HomeMy WebLinkAbout1991-01-16 - AGENDA REPORTS - SIX MONTH FINANCIAL REVIEW (2)CITY OF SANTA CLARITA
I N T E R O F F I C E M E X R A N D U M
TO: Honorable Mayor and Members o:
FROM: George Caravalho, City Manage]
DATE: January 16, 1991
SUBJECT: Six Month Financial Review
Each year the City takes the opportunity to conduct a
comprehensive review of its financial condition six months into
the fiscal year. For the 1990 -91 year, due to the present
state of National affairs, Staff has elected to present the
City Council with an overview of the National and State
economy, as well as an analysis of their impact on our local
economy.
In addition to an economic outlook, the City Council will
receive an overview of our present budget status. •In order to
provide the best overview, the City's six month revenues,
expenditures, fund balances and investments will be presented
by the Director of Finance.
Finally, in order to thoroughly prepare for the 1991-92 budget,
there will be a discussion of items the City Council may wish
to place under consideration for funding. This is an opportune
time to again gain input from the City Council as we recently
completed the review of our first strategic plan and will soon
be preparing for the Community Wide Strategic Plan.
Agenda Item:
The state of the local economy is
planning for budgeting expenditures.
actual expenditures from July 1, 1990,
Parks
- SIR -MONTHS
always a consideration in the city's
The following pie chart reflects the
to December 31, 1990.
Expenditures
July 1, 1990 - Dec 31,19M
Public Works \ s -: ~� Public safety
19.0% , 192%
Community Developmera ___��
6.0%
d Govenvnent
21.0%
Capital Outlay
22.7%
SUMMARY OF TOTAL EXPENDITURES
General Governmerrt
$2,907,000
Public Safety
2,443,000
Public Works
2,635,000
Parks $ Recreation
1,749,000
Community Development
7994000
Capital Outlay
3,026,000
Debt Service
0
TOTAL EXPENDITURES
$13,3.,6,000
For the six months ended December 31, 1990, the largest spending category is
capital outlay at 22.7%. The major capital expenditures are $1,703,000 for
the acquisition of the new corporate yard, $165,000 for Canyon Country Park
improvements, $201,000 for street median improvements, $109,000 for the
Apple Street Seal project, $201,000 for San Fernando Road Phases 3 & 4 and
$304,000 for the Decora Drive project.
Total personnel expenditures as of 12/31/90 is $2,501,000. The city
continues to expand its staffing requirements in order to service a.growing
population. During this six-month period, Public Works has been gradually
adding staff to assume the engineering and building and safety responsi-
bilities currently being performed by Willdan Associates. Also, Parks and
Recreation is operating in a transition phase -of creating and improving
recreational programs and the take-over of the park and median maintenance
from the County.
Other major expenditures include the purchase of 20 new vehicles for the
City's fleet in the amount of $292,000 and engineering services of
$1,058,000. Engineering services are billed based on actual time and
material cost with a maximum of 75% of building and safety permit revenues
collected during the life of the contract.
- 1 -
The following bar chart represents 12/31/90 actual expenditures plus
encumbrances as compared to the total budget:
CITY OF SANTA CLAWTA
Comparison of Actual Expendihlres & Encumbrances to Budget
Period 7/1/90 ; 12/31/90
25,000,000
1
,5,000.000 ........_'___. ........ _..... .......... .._..___..._...-..-....... _.... .......... _...... _ •`2'. �..._
10.000.000_.................................._,._..-.._..._........__._.___.._.............._...._._._......_.....:......_.-s , ...
. Amrele 5.000.000
Budgeted
9 Gov¢rmrer[
C,enaml
... w.,
Pudic Public
Safety Works
......
ssssk
Perks io Coelopnw Captw
Reaeetion DaveloprnerK OuOey
OkMay
.
(Figures e>rpresssd in
Arn.al
Encumbered
Budge
d Funds
Peresnra
'
thousands)
Available
Availab
General Government
S2,8116
$147
$6,995
$6.042
073%
Publio Salary
52,443
$1
S%269
$5,625
70A%
Public Works
$2,536
$9
$9.264
$6.719
725%
Parks d Reaeation
$1,584
5344
$4,543
52,615
57.6%
Community Developrnerrt $799
$146
52.320
$1.373
592%
capital Ounay
$3,189
$129
S23,201
S19ASS
65.7%
Debt 3ervics
So_
SO
is�____/00.0
K
TOTAL:
573,357
_____si��____
��--5770
558,092
S43,%7
75.7%
At this point in time, the city is on track with its budget plan with an
average of 60% of the budget remaining after the completion of -the first
half of the fiscal year.
One major item that was not reflected in the adopted budget is the
acquisition of the corporate yard and improvements which are being funded
from $325,000 previously budgeted in general government rent/leases and
$1,473,000 from general fund balance. The purchase price of the corporate
yardwas$3,600,000. In acquiring this property, the city made cash outlays
of $1,703,241 and assumed a loan of $1,945,000 with monthly, payments of
$18,300 including interest at 10.5% and a balloon payment of $1,834,000 due
May 1, 1996. Also unbudgeted was $93,000 taken from the contingency account
for new vehicles purchased.
As of July 1, 1990, the City Council allocated $1.5 million to the
contingency account. This account is designed to cover unforeseen
expenditures occurring subsequent to the adoption of the budget. To date,
$540,607 has been expended from this account, leaving. $959,393 for
unanticipated expenditures arising in the final six months of the 1990-91
fiscal year. Since July 1, eleven projects, ranging from $1,500 to
$167,000, have been funded by means of this account.
- 2 -
In order to assist the Council in remaining apprised of this fund's status,
a listing is attached to each agenda item where funding is requested.
City of Santa Clartta
1990-91
Contingency Account
Date of Council Action
(Requested)
Item
Description
Amount
July 1, 1990
Contingency Appropriation
$1,600,000
August 14, 1990
Antelope Fwy
(I SAM)
August 28, 1990
PAR.ET Unit
(6,000)
September 11,1990
Newhall Pod Recon.
(167,000)
September 11, 1990
SOV Historical Book
(13,660)
August 14, 1990
Special P.W.Supplies
(31000)
October 9, 1990
Bus Advertisement
(1,600)
October 30, 1990
AB 939 Requirements
(84,607)
November 27,1990
Purchase Fleet Vehicle
(93,000)
November 27,1990
Development Impact Fee Study
(60,000)
January 8, 1991
Fre Safety Program
(10,000)
January 8, 1991
Magic Mtn Pky/San Fernando Rd.
(86,000)
TOTAL REMAINING IN CONTINGENCY 1/08/91
$959.393
REVENUES
Revenues collected during the first six • months of fiscal year 1990-91
totaled $14,644,000. This reflects 44% of the budgeted revenues received.
Broken down further, general fund revenues received through December 1990
totaled $12,533,000, 50% of the general revenue fund budget. Special
revenue funds totaled $2,111,000, 26% of the amount budgeted. A large
portion of the city's special revenues comes from the. TDA Article 8 funds
which are typically received in the latter part of the fiscal year. The
City of Santa Clarita's TDA Article 8 allocation for fiscal year 1990-91
totals $2,849,000.
REVENUE
GENERAL A SPECIAL REVENUE FUNDS
for 12/31/90, 12/31/89, and 9"1 Budget
GEN SPECIAL
01 As of IZ"J1190 ® As of IZ31/89 M 90-91 Budget
— 3 —
The amount of revenues received during the first six months of this fiscal
year closely parallels the amount of revenues received at the same time of
the last fiscal year, as shown in the above graph. The Special Revenue
funds are slightly less than last year's figures due to the timing of
receipts.
Listed beloww are the top ten revenue sources for the six-month period from
July 1990 through December 1990 as compared to last year's six -month -totals
and this year's budget.
Top Ten Revenue Accounts
12/31/90
12/31/89
40/91 Budget
Sales & Use Tax
$5,620,551
$5,388,652*
$9,650,000
State Motor Vehicle
2,5610270
29530,408
50322,400
Property Tax
103450341
10266,747
39200,000
Gas Tax
9180432
845,520
11912,800
Interest Income
830,740
423,398
1,150,000
Building & Safety
676,648
1,049,664
2,000,000
Bridge & Thoroughfare
565,699
975,239
3009000
Prop A
544,337
4409447
1,330,000
Subdivision Maps/Improv.
217,329
142,589
400,000
Parks & Rec's Fees
249,394
154,081
852,000
* Amount does .not include $1.18 Million received as.a result of MRC's audit.
TOP 10 REVENUE ACCOUNTS AS OF 12/31/90
Compared to 1=1/99 and 90-91 Budget
70.000.000
9.0011.01)1)
8.000.001)
7.1)1)0,01)0
4000.000
4.000.000
4 000 000
2,000.000
7,000,01)0
0
LEGEND
M As d 72/37/00 ® As .1 12131189 0 90-81 Budget
ST - Sales Tax BS - Bog a Safety Permits
SMV - Stsm Morar Vehidean4Jeu BY - Bridga9Thorouahfare
PT - Property Tax PA - Proposition A
GT Gas Tax SM - Subdivision MapeAmprov.
11 - Inmrest IrxxKne PH - Pada a fisc Fees
Sales tax revenues are a. major contributor towards the city's overall
revenue base. In light of its significance, the city closely monitors the
taxable activity of the major business segments.
According to the California Commission on State Finance, the Nation had
shown signs of a slowing economy during the second quarter of 1990, even
prior to the Middle -East crisis. The extent of its . effect on the City of
Santa Clarita is reflected in the sales tax activity for the city.
- 4 -
Business Segment
Auto Dealers/Supplies
Restaurants
Building Materials
Food Stores
General Merchandise
Other Retail
Service Stations
Home Furnishings
Apparel
Packaged Liquor
SALES TAX COMPARISON
FOR SECOND QUARTER 1990 TO 1989
2Q 1990
(Apr..May.June)
718,130
238,321
217,435
198,874
185,993
178,474
173,938
89,894
76,738
16,523
2Q 1989
16.128.000
(Apr..May.June)
X Change
688,991
4.2
2069061
15.7
240,002
( 9.4)
191,757
3.7
1660202
11.9
1540679
15.4
1760008
( 1.2)
753173
19.6
652860
16.5
149188
16.5
In the midst of the economic slowdown, most business segments still
experienced a healthy, gain in sales. However, the building materials
segment and service stations did experience a decline. There were a
combination of factors which led to the decline in the building materials
group from second. quarter 1989 to second quarter 1990. A slowdown in the
housing market in 1990 coupled with the boom in the housing market in 1989
led to the decline of sales taxes from building materials during the second
quarter of 1990. Also, during the second quarter of 1990, sales taxes from
service stations experienced a decline of 1.2%. This may have been spurred
by the increase in gasoline prices which tends to decrease consumption and,
thus, causing sales tax revenues to decline.
INTRODUCTION TO CAFRA
It is my pleasure tonight to report that the financial state of the city is
in excellent condition. Santa Clarita has experienced a substantial
increase in revenues during the 1989-90 fiscal year. The most significant
in actual continued revenue was derived from taxes. A large portion of the
tax revenue increase was due to the collection of $1.2MIL in additional
sales tax. This resulted from sales tax audits performed by Municipal
Resource Consultants, who determined money was owed to the city versus the
County of Loa Angeles.
Fiscal Year '89-90 Revenues
Tares
421%
service charges a
others 3.1%
Rnes & Forfeitures
20%
MAJOR SOURCE
/ Interest income
&a%
Developer Fees
39%
license & Permits
10.6%
Tares
16.128.000
Ucerlses and Permits
3,795.000
Rhes. Forfeits and Penalties
710,000
Developer Fees
1,420.000
Revenue from Othm Sources
11,7069000
Service Charges & Others
1,122,000
Interest Income
._2_,068,000.
TOTAL CRY REVENUES
3SA63AW
- 5 -
Revenue derived from interest income increased 62% during the 1989-90 fiscal
year. Santa Clarita was able to maintain an investment portfolio which
averaged.approximately $21MIL as compared to approximately $13MIL during the
1988-89 fiscal year. Our investment portfolio - increased due* to revenues
exceeding expenditures. For example, in the special revenue funds, TDA and
Prop A funds were not expended for infrastructure projects in the budgeted
period.,
Temporarily idle cash was invested in a variety of investment vehicles
during the previous fiscal year. Diversification allows for flexibility and
safety -of the portfolio. The weighted average yield during the past fiscal
year was.8.6% with total interest earnings for all funds at $22071,455.
Fiscal Year '89-90 Expenditures
Public Works
20.8%
Parks & Reuearion
7.1%
Community Developmem
4.1%
Public Salary
20.4%
capital ably
335%
06131 Service
3.3%
oral Gavemmem
las%
SUMMARY OF TOTAL CRY EXPENDRURES
General Government
3,722,000
Public Safety
7,047,000
Public Works
7,174,000
Parr & Recreation
2,449,000
Community Developmerd
1,422,000
Capital Outlay
1115s9.000
Debt Service
1,150,000
TOTAL CITY EXPENDITURES
34,653,000
In fiscal year 1989-90, the city experienced tremendous growth which was
accommodated.by expanding our services. This translates into an increase in
overall expenditures as the city expanded its staffing requirements and
services to, the public. The most significant increase came in capital
outlay. There were two major capital expenditures: $6.9MIL was spent to
acquire land for the development of the civic center and $1.6MIL to
construct Canyon Country Park.
The city's general fixed assets represent those fixed assets used in the
performance of general governmental functions. As of 'June 30, 1990, the
city's general fixed assets aggregated $26,015,679.
The financial statements reflect an excellent financial condition for a city
beginning to emerge from its infancy. This is partly due to its
diversification in sales tax, Prop A funds, property tax, TDA funds, and
other revenue sources.
The City of Santa Clarita received two reporting awards last year and has
again submitted its Comprehensive Annual Financial Report for year ended
June 30, 1990, to the GFOA Certificate of Achievement Program and the CSMFO
Financial Award Program. We believe that the City's financial reports
continue to conform to the high standards of public financial reporting and
will be considered an -award winner.
— 6 —
All of the city's idle cash is invested in a variety of investments using
the "Prudent Man Rule." The "Prudent Man Rule" states, in essence, that "in
investing... property for the benefit of another, a trustee shall exercise
the judgment and care, .under the circumstances then prevailing, which men of
prudence, discretion, and intelligence exercise in the management of their
own affairs.....". Below is a comparison of the city's weighted average
investment portfolio for the first six months of the -1990-91 fiscal year as
compared to last year's first six months:
15,000.000
0
6 MONTH INVESTMENT PORTFOLIO
WEIGHTED AVERAGE COMPARISON
CD LAIF FEDER BANKERS COMMERCU MONEY
AGENCY ACCEPTANCE PAPER MAPKEr
■ Juy 90 -Dec 90 ® Jay 89-[) c89
The Iraqi invasion and the uncertainty of higher oil prices is a major
contributing factor in the drop of the investment yields.
As economic forecasting becomes more difficult, investors tend to pour more
cash into short-term instruments which typically have lower yields. Short-
term treasury bills and notes become highly.demanded by investors when there
are signs of economic or political trouble. On July 12, the Treasury sold
58BIL of new seven-year notes at an average yield of 8.57%, down from 8.62%,
since April 11.
With a hands-on approach to implementing its investment policy, taking into
consideration the safety of the investments first, liquidity second, and
yield third, the City will continue to enjoy the highest return on its
investments.
- 7 -
July 90 -
Yield
July 89 -
Yield
Instruments
Dec. 1990
%
Dec. 1989
%
Certificates of Deposit
$483,333
8.57
$466,667
9.16
LAIF (Local Agency Inv. Funds)
9,116,667
8.38
8,986,667
8.84
Federal Agency Issues
11,504,199
8.38
5,888,942
9.19
Bankers Acceptance
4,3930884
8.26
8,444,599
8.91
Commercial Paper
414,672
8.56
1,206,196
8.77
Money Markets
531.712
5.25
167.267
5.25
TOTAL PORTFOLIO
$26,444,467
8.3
$25,160,338
8.93
15,000.000
0
6 MONTH INVESTMENT PORTFOLIO
WEIGHTED AVERAGE COMPARISON
CD LAIF FEDER BANKERS COMMERCU MONEY
AGENCY ACCEPTANCE PAPER MAPKEr
■ Juy 90 -Dec 90 ® Jay 89-[) c89
The Iraqi invasion and the uncertainty of higher oil prices is a major
contributing factor in the drop of the investment yields.
As economic forecasting becomes more difficult, investors tend to pour more
cash into short-term instruments which typically have lower yields. Short-
term treasury bills and notes become highly.demanded by investors when there
are signs of economic or political trouble. On July 12, the Treasury sold
58BIL of new seven-year notes at an average yield of 8.57%, down from 8.62%,
since April 11.
With a hands-on approach to implementing its investment policy, taking into
consideration the safety of the investments first, liquidity second, and
yield third, the City will continue to enjoy the highest return on its
investments.
- 7 -
FUND BALANCES
June 30, 1990
General Fund
373%
Special Revenue Funds --
44.9%
al Projects
9.s%
Encumbrances
02%
long Tenn Obligations
7.1%
` Intemal service Fund
2.0%
General Fund
57,879,421
Special Revenue Funds
9,502,389
Internal Service Fund
432,777
Reserved for long-term obligations
1,505,302
Reserved for encumbrances
38,031
Reserved for capital projects
.-.1,789,276
Federal Urban Aid
$21.147,199
The general fund balance at 6/30/90 was $7,879,421. The total fund balances
for.Special Revenue Funds equaled $9,502,389. Special Revenue Funds account
for the proceeds of.specific revenue sources that are legally restricted to
expenditure for specific purposes. At June 30, 1990, the city reserved
portions of the fund balance. These reserves represent incorporation costs
debt of $1,505,302 with the Los Angeles County, open encumbrances of
$38,034, and anticipated capital expenditures of $1,789,276 for projects in
which dollars were budgeted in FY 89-90 but not expended.
CITY OF SANTA CLARITA
Status of Fund Balances
12131190 Fund Balance/(Deficit)
General Fund
12,509,138
Gas Tax Fund
395,135
Traffic Safety Fund
313,017
Park Improvement Fund
108,854
Federal Urban Aid
($1,064)
Community Development Block Grarrt
($56,651)
Bikeway Funds
77,042
TDA Street and Road Funds
6,250,426
Proposition A Funds
1,644,905
State Park Grants
(3/91,225)
Self -Insurance Fund
6,222
Via Donna Christa (SAD)
6.927
Bouquet Canyon B&T District
749,881
Route 126 B&T District
181,878
Other Bridge & Thoroughfare
740,939
Special Assessment Districts
8,547
This chart shows the status of fund balances as of 12/31/90 reflecting
actual revenues "and expenditures to date. The deficit balances in the
Community Development Block Grant, Federal Urban Aid and State Park Grant
Funds are due to the city paying for expenditures to be reimbursed from
grants when claims are processed.
- 8 -
FUND BALANCES
December 31, 1990
General Fund
24.7%
SPOdat Pe nue Funds —..
442%
COPItEd Pn�ects
13.s%
�-Enambrartces
22%
Long Tenn Ohlugetions
15.3%
Intemal Service Fund
0.l)%
General Fund
$5,550,747
SpecW Revenue Funds
9,926,611
Internal Service Fund
6.222
Reserved for tong -tern obligations
3,432,630
Reserved for encumbrances
493.000
Reserved for capital projects
522.443.971
As of 12/31/90, the city has reserved $3,432,830 for debt service comprised
of $1,505,302 for Los Angeles County incorporation costs and $1,927,528 for
the corporate yard loan. Other restricted amounts include $99928,611 for
Special Revenue Funds. Remaining is '$5,550,747 in the General Fund for
unusual/unanticipated expenditures.
PRE -BUDGET TIE-IN
As noted by the 'state of the national, state, and local economy, there are
uncertain times ahead. Because of this uncertainty, it is critical to
maintain a conservative fiscal and budgetary policy. While Santa Clarita
remains in sound financial condition, we must look at trends occurring and
plan accordingly. As the national and state economy experience difficul-
ties, it is logical to assume that intergovernmental revenues may lessen and
cities will be forced to pay for additional services, as witnessed in the
passage of SB 2557.
With this situation in mind, it is imperative that the city's budget policy
insure balanced budgets in which expenditures match the anticipated revenue
stream. In the 1990-91 budget process, fund balance was accessed for major
one-time capital expenditures.
There is not an infinite pot of funds available to finance all projects. In
the 1990-91 budget year, there was a capital financing deficit of over
$22MIL. With this type of deficit in projects. proposed for 1990-91, it
becomes clear that cities must continue to strive, to enhance, and diversify
their revenue base if additional programs and capital projects are to
occur. There is a difference in capital budget and major capital improve=
ments. Our capital budget is sound. However, capital improvement financing
is an expensive proposition.
- 9 -