Director of Finance Report CITY OF TACOMA Finance Department Robert K. Biles Director of Finance
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, 2011. 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, 2011 20,947,661 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, 2011 23,369,140 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
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
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 2011 2013 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 $104,367. 6. Fines and Forfeitures Penalties and Interest on Business Taxes are below projections by $196,023. 7. 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
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 31 2011 (In Thousands) Adjustment (2) Revenues Biennium To Date 2011-2012 Revenues Biennium To Date 2011-2012 Ending Fund Balance/Net Assets 0010 (1) General Fund $39,995 $73 $10,798 $17,475 $110,505 $112,215 $38,358 1020 Courts Special Revenue Fund 35 - - 26 94 84 45 1030 Contingency Fund 1,151-2 3 16 5 1,162 1060 Streets - Special Revenue Funds 10,193 58,866 3,332 1,352 20,347 9,677 79,729 1090 Fire Dept Special Revenue Funds (929) 225 332 84 1,384 743 (64) 1100 PW Facilities Right of Way Streets 469-2 7 203 35 638 1110 Local Improvement Guaranty 2,787 8 19 13 236 79 2,952 1140 PW Engineering Paths & Trails Reserve 512 277 2 1 14 9 794 1145 PW Building & Land Use 6,968-14 13 224 257 6,935 1155 EMS Special Revenue Fund 9,104 10 230 998 6,822 7,530 8,406 1180 Tourism & Conventions 886-304 1 1,224 1,540 571 1185 HRHS Special Revenue Funds 804-114 147 1,864 1,087 1,582 1195 CED Economic Development Grants 14,666 22 623 683 4,573 3,873 15,388 1200 Library Special Revenue Funds 5,616 4 11 10 177 122 5,675 1236 Finance HALO 121 - - - - - 121 1267 Police Special Revenue Funds 1,036 8 164 161 1,457 1,130 1,372 1431 IT Municipal Cable TV 2,499 409 314 106 1,957 1,224 3,641 1500 Human Resources Special Rev 247-1 8 70 167 151 1600 City Manager's Office Special Revenue Grant - 199 61 28 430 430 199 1650 Traffic Enforcement Engineering - - 242 433 1,882 2,751 (869) 2010 UTGO Bond Redemption 2002 1,522-8 - 1,178 586 2,114 2035 Non-Voted GO Bonds 297-297 297-2038 CTED PW Trust Fund Loans - 1,153 1,153 1,153 1,153-2039 LTGO Refunding Bonds 2001 26-26 26-2040 LTGO Bonds 2009 110-901 - 1,657 719 1,048 2041 LTGO Bonds 2010 23 - - - 1,371 1,386 8 3209 1997 Bond Issue (50) 1,045 - - 1 180 816 3211 Capital Projects Fund 13,655 5,145 1,581 860 4,097 1,958 20,939 3216 Police Facility (4,104) - - 21 1 63 (4,166) 3217 Parking Garage Capital Projects 61 173 187-471 282 423 3218 2009 LTGO Bond Capital Projects 28,490 18,342 780 952 17,536 15,995 48,373 3220 2010 LTGO Bonds Capital Projects 38,864 114 53 656 550 2,040 37,488 4110 Permit Services Fund (430) 6 392 520 2,323 4,067 (2,169) 4120 Mountain Rail 16,013-141 399 1,339 1,928 15,424 4131-CAPTL Thea Foss Waterway - Capital 670 (10) - - - - 660 4140 Parking Garages 38,517 6 357 464 3,345 3,660 38,208 4165 Convention Center & Bicentennial Pavilion 137 (17) 147 536 3,744 5,675 (1,810) 4170 Cheney Stadium 8,479-104 39 370 2,693 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
Fund Number Fund Description January 2011 Beginning Fund Balance/Net Assets Adjustment (2) Revenues Biennium To Date 2011-2012 Revenues Biennium To Date 2011-2012 Ending Fund Balance/Net Assets 4180 Tacoma Dome $23,324 - $496 $471 $3,053 $3,544 $22,833 4190 Performing Arts Funds 18,208-68 631 563 1,232 17,538 4200 Solid Waste 18,603-4,660 4,767 33,626 29,763 22,466 4300 Wastewater 281,498-4,648 4,261 31,735 30,695 282,538 4301 Surface Water 74,158-2,281 2,045 15,496 14,044 75,610 4450 Union Station Funds 957-212 213 1,482 1,485 954 4500 Tacoma Rail 13,609-2,117 1,511 13,099 11,488 15,219 4600 Tacoma Water 417,695 731 5,534 6,417 39,168 40,502 417,093 4700 Tacoma Power 744,736-32,305 27,923 255,517 210,289 789,964 4800 Self Insurance Claims 1,943-69 31 496 329 2,110 4850 Conservation Project (22,503) - 5 2 37 (22,538) 5007 Finance 1,774-231 159 1,204 1,151 1,828 5016 Finance Budget and Research 1,401-50 54 399 538 1,263 5027 Business Systems Improvement Project 78 - - - 3-81 5042 Graphic Services 175-369 235 1,031 1,545 (339) 5050 TPU Fleet Services 42,470-645 534 4,862 3,890 43,442 5086 Youth Build Tacoma 209-1 1 13 10 211 5400 Equipment Rental 22,830-822 832 6,798 6,877 22,750 5453 Asphalt Plant 245-52 32 244 182 307 5540 Comm Equipment Replacement Reserve 3,407-209 243 1,588 1,904 3,091 5550 Third Party Liability Claims (20,918) - 311 18,423 2,193 14,837 (33,562) 5560 Unemployment Compensation Fund 652-27 2 204 252 604 5570 Worker's Compensation Fund (3,354) - 615 383 4,616 2,863 (1,601) 5700 Facilities Management 10,691-490 424 3,836 4,324 10,203 5800 Information Systems 13,877-1,445 1,461 11,431 12,039 13,269 6050 Deferred Compensation Trust 265-68 7 208 91 382 6100 (3) (4) Tacoma Employees Retirement 1,081,019 - (7,666) 4,704 78,715 33,588 1,126,146 6120 Relief & Pension - Police 1,579-401 420 1,844 3,101 322 6150 Relief & Pension - Firefighters 648-551 548 3,498 3,791 355 6430 Health Care - Labor Management 6,421-4,794 432 33,850 25,125 15,146 6440 Group Life Trust 1,554-69 69 495 478 1,571 6460 Dental Care - Labor Management (180) - 499 388 3,532 3,711 (360) 6470 Health Care - Firefighters 761-326 - 1,992 1,088 1,665 6480 Health Care - Police 705-265 - 1,865 1,599 971 6660 Foss Waterway Dev Authority Agency 20,856 12 92 246 337 1,625 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 31 2011 (In Thousands) Page 5 of 10
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, 2011. 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 7/30/2010 4 3.5 3.74 3.77 4.12 3.98 3 2.94 2.82 2.5 2 2.3 2.09 1.5 1.6 1.35 1 0.5 0 0.84 0.55 0.55 0.36 0.29 0.14 0.16 0.15 0.2 0.16 0.2 1 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
Investments The Tacoma Treasury Investments Pool (TIP) Table below shows the investments as of July 31, 2011. 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 2010. Legal Investment Type Par Value as of July 31, 2011 Percent of Total Portfolio Concentration Limit Tacoma Treasury Investment Pool Bank Interest Bearing Accounts $ 5,163,528 0.48% 100.0% State Local Government Pool $ 87,034,927 8.01% 25.0% Secured Repurchase Agreements 0.00% 25.0% US Treasury Securities 0.00% 100.0% Bankers Acceptances $ 40,000,000 3.68% 20.0% Municipal Securities $ 270,525,000 24.91% 25.0% Federal Home Loan Mortgage Assn (Freddie Mac) $ 78,710,000 7.25% 50.0% Federal Agriculture Mortgage Corp (Farmer Mac) $ 12,090,000 1.11% 50.0% Federal Farm Credit Bank (Farm Credit) $ 43,000,000 3.96% 50.0% Federal Home Loan Bank (Home Loan) $ 229,790,000 21.16% 50.0% Federal National Mortgage Assn (Fannie Mae) $ 304,028,000 28.00% 50.0% Tacoma Treasury Investment Pool Subtotal: $ 1,070,341,455 Fund Specific Investments: Tacoma LID Warrant $ 3,000,000 0.28% 5.0% US Treasury Securities $ 1,109,000 0.10% 100.0% Secured Repurchase Agreements $ 8,761,250 0.81% 25.0% Municipal Securities $ 2,775,000 0.26% 25.0% Fund Investment Subtotal: $ 15,645,250 Tacoma Investments: $ 1,085,986,705 100.0% Page 7 of 10
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 2012. 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 2011. 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, 2011. 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 2006 07 the rate was at 5.00%. Page 8 of 10
8.00 Interest Rates on 2YR Treasury Notes January 1, 1999 to July 29, 2011 7.00 6.00 5.00 4.00 3.00 2.00 1.00 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 2011. 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
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 2011. 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 2010 2011 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) 2010 2011 2010 2011 2010 2011 January 471 312 102 52 369 260 February 152 151 79 52 73 99 March 175 194 104 66 71 128 April 217 215 79 38 138 177 May 214 163 65 46 149 117 June 168 177 87 48 81 129 July 221 239 52 12 169 227 Total 1,618 1,451 568 314 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