FOR THE COUNCIL MEETING OF FEBRUARY 15, 2022
COUNCIL AGENDA REPORT
TO: City Council
FROM: City Manager
Prepared by: Director of Finance
SUBJECT: FINANCIAL REPORT FOR THE SECOND QUARTER ENDING DECEMBER 31, 2021
RECOMMENDATION:
That the City Council receive and file the Financial Report for the Second Quarter Ending December 31, 2021.
BACKGROUND:
Four times each year, City staff completes a comprehensive analysis of City finances, including projected fund balances, revenues to date, departmental expenditures, encumbrances, and potential adjustments. This financial report summarizes the second quarter financial analysis.
DISCUSSION:
The attached report provides an overview of the current economic outlook on the State and National levels; General Fund, including Measure U revenues, expenditures, projected fund balances; and activity in the three Enterprise Funds. Though this information is not audited and does not contain all the usual year-end adjustments, accruals, or disclosures, the information does provide a general picture of the City's activity and the developing financial trends.
Impact to the Community:
The interim financial statement provides the community with an understanding of the financial activity of the City's primary funds.
MARY HARVEY
Director of Finance
Attachment A: Quarterly Financial Report Second Quarter Ending December 31, 2021
City of Santa Maria
Quarterly Financial Report
Second Quarter Ending December 31, 2021
Februa
OVERVIEW
The economy is steadily improving as we enter the third year of the pandemic, but COVID-19 still casts a pall. Consumer spending rose
7.9 percent in 2021 due to pent-up demand, and businesses are restocking warehouses and shelves. Concerns persist about the highest inflation pressures in 40 years, supply chain constraints, and the complicated reality of the pandemic -era labor force.
The national economy ended 2021 by adding 6.4 million jobs, and the unemployment rate was pegged at only 3.9 percent. The economy expanded at a 5.7 percent rate, including at a brisk 6.9 percent pace in the fourth quarter. However, the labor participation rate lags around only 62 percent and there are nearly 11 million job openings. The so-called "Great Resignation" of job quits is viewed as a dynamic free agency period for low-income workers switching jobs to make more money, plus a moderate surge of early retirements. A record 6.3 million Americans quit jobs in November, following nearly 13 million quits the prior three months.
Inflation accelerated to 7.0 percent for 2021 compared to a year ago.
Gains were driven by prices for food, energy, housing, and health care — and vehicle prices soared. In the Los Angeles -Long Beach -Anaheim area, prices overall rose by 6.6 percent in December compared with the same month a year ago. Nationally, food prices increased 6.3 percent, while prices for food at home inched up 6.5 percent in 2021, the largest over -the -year increase since 2008. Source:
https://www.bls.gov/opub/ted/2022/consumer-price-index-2021-in-review.htm . Energy prices surged 33.9 percent during 2021, mostly because of rising gasoline prices. The Federal Reserve is combating inflation, but economists say inflation will not sink back to pre -pandemic levels for quite a while.
Buying power is eroding at the same time there is an end to Federal relief measures that kept millions above water the past 20 months. The last stimulus payments were sent in the first half of 2021, and emergency Federal jobless benefits ended in September. In mid -January, more than 30 million families stopped receiving monthly child tax credit payments after Congress failed to pass an extension of the expanded credit.
Businesses struggling to hire have hiked pay, but rising prices for goods and services have eroded those income gains. Blame the pandemic. In the spring of 2020 as COVID-19 spread, the global economy was hit very hard. Factories shut down, travel stopped, millions were laid off. The Federal Reserve implemented emergency stimulus measures and Congress injected roughly $6 trillion in relief measures into the economy. Americans became flush with cash, the savings rate temporarily elevated with unemployment assistance, and many resumed shopping. The economy, however, could not rebound quickly to accommodate high demand, and supply chain bottlenecks are causing prices to rise.
California Governor Gavin Newsom is proposing a record $286 billion 2022-23 State Budget, 9 percent more than last year. He and the Legislature may expand spending on education, COVID-19, climate change, homelessness, health care, and crime.
California's unemployment rate fell to 6.5 percent in December — the worst of all 50 states. Santa Barbara County's jobless rate was 4.0 percent. Santa Maria's unemployment rate was 7.3 percent.
Demand for housing is expected to remain strong everywhere even as mortgage rates increase, which together with high prices will further erode affordability. The median new house price in December 2021 rose 3.4 percent from a year ago to $377,700. In Santa Maria, the median sales price for 2021 was $460,000, up 11.9 percent from a year ago.
15, 2022
Mayor
Alice Patino
Mayor Pro-Tem
Mike Cordero
Council
Carlos Escobedo
Gloria Soto
Etta Waterfield
City Manager
Jason Stilwell
Report Prepared By
Mary Harvey
Director of Finance
206 East Cook Street
Santa Maria, CA 93454
(805) 925-0951 Extension 2214
www.cityofsantamaria.org
Attachment A
Quarterly Financial Report - Second Quarter Ending December 31, 2021
GENERAL FUND
General Fund Balance. The chart below shows,
with 50 percent of the year complete, revenues are
at 45.7 percent of projections while expenditures
are at 45.6 percent of appropriations.
General Fund
Balance, Start of Year
Revenues'
Expenditures'
Balance
- Includes Transfers
Budget 2nd Quarter Percent
$ 10,071,920
74,846,040
78,341,860
$ 6,576,100 $ 8,507.070
$ 10,071,920
34,178,150
35,743,000
45.7%
45.6%
The beginning fund balance is an estimate because
the City's annual audit is not finalized. Revenues are
less than budget primarily because property tax in -
lieu amounts are not received until late January and
late May each year. The first installment of this
revenue will be just shy of $5.1 million. A discussion
of the changes in each category follows in the "Major
Revenue Variance" section of this report.
The City adopted the 2021-22 Budget with the intent
of having to use approximately $1 million in one-time
Local Economic Augmentation Fund (LEAF) to help
balance the 2021-22 budget.
The chart below provides summary comparison
information on revenues, expenditures, and
transfers for the second quarter ending December
31, 2021, versus the second quarter ending
December 31, 2020.
Year to Date Comparison to Prtor Year
General Fund
2021.22 2020-21 Over (Under)
Revenues:
Taxes
Licenses & Permits
Use of money
Intergovernmental
Charges for services
Other revenue
Operating revenues
Transfers -In
Total revenues
Expenditures:
Public Safety
Recreation & Parks
General Government
Community Dev.
Public Works
Operating Expenses
Transfers -out
Total expenditures
$ 26,463,270
1,577,530
673,850
988,820
2,301,610
177,630
32,182,710
1,995,440
$ 23,797,170
1,242,060
(2,722,700)
642,580
1,552,570
230,670
$ 2,666,100
335.470
3,396,550
346240
749,040
(53,040)
24,742,350 7,440,360
1,950,050 45,390
$ 34,178,150 5 26,692,400 $ 7,485,750
$ 20,985,600 5 20,517,780 $ 467,820
4,920,240 4,172,920 747,320
5,418,740 4,860,920 557,820
1,851,070 1,852,450 (1,380)
1,455,610 1,356,790 98,820
34,631,260
1,111,740
$ 35,743,000
32,760,860 1,870,400
1263,150 (151,410)
$ 34,024,010 $ 1,718,990
Measure U Fund: The following chart shows that
revenues received through the first six months are
at 59.3 percent of budget, or $12.9 million.
Expenditures are at 45 percent of budget or $1.1
million under budget.
Measure U Fund
Actual
Budget 2nd Quarter Percent
Beginning Fund Balance $ 11,254,028 $ 11,254,028
Revenue
Measure U Revenue $ 21,787,231 $ 12,918,610 59.3%
Expenditures
City Attorney 711,435 231,570 32.5%
City Manager's Office 20,000 19,290 96.5%
Finance 108,730 106,130 97.6%
Library 744,827 272,700 36.6%
Recreation & Parks 2,334,214 845,750 36.2%
Fire 8,760,311 3,621,410 41.3%
Police 9,830,754 5,026,650 51.1%
Total Expenditures 22,510,271 10,123,500 45.0%
Revenue over (under)
Expenditures $ (723,040) $ 2,795,110
Ending Fund Balance $ 10,530,988 $ 14,049,138
The majority of the budget underrun is in the Fire
Department and is primarily due to budget of about
$1.1 million for the purchase of two fire vehicles that is planned for later in the year. The match portion of
the Staffing for Adequate Fire and Emergency
Response (SAFER) grant -funded positions have yet
to be transferred from the General Fund and
accounts fora portion of the underrun in Fire. Police
is slightly over budget due to increase in overtime to
cover staffing shortages throughout the department,
as well as increases in leave cash -outs for
separating employees. The City Attorney's Office is
under budget because one Code Enforcement
Officer (COE) position is vacant and another COE
position funded by Measure U was being charged to
the General Fund. The Library and Recreation &
Parks programs continue to be affected by COVID-
19, but staff are hopeful that more programs can be
offered in the second half of the fiscal year. Budget
in the City Manager's Office is for the costs
associated with maintaining the City's mass
notification system database. The Finance budget
consists primarily of the annual levee loan payment
to the Solid Waste Collection Fund. Through
September, 92 percent of Measure U expenditures
have been spent on Public Safety, 4 percent on
Youth Services, and 4 percent on Quality of Life.
Quarterly Financial Report - Second Quarter Ending December 31, 2021
Major General Fund Revenue Variances: The five major General Fund revenue sources, as shown on the chart to the right, account for approximately 76 percent of total General Fund revenues. All five key revenues are showing increases
with Sales Tax revenue being
the largest dollar increase over
last year.
There are numerous differences
between the individual revenues
received during this year and
prior years. Below gives a better
picture of what is driving these
revenue variances.
General Fund
Actual
Receipts Percent
Budget 2nd Quarter Received
Receipts -
Prior Year
2nd Quarter
Sales Tax
Property Tax
Hotel/Bed Tax
NHIS
Licenses, Permits, 8 Fees
Total Key Revenues
All Other Revenues
Total Revenues
$ 26,102,400
22,972,390
2,902,580
200,000
2,091,050
54,268,420
$ 14,863,110
7,193,930
1,944,170
469,120
1,577,530
26,067,860
57.0%
31.3%
67.0%
234.6%
75.4%
48.0%
$ 13,405,480
6,877,410
1,259,900
449,770
1,242,060
23,234,620
20,577,620
8,110,290
39.4%
45.7%
3,457,780
$ 74,846,040
$ 34,178,150
$ 26,692,400
Key variances include:
• Sales Tax. Receipts through the second quarter are approximately 11 percent or about $1.5 million greater compared to last fiscal year. This increase is primarily due to strong growth in general consumer goods, autos and transportation, restaurants and hotels, and fuel and service station categories. In addition, growth in allocations from the county and state pools contributed to the higher revenues. These revenues are generated by out-of-state sales, including goods sold online, to customers within the state.
• Property Tax. The bulk of these payments are received from Santa Barbara County in December, January, April, and May of each year. Property taxes received to date are $316,520 or 4.6 percent greater than last fiscal year.
• Hotel/Bed Tax. Through December, receipts are approximately $684,000 or 54 percent more than last fiscal year and ahead of estimates by about $493,000 or 17 percent. The increase in revenues is due to the return of two large events, the Elk's Rodeo and the West Coast Kustoms Car Show in the City. Although normally, the summer months produce a large portion of the Transient Occupancy Tax (TOT) annual revenues, staff anticipates receipts will be received more evenly throughout the year as more community events resume and attract travelers to the area. The TOT is estimated to generate only about four percent of General Fund revenues in 2021-22, down from the typical five percent. • Non -Hazardous Impacted Soils Program (NHIS). Revenues earned through December are $469,120 compared to $449,770 last fiscal year, which is a 4.3 percent increase or $19,350. The majority of NHIS revenues received, about $459,320 occurred in the first quarter and was mostly generated from Chevron's Tank Farm Road Project. Chevron has stopped delivering NHIS material to the City's landfill from their Tank Farm Road Project and its Guadalupe site. NHIS receipts for the second quarter were less than $10,000 with the majority of NHIS material received from Southern California Gas Company. The City has also received material from other projects including Pacific Coast Energy Company, the Orcutt Hill Field project, and the Santa Maria Cemetery District. The City continues to anticipate a decline in materials during the winter months. Several new projects are anticipated to start in the second half of the fiscal year. Material from most of these projects are small clean-ups driven by development or vacant land and will not generate on -going NHIS revenues. Staff anticipates NHIS revenue for the remainder of 2020-21 will be minimal and continue to significantly reduce in future fiscal years.
• Licenses, Permits, & Fees. Permit revenue is at $1,577,530 or 75 percent of budget and is about $335,470 more than the second quarter of last fiscal year. During the second quarter, the City issued 100 permits for accessory dwelling units (ADUs), continuing the trend of increasing number of ADUs, and an increase of 37 ADU permits compared to the second quarter of the prior year. The City also issued permits for three buildings within the Enos Ranch West shopping center, which will serve as
Quarterly Financial Report - Second Quarter Ending December 31, 2021 Page 4 of 6 future locations for new retailers and dining establishments, including but not limited to, Boot Barn, Guitar Center, and Dutch Brothers Coffee. These are larger commercial developments compared to the developments for which permits were issued for during the prior year.
Expenditures. For the second quarter, ended December 31, 2021, expenditures are at 45.6 percent of budget. The below chart summarizes variances by department:
General Fund
21-22 Percent 20.21
Budget YTD Actual Expended YTD Actual
Police $ 31,669,100 $ 14,312,030 45.2% $ 13,767,380
Fire 12,443,030 6,673,570 53.6% 6,750,400
Recreation & Parks 10,060,020 4,920,240 48.9% 4,172,920 Finance 3,364,970 1,400,750 41.6% 1,383,410
Community Dev. 5,325,250 1,851,070 34.8% 1,852,450
Public Works 3,644,500 1,455,610 39.9% 1,356,790
City Manager's Office 7,980,580 3,350,810 42.0% 2,830,300 City Attorney's Office 1,239,220 581,200 46.9% 566,960
Mayor & Council 181,700 85,980 47.3% 80,250 • re. Fi Over budget by Sub -Total 75,908,370 34,631,260 45.6% 32,760,860 g
Transfers 2,433,490 1,111,740 45.7% 1,263,150 $452,000 because of the Total $ 78,341,860 $ 35,743,000 45.6% $34,024,010 extremely high level of overtime incurred to provide
Mutual Aid support to fight wildland fires. In addition, the match portion of the Staffing for Adequate Fire and Emergency Response (SAFER) grant -funded positions have yet to be transferred to Measure U. Excluding those reimbursable overtime costs and SAFER match expenditures, Fire is under budget by 2.6 percent.
• Community Development. Under budget 15.1 percent or approximately, $811,600 because of work on contractual services, in particular the General Plan Update does not occur evenly during the year.
In addition, vacancies in the Planning Division also contributed to the underrun. • Public Works. Under budget by $366,600 or 10.1 percent chiefly due to vacancies in the Engineering and Facilities divisions. Fewer outside plan -checks and inspections have occurred through contractual services and accounts for a portion of the underrun.
• City Manager's Office. Under budget 8 percent or $639,500, due vacant positions in the Human Resources division during the first six months of the fiscal year; those positions are now filled. In addition, payments for labor relations contract and the second quarter invoice for contractual services with Santa Barbara County for animal control services will occur in the third quarter. • Finance. Under budget 8.4 percent or $281,700, due to one vacant position and several contractual services, including cost allocation plan and user fee update contracts, to occur in the second half of the fiscal year.
• Other General Fund Departments. Remaining General Fund departments are underrun between one percent and three percent because of vacant positions, fewer contractual services, and program expenses anticipated to be spent in the third and fourth quarters.
Key variances include:
• Police. Under budget
by $1.5 million or about four
percent, primarily due to
vacant positions which have
resulted in salary (and
benefits) savings of $1.2
million through December.
Quarterly Financial Report - Second Quarter Ending December 31, 2021 Page 5 of 6 Budget
21-22 Over
YTD Actual (Under)
20-21
YTD Actual
Staffing
Contracts & Services
Materials & Supplies
Maintenance & Operations
Capital Outlay
Sub -Total
Debt Service
Transfers
Total $ 78,341,860 $ 35,743,000 45.6% $ 34,024,010 majority occurring in the police department. Materials and Supplies
are over budget by 2.2 percent or $69,900 and is caused from increases in electricity, gas, and water costs (rates), making it more expensive to operate the Paul Nelson Pool and maintain City parks.
Contracts & Services is under budget by 19 percent or about $1.6 million due to services scheduled to occur later in the fiscal year, including work on the General Plan Update project, as well as the timing of the second quarter payment toward the Animal Services contract. The debt service expenditure includes $653,240 for the annual payment from the Fire Department to the Solid Waste Collection Fund for the payoff of the CaIPERS Side Fund, and $133,460, the first payment of semi-annual lease financing payments for the CAD/RMS system.
54.908.820
8,224,380
3,163,250
8,097,560
594,210
74,988,220
920,150
2,433,490
25,456,760
2,531.050
1,651.480
3,996,220
209.050
33,844,560
786,700
1,111,740
46.4%
30.8%
52.2%
49.4%
35.2%
45.1%
85.5%
45.7%
$ 24,860,430
2,430,400
1,410,040
3,215,500
57,790
31,974,160
786,700
1,263.150
The chart to the left summarizes
General Fund costs by type and
shows that except for Materials and
Supplies, each type of operating
cost is within budget. Staffing is
under budget by approximately $2
million or 3.6 percent due to
numerous vacancies throughout
operational departments, with the
ENTERPRISE FUNDS
The Statement of Revenues and Expenses for the second quarter ending December 31, 2021, for the three enterprise funds are shown on the chart below.
Water/
Wastewater
Public
Solid Waste Transit
Revenues
Charges for Service
Interest Income
Other Revenue
Total Revenues
Expenses
Operating
Capital Expenditures
State Water Payments
Debt Service
Total Expenses
Revenues/Expenses
$ 24,901,150
414,670
727,250
$ 13,715,130 $ 359,100
242,190 112,280
77,760 1,673,070
26,043,070
14,035,080 2,144,450
7,362,530
1,063,410
12,982,380
3,823,340
13,042,160
5,421,410
2,163,980
43,190
25,231,660
$ 811,410
18,463,570
$ (4,428,490) $
2,207,170
(62,720)
Water/Wastewater Fund. Revenues
exceeded expenditures by $811,400,
which is about $4 million less than last
year. This variance is due to the $3.8
million semi-annual debt service
payment for the 1997 Certificate of
Participation (97 COPs) and 2012A
Refunding Bonds that occurred in the
first quarter, compared to the prior
year first quarter payment of
$748,000. The 97 COPs 2012A
Refunding Bonds were refinanced in
November 2021 with the issuance of
2021A Refunding Bonds. The first
debt service payment of $631,283 for the 2021A Refunding Bonds will occur in the second half of the fiscal year. Through the second quarter, Water and Wastewater operational expenses are under budget by 8 percent as a result of personnel savings from vacant positions and fewer repair and maintenance expenses incurred to date.
Solid Waste Fund. The Solid Waste Fund reports refuse collection and disposal activities. Through the second quarter, Solid Waste expenditures exceeded revenues by $4.2 million and is primarily due to capital expenditures of nearly $5 million toward the Landfill Liner Expansion project. Other notable capital expenditures to date include $98,100 for Los Flores landfill development plan, $60,300 toward the Landfill Collection Gas System Expansion, $127,400 toward landfill equipment, and $136,900 for organics, residential and recycling containers. Solid Waste operational costs are under budget by approximately $2 million or 6.6 percent.
Transit Funds. The City operates the Santa Maria Area Transit (SMAT) and Breeze Transit systems, which are funded by a combination of Federal grants, State transportation funds, and user fares. Fare
Quarterly Financial Report - Second Quarter Ending December 31, 2021 Page 6 of 6 revenue through the second quarter is $359,100, which is approximately $44,100 or 11 percent less than pre -pandemic receipts for the same period (July through December 2019). The City waived transit fares for sixteen months (March 2020 through June 2021) to assist customers during the emergency order and economic crisis relating to the coronavirus. The farebox ratio through December 2021 is 16.6 percent based on operating expenses paid to date.
FOR THE COUNCIL MEETING OF FEBRUARY 15, 2022
COUNCIL AGENDA REPORT
TO:
FROM:
SUBJECT:
City Council
City Manager
Prepared by: Director of Finance
BUDGET AMENDMENTS — OPERATIONAL CHANGES RELATED TO
THE FINANCIAL REPORT FOR THE SECOND QUARTER ENDING
DECEMBER 31, 2021.
RECOMMENDATION:
That the City Council adopt a Resolution approving second quarter amendments to the 2021-22 Budget for operational changes.
BACKGROUND:
As part of the City's budget process, staff presents to the City Council various personnel and operational changes in conjunction with the quarterly financial report. Staff is presenting two budget amendment requests for incorporation into the 2021-22 Budget.
DISCUSSION:
PUBLIC WORKS/MOBILE EQUIPMENT (FLEET) FUND
Increase appropriations by $811,000 in the Mobile Equipment (Fleet) Fund and authorize the replacement of a Caterpillar D7 Dozer.
With the concurrence of Public Works Fleet Division, the Utilities Department requests $811,000 appropriation of Fleet replacement funds, and authorization to purchase a D7 Dozer for use at the Santa Maria Regional Landfill. The total cost of the D7 is $811,000.
An existing D7 has reached the end of its useful life. No new funding is being requested from the Solid Waste Fund because sufficient funds have been collected through the Fleet replacement program. The D7 Dozer will allow Landfill operations to process material more efficiently and in a cost-effective manner.
UTILITIES/SOLID WASTE FUND
Increase appropriations by $1,350,000 in the Solid Waste Fund and authorize Fleet to purchase three new refuse trucks.
The Utilities Department requests $1,350,000 appropriation in the Solid Waste Fund to purchase three refuse trucks. These trucks are required for residential collections to meet the regulatory and operational impacts as a result of Senate Bill 1383 for Citywide mandatory organics (food waste) recycling implementation. Staff estimates it will take approximately 15 months to receive and place these refuse trucks into service.
Alternative
A decision to not approve the budget amendments is an alternative to this recommendation; however, doing so will limit the ability to maintain required operational services in the Utilities Department, and would prevent specific capital improvements projects from being completed.
Fiscal Considerations
If approved, the recommended budget amendments would result in the following changes in Fund Balances: 1) a decrease in the Mobile Equipment (Fleet) Fund by $811,000 and 2) a decrease in the Solid Waste Fund by $1,350,000.
Impact to the Community
The requested budget amendments will enable staff to maintain operations and meet new State regulatory requirements. The replacement of the D7 Dozer will improve operational efficiencies and have an indirect impact on the public. The purchase of three refuse trucks will not have an immediate impact on the public. However, the cost and maintenance of these trucks will be a factor in future refuse collection rates, which will directly impact rate payers.
MARY HARVEY
Director of Finance
2 RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MARIA, CALIFORNIA, APPROVING SECOND QUARTER AMENDMENTS TO THE 2021-22 BUDGET FOR
OPERATIONAL CHANGES
WHEREAS, certain personnel and operational issues are brought forward for the City Council's consideration in conjunction with the quarterly financial report; and WHEREAS, it is recommended to amend the 2021-22 budget for subsequent appropriations, actions, and costs as determined to be in the public's best interest.
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of the City of Santa Maria, California, as follows:
1. Increase appropriations by $811,000 in the Mobile Equipment (Fleet) and authorize the replacement of a Caterpillar D7 Dozer; and
2. Increase appropriations by $1,350,000 in the Solid Waste Fund and authorize Fleet to purchase three refuse trucks; and
3. The Chief Deputy City Clerk is hereby authorized to make minor changes herein to address clerical errors, so long as substantial conformance of the intent of this document is maintained. In doing so, the Chief Deputy City Clerk shall consult with the City Manager and City Attorney concerning any changes deemed necessary.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Santa Maria held this 15th day of February 2022.
Mayor
ATTEST:
Chief Deputy City Clerk
APPROVED
APPROVED AS TO CONTENT:
City Attorney
City Manager
1