1 Attachment A
City of Santa Maria
Quarterly Financial Report
First Quarter Ending September 30, 2023
MAYOR
Alice Patino
__
MAYOR PRO-TEM
Maribel Aguilera-Hernandez
__
COUNCIL
Mike Cordero
Carlos Escobedo
Gloria Soto
INTERIM CITY MANAGER
Alex Posada
REPORT PREPARED BY
Xenia Bradford
Interim Director of Finance
206 East Cook Street
Santa Maria, CA 93454
(805) 925-0951 Ext. 2215
www.cityofsantamaria.org
ECONOMIC INDICATORS ......... 1
GENERAL FUND ..................... 3
FUND BALANCE............................. 3
MAJOR REVENUES ........................ 3
REVENUE VARIANCES ................... 4
EXPENDITURES .............................. 5
MEASURE U FUND ................. 6
ENTERPRISE FUNDS ................ 7
WATER/WASTEWATER ................. 8
SOLID WASTE ................................ 8
PUBLIC TRANSIT ............................ 8
ECONOMIC INDICATORS
The still-resilient U.S. economy grew almost 5 percent in the third quarter of the calendar year , a robust figure that defied warnings of a recession, as higher wages from a tight labor market helped to fuel consumer spending and businesses restocked to meet the strong demand. It is unlikely that consumers will be able to maintain this level of spend ing say economists who expect spending to cool in early 2024.
The 4.9 percent figure was the best quarterly growth rate in two years, despite 11 consecutive interest rate hikes by the Federal Reserve, the highest mortgage rates in 22 years, and persistent inflation. During the prior quarter, the economy grew at 2.1 percent. In the past year, average hourly earnings have increased by
4.2 percent.
Economists believe a slowdown will happen soon. They point to lower savings rates, the depletion of trillions of dollars in pandemic governmental aid payments to households – which contributed to inflation, potentially higher long-term rates, and the resumption of student loan repayments.
Santa Maria City Hall
2 continued on p. 2
3 Quarterly Financial Report: First Quarter Ending September 30, 2023
ECONOMIC INDICATORS (CONTINUED)
The annual rate of inflation has fallen from a 40-year high of 9.1 percent in June 2022 to about 3.7 percent in September. Inflation remains above the Federal Reserve’s target of 2 percent. Its rate hikes have pushed 30 - year mortgage rates sharply higher toward 7.6 percent, constraining home sales and building. The number of homes sold each month are hovering near their lowest point in more than a decade.
At 3.8 percent, national unemployment remains close to a 50 -year low. California’s jobless rate stood at 4.9 percent (949,600 unemployed), up from 4.6 percent in August. Santa Barbara County’s rate was 3.7 percent, up from the year-ago estimate of 2.9 percent. The City of Santa Maria’s rate was 4.1 percent in September, up from 3.6 percent a year ago.
California’s minimum wage will increase from $15.50 per hour to $16 per hour for all employers on January 1, 2024. The State’s more than 500,000 fast-food workers will earn at least $20 an hour as of April 2024.
Governments continue facing huge deficits due to imbalances with expenditures and revenu es. The Federal government’s deficit soared to $1.7 trillion for the most recent Federal fiscal year that ended September 30.
California’s State Budget one year ago had a $97.5 billion surplus but that has morphed into a $31.5 billion deficit in part because tax revenues are falling below assumptions.
The City of Santa Maria’s revenues are up modestly but are matched or outpaced by expenses. The City has more operational needs than it can afford at this time. The City Council needs to brace for added expens es that will outpace added revenues, such as workers compensation rate s and increasing pension costs Capital projects funding will have to be examined because costs of projects are outpacing sources of funding.
Locally, fewer homes are on the market than a year ago. Comparing the 12 months through September 2023 with a year ago, the number of sold listings in zip code 93454 is down 32.8 percent. In zip code 93458 it is down 27.5 percent. Selling prices are close to the asking price. Of those homes sold in those zip codes through September, the ratio for zip code 93454 was 97.3 percent of sale to original list price. In zip code 93458, it was
97.5 percent of sale to original list price.
Santa Maria continues to move forward with downtown revitalization projects that are bringing housing and commercial businesses. Also, at least 1,300 new apartments have either been built or approved.
Source: realtor.com for the Santa Maria, CA housing market 4 Quarterly Financial Report: First Quarter Ending September 30, 2023
GENERAL FUND
Fund Balance
The table below shows that within the first quarter of the current fiscal year (25 percent of the year complet e), revenues are at 17.5 percent of projections while expenditures are at 19.8 percent of appropriations. The variances in projections are due primarily due to timing and the trends do not indicate a change in expected net position at the end of the fiscal year.
GENERAL FUND
(in millions) Budget 1st Quarter Percent
Beg. Fund Bal. $ 10,072 $ 10,072
Revenues* 90,878 15,948 17.5%
Expenditures* 92,744 18,373 19.8%
Avail. Bal. $ 8,206 $ 7,647
* Includes Transfers
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 revenue is not received until December and April each year. At the end of FY 2022 -23 there were several projects, contracts, and transactions that were not yet completed.
The remaining appropriations for those have been carried forward into FY 2023 -24, which accounts for some of the reasons why appropriations are exceeding estimated revenues. A discussion of the changes in each category follows in the “Major Revenue Variance” section of this report.
The City adopted the 2023 -24 Budget with the intent of having to use approximately $2.02 million in one -time Local Economic Augmentation Fund (LEAF) to help balance the 2023-24 Budget.
The chart below provides summary comparison information on revenues, expenditures, and transfers for the first quarter ending September 30, 2023, versus the first quarter ending September 30, 2022.
Major Revenues
The four major General Fund revenue
sources, as shown in the chart below,
account for approximately 67 percent
of total General Fund revenues.
There are numerous differences
between revenues received during
this and the prior year. The discussion
on the next page presents a picture of
what is driving these revenue
differences.
5 Quarterly Financial Report: First Quarter Ending September 30, 2023
GENERAL FUND (CONTINUED)
Revenue Variances
Two of the four key revenues are showing increases with Sales Tax revenue experiencing the largest dollar increase over last year . Here are the highlights of what is driving the variances in these individual revenue sources received through the first quarter.
Key variances include:
Sales Tax: Receipts through the first quarter are approximately 7.4 percent or about $581,200 higher compared to last f iscal year. All industry groups are contributing to the year -over-year increas e; however, current economic conditions are experiencing a slowdown. Autos-transportation reported a mix of results as new and used car dealers had lower sales as consumers were cautious in their spending.
Property Tax: The bulk of these payments are received through Santa Barbara County in December, January, April, and May of each year. The City has not received property tax as of September 30, 2023. Hotel/Bed Tax : Through September, Transient Occupancy Tax (TOT) receipts are approximately $372,000 or 42.8 percent more than last fiscal year and ahead of estimates by about $172,700 or 4.0 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 attractin g visitors to the area. TOT generated about 7.8 percent of General Fund revenues. Licenses, Permits, & Fees: Permit revenue is at $1.1 million, exceeding projections by 9.0 percent, or nearly $279,600, and is about $305,600 less than the first quarter for the prior fiscal year. During the first quarter, the City issued 87 permits for accessory dwelling units (ADUs), which is less than the 120 ADU permits issued for the same quarter last year. This is the primary reason revenue declined compared to the first quarter last year. However, revenue is still higher than the projected amount, since ADU permit activity is still higher -than-anticipated. There were no permits issued for new non - residential development during this quarter, aside from tenant improvements.
6 Quarterly Financial Report: First Quarter Ending September 30, 2023
GENERAL FUND (CONTINUED)
Expenditures
For the first quarter, ending September 30, 2023, expenditures are 19.8 percent of total appropriate annual budget. The chart below presents the percentage of expenditures through the first quarter by department:
Key variances include:
Fire: Under budget by $947,100 or about 8.2 percent, due to vacancies, fewer mutual aid responses resulting in lower overtime costs, and some fire equipment purchases that have not yet been made. Community Development: Under budget 6.3 percent or approximately $417,700 due to vacancies in the Planning and Community Services divisions, which were filled during the quarter, and the timing of expenditures for contr actual services. The contract for the General Plan Update extended into the current fiscal year.
Public Works: Under budget 6.0 percent, or approximately $292,400, due to vacancies as well as timing of contract service agreements and operating and maintenance expenses. Police: Under budget by about $1.7 million or about 4.6 percent, mainly due to vacant positions which have resulted in salary (and benefits) savings of $1.6 million through September. Mayor & Council: Under budget 3.2%, or about $6,60 0, due to timing of expenditures for contractual services.
Finance: Over budget 3.6 percent or $167,400, primarily due to the semi -annual lease financing payment for the Computer-Aided Dispatch/Records Management System (CAD/RMS). Other General Fund Depart ments: The remaining General Fund departments are under budget by between 2.7 to 2.8 percent for the City Attorney’s Office and City Manager’s Office as a result of vacant positions and/or incomplete contract service agreements.
7 Quarterly Financial Report: First Quarter Ending September 30, 2023
GENERAL FUND (CONTINUED)
The chart to the left summarizes General Fund costs by type and shows that with the exception of Capital Outlay, each type of operating cost is within budget. Staffing is under budget by $3.4 million or 5.4 percent due to vacancies, with the majority occurring in the Police Department and during the first three months of the fiscal year. There are currently 33 vacancies in the Police Department with all actively being recruited and at various stages of the process.
Contracts & Services is under budget by 3.7 percent or about $434,500 due to timing of the General Plan Update project and the grant funded, Recreation and Parks Santa Maria Outdoor Recreation Experience (SMORE) program. Materials and Supplies are under budget by 2.4 percent or $104,200. Capital is over budget by 6.4 percent or nearly $41,900 largely due to the unexpected replacement of the pool vacuum. The debt service expenditure includes the first payment of semi -annual lease financing payments for the Computer-Aided Dispatch/Records Management System (CAD/RMS) system.
MEASURE U FUND
The following table shows that revenues received through September are at 26.1 percent of budget, or $7.0 million. Expenditures are 18.4 percent of budget or $2.7 million under budget.
Most of the budget underrun, $2.2 million, is in the Fire Department and is primarily due to $9.3 million of capital projects, including 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
order. The Police
Department is under
budget by abo ut $274,000
due to capital purchases,
including tasers and the
body camera system that
were not acquired before
fiscal year -end 2022 -23.
Community Development
is under budget by $52,000
due to Code Enforcement
position vacancies. The
Library is under budge t by
$30,000 due to timing of
capital projects.
MEASURE U FUND
(in millions)
FY 2023-24
Budget
1Q 2024
Percent
Beginning Fund Balance $ 17,060 $ 17,060
Revenue $ 26,886 $ 7,030 26.1%
Expenses
Community Development $ 963 189 19.6%
City Manager’s Office 189 39 20.5%
Finance 3 - -
Library 1,232 278 22.6%
Recreation & Parks 3,692 758 20.5%
Fire 21,449 3,202 14.9%
Police 13,090 2,998 22.9%
Total Expenses $ 40,618 $ 7,464 18.4%
Revenues/Expenses $ (13,732) $ (434)
Ending Fund Balance $ 3,328 $ 16,626
8 9
Quarterly Financial Report: First Quarter Ending September 30, 2023
MEASURE U FUND (CONTINUED)
Recreation & Parks programs are under budget by $166,000 due to timing of capital purchases. The budget in the City Manager’s Office is for the costs associated with maintaining the City’s mass notification system database and the Public, Education, and Government (PEG)
Production Manager position, which was restored to full - time through adoption of the 2023 -24 budget. The
Finance budget is for the annual independent audit of
Measure U financial activity.
Through September, 89 percent of Measure U
expenditures have been spent on Public Safety, 6 percent on Youth Services, and 5 percent on Quality of Life.
ENTERPRISE FUNDS
The Statement of Revenues and Expenses for the first quarter ending September 30, 2023, for the three enterprise funds, are shown on the table below.
ENTERPRISE FUNDS
(in millions)
Water /
Wastewater
Solid
Waste
Public
Transit
Revenues
Charges for Service $ 15,237 $ 8,863 $ 142
Interest Income 508 214 106
Other Revenue 1,192 20 755
Total Revenues $ 16,937 $ 9,097 $ 1,003
Expenses
Operating $ 3,991 $ 6,642 $ 881
Capital 268 426 16
State Water Pymt 6,462 - -
Debt Service 749 - -
Total Expenses $ 11,470 $ 7,068 $ 897
Revenues/Expenses $ 5,467 $ 2,029 $ 106
10 The Utilities Department Administration Building has been a certified California Green Business since February 2018 and is currently recertifying as a Green Business with the assistance of the Public Works Department / Facilities Maintenance Division.
11 Quarterly Financial Report: First Quarter Ending September 30, 2023
ENTERPRISE FUNDS (CONTINUED)
Water/Wastewater Fund
Revenues exceeded expenditures by $5.5
million, which is about $3.5 million more than
last year. Revenues increased 37.2 percent or
$4.6 million compared to the prior year due to
higher revenues generated through sales of
metered water. Expenses are $1.1 million more
than last year primarily due to an increase in
payments to the Central Coast Water Authority.
Through the first quarter, Water and
Wastewater operational expenses are under
budget by 9.6 percent as a result of personnel
savings from vacant posi tions and timing of
payment of ongoing maintenance and
contractual services agreements.
Solid Waste Fund
The Solid Waste Fund reports refuse collection and disposal activities.
Through the first quarter, Solid Waste revenues exceeded expenditures by approximately $2.0 million as a result of operational costs being under budget by approximately $2.1 million or 6.0 percent. Budget of approximately $10.8 million was carried forward to 2023 -24 to complete several capital projects, including $6.1 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 and expenditures increased by $81,000 and $692,600, respectively.
Public 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 first
quarter is approximat ely $142,000, which is about
$22,100 more than fares earned through the first
quarter of the prior year. This difference is attributed to an increase in ridership. The farebox ratio through
September 30, 2023, is 16.1 percent based on fares
received and operating expenses recorded to date.