May 3, 2022
Finance Department
DATE: May 3, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Shasa Curl, City Manager
Anil Comelo, Interim Deputy City Manager
Delmy Cuellar, Interim Director of Finance
Mubeen Qader, Budget Administrator
Subject:
Fiscal Year 2021-2022 Third Quarter Budget report and
Overtime Report
FINANCIAL IMPACT: There is no fiscal impact as result of this agenda item.
PREVIOUS COUNCIL
ACTION:
June 29, 2021, October 26, 2021, January 25, 2022,
February 1, 2022, February 15, 2022, March 1, 2022,
and March 22, 2022
STATEMENT OF THE
ISSUE:
The quarterly budget report serves to assist the City in monitoring its revenues and expenditures, as compared
to the approved budgeted amounts. The report also
provides staff, the City Council, and the community the ability to monitor trends that impact the budget cycle.
RECOMMENDED ACTION:
RECEIVE the Fiscal Year 2021-2022 third quarter budget
report and the overtime report for the period of July 1, 2021 through March 31, 2022 – Finance Department
(Delmy Cuellar/Mubeen Qader 412-2077).
AGENDA
REPORT
May 3, 2022
DISCUSSION:
Overview
This report represents an overview of the City’s third quarter operating revenues and expenditures for Fiscal Year (FY) 2021-22. The period covers budget activity from July 1, 2021, through March 31, 2022. Generally, at the end of the third quarter, Finance would have expected to have expended 75 percent of the total expenditure budget.
Revenues are not necessarily measured against the same standard due to the seasonality of some major sources of revenue, such as property tax which is received annually in December, April, and June.
At the end of the third quarter, expenditure actuals are trending lower than expected for the current fiscal year and the prior fiscal years. Regardless of the year-to-date expenditures being lower, the budget will continue to be monitored closely given the City’s overall financial condition and the on-going uncertainty in the global economy.
Staff continues to explore cost-saving and revenue enhancement measures but emphasizes that longer-term solutions will be necessary to achieve a structurally balanced budget. It is worth noting that the FY 2021-22 approved Operating Budget includes set-asides from the operating surplus of the prior FY 2020-21 (Refer to City Council Mid-Year Budget Report from March 22, 2022).
General Fund
General Fund Revenues
For the third quarter of FY 2021-22, revenues received total $121 million (63 percent of the budget). This is below the threshold of 75 percent, but the variance is primarily due to the seasonality of most of the revenue sources. For example, the City receives its first secured property tax installment (55 percent) in December and the second installment in April (40 percent). Table 1 below summarizes the General Fund revenue budget to actuals through the third quarter. See Attachment 1 for the breakdown by department.
Table 1: General Fund Revenues thru March 31, 2022
May 3, 2022
For most of the major General Fund revenues, in particular the Utility User Tax and Sales Tax, the final number is unknown until after the revenue accruals have been posted in July and August.
Property Tax
FY 2021-2022 General Fund Property Taxes through third quarter total $24.3 million or
53.7 percent of the budgeted amounts as updated at mid-year. The secured property tax is on pace to meet budgeted amounts. Staff will continue analyzing other components of the Property Tax revenue which are received in the fourth quarter including Homeowner’s Exemptions, Successor Agency Surplus, and pass-through payments from the County.
Sales & Use Tax
Sales & Use Tax through third quarter total $30 million or 57.7 percent of the budgeted amounts as updated at Mid-Year. The Sales & Use Tax revenue stream was the most impacted by the shelter–in-place and the downturn in the economy in Fiscal Year 2019- 2020 due to COVID. The rebound has occurred faster than most predicted and the City Sales Tax revenues have surpassed the pre-COVID levels. The Sales Tax revenues received in the third quarter of FY2021-2022 are trending as budgeted. The amounts received year-to-date match the revenue estimates provided by Avenu Analytics, the City’s sales tax consultants. The increase from previous years is in part due to the local economy being strong, bolstered by the big box stores including Costco, Target, Home Depot, and Wal-Mart.
May 3, 2022
Utility Users Tax (UUT)
UUT through the third quarter total $35.7 million or 76.8 percent of the budgeted amounts as updated at mid-year. The UUT revenue stream, including the maximum cap amount paid by Chevron, is trending to meet the budgeted amounts. The cap amount was expected to grow by 3.0 percent and ended up being 6.8 percent.
Other Taxes
Through the third quarter, the City has received $12.3 million or 58.6 percent of the budgeted amount of Other Taxes. Revenues of note in this category includes the Documentary Transfer Tax, Hotel Tax, and Franchise Fees. The main driver of this revenue category, though, is Documentary Transfer Tax which can vary significantly from month-to-month. The calculation of the budgeted amount for Documentary Transfer Tax is stipulated in the adopted Guiding Fiscal Policies, and is on pace to reach the budgeted amount.
Licenses, Permits & Fees
Through the third quarter, the City has received $4.6 million or 44.1 percent of the budget amount for Licenses, Permits, and Fees. One of the main revenue categories includes the Business Tax. The methodology and collection was changed with the voter-approved passage of Measure U. The percent collected year-to-date is lower than previous years in part because, previously, much of the business tax was paid in December and January. The original budgeted amount for the business tax was $9.5 million. Staff anticipated and mitigated for a year-one reduction of $2 million to account for various potential issues that could impact this year’s Measure U revenue including (1) this being the first year of the program, (2) the expiration date being July 1st, and (3) the amnesty program for the first year where the City will not impose any late fees until after July 1, 2022. The City is currently budgeting $7.9 million in FY 2022 which includes a mid-year reduction of $1.6 million after City Council voted in December 2021 to allow small rental property owners to use any fees paid to the Rent Board as a credit towards the business tax; thus, the estimate for Measure U revenues for the current fiscal year could be as low as $5.9 million ($9.5 million - $1.6 million - $2.0 million = $5.9 million).
That said, City staff anticipated the potential for year-one revenues shortfall and has set-aside revenues from the previous year to mitigate that possibility.
City staff has collected $2.7 million or 34 percent of the $7.9M budgeted in Business Taxes through March 2022. The Measure U Team has recently updated various procedures, documents, online functionality, and brought on temporary staff that will make it easier for businesses to renew. City staff members will not know the final numbers until very late in the fiscal year, especially in light that many of the businesses that owe larger amounts might decide to hold off on submitting payments until closer to the expiration date.
May 3, 2022
General Fund Expenditures
General Fund expenditures totaled $127.4 million (65.2 percent of the budget) at the end of the third quarter of the Fiscal Year 2021-2022. Actuals are trending lower in all major expenditure categories. Table 2 below summarizes the third quarter expenditure budget to actuals. See Attachment 1 for the breakdown by department.
Table 2: General Fund Expenditures Thru March 2022
The following are explanations of some of the major categories’ variances explained.
Salaries and Wages and Payroll/Fringe Benefits
Salaries are at 70.4 percent and Fringe Benefits at 72.1 percent of their respective total budgets which is lower than the threshold of 75 percent. The driver behind the positive variance is due to the significantly higher vacancy rate when compared to prior years.
As of the March 2022 vacancy report there were a total 123 positions vacant and of the total, 98 positions were in the General Fund. A significant part of the saving from these vacant positions is off set by the budgeted vacancy saving factor of $5.8 million.
Professional & Admin Services
The services include professional and consulting services, and contractual obligations, such as animal control services. Actual expenditures total $6.2 million (38.6 percent of budget) and are below the threshold. Factoring in purchase order encumbrances of $2.6 million, the total is $8.8 million (54.7 percent of budget). Operating savings are typically captured in this category.
Other Operating
This category includes copier leases, office supplies, and other items. Actual expenditures total $3.7 million (52.3 percent of budget). Factoring in purchase order encumbrances of $1.1 million, the total is $4.8 million (67.7 percent of the budget).
General Fund
thru
March 31, 2022
ORIGINAL
APPROP
TRANFRS
/
ADJSMTS
REVISED
BUDGET YTD ACTUAL ENCUMB.
AVAILABLE
BUDGET
% USED
WITHOUT
ENCUMB.
% USED
WITHOUT
ENCUMB
40 SALARIES AND WAGES 75,424,602 416,527 75,841,128 53,384,860 - 22,456,268 70.39% 70.40% 41 PYRLL/FRINGE BENEFIT 62,145,202 - 62,145,202 44,819,015 - 17,326,187 72.12% 72.10% 42 PROF & ADMIN 11,201,880 4,790,674 15,992,554 6,177,756 2,576,083 7,238,715 38.63% 54.70% 43 OTHER OPERATING 10,680,893 (3,547,183) 7,133,710 3,731,779 1,100,096 2,301,835 52.31% 67.70% 44 UTILITIES 4,565,743 471,942 5,037,685 3,015,150 294,542 1,727,993 59.85% 65.70% 45 EQPT & CONTRACT SVCS 2,628,158 69,536 2,697,694 1,648,959 312,592 736,143 61.12% 72.70% 46 PROVISN FOR INS LOSS 25,725 1,948 27,673 26,673 - 1,000 96.39% 96.40% 47 COST POOL 14,130,436 325,000 14,455,436 10,597,825 - 3,857,611 73.31% 73.30% 48 ASSET/CAPITAL OUTLAY 1,602,890 (56,876) 1,546,014 652,429 59,349 834,236 42.20% 46.00% 49 DEBT SVC EXPENDITURE 1,065,359 - 1,065,359 644,090 - 421,270 60.46% 60.50% 4A A87 COST PLAN REIMBS (3,516,104) - (3,516,104) (2,603,644) - (912,460) 74.05% 74.00% 50 GRANT EXPENDITURES 2,500 80,000 82,500 10,272 - 72,228 12.45% 12.50% 91 OPER XFERS OUT 7,884,939 4,916,480 12,801,419 5,272,266 - 7,529,153 41.19% 41.20% EXPENDITURE TOTAL 187,842,223 7,468,048 195,310,271 127,377,429 4,342,662 63,590,180 65.22% 67.44%
May 3, 2022
Utilities
Utilities include gas, electricity, water, refuse, telephone, and internet services. Actual expenditures total $3 million (59.9 percent of budget). Factoring in purchase order encumbrances of $295,000, the total is $3.3 million (65.7 percent of the budget).
Equipment & Contract Services
Equipment and Contract Services include equipment and maintenance/repair services.
Actual expenditures total $1.6 million (61.1 percent of the budget). Factoring in purchase order encumbrances of $ 313,000, the total is $2 million (72.7 percent of budget).
Provision for Insurance Loss
This includes premium payments for several property insurances, the costs are paid in full in the beginning of the fiscal year. The total expenditure is at 96.4 percent of the total budget.
Cost Pool
This includes the cost of equipment replacement, general liability insurance premium and Civic Center debt allocation. The activity in this category is recorded through monthly transaction schedules
Transfers Out
This includes transfers out from the General Fund to non-General Funds mostly for operating subsidies and a portion of debt service. Actuals total $7.5 million (41.2 percent of budget). This amount is below the threshold due to the subsidies being on hold until the final subsidy amounts are known towards the end of the fiscal year.
General Fund Overtime Report
The General Fund total overtime, including sworn and miscellaneous overtime, revised budget is $10.7 million. At the end of the third quarter total actual overtime is at 69 percent below the threshold of 75 percent. Sworn-Fire and miscellaneous overtime are above the threshold at 76 percent and 89 percent respectively. Sworn-Police overtime is $3.1 million, below the threshold at 61 percent of the total budget. See attachment 3 for detailed overtime report by type and by department.
Non-General Funds
Non-General Fund Revenues
Overall, 54.5 percent of the Non-General Fund revenues have been collected and are trending as expected. The timing of receipts varies amongst the funds based on the source of funding. For instance, grant funds are typically received after expenditures are
May 3, 2022
incurred and reimbursement requests are submitted to grantors. The chart below summarizes the revenue budget to actuals for non-general funds. See Attachment 4 for revenue budget to actuals by individual fund.
Table 3: Non-General Fund Revenues, as of March 31, 2022
Non-General Fund Expenditures
Overall, 61.1 percent of the Non-General Fund budget appropriations have been expended. Spending patterns in other funds are slightly different than the General Fund depending on the type of the fund. For example, Capital funds’ expenditures depend on the progress of the projects and how invoices are received and processed. The majority of the expenditures are below the threshold of 75 percent. See Attachment 4 for expenditure budget to actuals by individual fund.
Table 4: Non-General Funds Expenditures as of March 321, 2022
Next Steps
City staff will continue to closely monitor the revenues and expenditures to determine if adjustments will need to be made during year-end cleanup process. Please visit the City’s website at https://www.ci.richmond.ca.us/1427/Presentations for the most up-to- date budget information and presentations.
DOCUMENTS ATTACHED:
Attachment 1 – Third Quarter Summary Budget Report – General Fund Fund Types ORIGINAL
APPROP
REVISED
BUDGET YTD ACTUAL AVAILABLE
BUDGET
W/O ENCUMB. %
USED
Other Operations (23,733,954) (27,526,325) (11,611,284) (15,915,040) 42.2% Special Revenue (18,089,047) (18,258,637) (19,425,486) 1,165,920 1.2% Capital Improvement (25,489,773) (33,477,407) (7,679,010) (25,798,397) 22.9% Debt Service (21,604,190) (21,604,190) (19,732,352) (1,871,839) 91.3% Enterprise (39,014,479) (39,339,830) (20,056,895) (19,282,935) 51.0% Internal Services (14,728,562) (31,969,993) (20,998,282) (10,971,711) 65.7% Housing Department (3,509,880) (3,509,880) (1,464,312) (2,045,568) 41.7% Richmond Housing Authority (4,680,205) (4,763,120) (2,035,693) (2,727,427) 42.7% Pension Trust (934,004) (2,225,764) 3,397,533 (5,623,297) -152.6% Total Revenue (151,784,094) (182,675,146) (99,605,781) (83,070,294) 54.5% Fund Types ORIGINAL
APPROP
REVISED
BUDGET YTD ACTUAL ENCUMB. AVAILABLE
BUDGET
W/O
ENCUMB.
% USED
WITH
ENCUMB.
% USED
Other Operations 24,275,841 29,590,926 12,152,166 4,053,841 13,384,919 41.1% 54.8% Special Revenue 28,652,357 33,819,483 14,502,790 3,548,063 15,636,941 1.2% 53.4% Capital Improvement 34,240,355 52,335,516 11,093,518 12,252,101 28,989,897 21.2% 44.6% Debt Service 22,536,642 22,536,642 18,007,935 - 4,528,707 79.9% 79.9% Enterprise 91,902,760 97,327,850 36,028,464 31,435,051 29,864,335 37.0% 69.3% Internal Services 28,920,034 38,583,592 22,278,398 3,909,450 12,395,745 57.7% 67.9% Housing Department 5,947,891 7,278,471 1,387,321 416,136 5,426,644 19.1% 24.8% Richmond Housing Authority 4,867,095 4,763,120 1,989,174 703,967 2,069,979 41.8% 56.5% Pension Trust - - 1,235,307 - (1,235,307) 100% 100% Expenditures 241,342,975 286,235,601 118,675,074 56,318,608 111,061,859 41.5% 61.1%
May 3, 2022
Attachment 2 – Third Quarter Budget Report by Department – General Fund Attachment 3 – Overtime Report – March 2022
Attachment 4 – Third Quarter Budget Report – All Funds
Attachment 5 – Presentation