November 28, 2022
Finance Department
DATE: November 28, 2023
TO: Mayor Martinez and Members of the City Council
FROM:
Andrea Miller, Director of Finance
Mubeen Qader, Deputy Director of Finance
Antonio Banuelos, Accounting Manager
SUBJECT:
Fiscal Year 2023-24 Quarter 1 Budget Review
FINANCIAL IMPACT: The fiscal impact is an increase in the General Fund budget appropriation of $237,677 and in the Non-General Funds Budget appropriation of $2,183,029.
PREVIOUS COUNCIL
ACTION:
June 20, 2023
STATEMENT OF THE
ISSUE:
Fiscal Year (FY) 2023-24 First Quarter (Q1) General
Fund budget report.
RECOMMENDED ACTION:
RECEIVE the Fiscal Year 2023-24 Quarter 1 budget
report for the period of July 1, 2023, through September 30, 2023; and APPROVE proposed budget adjustments
– Finance Department (Andrea Miller 510-620-
6790/Mubeen Qader 510-412-2077).
DISCUSSION:
City staff prepares the quarterly budget report to assist in monitoring revenue and expenditures as compared to the approved budget. The report also provides staff, the City Council, and the community with the ability to monitor trends that impact the budget cycle.
This report presents an overview of the City’s first quarter (Q1) operating revenue and expenditures for FY 2023-24 which covers financial activity from July 1, 2023 through September 30, 2023. The threshold for the first three months of the fiscal year is 25 percent, meaning an average of 25 percent of the adopted budget is expected to have been expended and 25 percent of revenue should have been received. Revenues can vary due to the seasonality of some of the major revenue sources, such as property taxes, which are received in December, April, and June of each year.
AGENDA
REPORT
November 28, 2022
General Fund
General Fund Revenues
Overall, revenue received totaled $45.1 million (20.0 percent of budget) for Q1 of FY 2023-24. This is slightly below the threshold of 25 percent, but the variance is primarily due to the seasonality of the revenue sources. For example, the City receives its first secured property tax installment (55 percent) in 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, FY2023-24, Quarter 1
For many of the General Fund revenues, it’s too early in the fiscal year to determine if adjustments will be needed. Staff will have a better understanding of the local revenue trends by mid-year. From the data points observed for the first quarter of FY 2023-24, most revenues are trending as expected or better.
Property Tax -- FY 2023-24 property tax revenue adopted budget includes estimated Assessed Valuation growth of 3.3 percent for Secured Property Taxes.
Contra Costa County released 2023-2024 Assessment Roll in July 2023 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
GENERAL FUND
FY 2023-24
ORIGINAL
BUDGET
FY 2023-24
REVISED
BUDGET
YTD ACTUALS ENCUMB.
% USED
W/O
ENCUMB.
% USED
W.
ENCUMB.
PROPERTY TAXES 50,567,173 50,567,173 - - 0.0% 0.0% SALES & USE TAX 56,752,495 56,752,495 3,510,502 - 6.2% 6.2% UTILITY USERS TAX 55,775,083 55,775,083 18,202,648 - 32.6% 32.6% OTHER TAXES 23,237,723 23,237,723 1,261,128 - 5.4% 5.4% LICENSES, PERMITS & FEES 13,286,195 13,286,195 1,012,451 - 7.6% 7.6% FINES & FORFEITURES 331,144 331,144 18,860 - 5.7% 5.7% USE OF MONEY&PROPRTY 1,011,535 1,011,535 - - 0.0% 0.0% CHARGES FOR SERVICES 2,561,992 2,561,992 456,285 - 17.8% 17.8% OTHER REVENUE 238,480 238,480 59,863 - 25.1% 25.1% RENTAL INCOME 777,028 777,028 198,639 - 25.6% 25.6% INTERGOV STATE TAXES 125,000 125,000 - - 0.0% 0.0% INTERGOV STATE GRANT 110,000 110,000 89,613 - 81.5% 81.5% INTERGOV OTHER GRANT 250,000 250,000 - - 0.0% 0.0% PROC FR SLE PROP - - 4,734 - - - LOAN/BOND PROCEEDS 40,400 40,400 - - 0.0% 0.0% OPER XFERS IN 20,310,358 20,310,358 20,245,270 - 99.7% 99.7% TOTAL REVENUES 225,374,607 225,374,607 45,059,992 - 20.0% 20.0%
November 28, 2022
to additional revenue of close to $2 million above the original budget.
Additionally, Successor Agency Surplus and Pass-through revenues that flow into the General Fund was higher than expected in FY 2022-23 meaning that those revenues should be higher in FY 2023-24 as well. Staff will have a clearer understanding of actual property tax revenues and will recommend mid-year adjustments after the City receives the December payment from the County.
Sales & Use Tax -- The sales tax revenue stream has seen steady growth over the last few 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 2023-24.
Utility Users Tax (UUT) --This revenue stream, including the maximum cap amount paid by Chevron, has been received close to expected in Q1. The cap amount was expected to grow by 13.1 percent and ended up being 11.3 percent.
Staff will continue monitoring the various revenue streams that make up this category to determine if a mid-year adjustment is necessary.
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 $1.3 million (9 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. 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 that was approved by voters in 2018.
Licenses, Permits, & Fees – This revenue stream includes the business tax revenue. Through September 2023, the full revenue is at 7.6 percent of the budgeted amount. Comparing Quarter 1 of FY2022-23 with Quarter 1 of FY2023- 24, a decrease of nearly $928,000 has been observed. This decrease is expected and stems from the collection of business tax after the adoption of Measure U which transitioned all businesses to have a December 31 expiration date. Most of this revenue will be received between January and December of 2024. Based on revenue received in FY 2022-23, staff expects to increase this revenue stream at Mid-Year.
General Fund Expenditures
Overall, expenditures totaled $49.5 million (22.0 percent of budget) for the first quarter of FY 2023-2024. Actuals are trending lower than the approved budget without encumbrances however, including encumbrances, the percentage used is 25.4 percent.
Encumbrances 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 28, 2022
Table 2: General Fund Expenditure, FY2023-24, Quarter 1
Salaries & Wages – includes base salaries for full-time and part-time staff, overtime, and other pay types. Actual expenditures total $19.5 million (23.4 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 fringe benefits. Actual expenditures total $14.5 million (23 percent of budget) which is below the threshold due to vacant positions.
Professional & Admin Services – includes professional and consulting services, and contractual obligations, such as animal control and professional consulting services.
Actual expenditures total $1.5 million (7 percent of budget) and are below the threshold. Factoring in purchase order encumbrances of $4.1 million, the total is $5.6 million (27.8 percent of budget).
Other Operating – includes copier leases, office supplies, and other items. Actual expenditures total $1.1 million (13 percent of budget). Factoring in purchase order encumbrances of $1.7 million, the total is $2.8 million (33 percent of budget).
Utilities – includes gas, electricity, water, refuse, telephone, and internet services.
Actual expenditures total $1.3 million (25 percent of budget). Factoring in purchase order encumbrances of $725,000, the total is $1.9 million (39 percent of budget).
Equipment & Contract Services – includes equipment and maintenance/repair services. Actual expenditures total $1 million (21 percent of budget). Factoring in purchase order encumbrances of $613,000 , the total is $1.6 million (32 percent of
GENERAL FUND
FY 2023-24
ORIGINAL
BUDGET
FY 2023-24
REVISED
BUDGET
YTD ACTUALS ENCUMB.
% USED
W/O
ENCUMB.
% USED
W.
ENCUMB.
SALARIES AND WAGES 83,345,132 83,313,182 19,512,963 - 23.4% 23.4% PYRLL/FRINGE BENEFIT 62,867,833 62,867,833 14,491,497 - 23.1% 23.1% PROF & ADMIN 20,302,711 20,478,343 1,517,948 4,167,109 7.4% 27.8% OTHER OPERATING 8,611,971 8,503,177 1,092,355 1,753,373 12.8% 33.5% UTILITIES 5,288,272 5,152,411 1,269,701 725,176 24.6% 38.7% EQPT & CONTRACT SVCS 5,918,655 5,209,645 1,079,619 613,490 20.7% 32.5% PROVISN FOR INS LOSS 34,200 34,200 29,572 - 86.5% 86.5% COST POOL 21,593,734 21,593,734 5,403,281 - 25.0% 25.0% ASSET/CAPITAL OUTLAY 1,893,500 2,703,483 451,922 353,205 16.7% 29.8% DEBT SVC EXPENDITURE 841,353 841,353 - - 0.0% 0.0% A87 COST PLAN REIMBS (3,531,611) (3,531,611) (913,905) - 25.9% 25.9% GRANT EXPENDITURES 19,155 19,155 (1,625) 6,277 -8.5% 24.3% OPER XFERS OUT 18,189,702 18,189,702 5,622,103 - 30.9% 30.9% TOTAL EXPENSES 225,374,607 225,374,607 49,555,430 7,618,629 22.0% 25.4%
November 28, 2022
budget).
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 $5.6 million (31 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 varies 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.
Table 3: Non-General Fund Revenues, FY 2023-24, Quarter 1
FUND ORIGINAL
BUDGET
REVISED
BUDGET YTD ACTUALS
% USED
W/O
ENCUMB
% USED
W.
ENCUMB.
Total Capital Improvement Fund (45,085,732) (46,289,757) (2,166,465) 5% 5% Total Debt Service Funds (19,551,216) (19,551,216) (9,029,460) 46% 46% Total Enterprise Funds (41,443,141) (41,443,141) (1,161,224) 3% 3% Total Housing Funds (1,911,772) (1,911,772) (1,171,535) 61% 61% Total Housing Authority Funds (5,563,388) (5,563,388) (509,398) 9% 9% Total Internal Service Funds (30,919,340) (30,919,340) (7,637,345) 25% 25% Total Other Operations Funds (32,931,748) (34,415,944) (3,219,152) 9% 9% Total Pension Funds (152,897) (152,897) (152,897) 100% 100% Total Special Revenue Funds (52,120,364) (52,129,697) (3,861,062) 7% 7% Total Trust Funds (90,000) (185,472) 206% 206% Total All Funds (229,679,599) (232,467,153) (29,094,009) 13% 13%
November 28, 2022
Capital Improvement Funds, the total actual revenue is below the budget threshold of 25 percent and the major source of the variance is due to the grant revenue, since the entire grant awards are appropriated as budget; however, actual revenue is based on the expenditures submitted for reimbursement to the grantor.
Debt Service, revenues are above budget threshold mainly due to the transfer in from Secured Pension Override fund for the Pension Obligation Bond debt service.
Enterprise Funds, actual revenue is below the threshold mainly due to the Wastewater fund. The sewer drain fee allocation from the County has not been received yet.
Housing Funds, actual revenue is above the budget threshold due to the Housing In Lieu Developer fee coming in higher than the budget. Housing Authority Funds, the revenue is below budget mainly due to the Capital fund as the Federal grant revenues are received in February and June. Other Operation Funds, actual revenue is below budget and the major source of the variance are Hilltop and Marina special district funds since the property tax revenue is received in December, April, and June every year. The other major driver behind the variance is Planning and Building fund due to grants revenues not received yet.
Pension Funds, actual revenue is above budget due to annual allocation from Secured Pension Tax Override fund has been transferred. Special Revenue Funds, the variance is due to the tax assessment in the Secured Pension Tax Override fund and the Library Grants fund due to tax assessment allocation and grant revenue timing respectively. Trust Funds, the variance is due to the Other Post Employment Benefits trust fund monthly transfer from the payroll processing. The trust funds are primarily pass-through accounts where the funds are held before payments are made out.
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 or below the threshold of 25 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.
Table 4: Non-General Fund Expenditures, FY2023-24, Quarter 1
November 28, 2022
Capital Improvement Funds, total expenditures are below budget due to the projects’ phases spanning over multiple years and their budgets being appropriated in a single year.
Debt Service Funds, debt service expenditures are incurred per the debt service schedules.
Enterprise Funds, major source of the variance is Wastewater fund, the fund includes budgets for several capital projects and the variance is due to the timing of the project completion spans over multiple years.
Housing Funds, a major source of the variance, are lower than expected expenditures in the Housing In Lieu Developer Fee fund. Housing Authority Funds, major source of the variance is the Village One, Village Two, and the Village Three funds’ expenditures lower than expected. Internal Service Funds, the variance is due to the Equipment Replacement fund having encumbered a significant number of vehicle purchases. Other Operations Funds, the variance is due to grant expenditures in Planning & Building and Employment & Training funds.
Pension Funds, the variance is due to the monthly payments made to the pensioners.
Special Revenue Funds, the variance is due to the transfer out of the Secured Pension Tax Override fund into the General Fund and the Debt Service Fund already being processed.
Trust Funds do not have budget allocations and generally just track the activity as the actuals are incurred.
Quarter 1 Budget Adjustments:
City staff propose net Non-General Fund Budget Adjustments of $478,384 in several funds as mentioned below and set forth in the Resolution (Attachment 4).
American Rescue Plan Act (ARPA) Fund, $17,490 - Community Needs Assessment
FUND TYPE ORIGINAL
BUDGET
REVISED
BUDGET
YTD
ACTUALS ENCUMB.
% USED
W/O
ENCUMB.
% USED
W.
ENCUMB.
Total Capital Improvement Funds 71,270,921 72,522,611 535,759 7,332,427 1% 11% Total Debt Service Funds 19,174,878 19,174,878 7,188,326 - 37% 37% Total Enterprise Funds 86,084,855 86,084,855 7,399,192 341,811 9% 9% Total Housing Funds 6,249,305 6,249,305 175,260 96,028 3% 4% Total Housing Authority Funds 5,570,438 5,570,438 593,576 325,755 11% 17% Total Internal Service Funds 36,799,838 37,839,838 6,466,483 7,443,079 17% 37% Total Other Operations Funds 33,182,604 34,411,604 4,216,394 1,884,011 12% 18% Total Pension Funds - - 60,279 - - - Total Special Revenue Funds 68,197,088 68,239,021 26,583,346 794,732 39% 40% Total Trust Funds - 90,000 26,960 1,000 30% 31% Total All Funds 326,529,928 330,182,551 53,245,575 18,218,844 16% 22%
November 28, 2022
and Strategic Investment Plan (SIP), balance needed for payment of invoices. Emergency Operations and Disaster Operations Fund, $239,000 - Winter Storm Project, needed to continue with tree removal in areas impacted by last year’s storms.
Engineering Grant Fund, $2,500 – Appropriate revenue and expenditure for the Greenway Rehabilitation and Bike Education Project grant balance. Park Open Space Impact Fee, $80,000 - reinstate budget to the SF Bay Trail Project, funding was used for the Richmond Soccer Field Study Port of Richmond, $141,894 - Cafeteria Building Winterization Project appropriate from fund balance for the project.
Next Steps
City staff will continue to monitor revenues and expenditure trends in the current fiscal year to determine if adjustments will be needed during the mid-year budget review planned for February 2024.
November 28, 2022
DOCUMENTS ATTACHED:
Attachment 1 – General Fund – Quarter 1 Budget Report
Attachment 2 – Non - General Funds – Quarter 1 Budget Report Attachment 3 – Capital Improvement Projects Quarter 1 Report Attachment 4 – Resolution
Attachment 5 – Presentation