May 28, 2024
Finance Department
DATE: May 28, 2024
TO: Mayor Martinez and Members of the City Council
FROM:
Shasa Curl, City Manager
Nickie Mastay, Deputy City Manager – Internal Services
Andrea Miller, Director of Finance
Mubeen Qader, Deputy Director of Finance
Jerry Gurule, Accounting Manager
Antonio Banuelos, Accounting Manager
SUBJECT:
Fiscal Year 2023-24 Quarter 3 Budget Review
FINANCIAL IMPACT: The total proposed General Fund fiscal impact is $288,726.
PREVIOUS COUNCIL
ACTION:
June 20, 2023, November 28,2023, March 5, 2024
STATEMENT OF THE
ISSUE:
Staff is presenting the Fiscal Year (FY) 2023-24 Quarter 3 Budget Report for all funds, and the Capital
Improvement Projects Quarter 3 Report. The purpose of
this report is to monitor revenue and expenditures, as
compared to the approved budgeted amounts.
RECOMMENDED ACTION:
RECEIVE the Fiscal Year 2023-24 Quarter 3 budget
report for the period of July 1, 2023, through March 31, 2024; and ADOPT a resolution to APPROPRIATE
$288,726 from the General Fund – Finance Department
(Shasa Curl 510-620-6512/Andrea Miller 510-620-
6790/Mubeen Qader 510-412-2077).
AGENDA
REPORT
May 28, 2024
DISCUSSION:
The purpose of the quarterly budget report is to assist the City in monitoring its revenue and expenditures, as compared to the approved budgeted amounts. 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 Quarter 3 operating, capital revenue, and expenditures for Fiscal Year (FY) 2023-24. The period covers budget activity from July 1, 2023, through March 31, 2024. The threshold through the first three quarters of the fiscal year is 75 percent, meaning that it is expected that 75 percent of the Revised Budget will be expended. Revenues are not necessarily measured against the same standard due to the seasonality of major revenue sources, such as property taxes, which are received in December, April, and June each year.
General Fund
General Fund Revenues
Overall, revenue received totaled $151.2 million (64.5 percent of budget) for Quarter 3 of FY 2023-24. This is below the threshold of 75 percent; the variance is primarily due to the seasonality of some revenue sources. For example, the City receives the Sales Tax revenue from the State with a two-month delay. Final Sales Tax payment will not be received until August, when it will be accrued and accounted for in the year it was earned. Based on the current year actuals and prior year trends, City staff members project total FY 2023-24 revenue at about $237 million. Table 1 and Figure 1 below summarizes the Quarter 3 revenue budget-to-actuals and year-end projection. See Attachment 1 for the breakdown by department.
Table 1: General Fund Revenue, FY2023-24, Quarter 3
GENERAL FUND
FY2023-24
ORIGINAL
BUDGET
FY2023-24
REVISED
BUDGET
ACTUALS
THRU
MARCH 2024
AVAILABLE
BUDGET
% USED
THRU
MARCH
2024
FY2023-24
YEAREND
PROJECTION
PROPERTY TAXES (50,567,173) (52,181,354) (28,367,873) (23,813,481) 54.4% (54,065,269) SALES & USE TAX (56,752,495) (57,897,341) (35,235,093) (22,662,248) 60.9% (61,241,216) UTILITY USERS TAX (55,775,083) (57,938,011) (43,516,676) (14,421,336) 75.1% (57,921,746) OTHER TAXES (23,237,723) (24,144,377) (7,498,664) (16,645,713) 31.1% (19,670,324) LICENSES, PERMITS & FEES (13,286,195) (15,779,175) (11,092,118) (4,687,058) 70.3% (16,223,582) FINES & FORFEITURES (331,144) (151,438) (132,107) (19,331) 87.2% (189,996) USE OF MONEY&PROPRTY (1,011,535) (1,796,421) (1,871,727) 75,306 104.2% (3,000,000) CHARGES FOR SERVICES (2,561,992) (2,536,992) (1,622,050) (914,942) 63.9% (2,242,226) OTHER REVENUE (238,480) (238,480) (190,672) (47,808) 80.0% (277,531) RENTAL INCOME (777,028) (777,028) (743,653) (33,375) 95.7% (1,009,971) INTERGOV STATE TAXES (125,000) (125,000) (143,154) 18,154 114.5% (143,154) INTERGOV STATE GRANT (110,000) (183,911) (146,980) (36,931) 79.9% (197,270) INTERGOV OTHER GRANT (250,000) (280,000) (328,851) 48,851 117.4% (358,854) PROC FR SLE PROP - - (4,987) 4,987 - (8,654) LOAN/BOND PROCEEDS (40,400) (40,400) - (40,400) 0.0% - OPER XFERS IN (20,310,358) (20,310,358) (20,288,662) (21,696) 99.9% (20,288,662) TOTAL REVENUES (225,374,607) (234,380,287) (151,183,268) (83,197,019) 64.5% (236,838,454)
May 28, 2024
Figure 1: General Fund Revenue, FY2023-24, Quarter 3
General Fund revenues were adjusted at Mid-Year based on revenues received through December 2024.The data points observed through in FY2023-24 indicate most revenues are trending as expected or better.
Property Tax – For the FY2023-24 General Fund property taxes, City staff members estimated growth of 5.1 percent for Secured Property Taxes and overall growth for this revenue category of 0.5 percent. Contra Costa County (County) released the 2023-2024 Assessment Roll in July 2023 which indicated growth of the Assessed Valuation (AV) at 6.77 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. Property Taxes budgeted amount was increased by $1.6 million during Mid-Year. It is expected that this revenue will come in at the budgeted amount or slightly higher.
Sales & Use Tax – The sales tax revenue stream, post COVID’s shelter–in-place and the associated downturn in the economy, has seen significant increases over the last three 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 aligns with the Revised Budget.
Utility Users Tax (UUT) –This revenue stream, including the maximum cap amount paid by Chevron, has been received as expected, while the Gas and Electricity Utility Users Tax is trending higher.
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 a total of $4.2 million (31.7 percent of budget) through February. Of the major revenue streams, this is the most volatile and unpredictable varying significantly month-to-month and one or more property sales can have huge impacts on the tax amount. The budgeted amount corresponds to the formula or monthly mean as outlined in the Guiding Fiscal policies since passage of Measure H in November 2018 and effective January 2019.
Licenses, Permits, & Fees – This revenue stream includes the business tax revenue. Through March 2024, the full revenue is at 74.1 percent of the budgeted amount. Comparing Quarter 3 of FY2022-23 with Quarter 3 of FY2023- -
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Category
REVISED BUDGET ACTUALS YEAR END PROJECTION
May 28, 2024
24, an increase of nearly $1.2 million has been received. The increase stems from changing the due dates from July 1 to March 1 for rental properties and April 1 for most other businesses.
General Fund Expenditures
Overall, expenditures totaled $162 million (65.7 percent of budget) through quarter 3 of FY2023-24. The expenditures are trending lower than the approved revised budgeted amounts due significantly to higher vacancy rates and several pending unspent encumbrances. With encumbrances, the expenditures are at 68.2 percent of the budget, which is still below the 75 percent threshold. Encumbrances are funds earmarked for specific operating expenditures, such as copier leases. Based on the current year actuals and prior years’ trend, City staff project the total FY2023-24 expenditures to be approximately $233 million by fiscal year-end. Table 2 and Figure 2 below summarizes the expenditure budget-to-actuals through March 31, 2024. However, since the Documentary Transfer Tax is trending lower, it likely requires adjustments in Q4, along with a new proposed policy for the City Council’s consideration. See Attachment 1 for a detailed report by department.
Table 2: General Fund Expenditure, FY2023-24, Quarter 3 - Table
GENERAL FUND
FY 2023-24
ORIGINAL
BUDGET
FY 2023-24
REVISED
BUDGET
ACTUALS
THRU
MARCH 2024
ENCUMB. AVAILABLE
BUDGET
% USED
THRU
MARCH
2024
FY2023-24
YEAREND
PROJECTION
SALARIES AND WAGES 83,345,132 85,847,575 59,720,372 - 26,127,203 69.6% 82,762,173 PYRLL/FRINGE BENEFIT 62,867,833 65,538,296 45,714,058 - 19,824,238 69.8% 63,827,262 PROF & ADMIN 20,302,711 21,688,714 8,367,438 3,522,408 9,798,868 38.6% 14,552,294 OTHER OPERATING 8,611,971 8,963,844 4,215,595 1,197,514 3,550,735 47.0% 5,161,150 UTILITIES 5,288,272 5,690,630 3,964,534 311,625 1,414,470 69.7% 6,056,600 EQPT & CONTRACT SVCS 5,918,655 5,946,835 2,124,002 327,684 3,495,148 35.7% 2,896,738 PROVISN FOR INS LOSS 34,200 34,200 29,572 - 4,628 86.5% 29,419 COST POOL 21,593,734 21,593,734 16,209,785 - 5,383,949 75.1% 21,593,734 ASSET/CAPITAL OUTLAY 1,893,500 2,817,457 1,397,213 712,127 708,117 49.6% 3,801,894 DEBT SVC EXPENDITURE 841,353 841,353 418,000 - 423,353 49.7% 1,476,147 A87 COST PLAN REIMBS (3,531,611) (3,514,373) (2,728,797) - (785,576) 77.6% (3,514,373) GRANT EXPENDITURES 19,155 98,723 (1,625) 6,277 94,071 -1.6% (10,009) OPER XFERS OUT 18,189,702 30,748,126 22,463,494 - 8,284,632 73.1% 34,806,564 TOTAL EXPENSES 225,374,607 246,295,113 161,893,640 6,077,635 78,323,838 65.7% 233,439,592
May 28, 2024
Figure 2: General Fund Expenditure, FY2023-24, Quarter 3 – Chart
Salaries & Wages – include base salaries for full-time and part-time staff, overtime, and other pay types. Actual expenditures totaled $59.7 million (69.6 percent of budget). This category is lower than the threshold primarily due to vacant positions. Benefits – include medical, dental, workers compensation, CalPERS pension costs, other post-employment benefits (OPEB), and other benefits. Actual expenditures totaling $45.7 million (69.8 percent of budget) is below the threshold due to vacant positions.
Professional & Admin Services – include professional and consulting services, and contractual obligations, such as animal control services. Actual expenditures total $8.3 million (38.6 percent of budget) and is below the threshold. Factoring in encumbrances of $3.5 million, the total is $11.9 million (54.7 percent of budget). Other Operating – include copier leases, office supplies, and other items. Actual expenditures total $4.2 million (47.0 percent of budget). Factoring in encumbrances of $1.2 million, the total is $5.4 million (60.4 percent of budget). Utilities – include gas, electricity, water, refuse, telephone, and internet services.
Actual expenditures total $4 million (69.7 percent of budget). Factoring in purchase order encumbrances of $311,000, the total is $4.3 million (75.1 percent of budget). Equipment & Contract Services - include equipment and maintenance/repair services. Actual expenditures total $2.1 million (35.7 percent of budget). Factoring in encumbrances of $328,000, the total is $2.5 million (41.2 percent of budget). Cost Pool – include vehicle replacement, general liability, Civic Center debt allocation, since these charges are distributed through equal monthly journals, the expenditures are at the threshold of 75 percent.
Asset/Capital Outlay – include capital purchases and major facility and infrastructure upgrades. Total expenditures, including encumbrances are 49.6 percent of the threshold.
Debt Service – include debt payments per the debt service schedule and total expenditures are at 49.7 percent of the budget.
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Category
REVISED BUDGET ACTUALS YEAREND PROJECTION
May 28, 2024
A87 Cost Plan Reimbursement – include administrative overhead credit from non- General Fund programs through monthly journals, hence the expenditures are at
77.6 percent of the budget due to reimbursement from Successor Agency which was not budgeted.
Grant Expenditures – include Recreation I Heart Richmond grant expenditures. The expenditures, including encumbrances are at 4.7 percent. Year-to-date actuals are showing a negative expenditure amount due to a returned grant balance from a grantee.
Transfers Out – include transfers out from the General Fund to non-General Funds for operating subsidies and a portion of debt service. Actuals total $22.5 million (65.7 percent of budget).
General Fund Estimated FY 2023-24 Unspent Funds
It is too soon to precisely project estimated year-end unspent funds as a significant amount of accounting is pending in the current fiscal year. However, due to vacancies, the preliminary estimates and trends indicate that General Fund revenues may exceed General Fund expenditures by approximately $3.4 million+/- at the end of FY 2023-24.
Given the City’s significant service needs and deferred maintenance in the built environment, additional revenue sources would be extremely helpful in meeting community needs.
Table 3: FY2023-24 Year End Revenue and Expenditure Projection Summary FY2023-24
Revised Budget
FY2023-24
Projection Draft
Total Revenue (234,380,287) (236,838,454)
Total Expenditures
246,295,113
233,439,592
Net (+)/-
11,914,826
(3,398,862)
Staff proposes allocating an additional $288,726 to the Rent Program to offset and subsidize the cost pool charges. If available, additional funding for built environment improvements will be identified during Q4 and/or after the fiscal year is closed and the Annual Comprehensive Financial Report (ACFR) is completed.
Richmond Main Library Renovation Project Update
As of May 2024, the Main Library renovation project is completing schematic design phase, during which the team develops preliminary cost estimates and architectural plans for the renovated library. It is during this phase when community input, functional needs, and innovative design ideas begin to synthesize and form an exciting plan for the building.
Prior to the schematic design phase, a robust outreach phase recorded 2,633 comments from 531 residents who shared their hopes and dreams for the library.
Richmond residents participated in focus groups and community meetings. Residents took a survey to share their ideas for library service and needs for library design.
May 28, 2024
Outreach was conducted in both Spanish and English. Participants asked for:
Comfortable reading spaces and quiet spaces to work and study More space for children’s materials and activities
Rooms for meetings or classes
A café and an ability to eat, drink and converse
Modern restrooms
Access to computers, charging stations, copying and printing services Public Art representing the history and vibrancy of Richmond
In addition, residents were surveyed regarding the concept of a multi-stall ‘universal’ restroom for adults, a modern restroom layout that is fully inclusive of all gender identities and reduces the problem of bathroom lines. Attendees at an in-person meeting voted 24-8 in favor of the universal restroom concept. As of May 15, online surveys about this restroom style have received 93 votes in favor, with 54 opposed.
The current design for the renovation includes features identified by the community, such as reservable meeting and study rooms, a dedicated teen space, increased space in the children’s area, a place for eating and drinking, improved access to technology for adults and children, and a dedicated space for Richmond historical materials. The plan also includes a multi-stall gender-neutral restroom for adults, a single-use all-gender restroom, and two dedicated family restrooms.
Initial cost estimates indicate that additional funding will be needed for several important features of the renovation:
A replacement roof
New solar panels
A covered trash enclosure
A larger generator and supporting systems to allow the library to serve as a resiliency and cooling center during climate emergencies
A geotechnical investigation and hazmat analysis have been completed. The team had a productive study session with the Historic Preservation Commission and introduced the Richmond Arts and Culture Commission to the project for future assistance with recruitment and selection of artists. Design development is expected to begin this summer, with construction documents and permitting taking place in fall and winter of 2024.
Staff will aim to identify an additional $4 million in funding to support these project elements.
Homekey Funding Update
Per Resolution 63-23, on June 20, 2023, the City Council authorized a $4.9 million loan from the General Fund to the Affordable Housing Fund contingent upon the award of Homekey funds. If awarded, this will need to be addressed at the FY 2023-24 year-end close and in the FY 2024-25 budget. Staff will book a commitment of the funds and the subsequent loan after funding has been identified.
May 28, 2024
Non-General Funds
Non-General Fund Revenues
Overall, 46.9 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. Table 4 and Figure 3 below summarize the revenue budget-to-actuals for Non-General Funds. See Attachment 1, revenue budget-to-actuals by the individual fund.
Table 4: Non-General Fund Revenues, FY 2023-24, Quarter 3
Figure 3: Non-General Fund Revenues, FY2023-24, Quarter 3 - Chart
Major fund types include the following:
Capital Improvement Funds – total revenue is 36 percent of the budget. A major variance is due to the grants that are pending for reimbursements in the Outside- funded services fund.
Debt Service Funds – transfer in revenue is 89.1 percent of the budget, that is consistent with the debt service payment schedules.
Enterprise Funds – total revenue is 61.7 percent of the budget because revenue in these funds are received in the last quarter of a fiscal year.
FUND
FY2023-24
ORIGINAL
BUDGET
FY2023-24
REVISED
BUDGET
ACTUALS
THRU MARCH
2024
AVAILABLE
BUDGET % USED
Capital Improvement Funds (45,085,732) (73,958,041) (26,588,679) (47,369,362) 36.0% Debt Service Funds (19,551,216) (19,551,216) (17,421,318) (2,129,899) 89.1% Enterprise Funds (41,443,141) (41,493,141) (25,613,426) (15,879,715) 61.7% Housing Funds (1,911,772) (1,911,772) (2,108,417) 196,644 110.3% Housing Authority Funds (5,563,388) (5,549,921) (2,574,663) (2,975,258) 46.4% Internal Service Funds (30,919,340) (30,919,340) (25,902,467) (5,016,873) 83.8% Other Operations Funds (32,931,748) (35,280,981) (16,793,143) (18,487,838) 47.6% Special Revenue Funds (52,120,364) (96,056,935) (25,922,556) (70,134,379) 27.0% Total All Funds (229,526,702) (304,721,348) (142,924,668) (161,796,680) 46.9% -
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May 28, 2024
Housing Funds – total housing funds are 110.3 percent of the budget mainly due to Community Development Block Grant loan payoff receipts coming in 167 percent of the budget.
Richmond Housing Authority – total revenue is 46.4 percent of the budget; a major part of the revenue is received in the last quarter of the fiscal year. Internal Service Funds – total revenue is 83.8 percent of the budget due to an interest earned allocation which is an unbudgeted line item. Other Operations Funds – total revenue is 47.6 percent of the budget. Major variance is due to Transportation receiving 4.6 percent of the budget. Special Revenue Funds – total revenues are 27 percent of the budget. Major variance is due to the Transformative Climate Community and Encampment Resolution Grants with a total revenue budget of $43.6 million. These grants are on a reimbursement basis and the revenue reimbursements are pending.
Non-General Fund Expenditures
Overall, 44.1 percent of Non-General Fund budget appropriations have been expended, including encumbrances. Spending patterns in other funds are like those in the General Fund and are trending as expected. Most of the actual expenditures are below the threshold of 75 percent except for Debt Service funds. Amounts over the threshold are primarily due to encumbrances. Table 5 and Figure 4 below summarizes the expenditure budget-to-actuals for Non-General Funds. See Attachment 1 for expenditure budget-to-actuals by individual fund.
Table 5: Non-General Fund Expenditures, FY2023-24 Quarter 3 - Table
FUND TYPE
FY2023-24
ORIGINAL
BUDGET
FY2023-24
REVISED
BUDGET
ACTUALS
THRU
MARCH 2024
ENCUMB. AVAILABLE
BUDGET
% USED
W/O
ENCUMB.
% USED
W.
ENCUMB.
Capital Improvement Funds 71,270,921 111,302,273 17,436,464 19,701,435 74,164,374 15.7% 33.4% Debt Service Funds 19,174,878 19,174,878 17,281,000 - 1,893,878 90.1% 90.1% Enterprise Funds 86,084,855 100,777,213 28,469,783 8,599,697 63,707,733 28.3% 36.8% Housing Funds 6,249,305 6,249,305 506,497 30,764 5,712,044 8.1% 8.6% Housing Authority Funds 5,570,438 5,763,509 2,582,138 169,084 3,012,287 44.8% 47.7% Internal Service Funds 36,799,838 42,753,440 23,730,021 6,542,312 12,481,108 55.5% 70.8% Other Operations Funds 33,182,604 40,221,190 20,963,023 9,303,918 9,954,250 52.1% 75.3% Special Revenue Funds 68,197,088 128,898,804 35,767,097 9,561,397 83,570,309 27.7% 35.2% All Funds 326,529,928 455,140,613 146,736,022 53,908,607 254,495,983 32.2% 44.1%
May 28, 2024
Figure 4: Non-General Fund Expenditures, FY2023-24 Quarter 3 - Table
Capital Improvement Funds - total expenditures without encumbrances are at
15.7 percent and with encumbrances are at 33.4 percent. A major source for the positive variance is the General Capital fund. Several projects are fully appropriated in the current fiscal year even though those are multi-year projects. Debt Service Funds - total expenditures are 90.1 percent of the budget due to the debt service schedules.
Enterprise Funds - total expenditures without encumbrances are 28.3 percent and with encumbrances are at 36.8 percent. The primary driver for the positive variance is the Wastewater fund capital projects. The capital projects are moving at a slower pace than anticipated in the budget.
Housing Funds - total expenditures without encumbrances are 8.1 percent and with encumbrances 8.6 percent. The primary source of the positive variance is the Community Development Block Grants fund.
Richmond Housing Authority Funds - total expenditures without encumbrance are 44.8 percent of the budget and 47.7 percent with encumbrances. The major source of the positive variance is expenditures trending lower than budgeted in the Central Office.
Internal Service Funds - total expenditures are 55.5 percent without encumbrances and 70.8 percent with encumbrances. A major driver of the variance is lower than expected vacation pay outs.
Other Operations Fuinds - total expenditures without encumbrances are 52.1 percent of the budget and 75.3 percent with encumbrances. A major source of the positive variance is the grant expenditures in several funds. Special Revenue - total expenditures are 27.7 percent of the budget without encumbrance and 35.2 percent with encumbrances. A major source of the positive variance are the Transformative Climate Community and Encampment Resolution Fund grants.
Next Steps
The Q3 budget review includes estimated FY 2023-24 year-end projections based on year-to-date actuals and anticipated year-end results. City staff will continue to closely -
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REVISED BUDGET ACTUALS THRU MARCH 2024
May 28, 2024
monitor the revenue and expenditures as we prepare to close out the current fiscal year to determine if additional adjustments will need to be made with the quarter 4 budget review.
Staff is in the process of updating the Guiding Fiscal Policies to incorporate Government Finance Officers Association (GFOA) recommended best practices for estimating recurring and non-recurring revenue, specifically the Documentary Transfer Tax. The revised policy is anticipated to be included on the June 4, 2024, City Council agenda.
DOCUMENTS ATTACHED:
Attachment 1 – FY 2023-24 Q3 Budget Review
Attachment 2 – American Rescue Plan Act (ARPA) Funding by Department Attachment 3 – Capital Improvement Projects
Attachment 4 – Resolution