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CC - Item 6D - Quarterly Interim Financial Update for the Quarter Ending on September 30, 2018ROSEMEAD CITY COUNCIL STAFF REPORT TO: THE HONORABLE MAYOR AND CITY COUNCIL FROM: GLORIA MOLLEDA, CITY MANAGER, I DATE: DECEMEBER 11, 2018 SUBJECT: QUARTERLY INTERIM FINANCIAL UPDATE FOR THE QUARTER ENDING ON SEPTEMBER 30, 2018 SUMMARY The City of Rosemead Quarterly Financial Update for the Quarter that ended on September 30, 2018, is attached for City Council review. The Treasurer's Report of Cash and Investments for the City as of September 30, 2018, is also attached for review. It should be noted, that the annual financial reports for the Fiscal Year that ended on June 30, 2018, are currently being prepared and reviewed by the City's auditor. These reports should be available in early January 2019. 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). FISCAL IMPACT —None STRATEGIC PLAN IMPACT — None PUBLIC NOTICE PROCESS This item has been noticed through the regular agenda notification. process. Prepared by: Pearl Lieu, Finance Director Attachment A: Quarterly Financial Update for the Quarter Ended September 30, 2018 Attachment B: Treasurer's Report of Cash and Investments AGENDA ITEM NO. 6.1) Attachment A City Quarterly Interim Financial Update Q1 City of Rosemead Quarterly Interim Financial Update 2018-19 For the Quarter Ended 9/30/18 With only 25% of the fiscal year completed, major revenues generated from taxes (Property Tax, Sales Tax, Franchise Fee, and Transient Occupancy Tax (TOT)) have not yet been received. Additionally, 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 FUN© General Fund Financial Condition: With only 25% of the year completed, 7.4% of estimated revenues have been collected and that is slightly lower 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, 18% of total appropriations have been spent and that is consistent with a year ago. Top Ten Revenues. The City's top ten revenue sources account for about 92% of total General Fund Revenues. Focusing on these sources can provide a useful understanding of the City's revenue position. Overall, these key revenues are performing as expected for this time of the fiscal year. Property Tax $9,100 - 0% Sales & Use Tax 5,550 470 8% Trans Occu pan cy Tax 2,400 14 0.1% Building Permits 1,680 392 23% Franchise Fees 1,120 - 04'0 instructional Classes 310 62 20% Parking Citations 400 98 25% Public Works Permits 450 118 269/. Business Licenses 220 45 20% Total $21,230 $1,199 69/a Page 1 Attachment A Property Tax. Under Proposition 13, the assessed valuation of properties held by the same owner from year-to-year is adjusted each year by the lesser of 2.0% or the percent change in the California Consumer Price Index (CCPI). For 2018/19 the adjustment factor is 2.0%. Property tax revenues is the City's largest tax source at $9.1 million and makes up approximately 38% of the General Fund revenues. The median sale price of a detached single family residential home in 2018 was $585,000, which is a 17% increase from 2017. The current median home prices are above the pre -recession peak values of $499,000. Rosemead's assessed values and property taxes are expected to continue performing strongly as the general economy improves. Data also show that Rosemead retains $0.0668 for every dollar of property tax collected within the City. Property tax revenues 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: Sales & Use Tax. Sales tax is the second largest revenue source for the General Fund, at $5.6 million and makes up approximately 23% of the General Fund revenues. Our City receives only one cent for every dollar of sales tax collected within the City. The top three sales tax producers are Walmart, Target, and Macys. The opening of Ross and having a full -year operation for Lucille's Smokehouse BBQ has increased sales tax. Sales tax revenues appear to be in- line with our budgeted figures. Transient Occupancy Tax. TOT revenues were budgeted higher than in the prior year because the City projected revenues for the Hartford Hotel based on a full -year operation. Fiscal year 2017/18 TOT revenues exceeded the budget by $127,000. The first quarter TOT revenues are not collected until October; therefore, the low dollar amount reported in the first quarter is expected. The top three TOT producers are Double Tree, Fairfield Inn & Suites, and Motel 6. Building Permits. Building permit revenues were up $412,000 in FY 2017/18 compared to FY 2016/17. The primary reason for this significant increase is the collection of building permits for four mixed-use projects, one residential planned development, and various single-family dwellings in FY 2017/18. Building activity during the first quarter of the year has been steady with a solid mixture of commercial and residential projects; actual revenues collected were 5% more than what was collected in the first quarter of the prior year. This should help continue the positive momentum for the next several months. 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. The City receives franchise payments from five utility companies and two cable TV companies. Additionally, the City receives a franchise payment of a minimum of $125,000 per quarter from our waste hauler. instructional Classes. instructional class revenues are generated from customers who participate in a variety of cultural, physical fitness, self-improvement, and special interest classes taught by contract instructors. The City retains 30% revenue share with contract classes. Revenues are consistent with the prior year and in line with the budget. Attachment A Parking Citations. These fines are collected at the Public Safety Center, through a third party collection service. Collections are up slightly from the previous fiscal year and are in line with the budget. Public Works Permits. Public Works Permit revenues are consistent with the prior year and in line with the budget. Business Licenses. Business license revenues are fees received from applicants in obtaining the business license to operate a business within the City. Revenues are consistent with the prior year and in line with the budget. Expenditures. At 16%, General Fund expenditures are well within budget parameters. It is not uncommon to have first quarter expenditures higher than 25% for Support Services and Parks & Recreation. Insurance premiums were made at the beginning of the fiscal year along with part-time personnel costs for summer programs and aquatics. The following table illustrates expenditures by major category: (Thousands) ... •. $1,103 $162 Staffing $7,118 $1,594 22% Maint, & Operation 15,361 2,097 14% CIP 245 10 4% Total $22,724 $3,701 16% Page 2 Legislative $1,103 $162 15% City Administration 635 110 17% Support Services 2,034 803 39% Public Safety 9,301 815 9% Public Works 4,887 823 17% Parks & Recreation 2,598 617 24% Community Development 1,921 361 19% CIP 245 10 4% Total $22,724 $3,701 16% 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 may show negative balances year to date, they are all within budget parameters. The City budgeted for expenditures to complete CIP carryovers from the prior years. (Thousands) Revenues - $1,229 $0 Expenditures - - Balance, Year -to -Date $1,229 $0 (Thousands) r� Revenues • $1,201 $175 15% Expenditures (711) (71) 10% CIP (981) -- - Balance, Year -to -Date ($491) $104 (Thousands) Revenues $920 $87 9% Expenditures - - - CIP (1,227) - - Balance, Year -to -Date ($307) $87 (Thousands) M. Revenues $2,105 $533 25% Expenditures (1,441) (103) 7% CIP (325) (19) 6% Balance, Year -to -Date $339 $411 (Thousands) •- . i• Revenues $669 $179 27% Expenditures (151) (40) 26% CIP (478) (26) 5% Balance, Year -to -Date $40 $113 (Thousands) Revenues $758 $204 27% Expenditures - - - CIP (693) - Balance, Year -to -Date $65 $204 Page 3 Attachment A (Thousands) . Revenues $950 $0 0% Expenditures (841) (100) 12% CIP (100) (16) 16% Balance, Year -to -Date $9 ($116) (Thousands) l:',+P-ACtUal —Percent Revenues $1,006 $9 0% Expenditures (1,028) (129) 13% Balance, Year -to -Date ($22) ($120) (Thousands) All-ITIL Fund i• Revenues $779 $0 - Expenditures (780) (124) 16% Balance, Year -to -Date ($1) ($124) 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) NI i s 1 s_ - Revenues $452 $113 25% Expenditures (877) (110) 13% Balance, Year -to -Date ($425) $3 OUTLOOK FOR THE FUTURE The City's General Fund revenues are projected to reflect modest increases over the prior fiscal year. The City anticipates an increase in the top four revenues sources as the economy continues to prosper. FY 2017/18 ended on a positive note with revenues exceeding budgeted amounts in several categories, including property taxes, TOT, sales tax, public work permits, and building permits. As a result, it is projected that the City's General fund balance may exceed $19 million at the end of FY 2018/19. Substantial progress was made during FY 2017/18 toward responding to priorities previously identified by the City Council and staff. Some of those accomplishments include the completion of the Zapopan Park, Jay Imperial Park, Hellman/Del Mar intersection improvements, Earle/Wells Street sidewalk installation, pedestrian lighting in Rosemead Park, and improvements to various roadways, sidewalks, parks, storm water, and traffic signal upgrades. Additionally, the City updated their website to enhance the user experience, simplify content management, and provide better information and customer services to residents and businesses. Lastly, the City completed the Garvey Avenue Specific Plan (GASP), which will help revitalize Garvey Avenue and bring more economic development to the area. Future projects that will help generate future revenues include Panda Express and several mixed-use projects including Garvey Earle, Garvey Willard, and The Elements. These mixed-use projects are currently under construction and anticipate a completion date either in late FY 2018/19 or early FY 2019/20. The City also anticipates the Hampton Inn and Suites and several mixed-use projects coming to the City of Rosemead in FY 2019/20. These new businesses will increase our revenues in future years. The City has been proactive on ongoing economic development to generate future revenues to combat increasing future costs and liabilities. Our City and other cities are faced with increasing pension costs. The City's unfunded liability pension obligation is projected to be $28.8 million, with a shortfall of $8.4 million to be paid over 27 years. The City is projecting an annual payment of approximately $1 to $1.6 million for the next 8 years to fund these pension costs. This does not include further potential reduction in discount rate Page 4 Attachment A expectations or change in assumptions; the outer year's pension obligations are uncertain. 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. 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