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HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 5/19/2009 *PLEASE NOTE: Since the Glendale City Council does not take formal action at the Workshops,Workshop minutes are not approved by the City Council. 'ep Ill GLENIE MINUTES OF THE GLENDALE CITY COUNCIL WORKSHOP SESSION Council Chambers—Workshop Room 5850 West Glendale Avenue May 19, 2009 1:30 p.m. PRESENT: Mayor Elaine M. Scruggs, Vice Mayor Manuel D. Martinez, and Councilmembers Joyce V. Clark, Steven E. Frate, David M. Goulet, Yvonne J. Knaack, and H. Phillip Lieberman ALSO PRESENT: Pam Kavanaugh, Assistant City Manager; Nick DiPiazza, Deputy City Attorney; and Pamela Hanna, City Clerk WORKSHOP SESSION 1. FY 2008-09 THIRD QUARTER GENERAL FUND STATUS REPORT ON REVENUES AND EXPENDITURES CITY STAFF PRESENTING THIS ITEM: Horatio Skeete, Deputy City Manager and Sherry Schurhammer, Management and Budget Director This is a request for City Council to review the FY 2008-09 third quarter report on General Fund (GF) revenues and expenditures. The third quarter report covers July 2008 through March 2009. The FY 2008-09 GF third quarter report is consistent with the Council's goal of ensuring the city's financial stability by conducting timely reviews of expenditures and revenues. General Fund The bottom line for the GF through the third quarter of FY 2008-09 is as follows: o GF revenues are $15.3 million or(11%)below budget. o GF expenditures are $14.3 million or (10%)below budget. We agree with the vast majority of economists who expect the economic downturn to bottom out during calendar year 2009. Recovery to more normal levels of growth is expected to occur over a couple of years. Signs of the economy beginning to stabilize are found in the following chart that shows by quarter the revenue collected this FY and last FY. o There was a$6.9 million or 14.5% decline from the 2nd quarter of last FY to the 2"d quarter of this FY. There was a $5.7 million or 12.5% decline from the 3`d quarter of last FY to the 3`d quarter of this FY, o More encouraging is the lessening of the rate of decline between quarters in the current FY. There was a $620,000 or 1.5% decline from the 2"a quarter to the 3`d quarter in the current FY; this is in contrast to the $1.5 million or 3.7%decline from the 1St to the 2"d quarter of the current FY. o These facts are an indication that the economy is close to bottoming out, a necessary turning point from which the economy can then begin strengthening and moving toward more normal levels of growth. Actual Revenues (in 000s) $160,000 $140,000 $120,000 AA' `$100,000i� C �+ der Q $80,000 $47,.76 $60,000 140,860 $40,000 $20,000 $44,434 $42,411 $0 FY 2007-08 FY 2008-09 0 First Quarter o Second Quarter Third Quarter 2 General Fund Revenues The following table reflects a comparison of the GF revenue budget and GF actual collections for FY 2008-09. YTD Comparison Budget to Actuals, FY 2008-09 (in 000s) 34 h '- A RT(; FY 2008-09 FY 2008-09 Percent 1 Over (Under) H4r r f 'r,h� YTD Budget YTD Actuals k 3 Budget City Sales Tax $48,670 $39,959 (17.9%) State Income Tax $26,016 $27,200 4.6% State Sales Tax $17,625 $15,057 (14.6%) State MV In-Lieu $7,532 $6,532 (13.3%) HURF $13,212 $10,709 (18.9%) Primary Prop Tax $3,064 $2,507 (18.2%) All Other $22,715 $21,547 (5.1%) Total $138,834 $123,511 (11%) GF revenue receipts through the third quarter of FY 2008-09 are $15.3 million under budget. GF city sales tax collections are $39.9 million. This amount is $8.7 million under budget. State-shared revenue collections are $48.8 million. This amount is $2.4 million under budget. I-IURF revenues are commonly called the gas tax even though there are several other transportation-related fees that comprise this revenue source. This revenue source is based primarily on the volume of fuel sold rather than the price of fuel. IIURF receipts are $2.5 million under budget. Property tax collections are $2.5 million. This amount is $557,000 under budget. The All Other category which includes such items as court fees, permit fees, business licenses, and recreation revenue is $1.2 million under budget. 3 The following table is a comparison of the third quarter actual revenues between FY 2007-08 and FY 2008-09. This comparison is important because it indicates changes in actual collections between fiscal years. Comparison of FY 2007-08 to FY 2008-09 Aetuals (in 000s) 1 } 1 FY 2008-09 '4 *r rit FY 2007-08 YTD Actuals Percent Change YTD Actuals From FY 2007-08 City Sales Tax $47,525 $39,959 (16%) State Income Tax $25,583 $27,200 6.3% State Sales Tax $16,712 $15,057 (10%) State MV In-Lieu $7,153 $6,532 (8.7%) IIURF $12,408 $10,709 (13.7%) Primary Prop Tax $2,416 $2,507 3.8% All Other $26,397 $21,547 (18.4%) 1 ; = $138,194 $123,511 (10.6%) .i� q S 41L.AV;L.r :i c tzraat inr urz,_ 2, GF revenue receipts through the third quarter of FY 2008-09 are $14.7 million or 10.6% less than the same period in the prior FY. City sales tax collections of $40 million are $7.6 million or 16% less than the $47.5 million collected through the third quarter of the prior FY. State-shared revenue collections, which include income tax, state sales tax, and motor vehicle in- lieu receipts, of $48.8 million are $659,000 less than the $49.4 million collected through the third quarter of the prior FY. Property tax is $91,000 ahead of last year's collections. The All Other category is $4.9 million less than last year's collections primarily due to a decrease in Development Services revenues. 4 General Find Expenditures The FY 2008-09 budget expenditures and actuals for the GF operating and pay-as-you-go (PAYGO) capital expenditures are shown in the following table. Expenditures Comparison Budget to Actuals, FY 2008-09 (in 000s) `..tea Kt FY 2008-09 FY 2008-09 Amount ff'ea ,i.Y.iSar a s.e YTD Budget YTD Actuals Under/(Over) - � " Budget GF Salaries/Benefits $95,854 $93,285 $2,569 GF Non-Personnel $41,168 $32,963 $8,205 GF Debt Service(leases) $2,152 $1,136 $1,016 PAYGO Capital $5,036 $2,495 $2,541 TOTAL $144,210 $129,879 $14,331 Overall, the third quarter actual expenditures are $14.3 million or 10% less than the amount budgeted. Designated Sales Tax Receipts At the end of the third quarter, the transportation sales tax budget to actuals comparison shows that this fund collected $2.4 million less than the amount budgeted. YTD Comparison Budget to Actuals, FY 2008-09 (in 000s) "^;; FY 2008-09 FY 2008-09 Percent ft y : ,` Budget Actuals Over/(Under) '4 a oLt. budget Transportation $18,639 $16,223 (13%) Sales Tax 5 The following table shows a comparison of budget to actuals for FY 2008-09 for the two components of the public safety sales tax. YTD Comparison Budget to Actuals, FY 2008-09 (in 000s) FY 2008-09 FY 2008-09 Amount $ 4 4;- l;t ' i " ' Budget Actuals Over/(Under) Budget Police sales tax $ 11,938 $9,613 (19%) Fire sales tax $5,899 $4,801 (19%) At the end of third quarter, the police component of the public safety sales tax was $2.3 million less than the budget and fire was $1.1 million less than the budget. Similar to the General Fund, the expenditures of these funds are being paced to match the revenue levels. This is a status report on the General Fund covering the third quarter of FY 2008-09. No Council guidance is requested on this report. Ms. Pam Kavanaugh, Assistant City Manager, introduced the item. Mr. Horatio Skeete, Deputy City Manager, provided a summary of the third quarter General Fund report. He indicated they are noticing small indicators nationwide that the economic cycle is bottoming out. He stated job losses were not as great as previous months and there have been signs of the home real estate market beginning to pick up. He said unemployment had climbed to almost 9% although in Arizona the rate was a more moderate 7.2%. He noted it was important to mention that even in this bad economy, jobs are still being added with employers across the county hiring 4.3 million workers in February 2009. Additionally, in April, Wal-Mart reported a 5% increase in sales activity. He reported on the government's efforts in reducing home mortgage interest rates that have resulted in multiple bids on homes in some areas of the county including Arizona. While these signs are positive, he said it was important to remember that this economic recession is unlikely to see a rapid recovery as many economists expect a gradual turnaround over a few years. Mayor Scruggs commented on a GPEC program on Channel 3 that included an economist who discussed Arizona's reliance on the home building industry. She said the economist alleged the Arizona building industry accounted for 9.3% of the state's jobs while other economists on the panel said the proportion was closer to 15%. The economists noted that Arizona will always have difficulties until home construction in Arizona stabilizes at no more than 5% of the economy. She said we are much too dependent on that industry. 6 Mayor Scruggs asked what Glendale had accomplished lately in response to Mr. Skeete's assertion that Glendale continues to diversify its economic base. Mr. Skeete explained that the economic development department was constantly assessing and trying to fill the vacant commercial office spaces and bring jobs into the area. These efforts encourage job growth and job creation. He said staff was laying the groundwork so the city can respond quickly when opportunities arise and noted that job creation can occur more quickly in those areas that are already zoned and have the appropriate infrastructure in place. Mayor Scruggs commented that a better statement would have been Glendale continues to prepare for future diversification of their economic base. She said Glendale was making plans and positioning itself to diversify its economic base and bring more jobs into the area. Mr. Skeete agreed. Ms. Sherry Schurhammer, Management and Budget Director, summarized a graph shown on a slide that compared, by quarter, GF revenue collections for the current and past fiscal year. She said the current FY's third quarter collections were very close to the amount collected in the second quarter of this FY, with the difference being only about $620,000 or 1.5%. She noted this was in contrast to the difference from the first to the second quarter. She said these numbers were an indication the economy was close to a turning point because they were not seeing the same level of decline as was the case earlier in the year. Ms. Schurhammer overall General Fund revenue in the current fiscal year was about 11% or $15.3 million below budget. She added expenditures were about 10% or $14.3 million less than budgeted and included expenditure management measures that were implemented earlier this fiscal year. She explained that those savings were helping to offset the shortage on the revenue side. She said staff will continue to closely monitor revenue and expenditures in future months and will return with the fiscal year end report after the summer break. Councilmember Clark said the Council had approved a certain figure to create a balanced budget for FY 2008 and suspects those revenues came in short since the economy had begun its decline in 2007. She asked Ms. Schurhammer for the amount the city was short in fiscal year 2008. Ms. Schurhammer said she believed FY 2007 GF revenues were about 2% or $4 million short. She said expenditure savings made up for that shortage. Councilmember Clark said the city was at $15.3 million less in revenue and asked how they were going to make-up the $1 million they were still short. Ms. Schurhammer said the difference could be made up in several different ways such as using the fund balance or generating more savings than previously anticipated. She stated it would be hard to have a definite answer at the moment since many variables can come into play. Councilmember Clark asked if these were the only options. Ms. Schurhammer noted there had been more vacancies this year than previously anticipated, which would help with generating more savings. Mr. Skeete explained other measures that could be used. He stated one measure they had traditionally used was to leave purchase orders open until the end of June. He noted he had recently sent out a memo stating purchase orders will be closed off at the beginning of June. He added any expenditure after that date will be charged to next year's budget. Councilmember Lieberman remarked staff had not provided actual numbers for 3rd quarter against 3rd quarter figures. Ms. Schurhammer stated the chart on page 2 provided the figures by quarter. Councilmember Lieberman questioned the 6.3% increase in income tax revenue (over budget) in FY 2009 when businesses were telling him their sales were down 30% to 34%. Ms. 7 Schurhammer explained that income tax lags by two years and the income tax revenue distributed to the cities in FY 2009 reflected the economy before the recession took hold. She said the city is receiving more this fiscal year than originally anticipated because there was a one-time adjustment approved by the state legislature that is included in this fiscal year's distribution. She said it was unknown whether the one-time adjustment would be received when the FY 2009 revenue budget was created. Ms. Schurhammer commented that state income tax is included in state shared revenue and is the largest component of the three revenue sources that comprise state-shared revenue. Councilmember Lieberman had comparison budget questions on pages four and five. Ms. Schurhammer noted that the chart on page four reflected the comparison of revenue collected last year. Councilmember Lieberman stated he was comparing the lack of income that was directly in proportion to the drop in actual expenditures. He explained his point was that in one instance, they had $14.7 million less income and in the other, they had spent $14.3 million less than was budgeted. He said the comparison was in line with the drop in income. Mayor Scruggs had a question on page 3. Mayor Scruggs questioned staff regarding the difference between city sales tax actual versus projected. She remarked it appeared they had missed their General Fund city sales tax collections by $8.7 million; however, the state shared revenue was only $2.4 million off from projection. She asked why they had missed their city's sales tax revenue projection by so much. Ms. Schurhammer explained their projections were conservative and some of the state shared revenue disbursements were uncertain when the budget was created. had not been included in the had been uncertain at the time the budget was created. Mayor Scruggs questioned staff regarding the city's budget for the legal and consultant expenses incurred with the Coyotes and Tohono O'odam Nation legal issues. Ms. Schurhammer explained the expenses for consultants were in the Intergovernmental Department budget and the expenses for legal fees in the City Attorney Department Special Project budget. Mayor Scruggs inquired how much more had these fees gone up over what was originally budgeted? Ms. Schurhammer stated she did not know have that information. Mayor Scruggs commented she believed that Special Project budget had been slashed quite bit Mayor Scruggs asked for detailed information on what was originally programmed for consulting and legal fees and what it was actually costing the city. Additionally, she would like to know the increase and from where the funding was coming. She stated she did not understand how this process was being prepared without any Council action, attention or review. Mr. Skeete stated they will bring the information to their attention. Mayor Scruggs asked for any other comments. Vice Mayor Martinez commented that even through the economy still had problems, it seemed by the figures presented to them, that things have gotten a little better. He explained he had talked to business owners who had made a profit for the first time in a long time. He noted that this news was encouraging. ADJOURNMENT 8 The meeting was adjourned at 2:05 p.m. 9