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HomeMy WebLinkAbout020720-02 MID-YEAR 2018/2019 FINANCIAL OVERVIEW BACKGROUND The Annual Planning and Goal Setting Workshop provides an opportunity for the Town Council to review the status of the Town’s finances at the December 31, 201 9 mid-point of the 2019/20 fiscal year, including revenues, expenditures, and potential changes that could affect the Budget or the ten-year forecasts. Revenue and Expenditure Trends For 2019/20, total Town operating revenues were forecast to increase by 2.2% above 2018/19 levels, with General Fund revenues increasing by 2.7% and Special Purpose (restricted) revenues increasing by 0.8%. The Town’s two largest revenues - Property Tax and Sales Tax, were forecast to increase by 4.5% and 1.0% respectively, with all other General Fund revenues increasing by 0.3%. Property Tax continues to be the Town’s largest revenue source, accounting for 53.1% of the General Fund. Although the Town receives only 7.5% of total Property Taxes paid, property values continue to outpace inflation and the overall Bay Area CPI. Sales Tax accounts for 20.8% of the General Fund. Property Tax and Sales Tax revenues are currently at their highest historic levels. Special Purpose revenues were projected to account for 26.1% of total 2019/20 revenues. The largest Special Purpose revenues are the Town-wide Lighting and Landscape Assessment District (LLAD), Building and Planning fees, and Gas Tax. LLAD revenues remain flat due to minimal growth and fixed assessment rate s. Building and Planning activities continue to slow, and 2019/20 revenues are forecast to decline by 12.5 %. Increases of 4.3% were forecast for Gas Tax and 102.3% for Solid Waste Vehicle Impact Fees. Gas Tax, Measure J Return to Source and Solid Waste VIF funds are the major sources of funding for the Town’s Pavement Management and Street Maintenance programs. Total 2019/20 operating expenditures were programmed to increase by only 0.9%, including increases/decreases of 1.1% for General Government, 3.0% for Police Services, -5.5% for Administrative Services, 4.7% for Development Services, 0.2% for Maintenance Services and –0.8% for Recreation, Arts and Community Services. 2 MID-YEAR 2019/20 OPERATING BUDGET UPDATE The Operating Budget is adopted following extensive review by the Town Council. Once adopted, it is a dynamic plan subject to revenue or expenditure variations driven by factors as broad as the economy or as narrow as shifts in a specific service need. Town finances are continuously monitored throughout the fiscal year. The mid-year update identifies potentially significant deviations to appraise the Town Council, and to identify any formal mid-year adjustments that may be required. A formal mid-year financial report will be presented to the Town Council for consideration at the February 18, 2020 Town Council meeting. As of December 31, 2019, overall revenues are tracking 1-2% ahead of the approved budget, while expenditures are on track to finish the fiscal year lower than budgeted. Overall fiscal condition remains str ong and the Town expects to finish the year on a positive note. Revenues General Fund General Fund revenues are tracking positively in comparison to budget. Property Tax – This includes the Town share of the ad valorem tax levied on real property plus property tax backfill received in lieu of vehicle license fees (“the VLF swap”). The VLF swap represents 30.1% of the total Property Tax revenue. 2018/19 Property Tax revenues were $14,740,670, 8.1% above the budget forecast. The 2019/20 budget forecasts Property Tax revenues of $14,260,222. Mid -year receipts and estimates indicate that actual revenues will equal or exceed 2018/19 actuals. A mid-year adjustment is recommended to increase Property Tax revenues by $245,000 to offset increased General Fund expenditures. Sales Tax – 2018/19 Sales Tax revenues were $5,947,752, 7.7% above the budget forecast. The 2019/20 budget forecasts Sales Tax revenues of $5,577,220. Revenues for the first five months of the fiscal year total $2 ,158,205. December revenues typically lag up to 60 days behind and have not been received yet. Initial receipts suggest that year-end revenues may fall short of the budget forecast. No mid-year adjustments are recommended. Recreation Fees and Charges for Service – 2018/19 recreation revenues were $2,531,713, 5.4% below the budget forecast. This was offset by reduced operating expenditures in Recreation, Arts and Community Servi ces. The 2019/20 budget forecasts revenues of $2,576,145. Mid-year receipts are tracking closely with prior year actuals and total revenues are expected to meet the forecast. No mid-year adjustments are recommended. 3 Franchise Fees – Franchise Fees are received for solid waste and recycling services, cable TV, and gas and electricity. 2018/19 Franchise Fee revenues were $2,207,090, 4.0% below the budget forecast. The 2019/20 budget forecasts revenues of $2,326,932. Mid-year receipts are on track to meet or exceed the forecast. No mid-year adjustments are recommended. Special Revenues Lighting and Landscape Assessment District (LLAD) – 2018/19 LLAD assessment revenues were $3,205,196. The 2019/20 budget forecasts revenues of $3,120,682. Mid - year LLAD revenues are tracking closely with budget. No mid-year adjustments are recommended. Building and Planning - 2018/19 revenues were $2,638,811, 4.3% above the budget forecast. The 2019/20 budget forecasts Building and Planning revenues of $2,212,200. Mid-year receipts total $1,319,171, or 52.2% of forecast. Mid-year revenues are on track to meet the budget forecast. No mid-year adjustments are recommended. Gas Tax Fund – Gas Tax revenues help fund street and road maintenance. 2018/19 revenues were $1,728,818, 6.1% below the budget forecast. The 2019/20 budget forecasts revenues of $1,919,117. Mid-year, revenues are on track to meet the forecast. No mid-year adjustments are recommended. Measure J Return to Source (RTS) – Measure J is the Contra Costa County half-cent transportation sales tax. Eighteen percent of the tax proceeds are returned to local jurisdictions to help fund local street and road maintenance. 2018/19 revenues were $866,743. The 2019/20 budget forecasts revenues of $815,217. Mid-year, revenues are on track to meet the forecast. No mid-year adjustments are recommended. Solid Waste Vehicle Impact Fees (VIF) – Refuse vehicle traffic accounts for 38.6% of the total impact on Danville’s public streets. The Town collects a Solid Waste VIF which is reinvested in maintaining public streets and roads. 2018/19 revenues were $317,827, 33.3% above the budget forecast. The 2019/20 budget forecasts revenues of $482,182. With an 8% rate increase effective as of March 1, 2020, this forecast will increase to $529,779. No mid-year adjustments are recommended. Donations - The Town has received a total of $16,000 in donations from private parties, including a $6,000 donation for the Police Department to purchase specialized equipment and School Resource materials and supplies, and a $10,000 donation for the Maintenance Department to plant trees. A mid-year adjustment of $16,000 is recommended to recognize the receipt of the $16,000 in donations. 4 Successor Agency Real Property Tax Trust Fund (RPTTF) revenues for 2019/20 are budgeted at $2,280,575, inclusive of Town re-payment under the Re-stated Cooperation Loan Agreement with the former CDA. RPTTF revenues fund debt service payments for the 2001 and 2005 Certificates of Participation, the 2001 Taxable Revenue Bonds, and reimbursement of allowed administrative costs. Mid-year revenues are on track to meet the forecast. No mid-year adjustments are recommended. Revenue Summary To date, the Town Council has approved no budget adjustments for 2019/20. As described above, mid-year adjustments are recommended to: • Increase Property Tax by $245,000 (General Fund) • increase Donations by $16,000 (Special Revenue). Table 1 summarizes the adopted budget forecast, prior amendments and recommended mid-year adjustments. Table 1 Mid-Year Revenue Summary Adopted Prior Mid-Year Budget Amendments Revised TOTAL $ 38,617,530 $ 38,617,530 $ 38,878,530 General Fund $ 26,846,684 $ 26,846,684 $ 27,091,684 Special Revenue $ 9,490,271 $ 9,490,271 $ 9,506,271 Successor Agency $ 2,280,575 $ 2,280,575 $ 2,280,575 Expenditures General Government – 2019/20 budget is $1,819,094. Pending legal claims and ongoing litigation will exceed outside counsel costs budgeted in the City Attorney’s Office. A mid-year adjustment of $125,000 is required to fund these activities. A citizen sponsored referendum will necessitate a March 2020 special election at an estimated cost of $90,000. All other direct and contract costs are tracking within budget. Mid-year adjustments are recommended to increase the City Attorney budget by $125,000 and the City Clerk budget by $90,000. Police Services – 2019/20 budget is $10,261,608. All contract and direct costs are tracking within budget. A private $6,000 donation was received to purchase specialized equipment for patrol officers and materials and supplies for the School Resource Program. One mid-year adjustment is recommended to recognize the private donation and increase the Patrol Budget by $6,000. 5 Administrative Services – 2019/29 budget is $4,071,336. costs are tracking within budget and no mid-year adjustments are recommended. Development Services – 2019/20 budget is $4,912,431. A Building staffing vacancy has required increased use of interim plan check services. All other contract and direct costs are tracking within budget. A mid-year adjustment is recommended to increase the Building budget by $60,000. Maintenance Services – 2019/20 budget is $7,827,415. A private $10,000 donation was received to plant new trees in Town parks and roadsides. Severe windstorms that occurred October 26 and 27 resulted in significant damage to town trees, facilities and structures, and required extensive use of contractors to perform repair and recovery work. A mid-year adjustment of $30,000 is required to offset those costs. All other contract and direct costs are tracking within budget. Mid-year adjustments are recommended to increase the Maintenance Services Budget by $40,000. Recreation, Arts and Community Services – 2019/20 budget is $4,335,187. All costs are tracking within budget and no mid-year adjustments are recommended. Personnel – 2019/20 budget is $12,565,100. At mid-year, 44% of the budget has been expended. No mid-year adjustments are recommended. Successor Agency For 2019/20, Successor Agency operating expenditures total $1,180,575 for debt service and administrative costs. Re-payment of the outstanding balance owed under the former CDA/Town loan funds capital transfers of $1,100,000. Successor Agency expenditures remain unchanged. No mid-year adjustments are recommended. Expenditure Summary Thus far in 2019/20 the Town Council has approved one budget adjustment for $48,000: • Resolution No. 80-2019, appropriating $48,000 from the General Fund for General Government - grant coordination and application services. As discussed above, mid-year adjustments are recommended to: • increase the City Attorney budget by $125,000 (General Fund) • increase the City Clerk budget by $90,000 (General Fund) • increase Maintenance Services budget by $30,000 (General Fund) • increase Police Patrol budget by $5,000 (Special Revenue) • increase School Resources by $1,000 (Special Revenue) • increase the Building budget by $60,000 (Special Revenue) • increase Maintenance Services budget by $10,000 (Special Revenue) 6 Table 2 illustrates 2019/20 expenditures, including the adopted budget forecast, prior amendments and recommended mid-year. Table 2 Mid-Year Expenditure Summary Adopted Prior Mid-Year Budget Amendments Revised TOTAL $ 34,407,646 $ 34,455,646 $ 34,776,646 General Fund $ 23,559,232 $ 23,607,232 $ 23,852,232 Special Revenue $ 9,667,839 $ 9,667,839 $ 9,743,839 Successor Agency $ 1,180,575 $ 1,180,575 $ 1,180,575 Transfers and Designations The 2019/20 budget includes General Fund transfers of $4,485,005: $1,000,000 for LLAD operations, $125,000 for Asset Replacement, $2,100,000 for CIP – Project B-626, $1,235,005 for CIP – General Purpose and $25,000 for CIP Pavement Management. On November 19, 2019, the Town Council adopted Resolution No. 76-2019, approving the 2018/19 CAFR and transferring $3,700,000 from the General Fund to CIP – Project B-626. This increased the total 2019/20 transfers and designations to $8,185,005. STATUS OF TEN-YEAR FORECAST Ten-year forecasts are key to planning for future years, ensuring long term fiscal stability and continuity of service for Town residents. The Mid -Year Financial Overview presents an opportunity to review and update information that has the potential to impact future year revenues or expenditures. No mid-year changes are recommended to the ten-year, however the following factors will affect the subsequent ten-year forecast to be included in the 2020/21 operating budget. Revenues Solid Waste Vehicle Impact Fees – A December 2017 study performed by the Recycle Smart JPA, identified that refuse vehicle traffic accounts for 38.6% of the total impact absorbed by Danville’s public streets. Based upon the Town’s Street Maintenance and Pavement Management costs, up to $1.34 million annually could be collecte d in Solid Waste VIF. The Town currently collects approximately one -half of that amount. The Solid Waste VIF will increase through 2021/22, to cover a larger portion of these costs while continuing to maintain low overall solid waste rates. This will i ncrease General Fund revenues by $3.4 million for years 2021 - 2029. 7 Expenditures The operating budget draws budget to budget comparisons year over year. A comparison of budget versus actual expenditures illustrates that the Town consistently underspends budget by 2.5% to 4%. A 2% annual reduction in total forecast Town operating expenditures would save $600,000 to $800,000 annually over the life of the ten-year forecast. Table 3 Operating Budget – Budget vs. Actual Year Budget Actual % B v A Savings 2018/19 $32,945,781 $31,115,954 94.45% 5.55% 2017/18 $31,711,857 $30,544,301 96.32% 3.68% 2016/17 $30,193,970 $29,397,775 97.36% 2.64% 2015/16 $29,292,673 $28,534,532 97.41% 2.59% 2014/15 $28,562,610 $27,430,531 96.04% 3.96% 2013/14 $27,196,963 $26,166,181 96.21% 3.79% Police Services – The ten-year forecast includes annual increases of 3.5% for contracted services with the Contra Costa County Office of the Sheriff. Depending upon future labor agreements, actual contract costs may exceed 3.5% annually. In addition, East Bay Regional Communications Systems Authority (EBRCSA) radio subscriber fees will increase by up to 80% over the next five years. Personnel - Ten-year forecasts assume 2% annual increases in employee costs. Actual cost increases have averaged 3% to 3.5% annually. Even with assumed staff turnover, annual personnel cost increases could easily exceed the 2% assumed in the forecast. Risk Management – The Town is insured through the Municipal Pooling Authority (MPA), for General Liability, Workers Compensation, Excess Liability, Employment Liability, Vehicle, Property and Earthquake. Owing to the Town’s recent claims history, premiums for General Liability and Workers Compensation increased by over $200,000 in 2018/19. These higher costs are carried through the full ten -year forecast. Assuming that the Town’s claims and experience performance returns to its pre-2018/19 cost, future costs from 2021/22 forward should be reduced by approximately $200,000 annually for years 3-10 of the ten-year forecast. Transfers Lighting and Landscape - The operating budget includes annual General Fund transfers to support LLAD operations. As with operating expenditures these transfers are based on year over year budget estimates. A comparison of budget versus actual LLAD expenditures and fund balance illustrates that actual costs are 8 less than budgeted, positively affecting the LLAD fund balance. A potential reduction in the General Fund LLAD subsidy could positively affect the ten-year forecast in future years. Table 4 LLAD Expenditures and Fund Balance Budget vs. Actual 2018/19 2017/18 2016/17 2015/16 Expenditures Budget $4,291,241 $4,016,699 $3,863,465 $3,707,206 Actual $3,940,950 $3,674,087 $3,395,450 $3,143,324 Variance $350,291 $342,612 $468,015 $563,882 Fund Balance Budget $3,143,421 $3,465,570 $3,354,985 $3,241,940 Actual $3,492,170 $3,869,964 $3,893,086 $3,882,398 Variance $348,749 $404,394 $538,101 $640,458 The Town prepares conservative ten-year forecasts. Overall revenues and expenditures are expected to outperform the current ten -year forecast and will be more comprehensively re-evaluated as part of the preparation of the 2020/21 Operating Budget and Capital Improvement Program. RECOMMENDATION Review and discuss the 2019/20 Mid-Year Financial Overview and provide direction and feedback to staff regarding any mid -year budget adjustments.