City of Lawrence, Kansas

Second Quarter Report – 2006

Purpose of Report

The following information summarizes the financial activities of the City of Lawrence for the first six months of 2006 and advises the City Commission as to current budgetary issues that may become a concern. In the first section, the budgetary highlights from the major funds of the City are itemized, including the General, Recreation, and Transportation Funds, which are partially funded by property taxes, and the Water & Sewer, Sanitation, Storm Water and Public Golf Course Funds, which are enterprise funds supported by user fees. The second section provides tables that compare year to date financial activities to the budget and prior year results for the same period. Included in the third section is a summary of the investment activities for the period. The fourth section summarizes the amount of outstanding debt. The final section provides information on capital project financing.

I. BUDGETARY HIGHLIGHTS

General Fund

● General Fund revenues are 63.3% of budget with six months remaining in 2006. This represents an increase of 7%, or $1,982,718, over the first half of 2005.

● Revenue from property taxes increased by 1.7% over the first half of last year. This can be attributed to growth in assessed valuation and a 1.0 mill decrease in the levy.

● Sales tax revenues increased $557,000 over the same period in 2005. City and county sales tax distributions to date are almost $80,000 over projections for this year.

● Other significant increases in the General Fund include an increase of 44% in licenses and permits and a 110% increase in service charges over the same period in 2005. The majority of the increase in service charges can be attributed to the timing of the payment from Douglas County for their share of the Planning Department operations. Other increases include increases in street trees and in engineering fees.

● Interest rates continue to rise, resulting in an increase in revenue of 162% over the first half of 2005. $722,626 of interest earnings exceeds the amount budgeted for all of 2006 by more than 80%.

● Total General Fund expenditures in the first half of 2006 were equal to 49.0% of the annual budget. This represents an increase of 12% over the same period last year. If encumbrances are excluded, General Fund expenditures in the first half of 2006 were equal to 44.6% of budget.

● There are six divisions that have expended over 50% of their general fund budget at the end of the first half of 2006. The table below shows General Fund expenditures in those divisions at the end of the second quarter and expenditures as a percentage of budget. It also shows expenditures as a percentage of budget if encumbrances are excluded.

ACCOUNT DESCRIPTION	ANNUAL BUDGET	Y-T-D EXP	ENCUMBRANCES	% BUDGET W/ENCUMB	% BUDGET W/O ENCUMB
CITY MANAGER	314,845.00	172,173.95	14.20	55	55
PLANNING	1,148,910.00	508,650.73	103,347.01	53	44
RISK MANAGEMENT	602,715.00	219,557.31	198,985.71	69	36
MUNICIPAL COURT	651,514.00	295,591.27	51,523.03	53	45
HEALTH	974,355.00	389,865.50	109,215.69	51	40
PUBLIC WORKS	6,279,099.00	2,313,344.72	1,520,000.72	61	37

● Some of the encumbrances include the contract with Matrix Consulting Group for review of the development process in the Planning Department; vehicle, property, and other insurance premiums in Risk Management; lease of Office Space for Municipal Court; janitorial and other contractual services for the Community Health building; and contracts for curb repair, crack sealing, and mill and overlay in public works. These funds have already been encumbered but will be spent throughout the remaining months of 2006.

Special Revenue Funds

● Recreation Fund service charges were $36,600 more than the same period last year. Outdoor pool revenue increased $9,000 over the first half of 2005 and indoor pool revenues increased $21,000 over this period last year.

● Recreation Fund expenditures were 14% above the same period in 2005 but only 43.2% of budget.

● The mill levy in the Transportation Fund was reduced, resulting in significantly lower property tax revenues in 2006 than in the first half of 2005. However, fare box revenue and other service charges were up almost 19% from the same period last year and were 61% of budget. Overall, revenues are 73% of budget. Public Transportation Fund expenditures were 34% of budget.

Enterprise Funds

● Water and Sewer Fund revenue increased 15.3% over the same period last year. The increase was primarily the result of a 10% increase in service charges and a 357% increase in interest earnings over the same period in 2005.

● Water and Sewer Fund expenses were less than 50% of budget as of the end of the first half of the year and were down significantly from the same period last year. It should be noted that in 2005 an increase was made in the transfer to cash finance capital projects. This transfer was reduced in 2006.

● Golf Course Fund revenues were 46% of budget; an increase of 10% over the same period last year.

● Golf Course Fund expenses were also 46% of budget. This is an increase of 25% over the first half of 2005. Most of this difference is due to the March bond payment that was made in March of this year. In 2005, the March payment was deferred until September.

● Revenues in both the Sanitation and Stormwater Funds were above first half of 2005 levels and above 50% of budget. Expenditures were below 50% in both funds.

II. REVENUE – EXPENDITURE TABLES

Second Quarter Fund Analysis

		2005 2nd Qtr.	% of budget	2006 2nd Qtr.	% of budget
General Fund
	Revenue Source
	Taxes	$12,293,425	76.8	$12,504,745	75.6
	Sales Tax	10,274,188	51.4	10,831,450	51.9
	Licenses & Permits	448,386	58.2	647,233	69.7
	Intergovernmental	371,215	57.8	341,283	51.2
	Service Charges	291,710	75.9	611,564	108.0
	Fines	1,333,946	66.0	1,283,607	59.0
	Interest	275,889	69.0	722,626	180.7
	Miscellaneous	1,853,969	56.3	2,149,744	60.8
	Transfers	826,137	52.0	859,331	52.8
	Total Revenue	27,968,866	62.0	29,951,584	63.3
	Expenditures
	General Government	7,815,404	47.8	$8,907,358	47.8
	Public Safety	9,963,529	42.9	12,005,180	47.6
	Public Works	2,913,431	45.1	2,313,345	61.0
	Parks & Recreation	1,267,115	43.4	1,400,677	44.9
	Total Expenditures	21,959,479	45.5	24,626,560	49.0
	Revenues over Expenditures	6,009,387		5,325,024

		2005 2nd Qtr.	% of budget	2006 2nd Qtr.	% of budget
Recreation Fund
	Revenue Source
	Taxes	$269,991	86.2	$282,061	81.0
	Service Charges	793,927	58.4	830,520	61.7
	Miscellaneous	2,017
	Transfers	652,000	50.0	700,000	50.0
	Total Revenue	1,717,935	57.6	1,812,580	58.6
	Expenditures
	Parks & Recreation	1,263,893	39.1	1,436,241	43.2
	Total Expenditures	1,263,893	39.1	1,436,241	43.2
	Revenues over Expenditures	454,042		376,339

		2005 2nd Qtr.	% of budget	2006 2nd Qtr.	% of budget
Transportation Fund
	Revenue Source
	Taxes	$900,515	82.9	$474,433	78.4
	Service Charges	76,651	57.2	90,956	60.6
	Miscellaneous	0	0.0	0	0
	Total Revenue	977,166	80.1	565,389	73.0
	Expenditures
	Public Transportation	457,527	22.6	557,947	34.0
	Total Expenditures	457,527	22.6	557,947	34.0
	Revenues over (under) Expenditures	519,9639		7,442

2005 Enterprise Funds	Water & Sewer	%	Sanitation	%	Storm	%	Golf	%
Revenue Sources
Service Charges	$11,116,897	52.3	$4,118,411	51.6	$1,324,173	51.9	$454,853	41.8
Interest	177,340	59.1	18,739	31.2	18,659	90.0	0
Intergovernmental	0		0		0		0
Miscellaneous	86,627	173.3	80623	78.0	7,129		3,277
Total Revenues	11,380,864	52.6	4,217,773	52.1	1,349,961	52.6	458,130	42.1
Expenses
Operations	15,132,632	43.9	4,339,807	43.8	1,214,967	31.9	359,433	30.7
Net Income	(3,751,768)		(122,034)		134,994		98,697
2006 Enterprise Funds	Water & Sewer	%	Sanitation	%	Storm	%	Golf	%
Revenue Sources
Service Charges	12,289,711	57.8	4,252,950	50.7	1,344,109	50.7	498,480	45.7
Interest	811,082	270.4	61,553	135.3	34,515	146.9
Intergovernmental	0		21,250		61104
Miscellaneous	27,011		74,098	80.5	236		5620
Total Revenues	13,127,804	60.9	4,409,851	51.7	1,439,963	53.9	504,100	46.2
Expenses
Operations	12,795,798	47.2	4,437,691	46.3	1,030,824	32.6	450,635	46.3
Net Income	332,006		(27,840)		409,139		53,465

III. Investments

Short term investment rates have increased significantly in the last year.  As a result, our interest earnings are greater than the first half of 2005.  Interest revenue should exceed the budget in 2006 for most funds. 

As of June 30, 2006, the City of Lawrence had over $122 million in cash and investments.  Approximately $102.5 million was invested in securities.  Approximately 24% of our investments were in certificates of deposits, 63% in government agencies and 13% was in the municipal investment pool.  The City’s investment policy limits the portfolio to a maximum of 30% in any one financial institution’s certificates of deposit.  The City’s certificates of deposit are with Sunflower Bank and Capital Federal.  The average rate of return on our investments during the second quarter was 3.49%. 

Over 93% of the City’s portfolio has an original maturity of less than twelve months. Only 3% of our securities had a maturity longer than twenty four months.  The City plans on holding its investments to maturity and has sufficient cash and short-term investments to avoid a liquidity crisis that would force the sale of the longer-term investments.

IV. DEBT ISSUANCE

For the period of time covered in this report (first six months of 2006), the City had not yet issued new debt. The City closed on its most recent general obligation debt issuance on September 13, 2005. The issues included a $22,128,000 temporary note that matures on October 1, 2006. In addition, general obligation bonds were sold, totaling $11,095,000 for street improvements.

The following table shows the current total outstanding debt for the City and the different funding sources. A preliminary analysis has shown that the City can issue approximately $4.5 – 5.0 million in at-large general obligation annually without having an adverse impact on the debt levy.

City of Lawrence Estimated Debt 6/30/06
	GO Debt	Enterprise Fund Debt	Less Enterprise Portion of GO Debt	Total
Long term debt, 1/1/06	$ 77,080,000	$ 83,644,679	$(10,957,188)	$ 149,767,491
Debt, added Fall 2006	-	-	-	-
Debt, added, Kansas Water Supply Loan	-	-	-	-
Less: Principal paid in 2006	-	(1,224,987)	-	(1,224,987)
Total long term debt, 6/30/06	$ 77,080,000	$ 82,419,692	$ (10,957,188)	$ 148,542,504
Total long term debt is composed of:
Enterprise fund portion	10,957,188	$ (1,224,987)	$ -	$ 82,419,692
Sales tax portion	9,883,363	-	-	9,883,363
Benefit District Debt (estimated)	10,350,880	-	-	10,350,880
Net long term debt, city at large, 6/30/06	45,888,569	10,957,188	(10,957,188)	45,888,569
Total long term debt, 6/30/06	77,080,000	9,732,201	(10,957,188)	148,542,504
Future long term debt will result from:
Notes currently outstanding which will be bonded (includes fall note issue)	$22,128,000	$ -	$ -	$ 22,128,000

V. CAPITAL BUDGET

As of June 30, 2006 expenditures in the capital project fund totaled just under $33.6 million. Funding sources for these projects consisted of $22.1 million temporary notes, $5.7 in cash, grants and other sources, and $5.8 million in general obligation bonds.

Detailed information on the status of the projects is shown in the following table. Note the list does not include projects funded by the Water and Sewer Fund.

PROJECT NAME	AMOUNT	FINANCED	OTHER	TOTAL RECEIPTS	EXPENDITURES	ENCUMBRANCES	AVAILABLE BALANCE
W. 6th St., Wakarusa to SLT	400,000		0.00	0.00	-	534,942.25	(534,942.25)
W. 6th St., Wakarusa to SLT	3,295,000	5,508,915.28	209,927.44	5,718,842.72	5,718,554.74	0.00	287.98
Kasold Bridge Improvement		-	1,321,000.00	1,321,000.00	1,321,000.00	-	-
KU Fire Station, 23rd & Iowa, STA 5	5,000,000	4,848,589.00	1,360.00	4,849,949.00	5,039,384.36	262,930.26	(452,365.62)
Monterey Way, Stetson Dr	4,850,000	2,749,966.40	0.00	2,749,966.40	2,033,826.93	72,187.81	643,951.66
2004 Fire Truck Purchase		301,200.00	0.00	301,200.00	278,683.19	20,893.00	1,623.81
2005 Fire Truck Purchase		0.00	0.00	0.00	695,271.00	0.00	(695,271.00)
23rd & Harper Geometric Imps	400,000	0.00	0.00	0.00	22,466.79	6,443.06	(28,909.85)
2006 Overlay, Phase II	700,000	0.00	0.00	0.00	189,914.19	510,085.81	(700,000.00)
Airport Runway Reconstruction		0.00	1,536,501.00	1,536,501.00	1,498,960.45	126,230.99	(88,690.44)
Kasold, 15th to Clinton Parkway	6,750,000	250,875.00	0.00	250,875.00	614,176.72	4,487,632.09	(4,850,933.81)
Hanscom Tappan, 2nd Plat	350,000	0.00	13,458.26	13,458.26	129,676.06	0.00	(116,217.80)
3rd St, Alabama to Illinois	140,000	140,490.00	0.00	140,490.00	83,313.02	1,170.00	56,006.98
2002 Traffic Signals	200,000	203,545.04	0.00	203,545.04	209,685.77	0.00	(6,140.73)
N. 2nd & Locust Geometric	240,000	0.00	0.00	0.00	63,709.44	168,112.56	(231,822.00)
Lake Pointe, Clinton Parkway to 22nd	1,166,250	752,625.00	147,663.97	900,288.97	929,197.26	0.00	(28,908.29)
Monterey Way, Peter to GV	2,620,000	2,628,167.00	0.00	2,628,167.00	1,321,170.02	100,027.61	1,206,969.37
23rd St Access Management	550,000	150,525.00	0.00	150,525.00	108,235.43	42,837.71	(548.14)
Peterson, Kasold to Monterey Way	3,420,000	3,423,942.00	0.00	3,423,942.00	1,930,428.40	491,965.12	1,001,548.48
Wakarusa Service Center		0.00	0.00	0.00	35,186.00	43,094.00	(78,280.00)
Kasold & Peterson Rd Intersection	300,000	301,050.00	0.00	301,050.00	21,365.42	119,249.70	160,434.88
O'Connell Road, WB left turn	328,960	328,145.00	0.00	328,145.00	20,928.76	2,977.00	304,239.24
Kasold, Peterson to KTA	770,000	210,735.00	0.00	210,735.00	184,477.40	89,563.45	(63,305.85)
Harvard Rd, East of GWW	550,000	422,724.00	7,171.56	429,895.56	440,336.84	0.00	(10,441.28)
2005 Traffic Signal Renovation	300,000	0.00	0.00	0.00	16,645.00	0.00	(16,645.00)
George Williams Way, 6th to Harvard	2,500,000	1,663,802.97	3,458.44	1,667,261.41	1,676,722.48	1,000.00	(10,461.07)
City Hall HVAC 2nd Floor		0.00	0.00	0.00	199,680.00	0.00	(199,680.00)
19th & Louisiana Traffic Signal	315,000	59,322.44	0.00	59,322.44	39,006.79	0.00	20,315.65
Bob Billings & Wakarusa	200,000	200,700.00	0.00	200,700.00	102,411.25	0.00	98,288.75
Public Works Facility - Site Development	300,000	302,416.01	0.00	302,416.01	131,561.97	0.00	170,854.04
Folks Rd, 6th to Harvard	1,820,000	1,061,001.00	0.00	1,061,001.00	1,075,734.26	0.00	(14,733.26)
Art Center Expansion			53,650.29	53,650.29	15,000.00	0.00	38,650.29
Station No 5 Construction		0.00	0.00	0.00	7.96	0.00	(7.96)
Investments			2,216,138.31	2,216,138.31			2,216,138.31
Misc. private projects			136,389.52	136,389.52	119,929.40		16,460.12
Carnegie Rehab - SAT grant		0.00	0.00	0.00	29,267.50	49,632.50	(78,900.00)
Fire Station #4 2121 Wakarusa	150,000	2,413,416.00	15,850.00	2,429,266.00	1,594,590.37	871,194.90	(36,519.27)
		27,922,152.14	5,662,568.79	33,584,720.93	27,890,505.17	8,002,169.82	(2,307,954.06)