Report to Mayor and City Council
Tuesday, November 17, 2020
Discussion
SUBJECT:
Title
FISCAL YEAR 2020-2021 FIRST QUARTER FINANCIAL REPORT AND CONSIDER ADOPTION OF RESOLUTION NO. 20-172 TO AMEND FISCAL YEAR 2020-2021 BUDGET (CITY COUNCIL).
Body
I. SUMMARY
The Finance Department performs an ongoing review of the City’s financial performance and provides updates on the General Fund results to the Mayor and the City Council. This report presents the City’s financial condition in the current Fiscal Year (2020-2021) based on actual revenue and expenditures for the July 1 through September 30, 2020. In addition, the report includes two funding requests from the Public Works and Public Safety departments.
II. RECOMMENDATION
Recommendation
1. RECEIVE and FILE First Quarter Fiscal Year 2020-2021 Report
2. Adopt Resolution No. 20-172, A RESOLUTION OF THE CITY OF CARSON CITY COUNCIL AMENDING THE FISCAL YEAR 2019-2020 BUDGET IN THE GENERAL FUND.
Body
III. ALTERNATIVES
Take another action deemed appropriate by City Council.
IV. BACKGROUND
Fiscal Year Ended 2019-2020
The City of Carson is projected to end Fiscal Year 2019-2020 with an estimated General Fund Balance Reserve of $39.4 million that includes a budget surplus in excess of $16 million above the City Council’s reserve policy requirements. The audited fund balance will be available upon the completion of the ongoing financial audit, December 30, 2020.
Fund balance is the City’s “reserve”; it provides a measure of the City’s ability to mitigate future risks associated with providing important services in times of economic uncertainties. To provide funding for emergencies, the City Council has adopted a policy that requires fund balance to be maintained at a minimum level equal to 20% of General Fund’s budget. The chart below provides a five year fund balance trend for the General Fund.
1st Quarter Fiscal Year 2020-2021
As of September 30, 2020, fiscal year 2020-2021 expenditures for all departments totaled $12.1 million (or 14% expended). Departments’ annual budgets are not spent evenly throughout the fiscal year. Human Resources and Risk Management department is at 40% of budgeted expenditures due to the annual payment for the Insurance Liability premium in the amount of $684,536 that always occurs in the first quarter of the fiscal year. The City purchases various insurance policies to protect its assets against accidental loss. These include excess liability, property and cyber. The premiums are due and paid at the start of the term (July 1st). Staff projects expenses to be within budget at year end.
|
Department |
Adopted Budget |
Actuals |
Remaining Budget |
% Spent |
|
City Attorney |
$2,920,000 |
$317,613 |
$2,602,387 |
11% |
|
City Clerk |
$1,022,797 |
$118,010 |
$904,786 |
12% |
|
City Council |
$1,220,841 |
$252,964 |
$967,878 |
21% |
|
City Manager |
$4,879,236 |
$780,372 |
$4,098,864 |
16% |
|
City Treasurer |
$745,713 |
$121,314 |
$624,399 |
16% |
|
Community Development |
$6,180,942 |
$518,381 |
$5,662,560 |
8% |
|
Community Services |
$13,532,689 |
$1,888,372 |
$11,644,317 |
14% |
|
Finance |
$4,384,082 |
$747,488 |
$3,636,594 |
17% |
|
Human Resources |
$2,999,196 |
$1,193,021 |
$1,806,175 |
40% |
|
Non-Departmental |
$6,874,984 |
$2,144,866 |
$4,730,118 |
31% |
|
Public Safety |
$25,604,357 |
$675,398 |
$24,928,959 |
3% |
|
Public Works |
$16,731,564 |
$3,363,748 |
$13,367,816 |
20% |
|
Total |
$87,096,399 |
$12,121,548 |
$74,974,852 |
14% |
Vacancies are the largest source of budget underspending. Note that vacancies are constantly changing and certain circumstances could be very different in a matter of days or weeks. The following table summarizes the 33 vacant positions across all departments, which is 10% of total General Fund FTEs. Human Resources department is actively recruiting for a total of 19 positions out of the 33 vacant FTEs.
On June 16th, 2020, as part of the strategy for balancing the City’s budget, staff had recommended a limited hiring freeze at 6% vacancy rate with a projected $2.1 million General Fund savings.
|
Department Name |
Budgeted FTEs |
Vacant FTEs |
Vacancy Rate |
|
Public Works |
130 |
16 |
12% |
|
Community Services |
67 |
6 |
9% |
|
Community Development |
23 |
3 |
14% |
|
Human Resources |
11 |
1 |
9% |
|
Public Safety |
23 |
3 |
13% |
|
Finance |
32 |
2 |
6% |
|
City Manager's Office |
6 |
|
|
|
Information Technology |
8 |
|
|
|
City Clerk's Office |
4 |
|
|
|
City Treasurer's Office |
4 |
1 |
25% |
|
City Council's Office |
5 |
1 |
20% |
|
Public Information Office |
4 |
|
|
|
TOTAL |
317 |
33 |
10% |
General Fund revenues collected through September 30, 2020 are $10 million (or 11% of budget). Revenue receipts for the first quarter do not necessarily provide a “clear” picture of revenue receipts for the fiscal year, as receipts are seasonal with major revenues such as property taxes not being received until December and January. Sales taxes for the July-September quarter are not finalized until end of November. Holiday events such as Black Friday, Cyber Monday and Christmas are all received after to the second quarter of the fiscal year. Business license tax receipts begin in January and peak in February towards the beginning of the annual renewal period.
|
Revenue Source |
Adopted Budget |
Actuals |
% Collected |
|
Property Tax |
$15,547,833 |
|
|
|
Sales Tax |
$23,203,365 |
$2,486,409 |
11% |
|
Utility Users Tax1 |
$7,000,000 |
$1,131,724 |
16% |
|
Transient Occupancy Tax |
$2,150,000 |
$380,626 |
18% |
|
Business License Tax |
$2,933,300 |
$824,557 |
28% |
|
Franchise Tax |
$9,500,000 |
$2,592,918 |
27% |
|
Fines & Forfeitures |
$2,490,800 |
$69,637 |
3% |
|
Charges for Services |
$5,790,430 |
$1,063,310 |
18% |
|
Oil Industry Business Tax |
$4,700,000 |
$456,230 |
10% |
|
Other Revenues |
$13,604,069 |
$971,439 |
7% |
|
Total |
$86,919,797 |
$9,976,850 |
11% |
1The Utility User Tax is set to sunset on June 30, 2023.
City of Carson Measure K:
While the November 3rd, 2020 General Elections votes have not been certified, the City of Carson residents appear to have approved the City’s Measure K that increases the Transaction and Use Tax by ¾ of a cent.
Pursuant to Revenue and Taxation Code Section 7265, the new tax is scheduled to become operative on April 1, 2021. In order for the State of California to implement City of Carson Measure K, the City is required to submit the certification of final election results and other supporting documents to Department of Tax and Fee Administration by January 4, 2021. Staff is working on gathering these documents to meet the State deadline.
The initial revenue forecast (before the COVID-19 pandemic) showed that Measure K would generate approximately $12 million annually to help Carson address important community needs. Due to the ongoing economic impact of the COVID-19 pandemic and the fact that the new tax won’t be operative until April 1, 2020, the updated forecast shows that the City can anticipate approximately $2.4 million for the months of April, May and June 2021.
Staff will present a proposed allocation of the $2.4 million Measure K funding as part of the mid-year budget report that we anticipate to be on the February 16, 2021 City Council agenda.
Proposed Enhanced Sidewalk and Asphalt Repair Program
The Public Works department is requesting the appropriation of an additional $330,000 to enhance the City’s Sidewalk and Asphalt repair programs during the remainder of Fiscal Year 2020-2021. The department is proposing a combined redeployment of City maintenance staff and the addition of supplemental on call services for both Asphalt Repairs and Concrete Grinding. A Mett and Confer has been requested with the required bargaining group regarding the On-Call Service Contract.
The $330,000 proposed budget allocation will help fund the following:
• $30,000 for additional concrete materials for the crews
• $100,000 for on call concrete grinding contract
• $200,000 for the on call contract for asphalt repair
With this strategy, Public Works staff believes the City will be able to jump start the efforts to minimize trip and fall claims, be more responsive to resident complaints and make meaningful progress towards eliminating the majority of the differed sidewalk maintenance and sidewalk needs.
Proposed Public Safety Crime Prevention Security Cameras Upgrade
In 2012, as part of a grant funded project, the City installed a series of cameras and other wireless networking components along Avalon Blvd as a public safety measure. Portions of the system need to be replaced because they are at the end of their useful life and/or non-operational. Staff is looking to make improvements to this system by upgrading the radios at specific intersections and for the system as a whole. The existing pan-tilt-zoom (PTZ) cameras will be inspected, cleaned, and checked for proper functionality; however, it is anticipated that some of the cameras will need to be replaced. An estimated budget of $200,000 is requested at this time to address the system connectivity issues and to replace some of the outdated cameras. It is also worth noting that the City has received a $700,000 Measure M grant to add new cameras and fiber on Carson Street. We are awaiting the funding agreement from LA Metro.
V. FISCAL IMPACT
The City’s budget provides the funding and expenditure plan for all departments. As such, it serves as the City’s financial plan for the fiscal year. If Recommendation #2 is approved, $530,000 would be shifted from reserves to certain accounts in the Public Works and Public Safety budgets as identified in Exhibit A - Resolution No. 20-176. As the funds are expended, one of the resultant benefits will be to reduce accidents that might otherwise occur from differed sidewalk maintenance, which in turn will result in fewer claims against the City. In addition, the funds provided to Public Safety will add an additional crime deterrent element that will offer an enhanced safety benefit to the community.
VI. EXHIBITS
1) Exhibit (A)- Resolution No. 20-176, A RESOLUTION OF THE CITY OF CARSON CITY COUNCIL AMENDING THE FISCAL YEAR 2020-2021 BUDGET IN THE GENERAL FUND.
1)
Prepared by: Tarik Rahmani, Finance Director