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OFFICE OF THE ALBANY CITY TREASURER DATE: May 29, 2014 TO: Hon. Kathy M. Sheehan Members of the Common Council FROM: Hon. Darius Shahinfar CC: Ismat Alam RE: 1st quarter 2014 Performance The following is a summary of the unaudited results for the 1st Quarter 2014. Revenue in the first quarter of 2014 totaled $75 million an increase of 3% ($1.9 million) compared to 2013. Expenses totaled over $37 million and were up almost 7.2% ($2.5 million) compared to the first quarter of 2013. Most of this comparative increase is due to the reporting of the annual pension contribution, and the effects of this harsh winter. Overall, while the City is roughly on budget for 2014 thus far, there are multiple causes for concern regarding our revenues that could lead to an operating deficit by year end. REVENUE (Thousands) MAR MAR % MAR Annual % REVENUE YTD 14 YTD 13 Variance YTD 14 Budget Variance Budget PROPERTY TAX 55,940 55,096 844 2% 55,940 56,048 (108) 100% SALES/USE TAX 7,720 7,533 187 2% 7,720 31,930 (24,210) 24% PILOTS/19-a 3,512 2,829 683 24% 3,512 19,045 (15,533) 18% OTHER LOCAL SOURCES 469 408 61 15% 469 3,690 (3,221) 13% LANDFILL 2,229 2,624 (395) -15% 2,229 11,177 (8,948) 20% OTHER DEPARTMENTS 386 493 (107) -22% 386 2,792 (2,406) 14% INTER GOVERNMENT 42 74 (32) -43% 42 315 (273) 13% FINES 992 1,222 (230) -19% 992 5,115 (4,123) 19% LICENSES AND PERMITS 872 645 227 35% 872 2,332 (1,460) 37% STATE AID 1,503 977 526 54% 1,503 20,426 (18,923) 7% SALE P/COMP/LOSS 20 35 (15) -43% 20 290 (270) 7% MISCELLANEOUS 1,553 1,719 (166) -10% 1,553 4,534 (2,981) 34% OTHER 2 (289) 291 -101% 2 5,502 (5,500) 0% TOTAL REVENUE 75,240 73,366 1,874 3% 75,240 163,196 (87,956) 46% The chart above summarizes the City’s sources of revenue through March 31, 2014. ---PAGE BREAK--- 2 1. Property Tax revenue increased from 2013 by $844,000 as a result of the tax levy increase under the tax cap, but it is under the 2014 budget by $108,000 as a result of assessment reductions, and reductions are expected to continue. 2. Sales Tax revenue from the first quarter increased 2% ($187,000) from 2013 and totaled $7.7 million. However, this increase is below the 2014 budget projections by approximately $250,000 for the quarter. Although sales tax revenue can fluctuate quarter to quarter, this shortfall projects to a $1 million revenue shortfall for 2014 should this trend continue. 3. PILOTS/19-a revenue was 24% higher than the same period in 2013. Most of the increase is due to receiving payments earlier this year than last year. Therefore this revenue line is expected to meet its budgeted amounts in 2014. 4. Other Local sources revenue was 15% higher than the first quarter of 2013. National Grid’s utilities gross receipts payment alone was $26,000 higher than last year. This revenue line fluctuates, and no 2014 budgetary prediction can yet be made. 5. Landfill revenue decreased 15% compared to the first quarter of 2013. Contaminated soil was lower by $174,000 and tipping fees decreased by almost $157,000 from commercial and municipal customers. This revenue line can fluctuate, but revenues are projected to be about $1 million under budget in 2014. 6. Other Departmental revenue was 22% lower than the same period last year, while rental registries increased almost $21,000, APD Event Security revenue decreased by almost $23,000, EMS Ambulatory revenue decreased by $57,000 and Safety Inspection revenue decreased by $81,000. This revenue line fluctuates, and no 2014 budgetary prediction can yet be made. 7. Fines and Forfeitures revenue decreased by 19% from the first quarter of 2013. Both parking ticket and traffic/police court fines combined for a decrease of $230,000, mostly from a drop in parking ticket revenue resulting from a reduction in parking tickets issued and revenue derived from the booting of vehicles. Although both ticketing and booting has increased since the end of the first quarter, should these trends continue, this item will be approximately $1.1 million (25%) below 2014 budget. 8. Licenses and Permits revenue increased 35% ($227,000) compared to the same period last year. Safety Inspection permit revenue increased by $200,000 and Plumbing Permit revenue increased $33,000. This revenue line fluctuates and no 2014 budgetary prediction can yet be made. ---PAGE BREAK--- 3 9. State aid was 54% higher in the first quarter compared to 2013. Most of the increase in this category resulted from an accounting requirement from the NYS Comptroller’s Office to recognize 25% of the 2013 amortized pension in 2014 as revenue, and will even out over the course of the next 3 quarters. 10. Miscellaneous revenue was decreased 10% ($166,000) compared to the same period last year primarily as a result of a decrease in delinquent debris and demolition charges levied onto 2014 property tax bills. This revenue line fluctuates and no 2014 budgetary prediction can yet be made. 11. Other revenue decreased 101% ($291,000) compared to the same period last year. Most of this revenue is derived from federal government grants, the timing of which varies from one year to the next. This line is largely budget neutral because expenses are generally tied to revenue: Should revenue not materialize, then neither do the expenses. DISBURSEMENTS Category/Account MAR MAR % Annual % YTD 14 YTD 13 Variance Budget Variance Budget Personal Benefits 7100-7199 18,508,375 18,603,783 (95,408) -0.5% 75,918,308 (57,409,933) 24% Fringe Benefits 7801-7863 12,340,448 11,530,855 809,593 7.0% 51,717,084 (39,376,636) 24% Non-Personal Service 7210-7701 6,549,891 4,766,860 1,783,031 37.4% 45,362,634 (38,812,743) 14% Total 37,398,714 34,901,498 2,497,216 7.2% 172,998,026 (135,599,312) 22% Number of weeks in period 13 13 0 52 25% Total disbursements increased by 7.2% compared to the same period last year to over $37 million. Spending was up in Fringe Benefits and Non-Personal Service but decreased in Personal Benefits for a total increase of almost $2.5 million compared to 2013. ---PAGE BREAK--- 4 1. Salary expense decreased by -0.5% compared to the same period last year. Salary expenses are level or lower in most of the departments compared to the first quarter of 2013. This is largely due to departures from the previous administration, reorganization, unfilled positions and delay in filling unfilled positions. 2. Benefits Expenses increased by 7.0% for the first quarter of 2014. Pension expenses were up $884,000 compared to 2013. The City is required to recognize 3 months or 25% of the NYS Retirement pension payment from 2013 in 2014. We are hopeful that the recent news about the enhanced state of the NYS Pension Fund will ultimately result in a reduction of this budgeted expense for 2014. 3. Non-Personal Service spending increased by 37.4% or almost $1.8 million from 2013. This category includes utilities, contracted services, supplies, materials, small equipment, consulting fees and debt service. The first quarter saw increases over last year in the Fire Department of $245,000 in equipment expense, most of this increase $165,000, is offset by a NYS grant to purchase air packs, DGS saw increases in the following accounts: gasoline expense increased $263,000, motor vehicle repair expense increased $120,000 and snow removal supplies and expense increased $521,000.The City’s utilities expenses increased by $237,000 from the same period last year. Some of the increases in DGS expenses and utilities expense can be attributed to the snow and extreme weather the City had to endure during the first three months of the year. This expense line can fluctuate and a cooler summer and warmer fall and early winter along with lower energy costs would serve to reduce 2014 costs. However, if trends continue, these unforeseen expenses will have significant negative consequences to the 2014 budget and to City finances. 5. Encumbrances (funds reserved for purchases) decreased by $1.5 million or almost 22% compared to the same period last year. Encumbrances total $5.4 million at the end of the first quarter. This figure represents expected and budgeted spending in the months ahead and does not affect the budget per se. ---PAGE BREAK--- 5 OVERTIME Department 2014 2013 Change % 2014 Budget Budget Police (non-reimbursable) 867,055 883,141 (16,086) 867,055 3,800,000 23% Fire 382,352 366,414 15,938 4% 382,352 1,750,000 22% Communications 42,693 40,654 2,039 5% 42,693 162,000 26% Parks Maintenance 97,581 60,138 37,443 62% 97,581 200,000 49% Waste Collection 81,159 60,258 20,901 35% 81,159 175,000 46% Landfill 79,940 57,762 22,178 38% 79,940 130,000 61% Central Maint. 18,278 22,370 (4,092) -18% 18,278 70,000 26% Street Maintenance 59,141 51,541 7,600 15% 59,141 130,000 45% Street Cleaning 81,550 54,558 26,992 49% 81,550 110,000 74% Recreation 0 5,387 (5,387) -100% 0 25,000 0% Traffic Engineering 6,777 6,277 500 8% 6,777 20,000 34% Capital Hills 7,654 4,081 3,573 88% 7,654 26,000 29% Central Garage 13,933 13,368 565 4% 13,933 28,000 50% Bleeker Stadium 0 274 (274) -100% 0 1,200 0% Buildings 11,862 16,627 (4,765) -29% 11,862 18,000 66% Control of Animals 1,397 1,450 (53) 1,397 9,000 16% Special Events 0 252 (252) -100% 0 20,000 0% General Fund 1,751,372 1,644,552 106,820 6% 1,751,372 6,674,200 26% Police (reimbursable) 215,224 205,173 10,051 5% 215,224 950,000 23% Traffic Eng. (reimbursable) 0 0 0 0% 0 0 100% Water 205,305 178,686 26,619 15% 205,305 605,000 34% Totals 2,171,901 2,028,411 143,490 7% 2,171,901 8,229,200 26% General Fund overtime was at 26% of budget at the end of the first quarter. Excluding the Water Department (for which the City is reimbursed) and reimbursable Police overtime, overtime expense was 6% ($106,820) higher than the same period last year. Parks Maintenance had the biggest increase in overtime expense percentage at 62% ($37,443) over last year. Police overtime was lower by 2% compared to the same period last year and finished the quarter at 23% of budget. The majority of departments have higher overtime expenses this year than last year, some of which can be attributed to the change in administration and the number and intensity of the snow storms during early months of 2014. ---PAGE BREAK--- 6 CASH JAN FEB MAR Receipts $75,184 $17,204 $13,272 Disbursements $(29,374) $(14,888) $(15,810) Cash on Hand $67,808 $70,124 $67,586 $(40,000) $(20,000) $20,000 $40,000 $60,000 $80,000 $100,000 Cash Flow (In Thousands) Receipts Disbursements Cash on Hand The City’s cash position was 2% less than forecasted and $1.0 million lower than the same period last year. Most of the decrease is the result of paying outstanding invoices to our vendors within 30 days of the date of the invoice, and is not a concern. CONCLUSION Revenue is ahead of last year by $1.9 million or Most of this increase is from the budgeted increase in the property tax levy and early payment of budgeted PILOT revenue. Expenses are just below budget for the first three months at 22%, but 7.2% or almost $2.5 million higher than last year at this time. The booking of pension costs, an increase in expenses related to snow and cold weather and the failure to realize budgeted sales tax, landfill and fine revenues, have had a negative impact on the City’s budget. Although it is early in the year and circumstances can change, we are facing year-end shortfalls in sales tax, landfill and fine revenues. On the expense side, prospects for cost savings will improve with increased efficiencies, consistent departmental monitoring of expenses including overtime, less severe weather conditions and a possible reduction in the City’s contribution to the NYS Pension Fund because of positive fund performance. Reduced health insurance costs would also assist the City in making up for trending revenue shortfalls.