Title
Staff Report for MOTION to Accept the Fiscal Year 2020-21 Third Quarter Financial Report as of March 31, 2021
Staffreport
SUMMARY AND RECOMMENDATIONS
MOTION to Accept the Fiscal Year 2020-21 Third Quarter Financial Report as of March 31, 2021.
BACKGROUND
The City Council adopted the Fiscal Year (FY) 2019-20 and 2020-21 General Fund, Enterprise and Internal Service Funds, and the Parking Fund budgets on June 3, 2019. On June 15, 2020, the City Council approved the 2020-21 Amended Budget to incorporating budget adjustments primarily related to COVID-19 impacts. On March 15, 2021, the City Council approved the mid-year operating budget amendment.
The approved budgets are the annual expenditure plan and resource allocation guiding and ensuring implementation of City Council policies and priorities. The budget implements the vision and direction for the broad range of services meeting the needs of the community in accordance with City Council policy.
This financial review as of March 31, 2021 provides the third-quarter budget update to the City Council. Analysis of the revenues collected and all expenditures through March 31, 2021 measures operational adherence to the budgetary allocation plan.
DISCUSSION
The Amended Budget incorporates estimated revenues and planned expenditures for all funds. The attached FY2020-21 Third Quarter Financial Report as of March 31, 2021 provides the revenue and expenditure summary for the General Fund, Enterprise and Internal Service Funds, and the Parking Fund. The following detailed discussion offers comparisons to the prior year and focuses on variances from the revenue and expenditure and allocation plans anticipated in the budget.
General Fund
The General Fund finances the operations of the City having no special or dedicated revenue sources and pays for basic municipal services. The amended FY2020-21 General Fund budget projects revenues totaling $122,073,100 and expenditures totaling $120,668,000, including purchase order encumbrance carryovers from FY2019-20 and approved budget amendments.
Revenue through the first nine-months at $74,078,000 totals 61% of the amended budget, compared to 64% in 2019-20. Expenditures of $72,181,000 amount to 60% of the anticipated total, compared to 59% in 2019-20. Both revenues and expenditures are generally in line with the prior year and expenditures are expected to stay within budget appropriations.
The $1,700,000 reallocated from the Police Department as part of the June 15, 2020 budget amendment may not be spent by the end of the current fiscal year, and funds will be set aside for program distribution in the FY2021-23 budget cycle. Certain purchase orders/encumbrances are expected to remain open (unspent) at year-end resulting in lower than budgeted expenditures. Although not spent, these funds are earmarked for specific projects or programs and not available for reappropriation. Expenditures will continue to be closely monitored throughout the year.
A detailed review of revenue and expenditure variances is presented below.
General Fund Revenue
• Property Tax - (61% of anticipated revenue in the Amended Budget has been collected, compared to 64% in FY2019-20). Property Tax is the City’s second largest revenue source and represents about 21% of the total General Fund’s revenue.
• Sales/Transaction and Use Taxes - (62% of anticipated revenue in the Amended Budget has been collected compared to 62% in FY2019-20). Sales/Transaction Tax’s is budgeted at $600,000 lower than the FY2019-20 budget. Sales and Transaction Taxes are the City’s largest revenue source and represents 36% of total General Fund revenue.
• Property Transfer Taxes - (57% of anticipated revenue in the Amended Budget has been collected compared to 56% in FY2019-20). This tax is highly volatile, relying on changes in property ownership. The increase of $1,100,000 represents both higher home sales activity and the initial impact of Measure VV.
• Utility Users Tax - (69% of anticipated revenue in the Amended Budget has been collected compared to 64% in FY2019-20). Utility Users Tax’s budgeted revenue is projected at $504,000 less than in FY2019-20. However, actual Utility Tax revenue is $253,000 greater than in the same period in FY2019-20. The increase was likely due to greater use of electricity and gas with the emergency stay-at-home orders.
• Business License Tax - (69% of anticipated revenue in the Amended Budget has been collected compared to 85% in FY2019-20). The variance was due to COVID-19 emergency stay-at-home orders leading some businesses to shut during the pandemic. One parking lot operator closed with significant impact on business license revenue.
• Charges for Services - (66% of anticipated revenue in the Amended Budget has been collected compared to 66% in FY2019-20). The budget for FY2020-21 was reduced by $1,700,000 reflecting the impact on Recreation Services and revenues related to COVID-19.
• Interest & Property Income - (93% of anticipated revenue in the Amended Budget has been collected compared to 66% in FY2019-20). The budget for FY2020-21 has been reduced to reflect the decrease in rental income generated by Recreation and Library.
• Intergovernmental - (69% of anticipated revenue in the Amended Budget has been collected compared to 24% in 2019-20). The variance was attributed by the $1,100,000 reimbursement from the Federal CARES Act.
As reported in the attached Third Quarter Financial Report, all other taxes and revenue receipts are relatively in line with budgeted revenues.
General Fund Expenditures
• General Fund, Total Expenditures - (60% of budgeted expenses has been spent compared to 59% in FY2019-20). Nine-month expenditures were $72,181,000, 60% of the amended budget of $120,668,000. General Fund expenditures were $949,000 less compared to the same period last year. All department expenditures remained less than 75% of its annual budget appropriation.
• Fire - (54% of anticipated expenditures in the Amended Budget has been spent compared to 53% in FY2019-20). The $822,000 increase in this year was due to 1) Fire and Emergency Services contract ($584,000) and 2) purchase of a brush truck ($238,000).
• Recreation & Human Services - (50% of anticipated expenditures in the Amended Budget has been spent compared to 65% in FY 2019-20). The decrease in revenues is offset by a decrease in expenditures as fewer recreation programs led to a significant reduction in part-time staffing.
• Engineering and Transportation - (54% of anticipated expenditures in the Amended Budget has been spent compared to 68% in 2019-20). Vacant positions have resulted in significant salary savings.
Enterprise, Internal Service Funds, and Parking Fund
Four Enterprise Funds make up the City's business-type operations. The Water Pollution Control Plant Fund, the Environmental Services Fund, the Shoreline Enterprise Fund, and the Storm Water Fund are City municipal operations designed to fully recover costs through user fees. Internal Service Funds also operate as business activities, exclusively supporting the City's internal operations. Facilities Maintenance, Information Technology, Insurance Services, and Equipment Maintenance make up these Internal Service Funds. The Parking Fund provides for parking meter and parking lot operations and maintenance at the Downtown Parking Structure and has been restructured in the last year to bring expenditures in line with annual revenues.
• Shoreline Enterprise, Revenue & Expenditures- (259% and 112% of budget compared to 71% and 54% in FY2019-20). The increase in revenue and expenditure of $1,700,000 is the result of golf course financial transactions for the first two quarters being recorded during the third quarter. The budget will be updated to reflect the changes to the recently adopted management agreement.
• Parking Fund, Revenue/Expenditures- (29% and 49% of budget compared to 129% and 69% in FY2019-20). The amended budget is $140,000 higher compared to FY2019-20; however, actual revenues were $462,000 lower because of the emergency stay-at-home orders.
ATTACHMENT
2020-21 Third Quarter Financial Report as of March 31, 2021.
PREPARED BY
Karen Chang, Assistant Finance Director