FROM:
Finance
SUBJECT:
Title
Fiscal Year 2023-24 Midyear Budget Status Report
End
RECOMMENDATION:
Recommendation
Approve the recommended Fiscal Year 2023-24 Midyear Budget adjustments.
End
COUNCIL GOALS:
• Operate in a businesslike manner by ensuring that the public debate is based on accurate information.
• Operate in a businesslike manner by correcting problems immediately.
• Practice sound fiscal management by producing timely and accurate financial information.
• Practice sound fiscal management by living within our means while investing in the future.
• Practice sound fiscal management by fully funding liabilities and reserves.
• Practice sound fiscal management by developing long-term funding and debt management plans.
• Invest in the City’s infrastructure (streets, sewers, parks, etc.) by maintaining and improving the city's existing infrastructure.
• Invest in the City’s infrastructure (streets, sewers, parks, etc.) by providing for the development of new infrastructure.
• Invest in the City’s infrastructure (streets, sewers, parks, etc.) by utilizing Measure-I Funds wisely.
DISCUSSION:
The City’s budget is an important policy document, serving as the annual financial plan that identifies the spending priorities for the organization. Quarterly budget status reports are developed and presented to the City Council to provide the most current information on the financial activities of the City upon which to base decisions. Additionally, quarterly reports assist City departments in communicating their financial operations throughout the fiscal year including any program changes and significant impacts to their annual budgets, as well as gauging the City’s budget plan as compared to actual revenue and expenditures. This report includes requested departmental budget adjustments and preliminary year-to-date actuals through Midyear of Fiscal Year 2023-24, covering the period through December 31, 2023.
The current citywide Fiscal Year 2023-24 budget is comprised of a total of 200 funds including the General Fund, Other General Funds (10 funds), Special Revenue Funds (135 funds), Enterprise Funds (5 funds), Capital Project Funds (36 funds), a Debt Service Fund, an Internal Service Fund, and Other Agency Funds (11 funds).
The current total citywide Fiscal Year 2023-24 budget (excluding other agency funds) includes total uses (expenditures and transfers out) for all City funds of $557.1 million and total sources (revenues and transfers in) of $423.1 million. The Recommended Budget includes an increase in total sources of $45.5 million for a total of $468.7 million and an increase in total uses of $99.0 million for a total of $656.1 million.
2023-24 Budget
All City Fund
GENERAL FUND
The current Fiscal Year 2023-24 General Fund Operating Budget includes total uses of $165.6 million and total sources of $159.3 million. The Recommended Budget includes an increase in total sources of $1.1 million for a total of $160.4 million and an increase in total uses of $14.7 million for a total of $180.3 million. The requested expenditure and transfers out adjustments of $14.7 million, include personnel expenses of $412,595, recurring expenditures of $879,854, one-time expenditures of $12.6 million, and off-setting adjustments of $832,000.
2023-24 Budget
General Fund (Fund 101)
Notable Changes
• Revenue Adjustments - an increase in revenues of $1.1 million primarily due to anticipated Cannabis business sales tax ($274,828) and business-related revenue from the business license compliance program ($832,000).
• Personnel Requests (recurring) - an increase in appropriations of $412,595 for increased cafeteria plan and health costs and part-time positions.
• One-time Requests - Increase appropriations in various operating accounts of $12.6 million to fund one-time expenditures and operating transfers out. Notable requests include:
o Fund Balance and Reserve Policy - Increase in transfers out of $10.3 million primarily to fund road improvements ($4.7 million) and prefund the CalPERS retirement UAL ($4.7 million).
o City Administration - Increase appropriations of $1.1 million for BB&K legal fees.
o Public Works & Engineering - Increase appropriations of $1.1 million for various park improvements, maintenance, and consulting services.
• Recurring Requests - Increase in appropriations of $879,854 in various operating accounts to fund one-time expenditures and operating transfers out primarily due to an increase in appropriations of $773,940 for BB&K legal fees.
• Offsetting Requests - Increase in appropriations and revenues of $832,000 for the business license compliance program.
Fund Balance Analysis
The recommended 2023-24 ending fund balance of $51.0 million reflects a decrease of $13.1 million. Included in the fund balance are total operating reserves of $33.1 million which reflects 25% of recurring annual expenditures.
2023-24 Budget
General Fund Balance
Notable fund balance changes are:
• Beginning Fund Balance Adjustment - Increase in beginning fund balance of $972,605 to adjust for prior year final fund balance.
• Animal Shelter JPA - Establishment of the Animal Shelter JPA reserve of $800,000 to fund the development of the animal shelter.
• Operating Contingencies - Establishment of the Operating Contingencies of $3.0 million per the new fund balance and reserve policy.
• Settlements - Establishment of reserves to fund an increase in anticipated settlements of $2.5 million.
• Unappropriated - Decrease in the unappropriated fund balance of $19.4 million to establish the fund balance reserves as indicated above and to fund the road improvements and CalPERS UAL prefunding plan per the new fund balance and reserve policy.
OTHER GENERAL FUNDS
Other General Funds includes a total of 10 funds which are funded by the General Fund for services that support the City’s general operations. The most notable funds include City Technology, Facility Maintenance, Self-Insurance, Retiree Medical Benefits, and General Fund Operating Projects.
The current 2023-24 Other General Funds Operating Budget includes total uses of $33.1 million and total sources of $32.6 million. The Recommended Budget includes an increase in total sources of $5.3 million for a total of $37.9 million and an increase in total uses of $18.6 million for a total of $51.7 million.
2023-24 Budget
Other General Funds
Notable Changes
• City Technology - Increase in appropriations of $563,309 primarily to due to costs associated with an Enterprise agreement due to a vendor change.
• Self-Insurance - Increase in appropriations of $5.5 million for settlement claims, legal services, and pending settlements.
• Supplemental Retirement - Increase in appropriations of $4.7 million due to the CalPERS UAL prefunding per the fund balance and reserve policy.
OTHER CITY FUNDS
Other City Funds includes a total of 178 funds which Special Revenue Funds, Debt Service Funds, Capital Project Funds, Enterprise Funds, and Internal Service Funds.
The current 2023-24 Other City Funds Operating Budget includes total uses of $358.4 million and total sources of $231.2 million. The Recommended Budget includes an increase in total sources of $39.1 million for a total of $270.4 million and an increase in total uses of $65.7 million for a total of $424.1 million. The impact of the adjustments is a $26.6 million net decrease in fund balance.
2023-24 Budget
Other City Funds
Notable Changes
• Special Revenue Funds - Increase in fund balance of $47,102 primarily due to:
o Measure I 2010-2040 Local (Fund 246) - Increase appropriations of $1.0 million for testing, maintenance, materials, equipment, and labor for Street Striping, Traffic Controller, and Traffic Signal Maintenance items.
o Solid Waste Mitigation (Fund 282) - Increase appropriations of $301,674 for storm drain pipe repairs.
o ARPA - City (Fund 302) - Decrease appropriations of $2.0 million to correct project budget carry over amounts.
o State COPS AB 3229 (Fund 322) - Increase revenues of $315,700 based on the ELEAS FY23/24 state report.
o CFD’s (Funds 395 thru 512)
• Increase appropriations of $472,800 for park improvements, equipment, materials, and installation.
• Increase appropriations of $487,430 for landscape and pool maintenance services contract increases.
• Capital Project Funds - Decrease in fund balance of $25.0 million primarily due to:
o Capital Reinvestment (Fund 601)
• Increase appropriations of $15,802,052 for auto center sign refurbishment, Stage Red renovations, City Hall Renovation Phase II, Randall Ave Street improvements, Downtown West Parking Structure, and Co-op Workspace improvements.
• Net fund balance increase of $2.8 million.
o Capital Improvement (Fund 602)
• Increase appropriations of $8.8 million for Revolving Loan Fund (RLF) Business initiative and Downtown revitalization property purchases.
• Net fund balance increase of $1.2 million.
o Storm Drain (Fund 622)
• Increase appropriations of $1.8 million for storm drain improvements at the Courtplace Apartments.
o Circulation Mitigation (Fund 630)
• Increase appropriations of $648,000 for Courtplace Apartments construction contract.
• Increase appropriations of $490,000 for balance owed to SBCTA for I-10 Citrus Interchange.
• Increase appropriations of $642,000 for Foothill Blvd between Hemlock Ave and Almeria Ave Right of Way Purchase.
o General Government (Fund 632) - Increase appropriations of $11.0 million for Downtown West Parking Structure project.
o Parks Development (Fund 635)
• Increase appropriations of $200,000 for the Veteran’s Park Dog Park and Action Park Admin Costs in design.
o Police Capital Facilities (Fund 636) - Decrease appropriations of $221,928 for Captain Office Remodel project close out.
o CFD #100 Victoria (Fund 673) - Increase revenues of $5.1 million for bond proceeds received.
• Enterprise Funds - Decrease in fund balance of $1.4 million primarily due to:
o Sewer Capital Projects (Fund 702) - Increase in appropriations of $294,000 for sewer improvements at Courtplace Apartments.
o Sewer Replacement (Fund 703) - Increase in appropriations of $460,936 to fund Pump Station Improvement Project.
o Stage Red (Fund 720) - Increase in appropriations of $500,000 to establish the enterprise fund for Stage Red.
• Internal Service Funds (Fleet) - Decrease in fund balance of $299,873 primarily due to vehicle purchases.
ORGANIZATIONAL CHANGES
Organizational changes were requested by departments in the total amount of $2.1 million ($1.6 million General Fund and $490,440 Other Funds).
However, due to the amount of General Fund recurring operational budget increases requested for the 2024-25 Supplemental Budget, it is recommended that only the organizational changes funded by other funds and part-time positions in the General Fund of $67,500, be approved at this time and that the balance of the midyear organizational change requests be deferred until both 2023-24 midyear and 2024-25 supplemental requests can be completely analyzed. Proposed changes are summarized below.
FISCAL IMPACT:
The fiscal impact associated with this item is summarized below and details are provided in Midyear Budget Status Report.
The General Fund projected ending fund balance reflects a net decrease of $12.6 million to a total of $51.5 million because of prior year operations and the net impact of the recommended budget adjustments.
MOTION:
Approve staff recommendation.