Agenda 12-06-21; 6-b - Approval of an Allocation Framework for the FY2020-21 Financial Results

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5 Update on FY2020-21 Year End Financial Results Commissioners, The County's auditors are finalizing the FY2020-21 Financial Audit. The results of this audit will show positive results in two areas. On an operating basis, the audit will show a surplus of approximately $8.9 million before transfers. Of that amount, approximately $8 million is available for a mid-year budget adjustment. In addition, the fund balance reconciliation contained in the audit will show $4 million in available one time resources resulting from a decrease in the fund balance appropriation used to balance the FY2020-21 Budget compared to the smaller amount appropriated to balance the FY2021-22 Budget. This memorandum will summarize the primary contributors to this positive financial outcome, outline a framework for the investment of those funds through a mid-year budget adjustment, and propose a timeline for the Board's consideration. A more detailed table of budgeted versus actual expenditures and revenues is attached. FY2020-21 Budget Results The FY2020-21 Budget was presented to the Board of Commissioners in May of 2020. At that time, the State was entering its sixth week of the Governor's Stay at Home order. Unemployment rates in the County were beginning to increase, and the County's otherwise resilient local economy was suffering. Under these circumstances,the County Manager's recommended budget included conservative revenue projections and austere expenditure measures designed to protect the County's financial well-being. Fortunately, the federal government asserted a variety of economic stimulus initiatives to individuals, private businesses, and the public sector to avoid widespread economic distress. Those stimulus measures manifested in positive impacts to the County's primary revenue sources. Property Tax and Motor Vehicle Collections The collection rates for property taxes and motor vehicle collections were adjusted down in the FY2020- 21 Budget in anticipation of residents struggling to pay those obligations. Property tax collection rates were decreased from 99.2% in FY2019-20 to 98.7%in FY2020-21. However,the actual collection rate did not decrease. Rather, it stayed consistent with the FY2019-20 rate at 99.27% resulting in a positive property tax revenue variance of over$1.6 million. The collection rate for Motor Vehicles also performed in excess of expectations. That rate was budgeted to decrease by 0.5%. However,the actual collection rate exceeded 100% at 103.8% as both current year and delinquent tax bills were paid. This positive variance amounted to over $400,000 in surplus collections compared to the budgeted amount. Both of these positive variances are expected to be recurring, so the funds could be used to support ongoing operating expenses. Sales Taxes Sales taxes were budgeted to decrease by 4.5%from the FY2019-20 budgeted amount. Actual sales tax collections, however, exceeded FY2019-20 collections. This unexpected performance resulted in actual collections exceeding the FY2020-21 budgeted amount by over $4 million. Although the Department of Revenue will not disclose the amount of sales tax collected from online sources, online purchases during and after the stay at home order likely fueled some of this growth, and direct federal stimulus payments 1