FY 2022-23
Mid Year Review,
ARPA &
General Fund
Financial Forecast
GROVERBEACH.ORG
Deanne Purcell
Administrative Services Director
GF Summary – FY 2022-23
GROVERBEACH.ORG
GF Summary Budget Projected
Beginning Reserves $ 6,937,300 $ 6,937,300
Revenues/Transfers In 18,728,000 18,488,800
Expenditures/Transfers Out 18,463,949 18,263,949
Annual Surplus 264,051 224,851
Ending Reserves $ 7,201,351 $ 7,162,151
% of Operating Expenditures 49% 49%
FY 2022-23
GF Revenue – Top 5
GROVERBEACH.ORG
Top 5 GF Revenue Budget Projected
Over/
(Under)
% of
Budget
1. Sales Tax $ 5,916,000 $ 5,986,000 $ 70,000 101.2%
2. Property Tax 5,381,000 5,381,000 - 100.0%
3. Cannabis Tax 1,632,000 1,300,000 (332,000) 79.7%
4. Franchise Fees 723,000 623,000 (100,000) 86.2%
5. TOT 750,000 874,000 124,000 116.5%
Total Top 5 $14,402,000 $ 14,164,000 $ (238,000) 98.3%
GF Expenditures – FY 2020-21
GROVERBEACH.ORG
• Approximately $200,000 lower than originally estimated due to:
• $100,000 net savings in salaries and benefits
• $100,000 savings for the streetlight project that will be delayed this year GF Expenditures Budget Projected Variance
% of
Budget
Salaries and Benefits $ 8,749,654 $ 8,649,654 $(100,000) 98.86% Supplies and Services 7,442,870 7,442,870 - 100.00%
Debt Service 181,425 181,425 - 100.00%
CIP/Transfers Out 2,090,000 1,990,000 (100,000) 95.22%
Total GF Expenditures $ 18,463,949 $18,263,949 $(200,000) 98.92% Water Fund
GROVERBEACH.ORG
Revenue
• Charges for service down
$50,000 from prior year due
to water conservation and
tiered rate structure
• Will continue to monitor
• New rate study in process
Expense
• 48% Total Expended includes:
• 74% expended for supplies and
services due to annual pmts
made first 6 months incl Lopez
Water Contract
• 1% expended for CIP projects
that are still being completed or
not yet started.
Wastewater Fund
GROVERBEACH.ORG
Revenue
• Includes rate increase
implemented July 1, 2022
• On track to meet budget
Expense
• 19% Total Expended includes:
• 45% expended for operating
expenditures
• .4% expended for CIP projects
not yet started
GF Appropriation Requests $331,000
GROVERBEACH.ORG
Public Works
$75,000
North 12th
Street
Sidewalk
Project
Parks &
Recreation
$56,000
Increase for
Part-Time
Admin Asst to
Full Time
Police
$200,000- (offset by salary
savings)
Special
Response Van
$60,000
(offset by salary
savings)
Ramona
Center Audio
Visual Project
NonDepartment
$200,000
Equity
adjustments
to salaries
GF Summary – FY 2022-23
GROVERBEACH.ORG
GF Summary
FY 2022-23
Projected
Revenues/Transfers In $ 18,488,800
Expenditures/Transfers Out 18,263,949
Annual Surplus $ 224,851
Beginning Reserves 6,937,300
Less: FY 22 CIP Carryover 915,744
Less: Carryover Authorized Appropriations 400,746
Less: Mid-Year Requests 331,000
Ending Reserves $ 5,514,661
% of Operating Expenditures 38%
GROVERBEACH.ORG
Homeless
Services
$101,570
encampment
cleanups and
services
($85,470
spent)
Nonprofit
Assistance
$50,000
community
grants
(Spring
2023)
Government
Services
Capacity
$439,359
incl’s ERP
system
($129,902
spent)
Business
Assistance
$140,748
business
grants, &
ED services
($110,281
spent)
Sewer
Projects
$14,621
spent
(rollover
from FY
2021-22)
Household
Assistance
$18,600
childcare &
utility
assist
($67,656
spent)
FY 23 ARPA - $1.6 M-$399,931 spent thru 12-31-22
Five Year GF Forecast - Benefits
GROVERBEACH.ORG
Planning tool for building a financially resilient government Open communication and transparency encourages
involvement
Provide context for goal-setting and the budget process Improves long-term financial sustainability
Forecast Drivers
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Economic Trends and Outlook
City Top 5 Revenues
CalPERS Investment Yield
Debt Service/Repayments
Capital Improvement Plan
Inflation
GROVERBEACH.ORG
• U.S inflation reached a new
40 year high in June 2022 of
9.1% (driven by gas prices,
food and utilities) (8.6% CA)
• Inflation cooling down-rate
slowed for a sixth straight
month to 6.5% in December
(4.9% CA)
Interest Rates
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• By raising rates, the Fed is hoping to cool
off demand by making it more expensive
to borrow
• The goal for the Fed is to stop high
inflation without potentially plunging the
economy into a recession
Meeting Date
Rate
Change Federal Funds Rate
12/14/2022 50 4.25% to 4.50%
11/2/2022 75 3.75% to 4.00%
9/21/2022 75 3.00% to 3.25%
7/27/2022 75 2.25% to 1.50%
6/16/2022 75 1.5 to 1,75%
5/5/2022 50 .75% to 1.00%
3/17/2022 25 .25% to .50%
2022 Federal Rate Hikes
+425 bps
(February 1, 2023-Fed raised rate by 25 basis points to target range 4.5%-4.75%, the highest since October 2007) U.S. Unemployment Rate
GROVERBEACH.ORG
• U.S. added over a half a
million jobs in January
2023 and unemployment
fell to 3.4%
• Well above estimates,
shows a strong labor
market, easing fears of
potential recession
CA & SLO County Unemployment Rate
GROVERBEACH.ORG
SLO County is 5th lowest UI rate among Calif’s 58 counties Source: Employment Development Department
Housing demand and home prices will soften
throughout 2023
California Association of Realtors is predicting declines in 2023 for home sales (- 7.2%) & median price (- 8.8%) Housing market is cooling down due to rising
interest rates
Housing Market
GROVERBEACH.ORG
Latest Sales Tax Forecast
GROVERBEACH.ORG
3rd Quarter 2022 Review (September 2022)
• Sales tax revenue compared with previous year:
• Statewide – up 13.6%
• Central Coast – up 12.1%
• In part, driven by inflation
• Business Activity
• Transportation – up 25%
• Construction – up 28%
• Cannabis – down 21%
Sales tax projection
• Flat for remainder 2023
• Average around 3% in 2024 and 2025
In summary - Economy Today
GROVERBEACH.ORG
• Inflation is cooling but still high including
• Fuel prices
• Food
• Utilities
• Federal Reserves and rate increases
• Cooling the economy
• Hoping for a soft landing
• Otherwise, potential recession
• Labor Market
• Strong – U.S. adding over half a
million jobs, well above estimates
• SLO County has 5th lowest
unemployment rate in State
Top 5 GF Revenues
GROVERBEACH.ORG
1. Sales Tax – 31%
2. Property Tax – 28%
3. Cannabis Tax – 9%
4. Franchise Fees – 4%
5. Transient Occupancy Tax (TOT) – 4%
Property Tax
28%
Sales Tax
31%
Franchise Fees
4%
TOT
4%
Cannabis
Tax 9%
Other
Governments
9%
Service
Charges
5%
Other Revenues
6%
Transfers In
4%
2022-23 General Fund Revenues & Transfers:
$18.9 Million
Top 5 GF Revenues – General Sales Tax
Assumption
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■ Current Year
• 2022-23 3.5%
■ Forecast
• 2023-24 0.6%
• 2024-25 2.7%
• 2025-26 3.0%
• 2026-27 2.7%
• 2027-28 2.4%
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
2011201220132014201520162017
20182019202020212022
EST 2023
FISCAL YEAR ENDING
General Sales Tax Revenues: Last Twelve Years
Average Annual % Change
Last 2 Years 1.6%
Top 5 GF Revenues – Property Tax
Assumption
GROVERBEACH.ORG
■ Current Year
• 2022-23 4.0%
■ Forecast
• 2023-24 4.0%
• 2024-25 4.0%
• 2025-26 3.0%
• 2026-27 3.0%
• 2027-28 3.0% Average Annual % Change
Last 2 Years 3.9%
Top 5 GF Revenues – Cannabis Tax
Assumption
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■ Current Year
• 2022-23 $1,300,000
■ Forecast
• 2023-28 2.0%
Average Annual % Change
Last 2 Years -25.9%
Top 5 GF Revenues – TOT Assumption
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■ Current Year
• 2022-23 $874,000
■ Forecast
• 2023-24 $900,000
• 2024-2028 3.0%
Average Annual % Change
Last 2 Years 27.9%
Top 5 GF Revenues – Franchise Fees
Assumption
GROVERBEACH.ORG
■ Current Year
• 2022-23 $623,000
■ Forecast
• 2023-24 $735,000
(incl $100K Fiber Optic Cable)
• 2024-25 $948,000
(incl $300K Fiber Optic Cable)
• 2025-28 2.0%
Average Annual % Change
Last 2 Years 1.9%
CalPERS Investment Yields
GROVERBEACH.ORG
• Latest Actuarial Report
used for forecast is
through June 30,2021
• Doesn’t reflect -6.1%
loss in FY 2021-22 (-10%
for calendar year 2022)
• Projections could get
worse, depending on
final results for FY 2022-
23 Source: CalPERS
Average Net Return as of June 30, 2022
Last Year -6.1%
Last 3 Years 6.6%
Last 5 Years 7.0%
Last 10 Years 8.0%
Last 30 Years 8.0%
21.3%
-6.1%
Debt Service Repayments
GROVERBEACH.ORG
■ Current debt service
• Energy efficiency loan - thru 2026-27 $ 25,600
• Police vehicles – thru 2022-23 $ 73,000
• Police command post vehicle – thru 2027-28 $ 69,000
• Broadband project - thru 2025-26 $142,000
• Development review repayment –
starts 2024-25 $178,000
■ Low level overall - debt service ratio (to GF revenues) is .4% for FY 2022-23 (anything below 10% is good!)
Capital Improvement Plan
GROVERBEACH.ORG
■ Current Year
• 2022-23 $1,990,000
■ Forecast
• 2023-24 $2,000,000
• 2024-28 2%
Five Year GF Forecast Summary
GROVERBEACH.ORG
General Fund 2023-24 2024-25 2025-26 2026-27 2027-28
Revenues $17,389,000 $18,097,000 $ 18,606,000 $19,106,000 $ 19,601,000 Expenditures 17,295,600 17,787,800 18,074,000 18,348,400 18,698,700 Annual Surplus 93,400 309,200 532,000 757,600 902,300
Beginning Reserves 5,372,700 5,324,100 5,491,300 5,845,300 6,424,900 Ending Reserves $ 5,466,100 $ 5,633,300 $ 6,023,300 $ 6,602,900 $ 7,327,200 Percent of Operating
Expenditures 36% 36% 38% 41% 45%
FIVE YEAR GF FORECAST
FY 2023-25 Financial Plan
Financial Summary
GROVERBEACH.ORG
1. Cannabis tax revenues continue to be sluggish but this is partly offset by TOT increases that are showing more activity than projected
2. Short-term issues with inflation and interest rate increases should level out by 2024
3. 5-year GF forecast shows strong financial position with reserves over goal of 25% of operating costs each year
4. The 5-year forecast does not include any Fire increases or pension cost increases, if investment returns continue to perform poorly
5. Degree of uncertainty in the overall economic environment shows the continued need for closely monitoring the situation and reporting to Council on a quarterly basis as well as updating the 5-year forecast on an annual basis
Recommendation
GROVERBEACH.ORG
■ Receive information on the FY 2022-23 Mid-Year Budget Review, including the City’s ARPA allocation and the updated General Fund Financial Forecast and provide input and direction to staff ■ Future budget agenda items
• Council goal-setting workshop March 6
• Draft Capital Improvement Program March 27
• FY 2023-25 Budget Update April 24
Questions and Comments
GROVERBEACH.ORG
FY 2021-22 Carryover of
GF One-Time Authorized Appropriations
GROVERBEACH.ORG
$5,000 replace
back-up storage
$60,000
circulation
element
$75,000 valve
truck
$227,067
remaining
CAD/RMS
$24,000
Ramona Center
remaining audio
visual project
$9,679
remaining Asset
Management
System (34% GF)
FY 2021-22 Carryover of
One-Time Authorized Appropriations
GROVERBEACH.ORG
$30,000 Water
System
Upgrades
$9,395 Asset
Management
System
allocation Water
and Wastewater
(33% each)
$67,500 DIF
study
conducted in
FY 23 (budgeted
in FY 22)
Other Funds Appropriation Requests
GROVERBEACH.ORG
• $25,000 Server (needed for
new ERP implementation)
Replacement
Fund