Title
Adopt a Resolution to Approve FY 2023-2024 Year-End and 2024-2025 Budget Amendment of One-Time Appropriation of Unspent Funds for the General Fund
Staffreport
COUNCIL PRIORITY
• Fiscal Sustainability and Transparency
SUMMARY
FY 2023-2024 Audited financials are provided for review and acceptance by Council. A FY 2024-2025 Budget Amendment to appropriate $915,936 in FY 2023-2024 unspent funds is presented for Council discussion and action.
RECOMMENDATIONS
Staff recommend that City Council accept the FY 2023-2024 audited financials and take action with respect to $915,936 in FY 2023-2024 unspent funds.
BACKGROUND
The City Council approves annual budgets based on the best revenue and expenditure information available several months prior to the adoption of budget appropriation. The City Council initially approved the FY 2023-2024 budget on May 15, 2023, as part of the City’s biennial budgeting process that covers two fiscal years. As a result, budget adjustments are periodically necessary for circumstances that arise and require additional budget appropriations. The City Council has approved various budget amendments since July 2023, including a mid-cycle adjustment to the biennial budget that was approved on May 20, 2024. Each year, staff present audited financial results with the fiscal year-end financial position.
Analysis
FY 2023-2024 ended with a General Fund unspent budget balance of $915,936. These available funds are primarily from stronger-than-projected revenues led by better than planned Property Tax ($1.6M), Sales Tax ($1.0M), Utility Users Tax ($1.5M), and investment income ($2.7M). These gains were offset by lower than estimated Property Transfer Tax (-$4.4M) for a favorable year-end revenue total that exceeded the Adjusted Budget by $4,690,249. Expenditures were closer to budget, coming in $0.5M under budget. Additionally, on November 4, 2024 Council approved a reappropriation of unspent FY 2023-2024 funds of $4,284,526 to carryover into FY 2024-2025 for previously approved Council initiatives still in progress. When year-end revenue and expenditure positions, as well as funds approved to carryover are considered, FY 2023-2024 ended with a positive balance of $915,936.
Year-end surpluses are considered one-time funding. Consistent with best practice, Staff recommend a one-time appropriation of $457,968 to the pension trust and the remaining $457,968 to return to fund balance to offset projected budget deficits in future years.
Pension Trust Fund
Staff propose appropriating and transferring $457,968 to the Pension Trust Fund. The PULL Plan calls for the City to direct up to 50 percent of all annual General Fund carryover funds toward unfunded liabilities. In addition, the plan directs 50 percent of all General Fund land sales toward PULL. In 2021, the City Council authorized establishing the Section 115 Pension Trust Fund with PARS (managed by PFMAM). The City’s objective is to set aside funds and accumulate investment earnings to buy down the City’s unfunded pension liability. The City’s prior contributions to the Trust total $28,932,725.
The Net Pension Liability reported as of June 30, 2024, was $235,700,000.
Deficit Reduction
Staff propose preserving $457,968 to return to fund balance for budget stabilization over the long term. Projected ongoing structural deficits will require planned use of fund balance. As of the last presentation of the City’s 10-year forecast, the General Fund Fiscal Year 2027-2028 budget is estimated to have a deficit of approximately negative $3.5 million. Replenishing reserves will help sustain a structural imbalance while staff continue to seek efficiencies, expenditure reductions, and revenue growth as part of fiscal sustainability efforts to support City services and operations.
City Council Priority Work Session
On February 1, 2025, City Council participated in a priority work session for the upcoming fiscal year. During this session, Council was updated on the accomplishments and progress of current priority initiatives as well as current capital needs and a financial forecast. Additionally, this was also an opportunity for City Council to provide feedback to staff regarding the top three priorities for staff to focus its efforts. While the prioritization work showed that Infrastructure, and specifically, streets and road repair, remain a top priority for City Council, no formal action was taken to implement a policy to allocate year-end unspent budget to streets and road repair.
Current Agency Policies
• The Prioritizing Unfunded Liability Liquidation Plan (PULL Plan) calls for the City to direct up to 50 percent of all annual General Fund carryover funds toward unfunded liabilities. In addition, the plan directs 50 percent of all General Fund land sales toward PULL.
Previous Actions
• City Council approved FY 2023-2024 budget carryover to FY 2024-2025 for ongoing previously approved City Council initiatives on November 4, 2025.
• The Preliminary FY 2023-2024 Financial and Performance Measures report was presented to the City Council Finance Committee on November 20, 2024.
• The City Council Finance Committee reviewed and forwarded the FY 2023-2024 Annual Comprehensive Financial Report to City Council on January 22 ,2025.
• City Council accepted the FY 2023-2024 Annual Comprehensive Financial Report on February 18, 2025.
Committee Review and Actions
• On February 26,2025, the City Council Finance Committee reviewed this item with staff report 25-080. No consensus was reached by the Committee on staff’s recommendation regarding the proposed budget amendment. The City Council Finance Committee recommended taking the item to Council for discussion.
Financial Impacts
The budget amendment staff proposed will appropriate $457,968 of the $915,936 unspent from the FY 2023-2024 budget. With this action, $457,968 will be transferred from the General Fund and invested in the Pension Trust Fund. The remaining $457,968 will revert to General Fund reserves to support future operating needs.
ATTACHMENTS
A: Draft resolution for FY 2023-2024 Unspent Funds
B: Fiscal Year 2023-2024 Audited Year-End Presentation
PREPARED BY: Felicia Silva, Assistant Finance Director, Finance Department