Quarterly Financial Report: Fourth Quarter Ending June 30, 2024 1 QUARTERLY
FINANCIAL
REPORT
FOURTH QUARTER ENDING
JUNE 30, 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 ............................................................. 6 ENTERPRISE FUNDS ............................................................ 7
WATER/WASTEWATER FUND
SOLID WASTE FUNDS
PUBLIC TRANSIT FUNDS
FY 2024-26 BIENNIAL BUDGET .......................................... 8 FUND BALANCE ................................................................ 8
GENERAL FUND
MEASURE U FUND
Quarterly Financial Report: Four th Quarter Ending June 30, 2024
1 ECONOMIC INDICATORS
Economic growth in the first half of the year wa s solid, with the economy expanding a robust 2.8 annualized rate in the second quarter. In early A u g u s t c a m e e c o n o m i c n e w s t h a t p u t a c r a c k i n investor confidence. The Department of Labor reported that the economy created fewer jobs in July than expected and the unemployment rate rose to 4. 3 percent. Still, the jobless rate has improved in every month of 2024 except February and now July.
Inflation remains a problem – most recently 3.0 percent for June - so pessimism has been felt broadly.
Purchasing a home in many markets across the na tion remains challenging with home prices at a record high and mortgage rates still elevated. Th e booming job market in the aftermath of the pandemic has recently returned to normal and it is tougher to find a new job. The 10-year median is 243,000 jobs added each month. In July the economy added 114,000 jobs.
Nationally, the housing market saw the median sales prices reach $426,900 in June, up 4.1 percent from last year. Higher mortgage rates contributed to a slowdown in sales for June, which were down
5.4 percent from a year ago. Rates are close to 6.5 percent. The pace of existing home sales jumped at the start of the year but remains far below typical levels.
In California, sales of existing homes dipped 0.8 percent in June, and the statewide median home price was $900,720, up 7.5 percent from a year ago, according to the California Association of Realtors. The group reported all major regions experienced an incr ease in their median price from a year ago in June. The Central Coast posted the biggest sales jump on a year-over-year basis, increasing 8.9 percent from a year ago. Redfin reported in June that Santa Maria home prices were up 4.1 percent, selling for a median price of $611,000. Zillow placed the median at $627,258 as of early August, up 8.6 percent from a year earlier.
California’s unemployment rate of 5.2 percent in June was unchanged from May – and remains the highest of any state. California’s job market expans ion officially entered its 50th month, according to the State Employment Development Department. Calif ornia gained 107,100 nonfarm payroll jobs in the first six months of 2024, which is more than do uble the number of nonfarm payroll jobs the State gained during the same time period last year (+38,400), Seven of California's 11 industry sectors gained jobs in June with the largest increase in Trade, Transportation, and Utilities (+9,800), adding jobs for the fourth consecutive month.
Due to California’s stubbornly high unemployment rate, Calmatters reported, the Employment Development Department expects the unemployment insurance fund to receive $4.8 billion in payroll taxes this year but to pay out $6.8 billion in benefits, meaning the fund’s deficit, including Federal loans, will reach $21.7 billion by the end of this year and $22 billion in 2025.
Santa Barbara County’s unemployment rate was 4.2 percent in June, and Santa Maria was at 5.0 percent.
California will make widespread cuts to state gove rnment operations, prisons, housing programs and health care workforce development in order to mainta in its social safety net as it moves to close a multibillion-dollar budget deficit. The $297.9 billio n budget relies on reserves and other means to address a remaining revenue gap estimated at $56 billion over the next two years.
Santa Barbara County adopted a $1. 59 billion budget, an increase of $100.3 million and 119 full-time equivalent positions from a year ago. A $6.6 million budget deficit in the General Fund is covered using reserves.
Quarterly Financial Report: Fourth Quarter Ending June 30, 2024
2 ECONOMIC INDICATORS (CONTINUED)
Since April 1st, when California’s minimum wage for fast food workers increased from $16 to $20 per hour, customers have seen prices climb. The objecti ve is to elevate the standard and ensure that workers are better equipped financially to meet their household expenses.
Gas prices are lower. The national average in early August was $3.48 per gallon, 30 cents less than one year ago. The average in California was $4.62, and it was $4.70 in Santa Barbara County.
The average rent in Santa Maria was $2,333 in earl y August according to Zillow.com. 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 nationwide av erage annual cost of full-coverage car insurance hit $2,329 in June, up from $1,601 in January 2021, per Insurify, a digital insurance agent that helps users collect quotes from multiple insurers.
GENERAL FUND
GENERAL FUND
(in millions)
Adopted
Budget
Current
Budget
Year-End
Estimates
2023-24
Actual
Percent of
Current Budget
Revenues & Transfers In
Sales Tax $ 32,188 $ 32,188 $ 31,057 $ 31,825 98.9% Property Tax 25,696 25,696 25,696 26,724 104.0%
Hotel/Bed Tax 4,273 4,273 4,273 3,987 93.3%
Licenses, Permits & Fees 3,104 3,104 3,601 3,684 118.7% All Other Revenues 25,575 26,078 25,684 26,985 103.5% Total Revenues & Transfers In $ 90,836 $ 91,339 $ 90,311 $ 93,205 102.0%
Expenses & Transfers Out
Staffing $ 62,492 $ 62,761 $ 59,725 $ 59,863 95.4%
Contracts & Services 10,819 12,317 12,376 12,006 97.5% Materials & Supplies 4,306 5,041 4,925 4,827 95.7% Maintenance & Operations 9,210 9,226 9,222 9,173 99.4% Capital Outlay 5 1,095 1,015 1,051 96.0%
Debt Service 267 267 267 267 100.0%
Transfers 3,737 6,052 4,283 4,757 78.6%
Total Expenses & Transfers Out $ 90,836 $ 96,759 $ 91,813 $ 91,944 95.0%
Budget
The table above presents the budget as adopted , amended, and estimated along with unaudited actual expenditures as of June 30, 2024. General Fund appropriations adopted on June 20, 2023 were
KEY STATISTICS
Quarterly Financial Report: Four th Quarter Ending June 30, 2024
3 GENERAL FUND (CONTINUED)
$90.8 million compared to budgeted sources of $90.8 million, inclusive of a $2.02 million draw from the Local Economic Augmentation Fund (LEAF). The current fiscal year General Fund appropriations as of year-end are $96.8 million compared to budgeted sources of $91.3 million, which includes a $2.02 million draw from the Local Economic Augmentation Fund (LEAF). Year-end estimates for revenues and expenditures were developed using a range of sources, including historical revenue analysis economic data, input from the City’s sales and property tax consultant, City departments, and the County of Santa Barbara.
Year-Over-Year Comparison
The chart below compares revenue receipts, expenditures, and transfers for the fourth quarter ending June 30, 2024, versus the fourth quarter ending June 30, 2023.
Major Revenues
Through the fourth quarter, revenue receipts are at 102.0 percent of projections. Receipts from the four major General Fund revenue sources (Sales tax, Property tax, Hotel Tax, Licenses, Permits, & Fees), as
Quarterly Financial Report: Fourth Quarter Ending June 30, 2024
4 GENERAL FUND (CONTINUED)
shown above in the Revenues chart on the left, account for approximately 71 percent of total General Fund revenues. Revenues are more than the fourth quarter receipts from the prior year primarily due to property tax; however, the increase is offset by sales tax and hotel tax declines reflecting consumers’ concern about the economy. Additionally, community development fees for services show a decline compared to prior year. Property Tax is the only key revenue experiencing an increase over last year.
Revenue Variances
Here are the highlights of what is driving the vari ances in these individual revenue sources received through the fourth 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 5.8 percent, or $1.5 million, more than last fiscal year.
Sales Tax: Receipts are 0.6 percent, or $180 thou sand, 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 furn ishings, and electronics, as well as autos- transportation because of the challenges posed by elevated Auto prices, escalating financing expenses, and diminished access to credit.
Hotel/Bed Tax: Through June, Transient Occupancy Tax (TOT) receipts are 5.9 percent, or $250 thousand, less than last fiscal year and behind estimates by 6.7 percent, or $286 thousand. The year-over-year decline is reflective of broader travel options opening up post-pandemic. Licenses, Permits, & Fees: Revenue of $3.7 millio n exceeds projections by 18.7 percent, or $579 thousand, but is 10.9 percent, or $450 thousand, less than FY 2022-23. This year’s revenue includes the issuance of 2,349 building permits including permits for the Skyview Estates single family residential neighborhood which is planned for the construction of 58 new single-family homes on Santa Maria Way, 2 new duplexes, a new veterinary clinic located on Miller Street, Heritage Lofts Apartments in the Downtown area, and 384 Accessory Dwelling Units (ADUs). This is a slight decline compared to FY 2022-23, which includ ed the issuance of 2,391 building permits; however, permit activity has continued to exc eed projections due to ADU permit applications and overall development activity in Santa Maria.
Expenditures
Through the fourth quarter, expenditures, includin g the balances at year-end pending carryover for encumbrances ($929 thousand) and capital projects ($409 thousand), are at 95.0 percent of total budget. Expenditures, as shown above in the Expenditure Categories chart on the right, are trending within budget.
Quarterly Financial Report: Four th Quarter Ending June 30, 2024
5 GENERAL FUND (CONTINUED)
Expenditure Variances
Financial Reporting policies require explanation of variances greater than five percent of major categories and departmental variances greater than 10 percent. Staffing: Under budget by 4.6 percent through the fourth quarter, due to vacancies mostly experienced in the Police Depart ment. Recruitments of lateral and entry positions continue to be the Department’s focus to fill 28 vacancies.
Transfers Out: Under budget by 21.4 percent due to less need for the General Fund to subsidize Library operations.
The chart below presents the percentage of expenditures by department:
Key variances include:
Fire: Under budget by 11.1 percent, or $1.3 m illion, due to vacancies and fewer mutual aid responses resulting in lower overtime costs, as well as timing of some capital purchases. A promotional recruitment to fill vacant Battalion Chief, Captain, and Engineer positions has been tentatively scheduled.
The City Council authorized, as part of the 2023-24 Budget, all General Fund revenues above expenditures be transferred equally to the Local Economic Augmen tation Fund (LEAF), General Capital Project Fund, and Reserve for Unfunded Pension Benefits. That calculation will be completed during the FY 2023-24 year- end process currently underway.
Quarterly Financial Report: Fourth Quarter Ending June 30, 2024
6 MEASURE U FUND
MEASURE U FUND
(in millions)
Adopted
Budget
Current
Budget
Year-End
Estimates
2023-24
Actual
Percent of
Current Budget
Revenue $ 26,886 $ 26,886 $ 25,881 $ 26,546 98.7%
Expenses
Community Development $ 963 $ 963 $ 963 885 91.9%
City Manager’s Office 189 189 189 162 85.7%
Finance 3 3 3 3 100.0%
Library 1,188 1,232 1,221 1,227 99.6%
Recreation & Parks 3,590 3,692 3,692 3,333 90.3%
Fire 17,889 21,449 19,405 19,536 91.1%
Police 12,268 13,090 13,099 12,237 93.5%
Total Expenses $ 36,090 $ 40,618 $ 38,572 $ 37,383 92.0%
The table above presents the budget as adopted , amended, and estimated along with unaudited actual expenditures as of June 30, 2024. Measure U Fund appropriations adopted on June 20, 2023 were $36.1 million compared to budgeted sources of $26.9 million. Current appropriations as of year- end are $40.6 million (including carry over) compared to budgeted sour ces of $26.9 million. Year-end estimates for revenues and expenditures were developed using a range of sources, including historical revenue analysis economic data, input from the Ci ty’s sales and property tax consultant, and City departments.
Revenues received through June are at 98.7 percent of budget, or $26.5 million. Expenditures, including the balances at year-end pending carryover for encumbrances ($129 thousand) and capital projects ($6.6 million), are at 92.0 percent of budget, or $3.2 million under budget due to reallocation of funds in FY 2024-26. Most of the capital projects carryov er ($6.4 million) is for the Fire Department and is primarily due to the timing of capital projects, including parking lot and building maintenance, the expansion of Fire Station 1, acquisition of radios, and the purchase of a ladder truck.
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 June, Measure U expended 90 percent on Public
Safety, 5 percent on Youth Services, and 5 percent on
Quality of Life.
Quarterly Financial Report: Four th Quarter Ending June 30, 2024
7 ENTERPRISE FUNDS
The Statement of Revenues and Expenses through the fourth quarter ending June30, 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 $ 55,729 $ 34,464 $ 626
Interest Income 2,093 840 327
Other Revenue 4,455 461 18,458
Total Revenues $ 62,277 $ 35,765 $ 19,411
Expenses
Operating $ 18,752 $ 31,535 $ 7,778
Capital 5,080 3,470 11,306
State Water Payment 23,648 - -
Debt Service 3,623 - -
Total Expenses $ 51,103 $ 35,005 $ 19,084
Revenues/Expenses $ 11,174 $ 760 $ 327
Water/Wastewater Funds
Revenues exceeded expenditures by $11.2 million, which is $2.0 million less than last year. Revenues increased 6.0 percent, or $3.5 million, compared to the prior year due to higher revenues generated through sales of metered water.
Expenses are $5.5 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 fourth quarter, Water and Wastewater operational expenses are under budget by 11.2 percent due to personnel savings from vacant positions and timing of maintenance and contractual agreements.
Solid Waste Funds
The Solid Waste Fund reports refuse collection and disposal activities. Through the fourth quarter, Solid Waste revenues ex ceeded expenditures by $760 thousand.
Operational costs are under budget by 9.6 percent, or $3.4 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.
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 fourth quarter is approximately $626 thousand, which is about $19 thousand mo re than last year. This difference is attributed to an increase in ridership. The farebox ratio through June 30, 2024, is 8.1 percent based on fares received and operating expenses recorded to date.
Quarterly Financial Report: Fourth Quarter Ending June 30, 2024
8 FY 2024-26 BIENNIAL BUDGET
The final budget was presented with a public hearin g at the City Council meeting held on June 18, 2024. Public engagement occurred during the City Council’s meetings in May and June along with budget presentations and discussion s with department directors. Get the latest information on the public meetings related to the development of the FY 2024-26 biennial budget by visiting the City’s website at: https://www.cityofsantamaria.org/services/departments/city-clerk-records/agendas- reports-meeting-videos.
FUND BALANCE
General Fund
The table below shows revenues are at 102.0 percen t of projections while expenditures, including the balances at year-end pending carryover for encu mbrances ($929 thousand) and capital projects ($409 thousand), are at 94.1 percent of appropriat ions. The beginning fund balance is an estimate because the City’s annual audit for FY 2022-23 is not finalized.
GENERAL FUND
(in millions) Budget 4 th Quarter Percent
Beg. Fund Bal. $ 10,072 $ 10,072
Revenues* 91,339 93,204 102.0%
Expenditures* 96,759 91,004 94.1%
Rev/Exp $ (5,420) $ 2,200
Avail. Bal. $ 4,652 $ 12,272
*Includes Transfers
Measure U Fund
The table below shows revenues are at 98.7 percent of projections while expenditures, including the balances at year-end pending carryover for encumbrances ($129 thousand) and capital projects ($6.6 million), are at 75.7 percent of appropriations. The beginning fund balance is an estimate because the City’s annual audit for FY 2022-23 is not finalized.
MEASURE U FUND
(in millions) Budget 4 th Quarter Percent
Beg. Fund Bal. $ 17,060 $ 17,060
Revenues* 26,886 26,546 98.7%
Expenditures* 40,618 37,383 92.0%
Rev/Exp $ (13,732) $ (10,837)
Avail. Bal. $ 3,328 $ 6,223
*Includes Transfers
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MAYOR & 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