CC - Item 5D - Quarterly Interim Financial Update for The Quarter Ending on Spetmember 30, 2016ROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: BILL R. MANIS, CITY MANAGER i2 o.
DATE: NOVEMBER 8, 2016
SUBJECT: QUARTERLY INTERIM FINANCIAL UPDATE FOR THE QUARTER
ENDING ON SEPTEMBER 30, 2016
SUMMARY
The City of Rosemead Quarterly Financial Update for the Quarter that ended on September 30,
2016, is attached for City Council review. The Treasurer's Report of Cash and Investments for
the City as of September 30, 2016, is also attached for review. It should be noted, that the annual
financial reports for the Fiscal Year that ended on June 30, 2016, are currently being prepared
and reviewed by the City's auditor. These reports should be available in early January 2017.
STAFF RECOMMENDATION
That the City Council receive and file the Financial Update report (Attachment A) and the
Treasurer's Report of Cash and Investments (Attachment B).
STRATEGIC PLAN IMPACT
This item relates to the Strategic Plan's Strategy 5: Finance, Action Item A; to improve
transparency and communication with the public regarding continuous monitoring and internal
controls of City finances.
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Prepared by:
Carolyn A. Chu, Finance Director
ITEM NUMBER: 5 1)
City Council Meeting
November 8, 2016
Page 2 of 2
Attachment A: Quarterly Financial Update for the Quarter Ended September 30, 2016
Attachment B: Treasurer's Report of Cash and Investments
Attachment A
Quarterly Financial Update for the Quarter Ended
September 30, 2016
Attachment A
Q1 City of Rosemead
Quarterly Interim Financial Update
2016 -17 For the Quarter Ended 9/30/16
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, 9.5% of estimated
revenues have been collected and that is
slightly higher than a year ago. All categories
appear to be on target and annual revenues are
expected to meet or exceed expectations. By
the end of this quarter 22% of total
appropriations had been spent and that is
consistent with a year ago.
Top Ten Revenues. The City's top ten revenue
sources for about 90% of total General Fund
Revenues. Focusing on these sources can
provide a useful understanding of the City's
revenue position. Because of the timing and
frequency of certain revenues, such as VLF Tax
In -Lieu, Property Tax 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.
(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
computation. 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 2015/16 Fiscal
Year. This is 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. The
opening of the new Grocery Outlet and the new
Boiling Crab restaurant should help increase
sales tax. Staff has met with our sales tax
consultant and while the early sales tax trends
are somewhat flat, they appear to be in -line
with our budgeted figures. Since the unwinding
of the Triple Flip, those funds that used to be
collected as Property Tax, will now be allocated
as Sales Tax.
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.
Transient Occupancy Tax. Transient Occupancy
Tax (TOT) revenues were budgeted higher than
in the prior year due to the expansion at the
Page 1
VLF Tax In -Lieu
$5,967
-
0%
Sales & Use Tax
5,023
599
12%
Property Tax
2,535
67
3%
Trans Occupancy Tax
1,800
-
0%
Franchise Fees
1,125
-
0%
Building Permits
1,245
548
44%
Public Works Permits
350
132
38%
Parking Citations
380
106
28%
Court Fines
180
15
8%
Interest Earnings
75
4
5%
Total
$18,680
$1,471
8%
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
computation. 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 2015/16 Fiscal
Year. This is 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. The
opening of the new Grocery Outlet and the new
Boiling Crab restaurant should help increase
sales tax. Staff has met with our sales tax
consultant and while the early sales tax trends
are somewhat flat, they appear to be in -line
with our budgeted figures. Since the unwinding
of the Triple Flip, those funds that used to be
collected as Property Tax, will now be allocated
as Sales Tax.
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.
Transient Occupancy Tax. Transient Occupancy
Tax (TOT) revenues were budgeted higher than
in the prior year due to the expansion at the
Page 1
Attachment A
Doubletree Hotel. However, fiscal year 2015/16
TOT revenues exceeded the budget by almost
$270,000. Therefore, due to this significant
increase, this revenue will most likely come in
higher than originally budgeted and a mid year
budget adjustment may be necessary. Third
quarter TOT revenues are earned and reported
in the first quarter but not collected until
October. Therefore, the zero dollar amount in
the first quarter is to be expected. Additional
increases in TOT can be expected once the Qiao
Garden Hotel is completed.
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 also
receives a franchise payment from our waste
hauler of $125,000 per quarter which
significantly strengthens this revenue category.
Property Tax In -Lieu of Sales Tax. Property Tax
In -Lieu of Sales Tax was another piece of the
State's Triple Flip legislation. The final "true -
up" payment was made in July 2016 and this
has ended the triple flip. Please note that this
relates to the property tax in lieu of sales tax
only. Property Tax in lieu of VLF payments will
not be affected, and in fact are constitutionally
protected.
collected at the Public Safety Center, through a
third party collection service and the courts.
Collections are up slightly from the previous
fiscal year and are in line with the budget.
Interest Earnings. Interest earnings is revenue
that is accrued based upon the period it is
earned. While interest rates continue to be at
historic lows and the Local Agency Investment
Fund (LAIF) hovering around 0.60 %, much of
the City's investable cash has been transitioned
into FDIC insured Certificates of Deposit (CDs),
Federal Securities and Agencies and Corprate
Bonds in accordance with our Investment
Policy. 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 remains consistent with the prior
year.
Expenditures. At 22 %, General Fund
expenditures are well 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:
Building Permits. Building Permit revenues are
up $65,000 from the prior year which is a large
increase. The primary reason for this increase is
various mixed use projects and new projects as
well as a sign of the improved construction
industry in the community. Building activity
during the first quarter of the year has been
steady with a solid mixture of commercial and
residential projects. This should help continue
the positive momentum for the next several
months.
Public Works Permits. Public Works Permit
revenues are consistent with the prior year and
in line with the budget.
Parking Citations /Court Fines. These fines are
(Thousands)
-
:.... , .
Staffing
$6,534 $1,581 24%
Maint. & Operating
13,685 3,059 22%
Capital Outlay
- - -
Transfers(Out) — CIP
835 -
Total
$21,054 $4,640 22%
SPECIAL REVENUE FUNDS
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.
While some of the funds show negative
balances year to date, they are all within budget
parameters.
Page 2
Attachment A
(Thousands)
Revenues $908 $5 .60%
Expenditures (908) (99) 11%
Transfers In (Out) - Balance, Year-to-Date $0 $(94)
(Thousands)
arr�r.�art.cm�
ONMUM 01111111111
Revenues
$2,082 $291 14%
Expenditures
(817) (84) 10%
Transfers(Out) - CIP
(1,253) -
Balance,Year -to -Date
$12 $207
(Thousands)
aFFIN :..
Revenues $1,984 $467 24%
Expenditures (1,389) (234) 17%
Transfers(Out) - CIP (60) - -
Balance, Year -to -Date $535 $233
(Thousands)
Revenues $627 $154 25'.
Expenditures (488) (21) 4%
Transfers(Out) - CIP (501) - -
Balance, Year -to -Date ($362) $133
(Thousands)
Revenues $849 $26 3%
Expenditures (778) (104) 13%
Transfers (Out) — CIP (1,105) - -
Balance, Year -to -Date ($1,034) ($78)
ROSEMEAD HOUSING DEVELOPMENT
CORPORATION (RHDC)
As has been discussed in previous Quarterly
Financial Updates, the RHDC funds are
operating at non - sustainable levels. In prior
years, 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 senior
housing complexes into the future.
(Thousands)
Revenues $446 $76 17%
Expenditures (844) (63) 7%
Transfers In (Out)
Balance, Year-to-Date ($398) $13
Page 3
OUTLOOK FOR THE FUTURE
The City's General Fund revenues are projected
to reflect modest increases over the prior fiscal
year. The Qaio Garden Hotel is under
construction and expected to be completed in
2017. The Doubletree Hotel has completed
their expansion which has increased TOT. Along
with this hotel expansion, there is the recent
opening of Ulta, Petsmart, Grocery Outlet and
the Boiling Crab restaurant. All of these are
expected to increase our revenues in the
upcoming fiscal year. We are also anticipating
the opening of a Lucille's BBQ Restaurant. We
do not have an expected completion date yet
on this project, however, the opening of these
new stores as well as the new restaurant
project and the expanded hotel project will
increase both our building permit revenue as
well as our sales tax and TOT revenue. Growth
in sales tax and TOT continue to be the sources
of greatest future opportunity to strengthen the
City's financial status. During 2016/17, the City
will continue to make an investment from its
General Fund reserves for the development of a
Garvey Avenue Corridor Specific Plan and
Environmental Impact Report (EIR) to spur and
guide economic development at key
opportunity sites.
In conclusion, the 2015/16 fiscal year ended on
a positive note with revenues exceeding
budgeted amounts in several categories,
including TOT, sales tax and building permits.
As a result of this , it is projected that the City's
General Fund balance may exceed $17 million
at the end of the 2016/17 fiscal year. In
addition, the City has set aside an additional $3
million in a special trust fund for future retiree
medical insurance obligations.
While the City's General Fund is positive, and
revenues continue to be strong, the long term
growth of expenditures will still likely outpace
the growth in revenues. Therefore, prudent
spending and examining means to generate
additional revenues must continue to be
pursued to ensure the City remains in a positive
financial position.
Attachment B
Treasurer's Report of Cash and Investments
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