December 2016 Review (see attachments)

Even though the new year has begun, that doesn't mean 2016 is complete. Financial reports are snapshot in time. There are many revenues and expenditures along with various other year-end entries that need to be made. We are paying bills and collecting receipts all related to 2016 through the end of February.

As you may recall, the 2017 budget included a revised or final 2016 budget. The first attached report (December 2016 Monthly Financial Report) includes the revised 2016 budget in lieu of the original budget. The second attached report compares the original and revised budget with a variance analysis between year-to-date expenditures and the revised 2016 budget.

The revised revenue budget was increased by approximately $1 million and the revised expenditure budget was reduced by $1.1 million. Excess reserves are being transferred to the city hall construction project, debt service reserves and the self-insurance fund. The original 2016 budget had a planned deficit of $449,000, the final budget has a budgeted surplus of $453,000.

The major changes from last month to this month are in bold. 

Revenue Variances

• Licenses & Permits will end the year with over $1 million more in revenue than originally budgeted and over $290,000 more than the revised budget.
• Charges for Services exceeded budget due to:
  • Increased community center general admissions of $28,000.
  • Increased community center membership of $48,000.
  • Increased contracted police services of $52,000.
  • Increased engineering and grading fees of $90,000.
  • Payments in lieu of taxes (PILOT) from SPU exceeding original estimates by $110,000.

• Miscellaneous revenues are about $50,000 greater than budget due to increased interest revenue and other miscellaneous revenues such insurance reimbursements and the sale of various minor surplus assets.

Expenditure Variances

• Administration
  • The revised salary budget includes wage distributions for various staff members. Actual wages were not distributed, so administration wages are more than anticipated. For example, three percent of the city administrator's salary was budgeted to come from the EDA. However, 100 percent was charged to administration.
• Finance
  • The city collects lodging tax and passes these collections onto the Shakopee Convention and Business Bureau. For 2016 collections exceeded expectations. We budgeted $308,750 of lodging tax disbursements compared to actual 2016 disbursements of $368,000. Lodging tax is a budget neutral expenditure, since we only disburse what the city first receives.
• Building Inspections
  • Actual expenditures are about $95,000 more than the revised budget. This overage is mainly due the implementation of an electronic review system, Project Docs, which is set to go live in early 2017. Expenditures for this new system include software, training and large format scanners. This project is being paid for with surplus building inspection revenue.
  • Another contributor to the variance is the actual charging of plan review time exceeded the anticipated budget. Employees from other divisions such as engineering, fire, and planning charge time to plan review with building inspections. This accounts for about $35,000 of the variance.
• Street Maintenance
  • Actual expenditures are about $53,000 more than the revised budget due to street light change outs on Southbridge Parkway along with additional sealcoating expenditures. 
• Fleet
  • The implementation of a new fleet management system approved by council back in July was not accounted for in the revised budget. Set up costs of approximately $26,000 includes computer hardware and software along with the necessary tool chests needed to accompany the computer setups.
• Natural Resources
  • Actual expenditures are more in line with the budget as an approximate $50,000 invoice for 2016 tree pruning was paid in February, 2017. 

It should be noted that revised expenditure budgets were generally reduced compared to the original budgets. Most departments that are over their revised budget would still be under their respective original budget. This was the first year of implementing revised budgets, so staff is still learning how to fine tune the revised budget. The revised budget did anticipate a year-end surplus, so overages will not materially effect the General Fund's financial position.

The city's annual audit is scheduled for fieldwork the middle of April.  Final year-end audited financial statements are tentatively scheduled to be presented to Council on June 6th. 

February 2017 Review (see attachment)

Revenue Variances

• Intergovernmental Revenue
  • The city received $288,680 in Municipal State Aid - Maintenance from MnDOT.  This first half payment is typically received in February each year.
• Charges for Services
  • $200,000 payment from the Shakopee School District for school resources officers for calendar year 2017.
  • $100,000 from the Shakopee Mdewakanton Sioux Community for 2017 Intergovernmental aid.
  • $83,333 from the Shakopee School District for 2016-17 ice and locker room rental, per agreement.
• Miscellaneous Revenue is down compared to last year due to the interest revenue allocation not being done for January and February as of today.  This entry will be done once the 2016 books are closed.  Cash balances amongst the funds can and does change until the prior year is closed.  Holding off on this and similar type entries provides a more accurate accounting of allocations. 

Expenditure Variances

Similar to the January financial review, the expenditures are all in line with either the expected budget allotment or the 2016 expenditures through two months of the year.

Community Center & Ice Arena Year-to-Year Comparison

The final attachment is a comparison of the community center and ice arena revenues and expenditures through February 2016 and 2017, respectively. The annual budget is also included in this report. 

Ice Arena revenues are at $162,000 through February due to receiving payment from the school district as noted above along with $42,800 from the Shakopee Youth Hockey Association for January ice rental.  Expenditures are higher than last year, which would be expected with an additional sheet of ice in operation.  Expenditures are within the budget allotment through February.

Community Center revenues have increased $65,000 compared to this same time last year.  As the Community Center begins to finalize renovations, membership sales should continue to increase.  In addition, membership rates are set to increase the middle of March, so there has been a push to sell annual memberships at the current rate.    

Personnel expenditures are up slightly compared to 2016, which is in line with the need for additional operational staff.