POINT ARENA CITY COUNCIL
AGENDA ITEM SUMMARY
AGENDA ITEM: VIII A
MEETING DATE: 2/25/2025
TITLE
Mid-Year Budget Review Fiscal Year 2024/25
RECOMMENDED ACTION
Approve Mid-Year revisions to the Fiscal Year 2024/25 City Budget
ANALYSIS
The City of Point Arena operates on an annual budget cycle. Through the budget, the City Council approves revenue estimates and authorizes City staff to expend the City's limited financial resources. Once the original budget is adopted, the Council makes budget adjustments to the budget throughout the year to reflect changes in expected revenues and to increase or decrease expenditures to address changes in policy, operations or fiscal challenges.
This mid-year budget review is the first formal evaluation for Fiscal Year 2024/25, which ensures the City’s financial soundness. The fiscal data for this review covers the first two quarters of Fiscal Year 2024/25 (July through December). The purpose is to determine whether the City is on track to meet the budget for the fiscal year or if adjustments are warranted. It also includes a projection of the fiscal year-end results, which serve as the starting point for the development of next year's budget. The report focuses on the General Fund operations, as well as Pier Operations and Wastewater Enterprise Funds.
In reviewing this report, the following information should be taken into consideration:
• Revenues and expenditures are recorded for the month paid, not invoiced. • The schedule of revenues received varies according to the source of funding. As an example, property tax payments as well as most wastewater fees are received three times per year: 55% in December, 38% in April, and 7% in August of the following fiscal year.
• Although most expenditures occur monthly, there are some quarterly, semi-annual, and annual expenditures. Examples include debt service payments, liability and other insurance, and audit fees.
• The report has been prepared without audit and does not include many of the yearend adjustments required to bring the City's financial records into compliance with generally accepted accounting principles (i.e. accruals of sales and use tax revenues, payroll, and other expenditures).
City operations are funded by the following specific revenues:
General Fund Revenues – Property Tax, Sales Tax, Transient Occupancy Tax (TOT) • General City Administration
• City Council
• Park Maintenance
Dedicated Taxes – Gas Tax, HUTA, and RMSA
• Streets and Road Maintenance
User Fees
• Planning Services
Grants
• Law Enforcement Sheriff Services
Enterprise Funds – Cost of Services
• Pier Operations
• Wastewater Treatment
FISCAL ANALYSIS
The City Council and the Point Arena community are aware that FY 2023/24 and FY 2024/25 presented serious financial challenges. The previous City accountant told the City Council in December 2023 that the City’s financial position was unsustainable. The City had a structural budget deficit (budgeted expenditures exceed budgeted revenues) in both the General Fund departments as well as Enterprise operations. One month after I arrived as the Point Arena Interim City Manager, the City accountant told me to find an attorney and file for City bankruptcy. Though I was shocked at the time, by the end of March 2024, the City only had $28,000 in its checking account- which was barely enough to make the next payroll. As Interim City Manager, I immediately began deep cost-cutting measures including the following:
• I proposed a very frugal financial payment package – hourly rate was half of my previous position, and I refused all benefits including health insurance, retirement contributions, leave accrual, holiday pay, and HAS contributions. Additionally, I decreased my paid hours to 25 hours per week, while continuing to work up to 50 hours per week.
• Administrative Clerical support was scheduled only 10 hours a week until November 2024, saving significant salary and benefit costs.
• The City laid off three field staff and reduced remaining staff hours by 20%, going from 32 to 25 hours per week.
All of these actions significantly reduced salary and benefit costs.
Not only were staffing costs decreased but Admin and Operations costs were reduced as well.
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
2023 2024
Staff Salary & Benefits
03/01 - 10/31
$517,713
$247,738
$340,000
$350,000
$360,000
$370,000
$380,000
$390,000
$400,000
$410,000
$420,000
2023 2024
Administration and Operations
01/01 - 12/31
$369,361
$415,834
In total, during 8 months in 2024 versus 2023, $269,975 in salaries and benefits were saved.
Between 12 months in 2023 versus 2024, total savings for Administration and Operations totaled $46,473. In total, Salary, Benefits, and Admin/Operations were reduced by $316,448 during 2024. So it was essentially the very frugal expenditures for all costs that dug the City out of its financial implosion beginning in 2023.
REMAINING CHALLENGES
Salary costs will continue to be a challenge. In late December 2024, staff hours increased back to 32 hours per week. This means from January – June 2025, Salary costs will increase by 20%. We will have to carefully monitor revenues to ensure we can actually handle this extra cost.
The new sales tax increase will become effective April 1, 2025, but we will not receive the first payment until May. This means that for FY 24/25, the City will only receive two months of increased sales tax revenue.
Our City depends on ongoing grant revenue to pay for some programs. For example, Sheriff services are paid from a U.S. Department of Justice grant. At this time, we are not sure whether the current administration will eliminate this grant. Additionally, the City still has reimbursements from FEMA due. We currently have $95,000 that has completed federal review, and we are waiting for the State to cut the check. This won’t be affected by the recent FEMA cuts already made. However, we still have $50,000 still being reviewed by FEMA. This reimbursement may be eliminated. At this time, everything is in flux, so it is difficult to make any predictions on the status of grants that originate at the federal level.
Staff will continue to fund only essential expenditures and closely monitor grant revenue.
It is anticipated that the Council may need to make budget adjustments in May to ensure we keep our expenditures under the revenue collected.
FISCAL IMPACT
None at this time.
ATTACHMENTS
Mid-Year FY 2024/25 Budget
CITY MANAGER SIGNATURE
_________________________________
Peggy Ducey, Interim, City Manager