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5-18-2021 AGENDA ITEM NO.12 - THIRD QUARTER FINANCIAL REPORT FOR FISCAL YEAR 2020-21AGENDA ITEM NO. 12 AGENDA STAFF REPORT City of West Covina I Office of the City Manager DATE: May 18, 2021 TO: Mayor and City Council FROM: David Carmany City Manager SUBJECT: THIRD QUARTER FINANCIAL REPORT FOR FISCAL YEAR 2020-21 RECOMMENDATION: It is recommended that the City Council take the following actions: 1. Receive and file the Third Quarter Financial Report for Fiscal Year 2020-21; and 2. Adopt the following resolution: RESOLUTION NO.2021-54 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST COVINA, CALIFORNIA, ADOPTING A BUDGET AMENDMENT FOR THE FISCAL YEAR COMMENCING JULY 1, 2020 AND ENDING JUNE 30, 2021 (THIRD QUARTER FINANCIAL REPORT) DISCUSSION: The City of West Covina has completed the third quarter of Fiscal Year 2020-2 1. The attached Quarterly Financial Report summarizes the City's overall financial position for the period of July 1, 2020 through March 31, 2021, but it is not meant to be inclusive of all finance and accounting transactions. While the focus of the report is the General Fund, summary financial information is also provided for the Enterprise Fund (West Covina Service Group) and Special Revenue Funds (i.e. Measure R, Proposition A, etc.). With only 65.3% of the City's General Fund Revenues received by March 31, 2021, the General Fund Revenues are below budget at this time. This is expected, as the City's two largest General Fund revenues (sales and property taxes) are not received on a consistent basis. In fact, most property tax revenues are received in December/January and April/May. As part of the second quarter review, staff reviewed General Fund revenue trends and current available information to provide revised General Fund revenue projections. No new revisions to revenue projections are proposed at this time. However, an increase in transfers is proposed to reflect actuals which increases revenues by $179,544. With 75% of the year completed, a review of the City's General Fund Expenditures by department shows that five of the nine departments are on target with budget projections. The Human Resources budget is at 98.4% of the budgeted amount through March 31, 2021. A budget amendment correcting this was approved with the mid -year report. The Planning Department is slightly over 75%, 78.3% at the end of the quarter, but should be within budget at June 30, 2021. The Fire Department expense is at 93.6% of budget, mainly due to overtime costs that were not budgeted in the 2020-21 budget. A study exploring alternative options for the provision of fire services is underway to provide the City Council with various options. Finally, the Finance Department is 79.9% of budgeted expenditures and is expected to end the year within budget. A study evaluating alternative options for the provision of fire services is underway. The use of overtime is being closely monitored and evaluated by the City Manager and the Finance Director and when the study is complete it will be presented to the City Council for review and direction to resolve this issue. The overtime budgets for the Police and Fire Departments are being reviewed biweekly by City staff. Staff will also provide another update on the overtime for both departments in the Fourth Quarter Financial Report. The City will make the Third Quarter Financial Report available on the City's website for review by the City's stakeholders. LEGAL REVIEW: The City Attorney's Office has reviewed the resolution and approved it as to form. Prepared by: Robbeyn Bird, Finance Director Fiscal Impact FISCAL IMPACT: The proposed budget amendment will increase General Fund estimated revenues by $179,544 and decrease General Fund expenditures by $1,440,015. The net increase in both revenues and expenditures is $1,619,559. Therefore, the General Fund remains in balance for Fiscal Year 2020-21. Proposed General Fund (Fund 110) changes are summarized as follows: 111PORWal Budgeted Revenues 66,672,236 Prior Budget Amendments: 1,485,900 Proposed Third Quarter Budget Adjustments: Transfer In from CIP Fund 179,510 Transfer In from Safer Grant Fund 11 Transfer In from Police Private 23 Grants Fund Original Budgeted Expenditures $66,672,236 Prior Budget Amendments: 3,105,459 Proposed Third Quarter Budget Adjustments: Transfer Out to CIP Fund 4,893,321 CIP Expenses (4,893,321) Transfer Out Prior Year PERS UAL 210,021 Decrease in PERS UAL (1,650,036) It should be noted that General Fund revenues and expenditures for Fiscal Year 2020-21 remain balanced. Proposed changes to other funds are summarized below: Service Park Acquisition Fund Law Enforcement Tobacco Grant Fund ' Debt Service Fund Self Insurance -Uninsured Loss Fund Self Insurance General and Auto Liability Fund Taskforce Regional Auto Theft Prevention Fund Capital Projects Fund Safer Grant Fund Police Private Grants Fund 38,200 15,000 23,200 0 3,560,534 (3,560,534) 0 100 (100) 100 0 100 T10,021 0 210,021 4,893,321 5,072,831 (179,510) 0 �1 (11) 0 23 (23) Attachments Attachment No. 1 — Third Quarter Financial Report for Fiscal Year 20-21 Attachment No. 2 — Resolution No. 2021-54 Exhibit No. 1 - Budget Amendment No. 43 CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability Respond to the Global COVID-19 Pandemic Financial Recovery Plan/Corrective Action CITY OF WEST COVINA ATTACHMENT NO. 1 Fiscal Year 2020-21 The City has completed the third quarter of Fiscal Year 2020-21. This report summarizes the overall financial performance of the City for the period of July 1, 2020 through March 31, 2021, but it is not meant to be inclusive of all finance and accounting transactions. While the focus of the report is the General Fund, summary financial information is also provided for the Enterprise Fund and Special Revenue Funds. The information presented is unaudited. This report is intended only to provide the City Council and the public with an overview of the City's general fiscal condition. The revenue and expenditure budgets per the Budget to Actual comparisons include adjustments for carryovers and any appropriations made as of March 31, 2021. The information presented reports revenues as they are received and expenditures when paid. Revenues and expenditures are only accrued at year end to account for such activity in the correct fiscal year. GENERALFUND The General Fund is the general operating fund for the City. It provides the resources to sustain the day-to- day activities and services to the community. All nine departments receive support, either directly or indirectly, from the General Fund. The General Fund original budget for FY 20-21 was $66,672,236 for revenues and expenditures excluding the payment to CalPERS for the Unfunded Accrued Liability in the amount of $185,582,240 as a result of issuing the Pension Obligation Bonds in July. All General Fund Budget Amendments during the fiscal year have been offset with the annual Unfunded Liability payment that was budgeted in the amount of $11,870,931 to keep the General Fund in balance during the current fiscal year. With 75% of the year complete, General Fund revenues are at 65.3% of budget and expenditures are at 87.9% excluding the budget of the PERS Unfunded Accrued Liability (UAL). General Fund Original Budget to Year -to -Date Actual $80,000,000 $70,000,000 $66,672,236 $66,672,236 $60,000,000 $50,000,000 $43,570,107 $48,165,832 $40,000,000 $30,000,000 $20,000,000 — $10,000,000 - $- — Revenues Expenditures ■ Budget ■ YTD Actual GEN RE NULU AL GET YTD ACTUAL % Property Tax $ 27,386,200 $ 15,066,974 55.0% Sales Tax 15,900,000 10,673,500 67.1% Other Taxes 8,800,700 5,000,386 56.8% Licenses & Permits 1,636,550 1,701,941 104.0% Fines & Forfeitures 588,000 876,147 149.0% Interest & Rents 1,111,054 831,661 74.9% Revenue from other Agencies 2,245,000 2,661,649 118.6% Charges for Services 7,062,139 3,784,716 53.6% Other Revenues 412,500 861,632 208.9% Transfers In 1,530,093 2,111,501 138.0% TOTAL $ 66,672,236 $ 43,570,105 65.3% The City's two major General Fund revenue sources are Property Tax and Sales Tax which make up 65% of the General Fund revenues. • Property Tax: The first major apportionment distribution to the City for FY 2020-21 occurred in December 2020. Also, the revenues received in July and August are for the prior year and accrued as such. Included in this line item are Secured Property Taxes, Property Taxes In -Lieu of Vehicle License Fees (VLF), and residual payments from the dissolution of the former redevelopment agency. City of West Covina Third Quarter Financial Report FY 2020-2021 • Sales Tax: The City received its allocations through January sales tax in March 2021. As of March 31, 2021, the allocation received represents approximately 67% of the total sales tax allocation for the year. The City will continue to receive sales tax allocations with the final quarter allocation distributed by the California State Department of Taxes and Fees Administration (CDTFA) in August 2021. Sales Tax projections were adjusted downward when the budget was prepared. Despite the COVID- 19 pandemic, Sales Tax projections do not need to be adjusted at this time. • Other Taxes: This category includes Franchise Fees, Business License Tax, Transient Occupancy Tax (TOT), and Property Transfer Tax. These revenues are not received evenly throughout the year and with the exception of Transient Occupancy Tax, are expected to be on target by the close of the fiscal year. Transient Occupancy Tax is expected to be down approximately $927,700 or 50% from the original budget projection. This reduction in revenue was addressed with the last budget amendment approved by City Council. • License & Permits: Revenues for licenses & permits include building and engineering permits, and animal licenses. Revenue projections are higher than originally projected mainly due to building activity increases. • Revenues from other Agencies: This category includes Vehicle In -Lieu, State Mandated Cost reimbursement revenue, the exchange of Prop A funds, which are the largest revenue source in this category, and COVID-19 relief funds of $1.3 million that was not budgeted. The Prop A exchange was $300,000 less than budgeted due to declines in anticipated Prop A revenues. The increase in revenue for the COVID-19 relief funds and the decrease in the Prop A exchange funds were part of the second quarter budget amendment approved by City Council. • Charges for Services: These revenues include plan check and zoning related fees, recreation fees, interfund charges, and police and fire fees. These fees are at approximately 53% through the end of March 2021. Due to the COVID-19 pandemic, the City's daycare programs have not been operating and therefore, the City is not collecting revenue for these programs. However, the reduction in revenue for these programs is offset by the reduction in expenditures. Revenue projections were revised with the Second Quarter Report based on revenue trends, and activity to date. No new revisions to revenue projections are proposed at this time. However, an increase in transfers is proposed for the Third Quarter which reflects a total increase in revenues of $179,544. Property Tex $ 27,3N." $ 37,366," $ - $ 37,366,200 40.1% Sees Tax 15,9W," 15,9W,0W 15,9W,W0 23.3% ONer Taxes 6,6007W 7,873,000 7,873,W0 11.5% Licenses & Permits 1,636,5W 116W,5W - 1,636,550 2.4% Fines&Fateitures 566," SBB,OW S ,WO 0.9% Interest & Rents 1,111,054 1,111,054 1,111,054 1.6% Revenue ham Miner Agencies 2,245,M 2,663,8I10 2,663,W0 3.9% ChaMesb Semces 7,062,139 6,9 ,139 6.9 ,139 10.2% Other Revenues 412,500 1,462,5W 1,462,W0 2.2% TrenMers In 1,530,093 2,S ,893 179,5 2,7",437 4.0% TOTAL $ 66,672,236 $ 68,158,135 $ 199,5a4 $ %,337,650 100. As of March 31, 2021, with 75% of the year complete, $48.1 million or 88% of the General Fund budget has been expensed (refer to chart on the next page). Most departments are at or below 75% through the end of the quarter with the exception of Finance, Human Resources, Planning, and Fire. 2 1 P a g e City of West Covina Third Quarter Financial Report FY 2020-2021 BUDGET YTD ACTUAL Administration $ 2,497,876 $ 1,694,371 67.8% CityClerk 612,557 263,564 43.09/6 Finance 1,683,086 1,344,208 79.9% Human Resources 655,931 645,591 98.49/6 Planning 336,434 263,413 78.3% Police 25,151,357 17,925,891 71.3% Fire 15,777,197 14,760,628 93.6% Public Services 5,256,017 2,892,152 55.0 0 communityDevelopment 1,210,528 900,734 74.4% Transfers OWDebt Service 1,620,322 7,475,280 461.3% TOTAL (Excluding PERS UAL) $ 54,801,305 $ 48,165,832 87.9% PERS UAL 11,870,931 - 0.0% TOTAL $66,672,236 $48,165,832 72.2°/0 Overtime expenditures should be 75% of budget based on the number of payrolls for the end of this quarter. The Police Department is trending at approximately 3.5 times over its overtime budget with expenditures over $184,000. The Fire Department overtime expenditures are over budget by approximately $2.4 million excluding mutual aid overtime which is fully reimbursable. Both departments have had numerous cases of positive COVID-19 incidents which has resulted in the increased overtime. At the end of the quarter, five of the nine General Fund department expenditures are at or below 75% of budget, excluding the PERS UAL prepayment. The Human Resources budget is at 98.4% of the original budgeted amount through March 31, 2021. However, a budget amendment correcting this was approved with the Second Quarter Financial Report. The Planning Department is slightly over 75%, 78.3% at the end of the quarter but should be within budget at June 30, 2021. The Fire Department expense is at 93.6% of budget, mainly due to overtime costs that were not budgeted in the 2020-21 budget. A study exploring alternative options for the provision of fire services is underway to provide the City Council with various options. Finally, the Finance department is 79.9% of budgeted expenditures and is expected to end the year within budget. The adopted General Fund budget for FY 2020-21 is $66,672,236 for revenues and expenditures. This reflects a balanced budget with no surplus at July 1, 2020. After adjusting revenues and expenditures to $68,337,680, the revised General Fund budget is projected to remain in balance through the end of this fiscal year. AdmiNsMicn soot $ 2,743,477 $ (246,601) $ 2,497,876 $ - $ 2,497,876 City CIeM 678,360 (65,803) 612,557 612,557 Finance 1,988,537 2,777,589 4,766,126 (1,650,036) 3,116,090 Human Ras es 777,769 378.162 1,155,931 11155,931 Planing 452,364 (115,950) 336AM 336AM Police 31,460,588 (6,606,103) 24sA85 24.854A65 Fire 20,021,267 (2,191,723) 1Z8M9 17.829544 Public Services 5.517.892 68,125 6,576,017 6,576,017 Community Development 1,411,640 96,760 1,507,400 1,507,400 Caplmllmpmwm.m 4,893,321 4,193,321 (1,893,321) Trermiars Oul 1,62g322 4,12],612 5,]48,904 5,193,342 10,851,346 TOTAL $88,872,238 $ 3,105,d59 $89,777,695 $(1,440,015) $68,337,680 The approved budget amendments of $ $3,105,459 include everything approved by City Council through the Second Quarter Budget Amendment (Resolution No. 2020-20), in addition to $1,619,559 under Capital Improvements for repairs at five fire stations (Resolution No. 2021-06). The requested General Fund budget amendment to balance the budget includes the following: 1) $4,893,321 transfer and reduction in expenses to reallocate capital expenditures under the Capital Projects Fund (Fund 160) — the net impact to the General Fund is zero, 2) $210,021 transfer to the Taskforce Regional Auto Theft Prevention Fund (Fund 233) for reimbursement for PERS UAL in prior years, 3) $1,650,036 reduction under Finance in the PERS UAL Payment account to balance the overall fund, 4) $179,510 transfer from the Capital Projects Fund to reimburse prior CIP expenses, and 5) $11 and $23 transfers in from Safer Grant Fund (Fund 133) and Police Private Grants Fund (Fund 221) for prior year interest allocations. The overall net impact of these changes is a positive impact to the General Fund of $1,619,559. 3 1 P a g e City of West Covina Third Quarter Financial Report FY 2020-2021 ENTERPRISE FUND The following table summarizes the revenues and expenditures for the City's Enterprise Fund: 77 ERPRISE F REVENUES BUDGET TIE=AL Police Computer Service Fund I S 1,047,139 1 $ 571,768 1 54.6% ENTERPRISE FUND EXPENDITURES ORIGINAL BUDGET D ACTUAL Police Computer Sendce Fund 1 $ 1,047,198 1 $ 450,724 143.0% The Police Department's Computer Service Group revenues and expenditures are trending within budget. There are not any proposed revisions to this fund. OTHER FUNDS Special Revenue Funds are restricted in their use for specified purposes. Budget versus actual comparisons for both revenue and expenditures for Special Revenue Funds are presented below: REVENU REVENUES BUDGET YTD ACTUAL % Assessment Districts $ 3,880,671 $ 2,435,677 62.8% Sewer Maintenance 3,781,918 2,262,129 59.8% Gas Tax 2,699,744 1,551,118 57.5% Pro A 2,384,800 1,801,802 75.6% Pro C 1,902,586 1,327,828 69.8% Measure R 1,671,988 1,000,171 59.8% Measure M 1,622,051 1,133,325 69.9% Housing Authority 310,000 22,213 0.0% CDBG 847,054 333,101 39.3% Grants 2,733,291 414,949 15.2% OtherSpecial Revenues 3,004,410 1,383,103 46.0% TOTAL $24,838,513 $13,66.1416 55.0% Assessment Districts $ 4,846,628 $ 2,530,230 % 52.2°% Sewer Maintenance 4,144,367 1,486,066 35.9% Gas Tax 2,860,177 1,553,655 54.3% Prop A 2,323,938 1,843,121 79.3% Prop C 2,469,761 1,121,787 45.4% Measure R 2,430,634 637,318 26.2% Measure M 1,006,423 118,822 11.8% Housing Authority 1,283,849 690,325 53.8% CDBG 990,605 376,182 38.0 0 Grants 1,811,173 428,935 23.7% OtherSpecial Revenues 2,869,449 1,351,037 47.1% TOTAL $27,037,004 $12,137,478 44.9% In addition to the amendments being proposed under the General Fund, the following amendments are recommended for other funds: 1) $1,629,548 under the Redevelopment Obligation Retirement Fund (Fund 810) to allocate the transfer made to CFD Debt Service Fund (Fund 853) to cover the bond 2021 payment, 2) $3,900,000 in revenues and $1,549,678 in expenses under the Park Acquisition Fund (Fund 169) for the sale of Sunset Field, 3) $15,000 for Overtime Salaries which are offset by $38,200 in grant revenue under the Law Enforcement Tobacco Grant Fund, 4) $3,560,534 to budget the 2020 Bond interest payment in the Debt Service Fund (Fund 300), and 5) $100 to close out the Self Insurance -Uninsured Loss Fund (Fund 360) into the Self Insurance General and Auto Liability Fund (Fund 361). After the proposed adjustments, the revenues and expenditures for all other funds will be trending within budget. FOR MORE INFORMATION This summary report is derived from detailed financial information generated by the City's Finance Department. Additional financial information is available online at www.westcovina.org. 41Page ATTACHMENT NO.2 RESOLUTION NO.2021-54 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST COVINA, CALIFORNIA, ADOPTING A BUDGET AMENDMENT FOR THE FISCAL YEAR COMMENCING JULY 1, 2020 AND ENDING JUNE 30, 2021(THIRD QUARTER FINANCIAL REPORT) WHEREAS, the City Manager, on or about June 23, 2020, submitted to the City Council a proposed budget for the appropriation and expenditure of funds for the City for West Covina for Fiscal Year 2020-2 1; and WHEREAS, following duly given notice and prior to budget adoption, the City Council held public meetings, considered and evaluated all comments, and adopted a budget for the fiscal year commencing July 1, 2020 and ending June 30, 2021; and WHEREAS, amendments must periodically be made to the budget to conform to changed circumstances following adoption of the budget. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WEST COVINA, CALIFORNIA DOES RESOLVE AS FOLLOWS: SECTION 1. The City Council hereby approves Budget Amendment No. 43, attached hereto as Exhibit No. 1, for Fiscal Year 2020-2 1. SECTION 2. The City Clerk shall certify to the adoption of this resolution and shall enter the same in the book of original resolutions and it shall become effective immediately. APPROVED AND ADOPTED this 18th day of May, 2021. APPROVED AS TO FORM Thomas P. Duarte City Attorney Letty Lopez-Viado Mayor ATTEST Lisa Sherrick Assistant City Clerk I, LISA SHERRICK, Assistant City Clerk of the City of West Covina, California, do hereby certify that the foregoing Resolution No. 2021-54 was duly adopted by the City Council of the City of West Covina, California, at a regular meeting thereof held on the 18th day of May, 2021, by the following vote of the City Council: AYES: NOES: ABSENT: ABSTAIN: Lisa Sherrick Assistant City Clerk EXHIBIT NO. 1 CITY OF WEST COVINA BUDGET AMENDMENT Date: 5/18/2021 Requested by: Robbeyn Bird Dept/Div: Finance EXPENDITURES BA # 043 Posted By: Date Posted: Fiscal Year: 20-21 Amount: 10, 387, 710.00 Description: Quarterly Review 3rd Otr Financial Reoort Account Number Dept/Account Description Current Budget Proposed Amendment dget 110.95.9500.9160 Transfer Out 4,893,321.00 1.00 21030.160.7700 Shadow Oak Park Restrooms 160.80.7004.7700 CIP Parks - 408 600.000.00 N2805162.00 21032.160.7500 Dispatch New Roof 160.80.7001.7500 Buildings - 60 000.000.00 21033.160.7500 EnergyEfficiency Pro'ec 160.80.7001.7500 Buildings 2 805 162.00 21034.160.7500 Fire Bldg Improvements 160.80.7001.7500 Buildings 1,619,559.00 1,619,559.00 21030.110.7700 Shadow Oak Park Restrooms 110.80.7004.7700 CIP Parks 408 600.00 408 600.00 21032.110.7500 Dispatch New Roof 110.80.7001.7500 Buildings 60 000.00 60 000.00 21033.110.7500 Energy Efficiency Pro'ec 110.80.7001.7500 Buildings 2 805 162.00 (2,805,162.00 21034.110.7500 Fire Bldg Improvements 110.80.7001.7500 Buildings 1 619 559.00 (1,619,559.00 110.95.9500.9233 Transfer Out 210 021.00 210 021.00 110.13.1350.5183 PERS UAL Pmt - Safe Misc 3,083,040.00 1 650 036.00 1,433,004.00 160.95.9500.9110 Transfer Out 179 510.00 179 510.00 810.95.9500.9853 Transfer Out 1,629,548.00 1,629,548.00 169.95.9500.9110 Transfer Out 1,034,796.00 1,034,796.00 169.71.5110.6114 Escrow Costs 14 882.00 14 882.00 169.71.5110.6421 Principal Payment 500 000.00 500 000.00 221.95.9500.9110 Transfer Out 23.00 23.00 133.95.9500.9110 Transfer Out 11.00 11.00 238.31.3110.5113 Overtime Salaries 15 000.00 15 000.00 300.13.9000.6420 Bond Interest 1,859,088.00 3,560,534.00 5 419 622.00 360.15.1520.6490 Miscellanous Expenses 100.00 100.00 9 835 449.00 30 387 710.00 20,22 159.00 REVENUES Account Number Account Description Current Budget Proposed Amendment Amended Budget 160.00.9110 Transfer In - 4,893,321.00 4,893,321.00 233.00.9110 Transfer In - 210 021.00 210 021.00 110.00.9160 Transfer In - 179 510.00 179 510.00 853.00.9810 Transfer In - 1,629,548.00 1,629,548.00 169.00.4823 Proceeds From Sale - 3,900,000.00 3,900,000.00 110.00.9221 Transfer In - 23.00 23.00 110.00.9133 Transfer In - 11.00 11.00 238.31.4521 State Grant - 38 200.00 38 200.00 361.15.4818 Miscellanous Revenue - 1o0.00 100.00 10 850 734.00 10 850 734.00 REASON/JUSTIFICATION Please be specific) 3rd Quarter Financial Review APPROVALS City Council Approval Date (if required, attach minutes): Dept Head Approval: Date: Finance Director: Date: Funds Available? n Yes nNo o Approval Not Required City Manager: Date: (if over $100,000) o Approved o Denied