City FY 2023/24 Budget Update &
FY 2023/24 Mid-Year Budget
Adjustments
City Council Meeting
March 19, 2024
1 Presentation Overview
• FY 2023/24 Budget Update
• FY 2023/24 Mid-Year Budget Adjustment Requests
2 City FY 2023/24 Budget Update
3 City Budget and Financial Position – FY 2022/23
The City ended FY 2022/23 with a $3.7 million General Fund surplus, after year-end transfers of $12.62M to partially fund unfunded liabilities (Workers’ Compensation, General Liability, Retirement Supplemental) and Infrastructure needs.
• Revenues were available for transfers primar ily due to one-time spikes in natural gas prices during Winter 2022-23, as well as increased natural gas and electricity rates, resulting in additional utility tax and franchise fee revenue above the adopted budget. • Additionally, Transient Occupancy Tax (TOT) remained strong, mainly due to higher average daily rates and a full fiscal year of TOT from the City’s Short-Term Vacation Rentals.
• Demand for emergency medical services (EMS) continues to increase. 4 City Budget and Financial Position – FY 2023/24
After 29 months of post-pandemic jobs growth in California, employment growth was flat in September 2023 and declined in October 2023. California consumers and businesses are spending less, and shifting from taxable goods to nontaxable items. • Property tax revenues, the City’s larges t General Fund revenue source (36.7%), remains strong, with revenue projected to be slightly above the adopted budget due to increased supplemental property taxes.
• Sales tax revenues, the City’s second larges t General Fund revenue source (18.9%), is projected to decline by approximately $1.3M due to a shift in consumer spending from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment.
• Utility tax and franchise fee revenues are lower than prior year due to lower gas commodity prices.
The City is currently projecting to end FY 2023/24 with a $2M General Fund surplus (subject to change).
5 General Fund Long-Term Financial Plan
6.1% CalPERS Return FY22/23
6 * FY 22/23 one‐time revenue consists of $29.6M in American Rescue Plan Act funding and $1.8M in transfers from the Housing Agreement and Triple Flip fund. FY 23/24 one‐time consists of General Fund portion of Emerald Cove settlement.
• Current forecast requires use of Section 115 Trust reserves (per UAL Policy) starting in FY 25/26. (in thousands) Actual
FY22/23
Projected
FY23/24
Projected
FY24/25
Projected
FY25/26
Projected
FY26/27
Projected
FY27/28
Revenue (Recurring) 281,337 282,969 2 87,221 294,366 301,718 309,310 Revenue (One‐Time)* 31,380 2,276 ‐‐‐‐
Planned Use of Reserves ‐ 8,804 ‐‐‐‐
Total Sources of Funds 312,717 294,049 287, 221 294,366 301,718 309,310 Expenditures less UAL 254,720 264,960 269,807 281,813 290,201 297,443 CalPERS UAL 4,891 5,000 5,223 8,981 12,727 16,458
POB Payment 13,663 13,276 13,010 12,750 12,537 12,537
One‐Time Expenditures 18,721 8,804 ‐‐‐‐
Total Expenditures 291,995 292,040 2 88,040 303,544 315,465 326,438 Restricted Reserves 16,978 ‐‐‐‐‐
Surplus/(Deficit) $3,744 $2,009 ($819) ($9,178) ($13,747) ($17,128) CalPERS Update
• CalPERS FY 21/22 return of -7.5% and FY 22/23 return of 6.1% requires escalating UAL payments by the City
• June 26 – City Council approved updates to the General Fund Reserve Policy requiring a minimum of 25% of unrestricted one-time revenues to be transferred to the City’s Section 115 Trust to address CalPERS’ unfavorable returns
• Section 115 Trust balance as of June 30, 2023: $20.6M 7 Decrease
UAL
Payments
Increase
UAL
Payments
CalPERS Return
CalPERS Return
• CalPERS’ investment policy
focuses on long-term plan
returns
• POB is financially advantageous
as long as CalPERS long-term
return is > 2.925%
CalPERS Target Return 6.8%
Unfunded Liabilities
• Insurance premiums are anticipated to increase due to rising medical costs and an expanded list of injuries that are presumed to be work related under California law, such as post-traumatic stress.
• General Liability insurance premiums are al so expected to increase as additional markets withdraw from California and from writing public entity liability. The City is currently self- insured up to $1 million per claim with $25M in excess coverage per claim/occurrence. • Staff is closely monitoring the City’s unfunded li abilities to identify cost saving opportunities on an ongoing basis.
8 Unfunded
Liabilities
as of 6/30/2023
Increase/(Decrease)
in Unfunded
Liabilities
Unfunded
Liabilities
as of 6/30/2022
Description
$22.9M($2.1M)$25.0MWorkers’ Compensation
$4.7M$4.5M$0.2MGeneral Liability
$8.8M($6.4M)$15.2MRetiree Supplemental
$190.6M$232.2M($41.6M)CalPERS UAL
FY 2023/24 Mid-Year Budget Adjustments
9 General Fund Adjustments
10 Community & Library Services Department
• $246K – increased demand for contract class instructors offset with recreational and art class revenues for a net zero impact
Fire Department
• $480K –F i r e strike team reimbursement costs offset with strike team reimbursement revenues for a net zero impact
• $117K –M e d i c a l & safety supplies for City ambulances offset with emergency medical response revenues for a net zero impact
Total General Fund Adjustments ‐ $843,187, all offset by additional revenues Other Fund Adjustments
11 LRSP Grant (Fund 1272) – Public Works
• $7,350 to allocate remaining awarded State grant funds for development of a Local Road Safety Plan (LRSP). A total of $147,000 was awarded, but only $139,650 has been appropriated to date. Staff is requesting appropriation of the remaining grant funds. There are sufficient offsetting grant revenues and expenditures for a net zero impact.
Summary of Mid-Year Budget Requests
• Approve appropriations of $850,537
• Projected General Fund FY 23/24 surplus after
appropriation: $2M
12 TotalAmountDescriptionFund
$843,187
$246,187Community & Library Services
General Fund
597,000Fire Department
$7,3507,350LRSP Grant FundOther Funds
$850,537Total
($850,537)Less: Offsetting revenues
$‐Net Increase
Questions?