CITY OF SAN MATEO. Administrative Report

Transcription

1 CITY OF SAN MATEO City Hall 330 W. 20th Avenue San Mateo, CA Administrative Report Agenda Number: 9., Status: Passed TO: FROM: PREPARED BY: City Council Larry A. Patterson, City Manager Finance Department MEETING DATE: Tuesday, February 21, 2017 SUBJECT: Fiscal Year Mid-Year Financial Summary RECOMMENDATION Accept the fiscal year mid-year financial summary and adopt a Resolution to authorizie the addition of 1.0 Full Time Equivalent position for Battalion Chief in the Fire Department. BACKGROUND This report summarizes the City s mid-year financial status by providing an analysis of revenues and expenditures through the first half of the fiscal year for the General, Sewer, Golf, Construction Services, and Workers Compensation Funds. The intent of this report is to provide Council with a brief update on how these funds are performing in comparison to the adjusted budget. This information will be supplemented by a more in-depth financial presentation to set the context for Council s goal-setting session. ANALYSIS General Fund Through mid-year, total revenues are on track to exceed budgeted amounts by approximately $2.5 million. This is predominantly being driven by property taxes and property transfer taxes being higher than projected. Current fiscal year revenue estimates are still preliminary and will continue to be refined during the budget development process, with a final estimate for fiscal year revenues being included in the recommended budget. While the overall revenue picture continues to be positive, there are a couple of areas where revenue estimates will need to be revised downward. One of those areas is sales tax, where the final impact of the State s Triple Flip mechanism occurred in fiscal year and resulted in a positive clean up payment to the City. Now back to receiving the standard 1% local sales tax, minus the 5% share that goes to the County, the sales tax baseline looks to be closer to approximately $19 million as opposed to the original projection of $19.6 million. The other revenue source that requires a downward adjustment is the permits, fees, and fines category. The adopted budget included an increased baseline for this revenue source to reflect the additional resources included in the budget for traffic safety activities. Due to staffing constraints in the Police Department that are attributable to a large number of officers being out on workers compensation, as well as the number of officer recruits in training, resources have had to be diverted out of the traffic safety area in order to meet minimum staffing levels on patrol. This has impacted revenues during the first half of the fiscal year, and this trend is expected to continue in the second half. In addition, revenue associated with the automated traffic enforcement program has been lower than projected in part due to fewer violations occurring over the last year. This is a positive outcome, as the goal of the program is to eliminate violations at these intersections. Overall, revenues in this category are expected to be down approximately $750,000 from CITY OF SAN MATEO Page 1 of 3 Printed on 3/16/2017 powered by Legistar

2 Agenda Number: 9., Status: Passed original projections. Expenditures are tracking within budgeted amounts through mid-year. Departmental operating budgets, with the exception of the Fire Department, are on track to meet budget expectations. Overtime in the Fire Department is tracking well above budgeted amounts due to deployments to activities outside of the City of San Mateo, which are reimbursable events, and several fire personnel being out on workers compensation, which requires a backfill on overtime. Staff will continue to monitor this situation and will likely return to Council later in the fiscal year to request a supplemental appropriation for Fire. One additional action being requested through this report for the Fire Department is to add 1.0 FTE (Battalion Chief). This position is currently budgeted in the Foster City budget, with the City of San Mateo paying twothirds of the salary and benefits costs through a reimbursement to Foster City. With the retirement of the existing Battalion Chief from Foster City, the FTE will move to the City of San Mateo, with Foster City reimbursing San Mateo for one-third of the cost. As such, there is no net fiscal impact to the City of San Mateo for taking this action. Sewer Fund Operating expenses through December are flat to last year and are tracking to expected amounts. Significant capital expenses related to the Clean Water Program, which are not a part of the operating budget, are continuing to accelerate as projects within that program get underway. Sewer service charge revenue is slightly below the amount collected through December of last fiscal year, and revenue projections for this fiscal year will need to be adjusted downward. This reflects the impact of water conservation on revenue collections in this fund, as increases in rates have not yielded corresponding increases in revenue because sewer charges are based on water usage. While this does not have an immediate negative impact, it is of increasing concern, as an increased revenue baseline is required to qualify for financing for the Clean Water Program. City staff is currently working to develop proposed rates for the next fiscal year that will meet revenue requirements. Staff has also held two study sessions on alternative rate structures and revenue requirements for this fund in anticipation of submitting applications to the State Revolving Loan Fund for Clean Water Program Financing. Golf Fund Golf Fund expenses, which include nearly $675,000 in debt service, are tracking to expectations through midyear. Fee revenue through December, however, is down in comparison to last year. A transfer from the General Fund in the amount of $450,000 was budgeted for fiscal year 2016/17 to address an expected cash shortfall in this fund. Should revenues continue to track below expectations, an additional transfer may be required. Staff will continue to closely monitor golf operations and will return to Council later in the fiscal year if necessary to request an additional General Fund contribution. Construction Services Fund Expenditures in this fund are up over last fiscal year through December; however, this was expected given the continued high level of development activity underway in the City. Overall, expenditures are tracking to budgeted amounts. Revenues are tracking above budgeted amounts for this fiscal year but are down 10 percent from last year through December. This is not necessarily an indicator of a slowdown in activity, as revenues over the past several years have been well above the historical baseline. Workers Compensation Fund Expenses in this fund are tracking well above budgeted amounts, as year-to-date claims expenses are well above historical averages for the first six months of the calendar year. Additionally, the amount of our liability for our outstanding claims has also increased from last fiscal year, resulting in an additional $1.4 million expense to the fund. As a result, it is expected that this fund will finish with negative fund balance this fiscal year if no action is taken. To mitigate this, a fund transfer will be made from another internal service fund, the CITY OF SAN MATEO Page 2 of 3 Printed on 3/16/2017 powered by Legistar

3 Agenda Number: 9., Status: Passed Fleet and Equipment Replacement Fund. This transfer is intended as a loan between the two funds and will be repaid when the Workers Compensation Fund is in better financial position. Starting in fiscal year , collections from the operating departments to fund the Workers Compensation Fund will have to be increased. This will result in additional operating costs to the General Fund, as the majority of the workers compensation claims experience comes from General Fund operations. BUDGET IMPACT There is no budgetary impact resulting from this report. The financial status of the General Fund for the current year, as well all other City funds, will continue to be monitored, with updated final estimates incorporated into the fiscal year recommended budget. ENVIRONMENTAL DETERMINATION Under section of the CEQA Guidelines, this item is not a project subject to CEQA review because it is being presented for informational purposes only. NOTICE PROVIDED All meeting noticing requirements were met. ATTACHMENTS Att 1 - Proposed Resolution STAFF CONTACT Drew Corbett, Assistant City Manager dcorbett@cityofsanmateo.org (650) CITY OF SAN MATEO Page 3 of 3 Printed on 3/16/2017 powered by Legistar

4 City of San Mateo Mid-Year Financial Update February 21,

5 Key Messages 1. We are doing well financially Property tax-driven revenue growth Strong reserve levels Short-term outlook remains positive 2. There are several challenges in front of us Revenue volatility and growth rates Pension cost increases Competing resource demands Issues in other funds 2

6 General Fund Update 3

7 General Fund Revenues Property tax 43% of total General Fund Up $1.2 million over original forecast Higher assessed valuation base Excess ERAF Sales tax 16% of total General Fund (local 1% amount) Down $700,000 from original forecast Projected growth not materializing 4

8 General Fund Revenues Property Transfer Tax 9% of total General Fund Tracking $1.75 million over original forecast High number of large transactions in 2016 Transient occupancy tax (TOT) 6% of total General Fund Tracking to original forecast Expecting to be relatively flat to

9 General Fund Expenditures Mid-year adjusted budget: $111.6 million Up $1 million over adopted budget Encumbrance carryover from Additional impact of contract with Fire employees Current estimate is for ~$5.5M surplus Original budgeted surplus: $3.6M 6

10 Pension Update 7

11 Unfunded Liabilities Have increased significantly CalPERS investment returns 2.4% in 2015 and 0.6% in 2016 Changes in actuarial assumptions Discount rate reduction from 7.5% to 7.0% Adds $37M to unfunded liability 8

12 Employer Contribution Rates Safety 75% 70% 65% 60% 55% 50% 45% 40% Dec-16 Feb-17 9

13 Employer Contribution Rates Miscellaneous 40% 35% 30% 25% 20% 15% 10% Dec-16 Feb-17 10

14 Payment on Unfunded Liability Report Date 12/12/16 Est. 2/10/17 Est. $ Increase FY 17/18 $11.3M $11.3M -- FY 18/19 $13.2M $13.2M -- FY 19/20 $15.1M $15.4M $300K FY 20/21 $16.2M $17.1M $900K FY 21/22 $17.6M $19.5M $1.9M FY 22/23 $18.8M $21.7M $2.9M FY 23/24 $19.8M $23.2M $3.4M FY 24/25 $20.7M $24.7M $4.0M 11

15 General Fund Financial Plan 12

16 Preliminary General Fund Plan Includes the following: All known increases to CalPERS costs Assumed annual salary increases Annual pension funding above CalPERS requirement $2.6 million in additional capital for Priority projects such as high voltage streetlights $2 million in annual additional capital from 2019 Full funding for housing set-aside 13

17 Preliminary General Fund Plan Estimate Plan Plan Revenues $117.1 $116.7 $119.4 Expenditures $111.6 $117.7 $122.3 Surplus/(Deficit) $5.5 ($1.0) ($2.9) Total Fund Balance $64.1 $63.1 $ Plan Plan Plan $122.7 $126.0 $129.4 $126.3 $130.2 $134.4 ($3.5) ($4.2) ($5.0) $56.6 $52.4 $ % Operating Reserve $25.5 $26.5 $27.4 Housing Set-Aside $3.1 $3.8 $4.5 Remaining Fund Balance $35.5 $32.8 $28.3 $28.4 $29.4 $30.5 $5.3 $6.1 $7.0 $22.9 $16.8 $9.9 14

18 Preliminary General Fund Plan Plan Plan Plan Plan Plan Plan Revenues $132.9 $136.5 $140.2 $144.1 $148.1 $151.7 Expenditures $138.7 $142.2 $145.7 $148.3 $151.9 $155.1 Surplus/(Deficit) ($5.8) ($5.7) ($5.5) ($4.2) ($3.8) ($3.4) Total Fund Balance $41.5 $35.8 $30.4 $26.2 $22.4 $ % Operating Reserve $31.6 $32.4 $33.3 $33.9 $34.8 $35.7 Housing Set-Aside $7.8 $8.7 $9.7 $10.7 $11.7 $12.7 Remaining Fund Balance $2.1 ($5.3) ($12.6) ($18.4) ($24.1) ($29.3) 15

19 Other Funds 16

20 Sewer Fund Revenues tracking below expectations Rate structure based on water consumption Down due to drought 2017/18 rates in development Expenses tracking to budgeted amounts Clean Water Program ramping up 17

21 Golf Fund Fee and driving range revenue tracking below last fiscal year Expenditures tracking to expectations Includes $675,000 in debt service $450,000 transfer from General Fund to support operations May not be enough based on revenue outlook 18

22 Construction Services Fund Mid-year revenues exceeding expectations Down 10% from last fiscal year through December Not necessarily indicative of slow down Expenditures tracking to budget Significant fund balance For services to be provided 19

23 Workers Compensation Fund Claims expense significant through mid-year Well above a typical year Claims liability adjusted upward $1.4M Will require fund transfer from another internal services fund Collections into Workers Compensation Fund to be increased starting 2017/18 20

24 Gas Tax Fund Gas tax revenues driven by consumption Revenues not sufficient to meet historical expenditure baseline $1.5 million for offset to street maintenance operations $1.2 million for street rehabilitation Funds for street rehabilitation to be reduced in budget From $1.2 million to $400,000 in $650,000 annually from

25 CIP Update budget focused on update to 5-year CIP Many priority initiatives Clean Water Program Infrastructure Traffic 22