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Home My WebLink AboutItem 30 - Fiscal Year 2021-22: Third Quarter Budget UpdateFinance and Management Services www.santa-ana.org/finance Item # 30 City of Santa Ana 20 Civic Center Plaza, Santa Ana, CA 92701 Staff Report May 3, 2022 TOPIC: Fiscal Year 2021-22: Third Quarter Budget Update AGENDA TITLE: Fiscal Year 2021-22: Third Quarter Budget Update RECOMMENDED ACTION Receive and file the Fiscal Year 2021-22: Third Quarter Budget Update, including increasing sales tax and plan checks revenue estimates. EXECUTIVE SUMMARY The Third Quarter Budget Update (Exhibit 1) provides a General Fund snapshot of the first nine months of the fiscal year and is the last update to City Council in regards to the 2021-22 Fiscal Year budget. This report includes recommendation for an additional increase to the sales tax (Bradley -Burns and Measure X) and plan checks revenue estimates (Exhibit 1), a summary of General Fund revenues and expenditures, an update on the FY 21-2022 Capital Improvement Program (CIP) budget, and a staff vacancy report as of March 31, 2022. A summary of the General Fund is detailed below: Beginning Balance Revenue Expenditures Net Transfers Net Activity Ending Balance $ 71,187,440 $ 109,415,983 $ 109,415,983 340,944,200 364,127,209 374,982,909 (328,791,570) (350,438,147) (350,438,147) (24,703,590) (36,568,949) (36,568,949) (12.550.9601 (22.879.887) (12.024.187) $ 58,636,480 $ 86,536,096 $ 97,391,796 Policy Reserve Requirement 61,369,956 65,542,898 67,496,924 Excess / (Deficiency) $ (2,733,476) $ 20,993,198 $ 29,894,872 Receive and file the FY 2021-22 — Third Quarter Budget Update May 3, 2022 Page 2 DISCUSSION The Third Quarter Budget Update includes General Fund activity posted during July 2021 through March 2022 and the vacancy report for funded staff positions as of March 31, 2022. The Third Quarter Budget Update is the final update to City Council for the FY 2021-22 budget. The last budget update to City Council was presented during the Mid -Year Budget Update on March 1, 2022. At the time, the City Council approved significant proposed revenue and expenditure adjustments, including several workforce changes. For the Third Quarter Budget Update, staff is proposing a few revenue adjustments (i.e., sales tax and plan checks) and anticipates no further adjustments to expenditures for the remainder of the fiscal year. Staff has reviewed the other funds and there are no proposed adjustments. In addition to the above, staff will provide a brief update on the next steps for the FY 2022- 23 budget process. General Fund Revenues During the FY 2021-22 third quarter, the City received approximately $240.2 million in General Fund revenues, which is 63.1 percent of the annual estimate. After analyzing revenue through March 2022, staff recommends adjustments to the sales tax and plan checks estimates with a net increase of approximately $10.9 million as summarized below. Third Quarter Report - Fiscal Year 2021-2022 General Fund Revenue Summary Sales Tax 57,600,000 61,252,000 3,652,000 Sales Tax - Measu re X 79,000,000 84,221,000 5,221,000 Plan Checks 3,364,300 5,347,000 1,982,700 Other Revenue - No Adjustments Needed 240,483,036 240,483,036 0 Total General Fund Revenue: 380,447,336 391,303,036 10,855,700 Sales Tax (Bradley -Burns & Measure X�: Total sales tax collected for the third quarter is approximately $35.2 million for Bradley -Burns and $48.7 million for Measure X, for a combined total of $83.9 million. The First Quarter Budget Report and the Mid -Year Budget Report approved on January 18, 2022 and March 1, 2022, respectively, included adjustments for sales tax estimates. In a recent March update, the City's sales tax consultant has noted strong performance from the General Retail (i.e., Apparel Stores, Receive and file the FY 2021-22 — Third Quarter Budget Update May 3, 2022 Page 3 Online Retailers), Transportation (i.e., New Auto Sales, Service Stations), and Food Products (i.e., Restaurants) sectors. Therefore, a revised estimate will include an increase of both the Bradley -Burns and Measure X revenue estimates by about $3.7 million and $5.2 million, respectively. The sales tax consultant's assumptions for the robust growth in sales tax revenues include growth at a higher rate than pre -pandemic levels in the following areas: Employment, Disposable Income, Gross Domestic Product (GDP), Domestic Tourism, Consumption of and Relative Prices of Taxable Goods. Furthermore, sharp increases in energy prices in 2021 have increased the prices of many taxable goods and the sanctions on Russia as a result of the Russia -Ukraine war is preventing it from exporting oil to the West. It is expected that oil prices will remain high through the second quarter of the 2022 calendar year (April to June 2022). Similarly, as a result of the war, California gas prices have soared in mid -March, which also contributed to the strong performance seen from the Service Stations segment of the Transportation sector. With more people returning to the workforce, price increases to taxable goods and a gradual decrease in inflation, sales tax performance should continue to remain strong through FY 2021-22. Plan Checks: Total plan check revenues collected for the third quarter is $5.2 million, which exceeded the annual budget estimates of $3.4 million by nearly $1.9 million or over 55 percent. The Mid -Year Budget Report approved on March 1, 2022 included adjustments for building plan check estimates. However, due to a one-time spike in plan check activity related to large construction projects for residential and mix -use development on 3rd & Broadway, Rafferty, Warner & Red Hill, 2727 Main Place, and Lacy Crossing, staff has increased the revenue estimates by $1,982,700, accordingly. Staff does not anticipate any new large construction project activity in the forecast for the fourth quarter. General Fund Expenditures As of March 31 2022, General Fund expenditures are at 72.2 percent of budget. Each department is within the expected range of spending for the third quarter. It should be noted that the City pays one -month in advance for contracted fire services. FY 2021-22 Capital Improvement Program (CIP) Staff expects significant carryovers for the Capital Improvement Program (CIP) FY 2021- 22 capital budget to FY 2022-23 as many capital projects require multiple years to construct. Large, unspent appropriations are anticipated to be carried over from the current fiscal year to the next fiscal year in excess of over $228 million and is expected to come before the City Council for approval in September 2022. Full -Time Employee Position Vacancy Report The staff vacancy report as of March 31, 2022 reflects all staffing changes authorized to date, including the Mid -Year Budget Report workforce changes approved on March 1, 2022. Receive and file the FY 2021-22 — Third Quarter Budget Update May 3, 2022 Page 4 As of March 31, there is a total of 179 total vacancies, of which, 153 are funded vacant positions and 26 are subject to the hiring freeze. Positions subject to the hiring freeze provided $2.5 million in savings in the current year budget. The vacancy report as of March 31 does not reflect the entire $0.4 million approved during the First Quarter Budget Update on January 18, 2022 to partially restore hiring freeze positions. ENVIRONMENTAL IMPACT There is no environmental impact associated with this action. FISCAL IMPACT The summary of General Fund fiscal impact appears at the beginning of this report and staff has listed the recommended revenue adjustments (i.e., sales tax and plan checks) in Exhibit 1. EXHIBIT(S) 1. FY 2021-22 Third Quarter General Fund Revenue Adjustments Submitted By: Kathryn Downs, FMSA Executive Director Approved By: Kristine Ridge, City Manager EXHIBIT 1 General Fund Revenue Adjustments Sales Tax 57,600,000 611252,000 3,652,000 Sales Tax - Measure X 79,000,000 84,221,000 5,221,000 Building Plan Check 2,700,000 4,030,000 1,330,000 Electrical Plan Check 312,600 600,000 287,400 Plumbing Plan Check 141,300 230,000 88,700 Mechanical Plan Check 210,400 487,000 276,600 Other Revenue - No Adjustments Needed 240,483,036 240,483,036 0 Total General Fund Revenue Adjustments 380,447,336 391,3031036 10,855,700 Orozco, Norma From: Nathan Taft <taft.nathan@gmail.com> Sent: Monday, April 25, 2022 12:40 PM To: eComment Subject: Budget Hi, Please reduce funding to the police department and redirect those resources to community programs. Thank you. Nathan Taft, Ward 3 CITY OF SANTA ANA Third Quarter Budget Update City Council Meeting - May 3, 2022 SANTA ANA FTcal Year 21 - 22 TOPICS TO BE COVERED • FY 21-22 General Fund Revenue Update • FY 21-22 Net General Fund Impact • 3rd Quarter General Fund Revenues • 3rd Quarter General Fund Expenditures • Vacancy Report as of March 31, 2022 • FY 21-22 Capital Improvement Program • Next Steps 2 FY21-22 General Fund Revenue Update Sales Tax 571 i001000 6112521000 31 652 1000 C les TC - M ec u re X 79 00M00 4� 22 1� 000 V1A0 Plan Cheeks 3� 364� 300 5� 347 000 L 2� 700 Cher Revenue - No Adj ustments Needed 24014831036 24014831036 0 Total General Fund Revenue: 380�4471336 391,3031036 10,855,700 3 FY21-22 Net General Fund Impact Beginning Balance Revenue Expenditures Net Transfers Net Activity Ending Balance $ 71,1 7, 440 $ 10 % 415, 9 3 $ 10 % 415, 9 3 (3 ,791,570) (24,703,590) (1 ,550;969) 34,17, 09 (350, 43,147 ) (36,5+6,949) ( , 79, 87) 374982909 (350, 43,147 ) (36,568,949) $ 58,636,480 6,536,096 97,391,796 I Policy Reserve Requirement +61,3+6%956 65,542,898 67,4961924 Excess (Deficiency) $ (1733,476) 0,993,19 $ 9, 94, 7 11 3rd Quarter General Fund Revenues Revenue Source Sales Tax FY 21-22 Revised Budget 57.600,000 FY 21-22 3rd Quarter Actuals 35.224,893 % Received 61-2% Sales Tax (Measure X) 79,000,000 48,678,844 61-6% Pro p e rty Tax / Pro p e rty Tax In - Lieu of VLF/ SA Residual 89,771,800 53,463,538 59-6% Hotel Visitor's Tax 7,000,000 4,704,916 67-2% Business License 14.000.000 11,223,133 80-2%r Utility User's Tax 23.650,000 16,602,907 70-2% Jail Reve«Lie 15,9AT920 10,491,441 65-9% Permits 3,285,400 3,193,947 97-2% Plan Checks 3,364,300 5,223,802 155-3% Cannabis Tax* 20,525,000 16.401,161 79-9% Subtotal Major GF Revenues 314,107,420 205,208,582 65-3% Other General FLInd Revenues 66,339,916 34.985,227 52-7% Total Revenues 380.447,336 240,193,809 63-19 *Includes Cultivation, Manufacturing, Distribution and Testing 3rd Quarter General Fund Expenditures Department City Manager FY 21-22 Revised Budget 2,774,200 FY 21-22 3rd Quarter Actualls 1,672,093 % Expended 60-3% City Council 879,280 378,786 431% Non -Departmental 49,220,468 47,697,690 96-9% Transfers to Projects and Debt Service 36,045,010 30,652,009 85-0% Clerk of the Council 1,600,770 803,965 502% City Attorneys Office 3,049,220 2,008,295 65-9% Human Resources 3,455,190 2,051,679 59-4% Finance & Management Services 11,253,390 6,693,269 59-5% Library 6,808,530 3,890,534 57-1% City -Owned Museum Building 1,474,030 1,100,742 747% Parks and Recreation Services Agency 26,171,661 15,307,204 585% Police Department 141,141,700 104,221,799 738% Fire Department-', 53,293,690 41,022,492 77-0% Planning & Building Agency 16,457,606 9,919,853 60-3% Public Works Agency 27,630,553 9,901,136 35-8% Community Development Agency 6,225,243 2,381,486 38-3% TOTAL GENERAL FUND $ 387,480,541 $ 279,703,033 72-2% *Includes one month advance payment Vacancy Report as of March 31 Department City Managers Office Funded ■sitons 13 GIF Vacanc-les 1 Non-GIF Vacancies 1 ota Funded Vacanc-ies 2 City Attorney"s Office 16 1 1 Clerk of the Council 7 2 2 Community Development 62 2 lF� 17 Finance & Management Services 63 3 2 5 Information Technology 24 0 9 Human Resources 30 3 Planning & Building 34 11 1 12 Police Department 636 43 1) 43 Parks, Recreation, c Community Services 73 7 4 11 Library 29 2 1 3 Public Works Agency 2 '} e 43 Tota 1 1302 81 72 153 Fiscal Year 2021-2022 Cainital Imiprovem ent Program CIP FY2022-23 Budget Process City Council Budget Workshop J City Council IN Meeting Workshop Next Steps Budget Public Hearing Adopt Budget IN Ordinance IN Beginning of New Fiscal Year I Questions? 10