Quarterly Financial Report: Third Quarter Ending March 31, 2024 1 QUARTERLY
FINANCIAL
REPORT
THIRD QUARTER ENDING
MARCH 31, 2024
ATTACHMENT A
1 MAYOR
Alice Patino
MAYOR PRO TEM
Gloria Soto
COUNCIL
Carlos Escobedo
Maribel Aguilera-Hernandez
Mike Cordero
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
QUARTERLY
FINANCIAL
REPORT
CITY OF SANTA MARIA, CA
V
TABLE OF CONTENTS
ECONOMIC INDICATORS ................................................... 1 GENERAL FUND ................................................................ 2 MEASURE U FUND ............................................................. 5 ENTERPRISE FUNDS ............................................................ 6
WATER/WASTEWATER FUND
SOLID WASTE FUNDS
PUBLIC TRANSIT FUNDS
FY 2024-26 BIENNIAL BUDGET DEVELOPMENT ..................... 7 FUND BALANCE ................................................................ 8
GENERAL FUND
MEASURE U FUND
Quarterly Financial Report: Third Quarter Ending March 31, 2024
1 ECONOMIC INDICATORS
Nationally, economic growth slowed to 1.6 percent in the first three months of the year, following robust growth of 4.9 and 3.4 percent in the third and fourth quarters of 2023. There was a sharp increase in imports and a slowdown in government spending. Consumer spending grew a solid 2.5 percent in the first quarter. Inflation is hotter than expected, up th ree months in a row. Gasoline, insurance, and rent are among the top culprits. Inflation has surged again, according to the March consumer price index report. Overall prices for everyday goods increased 3.5 percent from a year ago.
Gas prices are climbing, which they do in the spring. The national average in mid-April climbed to $3.56 per gallon. The average in California was $5.45, and it was $5.58 in Santa Barbara County. Insurers have been hiking premiums, and refusing to renew policies, to offset their rising costs due to extreme weather and the higher cost of new cars.
The US economy added 303,000 jobs in March, higher than the average monthly gain of 231,000 over the prior 12 months. The unemployment rate changed little at 3.8 percent. Job gains occurred in health care, government, and construction. The jobless rate has been in a narrow range of 3.7 to 3.9 percent since August 2023. One big reason why the labor market continues to defy expectations is the result of a surge in immigration over the past year. That population boom is supporting thousands more jobs that otherwise would not be sustainable, according to a recent report from the Brookings Institution. At the same time, it has not caused there to be fewer jobs available.
California’s unemployment rate of 5.3 percent in February was the highest in the nation. This is the first year since 1994 the state ranked last in the nation for job growth on a percentage point basis. California has large numbers of workers in businesses with big seasonal swings – hospitality, agriculture, and retail.
Other economically volatile industries, major employ ers in California, include technology, real estate, and entertainment.
California’s job market expansion turned 46 months old in February, according to the Employment Development Department which reported a gain of 3 million jobs since the pre-pandemic peak in February 2020.
California-based fast-food workers for chains with 60 or more locations around the nation now earn at least $20 an hour beginning in April, $4 higher than the overall State minimum wage of $16 that took effect January 1st. This affects about half a million workers. The objective is to elevate the standard and ensure that workers are better equipped financially to meet their household expenses.
The State budget outlook continues to evolve as va rious tax payments came in significantly weaker than expected and economic headwinds slow re venues. In mid-April the Legislature reduced spending by about $17 billion. The true size of the deficit has been difficult to pin down. In January, Governor Newsom insisted it was about $38 billion. Th e nonpartisan Legislative Analyst’s Office said it was actually $58 billion because Newsom did not include some reductions in public education spending. Then in February – after State revenues continued to come in below expectations – the LAO revised its estimate to as much as $73 billion. Th e governor will announce an updated deficit number in May – in the “May Revise” after Californians have filed their tax returns and officials have a better idea of revenues.
People want to live in Santa Maria. The local home market remains strong, according to the Santa Maria Association of Realtors. The sale to list price ratio was at or even a couple percent above asking price much of the past year, meaning sellers typically get asking price. Over the past year, the median selling price was consistently in the range of $550,000 to $600,000 and touched $650,00in mid-February 2024. Inventory remains constrained with fewer properties for sale now than a year ago. Homes are on Quarterly Financial Report: Third Quarter Ending March 31, 2024
2 ECONOMIC INDICATORS (CONTINUED)
average staying on the market for about one or two weeks, compared to a month a couple years ago. The existing Santa Maria house median sales price in February was $675,000 up 11.6 percent from a year earlier, according to the California Association of Realtors.
Across the County, there were 132 existing home sale s in February, up 23.4 percent, according to the California Association of Realtors. The median days on the market was 12, and the median price was $976,000, up 13.5 percent from a year earlier. Statewide, February’s median home price was $806,490, up 9.7 percent from a year ago. It was the tenth time in the last 11 months that the median price was above $800,000.
California’s insurance crisis reac hed new heights in April when leading insurer State Farm General announced it will not renew 72,000 property owner po licies statewide, joining Farmers, Allstate, and other companies in either not writing or limiting new policies or tightening underwriting standards.
GENERAL FUND
Current Budget
The current fiscal year General Fund appropriations as of the third quarter are $94.5 million compared to budgeted sources of $91.3 million, which includ es $2.02 million draw from the Local Economic Augmentation Fund (LEAF). At the end of FY 2022- 23 there were several projects, contracts, and transactions that were not yet completed. The re maining appropriations for those have been carried forward into FY 2023-24. A discussion of the chan ges in each category follows in the “Revenue Variances” and “Expenditure” sections of this report.
Year-Over-Year Comparison
The chart below compares revenue receipts, expenditures, and transfers for the third quarter ending March 31, 2024, versus the third quarter ending March 31, 2023.
KEY STATISTICS
Quarterly Financial Report: Third Quarter Ending March 31, 2024
3 GENERAL FUND (CONTINUED)
Major Revenues
Through the third quarter, revenue receipts are at 63. 2 percent of projections. Receipts from the four major General Fund revenue sources (Sales tax, Proper ty tax, Hotel Tax, Licenses, Permits, & Fees), as shown in the top chart on the right, account fo r approximately 74 percent of total General Fund revenues. Revenues are less than the third quarter rece ipts from prior year primarily due to sales tax and hotel tax relative declines reflecting cons umers’ concern about the economy. Additionally, community development fees for services show a decline compared to prior year.
Expenditures
Through the third quarter,
expenditures are at 67.2 percent of
total budget. The Expenditures
chart to the right presents shows
that each type of operating cost is
trending within budget. Staffing is
under budget by 6.7 percent
through the third quarter, due to
vacancies mostly experienced in
the Police Department.
Recruitment of lateral and entry
positions will continue to be the
Department’s focus to fill 30
vacancies. Contracts & Services is
under budget by 17.4 percent, or
$2.2 million due to timing of the
General Plan Update project,
which will be carried forward into
the next year. Capital Outlay is under budget by 17. 5 percent, or $119,300, due to the timing of some planned capital purchases for the Fire Department.
Revenue Variances
Property Tax is the only key revenue experiencing an increase over last year. Here are the highlights of what is driving the variances in these individual revenue sources received through the third quarter.
Key variances include:
Property Tax: The bulk of these payments are received through Santa Barbara County in December, January, April, and May of each year . Property Tax received is 7.5 percent, or $988,600, more than last fiscal year.
Sales Tax: Receipts are 5.8 percent, or $1.4 million, less than last year. With concerns about the economy still looming, consumers
continue to reduce spending in the
categories of general consumer
goods in discount stores, home
furnishings, and electronics, as well
as autos-transportation because of
Quarterly Financial Report: Third Quarter Ending March 31, 2024
4 GENERAL FUND (CONTINUED)
the challenges posed by elevated Auto prices, escalating financing expenses, and diminished access to credit.
Hotel/Bed Tax: Through March, Transient Occupa ncy Tax (TOT) receipts are 7.2 percent, or $200,000, less than last fiscal year and behind es timates by 14.5 percent, or $620,900. The year- over-year decline is reflective of broader travel options opening up post-pandemic. Licenses, Permits, & Fees: Revenue of $2.8 m illion exceeds projections by 14.7 percent, or $456,700, but is 10.5 percent, or $325,700, less than first nine months of FY 2022-23. This year’s revenue has included the issuance of 1,919 building permits including 19 permits for the Skyview Estates single family residential neighborhood, wh ich is planned for the construction of 58 new single-family homes on Santa Maria Way, a new veterinary clinic located on Miller Street, and 331 Accessory Dwelling Units (ADUs). This is a slight decline compared to the first nine months of FY 2022-23, which included the issuance of 1,950 building permits; however, permit activity has continued to exceed projections due to ADU permit applications and overall development activity in Santa Maria.
Expenditures
For the third quarter, ending March 31, 2024, operating expenditures are 67.2 percent of total budget.
The chart below presents the percentage of expenditures by department:
Key variances include:
Community Development: Under budget by 17.7 pe rcent, or $1.2 million, is primarily due to timing of expenditures for contractual servic es. The contract for the General Plan Update extended into the current fiscal year and will be carried forward into the next fiscal year as the work continues.
Sales in various retail sectors, including family apparel, electronics, and appliances, declined as consumer spending shifted towards travel and entertainment. The downturn extended to business-industrial returns, paralleling the contraction of the US Purchasing Manufacturing Index from November 2022 through November 2023, indicating a nationwide d e c r e a s e i n i n d u s t r i a l a c t i v i t i e s . - HdL, the City’s sales tax consultant
Quarterly Financial Report: Third Quarter Ending March 31, 2024
5 GENERAL FUND (CONTINUED)
Fire: Under budget by 12.2 percent, or $1.5 m illion, due to vacancies and fewer mutual aid responses resulting in lower overtime costs, as well as timing of some capital purchases. Fire has recently hired multiple Firefighters and is nearing full-staffing level. A promotional recruitment to fill vacant Battalion Chief, Captain, and Engineer position is scheduled for July 2024. Recreation & Parks: Under budget by 12.1 percent, or $1.7 million, due to vacancies in Administration, Recreation and Parks divisions, as well as timing of contractual services. Public Works: Under budget by 9.2 percent, or $446,100, due to vacancies as well as timing of contract service agreements and operating and maintenance expenses. Police: Under budget by 5.1 percent, or $1.9 million, due to vacant positions which have resulted in salary (and benefits) savings of $1.7 million as recruitment of lateral and entry positions continues to be a focus for the department. For reference, salary savings through December were $1.5 million. There are currently 14 Police Of ficer vacancies, which is six fewer than were vacant last quarter; however, eight trainees are poised to complete the academy. Other General Fund Departments: The remaining General Fund departments are under budget by between 2.5 to 6.7 percent.
MEASURE U FUND
The following table shows that revenues received through March are at 74.5 percent of budget, or $20.0 million. Expenditures are 55.8 percent of budget, or $7.8 million under budget.
MEASURE U FUND
(in millions)
FY 2023-24
Budget
3Q 2024
Percent
Revenue $ 26,886 $ 20,036 74.5%
Expenses
Community Development $ 963 632 65.6%
City Manager’s Office 189 129 68.3%
Finance 3 - -
Library 1,232 851 69.0%
Recreation & Parks 3,692 2,135 57.8%
Fire 21,449 9,807 45.7%
Police 13,090 9,092 55.8%
Total Expenses $ 40,618 $ 22,646 55.8%
Most of the budget underrun, $6.3 million, is in the Fire Department and is primarily due to the timing of $9.4 million of capital projects, including the desi gn and construction of a training center, the renovation design of the Fire administration buildin g, and the purchase of a second ladder truck. The Police Department is under budget by about $725,200 due to capital purchases, including tasers and the body camera system that will be paid by usin g other available funds. Recreation & Parks is under budget by $634,200 due to vacancies in various stages of recruitment and timing of capital purchases.
Community Development is under budget by $90,700 due to Code Enforcement vacancies. The Library On February 12, the Santa Maria Fire Department started its own in-house Lateral Recruit Fire Academy with five lateral hires. This academy is put together by the Santa Maria Fire Department CADRE team.
Quarterly Financial Report: Third Quarter Ending March 31, 2024
6 MEASURE U FUND (CONTINUED)
is under budget by $73,500 primarily due to timing of
capital projects.
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 March, Measure U expended 89 percent on
Public Safety, 6 percent on Youth Services, and 5 percent on Quality of Life.
ENTERPRISE FUNDS
The Statement of Revenues and Expenses through th e second quarter ending March 31, 2024, for the three enterprise funds, are shown in the table below.
ENTERPRISE FUNDS
(in millions)
Water /
Wastewater
Solid
Waste
Public
Transit
Revenues
Charges for Service $ 40,297 $ 25,256 $ 446
Interest Income 1,376 513 196
Other Revenue 4,616 112 10,636
Total Revenues $ 46,289 $ 25,881 $ 11,278
Expenses
Operating $ 12,006 $ 22,068 $ 4,762
Capital 2,951 2,509 6,320
State Water Payment 17,625 - -
Debt Service 3,623 - -
Total Expenses $ 36,205 $ 24,577 $ 11,082
Revenues/Expenses $ 10,084 $ 1,304 $ 196
Water/Wastewater Funds
Revenues exceeded expenditures by $10.1 million, which is $3.5 million more than last year. Revenues increased 16.0 percent, or $6.4 million, compared to the prior year due to higher revenues generated through sales of metered water. Expenses ar e $2.9 million more than last year primarily due to an increase in debt service payments as well as payments to the Central Coast Water Authority. Through the third quarter, Water and Wastewater operational expenses are under budget by 17.0 percent due to personnel savings from vacant positions and timing of maintenance and contractual agreements.
Quarterly Financial Report: Third Quarter Ending March 31, 2024
7 ENTERPRISE FUNDS (CONTINUED)
Solid Waste Funds
The Solid Waste Fund reports refuse collection and disposal activities. Through the third quarter, Solid Waste revenues exceeded expenditures by $1.3 million because operational costs are under budget by 10.7 percent, or $3.7 million. Budget of $10.8 million was carried forward to 2023-24 to complete several capital projects, including $6.1 million towards development of the In tegrated Waste Management Facility at Los Flores and $2.3 million for the landfill collection gas system expansion project.
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 third quarter is approximately $446,500, which is about $22,100 more than fares earned through the third quarter of the prior year. This difference is attributed to an increase in ridership. The farebox ratio through March 31, 2024, is 9.4 percent based on fares received and operating expenses recorded to date.
FY 2024-26 BIENNIAL BUDGET
The City is currently developing the FY 2024-2 6 biennial budget. Public engagement will be encouraged at the City Council’s meetings in May and June, during which budget presentations and discussion will be conducted and feedback received. The final budget will be presented with a public hearing at the City Council meeting. Get the latest information on public meetings related to the development of the FY 2024-26 biennial bu dget by visiting the City’s website at:
https://www.cityofsantamaria.org/services/departments/city-clerk-records/agendas-reports- meeting-videos.
JUNE:
Final Proposed
budget
hearing
MAY:
Preliminary
budget
presented to
City Council
APRIL:
Preliminary
budget
updated
MAR‐APR:
Budget Team
decides on
new initiatives
FEB‐MAR:
Budget Team
reviews and
adjusts
requests
DEC‐FEB:
Depts. prepare
operating and
capital
requests
OCT‐NOV:
Baseline
budget
developed for
depts.
Quarterly Financial Report: Third Quarter Ending March 31, 2024
8 FUND BALANCE
General Fund
The table below shows, with 75 percent of the ye ar complete, revenues are at 63.2 percent of projections while expenditures are at 67.2 percent of appropriations. The beginning fund balance is an estimate because the City’s annual audit is not finalized.
GENERAL FUND
(in millions) Budget 3 rd Quarter Percent
Beg. Fund Bal. $ 10,072 $ 10,072
Revenues* 91,309 57,675 63.2%
Expenditures* 94,477 63,452 67.2%
Rev/Exp $ (3,168) $ (5,777)
Avail. Bal. $ 6,904 $ 4,295
*Includes Transfers
Measure U Fund
The table below shows, with 75 percent of the ye ar complete, revenues are at 74.5 percent of projections while expenditures are at 55.8 percent of appropriations. The beginning fund balance is an estimate because the City’s annual audit is not finalized.
MEASURE U FUND
(in millions) Budget 2 nd Quarter Percent
Beg. Fund Bal. $ 17,060 $ 17,060
Revenues* 26,886 20,036 74.5%
Expenditures* 40,618 22,646 55.8%
Rev/Exp $ (13,732) $ (2,610)
Avail. Bal. $ 3,328 $ 14,450
*Includes Transfers
This Page Intentionally Left Blank
MAYOR & CITY COUNCIL
Gloria Soto
Councilmember
District 3
Maribel
Aguilera-
Hernandez
Councilmember
District 4
Alice Patino
Mayor
At-Large
Carlos
Escobedo
Councilmember
District 1
Mike Cordero
Councilmember
District 2
City of Santa Maria, California
110 E. Cook Street
Santa Maria, CA 93454
cityofsantamaria.org
EXPLORE
the City’s budget online at
www.cityofsantamaria.org/services/departments/city-manager-s-office/city-budget
CITY OF SANTA MARIA DISTRICTS
DISTRICT 2
Mike Cordero
DISTRICT 1
Carlos Escobedo
DISTRICT 3
Gloria Soto
DISTRICT 4
Maribel Aguilera-Hernandez