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File#: 25-54 Agenda Date: 1/29/2025
Version: 1 Item #:
Report presenting Fiscal Year (FY) 2024-25 Mid-Year Financial Report as of December 31, 2024, and proposed budget amendments for FY 2024-25 Operating and Capital Improvement Program (CIP) Budgets (Karen Chang, Director of Finance)
RECOMMENDATION
Staff requests that the Budget Standing Subcommittee of the City of South San Francisco (“City”) review the FY 2024-25 Mid-Year Financial Report and the proposed budget amendments for FY 2024-25; and refer the items to the February 12, 2025, City Council meeting for full Council consideration and approval.
BACKGROUND/DISCUSSION
The City Council adopted the FY 2024-25 General, Enterprise and Internal Service Fund budgets on June 12, 2024. The adopted budget features the annual expenditure and resource allocation plan that guides the implementation of City Council budget policies and priorities. The budget provides funding direction for the broad range of services that meet the needs of the community in accordance with City Council policy.
This financial review provides the mid-year budget update to the City Council for the current fiscal year. Analysis of the revenues collected and all expenditures through December 31, 2024 measures operational adherence to the budgetary allocation plan.
The adjusted budget incorporates current estimates for revenue and expenditure appropriations for all funds as of December 31, 2024. The Mid-Year Financial Report as of December 31, 2024, provides comparisons to the prior year and focuses on variances from the revenue and expenditure plans and allocations contemplated in the budget.
I. Current Fiscal Year (FY 2024-25) Update
A. General Fund Revenues – 2nd Quarter and Revenue Amendment Requests B. Additional General Fund Revenue Amendment Request
C. General Fund Expenditures – 2nd Quarter
D. General Fund Appropriations Request
E. Non-General Fund Appropriations Request
F. Additional Adjustment – Utilities
G. Mid-Year Capital Improvement Plan Request (CIP)
City of South San Francisco
Legislation Text
P.O. Box 711
(City Hall, 400 Grand Avenue)
South San Francisco, CA
City of South San Francisco Page 2 of 13
II. Reserves Overview & Considerations
I. CURRENT FISCAL YEAR (FY 2024-25) UPDATE
The General Fund accounts for the operations of the City and for basic municipal services. The adjusted FY 2024-25 General Fund budget projects revenues totaling $139.1 million, and expenditures totaling $155.2 million, including purchase order encumbrances from FY 2024-25 approved carryover amounts, $6.0 million salary and expenditure attrition and several City Council approved appropriation amendments prior to December 2024.
The following sections show the revenue and expenditure results as of December 31, 2024.
A. GENERAL FUND REVENUES – 2ND QUARTER AND REVENUE AMENDMENT
REQUESTS
Table 1, shown below, indicates actual revenues as of December 31, 2024, with a comparative view of where the City’s revenues were at the same time last year (December 31, 2023):
Table 1. FY2023-24 vs. FY2024-25 Revenues as of December 31 REVENUES FY 2023-24 FY 2024-25
(in millions) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
Taxes
Property Tax $48.0 $26.2 55% $50.2 $30.3 60%
Sales Tax 23.4 7.9 34% 23.2 7.2 31%
Transient Occupancy Tax 14.9 5.7 38% 14.5 6.6 46%
Other Tax 7.0 2.1 30% 6.7 2.4 36%
Franchise Fees 4.6 1.3 28% 6.2 1.4 23%
License and Permits
Building 13.9 5.9 42% 10.9 4.7 44%
Fire 3.0 1.8 59% 2.3 1.4 61%
Other 0.0 0.0 0% 0.0 0.0 0%
Fines & Forfeitures 0.7 0.2 28% 0.9 0.1 16%
Intergovernmental 4.4 2.3 53% 3.7 1.9 50%
Charges for Services
Planning 0.5 0.3 58% 0.4 0.7 177%
Fire 2.7 2.1 76% 3.7 2.4 64%
Parks & Recreation 3.7 1.7 46% 3.4 1.8 52%
Police 1.2 0.6 44% 1.1 0.6 54%
Other 0.0 0.0 86% 0.0 0.0 118%
Inter-Fund Admin Charge 2.0 1.0 50% 2.0 1.0 50%
Use of Money & Property 3.9 1.7 43% 4.5 2.6 58%
Other Revenues 0.3 0.1 25% 0.3 0.4 130%
Transfers In 8.7 0.8 9% 5.3 0.5 10%
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REVENUES FY 2023-24 FY 2024-25
(in millions) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
TOTAL REVENUES $143.1 $61.5 43% $139.1 $66.0 47%
As shown in the above Table 1, the adjusted revenue budget for FY 2024-25 as of December 31 is $139.1 million – approximately $4 million less than the FY 2023-24 adjusted budget. The primary culprit in the overall difference in adjusted revenue budget between last fiscal year and the current fiscal year is building permit revenues, which were budgeted at $13.9 million in 2023-24 and $10.9 million in 2024-25. Actual revenue collections for the two quarters ending December 31, 2024 is $4.5 million higher when compared with the prior year.
The following narrative highlights the recommended adjustments to the FY 2024-25 revenue budget.
The following provides an overview of each revenue category and presents staff recommendations for General Fund revenue amendment requests totaling $4.4 million.
1. Property Tax. Bay Area home values experienced a modest increase last year as interest rates briefly dropped before rising again. However, property taxes are expected to remain stable due to the enduring effects of Proposition 13, passed in 1978. Proposition 13 limits the annual increase in assessed property value to 2%, protecting homeowners from steep tax hikes as property values appreciate. Properties are reassessed at market value only upon sale or significant renovation.
Property tax accounts for 35% of the General Fund revenue in the current budget. The City receives property tax revenues in two major installments, typically in December and April.
As of December 31, 2024, property tax collections have reached 60.3% of the City's projection.
The mid-year budget adjustment includes a proposed $6.9 million increase in property tax revenue projections. This adjustment, driven by several factors, is proposed as follows:
a. Updated County Projections: The October 2025 levy letter from the County Controller’s Office included an upward revision to projected property tax revenues.
Staff recommends a $1 million increase in budgeted ERAF property tax. b. Shifted Revenues: The FY 2022-23 shortfall payment for Property Tax In Lieu of Vehicle License Fees (VLF) was delayed and is now reflected in FY 2024-25, boosting current-year projections. The recommended budget amendment is due to the appropriation in the State’s FY 2024-25 adopted budget, which reflects the City of South San Francisco Page 4 of 13
lobbying efforts of San Mateo County officials, the City’s lobbying firm, and major efforts by state delegates to ensure that San Mateo County’s FY 2022-23 VLF shortfall was included in the state budget. However, ongoing efforts are needed in a collaborative effort between every local city and the County of San Mateo to work towards a legislative amendment to address this long-term issue. The City’s Assistant City Manager represents its interests in the County’s VLF Task Force.
Staff recommends a $2.8 million increase in budgeted Property Tax In Lieu of VLF. c. Former Redevelopment Area (RDA) Allocation: Staff has seen a consistent increase in revenue in this category during the past couple of years. After discussing the trend with the San Mateo County Controller’s office, staff determines that this trend is likely to stay. Therefore, staff proposes to update the baseline.
Staff recommends a $3.1 million increase in budgeted Former RDA property tax.
While these adjustments reflect optimistic projections, particularly for the RDA allocation, the approach carries some inherent risks, especially the VLF shortfall. Staff will continue to closely monitor revenue trends and reassess projections if necessary to ensure budget stability.
2. Sales Tax. There is a two-month delay between when businesses remit sales taxes to the California Department of Tax and Fee Administration (CDTFA) and when the CDTFA distributes the City’s share of these revenues. As with the second quarter of FY 2023-24, the City has received approximately one-third of the projected sales tax revenue for the entire fiscal year. Since the adoption of the FY 2024-25 budget, the City’s sales tax consultant has revised their projection downward. This adjustment reflects the impact of lower gas prices and a continued downward trend in purchasing, and other adjustments and reallocations.
Staff recommends a $2 million decrease in budgeted sales tax revenue, which aligns with the City’s sales tax consultant’s revised projection.
3. Transient Occupancy Tax (TOT). Post-pandemic travel has leveled off. As of December 31, 2024, the City recorded TOT revenues of $6.2 million. However, due to the delay in when TOT is due, this does not include December revenues. Staff expect revenues to remain stable but have received a back payment for prior fiscal years.
Staff recommends a $336,000 increase in budgeted TOT revenues.
4. Other Taxes. Other taxes include real property transfer tax, business license tax, and commercial parking tax. Second quarter year-to-date collection of business license tax and City of South San Francisco Page 5 of 13
commercial parking tax are in-line with prior year’s amounts. Business license taxes are generally due on January 31. However, due to the passage of Measure W in November, staff have adjusted this year’s due date to February 28, 2025, to allow for businesses to adjust to the updated tax. Staff expect some large businesses to pay their business license tax throughout February. Real property transfer tax is projected flat.
Staff recommends a $1.0 million budget increase due to the changes in the business license tax approved by the voters in the most recent Measure W.
5. Licenses & Permits. The Federal Reserve Bank has started easing interest rates with the current rate of 4.25% down from the high of 5.25%. In general, when the rate is lower, there is an increase in new project starts, driving an increase in license and permit revenue.
While the City has seen an increase in some licenses and permits, it is not consistent across all departments.
Please refer to the department requests below for the budget adjustments in this category.
6. Service Charges. This revenue stream includes fees charges by various departments for services provided to the public. Due to the increase in paramedic call volume and changes to the California Department of Health Care Services supplemental program, Fire anticipates an increase of $0.2 million in paramedic service fees, which include an adjustment for prior years.
Please refer to the department requests below for the budget adjustments in this category.
7. Intergovernmental. The City received $1.7 million in grants and program reimbursement from other governmental entities for the 2nd quarter year-to-date.
Staff recommends no adjustment to the budget in this category.
8. Use of Money and Property. With the higher interest rate environment, the City projects additional interest earnings from investments. The City does not expect any sale of property in FY 2024-25. Rental income is within budget expectations, however, a back payment on rental property was made.
Staff recommends a $1.2 million budget increase in this category.
9. Transfers In. With the expected additional revenue, staff are proposing that the scheduled transfer of $3 million from Measure W to cover the General Fund FY 2024-25 deficit be eliminated.
Staff recommends a $3 million budget decrease in Transfers In.
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B. ADDITIONAL GENERAL FUND REVENUE AMENDMENT REQUEST
The following are additional General Fund revenue amendment requests totaling $910,000. • Economic and Community Development ($985,000)
Building Permit Fee Decrease - ($1,000,000)
Donations for Bio Conference 2025 - $15,000
• Fire Department $1,345,000
Paramedic Service Fee Increase - $195,000
Fire Plan Check Fee - $600,000
Mutual Aide Support Reimbursement- $550,000
• Public Works $550,000
Engineering Permit Fee - $550,000
If approved by the Council, the above changes would result in an increase to the overall revenue budget for FY2024-25 by $5.4 million from $139.1 million to $144.5 million.
C. GENERAL FUND EXPENDITURES – 2ND QUARTER
Table 2 below shows the actual expenditures by Department that have been recorded through December 31, 2024. As part of the mid-year budget review process, staff conducted a comprehensive analysis of expenditures across all departments. This included collaborating closely with departmental leadership to assess current spending trends, identify areas requiring adjustment, and ensure alignment with the City's fiscal priorities. As shown in Table 2, citywide payroll expenditures are on track, particularly when factoring in the partial position freezes incorporated into the budget. Notably, all savings associated with these temporary freezes were realized during the first half of the fiscal year.
Table 2. FY2023-24 vs. FY2024-25 Expenditures as of December 31 EXPENDITURES FY 2023-24 FY 2024-25
(in thousands) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
City Council
Payroll $189.0 $78.3 41% $192.9 $66.9 35%
Supplies & Services 36.6 31.1 85% 61.6 7.5 12%
Interdepartmental 43.9 21.5 49% 43.9 22.0 50%
Total 269.5 130.9 49% 298.4 96.3 32%
City Clerk
Payroll 1,001.3 399.2 40% 988.8 409.3 41%
Supplies & Services 208.4 38.0 18% 237.7 59.5 25%
Interdepartmental 55.3 26.8 48% 55.3 27.6 50%
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EXPENDITURES FY 2023-24 FY 2024-25
(in thousands) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
Total 1,265.0 463.9 37% 1,281.8 496.4 39%
City Treasurer
Payroll 31.2 11.7 37% 34.1 15.1 44%
Supplies & Services 102.1 44.7 44% 140.1 23.3 17%
Interdepartmental 0.1 0.1 50% 0.1 0.1 50%
Total 133.4 56.5 42% 174.3 38.4 22%
City Attorney
Supplies & Services 1,100.7 530.5 48% 1,450.7 816.8 56% Interdepartmental 8.1 3.9 49% 8.1 4.1 50%
Total 1,108.8 534.4 48% 1,458.8 820.9 56%
City Manager
Payroll 3,243.1 1,248.6 39% 2,599.5 1,191.0 46%
Supplies & Services 1,633.7 352.6 22% 1,185.1 231.9 20% Interdepartmental 144.4 70.8 49% 144.4 72.2 50%
Total 5,021.1 1,672.0 33% 3,928.9 1,495.1 38%
Finance
Payroll 3,333.3 1,324.0 40% 3,273.0 1,365.4 42%
Supplies & Services 1,047.9 81.9 8% 905.6 132.7 15%
Interdepartmental 138.5 65.5 47% 138.5 69.2 50%
Total 4,519.7 1,471.4 33% 4,317.2 1,567.3 36%
Non-Expense/Dept
Supplies & Services 1,394.4 824.2 59% 1,685.6 1,162.5 69% Transfers 500.0 250.0 50% 500.0 250.0 50%
Total 1,894.4 1,074.2 57% 2,185.6 1,412.5 65%
Human Resources
Payroll 2,365.0 1,110.8 47% 2,389.0 1,164.7 49%
Supplies & Services 575.1 103.4 18% 512.6 210.3 41%
Interdepartmental 55.2 26.3 48% 55.2 27.6 50%
Total 2,995.4 1,240.4 41% 2,956.8 1,402.5 47%
Economic & Comm
Development
Payroll 5,487.1 3,139.9 57% 6,112.7 2,786.2 46%
Supplies & Services 6,469.6 2,007.5 31% 5,046.8 1,129.0 22% Capital Outlay 113.4 0.0 0% 60.0 0.0 0%
Interdepartmental 368.6 175.7 48% 368.6 184.3 50%
Total 12,438.6 5,323.1 43% 11,588.1 4,099.6 35%
Fire
Payroll 28,172.9 17,482.7 62% 30,819.7 15,751.8 51%
Supplies & Services 2,825.9 1,311.9 46% 3,680.9 1,065.9 29% Capital Outlay 400.0 0.0 0% 374.0 0.0 0%
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EXPENDITURES FY 2023-24 FY 2024-25
(in thousands) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
Interdepartmental 2,251.0 1,101.4 49% 2,251.0 1,125.5 50% Total 33,649.8 19,896.0 59% 37,125.7 17,943.2 48%
Police
Payroll 32,464.2 18,209.0 56% 33,195.9 15,224.3 46%
Supplies & Services 1,857.1 747.1 40% 2,438.5 882.4 36% Interdepartmental 2,630.4 1,284.7 49% 2,630.4 1,315.2 50% Total 36,951.7 20,240.9 55% 38,264.9 17,421.9 46%
Public Works
Payroll 4,765.8 2,612.9 55% 5,428.3 2,559.7 47%
Supplies & Services 7,020.4 1,315.9 19% 5,960.8 1,491.1 25% Capital Outlay 271.6 0.0 0% 226.6 0.0 0%
Interdepartmental 1,763.8 874.3 50% 1,763.8 881.9 50%
Total 13,821.5 4,803.1 35% 13,379.5 4,932.7 37%
Library
Payroll 6,503.2 3,032.8 47% 7,413.5 2,670.1 36%
Supplies & Services 1,051.6 572.7 54% 839.4 498.2 59%
Interdepartmental 743.8 340.0 46% 743.8 371.9 50%
Total 8,298.6 3,945.5 48% 8,996.7 3,540.2 39%
Parks and Recreation
Payroll 19,171.7 8,664.6 45% 21,081.9 8,668.8 41%
Supplies & Services 6,556.9 2,087.6 32% 6,198.0 2,087.5 34% Capital Outlay 79.1 108.7 137% 0.0 0.0 0%
Interdepartmental 1,301.7 644.9 50% 1,301.7 650.8 50%
Total 27,109.4 11,505.8 42% 28,581.7 11,407.1 40%
CIP
Transfers 4,375.9 346.1 8% 695.2 9.0 1%
Total 4,375.9 346.1 8% 695.2 9.0 1%
Total General Fund
Expenditures 153,852.9 72,704.1 47% 155,233.4 66,683.1 43% Information Technology*
Payroll 2,298.9 1,039.2 45% 2,230.4 1,082.3 49%
Supplies & Services 2,726.0 1,014.7 37% 2,306.9 764.2 33% Interdepartmental 12.9 6.4 50% 12.9 6.4 50%
Total 5,037.8 2,060.3 41% 4,550.2 1,852.9 41%
* Non-General Fund: budgeted as internal service fund in Fund 785 D. GENERAL FUND APPROPRIATIONS REQUESTS
The following are General Fund expenditure appropriation requests totaling $2,919,000. The proposed adjustments address identified needs and reflect updated projections, enabling the City City of South San Francisco Page 9 of 13
to maintain balanced operations while adapting to changing conditions. • City Attorney $800,000
Litigation Expenses - $765,000
Labor Negotiation - $35,000
• City Clerk $79,000
Additional Election ballot measure for November election - $79,000 • City Manager’s Office $360,000
Abandoned/Derelict Vessel Removal - $150,000
Unfreeze of Administrative Assistant I position - $60,000 Bond Council for Community Facilities District development - $150,000 • Economic and Community Development $175,000
Bio 2025 increase back to original budget - $75,000
CEQA Analysis for alternative housing element to replace MSB - $100,000 • Finance ($90,000)
Reallocate Bond Council original budget to CMO - ($90,000) • Fire Department $950,000
Contracts for Fire Plan Reviews (offset by higher revenue)- $400,000 Overtime due to mutual aid support (offset by reimbursement)- $550,000 • Human Resources $40,000
Additional contract services - $40,000
• Library $38,000
Grand Library Wireless Access Point Replacement - $6,000 Peninsula Libraries Automated Network service increase - $18,000 LPR Digital media software renewal - $4,000
Patron Chromebook maintenance upgrades - $7,000
Patron Chromebook management software - $3,000
Unfreeze 0.69 FTEs with no fiscal impact in FY2024-25, as there is sufficient salary savings in the Library to fund this increase. Positions:
o 0.20 FTE - Library Assistant I
o 0.25 FTE - Library Clerk
o 0.09 FTE - Librarian II
o 0.06 FTE - Librarian I
o 0.04 FTE - Library Page
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o 0.05 FTE - Office Specialist
• Parks and Recreation Department $17,000
Uniforms - budget amount has not been adjusted to account for inflation. - $17,000 • Public Works $550,000
Contracts for Public Works Plan Reviews (offset by revenue)- $550,000 The ongoing fiscal impact of the proposed mid-year budget requests beyond FY2024-25 is estimated at $2,309,000 in supplies and professional services. This increase is primarily attributable to additional plan review support across multiple departments. Notably, these costs are offset by corresponding revenues generated from the services provided, ensuring minimal net impact on the General Fund. Additionally, there is a $610,000 increase in payroll expenses. This is primarily an increase in the Fire Department’s overtime, being offset with mutual aid funding.
Finally, there is a 1.0 FTE increase in the City Manager’s office ($60,000 in the current fiscal year) with an ongoing expense of $160,000.
E. NON-GENERAL FUND APPROPRIATIONS REQUEST
The following are the additional non-General Fund appropriations requests totaling ($1,460,000) from various sources.
• Measure W Sales Tax Fund (101) ($1,500,000)
Elimination of Transfer Out to the General Fund - ($3,000,000) Decrease in budgeted sales tax revenue, which aligns with the City’s sales tax consultant’s revised projection - $1,500,000
• Information Technology Internal Service Fund (785) $40,000 Overtime Budget - $14,000
Standby Pay Budget - $26,000
F. ADDITIONAL ADJUSTMENT - UTILTIES
To address rising utility costs, we are adjusting utility budgets across all funds to reflect recently implemented rate increases. These adjustments ensure that sufficient funding is allocated to cover the higher expenses for electricity, gas, and water required to maintain City operations and services. By aligning the budget with current utility rates, we ensure that financial projections accurately reflect the true cost of operations. Table 3 below show the recommended adjustment by fund.
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Table 3. Recommended Increase in Utilities by Fund
Fund
(in thousands)
Electric/Gas Water Total
General Fund $951.0 $152.0 $1,103.0
West Park Maint Dist 3 13.0 44.0 57.0
Stonegate Ridge Maint 1.0 5.0 6.0
West Park Maint Dist 1&2 2.0 4.0 6.0
Special Tax Levy B (CFD) 0.0 111.0 111.0
Sewer Enterprise Fund 657.0 0.0 657.0
Parking District Fund 160.0 1.0 161.0
Storm Water Fund 4.0 0.0 4.0
Total $1,788.0 $317.0 $2,105.0
G. MID-YEAR CAPITAL IMPROVEMENT PLAN REQUEST (CIP)
The following is an additional CIP project appropriation request, with their corresponding funding sources, amounting to ($2,000,000):
1. Linden Park (Existing project pk2305) $2,000,000
Funding Source: $1 million Park Construction Fund (806), $1 million Developer Contributions
The increase covers construction costs with the expectation that the contract for construction will be awarded in FY 2024-25.
II. RESERVES OVERVIEW & CONSIDERATIONS
Table 4. Projected City Reserves Summary as of 06-30-2025 Reserve Amount (in millions)
General Reserves (20%) $29.7
Pension Stabilization Reserves 5.8
Infrastructure Reserves 6.7
Total Reserve Levels $42.2
Available Unassigned GF Fund Balance 34.8
FY 2024-25 Projected Deficit (7.0)
Reserves & Surplus Fund Balance $70.0
Table 5 below shows the impact of the General Fund budget for FY 2024-25, the effect of yearto-date budget amendments already approved by Council, the mid-year appropriations requests City of South San Francisco Page 12 of 13
and revenue updates detailed in this report. The recommended revenue and expenditure budget updates are projected to result in a deficit of approximately $7.0 million.
Table 5. Projected General Fund Revenue and Expenditure Summary (in millions) Reserve for Encumbrances rollover $7.8
Adopted Budget Shortfall (8.0)
- FY2024-25 Net Budget Adjustments (8.1)
+ Mid-Year Revenue Adjustments 5.4
- Mid-Year Appropriation Requests (4.0)
Total Adjustments $ (14.7)
FY2024-25 Projected Deficit $ (7.0)
As shown in Table 5, the City experiences an annual rollover of unspent purchasing authority, referred to as the encumbrance rollover. Historically, this amount has averaged approximately $7.5 million. The encumbrance rollover is a routine City process designed to account for contracts or other multi-year initiatives that extend beyond the current fiscal year. This practice ensures continuity of funding for ongoing commitments and aligns with the City’s financial management policies.
The practice of encumbrances rollover is a major contributing factor to the General Fund experiencing a year over year surplus. Since the rollovers are unspent funds, this means that at year-end, General Fund actual revenues less its actual expenditures might have a break-even result instead of a deficit as projected in Table 5, which assumes all encumbered funds are fully expended.
Staff will continue to monitor encumbrance levels and evaluate their impact as part of the ongoing budget review process to ensure fiscal stability and accurate forecasting.
Conclusion
In general, this mid-year is good news, however, the projected deficit is broadly unchanged in the General Fund. The Measure W sales tax fund is made whole, with those funds retained for future use. Additionally, for departments with requests for additional expenditures, the majority of the additional budget appropriations are offset by an increase in projected revenue, resulting in a positive or no impact to the bottom line.
The macro-economic trends are uncertain and at the micro level for the City, some revenues are up, while others are in decline, making projections more uncertain. However, staff remain cautiously optimistic and believe the revenue streams in decline will level off somewhat from the current continued downward trajectory, particularly in TOT and sales tax. As always, Finance has communicated to the other departments to close purchase orders for projects that have already City of South San Francisco Page 13 of 13
been completed, review existing encumbrances, and use salary savings from vacancies to monitor department expenditures.
However, the City will continue to face significant fiscal challenges that require careful planning.
When staff developed the FY 2024-25 adopted budget, departments had taken a 5% (~$6M) reduction to get us down to the current deficit position. Over $4 million of the 5% reduction was a one-time saving that may not be available in the upcoming year.
Further, rising utility costs, driven by rate increases, pose a growing burden on operational budgets.
Similarly, Unfunded Actuarial Liability (UAL) pension payments are expected to continue to increase in the near term, further straining financial resources. Healthcare costs for employees are also projected to climb due to rising premiums and healthcare service costs. For all three of these cost areas, the City has a limited ability to influence or control the increased costs and must seek relief elsewhere.
Additionally, deferred maintenance on City facilities and infrastructure continues to accumulate, necessitating future investments to prevent further deterioration. These pressures underscore the importance of balancing immediate budgetary needs with strategic planning for fiscal sustainability.
The City has healthy financial reserves, as well as an unassigned fund balance available in the General Fund which can be used to fund the short-term shortfall. Staff will continue to closely monitor the revenue and expenditure status in the coming months. Finance will evaluate the revenue enhancement options and cost cutting measures that can help to achieve long-term fiscal sustainability. Staff will incorporate the findings into the FY 2025-26 budget preparation.
Staff recommends that the Budget Standing Committee accept the FY 2024-25 Mid-year financial update and budget amendment requests, and refer this report to the February 12, 2025, Council meeting for full Council consideration and approval.