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Home My WebLink AboutAGENDA REPORT 2020 1104 CCSA REG ITEM 09DCITY OF MOORPARK,  CALIFORNIA City Council Meeting of November 4, 2020 ACTION Received And Filed. (Roll Call Vote: Unanimous). BY B.Garza. D. Receive a Report on General Fund’s First Quarter (July-Sept) Budget Update for Fiscal Year 2020/21. Staff Recommendation: Receive and file the report. (Staff: Kambiz Borhani) Item: 9.D. MOORPARK CITY COUNCIL AGENDA REPORT TO: Honorable City Council FROM: Kambiz Borhani, Finance Director DATE: 11/04/2020 Regular Meeting SUBJECT: Receive a Report on General Fund’s First Quarter (July-Sept) Budget Update for Fiscal Year 2020/21 DISCUSSION This Report summarizes the City’s General Fund operating revenues and expenditures, based on the most recent financial information available for the first three months of the fiscal year beginning July 1, 2020 to September 30, 2020 (“first quarter”). This report compares the actual amounts received and expended to budgeted amounts adopted by City Council on June 17, 2020, and amounts disbursed during the same period in 2019. The quarterly report does not include accrual entries; therefore, revenues are not being recognized when they become available and measurable rather when cash is received. Expenditures are recorded when payments are made instead of when liabilities incur, and although transactions through the first quarter represent 25% of the fiscal year, not all line items will be at 25% of the budget as of the end of the quarter. Most transactions do not occur at uniform times or equal intervals throughout the year. In fact, while expenditure outflows for normal operations tend to be relatively even, the cash flow timing of capital expenditures, debt payments, and major revenues such as property taxes are not evenly distributed. Additionally, the following factors should also be considered when analyzing first quarter data: • Property Tax revenue has not yet been received (mid-January); • Some significant costs are either paid upfront (i.e. CalPERS, CJPIA, etc.) or are recorded at the end of the fiscal year (i.e. Transfers, Depreciation, etc.); • Seasonal variations or special occurrences in municipal operations may affect the proportion of revenues achieved or expenditures incurred to date; • It is difficult to determine a trend in only three months. All financial information is based on preliminary, unaudited figures reported from the City’s financial system as of the report date. Item: 9.D. 38 Honorable City Council 11/04/2020 Regular Meeting Page 2 General Fund Revenues The table below displays comparisons between the Adopted Budget and actual amounts received for the first quarter (Jul – Sep) of fiscal years ending (FYE) 2020/21 and 2019/20, respectively. • Property Tax – accounts for 48.5% of the General Fund’s revenue. A higher percentage of property tax revenue is received in the second half of the fiscal year than in first half. The $96,341 received during the first quarter represents $41,514 in Secured taxes, $53,560 in Property Transfer taxes, and $1,267 in Parcel taxes. • Sales and Use Tax – accounts for 18.3% of the General Fund’s revenue. This revenue is anticipated to be lower than prior years due to the pandemic and the deferral programs the State has instituted. There is a two-month lag in receipts. The $306,900 received in late September is for the month of July. August’s payment will be received in late October. • Transient Occupancy Tax (TOT) – is a new tax revenue category for the City. Fairfield Inn and Suites officially opened its doors on June 26, 2020. The entity’s first quarterly tax return was due on July 31st. The $980 received represents TOT from June 26-30. July through September reporting is due by October 31st. • Franchise Fees – accounts for 6.1% of the General Fund’s revenue. The majority of the payments are sent on a quarterly basis. July through September will be remitted in the latter part of October. The variance of $288,402 compared to first quarter of 2019 was due to accruals not being recorded in FYE June 30, 2018. • Use of Money and Property – accounts for 4.4% of the General Fund’s revenue. This revenue category includes investment related entries (i.e. interest income, fair market value (FMV) adjustments, gain & losses totaling ($128,269) plus parks & facilities use fees, along with rents & concessions (totaling $112,391) bringing the net amount to a loss of ($15,878). Although interest rates and income have significantly plummeted, the FMV adjustments are the main cause for this temporary loss. The net variance of $118,650 compared to first 39 Honorable City Council 11/04/2020 Regular Meeting Page 3 quarter of 2019 was a made up of investment entries being $75,325 less, and parks & facilities use fees and rents & concessions being $43,325 more since there was no Stay Well At Home Public Health Orders issued. • Fees for Services – accounts for 7.4% of the General Fund’s revenue. The variance of $107,640 compared to first quarter of 2019 was due to Stay Well At Home Public Health Orders issued which significantly reduced Parks and Recreations activities and events (i.e. Camps, Youth & Adult Sports, 3rd of July, etc.) revenues in addition to the Reimbursements (i.e. School Resource Officer. etc.). • Other Revenues – accounts for 4.1% of the General Fund’s revenue. The variance of $44,506 compared to first quarter of 2019 was again attributed to the Stay Well At Home Public Health Orders, which notably reduced revenue sources like Fines & Forfeitures and Donations/Contributions. • CARES Act Funding – The CARES Act funding was originally approved and disbursed by the federal government to States, Counties, and Cities with a population of 500,000 or more. Only six cities in California received direct funding from the federal government. The State of California then developed an allocation schedule for distributing specific amounts (based on population) to the remaining 476 cities in their jurisdiction. To receive the funding, local governments had to incur eligible expenditures from March 1, 2020 to June 30, 2020 and then July 1, 2020 to December 31, 2020, and were required to file a certification by July 10, 2020 that they will use the funds consistent with federal requirements, adhere to health orders and directives, return unspent funds, and repay any disallowed costs, among other compliance certifications. The payments were going to be made to the local governments in six installments, starting in early August 2020. The City of Moorpark was to receive a total of $447,929 in six monthly installments of $74,655 starting July 30th. Since the first filing period covered eligible expenditures from March 1, 2020 to June 30, 2020, the Matching Principle of the Generally Accepted Accounting Principles required that expenses incurred during a period be recorded in the same period in which the related revenues are earned. Although, the expenditures were much higher, at the time only two installments were received. Therefore, July and August 2020 payments had to be recorded as an accrual to FYE June 30, 2020 to match against some of those expenditures incurred during the said period. The $74,655 received in September of 2020, shown on the report above, was also used to match the second round of reporting, July 1, 2020 to September 30, 2020. There are two more reporting periods remaining, from October 1, 2020 to December 31, 2020, and Prior Period Adjustments for those Cities that inadvertently missed or misreported an eligible expenditure during the filing periods of March 1, 2020 to December 31, 2020. Also, as of the date of this report, the City is yet to receive three more installments equaling $223,964. 40 Honorable City Council 11/04/2020 Regular Meeting Page 4 General Fund Expenditures The table below displays comparisons between the Adopted Budget, actual amounts paid for the first quarter (Jul – Sep) for fiscal years ending 2020/21 and 2019/20. • Services and Supplies – accounts for 14.4% of the General Fund’s expenditures. The variance of $141,564 compared to first quarter of 2019 was due to cost saving measures placed as a result of the pandemic. • Salaries and Benefits – accounts for 25.5% of the General Fund’s expenditures. The $1,100,860 is consistent with the expected 25% of the fiscal year expenditures along with some employee accrued leave payouts. • Sheriff – accounts for 40.5% of the General Fund’s expenditures. The $1,193,865 represents two months of service. The variance of $577,204 compared to first quarter of 2019 was due to only recording one month of service at the time. • Utilities – accounts for 2.0% of the General Fund’s expenditures. The $46,638 is consistent with the expected quarterly expenditures within a fiscal year. • Capital Outlay – accounts for 1.3% of the General Fund’s revenue. The $158,159 is consistent with prior year’s purchase order rollover amounts. The variance of $1,156,817 compared to first quarter of 2019 was due to streetlight acquisition and streetscape projects. • Transfers Out – accounts for 16.3% of the General Fund’s expenditures. Transfers Out is adjusted annually in conjunction with the year-end analysis and preparation of the City’s Comprehensive Annual Financial Report (CAFR) for a completed fiscal year. 41 Honorable City Council 11/04/2020 Regular Meeting Page 5 Conclusion In summary, as the crisis unfolds, it is evident that the lingering effects of the pandemic is adversely affecting revenues compared to last year. Expenditures are trending proportionally to prior year with notable differences being the two service months of Sheriff’s contract getting paid as opposed to one month, and also three employees getting accrued leave payouts instead of one. The City’s continued efforts to curtail non-essential expenditures to offset revenue losses is materializing to be an effective stabilizing measure. It is too early to know what the implications would be. Staff will continue to monitor these variances and come back to City Council sometime during the first calendar quarter of 2021 with the mid-year adjustments report. FISCAL IMPACT There is no fiscal impact associated with receiving this report. COUNCIL GOAL COMPLIANCE This action does not support a current strategic directive. STAFF RECOMMENDATION Receive and file the report. 42