Administrative
Report
N.4., File # 24-1652 Meeting Date: 10/15/2024
To: MAYOR AND CITY COUNCIL
From: STEPHANIE MEYER, INTERIM FINANCE DIRECTOR
TITLE
DISCUSSION AND POSSIBLE ACTION REGARDING ASSIGNMENTS OF GENERAL FUND BALANCE FOR FISCAL YEAR 2023-24, WHICH ENDED JUNE 30, 2024 ADOPT BY 4/5THS VOTE AND BY TITLE ONLY RESOLUTION NO. CC-2410-101, A RESOLUTION
OF THE CITY COUNCIL OF THE CITY OF REDONDO BEACH, CALIFORNIA, AUTHORIZING TO
RE-BUDGET DEPARTMENTAL CARRYOVER REQUESTS AND CARRY OVER UNEXPENDED BALANCES AS OF JUNE 30, 2024 FOR DONATIONS, GRANTS, AND CAPITAL PROJECTS
EXECUTIVE SUMMARY
The Financial Services Department presents the General Fund balance status to City Council annually following the end of the prior fiscal year. As part of the presentation, staff also recommends budget carryovers and Department requests for available year-end funds and the use of any remaining unallocated General Fund balance. The carryovers and classifications are part of the City’s efforts, with independent outside auditors, to prepare the City’s Annual Comprehensive Financial Report (ACFR). As shown in the attached reports, overall, the City’s General Fund collected more revenue and spent less money than budgeted in Fiscal Year 2023-24.
On October 10, 2024, the Budget and Finance Commission (Commission) reviewed and provided input on the FY 2023-24 year-end fund balance and proposed carryovers and classifications. The Commission was supportive of staff’s recommendations which, if approved by Council, would result in an approximately $357,000 unallocated General Fund Balance.
BACKGROUND
The tables in this section provide a detailed view of the General Fund restrictions, commitments, and recommended carryover items, leading to an available year-end fund balance. The calculation leading to the projected, unallocated General Fund balance is also shown in the attached General Fund constraints table.
General Fund Balance
The estimated General Fund balance, effective June 30, 2024, before any designations or transfers, totals approximately $27,100,000. Note that, consistent with standard practice, this number is rounded down to account for final changes that might be necessary with year-end/final audit close.
There are external laws and policies that place mandatory designations of these monies, and, as a result, staff removes these portions to show only the available fund balance. These items are detailed in the table below. Note that the CalPERS reserve is in a different fund (the CalPERS Reserve Fund), and therefore does not need to be excluded from the General Fund balance.
N.4., File # 24-1652 Meeting Date: 10/15/2024
Item Amount
General Fund Balance before mandatory designations/transfers 27,100,000 Prepaid Costs (payments for goods to be received or services to be rendered in the near future, such as postage and lease payments) (135,578) Notes and Loans
(City loans to employees for computer purchases) (15,616) General Fund Contingency Reserve (one-month reserve) (8,599,208) General Fund Balance after mandatory designations/transfers 18,349,598 Recommendations
Items recommended to carry over to FY 2024-25 include: standard commitments and assignments for encumbrances, petty cash, and compensated absences; assignments included in the FY 2024-25 Budget, MOU commitments and other personnel expenses; and required transfers to bring the Harbor Tidelands and Uplands funds into balance related to capital spending. Recommendations also include Department carryover requests for one-time expenses linked to Council goals and carryover for unspent donations, grants, and capital funds for multi-year projects. Recommendations are summarized in the table below. Following all assignments, there is an estimated fiscal year-end available unallocated fund balance of $357,248.
Item Amount
General Fund Balance after mandatory designations/transfers 18,349,598 Encumbrances
(open General Fund purchase orders for contracted goods or services not yet received - See Attachment 5 for detailed listing) (2,130,355)
Petty Cash
(small cash funds held by departments for cash register change drawer or reimbursement of expenses in the amount of $50 or less) (10,450)
Compensated Absences
(provision for vacation cash outs upon retirement/ termination funded at 30% of employee balances as of June 30, 2024) (785,832)
Assignments included in the FY 2024-25 Adopted Budget (8,691,279) FY 2024-25 Anticipated Expenses to Fund with Year-end Savings (MOUS and other personnel costs) (998,280)
Transfers Required for Harbor Tidelands and Uplands capital spending (1,493,620) Carryover Assignments
(Departmental requests, donations, and capital expenditures as detailed in Exhibits A, B and D) (3,882,535) General Fund Balance after recommended designations/ transfers 357,248 Additional detail for General Fund Department requests, donation, and capital carryover recommendations are included as Resolution Exhibits A-Department Requests, B-Donations, and DCIP Summary.
The recommended carryovers are largely in line with those of prior years when there has been an available General Fund balance. The largest single item is $3.052 million for unspent capital project
N.4., File # 24-1652 Meeting Date: 10/15/2024
available General Fund balance. The largest single item is $3.052 million for unspent capital project funds. Council approved moving these projects to the Capital Projects Fund (300) starting in FY 2024-25, consistent with standard accounting practice. This line item will decrease over time as General Funded capital projects are executed in upcoming years.
The General Fund has sufficient balance to support the recommended assignments with unallocated balance remaining largely due to favorable performance in both revenue and expenditure as compared to budgeted amounts. The General Fund ended the fiscal year with approximately 2% more revenue than projected, and approximately 7% expenditure budget (excluding encumbrances) savings. More detail about the General Fund financial performance is available in Attachment 2- General Fund Financial Report.
Remaining Balance
Following all recommendations, there is approximately $357,000 left as the remaining unallocated balance. Staff recommends taking no action at this time to commit or spend the remaining funds.
Staff is aware of multiple pressures on the General Fund moving forward, including a $4.3 million unfunded accrued liability (UAL) payment in FY 2025-26. Further adjustments may also be required with the finalization of the FY 2023-24 financial audit and/or following the FY 2024-25 midyear review.
Other Funds
The annual carryover report focuses on the General Fund and occasionally on enterprise funds that impact the General Fund. As part of the FY 2023-24 midyear budget review, staff presented estimated fund balances showing large potential deficits in the Harbor Tidelands Fund and the Harbor Uplands Fund due to significant increases in the volume/amount of capital projects ($8.5 million Tidelands and $2.8 million Uplands) and the decline of revenue experienced during the Covid era. As part of the review, staff evaluated capital spending in the Harbor to identify only the most critical needs and recommended returning some of the projects to fund balance as part of the Fiscal Year 2024-25 Budget. This effort, combined with less than budgeted operating spending, especially in personnel, and solid revenue recovery in FY 2023-24 allowed the harbor funds to end the fiscal year with a fraction of the projected deficits ($1,091,927 and $401,692 in the Tidelands and Uplands Funds respectively).
While the prior fiscal year’s capital spending filled essential and long-awaited needs in the harbor, including the Harbor Dredging and International Boardwalk Paving projects, the pace of harbor enterprise funded capital spending will slow in the next two years. This coupled with anticipated increases to revenue, that should be realized as new businesses come online in the waterfront area, is expected to bring the harbor funds into balance. Staff will continue to monitor these funds and present an update as part of the 2024-25 midyear budget review.
COORDINATION
The Finance Department coordinated with operating Departments to prepare the year-end requests and the Department-level analysis included in the General Fund Report, capital carryover, along with the year-end balances and carryover recommendations. The Budget and Finance Commission reviewed the balances at their October 10, 2024 meeting and concurred with staff’s recommendations.
FISCAL IMPACT
The General Fund constraints and recommended carryover assignments leave $357,248 of
N.4., File # 24-1652 Meeting Date: 10/15/2024
The General Fund constraints and recommended carryover assignments leave $357,248 of remaining unassigned fund balance.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· General Fund Constraints
· General Fund Financial Report
· Re-Appropriation Summary
· Reso - No. CC-2410-101 Authorizing Re-Budget Department Carryover Requests and Carry Over Unexpended Balances as of June 30, 2024
o Exhibit A - Departmental Carryover Requests
o Exhibit B - Unexpended Balances for Donations
o Exhibit C - Unexpended Balances for Grants
o Exhibit D - Unexpended Balances for Capital Projects
· Outstanding Encumbrances