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HomeMy WebLinkAboutItem 4d: Resolution 6807: Fund Transfers Into Workers' Compensation/Liability Self-Insurance Fund and Equipment Replacement Fund pF ARc ar v rein ""4,An,cy Oct" ` STAFF REPORT Administrative Services Department DATE: December 6, 2011 TO: Mayor and City Council FROM: Donald Penman, City Manager Hue C. Quach, Administrative Services Director '..1'lah SUBJECT: Fiscal Year 2010-11 Year Ending Financial Results RESOLUTION NO. 6807 A Resolution of the City Council of the City of Arcadia, California, approving fund transfers as specified therein into the Workers' Compensation/Liability Self-Insurance Fund and the Equipment Replacement Fund as part of the Fiscal Year 2011-12 Operating Budget. Recommendation: Receive and File FY 2010-11 Year Ending Financial Results and Adopt Resolution No. 6807 SUMMARY Enclosed in Exhibit A is the Fiscal Year 2010-11 year ending financial results. Staff is happy to report that the Fiscal Year 2010-11 year ending numbers exceeded our initial surplus estimate during the Fiscal Year 2011-2012 budget process. As Council may recall, it was projected that the General Fund would end the fiscal year with a projected surplus of $1,105,525. That surplus was then "rolled over" and used to balance the FY 2011-12 General Fund Operating Budget. Since that point in time, staff has closed the 2010-11 fiscal year's financial statements and we are pleased to present to Council that the Fiscal Year 2010-11 ending surplus is a little over $2.4 million. The composition of the surplus is further detailed in the sections below. In general, the result was from higher than estimated revenue receipts of $513,268 and more expenditures savings of approximately $830,000. As a result of the surplus, staff is proposing Council to approve the transfer of funds of $1.0 million to the Worker's Compensation/Liability Self-Insurance Fund and $500,000 to the Equipment Replacement Fund. Mayor and City Council December 6, 2011 Page 2 DISCUSSION Enclosed as Exhibit A is the General Fund Summary reflecting the financial results at the end of Fiscal Year 2010-11. An overall surplus of $2,449,422 was a result of better revenue outcome but a larger share of the surplus was contributed to more savings from the expenditure side. As Council may recall, during the Fiscal Year 2011-12 budget preparation process, staff initially projected a surplus of $1,105,525. Since then, revenue receipts of $513,268 came in greater than then projected. Additional expenditure savings of $830,629 were further achieved to provide a surplus balance of $2,449,422 at the end of the Fiscal Year 2010-11. Revenue Part of the additional surplus came in the form of higher than expected revenues. The General Fund ended the year with higher total revenue of $513,268 than estimated. In general, the increases came from the areas of: License & Permits, Revenue from Other Agency, and Charge for Services. This represents a 1.1% change from our earlier estimates for total General Fund revenues. In the License & Permits category, revenue exceeded estimates by $330,952. These increases were mostly attributed by Plan Check Fees ($157,000), Building Permit Fees ($47,103), Mechanical & Electric Permit Fees ($28,803), and Water Efficient Landscape Fees ($53,778). Staff believes that these higher volumes corresponds to and are reflective of the current low mortgage rates and the strong demand for new large single family homes. The Revenue from Other Agency category exceeded estimates by $429,906. The two largest line items under this category are: Motor Vehicle License Fees ($234,591) and Prop A Maintenance ($169,844). Revenue from Motor Vehicle License Fees is based on a formula that ties the City's annual property tax valuation, population, and the amount of vehicle license fees collected State wide. This formula has benefitted the City as the City has had a steady increase in the property tax valuation even during the recession period. Our other line item, Prop A Maintenance is a County grant that the City is eligible for to use on Park maintenance. However, specific criteria need to be met in order to be eligible for such use. The amount of revenue received represents reimbursements of multiple years, so this increase should not be viewed as ongoing revenue at this level. • The last revenue group that exceeded estimated revenue comes from the Charges for Service area. In total, this category provided an additional $370,172 to the General Mayor and City Council December 6, 2011 Page 3 Fund. Most notable increases were from filming related services from our Fire and Police Department. Combined, both departments filming fees exceeded their year-end estimates by $122,000, however much of this revenue is offset by overtime costs incurred by the departments in staffing the filming. Two other areas that were above estimates were the Ambulance Charges, by $78,496 and Engineering Charges that was $64,938 higher. In total, revenues noted above are greater than the overall revenue surplus shown for the year ending. As one might guess, there were some areas that did not meet expected projections. Some of our major revenues were below the year end estimates. Property Taxes were approximately $110,000 (1.2%) below the estimated budget of $9.2 million. Sales Tax was $229,000 (2.6%) below the estimated budget of $8.8 million. And finally, our Utility User's Tax was $148,000 (2.8%) below the estimated budget of $5.3 million. So overall, while it is positive that General Fund revenues exceeded estimates, we must contain our enthusiasm with the fact that three of our largest revenue sources did not meet expectations. Expenditures As stated above, additional expenditure savings of $830,629 were achieved since staff's estimate during the Fiscal Year 2011-12 budgeting preparation. Departments were able to add to prior savings through $260,000 from Personnel related expenses; $106,000 from Supplies savings; $425,000 from Operating Expenditures - with most of this savings from contract services and lower than expected equipment replacement cost; and approximately $40,000 from Special Programs which budgets for community promotions, mailing, and various Parks & Recreation programs. Within the Personnel related category, mixed results from all departments sum up to the additional $260,000 savings. Notable in the mix were further savings from the Fire Department in their Overtime line items. Additional savings came from the Paramedics division with $40,457 and Suppression with $212,890. These savings were a result of filling all open positions in Paramedics and less than expected mutual aid responses in Suppression. The Police Department also contributed $94,055 towards the additional savings primarily in Administration and Patrol. Retirement and unfilled positions provided $55,680 from Administration and Patrol added $53,180 after netting the total salary savings of $117,000 against other benefits and the overtime overage of $54,000. The overtime overage was mainly due to Police Filming Services, which was noted in the revenue section above which brought in $152,000 in fees. Lastly, another significant figure that was in the mix is the result of the citywide vacation pay out and retiree medical premium. Combined, these two were $135,000 over estimated budget. These overages reflect recent retirements over the last two fiscal years. Mayor and City Council December 6, 2011 Page 4 The other category with significant savings of $425,000 was in Operating Expenditures. Noteworthy were the City Attorney contract savings of approximately $104,000 and Administrative Services with savings from Information Technology related contracts of $56,500, however this was offset by the Human Resources contract services that were over estimated budget by $42,000. The overages were due to legal counsel fees relating to labor negotiations and other Human Resources legal matters. Also as part of Operating Expenditures, there were large savings in the area of Equipment Replacement. In total, savings were approximately $237,000 citywide. The Fire Department's equipment replacement was under estimated budget by $74,000. The lower than expected cost was attributed to lower purchase cost for a replacement ambulance, coming under budget with Suppression equipments, and mobile data communication equipments. Police had savings of $51,000 which were partly from lower replacement cost to vehicles and communication equipments. The Library added $12,840 to overall savings by coming under budget in purchases of office equipment as well as deferring the purchase of book cases. Use of Surplus In total, the Fiscal Year 2010-11 General Fund Operating Fund ended with a surplus of $2,449,422. This balance is $1,343,897 greater than the estimated balance of $1,105,525 as projected during the Fiscal Year 2011-12 budget preparation for reasons noted in the revenue and expenditure sections above. As Council may recall, the projected surplus at the time of budget preparation was used as a "rollover" to cover the projected budget deficit for Fiscal Year 2011-12. With the current additional surplus as a result of year end, staff would propose transfers of funds to the Worker's Compensation/Liability Self-Insurance Fund and the Equipment Replacement Fund. During the Fiscal Year 2010-11, the Worker's Compensation/Liability Self-Insurance Fund absorbed significant payouts from a number of Worker's Compensation and Liability claims and settlements. These payouts have substantially lowered its fund balance. Because of this, staff would like to propose the transfer of $1.0 million to replenish the Worker's Compensation cash position with the surplus balance. The funding will provide the Fund with a balance of $1,233,715 ($309,090/Worker's Compensation; $924,625/Liability). Additionally, staff would like to recommend for the transfer of $500,000 to the Equipment Replacement Fund. Although the fund is not in a dire situation, the Equipment Replacement Fund does not have a revenue stream, other than the General Fund, to pay for annual equipment replacements. As such, it would be in good practice to build up its fund balance when an opportunity presents itself. Mayor and City Council December 6, 2011 Page 5 Should Council approve for the use of the surplus balance, below are line item details of its uses: FY 2010-11 Ending Surplus $ 2,449,422 FY 2011-12 Projected Budget Deficit/"Rollover" (848,843) Fund Transfer to Worker's Compensation/Liability Self- (1,000,000) Insurance Fund Fund Transfer to Equipment Replacement Fund (500,000) Net Surplus Balance: $ 100,579 Economic Outlook: Since the beginning of the Fiscal Year 2011-12, revenue receipts year to date have been very positive in comparison to the previous fiscal year. Most major revenues, such as: Sales Tax, Transient Occupancy Tax (TOT), Utility User's Tax, and Business License have come in within budget projections or above the prior year actual when the same period is compared. Sales Tax revenue is showing an increase of 8.8% when comparing remittances received through November. TOT is also showing an increase of 2.9% through November 2011. Property Tax is not included in this analysis due to the timing of when property tax payments are remitted to the City. The bulk of its payments come in late December and April. Similar to the prior fiscal year, Building/Safety and Planning division counters have been extremely busy. As of the end of October 2011, Plan Check Fees, Building Permits, and Mechanical/Electrical/Plumbing Permits have had a 36% increase in fees when compared with the same period in the prior fiscal year. Though the Fiscal Year 2011-12 has started out great, more signals of uncertainties have been on the news of late. The general economic forecast is for a very slow growth through the end of calendar year 2012. Many questions remain about the stability of the economy. Unemployment is still high. The State has projected to have a deficit of $13 billion to begin their FY 2012-13 which could impact our local budget if past experience is any indication. Mayor and City Council December 6, 2011 Page 6 With that in mind, staff will continue to monitor the budget for any sudden changes in revenues or expenditures. Staff is expected to return to Council for the Fiscal Year 2011-12 Mid-Year Budget Presentation sometime in February 2012. RECOMMENDATION It is recommended that the City Council: 1. Receive and File the Fiscal Year 2010-11 Year Ending Financial Results 2. Adopt Resolution No. 6807 A Resolution of the City Council of the City of Arcadia, California, approving of fund transfers from the General Fund of $1.0 million into the Workers' Compensation/Liability Self-Insurance Fund and $500,000 to the Equipment Replacement Fund as part of the Fiscal Year 2011- 12 Operating Budget. Approved By: Donald Penman City Manager Exhibit A — General Fund Summary for Fiscal Year 201-11 Resolution No. 6807 EXHIBIT A GENERAL FUND FY 10-11 FY 10-11 FY 10-11 Budget Estimates Actual Beginning Fund Balance 5,948,375 5,948,375 5,948,375 Estimated Revenue: Revenues * 41 ,475,435 41 ,396,890 42,015,543 Transfers-In from other funds 5,363,494 5,255,924 5,150,538 Total Revenues 46,838,929 46,652,814 47,166,082 Proposed Expenditures: 'Transfers-Out to other funds 738,730 708,268 697,364 Expenditures 46,017,870 44,839,021 44,019,296 Total Expenditures 46,756,600 45,547,289 44,716,660 Revenue Over Expenditure 82,329 1 ,105,525 2,449,422 Ending Fund Balance 6,030,704 7,053,900 8,397,797 * FY 2010-11 Budget Revenue figure includes proposed usage of $574,000 of Reserves by transfers of $199,894 from Life Insurance Fund; reduction of Worker's Compensation/Liability self- insurance allocation of $188,340; and transfer interest earnings from Capital Outlay Fund and Equipment Replacement Fund to General Fund. RESOLUTION NO. 6807 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, APPROVING FUND TRANSFERS AS SPECIFIED THEREIN INTO THE WORKERS' COMPENSATION/ LIABILITY SELF-INSURANCE FUND AND THE EQUIPMENT REPLACEMENT FUND AS PART OF THE FISCAL YEAR 2011- 2012 OPERATING BUDGET WHEREAS, on June 7, 2011, the City Manager submitted to the City Council a proposed budget for fiscal years 2011-2012, a copy of which is on file in the Office of the City Clerk; and WHEREAS, from time to time certain programs and services are enacted during the fiscal year which necessitate amendments to the adopted Operating Budget for fiscal year 2011-2012. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS: SECTION 1. The amounts listed below are hereby appropriated for fiscal year 2011-2012 for the purposes stated: Description From General Fund To Funds Transfer to Worker's Compensation/Liability Self- Insurance Fund ( $ 1,000,000 ) $ 1,000,000 Transfer to Equipment Replacement Fund ($ 500,000) $ 500,000 Total: ($ 1,500,000) $ 1,500,000 SECTION 2. That certain "City of Arcadia Budget, fiscal years 2011-2012", as on file in the office of the City Clerk, together with any approved amendments thereto, is hereby adopted, in pertinent part, as the official budget of the City of Arcadia for the 1 fiscal year 2011-2012 and the amounts specified therein as expenditures from the funds indicated are hereby appropriated for the purposes specified therein. SECTION 3. The City Clerk shall certify to the adoption of this Resolution. Passed, approved and adopted this day of , 2011. Mayor of the City of Arcadia ATTEST: City Clerk APPROVED AS TO FORM: S41,114,, l Stephen P. Deitsch City Attorney 2