City of Pacifica
Fiscal Year 2023‐24
ThirdQuarter Financial Report
1 OVERVIEW
This Third Quarterly Financial Report is an analysis of the unaudited financial status of the City’s General Fund from July 2023 through March 2024. The City of Pacifica has completed the Third Quarter of the Fiscal Year 2023‐24. The Third Quarterly Financial Report will summarize the City’s General Fund and is not meant to be inclusive of all finance and accounting transactions. This report intends to provide the Council and the public with a broad overview of the City’s fiscal condition, as the General Fund is the City’s primary operating fund and is used to account for most operational activities. Information presented in this report is unaudited, and additional adjustments may occur during the year-end process.
GENERAL FUND
General Fund Financial Condition: With three quarters of the year complete and after completing the Mid-year budget review staff projected a net deficit of $1,931,161 at the end of the FY 2023-24. At the end of the third quarter, the General Fund revenues are at 66% of the FY2023-24 Revised Budget, Expenditures are at 64% of projections. Budgeted operating and capital transfers have been recorded in FY2024 on a quarterly basis vs. at the end of the year before.
Therefore, transfer-ins are included in the department programs, and transfer-outs are included in the non-department expenditures. Expenditures exceeded revenues by $148,347 at the end of the quarter. Both revenues and expenditures saw a drop compared with the same period in FY2022-23. This 13% decrease in revenues compared to the prior year’s third quarter is attributable to a second allocation of the one-time ARPA stimulus funds of $4.6 million last year. This quarter’s expenditures showed a 6% decrease compared to the prior year’s expenditures. The table below demonstrates both General fund revenues and expenditures in more detail:
The General Fund Balance as of March 31, 2024, was $20,399,123, based on the audited General Fund balance of $20,547,470 as of the end of FY 2022-23 and factoring in a year-to-date net loss of $148,347 as of the end of the third quarter.
Expenditures:
Departmental operating expenditures are on target or under budget at the end of the Third Quarter. The following chart summarizes year‐to‐date combined expenditures by department as of the Third Quarter:
General Fund Qtr 3
FY2022-23
Qtr 3
FY2023-24
FY20223-24
AMENDED
Budget
% Change
Q3 FY23 vs
Q3 FY24
Qtr 3
% Budget
Revenues $ 35,338,517 $ 30,915,832 $ 46,695,600 -13% 66% Expenditures 33,093,499 31,064,179 48,626,761 -6% 64%
Net Rev over Exp $ 2,245,018 $ (148,347) $ (1,931,161)
City of Pacifica
Fiscal Year 2023‐24
ThirdQuarter Financial Report
2 The General Government category is 55% of the budget. Salaries and benefits of $2.6 million are on target at almost 70% of the budget of $3.7 million. However, in the materials and supply category, as well as in contractual expenditures there are delays in projects and processing payments due to staff turnover.
The Police and Fire Department expenditures were right on track, at 72% and 75% of the budget, respectively, at the end of the third quarter.
The Planning Department’s actual expenditures are consistent quarter to quarter but are significantly lower compared to the FY 2023-24 amended budget due to the delay in processing and reconciling the cost-reimbursable expenses.
Additional entries will occur in quarter 4. Finance staff made some adjustments to the Planning Department’s budget during the midyear budget review to align it with the projected level of activity and eliminate the large variances moving forward. Staff will continue to refine the budget numbers gradually for the upcoming budget.
Public Works Department expenditures of $3.1 million are a little lower than expected at about 62% of the budget of $5 million, primarily due to salary savings due to vacancies and staff turnover.
Parks, Beaches & Recreation departments expenditures of $3.9 million are about 67% of the budget consistent with the last quarter.
Non-department expenditures include mainly the following: retiree medical benefits, OPEB and PENSION contribution, animal control services, non-profit community agencies, transfer out to other fundssuch as internal services insurance funds, motor pool, debt service fund, and streets improvement fund. The actual total expenditures of $3.7 million are about 63% of the $5.8 million. Upon closer look, the $688K approved transfer out from the general fund to the general capital fund for the Civic Center furnishing project 0352 was correctly updated as a mid-year budget revised item but not booked as an actual transfer out yet. Staff will record the actual transfer in the 4th quarter, which will normalize the projections.
Revenues:
The following is a summary of revenues as of the end of the Third Quarter:
General Fund Expenditures
by Department
Qtr 3
FY2022-23
Qtr 3
FY2023-24
FY20223-24
AMENDED
Budget
% Change
Q3 FY23 vs
Q3 FY24
Qtr 3
% Budget
General Government $ 4,754,894 $ 3,912,312 $ 7,155,341 -18% 55% Police Department 8,381,357 $ 8,627,658 $ 12,003,588 3% 72% Fire Department 6,185,142 $ 5,797,820 $ 7,687,367 -6% 75% Planning & Building 1,847,383 $ 2,033,155 $ 5,031,717 10% 40% Public Works 3,526,564 $ 3,107,336 $ 5,032,522 -12% 62% PB&R 3,984,711 $ 3,908,093 $ 5,862,626 -2% 67%
Non-Departmental 4,413,448 $ 3,677,805 $ 5,853,600 -17% 63% Total General Fund
Expenditures $ 33,093,499 $ 31,064,179 $ 48,626,761 -6% 64% City of Pacifica
Fiscal Year 2023‐24
ThirdQuarter Financial Report
3 Property Tax: Property Tax is the City’s largest revenue source. The first major installment of the Property Tax payment was remitted to the City by the County of San Mateo on December 14, 2023. As of March 31, 2024, the City received roughly 64% of the budgeted Property Tax revenue. The second major installment usually comes in April, and at that time, 90% of the advance will be in until June, when it will reach 100% of the collection. Property tax includes both secured, unsecured, and real property transfer taxes. Secured property tax is budgeted at $16.4 million in FY2023-24, assuming an increase of 4% from the prior fiscal year of $15.7 million. The current actual receipts reflect a 3% yearover-year increase from FY2023 to FY2024. At the end of the third quarter, the City collected about $10.4 million or 64% of the property tax revenues, which is consistent with the Revised budget estimates.
Sales Tax: As of March 31, 2024, the City has received 58% of its budgeted Sales Tax revenues. There is a two-month lag on the receipt of sales tax revenues, so 58% only represents seven months of allocation, which is consistent with the prior year and appears to be on track or slightly under budget. The increase of 68% year over year shown in this category is attributable to the Measure Y revenues recorded with the sales tax. These revenues began effective on April 1, 2023, and therefore, there are no Measure Y revenues recorded in the previous year.
Transient Occupancy Taxes (TOT): In FY2024, TOT revenues are broken down into TOT generated from Pacifica hotels and TOT generated through STR. These taxes are remitted to the City approximately 30 days after the end of each month by HdL, and revenues are not accrued at quarter‐end during the year but based on a cash basis. The Third Quarter reflects the TOT receipts for the months of July through February. Even though the Revised Budget revenue projects a decline of $300K compared to the prior year, the City collected $2.1 million or 71% of the amended budget as of March 31, 2024. Economy-driven revenues like TOT are very sensitive to the market and economy. With one quarter and one month to go, we are confident that TOT will meet the projected budget estimates.
Other Taxes: These include franchise tax, business license, utility users tax, Vehicle License Fee, and cannabis General Fund
Revenues by Type
Qtr 3
FY2022-23
Qtr 3
FY2023-24
FY20223-24
AMENDED
Budget
% Change
Q3 FY23 vs
Q3 FY24
Qtr 3
% Budget
Property tax $ 10,096,101 $ 10,431,534 $ 16,411,900 3% 64% Sales Taxes 1,975,992 $ 3,328,982 5,731,000 68% 58%
Transient Occupancy Tax 1,328,115 $ 1,191,047 1,459,500 -10% 82% Transient Occupancy TaxSTR 981,143 $ 897,173 1,460,000 -9% 61% Franchise Tax 795,386 $ 665,374 1,236,200 -16% 54%
Business License Tax 476,694 $ 534,093 550,000 12% 97%
Utility Users Tax 1,814,971 $ 1,695,598 2,700,000 -7% 63% Vehicle License Fee 4,592,216 $ 2,298,081 3,849,700 -50% 60% Cannabis Tax 669,687 $ 672,968 950,000 0% 71%
ERAF 88,000 $ 105,000 105,000 19% 100%
Grants 5,411,381 $ 1,605,530 2,274,700 -70% 71%
Investment Earning 454,283 $ 583,460 730,000 28% 80%
Department Programs 6,654,547 $ 6,906,992 9,237,600 4% 75% Total General Fund
Revenues $ 35,338,517 $ 30,915,832 $ 46,695,600 -13% 66% City of Pacifica
Fiscal Year 2023‐24
ThirdQuarter Financial Report
4 operations tax. Payments for most of these taxes are remitted 30 days after the end of the month. As such, only 65% of the Budget has been received as of March 31, 2024. Included in this category is the Vehicle License Fee (VLF) in Lieu (property tax in lieu of VLF). This revenue includes a one-time backfill payment of $681,567 from the state for the VLF shortfall in FY 21-22 and 50% of the FY2023-2024 distribution of $1,568,733 with the second distribution of the same amount due in April. The FY2023-24 Revised budget reflects a big drop in this category from the original budget, which was recorded during the midyear analysis. The challenges around the VLF in Lieu revenues have been discussed at length during the midyear budget review, and it remains an evolving issue presenting a significant threat to Pacifica’s revenues.
Utility Users Tax is the third largest revenue source in the Other Taxes category, with a budget of $2.7 million, but only 63% of the revenue was collected as of March 2024. Staff recently noticed a drop in PGE remittances, the biggest UUT payee, which is concerning given that the fuel, gas, and electrical rates have increased substantially. Staff is currently checking with other cities if they experience similar trends and evaluating options for conducting an audit. Considering the one-month lag in filing and remittance from utility companies, we might still meet the budget estimates for FY2024.
Franchise Tax is the third largest source with a $1.2 million budget, but only 54% is collected as of the end of the third quarter. The larger franchisee payers, such as PG&E, typically remit in the middle of April on a yearly basis. However, as described during the budget process, a portion of Recology’s Franchise Tax revenues is now allocated to the street improvement fund to account for the Recology truck’s impacts on the city streets in the amount of $421K per year.
Overall, these revenues are expected to be on track with the budget.
Cannabis Tax is also on track, with about 71% collected from the five cannabis business providers as of the end of the third quarter.
Business License Tax was collected at 97% this quarter because our annual business license renewal is set for November 1 each year, and most renewals are complete by the third quarter. These revenues are projected to meet the budget by the end of the year, as additional revenues potentially will be collected from new businesses and various delinquent payments.
Excess ERAF: (Excess Educational Revenue Augmentation Fund). The FY2023-24 General Fund Revised Budget retains $105,00 of the ERAF revenues to fund a community grant program to local non-profit organizations as previously directed by the Council. This is an increase of $17K from the prior fiscal year of $88K. These revenues are usually booked in January and reflected in the third quarter asthey are received. The remainder of the FY 2023-24 Excess ERAF Revenues are reported in the Disaster Accounting and Housing Funds as per the Council's previously approved policy.
Grants: This category includes police grants, as well as PBR child care and senior grants. The grant revenues showed a decrease over the prior year due to the one-time receipt of $4.6 million in American Rescue Plan Act allocation from the State received last year. Also as the Childcare program audit is now completed, we are expected to catch up with the reimbursements requests for FY2021-22 and FY2022-23.
Investment Earnings: Investment earnings such as interest income continue performing well in the current economy, with favorable interest rate returns on bank deposits strategically managed by staff. Currently it is already at 80% of the budgeted amount. With three more months to go in the fiscal year, the City’s CDARS account projects to bring an additional $531K by the end of June. We expect to see a total of over $800K in general fund interest revenue at the end of the fiscal, given that the interest allocation will be applied to other funds as well. This is a reflection of the prudent investment strategies that Finance has implemented over the last year.
City of Pacifica
Fiscal Year 2023‐24
ThirdQuarter Financial Report
5 Department/Programs: These revenues include building permits, engineering and planning fees, charges related to Parks, Beaches & Recreation programs, and rentals, and the first three quarterly transfer-ins from other funds for cost recovery needs. As of March 31, 2024, the City received 75% of the Budget, which is right on track with the budget.
Permits and planning fees tend to fluctuate based on the timing of projects. Planning-related legal, consultant, and application fees are only at 30% of the Revised budget after factoring in the reduction to align with the timing of the cost recovery process. The FY 2024-25 Budget will further reduce the cost-reimbursable revenues and expenditures to keep the budget more in line with the projected activity level.
SUMMARY
Overall, staff is pleased to report that the FY2023-24 Budget is on track, with revenues and expenditures performing as expected and, in certain cases, a little better than expected. At the end of the third quarter, the City’s total general fund expenditures were 64% of the Budget, and the City’s total general fund revenues were 66% of the Budget.
It is also important to understand that these are only preliminary numbers as additional booking entries may occur throughout the year and during the fiscal year-end, which may modify some of the figures presented in this report.
However, it is encouraging to see that the budget appears to be on target at the end of the third quarter.