PFM 3rd 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


Q3 2014 Financial Results

 

This report summarizes preliminary financial results for the period January 1, 2014 through September 30, 2014 based on trial balance financial data provided by the City on November 10, 2014.

 

Overview

 

The City collected 74.0 percent of its budgeted revenues and spent 55.6 percent of its budgeted expenditures through September 2014. Revenues exceeded expenditures by $15.5 million through September because the City has yet to pay its $10.0 million pension contribution in 2014.  The table below compares revenues and expenditures with the budget target.

 

Budget to Actual Comparison

 

2014 Q3

2014 Budget

% Spent/Collected

Revenues

62,424,239

84,375,519

74.0%

Expenditures

46,893,217

84,360,519

55.6%

Difference

15,531,022

15,000

N/A

 

On the revenue side, the City collected $323,000 (or 0.5 percent) less through Q3 2014 than through the same period in 2013. The decrease in collections is mostly driven by the timing delay in the Commonwealth pension aid, which arrived in the fourth quarter this year as opposed to the third quarter last year.  Setting aside that timing quirk, the City received $2.7 million (or

4.4 percent) more than through the same period last year. The increase is mostly because the City collected more revenue from its real estate and earned income taxes, plus the City has more grant revenue with the receipt of the SAFER grant.1

 

On the expenditure side, the City spent $46.9 million through September 2014, $7.1 million (or

13.2    percent) less than through September 2013 because the City will make its $10 million pension contribution during the fourth quarter this year, instead of the third quarter. Setting the timing quirk aside, the City spent $2.8 million (or 5.3 percent) more than through the same period last year. The spending increase was attributable to $1.4 million increase in fringe benefit spending, primarily health insurance. The City also spent more on contracted services, street paving and IT hardware, which is incorporated in the operating budget.

 

 

2014 Q3

2013 Q3

Difference ($)

Difference (%)

Revenues

62,424,239

62,747,324

(323,085)

-0.5%

Expenditures

46,893,217

53,993,504

(7,100,287)

-13.2%

Difference

15,531,022

8,753,820

6,777,203

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.


 

 

Eight Trends to Watch

 

Revenue

 

§  The City’s property tax rate remained unchanged at 15.689 mills this year. Current year revenues were 2.2 higher this year through September 2014. Once the year is complete, we can assess whether collection rates are improving or something else accounts for the  positive change.

 

§  The City’s earned income tax revenues are outpacing last year’s collections, with the City collecting $494,000 (5.6 percent) more in current year revenues through September.

 

§  The City increased its portion of the per capita tax from $5 to $20 in 2014. Through September 2014, the City collected $213,000 in per capita tax revenue, and the very early indication is that the collection rate for this tax has increased over last year’s level.

 

§  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 collected $2.0 million from

EMS user fees through September, which is basically even with last year’s revenue and only

56.2 percent of the $3.5 million target. Expenditures

§  Through September 2014, the City spent 71.9 percent of its budget target on salaries. The City reports spending $192,000 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 September, the City spent $27,000 less on police overtime and $165,000 less on fire overtime than a year ago.

 

§  The City reports spending 78.0 percent of its budget for employee health insurance (fringe benefits) through September. Reported expenditures were $1.4 million (or 20.3 percent) higher than through the same period last year.

 

§   The City spent $203,000 (or 14.2 percent) more on contracted services through September 2014 than through September 2013 due to spending on capital projects, like the Pagoda wall repair.


REVENUES

The City had $62.4 million in General Fund revenues through September 2014. The table below compares the City’s revenue performance through September 2014 to this year’s budget and last year through September.

 

Major Revenues

2013 Q3

2014

Budget

%

Collected

2013 Q3

Difference ($)

Difference (%)

Real Estate Taxes

19,955,840

21,083,297

94.7%

18,721,698

1,234,143

6.6%

Act 511 Taxes

19,076,225

24,990,795

76.3%

17,871,533

1,204,692

6.7%

Licenses, Permits, Fine

4,259,167

5,887,796

72.3%

3,884,598

374,570

9.6%

Intergovernmental

4,999,176

10,681,789

46.8%

7,358,819

(2,359,642)

-32.1%

Charges for Services

3,649,881

6,247,771

58.4%

3,839,213

(189,332)

-4.9%

Interest and Rent

927,534

1,365,000

68.0%

1,097,641

(170,107)

-15.5%

Other

3,428,915

4,718,593

72.7%

3,996,323

(567,408)

-14.2%

Transfers in

6,127,500

9,400,478

65.2%

5,977,500

150,000

2.5%

TOTAL REVENUES

62,424,239

84,375,519

74.0%

62,747,324

(323,085)

-0.5%

 

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 Q3

2014 Budget

% Collected

2013 Q3

Difference ($)

Difference (%)

Current Year

18,549,671

19,783,297

93.8%

18,156,370

393,301

2.2%

Prior Years

1,424,355

1,300,000

109.6%

679,966

744,389

109.5%

Penalties and Interest

305,615

300,000

101.9%

201,495

104,120

51.7%

Early Payment Discount

(323,800)

(300,000)

107.9%

(316,133)

(7,667)

2.4%

Property Tax Subtotal

19,955,840

21,083,297

94.7%

18,721,698

1,234,143

6.6%

 

Through September 2014, the City collected 2.2 percent more in current year revenue than a year ago. Prior year revenues were more than twice the amount received through Q3 2013, which is partly a function of timing. The City only had $680,000 in prior year revenue at the end of September 2013, but it received more than $700,000 in the fourth quarter and finished 2013 with

$1.4 million. The apparent increase in prior year revenues is also partially a byproduct of the 2013 tax increase. By definition “prior year” now includes 2013, which had a 9 percent tax increase. Even with those differences, prior year revenues surpassed this year’s $1.3 million budget target.


Act 511 Taxes

 

Act 511 taxes are the City’s largest revenue category.   The City collected 76.3 percent of its budgeted Act 511 Taxes through September 2014.

 

 

2014 Q3

2014

Budget

%

Collected

2013 Q3

Difference ($)

Difference (%)

Earned Income Tax

15,137,081

19,602,820

77.2%

13,770,459

1,366,621

9.9%

Business Privilege Tax

1,444,066

2,100,000

68.8%

1,340,010

104,056

7.8%

Real Estate Transfer Tax

1,453,969

1,982,975

73.3%

1,895,825

(441,856)

-23.3%

Local Services Tax

828,235

1,100,000

75.3%

812,425

15,810

1.9%

Per Capita Tax

212,874

205,000

103.8%

52,813

160,060

303.1%

Total

19,076,225

24,990,795

76.3%

17,871,533

1,204,692

6.7%

 

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 third quarter, with the City collecting $1.4 million (or 9.9 percent) more. Most of that growth is in prior year revenue because of the 0.2 percent tax increase from 2012 to 2013.

 

The revenues from the other Act 511 taxes also exceeded 2013 collections, except for real estate transfer tax revenues that were 23.3 percent lower than a year ago.

 

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 due at a discounted rate by the end of August or the full rate at the end of October. The City received $213,000 at the end of September and at least a portion of that revenue (i.e. anything paid before the end of August) was paid at the discounted rate. Since the increase in revenue (303 percent) is greater than the increase in the tax rate (300 percent), that suggests the collection rate for this tax is also improving.

 

Licenses, Permits & Fees

 

This category includes rental housing permit fees, cable franchise fees, traffic and court fines and business privilege licenses. The City collected 72.3 percent of budgeted revenues in this category, $375,000 (or 9.6 percent) more than through the third quarter last year.


 

One of the largest items in this category is the City’s charges for rental housing permits.2 The City collected 78.7 percent of its current year budget target and 31.2 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 Q3

2014 Budget

                   %                  

            Collected           

Current Year

700,372

890,000

78.7%

Prior Years

139,294

450,000

31.2%

Housing/Rental Permit Total

839,666

1,340,000

62.7%

 

The City received $178,000 from quality of life fines through September 2014 versus $281,000 last year and $745 from new construction permits versus $49,000 last year. The increase in other licenses, permits and fees is driven by a $144,000 increase in remodeling permits and a $165,000 increase in street cuts revenue.

 

Licenses, Permits and Fees

 

 

2014 Q3

2014 Budget

% Collected

2013 Q3

Difference ($)

Difference (%)

Housing/rental permit

839,666

1,340,000

62.7%

777,084

62,582

8.1%

District court summary offenses

680,879

850,000

80.1%

634,226

46,653

7.4%

Franchise fees

391,444

725,000

54.0%

373,306

18,138

4.9%

New construction permits

745

90,000

0.8%

49,404

(48,659)

-98.5%

Traffic fines motor codes

281,490

325,000

86.6%

224,396

57,094

25.4%

Business privilege licenses

311,113

350,000

88.9%

269,932

41,181

15.3%

Quality of life fines

177,970

390,000

45.6%

280,912

(102,942)

-36.6%

Other

1,575,860

1,817,796

86.7%

1,275,337

300,523

23.6%

Total

4,259,167

5,887,796

72.3%

3,884,598

374,570

9.6%

 

Intergovernmental Revenues

 

The City received 46.8 percent of total budgeted intergovernmental revenues through September 2014.  The apparent decrease in total intergovernmental revenue is because the City received its

 

 

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


State pension aid during the fourth quarter of this year, as opposed to the third quarter of last year.

 

 

2014 Q3

2014

Budget

%

Collected

2013 Q3

Difference ($)

Difference (%)

Pension-State Contributions

0

3,150,000

0.0%

3,068,643

(3,068,643)

-100.0%

Meter Surcharge

1,275,000

1,700,000

75.0%

1,133,333

141,667

12.5%

RAWA Supplement

1,125,000

1,500,000

75.0%

1,125,000

0

0.0%

RPA Supplement

540,000

810,000

66.7%

607,500

(67,500)

-11.1%

Grants and Gifts

1,156,487

1,852,145

62.4%

419,151

737,336

175.9%

Reading Public Library

316,089

767,644

41.2%

337,270

(21,181)

-6.3%

Other

586,600

902,000

65.0%

667,921

(81,321)

-12.2%

Intergovernmental Total

4,999,176

10,681,789

46.8%

7,358,819

(2,359,642)

-32.1%

 

The City received $737,000 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 grant reimburses the City for 21 firefighter positions. The City received $963,000 in SAFER grant revenues last year, most of which arrived in the second half of the year. this year the City receives four quarters worth of grant reimbursements.

 

The City received $540,000 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 September payment.

 

The decrease in other intergovernmental revenue is driven by a $71,000 decrease in School District crossing guard payment. The 2014 budget anticipated a $55,000 reduction in these payments.

 

Charges for Services

 

The City collected 58.4 percent of budgeted revenues from charges for services, which was

$189,000 (or 4.9 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 September, the City collected

$2.0 million from EMS user fees, which was basically level with the Q3 2013 results and only

56.2 percent of the $3.5 million budget 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 tax receipts continue to trail last year’s pace, with the City receiving $24,000 (or

11.3 percent) less than through the same period last year. The shortfall in other charges is largely driven by a decrease of $124,000 in public health and safety inspection fees. The table below shows the large items in this category.

 

Service Charge Revenue

 

 

2014 Q3

2014

Budget

%

Collected

2013 Q3

Difference ($)

Difference (%)

EMS User Fees

1,988,976

3,536,638

56.2%

1,959,091

29,884

1.5%

Housing Inspection

577,835

800,000

72.2%

599,014

(21,179)

-3.5%

Kenhorst Police Contract

323,354

431,139

75.0%

313,936

9,418

3.0%

Admissions Fee/Tax

190,244

425,000

44.8%

214,459

(24,215)

-11.3%

Police Service/Copy Service

143,848

275,000

52.3%

196,993

(53,144)

-27.0%

Other

425,624

779,994

56.7%

555,720

(130,096)

-23.4%

Total

3,649,881

6,247,771

58.4%

3,839,213

(189,332)

-4.9%

 

Interest and rent

 

The City reports $170,000 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 Q3

2014

Budget

%

Collected

2013 Q3

Difference ($)

Difference (%)

Repayment of Debt to City

(95,333)

0

0.0%

0

(95,333)

N/A

Rental - Parking Authority

666,664

1,000,000

66.7%

749,997

(83,333)

-11.1%

Rent Other Property Bldgs

55,448

65,000

85.3%

47,491

7,958

16.8%

Other

300,000

300,000

100.0%

300,000

0

0.0%

Total

927,534

1,365,000

68.0%

1,097,641

(170,107)

-15.5%


 

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.3 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 budgeted a $1.2 million transfer from its fund balance this year to fund capital projects, like paving and information technology upgrade, but the Administration reports the City will not need to make this transfer, so it will remain $0.

 

 

2014 Q3

2014

Budget

%

Collected

2013 Q3

Difference ($)

Difference (%)

Transfer From RAWA

3,877,500

5,170,000

75.0%

3,727,500

150,000

4.0%

Transfer from Sewer Fund

2,250,000

3,000,000

75.0%

2,250,000

0

0.0%

Transfer from Fund Balance

0

1,230,478

0.0%

0

0

N/A

Total

6,127,500

9,400,478

65.2%

5,977,500

150,000

2.5%

 

Other Revenues

 

The City collected 72.7 percent of the total budget for all other revenues category, which was

$567,000 (or 14.2 percent) less than last year.

 

The largest item in this category is City employees’ contributions to the cost of health insurance4 which dropped by 11.3 percent compared to through the same period 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 pays 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. This contributes to the $127,000 reduction in revenue from Q3 2013 to Q3 Q2014.

 

 

 

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

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 when the receive care (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).


Other Revenues

 

 

2014 Q3

2014

Budget

%

Collected

2013 Q3

Difference ($)

Difference (%)

Employee Ins. Contribution

994,939

1,500,000

66.3%

1,122,261

(127,322)

-11.3%

Indirect Cost Reimb - Sewer

870,221

1,161,432

74.9%

859,200

11,020

1.3%

CDBG Revenue to Fund Codes

295,039

500,000

59.0%

339,415

(44,375)

-13.1%

Heart & Lung Reimbursement

222,474

290,000

76.7%

289,414

(66,939)

-23.1%

Indirect Cost Reimb - CD

0

189,996

0.0%

0

0

N/A

Rdg. Housing Auth - Reimb.

184,366

200,000

92.2%

186,889

(2,523)

-1.3%

Indirect Cost Reimb- Recycling

331,758

250,216

132.6%

188,247

143,511

76.2%

Indirect Cost Reimb- Water

0

0

N/A

504,673

(504,673)

-100.0%

Direct Cost Reimb. - Trades

53,555

170,000

31.5%

80,477

(26,922)

-33.5%

Other

476,563

456,949

104.3%

425,748

50,815

11.9%

Other Revenues Subtotal

3,428,915

4,718,593

72.7%

3,996,323

(567,408)

-14.2%

 

The biggest year-to-year difference is in the indirect cost reimbursement from the water fund, which was $0 through September 2014 compared to $505,000 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 in 2014, though it is likely to receive some reimbursement according to the most recent indirect cost study.6

 

 

 

 

 

 

 

 

 

 

 

 

 

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


EXPENDITURES

 

The City spent $46.9 million in its General Fund through September 2014, which was 55.6 percent of the $84.4 million budget. The City spent $7.1 million (or 13.2 percent) less than a year ago because of the City has not made the $10.0 million pension contribution as of September 2014. Setting aside that timing quirk, the City spent $2.9 million (or 5.3 percent) more than it did through the same period last year.

 

Major Expenditures

2014 Q3

2014

Budget

% Spent

2013 Q3

Difference ($)

Difference (%)

Salaries, wages & holiday pay

21,017,072

29,236,011

71.9%

20,309,525

707,547

3.5%

Overtime

2,138,175

2,497,300

85.6%

2,267,435

(129,261)

-5.7%

Pensions

0

9,957,024

0.0%

9,947,536

(9,947,536)

N/A

Fringe benefits

8,542,233

10,946,924

78.0%

7,103,388

1,438,845

20.3%

Other personnel

1,160,306

1,623,894

71.5%

1,165,648

(5,342)

-0.5%

Debt service

4,605,209

13,144,084

35.0%

4,596,316

8,893

0.2%

Operating costs

6,921,913

11,608,877

59.6%

6,016,335

905,578

15.1%

Other expenses

601,899

671,310

89.7%

608,013

(6,114)

-1.0%

Contingencies

139

2,133,400

0.0%

2,321

(2,182)

-94.0%

Interfund transfer expenses

1,906,271

2,541,695

75.0%

1,976,988

(70,717)

-3.6%

Total Expenditures

46,893,217

84,360,519

55.6%

53,993,504

(7,100,287)

-13.2%

 

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 70 percent 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. The 2014 budget increased by 6.4 percent compared to 2013 year-end actuals mostly because of firefighter positions added through the SAFER grant and increased expenses for six equipment operators that were shifted from the Recycling Fund to the General Fund. Through September 2014, the City spent $708,000 (or 3.5 percent) more than it did through the same period last year, representing 71.9 percent of its budget target.


Salaries, Temporary Wages and Holiday Pay by Department

 

 

2014 Q3

2014

Budget

% Spent

2013 Q3

Difference ($)

Difference (%)

Police

9,359,644

12,940,169

72.3%

9,293,409

66,235

0.7%

Fire

6,347,843

8,850,984

71.7%

6,038,721

309,122

5.1%

Public Works

1,274,628

1,803,899

70.7%

1,082,291

192,338

17.8%

Administration

1,313,366

1,858,797

70.7%

1,191,081

122,285

10.3%

Community Dev

1,516,276

2,139,443

70.9%

1,513,588

2,689

0.2%

Other

1,205,314

1,642,719

73.4%

1,190,435

14,879

1.2%

Total

21,017,072

29,236,011

71.9%

20,309,525

707,547

3.5%

 

Overtime

 

The City’s overtime expenditures through September 2014 were $129,000 (or 5.7 percent) less than through September 2013.

 

 

2014 Q3

2014

Budget

% Spent

2013 Q3

Difference ($)

Difference (%)

Police

1,340,798

1,814,500

73.9%

1,367,871

(27,073)

-2.0%

Fire

694,447

641,300

108.3%

859,558

(165,111)

-19.2%

Public Works

82,242

39,500

208.2%

34,201

48,041

140.5%

Other

20,687

2,000

1034.4%

5,805

14,882

256.4%

Total

2,138,175

2,497,300

85.6%

2,267,435

(129,261)

-5.7%

 

The Police Department spent $27,000 (or 2.0 percent) less than through Q3 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 $1.2 million in unreimbursed police overtime expenditures through September which was $26,000 (or

2.2 percent) more than through the same period in 2013.


Police Department Overtime including Reimbursements7

 

 

                                                   Budget          

Q3 Actual    

FY13 Overtime

1,479,063

1,367,871

FY13 Reimbursement

170,000

196,993

FY13 Unreimbursed

1,309,063

1,170,879

 

 

 

FY14 Overtime

1,814,500

1,340,798

FY14 Reimbursement

275,000

143,848

FY14 Unreimbursed

1,539,500

1,196,950

 

The Fire Department spent $165,000 (or 19.2 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.

 

Overtime trends

 

As noted in the Amended Recovery Plan, the City needs to improve how it tracks overtime usage in the police and fire departments so there is a better understanding of the factors driving overtime spending. For now, though, we are able to track overtime spending at a very high level for the police and fire departments on a quarter-by-quarter basis.

 

The police department spent $481,000 on overtime during the third quarter (i.e. July through September).  This was 7.4 percent more than the City spent during the third quarter of 2013 and

2.7 percent less than during the third quarter of 2012. This was the gross level of overtime spending and does not include the $54,000 in reimbursement revenue that the City received during Q3 2014. This analysis uses spending data because we do not have data on the number of hours of overtime worked.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


Police Department Overtime Spending ($1ks) Reimbursement not included

 

The fire department spent $247,000 on overtime during the third quarter (i.e. July through September).  That was 28.6 percent less than the City spent during the third quarter of 2013 and

50.5 percent less than the City spent during the third quarter of 2012. The quarter-by-quarter trends suggests that the City’s overtime spending increases as the year goes along, at least through the first three quarters.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits


Fire Department Overtime Spending ($1ks)


 

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 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. Last year the City made the pension contribution in September, after it received the pension aid. This year the City made the contribution during the fourth quarter.


General Fund Pension Expenditures

 

 

2014 Q3

2014

Budget

% Spent

2013 Q3

Difference ($)

Difference (%)

Police

-

6,051,235

0.0%

6,057,188

(6,057,188)

-100.0%

Fire

-

2,282,336

0.0%

2,286,857

(2,286,857)

-100.0%

Employees &              8

Officers

-

1,623,453

0.0%

1,603,491

(1,603,491)

-100.0%

Total

-

9,957,024

0.0%

9,947,536

(9,947,536)

-100.0%

 

Employee insurance (Fringe Benefits)

 

The City spent 78.0 percent of its fringe benefit budget through September 2014, which was $1.4 million (or 20.3 percent) more than through September 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

 

2014 Q3

2014 Budget

% Spent

2013 Q3

Difference ($)

Difference (%)

8,542,233

10,946,924

78.0%

7,103,388

1,438,845

20.3%

 

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

 

Other personnel

 

The City spent another $1.2 million on other personnel-related expenditures through September. Social security spending is higher because six positions shifted from the Recycling Fund to the General Fund as described earlier.

 

 

2014 Q3

2014

Budget

%

Spent

2013 Q3

Difference ($)

Difference (%)

Premium Pay

308,596

337,083

91.5%

324,173

(15,577)

-4.8%

Social Security

714,510

1,045,650

68.3%

691,402

23,108

3.3%

 

8 For the Employees and Officers pension plan, the City has additional pension expenditures in its enterprise funds (i.e. sewer, trash) since some active employees in that plan are supported by those funds.

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.


 

 

2014 Q3

2014

Budget

%

Spent

2013 Q3

Difference ($)

Difference (%)

Unemployment Comp

31,769

100,000

31.8%

17,639

14,130

80.1%

Penny Fund

6,089

2,035

299.2%

3,199

2,890

90.3%

Uniforms/Clothing Allowance

99,342

139,126

71.4%

129,235

(29,893)

-23.1%

Total

1,160,306

1,623,894

71.5%

1,165,648

(5,342)

-0.5%

 

Debt Service

 

The City spent 35.0 percent of its debt service budget through September 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 spends the majority of its debt service in the fourth quarter of the year.

 

 

2014 Q3

2014

Budget

%

Spent

2013 Q3

Difference ($)

Difference (%)

Debt Service

4,605,209

13,144,084

35.0%

4,596,316

8,893

0.2%

 

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

 

 

2014 Q3

2014

Budget

%

Spent

2013 Q3

Difference ($)

Difference (%)

Contracted Services

1,631,748

2,969,430

55.0%

1,428,407

203,341

14.2%

Maintenance Agreements

599,731

774,050

77.5%

662,513

(62,782)

-9.5%

Light & Power

796,846

1,488,800

53.5%

333,443

463,403

139.0%

Gas

106,590

123,000

86.7%

469,589

(362,999)

-77.3%

Other Operating Cost

3,786,998

6,253,597

60.6%

3,122,383

664,615

21.3%

Total

6,921,913

11,608,877

59.6%

6,016,335

905,578

15.1%

 

The City spent $203,000 (or 14.2 percent) more in contracted services because the budget allocation includes $779,000 in the Traffic Engineering Division of Public Works to repair three dams and the Pagoda walls.


The $463,000 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 used the money in the Liquid Fuels Fund for street paving and covered 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 September was $244,000, $51,000 more than through September 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 Q3

2014

Budget

% Spent

2013 Q3

Difference ($)

Difference (%)

Contingencies

139

2,133,400

0.0%

2,321

(2,182)

-94.0%

Miscellaneous

601,899

671,310

89.7%

608,013

(6,114)

-1.0%

Interfund transfers

1,906,271

2,541,695

75.0%

1,976,988

(70,717)

-3.6%

 

The City includes a contingency in its budget to help offset unanticipated revenue shortfalls or expenditure increases. This year the City budgeted $2.1 million, which brings the 2014 budgeted expenditures approximately equal to budgeted revenues. Through September the City spent a very small amount of the contingency.

 

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 September reflects that decrease.

 

We group all other expenditures in the “miscellaneous category.” The largest items are the City’s payment to Berks EIT, incorporated for tax collection ($303,000 through September), the Charter Review Board’s expenditures ($99,000 through September) and the City’s supplementary contribution to the Reading Public Library ($75,000 through September).