Agenda Item No. 7
CITY COUNCIL STAFF REPORT
TO: Honorable Mayor and City Council DATE: September 9, 2024 FROM: Matthew Bronson, City Manager
PREPARED BY: Nick Szamet, Administrative Services Director SUBJECT: FY 2023-24 Year-End Financial Review
RECOMMENDATION
Receive a report on the FY 2023-24 Year-End Financial Review.
BACKGROUND
On June 24, 2024, City Council adopted the FY 2024-25 budget. Since then, staff has conducted an initial review of the year-end financial results of FY 2023-24 to provide a summary to the Council prior to the completion of the City’s annual audit done by outside auditors and brought to the Council in January 2025. The following summary represents this initial review, subject to change, with the upcoming audit process.
General Fund
The General Fund is the City’s primary fund and includes general City services such as police, contracted fire protection and emergency medical services, general administration, and capital allocations to the Capital Improvement Plan. The General Fund is also where property tax, sales tax, and other general revenues are collected. Table 1 below shows the initial year-end projections for FY 2023-24 compared with the unaudited actuals:
Table 1: General Fund
FY2023-24
Projection
FY2023-2024
Unaudited
Actual
Difference
Beginning Reserves 5,053,965 5,053,965 -
Revenues
Revenue/Transfers In 24,480,611 24,417,302 (63,309)
Expenditures
Operating Expenditures 22,264,618 22,104,083 (160,535)
Debt Service 168,000 94,348 (73,652)
Transfers Out/Other 1,591,000 404,625 (1,186,375)
Total Expenditures 24,023,618 22,603,056 (1,420,562)
Annual Surplus 456,993 1,814,246 1,357,253
Wastewater Fund Repayment (142,000) (142,000) -
CIP Carry Over (2,179,578) (3,365,953) 1,186,375
Ending Reserves 5,368,958 5,539,835 170,877
Staff Report: FY 2023-2024 Year End Financial Report Page 2 September 9, 2024
FY 2023-24 actual revenues are $63,309 lower than projected amounts for a difference of less than 1% of projections. This is due to higher-than-expected revenues in several minor revenue sources as well as revenues from other governments. The year-end actuals for the City’s top revenue sources were mixed as property tax revenues were higher than projected while others such as sales and cannabis tax revenues were below projections. Staff will monitor these revenues closely in preparation for the upcoming FY 2025-27 budget process. Total expenditures for FY 2023-24 were projected to end at just over $24 million while unaudited actuals are closer to $22.6 million providing a variance of $1.4 million to projections. However, though the City is estimated to end the year with a surplus of $1.8 million, this is mainly comprised of unspent capital project funding which will be carried over to the next fiscal year.
After deducting repayment to the Wastewater Fund, CIP and other carryover, the General Fund ending reserves will be at 32% of operating expenditures compared with the Council’s 25% goal which is similar to the projected reserves level of 31%. Staff will return to the Council with additional information about the City’s current year financial condition in November 2024 and in February 2025 as part of the FY 2024-25 first quarter and mid-year review respectively.
Water Fund
The Water Fund is responsible for the maintenance and operation of City’s water system. This includes water lines, tanks, and wells. The Water Fund is estimated to end FY 2023-24 with a deficit of $1,245,860 which will be paid from reserves and reducing ending reserves to $3,492,737.
Table 2: Water Fund
FY2023-24
Projection
FY2023-2024
Unaudited Actual Difference
Beginning Reserves 4,738,597 4,738,597
Revenue Total 4,162,649 4,254,296 91,647
Expense Total 7,401,326 5,500,156 (1,901,170)
Surplus/(Deficit) (3,238,677) (1,245,860) 1,992,817
Ending Reserves 1,499,920 3,492,737 1,992,817
Water revenues are largely aligned with forecasts presented to Council based on the Council’s action in May 2024 to lower rates to 2021 levels which reduced the overall revenue capacity of the fund. The Water Fund was also impacted by the City’s withdrawal from the Central Coast Blue recycled water project, as the City was required to pay the balance of preconstruction costs to the City of Pismo Beach. Additionally, funding for a large capital project of $1.6 million Reservoir Maintenance project was not expended in FY 2023-24 though much of the Water Fund’s ending reserves have been committed to the Reservoir Maintenance project to be expended in FY 2024-
25. There will also be a repayment of land acquisition costs by the City of Pismo Beach which is pending completion of all terms related in the amended JPA Agreement.
Staff Report: FY 2023-2024 Year End Financial Report Page 3 September 9, 2024
Wastewater Fund
The Wastewater Fund is responsible for the City’s maintenance and operation of wastewater lines within the City and bills for and forwards funds collected to the South San Luis Obispo County Sanitation District. The Wastewater Fund is estimated to end the year a surplus of $406,335.
Table 3: Wastewater Fund
FY2023-24
Projection
FY2023-2024
Unaudited Actual Difference
Beginning Reserves 3,751,811 3,751,811 -
Revenue Total 2,000,377 1,854,172 (146,205)
Expense Total 3,735,526 1,447,837 2,287,689
Annual Surplus/(Deficit) (1,735,149) 406,335 2,141,484
Ending Reserves 2,016,662 4,158,146 2,141,484
Wastewater revenues are lower than projected by $146,205 given changes approved by the Council on the timing of implementing the new rate structure and resulting credits to customer accounts. Expenditures are also lower than anticipated mainly due to delays in bond financing which was planned for a major sewer upgrade project. The project and financing are now on hold pending resolution of Measure G-24 which seeks to repeal the water and wastewater rates adopted by the Council in December 2023. Staff does not believe it is prudent to move forward with this financing at this time given the possible repeal of the rates as they are the underlying basis for repayment.
FISCAL IMPACT
There is no fiscal impact from receiving this report.
ALTERNATIVES
The Council has the following alternatives to consider:
1. Receive a report on the FY 2023-24 Year-End Financial Review; or
2. Provide alternative direction to staff
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.