FAIRFAX TOWN COUNCIL MEETING
STAFF REPORT
AGENDA ITEM #3
MEETING DATE: March 6, 2024
PREPARED FOR: Mayor and Town Council
PREPARED BY: Michael Vivrette, Finance Director
SUBJECT: Receive 2023-24 Mid-Year Budget Review Report
RECOMMENDATION
Receive 2023-24 Mid-Year Budget Review Report
DISCUSSION
The attached Mid-Year Budget Report (Report) reviews key FY23-24 revenue and expenditure activities for the Town. The Report provides year-end budget estimates based on actual Town expenditures and revenues posted through January 31st and historical expenditure patterns.
The FY23-24 Adopted Budget projected that the Town planned to draw down $2,171,000 of its General Fund reserves to fund additional CIP. Based on projections using January 31st income statements and reasonable estimates of financial activity through June 30th, staff estimates revenues will exceed budget by $837,500 (6.7%) and expenditures will likely be under budget by $512,300 (3.5%). The net effect is that the reserves may only be reduced by $821,600.
Projected revenues will exceed budget in part due to:
• Continued favorable real estate market activity impacting property tax revenue, • Inflation (increasing sales tax revenues due to higher prices), • Increasing interest rates (due to Fed Funds & LAIF rate increases), • Grant revenues received from sources not budgeted for in the current year – including $160,000 in SB 2 planning expense recovery, and
• Post Covid demand for services especially in hospitality and building.
Key factors affecting original budget expenditure estimates include:
• Higher inflation, increasing costs for materials and services, • Tight labor market reflected in delayed or unfilled positions and higher salary costs for key positions,
• Inefficiencies due to staff and contractor turnover,
• Supply chain issues affected by the global unrest and political actions.
Expenditures in the General Fund are expected to be under budget overall. We recommend the budget adjustments for the listed departments come from expense savings in other General Fund departments and projected increased revenues at the discretion of the Town Manager.
ATTACHMENT
A. FY24 Midyear Summary
B. Midyear Budget Report for Fiscal 2023-24
Projected FY24 Income Statement
FEB MAR APR MAY JUN ADJ/CLOSE PROJECTED
FY24 ▲$ ▲%
Fund: 01 - GENERAL FUND
Revenue
010 - TAXES 4,563,360 315,361 200,452 200,452 2,697,989 200,452 100,465 8,278,530 7,718,600 559,930 7.3% 020 - FRANCHISE FEES 213,688 49,400 19,300 99,300 49,200 19,300 48,800 498,989 468,477 30,512 6.5% 030 - LICENSES 36,566 19,100 9,324 46,401 5,600 6,600 - 123,591 100,000 23,591 23.6% 040 - FINES 24,050 6,196 6,196 6,196 6,196 6,196 - 55,030 80,000 (24,970) -31.2% 050 - INTEREST & RENTS 161,008 1,000 500 51,000 2,500 1,300 60,000 277,308 135,500 141,808 104.7% 060 - REVENUES FROM OTHER AGENCIES 177,363 - - - 4,400 - - 181,763 36,450 145,313 398.7% 070 - GRANTS FROM OTHER AGENCIES 4,000 - - - - 43,932 - 47,932 81,000 (33,068) -40.8% 080 - CHARGES FOR CURRENT SERVICES 136,683 2,097 2,097 2,097 2,097 2,097 - 147,170 156,320 (9,150) -5.9% 090 - OTHER FEES 30,814 4,350 3,928 7,560 5,700 - 26,598 78,950 75,420 3,530 4.7% Revenue Before Transfers Total: 5,347,533 397,504 241,797 413,006 2,773,682 279,877 235,863 9,689,263 8,851,767 837,496 9.5% 100 - TRANSFERS IN - - - - - 3,651,800 - 3,651,800 3,651,800 - 0.0% Revenue Total: 5,347,533 397,504 241,797 413,006 2,773,682 3,931,677 235,863 13,341,063 12,503,567 837,496 6.7% Expense
111 - TOWN COUNCIL 21,277 1,592 1,592 1,592 1,592 5,363 796 33,802 29,013 (4,789) 16.5% 112 - TOWN TREASURER 2,210 329 329 329 329 329 164 4,018 4,475 457 -10.2% 116 - INDEPENDENT AUDITOR 38,967 - - - - - 27,371 66,338 66,338 - 121 - TOWN ATTORNEY 195,587 27,941 27,941 27,941 27,941 27,941 - 335,291 325,000 (10,291) 3.2% 211 - TOWN MANAGER 152,335 19,628 19,628 19,628 19,628 29,643 3,375 279,901 274,142 (5,759) 2.1% 221 - TOWN CLERK 212,729 19,698 19,698 19,698 19,698 24,888 11,563 327,970 366,946 38,976 -10.6% 222 - ELECTIONS 811 - - - - - - 811 - (811)
231 - PERSONNEL 73,144 9,195 9,195 9,195 9,195 35,195 4,568 176,390 198,907 22,517 -11.3% 241 - FINANCE 229,321 23,034 23,034 23,034 23,034 33,198 20,652 375,309 404,763 29,454 -7.3% 311 - PLANNING 455,557 44,570 44,570 44,570 44,570 71,259 318,861 1,023,958 1,045,728 21,770 -2.1% 321 - BLDG INSP & PERMITS 150,732 16,871 16,871 16,871 16,871 37,703 6,580 278,931 262,335 (16,596) 6.3% 411 - POLICE 2,363,796 255,602 255,602 255,602 319,934 699,172 87,849 4,256,786 4,276,678 19,892 -0.5% 418 - DISASTER PREP 3,637 429 429 429 429 429 8,628 14,408 14,078 (330) 2.3% 421 - ROSS VALLEY FIRE SERVICE 1,721,151 240,597 240,597 240,597 240,597 254,760 - 2,938,298 2,954,275 15,977 -0.5% 510 - PUBLIC WORKS ADMIN 310,396 18,137 18,137 18,137 18,137 24,930 45,200 355,756 368,451 12,695 -3.4% 511 - STREET MAINTENANCE 226,967 27,137 26,162 26,162 25,927 40,432 47,806 434,009 521,958 87,949 -16.8% 512 - STREET LGHT & TRAF SIGNALS 55,743 7,461 7,461 7,461 7,461 13,947 - 99,536 125,000 25,464 -20.4% 514 - CLIMATE & ENVIRON 51,496 10,872 10,872 10,872 10,872 7,360 4,442 106,786 262,105 155,319 -59.3% 611 - PARK MAINTENANCE 193,019 19,383 19,383 19,383 19,383 27,292 (6,802) 291,041 281,055 (9,986) 3.6% 616 - COMMUNITY SERVICES 25,164 2,718 2,718 2,718 2,718 4,654 - 40,690 44,055 3,365 -7.6% 617 - RECREATION 46,100 4,272 4,864 4,864 4,864 8,533 771 74,268 94,330 20,062 -21.3% 621 - FAIRFAX RECREATION 73,309 7,652 8,070 8,070 8,070 8,070 8,080 121,319 122,228 909 -0.7% 622 - SUMMER CAMPS 10,112 293 293 293 293 (7,766) 8,245 11,765 13,642 1,877 -13.8% 625 - RENTAL FACILITIES 39,927 5,885 5,885 5,885 5,884 11,385 1,254 76,105 71,668 (4,437) 6.2% 715 - NON DEPARTMENTAL 522,589 43,475 8,557 8,557 8,557 456,455 122,785 1,170,976 1,260,695 89,719 -7.1% 725 - TRANSFERS OUT - - - - - 1,287,063 - 1,287,063 1,287,063 - 911 - BUILDING MAINTANANCE 0 0 0 0 0 0 (18,896) (18,896) - 18,896 Expense Total: 7,176,078 806,771 771,887 771,887 835,985 3,102,235 703,291 14,162,629 14,674,928 512,299 -3.5% Fund: 01 - GENERAL FUND Surplus (Deficit): (1,828,545) (409,266) (530,090) (358,881) 1,937,698 829,442 (467,427) (821,566) (2,171,361) 1,349,795
JUL-JAN CURRENT
FY24 Budget
Town of Fairfax, CA
at January 31, 2024
ATTACHMENT A
Midyear Budget Report for Fiscal 2023-24
REVENUES
The General Funds are the seven discretionary funds including: General Fund (01), Dry Period Fund (02), Building & Planning Fund (04), Retirement Fund (06), and three equipment replacement funds Field & Vehicle (03), Building (05), and Office (08).
Revenues in the General Fund (01) are projected to exceed budget by $837,500 (6.7%) primarily due to higher-than-projected property taxes and sales tax revenues, higher interest income from LAIF, and revenues from unbudgeted sources. Revenues in the Building & Planning Fund (04) are projected to exceed the budget by $88,000. Retirement Fund (06) revenues are projected to closely match the budgeted total.
Table A: Projected Year-End Revenues – General Fund (01) Source: Projected Variance:
Property Taxes, ERAF, VLF Swap $ + 351,000
Sales Taxes + 70,000
Other Taxes + 139,000
Rents & Interest + 142,000
Revenues from Other Agencies + 145,000
Other categories - 9,500
Projected Additional Revenue +837,500
Property Taxes
Total property tax revenues are projected to exceed budget by $351,000 (+6.7%) this fiscal year. Several factors contribute to the higher revenues. Budgeted revenues were based on county estimates which were exceeded as we continue to experience a robust housing market increasing property values overall. Property tax assessments for FY23-24 predated most of the effects of rising interest rates which may dampen the market in future years. Secured Property Tax will exceed budget by $160,000 (4.6%). Property Tax in Lieu of VLF (Vehicle License Fees) from the state is projected to exceed budget by $120,000. ERAF Excess revenues (Educational Revenue Augmentation Fund) will be $80,000 higher than the estimates made when the budget was adopted.
Sales Taxes
When the budget was prepared, there was some expectation that there might be a downturn in the economy which has not materialized. Sales tax revenues have been robust and are projected to exceed the budget by an estimated $70,000 (+3.5%). The estimate of Sales Tax revenues to be received are based on the projections of Avenu – the Town’s sales tax
ATTACHMENT B
consultants. The most recent report for the 3rd quarter of 2023 shows sales tax decreasing in the overall Bay Area by 4.1% quarter-over-quarter but only decreasing in Fairfax by -.2%. Avenu uses this information in their quarterly estimates.
The base 1% sales tax (Bradley Burns) is estimated to exceed the budget by $68,000. The ¾ cent District Tax (Measure C) is estimated to be $9,000 over original estimates. Consumers have more spendable funds - in part boosted by higher available funds from government programs and higher wages. This has, in turn, increased online purchasing (Amazon, Target etc.) in preference to buying at stores out of town, capturing sales tax that would have gone to neighboring areas. Inflation, too, has contributed to increased revenues, although key prices for some goods, notably in gasoline, have leveled out.
User Taxes
Utility User Tax (UUT) revenues from Energy & Telecom are projected to come in $120,000 higher than budgeted due to significant increases in utility rates. Hotel User Tax (HUT) will likely be slightly lower than projected. The Town may also see an increase when the short-term rentals (STR) start paying HUT.
Franchise Fees
Franchise fees are collected from Garbage, Gas & Electric and Cable. Staff projects that the revenues will be $30,000 higher than budgeted due to higher rates and inflation. Cable fee revenues have been higher than expected. Gas & Electric fees are all paid in April and are projected to be close to budget, though higher rates may result in higher revenues for the Town.
Interest revenues
Interest revenue has benefitted by Fed Fund rate increases which result in higher LAIF rates. In January 2023, the LAIF interest rate was 4.012% in January 2024 (compared to 2.425% in January 2023 and .234% in January 2022). The projected additional interest will be about $139,000 more than the budget projection of $120,000. We expect the LAIF interest rate to continue to increase with further Fed Fund interest increases. Our current balance in LAIF has decreased by slightly less than $2.0 million year-over-year, to $5.2 million. ARPA funds ($1.8M) represent the largest portion of the LAIF balance.
Rental facility income is projected to exceed the budget by $3,000 due to the end of extended lockdown and closure of facilities for repairs.
Building & Planning Fees (Fund 04)
As of January 2022, the Building & Planning revenues from permits and fees were at 76.9% of budget, which is better than projected. Building & Planning revenues are estimated to be over budget by $88,000 which will be transferred to the General Fund to help offset the cost of planning projects.
Expenditures
The General Fund is projected to end the year with expenses under the adjusted budget by approximately $512,300 (-3.5%).
General Fund (GF) expenditures are on track as of January 2024 with $7,499,000 (48.9%) of budgeted expenditures for the fiscal year. The seven-month GF total also does not include any actual transfers, which are posted in June.
Personnel Costs
Personnel costs, the largest component of expenditures, are tracking on budget as of January 31, 2024. With the filling of several positions in Police, Public Works and Planning, costs will likely increase in the last five months depending on the timing of additional staff positions unfilled as of January 31 which will affect cost calculations.
CalPERS Health insurance costs increased this year by an average of 9.4%. However, the Delta Dental rates decreased in January which helped soften the impact. We budgeted for an overall increase of 6.0% in January, which may even out across all health insurance costs.
Departmental Expenditures
The year-end projection anticipates most departments, with some small exceptions, to be within budget. Most departments projected to be within budget overall, though there are some notable exceptions including:
• Town Clerk (221) – Expenses are projected to be under budget by $39,000 (10.6%) due to the retirement of the principal employee. There are cost savings as the position is vacant currently.
• Street Maintenance (511) – Projected expenses will be under budget by $88,000 (16.8%). One maintenance worker position remained vacant for half the year which resulted in some personnel cost savings.
• Fairfax Recreation (621) – Though the expenses are anticipated to be $20,000 under budget (21.3%), recreation revenues are projected to be slightly higher than budget by $3,500. This indicates there was higher participation in recreation programs than originally projected.
Expenses in the General Fund are expected to be under budget overall for all departments.
Staff recommends the budget adjustments for the listed departments come from expense savings in other General Fund departments and projected increased revenues at the discretion of the Town Manager.
Capital Improvement Program (CIP)
We do not require any mid-year budget adjustments for the Capital Improvement Program (CIP). It should be noted that any budget adjustments for capital projects are approved with the Council’s approval of the contracts for a specific project.
Through January 2024, the Town has spent approximately $1,632,200 (39.2%) on CIP projects.
The adopted FY23-24 CIP budget has approximately $4.16 million for Funds 51, 52 and 53. CIP projects that are not completed in FY22-23 can be carried over and re-budgeted in the following fiscal year.