DATE: January 6, 2025
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
FROM: Waqas Hassan, Assistant Finance Director
SUBJECT: FISCAL YEAR 2024-25 FIRST QUARTER FINANCIAL UPDATE
RECOMMENDATION
It is recommended that the City Council, by Minute Order, receive and accept the report on the Fiscal Year 2024-25 First Quarter Financial Update.
EXECUTIVE SUMMARY
Attached is the FY 2024-25 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 2024-25 General Fund budget (Funds 001-003) has a $5.58 million deficit, including a $5.75 million transfer to the City’s Capital Improvement Projects Fund.
General Fund revenues (Funds 001 to 003) for the First Quarter were $5.10 million compared to $4.33 million for the same quarter last year mainly due to higher interest income and the money received from the State for VLF backfill. The property tax in lieu of VLF backfill for FY 2023-24 was $667,000 vs. $1.40 million this fiscal year.
Notwithstanding, transient occupancy tax (TOT) for July and August is stable at $644,191, vs. $663,000 in the prior fiscal year. Sales tax revenues are steady as well at $295,500 vs. $294,000 over the two-month period. Based on trends over the past fifteen-month going back to the beginning of FY 2023-24, staff is adjusting the FY 2024- 25 revenue estimates for sales tax and business license tax revenues categories by
lowering the sales tax revenue estimates by $449,600 and increasing the business license tax revenue estimates by $1.4 million, creating a net increase in estimates of approximately $950,000. Recreation Center program revenue for the 1st quarter was $714,000, a $106,000 drop from last year for the same time period. Interest income also experienced year-over-year gains of $93,000 as Federal Funds rates have stayed higher and for a longer period.
As discussed above, staff is adjusting estimated FY 2024-25 General Fund revenues by $950,000 million which will help alleviate our budgeted General Fund deficit of $5.58 million.
General Fund expenditures were $16.36 million, or $2.84 million higher than the prior year’s mark of $13.52 million. In the prior year, considering 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 the previous fiscal year and instead made its 12 monthly payments. However, after looking at the actual results, there were no savings, staff opted to prepay UAL in the current fiscal year, which amounted to a cash outflow difference of $5.53 million ($7.37 million vs. $1.84 million). In addition, the City made recorded quarterly funding payments of $2.40 million each to SMC Fire Department for the current fiscal year, but made only the 1st quarterly funding payment totaling $2.29 million in the 1st quarter of the prior fiscal year. Wage COLA for FY 2024- 25 increased by 3.8% for the POA bargaining unit as well as the Management unit.
COLA payment for the AFSCME unit was made in the 1st quarter as that labor agreement was finalized in September 2024. As was presented at the November 4, 2024 City Council meeting, the City closed out FY 2023-24 with a $63.1 million General Fund reserve, which represents approximately 102% of budgeted FY 2024-25 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 2024-25 Q1 (for the three months ended September 30, 2024)
•Attachment 2 - Change in Fund Balances (for the three months ended September 30, 2024)
•Attachment 3 - Comparison of Budget vs. Actual and Prior Year’s Revenues (for the three months ended September 30, 2024)
•Attachment 4 - Comparison of Budget vs. Actual and Prior Year’s Expenditures (for the three months ended September 30, 2024)