HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 11/1/2011 *PLEASE NOTE: Since the Glendale City Council does not take formal action at the
Workshops,Workshop minutes are not approved by the City Council.
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GLENIE
MINUTES OF THE
GLENDALE CITY COUNCIL WORKSHOP SESSION
Council Chambers—Workshop Room
5850 West Glendale Avenue
November 01, 2011
1:30 p.m.
PRESENT: Mayor Elaine M. Scruggs, Vice Mayor Steven E. Frate and
Councilmembers Joyce V. Clark, Yvonne J. Knaack, H. Phillip
Lieberman, and Manuel D. Martinez,
ABSENT: Councilmember Norma S. Alvarez
ALSO PRESENT: Ed Beasley, City Manager; Horatio Skeete, Assistant City Manager; Craig
Tindall, City Attorney; and Pamela Hanna, City Clerk
1. FY 2011-12 FIRST QUARTER GENERAL FUND STATUS REPORT ON
REVENUES AND EXPENDITURES
PRESENTED BY: Sherry M. Schurhammer, Executive Director, Financial Services
Diane Goke, Finance Director
Don Bolton, Assistant Budget Director
This is a request for City Council to review the FY 2011-12 first quarter report on General Fund
(GF) revenues and expenditures. The first quarter report covers July, August, and September of
FY 2011-12. Historically, these three summer months comprise the slowest quarter for revenue
collections, resulting in actuals coming in under budget. We expect the second quarter results to
show collections closer to budget as long as the economy continues to recover gradually.
The FY 2011-12 GF report is consistent with Council's goal of one community that is fiscally
sound by ensuring the city's financial stability and conducting timely reviews of expenditures
and revenues.
General Fund-Summary
GF revenues through the first quarter total $32.4 million. They are $2.7 million (7.7%) below
budget. This difference is attributable to the normal first quarter lag we experience in sales tax
and other revenue sources. Current year collections are $928,000 (2.8%) less than the $33.3
million collected for the same period in FY 2010-11. This decrease over prior year collections
reflects lower state shared revenue distributions that the city knew about and accounted for in the
FY 2011-12 revenue budget.
City sales tax actuals are $12.5 million and are $847,000 (6.3%) below budget. Current year
collections are up $855,000 (7.3%) from the first quarter of FY 2010-11 when city sales tax
collections totaled $11.6 million.
GF expenditures are approximately even with budget through the first quarter of activity.
General Fund Expenditures
While expenditures are $143,000 more than budget, this variance equates to less than one-half of
one percent and is immaterial from a financial standpoint. Further, the minor variance for
salaries and benefits can be attributed to the phased approach to generating the additional
vacancies included as part of the budget balancing plan.
Expenditures Comparison
Budget to Actuals, FY 2011-12
(in 000s)
FY 2011-12 FY 2011-12 Amount
1st Qtr Budget 1St Qtr Actuals Under/(Over) Budget
GF Salaries/Benefits $26,603 $26,758 ($155)
GF Non-Personnel $8,942 $8,930 $12
TOTAL $35,545 $35,688 ($143)
General Fund Revenues
The following table reflects a comparison of the GF revenue budget and collections for the first
three months of FY 2011-12.
YTD Comparison Budget to Actuals, FY 2011-12
(in 000s)
FY 2011-12 FY 2011-12 Percent
1St Qtr Budget 1st Qtr Actuals Over (Under) Budget
City Sales Tax $13,341 $12,494 (6.3%)
State Income Tax $4,834 $4,783 (1.1%)
State Sales Tax $4,338 $4,298 (1%)
State MV In-Lieu $1,911 $1,867 (2.3%)
HURF $2,854 $2,605 (8.7%)
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Primary Prop Tax $213 $213
All Other $7,633 $6,164 (19.2%)
Total $35,124 $32,424 (7.7%)
The following table reflects a comparison of the GF revenue collections for the first quarter of
FY 2011-12 and the same period in FY 2010-11.
YTD Comparison FY2010-11 Actuals Budget to FY 2011-12Actuals
(in 000s)
FY 2010-11 FY 2011-12 Percent
1st Qtr Actuals 1st Qtr Actuals Over (Under) Prior FY
City Sales Tax $11,638 $12,494 7.3%
State Income Tax $5,898 $4,783 (18.9%)
State Sales Tax $4,247 $4,298 1.2%
State MV In-Lieu $2,127 $1,867 (12.2%)
HURF $3,273 $2,605 (20.4%)
Primary Prop Tax $306 $213 (30.4%)
All Other $5,863 $6,164 5.1%
Total $33,352 $32,424 (2.8%)
GF revenue receipts of $32.4 million through the first three months of FY 2011-12 are $2.7
million (7.7%) under budget. This difference is attributable to the normal first quarter lag we
experience in sales tax and other revenue sources.
GF city sales tax collections are $12.5 million and they are $847,000 (6.3%) below budget.
However, current year collections are up $855,000 (7.3%) from the first quarter of FY 2010-11
when city sales tax collections totaled $11.6 million.
State-shared revenue collections are $10.9 million and are $135,000 (1.2%) less than the budget
of $11.1 million. The same period of last fiscal year had state-shared collections of $12.3
million. FY 2011-12's lower state-shared revenue receipts are attributable to the impact of the
2010 census on the city's share as well as reduced state income tax receipts in FY 2010 because
of the economy. These changes were known about and planned for when the FY 2012 revenue
budget was established.
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HURF receipts of$2.6 million are $249,000 (8.7%) below budget for FY 2011-12 and are
20.4% less than the first quarter FY 2010-11 collections of$3.3 million. The decline in receipts
from the same period in the prior fiscal year is the result of two things: the State Legislature's
decision to alter the distribution formula for cities, towns and counties and the continuing high
prices for fuel. HURF 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.
The All Other category, which includes such items as court fees, permit fees, business licenses
and recreation revenue, totals $6.2 million and they are $1.5 million (19.25%) under budget.
This variance with budget is attributable to the uneven receipt of these revenue sources over the
course of a fiscal year. Compared to collections for the same period in the prior FY, actuals are
up 5.1%.
Designated Sales Tax Receipts
Revenue collections for the first quarter of FY 2011-12 for each of the designated sales taxes
show improvement when compared to the first quarter of FY 2010-11.
The transportation sales tax actuals of $5 million are $210,000 or 4.4% ahead of budget, an
improvement from the first quarter of FY 2010-11 when collections totaled $4.3 million and
were $327,000 or 7% less than budget.
YTD Comparison
Budget to Actuals, FY 2011-12
(in 000s)
FY 2011-12 FY 2011-12 Percent
1st Qtr Budget 1St Qtr Actuals Over/(Under)
....................................... ..
Budget
Transportation Sales Tax $4,825 $5,035 4%
The following table shows a comparison of budget to actuals for FY 2011-12 for the two
components of the public safety sales tax.
Receipts for the police component of the public safety sales tax were $3.1 million and were
$25,000 (1%) ahead of budget. Collections for the same period of the prior fiscal year were $2.8
million.
Receipts for the fire component were $1.5 million and were $16,000 (1%) ahead of budget.
Collections for the same period of the prior fiscal year were $1.4 million.
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YTD Comparison
Budget to Actuals, FY 2011-12
(in 000s)
FY 2011-12 FY 2011-12 Amount
Budget Actuals Over/(Under) Budget
Police sales tax $ 3,065 $3,090 1%
Fire sales tax $1,530 $1,546 1%
This is a status report on the General Fund covering the first three months of FY 2011-12. This
is for Council information only. Staff is available to answer any questions regarding the
information provided.
Sherry Schurhammer, Executive Director, Financial Services, said today's report is on the results
of the first three months of activity for the General Fund. She noted overall, they have some
reasons to be optimistic in looking to the future as will be explained in this presentation. She
explained that actual expenditures are even with budget for the first quarter of this FY and are
$2.1 million less than expenditures for the same period last FY. Additionally, on the revenue
side, GF receipts are within about $2.7 million of budget. This result is common for the first
quarter because the summer months typically are the slower months for overall revenue
collections. The $2.7 million revenue variance is less than 2% of the GF total revenue budget
and less than 1/2 of 1% of the total revenue budget across all funds.
Ms. Schurhammer noted some good news about the revenue results was found in the city and
state sales tax receipts. This FY's collections are higher than those for the same time period last
FY. She stated this was good news and will be discussed in more detail later in the presentation.
Staff will carefully watch the revenue collections each month. For now, they will stay the course
and as more information becomes available over the next few months, staff will be prepared to
implement steps if needed.
Don Bolton, Assistant Budget Director, explained a comparison slide of first quarter revenue
collections and the first quarter budget. He stated these budget figures were based on one-
quarter of the annual budget. He noted this was the way staff has presented this information
since they started these quarterly reports several years ago. He said this report covers the
summer months of July, August, and September and are historically the slowest quarter for
revenue collections; therefore the bottom line results seen on this slide are normal and
customary. He noted that for sales taxes, the three months of collections reflect actual retail sales
for the months of June, July and August because sales taxes are reported in the month following
the actual sale.
Diane Goke, Finance Director, stated that a sign of encouragement on the revenue side was the
fact that this FY's city sales collections have grown over the same period of last FY. She
explained the slide shows the first quarter city sales tax results are approximately 7% more than
the first quarter of FY 2011. State sales tax results also reflect growth over the same period in
the prior FY. For this category, the growth is approximately 1%. As a result, staff believes the
state and city sales tax results through the first quarter are a positive signal of the economy's
gradual improvement and an encouraging sign that consumers are spending their dollars on more
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than just essential purchases. Nevertheless, they will carefully watch the city and state
sales tax receipts over the next several months to determine if this encouraging growth is
sustained. She explained the state-shared revenue comparison of$12.3 million in FY 2011 vs.
$10.9 million in FY 2012 is not surprising. She indicated staff was aware the city's distribution
of state shared revenue would decline in FY 2012 and they planned for that situation when the
GF revenue budget was established.
Mayor Scruggs asked staff to explain how the city could be 6.3% below budget on the city's
sales tax actuals with the reason being given as the first quarter is so slow but at the same time
the transportation sales tax which is assessed on the exact same purchases as the city's sales tax
and the overall general fund city's sales tax is 4% above budget. The city was doing really well
on the public safety tax, which is 1% above budget. And of course, the difference is because of
the new four-tenths of a cent sales tax that the voters approved in 2007. The tax does not apply to
food for home consumption which she had fought hard to make it happen that way. So
obviously the collection of sales tax is lower for public safety and transportation which goes on
food for home consumption — it's all based on the exact same purchases as the rest of the sales
tax that goes into the general fund so why is there—in the case of public safety a 7.3% swing and
in the case of transportation a 10.3% swing. How does that happen? She thought there should
be an easy answer.
Ms. Schurhammer noted this issue had been previously explained in the budget book. She stated
they had included about $1.5 million in revenue to the city's sales tax number, general fund,
related to the canvassing effort staff was currently working on.
Mayor Scruggs asked if this was in the budget book that came out in the spring.
Ms. Schurhammer replied yes.
Mayor Scruggs asked Ms. Schurhammer to explain what the canvassing effort was?
Ms. Schurhammer stated staff was doing a business outreach effort to the community to ensure
that businesses operating in the city are licensed. She added this was also to provide businesses
with information.
Mayor Scruggs said staff started that effort and was going to have a presentation on it — a
workshop or two ago and then it didn't happen so — but that still wouldn't accomplish that
because, if you had that — so what you're saying is that million and a half, that the city staff
anticipates collecting through the business outreach program — which is to find who's not
licensed and get them licensed — that was going to go into the general fund city's sales tax
column throughout the entire year as the effort is undertaken, right?
Ms. Schurhammer stated she was correct, although, they had anticipated doing this a little
sooner.
Mayor Scruggs said so would it match then where we see transportation sales tax went up 4%
over budget? Okay, 4% over budget is huge. She didn't think that million and half would be 4%
over budget on city general fund sales tax. Mayor Scruggs said Ms. Schurhammer had said that
the revenues were $32.4 million and staff was aiming for $33.3 million so if the city were going
to do 4% of that. She didn't think 1.5 would be a 4% increase plus make up the 6.3% deficient.
The numbers are so far apart.
Horatio Skeete, Assistant City Manager, noted that was only one component of the
discrepancies. However, the most important component was the way they calculate and put
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together the budget. The transportation sales tax and the public sales tax are relatively easy
to predict and budget for because they are half a percent of all sales activity regardless of the
type of sale. He stated that in the general fund sales tax, the sales tax number was typically
2.2%. He indicated this figure was harder to project for the General Fund for a couple of
reasons. Once, the designated sales taxes receive all of the revenue generated from across the
city whereas this is not the case with the General Fund's portion. That is because the General
Fund portion of the city sales tax generated at the Westgate development and the stadium are
allocated for the corresponding debt service whereas the designated portions generated in those
two locations are not allocated for debt service. Further, he explained that some categories of the
General Fund portion of the city sales tax are higher than the standard 1.2%. Therefore, when
staff puts together the budget plan, they try to accommodate that additional increase by building
the general fund budget slightly bigger than the transportation just half percent sales tax across
the board.
Mayor Scruggs said putting it another way, having the lodging and restaurant taxes actually
offers an opportunity to bring more into the general fund because the transportation public safety
tax is not going to benefit from that going in. So, as much as no one would want to say this, it
sounds like it might have been an overly optimistic projection. So, going into next year, she just
wanted to put a suggestion out for staff to consider. Years ago when the city did budgets under
the previous budget director and previous city manager, the city never budgeted anything higher
than what it had gotten the year before. So, surely, budget and finance has records of what
lodging tax brings in and what restaurant tax brings in. So perhaps going into next year, staff
could just plug that in and don't go any higher than what that is. And surely staff knows the
stadium operations which they've done now for five, six years, so just stay within that. Because
it really looks peculiar the way this is that two are over budget and one is so far under budget.
And at the same time, I'm reading newspaper accounts from around the valley and everybody
else is bragging about how their budgets are coming in so far above budget. Poor Scottsdale
saying, they have this big problem of how to spend an extra $4 million that showed up in their
bank accounts. And you know, the state's bragging about how much more money and
everything so she was really surprised and disappointed when she read our numbers because
she'd been reading positive things from other cities across the valley. She wondered why
Glendale came in this way so if the problem is over-projecting on restaurants and lodging taxes,
it seems like that would be an easy thing to solve before we do next year's budget, if that's the
answer. Because the other numbers are great, it's been a long time since the city's transportation
and public safety tax were above projections. It appears that it's in our forecasting models.
Councilmember Martinez asked if staff did the forecast for the whole year in four quarters. Ms.
Schurhammer replied yes and added that was how they did the revenue budget. Councilmember
Martinez stated this discrepancy happened every year and the explanation was always the same.
He agreed with Mayor Scruggs' comments and suggestion regarding this issue and believes it
should be adjusted to avoid any confusion.
Councilmember Clark asked to comment on the chart on page three, regarding state taxes which
were all down by substantial percentages. She asked if staff projected the state's source of
revenue going down even more in the future. Ms. Schurhammer stated they did not have enough
information to make a projection for FY 13. However, on the income tax number, they will have
a better idea because income tax that was collected in FY 11 will be distributed in FY 13. She
added the preliminary results show that the income tax had gone up in FY 11.
Councilmember Clark asked staff to explain what "all other" sales tax was, for the viewing
public. Ms. Schurhammer explained it encompassed a variety of revenue sources such as
development permit fees, right-of-way permit fees, court revenue, recreation revenue, etc.
Councilmember Clark asked if they were to add all the pluses and subtract all the minuses, what
would the total be in terms of increase for total General Fund revenue. Ms. Schurhammer stated
that the bottom line figure for the actual to actual comparisons shows they were about $928,000
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or about 2.8% under the prior year. She added a lot of that was because of what was
happening in the income tax category.
Mayor Scruggs said the big driver to the city being under budget is city sales tax. Staff hit the
mark exactly on primary property tax and the decreases in the various forms of state shared
revenues. Staff knew the decrease to state share revenues was coming and so they came very
close. She said staff didn't know about HURF because it was a last minute legislative action that
took our HURF revenues away. But the others staff got very close, the big one, the one that staff
missed, really was the city's sales tax. And of course, Councilmember Martinez is saying that if
staff was able to break it out according to what they expected for each quarter, then we wouldn't
always be sitting here holding our breath waiting for that third quarter when we're supposed to
get rich. She believed that it would be helpful to straighten out the lodgings and restaurant
projections but otherwise you hit the mark in income tax. That's why the state is celebrating so
much...their income tax revenues have increased so much. So as Ms. Schurhammer stated the
city would see it in 2013, which will be wonderful but not just right now.
Councilmember Lieberman noted that Councilmember Clark stated her property value went
down, but he thinks the tax bills actually went up. However, this was not based on the property
tax valuations of Glendale. He indicated there were ten other items in the average property tax
that made the bill go up. He stated his property tax went up 12.5%. This was primarily because
of school taxes and not because of Glendale's lower property tax. He believes Glendale's lower
property tax will really hurt them in 2013/14 because it was based on the 2011/12 property
assessments. Ms. Schurhammer explained that property taxes were actually three years behind.
She added when staff worked on the capital improvement plan, they anticipated revenue would
be lower in the upcoming couple of years because of how property assessments affect future
revenue. Councilmember Lieberman indicated his point was that the city was going to suffer in
income down the road in two years and, in the case of property tax, in three years, based on the
current property valuation. He reiterated it was the ten other items on their county sales tax bill
that has increased what they pay, not the property tax valuation in Glendale.
As there were no further comments, Mayor Scruggs adjourned the meeting.
ADJOURNMENT
The meeting was adjourned at 2:05 p.m.
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