DATE: November 20, 2023
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
FROM: Edmund Suen, Finance Director
SUBJECT: FISCAL YEAR 2023-24 FIRST QUARTER FINANCIAL UPDATE
RECOMMENDATION
It is recommended that the City Council, by Minute Order, receive and accept the report on the Fiscal Year 2023-24 First Quarter Financial Update.
EXECUTIVE SUMMARY
Attached is the FY 2023-24 First Quarter Financial Update report. It is important to note that the City’s revenues are non-linear as they are not received evenly over the course of the fiscal year. As an example, the County pays most of its property tax to the City in December and April of each fiscal year. Since property taxes account for over 60% of the City’s General Fund revenues, total General Fund revenues in the first quarter are normally low, as is the case with the current quarter.
The City’s adopted FY 2023-24 General Fund budget (Funds 001-003) has a $6.32 million deficit, including a $6.0 million transfer to the City’s Capital Improvement Projects Fund.
General Fund revenues (Funds 001 to 003) for the First Quarter were $4.33 million compared to $8.74 million for the same quarter last year as the City received the 2nd and final tranche of the $4.05 million in American Rescue Plan Act (ARPA) relief monies in FY 2022-23. The property tax in lieu of VLF
backfill for FY 2022-23 was $2.01 million vs. $667,000 this fiscal year.
Notwithstanding, transient occupancy tax (TOT) for July and August improved from $489,000 to $663,000. Sales tax revenues climbed from $247,000 to $294,000 over the two-month period. Based on trends over the past fifteen- month going back to the beginning of FY 2022-23, staff is increasing the FY 2023-24 revenue estimates for these two revenues categories and business license tax by $522,000, $390,000, and $120,000 respectively. Recreation Center program revenue for the 1st quarter was $819,000, a $209,000 improvement from last year. Interest income also experienced year-over- year gains of $429,000 as Federal Funds rates have stayed higher and for a longer period.
Due to the stronger FY 2022-23 revenue results and expected revenue growth trends, staff is increasing estimated FY 2023-24 General Fund revenues by $1.03 million which will help alleviate our budgeted General Fund deficit of $6.32 million.
General Fund expenditures were $13.5 million or $6.6 million lower than the prior year’s mark of $20.1 million. Due to the availability of investment returns of approximately 5.5%, City staff opted not to prepay its unfunded accrued liability (UAL) to CalPERS in July of this fiscal year and instead make its 12 monthly payments. This amounted to a cash outflow difference of $5.67 million ($1.84 million vs. $7.51 million). In addition, the City made just the 1st quarterly funding payments of $2.29 million to SMC Fire Department for the current fiscal year, but made both the 1st and 2nd quarterly funding payments totaling $4.36 million ($2.18 million for each quarter) in the 1st quarter of the prior fiscal year. Wage COLA for FY 2023-24 increased by 4.2% for the POA bargaining unit as well as the Management unit. No COLA payment was made in the 1st quarter for the AFSCME unit as that labor agreement wasn’t finalized until October 2023. As was presented at the November 6, 2023 City Council meeting, the City closed out FY 2022-23 with a $58.6 million General Fund reserve, which represents 100% of budgeted FY 2023-24 operating expenditures.
BACKGROUND & ANALYSIS
The City Council and City staff have committed to provide quarterly financial updates at City Council meetings to review quarterly financial performance and identify general economic trends and specific issues that may affect, positively and negatively, the City’s financial situation.
The report is intended to provide high level financial information for the City Council, City Departments, and the community as a whole. Supplemental revenue and expenditure analyses are also provided for those readers desiring more detailed financial information.
FISCAL IMPACT
There is no fiscal impact associated with the acceptance of this report.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
Attachments:
•Attachment 1 - Foster City Financial Update FY 2023-24 Q1 (for the three months ended September 30, 2023)
•Attachment 2 - Change in Fund Balances (for the three months ended September 30, 2023)
•Attachment 3 - Comparison of Budget vs. Actual and Prior Year’s Revenues (for the three months ended September 30, 2023) •Attachment 4 - Comparison of Budget vs. Actual and Prior Year’s Expenditures (for the three months ended September 30, 2023)