1 City of Moreno Valley
Fiscal Year 2024/25
First Quarter Operating Budget Review
TO: Mayor and City Council
FROM: Launa Jimenez, Chief Financial Officer
DATE: Nov ember 19, 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, and Third Quarter Reviews. This ongoing process ensures a forum to look at expenditure and revenue deviat
ions 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 First Quarter of FY 2024/25 (July 2024 – September 2024, 25% of the fiscal year).
First Quarter Financial Summary FY 2024/25 2
CITYWIDE OPERATING EXPENDITURE SUMMARY
The following table contains a summary of the adopted budget, amended budget and expenditures through the First 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 First 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 2024/25
Adopted Budget
FY 2024/25
Amended Budget
Actuals as of
9/30/24
(unaudited)
% of Amended
Budget
Fund/Component Unit
General Fund $ 155,185,813 $ 156,404,720 $ 40,657,290 26. 0% Community Services District (CSD) 26,129,510 28,443,105 7,646,812 26. 9% Successor Agency 2,400,666 2,250,666 789,640 35. 1% Housing Fund - 250,000 38,278 15. 3% Special Revenue Funds 39,586,038 43,265,986 15,980,293 36. 9% Capital Projects Funds 17,348,000 21,651,394 7,521,496 34. 7% Electric Utility Funds 46,770,191 53,478,807 11,570,853 21. 6% Internal Service Funds 15,349,694 18,399,289 6,444,786 35. 0% Debt Service Funds 4,010,854 3,673,267 250 0. 0% Total 306,780,766$ 327, 817,234$ 90,649,698$ 27.7% First Quarter Financial Summary FY 2024/25 3
GENERAL FUND OPERATING
Table 2. General Fund Operations
FY 2024/25
Adopted Budget
FY 2024/25
Amended Budget
Actuals as of
9/30/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
P
roperty Tax $ 22,136,000 $ 22,136,000 $ 802,728 3.6% Property Tax in-lieu 28,100,000 28,100,000 - 0.0% Utility Users Tax 18,000,000 18,000,000 5,027,753 27.9% Sales Tax 37,750,000 37,750,000 1,814,937 4.8% Other Taxes 20,000,000 20,000,000 1,759,127 8.8% Licenses & Permits 5,639,454 5,639,454 1,552,475 27.5% Intergovernmental 615,803 615,803 276,570 44.9% Charges for Services 14,529,973 14,937,679 4,266,829 28.6% Use of Money & Property 4,725,100 4,725,100 3,265,907 69.1% Fines & Forfeitures 532,500 499,500 51,688 10.3% Miscellaneous 221,500 221,500 36,900 16.7% Total Revenues $ 152,250,330 $ 152,625,036 $ 18,854,914 12.4% Expenditures:
Personnel Services $ 30,985,300 $ 31,386,794 8,249,776$ 26.3% Contractual Services 108,073,742 109,078,742 27,596,284 25.3% Material & Supplies 4,414,612 4,414,612 938,037 21.2% General Government - - - - Debt Service - - - - Fixed Charges 6,151,248 6,151,248 1,523,235 24.8% Fixed Assets - - - - Total Expenditures $ 149,624,902 $ 151,031,396 $ 38,307,332 25.4% Excess (Deficiency) of Revenues
Over (Under) Expenditures $ 2,625,428 $ 1,593,640 $ (19,452,418) Transfers:
Transfers In $ 2,940,159 $ 3,784,360 $ 50,000 1.3% Transfers Out 5,560,911 5,373,324 2,349,958 43.7% Net Transfers $ (2,620,752) $ (1,588,964) $ (2,299,958) Total Revenues & Transfers In $ 155,190,489 $ 156,409,396 $ 18,904,914 12.1% Total Expenditures & Transfers Out 155,185,813 156,404,720 40,657,290 26.0% Net Change of Fund Balance $ 4,676 $ 4,676 $ (21,752,376) First Quarter Financial Summary FY 2024/25 4
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/Propert y Taxes In-Lieu
Property
taxes were budgeted to increase by 2.5% from the FY 2023/24 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 1% of the budgeted property tax revenue through the First Quarter. The City has currently received 1 .6% through the First 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 2024/25
Adopted Budget
FY 2024/25
Amended Budget
Actuals as of
9/30/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
Propert
y Tax $ 22,136,000 $ 22,136,000 $ 802,728 3.6% Property Tax in-lieu 28,100,000 28,100,000 - 0.0%
Utility Users Tax 18,000,000 18,000,000 5,027,753 27.9% Sales Tax 37,750,000 37,750,000 1,814,937 4.8% Other Taxes 20,000,000 20,000,000 1,759,127 8.8% Licenses & Permits 5,639,454 5,639,454 1,552,475 27.5% Intergovernmental 615,803 615,803 276,570 44.9%
Charges for Services 14,529,973 14,937,679 4,266,829 28.6% Use of Money & Property 4,725,100 4,725,100 3,265,907 69.1% Fines & Forfeitures 532,500 499,500 51,688 10.3%
Miscellaneous 221,500 221,500 36,900 16.7%
Total Revenues $ 152,250,330 $ 152,625,036 $ 18,854,914 12.4% First Quarter Financial Summary FY 2024/25 5
Note: FYs 2017/18 and 2019/20 through 2023/24 did not receive any property tax revenues in the first quarter.
Sales Taxes
Sales taxes were budgeted to increase by less than 1% as compared to the FY 2023/24 Amended Budget. Sales tax receipt trends will need to be continually monitored through the year for possible future budget adjustments.
Historical averages were at 11% budgeted sales tax revenue through First Quarter of actual receipts. The City has currently received 5% through First 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.
First Quarter Financial Summary FY 2024/25 6
Utility Users Tax Utility
Utility Users Tax were budgeted to increase by 3% as compared to FY 2023/24 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 20% of the budgeted utility users tax revenue through the First Quarter. The City has currently received 28% through the First 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 1.5% from the FY 2023/24 Amended Budget.
Based on historical averages of actual receipts, the City is expected to receive 12% of the budgeted Other Taxes revenue through First Quarter . The City has currently received 17% through the First Quarter.
First Quarter Financial Summary FY 2024/25 7
Li
censes & 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 2023/24 Amended Budget.
Based on historical averages of actual receipts, the City is expected to receive 24% of the budgeted Licenses & Permits revenue through the First Quarter. The City has currently received 28% through the First Quarter. The collection rate is related primarily to building and business license permit activities.
Chart 5. General Fund First Quarter Revenue Trend - Licenses & Permits First Quarter Financial Summary FY 2024/25 8
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 September 2024 of 5.260%. In addition, the City maintained funds in the State Local Agency Investment Fund Pool (LAIF) with a YTM of 4.575%. 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 4.75% to 5.00%.* Staff will continue to monitor closely to ensure we maximize our investment income going forward. *Federal Reserve Board - Federal Reserve issues FOMC statement 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 increase by a little over 1% as compared to the FY 2 023/24 Amended Budget.
Based on historical averages of actual receipts, the City is expected to receive 26% of the budgeted Charges for Services revenue through First Quarter. The City has currently received 29% through the First Quarter.
Chart 6. General Fund First Quarter Revenue Trend - Charges for Services First Quarter Financial Summary FY 2024/25 9
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 2024/25
Adopted Budget
FY 2024/25
Amended Budget
Actuals as of
9/30/24
(unaudited)
% of Amended
Budget
Department
City Council $ 1,164,811 $ 1,072,899 $ 260,642 24.3% City Clerk 769,143 1,346,055 155, 879 11.6%
City Manager 2,591,807 2,992,343 1,066,275 35.6% City Attorney 1,094,769 1,094,769 303, 351 27.7%
Community Development 15,484,210 16,004,210 2,999,245 18.7% Economic Development 2,589,931 2,589,931 569, 871 22.0% Financial & Management Services 15,877,282 16,000,749 3,500,317 21.9% Human Resources 1,886,331 1,886,331 593, 821 31.5% Public Works 16,114,873 16,114,873 3,069,440 19.0% Non-Departmental 2,494,961 2,307,374 4,132,711 179.1% Non-Public Safety Subtotal $ 60,068,118 $ 61,409,534 $ 16,651,554 27.1% Public Safety
Police $ 64,732,911 $ 64,732,911 $ 16,698,663 25.8% Fire 30,384,784 30,262,275 7,307,073 24.1% Public Safety Subtotal $ 95,117,695 $ 94,995,186 $ 24,005,736 25.3% Total $ 155,185,813 $ 156,404,720 $ 40,657,290 First Quarter Financial Summary FY 2024/25 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 2024/25
Adopted Budget
FY 2024/25
Amended Budget
Actuals as of
9/30/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
Property Tax $ 6,045,278 $ 6,045,278 $ - 0.0% Other Taxes 7,328,090 7,328,090 - 0.0% Intergovernmental - - 9,701 0.0% Charges for Services 6,351,095 6,364,395 424,627 6.7% Use of Money & Property 1,164,220 1,164,220 346,892 29.8% Fines & Forfeitures 24,897 24,897 1,300 5.2% Miscellaneous 14,500 1,200 779 64.9% Transfers In 1,480,120 1,480,120 233,538 15.8% Total Revenues $ 22,408,200 $ 22,408,200 $ 1,016,837 4.5% Expenditures:
Library Services Fund (5010) $ 3,283,990 $ 3,283,990 $ 820,229 25.0% Zone A Parks Fund (5011) 12,778,268 14,709,445 4,876,945 33.2% LMD 2014-01 Residential Street Lighting Fund (5012) 1,498,648 1,498,648 95,492 6.4% Zone C Arterial Street Lighting Fund (5110) 831,808 831,808 109,279 13.1% Zone D Standard Landscaping Fund (5111) 1,739,192 1,739,192 243,963 14.0% Zone E Extensive Landscaping Fund (5013) 395,267 398,085 44,607 11.2% 5014 LMD 2014-02 3,191,825 3,191,825 482,382 15.1% 5016 CFD 2021-01 Parks Fac Maint 145,900 525,500 35,442 6.7% Zone M Median Fund (5112) 406,213 406,213 55,737 13.7% CFD No. 1 (5113) 1,776,816 1,776,816 873,959 49.2% Zone S Financial & Management Svcs (5114) 81,583 81,583 8,778 10.8% Total Expenditures $ 26,129,510 $ 28,443,105 $ 7,646,812 26.9% Net Change or
Adopted Use of Fund Balance (3,721,310)$ (6,034,905)$ (6,629,975)$ First Quarter Financial Summary FY 2024/25 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 2024/25
Adopted Budget
FY 2024/25
Amended Budget
Actuals as of
9/30/24
(
unaudited)
% of Amended
Budget
Revenues:
Taxes:
P
roperty Tax $ 2,979,205 $ 2,979,205 $ - 0.0% Other Taxes 5,024,390 5,024,390 - 0. 0% Charges for Services 1,139,842 1,153,142 382, 966 33.2% Use of Money & Property 1,131,074 1,131,074 322, 045 28.5% Miscellaneous 14,500 1,200 ( 2,385) -198.8% Total Revenues $ 10,289,011 $ 10,289,011 $ 702, 626 6.8% Expenditures:
35010 Parks & Comm Svcs - Admin $ 1,075,031 $ 1,075,031 $ 252, 392 23.5% 35210 Park Maintenance - General 5,254,257 5,254,257 1, 261,908 24.0% 35211 Contract Park Maintenance 517,617 664,617 82, 057 12.3% 35213 Golf Course Program 699,017 699,017 130, 289 18.6% 35214 Parks Projects 297,834 297,834 55, 961 18.8% 35310 Senior Program 777,867 777,867 190, 269 24.5% 35311 Community Services 17,434 - 1 0. 0% 35312 Community Events 831,499 831,499 269, 847 32.5% 35313 Conf & Rec Cntr 616,992 634,426 146, 213 23.0% 35314 Conf & Rec Cntr - Banquet 271,278 271,278 74, 315 27.4% 35315 Recreation Programs 1,538,063 1,538,063 390, 591 25.4% 35318 Sports Programs 779,517 779,517 177, 867 22.8% 35319 Towngate Community Center 59,262 59,262 7, 511 12.7% 35320 Amphitheater 29,100.00 29,100 - 0. 0% 35321 March Annex 13,500.00 13,500 1, 666 12.3% 35324 Aquatics Programs - - 27,298 0. 0% 95011 Non-Dept Zone A Parks - 1,784,177 1, 808,759 101.4% Total Expenditures $ 12,778,268 $ 14,709,445 $ 4, 876,945 33.2% Net Change or
Adopted Use of Fund Balance ( 2,489,257)$ (4,420,434)$ (4,174,319)$ First Quarter Financial Summary FY 2024/25 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 8,606 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 demand.
FY 2024/25
Adopted Budget
FY 2024/25
Amended Budget
Actuals as of
9/30/24
(unaudited)
% of Amended
Budget
Revenues:
Taxes:
Charges for Services $ 49,374,318 $ 49,374,318 23,049,705 46.7% Use of Money & Property 338,500 338,500 477,432 141.0% Miscellaneous 160,000 160,000 153,907 96.2% Total Revenues $ 49,872,818 $ 49,872,818 $ 23,681,044 47.5% Expenditures:
45510 Electric Utility - General $ 33,863,657 $ 34,111,355 $ 9,248,735 27.1% 45511 Public Purpose Program 2,111,781 2,111,781 536,288 25.4% 45512 SCE Served Street Lights 861,312 861,312 239,965 27.9% 80005 CIP - Electric Utility 4,680,000 11,140,918 1,783,360 16.0% 96010 Non-Dept Electric - - 6,262 0.0% 96030 Non-Dept 2005 Lease Revenue Bonds 3,688,898 3,688,898 - 0.0% 96032 Non-Dept 2014 Refunding 2005 LRB 107,784 107,784 (18,546) -17.2% 96041 Non-Dept 2021 LRB Refinance 618,516 618,516 (102,761) -16.6% 96051 Non-Dept 2021 Streetlight Refin. 201,618 201,618 (17,167) -8.5% 96060 Non-Dept 2019 Taxable LRB 636,625 636,625 (105,283) -16.5% Total Expenditures $ 46,770,191 $ 53,478,807 $ 11,570,853 21.6% First Quarter Financial Summary FY 2024/25 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.