Finance and Management Services
www.santa-ana.org/finance
Item # 12
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
November 7, 2023
TOPIC: Fiscal Year 2023-24 First Quarter Budget Report and Proposed Appropriation Adjustments
AGENDA TITLE:
Fiscal Year 2023-24 First Quarter Budget Report and Proposed Appropriation Adjustments
RECOMMENDED ACTION
1. Approve the appropriation adjustments to General Fund expenditures (requires five affirmative votes) as detailed in the body of this report, with a net reduction of $408,196 and a net reduction to the General Fund revenue estimates of $530,000.
2. Receive and file the 1 st Quarter Budget Update.
GOVERNMENT CODE §84308 APPLIES
No
EXECUTIVE SUMMARY
This FY2023-24 first quarter budget report focuses on the General Fund, since it is the primary operating fund of the City. This report does not include a discussion of programs and other funds, as we do not expect any significant budget variances at this time.
For FY22-23, the City received revenue in excess of estimates and had expenditure savings. The FY22-23 audit is currently in process, and the final carryover amounts based on remaining FY22-23 budget availability have not been fully vetted. In December, staff will be able to identify the increase of the General Fund balance available for one-time spending, based on the positive FY22-23 variances.
In the meantime, based on actual revenue performance in FY22-23 and updated estimates from the City’s sales tax consultant, staff is able to adjust FY23-24 revenue
Fiscal Year 2023-24 First Quarter Budget Report and Proposed Appropriation Adjustments
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estimates. In addition, we are proposing expenditure reduction totaling $408,196. The net fiscal impact of all proposed adjustments is an overall reduction of $121,804.
FY23-24 General Fund Summary with Proposed Adjustments
FY23-24 Original
Budget
Proposed 1st
Quarter
Adjustments
Updated Estimate
Beginning Balance at
July 1, 2023 109,372,864 - 109,372,864
Revenue Estimate 400,938,670 (530,000) 400,408,670
Appropriated Spending (414,022,680) 408,196 (413,614,484) Pension Trust Set Aside (24,034,731) - (24,034,731)
Estimated Ending
Balance at June 30,
2024
72,254,123 (121,804) 72,132,319
Less: 18% Reserve 72,168,961 (95,400) 72,073,561
Estimated Spendable
Balance 85,162 (26,404) 58,758
The First Quarter budget and actual revenues and expenditures are included in Exhibits 1 & 2. The First Quarter vacancy report is included in Exhibit 3.
DISCUSSION
FY2023-24 Revenue
•The current budget for the Bradley Burns sales tax allocation is $64,715,000.
Actual revenue received in FY22-23 was only $61,068,452. Therefore, staff has adjusted the FY23-24 revenue estimate to $62,515,000 (a budget reduction of $2,200,000, but a 2.4% increase from FY22-23).
•The budget for Measure X sales tax is $88,616,000. Actual revenue received in FY22-23 was only $86,849,806. The City’s sales tax consultant has noted we are experiencing a decrease in new vehicle sales and taxable construction materials, which are having a greater impact on Measure X revenue. Therefore, staff has adjusted the FY23-24 revenue estimate to $85,916,000 (a reduction of $2,700,000 and a 1% further decrease from FY22-23).
•Increase Hotel Visitor’s Tax by $1 million, from $8.5 million to $9.5 million, based on normal collections received in FY22-23.
•Increase Electric Utility Users Tax by $1.7 million, from $15.1 million to $16.8 million, based on normal collections received in FY22-23. •Increase Business License Tax by $1 million, from $15 million to $16 million, to align current year estimates with prior year actuals.
Fiscal Year 2023-24 First Quarter Budget Report and Proposed Appropriation Adjustments
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•Reduce Cannabis revenue by $3 million, from $15.1 million to $12.1 million, to reflect statewide decreases in demand in combination with a reduced tax rate that became effective January 1, 2023.
•Increase Investment Income by $3.2 million, from $700,000 to $3.9 million, based on actual revenues received in FY22-23 and continued high interest rates. The projected revenue is lower than prior year actuals due to expected reduction in cash balances for the American Rescue Plan Act.
•Increase Paramedic Service Charge revenue by $2 million, from $6.6 million to $8.6 million due to increased reimbursement rates.
•Reduce Billboard revenue by $1.2 million, from $1.2 million to zero, due to a lack of currently approved billboards.
•Reduce Jail revenue by $350,000, from $17.5 million to $17.2 million, to more closely align with prior years actuals.
FY2023-24 Proposed Expenditure Adjustments
•Staff proposes a housekeeping adjustment for the sales tax audit contract and software licenses expenditures, with a net zero impact. Historically, these services have been paid from the revenue account, which understates revenue, instead of paying from the expenditure account. The net result is the same, but the revenue and expenditure will be reported at gross amounts, instead of net amounts.
•Staff proposes a $91,304 expenditure increase to reimburse the Select Street Construction Fund for the land transfer of two parcels to expand the City’s green space.
•The Library is in the planning stages of the Jerome Park Outdoor Library. The project will include a 24-hour “satellite library” kiosk at the southwest end of the park. This satellite library will incorporate recreation-based play learning experiences. Based on the most recent cost estimates, the project is approximately $800,000 short. To help fund this project, Parks, Recreation & Community Services has offered to pay $100,000 from its cell-tower revenue budget, and Public Works has offered to pay $300,000 from its Water Enterprise budget due to the water conservation elements in the project. Staff requests a one-time General Fund adjustment of $400,000 to make up the difference in the shortfall.
•As noted above, there are currently no approved billboards generating revenue for the City. The FY23-24 budget included a $1.2 million appropriation for right- of-way maintenance based on the billboard revenue. As no revenue is expected, staff proposes a corresponding expenditure adjustment to decrease the right-of- way maintenance.
FY 2022-23 Proposed Expenditure Adjustments
While closing the books for FY22-23, staff identified an opportunity to use $1,000,000 of unspent General Fund budget to fix streets, which is both a Measure X spending category and a contribution to the Orange County Transportation Authority (OCTA) Fiscal Year 2023-24 First Quarter Budget Report and Proposed Appropriation Adjustments
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Maintenance of Effort (MOE). Staff requests a year-end housekeeping adjustment to increase the Public Works budget in the General Fund by decreasing the budget for other departments with a net fiscal impact of zero dollars. This adjustment improves the City’s ability to meet its FY22-23 OCTA MOE requirement.
Fiscal Year 2023-24 First Quarter Budget Report and Proposed Appropriation Adjustments
November 7, 2023
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FISCAL IMPACT
If the City Council approves the recommended budget amendments, the updated estimate of the General Fund balance at June 30, 2024 is as follows:
Staff recommends the following appropriation adjustments:
General Fund FY2023-24 Updated
Beginning Balance at July 1, 2023 109,372,864
Revenue Estimate 400,408,670
Appropriated Spending (413,614,484)
Pension Trust Set-Aside (24,034,731)
Estimated Ending Balance at June 30, 2024 72,132,319
Less: 18% Reserve 72,073,561
Estimated Spendable Balance 58,758
Fiscal
Year
Accounting Unit
– Account #
Fund
Description
Accounting Unit,
Account
Description
Amount
FY2022-23 Appropriation Adjustments
FY22-23 01110130-62300 General Fund
Finance- Treasury/
Customer
Services, Contract
Services
($500,000)
FY22-23 01115330-62300 General Fund
Fire Suppression/
EMS, Contract
Services
($500,000)
FY22-23 01117017-66220 General Fund
PWA-Service
Enhancement,
Improvements
Other Than
Building
$1,000,000
FY2023-24 Appropriation Adjustments
FY23-24 01110130-62300 General Fund
Finance- Treasury/
Customer
Services, Contract
Services
$280,500
FY23-24 01111017-66220 General Fund
Library- Service
Enhancement,
Improvements
Other Than
Building
$400,000
Fiscal Year 2023-24 First Quarter Budget Report and Proposed Appropriation Adjustments
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EXHIBIT(S)
1. FY23-24 General Fund Revenue Summary
2. FY23-24 General Fund Expenditure & Transfer Summary
3. Full-Time Position Vacancy Report
Submitted By: Kathryn Downs, FMSA Executive Director
Approved By: Steven A. Mendoza, Acting City Manager
FY23-24 01117622-62300 General Fund
PWA-Right of
Way, Contract
Services
($1,180,000)
FY23-24 01106019-68000-
059 General Fund
General Fund-
Interfund
Transfers,
Transfer Out
($91,304)
FY23-24 05917661-66220 Select Street
Construction
OCTA-Bristol St
Corridor
Improvements,
Improvements
Other Than
Building
$91,304