HomeMy WebLinkAbout08/01/2017 06C 2017 Mid-Year Financial Status ReportBUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDASTATEMENT
Item No. 6.C.
For Meeting of: August 1, 2017
ITEM TITLE: 2017 Mid -Year Financial Status Report
SUBMITTED BY: Tara Lewis, Interim Director of Finance & Budget
SUMMARY EXPLANATION:
Attached for review is the 2017 Mid -Year Financial Status Report which consists of the following:
• Cover memo incorporating the Financial Monitoring System
• Financial Status Update Report
• City Wide Overview
• General Government Revenue and Expenditure Analysis
ITEM BUDGETED:
STRATEGIC PRIORITY:
Public Trust and Accountability
APPROVED FORcl*�
SUBMITTAL: "City Manager
STAFF RECOMMENDATION:
Accept Report
BOARD/COMMITTEE RECOMMENDATION:
ATTACHMENTS:
Description Upload Date Type
D 2017 Mid -Year Financial Status Report 7125/2017 Coxer Memo
OAF
MEMORANDUM
To: The Honorable Mayor and Members of the City Council
From: Tara Lewis, Interim Director of Finance & Budget
Date: August 1, 2017
Subject: 2017 Mid -Year Financial Status Report
Attached for your review is the City of Yakima's 2017 Mid -Year Financial Status Report with actual
results compared to budget for all city funds.
This report is summarized by type of fund, and incorporates the Financial Monitoring System
presentation. Information is reported by functional type, in the following order:
PAGE STATUS
Financial Status Update ....................................................... 1 NORMAL
City Wide Overview............................................................. 3 NORMAL
General Government Revenue Analysis ......................... 4 NORMAL
General Government Expenditure Analysis ................... 7 NORMAL
Legend:
Revenues & Expenditures
Revenues exceed budget >5%, Expenditures below budget >5% POSITIVE
Revenues exceed budget <5%, Expenditures below budget <5% NORMAL
Revenues below budget between 3-5% CAUTION
Revenues below budget >5% WARNING
Fund Balance
Percent of expenditure => 16.7%
POSITIVE
Percent of expenditure = 14.0%-16.6%
NORMAL
Percent of expenditure = 9.0%-13.9%
CAUTION
Percent of expenditure < 9.0%
G
FINANCIAL STATUS UPDATE
GENERAL GOVERNMENT
Net Revenue Reserve Balance Annual
Revenues Expenses (Expense) Beginning End/Current % of Exp
2017 Amended Budget $ 78,608,647 $ 78,520,112 $ 88,535 $ 7,305,413 $ 7,393,948 9.4%
2017 YTD Actual as of 6/30 $ 37,709,527 $ 38,400,293 $ (690,766) $ 7,933,127 $ 7,076,730 9.4%
Percent of Budget 48.0% 48.9%
As of June 30, both revenues and expenditures are running at just under 50% of budget. This is not
unusual due to low activity in winter months. Also, the City does not do mid -year accruals for
outstanding items such as unreceived grant revenue or unpaid invoices due. Actually, the savings on the
expenditure side is noteworthy. Included in the Budget is a Vacancy Savings of $675,000 for 2017.
General Government has already realized vacancy savings of this much so far in 2017. Other savings
have been achieved through prudent spending decisions.
Despite the savings, the numbers reflect a deficit of $690,766. This is partly due to revenues that trend
upward in the latter half of the year; and certain annual charges for insurance that were made in the first
half of the year which arbitrarily increase expenditures in this time period. Given these factors, the
current deficit is not problemmatic; we should see revenues trend upward relative to expenditures in the
second half of the year.
The Risk Management Fund (discussed below) was entirely depleted in 2016 with the ACLU settlement
payout. To shore up the fund to meet State required minimum reserve levels, the entire 2017 insurance
charge plus an extra surcharge were assessed and are reflected in these expenditure numbers. The
impact to General Government for the extra (unbudgeted) surcharge is $228,500 and the early (budgeted)
2nd half payment is $635,000. Combined, these entries account for $863,500 of expenditures that should
be paid from revenues received and savings realized in the second half of the year and more than make
up the deficit reflected in these numbers.
RISK MANAGEMENT
Net Revenue Reserve Balance Annual
Revenues Expenses (Expense) Beginning End/Current % of Exp
2017 Amended Budget $ 4,078,528 $ 3,913,381 $ 165,147 $ 1,403,627 $ 1,568,774 40.1%
2017 YTD Actual as of 6/30 $ 4,603,720 $ 2,771,008 $ 1,832,712 $ (951,265) $ 881,447 15.9%
Percent of Budget 112.9% 70.8%
During 2016, the ACLU settlement of $1.846 million depleted the Risk Management Fund bringing the
Reserve Balance to negative $951,265. The State requires a minimum Reserve Balance that addresses
expected claim activity as of each year end. The Reserve requirement is estimated by the Legal
Department based on pending claims against the City net of insured amounts. To shore up the fund as
quickly as possible, the entire budgeted insurance charge was administered to each contributing fund
early in 2017. Then, an additional 18% surcharge was administered to bring the reserve balance up to the
required minimum.
Finance 2017 2nd Quarter Report Page 1
HEALTH BENEFIT RESERVE
Net Revenue Reserve Balance Annual
Revenues Expenses (Expense) Beginning End/Current % of Exp
2017 Amended Budget $ 12,450,000 $ 12,308,313 $ 141,687 $ 1,403,627 $ 1,545,314 12.6%
2017 YTD Actual as of 6/30 $ 6,141,414 $ 6,510,651 $ (369,237) $ 1,900,393 $ 1,531,156 11.8%
Percent of Budget 49.3% 52.9%
2017 has seen an unusual number (8 to 10) of large claims. Historically the City experiences 3 to 5
unusually large claims in a year. These claims have caused the expenditures in this fund to increase
sharply in the first half of the year. Additionally, the fund reported an inadequate Reserve Balance at the
end of 2016 of just $1.8 million which triggered an inquiry from the State. While the State requires a
Reserve Balance of 16 weeks' expenditures (approximately $3.4 million or 30.8% of annual expenditures),
they will accept the City's lower actuarially determined Reserve requirement of $2.3 million.
This fund began to experience difficulty with rising health care costs several years ago. In response, a
reference -based pricing model was implemented in 2015 which ultimately proved to be unsuccessful.
While the initial appearance of savings seemed to be adequate to reduce premiums to the participating
funds and to employees, ultimately there were no savings and the costs were essentially transfered to
future years instead. Those prior year costs will have to be paid from reserves and cause additional
assessments to participating funds in 2017. Budgeted allocations to vacant positions for healthcare have
been transferred to the fund for the first half of 2017. A similar transfer will be done for the second half of
the year, and if necessary, an unbudgeted surcharge will be imposed. The Insurance Board has been
monitoring the situation and investigating various options to deal with the increasing costs. In the short
term it is anticipated that assessments to participating funds will need to be increased. In the longer term
it is hoped that incentives and new pricing strategies will curb cost increases as the comparison to
externally run insurance plans continues to prove that our self-insured plan continues to be more cost
efficient, despite recent difficulties.
Finance 2017 2nd Quarter Report Page 2
CITY WIDE OVERVIEW
REVENUE COMPARISON
(Budget vs. Actual)
EXPENDITURE COMPARISON
(Budget vs. Actual)
2016
2017
Annual
Actual
%
Amended
Actual
%
as of 6/30
Rec'd
Budget
as of 6/30
Rec'd
General
$ 31,669,810
50.3%
$ 65,177,882
$ 32,078,078
49.2%
Parks and Recreation
2,719,594
49.3%
5,547,225
2,721,491
49.1%
Street & Traffic Operations
2,581,821
51.0%
7,883,540
2,909,958
36.9%
General Government Subtotal
36,971,225
50.3%
78,608,647
37,709,527
48.0%
Other Government Operating Funds
5,362,490
37.5%
15,403,472
5,323,357
34.6%
Government Capital Funds
5,050,425
20.3%
22,394,243
2,125,408
9.5%
Enterprise Operating Funds
24,599,737
47.9%
54,804,822
24,261,012
44.3%
Enterprise Capital Funds
4,566,908
19.1%
18,640,710
5,564,153
29.8%
Internal Service Funds
2,806,594
39.8%
6,188,850
2,078,158
33.6%
Employee Benefit Reserves
5,695,348
48.3%
13,859,500
6,807,542
49.1%
Risk Management Reserve
3,470,130
70.9%
4,078,528
4,603,720
112.9%
Debt Service & Agency Funds
5,487,501
61.5%
8,894,059
5,297,390
59.6%
Total
$ 94,010,358
42.6%
$ 222,872,831
$ 93,770,267
42.1%
EXPENDITURE COMPARISON
(Budget vs. Actual)
Finance 2017 2nd Quarter Report Page 3
2016
2017
Annual
Actual
%
Amended
Actual
%
as of 6/30
Exp'd
Budget
as of 6/30
Exp'd
General
$ 31,824,861
50.5%
$ 65,418,043
$ 32,944,858
50.4%
Parks and Recreation
2,760,525
50.4%
5,583,642
2,729,630
48.9%
Street & Traffic Operations
3,025,517
55.9%
7,518,427
2,725,805
36.3%
General Government Subtotal
37,610,903
50.9%
78,520,112
38,400,293
48.9%
Other Government Operating Funds
5,759,043
39.9%
15,247,168
5,591,301
36.7%
Government Capital Funds
4,564,955
14.9%
27,219,604
4,319,405
15.9%
Enterprise Operating Funds
25,572,688
48.4%
56,617,902
26,824,751
47.4%
Enterprise Capital Funds
4,710,704
14.7%
32,335,306
3,334,522
10.3%
Internal Service Funds
2,586,828
35.6%
6,455,742
1,080,214
16.7%
Employee Benefit Reserves
5,908,157
44.6%
13,928,385
7,629,202
54.8%
Risk Management Reserve
4,134,698
73.0%
3,913,381
2,771,008
70.8%
Debt Service & Agency Funds
4,009,096
44.8%
8,847,465
3,949,263
44.6%
Total
$ 94,857,072
39.7%
$ 243,085,065
$ 93,899,959
38.6%
Finance 2017 2nd Quarter Report Page 3
GENERAL GOVERNMENT REVENUE ANALYSIS
GENERAL GOVERNMENT REVENUES
Status
Sales Tax - Sales tax revenues are running as expected. Collections as of June 30 are generally slightly less
than 50% due to sluggish retail sales in winter months, particularly in years of heavy snowfall which we
experienced this year. Sales tend to pick up in late spring and remain stronger through the end of the
year with the holiday season.
Property Tax - The bulk of property taxes are collected after the statutory due dates of April 30 and
October 31 with slightly higher collections in the first part of the year.
Utility and Franchise Taxes - Overall, telephone taxes continue to decline, with the migration away from
land lines and cell phone "talking minutes" to data which is not currently taxable. Cold winter
temperatures will tend to drive up utility taxes as will a hot summer. It is early to predict the outcome,
but revenues are trending about as expected. Reduced water consumption this spring is being attributed
to the cool temperatures and resulted in reduced in lieu tax of over $100,000. We are watching this
revenue source closely with the expectation that the warm temperatures will affect usage in a positive
way during the 3rd quarter.
State Shared Revenue - This category includes various revenues that are currently collected by the State
and shared with local governments. It is considered to have some associated risk due to the State budget
pressure to increase education funding. Some shared revenues have been reduced by the recent state
budget, notably the Marijuana Excise tax that was capped at a total distribution of $6 million per year
state wide. The City will receive only about $100,000 of this depending on relative sales and population
trends in the future. Earlier estimates would have more than doubled that amount if the limit had been
allowed to grow to the promised level of $20 million by 2020.
Finance 2017 2nd Quarter Report Page 4
2017
Revenues as of 6/30
Amended
Percent
2015
2016
2017
Budget
Rec'd
General Sales Tax $
7,520,655
$ 7,748,857 $
7,847,214
$ 17,023,200
46.1%
Criminal Justice Sales Tax
1,567,934
1,572,683
1,561,128
3,495,880
44.7%
Property Tax
9,123,719
9,354,129
9,561,957
17,069,450
56.0%
Utility & Franchise Taxes
7,201,342
7,738,356
8,228,666
16,871,400
48.8%
Charges for Services
4,792,603
4,983,155
5,033,933
11,003,776
45.7%
State Shared Revenue
1,355,910
1,518,825
1,702,416
3,334,650
51.1%
Other Intergovernmental
491,712
419,800
498,606
958,011
52.0%
Fines and Forfeitures
837,683
876,779
913,029
1,721,110
53.0%
Other Taxes & Fees
909,565
855,292
965,250
1,681,000
57.4%
Transfers from other Funds
298,152
629,797
643,524
1,513,060
42.5%
Licenses and Permits
413,128
510,508
431,667
981,000
44.0%
Other Revenue
322,457
763,044
322,138
2,956,110
10.9%
Total Revenue
34,834,860
36,971,225
37,709,528
78,608,647
48.0%
Status
Sales Tax - Sales tax revenues are running as expected. Collections as of June 30 are generally slightly less
than 50% due to sluggish retail sales in winter months, particularly in years of heavy snowfall which we
experienced this year. Sales tend to pick up in late spring and remain stronger through the end of the
year with the holiday season.
Property Tax - The bulk of property taxes are collected after the statutory due dates of April 30 and
October 31 with slightly higher collections in the first part of the year.
Utility and Franchise Taxes - Overall, telephone taxes continue to decline, with the migration away from
land lines and cell phone "talking minutes" to data which is not currently taxable. Cold winter
temperatures will tend to drive up utility taxes as will a hot summer. It is early to predict the outcome,
but revenues are trending about as expected. Reduced water consumption this spring is being attributed
to the cool temperatures and resulted in reduced in lieu tax of over $100,000. We are watching this
revenue source closely with the expectation that the warm temperatures will affect usage in a positive
way during the 3rd quarter.
State Shared Revenue - This category includes various revenues that are currently collected by the State
and shared with local governments. It is considered to have some associated risk due to the State budget
pressure to increase education funding. Some shared revenues have been reduced by the recent state
budget, notably the Marijuana Excise tax that was capped at a total distribution of $6 million per year
state wide. The City will receive only about $100,000 of this depending on relative sales and population
trends in the future. Earlier estimates would have more than doubled that amount if the limit had been
allowed to grow to the promised level of $20 million by 2020.
Finance 2017 2nd Quarter Report Page 4
7
The state Fire Insurance Premium Tax distribution which many cities use to fund their old Firefighter
pension plans is being discontinued. Fortunately, years ago when the state mandated certain benefit
levels for the old local plans, the City of Yakima levied an optional property tax to fund its plan. That
property tax covers most of the City's expenditures for the plan - about $1.24 million while the
discontinued revenue accounted for $96,000 in 2017. The Firefighter Pension fund has a healthy reserve at
this time and will likely not need additional funding from the General Fund for several years as costs
have been approximately $1.2 million per year and are trending to remain at that level this year.
This category also includes a "high -crime" distribution which is recalculated every year following the
State's fiscal year which ends June 30, based on the number of communities reaching certain thresholds.
Because of the change in eligible recipients, Yakima's allocation increased in the latter half of 2016. We
have not received notice of the new allocations that will be effective in July. If our eligibility continues we
stand to receive approximately $200,000 more than is budgeted.
Other Fees and Taxes - This category consists primarily of Business Licenses and Gambling Taxes and is
currently at 57.4% of budget. Business licenses are due in January each year, so this category tends to be
slightly ahead of budget in the first part of the year.
Other Revenue - This category consists primarily of interest earnings, concession revenue and sale of
assets. Concessions and pool rentals in the Parks fund are naturally low during winter months. Also,
grant and loan proceeds for the Street Light Energy Project are budgeted in this line for almost $2 million
and expected Tiger Mart sales comprise another $400,000. None of those events have occurred yet in
2017.
Finance 2017 2nd Quarter Report Page 5
$16,000,000
$12,000,000
$8,000,000
$4,000,000
$0
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$0
GENERAL GOVERNMENT REVENUES - By Month
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
GENERAL GOVERNMENT REVENUES - Cumulative By Month
2015
2016
2017
Jan $
4,497,986
$ 5,041,214
$ 4,929,751
Feb
4,721,588
5,025,994
4,478,659
Mar
5,504,708
4,977,453
6,583,140
Apr
11,332,602
11,269,682
11,218,434
May
4,855,896
5,909,109
5,052,721
Jun
3,922,536
4,747,772
5,446,822
Jul
4,604,158
4,599,067
—
Aug
4,636,645
4,385,199
—
Sep
5,084,171
5,512,763
—
Oct
10,623,480
10,711,391
—
Nov
4,782,115
4,781,900
—
Dec
5,699,543
7,090,302
—
$
70,265,428
$ 74,051,846
$ 37,709,527
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
GENERAL GOVERNMENT REVENUES - Cumulative By Month
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
■ 2015 ■ 2016 2017
8
Finance 2017 2nd Quarter Report Page 6
2015
2016
2017
Jan
$ 4,497,986
$ 5,041,214
$ 4,929,751
Feb
9,219,574
10,067,208
9,408,410
Mar
14,724,282
15,044,661
15,991,550
Apr
26,056,884
26,314,344
27,209,984
May
30,912,780
32,223,453
32,262,705
Jun
34,835,316
36,971,225
37,709,527
Jul
39,439,473
41,570,292
—
Aug
44,076,119
45,955,491
—
Sep
49,160,290
51,468,253
—
Oct
59,783,769
62,179,644
—
Nov
64,565,884
66,961,545
—
Dec
70,265,428
74,051,847
—
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
■ 2015 ■ 2016 2017
8
Finance 2017 2nd Quarter Report Page 6
GENERAL GOVERNMENT EXPENDITURE ANALYSIS
GENERAL GOVERNMENT EXPENDITURES
Status
NORMAL
Parks & Recreation Fund
2,610,280
2,760,525
2,729,630
2017
48.9%
NORMAL
Expenditures as of 6/30
2,344,960
Amended
Percent
7,518,427
2015
2016
2017
Budget
Exp'd
Police
$ 13,268,816 $
13,637,907 $
14,321,694
$ 28,119,824
50.9%
Fire
6,067,545
6,018,904
6,486,242
13,128,867
49.4%
Transfers To Other Funds
2,250,589
2,846,137
2,808,195
5,352,664
52.5%
Information Technology
1,724,150
1,622,578
1,846,567
3,478,097
53.1%
Code Administration
778,314
881,287
904,454
1,877,343
48.2%
Utility Services
804,526
822,685
819,849
1,852,285
44.3%
Legal
783,411
743,314
779,646
1,703,161
45.8%
Financial Services
738,787
747,271
782,878
1,625,592
48.2%
Municipal Court
626,783
675,725
699,223
1,496,999
46.7%
Indigent Defense
570,208
469,446
517,189
965,500
53.6%
Police Pension
454,335
493,082
459,257
964,997
47.6%
Engineering
388,494
337,494
349,430
753,162
46.4%
Economic Development
412,236
402,105
251,133
743,507
33.8%
Human Resources
306,444
307,992
302,736
724,580
41.8%
Planning
256,367
300,071
283,691
669,715
42.4%
Purchasing
303,307
308,333
273,428
608,463
44.9%
City Clerk / Records
331,982
406,523
227,089
582,429
39.0%
City Hall Facility
307,868
304,644
369,019
521,591
70.7%
City Management
208,883
238,488
202,133
399,805
50.6%
City Council
165,447
165,550
152,723
252,176
60.6%
Intergovernmental
87,596
94,739
96,759
155,287
62.3%
State Examiner
4,209
587
11,526
117,000
9.9%
Position Vacancy Savings
(675,000)
n/a
Total General Fund
30,840,297
31,824,862
32,944,861
65,418,044
50.4%
Status
NORMAL
Parks & Recreation Fund
2,610,280
2,760,525
2,729,630
5,583,642
48.9%
NORMAL
Street & Traffic Ops.
2,344,960
3,025,517
2,725,805
7,518,427
36.3%
NORMAL
1
Total General Government
$ 35,795,537
$ 37,610,904
$ 38,400,296
$ 78,520,113
48.9%
NORMAL
SIGNIFICANT EXPENDITURE VARIANCES
Expenditures overall came in slightly under budget for the first half of the year. City Hall Facility
Maintenance continues to be over budget mostly in insurance charges due to the annual assessment in
the first half of the year and an additional surcharge that was assessed to shore up the Risk Management
Fund Reserve. Overtime is over budget due to the lengthy Council meetings and the winter snow. These
costs should flatten over the year. Police should be realizing staff vacancy savings, but the service unit is
slightly over budget instead due to increased special patrols. An effort is being made to recover funds
through federal partnerships that compensate overtime spent fighting drug related crime. Savings in
other service units were primarily in position vacancies, seasonal variations and cautious spending of
Finance 2017 2nd Quarter Report Page 7
HE
travel and professional services budgets. Position Vacancy Savings were budgeted at $675,000. While
vacancies are definitely being realized, much of the savings has gone to shore up the Risk Management
Fund (please see the discussion in the Financial Status Update). Current activity is being closely
monitored in light of our of replenishing reserves.
Finance 2017 2nd Quarter Report Page 8