HomeMy WebLinkAboutItem 10 - Fiscal Year 2024-25 Third Quarter Budget Report and Proposed Appropriation Adjustments Finance and Management Services
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Item # 10
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
June 3, 2025
TOPIC: FY2024-25 Third Quarter Budget Report and Proposed Appropriation
Adjustments
AGENDA TITLE
Fiscal Year 2024-25 Third Quarter Budget Report and Proposed Appropriation
Adjustments
RECOMMENDED ACTION
1. Receive and file the Fiscal Year 2024-25 Third Quarter Budget Update.
2. Approve the recommended appropriation adjustments. (Requires five affirmative
votes)
GOVERNMENT CODE §84308 APPLIES: No
DISCUSSION
The FY2024-25 Third Quarter Budget Update provides a General Fund snapshot at the
75% mark 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, 2025. Other than the funds noted below in the Restricted
Fund Adjustments section, there is nothing significant to report for other City funds.
General Fund Summary
FY2024-25 Third Quarter Budget Update & Proposed Appropriation Adjustment
June 3, 2025
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Details on the updated revenue estimates and recommended expenditure reductions are
provided in the following sections. The revised recurring revenue estimates lowered the
required 18% reserve, which is calculated only on recurring revenues, by $129,600.
Based on the net changes in revenues and expenditures, along with the revised reserve
requirement, the estimated spendable fund balance as of June 30, 2025 increased by a
net amount of $199,070. The new estimated spendable fund balance is now $13.9 million.
The materials provided for the May 20 Budget Work Session indicated an estimated
ending spendable balance of $1.4 million. This balance reflects proposed FY 2025-26
one-time allocations, including $10.4 million for various projects and other one-time uses,
and an additional $1 million deposit to the Section 115 Pension Trust.
In addition, the City’s General Fund Reserve Policy requires maintaining a reserve equal
to 18% of annual recurring revenues. With the projected increase in recurring revenues
for FY 2025-26, approximately $1.1 million of the available balance as of June 30, 2025
was shifted to the reserve, reducing the remaining amount available for allocation. After
accounting for these proposed uses, the ending estimated spendable balance is $1.4
million.
Overall, after accounting for the adjustments to both revenues and spending, the General
Fund remains balanced, with recurring revenues exceeding recurring expenditures by
$14,711.
General Fund Revenues
A summary of General Fund revenues follows.
FY2024-25 Third Quarter Budget Update & Proposed Appropriation Adjustment
June 3, 2025
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Through March 31, 2025, the City received approximately $249.2 million in General Fund
revenues, representing 60.8% of the annual budgeted estimates. Because revenues for
FY 2024–25 will continue to be accrued through the end of August, this collection rate is
consistent with expectations and is on track to meet revenue estimates.
As noted in the Mid-Year Budget Update presented to City Council on March 4, 2025,
staff previously made certain adjustments to revenue estimates. For this Third Quarter
Budget Update, staff has completed a further review of revenues based on nine months
of actual collections and is recommending several additional adjustments to better align
with year-end estimates. Notable updates are summarized below.
Jail Revenues
The City's jail revenue continues to decline due to staffing challenges and deferred
maintenance, which have limited the jail's ability to operate at full capacity. Based on nine
months of billing and activity, staff decreased the jail revenue estimate by $3,820,000,
resulting in a revised budget total of $10,330,000.
To address these challenges, staff has implemented several improvements, including
adding an additional jail maintenance worker and securing funding to address deferred
maintenance needs. As part of the upcoming FY 2025-26 budget process, staff is also
proposing pay adjustments for Correctional Officers to improve recruitment and retention,
as well as funding for a Pay-to-Stay program designed to generate additional revenue.
Both staffing and facility improvements will be necessary to improve jail capacity and
support future revenue recovery.
Planning and Building Charges and Fees
Based on nine months of activity through March 31, 2025, staff decreased the plan check
and permit revenue estimate by $3,200,000, resulting in a revised budget total of
$8,191,000.
Plan check revenues are generated during the review of development plans to ensure
compliance with building codes, zoning regulations, and other applicable standards. Once
plans are approved, building permits are issued, generating additional permit fee revenue.
Both plan check and permit activities are sensitive to development trends and broader
economic conditions.
The adjustment reflects a continued slowdown in development activity, as higher interest
rates have led many developers to delay or pause new projects. According to the National
Association of Home Builders, elevated borrowing costs remain a major factor slowing
construction nationwide. This trend is expected to continue into Fiscal Year 2025-26 and
staff will incorporate updated projections into the upcoming budget process.
FY2024-25 Third Quarter Budget Update & Proposed Appropriation Adjustment
June 3, 2025
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Paramedic Service Charge
The Public Provider Ground Emergency Medical Transportation (PP-GEMT) program
provides supplemental federal reimbursement to public agencies for the cost of
emergency medical transports for Medi-Cal patients. To further support agencies, a new
federal program increasing reimbursement rates took effect on January 1, 2023, resulting
in higher collections than originally estimated. Based on year-to-date activity, staff
increased the Paramedic Services Charge revenue estimate by $3,500,000, resulting in
a revised budget total of $15,100,000.
Investment Earnings
Initial estimates assumed that American Rescue Plan Act (ARPA) funding balances would
significantly decrease by the December 2024 obligation deadline. However, because
major projects take time to complete, such as the Main Library renovation, Memorial Park
improvements, and others, project balances have remained higher than anticipated.
Combined with continued elevated interest rates, the City has experienced higher
investment earnings than originally projected. Accordingly, staff has updated the
investment earnings estimate by $1 million, resulting in a revised total of $3,150,000.
Business License Tax
Business Tax revenues continue to exceed original estimates, supported by ongoing
compliance efforts led by Treasury Services staff. Based on continued strong
performance through the third quarter, staff recommends increasing the revenue estimate
by an additional $560,000. This brings the revised total for FY 2024-25 to $18,010,000.
Refuse Franchise Fee Update
The Refuse Franchise Fee revenue estimate was previously updated during the Mid-Year
Report based on available data. Following continued strong collections through March,
the estimate has been increased by an additional $740,000, bringing the total to
$10,240,000 for FY 2024-25. The increase is primarily driven by higher waste collection
rates implemented by the City's hauler. As franchise fees are calculated as a percentage
of the hauler’s gross receipts, these rate adjustments have resulted in higher revenues to
the City.
Utility Users Tax – Electric
As part of the Mid-Year Budget Report on March 4, 2025, staff adjusted the Utility Users
Tax revenue estimate for electric services to reflect higher-than-expected receipts. Based
on continued strong collections through the third quarter ending March 31, 2025, staff has
adjusted the revenue estimate upward by an additional $500,000. This adjustment
accounts for sustained higher electricity rates implemented by Southern California Edison
(SCE) and elevated demand. The revised Utility Users Tax – Electric revenue budget for
FY 2024-25 is now $18,800,000.
FY2024-25 Third Quarter Budget Update & Proposed Appropriation Adjustment
June 3, 2025
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City Event Sponsorship
The Parks, Recreation, and Community Services Agency has actively pursued
sponsorships to help reduce the City’s share of event costs. To support this, staff
recommends appropriating $26,750 to the City Events budget, offset by sponsorship
revenue received this fiscal year. These funds will help address cost overages often
caused by last-minute requests and expanded event scope.
General Fund Expenditures
A summary of General Fund expenditures follows.
As of March 31, 2025, General Fund expenditures are at 61% of budget, which is
relatively consistent with the prior year when expenditures were at 62%.
In accordance with the City’s Budget and Reserve Policy, the General Fund budget must
remain balanced, with recurring expenditures not exceeding recurring revenues. To
support this requirement and in response to the lower revenue estimates noted above,
staff is recommending one-time expenditure reductions. These reductions reflect a
$1,036,000 decrease in the salary budget, achieved through vacancy savings in select
departments.
FY2024-25 Third Quarter Budget Update & Proposed Appropriation Adjustment
June 3, 2025
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Litigation Costs
Staff also recommends a one-time adjustment to increase appropriations in the Non-
Departmental budget by $300,000 for higher than expected litigation expenses. To
account for this trend, the FY 2025-26 Proposed Budget includes a one-time increase in
litigation funding.
Restricted Fund Adjustments
Water Enterprise
On June 4, 2024, the City Council approved the sale of Water Revenue Bonds to finance
$40 million in high-priority improvements to the City’s water system. These proceeds from
the Water Fund support the design, acquisition, and construction of capital improvements.
In accordance with governmental fund accounting standards, capital expenditures are
recorded in the Acquisition and Construction Fund.
A housekeeping adjustment has been made to move $14,745,008 in revenue originally
recorded in FY 2023–24 to the current fiscal year. This update ensures the Acquisition
and Construction Fund’s Spendable Fund Balance accurately reflects reimbursements
scheduled for this year and eliminates the current deficit.
A second housekeeping adjustment is also required to increase the transfer from Fund
060, the Water Revenue Fund, to Fund 066, the Acquisition and Construction Fund, by
$10,666,969 to ensure proper alignment of resources within the Water Enterprise.
SoCal Gas Community Investment Fund
The City’s Neighborhood Initiatives and Environmental Services (NIES) section of the
Planning Division is requesting an appropriation adjustment to recognize $50,000 in
advanced grant funds from the SoCal Gas Community Investment Fund and appropriate
the same amount to Misc Operating Expense. Monies will be used to purchase
purchasing air quality monitors, which monitors air quality on city-owned property and
some residential properties, depending on eligibility criteria. This Fund is facilitated by the
California Community Foundation, for the Air Pollution Monitors and Air Purifiers
(APMAP) project. This initiative addresses significant pollution burdens in the city's most
disadvantaged communities, identified by CalEnviroScreen 4.0 and California Healthy
Places Index as ranking 90% or above in pollution burden. The grant will fund the project's
initial phases focusing on:
(1) Community empowerment through education
(2) Installation of air quality monitors to improve data accessibility for residents. By
bridging data gaps and promoting environmental awareness, this project aims to
enhance climate resilience and air quality in vulnerable neighborhoods through
December 2026.
FY2024-25 Third Quarter Budget Update & Proposed Appropriation Adjustment
June 3, 2025
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Police Revenue Bonds
The Police Department’s Holding Facility Debt Service was paid off in FY2023-24, leaving
an immaterial remaining balance. To formally close the Fund, staff is recommending that
the remaining cash balance of $53,470 transfers to the General Fund, which provided
most of the funding for the debt service payments. There was a remaining balance in the
Fund because the City used interest proceeds in the trustee account to supplement the
debt service payments. This resulted in the total payments being less than the total
amount transferred from the General Fund.
RDA: Successor Agency Fund
Santa Ana’s Successor Agency finalized the sale of the Third Street and Main Street
Parking Lot to the City on April 21, 2025. In accordance with Long Range Property
Management Plan approved by the State Department of Finance, the proceeds from this
transaction must be remitted to the County of Orange Auditor-Controller for distribution
among the various taxing entities. Revenue has been updated to reflect $190,000 from
the sale. A corresponding appropriation adjustment of the same amount is requested to
authorize payment to the Orange County Auditor-Controller.
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action.
FISCAL IMPACT
The General Fund Fiscal Impact is detailed on page 2 of this report. Exhibit 1 lists the line
item changes to revenue estimates and recommended appropriation adjustments. After
accounting for all the revenue and expenditure adjustments, the net impact is a $199,070
increase to the General Fund’s estimated Spendable Fund Balance as of June 30, 2025.
EXHIBIT(S)
1. Line Item Changes to Revenue Estimates and Recommended Adjustments
2. Third Quarter Vacancy Report Summary
Submitted By: Alex Trinidad, Acting Executive Director of Finance and Management
Services Agency
Approved By: Alvaro Nuñez, City Manager
Line Item Changes to Revenue Estimates and Recommended Adjustments
Description Account Number Revenue Spending
Utility User Tax- Electric 01102002-50031 500,000
Business Licenses 01102002-50045 560,000
Refuse Franchise Fee 01102002-50058 740,000
Earnings on Investments 01102002-58000 1,000,000
Jail Facility Revenue- US Marshals 01114002-57462 (3,000,000)
Jail Facility Revenue- US Marshals San Diego 01114002-57463 (820,000)
Paramedic Services Charge 01115002-53510 3,500,000
Building Permits 01116002-51601 (925,000)
Plumbing Permits 01116002-51602 (377,000)
Electrical Permits 01116002-51603 (698,000)
Heating Permits 01116002-51604 (625,000)
Electrical Plan Check 01116002-53601 (75,000)
Plumbing Plan Check 01116002-53602 (75,000)
Mechanical Plan Check 01116002-53603 (55,000)
EIR Developer Fees 01116002-53607 (50,000)
Site Plan Review Charge 01116002-53616 (320,000)
Transfer In, Police Revenue Bonds 01102002-59000-400 53,470
City Events Sponsorship Revenue 01113002-53331 26,750
Increased litigation expenses 01105015-62300 300,000
Increase expenditure budget for City events 01113230-62300 26,750
Use of vacancy savings to offset revenue reductions 01114405-61000 (232,348)
Use of vacancy savings to offset revenue reductions 01114445-61000 (379,780)
Use of vacancy savings to offset revenue reductions 01116500-61000 (126,210)
Use of vacancy savings to offset revenue reductions 01116510-61000 (25,412)
Use of vacancy savings to offset revenue reductions 01116530-61000 (167,180)
Use of vacancy savings to offset revenue reductions 01116540-61000 (105,070)
Other Restricted Fund Totals
Housekeeping adjustment to move revenue originally recorded in FY23-24 06617002-59301 14,745,008
Housekeeping adjustment to move revenue originally recorded in FY23-24 06617002-50001 (10,079,528)
EXHIBIT 1
Line Item Changes to Revenue Estimates and Recommended Adjustments
Description Account Number Revenue Spending
Housekeeping adjustment to increase the transfer from Water Revenue to the
Acquisition & Construction Fund 06017019-68000-066 10,666,969
Housekeeping adjustment to increase the transfer from Water Revenue to the
Acquisition & Construction Fund 06617002-59000-060 10,666,969
SoCal Gas Community Investment grant funds to purchase air quality monitors 13116002-52040 50,000
SoCal Gas Community Investment grant funds to purchase air quality monitors 13116501-63001 50,000
Closure of Fund 400- Police Department Revenue Bonds 40019020-68000-011 53,470
Third & Main Street Parking Lot Sale proceeds & distribution to various taxing
entities 67018002-57071 190,000
Third & Main Street Parking Lot Sale proceeds & distribution to various taxing
entities 67018850-69142 190,000
As of March 31, 2025
Department FY 24 - 25
Adopted Positions
Unfunded
Positions GF Vacancies Non-GF Vacancies Total Vacancies Hiring Freeze
Vacancies
Total Funded
Vacancies
% of Dept.
Vacancies
City Manager's Office 15 3 1 4 0 4 27%
City Attorney's Office 23 3 4 7 0 7 30%
City Clerk 7 0 0 0 0 0 0%
Community Development 79 2 11 13 0 13 16%
Finance & Management Services 72 9 3 12 0 12 17%
Information Technology 24 0 8 8 0 8 33%
Human Resources 32 3 4 7 0 7 22%
Planning & Building 97 13 1 14 0 14 14%
Police Department 660 18 105 1 106 5 83 13%
Parks, Rec & Community Svcs 69 5 3 8 0 8 12%
Library 38 0 0 0 0 0 0%
Public Works Agency 319 12 39 51 0 51 16%
Total 1435 18 155 75 230 5 207 16%
EXHIBIT 2