HomeMy WebLinkAbout031021-4.1 Mid-Year Budget
MID-YEAR 2020/21
FINANCIAL UPDATE
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, 2020
mid-point of the 2020/21 fiscal year, including revenues, expenditures, and potential
changes that could affect the Budget or the ten-year forecasts.
Impact of Coronavirus Pandemic
The onset of the global Coronavirus pandemic and the resultant Shelter in Place (SIP)
Orders that began in March 2019 created significant economic uncertainty for local
governments. As a result, the process leading up to adoption of the 2020/21
Operating Budget and CIP was unique and unlike prior year efforts.
The pandemic presented both immediate and longer-term budget planning
challenges that required the Town Council to consider several different budget
scenarios including the original pre-COVID budget and three alternate scenarios
developed based upon reducing revenues, expenditures and transfers by $3 million,
$5 million and $7 million.
Ultimately the Town Council determined that the final 2020/21 Operating Budget
and CIP would be based upon the mid-range alternative scenario which assumed a
net total revenue loss of $5.0 million for the fiscal year.
In adopting the final budget, it was also acknowledged that the process was expected
to remain fluid and ongoing throughout the fiscal year, with frequent review as
financial information changed, in order to maintain a balanced budget.
Fortunately, and unlike most California cities, the Town has no unfunded future
liabilities related to employee pension or medical costs to compound the fiscal impact
of the pandemic. Despite the significant pandemic-driven fiscal impacts, the Town
Council adopted a balanced budget without the need to utilize reserves. In order
to reduce operating expenditures, some service level reductions were required in
Police Services, Development Services, Maintenance Services and Recreation, Arts
and Community Services. It was also necessary to scale back new capital
expenditures to further reduce impacts upon the General Fund and balance the
budget.
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The time frame for revenue recovery was projected to range from two to four years.
However, thanks to offsetting expenditure reductions the ten-year forecasts covering
2020/21 through 2029/30 showed the Town continuing on a fiscally sustainable
course while operating at minimally reduced service levels.
REVENUE AND EXPENDITURE OVERVIEW
Revenues
Based upon the alternative budget scenario used to develop the 2020/21 budget, total
revenues of $32.1 million were forecast for 2020/21, an 11.7% reduction from $36.3
million for 2019/20.
General Fund
Property tax continues to be the Town’s largest revenue source, accounting for 60.5%
of the General Fund. Although the Town receives only 7.5% of total property taxes
paid, property values have continued to increase at a robust level despite the
pandemic, outpacing inflation and the overall Bay Area CPI.
Sales tax accounts for 18.1% of the General Fund. Beginning of the year forecasts saw
sales tax revenues being significantly impacted by the pandemic due to the resultant
business closures and the unknown duration of the crisis. Sales tax estimates were
reduced by 22.2% below prior year.
Recreation fees and charges were also forecast to experience a major revenue loss due
to restrictions set forth in the various shelter in place and health orders. In order to
forecast revenues, it was necessary to make assumptions regarding when activities
would be allowed to resume, initially on a restricted basis, and then completely.
Revenue projections for 2020/21 were reduced by 47.5% below prior year.
Special Purpose
Special Purpose revenues were projected to account for 25.3% of total 2020/21
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 rates.
Building and Planning activities continue to slow, and 2020/21 revenues were
forecast to decline by 19.2 % below prior year. Based upon the anticipated loss of
sales tax revenues resulting from the pandemic, significant reductions to Gas Tax
revenues were also forecast, and revenues were expected to decline by 49.5% from
prior year. This was also the case with Measure J return to source revenues where a
decline of 29.3% below prior year was forecast.
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Solid Waste Vehicle Impact Fees were forecast to increase by 21.3%. Though solid
waste revenues were anticipated to be affected by the pandemic, the Solid Waste VIF
Fee was increased by the JPA in order to more fully capture and offset the impacts of
refuse and recycling vehicles upon Town streets. 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.
Expenditures
The 2020/21 operating budget included total operating expenditures $31.0 million, a
6.8% reduction from the prior year budget of $33.3 million. These included decreases
of -1.3% for Police Services, -6.7% for Administrative Services, -22.6% for
Development Services, -5.9% for Maintenance Services and –7.3% for Recreation, Arts
and Community Services. General Government costs increased by 2.5% as the result
of the cost of the November 2020 municipal election.
Personnel costs were reduced by 11.6% below prior year. For 2020/21 this required
a reduction in total full time equivalent (FTE) staffing from 161.25 to 135.25 positions
MID-YEAR 2020/21 OPERATING BUDGET STATUS
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 16, 2021 Town Council meeting.
As of December 31, 2020, overall revenues are tracking ahead of the approved budget,
while expenditures are on track to finish the fiscal year within budget. Overall fiscal
condition remains strong and the Town expects to finish the year on a positive note.
Revenues
The Town receives revenues incrementally at different points throughout the fiscal year,
ranging from monthly to annually. While the Town will not have complete revenue
information until the end of the fiscal year, sufficient information is available to assess
the status of most of the major revenue sources.
Table 1 presents revenues received to date at the mid-point in the 2020/21 fiscal year.
The table provides a snapshot of the actual revenues received for the current fiscal year
and what these actual receipts represent as a percentage of the total revenue forecast for
the year. Exhibit A to this memorandum includes this same information and expands
upon it to compare it with similar data for each of the prior three fiscal years (2017/18 –
2019/20).
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Table 1
Mid-Year Revenue Summary
Budget Mid-Year % of
General Fund Forecast Actual Total
Property Tax $14,505,222 $ 6,083,333 41.9%
Sales Tax $ 4,339,328 $ 2,394,705 55.2%
Transfer Tax $ 494,838 $ 457,186 92.4%
Transient Occupancy $ 54,597 $ 18,859 34.5%
Business License $ 146,060 $ 299,113 204.8%
Franchise Cable $ 899,152 $ 201,342 22.4%
Franchise Solid Waste $ 752,413 $ 341,125 45.3%
Franchise Gas & Electric $ 629,404 $ - 0.0%
Fines & Forfeitures $ 141,400 $ 32,542 23.0%
Interest Income $ 197,250 $ 107,766 54.6%
Rental Income $ 124,490 $ 67,455 54.2%
Recreation Fees and Charges $ 1,351,262 $ 286,465 21.2%
Budget Mid-Year % of
Special Revenue Forecast Actual Total
Building and Planning $ 1,787,458 $ 1,357,186 75.9%
Engineering $ 260,535 $ 134,581 51.7%
Gas Tax $ 969,080 $ 935,849 96.6%
Measure J - RTS $ 576,288 $ 5,254 0.9%
Clean Water $ 572,700 $ 28,657 5.0%
LLAD - A $ 583,858 $ 328,047 56.2%
LLAD - B $ 746,968 $ 410,577 55.0%
LLAD - C $ 664,183 $ 367,566 55.3%
LLAD - D $ 1,134,741 $ 601,336 53.0%
Solid Waste VIF $ 585,000 $ 272,900 46.6%
General Fund
General Fund revenues are tracking positively in comparison to budget.
Property Tax – Revenues are received in three installments in December, April and June.
The percentage of property tax received through mid-year is comparable to that received
in each of the three prior years and is on track to exceed the initial budget forecast. Mid-
year receipts of $6.1 million are $230,030 higher than mid-year receipts for 2019/20. Year-
end receipts for 2019/20 totaled $15.48 million, almost $1 million more than the 2020/21
forecast of $14.5 million. Based upon the 2019/20 year-end total and the 2020/21 mid-
year receipts, the 2020/21 year-end revenues should be approximately $15.7 million, $1.2
million above the budget forecast.
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Sales Tax – Revenues are received monthly with a built-in three-month lag time (i.e., June
revenues are received in September, etc.). Percentage of sales tax received through mid-
year (as shown in Table 1) is based upon 5 months of receipts (through November 30),
and is comparable to receipts in each of the three prior years. Actual revenues are
outperforming the forecast due to a significant increase in revenues from the county pool.
Table 2 illustrates annual per capita sales tax by sector. While overall sales have
remained fairly stable year over year, brick and mortar transactions are declining in favor
of increasing online sales. The county pool allocates revenues back to Danville from
online purchases. Because Danville’s brick and mortar businesses presently account for
3.3% of the total sales tax generated in Contra Costa County, Danville receives 3.3% of
the county pool proceeds. Because sales fluctuate from quarter to quarter, both the
percentage and actual revenues received can vary on a quarterly basis.
Table 2
Annual Danville Per Capita Sales Tax by Sector
Table 3 illustrates the year over year changes in sales tax received by sector for the third
quarter of the year (July 1 – September 30). Overall revenues for brick-and-mortar
businesses are down by 10.1% year over year. However, revenue returned to the Town
through the county pool has increased by 50.3% over that same time frame.
2016 2017 2018 2019 2020
$19 $19 $19 $20 $29
$2 $1 $1 $1
$1
$4 $5 $6 $7
$10
$2 $3 $3 $2
$2
$14 $14 $15 $14
$11
$32 $32 $31 $29
$27
$55 $54 $51
$44
$43General Retail
Food Products
Transportation
Construction
Business to Business
Miecellaneous
County Pool
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Table 3
Quarterly Comparison – 2020 Q3 vs. 2019 Q3
Based upon the information available at mid-year, sales tax is on track to meet or exceed
the initial budget forecast.
Business License Tax – Business license payments were due by December 30. While the
actual amount collected is approximately $50,000 less than collected in each of the prior
years, revenues have already exceeded the forecast by $153,000.
Franchise Fees – Franchise fees for Cable and Solid Waste are tracking closely with prior
years on a percentage basis and are expected to meet the budget forecast. Franchise fees
for electricity and gas are received in a single lump sum payment at the end of the fiscal
year.
Recreation Fees and Charges - Recreation Fees and Charges are underperforming the
budget forecast both in terms of actual revenue received and percentage collected at the
mid-year. Budget forecasts assumed that a greater degree of programming and facility
rental would be possible by the end of the 2020 calendar year. Unfortunately, this has
not been the case and programs and activities continue to be largely limited to what can
be offered virtually. This limitation is also expected to result in corresponding
expenditure reductions as funds budgeted for many programs and activities have not
been spent.
Special Revenue
Building and Planning – Greater than anticipated permit activity and workload have
resulted in revenues significantly outperforming the forecast at mid-year, and revenues
are expected to exceed the budget forecast.
Gas Tax - Revenues are significantly outperforming the forecast in terms of actual
revenue and percentage collected at mid-year, and are expected to exceed the budget
forecast.
Sector % Change
General Retail -2.3%
Food Products -11.6%
Transportation -31.6%
Construction 2.8%
Business to Business -7.6%
Miscellaneous -4.4%
Sub-Total -10.1% County Pool 50.3%
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Measure J Return to Source (RTS) – RTS revenues come from the countywide half cent
sales tax for transportation and are received as single year end payment. Mid-year sales
tax performance suggests that Measure J revenues should meet or exceed the forecast.
Solid Waste DIF - Revenues are tracking closely with prior years on a percentage basis
and are expected to meet the budget forecast.
Lighting and Landscape Assessment District – Percentage of revenues received through
mid-year is comparable to that received in each of the three prior years and is on track to
meet the initial budget forecast.
Successor Agency
Real Property Tax Trust Fund (RPTTF) revenues are budgeted at $2,279,212, 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.
Revenue Summary
To date, the Town Council has approved one budget adjustments for 2020/21.
• Resolution No. 71-2020, pass-through revenue and expense - increase $10,705
revenues from the SPCP Fund for Development Services - plan check fees for
the revised Stormwater Management Plan and Drainage Study.
Potentially significant variances to the forecast are noted for Property Tax (positive),
Sales Tax (positive), Business License Tax, (positive), Recreation Fees and Charges
(negative), Building and Planning (positive) and Gas Tax (positive) at mid-year.
Cumulatively, these variances are running positive to the forecast. However, given
ongoing uncertainty presented by the pandemic, no formal mid-year revenue
adjustments are recommended.
Table 1 summarizes the adopted budget forecast, prior amendments and
recommended mid-year adjustments.
Table 4
Mid-Year Revenue Summary
Adopted Prior Mid-Year
Budget Amendments Revised
TOTAL $ 34,354,793 $ 34,365,498 $ 34,365,498
General Fund $ 23,963,524 $ 23,963,524 $ 23,963,524
Special Revenue $ 8,112,057 $ 8,122,762 $ 8,122,762
Successor Agency $ 2,279,212 $ 2,279,212 $ 2,279,212
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Expenditures
General Government – 2020/21 budget is $1,864,513. All direct and contract costs are
tracking within budget and no mid-year adjustments are recommended.
Police Services – 2020/21 budget is $10,132,889. All contract and direct costs are
tracking within budget and no mid-year adjustments are recommended.
Administrative Services – 2020/21 budget is $3,796,878. Costs are tracking within
budget and no mid-year adjustments are recommended.
Development Services – 2020/21 budget is $3,804,345. Staffing vacancies have
required increased use of interim plan check services and temporary front counter
staffing in Building and Building revenues are significantly exceeding the forecast at
mid-year. Staffing vacancies are requiring the use of temporary staffing in
Transportation. All other contract and direct costs are tracking within budget. Mid-
year adjustments are recommended to utilize available fund balance to increase the
Building budget by $50,000 and the Transportation budget by $5,000.
Maintenance Services – 2020/21 budget is $7,362,710. The total water budget is
$415,000 for Roadsides, and $670,500 for Parks. The lack of rainfall through most of
the winter months has required unanticipated irrigation to sustain plant material and
drought conditions are expected to cause the annual water budget to be exceeded. A
mid-year adjustment is recommended to increase the water budgets for Roadsides
and Parks by 10%. All other costs are tracking within budget. Mid-year adjustments
are recommended to utilize available fund balance to increase the Roadside
Maintenance budget by $40,000 and the Parks budget by $60,000.
Recreation, Arts and Community Services – 2020/21 budget is $4,016,826. In order to
reduce operating costs and assist in other areas with staffing shortages, 3.0 FTE from
this department have been redeployed to Maintenance Services and Development
Services. As a result of the continued shelter in place orders, department costs will be
significantly less than budgeted and no mid-year adjustments are recommended.
Personnel – 2020/21 budget for regular and part-time temporary employees is $12.1
million, an 11.6% reduction from the prior year. At mid-year, 46% of the budget has
been expended. No mid-year adjustments are recommended.
Successor Agency
For 2020/21, Successor Agency operating expenditures total $1,179,212 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
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Thus far in 2020/21 the Town Council has approved five budget adjustments totaling
$598,705, including: • Resolution No. 62-2020, appropriating $21,000 from the General Fund to
provide traffic control for the closure of Hartz Avenue for temporary outdoor
restaurant seating due to the pandemic.
• Resolution No. 71-2020, appropriating $10,705 from the SPCP Fund for plan
check fees for the revised Stormwater Management Plan and Drainage Study.
• Resolution No. 74-2020, appropriating $250,000 from the General Fund to
establish a Forward Focus COVID-19 Business Grant Program.
• Resolution No. 82-2020, appropriating $293,000 from the General Fund for
$275,000 to establish Phase 2 of the Forward Focus COVID-19 Business Grant
Program, and $18,000 to administer of Business Assistance Program.
• Resolution No. 3-2021, appropriating $24,000 from the General Fund for grant
coordination and application services.
As discussed above, mid-year adjustments are recommended to increase:
• Maintenance Services - Parks budget by $60,000, including: $30,000 (General
Fund) and $30,000 (Special Revenue - LLAD Zone D);
• Maintenance Services - Roadsides budget by $40,000, including: $18,000
(Special Revenue - LLAD Zone A) and $22,000 (Special Revenue - LLAD Zone B);
• Development Services – Building budget by $50,000 (Special Revenue – Building
and Planning); and
• Development Services – Transportation budget by $5,000 (Special Revenue –
Measure J - RTS)
Table 2 illustrates 2020/21 expenditures, including the adopted budget forecast, prior
amendments and recommended mid-year adjustments.
Table 5
Mid-Year Expenditure Summary
Adopted Prior Mid-Year
Budget Amendments Revised
TOTAL $ 32,157,373 $ 32,756,078 $ 32,911,078
General Fund $ 22,785,837 $ 23,373,837 $ 23,403,837
Special Revenue $ 8,192,324 $ 8,203,029 $ 8,328,029
Successor Agency $ 1,179,212 $ 1,179,212 $ 1,179,212
Transfers and Designations
The 2020/21 budget includes General Fund transfers of $2,575,240: $900,000 for LLAD
operations and $1,675,240 for CIP – Project B-626. On November 17, 2020, the Town
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Council adopted Resolution No. 78-2020, approving the 2019/20 CAFR and
designating $3,392,641 from the General Fund as a “COVID Reserve” fund. This
increased the total 2019/20 transfers and designations to $5,967,881.
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 overview
presents an opportunity to review and update information that has the potential to
impact future year revenues or expenditures. Ten-year forecasts were adjusted to
reflect the impact of the pandemic upon the current fiscal year as a part of the 2020/21
budget process. There are no further changes recommended to the ten-year forecast
at mid-year.
RECOMMENDATION
Review and discuss the 2020/21 Mid-Year Financial Overview and provide direction
and feedback to staff regarding any mid-year budget adjustments.
Attachments
Exhibit A – 2020/21 Mid-Year Update Year over Year Comparison