Monthly Financial Report - November 2015

Page updated on Mar 16, 2016 at 10:02 AM

Presented to City Council by City Manager Mark Jinks on January 12, 2016.

Download the original report here.

Report Summary—Revenues

General Property tax collections are fairly consistent through the first five months compared to FY 2015.  Through November 2015 the City has collected 52.9 percent of the budget amount of General Property taxes.  By November 2014, total revenues of $221.0 million reflected 53.3 percent of the total revenue received in FY 2015.  With  Calendar Year 2015 real estate taxes now billed, it is interesting to note the amount of revenue that has been foregone due to real estate exemptions.  In Tax Year 2014, more than $320 million of the total taxable real estate value of $35 billion was exempt from taxes for the elderly and disabled.  An additional $38.7 million in taxable real estate value was exempted as required by the Commonwealth for permanently disabled veterans and surviving spouses of services members killed in action.  The result of these exemptions in tax year  2014 was foregone real property tax revenue of $3.7 million.  In tax year 2015 the total value of real estate that was exempt through these programs was $315.2 million and the resulting foregone revenue was $3.3 million. 

Other local taxes continue to compare favorably to last year.   Although there are anomalies when compared to the prior year, the variance is due to timing of payments and receipts and not from any economic factors.  In addition, consumer utility tax receipts through September are $0.6 million higher than through the same period last year.  This is attributable to the timing of payments and not an indication of actual increasing revenue collections.   Admissions tax is lower compared to FY 2015 due to the timing of payments.  In FY 2015, one of the July payments for June attendance was received too late in August to make the FY 2014 cutoff, so it was reflected as revenue for FY 2015.  In August this year, both July payments were received  in a timely  manner and as a result were included in FY 2015.  The significant variance in Other Revenue is attributable to the revenue from the sale of the Old Health Department Building included in FY 2015.  In terms of actual collections revenue from Fines and Forfeitures is higher than at the same time through five months in FY 2015.   However, the budget was increased to $6 million due to the addition of two new motor officers. The two motor officers were anticipated to bring in additional revenue in moving violations, such as HOV violations. Collections from court fines are $100K lower than FY2015.  The two motor officers have been hired  but the in-service start was later than anticipated.  The FY 2015 budget for Fines and Forfeitures was $5.8 million, but FY 2015 actual collections were only $4.9 million.

Report Summary—Expenditures

As of November 30, 2015, General Fund expenditures totaled $236.1 million, which equals 35.5 percent of the budgeted expenditures for FY 2016.  At this time period, the City is approximately 42 percent of the way through the fiscal year and 39.3 percent of payrolls have been processed.  Expenditures through November 2014 represented 33.1 percent of the expenditures for the entire year.  At this point in the fiscal year there are no significant unbudgeted or unanticipated expenditures recorded and the variances shown in Attachment 2 are the result of changes in staffing levels or vacancies in departments.  The City Attorney’s Office has experienced a significantly greater amount of outside legal fees for complex litigation than their current authorized budget.    A similar situation occurred  last year and in FY 2015 outside legal fee expenses were transferred to a Non-Departmental account with available resources.  In FY 2016, staff is recommending transferring resources from the Non-Departmental account to the City Attorney’s Office at this time (via the Supplemental Appropriation Ordinance) to more accurately track costs where they are occurring.   Other variances in the Legislative and Executive function, the Office of Management and Budget, Emergency Communications, Code Administration, Housing and Finance are related to vacancies and turnover of senior positions  at lower costs.  Where applicable, these reduced costs will be factored into the FY 2017 budget. 

The chart below shows the City’s personnel expenditures to date as a percentage of the total personnel budget.  This is the most significant area of budget commitments and represents  approximately 60 percent of the City’s operating budget.  Through November 37.1 percent of payrolls have been posted.  Through the first five months of the year, the average payroll is $7.7 million.  Payroll expenditures as a percentage of the total personnel budget is 7.2 percent in the month of November 2015, which is less than November 2014 by 0.4 percent. 

YTD Personnel Expenditures - November 2015

Revenue Variances in Detail

Revenue Variances in Detail - November 2015

Economic Indicators

  •  In mid December the Federal short term interest rate was increased by one quarter of one percent.  The rate has been at 0.0 percent since 2008.
  •  Although long anticipated, the impact of the rate increase will be watched closely.  In the short term it is unlikely to have a significant effect on economic factors or revenues in general in Alexandria.
  •  In the first week following the rate increase, fixed home loan rates did not change.
  •  If the economy continues to show signs of improvement, the Fed has indicated that the federal interest rate is likely to be increased gradually over the next year, home loan rates are still expected to remain between 3 and 5 percent.
  •  The anticipation of the rate increase did fuel mortgage applications in the past few weeks, particularly for refinancings, which accounted for 62.8 percent of all mortgage applications.  This national trend is consistent with what the City is experiencing, as the average monthly revenue for Recordation Tax revenue in the past three months is approximately $527,000, compared to the monthly average in FY 2015 of only $446,000.
  •  The interest rate increase is not expected to impact other long term borrowing for consumers on transactions such as auto loans or college tuition in the short term.  Short term borrowing costs for banks is expected to increase slightly, which  would likely be passed on to consumers in the form of credit card interest rates and home equity loans.  These increases are likely to appear in the next one to two months, following the federal rate increase, however, the small increase of one quarter of one percent is unlikely to impact consumers.
  •  According to Bankrate.com, a one quarter percentage point increase on a $25,000, five year car loan would increase monthly payments by $3.
  •  There are additional rate increases expected throughout 2016, but future increases will be dependent on continued positive economic trends, related to jobs, continued economic expansion and increased household and business spending.
  •  One of the positive results of the federal interest rate increase is the slight increase in revenues from interest bearing investments and savings accounts.  Although extremely small, this revenue increase will be enjoyed by citizens, businesses and the City, as well. 

Sources:  “Mortgage rates steady as Fed’s increase has limited effect on home loans,” Kathy Orton, Washington Post, December 25, 2015, page A16.

“Buying a car? A home? Fed rate hike shouldn’t matter much,” Christopher Rugabar, Associated Press, December 16, 2015.

“Federal Reserve raises key interest rates, but it’s still a great time for borrowers,” Schuler Velasco, Reuters News Service, December 16, 2015.


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