Loading...
HomeMy WebLinkAbout05(C) - Approval of the 3rd Quarter Financial Reports Report City of Prior Lake | 4646 Dakota Street SE | Prior Lake MN 55372 CITY COUNCIL AGENDA REPORT ITEM: 5C MEETING DATE: November 07, 2022 PREPARED BY: Jason Etter, Senior Accountant Nicole Klekner, Assistant Finance Director PRESENTED BY: Cathy Erickson, Finance Director AGENDA ITEM: Approval of 3rd Quarter Financial Report GOAL AREA OBJECTIVE: High-Value City Services 1. Establish financial stability for all funds. RECOMMENDED ACTION: Approve the 2022 3rd Quarter Financial Report as presented. BACKGROUND: Introduction: Staff has prepared preliminary summary financial reports (attached) as of September 30, 2022, for the following funds: • General Fund • Debt Service Funds • Cable Fund • Capital Park Fund • Revolving Equipment Fund • Facilities Management Fund • Permanent Improvement Revolving Fund • Water Fund • Sewer Fund • Water Quality Fund • Economic Development Authority Special Revenue Fund The reports reflect revenue and expenditure activity during the third quarter 2022. The reports are preliminary, unaudited and may change. The attached memorandum provides a summary of the significant issues. As requested by the City Council, comparative information has been included for the same period of the prior year. ALTERNATIVES: 1. Motion and second as part of the consent agenda to approve the 2022 3rd Quarter Financial Report as presented. 2. Motion and second to remove the Financial Report from the consent agenda for additional discussion. ATTACHMENTS: Item 5C Page | 2 1.2022 3rd Q Memorandum (attach 1) 2.2022 3rd Q Financial Report (attach 2) MEMORANDUM DATE: November 7, 2022 TO: Prior Lake City Council FROM: Cathy Erickson, Finance Director RE: Financial Report dated 09/30/2022 The financial reports presented as part of this agenda item reflect activity during the third quarter of 2022. The significant issues identified at this time are summarized below. General Fund Projection Staff has prepared a financial projection for the General Fund. Our assumptions and projections are based on the information we have today and may change as we get updated information. The estimated reduction in (use of) General Fund reserves is $546k. Shown below is a summary of the components of the estimated net decrease in Fund balance. The drivers of the net reduction in fund balance are summarized below: Estimated Revenue Shortfall - $618k • Building permits/fees - $300k unfavorable to budget: Building permits/fees are at 60% of budget through Q3. Staff estimates that total year revenue for building permits/fees will be about $300k unfavorable to budget based on 2022 projected building permits/fees for 92 units. Single family residential building is down, but the city has three multi-family residential building projects in the development phase (Preserve at Jeffers Pond/197 units, Prior Lake Lofts/98 units and Rachel Development /140units). However, the multifamily residential projects are estimated to finalize in 2023 not 2022. • Intergovernmental revenue - $136k favorable to budget: This is due to state road aid above budget by $80k (city budget based on prior year actual) and grant revenue not budgeted of $48k (builder inspector and election grants). General Fund Projection - 2022 2022 Projection Total Revenues 15,918,000 Total Expenditures 16,554,000 Net Change-Reduction in Fund Balance (636,000) 2022 Year End Estimated Fund Balance Reserve % 52.1% Components of Estimated Reduction in Fund Balance: Revenue below budget (618,000) Expenditures less than budget 310,000 Planned Use of Reserves (328,000) Net Change -Reduction in Fund Balance (636,000) Page 2 • Unrealized loss on investments - $515k unfavorable to budget: As rates increase, the market value of the existing securities will decrease. As of September 30, 2022, the cost value of the portfolio is more than the market value of the investments by $2.1M. The year- to-date change in the fair value of the securities of $515k is adjusted against interest earnings in each of the funds. This is a paper loss for the third quarter of 2022; no actual gain/loss is realized because the city holds the securities until maturity • Charges for Services - $75k favorable to budget: This is due to temporary lease extensions requested by Sprint and AT&T totaling $47k and recreation program revenue above budget by $28k. Estimated Expenditures less than budget - $310k • Expenditures are projected to be 98% of budget due to open positions across departments (City clerk, Communications, IT, Comm. Dev., Police and Streets). Currently, all positions are filled. Planned Use of Reserves - $329k • IT department professional services of $6,000 for the regular maintenance and updates of the council chambers equipment to televise the council meetings. • Emergency Management department expenditures of $13,000 for emergency siren maintenance costs and training. • Police department expenditures of $115,000. There were many supplies and equipment that the police department ordered in 2021 but have not received due to global supply chain issues. • Central Garage department: Carryforward the 2021 fuel budget savings of $43,800 to be used a funding source for the city’s rising fuel costs. • Streets and Parks department: Staff was not able to complete sidewalk maintenance at the police department and on Willow Lane. A budget amendment for Streets of $79,390 and for Parks of $17,610 is needed to carryforward the expenditures to 2022. • Community Survey and Strategic Plan of $54,000 General Fund Activity through September 30th Preliminary financial information reflects expenditures exceeding revenues by $777,447. This is primarily due to building permits/fees at 60% of budget and there is a $515k decrease in the fair value of the securities. This is a paper loss; no actual loss is realized because the city holds the securities until maturity. Additionally, expenditures are at 67% of budget due to open positions across departments (City clerk, Communications, IT, Comm. Dev., Police and Streets). See Attachment 2 for the 3rd Quarter 2022 Financial Report. General Fund Revenues Property taxes are received in June, December, and January. Revenue from taxes is recognized on a cash basis for the General Fund. Therefore, tax revenue collected in June are reflected in this financial report. Building permits (single family and townhomes) were budgeted at 150 for 2022. Revenues associated with building permits and plan check fees are approximately $160k lower than year to date through 3rd quarter 2021 and 60% of the annual budget. The following table provides a breakdown of the activity year to date through September for each year shown. Page 3 Year Single Family Townhomes Commercial / Industrial Other Permits Total Change from PY 2022 74 4 1 1870 1949 (13%) 2021 102 0 4 2150 2256 (2%) 2020 118 4 3 2200 2325 29% 2019 105 49 2 1640 1796 (8%) 2018 85 57 1 1810 1953 66% The first half payments were received for Municipal State Aid and the township fire agreements. SMSC Police Aid of $750k has been received for 2022 which equals 75% of the $1,000,000 budget for this line item. First and second quarter franchise fees are included in this report. Third quarter franchise fees will be collected in October and reported in the fourth quarter report. Project engineering fees are currently at 82% of its annual budget. The 2022 project admin/engr. fee is the cost for internal work done on city construction projections. City staff time on the projects is charged over the life of the project, which is typically three years and includes planning, construction, and project closeout. Recreation revenues (including Park admission fees and facility rental) are higher than the 3rd quarter of 2021 primarily due to the increase in facility rentals and Recreation program fees. Interest earnings are at 109% of its budget. The report also reflects a $515k decrease in the fair value of the securities. This is a paper loss; no actual loss is realized because the city holds the securities until maturity. The miscellaneous revenue category includes planned developer agreement fee revenue which is collected to cover the city’s internal cost to administer the development projects. Developer agreement fee revenue is unfavorable to budget by $70k as several development projects have shifted from 2022 to 2023. General Fund Expenditures/Transfers General Fund expenditures for 2022 represents 67% of the $16,864,687 amended budget due to open positions across departments. Currently there are only two Police positions open. The level of expenditures (as a percent of budget) is consistent with the same period in 2021. Key points related to expenditures for the 3rd quarter of 2022 are: • Admin is higher than the same period in 2021 due to the community survey of $24k and the addition of an admin assistant. • Police and Fire personal services now include additional staff as compared to this same period last year. • Streets general maintenance agreements are favorable by $190k compared to this same time last year. • Parks maintenance agreements are higher than the same period last year by $87k. At this point in the year, there are no other significant variances to report. Debt Service Funds Property taxes and special assessments are received in June, December, and January (final tax settlement). Prepayments have been received for special assessments. Scheduled bond payments (interest) were made in June. Other bond payments (principal and interest) will be due mid-December. Page 4 Bond proceeds for the Downtown South Street project of $ 2,148,360 were received in August and deposited in the Construction Fund. Cable Fund First and second quarter franchise fees are included in this report. Third quarter franchise fees will be collected in October and reported in the fourth quarter report. Capital Park Fund Park Dedication Fees are less than compared to the same time in 2021 by $356k. Contract payments of $13k have been incurred in 2022 compared to $197k in 2021. Revolving Equipment Fund Property taxes, the primary funding source, are received in June, December, and January (final tax settlement). Vehicle and equipment purchases were approved at council meetings earlier in the year, but most of the equipment is purchased and received in the 2nd and 3rd quarter. Revolving Park Equipment Fund The planned infrastructure improvements and the Lakefront renovation study will be completed in the 3rd and 4th quarter. $88k has been spent so far in 2022. Facilities Management Fund The planned Police, Fire, Central Garage and Club Prior facility work will be completed in the 3rd and 4th quarter. $138k has been spent so far in 2022, $127k of which is for the fire station #1 remodel. The fire station #1 remodel work will be supported by $400k of ARPA grant revenue funding. Permanent Improvement Revolving Fund There are no approved street overlay projects scheduled for 2022. The Council approved the 2022 Fee Schedule increase in gas and electric franchise fees dedicated to the city’s pavement management plan. The first and second quarter collections are $504k. Third quarter collections will be received in October. Water Fund The financial report for the Water Fund reflects four billing cycles. Operating revenues are at 61% of budget. This is consistent with prior years. Consumption is consistent with 2021 and operating revenues are behind the prior year by $188k. Summer water and sewer consumption from May 21 through July 20 were billed on August 1 and reflected in this report. Operating expenditures and transfers are at 76% of budget which is slightly higher than prior years due to the city experiencing several watermain breaks, resulting in expenditures higher than budget by $149k for the water distribution maintenance line item. Sewer Fund The financial report for the Sewer Fund reflects four billing cycles. Operating revenues are at 49% of budget. This is a slight decrease from prior years. The August billing cycle includes the summer sewer rate break. The rate break will also be reflected on the October 1 billing which is recorded in the 4th quarter. Consumption decreased slightly from 2021 (approximately 3%) and operating revenues are behind the prior year by $23k. Operating expenditures and transfers for 2022 are at 63% of the approved budget which is consistent with prior years. Page 5 Water Quality Fund The financial report for the Water Quality Fund reflects four billing cycles. Water Quality revenues are based on flat rates per billing cycle. Operating revenues are at 57% of budget. This is consistent with prior years. Operational expenditures and transfers are at 59% of budget which is consistent with prior years. Economic Development Authority Special Revenue Fund Property taxes are received in June, December, and January (final tax settlement). Facility rental payments have been received from Sebastian Automotive. Personnel, commissioner per diems, and professional services expenditures comprise the expenditures and are at 18% of budget as of the end of the third quarter. The budget includes $385k for property acquisition that will not occur in 2022, and the spending will shift to 2023.