City of Culver City, California
City Council Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council receive a presentation on the Year-end Fiscal
2005-06 Budget.
BACKGROUND:
The City Controller’s Office prepares monthly, quarterly, mid-year, and year-end
budget monitoring reports for the City Council once the City Treasurer’s Office has
closed the books of the respective time periods.
General Fund
Total actual General Fund expenditures at the end of Fiscal 2005-06 were $79.27
million, and total General Fund revenues were $83.03 million. The end result of the
approximately $3.7 million operating surplus was mostly due to one-time revenues,
including $2.62 million from the Warner Parking Lot.
It should be noted that there was a $5.6 million Land Acquisition transaction
executed in fiscal 2005-06 by the City on behalf of the Redevelopment Agency. The
Agency reimbursed the City for the full cost of that transaction. Currently, the $5.6
million is shown on the City’s annual Comprehensive Financial Report as “reserved
for land held for resale.” Ultimately, this money will be returned to the
Redevelopment Agency when development of the land has taken place.
It should also be noted that expenditures are understated in fiscal 2005-06 as many
employees worked without a labor contract for more than half of the fiscal year. As a
result, no negotiated salary and benefit increases for these employees were
Meeting Date: February 12, 2007 Item Number: A-4
AGENDA ITEM: Fiscal 2005-06 Year-end Financial Budget Monitoring Report
Contact Person/Dept.:
Mary V. Noller, Sr. Budget Analyst
Phone Number: (310) 253-6012
Fiscal Impact: Yes [] No [X] General Fund: Yes [] No []
Public Hearing: [] Action Item: [X] Attachments: [X]
Public Notification:
Master Notification 2/7/07
Department Approval:
Marlee Chang (02/05/2007)
City Attorney Approval::
Heather Iker (02/08/2007)
City Controller Approval:
Marlee Chang (02/05/2007)
City Manager Approval:
Jerry B. Fulwood (02/08/2007)City of Culver City, California
City Council Agenda Item Report
expended in fiscal 2005-06. Retro-active pay of approximately $500,000 was
carried forward from fiscal 2005-06 to fiscal 2006-07 for payroll distribution. If these
personnel expenses would have been expended in fiscal 2005-06, the General Fund
would still have met the 96% appropriation limit.
The final 2005-06 year-end budget review reflects an unreserved General Fund fund
balance of $27.76 million, or 35% of total General Fund operating expenditures from
2005-06. The adopted 2006-07 budget includes approximately $1.3 million
appropriation which was transferred from the General Fund reserve to fund capital
projects; therefore, $1.3 million of the surplus has already been earmarked for
capital spending in 2006-07.
An important point should be noted that the General Fund fund balance has
approximately $2 million that might need to be fully committed to fulfill Fund 420
Capital appropriations for the new Fire Station #3. It is anticipated that
approximately $1 million may be received from the sale of the three lots on which the
current Fire Station #3 sits. There are also opportunities for the City to receive grant
funding for all, or a portion of, the $1 million that was appropriated per a “loan” from
the General Fund reserve. If these actions occur, the appropriated $2 million from
the General Fund reserve will be released back to the reserve; otherwise, the
General Fund is expected to provide the project funding needs.
Enterprise Funds
The Refuse Fund came in under projected revenue receipts by a minor 0.5%, and
were $9.85 million. Expenditures finished the year at 92% of the adjusted budget,
and were $9.46 million. As a result, the fund showed an annual operating surplus of
$390,000.
The Transit Fund finished the year slightly over operating revenue projections at
$15.66 million. This was due in part to the timely receipt and recording of federal
and state monies. Expenditures, including both operating and capital items, were
70% of the adjusted budget, and were $16.54. A few Transit capital projects were
not completed in 2005-06, and have been carried over to fiscal 2006-07.
The Sewer Fund came in over revenue projections by approximately 10%. This was
partly attributable to Sewer Facility Charges coming in above projections from a new
development project. Sewer operating appropriations were 86% expended, with
overall Sewer appropriations 56% expended. Several budgeted Sewer capital
projects were not completed in fiscal 2005-06, and have been carried over to fiscal
2006-07. City of Culver City, California
City Council Agenda Item Report
Self-Insurance Fund
The Self-Insurance Fund was able to increase its cash balance to approximately
$3.9 million at the end of fiscal 2005-06. However, it is anticipated that the City will
be responsible for at least $1 million, the entire self insured retention (SIR) limit, for
outstanding general liability litigation issues. Thus the cash balance will potentially
be reduced to $2.9 million. Litigation is still pending and the end result of the
financial impact is still uncertain.
FISCAL ANALYSIS:
Final results for the General Fund in fiscal 2005-06 were very positive, mainly due to
one-time revenue receipts such as the $2.62 from the sale of the Warner Parking
Lot. General Fund Departments, for the most part, were able to hold expenditures
within the 96% target. Overall, most funds were able to hold spending within the
restraints of available revenues or reserves.
ATTACHMENTS:
Fiscal 2005-06 Year-end Budget Report
Fiscal 2005-06 Year-end Expenditure Summary
Fiscal 2005-06 Year-end Revenue Summary
MOTION:
That the City Council:
Receive the presentation of the Year-end Fiscal 2005-06 Budget.
MEETING DATE: 2/12/07
AGENDA ITEM: Fiscal 2005-06 Year-end Budget Monitoring Report
ATTACHMENTS
Pages
1. Fiscal 2005-06 Year-end Budget Monitoring Report
1 -7
2. Fiscal 2005-06 Year-end Revenue Summary
8 - 9
3. Fiscal 2005-06 Year-end Expenditure Summary
10- 11CITY OF CULVER CITY
2005-2006 Budget Monitoring Report
Final Year-End Report
Introduction:
This report includes the final revenue and expenditure analysis for Fiscal Year 2005-06.
Overall, the City's fiscal outlook, especially for the General Fund, ended on a positive note,
mainly due to one-time funds that were received during the last six months of the fiscal year.
General Fund Summary:
According to the final figures, total General Fund expenditures in 2005-06 were $79.27 million,
while General Fund revenues were $83.03 million. The end result is approximately a $3.7
million surplus. On the revenue side, there were a number of one-time revenues that the City
received this fiscal year, including $2,62 million in land revenue for the sale of the Warner Lot.
Additionally, the adopted budget for fiscal year 2006-07 includes a transfer of approximately
$1.3 million from the General Fund reserve to fund capital projects. Therefore, $1.3 million of
the surplus has already been earmarked for those projects.
It should also be noted that expenditures are understated in fiscal 2005-06 as many employees
worked without a labor contract for more than half of the fiscal year. As a result, no negotiated
salary and benefit increases were expended. The City Council approved MOUs for three of the
bargaining units in October 2006, and Retro-active pay of approximately $500,000 was carried
_forward to fiscal-2006-07 for-payroll-distribution. The final 2005-06 year-end budget review reflects an unreserved General Fund fund balance of
$27.7 million, or 35% of total General Fund operating expenditures from 2005-06. The City
received approximately $500,000 from the Redevelopment Agency from the past sale of the
Duquesne parking lot located next to the Post Office. Thus, our estimated fund balance for the
end of fiscal 2006-07, including the $1.3 million appropriated for capital projects, will be
approximately $26.9 million, or 35.3% of total General Fund expenditures for 2006-07.
An important point to note is the General Fund fund balance has approximately $2 million that
may need to be committed to fulfill Fund 420 Capital appropriations for the new Fire Station #3.
It is anticipated that approximately $1 million will be received from the sale of the three lots on
which the current Fire Station #3 sits. There are also opportunities for the City to receive grant
funding for all, or a portion of, the other $1 million that was appropriated per a "loan" from the
General Fund reserve. If these actions occur, the appropriated $2 million from the General
Fund reserve will be released back to the reserve; otherwise, the General Fund is expected to
provide the project funding needs.
Overall, it is important to remember that the recorded General Fund surplus at the end of
fiscal 2005-06 is almost entirely the result of one-time revenues.2
Revenues:
> General Fund revenue receipts through June 2006 are $83,030,355, which exceeds the
adjusted budget amount by approximately $5.4 million. (Detailed information will be
given in the General Fund Analysis section.)
o Following are some of the factors: 1) $2.62 million one-time receipt for sale of the
Warner Lot, 2) $1 million of Sales Tax revenue receipts over the adjusted revenue
estimate; this is due in part to Sales Tax receipts coming in stronger than what
was anticipated at mid-year, and the projected loss of sales tax being less than
earlier expectations, 3) $276,000 increased Business Tax, of which the majority is
from penalty receipts, 4) $627,000 increase in Real Property Transfer Tax from
prior year payments, which were identified by auditors, 5) $317,000 increased
Vehicle Code Fines, and 6) $253,000 increased fees and charges from Vet's
Complex rentals and Plan Check fees from the Symantec project.
Expenditures:
> General Fund expenditures are 98% of appropriations. This includes a $5.6 million Land
Acquisition transaction executed by the City on behalf of the Redevelopment Agency.
The Agency reimbursed the City for the full cost of that transaction.
o NOTE: The expenditures DO NOT include any retroactive pay, which was made in
November of 2006-07 based on adopted MOUs with the bargaining groups.
> For the most part, departments successfully adhered to the_96?/0—wencling_assump1ion_as budgeted_ However, the trend suggests it is becoming increasingly difficult for some
small departments to hold the line with the current budgeting practice. Overall, if
personnel costs were to have been expended out of fiscal 2005-06, the expenditures in
fiscal year 2005-06 would still meet the 96% appropriation projection.
> For additional detail, see the attached chart entitled, "General Fund Expenditures by
Month" and table (Exhibit B) 'Summary of Expenditures, Preliminary Year End 2004-05
and 2005-06."
General Fund Analysis:
Revenues:
> Property Tax came in above projections due in part to Prior Year taxes received by the
City, which was recorded at $190,000. Increased housing prices also allowed this
category to remain strong. Overall, this revenue came in approximately $370,000 above
projections.
• Real Property Transfer Tax came in above projections due mainly from auditor
recovered revenues from prior years_ This amounted to approximately a $625,000
increase in revenues for fiscal 2005-06. The City will also be realizing auditor-identified
additional revenue receipts for this category in fiscal 2006-07.
Sales Tax
came in strong with approximately a $1 million increase over adjusted mid-
year projections. Although the City lost a car dealership in May 2005, other revenueswere able to help off-set this loss. The expected loss of revenue from the car dealership
was much less than originally anticipated.
> Business License Tax came in above projections due to additional penalty charges.
This category, including penalties, came in approximately $276,000 above projections.
> Utility User's Tax missed the projected target by approximately $170,800.
Telecommunications UUT came in approximately 8.3% below projections, and was
partially covered by increased Electricity UUT receipts. Total receipts were 98.7% of
projections.
> Licenses and Permits anticipated one-time revenues in this category were realized in
March, and as a result, this category is slightly over projections for fiscal 2005-06.
> The majority of Commercial/Industrial Development Fees and Building Permit Fees
were received in March 2006. Overall, this category came in at approximately 92% of
projections, and most of the receipts were one-time fees from major new development
projects.
> The Charges for Services category continued to show an increase in receipts over last
year due to Redevelopment Billings being made in a timely manner, and higher than
anticipated Vet's Building revenues. Vet's Building revenues came in at approximately
135% over projections due in part to an increase in rentals from private parties and
spiritual gatherings. The Vet's Complex offers free parking and enables customers to
bring their own food and beverages, including alcoholic beverages. These are only a few
of the benefits that have helped increase Vet's rentals. Overall, it has helped to keep this
category high, which ended at 107.7% above projections.
> Court Fines and Vehicle Co_de Fines_are approximately 8%_above projections_for fiscal-
2005-06. This is mainly attributable to Vehicle Code Fines being above projections.
Additional photo enforcement (red-light) cameras were installed at ten (10) approaches,
which also contributed to the increase in receipts.
> For additional detail, see the attached chart entitled 'General Fund Revenues by Month,"
and table (Exhibit A) "Summary of Revenues, Preliminary Year-End 2004-05 and 2005-
06"
Self Insurance Fund Summary:
> In 2005-06, the Self-Insurance Fund expended approximately 86% of the adjusted
budget.
> As a result, the Self Insurance fund was able to increase its cash balance to
approximately $3.9 million at year end. However, it is anticipated that the City will be
responsible for at least $1 million, the entire self insured retention (SIR) limit, for
outstanding general liability litigation issues. Thus the cash balance will potentially be
reduced to $2.9 million. Litigation is still pending and the end result of the financial
impact is still uncertain.
> Future liability adjustments through June were as follows:
o Workers' Compensation future liability decreased approximately $698,750.1
However, an increase in future liability for the year of approximately $6 million
As reported by Colen & Lee, the City's workers' compensation third party administrator.|1010|3was recorded to recognize Incurred But Not Reported (IBNR) claims per
actuarial review (see note at conclusion of report for explanation of IBNR claims).
• General Liability future liability increased approximately $903,300. 2 An increase
in future liability of approximately $1.4 million was recorded to recognize Incurred
But Not Reported (IBNR) claims per actuarial review.
O Overall, the future liability for the Self Insurance Fund increased to approximately
$22.2 million due to increased exposure to litigation and IBNR claims.
It is common to see the fluctuations of these adjustments, and it is important for staff to
analyze and understand the reasons for these changes in order to preserve the good
financial condition of this fund.
Other Fund Highlights:
Revenues:
D Refuse Fund - The outstanding Refuse Fund Loan amount will be approximately $1.3
million at the end of fiscal 2005-06. Of this amount, $776,000 is owed the General Fund,
$454,000 to the Equipment Replacement Fund, and $69,000 to the Innovation Fund.
D Enterprise Funds — Total receipts came in at approximately 103%. Much of this is
attributable to Sewer Fund Facility Charges from a new development project. This
contributed to Sewer Fund receipts coming in at approximately 110% of projections.
O The Refuse Fund came in under projected revenue receipts by a minor 0.5%.
Can and Bin Service billing receipts came in Jssthan anticipatedy_which__
contributed to this minor shortfall. Non-City Waste Charges helped close the gap,
and came in strong at over twice estimated projections.
o The Transit Fund finished the year slightly over revenue projections, and came in
at 101.5%. This was due in part to timely receipt of federal and state grant
monies, and receipt and recording of Prop C monies.
O The Sewer Fund came in above projections by over 10%. As mentioned above,
this was attributable to Sewer Facility Charges coming in above projections from a
new development project. This helped close the small shortfall in Sewer
Operating Charges of approximately 3%.
The Parking Improvement Fund has surpassed projections, and is currently at 127.8%
of estimates. A large portion of this increase is generated by filming permit revenue.
Sometimes filming or production companies need spaces to park their vehicles or trailers,
and pay the City a set fee for the parking spaces, both metered and non-metered. There
are also occasions where filming may require no cars to be in a scene, and thus, fees are
received to keep those parking spaces empty for a required period of time.
The Graphics Services Fund had an operating surplus of approximately $100,000 at
fiscal year-end. The Graphics Services Fund will no longer be an Internal Service Fund
in fiscal 2006-07.
The Improvement & Acquisition Fund revenues were lower than the adjusted budget
due almost entirely to the $1 million budgeted in Miscellaneous Revenue. This revenue
2
As reported by Ward North America, the City's General Liability third party administrator.|1010|/7/was budgeted in fiscal 2005-06 in anticipation of the sale of the existing Fire Station #3
lots. To date this has not taken place.
Expenditures:
Enterprise Funds: The Refuse (92%), Transportation (70%), and Sewer Fund (56%)
expenditures are all below 92% of the adjusted budget. Excluding Capital Projects and
Debt Service payments (i.e. operational budget only), the Sewer Fund expended 86% of
its budget.
o The Refuse Fund finished the year at 92% of budgeted expenditures. Part of this
was due to Other Contractual Services appropriations not being expended in fiscal
2005-06, and Personnel Expenses coming in slightly lower than budgeted due to a
few vacancies.
o The Transit Fund came in at 70% of expenditures, mainly due to capital projects
funds not being expended in fiscal 2005-06. These capital projects include the
SmartBus project, and upgrade of the CNG filling stations at the Transportation
Facility_
o The Sewer Fund expended approximately 86% of budgeted operating
appropriations. Overall, the fund expended 56% of its appropriations.
o On September 11, 2006, a CNG Refuse Vehicle was involved in an accident at the
corner of Jefferson and Duquesne. The estimated repair cost for the vehicle is
$11,272. Risk Management staff has filed a claim with the insurance carrier, and it
is anticipated the City will receive a net amount of $6,272 after subtracting our
deductible ($5,000).
Conclusion:
Final results for the General Fund in fiscal 2005-06 were very positive, mainly due to one-time
revenues as mentioned above. General Fund Departments, for the most part, were able to hold
expenditures within the 96% target. Overall, most funds were able to hold spending within the
restraints of available revenues or reserves. Exceptions to this were the capital and operating
grant funds, which are mainly reimbursable driven, and thus perpetually show a negative
balance_ Staff in the City Treasurer's Office, City Controller's Office, and affected Departments,
are working closely to ensure the City captures all of the grant reimbursement due it. Quarterly
grant status reports are submitted to the City Council, with the next one expected to be
submitted in February.
END NOTE:
1BNR Claims: Accounting standards require that Incurred But Not Reported (IBNR) claims are recorded in the
financial statements. IBNR claims are claims that happened in the current fiscal year, but may not be reported until
several years in the future. For example, a firefighter or public works employee may contract an asbestos related
disease from entering an older building; however, symptoms may not show up for decades after the exposure.
IBNR also refers to estimates made about claims already reported, but the full extent of the injury is not yet known.
For example, an employee may injure their back during the course of employment. Initially, future liability is
established for a routine back injury. Over time, there may be complications that result in the back injury being
much worse than originally diagnosed. The future liability would then need to be increased to account for the
higher cost associated with a more serious injury.
5General Fund Revenues Collected Year to Date
90,000,000
80,000,000 A
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
-10,000,000|109| c
Tf3
023 e cfr e
° ‘40
a 200405 u 2005-06 I
80,000,000 -1
70,000,000 -1
General Fund Expenditures
Preliminary Year End
6 6
NzP v e` 2, 21. cc,
c k' k o 46-
•1
se,
1132004-05 02005-06 I
REVENUE AND EXPENDITURE CHARTS
CHART 'I
CHART 2
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000|10 10|a,0
614,000,000-i
12,000,000-
10,000,000 -4
8,000,000-4
6,000,000
4,000,000-1
2,000,000--'
e 4Cfr se 0 .* 0.2'6
o c' -1 0 6 2' ''s`b