City of Lawrence, Kansas

Third Quarter Report – 2009

 

Purpose of Report

The following information summarizes the financial activities of the City of Lawrence through the end of the third quarter of 2009 and advises the City Commission as to current budgetary issues that may become a concern. 

 

The report provides budgetary highlights from the major funds of the City, including the General Operating and Recreation Funds, which are partially funded by property taxes, the Public Transportation Fund, and the enterprise funds: Water & Wastewater, Solid Waste, Storm Water and Public Golf Course Funds, which are supported by user fees.  The report also compares year to date financial activities to the budget and results for the same period in the two previous years.  Finally, the report includes a summary of the City’s investment activities for the year and outstanding debt. 

 

Summary / Conclusion

With 75% of the year lapsed, 2009 revenues as a percent of budget are in line with or slightly below 2008 revenues as a percent of budget as of the end of the third quarter.  Expenditures through the end of the third quarter have decreased in some funds compared to expenditures through the end of September 2008.  In instances where expenditures have increased over prior years, increases are due to increased transfers from the new sales taxes, planned expenditures, or the timing of purchases or payments.  No fund has exceeded 75% of budget for expenditures to date. 

                                                                                               

Using year to date information, the attached General Fund projection shows revenues are likely to be below budget.  Staff will continue to monitor expenditures and make reductions, if necessary, to ensure expenditures are within projected revenues.

 

 

General Operating Fund

Summary

The table below summarizes General Operating Fund revenues to date by source and expenditures to date by category for three years. 

 

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With three quarters of the year lapsed, we have collected $45,539,839, or 75.4% of budgeted revenues.  This is an increase of 5.4% from the same period last year.  Expenditures to date total $42,207,298, which represents an increase of 5.7% from the first three quarters of 2008.  Expenditures to date represent only 63.4% of budgeted expenditures for 2009, compared to 68.1% in 2008 and 71.4% in 2007.  It should also be noted that the revenues to date exceed expenditures to date by a larger margin ($3,332,542) for the third consecutive year.

 

Revenue Highlights

Highlights for each category of general fund revenue are provided below.

Taxes.  Revenues collected from taxes to date represent 87.8% of the amount budgeted for 2009 and increased 5.8%, or $960,815, compared to this period last year.  Property taxes, including motor vehicle taxes, increased $651,526, or 5.2%, from this period in 2008.  Revenues from gas franchise fees as well as telephone franchise fees are down.  However, revenue from cable TV franchise fees is slightly up and electric franchise fees revenues are almost 11% more than this period last year.  The result is an increase in franchise fees overall of 5.2% or $221,489 over the first three quarters of 2008.     

 

Sales Tax.  Receipts from the City sales tax / use tax and City share of the countywide sales tax / use tax increased by $1,855,121, or 10.8%, from the same period last year but represent only 70.8% of the amount budgeted for 2009.  This increase can be attributed to the new City sales tax rate, a breakdown of which is shown below.  Note – The third quarter is the first full quarter of receipts that reflect the new sales tax rate, which went into effect April 1, 2009. 

 

City Sales/Use Tax

Budget

Year to Date

as of 9/30/09

% of Budget

City 1%

$13,871,685

$10,098,046

72.8%

City Infrastructure 0.3%

2,255,925

1,337,422

59.3%

City Transit 0.2%

1,503,950

891,616

59.3%

City Transit Eq. 0.05%

375,988

222,904

59.3%

                 *This does not include revenue from the City share of the countywide sales tax / use tax

 

Licenses and Permit Fees.  Revenue from licenses and permit fees decreased 22.9% from the same period last year and represent only 54.5% of budget.  While occupational and professional licenses are up 8.9% from this period last year, rental inspection fees are down almost 5% from the third quarter of 2008.  Building permit and inspection fees were also down 28.9%, or $177,520, from this period in 2008. 

 

Intergovernmental Revenues.  Despite a 2.2% decrease in liquor tax receipts, intergovernmental revenues overall received to date are 2.1% greater than those received in the first three quarters of 2008.  The bulk of the increase can be attributed to an increase of $25,145 in state revenue sharing from the slider payment.  The slider payment is revenue from the State meant to offset the impact of the machinery and equipment exemption.  To date, the City has received $81,757 of the $146,805 budgeted for state revenue sharing in the general fund for 2009.  Unfortunately, State budget issues lead to the elimination of the second half of the slider payment, so the City will not be receiving any further distributions in 2009.  As of the end of September, 75.6% of budgeted intergovernmental revenues have been collected. 

 

Service Charges.  Revenue from service charges decreased 49.3%, or $264,996, from the first three quarters of 2008 and represent only 47.4% of budget.  This is due to the timing of the payment from Douglas County for one sixth (1/6) of the planning department budget.  No payment has been received as of the end of the third quarter, compared to 2008, when the payment had been received at this point in the year.  No revenue from engineering fees has been collected to date this year either, compared to $18,215 received in the first three quarters of 2008. 

 

Revenues from many services charges have decreased over the first three quarters of last year.  They include planning review fees (22.0% decrease), maps, plans, and ordinance fees (29.5% decrease), police tow charges (36.5% decrease), weed inspection /mowing (5.6% decrease), copy/reproduction charges (2.3% decrease), and cemetery lot charges (26.8% decrease.)  Reimbursements paid by non-City user groups (i.e. Kaw Valley Soccer, Lawrence Youth Football, etc.) for the daily maintenance costs of the YSI complex were down 15.6% when compared to this period in 2008.  However, collection of this revenue varies each year according to the timing of fee collection from user group participants. 

 

There were service charges that increased over the first three quarters of last year.  Revenue from burial fees was up 19.1%, in part due to an increase in cemetery fees.  Pursuant to our agreement with Grant Township, revenue from the township fire levy has increased 15.4% from last year.  Finger print fees are up almost 2% as are driving record fees.          

 

Fines.  Fines in the General Fund decreased less than one percent, or $12,923, from the third quarter of last year and represent 70.4% of the amount budgeted for fines in 2009.  Revenue collected from police officer tickets increased by $47,776, or 23.7%, however, municipal court fines and fees collected decreased by $60,699, or 3.7%, compared to this period in 2008. 

 

Interest.  Interest revenue in the General Fund continues to be down significantly compared to the same period in 2008 due to lower interest rates, the timing of our investments, and having lower balances to invest.  Only 11.3% of the budget for interest in 2009 has been collected as of the end of September.  In 2008, 48.8% of the amount of interest budgeted had been collected by the end of the third quarter, while 103.9% of budget had been collected at this point in the year in 2007. 

 

Miscellaneous Revenues.  Miscellaneous revenues collected to date have increased 9.7% when compared to the same period last year and represent 70.4% of budget for this revenue source.  Included in miscellaneous revenues are payments from Douglas County for providing EMS services, which were up $245,052, or 9.8%, from last year. 

 

Transfers In.  Revenue is transferred to the General Operating Fund from other City funds for general overhead expenses and in lieu of a franchise fee paid by utilities.  As of the end of September 2009, 4% more had been transferred that at this point last year due to an increase in the amount transferred from the Water and Wastewater Fund. 

 

Expenditures

Overall, General Fund expenditures increased $2,266,795 or 5.7% from the first three quarters of 2008 and represent 63.4% of the 2009 adopted budget.  In 2008, expenditures through the end of the third quarter represented 68.1% of the 2008 budget while in 2007, 71.4% of the budget was expended by September 30. 

 

As shown in Table 2, four divisions in the General Fund have expended more than 75% of budget as of the end of the third quarter of 2009:

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Highlights for each category of expenditure are provided below.    

 

General Government expenditures include City Commission, City Manager’s Office, Public Information, Planning and Development Services, City Clerk, Personnel, Risk Management, Finance, General Overhead, Information Systems, Legal Services, Human Relations, and Municipal Court.  Expenditures in this category have increased $1,637,017, or 11.9% over the third quarter last year.  The majority of the increase is due to transfers of the new sales tax proceeds.  To date, $1,997,017 more has been transferred from the General Fund than was transferred through the end of the September 2008.  This increase has been offset by reduced expenditures in other departments/divisions including the City Commission, Planning, Building Inspection, Risk Management, Finance, General Overhead, Information Systems, Legal Services, Human Relations.  Total general government expenditures to date represent only 53.9% of the 2009 budget, compared to 67.5% in 2008, and 69.7% in 2007.     

 

Public Safety includes Police, Fire Medical, and the City’s share of the Health Department operations and community health building maintenance.  Overall, public safety expenditures increased 2.2%, or $422,654, over this period last year and represent 70.2% of budget.  Police expenditures in the General Fund were $20,500 more than the first three quarters of 2008 and represent 69.2% of the 2009 budget.  Expenditures in Fire Medical represent 69.7% of budget and have increased $364,828, or 4.2%, over this period last year.  This increase is largely due to salary adjustments.  Other contributing factors include an almost 93% increase in electricity costs due to the correction of an accounting error that was paying for electricity for Fire Station 5 out of a different department.  Also contributing were increases in consumable supplies (fire fighting hose, fire fighting clothes, software, etc.), other operating supplies (equipment, computer equipment, and breathing apparatus), and capital outlay.

 

Expenditures related to the Health Department and maintenance of the community health building increased $37,326, or 4.2% over expenditures through the end of September 2008 and represent 88.1% of budget.  The increase is due in part to an increase of $16,700, or 2.5%, in the City’s share of the Health Department operations.  The remainder of the increase was due to increased expenditures related to the maintenance of the community health building.  A total of $257,854 has been spent (including encumbrances) this year to date on maintenance of the facility.  This is an increase of 8.7%, or $20,626, compared to this period in 2008.  The majority of this increase can be attributed to other service contracts, due to the timing of the payment for the heating and air conditioning repair contract for 2009.    

 

Public Works includes Street Maintenance, Engineering, Traffic, Airport, Building Maintenance, Street Lights, Levee Maintenance, and Building Maintenance.  Expenditures in this category to date have increased $261,699, or 5.7%, from the same period in 2008, and represent 74.2% of budget.  In 2008, 70.3% of the budget was expended as of the end of September.  Changes for each division are highlighted below.

·         Street Maintenance  - expenditures are up 5.9% over 2008 due to additional resources being spent on street maintenance activities (overlay, curb repair, etc.); 

·         Engineering – The bulk of the increase can be attributed to salaries and benefits.  Non- personnel related expenses increased by just $1,147 over this period last year;

·         Traffic- increases over expenditures through September of 2008 are due to increased expenditures for pavement marking, traffic signal, and traffic counter supplies;

·         Airport Maintenance – decreases from third quarter expenditures last year can be attributed to lower fuel prices as well as reduced repairs and maintenance;

·         Building Maintenance – increases over expenditures through the end of September 2008 are due to increased building repairs including HVAC repair for the computer room in City Hall, and the timing of the payment to Douglas County for operations of the Judicial Law Enforcement building;

·         Street Lights – increases are due to increased rates in 2009;

·         Levee Maintenance- the decrease from the first three quarters of 2008 can be attributed to a reduction in motor vehicle repairs. 

 

Parks and Recreation expenditures from the General Fund decreased by 2.4%, or $54,576, compared to this period last year.  Expenditures in this category to date in 2009 represent 66.9% of budget compared to 64.7% of budget spent at the end of the September 2008.  The decrease is largely due to a vehicle replacement that occurred in 2008 that did not occur in 2009 as well as salary savings and decreased tree removal in the Forestry division.  Other parks and recreation divisions that have reduced expenditures from this period last year include Construction, YSI operations, District 2, District 3, and Landscaping.      

 

Special Revenue Funds

Recreation Fund

 

Revenues.  Table 3 shows Recreation Fund revenues increased $86,275, or 3.0%, over the first three quarters of 2009 and represent 84.5% of budget.  

 

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As shown on Table 3a below, the largest category of revenues in the Recreation Fund is service charges.  Service charges increased 6.0%, or $85,286, over this period last year despite decreased revenue from the outdoor pool and Carl Knox pool and only a slight increase from the indoor pool.  The overall increase can be attributed to youth sports entry fees and the addition of the DCABA league, class enrollment fees, field rental, and special population program fees. 

 

 

More than one-third of the revenues in the Recreation Fund are proceeds from the City share of the countywide sales tax transferred from the General Fund.  State law requires all sales tax revenue to be deposited in our General Operating Fund before it can be transferred to other funds.  Transfers through the end of September have remained flat relative to 2008, and represent 75.5% of budget.  The remaining revenues in this fund come from property taxes, which are up just $989 over the same period last year.

 

Expenditures.  Table 3 above shows Recreation Fund expenditures to date increased by almost 4.0% from the same period last year and represent 67.2% of 2009 budget.  In 2008, 66.6% of the budget had been expended as of the end of the third quarter, while 68.2% of budget had been expended at the end of this quarter in 2007.

 

Public Transportation Fund

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* Expenditures do not include encumbrances to MV Transportation for operations, but encumbrances to MV for repairs and encumbrances for fuel are included.

 

Revenues.  Revenues collected through the end of the third quarter of 2009 represent only 48.3% of budget, compared to 85.2% for the first three quarters of 2008.  However, in 2008, the Public Transportation Fund received support from property tax.  In 2009, that revenue source was replaced with proceeds from one of the two new sales tax provisions for transit.  Similar to the Recreation Fund, state law requires that sales tax revenue be deposited in our General Operating Fund before it can be transferred to other funds.  The transit sales tax provisions did not go into effect until April 1, 2009 so slightly less than four months of collections are reflected in revenue to date. 

 

Tax revenues totaling $72,226 were received from delinquent property tax, motor vehicle tax, and vehicle excise taxes in 2009.  In addition, the fund receives revenues from bus fares and the sale of bus passes.  At the end of the third quarter of 2009, fare box revenues have decreased $19,386, or 12.5%, compared to this period last year.  The reduction in fare revenue is due to the reciprocal agreement with the University of Kansas under which KU cardholders can ride the T for no additional charge.  This arrangement has not been revenue neutral; however, it has lead to a significant increase in ridership.  Table 4a shows the fixed route ridership by month for 2008 and 2009.  As of the end of September, total ridership on the fixed route system is up 17.7% for the year. 

 

 

Expenditures.  Expenditures in the Public Transportation Fund through the end of September represent 60.9% of budget (not including the encumbrance to MV Transportation for operations) and have increased by $535,951, or 56.8% compared to this quarter in 2008.  This increase can be attributed to encumbrances for fuel and major component replacement.  The City entered into a new contract with MV Transportation, which began January 1, 2009, and requires the City to pay for these expenses, which were the responsibility of MV under the contract in place in 2008.

 

 

Enterprise Funds

Summary

Table 5 compares revenues and expenses to date for the City’s four major Enterprise Funds.  Of the four major Enterprise Funds, only one – the Golf Fund – has collected more revenues to date than expenses to date.  Expenses to date in the Water and Wastewater Fund, as well as the Solid Waste and Storm Water Fund have exceeded revenues collected through the end of September.  This is in line with the past two years, when expenditures exceeded revenues at this point in the year.

 

 

 

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Table 6 compares 2009 revenues and expenses to date with the same period for the two prior years.  Highlights for these four Enterprise Funds are also provided below.

 

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Water and Wastewater Fund

Revenues.  Due in part to an increase in water and sewer rates for 2009, revenues collected to date have increased $524,136, or 2.4%, compared to the same period last year and represent 74.3% of the  adopted budget. 

 

Expenses.  Water and Wastewater Fund expenses increased 6.1%, or $1,363,852, over the first three quarters of 2008 and represent 66.5% of the adopted budget.  Expenses include over $2.2 million in encumbrances that may not be expended in 2009. 

 

The relatively cool, wet summer is likely to mean that revenues collected in 2009 will be below budget.  In response, staff has worked to reduce expenditures to be more in line with projected revenues.  As shown on the attached projection, 2009 expenditures are projected to exceed 2009 projected revenues by $142,611, or 0.49%.  This is significantly less than the 2009 budgeted deficit of $5,282,748 and should still leave the Water and Wastewater Fund with a healthy fund balance of 45% of expenditures at the end of 2009.    

 

 

Solid Waste Fund

Revenues.  Revenue in the Solid Waste Fund increased $103,137, or 1.4%, from the first three quarters of 2008 and represent 75.1% of budget.  This is similar to 2008, when 75.5% of budgeted revenues had been collected as of the end of September.

 

Expenses.  Expenses to date represent 68.9% of budget and decreased just over one percent from this period last year.  Expenses to date exceed revenues to date by $417,675 due to significant encumbrances ($555,416) for landfill charges and vehicle and equipment replacement ($334,124).  This deficit is smaller however, than the deficit in the fund at the end of September in the two previous years.  In 2008, expenses exceeded revenues by $608,187 at the end of the first three quarters, and in 2007, the deficit was $866,245.

 

 

Storm Water Fund

Revenues.  Revenue in the Storm Water Fund decreased just $16,720, or less than 1%, from the first three quarters of last year and represent 76.8% of budget.  This decrease can be attributed to lower interest earned in 2009.  In 2008, 77.4% of budgeted revenues were collected as of the end of September, while 77.8% of budgeted revenues were collected in the first nine months of 2007. 

 

Expenses.  Year to date expenses as of the end of September 2009 represent 69.1% of budget and decreased $412,590, or 14.5%, compared this period last year.  This is due largely to expenses related to capital improvements made at the intersection of 19th and Louisiana in the 2008 and reduced transfers to the General Fund in 2009.  

 

 

Public Golf Course Fund

Revenues.  Public Golf Course Fund revenue increased 2.0% from revenues collected through the end of September in 2008 and represent 85.1% of 2009 budgeted revenues.  Revenue collected through the end of the first three quarters of 2008 represented 81.1% of the 2008 budget, while 80.6% of budgeted revenues were collected in this period in 2007. 

 

Expenses.  Public Golf Course Fund expenses to date represent 57.4% of budget and have decreased $18,521, or 2.8%, from year to date expenses at the end of September 2008.  Expenditure levels to date in 2009 remain below revenues collected to date in 2009 by almost $196,000.  

 

 

 

INVESTMENTS

Short-term investment rates have remained low in the third quarter of 2009 compared to last year.  Because of very low interest rates, interest revenue is less than in previous years.  As a result, recognized interest earnings are lower than the third quarter of 2008 for most funds.  Interest revenue will likely be significantly less than the budget in 2009 for most funds. 

 

As of September 30, 2009, the City of Lawrence had over $107 million in cash and investments.  More than $83 million was invested in securities and $24 million in the Municipal Investment Pool or interest bearing checking account pending investment.  Approximately 51% of our investments were in certificates of deposit, 26% in government agencies, and 23% in the Municipal Investment Pool or an interest bearing checking account.  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 the Bank of Kansas City, Commerce Bank, Bank of Kansas City, and Corner Bank.  The average rate of return on our investments during the third quarter was 0.39%. 

 

The City’s entire portfolio has an original maturity of twelve months or less.  More than 64% of investments mature in six months or less.  The City plans to hold 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.

 

 

DEBT ISSUANCE

The City closed on its most recent general obligation debt issuance in September of 2009.  The issues included a $3,250,000 general obligation bond and a temporary note totaling $14,120,000.  The debt was issued to pay for various street and sewer improvements, several of which involve benefit districts.  The City also issued a $10,385,000 water and sewer revenue bond to pay for water line rehabilitation and wastewater digester 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

9/30/09

 

GO Debt

Enterprise
Fund Debt

Less Enterprise Portion of

GO Debt

Total

Long term debt, 1/1/09

80,990,000

$91,939,339

$(5,504,935)

$167,424,404

 

 

 

 

 

Debt, added

3,250,000

10,385,000

-

13,635,000

 

 

 

 

 

Debt, added, Kansas Water Supply Loan

- 

-

-

-

 

 

 

 

 

Less: Principal paid in 2009

(9,730,000)

(2,385,898)

687,349

(11,428,549)

 

 

 

 

 

Total long term debt, 9/30/09

$74,510,000 

$99,938,441 

$ (4.817,586)

$ 169,630,855

 

 

 

 

 

Total long term debt is composed of:

 

 

 

 

Enterprise fund portion

$4,817,586

$95,120,855 

$ -

$99,938,441 

Sales tax portion

6,358,050

-

-

6,358,050

Benefit District Debt (estimated)

16,228,168

-

-

16,228,168

 

Net long term debt, city at large, 9/30/09

$47,106,196

$4,817,586

$(4,817,586)

$47,106,196

Total long term debt, 9/30/09

$74,510,000

$99,938,441

$(4,817,586)

$169,630,855

 

 

 

 

 

Future long term debt will result from:

 

 

 

 

Notes currently outstanding which will be bonded (includes fall note issue)

$14,120,000

$ -

$ -

$14,120,000

 

 

CAPITAL BUDGET

As of September 30, 2009, expenditures for active projects in the capital improvement budget totaled $19.5 million.  Funding for the projects came from $14.1 million in temporary notes and $5.4 million in grants and reimbursements.