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November 28, 2023
ITEM TITLE
Financial Report and Appropriation: Accept the Quarterly Financial Report for the Quarter Ending September 30, 2023 (First Quarter Report), and Appropriate Funds to Implement Required Budget Adjustments
Report Number: 23-0290
Location: No specific geographic location
Department: Finance
Environmental Notice : The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Accept the quarterly financial report for the quarter ended September 30, 2023 (First Quarter Report) and adopt a resolution making various amendments to the Fiscal Year 202 3-24 budget to adjust for variances and appropriating funds for that purpose (4/5 Vote Required).
SUMMARY
The Finance Department, in collaboration with other City departments, prepares quarterly financial reports for the General Fund that reflect budget to actual comparisons, projected revenues and expenditures, and highlight major variances that may require additional action or changes. This First Quarter Report is as of September 30, 2023, and is in compliance with Section 50 5(f) of the City Charter, which requires that quarterly financial reports be filed by the Director of Finance through the City Manager.
In preparing the First Quarter Report , staff has identified various budget changes that are needed to accurately reflect actual revenues and expenditures or address changes in budgetary needs. For government entities, a budget creates a legal framework for spending during the fiscal year. After the budget is approved by the City Council, there are circumstances which arise that could require adjustments to the approved budget. Council Policy 220 -02 “Financial Reporting and Transfer Authority” was established in January of 1996 and allows for budget transfers and adjustments to be completed. This First Quarter Report discusses budget adjustments that staff recommends in the General Fund as well as various other funds to address identified fiscal issues.
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ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the propose d activity consists of a governmental fiscal/administrative activity which does not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable
DISCUSSION
The First Quarter Report is developed using three months of actual activity for Fiscal Year 202 3-24 as of September 30, 2023. The data in this report is the most current data available; however, due to the limited data available, year-end projections for departmental revenues and expenditures are not included in this report but will be provided in future quarterly financial reports. As a result, the projection s are likely to change.
This report will provide summary information for the following areas:
General Fund Revenues and Expenditures
Adjustments to General Fund Expenditures
Adjustments to non-General Fund funds
The Finance Department will continue to monitor the City’s actual revenues and expenditures and will provide any significant changes in subsequent quarterly financial reports.
General Fund Overview
As of the Quarter ended, September 31, 2023, revenues and expenditures are projected to exceed the Amended Budget by $1.8 million. There are unknown variables that may affect the General Fund including economic factors that may slow economic growth includi ng inflation, changes to current interest rates, unemployment, and other financial uncertainties. Staff will continue to monitor and will provide updates in future quarterly financial reports.
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Fiscal Year 2023-24 General Fund Overview
Table 1 In Millions
Adopted
Budget
Amended
Budget
Year-end
Projection Variance1
Revenue Source
Major Discretionary Revenues
Property Tax $ 48.3 $ 48.3 $ 49.0 $ 0.7 Property Tax in lieu of VLF 29.3 29.3 29.9 0.6 Sales Tax 45.8 45.8 45.8 - Measure P Sales Tax 27.8 27.8 27.8 - Measure A Sales Tax 27.8 27.8 27.8 - Franchise Fees 14.8 14.8 14.8 - Transient Occupancy Tax 9.3 9.3 9.3 - Utility User Tax 3.8 3.8 3.8 - Major Discretionary Revenues
Subtotal
207.1
207.1
208.3
1.3 Other General Fund Revenues
Other Revenues 51.2 51.3 51.9 0.6 Other General Fund Revenues
Subtotal
51.2 51.3
51.9 0.6
Total Revenues $ 258.2 $ 258.4 $ 260.2 $ 1.8
Expenditures
Personnel Services $ 132.9 $ 133.0 $ 133.7 $ (0.7)
Non-Personnel
Supplies and Services 25.2 26.6 27.5 (0.9) Other Expenses 1.8 2.8 2.8 - Transfers Out 86.8 86.8 87.0 (0.3) Internal Service 4.5 4.5 4.5 - Utilities 6.7 6.7 6.7 - Other Expenditures Category2 0.4 0.6 0.6 - Total Non-Personnel 258.2 128.0 129.2 (1.2)
Total Expenditures $ 258.2 $ 261.0 $ 262.9 $ (1.8)
Total General Fund Surplus/(Deficit) $ - $ (2.6) $ (2.6) $ - Use of Prior Year Fund Balance - 2.6 2.6 - Total General Fund Surplus/(Deficit) $ - $ - $ - $ - Note: Minor variances due to rounding.
1 Variance compares the Amended Budget and the Year-End Projection. 2 Other Expenditure Categories include: Other Capital, Non-CIP Projects Expenditures and CIP Project Expenditures.
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General Fund Revenues
General Fund revenues are projected to exceed the Amended Budget by approximately $1.8 million. This is due to increased Property Tax and Property Tax in-lieu of VLF. Based on Fiscal Year 2022 -23 projected actuals as reported in the Fourth Quarter Report as well as the increased home prices and home sales that occurred in the past year, Property Tax is expected to exceed the Amended Budget by $0.7 million, reflecting the County Assessor estimate of Assessed Valuations increasing by 6.6% instead of the 5% increase assumed in the Adopted Budget. Similarly, the Property Tax in-lieu of VLF will exceed the Amended Budget by $0.6 million based on the updated information provided by the County of San Diego. The Other Revenues category is projected to exceed the Amended Budget by $0.6 million in the Charges for Services category primarily associated with the reimbursement for permit fees associa ted with the Bayfront development for the Engineering Department as well as additional program revenue for Parks and Recreation Department.
General Fund Expenditures
General Fund expenditures are projected to exceed the Amended Budget by approximately $1.8 million. This is due to various adjustments related to operations such as increased credit card fees for community service departments that are supported by increased revenues.
Additionally, on June 15, 2023, the City was notified that American Rescue Plan Act (ARPA) funds could not be used to reimburse stipends paid after April 10, 2023 by the U.S. Department of Treasury with the Federal government declaration an end to the global Public Health Emergency for COVID-19 on May 19, 2023. These stipends are n ow being paid out of the General Fund either directly or by reimbursement to comply with adherence to existing MOU agreements with various labor groups. The estimated impact of this action is approximately $1.5 million for all funds combined. This was cite d in the Staff Report for the ARPA amendment that was presented to the City Council on the July 25, 2023 Agenda (Item 8.2).
The total budgetary needs are anticipated to be $1.8 million.
Departmental Revenues and Expenditures
Departmental Revenues
Table 2 below provides the Amended General Fund revenue budget, the projected year -end revenues, and the projected variance at the department level.
Fiscal Year 2023-24 General Fund Departmental Revenues
Table 2 In Thousands
Department Current
Budget
Year-end
Projection Variance
City Council $ - $ - $ - City Clerk 47.8 47.8 - City Attorney 425.4 425.4 - Administration 55.1 55.1 - Information Technology 394.7 394.7 - Human Resources 622.3 622.3 - Finance 1,902.0 1,902.0 - Non-Departmental 220,771.6 222,023.7 1,252.1 Animal Care Facility 1,530.3 1,530.3 - P a g e | 5
Fiscal Year 2023-24 General Fund Departmental Revenues
Table 2 In Thousands
Department Current
Budget
Year-end
Projection Variance
Economic Development 451.7 451.7 - Development Services 2,253.1 2,253.1 - Engineering/Capital Projects 8,810.7 9,229.6 418.9 Police 5,919.2 5,919.2 - Fire 2,899.4 2,899.4 - Public Works 8,478.3 8,478.3 - Parks and Recreation 2,849.0 2,999.0 150.0 Library 1,002.6 1,002.6 - Total Departmental Revenue $ 258,413.2 $ 260,234.2 $ 1,821.0 Note: Minor variances due to rounding.
As previously mentioned in the General Fund Revenues section above, the largest variances in Departmental Revenues are projected to be in Non-Departmental. The Non-Departmental positive variance of $1.3 million is where the major revenues are recorded, including Property Tax, Sales Tax, Measure A, Measure P, and Motor Vehicle License Fees (VLF). Property Tax positive variance of $0.7 million reflects an updated projection of the Assessed Valuations based on the County’s Assessors estimates in Fiscal Year 2023-24. The Property Tax in-lieu of VLF positive variance of $0.6 million is based on the updated information provided by the County of San Diego.
The Engineering/Capital Projects Department increase in revenues by $0.4 million is due to an increase to the Charges for Services for permit inspection work performed for the Bayfront development project. The Parks and Recreation Department increase reflects $0.2 million in increased program revenues.
Departmental Expenditures
Table 3 below provides the Amended General Fund expenditure budget, the projected year -end expenditures, and the projected variance at the department level.
Fiscal Year 2023/24 General Fund Departmental Expenditures Table 3 In Thousands
Department Current
Budget
Year-end
Projection Variance
City Council $ 1,527.4 $ 1,529.9 $ (2.5) Boards & Commissions 2.1 2.1 - City Clerk 3,497.5 3,498.5 (1.0) City Attorney 3,177.4 3,178.2 (0.9) Administration 2,591.7 2,592.7 (1.0) Information Technology 4,597.7 4,599.2 (1.5) Human Resources 3,524.3 3,527.9 (3.5) Finance 4,703.2 4,710.3 (7.1) Non-Departmental 97,090.7 97,351.5 (260.7) Animal Care Facility 3,437.4 3,449.0 (11.6) Economic Development 1,760.6 1,762.6 (2.0) P a g e | 6
Fiscal Year 2023/24 General Fund Departmental Expenditures Table 3 In Thousands
Department Current
Budget
Year-end
Projection Variance
Development Services 2,758.2 2,765.8 (7.6) Engineering/Capital Projects 10,856.4 11,278.1 (421.6) Police 55,402.3 55,836.5 (434.2) Fire 34,924.3 35,346.8 (422.5) Public Works 23,015.7 23,066.9 (51.2) Parks and Recreation 4,363.4 4,548.8 (185.4) Library 3,805.7 3,812.0 (6.3) Total Expenditure Budget $ 261,036.0 $ 262,857.0 $ (1,821.0) Note: Minor variances due to rounding.
As previously mentioned in the General Fund Expenditures section above, the employee stipends that were previously reimbursed by ARPA funds have resulted in an approximately $1.5 million expense in the General Fund, which expenditures in excess of the amended budget are projected in multiple departments. The largest variances are reported in both the Police and Fire Department s of over $0.4 million each, primarily due to ARPA funds not covering stipends. The third largest variance is reported i n the Engineering/Capital Project Department by $0.4 million and is primarily due to consultant services required for the Bayfront development project. The recommended budget amendments are reflected in the General Fund Adjustments section of this report.
Fiscal Year 2023-24 Budget Adjustments
Staff is recommending various adjustments, appropriations, and transfers to City Departmental and Fund budgets that require City Council authorization. Attachment 1 summarizes all budget transfers processed in Fiscal Year 2023 -24 and Attachment 2 summarizes all budget amendments approved by Council in Fiscal Year 2023-24.
General Fund Adjustments
In the General Fund, some of the transfers are between expense categories within the same Department and some transfers are between Departments. There are also proposed budget adjustments reflecting increased revenue where needed to address unanticipated expenditure category overages and ensure accurate year - end reporting. Additionally, this reflects an increased appropriation for the estimated transfer to the Pension Reserve Fund per Council Policy 220-09. The recommended budget adjustments are shown in Table 4 below.
General Fund Budget Adjustments Summary - First Quarter Fiscal Year 2023-24 Table 4
DEPARTMENT PERSONNEL
NON-
PERSONNEL TOTAL TOTAL
Footnote SERVICES EXPENSES EXPENSE REVENUE NET IMPACT
GENERAL FUND
City Council 1 $ 2,536 $ - $ 2,536 $ - $ 2,536 City Clerk 1 1,015 - 1,015 - 1,015 City Attorney 1 887 - 887 - 887 Administration 1 1,521 - 1,521 - 1,521 Information Technology 1 1,522 - 1,522 - 1,522 P a g e | 7
General Fund Budget Adjustments Summary - First Quarter Fiscal Year 2023-24 Table 4
Human Resources 1 3,550 - 3,550 - 3,550 Finance 1 7,103 - 7,103 - 7,103 Non-Departmental 1, 2-6 - 242,152 242,152 (1,151,220) (909,068) Animal Care Facility 1 11,616 - 11,616 - 11,616 Economic Development 1, 7 2,029 (100,000) (97,971) 100,000 2,029 Development Services 1, 8 7,610 35,660 43,270 (35,660) 7,610 Engineering/Capital
Projects 1, 9 2,768 418,861 421,629 (418,861) 2,768 Police 1, 10 134,206 300,000 434,206 - 434,206 Fire 1 422,540 - 422,540 - 422,540 Public Works 1, 11-13 51,233 33,985 85,218 (118,985) (33,767) Parks and Recreation
1, 6, 11,
14 6,592 150,000 156,592 (135,000) 21,592 Library 1, 15 6,340 16,000 22,340 - 22,340 TOTAL GENERAL FUND $ 663,068 $ 1,096,658
$1,759,726
$(1,759,726) $ -
The proposed General Fund budget adjustments result in no net impact to the Fiscal Year 2023-24 budget, primarily being derived by the following transactions:
1. On June 15, 2023, the City was notified that ARPA funds could not be used to reimburse stipend paid after April 10, 2023 by the U.S. Department of Treasury with the Federal government declaration an end to the global Public Health Emergency for COVID -19 on May 19, 2023. These stipends are now being paid out of the General Fund either directly or by reimbursement to comply with adherence to existing MOU agreements with various labor groups. The estimated impact of this action is approximately $1.5 million for all funds combined.
2. Increase the revenue budget for Property Tax in Lieu of Vehicle License Fees (VLF) by $567,421 to reflect the Fiscal Year 2023-24 allocation due from the County of San Diego.
3. Increase the revenue budget for Property Taxes based on revised estimates by $684,725 to reflect the Fiscal Year 2023-24 allocation based on an increase in Assessed Valuations going from 5% used in the budget to 6.6% based on the projection from the County Assessor’s office.
4. Transfer the Special Events expenditure appropriations and decrease the revenue budget related to donations from the General Fund to the Donation Fund by $120,000.
5. Increase Transfers Out expenditure appropriations for debt service payment by $1,423.
6. Increase both the Transfers Out expenditure appropriations in Non-Departmental and the revenue budget in Parks and Recreation by $100,000 to cover utility expenses for the Living Coast Discovery Center.
7. Decrease both the Non -CIP expenditure appropriations and decrease the revenue budget by $100,000 to remove the ARPA reimbursement from Fiscal Year 2022-23.
8. Increase both the Other Expenses expenditure appropriations and the revenue budget by $35,660 for the MRLLP (Mobile home Residency Law Protection Program) payment to the State of California.
9. Increase both the Supplies and Services expenditure appropriations and the revenue budget by $418,861 for permit inspection work related to the Bayfront development project.
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10. Decrease the Personnel Services expenditure appropriations and increase the Supplies and Services expenditure appropriations by $300,000 from Salary Savings to increase recruitment and training budgets in the Police Department.
11. Decrease the revenue budget in the Parks and Recreation Department and increase the revenue budget in the Public Works Department as part of the Parks Maintenance restructuring in Fiscal Year 2023 by $115,000 for the reimbursement of CFD Maintenance staff.
12. Increase both the Other E xpenses expenditure appropriations and the revenue budget in Public Works for damage to City Property by $3,985.
13. Increase the Supplies and Services expenditure appropriations in Public Works for root pruning of trees by $30,000.
14. Increase both the Other Expenses expenditure appropriations and the revenue budget by $150,000 for credit card transaction fees.
15. Increase the Utilities expenditure appropriations by $16,000 for gas and electricity costs.
Other Fund Adjustments
The following recommended adjustmen ts are for funds outside of the General Fund. The proposed adjustments, displayed in Table 5, have a net cost decrease of approximately $ 0.2 million to the various identified funds. The proposed adjustments are to impact the fund balances or current year available revenues of the respective noted funds.
Other Fund Budget Adjustments Summary – First Quarter Fiscal Year 2023-24 Table 5
PERSONNEL
NON-
PERSONNEL TOTAL TOTAL
Footnote SERVICES EXPENSES EXPENSE REVENUE NET IMPACT
OTHER FUNDS
2016 Measure P Sales Tax 2, 3 $ - $ 925,000 $ 925,000 $ - $ 925,000 Transportation Grants-Gas
Tax 1 1,522 - 1,522 (1,522) -
2018 Measure A Sales Tax 1 200,364 - 200,364 (200,364) - Advanced Life Support
Program 1, 4 507 60,000 60,507 (60,507) -
Donations 5 - 120,000 120,000 (120,000) - Special Revenue
Endowments 6 - 20,000 20,000 - 20,000
American Rescue Plan Act
2021 7, 8 - (1,844,633) (1,844,633) - (1,844,633)
Other Grants 9 - 50,000 50,000 (50,000) - Federal Grants 1, 10-14 4,698,447 97,132 4,795,579 (6,304,524) (1,508,945) State Grants 1, 15 26,594 394,093 420,687 (584,747) (164,060) Environmental Services 1 4,058 - 4,058 (4,058) - CDBG Housing Program 10 - - - (719,863) (719,863) Chula Vista Housing
Authority 1 1,015 - 1,015 (1,015) -
Public Educational & Govt
Fee 16 - 225,000 225,000 - 225,000
Section 115 Trust 17 - 80,000 80,000 - 80,000 Public Liability Trust 18 - 481,044 481,044 - 481,044 Open Space District #09 19 - 10,000 10,000 - 10,000 Central Garage Fund 1 4,565 - 4,565 (1,015) 3,550 P a g e | 9
Other Fund Budget Adjustments Summary – First Quarter Fiscal Year 2023-24 Table 5
PERSONNEL
NON-
PERSONNEL TOTAL TOTAL
Footnote SERVICES EXPENSES EXPENSE REVENUE NET IMPACT
Living Coast Discovery
Center 20 - 100,000 100,000 (100,000) -
Development Services
Fund 1 12,769 - 12,769 (18,769) (6,000)
Transport Enterprise 1, 21 9,638 1,042,073 1,051,711 (1,042,580) 9,131 Sewer Service Revenue 1 23,349 - 23,349 (24,349) (1,000) Long Term Debt - City of
CV 12 - - - 560,082 560,082
Public Facilities DIF 22 - 3,576 3,576 - 3,576 Capital Improvement
Projects 8 - - - 1,765,000 1,765,000
TOTAL OTHER FUNDS
$4,982,828
$1,763,285
$6,746,113
$(6,908,230) $ (162,118)
The Other Funds proposed budget adjustments result in a positive net impact of $162,118, primarily being derived by the following transactions:
1. On June 15, 2023, the City was notified that ARPA funds could not be used to reimburse stipend paid after Apr il 10, 2023 by the U.S. Department of Treasury with the Federal government declaration an end to the global Public Health Emergency for COVID -19 on May 19, 2023. These stipends are now being paid out of the General Fund either directly or by reimbursement to comply with adherence to existing MOU agreements with various labor groups. The estimated impact of this action is approximately $1.5 million for all funds combined.
2. Decrease the Supplies and Services expenditure appropriations by $100,000 and increase Other Capital expenditure appropriations by $100,000 for the Motorola CAD Server.
3. Increase CIP Project Expenditures by $925,000 from available Measure P Sales Tax fund balance for Fire Station #1 repairs (GGV0252).
4. Increase both the Supplies and Services e xpenditure appropriations and the revenue budget by $60,000 to cover program supplies.
5. Transfer the Special Events expenditure appropriations and decrease the revenue budget related to donations from the General Fund to the Donation Fund by $120,000.
6. Increase the Supplies and Services expenditure appropriations by $20,000 from available fund balance for the Bella Lago Preserve.
7. Decrease the Transfers Out expenditure appropriations by $100,000 to remove the ARPA reimbursement from Fiscal Year 2022-23 to the General Fund.
8. Decrease the Transfers Out expenditure appropriations by $1,765,000 to remove the ARPA reimbursement from Fiscal Year 2022-23 to the Capital Improvements Project Fund.
9. Increase both the Supplies and Services expenditure appropriations and the revenue budget by $50,000 to cover program supplies.
10. Increase the revenue budget for the HUD Fiscal Year 2023-24 allocation by $3,418,050, which the expenditure appropriations were included on the City Council Resolution No. 2023 -045 on May 9, 2023.
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11. Increase expenditures appropriations for HIDTA CBAG grant by $2,027,818 and increase expenditures appropriations by $2,542,295 , and the revenue budget by $3,478,002 for the SD Law Enforcement Coordination Center HSGP grant.
12. Decrease both the Transfers Out in the Federal Grants Fund expenditure appropriations and the revenue budget in the Long -Term Debt Fund by $560,082 related to the HIDTA CBAG grant to correct the transfer schedule in Fiscal Year 2023-24.
13. Increase both the Personnel Services expenditure ap propriations and the revenue budget by $126,305 for the OPSG Grant approved by the City Council on Resolution No. 2022 -220 for the Fiscal Year 2023-24 allocation.
14. Increase the Transfers Out expenditure appropriations by $657,214 for the CDBG Section 108 Loan to match the debt service payment schedule.
15. Increase the expenditure appropriations in various categories by $414,093, and the revenue budget by $578,153 for the State Grants Other - Fire.
16. Increase the Supplies and Services expenditure appropriations by $225,000 from available fund balance for the Public Educational & Govt Fee Fund.
17. Increase the Supplies and Services expenditure appropriations by $80,000 from available fund balance for the Section 115 Fund to cover trustee fees.
18. Increase the Other Exp enses expenditure appropriations by $481,044 from available fund balance for the Public Liability Trust Fund to cover various legal expenses.
19. Increase the Supplies and Services expenditure appropriations by $10,000 from available fund balance for the Open Space District #09 Fund for the unanticipated removal of 14 palm trees.
20. Increase the revenue budget by $100,000 to cover utility expenses for the Living Coast Discovery Center.
21. Increase both the Supplies and Services expenditure appropriations and the rev enue budget by $1,032,942 for participation in the PP -IGT (Public Provider Intergovernmental Transfer) program.
22. Increase Transfers Out expenditure appropriations for debt service payment by $3,576.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property holdings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
The F irst Quarter Report presents projected revenue and expenditure actuals as of September 30, 2023.
Approval of the resolution amending the Fiscal Year 2023-24 budget will result in the following impacts:
General Fund – The proposed adjustments result in no net impact to the Fiscal Year 2023-24 budget. This includes an increase in General Fund appropriations of approximately $ 1,759,726 and an increase in estimated revenues of $1,759,726.
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Other Funds – The proposed adjustments result in a net impact to the Fiscal Year 2023-24 budget of the Other (non-General Fund) Funds of $162,118. This includes an increase in appropriations of approximately $6,746,113 and an increase in estimated revenues of $6,908,230.
ONGOING FISCAL IMPACT
Staff will review the impacted budgets to identify potential ongoing impacts and will incorporate as required during the Fiscal Year 2024-25 budget development process.
ATTACHMENTS
1. General Fund Budget Transfers
2. General Fund Budget Amendments
Staff Contact: Sarah Schoen, Director of Finance/Treasurer Ed Prendell, Budget and Analysis Manager