HomeMy WebLinkAboutItem 4.7 - 1639 Fiscal Year 2016-17 4th Quarter Financial R
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STAFF REPORT
CITY COUNCIL
DATE: October 17, 2017
TO: Honorable Mayor and City Councilmembers
FROM:
Christopher L. Foss, City Manager
SUBJECT:
Fiscal Year 2016-17 4th Quarter Financial Review
Prepared by: Colleen Tribby, Director of Administrative Services
EXECUTIVE SUMMARY:
The City Council will receive a financial report on the fourth quarter of Fiscal Year 2016 -
17 and consider amendments to General Fund reserve designations.
STAFF RECOMMENDATION:
Receive the report and confirm General Fund reserve designations as of June 30, 2017.
FINANCIAL IMPACT:
City Council confirmation of reserve designations will not alter amounts received or
spent, but will allow Staff to close the Fiscal Year 2016 -17 financial books.
Total General Fund reserves are projected at $122.4 million at June 30, 2017, with
$38.0 million in the unassigned cash flow reserve, representing 5.4 months of the Fiscal
Year 2017-18 Adopted Budget. It should be noted that this is above the target of 4.0
months in cash flow reserve, and the City Council has discretion to make additional
reserve designations allowable by the City’s Fund Balance and Reserves Policy. All
balances in other funds are in compliance with the Policy.
DESCRIPTION:
This report transmits the preliminary financial results of the Fiscal Year 2016-17 year-
end, focusing on the General Fund. At this time, the numbers are essentially final, and
though adjustments may happen as the audit is finalized, Staff does not expect
substantial changes from the numbers in this report. The Comprehensive Annual
Financial Report, which will be presented to the City Council at its second meeting in
December 2017, will contain the final audited results.
General Fund Overview
General Fund revenues came in at $84.0 million ($4.1 million over budget) in FY 2016-
17, while expenditures totaled $66.2 million ($4.3 million under budget). Transfers from
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the General Fund to Capital Improvement Project Funds totaled $5.5 million. There was
also a one-time adjustment (a $1.1 million decrease) to accrued expenditures. The
resulting impact on total General Fund Reserves was an increase of $13.2 million, as
shown in Table 1.
Table 1: Total Reserves
FY 2015-16 FY 2016-17
Total Reserves, Beginning of Year $97,706,495 $109,184,026
Total Revenue 82,935,416 83,950,420
Total Expenditures (69,048,878) (66,244,975)
Total Transfers to CIP Projects (2,409,006) (5,542,414)
Adjustment to Accrued Expenditures 1,069,534
Total Reserves, End of Year $109,184,026 $122,416,591
Change $13,232,565
In June 2017, based on estimated revenues and expenditures at that time, the City
Council designated $1.3 million of the estimated year-end surplus to specific Committed
Reserves, and confirmed $7.9 million in allocations to Assigned Reserves (the largest of
which was $5.2 million for the Chevron Debt Payoff). These designations, as well as
reserve allocations for budget carryovers and for set asides required by accounting
rules and/or City policy, have been incorporated into the General Fund Reserve
Balances (Attachment 2). In addition, Staff is recommending the following changes,
which require City Council approval:
1. Within the Committed Reserves category:
a. Increase the Public Safety Reserve by $600,000, for a total of $1.6 million
set aside for future enhancements to Police Services.
b. Increase the Economic Development Reserve by $1 million for a total of
$2 million for future efforts in this area.
c. Increase the Storm Drain Trash Capture Reserve by $243,251 to match
the remaining project budget.
2. Within the Assigned Reserves category:
a. Increase the Catastrophic Loss Reserve by $2,550,000 to account for the
addition of The Wave to the City’s assets. This is based on 15% of the
construction value of $34 million, phased in over two years ($5.1 million
attributed to The Wave by Fiscal Year 2017-18 year end). This reserve
may be adjusted further as the financial books are finalized.
b. Increase the Pension Rate Stabilization Plan Reserve by $500,000, in
addition to the $1.5 million allocated here by the City Council in June.
c. Increase the HVAC Replacement Reserve by $500,000 in addition to the
$500,000 allocated here by the City Council in June. This would bring total
HVAC funding to approximately $2.8 million ($2 million in the General
Fund and $833,000 in the Equipment Replacement Fund).
d. Set up a new Assigned Reserve for Façade Improvement Grants, with
$250,000 from funds that have been budgeted over the last several years
but not yet utilized.
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With approval of the recommendations above, the Unassigned Cash Flow Reserve,
estimated at $38.0 million (or 5.4 months of the Fiscal Year 2017-18 Adopted Budget),
is above the reserve target as provided for in the City Policy. However, Staff is not
recommending any additional allocations from that reserve, pending the City Council’s
strategic planning session scheduled for February 2018 and the recommendations from
the Fiscal Sustainability Task Force, anticipated in early 2018 . The table below
illustrates the General Fund Cash Flow coverage over the last five years.
Table 2: Five-Year General Fund Cash Flow Coverage
The following is a discussion of the major factors in budgetary variances (+/- $250,000)
that occurred in Fiscal Year 2016-17. The General Fund Summary (Attachment 1)
presents this data by major category.
Revenue
Property Tax: $876,848 higher than budget. Property taxes in Fiscal Year 2016-17 saw
an increase in net assessed valuation (AV) by $1.1 billion (9.1%) over the prior year,
which was the second largest percentage growth in Alameda County, after Newark’s
9.8% growth.
Sales Tax: $664,881 lower than budget. While total Sales Tax came in $648,216 (3.2%)
higher than Fiscal Year 2015-16, the growth that was planned for in the budget did not
occur. Specifically, the Autos and Transportation sector grew only 2.4% over the prior
year, adding just $155,815 to Sales Tax revenues, after three years of average annual
growth of 7.8%. Moreover, the majority of the growth in Fiscal Year 2016-17 occurred in
the third quarter of 2016, followed by two quarters of flat revenue, and a final quarter
that reflected a loss of 7.9% ($133,241). The Building and Construction sector also grew
2.4% ($101,231) for the year, compared to 7.0% the prior year. Staff will continue to
closely monitor Sales Tax and adjust the 10-Year Forecast accordingly.
Development Revenue: $1,372,236 higher than budget. Development Permits includes
all permits associated with new development (primarily building permits), as well as
tenant improvements on current structures. Development Services includes fees for City
services provided, most typically Zoning and Plan Checking services. The net increase
in these revenue streams is related to development activity that had been originally
anticipated to occur over the course of the next few fiscal years.
Other Taxes: $969,545 higher than budget. The majority of the increase in this category
comes from an increase in Property Transfer Tax ($464,805), linked to increased home
sales and AV. In addition, hotel occupancy and room rates brought Transient
Occupancy Tax revenue in $198,493 over budget; and Garbage franchise fee revenue
came in $227,372 above budget due to expanded services and the incorporation of the
annual rate adjustment.
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Interest: $446,062 higher than budget. Interest earnings reflect the health of the
economy and the strategies used by Chandler Asset Management in managing the
City’s portfolio.
Charges for Services: $368,858 higher than budget. The City received $289,977 in
revenue above the budgeted amount in reimbursement for services provided by
Alameda County Fire Services at the Santa Rita Jail. The remainder of the variance was
spread across all other revenues in this category, including fire inspection services
and waste management administration fees.
Other Revenue: $391,483 higher than budget. This increase is due primarily to a
$250,000 developer contribution towards the Dublin Historic Park, which was set aside
in the Restricted Reserve for this purpose. General reimbursements from a variety of
sources were also higher than budgeted.
Expenditures
Salaries and Wages: $677,910 lower than budget. Staff costs came in lower than
budgeted due to vacant positions and budgeting practices for new hires.
Benefits: $567,084 lower than budget. This budget variance is due to vacant positions
and the fact that health insurance rates came in $306,419 lower than budgeted in Fisca l
Year 2016-17.
Services and Supplies: $841,587 lower than budget. This variance occurred primarily in
fuel costs, linked to lower gas prices, advertising services for The Wave, and lower
training costs related to vacancies and the timing of new hires. Staff out-of-state travel
during the fourth quarter included the Mayor’s attendance at the US Mayors Conference
in Miami Beach, Florida in June 2017.
Utilities: $450,319 lower than budget. The City realized savings again this year in
both potable and recycled water budgets, and received higher-than-budgeted solar
rebates throughout the year.
Contracted Services: $3,157,618 lower than budget. Of the remaining budgets for
contracted services, $1,193,397 has been carried forward to be utilized in the curre nt
fiscal year. The largest carryover is $612,351 for the true-up of Police Services –
Dispatch costs, which occurs each year after the books are closed.
Contingency: $515,064 lower than budget. This savings resulted from not using Non-
Departmental budgeted contingency funds.
Transfers Out for Capital Improvement Projects
The General Fund transferred out $5.5 million in Fiscal Year 2016-17 for capital project
expenditures, the largest of which was the $3.0 million contribution to The Wave,
followed by $1.8 million for Fallon Sports Park Phase II. Both of those transfers were
covered by Committed Reserves.
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General Fund Reserve Balances
After transfers out to CIP projects, total reserves increased $13.2 million in FY 2016-17.
Table 3 summarizes how those funds are allocated among reserve categories. Some of
the reserve shifts occur for accounting purposes or are dictated by the Fund Balance
and Reserves Policy, while the other shifts are based on City Council approval and/or
Staff recommendation. Attachment 2 provides the detail of these allocations.
Table 3: Summary of Reserve Changes
Summary
As discussed in this report, General Fund surpluses over the last several years have
allowed the City to bolster essential reserves that help the City prep are for unforeseen
events and economic downturns. However, rising contracted service costs,
unsustainable annual growth in ongoing operating revenue (Property Tax and Sales Tax
revenues), and the inevitable decline in development revenue call for increased
vigilance in revising the City’s long-term financial plan. Staff will continue to focus on
providing the City Council with accurate, up-to-date information throughout the budget
year.
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
None.
ATTACHMENTS:
1. General Fund Summary, 4th Quarter 2016-17
2. General Fund Reserves Summary
GENERAL FUND SUMMARY ATTACHMENT 1
FY 2016-17 4TH QUARTER
Actual
2015-16
Adopted
2016-17
Amended
2016-17
Actual
2016-17
$ Change
from Budget
%
Change
$ Change
from PY
%
Change
Revenues
Property Taxes 33,598,601 35,182,061 36,087,937 36,964,785 876,848 2.4%3,366,184 10.0%
Sales Taxes (1)20,938,826 20,666,260 20,666,260 20,001,379 (664,881) -3.2%(937,446) -4.5%
Development Revenue 10,562,963 8,568,899 10,978,502 12,350,738 1,372,236 12.5%1,787,775 16.9%
Other Taxes 6,606,016 5,465,000 5,865,000 6,834,545 969,545 16.5%228,529 3.5%
Licenses & Permits 310,286 292,140 292,140 318,981 26,841 9.2%8,695 2.8%
Fines & Penalties 116,016 109,932 109,932 94,205 (15,727) -14.3%(21,811) -18.8%
Interest Earnings 1,068,351 465,880 840,880 1,286,942 446,062 53.0%218,591 20.5%
Rentals and Leases 1,114,747 1,033,488 1,033,488 1,117,593 84,105 8.1%2,845 0.3%
Intergovernmental 324,075 198,618 198,618 258,508 59,890 30.2%(65,567) -20.2%
Charges for Services 5,396,964 4,838,466 4,905,866 5,274,724 368,858 7.5%(122,240) -2.3%
Community Benefit Payments 424,000 100,000 550,000 699,000 149,000 27.1%275,000 64.9%
Other Revenue 604,944 256,344 519,078 910,561 391,483 75.4%305,617 50.5%
Total Revenues 81,065,789 77,177,088 82,047,701 86,111,961 4,064,259 5.0%5,046,172 6.2%
Unrealized Gains/Losses 1,869,627 (2,161,541)
Total Revenues 82,935,416 77,177,088 82,047,701 83,950,420 1,902,718 2.3%1,015,004 1.2%
Expenditures
Salaries & Wages 9,437,426 11,100,241 11,065,241 10,387,331 (677,910) -6.1%949,905 10.1%
Benefits 4,172,485 5,707,982 5,976,982 5,409,898 (567,084) -9.5%1,237,413 29.7%
Services & Supplies 1,875,458 2,946,394 2,919,392 2,077,805 (841,587) -28.8%202,347 10.8%
Internal Service Fund Charges 2,637,354 3,065,342 3,040,284 3,040,296 12 0.0%402,942 15.3%
Utilities 1,723,204 2,248,261 2,243,857 1,793,538 (450,319) -20.1%70,334 4.1%
Total Contracted Services *39,869,473 43,297,583 45,757,765 42,600,147 (3,157,618) -6.9%2,730,674 6.8%
Capital Outlay 133,477 719,801 1,172,805 935,960 (236,845) -20.2%802,483 601.2%
Contingency - 989,112 515,064 - (515,064) -100.0%-
Subtotal Expenditures 59,848,878 70,074,716 72,691,390 66,244,975 (6,446,415) -8.9%6,396,097 10.7%
Contribution to OPEB/PERS 9,200,000
Total Expenditures 69,048,878 70,074,716 72,691,390 66,244,975 (6,446,415) -8.9%(2,803,903) -4.1%
Operating Impact 13,886,538 7,102,372 9,356,311 17,705,444
One Time Adjustment for Accruals 1,069,534
Transfers Out (2,409,006) (759,510) (9,074,188) (5,542,414)
Impact on Total Reserves 11,477,531 6,342,862 282,123 13,232,565
TOTAL RESERVES 109,184,026 122,416,591
1) FY 2015-16 Sales Tax included a final triple flip payment.
* Contracted Services Detail
Actual
2015-16
Adopted
2016-17
Amended
2016-17
Actual
2016-17
$ Change
from Budget
%
Change
$ Change
from PY
%
Change
Police Services 15,868,735 17,055,970 17,167,881 16,245,666 (922,215) -5.4%376,930 2.4%
Fire Services 11,046,058 11,950,705 11,950,705 11,788,015 (162,690) -1.4%741,957 6.7%
Maintenance Services (MCE)3,997,800 4,296,214 4,611,915 4,484,851 (127,064) -2.8%487,051 12.2%
Development (Reimbursable)2,775,306 2,295,394 2,927,063 2,700,966 (226,097) -7.7%(74,340) -2.7%
Development (Not Reimburseable)1,804,082 2,276,432 4,965,640 4,649,928 (315,712) -6.4%2,845,846 157.7%
Other Contracted Services 4,377,491 5,422,868 4,134,561 2,730,721 (1,403,840) -34.0%(1,646,770) -37.6%
Total Contracted Services 39,869,473 43,297,583 45,757,765 42,600,147 (3,157,618) -6.9%2,730,674 6.8%
GENERAL FUND RESERVES SUMMARY ATTACHMENT 2
FY 2016-17 DESIGNATIONS
Reserve Balances
Actual
2015-16
Increase
2016-17
Decrease
2016-17
NET
CHANGE
Projected
2016-17
Non-Spendable 669,880 - (471,005) (471,005) 198,875
Prepaid Expenses 39,262 - 39,262
Advance to Public Facility Fees - - -
Advance to Fire Impact Fee 80,672 (80,672) (80,672) -
Advance to PERS Side Fund 549,946 (390,333) (390,333) 159,613
Restricted 639,000 1,123,000 - 1,123,000 1,762,000
Heritage Park Maintenance 500,000 250,000 250,000 750,000
Cemetery Endowment 60,000 - 60,000
Developer Contr - Downtown - 873,000 873,000 873,000
Developer Contr - Nature Pk 60,000 - 60,000
Developer Contr - Heritage Pk 19,000 - 19,000
Committed 38,928,756 3,173,924 (5,888,964) (2,715,040) 36,213,716
Economic Stability 8,000,000 - 8,000,000
Public Safety Reserve 1,600,000 1,600,000 1,600,000
Downtown Public Impr 1,000,000 (547,830) (547,830) 452,170
Economic Development 1,000,000 1,000,000 1,000,000 2,000,000
Emergency Communications 741,000 - 741,000
Fire Svcs OPEB 3,004,000 330,672 330,672 3,334,672
Innovations & New Opport 2,122,785 (309,377) (309,377) 1,813,408
One-Time Initiative 1,341,408 - 1,341,408
Specific Committed Reserves
Emerald Glen Aquatic Complex 3,000,000 (3,000,000) (3,000,000) -
Maintenance Facility 215,101 (139,069) (139,069) 76,033
Cemetery Expansion 5,272,210 - 5,272,210
Fallon Sports Park 2,000,000 (1,800,000) (1,800,000) 200,000
Civic Ctr Expansion 27,773 (5,027) (5,027) 22,746
Storm Drain Trash Capture 546,878 243,251 (67,931) 175,320 722,198
Shannon Center Parking Lot 987,410 (19,730) (19,730) 967,680
Utility Undergrounding 1,170,190 - 1,170,190
Advance to Public Facility Fee 6,000,000 - 6,000,000
Dublin Sports Ground 2,500,000 - 2,500,000
Assigned 39,078,695 14,677,696 (3,629,584) 11,048,113 50,126,808
Accrued Leave 988,708 9,527 9,527 998,235
Operating Carryovers 1,612,658 1,240,217 (1,612,658) (372,441) 1,240,217
CIP Carryovers 1,227,829 1,739,331 (1,227,829) 511,502 1,739,331
Non-Streets CIP Commitments 3,879,516 - 3,879,516
Catastrophic Loss 11,368,531 2,550,000 2,550,000 13,918,531
Service Continuity 3,000,000 150,000 150,000 3,150,000
Pension Rate Stabilization Plan 2,000,000 2,000,000 2,000,000
Chevron Debt Payoff 5,238,622 5,238,622 5,238,622
Pension & OPEB 10,614,353 - 10,614,353
Fiscally Responsible Adj 325,000 - 325,000
Municipal Regional Permit 2,250,000 (379,970) (379,970) 1,870,030
HVAC Replacement 1,000,000 1,000,000 1,000,000 2,000,000
Relocate Parks Dept 250,000 - 250,000
Specific Assigned Reserves
Civic Ctr Renovation-Police 1,962,100 - 1,962,100
Façade Improvement Grants 250,000 250,000 250,000
Contribution to ISF 500,000 500,000 500,000
Fire Equipment Replacement 600,000 (409,127) (409,127) 190,873
Unassigned 29,867,695 9,989,553 (5,742,055) 4,247,497 34,115,193
Unassigned-Unrealized Gains (2,197,354) 249,182 (1,912,359) (1,663,177) (3,860,531)
Unassigned (Available)32,065,049 37,975,723
TOTAL RESERVES 109,184,026 28,964,173 (15,731,608) 13,232,565 122,416,590