TO:
VIA:
FROM:
DATE:
CITY COUNCIL
CITY ADMINISTRATOR
DIRECTOR OF FINANCE
FEBRUARY 20, 2024
Placentia City Council
SUBJECT: FY 2023-24 MID -YEAR BUDGET REPORT
FISCAL
IMPACT:
Fund
General Fund
Special Revenue
Capital Projects
Enterprise Funds
Internal Service Fund
Total
SUMMARY:
Revenues
(Including Transfers -In)
$649,157
$16,700
$511,376
$1,177,233
AGENDA REPORT
Appropriations
(Including Capital &
Transfers -Out)
$390,473
$902,795
$35,000
$1,328,268
The City's Operating Budget is reviewed and presented to the City Council quarterly for recommended amendments and to provide current information on the financial activities of the City. Additionally, these types of quarterly reports assist City departments in communicating their financial operations throughout the fiscal year including any program changes and significant impacts to their annual budgets, as well as ensuring spending and revenues received throughout the year closely align with the adopted budget. This report includes requested departmental budget adjustments through the second quarter of fiscal year 2023-24, covering the period through December 2023.
RECOMMENDATION:
It is recommended that the City Council take the following action:
1. Approve the Mid -Year Budget Report and adopt Resolution No. R-2024-11, amending the City's FY 2023-24 Budget; and
2. Approve the Second Quarter Position Allocation Plan.
3.a.
Feb 20, 2024
City Council Agenda
February 20, 2024
STRATEGIC PLAN STATEMENT:
This item is consistent with the City Council approved 5 -Year Strategic Goal to Ensure Long -Term Fiscal Sustainability, under Objective #1.6 Update the existing 10 -Year Financial Plan.
DISCUSSION:
At the June 6, 2023 City Council meeting, City Council approved the FY 2023-24 budget which included $86.4 million in expenditures supported by $84.9 million in revenues, with the difference supported by the use of one-time monies in various funds to address capital improvement projects.
The City conducts a thorough mid -year analysis of its budget after completion of the first two quarters and makes adjustments as needed to both the revenues and the expenditures in order to ensure sufficient funding through June 30tH
General Fund: The General Fund FY 2023-24 Amended Budget, inclusive of proposed mid -year adjustments includes total revenues of $64.5 million and expenditures of $71.4 million. The proposed budget adjustments in the FY 2023-24 Mid -Year Budget Report include a net increase to revenues of $649,157 and a net increase in expenditures of $390,473.
General Fund Revenue
Changes to revenue is based upon year-end projections based on current year activity. While there are minor adjustments in several revenue line items, the largest changes are occurring to property, sales, transient occupancy (TOT) and utility users' taxes. ➢ Property tax— The City receives the majority of its property tax revenue over 3-4 months each fiscal year clustered around the property tax due dates of December 10th and April 10th. As a result, the City does not receive its first payments until November, with the bulk of the first installment payments received at the end of December, making it difficult to compare revenue received to the budget until the mid -year budget review. Fortunately, for FY 2023-24, the City received higher than budgeted property tax for both the secured roll and property tax in -lieu of VLF (vehicle license fees).
Properties are assessed every January 1, with payments based upon that assessment due the following December and subsequent April creating a significant lag between the assessment of the property and the payment of the property tax. If a property changes ownership, or is reassessed after January 1, the City will not receive the increased property tax for up to 18 months making it difficult to predict significant increases. For the tax year 2022- 23, the City's overall assessed value increased by 7.5%, compared to 6.4% for the County and was bolstered by a few significant property reassessments due to construction improvements as well as changes in ownership.
City Council Agenda
February 20, 2024
Based upon property tax received year-to-date, Staff is projecting an increase of $836,921 to the FY 2023-24 budget across all property tax categories.
TAXABLE ASSESSED VALUE
$8.1 BILLION
+7.5% 0 +6.4%
PLACENTIA COUNTY
J v.
z
C
D
5 HISTORY OF VALUE CHANGES BY CAUSE
IPICLUDING TOTAL ASSESSED VALUE
ca egory may .nduoe effects c' assessment apq^ea's mull. parcel saes. a^4 changes to serve eae^p,-or.s. personal pnXvirty or e;t property values ➢ Sales Tax- Receipts for sales tax have been approximately 6.2% lower in FY 2023-24 compared to the prior fiscal year, with the most recent quarter's (Q3) information showing receipts down 11.9% compared to the same quarter in 2022.
Working with our sales tax consultant, HdL, reasons behind the decreases include the significant decrease in fuel prices from last fiscal year when compared to current year, the impact of higher interest rates on purchases of new automobiles and the change in consumer behavior as people eat out less often because of menu price increases and service charges. More information regarding sales tax is included in the HdL quarterly sales tax update attached to this staff report.
For FY 2023-24 the City is projected to receive $8.7 million, which represents $525,000 less than originally budgeted.
➢ Transient Occupancy Tax (TOT) revenues are projected to be $1.7 million compared to an adopted budget of $1.5 million ($225,000 increase), with the City receiving approximately 18% more revenue from TOT than this time last year. Higher revenue is a result of increased room rates, higher occupancy rates and demand, as well as an increase in the number of short-term rentals operating within the City. ➢ Utility Users' Tax (UUT) revenues are also included in the "Other taxes" category and are trending approximately $200,000 higher than budgeted, for a total projected revenue of $2,750,000 for the current fiscal year.
City Council Agenda
February 20, 2024
➢ Permits & Licenses are projected to end the fiscal year lower than budget due to the accidental duplicate line -item budgeting for fire plan review/ permits in both the Fire & Life Safety and Development Services Departments. FY 2023-24 is the first full budget year where this service is being performed by the Fire & Life Safety Department and both departments budgeted revenue for this service, when it should only have been budgeted within the Fire & Life Safety Department as staffing has recently been fulfilled.
FY 2023-24
Adopted
FY 2023-24
Amended
(Current)
Mid -Year
Requests
FY 2023-24
Amended
(Proposed)
Revenue
Property Taxes 19,578,023 19,578,023 836,921 20,414,944 Sales & Use Taxes 9,175,000 9,175,000 (525,000) 8,650,000 Other Taxes 7,095,500 7,095,500 413,736 7,509,236
Permits/ Licenses 2,802,000 2,802,000 (184,000) 2,618,000 Fines & Forfeitures 452,500 452,500 12,500 465,000
Intergovernmental 312,000 3,125,115 - 3,125,115
Charges for Service 1,514,000 1,589,000 95,000 1,684,000 Misc. Revenue 2,454,000 2,454,000 - 2,454,000
Subtotal Revenues 43,383,023 46,271,138 649,157 46,920,295 Operating Transfers -In 1,047,800 1,052,750 - 1,052,750 Measure U Transfer In: - -
Employee Retention 3,337,946 3,337,946 3,337,946
OPEB 1,112,649 1,112,649 - 1,112,649
Measure U Reserve 920,000 920,000 920,000
Subtotal Transfers -In 6,418,395 6,423,345 6,423,345
Total Operating
Resources 49,801,418 52,694,483 649,157 53,343,640
Capital Improvement
Projects Revenue 11,160,044 11,160,044
Total Resources 49,801,418 63,854,527 649,157 64,503,684 General Fund Expenditures
As outlined in the table below, the mid -year forecast for General Fund operating expenses is $44.2 million for FY 2023-24, with total General Fund expenditures projected at $71.4 million, a net increase of $390,473 over the revised budget.
City Council Agenda
February 20, 2024
Expenditures
Legislative
City Administrator
Administrative Services
Finance
Development Services
Public Safety -Police
Fire & Life Safety
Public Works
Community Services
General Government
Operating Expenses
Capital Improvement
Program
Interfund Transfers Out
GF Debt Service
Total Expenditures
FY 2023-24
Adopted
FY 2023-24
Amended
(Current)
Mid -Year
Requests
FY 2023-24
Amended
(Proposed)
1,004,000
1,010,377
6,002,513
1,305,000
1,571,100
13,612,323
4,503,794
4,795,070
2,947,452
5,209,200
41,960,829
4,264,280
36,214
6,021,200
52,282,523
1,004,000
1,050,134
6,106,938
1,336,468
1,689,556
13,834,576
4,596,808
4,627,218
3,323,517
5,264,200
42,833,415
22,383,317
36,214
5,760,900
71,013,846
135,000
4,000
231,150
9,900
130,000
78,900
171,750
311,873
53,900
234,000
1,360,473
(970,000)
390,473
Notable General Fund expenditure budget adjustment requests include the following:
1,139, 000
1,054,134
6,338,088
1,346,368
1,819,556
13,913,476
4,768,558
4,939,091
3,377,417
5,498,200
44,193, 888
21,413,317
36,214
5,760,900
71,404, 319
➢ Legislative- Projected increases of $135,000 in Legal Services due to a combination of rate increases per the City Attorney contract, and outside legal services needed for ongoing labor negotiations.
➢ Administrative Services -
o As part of the FY 2023-24 budget, Information Technology functions transitioned away from contracted services to an in-house division with the addition of two full- time Information Technology Technicians. Recruitment for these positions and the training period took longer than anticipated and the City needed to retain the contract services for a longer period of time. As a result, the department is requesting $120,000 to cover these expenses.
o As the City's investment in technology continues and more companies transition to ongoing, annual software subscriptions, the cost of software maintenance has significantly increased. The IT division supports software purchases citywide and is requesting $75,000 to support contract software expenses through June 30th ➢ Development Services- The Development Services Department's FY 2023-24 budget included the transition from outside, contract services to in-house provision of services in both planning and building. Some of those positions have been difficult to recruit for, or were filled later than anticipated, requiring the need for extended use of outside consultants. As a result, the department is requesting $115,000 to support these expenses.
City Council Agenda
February 20, 2024
➢ Police- The Police Department utilizes a wide range of specialized software in the course of their day-to-day operations. As noted in the Information Technology request, annual software subscriptions have become the normal business model for many software services and are increasingly expensive. The department is requesting $70,000 to cover these expenses through June 30, 2024.
• Fire & Life Safety- The Fire & Life Safety Department is a 24/7 operation which requires a minimum amount of staffing to provide the appropriate level of service to the community.
When vacancies occur, for any reason, the department must pay overtime to cover the vacancy. This fiscal year the department experienced a long-term vacancy at one of its higher ranks due to an injury, requiring a higher -than -normal amount of overtime. With the injured employee back to full duty, and all positions now filled, the pace of spending on overtime should decrease, however the department is requesting $75,000 to offset the amount of overtime already experienced this fiscal year. ➢ Public Works -
o The Public Works Department maintains the vehicles for all departments with the exception of specialized Fire Department equipment. The City has made strides in recent years modernizing its fleet and replacing older vehicles, but there are still many older vehicles that need costly repairs to remain useful. A request of $50,000 is needed to maintain the City's fleet through the end of the fiscal year. An additional $50,000 is requested for unplanned repairs to two Police patrol vehicles that were involved in a car accident and sustained significant damage. o The City's stormwater pump station is in need of repairs by the end of the fiscal year in order to remain operational. With last year's increased rain levels, and large storms experienced so far this year, these repairs are urgently needed to prevent flooding and damage to the City's streets. $30,000 is requested for this repair. o Many of the City's facilities and systems, including HVAC, are aging and are frequently in need of repair. The department is requesting $57,000 for facility maintenance as the majority of the budget has been spent on unforeseen repairs to the City Hall HVAC system and other unbudgeted projects. o The department is requesting $110,000 for gasoline. The City was on pace to exceed the original budget prior to the fuel tank leak that was discovered in the City's unleaded fuel tank. For approximately two months City vehicles were required to use retail fuel stations at a much higher price point than the wholesale fuel previously delivered to the corporation yard, further contributing to the need for additional appropriations in this account.
➢ Community Services- The Community Services Department assumed responsibility for maintenance of park facilities this fiscal year. Their maintenance division is now fully staffed and is working on a backlog of maintenance projects as well as unplanned repairs as they arise. The department is requesting $30,000 to cover these expenses.
City Council Agenda
February 20, 2024
➢ General Government- The General Government department covers expenses that support all citywide departments such as insurance, postage and electricity and are often outside the City's control. After review of these accounts the following adjustments are requested for the remainder of the fiscal year.
o Telephone- $25,000
o Electricity- $150,000
o Postage- $20,000
o Office Equipment Rental (copiers/ printers)- $30,000
➢ Capital Projects- The FY 2023-24 budget included a $1 million ban contribution to the Enhanced Infrastructure Financing District (EIFD). After review of the project timeline including the need to receive direction from the City Council on design plans for Santa Fe Avenue prior to project bidding and/or securing a bond, Staff is proposing to disencumber $970,000 of this funding and re -budget it in the FY 2024-25 budget. Staff does not anticipate needing this funding prior to July 1, 2024.
Special Revenue Funds: The Special Revenue Fund FY 2023-24 Amended Budget includes revenues of $21.5 million and expenditures of $31.0 million, with the difference due to the carryover of projects and their respective funding source from one fiscal year to the next. The proposed budget adjustments in the FY 2023-24 Mid -Year Budget Report include an increase in revenues of $16,700 for a North Orange County task force at the Whitten and Teen Center (with corresponding expenses) and an increase in expenditures of $937,795.
Notable expenditure adjustments include:
$36,000 in the PEG fund to support the broadcasting of City Council meetings per the recently approved contract.
➢ $55,000 in the Technology Fund to support software previously supported by the General Fund for the Development Services Department.
➢ $770,595 for the transfer of fund balance in the Measure U fund to the General Fund for funding of the Section 115 Trust for OPEB related expenses. This transfer was approved and accounted for in the General Fund Revenue with the FY 2023-24 budget adoption, but a corresponding transfer out of the Measure U fund was omitted. The City will transfer the funds to Section 115 trust pending approval of this request.
Internal Service Funds: The Internal Service Fund for FY 2023-24 Amended budget includes revenues of $4.3 million and expenditures of $3.8 million. Proposed changes to Internal Service Fund revenues include $511,376 in reimbursements, primarily $500,000 from an insurance premium refund from PARSAC, the City's insurance provider.
City Council Agenda
February 20, 2024
Positions Allocation Plan: Changes to the Position Allocation Plan include the following proposed changes:
• Reclassification of one (1.0 FTE) Maintenance Worker to a Facilities Maintenance Technician ($7,100 annual) in the Community Services Department to better reflect the duties currently being done, the needs of the department and to be consistent with the classification of the other Facilities Maintenance Technicians. • Reclassification of one Office Assistant to an Administrative Assistant ($5,250 annual) in the Fire & Life Safety Department to better reflect the duties currently being done and the needs of the department.
FISCAL IMPACT:
The fiscal impact associated with the approval of this item is summarized below with the detailed budget adjustments as listed in Exhibit A.
Revenues Appropriations
Fund (Including Transfers -In) (Including Capital &
Transfers -Out)
General Fund $649,157 $390,473
Special Revenue $16,700 $902,795
Capital Projects - -
Enterprise Funds - $35,000 1
Internal Service Fund $511,376 - 1
Total $1,177,233 $1,328,2681
Based upon preliminary FY 2023-24 projections, which reflect an increase in revenues of $649,157 and a net increase in expenses of $390,473, it is anticipated that the General Fund fund balance, inclusive of the Measure U and General Fund reserves, Unassigned Fund Balance and Nonspendable monies will be $12,939,460 at the end of the fiscal year, maintaining a reserve level of 25.3%.
Prepared by: Reviewed and approved:
Jennifer Lampman
Director of Finance
I 9�=
Damien R. Arrula
City Administrator
City Council Agenda
February 20, 2024
Attachments:
1. Resolution R-2024-11 — Authorizing a Budget Amendment in Fiscal Year 2023-24 a. Exhibit A — Detailed Budget Adjustments
2. Mid -Year (Q2) Position Allocation Plan
3. HDL 3rd Quarter Sales Tax Update