QUARTERLY FINANCIAL REPORT
FOURTH QUARTER, 2019-20
Quarter Ended June 30, 2020
Purpose of this Report
This report is intended to provide city management, the city council, and the community a general update on the financial activities and condition of the City on a quarterly basis. In addition to providing financial information it provides a narrative or annotations on financial highlights meant to give context to the numbers, charts, and graphs found throughout.
Budget information is also provided in this report, and a link to the City’s fiscal year 2019-20 adopted budget can be found here:
Annual Operating and Capital Budget, FY 2019-20
Information contained in this report is preliminary and unaudited. Further adjusting entries may be made as part of the City's year-end close and audited processes. It is prepared and reported on a budgetary basis, meaning revenues and expenditures related to internal services funds are presented discretely and not consolidated. Please refer to the City's audited financial statements for a complete report on the City's financial activities and balances for the year. These reports are issued by December 31 following the end of the fiscal year.
Included in this report are the following sections:
-City-wide financial information
-Major fund financial information, including:
- General fund
- Electric enterprise
- Water enterprise
- Wastewater enterprise
-Departmental budget to actual
-Capital improvement budget to actual
-Special report: Indirect cost allocation plan
Financial Summary
In this section we report on the financial activities of the City as a whole (City-wide), which include all governmental and proprietary (enterprise and internal service) funds, all City departmental activities, and information on the status of capital improvement projects identified by the City Council.
Financial highlights of the last twelve months ending June 30, 2020 include the following:
- Revenues City-wide of $91.6 million outpaced expenditures of $73.5 million by $18.1 million.
- Capital expenditures were $19.3 million, of which $161,409 was paid for by the general fund.
- Major enterprise funds remained well capitalized and able to meet their service demands.
- Top ten revenues of the general fund came in 7% higher than the same period last year, driven by sales taxes.
- Departments and activities ended the quarter under budget estimates.
- Personnel expenditures were the largest category of cost through the end of the quarter, totaling 36.5% of total City expenditures. Materials, services, insurance, and supplies totaled 32.56%, while debt service and capital outlay rounded out the remaining amount at 4.3% and 26.34%, respectively.
For More Information. This report is prepared by the City’s Finance Department and is a summary based on detailed information produced by its financial management system. If you would like additional information, or have questions about this report, please call the Finance Department at 707.463.6220.
CITY-WIDE (ALL FUNDS)
All City governmental and proprietary funds, including the general fund, special revenue funds, capital project funds, enterprise funds, and internal service funds.
Assets
Current assets are those available in the current period or shortly thereafter. They do not include fixed assets, long-term receivables, or other assets of a long-term nature.
Liabilities
Current liabilities are those due and payable in the current period or shortly thereafter. They do not include long-term liabilities, such as loans or bonds payable; long-term portion of pension obligations, compensated absences, or other liabilities of a long-term nature.
Fund Balance (Working Capital)
Revenues by Source, City-Wide
Expenditures
Cost of Service
Governmental
Governmental activities are those supported primarily by non-exchange resources, i.e. taxes. In other words there is no direct correlation in most cases to the services provided and the revenue collected.
This presentation includes the allocation of indirect costs to governmental activities. A more detailed discussion of direct and indirect costs can be found later in this report.
Business-Type
Business-types activities are services provided for which a specific fee or charge is imposed. The fee or charge is meant to be the primary or exclusive source of funding to provide the service. These are otherwise known as exchange transactions. Service examples include water, electric, or golf.
This presentation includes the allocation of indirect costs to business-type activities. A more detailed discussion of direct and indirect costs can be found later in this report.
THE GENERAL FUND
The General Fund is the main operating fund for the City. It accounts for sources and uses of resources that (primarily) are discretionary to the City Council in the provision of activities, programs and services deemed necessary and desirable by the community. It accounts for all general revenues of the City not specifically levied or collected for other City funds, and the related expenditures. The major revenue sources for this fund are sales taxes, property taxes, franchise fees, business license fees, unrestricted revenues from the state, fines and forfeitures, and interest income. Expenditures are made for community development, parks and recreation, public safety (including police and fire), public works, and other services.
Assets
Assets of note include advances to other funds, which represent internal interfund borrowing which the general fund was the lender. Restricted cash are amounts held with the Infrastructure Development Bank (I-Bank) on the City's behalf and will be available once the Redwood Business Park right-of-way improvement project has been completed. The most significant item on the general fund balance sheet is a $6 mil receivable from the Ukiah Redevelopment Successor Agency reimbursing it for expenditures related to the Redwood Business Park improvements.
Liabilities
Liabilities of note include advances from other funds, which represent internal borrowing to complete the Redwood Business Park right-of-way improvements.
Fund Balance
Fund balance in the general fund has increased to just over 45% of revenues for the year, which is higher than the requisite 25% threshold established by City Council. This is due primarily to the recognition of receivables to reimburse the general fund for capital projects. Reserves were used to complete those projects, including the Redwood Business Park right-of-way improvements.
The change in fund balance presented here includes the net of revenues + other financing sources (e.g. transfers in) - expenditures - other financing uses (e.g. transfers out).
General Revenues
General revenues are those principally available for use for any governmental purpose deemed necessary and desirable by the City Council. Taxes are the largest component of these revenues, including sales and property taxes. General revenues in total have increased over the last three years, driven by new sales tax revenues (Measure Y), increased commerce activities (Costco), and a strong local economy.
Note: revenues do not include other financing sources, which include transfers in and debt proceeds. However, the inflow of such resources do affect fund balance in governmental funds, including the general fund.
General Fund Top Ten
Top ten revenues in the general fund make up over 80% of the total revenues for the City's main operating fund. These revenues include sales and property taxes, franchise fees, transient and occupancy taxes (TOT), a business license taxes.
Most of these sources were up from the year prior with notable exceptions of TOT, Ukiah Redevelopment Agency (URDA) pass-through tax increment payments, and business license taxes.
Sales tax revenues, although ending the year higher than the year prior, came in lower than anticipated. Initial estimates that Costco would generate approximately $1 million in Bradley-Burns sales and use taxes actually resulted in a little more than three quarters that amount. City management adjusted the budget accordingly moving forward.
Note: expenditures do not include other financing uses, which include transfers out. However, the outflow of such resources do affect fund balance in governmental funds, including the general fund.
Direct Expenditures by Character, 2020
This chart includes direct expenditures only. Part of those direct expenditures to the general fund include the provision of administrative and overhead costs, which are offset by the category Admin Overhead Offset, representing the amount of cost allocated out to other funds.
Direct Expenditures by Character Over Time
Of note, the portion of the chart above that is in the negative represents the amount of indirect cost allocation back to the general fund as of December 31, 2019. Indirect cost allocation was not done at this time in prior years.
Total Expenditures by Function
ELECTRIC UTILITY
The City's electric utility provides 24-hour, 365-day response to emergency service calls for customer power problems, and outages. Additionally, this team is responsible for making high voltage power lines safe for Fire & Police personnel at structure fires, automobile accidents, and to make other situations where electric lines are near emergency crews.
Services provided include:
- Power purchase and generation
- System expansion and enhancement
- Technical services
- Distribution
- Public benefits (electric bill assistance)
- Street lighting
Current Assets
Current Liabilities
Working Capital
The electric utility's working capital has been deployed for capital projects.
Electric Revenues by Source
Revenues continue to trend positively for the Electric Utility due to a rate adjustment implemented in 2017.
Service Revenue Composition
Commercial electric usage continues to be the largest source of revenue for the utility.
Total Expenditures
Of total expenditures for the utility, just under 11% was for indirect costs.
Direct Expenditures by Character
Of total expenditures for the utility, power purchases comprised the largest single outflow, totaling nearly $3.078 million.
Direct Expenditures Over Time
Utility expenditures over the last three years have remained relatively consistent.
WATER UTILITY
The water utility is responsible for the production, treatment and distribution of drinking water to the residents and businesses of the City of Ukiah. Additionally, the recently completed recycled water project is a shared activity between the water utility and wastewater utility.
Services provided include:
- Potable water production and capacity enhancements
- Service expansion
- Treatment
- Distribution
- Recycled water
Current Assets
Current Liabilities
Working Capital
Water Revenues by Source
The increase in 2019 is due to the SRF loan/grant for the purple pipe project.
Service Revenue Composition
The majority of revenue for the water utility comes from 3/4" services, used by both residential and commercial customers.
Total Expenditures
Of total expenditures for the utility, just over 11.60% was for indirect costs.
Direct Expenditures by Character
Personnel costs make up the majority of expenditures for the utility at 37.65%
Direct Expenditures Over Time
Working capital for the utility decreased over the last several years as it completed capital projects, including recycled water.
WASTEWATER UTILITY
The wastewater utility serves the City by providing for the collection, treatment, and disposal of wastewater for the City of Ukiah and the Ukiah Valley Sanitation District (UVSD).
Costs for operations, debt service, and capital are budgeted in City funds and are shared by the City and UVSD based on an agreed upon apportionment.
Services provided include:
- Wastewater collection
- Service expansion
- Treatment
- Disposal
- Recycled water
- Direct sewer services to the Ukiah Valley Sanitation District
Current Assets
Restricted cash represents unspent bond proceeds from the 2006 sewer plant expansion and rehabilitation.
Current Liabilities
Working Capital
The utility maintains an adequate reserve to meet operational needs over the next several years; however, the recently settled litigation with the Ukiah Valley Sanitation District had a dramatic effect to the reserve balances of both agencies, costing rate payers nearly $9 million in attorney and other litigation costs. Both agencies will need to recoup those losses through rates.
Wastewater Revenues by Source
Revenues from commercial and residential rates comprise the majority of inflows to the utility.
Service Revenue Composition
Wastewater rates from base and usage charges are the overwhelming majority of rate revenue.
Total Expenditures
Of total expenditures for the utility, 10.66% was for indirect costs.
Direct Expenditures by Character
Debt service is the largest share of total expenditures for the utility, related to the 2006 treatment plant rehabilitation and expansion project and, newly added to 2019, the settlement arrangement with the Ukiah Valley Sanitation District of $4.9 million over five years. As of December 31, 2019 $3 million remains to be paid to the UVSD.
Direct Expenditures Over Time
Expenditures over the last three years have increased due to litigation costs in defense of the lawsuit brought by the Ukiah Valley Sanitation District.