.
2014 -15 Outlook
Much of the large growth in revenues for the current fiscal year are not expected to continue into
2014 -15. The City's majortax revenue bases (property tax and sales tax) are projected to continue
growth at a slow pace. Property tax revenue increases are a result of two factors: CPI increase
on existing tax bills and increased assessed values from the sale of properties. While the property
sales market in Rosemead continues to remain strong especially on the "residential side, the CPI
increase will only be 0.5 %. It's likely that most of the CPI increase will be offset by pending
assessed valuation appeals from large commercial properties. As a result, any increase in
property tax revenue will need to come from sale of existing properties and the resulting increase
in assessed value.
Sales tax revenues should continue to grow, but with few new retail centers or storefronts
becoming available, the growth will be slow. The opening of the new retail center at Walnut Grove
and Valley Blvd will certainly have a positive impact on revenues; however, due to the timing of
the sales tax reporting and payments, the City will likely only receive 6 months of revenue in the
fiscal year. Other major revenue sources such as TOT, fines, business licenses and fee for use
programs are projected to grow slowly unless fees are increased.
The demand for service from the City's residents and businesses remains high and any increases
to service levels will need to be met with new or increased fees to offset costs. As an example,
transitioning the business license system to updated software that allows for online payments,
renewals and applications is available; however, at a cost of almost $30,000. This increased cost
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would need to be factored in to the business license fees to ensure adequate cost recovery of the
new service. Similar considerations will need to be made for other endeavors like the Wi -Fi project
at City Facilities or new community education and outreach efforts.
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Prepared by:
Matthrw E. Ha kesworth
Assistant City Manager
Attachments: Resolution 2014 -04