City of Pacifica
Fiscal Year 2023-24
Fourth Quarter Financial Report
1 OVERVIEW
This Fourth Quarterly Financial Report is an analysis of the unaudited financial status of the City’s General Fund from July 2023 through June 2024. The City of Pacifica has completed the Fourth Quarter of the Fiscal Year 2023-2024. The Fourth 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 primary operating fund of the City 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 the entire year complete, General Fund Expenditures are at 94% of projections, and revenues are at 102% of the FY2023-24 Budget. These figures include budgeted operating and capital transfers, and some routine year-end journal entries and accruals. There might be more adjustments to be posted as part of the fiscal year-end closing, and additional FY 2023-24 invoices might be still processed and posted in the next two weeks.
Net revenues exceed expenditures by $1.6 million at the end of the Fourth Quarter. This preliminary FY2023- 24 year-end number demonstrates a better result than projected at the mid-year budget review, which showed expenditures exceeding revenues by $1.9 million. The positive net revenues over expenditures are arising from two factors: better than expected revenue performance resulting in an additional $0.7 million, comprising a property tax increase of $0.3 million, OES Reimbursements in Fire overtime cost of $0.2 million, and $0.2 million in FEMA reimbursements from 2023 storms. The expenditures also showed a decrease of $2.8 million due to project delays and savings in contractual expenses in general government, as well as the planning department delay in billing for cost-reimbursable contractual services for development projects. Both expenditures and revenues have favorable variances over budgeted amounts which will be explained in more detail below.
The audited General Fund Balance as of June 30, 2023, was $20,547,470. With the 4th quarter financial information coming in, a net revenues over expenditures of $1.6 million, it is projected that fiscal year 2024 will end with a positive fund balance of $22,167,698.
General Fund Qtr 4
FY2022-23
Qtr 4
FY2023-24
FY2023-24
AMENDED
Budget
% Change
Q4 FY23 vs
Q4 FY24
Qtr 4
% Budget
Revenues 49,970,028 $ 47,396,738 $ 46,695,600 $ -5% 102% Expenditures 45,714,781 45,776,510 48,626,761 0% 94%
Net Rev over Exp $ 4,255,246 $ 1,620,228 $ (1,931,161)
City of Pacifica
Fiscal Year 2023-24
Fourth Quarter Financial Report
2 Expenditures:
Departmental operating expenditures were, in general, on target at the end of the Fourth Quarter.
The following chart summarizes year-to-date combined expenditures by department for the quarter ended on June 30, 2024:
The general department expenditures are under budget by $1.2 million mostly because of delays in budgeted cost-reimbursable contractual legal services resulting in a favorable variance at the end of the year. Also, high vacancy rate and project delays result in significant salary and other savings as well.
Both the Fire Department and Police Department are slightly over budget by 4% and 1% respectively, primarily due to overtime costs, which are partially offset in the Fire Department by OES reimbursement of $196K from the Smith River complex fire.
All other departments' expenditures are currently under budget. The Planning Department’s expenditures are low due to lower-than-expected cost-reimbursable expenses, only 66% of the budget. Staff made budget adjustments in the current FY 2024-25 to more accurately project cost-reimbursable revenues and expenditures activities throughout the year. Public Works expenditures are under budget by about $0.3 million as a result of salary savings due to a high vacancy rate, several recent retirements and delays in filling vacancies.
The expenditures of the Parks, Beaches & Recreation Department and non-departmental are right on target with 99% of budget expended at the end of the fourth quarter.
Revenues:
The following is a summary of revenues for the quarter ended on June 30, 2024:
City of Pacifica
Fiscal Year 2023-24
Fourth Quarter Financial Report
3 Property Tax: Property Tax is the City’s largest revenue source. The first installment of the Property Tax payment was remitted to the City by the County of San Mateo in December 2023, and the second installment was received in April 2024. The property tax revenues continued to show a healthy increase compared with last year's actual and current year's budget. The City received roughly 102% of the budgeted Property Tax revenue, which is 5% over the prior fiscal year and 2% over the current fiscal year amended budget.
Sales Tax: As of June 30, 2024, the City has received 99% of its budgeted Sales Tax revenues. HdL adjusted down the sales tax budget from $3,045,000 to $2,875,000 to make the actual very close to the revised budget, as the City received $3,199,915 in total sales tax revenues, which includes $2,845,133 in BradleyBurns sales taxes and $354,782 for the half cent public safety sales taxes.
Measure Y: Measure Y is a ½ cent Transaction & Use Tax that was passed by the voters in the City of Pacifica in November 2022. The tax became effective April 1, 2023 (only three months of Measure Y revenue, $557,966 in FY2022-2023) and City has received $2,566,255 for fiscal year 2023-2024, which is slightly above the revised budget by $66,255, or 3%.
Transient Occupancy Taxes (TOT): In FY2023-2024, TOT revenues are broken down into TOT generated from Pacifica hotels and through STR. These taxes are remitted to the City approximately 30 days after the end of City of Pacifica
Fiscal Year 2023-24
Fourth Quarter Financial Report
4 each month by HdL. July receipts are accrued back to FY2023-2024. TOT revenues are very sensitive to the market and economy. Even though the Revised Budget revenue projects a decline of $300K compared to the prior year, the City collected $2.9 million or 100% of the revised budget. This includes $1.6 million collected from Pacifica hotels and $1.3 million from STRs.
Other Taxes: These include franchise tax, business license, utility users tax, Vehicle License Fee, and cannabis operations tax.
Vehicle License Fee (VLF) in Lieu (property tax in lieu of VLF) reflects a big drop in this category from the original budget, which was recorded during the midyear analysis. The actual receipts for FY2023-2024 closely align with the revised budget with a marginal 1% increase. 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 2nd largest revenue source in the Other Taxes category, with a revised budget of $2.7 million, with 97% of receipts of budget in the amount of $2.61 million, about $89K less than the revised budget.
Staff will continue investigating a recent drop in PGE remittances, the biggest UUT payee, which is concerning given that the fuel, gas, and electrical rates have increased.
Franchise Tax is the third largest source in this category. The revenue goal is on target as we received $1,248,599 Franchise tax revenue compared with a $1,236,200 budget. However, as described during the budget process, a portion of Recology’s Franchise Tax revenues ($421K per year) is now being allocated to the street improvement fund to account for the Recology truck’s impacts on the city streets. That leaves the Franchise tax revenue on target, performing as expected.
Business License Tax is collected at 105% of the revised budget this fiscal year, reflecting closer monitoring of these revenues by HdL, the City’s third party tax administrator.
Cannabis Tax is falling slightly short, with about 91% collected from the five cannabis business providers, $100K less than what was budgeted. The City contracted with HdL to perform annual Cannabis audits to help operators to keep the business in compliance with City rules and regulations. It is likely that after further analysis, additional revenues will be accrued.
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 as they are received. The majority of Excess ERAF Revenues of $3.5 million are recorded between the Disaster Accounting Fund and the Housing in lieu funds as per previously approved Council policy.
Grants: This category includes various police grants, as well as Parks, Beaches & Recreation grants for childcare and senior services. The grant revenues showed a decrease over the prior year due to the prior year’s onetime receipt of $4.6 million in American Rescue Plan Act allocation from the State. However, the grants revenue is showing an increase over the amended budget due to recent FEMA reimbursement for the 2023 Winter storms, as well as OES reimbursement for Fire overtime and a one time grant from PBR.
Investment Earnings: Investment earnings such as interest income continues to perform well in the current City of Pacifica
Fiscal Year 2023-24
Fourth Quarter Financial Report
5 economy, with favorable interest rate returns on bank deposits strategically managed by staff. The general fund interest revenue currently is at 107% of the budgeted amount, after factoring in the pooled interest allocation of interest revenues to other special revenue funds based on their cash fund balance.
Department/Programs: These revenues include building permits, engineering and planning fees, charges related to Parks, Beaches & Recreation programs, and rentals, and the transfer-ins from other funds for cost recovery needs. As of June 30, 2024, the City received 95% of the Budget, which is about $500K under budget.
Permits and planning fees tend to fluctuate based on the timing of projects. Planning-related legal, consultant, and application fees are falling behind at only 30% of the Revised budget, after already factoring in some reduction at mid-year to better align the timing of the cost recovery process. Staff may further reduce the cost-reimbursable revenues and expenditures for the FY 2024-25 Budget at mid-year to keep the budget in line with the projected activity level.
SUMMARY
Overall, staff is very pleased to report that the FY2023-2024 Budget was on track, with revenues and expenditures performing as expected and, in certain cases, a little better than expected. At the end of the fourth quarter, the City’s total general fund expenditures are 94% of the Budget, and the City’s total general fund revenues were 102% of the Budget.
It is also important to understand that these are only preliminary numbers as additional booking entries may occur 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 fourth quarter.