City of Culver City
FISCAL YEAR 2022/2023
UNAUDITED
GENERAL FUND
FINANCIAL REPORT
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1 INTRODUCTION
The Finance Department has prepared a Fiscal Year 2022-2023 Unaudited Financial Report for the General Fund. It is important to note, the enclosed year-end financials are approximately 98% complete and the final audit has not yet been completed by the City’s auditors. The Fiscal Year 2022/2023 report is an overview of the City’s General Fund operating revenues and expenditures as compared to revised budget amounts adopted by the City Council , explaining any notable deviations or trends in the numbers.
This f iscal year-end report illustrates the City’s focus on monitoring its revenues and expenditures, with the intent to proactively respond to unanticipated changes or emerging trends. Secondly, and equally important, the report serves to support fiscal transparency and accountability by providing the Council and members of the public with information on the sources and uses of City revenue.
While e arly predictors suggested that the economic recovery from the COVID -19 pandemic would be slow, the economy recovered more quickly than anticipated in great part due to the flow of stimulus funding from the federal government. The year-end numbers in this r eport demonstrate that the City’s recovery exceeded expectations.
It is important to note the continued recovery is now being tempered by concerns about inflation and the Federal Reserve’s raising of interest rates which are having a cooling effect on the economy. Economic pressures from the war in Ukraine and its impacts on fuel prices and supply chains compound these concerns. Finance Department staff will continue to watch these trends carefully as the current fiscal year progresses.
Finance staff ha ve reviewed all line items and compared actual results against budget expectations, historical trends, seasonality, and other known factors affecting revenue or spending streams to inform its recommendations during upcoming budget discussions.
REPORT HIGHLIGHTS:
• General Fund Operating Revenues for Fiscal Year 2022-2023 were $158.8 million. This high amount reflects both the economic recovery and some unusual one-time revenues. o Actual revenues were 103.3% of the Fiscal Year 2021-2022 Revised Budget of $153.7 million. Further detail is included in the report outlining some of the larger variances between actual and revised budget.
• General Fund Expenditures for Fiscal Year 2022-2023 were $150.3 million. There are $4.1 million in encumbrances that will be carried over into Fiscal Year 2023-2024, along with approved carryover in the amount of $3.1 million for items such as programs, services, and the purchase of equipment that was unable to be completed in Fiscal Year 2022-2023.
2 o Actual expenditures were 92.7% of the Fiscal Year 2022-2023 Revised Budget of $159.9 million. A high number of staff vacancies during the second half of the fiscal year was one of the major factors contributing to this variance.
GENERAL FUND
GENERAL FUND REVENUES
General Fund Revenues were $158.8 million or 103.3% of the Fiscal Year 2022-2023 Revised Budget. The table below displays comparisons between the Adopted Budget, Revised Budget, and Actual amount s for Fiscal Year 2022-2023. The percentage difference is based on the Actual amounts versus the Revised Budget amounts. Total General Fund Revenues from Fiscal Year 2021-2022 have also been included as a comparison. Actual revenues for Fiscal Y ear 2022-2023 were $13.7 million lower than actual revenues for the prior year.
Property Tax – For Fiscal Year 2022-2023, this category was $14.7 million or 111.2% of the Revised Budget amount, and 14 .2% above the previous year . A strong housing market in the prior year helped drive property tax revenue above the amount estimated in the revised budget. Housing sales have slowed since the final months of calendar year 2022 due to rising interest rates and economic uncertainty , but this revenue category is anticipated to experience measured growth in Fiscal Year 2023-2024 based on increased assessed values in the City.
Sales Tax – Total Sales Tax receipts for Fiscal Year 2022-2023 were $42.4 million or
97.5% of the revised b udget, and 4.5% below the previous year. The Sales Tax total includes Bradley-Burns Uniform Local Sales Tax, Measure C and Measure CC revenues.
Several sectors cooled during the year, including auto sales, service stations, business and industry, and general consumer goods , along with receipts from the City’s share of the State and County pools. Inflation and other current economic stressors are prolonging FY 2021-2022
Revenue Category Adopted Budget Revised Budget Actual % Actual Property Tax 11,543,711 13,243,711 14,723,868 111.2% 12,896,922 Sales Tax 42,630,257 43,464,000 42,394,800 97.5% 43,415,098 Business Tax 16,025,000 16,000,000 18,736,311 117.1% 16,186,447 UUT 13,414,320 15,413,360 16,524,880 107.2% 14,858,827 TOT 8,000,000 10,835,000 11,963,174 110.4% 8,813,484 Franchise Tax 1,500,000 1,475,000 1,805,748 122.4% 1,456,175 Real Prop Trans Tax 14,300,000 11,000,000 9,655,756 87.8% 32,575,269 Comm/Ind Dev Tax 500,000 500,000 545,566 109.1% 1,969,753 Licenses & Permits 5,345,500 4,528,400 4,010,256 88.6% 5,741,465 Fines & Forfeitures 3,065,500 3,417,000 5,290,389 154.8% 3,580,843 Intergovernmental 6,869,184 7,486,600 8,055,497 107.6% 11,254,174 Charges for Services 9,552,007 12,292,271 10,949,213 89.1% 11,921,128 Earnings, Prop. Use & Transfer In 6,744,511 7,678,350 7,791,214 101.5% 2,246,568 Cost Allocation Rec 6,400,409 6,400,409 6,365,094 99.4% 5,560,449 Total Revenues 145,890,399$ 153,734,101$ 158,811,766$ 103.3% 172,476,602$ FY 2022-2023
3 this flattening out of Sales Tax receipts in the current fiscal year based on data received from the City’s Sales Tax consultant, HdL.
Business Tax – Business Tax receipts for Fiscal Year 2022-2023 were $18.7 million, 117.1% of the revised budget, and 15.8% above the previous year. On November 8, 2022, Culver City voters approved an update to the City’s Business Tax rates. The new rates went into effect on April 1, 2023 for new businesses. Existing businesses will use the new rates for the 2024 renewal period and will be reflected in Fiscal Year 2023-2024 receipts.
Utility Users Taxes (UUT) – Total UUT receipts for Fiscal Year 2022-2023 are $16.5 million or 107.2% of the revised budget, and 11.2 % above the previous year . U UT for Gas, Cable and Electricity performed higher than predicted. Increased prices from utility companies drove much of this increase, along with increased telecommuting activities.
UUT for Telecommunications came in slightly under the revised budget and is a category that has continued to decline in recent years. Staff continues to evaluate increasing the City’s auditing efforts to help capture any UUT revenues not currently being collected.
Transient Occupancy Tax (TOT) – For Fiscal Year 2022-2023, receipts in this category were almost $12.0 million or 110.4% of the r evised budget, and over a third more than the receipts from the prior year . TOT receipts have rebounded from the depths of the COVID-19 pandemic as travel patterns return to pre-pandemic levels. Revenue for the first several months of the current fiscal year has exceeded receipts prior to the pandemic.
The planned development of new hotels in the City will further increase TOT revenue in the coming years.
Franchise Tax – Revenues for Fiscal Year 2022-2023 were $1.8 million or 122.4% of the revised budget. Revenue was higher than t he prior year revenue by $349,573.
Historically, this category stays around $1.4 million and routinely meets estimates.
Real Property Transfer Tax – Revenues for Fiscal Year 2022-2023 were $9.7 million or
87.8% of revised budget. The decreasing number of sales due to inflation and high interest rates resulted in this revenue source not meeting budget. In the prior year, high revenues were due to some very large commercial property sales. Large receipts like those are not anticipated to occur on a regular basis and are treated as one-time receipts.
By the end of calendar year 2022, home sales have slowed significantly due to rising interest rates and other economic stressors. This is reflected in lower receipts in recent months. Finance staff will watch this carefully as predictions are made for the upcoming budget.
Commercial and Industrial Development Tax – Revenues for Fiscal Year 2022-2023 were $5 45,566 or 1 09.1% of the revised budget. This was largely due to more development projects resuming after a sharp decline during the COVID-19 pandemic.
Licenses & Permits – Revenues for Fiscal Year 2022-2023 were $4.0 million or 88.6% of revised budget, and 43.2% below the previous year. Licenses and Permits revenues are driven by residential and commercial construction activity, which had seen an 4 increase in Fiscal Year 2021- 2022 after the COVID -19 pandemic but fell off during the prior fiscal year. Building, Electrical and Plumbing permits are the most significant source for this revenue category.
Intergovernmental Revenue – Intergovernmental revenue is $8.1 million or 107.6% of the revised budget. This revenue is normally comprised of the motor vehicle license fees from the State Department of Motor Vehicles. In Fiscal Year 2021-2022, the City received the second and final tranche of the Coronavirus Relief Funds (CRF) from the American Rescue Plan Act (ARPA) in the amount of $4.7M. This federal stimulus funding will not continue in future years.
Charges for Services – Receipts in this category were almost $11.0 million or 89.1% of the revised budget, and 8.9% below the previous year. Charges for Services category is comprised of a variety of revenues ranging from recreation fees to police services and plan checks. This category experienced the most significant decreases due to the COVID-19 pandemic. During Fiscal Year 2021-2022, this category saw a dramatic recovery from the prior two years as recreation related activities returned to pre-pandemic levels, but these activities slowed in Fiscal Year 2022-2023.
Fines and Forfeitures – Fines and Forfeitures were $5.3 million or 154.8% of the revised budget and are significantly higher than the previous year . This category is primarily comprised of red-light camera violations, moving violations written by Culver City traffic enforcement, and parking violations written by Culver City parking enforcement.
Earnings, Property Use and Transfers-In – This category was $3.7 million or 141.1% of the revised budget. Th e revenue received in this category improved due to higher returns on investments and increasing interest rates, creating a significant increase in the actual interest income, along with a positive fair market value adjustment . Staff will continue to monitor economic conditions that may impact this revenue source in the current and upcoming fiscal year.
Overall, the revenues for the General Fund finished $5.1 million above the City’s Fiscal Year 2022-2023 Revised Budget revenue predictions. Following adopted policy, the City transferred $2 million to the Self Insurance Fund to satisfy reserve requirements. When the final audited numbers are complete, the City will adjust the amounts allocated to other reserve funds according to established percentages.
5 GENERAL FUND EXPENDITURES
General Fund Expenditures for Fiscal Year 2022-2023 were $150.3 million or 94.0% of Fiscal Year 2022-2023 Revised Budget.
The tables below include information for the Adopted Budget, Revised Budget, Actual amount , and Encumbrance amount carried over to Fiscal Y ear 2023-2024. The Encumbrance amount also includes City Manager approved carry overs. The percentage difference is based on the Actual amounts versus the Revised Budget amounts. Total General Fund Expenditures from Fiscal Year 2021-2022 have also been included as a comparison.
Comparison by Department:
Comparison by Category:
As can be seen on the expenditure chart by Department, the actual expenditures came in below the 2022-2023 revised budget for all General and Operating Departments . The Encumbrances are at $4.1 million for Fiscal Year 2022-2023, and they represent purchase orders and contracts that were not completed in Fiscal Y ear 2022-2023. Adding the City Manager approved Carry Over amounts for necessary equipment and supply purchases that were unable to be completed by the end of the fiscal year increases this total to $7.2 million. This amount will be carried over and realized in Fiscal Y ear 2023-2024. Non- Departmental actuals are greater than predicted because they include an end of year transfer of $2 million to the Self Insurance Fund to satis fy reserve requirements.
FY 2021-2022
Expenditures by Department Adopted Budget Revised Budget Actual % Encumbrance
& Approved
Carryforward
Actual
Administration 3,871,702 4,066,219 3,778,799 92.9% 304,229 1,861,008 City Attorney 2,846,250 2,909,651 2,129,319 73.2% 247,519 2,548,027 Finance 6,604,954 7,117,627 6,270,598 88.1% 426,990 5,984,253 Non-Departmental 9,194,107 9,715,075 13,925,429 143.3% 1,924,150 12,666,276 Human Resources 2,399,987 3,025,481 2,252,778 74.5% 647,377 2,868,911 Information Technology 5,646,620 5,882,416 5,121,870 87.1% 221,325 5,041,859 Parks Recreation & Comm Svs 11,008,221 12,035,856 9,953,494 82.7% 340,663 9,866,390 Police 50,954,116 51,366,313 50,330,046 98.0% 82,369 45,382,490 Fire 29,558,593 30,646,031 30,959,964 101.0% 292,014 27,637,595 Community Development 11,453,766 13,884,492 10,532,910 75.9% 1,810,826 10,440,699 Public Works 17,082,165 19,276,004 14,996,165 77.8% 940,187 14,030,468 Total Expenditures 150,620,481$ 159,925,165$ 150,251,372$ 94.0% 7,237,649$ 138,327,976$ FY 2022-2023
FY 2021-2022
Expenditures Original Budget Revised Budget Actual % Actual Personnel 110,655,511 111,927,633 108,315,347 96.8% 100,248,405 O & M 35,462,630 44,893,757 32,586,144 72.6% 28,940,479 Capital 447,697 809,465 427,492 52.8% 805,790 Excess Appropriations/Appropriated Reserve (1,640,000) (4,628,079) - 0.0% 7,998 Transfers 5,694,643 6,922,389 8,922,389 128.9% 8,325,304 Total Expenditure 150,620,481$ 159,925,165$ 150,251,372$ 94.0% 138,327,976$ FY 2022-2023
6 The Personnel category is $108.3 million or 96.8% of the Revised Budget. The hiring freeze put in place by the City Manager during the COVID-19 pandemic was fully lifted by Mid-Year Fiscal Year 2021-2022. In Fiscal Y ear 2021-2022, there w ere also an unprecedented number of retirements, most occurring in December of 2021. The Human Resources Department (HR) needed to fill many of its vacancies before citywide recruitment could be ramped up. These vacancies were not all filled by the end of Fiscal Y ear 2021-2022 leading to lower actual expenses in this category of approximately $5.5 million. As HR has built back its staff resources, recruitments are moving forward more quickly in the current fiscal year, but all of the vacancies have not yet been filled.
Operations and Maintenance (O&M) category was $32.6 million or 72.6% of the revised budget.
This category saw an increase in spending over the previous year as Departments began getting back to normal operations. The higher Revised Budget total for Fiscal Y ear 2022-2023 also included Fiscal Y ear 2021-2022 encumbrance carryover of $2.6 million. This category was increased significantly during the Mid- Year Budget process, but departments did not have sufficient time remaining or staffing resources availability in the fiscal year to implement purchases and procurement of services. Many of these expenditures were approved by the City Manager to be carried forward into the current fiscal year.
Overall, the total General Fund expenditures came in $9.7 million below the Fiscal Year 2022- 2023 Revised Budget of $159.9 million. As mentioned above, a large part of this is attributable to continued personnel vacancies, and operations and maintenance still playing catch up from the COVID-19 pandemic.
CONCLUSION
In conclusion, the Unaudited Financial Report for Fiscal Y ear 2022-2023 indicates that the General Fund has shown significant recovery this past year as the City move s out of the uncertainty of the COVID-19 pandemic. Revenues significantly recovered during the fiscal year.
The estimated increase to the General Fund unappropriated reserve is shown in the table below.
It includes the $2 million transfer to the Self Insurance Fund.
The City is positioned to end Fiscal Year 2022-2023 with a small surplus of $1.3 million due to recovering revenues, personnel vacancies, and continued conservative spending. Once th e year-end num bers are fully audited, the City will adjust other reserve funds according to established percentages.
Beginning Fund Balance 142,956,654$
Estimated Increase in Fund Balance 10,560,394
Less Transfer to Self Insurance Fund (2,000,000)
Less Carryover and Encumbrances (7,237,649)
Net Increase in Fund Balance 1,322,745
Estimated Ending Fund Balance 144,279,399$
Fund Balance Analysis for the General Fund