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Home My WebLink About19 - Year -End FY 2019-20 and FY 2020-21 Q1 Financial Report - PowerPointNovember 24, 2 Item No. 19 Fiscal Year 2019-20 Year End and Fiscal Year 2020-21 Quarter 1 Budget Update City of Newport Beach City Council Meeting November 24, 2020 Economic Overview • Economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the outbreak. • For California and the nation, job losses were largest for low-wage sectors, with leisure and hospitality losing around 40 percent of its total jobs over one quarter. • Citywide hotel occupancy is currently averaging about 40 percent a week, when at this time of the year, occupancy is typically about 85 percent. • Newport Beach restaurants with outdoor patios are doing well, although overall volume is down with indoor dining off limits for now. General Fund Revenues • Uncertainty of how long the presence of the virus would disrupt the U.S. economy made forecasting revenues particularly challenging. • FY 2019-20 General Fund revenues were reduced by $13 million and provisions were made to realize at least $13 million in expenditure savings. • General Fund revenues ended FY 2019-20 at $229.8 million, $10.9 million or 5% higher than the projected budget in almost all categories. • General Fund revenues for 2020) are likely to perform at to more favorable economic developed in April. the first quarter of FY 2020-21 (July -September or higher than their projected levels this year due conditions than anticipated when the budget was • Higher property tax valuations within the City are also expected. General Fund Revenues FY 2019-20 Property Taxes Sales Tax Transient Occupancy Tax Other Taxes Service Fees & Charges Parking Revenue Licenses & Permits Property I ncome Fines & Penalties Intergovernmental Revenues Investment Earnings Miscellaneous Revenues 108, 365, 261 38, 502, 470 24, 697, 446 11, 327, 777 20, 300, 379 4,935,024 5,071,609 4,679,578 3, 454, 660 3,922,453 114841828 3,071,110 112, 723, 626 34, 411, 405 19, 062, 031 10, 841,170 18, 820, 002 514421379 4,567,521 3,493,784 3,089,260 2,854,873 155055673 25252,529 113, 313, 535 36, 232, 969 20, 847, 883 11, 846, 082 20, 913, 897 5,529,753 477527252 4,619,106 376597011 3,140, 547 112951547 3,759,851 589,909 1,821,564 1)785,852 1, 004, 912 2,093,895 871374 1841731 1,125, 322 569,751 285,674 -210,126 1,507,322 0.5% 5.3% 9.4% 9.3% 11.1% 1.6% 4.0% 32.2% 18.4% 10.0% -14.0% 66.9% Total Revenues $22%812,595 $21990649253 $22999109433 $1098469180 4.95% General Fund Revenues FY 2020-21 Property Taxes Sales Tax Transient Occupancy Tax Other Taxes Service Fees & Charges Parking Revenue Licenses & Permits Property I ncome Fines & Penalties Intergovernmental Revenues Investment Earnings Miscellaneous Revenues $119591353 3,318,814 4, 959,179 2,100, 682 7, 385, 417 25211,940 1)266,680 1, 234, 287 1,121,961 310,547 295,212 372,814 $11775087227 28, 690, 831 6, 434,115 956525973 17, 653, 465 4,621,160 4)239,333 3, 892, 635 3, 681, 031 257975691 1,112, 200 1,022,350 $2)070)771 2,376,040 495,918 156805546 650305902 17769,260 1,012,047 170147606 8971397 1205235 58,039 2,170 $1)777)845 3,200,436 27 267, 092 118151674 417905281 2,593,300 1,130, 791 112131468 818, 067 646751 390,533 75,076 -$2921926 824,396 1,771,174 135,128 -152405621 824,040 118744 198, 862 -79)330 526,516 332Y494 72,906 -14.1% 34.7% 357.2% 8.0% -20.6% 46.6% 11.7% 19.6% -8.8% 437.9% 572.9% 3359.7% Total Revenues $26,5367886 $20153065011 $1775277931 $2077197314 $371917383 18.2% COVID=1 9 Impacts to Other Funds • Other funds that are subject to Gas Tax, Measure M, SB1 Rehabilitation Account) and the revenue volatility include Tidelands, RMRA (Road Maintenance and Water and Wastewater funds. • An analysis of the budget performance through the first quarter reveals no budget adjustments are currently necessary. • Staff will continue to monitor these and all funds on a monthly basis. General Fund Expenditures • General Fund expenditures ended FY 2019-20 at $211.1 million, $3.9 million or 1.8% lower than the projected budget in almost all categories. •Actual expenditures ended the year lower than budgeted due to hiring freeze and the $13.8 million budget reduction. • With 25% of the year complete, FY 2020-21 General Fund expenditures are at 21.6% of the budget and are generally on -track. Expenditures through the first quarter of the year are $3.4 million, or 1.5% lower than projected. General Fund Expenditures FY 2019-20 Salary & Benefits $142)3151972 $14513147954 $14477067363 -$608,591 -0.4% Contract Services 21, 318, 540 22, 771, 477 21, 6131242 -111581235 -5.1% Maintenance & Repair 9, 469,175 858345182 854647356 -3691826 -4.2% Supplies & Materials 4, 427, 660 378957994 377157045 -1807949 -4.6% Utilities 2, 971, 221 313285840 3,107, 708 -2211132 -6.6% General Expenses 2, 209, 597 2,104, 868 179707506 -1347362 -6.4% Travel & Training 826,174 7857467 6507609 -1347858 -17.2% Grant Operating 663,825 1,120, 502 884, 466 -236)036 -21.1% Internal Svc Charge 22, 393, 942 255160,173 241 911, 535 -2485638 -1.0% Risk Management 7607133 8485023 4307207 -4177816 -49.3% Capital Expenditures 8087019 7797516 612,501 -167,015 -21.4% Total $20871647258 $21479437996 $2117066)538 -$3)877)458 -1.8% General Fund Expenditures FY 2020-21 Salary & Benefits $149,635,979 $3555255191 $34,311,953 -$1,213,238 -3.4% Contract Services 25, 398, 708 454355618 37908,656 -526,962 -11.9% Maintenance & Repair 8,987,338 1,977,052 1,191, 663 -785,389 -39.7% Supplies & Materials 453385054 1,160,497 998,716 -161)781 -13.9% Utilities 2,961 , 757 585,194 5947072 81878 1.5% General Expenses 2, 290, 459 512, 276 365,704 -1465572 -28.6% Travel & Training 809,309 2285672 58,191 -170,481 -74.6% Grant Operating 1,155, 371 359,101 202,300 -156,801 -43.7% Internal Svc Charge 25, 977, 295 614945324 614947324 0 0.0% Risk Management 750,915 206,312 397780 -166,532 -80.7% Capital Expenditures 849,412 1435022 56,011 -875011 -60.8% Total $223,1549597 $51,6273259 $4892219370 -$394059889 -6.6% General Fund Sources and Uses SOURCES: FY 2017-18 Surplus FY 2018-19 Surplus FY 2019-20 Surplus Use of FY 2019-20 Contingency Reserve Operating Revenues Less: Restricted Revenues Use of Restricted Revenues and Encumbrances Transfers -In TOTAL SOURCES USES: Operating Expenditures Transfers Out Set aside -PERS Reserve TOTAL USES UNRESTRICTED RESOURCES CONTINGENCY RESERVE Contingency Replenishment NET CONTINGENCY RESERVE CONTINGENCY RESERVE TARGET A B 2019-20 2019-20 REVISED ACTUAL BUDGET B -A 2019-20 2020-21 BUDGET TO ACT REVISED $ VAR BUDGET 11,591,448 11,591,448 - 11,528,065 11,528,065 - 219,064,254 229,910,433 10,846,179 (1,447,784) (2,895,001) (1,447,217) 2,549,640 - (2,549,640) 13,389,413 17,207,099 3,817,686 $ 256,675,036 $ 267,342,044 $ 10,667,008 11,528,065 12,401,197 2,304,399 201,306,011 (765,967) 2,095,632 17,560,543 $ 246,429,880 214,943,995 $ 211,066,539 $ (3,877,456) $ 223,154,598 32,346,243 32,346,243 $ - 6,000,000 - - - 5,000,000 $ 247,290,238 $ 243,412,782 $ (3,877,456) $ 234,154,598 $ 9,384,798 $ 23,929,262 $ 14,544,464 $ 12,275,282 $ 52,618,059 $ 52,618,059 $ - $ 50,313,660 2 304 3 $ 52,618,05 $ 52,403,031 m Additional Pension Payment= $5 million • The City set aside a $5 million PIERS reserve in anticipation of adverse investment results that would increase the City's unfunded actuarial liability in the FY 2020-21 budget. • It is recommended, based on strong revenue performance, to transfer the $5 million from the PIERS set aside reserve to the operating budget to continue funding the total PIERS unfunded liability ($40 million total). • • • • • • • • • • • • • • • • • • • • Proposed Partial Restoration of Funds Through Tier Framework Tiered Short-term Budget Reduction Strategy - FY 2020-21 Proposed restorations indicated by 0 1 Contin.=en:y Reserveredunion cri inalfy $2,31E,Hz� in Pr: po=ed Budget, and redu:ed to 52,3CL,333 inAdcpted Bud¢et. Thi-- reduction of 512,285 is duetc a reduction in a ppropratkmswithin the Police Department. Operating Outs No Service Level Temp Hiring Deferred Capital ISF Charge Contingency Service Level TOTAL OAP FUNDING Financial First Aid - Initial Bridging Options Change Freeze Funding & Spend Reductions Reserve Cuts SOLUTIONS Tier 1 Tier 2 Tier 3 Tier4 Tier 5 Tier 6 Salaries And Benefits Salaries, Benefits and Other Pays (2,000,000) (2,000,000 Discretionary Pension Payments Total Salaries And Benefits (2,000,000) (2,000,000) Maintenance And Operations Professional & Contract Services (1,774,131) (1,774,131) Intern aIService Premiums Workers' Compensation (1,000,000) (1,000,000) G en era I Liability Uninsured Claims (1,000,000) (1,000,000) OPEB Equipment Repla cement/M aint ena nce (17,511) (500,000) (517,511) Information Technology ( 2,000,000) (2,000,000) Maintenance & Repair (179,009) (179,009) Supplies & Materials (289,571) (289,671) Utilities (361,201) (361,201) General Expenses (98,300) (98,300) Travel & Training (151,115) (151,115) Grant Operating Expenses (40,000) (40,000) Total Maintenance And Operations (2,910,438) (4,500,000) (7,410,938) Total Transfers Out (18,477,137) (500,000) (18,977,137) 03 pit a 1 (2,500,000) 1 (2,500,000) Contingency Reserves (2,304,399) (2,304,399) Total by Tier (2,910,938) (2,000,000) (20,977,137) (5,000,000) (2,304,399) (33,192,474) Cumulative by Tier (2,910,938) (4,910,938) (25,888,075)(30,888,075) (33,192,474) (33,192,474) 1 Contin.=en:y Reserveredunion cri inalfy $2,31E,Hz� in Pr: po=ed Budget, and redu:ed to 52,3CL,333 inAdcpted Bud¢et. Thi-- reduction of 512,285 is duetc a reduction in a ppropratkmswithin the Police Department. Tier 5 - Contingency Reserve • In order to balance the budget and under the emergency provisions of Policy F-2, this current year budget has a $2.3 million draw from the Contingency Reserve. • Pursuant to policy, staff must present a plan to City Council to replenish the reserve within five years after the economy has stabilized. • Based on the positive budget to actual variances realized in FY 2019-20 that resulted in a surplus, the better than expected quarter one results, and the positive revenue results to date for FY 2020-21; staff recommends restoring $2.3 million to the contingency reserve and fully funding the contingency reserve at 25% of GF operations. Contingency Financial First Aid - Initial Bridging Options Reserve Tier 5 Salaries And Benefits Salaries, Benefits and Other Pays Discretionary Pension Payments Total Salaries And Benefits Maintenance And Operations Professional & Contract Services Internal Service Premiums Workers' Compensation General Liability Uninsured Claims OPEB Equipment Replacement/Maintenance Information Technology Maintenance & Repair Supplies & Materials Utilities General Expenses Travel & Training Grant Operating Expenses Total Maintenance And Operations Transfers Out Transfer Out FFP Transfer Out Tideland Harbor Cap Transfer Out Nbr Enhancement Transfer Out Facilities Maint Transfer Out 800 Mhz Radio Transfer Out Intrafund Transfer IN Intrafund Transfer IN Tidelands Total Transfers Out Capital Contingency Reserve' (2,304,399) Total by Tier (2,304,399) Cumulative by Tier (33,192,474) Tier 4 - Internal Service Fund Charges • Funds in the amount of $4.5 million were transferred in from other funds to partially backfill General Fund revenue shortfall for FY 2020-21. • These charges are intended to reimburse ISF operations related to equipment replacement charges, or centrally managed insurance reserves and most were returned without significantly impacting the replacement schedule or funding for liabilities. • Staff recommends the replenishment of the $500,000 taken from the Equipment Replacement Fund. This would help improve the percent of that Fund's reserve that is set aside to cover the accumulated depreciation — currently at 66%. ISF Charge Financial First Aid - Initial Bridging Options Reductions Tier 4 Salaries And Benefits Salaries, Benefits and Other Pays Discretionary Pension Payments Total Salaries And Benefits Maintenance And Operations Professional & Contract Services Internal Service Premiums Workers' Compensation (1,000,000) General Liability Uninsured Claims (1,000,000) OPEB (500,000) Equipment Replacement/Mainten Information Technology (2,000,000) Maintenance & Repair Supplies & Materials Utilities General Expenses Travel & Training Grant Operating Expenses Total Maintenance And Operations (4,500,000) (500,000) Transfers Out Transfer Out FFP Transfer Out Tideland Harbor Cap Transfer Out Nbr Enhancement Transfer Out Facilities Maint Transfer Out 800 Mhz Radio Transfer Out Intrafund Transfer IN Intrafund Transfer IN Tidelands Total Transfers Out (500,000) Capital Contingency Reserve' Total by Tier (5,000,000) Cumulative by Tier (30,888,075) Tiers 1-3 Tier 3 — Deferred Capital Funding Recommend maintaining the reductions at this time. Propose consideration as part of planning the FY 2021-22 CIP during the City Council Planning Workshop in early 2021. Tier 2 —Temporary Hiring Freeze Recommend selective hiring with approval by City Manager. We will still target $2 million in personnel savings, which should be obtainable. Tier 1 — Operating Reductions No change recommended — continue with reductions. Operating Cuts No Service Level Temp Hiring Deferred Capital Financial First Aid - Initial Bridging Options Change Freeze Funding & Spend Tier 1 Tier 2 Tier 3 Salaries And Benefits Salaries, Benefits and Other Pays (2,000,000) Discretionary Pension Payments Total Salaries And Benefits (2,000,000) Maintenance And Operations Professional & Contract Services (1,774,131) Internal Service Premiums Workers' Compensation General Liability Uninsured Claims OPEB Equipment Replacement/Mainten (17,511) Information Technology Maintenance & Repair (179,009) Supplies & Materials (289,671) Utilities (361,201) General Expenses (98,300) Travel & Training (151,115) Grant Operating Expenses (40,000) Total Maintenance And Operations (2,910,938) (8,500,000) (4,500,000) (4,977,137) (500,000) Transfers Out Transfer Out FFP Transfer Out Tideland Harbor Cap Transfer Out Nbr Enhancement Transfer Out Facilities Maint Transfer Out 800 Mhz Radio Transfer Out Intrafund Transfer IN Intrafund Transfer IN Tidelands Total Transfers Out (18,477,137) Capital (2,500,000) Contingency Reserve' Total by Tier (2,910,938) (2,000,000) (20,977,137) Cumulative by Tier (2,910,938) (4,910,938) (25,888,075) Recommendations • Staff will consider adjustments to the operating and capital budgets in subsequent quarters should revenue projections prove to be either too optimistic or conservative. • Proposed Restorations through Budget Amendment 21-021: • $5 million from PERS Reserve to make Additional Discretionary Payment to PERS • $2.3 million from GF Fund Balance to replenish GF Contingency Reserve • $500,000 from GF Fund Balance to replenish Equipment Replacement (Fleet) Fund 44