TO: HONORABLE MAYOR AND FROM: Toni J. Taber, CMC
CITY COUNCIL City Clerk
SUBJECT: SEE BELOW DATE: June 6, 2023
SUBJECT: Third Quarter Financial Reports for Fiscal Year 2022-2023
Recommendation
As recommended by the Public Safety, Finance, and Strategic Support Committee on May 18, 2023, accept the Third Quarter (period ending March 31, 2023) Financial Reports for the Fiscal Year 2022-2023 for (1) Debt Management; (2) Investment Management; (3) Revenue Management; and (4) Purchasing and Risk Management.
CEQA: Not a Project, File No. PP17-009, Staff Reports, Assessments, Annual Reports, and Informational Memos that involve no approvals of any City action. (Finance) [Public Safety, Finance, and Strategic Support Committee 5/18/2023 - Item (c)1]
COUNCIL AGENDA: 6/6/2023
ITEM: 2.9
FILE NO: 23-816
PSFSS COMMITTEE AGENDA: 5/18/2023
ITEM: (c)1.
TO: PUBLIC SAFETY, FINANCE AND
STRATEGIC SUPPORT COMMITTEE
FROM: Rick Bruneau
SUBJECT: THIRD QUARTER FINANCIAL
REPORTS FOR FISCAL YEAR
2022-2023
DATE: May 3, 2023
Approved Date
RECOMMENDATION
(a) Accept the Third Fiscal Quarter (period ended March 31, 2023) Financial Reports for Fiscal Year 2022-2023 for the following programs:
(1) Debt Management;
(2) Investment Management;
(3) Revenue Management;
(4) Purchasing and Risk Management; and
(b) Refer and cross-reference the Third Quarter Financial Reports for Fiscal Year 2022-2023 to be heard by the full City Council for approval at its meeting on the June 6, 2023.
SUMMARY AND OUTCOME
Provide the quarterly update on debt management, investment management, revenue management, purchasing and risk management activity.
BACKGROUND
The attached Third Quarter Financial Reports for Fiscal Year 2022-2023 (quarter ended March 31, 2023) (Financial Reports) present the quarterly activity for the City of San José (City) Finance Department Debt Management, Investment Management, Revenue Management, Purchasing, and Risk Management programs (Attachment A). Additionally, the Third Quarter Investment Report has been distributed to the City Council via email, is available on the Finance Department web page1 and included as part of the report to the Committee. As part of the
1 https://www.sanjoseca.gov/your-government/departments/finance/reports/-folder-450 5/9/2023
PUBLIC SAFETY, FINANCE, AND STRATEGIC SUPPORT COMMITTEE May 3, 2023
Subject: Third Quarter Financial Reports for Fiscal Year 2022-2023
ongoing effort to streamline work efforts within the Finance Department, these programs are combined into a single report for submission to the Public Safety, Finance and Strategic Support Committee (PSFSS Committee) for its review and referral to the City Council for acceptance.
ANALYSIS
A brief narrative discussion is provided below for all programs in this quarterly report:
• Debt Management
• Investment Management
• Revenue Management
• Purchasing Management
• Risk Management
Debt Management Program
This Third Quarter Debt Report focuses on the City’s debt activities for the period ended March 31, 2023 and the following quarter ending June 30, 2023, and relates to the following elements of the City’s Debt Management Program:
• Completed financings and current debt portfolio;
• Debt issuance, redemptions, and management activities completed during the third quarter and anticipated in the fourth quarter (April 1, 2023 through June 30, 2023); and • Current interest rate environment as of March 31, 2023 and credit ratings.
Investment Management Program
Pursuant to the City Investment Policy, verbal presentations in addition to the written reports are provided to the Public Safety, Finance and Strategic Support Committee for the Second and Fourth Quarter Reports. The materials presented in this consolidated report provide a “snapshot” of the investment portfolio. The Investment Report will be agendized for acceptance by the City Council pursuant to the Investment Policy.
Revenue Management Program
The Revenue Management report highlights key aspects of the City’s ongoing collection efforts. These efforts focus on reducing delinquent accounts receivable and enhancing revenue compliance through four primary collection programs: Accounts Receivable, Business Tax, Revenue Compliance and Monitoring, and Utility Billing. This report highlights the Revenue Management Division’s collection efforts and summarizes the progress towards maintaining a Return on Investment (ROI) ratio of 5 to 1. The Third Quarter FY 2022-23 ROI is 5.7 to 1.
PUBLIC SAFETY, FINANCE, AND STRATEGIC SUPPORT COMMITTEE May 3, 2023
Subject: Third Quarter Financial Reports for Fiscal Year 2022-2023
Overview of Collection Process. City departments issue invoices for various fines, fees, or other costs incurred by the City. Invoices are entered in the City's centralized Accounts Receivable system, RevQ, or sent to the Accounts Receivable group for accounts generated by City departments through stand-alone billing systems. Each department is responsible for the initial invoicing of its respective parties.
If an account has an unpaid balance after 30 days, a delinquency notice, including any additional interest, penalties, and applicable fees, is generated and mailed to the debtor. The account is then assigned to an Investigator Collector in the Finance Department, who begins the revenue collection process by contacting the debtor to attempt to collect the past due amount. After 60 days, a second collection notice, including any additional interest, penalties, and other fees, is mailed to the debtor. At this point, a collection cost recovery fee is added to each account. This cost recovery fee is reviewed and established on an annual basis. After approximately 120 days, the Senior Investigator Collector reviews each remaining delinquent invoice with Investigator Collectors to determine the appropriate action to take against the debtor to collect the outstanding balances.
Accounts Receivable Amnesty Program. The Accounts Receivable Amnesty Program (Amnesty Program) was developed to encourage certain delinquent debtors to pay any past-due amounts owed to the City. Participants in the Amnesty Program will have their respective delinquency fees waived, once full payment of the principal balance is received. The Amnesty Program application period began November 1, 2022 and continues through June 30, 2023, with eligibility limited to invoices billed between April 2020 to August 2021. The debt owed to the City may not pertain to a tax, license, or lien collectible, and the debtor must have outstanding delinquent fees remaining.
Activities during the third fiscal quarter included (1) mailing detailed letters to eligible Amnesty Program participants in three tranches, which aided in managing responses to submitted applications, and (2) updating the Revenue Management phone tree, to add an option directly connecting interested callers with staff. In the upcoming fiscal quarter, final notices will be mailed to eligible participants whose invoices remain unpaid, as the Amnesty Program ends on June 30, 2023. As of March 31, 2023, approximately $100,000 was collected on eligible accounts.
Purchasing Program
The Purchasing Report highlights the key aspects of the City’s purchasing operations. The Purchasing Program of the Finance Department is responsible for the centralized procurement of equipment, supplies, materials, information technology, and non-consulting services, pursuant to Chapter 4.12 of Title 4 of the San José Municipal Code. The Purchasing Program's mission is to deliver procurement and contracting services pursuant to public procurement best practices. The Purchasing Program is also leading two strategic initiatives on the City’s Initiative Roadmap.
PUBLIC SAFETY, FINANCE, AND STRATEGIC SUPPORT COMMITTEE May 3, 2023
Subject: Third Quarter Financial Reports for Fiscal Year 2022-2023
Citywide Disparity Study. The City’s partner in the study, MGT Consulting of America LLC (MGT), continued outreach activities designed to engage local businesses to share their experiences attempting to do, or actually doing, business with the City. Outreach media included email, postcards, and website posts. Additionally, four focus group sessions (construction contractors, commodities, services vendors, and trade associations) were held in April, but with lower attendance at the sessions than expected. MGT has scheduled two additional group sessions on May 24th. To generate greater interest and attendance at these two sessions, MGT has committed to increasing the outreach activities using multiple platforms such as radio, television, postcards, social media posts, and posting on the City’s procurement site. Furthermore, MGT is contacting identified contractors and businesses to participate in surveys and complete in-depth interviews about their experience. Purchasing will report on the outcome of these activities in the Fourth Quarter Report to PSFSS Committee in August 2023.
Procurement Improvement Initiative. On March 14, 2023, City Council approved the proposed amendments to Title 4 of the San Jose Municipal Code. As a follow-up action, the City Attorney’s Office is drafting the proposed ordinance to fully implement the recommended changes to Title 4 of the San José Municipal Code and anticipates returning to City Council by September 2023. Staff is also continuing to review the recommendations in the report of the Procurement Improvement Study and assessing further options for adoption and implementation.
Risk Management Program
The Risk Management report highlights the key aspects of the City Risk Management Program.
The Risk Management Program is responsible for procurement and oversight of the City’s property and casualty insurance programs. The Program also provides contractual risk management services, property subrogation claims reporting, and other key services to City Departments including enterprise departments such as the Airport Department and San José – Santa Clara Regional Wastewater Facility.
EVALUATION AND FOLLOW-UP
The Finance Department prepares this report on a quarterly basis for review and approval by the PSFSS Committee. Finance Department staff will be available to answer questions on the Thrid Quarter Financial Reports for Fiscal Year 2022-2023 at the PSFSS Committee meeting on May 18, 2023.
PUBLIC SAFETY, FINANCE, AND STRATEGIC SUPPORT COMMITTEE May 3, 2023
Subject: Third Quarter Financial Reports for Fiscal Year 2022-2023
COORDINATION
This memorandum has been coordinated with the City Attorney’s Office and City Manager’s Budget Office.
PUBLIC OUTREACH
This memorandum will be posted on the City website for the May 18, 2023 PSFSS Committee meeting and on the June 6, 2023 City Council agenda.
COMMISSION RECOMMENDATION AND INPUT
No commission recommendation or input is associated with this action.
CEQA
Not a project, Public Project number PP17-010, City Organizational & Administrative Activities resulting in no changes to the physical environment.
PUBLIC SUBSIDY REPORTING
This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution.
/s/
RICK BRUNEAU
Director of Finance
PUBLIC SAFETY, FINANCE, AND STRATEGIC SUPPORT COMMITTEE May 3, 2023
Subject: Third Quarter Financial Reports for Fiscal Year 2022-2023
For questions please contact:
Program Finance Contact
Finance Division
Phone
Debt Management Qianyu Sun Deputy Director, Debt &
Treasury Management
(408) 535-7832
Investment Management Qianyu Sun Deputy Director, Debt & Treasury Management
(408) 535-7832
Revenue Management John Kachmanian Deputy Director, Revenue Management
(408) 535-7034
Purchasing Albie Udom Deputy Director, Purchasing &
Risk Management
(408) 535-7059
Risk Management Albie Udom Deputy Director, Purchasing & Risk Management
(408) 535-7059
ATTACHMENT A: Third Quarter (period ended March 31, 2023) Financial Report for FiscalYear 2023-2023
THIRD QUARTER FINANCIAL REPORT
FISCALYEAR 2022-2023
Public Safety, Finance and
Strategic Support Committee
Prepared by the Finance Department
May 3, 2023
COMMITTEE AGENDA: MAY 18, 2023
ITEM: (C)1.
ATTACHMENTA
THIRD QUARTER
DEBT MANAGEMENT REPORT
FISCAL YEAR 2022-2023
2 Outstanding Debt as of March 31, 2023: $4.74 Billion
FY 2022-23 Year to Date Debt Issuance: $606.5 Million
3 OUTSTANDING DEBT ISSUED
(CITY AND ALL AGENCIES)
*YTD Debt Issuance
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Annual Debt Issuance
($ million)
Outstanding Debt
($ million)
Quarter Ending March 31
City and Related Entity Debt Outstanding Conduit Debt Outstanding Annual Debt Issuance Outstanding Debt as of March 31, 2023: $3.94 Billion
(Excluding Multifamily Housing Revenue Bonds)
4 DIRECT OUTSTANDING DEBT
(CITY AND ALL AGENCIES)
CSJ GO Bonds,
$548,595,000, 13.93%
TRAN, $137,500,000,
3.49%
CSJFA Bonds/ CP Notes,
$724,600,000, 18.40%
Airport Revenue Bonds/ CP,
$1,069,393,000, 27.16%
Wastewater Revenue
Bonds, $268,355,000,
6.82%
Successor Agency Tax
Allocation Bonds,
$1,188,750,000, 30.19%
SELECTED DEBT MANAGEMENT ACTIVITIES
DURINGTHIRD QUARTER (JANUARY – MARCH 2023)
5 • Debt Management
▪ Redeemed $300 million of Subordinate Wastewater Revenue Notes, Series A with bond proceeds from CSJFA Wastewater Revenue Bonds, Series 2022B, realizing an interest arbitrage gain of $539,000
▪ San José Clean Energy repaid $20 million CSJFA Lease Revenue Commercial Paper
▪ Completed Sharks Ice Solar4America expansion project and made the final disbursement
• Reporting
▪ CDIAC – Annual Debt Transparency Report (SB 1029) – January 2023
SELECTED DEBT MANAGEMENT ACTIVITIES
DURINGTHIRD QUARTER (JANUARY – MARCH 2023)
6 • On March 27, 2023, the City’s Finance Department held a Tax Equity and Fiscal Responsibility Act (TEFRA) hearing approving the issuance of Multi-Family Housing Revenue Bonds (MHRB):
▪ 1860 Alum Rock Apartments
▪ Tamien Station Affordable
▪ The Charles
▪ 777 West San Carlos Apartments
UPCOMING DEBT REDEMPTIONS
THROUGH JUNE 30, 2023
7 • Commercial Paper
▪ San José Clean Energy will repay $20 million CSJFA Lease Revenue Commercial Paper in May
▪ Airport plans to pay off $24.6 million Commercial Paper, Series B (AMT) in June.
• Tax and Revenue Anticipation Note will be fully redeemed in June
ANTICIPATEDDEBT ISSUANCE
THROUGH JUNE 30, 2023
• Multi-Family Housing Revenue Bonds Issuance
▪ 1860 Alum Rock Apartments (~$38 million)
▪ Tamien Station Affordable (~$75 million)
▪ The Charles (~$55 million)
▪ 777 West San Carlos Apartments (~$73 million)
• Commercial Paper Issuance
▪ $2.7 million in CSJFA Lease Revenue Commercial Paper for Flood Recovery Projects in June
▪ Up to $10 million in Airport Commercial Paper, Series A-1 (Non-AMT) 8 SELECTED DEBT ADMINISTRATION
THROUGH JUNE 30, 2023
• Issue Request for Proposals for Municipal Advisory Services and select municipal advisors for various retainer engagements and pools 9 • 10-year history of higher rated
(“AA+”) General Obligation
debt (20-year term) yield
averaged 3.04% and is currently
at 3.22% (as of 4/12/2023).
10 BOND BUYER GO BONDYIELD INDEX
3.04%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Interest Rate
Bond Buyer 11-Bond GO Index ('AA+') avg. rating)
Index Average 3/13 - 3/23 (3.04%)
• Taxable 3-Month LIBOR
interest rates paid by the City
averaged 4.92% in Q3. The
Taxable 3-Month LIBOR and
Daily SOFR interest rates are
currently 5.26% and 4.80%
respectively (as of 4/14/2023).
11 VARIABLE INTEREST RATES
(TAXABLE)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Interest Rate
3-Month LIBOR (Taxable)
Daily SOFR
GENERAL OBLIGATION CREDIT RATINGS
• The City’s GO Ratings are higher than the State of California’s ratings and analogous to Santa Clara County’s ratings, which is to be expected given the extent of the tax base and other credit fundamentals that the City and the County share:
12 Entity Moody’s S&P Fitch
CITY OF SAN JOSÉ Aa1 AA+ AAA
STATE OF CALIFORNIA Aa2 AA- AA
SANTA CLARA COUNTY N/A AAA AA+
[1] Moody’s does not currently rate Santa Clara County’s General Obligation Bonds but maintains an Issuer rating of Aa1.
GENERAL CREDIT RATINGS
CITY OF SAN JOSE
• The City of San José continues to maintain very high credit ratings. 13 T ype of Rating Moody’s S&P Fitch KBRA (Kroll)
ISSUER RATING Aa1
(stable)
AA+
(stable)
AA+
(stable) N/A
GENERAL OBLIGATION BONDS Aa1
(stable)
AA+
(stable)
AAA
(stable) N/A
LEASE REVENUE BONDS
(ESSENTIAL ASSETS)
Aa2
(stable)
AA
(stable)
AA
(stable) N/A
LEASE REVENUE BONDS
(LESS ESSENTIAL ASSETS)
Aa3[2]
(stable)
AA
(stable)
AA-[3]
(stable) N/A
WASTEWATER REVENUE BONDS N/A[1] AAA
(stable)
AAA
(stable)
AAA[4]
(stable)
[1] Moody’s does not rate CSJFA Wastewater Revenue Bonds. [2] Moody’s assigns a rating of Aa3 to CSJFA 2020B and 2022A bonds which the rating agency considers less essential assets. [3] Fitch assigns a rating of AA- to CSJFA 2020B bonds which the rating agency considers less essential assets [4] KBRA (Kroll) has assigned a rating to the CSJFA Wastewater Revenue Bonds exclusively.
OTHER CITY CREDIT RATINGS
14 T ype of Rating Moody’s S&P Fitch
SAN JOSÉ AIRPORT BONDS A2
(stable)
A
(stable)
A
(stable)
SARA SENIOR TAX
ALLOCATION BONDS N/A AA
(stable)
AA
(stable)
SARA SUBORDINATETAX
ALLOCATION BONDS N/A AA-
(stable)
AA-
(stable)
THIRD QUARTER
INVESTMENT MANAGEMENT REPORT
FOR FISCAL YEAR 2022-2023
15 INVESTMENT POLICY
(COUNCIL POLICY 1-12)
• Investments meet the requirements of the City’s Investment Policy and conform with California Government Code section 53601 • Authorized investments are only highly-rated fixed income securities • Investment Policy is reviewed annually and was last adopted by resolution of the City Council on March 14, 2023
• Investment Program is audited semi-annually for compliance purposes 16 INVESTMENT OBJECTIVES & REPORTING
• Manage investments to meet the City’s Investment Policy objectives:
▪ Safety
▪ Liquidity
▪ Yield
• Quarterly reports are available to the public
▪ On-line
▪ In PSFSS Committee agenda packets
▪ In City Council agenda packets (for acceptance)
17 SOCIALLY RESPONSIBLE INVESTMENT GOALS
Articulated in Section 22 of the Investment Policy
• Support community well-being through:
▪ safe and environmentally sound practices
▪ fair labor practices
• Support equality of rights
• Serve all members of the local community
• Promote community economic development
18 PORTFOLIO PERFORMANCE SUMMARY
Size of Total Portfolio $2,681,321,553
Earned Interest Yield 2.645%
Weighted Average Maturity 570 days
Fiscal Year-to-Date Net Income Recognized $42,317,450
Exceptions to the City Investment Policy this Quarter None 19 T otal Investment Portfolio:
$2,681,321,553
20 PORTFOLIO INVESTMENTS
U.S. Treasury
$151,818,359 5.7%
U.S. Agency
$1,314,360,773
49.0%
Supranationals
$163,772,020 6.1%
Negotiable
Certificate of
Deposit (NCD)
$65,614,720 2.4%
Commercial Paper
$97,155,465 3.6%
Corporate Notes
$339,622,462 12.7%
Asset Backed
Securities $2,268,941
0.1%
Muni Bonds
$291,726,925
10.9%
Mortgage Backed
Securities
$157,253,606 5.9%
JPAP
$95,728,281 3.6%
LAIF $2,000,000
0.1%
The $658.8 million in the General
Fund presented includes
$559,096,267 of General Fund
monies, as well as $99,721,640 in
other, separately tracked general
funds, such as the Emergency Reserve
Fund, the Coronavirus Aid, Relief, and
Economic Security (CARES) Act, the
American Rescue Plan Act (ARPA) of
2021 and other smaller funds and
reserves.
21 INVESTMENTS BY FUND
Internal Services
Fund $13,527,714
Airport
$251,841,781 Capital Projects
$68,914,060
Debt Service
$81,319,473
Development Fees
$56,517,923
General Fund
$658,817,907
Muni Water
$38,127,962
Parking
$42,043,159
Housing
$327,963,416
Special Revenue
Funds $461,206,118
Wastewater
$481,973,026
Trust & Agency
$9,323,421
SJ Clean Energy
$142,654,489
GENERAL FUND BALANCE
• The General Fund balances increased to over $1 billion in January with the receipt of property tax disbursements. Redemption of $137.5 million Tax Revenue Anticipation Notes (TRANs) and other operating expenditures brought the balance to $658.8 million as of March 31, 2023, $50 million lower than the previous quarter
▪ General Fund balances usually peaks during the months of January and June, when the bulk of property taxes are received; declines in the summer due to retirement prefunding; and declines throughout the rest of the year due to debt service payments and operational expenditures
• Projected investment maturities, cash and revenues are sufficient to cover anticipated expenditures for the next six months
22 23
COMPARISON OF CASH BALANCES
(BY SELECT FUNDS)
The following graph compares
monthly balances of the five largest
City funds as reported by FMS.
$0
$200
$400
$600
$800
$1000
$1200
Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Dollars in millions
General Fund Wastewater Airport Housing Special Revenue Fund • City refers to City's Fund 3
Portfolio, and the yield data are
month-end weighted average
yields.
• LAIF refers to the State of CA
Local Agency Investment Fund and
yield data are average monthly
effective yields.
• BAML refers to Bank of America
Merrill Lynch 1-3 Year AAA-A US
Corporate & Government Index
and yield data are rolling 2-year
effective yield.
24 BENCHMARK COMPARISONS
0.00 0.50
1.00 1.50
2.00 2.50
3.00 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Yield (%)
City LAIF BAML
Yield WAM
LAIF: 2.831% 275
CITY: 2.768% 570
BAML 2.241% 675
INVESTMENT STRATEGY
• Continue matching known expenditures with suitable investments within the 24-month horizon
• Extend a portion of the portfolio beyond two-year term, when appropriate, to provide income and structure to the portfolio • Maintain the diversification of the portfolio
• Focus on core objectives of safety, liquidity, and yield 25 THIRD QUARTER
REVENUE MANAGEMENT REPORT
FOR FISCAL YEAR 2022-2023
26 REVENUE MANAGEMENT PROGRAMS
• The Revenue Management Program focuses on collecting all outstanding receivables, with an emphasis on reducing delinquent accounts and enhancing revenue compliance, through four primary collection programs:
▪ Accounts Receivable
▪ Business Tax
▪ Compliance and Monitoring
▪ Utility Billing
• Revenue Management offered an Accounts Receivable Amnesty Programto encourage eligible debtors to pay their principal balances • Efforts may span several reporting periods, and actual collections are reported as funds received by the City.
27 T otal Revenue: $4.624B
Source: 2021-22 City Manager’s
Budget Office Annual Report
(Graph is updated annually)
28 REVENUE MANAGEMENT PORTFOLIO
FY 2021-22 REVENUE ($ IN MILLIONS)
Lodging Taxes
and Fees
$37.6M
2.7%
Franchise Fees
$49.9M
3.6%
Utility Users Tax
$103.6M
7.6%Telephone Line Tax
$21.3M
1.6%Real Property
Transfer Tax
$110.0M
8.0%
Utility Billing
$429.5M
31.3%
Sales Tax
$323.1M
23.6%
Misc. Billing
$223.8M
16.3%
Business Taxes
$72.6M
5.3%
Revenue
Management
$1.372B
City-wide Revenue
(excluding Revenue
Management)
$3.252B
Includes invoices billed through the
Business Tax System, the centralized
Accounts Receivable system (RevQ),
and the Utility Billing System.
(Graph is updated annually)
29 INVOICING AND PAYMENTS
FIVE-YEAR HISTORY (FY 2017-18 TO FY 2021-22)
99.6% 99.5% 99.6% 98.9% 96.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$-
$100
$200
$300
$400
$500
$600
$700
$800
FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22
In Millions
Payments Outstanding Percentage Collected
30 OUTSTANDING RECEIVABLES
THREE-YEAR HISTORY (Q4 FY 2019-20 TO Q3 FY 2022-23)
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
19-20
Q4
20-21
Q1
20-21
Q2
20-21
Q3
20-21
Q4
21-22
Q1
21-22
Q2
21-22
Q3
21-22
Q4
22-23
Q1
22-23
Q2
22-23
Q3
Quarter to Quarter % Change
Millions
Revenue Mangement Aging
Total Receivables Delinquent (91+ days) Delinquency Percentage Change 31 FY 2022-23 Q3 DELINQUENT RECEIVABLES
COLLECTION STATUSSUMMARY ($ IN MILLIONS)
*Rounded
As of March 31, 2023
Write-Off Pending (A/R only)
$3.1M
1,725 Invoices
Liens (A/R only)
$0.7M
287 Invoices
Restitution, Payment Plan (A/R only)
$1.1M
299 Invoices
Legal, Bankruptcy (A/R only)
$3.3M
689 Invoices
Collection Agency
$17.7M
26,004 Invoices
Active
$30.2M
31,325 Invoices
Total Current
$25.9M
(32%)
Total Delinquent
$56.1M
(68%)
Revenue Management
COLLECTIONS & RETURN ON INVESTMENT
REVENUE MANAGEMENT COLLECTIONS (Q4 FY 2020-21 TO Q3 FY 2022-23) Target ROI: 5.0
32 5.7
11.2 10.6
10.8 5.8
5.6 5.3
5.7 0.00
5.00 10.00
15.00 $0.0
$0.5
$1.0
$1.5
$2.0
$2.5
20-21 Q4 21-22 Q1 21-22 Q2 21-22 Q3 21-22 Q4 22-23 Q1 22-23 Q2 22-23 Q3 Return on Investment (ROI)
Millions
Revenue Management Collections
Business Tax Accounts Receivable Actual ROI
ACCOUNTS RECEIVABLEAMNESTY
PROGRAM
• Amnesty Program is a limited-time opportunity for individuals and entities to pay the principal amount owed in exchange for forgiveness of associated penalties and interest • Amnesty Application Period: November 1, 2022 – June 30, 2023 • Invoice Eligibility: Billed from April 2020 – August 2021 • Invoice may not pertain to a tax, license or lien
• Debtor must have outstanding delinquent fees (Invoices paid in full prior to Amnesty are not eligible) • Payments Received as of March 31, 2023: $100K
• Amnesty Outreach:
• 3,046 letters sent in January and February 2023
• Secondary letters/final notices to be sent in April and May 2023 33 COLLECTION AND WRITE-OFF PROCESS
Delinquency Notifications Sent to Debtor
▪ 30 Day Notice, 60 Day Notice, Final Notice
Collection Agency Referral Analysis
▪ Cost-benefit analysis of staff time vs. receivable amount ▪ City’s ability to collect through alternative means
▪ Type of service billed or receivable amount
Analysis for Write-Off
▪ Collection efforts exhausted
▪ Debtor has no assets, filed bankruptcy, expiration of statute, deceased, incarcerated, or “skipped”
34 THIRD QUARTER
PURCHASING AND
RISK MANAGEMENT REPORT
FOR FISCALYEAR 2022-2023
35 PURCHASING PROGRAM
The Purchasing Division of the Finance Department is responsible for the centralized procurement of equipment, supplies, materials, Information T echnology (IT), and non-consulting services, pursuant to the City of San José Municipal Code Title 4, Chapter 4.12. 36 PURCHASINGTRANSACTIONS COMPLETED
THIRD QUARTER FY2022-23
PROCUREMENTTYPE
THIRD QUARTER
TRANSACTIONS
FISCALYEAR TO
DATE
Request for Quotes Awarded 11 36
Request for Bids Awarded 17 38
Request for Information Completed 0 4
Request for Proposals Completed 1 3
Purchase Orders and Purchase Order Adjustments Issued 440 1,626 New Agreements Negotiated and Executed 6 15
Amendments, Change Orders, Service Orders, Options Executed 38 101 Council Memoranda Issued 10 35
Purchase Order & Contract Dollars Procured $87,573,876 $331,962,674 37 PROCUREMENT IMPROVEMENT UPDATE
• Procurement Improvement is a Strategic Support initiative under the City Roadmap
• Staff presented a status report on the efforts to implement the recommendations at the last quarterly meeting.
• Staff are engaging with the City Attorney's Office to cross reference the proposed changes to Title 4 against the rest of the San Jose Municipal Code for consistency.
• Staff will continue to review and consider other recommendations from Procurement Improvement Study for adoption and implementation. 38 DISPARITY STUDY UPDATE
• A Citywide Disparity Study is underway to evaluate any need for new or updated procurement policies to facilitate participation of diverse business enterprises in City contracting.
• Finance-Purchasing, in collaboration with the City Manager's Office of Communications, Racial Equity and Economic Development & Cultural Affairs, is working with MGT of America Consulting, LLC to deliver this scope of work. • Completed Activities this Quarter
▪ MGT continued outreach activities to engage businesses to share their experiences. Such activities included but were not limited to the following:
* Scheduled four focus group sessions (construction contractors, commodities, services vendors, and trade groups).
* Sent invitations to local business to participate in surveys an in-depth interviews in the fourth quarter. 39 RISK MANAGEMENT PROGRAM
The Division is responsible for the procurement and oversight of the City’s property and casualty insurance programs and providing contractual risk management services, property subrogation claims reporting and other key services to City Departments
40 41
RISK MANAGEMENTTRANSACTIONS COMPLETED
FY2022-23, THIRD QUARTER
Transaction T ype Third Quarter
Transactions
Fiscal Y ear to
Date
Request for Contract Insurance Specifications 293 804
Request for Insurance Compliance Review 177 435
Request for Letters of Self-Insurance 16 55
Subrogation Dollars Billed to Responsible Third Parties1 $91,700 $581,160 Council and Committee Memorandums Issued 0 3
(1) The FY2022-2023, Second Quarter report duplicated $49,586 in Subrogation Dollars Billed previously reported in the FY2022-2023, First Quarter report. This has been corrected in the Third Quarter report.
RISK MANAGEMENT ACTIVITIES
• Facilitated property loss prevention visits at the San José – Santa Clara Regional Wastewater Facility and City Hall
• Completed on-site visits for property appraisals of the Cambrian Library, the Seven Trees Community Center & Library, the Camden Community Center, and the SAP Center
• Reported property damage claims related to atmospheric storm events and History Park fire
42