Item 11 - Fiscal Year 2022-2023: Third Quarter Budget Update

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Receive and file the FY 2022-2023 – Third Quarter Budget Update May 16, 2023 Page 4 3 4 4 4 Hotel Visitor Tax (HVT): While staff was preparing the budget for FY 22-23, we saw a return to normal levels of HVT. That has continued to be the case for the first 3 quarters of the current fiscal year. Staff originally estimated the revenue at $8.5 million. However, we expect to receive approximately $9.5 million, which aligns with actual pre-pandemic receipts. Fiscal Year Actual 2019 $9,414,661 2018 $9,245,942 2017 $9,767,741 Cannabis Tax: Staff originally estimated a total Cannabis tax revenue of $22.2 million. However, in response to requests from the Cannabis industry, the City Council took action to decrease Cannabis tax rates effective January 1, 2023. With limited data available, our best estimate of revenue follows: July through December 6 months actuals $9,592,952 January through February 2 months actuals $2,494,202 March through June 4 months expected $4,421,316 Total Revenue Expected $16,508,470 Therefore, we expect a revenue shortfall of $5.7 million ($22.2 million budget, less $16.5 million expected). The expected revenue shortfall includes $5.4 million subject to the two-thirds transfer to the Cannabis Public Benefit Fund, as medical-related tax revenue is exempt from the transfer. Therefore, the net General Fund impact is a $2.1 million loss, and the Cannabis Public Benefit Fund revenue loss is $3.6 million. The Cannabis Public Benefit Fund has an accumulated fund balance which can absorb the current year loss; however, the FY23-24 budget will need to be rebalanced. Property Tax in lieu of VLF: The City has received confirmation that the actual revenue will exceed the budget by $437,627. Franchise Fees: The City has received the actual annual franchise fee payments for gas and electricity utilities, as well as the final payment related to commercial refuse from the prior year. This actual revenue exceeds the budget by $1,331,077. Investment Earnings: With the Midyear report, staff adjusted the revenue estimate for investment earnings by $2.2 million based on actual amounts received to date. With additional information available, staff expects investment earnings to exceed the adjusted budget by another $1.1 million. Parking Fines: For the first 10 months of the year, the City has received more than $5 million of parking fine revenue. Staff expects to receive another $1 million of revenue for