HomeMy WebLinkAboutItem 4c: Fiscal Year 2008-09 Financial Budget Summaryloesrp and
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STAFF REPORT
Administrative Services Department
DATE: September 15, 2009
TO: Mayor and City Council
FROM: Donald Penman, City Manager
Hue C. Quach, Administrative Services Director
SUBJECT: Fiscal Year 2008-09 Financial Summary
Recommendation: Provide Direction
SUMMARY
Due to an anticipated revenue shortfall during the fiscal year 2008-09, various alternatives
were proposed for Council at the mid-year review study sessions and some of those
measures were implemented to mitigate the expected deficit in our General Fund. Those
options implemented were a combination of budget cuts to the operating expenses totaling
$1,256,588, achieving additional revenues of $207,000, and the use of $500,000 from
Reserve Fund with Council's approval.
With the fiscal year 2008-09 just ended, staff has prepared this report to provide Council
with an update of the result of the year's financial condition and bring about for discussion
the financial outlook of the current fiscal year 2009-10.
DISCUSSION
As a result of the revenue shortfall that was directly attributed to the economic recession,
the General Fund was projected to receive about $2 million less in revenue for the fiscal
year 2008-09. The City Council conducted a study session discussing the matter and
directed staff to analyze alternatives to close the budget gap.
At a follow up study session, Council was provided several options to consider in
addressing the shortfall in General Fund. The session concluded with Council's direction
to balance the budget through operational budget cuts of $1,256,588 proposed by staff;
additional revenues and earlier phase-in time on the lease of City property to the Water
Fund which in total brought an additional $207,000 of revenue; and Council's approval in
using $500,000 from Reserve Fund Balance. This report provides a financial update on
the result of the net affect to the fund balance as we ended the fiscal year 2008-09.
Mayor and City Council
September 15, 2009
Fund Balance:
At the conclusion of the fiscal year, the General Fund ended with a fund balance of
$4,546,185 placing it in a better position than the initial midyear projected balance.
Although the fiscal year still ended with a deficit balance of $409,318 that balance was
approximately $100,000 below Council's approved use of $500,000 from Reserve Fund.
The healthier fund balance of $4,546,185 was primarily attributed to achieving the mid-year
proposed expenditures cuts and better results in overall revenues. Most of the major
revenue sources came in as expected but additional decreases was seen in the more
economically sensitive categories such as sales tax, transient occupancy tax, building
permits and plan check fees. A brief relating to their decreases is discussed in the
following section below.
CITY OF ARCADIA
GENERAL FUND - FISCAL YEAR 2008-09 YEAR END
FY 2008-09 FY 2008-09 FY 2008-09
Mid-year Estimated Year
Adopted Budget Presentation End Actual
Beginning Fund Balance
$4,955,503 $
4,955,503 $
4,955,503
Revenues:
Revenues
$41,861,845
40,095,790
40,468,907
Transfers in from other funds
4,655,271
4,655,271
3,962,728
Total revenues
46,517,116
44,751,061
441431,635
Expenditures:
Expenditures
Transfers out to other funds
Total expenditures
Revenues over (under)
expenditures
Ending Fund Balance
45, 799,172
481,052
44,779,476
481,052
44,334,345
506,608
46,280,224 45,260,528 44,840,953
236,892 (509,467) (409,318)
$4;446,Q36 $
Mayor and City Council
September 15, 2009
Revenues:
Property tax
Franchise fee
Sale tax
Transient occupancy tax
Utility users tax
Business license tax
Building permits
Plan check fee
Motor vehicle license fee
Ambulance charge
All other
Total revenues:
Revenues:
FY 08-09 FY 08-09
Mid-Yr Estimate
Revised Budget Actual Difference % Change
$ 9,205,000 $
9,339,476
$ 134,476
1.46%
1,020,000
1,077,047
57,047
5.59%
9,252,000
9,024,834
(227,166)
-2.46%
2,495,000
2,428,763
(66,237)
-2.65%
5,267,000
5,128,782
(138,218)
-2.62%
900,000
938,278
38,278
4.25%
741,000
717,160
(23,840)
-3.22%
582,000
530,319
(51,681)
-8.88%
4,300,000
4,433,640
133,640
3.11%
1,000,000
1,032,628
32,628
3.26%
5,333,790
5,817 981
484,191
9.08%
$ 40,095,790 $ 40,468,907 $ 373,117 0.93%
The results of the City's major revenue sources were mixed as some of the more
economically sensitive sources had further decreases than projected at mid-year. The
Transient
categories which had additional reductions were in Sales Tax ($227,166),
Occupancy Tax ($66,237), Plan Check ($51,681), and Building Permit fees ($23,840). The
City's Utility User's Tax also had a decrease of $138,218 but was mainly attributed from
significant drop in natural gas pricing and demands from commercial and industries.
Sales Tax: Sales tax further decreased by $227,166 from our mid-year projection of
$9,252,000 and ending the fiscal year at $9,024,834. This decrease was mostly attributed
to the sales that occurred between January and March, after our mid-year presentation and
analysis were prepared. This particular quarter saw an unexpected decrease of 10% to
15% statewide. Arcadia, during this quarter, was affected by a 9.8% drop which made up
most of the unanticipated drop we see at the end of the year. This revenue had an overall
decrease of 5.8% when comparing fiscal year 2008-09 vs. 2007-08 and we missed our
revised mid-year budget projection by 2.5%
Mayor and City Council
September 15, 2009
Transient Occupancy Tax (TOT): Despite the benefit of the Breeder's Cup event, we saw
that TOT was adversely affected by the economy at mid-year but our adjustment still
missed the mark with the actual receipts coming in at $66,237 less or 2.65% lower. Even
though staff made a sizeable adjustment in decreasing this revenue by $550,000 to a
projected receipt of $2,495,000, actual receipts was further affected by fears and concerns
of a worsen economic condition that affected business travels.
Building Permits and Plan Check Fee: Both categories have shown significant decreases
as the result of declines in the housing market, overall construction industry and the current
credit tightening situation. Building permits receipts were $23,840 less than revised budget
of $741,000 and Plan Check fee received $51,681 less than projected revenue of
$582,000.
Utility Users Tax: This revenue category missed the projected budget amount of
$5,267,000 by $138,218. Of the total decrease, $80,000 was from the natural gas
company. Staff has determined that the cause was due to substantial drop in pricing of
natural gas and that the economic downturn caused a further decline in demand from the
commercial and industrial sectors which overall resulted in lower UUT remittance to the
City.
Property Tax: The City's property tax is one of the few major revenue sources that haven't
been adversely affected. This category received $134,476 above our projected budget of
$9,205,000.
Motor Vehicle License Fee (VLF): The agreement made in 2004-05 between the State and
local agencies when the VLF fees were decreased has benefitted Arcadia as the "back fill"
or "in-lieu payments" as a result of the VLF rate decrease are tied to the growth or decline
of property assessments. This in-lieu payment makes up a large share of the overall VLF
that is received during the year. As such, this category brought in an additional $133,640
above our forecast receipt of $4,300,000.
Franchise Fee: Overall receipts from this category were $57,047 greater than budgeted.
Greater payments came from AT&T, which did not make a full year's payment last year
and So. Cal Gas Company. Those companies provided larger payments of $24,000 and
$31,000, respectively.
Business License Tax and Ambulance Charges: Both revenue sources collected revenues
greater than forecasted amounts. Business License receipts were $38,278 higher and
Ambulance Charges were $32,628 higher. There is no specific reason behind the increase
other than that the projected amounts during mid-year were more conservative, however
staff has taken a more proactive approach to ensuring all businesses, including those that
provide home service such as gardeners, have licenses.
Mayor and City Council
September 15, 2009
Other Revenues:
The overall changes within the major revenue group provided a net decrease of $111,074
when comparing their actual to budget projections. However, overall revenue came in
better than expected as a result of two revenue items under the "Other" category that
provided an offset to the decrease. The first was the interest income account which
earned $108,785 above our budgeted projection. The result of higher than expected
income was due to conservation budget projections. The second came from the
reimbursements to the Fire Department's strike team where a total of $441,696 was
received and -which $314,435 was above that occurredan 2006 07 and 2007 08 as well as
reimbursement total were for incident
those responses that occurred in 2008-09.
Outlook for Fiscal Year 2009-10
At this time, the result from the fiscal year 2008-09 has provided a glimpse to the possible
"trend" that may follow in fiscal year 2009-10. Changes occurred since the 2008-09 mid-
year review was in the more economically sensitive revenue categories and have overall
decreased approximately $400,000. We can project that these decreases may affect the
budgeted revenues in fiscal year 2009-10 as those numbers were based on estimates prior
a better
to the end of fiscal year 2008-09• Unfortunately, as still to early at this point in time.
awareness of where revenues may trend are
If we were to assume that the current year's budget is off by an additional $400,000 (due to
the FY 08-09 revenue result from sales tax, TOT, etc.) that would increase our projected
fiscal year 2009-10 deficit to approximately $700,000. As Council may recall, the adoption
of the 2009-10 budget and after employee would be used to balance the budgets Certainly,
approximately $300,000 in Reserve Fund
should the year continue to trend like fiscal year 2008-09, options to further cut expenses
would need to be implemented and started earlier so that available time remaining into the
fiscal year can allow for segmented adjustments as oppose to drastic and unplanned cuts.
With respect to revenues, not all of the recent User Fees that were adopted were factored
into the fiscal year 2009-10 budget. It was projected that a full year's fee increase, net
Business License ($60,240), would generate an additional $420,000. Although a full year's
revenue would not be collected due to the timing and when those fees were effective, staff
believes that those fees would generate approximately $270,000 or 65% of the annual
projection.
While there are a number of options that can be brought back for Council's consideration
to address a potential growing deficit for FY09-10, the fact that we are only two and one-
half months into the fiscal year and without enough
that data
review be brought back to Council
outcome of our finances, staff would recommend
Mayor and City Council
September 15, 2009
in late November with another budget review. Nonetheless, even though staff has
suggested a meeting in November, we will continue to monitor our finances and would
bring to the attention of Council should a situation present itself where an immediate and
adverse affect of the City's finances occur. Staff would report to Council as needed and
provide options to address such circumstance. Currently, there are fourteen (14) frozen
positions in the budget. Of these, eleven were factored into the budget and these savings
are reflected in the budget. Three (3) additional full-time positions have been frozen by the
City Manager as a precaution in order to achieve further savings.
FISCAL IMPACT
At the end of the fiscal year 2008-09, the City General Fund will show a deficit balance of
$409,318 and providing a projected ending fund balance of $4,546,185. Although a deficit
balance remains, the overall financial position is greater than the initial projection during
the mid-year review in which it was estimated that we would need to use $500,000 from
our Reserve Fund.
RECOMMENDATION
It is recommended that the City Council provide direction as a result of the report on the
financial update and summary for the fiscal year ending June 30, 2009.
Approved By:
Donald Penman
City Manager
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