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OFFICE OF THE ALBANY CITY TREASURER DATE: July 7, 2020 TO: Hon. Kathy M. Sheehan Members of the Common Council FROM: Hon. Darius Shahinfar CC: Rachel McEneny, Mike Wheeler RE: YTD 2019 Performance The following is a summary of the unaudited results for 2019. The final numbers present a positive financial picture as the City generated a year-end surplus of almost $5.3 million on the fund financials. Spending was up by $300K from 2018, although spending was $7M under-budget and revenues exceeded expenses, creating the surplus. The surplus was largely due to $2M more in sales tax revenue, $1.2M more in insurance recoveries and property sales (mostly the Coeymans property), and a decrease in utility expenses of almost $2.4M, most of which is directly related to the purchase of the street lights. Other revenues and saving make up the balance of the surplus. These are one-time events and should not be expected to continue, particularly with sales tax revenue in 2020 which will likely be significantly under budget. It is stressed that the surplus must not be viewed as a structural surplus. Generally, salaries increased by 2.4% ($1.8M) compared to 2018 ($1.1 million in AFD(2% salary increase ($350K), OT ($326K), Accumulated Sick Leave ($347K)), $487K in DGS (OT ($316K), 2% salary increase ($171K)), and were about $1.7M over budget (AFD OT ($869K), DGS OT ($432K), fringe benefits increased by 5% compared to 2018 but were under-budget. Most of the over-budget salary figures are based on significant vacancies in the police and fire departments. During 2019, AFD reached a high of 14 vacancies, APD had 37 vacancies and DGS had vacancies, leading to salaries being more than $1.3M over-budget from overtime. (Savings due to under-budget spending on salaries due to vacancies is largely used up on buyouts as individuals retire, as well as contract settlements.) The rest of the over-budget figure on salaries in 2019 was largely due to nearly $270K spent as a result of expanding the summer youth program to include more than 1,000 participants. About half of this amount was offset by a $100K increase in federal reimbursement for the program. There was also unspent money from the startup of the new APD training academy and various APD grants ($444K). There was also over-budget revenue from the Landfill of $1.1M, and under-budget revenue from State Aid by $540K because ---PAGE BREAK--- 2 the Capital City funding was underfunded by the State by $500K. There was over-budget spending as well, particularly in overtime at $1.3M. Revenue in 2019, including debt reserve funds, totaled $179.0M which was $2.7M more than last year. Expenses including debt reserve expenses totaled over $173.8M, increase of about ($302K) compared to 2018. Revenues were almost $1.7M less than budgeted and expenditures $7.0M less than budgeted, which was largely due to grant revenue and expenditures that were not realized. The excess of revenues over expenses provided the City with almost a $5.3M surplus for the year. The $5.3M surplus is welcome but is essentially due to the one time occurrences listed above. This surplus is not structural, and therefore should not be expected to continue, especially in light of the State’s decision to cut $500K from its Capital City Funding. It should be further cautioned that without the $12.0M in assistance from NYS, there would have been a massive deficit. The City’s unassigned Fund Balance, the key criteria used by the State Comptroller’s office to gauge fiscal stress, stands at $14.4M. This is a big turnaround in the past 4 years, but still below the $17.5M (10% of City expenses) in Fund Balance needed to begin the road out of fiscal stress as determined by the State Comptroller. Furthermore, the current fund balance most likely will be reduced in 2020 as a result of the pandemic. REVENUE (Thousands) DEC DEC % DEC Annual % REVENUE YTD 19 YTD 18 Variance YTD 19 Budget Variance Budget PROPERTY TAX 58,313 58,252 61 0% 58,313 58,250 63 100% SALES/USE TAX 36,637 35,425 1,212 3.4% 36,637 34,594 2,043 106% PILOTS/19-a 20,708 20,108 600 3% 20,708 19,675 1,033 105% OTHER LOCAL SOURCES 2,951 3,225 (274) 2,951 3,092 (141) 95% LANDFILL 7,171 6,591 580 9% 7,171 6,030 1,141 119% OTHER DEPARTMENTS 5,782 5,354 428 8% 5,782 7,021 (1,239) 82% INTER GOVERNMENT 590 413 177 43% 590 532 58 111% FINES 5,012 4,969 43 1% 5,012 5,391 (379) 93% LICENSES AND PERMITS 4,142 4,553 (411) 4,142 4,945 (803) 84% STATE AID 29,005 29,110 (105) 0% 29,005 29,543 (538) 98% SALE P/COMP/LOSS 1,610 430 1,180 274% 1,610 395 1,215 408% MISCELLANEOUS 5,414 6,114 (700) -11% 5,414 8,649 (3,235) 63% OTHER 757 837 (80) -10% 757 1,697 (940) 45% DEBT RESERVE 1,000 1,000 0 100% 1,000 1,000 0 100% TOTAL REVENUE 179,092 176,381 2,711 2% 179,092 180,814 (1,722) 99% The chart above summarizes the City’s sources of revenue for 2019. ---PAGE BREAK--- 3 1. Property Tax revenue was higher than last year by $61K primarily as result of the expansion of the tax base although SCO payments were higher compared to last year. 2. Sales Tax revenue increased by almost $1.2M from last year and was over-budget at 106% for the year. The increase relates to a strong economy with low unemployment and strong retail sales in 2019. 3. PILOTS/19-a revenue was 3% higher than last year and 105% of budget. Payments received from prior year voluntary PILOTS increased the revenue and exceeded budget. 4. Other Local sources revenue was 8% or $274K lower than 2018 and ended the year 95% of budget. Interest and penalties on property taxes was down by $20K, utilities gross receipts tax decreased by $191K, Time Warner / Spectrum franchise fees were lower by $10K and OTB receipts decreased by $29K. 5. Landfill revenue increased 9% or almost $580K and 119% compared to last year. Tipping fees increased by $952K from commercial and municipal customers and coupon sales increased $138K 6. Other Departmental revenue was or $428K higher than 2018, but only 82% of budget for the year. Waste collection fees increased $737K, golf fees were higher by $41K and golf cart and range fees increased by $24K. APD Event Security revenue decreased by $137K and DGS fees decreased by $59K. 7. Intergovernmental revenue increased by 43% from last year. Interest income was up almost $156K from an increase in interest rates. Cell tower rent fees increased by over $11K. 8. Fines and Forfeitures revenue increased by 1% ($43K) from 2018. The increase is related to an increase in parking violation fines which were up $116K, handicap fees increased $5K and parking surcharges increased $70K. Traffic violation fines decreased $13K and miscellaneous revenue decreased $57K 9. Licenses and Permits revenue decreased 9% ($411K) compared to last year. Most of the decrease is from street opening fees which decreased by $447K and demolition fees which decreased by $53K. While plumbing permit revenue increased by $57K, electrical permits increased $26K, safety inspection permits increased $41K and parking permit revenue increased $11K. ---PAGE BREAK--- 4 10. State aid – decreased by ($105K). The police court security program fees decreased $76K and mortgage taxes decreased $75K. There were also decreases from funds received from multiple state grants. It is important to note that this category includes Capital City Funding which remained at $12.0M in 2019 but without this funding the City would have ended the year with a $7.0M deficit to its fund balance. 11. Sale of property and insurance recoveries revenue increased by almost $1.2M or 274% from last year. Most of this increase is the result of the sale of the Coeymans land $865K. Insurance recoveries also added $275K to this revenue category. 12. Miscellaneous revenue decreased 11% ($700K) from 2018. Refund of prior expenses decreased by $1.6M this a combination of fewer demolition fees and WCF fees rolled onto the 2019 property taxes. Additional revenue was received for reimbursements from other sources which offset this decrease. Court settlements increased $186K, ACDA reimbursements increased $496K and funds from various City run festivals increased $69K. The large variance to budget is due to the funds that are included with the general fund for Housing & Community Development Reimbursement. This simply acts as a pass through account that does not impact the general fund, but was set up comply with HUD grant disbursement regulations. 13. Other revenue decreased 10% ($80K) compared to last year. During 2019 FEMA funding was lower compared to last year. Other federal funding for various grants was lower. Most of the revenue in this category is derived from federal government grants, is budget neutral and the timing of these payments varies from one year to the next. ---PAGE BREAK--- 5 DISBURSEMENTS Category DEC DEC % Annual % YTD 19 YTD 18 Variance Budget Variance Budget Personal Benefits 79,305,686 77,456,108 1,849,577 2.4% 77,642,003 1,663,682 102% Fringe Benefits 36,909,587 34,891,899 2,017,688 5.8% 36,710,444 199,144 101% Retirement including estimate 14,224,012 13,772,401 451,611 3.3% 14,312,840 (88,828) 99% Total Benefits 51,133,599 48,664,300 2,469,299 5.1% 51,023,284 110,315 100% Non-Personal Service 42,365,092 46,381,825 (4,016,733) -8.7% 51,148,422 (8,783,330) 83% Use of Debt Reserve 1,000,000 1,000,000 0 0.0% 1,000,000 0 100% Total 173,804,376 173,502,233 302,143 0.2% 180,813,709 (7,009,333) 96% Number of weeks in period 52 52 0 52 100% In 2019, total disbursements increased by $302K or 0.2% compared to 2018 although they were $7.0M under-budget for the year. Spending increased in Personal Benefits and Fringe Benefits while Non-Personal Services decreased compared to last year. 1. Salary expense (Personal Benefits) increased by almost $1.8M or 2.4% from last year and finished the year 2% over budget for 2019. The Fire Department’s salary and related expenses increased by $327K and the Communications Department increased by $321K from 2018. Most of the other City departments had higher salary expenses for the year which was anticipated in the budget. Overtime expenses which are included in this category increased by $1.3M from last year and were over budget by $1.2M 2. Fringe Benefit expenses increased almost $2.5M or 5.1% from 2018 but were just $110K over-budget. Most of the increase in this category is related to an increase in retiree health insurance costs which increased by $1.8M but ended the year at 100% of budget. The City is self-insured under the Empire Blue Cross plan and pays its claims directly. These expenses vary from year to year as a result of being self- insured and not paying a set premium. NYS Retirement expenses increased by $452K from 2018 but ended the year at 100% of budget. Medicare refunds were $281K higher than last year mostly related to retro payments after legal settlements. 3. Non-Personal Service spending decreased by almost $4.0M or 8.7% from last year and was below budget for the year by almost $8.8M. This category includes utilities, contracted services, supplies, materials, small equipment, consulting fees and debt service. Utility expenses ---PAGE BREAK--- 6 decreased by almost $2.4M most of this is related to the purchase of the street lights. Debt service expenses decreased by $2.5M as a result of having a lower pay down on the bond anticipation notes compared to last year. Overall contracted services increased by $302K. Most the remainder of this variance is related to the ACDA pass thru funds which are budgeted in this category and ended the year almost $3.7M under- budget. OVERTIME % of Department 2019 2018 Change % 2019 Budget Budget Police (non-reimbursable) 5,845,153 5,439,316 405,837 7% 5,845,153 5,845,554 100% Fire 1,307,822 981,379 326,443 33% 1,307,822 439,000 298% Communications 506,949 371,369 135,580 37% 506,949 525,000 97% Parks Maintenance 263,400 208,252 55,148 26% 263,400 185,000 142% Waste Collection 407,059 243,680 163,379 67% 407,059 225,000 181% Landfill 154,839 148,164 6,675 5% 154,839 150,000 103% Central Maint. 52,957 64,297 (11,340) -18% 52,957 70,000 76% Street Maintenance 427,398 364,803 62,595 17% 427,398 270,000 158% Recreation 15,873 13,568 2,305 17% 15,873 12,000 132% Traffic Engineering 48,515 36,625 11,890 32% 48,515 48,871 99% Capital Hills 31,200 19,220 11,980 62% 31,200 26,000 120% Fleet Maintenance 44,786 21,307 23,479 110% 44,786 25,000 179% Bleeker / Facility Operations 125 210 (85) -40% 125 500 25% Buildings 141,935 118,762 23,173 20% 141,935 92,400 154% DGS Administration 4,898 694 4,204 606% 4,898 3,104 158% Control of Animals 15,440 18,519 (3,079) -17% 15,440 15,441 100% Cultural Affairs 8,003 10,055 (2,052) -20% 8,003 12,000 67% General Fund 9,276,352 8,060,220 1,216,132 15% 9,276,352 7,944,870 117% Police (reimbursable) 1,518,745 1,416,394 102,351 7% 1,518,745 1,536,468 99% Fire (reimbursable) 0 0 0 0% 0 110,000 0% Traffic Eng. (reimbursable) 0 0 0 0% 0 500 0% Water 520,480 558,591 (38,111) 520,480 526,554 99% Totals 11,315,577 10,035,205 1,280,372 13% 11,315,577 10,118,392 112% 2019 General Fund, non-reimbursable overtime increased by 15% ($1.2M) from 2018, and was at 117% of budget for the year and $1.3M over budget. Reimbursable OT includes the Water Department (for which the City is reimbursed) and a portion of Police overtime. The Police department had an increase in overtime payments which were higher by almost $407K compared to last year. The overage for APD was due to court OT ($400K), Special Events OT ($200K, partially caused by increased police presence due to increased general safety concerns), and increased training for ---PAGE BREAK--- 7 the LEAD and Implicit Bias training programs. Additionally much of the Police OT costs were caused by unfilled vacancies. Over budget OT costs are offset by the number of vacancies by budgeting for the full complement of police officers. AFD OT increased by over $326K from 2018 and ended the year over budget by 298% ($869K). AFD OT is expected to be reduced going forward as new recruits fill staffing gaps and training costs are reduced. $110K is reimbursable OT, but the remaining deficit is due to the number of position vacancies, and other types of vacancies (absences) such as worker’s comp and paramedic school training. Most of the departments had increases in overtime expenses from last year and most departments finished the year at over budget. CASH The City’s cash position was $9.1M at the end of 2019 and $7.8M more than the same period last year. Landfill cash was almost $900K more compared to last year. Sales Tax revenue provided an additional $1.7M in cash. Delays in PILOT payments to the Albany School District provided us with over $7.0M in cash to get through the end of 2019. It is important to mention without the Capital City Funding payment of $12.0M the City’s cash balance at the end the year would have been almost a $2.9M deficit and could have required us to issue RANs to get through the end of the year. ---PAGE BREAK--- 8 CONCLUSION It continues to be a positive sign that the City is managing within its budget overall, and that multiple smaller efforts to cut costs and increase revenue are succeeding. The $5.3M surplus is a welcome and positive development for 2019, but is not structural in nature, is based largely on one time savings and revenue increases, and cannot be expected to last or continue. Continued aid in some form from NYS will remain necessary to balance the budget for the foreseeable future. Therefore, the City will have to continue to find other savings and revenue sources in order to offset increases in salaries and associated expenses (particularly as union contracts come up for renegotiation), as well as other revenue declines and cost increases.