PFM 2nd Quarter 2014 Report

 

 

 

 

 

 

 

Public Financial Management, Inc.
PFM Asset Management LLC
PFM Advisors

Two Logan Square
Suite 1600

18th & Arch Streets
Philadelphia, PA 19103-2770

215 567-6100

215 567-4180 fax

www.pfm.com


Q2 2014 Financial Results

 

This report summarizes preliminary financial results for the period January 1, 2014 through June 30, 2014 based on trial balance financial data provided by the City on July 16, 2014.

 

Overview

 

The City collected 54.8 percent of its budgeted revenues and spent 38.0 percent of its budgeted expenditures through June 2014. While revenues exceeded expenditures by $14.2  million through June, expenditures are usually low in the second quarter since the City has yet to pay its

$10 million pension contribution. The table below compares revenues and expenditures through June 2014 with the budget target.

 

Budget to Actual Comparison

 

 

2014 Q2

2014 Budget

% Spent/Collected

Revenues

46,235,869

84,375,519

54.8%

Expenditures

32,080,912

84,360,519

38.0%

Difference

14,154,957

15,000

N/A

 

On the revenue side, the City collected $1.8 million (or 4.0 percent) more through June 2014 than through the same period in 2013. The increase is mostly because the City collected more revenue from its real estate and earned income taxes than a year ago through this period, plus the City has more grant revenue with the receipt of the SAFER grant.1 Revenues from the business privilege tax, local services tax, quality of life fines and admissions fee all trailed last year’s pace through June 2014.

 

On the expenditure side, the City spent $32.1 million through June 2014, $2.3 million (or 7.7 percent) more than through June 2013. The spending increase was attributable to higher salary spending in Public Works with six equipment operator positions shifted from the Recycling Fund to the General Fund in the 2014 budget. The City also had more spending on contracted services, street paving and IT hardware, which is incorporated in the operating budget.

 

 

2014 Q2

2013 Q2

Difference ($)

Difference (%)

Revenues

46,235,869

44,455,327

1,780,542

4.0%

Expenditures

32,080,912

29,800,4632

2,280,450

7.7%

Difference

14,154,957

14,654,864

(499,907)

N/A

 

1 The City started receiving the SAFER grant revenue after March last year and the majority of the grant revenues came in during the second half of the year.

2 The refinancing of General Obligation bonds in 2013, including $3.1 million in bond proceed revenues and $3.3 million in expenditures, are excluded from all numbers.


 

 

Eight Trends to Watch

 

Revenue

 

§  The City’s property tax rate remained unchanged at 15.689 mills this year. Through June, current year revenues are up 2.9 percent.

 

§  The City’s earned income tax revenues are outpacing last year’s collections, with the City collecting $354,000 (9.2 percent) more in current year revenues through June.

 

§  The City collected 36.1 percent of is local services tax, which was $188,000 (or 32.2 percent) less than through June last year. City finance indicated the lower mid-year receipts are a timing quirk related to when the City receives revenues from its external collector and that the City will still hit the $1.1 million budget target.

 

§  The City activated a fourth ambulance in the fourth quarter of 2013 so the 2014 budget assumed

$3.5 million in annual revenue associated with that change. The City has collected $1.3 million from EMS user fees through June, which is $275,000 (or 27.6 percent) more than through June last year but only 35.9 percent of the $3.5 million target. Unless the City has higher revenues in the second half of the year, it will not hit its revenue target.

 

Expenditures

 

§  Salary spending is generally on target with 48.4 percent of the total budget spent through June. The City reports spending $137,000 more on public works salaries, wages and holiday pay than a year ago because the City shifted the salary expenses for six equipment operators from the Recycling Fund to the General Fund.

 

§  Through June, the City spent $60,000 less on police overtime and $66,000 less on  fire overtime than a year ago. According to the information provided to PFM, non-reimbursed police overtime is also slightly lower through June this year.

 

§  The City reports spending 44.0 percent of its budget for employee health insurance (fringe benefits) through June. Reported expenditures were $375,000 (or 8.5 percent) higher than through the same period last year, but the City’s third party administrator projects that the City is on pace to stay within its annual allocation for prescription drug and medical insurance costs.

 

§   The City spent $385,000 (or 45.0 percent) more on contracted services through June 2014 than through June 2013 due to spending related to the repair of three dams and the Pagoda walls.


REVENUES

The City had $46.2 million in General Fund revenues through June 2014. The table below compares the City’s revenue performance through June 2014 to this year’s budget and last year through June.

 

Major Revenues

2014 Q2

2013

Budget

%

Collected

2013 Q2

Difference ($)

Difference (%)

Real Estate Taxes

18,111,798

21,083,297

85.9%

17,160,731

951,067

5.5%

Act 511 Taxes

12,648,272

24,990,795

50.6%

12,341,305

306,967

2.5%

Licenses, Permits, Fine

3,125,389

5,887,796

53.1%

2,813,719

311,670

11.1%

Intergovernmental

3,075,396

10,681,789

28.8%

2,292,638

782,759

34.1%

Charges for Services

2,391,050

6,247,771

38.3%

2,353,505

37,545

1.6%

Interest and Rent

660,497

1,365,000

48.4%

828,816

(168,319)

-20.3%

Other

2,138,467

4,718,593

45.3%

2,679,613

(541,146)

-20.2%

Transfers in

4,085,000

9,400,478

43.5%

3,985,000

100,000

2.5%

TOTAL REVENUES

46,235,869

84,375,519

54.8%

44,455,327

1,780,542

4.0%

 

Real Estate Taxes

Real estate taxes represent about a quarter of all General Fund revenues.  The City’s real estate tax rate remained the same in 2014 after it increased by 9 percent in 2013 to 15.689 mills.

 

 

2014 Q2

2014

Budget

% Collected

2013 Q2

Difference ($)

Difference (%)

Current Year

17,194,906

19,783,297

86.9%

16,708,280

486,626

2.9%

Prior Years

1,073,706

1,300,000

82.6%

662,017

411,689

62.2%

Penalties and Interest

166,982

300,000

55.7%

106,531

60,451

56.7%

Early Payment Discount

(323,796)

(300,000)

107.9%

(316,097)

(7,699)

2.4%

Property Tax Subtotal

18,111,798

21,083,297

85.9%

17,160,731

951,067

5.5%

 

Through June 2014, the City collected 2.9 percent more in current year real estate tax than a year ago and 11.5 percent more than through Q2 2012 when the tax rate was 9 percent lower. Revenues from prior year real estate tax were 62.2 percent more than through last year and more than twice the amount received through Q2 2012. The table below compares current and prior year property tax revenues collected through the second quarters of the last three years.

 

 

2012 Q2

2013 Q2

2014 Q2

% Change from 2012 - 2014

Current Year

15,419,086

16,708,280

17,194,906

11.5%

Prior Years

483,823

662,017

1,073,706

121.9%

Total

15,902,909

17,370,297

18,268,612

14.9%


Act 511 Taxes

 

Act 511 taxes are the City’s largest revenue category.   The City collected 58.8 percent of its budgeted Act 511 Taxes through June 2014.

 

 

2014 Q2

2014

Budget

%

Collected

2013 Q2

Difference ($)

Difference (%)

Earned Income Tax

9,852,069

19,602,820

50.3%

9,246,332

605,737

6.6%

Business Privilege Tax

1,368,804

2,100,000

65.2%

1,443,945

(75,141)

-5.2%

Real Estate Transfer Tax

1,028,958

1,982,975

51.9%

1,061,468

(32,510)

-3.1%

Local Services Tax

396,571

1,100,000

36.1%

584,707

(188,137)

-32.2%

Per Capita Tax

1,870

205,000

0.9%

4,853

(2,983)

-61.5%

Subtotal

12,648,272

24,990,795

58.8%

12,341,305

306,967

2.5%

 

The earned income tax is by far the largest of these taxes, and the City’s second largest source of budgeted revenue after the real estate tax. Berks EIT, Incorporated handles EIT collections for the City and all other governments in Berks County under the terms of Act 32 of 2008.

 

Earned income tax revenues outpaced last year’s level through the second quarter, with the City collecting $606,000 (or 6.6 percent) more. Current year revenue was 9.2 percent higher through the second quarter and prior year revenues was 4.6 percent higher, likely because of the 0.2 percent tax increase from 2012 to 2013.

 

While earned income tax exceeded last year’s collection rate, other Act 511 taxes trailed last year’s pace. The City collected $397,000 in local services tax through June 2014, $188,000 less than through the same period last year. City finance indicated the lower mid-year receipts are a timing quirk related to when the City receives revenues from its external collector and projects the City will still hit the $1.1 million budget target.

 

Business privilege tax collections through June also lagged behind last year’s pace, with the City collecting $75,000 (or 5.2 percent) less than through the same period last year. Much of the drop is attributable to lower collections in prior year business privilege taxes.

 

This year the City increased its per capita tax rate from $15 ($10 for the Reading School District,

$5 for the City) to $30 ($10 for the School District, $20 for the City). It also shifted collection responsibility to Berks EIT, Incorporated, the entity that collects earned income tax on behalf of the City and School District. Per capita tax payments were mailed in July and are due at a discounted rate by the end of August or the full rate at the end of October. The third quarter results will be the first indication how the rate increase and change in collection methodology impacts revenues.


Licenses, Permits & Fees

 

This category includes rental housing permit fees, cable franchise fees, traffic and court fines and business privilege licenses. The City collected 53.1 percent of budgeted revenues in this category, $312,000 (or 11.1 percent) more than through the second quarter last year.

One of the largest items in this category is the City’s charges for rental housing permits.3 The City collected 37.6 percent of its current year budget target and 15.6 percent of its prior year target. The City recently contracted with an external entity to collect revenue from delinquent housing rental permits.

 

Rental Housing Permit Revenues

 

 

2014 Q2

2014 Budget

%

Collected

Current Year

664,077

890,000

74.6%

Prior Years

113,252

450,000

25.2%

Housing/Rental Permit Total

777,329

1,340,000

58.0%

 

The City received $116,000 from quality of life fines through June 2014 versus $192,000 last year and no revenue from new construction permits versus $38,000 last year. The increase in other licenses, permits and fees is driven by a $170,000 increase in remodeling permits and a

$117,000 increase in street cuts revenue.

 

Other Licenses, Permits and Fees

 

 

2014 Q2

2014

Budget

% Collected

2013 Q2

Difference ($)

Difference (%)

District court summary offenses

444,877

850,000

52.3%

431,601

13,275

3.1%

Franchise fees

191,943

725,000

26.5%

180,224

11,719

6.5%

New construction permits

0

90,000

0.0%

38,034

(38,034)

-100.0%

Traffic fines motor codes

178,830

325,000

55.0%

131,131

47,699

36.4%

Business privilege Licenses

284,147

350,000

81.2%

250,188

33,959

13.6%

Quality of life fines

115,919

390,000

29.7%

191,796

(75,876)

-39.6%

Other

1,132,344

1,817,796

62.3%

853,570

278,774

32.7%

Subtotal

2,348,060

4,547,796

51.6%

2,076,545

271,515

13.1%

 

Intergovernmental Revenues

 

The City received 28.8 percent of total budgeted intergovernmental revenues.  The largest item in this category is the Commonwealth pension aid, which arrives in the second half of the year.

 

3 Revenue from rental housing inspections is tracked separately in the Charges for Service category.


 

 

 

2014 Q2

2014

Budget

% Collected

2013 Q2

Difference ($)

Difference (%)

Pension-State Contributions

0

3,150,000

0.0%

o

0

N/A

Meter Surcharge

850,000

1,700,000

50.0%

708,333

141,667

20.0%

RAWA Act 47

750,000

1,500,000

50.0%

750,000

0

0.0%

Parking Authority Supplmt

337,500

810,000

41.7%

405,000

(67,500)

-16.7%

Grants and Gifts

767,113

1,852,145

41.4%

78,894

688,219

872.3%

Reading Public Library

158,676

767,644

20.7%

169,615

(10,938)

-6.4%

Other

212,107

902,000

23.5%

180,796

31,311

17.3%

Intergovernmental Total

3,075,396

10,681,789

28.8%

2,292,638

782,759

34.1%

 

The City received $688,000 more in grant and gift revenue than a year ago because of the timing of the SAFER grant. Last year the City received a grant from the Staffing for Adequate Fire and Emergency Response (SAFER) program administered by the US Department of Homeland Security. The City received $963,000 in SAFER grant revenues last year, most of which arrived in the second half of the year. The City budgets another $1.3 million this year. The grant reimburses the City for 21 firefighter positions added through the grant.

 

The City received $338,000 in parking authority supplement, $67,500 less than through the same period last year. The Parking Authority pays the City $67,500 each month, so the shortfall is likely a delay in the receipt or posting of the June payment.

 

Charges for Services

 

The City collected 38.3 percent of budgeted revenues from charges for services, which was

$38,000 (or 1.6 percent) less than a year ago.

 

The largest item in this category is the City’s charges for EMS service. The City activated a fourth ambulance in the fourth quarter of 2013 so the 2014 budget assumed EMS revenue would increase by approximately 25 percent to $3.5 million. Through June, the City collected $1.3 million from EMS user fees, which was $275,000 (or 27.6 percent) more than last year but only

35.9 percent of the $3.5 million target. Unless the City has higher revenues in the second half of the year, it will not hit its revenue target.

 

Revenue that the Police Department generates by providing additional coverage to specific entities at a reimbursable rate is partially reported in the Police Service/Copy Service line. The City also records some revenue received to offset reimbursed overtime activities under grants and gifts in the Intergovernmental Revenue category. That revenue is lower than last year, though so are overtime expenditures as described more below.


Admissions fee receipts continues to trail last year’s pace, with the City receiving $93,000 (or

39.0 percent) less than through the same period last year.  The table below shows the large items in this category.

Service Charge Revenue

 

 

2014 Q2

2014

Budget

%

Collected

2013 Q2

Difference ($)

Difference (%)

EMS User Fees

1,268,117

3,536,638

35.9%

993,508

274,609

27.6%

Housing Inspection

400,760

816,817

49.1%

414,107

(13,347)

-3.2%

Kenhorst Police Contract

215,569

431,139

50.0%

209,291

6,279

3.0%

Admissions Fee/Tax

146,213

425,000

34.4%

239,646

(93,433)

-39.0%

Police Service/Copy Service

89,431

275,000

32.5%

139,275

(49,844)

-35.8%

Police Reimb. - RSD

0

0

N/A

-

0

N/A

Other

270,959

763,177

35.5%

357,678

(86,719)

-24.2%

Service Charge Total

2,391,050

6,247,771

38.3%

2,353,505

37,545

1.6%

 

Interest and rent

 

The City reports $168,000 less in revenue from interest and rent than in 2013. The apparent drop in revenue is due to a timing lag in the receipt or posting of the $83,000 monthly Parking Authority’s rental payment and an accounting adjustment related to debt repayment from the Greater Berks Development Fund. That adjustment appears as “negative revenue” in the trial balance report.

 

Interest and Rent Revenues

 

 

2014 Q2

2014

Budget

%

Collected

2013 Q2

Difference ($)

Difference (%)

Rental - Parking Authority

416,665

1,000,000

41.7%

499,998

(83,333)

-16.7%

Rental on Stadium

300,000

300,000

100.0%

300,000

0

0.0%

Repayment of Debt to City

(95,333)

0

N/A

0

(95,333)

N/A

Other

39,165

65,000

60.3%

28,818

10,348

35.9%

Interest & Rental Subtotal

660,497

1,365,000

48.4%

828,816

(168,319)

-20.3%

 

Other Revenues

 

The City collected 45.3 percent of the total budget for all other revenues category, which was

$541,000 (or 20.2 percent) less than last year.


The largest item in this category is City employees’ contributions to the cost of health insurance4 which dropped by 14.0 percent compared to last year because of a provision in the City’s Recovery Plan. According to the Recovery Plan, the City’s share of total premiums increases by five percent each year, even if the premiums themselves stay flat or decline as was the case this year.5   If the total premiums decline, and the City is paying a higher share of the smaller amount,

then the employees’ share drops. So employees with single coverage under the Preferred Plus option are contributing 30 percent less in 2014 than in 2013 and employees with family coverage under the Preferred option are contributing 29 percent less.

 

Other Revenues

 

 

2014 Q2

2014

Budget

% Collected

2013 Q2

Difference ($)

Difference (%)

Employee Ins. Contribution

679,400

1,500,000

45.3%

790,369

(110,968)

-14.0%

Indirect Cost Reimb - Sewer

580,147

1,161,432

50.0%

556,969

23,178

4.2%

CDBG Revenue to Fund Codes

41,732.66

500,000.00

8.3%

145,115.99

(103,383)

-71.2%

Heart & Lung Reimbursement

139,022

250,000

55.6%

170,974

(31,952)

-18.7%

Indirect Cost Reimb - CD

0

189,996.00

0.0%

141,249

(141,249)

-100.0%

Rdg. Housing Auth - Reimb.

133,119

200,000

66.6%

92,537

40,582

43.9%

Indirect Cost Reimb- Recycling

221,172

250,216

88.4%

126,278

94,894

75.1%

Indirect Cost Reimb- Water

0

0

N/A

251,869

(251,869)

-100.0%

Direct Cost Reimb. - Trades

7,761

170,000

4.6%

48,022

(40,261)

-83.8%

Other

336,114

496,949

67.6%

356,232

(20,118)

-5.6%

Other Revenues Subtotal

2,138,467

4,718,593

45.3%

2,679,613

(541,146)

-20.2%

 

The biggest year-to-year difference is in the indirect cost reimbursement from the water fund, which was $0 through June 2014 compared to $252,000 last year. The City uses resources budgeted in the General Fund to support activities budgeted outside the General Fund and then recovers those costs based on an indirect cost calculation by an external vendor. For example, the Citizen Service Center (General Fund operation) previously provided customer service support for water customers (non-General fund operation) and then recovered the costs. In the case of the indirect cost reimbursement from the water fund, that amount will eventually decline because the Reading Area Water Authority (RAWA) assumed responsibility for some of the services that the City was providing.  The City budgeted $0 for the indirect cost reimbursement

 

 

 

4 The expenditure section of this report discusses the City’s expenses related to employee health insurance. Please note that this revenue line does not include the expenses that City employees pay to medical care providers at the time of receiving service (e.g. office or prescription drug copayments).

5 If the total premium costs increase by more than five percent, than the City employees would make higher contributions to cover the difference. Employees also could reduce their contributions by selecting a different kind of coverage (i.e. moving from Preferred Plus to Preferred).


in 2014, though it is likely to receive some reimbursement according to the most recent indirect cost study.6

 

Interfund revenues

 

The City transfers $5.2 million from the Water Fund to the General Fund as an annual lease payment from RAWA based on their lease agreement.7 The City also transfers $3.0 million per year from the Wastewater Treatment Plant Fund to the General Fund each year as restricted by the November 2005 federal consent decree. Both transfers are made on a monthly basis throughout the year. The City also budgeted a $1.2 million transfer from its fund balance this year to fund capital projects, like paving and information technology upgrades.

 

 

2014 Q2

2014

Budget

%

Collected

2013 Q2

Difference ($)

Difference (%)

From RAWA

2,585,000

5,170,000

50.0%

2,485,000

100,000

4.0%

Transfer from Sewer Fund

1,500,000

3,000,000

50.0%

1,500,000

0

0.0%

Transfer from Fund Balance

0

1,230,478

0.0%

0

0

N/A

Interfund Total

4,085,000

9,400,478

43.5%

3,985,000

100,000

2.5%

 

EXPENDITURES

 

The City spent $32.1 million in its General Fund through June 2014, which was 38.0 percent of the $84.4 million budget. The City spent $2.3 million (or 7.7 percent) more than a year ago with most of the difference in salaries and operating costs as explained below.

 

Major Expenditures

2014 Q2

2014 Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Salaries, wages & holiday pay

14,146,137

29,236,011

48.4%

13,576,868

569,269

4.2%

Overtime

1,390,035

2,497,300

55.7%

1,463,538

(73,503)

-5.0%

Pensions

0

9,957,024

0.0%

0

0

N/A

Fringe benefits

4,815,141

10,946,924

44.0%

4,439,841

375,300

8.5%

Other personnel

843,246

1,623,894

51.9%

829,345

13,901

1.7%

Debt service

4,227,379

13,144,084

32.2%

3,938,428

288,951

7.3%

Operating costs

4,928,565

11,608,877

42.5%

3,837,118

1,091,447

28.4%

Other expenses

459,431

671,310

68.4%

395,512

63,919

16.2%

Contingencies

132

2,133,400

0.0%

1,821

(1,690)

-92.8%

 

 

6 This indirect cost reimbursement is separate from RAWA’s payment to the City under the lease agreement.

7 The lease agreement also sets RAWA’s supplemental payment to the General Fund, which is tracked in intergovernmental revenues as “RAWA supplement.”


 

Major Expenditures

2014 Q2

2014 Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Interfund transfer expenses

1,270,848

2,541,695

50.0%

1,317,992

(47,144)

-3.6%

Total Expenditures

32,080,912

84,360,519

38.0%

29,800,463

2,280,450

7.7%

 

Personnel

 

Most of the City's General Fund expenditures are for employee compensation, including fringe benefits (health insurance) and the City's pension contribution. Personnel-related costs account for two-thirds of the City's mid-year spending and 64 percent of the City's General Fund budget.

 

The largest portion of the City's personnel expenditures are for the “regular” pay of City employees: their salaries, temporary wages, and holiday pay. The table below shows that spending by department. All departments are close to the 50 percent spending level expected through the second quarter of the year. The Fire Department spent $285,000 more than last year because of the positions added through the SAFER grant. Public Works spent $137,000 (or 19.1 percent) more than last year because of increased expenses in the Highways division. The City shifted the salary expenses for six equipment operators from the Recycling Fund to the General Fund.

 

Salaries, Temporary Wages and Holiday Pay by Department

 

 

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Police

6,306,953

12,940,169

48.7%

6,277,055

29,899

0.5%

Fire

4,278,292

8,850,984

48.3%

3,992,944

285,347

7.1%

Public Works

856,658

1,803,899

47.5%

719,275

137,384

19.1%

Administration

1,014,509

2,108,547

48.1%

900,975

113,534

12.6%

Community Dev

1,001,720

2,139,443

46.8%

1,010,984

(9,264)

-0.9%

Other

688,005

1,392,969

49.4%

675,635

12,370

1.8%

Salaries Total

14,146,137

29,236,011

48.4%

13,576,868

569,269

4.2%

 

Overtime

 

The City’s overtime expenditures through June 2014 were $74,000 (or 5.0 percent) less than through June 2013.

 

 

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Police

859,766

1,814,500

47.4%

920,004

(60,238)

-6.5%

Fire

446,952

641,300

69.7%

512,750

(65,798)

-12.8%

Public Works

72,021

39,500

182.3%

28,012

44,009

157.1%


 

 

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Other

11,296

2,000

564.8%

2,772

8,524

307.6%

Overtime Total

1,390,035

2,497,300

55.7%

1,463,538

(73,503)

-5.0%

 

The Police Department spent $60,000 (or 6.5 percent) less than in Q2 2013. Last year police overtime spending finished at $1.9 million. As discussed in our September 2013 Police Overtime Analysis, the overtime expenditures are only part of the story. Some overtime expenditures are reimbursed by private parties, other governmental entities, or grants. Accounting for the reimbursements tracked in the Police Service revenue line, the City had

$770,000 in unreimbursed police overtime expenditures through June, which was $10,000 (or 1.3 percent) less than through the same period in 2013.

 

Police Department Overtime including Reimbursements8

 

 

                                                     Budget        

Q2 Actual   

FY13 Overtime

1,479,063

920,004

FY13 Reimbursement

170,000

139,275

FY13 Unreimbursed

1,309,063

780,729

 

 

 

FY14 Overtime

1,814,500

859,766

FY14 Reimbursement

275,000

89,431

FY14 Unreimbursed

1,539,500

770,335

 

The Fire Department spent $66,000 (or 12.8 percent) less on overtime than through the same period in 2013. The City spent $1.1 million on fire overtime for all of last year. Based on Department's spending through June, the City projects the Department will spend $883,000 on overtime this year, which would be $179,000 less than in 2013 but $242,000 more than budgeted. The City projects it will spend $186,000 more than budgeted in the Emergency Medical Services (EMS) division.

 

Benefits

 

This category includes the City's annual required contributions to the employee pension plans and spending on different types of employee insurance coverage (e.g. medical, prescription, dental, vision, life, Medicare).

 

Pensions

 

Pennsylvania law requires the City to make an annual contribution to each of its three employee pension plans.   The City's contributions, also known as the Minimum Municipal Obligations

 

8 This does not include the overtime reimbursements that are recorded as grant and gift revenue.


(MMOs), are calculated by an external actuary based on the pension plans' assets and liabilities, and accounting for the employees' contributions. The City uses Commonwealth pension aid and General Fund revenues to make the MMO payments.  The City's total contributions for 2014 are

$10.0 million, basically the same as in 2013. The City did not make the contributions until September last year and is expected to make the contributions in the second half of this year.

 

 

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Police

-

6,289,708

0.0%

-

0

N/A

Fire

-

2,291,508

0.0%

-

0

N/A

Employees & Officers

-

1,375,808

0.0%

-

0

N/A

Pension Total

-

9,957,024

0.0%

-

0

N/A

 

Employee insurance (Fringe Benefits)

 

The City spent 44.0 percent of its fringe benefit budget through June 2014, which was $375,000 (or 8.5 percent) more than through June 2013. The City is self-insured, so it pays the cost of claims as employees receive medical care with some time lag associated with the medical billing and payment posting process. The City also has a stop-loss insurance policy that covers an employee’s medical treatment after the total costs for an injury or illness reach $225,000.

 

Fringe Benefit Expenditures by Department

 

2014 Q2

2014 Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

4,815,141

10,946,924

44.0%

4,439,841

375,300

8.5%

 

Because the City is self-insured, fringe benefit spending can vary throughout the year as claims are filed and processed. While the total fringe benefit costs include medical, prescription drug, dental, vision and life insurance, the majority (70 percent) is for medical claims.9 According to the medical usage and forecast report provided by Evolution Benefits Consulting, the City spent

$3.8 million (or 47.3 percent) of its $8.1 million medical claim budget10 through June 2014, which was 3.5 percent less than the half-year budget target.

 

 

 

 

 

 

 

 

 

9 Medical claim costs account for $8.7 million of the $12.5 million fringe benefits budget across all funds according to the medical usage and forecast report provided by Evolution Benefits Consulting.

10 The $8.1 million in medical claim budget is across all funds.


Other personnel

 

The City spent another $843,000 million on other personnel-related expenditures through June. Social security spending is higher because six positions shifted from the Recycling Fund to the General Fund as described earlier.

 

 

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%

Premium Pay

253,624

337,083

75.2%

268,754

(15,130)

-5.6%

Social Security

484,296

1,045,650

46.3%

463,576

20,720

4.5%

Unemployment Comp

16,510

100,000

16.5%

17,639

(1,129)

-6.4%

Penny Fund

4,022

2,035

197.7%

1,318

2,705

205.2%

Uniforms/Clothing Allowance

84,794

139,126

60.9%

78,058

6,735

8.6%

Other Personnel Total

843,246

1,623,894

51.9%

829,345

13,901

1.7%

 

Debt Service

 

The City spent 32.2 percent of its debt service budget through June 2014. The City pays its debt according to the schedules established in the individual borrowing agreements. Most of those agreements require the City to make two payments, the first in May and the second in November. The May payment often covers only interest on the borrowings while the November payment covers interest and principal. Since the November payment is larger, the City generally does not spend half of its debt service budget by June.

 

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%

4,227,379

13,144,084

32.2%

3,938,428

288,951

7.3%

 

Operating Costs

 

Representing 13.8 percent of the total budget, this is the category for materials and services that the City government uses in its regular operations. It includes utilities, legal services, equipment, and building maintenance.

 

Operating Costs

 

Operating Costs

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Contracted Services

1,240,734

2,969,430

41.8%

855,611

385,122

45.0%

Light & Power11

474,554

1,488,800

31.9%

192,346

282,208

146.7%

Machinery and Equipment

307,621

1,160,575

26.5%

153,479

154,142

100.4%

Maintenance Agreements

501,238

774,050

64.8%

457,960

43,277

9.5%

 

11 Includes street lighting.


 

Operating Costs

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Gas

313,341

610,000

51.4%

343,815

(30,474)

-8.9%

Vehicles

203,808

265,100

76.9%

60,349

143,460

237.7%

Other Operating Cost

1,887,270

4,340,922

43.5%

1,773,557

53,364

2.9%

Operating Costs Total

4,928,565

11,608,877

42.5%

3,837,118

1,091,447

28.4%

 

The City spent $385,000 (or 45.0 percent) more in contracted services because the budget target was increased by $779,000 in the Traffic Engineering Division of Public Works in 2014 to repair three dams and the Pagoda walls.

 

The $282,000 increase in light and power expense is related to street paving. In prior years the City used money in the separate Liquid Fuels Fund to cover most street lighting expenditures. This year the City will use the money in the Liquid Fuels Fund for street paving and cover the street lighting expenditures with General Fund money. So General Fund spending on this category of expenditures will be higher than in prior years.

 

The City also increased its budget target for machinery and equipment by $928,000 to replace basic IT infrastructure. So spending in that line will also be higher than in prior years. Vehicle spending through June was $204,000, $143,000 more than through June last year. The majority of the vehicle spending was in the Police and Fire Departments.

 

Other expenses

 

The table below shows other expenses in the General Fund.

 

 

2014 Q2

2014

Budget

% Spent

2013 Q2

Difference ($)

Difference (%)

Contingencies

132

2,133,400

0.0%

1,821

(1,690)

-92.8%

Miscellaneous

459,431

671,310

68.4%

395,512

63,919

16.2%

Interfund transfers

1,270,848

2,541,695

50.0%

1,317,992

(47,144)

-3.6%

 

Rather than budgeting revenues higher than expenditures and showing an anticipated year-end positive result, the City budgets contingencies that bring expenditures approximately equal to revenues. This year the City budgeted $2.1 million for contingencies, including $1.1 million for recycling.

 

The interfund transfer is a payment from the General Fund to the Self Insurance Fund for the actual cost of property, liability and workers compensation claims and associated administrative costs. This transfer decreased by $94,000 this year and the spending through June reflects that decrease.