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File #:
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2019-314
Version:
1
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Name:
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Type:
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Discussion
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Status:
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Agenda Ready
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On agenda:
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4/9/2019
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Final action:
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Title:
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FISCAL YEAR 2018-19 MIDYEAR FINANCIAL REPORT (CITY COUNCIL)
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Report to Mayor and City Council
Tuesday, April 09, 2019
Discussion
SUBJECT:
Title
FISCAL YEAR 2018-19 MIDYEAR FINANCIAL REPORT (CITY COUNCIL)
Body
I. SUMMARY
This item was continued from the March 19, 2019, City Council agenda. The purpose of this report is to provide a Mid-Year update of revenue estimates and expenditure variances. The report also includes mid-year funding requests from departments and the status of the City’s General Fund for the Fiscal Year 2018-19 at the halfway point. The report includes new revenues received, and expenditures approved by the City Council after the adoption of the budget. It also includes budget savings and carry-forwards from prior Fiscal Year 2017-18.
The City began the Fiscal Year 2018-19 with a $27.4 million fund balance. This is $7.6 million higher than originally anticipated. In addition to salary savings, most of the increase is largely attributable to three major items: (1) a $1.6 million in stale deposits that the City moved to General Fund; (2) a one-time $2.5 million settlement payment from Tesoro; and (3) $1.2 million in Measure C revenues where staff only budgeted a projected $266,000.
Forecasting Revenues from the Oil Industry Tax (Measure C) remains a challenge as actual receipts have been significantly lower than originally anticipated. The Oil Industry Tax Accountability Audit process is still underway and Staff anticipates a final audit within the next month or so. The Oil Industry Tax has not solved the City’s budget issues. Staff continues to recommend prudence as the City prepares the Fiscal Year 2019-20 budget. Without significant service reductions, new revenues or the combination of both, the City will maintain its structural General Fund budget deficit for next fiscal year and the revised Five-Year Model predicts budget deficits for the next four years. The City has adopted nine deficit budgets in the last twelve years.
II. RECOMMENDATION
Recommendation
RECEIVE and FILE the Mid-year Budget Report, which includes the 2nd Quarter Update and Vacancy Report.
Body
III. ALTERNATIVES
TAKE another action deemed appropriate by City Council.
IV. BACKGROUND
At the halfway point in Fiscal Year 2018-19 budget the City finds itself in a somewhat stronger position with the General Fund Reserve, due to an increase of beginning fund balance total of $27.4 million (compared to $19.8 million originally budgeted). As of December 31, 2018, revenues totaled $30.1 million, which is 35% of the annual planned revenue (due mainly to timing lags). Expenditures totaled $37.3 million or 42% of originally planned costs.
In viewing the Five-Year Model, the largest single increasing expense facing the City is its payment to CalPERS for employee pensions. Carson’s CalPERS payments are estimated to increase by $2,392,552 next fiscal year, ramping up to an additional annual increase of $5,795,930 (over the current year’s base) by Fiscal Year 2022-23. All CalPERS agencies are facing similar growth in pension costs due to changes in CalPERS’ anticipated rate of return and the requirement to reduce unfunded liabilities. There is no easy solution to this problem for any agency. Because of the significant increase in the budget solely due to PERS costs, Staff recommends caution as it has begun to prepare the Fiscal Year 2019-20 budget.
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FY 17-18 |
FY 18-19 |
FY 19-20 |
FY 20-21 |
FY 21-22 |
FY 22-23 |
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PERS Contributions |
$4,869,400 |
$5,968,035 |
$7,261,952 |
$8,580,793 |
$9,689,494 |
$10,665,336 |
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Increase |
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$1,098,635 |
$2,392,552 |
$3,711,393 |
$4,820,094 |
$5,795,936 |
Adopted & Current Fiscal Year 2018-19 General Fund Budget
The Fiscal Year 2018-19 budget was adopted on July 1, 2018 with projected deficit of $1,879,997 and an estimated General Fund Reserve at year-end (June 30, 2019) of $17.6 million. A summary of the estimated ending General Fund balance compared to the City Council approved budget is as follow:
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FY18-19 Adopted Budget |
FY18-19 Mid-Year Actuals |
FY18-19 YE Forecast |
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Beginning/Fund Balance |
$19,811,555 |
$27,386,187 |
$27,386,187 |
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Revenue |
$86,919,816 |
$30,143,034 |
$86,178,159 |
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Expenditures |
($88,799,813) |
($37,310,578) |
($95,939,900) |
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Net Transfers & Adjustments |
($460,000) |
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Ending Balance |
$17,491,859 |
$20,218,643 |
$17,624,446 |
GFOA (Government Finance Officers Association) recommends, at minimum, that general-purpose governments, regardless of size, maintain unrestricted budgetary fund balance in their General Fund. These best practice policies translate to 17% to 20% of operating expenditures. The minimum calculated operating reserve is $15.4 million (17% of $95,939,900 million expenditures). The estimated ending fund balance at June 30, 2019 of $17.6 million is compliant with the General Fund reserve best practice policy.
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Department Name |
Adopted Budget |
Revised Budget |
Expenses |
Spent |
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City Council |
927,549 |
927,549 |
478,913 |
52% |
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City Attorney |
2,920,000 |
2,920,000 |
1,740,595 |
60% |
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City Clerk |
1,112,767 |
1,199,767 |
409,673 |
34% |
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City Treasurer |
788,874 |
789,374 |
342,329 |
43% |
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City Manager |
4,351,107 |
4,670,757 |
1,733,211 |
37% |
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Public Safety |
24,071,329 |
24,278,260 |
7,934,271 |
33% |
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Finance |
4,085,693 |
4,180,693 |
1,746,250 |
42% |
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Human Resources/Risk Mgmt |
2,597,877 |
2,630,107 |
1,353,311 |
51% |
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Community Development |
7,496,259 |
7,622,634 |
922,810 |
12% |
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Public Works |
16,444,543 |
22,531,369 |
6,778,579 |
30% |
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Community Services |
13,234,510 |
13,420,085 |
5,318,681 |
40% |
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Non-Departmental |
10,769,305 |
10,769,305 |
8,552,053 |
79% |
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Total |
88,799,813 |
95,939,900 |
37,310,578 |
39% |
The City Departments General Fund expenditures budget consists of labor and non-labor components. The overall expenditures finished December at 34% of revised budget two quarters through the year.
Summary Fiscal Year 2018-19 General Fund Revenue
The following chart summarizes prior year actual revenue, current year budget, and updated expectations for General Fund revenue. It should be noted there are a series of non-recurring receipts that have contributed to a significant increase of the General Fund balance when compared to prior estimates.
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FY 17-18 Actuals |
FY 18-19 Adopted Budget |
FY 18-19 Projections |
Variance |
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Sales Tax |
24,439,000 |
24,672,756 |
24,825,099 |
152,343 |
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Property Tax |
7,607,000 |
7,401,445 |
7,261,445 |
(140,000) |
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Property Tax in Lieu of VLF |
7,724,000 |
7,873,445 |
7,743,445 |
(130,000) |
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Franchise Fees |
9,094,860 |
9,948,750 |
9,448,750 |
(500,000) |
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Utility Users Tax (UUT) |
8,129,000 |
7,000,000 |
7,000,000 |
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Building Permits |
6,927,000 |
3,500,000 |
3,500,000 |
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Business License Tax/Fee |
2,916,000 |
2,900,000 |
2,900,000 |
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Transient Occupancy Tax (TOT) |
2,242,000 |
2,150,000 |
2,150,000 |
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Oil Industry Business License Tax |
1,223,000 |
4,700,000 |
4,700,000 |
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Other Revenues |
15,612,000 |
16,773,420 |
16,649,420 |
(124,000) |
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Total General Fund Revenue |
85,914,000 |
86,919,816 |
86,178,159 |
(741,657) |
General Fund revenues for Fiscal Year 2018-19 are projected to total $86.2 million. This includes a $4.7 million estimate of Measure C revenue. The City’s major revenue sources (Sales Tax, Property Tax and Utility Use Tax) represent 55% of the total General Fund revenues. The City utilizes a consultant for sales tax analysis and audit. The consultant has increased its Fiscal Year 2018-19 revenue estimate by $152,343 for continued strong auto sales. A portion of the City’s property tax is based upon the assessed value of oil inventory at the refineries in Carson. Los Angeles County assesses the inventory every January and the price of oil on that assessment date causes some annual fluctuations in the City’s property tax revenue.
As part of franchise fee revenue, the City receives an annual payment from Southern California Edison each April. The Fiscal Year 2018-19 revenue estimate of $1.1 million was based upon actual Fiscal Year 16-17 revenue.
In November 2017, the City’s voters approved an Oil Industry Business License Tax, based upon 0.25% of applicable oil industry gross receipts. The tax went into effect December 1, 2017 and the first payments were due January 30, 2018. As of December 31, 2018, the total Measure C revenue totaled $2,353,442 which is 53% of revised plan ($4.7 million).
Proposed Amendments to General Fund Expenditures
Since the beginning of the fiscal year, departments have requested and City Council has approved budget amendments that added a total of $1,663,604 to the General Fund expenditure budget. The detailed requests and justifications are listed on Exhibit B. Requests are summarized below.
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Restore funding for Annual Parent Conference |
$4,209 |
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GIS Software and Equipment Upgrade |
$7,500 |
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Increased appropriation for Events Services |
$104,000 |
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Ocean Blue damage repair |
$14,634 |
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Environmental resolution no 18-134 |
$23,407 |
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Resolution 18-125 Continuing appropriations for variety of project |
$1,117,337 |
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Medians Maintenance |
$211,032 |
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Administration/Management and Control |
$26,375 |
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Family Support Prevention |
$6,175 |
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Professional Services |
$33,235 |
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Other Miscellaneous Requests |
85,700 |
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Total General Fund Approved Budget Amendments |
$1,663,603 |
Fiscal Year 2018-19 Vacancy Status
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Department |
POSITION TITLE |
FTE |
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City Treasurer |
Deputy City Treasurer |
1.0 |
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CITY MANAGER |
Executive Assistant |
1.0 |
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CITY MANAGER |
Code Enforcement Officer |
1.0 |
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COMMUNITY DEVELOPMENT |
Senior Planner |
1.0 |
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COMMUNITY DEVELOPMENT |
(Senior) Administrative Specialist |
1.0 |
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FINANCE |
Senior Budget Analyst |
1.0 |
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FINANCE |
Accounts Payable Specialist I |
1.0 |
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HUMAN RESOURCES |
Senior Human Resources Analyst |
1.0 |
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HUMAN RESOURCES |
Human Resources Specialist |
1.0 |
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COMMUNITY SERVICES |
Senior Recreation Center Supervisor |
1.0 |
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COMMUNITY SERVICES |
Event Services Supervisor |
1.0 |
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COMMUNITY SERVICES |
Recreation Program Manager |
1.0 |
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COMMUNITY SERVICES |
Human Services Supervisor |
1.0 |
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COMMUNITY SERVICES |
Early Childhood Director |
1.0 |
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COMMUNITY SERVICES |
Early Childhood Instructor |
1.0 |
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COMMUNITY SERVICES |
Human Services Senior Coordinator |
1.0 |
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COMMUNITY SERVICES |
Human Services Assistant Coordinator |
1.0 |
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PUBLIC WORKS |
Right of Way Ops and Maint Superintendent |
1.0 |
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PUBLIC WORKS |
Landscape and Bldg Maint Superintendent |
1.0 |
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PUBLIC WORKS |
Principal Administrative Analyst |
1.0 |
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PUBLIC WORKS |
Construction Inspector |
2.0 |
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PUBLIC WORKS |
Traffic Engineer |
1.0 |
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PUBLIC WORKS |
Engineering & Maintenance Supervisor |
1.0 |
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PUBLIC WORKS |
Engineering Technician |
1.0 |
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PUBLIC WORKS |
Division Secretary |
1.0 |
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PUBLIC WORKS |
Senior Maintenance Worker I |
1.0 |
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TOTAL |
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28.0 |
The City has 26 General Fund citywide vacancies across departments. The City Council will have the opportunity to re-visit staffing budget levels during the fiscal year 2019-20 budget process
V. FISCAL IMPACT
Staff has amended General Fund revenue estimates based on current information. The estimated General Fund balance at June 30, 2019 will be $17,624,446.
VI. EXHIBITS
None
Prepared by: Tarik Rahmani - Director of Finance
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