Consider receiving and filing the City s fiscal year 2017/18 mid-year financial report.

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1 STAFF REPORT MEETING DATE: February 27, 2018 TO: FROM: City Council Tony Clark, Finance Manager 922 Machin Avenue Novato, CA / FAX 415/ SUBJECT: FY17/18 MIDYEAR FINANCIAL REPORT REQUEST Consider receiving and filing the City s fiscal year 2017/18 midyear financial report. DISCUSSION The purpose of this report is to provide a snapshot of the City s revenues and expenditures as of December 31, Staff will be presenting an updated analysis of the General Fund Five year forecast in March as part of the FY 18/19 budget process which will provide a better outlook on trends for future fiscal years. The revenue and expenditure estimates are projected to be consistent with the City s adopted FY 17/18 budget. The midyear expenditures are 51.81%, and the revenues are 35.6%. There are some outliers in certain revenue and expenditure categories worthy of note that are discussed within the report. Departments that were closely in line with their midyear budgeted appropriations are not discussed in detail within this report. Revenues Property Tax The City s overall assessed valuation increased by 0.64% from the prior year, which is substantially less than the assumed 4% growth rate. The declining growth in revenue can attributed to a cooling real estate market. In addition, the budgeted annual amount of $4,776,960 for Vehicle License Fee InLieu payments are received in two installments; the first was posted in January 2018versus December This explains why property tax revenues are not closer to 50% at midyear. Sales Tax Due to the accrual of sales tax receipts, the budget report more closely resembles collections for September through December. This is because July & August receipts are accrued and recognized in the prior year. With 37.2% of revenue collected by 12//31/17, sales and use tax is generally on track with the overall budgeted 4.2% year over year increase. Some factors contributing to the growth in the Measure C ¼ sales tax receipts is that U.S. retail spending, excluding the automotive sector was up 4.9% for the months of November and December, compared to the same period last year. cc

2 In addition, the unemployment rate was 4.7% in September, compared to 5.2% for the same period in FY 2016/17. Looking at the same period from 1990 to present, the unemployment rate has only been lower in two years, 2000, and 2006 which were both close at 4.6%. Locally, the top 5 tax generators in Novato were Costco, Target, Shell Service Stations, Safeway Service Stations, and Marin County Ford. Other Taxes Similar to above, timing of collections and accruals has several of these tax categories appearing well under budget. Staff expects these revenues to come in very close to budget, including the Transient Occupancy Tax, Franchise fees, and Business License fees. Licenses / Permits / Charges / Fines / Miscellaneous The nontax categories also appear to be trending well compared to budget. License and permits are performing particularly well, with about 56.5% of the budgeted revenue collected in the first half of the fiscal year. Several small service charge categories such as Engineering Fees & Inspections, and Zoning & Subdivisions are showing robust growth and are on track to exceed annual budgeted estimates. The largest single portion of service charges, Recreation Fees, appears to be continuing its trend of amassing approximately 2/3 of the annual budgeted revenue in the first half of the year. Taking into consideration the timing of revenue collections, at 35.6%, overall revenue trends appear to correlate well with budget estimates for 2017/18. Expenditures Administrative Services Overall, the Administrative Services Department expenditures are in line with the FY17/18 budget. However, the Special Programs within the CityWide Programs Division have several onetime expenditures such as the $320, employee recognition payments approve by City Council, a $101,721 payment to the Transportation Authority of Marin for a Congestion Management Fee, a $9,903 payment to the Marin County Fire for the Joint Powers Authority Hazardous Materials Fee, and $34,815 in payments to the Marin County General Service Agency for homeless assistance; all of which have been made in the first half of the 17/18 fiscal year. Although expenditures are at 70% of budgeted appropriations, staff is confident that given the recent retirement of the Human Resource Director and departure of a Management Analyst, there will be significant personnel costs savings that will allow the division to be in line with the FY17/18 overall budget. Police expenditures Police overtime is at almost 70% of the annual budget as a result of both the mutual aid provided during the Sonoma County fires as well as various special events. 2 2

3 The Police Department incurred $87,623 in expenditures related to its mutual aid offered to Sonoma County for the North Bay fire disaster. Another $1,300 of associated benefit costs were incurred as well. There is no budget allocation for these expenses. Staff is in the process of compiling FEMA Assistance Claims to recover these costs. However, given the subsidy application process, these costs will likely not be reimbursed during this fiscal year. Special events that the Police Department has either offered or participated in over the holidays skewed the timing of expenditures in this line item as well. Examples of such events are Heroes and Helpers, Bell Ringing Competition, Toy Drive, National Night Out, and Back to School Shopping. The Police Department has increased its involvement in special events this fiscal year in order to meet the Council s Strategic Plan of expanding City support, partnership, and sponsorship of events to build community cohesiveness, and to promote outreach. There have been other large onetime expenditures that have artificially inflated expenditures. These onetime expenditures include $1,230,000 in costs for the PERS unfunded liability, and $386,702 in Holiday pay. Overall, the Police Department s budget through December is 53% expended, and in line with the overall FY17/18 appropriations. ATTACHMENT 1. MidYear Financial Report 3 3

4 Revenue FY17/18 Budget 12/31/2017 Remaining % Received FY16/17 Budget 12/31/2016 Remaining % Received Secured Property Taxes 13,646, ,488, ,157, % 12,979, ,506, ,472, % Unsecured Property Taxes 138, , , % 140, , , % Supplemental Property Tax 210, , , % 210, , , % Special Assessments 4, , , % 4, , , % Property Taxes 13,999, ,665, ,334, % 13,334, ,635, ,698, % 1% Real Property Transfer Tax 358, , , % 353, , , % Sales & Use Tax 11,675, ,346, ,329, % 11,690, ,899, ,791, % Hotel Tax 1,768, , ,236, % 1,669, , ,158, % Business Licenses 1,218, , , % 1,202, , ,142, % Franchise Fees 1,733, , ,462, % 1,581, , ,321, % Residential Development Tax 5, , , % 5, , , % Other Taxes 16,759, ,550, ,208, % 16,502, ,849, ,652, % Construction Permits 1,115, , , % 1,091, , , % Police Permits 21, , , % 20, , , % Other Permits 15, , , % 15, , , % License & Permits 1,152, , , % 1,127, , , % Vehicle License Fees 23, , % 21, , % Grants 344, , , % 250, , , % Other Revenue 13, , % 166, , % Intergovernmental Revenue 381, , , % 438, , , % General Government 240, , , % 206, , , % Zoning & Subdivision 191, , , % 190, , , % Plan Checking Fees 186, , , % 188, , , % Engineering Fees, Inspections & Other 97, , , % 80, , (3,656.61) 104.6% Parks & Recreation 2,023, , ,074, % 1,983, ,227, , % Police Services 99, , , % 98, , , % Other Service Charges 82, , , % 82, , (741.23) 100.9% Service Charges 2,920, ,434, ,486, % 2,828, ,701, ,126, %.66 Fines & Forfeitures 220, , , % 220, , , % Code Enforcement Fines 200, , , % 195, , , % Parking Fines 90, , , % 80, , , % Penalties 15, , , % 15, , , % Fines & Forfeitures 525, , , % 510, , , % Investment Earnings 110, (5,490.52) 115, % 50, , (31,651.63) 163.3% Rents 430, , , % 425, , , % Sale of Property 1, , % 1, % Use of Money & Property 541, , , % 476, , , % Private Donations/Contributions 13, , , % 13, , , % Miscellaneous Reimbursements 29, , (13,077.39) 144.6% 55, , , % Bad Debt Writeoffs % % Other 17, , , % 18, , , % Misc Revenue 60, , , % 87, , , % Other Financing Sources 1,359, , , % 1,275, , , % Grand Total 37,700, ,427, ,273, % 36,580, ,100, ,480, % 4

5 Expenses Department 10 Central Administration Division 100 City Council Division 110, 112, 120 City Manager Division 130 City Clerk Division 140, 141, 142 City Attorney Department 10 Central Administration Totals Department 15 Administrative Services Division 150 ASD Administration Division 160 Human Resources Division 170 Finance Division 180 Information Technology Division 190, 191, 192, 193, 194, 195, 196, 197 City Wide Programs Department 15 Administrative Services Totals Department 20 Police Division 201, 202, 203, 205, 206 Police Administration Division 211, 212 Technical Services Division 222 Professional Standards Division 231 Criminal Investigations Division 241, 245, 246 Patrol Division 252 Traffic Operations Division 280, 281, 282, 283, 284, 286, 290 Special Police Services Department 20 Police Totals Department 40 Community Development Divisions 401, 403 CDD Administration Division 414, 415 Code Enforcement Division 421, 422, 423 Planning Division 430 Clerical Support Services Division 441 Building Inspection Department 40 Community Development Totals Department 50 Public Works Division 501, 502 Traffic & Engineering Administration Division 510 Private Project Engineering Division 521 Capital Projects Engineering Public Works Engineering Division 531 Maintenance Administration Division 541, 544 Street Maintenance Division 551 Traffic Operations Division 561 Median Island Maintenance Division 571, 572 Parks Maintenance Division 591, 592, 593, 594, 595, 596, 597 Building Maintenance Public Works Maintenance Department 50 Public Works Totals Department 60 PRCS Division 601, 605, 606, 607, 608 Administration Division 612 Lu Sutton Child Care Division 627 Museum Administration & Classes Division 631, 632 Senior Citizen Programs Division 641, 642 Athletic Programs Department 60 PRCS Totals Department 00 Non Departmental Totals Grand Total FY17/18 Budget Encumbrances 12/31/2017 Remaining % Expended FY16/17 Budget 12/31/2016 Remaining % Expended 79, , , % 81, , , % 1,211, , , , % 1,011, , , % 556, , , % 319, , , % 561, , , % 486, , , % $2,408, $99, $967, $1,440, % 1,898, , , % 253, , , % 310, , , % 790, , , % 768, , , % 732, , , , % 705, , , % 1,203, , , , % 1,152, , , % 2,901, ,893, ,008, % 2,249, ,488, , % $5,881, $10, $3,338, $2,532, % 5,185, ,016, ,168, % 1,291, , , % 1,210, , , % 2,003, ,010, , % 1,790, , , % 479, , , % 423, , , % 924, , , % 888, , , % 7,751, , ,841, ,897, % 7,364, ,812, ,552, % 756, , , % 704, , , % 1,111, , , % 1,070, , , % $14,317, $11, $7,587, $6,717, % 13,453, ,093, ,359, % 333, , , % 208, , , % 392, , , % 361, , , % 900, , , % 854, , , % 348, , , % 334, , , % 641, , , % 605, , , % $2,616, $0.00 $1,339, $1,276, % 2,363, ,148, ,215, % 774, , , , % 721, , , % 336, , , , % 330, , , % 388, , , , % 343, , , % 2,273, , ,015, , % 1,396, , , % 320, , , % 326, , , % 1,324, , , , % 1,294, , , % 450, , , % 438, , , % 365, , , , % 352, , , % 1,567, , , % 1,512, , , % 1,359, , , , % 1,306, , , % 8,279, , ,773, ,383, % 5,231, ,624, ,606, % $6,887, $262, $3,136, $3,488, % 6,627, ,219, ,408, % 798, , , , % 915, , , % 806, , , , % 781, , , % 7, , , % 9, , , % 433, , , , % 347, , , % 1,481, , , , % 1,383, , , % $3,527, $209, $1,655, $1,662, % 3,436, ,708, ,728, % $3,174, $0.00 $2,083, $1,091, % 4,886, ,064, ,822, % $38,814, $594, $20,109, $18,209, % 37,851, ,196, ,654, % 5