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OFFICE OF THE ALBANY CITY TREASURER DATE: November 4, 2015 TO: Hon. Kathy M. Sheehan Members of the Common Council FROM: Hon. Darius Shahinfar CC: Ismat Alam RE: 3rd quarter 2015 Performance The following is a summary of the unaudited results for the 3rd Quarter 2015. Second quarter revenue totaled $118.2 million which was an increase of 7% compared to last year at this time. Expenses totaled over $119.6 million which is almost the same amount compared to the third quarter of 2014. While this is good news, and we are cautiously optimistic about further good news on sales tax revenue increases as well as energy and other variable cost decreases, these savings are proving to be fleeting due to several realized and/or anticipated added expenses or revenue shortfalls in: The Firefighters and Dispatchers resolutions, as well as landfill, fine and Coeymans land sale revenue. REVENUE (Thousands) Sept Sept % Sept Annual % REVENUE YTD 15 YTD 14 Variance YTD 15 Budget Variance Budget PROPERTY TAX 56,698 55,858 840 2% 56,698 56,528 170 100% SALES/USE TAX 24,487 23,925 562 2% 24,487 31,973 (7,486) 77% PILOTS/19-a 11,946 4,016 7,930 197% 11,946 19,490 (7,544) 61% OTHER LOCAL SOURCES 1,710 1,920 (210) -11% 1,710 4,833 (3,123) 35% LANDFILL 8,756 8,534 222 3% 8,756 12,077 (3,321) 73% OTHER DEPARTMENTS 1,999 2,106 (107) 1,999 3,506 (1,507) 57% INTER GOVERNMENT 162 153 9 6% 162 117 45 138% FINES 3,077 3,037 40 1% 3,077 7,049 (3,972) 44% LICENSES AND PERMITS 2,396 2,237 159 7% 2,396 2,718 (322) 88% STATE AID 2,687 2,620 67 3% 2,687 17,354 (14,667) 15% SALE P/COMP/LOSS 202 210 202 5,404 (5,202) 4% MISCELLANEOUS 2,654 3,516 (862) -25% 2,654 12,998 (10,344) 20% OTHER 129 1,670 (1,541) -92% 129 275 (146) 47% DEBT RESERVE 1,335 500 835 100% 1,335 1,500 (165) 89% TOTAL REVENUE 118,238 110,302 7,936 7% 118,238 175,822 (57,584) 67% ---PAGE BREAK--- 2 The chart above summarizes the City’s sources of revenue through September 30, 2015. 1. Property Tax revenue increased by $840,000 from 2014 as a result of the tax levy increase under the tax cap. However, while the City was over budget by $170,000 with assessment reductions included through the 3Q, recent large SCOs reduced assessments which have put the City at least $150K under budget, with some smaller additional cases pending. 2. Sales Tax revenue the sales tax revenue increased 2% and totaled $24.5 million which was $562,000 higher compared to last year at the same time. We are over budget at 77% for the year to date, and should this increase continue for the next quarter as it usually does for the 4th Quarter, it would lead to greater revenue than budgeted. 3. PILOTS/19-a revenue was 197% higher than the same period last year, but the increase is primarily due to the City receiving the first half, $7.5 million, of the 19-a payment in July. Last year the City received the whole $15.0 million in November. 4. Other Local sources revenue was 11% lower than the third quarter of 2014. Utilities gross receipts and Time Warner franchise fees both ended the quarter lower than last year based on lower energy costs and lower usage of Time Warner services. 5. Landfill revenue increased 3% compared to the last year at this time. Increases in landfill permits, coupon sales, contaminated soil and methane gas sales which combined for a $709,000 increase while tipping fees decreased by $422,000. The expected revenue loss of $0.9 to $1.2 million due to the loss of a large landfill client has been reduced to approximately $400K. 6. Other Departmental revenue was 5% lower than the same period last year. Most of the decrease was the result of decreases in rental registries which was down $65,000, safety inspection fees which decreased by $75,000 and APD Event Security revenue which decreased by $23,000. These decreases were off-set by an increase of $67,000 in EMS Ambulatory revenue. 7. Fines and Forfeitures revenue increased by 1% from the third quarter of 2014. Both parking ticket fines and surcharges combined for a slight increase of $51,000. Traffic violations decreased by $73,000. While parking ticket revenue has been slowly increasing back to the levels of last year, budgeted red light camera ticket revenue is expected to be more than 80-90% lower than budgeted. ---PAGE BREAK--- 3 8. Licenses and Permits revenue increased 7% ($159,000) compared to the same period last year. Most of this increase is directly related to recording the revenue from bills invoiced for building demolitions in the current year as compared to the traditional process of including them on the property tax bills in the next year. There were also increases in plumbing permit revenue of $72,000 and electrical permit revenue increased by $15,000. Safety Inspection permit revenue on the other hand decreased by almost $173,000, street opening permits decreased by $45,000, vacant building fees decreased by $16,000 and parking permit revenue decreased by $13,000. 9. State aid increased 3% ($67,000) from 2014. Most of this revenue is derived from state grants and various state payments, which makes this line largely budget neutral (other than State AIM monies). The timing of these payments varies from year to year. The City received $127,000 more from a NYS Homeland Security Grant compared to 2014. Mortgage tax revenue also increased by $211,000 from the same period last year. However, there was a decrease of $204,000 from a NYS Operation Impact Grant compared to the 3rd quarter of 2014. 10. Miscellaneous revenue decreased 26% ($682,000) compared to the same period last year primarily as a result of a decrease in delinquent debris and demolition charges levied onto 2015 property tax bills which decreased $250,000. Also the Albany Parking Authority, which prior to 2015 reimbursed the City for the PSO salaries and benefits, was lower by $350,000. This decrease is offset by the transfer of the PSO employees and related expenses to the APA. 11. Other revenue decreased by 25% ($862,000) compared to the same period last year. Most of this revenue is derived from federal government grants, making it largely budget neutral, and the timing of these payments varies from one year to the next. So far this year the City has received almost $105,000 from a few Federal public safety grants. The reason for the decrease is related to a COPS Hiring Grant which the City received $763,000 less this year compared to 2014. ---PAGE BREAK--- 4 DISBURSEMENTS Category Sept Sept % Annual % YTD 15 YTD 14 Variance Budget Variance Budget Personal Benefits 54,991,704 55,083,489 (91,785) -0.2% 74,223,477 (19,231,773) 74% Fringe Benefits 30,735,262 28,098,107 Retirement Estimate 8,230,657 10,015,517 38,965,919 38,113,624 852,295 2.2% 51,932,558 (12,966,639) 75% Non-Personal Service 32,548,583 35,574,193 (3,025,610) -8.5% 50,659,195 (18,110,612) 64% Use of Debt Reserve 1,335,000 500,000 835,000 167.0% 1,500,000 (165,000) 89% Total 127,841,206 129,271,307 (1,430,100) -1.1% 178,315,230 (50,474,024) 72% Number of weeks in period 39 39 0 52 75% Total disbursements decreased by $1.4 million or 1.1% compared to the same period last year. Spending was down in Personal Benefits and Non- Personal Service but increased in Fringe Benefits compared to 2014. 1. Salary expense decreased by 0.2% compared to the same period last year. Salary expenses are level or lower in most of the departments compared to 2014. The Police department was lower by over $389K, while the Fire department was higher by $888K from last year. This category also includes overtime expenses which ended the quarter $154K higher than in 2014. The recent arbitration award to the Firefighters for retroactive pay was not included in the budget. The firefighter’s received their retro pay in July which is the primary reason for the increase in salary expense and to some degree the overtime expense in the Fire Department. 2. Benefits Expenses increased by 2.2% compared to last year at this time. Most of the increase in this category is attributable to the Police department which increased by over $1.2 million from 2014. The biggest increase was in the workers compensation expenses which increased by almost $836K, largely as a result of the closing out of old claims. Employee health insurance also increased by over $900K (the premiums charged by alone increased by over but was at only at 68% of budget from the same time last year. Retiree health expenses increased almost $859K from 2014, but the estimate for retirement expense is down by $1.8 million from the same time last year. Overall even with these increases this category is at budget for the year. ---PAGE BREAK--- 5 3. Non-Personal Service spending decreased by 8.5% or just over $3.0 million. This category includes utilities, contracted services, supplies, materials, small equipment, consulting fees and debt service. DGS saw decreases in the following accounts: gasoline expense decreased $595K and motor vehicle repair expense decreased $351K. The City’s utilities expenses decreased by almost $632K with street lighting making up most of the decrease at $291K less than the same period last year. Gasoline expense City wide decreased $673K. Debt service is down by $1.2 million on the General Fund from paying this amount out of the Debt Reserve Fund. 5. Encumbrances (funds reserved for purchases) decreased by $1.5 million or almost 29% compared to the same period last year. Encumbrances total $3.6 million at the end of the third quarter. OVERTIME 2015 OT OVERTIME % of Department 2015 2014 Change % 2015 Budget Budget Police (non-reimbursable) 2,983,522 2,931,528 51,994 2% 2,983,522 3,950,000 76% Fire 1,617,493 1,411,878 205,615 15% 1,617,493 750,000 216% Communications 124,159 135,466 (11,307) 124,159 175,000 71% Parks Maintenance 129,443 169,010 (39,567) -23% 129,443 200,000 65% Waste Collection 138,281 160,181 (21,900) -14% 138,281 175,000 79% Landfill 103,661 127,764 (24,103) -19% 103,661 151,000 69% Central Maint. 61,995 54,215 7,780 14% 61,995 70,000 89% Street Maintenance 84,562 86,802 (2,240) 84,562 150,000 56% Street Cleaning 100,336 120,712 (20,376) -17% 100,336 150,000 67% Recreation 9,901 3,004 6,897 230% 9,901 12,000 83% Traffic Engineering 28,653 15,162 13,491 89% 28,653 40,925 70% Capital Hills 19,148 20,128 (980) 19,148 26,000 74% Central Garage 11,209 17,192 (5,983) -35% 11,209 28,000 40% Bleeker Stadium 0 75 (75) -100% 0 600 0% Buildings 30,198 36,206 (6,008) -17% 30,198 50,000 60% Control of Animals 6,577 5,720 857 15% 6,577 9,000 73% Special Events 9,074 9,564 (490) 9,074 20,000 45% General Fund 5,458,212 5,304,607 153,605 3% 5,458,212 5,957,525 92% Police (reimbursable) 707,311 764,166 (56,855) 707,311 1,248,161 57% Traffic Eng. (reimbursable) 160 446 (286) 0% 160 0 100% Water 448,451 506,714 (58,263) -11% 448,451 580,000 77% Totals 6,614,134 6,575,933 38,201 1% 6,614,134 7,785,686 85% ---PAGE BREAK--- 6 General Fund overtime was at 92% of budget at the end of the third quarter. Excluding the Water Department (for which the City is reimbursed) and reimbursable Police overtime, overtime expense was 3% ($153,605) higher than the same time last year. Recreation had the biggest increase in overtime expense percentage wise at 230% although it ended the quarter at only 83% of budget and the Fire Department had the largest increase dollar wise at $205,615 which is 15% higher than the same period last year and was the only department over budget at 216% so far this year. Police overtime was higher by 2% compared to the same period last year and finished the quarter at 76% of budget. The majority of departments have lower overtime expenses this year than last year except for those indicated on the chart. CASH The City’s cash position was 27% higher than forecasted and $4.5 million higher than the same period last year. The increase is the result of NYS paying the first half ($7.5 million) of the 19-a payment in July. Last year the City received the whole 19-a payment of $15.0 million in November. ---PAGE BREAK--- 7 CONCLUSION Although revenue is ahead of last year, and expenses were controlled through the third quarter (1.1% or almost $1.4 million lower than last year at this time; only 72% of 2015 budgeted expenses), these savings are not expected to last or continue. Most of the savings will be used for the firefighters current year salary increase. Retiree health insurance totals $7.4 million and is at 97% of budget. The red light camera installations are behind schedule so we will not make revenue estimates for this project. The Coeymans land sale to NYS was budgeted at $5.0 million but the City is now only expecting to receive $3.7 million. Therefore, the City will have to continue to find other savings in order to offset the additional decrease to the fund balance related to these items, as well as other expected revenue declines and cost increases. The current estimate regarding our fund balance is that by year end, it will be approximately $3.3 million less than budgeted, meaning that projected expense increases retro salary increases) and revenue shortfalls RLC and Coeymans sale revenue) will be $3.3 million more than savings realized energy costs) plus revenue enhancements sales tax). This will leave our unassigned fund balance at essentially zero by the end of the year, unless savings are realized elsewhere in the budget.