Recommendation to Accept the First Quarter Financial Report for the Period Ending September 30, 2014. [City Council and SACIC] (Finance 2410) (Continued from January 20, 2015)
Good evening. Excuse me. Good evening. This evening I'm presenting to you the first quarter of fiscal year 1415 financial report for both the city and the successor agency. And you have had the report for a while because this was carried over from a previous meeting. So I want to just briefly review some information with you that's background so that you have an understanding of how these reports come to be and when you will see them because they happen every three or four months. Oh, I know. Yeah, yeah. Yeah. If you can do it, be better. I don't push and talk well. So the financial reports are presented quarterly to the city council and the successor agency of the Community Improvement Commission. The first three quarters are unaudited. That means simply that no independent auditor has looked at the numbers. It's simply our own internal review, what we see as being correct. The fourth quarter has some review by independent auditors, but it's not the final audit numbers. So we get the report ready. We get all the documents ready. The auditor is looking at all of our numbers. And so we kind of have an idea about what they think about how we're reporting things. So we include any big items that they found if if there are any. Fortunately, we haven't had any big ones lately. The fourth quarter has a look at where we think we're going to end up for the year. Are three components to each report the general fund, revenue and expenditures, capital projects and the summary of all funds. So the revenue and expenditures are a comparison to budget and a comparison to the same quarter of the prior year that and we presented in a graph form as well as statistical data just so that you have a way of looking at it and two different aspects. The summary of all funds provides you with year to date results. Those will not be the final fund balances. They are the fund balances as of the end of that quarter. So in the first quarter, the property taxes are still our largest item and we receive them only twice a year in December and in June. So our first quarter report is really not a good indicator of that revenue stream because of the timing. This is typical. That's how the county tax collector pays us. And so we know that ahead of time. And we just know that we really don't expect it until either late December or early January. Expenditures this year. In the first quarter, the spending rate is at a rate slower than prior years, but within the budget constraints. So it's slower but still under budget. Next slide. I've reproduced here the the schedule that appeared in the attachment to the report. And the first you will note that the first quarter revenues are within expected results. The property taxes are received in late December or early January and then again in May and May or June. Sales tax revenues are one payment behind in this particular quarter, but the collections are higher than prior year. We have to do a little bit of analysis to compare how many payments we've gotten from the state and how do those payments compare with one another. Utility users, tax collections are slower than expected. And I must tell you that utility tax users tax revenues are dropping. And we are concerned about that. We are. We have unique services who are doing analyzes of which vendors are paying how much and for what. And so we know that in future years, we will not be able to count on as much of this revenue as we do currently. We believe that we need to stay in tune with what the federal legislation and state legislation are, how they are impacting this revenue source for us. The franchise tax collections are on target, and that line is a combination of many different kinds of franchise taxes. The transfer tax appears to be ahead of schedule, but it includes approximately $250,000 in one time payments for sale of large buildings. So a building that is sold for over $2 million will produce $200,000 of revenue. For us, though, we've looked at how many of those buildings that are large value are being sold and taken that into account when we look at this and do the analysis. So it's on schedule because of that, those big one time payments. The transient occupancy tax is ahead of schedule as local hotels and motels are experiencing higher occupancy rates. This is we have not been able to determine that it's rate dependent so much as it is occupancy dependent. So more people paying the same rate gets us more money. Business licenses are renewed each July, yielding almost all of the revenue in the first quarter of the fiscal year. That's just the cycle that it takes. And so we know each year when we look at it that we expect to see by the end of the first quarter close to 100% of what we estimated for the revenues, departmental revenue. May I just hop in here and say that I want to actually do a shout out to the Finance Department because our increase in the business license, taxes and fees is due largely in part to some really concerted, very concerted effort on the part of staff to go after the collections and stay on it. So whereas something like a transient occupancy tax, we're glad that people are coming and staying in Alameda and we've built more hotels. But this was really the work of staff and I just want to commend you for it because it's a big increase from one year to the next. I will pass that along. Departmental revenues. Are those revenues unique to each operating department and they are on target. Interest in rental income is behind expectations, but we know that it catches up in the second quarter. It's just a timing issue. The cost allocation is those charges to other funds for services provided by the general fund operating departments, and it is on target. Transfers and other fees are administrative costs transferred in from assessment districts or other special revenue funds. So is all of the administrative services provide service to those special assessment districts? They are charged a fee and that's counted as a transfer in and that's on target. But the next slide, please. General fund expenditures. We are on target for the general fund expenditures. The General Government, City Council, city manager, city clerk, city attorney are spending at a slower rate in the first quarter. Administrative services, finance and human services are spending at a slower rate as well. Police spending is slower than anticipated as vacancies create the savings. I are spending is slower in the first quarter but is on path to be at budget in the next quarter. Recreation and parks is slower than anticipated but will be close to budget in the next quarter. And public works is slower than anticipated due to vacancies creating savings and the transfers out support other functions and are on target. That's the transfers out to the library, the recreation fund, those kinds of things. Debt service funds. Capital maintenance projects are under budget. This is typical in that first quarter of the year because we're just getting started with some of those projects. And so they're in the planning phase, which is the lesser expenditure. His projects don't follow an even expenditure path as projects are in different phases at different times. The Fund Balance summary shows that the subtotal by each fund group, which have similar characteristics, and the internal service fund group is represented by working capital, not the fund balance , and that is the usable portion of the available fund balance. The successor agency has unique reporting requirements. These were imposed by the law which closed redevelopment agencies. Total debt is included. The total of outstanding debt is included in each fund and is therefore it creates a negative fund balance. I don't want you to think that we're spending money or that we're creating something that is untoward. It is what the state expects us to do. Revenues are tax increments and are received in December or January and May or June, just like other property taxes. So in total that's we are in a good position at the end of the first quarter and I know that there have been questions asked and I will try to help answer any questions that you might have this evening. We have any speakers on this item? No speakers. Right. So council members. Questions, comments. And Ambra. Oh, I was just going to recommend that we accept the report if there were no word limits. Is to remember de. Great. I just want to make a comment on the general fund expenditure slide. You'll notice that that at the top there's a reference to 25% complete. And just basically what that really refers to is three months out of 12 months is 25%, three divided by 12 because 25%. So when you look at this slide and you look at the percentage of the budget on all of the cost centers, whether it's police or recreation and parks or whether it's public works, what the finance director means by coming in slow is that we are spending less than 25%. Right. So there is so that's actually good news. That's not to say, you know, in a subsequent fiscal month, our fiscal quarters, that we're going to stick to 25%. But in general, each quarter, you should each quarter should represent 25% of your budget. Yes. On the expenditure side, because 25 plus 25 plus 25 plus 25 equals 100%. So what you see here is good work on the part of city staff, the city finance department and the city manager's office as well as everyone else, and doing their best to hold the line. The thing that really caught myself eyes on the revenue side is the transient occupancy. Granted. Overall, the transient occupancy is roughly $270,000, or roughly 18% of our overall revenue side of the budget. But compared to the previous year, it grew by 50% from roughly $180000 to $269000 now. And that's a great it's really good news because it means somehow people are finding Alameda to stay here. I suspect what's really happening is that as the economy is getting better, particularly in the Harbor Bay Isle area, more and more people are staying at the at the motels hotels, but they're resulting in this increase, this bump up in the transient occupancy tax. So that to me, that was the thing that really caught my eye, as did the sales tax. And actually in a later agenda item, we dug in deeper into the sales tax item. So I'll hold withhold my discussion there. But again, when you look at where that what part of Alameda is driving the sales tax number of $737,000 for this quarter and for quarter four for the first quarter. What's driving it is the area of the Harbor Bay Isle area, the commercial area, our Bay Parkway. Exactly. That kind of tells you something about the type of sales tax that's occurring, i.e. business of business and what kinds of, you know, policy implications that has. Right. Thank you. And I do have a question on the staff report. It referred to sales taxes are significantly higher than for the same period partially and due to continued recovery of the economy, but also a one time favorable adjustment of $313,000. Can what was that adjustment so frequently? And this is one of the reasons why we hire a consultant deal to review the raw data from the Franchise Tax Board. And what they look at is not just who's what we're getting paid, but are we getting paid by all the people we should be getting tax money from. And when they find a company located in Alameda making sales but reporting those sales at a location outside of Alameda. And this happens when companies move. It's not intentional. It just happens. They approach Franchise Tax Board who contacts the payor and they get an adjustment made. The payor gets a new tax number that's by this location and they report the sales accurately. Well, when that happens, they determine what date it started and then give us an adjustment. So we get those we get some money practically every quarter. But this time it was a particularly large amount. Thank you very much. I appreciate that. Right now, do we have a motion? Okay. I would be happy to recommend that we accept the first quarter financial report for the period ending September 30, 2014. All those in favor. I oppose extensions. Motion carries unanimously. Thank you and no other agenda items. Comments. I will adjourn the S.A. CIC special meeting for this evening and now we will open our regular city council meeting. Roll call. Council Member States. I'm here as the guest. Here. Here. Here. Mayor Spencer. Here. I present.