Mid-Year Financial Report
As of February 29, 2024
Introduction
This Mid-Year Financial Report provides an analysis of the City’s General Fund and Proprietary Fund revenues and expenditures for the first eight months of the 2023/24 fiscal year.
Management’s Overview
The City’s budget for fiscal year 2023/24 was adopted by the City Council on June 20, 2023. The purpose of the mid-year financial report is to provide regular updates to the Council regarding revenue and expenditure trends to ensure the City Council has a strong understanding of the City’s current financial condition. The numbers in this report are based on the FY 2023/24 revenues and expenditures through February 29, 2024. A discussion of the significant budget items is presented below.
This Mid-Year Report includes revenue adjustments to reflect current economic conditions, Staffing Plan updates, and Capital Improvement Plan updates. It additionally includes $16.1 million of expenditure budget increases across all funds including transfers out. Recommended budget adjustments for Staffing Plan updates; Add 3 Fire Captain positions (3 FTEs).
FY 2023/24 General Fund Budget
The FY 2023/24 budget as originally adopted in June 2023 estimated revenues of $122.32 million to fund expenditures of $122.12 million. Budget adjustments and carryforwards in the first half of the fiscal year have updated operating revenues to $123.1 million, and expenditures to $123.8 million (includes $.9 million of budget carried forward from FY 2022/23).
With consideration of the City’s Sales Tax consultants, HdL Companies, provided projections and actuals received, a $0.2 million budget decrease for state sales tax is recommended. Transient Occupancy Tax grew strongly over calendar year 2022 and early 2023, however all actuals posted in the first half of FY 2023/24 are less than FY 2022/23’s same months. The original budget for FY 2023/24 is too high. A budget decrease of $2.7 million is recommended. In contrast, Property tax revenue is performing strong. With consideration of the City’s Property Tax consultants, HdL Companies, provided projections and an analysis of actuals received, a budget increase of $2.5 million is recommended. Additionally, $3.4 ATTACHMENT 2
1 million of Excess ERAF was received in November 2023 of which $2.3 is budgeted within the General Fund. $1.1 million remains in the Non-Recurring General Fund for one-time needs.
All revenue budgets were analyzed resulting in an overall increase. Increases are recommended for Business License Tax ($0.2 million), Licenses and Permits ($0.6 million), Charges for Services ($0.5 million), Investment Earnings ($0.6 million), and other revenue ($0.1 million). A decrease to Other Taxes ($0.2 million) is recommended. Overall, the recommended adjustments would result in an increase of $1.6 million for General Fund revenues.
The expenditure budget increases are primarily for revenue generating program supplies and service needs, contingency for additional department needs, the PD Range repairs, and the required contributions to reserves per fiscal policy.
Recommended usage of FY 2022/23’s ending fund balance ($6.3 million) was presented to City Council in February 2024. The related increases to FY 2023/24’s expenditure budget are recommended primarily for one-time contributions to reserves for pension obligations, capital improvement, and fleet replacement.
Additionally, staff recommended a one-time contribution to the Public Art in Parks project, funding for a Downtown Specific Plan, and for three Fire Captains (3 FTEs) for the restoration of Fire Engine 1.
ATTACHMENT 2
2 FY 2023/24
Budget
(as of
2/29/2024)
FY 2023/24
YTD Actual
(as of
2/29/2024)
% to date
(Budget to
Actual)
Proposed
Mid-Year
Adjustments
Operating Revenues
Property Tax 43.62 25.38 58% 2.52 Sales Tax 22.56 11.66 52% (0.15) Transient Occupancy Tax 32.78 16.57 51% (2.67) Business License Tax 4.18 3.21 77% 0.22 Other Taxes 2.76 0.69 25% (0.15) Licenses and Permits 2.36 2.07 88% 0.62 Charges for Services 6.18 2.57 42% 0.49 Intergovernmental 0.93 0.82 88% 0.10 Investment Earnings 0.22 0.35 155% 0.58 Miscellaneous / Other Revenues 0.36 0.26 72% 0.03 Transfers In 4.90 2.45 50% - Total Operating Revenues 120.84 66.02 55% 1.58 Non-Operating Revenues
Excess ERAF Above Baseline 2.25 2.25 100% - Total Non-Operating Revenues 2.25 2.25 100% - Total Revenues 123.09 68.27 55% 1.58 Operating Expenditures
City Council / City Clerk 1.69 1.01 60% - City Manager 5.84 3.74 64% - Finance 5.56 3.09 55% -
City Attorney 1.67 0.93 56% - Human Resources 2.61 1.50 57% - Community Development 5.65 3.25 58% - General Government 13.02 6.22 48% 7.44 Included in General Government:
Transfer to CIP Facilities Reserve 2.32 1.16 50% 1.76 Transfer to CIP General Reserve 1.16 0.58 50% 0.53 Transfer to General Fund Reserves 1.26 - 0% 0.35 Police Department 36.94 23.24 63% - Fire Department 25.28 15.68 62% 0.34 Public Works 15.57 8.49 54% - Parks & Recreation 9.95 5.65 57% 0.05 Total Operating Expenditures 123.77 72.80 59% 7.83 Fund Balance for Carryforwards 0.90 6.35
Budgeted Net Position 0.22 0.10
General Fund Summary (in millions)
ATTACHMENT 2
3 Major Revenues
Property Tax
FY 2023/24 Property Tax revenues are currently budgeted at $43.6 million. The City’s major source of property tax revenue to the General Fund is residential property (80.5%), followed by commercial property (14.7%) and industrial property (3.2%). Year-to-date property tax revenue appears on target, but review of revenues show that overall this revenue source will exceed the FY 2023/24 budgeted amount. Despite the expectation that the real estate market would slow due to higher mortgage rates, Napa County medium home prices in December 2023 were 2.6% higher than December 2022. The City’s original budget is about $2.5 million lower than anticipated revenues.
Sales Tax
Sales Tax revenues for FY 2023/24 are currently budgeted at $22.6 million. Sales tax is received in monthly advances from the California Department of Tax and Fee Administration (CDTFA) based on prior year actual revenues received, and lag two (2) months behind. Analyzing our year-to-date revenue and our sales tax consultants, HdL Companies, provided projections, it is anticipated that the City’s original budget is about $0.2 million higher than anticipated revenues, and a budget decrease is recommended.
For July-September 2023 sales tax revenues were 1.8% higher than the same quarter in 2022. The three largest categories, making up 63.4% of total revenue, were Business and Industry, Restaurants and Hotels, and State and County Pool.
The largest increases were in Transfers & Unidentified with a 80.6% increase, Restaurants and Hotels with a 12.6% increase, Building and Construction with a 11% increase, and Autos and Transportation with a 6.2% increase. Decreases were observed in Fuel and Service Stations, and County & State Pool.
Transient Occupancy Tax
-
5.00 10.00
15.00 20.00
25.00 30.00
35.00 40.00
45.00 50.00
Property Tax Sales Tax Transient
Occupancy Tax
Other Revenues
Operating Revenues: Budget to Actual
(in millions)
FY 2023/24 Budget
(as of 2/29/2024)
FY 2023/24 YTD Actual
(as of 2/29/2024)
ATTACHMENT 2
4 Transient Occupancy Tax (TOT) revenue was the hardest hit by the COVID-19 pandemic but rebounded in FY 2021/22 to higher than pre-pandemic levels. FY 2022/23 was another year for considerable growth ending the year at $30.9 million.
The adopted budget for FY 2023/24 is $32.8 million. Collections for TOT lag in a similar fashion to Sales Tax, and the $16.6 million received as of February 29 roughly corresponds to July-December receipts. Current projections estimate that actual TOT revenue for the current fiscal year will be approximately $30.1 million, and a revenue budget decrease of $2.7 million is recommended.
There were 28 hotels, 1 timeshare, 22 bed and breakfast establishments, 41 non- hosted and 31 hosted vacation rentals generating transient occupancy tax revenue within the City as of December 31, 2023.
Other Revenues
Business License Tax revenues are trending higher than the City’s 5-year trends.
Other Taxes appear low, partially due to the timing of payment receipt but also behind the City’s 5-year trends.
Licenses and Permits revenues are trending higher than the City’s 5-year trends.
Charges for Services appear low; the City has not yet booked the Dispatch revenue that is a major component of this category. Revenues are expected to be slightly higher than budgeted.
Intergovernmental revenues appear high; the timing of these revenues can vary from year-to-year based on when the other governments disburse funds to the City, and the amount of CalOES reimbursement revenue the Fire Department receives.
Investment Earnings have only been booked for the first six months of FY 2023/24.
Investment earnings already received are higher than the annual budgeted amount.
Miscellaneous Revenues include Rents and Royalties, as well as Contributions/Donations from Private Sources. This category appears high but timing varies and significant revenue is received in the summer/beginning of the fiscal year.
Non-Operating Revenues for the current year is the $2.3 million of additional Excess ERAF budgeted to the General Fund to balance the budget.
ATTACHMENT 2
5 Expenditures
As of February 29, 2024, all departments were operating within 59% of their approved budgets.
The following table provides the expenditure budget and actual spent to date for each department through February 29, 2024:
Departments request additional funding for this fiscal year to meet needs.
Additionally, staff recommended usage of the FY 2022/23 ending fund balance are included. Requests included in this report for the General Fund total $7,826,720:
$5,700,000 for General Government for transfer to the 115 Trust, and the Capital Improvement and Fleet Replacement Reserves
$300,000 for three Fire Captains (3 FTEs) for Fire Engine 1 Restoration $100,000 for the Downtown Specific Plan
$250,000 for the Public Art in Parks project
$342,420 for unbudgeted benefit costs
$45,000 for Parks and Recreation program supplies and services $175,000 for the PD Range repairs – Bullet traps & Stormwater $180,000 for business license discovery and recovery services $300,000 for contingency budgeted for potential department needs $434,300 for transfer to reserves per fiscal policy
Expenditures by Department
Budget
2/29/2024
$ in millions
Actual
2/29/2024
$ in millions
% to date
(Budget to
Actual)
City Council / City Clerk 1.69 1.01 60% City Manager 5.84 3.74 64% Finance 5.56 3.09 55%
City Attorney 1.67 0.93 56% Human Resources 2.61 1.50 57% Community Development 5.65 3.25 58% General Government 13.02 6.22 48% Police Department 36.94 23.24 63% Fire Department 25.28 15.68 62% Public Works 15.57 8.49 54% Parks & Recreation 9.95 5.65 57% Total Expenditures 123.77 72.80 59% ATTACHMENT 2
6 Non-Recurring General Fund
Excess ERAF was budgeted in the General Fund ($2.3 million) to balance the FY 2023/24 budget; at this time $1.1 million of the original $3.4 million will remain in the Non-Recurring General Fund for future appropriation. Recommended increases to the Non-Recurring General Fund are to align the budget with actuals received and for one-time transfers in for the Downtown Specific Plan and repairs to the PD Range repairs.
General Fund Reserves
In accordance with the City’s Fiscal Policy, the City maintains an Operating Reserve of 5%, an Emergency Reserve of 14% and a Contingency Reserve of 1% of the annual General Fund Operating Budget. The CIP Facilities Reserve receives an annual transfer equal to 2% of the General Fund Operating Budget, and the CIP General Fund Reserve an annual transfer of 1% of the General Fund Operating Budget. The increases to the General Fund Operating Budget requested in this report will increase the required contributions for the year.
FY 2023/24
Budget
(as of 2/29/24)
FY 2023/24
YTD Actual
(as of 2/29/24)
% to date
(Budget to
Actual)
Proposed
Mid-Year
Adjustments
Beginning Fund Balance 6.55 6.55
Non-Recurring Revenues
Property Tax (Excess ERAF) 0.25 1.13 451% 0.88 Sales Tax - - 0%
Licenses and Permits 0.40 0.05 13% Charges for Services 0.81 0.37 46% Intergovernmental 4.35 0.38 9% Investment Earnings - 0.02 0% Miscellaneous / Other Revenues 0.26 0.26 0% Transfers In - - n/a 0.28 Total Non-Recurring Revenues 6.07 2.22 36% 1.15 Non-Recurring Expenditures
Salaries, Wages & Benefits 0.49 0.25 50% Services 9.06 1.24 14% 0.10 Materials and Supplies 0.58 0.09 15% Capital Outlay 0.60 0.02 4% 0.18 Internal Services 0.00 0.00 58% Transfers Out 0.54 0.54 100% Total Non-Recurring Expenditures 11.28 2.14 19% 0.28 Net Impact of Non Recurring (5.21) 0.08
Projected Ending Fund Balance 1.34 0.88
Non-Recurring General Fund Summary (in millions)
ATTACHMENT 2
7 Proprietary Funds
In addition to the General Fund, the Mid-Year Financial Report also provides a snapshot of the City’s Proprietary Funds. Proprietary funds are those funds in which the City charges a fee to customers to recover the cost of providing the service. These funds are made up of Enterprise Funds and Internal Service Funds.
Both types of funds are presented separately below, along with summary information for each of the individual funds within each category.
Enterprise Funds
Enterprise Funds are those funds that provide goods or services to the public for a fee that makes the entity self-supporting. Napa’s Enterprise Funds include: Solid Waste & Recycling and Water. A listing of these funds and summary of the activity from July 2023 through February 2024 follows below:
Solid Waste & Recycling Fund
The Solid Waste & Recycling (SWR) Fund is responsible for the collection, processing, public education, and long-term planning related to solid waste materials generated in the City of Napa. Beyond the safe and cost-effective handling of solid waste materials, the fund’s primary mission is to maximize the diversion of solid waste materials from landfill disposal in order to meet or exceed State mandates. A summary of the SWR Fund activity (shown in millions) through February 29, 2024, is provided below:
FY 2023/24
Beginning
Balance Usage
Budgeted
Transfers
In
Mid-Year
Additional
Transfers In
FY 2023/24
Ending
Balance
Emergency Reserve 15.52 - 0.86 0.27 16.65 Operating Reserve 5.54 - 0.33 0.07 5.95 Contingency Reserve 1.11 - 0.07 0.01 1.19 CIP Facilities Reserve 6.85 (4.42) 2.32 1.76 6.50 CIP General Fund Projects Reserve 3.73 (1.37) 1.16 0.53 4.06 Total Reserves 32.75 (5.79) 4.75 2.64 34.35 Reserves
(in millions)
ATTACHMENT 2
8 FY 2023/24
Amended
Budget
(as of 2/29/2024)
FY 2023/24
YTD Actual
(as of
2/29/2024)
% to date
(Budget to
Actual)
Proposed
Mid-Year
Adjustments
Revenues
Refuse Collection Charges 30.28 15.31 51% - MDF Gate Fees 3.82 2.45 64% - Material Sales 8.62 3.97 46% - Other Revenues 0.24 0.13 56% - Total Revenues 42.95 21.86 51% - Expenditures
Salaries and Benefits 1.69 0.95 56% - Contractor Service 30.12 19.88 66% 0.84 Transfer Station Disposal Fees 3.75 1.97 53% - MDF Facility Materials 2.54 1.49 59% - Debt Service 0.87 0.73 83% - Other Materials, Supplies & Services 3.70 1.70 46% - Administrative Support 0.89 0.45 50% - Transfer Out to Street Resurfacing 1.20 0.60 50% - Transfer Out to SWR CIP Fund 0.73 0.37 50% - Transfer Out to SWR Non-Recurring Fund 0.45 0.45 100% - Total Expenditures 45.95 28.58 62% 0.84 Fund Balance for Carryforwards
Surplus / (Deficit) (2.99) (6.72)
Solid Waste & Recycling Operating Fund
FY 2023/24
Amended
Budget
(as of 2/29/2024)
FY 2023/24
YTD Actual
(as of
2/29/2024)
% to date
(Budget to
Actual)
Proposed
Mid-Year
Adjustments
Revenues
Transfer In from SWR Operating Fund 0.73 0.37 50% - Total Revenues 0.73 0.37 50% - Expenditures
Capital Projects 1.16 0.66 57% - Total Expenditures 1.16 0.66 57% - Fund Balance for Carryforwards
Surplus / (Deficit) (0.42) (0.29)
Solid Waste & Recycling CIP Fund
ATTACHMENT 2
9 For the Solid Waste & Recycling (SWR) Operating Fund Table above, please be aware that the revenues are one month behind the expenditures. Thus, the table shows SWR revenue booked through January 31, 2024, while expenditures are shown through February 29, 2024. With this caveat, you can see that overall operating revenues are on track with the adopted SWR FY2023/24 budget. Refuse collection charges are slightly ahead of the adopted budget at 51% of budget.
Revenue from Gate Fees is ahead of the projected budget at 64% and this is reflective of higher volumes of recyclable and/or compostable materials being delivered to the City’s Materials Diversion Facility (MDF). Materials sales revenue is tracking lower than adopted (46%) and this trend is likely to continue as global commodity prices have declined in the last 12-18 months. Operating expenditures are tracking higher than adopted FY2023/24 budget, but this is presented artificially high (62%) as it reflects an extra month of expenditures (through end of February 2024 vs. revenue only shown through January 2024). The other major factor is the contractual lump sum progress payments for “over-baseline” processing (approximately $5.9 million) that has already been made to Napa Recycling & Waste Services (NRWS) through February 2024 with only about $137,000 remaining to be paid through the end of FY2023/24.
FY 2023/24
Amended
Budget
(as of 2/29/2024)
FY 2023/24
YTD Actual
(as of
2/29/2024)
% to date
(Budget to
Actual)
Proposed
Mid-Year
Adjustments
Revenues
Organics Grant - 0.05 0% - Transfer In from SWR Operating Fund 2.22 0.45 20% - Total Revenues 2.22 0.50 23% - Expenditures
Organics Grant - - 0% - Other Expenditures 2.48 2.00 81% - Total Expenditures 2.48 2.00 81% - Surplus / (Deficit) (0.26) (1.50)
Solid Waste & Recycling Non-Recurring Fund
ATTACHMENT 2
10 Water Fund
The Water Fund is responsible for the operation, maintenance, and improvement of the municipal water system serving the City and adjacent areas. The Fund’s mission is to provide an uninterrupted supply of high-quality and low-cost water to the community for consumption, sanitary needs, irrigation, and fire protection. The Water Fund’s Administration, Engineering, Treatment, and Distribution sections accomplish this mission by delivering approximately 12,160 acre-feet (3.96 billion gallons) of water meeting State and Federal drinking water regulations, investing in capital improvements, planning for long-term water supply needs, responding to emergency repairs, and maintaining a proactive water conservation program. In concert with City Council priorities, staff has prioritized monitoring and analyses of local source waters in the interest of maintaining the quality of our drinking water sourced from watersheds. A summary of the Water Fund activity through February 29, 2024 is provided below:
Revenue in the Operating Fund is tracking at 60% of the budget at the end of Q3 as expected. Council-approved rate adjustments were effective at the start of Q3. Due to a wet winter and expected late start to the irrigation season, there are no proposed adjustments to revenue this fiscal year. Operating expenditures are tracking at 47% of budget as staff vacancies continue to be filled. As is typical for Mid-Year, Services, Materials, and Supplies are tracking similar to last FY 2023/24
Amended
Budget
(as of
2/29/2024)
FY 2023/24
YTD Actual
(as of
2/29/2024)
% to date
(Budget to
Actual)
Proposed
Mid-Year
Adjustments
Revenues
Charges for Services 35.94 21.86 61% - Other Revenues 0.94 0.23 24% - Total Revenues 36.88 22.09 60% - Expenditures
Salaries and Benefits 12.82 6.50 51% - Services, Materials and Supplies 10.32 5.03 49% - NBA Water Supply 9.10 4.65 51% - Administrative Support 3.11 1.56 50% - Water Bond Debt Service 3.33 0.53 16% - Transfer Out to Water CIP Fund 5.80 2.60 45% - Transfer Out to Water Non-Recurring Fund - - n/a - Transfer Out to Fleet - - n/a - Total Expenditures 44.49 20.88 47% - Surplus / (Deficit) (7.61) 1.21
Water Operating Fund
(in millions)
ATTACHMENT 2
11 year since expenditure patterns do not follow the calendar year. Annual Water Bond Debt Service payments will be made in full in Q4.
The Non-Recurring Fund includes Disaster recovery projects that are anticipated to be reimbursed by FEMA/CalOES as they progress into the construction phase.
The Redwood Road slip lining project, due to damage from the 2014 Earthquake, and Milliken access road walkway repairs, due to damage by the 2017 Atlas Fire, are scheduled to commence construction in Q4 and continue into FY25. The Other Expenditures category in this non-recurring fund includes $0.55M of the $3.1M budgeted for special studies, including the Purified Water Feasibility Study and the multi-year Water System 30-Year Master Plan and Corresponding Financial Plan which is scheduled to continue into FY25.
FY 2023/24
Amended
Budget
(as of
2/29/2024)
FY 2023/24
YTD Actual
(as of
2/29/2024)
% to date
(Budget to
Actual)
Proposed
Mid-Year
Adjustments
Revenues
Other Revenues 0.40 0.12 n/a - 2014 Earthquake Revenues (FEMA/CalOES) 0.51 - 0% (0.51) 2017 Fire Revenues (FEMA/CalOES) 3.20 - 0% (4.10) Total Revenues 4.12 0.12 3% (4.61) Expenditures
2014 Earthquake Projects 0.89 0.00 0% (0.87) 2017 Fire Projects 7.35 0.08 1% (7.19) Administrative Support 0.03 0.01 50% - Other Expenditures 3.10 0.55 18% - Transfer Out to Water CIP 5.24 3.45
Total Expenditures 16.60 0.65 4% (4.61) Fund Balance for Carryforwards 16.23 16.23 Surplus / (Deficit) 3.74 15.70
Water Non-Recurring Fund
(in millions)
ATTACHMENT 2
12 The Water Capital Improvement Program (CIP) Fund is dedicated to investing in the critical infrastructure necessary to store, treat, and deliver drinking water to our customers. Annual investments total $6M funded by revenue from capacity fees and water rates. Capacity fees have been tracking at $0.8M annually over the last four years, however $2.39M has been collected through Q3 largely as a result of new connections for residential housing blocks in the Napa Pipe Redevelopment Area. Most large capital improvement projects are multi-year efforts for planning and design through construction. The planning and design phases generally average approximately 10%-20% of total project costs.
Construction costs account for the remaining 80-90% of the project. The capital projects for Administration support the software and development of the asset management program. Projects allocated for Water Distribution replace and repair meters, fire hydrants, and pipelines up to twelve inches in diameter. Water Supply Projects are implemented to improve and maintain watersheds, dams, and reservoirs. Water Treatment Projects invest in our three water treatment plants, while Water Transmission Projects are implemented to improve and maintain tanks, pump stations, and pipelines greater than twelve inches. Water Distribution Projects have replaced 5,000 linear feet of pipe this fiscal year.
FY 2023/24
Amended
Budget
(as of
2/29/2024)
FY 2023/24
YTD Actual
(as of
2/29/2024)
% to date
(Budget to
Actual)
Proposed
Mid-Year
Adjustments
Revenues
Capital Projects Distribution - - n/a 0.51 Capital Projects Supply 2.69 - 0% 4.10 Capital Projects Transmission 0.18 - 0% - Capital Projects Treatment - - n/a - Capacity Fees 0.80 2.39 298% - Transfer In from Water Operating Fund 11.85 2.60 22% - Transfer in from Water Non-Recurring Fund - - n/a 3.45 Other Revenues - 0.11 n/a - Total Revenues 15.52 5.10 33% 8.06 Expenditures
Capital Projects Administration 0.07 0.04 63% - Capital Projects Distribution 5.05 0.60 12% 0.87 Capital Projects Supply 6.25 0.03 0% 7.19 Capital Projects Transmission 4.39 0.38 9% - Capital Projects Treatment 1.36 0.01 1% - Other Expenses - 0.01 0% - Total Expenditures 17.11 1.08 6% 8.06 Fund Balance for Carryforwards 6.80 6.80 Surplus / (Deficit) 5.21 10.82
Water CIP Fund
(in millions)
ATTACHMENT 2
13 Internal Service Funds
Internal Service Funds are used to account for the financing of goods and services provided by one department to other departments of the city.
ATTACHMENT 2
14 Internal Service Funds
FY 2023/24
Budget
(as of
2/29/2024)
FY 2023/24
YTD Actual
(as of
2/29/2024)
% to date
(as of
2/29/2024)
Proposed
Mid-Year
Adjustments
Fleet Management Fund
Available Capital [1] 5.02 5.02 Revenues 4.85 3.25 67%
Expenditures 9.07 3.45 38%
Fund Balance Addition/(Reduction) (4.22) (0.20) Projected Ending Available Balance 0.80
Fleet - Fire Apparatus Replacement Fund
Available Capital [1] 1.94 1.94 Revenues 0.71 0.70 98%
Expenditures 1.68 0.89 53%
Fund Balance Addition/(Reduction) (0.97) (0.20) Projected Ending Available Balance 0.97
IT Replacement
Available Capital [1] 2.64 2.64 Revenues 0.46 0.21 46%
Expenditures 1.06 0.38 36%
Fund Balance Addition/(Reduction) (0.59) (0.17) Projected Ending Available Balance 2.05
Risk Management - General Liability
Available Capital [1] 3.02 3.02 Revenues 8.62 4.31 50%
Expenditures 8.91 4.91 55%
Fund Balance Addition/(Reduction) (0.29) (0.60) Projected Ending Available Balance 2.73
Workers Compensation
Available Capital [1] 5.72 5.72 Revenues 5.32 3.24 61%
Expenditures 5.92 2.76 47%
Fund Balance Addition/(Reduction) (0.59) 0.48 Projected Ending Available Balance 5.13
Unemployment Insurance
Available Capital [1] 0.38 0.38 Revenues 0.10 0.03 30%
Expenditures 0.10 0.01 12%
Fund Balance Addition/(Reduction) (0.00) 0.02 Projected Ending Available Balance 0.37
Post Employment Benefits (PEB)
Available Capital [1] 6.70 6.70 Revenues 1.29 0.91 70%
Expenditures 0.02 0.78 3898%
Fund Balance Addition/(Reduction) 1.27 0.13 Projected Ending Available Balance 7.97
Equipment Replacement
Available Capital [1] 1.06 1.06 Revenues 0.16 0.08 50%
Expenditures 0.37 0.06 17%
Fund Balance Addition/(Reduction) (0.21) 0.01 Projected Ending Available Balance 0.84
[1] Available Capital = Fund Balance available for Appropriation ATTACHMENT 2
15 What We Are Watching
Nationally:
Equity markets and policymakers continue to watch inflation closely. Inflation has subsided in the American economy over the last twelve months. The Federal Reserve is poised to adjust its policy interest rate (the Federal Funds Rate target) some time in summer or fall 2024. Continued inflation and geopolitical issues in Europe and the Middle East confound the continued fall of price growth in 2024 and 2025; forecasters are generally confident that inflation will continue to fall, but at a slower pace than in 2023. Part of that slowness is continued labor-market strength.
Nationwide, unemployment was 3.7% for December 2023, up slightly from December 2022 (3.5%). The number of people working in the United States increased in 2023 by an estimated 2.57 million workers; the increase in the unemployment rate was due to an increase in the national labor force, as workers exited after the pandemic continued to re-emerge, perhaps drawn back by higher prices and household economic pressure, higher wage levels, or both.
Unemployment rates fell in 2023 for Black (4.8% in December 2023 from 5.5% in December 2022). Latino workers saw no change in unemployment in 2023 (5.0%) people, while teenagers (11.9%) experienced an increase in unemployment in 2023 per the U.S. Bureau of Labor Statistics (BLS). These statistics only count those actively looking for work or on temporary layoff, and do not include people unable to work or who have dropped out of the workforce due to childcare issues or disability (such a choice means the worker is no longer counted, but may be generating self-employed income). Given higher interest rates persisting, labor- market growth confounds forecasters somewhat to the positive, as did the growth of gross domestic product (GDP) after inflation in 2023.
GDP after inflation (real GDP) had an amazing year in 2023, especially in light of forecasts. American consumers drove income growth in spite of higher interest rates and lingering inflation. Growth for 2023 was 2.5 percent versus 1.9 percent for 2022. The third quarter (summer) of 2023 saw actual outcomes almost double consensus estimates, driving the annual gains. A slower-moving economy has been predicted for 18 months or so, specifically after inflation took flight and interest rates began to increase to reflect the enhanced risk. If consumers remain resilient and spend, and business continue to hire, a soft landing from the pandemic’s fading shadow looks likely. The current forecasts for the American economy are for between 1.8% and 2.5% growth of GDP after inflation through 2025, unemployment rates to be stable and inflation to continue moving toward 2.0 percent.
State:
California’s economy continued to show signs of a slowdown in hiring throughout 2023 with respect to Californians with jobs. From June 2022 to Dec 2023, after seasonal adjustments, there were 138,000 fewer Californians working. Outside ATTACHMENT 2
16 of a declared recession, this is a rare occurrence. An increase in California’s labor force of just over 100,000 workers over the same 19 months means the state’s unemployment rate increased from 3.9% to 5.1% as of December 2023. These data come from BLS and California Employment Development Department (EDD).
From June 2022 to December 2023, employers in California hired over 513,800 more workers, or 2.8 percent growth. These data suggest increases in most industries and hiring. From December 2022 to December 2023, largest job gains were in Leisure and Hospitality, Agriculture, Healthcare, Government (at all levels), and Construction.
The state budget is projected to be a $38 billion deficit in the 2024-25 fiscal year (the Legislative Analyst is projecting $78 billion as of February 20). This continued reversal needs delays in spending and cost cuts, as well as continued use of savings through the state’s “rainy-day fund”. Projected deficits remain for California to 2027, the extent of the California Department of Finance’s forecast outlook. California’s tax code depends on personal income, capital gains income, and taxable sales.
Property taxes are likely to remain stable or rise per the Proposition 13 methodology but are predominately for education or parcel initiatives in local areas.
Bay Area home prices ranged between $1.2 and $1.35 million at the median across major cities, slight price growth from 2022.
Local Economic Condition:
The City relies on the TOT and sales tax revenue generated by visitors to the area.
TOT revenue slowed down in 2023, as occupancy rates fell slightly from 62.9 percent in 2022 to 61.7 percent in 2023. Napa’s hotels had more total rooms available, but lower revenue per available room (RevPAR), down about $20 per room from 2022 to 2023. The City’s hoteliers have recovered more quickly than previously expected; 2024 is likely to be a year of slower growth again of hotel revenues, but continued strength for the city economy.
The City of Napa the median single-family home sold price was $887,400 in December 2023, 2.6% higher than December 2022’s median home price and
19.5% higher than in December 2020. Housing affordability has fallen in Napa County again in Q3 2023, up to 16% of households versus 13% in Q3 2022. A slowdown in price ascension parallel to continued income gains made homes at the median price slightly more affordable in 2023.
Napa County’s unemployment rate continues to be lower than California’s overall rate and was 4.2% for December 2023 after seasonal adjustments. This was an increase from the 3.1% unemployment rate experienced in December 2022, reflected similar changes in Napa County’s residents being employed and available for work (labor force and residents employed both fell in 2023), but hiring at Napa County’s employers increased by 1.8 percent in 2023. These data together suggest Napa County employers are hiring from outside the county.
ATTACHMENT 2
17 Mid-Year Appropriation Adjustments
In accordance with Fiscal Policy 5.b.iii, adopted by City Council on June 20, 2023, the City Manager is authorized to increase appropriations for specific purposes, as long as the expenditure appropriations do not exceed the amount of the donation, and the adjustment is reported to the City Council as part of the next regular financial report.
Budget Adjustment Summary (Fund / Department /
Purpose) Revenues Expenditures
Fund 100 / Fire / Reimbursement 601,755.00 601,755.00
Fund 100 / Police / Grants and Donations 15,000.00 15,000.00 Fund 100 / City Attorney / Reimbursement 9,125.00 9,125.00 Fund 100 / Parks and Recreation / Grants and
Donations
48,500.00
48,500.00
Total Operating General Fund
674,380.00 674,380.00
Budget Adjustment Summary (Fund / Department /
Purpose) Revenues Expenditures
Fund 101 / Human Resources / Grants and Donations 11,011.00 11,011.00 Fund 101 / Police/Reimbursements 199,271.00 199,271.00
Fund 101 / Parks and Recreation / Grants and
Donations
260,000.00
260,000.00
Fund 101 / General Government / Grants and
Donations
434,000.00
434,000.00
Total Non-Recurring General Fund
904,282.00 904,282.00
Budget Adjustment Summary (Fund / Department /
Purpose) Revenues Expenditures
Fund 610 / Fleet / Reimbursements 29,703.00 29,703.00
Total Other Funds 29,703.00 29,703.00
ATTACHMENT 2
18 Recommendation
Receive and file the Mid-Year Financial Report and approve a resolution to update the City’s Staffing Plan, CIP Projects, and approve Council Budget Amendment No. 212P9. This budget amendment will increase revenues based on current projections and increase expenditures based on staff recommendations and department requests.
Staffing Plan Changes:
Fire: Add 3 Fire Captain positions (3 FTEs)
CIP Project Updates:
Public Art in Parks Project (33PA22PR03) - Swap funding source for Fuller Park Public Art. Remove $250,000 of Public Art funding from the Public Art in Parks Project and replace with an appropriation of $250,000 from the General Fund.
Redwood Rd HDD Line Repair PW206 (9015F206) - Deobligate remaining project funding and expenditure budgets within the Water Utility Non- Recurring Fund and reappropriate equal funding and expenditure allowances within the Water Utility Capital Improvement Fund. This recommendation would require a transfer from the Nonrecurring Fund to the Capital Improvement Fund for $353,286. This project was previously included in the FY 2024/25 5-Year Capital Improvement Program. Milliken Raw Water Pipeline Hardening HMGP (9017FR20) - Deobligate remaining project funding and expenditure budgets within the Water Utility Non-Recurring Fund and reappropriate equal funding and expenditure allowances within the Water Utility Capital Improvement Fund. This recommendation would require a transfer from the Non-Recurring Fund to the Capital Improvement Fund for $3,092,877. This project was previously included in the FY 2024/25 5-Year Capital Improvement Program.
Budget Amendments:
Fund Fund Name
Revenue
Budget Increase /
(Decrease)
Expenditure
Budget
Increase /
(Decrease)
100 General 1,571,000 7,826,720
Revenue Adjustments for Current
Trends 1,571,000
3 Fire Captains 300,000
Public Art in Parks 250,000
115 Trust 3,000,000
CIP Facilities Reserve 1,700,000
CIP General Reserve 500,000
Fire Apparatus Reserve 250,000
Fleet General Reserve 250,000
Downtown Specific Plan 100,000
ATTACHMENT 2
19 Fund Fund Name
Revenue
Budget Increase /
(Decrease)
Expenditure
Budget
Increase /
(Decrease)
Business License Discovery &
Recovery 180,000
Unbudgeted Benefits 342,420
Contingency (Department Needs) 300,000
PD Range Repairs 175,000
Parks & Recreation Supplies &
Services 45,000
Transfer to Reserves per Fiscal
Policy 434,300
101 General Non-Recurring 1,153,273 275,000
Excess ERAF (Unbudgeted) 878,273
PD Range Repairs 175,000 175,000
Downtown Specific Plan 100,000 100,000
230 Public Art (DIF) - (250,000) 33PA22PR03 Public Art in Parks (250,000)
300 City Capital Projects 2,534,300 -
33PA22PR03 Public Art in Parks 250,000
CIP General Reserve 528,100
CIP Facilities Reserve 1,756,200
510 SW&R Operating - 837,000
Additional Over Baseline Payment 837,000
531 Water Utilities CIP 8,056,425 8,056,425
9015F206 Redwood Rd HDD 866,838 866,838
9017FR20 Milliken Raw Water PL 7,189,587 7,189,587
539 Water Utilities Non-Recurring (4,610,263) (4,610,263) 9015F206 Redwood Rd HDD (513,553) (513,553)
9017FR20 Milliken Raw Water PL (4,096,710) (4,096,710) 610 Fleet Replacement Reserve 250,000 -
Transfer in from General Fund 250,000
611 Fire Apparatus Replacement Rsrv 250,000 -
Transfer in from General Fund 250,000
650 Postemployment Benefits 3,000,000 4,000,000
Transfer in from General Fund 3,000,000
115 Trust 3,000,000
Unbudgeted Contributions 1,000,000
Total 12,204,736 16,134,883
ATTACHMENT 2
20