DATE: MARCH 8, 2022
DEPARTMENT: FINANCE
FROM: MARK ROBERTS, DIRECTOR OF FINANCE
TITLE: FISCAL YEAR 2022 mid-year BUDGET review & SUPPLEMENTAL APPROPRIATION REQUESTS RECOMMENDED MOTION:
A motion to accept the Fiscal Year 2022 mid-year budget report and approve budget adjustments to the City of Salinas’ Fiscal Year 2022 operating and capital budgets.
RECOMMENDATION:
Staff recommends the City Council accept the Fiscal Year 2022 mid-year budget report and approve budget adjustments to the City of Salinas’ Fiscal Year 2022 operating and capital budgets.
EXECUTIVE SUMMARY:
This report provides the status of the Fiscal Year 2022 budgets for the City’s General Fund, Measure E (formerly Measure V) Fund, and Measure G Fund (collectively, lower case “general fund[s]”). In addition, the report recommends supplemental appropriations for various funds based upon staff analysis of actual fiscal-year-to-date expenditures and estimated expenditures through the end of the fiscal year. The recommended appropriation adjustments are summarized in the “Fiscal and Sustainability Impact” section of this report, and details are provided in Exhibit A to this report.
BACKGROUND:
The City’s Fiscal Year 2022 operating and capital budgets were adopted on June 8, 2021. As adopted, the combined general fund budget included a budgetary surplus of approximately $0.2 million. The estimated revenues and adopted appropriations and transfers for each of the general funds are shown in Table 1 below.
Table 1
Adopted Fiscal Year 2022 General Fund Budgets
Fund
Estimated Revenues
CIP Fund Transfers
Other (Net) Transfers
Appropriations
Surplus/
(Deficit)
General Fund
$105,119,000
($5,463,000)
($5,810,000)
$93,217,000
$629,000
Measure E Fund
14,230,000
(555,000)
(507,000)
13,164,000
4,000
Measure G Fund
27,995,000
(5,188,000)
(7,772,000)
15,506,000
(471,000)
Total
$147,344,000
($11,206,000)
($14,089,000)
$121,887,000
$162,000
DISCUSSION:
Revenues
Overall, Fiscal Year 2022 revenues through December 31st were strong. Table 2 below compares revenue totals for the general funds through the mid-point of the current fiscal year and previous fiscal year.
Table 2
General Fund 1 Revenues as of December 31st
Fiscal Year 2022 vs Fiscal Year 2021
Category
FY 22
FY 21
Difference
Sales & Use Tax
$12,552,000
$11,404,000
$1,148,000
Transactions & Use Taxes 2
16,822,000
14,422,000
2,400,000
Property Taxes
10,969,000
10,786,000
183,000
Property Tax in Lieu of VLF
7,416,000
7,181,000
235,000
Other Revenues
13,822,000
14,279,000
(457,000)
Total
$61,581,000
$58,072,000
$3,509,000
1 Includes Measure E and Measure G Funds
2 Measures E and G tax revenues
The general funds’ primary sources of revenue are the sales & use tax, the district transactions & use tax, property taxes, and property tax in lieu of vehicle license fees. During the first six months of the current fiscal year, these revenues were approximately $47.8 million, $4.0 million ahead of last year, while general fund revenues as a whole totaled $61.6 million, approximately $3.5 million more than the same period last year. The most significant factor in the year-to-year difference is receipts from sales-related taxes, which, combined, were $3.5 million higher than those received for the same period of the prior fiscal year. While the adopted budget for these funding sources anticipated a significant negative impact from the COVID-19 pandemic, retail sales have turned out to be stronger than anticipated. “Other Revenues” comprises all other general fund revenues not specifically identified in the above table. These revenues were $0.5 million lower during the first half of the year compared to the first half of last year. As is to be expected, some of the accounts are ahead of last year’s amounts and some are behind, because of the nature of the funding source and variations that occur from year to year in the timing of receipts.
Expenditures
Expenditures through December 31st are behind last year’s pace overall. A comparison of fiscal-year-to-date general fund expenditures as of the mid-point of the current fiscal year and previous fiscal year are reflected in Table 3 below.
Table 3
General Fund 3 Expenditures by Category as of December 31st Fiscal Year 2022 vs Fiscal Year 2021
Category
FY 22
FY 21
Difference
Salaries & Benefits
$51,343,000
$49,095,000
$2,248,000
Maintenance & Operations
8,045,000
12,813,000
(4,768,000)
Capital Outlays
340,000
241,000
99,000
Total
$59,728,000
$62,149,000
($2,421,000)
3 Includes Measure E and Measure G Funds
As of December 31, 2021, expenditures totaled $59.7 million, below those at the same point last year by $2.4 million, with higher personnel costs partially offsetting significantly lower expenses in the “Maintenance & Operations” category, which collectively refers to expenses for non-capital goods and services. The primary factors in the year-to-year differences in these categories were:
maintenance & operations – a $4.5 million lump sum unfunded liability contribution to the City’s New York Life pension plan in Fiscal Year 2021 compared to $0 thus far for the current fiscal year. (These contribution amounts vary from year to year, sometimes sharply) personnel – higher salaries & benefits costs, primarily as the result of the filling of numerous positions which had been left vacant as a cost-savings measure during the previous fiscal year, due to the uncertainty of the fiscal impact of the COVID-19 pandemic. As the uncertainty has subsided, positions have been filled somewhat quickly, sharply increasing these costs.
Staff will continue to monitor all revenues and expenditures and will provide updates in the third quarter budget report and in conjunction with the Fiscal Year 2023 budget development process.
Transfers In/Out
While technically not revenues and expenditures (and, hence, not shown above), transfers in and out of the general funds contribute to fund balance increases and decreases, respectively. Transfers to the CIP Fund at the fiscal year mid-point were $0.6 million higher this year than for the previous year, due to lower spending on capital projects primarily as the result of typical year-to-year variations in the timing of work and invoicing from contractors. “Other Transfers (Net),” which comprises all transfers in and out of the general funds, other than transfers to the CIP Fund, were $6.7 million higher than at the same point last year, largely due to a $7.6 million transfer for payment for the early redemption (call) of some of the 2018 Lease Revenue Bonds for the (City of Salinas) Public Safety Building Project.
Capital Improvement Program (CIP) Expenditures
The total Fiscal Year 2022 CIP budget is $102.9 million and includes $28.5 million budgeted as part of the Fiscal Year 2022 adopted budget, ($9.7 million) in adjustments through December 31st, and $84.1 million of projects in progress for which appropriations are carried forward year-to-year until completed. Year-to-date CIP expenditures totaled $10.8 million and encumbrances totaled $19.2 million at the mid-point of the year.
CEQA CONSIDERATION:
The City of Salinas has determined the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378).
STRATEGIC PLAN INITIATIVE:
As monitoring the growth of revenues and expenditures, including determining when supplemental appropriations are necessary, is essential in ensuring awareness of the need to reduce expenditures and thereby eliminate the City’s structural budget deficit, this report and supplemental appropriation request schedule meets the Council goals of Investment Strategies / Risk Management and Operational Efficiencies DEPARTMENTAL COORDINATION:
Preparation of this report and supplemental appropriation schedule required communication with all departments.
FISCAL AND SUSTAINABILITY IMPACT:
Operating and Capital Expenditures Adjustments
General Fund
Approval is requested for up to $2.6 million of operating budget appropriation adjustments and up to $0.1 million of capital appropriation adjustments to the General Fund. Detailed costs and explanations for these requests are included in Exhibit A to this report. Requests by department and budget type (operating or CIP) are shown below.
Other Funds
Approval is requested for a totals of up to $0.2 million of operating budget appropriation adjustments and up to $1.7 million of capital appropriation adjustments to non-general funds. Detailed costs and explanations for these requests are included in Exhibit A to this report. Requests by department and budget type (operating or CIP) are shown below. All funds listed above are funded by restricted funding sources.
ATTACHMENTS:
Resolution – Fiscal Year 2022 Mid-Year Budget Adjustments Exhibit A – Fiscal Year 2022 Supplemental Appropriation Requests Page | 3
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