CC - Item 5A - Quarterly Interim Financial Update for Quarter Ended March 31, 2009ROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCI
FROM: JEFF STEWART, INTERIM CITY MANAGER
DATE: MAY 12, 2009
SUBJECT: QUARTERLY INTERIM FINANCIAL UPDATE FOR THE QUARTER
ENDED MARCH 31, 2009
SUMMARY
Attached is the City of Rosemead Quarterly Financial Update for the Quarter Ended
March 31, 2009 for City Council review. Also, attached to the Quarterly Financial
Update is the treasurer's report of cash balances for the Quarter ended March 31, 2009.
The treasurer's report of cash and investment balances is being presented to City
Council for the first time.
Staff Recommendation
Staff recommends that the City Council receive and file the update report (Attachment
A) and the Treasurer's Report (Attachment B).
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Submitted by:
Steven Brisco
Finance Director
Attachment A: Quarterly Financial Update for the Quarter Ended March 31, 2009
B: Treasurer's Report
APPROVED FOR CITY COUNCIL AGENDA: ITEM NUMBER:
Attachment A
Q3 City of Rosemead
Quarterly Interim Financial Update
2008-°9 For the Quarter Ended March 31, 2009
The purpose of this report is to present a "big
picture" review of the financial progress of the
City through the third quarter of fiscal year
2008-2009. Its focus is general and is intended
to provide general financial information
For the first time ever, the Treasurer's Report
Schedule of Cash and Investments (Treasurer's
Report) is being presented and will become a
regular addition to the Quarterly Interim
Financial Update (Update) report. The
Treasurer's Report is a snapshot view of all cash
and investments for all City funds by institution
as of March 31, 2009. The reporting
requirements of the Treasure's Report are
defined in Section 53646 of the Government
Code. The purpose for adding the Treasurer's
Report to the Update report is to aid in the
overall understanding of the fiscal affairs of the
City. Treasurer's Reports for the Community
Development Commission and the Housing
Development Corporation will be presented in
memo form to the Council Members.
Economic news on the Federal, State and local
level is discouraging. The world is in the grips of
a recession, the State is struggling to grapple
with a projected $42 billion budget shortfall
over the next year and a half and city revenues
are being squeezed to make up for State
shortfalls. In spite of all the bad news, there are
some bright spots in Rosemead. Except for
shortfalls in building permit fees and Vehicle
License Fees most revenues are being received
as expected.
Typical of California city government,
Rosemead's third quarter revenues still appear
low when compared to the budget because of
the timing of revenue receipts. Franchise fees,
property tax in-lieu of sales tax and property tax
in-lieu of motor vehicle license fees are not
received in 12 equal installments, instead
franchise fees are received only once per year in
the fourth quarter of the fiscal year. The two
in-lieu fees just mentioned are very significant
in size and are received in January and May of
each year. Additionally, the last payments for
certain revenues are received after the end of
the fiscal year but are counted (accrued) in the
current fiscal year. An example of accrued
revenue is the Community Development
Commission's revenue which is paid unevenly
by the County from November through August
but all the revenue is included in the current
fiscal year. At the same time, many
expenditures, except for capital outlay and one-
time expenditures for annual insurance
premiums are evenly spent throughout all four
quarters. The effect is for the earliest quarters
of the fiscal year to experience a net loss
condition. However, this is normal and no
cause for alarm.
The focus of this report is on discretionary
funds such as the General Fund, Rosemead
Community Development Commission's funds
and the Rosemead Housing Development
Corporation's funds.
Finances in Brief
General fund revenues (excluding a sales tax
allocation correction by the State) are slightly
below budget expectations and are beginning
to reflect the general state of the economy. For
example, building permit and related revenues
are about 16% below initial expectations as a
result of limited financing opportunities to
developers and individuals alike due to the
struggling economy. Vehicle License Fees are
substantially below expectations and will be
explained later in this report. However, the
Page 1
Attachment A
remainder of the general fund revenues are
expected to finish the year meeting projections.
General Fund expenditures equal 73% of
total appropriations. Spending at that level
provides some savings to offset revenue
shortfalls.
Special revenue funds such as CDBG, HOME,
Gas Tax and Prop A and C have received $3.7
million in revenue through the first three
quarters of the year. The funds expended $2.9
million during the same period. In the case of
CDBG and HOME funds, they must first spend
money before they can be reimbursed by HUD.
Revenues for those two funds are $588
thousand in arrears but requests for
reimbursement have been submitted to HUD
and are expected to be received in the
subsequent quarter.
Community Development Commission (CDC)
funds received $3.5 million of gross property
tax increment payments from Los Angeles
County through March 31, 2009. From that
amount the CDC must transfer 20% to the Low
and Moderate Income Housing Fund, pass-
through payments to the County Fire Protection
District, Rosemead area school districts and L.A.
County for administration fees. CDC
expenditures and transfers totaled $8.4 million
through the end of March. Excess expenditures
were paid with accumulated prior year fund
balances. Cash deficits are primarily due to
timing differences between the times when
cash is needed as opposed to when it is
received.
Rosemead Housing Development Corporation
serves as the legal entity for the City's low
income senior housing apartments. Rents, and
transfers from the Low and Moderate Income
Housing Fund through the third quarter totaled
$464.0 thousand. FY 2007-08 revenues for the
same quarter were approximately the same.
Expenditures and transfers out for three
Page 2
quarters were $708thousand.
General Fund Revenues
$10.5 million or 58.2% of budgeted General
Fund revenues have been collected in through
the first three quarters of the fiscal year (see
Chart 1). While this seems like a small
percentage of the total budgeted revenue, it
must be remembered that significant amounts
of revenues such as franchise fees, property
taxes and property tax in-lieu payments are
received in subsequent quarters.
Taxes. General Fund taxes include Sales Tax,
Property Tax, Taxes In-lieu, Transient
Occupancy Tax and the like. Total taxes, not
including a one-time Sales Tax makeup
payment, is about 6.9% higher than last fiscal
year for the same period. Sales tax, less the
makeup payment, is a mere $8,800 more than
last year at this time, which indicates that
Rosemead is holding up well in the current
recession. If sales in Rosemead continue with
the current trend, it can be expected that Sales
Tax revenue will be on track to meet budget
projections. Property Tax collections except
for property taxes in-lieu are $1.1 million
(58.7%) through the end of the second quarter.
That is almost identical to property tax
collections at this time last year; that is a
remarkable feat in this recessionary economy.
$938 thousand of Transient Occupancy Tax has
been accounted for in this report, a comparable
amount to last year. Just as in the previous two
quarters, revenue collections are slowing
primarily in the development and VLF accounts.
Staff is taking a very cautious approach to
revenue expectations and is contemplating if
and what the appropriate defensive tack should
be for the remainder of the fiscal year.
Vehicle License Fees (VLF). At the end of the
third quarter only 31% or $106 thousand of
Vehicle License Fees have been received. Using
League of California Cities (League) estimates
the City will receive $162 thousand; the
estimated revenue when the budget was
Attachment A
adopted was $340,500. The decline in VLF can
be traced to the following factors:
1. A 10% DECLINE in total VLF collections
over last year;
2. An increase in DMV charges;
3. A change in the formula that takes DMV
charges from the City's share of VLF
revenue collections;
expectations.
Other Revenue. Other General Fund revenues
remain higher than last year due to a one-time
$519 thousand reimbursement from L.A.
County for a special Garvey Center project, as
illustrated by Chart 1.
General Fund Revenues
4. A provision in the Revenue and
Taxation Code that allows the
Legislature to set DMV charges as if the
VLF rate were still at 2%.
The League estimates that VLF revenue to cities
will increase 26% in FY 2009-10.
Licenses and Permits. Building permit and
related revenues have maintained their
underperforming status for the third quarter.
However, some very slight glimmers of a
bottoming out of this recession are beginning to
be reported. Housing sales in April beat
analysts' expectations and remarkably, there
were new housing starts, though not in
Rosemead. Hopefully, that will lead to
increased building activity in the City. Building
permit revenue is $658 thousand or 59.0% of
budgeted revenue. Considering the current
economic conditions it is difficult to believe that
the rate of building permit revenue receipts will
accelerate sufficiently, if at all, in the second
half of the fiscal year to meet annualized
budget expectations. The management team
will consider corrective actions for the
remainder of the fiscal year. Staff will remain
watchful of this revenue source throughout the
year and adjustments to the budget may be
necessary.
Fines & Penalties. Combined receipts from
Court Fines are $333 thousand and are lagging
behind collections for the same period last year.
However, with year-end accruals court fines
revenue are expected to meet budget
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
/31/2009 3/31/2008
03L
Chart 1
General Fund Expenditures
General Fund salary and benefits as well as
maintenance and operations are fairly evenly
paid throughout the year. After completing
75% of the year, 73% of appropriations have
been spent. With the slippage of some revenue
items staff is cautiously watching expenditures.
Capital outlay is for large, one-time items and
they do not track evenly throughout the year.
They are, however, within the budgetary range.
Salary and Benefits. General Fund Salary and
Benefit charges of $4.9 million have declined to
69.7% of the budget for this time of the fiscal
year. It is expected that by the end of the
fiscal year the timing differences will even out
and Salaries and Benefits will conclude the year
within budget plans. (See Chart 2).
Page 3
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Attachment A
Maintenance and Operations. Through three
quarters of the fiscal year, maintenance and
operating expenses totaled $8.6 million or
75.9% of the budget. Some of the more
significant negative variances can be found in
Building Inspections, legal fees and liability
insurance. The combined remainder of
maintenance and operating expenses, including
some one-time expenditures, are being spent in
expected budgetary proportions for the three
quarters just ended. Staff will continue to
monitor Maintenance and Operations
expenditures and make adjustments when
needed.
General Fund Expenditures
($1,000's)
$10,000 - -
$8,000
$6,000
$4,000
$2,000
Capital Outlay. This is an expenditure category
that is characterized by relatively large, one-
time expenditures rather than a smooth even
flow of expenditures throughout the year. In
any quarter expenditures may seem large or
small, however, by the end of the fiscal year,
with careful monitoring, the expenditures
should be in line with the budget. Through the
third quarter of FY 2008-09 $158 thousand has
been spent on park and pool improvements,
the purchase of equipment and office furniture
and the development of the website. The
budget for General Fund capital outlay is $443
thousand including $250 thousand which is
programmed to be transferred into the Capital
Improvement Program Fund for funding of large
projects. With careful monitoring by staff,
expenditures will remain within budgetary
constraints for the year.
■ 3/31/2009 3/31/2008
Chart 2
Community Development Commission
The CDC has received gross property tax
increment payments from L.A. County during
the first three quarters of the fiscal year totaling
$3.5 million. This amount is in line with budget
projections at this time of the fiscal year.
20% of property tax increment must be
transferred to the Low and Moderate Income
Housing Fund when it is received. Low and
Moderate projects have very specific
requirements and are not planned for in the FY
2008-09 budget but will be in future budget
years as specific projects are identified. CDC
expenditures for the first and second quarters
of the year totaled $8.4 million. Expenditures
included: 1) $4.3 million for the purchase of the
Rosemead Inn, 2) $1.7 million for debt service
payments, 3) $1.1 thousand for salaries and
benefits, 4) $726 thousand for fire protection
and administrative fees and 5) $486 thousand
for transfers to the Low and Moderate Income
Housing Fund in the second quarter of fiscal
year 2008-09.
Rosemead Housing Development Corporation
As reported in the first quarter update report
the Garvey and Angelus senior housing project
Page 4
Sal & Bnft Maint & Capital
Opn
Attachment A
finances remain remarkably consistent each
quarter. Each year, to supplement costs, the
Low and Moderate Housing Fund contributes
$250 thousand to the Corporation to assist with
land leases and administrative costs. The
Corporation, in turn, transfers $352 thousand to
the City for payment of land leases and
administrative costs. Staff will be presenting an
analysis of operating costs and revenues under
separate cover which will address, among other
things, the cost of land leases and
administrative costs due to the City. In the FY
2009-10 budget, management team members
will present a plan to address the continuing
deficit in the housing fund. With costs already
held to a bare minimum the management team
will evaluate various options. The following
chart, with combined first through third quarter
data will further illustrate the need to evaluate
the fund:
Rosemead Housing Development Corp.
First and Second Quarters Ended
3/31/2009
recovery will likely be tepid and unemployment
remain high. Obviously, this means that
Rosemead will continue to suffer revenue losses
into the next fiscal year and possibly beyond.
The evidence: Construction in the City has
greatly decreased. On the brighter side, the
League of California Cities analyst Michael
Coleman is projecting a revised formula for
calculating city portions of VLF in FY 2009-10.
Other somewhat improved news includes a
report from payroll processing giant ADP that
the pace of job losses for April is beginning to
slow.
Although there are signs for optimism, we must
also remain vigilant about the City's finances. If
corrections need to be made they must be done
quickly and decisively. The FY 2009-10 budget,
which will soon be presented to the Council, will
also lay the groundwork for a fiscally precarious
year. It is this attention to financial detail that
will lead to Rosemead excellence.
Angelus
Garvey
Rents
108,220
$ 168,331
Low-Mod
transfer
93,750
93,750
Expenditures
(112,773)
(243,376)
Transfer to
City
(169,800)
(181,800)
Income
(loss)
$ (80,603)
$ (163,095)
Chart3
Outlook for the Future
In spite of the downturns in some accounts,
most notably building permit and related
accounts as well as VLF, the outlook for
Rosemead remains remarkably resilient. The
Federal Reserve Chairman recently reported to
Congress that economic growth will likely
resume later this year, but warned that the
Page 5
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