AGENDA REPORT
Meeting Date: March 18, 2025
Item Number:
To: Honorable Mayor & City Council
From: Jeff S. Muir, Director of Finance
Tatiana Szerwinski, Assistant Director of Finance
Brandy Gros, Budget Manager
Subject: MIDYEAR UPDATE ON FISCAL YEAR 2024-25 GENERAL FUND
AND ENTERPRISE FUND FINANCIAL RESULTS, GENERAL FUND
FORECAST, AND UPDATES ON COST REDUCTION AND REVENUE
ENHANCEMENT OPPORTUNITIES
Attachments: 1. None
RECOMMENDATION
It is recommended that City Council provide direction as needed regarding this financial report.
INTRODUCTION
This report presents a midyear update on the City’s financial performance for fiscal year 2024-25. It includes a comparative analysis of General Fund results for the same period in fiscal year 2023-24, a forecast for the remainder of the fiscal year and a ten-year outlook through fiscal year 2033-34. Additionally, it evaluates Enterprise Fund performance against the revised budget for 2024-25. The report also outlines updates on cost reduction and revenue enhancement opportunities.
G-2
Meeting Date: March 18, 2025
DISCUSSION
Fiscal Year 2024-25 Midyear Update
On November 19, 2024, Finance presented the unaudited financial results for the General Fund and Enterprise Funds for fiscal year 2023-24, as well as the first quarter General Fund results for fiscal year 2024-25. This report analyzes the interim General Fund performance through the second quarter of fiscal year 2024-25, comparing results to the same six-month period of the previous fiscal year, while assessing Enterprise Fund performance against the revised budget for 2024-25.
General Fund
General Fund revenue for the first two quarters was $137.9 million, $15.6 million (12.7%) higher than the prior year’s results primarily due to one-time major projects revenue and permitting and licensing revenue increases, while expenditures were $159.7 million, $9.6 million (5.6%) lower than prior year results predominantly due to decreases in transfers out for capital projects and a property purchase in the prior year. Year-to-date results depict the expected annual trend of revenues exceeding expenditures at this point due to revenue timing, discussed and detailed further below.
Meeting Date: March 18, 2025
Property Tax 44,134 $ 42,631 $ 1,503 $ 3.5%
Sales Tax 22,595 20,959 1,635 7.8%
Transient Occupancy Tax 24,869 25,901 (1,032) -4.0%
Business Tax 2,547 2,538 9 0.4%
"Big Four" Tax Subtotal 94,144 92,029 2,115 2.3%
Other Taxes 773 457 316 69.2%
Intergovernmental Revenue 727 134 593 444.1%
Licenses and Permits 11,695 8,145 3,551 43.6%
One-Time Major Development Projects Revenue 6,553 2,298 4,255 185.2% Fines and Penalties 3,003 3,472 (469) -13.5%
Use of Money and Property 4,434 2,546 1,887 74.1%
Service Fees and Charges 7,637 7,186 450 6.3%
Miscellaneous Revenue 5,536 6,066 (530) -8.7%
Transfers In 3,408 3 3,405 113485.3%
Total Revenue [2] 137,909 122,335 15,573 12.7%
EXPENDITURES
Salaries and Benefits 68,606 66,606 2,001 3.0%
Materials and Supplies 1,243 1,049 194 18.5%
Contractual Services 13,222 11,712 1,509 12.9%
Marketing and Promotion 6,009 5,229 780 14.9%
BHUSD Joint Powers Agreement 7,050 6,850 200 2.9%
Private Security 2,918 3,200 (282) -8.8%
Supportive Housing / Unhoused Assistance 1,732 2,231 (499) -22.4% Internal Service Charges 40,160 36,553 3,607 9.9%
Other Charges 2,792 2,740 52 1.9%
Transfer to Pension Trust 5,000 5,000 0 0.0%
Transfer for Real Property Acquisition 0 8,419 (8,419) -100.0% Transfers Out 10,946 19,646 (8,699) -44.3%
Total Expenditures 159,677 169,235 (9,558) -5.6%
Net Year-to-Date Variance (21,768) $ (46,899) $ 25,131 $ -53.6% Public Benefit Contributions 12,500 10,000 2,500 25.0%
Total Year-to-Date Results (9,268) $ (36,899) $ 27,631 $ -74.9% [2] Total Revenue excludes one-time public benefit contributions, accounted for below the line. [1] Results differ from figures presented in the March 18, 2024 financial update report because journal entries continue to be recorded to prior periods after the Staff Report is prepared.
NOTE: Immaterial differences may exist when adding rounded figures above. The Section 115 Pension Trust is included in the General Fund for purposes of financial reporting in the Annual Comprehensive Financial Report. The results above exclude the Section 115 Pension Trust, as well as certain accounting/accrual entries in order to assist with comparison.
General Fund
($ Thousands)
REVENUE
FY 2024-25
July - Dec
Actuals
FY 2023-24
July - Dec
Actuals[1]
Variance
from Prior
Year
%
Variance
Meeting Date: March 18, 2025
High-level midyear revenue variances between fiscal year 2024-25 and fiscal year 2023- 24 are as follows:
“Big Four” tax revenues are up $2.1 million (2.3%) in aggregate compared to the same period in the previous fiscal year. Property Tax inflows for the current year have exceeded the prior year’s six-month results by $1.5 million (3.5%), aligning with an increase in the City’s taxable assessed valuation. Sales Tax receipts have also seen a $1.6 million (7.8%) increase compared to the previous year, largely due to the recovery of delayed payments owed from earlier quarters. Transient Occupancy Tax (TOT) slightly trailed the prior year’s results by $1.0 million (4.0%) and Business Tax receipts were flat. It is important to note that Business Tax results through December are not a reliable predictor of year-end outcomes, as the vast majority of these taxes are collected when due in January. Business Taxes for the year are forecasted to be $59.2 million, or 5.4% below the adopted budget of $62.6 million.
Swings in Other Taxes are predominantly driven by the impact of housing market conditions on the realization of property transfer tax, which saw a $0.3 million (69.2%) gain over the prior year six-month period.
The $0.6 million increase in Intergovernmental Revenue reflects the collection of $0.4 million in one-time revenue from FEMA cost recovery and $0.2 million in onetime strike team reimbursements. Licenses and Permits revenue has outperformed the prior year-to-date activity by $3.6 million (43.6%). While they do not rise to the level categorized as “major projects,” there are many development projects underway within the City that have substantial valuation amounts which are currently contributing to the rise in revenue. By nature, this revenue source can vary significantly. One-Time Major Development Projects Revenue generated $6.6 million in the first half of the current fiscal year, predominantly from building plan check revenue for the One Beverly Hills (One BH) development project. While this is a $4.3 million increase over the prior year, year-end revenues are anticipated to fall considerably short of initial current year projections due to extension of project timelines (i.e. a timing difference).
Fines and Penalties declined by $0.5 million (13.5%) primarily due to the increased utilization of parking enforcement staff to mandatory Metro-related traffic control duties.
There was significant growth ($1.9 million or 74.1%) in Use of Money and Property largely due to the continued realization of higher earnings in the City’s investment portfolio and increasing revenue from a growing portfolio of lease agreements with wireless service providers and antenna encroachment fees. The $0.5 million (6.3%) increase in Service Fees and Charges is driven by the increasing demand for afterschool programming provided at the Beverly Hills Unified School District elementary schools.
The $0.5 million (8.7%) decline in Miscellaneous Revenue is attributable to lower reimbursements of Metro-related expenditures in the first six months of the fiscal year as compared to the prior year.
A $3.0 million Transfer In was recognized in the first half of fiscal year 2024-25 in accordance with the recommendation approved by Council on November 19, 2024 to reimburse the General Fund for prior year operational subsidies provided to the Parking Enterprise Fund in fiscal year 2023-24.
Meeting Date: March 18, 2025
High-level midyear operating expenditure variances between fiscal year 2024-25 and fiscal year 2023-24 are as follows:
Midyear Salaries and Benefits increased by $2.0 million (3.0%) compared to last year, largely related to contractual cost of living adjustments as stipulated in the memoranda of understanding with employee bargaining units. Spending on Materials and Supplies increased by $0.2 million (18.5%) primarily related to investments in resources for the library.
The $1.5 million (12.9%) rise in Contractual Services predominantly relates to increased spending on engineering and compliance monitoring services for the Metro project due to expanded workload in addition to rate increases. Inflationary pressures on the cost of services as well as youth programming to accommodate the increasing demand for afterschool care also contributed to a rise in contractual service costs. However, both the Metro project and youth programming costs are revenue offset, to varying degrees.
The most significant increase in Marketing and Promotion costs stem from the engagement of services for the installation of the Rodeo Drive bollards in the current fiscal year.
Supportive Housing / Unhoused Assistance costs dropped in the current fiscal year, as prior year costs included $0.6 million in one-time start-up costs for the scattered site housing program with Step Up on Second. This savings was slightly offset by the additional current year cost of outreach and engagement services for the City’s Changing Lives and Sharing Places (CLASP) program as compared to the first half of the prior fiscal year.
Internal Service Charges continue to rise ($3.6 million or 9.9%) with the overall increase in cost of providing internal services, rising insurance premiums, and the increasing cost of liability claims and legal services. In fiscal year 2023-24, $8.4 million was transferred to the Capital Assets Fund to fund a real property purchase; no such acquisitions have occurred to-date in fiscal year 2024-25.
Budgeted Transfers Out have declined significantly, resulting in an $8.7 million (44.3%) reduction when compared to the first two quarters of the prior fiscal year largely due to two factors. First, there has been a substantial reduction in transfers for capital spending as compared to last year, bringing these transfers more in line with historical averages. Second, the elimination of the Parking Enterprise Fund operating subsidy is a material change from the prior year.
Overall, variances between the first half of the current fiscal year compared to the prior year are explainable and generally within expectations. The fact that expenditures significantly outpace revenues through the second quarter is a typical pattern each fiscal year because Property Tax is primarily received from December through June and Business Tax is primarily received in January. The gap between expenditures and revenues over this period is significantly less than the prior year, as detailed above.
Meeting Date: March 18, 2025
Enterprise Funds
The City's Enterprise Funds represent self-supporting business-type activities, operating much like private sector entities. These funds, which include utilities as well as parking operations, are designed to be financially independent, with revenues generated from user fees intended to cover their operational costs and capital investments.
At the midpoint of the fiscal year, all Enterprise Funds are performing within expectations, with total revenue either nearly meeting or exceeding the 50% target level for all funds.
Operating expenses (excluding CIP) across all Enterprise Funds are tracking within the 50% prorated budget. It is important to note that Salaries and Benefits should be evaluated against an adjusted target of 46.2% based on the number of pay periods in the first six months of the year, and all are currently within the prorated budgeted expectation.
Some spending categories may show variability due to their sporadic nature, which is normal and expected. Regarding capital projects, the revised budget includes substantial carryover funds from previous fiscal years to build up resources for future major investments. This strategic practice ensures that adequate reserves are in place to fund significant capital investment projects, providing financial flexibility for multi-year infrastructure initiatives. While this approach results in an apparent large deficit in the bottom line budget, it is a normal and prudent financial management strategy. The deficit primarily reflects previously allocated funds for ongoing and future capital projects, rather than operational overspending. This method allows for smoother execution of large-scale improvements and better long-term financial planning. As a result, capital improvement program (CIP) spending may significantly exceed or fall short of the budget in any given year, which is a typical occurrence given the long-term nature of these projects. Overall, these interim results are within expectations and align with financial projections.
The charts below provide the financial results for the first six months of fiscal year 2024- 25 relative to the revised budget for the year, along with additional explanations for any unique circumstances or notable variances in specific areas.
Meeting Date: March 18, 2025
Water Funds
The Water Funds include the Water Enterprise Fund, the Water Capacity Fee Fund, and the Water Supply Fee Fund. Overall, the Water Funds realized 54.9% ($24.7 million) of budgeted revenue for the first half of the year, driven by healthy results from Water Service Charges. The negative balance in Other Revenue results primarily from an accounting entry to return to the State $141,000 in excess grant revenue received in fiscal year 2023- 24 from the California Water and Wastewater Arrearage Payment Program.
Operating expenses amounted to $15.5 million in the first half of the year, or 45.7% of the revised budget. Water purchases exceeded the 50% target at 58.3% ($6.5 million) of budget, which is a typical pattern due to higher consumption in the summer months. After consideration of $5.9 million in capital project costs, the net result for the first six months of fiscal year 2024-25 reflects a $3.3 million surplus in current year-to-date resources which accumulate in fund balance as an investment in substantial planned and ongoing capital spending.
Water Service Charges 38,104 21,167 55.6%
Lease Revenue 2,943 1,472 50.0%
Use of Money and Property 2,300 1,526 66.3%
Other Revenue 479 (41) -8.6%
Transfers In 1,158 579 50.0%
Total Revenue 44,983 24,703 54.9%
EXPENSES
Salaries and Benefits 7,632 3,411 44.7%
Water Purchases 11,191 6,525 58.3%
Materials and Supplies 2,170 590 27.2%
Contractual Services 1,566 645 41.2%
Internal Service Fund Charges 6,647 3,323 50.0%
Other Charges 4,676 979 20.9%
Total Operating Expenses 33,882 15,473 45.7%
Capital Projects1
70,813 5,889 8.3%
Total Year-to-Date Results (59,712) 3,340
NOTE: Immaterial differences may exist when adding rounded figures above. [1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for longterm financial planning.
REVENUE
FY 2024-25
July - Dec
Actuals
% Realized
/ Expended
Water Funds
($ Thousands)
FY 2024-25
Revised
Budget
Meeting Date: March 18, 2025
Parking Funds
The Parking Funds include the Parking Enterprise Fund and the Parking Authority Fund.
Revenue projections were 53.4% realized at the six-month mark, yielding $19.8 million in total revenue. Only Lease Revenue fell slightly short of the prorated target due to assumptions made regarding the timing of occupancy of vacant commercial units.
Operating expenses are within the prorated budget for the year at 37.9% expended ($11.7 million), yielding a $3.5 million surplus thus far, after consideration of $1.6 million in capital costs and a one-time $3.0 million transfer to the General Fund for reimbursement of operating subsidies received in the prior fiscal year. The Parking Funds also require significant investment in capital spending and current year resources will be applied towards those costs as capital projects progress.
Parking Revenue 14,623 8,391 57.4%
Lease Revenue 18,659 9,047 48.5%
Use of Money and Property 1,742 1,300 74.6%
Other Revenue 1,972 1,024 51.9%
Total Revenue 36,996 19,761 53.4%
EXPENSES
Salaries and Benefits 6,156 1,844 30.0%
Materials and Supplies 324 11 3.3%
Contractual Services 5,683 2,096 36.9%
Internal Service Fund Charges 8,788 4,394 50.0%
Other Charges 9,942 3,354 33.7%
Total Operating Expenses 30,893 11,698 37.9%
Capital Projects1
34,208 1,587 4.6%
Transfers Out 3,000 3,000 100.0%
Total Year-to-Date Results (31,105) 3,476
NOTE: Immaterial differences may exist when adding rounded figures above. [1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for longterm financial planning.
Parking Funds
($ Thousands)
REVENUE
FY 2024-25
July - Dec
Actuals
% Realized
/ Expended
FY 2024-25
Revised
Budget
Meeting Date: March 18, 2025
Solid Waste Fund
The Solid Waste Fund netted a $1.1 million surplus to-date with total revenue of $12.0 million, or 51.8% of the projected amount for the year. Total operating expenses of $10.8 million were within budget at 41.9% expended. Contractual service costs for commercial solid waste collection and residential solid waste processing services have risen sharply in recent years and a cost of service study for solid waste rates is underway to ensure rates support cost recovery for the anticipated future needs of the Solid Waste Enterprise to comply with several refuse and recycling laws.
Solid Waste Service Charges 22,810 11,802 51.7%
Use of Money and Property 306 171 55.8%
Other Revenue 2 0 0.0%
Total Revenue 23,118 11,972 51.8%
EXPENSES
Salaries and Benefits 4,120 1,564 38.0%
Materials and Supplies 265 8 2.8%
Contractual Services 14,680 5,879 40.0%
Internal Service Fund Charges 6,428 3,214 50.0%
Other Charges 248 118 47.6%
Transfers Out 60 30 50.0%
Total Operating Expenses 25,801 10,813 41.9%
Capital Projects1
3,396 41 1.2%
Total Year-to-Date Results (6,080) 1,119
NOTE: Immaterial differences may exist when adding rounded figures above. [1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for longterm financial planning.
Solid Waste Fund
($ Thousands)
REVENUE
FY 2024-25
Revised
Budget
FY 2024-25
July - Dec
Actuals
% Realized
/ Expended
Meeting Date: March 18, 2025
Wastewater Funds
The Wastewater Funds include the Wastewater Enterprise Fund and the Wastewater Capacity Fee Fund. In March 2024, the City adopted new wastewater rates, implementing adjustments to better align the rates for each customer class with the actual costs attributable to providing their respective services. To mitigate sudden financial impacts on households, wastewater rates for residential customers are being phased in gradually.
This rate restructuring presented unique challenges in projecting revenue for fiscal year 2024-25. Despite these complexities, Wastewater Service Charges have approached expectations, reaching 46.0% of the annual target at the fiscal year’s midpoint, totaling $5.8 million. This performance demonstrates that the new rate structure is tracking close to expectations, even amidst the transition.
Through two quarters, operating expenses totaled $3.8 million (41.8% of budget) and year-to-date results reflect a $3.2 million surplus, with significant funding available for planned capital projects.
Wastewater Service Charges 12,583 5,793 46.0%
Use of Money and Property 1,940 1,304 67.2%
Other Revenue 5 3 57.8%
Total Revenue 14,528 7,100 48.9%
EXPENSES
Salaries and Benefits 1,907 802 42.0%
Materials and Supplies 107 18 17.0%
Contractual Services 4,530 1,716 37.9%
Internal Service Fund Charges 2,320 1,160 50.0%
Other Charges 154 72 46.6%
Total Operating Expenses 9,017 3,768 41.8%
Capital Projects1
30,088 124 0.4%
Total Year-to-Date Results (24,578) 3,209
NOTE: Immaterial differences may exist when adding rounded figures above. [1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for longterm financial planning.
Wastewater Funds
($ Thousands)
FY 2024-25
Revised
Budget
% Realized
/ Expended REVENUE
FY 2024-25
July - Dec
Actuals
Meeting Date: March 18, 2025
Stormwater Funds
The Stormwater Funds include the Stormwater Enterprise Fund, the Stormwater Measure W – Regional Program Fund, and the Stormwater Department of Water Resources Prop 1 Fund. Unlike other enterprise funds, the Stormwater Funds cannot achieve full cost recovery through user fees due to regulatory constraints, necessitating significant ongoing support from the General Fund to maintain stormwater management services. With Stormwater Service Charges generating only $0.8 million in revenue through the halfway mark of the year, this operation is highly dependent on perpetual infusions from the General Fund as its main funding source, reflected in $2.5 million of Transfers In to-date.
Stormwater expenses totaled $2.3 million, within 44.7% of budget, as funds are accumulated for planned capital projects.
Stormwater Service Charges 1,740 833 47.9%
Use of Money and Property 206 142 68.8%
Other Revenue 10 11 109.1%
Transfers In 5,060 2,530 50.0%
Total Revenue 7,016 3,516 50.1%
EXPENSES
Salaries and Benefits 2,022 867 42.9%
Materials and Supplies 15 3 23.0%
Contractual Services 386 73 18.9%
Internal Service Fund Charges 2,579 1,289 50.0%
Other Charges 82 40 49.0%
Total Operating Expenses 5,083 2,273 44.7%
Capital Projects1
6,517 87 1.3%
Total Year-to-Date Results (4,584) 1,155
NOTE: Immaterial differences may exist when adding rounded figures above. [1] The revised budget for capital projects incorporates substantial carryover funds from prior fiscal years, creating the appearance of a large deficit. This, however, is not indicative of operational overspending but rather reflects a strategic budgeting approach to ensure resources are available for significant capital investments while spreading the accumulation of funds over time for longterm financial planning.
Stormwater Funds
($ Thousands)
% Realized
/ Expended
FY 2024-25
Revised
REVENUE Budget
FY 2024-25
July - Dec
Actuals
Meeting Date: March 18, 2025
Fiscal Year 2024-25 General Fund Forecast
The table below summarizes the fiscal year 2024-25 General Fund adopted budget, revised budget, forecasted actuals, and percentage of revised budget.
REVENUE
Property Tax 103,496 $ 103,496 $ 104,776 $ 1,280 $ 1.2% Sales Tax 44,768 44,768 46,747 1,979 4.4%
Transient Occupancy Tax (TOT) 51,233 51,233 50,000 (1,233) -2.4% Business Tax 62,600 62,600 61,000 (1,600) -2.6%
"Big Four" Tax Subtotal 262,097 262,097 262,523 426 0.2% Other Taxes 933 933 1,385 452 48.4%
Intergovernmental Revenue 458 458 895 438 95.7%
Licenses and Permits 13,997 13,997 21,083 7,087 50.6%
One-Time Major Development Projects Revenue 16,050 16,050 7,585 (8,465) -52.7% Fines and Penalties 6,146 6,146 5,796 (350) -5.7%
Use of Money and Property 10,048 10,048 9,612 (436) -4.3% Service Fees and Charges 11,726 11,726 14,668 2,942 25.1% Miscellaneous Revenue 11,341 11,792 11,136 (656) -5.6%
Transfers In 6 3,006 3,006 0 0.0%
Total Revenue[1] 332,801 336,252 337,690 1,438 0.4%
EXPENDITURES
Salaries and Benefits 151,959 152,148 148,562 (3,587) -2.4% Materials and Supplies 2,603 2,691 2,619 (72) -2.7%
Contractual Services 30,454 36,704 34,355 (2,349) -6.4% Marketing and Promotion 8,130 10,760 10,766 6 0.1%
BHUSD Joint Powers Agreement 14,200 14,200 14,100 (100) -0.7% Private Security 6,110 6,170 6,170 0 0.0%
Supportive Housing / Unhoused Assistance 1,999 1,925 1,881 (44) -2.3% Internal Service Fund Charges 80,319 80,319 80,320 0 0.0% Other Charges 7,132 7,317 6,665 (652) -8.9%
Transfer to Pension Trust 10,000 10,000 10,000 0 0.0%
Transfers Out 21,892 21,892 21,892 0 0.0%
Total Expenditures 334,800 344,127 337,331 (6,797) -2.0% Net Surplus/(Deficit) before Public Benefit
Contributions $ (7,875) (1,999) $ 360 $ 8,235 $ -104.6% Public Benefit Contributions 12,500 12,500 12,500 0 0.0% Total Surplus/(Deficit) 10,501 $ 4,625 $ 12,860 $ 8,235 $ 178.1% [1] Total Revenue excludes one-time public benefit contributions, accounted for below the line. [2] The difference between the revised and adopted expenditure budget is $8.1 million in carryovers from prior year and $1.2 million in midyear appropriations.
NOTE: Immaterial differences may exist when adding rounded figures above. The Section 115 Pension Trust is included in the General Fund for purposes of financial reporting in the Annual Comprehensive Financial Report. The results above exclude the Section 115 Pension Trust, as well as certain accounting/accrual entries in order to assist with comparison.
General Fund
($ Thousands)
FY 2024-25
Adopted
Budget
FY 2024-25
Revised
Budget[2]
FY 2024-25
12-Month
Forecast
Variance
Revised
Budget vs.
Forecast
%
Variance
Meeting Date: March 18, 2025
Forecast for the Remainder of Fiscal Year 2024-25
Before considering public benefit contributions, total revenue of $337.7 million is projected to surpass the budget by $1.4 million (or 0.4%). High-level revenue comparisons of the revised budget to forecasted actuals are as follows:
Total “Big Four” tax revenues are forecasted to slightly exceed the budgeted amount by $0.4 million (0.2%), with some variation amongst the four. Property Tax is forecasted to exceed initial expectations by $1.3 million (1.2%) primarily due to higher projections for both assessed valuation and the actuarially determined annual amount of the property tax override to pay for eligible public safety pension costs compared to projections formulated at the time the budget was originally developed. The projected rise in Property Tax revenue is partially offset by expected deferrals, stemming from the Governor's Executive Order to suspend penalties, costs and interest on late property tax payments until April 10, 2026 for properties impacted by the Eaton and Palisades fires, which impacts both the County pool and the City's ultimate allocation from it. Sales Tax also reflects a forecasted increase of $2.0 million (4.4%) largely due to the recovery of delayed payments owed from the prior year. Projections for both Transient Occupancy Tax (TOT) and Business Tax have been adjusted downwards by $1.2 million (2.4%) and $1.6 million (2.6%), respectively, based on current year results to-date and historical trends.
Initial budget projections for Other Taxes were conservatively estimated due to their inherently volatile nature. However, based on year-to-date actuals, we now anticipate property transfer tax revenue, a component of Other Taxes, to significantly exceed the revised budget projections, resulting in the $0.5 million (48.4%) forecasted increase.
Intergovernmental Revenue reflects the receipt of $0.4 million in COVID-related FEMA cost recoveries, which was not assumed in the budgeted amount. In developing budget projections for Licenses and Permits, a conservative approach was taken due to expected resource allocation to major projects.
However, as the fiscal year has progressed, development patterns have shifted.
Timelines for some major projects are now expected to extend into the next fiscal year, while significant revenue has been generated from projects not classified as “major.” Consequently, year-to-date revenue for Licenses and Permits has exceeded initial estimates, while realization of One-Time Major Development Projects Revenue1 will be deferred. Overall, the forecasted revenue from Licenses and Permits is within 8.0% of the total budgeted revenue (including major projects), indicating that development activity remains strong and aligns with broader fiscal expectations.
Service Fees and Charges have yielded strong results this fiscal year, lead primarily by record levels in recreation program fees, particularly afterschool care, and followed by tennis court fees (i.e. pickleball) and other youth programming.
Some of this increased revenue is offset by the need for additional contractual services to deliver programming. As a result, forecasted Services Fees and Charges revenue exceeds budgeted projections by $2.9 million (25.1%). 1One-Time Major Development Projects Revenue is derived by disaggregating it from various revenue categories including Licenses and Permits, Service Fees and Charges, and Miscellaneous Revenue. For the fiscal year 2024-25 forecast, the $7.6 million in forecasted revenue is composed of $6.6 million in permit revenue (from Licenses and Permits) and $1.0 million in Environmental Mitigation and Sustainability (EMS) fees (from Miscellaneous Revenue), while all of the $16.1 million budgeted was projected to come from Licenses and Permits revenue.
Meeting Date: March 18, 2025
Total expenditures for fiscal year 2024-25 are forecasted to be $337.3 million, which is
2.0% lower than the revised budget and results in an anticipated expenditure savings of $6.8 million overall. Forecasted expenditures presented include budgeted goods and services expected to be expended within the current fiscal year. However, it is important to note that an estimated $7.1 million of these funds may need to be carried over to the subsequent fiscal year when the actual spending is anticipated to occur. This annual carryover process ensures that resources are available when needed, even if project timelines or procurement processes extend beyond the current fiscal year.
Expenditures are not anticipated to vary greatly from the revised budget. High-level expenditure comparisons of the revised budget to forecasted actuals are as follows:
Salaries and Benefits are forecasted to be $3.6 million (2.4%) lower than budgeted primarily due to salary savings from vacancies in authorized positions. This is particularly evident in the newly added Police Officer positions for Metro station detail as the hiring process for sworn positions is lengthy. While overtime costs are expected to substantially exceed the budgeted amount, the overall savings from vacancies is anticipated to more than offset these additional expenses. This approach of allowing vacancy savings to counterbalance higher-than-budgeted overtime costs is a strategic method employed to manage personnel costs effectively while maintaining operational flexibility.
When accounting for anticipated spending of carryover funds, it is forecasted that Contractual Service costs for the year will be within 6.4% of the revised budget at $34.4 million, resulting in estimated savings of $2.3 million. These overall savings are the cumulative result of small, estimated savings identified across a variety of programs and departments throughout the City.
The originally adopted fiscal year 2024-25 budget projected an overall deficit of $2.0 million, which was to be balanced by partially utilizing the public benefit contribution.
However, the financial outlook has improved slightly based on revenues projected just above budget and modest expenditure savings as discussed. This has reduced the originally projected General Fund deficit to a small surplus of $0.4 million for fiscal year 2024-25. Thus, public benefit contributions will likely be earmarked for future one-time purposes as intended.
Meeting Date: March 18, 2025
General Fund Reserves
Based on audited results, the City had total General Fund reserves of $234.7 million as of June 30, 2024, as detailed in the table above.
The economic/contingency reserve required by the City’s financial policies is comprised of at least 40% of General Fund operating expenditures and shall not decrease unless approved by the Council. Based on the current fiscal year 2024-25 forecast and increased operating expenditure budget, it is estimated that the economic/contingency reserve will need to be increased by $5.8 million to $115.7 million for fiscal year 2024-25 to meet policy requirements. Council has also previously established a $13.0 million budget stabilization reserve available for one-time uses as directed by City Council. $7.9 million was set aside at the end of fiscal year 2023-24 to cover then-existing encumbrances and carryovers into the current year, which have been forecasted to be expended in the current fiscal year.
The amount to cover estimated encumbrances and carryovers from the current fiscal year to fiscal year 2025-26 is $7.1 million.
Additional elements of total reserves include funds committed by Council for specified purposes or other restricted funds, including public benefit contributions set aside to fund future Council prioritized initiatives for the Beverly Hills community. If final year-end financial results are in line with projections, staff will recommend earmarking the current year's $12.5 million public benefit contribution to Committed fund balance for Council consideration.
Unassigned fund balance (the amount above current restrictions and Council earmarks, contingency, and stabilization reserves) is forecasted to decrease by $4.6 million to $32.0 million, primarily as a result of needing to increase the economic/contingency reserve.
Unassigned reserves can be available for one-time uses at the direction of the City Council. The City’s General Fund reserves continue to exceed the baseline amount required by its adopted financial policies.
General Fund Reserves (Fund Balance)
($ Millions)
FY 2023-24
Audited
Actuals
FY 2024-25
Unaudited
Forecasted
Actuals
Change from
Prior Year
Economic/Contingency Reserve (minimum 40%)
Contingency Reserve (minimum 25%) 68.7 $ 72.3 $ 3.6 $
Economic Reserve (minimum 15%) 41.2 43.4 2.2 Total Economic/Contingency Reserve 109.9 115.7 5.8 Budget Stabilization Reserve 13.0 13.0 - Committed Fund Balance (Council earmarks) Street Tree Removal & Replacement 1.1 1.1 -
One-time Public Benefit Contributions 6.5 19.0 12.5
One-time Capital Improvement Plan Contributions 26.1 26.1 - Committed Fund Balance Total 46.2 33.7 12.5 Nonspendable (long-term receivables/advances to other funds) 3.3 3.3 - Restricted (Pension trust) 25.5 25.5 - Restricted (Metro Projects) 4.8 4.8 - Encumbrances/Carryovers 7.1 7.9 (0.8) Unassigned 36.6 32.0 (4.6) Total Fund Balance 234.7 $ 247.6 $ 12.9 $
NOTE: Immaterial differences may exist due to rounding.
Meeting Date: March 18, 2025
Public Benefit Contribution Tracking
To provide a running history of public benefit contributions received and anticipated, a summary is provided below. This overview will help transparently illustrate how these funds have been utilized and what future resources are forthcoming to support key community priorities and enhance the City's financial resilience.
Ten-Year General Fund Forecast through Fiscal Year 2033-34 In line with our commitment to long-term financial planning and transparency, staff has prepared an updated ten-year General Fund forecast. This analysis provides a strategic outlook on the City's fiscal health, projecting revenues and expenditures through fiscal year 2033-34. It identifies potential financial challenges and opportunities, facilitating proactive decision-making and policy development.
The forecast incorporates current economic trends and future commitments while recognizing uncertainties in long-term projections. It aims to guide discussions on sustainable fiscal policies, resource allocation, and maintaining essential community services. Given projected future deficits, evaluating the sustainability of the City’s obligations relative to anticipated revenue is crucial for strategic decisions on new initiatives.
The ten-year forecast uses inflationary assumptions for revenue and expenditure growth based on historical data, economic indicators, and expert projections. While these percentages provide a baseline, actual year-to-year changes may differ due to adjustments for known anomalies or unique factors affecting specific line items. The chart below illustrates the inflationary assumptions applied to various revenue and expenditure categories in the forecast.
FY 2020-21 - $ 1,000,000 $ - $ 1,000,000 $
FY 2021-22 5,000,000 - 5,000,000 - FY 2022-23 - 1,500,000 1,500,000 - FY 2023-24 10,000,000 - - 10,000,000 FY 2024-251 2,500,000 10,000,000 - 12,500,000 FY 2025-26 10,000,000 - - - FY 2026-27 15,000,000 - - - FY 2027-28 15,000,000 - - - FY 2028-29 15,000,000 - - - FY 2029-30 20,000,000 - - - Total 100,000,000 $ 5,000,000 $ 19,000,000 $ 11,000,000 $
PUBLIC BENEFIT CONTRIBUTIONS
Rosewood
Residences
Committed
Fund Balance Fiscal Year One BH Utilized for Expenditures [1] Estimated recommended earmark for Council consideration, pending final year-end results.
Meeting Date: March 18, 2025
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 through
Forecast Forecast Forecast FY 2033-34 Forecast
Revenue
Property Tax (Assessed Value) 5.8% 3.2% 3.6% 3.6%
Sales Tax1
3.0% 3.0% 3.0% 2.5%
Transient Occupancy Tax (TOT)2
3.0% 3.0% 3.0% 3.0%
Business Tax 2.5% 2.5% 2.5% 2.5%
Other Taxes 2.0% 2.0% 2.0% 2.0%
Intergovernmental Revenue 2.0% 2.0% 2.0% 2.0%
Licenses and Permits 2.0% 2.0% 2.0% 2.0%
Fines and Penalties 1.0% 1.0% 1.0% 1.0%
Use of Money and Property 0.0% 0.0% 0.0% 0.0%
Charges for Current Services 2.0% 2.0% 2.0% 2.0%
Miscellaneous Revenue 0.0% 0.0% 0.0% 0.0%
Transfers In 0.0% 0.0% 0.0% 0.0%
Expenditures
Salaries and Benefits 4.5% 3.8% 3.8% 3.0%
Materials and Supplies 2.0% 2.0% 2.0% 2.0%
Contractual Services 2.0% 2.0% 2.0% 2.0%
Internal Service Fund Charges 4.0% 4.0% 4.0% 4.0%
Other Charges 2.0% 2.0% 2.0% 2.0%
Transfer to Pension Trust 0.0% 0.0% 0.0% 0.0%
Transfers Out 0.0% 0.0% 0.0% 0.0%
Category
1While average Sales Tax growth is assumed for future years, the forecasted drop in FY 2025-26 reflects removal of recovery of delayed payments owed for previous quarters that boosted cash receipts in FY 2024-
25. 2While average growth is assumed for future years, the TOT forecast includes adjustments assumptions regarding the closure period for the Beverly Hilton Hotel refurbishment (calendar years 2026-2027) and new revenue from the One BH development in fiscal years 2028-29 and 2029-30.
Meeting Date: March 18, 2025
Some other considerations factored into the forecast include (but are not limited to):
Ramping up and down of Metro Purple Line Extension construction, which is reflected in Miscellaneous Revenue and Contractual Services for costs incurred and reimbursement from Metro thereof;
Miscellaneous Revenue from the One BH development agreement including public benefit contributions, environmental mitigation sustainability fees, and municipal surcharge revenue;
Impacts on TOT of hotel closure during One BH construction; Funding commitments for interfund transfers and capital improvement projects as reflected in the approved CIP five-year plan;
Impacts on Property Tax, TOT, and Licenses and Permit revenue for construction, completion, and opening of the One BH development project; and Assumed one-time increases in Contractual Services for plan review consulting services for the One BH development.
The ten-year forecast generally assumes the status quo with respect to current services provided, positions/full-time equivalents (FTEs) authorized (except for eight sworn Police Department positions added to staff the Metro Station 2 detail starting in fiscal year 2026- 27), and policy decisions to-date. It is important to note that any additional midyear appropriations, future budget enhancements, and/or results of labor negotiations above and beyond current assumptions would require an update to the projections shown below.
Meeting Date: March 18, 2024
FY 2024-25 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 Adopted Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Revenue
Property Tax 103,496 $ 104,776 $ 112,278 $ 113,849 $ 117,227 $ 120,728 $ 127,764 $ 135,081 $ 139,254 $ 143,577 $ 148,056 $ Sales Tax 44,768 46,747 45,853 47,283 48,701 49,919 51,167 52,446 53,757 55,101 56,479 Transient Occupancy Tax (TOT) 51,233 50,000 49,955 49,862 52,997 57,733 63,839 65,754 67,727 69,759 71,852 Business License Tax 62,600 61,000 62,525 64,088 65,690 67,332 69,015 70,740 72,509 74,322 76,180 Other Taxes 933 1,385 1,412 1,440 1,469 1,498 1,528 1,559 1,590 1,622 1,654 Intergovernmental Revenue 458 895 467 476 486 496 506 516 526 537 548 Licenses and Permits 13,997 21,083 18,750 19,125 19,508 19,898 20,296 20,702 21,116 21,538 21,969 One-Time Major Development Projects Net Revenue 16,050 7,585 13,004 2,305 0 9,691 9,691 9,691 9,691 9,691 9,691 Fines and Penalties 6,146 5,796 5,646 5,702 6,259 6,322 6,385 6,449 6,513 6,578 6,644 Use of Money and Property 10,048 9,612 10,296 10,296 10,296 10,296 10,296 10,296 10,296 10,296 10,296 Service Fees and Charges 11,726 14,668 12,044 12,285 12,531 12,782 13,038 13,299 13,565 13,836 14,113 Miscellaneous Revenue 11,341 11,136 7,200 4,100 3,150 3,363 4,617 5,871 5,871 5,871 5,871 Transfers In 6 3,006 6 6 6 6 6 6 6 6 6
Total Revenue 332,802 337,690 339,435 330,817 338,320 360,064 378,148 392,410 402,421 412,734 423,359 Expenditures
Salaries and Benefits 151,959 148,562 157,564 165,883 172,780 178,823 183,734 188,664 192,089 196,670 200,017 Materials and Supplies 2,603 2,619 2,655 2,708 2,762 2,817 2,873 2,930 2,989 3,049 3,110 Contractual Services 30,454 34,355 28,072 24,323 24,483 23,953 24,432 24,921 25,419 25,927 26,446 Marketing and Promotion 8,130 10,766 7,948 7,934 8,382 9,059 9,931 10,205 10,486 10,777 11,076 BHUSD Joint Powers Agreement 14,200 14,100 14,500 14,790 15,086 15,388 15,696 16,010 16,330 16,657 16,990 Private Security 6,110 6,170 6,110 6,232 6,357 6,484 6,614 6,746 6,881 7,019 7,159 Supportive Housing / Unhoused Assistance 1,999 1,881 1,497 1,530 1,563 1,597 1,633 1,668 1,705 1,743 1,778 Internal Service Fund Charges 80,319 80,320 83,532 86,873 90,348 93,962 97,720 101,629 105,694 109,922 114,319 Other Charges 7,132 6,665 6,265 6,324 6,450 6,579 6,711 6,845 6,982 7,122 7,264 Transfer to Pension Trust 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Transfers Out 21,892 21,892 21,396 21,392 20,396 17,895 19,187 19,689 20,188 21,188 21,189 Total Expenditures 334,798 337,331 339,539 347,989 358,607 366,557 378,530 389,307 398,764 410,073 419,348 Net Surplus / (Deficit) (1,996) 360 (103) (17,172) (20,287) (6,494) (383) 3,103 3,657 2,661 4,011 Public Benefit Contribution Utilization[1] 2,000 0 0 0 0 0 0 0 0 0 0 Total Surplus / (Deficit) 4 $ 360 $ (103) $ (17,172) $ (20,287) $ (6,494) $ (383) $ 3,103 $ 3,657 $ 2,661 $ 4,011 $ General Fund
($ Thousands)
Category
[1] Reflects only those public benefit contributions that are recommended to be applied against current expenditures and exlcudes public benefit contributions expected to be earmarked for future public benefit over fiscal years 2024-25 through 2029-30.
Meeting Date: March 18, 2024
In reviewing the net results before consideration of public benefit contributions, three consecutive years of significant General Fund deficits are forecasted (before incorporation of any potential future budget enhancements beyond Station 2 Metro Officers) starting with fiscal year 2026-272. As originally reported to Council in March 2024, we continue to anticipate substantial forecasted deficits in fiscal years 2026-27 and 2027-28 triggered by the cessation of significant one-time revenue from major development projects. With the estimated opening of the One BH development in fiscal year 2028-29, the financial outlook is expected to improve annually, yielding an estimated $6.5 million deficit in fiscal year 2028-29 and a $0.4 million deficit in fiscal year 2029-30, followed by surpluses thereafter.
The good news is that the aggregate projected deficits through fiscal year 2028-29 above are $23.7 million below the projected deficits in last year’s five-year forecast3. The bad news is that the City will still have work to do in how we address them.
To preserve the long-term financial health of the City, it is critical that current operations be supported by ongoing revenues, and that one-time revenue (like that of major development projects) be relied upon to fund one-time costs. Unassigned reserves alone will not be adequate to address the forecasted deficits of fiscal years 2026-27 through 2028-29. Utilization of certain existing earmarked or budget stabilization reserves could also be considered an option for offsetting some of the forecasted future deficits.
This long-term forecast further emphasizes the City’s current reliance on one-time major development projects to sustain its existing operations. The City must continue its development and implementation of strategies for revenue enhancement opportunities, cost containment measures, and operational efficiencies to mitigate dependence on utilization of overall General Fund reserves to meet the status quo demands of the next few years.
Update on Cost Reduction Plans and Revenue Enhancement Opportunities On March 18, 2024, the Blue Ribbon Committee provided their report and recommendations on long-term strategic planning, which largely encompassed revenue enhancement opportunities. Given the forecasted deficits presented at the same meeting, then Mayor Gold and the City Council directed that strategies to reduce spending be developed and brought through the Audit and Finance Committee (AFC). The AFC met on July 9, 2024 and provided initial feedback and ideas on structural/long-term changes and short-term/one-time changes. This summary of suggestions was brought forward to the full City Council on August 20, 2024 along with a draft timeline for consideration.
Direction was given to staff to proceed with working on a variety of the strategies presented.
In light of the projected General Fund deficits over the next five years, staff has begun reviewing and implementing strategies to address the financial situation. These initial steps are part of a broader, ongoing effort to ensure fiscal sustainability. Below is a brief update of the major items where significant progress has been made.
Citywide Priorities (Completed)
Through the work conducted by the Priority Setting Ad Hoc, a new hierarchical list of strategic priorities, goals, and work plans was established for the upcoming fiscal year 2025-26. Priorities were to be achievable, measurable, and action-oriented, and to be completed prior to the budget to better inform the budget process and plans for the upcoming fiscal year.
2Small deficits are also projected in FY 25026 and FY 2029-30, though these are near break-even levels. 3See the Five-Year Forecast included in the Fiscal Year 2024-25 Adopted Operating Budget.
Meeting Date: March 18, 2025
The strategic priority areas developed include:
1. Enhance Community Safety and Health
2. Practice Effective and Transparent Governance
3. Ensure Financial Stability and Economically Sustainable Growth
4. Augment Community Quality of Life
5. Maintain and Develop Infrastructure and Facilities
6. Accomplish City Housing Goals
7. Practice Environmental Stewardship
The updated process used the aforementioned priorities to then develop goals and work plans for achieving these goals, which allows for improved alignment with ensuring commission and department work plans correspond with these larger Citywide priorities.
The fiscal year 2025-26 strategic priorities, goals, and work plans were adopted by the City Council on December 10, 2024.
Community Assistance Grant Funding (CAGF) Program Updates (Completed) Through the Social Services Ad Hoc Committee, the CAGF program has undergone an extensive overhaul. Now managed by the Fire Department’s Human Services Division, the CAGF enables the City to secure partnerships with local social service agencies to support the quality of life of Beverly Hills residents. The City’s Safety Network creates a continuum of care for the most vulnerable members of the community including active and frail elderly residents, disabled individuals, residents of little to low means, and unhoused individuals.
Council Ad Hoc Committee members Vice Mayor Nazarian and Councilmember Mirisch made the recommendation for a CAGF hiatus for fiscal year 2025-26 to instead pursue service provider contracts for community and cultural services with the sixteen organizations, which was brought before the City Council and approved on December 10, 2024.
The new approach reduces the proposed amount of grant awards for CAGF and Critical Service Providers by $563,500 in fiscal year 2025-26 compared to the current year’s budget, and an additional twelve of the current CAGF partners were placed on a funding and contractual hiatus for fiscal year 2025-26, representing a potential savings of $395,000.
While total proposed appropriations for fiscal year 2025-26 remain unchanged, overall savings of $395,000 in budgeted CAGF funds on hiatus for fiscal year 2025-26 are anticipated.
Meeting Date: March 18, 2025
Unhoused Transport (Completed)
The City has been in the process of evaluating services for the unhoused. The City contracted with Nastec International, Inc. for unhoused assistance services, which included answering the Outreach Hotline overnight and on weekends, responding to those calls or dispatching the appropriate outreach team, and transporting unhoused individuals to a local motel. It was determined that existing security contracts could cover the afterhours homeless assistance phone line and transportation to housing when required at no additional cost; therefore, the Nastec agreement was ended November 1, 2024 and these services were assumed by the existing security contract with Covered 6, LLC. This resulted in a one-time savings of approximately $0.9 million.
Ambassadors Program (In progress)
The City has been evaluating security sweeps of business areas and parking structures which have been the responsibility of the Ambassadors Program. Based on additional review and through the work of the Community Security Ad Hoc Committee, the security sweeps of parking structures are being absorbed into the existing private security contracts. Additionally, the Ambassadors' service area is being reduced as part of the new agreement being solicited and prepared, which will go into effect at the beginning of the new fiscal year. While these efforts may help avoid certain additional costs, the upcoming Ambassadors services contract is expected to increase in costs due to the anticipated rise in labor rates for these services compared to current rates.
Reconfiguration of Commissions/Committees (In progress) On December 3, 2024, the City Council adopted Ordinance No. 24-O-2906 to sunset the Rent Stabilization Commission. The Commission was created in 2018 and charged with reviewing and making recommendations on specific issues related to the Rent Stabilization Ordinance. The Commission completed its review of the issues and fulfilled its purpose, with no additional issues to discuss or business to conduct.
The Commission Standardization Ad Hoc has also worked on implementing a variety of reconfigurations of standing commissions and committees to increase efficiency and reduce administrative costs. The Ad Hoc met on August 14, 2024, November 18, 2024, and on February 18, 2025 to discuss reconfiguration possibilities and recommended the merger of the Health and Safety Commission with the Human Relations Commission, and establishing a new name for the new Commission. They also recommended the consolidation of the Design Review Commission with the Architectural Commission, which will become the Architectural and Design Review Commission. Lastly, it was not recommended that the Recreation and Parks Commission merge with the Arts and Culture Commission, but instead a re-evaluation of each Commission’s duties was discussed and the potential of reducing the frequency of meetings to reduce administrative costs associated with maintaining both Commissions.
Meeting Date: March 18, 2025
Zero-based Budgeting for Capital Improvement Program (CIP) Costs (In progress) Building upon our financial forecast analysis, staff is currently placing significant emphasis on Capital Improvement Program (CIP) costs. These expenditures represent a substantial portion of the budget and have a considerable impact on the overall fiscal health of the General Fund. By focusing on CIP, we can potentially identify areas for meaningful financial adjustments and strategic investments.
As part of the upcoming fiscal year’s budget process, the City has been moving towards a more rigorous budgeting approach for certain Capital Improvement Program (CIP) funds, specifically those funded predominantly by the General Fund, incorporating elements of zero-based budgeting to better justify and optimize expenditures.
Staff is prioritizing required maintenance to preserve our existing facilities and infrastructure. This proactive stance aims to prevent the need for more significant and costly repairs that could arise from the deferral of preventative maintenance, ultimately saving the City money in the long run and ensuring the longevity of the City’s assets.
Furthermore, staff is conducting a thorough analysis of CIP carryovers to better align current funding needs with project timelines. This examination may reveal opportunities for short-term savings to the General Fund by potentially reducing internal service fund charges and transfers to capital project funds. Such adjustments could provide some relief to our near-term budget constraints without compromising long-term project goals.
Looking ahead, we plan to present Council with a range of competing future capital projects that would draw on General Fund resources. This presentation will seek Council's direction on prioritizing these projects relative to available funds.
Review of City-Sponsored Events (In progress)
Staff has been conducting a comprehensive review of City-sponsored events to assess their value and cost-effectiveness. The Rodeo Drive - Special Events - Holiday Program Committee met on November 20, 2024 to initiate a review of Citywide events and begin formulating a framework for the types of events that should be offered by the City.
Review of Department Operating Budgets (In progress)
The City Manager has been collaborating with individual departments to identify and evaluate potential expenditure reduction opportunities. This remains an ongoing task and identified reductions will be incorporated into the proposed budget for fiscal year 2025-26.
Areas being reviewed include large vendor contracts for contractual services and large purchases of materials and supplies.
Review of Insurance Coverage Options (In progress)
The Litigation Committee met in the fall to begin discussions about the potential of a joint powers agreement (JPA) for City insurance coverages. The Committee will be reconvening in spring 2025 to receive a state of the insurance market report and further discuss JPA options. It should be noted that while there are cost savings associated with entering into a JPA, this would not generate potential cost savings until fiscal year 2026- 27 due to the timing of the application process.
Meeting Date: March 18, 2025
Review Business Tax Categories and Basis for Tax Calculation (In progress) This represents one of ten revenue enhancement opportunities recommended by the Blue Ribbon Committee for further consideration. Upon reviewing and comparing other local cities’ business tax categories and associated methodologies, it was observed that other cities tend to utilize gross receipts across most categories, whereas, the City has several classifications where the basis of payroll hours is used to calculate the tax. While the City could be collecting less in business tax than other cities for these classifications, further analysis would be required to determine whether a change in methodology might yield increased revenues for the City. As such, the Committee recommended that a consultant be engaged to further review the City’s business tax classifications and calculation methodologies in comparison to other cities and in light of any updates/trends in this area.
At this time, the request for proposal (RFP) is being finalized to solicit a consultant with expertise in the area of business tax.
Community Services Fees (In progress)
The Community Services Department has been reviewing their Adventure Camp and other recreation programming fees to ensure that the City is recouping significant portions of the cost of providing these services to the community. The analysis is underway and rate increases will be implemented annually until programs reach full cost recovery.
These aforementioned actions represent the City’s initial steps to address projected deficits. Moving forward, staff will continue to explore additional measures and refine strategies to ensure the City's long-term financial health while preserving essential services for our community.
FISCAL IMPACT
This financial update to the City Council is informational and has no specific fiscal impact.
Based on the forecast presented above, unassigned reserves will not be adequate to address the forecasted future year deficits, and other actions to increase revenues or decrease expenditures will be required.
Tatiana Szerwinski
Assistant Director of Finance
Jeff S. Muir
Director of Finance
Approved By Approved By