City Council Agenda Report
February 20, 2024
TO: Honorable City Council
FROM: Jesus M. Gomez, City Manager
BY: Jana Stuard, Director of Finance/City Treasurer
Jesenia Sanchez, Human Resources Manager
SUBJECT: RESOLUTION NO. 24-10 – FISCAL YEAR 2023/24 MID-YEAR BUDGET REVIEW AND REVISIONS; AND RESOLUTION NO. 24-12 – AMENDING THE FISCAL YEAR 2023/24 SALARY SCHEDULE FOR GENERAL AND HOURLY
UNIT EMPLOYEES AND EXECUTIVE MANAGEMENT AND MID-
MANAGEMENT EMPLOYEES
Background:
Enclosed are mid-year budget projections for the Fiscal Year (FY) 2023/24 Budget. The projections and recommended budget adjustments are based upon the final Audited Financial Statements for the fiscal year ending June 30, 2023 and six months actual expenses and revenues during the current fiscal year.
General Fund:
FY 2022/23
Based on audited results, net of accounting Governmental Accounting Standards Board (GASB) adjustments; all revenues, except sales and real property transfer taxes outperformed the City’s revenue estimates. In addition to ongoing revenue sources, the City received $2.6 million in one-time revenues from a legal settlement and energy rebates. The total revenue collected amounted to $78 million, 9% or $6.1 million over the budgetary estimates. Expenditures were $7.6 million, 9% under the budget, due mainly to savings realized under: Personnel ($4.5 million), Sheriff’s Contract ($1.8 million) and other expenditures ($1.3 million).
The outcome of the above mentioned positive financial impacts result is the General Fund ending available balance of $28.1 million, which is $2.4 million higher than anticipated during the preparation of the FY 2023/24 Budget.
City Council February 20, 2024
Resolution No. 24-10 Budget FY 2023/24
Resolution No. 24-12 Salary Schedule Revision
Page No. 2
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4 Attachment No. 1 provides an overview of the City’s financial results for the fiscal year ending June 30, 2023.
FY 2023/24
The current FY 2023/24 budget year-to-date results indicate that the City is on target with the projections, with the exception of the following:
Revenue Adjustments:
For FY 2023/24, the overall General Fund revenues are expected to outperform the original revenue estimates by a total of $2.1 million, or 2.9%, and reach $77.1 million. As in the prior fiscal year, this year’s revenues include the last allocation of $2.9 million from the American Rescue Plan Act’s (ARPA) Coronavirus State and Local Fiscal Recovery Fund (SLFRF) that provides financial relief to the General Fund for loss of revenues during the pandemic. The proposed increase of $2.1 million in General Fund revenues estimates is a combination of the following revisions:
Sales Taxes – Local Tax & Measure P: The City’s largest revenue category is slightly under the anticipated revenues. Current year revenues are expected to remain flat when compared to the prior year’s actual revenue amount of $26.2 million, exceeding it only by $123 thousand. Staff recommends decreasing the current estimates by $52 thousand, to a combined total of $26.3 million. This negative adjustment results reflects the state of economy and is in line with regional economy trends.
Property value derived revenues represent the second most significant portion of General Fund revenues. Projections for all categories combined are proposed to be increased by $1 million. The detail of adjustments is as follows:
•Property Tax In Lieu of VLF: This category is estimated to increase substantially from the original FY 2023/24 projections. The City receives two equal allocations from the State in January and May. Based on the amount received in January, staff estimates this revenue will be $639 thousand higher than projected.
•No/Low and South-East Recreational Park Property Tax: Based on the year-to-date receipts, staff recommends increasing these categories by $215 thousand and $75 thousand, respectively.
•Property Tax allocated to the City from Successors of the former Redevelopment Agencies is estimated to reach $920 thousand, which is $70 thousand higher than staff’s original estimates.
Utility User Tax (UUT): As the prices of electricity and gas continue to increase, so do the City’s UUT revenues. Staff estimates that this year the UUT will generate $6 million in revenues, $389 thousand over the original budget estimates.
City Council February 20, 2024
Resolution No. 24-10 Budget FY 2023/24
Resolution No. 24-12 Salary Schedule Revision
Page No. 3
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4 Transient Occupancy Tax: Year to date receipts from local hotels are trending to reach $1.7 million, which is $80 thousand higher than our original estimates.
Franchise Fees: The annual revenues are estimated to be $388 thousand over the budgeted amount, primarily under trash, electricity and gas categories. However, Cable TV franchises continue declining from year to year, as the streaming services become more prevalent.
Real Property Transfer Tax: Receipts are lagging projections by $10 thousand, as sales of single family homes are declining primarily due to the high interest rates.
Other General Fund revenues will increase by a net amount of $353 thousand, out of which approximately $187 thousand will be generated by Recreation fees for services. Details of revenue budget revisions can be found in Exhibit A attached to Resolution No. 24-10.
Expenditure Adjustments:
The proposed mid-year budget revisions increase the operational spending by $1.2 million, out of which about $108 thousand is under personnel cost; $929 thousand is under other operating expenses; and the remainder, $115 thousand, is requested for minor capital outlay purchases. The most significant changes are as follows:
• Communications/Public Affairs, Multimedia, Social Services and Recreation personnel changes represent about $108 thousand in additional personnel cost for the remainder of the fiscal year. The requested personnel changes are detailed in Exhibit C to Resolution No. 24-10.
• Under operations and maintenance, net $929 thousand budget increase is requested to cover various departmental needs. Among the most significant requests are: $185 thousand to fund various contractual services city-wide; $169 thousand for computer software and support costs; $161 thousand under vehicle maintenance costs, which includes a request of $50 thousand to refurbish the City’s mobile command center unit. • Additional appropriations to cover the minor capital outlays total $115 thousand.
Proposed revisions to the General Fund expenditure budget are detailed in Exhibit B attached to Resolution No. 24-10.
In addition, the City’s capital reserves for street repairs are proposed to be replenished by $3 million.
Taking into consideration the proposed budget revisions, the estimated unassigned General Fund balance will be approximately $15.2 million, which is 1% ($580 thousand) above the City’s reserve policy, currently set at 20% of operating and minor capital outlays budget. Exhibit D to Resolution No. 24-10 provides more detail of the General Fund balance projections.
City Council February 20, 2024
Resolution No. 24-10 Budget FY 2023/24
Resolution No. 24-12 Salary Schedule Revision
Page No. 4
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4 Special Revenue Funds:
Based on the actual results, staff also proposes various adjustments to expenditures and revenues from Special Revenue Funds, identified in the Exhibit E attached to Resolution No. 24-
10. Personnel changes affecting Special Revenue Funds total $89 thousand for the remainder of this fiscal year and are detailed in Exhibit C.
Significant budget revisions are proposed in the following funds:
Child Care: City will program federal and state entitlement, total of $2.4 million in additional funding to provide childcare services to qualified families.
Elderly Nutrition Program: Los Angeles County allocated additional funding of $519 thousand, of which $300 thousand is purposed to provide meals to elderly residents, and $219 thousand reimbursement for prior fiscal year purchase of two trucks utilized for meal deliveries.
Exhibit F attached to the Resolution No. 24-10 details proposed revisions to Various Capital Improvement Projects funded from Special Revenue Funds:
Measure W Storm Water Grant: An additional $17.7 million will fund Hermosillo Park Storm Water Capture Filtration project.
American Rescue Plan Act (ARPA): Proposed budget revisions shift funding originally allocated to the Tank Farm to projects that are already in planning stage or underway, such as City Hall security upgrades and a portion of the Syserco design-build Energy Sustainability project.
Park Renovation Fund: The existing budget includes $1.9 million for the sports lighting project at Zimmerman, Lakeside, Ramona and Holifield parks. Based on Syserco’s estimate an additional $1.6 million is needed to complete the project.
Street Renovation Fund: Staff is requesting a total of $5.5 million to secure funding for the Firestone Boulevard widening from Hoxie to Imperial Highway project ($4.6 million), and Information Traffic System improvement on Imperial Highway ($0.9 million).
Enterprise Funds:
Transportation: Staff proposes an increase of $0.6 million in operating revenues and a $0.4 million in net increase of operating expenses. Transportation budget revisions are summarized in Exhibit G attached to Resolution No. 24-10.
Water: Operating revenue estimates can be increased by $0.7 million and expenses are requested to be increased by net of $0.8 million. The major cost increase of $0.4 million is attributed to the cost of purchased water.
City Council February 20, 2024
Resolution No. 24-10 Budget FY 2023/24
Resolution No. 24-12 Salary Schedule Revision
Page No. 5
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4 Sewer: Operating and expenses are requested to be increased by $0.4 million. The major cost increase of $0.3 million is needed to cover the cost of sewer lift stations discharge piping, vault lid and associated equipment replacement.
The requested budget revisions for both Water and Sewer funds are detailed in Exhibit H attached to Resolution No. 24-10.
Conclusion:
Staff is confident that the proposed mid-year revisions highlighted above and detailed in the Exhibits attached to Resolution No. 24-10 are reasonable and within the guidance of preparing a financial plan that will maintain required services within the City’s available resources. Personnel changes affecting the Salary Schedule are reflected in Exhibit A attached to Resolution No. 24-12.
Fiscal Impact:
The requested mid-year adjustments to the General Fund estimated revenues total a net increase of $2.1 million. The net increase in appropriations is $4.2 million. The Budgetary Unassigned General Fund balance as of June 30, 2024, is expected to be $15.2 million absent any future budget amendments approved by City Council.
The proposed revisions to the FY 2023/24 budget are subject to City Council review and consideration and any approved modifications will be reflected in the balances of the appropriate funds.
Citizens Advised:
N/A
Strategic Plan 2023 Implementation:
The recommended action will further the City’s Strategic Plan Goal 3: Create and sustain a resilient and economically prosperous City.
City Council February 20, 2024
Resolution No. 24-10 Budget FY 2023/24
Resolution No. 24-12 Salary Schedule Revision
Page No. 6
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4 Recommended Action:
Staff recommends City Council adopt:
a. Resolution No. 24-10, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NORWALK AUTHORIZING AMENDMENTS TO THE FISCAL YEAR 2023/24 BUDGET; and
b. Resolution No. 24-12, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NORWALK AMENDING THE FISCAL YEAR 2023/24 SALARY SCHEDULE FOR
GENERAL AND HOURLY UNIT EMPLOYEES AND EXECUTIVE MANAGEMENT AND MID-MANAGEMENT EMPLOYEES.
Attachments:
1. Overview of the Fiscal Year 2022-23 Financial Results
2. Resolution No. 24-10 with Exhibits A-H as follows:
A. General Fund – Revenue Revisions
B. General Fund Expenditures – Mid-Year Revisions
C. Personnel Changes – Fiscal Year 2023-24
D. General Fund Unassigned Fund Balance Projection
E. Special Revenue Funds – Revisions
F. Special Revenue Funds – Capital Improvement Projects Revisions G. Transit & Vehicle Maintenance Funds – Revisions
H. Water and Sewer Fund – Revisions
3. Resolution No. 24-12 with Exhibit A