2 1
0 4
as licenses and permits, fines and forfeitures, and charges for services, are tracking closely to the expected 25% threshold of their annual budgets by the close of the first quarter overall. Overall revenues at this time suggest a steady start to the fiscal year.
The report includes an analysis of the most recently available economic data, including unemployment rates, the size of the labor force, consumer price index, residential real estate sales and prices, and summarized trends in sales tax. An overview of the information presented in the report is:
•As of August 2023, the City's unemployment rate increased slightly to 3.7% compared to the same period in the previous year. Despite this slight uptick, the City's unemployment remains better than that of the broader state of California, San Bernardino County, and neighboring municipalities.
•In concert with the change in the unemployment rate, the labor force, which tracks people who are employed or actively seeking employment, has 800 fewer individuals compared to last year, bringing the total workforce down to 99,200. •In September 2023, the consumer price index rose to 4.87%, year-over-year, primarily driven by escalating costs in food and energy. In response to inflationary pressures, the Federal Reserve has maintained interest rates, continuing its strategy of utilizing higher interest rates as a deterrent to inflation.
•The housing market has cooled, with home sales remaining below the peak levels of a few years ago. Median home prices have seen a modest increase of 0.7% from the previous quarter, likely attributed to a tight supply in the housing market, exacerbated by high mortgage rates that are influencing both supply and demand. •Despite a short-term uptick in retail sales, consumer confidence is cautious amid concerns of impending economic headwinds that may suppress future spending and, consequently, sales tax revenues. On a statewide level, the initial post-pandemic surge in sales tax growth has tempered, with projections indicating a slight downturn soon, expected to be followed by a gradual upward trend.
FISCAL IMPACT:
The following appropriation requests are recommended for department operations.
Account Number Description Purpose
Increase/
(Decrease)
1001319-5310 General Fund -
Park Maintenance -
Tree Maintenance
Removal of trees along Fisher
Drive
$40,000
1001301-5300 General Fund -
Economic Development -
Contract Services
Professional services for
appraisals
$25,000
1001001-5410 General Fund -
General Overhead -
Property Insurance
Reflect property insurance
premium increases
$344,570
3281501-5410 Fire Fund -
Fire Administration -
Property Insurance
Reflect property insurance
premium increases
$122,050
2 1
0 4
1712001-5604 Equipment and Vehicle
Replacement Fund -
General Overhead –
Capital Outlay – Vehicles
Purchase of two Ford F-150
electric vehicles
$143,450
3288501-5604 Fire Protection Capital Fund -
Fire Administration –
Capital Outlay - Vehicles
Purchase of one Ford F-150
electric vehicle
$64,820
1712001-5604 Equipment and Vehicle
Replacement Fund -
General Overhead -
Capital Outlay - Vehicles
Purchase of two Chevrolet Bolt
electric vehicles
$73,550
1001314-5300 General Fund -
Planning -
Contract Services
Professional services for
master planning
$90,000
1001302-5300 General Fund -
Building and Safety -
Contract Services
Professional services for plan
check and building inspection
services
$101,070
1281501-5300 Fire Fund -
Fire Administration -
Contract Services
Professional services for plan
check and building inspection
services
$50,540
Corresponding to the City Council and Fire Board's approval of the budget appropriations noted above, the following will also be approved:
1. Approve increases of $50,532 each for Contract 2023-118 with BPR Consulting, Contract 2023-121 with Interwest Consulting, and Contract 2023-119 with Wildan Group for plan checks and building inspection services.
COUNCIL MISSION / VISION / GOAL(S) ADDRESSED:
Providing the City Council with regular financial updates on the City's financial performance supports the Council's efforts to create an equitable, sustainable, and vibrant City, rich in opportunity for all to thrive, by providing meaningful, timely financial information upon which they can base their current and future decisions that impact the City's finances.
ATTACHMENTS:
Attachment 1 – Quarterly Financial Update – First Quarter of the Fiscal Year 2023/24 Quarterly Financial Update
Quarter Ended
September 30, 2023
ATTACHMENT 1
1 INTRODUCTION AND EXECUTIVE SUMMARY
The City Manager’s Office and Finance Department is
providing this quarterly financial report to the City Council as a high-level overview of the City's financial status through the quarter ended, and an overview of economic
indicators that can influence the City's revenues and
expenditures.
This report has several components:
1. Quarterly Report: This report includes budget to
actual variance analysis for revenues and
expenditures for July 1, 2023, through September 30,
2023. The quarterly report provides this detail for the General Fund, Fire District, and Library Fund.
2. Economic Brief: This report compiles economic
information and indicators, such as employment data,
sales tax data, and other local and regional economic
news.
After the first quarter of the fiscal year, the City's financial status is in line with expectations. Significant accounts and notable variances are presented in this quarterly financial report.
The tables in this report compare budgeted to actual
amounts for the General Fund, Fire District, and Library.
The year-to-date (YTD) financials are unaudited actuals and presented with encumbrances requested through the
quarter. The revised budget includes budget adjustments, encumbrance carryovers from the prior fiscal year, and
any supplemental appropriations approved by the City
Council through the quarter. The percent of the budget
(% Bud) is the percentage received/spent of the budget.
The prior year-to-date (PYTD) financials show comparable information from the same quarter of the prior fiscal year.
The report uses colored icons to illustrate how well the category is doing financially. Green means everything is reasonable, yellow means that something is being
watched closely, and red means that there is a problem
that needs attention.
It’s important to know that this report does not present revenue and expenditure budgets that are not approved.
Therefore, updated revenue and expenditure information
based on new information and forecasts are not shown in these reports. Despite this, the City makes sure to
maintain a balanced budget, meaning that the amount of
money it plans to spend is always equal to or less than the amount of money it expects to bring in or use from
reserves.
GENERAL FUND OVERVIEW
The City’s General Fund is the primary fund used to pay for a variety of programs and services that are provided to people and businesses in Rancho Cucamonga. This
includes programs and services offered by different
departments of the City.
Overall, the revenues (amount of money coming in) and
expenditures (going out) of the General Fund are within the expected range, taking into account things like
seasonal changes and ongoing expenses.
Currently, the amount of money spent from the General
Fund is 22% of the total budget for the year. This includes both general expenses that benefit the whole city, as well as the costs of running individual departments. However, when we look only at the costs of running specific
departments, the amount spent so far this year is 35% of the budget. This report will focus on analyzing the
expenses for each department within the General Fund.
The table above includes departmental and non-departmental spending. Non-departmental expenditures are excluded from the operating departmental analysis section.
2 General Fund Revenues
Primary revenue sources for the General Fund are
property tax, sales tax, franchise fees, and transient
occupancy tax. Collectively, these comprise about 81% of the annual budget.
Property Tax. The first major apportionment of property tax occurs in December each year. The City partners with a property tax consultant to continually monitor and
project property tax revenues for the City. The budget
represents a forecasted 5.5% growth in assessed
valuation from the prior fiscal year; however, preliminary data suggest that the increase might be 6.0%. The
increase is favorable for revenue forecasts in the fiscal year but still too early to be conclusive because the
County won’t finalize reports until November.
Additionally, City staff is waiting on reports and data in order to finalize estimates for the amount of City tax
increment pledged towards the RC Enhanced
Infrastructure Financing District and to be used towards projects that will aid further economic development
activity within the City. Revised estimates should be
available for the second quarter of the fiscal year and adjusted at midyear.
Property taxes include property tax in lieu of vehicle
license fees budgeted for $25.3 million and residual
property tax for the form RDA budgeted for $3.4 million.
Both revenue sources are received in installments later in the fiscal year.
Sales Tax. Sales tax is the largest single source of revenue for the City. As such, City staff and consultants monitor how much sales tax is coming in closely. Consistent with the delay in receipts, the City received the first monthly allocation of sales tax for the fiscal year in September. The sales tax budget reflects a decrease in revenue from the prior fiscal year, which reflected a slowdown in taxable sales given economic pressures. However, the decline
represents a complex economic environment, and the
City’s peak sales tax generation occurs between October and December. Additional forecasts are impossible
without data from those months for analysis. To date, the September and October receipts have exceeded
estimates, likely due to an increase in taxable sales from inflationary pressures on consumer goods and the rise in gasoline during the applicable months. Note that the
October receipt is not included in this report.
Franchise Fees Transient Occupancy Taxes. Transient
Occupancy Taxes (TOT) and Franchise Fees comprise 16%
of the taxes received by the General Fund. Franchisees
remit payment to the City on recurring schedules, but not in the first quarter of the year. Gas and electric franchise fees are received in the year's final quarter. At the same time, refuse and cable franchise fees are received after the quarter. TOT is remitted by hotels to the City monthly.
The budget estimate projects growth of approximately
7.8% from the prior year's budget, based on the opening of the Tapestry Hotel during the fiscal year and forecasted room occupancy and revenue per available room for
existing hotels.
Licenses and Permits. After the end of the first quarter, actual revenue is at 25% of the budget. The largest
category of this section is business licenses, which
comprise almost 60% of the budget. In the first quarter, business license revenues are lower than the prior year and overall. City staff will continue to monitor business license revenue throughout the next quarter.
Fines and Forfeitures. Includes vehicle and parking fines and citations comprise 62% of the fines and forfeitures budget, and other general fines and forfeitures. This
category includes vehicle code fines collected by San
Bernardino County and remitted to the City. At the end of the first quarter, fines and forfeitures are in line with expectations.
Charges for Services. Charges for services refer to the amounts collected for specific services provided by the departments. Includes various community development
3 fees, such as plan check, planning, and engineering fees, comprise 70% of the budget, and recreation fees make up 20%. As of the first quarter, recreation fees, specifically ticket sales, are exceeding their respective budgets, which is favorable considering prior fiscal years have been lower than expected as the City came out of the pandemic.
Community development is in line with expectations
overall.
Intergovernmental. The majority of this category includes motor vehicle in-lieu fees and homeowners property tax
relief revenues from the County, which are received later in the year. The City will recognize a local grant in the amount of $45,000 from the ASPCA as the expenditures
to expand its capacity to temporarily hours and care for large animals during natural disasters will occur this fiscal year.
Transfers In. Transfers represent the transfers of
resources from other funds to the General Fund. Through the first quarter of the fiscal year, transfers are in line with expectations.
Other Revenues. Includes interest earned on invested
funds, rental and lease income, reimbursements, and
miscellaneous revenues. Reimbursements represent 32%
of this category. This category includes $250,000 and
$200,0000 reimbursements for the administration of the
former redevelopment agency and Housing Successor
Agency, respectively. Recreational and miscellaneous
rental and lease income represent 26% of this category
and is in line with expectations for the first quarter.
General Fund Departmental Expenditures
Expenditures for the General Fund can vary because of
the timing of vendor payments, carryover of purchase
orders from the prior year, and the changes in operations during the year. Therefore, even if expenditures are above or below the benchmark of 25%, departments could be
within the expected ranges due to their need to issue
purchase orders and blanket encumbrances at the start of each fiscal year for operations.
Personnel services will appear to be higher due to the
allocation of estimated benefits to departments at the
start of the fiscal year. The allocation is based on
budgeted positions at the beginning of the year and
adjusted at the end of the year to reflect the actuals.
Personnel services that deviate from the expected range given the whole allocation at the start of the year will be analyzed further by the department.
Departments that provide services that benefit the City as a whole have their budgets reduced to reflect the
allocation of the cost of those services to the benefiting departments. This is the Cost Allocation category within the department’s budget.
Operations and maintenance are below the benchmark
but are not significant costs overall. Operations and
maintenance are lower in the current year due to the
timing of conferences and travel in the current year,
which can vary depending on scheduled conferences.
Operations and maintenance and professional services
expenses are over the expected range at 67% and 63%,
respectively. Operations and maintenance include
encumbrances for recurring programs, such as
professional spay and neuter services, as well as
laboratory testing services. The budgets for these
categories will be monitored to ensure overspending does not occur but overall are within the expected range.
The budget for capital outlay reflects the need to
purchase medical tool replacements and large animal
disaster emergency equipment and supplies. The latter is being purchased utilizing local grant funds from the
ASPCA.
4 Professional services are higher than expected at 98% due to encumbrances with contractors and consultants to
assist with building examinations and plan check services to aid in operations.
Professional services are slightly above the benchmark at 30% of the budget. Overall operations and professional
services are within expected ranges for the first quarter of the fiscal year as variances from the prior year reflect services, such as records management consulting, which
are not budgeted for this fiscal year.
Operations and maintenance expenses can vary as they
primarily consist of travel and meetings. As such, the
increased spending in the current fiscal year through the first quarter represents the League of California Cities, which required additional travel and conference
expenses.
Professional services are at 61% of the budget and higher than the prior fiscal year for planned spending towards a video production related to Healthy RC and the City, as well as printing services of the Grapevine.
Professional services expenses, which primarily include legal fees for abatements, civil litigation, and other
necessary services, are at 65% of the budget. Legal costs for compliance can vary based on the needs of the
department and cases; however, expenditures are
recoverable in some circumstances.
The Community Services department is spending less on
personnel services than expected, at 37% of the budget.
There will be anticipated salary savings for Community
Services based on results through the first quarter of the fiscal year because of position vacancies and resignations.
Currently, there are ten vacancies in Community Services.
However, two Community Service Superintendents are
scheduled to start in the second quarter of the fiscal year.
City staff will monitor through the midyear budget and
adjust based on the expected dates to fill these positions.
As of the first quarter, full-time and part-time spending, excluding fringe benefits, is at 15% of the budgeted
amounts.
Operations and maintenance and professional services
are approximate to the benchmark, at 20% and 22% of
their respective budgets. Operations and maintenance
and professional services can vary depending on the
timing of events. In the current fiscal year, significant expenditures represent special event programming and
consulting of the Victoria Gardens Cultural Center, as well as planned spending for additional subsites for the Lewis Family Playhouse and Second Story and Beyond®.
Capital Outlay includes spending and encumbrances for
portable radios, a sound system, and camera equipment
for the Victoria Gardens Cultural Center.
Operations and maintenance are below the benchmark at
12% of the budget. The current fiscal year spending is
lower than the prior year due to the timing of bills to vendors but is within the expected ranges overall.
Professional services are 83% of its budget due to
encumbrances for marketing, branding, and
5 communications services for specific efforts, such as the HART District and economic development, necessary for
the development of the City’s economic activity.
Operations and maintenance are above the benchmark at
65% of the budget. The increase is due to the increasing costs of required permits for water pollution paid to San Bernardino County. Historically, the cost of the permit as a member agency was low due to the use of reserves;
however, the permit costs have increased over the last
few years as the reserves have been fully used.
Professional services are at 45% of its budget, which
includes spending on engineering on-call plan check
services and other land development services to aid in
reviewing large projects. The variance from the prior year is due to the timing in which encumbrances because
approximately $240,000 in vendor encumbrances were
recorded after the first quarter.
Operations and maintenance and professional services
are at 52% and 78% of the budget, respectively, and
approximate to the prior fiscal year. Both of these
categories include encumbrances for facility maintenance and janitorial services, which are encumbered at the
beginning of each fiscal year.
The department's utilities spending is at 30% of the
budget, which is consistent with the prior fiscal year. The budget for electrical utilities was increased because SCE increased its rates by 4.3% for the fiscal year. Utilities are cyclical and will be monitored throughout the winter and summer months when severe weather can impact
electricity and gas usage.
Professional services are at 56% of the budget, which
includes encumbrances for property and sales tax
consulting services, as well as services related to the implementation of accounting standards.
Operations and maintenance and Professional Services
are above the benchmark at 55% and 51% of the budget,
respectively. In the current fiscal year, multiple
encumbrances result in variances from the prior fiscal
year. Notably, risk management has issued a $50,000
encumbrance for Class A driver's license training, which is necessary for specific operations within public works.
Additionally, there is an ongoing cost for 24/7 COVID-19 tracing service, which a third party delivers, whereas, in the past, it was performed by City staff, resulting in
overtime and strains on employees. This fiscal year has an encumbrance of $70,000.
Operations and maintenance are above the benchmark at
81% of the budget. Due to internal service user fee charge by the City’s Computer Equipment and Equipment
Replacement Fund. This fee accounts for the immediate
and long-term capital replacement needs for the City’s
technology-related equipment. It is charged at the start of the year. The user fee was increased to $1 million at the end of the prior fiscal year, representing the rising costs for such equipment.
Professional services are at 46% of the budget due to
software subscriptions and support services. These can
vary since subscriptions and services are paid based on
6 the timing of their contracts throughout the fiscal year. As of the first quarter, spending is within expectations.
Professional services are above the benchmark at 76%
due to a $1.7 million purchase order carryover for CEQA analysis and services being performed on behalf of
developments within the City. These costs are
reimbursable to the City.
Operations and maintenance and professional services
are approximate to the benchmark at 25% and 22% of the
budget, respectively. Operations and maintenance cover
events, training, and other crime prevention activities.
Professional services primarily is the contract with the San Bernardino County Sheriff for policing services in the City.
Operations and maintenance are above the benchmark at
82% of the budget, mainly due to internal service user
fees for vehicle and equipment charges from the City’s
Equipment and Vehicle Replacement Fund at the
beginning of the fiscal year. This fee accounts for the immediate and long-term capital replacement needs for
the City’s vehicles and equipment. It is charged at the start of the year.
Professional services are at 85% of the budget due to
encumbrances for maintenance contracts made at the
beginning of the fiscal year, including park, vehicle,
equipment, and street maintenance.
Capital outlay expenditures are for the recurring citywide concrete repair project. In the current fiscal year,
$500,000 was budgeted, and another $492,000 was
carried over from the prior year. The project is ongoing and is being done in segments.
LIBRARY FUND OVERVIEW
The Library Fund has spent 52% of its total budget for the year, while the revenues are 2% of the total budget.
Library Revenues
Property Tax. The Library Fund receives a portion of the property taxes collected by the City. The first major
apportionment of property tax occurs in December each
year. As mentioned in the City’s analysis, preliminary
assessed valuation reports suggest that growth could be more than expected when the adopted budget was
forecasted. Also included in the property tax revenue
category is a total of $2.5 million in statutory and residual payments from the dissolution of the former
redevelopment agency, which are received later in the
year.
Other Notable Variances. The Library Fund received
$70,000 in donations from the Friend of the Library in the first quarter of the fiscal year.
7 Library Expenditures.
Operations and maintenance spending are above the
benchmark at 75% of the budget, but this is because of
encumbrances of printed and digital books, materials, and supplies for the two libraries made at the start of each fiscal year.
Professional services spending is at 79% of the budget, which is approximate to the prior year, and due to
encumbrances for security services, cataloging services, and other materials at both libraries.
Capital outlay represents the planned installation of a Library Kiosk at Fire Station 178. The kiosk will be installed later this fiscal year when Fire Station 178 is opened.
FIRE DISTRICT OVERVIEW
The Fire District is responsible for keeping the community safe by providing fire prevention and suppression
services. It includes the Fire General Fund and two
Community Facilities Districts (CFD) 85-1 and 88-1. The City has seven fire stations that are currently operational, and one is under construction.
The Fire District’s expenditures are at 26% of the budget, while revenues are at 3% of the budget.
Fire District Revenues
Property Tax. The first major apportionment of property tax occurs in December each year. As mentioned in the
City’s analysis, preliminary assessed valuation reports suggest that growth could be more than expected when
the adopted budget was forecasted. Additionally, City
staff is waiting for reports and data from San Bernardino to determine the portion of tax increment that the Fire District will redirect to the RC Enhanced Infrastructure Financing District. The information is expected to be
available in the second quarter of the fiscal year, and revised estimates will be provided at midyear.
The property tax revenue category includes $14.1 million for statutory payments from the dissolution of the former redevelopment agency, which are received later in the
year.
CFDs 85-1 and 88-1 levy special taxes for funding
administration, personnel services, maintenance, and
operations within the CFDs' boundaries. The special tax levy increased from the prior year by 7% to reflect the costs of performing public safety operations in the current fiscal environment. The increase was approved after
several years of keeping rates flat and, before that,
decreasing rates. Combined, the CFDs will collect $7.3
million and receive a $5.2 million contribution of
resources from the Fire District’s General Fund to
subsidize operations. The contribution is shown as a
Transfer In (revenue) to the CFDs and Transfers Out
(expenditure) from the Fire District in the summary,
revenue, and expenditure tables for the Fire District.
Other Revenues. Other revenue includes interest earned
on invested funds, rental and lease income,
reimbursements, and miscellaneous revenues.
Reimbursements from the Other Post-Employment
Benefits (OPEB) Trust for the retiree healthcare costs
comprise 48% and other non-abated reimbursements,
8 which primarily consist of CalOES, comprise 21% of the budget. Finance requests reimbursements from the OPEB
Trust for retiree healthcare costs near the end of each fiscal year, and reimbursement from CalOES for fire
support depends on the timing of reimbursement receipts processing by the state agency. As of the first quarter, results are within expectations.
Fire District Expenditures
Fire District personnel services incur fringe benefits as incurred. Personnel services are lower than the
benchmark at 19%, which is comparable to last year.
Operations and maintenance are at 55% of the budget
due to the timing of expenditures and encumbrances
necessary for operations. For example, the payment of
the general liability insurance premium for $767,000
occurred within the first quarter of the current fiscal year but not in the first quarter of the prior fiscal year. Despite the timing of these transactions, overall operations and maintenance appear to be within expected ranges.
Professional services are at 34% of the budget due to
spending and encumbrances for various contract services necessary for fire administration, communications, and
facilities maintenance, and is comparable with the prior year.
Capital outlay represents budgeted ADA Improvements at
Fire Station 174, which is planned to be completed this year.
Debt service accounts for the interfund loan between the Fire District and the General Fund. The interest
component of the interfund loan is shown as debt service for the Fire District. This interfund loan will be fully repaid in October 2023.
Cost allocation represents the estimated service costs
that City departments expend to benefit the Fire District.
The City charges cost allocation at the start of each fiscal year.
9 ECONOMIC BRIEF
The economic brief provides information on economic indicators that can be used to measure and track economic activity at a local level. The economy is a combination of individual, business, and government spending or investment at the national, regional, and local levels. Governments of all levels keep an eye on these economic factors to assess the strength of the economy. This section of the brief focuses on indicators that can help track aspects of the local economy.
Statewide, Regional and Local Labor Market
According to preliminary August 2023 figures, San Bernardino County had an unemployment rate of 5.1%, which is approximate to the average unemployment rate for the State of California.
The graph below shows the unemployment rates (not seasonally adjusted) for the largest Counties and Metropolitan Areas statewide for August 2023:
Source: Employment Development Department, State of California
At a local level, the City’s unemployment rate for August 2023 was 3.7%. The City’s unemployment rate is lower but also consistent with changes in the unemployment rate for the County and State.
Source: Employment Development Department, State of California
Rancho Cucamonga San Bernardino County CaliforniaAugust 2023 3.7% 5.1% 5.1%July 20233.5%4.8%4.8%June 2023 3.7% 4.9% 4.9%August 2022 3.1% 4.1% 4.1%Month Over Change 0.2% 0.3% 0.3%3-Month Average3.6%4.9%4.9%Year Over Change 0.6% 1.0% 1.0%
10 The graph below illustrates the historical unemployment rate for the City, County, and State.
Source: Employment Development Department, State of California
For the region, the City’s unemployment rate is also favorable when compared to other comparable cities in San Bernardino County.
Source:
Employment Development Department, State of California
11 Labor Force
Reviewing the labor force is another measure of the job market's health since it counts all the people who are employed or looking for work but not those who are unemployed and not actively seeking employment. This helps us understand how many people are actively seeking employment and their likelihood of finding a job.
In August 2023, the City's labor force decreased to 99,200 from 100,000 in the prior year. Meanwhile, the number of unemployed workers increased by 600, and the number of employed workers fell by 1,400, which corresponds to changes in the unemployment rate.
Source: Employment Development Department, State of California
The graph below illustrates the City's labor force and employment figures over the past two years. The gap between the labor force and full employment represents the number of unemployed people rather than the percentage rate.
Source: Employment Development Department, State of California
12 Consumer Price Index
US headline inflation rose to 3.7% year-over-year in August, with core inflation moderating to 4.3%. The Federal Reserve maintained interest rates between 5.25% and 5.50% during its September policy meeting, indicating that interest rates will stay high for longer to combat inflation.
CPI is also calculated for cities and metropolitan areas, which helps take into account more localized factors that affect price changes. Over the two months ending in September 2023, the Consumer Price Index for All Urban Consumers (CPI-U) in the Riverside area increased by 1.4%. The CPI for this area was recorded at a level of 131.37, up from 129.52 two months prior and up from 125.27 one year ago. This represents a change of 1.43% from two months ago and 4.87% from one year ago.
From September 2020 to September 2023, there has been a notable increase in the percentage change in CPI-U, with the inflation rate peaking around March 2022 and then gradually decreasing, but still higher compared to the rates in 2020 and early 2021
Within the area, food prices increased by 3.4% over the year, with prices for food at home rising by 2.1% and prices for food away from home increasing by 5.8%. Energy prices increased by 5.1% over the year, driven mainly by an increase in electricity prices. The index for all items less food and energy rose by 5.5% over the year.
The graph below presents the rolling 12-month change for CPI for the Riverside-San Bernardino-Ontario area.
Source: Bureau of Labor Statistics
13 Home Sales and Prices
Home sales have decreased compared to record highs over the last few years. In contrast, the median home price has increased by 0.76% in the third calendar quarter of 2023 and 3.2% in the third calendar quarter of 2022. A notable challenge in the housing market is the sharp rise in mortgage rates, which have reached their highest in nearly two decades. This surge is potentially slowing down the housing market recovery. Mortgage rates, now above 7%, are correlated with the Federal Reserve's stance on keeping interest rates higher to respond to inflation. Furthermore, higher mortgage rates could be adding to inventory concerns as homeowners are maintaining lower-rate mortgages.
The graph below shows the median sales prices of a detached single-family home in the City and the number of sales by year and quarter.
Source: HdL Companies
Sales Tax
Sales tax revenue is a primary source of revenue for the City. It is generated from retail and business activity, whether that be from sales within the City or sales tax receipts allocated from State and county pools. City staff closely monitors sales tax, not only for its fiscal impacts on operations but also at a policy level, ensuring revenue streams are healthy and diversified.
As of September 2023, various macroeconomic indicators and consumer spending trends in California depict a mixed picture, which may have implications for sales tax revenues for local governments. Nationwide, retail sales grew by 2.1% over the last three months and 3.8% during the previous 12 months as of September 2023. The growth in retail sales has outpaced inflation over the previous three months, although not over the last 12 months (“US Retail Sales Update: September 2023” – California Legislative Analyst’s Office).
14 Inflation measures seem to be declining overall despite the recent increase in September 2023. However, a poll from the Public Policy Institute of California revealed that public sentiment in California believes that bad economic times lie ahead because of economic headwinds, including elevated inflation, higher interest rates, and slowing labor market and income gains. This perception might affect consumer spending and, consequently, sales tax revenues.
At a Statewide level, sales tax revenue grew by 2.1% for the Fiscal Year 2022-23, lagging compared to double-digit growth during the pandemic recovery. Challenges like tight household budgets, labor costs, inventory issues, and competition in various industries are foreseen. A slight dip in spending generating sales taxes is anticipated for the Fiscal Year 2023-24, with modest growth expected in Fiscal Year 2024-25.
For the City, sales tax revenues were virtually unchanged for the Fiscal Year 2022-23 and, like the Statewide trend, are forecasted to decline slightly for the Fiscal Year 2023-24. However, this decline represents a complex economic environment with mixed performance across sectors. Thus, continuous adaptation to changing consumer behaviors, price fluctuations, and other economic challenges will be just as necessary as it has been over the last two years. The growth in e-commerce, the shift towards in-state fulfillment, and changing sales tax allocations are critical factors that might impact sales tax revenues in the coming fiscal years.
The chart below depicts a breakdown of business sectors that generate sales tax for the City as of the most recent sales tax data available.