Title
Adopt Resolution Approving 2022-2023 Mid-Year Financial Report as of December 31, 2022, and Approving Budget Amendments for 2022-2023
Staffreport
SUMMARY AND RECOMMENDATIONS
Staff recommends the City Council adopt the resolution approving the 2022-2023 Mid-Year Financial Report and approving budget amendments for 2022-2023.
BACKGROUND
The City Council approved the 2021-2022 and 2022-2023 General, Enterprise, Internal Service, and Parking Fund budgets on June 28, 2021. The City Council also approved a budget adjustment during the Mid-Cycle Budget Review on June 21, 2022. The approved budgets feature the annual expenditure and resource allocation plan that guides the implementation of City Council budget policies and priorities. The budget provides funding direction for a broad range of services that meet the needs of the community in accordance with City Council policies.
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, 2022, measures operational adherence to the budgetary allocation plan.
DISCUSSION (Mid-Year Report)
The City budget for 2022-2023 was adopted in June 2021. The amended budget incorporates current estimates for revenue and expenditure appropriations for all funds as of December 31, 2022. The attached 2022-2023 Mid-Year Financial Report as of December 31, 2022, provides the revenue and expenditure summary for the General, Enterprise, Internal Service, and Parking Fund. The report provides detailed revenue and expenditure comparisons to the prior year while also focusing on variances from financial plans and budgeted allocations.
General Fund
The General Fund finances the operations of the City having no special or dedicated revenue sources and pays for basic municipal services. The amended 2022-2023 General Fund budget projects revenues totaling $133,525,000 and expenditures totaling $151,916,000, including purchase order encumbrances from 2021-2022, approved carryover amounts, and several City Council approved appropriation amendments prior to December 2022.
Mid-year revenue in 2022-2023 totals $49,702,000, 37% of the amended budget of $133,525,000, compared with 36% in 2021-2022. Mid-year expenditures total $52,743,000, 35% of the anticipated total of $151,916,000, compared with 42% in 2021-2022. Expenditures are expected to stay well within the 2022-2023 budget appropriations. Nevertheless, costs will continue to be closely monitored throughout the year.
A detailed review of revenue and expenditure variances is presented below.
General Fund Revenue
• Property Tax- (received 48% of anticipated budget compared to 47% in 2021-2022). The Property Tax appropriations increased by $982,000 in the amended budget approved in June 2022. Property Tax is the City’s second largest revenue source and represents 20% of total General Fund revenue. Secured Tax and Redevelopment Residual Property Tax revenues make up 62% of the City’s annual Property Tax revenue. Actual Secured Tax revenue amounts to $7,691,000 to date in 2022-2023, $517,000 above the same period in 2021-2022. Alameda County will distribute the first payment of the Redevelopment Residual Tax in early 2022-2023 ($1,441,000 was recorded in January 2023) and the second payment of Secured Tax will be in April.
• Sales/Transaction Taxes- (received 31% of anticipated budget compared to 31% in 2021-2022). Sales/Transaction Tax appropriations were increased $3,068,000 in the budget reflecting the continuing economic rebound from impacts of COVID-19. Actual revenues at mid-year are $512,000 greater than last year at the same time. Avenue Insights, the City’s sales tax advisor, projects the City will receive Sales/Transaction Tax revenue at the level of the budget appropriation by year end. This favorable report on taxable transactions is critical as Sales and Transaction Taxes are the City’s largest revenue sources and makes up 42% of the General Fund revenue.
• Real Property Transfer Tax- (received 43% of anticipated budget compared to 33% in 2021-2022). This tax is highly volatile, relying on changes in property ownership. Property Transfer tax revenue is budgeted at $1,730,000 less than in 2021-2022. Revenue through December 31 is $306,000 higher than in 2021-2022. Property Transfer Tax revenue ($1,152,000) was generated by the sale and leasehold transfer to Cal Coast ($104,000,000) of City property in the Marina and paid from the Shoreline Enterprise Funds. The proposed Budget Amendment recommends a $1,152,000 transfer out of the General Fund to the Capital Improvement Fund for the Shoreline Park at the Marina project.
• Business License Tax- (received 8% of anticipated budget compared to 19% in 2021-2022). The budget for Business License revenue in 2022-2023 was maintained at the previous year’s level. Business License revenue through December 31, 2022, is $638,000 lower than in 2021-2022. The yearly difference in license renewal revenue resulted from the renewal process being initiated substantially earlier in 2021-2022.
• Charges for Services- (received 67% of the anticipated budget compared to 66% in 2021-2022). Charges for Services revenue through December 31 is $1,725,000, which is $776,000 above 2021-2022 revenue. Recreation program revenues are $219,000 higher than in 2021-2022.
• License & Permits- (received 70% of anticipated budget compared to 55% in 2021-2022). Building Permit revenues recorded through December 31, amount to $2,111,000 in 2022-2023. Revenue in the same period last fiscal year was $1,561,000. This increase in Building Permit revenue reflects nearly all the change in Licenses & Permit revenue. Extraordinary projects affecting Building Permit revenue this year include Centro Callan at East 14th, Ariat Apparel on Alvarado, and tenant improvements at Prologis Development on Doolittle.
As reported in the attached Mid-Year Financial Report, all other taxes and revenue receipts are relatively in line with budgeted revenues.
General Fund Expenditures
• General Fund, Total Expenditures- (35% of budget compared to 42% in 2021-2022). Mid-year expenditures were $52,743,000, 35% of the budget of $151,916,000. Expenditures for all departments remain less than one-half of their budget appropriation (except Engineering & Transportation at 51%). Over the past five years, an average of 40% of the annual budget appropriation has been expended by December 31.
Enterprise, Internal Service Funds, and Parking Fund
The City's business-type operations are made up of four Enterprise Funds. The Water Pollution Control Plant Fund, the Environmental Services Fund, the Shoreline Enterprise Fund, and the Storm Water Fund are City municipal operations designed to fully recover costs through user fees. Internal Service Funds also operate as business activities, exclusively supporting the City's internal operations. Facilities Maintenance, Information Technology, Insurance Services, and Equipment Maintenance comprise the Internal Service Funds.
The Parking Fund provides for parking meter and parking lot operations and maintenance at the Downtown Parking Structure.
A detailed review of revenue and expenditure variances is presented below.
• Environmental Services, Revenue- (9% of budget compared to 31% in 2021-2022). Environmental Enterprise revenues appear to decrease by $144,000 compared to 2021-2022. Sampling Service Charge revenue and Pretreatment Lab/Permit Fee revenue are now recorded in the Water Pollution Control Plant (593) rather than Environmental Services. Related expenditures are also recorded in Fund 593.
• Shoreline Enterprise, Revenues- (100% of budget compared to 49% in 2021-2022). Shoreline Enterprise revenues) in 2022-2023 amounted to $5,776,000. One-time Sale of Property revenue ($3,725,000) recorded the downpayment by Cal Coast for acquisition of the City Marina property. The proposed Budget Amendment recommends a $3,725,000 transfer out of the Shoreline Enterprise Fund to the Capital Improvement Fund for the Shoreline Park at the Marina project.
• Insurance Services, Expenditures- (46% of budget compared to 78% in 2021-2022). Insurance Services expenditures are $1,579,000 lower year-to date in 2022-2023 compared to 2021-2022. Expenditures in 2021-2022 included the transfer of $1,500,000 to the OPEB Trust as authorized by the City Council. No transfer was recorded in 2022-2023 prior to December 31.
DISCUSSION (Budget Amendment)
The City Council approves annual budgets based on the best revenue and expenditure data available prior to adoption of the budget appropriations. As a result, budget adjustments are periodically necessary for changes that arise requiring changes in revenue or expenditure budget appropriations or re-appropriations between budget line items. The City Council approved the 2022-2023 budget on June 28, 2021. The City Council also approved a budget adjustment during the Mid-Cycle Budget Review on June 21, 2022. Staff recommends a 2022-2023 budget amendment appropriating expenditure funds as follows.
Shoreline Park at the Marina
Staff proposes appropriating $5,810,000 in the Capital Project Fund (210-57-203) related to the Shoreline Park at the Marina for shoreline park design and construction. The appropriation is made up of a transfer from the General Fund for Property Transfer Tax revenue ($1,152,000) generated by the sale, leasehold transfer to Cal Coast ($104,000,000) of City property in the Marina, the down payment made by Cal Coast for the property ($3,725,000), and the initial interest payment on the take-back loan due in December 2023 ($933,000).
Downtown Safety Ambassador Program
Staff proposes appropriating $93,000 in the Economic Development account (010-41-003-5120) for the Downtown Safety Ambassador Program extending the grant program through December 2023. The additional appropriation is based on actual monthly expenditures to date. Funding is available from the current year salary savings.
Technology Upgrade Initiatives
Staff proposes appropriating $670,000 in the Technology Upgrade Initiatives Program (688-13-133) account. The additional appropriation addresses information technology infrastructure by accelerating replacement of aging equipment and enhancing cybersecurity. Funding is available from the current year salary savings.
REVIEW BY FINANCE COMMITTEE
The 2022-2023 Mid-Year Financial Report and budget amendment for 2022-2023 were reviewed by the City Council Finance Committee on March 22, 2023. The Finance Committee unanimously recommended the report and budget amendment be moved to the City Council.
ATTACHMENTS
• Attachment A- Resolution Approving Mid-Year Financial Report and Budget Amendment
• Attachment B- 2022-23 Mid-Year Financial Report as of December 31, 2022
• Attachment C- Mid-Year Budget Amendment Detail
PREPARED BY
T. Michael Yuen, Finance Director