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OFFICE OF THE ALBANY CITY TREASURER DATE: November 13, 2017 TO: Hon. Kathy M. Sheehan Members of the Common Council FROM: Hon. Darius Shahinfar CC: Rachel McEneny, Mike Wheeler RE: 3rd quarter 2017 Performance The following is a summary of the unaudited results for the 3rd Quarter 2017. Fiscal performance was stable and well within overall budgetary expectations for 2017. Some notable outliers are sales tax revenue (which was down and which we are watching closely) and increases in overtime and worker’s compensation expenses. Revenue in the third quarter of 2017 totaled almost $133.8M (nearly $7.5M more than the same period last year, largely because the $12.5m from NYS was paid all at once), while expenses totaled almost $129.7 million (including retirement), an increase of nearly $2.9M compared to the third quarter of 2016, largely because of higher workers’ comp, demolition expenses and debt service. REVENUE (Thousands) Sept Sept % Sept Annual % REVENUE YTD 17 YTD 16 Variance YTD 17 Budget Variance Budget PROPERTY TAX 57,602 56,595 1,007 2% 57,602 57,700 (98) 100% SALES/USE TAX 24,652 24,762 (110) 0% 24,652 34,112 (9,460) 72% PILOTS/19-a 12,215 16,947 (4,732) -28% 12,215 20,429 (8,214) 60% OTHER LOCAL SOURCES 2,047 1,780 267 15% 2,047 3,169 (1,122) 65% LANDFILL 6,664 8,933 (2,269) -25% 6,664 7,253 (589) 92% OTHER DEPARTMENTS 4,053 4,703 (650) -14% 4,053 5,647 (1,594) 72% INTER GOVERNMENT 201 177 24 14% 201 235 (34) 86% FINES 3,310 3,548 (238) 3,310 5,204 (1,894) 64% LICENSES AND PERMITS 3,710 2,197 1,513 69% 3,710 4,486 (776) 83% STATE AID 15,011 2,440 12,571 515% 15,011 29,559 (14,548) 51% SALE P/COMP/LOSS 225 268 (43) -16% 225 401 (176) 56% MISCELLANEOUS 3,522 2,870 652 23% 3,522 8,396 (4,874) 42% OTHER 581 117 464 397% 581 1,132 (551) 51% DEBT RESERVE 0 1,000 (1,000) 100% 0 1,000 (1,000) 0% TOTAL REVENUE 133,793 126,337 7,456 6% 133,793 178,723 (44,930) 75% The chart above summarizes the City’s sources of revenue through September 30, 2017, and the figures are largely within budget expectations. ---PAGE BREAK--- 2 1. Property Tax revenue was higher than last year by over $1.0M as result of the expansion of the tax base and under budget at the end of the third quarter as a result of paying assessment reductions by the end of the quarter. 2. Sales Tax revenue decreased by $110,000 from last year and was below budget at 72% for the year in the third quarter. This item bears watching as a $500,000-$1M reduction in this revenue line is possible without a rebound in County sales. 3. PILOTS/19-a revenue was 28% lower, or a little over $4.7 million less than the same period last year. Most of the decrease is due to the City receiving half ($6.25 million) of the $12.5 million in additional 19-a money from the State by this time last year, but which is paid into State Aid this year. 4. Other Local sources revenue increased 15% from the third quarter of 2016. Interest fees on late property taxes increased by almost $235,000 and utility gross receipts increased almost $46,000. OTB receipts were lower by $28,000 mostly from receiving the August payment in early October. 5. Landfill revenue decreased 25% or almost $2.3 million compared to the same period last year. As anticipated, tipping fees decreased by just over $1.8 million from commercial and municipal customers and contaminated soil decrease by $431K. However, revenue is at 92% of budget for the year and should end the year above estimates with another quarter remaining in 2017. 6. Other Departmental revenue was 14% ($650K) lower than last year at this time. Waste collection fees decreased by $259,000 which is related to billing corrections and lower collections compared to the previous year, golf fees were lower by over $200,000, golf cart and range fees were down by over $141,000 but will increase when September’s revenue reports are posted. Rental registries were down $68,000, and APD Event Security revenue decreased by almost $30,000. 7. Fines and Forfeitures revenue decreased by 7% from last year. Parking ticket fines and surcharges combined for an estimated $2.6 million which is about the same as last year. (This is estimated because not all quarterly revenue is posted yet due to the changeover in ticketing systems.) Traffic violation fines were down by over $305,000. 8. Licenses and Permits revenue increased 69% ($1.5M) compared to the same period last year. Most of the increase is from the timing of billing demolition fees ($1.6M) on the new ERP system, street opening revenue ---PAGE BREAK--- 3 increased by $265K and plumbing permit revenue increased by $127K. Parking permit revenue decreased by almost $43K from a four month lag in reporting also due to a changeover in ticketing systems. Safety inspection permits decreased by $90K. 9. State aid – Increased by $12.6 million. The majority of the increase $12.5 million is from the State making a first time payment for Capital City Funding. 10. Miscellaneous revenue increased $652,000 or 23% from last year at this time. Refund of prior expenses increased by $923,000, health insurance reimbursements increased by almost $25,000, while self- insurance recoveries decreased $74,000 and refund of prior year recycling expenses decreased by $246,000. 11. Other revenue increased by $464,000 compared to the same period last year. The city received over $456,000 from a SAFER Grant for the fire department. Most of the revenue in this category is derived from federal government grants and the timing of these payments varies from one year to the next. DISBURSEMENTS Category Sept Sept % Annual % YTD 17 YTD 16 Variance Budget Variance Budget Personal Benefits 57,807,236 55,727,000 2,080,235 3.7% 75,715,045 (17,907,809) 76% Fringe Benefits 28,978,353 28,870,743 Retirement Estimate 7,500,240 8,230,657 36,478,593 37,101,400 (622,807) -1.7% 52,004,971 (15,526,378) 70% Non-Personal Service 35,372,766 32,962,810 2,409,956 7.3% 51,056,716 (15,683,950) 69% Use of Debt Reserve 0 1,000,000 (1,000,000) -100.0% 1,000,000 (1,000,000) 0% Total 129,658,595 126,791,210 2,867,384 2.3% 179,776,732 (50,118,137) 72% Number of weeks in period 39 40 -1 52 75% Total disbursements increased by over $2.8M or 2.3% compared to the same period last year. Spending was up in Personnel Benefits and Non- Personal Services compared to 2016. While Fringe Benefits were lower at the ---PAGE BREAK--- 4 end of the quarter when estimated retirement expenses are included, Fringe Benefits and Non-Personal Services remain under budget thus far for the year. 1. Salary expense increased by almost $2.1M or 3.7% compared to the same period last year. The Fire department was up by $1.4 million from salary increases related to new hires and contract settlements and the Police department increased by $865,000 from 2016. Most of the other City departments were at similar levels or had lower salary expenses for the quarter. Contract settlements have moved and will move these numbers higher by the end of the year. At year end an adjustment will also be made as about $500k in sick leave pay for AFD was allocated to salary and should be allocated to benefits. 2. Benefits Expenses decreased by $622k or 1.7% from 2016. This category was still below budget for the quarter at 70%. Most of the decrease in this category was from retiree health insurance which decreased ($1.3M) while active employee’s health insurance expense increased by ($569K). Worker’s compensation expenses increased by ($868K). The retirement expense estimate is lower by ($731K) based on a reduced anticipated cost for 2017, and about $500k will be adjusted into these lines from sick pay misallocated to salary at year end. 3. Non-Personal Service spending increased by more than $2.4 million or 7.3%. Not including encumbrances this category was lower than budgeted, at 69% by the end of this quarter. This category includes utilities, contracted services, supplies, materials, small equipment, consulting fees and debt service. This quarter saw increases over last year in the following areas: for DGS, gasoline expense ($142K), demolitions expenses ($593K); Special Events expenses increased by ($197K) and debt service expenses increased by $1.8M from making the first payments on the 2016 bonds this year. However equipment expenses decreased ($110K). Because the timing of debt service payments is different than last year, most of the overall increase in Non- Personal service will even out by year end. 4. Encumbrances (funds reserved for purchases) increased by almost $350K compared to the same period last year. Encumbrances total almost $4.5M at the end of the quarter. ---PAGE BREAK--- 5 OVERTIME % of Department 2017 2016 Change % 2017 Budget Budget Police (non-reimbursable) 3,843,373 3,717,580 125,793 3% 3,843,373 4,050,000 95% Fire 661,229 781,872 (120,643) -15% 661,229 439,000 151% Communications 223,267 162,668 60,599 37% 223,267 175,000 128% Parks Maintenance 146,441 116,614 29,827 26% 146,441 185,000 79% Waste Collection 184,217 133,625 50,592 38% 184,217 205,000 90% Landfill 111,771 70,514 41,257 59% 111,771 151,000 74% Central Maint. 32,549 30,221 2,328 8% 32,549 70,000 46% Street Maintenance 218,794 154,868 63,926 41% 218,794 270,000 81% Recreation 8,317 10,177 (1,860) -18% 8,317 12,000 69% Traffic Engineering 29,757 27,962 1,795 6% 29,757 45,000 66% Capital Hills 18,673 16,376 2,297 14% 18,673 26,000 72% Fleet Maintenance 22,659 4,754 17,905 377% 22,659 26,000 87% Bleeker Stadium 0 95 (95) -100% 0 600 0% Buildings 63,515 59,811 3,704 6% 63,515 50,000 127% DGS Administration 639 893 (254) -28% 639 2,500 26% Control of Animals 8,114 5,608 2,506 45% 8,114 9,000 90% Special Events 10,543 12,578 (2,035) -16% 10,543 15,000 70% General Fund 5,583,858 5,306,216 277,642 5% 5,583,858 5,731,100 97% Police (reimbursable) 903,720 891,127 12,593 1% 903,720 1,200,000 75% Traffic Eng. (reimbursable) 0 224 (224) 0% 0 500 0% Water 402,948 528,123 (125,175) -24% 402,948 580,000 69% Totals 6,890,526 6,725,690 164,836 2% 6,890,526 7,511,600 92% General Fund overtime was at 97% of the 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 5% or almost ($278K) higher than the same period last year. The Police department had the biggest increase in overtime payments which were up by almost $126K. Street Maintenance increased by almost $64K, which was related to the additional work required for snow removal this past winter. The Fire department decreased by over $120K and posted its lowest 3Q OT since 2012, but ended the quarter at 151%of budget. The majority of departments have higher overtime expenses this year than last year. ---PAGE BREAK--- 6 CASH The City’s cash position was 19% more than forecasted and $6.4M higher than the same period last year. Most of the increase is related to the City receiving $12.5M from the Capital City Funding payment for the first time. Some of this increase was offset by paying out more for payroll costs from converting back to a 52 week pay period from a 53 week pay period last year and for labor contract settlement related increases. CONCLUSION The City’s revenues for the quarter totaled almost $133.8 million a $7.5 million increase over last year primarily related to receiving the $12.5 million for Capital City Funding. Expenses totaled $129.7 million and increased by almost $2.9 million compared to 2016, mostly as the result of increases in fire department and police department salaries, overtime expenses, worker’s compensation expenses, demolition expenses and debt service expenses. Thus far, there are no major surprises for 2017 and the City is largely moving forward as expected financially. The City will have to continue to watch expenses closely, particularly overtime, and try to control them as much as possible, while continuing to push for revenue increases where it can locally, and at the State level where a permanent solution for the revenue gap caused by tax exempt properties remains the goal.