Administrative
Report
N.2., File # 23-5940 Meeting Date: 4/18/2023
To: MAYOR AND CITY COUNCIL
From: WENDY COLLAZO, FINANCE DIRECTOR
TITLE
DISCUSSION AND POSSIBLE ACTION REGARDING THE FISCAL YEAR 2022-23 MIDYEAR
BUDGET REVIEW
RECEIVE AND FILE THE FY 2022-23 MIDYEAR BUDGET REPORT
ADOPT BY 4/5THS VOTE AND BY TITLE ONLY RESOLUTION NO. CC-2304-041, A RESOLUTION
OF THE CITY COUNCIL OF THE CITY OF REDONDO BEACH, CALIFORNIA, MODIFYING THE BUDGET FOR FISCAL YEAR 2022-23
EXECUTIVE SUMMARY
In June, the City Council adopted the FY 2022-23 operating budget. The City Council adopted a balanced budget which allocates funding for the provision of core municipal services to the residents, businesses, and visitors of Redondo Beach.
This report reviews the City’s budget and financial condition at the midyear point of FY 2022-23. The report is condensed due to circumstances surrounding the development of the City’s annual Financial Statements and the incorporation of GASB 87. The report provides a broad view of the City’s revenue and expenditure projections and includes no Decision Packages. This is for two reasons; one, the adopted budget included a significant number of programs and projects that are still underway and two, the proposed FY 2023-24 budget is less than a month away and is a better time to consider budget modifications. It should be noted that the mid-year update is positive, as total FY 2022-23 General Fund revenues are expected to exceed total expenditures by roughly $1.9 M.
BACKGROUND
Where are the revised estimated ending fund balance summaries shown with proposed midyear FY 2022-23 revenues and expenditures?
Attachment 1 provides details of the revised estimated ending fund balances as shown on the Proposed Midyear FY 2022-23 Summary that arise in consideration of adjustments to appropriations, and adjustments to revenue projections if needed.
What was the remaining amount of the General Fund balance at FY 2021-22 year-end after completing the June 30, 2022 Annual Comprehensive Financial Report (ACFR) that becomes the FY 2022-23 beginning fund balance?
N.2., File # 23-5940 Meeting Date: 4/18/2023
The remaining General Fund balance was calculated as follows by excluding fund balance assignments made in March for fiscal year end 2021-22 which are not available to pay for FY 2022- 23 expenditures.
$11,953,989 Total General Fund balance before assignments and transfers (June 30, 2022 ending fund balance)
-8,599,208 Committed fund balance for 8.33% General Fund reserve (contingency reserve required by the City Council’s Financial Principles) -18,605 Nonspendable fund balance for notes and loans (loans to employees for computer purchases pursuant to labor agreements)
-785,832 Fund balance assignment for compensated absences (provision for vacation cashouts upon retirement/termination funded at 30% of employee balances as of June 30, 2022)
-12,800 Fund balance assignment for petty cash (small cash funds held by departments for cash register change drawer or reimbursement of expenses in the amount of $50 or less)
$3,422,710 General Fund remaining fund balance
The remaining General Fund balance can also be calculated as follows by including fund balance assignments (but not transfers) made in March for fiscal year end 2021-22 which are available to pay for FY 2022-23 expenditures.
$253,693 Unassigned/unallocated fund balance (after all other fund balance assignments)
52,821 Nonspendable fund balance (payments made in FY 2021-22 for FY 2022-23 expenditures)
1,270,389 Fund balance assignment for encumbrances (open purchase orders as of June 30, 2022 for contracted goods or services not yet received) 1,845,807 Fund balance assignment for carryovers (unspent FY 2021-22 funds to be used for FY 2022-23 departmental, donation, grant and capital improvement project expenditures)
$3,422,710 General Fund remaining fund balance
The beginning fund balances of the other funds are calculated similarly, with capital assets and net
N.2., File # 23-5940 Meeting Date: 4/18/2023
The beginning fund balances of the other funds are calculated similarly, with capital assets and net pension and OPEB liabilities excluded from the balances in the Enterprise and Internal Service Funds.
What additional items adjust the beginning fund balances to their estimated ending fund balances?
In addition to the General Fund adopted revenues and transfers-in and the adopted appropriations and transfers-out, the following items adjust the beginning fund balance to the estimated ending fund balance.
$3,422,710 General Fund beginning fund balance for FY 2022-23 101,870,217 Adopted revenues and transfers in FY 2022-23 -110,401,496 Adopted appropriations and transfers out FY 2022-23 -1,270,389 Prior year encumbrances (finalized open purchase orders as of June 30, 2020 for which a fund balance assignment is included in the beginning fund balance - see above)
-1,845,809 Carryover appropriations and transfers out (re-budgeted departmental carryover requests for which a fund balance assignment is included in the beginning fund balance - see above)
-160,000 Other Council-approved appropriations and transfers out (budget modifications approved by City Council resolutions with a 4/5ths affirmative vote during the FY
$146,512 Estimated General Fund ending fund balance for FY 2022-2023 The estimated ending fund balances of the other funds are calculated similarly.
What midyear revenue adjustments to the estimated fund balances are recommended? At this point in the fiscal year, staff has reviewed revenues received to date and revised the adopted revenue estimates as necessary. The revised revenue estimates are shown in Exhibit B with critical General Fund tax revenues anticipated to finish $2.6 million higher than projected at budget adoption.
The largest increase is from property tax which continues to remain strong. Utility Users Tax is also showing solid growth and transient occupancy tax revenue is trending upwards despite the delay in funding from the Marine Ave hotel properties.
N.2., File # 23-5940 Meeting Date: 4/18/2023
What midyear adjustments to appropriations are recommended? The proposed adjustments included in the Midyear Adjustments to Appropriations Schedule reflect the annual update to the internal service fund/overhead allocations totaling $801,150, which reflects roughly a 3% increase across all funds, as well as an increase of $65,639 for the SBCCOG (South Bay) Grant for the Fund 230 Intergovernmental Grants Fund.
Midyear changes to the adopted budget are also considered by the City Council through supplemental requests called Decision Packages. Decision Packages typically relate to policy, operational, and/or other financial matters. As mentioned above, due to the current workload across all City operating departments and the general proximity to the FY 2023-24 Budget Adoption process which will begin in May, no Decision Packages are recommended at this time.
What is the resulting impact of revising the revenue estimates and funding the recommended Internal Service Fund Allocation and proposed Grants Fund changes at this time? The FY 2022-23 General Fund revised estimated ending fund balance after adjusting for revenue increases and funding the annual Internal Service Fund Allocation changes is as follows:
$146,512 Estimated General Fund ending fund balance for FY 2022-23 2,648,285 Adjustments to Revenue (impact of the revenue revisions as shown in Exhibit B)
(866,789) Adjustments to Appropriations (Exhibit C)
$1,928,008 Estimated General Fund ending fund balance for FY 2022-23 Is there a proposed use for the estimated General Fund Balance for FY 2022-23? There is no recommended use for the expected fund balance at this time, due to the issues described above. The Fund Balance will be included/utilized as part of the proposed FY 2023-24 Budget.
What is the status of preparation of the FY 2023-24 Budget? Following completion of the midyear review, attention will turn immediately towards preparation of the FY 2023-24 Budget that takes effect July 1, 2023. The Budget will be proposed to the City Council for consideration on May 16, 2023. Staff are preparing a public hearing and budget workshop meeting calendar that will be considered for approval by City Council on May 2.
COORDINATION
Each Department analyzed their respective FY 2022-23 revenue and expenditure projections to look for potential revenue shortfalls and/or expenditure overages. The Budget and Finance Commission reviewed the midyear budget report on April 13th. The midyear budget resolution has been approved
N.2., File # 23-5940 Meeting Date: 4/18/2023
reviewed the midyear budget report on April 13th. The midyear budget resolution has been approved as to form by the City Attorney’s Office.
FISCAL IMPACT
The report describes the City’s financial and budgetary situation at the midyear point of FY 2022-23.
As mentioned, year-end revenues are expected to exceed year-end expenditures.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· FY 2022-23 Midyear Budget Resolution
· Attachment 1 - FY 2022-23 Summary
· Exhibit A - Council-Approved Appropriation Modifications · Exhibit B - Adjustments to Revenue
· Exhibit C - Adjustments to Appropriations