July Director of Finance Report. CITY OF TACOMA Finance Department Robert K. Biles Director of Finance

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1 Director of Finance Report CITY OF TACOMA Finance Department Robert K. Biles Director of Finance

2 In accordance with the City of Tacoma s Charter, the Director of Finance prepares a monthly report which analyzes the City s revenues and expenditures for the prior period. This report covers the seven months ending July 31, EXECUTIVE SUMMARY GENERAL FUND The chart below provides a high level overview of the General Fund s revenues and expenditures compared to budget projections. Please see page 2 for a more detailed review of General Fund revenues and expenditures. Period to Date Budget Period to Date Actuals Variance Favorable/ (Unfavorable) Revenues $ 113,098,072 $ 110,505,101 $ (2,592,971) $ 111,090,172 $ 112,214,750 $ (1,124,578) Net $ 2,007,900 $ (1,709,649) $ (3,717,549) The chart below provides a summary of the changes in General Fund reserved and unreserved fund balances since the beginning of the fiscal biennium. Reserved Unreserved Total Fund Balance Fund Balance Fund Balance Balances at January 1, ,947,661 19,047,952 39,995,613 Biennium to Date Changes: Changes affecting Unreserved Fund Balance Only: Revenues over (under) expenditures - (1,709,649) (1,709,649) GASB 31 Gain (Loss) - 72,501 72,501 Changes between Reserved and Unreserved Fund Balance: Release of December 31, 2010 encumbrances (2,372,353) 2,372,353 - Current biennium encumbrances 4,392,389 (4,392,389) - Other Changes (Advances, Inventory, etc.) 401,443 (401,443) - Balances at July 31, ,369,140 14,989,325 38,358,465 Financial Reports General Fund Budget to Actual Comparisons The Budget and Research Division of the Finance Department is primarily responsible for budgetary control and analysis. For purposes of budgetary comparison reporting, the actual amounts of revenues and expenditures are compared to the projected amounts. Page 1 of 10

3 City of Tacoma, Washington Budget vs Actual Revenues and Monthly Financial Report General Fund For the Period Ended July 31, 2011 Biennial Budget Biennium to Date Budgeted Revenues and Biennium to Date Actual Revenues and Variance Favorable / (Unfavorable) REVENUES: Property Taxes $ 101,339,565 $ 26,443,816 $ 26,799,640 $ 355,824 Sales Taxes $ 83,658,226 $ 22,613,023 $ 23,469,304 $ 856,281 Business Taxes $ 78,085,664 $ 24,521,543 $ 23,570,333 $ (951,210) Utility Taxes / Other Taxes $ 91,888,990 $ 26,002,585 $ 25,583,662 $ (418,923) Licenses & Permits $ 7,002,404 $ 2,159,790 $ 2,064,878 $ (94,912) Intergovernmental Revenues $ 19,932,170 $ 6,276,427 $ 5,617,958 $ (658,469) Charges for Services $ 4,731,700 $ 1,298,943 $ 616,305 $ (682,638) Fines & Forfeits $ 2,260,500 $ 674,704 $ 478,682 $ (196,022) Miscellaneous Revenues $ 9,673,145 $ 3,107,241 $ 2,304,339 $ (802,902) Use of Reserved Fund Balance $ 401,553 $ $ $ TOTAL REVENUES $ 398,973,917 $ 113,098,072 $ 110,505,101 $ (2,592,971) EXPENDITURES: City Council $ 1,056,513 $ 308,074 $ 317,223 $ (9,149) City Manager $ 2,491,767 $ 722,359 $ 785,665 $ (63,306) Community Economic Development $ 13,699,540 $ 3,583,400 $ 3,007,611 $ 575,789 Finance $ 8,240,103 $ 2,219,397 $ 2,192,220 $ 27,177 Fire $ 101,479,925 $ 28,507,181 $ 28,634,646 $ (127,465) Government Relations $ 436,932 $ 130,602 $ 93,545 $ 37,057 Hearing Examiner $ 569,058 $ 164,436 $ 139,309 $ 25,127 Human Resources $ 3,516,478 $ 925,694 $ 777,870 $ 147,824 Human Rights/Human Services $ 14,956,636 $ 3,484,092 $ 2,735,038 $ 749,054 Legal $ 9,095,625 $ 2,555,655 $ 2,413,840 $ 141,815 Library Operations $ 24,536,000 $ 6,694,094 $ 6,341,278 $ 352,816 Municipal Court $ 6,728,743 $ 1,880,979 $ 1,871,702 $ 9,277 Police $ 143,684,527 $ 40,573,060 $ 40,549,264 $ 23,796 Public Works $ 30,853,601 $ 8,523,748 $ 7,839,547 $ 684,201 Vacancy Savings $ (14,335,128) $ (4,097,457) $ $ (4,097,457) Non Departmental $ 3,239,257 $ 944,783 $ 545,917 $ 398,866 Transfers Interfund $ 34,997,130 $ 9,590,063 $ 9,590,063 $ Transfers Outside Agencies $ 13,727,210 $ 4,380,012 $ 4,380,012 $ TOTAL EXPENDITURES $ 398,973,917 $ 111,090,172 $ 112,214,750 $ (1,124,578) Revenues Over (Under) $ $ 2,007,900 $ (1,709,649) $ (3,717,549) REVENUE 1. Sales Taxes Sales taxes are currently four percent ahead of projections. This is largely related to approximately $815,000 in past due taxes received during the state s tax amnesty program. 2. Business Taxes Business taxes are under projections by $951,210. The due date for the 2 nd Quarter tax payment was changed from July 31 st to August 1 st due to the 31 st being a Sunday. Page 2 of 10

4 August receipts through August 9 th have exceeded the monthly projected receipts and Business Taxes will be at or ahead of projections after August books have closed. 3. Utility Taxes/Other Taxes Power gross earning taxes are $185,168 over projections due to higher than projected sales of wholesale power. Water gross earning taxes are $486,807 under projections. Wastewater and Solid Waste gross earning taxes have unfavorable variances of $118,787 and $110,964, respectively. 4. Intergovernmental Revenue Criminal Justice High Crime and State Liquor Profits have unfavorable variances of $224,629 and $144,299, respectively. Recent passage of the State s Budget includes further reductions in Criminal Justice grants and Liquor Profits. 5. Charges for Services Law Enforcement Services has an unfavorable variance of $222,918. Collections for damage to Public Works have an unfavorable variance of $104, Fines and Forfeitures Penalties and Interest on Business Taxes are below projections by $196, Miscellaneous Revenues Investment Pool and Other Miscellaneous Revenues are below projections by $95,943 and $511,958, respectively. EXPENDITURES 1. Community and Economic Development A small unfavorable variance in personnel costs is offset by M&O savings (mostly external & professional contract services). Additional savings are related to a projected transfer to Permit Services of $411K that has not occurred. 2. Fire Personnel overtime, vehicle maintenance and fuel expenses are all over current projections and are almost completely offset by savings in regular personnel time. 3. Human Rights/Human Services Contract expenditures are coming in slower than projected. 4. Public Works Transfers to the Parking Fund are $331K below the July 31 st projection. The remainder of the variance is related to lower than projected expenses in labor as well as maintenance and operations in several of the program areas. Funds Report The Accounting Services Division of the Finance Department is responsible for reporting the actual revenues and actual expenditures for all City funds. The report includes biennium revenues and expenditures and the effect of biennium activity on fund/net asset balance. Page 3 of 10

5 Fund Number Fund Description January 2011 Beginning Fund Balance/Net Assets City of Tacoma Funds Report Revenues and by Fund For the Seven Month Period Ended July (In Thousands) Adjustment (2) Revenues Biennium To Date Revenues Biennium To Date Ending Fund Balance/Net Assets 0010 (1) General Fund $39,995 $73 $10,798 $17,475 $110,505 $112,215 $38, Courts Special Revenue Fund Contingency Fund 1, , Streets - Special Revenue Funds 10,193 58,866 3,332 1,352 20,347 9,677 79, Fire Dept Special Revenue Funds (929) , (64) 1100 PW Facilities Right of Way Streets Local Improvement Guaranty 2, , PW Engineering Paths & Trails Reserve PW Building & Land Use 6, , EMS Special Revenue Fund 9, ,822 7,530 8, Tourism & Conventions ,224 1, HRHS Special Revenue Funds ,864 1,087 1, CED Economic Development Grants 14, ,573 3,873 15, Library Special Revenue Funds 5, , Finance HALO Police Special Revenue Funds 1, ,457 1,130 1, IT Municipal Cable TV 2, ,957 1,224 3, Human Resources Special Rev City Manager's Office Special Revenue Grant Traffic Enforcement Engineering ,882 2,751 (869) 2010 UTGO Bond Redemption , , , Non-Voted GO Bonds CTED PW Trust Fund Loans - 1,153 1,153 1,153 1, LTGO Refunding Bonds LTGO Bonds , , LTGO Bonds ,371 1, Bond Issue (50) 1, Capital Projects Fund 13,655 5,145 1, ,097 1,958 20, Police Facility (4,104) (4,166) 3217 Parking Garage Capital Projects LTGO Bond Capital Projects 28,490 18, ,536 15,995 48, LTGO Bonds Capital Projects 38, ,040 37, Permit Services Fund (430) ,323 4,067 (2,169) 4120 Mountain Rail 16, ,339 1,928 15, CAPTL Thea Foss Waterway - Capital 670 (10) Parking Garages 38, ,345 3,660 38, Convention Center & Bicentennial Pavilion 137 (17) ,744 5,675 (1,810) 4170 Cheney Stadium 8, ,693 6,155 Modified Accrual Basis (1) This report includes reserved and unreserved fund balances. General Fund reserved fund balance at January 1, 2011 and July 31, 2011 was $20,948 and $23,369 respectively. Unreserved fund balances at January 1, 2011 and July 31, 2011 were $19,048 and $14,989 respectively. (2) Adjustments for GASB 31 gain in the General Fund; capital assets in the other governmental funds; capital contributions, prior period adjustments, and appropriations of restricted retained earnings in the enterprise funds. Page 4 of 10

6 Fund Number Fund Description January 2011 Beginning Fund Balance/Net Assets Adjustment (2) Revenues Biennium To Date Revenues Biennium To Date Ending Fund Balance/Net Assets 4180 Tacoma Dome $23,324 - $496 $471 $3,053 $3,544 $22, Performing Arts Funds 18, ,232 17, Solid Waste 18,603-4,660 4,767 33,626 29,763 22, Wastewater 281,498-4,648 4,261 31,735 30, , Surface Water 74,158-2,281 2,045 15,496 14,044 75, Union Station Funds ,482 1, Tacoma Rail 13,609-2,117 1,511 13,099 11,488 15, Tacoma Water 417, ,534 6,417 39,168 40, , Tacoma Power 744,736-32,305 27, , , , Self Insurance Claims 1, , Conservation Project (22,503) (22,538) 5007 Finance 1, ,204 1,151 1, Finance Budget and Research 1, , Business Systems Improvement Project Graphic Services ,031 1,545 (339) 5050 TPU Fleet Services 42, ,862 3,890 43, Youth Build Tacoma Equipment Rental 22, ,798 6,877 22, Asphalt Plant Comm Equipment Replacement Reserve 3, ,588 1,904 3, Third Party Liability Claims (20,918) ,423 2,193 14,837 (33,562) 5560 Unemployment Compensation Fund Worker's Compensation Fund (3,354) ,616 2,863 (1,601) 5700 Facilities Management 10, ,836 4,324 10, Information Systems 13,877-1,445 1,461 11,431 12,039 13, Deferred Compensation Trust (3) (4) Tacoma Employees Retirement 1,081,019 - (7,666) 4,704 78,715 33,588 1,126, Relief & Pension - Police 1, ,844 3, Relief & Pension - Firefighters ,498 3, Health Care - Labor Management 6,421-4, ,850 25,125 15, Group Life Trust 1, , Dental Care - Labor Management (180) ,532 3,711 (360) 6470 Health Care - Firefighters ,992 1,088 1, Health Care - Police ,865 1, Foss Waterway Dev Authority Agency 20, ,625 19,580 TOTAL $2,997,510 $85,648 $79,746 $105,022 $751,933 $653,684 $3,181,407 Modified Accrual Basis (3) Current month negative revenue is due to recording the GASB 31 loss on market value of investments. (4) Tacoma Employee's Retirement System also presents reports based on market values. City of Tacoma Funds Report Revenues and by Fund For the Seven Month Period Ended July (In Thousands) Page 5 of 10

7 Treasurer s Report Background The City Charter charges the City Treasurer with the responsibility for investing City monies in accordance with the stated Investment Policy. The City Treasurer manages investments to preserve principal while maximizing income and maintaining liquidity to meet the City s cash needs. As the preservation of principal is the paramount objective, investments are selected in a manner that will strive to ensure safety of principal. The City s investments are limited to those specified by State statute. Interest Rates The interest rate yield curves for 2010 and 2011 below show interest rates are relatively steep and have mirrored each other in the last 12 months. The following graph shows U.S. Treasury securities from the 3 month Treasury bill to the 30 year Treasury bond, comparing July 30, 2010 to July 29, For July 29, 2011 the line starts with the 3 month Treasury bill yielding an extremely low 0.014% and the 30 year at 4.118%. 4.5 Historical Yield Curve 7/29/2011 7/30/ Month 3 Month 6 Month 1 Year 2 Year 3 Year 5 Year 7 Year 10 Year 20 Year 30 Year Page 6 of 10

8 Investments The Tacoma Treasury Investments Pool (TIP) Table below shows the investments as of July 31, The investment par value is $1,070,341,455, the investment cost is $1,064,115,258, and the market value is $1,069,955,107. The TIP went over $1 billion for the first time in August Legal Investment Type Par Value as of July 31, 2011 Percent of Total Portfolio Concentration Limit Tacoma Treasury Investment Pool Bank Interest Bearing Accounts $ 5,163, % 100.0% State Local Government Pool $ 87,034, % 25.0% Secured Repurchase Agreements 0.00% 25.0% US Treasury Securities 0.00% 100.0% Bankers Acceptances $ 40,000, % 20.0% Municipal Securities $ 270,525, % 25.0% Federal Home Loan Mortgage Assn (Freddie Mac) $ 78,710, % 50.0% Federal Agriculture Mortgage Corp (Farmer Mac) $ 12,090, % 50.0% Federal Farm Credit Bank (Farm Credit) $ 43,000, % 50.0% Federal Home Loan Bank (Home Loan) $ 229,790, % 50.0% Federal National Mortgage Assn (Fannie Mae) $ 304,028, % 50.0% Tacoma Treasury Investment Pool Subtotal: $ 1,070,341,455 Fund Specific Investments: Tacoma LID Warrant $ 3,000, % 5.0% US Treasury Securities $ 1,109, % 100.0% Secured Repurchase Agreements $ 8,761, % 25.0% Municipal Securities $ 2,775, % 25.0% Fund Investment Subtotal: $ 15,645,250 Tacoma Investments: $ 1,085,986, % Page 7 of 10

9 Interest Rate Outlook Starting In 2009 and through today, the economy shows signs of a slow recovery. The current consensus forecast is there will be no raise in the federal funds rate until The Federal Reserve is keeping rates low to spark the economic recovery. Since March 16, 2010 the Federal Open Market Committee (FOMC) statements have included guidance that: The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends and stable inflation expectations, are likely to warrant exceptionally low levels of federal funds rate for an extended period. This position has been reaffirmed at Fed meetings since then. On November 3, 2010 the Fed announced quantitative easing of $600 billion, purchasing treasury securities in the open market between then and the end of June This is expected to promote a stronger pace of economic recovery. The following are bullet points from the July 27, 2011 Federal Reserve Summary of Commentary on Current Economic Conditions, commonly called the Beige Book because of the color of its cover. The Beige Book is published 8 times a year by the Federal Reserve. Each of the 12 Federal Reserve Districts gather anecdotal information on current economic conditions, and an overall summary of the districts are prepared in the Beige Book. The benchmark 10 year U. S. Treasury note had fallen to a low of 2.796% on July 29, 2011 and has since tumbled to 2.44% on August 4, This appears to be in response to fears of a slowing economy and the specter of a global economy that may relapse into recession. This is driving investors into the relative safety of U. S Treasury bonds. The following graph shows the interest rates of 2 year U.S. Treasury Notes since 1999 and shows how historically low today s interest rates are at.357%. In the rate was at 5.00%. Page 8 of 10

10 8.00 Interest Rates on 2YR Treasury Notes January 1, 1999 to July 29, Investment Return In 2000, the TIP was established as an active investment pool alternative to the state Local Government Investment Pool (LGIP). The result has been over $211.1 million of additional interest earnings through June Because TIP invests in longer term maturities, its earnings have less volatility and higher returns than the LGIP through the interest rate cycle. The TIP purchases appropriate investments depending on market and economic conditions. For the 2nd quarter 2011, the TIP purchased $140.1 million mostly in federal agency notes and taxable municipal general obligation bonds with an average yield of 1.66%. For the 1st half of 2011 the TIP portfolio average yield was 2.06% and the LGIP was.19%. Page 9 of 10

11 Tax & License Report The City s Tax & License Division is responsible for the administration and collection of the City s Business & Occupation (B&O) Tax and licensing the businesses operating within the City. A total of 239 new businesses applied for licenses during the month of July for a year to date total of 1,451 new business licenses. Businesses that change form of legal ownership (e.g. from a partnership to a sole proprietor) are included in the count of new business licenses. The table below provides a comparison of B&O tax collections by month for 2010 and As many businesses have seasonal variations in their business activities, this month to month comparison is useful in evaluating real changes in tax collections over the previous year. Monthly B&O Tax Collections Comparison Difference January $ 3,374,712 $ 2,917,636 $ (457,076) February $ 6,062,771 $ 7,198,678 $ 1,135,907 March $ 1,743,732 $ 1,493,366 $ (250,366) April $ 4,332,408 $ 3,432,553 $ (899,855) May $ 3,000,944 $ 4,801,149 $ 1,800,205 June $ 2,215,525 $ 1,101,273 $ (1,114,252) July $ 3,821,268 $ 2,625,677 $ (1,195,591) Total $ 24,551,360 $ 23,570,332 $ (981,028) Businesses Opening Businesses Closing Net Gain/(Decrease) January February March April May June July Total 1,618 1, ,050 1,137 Note: The Tax and Licensing Office recently updated their system for tracking activity. These numbers may fluctuate month over month but represent a significant improvement in data quality over the previous method of tracking this information. Page 10 of 10