BACKGROUND:
The purpose of this presentation is to update the City Council on the status of the City’s General Fund Year End Balance. The City is closing the year with a $2.5M+ surplus for fiscal year (FY) 2022/2023. The brings the City’s General Fund “savings account” balance to more than $39 million.
It is essential the City maintain its Fund Balance at a minimum target balance of 33% of budgeted expenditures. The City is ending FY 2022/2023 with a 58% Fund Balance reserve. The budget for the upcoming FY 2023/2024 was planned to retain a 53% Fund Balance reserve; however, the August 20, 2023 Tropical Storm Hilary event and the resulting expenditures provide a current projection of 38% Fund Balance reserve for the upcoming fiscal year. The City’s Forecast for this biennial budget cycle through June 30, 2025 projects an operating deficit and a Fund Balance reserve at 33%, reinforcing the Council’s historical decision to prioritize achieving a minimum Fund Balance reserve and to have a sufficient “savings account”.
DISCUSSION:
In comparing the financial results for FY 2022/2023 to FY 2021/2022, the City recognized revenues totaling $70M+ in FY 2022/2023, representing a 13%+ increase from the previous fiscal year with revenues at $62M+. The following breakdown identifies the changes for the various revenue categories:
ANNUAL REVENUES
REVENUE CATEGORY FY2022/2023 FY 2021/2022 INCREASE/
(DECREASE)
CANNABIS TAX $3,001,871 $4,508,124 $(1,506,253)
FRANCHISE FEES 2,914,705 2,684,413 230,292
IN-LIEU VEHICLE LICENSE FEE 5,644,072 5,106,648 537,424 PROPERTY TAX 6,371,951 5,413,540 958,411
SALES TAX 13,871,872 14,032,919 (161,047)
TRANSACTIONS & USE TAX 9,706,198 9,711,716 (5,518) TRANSIENT OCCUPANCY TAX 5,413,963 5,312,787 101,176 UTILITY USER’S TAX 3,627,037 3,241,612 385,425
TOTAL TAXES 50,551,669 50,011,759 539,910
LICENSES & PERMITS $3,530,107 $2,959,562 $570,545
SERVICES & FEES 5,439,006 5,510,516 ( 71,510)
CITATIONS 389,501 552,855 (163,354)
REVENUE CATEGORY FY2022/2023 FY 2021/2022 INCREASE/
(DECREASE)
INTERGOVERNMENTAL 447,813 309,902 137,911
PROPERTY/INTEREST 766,798 (394,552) 1,161,350 MISC REVENUES/TFRS 1,115,420 1,184,684 (69,264) COVID-19 ASSISTANCE 8,223,261 1,894,706 6,328,555 TOTAL REVENUES $70,463,576 $62,029,432 $8,434,143
EXPENDITURE CATEGORY FY 2022/2023 FY 2021/2022 INCREASE/ (DECREASE)
SALARIES & BENEFITS $40,980,549 $37,341,404 $3,639,145
OPERATIONS 26,934,800 17,889,470 9,045,330
TOTAL EXPENDITURES $67,915,349 $55,230,874 $12,684,475
SURPLUS $ 2,548,227 $ 6,798,558
FISCAL IMPACT:
Even with the improved year-end financial position in the past two fiscal years, the City must continue to manage expenditures carefully, particularly due to the extraordinary fiscal impacts from Tropical Storm Hilary, which to date, the City Council has approved close to $6M in expenditures for contract labor and debris removal, above and beyond the original FY 2023/2024 approved budget. It is for these types of extraordinary circumstances the City Council established a General Fund Balance Policy for the City’s “savings account” to have a minimum 33% target to be able to plan for such volatility.
The table below is a snapshot for FY 2022/2023 actuals and the next two years’ projection (the current biennial budget). This includes the current Tropical Storm Hilary approved costs and items approved by Council since the original budget was adopted in May 2023. At the November 8, 2023 City Council meeting, staff will present a variety of options for City Council to consider amendments to the current budget, e.g., increased insurance costs above original budget, CalPERS pension fund obligation payments, etc. 2023
Year End
Results
2024
Original
Budget
2024
Current
Projection
2025
Original
Budget
Beginning GF Balance 35,728,660 39,276,887 39,276,887 29,557,438 Revenues 62,240,315 62,007,499 62,053,539 63,646,766
Expenditures 67,915,349 69,679,551 76,772,988 70,605,394 Operating Surplus / (Deficit) (5,675,034) (7,672,052) (14,719,449) (6,958,628) GF Balance (Available Cash) 30,053,626 31,604,835 24,557,438 22,598,810 ARPA Revenue comprised of: 8,223,261 5,000,000 5,000,000 1,000,000 Rehiring Public Sector Staff 1,385,415 1,000,000 1,000,000 1,000,000 Supplemental Pay 836,963
Revenue Recovery 6,000,884 4,000,000 4,000,000
Surplus / (Deficit) 2,548,227 (2,672,052) (9,719,449) (5,958,628) Ending GF Balance(Avail. Cash) 39,276,887 36,604,835 29,557,438 23,598,810 33% Fund Balance Reserve Policy 22,412,065 22,994,252 25,335,086 23,299,780 50% Target Fund Balance Policy 33,957,675 34,839,776 38,386,494 35,302,697 Actual Percent Fund Balance
Reserve
58% 53% 38% 33%
FIVE-YEAR STRATEGIC PLAN:
Goal C: Fiscal Stability and Sustainability
Objective: Cathedral City has economically prospered by facilitating the investment of private dollars in high quality development which benefits the community. We remain financially solvent by instituting prudent fiscal policies and transparent financial practices.