November 22, 2022
Finance Department
DATE: December 6, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Shasa Curl, City Manager,
Nickie Mastay, Deputy City Manager
Delmy Cuellar, Director of Finance
Mubeen Qader, Budget Administrator
Antonio Banuelos, Accounting Manager
SUBJECT:
Fiscal Year 2022-23 Quarter 1 Budget Report
FINANCIAL IMPACT: The fiscal impact is an increase in net budget appropriation of $447,486 in Non-General Funds.
PREVIOUS COUNCIL
ACTION:
June 21, 2022
STATEMENT OF THE
ISSUE:
The City staff is presenting the Fiscal Year (FY) 2022- 2023 Quarter 1 General Fund budget to actuals report,
All Funds budget to actuals report, and the Capital
Improvement budget to actuals report. The purpose of
this report is to monitor revenues and expenditures, as compared to the approved budgeted amounts.
RECOMMENDED ACTION:
RECEIVE the FY 2022-23 Quarter 1 Budget Report for
the period of July 1, 2022, through September 30, 2022; and APPROVE proposed budget adjustments – Finance
(Shasa Curl/Nickie Mastay/Delmy Cuellar 620-6790).
DISCUSSION:
The purpose of the Quarter 1 Budget Report is to assist the City in monitoring its revenue and expenditures, as compared to the approved budgeted amounts. The report also provides the City Council, staff, and the community the ability to monitor trends that impact the budget cycle.
AGENDA
REPORT
November 22, 2022
This report represents an overview of the City’s first quarter operating revenues and expenditures for FY 2022-23. The period covers budget activity from July 1, 2022, through September 30, 2022. The threshold for the first three months of the fiscal year is 25 percent, meaning that it is expected that 25 percent of the adopted budget will have been expended. Revenues are not necessarily measured against the same standard due to the seasonality of some major revenue sources, such as property taxes, which are received in December, April, and June each of year.
General Fund
General Fund Revenues
Overall, revenue received totaled $41.9 million (20.3 percent of budget) for the first quarter of FY 2022-23. This is below the threshold of 25 percent, but the variance is primarily due to the seasonality of some revenue sources. For example, the City does not receive its first property tax installment (55 percent) until the end of December.
Table 1 below summarizes the first quarter revenue budget to actuals. See Attachment 1 for the breakdown by department.
Table 1: General Fund Revenue, FY2022-23, Quarter 1
For most General Fund revenues, it is still too early to tell if adjustments will be needed.
By mid-year, the City staff will have a better understanding of the local trends. From the data points we have received thus far in FY 2022-23, most revenues are trending as expected or better.
Property Tax -- For the FY 2022-23 General Fund property taxes, staff estimated growth of 2.9 percent for Secured Property Taxes and overall growth for this revenue category of 1.8 percent. The County released 2022-2023 Assessment FUNDS
ORIGINAL
APPROP
REVISED
BUDGET YTD ACTUAL ENCUMB.
AVAILABLE
BUDGET
W/O
ENCUMB.
% USED
WITH
ENCUMB.
% USED
0001-General Fund
PROPERTY TAXES (46,056,962) (46,056,962) - - (46,056,962) 0% 0% SALES & USE TAX (55,282,200) (55,282,200) (2,464,665) - (52,817,535) 4% 4% UTILITY USERS TAX (49,963,589) (49,963,589) (17,672,407) - (32,291,182) 35% 35% OTHER TAXES (21,638,449) (21,638,449) (2,278,697) - (19,359,752) 11% 11% LICENSES,PRMITS&FEES (11,129,402) (11,129,402) (1,940,532) - (9,188,870) 17% 17% FINES & FORFEITURES (475,275) (475,275) (10,304) - (464,971) 2% 2% USE OF MONEY&PROPRTY (236,079) (236,079) - - (236,079) 0% 0% CHARGES FOR SERVICES (3,571,292) (3,571,292) (586,021) - (2,985,271) 16% 16% OTHER REVENUE (187,500) (187,500) (67,048) - (120,452) 36% 36% RENTAL INCOME (874,506) (874,506) (233,227) - (641,280) 27% 27% INTERGOV STATE TAXES (125,000) (125,000) - - (125,000) 0% 0% INTERGOV STATE GRANT (175,000) (175,000) - - (175,000) 0% 0% INTERGOV OTHER GRANT (253,569) (263,569) (119,209) - (144,360) 45% 45% PROC FR SLE PROP (100,000) (100,000) - - (100,000) 0% 0% OPER XFERS IN (16,563,424) (16,563,424) (16,498,336) - (65,088) 100% 100% Total Revenue (206,632,248) (206,642,248) (41,870,445) - (164,771,802) 20% 20%
November 22, 2022
Roll in July 2022 which indicated growth of the Assessed Valuation (AV) at 8.15 percent for Secured Property Taxes. This is the main component in changes to secure property taxes year to year. Other significant impacts include sale of properties and tax increment allocation. If the 8.15 percent AV increases hold, that would translate to additional revenue of close to $2.9 million above what was budgeted. The City staff will have a clearer understanding of actual property tax revenues after the City receives the December payment from the Contra Costa County.
Sales & Use Tax -- The sales tax revenue stream, post COVID’s shelter–in-place and the associated downturn in the economy, has significantly increased over the last two years and the trend is expected to continue through the current fiscal year. The updated forecast from the City’s financial consultants and the internal forecast tie to what is currently budgeted for FY 2022-23.
Utility Users Tax (UUT) --This revenue stream, including the maximum cap amount paid by Chevron, has been received as expected. The cap amount was expected to grow by 13.1 percent and ended up being 13.12 percent. Like the other major revenue streams, the year-to-date amounts for UUT currently align with budgeted amounts.
Other Taxes -- Other revenues of note include the documentary transfer tax which is collected by the County on the sale of properties. The City has received the July, August and September payment totaling $2.1 million (16 percent of budget). Of the major revenue streams, this is the most volatile and hardest to predict with month to month varying significantly and a sale or two having huge impacts on the tax amount. It is too early to tell if an adjustment will be needed at mid-year, but, as stipulated in the Guiding Fiscal Policy document, the budgeted amount will be recalculated in January by calculating the mean monthly amount collected since the increase to the rate was approved by voters in 2018.
Licenses, Permits, & Fees – This revenue stream includes the business tax revenue. Through September 2022, the full revenue is at 17 percent of the budgeted amount. Comparing first quarter of FY2021-22 with the first Quarter of FY2022-23, there is an increase of nearly $1 million. The increase stems from the collection of business tax after the adoption of Measure U. The City is being sued and it is difficult to estimate the impact of this pending litigation with the revenue stream.
General Fund Expenditures
General Fund expenditures totaled $37.5 million (22 percent of budget) for the first quarter of FY 2022-23. Actuals are trending lower than the approved budgeted amounts. The variances around the 22 percent threshold are mostly due to purchase order encumbrances, which are funds earmarked for specific operating expenditures, such as copier leases. Table 2 below summarizes the first quarter expenditure budget to actuals. See Attachment 1 for the breakdown by department.
November 22, 2022
Table 2: General Fund Expenditure, FY2022-23, Quarter 1
Salaries & Wages – includes base salaries for full-time and part-time staff, overtime, and other pay types. Actual expenditures total $16 million (21 percent of budget). This category is lower than the threshold primarily due to vacant positions.
Benefits –includes medical, dental, workers compensation, CalPERS pension costs, other post-employment benefits (OPEB), and other benefits. Actual expenditures total $14.7 million (22 percent of budget) is below the threshold due to vacant positions.
Professional & Admin Services – includes professional and consulting services, and contractual obligations, such as animal control services. Actual expenditures total $1.7 million (10 percent of budget) and are below the threshold. Factoring in purchase order encumbrances of $3.8 million, the total is $5.6 million (32 percent of budget).
Operating savings are typically captured in this category.
Other Operating – includes copier leases, office s upplies, and other items. Actual expenditures total $1.2 million (15 percent of budget). Factoring in purchase order encumbrances of $1.7 million, the total is $2.9 million (37 percent of budget).
Utilities – includes gas, electricity, water, refuse, tele phone, and internet services.
Actual expenditures total $822 thousands (15 percent of budget). Factoring in purchase order encumbrances of $900 thousands, the total is $1.7 million (37 percent of budget).
Equipment & Contract Services - includes equipment and maintenance/repair services. Actual expenditures total $842 thousands (31 percent of budget). Factoring in purchase order encumbrances of $552 thousands, the total is $1.3 million (31 percent of budget).
FUNDS
ORIGINAL
APPROP
REVISED
BUDGET YTD ACTUAL ENCUMB.
AVAILABLE
BUDGET
W/O
ENCUMB.
% USED
WITH
ENCUMB.
% USED
0001-General Fund
SALARIES AND WAGES 78,761,868 78,549,213 16,158,437 - 62,390,776 21% 21% PYRLL/FRINGE BENEFIT 66,929,804 66,887,328 14,746,497 - 52,140,831 22% 22% PROF & ADMIN 16,977,138 17,173,006 1,771,014 3,780,379 11,621,613 10% 32% OTHER OPERATING 7,970,902 7,987,130 1,195,630 1,738,687 5,052,813 15% 37% UTILITIES 5,399,957 5,397,722 821,829 900,421 3,675,473 15% 32% EQPT & CONTRACT SVCS 2,731,448 2,714,957 842,428 551,802 1,320,727 31% 51% PROVISN FOR INS LOSS 25,725 29,641 3,770 24,871 1,000 13% 97% COST POOL 15,277,766 15,277,766 - - 15,277,766 0% 0% ASSET/CAPITAL OUTLAY 3,172,136 3,455,211 133,172 71,242 3,250,798 4% 6% DEBT SVC EXPENDITURE 1,037,009 1,037,009 118,080 - 918,929 11% 11% A87 COST PLAN REIMBS (3,531,610) (3,531,610) - - (3,531,610) 0% 0% GRANT EXPENDITURES 2,500 82,500 - 8,000 74,500 0% 10% OPER XFERS OUT 11,877,605 11,877,605 1,718,722 - 10,158,883 14% 14% Total Expenditures 206,632,248 206,937,477 37,509,577 7,075,400 162,352,499 18% 22%
November 22, 2022
Transfers Out – includes transfers out from the General Fund to non -General Funds mostly for operating subsidies and a portion of debt service. Actuals total $1.7 million (14 percent of budget).
Non-General Funds
Non-General Fund Revenues
Overall, 13 percent of non -general fund revenues have been collected and are trending as expected. The timing of receipts vary amongst the funds based on the source of funding. For instance, grant funds are typically received after expenditures are incurred and reimbursement requests are submitted to grantors. The chart below summarizes the revenue budget to actuals for non -general funds. See Attachment 2 for revenue budget to actuals by individual fund.
Chart 1: Non-General Fund Revenues, FY 2022-23, Quarter 1 Actual vs. Budget
Non-General Fund Expenditures
Overall, 19 percent of non -general fund budget appropriations have been expended.
Spending patterns in other funds are like those in the General Fund and trending as expected. Most of the actual expenditures are either at o r below the threshold of 25
November 22, 2022
percent. Amounts over the threshold are primarily due to purchase order encumbrances.
The chart below summarizes the expenditure budget to actuals for non -general funds.
See Attachment 2 for expenditure budget to actuals by individual fund.
Chart 2:Non-General Fund Expenditures, FY2022-23 Quarter 1 Actual vs. Budget
Capital Improvement Project Highlights
The Capital Improvement Project budget total is $114.9 million which consists of $40 million of special project funding and $74.9 million of funding from Enterprise funds, Internal Services, or other funds. $35.9 million of the total includes project funding that was carried-forward from the prior year. Overall, 5 percent of capital project fund budget appropriations have been expended. Spending patterns may seem low due to several projects still under design phase. Expenditures will pick up quickly once the projects move into construction. The table below shows major project highlights, See Attachment 3 for Capital Improvement Project Quarter 1 expenditure budget to actuals for details.
November 22, 2022
Table 3: Capital Improvement Projects Highlights
Quarter 1 Budget Adjustments:
City staff propose budget adjustments net of $447,486 as mentioned below and set forth in the Resolution (Attachment 4):
American Rescue Plan Act – City staff is proposing to appropriate $296,300 for the Environmental Planning. The project was appropriated in the FY2021-22 budget; however, the appropriation was inadvertently not included in the FY2022-23 budget that was approved on June 21, 2022.
American Rescue Plan Act – City staff is proposing to appropriate $1,000,000 for the Community Beautification Project. The project was appropriated in the FY2021-22 budget; however, the appropriation was inadvertently not included in the FY2022-23 budget that was approved on June 21, 2022.
American Rescue Plan Act – City staff is proposing to appropriate $150,000 for MLK Turf Field. The project was appropriated in the FY2021-22 budget; however, the appropriation was inadvertently not included in the FY2022-23 budget that was approved on June 21, 2022.
Wastewater Fund 4003 – City staff is requesting to remove the Flood Risk Reduction Rheem Creek grant budget of ($1,598,844). The Grant is already budgeted in the Stromwater fund and this appropriation is redundant.
Measure J – the revenue exceeded by $600,000 than the original budget, the City staff is proposing to appropriate the additional monies to the Street Paving Program.
Labor Negotiations and Looming Recession:
The City is in the middle of labor negotiations with several bargaining units regarding labor contracts and the implementation of the Classification and Compensation study.
The results of the negotiations will impact the expenditure trends in the next three quarters. The global economy is also indicating early signs of recession in the calendar Budget Actual
Castro Ranch Road – this project is at end of planting landscaping establishment and is expected to be completed by end of this fiscal year 1,070,682$ 483$ Grit and Aeration Replacement – this project is funded by the State Revolving Fund (SRF) Loan and is under top priority order of the Baykeeper Settlement agreement to rehabilitate the Wastewater Treatment Plant 37,139,075$ 1,413,954$ Richmond Parkway – this funding covered the worse paving locations along the corridor 1,000,000$
Street Paving - the annual program is underway and is an ongoing effort 2,456,167$ 466,085$ Yellow Brick Road – this project will be complete once Pacific Gas & Electric (PG&E) service connections are met 1,904,636$ 340,070$ CIP - Highlights 43,570,560$ 2,220,592$
November 22, 2022
year of 2023. Due to these pressures on the City’s expenditures and revenues, there is a great deal of potential for fiscal headwinds in the coming years that could deplete the City’s reserves.
Next Steps
City staff will continue to closely monitor the revenues and expenditure trends in the current fiscal year to determine if adjustments will need to be made during the mid-year budget review.
DOCUMENTS ATTACHED:
Attachment 1 – General Fund – Quarter 1 Budget Report
Attachment 2 – All Funds – Quarter 1 Budget Report
Attachment 3 – Capital Improvement Projects Quarter 1 Report Attachment 4 – Resolution
Attachment 5 – Presentation