CITY COUNCIL: Fiscal Year 2011/1012 Second Quarter Financial Report

CITY OF CARMEL-BY-THE-SEA
STAFF REPORT

TO: MAYOR McCLOUD AND COUNCIL MEMBERS
FROM: JASON STILWELL, CITY ADMINISTRATOR
DATE: FEBRUARY 7, 2012
SUBJECT: FISCAL YEAR 2011-2012 SECOND QUARTER FINANCIAL REPORT.

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BACKGROUND
The second quarter financial report is presented annually to the City Council to provide a mid-year assessment of City revenue and spending. At this time no adjustments to the budget are being recommended. Attached is a budget status report for the first half of this fiscal year.

In summary both revenues and expenditures are closely aligned with budget estimates. Overall at 50% of the year revenues are at 47% of budget and expenditures are at 50% of budget. Specific variances and key issues are described below.

Revenue
Revenue received through the first part of this fiscal year is slightly below budget projections. This negative variance is primarily due to timing; a timing variance is when revenue is still projected to materialize but at a different time than projected in the budget. Staff does not recommend recognizing additional revenue estimates at this time.

Property tax has a positive timing variance. Property taxes are paid in December and April and some estimating is always required of how much of the taxes will be paid in each installment. We anticipate the second installment being slightly below budget with the overall revenue for the year meeting budget estimates.

Transient Occupancy Tax is below budget at the mid-point of the fiscal year. Economic recovery is slow. Occupancy rates remain stable but there is downward pressure on room prices from online sales. The holiday season revenue has yet to be received and indications are that the season's occupancy and rates were strong. A primary concern for Transient Occupancy Tax revenue is the temporary closure of the La Playa hotel. Although many visitors will likely stay at other inns within the Village, the loss of the
largest Inn creates the distinct possibility that Transient Occupancy Tax revenue will fall short of budget estimates. This revenue source will have to be monitored closely during the second half of the fiscal year.

Sales tax revenues have a negative variance through the first half of the fiscal year. The variance is both a timing variance and a true variance. Adjusting for the timing variance, sales tax revenues are at approximately 49% of budget at the mid-point of the fiscal year.

Receipts for first quarter sales were 8.0% higher than the first quarter of fiscal year 2010-2011. This year's budget assumed a seven percent growth in sales tax revenue from the prior fiscal year. We anticipate strong sales tax receipts from the holiday period but broader trends show a slowing of the sales tax growth after the first of the year. At this point we project sales tax revenues will meet the budget estimates.

Revenues other than the big three are generally tracking budget. The primary negative variance is transfers from other funds. These transfers will be completed during the second half of the fiscal year as required, based on project costs, and as revenue becomes available.

Expenditures
Expenditures incurred during the first half of the fiscal year match budget estimates. This apparent alignment presents areas of potential concern upon closer analysis.

Expenditures are balanced despite departmental staffing vacancies. Library, Police, and Administration have positive variances as a result of salary savings.

Opposing these savings are projected over expenditures in Legal, Administrative Services, and Ambulance.

• Legal has significant expenditures, beyond what was included in the adopted budget, for litigation costs and preservation of the City's ambulance operation rights. The year end estimate is that Legal will be over budget by $100,000.

• Ambulance has significant transition costs that were not included in the budget. These transition costs may be partially absorbed in the budget during the second half of the year as the ambulance function continues to operate with staffmg efficiencies.

• Administrative Services has a true variance of $33,000 in liability insurance and risk management premiums. The increase in premiums was not fully accounted for in the budget.

The operating departments overall are managing their budgets and expenditures. Information Services, Community Planning and Building, Public Works, and Forest Parks and Beach all are closely monitoring their budgets and are managing costs to end the fiscal year within appropriation limits.

City of Carmel-by-the-Sea
Second Quarter Financial Report
Fiscal Year 2011-2012

YTD Actual--Annual Budget--Budget Remaining-50% of year

Revenue
Property Tax 2,396,946 4,200,000 1,803,054 57%
Transient occupancy Tax 1,973,214 4,210,000 2,236,786 47%
Sales Tax 772,580 1,870,000 1,097,420 41%
Business license Tax 451,500 500,000 48,500 90%
Fees and Permits 202,129 : 425,000 222,871 48%
Interest, Rent, Parking Lot 128,199 l 263,300 135,101 49%
Franchise Fees 86,492 504,608 418,116 17%
Intergovernmental 179,279 382,800 203,521 47%
Traffic Safety 53,717 250,000 196,283 21%
Charges for Service 21,360 49,200 27,840 43%
Court Fines 5,074 35,200 30,126 14%
Grants 181,863 352,158 170,295 52%
Miscellaneous 26,509 100,600 74,091 26%
Transfers 167,689 1,059,080 891,391 16%
Total Revenuet 6,646,551 14,201,946 7,555,395 47%

Expenditures
City Council 76,017 106,574 30,557 71%
Legal 152,121 204,333 52,212 74%
Engineering 900 10,800 9,900 8%
Treasurer 1,000 2,400 1,400 42%
Administration 382,492 930,122 547,630 41%
Information Services 150,288 306,003 155,715 49%
Administrative Services 464,840 638,660 173,820 73%
Community Planning & Building 280,962 560,472 279,510 50%
Facilities Maintenance 243,339 471,364 228,025 52%
Fire 884,996 1,769,740 884,744 50%
Ambulance 225,000 ' 250,000 : 25,000 90%
Police 1,330,713 3,069,774 1,739,061 43%
Public Works 547,962 1,100,423 552,461 50%
Forest, Parks & Beach 210,613 484,918 274,305 43%
Sunset 325,000 650,000 325,000 50%
Community Services 47,607 124,833 77,226 38%
Harrison Memorial Library 433,476 ; 998,173 564,697 43%
Marketing & Economic Revitalization 179,787 324,000 144,213 55%
Grants 74,834 158,350 83,516 47%
Capital Outlay 263,871 3.59,370 95,499 73%
Capital Improvement 408,863 1,126,538 717,675 36%
Property Tax Assessments 31,289 32,600 1,311 96%
Debt Service 422,211 533,515 111,304 79%
Benefit Liability 13,999 56,650 42,651 25%
Salary Savings (80,000} (80,000} 0%
Total Expenditures 7,152,182 14,189,612 7,037,430 50%