Item 13 - Fiscal Year 2022-23 First Quarter Budget Report and Proposed Appropriation Adjustments

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Fiscal Year 2022-23 First Quarter Budget Report and Proposed Appropriation Adjustments November 15, 2022 Page 3 3 0 7 1 fund balance is primarily attributable to the following FY 2021-22 positive budget variances. •Additional sales tax of $3.1 million ($1.3 million of Measure X and $1.8 million of Bradley-Burns). Taxable sales defied expectations and grew 14% during FY 2021-22 with unprecedented economic activity likely boosted by federal spending. However, the most recent data shows signs that taxable sales growth is slowing down and may only grow by approximately 2.8% in FY 2022-23. •Additional residual property tax of $1.3 million allocated to the City from the Redevelopment Property Tax Trust Fund. •Additional utility user tax of $1.2 million, primarily related to increased electricity usage. •Additional business license tax of $1.7 million. When the FY 2022-23 estimates were prepared, the City had not yet received the bulk of FY 2021-22 revenue. •Additional supply-side Cannabis tax of $0.9 million and adult-use retail tax of $2.6 million as reported on October 4 with City Council adoption of the Cannabis tax reduction. •Additional parking fine revenue of $0.8 million and jail revenue of $1.4 million due to diligent management of resources. •Expenditure savings of $1.7 million from Recreation & Community Services and $1.5 million from Fire & Ambulance Services. FY 2022-23 Revenue For the most part, the FY 2022-23 budget already reflects the higher revenue amounts received during FY 2021-22. Only the notable exceptions follow: •The FY 2022-23 budget for Cannabis tax is $1.6 million less than actually received during FY 2021-22. However, with the recent reduction to the Cannabis tax rates, staff does not propose an adjustment at this time. With the Midyear budget report, staff will have more information and may be in a better position to adjust the revenue estimate. •The FY 2022-23 budget for Business License tax is $0.7 million less than actually received during FY 2021-22. However, with the ballot measure to change the tax rates, staff does not propose an adjustment at this time. The City receives most of its business license tax revenue in the spring. Therefore, the 3rd quarter budget report is most likely to include a potential adjustment to the revenue estimate. •The FY 2022-23 budget for planning & building permit revenue is $5.3 million less than FY 2021-22 actuals. However, planning & building activity is very difficult to predict, and this is cost recovery revenue offset by expenditures. Therefore, staff proposes no adjustment at this time. With the Midyear budget report, staff will have more information and may be in a better position to adjust both the revenue estimate and expenditure budget related to planning & building activity.