Title
Adopt a Resolution to Approve Fiscal Year 2022-2023 First Quarter Financial Update
Staffreport
SUMMARY AND RECOMMENDATIONS
Staff report for City Council resolution approving the Fiscal Year (FY) 2022-2023 First Quarter Financial Report as of September 30, 2022.
BACKGROUND
The City Council adopted the 2021-2022 and 2022-2023 General Fund, Enterprise, and Internal Service Funds and Parking Fund budgets on June 28, 2021. The approved biennial budget is the annual expenditure and resource allocation plan guiding and ensuring implementation of City Council policies and priorities. The budget implements the vision and direction for the broad range of services meeting community needs in accordance with City Council policy.
This financial review as of September 30, 2022, provides the first quarter budget update to the City Council for the current fiscal year. Review of the revenues collected and all expenditures through September 30, 2022 measures operational adherence to the budgetary allocation plan.
DISCUSSION
The 2022-2023 second year of the adopted biennial budget, amended in June 2022, incorporates estimated revenues and planned expenditures for all funds. The attached First Quarter Financial Report as of September 30, 2022, provides the revenue and expenditure summary for the General Fund, Enterprise, and Internal Service Funds and Parking Fund. The details provide comparisons to the prior year and focuses on variances from the revenue and expenditure plans and allocations in the budget.
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 $151,392,000, including purchase order carryover balances. The adjusted 2022-2023 General Fund revenue/expenditure gap amounts to $17,867,000, requiring use of General Fund reserves.
First quarter revenue in 2022-2023 totals $11,485,000, 9% of the amended budget of $133,525,000, compared with 9% in 2021-2022. Expenditures of $24,867,000 for the first quarter amount to 16% of the anticipated total of $151,392,000, compared with 18% in 2021-2022. Expenditures are expected to stay within 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
• Sales/Transaction Taxes- (6% of anticipated budget has been collected compared with 7% in 2021-22). Sales/Transaction Tax revenue in 2022-2023 is budgeted at $55,995,000, $3,068,000 higher than the 2021-2022 budget. First quarter revenues were $3,082,000, nearly $810,000 lower than the same period last year. The first quarter payments from the state both years were close in amount, a negative adjustment of $977,000 in 2021 resulted in the lower revenue during 2021-2022’s first quarter. Transaction & Use Tax payments are first received in October. Avenu Insights, the City’s sales tax advisor, projects the City will receive the budgeted revenue by June 30, 2023. Sales and Transaction Tax revenue is the City’s largest revenue source and is 46% of total General Fund tax revenue.
• Property Transfer Tax- (26% of anticipated budget has been collected compared with 18% in 2021-2022). Property Transfer tax revenue is budgeted in 2022-2023 at $9,270,000, $1,730,000 below the 2021-2022 budget. First quarter revenues were $2,393,000, nearly $407,000 above the first quarter total in 2021-2022. Two extraordinary sales of industrial properties exceeding $10,000,000 each were completed in the first quarter of 2021-2022, while four occurred in 2022-2023 (two buildings on one parcel on Merced Street sold for more than $45,000,000 in the first quarter). This higher number of property sales amounted to greater tax revenue of $600,000.
• Emergency Communications Access (911) Fee- (8% of anticipated budget has been collected compared with 15% in 2021-2022). 911 fee revenue is budgeted in 2022-2023 at $3,366,000, $66,000 greater than the 2021-2022 budget. First quarter revenues in 2022-2023 were $278,000. August 2022 revenues ($300,000) were not recorded until October 10, 2022 (early in the second quarter). August 2021 revenues were recorded in the first quarter.
• Charges for Services- (37% of anticipated budget has been collected compared with 41% in 2021-2022). Charges for Services revenue is budgeted in 2022-2023 at $2,590,000, $1,150,000 above the 2021-2022 budget. Revenues were $965,000, which is $370,000 higher than the same period last year. Higher revenues were recorded for Fire Review & Inspection ($113,000) and numerous Recreation programs including Contract Programs ($34,000), Day Camp ($25,000), and aquatics ($143,000). Impacts from earlier Covid-19 pandemic restrictions on recreation programs continue to recede in 2022-2023.
• Interest & Property Income- (10% of anticipated budget has been collected compared with 21% in 2021-2022). Interest Income revenues recorded through September 30, 2022, amount to $22,000. Revenues in the same period in 2021-2022 totaled $342,000.
• Fines, Fees & Forfeitures- (5% of anticipated budget has been collected compared with 19% in 2021-2022). Fines, Fees & Forfeitures revenue is budgeted in 2022-2023 at $622,000, $124,000 lower than the 2021-2022 budget. First quarter revenues were $34,000, $111,000 lower than the 2021-2022 first quarter. Vehicle Code Fines-County revenue is lower by $47,200 and Red-Light Safety Program residual fine revenue of $11,000 received in 2022-2023 compares with $66,000 in 2021-2022. No revenue budget recorded for 2022-2023 because of the termination of the program effective June 30, 2021.
As reported in the attached First Quarter Financial Report, all other taxes and other revenue receipts are in line with the budget. The mid-year report will more closely estimate the year-end revenue and expenditure results.
General Fund Expenditures
• General Fund, Total Expenditures- (16% of budget compared with 18% in 2021-22). First quarter expenditures were $24,867,000, 16% of the $151,392,000 total budget. Year-over-year General Fund expenditures increased by $1,589,000 during the quarter. All departments’ expenditures are below 25% of the budget appropriation. Over multiple years, an average of 19% of the annual expenditure appropriations has been expended by September 30.
• Finance- (16% of budget compared with 19% in 2021-2022). The budget was increased by $1,012,000, while first quarter expenditures were $777,000, only $56,000 higher. The additional budget reflects personnel changes from reorganizations in Finance-Administration.
• Police- (20% of budget compared with 22% in 2021-2022). First quarter expenditures were $9,120,000, only $182,000 lower than in 2021-2022, while the 2022-2023 budget increased by $3,049,000.
• Recreation & Human Services- (22% of budget compared with 20% in 2021-2022- as a combined department). Total first quarter expenditures were $1,351,000. Significant additional budget (in Human Services) reflects appropriations for the Navigation Center and expanded mental health service response.
• Public Works- (17% of budget compared with 21% in 2021-2022). First quarter expenditures were $1,470,000, $32,000 less than in 2021-2022 while the 2022-2023 budget increased by $1,642,000.
• Non-Departmental- (4% of budget compared with 20% 2021-2022). First quarter expenditures were $159,000, $43,000 lower than in 2021-2022, while the 2022-2023 budget increased to $3,811,000. The lower budget, $1,024,000 in 2021-2022, reflects one-time appropriation reduction for the projected rise in Vacancy Savings.
Enterprise, Internal Service Funds, and Parking Fund
Four Enterprise Funds make up the City's business-type operations. The Water Pollution Control Plant Fund, Environmental Services Fund, Shoreline Enterprise Fund, and 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 make up these Internal Service Funds. The Parking Fund provides for parking meter and parking lot operations and maintenance at the Downtown Parking Structure.
• Shoreline Enterprise, Revenue- (28% of anticipated budget compared with 29% in 2021-2022). Operating revenues at the Monarch Bay golf courses remain higher from the time of the start of the Covid-19 pandemic.
• Parking Fund, Expenditures- (7% of anticipated budget compared with 15% in 2021-2022). First quarter expenditures were $78,000, 7% of the $1,188,000 budget. Expenditures lower in 2022-2023 during the contractual transition to LAZ Parking for enforcement services.
ATTACHMENTS
Attachment A: Resolution Approving First Quarter Financial Report
Attachment B: First Quarter Financial Report as of September 30, 2022.
PREPARED BY
T. Michael Yuen, Finance Director