Item 4.1 - Fiscal Year 2018-19 General Fund Financial PerformanceDATE:
TO:
FROM:
CONTACT:
SUBJECT:
Summary:
City of Poway
COUNCIL AGENDA REPORT
December 17, 2019
Honorable Mayor and Members of the City Council
Aaron Beanan, Director of Finance �
Aaron Beanan, Director of Finance
(858)668-4411 or abeanan@poway.org
Fiscal Year 2018-19 General Fund Financial Performance
This report for Fiscal Year (FY) 2018-19 only discusses the unaudited General Fund financial
performance as of June 30, 2019. As such, the information contained in this report may differ from
the audited Comprehensive Annual Financial Report (CAFR), which is still being finalized. This
report does not include information related to enterprise funds, including the water and
wastewater funds, or other non-General Fund accounts.
Recommended Action:
It is recommended that the City Council receive this report.
Discussion:
The FY 2018-19 budget was adopted anticipating there would be an $852k General Fund
operating surplus. In March 2019 the FY 2018-19 mid-year budget update increased the
anticipated General Fund operating surplus to $1.55M. Higher projected revenues were the
primary driver for this increased projection. During the mid-year budget update, staff indicated the
actual financial performance of the General Fund wouldn't be known until FY 2018-19 closed.
For FY 2018-19, the General Fund had revenues of $50.0?M, expenses of $50.22M, and other
financing sources of $1 .48M for a total surplus of $1.33M, as shown in the table below.
General Fund Revenues Budget Actual Variance
Taxes $38,216,120 $39,050,341 $834,221
CharQes for Services 4,059,854 3,635,111 (424,743)
Developer Fees 2,890,025 2,897,874 7,849
Other 3,385,950 4,485,482 1,099,532
Total $48,551,949 $50,068,808 $1,516,859
General Fund Expenses
Community Services $6,380 ,590 $5,839,704 $540,886
Development Services 5,790,318 4,977,001 813,317
General Government 6,909,522 6,145,232 764,290
Public Safety 25,756,202 25,092,171 664,031
Public Works 4,768,507 4,401,878 366,629
Capital Outlay 22,519 ,682 3,765,612 18 ,754,070
Total $72,124,821 $50,221,598 $21,903,223
Other Financing Sources/(Uses) $1,484,333 $1,484,333 $0
Total Surplus/(Deficit) $1,331,543
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Revenues came in $1.5M higher than anticipated. Taxes ended the year $834K higher than
anticipated. Decreases in Redevelopment Property Tax revenues of $230k, due to lower
administration related revenues, were offset by higher than anticipated Sales Tax revenues of
$670K, due to unanticipated performance by two taxpayers, and Property Tax revenues of $350k,
primarily related to new commercial development. Charges for Services ended the year $424k
lower than anticipated. Decreases in Ambulance Fee revenue of $250k related to timing
differences, decreases in Telecomm Leases of $104k due to timing differences, and decreases
in Recreation related revenues of $69k due to the Poway Community Swim Center closure were
the largest drivers of this variance. Other revenues came in $1.1 M higher than anticipated which
was driven almost entirely by interest of $966k. Of this amount, however, $403k represents
unrealized gains. Unrealized gains do not directly benefit the city until the underlying investments
are liquidated. The practice of the investment committee is to hold investments to maturity
maximizing interest earnings and potential price appreciation over the long term.
Expenses came in $21.9M lower than anticipated. Much of this difference is $18.8M in capital
outlay that has not yet been completed. Projects in progress at June 30 , 2019, such as the Mickey
Cafagna Center and Espola Road, account for this difference. Approximately $3.1 M relates to
operating departments coming in under budget. Of that amount, $1.2M relates to salary and
benefit savings from 35 vacancies which occurred during various parts of the fiscal year. The
remaining $1.9M in savings relates to maintenance and operations. The Poway Community Swim
Center's closure was a leading contributor to budget savings in Community Services. Fewer
development projects contributed to savings in the Development Services budget. Not all vehicles
identified for replacement were replaced during the year leading to savings in General
Government. A City of San Diego bill credit for previous overcharges in the Fire Dispatch Service
contract was a contributor to the savings in the Public Safety budget. Several projects, such as
park and playground refurbishments, were not completed prior to the end of the fiscal year which
contributed to the savings in Public Works.
Fund balance classifications changed with Governmental Account Standards Board Statement
No. 54. The table below gives a brief definition for each type fund balance classification relevant
to the General Fund along with an example of the classification for reference.
Classification Definition
Nons endable uired to be maintained
Committed Extreme events reserve
Use is narrower than the Encumbrances
No restrictions
General Fund balance for FY 2018-19 increased by $1.33M as shown in the table below.
General Fund Balance FY 2017-18 FY 2018-19 Variance
Nonspendable: $15,639,036 $15,550,648 ($88,388)
Committed:
Economic volatility: revenue 4,293,683 4,658,284 364,601
Economic volatility: expense 2,146,841 2,328,706 181,865
Extreme events 12,881,059 13,974,863 1,093,804
Assigned: 16,613,992 15,592,275 (1,021,717)
Unassigned: 14,063,706 14,865,084 801,378
Total General Fund Balance $65,638,317 $66,969,860 $1,331,543
The City was able to maintain compliance with its General Fund Reserve Policy of 45 percent by
adding $1.6M to its economic and extreme events reserves during FY 2018-19. Unassigned fund
balance increased approximately $800k. However, as historically reported, unassigned fund
balance includes ongoing capital project funds which have not yet been encumbered for contracts.
Accounting for ongoing capital projects which have not yet been encumbered to contracts, the
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unassigned fund balance only increases $117k as shown in the table below.
Unassigned Fund Balance FY 2017-18 FY 2018-19 Variance
As reported in CAFR $14,063,706 $14,865,084 $801,378
Less: Ongoing capital projects {6,484,425) (7,168,445) (684,020)
Total Available $7,579,281 $7,696,639 $117,358
Therefore, the General Fund has available unassigned fund balance of $7.7M. Government
Finance Officers Association (GFOA) best practice suggests that unassigned fund balance be
used for one-time expenditures, not ongoing recurring expenditures. For example, the City will be
purchasing self-contained breathing apparatus (SCBAs) for the Fire Department using
unassigned fund balance since the SCBA grant application was denied. Staff is in ongoing
negotiations with the City of San Diego about the City of Poway's proportionate share of the Los
Penasquitos Watershed Management Area Water Quality Improvement Plan and Comprehensive
Load Reduction Plan project. Unassigned fund balance could pay for the City's proportionate
share since it is not an ongoing expenditure. The potential future expenditures related to the
Espola Road Safety Improvement Project, should funding be required in addition to what has
already been programmed, would also be a good candidate for unassigned fund balance under
GFOA's best practice recommendations. Depending on the outcome of discussions with Poway
Unified School District and future Council direction, the extensive capital projects needed at the
Poway Center for the Performing Arts (PCPA) would also be a good candidate for unassigned
fund balance. The rising operational costs of PCPA would need to be addressed separately as
they are ongoing expenditures, not one-time. Additionally, the City is also still in the process of
appealing a recent decision by the State to redistribute sales tax dollars received in 2005 in a
manner that would adversely impact the City. Because the issues involve a single taxpayer, most
details are confidential. Should the City be required to reimburse the State, unassigned fund
balance would be appropriate under GFOA's best practice recommendations. Further, at the
September 18, 2018 City Council workshop on the California Public Employees' Retirement
Systems (PERS) actuarial analysis, the Council expressed interest in identifying funds to pay
down some of the City's unfunded pension liability. Funding this liability would also be appropriate
from unassigned fund balance.
Environmental Review:
This action is not subject to review under the California Environmental Quality Act (CEQA).
Fiscal Impact:
There is no direct fiscal impact associated with this staff report because it only contains
information related to the financial performance of the General Fund during FY 2018-19.
Public Notification:
None.
Attachments:
None.
Reviewed/Approved By:
Wendy aserman
Assistant City Manager
3 of 3
Reviewed By:
Alan Fenstermacher
City Attorney
Approved By:
December 17, 2019, Item #4.1