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STAFF REPORT
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Administrative Services Department
DATE: February 19, 2013
TO: Mayor and City Council
FROM: Dominic Lazzaretto, City Manager
Hue C. Quach, Administrative Services Director
SUBJECT: Fiscal Year 2012 -13 Budget Mid -Year Review
Recommendation:
1) Receive and File the FY 2012 -13 Budget Mid -Year Review; and
2) Adopt Resolution No. 6861, adopting an amendment to the Fiscal Year
2012 -13 General Fund Operating Budget for programs and
expenditures that occurred during the Fiscal Year and appropriating the
amount specified therein.
SUMMARY
Enclosed as Exhibits A and B, respectively, are the most recent General Fund revenue
budget projections and an estimated ending fund balance for the Fiscal Year (FY) 2012-
13.
Overall, the mid -year analysis is showing considerable improvements in comparison to
the adopted FY 2012 -13 Budget. The FY 2012 -13 Operating Budget was adopted with
a projected deficit of $1,514,070. However, the adoption presumed that careful
expenditure monitoring and improvements of revenues during the Fiscal Year would
provide the opportunity for a balanced budget by the end of the Fiscal Year.
The mid -year analysis shows that the projected deficit has been reduced to $590,130
based on revenue improvements alone. As we have not provided the expected
expenditure savings at this time, the remaining deficit is less than 1.5% of the General
Fund's Operating Budget. Based on past experience, it is expected that sufficient
expenditure savings will be achieved to provide a balanced budget or a small surplus at
the end of the Fiscal Year.
Fiscal Year 2012 -13 Mid -Year Budget Review
February 19, 2013
Page 2
DISCUSSION
Since the budget adoption, the economy has steadily improved and revenues received
to date are favorable in comparison to the adopted Budget figures. Overall changes to
the major revenue groups that include Property Tax, Property Transfer Tax, Transient
Occupancy Tax, and Business License Tax are trending higher than Budget estimates.
Specifically, the largest increases have come from the categories of Property Transfer
Tax and Property Tax. Combined, these two line items are projected to end the Fiscal
Year at $1.1 million above their initial budgeted estimates.
These two line items are reflective of the improvements to the housing sector. Arcadia's
housing activities continue to outpace the norm in sales activities and growth valuation.
Revenue from Property Transfer Tax through January 2013 was up 41 % in comparison
to the same period in the prior year. Using a more conservative growth factor for the
remainder of the Fiscal Year, it is estimated that Property Transfer Tax will exceed the
budget amount of $376,880 by $118,780 and end the year. Property Tax revenue is
projected to surpass its budgeted amount by $992,050. It should be noted, however,
that within this projected amount, there is an anomaly that has contributed to the overall
increase. The irregularity was a result of the Arcadia Redevelopment Agency's
dissolution, which in turn, mandated that Housing Funds had to be returned to the State.
In this instance, the balance totaled $6,793,233. From this total, $652,301 was returned
to the City as our share of property tax as an affected taxing entity under
redevelopment. When that figure is taken out, the City's Property Tax still has
increased 5.9% in comparison to the prior Fiscal Year through January.
There are two categories that are not trending positively; namely, Sales Tax and Utility
User's Tax. Sales Tax was projected to grow at 6% due to the anticipated occupancy of
117,000 sq. ft. of space by the retailer Forever 21. As of this reporting, the estimate for
year end is expected to be $167,370 below the budgeted amount of $9,600,000. This
projection assumed a continuing 3% growth for the remainder of the Fiscal Year. It
should be noted that Sales Tax information for the holiday quarter ending in December
2012, was not available for this analysis and will not be available until March 2013.
Indications are that Westfield Mall did well during the holiday season; as such, Sales
Tax receipts could very well meet or exceed budget.
The other category showing less than preferable results is Utility User's Tax. In
comparison to the prior year, Natural Gas and Land Line Telecommunications have
decreased significantly. The drop in the natural gas receipts stems from lower usage
levels due to fair weather conditions and lower energy cost. Land Line
Telecommunication continues its decline as mobile telephones become the preferred
communication tool for most people and mobile phone plans have decreased in cost.
Fiscal Year 2012 -13 Mid -Year Budget Review
February 19, 2013
Page 3
In all other revenue areas, it is expected that there will be approximately $121,310 in
cumulative revenue increases over the adopted Budget. As a result, overall revenues
are expected to increase $1,065,700 over the adopted Budget.
After factoring those new revenue estimates and presuming that expenditure will be fully
utilized at the end of the Fiscal Year, it is anticipated that there will be a deficit balance
of $590,130. Historically, by year end, savings from all departments tend be in the
range of 2% to 3 %. As the projected deficit is less than 1.5% of the operating budget at
full expenditure levels, there is confidence that savings will be achieved to provide a
surplus at the end of the Fiscal Year.
Additional Appropriations:
The Development Services Department is requesting an appropriation of $18,000 to
cover the costs of hazardous materials investigation and reporting for the vacant
buildings on North Santa Anita Avenue between Morlan Place and Santa Clara Street.
This work was completed in order to have hazardous material abatement specifications
prepared and released as part of the Request for Proposals (RFP) to demolish the
buildings onsite. The City Council had originally authorized the preparation of a RFP for
demolition of these buildings as part of the October 31, 2012, Workshop. On February
5, 2013, an item was on the City Council agenda to authorize a contract of $190,000 to
complete the abatement and demolition of the Santa Anita buildings, which included the
$18,000 requested. However, leading up to the meeting it became clear that it may be
possible to obtain former Redevelopment funds to complete the demolition, rather than
utilizing General Fund monies. For this reason, the item was tabled to explore options of
funding the abatement and demolition through other means. Despite this, it is necessary
to pay the consultant for work completed to -date on hazardous material reporting and to
further secure the vacant building from vandalism. For these reasons, an $18,000
appropriation is requested at this time from General Fund reserves.
CONCLUSION:
Based on the mid -year Budget analysis, it is expected that the Fiscal Year will have a
better result than originally forecasted at Budget adoption. Revenues are coming in
more favorably than anticipated. Expenditures to date are also within budget and, with
careful monitoring, there is an expected savings that will eliminate the current deficit
projection of $590,130. Nevertheless, if the current projected deficit of $590,130
remains at the end of the Fiscal Year, the General Fund Operating Budget Reserve
would end the year with an estimated Fund Balance of $9,020,000 as opposed to the
forecast of $6,922,240 in the originally- adopted FY 2012 -13 Budget due to stronger
than expected results with the 2011 -12 FY Budget and the enhanced revenues
identified above.
Fiscal Year 2012 -13 Mid -Year Budget Review
February 19, 2013
Page 4
RECOMMENDATION
It is recommended that the City Council:
1. Receive and File the FY 2012 -13 Budget Mid -Year Review
2. Adopt Resolution No. 6861, adopting an amendment to the Fiscal Year 2012 -13
General Fund Operating Budget for programs and expenditures that occurred
during the Fiscal Year and appropriating the amount specified therein.
Exhibit A — FY 2012 -13 Budget Mid -Year Revenue Review
Exhibit B — FY 2012 -13 General Fund Summary
Resolution No. 6861
EXHIBIT A
CITY OF ARCADIA
GENERAL FUND: BUDGET MID -YEAR REVENUE REVIEW
FY 2012 -13
FY 2012 -13
Change
Adopted
Estimated
Budget vs.
Revenue
Budget
Actual
Estimated
Change
Actual
Property tax
$ 9,542,090
$ 10,534,140
$ 992,050
10.40%
Franchise fee
1,010,000
1,010,000
$ -
0.00%
Sales tax
9,600,000
9,432,630
$ (167,370)
-1.74%
Transient Occupancy
2,710,800
2,758,760
$ 47,960
1.77%
Tax
Property Transfer Tax
376,880
495,660
$ 118,780
31.52%
Utility Users tax
5,128,000
5,049,710
$ (78,290)
-1.53%
Business License Tax
1,200,000
1,215,600
$ 15,600
1.30%
Plan check fee
800,000
784,750
$ (15,250)
-1.91%
Building permits
1,000,000
965,720
$ (34,280)
-3.43%
Motor Vehicle License
4,885,800
4,900,990
$ 15,190
0.31%
Fees
Ambulance
Subscription Service /
1,150,000
1,200,000
$ 50,000
4.35%
Charge
All other
10,805,920
10,927,230
$ 121,310
1.12%
Total Revenue:
$4832093490
$4932753190
$ 130653700
2.21%
I *: /:11 =11114
CITY OF ARCADIA
FISCAL YEAR 2012 -13 BUDGET MID -YEAR REVIEW
GENERAL FUND SUMMARY
* Figure updated as a result of Fiscal Year 2011 -12 actuals.
FY 2012 -13
FY 2012 -13
FY 2012 -13
Adopted
Adopted
Mid -Year
Budget
Budget
Estimates
'
Beginning Fund Balance
$ 8,506,310
$ 9,612,130
$ 9,612,130
Mid -Year Revenue Estimates:
Revenues
43,547,030
43,547,030
44,612,730
Transfers -In from other funds
4,662,460
4,662,460
4,662,460
48,209,490
48,209,490
49,275,190
Total Revenues
Expenditures:
Transfers -Out to other funds
743,530
743,530
743,530
Expenditures
48,980,030
48,980,030
49,103,790
49,723,560
49,723,560
49,847,320
Total Expenditures
Mid -Year Appropriations
Hazardous materials investigation
-
18,000
reporting
Revenue Over Expenditure
(1,514,070)
(1,514,070)
(590,13M,
Estimated Ending Fund Balance
$ 6,992,240
$ 8,098,060
$ 9,022,000
* Figure updated as a result of Fiscal Year 2011 -12 actuals.
WHEREAS, on June 19, 2012, the City Manager submitted to the City Council a
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 2012-13.
SECTION 1. That certain "City of Arcadia Budget, Fiscal Year 2012-13", as on
file in the office of the City Clerk, is hereby amended to include the description and
expenditure set forth below, and the amounts specified therein as expenditures from the
funds indicated are hereby appropriated for the purposes specified therein,
Description General Fund
Hazardous materials investigation & reporting General =Fund
Hazardous u�
for r ro $
or properties located on North Santa Anita $18,000
properties rt
v u
rAvenue between Morlan Place and Santa
Clara Street
'0
Total: $18.000
- 1 -
SECTION 2. The City Clerk shall certify to the adoption of this Resolution,
Vj '4
, assed, approved: and adopted this day of
City Clerk
Stephen P. D eitsch
City Attorney
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