Agenda Item
City Council
Item #: 6.3. 10/11/2022 File #: 22-0567
TO: Honorable Mayor and Members of the City Council
THRU: Rob Houston, City Manager
FROM: Will Kolbow, Assistant City Manager/Administrative Services Director
1. SUBJECT
Financial status update for Fiscal Years 2021-2022 and 2022-23.
2. SUMMARY
This report provides a summary of the City’sGeneral Fund year-end for Fiscal Year 2021-22 and a status update for Fiscal Year 2022-23.
3. RECOMMENDED ACTION
Receive and file.
4. FISCAL IMPACT
None.
5. STRATEGIC PLAN GOALS
Goal 2: Be a fiscally healthy community
b: Analyze future fiscal needs and potential revenue opportunities.
6. DISCUSSION AND BACKGROUND
Background
The General Fund is the City’smain operating fund that accounts for over half of the City’soverall revenues and expenditures. For the purposes of this report, due to the unique circumstances that COVID and related funding presented, staff is combining the activities of the General Fund, American Rescue Plan (ARP) Fund, and Business Activities Fund. These funds are very closely related to the General Fund and adding those activities presents a more complete picture of the General Fund’s overall health.
Fiscal Year 2021-22 (FY 22) General Fund Revenues
The General Fund concluded the year with total revenues of $147.3 million, $20.8 million more than the budget of $126.5 million.
Sales tax revenue closed at $49.8 million, $2.6 million more than the budget of $47.2 million. Strong performances in fuel sales, auto sales, and building materials and construction contributed to this increase.
Property tax closed at $48.5 million, $1.3 million above budget as we received higher than City of Orange Printed on 10/5/2022Page 1 of 4
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Item #: 6.3. 10/11/2022 File #: 22-0567
Property tax closed at $48.5 million, $1.3 million above budget as we received higher than anticipated revenue due to more property tax increment distributed from the County of Orange for the Successor Agency, and more property tax in-lieu of motor vehicle license fees.
Transient Occupancy Tax (TOT) was $5.2 million, and $800,000 more than was expected in June 2022 when the FY 23 budget was adopted. With a full year of unrestricted business and leisure travel, and the implementation of the Short Term Rental Program, TOT revenues have steadily normalized back to pre-pandemic levels.
Licenses and Permits were $880,000 more than the budget of $5.6 million, mainly as a result of increased business license revenues as well as a steady amount of building related permits (building, electrical, plumbing, etc.) which had increased during the pandemic. Miscellaneous Revenues of $4.2 million were $740,000 over budget of $3.5 million. This increase was primarily due to reimbursements from the Office of Emergency Services for costs incurred by the City through its assistance in out-of-town fire suppression efforts.
In addition to these revenues, $14 million was received as a second disbursement of ARP Funds, which was used to offset the public safety salaries in both Police and Fire Departments.
FY 22 General Fund Expenditures
The expenditure side of the ledger showed another year of savings of about $3.3 million, the difference between the final budget of $117.0 million and actuals of $113.7 million.
Although salaries & benefits were overbudget due to unanticipated overtime costs, departments continued their efforts to maintain and seek out cost-saving measures, while sustaining optimal service levels. A majority of departmental savings are due to controlling costs associated with maintenance and operation expenses. The debt service overage is due to an accounting entry that is made to account for the costs of acquiring streetlights from Southern California Edison. An offsetting savings exists in electricity expenditures, which is within the maintenance and operations category.
Itemized differences in budget vs. actuals in each category are noted below:
Category FY22 Final Budget FY 22 Actual Difference
Salaries & Benefits $88,648,539 $90,018,227 ($1,369,688) Maintenance & Operations 20,745,272 15,809,565 4,935,707 Internal Costs 20,144,816 20,144,816 -
Debt Service 1,706,800 1,961,828 (255,028)
$131,245,427 $127,934,436 $3,310,991
FY 22 Fund Balance
During the FY 23 budget preparation, the General Fund was projected to end FY 22 with a $23.5 million unreserved fund balance available (FBA). After the final numbers were calculated, FY 22 performed better than expected with revenues of about $147.3 million and expenditures of $127.9 million resulting in a revised FY 22 ending FBA of $28.3 million. The following is a comparative illustration:
FY22 Adopted
Budget for
FY22 June
2021
Original Estimate
for FY22 June
2022
Year-End
Actuals for FY
22 October 2022
Beg. Fund
Balance for FY 22
$27,012,409 $29,979,264 $29,979,264
Revenues 136,687,773 141,055,408 147,256,742
Expenditures (124,232,117) (126,516,116) (127,934,436)
Net Surplus 12,455,656 14,539,292 19,322,306
Transfers Out (10,850,000) (21,050,000) (21,350,000)
FY22 Ending
Fund Balance
$28,618,065 $23,468,556 $27,951,570
City of Orange Printed on 10/5/2022Page 2 of 4
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Item #: 6.3. 10/11/2022 File #: 22-0567
FY22 Adopted
Budget for
FY22 June
2021
Original Estimate
for FY22 June
2022
Year-End
Actuals for FY
22 October 2022
Beg. Fund
Balance for FY 22
$27,012,409 $29,979,264 $29,979,264
Revenues 136,687,773 141,055,408 147,256,742
Expenditures (124,232,117) (126,516,116) (127,934,436)
Net Surplus 12,455,656 14,539,292 19,322,306
Transfers Out (10,850,000) (21,050,000) (21,350,000)
FY22 Ending
Fund Balance
$28,618,065 $23,468,556 $27,951,570
As shown above, year-end revenues are $6.2 million higher than originally estimated, indicating a positive performance in sales tax revenues and highlighting a strong, diverse stream of revenue sources. Additionally, shown above are year-end expenditures of $127.9 million, approximately $1.4 million more than the estimate in June mostly attributed to overtime charges.
A full report of the FY 22 revenues and expenditures will be included as part of the presentation of the Annual Comprehensive Financial Report (ACFR, formerly the CAFR) at a future council meeting.
FY 23 Status Update
Revenues continue to show positive growth compared to previous years and have now reached pre- COVID-19 conditions. We are fortunate that the City’shistory of conservative spending practices positioned us to weather the past few budget cycles. Despite this, we continue to monitor changes in public policy and market conditions as major uncertainties are still present and may affect the lives of our citizens. Specifically, the impacts of inflation and rising interest rates will continue to affect our operating expenses.
As the economy stabilizes, revenues are currently anticipated at $132.8 million, up slightly from the budgeted revenues of $130.7 million. We have seen positive trends across most sales tax industries and anticipate revenues to continue to gradually increase over time as more of the general public leave their homes to shop, dine, and travel. However, staff is mindful of the possibility of economic turbulence and is closely monitoring any developments on that front. We anticipate having a better forecast to provide in the next few months when we have more information on sales tax receipts for the third quarter of the calendar year.
Expenditures are tracking as anticipated at $133.2 million, up $2.9 million over the approved FY 23 budget of $130.3 million due to carryovers, rolled forward encumbrances, and budget adjustments from previous Council-approved appropriations. As recent experience has proven, staff expects continued savings in this area. We will continue to monitor our fiscal situation to determine if any mid- year adjustments will be necessary.
Currently, expenditures exceed revenues by $850,000 due to the aforementioned carryovers and rollovers. This is typically the case early in the fiscal year. However, we anticipate refined sales tax projections coupled with judicious spending will ensure we continue to maintain a healthy fund City of Orange Printed on 10/5/2022Page 3 of 4
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Item #: 6.3. 10/11/2022 File #: 22-0567
balance. Moreover, the current estimated available fund balance at the end of FY 23 is $4.8 million.
FY 23 Revised Estimated Available General Fund Balance
Unreserved Fund Balance Available @ 7/1/22 $27,951,570 FY 23 Estimated Revenues 132,755,658
FY 23 Estimated Expenditures (130,323,637)
Excess Revenues over Expenditures 2,032,021
Carryovers/Encumbrances/Budget Adjustments (2,885,002) Unreserved Fund Balance Available @ 6/30/23 27,098,589 Transfers Out (approved with adoption of budget)
Transfer to Computer Replacement Fund (7,750,000) Transfer to Capital Project Fund (7,000,000) Transfer to Equipment Replacement Fund (5,750,000) Transfer to General Fund Contingency Reserve (1,093,938) Transfer to Accrued Liability Fund (660,000) Transfer to EMT Fund (400,000)
Total Transfers Out (22,653,938)
Estimated Available Fund Balance @ 6/30/23 4,444,651 General Fund Catastrophic Reserve 21,761,898
Est. Reserved & Unreserved General Fund Balance @ 6/30/23 $26,527,855 Early Look at FY 24
Staff has begun the budget process for FY 24, and these numbers will continue to be refined as many considerations will be measured, including revised revenue projections, potential savings in expenditures and the implementation of additional budget strategies to ensure we continue to maintain a balanced budget.
7. ATTACHMENTS
· None
City of Orange Printed on 10/5/2022Page 4 of 4
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