i'll call to order the santa barbara city council finance committee meeting for september th and we have one item on the agenda which is the fourth quarter financial review is nemeth good afternoon chair hart committee member wait i i treasury manager for the finance department and i'm here today with ms thomashefsky and we are here today to present the fourth quarter financial review for fiscal year two thousand and seventeen i did want to mention that these numbers are still preliminary we're still closing the fiscal year so today we will not be presenting the general fund reserve balances so we'll be coming back in about a month to present the general fund reserve balances and more final balances for the fiscal year when more year and financial results are ready and more year on closing entries have been done so the outline for today is that i will be presenting the significant variances as of june thirty two thousand and seventeen for the general fund revenues miss tomashevsky will be presenting variances for the general fund expenditures as well as the enterprise funds she will also be going into the proposed budget adjustments for fourth quarter so moving on to general fund revenues this first table is a summary of all of the revenues for fiscal year two thousand and seventeen all of the tables are a comparison of the annual budget versus actuals for fiscal year two thousand and seventeen as well as a comparison of actuals for the current year versus the prior year actuals i did want to make one note that the numbers for taxes and other revenues are different from the interim financial statements in your attachment one in your report we received some data after the interim financial statements were prepared and so we updated the figures both in your council agenda packet for attachment two as well as in the powerpoint these primarily relate to sales and use tax and franchise fees and i'll go into detail on the next couple slides as to what the accruals were that we updated but in total you'll see that taxes and fees and service charges both came in under budget for fiscal year two thousand and seventeen taxes by about one hundred zero and fees and service charges one two million and other revenues actually exceeded budget by about one five million in total we're looking at all revenues coming in under budget by about four hundred thousand dollars we are aware of some additional accruals that are still pending that will lower this number by about a hundred to two hundred thousand dollars and those will still be posted in the next couple weeks as we close the year i did want to point out that compared to prior year total revenues did come in  higher than prior year by about four point five percent so now go into some details for each of these categories the first one being sales and taxes total taxes as i mentioned they come in they're coming in under budget for the year by about seven hundred and thirteen thousand dollars and there's four variances that i wanted to focus on mostly negative but one positive the first one being sales and use tax as i mentioned on the previous slide we did post adjustment to this number and that was due to the fourth quarter number coming in in the last week we got the fourth quarter sales tax data for fiscal year two thousand and seventeen it did come in down two seven percent compared to the prior quarter prior year fourth quarter so what i did was i went and i actually updated the actuals for fiscal year seventeen and i also updated the prior year actuals to represent the fourth quarters for both years so we could do a comparison for year to year so when you look at the fourth quarters for fiscal year seventeen and compare it to the four quarters for the prior year we're down point six percent compared to the prior year and that amounts to one million dollars and there are a lot of reasons why we think sales and use tax is going down while we're seeing this year to year decline or continue to see low inflation we've talked about it over the last year or two years we're seeing this general shift to a more service based economy we're continuing to see an increase in online sales and that shift away from your brick and mortar sales and so we think that that's continuing to impact our sales and use tax returns so the other thing we also saw in the fiscal year two thousand and seventeen news we saw an impact from the closure of a couple of prominent businesses in the downtown corridor so that also impacted ourselves in huge attacks for the current year moving on to property tax this has been one of our really healthy revenues for the city over the last couple of years we've seen some significant growth in the property taxes and the current year it actually exceeded budget by over seven hundred thousand dollars and that was due to increase in assessed values for per county records it was over six percent this year and we also saw some real increases in other lines such as supplemental taxes next is uut it really was pretty much in line with budget but the reason i wanted to talk about it was that number compared to prior year it's another one of those revenue sources that is just not seeing that growth we've seen in other years it's down from prior two percent and we've been seeing over the last couple years a real decline in the traditional landline and cellular usage in favor of prepaid cellular we get some property i mean uut from prepaid cellular but not anything to replace what we lost in the traditional landline and traditional cellular we're also seeing a real competition the video programming market we're seeing people move away from cable service to other video programming like streaming and the last one i wanted to talk about was transient occupancy tax it is down below budget by over five hundred zero we did see a pretty healthy increase in hotel growth of over five  percent we saw that real impact was in the enforcement of short term vacation rentals we did budget for the enforcement but we saw a quicker enforcement than we had predicted in the original budget and that's why we see this impact in the current fiscal year so that's a summary of tax revenues now i'm going to move on to the other revenues overall other revenues was came in actually over budget by over one point four million dollars and there's a few variances i wanted to talk about the first forfeitures which actually came in below budget and once again this was due to parking citation revenues largely due to vacancies as well as more timely payments the next is franchise fees and i mentioned this in the first slide that this was one that we updated based on more data that came in after we prepared the interim financial statements for the last couple years we have collected the additional one percent electrical franchise fee but we've put it in a separate account we actually haven't recorded his revenues so ash after we prepared the interim permit financial statements we did receive a favorable california supreme court decision in the jax versus city of santa barbara case so actually then then went and recorded about one three million dollars to revenues in fiscal year two thousand and seventeen and that's why we see a favorable variance originally it was a slightly negative variance largely due to the same issues that have affected uut next use of money and property  saw overall an increase in interest income but we saw a slight decrease in the general fund portion we also saw an impact in rental income from some recreation facilities and that's what's causing this decrease compared to budget and intergovernmental this is a pretty significant significant positive variance of about a million and this again is due to what we've seen in prior years mutual aid reimbursements moving on to general fund fees and service charges this is a negative variance of over one one million dollars and there's really only two variances that are creating this variance of one one million first one being community development of about two hundred and twenty thousand dollars this really is due to just a moderate decline in general permitting activity one project can really swing it either way and the next is in public works of over seven hundred zero dollars and there's a couple factors here the first being a decline in engineering work order revenue and that's due to staff vacancies so we have a significant decline on the expenditure side and another factor is a reclassification of measure a staff revenue to the measure a capital fund and the last is on billable in kind general fund contribution to that cli positas project the last area i'm going to be covering is the miscellaneous revenues we had a category of mislaid on one of the first slides that was below budget of three hundred and eighty thousand dollars and this is the breakdown of that category there's really just two categories that make up this difference one positive one negative the first one is miscellaneous actually it's a positive variance but i wanted to discuss it briefly because of that number compared to prior year it's forty three percent and that's all due to a one time two point five million dollar planes all american settlement related to the refugio oil spill so we actually increased the budget and actuals but it's a significant increase from the prior year so i wanted to point it out the next is operating transfers and it was below budget and that's really what caused the variance in this category of miscellaneous revenues and more than half of this is due to transfers in from the traffic safety fund and that's due to a decline in moving traffic citations that are issued by the city and paid from the county this is really due to some vacancies in that program so that sums up  the uut the i'm curious so wait am i looking at the right tax which is the one that had a variance because of the lawsuit oh french franchise franchise so that was it's a million plus variance so next year will our baseline from this year be about the same because the fee franchise fee we it was it's about six to seven hundred thousand dollars a year and for the last two years we have not budgeted for it so those were about one three million and unbudgeted revenues so next year we actually have already factored in the about seven  thousand dollars in our budget so it'll be about three seven million next year in our budget hey it next year it should be about i'd have to look at it but it spent three yeah it should be about three seven because it is not in our current the current year budget correct okay great thank you any other questions okay thank you mis funds and then the budget adjustments so on this first slide as i'm sure you're familiar with we have we have this the general fund expenditures are broken out by department and the first c we see the annual adjusted annual adjusted budget so that's the original adopted budget along with any prior year carry forwards and any changes approved by counsel throughout the year so we see that's about a hundred and thirty two and a half million dollars compared to the actual amount spent and again this is preliminary numbers so actual about one hundred and twenty seven million for basically the next column is the so the difference between the two so at the preliminary year end we see about a five and a half million dollar savings from the adopted bud or from the adjusted budget and now i'm just going to hit a couple of the highlights so  do see that police make up about almost two million of that variance and as reported in prior quarters as a result of their ongoing efforts to recruit and fill vacancies  we do know i think at third quarter we had about sixteen vacancies since then some of the dispatcher and citation officer positions have been filled seven or eight position our police officers  positions will be starting the academy in october but at the same time they also anticipate there will be some retirements this year as well so we will continue to monitor this but this at least in the short term will continue to be the trend next i wanted to point out fire we see that fire is actually over budget by about one three million and this is actually a combination of a couple things first as  talking on the revenue side with the mutual aid the department tends to be conservative and budgeting for mutual aid because it can it can fluctuate so much from year to year and i think they base it on a three year average and  this was a high fire season so with that about nine hundred thousand of that makes up additional mutual aid activity and the remaining of that is a combination of three other factors we had to overfilled positions that were filled but not budgeted there were some vacation payouts that were also not budgeted and then we have a unique thing with our pension with the calpers and what this is is calpers changed the way that they charge for contributions and it's it's it's a little complicated in that it used to be that every dollar of salary that was paid we would pay a percentage to calpers for that covered payroll cost in the last couple years calpers has been changing that for their unfunded liabilities and now they invoice us for about half of that so regardless of what our covered payroll is we we pay that check and then so it doesn't all run through our payroll so it was a little bit tricky to budget for in this kind of in between year we've since changed how we budget for that and we've corrected that going forward but because of that there was us we were slightly under budgeted on the fire pension costs as well so those are the main contributing factors for that and i will be looking at this one again when we get to the budget adjustments and then just last i just wanted to point out we see public works parks and recreation library community development the continued theme of saving from vacancies so again just to recap we see that the the surplus are the surplus the savings of about five and a half million in our expenditures that year and for general fund this doesn't mean this is the amount going to reserves we have to net that against what we we had also budgeted for about i think two point three million in our revenues for the anticipated year in reserves so that you know we need to account for that we have almost a million in carryforwards and we are also still closing the books we don't anticipate that that number is going to fluctuate much but we will be as julie's arm is nema stated we will be bringing the reserves the the reserves back in october next i will be going through the enterprise funds and similar set up to the last slide  actually broke this up into two slides this time so you can actually see the numbers a little bit better so here we have solid waste water waste water and downtown parking so i just wanted to discuss a few highlights so first we see the water fund ended the year with about a two six million dollar surplus and revenues from from budget and this is actually made up of there's two main drivers here first about one  million of that is as a result of increased revenues from metered water sales and this the main driver here is the replacement of the water meters i think at year end they estimate about fourteen thousand of the twenty four zero meters that have been replaced it has substantially reduced system losses and then the other factor being about one four million in additional an additional buy in and tap fees due to development in the upper state street area so on the expenditure side we see that expenses have a savings of about nine point six million and this is actually made up of quite a few moving pieces here the largest being the desalination facility there are savings of about three three million due to delays in the operations so there's significant savings there in addition about one and a half million reduced cost in water purchases and i think in this case i think it's my recollection that the water costs were conservatively budgeted and the cost the actual cost came in lower and there was also almost a million dollar in salary savings and then another million in chemical costs that were anticipated to come in that there were there was additional savings there as well and then the remainder is just spread over the rest of their operating budget so there's a lot of moving pieces in this one on the wastewater fund kind of tracking similar with though with the water fund there are also savings of about one six million and this is also made up of several factors the two largest being there was some salary savings in wastewater operating or in operations and there were also several budgeted costs for equipment and operating maintenance that were rolled into the cip program so those are the two largest factors and then on the next slide i just wanted to quickly highlight and this this the remaining enterprise funds being airport golf and waterfront and airport ended the year with about a million dollar savings and about half of this is related to salary savings as well the other half is spread over services and supplies of the one of the items here is about a hundred or two hundred and twenty seven zero that was originally anticipated to be spent on the runway rehabilitation project if i'm saying that correctly yes the runway rehabilitation project the project was delayed and they will be bringing that back to reappropriation two thousand and eighteen and then lastly the waterfront fund they had about a one one million dollar savings here this is also because of several factors the two largest being salary savings and then there was a delay in the marina management software implementations so there's credit card processing fees that there were savings for that and then i think about two hundred zero of this is just timing differences on the spending they'll be carrying that forward into next year's budget so that's it for the enterprise funds and i can either answer questions you have any questions sookie i had a question about the library expenditures that seems like that is the outlier percentage wise on the salary savings and so i imagine that means just more vacancies for the library is there anything is there anybody here from the library they could speak to that is that something unique to them they've had salary savings for the last couple years i do know that the majority of that is because of salary savings i i can follow up on that i don't have any more details at this point but i can definitely get that information for you i'd appreciate knowing that okay any videos with questions councillor mingus i've had a book out for about a year i think it could be the fines  suicide customer why did you fight the fire department at one the mutual aid so is that something that we have more expenditures in revenue no it's actually the opposite we have well we have more expenditures let me let me back up so when we budget for mutual aid activity we tend to be very conservative with that because that can fluctuate so much so the  the budget on that is usually very low and then at the end of the year with if it goes above that we bring in the revenues and the appropriation budget to match that so they're not over budgeting for mutual aid activity every year and in this case  the we were over about nine hundred thousand on mutual aid activities but i believe mutual aid revenue was about an additional one one million one one one point two million wouldn't that do a smaller variance but there there were other items in that variance this time that that also accounted for that such as the overfill positions and the pension costs and some unbudgeted vacation payout so it's not all all when we look at that one three million we have to look at about nine hundred thousand of that one three is due to mutual aid and the remaining is overages for the other factors so really the variance was two one million and the nine hundred zero in mutual aid brought it down so in the in the budget adjustment what what we're asking for is to account to appropriate the additional revenues that were received along with the appropriations to cover those additional costs because we did bring in more revenues than the appropriations  however and i'll explain that when we get to the budget adjustments we're also asking for about another fifty zero that is not covered by those revenues but but we think that we aren't going to need that so like if you want i can explain that a lot of that is giving ourselves a little bit of a cushion as we're going through these final closeouts for the year end we need to be under our appropriation authority so we can't spend more than we have budget for so this is to correct for and also give us a little bit that i think when we get to the budget adjustments you're probably referring to the other fifty thousand that were also asking for from reserves but we don't think we're really going to need it if that makes sense i'm not asking about budget adjustments okay i'm just trying to find out so and let me back up maybe that'll make it clear a normal year you're saying we look at kind of a three year running average in terms of our budgeting of mutual aid we're looking at we come up with two numbers every year what our revenue might be and what our expenditure might be is that correct correct and generally the revenue number is bigger than the expenditure number so it is it is not a money losing venture correct so this year we had a lot more mutual aid than a normal in the normal three year cycle the last couple years  activity has been higher than in prior years so wouldn't we have a bigger revenue over expenditure gap or more revenue we do the the expenditures are about nine hundred thousand and we're asking and the revenues are about one one million both of those over budget so appropriations are x i'm sorry could you say those numbers again the revenue is how much the revenue just for the if we're splitting it out for the mutual aid activity alone it's about another one one to one two somewhere in there million and that covers nine hundred thousand dollars of additional mutual aid expenditures but we're also asking for the remainder of that revenue to cover the other cost that weren't budgeted so that's about a three hundred thousand dollar difference yes so what was the nine hundred thousand number you gave me earlier that was just that's under charge that's if we're looking at this one point and i can't let me go back that's if we're looking at total expenditures over budget and that's about one point two  it's it's if you look at that one three million number nine hundred thousand of is because of mutual aid activity so it's over one one point two one point three million and part of that a subset of that is mutual aid overages so this numbers in parentheses meaning where there's more expenditures in revenue it means that there's more expenditures than budgeted okay five percent on the end is much bigger in fact i guess it's the only negative variance out of this list of departments and typically we see that every year every year revenue this number pretty much shrinks down correct okay and we will see that again in the budget adjustments okay thank you councilmember dominguez if i could just jump in for a second we we do show mutual aid in separately on the revenue side and the expenditure side so on my revenue presentation and intergovernmental revenues it's a it's a section of other revenues it is right now  showing as additional revenues over budget by about a million dollars and that is due to mutual aid revenues exceeding budget it was budgeted at about six hundred thousand dollars and it is coming in at about one two million so a lot of that variance is due to additional revenues and that's why we do show expenditures on the expenditure side that that's coming in over budget because both the revenue side and the expenditure side were budgeted lower and both came in higher and there's always more revenues and expenditures because they bill for all of the costs plus an admin fee that gives that additional revenues over spend atures i hope that helps so that inner intergovernmental category correct is there anything else in that category is that yes there are things other than mutual aid mutual take on the gulf fund just of how that's doing just a check in on how that's going please white yes so the goal fund had had a challenging financial year i would say that and lead with that because of course this is a finance committee and the numbers that you see before you show a significant adverse variance in revenue and a significant saving in expenditure so similar to the conversation we just had around mutual aid being higher a lot of the revenue shortfalls were saved in reduce expenditures from  play and a golfer experience standpoint i think the feedback has been exceptional everyone's very happy with the quality of the golf course everyone's happy with the transition and how that was managed the staff who decided to retain city employment w successfully transferred across to the general fund and a number of savings were made with regards to that transition as we were able to absorb those with into the general fund headcount it's fair to say that the revenue short all is in two parts derived one is operational play we've had conversations in during budget presentations around how weather is impacted play levels and we've had obviously a lot of storms through the winter and the other major part of the revenue shortfall was the fact that from a good news standpoint the gulf fund didn't require new debt so within the budget we we assumed one hundred and eighty thousand dollars of new debt from the general fund if the golf course was unable to pay bills from its cash flows we actually had a very good year in terms of making savings and we didn't require the use of those additional funds so of the three hundred and eighty i think it is shortfall in revenue one hundred and eighty of that is actually no new debt improve we've seen since we've had uninterrupted play from rain and other events growth each every month year over year and this fiscal year looking like it's starting about ten percent up from last fiscal year so i'm confident that it's growing but of course there's always that temptation to be too confident when you put set your budget for revenue targets and round growth that sounds encouraging i know that i mean this has been a big disruption and that  so just to continue with the fire department conversation here's the budget adjustment i was referring to when we were discussing the expenditures so we actually brought in about a one two million of revenues above what we had budgeted for fire so we staff are recommending a receiving recognizing that revenue and the appropriation to match that and with that because we're also closing the books and we don't want to just say this is exactly the amount give ourselves a little bit of room so that we are still within our appropriation authority knowing we're probably not going to need that and that that'll fall back to general fund reserves at the end of the year when we actually know the final numbers so and i should quickly say  last last quarter we decided to not go through every single budget adjustment so we are going to continue with that so on the next slide i do just quickly want to reference a few adjustments that you're going to see on several of the upcoming slides there were two things that in closing the year we had three disaster funds from fiscal years two thousand and seven to two thousand and nine so the tea cedar fire and the zaca fire that it's taken quite a while to reconcile all those costs and get all those claims and the reimbursements back and with that now we're ready to close those funds so there was some residual amounts in those funds so in order to do that there's several funds that we're transferring those monies back to so it's really just cleaning up those funds so we can close them so that's one of the themes we'll see throughout these slides the other area is with the public works and the community community development technology fees as well as with the axela and tide mark project because of this is  a pretty complex project in the fact that it's funded by future technology fees and was so the ite capital fund loans loan some of that money up front to do the project sooner and with that at the end of each year we have to true up those balances based on the actual revenues that come in and you know in the loans that are needed to get all those balances correct so you're go several adjustments that relate to that as well so and that's what that's what you saw in that last slide this is also continuation of the three disaster funds and on and on this slide this is just these are just several small clean up recognition of some revenues and appropriations for some small grants and i do want to reference these two on this next slide this first one relates to the streets capital fund and specifically the overlay project in this case there were three bridge projects that would have been funded by the sale of i believe it's twenty west mason and due to the timing of those projects the the funding was borrowed from the overlay project since then the property has been sold and so this is to reimburse the overlay project back and on the next budget adjustment for the streets grants capital fund this relates to the mission canyon bridge rehabilitation project and in this case the city received grant funding for eight hundred and eighty five thousand dollars and normally staff would bring these budget adjustments when they actually award the contract for this was for the design phase of the project rfp went out and there were no proposals received when staff went to do the second rfp there were additional costs and an administrative costs and engineering costs incurred therefore staff recommend that we receive that revenue and the appropriation at for fiscal y seventeen and with that a consultant was selected in the second round and staff do anticipate awarding that contract later this year fiscal year eighteen roy so when will we be hearing an update on that project hearing design i thought we were still in a planning phase on that rather than i mean we still had choices to make on that design phase that's all right so and i thought we still had some more planning work to be doing there so but in november is when we'll be hearing about that yes and i can ask that question too and follow up with all of you great thank okay so on this next slide the only one i really wanted to bring to your attention relates to the water drought fund and the water srf loan fund and we have brought a similar adjustment earlier this year this is again just a clean up item when costs are incurred there were some costs that were incurred in the water drought fund and then subsequent reimbursements received to the srf fund so this is just to match the costs with the reimbursements and then on the last slide this is also another clean up item but it's because it's such a large amount i wanted to point that out and in this case this this relates to the airport operating fund and the airport development fund for the sale of the hollister property and in this case the the fixed asset itself resided reside in the airport operating fund however we received the revenues for the the proceeds for the sale of the property in the development fund and really what we should have done is received it to the airport operating funds so we could dispose of the asset and then transfer the money so this is really just a clean up item to correct for that and with that just to recap staff recommend that we that the committee accept the interim financial statements for y end and approve the proposed budget adjustments and we would be happy to answer any questions are there any questions for longer term pattern so just to get more feedback down on what you folks are hearing what your in antennae are are telling you just obviously patterns and information that you might be receiving through your networks on on that any other questions this is kind of a boring technical accounting question but i'm curious the the second c we're showing increase and an estimated revenues for most of these situations but the first column is an increase in appropriations so why wouldn't it be an increase in music expenditures or something else what is what is the appropriations category and how does that fit into this any minute committee member dominguez which budget adjustment are you referring to well pretty much all of these we show an increase in revenues and then a corresponding increase in appropriations in the same amount in a different category so i'm just curious what the appropriations category is i mean assuming we're appropriating money to spend it well for example if we get extra grant funding we would increase the  we would increase the estimated revenue and then increase the corresponding appropriation allowing the authority to utilize the additional revenues in is is there a specific question i'm not sure i'm following question is why are we doing it seems like we're creating extra work if we're just increasing it in both categories every time and that's just a requirement to show we're spending it in that particular category well yes but then it's also we have to spend within our appropriation limits so okay revenues or is going to be reserved so if we know we got additional revenues we're gonna do a corresponding entry to the to the budgetary account that we call us tomato revenues otherwise it's gonna come from reserves so this just indicate that it's a balanced transaction from a budgetary perspective right and what i am assuming and maybe it's not incorrect maybe it's not correct you basically want to adjust the budget because you want to show people who are watching that there were big adjustments that were made and not kind of do them behind closed doors you want people who were relying on the budget documents to have faith in the budget so if it's a big ticket item you want to do an adjustment yeah so well but more importantly i think my question was really just about why we call it appropriations and not expenditures because the it is an authority's appropriation is can't why wouldn't you adjust the expenditure say for fire where we said okay we're bringing in you know the million point two and we've we've shown that in the increased revenue why wouldn't you go back and adjust the general fund expenditure for fire upward by the right hundred thousand extra dollars we actually expended because we don't need to adjust that because that's just done through transactional activities so when you would run a payroll we incur these costs that's already occurring in our in our actual expenditures the budget side of the things has to  sometimes for these things we kind of come after the fact you know we know you've had these mutual aid expenditures funded from mutual aid revenues and so we know if a balanced sort of thing going on we're not using reserves or presuming to your reserves so sometimes they'll come after the fact to true up the budgetary counts to show  yeah we need still need that budgetary authority on the appropriation side to cover those costs but it's being funded from revenues through which allayed and we'll just the estimated revenues accordingly so if someone goes back a year or two from now and looks at this budget they're gonna see the revenues with the extra amount because we've adjusted it but the expenditures will still be way down here no actually the expenditures again we encourage nine hundred thousand dollars more in expenditures than we had planned so we need appropriation to cover those so we have nine hundred thousand dollars more in actual expenditures and also the budget reflects that the revenues that the budget will actually change to conform to the actual expenditures absolute on the expenditure side always because we have revenue doesn't we typically we budget but we don't we can have a revenue come in one year and if we don't need to spend it that year we might just leave it there and we'll bring it the next year as an appropriation authority because when we want to spend it so there isn't that that requirement for the revenue side that we have to adjust us to meet a revenue account but certainly we want to spend money on a given year we have to adjust the appropriations for the authority of that okay i just thought i would ask cuz it struck me as asymmetrical and i always wonder why if there's a reason why we do it a certain way and i'm sure it's accounting guidelines that mandate that but i was just wanted to ask well it was on my mind thank you are there any comments or questions from members of the public okay well then i just want to thank ms names and ms tomaszewski for the report and is there a motion to accept the financial statements and approve the proposed budget