CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
3/24/2025
1 SUBJECT:
Mid-year budget review and adoption of a resolution to adjust the Fiscal Year 2024-25 budget.
RECOMMENDED ACTION:
Adopt a resolution authorizing the mid-year FY 2024-25 Operating and Capital Budget adjustments.
STAFF CONTACT:
Yulia Carter, Assistant City Manager
650-738-7301
[email protected]
Marisol Gómez, Director of Finance and Administrative Services 650-501-0257
[email protected]
BACKGROUND:
The Finance staff has completed a Mid-year Budget review and is proposing adjustments to the FY 2024-25 Adopted Budget.
The purpose of the mid-year 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 mid-year budget review is also a segue to the next fiscal year's budget development process, as the mid-year analysis is used to develop the base budget assumptions for the new year.
On June 24, 2024, the City Council adopted a balanced FY 2024-25 Budget that reflected the Council's Strategic Plan and priorities for the upcoming fiscal year. This FY 2024-25 Mid-year Budget report will focus on the following key objectives:
1. Updating City Council on the status of revenues and expenditures within the FY 2024-25 General Fund Revised Budget and requesting an increase to the FY 2024-25 General Fund revenue of $171,367 and net appropriation increase of $755,000 (Attachment 1), including all previously approved by the Council expenditures throughout the year (Attachment 2) and mid-year adjustments (Attachment 3).
2. Updating City Council on the status of revenues and expenditures within the FY2024-25 Non-General Fund Revised Budget and requesting an increase to the FY 2024-25 nongeneral (Other) Funds Revenues totaling $751,000 and Other Funds Expenditures adjustments of $3.9 million (Attachment 1), including all previously approved by the Council expenditures throughout the year (Attachment 2) and mid-year adjustments (Attachment 3).
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3. Updating Council on the projected fund balance for all City Funds through June 30, 2025 (Attachment 6).
The FY 2024-25 General Fund Budget was adopted as a balanced budget, meaning that the General Fund operating expenditures did not exceed operating revenues. The FY 2024-25 Revised General Fund budget is $48.2 million in revenue, $47.7 million in total General Fund operating expenditures, including $75,000 in capital project expenditures. The difference between the budgeted operating revenues and expenditures and mid-year adjustments of $583,633 will decrease the General Fund balance accordingly, projecting a fund balance of $19,309,045 at June 30, 2025 compared with previously budgeted ending fund balance of $19,892,678. As a side note the audited ending General Fund balance was $18,740,450 as of June 30, 2024, which was higher than the estimate used for the beginning fund balance of $18,616,311 adopted with the FY 2024-25 budget.
Staff used the following methodology for the mid-year 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 2024-25 Revised Budget FY 2024-25 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 $48.2 million or $0.2 million (0.4%) higher than the Adopted Budget of $48.0 million, mainly due to the revenue increase in the Child Care one-time grant backfill of $0.4 million, which was not expected when the budget was adopted. The revised revenue projections also include reductions of $0.2 million in Sales Tax (including Measure Y) based on the actual data analysis as of the quarter ending December 31, 2024.
The following Table 1 demonstrates General Fund revenues for the FY 2023-24 actuals, FY 2024-25 adopted budget, and mid-year revised FY 2024-25 budget projections:
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FY 2024-25 General Fund Revenues Adjustments for Council Approval The following revenues are projected to reflect changes over the FY 2024-25 Adopted Budget and recommended for budget adjustment:
• 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 $144,710 or 4.4% in sales tax revenues from the Adopted budget of $3.1 million. Unfortunately, the local sales tax is showing decreases in six out of the nine industry groups compared to the prior year, with the largest percentage decreases occurring in the Fuel and Services Stations and Food and Drugs groups based on year-to-date revenue trends. In addition, the Measure Y ½ cent transactions and use tax revenues category projections include a decrease of $56,000 or 2.2% from $2.51 million to $2.46 million. There is an approximately two-months lag of when the City receives Sales Tax revenues from the State. The calendar year’s quarter 4, as of December 31, 2024, will be available in the next few weeks for staff to review and develop reasonable assumptions for the upcoming FY 2025-26 budget. • Cannabis Tax is reduced by $60,000 or 7.0% based on the current year’s remittance received from the cannabis businesses, and what is expected to be received through the end of the fiscal year. Pacifica’s cannabis tax is following State trends which show a decline when compared to the previous year.
• Intergovernmental is increased by $432,077 or 18.3% based on the current year’s receipts of the previous year’s reimbursement from the State for the Childcare program upon completion of the program audit. Since this adjustment is correlated to previous years’ Childcare audits, the revenue increase is considered to be one-time.
FY 2024-25 General Fund Expenditures
Expenditure projections were reviewed based on five categories: personnel costs, Contractual services, materials & supplies, transfer out for operating, and transfer out for Capital listed below.
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Previously Approved Changes to the FY 2024-25 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 mid-year budget review process, Finance staff incorporate all previously approved budget amendments year-to-date into the FY 2024-25 Revised Budget. These adjustments increased the General Fund appropriation by $302,000, as further described in Attachment 2.
Mid-year Adjustments
During the mid-year 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 2024-25 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 mid-year budget adjustment.
There are two mid-year budget requests in the General Fund, totaling $453,000. Combined with the previously approved $302,000, this brings the total General Fund budget adjustment to $755,000. The requests include:
• $101,000 for the Police Department to upgrade the jail-related audio and video systems to comply with the State audit and to upgrade Police Station security and surveillance; • $352,000 transfer out to the City’s Motor Pool Fund for fleet replacement and maintenance.
Overall, FY 2024-25 General Fund operating expenditures are proposed to be amended with a net increase of $755,000, or 1.6% over the adopted budget.
2. Status of Non-General Fund Revenues and Expenditures in FY 2024-25 Revised Budget
Non-General Funds include the following categories.
• Enterprise Funds, including Sewer Operating and Capital and Beach Parking funds • Special Revenue and Capital Funds, including Gas Tax and Street funds, Drainage, Pacifica City Council 5
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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 2024-25 Revenues and Transfers-In
In the Adopted FY 2024-25 Budget, these revenues comprise $37.2 million or 43.6% of the City's $85.3 million total revenue budget. The non-general fund revenues are projected to increase by a net of $751,000 or 2% to $37.96 million or 44% of the total revenue budget, as listed in Attachment 4.
FY 2024-25 Non-General Fund Revenues Adjustments for Council Consideration The following non-General Fund revenues as shown in Attachment 4 are projected to reflect material changes over the FY 2024-25 Adopted Budget and are recommended for budget adjustment:
Special Revenue and Capital Funds:
• Motor Pool (Fund 672) revenues are proposed to be increased by $751,000 from $25,000 to $776,000 for the contributions to be made from the General Fund and Sewer Fund for the fleet purchase and maintenance of $352,000 and $399,000 respectively.
Additional information on individual non-general fund mid-year revenue requests is presented in Attachment 3.
FY 2024-25 Non-General Fund FY 2024-25 Expenditures and Transfers-Out Adjustments for Council Consideration
Non-General Fund FY 2024-25 Adopted expenditures comprise $52.2 million, or 52.7% of the City's $101.8 million total expenditure budget. These expenditures are proposed to be amended by a net of $3.9 million or 7.5% over the adopted expenditures budget. This includes $2.7 million from previously approved City Council items, and $1.2 million from department requests and adjustments as detailed below.
Summary of previously approved items:
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 mid-year budget review process, Finance staff incorporated all previously approved budget amendments year-to-date into the FY 2024-25 Revised Budget. These adjustments increased the NonGeneral Funds appropriation by $2,671,354 as further described in Attachment 2 which contains the list of previously approved items with Council dates and resolution numbers.
Mid-year adjustments:
• General Liability Insurance Fund (Fund 667): An additional appropriation of $50,000 to cover a Forestry Management Survey of the Pacifica Urban Forest. • Supplemental Law Enforcement Services Fund (Fund 207): An additional $30,000 to Pacifica City Council 6
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fund the installation of security cameras, access control systems, and holding cell intercoms at the police department building.
• Motor Pool Fund (Fund 672): An additional budget appropriation of $751,000 is needed to cover previously approved vehicle purchases for Public Safety from the prior year, as well as a transfer from the Sewer Fund to fund a crane truck for the Wastewater division in the current year.
• Sewer Fund (Fund 518): A $399,000 transfer out to the City’s Motor Pool fund is proposed to support the purchase of a crane vehicle for the Wastewater Division. This transfer utilizes funds that were previously budgeted in Wastewater. Additionally, the Wastewater division requested a budget appropriation transfer from CIP projects P0024 and P0037 to initiate a new Sewer Rate Study project before the end of the fiscal year, resulting in a net zero budget change.
Additional information on individual non-general fund mid-year budget adjustments is presented in Attachment 3.
Capital Improvement Program
There are no other adjustments to the Capital Budget. The Capital expenditures will be further reviewed by staff during the FY 2025-26 CIP Budget development process that is now being prepared by the Public Works Department.
3. Projected Fund Balance Structure
After incorporating all mid-year budget adjustments described in this report, the City is projected to have a small surplus of $568,596 in the FY 2024-25 budget year, which is a reduction from the projected surplus at the budget adoption, but is still a positive number that will project to increase the General Fund balance.
Adopted
FY2024-25
Revised
FY 2024-25
(Mid Year)
Change
(Revised vs.
Adopted)
Total Revenue 48,068,300 48,239,667 171,367
Total Expenditures 46,916,071 47,671,071 755,000
FY 2024-25 Surplus (Deficit) 1,152,229 568,596 (583,633) Table 3 - FY2024-25 REVISED BUDGET (MID-YEAR)
NET GENERAL FUND FY 2024-25 PROJECTED SURPLUS (DEFICIT) The FY 2024-25 revised budget amounts have been updated from the adopted budget figures following the independent audit of FY 2023-24. 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.
As shown in Table 4 below and Attachment 6, the mid-year budget review reflects restricted reserves and operating contingencies at $5.97 million, leaving an unassigned projected balance of $13.3 million. This amount represents 28% of the General Fund operating expenditures Pacifica City Council 7
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(excluding one-time and capital transfers). This is a decrease of $583,633 from the Adopted Budget, adjusted by the beginning fund balance.
The General Fund balance 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.
Designations FY 2023-24
Actuals
FY 2024-25
Adopted
Budget
Revised
2024-25
(Mid-Year)
$ Change
Revised
over
Adopted
Beginning Fund Balance $ 16,884,462 $ 18,740,449 $ 18,740,449 $ - Total Revenue 47,785,173 48,068,300 48,239,667 171,367
Total Operating Expenditures 44,591,185 46,841,071 47,596,071 755,000 Total Capital Project Expenditures 1,338,000 75,000 75,000 - Ending Fund Balance 18,740,449 19,892,678 19,309,045 (583,633) Non-Spendable 8,287 8,287 8,287 -
Restricted 375,291 375,291 375,291 -
Assigned Reserves
Policy Level of 10% of Expenditures 4,728,876 4,684,107 4,684,107 - 2/3 Emergencies 3,152,584 3,122,738 3,122,738
1/3 Economic Contigency 1,576,292 1,561,369 1,561,369
Facility Maintenance & Replacement 205,000 205,000 205,000 - Compensated Absences 200,000 200,000 200,000 -
Child Care Reserve 494,591 494,591 494,591 -
Legal Reserves 100,000 100,000 - (100,000)
Assigned Reserves 5,728,467 5,683,698 5,583,698 (100,000) Total Designations 6,112,045 6,067,276 5,967,276 (100,000) Unassigned Fund Balance 12,628,404 13,825,402 13,341,769 (483,633) Operating Expenses 44,591,185 46,841,071 47,596,071
Unassigned Fund Balance as % of Op. Expenses 28% 29.5% 28% Table 4 - FY2024-25 REVISED BUDGET (MID-YEAR)
GENERAL FUND (ASSIGNED & UNASSIGNED BALANCES)
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 2025-26 Budget.
Staff will continue monitoring remaining fund balances and reevaluate strategies for future use of these funds as part of the FY2025-26 budget development. Please refer to the attached summary schedule presented in Attachment 6 for additional information on the City's Revised FY 2024-25 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 Pacifica City Council 8
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study sessions. The City Council held a Strategic Planning workshop on March 1, 2025, 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 weeks, staff will translate the Council’s vision into the workplan for the upcoming year to be later reflected in the City Manager’s Recommended FY 2025-26 Budget that will be brought forward for the Council’s adoption in June 2025.
ALTERNATIVE ACTION:
The City Council is being asked to adopt a resolution amending the FY 2024-25 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 2024-25 mid-year review, General Fund revenues are amended to $48.24 million, an increase of $171,367 or 0.4%, and General Fund operating expenditures are amended to $47.67 million, a net increase of $755,000 or 1.6% over the FY 2024-25 Adopted budget.
The combined non-General Fund revenue increases of $751,000 or 2.0% and the combined non-General Fund appropriation increases of $3.9 million or 7.5% are also included in the midyear budget adjustments as described above and in the supporting attachments.
ORIGINATED BY:
Finance Department
ATTACHMENT LIST:
Attachment 2 - FY 2024-25 Previously Approved Budget Amendments (PDF) Attachment 3 - Department Requests (PDF)
Attachment 4 - FY 2024-25 Summary of Revenues and Transfers by Fund (PDF) Attachment 5 - FY 2024-25 Summary of Expenditures and Transfers by Fund (PDF) Attachment 6 - FY 2024-25 Fund Balance Summary by Fund (PDF) Pacifica City Council 9
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RESOLUTION NO. ________
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA ADOPTING THE FISCAL YEAR 2024-2025 MID-YEAR BUDGET ADJUSTMENTS
WHEREAS, the City Council adopted the FY 2024-25 Operating and Capital Budget on June 24, 2024; and
WHEREAS, the Adopted FY2024-25 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 2024-25 Mid-Year adjustments to the FY 2024-25 budget.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pacifica hereby approves the mid-year adjustments to the FY 2024-25 budget.
The citywide revenues and appropriations are amended as follows:
Pacifica City Council 10 March 24, 2025
Fund Number and Fund Name Revenue
Adjustments
Appropriation
Adjustments
GENERAL FUND
101 General Fund 171,367 755,000
Total General Funds 171,367 755,000
SPECIAL REVENUE AND CAPITAL FUNDS
207 SLES Fund - 30,000
210 Gas Tax Maintenance Fund* - 52,355
211 Measure W Fund - 624,392
213 Street Improvement Fund - 465,355
238 Disaster Accounting Fund - 1,340,000
Total Special Revenue & Capital Funds - 2,512,102
ENTERPRISE FUNDS
518 Sewer Utility - 588,252
Total Enterprise Funds - 588,252
INTERNAL SERVICE FUNDS
667 Self-Insurance Fund Liability - 50,000
671 Motor Pool Operations Fund - 751,000
672 Motor Pool Replacement Fund 751,000 -
Total Internal Service Funds 751,000 801,000
751,000 3,901,354
$ 922,367 $ 4,656,354
City of Pacifica
Summary of FY 2024-25 Mid-Year Budget Adjustments
Total Other Funds (non-General Fund)
Total All Funds
• • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 24th day of March 2025, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________________
Sue Beckmeyer, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney