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02-07-2006 - 2005/06 Fiscal Year Mid-Year Budget Update• • i City of West Covina 14 - . 1 MEMORANDUM AGENDA Item No.: D. 7ff, Date: February 7, 2006 TO: Andrew G. Pasmant, City Manager and City Council FROM: Tom Bachman, Director Finance Department SUBJECT: 2005-06 FISCAL YEAR MID -YEAR BUDGET UPDATE RECOMMENDATION: It is recommended that: 1. The City Council receives and files the budget update report. 2. Provide direction on the 2006-07 and 2007-08 budget as necessary DISCUSSION: 2005-06 BUDGET MID -YEAR UPDATE The City adopted a General Fund budget for the 2005-06 fiscal year that contained a budget gap of only $56,908. The budget gap had been projected at $7 million at the beginning of the 2005- 06 budget process. A number of measures were taken and certain events occurred during the budget process that resulted in the adopted budget that contained a gap of only $56,908. Reducing the gap was a significant accomplishment and included the following actions and events. • Expenditure reductions totaling $950,000 • Re -amortizing the public safety pension unfunded liability resulting in $810,000 in savings • Property tax revenues growing faster than projected • Investment income increasing due to the run up in short term interest rates • Ambulance transport service in operation for the full fiscal year and increase in fees to bring them in line with county rates • Early repayment of VLF gap loan resulted in one-time revenue of $1.9 million • Implementation of the Sales Tax Reimbursement with the CDC to reimburse City for sales tax revenues pledged to support the CFD bonds generated $1.5 million in annual revenue Since the adoption of the budget in July, the following adjustments have been made to the 2005- 06 General Fund budget. The state in October provided the City with its Property Tax in lieu of VLF allocation for 2005-06. That amount is $719,716 higher than the amount that was included in the budget. Changes on the expenditure side include an additional appropriations of $328,487 necessary to fund the public safety MOU's, $180,000 to fund the Cortez Park walking trail and $10,000 for solar lighting on the City entrance monument signs. These adjustments cause the 2005-06 budget to show a current year surplus of $144,321. When carryovers from the prior year of $368,923 are considered, there is a gap of $224,602. It is expected that revenues such as property tax, property transfer tax, construction tax and building permits will exceed their estimates during the current year and that the General Fund will end up in a surplus position at the end of the year. Attachment 1 to this report provides a summary of General Fund budget with revenues and expenditures through the month of December (50% of the fiscal year). A brief analysis of performance of the major revenues is included with the summary. Expenditures for all departments are in line with budgeted amounts at this point in the fiscal year. • 0 2006-07 and 2007-08 BUDGET —PRELIMINARY OUTLOOK The City will be preparing its first two-year budget for the upcoming 2006-07 and 2007-08 fiscal years. The outlook for these two fiscal years is better than it has been in recent years and is the result of actions taken by the City over the past couple years to reduce expenditures and increase or implement new revenues as well as an improving tax base, most notably property tax. The City was able to produce a near balanced budget for 2005-06 after six consecutive years of adopting gap budgets. While the outlook is more favorable than in the past, the City's ability to produce balanced budgets in the future will rely heavily on its ability to control the growth of expenditures in line with the growth in revenues. The chart below summarizes the "preliminary" outlook for the current year and the two budget years, prior to City Manager line item review. As mentioned above, because it is expected that certain revenues will exceed their budgeted amounts and with expenditures estimated to spend the full appropriation during the year, the 2005-06 fiscal year is estimated to end up with a surplus. The outlook for the two budget years at this early point in the budget process projects a gap of about $400,000 in the first year with the budget being balanced in the second year. Total Revenues % increase Total Expenditures % increase Surplus/(Deficit) Total Fund Balance Available Fund Balance Estimated 2005/06 49,925,865 9.0% 49,637,924 5.8% Preliminary Preliminary 2006/07 50,721,770 1.6% 51,138,725 3.0°/0 2007/08 53,096,261 4.7% 53,086,020 3.8% 287,941 (416,9551 10,241 47.658,448 47,241,493 47,251,735 21,965.757 21.951,859 22,695,262 The following are some of the more significant changes in the upcoming budget that are factored into these preliminary projections. • The VLF gap loan repayment that was a large piece of reducing the gap in the 2005-06 budget was a one-time revenue of $1.9 million in the current year that will not be in future budgets. • The 2006-07 fiscal year will mark the end of the ERAF III shift which was a two-year shift of $1.1 million of City property tax each year to the ERAF fund. The end of this shift will somewhat offset the one time VLF gap loan payment. • Projections 2006-07 for sales tax include amounts for opening of the BKK commercial center, and the Nissan and Audi dealerships. • Interest income will decrease in 2006-07 as the $3.3 million repayment to the City of the advances to the CDC will now start reducing the principal. While principal payments do not show as income to the City, they do increase the available fund balance of the General Fund. • Expenditures have been projected to increase at 3.5% annually over the two-year budget period. • The City is committed to implement the 2.5% @ 55 pension plan for miscellaneous employees effective July 1, 2006. This is estimated to increase pension costs $475,000 in the first year. • Public safety retirement costs which have increased dramatically in recent years are projected to level off in coming years due to changes by Ca1PERS in their methods of amortizing unfunded liabilities and smoothing investment returns. • The debt service on the Civic Center Bonds will increase in 2006-07 by approximately $400,000 as principal payments begin. A copy of 2006-07 and 2007-08 budget calendar is Attachment 3 to this report. Prepared by: To achman Director of Finance Attachments No. 1 2005-06 General Fund Revenue and Expenditure Summary. No. 2 2005-06 Non -General Fund Revenue and Expenditure Summary No. 2 2006-07.Budget Calendar In Attachment 1 Shown below is a summary of the 2005-06 adopted budget with revenues and expenditures through the month of December (50.0% of the year). The $719,716 difference between the original revenue budget and the adopted budget reflects the increase in the Property Tax in lieu of VLF. Certain of the larger revenue sources are running will below the 50% mark due to timing of when revenues are received during the fiscal year. Through the first six months of the year, the major revenue sources (sales tax, property tax, and interest income) appear to be on track with or running ahead of budget estimates. As for the remaining revenue sources, based on the information available at this time, there are no major fluctuations expected from their budgeted amounts. REVENUESOURCE Sales Tax % of Total 21.3% Original Budget 10,375,000 Amended BudgetRemaining 10,375,000 YTD 4,856,702 :. 5,518,298 % 46.8% Sales Tax Compensation Fund 7.0% 3,430,000 3,430,000 0 3,430,000 0.0% Property Tax 25.4% 12,354,600. 13,074,316 2,719,391 10,354,925 20.8% Interest 9.6% 4,684,480 4,684,480 2,080,012 2,604,468 44.4% Franchise Tax 5.7% 2,770,600 2,770,600 100,000 2,67000 3.6% Overhead Chargebacks 6.2% 3,000,000 3,000,000 930,906 2,069,094 31.0% Business License Tax 3.0% 1,450,000 1,450,000 326,461 1,123,539 22.5% Transient Occupancy Tax 1.8% 900,000 900,000 355,734 544,266 39.5% Vehicle In Lieu 5.3% 2,599,035 2,599,035 2,205,588 393,447 84.9% Ambulance Service 3.7% 1,800,000 1,800,000 851,987 948,013 47.3% Other Revenues 6.6% 3,212,141 3,212,141 1,645,822 1,566,319 51.2% Transfers In 4.3% 2,117,750 2,117,750 1,044,612 1,073,138 49.3% Total Revenues 100.0% 48,693,606 49,413,322 17,117,215 32,296,107 34.6% Sales Tax - Although sales tax is at 46.8% through the first six months of the year, this does not include fourth quarter receipts, which is typically the largest quarter, and does not include the sales tax transfer from the Fashion Plaza CFD. Sales tax revenue at this time last year was $4,346,737. Sales tax appears to be on track to meet their budget estimate at this point. Sales Tax Compensation Fund - This revenue source is the one -quarter cent sales tax that is being paid through property tax due to the triple flip. While this revenue source shows zero revenue through December, the City received $1,866,175 in January. This amount also includes the amount of sales tax withheld from the Plaza CFD. This revenue source will be reconciled to actual sales tax withheld in January 2007. Property taxes - Property tax revenues became a much larger share of the City's General Fund revenues as part of the state budget, now making up 25.4% of total revenues. Total property tax revenues now include $6.9 million in supplemental property taxes in lieu of VLF fees and a deduction of $1.1 million for the ERAF III shift. The ERAF III shift ends after this year. Due to the timing of when revenues are received under the new payment schedule, total property taxes are only at 20.8% but should exceed their budget estimate. Interest - Interest income is pretty close to where it should be at this time of the year. $3.3 million (75%) of all interest income in the General Fund comes from loans to the redevelopment agency. Franchise Tax - Franchise tax receipts are only at 3.6% due to the fact that most payments are not required to be made until later in the year. This is consistent with prior years. Overhead Chargebacks - These are budgeted chargebacks to various department and funds that receive external funding. This revenue source should meet its budget projection. Business License Tax - Business license revenues are only at $326,461 (22.5%) due to most revenue from this source being due in January. This amount was $200,600 at this time last year. Transient Occupancy Tax - Transient occupancy taxes are at $355,734 (39.5%) and only include five months for the year. This is slightly below last year's total of $363,895 at the same time of year. Motor Vehicle in -lieu - This revenue source was reduced by approximately 87% as part of the 2004-05 state budget and the revenue loss is replaced with a like amount of property tax revenue. Total revenue to date is 84.9% due to the $1.9 million one-time VLF gap loan repayment that occurred early in the fiscal year. Ambulance Service - 2005-06 is the first full year for the ambulance service. The City instituted higher rates this year in line with those charged by Los Angeles County. Revenues to date are at 47.3% of budget and should end up very close to the budget estimate of $1.8 million Other Revenues - This revenue source contains all other revenues and is at $1,645,822 (51.2%) for the year. This exceeds last year's total of $1,537,679 at the same time of year. Fund Transfers - This revenue source includes transfers from the Traffic Safety, Public Safety Augmentation and West Covina Service Group Funds. This revenue source should end up the year right at its budget estimate. A chart of expenditures for 2005-06 is shown below. EXPENDITURES ity Council % of Total 0.5% Original Budget 219,516 Amended 219,516 108,858 :. 110,658 % 49.6% eneral Administration 2.4% 1,150,999 1,150,999 470,700 680,298 40.9% ity Clerk 1.4% 664,192 665,05 159,014 506,042 23.9% Finance 3.90% 1,898,285 1,933,782 947,061 986,721 - 49.0% Human Resources 1.2% 605,437 677,824 257,901 419,923 38.0% Tanning 1.2% 560,887 585,928 245,216 340,712 41.9% Police Total 45.4% 22,132,996 22,259,833 11,010,688 11,249,145 49.5% Fire 28.8% 14,037,096 14,272,558 7,143,473 71129,085 50.1% Communications 4.3% 2,074,976 2,124,975 953,568 1,171,407 44.9% Public Works 8.4% 4,074,961 4,106,376 1,800,608 2,305,767 43.8% Community Services 1.6% 759,823 760,548 420,096 340,452 55.2% Environmental Management 0.3% 141,346 141,341 60,042 81,298 42.5% Transfers Out 0.9% 430,000 430,000 0 430,000 0.0% Total Operating Budget 48,750,514 49,328,735 23,577,225 25,751,511 47.8% apital Projects Total 0.0% 0 309,188 24,292 284,897 7.9% General Fund Budget Total 100.0% 48,750,514" 49,637,924 23,601,5161 26,036,4071 47.5% Most departments are running below the 50% mark midway through the year due in part to the many position vacancies. • City of West Covina 0 Attachment 2 REVENUE and EXPENDITURES NON -GENERAL FUNDS ONLY As of 12-31-2005 REVENUE EXPENDITURES Adjusted As of 12/31/05 Percent Adjusted As of 12/31/05 Percent FUND# FUND DESCRIPTION Estimate of Budget of FY 05 06 Estimate FY 05-06 Budget SPECIAL REVENUE FUND TYPES ill FEE & CHARGE 1,383,123 589,776 42.6% ::: 1,359,956 596,413 43.9% 116 STATE ASSET FORFEITURES 6,980 56,117 804.0% 67,892 25,892 38.1% 117 DRUG ENFORCEMENT REBATE 4,500 10,171 226.0% 5,918 5,918 100.0% 118 BUSINESS IMPROVEMENT TAX 800 299 37.4% 119 AIR QUALITY IMPROVEMENT TRUST 128,000 83,993 65.6% 199,453 21,536 10.8% 121 PROPOSITION "A" 1,636,458 1,013,214 61.9% :: 1,919,939 608,400 31.7% 122 PROPOSITION "C" 1,345,311 749,255 55.7% ; :c;. 3,052,664 319.333 10.5% 123 TRAFFIC SAFETY 1,350,000 494,780 36.7% z` 1,599,615 724,176 • 45.3% 124 GASOLINE TAX 2,020,000 719,123 35.6%:::: 2,446,631 1,150,289 47.0% 125 TRAFFIC CONGESTION (AB2898) 469,796 139,388 29.7% ::: 465,000 14,003 3.0% 127 POLICE DONATIONS 1,350 2,458 182.1% 5,951 510 8.6% 128 TRANSPORTATION DEV. ACT 56,000 29,426 52.5% 134,515 57.948 43.1 % 129 INTEGRATED WASTE MANAGEMENT 215,327 56,030 26.0% 234,793 118,693 50.6% 131 COMMUNITY DEVEL. BLOCK GRANT 1,883,461 1,648,183 87.5% 3?>? 3,180,623 759,316 23.9% 133 TRAFFIC ENFORCEMENT GRANT 3,113 134 COPS/SCHOOL BASED PARTNERSHIP 4 135 BJA BLOCK GRANT 22 136 COP UHP GRANT 24,160 0.0%::...:.:: 31,097 26,275 84.5% 140 F.A.U./I.S.T.E.A./T21 325,000 0.0% 1573,443 256,791 44.8 % 141 G.R.E.A.T.GRANT 42,750 0.0%< 42,750 42,102 98.5% 142 OCJP DOMESTIC VIOLENCE GRANT 8 143 LA COUNTY PARK BOND 173,979 0.0% 144 TREE FUND 12 2,000 0.0% 145 WASTE MGT ENFORCEMENT - GRANT 18,108 15;827 87.4% !i:''i 18,202 8,093 44.5% 146 SENIOR MEALS PROGRAM 195,920 70,715 36.1% 192,929 89,221 46.2% 148 SCAQMD ELEC. VEH. CORRIDOR GRANT 2,520 0.0 149 USED OIL BLOCK GRANT 54,400 5,203 9.6% 54,855 17,285 31.5% 150 INMATE WELFARE 10,500 9,988 95.1 % :;::;: 18,276 846 4.6% 152 BKK COMMUNITY 221,306 96,707 43.7% 153 PUBLIC SAFETY AUGMENTATION 600,000 265,527 44.3% :; .:::: 732,263 316,250 43.2 % 154 PRIVATE GRANTS 50 155 COPS/SEES 163,000 162,306 99.6% i[Sii 227,447 150,182 66.0% 157 ELECTRIC VEHICLE AQMD MATCH 1 158 C.R.V. / LITTER REMOVAL GRANT 31,000 30,729 99.1 % 32,562 19,040 58.5% 159 SUMMER MEALS PROGRAM 28,525 20,525 72.0% :::: 28,975 20,958 72.3% 169 STATE PARK BOND GRANT 10 51,146 0.0% 181 MAINTENANCE DISTRICT #1 180,185 125,770 69.8% :.... 227,589 93,541 41.1 182 MAINTENANCE DISTRICT #2 87,260 47,836 54.8% 90,298 31,366 34.7% 184 MAINTENANCE DISTRICT #4 1,037,604 427,299 41.2% : 1,034,643 448,010 43.3% 186 MAINTENANCE DISTRICT #6 97,398 41,458 42.6% :::: 126,540 54,795 43.3% 187 MAINTENANCE DISTRICT #7 65,645 36,577 55.7% :::: 126,233 61,274 48.5% 188 CITYWIDE MAINTENANCE DISTRICT 1.351,985 532,244 39.4% ::?:: 1,313,074 593,621 45.2% 189 SEWER MAINTENANCE 1,251,000 529,758 42.3% 1,359,570 527,900 38.8% 190 BUSINESS IMPROVEMENT DISTRICT 86,703 56,833 65.5% :::: 90,749 26,370 29.1% 192 BJA LLEBG 2004 108 24,067 28,663 119.1% 194 OCJP - CLETEP 86 195 BULLET PROOF VEST GRANT 85 2,213 .2,213 100.0% 196 STATE DOMESTIC PREP EQUIP GRANT 18,320 (10,201) 55.7% 197 COPS/SRO 41 198 OTS CSBCC GRANT 21,486 30,064 139.9% 8,840 10,629 120.2% 199 TRANSPORTATION (PROP A) GRANT 287,179 2,394 2,394 100.0% 201 BJA LLEBG 2003 55 203 CHARTER SETTLEMENT FUND 4,294 176,350 26,937 15.3% 204 COPS TECHNOLOGY GRANT 25,991 20,285 78.0% 205 CHARTER PEG FUND 150,000 1,743 1.2%'' 144,188 59,426 41.2% 206 2004 HOMELAND SECURITY GRANT 100,453 58,220 58.0% 207 OTS GRANTS 22,059 0.0% 33 208 JUSTICE ASSISTANCE GRANT 36;646 28,673 782% 209 RIVERS & WATER CONSERVATION 472.342 51,499 10.9% 210 LA COUNTY 5TH DISTRICT GRANT 160,221 0.0% 211 LAND & WATER CONSERVATION 255,073 0.0% 212 ART IN PUBLIC PLACES 57 213 STATE HOMELAND SECURITY GRANT 106.873 0.0% '' ` 106,873 0.0% 214 USDOJ COPS GRANT 98,664 0.0% 98,664 0.0 215 N AZUSA RELINQUISHMENT 4,400,000 64,600 0.0% 16,551,331 12,697,689 76.7%:;:;:;:; 23,142,632 7,561,878 32.7% TOTAL SPE51Ai,1REVE1111t1EFUhETiYPES CAPITAL PROJECT,. FUND TYPE 160 CAPITAL PROJECTS 135,350 11,499,598 1,064,547 9.3% 161 CONSTRUCTION TAX 120,000 113,589 94.7% ::: 426,996 107,409 25.2% 163 PARKS 20,000 10,736 53.7% 96,919 12,639 13.0% 170 PARK DEDICATION FEES "A" 2,523 61,345 394 0.6% 171 PARK DEDICATION FEES "B" 1,146 13,877 1,808 13.0% 172 PARK DEDICATION FEES "C" 937 77,156 10,302 13.4% 173 PARK DEDICATION FEES "D" 56 7,062 0.0% 174 PARK DEDICATION FEES "E" 12.248 638,859 61,897 9.7% 175 PARK DEDICATION FEES "F" 1,045 145,762 8,000 5.5% 176 PARK DEDICATION FEES "G" 7,369 506,306 16,646 3.3% 177 PARK DEDICATION FEES "H" 992 140,000 285.990 204.3% ...... 13.473,880 1,283.644 9.5% TOTALAPtTAL P OJECT�FUND TYPES """ 3, wcbudget \ FINAL 2005-2006 \Quarterly Report - Non GF Rev & Exp FY 05-06 As of 12-31-05 1/31/2006 1 of 2 • City of West Covina 0 . Attachment 2 REVENUE and EXPENDITURES NON -GENERAL FUNDS ONLY As of 12-31-2005 REVENUE EXPENDITURES Adjusted As of 12/31/05 Percent Adjusted As of 12/3l/05 Percent FUND# FUND DESCRIPTION Estimate of Budget of FY 05-06 Estimate FY 05-06 Budget DEBT SERVICES FUND TYPES 300 DEBT SERVICE - CITY 2,473,387 280,903 11.4% 2,466,994 4,359,384 176.7% 2,473,387 3,650,460 147.6%i`.i 2.466,994 4.359.384 176.7% I! PE PROPRIETARY FUND TYPES INTERNAL SERVICEFUND TYPES 360 UNINSURED LOSS CITY PROPERTY 38,811 117,352 35,471 30.2% 361 GENERAL LIABILITY 1,454,952 1,265,833 87.0% > 1,354,950 615,359 45.4% 363 WORKER'S COMPENSATION 1,612,796 1,023,117 63.4% :: 1,616,273 809,941 50.1% 365 FLEET MANAGEMENT 1,024,390 583,193 56.9% ::::: 1,296,910 682,235 52.6% ENTERPRISE FUND TYPES: 375 POLICE SERIVCE GROUP 1,800,000 1,704,749 94.7% 2,351,478 1,251,061 53.2% TOTAL PRSiPRiET�SRY.;FUNd P l 5.892,138 4.615,703 78.3%:i;: 6,736,962 3,394,067 50.4% COMMUNITY DEVELOPMENT COMMISSION CDC CAPITAL PROJECT FUND TYPE., 862 HOUSING SET -ASIDE 3,190,500 653,686 20.5% :::::::::: 3,179,658 2,044,379 64.3% 863 H.O.M.E. PROGRAM - 454 876 MERGED AREA CAPITAL PROJECTS 8,643,200 8,337,060 96.5% :'':: : 5,520,276 1,355,756 24.6% 877 CITYWIDE AREA CAPITAL PROJECTS 635,000 13,376 2.1 % 430,415 79,722 18.5 CDC DEBT SERVICE FUNDS: 853 CFD DEBT SERVICE 4,352,000 1,432,731 32.9% > 4,350,950 3,022,533 69.5% 882 MERGED AREA DEBT SERVICE 13,838,480 5,036,772 36.4% : 13,852,950 3,343,043 24.1 % 883 CITYWIDE AREA DEBT SERVICE 813,500 552;051 1,043,280 47,797 4.6% CDC Fund Transfers In /Transfers Out (6,495,980) 0.0% `?;#> (6,495,980) 0.0% TOTpC CDGinetaftraii ° �� . ` .. __ _ _ •....�::a 24.976,700 16,026,130 64.2%`E``. 21,881,549 9,893,230 45.2% TC)7A1. NON 1 ERA , ;I PiC , , , • • , �� € % 50,033,556 37,275,972 74.5% :::: 67,702,016 26,492,202 39.1 % wcbudget \ FINAL 2005-2006 \Quarterly Report - Non GF Rev & Exp FY 05-06 As of 12-31-05 1/31/2006 2 of 2 i' 9 Attachment 3 OPERATING BUDGET CALENDAR 2006-2007 & 2007-2008 Date Day Description 11/29/2005 Tue. Community services distributes CIP request forms to sports groups & school districts l/l/2006 Tue. CIP request forms due from sports groups & school districts. 2/4/06 Sat. Community services commission CIP sub -committee site review of proposed sports groups CIP projects with public works project manager. 2/7/06 Tues. * 2005-2006 fiscal year mid -year budget update 2/8/06 Wed. Staff budget kick-off meeting with City Manager, department directors & departmental budget coordinators. Calendar, instructions, salary worksheets & forms to be distributed. 2/14/06 Tue. Applications for fiscal year 2006-2007 CDBG public service projects due. 2/21 & Tue./Thur. Joint meetings of the community services & senior commissions to 2/23 review CDBG public service requests. 2/23/06 Thur. City Manager, Assistant City Manager, finance director & requested staff review revised revenue estimates/interfund transfers. 2/27/06 Mon. Personnel estimate forms due to finance (overtime, limited service, etc.) 2/28/06 Tue. CIP requests, suggested funding sources & justifications due to public works analyst. 3/2/06 Thur. CDBG public service projects review/rate by community services & senior commission sub -committee. 3/9/06 Thu. Senior commission recommends CDBG public service project funding. 3/10/06 Fria Departmental budget forms, justifications, & 06-07/07-08 year-end estimates due to finance. 3/10/06 Fri. Grant information due to finance. Public works project manager completes final review & cost estimates of CIP. 3/13-3/31 Finance staff prepares budget pages. 3/14/06 Tue. Community services commission review/rate CIP requests. R I Date Day Description 3/14/06 Tue. Community services commission recommends CDBG public service project funding. 3/17/06 Fri. Department/division narratives including issues, goals & 'workload indicators due to finance. 3/20-5/12 Individual departmental budget meetings with City Manager & finance director to review requests & CIP status. 3/24/06 Fri. C1P fund balances due from finance. 4/4/06 Tue. CDBG public service project funding recommendation to city council. 5/15-5/26 Final budget adjustments. 5/17%06 Wed. City Manager budget message due. 5/30/06 Tue.. Preliminary budget due to city council. 6/1-6/20 TBD * 2006-07 & 2007-08 preliminary budget study session. 6/20/06 Tue. * Budget adoption * Denotes city council participation TBD = to be determined