1 City of Moreno Valley
Fiscal Year 2023/24
Third Quarter Operating Budget Review
TO: Mayor and City Council
FROM: Launa Jimenez, Chief Financial Officer
DATE: June 4, 2024
INTRODUCTION
On May 2, 2023, the City Council adopted the Two-Year Operating Budget for Fiscal Years (FY) 2023/24 – 2024/25. During the two-year budget period, the City Council will be kept apprised of the City’s financial condition through the process of First Quarter , Mid-Year Quarter, and Third Quarter Reviews. This ongoing process ensures a forum to look at expenditure and revenue deviations from the estimates made in the budget document. Additionally, any significant changes in projected revenue or unanticipated expenditure that may occur will be shared with the City Council.
This report provides a review of the unaudited financial results for the Third Quarter of FY 2023/24 (July 2023 – March 2023, 75% of the fiscal year).
Third Quarter Financial Summary FY 2023/24 2
CITYWIDE OPERATING EXPENDITURE SUMMARY
The following table contains a summary of the adopted budget, amended budget and expenditures through Third Quarter. The totals represent each major fund type and component unit of the City.
Table 1. Citywide Operating Expenditures
Actions taken by the City Council after the May 2, 2023 adoption of the two- year budget and included in the Amended Budget are:
• Throughout the fiscal year, there are also budget amendments to reflect the acceptance of grants and adjustments to contractual services and material/supplies. The individual amendments are reviewed as part of separate City Council agenda items. • Much of this Third Quarter update will focus on the General Fund, as it supports all basic services provided to City residents. Highlights for other key component funds will be discussed at a summary level as well.
FY 2023/24
Adopted Budget
FY 2023/24
Amended Budget
Actuals as of
03/31/24
(unaudited)
% of Amended
Budget
Fund/Component Unit
General Fund $ 152,830,827 $ 156,207,718 $ 101,668,673 65.1% Community Services District (CSD) 26,263,400 34,625,660 18,225,327 52.6% Successor Agency 2,461,216 2,311,216 1,951,785 84.4% Housing Fund - 436,900 59,908 13.7% Special Revenue Funds 38,406,705 75,233,230 34,946,002 46.5% Capital Projects Funds 15,350,000 82,490,440 25,248,167 30.6% Electric Utility Funds 47,577,187 63,257,655 28,759,134 45.5% Internal Service Funds 17,700,310 20,944,970 10,998,156 52.5% Debt Service Funds 4,018,340 3,887,194 2,223,153 57.2% Total 304,607,985$ 439,394,983$ 224,080,305$ 51.0% Third Quarter Financial Summary FY 2023/24 3
GENERAL FUND OPERATING
Table 2. General Fund Operations
FY 2023/24
Adopted Budget
FY 2023/24
Amended Budget
Actuals as of
03/31/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
Property Tax $ 21,500,000 $ 21,500,000 $ 13,110,342 61.0% Property Tax in-lieu 27,500,000 27,500,000 14,065,551 51.1% Utility Users Tax 17,500,000 17,500,000 13,883,391 79.3% Sales Tax 37,500,000 37,500,000 23,444,785 62.5% Other Taxes 19,700,000 19,700,000 12,145,876 61.7% Licenses & Permits 5,638,254 5,638,254 4,773,343 84.7% Intergovernmental 615,803 872,842 1,313,816 150.5% Charges for Services 14,476,273 14,666,273 11,389,775 77.7% Use of Money & Property 4,723,000 4,723,000 7,001,003 148.2% Fines & Forfeitures 532,500 557,500 303,449 54.4% Miscellaneous 221,500 221,500 171,233 77.3% Total Revenues $ 149,907,330 $ 150,379,369 $ 101,602,564 67.6% Expenditures:
Personnel Services $ 29,238,558 $ 29,352,565 23,937,217$ 81.6% Contractual Services 107,114,087 108,245,555 66,742,103 61.7% Material & Supplies 5,369,852 7,165,635 2,517,266 35.1% General Government - - - - Debt Service - - - - Fixed Charges 6,151,248 6,151,248 4,521,242 73.5% Fixed Assets - 523,220 16,599 3.2% Total Expenditures $ 147,873,745 $ 151,438,223 $ 97,734,426 64.5% Excess (Deficiency) of Revenues
Over (Under) Expenditures $ 2,033,585 $ (1,058,854) $ 3,868,138 Transfers:
Transfers In $ 2,926,713 $ 6,019,152 $ 67,491 1.1% Transfers Out 4,957,082 4,769,495 3,934,247 82.5% Net Transfers $ (2,030,369) $ 1,249,657 $ (3,866,756) Total Revenues & Transfers In $ 152,834,043 $ 156,398,521 $ 101,670,055 65.0% Total Expenditures & Transfers Out 152,830,827 156,207,718 101,668,673 65.1% Net Change of Fund Balance $ 3,216 $ 190,803 $ 1,382 Third Quarter Financial Summary FY 2023/24 4
General Fund Operating Revenues
The General Fund is comprised of several revenue types. However, the main sources include property tax, sales tax, and utility user’s tax. Each of these is affected by different economic activity cycles and pressures. Miscellaneous revenue consists of claims, donations, business license report fees, business fees for events, etc.
Table 3. General Fund Operating Revenues
Property Taxes/Property Taxes In-Lieu
Property taxes were budgeted to increase by 8% from the FY 2022 /23 Amended Budget. The annual schedule of property tax payments from the County of Riverside will provide payments to the City based on the following estimated schedule:
Secured Property Tax Payment Dates
Settlement 1 January
Settlement 2 May
Settlement 3 August
Teeter Settlement October
Based on historical averages of actual receipts, the City is estimated to receive less than 55% of the budgeted property tax revenue through Third Quarter. The City has currently received 56% through Third Quarter. Property taxes will continue to be monitored as property valuations may adjust through the year based on property sales and assessment appeals filed with the County.
FY 2023/24
Adopted Budget
FY 2023/24
Amended Budget
Actuals as of
03/31/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
Property Tax $ 21,500,000 $ 21,500,000 $ 13,110,342 61.0% Property Tax in-lieu 27,500,000 27,500,000 14,065,551 51.1% Utility Users Tax 17,500,000 17,500,000 13,883,391 79.3% Sales Tax 37,500,000 37,500,000 23,444,785 62.5% Other Taxes 19,700,000 19,700,000 12,145,876 61.7% Licenses & Permits 5,638,254 5,638,254 4,773,343 84.7% Intergovernmental 615,803 872,842 1,313,816 150.5% Charges for Services 14,476,273 14,666,273 11,389,775 77.7% Use of Money & Property 4,723,000 4,723,000 7,001,003 148.2% Fines & Forfeitures 532,500 557,500 303,449 54.4% Miscellaneous 221,500 221,500 171,233 77.3% Total Revenues $ 149,907,330 $ 150,379,369 $ 101,602,564 67.6% Third Quarter Financial Summary FY 2023/24 5
Note: FYs 2014/15, 2017/18, 2019/20 and 2020/21 did not receive any property tax revenues in the first quarter.
Sales Taxes
Sales taxes were budgeted to increase by 2% as compared to the FY 2022/23 Amended Budget.
Sales tax receipt trends will need to be continually monitored through the year for possible future budget adjustments.
Based on historical averages of actual receipts, the City is estimated to receive 64% of the budgeted sales tax revenue through Third Quarter. The City has currently received 63% through Third Quarter.
Note: For FY 2017/18, the reversal of revenues accrued to the prior fiscal year in accordance with the Government Accounting Standards Board (GASB) did not occur until the second quarter.
Third Quarter Financial Summary FY 2023/24 6
Utility Users Tax Utility
Utility Users Tax were budgeted to increase by 11% as compared to FY 2022/23 Amended Budget. This projection is primarily due to competitive forces within the communications markets.
Based on historical averages of actual receipts, the City is estimated to receive 73% of the budgeted utility users tax revenue through Third Quarter. The City has currently received 79 % through Third Quarter.
Other Taxes
Other taxes are primarily composed of Business Gross Receipts, Transient Occupancy Tax, Documentary Transfer Tax, and Franchise Fees. Collectively, other taxes were budgeted to increase 16% from the FY 2022/23 Amended Budget.
Based on historical averages of actual receipts, the City is estimated to receive 70% of the budgeted Other Taxes revenue through Third Quarter. The City has currently received 67% through Third Quarter.
Third Quarter Financial Summary FY 2023/24 7
Licenses & Permits
Licenses & Permits are primarily composed of Business Permits, to include Cannabis Business Permits, as well as Animal Licenses, Building, Electrical, Mechanical, Plumbing and other permits.
Collectively, Licenses & Permits were conservatively budgeted to increase by less than 1% as compared to the FY 2022/23 Amended Budget.
Based on historical averages of actual receipts, the City is estimated to receive 80% of the budgeted Licenses & Permits revenue through Third Quarter. The City has currently received 85% through Third Quarter. The collection rate is related primarily to building and business license permit activities.
Third Quarter Financial Summary FY 2023/24 8
Charges for Services
Charges for Services are primarily composed of Plan Check Fees, Inspection Fees, Administrative Charges to other funds, and Parking Control Fines. Collectively, Charges for Services were conservatively budgeted to in crease by 4% as compared to the FY 2022/23 Amended Budget.
Based on historical averages of actual receipts, the City is estimated to receive 79% of the budgeted Charges for Services revenue through Third Quarter. The City has currently received 78% through Third Quarter.
Chart 5. General Fund Third Quarter Revenue Trend - Licenses & Permits
Chart 6. General Fund Third Quarter Revenue Trend - Charges for Services Third Quarter Financial Summary FY 2023/24 9
Use of Money and Property
Investment income continues to remain low due to extremely low rates of return for fixed income investments but have increased over the last year due to actions taken by the Federal Open Market Committee (FOMC). The investments achieved a Yield to Maturity (YTM) for March 2024 of 3.176%. In addition, the City maintained funds in the State Local Agency Investment Fund Pool (LAIF) with a YTM of 4.232%. LAIF is realizing considerable investment gains based on the increases to the Federal Funds target rate increase. FOMC is expected to keep current rates through 2024 with no reductions until 2025. The FOMC target rate is currently 5.25% to 5.50%.* Staff will continue to monitor closely to ensure we maximize our investment income going forward. *Federal Reserve issues FOMC Statement
General Fund Expenditures
Expenditures are being spent in- line with prior year expenditures . Each Department’s activities will be monitored throughout the year as they may be impacted by different operational activities and project timelines.
Table 4. General Fund Expenditures
FY 2023/24
Adopted Budget
FY 2023/24
Amended Budget
Actuals as of
03/31/24
(unaudited)
% of Amended
Budget
Department
City Council $ 1,098,852 $ 1,026,329 $ 806,564 78.6% City Clerk 913,394 996,907 558,364 56.0% City Manager 2,451,565 2,717,083 2,267,896 83.5% City Attorney 1,094,769 1,094,769 1,278,721 116.8% Community Development 14,611,542 14,798,542 10,277,624 69.5% Economic Development 2,490,137 2,490,137 1,700,412 68.3% Financial & Management Services 19,422,262 19,575,771 9,939,581 50.8% Human Resources 1,793,197 2,407,647 1,392,370 57.8% Public Works 15,600,403 17,018,812 8,824,657 51.9% Non-Departmental 2,571,132 2,269,095 6,746,304 297.3% Non-Public Safety Subtotal $ 62,047,253 $ 64,395,092 $ 43,792,492 68.0% Public Safety
Police $ 61,854,760 $ 62,138,076 $ 36,265,258 58.4% Fire 28,928,814 29,674,550 21,610,923 72.8% Public Safety Subtotal $ 90,783,574 $ 91,812,626 $ 57,876,181 63.0% Total $ 152,830,827 $ 156,207,718 $ 101,668,673 Third Quarter Financial Summary FY 2023/24 10
OTHER KEY FUNDS
The following summaries describe other major funds in the City.
Moreno Valley Community Services District
The Moreno Valley Community Services District (CSD) was formed by the voters in 1984 to collect fees and certain taxes to provide an array of services including parks, recreation and community services, streetlights, landscaping and ongoing maintenance. The CSD provides these services through separate “zones” that define the services that are provided.
For certain zones, the primary revenue source used to provide services to properties is parcel fees or taxes levied on properties via their annual tax bill. Proposition 218, passed by California voters in November 1996, and has posed a serious challenge to managing the future operation of the CSD zones. Prop. 218 requires any revenue increase to be addressed through a voting process by affected property owners. For the period following the initial implementation of Prop. 218, the CSD was successful in receiving approval for some new or increased revenues. There were also revenue increases due to the growth of developed parcels within the zones.
Table 5. CSD Operations
FY 2023/24
Adopted Budget
FY 2023/24
Amended Budget
Actuals as of
03/31/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
Property Tax $ 6,045,278 $ 6,045,278 $ 4,488,008 74.2% Other Taxes 7,268,090 7,268,090 4,034,024 55.5% Intergovernmental - 69,042 75,469 109.3% Charges for Services 6,229,297 6,229,297 3,727,451 59.8% Use of Money & Property 1,164,220 1,164,220 972,890 83.6% Fines & Forfeitures 24,897 24,897 3,117 12.5% Miscellaneous 14,500 14,500 21,780 150.2% Transfers In 1,338,472 1,347,472 991,517 73.6% Total Revenues $ 22,084,754 $ 22,162,796 $ 14,314,256 64.6% Expenditures:
Library Services Fund (5010) $ 3,281,250 $ 3,364,366 $ 2,549,151 75.8% Zone A Parks Fund (5011) 12,396,080 19,039,133 9,459,484 49.7% LMD 2014-01 Residential Street Lighting Fund (5012) 1,452,095 1,452,095 1,025,974 70.7% Zone C Arterial Street Lighting Fund (5110) 780,940 805,940 640,619 79.5% Zone D Standard Landscaping Fund (5111) 2,175,957 2,175,957 799,163 36.7% Zone E Extensive Landscaping Fund (5013) 426,412 426,412 284,260 66.7% 5014 LMD 2014-02 3,206,916 3,206,916 1,812,658 56.5% 5016 CFD 2021-01 Parks Fac Maint 147,900 229,500 76,250 33.2% Zone M Median Fund (5112) 596,776 596,776 239,332 40.1% CFD No. 1 (5113) 1,721,244 3,250,735 1,290,783 39.7% Zone S Financial & Management Svcs (5114) 77,830 77,830 47,651 61.2% Total Expenditures $ 26,263,400 $ 34,625,660 $ 18,225,327 52.6% Net Change or
Adopted Use of Fund Balance (4,178,646)$ (12,462,864)$ (3,911,071)$ Third Quarter Financial Summary FY 2023/24 11
Community Services District Zone A – Parks & Community Services The largest Zone within the CSD is Zone A. It accounts for the administration and maintenance of the Parks & Community Services facilities and programs. Funding sources for these services come from a combination of property taxes, fees for service, and smaller amounts from other City funds.
Table 6. CSD Zone A Operations
FY 2023/24
Adopted Budget
FY 2023/24
Amended Budget
Actuals as of
03/31/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
Property Tax $ 2,979,205 $ 2,979,205 $ 2,322,197 77.9% Other Taxes 5,024,390 5,024,390 2,776,760 55.3% Charges for Services 1,139,842 1,139,842 987,570 86.6% Use of Money & Property 1,131,074 1,131,074 903,987 79.9% Miscellaneous 14,500 14,500 6,901 47.6% Total Revenues $ 10,289,011 $ 10,289,011 $ 6,997,415 68.0% Expenditures:
35010 Parks & Comm Svcs - Admin $ 1,028,430 $ 1,028,430 $ 973,538 94.7% 35210 Park Maintenance - General 5,078,807 5,448,807 3,694,289 67.8% 35211 Contract Park Maintenance 512,197 637,197 395,459 62.1% 35213 Golf Course Program 684,086 684,086 541,430 79.1% 35214 Parks Projects 283,141 283,141 172,757 61.0% 35310 Senior Program 756,537 756,537 597,212 78.9% 35311 Community Services 16,516 16,516 320 1.9% 35312 Community Events 801,467 801,467 815,847 101.8% 35313 Conf & Rec Cntr 614,518 614,518 442,878 72.1% 35314 Conf & Rec Cntr - Banquet 262,759 339,882 208,055 61.2% 35315 Recreation Programs 1,504,040 1,504,040 1,006,355 66.9% 35318 Sports Programs 751,720 751,720 505,737 67.3% 35319 Towngate Community Center 59,262 59,262 24,152 40.8% 35320 Amphitheater 29,100.00 29,100 - 0.0% 35321 March Annex 13,500.00 13,500 1,227 9.1% 80003 CIP - Buildings - 70,930 - 0.0% 80007 CIP - Parks - - 959 0.0% 95011 Non-Dept Zone A Parks - 6,000,000 79,269 1.3% Total Expenditures $ 12,396,080 $ 19,039,133 $ 9,459,484 49.7% Net Change or
Adopted Use of Fund Balance (2,107,069)$ (8,750,122)$ (2,462,069)$ Third Quarter Financial Summary FY 2023/24 12
Electric Utility
The Moreno Valley Utility (MVU) manages the operation, maintenance, and business planning of the City’s electric utility. MVU’s basic purpose is to purchase and distribute electricity to customers in newly developed areas of the City. The City began serving new customers in February 2004, and now serves close to 8,000 customers. As it reaches fiscal and operational maturity, MVU will continue to be a key component of the City’s economic development strategy.
The City Council has established special tiered rates for electric utility customers based upon factors such as the number of jobs created.
The main revenue source for this fund is derived from charges for services. The customer base includes residential, commercial, and industrial customers. The growth in the customer base will continue to provide for the ability to create rate stabilization and replacement reserve funding.
Table 7. MVU Operations
*MVU’s revenues and expenses will fluctuate annually based on energy demands.
FY 2023/24
Adopted Budget
FY 2023/24
Amended Budget
Actuals as of
03/31/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
Charges for Services $ 48,527,796 $ 48,527,796 $ 39,775,065 82.0% Use of Money & Property 338,500 338,500 1,254,308 370.5% Miscellaneous 160,000 160,000 3,029,248 1893.3% Total Revenues $ 49,026,296 $ 49,026,296 $ 44,058,621 89.9% Expenditures:
45510 Electric Utility - General $ 33,313,158 $ 37,632,744 $ 22,523,404 59.9% 45511 Public Purpose Program 2,102,880 2,942,880 1,561,213 53.1% 45512 SCE Served Street Lights 850,000 1,023,776 551,124 53.8% 80005 CIP - Electric Utility 6,091,340 16,438,446 692,326 4.2% 96010 Non-Dept Electric - - 10,765 0.0% 96030 Non-Dept 2005 Lease Revenue Bonds 3,620,898 3,620,898 2,213,454 61.1% 96012 Non-Dept Electric-Public Purpose - - 770 0.0% 96032 Non-Dept 2014 Refunding 2005 LRB 115,597 115,597 215,420 186.4% 96041 Non-Dept 2021 LRB Refinance 627,956 627,956 317,428 50.5% 96051 Non-Dept 2021 Streetlight Refin. 218,733 218,733 355,957 162.7% 96060 Non-Dept 2019 Taxable LRB 636,625 636,625 317,275 49.8% Total Expenditures $ 47,577,187 $ 63,257,655 $ 28,759,134 45.5% Net Change or
Adopted Use of Fund Balance $ 1,449,109 $ (14,231,359) $ 15,299,487 Third Quarter Financial Summary FY 2023/24 13
SUMMARY
The City of Moreno Valley has experienced certain levels of growth and continued to maintain a structurally balanced Budget without the use of reserves.
The economic climate is ever changing and for these reasons the City must remain optimistically cautious and only increase revenues when they are received . Staff will continue to monitor and request quarterly revenue adjustments based on this approach. These revenue adjustments will be offset by replenishing our expenditure levels accordingly.