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SPECIAL MEETING
CITY COUNCIL
OF THE
CITY OF SOUTH SAN FRANCISCO
P.o. Box 711 (City Hall, 400 Grand Avenue)
South San Francisco, California 94083
CITY HALL CONFERENCE ROOM
400 GRAND AVENUE
WEDNESDAY, FEBRUARY 15,2006
6:30 P.M.
NOTICE IS HEREBY GIVEN, pursuant to Section 54956 of the Government Code of the
State of California, the City Council of the City of South San Francisco will hold a Special Meeting
on Wednesday, the 15th day of February 2006, at 6:30 p.m., in the City Hall Conference Room, 400
Grand Avenue, South San Francisco, California.
Purpose of the meeting:
1. Call to Order
2. Roll Call
3. Public Comments - comments are limited to items on the Special Meeting
Agenda
4. Study Session:
a) Oak A venue street improvements
b) Mid-year financial update and resolution amending the 2005-06
General Fund Operating Budget to increase general fund revenues by a
total of $1 ,812,406 and to decrease general fund expenditures by
$50,000
c) Presentation regarding draft Northwest AirlinesINorthwest fuel
agreement
5. Adjournment
--57n ~,
City Clerk
-
SP. AGENDA ITEM #4 a
CITY OF SOUTH SAN FRANCISCO
INTEROFFICE MEMORANnUM
DATE:
January 20, 2006
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SUBJECT:
Honorable Mayor and City Council //
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,,\\" /\.-----./"
Marty VanDuyn, Assistant City Manager
'I V .
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Oak Avenue Street Improvements
TO:
FROM:
During the special meeting, staff will review with Council the proposed street
improvements for Oak Avenue between Grand and Mission relative to the Oak Avenue
Housing Project. Visual exhibits will be available at the special meeting.
SP. AGENDA ITEM #4 b
DATE:
TO: Honorable Mayor and City Council
FROM: Jim Steele, Director of Finance
SUBJECT: MID- YEAR FINANCIAL REVlEW FOR 2005-06
RECOMMENDATION:
It is recommended that the City Council approve lthe 2lttached budget amendment
resolution for 2005-06, adjusting various revenues and expensles at mid-year.
BACKGROUNDIDISCUSSION:
Staff is projecting a year-end operating budget surplus in the General Fund (before paying for
capital expenditures) of $2.7 million, an increase of $1.9 million from the adopted budget.
While some of the revenue increase is ongoing, some of it is either one time, or cannot reliably
be counted upon for ongoing budget support. Next year's budget, assuming no new programs or
expenditures, is projected to have a modest surplus.
General Fund Revenues at Mid-year:
Below are highlights of major changes recommended at mid-year:
Property Taxes
Amended Budget
11,539,000
Proiected
11,326,000
Variance:
<213 ,000>
Based on actual receipts, the current secured tax receipts are projected to be very close to
budgeted levels. The unsecured tax is coming in lowcr than projected, mainly due to a
reallocation/correction of a portion of these taxes.
ERAF Refund
Amended Budget
650,000
Proiecte:d
1,521,000
Variance:
871,000
The ERAF Refund was finalized and distributed by the County in mid-January. This refund was
conservatively estimated for 05-06, as recommended by the County, pending the calculation of
school funding. While the actual payment for 05-06 is well over expectations, staff recommends
that future estimates for budget purposes continue to be conservative, as this revenue source is
somewhat at risk. See the discussion on budget policy implications on page 3 for a further
discussion of this point.
Staff Report
Subject: Midyear Financial Review for 2005-06
Page 2 of 4
Sales Tax
Amended Budget
11,405,000
Proiected
11,614,000
Variance:
209,000
The sales tax receipts for the most recent tax quarter were boosted by an unexpected increase
apparently related to a one-time transaction reported by a biotech company. Projections for next
year's sales tax collections will not reflect this apparent one-time event.
Transient Occupancy Tax
Amended Budget
4,950,000
Proiected
5,150,000
Variance:
200,000
As a group, local hotels have enjoyed both higher occupancy rates and higher average daily rates
over the first fiye months reported for the fiscal year. This projection reflects a continued
recovery in the local hotel industry, but not to the levels that were achieved before 2000-01.
Vehicle License Fees
Amended Budget
3,782,000 .
Proiected
4,434,000
Variance:
652,000
The major part of Vehicle Lice~se Fees (VLF) is now in the form of the VLF backfill paid by the
State through property taxes redirected to cities. The 2005-106 budget was based on the 2004-05
VLF backfill amount. However, the State's 2004-05 estimate of their "true up" payment to cities
was low, and required a $209,000 "true-up" payment and a related adjustment to the 2005-06
projection. While this increase will not be ongoing into 2006-07, regular VLF receipts will be up
in 2006-07 over the current year because the VLF is now tied to the growth in property taxes.
Amended Budget
Projected
Variance:
Basic Life Support (BLS)
Ambulance Transport Fees
773,000
423,000
<350,000>
The BLS program has not achieved projected levels of services or collection, although progress
in the collection area has been noted. Staff had originally budgeted an ayerage number of 5
transports per day, and the actual results have been closer to 2.7 per day. Projections have been
revised based on lowered transport assumptions for the rest of the year. Some savings in
expenditures are included in revised expenditure projections..
Staff Report
Subject: Midyear Financial Review for 2005-06
Page 3 of 4
Of the changes noted, the ERAF refund cannot be counted on as reliable, ongoing revenue, and
the Motor Vehicle In Lieu Fee increase is comprised of some ongoing revenue increase and
some one-time adjustments.
Budget Policy Implications:
Staff believes the ERAF refund cannot be relied upon long term as an ongoing source of
operating budget revenue. It is not clear these dollars are protected under Proposition lA, so
staff recommends that the Council consider a budget policy that does not count on the high
amount in future years for ongoing program funding. Instead, sta.ff recommends a more prudent
course would be to budget a conservative amount for ongoing programs, for example in the
$500,000 - $750,000 range, and allocate any amount received over that amount to a reserve for
future capital projects. In that way, the City could begin funding needed capital improvements,
which have been deferred for a number of years. With Council concurrence on this policy, staff
will bring back a capital budget for 2006-07 that totals approximately $1.0 million, and staff
expects that the priorities will be additional street projects. The recommended mid-year budget
therefore includes a reserve item adjustment, which would broaden the name of the Reserve for
Economic Development to now be the "Reserve for future Economic Development and Capital
Projects", and to add $1.0 million to that reserve. That will fund a $1.0 million capital program
for next year. Staff is still projecting the Undesignated Reserve to end the 2005-06-budget year
at $5.2 million.
Other Recommended Changes:
. Staff recommends reducing the BLS program expense budget by $50,000, as fewer transports
than the original projection are being made.
Other Funds:
Besides detailed revenue and reserve projections for the General Fund, fund summaries are
attached to this report for the other major City funds: Sewer, Stormwater, Parking, and the
different Redevelopment project area funds.
Staff Report
Subject: Midyear Financial Review for 2005-06
Page 4 of 4
FUNDING:
Staff is recommending changes to the 2005-06 General Fund budget at mid-year that will result
in a year-end Undesignated Reserve balance of $5.2 million
Prepared by: ~
Jim eele
Finance Director
Approved b
ATTACHMENTS: Budget Amendment Resolution
Mid-year Financial Review Summary Report
General Fund Summary and Reserves at Mid..year
Fund Summaries for Other Major Funds
Hotel Tax Summary as of 12/31/05
JS/BN:ed
RESOLUTION NO.__
CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA
A RESOLUTION AMENDING THE 2005-06 GENERAL
FUND OPERATING BUDGET TO INCREASE
GENERAL FUND REVENUES BY A TOTAL OF
$1,812,406 AND TO DECREASE GENERAL FUND
EXPENDITURES BY $50,000.
WHEREAS, it is recommended that the City Council review the 2005-06 2nd Quarter
Financial Report and approve the 2nd Quarter 2005-06 General Fund Operating Budget Amendment
Changes included as "Attachment B" hereto, and shown in the "Variance" column of that
attachment.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of South San
Francisco that the City Council hereby amends the 2005-06 General Fund Operating Budget to
increase General Fund Revenues by a total of $1,812,406, and to decrease General Fund
Expenditures by $50,000.
*
*
*
*
*
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 meeting held on the
_ day of , 2006 by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST:
City Clerk
City of South San Francisc4)
Attachment A
Quarterly Financial Report
2nd Quarter 2005-06
February 15, 2006
OVERVIEW
This is an update of revenues and expenditures for the
second quarter of fiscal year 2005-06, Le., October -
December 2005. At this point a substantial portion of
annual revenues have been received, and income is
exceeding expectations in some areas. Property Taxes,
the city's largest revenue source, are close to projected
levels. Sales Tax allocations from the State Board of
Equalization in the 3rd quarter were better than
anticipated, in part due to some one-time transactions.
Transient Occupancy Tax (TOT) collections, Building
and Fire Permits, and Vehicle License Fees Permits are
all running ahead of original budget projections.
The amended budget includes a net operating surplus of
$.8 million. However, due to the continued
improvement in revenues, the projected operating
budget is now expected to be a net surplus of $2.7
million, prior to operating and capital budget
commitments.
Economy
The nation's economy has largely shaken off the effects
of the gulf hurricanes as oil prices moderated. The
Conference Board reported in December that their index
of leading economic indicators rose 0.5% in September
after a gain of 1.0% in October. These increases were
driven by the index component representing initial
unemployment claims, which returned to pre-storm
levels. On the other hand, some economists are
predicting slower growth in the national economy in
2006, and many are concerned about a slowdown in the
housing and construction industries.
BT Commercial reports that office vacancy in South
San Francisco was 15.1 % in the 4th quarter of 2005,
down from 24.1 % a year before. The reported vacancy
rate for research and development space in the South
San Francisco / Burlingame market rose slightly to 8.2%
for the quarter, compared to 7.9% in the 4th quarter of
2004, although with about 1 million more square feet
available than before. BT Commercial also reports that
the San Mateo County unemployment rate remained at
4.2% in November.
MBlA, the City's sales tax consultant, analyzed sales
taxies to c:alcuIate economic growth for the year ending
September 30. Their results showed growth of 6.2%
statewide, 6.0% in Northern California, and 4.0% for the
Bay Area.
Top Revenues Summary
Th~ following major revenue sources total over half of
General Fund revenues.
% of Budget Project-ed Projected
Selected General Received Year-end Variance to
Fund Revenues Budget YTO YTO Budget
(000 $'s)
Sales Tax 11 ,405 4.566 40.0% 11,614 209
Property Taxes 11,539 5,652 49.0% 11,326 (213)
ERAF Refund 650 - 0.0% 1,521 871
ransient
Occupancy Tax 4,950 2,792 56.4% 5,150 200
Motor Vehicle In
Lieu Fees 3.782 2,251 59.5% 4,434 652
Franchise Fees 2,850 767 26,9"10 2,850 -
Building and Fire
Permits 2,850 1,700 59.6% 2,925 75
Recreation I;:ees 2,502 906 36.2% 2,502 -
BuSiness License
Fees 1,665 827 49.7% 1,760 95
Paramedic Fees 1,186 544 45.9% 1,100 (86)
BLS Transport 773 97 12.5% 423 (350)
-
Tqtal 44,152 20,102 45.5% 45,605 1,453
At the midpoint of the fiscal year, total General Fund
revenues appear to be on a pace to come in $1.8 million
over the amended budget, due primarily to the one-time
re-paym~mt of the VLF loan, additional VLF backfill
from the state" and a much larger Educational Reform
- 1 -
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Quarterly Financial Report
2nd Quarter 2005-06
6. Building, Fire, and Planning Fee,s.
Year to date building permit receipts are $.5 million
higher than last fiscal year to date. The results so far,
have reached 60% of the amended budget, which was
increased by $100,000 after the first quarter. Staff
believes it would be prudent to increase the budget
another $75,000 for higher construction activity this
year.
7. Recreation Fees
The largest revenues are paid in the spring, and staff
believes the current budget is still realistic for this
fiscal year.
8. Business License Taxes
This source of revenue is made up of business
licenses and commercial parking taxes. Business
license renewals aren't due until January 31 S\ and
only one full quarter of parking taxes have been paid
as of mid-year. Staff believes the budget projection
will be exceeded due to stronger parking tax receipts,
and is recommending a $95,000 upward adjustment
at this time.
9. Paramedic Fees
The City's outside billing processor receives
payments for the regular Advanced Life Support
(ALS) paramedic services, and staff believes the
current budget is realistic.
The new Basic Life Support (BLS) services were
added last year to augment the General Fund in lieu
of additional budget cuts. BLS revenues are invoiced
by contract City staff, and, as noted in the first
quarter financial report, collections are running
significantly behind budget. The collection rate for
2005 (actual revenues deposited divided by net
charges) was only about 25%. The adopted budget
was based on BLS service levels averaging over five
trips daily, but reports for 2005 indicate that actual
service levels were less than 3 trips per day.
The BLS prograIJ1 has made substantial progress in
recent weeks, in part due to a new software system
and stepped up efforts by a new contract staff
member. However, achieving budgeted goals is very
unlikely. A new projection based on fiscaI-year-to-
date activity and slightly optimistic assumptions for
performance over the remaining six months of 05-06
indicates BLS revenues of $421,000, short of the
budgeted $773,200. This is partially mitigated by the
estimate of 05-06 expenditures at $259,000, against
the budgeted $305,000. In summary, the BLS
program is projected to cover its 05-06 cost and
contribute an estimated $162,000 to the general fund,
instea.d of the $468,000 surplus projected in the
adopted budget.
Expenditures
Salaries and benefits make up about four-fifths of
budgeted General Fund expenditures. The actual salaries
and benefit expenditures are running at 50% of the
annual budget through December.
Expenditures (000 % of Budget
$'5) Budget YTD Actual Expended
Salaries and
Benefits
42,184 21 ,305 50%
12,725 5,847 46%
54,909 27,152 49.4%
Non-Salaries
Total General
Fund Opl3rating
Budget
- 3 -
Attachment B
Midyear General Fund Budget Beview,
2005-06
Year-End Adopted Amended Actual Projected Variance
Actual BUdget Budget through Dec Actual Favorable
2004-05 2005-06 2005;-06 2005-06 2005-06 (Unfavorable )
Revenues and Other
Financing Sources
Property Taxes 11,076,530 11 ,538,588 11,538,588 5,651,698 11 ,326,042 -212,546
ERAF One Time Refund from
County 1,337,037 650,000 650,000 247 1,521,298 871 ,298
Sales Tax 10,975,749 11,525,384 11,405,384 4,565,562 11,614,273 208,889
Transient Occupancy Tax 4,518,293 4,800,000 4,950,000 2,353,872 5,150,000 200,000
Motor Vehicle In Lieu Fees 2,977,292 2,735,600 3,782,272 2,251,206 4,433,834 651,562
Revenue from Other Agencies 1,212,142 1,238,536 1,339,813 479,540 1,220,536 -119,277
Franchise Fees 2,710,213 2,850,000 2,850,000 767,072 2,850,000 0
Business License 1 ,771 ,282 1,665,000 1,665,000 840,914 1,760,000 95,000
Building and Fire Permits 2,479,694 2,750,000 2,850,000 1,700,459 2,925,000 75,000
Charges for Services 4,970,407 5,456,900 5,456,900 2,209,162 5,340,500 -116,400
Fines 971 ,050 1,083,000 1,083,000 401,173 1,090,000 7,000
Interest 433,264 476,000 476,000 272,000 525,000 49,000
Net Change Investment Value -5,750 0 0 0 0 0
Rent 2,485,932 2,450,000 2,450,000 1,106,892 2,500,000 50,000
Administrative Charges 2,133,950 1,986,774 1,986,774 993,387 1,986,774 0
Other 688,986 590,981 590,981 315,655 640,981 50,000
Transfers In 2,837,897 2,123,500 2,283,040 1,033,500 2,285,921 2,881
Total Revenues: 53,573,969 53,920,263 $5,357,752 24,942,340 57,170,158 1,812,406
Plus Prior Year Carryovers 371,816 371,816 371,816
Total Revenues and Other
Financing Sources $ 53,573,969 $ 53,920,263 $ 55,729,fi68 $ 25,314,156 $ 57,541,974 $ 1,812,406
Expenditures
Employee Services 38,331,607 42,024,201 42,184,126 21,305,062 42,184,126 0
Non Salaries 14,438,930 12,231,812 12,729,526 5,848,670 12,679,526 -50,000
Subtotal, Operating
Budget Expenditures 52,770,537 54,256,013 54,913,Ei51 27,153,731 54,863,651 (50,000)
Net Operating Budget Impact $ 803,432 $ (335,750) $ 815,~117 $ (1,839,576) $ 2,678,323 $ 1,862,406
4
5
$ 13,034,423 $ 12,486,673__$u12,917,009 $ 14,779,416
Total General Fund Reserves
291,330
283,830
Appropriated Capital Projects
40,000
90,000
90,000
40,300
Inventory and Other
Advances to Other Funds
371,816
381 ,400
Encumbrances
II. Non-Discretionary Reserves!
Reserves Already Committed
5,179,416
3,663,863
3&9J3,673
4,128,893
Undesignated Reserve
4,620,000
3,600,000
3,600,000
3,600,000
Designated for future Economic Development and Capita
Projects
3,840,000
3,800,000
3,800,000
3,500,000
Economic Contingencies
1,100,000
1,100,000
1,100,000
1,100,000
Emergencies
IGeneral Fund Reserves Projection
I. Discretionary Reserves!
Liquid Reserves Available
Adopted Amended Proiected
Year End Budget Budget BUdget
2004-05 2005-06 2005-06 2005-06
803,432 (335,750) 815,917 2,678,323
(338,493) (82,OOO) (803,330) (803,330)
(136,154) (130,000) (130,000) (130,000)
$ 328,785 $ (547,750) $ (117,413) $ 1,744,993
Net Impact on General Fund Reserves
Less Transfers to Debt Service
Less Transfers to Capital Projects:
Net Operating Budget Impact (from Table I)
Total General Fund Operating and Capital Budget,
& Projected Changes to General Fund Reserves
Midyear 2005-06 Projection
Attachment C
ENTERPRISE FUNDS, 2005-06
Midyear Review
Sewer Rental Fund
Summary of Revenues, Expend~ures, and Clhanges in Fund Balance
6
7
* (Net of Fixed Assets)
151,180
725,000
326,666
396,838 565,827 738,998 738,998
125,000
(6,944)
396,838 558,883 738,998 863,998
11 ,225 (145,761)
597,941 452,180
Undesignated Fund Equity *
(301,000)
Net Income
Total Expenditures
600,000
125,000
326,666
Operating Expenses
Transfers Out to Capitallmpr Fund
Net Balance Sheet Adj.
EXPENDITURES
Actual Actual Adopted Amended YTD Actual Projected
:W03-04 2004-05 2005-06 2005-06 12/31/2005 2005-06
REVENUES
Operations:
Service Charges 405,578 401,484 460,000 460,000 207,706 414,000
Interest and Other 2,465 11,638 15,000 15,000 5,283 10,000
Total Revenues 408,063 413,122 475,000 475,000 212,989 424,000
Summary of Revenues, Expenditures, and Changes in Fund Balance
Stolrm Water Fund
ENTEFlPRISE FUNDS, 2005-06
Midyear Review
ENTERPRISE FUNDS, 200S-Qli
Midyear Review
Parking District Fund
Summary of Revenues, Expenditures, and Changes in Fund Balance
Actual Actual Adopted Amended YTD Actual Projected
2003-04 2004-05 2005-06 2005-06 12/31/2005 2005-06
REVENUES
Operations:
Parking Fees 312,875 401,081 3E10,000 350,000 219,675 400,000
Interest and Other 4,899 21,203 2:0,000 30,000 10,617 21,000
Total Revenues 317,774 422,284 2:0,000 380,000 230,292 421 ,000
EXPENDITURES
Operating Expenses
Transfers Out
Capital Outlay (1)
Net Balance Sheet Adj
Undesignated Fund Equity *
214,152 229,087 2B8,230 298,230
75,000 75,000
300,000
585,714
289,152 889,801 2'8,230 598,230
28,622 (467,517)
1,157,744 690,221
141,618
298,230
119,970
300,000
Total Expenditures
261,587
598,230
Net Income
(177,230)
512,997
(1) Land acquisition for parking lot
* Net of Fixed Assets
8
9
67,755
450,747
518,502
Train Station
US 101 Flyover/ Hook Ramps
Total
05/06 budgeted capital projects
(1) Capital Projects:
Notes:
19,237,078
17,9E?7,688
Mandated Bond Retirement Account
837,011
Bond Funds, End of Year
17,169,611
15,900,221
Fund Balance, End of Year
15,900,221
17,319,241
Fund Balance, Beginning of Year
1,269,390
217,248
(1,419,020) 2,181,052 1,653,800
Excess of Revenues
over (under) Expenditures
125,000 125,000 125,000 140,280 170,000
2,207,743 ' 2,244,348 2,244,348 1,607,663 2,244,348
1,214,891 1 ,113,600 1 ,113,600 555,236 1,175,282
3,595,488 - 518,502 260,994 518,502
8,750 8,750
36,000 36,000 36,000
7,143,121 3,518,948 4,046,200 2,564,173 4,152,881
Total Expenditures
Program Expenditures
Transfers Out - Debt Service
Transfers Out - Low Mod Housing
Transfers Out - Capital Projects (1)
Transfers Out - Equipment
Pass Through Agreements
EXPENDITURES
Actual Adopted Amended Actual 05/06 Projected
2004-05 2005-06 2005-06 Thru Dec 2005-06
-
REVENUES
Gross Tax Increment 5,591,297 5,568,000 5,568,000 2,776,178 5,304,489
Interest 132,804 132,000 132,000 19,461 132,000
Other Taxes (14,218) (14,218)
Total Revenues 5,724,1Q1_ 5,700,000 5,700,00Q _g,lf3.1,421 5,422,271
GATEWAY PROJECT AREA
Summary of Revenues, Sxpenditures, and Changes in Fund Balance
REDEVELOPMENT AGENCY, 2005-06
Mid-Year Review
REDEVELOPMENT AGENCY, 2005-06
Mid-Year Review
DOWNTOWN I CENTRAL PROJECT AREA
Summary of Revenues, Expenditures, and Chan~les in Fund Balance
10
11
US 101 Off Ramp & Hook Ramps 150,000
Capital Projects: 05/06 budgeted capital projects
Note:
(1) 05/06 projected capital expenses include the $150K originally budgeted, and $71 K toward the San
Bruno Mountain Habitat as part of the fulfillment of the County settlement agreement.
Actual Adopted Amended Actual 05/06 Projected
2004-05 2005-06 2005-06 Thru Dec 2005-06
--
REVENUES
Gross Tax Increment 2,785,038 2,736,000 2,736,000 1,587,971 2,801,645
Interest 78,829 58,000 58,000 29,672 58,000
Total Revenues 2,863,867 2,794,000 2,794,000 1,617,643 2,859,645
EXPENDITURES
Program Expenditures 470,428 285,462 285,462 134,153 285,462
Transfers Out - Low Mod Housing 602,492 547,200 547,200 317,594 615,787
Transfers Out - Capital Projects (1) 150,000 150,000
Pass Through Agreements 777,000 777,000 806,148
Transfers Out - Equipment 8,750 8,750
Total Expenditures 1,072,920 1,609,662 1,768,412 451,747 1 ,857,397
Excess of Revenues
over (under) Expenditures 1,790,947 1 ,184,338 1,025,588 1 ,165,896 1,002,248
Fund Balance, Beginning of Year 10,875 1,801,822
Fund Balance, End of Year 1,801,822 2,804,070
Unreserved / Undesignated
End of Year ...1,801,822 2,804,070
SHEARWATER PROJECT AREA
Summary of Revenues, Expenditures, and Changes in Fund Balance
REDEVELOPMENT AGENCY, 2005-06
Mid-Year Review
REDEVELOPMENT AGENCY, 2011)5-06
Mid-Year Review
EL CAMINO CORRIDOR PRQJECT AREA
Summary of Revenues, Expenditures, and Changes in Fund Balance
Actual Adopted Amended Actual 05/06 Projected
2004-05 2005-06 2005-06 Thru Dec 2005-06
REVENUES
Transfers In - 20% Housing 3,B89,724 3,484,500 3,484,500 2,332,938 4,056,129
Interest & Other 412,710 360,000 360,000 246,669 460,000
Misc. Revenue / Rent ~~99,546 70,000 70,000 85,987 110,000
Total Revenues ~~01 ,980 3,914,500 ~914,500 2,665,594 4,626,129
EXPENDITURES
Program Expenditures 1,J86,126 1,336,611 1,517,300 390,577 1,250,000
Transfers Out - Debt Service :327,588 344,089 344,089 217,104 344,089
Transfers Out - Capital Projects 2,000,000 8,500,000 1,474,717 8,500,000
Total Expenditures ~113,?1i4 3,680,700 10,361,389 2,082,398 10,094,089
Excess of Revenues
over (under) Expenditures 2,:288,265 233,800 (6,446,889) 583,196 (5,467,960)
Fund Balance, Beginning of Year 22,319,313 24,607,578
Fund Balance, End of Year 24,1307,578 19,139,618
Bond Funds, End of Year 2,1339,414 1,639,414
Less:
Loan Commitments to 1,1026,632 1,026,632
Mid Pen and Other
Loans Receivable 9,1061,853 9,818,565
All Other Reserved Funds 5,478,938 345,991
Unreserved / Undesignated ~400,741 6,309,017
Fund Balance, End of Year
(1) Capital Projects:
San Mateo County Housing Proj
RDA Misc Land Acquisition
13
LOW 8l MODERATE HOUSING
Summary of Revenues, Expel1ditures, and Changes in Fund Balance
REDEVELOPMENT AGENCY, 2005-06
Mid-Year Review
TOT Collected
% Change Dec"05 Dec, '04 Change % Change
6.5% $282,975 $227,077 $55,898 24.6%
0.3% $36,827 $25,442 $11,385 44.7%
- - - - -
5.0% 319,802 252,519 $67,283 26.6%
Transient Occupancy Tax (TOT) Summary through December 2005
Residential Hotels Rooms ~cupancy Rate Averaae Room Rate
~ Dec"05 Dec,'04 % Change Dec"05 Dec,'04 Change
Business Hotels (17) 2,322 55.6% 53.4% 4.0% $ 79.74 $ 74.88 $ 4.85
Economy Hotels (10) 548 55.1% 47.3% 16.5% $ 50.55 $ 50.42 $ 0.13
- - - - - -
2,870 55.5% 52.3% 6.1% 74.20 70.65 $ 3.55
-
-
14
SP. A GENDA ITEM #4 c
CITY OF SoUTII SAN FRANCISCO
FINANCEDEPARlMENT
Memo
Cc:
City Council via City Manager
Marty Van Duyn, Assistant City M
Jim Steele, Finance Director _
City Attorney
To:
From:
Date:
February 10,2006
Re:
Potential Economic Incentive Agreement with Northwest Fuel and Northwest
Airlines
Staff and the City Attorney will be briefing the City Council at next Wednesday's study session (February
15th) on progress made on an economic incentive agreement that is being negotiated with Northwest Fuel
(NWF), a subsidiary of Northwest Airlines (NW A), and with NW A. The draft agreement is related to
NWF's purchase of jet fuel at SFO. In summary, the City would agree to pay NWF a percentage of the
sales tax allocated to the City as an economic incentive payment and NWF would agree to maintain a stock
of fuels at the Shell tank farm facility near SFO. Because NW A and NWF conduct their fuel purchase
negotiations out of state and because the fuel would be stocked at the Shell facility, the City would be the
location for the taxable event and would received sales tax revenue associated with the sale of the fuel.
Although there are some similarities to the agreement between United Airlines and the City of Oakland
that received a lot of press in the last several years, there are some key differences in the NWF draft
agreement that staff wanted to make Council aware of.
The United Deal
United opened a fuel sales office in Oakland and declared it was using this office to purchase jet fuel for all
of its aircraft at all airports throughout California Had it not opened the sales office, the sales tax on the jet
fuel would have been assigned to the location of each aircraft (referred to as "at the wingtip"). Because
SFO is physically in San Mateo County, the sales taxes from the sale of jet fuel to United for its planes at
SFO were previously going to San Mateo County.
In return for United declaring its point of sale in Oakland, the City of Oakland entered into a sales tax
sharing agreement with United in which 65% of the sales taxes. on jet fuel that then accrued to the City of
Oakland from United's sales throughout the state would be rebated to United Airlines. As a result of
United's agreement with the City of Oakland, San Mateo County began losing seyeral million dollars of jet
fuel tax annually. In response to this action, the legislature adopted a new law that will return the sales tax
to the wingtip for these types of transactions effective January 1,2008.
- 1 -
Northwest Economic Incentive Agreement
February 10,2006
The Potential NWF Deal
As Council may recall, Shell Oil is reactivating the large jet fuel storage tanks adjacent to the older Costco
near Airport Blvd. and Belle Air Rd. Those tanks have been vacant for several years. Shell will be
pumping jet fuel to these tanks from refineries in the East Bay and then selling/distributing them to airlines
at SFO.
Staff believes, through discussions with our sales tax consultants MBIA, that if NWF files its sales and use
tax permit with the State Board of Equalization (SBOE) in such a way that it shows it is physically taking
ownership and possession of the jet fuel in the Shell tanks themselves in South San Francisco, that NWF
would then pay sales tax at the location of where possession takes place, that is, at the fuel tanks
themselves in South San Francisco, not at the wingtip at SFO. The SBOE recognizes use tax accruing at
the place of inventory when there is no sales office in Califomia.
As an economic incentive to NWF and NW A, in part to ensure their continued operations at SFO and in
part for their decision to maintain a stock of fuel at the tank faITn in South San Francisco, the City would
rebate 65% of the sales taxes it would now receive to NWF through December 31, 2007. In addition, for
the assistance in filing the correct paperwork and shepherding the application through the SBOE, the City's
sales tax auditing firm, MBIA, would retain 10% of the net remaining City sales taxes through a separate
agreement. Both NWF and MBIA would only be paid if the City received a sales tax distribution from the
SBOE. If NWF took no action and if it did not enter into this type of agreement with another entity, its
fuel would otherwise be taxed at the wingtip, and those proceeds would be paid to San Mateo County.
MBIA reports that NWF currently pays $240,000 annually (on average) in sales and use taxes that get
allocated to San Mateo County. Under the draft agreements, the City of South San Francisco would begin
receiving the $240,000 annually, of which it would remit 65% ($156,000) to NWF' The City would then
owe 10% ofthe net proceeds to MBIA (10% of the remaining $84,000, or $8,400). MBIA's payment
would end after six quarters. If MBIA was required to pursue corrective actions through the State Board
of Equalization, including filing an appeals application and following up on the appeals process on
behalf of the City, MBIA's share would increase to 15%. These corrective actions are not expected.
The key difference in the City's draft agreement from the agreement in Oakland is that the City is not
intending to become the point of sale for NWF sales throughout California. The point of sale would
only be NWF' s purchases directly at the Shell fuel tank in South San Francisco. The other key
difference is that unlike Oakland, the City of South San Framcisco will be impacted by Shell's fuel
tanks. The tanks prevent a potential more valuable land use from developing at that site, and they
also require city services be available including fire, police and water treatment issues. For all of
these reasons, the City is bearing some costs by this type of land use, which differentiates it from the
City of Oakland's deal in which it merely facilitated the opening of a sales office without any of the
other negative environmental or land use impacts. Staff believes the real impacts the City will realize
from the reopening of the tanks justifies the sales taxes it would get under this arrangement.
- 2-
Northwest Economic Incentive Agreement
February 10, 2006
Again, the agreement with NWF is still in draft form and staff awaits Council feedback at the Wednesday
study session. The Council will not be asked to approve the agreement at that time, but will be asked to
provide feedback and direction to staff. For more information on the zoning/land use implications of the
Shell tanks, please contact Marty Van Duyn at 877-8500. For more information on the sales tax details,
please call me at 877-8509, or email [email protected].
-3-