City of Santa Maria
Quarterly Financial Report
Fourth Quarter Ending June 30, 2023
Attachment A
August 15, 2023
OVERVIEW
The resilient economy grew in the first half of the year. Wages climbed, business investment surged, job growth continued but slowed, and inflation further receded. Real gross domestic product (GDP) increased at an annual rate of 2.4 percent in the second quarter (April-June), following a 2.0 percent growth in GDP in the first quarter.
The national unemployment rate ticked down to 3.5 percent from 3.6 percent. During the past 16 months, the jobless rate has hovered between 3.5 and 3.7 percent — levels not seen in more than 50 years. A slowdown in consumer spending was offset by a 7.7 percent surge in business investment in th e second quarter.
Consumer spending, which makes up about 70 percent of economic activity, grew a modest 1.6 percent in the second quarter, following a 4.2 percent advance in January-March.
Inflation is now at its lowest rate since March 2021. Annual inflation slowed to 3 percent in June after easing for 12 consecutive months from the 9.1 percent rate fueled largely because of record-high energy costs. Inflation remains one percentage point above the Federal Reserve’s target of 2 percent. Starting in March 2022, the central bank has now rolled out 11 consecutive interest rate hikes to tame inflation. From essentially zero, its benchmark rate is now in the range of 5.25 to 5.5 percent.
These rate hikes have pushed mortgage rates sharply to their highest level in 22 years, constraining home sales and building. Many Americans were able to lock in low interest rates on mortgages, car loans, and other debts before the Fed started raising rates. Some homeowners are reluctant to sell because they would have to give up locked-in low mortgage rates. Current 30-year fixed-rate mortgages are just under 7 percent.
Gas prices have spiked to their highest mark since November 2022. The national average retail price for a gallon of unleaded gas reached $3. 81 in early August. A year ago, gas was hovering around $4.23.
The average price in California was $5.04, and the average in Santa Barbara County was $5.08.
The Federal government’s deficit nearly tripled in the first nine months of the fiscal year that began October 1st. The deficit was $1.39 trillion, 170 percent more than the $515 billion deficit for the same period in the previous fiscal year. The deficit ballooned both because of a sharp increase in government spending and a significant drop in tax revenues. Spending rose on Medicare and Medicaid, and for Social Security in part due to an 8.7 percent cost of living adjustment. The Federal debt is now estimated at more than $32 trillion. Interest payments over the past nine months reached $652 billion.
California’s $310.8 billion budget that Governor Gavin Newsom signed in June includes a balanced package of solutions to close a $31.7 billion shortfall. Just a year ago, the State budget had close to a $100 billion surplus.
Nationally, the unemployment rate remains at 3.6 percent, a couple of notches above January’s half - century low of 3.4 percent. California’s jobless rate stood at 4.6 percent (899,100 unemployed), up from
4.5 percent in May. Santa Barbara County’s rate was 3.8 percent, up from the year -ago estimate of 3.2 percent. The City of Santa Maria’s rate was 4.5 percent in June, up from 3.9 percent a year ago.
Mayor
Alice Patino
Mayor Pro-Tem
Maribel Aguilera-Hernandez
Council
Mike Cordero
Carlos Escobedo
Gloria Soto
City Manager
Jason Stilwell
Report Prepared By
Mary Harvey
Director of Finance
206 East Cook Street
Santa Maria, CA 93454
(805) 925-0951 Extension 2215
www.cityofsantamaria.org
Quarterly Financial Report - Fourth Quarter Ending June 30, 2023 Page 2 of 5
GENERAL FUND
General Fund Balance . The chart below shows,
with 100 percent of the year complete, revenues are
at 102.2 percent of projections while expenditures
are at 98.7 percent of appropriations.
The beginning fund balance is an estimate because
the City’s annual audit is not finalized. Revenues are
more than budget because key revenue sources
outperformed projections by $4.3 million. Most
notably, Hotel/Bed Tax and Permit Revenues both
exceeded estimates by about 34 percent. A
discussion of the changes in each category follows
in the “Major Revenue Variance” section of this
report.
It is important to note that expenditures include a
transfer totaling $ 8.4 million, with the Local
Economic Augmentation Fund (LEAF) , General
Capital Project Fund, and Reserve for Unfunded
Pension Benefits each receiving one -third or $ 2.8
million. The City C ouncil authorized, as part of the
2022-24 Budget, all General Fund revenues above
expenditures as of June 30 th of each year be
transferred equally between those three accounts.
Excluding the $ 8.4 million transfer, General Fund
expenditures were $80.2 million or 89.3 percent of
budget.
The chart below provides summary comparison
information on revenues, expenditures, and
transfers for the fourth quarter ending June 30 ,
2023, versus the fourth quarter ending June 30 ,
2022.
The significant drop in r evenues is primarily
because of a one -time, $10 million revenue loss
allocation allowable under the America n Rescue
Plan Act (ARPA) received in 2021-22.
Measure U Fund: The following chart shows that
revenues received through June are at 105.5
percent of budget , or $27.2 million. E xpenditures
are 82.6 percent of budget or $ 5.8 million under
budget.
Most of the budget underrun, $ 4.1 million, is in the
Fire Department and is primarily due to $4.6 million
of budgeted capital projects and equipment
purchases of which just under $1.1 million has been
expended through the fourth quarter. Budgeted
capital projects include the design and construction
of a training center, the renovation design of the Fire administration building, and the purchase of a
second ladder truck that has been ordered . The
Police Department is under budget by about $1
million due to vacant positions and capital
purchases, including tasers and the body camera
system were not acquired before fiscal year -end.
Community Development is unde r budget by
$130,000 because of Code Enforcement vacancies.
The Library is under budget by $239,900 because
plans to resume Sunday operations have been
delayed until July 2023. Recreation & Parks
programs are under budget by $281,900, as a result
of vacancies in the Park Rangers division. The
budget in the City Manager’s Office is for the costs
associated with maintaining the City’s mass
notification system database. The Finance budget is
for the annual independent audit of Measure U
financial activi ty. Through June, 89 percent of
Measure U expenditures have been spent on Public
Safety, 6 percent on Youth Services, and 5 percent
on Quality of Life.
General Fund Budget 4th Quarter Percent
Balance, Start of Year 10,071,920$ 10,071,920$
Revenues* 86,759,760 88,668,430 102.2%
Expenditures* 89,801,530 88,668,430 98.7%
Balance 7,030,150$ 10,071,920$
* Includes Transfers
General Fund 2022-23 2021-22 Over (Under)
Revenues:
Taxes 67,203,380$ 64,564,690$ 2,638,690$
Licenses & Permits 4,133,760 4,481,160 (347,400) Use of money 1,752,830 1,631,490 121,340
Inter-governmental 1,810,830 12,465,860 (10,655,030) Charges for services 5,957,310 6,992,810 (1,035,500) Other revenue 262,730 333,160 (70,430) Operating revenues 81,120,840 90,469,170 (9,348,330) Transfers-in 7,547,590 5,061,390 2,486,200
Total revenues 88,668,430$ 95,530,560$ (6,862,130)$
Expenditures:
Public Safety 44,558,840$ 40,894,630$ 3,664,210$
Recreation & Parks 11,145,360 9,622,120 1,523,240 General Government 12,444,350 11,979,380 464,970
Community Dev. 5,080,250 3,977,210 1,103,040 Public Works 3,682,630 3,272,890 409,740
Operating Expenses 76,911,430 69,746,230 7,165,200 Transfers-out 11,757,000 25,784,330 (14,027,330)
Total expenditures 88,668,430$ 95,530,560$ (6,862,130)$ Year to Date Comparison to Prior Year
Measure U Fund Budget
Actual
4th Quarter Percent
Beginning Fund Balance 17,407,947$ 17,407,947$
Revenue
Measure U Revenue 25,787,354$ 27,209,490$ 105.5%
Expenditures
Community Development 916,724 786,790 85.8% City Manager's Office 22,500 19,760 87.8% Finance 2,600 2,600 100.0%
Library 1,065,960 826,070 77.5%
Recreation & Parks 3,358,817 3,076,950 91.6% Fire 15,363,935 11,214,150 73.0%
Police 12,614,692 11,630,840 92.2%
Total Expenditures 33,345,228 27,557,160 82.6%
Revenue over (under)
Expenditures (7,557,874)$ (347,670)$
Ending Fund Balance 9,850,073$ 17,060,277$
Quarterly Financial Report - Fourth Quarter Ending June 30, 2023 Page 3 of 5 Major General Fund Revenue Variances : The four major General Fund revenue sources, as shown on the chart to the right,
account for approximately
74 percent of total General
Fund revenues. Three of the
four key revenues are
showing increases with
Property Tax revenue
having the largest dollar and
percentage 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.
Key variances include:
Sales Tax. Receipts through the fourth quarter are approximately 3 percent or about $930,600 higher compared to last fiscal year. All industry groups are contributing to the year-over-year increase with restaurants and hotels showing the highest percentage growth and autos and transportation showing the largest dollar increase. However, sales tax receipts from autos and transportation category is expected to decline in 2023-24, because of higher financing costs and prices for essential goods like groceries and rent, making a vehicle purchase out of reach for many consumers. Property Tax. The bulk of these payments is received from Santa Barbara County in December , January, April, and May of each year. Property taxes received to date are $1.8 million or 7.9 percent greater than last fiscal year. The majority of the gain is derived from increases in assessed values from the 2 percent Proposition 13 inflation adjustment, transfers of ownership, and recapture of previous reductions due to market value losses under Proposition 8. Hotel/Bed Tax. Through June, Transient Occupancy Tax (TOT) receipts are approximately $84,500 or 2 percent more than last fiscal year and ahead of estimates by about $1.1 million or 34.4 percent.
The increase in revenues is partly due to inflation prompting hoteliers to raise room rates, coupled with steady occupancy rates with the return of community events attracting visitors to the area. TOT generates about five percent of General Fund revenues.
Licenses, Permits, & Fees. Permit revenue is at $4.1 million, exceeding projections by 34.1 percent or nearly $1.1 million, and is about $347,000 less than the fourth quarter for the prior fiscal year.
During the fourth quarter, the City issued 120 permits for accessory dwelling units (ADUs), comparable to 122 ADU permits issued for the same quarter last year. The City also issued permits for Seaside Packing, an industrial warehouse located north of La Brea and east of A Street, and 20 permits for single-family homes at a new residential subdivision, called Skyview Estates, located east of Santa Maria Way, south of Valley Christian Academy.
Expenditures. For the fourth quarter, ended June 30, 2023, expenditures are 98.7 percent of budget.
The below chart summarizes variances by department:
Key variances include:
General Fund Budget
Actual
Receipts
4th Quarter
Percent
Received
Sales Tax 30,694,440$ 32,005,340$ 104.3% 31,074,690$ Property Tax 24,419,910 25,253,480 103.4% 23,409,600 Hotel/Bed Tax 3,152,580 4,237,640 134.4% 4,153,140 Licenses, Permits, & Fees 3,081,550 4,133,760 134.1% 4,481,160 Total Key Revenues 61,348,480 65,630,220 107.0% 63,118,590 All Other Revenues 25,411,280 23,038,210 90.7% 32,411,970 Total Revenues 86,759,760$ 88,668,430$ 102.2% 95,530,560$ Receipts -
Prior Year
4th Quarter
Quarterly Financial Report - Fourth Quarter Ending June 30, 2023 Page 4 of 5 Police. Under budget by
about $3 million or about 8.5
percent, mainly due to vacant
positions which have resulted
in salary (and benefits) savings
of $2.9 million through June.
Fire. Under budget by $1.2
million or about 9.2 percent,
due to vacancies, fewer mutual
aid responses resulting in lower
overtime costs, as well as
some fire equipment purchases
not occurring as planned.
Community Development.
Under budget 22.7 percent or approximately $1 .5 million because of vacancies in the Planning and Community Services divisions and the timing of expenditures for contractual services. The contract for the General Plan Update will extend into the next fiscal year. In addition, the pending payment of the fourth-quarter invoice for contractual services with Santa Barbara County for Animal Control Services accounts for a portion of the budget underrun. The quarterly payments for animal control services are $215,135 totaling $850,540 for fiscal year 2022-23. City Manager’s Office. Under budget 16.1 percent or approximately $1.4 million, due to vacant positions mostly in the Information Technology division and primarily in the first half of the fiscal year.
Four of the five vacant positions were filled in the third quarter. In addition, some contractual service agreements and capital purchases were not complete by fiscal year -end and are contributing to the underrun.
Finance. Under budget 17.9 percent or $793,000, due to vacant positions, mostly in the first part of the year, in the Accounting and Budget functional areas. Recruitments in the past three quarters have been successful, dropping the number of vacancies from seven to two. Other General Fund Departments. The remaining General Fund departments are under budget by between 7 percent and 15.2 percent as a result of vacant positions and incomplete contract service agreements. Public Works has the largest percentage of budget savings at 15.2 percent, and Recreation and Parks has the largest dollar budget savings at approximately $842,000.
The chart to the left
summarizes General Fund
costs by type and shows
that with the exception of
Materials and Supplies,
each type of operating cost
is within the budget. Staffing
is under budget by
approximately $ 7.2 million
or 11.6 percent due to
numerous vacancies
throughout operational
departments, with the majority occurring in the Police Department and during the first six months of the fiscal year. Recently, the labor market has eased and the City has been much more successful in hiring full-time personnel. Contracts & Services is under budget by 19.3 percent or about $2.1 million due to some service agreements that were not complete by year -end, including wo rk on the General Plan Update project and the grant funded, Recreation and Parks Santa Maria Outdoor Recreation Experience (SMORE) program. Both contracts are multi-year agreements and will continue in the next fiscal year.
The timing of the fourth quarter payment of $215,135 toward the Animal Services contract is also contributing to the underrun. Materials and Supplies are over budget by 10.5 percent or $384,000 and is caused by increases in electricity, gas, and water costs (rates), making it more expensive to operate and General Fund Budget
22-23
YTD Actual
Percent
Expended
21-22
YTD Actual
Police 36,060,710$ 33,007,640$ 91.5% 28,368,250$
Fire 12,719,220 11,551,200 90.8% 12,526,380
Recreation & Parks 11,987,630 11,145,360 93.0% 9,622,120 Finance 4,425,710 3,632,480 82.1% 3,127,710 Community Dev. 6,570,820 5,080,250 77.3% 3,977,210 Public Works 4,345,200 3,682,630 84.8% 3,272,890 City Manager's Office 8,800,400 7,381,270 83.9% 7,619,780 City Attorney's Office 1,323,640 1,239,280 93.6% 1,062,800 Mayor & Council 196,220 191,320 97.5% 169,090 Sub-Total 86,429,550 76,911,430 89.0% 69,746,230 Transfers 3,371,980 11,757,000 348.7% 25,784,330 Total 89,801,530$ 88,668,430$ 98.7% 95,530,560$
Budget
22-23
YTD Actual
Percent
Expended
21-22
YTD Actual
Staffing 62,054,470$ 54,862,760$ 88.4% 50,185,950$
Contracts & Services 11,163,320 9,007,600 80.7% 6,652,010 Materials & Supplies 3,650,480 4,034,650 110.5% 3,512,350 Maintenance & Operations 7,735,590 7,717,580 99.8% 8,020,670 Capital Outlay 905,540 368,690 40.7% 455,100 Sub-Total 85,509,400 75,991,280 88.9% 68,826,080 Debt Service 920,150 920,150 100.0% 920,150 Transfers 3,371,980 11,757,000 348.7% 25,784,330 Total 89,801,530$ 88,668,430$ 98.7% 95,530,560$
Quarterly Financial Report - Fourth Quarter Ending June 30, 2023 Page 5 of 5 maintain City buildings and parks. Capital is under budget by 59.3 percent or nearly $537,000 because some equipment ordered in the fourth quarter, including the unexpected replacement of the pool heater, were not received before June 30, 2023. In addition, some planned purchases for equipment for the Fire Department did not occur. The debt service expenditure includes $634,210 for the final annual payment from the Fire Department to the Solid Waste Collection Fund for the payoff of the CalPERS Side Fund, and $266,910, total semi-annual lease financing payments for the CAD/RMS system.
ENTERPRISE FUNDS
The Statement of Revenues and Expenses for the fourth quarter ending June 30, 2023, for the three enterprise funds, are shown on the chart below.
Water/Wastewater Fund. Revenues
exceeded expenditures by $ 13.2
million, which is about $1.8 million more
than last year. Revenues increased 1.3
percent or $ 780,000 compared to the
prior year due to higher revenues
generated through increases in the City
Council-approved water rates and user
fees. Expenses are $980,000 less than
last year primarily due to lower debt
service payment of $ 1.5 for the 2021A
Refunding Bonds compared to the prior
year's payment of $ 4.3 million for the
1997 Certificate of Participation (97
COPs) and 2012A Refunding Bonds. The 97 COPs and 2012A Refunding Bonds were refinanced in November 2021 with the issuance of 2021A Refunding Bonds. Through the third quarter, Water and Wastewater operational expenses are under budget by 13.6 percent as a result of personnel savings from vacant positions and fewer maintenance and contractual services agreements needed than expected.
Solid Waste Fund. The Solid Waste Fund reports refuse collection and disposal activities. Through the fourth quarter, Solid Waste revenues exceeded expenditures by approximately $7.2 million as a result of operational costs being under budget by approximately $ 3.6 million or 10.5 percent, combined with relatively low capital expenditures made through June. However, budget of approximately $10.6 million is expected to be carried forward to 2023-24 to complete several capital projects, including $6.2 million towards development of the Integrated Waste Management Facility at Los Flores and $2.3 million for the landfill collection gas system expansion project. Compared to the prior year, revenues increased by $ 8 million, and expenditures decreased by $3.2 million.
Transit Funds. The City operates the Santa Maria Regional Transit (SMRT) and Breeze Transit systems, which are funded by a combination of Federal grants, State transportation funds, and user fares.
Fare revenue through the fourth quarter is approximately $ 607,000, which is about $ 75,000 less than fares earned through the fourth quarter of the prior year. This variance is attributed to a fewer number of bus passes purchased by local school districts this year as districts restored school bus service. In addition, in the pr ior year, there were one -time purchases of bus passes from Allan Hancock College (AHC) and other grant programs that allowed free AHC student bus rides.
Transit capital expenditures include $1.7 million for the purchase of two electric replacement, $1.1 million towards transit fleet electrification infrastructure , $427,300 to acquire land for the Jones Street Multi- Purpose Trail, and $145,300 for bus stop improvements. The farebox ratio through June 30, 2023, is 8 percent based on fares received and operating expenses recorded to date.
Water/
Wastewater Solid Waste
Public
Transit
55,233,200$ 32,198,350$ 607,050$
Interest Income 1,258,450 521,760 260,890
Other Revenue 2,253,920 6,496,720 10,557,832
58,745,570 39,216,830 11,425,772
17,175,990 30,317,130 7,608,110
3,504,610 1,701,650 3,556,750
23,401,100
1,498,350
45,580,050 32,018,780 11,164,860
13,165,520$ 7,198,050$ 260,912$
State Water Payments
Total Expenses
Revenues/Expenses
Total Revenues
Revenues
Charges for Service
Expenses
Operating
Debt Service
Capital Expenditures