STAFF REPORT
CITY OF BURBANK
FINANCIAL
SERVICES
DATE: February 28, 2023
TO: Justin Hess, City Manager
FROM: Jennifer Becker, Financial Services Director OB
By: Heidi Okimoto, Accounting and Audit Manager
Susan Langford, Revenue Grant Manager
Leana Mkrtchyan, Deputy Financial Services Director
Angela O'Connor, Principal Accountant
SUBJECT: Review of Fiscal Year 2021-22 Annual Comprehensive Financial Report
RECOMMENDATION
Note and file.
BACKGROUND
The purpose of this report is to provide the City Council with an overview of the City of Burbank's financial status as of the Fiscal Year (FY) ending June 30, 2022, as presented in the Annual Comprehensive Financial Report (ACFR) (Attachment 1).
DISCUSSION
The Annual Comprehensive Financial Report Purpose and Goals The ACFR presents the City's financial statements with supporting footnote disclosures. This report must follow Generally Accepted Accounting Principles (GAAP) and all pronouncements by the Governmental Accounting Standards Board (GASB). These standards and regulations provide the guidance staff utilizes in preparing the ACFR. Per Section 1040 of the City Charter, this annual audited financial report shall be submitted to the Council by the City Manager in such form that may be approved by the Council. The City Council engaged an independent certified public accounting firm, CliftonLarsonAllen (CLA), to perform the annual audit of the City of Burbank and its component units. The results of the audit are in the Independent Auditor's Report which can be found at the beginning of the Financial Section of the ACFR.
For the FY 2021-22 audit, the City of Burbank received an unmodified opinion, which is the highest given. An unmodified opinion indicates that the financial statements have been prepared in accordance with GAAP, comply with statutory requirements and regulations,
and there is adequate disclosure of all material matters relevant to the proper presentation of the financial statements.
The ACFR provides readers with necessary information for both financial decision-making and assessment of financial stewardship. By preparing an accurate and well-organized ACFR, the City provides interested parties the opportunity to make these assessments. The City of Burbank is committed to providing the highest quality ACFR, and to that end, the document will be submitted to the Government Finance Officers Association (GOA) for an annual national achievement of excellence award. To qualify for this award, the City must publish an easily readable and effectively organized ACFR and conform to the rigorous standards established by the GOA. The City has received this award for 38 consecutive years, and staff believes that the 2021-22 report submitted to the City Council will continue to conform to the standards established by this program. In addition to the GFOA, the ACFR is sent out to numerous government agencies and financial institutions to comply with various reporting, financial, and subsequent bond disclosure requirements.
ACFR - Statements
The ACR includes separate sets of financial statements for governmental, proprietary, and fiduciary funds, as well as a set of Government-wide financial statements. The fund financial statements are designed to focus on near-term liquidity and on current financial resources.
These statements are designed to provide readers with a broad overview of the City's finances similar to a private-sector business. The government-wide financial statements distinguish functions of the City by segregating the financial results of governmental activities from business-type activities. The City's governmental activities include general government, public safety, public services, culture and recreation, and interest on long-term debt. The business-type activities of the City include operations of the electric, water, wastewater, and solid waste utilities. The combination of all statements and disclosures shows the June 30, 2022, fiscal year-end balances, and overall results of operations for all City funds.
To gain a complete understanding of the City's financial position it is necessary to review all financial statements and the related disclosures.
Governmental Accounting Standards Board (GASB) Statement Changes - GASB 87 For the FY 2021-22 ACFR, the City has implemented GASB Statement No. 87 - Leases.
The primary objective of this statement is to achieve more accuracy and transparency in the accounting and financial reporting of leases by state and local governments. The purpose of this statement is to improve the usefulness of the government financial statements by requiring the recognition of certain lease assets and liabilities that were previously classified as operating leases and recognizes as inflows or outflows of resources based on the payment provisions of the contract.
The implementation of GASB 87 required a substantial number of additional staff hours to complete the data collection and analysis of nearly 100 different contracts to determine whether each had a material impact to the City's ACFR. As such, the completion of the FY 2021-22 audit process was delayed by several weeks in comparison to prior year audits.
Citywide Financial Status
Chart 1 provides a summary of the net position over the last five years for governmental activities, business activities, and their combined amounts for the citywide net position. The total net position represents the difference between the value of all assets and liabilities.
Chart 1 - Citywide Net Position History
(In $1,000's)
$1,400,000 $1,321,547
$1,255,506
$1,187,082 $1,209,779
$1,200,000 $1,139,682
$1,000,000
$830,511
$731,024 $741,888 $765,534
$800,000 $707,234
$600,000 $489,972 $491,036
$432,448 $456,058 $467,891
$400,000
$200,000
$-
FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22
- Total City - Governmental Activities - Business-type Activities Over time, increasing or decreasing trends in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. As of June 30, 2022, the City's total net position was $1.3 billion, which was a $66 million increase over the prior fiscal year. This growth was attributable to a $1 million increase in business-type activities and a $65 million increase in governmental activities. Additional individual fund analysis follows later in this staff report.
Enterprise Funds
The City's Enterprise Funds account for activities that provide services to the public-at-large on a consumer-charge basis. For Enterprise funds, the unrestricted net position is the difference between the total net position and the fund's capital assets. A positive unrestricted net position trend line can indicate long-term fiscal health and sustainability. As of June 30, 2022, the Statement of Net Position for Proprietary Funds' unrestricted balance for the City's Enterprise Funds totaled $83.3 million, a decrease of $7.4 million from the prior year. On the entity-wide Statement of Net Position, the unrestricted balance is $82.2 million as the entity- wide statement adjusts $1.1 million for Internal Service Funds' activities related to Enterprise funds. Chart 2 illustrates the five-year history of the Enterprise Funds' unrestricted net positions. The Electric Fund decrease in FY 2021-22 was due to the lingering impacts from the COVID-19 Pandemic (Pandemic) and higher power supply and fuel costs.
Chart 2 - Enterprise Funds - Unrestricted Net Position History (In $1,000's)
$60,000
$49,364
$50,000 $46,362
$44,229 $38,015
$40,000
$34,534 $35,103
$32,703
$30,000 $25,412 $33,453
$20,280
$20,000
$14,537 $14,069
$13,322
$9,474 $10,059
$10,000
$3,011 $3,515 $11,001
$2,033 $8,894
FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22
- Electric Utility Water Reclamation & Sewer
Refuse Collection & Disposal -Water Utility
494 - Water Reclamation and Sewer
The Water Reclamation and Sewer Fund ended FY 2021-22 with an unrestricted net position of $38 million, which was a $2.9 million or 7.7% increase over the prior fiscal year. The total net position of the Water Reclamation and Sewer Fund increased by $2.6 million due to a decrease in the net pension liability. 496 - Electric Utility
The Electric Utility Fund's ending unrestricted net position for FY 2021-22 was $20.3 million, which was a $13.2 million or 65% decrease over the prior fiscal year. The decrease is attributed to the partial recovery from the Pandemic, higher fuel costs, and higher power supply costs. The total net position of the Electric Utility Fund decreased by $3.6 million.
497 - Water Utility
The Water Utility Fund's ending unrestricted net position for FY 2021-22 was $11 million, which was a $2.1 million or 19% increase over the prior fiscal year. The total net position of the Water Utility Fund increased by $2.7 million, primarily due to the decrease in net pension liability, and an increase of assets due to the issuance of the 2021 Water bond, which paid off the Water Resources Board loans in FY 2021-22. 498 - Refuse Collection and Disposal
The Refuse Collection and Disposal Fund ended FY 2021-22 with an unrestricted net position of $14.1 million, which was a $747,000 increase over FY 2020-21. The increase in total net position of $493,000 is from a reduction of liabilities due to paying off the 2012 Waste Disposal bond and the decrease in net pension liability.
Municipal Infrastructure Fund (Measure P)
On November 6, 2018, the City of Burbank voters approved a general-purpose 3/4C local sales tax known as Measure P. By doing so, the voters approved a new ordinance in the Burbank Municipal Code (BMC) which established the requirement for an annual independent audit to ensure the proper expenditure of Measure P revenues consistent with the purposes established by the ordinance.
CliftonLarsonAllen, the City's external independent auditors, performed additional audit procedures to confirm the City's compliance with Measure P oversight provisions. As a result of their procedures the auditors confirmed, without exception, the following:
1) The $4.7 million annual baseline General Fund commitment was transferred to the Municipal Infrastructure Fund to ensure that Measure P revenues do not supplant previously available General Fund infrastructure funding. 2) Measure P tax revenues received during the fiscal year ended June 30, 2022, totaled $31,699,582 million, of which 50% were recorded to the Municipal Infrastructure Fund.
3) Expenditures within the Municipal Infrastructure Fund were solely expended on infrastructure improvements, maintenance, and repairs.
General Fund Revenues
The General Fund's actual recurring revenues for FY 2021-22 totaled $212.1 million, which was a 17.3% increase over FY 2020-21 actuals. General Fund revenues ended the year $20 million higher than the revised forecast for FY 2021-22, a difference of 10.5%. Total revenues received, including non-recurring resources, was $216 million.
Non-recurring revenues totaling $7.5 million included reimbursements for grants and federal Pandemic relief funding that were offset by the fair value losses experienced on investments.
Most notable was the allocation from the American Rescue Plan Act (ARPA) of 2021, totaling $4.5 million for FY 2021-22. Other sources of non-recurring revenues included reimbursements for fire mutual aid, strike team response, and pass-through transactions received for environmental impact reports. Table 1 illustrates the comparison between the forecasted recurring revenues and the actual revenues received for FY 2021-22 and reconciles the General Fund revenues as reported in the ACFR.
Table 1: General Fund Revenues as of June 30, 2022
(In $1,000's)
FINAL BUDGET ACTUAL
ACTUAL VS % OF BUDGET
NO. RECURRING REVENUE CATEGORY RECURRING RECURRING
FY 2021-22 6/30/22 BUDGET RECEIVED
1 Sales Tax 52,576 $ 58,549 $ 5,972 111.4%
2 Property Tax 59,822 63,295 3,474 105.8%
3 Utility Users Tax 15,707 16,392 685 104.4%
4 Services Charges - Intra City 13,397 13,360 (36) 99.7% 5 Services Charges 16,802 21,585 4,784 128.5%
6 In Lieu Tax 8,392 8,485 92 101.1%
7 Interest/Use of Money 2,013 2,603 590 129.3%
8 Parking/Traffic/Other Fines 2,202 1,667 (535) 75.7%
9 Transient Occupancy Tax 8,373 10,526 2,153 125.7%
10 Building Permits/License Fees 4,820 7,420 2,600 154.0% 11 Transient Parking Tax 3,180 3,691 511 116.1%
12 Business Taxes 2,300 2,379 79 103.4%
13 Franchises 1,524 1,488 (36) 97.6%
14 Intergovernmental Revenues 859 632 (228) 73.5%
TOTAL RECURRING REVENUE 191,968 $ 212,071 $ 20,103 110.5%
NON-RECURRING REVENUE
Grants and State Reimbursements $ 7,503$ 7,503
Environmental Impact Report 140
PEG Revenue 227
Trust Account from Fund 115 (1,322)
GASB 31 Fair Value Adjustment (5,112)
Worker's Comp Reimbursement 868
Miscellaneous Revenue 10 693
TOTAL NON-RECURRING REVENUE I$ 7,513 $ 2,997
TOTAL FY 2021-22 GENERAL FUND REVENUES 199,481 $ 215,068
RECONCILIATION TO ACFR
Services Charges-Intra City (Cost Allocation) (13,363)
TOTAL RECONCILIATION ITEMS $ (13,363)
ACFR GENERAL FUND TOTAL REVENUES 199,481 $ 201,705
Sales Tax
Sales tax revenue for FY 2021-22 was $58.5 million.
Revenues increased by 26.3% in comparison to the FY 2020- Forecast: $52,576,463 21 year-end total of $46.3 million. Restaurants experienced a Actuals: $58,548,585 dynamic turnaround from the Pandemic. Fuel and service % Received: 111.4% stations also saw significant gains due to rising prices and sales of jet fuel at the Hollywood Burbank Airport as a result of increased travel.
Property Tax
Property taxes received for FY 2021-22 outperformed
projections by $3,473,587, up 5.8%. The payoff of the prior Forecast: $59,576,463 redevelopment loan to the City's General Fund resulted in an Actuals: $63,295,371 increase in residual payments to all taxing entities, including % Received: 105.8% the City of Burbank. Additional revenues were due to
supplemental revenue, real property transfer tax, and post-RDA residual allocations.
Supplemental taxes occur when the property changes ownership and the assessed value goes up on the date the title transfers and is received separately from regular property tax disbursements.
Utility Users Tax (UUT)
UUT ended FY 2021-22 above the revised forecast,
attributable to the return of film and television production Forecast: $15,707,000 activity and local businesses returning to the workplace, in Actuals: $16,391,931 addition to increases to electric rates. Overall, UUT increased % Received: 104.4% by 4.4% from the revised projection.
Service Charges
Leisure travel rebounded faster than predicted and passport revenues increased by 66.9% for FY 2021-22 over the prior Forecast: $16,801,612 fiscal year. Golf fees increased significantly by 47.4% over the Actuals: $21,585,346 prior year with the return of tournaments and events. % Received: 128.5% General Fund Expenditures
The General Fund's Adopted Budget for FY 2021-22 was $203.9 million, of which 75% was allocated for salaries and benefits. After City Council approved carryovers and budget amendments, General Fund appropriations for the fiscal year totaled $221.1 million.
For FY 2021-22, all City Departments remained within approved budget appropriations. The total amount expended in the General Fund in FY 2021-22 was $198.6 million, which equates to 89.8% of total appropriations. However, $14.4 million of the remaining unspent appropriations were approved for carryover or are currently encumbered. Therefore, the City's total amount expended and assigned for expenditure was $213 million or 96.3% of total appropriations. This leaves a General Fund budget savings of $8.1 million, primarily due to position vacancies resulting from staffing shortages.
Table 2 provides a summary of the General Fund's total appropriations and expenditures by Department for FY 2021-22 including the reconciliation to the ACR.
Table 2 - General Fund Appropriations and Expenditures as of June 30, 2022 (In $1,000's)
FY 2021-22 FY 2021-22 PERCENT
DEPARTMENT
APPROPRIATIONS* EXPENDITURES REALIZED
Police 64,492 60,994 94.6%
Fire 40,281 40,255 99.9%
Parks and Recreation 28,989 25,407 87.6%
Public Works 17,858 15,989 89.5%
Community Development 18,822 12,819 68.1%
Library Services 8,559 7,622 89.1%
Administrative Services 23,510 19,687 83.7%
Non-Departmental 18,663 15,837 84.9%
TOTAL EXPENDITURES Ş 221,175 198,610 89.8%
ENCUMBRANCES & CARRYOVERS $ 14,412
GRAND TOTAL 221,175 $ 213,022 96.3%
* Appropriations include all carryovers as well as any additional General Fund budget amendments approved by the City Council since the adoption of the FY 2021-22 Budget.
RECONCILIATION TO ACFR
Encumbrances & Carryovers $ - $ (14,412)
Services of Other Departments (13,383) (13,383)
Transfers to Other Funds $ (6,019) (6,001)
TOTAL RECONCILIATION ITEMS $ (19,402) $ (33,796)
ACFR GENERAL FUND TOTAL EXPENDITURES $ 201,773 $ 179,226 General Fund Year-End Balance
As of June 30, 2022, the General Fund's total balance was $130 million, an increase of $17.3 million from the prior fiscal year. Table 3 provides a breakdown of the General Fund's balances in accordance with the GASB-defined categories.
Table 3 - General Fund Balance as of June 30, 2022
(In $1,000's)
CATEGORIES DESCRIPTION FY 2021-22
Nonspendable Amounts that cannot be spent due to their nature such as inventories, $ 1,431 prepaid amounts, property, etc.
Restricted Amounts that can only be spent for the specific purposes stipulated by 1,336 constitution, grants, or through enabling legislation.
Committed Amounts that can be used only for the specific purposes determined by a - formal action of the City Council.
Assigned Unencumbered amounts approved by Council for manual carryover from FY 6,222 2020-21 to FY 2021-22.
Unassigned Amounts include all spendable amounts not contained in the other 111,260 classifications.
TOTAL GENERAL FUND BALANCE $ 120,249
The unassigned balance of $111.3 million represents the amount available to the City Council for meeting the City's general needs. Within the unassigned balance, the City Council has taken action to set aside certain amounts for specific purposes. Table 4 details the budgetary reserves, outstanding accounts receivable, encumbrances, and the remaining spendable fund balance available for future appropriations, all of which comprise the total General Fund unassigned balance at the close of FY 2021-22.
Table 4 - General Fund Unassigned Balance as of June 30, 2022 (In $1,000's)
Budgetary Reserves
Emergency Reserve (5%) $ 9,715
Working Capital Reserve (15%) 29,144
Compensated Absences 2,273
RDA Loan Repayments 9,953
Park Development Fees 258
Performing Arts 224
Art In Public Places 1,606
Youth Endowment 13
Burbank Athletic Federation (BAF) 149
General Plan Fee 503
Sub-total of Budgetary Reserves $ 53,838
Encumbrances $ 8,190
Outstanding Accounts Receivable $ 213
Spendable Fund Balance Available for Future Appropriations $ 49,019 JUNE 30, 2022 YEAR-END UNASSIGNED BALANCE $ 111,260
The General Fund spendable balance on June 30, 2022, of $49 million is significantly higher than the spendable balance projected during the FY 2021-22 budget process. The difference is attributed to the $20 million increase in recurring revenues, combined with the unanticipated non-recurring revenues and overall expedited Pandemic recovery, and higher budgetary savings due to staffing shortages, as previously mentioned in this report.
ENVIRONMENTAL REVIEW
This activity has no potential for resulting in either a direct or a reasonably foreseeable indirect physical change in the environment. As such, is not a "project" subject to the requirements of the California Environmental Quality Act (CEQA) 14 Cal. Code Regs § 15378.
CONCLUSION
The City of Burbank's overall FY 2021-22 actual financial results were favorable, and represent a period of strong economic growth as the City emerged from the impacts of the Pandemic. The increase in Citywide net position at year end is a positive indicator of the City's overall financial health, and are a result of the strong fiscal policies and strategic goals previously adopted by the City Council. Burbank continues to be in a strong financial position and is well prepared to face any future fluctuations in the economy.
ATTACHMENTS
Attachment 1 - Annual Comprehensive Financial Report, Fiscal Year Ended June 30, 2022