SCHEDULED PRESENTATIONS Agenda Item No. : 7b CC Mtg. : 5/24/2005

Transcription

1 SCHEDULED PRESENTATINS Agenda Item No. : 7b CC Mtg. : 5/24/2005 DATE : May 13, 2005 T : FRM : SUBJECT : Mayor and City Council Members City Manager's ffice and Finance Department CITY MANAGER'S FISCAL YEAR THIRD QUARTER FINANCIAL REPRT AND STRATEGIC PLAN UPDATE BACKGRUND/ISSUE Section 5.05 R of the Charter of the City of Folsom requires that the City Manager submit to the City Council a financial and management report showing the relationship between budgeted and actual revenues, expenditures and encumbrances on a quarterly basis. This ly Financial Report is an analysis of the financial status of the City's major funds through the third quarter of Fiscal Year , covering the time period of July 2004 through March The City Council also has implemented a strategic planning process to guide budgetary priorities. The quarterly update of the strategic plan is complete and summaries are included in the ly Financial Report. PLICY/RULE Section (b) of the Folsom Municipal Code states ".... within 30 days after the end of each quarter during the fiscal year, and more often if required by the City Council, the City Manager shall submit to the City Council a financial and management report." ANALYSIS The report provides an analysis of the national, state and local economy. It also provides an analysis of each fund's actual revenues, expenditures and fund balance as compared to the FY budget. Tables and graphs have been integrated into the report in order to help illustrate financial performance. Please refer to the Appendix of the report for detailed schedules of the City's key funds for the period ending March 31, 2005, including cumulative fund balances from prior years. The document includes an analysis of the revenue and expenditure activity for the City's : " General Fund " Special Revenue Funds - Development, Redevelopment, Library " Enterprise Funds - Recreation, Water, Sewer, Solid Waste, Transit

2 ATTACHMENT 1. Third Financial Report FY CNCLUSIN Leading economic indicators, a closely watched index forecasting future business activity fell in March, a sign that the nation's economic growth may be slowing. Energy prices are again being blamed for potentially leading the economy into a soft patch. Within California, employment has continued to steadily grow and the unemployment rate has decreased from 6.4% to 5.4% during the same quarter last year. At 5.3%, Folsom's unemployment rate remains in line with national and state rates. The median price of existing single-family detached homes sold in California softened in February to $471,620 from $485,700 in January, according to the California Association of Realtors. Folsom's retail sales remained strong with sales tax revenues increasing 38.1% higher than the same quarter last year, but onetime sales tax payments inflated results. verall, the City's major funds performed as anticipated for the third quarter of Fiscal Year Job growth coupled with continued strong retail sales in the third quarter of 2005 accounted for the overall improved financial condition of the City compared to the third quarter of RECMMENDATIN/ CITY CUNCIL ACTIN It is recommended that City Council receive and file the City Manager's Fiscal Year Third Financial Report and Strategic Plan Report. Respectfully submitted, V1MAIL Martha Clark Lofgren, City Mina er avdeep S Gill, Finance Director

3 Attachment

4 City of Folsom, California Economic Indicators National Economic Indicators : Gross Domestic Product (GDP) Third Financial Report FY 2U4-oS A*3.8% (over prior quarter) 1. Economic Indicators Consumer Price Index 2. Introduction/Summary 43.1% over prior year) =1. Economic verview 10. State Budget Impact Regional Economic Indicators : 1 2. General Fund State's Unemployment Rate 18. Special Revenue Funds - Development, Redevelopment, Library 1.0% (over prior year) 22. Enterprise Funds - Recreation,, Sacramento Region Retail Sales Water, Sewer, Solid waste., Transit % ( over same q uarter last year) Folsom Economic Indictors : Retail Sales 27. Strategic Plan Update 70. Appendix Revenue and Expense Statements The HdL Companies' Folsom' ' Sales Tax Report 438.1% (over same quarter last year - 12/04 Data) Housing Permits 19% (over prior year 459 vs. 565) Martha Clark Lofgren City Manager May 12, 2005 Prepared by the Finance Department

5 Introduction Section 5.05R of the Charter of the City of Folsom requires that the City Manager submit to the City Council a financial and management report showing the relationship between budgeted and actual revenues, expenditures and encumbrances on a quarterly basis. This ly Financial Report is an analysis of the financial status of the City's major funds for the third quarter of Fiscal Year , covering the time period July through March The report provides an analysis of each fund's actual revenues, expenditures and fund balance as compared to the FY Budget. Tables and graphs have been integrated into the report in order to help illustrate financial performance. Please refer to the Appendix for detailed schedules of the City's key funds for the period ending March 31, 2005, including cumulative fund balances from prior years. The document includes an analysis of the revenue and expenditure activity for the City's : " General Fund " Special Revenue Funds - Development, Redevelopment, Library " Enterprise Funds - Recreation, Water, Sewer, Solid Waste, Transit Fund Financial Statements are designed to report information about groupings of related accounts which are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate finance related legal compliance. The City Council also has implemented a strategic planning process to guide budgetary priorities. The Third Summary Update of the Strategic Plan is included in the ly Financial Report. Summary Within the Economic verview section is a discussion of the National, State and City of Folsom's economic situation. Reports from all twelve Federal Reserve Districts indicate that business activity continued to expand from late February through early April. The Twelfth Federal District economy expanded at a solid pace in March and early April. Although it was noted that a slight increase in inflation for final goods and services, due in part to higher energy prices, the pace of inflation reportedly remained modest. Compensation pressures were up slightly, with rising health-care costs and some pickup in demand for skilled workers. Retailers and service providers noted solid demand in recent weeks, and manufacturing activity continued to expand throughout the District. Auto sales continued to be strong overall, although demand reportedly softened somewhat for domestic makes. Residential real estate markets remained robust in March and early April, and conditions improved slightly in commercial real estate markets. The pace of home sales, price appreciation,

6 and home construction remained rapid in most areas. The median price of existing single-family detached homes sold in California softened in February to $471,620 from $485,700 in January, according to the California Association of Realtors. This price is in line with the narrow price range that California home prices have been in since April Diminished home affordability appears to have dampened demand. Despite stillfavorable home mortgage rates, sales of existing single-family detached California homes slowed in February. Within California, employment has continued to steadily grow and the unemployment rate has decreased from 6.4% to 5.4% during the same quarter last year. At 5.3%, Folsom's unemployment rate remains in line with national and state rates. The City's retail sales remained strong with sales tax revenues increasing 38.1% higher than the same quarter last year, but onetime sales tax payments in the business and industry category inflated results. After adjustments for the previously mentioned one time anomalies, sales grew 15.4% over the same period a year ago. Annual building permits sales were 31 % lower than last year as 185 permits were issued during the third quarter of Fiscal Year versus 270 in the prior year. Cumulative totals for permits totaled 459 through March 31, 2005 versus 565 for the prior year, an overall decline of 106 permits or -18%. verall, the City's major funds performed as anticipated for the third quarter of Fiscal Year The City's combined General Fund revenues through the 3`a quarter 2005 were up 17% or 5.12 million over Expenditures in the third quarter 2005 were up 35% over the third quarter 2004 and were at 75% of budget. Sales tax revenues increased 12% or $1,501,750 due to continued strong retail sales growth and a large onetime use tax payment in the business services sector

7 Third Financial Report FY Economic verview

8 National Economic Growth : After a stellar first quarter, U.S. economic performance appears to be moderating, most likely due to higher energy prices. Motor vehicle sales have slowed and weekly jobless claims have ticked back up a notch. The Producers Price Index (PPI) rose 0.7% which was slightly higher than market expectation. The increase follows a 0.4% gain in February and puts finished goods prices up at a 5.7% annual rate over the past three months. Energy prices, which jumped 3.3% in March, and were up at a 15.9% annual rate in the first quarter, accounted for the majority of the increase. Gasoline prices were the biggest problem in March, climbing 5.3%. The increase followed a 5.2% rise in February and brought the increase in the quarter up to a 26.9% annual rate. The wholesale price of gasoline is currently 31.9% above its year ago level. Excluding food and energy, the PPI rose just 0.1% in March, but still climbed at a stifling 3.7% annual rate in the first quarter. The majority of the damage, however, was done in January, when core finished goods prices rose 0.8%. Employment : Not seasonally adjusted employment was up over 800,000 U.S. Unemployment Rate while the seasonally adjusted employment gain was just 110,000 jobs. Traditionally, March has been a 6.0% difficult month to adjust payrolls 5.5/0 '~- because of the weather and Easter holiday timing. The improvement in 5.0% L jobs remains primarily in the service 4.5% sector. Professional service sectors 4.0%! C7 continue to add jobs with gains in < ~ v ~ N N N N M <t business services education & health o a o a o 0 finance and leisure & hospitality. Manufacturing employment remains weaker than the historical trend as is consistent with the structural change underlying the labor markets. Consumer spending : Retail sales rose 0.3% in March, much less than the ~ GDP and Consumer Spending : Annualized Percent Change by consensus expectation for a 0.8% gain. Excluding motor vehicles and parts, 8.00%, - sales rose a trivial 0.1% Despite the 1 weak showing during March, retail 6.00% +GDP sales are hanging on to strong gains 4.00 ~ over the last several months. Solid 2.00% `` 1-* ~- -rt1,1~ US Consumer sales in January and February helped Spending --,- -,-T-- --~T-. propel the three month moving average 0.00% - of sales to 7.1 % during the first quarter. -Z.oo~c; ~ ~ ~ J

9 Business Spending: The National US Index of Leading Indicators and Purchasing Association of Purchasing Management Managementlndex (NAPM) Chicago factor index decreased to 55.2 in March versus a reading of »so ~.,»,r 00 m December. This is not considered a massive decline, and is supportive of the "o " 2 5 ao theory that the economy is slowing not ton collapsing, that we are witnessing the 1 o ~- No T' -- M N M<- « M onset of trend-like economic expansionary = ~; 7~; Z 0 C) C~ 0 growth. nly two of the ten indicators that -Leading Indicators -a-pm Index comprise the leading economic indicator index increased in March. Interest rate spread and manufacturers' new orders for consumer goods were the positive contributors. n the negative side of the index were initial jobless claims, building permits, vendor performance, average weekly manufacturing hours, real money supply, index of consumer expectation, stock prices, and manufacturers' new orders for nondefense capital goods. Construction Spending : Construction Construction Spending '2.096 spending rose 0.4% in February, somewhat lower than expected by ' market participants. February $ 8.0% expenditures were 10% higher than, " year ago levels. Private residential x 2.0% spending was up 0.7% after last 0.0% month's 0.3% increase. The private 2.0% nonresidential sector, which grew a & 1.3% in January, declined by 1.2% in updated 4HA6 February. Private residential expenditures are up 12.1% from a year ago, while private nonresidential spending is 6 higher than last January. Construction spending rose 0.7 % in January. Housing starts improved in the past three months and this could help boost construction expenditures in upcoming months. In addition, we could see increases in nonresidential spending as well. Construction spending has moderated significantly over the past year despite strength in the housing market. Residential construction is not growing as rapidly as it did even though current levels are high. Nonresidential construction has begun to improve, but gains are still modest. Federal Funds Rate Inflation : U.S. consumer prices jumped 0.6 % in 7.00% - -- March, the biggest inflation sure in five 500% - months, as the costs of energy, clothing 4.00% -~ and airline fares all rose sharply. 3.00% % _ Economists said the report was likely to 1.o % raise worries at the Federal Reserve, o.oo% T- T r N N N N M M M M R? < V 47 p p p 9 G U ' G G U q " 7 7 Q

10 which has been gradually raising interest rates, because of price pressures becoming evident outside of the energy area. The Labor Department said last month's increase in the Consumer Price Index, the most closely watched inflation gauge, followed a 0.4 % rise in February and left consumer inflation rising at an annual rate of 4.3 % in the first three months of this year. That was a full %age point above the 3.3 % rise in prices for all of The higher inflation pressures are coming at a time when a number of reports in recent weeks have shown economic weakness, from a disappointing employment rise in March to lower-than-expected retail sales. Economists and the Federal Reserve track the core inflation figure closely, believing it is a better gauge of underlying inflation pressures since the overall price number can swing widely in response to the volatile energy and food components. The 0.4 % rise in the prices outside of food and energy in March followed a 0.3 % increase in February, which had been the first uptick from four straight months of more moderate 0.2 % gains in the core inflation rate. So far this year, the core rate for consumer prices are rising at an annual rate of 3.3 % in the first three months of the year, the fastest quarterly inflation spurt for core prices since the summer of For all of last year, core inflation rose by just 2.2 %. For March, energy costs shot up 4 %, the biggest one-month gain since a similar 4 rise last ctober. Gasoline prices climbed 7.9 %, reflecting the shock motorists have gotten at the pump. There should be a further jump for April given that motorists nationwide are now paying an average of $2.28 per gallon. California Employment Data : California's employment picture improved during the first quarter of The state's unemployment rate fell to 5.4 % in March from a revised 5.8 % in February. This dramatic drop was principally due to an unprecedented 71,000 drop in the number of persons unemployed. This is the largest one-month decline in the current employment series dating back to A good portion of this drop was likely due to the introduction of new methods of counting the unemployed used by the U.S. Bureau of Labor Statistics. The six-county Sacramento Region's job growth remained around the statewide and national averages, showing 1.5 % growth between March 2004 and 2005, or a gain of 13,000 jobs. Looking over the past year, employment growth in the Region has trended relatively flat, averaging about 1.3 %. This is different from the state, the nation, and the Bay Area that demonstrate overall increasing trends over the past year. The Sacramento Region's Government sector posted its first year-over-year employment gain since early This is a positive sign for the Region, and future gains may show that the sector has bottomed out; however, its outlook is uncertain considering the continued state budget issues. Information and Leisure & Hospitality were the only two sectors that experienced job losses over the past year, while Trade, Transportation, & Utilities ; Educational & Health Services ; and Manufacturing

11 provided 80 % of the 12,500 private sector employment increases. There are two interesting things to note regarding the Region's employment gains and losses-the Construction sector, which was regularly at the top of the year-over-year job gain list in the past, has fallen to the middle of the list over the past few months while the Manufacturing, a previous poor performer, has recently moved up the list. Retail sales : Taxable sales remained positive, with an annual increase of 11.36% State-wide. Retail sales continue to show strong growth in suburban communities surrounding Sacramento, Southern California's Inland Empire and the San Joaquin Valley. Housing : The local housing market set records again in March 2005 as the median price of a resale home in Sacramento County rose to a high of $332,000, up 25% from a year ago. Since the county housing market began in 1998 to bounce back from a years-long slump, the median resale price has risen $217,000, or about 189 %, from a median of $115,000 in March Median resale prices hit records or came very close across the entire capital region last month. The price gain from a year ago ranged from 19 % in El Dorado County to 30 % in Yolo County. Folsom Employment Data : Unemployment rates in both Sacramento County (4.9%) and Folsom (5.3%) continued to decline at the end of the third quarter, though still slightly below the statewide rate of 5.4% and in-line with the national rate of 5.2% Unemployment Rate 7.5% l 7.0% -- a-s~asf~ 5.0% 4.5% 4.0% 3.5% 4~ 9 4 ~ 75 a Q ' --~-- US ~ State Sac. County Folsom

12 Retail Sales : Receipts from the Sales Tax Growth comparison holiday resulted in quarterly sales 3rd FY gains of 38.1%, but onetime -- 7S.oox payments in the business and,..00% industry category inflated results. 12 ~' 10.00% - Adjusted for anomalies sales e.oox 00% grew at 15.4% over the same 4.gg,i. period one year ago. Strong sales 2.SU% g.ggx from new car dealers, discount Foleom S.--to, Saeomento Six County County Region State of California department stores and lumberlbuilding material sectors provided big gains. Recent additions to discount department stores, family apparel, radio/appliance store and office supply/furniture sectors along with a 35.5% jump in the City's share of the countywide use tax allocation pool were also key factors in the growth. The graphic above is a comparison of growth in sales tax receipts for the City of Folsom, Sacramento County, the six-county Sacramento Region, and the State of California during the second quarter of Fiscal Year The appendix to this report contains a detailed analysis of the City's sales tax activity for the quarter provided by The HdL Companies. New Construction Building permits are a leading Single Family Residential Building Permits For indicator of new home construction The Nine Month period Ended March 31 activity and subsequent increases - in assessed property values, which 950 translate into increased property tax revenues. verall residential = 550 building permits issued were down % for the first nine months of Fiscal Year , with building permits issued in the current year being 459 versus 565 in the previous year. Single Family Residential Building Permits IS -..._ :._._: ' ` January February D March

13 Third Financial Report FY State Budget

14 In early May 2005, the governor released his revised budget plan. The most anticipated news was the updated tax revenue numbers, which will determine the amount of money the legislature has to spend beyond the governor's initial budget. The Legislative Analyst's ffice is projecting that the governor and the Legislature will have an additional $2.2 billion to spend at May Revise, due to better than expected economic performance at the end of the 2004 calendar year. ptimists project that the number may escalate further with the April personal income tax revenues. Vehicle License Fee Repayment In his May revise, the Governor has indicated his willingness to accelerate the repayment schedule for the FY Vehicle License Fee (VLF) gap loan from the local agencies to the State. Based on prior year payments, it is estimated that $600,000 could be received under this proposal. Payment of the VLF gap loan is not required until FY The potential use of the funds, if received, will be identified in the proposed budget for FY Prop 42 Impact Governor Arnold Schwarzenegger announced on May 13, 2005 that the State's improving economy makes it possible for him to restore more than $1.3 billion in transportation funds as part of the May revision to his budget proposal. That allocation fully restores funds as called for by Proposition 42, approved by voters in 2002 to require that the gasoline sales tax that drivers already pay at the gas pump be used to fix potholes and improve highways, local roads and mass transit. The $1.3 billion is to be distributed as Proposition 42 prescribes : $678 million to the Transportation Congestion Relief Program ; " $254 million to the State Highway Account for State Transportation Improvement Program (STIP) projects ; " $254 million to cities and counties for deferred maintenance of local roads ($127 million to cities, $127 million to counties) ; " $127 million to the Public Transportation Account, with half ($63.5 million) of those funds available for STIP projects and half ($63.5 million) for State Transit Assistance. At this time, the City of Folsom's share is not known

15 Third Financial Report FY General Fund

16 Summary : As previously presented in prior quarterly reports the General Fund is being reported on a combined basis as it is presented in the City's Comprehensive Annual Financial Report. The combined General Fund includes the Community Center, Community Correctional Facility, Engineering and Folsom History Interpretive funds. The General Fund is the City's primary operating fund. This fund accounts for the revenues and expenditures associated with operating governmental service functions. These functions include General Government, Public Safety, Public Works, and Culture and Recreation expenditures. During the fiscal year the fund balance amount General Fund fluctuates based on timing of revenues received, such $46,000,000 $40,000,000 as property tax which is $36,001,111 received in December and $30,001,000 April. The city's policy is $26,000,000 $21,100,001 to maintain a 15% $1$,000,000 unreserved fund balance at $,0,000,000 the end of the fiscal year. $6,000,000 The General Fund ended $0 of Q2 03 Q4 the quarter in a solvent and ~ fiscally healthy position. I"' evenues EEnpsnditures The chart above shows a graphical comparison of the combined General Fund's quarterly revenues and expenditures through March 31, For the quarter ending Combined General Fund Revenues March 31, 2005, the Sales Taxes Property combined ;General Fund'; Taxes received $34,843,341, or Transfers In~ -_ 64% of budgeted revenues. Transfer Msc. - ccupancy Total Combined General Interest Real Property Fund Revenues excluding Fines & Forfeitures~ Transfer transfers in increased 12.4% charges services Intergovernmental Franchise Fees Licenses s Pernits in the third quarter of 2005 compared to Property tax collections decreased 2% or $70,598, due to timing differences. Sales tax revenues increased 12% or $1,501,750 due to continued strong retail sales growth and a large onetime use tax payment in the business services sector. Transient ccupancy taxes increased 25% or $158,708. Intergovernmental revenues increased 47% or $1,075,708 due to police related grants, state grants and shared state revenues. Charges for current services increased 6% or $162,631 due to engineering charges. No Franchise fees revenue has been received as this category is typically received in the 4th quarter

17 Expenditures through the third Combined General Fund Expenditures quarter were as expected, and perating Transfers ut totaled $41,509,258. Total General Govemrrsnt Fund expenditures at 75% of CuHur.Ind budget. All General Fund ' ree n department expenses were less than public Works 75% of budgeted levels through the third quarter with the exception of Nbfic Safety the Zoo at 78% of budgeted level. The 2005 expenditure budget includes approximately $1 million carried forward from Fiscal Year 2004 including $410,000 for street repair and resurfacing and other one time operating expenditures. The chart above depicts a graphical comparison of expenses for each category as a percentage of total expenses for third quarter of Fiscal Year : Property Tax: The City's property tax is levied based on the assessed value as of Property Tax March 1, the lien date, of the $,8,000,000 preceding fiscal year. Secured s+cooo,ooo property tax is levied on September $11,000, $12,000, and due in two installments, on $,0,000,000 November 1 and February 1. s 8.o00, Collection dates are December 10 $s.ggg :"000, and Aril p 10, which are also the $2,000,000 delinquent dates. Consistent with $0 previous years, Secured Property Tax Ati1-,~~aa~~~A`'%%y~a 946~9~,~~AA o,~~otiooti~c'~oo,~~0 ' 1%4~ 140 payments were not received in the, ^ ~, ^ 110 ^ ti ti h h quarter. As mentioned in previous quarterly reports, property tax receipts indicate that growth is at the expected level for Fiscal Year For Fiscal Year , the City has budgeted an increase of 12% over the prior year but has reduced the fiscal year amount by $1.0 million in anticipation of the State budget reductions. During Fiscal Year , property tax revenues increased 11.6% over the prior fiscal year, due to the City's strong housing market and increases in assessed land values. As of June 30, 2004, the assessed value of property within the City of Folsom was $7.1 billion, an increase of 11.8% over last year. The chart above shows a graphical comparison of the City's property tax revenue

18 Sales Tax: Sales tax is levied on the sale, lease or rental of all taxable goods and Sales Tax Growth Trend For the Nine services within the City. Purchasers Months Ended March 31 of these goods and services pay the tax. Sales tax is collected by $14,500,000 businesses at the time of sale then $13,500, $12,500, periodically remitted to the $11,500,000 - California State Board of $10,500, Equalization. The Board of $9,50o,00o Equalization then remits that portion $6,500,000 due to the City. Sales tax revenues, $7, , budgeted for 37% of General Fund $6,500, revenues increased 12% over the same nine-month period in the prior year and is related to large onetime sales tax payments in the business and industry category. Included in the appendix is a detailed analysis of the City's sales tax activity for the quarter provided by The HdL Companies. The following chart shows graphical comparisons of sales tax revenue. Sales Tax Growth Trend FY 00/01 FY 01/02 FY 02/03 FY 03/04 FY 04/05 Nine months ending March 31 $9,251,236 $10,708,561 $10,691,122 $12,517,816 $14,019,566 Yr-ver-Yr Growth 15.75% -0.16% 17.09% 12.00% Intergovernmental Revenues Through March 31, 2005 Vehicle License Fee Growth Trend For The intergovernmental revenues Nine Months Ending March 31 (Federal Grants, State Grants and Shared State Revenue $3,000, _..._...._.._._._._. $2,800, ~ have increased 47% or $2,000, $1,075,708 over the prior year $2,400, level. The majority of the $2,200, $2,000,000 increase is due to police related $1,6oo,ooo grants, state grants and shared $1,600, / / / / /05 state revenues. The graph at right portrays Vehicle License Fee Revenue (VLF). In Fiscal Year the State dropped this fee from 2% to 0.67%. Except for the first three months of the year, the State backfilled this fee reduction with other State funds, keeping the local government revenue "whole." Beginning in FY 04-05, the local government share of VLF revenue has further narrowed, however the State is now backfilling the 2% to 0.67% fee reduction VLF revenue loss with an additional allocation of local property tax from County ERAF funds. The decrease was due to a 3 month loan to the State, which took effect in Fiscal Year The VLF accelerated gap loan repayment in FY would help the City which is still facing tight budgets as a result of these Prop 1 A funding losses. The

19 City has budgeted $3,780,000 for Fiscal Year and has received $2,365,872, or 63% of budget through the third quarter of Fiscal Year For Fiscal Year 04-05, the State has estimated each local government's share of VLF. Counties are scheduled to distribute this estimate to Cities in two installments, in January and May. VeF~icle License Fee Revenue $2050,000 $1 : 50, $ $ $ $ $ $ $450, $ ~~ el 4? -- -Projected ~A, ctual Vehicle License Fee Revenue FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 Nine months ended March 31 $ 1,986,869 $ 2,335,139 $ 2,623,848 $1,869,103 $ 2,365,872 Year-ver-Year Growth Rate 18% 12% -29% 27% Transient ccupancy Taxes (TT) For the nine months ending March Transient ccupancy Tax Growth Trend For 31, 2005, the City received TT The Nine Months Ending March 31 revenue of $798,581 an increase of $117,799, or 25% over same $860, period last year. This reflects the $760, improvement in the economy and $660,000 the addition of two new hotels $660,000 - $+60, within the city. The following i chart shows graphical comparisons $360, of the TT revenue. The City continued its practice of not budgeting any TT increase due to volatility in the revenue source Transient ccupancy Tax ' 280:000 $260, $240,000 $220,000 - $ Y , :140,000 - $120,000 $100,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q f-projected - --Actual

20 Transient ccupancy Tax Revenue FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 Nine months ended March 31 $ 542,313 $ 521,261 $ 522,072 $ 639,871 $ 798,799 Year-ver-Year Growth Rate -4% 0% 23% 25%

21 Third Financial Report FY Special Revenue Funds " Development " Redevelopment " Library

22 i ~ As stated previously, as the City Development Fund Expenditures by Division approaches build-out and Community Development, previously approved projects are 2,035,3'15 completed, the fund balance for Econorric i+~"nn~~rr. this fund will decrease. Staff Developm elopr ent, 273,740 ~~ continues to monitor building Transfers ut, Neighborhood permit activity and required 1,219,277 /\ Services, Traffic -SAVSA, 2,218,601 staffing levels in this fund. Naintenance,J Development Fund expenditures for the quarter totaled $5,794,505 or 67% of budget. f this amount, salaries, benefits and transfers accounted for 59% and 24% of expenditures respectively. This fund ended the quarter with Transfers, unrestricted and restricted fund 1,219,277 balances of $1,033,510 and $142,127 respectively. Cap61, 06IaY1 Unrestricted fund balance represents 11.9% of current year budgeted expenditures. 35,676 11'996 Development Fund Expenditures by Type Salaries & Benefits, 3,459,216 Contracts, 524,619 Services & Supplies, 277,346 Insurance Liability, 252, Development Fund The Development Fund recorded Development Fund revenues of $3,782,359 or 42% of budgeted revenue at the end of the $6,000,000 i third quarter of Fiscal Year $5,000, With the exception of sundry $4,000,000 $3,000,000 revenue, which represents a budget $2,000,000 I,- appropriation of fund balance to $1,000,000 balance expenditures with $0 '- 1 n' Qa revenues, fund revenues are at 89% 2 rtevenues~elcpendituros of budget. Significant revenues of the fund are licenses and permits $1,615,478 (96% of budget) and charges for current services $1,988,541 (99% of budget). -19-

23 Redevelopment Funds Low to Moderate Housing Fund ! The Low to Moderate Housing Fund RDA Low To Moderate Housing Fund received $755,291 or 50% of ', budgeted revenue for the quarter $800,000 ending March 31, With the exception of sundry revenue, which $6 '0 i- represents a budget appropriation of $4 0 fund balance to balance expenditures $200,000 with revenues, fund revenues are $0 slightly behind prorated percentages. 01 Q2 Q3 Q4 Revenues are tracking lower than the n Revenues a Expenditures prorated budget (69%) due to timing of property tax revenue. Through March, expenditures of RDA Low to Moderate Housing Fund $363,429 are tracking below Expenditures by Type budgeted levels in all categories. The majority of the unexpended budget $1,006,103 is occurring in the - Transfers ut, _ Salary & Benefits, 141, ,587 urban redevelopment contracts line item. This fund ended the quarter Services & Insurance, 4~- 9,514 with unrestricted and restricted fund Supplies, 3,982 Contracts, 52,447 balances of $2,751,127 and $1,381,701 respectively. Unrestricted fund balance represents 181 % of current year budgeted expenditures. Redevelopment Project Fund The Redevelopment Project Fund RDA Project Fund received $2,498,764 or 72% of its budgeted revenue for the quarter $2,500,000 ending March 31, Consistent $2,000,000 with previous years, Secured $1,600,000! Property Tax payments were not $1,000,000 received in the quarter. Initial data ~ 0 from the County of Sacramento $o Q1 a indicates growth is currently at or Revenues <r Expenditures above the budgeted levels for Fiscal Year

24 Expenditures including RDA Project Fund Expenditures by Type transfers totaled $1,377,208 or 34% of budget, leaving the operating fund with unrestricted and Transfers restricted fund balance of out (Inc Add $10,007,096 and $1,965,476 80% to 75%), Salary & 897,422 respectively at quarter-end. 873,860 The main factor for spending Insurance, below budgeted amounts Contracts, 9,078 Services & 390,210 occurred in the following Supplies, contract line items : Urban 6,638 Redevelopment, wner Participation Agreements and AB 1290 programs. Transfers out were slightly above the prorated budget amounts (87% of budget) as debt service requirements were recorded in the first operating quarter of Fiscal Year Library Fund The Library ~' Fund has received Library Fund $733,460 or 79% of budgeted revenues for the quarter ending $,,400,000 March 31, During the $+,200,000 $1,000,000 quarter, this fund received $800,000 payments for Secured Property $600,000 %'`` Taxes totaling $658,406. $400,000 $200,000 - Furthermore, the Fund received $0 a transfer from the Library 01 ci2 03 a4 Capital Project Fund in the 10 Revenues 0 Expenditures amount of $325,000, which was authorized per Resolution No Expenditures for the quarter Library Fund Expenditures by Type were $829,967 (59% of budget). The expenses Salaries consisted of salaries and Benefits, 281,220 benefits of $489,973 and - Supplies operating transfers of $196,963. Services, 49,004 perating This fund ended the uarter ut, Contracts, 9,734 q Transfers rs ut, 131,309 with unrestricted fund balance Insurance Liability, 35,804 of $631,998 and restricted fund balance of $491,350 ; unrestricted fund balance represents 45% of Fiscal Year budgeted expenditures

25 Third Financial Report FY Enterprise Funds " Recreation " Water " Sewer " Solid Waste " Transit

26 Recreation Fund As presented in the previous quarterly reports, the Recreation Combined Recreation Fund Fund is being reported on a s3,oao.ooo combined basis and includes funds :$500, (Recreation) and 511 (Aquatics). sz,oo0,o00 The Recreation Fund ended the S1,6w.ooo 51,000,000 second quarter of Fiscal Year with operating revenues of $6 ' $0 $2,502,867 and expenditures of Qt Qa $2,714,118 resulting in a net Revenues 0 Expenditues operating loss of $211,251. Revenues for this fund are seasonal with major revenue sources for these funds coming in the first and last quarters of the fiscal year. perating revenue percentages were comprised as follows: operating Combined Recreation Fund Revenues by Type subsidy transfers of $1,128,761 (45 /o), charges for services $ (48%), and miscellaneous Transfersln, /^1 Chargestor $179,907 (8%) /o). Miscellaneous Services, 1,129,761,45% revenues ' consisted of concessionaire ''9<.'99.<9% - - sales $75,100, facility rentals $65,461 Miscellaneous, 179'9 07.7% and special events $39,346. C% perating expenses totaled ombined Recreation Fund Expenditures by $2,714,118 or 86 Qo of budget. The Type employee services and contractual services operating expense line items were the only operating expenditures Ereptoyee Services not in line with the budget at this point in time. Contractual services Transfers out expenditures, which are seasonal in ther Utifities nature, were for various programs, Depreciation Contractual ~ ~ Supplies sponsored by the recreation fund Services Maintenance such as sports officials, Renaissance Faire, Mayor's Cup Golf Tournament, and sports camps. Depreciation expense of $2,004 has not been presented in the financial analysis as it is not a budgeted expense. Excluded from the Recreation fund activities are the Zoo perations, which are accounted for in the City's General Fund. For Fiscal Year it is estimated the General Fund will subsidize Zoo perations by approximately $900,000. For the first nine months of Fiscal Year Zoo perations has recorded total revenues of $167,228 and operating expenditures of $939,703. The difference between operating revenues and expenditures of $772,475 has been absorbed by the City's General Fund

27 perating expenditures are comprised of the following activities ; Salaries and Benefits $ 685,883, perations and Maintenance $134,807 and Capital utlay of $37,498. Water Fund As presented in the previous Combined Water Fund -Total Revenues and Expenditures quarters the Water Fund is being reported on a combined -I $14,000,000 basis and includes funds 456 $12,000,000 (water impact), 520 (water $10,000,000 operating) and 521 (water $8,000,000 capital)' 522 (water meters) $8,000,000 $4,000,000 and 524 (1998 Water Bonds $2,000,0$0 Project) as presented in the City's Comprehensive Q1 Q2 Q3 Q4 Annual Financial Report. le Revenues s Expenditures The Water Fund's operating revenues of $7,001,619 (89% of budget) and operating expenditures of $6,593,374 (72% of budget), resulted in net operating income of $408,245 for the first three quarters of Fiscal Year Non-operating activities in this fund included investment income of $267,262, impact fees of $2,005,958 capital outlay expenditures of $5,573,585 and debt service expenditures of $1,039,554. perating revenues consisted of the following charges for services $4,878,926 and debt service operating transfers in of $1,246,526. The debt service transfer in and corresponding transfer out covered the water fund's debt service requirements for Fiscal Year , which will occur in November 2004 and May 2005.,. perating expenses totaled Combined Water Fund -perating Expenditures $6,593,374 or 72 % of by Type budget driven by debt service transfers out. The ther, 191,644, Transfers ut, chart at right provides a 3 % 2,916, % Ernployee Services, graphical representation of Contractual 1,660,183.25% the fund's expenditure Services, 1,009,187,15% i- breakdown. Aside from Maim 8 Utilities, 360,985 perations, transfers and employee Supplies, 397,761 5 r' 54,651 1% 6% services, contractual services is the third largest expense of this fund and can be categorized relating to the following activities ; uncategorized $266,440, engineering utilities $76,194, water distribution $174,532, water treatment plant $485,153 and water quality $6,868. Depreciation expense of $1,570,978 has not been presented in the financial analysis as it is not a budgeted expense. Significant activity occurred in the following approved capital projects : " Water treatment plant expansion Phase IV $3,742,000 and " Water treatment plant water storage $720,000 " Fuel system upgrade at Corporation Yard $828,

28 Sewer Fund Continuing this quarter, the Combined Sewer Funds Sewer Fund is being reported, _ _ on a combined basis and $4,000,000 r' includes funds 530 (Sewer $3,500,000 :- - perating) and 531 (Sewer $3.000,000 f ' Capital). The Sewer Fund's $2,500,000 $2,000,000 operating revenues $3,733,445 $1,500,000, (80% of budget) and expenses $i,ooo,ooo totaled and $2,058,386 (48% of $500,000 budget) for the nine months $0 Qt Q2 Q3 Q4 ending March 31, 2005, Revenues " E7ntiitures resulted in operating income of $1,675,059. Non-operating activities consisted of impact fees of $24,925 and investment income of $23,280. During the first three quarters the fund has incurred capital outlay expenditures of $266,986 relating to master plan improvements and manhole modifications. The chart above provides a graphical representation of the revenues versus expenditures. The Sewer Fund has expended Combined Sewer Fund - Expenditures by Type 48% of its operating budget, primarily driven by expenditures below budgeted Transfers out, , 19% Brployee levels in the contractual '~ services, , ther, , 9% ~% services (sewer project utilities, management). Significant 28482,1% Co, 3040 contractual service expenditures services, , Maintenance and range from proj ect 15 operat ns, 95761, ~ Supplie;~41426, management, interdepartmental cost recovery, RWQCB reporting and GIS systems. The graph above portrays the relative spending in each expenditure category. Depreciation expense of $659,725 has not been presented in the financial analysis as it is not a budgeted expense. Solid Waste Fund Continuing this quarter, the Solid Waste fund is being reported on a combined basis and includes Funds 540 (Solid Waste perating), 541 (Solid Waste Capital) and 542 (Solid Waste Recycling). The Solid Waste Fund's operating revenues and expenses totaled $6,809,116 (77% of budget) and $5,800,098 (62% of budget) respectively, resulting in operating income of $1,009,

29 ' This fund has expended Combined Solid Waste Fund - Expenditures by only 62% of operating Type expenditures and is due to below budgeted spending in Employee services, the following significant 2,227,044, 38% Utilities, 6'796 ' 0% line items, employee Transfers out, ~` 704, % i Supplies, 414,659 services and contractual 7% services. The fund ended ~ Wintenance and Contractual ther, 652,319, operations, the quarter with unrestricted 15% 1,31867 s, 23% 277,008,5% and restricted fund balances of $2,252,374 and $406,809 respectively. Unrestricted fund balance represents 25% of budgeted expenditures. The charts above provide a graphical representation of relative spending in each expenditure category. Depreciation expense of $157,210 has not been presented in the financial analysis as it is not a budgeted expense. Transit The Transit Fund's operating Transit Fund revenues of $300,288 (24% r _ _ _..._ of bud et and ex enses of $2,400,000 ' g ) p $2,200,000 2,0000,000 $1,604,460 (55% of budget), 1800, ,000 resulted in an operating loss 1,400,000 I 1,200,000 r of $1,304, 171 for the three 11,000, ,00000 i '. quarters ending March 31, 1400,000 X20000, Consistent with expectations this fund has 0 Revenues Expenditures received 103% of budgeted intergovernmental revenues from SACG in the amount $1,934,903 relating to State transportation taxes. n January 1, 2004 transit Transit Fund - Expenditures by Type rates were increased to provide the required fare box Employee Utilflies, 2,222, ratio to receive State funding. services, 933,433 0%.59% Subsequently, the second Phase of this rate increase Transfers out, became effective July 1, 344,185, 22% Supplies, 112, The Transit Fund had J 7% an unrestricted fund balance Contractual ~Meintenance& ther, 117,243, rvices perations, of $2,260,809 and restricted 7% Se 1% ' 70,666,4% fund balance of $91,102 as of March 31, Depreciation expense of $125,872 has not been presented in the financial analysis as it is not a budgeted expense

30 3rd Financial Report FY Strategic Plan Update

31 Strategic Plan Fiscal Year Date : April 15, 2005 Goal I : To ensure and promote the long-term financial health of the City of Folsom. Target Percent bjective Strategies Department Completion Complete bjective ly financial reports to City Council. Finance ngoing ngoing To implement approved programs and 1.2 ly strategic plan updates to City Council. City Manager ngoing ngoing expenditures authorized in FY Budget. bjective Departmental training and monitoring of results. City Manager ; Fourth 50% To implement financial Finance policies adopted by City 2.2 Council during Identification of financial policy compliance in staff reports. City Manager ngoing ngoing FY bjective Present an updated five-year financial projection for the general Finance ngoing ngoing To accurately manage the fund and each enterprise fund, testing economic (growth v. City's financial capacity recession) and "build out" assumptions, in order to identify areas to sustain annual for study and corrective actions. operations, including 3.2 Implement policies for key indicators of fiscal health (i.e., the fund Finance infrastructure balance level for the general fund, net income level for enterprise ngoing ngoing maintenance, as analyzed funds) that support the findings of the five-year financial projection. over a five-year period. 3.3 Evaluate impacts of State budget actions on Folsom revenues. Finance ngoing ngoing 3.4 Complete capital improvement plan (five-year maintenance and NS, L & L Fourth 95% enhancement plan) for each landscaping and lighting district. Division 3.5 Evaluate long-term needs and funding requirements for each NS, L & L Fourth 95% landscaping and lighting district and proposed funding strategies. Division W ~` L 1

32 Target Percent W bjective N Strategies Department Completion Complete bjective Present quarterly financial status reports in order to compare actual Finance ngoing ngoing To provide financial revenue and expenditure activity compared to the amended budget, information to City and to track progress with FY programmatic goals. Council, City Manager, 4.1 Present quarterly financial status reports in order to compare actual Finance and Departments in a revenue and expenditure activity compared to the amended budget, ngoing ngoing useful and timely and to track progress with FY programmatic goals. manner. 4.2 Submit the City's FY Comprehensive Annual Financial Finance Second 100% Report (CAFR) to City Council by ctober 31, Provide the City Manager's Recommended FY Budget to Finance Fourth 60% the City Council by May 25, bjective Present an annual Capital Improvement Program (CIP) process that Finance Fourth 60% To proactively and matches the City's General Plan and individual departmental master accurately assess the plans (levels of service) with the financial plan necessary to fund City's financial capacity recommended improvements. to invest in capital 5.2 Develop a presentation for the three bond rating agencies that Finance Fourth improvements, including demonstrates the City's capacity to satisfy its debt obligation, which 50% infrastructure should lead to rating upgrades. replacement and renovations, over the long term (ten years). bjective Develop/update a cost recovery program to recoup a portion or all Finance Fourth 80% To evaluate the level of of the direct and indirect costs associated with the programs and cost recovery, cost activities. competitiveness and collections for City 6.2 Compare the cost of selected services with other cities and counties Finance Fourth 50% activities. in order to determine cost competitiveness. I.2