TO:
VIA:
FROM:
DATE:
CITY COUNCIL
CITY ADMINISTRATOR
DIRECTOR OF FINANCE
MAY 7, 2024
Placentia City Council
SUBJECT: FY 2023-24 THIRD QUARTER BUDGET REPORT
FISCAL
IMPACT:
Fund
SUMMARY:
Revenues
(Including Transfers -
In)
General Fund ($700,595)
Special Revenue -
Total ($700,595)
AGENDA REPORT
Appropriations
(Including Capital &
Transfers -Out)
$-
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.
RECOMMENDATION:
It is recommended that the City Council take the following action:
1. Approve the Third Quarter Budget Report and adopt Resolution No. R-2024-24, amending the City's FY 2023-24 Budget.
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 General Fund's expenditures accounted for $52.3 million of those expenditures, with I
City Council Agenda
May 7, 2024
General Fund revenues adopted at $49.8 million. Subsequently, at the Mid -Year Budget review the City Council approved proposed adjustments to the General Fund budget bringing the total expenditures to $71.4 million, with $64.5 million in revenues, inclusive of carryover funding from FY 2022-23 approved in the first quarter.
Since the Mid -Year report, the City has received three additional months' sales tax allocations.
Through it's April allocation, sales tax is down $388,000, or 7.2% compared to April 2023 and Staff has learned of the closure or future closure of several sales tax producers within the City, further reducing the amount of sales tax expected this fiscal year. Staff is now projecting to receive $7.75 million in sales tax for FY 2023-24 compared to the current amended budget of $8.25 million.
Similarly to sales tax, Measure U is also projected to be lower than its $9.2 million budget, with the City now expecting $8.7 million, compared to $8.9 million last fiscal year. While managed in a separate fund, this reduction will negatively impact the transfer made to the General Fund from the Measure U fund per Policy 460 by $200,000.
For the third quarter of FY 2023-24 there are no proposed adjustments to the expense budget.
To mitigate against the further loss of revenue, the City Administrator gave direction to issue the annual Stop Spending Order, which went into effect March 21st requiring departments to cease all unnecessary spending (not contractually obligated, directly supported by revenue, or required for public safety) for the remainder of the fiscal year.
FY 2024/25 Budget
Budget preparation for the 2024-25 fiscal year is actively underway and the Proposed FY 2024/25 Budget is scheduled to be presented to the City Council on May 21, 2024. Projections for our largest revenue source, property tax, is projected to increase by approximately 9% from the Adopted FY 2023-24 budget. Offsetting this increase, however, is a continued decline in sales tax with our sales tax consultant, HdL, projecting $8.0 million for the upcoming fiscal year, down $767,000, or 9% from the Adopted FY 2023-24 budget.
On the expense side, costs continue to increase, several of which are outside the City's control.
Known increases for FY 2024-25 include increased insurance costs, an unfunded actuarial liability (UAL) payment required to CaIPERS resulting from their recent rate of returns being lower than the discount rate, countywide cost increases for the public safety 800 MHz radio system, and cost of living adjustments per negotiated Memoranda of Understanding. These are in addition to citywide increases in contract and software costs, gasoline, utilities and an overall higher cost of goods and services.
The graphic below illustrates the challenge the City is facing in preparing a balanced budget for the upcoming fiscal year(s). While the most recent CPI figure, 3.5% is lower than peak CPI figures experienced in 2022, it only represents the change consumer costs in one twelve-month period.
However when looking at the cumulative impact of each month's CPI increase on the second graph below, it illustrates how the overall cost of doing business has increased dramatically since 2021.
c m�• m-
O (D
0 Com)
0) 2.)
Q
c'
30)
N O
0) 0)
O
n
O a)
0_
Q Q
m�
aCD
ill
-o
O
0)
O
5 N
(D
3 (7.
cn3
3 0))
N
(D
Q
0 (D
O
CD
Q
(D
0)
(D
Q
:13VdWl 1VOSEI
(11 4�
en st) Clr-) ▪ C)
2 an C) In
$100.00
$100.55
$101.26
$102.09
$102.91
$103.87
$:L04.37
$104.58
$104.87
$105.74
$106.26
$106.58
$107.48
$108.46
$109.91
$110.52
$111.74
$113.28
$113.26
$113.22
$113.47
$113.93
$113.81
$113.43
$114.37
$115.01
$115.39 S
$115.97 _11111
$116.26 1141111111111
$116.64 1111111
$116.86
$117.37
$117.66
$117.62
trt
1?
$117.38 -4111111111
$117.27 ems
$117.90 is
$118.63
$119.40
Ln
S7 0 S_k
Source: US Bureau of Labor Statistics
uo!leI4Ui an! eJnwn) Ids Sfl
l'yty, 1 4.2%
`. o�'• n" ef' 'o`er' V V a a
7.1% y
6.4°% sl"
6.4% a '?e
n N
6.0% ^ ,�
,� 5.0%
roy: 4.9% D
9'� 4.0%
'6.f 3.0%
3.2%
s',
3.7%
'"' 3.7%
l'a3.2%
v-
3.1%
,i. 3.4%
J y 3.1%
49:.f 3.2%
fi; 3.5%
City Council Agenda
May 7, 2024
Fund
General Fund
Special Revenue
Total
Prepared by:
Jenni. er Lampman
Director of Finance
Revenues
(Including Transfers -
In)
($700,595)
($700,595
Appropriations
(Including Capital &
Transfers -Out)
Reviewed and approved:
Damien R. Arrula
City Administrator
Attachment:
Resolution R-2024-24 — Authorizing a Budget Amendment in Fiscal Year 2023-24 a. Exhibit A — Detailed Budget Adjustments