Agenda Item No. 8
CITY COUNCIL STAFF REPORT
TO: Honorable Mayor and City Council DATE: November 12, 2024 FROM: Matthew Bronson, City Manager
PREPARED BY: Nick Szamet, Administrative Services Director SUBJECT: FY 2024-25 First Quarter Financial Review
RECOMMENDATION
Receive and file the FY 2024-25 First Quarter Financial Review.
BACKGROUND
General Fund
The City Council adopted the budget for FY 2024-25 on June 24, 2024, which includes a General Fund budget of $18,435,020. The adopted General Fund budget assumes revenues and transfers-in of $18,480,020 leading to a projected surplus of $45,000 with ending reserves equivalent to 31% of operating expenditures. This first quarter report covers revenue and expenditure activity in the beginning of FY 2024-25 from July-September 2024 for both the General Fund and the two Enterprise Funds (Water and Wastewater). This report is provided for financial transparency though staff would note that broader trends are difficult to determine from only the first quarter of the fiscal year.
Overall, over the first quarter General Fund revenues are aligned with expectations. The first quarter of the fiscal year is slow to recognize revenues as payments for taxes occur at later periods in the fiscal year. Table 1 shows the total revenue for City’s top five General Fund revenue sources compared to first quarter FY 2023-24 (prior year).
Table 1
FY 2024-25 FY 2023-24
Activity Q1 Budget Activity Q1 Year-End
Actual
Sales Tax 445,201 6,710,000 424,494 5,733,277
Property Tax 130,096 5,949,000 23,634 5,859,025
Cannabis Tax 166,043 1,224,000 141,313 1,066,489
Franchise Fees 74,127 947,000 151,985 718,906
Transient Occupancy Tax 203,778 1,186,000 208,850 953,685 Total 1,019,245 16,016,000 950,276 14,331,382
Sales Tax – Sales tax reported in the first quarter is $20,707 higher when compared to the first quarter in the prior year. Sales tax revenue for the first quarter represents revenue collected for one month only (July 2024) as there is a two-month delay.
Property Tax- Property taxes are due November 1 and February 1, therefore property tax revenue collected in the first quarter is minimal. Property tax revenue overall is following past years’ Staff Report: FY 2024-25 First Quarter Financial Review Page 2 November 12, 2024
historical trends. However, there was a jump in Current Unsecured Property Taxes which can be attributed to personal property such as boats and airplanes or business machinery. This is unlikely to affect larger secured property taxes associated with real estate.
Cannabis Tax – Cannabis tax collected in the first quarter is slightly higher than last fiscal year by approximately $24,000. This is likely owing to additional retailers opening within the City, although there remain uncertainties for the industry statewide.
Transient Occupancy Tax (TOT) – TOT revenue for the first quarter is slightly less than prior year by $5,072. However, staff anticipates this gap to be eliminated once any pending receipts from hotel operators or STRs are collected and accrued to appropriate accounting period.
Franchise Fees – Franchise fees for the first quarter are $77,858 lower than the prior year. This is largely owing to timing and receipt of payment. It is anticipated revenues will be aligned with budget targets by the mid-year report in February 2025.
A more detailed estimate of City revenues will be presented with the mid-year budget review and included in the updated five-year financial forecast presented to the Council in February 2025 in preparation for the upcoming FY 2025-27 budget development process.
Turning to expenditures, departments are on track with 25% expended in the first quarter of the fiscal year. There are overages in Non-Departmental accounts and in the Public Works and Police departments. Non-Departmental accounts regularly have higher expenses in the beginning of the year, due to upfront payment of insurance premiums for the entire fiscal year. The Public Works and Police departments have expended more than anticipated on vehicle maintenance costs due to staffing-related challenges which have required Public Works to utilize third-party vehicle maintenance. The Administrative Services Department will work with these departments to reconcile the vehicle maintenance budget during the mid-year budget process.
Table 2
ACTUAL ANNUAL
BUDGET REMAINING %
Non-Departmental 1,513,895 5,252,430 3,738,535 71%
City Manager's Office 437,908 1,815,519 1,377,611 76%
Administrative Services Department 95,318 647,581 552,263 85% Community Development Department 263,073 1,275,685 1,012,612 79% Public Works 412,880 1,556,801 1,143,921 73%
Police Department 1,635,382 6,962,264 5,326,882 77%
Total 4,358,456 17,510,280 13,151,824 75%
Water Fund
Water Fund revenues were $1,369,146 for the first quarter or $300,000 more than projected.
However, this additional revenue is largely due to the one-time payment to the City from the Central Coast Blue Recycled Water Project Joint Powers Authority for the City’s share of property acquisition costs following the City’s withdrawal from the project. Operating expenditures for the Water Fund are aligned with expectations with 73% of budget remaining, which includes an annual payment for insurance, a semi-annual payment made to the County for the Lopez Lake water contract, and debt service payment for the water revenue bonds. Capital project Staff Report: FY 2024-25 First Quarter Financial Review Page 3 November 12, 2024
expenditures are higher due to carryover of the Water Tank Rehab Project and expenditures occurring largely in this fiscal year, although budgeted in the prior year.
Wastewater Fund
Wastewater Fund revenues for the first quarter are on track as compared to this time in FY 2023-
24. Expenditures are below budget for the first quarter with only 19% expended to date. This is mainly due to capital projects that are scheduled to start later this fiscal year pending available revenues along with transfers-out that are reconciled and accounted for annually as a year-end adjustment. Operating expenditures that include salaries and benefits along with supplies and services are on track to meet budgeted expenditures.
FISCAL IMPACT
There is no fiscal impact from receiving this report.
ALTERNATIVES
The Council has the following alternatives to consider:
1. Receive and file the FY 2024-25 First Quarter Financial Review; or
2. Provide alternative direction to staff
PUBLIC NOTIFICATION
The agenda was posted in accordance with the Brown Act.