Public Works Stores Fund
2022-2027 Financial Plan
Introduction
The Public Works Stores Internal Service Fund accounts for the centralized procurement, receiving, warehousing, and distribution of stocked inventory items and the purchase of special goods and services. The fund’s mission is to provide goods in a cost effective manner to City departments. The fund includes the Traffic Stores department, which is managed by Public Works, and the Central Stores department, which is managed by Finance and Property Services. Traffic Stores purchases components for traffic signals, controllers, and street lights. Central Stores purchases the City’s office supplies and non-specialty items. The fund earns revenue by applying overhead charges to inventory sales and transaction processing.
Historical financial performance
The fund has steadily increased net position from $4.6 million at the end of 2016 to $5.9 million at the end of 2020. The majority of net position is from inventory held by the fund. At the end of 2020, the inventory balance was $6.5 million. The fund had a negative cash balance in the past and by the end of 2020 cash balance is $1.1 million. This is a slight decrease of $91,686 from cash balance of $1.2 million at the end of 2016. The primary reason for the decrease is due to an increase in inventory balance.
From year-end 2016 to year-end 2020, the fund’s revenue has remained between $1.8 million to $1.9 million. Expenses have remained between $1.3 million and $1.8 million. Revenue fluctuates year-to-year based upon the level of inventory purchases by customer departments and requisition processing transactions related to City projects. In addition, starting in 2018, the Traffic Stores department reduced their overhead rate from 22% to 11% and starting in 2020 the Central Stores at Royalston location has increased their overhead rate from 22% to 26%. This brings them closer to the fund’s break-even point.
Current year projections
Revenues
Revenues for 2021 are projected at $2.0 million, an increase of 26.5% over the budgeted amount of $1.6 million. This is primarily due to an increase of $25,525 in Traffic Stores for selling scrap and a $400,670 increase in overhead charges to inventory sales and transactions processing.
Expense
Expenses for 2021 are projected at $1.7 million, an increase of 5.4% over the budgeted amount of $1.6 million. This increase is mostly due to higher contractual services of $100,708, and materials of $43,648. These increases are offset by a decrease in personnel of $57,449, which is driven by the coronavirus pandemic in 2020 and carries over into 2021.
Net position and cash balance
The fund’s projected net position at the end of 2021 is $6.3 million, which is a slight increase of $339,288 over the budgeted ending net position of $5.9 million.
The fund’s projected cash balance at the end of 2021 is $1.5 million, which is a slight increase of $339,288 over the budgeted ending cash balance of $1.1 million.
The increase in projected net position and projected cash balance are due to an increase in the selling scrap, an increase in overhead charges and transactions processing, and a decrease in personnel costs as describe above.
2022 Budget
Revenues
Revenues for 2022 are budgeted at $1.6 million, a slight increase of $11,643 from the 2021 budget amount of $1.6 million. The increase in the 2022 budget amount is due to overhead earnings by both Central Stores and Traffic Stores. The 2022 revenue budget reflects a decrease of 20.4% from the 2021 projected amount of $1.7 million. This decrease from the 2021 projected revenue is due to higher than expected sales in overhead earnings in 2021.
Expenses
Expenses for 2022 are budgeted at $1.6 million, a slight increase of $11,643 from the 2021 budget amount of $1.6 million, primarily from personnel cost and materials. The 2022 budget reflects a decrease of 4.4% from 2021 projected expenses of $1.7 million due to the reduction in personnel costs as describe above in 2021.
Transfers
There are no transfers scheduled for this fund in 2022.
Debt Service
This fund does not have any debt service payments.
Net position and cash balance
The financial policy for this fund states that the fund should maintain a minimum net position equal to 15.0% of the operating budget. The projected year-end net position for both 2021 and 2022 is $6.3 million. The projected 2021 ending balance exceeds the net position target amount of $241,193 by $6.3 million and the projected 2022 ending balance exceeds the net position target amount of $242,939 by $6.3 million.
The financial policy for this fund states that the fund should maintain a minimum target cash reserve equal to 15.0% of the operating budget. The projected year-end cash balance for both 2021 and 2022 is $1.5 million. The projected 2021 ending balance exceeds the cash balance target amount of $241,193 by $1.2 million and the projected 2022 ending balance exceeds the cash balance target amount of $242,939 by $1.2 million.