PFM 3nd Quarter 2016 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

 

Q3 2016 Financial Results

 

This report summarizes the City of Reading’s preliminary financial results for the period January 1, 2016 through September 30, 2016 based on trial balance financial data provided to PFM.

 

The City collected 74.4 percent of its budgeted revenues and spent 52.4 percent of its budgeted expenditures through September 2016. Revenues exceeded expenditures by $19.7 million mostly because the City had not yet made any of its pension or most of its debt service payments. The table below compares revenues and expenditures through September 2016 with the budget.

 

Budget to Actual Comparison

 

 

2016 Q3

2016 Budget

% Spent/ Collected

Revenues

66,653,969

89,546,341

74.4%

Expenditures

46,918,887

89,546,341

52.4%

Difference

19,735,082

0

N/A

 

On the revenue side, the City collected $3.8 million (or 5.3 percent) less than a year ago through the same period. Much of that difference was the result of outstanding intergovernmental revenues. The City had not yet received $3.2 million in state pension aid or $2.9 million from the Reading Parking Authority (RPA). This was partially offset by increases in revenue from Act 511 taxes, with the exclusion of the per capita tax. Real estate tax revenues were also $2.0 million higher because of this year’s tax increase.

 

On the expenditure side, the City spent $11.9 million (or 20.3 percent) less than a year ago through the same period. The decrease mostly results from the City having not yet made its $14.2 million pension contribution. Last year the pension contributions were made in the third quarter and this year they were made in the fourth.

 

Year-to-Year Comparison1

 

 

2016 Q3

2015 Q3

Difference ($)

Difference (%)

Revenues

66,653,969

70,420,848

(3,766,879)

-5.3%

Expenditures

46,918,887

58,825,758

(11,921,072)

-20.3%

Difference

19,735,082

11,595,090

8,139,992

N/A

 

 

image

1 The City’s 2015 General Ledger includes unbudgeted revenues and expenditures associated with the debt refinancing transactions completed early last year. There were $58.8 million in bond proceeds on the revenue side and $58.7 million in bond payments on the expenditure sides. These revenues and expenditures were generally offsetting – the City received money from its new bonds to repay the old bonds –so they are excluded from all numbers and discussion in this report.

 

 

Eight Trends to Watch

 

Revenue

 

  • The City’s property tax rate increased 2 mills (or 12.7 percent) this year to 17.689. Current year revenues through three quarters were 11.9 percent higher than a year ago, including the portion that will be transferred to the Reading Public Library.

     

  • General Fund earned income tax receipts were 0.4 percent higher than a year ago through three quarters. The City now allocates a portion of its EIT receipts to its capital improvement fund. So total EIT revenues are higher than a year ago, but the amount available to fund operations through three quarters was not higher by a substantial amount.

     

  • The City’s other Act 511 taxes show an overall increase through the third quarter in comparison to 2015. Real estate transfer tax and business privilege tax revenue came in 12.8 percent and

    13.3 percent higher, respectively, than last year.

     

  • Through three quarters intergovernmental revenue was $6.8 million lower than a year ago. Timing differences in the recording of State pension aid account for about half of the difference and the 2016 budget anticipated that intergovernmental revenue would be lower this year since the RPA was scheduled to make a smaller contribution. But the City did not receive any of the

    $1.3 million budgeted RPA contribution through September 2016.

     

    Expenditures

     

  • Because of position vacancies throughout City government, the City was on pace to spend less than budgeted on employee salaries. Through three quarters the City spent 71.1 percent of its salary budget across all General Fund departmental allocations.

     

  • Through September, the City spent approximately the same amount on non-public safety and police overtime as a year ago. In contrast, the Fire Department spent 26.5 percent more than budgeted on overtime. That excess was partially offset by lower spending than budgeted on salaries.

     

  • The City spent 70.4 percent of its $14.1 million budget for employee health insurance through September. That is $1.0 million (or 11.5 percent) more than a year ago, with most of the increase in the Police and Fire Departments.

     

  • The City’s spending on non-personnel operating items through September 2016 was $1.1 million (or 15.1 percent) lower than a year ago. The majority of this decrease in expenditures was due to reduced spending on street lighting (i.e. lighting project in 2015 that did not recur this year) and machinery and equipment.

 

REVENUES

The City had $66.7 million in General Fund revenues through September 2016. The table below compares the City’s revenue performance through the third quarter to this year’s budget and last year through the same period.

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

Real Estate Taxes

22,110,884

23,947,112

92.3%

20,078,198

2,032,686

10.1%

Act 511 Taxes

20,868,713

25,761,058

81.0%

20,257,315

611,398

3.0%

Licenses, Permits, Fine

3,699,214

5,944,480

62.2%

4,103,429

(404,215)

-9.9%

Intergovernmental

2,138,508

8,672,839

24.7%

8,946,557

(6,808,049)

-76.1%

Charges for Services

3,421,145

5,260,323

65.0%

3,538,560

(117,415)

-3.3%

Interest and Rent

1,088,466

1,380,000

78.9%

1,117,266

(28,800)

-2.6%

Other

4,120,789

5,348,514

77.0%

3,173,273

947,516

29.9%

Transfers in

9,206,250

13,232,015

69.6%

9,206,250

0

0.0%

TOTAL REVENUES

66,653,969

89,546,341

74.4%

70,420,848

(3,766,879)

-5.3%

 

Real estate taxes

The real estate tax generates about a quarter of all General Fund revenues and is the City’s largest revenue source. Beginning in 2016, the City’s real estate tax rate increased 2 mills (or

12.7 percent) to 17.689 mills. A portion of the tax increase (0.2 mills) is now dedicated to the Reading Public Library, which will receive about $250,000 from this millage and an additional

$100,000 from the City’s General Fund.

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

Current Year2

20,935,497

21,997,112

95.2%

18,711,555

2,223,942

11.9%

Prior Years

1,263,559

1,900,000

66.5%

1,388,018

(124,460)

-9.0%

Penalties and Interest

278,370

375,000

74.2%

302,172

(23,803)

-7.9%

Discount for Early Payment

(366,542)

(325,000)

112.8%

(323,548)

(42,994)

13.3%

Property Tax Subtotal

22,110,884

23,947,112

92.3%

20,078,198

2,032,686

10.1%

 

Through September 2016, the City collected 11.9 percent more in current year real estate tax revenue than a year ago. Because real estate tax is due by June 30, collections in the first half of the year usually represent the majority of the year’s revenues. The following table shows the amount of current year real estate tax revenues collected through September for the last four years. This year’s results were in line with prior years.

 

image

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

 

 

 

2013 Q3

2014 Q3

2015 Q3

2016 Q3

Q3 Current Year Revenues

18,156,370

18,549,671

18,711,555

20,935,497

Actual/Budgeted Revenues

19,171,145

19,605,173

19,637,933

21,997,112

Percent Collected Thru Q3

94.7%

94.6%

95.3%

95.2%

 

Act 511 Taxes

 

Act 511 taxes are the City’s largest revenue category. The City collected 81.0 percent of budgeted revenues for this category through September 2016.

 

 

 

2016 Q3

2016

Budget

%

Collected

 

2015 Q3

Difference ($)

Difference (%)

Earned Income Tax

15,642,389

20,371,058

76.8%

15,579,898

62,491

0.4%

Business Privilege Tax

1,674,116

1,875,000

89.3%

1,477,309

196,808

13.3%

Real Estate Transfer Tax

2,542,081

2,200,000

115.5%

2,253,687

288,394

12.8%

Local Services Tax

838,376

1,100,000

76.2%

753,759

84,617

11.2%

Per Capita Tax

171,751

215,000

79.9%

192,663

(20,912)

-10.9%

Act 511 Taxes Subtotal

20,868,713

25,761,058

81.0%

20,257,315

611,398

3.0%

 

The earned income tax (EIT) is by far the largest item in this category and the City’s second largest source of revenue after the real estate tax. Berks EIT, Incorporated collects the EIT for the City and all other governments in Berks County according to the terms of Pennsylvania Act 32 of 2008.

 

Through three quarters General Fund EIT receipts were very close to the $15.6 million collected last year. As required in the Amended Recovery Plan, the City now allocates a portion of its EIT receipts to its capital improvement fund. So total EIT revenues are higher than a year ago, but the amount available to fund operations through three quarters was not higher by a substantial amount.

 

Most other Act 511 taxes met or surpassed last year’s levels. The City collected $1.7 million in business privilege tax revenue, which was $197,000 (or 13.3 percent) more than last year. The City also collected $2.5 million in real estate transfer tax revenue, which was $288,000 (or 12.8 percent) more than a year ago. The 2017 budget projects more revenue from these sources, reflecting the stronger 2016 performance.

 

Per capita tax receipts were lower than a year ago through three quarters. The City collected

$153,000 in current year revenue through Q3 20163, which was $21,000 (or 12.1 percent) less

 

image

3 The City also collected $19,000 in prior year per capita tax revenue. The table above shows the sum of current and prior years ($172,000).

 

than last year. With $153,000 in current year revenue from this $20 head tax, the City only collected revenue from about 7,650 (or 12.5 percent) of its 61,000 residents over the age of 18 through the third quarter4.

 

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 62.2 percent of its budget target for this category, which was $404,000 (or 9.9 percent) less than last year.

 

One of the largest items in this category is the City’s charges for rental housing permits5. The City collected 92.3 percent of its current year budget target and 36.2 percent of its prior year target. Compared to last year, the City collected $30,000 (or 3.5 percent) more in total revenues.

 

 

2016 Q3

2016 Budget

%

Collected

Current Year

821,719

890,000

92.3%

Prior Years

54,342

150,000

36.2%

Housing/Rental Permit Total

876,062

1,040,000

84.2%

 

While the City collected $6,000 (or 2.3 percent) more in business privilege license (BPL) revenue compared to last year’s third quarter results, collections are still down 10.2 percent relative to 2014 levels. 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. The City issued a request for proposals (RFP) for an external entity to collect the business privilege license and Act 511 tax revenues other than the EIT.

 

Other large items in this category are down in comparison to 2015.imageThe City collected only 42.5 percent of its $975,000 budget target for district court summary offenses through Q3 2016 and

$304,000 less than a year ago. City officials note that the weak performance may reflect a change in when revenues are recorded in the general ledger, which means the final audited numbers for 2016 should be closer to the budget target once accrual adjustments are made. Similarly revenues from traffic fines and quality-of-life fines were $113,000 and $100,000 lower than a year ago respectively.

 

image

4 The US Census Bureau’s American Community Survey lists Reading’s population at 88,057 with 26,869 people below age 18 (2015 ACS five-year estimates).

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

 

Other Licenses, Permits and Fees

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

District court summary offenses

414,721

975,000

42.5%

718,429

(303,708)

-42.3%

Franchise fees

445,901

825,000

54.0%

430,639

15,262

3.5%

New construction permits

0

20,000

0.0%

600

(600)

-100.0%

Traffic fines motor codes

122,413

380,000

32.2%

235,325

(112,912)

-48.0%

Business Privilege Licenses

279,353

275,000

101.6%

272,985

6,367

2.3%

Quality of life fines

96,250

245,000

39.3%

196,233

(99,983)

-51.0%

Other

1,463,925

2,181,480

67.1%

1,402,938

60,987

4.3%

Total

3,699,214

5,944,480

62.2%

4,103,429

(404,215)

-9.9%

 

Intergovernmental Revenues

 

The City only received 24.7 percent of total budgeted intergovernmental revenues through Q3 2016. The largest item in this category, the Commonwealth pension aid, was not recorded during the third quarter this year. That timing difference accounts for about half of the $6.8 million drop in revenue compared to the third quarter a year ago.

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

Pension-State Contributions

0

3,200,000

0.0%

3,238,295

(3,238,295)

-100.0%

Meter Surcharge

1,275,000

1,700,000

75.0%

1,275,000

0

0.0%

RPA Supplement6

0

1,310,000

0.0%

2,908,917

(2,908,917)

-100.0%

Grants and Gifts

263,190

626,913

42.0%

835,796

(572,606)

-68.5%

Reading Public Library

168,826

843,926

20.0%

171,618

(2,792)

-1.6%

Other

431,492

992,000

43.5%

516,932

(85,439)

-16.5%

Total

2,138,508

8,672,839

24.7%

8,946,557

(6,808,049)

-76.1%

 

The Reading Parking Authority (RPA) makes two substantial payments to the City7. It pays the City $1.0 million a year to lease and operate the parking meters. The RPA’s lease payments are on schedule and recorded in the Interest and Rentals category of this report. The second payment

 

image

6 This is the PRA’s supplemental contribution of the General Fund. The RPA’s lease payment for use of the City’s parking meters is recorded under the Interest and Rent category discussed below.

7 There is a third smaller revenue called Parking Authority Tax Surcharges, which is recorded under Charges for Service. The City had not received any of the $190,000 budgeted for that source.

 

is a supplemental contribution to the General Fund (listed above as RPA Supplement) that has ranged from $810,000 to $3.9 million in recent years.

 

When we amended the City’s Recovery Plan in 2014, the Spencer Administration and City Council expressed their preference for higher RPA supplemental contributions instead of higher real estate tax increases. The approved version of the 2014 Amended Recovery Plan reflected that preference and anticipated the RPA would make a $1.3 million supplemental contribution to the City’s General Fund each year for 2016 through 2019, as incorporated in the City’s final 2016 budget8. Through September the RPA had not made any of this supplemental contribution and we consider it a risk whether the RPA will do so this year.

 

The City anticipated that grant revenues would be lower in 2016 than a year ago because of the expiration of the Staffing for Adequate Fire and Emergency Response (SAFER) grant. The Fire Department received $752,000 in grant revenue through three quarters last year versus $179,000 this year. The City also only received $57,000 of the $380,000 in budgeted police grant revenue through September 2016.

 

Charges for Services

 

The City collected 65.0 percent of its budgeted revenues from service charges and $117,000 (or

3.3 percent) less than a year ago. Most of that shortfall was because the City had not received any of the $190,000 Parking Authority surcharge revenue, as compared to the $143,000 it received through Q3 2015.

 

The largest item in this category is the City’s emergency medical system (EMS) transport service charges. The City collected $87,000 (or 4.4 percent) less revenue for these “user fees” than a year ago. Also included in this category is a 5.0 percent admissions tax on events at the Santander Arena, Santander Performing Arts Center and FirstEnergy Stadium. Through the first three quarters, admissions tax revenue exceeded the prior year by $86,000 (or 38.4 percent), offsetting the decrease in EMS user fees.

 

The City receives reimbursements from external organizations when it provides additional police coverage to them. That revenue, which is recorded in the Police Service/Copy Service account, was in line with last year9.

 

 

image

8 Please see Amended Recovery Plan initiative RV02, pages 287-289.

9 The City also records some of the revenue it receives to offset reimbursable overtime activities under grants and gifts in the Intergovernmental Revenue category.

 

Service Charge Revenue

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

EMS User Fees

1,897,011

2,900,000

65.4%

1,984,047

(87,036)

-4.4%

Housing Inspection

486,016

775,000

62.7%

449,188

36,828

8.2%

Kenhorst Police Contract

298,923

448,384

66.7%

298,923

(0)

0.0%

Admissions Fee/Tax

311,225

375,000

83.0%

224,938

86,287

38.4%

Police Service/Copy Service

114,798

160,000

71.7%

114,677

121

0.1%

Other

313,172

601,939

52.0%

466,787

(153,615)

-32.9%

Total

3,421,145

5,260,323

65.0%

3,538,560

(117,415)

-3.3%

 

Interest and rent

 

The City reported $29,000 less in revenue from interest and rent than a year ago. The apparent decrease was possibly due to a timing lag in the receipt and posting of the RPA’s monthly parking meter rental payment. Additionally, the City moved a portion of its unassigned General Fund balance to a separate investment fund with a better interest rate than the General Fund bank account. That revenue is recorded under “CD Bond Interest” and shows an increase of $62,000.

 

Interest and Rent Revenues

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

Repayment of Debt to City

3,296

0

0.0%

0

3,296

N/A

Rental - Parking Authority

666,664

1,000,000

66.7%

749,997

(83,333)

-11.1%

CD Bond Interest

76,866

15,000

512.4%

14,574

62,292

427.4%

Rent Other Property Bldgs

51,351

65,000

79.0%

52,470

(1,119)

-2.1%

Other

292,516

300,000

97.5%

300,000

(7,484)

-2.5%

Total

1,088,466

1,380,000

78.9%

1,117,266

(28,800)

-2.6%

 

Interfund transfer revenues

 

The largest revenue in this category is the Reading Area Water Authority (RAWA) lease payment to the City. The City also transfers $3.0 million per year from the Wastewater Treatment Plant Fund to the General Fund as restricted by the November 2005 federal consent decree.

 

The City makes these transfers on a monthly basis as reflected in the chart below. The 2016 budget also shows a $1.0 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.

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

From RAWA

6,956,250

9,275,000

75.0%

6,956,250

0

0.0%

Transfer from Sewer Fund

2,250,000

3,000,000

75.0%

2,250,000

0

0.0%

Transfer from Fund Balance

0

957,015

0.0%

0

0

N/A

Total

9,206,250

13,232,015

69.6%

9,206,250

0

0.0%

 

Other Revenues

 

Revenues not counted in prior categories are grouped together in this “other” category. Between all of these revenues, the City collected 77.0 percent of the total budget and $948,000 (or 29.9 percent) more than last year.

 

The largest item in this category is City employees’ contributions to the cost of their health insurance10. As noted elsewhere, it has been very difficult to project this revenue accurately. Last year the City budgeted $1.7 million, collected a little more than half of that through the third quarter and finished $433,000 below budget on an unaudited basis. This year the City’s revenues are $430,000 higher than a year ago through three quarters, but still off the budgeted pace. While the City has filled vacant positions during the year, and that should increase this revenue and associated spending on employee health insurance, the amount recorded during the third quarter ($468,000) was not substantially higher than it was during the first half of the year ($458,000 per quarter for January through June).

 

Other Revenues

 

 

 

2016 Q3

2016

Budget

%

Collected

 

2015 Q3

Differenc e

($)

Difference (%)

Employee Insurance Contribution

1,383,926

2,103,000

65.8%

953,711

430,215

45.1%

Indirect Cost Reimb - Sewer

775,989

1,103,347

70.3%

827,510

(51,521)

-6.2%

CDBG Revenue to Fund Codes

248,942

500,000

49.8%

288,503

(39,562)

-13.7%

Heart & Lung Reimbursement

135,957

100,000

136.0%

61,871

74,085

119.7%

 

image

10 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).

 

 

 

 

2016 Q3

2016

Budget

%

Collected

 

2015 Q3

Differenc e

($)

Difference (%)

Indirect Cost Reimb - CD

142,500

190,000

75.0%

0

142,500

N/A

Rdg. Housing Auth - Reimb

162,858

275,000

59.2%

183,216

(20,357)

-11.1%

Indirect Cost Reimb - Recycling

407,947

384,971

106.0%

288,728

119,219

41.3%

Direct Cost Reimb - Trades

76,361

170,000

44.9%

0

76,361

N/A

Other

786,310

522,196

150.6%

569,734

216,576

38.0%

Other Revenues Total

4,120,789

5,348,514

77.0%

3,173,273

947,516

29.9%

 

EXPENDITURES

 

The City spent $46.9 million from its General Fund through September 2016, which was 52.4 percent of its $89.5 million budget. The City spent $11.9 million (or 20.3 percent) less than a year ago with most of the decrease due to the City making its pension contribution during the third quarter last year.

 

Major Expenditures

2016 Q3

2016

Budget

%

Spent

2015 Q3

Difference Difference ($) (%)

Salaries, wages & holiday pay

20,781,840

29,225,587

71.1%

21,025,039

(243,199)

-1.2%

Overtime

2,614,466

2,955,775

88.5%

2,133,216

481,251

22.6%

Pensions

0

14,238,211

0.0%

13,204,538

(13,204,538)

-100.0%

Fringe benefits

9,938,968

14,122,642

70.4%

8,912,694

1,026,274

11.5%

Other personnel

1,125,469

1,663,548

67.7%

1,159,070

(33,602)

-2.9%

Debt service

3,341,861

12,553,772

26.6%

2,596,571

745,290

28.7%

Operating costs

6,058,977

10,702,821

56.6%

7,139,374

(1,080,396)

-15.1%

Other expenses

586,740

1,047,940

56.0%

843,633

(256,893)

-30.5%

Contingencies

0

0

0.0%

0

0

0.0%

Interfund transfer expenses

2,470,565

3,036,045

81.4%

1,811,624

658,942

36.4%

Total Expenditures

46,918,887

89,546,341

52.4%

58,825,758

(11,921,072)

-20.3%

 

Head count

 

Head count impacts salary and overtime expenditures. To better understand how these expenditures for the City’s public safety units compare to both budget and prior year, the tables below show changes in head count over the same time period.

 

As of September 2016, the City had 186 filled full-time positions in the Police Department, eight fewer than budgeted. Please note that this includes all positions, including non-uniformed employees. Head count has ranged from 180 to 190 employees throughout the year and is now even with that of the prior year. Despite the difference between actual and budgeted positions, salary spending is higher than last year. Police officers and department employees represented by AFSCME 2716 received two percent base wage increases this year.

 

Police Department

Budget 2016

Actual 2016

Actual 2015

January

194

189

193

February

194

188

193

March

194

186

189

April

194

182

188

May

194

180

187

June

194

180

186

July

194

**

190

August

194

190

187

September

194

186

186

Average

194.0

185.1

188.8

 

** Data not available

 

As of September 2016, the City had 133 filled full-time positions in the Fire Department, four less than budgeted. The City started the year with 126 filled positions and brought it closer to budgeted level with seven hires in March. The average monthly head count this year (131.3) is lower than a year ago through September (137.2) because the City eliminated the non-emergency medical transport function midway through 2015. The Department spent 5.2 percent less on salaries in comparison to 2015. Overtime spending in contrast outpaced the budget by 26.5 percent, exceeding the cost savings in salary expenditures.

 

Fire Department

Budget 2016

Actual 2016

Actual 2015

January

137

126

144

February

137

126

142

March

137

133

141

April

137

133

141

May

137

132

140

June

137

133

136

 

 

Fire Department

Budget 2016

Actual 2016

Actual 2015

July

137

**

131

August

137

133

131

September

137

133

129

Average

137.0

131.3

137.2

 

** Data not available

 

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 costs account for 69.5 percent of the General Fund budget and almost 73.4 percent of the City's spending through September.

 

The largest portion of the City's personnel expenditures is for the “regular” pay of City employees – their salaries and holiday pay – along with wages for temporary employees. The table below shows spending on those items by department. Most departments spent 70 to 73 percent of their budget allocation through the third quarter. Administrative Services and Community Development, each of which had a handful of vacant full-time positions, spent less than 70 percent of their budget.

 

Salaries, Temporary Wages and Holiday Pay by Department

 

 

2016 Q3

2016

Budget

% Spent

2015 Q3

Difference Difference ($) (%)

Police

9,599,943

13,400,017

71.6%

9,487,072

112,871

1.2%

Fire

5,912,286

8,367,054

70.7%

6,234,094

(321,809)

-5.2%

Public Works

1,441,817

1,873,483

77.0%

1,352,604

89,213

6.6%

Administration

1,281,931

1,931,023

66.4%

1,252,789

29,142

2.3%

Community Dev

1,455,750

2,151,515

67.7%

1,559,975

(104,225)

-6.7%

Other

1,090,113

1,502,495

72.6%

1,138,504

(48,391)

-4.3%

Total

20,781,840

29,225,587

71.1%

21,025,039

(243,199)

-1.2%

 

Overtime

 

For most departments, the City’s overtime expenditures through September 2016 were close to or less than last year’s levels. But total overtime expenditures through September 2016 were

$481,000 (or 22.6 percent) more than a year ago because of the increase in the Fire Department.

 

 

Overtime

2016 Q3

2016

Budget

% Spent

2015 Q3

Difference Difference ($) (%)

Police

1,293,659

1,878,571

68.9%

1,341,679

(48,020)

-3.6%

Fire

1,248,128

986,704

126.5%

699,924

548,203

78.3%

Public Works

59,312

78,500

75.6%

71,601

(12,289)

-17.2%

Other

13,368

12,000

111.4%

20,011

(6,643)

-33.2%

Total

2,614,466

2,955,775

88.5%

2,133,216

481,251

22.6%

 

Fire Department

 

Through September, the Fire Department already spent 126.5 percent of its $1.0 million annual overtime budget. As noted above, the Department spent $322,000 (or 5.2 percent) less on salaries than a year ago. Altogether, the City’s spending on fire salaries and overtime was 3.3 percent higher than last year through the third quarter.

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

Fire Salaries

5,912,286

8,367,054

70.7%

6,234,094

(321,809)

-5.2%

Fire Overtime

1,248,128

986,704

126.5%

699,924

548,203

78.3%

Fire Subtotal

7,160,413

9,353,758

76.6%

6,934,019

226,394

3.3%

 

The graph below shows the City’s spending on Fire Department salaries11 and overtime for each quarter since the beginning of 2013. Salary spending during Q3 2016 was essentially even with salary spending during Q3 2015, but overtime spending was higher this year.

 

image

11 This includes holiday pay and any other items that the City records in the salary account lines.

 

Fire Department Salary and Overtime Spending ($ Millions)

 

image


imageOvertime imageSalaries

 

The Police Department’s spending on salaries and overtime through Q3 2016 was basically even with last year.

 

 

2016 Q3

2016

Budget

%

Collected

2015 Q3

Difference ($)

Difference (%)

Police Salaries

9,599,943

13,400,017

71.6%

9,487,072

112,871

1.2%

Police Overtime

1,293,659

1,878,571

68.9%

1,341,679

(48,020)

-3.6%

Police Subtotal

10,893,601

15,278,588

71.3%

10,828,751

64,851

0.6%

 

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 $1.2 million in unreimbursed police overtime expenditures through September, which was

$94,000 (or 7.6 percent) less than through the same period in 2015.

 

Police Department Overtime including Reimbursements12

 

 

Budget

Actual

FY15 Overtime

1,693,781

1,341,679

FY15 Reimbursement

225,000

114,677

FY15 Unreimbursed

1,468,781

1,227,002

 

image

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

 

 

 

Budget

Actual

FY16 Overtime

986,704

1,248,128

FY16 Reimbursement

160,000

114,798

FY16 Unreimbursed

826,704

1,133,330

 

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. The City uses Commonwealth pension aid and General Fund revenues to make the MMO payments. The City's total contributions for 2016 were $14.2 million, or $1.0 million higher than budgeted for 2015. The City made its pension contribution in the third quarter last year and will do so in the fourth quarter this year.

 

Pension

2016 Q3

2016

Budget

%

Spent

2015 Q3

Difference Difference ($) (%)

Police

0

9,678,338

0.0%

8,398,280

(8,398,280)

-100.0%

Fire

0

2,811,430

0.0%

2,956,620

(2,956,620)

-100.0%

Employees & Officers

0

1,748,443

0.0%

1,849,638

(1,849,638)

-100.0%

Total

0

14,238,211

0.0%

13,204,538

(13,204,538)

-100.0%

 

Employee insurance (Fringe Benefits)

 

The City spent 70.4 percent of its fringe benefit budget through September 2016, which was $1.0 million (or 11.5 percent) more than last year. 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. The Police and Fire departments had the largest increase in costs in comparison to the prior year, though both spent less than 75 percent of the budgeted allocation.

 

Fringe Benefit Expenditures

 

Fringe Benefits

2016 Q3

2016

Budget

% Spent

2015 Q3

Difference Difference ($) (%)

Admin. Services

646,526

945,694

68.4%

647,273

(747)

-0.1%

Public Works

650,320

1,016,887

64.0%

689,797

(39,477)

-5.7%

Police

5,089,479

6,995,025

72.8%

4,393,149

696,330

15.9%

Fire

2,678,643

3,716,617

72.1%

2,188,442

490,202

22.4%

Community Dvlpmt

558,623

1,005,453

55.6%

637,764

(79,142)

-12.4%

Other

315,377

442,966

71.2%

356,269

(40,892)

-11.5%

Total

9,938,968

14,122,642

70.4%

8,912,694

1,026,274

11.5%

 

Other personnel

 

The City spent another $1.1 million on other personnel expenditures through September. Police and Fire both spent less on longevity payments than a year ago. Longevity payment amounts and eligibility for the payments are frozen under the terms of the 2010 and 2014 Recovery Plans, so spending on this type of premium pay will drop when senior employees who receive the payments are replaced by more junior employees who receive lower or no longevity payments.

 

Other Personnel

2016 Q3

2016

Budget

% Spent

2015 Q3

Difference Difference ($) (%)

Premium Pay

215,321

254,289

84.7%

258,836

(43,515)

-16.8%

Social Security

702,576

1,058,599

66.4%

714,076

(11,500)

-1.6%

Unemployment Comp

50,412

100,000

50.4%

42,496

7,916

18.6%

Penny Fund

6,521

48,960

13.3%

8,318

(1,797)

-21.6%

Uniforms/Clothing Allowance

150,638

201,700

74.7%

135,345

15,293

11.3%

Total

1,125,469

1,663,548

67.7%

1,159,070

(33,602)

-2.9%

 

Debt service

 

The City spent 26.6 percent of its debt service budget through September 2016, which was $0.7 million (or 28.7 percent) more than last year. According to the debt repayment schedules, the City makes most of these payments during the fourth quarter.

 

Debt Service

2016 Q3

2016

Budget

% Spent

2015 Q3

Difference Difference ($) (%)

Debt Service

3,341,861

12,553,772

26.6%

2,596,571

745,290

28.7%

 

Operating costs

 

Representing 12.0 percent of the total budget, this is the category for materials and services that City government uses in its regular operations. It includes utilities, legal services, equipment, and building maintenance.

Operating Costs

 

Operating Costs

2016 Q3

2016

Budget

% Spent

2015 Q3

Difference Difference ($) (%)

Contracted Services

1,605,599

2,413,138

66.5%

1,729,454

(123,856)

-7.2%

Maintenance Agreements

354,849

529,914

67.0%

362,112

(7,263)

-2.0%

Light & Power

828,530

1,586,800

52.2%

1,299,154

(470,624)

-36.2%

Gas

46,401

106,000

43.8%

64,388

(17,987)

-27.9%

General Plant Supplies

151,816

360,660

42.1%

218,441

(66,626)

-30.5%

Maintenance/Repair Equipment

178,153

307,388

58.0%

48,852

129,301

264.7%

Fees

346,815

569,980

60.8%

295,632

51,183

17.3%

Other Operating Cost

2,546,815

4,828,941

52.7%

3,121,340

(574,525)

-18.4%

Total

6,058,977

10,702,821

56.6%

7,139,374

(1,080,396)

-15.1%

 

The City’s spending on these items through September 2016 was $1.1 million (or 15.1 percent) lower than a year ago. The City spent $471,000 (or 36.2 percent) less on light and power than a year ago because the City had a $223,000 one-time lighting project last year.

 

Other expenses

 

The table below shows other expenses in the General Fund.

 

 

2016 Q3

2016

Budget

% Collected

2015 Q3

Difference ($)

Difference (%)

Contingencies

0

0

0.0%

0

0

N/A

Miscellaneous

602,576

1,047,940

57.5%

873,669

(271,093)

-31.0%

Capital Fund

774,127

774,127

100.0%

0

774,127

N/A

Self-Insurance Fund

1,696,439

2,261,918

75.0%

1,811,624

(115,185)

-6.4%

 

The 2016 budget has two large transfers out of the General Fund. The City will transfer $2.3 million from the General Fund to the Self Insurance Fund which pays the actual cost of property, liability and workers compensation claims and associated administrative costs. The City is making a portion of that transfer each month.

 

The City also transferred $774,000 from the General Fund to the Capital Project Fund to cover the debt associated with the 2014 IT equipment refresh. The City made that full transfer during the first quarter so the money was available to repay the debt when it was due.

 

In prior years the City’s budget included a contingency as a buffer against unanticipated revenue shortfalls or increased expenditures that could occur during the year. The 2016 budget does not have a contingency.

 

The City also budgets $1.0 million on miscellaneous expenses, the majority of which is collection expense ($557,000) and the contribution to the Reading Public Library ($352,000). Through September the City recorded a $75,000 contribution to the Reading Public Library this year versus $354,000 last year.