Finance and Management Services
www.santa-ana.org/finance
Item # 8
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
November 19, 2024
TOPIC: Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
AGENDA TITLE
Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
RECOMMENDED ACTION
1. Receive and file the 1 st Quarter Budget Update.
2. Approve $2.9 million in appropriation adjustments as detailed in the body of the report, including multiple restricted fund adjustments and one housekeeping adjustment to the General Fund with a net zero impact. (Requires five affirmative votes.)
GOVERNMENT CODE §84308 APPLIES: No
DISCUSSION
The FY2024-25 (FY24-25) first quarter budget report provides a General Fund snapshot of the first three months of the fiscal year. After conducting a comprehensive analysis paired with the limited information currently available, this report provides a summary update on General Fund revenues and expenditures, including a housekeeping adjustment with a net zero impact. Staff anticipates having more detailed insights on the major General Fund revenue sources, such as the Property tax, Sales taxes, and Utility Users’ taxes, at the Mid-Year Budget Update, which is currently scheduled for the second City Council meeting in February.
Proposed adjustments to multiple restricted funds are addressed in greater detail later in this report.
A General Fund summary as of September 30 follows.
Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
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General Fund Summary (Fund 011)
The FY23-24 audit is currently underway and the final carryover amounts based on the remaining FY23-24 budget availability are still being compiled. The City received revenue that exceeded estimates and anticipates additional savings in expenditures. Staff expects to have final information by the second City Council meeting in December to determine the increase of the General Fund balance available for one-time spending.
A summary of General Fund revenues through September 30 follows.
General Fund Revenue
FY2024-25 1st Quarter Budget Update
FY24-25 Original
Budget
General Fund
Adjustments
approved by City
Council through
09/30/2024
Updated Estimates
Estimated Beginning Balance at July 1, 2024 109,495,834 109,495,834 Revenue Estimate 406,527,340 15,803 406,543,143Appropriated Spending (406,773,060) (134,351) (406,907,411)Pension Trust Set Aside (34,565,751) (34,565,751)Estimated Ending Balance at June 30, 2024 74,684,363 (118,548) 74,565,815 Less: 18% Reserve ¹ 73,173,121 73,173,121
Estimated Spendable Balance 1,511,242 (118,548) 1,392,694¹The $15,803 in recognized revenue is one-time money. The City's 18% reserve policy applies to annual recurring revenue only.
Revenue Source
FY24-25 Original
Budget
Received As of
9/30/2024 % Received
Property Tax/ Property Tax In-Lieu of VLF 92,819,320 820,345 0.9% Sales Tax (Measure X) 85,632,610 6,928,251 8.1%
Sales Tax (Bradley Burns) 61,682,950 5,193,690 8.4%
Other General Fund Revenue 41,743,660 5,899,966 14.1%
Charges for Service 30,590,300 7,970,831 26.1%
Utility Users Tax 27,300,000 5,938,572 21.8%
Business License 16,200,000 1,295,406 8.0%
Cannabis Revenue 14,530,000 2,195,424 15.1%
Jail Revenue 14,153,500 1,062,079 7.5%
Franchise Fees 12,375,000 874,673 7.1%
Hotel Visitor's Tax 9,500,000 1,842,020 19.4%
Total General Fund Revenue¹ 406,527,340 40,021,255 9.8% ¹Excludes revenue recognized for the Library by $15,802.58 approved at the Sept 16 City Council meeting.
Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
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As of September 30, the City generated approximately $40 million, or 10% in revenue, which is typical for this time of year. Sales tax receipts lag about two months after the corresponding period and the City’s first half of major property tax installments is not received until November and December. Preliminary economic data from the City’s Sales Tax consultants suggest that sales tax revenue is projected to fall below original expectations for FY24-25; however, we have only received detailed data from the state through June 2024. Increases in online shopping were not enough to offset declines in luxury auto sales, general consumer goods, and food and drug stores (including Cannabis). The benefits stemming from reduced inflation and interest rates are not expected to arrive until closer to FY2025-26. Therefore, staff is not recommending any revenue adjustments at this time, pending further data. In the interim, staff will explore alternative strategies to offset the impact of reduced sales tax revenue. This may include identifying other revenue streams that are outperforming expectations, utilizing savings from staffing vacancies, or proposing adjustments to expenditures for budget rebalancing.
A summary of General Fund expenditures through September 30 follows.
General Fund Expenditures
Overall, expenses are tracking closely to the prior year, with a total of $97,287,325 spent through September 30, 2023. In FY24-25, spending for most departments is below the Department
FY24-25 Original
Budget
Spending as of
9/30/2024
%
Expended
City Attorney 4,500,350 758,120 16.85%
City Clerk 1,934,570 303,126 15.67%
City Council 1,043,970 199,500 19.11%
City Manager 3,963,160 766,083 19.33%
Community Development 4,327,760 569,939 13.17%
Finance & Mgmt Services 13,268,160 2,773,998 20.91%
Fire & Emergency Medical Svcs³ 57,837,370 18,137,088 31.36% General Non-Departmental 38,543,830 14,184,590 36.80%
Human Resources 4,393,370 826,203 18.81%
Inter-Fund Transfers 17,999,970 3,570,106 19.83%
Library 7,916,230 1,875,661 23.69%
Museum Funding 1,715,320 424,427 24.74%
Parks, Recreation & Comm Svcs 16,083,960 4,363,563 27.13% Planning & Building 18,731,210 4,301,482 22.96%
Police 162,545,030 34,762,261 21.39%
Public Works 51,968,800 9,552,046 18.38%
Total General Fund Expenditures² 406,773,060 97,368,193 23.9% ³Fire & Emergency Medical Services includes an one-month advance ²Excludes increased appropriations for the Library by $15,802.58 approved at the Sept 16 City Council meeting, $118,548 in the use of fund balance approved at the September 23rd City Council meeting & Carry Forwards approved at the October 1 City Council meeting Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
November 19, 2024
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informal marker of 25%, which represents the first three months of the fiscal year. The exceptions are Fire & Emergency Medical Services, which is addressed in the footnote above, as well as Non-Departmental, and the Parks, Recreation, and Community Services Agency (PRCSA) expenditures. Non-Departmental expenses are slightly higher this year due to the timing of payments for legal services. Staff will re-evaluate the status of this budget as part of the Mid-Year Budget Update, and may request to revise this if unexpected conditions warrant an increase.
PRCSA’s expenses do not yet reflect the carryovers approved at the October 1 City Council meeting. Once the carryovers are uploaded to the budget, their expense budget will be under the 25% marker, aligning them more closely with other City departments.
The carryovers are expected to be posted to the general ledger and reflected in the City’s budget in November.
General Fund Adjustments
The deadline to obligate ARPA funds is December 31, 2024. To meet the obligation deadline and have funds available to complete the installation of digital information kiosks, we request an appropriation adjustment reallocating $166,810 in the General Fund from PRCSA Service Enhancement, Building and Building Improvements to CMO, Improvements Other Than Buildings. There is no budget impact to PRCSA, as the same amount referenced above will be transferred to their budget through ARPA funding. The agreement for this project did not include the contingency language required per federal guidelines to obligate these funds. This request has a net zero General Fund impact and will allow contingency funds to be available for the project.
Restricted Fund Adjustments Overview
Liability & Property Insurance Fund Projects (Fund 80)
Fund 80 has a spendable fund balance of $14 million as of June 30, 2024, which meets the City’s target reserve level of 80% of the most recent actuarial liability. After approving the recommended appropriation adjustment of $153,055 for the following risk management projects, the fund balance remains compliant with the reserve requirement. •City Facilities Security Enhancements (Project No. 22-0505) •Council Chamber Restrooms ADA Compliance (Project No. 22-0504) •4 th Floor ADA Compliance (Project No. 22-0502)
National Opioid Settlement Adjustments (Fund 111)
The City received additional installments from the Opioid Settlement funds following recent agreements with major retailers and pharmaceutical companies, including Walmart, Walgreens, CVS, Allergan, Teva, and McKinsey, aimed at addressing the opioid crisis. This funding is expected to support the establishment of in-hospital detoxification Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
November 19, 2024
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services for the City’s unhoused population, which will be managed by the City Manager’s Office and located outside City boundaries. The anticipated start date for these services is February 1, 2025. Additionally, the Police Department plans to allocate a portion of these funds for the purchase of naloxone, to be deployed by officers in the field. Some of the funds will be reserved for legal expenses as required by the settlement agreements.
Therefore, staff is requesting the recognition of $2,216,854 in revenue and the appropriation of the same amount in expenditures.
Workforce Innovation and Opportunity (WIOA) Fund (Fund 123) California’s Employment Development Department released final notification of the WIOA funds allocation in the latter part of the budget process, leaving minimal time to make necessary adjustments. Therefore, staff originally budgeted for this fund using the prior year’s allocations to estimate projected award amounts which may lead to discrepancies between budgeted amounts and actual awards. The lower-than-expected grant amount results from revisions to the funding formula. Now that FY24-25 actual award amounts have been released, staff recommends reducing expenditures by $319,940 to align the budget with the actual award allocations. Due to this 12% reduction, WORK Center staff has delayed some technology and equipment purchases and pared back some job training services and case management.
Community Planning and Development Program Allocations (Funds 130 and 135) Housing and Urban Development (HUD) also did not release FY24-25 award amounts until very late in the budget process. As with the WIOA grant, staff used the prior year's allocations to estimate projected award amounts. Due to an adjustment to HUD’s formula methodology, there was a decrease in award amounts for FY24-25. Staff recommends the following reduction in revenues and expenditures:
•Home Program Federal Grant (Fund 130) - Decrease revenues by $421,595 and decrease expenditures by $414,595.
•CDBG (Fund 135) - Decrease revenues by $408,910 and decrease expenditures by $160,890.
The City’s award amount decreased by an overall average of 14% due to this new methodology. In response to this decrease and to avoid a reduction in service levels and/or programming, staff reprioritized projects and continues to seek alternate funding sources for the lower-priority projects.
Details for all of the recommended appropriation adjustments listed above are located in the Fiscal Impact section of this staff report.
CIP Projects Update
Staff has compiled an updated FY24-25 Capital Improvement Program (CIP) in Exhibit 1, including Carryforward Projects and new FY24-25 projects. The exhibit includes the following fields:
Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
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•Currently funded projects greater than $20,000
•Project name
•Funding sources
•Amounts
•Status
•Estimated completion date
These project totals reflect only the remaining balances carried forward into FY24-25 and new funding awarded in FY24-25. The amounts shown do not represent the total project cost, including funds awarded and expensed in prior fiscal years. Approximately 55% of all currently funded projects, regardless of dollar value are either complete or expected to be complete by year end. Staff expects to provide a comprehensive update of all projects funded by the American Rescue Plan Act (ARPA) on December 3, 2024 to demonstrate the City is in compliance with the requirement to obligate funds by December 31, 2024.
Staff Vacancy Report
Exhibit 2 lists the City’s vacancies by department and funding source as of September 30, 2024.
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action.
FISCAL IMPACT
Fiscal
Year
Accounting Unit
– Account #
Fund
Description
Accounting Unit,
Account
Description
Amount
FY24-25 01113017-66200 General Fund
PRCSA-Service
Enhancement,
Buildings &
Building
Improvements
($116,810)
FY24-25 01103010-66220 General Fund
City Manager,
Improvements
Other Than
Buildings
$116,810
FY24-25 08009053-66200
Liability &
Property
Insurance
Risk Management
Projects –
Buildings &
153,055
Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
November 19, 2024
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Building
Improvements
FY24-25 11103002-57492 Opioid
Remediation
Opioid
Remediation
Revenue – CMO,
Abatement
$1,800,654
FY24-25 11103002-57493 Opioid
Remediation
Opioid
Remediation –
CMO, Subdivision
$416,200
FY24-25 11103010-62300 Opioid
Remediation
Opioid
Remediation –
CMO, Contract
Services
$2,000,000
FY24-25 11103010-63001 Opioid
Remediation
Opioid
Remediation –
CMO,
Miscellaneous
Operating
Expenses
$216,854
FY24-25 12318XXX-
61XXX
Workforce
Investment
Act
Workforce
Investment Act –
Various
Accounting Uniting
Units/Accounts
($319,940)
FY24-25 13018002-52000
Home
Program
Federal Grant
Home Program
Federal Grant –
Federal Grant –
Direct
($421,595)
FY24-25 13018780-69011
Home
Program
Federal Grant
Home Program
Federal Grant –
Reserve
Appropriation
($414,595)
FY24-25 13518002-5XXXX
Community
Development
Block Grant
Community
Development
Administration –
Various Accounts
($408,910)
FY24-25 13518780-61000
Community
Development
Block Grant
Community
Development
Administration –
Salaries Regular
$15,993
FY24-25 13518783-6XXXX
Community
Development
Block Grant
CDBG Programs –
Various Accounts ($152,213)
Fiscal Year 2024-25 First Quarter Budget Update and Proposed Appropriation Adjustments
November 19, 2024
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EXHIBIT(S)
1. FY24-25 Capital Improvement Program (CIP) Projects Status Update
2. 1 st Quarter Vacancy Report Summary
Submitted By: Kathryn Downs, FMSA Executive Director
Approved By: Alvaro Nuñez, City Manager
FY24-25 13518785-6XXXX
Community
Development
Block Grant
HUD-Emergency
Solutions Grant –
Various Accounts
($24,670)