FY 2010 END OF YEAR REPORT JUNE SEPTEMBER

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1 CITY OF BOISE Greenhouse opening Kristin Armstrong Bikeway commemoration TRACON announcement END OF YEAR REPORT JUNE SEPTEMBER December 13, 2010

2 End of Year TABLE OF CONTENTS The financial figures presented in this report have not been reviewed by the City s independent auditors and are subject to change. Mayor s Recommendation Letter... 1 Financial Analysis Report... 5 Financial Summary Reports Tax Funds Financial Summaries...29 Rebudget and Encumbrance Resolution and Exhibit...33 End of Year Appropriation Resolution and Exhibit...35 Citywide Interim Change Report...39 Citywide Approved FTE Change Report...45 Capital Status Report Capital Status Summary Report Appendix Appendix A - Capital Status Detail Report...49 Appendix B - Contract Financials...65 Appendix C - Contract Performance Measures...71 Appendix D - Final Rebudget Summary...73

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4 End of Year MAYOR S RECOMMENDATION Overview Like the rest of the nation, Boise continues to struggle through one of the most serious and persistent economic downturns in decades. Unemployment remains high; housing starts and construction activity remain low; and families and businesses face ongoing threats to their livelihoods. The recession has negatively impacted the City s resources, as building permit activity and sales tax revenues have fallen apace. At the same time, however, demand for City services has largely remained constant and in some cases has grown dramatically especially for low-cost services, such as library and recreation programs, that help provide a safety net to families struggling to make ends meet. Meeting citizens rising expectations while facing declining revenues has compounded the challenges facing the City. The good news is that City employees have been rising to the challenge, finding efficiencies and working smarter to provide exceptional municipal services. Those efforts have been bolstered by seven years of rigorous strategic planning and conservative financial restructuring to ensure flexibility, structural balance and protection of core citizen services. Despite the lukewarm economic environment, the City was still able to post several notable accomplishments throughout the year. Some of the highlights of include: The City, in partnership with other government and social service agencies, opened Allumbaugh House, the much-needed community sobering, detox and crisis mental health facility. After years of effort by the City and by Idaho s congressional delegation, the Federal Aviation Administration announced that it would keep Boise s Terminal Radar Approach Control system (TRACON) in place rather than consolidating it in Salt Lake City, a decision that will save taxpayer dollars without compromising safety. In partnership with the Idaho Small Business Development Center at Boise State University, the City opened the Greenhouse, a business incubator focused on supporting and advancing alternative energy and sustainable companies. Mayor Bieter and local residents joined Olympic gold medalist Kristin Armstrong in a community bike ride to commemorate the Kristin Armstrong Bikeway on Bogus Basin Road. The City launched Our Troops, Our Families, a program to support military families during the year-long deployment of the Idaho Army National Guard's 116th Cavalry Brigade to Iraq in As a result of prudent budgeting and lots of hard work, we come to the end of Fiscal Year 2010, the first year of the two-year budget cycle, in remarkably solid fiscal shape and strongly positioned to move forward, despite an economic recovery that is anticipated to be slow at best. Key Financials As of the close of on September 30, the Department of Finance and Administration estimates that the City s General Fund and Capital Fund have $2,013,442 in one-time, unallocated end-of-year (EOY) funds. This is equivalent to 1.2% of total budgeted expenditures for the General Fund in essence, a balanced budget. Mayor s Recommendation 1

5 End of Year MAYOR S RECOMMENDATION This EOY balance is the result of continued cost-containment efforts by City departments, primarily in personnel, and not of any additional, unanticipated revenues. Revenues were nearly on target for most categories, over or short by approximately.2% to 2.5%, and a few categories significantly underperformed. In total, General Fund revenues fell short of budget amounts by more than $2.2 million. Franchise fee revenues were particularly affected, falling short of budget by 13.4%. This was largely due to a rate reduction announced by Intermountain Gas Company in October The impact of the rate change, coupled with usage based on weather conditions and changes in the number of customers, was realized in late spring Likewise, internal revenue fell more than 7.2% short of budget and 3.0% from FY Since internal revenue is reimbursement for internal services, this aligns with the cost savings that was achieved. Interest income, although not constituting a major portion of the City s budget, posted the biggest percentage decrease off 16.0% from budget, but an 8.1% increase from the prior year In response to the continued economic situation and the City s cautionary approach during, the Mayor s Office and the Executive Management Team focused their cost-containment efforts on sustainable operating efficiencies that would result in lower personnel costs the City s single largest cost. Many positions remained vacant through, and were consequently eliminated (59.0 fulltime equivalents, FTEs) and frozen for hiring for an extended period of time (29 FTEs). These actions resulted in the largest contributor to the cost savings, approximately $2.7 million. Savings achieved in equipment and in maintenance and operating costs were used to offset revenue shortfalls and then designated for the continued implementation of the City s Strategic Plan. Our employees have been asked to work harder and smarter as a result, and they have risen to this challenge. Indeed, the City was able to maintain a number of services and achieve several key objectives during the past year, including: Through the generous gift of an anonymous donor, the City was able to purchase 1,320 acres of property in the foothills, including the Stack Rock geologic formation. The City also acquired the critical Polecat Gulch and Hammer Flat properties using Foothills Levy funds. The Boise City Fire Department established a fee-for-service agreement with the North Ada County Fire & Rescue (NACFR) whereby Boise Fire will provide contract fire services within NACFR jurisdiction. The City flipped the switch on the first of 725 environmentally friendly LED streetlights in downtown, a project funded through a $430,000 federal economic stimulus grant. Allumbaugh House, a detoxification and mental health crisis facility, opened to the public on May 3, In its first month of operation, 67 individuals were treated. The Neighborhood Stabilization Program purchased several distressed homes for rehabilitation and resale. Completion of wetlands mitigation, grading and irrigation for Marianne Williams Park. Extension of the City s geothermal system through the BSU campus supported in part with a $1.0 million federal grant. Mayor s Recommendation 2

6 End of Year MAYOR S RECOMMENDATION We are continually facing the challenge of meeting citizen service expectations with limited resources. Departments have begun working to assess their programs and services and how they can best achieve desired outcomes in the FY 2012/2013 Biennial period. Caution was our watchword going into the downturn, and it must remain our motto as we move to embrace the recovery. In light of that, my list of recommendations for use of the unallocated EOY funds is short. It is designed specifically to offer the City of Boise maximum flexibility to ensure we have the ability to meet whatever changes to our financial and service picture we encounter going forward. Recommendations Enterprise Resource Planning, Phase II ($1,311,000) To date, the City Council has approved a total allocation of $3.0 million, partially funded from enterprise funds, for a new Enterprise Resource Planning system. The total cost of the project, which will replace and integrate nearly all of the City s human resource and financial systems, including time keeping, is estimated at $4.8 million. The project is projected to save the City approximately $3.8 million over the next 10 years in hard dollars and result in significant operating efficiencies and improvements. The second allocation of $1.3 million will complete the implementation of all components except the planning and budgeting module. A subsequent allocation of up to $600,000 may be requested when the implementation plan for the planning and budgeting module has been further developed, most likely during the FY 2012 budget development process. Goal Achievement Awards ($460,000) In June 2010, the City Council affirmed my recommendation to utilize end-of-year funds for the one-time goal-achievement portion of the pay-for-performance system. This is not a bonus, but a critical step toward ensuring that our employees compensation is directly tied to their success at implementing our strategic and department business plans. Arts & History Department ($46,500) During, the Arts & History Department was notified that the Capital City Development Corporation would no longer be able to provide an annual contribution in support of maintenance of downtown capital art projects. This allocation will provide the department with the necessary funding through FY 2011 to complete its business plan as approved for the current biennial period. Capital Contingency ($195,942) This remaining balance should be held in reserve to respond to any additional revenue declines during FY 2011 that we cannot close through cost-containment measures. If those needs do not materialize, these resources could be used with existing funds in the Capital Facility Account for the City s infrastructure projects. Several of those projects particularly the River Recreation/Esther Simplot park complex, City Hall project and Fire Station 15 are nearing the final stages of planning, with construction to follow soon thereafter. The economic downturn provides an excellent opportunity to address municipal facilities needs. A favorable bid environment means potentially lower costs to taxpayers, and spending on capital projects helps keep our citizens working and our local economy afloat. It is an investment that pays dividends both short- and long-term. By directing the balance of the EOY funds to the Capital Contingency, we can maintain flexibility on important projects as well as provide additional resources for Mayor s Recommendation 3

7 End of Year MAYOR S RECOMMENDATION unanticipated, one-time needs. Appropriation of these funds would come only as needed and with City Council approval. Conclusion Our recently completed biennial Citizen Survey found Boise residents giving the highest customersatisfaction ratings in seven years to virtually every service the City offers. This is a testament not only to the hard work of our employees but to the increased reliance on their municipal government during stressful economic times. Our commitment going forward is to continue to provide City programs at the highest level, to continue to plan aggressively and think creatively to provide taxpayers with the best possible value for their dollar, to do all we can with our limited toolkit to support and encourage economic development in our city, and most of all to protect the quality of life that we all hold so dear. Our vision is to make Boise the most livable city in the country, and our challenge is to continue our progress toward that vision as we drive toward recovery. Our track record continues to demonstrate that we are more than equal to that task. Respectfully submitted, David H. Bieter Mayor Mayor s Recommendation 4

8 End of Year FINANCIAL REPORT I. Executive Summary Fiscal Year 2010 was the first year of the City s 2010/2011 Two-Year. was a period marked with uncertainty and continued concern regarding the economic pressures facing the City. While the National Bureau of Economic Research officially declared the recession over in June 2009, the recovery has been and is anticipated to be slow and deliberate. Despite the lukewarm economic environment, the City s general operating fund ended positively, largely thanks to the deliberate cost containment efforts undertaken during the year. The following summarizes the major components of the General Fund performance: General Fund Revenues for the year totaled $165.2 million, which was $2.2 million (1.4%) less than anticipated; however, this was $9.0 million over the amount received in FY General Fund Expenditures totaled $157.0 million for the year - $17.3 million less than budgeted. This was nearly the same amount expended during FY 2009, which totaled $156.6 million. As shown below, about $13.1 million of the net $15.1 million ($2.2 million revenue shortfall and $17.3 million in cost savings) was reserved and designated for subsequent use in the General Fund and Capital Fund. These uses include encumbrances, rebudgets, funding for the first phase of the City Hall renovation, and maintenance of the Cash Flow Reserve. The City ended the year with approximately $2.0 million in net available resources from the General Fund and Capital Fund. FY 2009 Actual Actual Revised Actual to Revised Actual to FY 2009 Actual General Fund Total Revenues 156,140, ,164, ,422,649 (2,258,101) 9,023,573 Total Expenditures 156,552, ,969, ,295,073 17,325, ,736 Net General Fund (411,457) 8,195,380 (6,872,424) 15,067,804 8,606,837 Changes in Reservations & Designations (13,054,362) Net Available Resources 2,013,442 The following summarizes the major components of the Capital Fund performance: Capital Fund Revenues for the year amounted to $4.9 million, which was $12.8 million less than anticipated. This significant difference was related to donations and grants not received. Of the $12.8 difference, $4.2 million is anticipated to be received in FY 2011 and the remaining $8.6 is deemed unlikely in the next year and is no longer carried in the budget. Capital Fund Expenditures of $11.4 million were also significantly less than the budgeted amount of $34.7 million. Of the $23.3 million difference, $16.4 million was encumbered and rebudgeted intofy 2011 for completion of approved projects. The remaining $6.9 million is no longer carried in the budget at this time until a revenue source, such as grants or donations, has been affirmed. Financial Analysis Report 5

9 End of Year FINANCIAL REPORT FY 2009 Actual Actual Revised Actual to Revised Actual to FY 2009 Actual Capital Fund Total Revenues 8,719,570 4,885,223 17,664,210 (12,778,987) (3,834,347) Total Expenditures 16,304,808 11,369,489 34,678,395 23,308,906 (4,935,319) Net Capital Fund (7,585,239) (6,484,266) (17,014,185) 10,529,919 1,100,973 revenues and expenditure figures in this report reflect year-end results. However, the City s independent auditors have not reviewed the financial figures presented, and they are subject to change. A. Economic Recap The following summary is intended to provide an economic perspective for the financial review of FY Commencing at the start of FY 2009, Financial Services began reporting on key economic indicators and related financial information on a monthly basis. These reports are located on the City s website at Figures provided by the Idaho Department of Labor indicate that the labor market has stabilized and appears to be showing signs of improvement. At the beginning of, the Boise Metropolitan Statistical Area ( MSA ) had a preliminary, seasonally adjusted unemployment rate of 10.0% and a labor force of approximately 288,000 willing workers. In the following twelve months, the preliminary, seasonally adjusted unemployment rate declined to 9.1% and a labor force of approximately 287,912. The 88 decrease in labor force relative to the change in unemployment would indicate a decrease in the number of households and population. This would affect franchise fee revenues, sewer and solid waste revenues. Construction activity in showed some positive signals primarily in the number of permits issued. In, 13,734 permits were issued % over the 11,412 issued in The total valuation dropped, however, from $264.7 million to $159.9 million during the same period. Further analysis concerning construction activity is addressed later in this report. Airport passenger traffic at the Boise Airport is a leading economic indicator, and during it appears to have stabilized. Passenger volumes stabilized in April of 2010 and for four months were nearly identical when compared to the same period in As of August 2010, passenger volumes began experiencing slight increases in each successive month. Financial Analysis Report 6

10 End of Year FINANCIAL REPORT II. Financial Analysis by Fund The following financial analysis provides a closer review of the City s primary funds General, Capital, Airport, Sewer, Solid Waste, Housing, and Risk Management. The review briefly describes the significant changes from last fiscal year and from the revised budget. A. General Fund The General Fund started the year with $1.3 million more in fund balance (prior year s spendable resources) than 2009 ($6.9 million versus $5.6 million). For the third year in a row, total actual revenues were less than the budgeted amount (1.3%). Nonetheless, revenue continued to grow, up nearly $9.0 million or 5.8% compared to last year s amount. Property tax revenue had the largest dollar gain ($4.5 million) primarily due to its size in proportion to the remaining revenue sources and the lack of volatility in its calculation. The revenue increase was also the result of the newly established North Ada County Fire & Rescue ( NACFR ) contract ($2.7 million) and one-time health savings ($2.2 million) in the form of a rebate Year End General Fund Year over Year Actual/ Actual Variance Variance Fav/(Unfav) 2010 Fav/(Unfav) Prior Year's Spendable Resources * $5,649,353 $6,872,424 $1,223,071 $6,872,424 $0 Revenues Property Tax Revenue 97,284, ,821,846 4,536, ,152,839 (330,993) Sales Tax Revenue 12,024,515 11,559,870 (464,644) 11,400, ,620 Development Fees 4,285,326 3,900,387 (384,939) 3,836,089 64,298 External User Fees 10,820,342 14,077,430 3,257,088 13,930, ,653 Other Revenue 31,725,936 33,805,014 2,079,079 36,102,694 (2,297,680) Total Resources $161,790,328 $172,036,972 $10,246,645 $174,295,073 ($2,258,101) Expenditures Personnel Services $107,510,159 $112,171,556 ($4,661,397) $114,891,594 $2,720,039 Maintenance & Operations 46,110,010 40,541,227 5,568,783 53,349,984 12,808,757 Equipment (including minor) 4,002,764 4,256,385 (253,622) 6,053,495 1,797,110 Total Expenditures $157,622,932 $156,969,168 $653,764 $174,295,073 $17,325,905 Changes in Designations & Reservations ($1,918,206) ($13,054,362) ($11,136,157) $0 ($13,054,362) Net Available Resources $2,249,190 $2,013,442 ($235,748) $0 $2,013,442 Total Resources include current year revenues and prior years' reserves and designations allocated for use during the fiscal year. * Prior Year's Spendable Resources are net revenues from FY 2009 used to support approved and budgeted expenditures in. The amount reflected as "Year End Actual" represents the unallocated, undesignated balance after all balance sheet adjustments. Financial Analysis Report 7

11 End of Year FINANCIAL REPORT Franchise fees experienced both the most significant percentage loss compared to last year, with a nearly 9.3% decline, and the largest dollar decrease, nearly $543,000. This was primarily attributable to a substantial rate reduction at Intermountain Gas, compounded by warmer weather. The fiscal year started with abnormally cold weather, including a record low and sub-zero temperatures in December, which effectively offset the rate decrease. As the fiscal year wore on, unusually warm temperatures, including the eighth warmest January on record compounded the negative effect of rate reductions on the City resources. Proactive cost-saving measures by departments were the contributing factor for EOY unallocated resources. However, in conjunction with the 5.6% revenue growth, actual expenditures declined by 0.5%. Personnel costs increased 4.3% as a result of salary compensation increases, temporary wage increases, and health care premium increases. Maintenance and operating costs decreased 1.6%, while equipment spending increased by 6.3%. The remainder of the variation in as compared to FY 2009 was due to reserving cash flow for capital projects rather than transferring the money to the Capital Fund and making the reservations there. Resources Total General Fund revenues during amounted to $165,164,548. This was nearly $2.3 million or 1.3% under the budgeted amount of $167.4 million. Of the revenue shortfall, $947,387 was rebudgeted into FY 2011, leaving an approximate revenue shortfall of $1.3 million. One-half of all revenue categories were under budget and one-half were over budget. This is an improvement over FY 2009 when all of the revenue categories were under budget, primarily from rapid declines in revenue categories across the board. A more stabilized market has enabled better forecasting and planning. Property tax revenue totaled $101.8 million or $330,993 (0.3%) below the budgeted amount, largely due to a $500,000 property tax contingency established to enable the City to certify for a larger property tax amount in September, after the budget has been adopted. Excluding the $500,000 contingency, property taxes exceeded budget by $169,007 (0.2%). Sales tax revenue amounted to approximately $11.6 million or $160,000 (1.4%) over the budgeted amount. This represented a 3.9% decrease ($465,000) compared to the amount received during FY Major revenue modifications were implemented at the beginning of, including a $1.9 million reduction to sales tax along with corresponding citywide expense reductions. Liquor tax revenues were budgeted at $3.1 million based on flat sales statewide. Actual revenues disbursed to the City totaled $2.7 million or $412,100 (13.1%) under budget. The Office is still researching the revenue shortfall, as this was unexpected and is still unexplained. Total franchise fee revenue was $823,100 (13.4%) less than the budgeted amount of $6.1 million. As stated previously, was $543,300 (9.3%) below FY Beyond the known Intermountain Gas rate reduction, franchise fees in general have been declining in relationship with the labor force reductions experienced within the City and the general economic conditions. Financial Analysis Report 8

12 End of Year FINANCIAL REPORT 2009 Actual 2010 Actual 2010 Variance Fav/(Unfav) % of Collected/ Expended Franchise Fees Natural Gas 2,358,630 1,899,069 2,578,935 (679,866) 74% Garbage 1,194,678 1,161,891 1,173,073 (11,182) 99% Cable Television 1,360,942 1,296,116 1,371,984 (75,868) 94% Water 952, ,588 1,022,771 (56,183) 95% Total Franchise Fees $5,866,934 $5,323,663 $6,146,763 ($823,100) 87% Natural Gas: The total amount anticipated for natural gas franchise fee revenue was $2.6 million. The total received was $1.9 million or $ (26.4%) under budget, based primarily on the rate reduction. Garbage: Solid Waste franchise fees were slightly under budget by $7,000 (0.6%). Cable: Total cable franchise fee revenue was $1.3 million or $80,100 (5.7%) below the budgeted amount. This was $68,500 or 4.9% below FY During economic slow periods, cable franchise revenues tend to decrease due to subscribers discontinuing service or decreasing their service levels. Water: Water franchise fee revenue was under the budgeted amount of $1.02 million by about $56,200 (5.5%). External fees came in at $14.1 million, slightly over the budgeted amount of $13.9 million. While actual to budget variances were minor, variances in comparison to FY 2009 were substantial, primarily driven from increased revenue from the Fire Department s external service contracts with Whitney Fire and North Ada County Fire and Rescue Districts. Fine and forfeiture revenue amounted to $3.8 million about $93,400 (2.5%) above the budgeted amount of nearly $3.7 million. This was the result of a $129,800 (8.7%) budgetary shortfall in traffic fines, offset by budgetary surpluses in parking fines and airport fines of $176,300 (9.4%) and $42,000 (405.9%), respectively. All three categories exceeded FY 2009 by substantial amounts, which resulted in an overall budgetary surplus for fines and forfeitures of $464,300 (13.9%) when compared to FY Total development revenues amounted to nearly $3.9 million, nearly on target with budget expectations. However, this was a substantial decrease (9.0%) compared to actual revenue received during FY was unusual because the number of permits for was up 20.3% from FY 2009, yet total construction value declined by 39.6 %. This reflected the residential sector improving faster than the commercial sector, and that the average residential permit valuation was significantly less than the value of a commercial permit. According to the September 2010 Construction Report, the number of new single-family residence units showed substantial increases, up 88% during the fiscal year when compared to FY Multi-family construction saw no activity in and is not anticipated to see new construction activity in the foreseeable future. By contrast, the value of commercial construction posted a 62% decrease in activity during. Financial Analysis Report 9

13 End of Year FINANCIAL REPORT Expenditures At fiscal year-end, General Fund expenditures totaled $156,969,168 and were $17.3 million (9.9%) under budget. However, compared to the amount actually expended during FY 2009, this was $416,000, or 0.3%, more - relatively flat, and a testament of the City s cautious approach during FY Of the $17.3 million, the City Council approved the reservation and/or designation of the following: $6,992,361 for rebudget requests for to account for operating projects or purchases initiated but not yet completed. $1,378,763 for encumbrances to account for contracted obligations that could not be completed within the fiscal year. After consideration of the above items and changes in other fund balance accounts, budgetary expenditure savings amounted to about $3.3 million. The expenditure savings, coupled with net revenue losses of nearly $1.3 million after rebudgets, resulted in approximately $2.0 million available for reallocation to one-time priorities. B. Capital Fund Revenues and expenditures fluctuate from year to year depending on the types and size of projects and the timing of revenues, such as grants and donations, and progress on the projects. Resources Capital Improvement Plan ( CIP ) revenue earned during the fiscal year was $4,885,223 (27.7%) of the budgeted amount. Electric franchise fees and tax support from the General Fund are typically the largest sources of revenue for the Capital Fund. Grants, donations, and partnership contributions are smaller but essential resources that allow the City to leverage its ability to pay for capital assets. Electric franchise fee revenue was under budget by $56,300 (3.3%) partially due to a collective average decrease of 5.2%, effective June 1, 2010, by Idaho Power. This amount was magnified by the underperformance of interest income, about $311,900 (71.7%) under the budgeted amount of $434,800. The $100,000 transfer from the General Fund was approximately $5.0 million less than the budgeted amount largely due to the lack of funding needed for existing projects in. The remainder of the budgetary shortfall, approximately $6.5 million (76.2%), is attributable to dedicated funding resources such as grants and donations. The City collects impact fees to meet growth-related parks, fire, and police needs. Impact fees are deposited in specific accounts based on area of collection and use. Current-year projects are funded from the specific accounts using a combination of impact fee equity and current year receipts to ensure that the oldest impact fees are used within the designated time. Impact fees totaled $865,200, or $184,800 (17.6%) lower than the budgeted amount of $1.1 million. Of the total, $199,800 was collected for fire projects, $58,300 for police projects, and $607,100 for parks projects. The total represented a decline of $144,900 (14.3%), compared to the amount received last fiscal year. This was associated with the slower development activity experienced during. Financial Analysis Report 10

14 End of Year FINANCIAL REPORT 2009 Actual 2010 Year End Capital Fund 2010 Actual 2010 Variance Fav/(Unfav) % of Collected/ Expended Prior Year's Spendable Resources * $8,188,238 $6,679,924 $17,014,185 ($10,334,261) 39% Revenues Electric Franchise Fee Revenue 1,660,012 1,673,926 1,730,267 (56,341) 97% General Fund Transfer In 4,740, ,000 4,228,049 (4,128,049) 2% Impact Fees 1,010, ,178 1,050,000 (184,822) 82% Other Revenue 1,309,482 2,246,119 10,655,894 (8,409,775) 21% Total Resources $16,907,808 $11,565,146 $34,678,395 ($23,113,249) 33% Expenditures Construction $7,204,902 $7,204,902 $24,676,373 $17,471,471 29% Other 9,702,906 4,360,244 10,002,022 5,641,778 44% Total Expenditures $16,907,808 $11,565,146 $34,678,395 $23,113,249 33% Net Available Resources $0 $0 $0 $0 * Prior Years' Spendable Resources represent donations, grants, and/or impact fees received in prior years and used to support approved capital projects in. The amount reflected as "Year End Actual" represents the unallocated, undesignated balance after all balance sheet adjustments. Expenditures Expenditures on capital projects during amounted to $11.6 million (33.3%) of the available expenditure budget. A small sampling of the many projects either completed or in progress during the fiscal year (with the amount expended and/or encumbered) included: Phase I City Hall Renovation ($425,859) L.E.D. Streetlight Conversion ($633,047) Final Payment for Hollandale Station 14 ($1,117,553) Fire Hydrant Replacements ($234,188) Greenbelt Repairs ($325,488) River Recreation Park ($298,207) IT Network Replacement ($233,775) Stack Rock Property Purchase ($1,000,000) Warm Springs Golf Course Maintenance Facility ($569,405) Sports Field Lighting ($293,133) Financial Analysis Report 11

15 End of Year FINANCIAL REPORT Major Repair and Maintenance In, $3.3 million was budgeted for major repair and maintenance projects. The following table shows the allocation between departments and the percentage expended: Department Actual % Expended Fire $525,004 $391,736 75% Library 345, ,154 50% Parks & Recreation 1,301,384 1,070,284 82% Public Works 81,834 54,207 66% Total Major R&M $2,253,333 $1,688,380 75% Overall, departments expended 75% of the budgeted amount for major repair and maintenance projects. This is comparable to last year s 78% expenditure rate. A majority of the remaining budget was rebudgeted into FY 2011 to allow for completion Year End Capital Fund by Department 2009 Actual 2010 Actual 2010 Variance Fav/(Unfav) % of Collected/ Expended Prior Year's Spendable Resources * $8,188,238 $6,679,924 $17,014,185 ($10,334,261) 39% Revenues Electric Franchise Fee Revenue 1,660,012 1,673,926 1,730,267 (56,341) 97% General Fund Transfer In 4,740, ,000 4,228,049 (4,128,049) 2% Impact Fees 1,010, ,178 1,050,000 (184,822) 82% Other Revenue 1,309,482 2,246,119 10,655,894 (8,409,775) 21% Total Resources $16,907,808 $11,565,146 $34,678,395 ($23,113,249) 33% Expenditures Intergovernmental $231 $24,155 $1,173,326 $1,149,171 2% Arts and History 274,040 93, , ,266 30% Finance and Administration % Fire 1,295,240 2,254,448 6,224,429 3,969,981 36% Human Resources % Information Technology 170, ,513 2,511,402 2,062,889 18% Library 4,401, , , ,714 44% Mayor's Office 487,063 35,678 3,162,600 3,126,922 1% Parks and Recreation 4,548,802 5,453,987 13,717,334 8,263,347 40% Planning & Development 389, ,092 1,576, ,185 47% Police 7,060 78, , ,424 13% Public Works 5,333,943 2,069,166 4,573,516 2,504,350 45% Total Expenditures $16,907,808 $11,565,146 $34,678,395 $23,113,249 33% Net Available Resources $0 $0 $0 $0 * Prior Years' Spendable Resources represent donations, grants, and/or impact fees received in prior years and used to support approved capital projects in. The amount reflected as "Year End Actual" represents the unallocated, undesignated balance after all balance sheet adjustments. Financial Analysis Report 12

16 End of Year FINANCIAL REPORT C. Airport Fund 2009 Actual 2010 Year End Airport Fund * 2010 Actual 2010 Variance Fav/(Unfav) % of Collected/ Expended Revenues Operating Revenue $22,983,352 $24,568,511 $25,880,283 ($1,311,772) 95% Capital Revenue 8,885,341 11,201,246 24,535,519 (13,334,273) 46% Total Resources $31,868,693 $35,769,756 $50,415,802 ($14,646,046) 71% Expenditures Personnel Services $5,362,467 $5,655,008 $6,114,072 $459,064 92% Maintenance & Operations 13,210,188 12,768,795 17,701,961 4,933,166 72% Equipment 1,488, ,840 3,378,025 3,056,185 10% Depreciation 11,401,225 11,462,333 11,989, ,282 96% Capital Accounts 5,630,428 8,109,929 29,947,042 21,837,113 27% Total Expenditures $37,093,053 $38,317,906 $69,130,715 $30,812,809 55% Retained Earnings Use/(Resource) $5,224,361 $2,548,150 $18,714,913 $16,166,763 * Expenditures include depreciation. Expenditures include capitalization amounts for equipment and capital. Resources Airport total revenues amounted to $35.8 million at fiscal year-end, or 71% of the budgeted amount. This was $3.9 million more than the total received last year, primarily due to an increase in capital revenues. Charge for service revenues experienced a $1.2 million (4.5%) increase compared FY Actual operating revenue fell short of the budgeted amount by $1.3 million. This was an increase of $2.3 million (26.1%) compared to FY Airline fees were nearly $800,000 (22.2%) under the budgeted amount and car rental revenue was $475,800 (14.4%) under the budgeted amount. Capital revenues are comprised of passenger facility charges ( PFCs ), customer facility charges ( CFCs ), and capital grants. Total actual capital revenue amounted to $11.2 million, an increase of $2.3 million (26.1%) compared to FY PFCs and CFCs experienced a combined budgetary shortfall of $538,500 (7.9%). PFC and CFC revenues were up $125,900 (2.0%) during compared to the previous year. Airport did not realize capital grant revenue to the extent budgeted, primarily because grant revenue is typically received after the capital expenditures have been incurred or because the grants are pending Federal approval. Operating Expenditures Actual total operating expenditures amounted to nearly $18.8 million about $8.4 million (31.0%) under budget. This represents a $1.3 million (6.5%) decrease compared to actual operating costs for FY Financial Analysis Report 13

17 End of Year FINANCIAL REPORT Of the $8.4 million in budgetary savings, $447,200 was personnel savings, $3.1 million from the deferral of equipment purchases, and approximately $4.9 million in M&O budgetary savings. Within M&O, $2.0 million of the savings is attributable to asset write-offs with $1.0 million being booked in the accounting 13th period adjustment. The remainder of saving in M&O is attributable to $411,900 in police services savings, $661,800 in parking management savings and about $1.8 million spread between several other accounts. Capital Expenditures Of the total $29.9 million budgeted for capital projects, Airport spent $8.1 million during. Appropriations for projects in progress were rebudgeted as necessary. Airport continues to review the capital improvement plan and make any necessary adjustments. Retained Earnings As of September 30, 2010, cash and investment balances amounted to $40.3 million, which is $4.2 million (11.8%) more than the $36.1 million reported last year due to the deferral of capital projects. Of the total amount, nearly $15.0 million is dedicated to support approved PFC/CFC capital projects. The balance of $21.1 million is intended to support other commitments, primarily open purchase orders, cash flow needs, and other approved capital projects. D. Sewer Fund 2009 Actual 2010 Year End Sewer Fund * 2010 Actual 2010 Variance Fav/(Unfav) % of Collected/ Expended Revenues Operating Revenue $29,122,583 $30,145,179 $32,973,109 ($2,827,930) 91% Capital Revenue 2,328,761 3,111,931 1,817,400 1,294, % Total Resources $31,451,343 $33,257,110 $34,790,509 ($1,533,399) 96% Expenditures Personnel Services $12,103,002 $12,141,868 $12,211,873 $70,005 99% Maintenance & Operations 17,600,680 18,027,991 20,636,649 2,608,658 87% Equipment 1,057,129 2,309,967 2,949, ,556 78% Capital Accounts 10,222,610 7,003,379 26,107,865 19,104,486 27% Total Expenditures $40,983,422 $39,483,205 $61,905,910 $22,422,706 64% Retained Earnings Use/(Resource) $9,532,079 $6,226,095 $27,115,401 $20,889,307 * Expenditures include depreciation. Expenditures include capitalization amounts for equipment and capital. Financial Analysis Report 14

18 End of Year FINANCIAL REPORT Resources Overall, revenues were under budget $1.5 million (4.4%). The impact of the economy on development was the main cause for the revenue underperformance. In, Sewer Fund operating revenues were $2.8 million (8.6%) under budget and 3.5% more than FY Combined commercial and industrial service revenue was $840,400 less than budget and $320,900 more than FY The shortfall is due to reduced flows and economic impacts on local businesses. Residential service revenue also reflects the economic downturn, with a $386,000 difference between budget and actual. Capitalized salaries are responsible for the other significant difference between budget and actual ($643,700). This accounting entry is part of the year-end closing process. Capital revenues for were $1.3 million (71.2%) more than budget and 33.6% more than FY 2009 due to residential construction activity greater than budgeted and new customer sewer capacity use. Planned capital expenditures are regularly adjusted to account for projected available funding. Contributed assets from developers are excluded from the analysis in this report because the City does not budget this item due to the difficulty in estimating the value and timing of the contribution. Operating Expenditures Personnel costs for Public Works Sewer Fund were $93,100 (0.7%) under budget due to vacancies held throughout the department. M&O expenses were $2.6 million (12.6%) less than budget and 2.4% more than FY Developer payback was the largest portion of the variance, totaling $770,800 (77.1%) below budget, due to the shortage of development activity. Public Works Sewer Fund found operating savings to offset the operating revenue shortfall. The following accounts illustrate the areas of significant savings: bad debt $239,450 (down 79.8%); R&M other $157,250 (down 18.2%); contract labor $89,950 (down 54.6%); and asset write-offs $125,000 ($43,300 was booked in the accounting adjustment period). Overall, Sewer Fund equipment expenditures were $639,550 (21.7%) under budget. A portion of the budgetary savings was rebudgeted, the remaining savings was due to the deferral of equipment purchases. Capital Expenditures Capital project expenditures totaled 27% of the budget. Major project expenditures included the Central Lab Addition ($2.1 million), Wastewater Facilities Land Acquisition ($450,300), and several capital main line and rehabilitation projects. The Wastewater 2020 Facilities Plan was completed in FY 2009, and the department continues to execute the plan by laying the groundwork for plant and facility improvements into the future. The Phosphorous Removal project is ongoing in parallel with the wastewater discharge permit negotiations with the U.S. Environmental Protection Agency. Timing of planned capital expenditures was adjusted to align with capital revenue cash flow. Retained Earnings As of September 30, 2010, cash and investments in the Sewer Fund amounted to $33.3 million, an increase of $478,400 (1.5%) compared to FY 2009 year-end. Financial Analysis Report 15

19 End of Year FINANCIAL REPORT Of the remaining balance at year-end, $4.5 million is reserved for other sewer districts and $3.0 million is held for developer reimbursement contracts, leaving $25.8 million for open purchase orders, planned capital expenditures, cover unanticipated costs, and to meet cash flow needs. E. Solid Waste Fund 2009 Actual 2010 Year End Solid Waste Fund * 2010 Actual 2010 Variance Fav/(Unfav) % of Collected/ Expended Revenues User Fee Revenue $24,157,688 $23,562,777 $24,753,120 ($1,190,343) 95% Other Revenue 424, , ,490 (16,960) 95% Total Resources $24,581,913 $23,869,307 $25,076,610 ($1,207,303) 95% Expenditures Personnel Services $361,486 $393,887 $372,409 ($21,478) 106% Maintenance & Operations 23,451,195 23,358,584 24,710,216 1,351,632 95% Equipment 2,215 41,854 53,380 11,526 78% Capital Accounts 37,242 46,665 73,983 27,318 63% Total Expenditures $23,852,137 $23,840,990 $25,209,988 $1,368,998 95% Retained Earnings Use/(Resource) ($729,776) ($28,318) $133,378 $161,696 * Expenditures include depreciation. Expenditures include capitalization amounts for equipment and capital. Resources Solid Waste Fund total revenues were $1.2 million (4.8%) less than budgeted, primarily due to residential trash and recycling, which at year-end were nearly $937,300 (7.7%) under budget. Compared to FY 2009, total revenues were down $712,600 (2.9%) reflecting the full annual impact of the poor economy. Operating Expenditures Overall, maintenance and operating expenses were on par with FY 2009, showing only a 0.4% decrease. Including fuel and recycling commodity targets, the contract reimbursement to Allied Waste Services ( AWS ) increased 1.9% over. Landfill expenses reflect the commercial activity slowdown, with a 9.3% reduction year-over-year and an 11.9% reduction from two years prior. Capital Expenditures Capital expenditures are comprised of the continued Gowen Field Remediation project, Percent for Art and the Enterprise Resource Planning System Replacement. Sixty-three percent of the $74,000 budget was spent in. Financial Analysis Report 16

20 End of Year FINANCIAL REPORT F. Housing Funds 2009 Actual 2010 Year End Housing Funds * 2010 Actual 2010 Variance Fav/(Unfav) % of Collected/ Expended Revenues Housing Program Income $1,250,825 $1,238,463 $1,359,928 ($121,465) 91% Grant Revenue 1,930,323 2,956,171 5,100,145 (2,143,974) 58% Other Revenue 646, , , , % Total Resources $3,827,900 $4,817,176 $6,916,407 ($2,099,231) 70% Expenditures Personnel Services $846,626 $943,904 $932,808 ($11,096) 101% Maintenance & Operations 1,658,442 1,827,167 3,018,198 1,191,031 61% Equipment 10,586 3,855 11,722 7,867 33% Housing Loans 0 0 1,775,000 1,775,000 0% Capital s 20,424 1,454,883 2,649,234 1,194,351 55% Total Expenditures $2,536,079 $4,229,807 $8,386,962 $4,157,154 50% Retained Earnings Use/(Resource) ($1,291,822) ($587,368) $1,470,555 $2,057,923 * Expenditures include depreciation. Expenditures include capitalization amounts for equipment and capital. Loans are reclassified to the balance sheet. Resources Housing revenues were under budget by nearly $2.1 million (30.3%) and were $989,300 (25.8%) more than the previous year s actual revenues. The positive difference between actual and budgeted revenue is primarily due to federal stimulus funding which has not been received. Grant revenue increased $1.0 million (53.1%) compared to last year, due to the receipt of additional federal stimulus funding that was not part of the FY 2009 budget. Entitlement funding is both a function of actual expenditures and the timing of those expenditures. Rental income was $49,000 (4.0%) below the budgeted amount. This was a marginal decline of $8,000 (0.7%) compared to FY 2009 year-end. Housing and Community Development reported that the vacancy rate dropped from an average 0.6% in FY 2009 to 0.4% on average for. The marginal decline in rental income is primarily due a 42.9% increase in evictions. Operating Expenditures Operating expenditures totaled about $2.7 million and were under budget by approximately $1.2 million (30.3%) at year-end, primarily due to the unused stimulus grant expense appropriation. Housing loans require budget to complete the accounting setup but are actually booked as a liability and are not reflected in the income statement. The budget for was nearly $1.9 million, which is recognized as budgetary savings each year. The balance of outstanding housing loans (mortgage loans receivable) was more than $11.5 million, a $404,000 (3.6%) increase from the $11.1 million booked at FY 2009 year-end. Financial Analysis Report 17

21 End of Year FINANCIAL REPORT Capital Expenditures Capital expenditures amounted to about $1.5 million, largely from the continuation of federal stimulus programs. The $1.2 million in unused capital budget primarily consists of committed stimulus funds that were not realized by year-end. Retained Earnings As of September 30, 2010, investments totaled about $1.3 million, approximately $21,000 (1.7%) more than this time last year. Nearly all of the investment balance is restricted in use to fund the City s housing programs. G. Risk Management Funds 2010 Year End Risk Management & Worker's Compensation Funds 2009 Actual 2010 Actual 2010 Variance Fav/(Unfav) % of Collected/ Expended Revenues Premiums $4,031,456 $3,622,258 $3,577,744 $44, % Other Revenue 396, , ,475 (243,358) 46% Total Resources $4,427,686 $3,833,375 $4,032,219 ($198,844) 95% Expenditures Insurance $2,425,213 $2,462,764 $2,624,564 $161,800 94% Maintenance & Operations 2,584,381 1,206,680 1,498, ,524 81% Capital 138,010 3,274 52,414 49,140 6% Total Expenditures $5,147,604 $3,672,718 $4,175,182 $502,465 88% Risk Management Funds include the Worker s Compensation Fund and the Risk and Safety Services Fund. Revenues support actuarially determined liability accounts and retained earnings at a targeted 90% confidence level. Under state law, a person has up to 180 days to file a claim from the date of the incident, after which time the claim is invalid. The federal statute of limitations is two (2) years from the date of incident to file a suit. Worker s Compensation law sets forth several filing milestones relating to different stages of a potential claim. Resources Operating revenues amounted to more than $3.8 million by the end of. This was $198,800 (4.9%) under the budgeted amount and $594,300 (13.4%) less than last year s actual revenues. Interest income was primarily responsible for the budgetary shortfall. Decreased revenue compared to last year was due to a premium reduction in Worker s Compensation. Financial Analysis Report 18

22 End of Year FINANCIAL REPORT Expenditures Expenditures for were under budget by $500,100 (12.0%) due to the following: $124,700 in professional services savings. $20,200 in Worker s Compensation reinsurance savings. $121,500 in other insurance savings. $113,400 in indirect cost savings. $14,600 in personnel savings. Several other accounts had small savings. Compared to last year, however, expenditures were $1.5 million (28.6%) lower, chiefly due to the transfer out of $1.3 million from the Risk Management Fund in FY 2009 for the risk rebate. Risk Reserves The City maintains liability accounts for outstanding claims and lawsuits from prior years. The liability accounts were funded at the 50% confidence level during the relevant fiscal year. This funding, combined with the undesignated retained earnings balance, equate to the overall confidence level. The City s goal is to maintain the Risk Management and Worker s Compensation Funds at the 90% confidence level. An actuarial study is conducted at the end of each fiscal year to determine the current confidence levels. The Risk Management Division believes that the levels meet the 90% goal. As of September 30, 2010, the sum of the liability accounts was approximately $5.5 million, an increase of about $117,100 (2.2%) since this time last year, attributed to an increase in claims. Cash and investments amounted to nearly $8.6 million, an increase of about $234,500 (2.8%) driven primarily from growth in investments. H. Health Insurance Trust Fund The City established Health Insurance Trust Fund operates on plan years that are on a calendar year basis. Trustees from the Health Trust will present their annual report to the City Council upon the close and audit of the Trust. Financial Analysis Report 19

23 End of Year FINANCIAL REPORT III. Financial Analysis by Department The following financial analysis provides a closer review of each department funded from the General Fund. The review briefly describes the significant changes from last fiscal year and from the revised budget. In summary, the general fund departmental operating revenue fell short of the budget by $2,879,400 (6.6%) but was offset by personnel savings of $1,257,300 (1.1%), M&O savings (before encumbrances and rebudgets) of $5,760,800 million (15.0%) and equipment savings of $726,100 (22.1%). These figures exclude Intergovernmental revenues and expenses, such as property taxes, discussed earlier in this report. Net Departmental Savings At the close of each fiscal year, the Department of Finance and Administration ( DFA ) reviews each department s financial status to determine department effected savings. The following department summaries represent unadjusted departmental surplus or deficits, both before and after encumbrances and rebudgets. Prior to the compilation of this report, DFA calculated the eligible rebudget amounts for all General Fund departments. Part of the calculation included an analysis of indirect revenues received by General Fund departments. It was determined that the current methodology for maintaining the indirect cost plan did align with Federal guidance. As a result, revenue entries reverted to the prior Federally acceptable plan based on FY 2008 actual charges. This resulted in significant revenue reductions for General Fund departments when compared to their budget. Departments were then held harmless for the budgetary revenue shortfall in their rebudget calculations Actual vs Variance Arts and History Actual Actual $ % Revenue $111,582 $92,945 $90,807 $2, % Expenses Personnel Services $331,825 $372,904 $347,403 $25, % Maintenance & Operations 225, , ,197 (9,741) -3.8% Equipment 4, % Subtotal $561,922 $617,385 $601,600 $15, % Departmental Surplus/(Deficit) ($450,341) ($524,440) ($510,793) ($13,647) -2.7% Encumbrances $0 $0 0.0% Net Grants/Dedicated Funding 4,649 (4,649) % Rebudgets % Departmental Net Surplus/(Deficit) ($450,341) ($524,440) ($515,442) ($8,998) -1.7% Arts and History ended the year $13,647 (2.7%) over budget before adjustments and $8,998 (1.7%) over budget after adjustments. The overage was primarily attributable to a change in health insurance elections within the department s personnel. When compared to FY 2009, the departmental revenue declined by $18,637 (16.7%), primarily due to less time spent working on enterprise fund projects. Expenses increased $55,463 (9.9%) for a net departmental decline of $74,100 (16.5%). Financial Analysis Report 20