Monthly Financial Report for the Period Ending January 31, 2013
Presented to City Council by City Manager Rashad M. Young on March 12, 2013.
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- Unemployment rates are sending mixed signals about the economy. The local unemployment rate (not seasonally adjusted) declined year-over-year to 4.2 percent in December 2012 from 4.6 percent in December 2011, indicating that the City’s economy is in a stronger position now than it was a year ago. However, based on Virginia Employment Commission data, it appears that less than half the past year’s growth in the employed population (up 12 percent year-over-year) can be attributed to the decline in the unemployed population (down 10.7 percent year-over-year) while slightly more than half reflects growth in the labor force. Despite periods of stagnation in the second and third quarters of 2012, the state unemployment rate (seasonally adjusted) declined again in the fourth quarter to 5.5 percent as of December 2012, a significant year-over-year decrease from the December 2011 rate of 6.1 percent. This was the second such year-over-year decrease in a row and seems to indicate that the state economy continues to improve. The U.S. unemployment rate (seasonally adjusted) has remained relatively flat since September 2012 and stands at 7.9 percent as of January 2013, indicating that job creation is barely keeping up with and perhaps even slightly lagging behind growth in the labor force. This stagnation is at least partially related to marginally attached and discouraged workers reentering the job market, as both indicators show significant year-over-year decreases, indicating improved worker optimism about the job market. However, there is still room for concern, especially when the potential negative economic effects of the upcoming federal budget cuts are taken into consideration.
- Miscellaneous tax revenues show that the City benefited from pre-inaugural activities in December. While sales and admission tax collections increased approximately 4.0 percent fiscal year-to-date, restaurant meal sales and transient lodging tax collections increased 9.0 and 6.0 percent fiscal year-to-date, which seems to reflect greater tourism-related spending in the City. Transient lodging tax one-month collections for January show a 7.3 percent increase over January 2012, while meal sales tax one-month collections show a 10.0 percent increase over the same time period. Considering that collections for and through January reflect actual economic activity for and through December, these statistics seem to indicate that the City benefited from tourism-related spending associated with December pre-inaugural activities. Staff anticipates that the City will experience a similar if not greater year-over-year increase in collections through February 28, which will be provided in next month’s report and reflect economic activity related to the January presidential inauguration and inauguration-related activities.
- Fourth quarter 2012 numbers reflect a Washington, DC metropolitan area housing market that is in recovery but not yet in its expansion phase. According to the Delta Associates report Washington Area Housing Outlook Year-End 2012, fourth quarter 2012 metro area prices were up 10.8 percent from fourth quarter 2011, unit volume was up 15.5 percent, days on the market decreased by 23 days, falling below the 10-year average, and months of inventory reached a new low of 2.1 months. For the Core Jurisdictions (DC, Arlington, and Alexandria), the average price was up 1.4 percent from third quarter 2012 and 9.2 percent from fourth quarter 2011. Prices remained highest in the Core Jurisdictions, with DC median prices now at 100 percent of their prior peak and Alexandria median prices just slightly below peak. (Median prices in all other area jurisdictions remain below and sometimes well below 90 percent of peak.) Unit volume for the Core Jurisdictions decreased 7.0 percent from third quarter 2012 but was up 22.4 percent from fourth quarter 2011. For the Inner Ring (Fairfax, Montgomery, and Prince George’s Counties as well as Fairfax and Falls Church Cities) and Outer Suburbs (Loudoun, Prince William, and Frederick Counties), both average prices and unit volume declined compared to third quarter 2012 but showed substantial growth from fourth quarter 2011. Average prices were down 4.1 percent and 2.0 percent respectively from third quarter 2012 but up 10.8 percent and 11.1 percent respectively from fourth quarter 2011. Unit volume was down 13.2 percent and 12.2 percent respectively from third quarter 2012 but up 11.1 percent and 20.3 percent respectively from fourth quarter 2011. For calendar year 2013, Delta Associates predicts sustainable growth in the metro area housing market that will be tempered by fiscal issues at the federal level and their economic impact. Much of this growth is expected to take place in the second half of 2013, after the federal government’s fiscal issues are addressed.
Year-to-Date Revenues: As of January 31, 2013, actual General Fund revenues totaled $322.8 million, which is 10 percent higher than FY 2012 for the same period. Most of this increase reflects refunding bond proceeds, the bulk of which was used to fund the refunded bonds listed in the expenditure report. The rest of the increase is mainly related to general property taxes (real estate and personal property).
- Transient Lodging Taxes: The increase reflects increased hotel occupancy in December, primarily related to pre-inaugural events in the DC area.
- Restaurant Meals Taxes: The increase reflects increased tourism in December, primarily related to pre-inaugural events in the DC area.
- Other Local Taxes: The increase is mainly due to the timing of the receipt of telecommunications taxes.
- Revenue from the Federal Government: The decrease is primarily a result of the timing of payments for the Federal Prisoner Per Diem.
- Fines and Forfeitures: Collections in this category primarily reflect budgeted increases for red light cameras installed in FY 2012. The FY 2013 projection has been increased to reflect the additional revenue.
- Other Revenue: The increase is due to $0.2 million from the sale of surplus property and insurance recoveries.
This report also includes revised estimates for FY 2013 revenues. The projection shows additional revenue from a proposed 5.5 cent real estate tax rate increase. This additional $9.5 million will be used to: 1) fund the FY 2014 Proposed Operating Budget for the City and increased school enrollment needs; and 2) fund additional capital projects as directed by City Council in the guidance issued for the FY 2014 budget. Assessment increases and other increased revenue estimates resulted in an additional $1.4 million, or less than one quarter of one percent, compared to the original FY 2013 budget estimate of General Fund revenues of $587.9 million.
Year-to-Date Expenditures: As of January 31, 2013, actual General Fund expenditures totaled $338.8 million, an increase of $51.7 million, or 18 percent, above expenditures for the same period last year. Personnel expenditures remain consistent with the budget at 11.1 percent higher than last year. Non-personnel spending increased 22.1 percent from the same period in FY 2012, primarily due to budgeted debt service and payment to the refunding bond escrow agent for refunded bonds. We are closely monitoring and controlling these expenditures to be at or below budget.
- Planning and Zoning: Increased costs are for temporary personnel staffing to handle increased workloads for planning activities. To the extent additional fees are available to support the additional activities, staff will recommend an appropriation of those fees as part of the supplemental appropriation. Department staff will monitor non personnel spending in order to remain at or below budget.
- Registrar: Increased costs are primarily due to budgeted costs for the presidential election. Costs for the additional primary and voting machines may exceed the budget. Staff will propose a transfer as appropriate in the transfer resolution.
- Fire: Fire overtime costs are currently projected to be over the current budget again this year as the number of minimum staffing overtime hours are already higher than at this time last year. However, unlike prior years, the Fire Departments’ full-time salaries budget is projected to absorb this overage. As newer employees are hired for the new station to replace retiring firefighters, their salaries and overtime costs are lower than those of the senior firefighters who were the only ones eligible to work these hours in previous years.
- Police: During the last several fiscal years, APD has experienced a high attrition rate among sworn staff largely due to a large number of retirements. To offset the impact of this high attrition rate, 18 recruits were put into the July Police Academy. This resulted in higher payrolls in the beginning of the fiscal year. Attrition is expected to continue and future payrolls will be lower due to anticipated retirements and other separations.
- Debt Service: The increase in debt service reflects planned expenditures for the FY 2012 General Obligation and refunding bonds.
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