PFM 2ND Quarter 2018 Report

 

 

Public Financial   215 567-6100

Management   215 567-4180 faxpff logo

1735 Market Street  www.pfm.com,

43rd Floor

Philadelphia, PA

19103

 

 

 

 

 

Q2 2018 Financial Results

This report summarizes preliminary General Fund financial results for the period January 1, 2018 through June 30, 2018 based on trial balance financial data provided by the City. Please note that all numbers shown in this report are unaudited.

 

Overview

 

The City collected 53.8 percent of its budgeted revenues and spent 44.4 percent of its budgeted expenditures through June 2018. Revenues exceeded expenditures by $8.6 million through June, which is not unusual for mid-year results. The City usually receives the majority of its revenue in the first half of the year because of the billing cycle for real estate taxes and usually spends the majority of its budget in the second half of the year because of the schedule for debt payments. The gap between revenues and expenditures midway through 2017 was $11.6 million. The table below compares revenues and expenditures through June 2018 with the budget target.

 

Budget to Actual Comparison

 

 

2018 Q2

2018 Budget

%

Spent/Collected

Revenues

49,835,397

92,677,520

53.8%

Expenditures

41,187,503

92,677,520

44.4%

Difference

8,647,894

0

N/A

 

On the revenue side, the City collected $441,000 (or 0.9 percent) more through June 2018 than through the same period in 2017. Charges for services and the “other” revenue category came in $359,000 and

$439,000 higher, respectively, in comparison to 2017. This more than offset weaker performance in real estate tax (primarily prior year) and interest and rent revenues.

 

On the expenditure side, the City spent $41.2 million through June 2018, $3.4 million (or 8.9 percent) more than through June 2017. The increase in expenditures in 2018 is largely the result of the City’s increased pension contribution. The City also had higher non-pension personnel expenses ($415,000) and operating costs ($400,000). These increases, however, were partially offset by a $1.9 million reduction in debt service costs relative to 2017 mid-year results when the City made an additional debt payment to retire a bank loan ahead of schedule.

 

Year-to-Year Comparison

 

 

2018 Q2

2017 Q2

Difference ($)

Difference (%)

Revenues

49,835,397

49,394,155

441,242

0.9%

Expenditures

41,187,503

37,810,973

3,376,530

8.9%

Difference

8,647,894

11,583,182

(2,935,288)

N/A

 

Eight Trends to Watch

 

Revenues

 

  • The City’s real estate tax rate for 2018 is the same as in 2017 (17.689 mills). Delinquent (or prior year) real estate tax revenues were $266,000 lower than a year ago. In 2017 delinquent revenues reached their highest amount in at least the last five years.

     

  • Mid-year earned income tax (EIT) receipts in the General Fund were $9.8 million, or 4.0 percent lower than last year through June. The City is shifting a growing portion of the EIT to a separate Capital Project Fund to support those types of projects and facilitate its exit from Act 47 oversight. Overall the growth in EIT revenue remains positive across all funds, though the City is currently not on pace to hit the $22.7 million General Fund target.

     

  • Total revenues from charges for services were $324,000 (or 15.0 percent) higher in comparison to 2017. The increase is seen across multiple categories, including EMS user fees ($131,000), the admissions tax ($111,000), and fire recovery revenue ($53,000). Revenues from licenses, permits and fees are also higher than a year ago because of more revenue related to property remodeling.

     

  • There was also a notable increase in the “other revenues” category. Through June these revenues came in $439,000 (or 20.3 percent) higher than in 2017. Much of this increase appears to be due to increased prescription drug reimbursements ($205,000), which could a reflection of a change in how these reimbursements are recorded rather than an increase in the dollar value fo the reimbursements.

     

    Expenditures

     

  • The City’s spending on salaries and overtime within the Police Department was 2.1 percent higher than a year ago and on target to stay within budget. Spending on those same items within the Fire Department was 5.0 percent higher than a year ago.

     

  • Before 2017 the City generally had not made any of its required employee pension contribution until late in the year. To help boost pension funding levels, the Administration started making a portion of these contributions throughout the year. Through the second quarter the City has contributed $9.2 million, or 54.1 percent of the total.

     

  • The City spent $129,000 less than a year ago on employee insurance (fringe benefits) across all employees and has spent less than 40 percent of the budget allocation for 2018. The City is self-insured and has recently spent more on fringe benefits in the second half of the year.

     

  • City spending on non-personnel operating costs was $400,000 (or 9.6 percent) higher than a year ago, mostly due to the purchase of new equipment for the Police Department.

REVENUES

 

The City had $49.8 million in General Fund revenues through June 2018. The table below compares the City’s revenue performance through June 2018 to this year’s budget and last year through June.

 

 

2018 Q2

2018

Budget

%

Collected

2017 Q2

Difference ($)

Difference (%)

Real Estate Taxes

20,121,298

24,208,460

83.1%

20,542,911

(421,613)

-2.1%

Act 511 Taxes

13,371,155

29,635,000

45.1%

13,400,231

(29,076)

-0.2%

Licenses, Permits, Fines

2,909,805

4,993,800

58.3%

2,722,418

187,387

6.9%

Intergovernmental

1,366,687

7,474,370

18.3%

1,330,849

35,838

2.7%

Charges for Services

2,480,863

5,151,230

48.2%

2,156,580

324,283

15.0%

Interest and Rent

753,946

2,441,000

30.9%

940,815

(186,869)

-19.9%

Other

2,601,394

5,063,160

51.4%

2,162,852

438,542

20.3%

Transfers in

6,230,250

13,710,500

45.4%

6,137,500

92,750

1.5%

TOTAL REVENUES

49,835,397

92,677,520

53.8%

49,394,155

441,242

0.9%

 

Real estate taxes

 

The real estate tax generates about a quarter of all General Fund revenues and is the City’s largest source of budgeted revenue. The 2018 real estate tax millage is the same as the 2017 tax rate – 17.689 per $1,000 of assessed value, including 0.2 mills a piece for the Shade Tree Fund and Reading Public Library. The revenues in this report do not include the money for the Shade Tree Fund1.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference ($)

Difference (%)

Current Year2

19,214,688

21,784,960

88.2%

19,336,227

(121,539)

-0.6%

Prior Years

1,099,408

2,264,900

48.5%

1,365,647

(266,239)

-19.5%

Penalties and Interest

172,747

526,000

32.8%

206,703

(33,956)

-16.4%

Discount for Early Payment

(365,544)

(367,400)

99.5%

(365,666)

121

0.0%

Property Tax Subtotal

20,121,298

24,208,460

83.1%

20,542,911

(421,613)

-2.1%

 

Through June 2018, the City collected approximately 0.6 percent less in current year real estate tax than a year ago. Because real estate tax is due by June 30, the City receives most of its current year revenue by end of Q2. The following table shows the amount of current year revenues collected through June for the last four years, including the last tax increase in 2016. This year’s collections were lower than last year’s by $122,000.

 

 

2014 Q2

2015 Q2

2016 Q2

2017 Q2

2018 Q2

Q2 Current Year Revenues

17,194,906

17,299,001

19,186,260

19,336,227

19,214,688

Actual/Budgeted Revenues

19,605,173

19,637,933

21,997,112

21,734,954

21,784,960

Percent Collected Thru Q2

87.7%

88.1%

87.2%

89.0%

88.2%

 

1 The Shade Tree Fund revenues are recorded outside the General Fund. The Reading Public Library revenue is recorded in the General Fund and then transferred to the Library as part of the City’s contribution.

2 Current year results include the amount designated for the Reading Public Library.

The City received $266,000 (or 19.5 percent) less in prior year revenues through June. In 2017, the City received $2.5 million in prior year real estate taxes, which was the highest amount in at least the last five years and $0.7 million (or 36.6 percent) higher than in 2016. The 2016 tax increase accounts for part of the jump since there is a time lag between the tax increase and the impact on prior year receipts. But that alone would not account for the entire increase. We have contacted the Tax Claim Bureau to gather more information.

 

Act 511 Taxes

 

Act 511 taxes are the City’s largest revenue category. The City collected 45.1 percent of its budgeted Act 511 tax revenue through June 2018.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference ($)

Difference (%)

Earned Income Tax

9,755,441

22,700,000

43.0%

10,161,751

(406,310)

-4.0%

Business Privilege Tax

1,497,716

1,960,000

76.4%

1,175,508

322,208

27.4%

Real Estate Transfer Tax

1,516,065

3,350,000

45.3%

1,677,999

(161,933)

-9.7%

Local Services Tax

530,666

1,295,000

41.0%

380,036

150,629

39.6%

Per Capita Tax

71,267

330,000

21.6%

4,938

66,330

1343.3%

Act 511 Taxes Subtotal

13,371,155

29,635,000

45.1%

13,400,231

(29,076)

-0.2%

 

The earned income tax (EIT) 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.

 

According to the provisions in the Amended Recovery Plan, the City splits the earned income tax revenue between its General Fund and the Capital Improvement Fund and is gradually shifting a larger portion from operations to capital projects. That movement from the General Fund to the Capital Fund accounts for the General Fund receiving $406,000 less in Q2 2018 than in Q2 2017. That money flowed to the Capital Fund instead. Across all funds, all years and all taxpayers, the City’s EIT performance shows growth through Q2. On a cash basis, the City received $13.2 million through June 2018 versus $12.5 million through June 2017.

 

BPT payments are due at the end of June. The City collected $322,000 (or 27.4 percent) more through Q2 in comparison to 2017. While revenues were higher than in 2017, collections are still lagging behind 2016. The City collected 76.4 percent of its total budgeted revenue by the end of June 2018 compared to

89.8 percent in 2016.

 

 

2016 Q2

2017 Q2

2018 Q2

%

Change

Current Year

1,508,268

1,145,161

1,328,150

-11.9%

Prior Years

175,018

30,346

169,566

-3.1%

Total

1,683,286

1,175,508

1,497,716

-11.0%

 

Local services tax (LST) revenue continues to fluctuate by quarter. Q2 2018 receipts were $531,000 compared to $217,000 in Q1 2018 and $380,000 in Q2 2017. The year-to-year results have been more stable at $1.3 million the last two years.

Mid-year per capita tax revenues were also higher than in the past3. The bulk of those revenues arrive in the second half of the year because of the City’s billing cycle.

 

Licenses, Permits and Fees

 

This category includes rental housing permit fees, cable franchise fees, traffic and court fines and business privilege licenses. The City collected 58.3 percent of budgeted revenues in this category, which was $187,000 (or 6.9 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 permits4. The City collected 73.9 percent of its current year budget target and 15.3 percent of its prior year target. Compared to last year, the City collected $161,000 (or 19.4 percent) less in current year revenue and $13,000 (or

44.6 percent) less in prior year revenue. Renewal applications and the associated fees are due to the City at the end of June, but the City offered a discount for early payment for the first time this year, which would explain some of the reduction. The City also started recording a portion of the fees associated with abandoned properties in a different account code.

 

Rental Housing Permit Revenues

 

 

2018 Q2

2018 Budget

%

Collected

Current Year

669,040

905,000

73.9%

Prior Years

16,018

105,000

15.3%

Housing/Rental Permit Total

685,058

1,010,000

67.8%

 

This category also includes revenue from the business privilege license (BPL). The BPL is a measure of the number of businesses active in the City since each one is required to pay the $55 annual license fee. This applies to any business that receives payment for goods and services provided inside City limits, even if the business itself is located outside Reading. BPL revenues were $11,000 (or 4.6 percent) higher than a year ago through two quarters.

 

Remodeling permits were $180,000 (or 62.5 percent) higher in comparison to the prior year through June. Additionally, traffic fines motor codes were $92,000 (157.1 percent) higher because of timing differences between when the Reading Parking Authority remitted money to the City in 2018 versus 20175. The increased revenues from these sub-categories more than offset the $174,000 (or 20.3 percent) drop in housing and rental permits for an overall increase in total revenue for this category.

 

Other Licenses, Permits and Fees

 

 

2018 Q2

2018

Budget

%

Collected

2017 Q2

Difference ($)

Difference (%)

Housing/rental permit

685,058

1,010,000

67.8%

859,177

(174,119)

-20.3%

District court offenses

178,132

350,000

50.9%

181,124

(2,992)

-1.7%

Franchise fees

212,684

930,000

22.9%

229,933

(17,249)

-7.5%

Remodeling permits

467,325

450,000

103.9%

287,574

179,751

62.5%

Traffic fines motor codes

151,251

225,000

67.2%

58,836

92,415

157.1%

Business Privilege Licenses

257,743

275,000

93.7%

246,424

11,319

4.6%

Quality of life fines

44,837

135,000

33.2%

55,742

(10,904)

-19.6%

 

3 Mid-year results were $12,000 in 2015; $19,000 in 2016 and $5,000 in 2017.

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

5 The RPA remitted two quarters worth of revenue during the first six months of 2018 (the third and fourth quarters of 2017) and only one quarter of revenue during the first six months of 2017.

 

 

2018 Q2

2018

Budget

%

Collected

2017 Q2

Difference ($)

Difference (%)

Other

912,774

1,618,800

56.4%

803,608

109,166

13.6%

Total

2,909,805

4,993,800

58.3%

2,722,418

187,387

6.9%

 

Intergovernmental Revenues

 

The City received 18.3 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.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference ($)

Difference (%)

Pension-State Contributions

0

3,615,550

0.0%

0

0

N/A

Meter Surcharge

850,000

1,700,000

50.0%

850,000

0

0.0%

Grants and Gifts

139,945

307,500

45.5%

37,244

102,701

275.8%

Reading Public Library

0

840,000

0.0%

278,355

(278,355)

-100.0%

Other

376,741

1,011,320

37.3%

165,250

211,491

128.0%

Total

1,366,687

7,474,370

18.3%

1,330,849

35,838

2.7%

 

The largest difference in intergovernmental revenue in comparison to the prior year is the revenue that supports the Reading Public Library. The City receives this revenue from the County as a reimbursement for some of its expenditures. Last year’s revenues came in $276,000 (32.8 percent) above the budget target, while the City’s general ledger for 2018 Q2 $0. This was due an accounting adjustment related to a late reimbursement for 2017 Q4 expenditures that has been accrued back to that year.

 

The next largest difference is in the other intergovernmental revenues category. The increase in revenues through June is largely the result of the City collecting $138,000 more in payments-in-lieu-of- taxes (PILOT) revenue and $75,000 more in reimbursements from community policing.

 

Additionally, the City received $90,000 in grant revenue during the first quarter of 2018, most of it coming from Fire Department grants. This accounts for the majority of difference in Q2 revenues in comparison to the prior year.

 

Charges for Services

 

The City collected 48.2 percent of budgeted revenues from charges for services, which was $324,000 (or

15.0 percent) more than a year ago. All categories except for housing inspection came in higher than the prior year.

 

The largest item in this category is the City’s charges for EMS service where the City collected $1.3 million through June, which was $131,000 (or 11.2 percent) more than in the previous year. The “other” revenue category also came in higher through June by $82,000 (or 38.4 percent). This is mostly the result of an increase of $53,000 in fire recovery revenue.

The City levies a 5.0 percent admissions tax on events at the Santander Arena, Santander Performing Arts Center and FirstEnergy Stadium. Through two quarters admissions tax revenue was $111,000 (or

57.3 percent) more than the revenue received during the same period in 20176.

 

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 of the revenue it receives to offset reimbursable overtime activities under grants and gifts in the Intergovernmental Revenue category. This revenue is consistent with the prior year.

 

Service Charge Revenue

 

 

2018 Q2

2018

Budget

%

Collected

2017 Q2

Difference ($)

Difference (%)

EMS User Fees

1,294,804

2,900,000

44.6%

1,163,965

130,839

11.2%

Housing Inspection

285,031

655,000

43.5%

293,472

(8,440)

-2.9%

Kenhorst Police Contract

230,963

461,930

50.0%

226,434

4,529

2.0%

Admissions Fee/Tax

305,724

460,000

66.5%

194,401

111,323

57.3%

Police Service/Copy Service

67,430

170,000

39.7%

63,813

3,617

5.7%

Other

296,911

504,300

58.9%

214,495

82,417

38.4%

Total

2,480,863

5,151,230

48.2%

2,156,580

324,283

15.0%

 

Interest and Rent

 

The City reports $187,000 less in revenue from interest and rent than through June 2018 because of a lower payment from the Reading Parking Authority relative to last year. The $325,000 shown below was the total at end of the first quarter, so the City did not receive any rental payments during the second quarter. The City also anticipates that it will not receive the full $1.9 million amount shown below.

 

Interest and Rent Revenues

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference ($)

Difference (%)

Rental - Parking Authority

324,999

1,900,000

17.1%

499,998

(174,999)

-35.0%

CD Bond Interest

145,864

175,000

83.4%

90,451

55,413

61.3%

Rent Other Property Bldgs

43,674

65,000

67.2%

49,834

(6,161)

-12.4%

Other

239,015

300,000

79.7%

300,000

(60,985)

-20.3%

Total

753,946

2,441,000

30.9%

940,815

(186,869)

-19.9%

 

Interfund revenues

 

The City transfers revenue from the Water Fund to the General Fund to account for the Reading Area Water Authority (RAWA) lease payment. 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

 

6 The Administration noted that 2017 year-to-date admission fee receipts were higher on a cash basis. It is possible that the weaker performance shown for 2017 on a modified accrual basis was the result of some revenue from 2017 accidentally being accrued back to 2016. If that is the case, it can be corrected during the external audit process.

federal consent decree. The City makes these transfers on a monthly basis as reflected in the chart below.

 

The 2018 budget also shows a $1.3 million transfer from prior year fund balance (i.e. the City’s reserves). Use of prior year fund balance is not considered current year revenue from an accounting perspective, but it is often recorded that way in Pennsylvania local government budgets. The City has yet to use this contingency.

Interfund Revenues

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference ($)

Difference (%)

From RAWA

4,730,250

9,460,500

50.0%

4,637,500

92,750

2.0%

Transfer from Sewer Fund

1,500,000

3,000,000

50.0%

1,500,000

0

0.0%

Prior year carryover

0

1,250,000

0.0%

0

0

N/A

Total

6,230,250

13,710,500

45.4%

6,137,500

92,750

1.5%

 

Other Revenues

 

Revenues not counted in the prior categories are grouped together in this “other” category. Between all of these revenues, the City collected 51.4 percent of the total budget and $439,000 (or 20.3 percent) more than last year. The largest item in the other revenues category is the City employees’ contributions to the cost of health insurance7. Collections through the second quarter were $89,000 (or 9.6 percent) higher than in the prior year. Much of the increase in total revenue, however, appears to be due to increased prescription drug reimbursements ($205,000) and miscellaneous revenue ($141,000). The variance in prescription drug reimbursements could be a change in how this activity is recorded, rather than an increase in the dollar value of reimbursements.

 

Other Revenues

 

 

2018 Q2

2018

Budget

%

Collected

2017 Q2

Difference ($)

Difference (%)

Employee Insurance Contribution

1,012,605

2,107,210

48.1%

924,020

88,585

9.6%

Indirect Cost Reimb - Sewer

599,920

1,199,840

50.0%

571,350

28,570

5.0%

CDBG Revenue to Fund Codes

80,077

250,000

32.0%

0

80,077

N/A

Heart & Lung Reimbursement

107,119

95,000

112.8%

199,128

(92,009)

-46.2%

Indirect Cost Reimb - CD

99,625

199,250

50.0%

99,624

1

0.0%

Rdg. Housing Auth - Reimb.

108,779

290,000

37.5%

80,810

27,969

34.6%

Indirect Cost Reimb- Recycling

99,750

199,500

50.0%

186,612

(86,862)

-46.5%

Direct Cost Reimb. - Trades

0

150,000

0.0%

0

0

N/A

Other

493,520

572,360

86.2%

101,309

392,211

387.1%

Other Revenues Total

2,601,394

5,063,160

51.4%

2,162,852

438,542

20.3%

 

EXPENDITURES

 

The City spent $41.2 million in its General Fund through June 2018, which was 44.4 percent of the $92.7 million budget. The City spent $3.4 million (or 8.9 percent) more than a year ago. The majority of the increase was the result of an increase in the City’s pension contributions. Additionally, the City’s spending on non-pension personnel costs was also higher than in the prior year. Those increases were partially offset by $1.9 million decrease in debt service expense.

 

7 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 payments that City employees make to medical care providers when they receive service (e.g. office or prescription drug copayments).

 

Major Expenditures

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference ($)

Difference (%)

Salaries, wages & holiday pay

14,278,072

29,048,748

49.2%

13,941,297

336,775

2.4%

Overtime

1,838,447

2,901,100

63.4%

1,644,682

193,766

11.8%

Pensions

9,229,895

17,064,150

54.1%

4,863,741

4,366,154

89.8%

Fringe benefits

6,090,491

15,472,767

39.4%

6,219,188

(128,697)

-2.1%

Other personnel

760,682

1,692,119

45.0%

747,491

13,192

1.8%

Debt service

2,650,541

11,712,390

22.6%

4,523,039

(1,872,498)

-41.4%

Operating costs

4,591,071

10,531,593

43.6%

4,190,816

400,254

9.6%

Other expenses

582,124

1,741,700

33.4%

479,542

102,582

21.4%

Contingencies

0

160,594

0.0%

35,000

(35,000)

-100.0%

Interfund transfer expenses

1,166,180

2,352,359

49.6%

1,166,178

2

0.0%

Total Expenditures

41,187,503

92,677,520

44.4%

37,810,973

3,376,530

8.9%

 

Head count

 

The City spends the majority of its General Fund budget on employee compensation. Spending on active employee salaries, overtime, fringe benefits and other types of compensation accounted for more than half of the first half expenditures. Therefore, changes in head count (i.e. the number of active employees) are an important factor in the City’s financial performance.

 

For now we are focusing our headcount analysis on the Police and Fire Departments which have the most full-time positions supported by the General Fund. Public Works has the third most full-time employees overall, but close to half of the Department’s positions are supported by enterprise funds outside the General Fund.

 

For the Reading Fire Department, the 2018 budget has 137 full-time positions across the Department’s five divisions8. The City began the year with 127 fire personnel in January and finished Q2 2018 with an average head count of 131. In contrast, the City had 131 fire personnel at the start of 2017, added seven firefighters by March and finished the first half of last year with an average headcount of 134.

 

Fire head count

Budget

Actual 2018

Actual 2017

January

137

127

131

February

137

133

130

March

137

132

137

April

137

131

136

May

137

131

136

June

137

129

135

Average

137

131

134

 

The Reading Police Department has 195 full-time positions (including civilians) in the 2018 budget9. After finishing 2017 with 189 filled positions, head count rose to 191 in January 2018 and then began to decrease through the second quarter, much like last year.

 

8 This total is the positions represented by the International Association of Firefighters, plus the Chief, his four deputies, the EMS Coordinator and one clerical employee.

9 This includes 167 police officers, 26 civilians, the Chief and the Deputy Chief.

 

Police head count

Budget

Actual 2018

Actual 2017

January

195

191

188

February

195

190

187

March

195

190

187

April

195

189

187

May

195

186

185

June

195

182

184

Average

195

188

186

 

While the position ordinance for 2018 shows 167 police officers (excluding the Chief and Deputy Chief), the City does not expect to have that many positions filled on average throughout the year. Attrition and hiring cycles naturally lead to lower staffing levels and the City accounts for those factors through the “vacancy allowance” added to the 2018 budget. The vacancy allowance in 2018 is $500,000, which is equal to the starting salary plus fringe benefits for about seven officers. With this vacancy allowance, the City only anticipates that it will have 160 officers on average throughout the year. During the second quarter the City averaged 162 officers.

 

Personnel

 

Salaries, Temporary Wages and Holiday Pay

 

The largest category in the City’s budget is the “regular” pay of City employees: their salaries, holiday pay and wages for temporary employees. At $29.0 million, this category accounts for about one-third of the total General Fund budget. The table below shows spending for each of the major departments through June. All departments except Public Works spent within two percent of their budget allocation.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference Difference ($) (%)

Police

6,347,244

13,005,454

48.8%

6,334,015

13,229

0.2%

Fire

4,263,725

8,689,784

49.1%

4,078,483

185,242

4.5%

Public Works

994,032

2,090,180

47.6%

933,538

60,494

6.5%

Administration

832,648

1,617,290

51.5%

830,548

2,100

0.3%

Community Dev

1,034,056

2,013,270

51.4%

1,017,612

16,444

1.6%

Other

806,367

1,632,770

49.4%

747,100

59,267

7.9%

Total

14,278,072

29,048,748

49.2%

13,941,297

336,775

2.4%

 

Overtime

 

The City’s overtime expenditures through June 2018 were $194,000 (or 11.8 percent) more than through June 2018 mostly due to the increase in Police Department spending.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference Difference ($) (%)

Police

1,061,405

1,823,000

58.2%

920,757

140,648

15.3%

Fire

731,356

981,710

74.5%

677,329

54,027

8.0%

Public Works

32,486

82,620

39.3%

37,271

(4,785)

-12.8%

Other

13,200

13,770

95.9%

9,324

3,875

41.6%

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference Difference ($) (%)

Total

1,838,447

2,901,100

63.4%

1,644,682

193,766

11.8%

 

The Fire Department spent $731,000 on overtime, $54,000 (or 8.0 percent) more than through the second quarter of last year. As shown above, the department spent $185,000 (or 4.5 percent) more on salaries than a year ago. Altogether, the City’s spending on fire salaries and overtime was approximately

5.0 percent higher than last year through the second quarter.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference ($)

Difference (%)

Fire Salaries

4,263,725

8,689,784

49.1%

4,078,483

185,242

4.5%

Fire Overtime

731,356

981,710

74.5%

677,329

54,027

8.0%

Fire Subtotal

4,995,081

9,671,494

51.6%

4,755,812

239,269

5.0%

 

The Police Department’s spending on salaries was consistent with the prior year, while overtime spending was $141,000 (or 15.3 percent) higher in comparison to 2017. Overall, the City spent $154,000 (or 2.1 percent) more through the second quarter.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference ($)

Difference (%)

Police Salaries

6,347,244

13,005,454

48.8%

6,334,015

13,229

0.2%

Police Overtime

1,061,405

1,823,000

58.2%

920,757

140,648

15.3%

Police Subtotal

7,408,649

14,828,454

50.0%

7,254,773

153,877

2.1%

 

The overtime expenditures shown in the table above 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 $994,000 in unreimbursed overtime through June 2018, which was 16.0 percent more than a year ago.

 

Police Department Overtime including Reimbursements10

 

 

Budget

Q2 Actual

FY17 Overtime

1,844,730

920,757

FY17 Reimbursement

170,000

63,813

FY17 Unreimbursed

1,674,730

856,944

     

FY18 Overtime

1,823,000

1,061,405

FY18 Reimbursement

170,000

67,430

FY18 Unreimbursed

1,653,000

993,975

 

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

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).

 

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 (MMOs), are calculated by an external actuary based on the pension plans' assets and liabilities, and accounting for employee contributions. The City uses Commonwealth pension aid and General Fund revenues to make the MMO payments. The City made a larger portion of its pension contribution during the first half of 2018 than it did during the first half of 2017, so timing accounts for some of the $4.3 million year-to-year difference. The City’s total year-end contribution also will be $2.2 million (or 14.6 percent) higher this year, even without that timing effect.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference Difference ($) (%)

Police

5,719,110

11,371,020

50.3%

2,999,007

2,720,103

90.7%

Fire

1,768,185

3,515,600

50.3%

907,521

860,664

94.8%

Employees & Officers

1,742,600

2,177,530

80.0%

957,213

785,387

82.0%

Total

9,229,895

17,064,150

54.1%

4,863,741

4,366,154

89.8%

 

Employee insurance (Fringe Benefits)

 

The City spent 39.4 percent of its fringe benefit budget through June 2018, which was $129,000 (or 2.1 percent) less than through June 2017. 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. While fringe benefit costs were lower across the majority of departments, Police Department spending was $156,000 (or 4.8 percent) higher in comparison to the prior year.

 

Fringe Benefit Expenditures

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference Difference ($) (%)

Administration

303,826

1,040,641

29.2%

400,546

(96,720)

-24.1%

Public Works

345,365

1,156,796

29.9%

451,403

(106,038)

-23.5%

Police

3,396,513

7,729,790

43.9%

3,240,329

156,184

4.8%

Fire

1,528,584

4,049,560

37.7%

1,521,239

7,345

0.5%

Community Dev

349,808

1,012,320

34.6%

423,555

(73,747)

-17.4%

Other

166,395

483,660

34.4%

182,116

(15,721)

-8.6%

Total

6,090,491

15,472,767

39.4%

6,219,188

(128,697)

-2.1%

 

Please also note that, while the City has spent less than half of its budget allocation midway through the year, this does not mean that the City will necessarily finish well under budget in 2018. Last year the City spent more on health insurance in the second half of the year than in the first.

 

Other personnel

 

The City spent another $761,000 on other personnel-related expenditures through June which was consistent with the prior year.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference Difference ($) (%)

Premium Pay

154,446

223,029

69.2%

164,860

(10,413)

-6.3%

Social Security

489,638

1,066,660

45.9%

474,919

14,719

3.1%

Unemployment Comp

17,330

100,000

17.3%

8,555

8,775

102.6%

Uniforms/Clothing Allowance

99,268

302,430

32.8%

99,156

111

0.1%

Total

760,682

1,692,119

45.0%

747,491

13,192

1.8%

 

Debt Service

 

The City spent 22.6 percent of its debt service budget through June 2018. The City generally makes its first debt payment (interest only) in the first half of the year and then a second payment (interest plus principal) in the second half of the year. In 2017, the City repaid the bank loan that funded its 2014 information technology refresh project, retiring that loan ahead of schedule11 and resulting in the one-time additional $1.5 million payment. The City paid $2.7 million in debt service through the second quarter of 2018.

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference Difference ($) (%)

2,650,541

11,712,390

22.6%

4,523,039

(1,872,498)

-41.4%

 

Operating Costs

 

Representing 11.4 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.

 

 

2018 Q2

2018

Budget

% Spent

2017 Q2

Difference Difference ($) (%)

Contracted Services

1,421,430

3,105,630

45.8%

1,206,040

215,390

17.9%

Maintenance Agreements

349,969

571,050

61.3%

297,754

52,215

17.5%

Light & Power

589,150

1,573,800

37.4%

429,189

159,961

37.3%

Gas

201,221

383,330

52.5%

159,891

41,330

25.8%

General Plant Supplies

99,247

346,180

28.7%

335,424

(236,176)

-70.4%

Maintenance/Repair Equipment

278,950

647,830

43.1%

105,329

173,621

164.8%

Maintenance/Repair - Other

111,073

439,000

25.3%

167,309

(56,236)

-33.6%

Fees

183,351

472,480

38.8%

228,813

(45,463)

-19.9%

Other Operating Cost

1,356,678

2,992,293

45.3%

1,261,067

95,612

7.6%

Total

4,591,071

10,531,593

43.6%

4,190,816

400,254

9.6%

 

11 The loan was scheduled for repayment in 2018.

The City’s spending on these items through June 2018 was $400,000 (or 9.6 percent) higher than it was a year ago because the City needed to replace equipment for the police department.

Other expenses

 

The table below shows other expenses in the General Fund.

 

 

2018 Q2

2018

Budget

%

Spent

2017 Q2

Difference ($)

Difference (%)

Contingencies

0

160,594

0.0%

35,000

(35,000)

-100.0%

Miscellaneous

582,124

1,741,700

33.4%

479,542

102,582

21.4%

Transfer to Capital Fund

0

20,000

0.0%

0

0

N/A

Transfer to Self-Insurance

1,166,180

2,332,359

50.0%

1,166,178

2

0.0%

Total

1,748,304

4,254,653

41.1%

1,680,720

67,584

4.0%

 

The 2018 budget has one large transfer out of the General Fund. The City will transfer $2.3 million from the General Fund to the Self Insurance Fund to pay the actual cost of property, liability and workers compensation claims and associated administrative costs. The City makes a portion of that transfer each month.

 

The City’s 2017 budget includes a contingency of $161,000 as a modest buffer against unanticipated revenue shortfalls or increased expenditures that could occur during the year. The City also budgets $1.7 million on miscellaneous expenditures. The largest items in this category are tax collection expenditures ($608,000), a one-time allocation for sidewalk repair ($400,000) – which has not been used through the end of June, and the City’s contribution to the Reading Public Library ($362,000).