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Home My Public Portal About2020-03-10 Item 11CITY COUNCILAGENDA REPORTf<<•€«tr-V,s0CITY OF MILLBRAE621 Magnolia AvenueMillbrae, CA 94030SUBJECT: Accept the Fiscal Year 2019-20 Mid-YearBudget Report and Adopt a ResolutionAmending the 2019-20 Adopted BudgetATTACHMENTS:Attachment 1: ResolutionExhibit A to Resolution: Amendments to 2019-20 BudgetAttachment 2: Power Point PresentationReport No. ^? ^/ 3 ^For Agenda of: March 10, 2020Department: FinanceOriginator: Emily A. Boyd <^^^~Approved::'«..^1/1//Budget ActionYes: X No:~^^ c~Finance Review:REPORT TYPE: ACTION XINFORMATIONALITEM TYPE: CONSENT PUBLIC HEAMNG EXISTEVG BUSINESS NEW BUSINESS XRECOMMENDATION:Staff recommends that the City Council receive a fiscal year 2019-20 budget update and adopt aresolution amending the fiscal year 2019-20 budget.BACKGROUND:This report is intended to provide a mid-year review of the budgeted revenues and expendituresof the City's operating funds.On June 12, 2018, the City Council adopted an Operating and Capital Budget for fiscal year2018-19 and fiscal year 2019-20. On November 12, 2019, the City Council adopted amendmentsto the fiscal year 2019-20 budget resulting in a total operating budget in the amount of $32.1million in the General Fund. This proposal reduces the General Fund operating budget to $31.9million, a net reduction of approximately $200 thousand.ANALYSIS:For all funds not outlined below, revenue and expenses are within expectations for mid-year.Normally, the mid-year analysis would be done in January using year-to-date actuals as ofDecember 31. In "this case, analysis of the budget versus actuals was conducted as of February28, 2020. As of that date, 67% of the fiscal year has passed and actual revenues andexpenditures should be approximately 67% of budget estimates.«.Page 1 of 415217117.1 General FundStaff is pleased to report that revenues and expenditures in the General Fund are balanced despitesignificant fiscal challenges. In light of the recent COVID-19 outbreak, the short term economicoutlook raises concern not only for the macro economy but for the City ofMillbrae's localeconomy. Recent feedback from local businesses indicate that a 50 percent reduction in somerestaurant businesses and a 25 percent decrease in hotel occupancy. Transient Occupancy Tax(TOT) is one of the primary sources of revenue for the City ofMillbrae. Staff will be monitoringthe economic impact over the next few months but caution must be raised that a 25 percentdecline or more in TOT and sales tax could cause significant shortfalls in revenue and futurebudget challenges.General Fund Revenues for fiscal year 2019-20Property tax revenues are 39% of total revenues. To date, all categories of property tax receiptstotaled $8,157,741 or 64% of budget projections of $12,852,033.Property tax in lieu of Vehicle License fees (VLF) was originally budgeted at $2.6 million.However, staff has been informed by the County of San Mateo that VLF fees due to the Countyand cities is $207,943,589 and there is only $165,506,767 available for distribution, leaving afunding shortfall of $42,436,822. The County will ask the State to backfill this shortfall, butthere is no guarantee that will occur. The impact to the City ofMillbrae is $581,561 less revenue.Offsetting this shortfall is an increase in the amount of excess ERAF (Educational RevenueAugmentation Fund) of $362,651, and other projected property tax increases of $11,213,resulting in a net reduction of General Fund revenue of $207,697.The next largest source of revenues is Transient Occupancy Tax (TOT) which has a budget of$8,300,000 or 26% of total revenues. To date, TOT for hotels and short-term residential rentalTOT have receipts totaled $4,994,325 or 60% of budget projections. TOT is typically received inthe month following occupancy and therefore receipts will lag a little behind budget projections.Staff is recommending an increase in TOT of $121,534 which consists primarily of short-termresidential rental TOT collections.Sales and Use Tax, Parking Tax, and Franchise Fees, together have a budget of $4,564,797, or14% of total revenues. To date, $1,906,030, or 42%, has been received. Sales tax receipts lag 2-3months behind sales, and a large portion of Franchise Fees are not received until the 4th quarterof the fiscal year. Staff is recommending a minor adjustment to these revenue budgets in theamount of $27,262.Collection of Business Licenses has improved, and staff recommends an increase to this budgetof $29,910. Interest Income, Gain on Sales of Investments, and Rents and Concessions togetherresult in an increase to General Fund revenues of $84,652.The One Bay Area Grant (OBAG) of $387,000 is being deferred until next fiscal year whenconstruction of the project is expected to take place. A TDA Grant of $260,000 was added in thisfiscal year, resulting in a net reduction in General Fund revenue of $127,000.Service Charge revenues are expected to increase by $36,317.Page 2 of 415217117.1 Operating Transfers-In are reduced by $193,389, which includes a correction to the RecognizedObligation Payment Schedule (ROPS) transfer of $30,000 (administrative funds from theSuccess Agency to the Redevelopment Agency), and a cancellation of an OPEB (Other PostEmployment Benefit) transfer of $163,389. The OPEB transfer was used in the original budget tobalance the budget but is not needed at this time. Funds will remain invested in the City's OPEBtrust and will be available in future years.All the above total a projected reduction to General Fund Revenues of $228,411.General Fund Expenses:The San Mateo County Sheriffs office has advised us of an overpayment of the UnfundedActuarial Liability (UAL) for pensions for police officers. In fiscal year 2019-20, this resulted ina refund to the City of $1,058,435. That credit is offset by an increase of $304,200 for acorrection to the OPEB for Police and Fire resulting from a data entry error during the priorbudget review.Services and Supplies costs across all departments are projected to increase by $132,000 due toexpenses coming in higher than budget estimates. All together this is a net reduction in GeneralFund Expenditures of $622,235.Special Projects in the General Fund include an amendment to the BID (Business ImprovementDistrict) contract, and rollforward of capital budgets for Development Impact Fees, FinanceSystem Upgrade, Information Technology Upgrades and the Master Fees Study. These itemstotal $393,825.General Fund Summary:Budget projections as outlined above result in a net change to the General Fund budget of zero asfollows:Reduction in Revenue is a loss $(228,411)Reduction in Expenditures is a gain 622,235Increase in Special Projects is a loss f393,825)Net Change $ -0-Other FundsAll other funds are within budget targets for revenues and expenditures. Below are somerecommended adjustmentsCommunity Center FundThe City sold land to BART in accordance with Resolution No. 19-66 for $2,250,000. Thesefunds will be used in the further work on the Community Center.Page 3 of 415217117.1 Measure W FundOriginal budget estimates for Sales and Use Taxes were low and a budget amendment of$140,000 is recommended.Sewer FundSewer Fund expenditures are projected to increase by $25,000 in personnel costs due toadditional support needed for the Tyler Financial software conversion, and $295,000 in servicesand supplies for collections, the treatment plant, and pretreatment.Sewer Modernization FundSewer Modernization Fund revenues are expected to increase by $65,000 for interest incomereceived.FISCAL IMPACT:As a result of this action, the General Fund Operating Budget is anticipated to decrease from$32.1 million to $31.9 million. The reduction in revenues is matched by a net reduction inexpenditures.For other funds with recommended increases in operating budget, sufficient operating revenueswere previously forecasted in the adopted budget and are available to cover the increasedappropriations.COUNCIL ACTION:Staff recommends that the City Council receive a fiscal year 2019-20 budget update and adopt aresolution amending the fiscal year 2019-20 budget.Page 4 of 415217117.1\ CITY OF MILLBRAECOUNTY OF SAN MATEOSTATE OF CALIFORNIA***RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MILLBRAEAUTHORIZING BUDGET ADJUSTMENTS FOR FISCAL YEAR 2019-20WHEREAS, on June 12, 2018, the City Council (Council) adopted a budget forthe City ofMillbrae (City) for fiscal year 2018-19 and fiscal year 2019-20; andWHEREAS, on June 22, 2019, Council received a Mid-Year Budget Updateincluding budget adjustments for fiscal year 2018-19; andWHEREAS, on November 12, 2019, Council received a Preliminary Year EndBudget Update for fiscal year 2018-19 and adopted budget adjustments; andWHEREAS, on March 10, 2020, Council received a Mid-Year Budget Updatefor fiscal year 2019-20 and staff has recommended modifications to the adopted andamended budget; andWHEREAS, the City provides services such as plan check, developmentservices, and recreation contract classes for which revenues are collected and services arecontracted out and those services may fluctuate during a fiscal year and an increase inrevenue and appropriations will not have an impact on the City's reserves as revenuesincreases will be the same as or greater than increases in expenses.NOW, THEREFORE BE IT RESOLVED THAT THE CITY COUNCIL OFTHE CITY OF MILLBRAE authorizes updates to the fiscal year 2019-20 budget asoutlined in Exhibit A to this resolution;REGULARLY PASSED AND ADOPTED this 10th day of March 2020.MayorATTEST:City Clerk Exhibit A to Resolution:Amendments to City ofMUlbrae Operating and Capital Budget for 2019-20General FundRevenueProperty TaxSales & Use TaxFranchise FeesTransient Occupancy Tax (TOT or Hotel Tax)Business LicensesInterest IncomeGains on Sales of InvestmentsRents and ConcessionGrantsService ChargesOperating Tranfser InTotal Revenue Increases (Reductions)Operating ExpenseSalary & BenefitsServices & SuppliesTotal Expense Increases (Reductions)Special Project ExpenseSpecial Project ExpenseTotal Capital & Special Project Expense Increases (Reductions)Amount(207,697)5,79621,466121,53429,91026,62030,60027,432(127,000)36,317(193,389)(228,411)Amount(754,235)132,000(622,235)Amount393,825393,825NET CHANGE TO GENERAL FUNDGeneral Fund Revenues (Amended November 12,2019)General Fund Operating Expenses (Amended November 12, 2019)General Fund Revenues (Amended March 10,2020)General Fund Operating Expenses (Amended March 10, 2020)Operating Surplus (Deficit)32,139,632(32,139,632)31,911,222(31,911,222)0Other FundsCommunity Center Capital ProjectRevenue:Sale of PropertyIncrease(Decrease)2,250,000Z:\Budget\201920\MidYear\202002MidYearResolutionExhibitA (version 3) Reso Attachment (2) Expenditures:Capital Outlay: BuildingsIncrease(Decrease)1,900,000Revenue:Sales and Use TaxMeasure WIncrease(Decrease)140,000Expenditures:Personnel CostsServices and SuppliesSewer Sanitation FundIncrease(Decrease)25,000295,000Revenue:Interest IncomeSewer ModernizationIncrease(Decrease)65,000Expenditures:Services and SuppliesWater FundIncrease(Decrease)125,000Z:\Budget\201920\MidYear\202002MidYearResolutionExhibitA (version 3) Reso Attachment (2) 2/28/2020City of MillbraeMid-Year Update for Fiscal Year 2019-20Operating BudgetMarch 10,20201\OverviewMILLBRAEfiscal Year 2019-20 Mid-Year•Proposed Adjustments to Operating Budget for FiscalYear 2019-2021 2/28/2020\3Fiscal Year 2019-20Mid-Yeor-General Fund RevenuesAs of 2-28-2014.0CC.OOO! 2,000.000lO.OOO.tXOacco.cco6.000.CXX)4.000.CCO2.0CO.CCO63%f-ropQHy 'ia/Sales T.Transient Occupancy Tij..' A!; other Pek/enuesBudge! • ActuaSPercentages represent amount collected year-to-date.Fiscal Year 2019-20Mid-Year-General Fund Revenues•> Revenues Decline by $228,41 1•Property Tax $(207,697)• Sales and Use Taxes $ 5,796:ranchise Fees $ 21,466Transient Occupancy Tax (TOT) $ 121,534Business Licenses $ 29,910Use of Money and Property $ 84,652Grants $(127,000)Service Charges $ 36,317Operating Transfer In $(193,389)42