CC - Item 7H - Quarterly Interim Financial Update for the Quarter Ended September 30, 2009y~
ROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: JEFF ALLRED, CITY MANAGER
DATE: NOVEMBER 17, 2009
SUBJECT: QUARTERLY INTERIM FINANCIAL UPDATE FOR THE QUARTER
ENDED SEPTEMBER 30, 2009
SUMMARY
Attached is the City of Rosemead Quarterly Financial Update for the Quarter Ended
September 30, 2009 for City Council review. Also, attached to the Quarterly Financial
Update is the treasurer's report of cash and investment balances at September 30,
2009.
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 September 30, 2009
B: Treasurer's Report
APPROVED FOR CITY COUNCIL AGENDA: ITEM NUMBER:
Attachment A
Q1 City of Rosemead
Quarterly Interim Financial Update
2009-10 For the Quarter Ended 9/30/09
With only the first quarter of the fiscal year
complete, it is too early to identify any major
financial trends. However, there do not appear
to be any significant deviations from revenue
and expenditure patterns for the first quarter of
the fiscal year. A more detailed analysis will be
presented in the mid-year review which will be
presented in February.
While the financial audit for the 2008-09 fiscal
year is not yet complete, we believe the
information presented in this report is
reasonable and not likely to change
significantly.
Special revenue funds such as CDBG, HOME,
Gas Tax and Prop A and C have received $579
thousand in revenue for the quarter. This is
considerably less than the previous year's $1.8
million because the State has deferred payment
of the first quarter's Gas Tax revenue of $253.5
thousand until November. The remaining
difference in FY 2008-09 was the receipt of
Proposition 1B street resurfacing grant
proceeds totaling $924.6 thousand in FY 2008-
09. Special Revenue fund spending in the first
quarter of FY 2009-10 was $523.2 thousand for
operating expenditures and $347.2 for street
resurfacing capital projects.
Finances in Brief
General Fund revenues this quarter are slightly
greater than revenues for the same period last
year, excluding extraordinary items, totaling
$1.4 million in FY 2008-09. However, building
permit revenue is continuing to come in at a
slower pace than last year and some
intergovernmental payments have additional
administrative costs added to them which
reduces the revenue available to the City.
Community Development Commission (CDC)
funds have not received any revenue for the
quarter. Property tax increment payments to
local agencies from the County are scheduled to
begin late in the second quarter (November).
CDC expenditures totaled $441.3 thousand and
consisted primarily of salaries and benefits,
routine maintenance and operating
expenditures as well as interest expense on
existing indebtedness. All expenditures were
paid from cash balances on hand.
Total General Fund expenditures are 19.0% of
the budget for the first quarter. The percentage
of budgeted expenditures is identical to the
same period last year. The budget, which is
10.6% smaller than last year, reflects the
reduced spending plan that correlates to
expected revenue reductions. At 19% of the
budget, actual spending has remained within
budget constraints and is a predictor of future
budget management. The first quarter also
includes only one expenditure for the City's
annual property and liability insurance
premiums of $327 thousand, a 3.8% rate
increase over last year.
Rosemead Housing Development Corporation
(RHDC), which is the legal entity for the City's
low income senior housing apartments,
received revenues, and transfers this quarter
totaling $103.7 thousand. Chart 3 below will
illustrate the details. FY 2007-08 revenues and
expenses for the same quarter' were
approximately the same. The trend of
underperforming revenues and excessive
expenditures continue to plague the RHDC.
Staff will be evaluating various options and will
present them at a future date.
Page 1
Attachment A
General Fund Revenues
Including accrued Transient Occupancy Tax of
$300 thousand, interest earnings of $131
thousand and Cable TV franchise fees of $40
thousand, 9.6% ($1.6 million) of estimated
General Fund revenues have been collected in
the first quarter (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. Taxes include Sales Tax, Property Tax,
Taxes In-lieu, Transient Occupancy Tax and the
like. Sales tax collections for the first quarter of
the fiscal year are 15% of estimated total sales
tax revenue and consists of just one of 12
remittances by the State. This may seem low
but it must be remembered that July and
August remittances are accrued to the prior
fiscal year and by year end all 12 payments will
be accounted for. The City's sales tax
consultant recently reported that the City sales
tax revenue has declined 7.8% from the same
period a year earlier compared to a County
average decline of 16.4%. First quarter FY
2009-10 Property Tax collections are minimal,
at $65.7 thousand, but are 6% more than the
amount collected in the first quarter of FY 2007-
08. Large Property Tax distributions resume in
November. Accrued Transient Occupancy Tax
collections are $300 thousand for the quarter
and are down about $20 thousand from the
same quarter a year ago.
fee (MVLF) collections are also down about 50%
($32.6 thousand) from last year. The decline in
MVLF can be explained by considerable
increases in administrative processing costs
charged by the State and withheld from MVLF
remittances as well as weak automobile sales
activity
Fines & Penalties. Receipts of Court Fines
revenue ($33.7 thousand) has declined from the
same period last year in large part due to less
vehicle code fine tickets being written in the
area surrounding the auto auction, which
ceased operating in February 2009.
Other Revenue. There was an immaterial
variance other revenue reported this quarter
versus a year ago. No significant amounts have
been collected other revenue receipts are
trending in an expected.manner.
- -
General Fund Revenues
$1,400
$1,200
-
$1,000 -
$800
$600
$400 -
$200
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Chart 1
Licenses and Permits. At $6,044, Business
License fees are double the amount collected in
the first quarter of last year. Building Permit
revenue ($161.2 thousand) collected in the first
quarter is about half the amount collected for
the same period a year ago. The weak showing
in building permit is a grim reminder of the
continuing state of lack of construction activity
throughout the Ctiy. Motor Vehicle License
Page 2
General Fund Expenditures
General Fund salary and benefits as well as
maintenance and operations are fairly evenly
paid throughout the year and are tracking
within budgetary ranges for the first quarter of
this fiscal year. Capital outlay is mostly for
Attachment A
large, one-time items and they do not track
evenly throughout the year. They are, however
within the budgetary range at this time as well.
General Fund Expenditures (continued)
Salary and Benefits. General Fund salaries and
benefits totaled $1.4 million (22.6% of
budgeted salaries and benefits) for the first
quarter of FY 2009-10 compared to $1.8 million
for the same period a year ago (see Chart 2). It
is important to recognize that with 25% of the
fiscal year completed salary and benefit
expenditures, at 22.6% of budget, are well
within the budget constraints; what makes it
even more noteworthy is that in the first
quarter seven payrolls were paid instead of the
usual six due to payday timing.
concerning capital outlay expenditures.
Maintenance and Operations. At the close of
the first quarter of FY 2009-10 $1.3 million or
11.6% of the maintenance and operations
budget has been spent. August and September
invoices for the Sheriff's contract totaling
approximately $1 million were received and
paid after the close of the quarter, the same as
in FY 2008-09. If the Sheriff's invoices would
have been paid in the first quarter, instead of
the second quarter, then the expenditures
would have been approximately 20% of the
annual budget. At the current spending pace,
total maintenance and operating expenditures
for the year will remain well within the budget.
Capital Outlay. This is another expenditure
category that is characterized by relatively
large, one-time expenditures rather than a
smooth even flow of expenditures throughout
the year. Accordingly, it may appear that the
first quarter's expenditures are excessively large
or small. However, by the end of the fiscal year
the expenditures should be in line with the
budget. For the first quarter of FY 2009-10, $88
thousand was spent to replace old Public Works
Department trucks. Another $17 thousand was
spent on smaller building improvement
projects. The remaining appropriation of $61
thousand will be spent in subsequent quarters.
There are no other noteworthy items
Chart 2
Community Development Commission
The CDC has received no property tax
increment income during the first quarter. Los
Angeles County (County) will resume Property
Tax Increment distributions in November and
will continue through August 2010. July and
August 2009 property tax increment payments
were accrued in FY 2008-09 and payments
received in July and August 2010 will likewise be
accrued in FY 2009-10. The delay of revenue
distributions by the County until November is
normal. CDC expenditures consisted of $279.5
for salaries and benefits, $131.1 thousand for
interest expense and $30.7 thousand for
operating expenditures. CDC expenditures
were paid with currently held cash. As property
tax increment is received from the County the
cash balance will be replenished.
Rosemead Housing Development
The Garvey and Angelus senior housing project
finances remain remarkably consistent each
quarter. With basically no vacancies and a list
of people waiting to move in when vacancies
occur, the revenues remain constant each
Page 3
Attachment A
quarter. However, as discussed in previous
Quarterly Financial Updates reports, the
operating expenses are creeping up and are
beginning to outpace revenues in the Angelus
complex (Chart 3). Also, maintenance expenses
have been routine in nature but, like any
building, will eventually require expensive
major repairs. Also, as previously reported,
alternative solutions to the growing operating
deficit will be presented for City Council
consideration at subsequent meetings. The
following chart (Chart 3) summarizes the
quarterly financial position of RHDC:
Rosemead Housing Development Corp.
Quarter Ended 9/30/2009
Angelus
Garvey,,-,
Rents
$ 40,412
$ 63,312
Low-Mod
transfer
31,250
31,250
Expenditures
(86,502)
(91,215)
Income
(loss)
$ (14,840)
$ 3,347
Chart 3
Outlook for the Future
in spite of the bad economic news that is
reported in the media on a daily basis, the
outlook for Rosemead remains promising. The
rate of Sales Taxes revenue losses are well
below the County average. The housing market
is less affected in Rosemead than in newer
communities such as in the Inland Empire
because our neighborhoods are established and
do not consist of large new developments that
were purchased at peak housing prices with
sub-prime mortgages.
to work with other local businesses.
Furthermore, Rosemead has two major retailers
that historically do well in slower economic
conditions, Target and Wal-Mart. However, in
the short run Rosemead has had to bear some
of the burden of the State's fiscal woes. The
State continues to look for ways to balance
their own budget at the expense of local
governments; the State plans a large revenue
take from the Community Development
Commission later this year but that is being
contested in the courts and a similar proposal
last year was defeated by the courts. More
administrative costs are being passed on to
cities by both the State and counties and delays
in payments reduce the amount of cash cities
can invest for interest earnings. However,
improved economic news is beginning to
appear in the media, though high
unemployment is expected to continue well
into 2010. Many economists are reporting that
the recession is now over and that the worst
(economic downturn) is behind us.
However, information provided by the City's
financial consultants and professional
associations point to the need to be very
conservative and cautious in our financial
planning over the next few years. Recently, the
League of California Cities published an article
entitled, "Dire Outlook for Future Budgets".
The article quoted Wall Street Journal
columnist, Carol Rodoni, who addressed the
League's annual conference as follows: "I think
we'll be break-even or even see a little growth
in the economy by the end of the year. Even
with an uptick in the economy and what
appears to be growing consumer
confidence... cities should be planning for bad
times when the good times return."
Rosemead has a good blend of businesses and
is not overly dependent on one industry for its
sales tax revenue, such as automobile sales.
The Community Development Department
staff is working to bring in new businesses such
as Fresh and Easy market as well as continuing
By carefully following the Strategic Plan that is
being crafted by the City Council there is every
reason to believe that Rosemead will emerge
from the economic calamity that the entire
world is enduring, without too much pain.
Page 4
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