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HomeMy WebLinkAboutReso 21-2007 RESOLUTION NO. 21-2007 CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION AMENDING THE 2006-07 GENERAL FUND OPERATING BUDGET TO INCREASE GENERAL FUND REVENUES BY A TOTAL OF $2,343,338 AND TO INCREASE GENERAL FUND EXPENDITURES BY $250,000. WHEREAS, it is recomlnended that the City Council review the 2006-07 2nd Quarter Financial Report and approve the 2nd Quarter 2006-07 General Fund Operating Budget Atnendlnent Changes included as "Attachlnent B" hereto, and shown in the "Variance" colUlnn of that attacmnent. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of South San Francisco hereby amends the 2006-07 General Fund Operating Budget to increase General Fund Revenues by a total of $2,343,338 and to increase General Fund Expenditures by $250,000. * * * * * I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a regular meeting held on the 14th day of March 2007 by the following vote: AYES: Councilmembers Mark N. Addiego, Joseph A. Fernekes and Karyl Matsulnoto, Vice Mayor Pedro Gonzalez and Mayor Richard A. Garbarino NOES: ABSTAIN: ABSENT: ATTEST: uth n Quarterly Financial Report Mid-year 2006-07 Attachment B OVERVIEW This is a mid-year review of revenues and expenditures for the fiscal year 2006-07, based on the six months ending December 31, 2006. At this point there has been enough activity recorded to compare actual performance to the budget, and to propose revisions to the budget. Overall, General Fund revenues are running ahead of the projections in the adopted budget, particularly in Building and Fire Permits, Franchise Fees, Transient Occupancy Tax, and interest earnings. Traffic fines, the commercial parking tax, and sales tax appear to be somewhat down. In January 2007, the County released the ERAF refund for 06-07, which was $660,000 above the conservative projection in the adopted budget. Expenditures are close to 50% of the budget. Economy The Conference Board reported that the index of leading economic indicators increased 0.30/0 in December, but was still 0.1 % below the December 2005 level. Forbes magazine reported that growth in the national economy slowed to about 2% in the summer and fall and speculated that there was a "Goldilocks economy" in which "growth is fast enough to create jobs and boost corporate profits but not so fast that it will create inflationary bottlenecks." Lower fuel costs have also offered some relief to consumers and businesses. The Federal Reserve deferred further interest rate increases at its last meeting. At the recent ABAG Regional Economic Outlook Conference, economists predicted slower state growth in 2007 than in 2006, in part because momentum has slowed. On the other hand, job growth in the Bay Area was cited as the growth leader in the State as the tech sector was improving. ABAG has developed a Bay Area Index of Economic Indicators, which predicts low to moderate growth in the region. The housing slump, considered a contributing factor for lower vehicle sales, income tax withholding, and other declines in 2006, is believed to have nearly leveled off. Demand remains generally high in the commercial real estate market. BT Commercial reports that the office vacancy rate in South San Francisco was 8.9% in the fourth quarter of 2006 (calendar year), compared to 12.2 % a year before. The reported vacancy rate for research and development space in the SSF/Burlingame submarket was 6.0% for the quarter, down from the 6.5% reported for the comparable quarter in 2005. The vacancy rate for local warehouse space rose to 5.9% in the fourth quarter of 2006 from 5.6% in the previous year. However, this report also noted several major sales of warehouses in the City during 2006. MBIA Muniservices, the City's sales tax consultant, reported that sales tax growth slowed from the second quarter 2006 to the third quarter, statewide, and in Northern California. In South San Francisco, this trend was reversed, as sales taxes increased over the last two quarters. However, comparing the third quarter sales tax in 2006 to that of 2005 shows a large drop of over $166,000. This drop is primarily attributable to a one- time boost in 2005 due to a major purchase of capital equipment in the biotech sector. Top Revenues Summary The following revenue sources total over half of General Fund revenues. - I - Quarterly Financial Report %01 Projected Projected Selected General Budget Year-end Variance to f:undRevenues Budget YTO Received Budget (000 $'s) YTD Sales Tax 12,839 4,921 38.3% 12,689 (150) Property Taxes 12,683 6,340 50.0% 12,683 ERAF Refund 750 - 0.0% 1,410 660 Transient Occupancy Tax 5,650 2,517 44.5% 5,900 250 Motor Vehicle In Lieu Fees 4,361 2,343 53.7% 4,611 250 Franchise Fees 2,950 872 29.6% 3,150 200 Building and Fire Permits 3,025 2,804 92.7% 3,850 825 Recreation Fees 2,501 1,087 43.5% 2,501 Business License Fees 1,785 745 41.7% 1,635 (150) Paramedic Fees 1,150 520 45.2% 1,150 BLS Transport 425 226 53.2% 425 Interest Earnings 600 338 56.3% 700 100 Total 48,719 22,713 46.6% 50,704 1,985 By the time the December 31, 2006 accounting records have been finalized, approximately half of the annual total for many revenues, including property. taxes, building and fire permits, and recreation fees, have been posted. for other revenues, such as transient occupancy taxes (TOT), franchise fees, and paramedic fees, five months of receipts have been reported. Other revenues, such as Business Licenses, are seasonal. Enough information is now available to revise last year's budget projections. Most notably, the ERAF refund has come in more than $660,000 over the adopted budget, and Building and Fire Permit revenue almost met the annual budget total in the first six months. For the twelve major revenue types in the above schedule, projections now exceed budget by a total of $1,985,000. For all revenues, an amendment to the General Fund Budget of $2,343,338 is proposed. All revenues are shown on Attachment C. 1. Sales and Use Taxes The State Board of Equalization (SBOE) made the usual monthly allocations to the City for sales tax collections. This are mainly advances, an estimate based on 90% of actual collections for the same quarter in the prior year. The mid-December 2006 payment included a small ($16,000) third quarter reconciliation to actual collections, which indicates that 2006-07 sales taxes are running slightly ahead of the previous year. Mid-year 2006-07 MBIA reported that "business-to-business" remains the major provider of local sales taxes, with over 27% of the total, slightly ahead of the general retail category. The construction category, at 19% for the last quarter, has been much improved over the last year. MBIA revises its forecast each quarter as it updates the base year to the most recent four quarters. As a result of the third quarter of 2005 dropping out of the base year (for the capital purchase mentioned above) the new forecast has been reduced from the forecast used in the adopted budget. The budget projection is therefore also being reduced to conform to this forecast. 2. Property Taxes The November and December 2006 payments of property tax collections comprise approximately half of the total annual revenue. Based on this ratio, it appears that total 2006-07 secured property tax collections will slightly exceed the amended budget. (The budget was amended after the first quarter by $500,000, based on new estimates of secured property tax revenue from the County Controller's Office.) However, unsecured and supplemental property taxes may be lagging enough to offset any additional secured tax revenue, so no adjustment to the property tax category will be proposed. While the real estate market has cooled in the Bay Area, the total of assessed valuations will continue to rise as new properties are added and existing properties are reassessed on sale. This growth in assessed valuations should support increases in property tax revenues. 3. ERAF Refund The County released the annual ERAF refund to the cities in January 2007. This refund is based on past collections of ERAF shifts to County school districts in excess of State requirements. The amount is essentially unpredictable each year, so only a conservative estimate of $750,000 was included in the adopted budget. The actual payment was $1,410,000, so a budget increase is included for $660,000. Council policy has been to use this unpredictable revenue to fund next year's General Fund contribution to the Capital Improvement budget, so Staff will place the extra dollars in the reserve that is designated for future Capital Projects. - 2 - Quarterly Financial Report Mid-year 2006-07 4. Transient Occupancy Taxes (TOT) The hotels report TOT one month after collection, so only the returns for July through November have been recorded through December 31, 2006. Based on actual returns, which include unrecorded late November 2006 payments, the City has received $27 I ,000 more TOT than the same time period a year ago, although 7,663 fewer room nights were rented. This indicates that the local hospitality market remains strong, and that hotels are able to increase room rates. For non-residential hotels, average year to date occupancy and room rates citywide are at 74.0% and $89.64 compared to 73.0% and $80.55 for the same period a year ago. Because TOT is seasonal, only a conservative $250,000 increase to the projected TOT total for 2006-07 is proposed at this time. Another increase may be proposed in the sprIng. 5. Motor Vehicle in Lieu Fees (VLF) The State repaid the VLF loan (3 months of payments withheld two years ago) in July 2005, and there is no comparable payment for 2006-07. The tax has been reduced for vehicle owners, and the State backfills this tax reduction to the cities from property taxes. The backfill amount increases each year in line with the growth in property taxes. The first (of two annual) State backfill payments in December 2006 reflected the strong growth in property taxes, and the new projection has been increased by over $200,000. A budget amendment of $250,000 (including the regular VLF) is proposed. 6. Franchise Fees. Only five monthly payments from the South San Francisco Scavenger Company and one quarterly payment from Comcast have been recorded as of December 31, 2006. These reflect the higher garbage rates that became effective in July 2006, and higher Comcast franchise fees received. A $200,000 increase to the budget projection is proposed. However, the largest franchise fee payment, from PG&E, isn't received until April 2007. 7. Building and Fire Fees. Year to date building permit receipts are $866,000 higher than last fiscal year to date. The results as of December 31, 2006 are at 97% of the adopted budget. Similarly, fire permit revenues are $237,000 ahead of last year, and are at 77% of the adopted budget. A budget increase of $825,000 (which may still prove conservative) is proposed. 8. Recreation Fees The largest revenues are paid in the spring, and Staff believes the current budget is still realistic for this fiscal year. 9. Business License Taxes This source of revenue is made up of business licenses and commercial parking taxes. Business license renewals were due January 31, 2007. At this point, renewals are running slightly behind last year. Parking taxes are paid a quarter in arrears, so only returns for one quarter have been recorded through December 31, 2006. Staff is concerned about potential competition from the parking garage at San Francisco International Airport (SFO) opened to the public in July 2006. It appears that the outdoor lots in the City may be losing business to the SFO lot. A decrease to the projected budget in the amount of $150,000 is proposed for business license and parking tax revenues, based on the next quarter's receipts analyzed in early February 2007. 10. Paramedic Fees Payments for the regular Advanced Life Support (ALS) paramedic services are received both by the City's outside billing processor and in-house Staff, and the current budget appears realistic at this point. The Basic Life Support (BLS) services added two years ago have failed to meet past revenue projections, but for the first six months of 2006-07 collections are running slightly ahead of budget. 11. Interest Earning Interest earnings are allocated for the first six months in January 2007, after extensive calculations. Because interest earnings on the City's investments have risen with the overall change in interest rates, an increase to the projected budget of $100,000 is proposed. - 3 - Quarterly Financial Report Mid-year 2006-07 12. Other After the City's 2006-07 budget was adopted, the State made funds available to reimburse cities for booking fees for one last year. South San Francisco received $164,838, and a corresponding budget increase is proposed. An additional increase to the projected budget in the amount of $128,500 is proposed for disaster recovery reimbursements and traffic signal maintenance reimbursements from the State, which were in excess of expectations. $175,000 is proposed as an increase to the projected revenues for higher planning fees, reimbursed Staff time and other reimbursements, which are substantially in excess of the adopted budget. Finally, a net reduction of $110,000 to the Fines revenues is proposed. Traffic fines may be $200,000 below budget for the year, but part of this will be offset by higher revenues for administrative citations. Expenditures Salaries and benefits make up about four-fifths of General Fund budgeted expenditures. The actual salaries and benefit expenditures are running at 50.0% of the adopted annual budget through December 2006. Expenditures (000 % of Budget $'s) Budget YTO Actual Expended --- Salaries and Benefits 45,721 22,993 50.3% Non-Salaries 12,483 6,080 48.7% Total General Fund Operating Budget 58,204 29,073 50.0% - 4 - CITY OF SOUTH SAN FRANCISCO OPERATING BUDGET, 2006-07 Attachment C GENERAL FUND SUMMARY, 2006-07 MIDYEAR REVIEW Projected Unaudited Adopted Amended Year to Date Projected Variance Actual Budget Budget 12/31/2006 Year End Favorable % 2005-06 2006-07 2006-07 2006-07 2006-07 (Unfavorable) Change Revenues and Other Financing Sources Property Taxes 11,776,863 12,183,306 12,683,306 6,339,664 12,683,306 ERAF Refund from County 1,871,955 750,000 750,000 0 1,410,000 660,000 88.0% Sales Tax 12,251,284 12,839,494 12,839,494 4,920,860 12,689,494 (150,000) -1.2% Transient Occupancy Tax 5,469,708 5,650,000 5,650,000 2,516,560 5,900,000 250,000 4.4% Motor Vehicle In Lieu Fees 4,460,748 4,361,219 4,361,219 2,342,763 4,611,219 250,000 5.7% Revenue from Other Agencies 1,522,527 866,500 1,103,802 941,388 1,397,140 293,338 26.6% Franchise Fees 2,858,554 2,950,000 2,950,000 872,037 3,150,000 200,000 6.8% Business License 1,787,569 1,785,000 1,785,000 744,853 1,635,000 (150,000) -8.4% Building and Fire Permits 3,554,441 3,025,000 3,025,000 2,803,665 3,850,000 825,000 27.3% Charges for Services 5,736,520 5,116,400 5,616,427 3,031,484 5,791,427 175,000 3.1% Fines 889,085 1,090,000 1,090,000 489,862 980,000 (110,000) -10.1 % Interest 767,495 600,000 600,000 337,592 700,000 100,000 16.7% Net Change Investment Value -54,909 Rent 2,526,995 2,532,000 2,532,000 1,151,153 2,532,000 Administrative Charges 1,986,774 2,018,500 2,018,500 1,009,250 2,018,500 Other 639,783 540,000 697,000 375,019 697,000 Transfers In 2,293,579 1,623,500 1,640,953 702,500 940,953 (700,000) Total Revenues: 60,338,973 57,930,919 59,342,701 28,578,651 60,986,039 1,643,338 2.8% Plus Prior Year Carryovers 386,684 386,684 Total Revenues and Other Financing Sources $ 60,338,973 57,930,919 59,729,385 28,578,651 61,372,723 1,643,338 Expenditures Administration 4,987,088 5,162,414 5,273,205 2,362,018 5,273,205 Economic & Comm. Dev. 3,600,855 3,375,585 3,829,841 2,121 ,768 4,079,841 250,000 Fire 14,902,099 14,875,060 15,047,831 7,813,827 15,047,831 Library 4,067,035 4,202,541 4,386,148 2,182,335 4,386,148 Police 16,294,619 17,541,466 17,597,068 9,006,167 17,597,068 Public Works (formerly Maintenance Services) 7,154,504 7,702,307 7,731,408 3,864,831 7,731,408 Recreation and Community Services 4,633,023 4,739,617 4,796,914 2,524,584 4,796,914 Subtotal, Operating Budget Expenditures 55,639,224 57,598,990 58,662,416 29,875,530 58,912,416 250,000 Net Operating Budget Impact $ II r-nn. -'lIn '" 331,929 '" ... nee ncn '" ,... ....nc O""7n\ '" " lien "n"7 Lt,O;:7;:7,/Lt;:7 ill ill I,VUO,;:7U;:7 ill \1,L;;1U,OI;;1/ ill L,....UU'uu I CITY OF SOUTH SAN FRANCISCO OPERATING BUDGET, 2006-07 Attachment C-1 Total General Fund Operating and Capital Budget, & Projected Changes to General Fund Reserves Midyear Review Net Operating Budget Impact (from Table I) Adopted Proiected Year End Actual Budget Actual 2004-05 2005-06 2006-07 2006-07 803,432 4,699,749 $ 331,929 $ 2,460,307 (338,493) (471,129) (1,375,000) (1,710,364) (136,154) (130,000) (130,000) (130,000) $ 328,785 $ 4,098,620 $ (1,173,071) $ 619,943 Less Transfers to Capital Projects: Less Transfers to Debt Service Net Impact on General Fund Reserves IGeneral Fund Reserves Projection I. Discretionary Reserves! Liquid Reserves Available Emergencies 1,100,000 1,200,000 1,159,000 1,220,000 Economic Contingencies 3,500,000 4,211,000 4,055,000 4,269,000 Designated for future Economic Development and Capital Projects 3,600,000 4,950,000 3,595,000 4,235,000 Undesignated Reserve 4,125,250 6,046,172 7,147,329 8,025,343 Subtotal, Discretionary (Available) Reserves $ 12,325,250 $ 16,407,172 $ 15,956,329 $ 17,749,343 II. Non-Discretionary Reserves! Reserves Already Committed Encumbrances 381 ,400 386,864 Advances to Other Funds Inventory and Other 40,300 Appropriated Capital Projects 283,830 335,364 Subtotal, Non Discretionary (Committed) Reserves Total General Fund Reserves $ 13,030,780 $ 17,129,400 15,956,329 17,749,343 Q) ~ ~ ~ OJ 0 0 0 c ~ C') '<;j- Cll ..- 0) ~ .c 0 ..- ..- ?f. Q) C') '<;j- OJ ..- c f'-. ..- ex:> Cll '<;j- ..- L() .c N r--: crl "C 0 Q) C') f;FJ C') t) f;FJ f;FJ ~ 0 l{) L() f'-. C\J 9 () Oi f'-. 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