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Item # 13
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
June 4, 2024
TOPIC: FY 2023-24 Third Quarter Budget Report and Proposed Appropriation
Adjustments
AGENDA TITLE
Fiscal Year 2023-24 Third Quarter Budget Report and Proposed Appropriation
Adjustments
RECOMMENDED ACTION
1. Receive and file the Fiscal Year 2023-24 3rd Quarter budget update.
2. Approved the recommended appropriation adjustments. (Requires five
affirmative votes)
GOVERNMENT CODE §84308 APPLIES: No
EXECUTIVE SUMMARY
The FY 2023-24 Third Quarter Budget Update provides a General Fund snapshot of the
first nine months of the fiscal year. This report includes updates to revenue estimates,
recommended appropriation adjustments, summary information, and a full-time staff
vacancy report as of March 31, 2024. Other than the Internal Service Fund and
Restricted Fund items noted below, there is nothing significant to report for other funds
of the City.
General Fund Summary with Proposed Adjustments:
As noted in the Early Direction Report published for the March 19 agenda and
discussed by City Council on April 2, staff has requested a General Fund subsidy to
close the Central Stores Fund. Based on City Council direction on May 16, staff has
requested a General Fund appropriation for the Dog Park. All other recommended
adjustments have a net zero impact on the General Fund. The updated estimate of the
Spendable General Fund Balance is $13.8 million as shown below.
FY 2023-24 Third Quarter Budget Report and Proposed Appropriation Adjustments
June 4, 2024
Page 2
FY2023-24 3rd Quarter Budaet Update
FY23-24 Adjusted
Budget
(As of 03/31/24)'
Proposed 3rd
Quarter
Adjustments
Updated
Estimate
Beginning Balance at July 1,
2023
127,208,578
-
127,208,578
Revenue Estimate
400,845,809
3,140,780
397,705,029
Appropriated Spending
417,220,543
1,730,800
415,489,743
Pension Trust Set Aside
(24,034,731)
-
(24,034,731)
Estimated Ending Balance at
June 30, 2024
86,799,113
(1,409,9821
85,389,133
Less: 18% Reserve
72,151,382
565,340
71,586,905
Estimated Spendable Balance
14,647,731
844,640
13,802,228
'Includes all Appropriation Adjustments through March 31, 2024, excluding Carry Forwards
appropriated on September 19, 2023
The materials provided for the May 16 Budget Work Session indicated a spendable
balance of $12.8 million, with staff recommendations to appropriate that amount for one-
time spending in FY 2024-25. The General Fund Reserve policy requires the City to
maintain a balance equivalent to 18% of annual recurring revenue. With the expected
increase of revenue in FY 2024-25, approximately $1 million of the spendable balance
at June 30, 2024 shifts to the General Fund reserve for FY 2024-25, leaving only $12.8
million available for the budget FY 2024-25 process.
DISCUSSION
The Third Quarter Budget Update includes General Fund activity posted from July 2023
through March 2024.
Property Tax+ln-Lieu of + Residual
100,099,640
59,140,800
59.1%
Sales Tax (Measure X)
85,693,500
49,198,318
57.4%
Sales Tax (Bradley Burns)
61,042,050
35,212,586
57.7%
Charges for Service
33,816,140
29,152,626
86.2%
Utility Users Tax
27,500,000
19,668,543
71.5%
All Other
25,970,049
19,511,951
75.1 %
Business License Tax
16,000,000
11,263,986
70.4%
Cannabis Tax
13,060,130
10,359,793
79.3%
Jail Facility Revenue
17,209,500
8,277,160
48.1%
Hotel Visitor's Tax
9,500,000
6,092,989
64.1%
Franchise Fees
10,950,000
5,852,940
53.5%
Total General Fund Revenue
400,841,009
253,731,692
63.3%
FY 2023-24 Third Quarter Budget Report and Proposed Appropriation Adjustments
June 4, 2024
Page 3
Through March 31, 2024, the City received $253.7 million in General Fund revenues,
which is 63.3% of annual estimates. After analyzing revenues through March 2024, staff
has adjusted estimates for various revenues to align with expectations. In particular,
Sales Tax has continued a downward trend, with lower tax receipts across most
economic segments, particularly in general retail and transportation. This declining trend
is not expected to change until later in 2024.
• The original budget estimate for Bradley -Burns was $67.7 million. The First
Quarter and Mid -Year budget report included overall adjustments to reduce the
revenue estimate by $3.6 million. With the most recent quarterly update, the
City's Sales Tax consultant noted a decrease in the Transportation and General
Retail (i.e., New Auto Sales) sectors. Therefore, the City's Sales Tax consultant
is projecting a further reduction of $1,626,700, bringing the revised Sales Tax
estimate to $59,415,306.
• The original budget estimate for Measure X was $88.6 million. The First Quarter
and Mid -Year budget report included overall adjustments to reduce the revenue
estimate by $2.9 million. With the most recent quarterly update, the City's Sales
Tax consultant noted a decrease from the Transportation and General Retail
(i.e., New Auto Sales) sector. Therefore, the City's Sales Tax consultant is
projecting a further reduction of $2,333,460, bringing the revised Sales Tax
estimate to $83,360,040.
• Due to a higher -than -anticipated payment from Southern California Gas
Company, the estimate for the annual Franchise payment can be increased by
$247,465 for a revised total budget of $797,465. The higher payment is attributed
to a prolonged winter with below average seasonal temperatures, resulting in
higher demand.
• The annual Electric Franchise payment from Southern California Edison was also
higher than originally estimated due to the multiple rate increases that occurred
in 2023. Therefore, staff is recommending an increase of $417,090 bringing the
new estimate to a total of $1,817,086.
• Because the Utility Users Tax is imposed on the consumer, Southern California
Edison's rate increases have also affected Utility Users Tax -Electric revenue,
resulting in consumers paying more than originally projected. Consequently, staff
is recommending a further increase of $500,000, bringing the revised total
budget to $17,300,000.
• Investment earnings continue to outpace estimates due to higher interest rates
and American Rescue Plan Act (ARPA) cash balances. Many of the City's
projects funded with ARPA take time to complete (e.g. Main Library renovation
and Memorial Park), which means the City has been holding ARPA cash. Due to
these two factors, staff is comfortable increasing estimates by $1,000,000, for a
new total of $4,900,000.
• Based on actual and expected collections, staff proposes increasing permit
revenues by $1,458,900. This is primarily due to large construction projects for
residential and mixed -use development on The Warner, 4th & Mortimer, The
Legado at the Met, Central Pointe, and Third & Broadway. The plan check
FY 2023-24 Third Quarter Budget Report and Proposed Appropriation Adjustments
June 4, 2024
Page 4
revenues collected for the third quarter were $3,755,757, representing only 53%
of the annual budget estimate of $7,041,000. Therefore, staff has decreased the
annual revenue for plan check by $2,777,860. When the building code changed
in December 2022 there was a rush to get plans in under the old code. That FY
2022-23 rush and the high interest rate environment has resulted in a slowdown
of activity for FY 2023-24. The overall net revenue reduction is $1,318,960
($1,458,900 increase + $2,777,860 decrease).
As reported previously, due to the PP-GEMT program of increased
reimbursements for Medicare and Medi-Cal transports, Paramedic Service
Charge revenue has increased. As a result, staff is recommending another
increase of $4,173,785, which brings the revised budget to a total of
$14,173,785.
The jail revenue continues to decline due to staffing challenges and deferred
maintenance, which prevents the jail from operating at full capacity. Therefore,
staff recommends a decrease of $4,200,000 in jail revenue, bringing the revised
budget total to $12,950,000. While the City continues to develop a plan to
improve hiring at the jail, the FY 2024-25 budget includes recommendations to
improve maintenance. Both solutions will be necessary to generate additional
revenue
Summary of Changes to General Fund Revenue Estimates
Sales Tax (Bradley -Burns)
$ 1,626,700
Sales Tax Measure X
$ 2,333,460
Gas Franchise Fee
$247,465
Electric Franchise Fee
$417,090
Utility User Tax — Electricity
$500,000
Earnings on Investments
$1,000,000
Building & Planning Revenues
$ 1,318,960
Paramedic Service Charges
$4,173,785
Jail Revenues
$(4,200,000)
Estimated Revenue Reduction
$ 3,140,780
Corresponding adjustment to 18% Reserve
$565,340
Net Impact of Revenue Adjustments
$ 2,575,440
FY 2023-24 Third Quarter Budget Report and Proposed Appropriation Adjustments
June 4, 2024
Page 5
General Fund Expenditures
City Attorney
4,470,880
2,321,667
51.9%
City Clerk
2,411,150
1,173,479
48.7%
City Council
1,048,470
577,292
55.1%
City Manager
3,637,880
2,503,274
68.8%
Community Development
10,088,776
3,640,422
36.1%
Finance & Mgmt Services
12,842,132
8,567,013
66.7%
Fire & Emergency Medical Svcs2
48,566,904
34,591,972
71.2%
General Non -Departmental
51,699,579
27,880,078
53.9%
Human Resources
4,490,140
2,923,122
65.1%
Inter -Fund Transfers
33,994,854
25,138,232
73.9%
Library
13,040,751
5,091,209
39.0%
Museum Funding
1,674,210
1,259,457
75.2%
Parks, Recreation & Comm Svcs
29,403,747
11,630,037
39.6%
Planning & Building
23,029,319
13,254,999
57.6%
Police
152,846,595
112,641,037
73.7%
Public Works
74,956,578
38,142,536
50.9%
Total General Fund Expenditures
468,201,965
291,335,827
62.2%
'Includes all Appropriation Adjustments through March 31, 2024, including Carry Forwards
2Fire & Emergency Medical Services includes a one -month advance
As of March 31, 2024, General Fund expenditures are at 62.2% of budget. Due to an
overall reduction in revenue projections as noted above, staff recommends the following
adjustments to rebalance the General Fund budget.
• The FY 2023-24 budget included $1 million for the November 2023 recall
election. The recall election costs were $617,800 less than anticipated. Staff
recommends an appropriation adjustment accordingly.
• The Resident Vehicle Incentive Program expired on March 31, 2024. Staff
recommends an appropriation reduction of $880,000 to adjust the budget to
actual disbursements.
• The Orange County Fire Authority (OCFA) budget for fire services was prepared
with an estimated contract increase of 4.50%. The City subsequently was notified
of the final contract rate of 3.99%. Therefore, staff recommends an appropriation
adjustment to reduce the OCFA budget by $250,000 to re -align it with the actual
contract rate increase for FY 2023-24.
• The FY 2023-24 budget included a transfer of $1,182,400 to the Civic Center
fund for our required contribution to the Civic Center Authority for maintenance.
Staff recommends an appropriation adjustment to reduce this by $582,400 to
align it with the required contribution of $600,000 for FY 23-24.
FY 2023-24 Third Quarter Budget Report and Proposed Appropriation Adjustments
June 4, 2024
Page 6
The FY 2023-24 budget included a carryover of $2.3 million from the unspent FY
2022-23 non -departmental set -aside for employee negotiations. Based on actual
MOU requirements, we recommend a reduction of $1,275,600 for this
appropriation, as the FY23-24 budget includes another non -departmental set -
aside for employee negotiations.
As previously reported on May 8, 2024, the estimated cost of $25,000 for the
current fiscal year for Investment Management and Portfolio Services would be
included with the third quarter report. Staff recommends an appropriation
adjustment of $25,000, offset by an increase of revenue.
Stores and Property Control Internal Service Fund Close -Out
The Early Direction report on March 19, 2024 included staff's plan to close the Central
Stores internal service fund by the end of the current fiscal year. The demand for
Central Stores has declined over the years, due to just -in -time availability from vendors,
placing the fund in a situation where it has become impossible to remain financially self-
sufficient. Approximately 78% of the Central Stores inventory solely supports the Water
Enterprise. The Central Stores remaining inventory and staffing that supports the Water
Enterprise will be absorbed by that fund. Gas and diesel sales will transfer to the
Corporate Yard, and all remaining Central Stores activity will be discontinued. After
performing account reconciliation for the fund, staff recommends an appropriation
adjustment of up to $850,000 to close the fund.
Dog Park Appropriation
Based on City Council direction from May 16, staff has developed a $4 million funding
plan for the Dog Park. This plan will allow for future expansion as additional funding is
identified.
• As noted above, staff has identified expenditure savings from the Non -
Departmental set -aside for labor negotiations. Staff recommends an
appropriation adjustment of $1,000,000 to reallocate this budget from Non -
Departmental to PWA.
• The Community Development Agency (CDA) has $800,000 of available budget
from money that has been carried forward for two consecutive fiscal years. Staff
recommends an appropriation adjustment of $800,000 to reallocate this from
CDA to PWA.
• The Public Works Agency (PWA) has a carryover budget of $5.2 million for
various maintenance projects at the Santa Ana Regional Transportation Center
(SARTC). We expect PWA to utilize $3.4 million of this budget in the near term,
leaving $1.8 million available. When the books are closed for the current fiscal
year, staff may request City Council approval to replenish the SARTC
maintenance project budget with any available expenditure savings. As this
reallocation is within the PWA budget, no appropriation adjustment is necessary.
• The Parkland Acquisition & Development Fund for District 4 (including Centennial
Park) has an available balance of $400,000. Staff recommends an appropriation
adjustment of $400,000 from the available balance.
FY 2023-24 Third Quarter Budget Report and Proposed Appropriation Adjustments
June 4, 2024
Page 7
Summary of Recommended General Fund Appropriation Adjustments
Recall Election
$(617,800)
Vehicle Incentive Program
$ 880,000
Orange County Fire Authority Contract
$ 250,000
General Fund transfer to Civic Center Authority
$ 582,400
Employee Negotiations unused amount
$ 1,275,600
Appropriation for Investment Manager and Portfolio Services
$25,000
Stores & Property Control Internal Service Fund Close -Out
$850,000
Appropriate $1 million of savings for Dog Park
$1,000,000
Reallocation from CDA to PWA for Dog Park, Net Zero Impact
Net Impact of Proposed Appropriation Adjustments
$ 1,730,800
Other Restricted Fund Adiustments
The City received updated information after the Midyear Budget Report for various
restricted funding sources such as federal monies available for multiple programs. Staff
recommends adjustments to align restricted money appropriations with available
balances and authorizations.
• Approve two $490 appropriation adjustments aligning projected grant budgets for
two Bristol Street Protected Bike Lane projects in the Measure M Street
Construction (Fund 032) and Select Street Construction (Fund 059) Funds with
actual award amounts. The amount listed on the original grant award letter did
not match the amount on the actual grant award received.
• Approve an appropriation adjustment recognizing $14,378 in the Department of
Justice (DOJ) grant fund (12714002-52000), and appropriating the same amount
to the Bulletproof Vest Grant expenditure account (12714411-63001) for
expenditure in the current fiscal year.
• Reimburse the Local Drainage Area II Fund (Fund 222), with $275,028 in funds
that were incorrectly recorded to the Emergency & Health Grants Fund (Fund
122) in FY 2022-23. This adjustment was recommended by the City's Auditors as
part of the Single Audit received and filed by City Council on May 7, 2024.
• As stated in the General Fund section earlier in this report, Staff is
recommending an appropriation adjustment to reduce the Civic Center Authority
contribution by $582,400 to align it with the City's required contribution of
$600,000 for FY2023-24 (Fund 074).
• Two restricted fund adjustments are needed to formally fund the Dog Park
Budget for District 4's Park Acquisition & Development Fund (Fund 314). The first
is recognizing $131,422 in District 4 Acquisition & Development Fee revenue and
the second is appropriating $400,000 in expenditures.
Internal Service Fund Adjustments
The Public Works Agency utilizes the services from the Solis Group (Solis) on every
Capital Improvement Project to ensure that contractors adhere to the Community
FY 2023-24 Third Quarter Budget Report and Proposed Appropriation Adjustments
June 4, 2024
Page 8
Workforce Agreement. The costs related to the services provided by Solis are paid by
the contractor. Due to an oversight, the estimated revenues and corresponding
expenditures were not included during the budget process. Therefore, staff
recommends recognizing $300,000 in the Public Works Agency's Administrative
Services fund, CIP Construction Projects Permits revenue account (10117002-51708)
and appropriate into the Contract Services-PWA-CIP Construction expenditure account
(10117106051-62340).
Fiscal Impact
The General Fund fiscal impact is detailed in the body of the staff report on page 2.
EXHIBIT(S)
1. Line Item Changes to Revenue Estimates and Recommended Adjustments
2. Full -Time Position Vacancy Report as of March 31, 2024
Submitted By: Kathryn Downs, FMSA Executive Director
Approved By: Alvaro Nunez, Acting City Manager
EXHIBIT 1
Line Item Changes to Revenue Estimates and Recommended Adjustments
Description
Account Number
Revenue
Spending
Sales Tax (Bradley Burns)
01102002-50020
(1,626,700)
Sales Tax (Measure X)
01102002-50022
(2,333,460)
Gas Utility
01102002-50050
247,465
Electrical Utility
01102002-50051
417,090
Utility User Tax- Electric
01102002-50031
500,000
Earnings on Investments
01102002-58000
1,000,000
Building Permits
01116002-51601
834,390
Electrical Permits
01116002-51603
315,350
Heating Permits
01116002-51604
309,160
Building Plan Check
01116002-53600
(1,141,400)
Electrical Plan Check
01116002-53601
(400,000)
Plumbing Plan Check
01116002-53602
(225,000)
Mechanical Plan Check
01116002-53603
(400,000)
EIR Developer Fees
01116002-53607
(310,860)
Site Plan Review Charge
01116002-53616
(300,600)
Paramedic Services Charge
01115002-53510
4,173,785
Jail Facility Revenue- US Marshals
01114002-57462
(4,200,000)
Clerk of the Council - Admin, Contract Services -Professional
01107031-62300
(617,800)
Resident Vehicle Incentive Program Expired March 30, 2024
01118017-62300
(880,000)
OCFA (Savings from final contract rate 3.99% vs 4.5%)
01115017-62300
(250,000)
Reduce Civic Center Authority Contribution from General Fund to align with
01106019-68000-074
(582,400)
annual budget
Employee Negotiations carryover amount not used
01105015-69011
(1,275,600)
Appropriation for Investment Management & Portfolio Services
01110100-62300
25,000
General Fund one-time subsidy to close out the Stores & Property Control Fund
01106019-68000-076
850,000
(Fund 076)
Reallocation of unused funding to support the construction of a Dog Park @
01117017-66220
1,000,000
Centennial Park from Non -Departmental to PWA
Reallocation of unused funding to support the construction of a Dog Park @
01118810-62300
(800,000)
Centennial Park from CDA to PWA
Reallocation of unused funding to support the construction of a Dog Park @
01117650-66220
800,000
Centennial Park from CDA to PWA
Line Item Changes to Revenue Estimates and Recommended Adjustments
Description
Account Number Revenue Spending
Other Restricted Fund Totals
Adjust Measure M-Street Construction revenue to align with awarded amounts
03217002-52333
(490)
(Bristol St Protected Bike Lane)
Adjust Measure M-Street Construction expenditures to align with awarded
03217662-66220
(490)
amounts (Bristol St Protected Bike Lane)
Adjust Select Street Construction revenue to align with awarded amounts (Bristol
05917002-52001
490
St Protected Bike Lane)
Adjust Select Street Construction expenditures to align with awarded amounts
05917660-66220
490
(Bristol St Protected Bike Lane)
Recognize revenues for the DOJ Grant Fund
12714002-52000
14,378
Appropriate expenditures for the Bulletproof Vest Grant
12714411-63001
14,378
Correct FEMA Revenue reimbursement
12217331-68000-222
275,028
Reimburse Local Drainage Area II Fund
22217002-59000-122
275,028
Appropriate expenditures for the Local Drainage Area II Fund
22217660-66220
275,028
Reduce Civic Center Authority Contribution from General Fund to align with
07417002-59000-011
(582,400)
annual budget
Recognize revenue for District 4 Park Acquisition & Development Fees
31413002-53300
131,422
Recognize revenue for CIP Construction Project Permits
10117002-51708
300,000
Appropriate expenditures to reimburse the Solis Group for professional services
10117601-62340
300,000
Appropriate expenditures to support the construction of a Dog Park @
31413260-66220
400,000
Centennial Park
General Fund one-time subsidy to close-out the Stores Fund
07617002-59000-011
850,000
EXHIBIT 2
As of March 31, 2024
Departme
City Attorney's Office
FY 23 - 24
Adopted
Positions
22
GF Non-GF
Vacancies Vacancies
4 4
Total Hiring
Vacancies Freeze
8 0
Total
Funded
8
Vacancy
Rate
36%
City Clerk
7
1
0
1
0
1
14%
City Manager's Office
16
1
1
2
0
2
13%
Community Development
72
0
11
11
0
11
15%
Finance & Management Services
69
3
3
6
0
6
9%
Human Resources
32
1
4
5
0
5
16%
Information Technology
24
0
11
11
0
11
46%
Library
38
2
0
2
0
2
5%
Parks, Rec & Community Svcs
64
5
2
7
0
7
11%
Planning & Building
99
12
5
17
0
17
17%
Police Department
644
77
2
79
6
73
12%
Public Works Agency
316
8
43
51
0
51
16%
Total
1403
114
86
200
6
194
14%