STAFF REPORT
DATE: February 25, 2025
TO: Justin Hess, City Manager
FROM: Jennifer Becker, Financial Services Director
BY: Leana Mkrtchyan, Deputy Fi nancial Services Director Joy Es calante, Budget Manager
Cathy Jaramillo, Senior Administrative Analyst
SUBJECT: Review of the General Fund’s Fin ancial Status as of December 31, 2024, and Adoption of Resolutions Amending the Fiscal Year 2024-25 Budget for the Purpose of Mid-Year Adjustments
RECOMMENDATION
1. Adopt A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK AMENDING THE BUDGET OF FISCAL YEAR 2024- 2025 FOR THE PURPOSE OF MID-YEAR ADJUSTMENTS.
2. Adopt A RESOLUTION OF THE HOUSING AUTHORITY OF THE CITY OF BURBANK AMENDING THE BUDGET OF THE FISCAL YEAR 2024- 25 FOR THE PURPOSE OF MID-YEAR ADJUSTMENTS.
BACKGROUND
The purpose of this report is to provide the City Council with a comprehensive review of the General Fund’s financial performance as of December 31, 2024, and to request the Council’s approval of mid-year adjustment s to the Fiscal Year (FY) 2024-25 Adopted Budget. This report also provides info rmation about the City’s FY 2025-26 Budget development.
The end of the second quarter represents the hal fway point of the fiscal year, at which time the City’s Budget Office asks each department to review their adopted revenues and appropriations to determine how they are tracking and identify necessary amendments to their budgets. For the first half of the fiscal year, most departments are performing within expected budgetary levels. However, severa l departments have identif ied unanticipated
FINANCIAL
SERVICES
expenses that require additional appropriations , generating the need for the mid-year budget requests outlined in Attachment 5.
DISCUSSION
General Fund’s Financial Status - Updated FY 2024-25 Budget Based on the FY 2024-25 ending balance, revised revenue projections, and adopted appropriations, staff is expecting an available balance of approximately $28.7 million in the General Fund at fiscal year-end, pending the approval of the mid-year budget adjustments discussed later in this report of which $8.8 million is recurring (Attachment 3).
Fiscal Year 2024-25 General Fund Revenues
For the first six months of the fiscal year , the General Fund received $86.4 million in recurring revenues, representing 34% of the revised revenue forecast. For perspective, revenues for the first six months of FY 2023-24 were $84.7 million and 36.3% of the forecast. The economy remains stable despite elevated interest rates, lingering inflation, and a slow-growing labor market. Throughout th e country, uncertainty about the effects of anticipated federal policy changes has impacted consumer c onfidence, however, economists generally remain optimistic about the overall state of the economy. During the first quarter report to the City Council in November 2024, staff recommended $7.6 million of adjustments to the City’s General Fund recurring revenue projections. After reviewing Burbank’s FY 2024-25 second-quarter results, staff is not recommending any further adjustments to forecasted revenues.
Table 1 outlines the FY 2024-25 recurring General Fund revenue projections by category.
This is the best estimate of General Fund re venue available at this time, which is based on actual receipts from the prior year and the first half of the current fiscal year, along with general economic trends and activity.
Table 1 - General Fund Recurring Revenues as of December 31, 2024
The following is a brief summary of Burbank’s largest General Fund revenue sources as of the end of the second quarter of FY 2024-25:
Sales Tax: The California Department of Tax and Fee Administration (CDTFA) has released sales tax information for sales occurring in the third quarter (July to September) of the calendar year 2024. A fter correcting for one-time adjustments, traditional Bradley Burns sales tax receipts were down 2.5% compared to the same quarter in the prior year, with Burbank slightly above the Los Angeles County results for the same period. Receipts declined in several categories, including Autos and Transportation, General Consumer Goods , Restaurants and Hotels, and Fuel and Service Stations. The 7.8% decline in th e Consumer Goods category is mostly attributed to a decline in home furnishings, specialty, and apparel items. The Auto and Transportation category continues to ex perience a decline as high prices and elevated financing costs have negatively impacted consum er demand. The Writers Guild of America and SAG-AFTRA labor disputes were resolved in November 2023, however, the impact of these events continues to show their long-term effects on the Business and Industry category. Motion picture equipment sales fell 4.1% for the third quarter of 2024 compared to the prior year period which occurred during the strikes.
The City’s Transactions and Use Tax (TUT ) revenues, which are derived from Measure P, experienced a sl ight decline in revenues (0.5%) when compared to the prior year, with results mirroring the decreases in the Bradley Burns tax. One positive point for TUT was in the Building and Cons truction category, which increased 26.9% from the same quarter in the prior year. This is largely due to construction and development activity taking place throughout the City, in which the contractors applied for CDTFA sub-permits. This allows Burban k to receive the sales tax for building 1 Sales Tax 63,522,092 $ 64,412,066 $ 64,412,066 $ 21,846,171 $ 33.9% 2 Property Tax 76,196,111 74,955,921 3,670,000 78,625,921 18,899,583 24.0% 3 Utility Users Tax 18,687,489 19,639,000 19,639,000 8,270,520 42.1% 4 Services Charges - Intra City 15,439,505 15,657,042 15,657,042 3,684,896 23.5% 5 Services Charges 27,323,615 25,458,890 2,400,000 27,858,890 11,146,027 40.0% 6 In Lieu of Tax 9,564,335 9,893,000 9,893,000 5,058,853 51.1% 7 Interest/Use of Money 5,027,099 4,318,156 500,000 4,818,156 2,591,930 53.8% 8 Parking/Traffic/Other Fines 2,167,922 2,601,000 2,601,000 1,377,698 53.0% 9 Transient Occupancy Tax 13,184,332 13,853,000 13,853,000 5,000,347 36.1% 10 Building Permits/License Fees 9,006,020 6,152,195 750,000 6,902,195 4,887,259 70.8% 11 Transient Parking Tax 4,564,487 4,401,000 300,000 4,701,000 1,407,835 29.9% 12 Business Taxes 2,294,821 2,464,190 2,464,190 663,904 26.9% 13 Franchises 1,508,310 1,519,650 1,519,650 272,350 17.9% 14 Intergovernmental Revenues 1,238,384 1,511,018 1,511,018 1,337,008 88.5% TOTAL RECURRING REVENUE 249,724,522$ 246,836,128 $ 7,620,000 $ 254,456,128$ 86,444,380 $ 34.0% NO.
RECURRING REVENUE
CATEGORY
ACTUAL
RECURRING FY
2023-24
ADOPTED
RECURRING
FY 2024-25
CHANGE FROM
ADOPTED
1Q24
REVISED
RECURRING
FY 2024-25
ACTUAL
RECURRING
12/31/24
% OF
REVENUE
RECV'D YTD
materials purchased for use in these projects . Of the $21.8 million that was received in sales tax for the first six months of FY 2024-25, $5.2 million was generated from TUT revenue, which represents the General Fund’s 50% share of Measure P.
Property Tax: A total tax of 1% is levied on the Assessed Value (AV) of property as determined by the Los Angeles County A ssessor. The City of Burbank receives approximately 18.5% of the 1% levy on AV. Compared to FY 2023-24, the AV for the entire City increased by approximately $1.6 billion, or 4.9%. General Fund related AV increased by $1.2 billion or 5.3% from the prior fiscal year. The City received a recent quarterly report for home sales in Burbank from our property tax consultant, HdL Coren and Cone. The median sales price of a detached single-family residential home in Burbank for the fourth quarter of 2024 was $1, 275,000. This is a 1.6% increase from the third quarter of 2024 and a 15.9% from the four th quarter of 2023. The housing market is expected to improve further in 2025.
Transient Occupancy Tax (TOT): While domestic leisure travel remains stable overall, Burbank’s hotel occupancy rate for December 2024 was down year over year at 66% compared to 69% in December 2023, which the Average Daily Rate (ADR) was largely flat. On a six-month average, occupancy rates remain relatively the same as the prior year. TOT revenues for the first six months of FY 2024-25 are $5 million, a 3% increase over the same period from the prior year, but below staff’s expectations when factoring in the new Cambria Hotel wh ich opened in Decem ber of 2024. Staff anticipates an increase in bot h occupancy rates and ADR for the third quarter of FY 2024-25 as a result of recent wildfires in neighboring cities. Chart 1 compares Burbank hotel occupancy rates for FY 2021-22 through FY 2024-25 to date.
Chart 1 – Burbank Hotel Occupancy Rates
$0
$50
$100
$150
$200
0%
10%
20%
30%
40%
50%
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70%
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90%
2020 2021 2022 2023 2024
Occupancy Rate ADR
Utility Users Tax (UUT): . The City of Burbank colle cts a 7% tax on qualifying electricity, natural gas, and telecommuni cation utility charges. Unlike many other cities, Burbank does not assess UUT on wa ter or cable television. UUT revenue growth is attributable to an electric rate increase and higher natural gas prices, offset by reduced electric usage due to efficiencies as well as the decline in telecom revenue as a result of the Federal Communications Commission (FCC) reclassification of data to non-taxable information services.
Fiscal Year 2024-25 General Fund Expenditures
As of December 31, 2024, 47.4% of the General Fund’ s appropriations have been expended, coinciding with the general expectati on of 50% for the halfway point of the fiscal year. For perspective, 46.3% of appropriations were expended for the same period last year. Table 2 provides budget to actual results by department for the General Fund expenditures at the end of the second quarter. Expenditures for the Fire Department are trending above expectations six months into the fiscal year at 55% due to higher overtime costs resulting from reimbursable strike team participation.
Table 2 - General Fund Expenditures as of December 31, 2024*
EXPENDITURE APPROPRIATIONS EXPENDITURES PERCENT
NO. CATEGORY FY 2024-25 as of 12/31/2024 EXPENDED
1 City Attorney 6,485,948 2,812,059 43.4%
2 City Clerk 2,676,090 702,905 26.3%
3 City Council 1,662,036 768,575 46.2%
4 City Manager 3,467,051 1,446,826 41.7%
5 City Treasurer 1,187,048 472,190 39.8%
6 Community Development 26,534,895 9,049,473 34.1%
7 Financial Services 7,732,251 3,408,640 44.1%
8 Fire 53,849,559 29,580,177 54.9%
10 Library Services 10,882,536 5,022,382 46.2%
11 Management Services 8,934,352 3,318,425 37.1%
12 Non-Departmental 24,416,711 14,755,812 60.4%
13 Parks and Recreation 40,321,201 17,192,595 42.6%
14 Police 78,793,872 38,179,898 48.5%
15 Public Works 21,471,542 9,957,474 46.4%
TOTALS 288,415,092 136,667,430 47.4%
*Appropriations include all carryovers as well as any additional General Fund budget amendments approved by the City Council since the adoption of the FY 2024-25 Budget. The original General Fund adopted budget totals $258,693,806.
Mid-Year Budget Adjustments
As was previously discussed, departments were asked to identify necessary adjustments to their budgets resulting from changed circ umstances and/or unanticipated expenses that exceed their budget au thority. Each of the requested adjustments (both appropriations and revenues) are itemized and described in detail in Attachment 5.
General Fund appropriation requests tota l $2,072,424 and are offset by revenue adjustments and the use of restricted funding of $1,093,446 for a net impact of $978,978.
Requests include additional funding for the Parks and Recreation Department for emergency repairs at the DeBell Golf Course and the replacement of aging food service equipment at the clubhouse. The Community Development Department is requesting to appropriate Permanent Local Housing Allocation (PLHA) and National Opioid Settlement funds. The Fire Department is requesting funding to prepare for the upcoming Fire Academy as well as funding to augment their brush clearance budget.
Non-General Fund appropriati on requests total $11,383,109 and is offset by revenue adjustments of $2,905,727 for a net impact of $8,477,382. The Housing Authority is requesting $2.2 million in Housing Assistance Payments to support the Section 8 program and $420,000 in Emergency Housing Vouchers. Municipal Infrastructure Fund requests include funding for emergency tree work thr oughout the City in respon se to the recent windstorms, as well as fence repairs, shade sails, and windscreen r epairs at ballparks.
The Information Technology Department is requesting funds to replace laptops/desktops and an upgrade of the current Mi crosoft Windows software. Burbank Water and Power (BWP) is requesting additional funds for the Burbank Bridge rebuild, the replacement of the protective relay network for critical in frastructure, and funding fo r the training center rehabilitation.
General Fund Financial Forecast
The purpose of the Financial Forecast is to provide insight into the potential long-term financial trends for the General Fund. Based on current assumptions, staff expects that General Fund recurring revenues will increase by an average of 4.8% over the next five years of our forecast. General Fund expenditures are projected to grow by an average of
6.4% over the same time period.
Projected Revenues
Forecasted revenues are driven by the parameters included in Attachment 3. The forecast assumes continued economic growth in FY 2024-25 and beyond at a more conservative level. The average revenue growth projected in the five-year forecast includes increases in Sales Tax by 1.2%, Property Tax by 6.5%, and Utility Users Tax by 5.2%. Forecasted revenues include slightly lower sales tax receip ts in the next two years and returning to increases in years four and five. Proper ty tax growth remains strong with new
developments and continued increases in proper ty values. UUT growth is driven by forecasted rate increases for electric and natural gas services. Revenue projections included in the forecast ar e based on staff’s best estimates and may be subject to fluctuations resulting from economic cycles and legislation. Staff will continue to monitor projected revenues throughout the year and provide the City Council with updates as new information becomes available.
Memorandum of Understanding (MOU) Projected Costs
Salaries and benefits currently comprise approximately 74% of the General Fund recurring budget. As such, the MOU negotiation process for the various bargaining groups plays a significant role in determining t he City’s financial position. All bargaining groups have current MOUs for FY 2024-25 except fo r the Burbank City Employees Association (BCEA) and the Internationa l Brotherhood of Electrical Wo rkers (IBEW). Aligning with Council’s Financial Policies related to em ployee compensation, the General Fund forecast includes assumptions for salary a nd benefit growth over the next five years based on projected market rates for all em ployee groups. Market rates are determined through salary and benefits surveys which compare the City’s job classifications to those of similar organizations throughout the region. The City of Burbank calculates the average salary paid for comparable positions to determine whether they are at market value.
Public Employees Retirement System (CalPERS) Costs
Managing costs associated with pensions continues to be a challenge for CalPERS cities throughout California, and Burbank is no excepti on. In recent years, the City has taken measures toward mitigating pension cost increases including:
Sending Additional Discr etionary Payments (ADPs) to CalPERS over the City’s required contributions to decrease Burbank’s unfunded liability; Establishing a Section 115 Trust to offset future pension volatility; and Increasing employee contributio ns toward their pension rates.
Based on the recent actuarial reports, Burbank has an Unfunded Actuarial Liability (UAL) of just over $439 million across the City’s three pension plans. The funded status for the City’s three plans is currently 77.1% for Miscellaneous, 70.9% for Police, and 74.6% for Fire, for an average of 74.2%, up just slightly from 73.9% in the prior year. Table 3 shows the actual CalPERS employer rates and UA L contributions for the three employee classifications for the current fiscal year (FY 2024-25), the upcoming fiscal year (FY 2025- 26), and the projected amounts for the follo wing two fiscal years (FY 2026-27 and FY 2027-28).
Table 3 – City of Burbank Pension Costs FY 2024-25 – FY 2027-28
Classification
Actual
FY 2024-25*
Actual
FY 2025-26
Projected
FY 2026-27
Projected
FY 2027-28
Police 3% @ 50 Rate 23.20% 22.80% 22.30% 21.80%
Police Liability Payment $7,997, 927 $8,314,615 $9, 314,000 $9,906,000 Fire 3% @ 55 Rate 18.42% 18.32% 17.90% 17.50%
Fire Liability Payment $5,066,096 $5,818,144 $6,579,000 $7,014,000 Misc 2.5% @ 55 Rate 10.96% 10.76% 10.60% 10.40%
Misc Liability Payment $20,417,78 2 $21,711,502 $24,828, 000 $26,482,000 * Amounts shown are the total employer contribution amounts required for FY 2024-25. The City has completed the prepayment of the additional UAL payment to CalPERS which will result in a net savings of $1,547,461 citywide.
As part of the FY 2024-25 budget process, Council adopted an expanded pension funding plan which includes a citywide contribution of $9 million in FY 2024-25 and another $4.5 million ADP in FY 2025-26 to help reduce future pension liability. In July 2024, the City made the $9 million ADP to CalPERS. Subsequently, in September 2024, CalPERS provided the City with an updated UAL payment schedule for FY 2025-26, which accounts for the July payment. The total savings generated were $1,547,461 citywide ($1,019,090 General Fund)..
Additionally, Council’s Pension Funding Commitment Policy requires the City to contribute half of any year-end General Fund balance over 6% of the budgeted recurring appropriations to fund employee pension liabilities. This fundi ng is required if employee pension benefits are less than 90% funded. Correspondingly, $6.4 million was contributed to the Section 115 Trust in FY 2024-25. The tr ust has a balance of over $31.7 million as of December 2024.
Fiscal Year 2025-26 State Budget Proposal
In early January, Governor Newsom released his proposed budget for FY 2025-26. This proposal serves as the beginning of deliberations in the State Legislature leading to final budget adoption in June 2025. The proposal calls for a $322. 2 billion budget, with a General Fund total of $228.9 billion. The proposed budget estimates $23 billion in various budget solutions in FY 2025-26. Last year, the administration was proactive by taking a multi-year approach and addre ssing shortfalls ahead of time to propose a balanced budget for the upcoming year. Revenue receip ts continued to improve since June 2024 and have contributed to strong growth for fiscal years 2024-25 and 2025-26.
The budget includes three categories of discretionary proposals:
Short-term proposals providing budget saving s of $2.2 billion, of which $1.6 billion is related to schools and community colleges.
New discretionary General Fund spendi ng of $570 million for various programs and $150 million for expansions of existing/new tax expenditures. New discretionary reserve balance of $4.5 billion for the Special Fund for Economic Uncertainties (SFEU), to pr ovide the State support to deal with unanticipated cost increases, such as for wildfires and modest revenue declines.
The governor is revising the revenue foreca st from the 2024 Budget Act due to the stronger than anticipated performance of the economy, stock market, and cash receipts.
The three main drivers of the revision are as follows:
Personal income tax ($12.6 billion)
Corporation tax ($2.5 billion)
Pooled money interest ($2.0 billion)
The 2024 Budget Act assumed withdrawals from the Budget Stabilization Account (BSA), also known as the Rainy-Day Fund, of $5. 1 billion in FY 2024-25 and $7.1 billion in FY 2025-26. The BSA receives 1.5% of the Gener al Fund tax revenue as well as a portion from capital gains. The FY 2025-26 proposed budget maintains the planned $7.1 billion withdrawal from BSA. The State has only used half of the budget reserves to date.
FY 2025-26 Budget Development Process
The FY 2025-26 budget process is underway and City departments are currently working on their respective budgets. Staff is proj ecting a recurring General Fund balance of approximately $1.8 million heading into the 2025-26 fiscal year. However, the recurring balance is expected to decrease to a $1.4 million deficit by FY 2026-27, which continues through the remaining years of Five-Year Forecast due to rising expenses outpacing revenue growth. Staff will continue to focu s on strengthening revenues and developing additional cost-saving initiatives to provi de long-term fiscal stability and prevent future structural imbalances in the City’s financial forecast.
The City Manager’s Office is in the process of reviewing each de partment’s proposed budget and incorporating revisions as needed, with the goal of preparing a Proposed FY 2025-26 Budget for Council review in early May. Should Council Members have specific requests for the upcoming fiscal year, staff encourages Council to inform them before the scheduled budget study sessions in May to pr ovide for adequate research time, if necessary.
ENVIRONMENTAL REVIEW
This activity includes amendments to the FY 2024-25 Adopt ed Budget and has no potential for resulting in either a direct or a reasonably foreseeable indirect physical change in the environment. As such, is not a “project” subject to the requirements of the California Environmental Quality Act (CEQA) 14 Cal. Code Regs § 15378.
FISCAL IMPACT
If approved, the requested mid-year adjustm ents for the General Fund will total $2,072,424 and are offset by revenue adjustment s and the use of restricted funding of $1,093,446 for a net impact of $978,978. Overall, mid-year appropriation requests for all funds total $9,456,360 net of revenue (total appropriations are $13,455,533).
CONCLUSION
The City’s revenues performed above expectations for several consecutive years, buoyed by the impacts of inflation. Similarly, the City has experienced cost increases across the board for goods and services, labor agree ments and related pension expenses. As inflation eases, the challenge wi ll be for the City to maintain that expenditure growth in line with more tempered revenue expectations. As shown in Chart 3, the General Fund's five-year financial forecast includes a balance of approximately $8.8 million for the current fiscal year and roughly $1.8 million heading into the FY 2025-26 budget process. Even without any new items added to the budget, this balance will decrease to a $1.4 million deficit by FY 2026-27. It should be noted that several risks may impact the City’s financial projections, including economic and political uncertainties at home and abroad, impacts of MOU negotiations, and pot ential impacts of CalPERS returns and assumption changes.
Chart 3 - General Fund Financial Forecast FY 2024-25 through FY 2028-29
$254.5
$263.3
$273.3
$284.1
$295.4
$245.7
$261.4
$274.7
$285.1
$296.7
$200
$210
$220
$230
$240
$250
$260
$270
$280
$290
$300
2024-25 2025-26 2026-27 2027-28 2028-29
Revenue Expenses
Balance/
(Deficit): $8.8 $1.8 ($1.4) ($1.0) ($1.3)
Despite facing projected recurring deficits in future years, the City’s overall financial health is stable, due to a strong General Fund cash position. The City Council has consistently pursued sound fiscal policies and strategies like strengthening revenues, working with labor groups to implement pension cost sharing, paying down pension liabilities, building up reserves, and utilizing one-time funds to make strategic investments to reduce future recurring expenses. In addition to the proj ected FY 2024-25 year-end General Fund Balance of $28.7 million, Burbank’s working capital, emergency, and budget stabilization reserves total approximately $61.4 million. In addition, the Section 115 Trust balance is $31.7 million. These funds will allow Bur bank to weather any potential economic fluctuations over the next several years. Staff will cont inue to monitor any economic conditions or legislative actions that may impact the City’s financial position and provide updates to Council.
ATTACHMENTS
Attachment 1: Mid-Year Resolution General City
Attachment 2: Mid-Year Resolution Housing Authority
Attachment 3: General Fund Projected Spendable Fund Balance for June 30, 2025 Attachment 4: General Fund Financial Forecast FY 2024-25 through FY 2028-29 Attachment 5: Mid-Year Appropriation Requests and Revenue Adjustments