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CITY OF FORT BRAGG

First Quarter 2017-2018 On September 30, 2017, the City completed the first quarter of the 2017-18 fiscal year (FY). This report summarizes the City’s financial results for the period from July 1, 2017 through September 30, 2017 for the City’s General Fund, Water Enterprise and Wastewater Enterprise. It is not meant to be inclusive of all finance and accounting transactions. It is intended only to provide the Council and the public with an overview of the state of the City’s general fiscal condition. The report has been prepared by the City’s finance department without audit and does not include many of the year-end adjustments required to bring the City’s financial records into compliance with generally accepted accounting principles (i.e. accruals of sales and use tax revenues, payroll and other expenditures). Certain additional information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that this information be read in conjunction with the audited financial statements and notes included in the City’s Comprehensive Annual Financial Report as well as the FY 2017-18 Budget.

The General Fund is the primary operating fund of the City and is used to account for most operating activities. The Enterprise Funds account for the activities of the City’s Water, Wastewater and the C.V. Starr Community Center. Financial information for the C.V. Starr Community Center Fund was not available as of the writing of this report but will be presented at mid-year.

GENERAL FUND BUDGET REVIEW: At the May 24, 2017 budget workshop, staff presented the Council with a budget that included a $331k General Fund budget deficit. The budget presented was a $226k improvement over the prior year. At the budget workshop, Council approved additional appropriations that increased the deficit to $415k. In the first quarter of FY 2017-18, the Council has approved additional appropriations increasing the budget deficit to $457k.

REVENUE: First quarter General Fund operating revenues were $1.9M which represents 21% of the FY 2017-18 General Fund budget. A large portion of these revenues are received on a monthly or quarterly basis; however many revenue receipts are dictated by seasonal variations or third party payment schedules. Further, some receipts are simply intermittent or unpredictable. With this variability in mind, it can be useful to look at prior year trends when analyzing first quarter revenues. For example: first quarter General Fund operating revenues were 23% of the FY 2016-17 General Fund budget at the same time last year yet finished the year approximately 1% above budget.

EXPENDITURES: As shown in the table below, expenditures were generally on target for the first quarter of the year at 23% of budget and a $229k positive variance. In the previous year first quarter General Fund operating expenditures were 25% of total budget.

NET RESULTS: The first quarter showed a net expenditure of $243k. On an annualized basis, the net expenditure is higher than the General Fund budgeted deficit of $457k. If the deficit comes to pass by year end, the gap will be filled using fund balance. As the year progresses however, it is likely that revenues will “catch up” to expenditures and the deficit may end the year as budgeted or better.

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CITY OF FORT BRAGG

Discussion of Variances: 

Transient Occupancy Tax (TOT) receipts tend to be highest in the first and last quarter of each fiscal year. Receipts in the first quarter were 37% of total budget and are in line with prior year trends. TOT appears to be on track for another strong year.

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Reimbursements are at 18% of total budget as of Q1 due to certain interfund cost reimbursements that have not been transacted, including general plan maintenance fees, the COPS AB 1913 allocation, Asset Forfeiture reimbursements, and the Gas tax reimbursements ($123k first quarter variance). Additionally, several budgeted training reimbursements have yet to occur.

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Sales and use tax receipts lag two months due to the State’s payment schedule. Based on preliminary information and the receipts received in the first quarter, sales and use tax receipts are trending consistent with budget assumptions.

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Public Safety is showing a positive variance of $75k for the quarter. The variance is caused in part by one open position in the department early in the year. Additionally, the department has made a concerted effort to control overtime work and pay.

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Public Works is showing a positive variance of $67k for the quarter. The variance is caused in part by one open position in the Engineering department and two temp positions at the Corporation Yard early in the year.

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Community Development is showing a positive variance of $63k for the quarter related to the ramp up of the new Tourism Marketing & Promotions division.

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CITY OF FORT BRAGG WATER ENTERPRISE; BUDGET REVIEW: The Water Enterprise adopted a $554k surplus budget for FY 2017-18 and no budget amendments were adopted in the first quarter of the year.

REVENUE: The Water Enterprise FY 2017-18 first quarter revenues total $807K. Water revenues are expected to be somewhat higher during the first and last quarter of each year due to seasonality.

Additionally, the Water Enterprise increased rates 5% beginning July 1, 2017. By comparison, f irst quarter Water Enterprise operating revenues were 29% of the FY 2016-17 Water Enterprise budget at the same time last year.

EXPENDITURES: The Water Enterprise FY 2017-18 first quarter expenditures total $689K or 33% of the annual budget. Expenditures are higher than 25% due to the semi-annual nature of debt payments.

NET RESULTS: The first quarter showed net revenues of $117k. Excess fund balance in the Water Enterprise is accumulated and used to fund an operating reserve and for capital infrastructure improvements and replacements.

Discussion of Variances: ďƒ˜

Debt Service expenditures are at 70% of budget due to the semi-annual nature of debt payments.

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Repairs & maintenance are at 9% due to project scheduling. Projects budgeted but not yet begun for FY 2017-18 include the removal and rehabilitation of the Madsen Hole pump, a wireless connection from the water plant to Madsen Hole and installation of fencing at Waterfall Gulch.

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CITY OF FORT BRAGG WASTEWATER ENTERPRISE; BUDGET REVIEW: The Wastewater Enterprise adopted a $795k surplus budget for FY2017-18. Prior year encumbrances were rolled forward in the amount of $89k.

REVENUE: The Wastewater Enterprise FY 2017-18 first quarter revenues total $931K or 28% of the annual budget. The Wastewater Enterprise increased rates 3% beginning July 1, 2017. First quarter Wastewater Enterprise operating revenues were 26% of the FY 2016-17 budget at the same time last year.

EXPENDITURES: The Wastewater Enterprise FY 2017-18 first quarter expenditures total $620K or 24% of the annual budget. Expenditures are in line with the budget.

NET RESULTS: The first quarter showed net revenues of $312k. Excess fund balance in the Wastewater Enterprise is accumulated and used to fund an operating reserve and for capital infrastructure improvements and replacements.

Discussion of Variances: ďƒ˜

Debt Service expenditures are at 94% of budget due to the semi-annual nature of debt payments.

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Contractual services are at 10% due to scheduling of contract work. Receiving water monitoring work is on hold pending weather and tide conditions which is a requirement of the State of California. The work will commence when the conditions are adequate.

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CITY OF FORT BRAGG MEASURE AA/AB:

In November 2016, the voters of Fort Bragg passed Measure AA which increased the City’s TOT rate from 10% to 12%. The new rate became effective April 1, 2017. The chart above illustrates the amount of tax collected in fourth quarter FY 2016-17 and first quarter FY 2017-18 due to passage of the measure. The chart also illustrates amounts spent thus far and balances remaining both in total and for each of the four program areas earmarked for the revenue.

Total: Tax collections through two quarters total $276k. Expenditures thus far equal $38k leaving a balance of $238k.

Marketing and Promotions: This program is earmarked for 50% or $138k of total Measure AA tax collected. Thus far, expenditures are $17k leaving a balance of $121k. Based on projected revenue for the year, the Marketing and Promotions division of the Community Development Department received approval for $245k of appropriations. As the program ramps up through the year, expenditures are expected to increase significantly.

Coastal Trail Maintenance: This program is earmarked for 25% or $69k of total Measure AA tax collected. In the first quarter of FY 2017-18, $6k has been expended on additional maintenance workers.

Based on projected revenue for the year, the Coastal Trail Maintenance program received approval for $131k of appropriations. The remaining budget is expected to be spent once the Glass Beach Staircase project has been completed.

Noyo Center for Marine Science: This program is earmarked for 12.5% or $35k of total Measure AA tax collected. In the first quarter of FY 2017-18, $15k has been granted to the Noyo Center. Based on projected revenue for the year, the Noyo Center program area received approval for $54k of appropriations. Collected taxes will continue to be granted to the Noyo Center on a quarterly basis.

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CITY OF FORT BRAGG Special Projects – School Playing Fields: This program is earmarked for 12.5% or $35k of total Measure AA tax collected. To date, no specific projects or funds request have been presented to the City by the Fort Bragg Unified School District. Based on projected revenue for the year, the School Playing Fields program area received approval for $54k of appropriations.

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CITY OF FORT BRAGG TREASURER’S REPORT; The City of Fort Bragg’s Fiscal Policies state the following: City funds and the investment portfolio should be managed in a prudent and diligent manner with emphasis on safety, liquidity, and yield, in that order.

Reports on the City’s investment portfolio and cash position are developed by the Finance Director/City Treasurer and reviewed by the Finance & Administration Committee and the City Council at first quarter, mid-year and fiscal year end.

As of September 30, 2017 the City’s cash and investment portfolio balances at market value are as follows:

The portfolio is highly safe, consisting primarily of CDs purchased at a maximum of $250k plus investments in the Local Agency Investment Fund. Investment interest earned for the first quarter of FY 2017-18 was approximately $18k. On an annualized basis the earnings rate is approximately 0.7%.

Although interest rates have started to climb slightly, the City has yet to see any significant effect.

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CITY OF FORT BRAGG As of September 30, 2017 the City’s cash and investment portfolio liquidity at market value is as follows:

The portfolio is highly liquid with 50% available within 30 days and 70% available within a year.

FOR MORE INFORMATION This summary is based on detailed information produced by the City’s Finance Department. If you would like additional information or have any questions about this report, please call 707-961-2825.

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