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 twenty three month period ending November 30, 2010. Executive Summary: General Fund Period to Date Budget Period to Date Actuals Variance Favorable/ (Unfavorable) Revenues $ 375,174,387 $ 374,002,130 $ (1,172,257) $ 387,347,666 $ 384,669,802 $ 2,677,864 $ (12,173,279) $ (10,667,672) $ 1,505,607 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. Projected revenues are based on revenue collection patterns over the last three years. Funds Report This is the monthly report of actual revenues and actual expenditures for all City funds. The report includes biennium to date revenues and expenditures and the effect of biennium todate activity on fund/net asset balance. Page 1 of 10
City of Tacoma, Washington Budget vs Actual Revenues and Monthly Financial Report General Fund For the Period Ended November 30, 2010 Biennium to Biennial Budget Date Budgeted Revenues and Biennium to Date Actual Revenues and Variance Favorable / (Unfavorable) REVENUES: Property Taxes $ 95,268,000 $ 90,877,526 $ 90,696,425 $ (181,101) Sales Taxes $ 76,325,000 $ 73,170,612 $ 73,148,538 $ (22,074) Business Taxes $ 80,594,000 $ 79,774,117 $ 78,448,413 $ (1,325,704) Utility Taxes / Other Taxes (1) $ 83,323,000 $ 78,817,153 $ 78,788,924 $ (28,229) Licenses & Permits $ 7,618,000 $ 7,478,152 $ 7,660,837 $ 182,685 Intergovernmental Revenues $ 17,931,000 $ 17,166,535 $ 18,090,053 $ 923,518 Charges for Services $ 5,699,000 $ 5,388,822 $ 4,507,014 $ (881,808) Fines & Forfeits $ 10,717,000 $ 10,281,645 $ 9,509,792 $ (771,853) Miscellaneous Revenues $ 12,384,000 $ 12,219,825 $ 13,152,134 $ 932,309 Cash Balance (2) $ 16,523,053 N/A N/A N/A Revenue Subtotal $ 406,382,053 $ 375,174,387 $ 374,002,130 $ (1,172,257) Offset for Revenue Adjustments $ 37,047,150 N/A N/A N/A TOTAL REVENUES $ 443,429,203 $ 375,174,387 $ 374,002,130 $ (1,172,257) EXPENDITURES: City Council $ 1,366,000 $ 1,301,864 $ 1,426,419 $ (124,555) City Manager $ 2,363,000 $ 2,252,054 $ 2,224,734 $ 27,320 Community Economic Development $ 10,689,000 $ 10,187,136 $ 9,818,036 $ 369,100 Finance $ 5,901,000 $ 5,623,939 $ 6,041,664 $ (417,725) Fire $ 91,620,000 $ 87,318,305 $ 88,111,046 $ (792,741) Government Relations $ 831,000 $ 791,984 $ 701,546 $ 90,438 Hearing Examiner $ 764,000 $ 728,129 $ 707,443 $ 20,686 Human Resources $ 2,372,000 $ 2,260,631 $ 2,574,624 $ (313,993) Human Rights/Human Services $ 12,734,000 $ 12,136,120 $ 11,534,625 $ 601,495 Legal $ 7,233,000 $ 6,893,400 $ 6,766,793 $ 126,607 Library Operations $ 22,517,684 $ 21,460,446 $ 21,370,402 $ 90,044 Municipal Court $ 8,242,000 $ 7,855,026 $ 8,063,552 $ (208,526) Police $ 143,978,000 $ 137,218,019 $ 138,112,526 $ (894,507) Public Works $ 42,714,000 $ 40,708,514 $ 40,633,813 $ 74,701 Non Departmental $ 16,100,596 $ 14,968,517 $ 12,597,852 $ 2,370,665 Transfers Interfund $ 26,868,783 $ 25,607,254 $ 23,948,399 $ 1,658,855 Transfers Outside Agencies $ 10,136,102 $ 10,036,328 $ 10,036,328 $ Expenditure Subtotal $ 406,430,165 $ 387,347,666 $ 384,669,802 $ 2,677,864 Offset for appropriation adjustment $ 37,047,150 N/A N/A N/A TOTAL EXPENDITURES $ 443,477,315 $ 387,347,666 $ 384,669,802 $ 2,677,864 BEGINNING UNRESERVED FUND BALANCE $ 27,500,000 $ 27,500,000 $ 27,500,000 $ RE ALLOCATION OF RESERVED FUNDS $ 3,300,000 $ 664,000 $ 664,000 $ RESTATED BEGINNING UNRESERVED FUND BALANCE $ 30,800,000 $ 28,164,000 $ 28,164,000 $ REVENUES OVER(UNDER) EXPENDITURES PLUS USE OF CASH BALANCE $ (16,571,165) $ (12,173,279) $ (10,667,672) $ 1,505,607 ENDING UNRESERVED FUND BALANCE $ 14,228,835 $ 15,990,721 $ 17,496,328 $ 1,505,607 (1) Gross Earnings Taxes on utilities are estimated based on the prior three years of activity. (2) Cas h Balance is not considered a revenue so no va ria nce is calculated for it. Page 2 of 10
Fund Number Fund Description City of Tacoma Funds Report Revenues and by Fund For the Twenty Three Month Period Ended November 30, 2010 (In Thousands) January 2009 Beginning Fund Balance/Net Assets Adjustment (9) Page 3 of 10 Revenues Biennium To Date 2009-2010 Revenues Biennium To Date 2009-2010 Ending Fund Balance/Net Assets 0010 (1) General Fund $52,405 (427) $28,789 $17,067 $374,002 $384,670 $41,310 1020 Courts Special Revenue Fund 31-18 10 279 208 102 1030 Contingency Fund 1,609-2 - 1,597 2,051 1,155 1060 Streets - Special Revenue Funds 11,167 30,717 1,263 165 48,212 3,619 86,477 1090 Fire Dept Special Revenue Funds (1,185) (53) 50 32 2,283 1,869 (824) 1110 (2) Local Improvement Guaranty 3,004 - (1) 13 283 309 2,978 1140 PW Engineering Paths & Trails Reserve 498 (595) 2-874 3 774 1145 (3) PW Building & Land Use 8,166 - (117) (225) 1,734 3,558 6,342 1155 EMS Special Revenue Fund 7,413 (105) 3,636 1,048 24,302 22,477 9,133 1180 Tourism & Conventions 448-277 1,641 5,798 6,001 245 1185 HRHS Special Revenue Funds 625-169 146 4,340 3,378 1,587 1195 CED Economic Development Grants 15,816 (36) 477 379 17,432 17,483 15,729 1200 Library Special Revenue Funds 4,935 (304) 11 3 1,324 334 5,621 1236 (4) Finance HALO 371 (248) - (247) (17) (14) 120 1267 Police Special Revenue Funds 778 (64) 219 126 6,247 5,155 1,806 1300 (5) Foss Waterway Dev Authority Spec Rev (2) - - - - (2) - 1400 Legal Special Revenue Fund - - - - 3 3-1431 (6) IT Municipal Cable TV 950-236 272 4,982 4,585 1,347 1431-PEGSP IT Special PEG Support 722-45 12 961 132 1,551 1500 Human Resources Special Rev - 248-13 318 329 237 1600 City Manager's Office Special Revenue Grant - - 94 4 692 226 466 2010-02UTG UTGO Bond Redemption 2002 961-934 - 5,353 3,463 2,851 2035-97AB LTD GO Bonds 1997 A&B - - - - 1,251 1,251-2039 LTGO Refunding bonds 2001 - - - - 2,399 2,399-2040 LTGO Bonds 2009 - - - 10 1,675 675 1,000 2041 (7) LTGO Bonds 2010 - - - (3) - (3) 3 3209 1997 Bond Issue 91 1,009 - - 7 51 1,056 3211 Capital Projects Fund 33,576 (8,518) 337 513 30,991 37,057 18,992 3216 Police Facility (3,889) (130) - - 189 273 (4,103) 3217 Parking Garage Capital Projects 2,401 (4,025) - - 3,480 1,341 515 3218 2009 LTGO Bond Capital Projects - - 2,643 2,588 58,722 11,839 46,883 3220 2010 LTGO Bonds Capital Projects - - 83,374 44,327 83,374 44,327 39,047 4100 Airport 250 - - - 8 97 161 4110 Permit Services Fund - - 204 462 3,643 4,894 (1,251) 4120 Mountain Rail 10,388-51 176 10,285 4,968 15,705 4131-CAPTL Thea Foss Waterway - Capital 629 29 - - 12-670 4140 Parking Garages 19,751 (3) 625 527 26,690 7,471 38,967 4165 Convention Center & Bicentennial Pavilion 6,308-2,475 465 15,912 20,192 2,028 4170 (8) Cheney Stadium 7,434 (274) 53 49 490 (833) 8,483 Modified Accrual Basis (1) This report includes reserved and unreserved fund balances. General Fund reserved fund balance at January 1, 2009 and November 30, 2010 were $24,871 and $23,814 respectively. Unreserved fund balances at January 1, 2009 and November 30, 2010 were $27,534 and $17,496 respectively. (2) Negative revenue is due to amortization expense recorded against investment revenue. (3) Negative revenue is due to an adjustment to miscellaneous income from infractions. Negative expenditures are due to an adjustment of a claim paid in a prior period. (4) Biennium to date negative revenues are due to transferring amounts to the new LEAP fund. Negative expenditures are due to a prior period correction. (5) The credit to biennium to date expenditures is a result of transferring cash back to fund 1300 for leasehold tax payments. (6) In October 2010 there was a correction made to this report, in Fund 1431 IT Municipal Cable TV, for biennium to date revenue and expense. (7) Negative expenditures are due to the refunding of a 2009 note. (8) Biennium to date negative expenses are due to a transfer of $2.3 million to the Capital Projects fund for Cheney Stadium Phase II Assets. (9) Prior year and balance sheet account adjustments.
Fund Number Fund Description City of Tacoma Funds Report Revenues and by Fund For the Twenty Three Month Period Ended November 30, 2010 (In Thousands) January 2009 Beginning Fund Balance/Net Assets Adjustment (9) Revenues Biennium To Date 2009-2010 Revenues Biennium To Date 2009-2010 Ending Fund Balance/Net Assets 4180 Tacoma Dome $26,128 $5 $300 $604 $10,302 $11,549 $24,886 4190 Performing Arts Funds 18,365-9 91 2,594 2,932 18,027 4200 Solid Waste 6,395-4,455 4,370 109,796 106,267 9,924 4300 Wastewater 264,019-4,049 4,241 105,910 94,281 275,648 4301 Surface Water 62,377-2,406 1,998 49,458 40,283 71,552 4450 Union Station Funds 963-223 223 5,240 5,246 957 4500 Tacoma Rail 12,864-1,268 1,378 32,189 32,344 12,709 4600 Tacoma Water 404,010-5,302 6,367 138,956 127,815 415,151 4700 Tacoma Power 695,304-26,145 29,153 735,521 672,288 758,537 4800 (10) TPU Self Insurance - 2,910 33 (24) 822 981 2,751 4850 Conservation Project (9,123) (13,265) - 5 5 115 (22,498) 5007 Finance 4,626 254 190 186 4,009 7,141 1,748 5016 (11) Finance Budget and Research 1,515 - (133) 43 1,276 1,390 1,401 5027 Business Systems Improvement Project 64-1 - 15-79 5042 Graphic Services 529-196 187 3,574 3,791 312 5050 TPU Fleet Services 39,234-814 561 17,021 12,704 43,551 5086 Youth Build Tacoma 200 - - - 396 388 208 5400 Equipment Rental 24,613-596 762 16,270 17,925 22,958 5453 (12) Asphalt Plant 361 - (25) (27) 2,040 2,099 302 5540 Comm Equipment Replacement Reserve 3,392-5 158 5,921 5,983 3,330 5550 (13) Third Party Liability Claims (40,196) - 321 475 7,365 (17,623) (15,208) 5560 Unemployment Compensation Fund 5,036-27 3 1,315 5,550 801 5570 Worker's Compensation Fund (2,182) - 616 827 15,224 15,211 (2,169) 5700 Facilities Management 10,613-162 374 11,089 10,926 10,776 5800 Information Systems 10,122 156 1,469 1,646 36,289 38,510 8,057 6050 Deferred Compensation Trust 491 (353) 61 77 457 342 253 6100 (14) Tacoma Employees Retirement 763,725 327,772 30,227 5,233 58,170 101,360 1,048,307 6120 Relief & Pension - Police 3,067 1,495 3 386 6,304 8,837 2,029 6150 Relief & Pension - Firefighters 552 437 521 529 10,092 10,121 960 6430 Health Care - Labor Management 10,401 21 4,413 483 92,096 89,505 13,013 6440 Group Life Trust 1,489-71 72 1,573 1,509 1,553 6460 Dental Care - Labor Management (540) 665 457 334 10,032 10,111 46 6470 Health Care - Firefighters 1,256-293 1 4,312 4,510 1,058 6480 Health Care - Police 1,133-235 1 4,718 4,812 1,039 6570 LESA 636 2,650 133 1,166 34,140 33,481 3,945 6660 (15) Foss Waterway Dev Authority Agency 20,744 - (33) 86 2,864 3,504 20,104 TOTAL $2,527,834 $339,968 $210,676 $131,542 $2,277,482 $2,062,024 $3,083,260 Modified Accrual Basis (10) Negative expense is due to an accrual reduction for incurred but not reported claims. (11) Revenues in November were negative as a result of a prior period adjustment to Interfund service revenue. (12) Negative revenues and expenses are due to a prior period correction to interfund charges for services. (13) Negative expense is due to the reversal of the 2007 accrual for a legal challenge to the City's billboard regulations. (14) Tacoma Employee's Retirement System also presents reports based on market values. (15) Revenues in November were negative due to an adjustment to prior period lease revenue. Page 4 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. Safety of principal is very important to us and even more so in this current time of financial and credit crisis. The City s investments are limited to those specified by State statute. Interest Rates In this economic cycle short term interest rates continually fell from September 2007 through December 2009 as there were a series of cuts in Federal Funds rates from 5.25% to the current 0.0% to 0.25%. These rate cuts were primarily due to the subprime mortgage crisis, followed by the credit liquidity crisis, which led into the banking crisis; as well as the fears which arose during the economic downturn with only limited signs of a recovery in the near future. The interest rate curve has flattened in 2010 and the two yield curves for November 2009 and below mirror each other, reflecting that interest rates have not changed much in the last twelve months. The following graph shows U. S. Treasury securities from the 3 month Treasury bill to the 30 year Treasury bond, comparing November 30, 2009 and November 30, 2010. For November 30, 2010 the 3 month Treasury bill is yielding a very low 0.155% and the 30 year is at 4.110%. 4.5 Historical Yield Curve 11/30/2010 11/30/2009 4 3.5 4.07 3.8 4.2 4.12 3 2.5 2.69 3.21 2.81 2 2.01 2.16 1.5 1.47 1 0.5 0 1.12 0.67 0.72 0.45 0.18 0.17 0.21 0.27 0.15 0.08 0.06 1 Month 3 Month 6 Month 1 Year 2 Year 3 Year 5 Year 7 Year 10 Year 20 Year 30 Year Page 5 of 10
Investments The Tacoma Treasury Investments Pool (TIP) table below shows the investments as of November 30, 2010. The investment par value was $1,202,436,574, investment cost was $1,196,140,972 and the market value was $1,200,057,000. The TIP went over $1 billion for the first time in August 2010 which is attributable to the $187,255,000 in proceeds from the 2010 power bond issue which closed in July 2010, the $73,650,000 2010B Water and $44,135,000 2010B Regional Water Supply System bond issues which closed in August 2010, and the $39,000,000 2010 LTGO bonds in. Legal Investment Type Par Value as of November 30, 2010 Percent of Total Portfolio Concentration Limit Tacoma Treasury Investment Pool Bank Interest Bearing Accounts $ 10,156,959 0.84% 100.0% State Local Government Pool $ 101,020,365 8.40% 25.0% Secured Repurchase Agreements 0.00% 25.0% US Treasury Securities 0.00% 100.0% Bankers Acceptances $ 130,000,000 10.81% 20.0% Municipal Securities $ 234,145,000 19.47% 25.0% Federal Home Loan Mortgage Assn (Freddie Mac) $ 103,710,000 8.62% 50.0% Federal Agriculture Mortgage Corp (Farmer Mac) $ 22,090,000 1.84% 50.0% Federal Farm Credit Bank (Farm Credit) $ 31,640,000 2.63% 50.0% Federal Home Loan Bank (Home Loan) $ 145,240,000 12.08% 50.0% Federal National Mortgage Assn (Fannie Mae) $ 411,689,000 34.24% 50.0% Tacoma Treasury Investment Pool Subtotal: $ 1,189,691,324 Fund Specific Investments: US Treasury Securities $ 1,109,000 0.09% 100.0% Secured Repurchase Agreements $ 8,761,250 0.74% 25.0% Municipal Securities $ 2,875,000 0.24% 25.0% Fund Investment Subtotal: $ 12,745,250 Tacoma Investments: $ 1,202,436,574 100.0% Page 6 of 10
Interest Rate Outlook In 2009 and through 2010, the economy showed signs of a slow recovery. The current consensus forecast is there will be no raise in the federal funds rate until after December 2010 and possibly not until 2012. The Federal Reserve needs to keep rates low to spark the economic recovery. The March 16, 2010 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 was reaffirmed at Fed meetings since then. On November 3, 2010 the Fed announced quantitative easing of $600 billion between November and the end of June 2011. The Fed will be purchasing treasury securities in the open market, and this is expected to promote a stronger pace of recovery. The following are bullet points from the FOMC December 14, 2010 meeting: The benchmark 10 year U.S. Treasury note was at 2.797% on November 30, 2010. In the two weeks following, interest rates rose to near 3½ %. This was in response to higher supply, inflation fears, and the Federal Reserve quantitative easing which began in November and increased pricing volatility as dealers aggressively decreased risk in response to year end balance sheet constraints. The following graph shows the interest rates of 2 year U.S. Treasury Notes since 1999, and shows how low interest rates are now. In 2009 2010 the rate was below 1.00% and closed at a low of.476%. In 2006 2007 the rate was at 5.00%. Page 7 of 10
8.00 Interest Rates on 2YR Treasury Notes November 30, 1999 to November 30,2010 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 $90 million of additional interest earnings through September 2010. In 2000, and again in 2006, short term interest rates moved up rapidly due to Federal Reserve tightening policy. Both periods were followed by rapidly declining short term interest rates due to Federal Reserve loosening policy. Because TIP invests in longer term maturities, its earnings have less volatility and higher returns through the interest rate cycle. The TIP purchases appropriate investments depending on market and economic conditions. For the first three quarters of 2010, the TIP purchased $1.175 billion mostly in federal agency notes and taxable municipal general obligation bonds with an average yield of 1.95%. During this period the state LGIP average yield was.27%. For 2010 the TIP portfolio average yield was 2.37% and the LGIP was.27%. These numbers will be updated for all of 2010 in the January 2011 treasurer s report. Page 8 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 77 new businesses applied for licenses during the month of November for a year todate total of 2,142 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 2009 and 2010. 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. In 2010 July revenues in the amount of $727,000 were posted in August. Monthly B&O Tax Collections Comparison 2009 2010 Difference January $ 3,254,058.00 $ 3,374,712.00 $ 120,654.00 February $ 6,415,469.00 $ 6,045,154.00 $ (370,315.00) March $ 2,100,041.00 $ 1,743,732.00 $ (356,309.00) April $ 4,030,328.00 $ 4,314,642.00 $ 284,314.00 May $ 3,784,940.00 $ 3,000,944.00 $ (783,996.00) June $ 2,255,273.00 $ 2,215,525.00 $ (39,748.00) July $ 4,580,801.00 $ 3,821,268.00 $ (759,533.00) August $ 3,406,389.00 $ 4,218,146.00 $ 811,757.00 September $ 1,210,152.00 $ 924,776.00 $ (285,376.00) October $ 4,095,527.00 $ 4,198,390.00 $ 102,863.00 November $ 4,093,090.00 $ 4,373,708.00 $ 280,618.00 Total $ 39,226,068.00 $ 38,230,997.00 $ (995,071.00) Businesses Opening Businesses Closing Net Gain/(Decrease) 2009 2010 2009 2010 2009 2010 January 408 460 88 102 320 358 February 180 151 65 72 115 79 March 178 174 115 96 63 78 April 188 216 71 70 117 146 May 169 214 89 65 80 149 June 124 168 115 87 9 81 July 164 221 73 52 91 169 August 154 168 54 55 100 113 September 164 150 88 48 76 102 October 165 143 46 35 119 108 November 144 77 42 15 102 62 Total 2,038 2,142 846 697 1,192 1,445 Page 9 of 10
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