CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
3/25/2024
1 SUBJECT:
Midyear budget review and adoption of a resolution to adjust the fiscal year 2023-24 Budget.
RECOMMENDED ACTION:
Adopt a resolution authorizing the midyear FY 2023-24 Operating and Capital Budget adjustments.
STAFF CONTACT:
Kevin Woodhouse, City Manager
650-738-7409
[email protected]
Yulia Carter, Assistant City Manager
650-738-7301
[email protected]
BACKGROUND:
The Finance staff has completed a Midyear Budget review and is proposing adjustments to the FY 2023-24 Adopted Budget.
The purpose of the midyear budget review is to analyze the year-to-date revenues and expenditures to review assumptions made before the budget cycle and make necessary adjustments to reflect changes in the City's financial conditions. The midyear budget review is also a segue to the next fiscal year's budget development process, as the midyear analysis is used to develop the base budget assumptions for the new year.
On June 26, 2023, the City Council adopted a balanced FY 2023-24 Budget that reflected the Council's Strategic Plan and priorities for the upcoming fiscal year. This FY 2023-24 Midyear Budget report will focus on the following key objectives:
1. Updating City Council on the status of revenues and expenditures within the FY 2023-24 General Fund Revised Budget and requesting a decrease to the FY 2023-24 General Fund revenue of $2.2 million or 5% (Attachment 4) and net appropriation decrease of $19,500 (Attachment 5), including all midyear adjustments and previously approved by the Council expenditures throughout the year (Attachment 5).
2. Updating City Council on the status of revenues and expenditures within the FY 2023-24 Non-General Fund Revised Budget and requesting a decrease to the FY 2023-24 nongeneral (Other) Funds Revenues totaling $97,000 or 0.2% from the Total Other Funds Adopted Budget of $44.8 million (Attachment 4). The Other Funds Expenditures adjustments total $55.3 million, an increase of $2.1 million or 4% (Attachment 4), most of which were the result of previously approved and recommended capital projects appropriations (Attachments 2-3).
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3. Updating Council on the projected fund balance for all City Funds through June 30, 2024 (Attachment 6).
The FY 2023-24 Operating and Capital Budget was adopted as a balanced budget, meaning that the City's operating expenditures did not exceed operating revenues. The FY 2023-24 Revised General Fund budget is $46.7 million in revenue, $47.3 million in total General Fund operating expenditures, and $1.3 million in capital project expenditures. The unbalanced difference between the operating revenues and expenditures of negative $593,161 will be covered by a one-time reduction of the assigned 10% General Fund emergency reserves, reducing this reserve to 8.7% this year.
Staff used the following methodology for the midyear budget analysis: the year-end estimates in operating revenues and expenditures exceeding the adopted budget by 5% and $25,000 in each revenue and expense category or cost center were considered material in nature and are being proposed for a budget adjustment.
1. Status of General Fund Revenues and Expenditures in FY 2023-24 Revised Budget FY 2023-24 General Fund Revenues
The General Fund is the City’s primary operating fund and is used to account for most day-today activities. It receives unrestricted revenues and provides the City’s general administrative services, public safety, parks, beaches and recreation, public works, and community development-related activities such as planning, building, and engineering. Revenue sources include but are not limited to property tax, sales tax, transient occupancy tax (TOT), business tax registration, and current fees and charges for services.
The revised estimates for General Fund revenues are projected to be $46.7 million or $2.2 million (5%) lower than the Adopted Budget of $48.9 million, mainly due to the revenue reduction in the Vehicle License Fees category ($1.7 million), which was not expected when the budget was adopted. The revised revenue projections also include reductions in Sales Tax (including Measure Y) that are offset by increases in TOT, Business License Tax, and Investment Income categories, based on the actual data analysis as of the quarter ending December 31, 2023.
The following table demonstrates General Fund revenues for the FY 2022-23 actuals, FY 2023- 24 adopted budget, and revised FY 2023-24 budget projections:
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FY 2023-24 General Fund Revenues Adjustments for Council Approval The following revenues are projected to reflect material changes over the FY 2023-24 Adopted Budget and recommended for budget adjustment:
• Vehicle License Fee has been a long-standing traditional source of funding through the state for local government, funding general operating fund services. It comprises approximately 11% of Pacifica’s General Fund revenue. Traditionally collected by the state from vehicle registration fees, in 2004, the state revised the VLF framework to be remitted to local government through a complex property tax swap mechanism. Now called the “in-lieu” VLF payment, this new complex VLF framework is also entangled with the state’s creation of the Educational Revenue Augmentation Fund (ERAF). The state devised ERAF to shift local property taxes from cities, counties, and special districts to meet the state’s funding obligations to certain school districts whose local property tax revenues are not sufficient to meet the minimum amount of per-student funding (as determined by another complicated calculation, called the Local Control Funding Formula). Importantly, in this 2004 compromise, the state guaranteed counties and cities that their lost VLF revenues would be covered by the “in-lieu” VLF payment.
However, over recent years, unique property tax circumstances in San Mateo County related to this VLF framework have resulted in a shortfall of revenue in the funding source the state traditionally used to cover its in-lieu VLF obligation to cities and counties. When this happened, the state began back-filling this shortfall with other state revenue sources to meet their obligation and keep the cities and counties whole. This back-filling approach creates a 2-year delay in an important revenue source for counties and cities, however at least the revenue has been received. For example, during this Fiscal Year 2023-24, Pacifica received its FY 2021-22 shortfall revenue payment of $681,567.
This back-fill payment mechanism has been a year-by-year negotiation with the state, and this year, the state has thus far taken the position that they do not expect to pay the back-fill for the FY 2022-23 shortfall amount of $1,452,355, plus the FY2023-24 shortfall amount of $2,338,803 is also at risk. As a result of the state’s take-away of this funding, a midyear reduction adjustment of $1,689,000 is needed.
Based on the state’s continuing position, it appears that the on-going future receipt of Pacifica City Council 4
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these revenues is in jeopardy. The San Mateo County City Managers and Finance Officers are working together on a unified response to this economic stability threat. This is an evolving matter that may have a major impact on the FY 2024-25 Budget and beyond and could dramatically impact City services. Staff will be monitoring this issue closely and plans to provide more information and a more in-depth briefing to the City Council during the budget development process for FY2024-25. • Business License Tax shows an increase of $50,000 or 8.8% to $570K, based on the actual revenue collected in the first half of this fiscal year. This increase reflects the efforts made by staff and HdL to identify businesses operating without a business license and bring them into compliance.
• Sales Tax is the City’s second-largest revenue source. Based on the current year’s activity and the most recent projections from HdL, the City’s sales tax advisor, staff is proposing a decrease of $170,000 or 5.3% in sales tax revenues from the Adopted budget of $3.4 million. Unfortunately, the local sales tax is showing decreases in all nine industry groups compared to the prior year, with the largest percentage decreases occurring in the Building & Construction and Business & Industry groups based on yearto-date revenue trends. In addition, the Measure Y ½ cent transactions and use tax revenues category projections include a decrease of $300,000 from $2.8 to $2.5 million.
There is an approximately two-months lag of when the City received sales tax revenues from the State. The calendar year’s quarter 4, as of December 31, 2023, will be available in the next few weeks for staff to review and develop reasonable assumptions for the upcoming FY 2024-25 budget.
• Transient Occupancy Tax (TOT). The revised FY 2023-24 TOT revenues are projected at $2.9 million, an additional $250,000 or 8.6% increase over the Adopted Budget. The increase is mostly attributable to recent efforts by HdL, the City’s tax consultant, to identify short-term rentals (STRs) and bring them into compliance. Approximately $1.5 million, or approximately 50% of the total TOT revenues, comes from STRs. • Other revenue category is projected to increase by $230,000 or 27.5%, mainly due to an increase in investment earnings resulting from prudent investment strategies recently initiated by the Finance Department to invest in Certificates of Deposit. • Charges for Services are projected to decrease by $564,850 or -7.0%, mainly due to an $800,000 budget decrease in Planning fees for cost-reimbursable services. There is a corresponding decrease in the cost-reimbursable expenditures, making this a net $0 change, but more in line with the anticipated cost-reimbursable activities throughout the fiscal year. The net adjustment figure of this category also includes revenue increase from the swim and day camp programs in PB&R.
FY 2023-24 General Fund Expenditures
Expenditure projections were reviewed based on three categories: personnel costs, general government program budget in contract services, and materials & supply categories as listed below.
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Previously Approved Changes to the FY 2023-24 Budget
At every Council meeting, staff brings agenda items for the Council's consideration and approval. Some of these items require amendments to the original budget. During the midyear budget review process, Finance staff incorporated all previously approved budget amendments year-to-date into the FY 2023-24 Revised Budget. These adjustments increased the General Fund appropriation by $95,000, as further described in Attachment 2. Previously approved personnel-related adjustments like approval of the new labor agreements and additional positions are included in the attachment but not being entered into the revised budget, as the FY2023-24 cost is anticipated to be covered by projected salary savings. These adjustments will be included in the FY 2024-25 Base Budget.
Staff Adjustments to Budget
During the midyear budget review process, staff makes a number of minor cleanup changes and adjustments within the department's budgets. Money is moved from various individual line items with savings to other line items within a department budget. This is done when a line item may go over its original budget amount. These changes are considered routine as they have minimal effects on the overall budget and remain within the FY 2023-24 Council-approved funding level. Again, only the year-end estimates in expenditures categories in excess of the adopted budget by 5% and $25,000 in each cost center are being proposed for a midyear budget adjustment.
FY 2023-24 General Fund Operating Expenditures Adjustments for Council Approval Salaries and Benefits and Position Control
Personnel cost projections are based on the most current payroll cost and projected for the remainder of the fiscal year after factoring in all expected personnel changes. Over the past two years, the City has been hampered by a high vacancy rate and challenges in recruiting and retaining talent. These challenges are currently widespread in the local government sector, especially in highly competitive and costly labor markets like the Bay Area. Some recruitments had to be repeated multiple times without success. Because of these trends, staff is projecting substantial salary savings in the General Fund created by ongoing high vacancy rates and, in some cases, new employees coming in at a lower salary step than the incumbents leaving due to retirements and/or promotional opportunities elsewhere.
Staff is not recommending any budget adjustments related to the salary savings as part of the midyear budget review. However, it is important to understand the City’s ongoing staffing challenges, as the projected salary savings are substantial enough to cover the impacts of the previously approved new labor agreements that were not included in the Adopted Budget but went into effect in July.
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Position Control Changes
As part of the midyear budget review, staff is requesting adjustments to the current FY 2023-24 position control. In the efforts to strengthen the organizational capacity and improve staff retention, the City Manager recommends removing limited-term position designations from previously approved positions funded over the last two years by one-time ARPA funds in order to make them permanent. Although the City has managed to successfully recruit and fill some of these limited-term positions, making these positions permanent will help retain these employees, who would otherwise likely begin looking for other opportunities.
1. HR Analyst (Administration - HR)
The limited-term ARPA-funded HR Analyst position was created in FY 2022-23. The City was able to fill this position at the entry level to provide critical support to the HR division and all city departments, assisting with ongoing recruitments, benefits administration, and labor negotiations. As the position’s term was scheduled to expire in December 2024, understandably, the incumbent was on a lookout for other opportunities and just accepted a permanent job with another public agency. Successful recruitment for this position for less than a one-year remaining term is very unlikely. However, continuing HR support of the City workforce is especially critical given the upcoming retirement of the HR Manager and ongoing implementation of the Human Resources Management System module of the ERP. Therefore, making this position permanent is critical to the success of the recruitment. There is no FY 2023-24 fiscal impact to this action as the position is already included in the salaries and benefits projections and, if approved, will continue to be funded in the FY 2024-25 Base Budget ($148,600).
2. Records Clerk (Police)
The limited-term ARPA-funded Records Clerk position was created in the FY2022-23 budget and the term ends in May, 2025. The position has recently become vacant and the City was not able to attract qualified candidates to backfill this vacancy, likely due to its limited-term. In the meantime, the current workload in the records unit is unsustainable due to recent unfunded state mandates (PRA, RIPA, CIBRS), resulting in challenges in meeting Department of Justice reporting requirements and unsustainable overtime costs for the Records Supervisor, posing an ongoing threat to staff retention.
Therefore, the City Manager recommends converting this position to a permanent Records Clerk position to ensure successful recruitment. There is no FY 2023-24 fiscal impact to this action as the position is already included in the salaries and benefits projections and, if approved, will continue to be funded in the FY 2024-25 Base Budget ($119,000).
3. Community Services Officer (Police)
The limited-term ARPA-funded CSO position was created in the FY2021-22 budget to compensate for previously cut permanent CSO position. However, this limited-term position was not filled until the following year, and was vacated since. Due to the same challenges of filling the vacancy on a reduced limited basis-term, this position remained vacant while the department continued using two part-time grant-funded CSO positions.
CSOs support police officers by handling non-emergency service requests, including abandoned vehicles, parking violations, traffic control, non-injury traffic collisions, and property crime reports without suspect information. Restoring this position on a permanent basis will provide a highly needed operational support to allow officers to Pacifica City Council 7
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prioritize emergency calls and crimes in progress ($111,800).
4. Assistant Planner (Planning)
The limited-term ARPA-funded Assistant Planner position was created in the FY2021-22 budget. The position was filled but became vacant shortly after and then was refilled again. Like other City departments, Planning is understaffed. Considering ongoing operational demands and increased workload related to major undertakings, including the Housing Element and Local Coastal Land Use Plan updates, losing this limited-term position would impact the entire department, hampering progress on the City’s strategic priorities and initiatives. Therefore, the City Manager recommends converting this position to a permanent Assistant Planner position to help with staff retention and ensure the continuity of the Planning Department’s operations. There is no FY 2023-24 fiscal impact to this action as the position is already included in the salaries and benefits projections and, if approved, will continue to be funded in the FY 2024-25 Base Budget ($127,200).
5. Restore Senior Accountant position (Finance)
The two-year limited-term Sr. Accountant classification was created and approved by the Council in the FY 2022-23 budget in preparation for the ERP implementation. Staff was not able to fill the position and, later that year, requested unfunding this classification and reallocating funds towards a consulting services agreement to proceed with the ERP implementation. The City is currently in the process of implementing a new Enterprise Resource Planning system to modernize it's financial and human resources systems, which is a major organization-wide undertaking and requires focused project management expertise to roll out over an 18-month to two-year period. Although staff is using an outside consultant for the Project Management work related to the implementation, Finance recently lost two staff members, and although their replacements are in-progress or underway, it will take time for the new staff members to get fully onboarded and trained, and it is critical that the City has adequate resources to continue the project implementation and critical daily operations, including accounts payable, receivable, and payroll in addition to bank reconciliation, quarterly closures, mandated reporting and annual year-end process and interim and final audit cycles. A Senior Accountant classification would provide the right skill set in governmental accounting to help manage these functions and possibly assist with project management and systems implementation to ensure successful ERP implementation on time and within the budget. Therefore, the City Manager recommends restoring this position on an ongoing permanent basis to ensure the success of the ERP implementation and continuity of the Finance division’s day-to-day financial operations. There is no FY 2023- 24 fiscal impact to this action as the recruitment will likely take a few months to complete, but if the incumbent is hired before the end of the fiscal year, this cost will be covered by the salary savings. If approved, the position will continue to be funded in the FY 2024-25 Base Budget ($183,000).
6. Add two “Over-hire” Police Officer positions.
In addition to converting the aforementioned limited-term positions into permanent ones, there is an urgent need within the Police Department to address the ongoing Police Officer recruitment crisis, which is resulting in unsustainable overtime burdens and costs. This situation will be further exacerbated by the expected retirements of six eligible individuals in FY2024-25. The Police Department's current staffing level is approximately 30% lower than that of similar-sized San Mateo County agencies. The existing minimum staffing requirements and mandated overtime have led to one Pacifica City Council 8
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resignation and two workers' compensation injuries, stemming from both mental health issues and physical injuries.
To support staff retention and prioritize the health and safety of officers, while also accommodating sick leave, vacation, comp time, court, or training, and adequately addressing current public safety issues such as traffic, substance abuse, and rising property crimes, the City Manager recommends authorizing two over-hire positions in the Police Department. If approved, this option would allow the Police Department to recruit for two additional officer positions to fill current vacancies and absences (e.g., officers on workers' compensation). Additionally, once other permanent positions become vacant (e.g., due to retirements), their replacements will be filled with already onboarded and trained over-hire positions, rather than initiating a new recruitment process at that time.
If approved, due to the timing of police recruitments, the over-hire positions will likely be brought onboard in the FY2024-25 budget, resulting in no impact on the FY2023-24 Budget. However, there will be an additional FY 2024-25 cost of $248,200 (fully burdened cost of an entry-level Police Officer is $124,100 per). This additional cost will be partially offset by the corresponding reduction in overtime).
To reiterate, there is no FY 2023-24 fiscal impact for any of these position control-related items as the cost is either already included in the FY 2023-24 Adopted Budget or will be covered by the salary savings or overtime reductions. However, restoring these positions will have an ongoing impact in the future years’ budget. Some of them are already included in the current salaries and benefits projections (e.g. HR Analyst, Assistant Planner and Records Clerk) and some are not (e.g. Sr. Accountant and two Police over-hires) If approved, the ongoing costs will be included in the FY 2024-25 Base Budget and will continue in the future years.
Contract Services
• GIS Software - An additional allocation of $36,500 in the Public Works department budget is being added as a mid-year budget adjustment to cover the cost of the GIS system citywide. The corresponding implementation work will be conducted by employing a retired annuitant at the estimated additional one-time cost of $75,000, which will be partially covered by the FY2023-24 salary savings this year, and the remaining cost will be included in the FY2024-25 Base Budget based on the implementation schedule.
• Planning Cost-reimbursable Contractual Services - is being decreased by $800,000 related to reimbursable contractual services for development projects based on the revised estimate of the projected activity level by the end of the year. There is a corresponding decrease in Planning fees for those reimbursable services, so the net effect on the General Fund is zero. At midyear, the Planning Department is projecting to not incur these reimbursable services through the end of the fiscal year.
Overall, FY 2023-24 General Fund operating expenditures are proposed to be amended by a net increase of $19,500 or less than 0.5%, which includes the above-mentioned changes and additional $95,000 of previously approved Council adjustments throughout the year (Attachment 2).
2. Status of Non-General Fund Revenues and Expenditures in FY 2023-24 Revised Budget
Non-General Funds include the following categories.
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• Enterprise Funds, including Sewer Operating and Capital and Beach Parking funds • Special Revenue and Capital Funds, including Gas Tax and Street funds, Drainage, General Capital, Housing and Park in lieu funds, PB&R Roy Davies Trust fund, Disaster Accounting and others.
• Internal Service Funds, including Motor Pool Operating and Replacement funds, Dental Benefit funds, and Risk Management (Workers' Comp and General Liability) funds. • Debt Service Fund
Non-General Fund FY 2023-24 Revenues and Transfers In
In the Adopted FY 2023-24 Budget, these revenues comprise $44.8 million or 47.8% of the City's $94.7 million total revenue budget. The non-general fund revenues are projected to decrease by a net of $97,000 or 0.2% to $44.6 million, as listed in Attachment 4.
FY 2023-24 Non-General Fund Revenues Adjustments for Council Approval The following non-General Fund revenues are projected to reflect material changes over the FY 2023-24 Adopted Budget and are recommended for budget adjustment:
Special Revenue and Capital Funds:
• Measure A (Fund 09) revenues are proposed to be decreased by $240,000. The Development Impact Fees account is proposed to decrease by $200,000 due to drop-in development fees. Although several developments may be in progress throughout the City, collection of this fee is based on applicant receiving the permit for the work. Also, the adjustment includes the removal of the Local Roadway Safety grant of $40,000 carried over in the FY2023-24 Budget in error.
• Gas Tax Maintenance Fund (Fund 10) revenues are proposed to decrease by $30,000 from $180,000 to $150,000, per a refined estimate of the Measure M revenues received from the County. Also included in the midyear budget is the $130,000 transfer in from the Disaster Account Fund (fund 38) related to replacing damaged crash cushions on Sharp Park Road. The department request form provides more details. • Highway 1 Improvement Fund (Fund 12) revenues are projected to decrease by $25,000 in the Highway 1 Improvement Fees based on analysis of actual revenues received through February 29, 2024, and projected through the remainder of the year.
This fee is tied to development around the Highway 1 area and a drop-in developments receiving permits has caused the $25,000 decrease.
• Planned Local Drainage Fund (Fund 19) The Recoveries and Settlement account revenues are reduced by $450,000. This was a previously established fund to received insurance reimbursements related to the Sierra Drive Outfall and Milagra Outfall projects, completed in the previous fiscal years and this account was inadvertently carried over into this fiscal year. No insurance reimbursements will be received this year. • General Capital Improvement Fund (Fund 22) The Transfer In of $688,000 from the undesignated General Fund balance for additional under-budgeted needs to complete the Civic Center project. The expense side of the budget increase if reflected in the next section of this report below and more details are provided in the department request form for this project.
• Park In-Lieu Capital Improvement (Fund 26) The Parkland Dedication Fees revenue account is proposed to be reduced by $120,000 based on updated projections at Pacifica City Council 10 March 25, 2024
Midyear. Parkland Dedication Fees are paid when developments are approved. The fee has been reduced due to less development approvals than the prior year. • Beach Parking Fund (Fund 35) revenues are proposed to be decreased by $50,000 from $450,000 to $400,000 based on prior and current year trends and updated projections at Midyear.
Additional information on individual non-general fund revenue categories is presented in Attachment 3.
FY 2023-24 Non-General Fund FY 2023-24 Expenditures and Transfers Out Adjustments for Council Consideration
Non-General Fund FY 2023-24 Adopted expenditures comprise $53.2 million, or 52.3% of the City's $101.8 million total expenditure budget. These expenditures are proposed to be amended by the net of $2.1 million or 4%, which includes all below-mentioned adjustments and $496,300 previously approved by the City Council as listed in Attachment 2. • Sewer Charge Fund (Fund 18): An additional $306,000 appropriation is needed to fund a significant increase in the electric cost to operate the Wastewater enterprise. PG&E rates have gone up significantly, increasing the electric utility cost. Although this increase is still consistent with the user rate study assumptions, this new trend of the rising cost of utilities will continue to be monitored. • Sewer Facility Construction Fund (Fund 34): An additional $113,278 is requested for the Anza Pump Station Repair Project. The department request form in Attachment 3 provides more details.
• Gas Tax Maintenance Fund (Fund 10) $130,000 is requested for the replacement of damaged crash cushions on Sharp Park Road as mentioned above, plus $50,000 is requested for the ongoing Signal and Streetlight program to cover current electric/lighting maintenance needs. More details are provided in the department request form for both requests in Attachment 3.
• Street Improvement Fund (Fund 13) $75,000 is requested for emergency asphalt repairs as further described in the department request form in Attachment 3. • General Capital Improvement Fund (Fund 22) $688,000 is requested for the additional needs to complete the Civic Center project. Also, $52,600 is requested for the Sharp Park Priority Development Area Pedestrian Improvement Project. More details are provided in the department request form presented in Attachment 3. • Park In-Lieu Capital Improvement (Fund 26) Additional $20,400 is requested to for oncall certified arborist services for priority parks project. More details are provided in the department request form.
• Roy Davies Trust (Fund 27) Additional $40,000 is being requested for the Little League Fencing project as further described in the department request form presented in Attachment 3.
• Disaster Accounting Fund (Fund 38) An additional $130,000 budget adjustment is recorded as transfer out of the Disaster Accounting fund for funding the replacement of damaged crash cushions on Sharp Park Road, respectively. More details are provided in the department request form.
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Capital expenditures will be further reviewed by staff during the FY 2024-25 CIP Budget development process that is now being prepared by the Public Works Department.
3. Projected Fund Balance Structure
The negative impact of the midyear budget review on the General Fund includes a $2.2 million reductions in revenue that together with net of reductions in operating expenditure and additional contribution towards CIP resulted in negative $2.3 million change to the General Fund. Despite this significant reduction in General revenues, the projected structural deficit (the net operating revenue less operating expenses, excluding capital one-time transfers) is projected to be only $593,161 due to some budget surplus projected at the budget adoption.
The City Manager recommends covering this deficit with a one-time reduction of 10% emergency fund balance reserve, which will be respectively reduced to 8.7% this year with the intent to be restored back to 10% for the FY2024-25.
Adopted
2023-24
Revised
2023-24
(Midyear)
Change
(Revised vs.
Adopted)
Total Revenue 48,941,100 46,695,600 (2,245,500)
Total Operating Expenditures 47,957,261 47,288,761 (668,500) FY 2023-24 Surplus (Deficit) 983,839 (593,161) (1,577,000) FY2023-24 REVISED BUDGET (MID-YEAR)
NET GENERAL FUND FY 2023-24 PROJECTED SURPLUS (DEFICIT) The FY 2023-24 revised budget amounts have been updated from the adopted budget figures following the independent audit of FY 2022-23. Under GASB 54, this balance consists of the following components: non-spendable items or portions of fund balance that cannot be liquidated, restricted amounts for use by outside agencies, committed amounts by Council action such as emergency/contingency reserves, and assigned balances to pay off unfunded liabilities and fund infrastructure improvements.
At the midyear budget review, these restricted reserves and operating contingencies are at $9.7 million, leaving an unassigned projected balance of $8.9 million, which equates to 19% of the General Fund operating expenditures (excluding one-time and capital transfers). This is a decrease of $1.6 million or 15% from the Adopted Budget (adjusted by the beginning fund balance), primarily due to a reduction in the General Fund revenues, including VLF and Sales Tax and additional allocation towards the capital program.
However, the General Fund balance still complies with the Government Finance Officers Association of the US and Canada (GFOA) recommendation for government entities to meet the minimum unassigned reserve recommendation of at least two months of operating revenues or expenditures ($7.9 million or 16.7%). This minimum reserve recommendation is being met before considering any additional assigned reserves previously set aside by Council policy, as listed in the table below.
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A major contributing factor to the healthy unassigned fund balance is prudent fiscal management by the City Council and demonstrated financial discipline by the City Manager and all City Departments in keeping their operations within their limited budget means. This projected General Fund balance will be used as a starting point in preparation for the new FY 2024-25 Budget.
Staff will continue monitoring remaining fund balances and reevaluate strategies for future use of these funds as part of the FY2024-25. Please refer to the attached summary schedule presented in Attachment 5 for additional information on the City's Revised FY 2023-24 projected fund balances across all funds.
The City of Pacifica prides itself on an open, inclusive, and comprehensive budget process. This process traditionally takes place over the course of several months and involves several Council study sessions in which the public has been invited to participate. The City Council held a Strategic Planning workshop on March 9, 2024, which provided a critically important roadmap for the organization as it established the framework for the City's short and long-term priorities and objectives. Over the next few months, staff will translate the Council’s vision into the workplan for the upcoming year to be reflected in the City Manager’s Recommended FY 2024- 25 Budget.
ALTERNATIVE ACTION:
The City Council is being asked to adopt a resolution amending the FY 2023-24 Budget. No reasonable alternative action is identified.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
A balanced and structurally sustainable budget is consistent with all the City Council's goals.
FISCAL IMPACT:
As part of the FY 2023-24 midyear review, General Fund revenues are amended to $46.7 million, a decrease of $2.2 million or 5%, and General Fund operating expenditures are amended to $48.6 million, a net increase of $19,500 over the FY 2023-24 Adopted budget. The non-general fund revenue decrease of $97,000 or 0.2% and non-general fund appropriation Pacifica City Council 13 March 25, 2024
increase of $2.1 million or 4% are also included in the midyear budget adjustments as described above and in the supporting attachments.
ORIGINATED BY:
City Manager's Office
ATTACHMENT LIST:
Attachment 2 - FY 2023-24 Previously Approved Budget Amendments (PDF) Attachment 3 - FY 2023-24 Department Mid-Year Budget Request Forms (PDF) Attachment 4 - FY 2023-24 Summary of Revenues and Transfers by Fund (PDF) Attachment 5 - FY 2023-24 Summary of Expenditures and Transfers by Fund (PDF) Attachment 6 - FY 2023-24 Fund Balance Summary by Fund (PDF) Pacifica City Council 14 March 25, 2024
RESOLUTION NO. ________
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA ADOPTING THE FISCAL YEAR 2023-2024 MID-YEAR BUDGET ADJUSTMENTS
WHEREAS, the City Council adopted the FY 2023-24 Operating and Capital Budget on June 26, 2023; and
WHEREAS, the Adopted FY2023-24 budget was a balanced expenditure plan that ensured the maintenance of adequate reserves; and
WHEREAS, City Staff has completed a midyear budget review to validate budget assumptions and conduct an analysis of the year-to-date revenues and expenditures; and WHEREAS, the City Council has reviewed the Mid-Year Budget analysis and requested budget adjustments; and
WHEREAS, the City of Pacifica now desires to adopt the FY 2023-24 Mid-Year adjustments to the FY 2023-24 budget.
NOW, THEREFORE, THE CITY COUNCIL HEREBY RESOLVES: The City Council of the City of Pacifica hereby approves the mid-year adjustments to the FY 2023-24 budget:
Section 1. The citywide revenues and appropriations are amended as follows:
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Section 2. The CIP Budget is amended to include additional appropriations for Sharp Park PDA Pedestrian Improvement, Civic Center, Priority Parks, and Anza Pump Station Repair projects as requested at the midyear budget review, and include the corresponding increase in the construction contingency for two projects:
a) Increase the Civic Center contingency by $150,000, or 1% of the construction budget, to a total contingency of $1,387,838, or 12.6%, which will increase the total project construction budget authority to $10,801,966.
b) Increase the Anza Pump contingency by $113,278, or 4% of the construction budget, to a total contingency of $806,611, or 35%, which will increase the total project construction budget authority to $3,132,611.
• • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 25th day of March, 2024, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________________
Sue Vaterlaus, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney