PFM 4th Quarter 2013 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


Q4 2013 Financial Results

 

This report analyzes preliminary, unaudited financial results for the period January 1, 2013 through December 31, 2013 based on trial balance financial data provided by the City on April 3, 2014. This data included unbudgeted revenues and expenditures from refinancing debt in 2013 ($3.4 million) and in 2012 ($15.4 million). The revenues and expenditures from debt refinancing are excluded from the numbers and analysis presented in this report.

 

Overview

 

The City collected 106.7 percent of its budgeted revenues and spent 100.6 percent of  its budgeted expenditures in 2013. The net result is a positive annual operating result of $4.6 million or 6.0 percent of budgeted expenses based on these preliminary, unaudited results.

 

2013 Budget to Actual Comparison

 

 

2013 Q4

2013 Budget

%

Spent/Collected

Revenues

82,059,554

76,932,310

106.7%

Expenditures

77,425,581

76,932,310

100.6%

Difference

4,633,973

0

N/A

 

The results were especially positive in comparison to deficits in 2010 and 2011, and they were better than the $3.0 million surplus in 2012 using adjusted year-end results.1 The table below compares the City’s budget-to-actual  performance in 2012 and 2013. Actual revenues and expenditures in 2012 are adjusted because of an accounting quirk that understated revenues and overstated expenditures, as noted in the fourth quarter report in 2012.

 

 

2013 Q4

2013

Budget

% Spent/ Collected

2012 Q4

Difference ($)

Difference (%)

Revenues

82,059,554

76,932,310

106.7%

76,963,257

5,096,297

6.6%

Expenditures

77,425,581

76,932,310

100.6%

73,981,284

3,444,297

4.7%

Difference

4,633,973

0

N/A

2,981,973

1,652,000

N/A

 

 

 

 

1 The Coordinator is using 2012 figures provided by the City in early 2014. These figures differ from the preliminary, unaudited results discussed in the Q4 2012 financial report, which showed an $886,000 positive operating result. The Q4 2012 report was based on the preliminary, unaudited results that were available in early 2013, and the City adjusts its records during the 2012 audit process.


 

 

 

Seven Key Findings

 

Revenue

 

§  The City increased its property tax rate by 9 percent in 2013 and revenues increased by 8.6 percent. The 2013 preliminary actual results suggest an 87 percent collection rate, which was also the collection rate in 2012. The 2014 budget assumes a 90 percent collection rate, so there is risk the City will not reach its budget target this year.

 

§  Earned income tax revenue is pivotal to the City’s financial performance. The City received $3.1 million (or 19 percent) more than budgeted in 2013 because of improvements in how the tax is collected under Pennsylvania Act 32 of 2008.

 

§  To mitigate the need for further tax increases and fund an increase in Community Development staffing, the City increased revenue projections for housing inspection fees, housing rental permits and other fees or service charges managed by the Community Development department. Housing inspection fee revenue fell $557,000 (or 42 percent) short of budget, and the City reduced its 2014 budget projection accordingly. Rental permit revenue fell $448,000 (or 36 percent) short because of the delayed launch of the delinquent collection process.

 

Expenditures

 

§  The City stayed within its budget for salaries, temporary wages and holiday pay, despite adding

21  firefighters  during  the  year.     Fire  Department  salary  spending  was  $461,000  higher  than budgeted, and those expenses were offset by federal grant revenue.   Police salary spending was

$505,000 less than budgeted.

 

§  The Police Department spent close to the same amount on overtime in 2013 as in 2012. Once reimbursement from external parties are included, Police spent $325,000 (or 25 percent) more than budgeted last year. The Fire Department spent $422,000 (or 66 percent) more than budgeted last year, but $646,000 less than in 2012.

 

§  The City spent $875,000 (or 18.6 percent) more than budgeted on police officer health insurance because the 2013 budget assumed the City would reduce the number of retired officers with City- funded coverage. A June 2013 arbitration ruling has thus far prevented the City from doing so.

 

§   The City spent $541,000 (or 6 percent) more than budgeted on non-personnel operating costs. The City spent more than budgeted on external legal services in the Law Department and Charter Review Board and light, power and gas utility costs.


 

On the revenue side, the City collected $5.1 million (or 6.6 percent) more in 2013 than in 2012, setting aside an accounting quirk that understated the 2012 revenues.2 The City collected more revenue from its real estate tax and its earned income tax than in 2012 after increasing both tax rates in 2013.

 

City revenues from licenses, permits and fines and service charges fell short of budget by more than $1.5 million combined. The largest shortfalls were in housing inspection fees ($547,000); new construction permits ($545,000); and housing rental permits ($448,000).

 

On the expenditure side, the City spent $3.4 million (or 4.7 percent) more in 2013 than in 2012, setting aside the $5.0 million extra debt service payment that the City made in 2012.3 The higher spending level was largely due to the increased pension contributions based on the Minimum Municipal Obligation (MMO) and increased transfer to the Self Insurance Fund.

 

From a different perspective, the City spent $1.5 million (or 1.9 percent) more than budgeted once the budget contingency is removed. The contingency provides a small margin to handle unanticipated expenses or revenue shortfalls, but should not otherwise be spent. The areas with the largest spending over budget were overtime ($820,000) and debt service ($494,000). The City spent $229,000 less than budgeted on employee salaries.

 

REVENUES

 

The City had $82.1 million in General Fund revenues in 2013. The table below compares the City’s revenue performance to the 2013 budget and 2012.

 

Major Revenues

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

Real Estate Taxes

20,735,249

20,606,517

100.6%

18,563,997

2,171,252

11.7%

Act 511 Taxes

24,971,555

20,986,686

119.0%

22,231,322

2,740,234

12.3%

Licenses, Permits, Fine

5,638,546

6,512,327

86.6%

5,402,783

235,763

4.4%

Intergovernmental

10,169,222

8,629,963

117.8%

9,315,453

853,769

9.2%

Charges for Services

5,367,949

6,192,233

86.7%

5,398,277

(30,327)

-0.6%

Interest and Rent

1,417,771

1,113,000

127.4%

823,481

594,290

72.2%

Other

5,789,261

4,921,584

117.6%

5,307,945

481,316

9.1%

Transfers in

7,970,000

7,970,000

100.0%

7,620,000

350,000

4.6%

Total Revenues

82,059,554

76,932,310

106.7%

74,663,257

7,396,297

9.9%

 

2 As explained in the Q4 FY2012 report, the City budgeted a $2.3 million payment from the Greater Berks Development Fund for 2012, but actually received the payment in December 2011. The City’s financial reports include the $2.3 million payment in its 2011 fiscal year.

3 The City paid $5 million toward its unfunded debt loan ahead of schedule in early 2012.


 

Property taxes

 

Property taxes represent about a quarter of all General Fund revenues. The City increased its tax millage by 9 percent last year. The City collected 8.6 percent more current year revenue than in 2012, a little less than the rate increase, suggesting that the City’s collection rate was lower than the 89 percent assumed in the 2013 budget.

 

 

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

Current Year

19,171,145

19,706,517

97.3%

17,645,325

1,525,820

8.6%

Prior Years

1,402,448

1,000,000

140.2%

941,109

461,339

49.0%

Penalties and Interest

477,848

200,000

238.9%

274,315

203,533

74.2%

Discount for Early Payment4

(316,192)

(300,000)

105.4%

(296,924)

(19,268)

6.5%

Property Tax Legal Fees

0

0

N/A

172

(172)

-100.0%

Property Tax Subtotal

20,735,249

20,606,517

100.6%

18,563,997

2,171,252

11.7%

 

While current year property tax revenue fell $535,000 (or 2.7 percent) short of budget, collections from prior years covered the shortfall.  Prior year tax revenues were $402,000 (or

40.2 percent) higher than budgeted and the additional penalties and interest assessed for late payment of taxes were more than double the $200,000 budgeted.

 

The Berks County Tax Claim Bureau started collecting prior year real estate tax in 2012 and the County uses a longer collection cycle than the City’s prior tax collector. So the City received some prior year revenue initially anticipated to arrive in 2012 in early 2013 instead.

 

Act 511 Taxes

 

Act 511 taxes are the City’s largest revenue category. The earned income tax on residents and non-residents is the City’s second largest source of budgeted revenue after the property tax. Buoyed by the strong EIT revenues, the City collected 119.0 percent of its budget target last year.

 

 

 

 

 

 

 

 

 

Tax payers receive a discount for paying their property taxes early. The City budgets that discount as a negative number against the revenues.


Act 511 Tax Receipts

 

 

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

Earned Income Tax

19,396,538

16,271,686

119.2%

16,824,024

2,572,515

15.3%

Business Privilege Tax

1,483,238

1,550,000

95.7%

2,048,382

(565,144)

-27.6%

Real Estate Transfer Tax

2,825,536

1,900,000

148.7%

1,972,840

852,696

43.2%

Local Services Tax

1,204,472

1,200,000

100.4%

1,315,032

(110,561)

-8.4%

Per Capita Tax

61,771

65,000

95.0%

71,043

(9,273)

-13.1%

Act 511 Taxes Subtotal

24,971,555

20,986,686

119.0%

22,231,322

2,740,234

12.3%

 

The earned income tax accounted for 77.7 percent of Act 511 tax revenue in 2013. Berks EIT, Incorporated handles EIT collections for the City and all other governments in Berks County under the terms of Act 32 of 2008. The City collected $2.6 million (or 15.3 percent) more than in 2012.  Two factors caused the increase.  First, the City increased the resident EIT levy from

3.1 percent to 3.3 percent and the non-resident levy from 0.1 percent to 0.3 percent. Second, many Pennsylvania cities, including Reading, saw EIT revenues increase because of changes in the Commonwealth law governing how the EIT is levied and collected.

 

 

How much does the non-resident earned income tax generate?

 

This is a common question because the City’s ability to levy a non-resident EIT is linked to its Act 47 status. In 2013 the City received $2.4 million in non-resident EIT, including prior year money. To estimate the tax’s future value, PFM uses the current year tax receipts to estimate how much is generated by each tenth of a percent in EIT levy. This is also a useful way to measure the difference between resident and non-resident earnings and changes in both.

 

Annualized revenue generated per 0.1% on…

2012

2013

Residents

$674,000

$721,000

Non-residents

$961,000

$950,000

 

This calculation demonstrates positive impact of Act 32. The results suggest a 7.0 percent increase in resident earnings when census data suggests actual earnings did not grow that fast. The apparent increase is likely attributable to better collections under Act 32.


 

Real estate transfer tax revenues also exceeded the 2013 budget target and 2012 collections. The City received $926,000 (or 48.7 percent) more than budgeted partly because of the Penn Street properties sale.

 

The City collected 95.7 percent of its business privilege tax budget target last year. BPT receipts were lower in 2013 than 2012, partly because of adjustments made in the 2012 year-end audit.5 The 2012 results also included a one-time increase in prior year revenues generated by the City’s tax amnesty program.

 

Licenses, Permits & Fees

 

This category includes rental housing permit fees, franchise fees, traffic and court fines and business privilege licenses. The City collected 86.6 percent of budgeted revenues in this category and $236,000 (or 4.4 percent) more than in 2012.

 

One of the largest items in this category is the City’s charges for rental housing permits.6 The City collected $688,000 (or 92.5 percent) of the current year target.   The City also had a

$508,000 target for prior year permit revenues, but only collected $117,000 (or 23.0 percent). The City launched a more aggressive delinquent collection process in the second half of 2013 with an external vendor now pursuing the amounts due to the City. All prior year permit revenues were collected in the fourth quarter of last year.

 

Rental Housing Permit Revenues

 

 

2013 Q4

2013

Budget

%

Collected

Current Year

687,501

743,576

92.5%

Prior Years

116,919

508,437

23.0%

Housing/Rental Permit Total

804,419

1,252,013

64.3%

 

Revenue from new construction permits had the other major variance in this category. The City only collected $51,000 versus the $596,000 budget target. That target assumed fees related to the new hotel project, which did not progress far enough to generate that revenue last year.  The

$51,000 total was also less than a third of the revenue generated in 2012.

 

 

 

 

5 The 2012 year-end audit increased 2012 and decreased 2013 BPT current receipts by $158,593 and BPT prior receipts by $25,154.

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


Other Licenses, Permits and Fees

 

 

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

District court summary offenses

893,490

825,000

108.3%

868,031

25,459

2.9%

Franchise fees

745,544

725,000

102.8%

720,254

25,291

3.5%

New construction permits

50,604

596,000

8.5%

168,525

(117,920)

-70.0%

Traffic fines motor codes

417,486

325,000

128.5%

343,502

73,985

21.5%

Business privilege licenses

287,267

350,000

82.1%

359,096

(71,828)

-20.0%

Quality of life fines

330,608

390,000

84.8%

374,650

(44,042)

-11.8%

Other

2,109,126

2,049,314

102.9%

1,677,510

431,617

25.7%

Subtotal

4,834,127

5,260,314

91.9%

4,511,566

322,560

7.1%

 

Intergovernmental Revenues

 

The City collected 117.8 percent of total budgeted intergovernmental revenues. All items in this category met or exceeded the budget target except the intergovernmental funding for the Reading Public Library. The City’s 2013 budget anticipated a $122,000 reduction from 2012 levels, but the preliminary 2013 results were another $39,000 lower than budgeted.

 

The largest item in this category is the Commonwealth pension aid, which the City received in full and above the budget target. The City received more aid than budgeted because it hired additional firefighters under the federal Staffing for Adequate Fire and Emergency Response (SAFR) grant, and each firefighter counts as two units in the Commonwealth’s aid calculation. The amount of Commonwealth aid per unit also increased by 8.7 percent over 2012 levels.

 

Intergovernmental Revenues

 

 

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

Pension-State Contributions

3,068,643

2,800,000

109.6%

2,701,960

366,683

13.6%

Meter Surcharge

1,700,000

1,700,000

100.0%

1,699,992

8

0.0%

RAWA Supplement

1,500,000

1,500,000

100.0%

1,500,000

0

0.0%

RPA Supplement

810,000

810,000

100.0%

810,000

0

0.0%

Grants and Gifts

1,507,921

222,963

676.3%

1,135,761

372,160

32.8%

Reading Public Library

581,193

620,000

93.7%

706,041

(124,848)

-17.7%

Other

1,001,465

977,000

102.5%

761,698

239,767

31.5%

Intergovernmental Subtotal

10,169,222

8,629,963

117.8%

9,315,453

853,769

9.2%


The City received a portion of the $2.7 million SAFER grant in 2013, increasing the grant and gift revenue above the budgeted amount. That revenue reimburses the City for the 21 additional firefighter positions.

 

Charges for Services

 

The City collected 86.7 percent of budgeted revenues from charges for services and $30,000 less than a year ago. The largest item in this category is the City’s charges for EMS service where the City collected $130,000 (or 4.7 percent) more than a year ago.

 

While housing inspection revenues were $249,000 (or 48.4 percent) higher than in 2012, they were only 58.3 percent of the budget target. Revenue that the Police Department generates by providing additional coverage to specific entities at a reimbursable rate is reported in the Police Service/Copy Service line. The Department generated $70,000 more than budgeted in 2013, but

$96,000 less than in 2012.

 

The table below shows other large items in this category. Admissions fee receipts were lower than in 2012 because of adjustments in the 2012 year-end audit,7 and the City did not receive any revenues related to zoning housing appeals in 2013.

 

Service Charge Revenues

 

 

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

EMS User Fees

2,894,160

2,836,638

102.0%

2,764,506

129,654

4.7%

Housing Inspection

764,633

1,311,643

58.3%

515,326

249,307

48.4%

Admissions Fee/Tax

409,628

510,000

80.3%

459,675

(50,047)

-10.9%

Kenhorst Police Contract

418,581

418,581

100.0%

410,374

8,207

2.0%

Police Service/Copy Service

239,868

170,000

141.1%

336,159

(96,291)

-28.6%

Zoning Housing Appeals

0

100,000

0.0%

-

0

0.0%

Police Reimb. - RSD

N/A

N/A

N/A

280,292

(280,292)

-100.0%

Other

641,078

845,371

75.8%

631,944

9,134

1.4%

Charges for Services Subtotal

5,367,949

6,192,233

86.7%

5,398,277

(30,327)

-0.6%

 

Interest and rent

 

The City collected 127.4 percent of the budget  target for interest and  rent because of  an accounting change related to FirstEnergy Stadium. The Reading Fightin’ Phils pay the City approximately $300,000 a year with $22,000 for rent and the rest to cover debt service on a bank

 

7 The 2012 year-end audit increased 2012 and decreased 2013 admission fee receipts by $72,027.


loan related to the Stadium. Previously the City only budgeted the $22,000 for the rental payment. Going forward the City will also report the $278,000 payment that covers Stadium related debt.  The City’s debt service payments should also be $278,000 higher than budgeted so there is no net impact on the City’s financial performance. Other interest and rent revenues include rental fees for other City properties and bond interest.

 

Interest and Rent Revenues

 

 

2013 Q4

2013 Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

Rental - Parking Authority

999,996

1,000,000

100.0%

399,996

600,000

181.3%

Rental on Stadium

300,000

22,000

1363.6%

22,000

278,000

1263.6%

Other

117,775

91,000

129.4%

401,485

(283,710)

-70.7%

Interest & Rental Subtotal

1,417,771

1,113,000

127.4%

823,481

594,290

72.2%

 

Other Revenues

 

The City collected 117.6 percent of the total budget in the other revenues category and $481,000 (or 9.1 percent) more than through the same period in 2012. The largest item in this category is the City employees’ contributions to the cost of health insurance.8 Total employee contributions were 29.6 percent higher than in 2012 because last year was the first in which police officers made higher contributions in compliance with the Recovery Plan and similar to other employee groups.

 

The City also received a higher than budgeted indirect cost reimbursement from the Water Fund because the final calculation that determines the payment was completed after the 2013 budget target was set at a lower amount based on internal estimates. For the same reason the City received less than budgeted for its indirect cost reimbursement from community development the internal estimate was higher than the final calculation that set the actual payment for 2013.

 

Other Revenues

 

 

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

Emp. Insurance Contribution

1,451,416

1,465,845

99.0%

1,120,222

331,195

29.6%

Indirect Cost Reimb - Sewer

1,161,432

1,066,442

108.9%

1,161,432

0

0.0%

CDBG Revenue to Fund Codes

500,000

500,000

100.0%

0

500,000

N/A

Heart & Lung Reimbursement

363,523

300,000

121.2%

356,658

6,865

1.9%

 

8 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 the City employees pay to medical care providers at the time of receiving service (e.g. office or prescription drug copayments, deductibles).


 

 

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

Indirect Cost Reimb - CD

189,996

282,497

67.3%

352,476

(162,480)

-46.1%

Rdg. Housing Auth - Reimb.

282,834

265,000

106.7%

177,949

104,884

58.9%

Indirect Cost Reimb- Recycling

250,216

254,896

98.2%

383,905

(133,689)

-34.8%

Indirect Cost Reimb- Water

757,476

250,000

303.0%

757,476

0

0.0%

Direct Cost Reimb. - Trades

140,946

170,000

82.9%

171,661

(30,715)

-17.9%

Other

691,422

366,904

188.4%

826,166

(134,744)

-16.3%

Other Revenues Subtotal

5,789,261

4,921,584

117.6%

5,307,945

481,316

9.1%

 

Interfund revenues

 

The City transfers $4.97 million from the Water Fund to the General Fund as an annual payment from the Reading Area Water Authority (RAWA) to lease the City’s system. The  lease agreement between the City and RAWA sets the transfer amount.9 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. Both transfers are made on a monthly basis throughout the year.

 

Interfund Revenues

 

 

2013 Q4

2013

Budget

%

Collected

2012 Q4

Difference ($)

Difference (%)

Transfer from Water Fund

4,970,000

4,970,000

100.0%

4,420,000

550,000

12.4%

Transfer from Sewer Fund

3,000,000

3,000,000

100.0%

3,000,000

0

0.0%

Other

0

0

0.0%

200,000

-200,000

-100.0%

Transfers Subtotal

7,970,000

7,970,000

100.0%

7,620,000

350,000

4.6%

 

EXPENDITURES

 

The City had $77.4 million in General Fund expenditures in 2013, which was 100.6 percent of the $76.9 million budget. However, that budgeted figure includes a $982,000 contingency, which was not intended for use during the year. Once the contingency is removed, the City spent

$1.5 million (or 1.9 percent) more than budget. The areas with the largest spending over budget were overtime ($820,000) and debt service ($494,000).

 

 

 

 

 

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


The City spent $3.4 million (or 4.7 percent) more in 2013 than 2012. The higher spending level was mostly due to the increased pension contributions based on the Minimum Municipal Obligation (MMO) and increased transfer to the Self Insurance Fund in 2013.

 

Major Expenditures

2013 Q4

2013

Budget

%

Spent

2012 Q4

Difference                 Difference ($)                    (%)

Salaries, wages & holiday pay

27,257,424

27,486,737

99.2%

27,761,117

(503,694)

-1.8%

Overtime

2,995,212

2,175,563

137.7%

3,652,795

(657,584)

-18.0%

Pensions

9,947,536

9,919,726

100.3%

6,392,011

3,555,524

55.6%

Fringe benefits

10,021,828

9,968,428

100.5%

10,076,987

(55,159)

-0.5%

Other personnel

1,408,166

1,639,017

85.9%

1,570,098

(161,932)

-10.3%

Debt service

13,267,796

12,774,079

103.9%

12,523,181

744,615

5.9%

Operating costs

9,005,931

8,770,024

102.7%

9,430,144

(424,213)

-4.5%

Other expenses

882,218

577,137

152.9%

878,784

3,434

0.4%

Contingencies

3,486

985,615

0.4%

8,473

(4,986)

-58.9%

Interfund transfer expenses

2,635,984

2,635,984

100.0%

1,687,693

948,291

56.2%

Total Expenditures

77,425,581

76,932,310

100.6%

73,981,284

3,444,297

4.7%

 

Personnel

 

The majority of the City’s budget is for personnel costs, most of which goes toward the “regular” pay of City employees - salaries, temporary wages, and holiday pay. These categories accounted for 91 percent of the 2013 Personnel budget. Overtime pay represents another 7.2 percent and the remaining  1.8 percent  covers  longevity, any  settlement  payments and  uniform/clothing allowance.

 

The table below shows spending for salaries, temporary wages, and holiday pay by department. Most departments were close to the 100 percent spending level expected at year’s end. The Fire Department exceeded its budget and spent $497,000 (or 6.5 percent) more than in 2012 because of increased headcount related to the SAFER grant. Community Development spent $132,000 (or 7.0 percent) more than last year because of increased headcount in the Property Maintenance Division.

 

Salaries, Temporary Wages and Holiday Pay by Department

 

 

2013 Q4

2013

Budget

%

Spent

2012 Q4

Difference ($)

Difference (%)

Police

12,443,931

12,949,255

96.1%

13,373,569

(929,638)

-7.0%


 

 

2013 Q4

2013

Budget

%

Spent

2012 Q4

Difference ($)

Difference (%)

Fire

8,169,630

7,708,755

106.0%

7,673,087

496,543

6.5%

Public Works

1,445,056

1,455,686

99.3%

1,653,368

(208,312)

-12.6%

Administration

1,601,153

1,630,694

98.2%

1,606,379

(5,227)

-0.3%

Community Dev

2,010,589

2,082,784

96.5%

1,878,551

132,037

7.0%

Other

1,587,065

1,659,563

95.6%

1,576,163

10,902

0.7%

Total

27,257,424

27,486,737

99.2%

27,761,117

(503,694)

-1.8%

 

Police spent $930,000 (or 7.0 percent) less in 2013 than 2012. One possible explanation is that several police officers retired in 2012, impacting salary spending in two ways. As officers retired, they converted unused leave into cash payments, increasing the 2012 spending levels. The City hired new officers to fill their vacancies, and those officers have lower starting salaries, reducing the 2013 spending levels.

 

Overtime

 

The City’s overtime expenditures exceeded the budget target, although they were $658,000 (or

18.0 percent) less than in 2012.

 

 

2013 Q4

2013 Budget

% Spent

2012 Q4

Difference ($)

Difference (%)

Police

1,873,721

1,479,063

126.7%

1,899,901

(26,180)

-1.4%

Fire

1,061,913

640,000

165.9%

1,707,489

(645,576)

-37.8%

Public Works

53,461

54,500

98.1%

42,590

10,871

25.5%

Other

6,116

2,000

305.8%

2,815

3,301

117.3%

Total

2,995,212

2,175,563

137.7%

3,652,795

(657,584)

-18.0%

 

The Police Department spent close to the same amount on overtime as in 2012 and $395,000 (or

26.7 percent) more than budgeted. As discussed in the Police Overtime Analysis produced by PFM in September 2013, reporting police overtime expenditures alone misses part of the story. Some of the Department's overtime expenditures are covered by private parties, other governmental entities, or grants. Accounting for these reimbursements, the City had $1.6 million in unreimbursed Police overtime expenditures last year, which was $325,000 (or 24.8 percent) more than budgeted and $70,000 (or 4.5 percent) more than in 2012.


Police Overtime Spending, Net of Reimbursement

 

 

Budget

Q4 Actual

Difference ($)

Difference (%)

FY12 Overtime

1,187,500

1,899,901

(712,401)

-60.0%

FY12 Reimbursement

135,000

336,159

201,159

149.0%

FY12 Unreimbursed

1,052,500

1,563,742

(511,242)

-48.6%

 

 

 

 

 

FY13 Overtime

1,479,063

1,873,721

(394,658)

-26.68%

FY13 Reimbursement

170,000

239,868

69,868

41.10%

FY13 Unreimbursed

1,309,063

1,633,854

(324,791)

-24.81%

 

The Fire Department exceeded its budget for 2013, though it spent $646,000 (or 37.8 percent) less than in 2012 when overtime spending finished at $1.7 million.

 

Benefits

 

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

 

Pensions

 

Pennsylvania law requires the City to make an annual contribution to each of its three employee pension plans. The City's contributions, also known as the Minimum Municipal Obligations (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 2013 were $9.9 million, which was $3.6 million (or 55.6 percent) higher than in 2012.

 

 

2013 Q4

2013

Budget

% Spent

2012 Q4

Difference          Difference ($)                      (%)

Police

6,057,188

6,057,187

100.0%

3,663,428

2,393,760

65.3%

Fire

2,286,857

2,286,857

100.0%

1,903,873

382,984

20.1%

Employees & Officers

1,603,491

1,575,682

101.8%

824,710

778,781

94.4%

Total

9,947,536

9,919,726

100.3%

6,392,011

3,555,524

55.6%


Employee insurance (Fringe Benefits)

 

The City spent 100.5 percent of its fringe benefit budget in 2013, which was $55,000 (or 0.5 percent) less than in 2012. Reported spending by departments other than police and fire was particularly low compared to budget.

 

Fringe Benefit Expenditures by Department

 

Fringe Benefits

2013 Q4

2013

Budget

% Spent

2012 Q4

Difference ($)

Difference (%)

Police

5,584,356

4,709,012

118.6%

5,208,425

375,930

7.2%

Fire

2,547,077

2,706,153

94.1%

2,610,668

(63,591)

-2.4%

Community Dvlpmt

540,719

764,450

70.7%

583,502

(42,783)

-7.3%

Public Works

537,824

688,005

78.2%

727,322

(189,497)

-26.1%

Admin. Services

450,091

657,427

68.5%

513,220

(63,129)

-12.3%

Other

361,761

443,381

81.6%

433,849

(72,088)

-16.6%

Total

10,021,828

9,968,428

100.5%

10,076,987

(55,159)

-0.5%

 

Police spending exceeded budget by 18.6 percent because the 2013 budget assumed the City would reduce the number of retired police employees receiving City-funded health insurance. A June 2013 arbitration ruling has prevented the City from doing so thus far.

 

Other personnel

 

The City spent another $1.4 million on other personnel-related expenditures last year, which was

$162,000 (or 10.3 percent) less than in 2012. Spending on these items is lower than a year ago because of reduced spending on premium pay, social security and unemployment compensation.

 

 

Other Personnel

2013 Q4

2013

Budget

% Spent

2012 Q4

Difference                    Difference ($)                      (%)

Premium Pay

327,511

369,659

88.6%

380,906

(53,395)

-14.0%

Social Security

909,153

978,333

92.9%

961,642

(52,489)

-5.5%

Unemployment Comp

37,837

150,000

25.2%

133,050

(95,213)

-71.6%

Penny Fund

4,117

500

823.4%

12,491

(8,374)

-67.0%

Uniforms/Clothing Allowance

129,548

140,525

92.2%

82,009

47,539

58.0%

Total

1,408,166

1,639,017

85.9%

1,570,098

(161,932)

-10.3%


 

Debt Service

 

The City spent 103.9 percent of its debt service budget through December 2013. For most outstanding bonds, loans and notes, the City makes one payment in the second quarter (May or June) and a second payment in the fourth quarter (November or December). The second payment is usually larger it includes interest and principal.

 

Actual debt service spending in 2013 exceeded budget by $494,000 (or 3.9 percent) because the amount budgeted for the General Obligation Bonds, Series 2008 C and D did not include refinancing fees.

 

 

2013 Q4

2013 Budget

% Spent

2012 Q410

Difference                      Difference ($)                         (%)

Debt Service

13,267,796

12,774,079

103.9%

12,523,181

744,615

5.9%

 

Operating Costs

 

Representing 11.4 percent of the total budget, this is the category for materials and externally provided services used in regular government operations. This category includes utility, legal services, equipment, and building maintenance costs.  The City spent $424,000 less on operating expenses in 2013 than in 2012, although spending on contracted services, maintenance agreements and utilities (light, power and gas) all exceeded the budget target.

 

Operating Costs

 

Operating Costs

2013 Q4

2013

Budget

%

Spent

2012 Q4

Difference       Difference ($)                 (%)

Contracted Services

2,094,181

1,937,376

108.1%

2,266,740

(172,559)

-7.6%

Maintenance Agreements

931,751

853,635

109.2%

965,979

(34,227)

-3.5%

Light & Power

732,748

612,723

119.6%

777,321

(44,573)

-5.7%

Gas

749,124

575,000

130.3%

777,659

(28,535)

-3.7%

General Plant Supplies

240,993

411,667

58.5%

260,468

(19,475)

-7.5%

Maintenance/Repair Equipment

298,713

327,540

91.2%

183,854

114,859

62.5%

Fees

274,867

319,385

86.1%

296,823

(21,955)

-7.4%

Other Operating Cost

3,683,554

3,732,698

98.7%

3,901,300

(217,747)

-5.6%

Operating Costs Subtotal

9,005,931

8,770,024

102.7%

9,430,144

(424,213)

-4.5%

 

 

 

10 This does not include the $5 million unbudgeted payment made toward the 2010 unfunded debt.


On a whole the City spent $173,000 (or 7.6 percent) less on contracted services than in 2012, though spending levels vary by department. The Law Department spent $297,000 more than budgeted on external legal services while other units, like the Managing Director’s Office and Human Resources, barely spent any of their allocation. The table below shows the variances in contracted services among departments.

 

Contracted Services by Department

 

 

2013 Q4

2013

Budget

% Spent

2012 Q4

Difference ($)

Difference (%)

Mayor's Office

3,297

2,500

131.9%

112,629

(109,332)

-97.1%

Managing Director

1,075

80,000

1.3%

67,252

(66,177)

-98.4%

Accounting

146,884

92,218

159.1%

135,796

11,087

8.2%

Public Works

547,612

474,143

115.5%

623,034

(75,421)

-12.1%

Police

294,301

352,565

83.5%

48,589

245,712

505.7%

Fire

119,360

116,500

102.5%

179,437

(60,077)

-33.5%

CD

93,010

165,450

56.2%

35,896

57,114

159.1%

HR

5,875

71,000

8.3%

55,525

(49,650)

-89.4%

Law

392,227

95,000

412.9%

518,947

(126,721)

-24.4%

Recreation

488,000

488,000

100.0%

489,634

(1,634)

-0.3%

Human Relat. Commission

2,540

0

N/A

0

2,540

N/A

Subtotal

2,094,181

1,937,376

108.1%

2,266,740

(172,559)

-7.6%

 

Other expenses

 

The table below shows other expenses in the General Fund. Contingencies represent the City’s fund balance. Rather than budgeting revenues higher than expenditures and showing a fund balance, the City budgets expenditures to equal revenues, with the marginal difference in the Contingencies line. The City theoretically should not spend much in category, which was the case the last two years.

 

 

2013 Q4

          2013                   

%         

2012 Q4

   Difference      

Difference  

        Budget             

Spent     

          ($)                    

(%)          

Contingencies

3,486

985,615

0.4%

8,473

(4,986)

-58.9%

Miscellaneous

882,218

577,137

152.9%

878,784

3,434

0.4%

Interfund transfers

2,635,984

2,635,984

100.0%

1,687,693

948,291

56.2%

 

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. The size of this transfer increased by $948,000 (or 56 percent) over 2012 levels.

 

We have grouped all other expenses into the category above called miscellaneous. This category exceeded budget by 52.9 percent, largely driven by legal service expenditures for the Charter


Review Board. Those expenses were $115,000 (or 91.5 percent) more than in 2012 and four times higher than the 2013 budget target.