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HomeMy WebLinkAbout19C - FY 18-19 BUDGET UPDATEREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: DECEMBER 4, 2018 TITLE: RECEIVE AND FILE — FISCAL YEAR 2018-19 FIRST QUARTER BUDGET UPDATE AND VACANCY REPORT (STRATEGIC PLAN NO. 4, 1) 1 i\ Cly MANAGER RECOMMENDED ACTION Receive and file the following: Fiscal year 2018-19 First Quarter Budget Update. Fiscal year 2018-19 First Quarter Vacancy Report. DISCUSSION CLERK OF COUNCIL USE ONLY: ❑ As Recommended ❑ As Amended ❑ Ordinance on 1s' Reading ❑ Ordinance on 2ntl Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER As part of City Council direction, staff is presenting a quarterly fiscal review for FY 2018-19, for the General Fund, and an update on current citywide vacancies. FISCAL YEAR 2018-19 General Fund: 1St Quarter Update (Exhibit 1) General fund revenues collected during the first quarter (July — September) amounted to approximately $25.5 million representing 9.6% of the general fund budget, slightly below the first quarter historical trend of ten percent (10%). This is $3 million higher than fiscal year 2017-18 of $22.5 million and is largely attributable to increases in sales tax ($300 thousand) permits and plan check (approximately $700 thousand), jail revenue ($1 million) and Adult -Use Retail cannabis revenue ($712 thousand). Top Six General Fund Revenues Sales Tax received in the first quarter represents only one payment. In October 2018, the City began to receive the unprocessed payments related to fiscal year 2017-18 from the California Department of Tax and Fee Administration (CDTFA) formerly the BOE. These unprocessed payments are combined with the City's regular sales tax allocation. Staff is currently working with the City's consultant to determine the amounts related to the prior fiscal year. An update will be provided as part of the Mid -Year (Second Quarter) Review. Property Tax received represents a minimal amount of $673 thousand, primarily consisting of unsecured and supplemental property tax and is slightly below the three-year trend of 2.3%. The 19C-1 Fiscal Year 2018-19 First Quarter Budget Update December 4, 2018 Page 2 majority of Property Tax collected occurs in the months of December (Second Quarter) and April (Fourth Quarter) and will be reflected in future budget updates. Similarly, fifty percent (50%) of the Property Tax in Lieu of VLF is received in January (Third Quarter) and May (Fourth Quarter). Business License continues to remain steady and is slightly above first quarter projections. The majority of Business License collected occurs in the month of March (Second Quarter) and April (Third Quarter). Hotel Visitors Tax (HVT) is near first quarter projections and with the recent opening of a new hotel in August and construction of a new hotel during the fiscal year, HVT should continue to meet projections. The City's Utility User Tax continues to decline by nearly four percent (4%) since fiscal year 2015-16 primarily due to a reduction in the telecommunication sector. Other General Fund Revenues: Jail Revenue is projected to meet estimated revenue as a result of continued housing of inmates from the US Marshals and Federal Bureau of Prisons. The first quarter amount of $2.2 million reflects only two months of billing for jail housing but is significantly higher than last year by $1 million largely as a result of the ramp -up in operations at the facility. As reflected in the first quarter revenue, Commercial Cannabis revenue has not been received. This is due in part, that the commercial cannabis industry is in its infancy stages and businesses have commenced the registration and permit process only. Additionally, the Adult Use — Retail cannabis operations continues to evolve and it is anticipated that more businesses will be entering the industry by the end of the current fiscal year. The current amounts received reflects approximately two months of revenue; however, revenues will continue to be monitored throughout the fiscal year. The Business Tax component on medical cannabis is projected to plateau this fiscal year in comparison to last fiscal year at $2.3 million. The introduction of the Adult Use — Retail has affected the medical cannabis as consumers' activities have shifted away from medical cannabis. Key permit and plan check revenue remain steady. These revenues remain largely cyclical with most revenues collected during the third quarter (January — March). Upcoming development projects such as Heritage Village, Magnolia at the Park, Raising Cane's Restaurant and Tapestry by Hilton will continue to improve permit and plan check revenues. Overall, general fund revenues have increased in comparison to last fiscal year. In addition, the one-time revenue from the sale of land of $2.075 million occurred in November and will be reflected in the Mid -Year (Second Quarter) Review along with previously mentioned Sales Tax payment and Property Tax revenue that will be received in December 2018. General Fund Expenditures Overall first quarter expenditures of $63 million exceeded last year's expenditures of $56 million by $7 million or thirteen percent (13%). This is largely attributable to an increase in overall labor costs such as salaries ($1.3 million increase) and retirement costs ($2.5 million increase). Most departments are trending at or below expenditure trends of twenty-four percent (24%) for the first 19C-2 Fiscal Year 2018-19 First Quarter Budget Update December 4, 2018 Page 3 quarter with the exception of the Fire suppression/EMS Services and Community Development Agency. The current expenditures for the Fire suppression/EMS Services appear higher because of an advanced payment made in July and thus represent four months of payments as required by the Orange County Fire Authority contract. The report shown also reflects no expenditures for Youth Programs and Cannabis Enforcement. These programs are related to anticipated Commercial Cannabis revenues of $5.2 million which, if the Ordinance is adopted on December 4th, these funds will be budgeted beginning in FY 2019-20 in a separate fund. Since revenues have not been collected to date, no monies have been appropriated and/or expended for youth programs and Cannabis Enforcement activities respectively. Expenditures will continue to be monitored throughout the fiscal year and will be reported out in the Mid -Year (Second Quarter) Review. CURRENT FINANICAL TRENDS FOR FISCAL YEAR 2018-2019 Since fiscal year 2013-14, general fund revenues have increased on average by 2%. While the "Top Six" general fund revenues have increased by 3%, other general fund revenues have primarily remained unchanged. Furthermore, general fund expenditures have risen by 5% due to increasing labor costs such as salaries and retirement. An update on pension costs will be provided during the Mid -Year Review (Second Quarter) in February. FISCAL YEAR 2017-2018 Vacancy Status (Exhibit 2) The City has a total of 191 citywide vacancies across all funds with 134 vacancies in the general fund. These general fund vacancies include 57 unfunded positions. Staff expects to request the City Council to reconsider (fund, remove or amend) these positions and other organizational changes during the fiscal year 2019-20 budget process. STRATEGIC PLAN ALIGNMENT Approval of this item allows the City to meet Goal #4 - City Financial Stability, Objective #1, (Maintain a stable, efficient and transparent financial environment). FISCAL IMPACT There is no fiscal impact associated with this action. ^� � �✓YY7 Ka hryn Downs, CPA Executive Director Finance and Management Services Agency Exhibits: 1. Fiscal Year 2018-2019 First Quarter Budget Update 2. Fiscal Year 2018-2019 Vacancy Report 19C-3 19C-4 40i f,t-1 / r 1. Lrm W U 40. t!O3 maih LL ruV, u LL LL r -I C6 C6 � L L 00 (L) Q) r -I C C� O v N N (D (D LL ca E E Ln LL LL 1'9C-6 ' N Q X Lj V) Q N V) X N z rz W m Z D LL J Q W Z W 0 0) CD r -I O N D W F- 0. a L d' N v Q. to �+ C Qi w N CLO O c � a � ca3 m m s v C � c W O m m 0 0 m n N N V? 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