STAFF REPORT
CITY OF BURBANK,
FINANCIAL
SERVICES
DATE: January 28, 2025
TO: Justin Hess, City Manager
FROM: Jennifer Becker, Financial Services Director 03
Via: Leana Mkrtchyan, Deputy Financial Services Director By: Heidi Okimoto, Accounting and Audit Manager
Susan Langford, Revenue Manager
SUBJECT: Review of Fiscal Year 2023-24 Annual Comprehensive Financial Report
RECOMMENDATION
Note and file.
BACKGROUND
The purpose of this report is to provide the City Council (Council) with an overview of the City's financial status as of the Fiscal Year (FY) ending June 30, 2024, as presented in the Annual Comprehensive Financial Report (ACFR) (Attachment 1).
DISCUSSION
The Annual Comprehensive Financial Report Purpose and Goals The ACR presents the City's financial statements with supporting footnote disclosures.
This report must follow Generally Accepted Accounting Principles (GAAP) and all pronouncements by the Governmental Accounting Standards Board (GASB). These standards and regulations provide the guidance staff utilizes in preparing the ACR. Per Section 1040 of the City Charter, this annual audited financial report shall be submitted to Council by the City Manager in such form that may be reviewed by Council. The Financial Services Department utilized the independent certified public accounting firm, Lance, Soll & Lunghard, LLP (LSL), to perform the annual audit of the City and its component units.
The results of the audit are in the Independent Auditor's Report, which can be found at the beginning of the Financial Section of the ACFR.
For the FY 2023-24 audit, the City received an unmodified opinion, which is the highest given. An unmodified opinion indicates that the financial statements have been prepared in accordance with GAAP, comply with statutory requirements and regulations, and there
is adequate disclosure of all material matters relevant to the proper presentation of the financial statements.
The ACFR provides readers with the necessary information for both financial decision- making and assessment of financial stewardship. By preparing an accurate and well- organized ACR, the City provides interested parties the opportunity to make these assessments. The City is committed to providing the highest quality ACFR, and to that end, the document will be submitted to the Government Finance Officers Association (GFOA for an annual national Achievement of Excellence award. To qualify for this award, the City must publish an easily readable and effectively organized ACR and conform to the rigorous standards established by GOA. The City has received this award for 40 consecutive years, and staff believes that the FY 2023-24 report submitted to Council will continue to conform to the standards established by this program. In addition to the GOA, the ACFR is sent out to numerous government agencies and financial institutions to comply with various reporting, financial, and subsequent bond disclosure requirements.
ACFR - Statements
The ACR includes separate sets of financial statements for governmental, proprietary, and fiduciary funds and a set of government-wide financial statements. The fund financial statements are designed to focus on near-term liquidity and current financial resources.
These statements are designed to provide readers with a broad overview of the City's finances similar to a private-sector business. The government-wide financial statements distinguish functions of the City by segregating the financial results of governmental activities from business-type activities. The City's governmental activities include general government, public safety, public services, culture and recreation, and interest on long- term debt. The business-type activities of the City include operations of the electric, water, wastewater, and solid waste utilities. The combination of all statements and disclosures shows the June 30, 2024, fiscal year-end balances, and overall results of operations for all City funds. To gain a complete understanding of the City's financial position, it is necessary to review all financial statements and the related disclosures.
Governmental Accounting Standards Board (GASB) Statement Changes - GASB 100 For the FY 2023-24 ACFR, the City implemented GASB Statement No. 100 - Accounting Changes and Error Corrections - an Amendment of GASB Statement No. 62. The primary objective of this statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. This statement defines accounting changes and requires descriptive information about accounting changes and error corrections in the notes to the financial statements. The display in the financial statements and note disclosure requirements will result in more consistent and comprehensive information for users.
Citywide Financial Status
Chart 1 provides a summary of the net position over the last five years for governmental activities, business activities, and their combined amounts for the citywide net position.
The total net position represents the difference between the value of all assets and liabilities.
Chart 1 - Citywide Net Position History
(In $1,000's)
$1,600,000
$1,445,375
$1,362,837
$1,400,000 $1,321,547
$1,255,506
$1,209,779
$1,200,000
$1,000,000 $935,097
$872,846
$830,511
$741,888 $765,534
$800,000
$600,000 $489,972 $491,036 $489,991 $510,278
$467,891
$400,000
FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
- Total City age Governmental Activities -Business-type Activities Over time, increasing or decreasing trends in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. As of June 30, 2024, the City's total net position was $1.4 billion, which was an $82 million increase over the prior fiscal year. This growth was attributable to a $62 million increase in governmental activities and a $20 million increase in business-type activities. Additional individual fund analysis follows later in this report.
Enterprise Funds
The City's Enterprise Funds account for activities that provide services to the public at large on a consumer-charge basis. For Enterprise Funds, the unrestricted net position is the difference between the total net position and the fund's capital assets. A positive unrestricted net position trend line can indicate long-term fiscal health and sustainability.
As of June 30, 2024, the Statement of Net Position for Proprietary Funds' unrestricted balance for the City's Enterprise Funds totaled $121.7 million, an increase of $35.9 million from the prior year. On the entity-wide Statement of Net Position, the unrestricted balance is $121.1 million as the entity-wide statement adjusts $537 thousand for Internal Service Funds' activities related to Enterprise funds. Chart 2 illustrates the five-year history of the Enterprise Funds' unrestricted net positions.
Chart 2 - Enterprise Funds: Unrestricted Net Position History (In $1,000's)
$60,000
$50,068
$50,000
$41,085
$38,015
$40,000 $35,103 $35,465
$34,534
$30,000 $25,412 $33,453
$20,280
$16,277 $18,053
$20,000 $15,752
$14,537 $13,322 $14,069
$18,080
$10,000 $11,001 $12,695
$2,033 $8,894
FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
- Electric Utility - Water Reclamation & Sewer
Refuse Collection & Disposal -Water Utility
494 - Water Reclamation and Sewer
The Water Reclamation and Sewer Fund ended FY 2023-24 with an unrestricted net position of $35 million, a $6 million or 13.7% decrease over the prior fiscal year. The total net position of the Water Reclamation and Sewer Fund decreased primarily due to the use of reserves to purchase the 904-906 Lake Street property for future public use.
496 - Electric Utility
The Electric Utility Fund's ending unrestricted net position for FY 2023-24 was $50 million, a $33.8 million or 207% increase over the prior fiscal year. The total net position of the Electric Utility increased by $12.5 million primarily due to an increase in cash from the 2023 Electric Revenue Bonds, decreased retail power supply, and fuel expenses due to lower power and natural gas prices. 497 - Water Utility
The Water Utility Fund's ending unrestricted net position for FY 2023-24 was $18 million, a $5.4 million or 42.4% increase over the prior fiscal year. The total net position of the Water Utility increased by $2.8 million primarily due to increased service charge revenues and increased interest income earned on the proceeds from the 2021 Water Revenue Bonds.
498 - Refuse Collection and Disposal
The Refuse Collection and Disposal Fund ended FY 2023-24 with an unrestricted net
position of $18 million, a $2.3 million increase over FY 2022-23. The total net position of the Refuse Collection and Disposal Fund increase was primarily due to rate increases.
Municipal Infrastructure Fund (Measure P)
On November 6, 2018, Burbank voters approved a general-purpose 3/4C local sales tax known as Measure P. By doing so, the voters approved a new ordinance in the Burbank Municipal Code (BMC) which established the requirement for an annual independent audit to ensure the proper expenditure of Measure P revenues consistent with the purposes established by the ordinance.
Lance, Soll & Lunghard, LLP (LSL), the City's external independent auditors, performed additional audit procedures to confirm the City's compliance with Measure P oversight provisions. The auditors confirmed, without exception, the following:
1) The $4.7 million annual baseline General Fund commitment was transferred to the Municipal Infrastructure Fund to ensure that Measure P revenues do not supplant previously available General Fund infrastructure funding. 2) Measure P tax revenues received during the fiscal year ended June 30, 2024, totaled $31.4 million, of which 50% were recorded to the Municipal Infrastructure Fund.
3) Expenditures within the Municipal Infrastructure Fund were solely expended on infrastructure improvements, maintenance, and repairs.
General Fund Revenues
The General Fund's actual recurring revenues for FY 2023-24 totaled $249 million, which was a 9.5% increase over FY 2022-23 actuals. General Fund revenues ended the year $15.5 million higher than the revised forecast for FY 2023-24, a difference of 6.6%. Total revenues received, including non-recurring resources, was $246.2 million.
Non-recurring revenues totaling $11.9 million included reimbursements for grants and federal Pandemic relief funding. Most notable in grant funding was the allocation from the American Rescue Plan Act (ARPA) of 2021, the reimbursements from the US Forestry Service for strike team response, and an allocation as part of a five-year plan for the Permanent Local Housing Allocation (PLHA) program. These programs total approximately $3.8 million. Other sources of non-recurring revenues included reimbursements for fire mutual aid and pass-through transactions received for environmental impact reports. Table 1 illustrates the comparison between the forecasted recurring revenues and the actual revenues received for FY 2023-24 and reconciles the General Fund revenues as reported in the ACFR.
Table 1: General Fund Revenues as of June 30, 2024
(In $1,000's)
FINAL BUDGET ACTUAL
ACTUAL VS % OF BUDGET
NO. RECURRING REVENUE CATEGORY RECURRING RECURRING
BUDGET RECEIVED
FY 2023-24 6/30/24
1 Sales Tax $ 63,103 63,522 $ 419 100.7%
2 Property Tax 69,818 76,196 6,378 109.1%
3 Utility Users Tax 18,884 18,687 (197) 99.0%
4 Services Charges - Intra City 14,622 14,708 87 100.6% 5 Services Charges 22,741 27,314 4,573 120.1%
6 In Lieu Tax 9,513 9,564 51 100.5%
7 Interest/Use of Money 4,249 5,027 778 118.3%
8 Parking/Traffic/Other Fines 2,401 2,168 (233) 90.3%
9 Transient Occupancy Tax 12,259 13,184 925 107.5%
10 Building Permits/License Fees 6,657 9,006 2,349 135.3% 11 Transient Parking Tax 4,273 4,565 292 106.8%
12 Business Taxes 2,464 2,295 (169) 93.1%
13 Franchises 1,442 1,508 66 104.6%
14 Intergovernmental Revenues 1,067 1,239 171 116.2%
TOTAL RECURRING REVENUE 233,493 $ 248,983 $ 15,490 106.6%
NON-RECURRING REVENUE
Grants and State Reimbursements $ 6,013 $ 6,013
Environmental Impact Report 649
PEG Revenue 233
Trust Account from Fund 115 1,717
GASB 31 Fair Value Adjustment 2,462
Worker's Comp Reimbursement 731
Miscellaneous Revenue 56
Transfers From Other Funds 90
TOTAL NON-RECURRING REVENUE 6,023 $ 11,951
TOTAL FY 2023-24 GENERAL FUND REVENUES 239,516 $ 260,934
RECONCILIATION TO AFR
Services Charges-Intra City (Cost Allocation) (14,708)
TOTAL RECONCILIATION ITEMS $ $ (14,708)
ACFR GENERAL FUND TOTAL REVENUES 239,516 246,226
Sales Tax
Sales tax revenue for FY 2023-24 was $63.5 million. Revenues increased by 3% in comparison to the FY 2022-23 year-end total Forecast: $63,103,399 of $61.7 million. Despite inflation and higher interest rates on loans Actuals: $63,522,092 and credit cards, consumer spending remained steady in FY % Received: 100.7% 2023-24. Households have slowly begun to focus on essential needs while limiting discretionary spending. Although the Writers Guild of America Strike and SAG-AFTRA labor disputes were resolved in November of 2023, the impact of the events had lingering effects on Business and Industry.
Fortunately, because of Burbank's diverse sales tax base, the negative impact on Business and Industry was offset by a positive correction to Autos and Transportation and the increased consumption of jet fuel at the Hollywood Burbank Airport.
Property Tax
Property taxes received for FY 2023-24 outperformed projections by $6.4 million, up by 9.1%. The increase was primarily a result of Forecast: $69,817,908 the payoff of the city loans from the former Redevelopment Actuals: $76,196,111 Agency in FY 2022-23 and the bond principal reduction in FY % Received: 109.1% 2023-24 based on the debt service schedules. The payments that would have been used to pay off the debt are now part of residual distributions to the General Fund. Property taxes increased by 9.8% for FY 2023-24 compared to FY 2022-
23. Service Charges
Plan check fees and building fees were largely responsible for the remarkable increase in revenues for FY 2023-24. There was a Forecast: $22,740,816 significant amount of activity from larger developments and a rise Actuals: $27,313,632 in Accessory Dwelling Units (ADUs). Revenues increased by % Received: 120.1%
20.2% in comparison to the FY 2022-23 year-end total of $22.7 million.
Building Permits / License Fees
Similar to planning fees, construction activity has driven the surge in building permits for FY 2023-24. Large one-time developments, Forecast: $ 6,656,678 such as the new airport terminal along with improvements to Actuals: $ 9,006,020 residential and commercial properties, boosted building permits by % Received: 135.3% $2.3 million in FY 2023-24, or 72%, compared to the prior fiscal year. Also contributing to the growth in this category are fire permits, increasing 98%, or $83,449 from the prior fiscal year.
General Fund Expenditures
The General Fund's Adopted Budget for FY 2023-24 was $232.5 million, of which 71% was allocated for salaries and benefits. After the Council approved carryovers and budget amendments, General Fund appropriations for the fiscal year totaled $268.6 million.
For FY 2023-24, all City Departments remained within approved budget appropriations.
The total amount expended in the General Fund in FY 2023-24 was $240 million, which equates to 90% of total appropriations. However, $24 million of the remaining unspent appropriations were approved for carryover or are currently encumbered. Therefore, the
City's total amount expended and assigned for expenditure was $264 million or 98% of total appropriations. This leaves a General Fund budget savings of $4.7 million, primarily due to staffing vacancies.
Table 2 provides a summary of the General Fund's total appropriations and expenditures by Department for FY 2023-24 including the reconciliation to the ACFR.
Table 2 - General Fund Appropriations and Expenditures as of June 30, 2024 (In $1,000's)
FY 2023-24 FY 2023-24 PERCENT
DEPARTMENT
APPROPRIATIONS* EXPENDITURES REALIZED
Police $ 72,974 $ 68,845 94.3%
Fire 53,016 52,669 99.3%
Parks and Recreation 37,275 33,044 88.6%
Public Works 21,185 18,865 89.0%
Community Development 25,526 17,909 70.2%
Library Services 10,713 9,190 85.8%
Administrative Services 28,506 25,252 88.6%
Non-Departmental 19,412 14,053 72.4%
TOTAL EXPENDITURES 268,607 $ 239,827 89.3%
ENCUMBRANCES & CARRYOVERS $ 24,074
GRAND TOTAL $ 268,607 $ 263,901 98.2%
* Appropriations include all carryovers as well as any additional General Fund budget amendments approved by the City Council since the adoption of the FY 2023-24 Budget.
RECONCILIATION TO ACFR
Encumbrances & Carryovers $ - $ (24,074)
Services of Other Departments $ (14,741)
Transfers to Other Funds (10,282) (10,279)
TOTAL RECONCILIATION ITEMS (10,282) $ (49,094)
ACFR GENERAL FUND TOTAL EXPENDITURES $ 258,325 $ 214,807 General Fund Year-End Balance
As of June 30, 2024, the General Fund's total balance was $161.8 million, an increase of $21.1 million from the prior fiscal year. Table 3 provides a breakdown of the General Fund's balances in accordance with the GASB-defined categories.
Table 3 - General Fund Balance as of June 30, 2024
(In $1,000's)
CATEGORIES DESCRIPTION FY 2023-24
Nonspendable Amounts that cannot be spent due to their nature such as inventories, $ 389 prepaid amounts, property, etc.
Restricted Amounts that can only be spent for the specific purposes stipulated by 26,100 constitution, grants, or through enabling legislation.
Committed Amounts that can be used only for the specific purposes determined by a - formal action of the City Council.
Assigned Unencumbered amounts approved by Council for manual carryover from FY 16,211 2022-23 to FY 2023-24.
Unassigned Amounts include all spendable amounts not contained in the other 119,107 classifications.
TOTAL GENERAL FUND BALANCE $ 161,807
The unassigned balance of approximately $119.1 million represents the amount available to the Council for meeting the City's general needs. Within the unassigned balance, the City Council has taken action to set aside certain amounts for specific purposes. Table 4 details the budgetary reserves, outstanding accounts receivable, encumbrances, and the remaining spendable fund balance available for future appropriations, all of which comprise the total General Fund unassigned balance at the close of FY 2023-24.
Table 4 - General Fund Unassigned Balance as of June 30, 2024 (In $1,000's)
Budgetary Reserves
Emergency Reserve (5%) $ 10,885
Working Capital Reserve (15%) 32,656
Budget Stabilization 10,885
Compensated Absences 3,569
RDA Loan Repayments 928
Park Development Fees 323
Performing Arts 135
Art In Public Places 1,262
Youth Endowment 14
Burbank Athletic Federation (BAF) 251
General Plan Fee 1,304
Sub-total of Budgetary Reserves $ 62,212
Encumbrances $ 7,863
Outstanding Accounts Receivable $ 1,524
Spendable Fund Balance Available for Future Appropriations $ 47,508 JUNE 30, 2024 YEAR-END UNASSIGNED BALANCE $ 119,107
The General Fund spendable balance on June 30, 2024, of approximately $47 million, is significantly higher than the spendable balance projected during the FY 2023-24 budget process. The difference is attributed to increases in the various tax revenues and the collection of fees driven by large developments as described previously in this report. This recurring revenue growth, combined with budgetary savings due to staffing shortages, all contributed to the higher ending General Fund spendable balance.
ENVIRONMENTAL REVIEW
This activity includes the FY 2023-24 Annual Comprehensive Financial Report and has no potential for resulting in either a direct or a reasonably foreseeable indirect physical change in the environment. As such, it is not a "project" subject to the requirements of the California Environmental Quality Act (CEQA) 14 Cal. Code Regs § 15378.
FISCAL IMPACT
There is no fiscal impact associated with this informational report to Council.
CONCLUSION
The City's overall FY 2023-24 actual financial results were favorable and represent a period of steady economic growth, even during an inflationary period. The increase in Citywide net position at year-end is a positive indicator of the City's overall financial health and is a result of the strong fiscal policies and strategic goals previously adopted by the City Council. Burbank continues to be in a solid financial position and is continuing to monitor any future fluctuations in the economy.
ATTACHMENT
Attachment 1 - Annual Comprehensive Financial Report, Fiscal Year Ended June 30, 2024