FEBRUARY 12, 2024 www.cityofpaloalto.org/budget
CITY COUNCIL
FY 2024 MID-YEAR
BUDGET REVIEW
City Council, Item #11
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MID-YEAR BUDGET REVIEW OVERVIEW
• Through Q2 expenses tracking below budgeted levels, consistent with FY 2023; vacancies at 13% compared to 15% in FY 2023
• In alignment with the FY 2025 – 2034 LRFF, General Fund revenue projected to exceed budget by $3.6M, recommended to be recognized
• Recommendations for urgent/high priority needs, revenue supported program activities, and technical adjustments
• Net addition of 1.0 FTE
• Address FY2024 Council budget referral for priority programs investments; $0.6M allocated from Uncertainty Reserve
• Maintain one-time funds in reserves to address near term projected deficits 5 REFERRAL FY 2024 COUNCIL BUDGET PRIORITIES
Rental Registry Program (consultant and staff as approved by Council) $0.2M and 1.00 FTE ongoing
California Avenue Car Free Streets (oversight of car-free street efforts, 0.6 FTE) $0.1M $0.2M in FY25
Parklet Prototypes (Up to three standard design concepts) $0.1M One-time
Fleet Electrification (Nine vehicle replacements) General Fund $0.1M; All Funds $1.4M; one-time
Youth Mental Health (Host event on youth well-being and empowerment) $33,000; $0.1M ongoing
Sea Level Rise (Public Works, ongoing evaluation, possible FY25 budget request for funding) Eucalyptus Tree Removal (Community Services/Emergency Services pursuing grant funding) Unhoused Resident Services (City Manager’s Office coordinating with County services focusing on strengthening coordination and a pilot outreach worker program)
Regulate Short Term Rentals
(Planning & Development Services prioritizing rental registry program, this is on hold due to capacity limitations) 3 4
FY 2024 RECOMMENDED ADDITIONAL FUNDING OF $0.3 M
Planning and Transportation Services (Net Cost $0.2M)
• Measure B revenue for Safe Routes to School Program (One-time Net cost $0) • Development Center and Planning Special Project Staffing realignment ($0; $0.1M ongoing)
• Electric vehicle for code enforcement supervisor ($0.1M one-time) • Development Impact Fee and Cost Allocation Fee Studies ($0.1M one-time) • Palo Alto Transportation Management Authority (PATMA) funding to continue the current level of services ($42k; potential ongoing costs) Public Safety Services ($0.1M ongoing)
• Fire equipment maintenance and repair needs & increased training supply costs
5 FY 2024 MIDYEAR GENERAL FUND TECHNICAL ADJUSTMENTS
Technical Adjustments Net
Revenue/(Cost)
Major Sales Tax Revenue & Investment Earnings $3.6M
Utility Equity Transfer FY23 True-Up $0.3M
Utility Equity Transfer Case (Net-Neutral Action)
($11.2M for first round of settlement, offset by $11.2M from Reserve) $0.0M City Council Approved Actions
FY23 Excess BSR to Pension Trust ($1.7M) and Capital Improvement Fund ($1.7M) ($3.4M) Operating Adjustments
El Camino Real Ballpark/Lot37 FY23 Rent
Golf Course Services Revenue FY23 True-up
($0.2M)
($0.1M)
Total Technical Adjustments (Net Cost, no FTE) $0.2M
6 FISCAL YEAR 2024 GENERAL FUND RESERVES STATUS
Year-End BSR Summary (in millions)
General Fund BSR Balance, January 2024 $57.3
FY 2024 Mid-Year Adjustments Net Total ($0.1)
+$3.9M Major Tax Revenues, Investment Earnings, Equity Transfer ($3.4M) FY 2023 excess to pension trust & CIP (per Council Policy) ($0.6M) in Recommended Funding & other technical adjustments Projected FY 2024 BSR Balance, June 30, 2024 $57.2
Council 20.0% target =
$53.9M
FY 2024 projected $3.3M
surplus with a BSR of
$57.2 (21.2%)
$9.5M reserve balance
FY 2025 deficit of $6.0M
FY 2026 deficit of $5.4M
Uncertainty Reserve (in millions)
Uncertainty Reserve Balance $10.1
FY 2024 Mid-Year Adjustments for Council Priorities Total ($0.6) Projected Uncertainty Reserve Balance, June 30, 2024 $9.5 7 TECHNICAL ADJUSTMENTS – OTHER FUNDS
Enterprise Funds
• Electric Fund - Revenue and Commodity cost alignment due to increased hydro output Internal Service Funds
• General Benefits Fund - one-time contribution to Section 115 Pension Trust Fund • General Liabilities Fund - Supplemental insurance funding for increasing umbrella excess liability and property loss insurance premium costs • Vehicle Replacement & Maintenance Fund - fleet electrification to replace 9 additional vehicles, net $1.4 million additional expense all funds 7 NEXT STEPS
8 May
• FY 2025 Proposed Operating and
Capital Budgets Published
• FY 2025 Proposed Budget Review,
including Utility Rates, Municipal
Fees, and Five-Year Capital
Improvement Plan
June
• FY 2024 3rd Quarter Fiscal
Analysis Report
• Adopt FY 2024 Operating &
Capital Budgets, Utility
Rates, and Municipal Fees
March - April
UAC & Finance Committee
• Utility Financial Plans and FY 2025
Rate Recommendations (Electric,
Fiber, Gas, Refuse, Stormwater,
Wastewater, Water)
March April May June
Staff Work: Development and production of FY 2025
Proposed Budgets and Municipal Fee Adjustments
9 RECOMMENDED ACTION
Staff recommends that the City Council:
• Approve amendments to the Fiscal Year 2024 Budget Appropriation for various funds and various capital projects, as identified in Attachment A and Attachment A, Exhibit 1 and 2 (requires a supermajority, 2/3 approval); and • Approve amended FY 2024 Table of Organization in Attachment B consistent with the budget amendments in Attachment A, adding 1.00 full time position.
Alternatively, Council could amend this to consolidate excess BSR of $3.3M into the Uncertainty Reserve for a new reserve balance of $12.8M
• Amend Attachment A, Exhibit 1 to increase the Uncertainty Reserve appropriation in the amount of $3.3 million and decrease the Budget Stabilization Reserve by $3.3 million.
Paul Harper
Budget Manager
[email protected]
Kiely Nose
Administrative Services Director / CFO
[email protected]