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LTC 182-2017 FY 201617 First Quarter AnalysisMIAMI BEACH OFFICE OF THE CITY MANAGER NO. LTC# 182 -2017 LETTER TO COMMISSION TO: Mayor Philip Levine and Members of he City Commi':sion FROM: Jimmy L. Morales, City Manager DATE: April 5, 2017 SUBJECT: FY 2016/17 First Quarter Analysis The purpose of this LTC is to provide the Mayor and Commission with the status of the FY 2016/17 budget to actual revenue and expenses reflected at the end of the first quarter with projections through September 30, 2017. The City's Charter requires that "the City Manager shall make public a quarterly report showing the actual expenditures during the quarter just ended against one quarter of the proposed annual expenditures set forth in the budget." The first quarter of any fiscal year is not necessarily the most reliable indication of the experience for the remainder of the fiscal year, but does provide a first glance in identifying any potential issues. Certain assumptions for both revenue and expenditures were made that are still developing and will be adjusted for in later projections. These assumptions, along with our continued effort at managing the City's resources and ongoing adjustments to line item revenues and expenditures throughout the year will affect our projections going forward. The First FY 2016/17 budget amendment adopted by the City Commission on November 18, 2016, recognized a preliminary year -end surplus of $4.558 million. Of this surplus, $2,230,250 was allocated to the 11 percent Emergency reserves, $1,092,000 funded rollover requests and the remainder, $1,235,750, was set aside to supplement the 6 percent optional Emergency Reserves. The Second Budget Amendment approved on February 8, 2017, added $445,740 from other sources to the General Fund, $733,260 from General Fund Balance, realigned $491,000 within the General Fund and appropriated $1,218,000 to Special Revenue Funds. GENERAL FUND Based upon this first quarter analysis, it is projected that General Fund revenues will exceed expenditures by $627,000. General Fund Overview An analysis of the actual three -month operating revenues and expenditures for the period October 1, 2016 through December 31, 2016, reveals an operating budget surplus of $111.2 million. While the surplus as of December 31, 2016 seems unusual as compared to the projection for the fiscal year ending on September 30, 2017, it should be noted that the City receives a greater percentage of ad valorem taxes during the first quarter, (historically 60 percent). Ad valorem tax revenues represent approximately 51 percent of total budgeted revenues and represent 79 percent of the revenues received in the first quarter of the fiscal year. As of December 31, 2016, revenues collected were approximately 57 percent of the amended LTC — FY 2016/17 First Quarter Analysis Page 2 of 9 budget or $182.8 million. Expenditures are approximately 22 percent of the amended budget or $71.6 million; however, there are often delays in expenditures in the first quarter of the fiscal year. General Fund Adopted Budget FY 2016/17 Budget Amended Budget 1/4 of Amended Budget Revenues Expenditures $ 317,252,000 $ 317,252,000 $ 319,523,000 $ 319,523,000 79, 880, 749, 96 79,880,749.96 Actuals as of 12/10/2016 $ 182,778,134 $ 71,567,326 Variance from 1/4 Amended Budget Over / (Under) 102,897,384 (8,313,424) Surplus/ (Deficit) $ 111,210,808 General Fund Year -End Projections The projected year -end operating revenues and expenditures through September 30, 2017, provide a more realistic snapshot of anticipated year -end shortfalls or surpluses at this point in time. Further, while the actual revenues and expenditures presented are as of December 31, 2016, some of the projections have incorporated more recent information, if available. A summary of preliminary projected General Fund Revenues and Expenditures through September 30, 2017, reflects a surplus totaling $627,000. It should be noted that this analysis is a preliminary projection based on the experience in the first quarter, which is not necessarily the most reliable indication of the experience for the remainder of the fiscal year, but does provide a first glance in identifying any potential issues. FY 2016/17 Budget General Fund Adopted Budget Amended Budget Protected Variance Projected v Amended Budget % Over / (Under) Revenues Expenditures $ 317,252,000 317,252,000 319,523,000 319,523,000 319,205,000 318,578,000 (318, 000) (945,000) -0,1% -0.3% Surplus / (Deficit) $ 627,000 General Fund Operating Revenues For a detail of General Fund Revenues by category, see attached Schedule A. At this time, we are projecting property tax collections for FY 2016/17 at 95 percent of total property taxes assessed and consistent with the original adopted budget, thereby, allowing adjustments for discounts, as well as, a level of adjustments due to appeals similar to long -term historical levels. It is important to note, that in the last few years, property tax collections have been below prior year levels due to higher levels of appeals and adjustments. The impact of appeals and adjustments for the FY 2016/17 budget will be provided by the Miami -Dade County Property Appraiser in July. Overall, revenues are projected to be $318,000 below the amended budget. As in prior years, significant variances to budget in excess of $300,000 or 10 percent by revenue category are explained below: Other Taxes — This category includes franchise tax revenues such as electricity, gas, waste contractors, and cable TV and is projected to be lower than budget by $525,000, primarily due to a decrease in projected electricity revenues. Fines & Forfeits — This category includes traffic and parking fines, building code violations, code enforcement violations, and other items. The revenue projection for Fines & Forfeits is higher than amended budget by 17.7% or $319,000, primarily due to Code Enforcement Violations ($130,000) and Public Works elevator violations that were previously unbudgeted ($200,000). LTC — FY 2016/17 First Quarter Analysis Page 3 of 9 Rents and Leases This category includes revenue from various rentals and leases realized from city properties. Projected collections are $483,000 lower than amended budget primarily due to changes in contract terms for Colony Theater ($190,000) and Live Nation ($142,000). Miscellaneous — This category includes revenue from various categories such as concessions, reimbursements and miscellaneous revenue categories like beach access fees and sale of city property. Projected collections are $761,000 higher than amended budget primarily due to previously unbudgeted fee collections for Concessions ($401,000) and an increased projection in Design Review fees ($265,000). General Fund Operating Expenditures As of December 31, 2016, actual expenditures were approximately 22 percent of budget or $71.6 million. Year -end projections through September 30, 2017, indicate that expenditures will be $318.6 million, approximately $945,000 (0.3 percent) below the amended budget. The expenditure projections are based on the first quarter analysis and will be continually monitored and updated. A comparison of actual and projected expenditures to budget by Department is provided in the attached Schedule A. As in prior years, Departments projected to exceed budget or with significant variances to budget in excess of $300,000 or 10 percent are explained below: Building — The department is preliminarily estimated to be below the amended budget by 3.3 percent or $494,000. The variance is due primarily to projected savings in professional services. Building Expenditures Amended Budget 15,153, 000 Projected $ 14, 659, 000 Variance Projected v Amended Budget $ (494, 000) % Over / (Under) -3.3% Communications — The department is preliminarily estimated to be above the amended budget by 6.6 percent or $131,000. The variance is due primarily to personnel changes including reclassifications and promotions. Amended Budget Communications Projected Expenditures 1,995,000 $ 2,126, 000 Variance Projected v Amended Budget $ 131,000 % Over / (Under) 6.6% Emergency Management — The department is preliminarily estimated to be above the amended budget by 2 percent or $211,000. The variance is due primarily to increases in the usage of contracted services, specifically security services citywide to enhance public safety and emergency call taker services due to staffing shortages in the E -911 call center managed by the department's Public Safety Communications Unit (PSCU), The PSCU is responsible for operating the City's centralized emergency call center where all emergency calls are received and routed to the appropriate first responders. LTC — FY 2016/17 First Quarter Analysis Page 4 of 9 Emergency Management Amended Budget Projected Variance Projected v Amended Budget % Over / (Under) Expenditures 10, 370, 000 10,581,000 $ 211,000 2.0% Environment & Sustainability — The department is preliminarily estimated to be below the amended budget by 10.5 percent or $121,000. The variance is due primarily to salary savings, Environment & Sustainability Amended Budget Expenditures Projected $ 1,153, 000 Variance Projected v Amended Budget 1,032,000 % Over / (Under) (121,000) - 10.5% Planning — The department is preliminarily estimated to be above the amended budget by 1.9 percent or $81,000. The variance is due primarily to salary increases for various personnel in the department, as well as an increase in overtime expenditures resulting from increased demand for expedited plans review services provided. Overtime expenditures resulting from expedited plans review services are, however, offset by revenues. Planning Amended Budget Projected Variance Projected v Amended Budget % Over / (Under) Expenditures 4,306,000 4,387,000 81,000 1.9% Citywide Accounts — The Citywide Accounts are projected to be above the amended budget primarily due to conservatively maintaining contingency funds at budgeted amounts. Citywide Accounts Amended Budget Projected Variance Projected v Amended Budget % Over / (Under) Expenditures $ 18,237,260 18, 822, 000 584,740 3.2% ENTERPRISE FUNDS The City accounts for proprietary operations in Enterprise Funds. Convention Center, Parking, Sanitation, Sewer, Stormwater, and Water are included in this grouping. The expenditures for these funds are budgeted to be fully offset by charges for services. An analysis of the actual three -month operating expenditures for the period October 1, 2016 through December 31, 2016, reveals that Sanitation, Sewer, Stormwater, Parking, and Convention Center have expenditures less than one - quarter of their budget. However, this is not representative of trends for a full fiscal year, as there is often a lag in expenditures, particularly related to those billed by outside entities. fin LTC — FY 2016/17 First Quarter Analysis Page 5 of 9 ENTERPRISE FUNDS Itafiol In wentot center FY 2016/17 Adopted Budget Budget Amendment - 11/18/16 Budget Amendment - 02/08/17 FY 2016 /17 Amended Budget 20,624,000 262,000 54,156,000 28,334,000 34,402,000 516,000 198,000 393,000 60, 815, 000 11, 038, 000 553,000 - 20,886,000 54,672,000 28,532,000 34,795,000 61,368,000 11,038,000 1/4 Adopted Budget 1/4 Amended Budget Expenditures as of 12/31/2016 5,156,000 13,539,000 7,083,500 8,600,500 15,203,750 2,759,500 5,221,500 13,668,000 7,133,000 8,698,750 15,342,000 2,759,500 4,026,905 15,628,213 3,311,749 9,746,549 9,134,409 2,704,061 Expenditures Above /(Below) Amended Budget % Variance (1,194,595) 1,960,213 (3,821,251) 1,047,799 (6,207,591) (55,439) -5.7 % 3,6% - 13.4% 3.0% - 10.1% -0.5% The projected year -end operating revenues and expenditures through September 30, 2017, is, however, a more realistic snapshot of any anticipated surplus or shortfall at this point in time. In addition, while the actual revenues and expenditures presented are as of December 31, 2016, the projections have incorporated more recent information, as available. As represented below, Sewer, Parking and Convention Center revenues are projected to be equivalent to expenditures. All other funds are projected to net a surplus at the end of the fiscal year. ENTERPRISE FUNDS FY 2016/17 PROJECTED REVENUES Charges for Services Other 15,375,000 49,654,000 28,856,000 34,410,000 50,129,000 7,343,000 5,302,000 1,211,000 550,000 1,254,000 7,733,000 2,413,000 FY 2016/17 Revenue Projection FY 2016/17 Expenditure Projection Surplus /(Shortfall) 20,677,000 50,865,000 29,406,000 35,664,000 57,862,000 9,756,000 20,599,000 50,865,000 27,380,000 34,604,000 57,862,000 9,756,000 78,000 0 2,026,000 1,060,000 0 0 INTERNAL SERVICE FUNDS The City accounts for those goods and services provided by one Department to other Departments citywide on a cost reimbursement basis. Central Services, Fleet Management, Information Technology, Property Management, Medical and Dental, and Risk Management (Self Insurance) are included in this grouping. An analysis of the actual three -month operating expenditures for the period October 1, 2016 through December 31, 2016, reveals that all funds have expenditures less than one - quarter of the FY 2016/17 Amended Budget. These variances are primarily due to expenditures that will be incurred later in the fiscal year. INTERNAL SERVICE FUNDS FY 2016/17 Adopted Budget Budget Amendment - 11/18/16 Budget Amendment - 02/08/17 1,015,000 9,547,000 16,828,000 8,409,000 17,580,000 5,000 50,000 202,000 30,532,000 Amended Budget 1,015,000 9,597,000 17,030,000 8,409,000 17,585,000 30,532,000 1/4 Adopted Budget 1/4 Amended Budget 253,750 2,386,750 4,207,000 2,102,250 4,395,000 7,633,000 253,750 2,399,250 4,257,500 2,102,250 4,396,250 7,633,000 Expenditures as of 12/31/2016 249,938 1,163,413 1,923,089 1,428,867 1,728,219 6,309,770 Expenditures Above /(Below) Amended Budget % Variance (3,812) (1,235,837) (2,334,411) (673,383) (2,668,031) (1,323,230) -0.4% -12.9% - 13,7% -8.0% - 15.2% -4.3% Based on the more realistic projection of year -end operating revenues and expenditures through September 30, 2017, and incorporating more recent information as available, all Internal Service LTC — FY 2016/17 First Quarter Analysis Page 6 of 9 Funds are expected to have revenues equal to or in excess of expenditures. INTERNAL SERVICE FUNDS in ins FY 2016/17 PROJECTED REVENUES Charges for Services Other 616,000 9,524,000 15,815,000 7,972,000 15,948,000 30,558,000 497,000 73,000 1,208,000 204,000 672,000 536,000 FY 2016/17 Revenue Projection FY2016/17 Expenditure Projection 1,015,000 9,175,000 17,023,000 8,176,000 16,620,000 30,532,000 Surplus /(Shortfall) 1,113,000 9,597,000 17,023,000 8,176,000 16,620,000 31,094,000 98,000 422,000 0 0 0 562,000 SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for revenues and expenditures that are legally restricted or committed for specific purposes other than debt or capital projects. Special Revenue Funds include the Resort Tax Fund as well as 7th Street Garage Operations; 5th & Alton Garage Operations; Art in Public Places; Tourism and Hospitality Scholarship Program; Green /Sustainability Fund; Waste Hauler Additional Services and Public Benefit Contribution Fund; Education Compact Fund; Red Light Camera Fund; Emergency 911 Fund; Information and Communications Technology Fund; People's Transportation Plan Fund; Concurrency Mitigation Fund; Miami Beach Cultural Arts Council; Police Special Revenue Account; Police Confiscation Trust Funds (Federal and State); and Police Training and School Resources Fund. All special revenue funds are projected to be at or under the amended budget. More detailed information is provided for the Resort Tax fund below. Resort Tax Fund The City's Resort Tax Fund is primarily supported by Resort Taxes collected pursuant to Chapter 67 -930 (Section 6) of the Laws of Florida, as amended, and Section 5.03 of the City of Miami Beach Charter, as amended. This legislation authorizes the use of Resort Taxes for the promotion of the tourist industry, which includes, but is not restricted to the following: Publicity, advertising, news bureau, promotional events, convention bureau activities, capital improvements and the maintenance of all physical assets in connection therewith; and for the payment of the reasonable and necessary expenses of collecting, handling and processing of said tax. Typically, the City has considered the following services as "Services Related to the Promotion of Tourism ": • Police Officers serving entertainment areas • A portion of Fire Rescue services from Fire Stations 1 & 2 • Ocean Rescue services • Sidewalk pressure cleaning in South, Middle and North Beach visitor areas • South Beach sanitation • Enhanced Code Compliance /Enforcement provided to respond to evening entertainment area violations and staffing of special events • Other Code Compliance /Enforcement activities in tourism and visitor related facilities /areas • Tourism and Cultural Development Department and the Cultural Arts Council • Museums and Theatres (Garden Center, Bass Museum, Colony and Byron Carlyle Theatres) • Golf courses (net of revenues) LTC — FY 2016/17 First Quarter Analysis Page 7 of 9 • Memorial Day and other special event costs • Homeless services • July 4th, Visitor Center funding, Holiday Lights, Festival of the Arts, Jewish Museum, MDPL, Orange Bowl, Monuments, etc. These allowable uses have led to increased tourism related activities, such as special events, Art Basel, and various concerts. The 2 percent Resort Tax Fund operating revenues are projected to be below budget by approximately by 6.4 percent or $3.8 million and, as a result, the contribution to the Visitor's Convention Authority (VCA) which is based on a percent of revenues, is projected to be below budget. The proceeds of the additional one percent (1 percent) bed tax are used as follows; 45% is allocated for Transportation initiatives in tourist - related areas; 15% is allocated equally among North Beach, Middle Beach and South Beach for capital projects that enhance Miami Beach's tourist related areas, and 10% is allocated to various arts and cultural programs. The 1 percent Resort Tax Fund operating revenues are projected to be lower than budget by approximately 2.5 percent or $357,000. The proceeds of the additional 1% bed tax for the Convention Center debt service are also projected to be lower than budget by approximately 2.5 percent or $357,000. In total, the projected revenues are estimated to be below budget by 5 percent or $4.5 million and expenditures to be below budget by 1.8 percent or approximately $1.6 million. This results in a net operating deficit of approximately $2.9 million for the Resort Tax revenues and expenditures, combined. RESORT TAX FUND FAY 20 / ' _t�p£Yt�r } nded tuatsr o '2016/ ( Ove1 t Eder) �tdget<ast ended z Revenues 2% Resort Tax 59;657,000 59,657,000 10,997,671 55,866,000 (3,791,000) -6.4% 1% Resort Tax 14,065,000 14,065,000 2,539,085 13,708,000 (357,000) -2.5% Additional 1 %for Convention Center 13,000,000 14,065,000 2,539,085 13,708,000 (357,000) -2.5% Transfer in from Fund Balance 0 1,731,000 0 1,731,000 (0) 0.0% Total Revenues 86,722,000 89,518,000 16,075,842 85,013,000 (4,505,000) -5.0% Expenditures General Fund Contribution 37,609,000 37,609,000 18,804,500 37,609,000 - 0.0% Contributions to VCA and GMCVB 9,332,000 9,332,000 1,900,937 8,866,000 (466,000) -5.0% Contribution to Mt. Sinai 1,000,000 1,000,000 0 1,000,000 - 0.0% Other Operating /Other Uses 11,336,000 13,067,000 1,636,542 12,747,000 (320,000) -2.4% Marketing 350,000 350,000 88,448 305,000 (45,000) - 12,9% Contingency 30,000 30,000 0 - (30,000) - 100% Additional 1 %Debt Service for Convention Center 13,000,000 14,065,000 0 13,708,000 (357,000) -2,5% Transfer to Capital, Transp, and Arts 14,065,000 14,065,000 2,539,085 13,708,000 (357,000) -2,5% Total Expenditures 86,722,000 89,518,000 24,969,513 87,943,000 (1,575,000) -1.8% Surplus /(Deficit) 0 0 (8,893,671) (2,930,000) CONCLUSION This analysis of budget to actual operating revenues and expenses with projections through September 30, 2017, provides the status of the FY 2016/17 Budget for the first three months of the fiscal year. Although the first quarter of any fiscal year is not necessarily the most reliable indication of the experience for the remainder of the fiscal year, it does provide a first glance in identifying any potential issues. LTC — FY 2016/17 First Quarter Analysis Page 8 of 9 Based on preliminary projections, the General Fund is anticipated to have a $667,000 surplus at year -end. We will continue to monitor these funds on an ongoing basis. JLM /CGR LTC - FY 2016/17 First Quarter Analysis Page 9 of 9 SCHEDULE A CITY OF MIAMI BEACH FY 2016/17 GENERAL FUND 1st QUARTER FY 2016/17 Adopted Budget Amended FY2016/17 Budget AcfUeIS as of - December 3l, 2016 6Y 2016/17 Year End Projections(rd) a a a e . REVENUES Ad Valorem Taxes 159,950,000 159,950,000 144,135,775 159,950,000 - 0.0% Ad Valorem Taxes - Capital Renewal & Replacement 662,000 662,000 662,000 662,000 - 0.0% Ad Valorem Taxes - Normandy Shores 169,000 169,000 169,000 169,000 - 0.0% Other Taxes 23,732,000 23,732,000 6,265,766 23,207,000 (525,000) -2.2% Licenses and Permits 30,348,000 30,348,000 8,128,327 30,596,000 248,000 0.8% Intergovernmental 11,439,000 11,439,000 2,678,864 11,430,000 (9,000) -0.1% Charges for Services 6,167,000 6,167,000 1,153,991 5,900,000 (267,000) -4.3% Golf Courses 6,007,000 6,007,000 1,291,880 5,760,000 (247,000) -4.1% Fines and Forfeitures 1,799,000 1,799,000 391,640 2,118,000 319,000 17.7% Interest 2,500,000 2,500,000 (45,031) 2,500,000 - 0,0% Rents and Leases 6,426,000 6,426,000 1,432,491 5,943,000 (483,000) -7.5% Miscellaneous 12,575,000 12,575,000 1,673,429 13 ,336,000 761,000 6.1% Other - Resort Tax Contribution 37,609,000 37,609,000 9,402,250 37,609,000 - 0,0% Other - Non - Operating Revenues 11,469,000 11,469,000 3,837,750 11,353,000 (116,000) -1,0% Fund Balance /Retained Earnings 0 1,825,260 1,826,000 740 0.0% Transfer in from South Pointe RDA 370,000 370,000 - 0% Transfer in from Proceeds from Segafredo Colony Cafe 75,740 76,000 260 0% Lease PrlorYearSurplusfrom Parking Fund 6,400,000 6,400,000 1,600,000 6,400,000 - 0% TOTAL REVENUES 317,252,000 319,523,000 182,778,134 319,205,000 (318,000) -01% EXPENDITURES Building 15,146,000 15,153,000 3,141,469 14,659,000 (494,000) -3.3% Capital Improvement Projects 5,051,000 5,051,000 1,150,431 4,949,000 (102,000) -2.0% City Attorney 5,370,000 5,370,000 1,160,833 5,299,000 (71,000) -1,3% City Clerk 1,560,000 1,622,000 311,175 1,622,000 - 0,0% City Manager 3,625,000 3,630,000 900,110 3,628,000 (2,000) -0.1% Code Compliance 5,845,000 5,947,000 1,344,972 5,947,000 - 0.0% Communications 1,995,000 1,995,000 417,325 2,126,000 131,000 6.6% Emergency Management 9,509,000 10,370,000 2,254,802 10,581,000 211,000 2.0% Environment &Sustainability 1,064,000 1,153,000 220,688 1,032,000 (121,000) -10.5% Finance 5,746,000 5,816,000 1,233,226 5,712,000 (104,000) -1.8% Fire 71,938,000 71,938,000 17,607,268 71,674,000 (264,000) -0.4% Housing & Comm Services 2,798,000 2,798,000 555,357 2,754,000 (44,000) -1.6% Human Resources /Labor Relations 2,780,000 2,780,000 605,923 2,755,000 (25,000) -0.9% Mayor and Commission 2,093,000 2,283,000 513,027 2,251,000 (32,000) -1.4% Office of Budget & Performance Improv 2,499,000 2,658,000 516,599 2,545,000 (113,000) -4.3% Organizational Development & Perf Initiatives 629,000 629,000 131,691 629,000 - 0.0% Parks and Recreation 31,934,000 31,934,000 7,434,513 31,643,000 (291,000) -0.9% Planning 4,156,000 4,306,000 992,291 4,387,000 81,000 1.9% Police 104,470,000 104,401,000 25,582,934 104,311,000 (90,000) -0.1% Procurement 2,258,000 2,288,000 517,315 2,272,000 (16,000) -0.7% Public Works 14,698,000 14,746,000 2,659,597 14,574,000 (172,000) -1,2% Tourism, Cultural, & Economic Development 3,680,000 3,755,740 650,791 3,744,000 (11,740) -0.3% Citywide Accounts & Operating Contingency 14,694,000 15,185,260 1,664,990 15,770,000 584,740 3.9% Citywide - Normandy Shores 257,000 257,000 - 257,000 - 0,0% Citywide- Transfers - Info &Comm Technology Fund 395,000 395,000 - 395,000 - 0.0% Citywide- Transfers - Pay -As -You Go Capital Fund 2,400,000 2,400,000 - 2,400,000 - 0.0% Capital Renewal & Replacement 662,000 662,000 - 662,000 - 0.0% TOTAL EXPENDITURES 317,252,000 319,523,000 71,567,326 318,578,000 (945,000) -0.3% EXCESS OF REVENUES OVER /(UNDER) EXPENDITURES 0 0 111,210,808 627,000