TO: ADAM PIRRIE, CITY MANAGER
FROM: JEREMY STARKEY, FINANCE DIRECTOR
DATE: FEBRUARY 13, 2024
Reviewed by:
City Manager: AP
SUBJECT:
Title
2023-24 MID-YEAR BUDGET REPORT
Body
SUMMARY
This mid-year budget report for 2023-24 covers the six-month period ending December 31, 2023. It provides a status update on the City’s primary revenue and expenditure sources in its major funds, with a focus on the General Fund.
Staff closely monitors the City’s budget to ensure that current year revenues and expenditures are meeting expectations, which is necessary to maintain budget stability and avoid service disruptions in any given year.
Through the first half of the year, City funds are generally performing within expected 2023-24 budgeted levels. The City has received sufficient revenues to suggest that full-year budgetary estimates are realistic and that the City is on track to meet or exceed those full-year projections. Expenditures through December 31, 2023, are generally in line with expectations of fifty percent of full-year expenditures that could be reasonably expected at the midpoint of the fiscal year. At this point, staff expects that full-year expenditures will remain within budgeted constraints by the end of the fiscal year. Staff will continue to monitor expenditures through the remainder of the fiscal year for any adjustments in appropriations if necessary.
Results for the City’s General Fund, as well as the other major fund categories, are presented in more detail in the remainder of this report.
RECOMMENDATION
Recommended Action
Staff recommends the City Council receive and file the 2023-24 Mid-Year Budget Report.
Body
ALTERNATIVE TO RECOMMENDATION
In addition to the recommendation, there is the following alternative:
• Request additional information.
FINANCIAL REVIEW
Financial data through December 31, 2023, indicate that for the full-year, revenues are likely to meet or exceed budgetary estimates and that expenditures are generally expected to remain within the constraints of the budget. Any significant variances from the budget are discussed further in this report.
The staff cost to prepare this report is estimated at $1,758 and is included in the operating budget of the Financial Services Department.
ANALYSIS
The information in this report represents a snapshot of City revenues and expenditures as of December 31, 2023, and is the most accurate and up-to-date information available at the time of publication. This information may not represent pending payments or revenues, or irregularities in payment or revenue timing. The City monitors and adjusts its revenue and expenditure projections based on fiscal year to date performance and other developments to develop a more accurate picture of the City’s anticipated yearend financial position. If a significant change is anticipated, budget adjustments will be recommended during the fiscal year.
The City Council adopted an operating and capital improvement budget for 2023-24 that included $59,989,747 in revenues and transfers in from other funds. Subsequent amendments have been made to the budget to account for grant revenues that have yet to be received, resulting in an adjusted total revenue budget of $60,547,621.
This total revenue budget is spread across a number of fund categories, representing more than thirty distinct funds used to account for a wide variety of programs and activities. Total revenues by fund category are shown in the table below:
Through December 31, 2023, $23,902,834 in total revenues and transfers in had been received, representing 39.48% of the full-year budget. This figure is in line with typical revenue receipts for the first six months of the fiscal year when compared to prior fiscal years.
Total expenditures and transfers out to other funds reflected in the original adopted budget amounted to $62,963,066. Subsequent amendments to the budget for energy efficiency and other capital projects, equipment acquisitions, grants, and carryover of unspent funds from prior year projects have resulted in an adjusted total budget of $68,321,644.
Expenditures through December 31, 2023 totaled $31,767,604 or 46.50% of the full-year budget. Given the current status of expenditures, it is expected that the City will remain within the constraints of the current budget.
The table below shows total expenditures and transfers out to other funds as of December 31, 2023:
General Fund
General Fund revenues and transfers in for 2023-24 were originally budgeted at $31,630,963. The Adjusted Budget of $31,656,568 includes a Transfer In of $25,605 from the Technology Fund, reported under Miscellaneous Revenues, to cover the first year cost of the Frontier agreement for telephone services paid from the General Fund.
At December 31, 2023, $12,060,933 of budgeted revenues had been received, representing 38.10% of the full-year budget. This is typical for General Fund revenues as most of the major sources of revenue are received in the latter part of the fiscal year. At the same point in 2022-23, $11,190,179 in General Fund revenues had been received, which amounted to approximately 36.57% of 2022-23 full-year revenues.
The table below shows 2023-24 General Fund revenues and transfers in as of December 31, 2023:
The major General Fund revenues, and their budgetary highlights as of December 31, 2023, are as follows:
Property Tax - To date, $2,640,436 in property tax revenues have been received from Los Angeles County, representing approximately 22.02% of the full-year budget. At the same time last year, approximately 22.11% of full-year actual revenues were received by December 31.
Sales Tax - Sales tax revenues received through the second quarter of the fiscal year amounted to $2,856,386. These represent collections for less than six months due to a general lag in receipts of sales tax from the County. In the prior year, $2,725,425 in sales tax revenue had been received by the midpoint of the fiscal year. The percentage increase over the prior year amounts to approximately 4.81%.
Transient Occupancy Tax (TOT) - TOT revenues through December 31, 2023 were $666,444 compared with $618,413 through the second quarter of 2022-23. This represents an increase of $48,031 over the prior year. The revenues collected are more in line with pre-pandemic trends for the midpoint of the year.
Business License Tax - With revenues of $391,915 in the first half of this fiscal year, business license tax revenues are $153,324 or 64.26% higher than at the same point in last fiscal year. The increase this year is primarily due to the restoration of the full business license fee in 2023-24. In the prior fiscal year, the City Council approved an ARPA-funded rebate of the base business tax amount for Claremont-based businesses of $134.99 per business.
Utility User Tax (UUT) - At December 31, 2023, UUT revenues totaled $2,086,942. Through the second quarter of 2022-23, these revenues totaled $2,187,153. Revenues reflect a decrease of approximately 4.58% over the same period in the prior year, which were primarily due to a City Council approved pause in the collection of Gas UUT from July through November to provide assistance to residents and businesses who saw very high gas bills during 2022-23.
Other Taxes - Other taxes include franchise fees and property transfer taxes. Through December 31, 2023, these revenues amounted to $169,839, representing 17.78% of the full-year budget. At the same point in the prior fiscal year, $151,182 in revenues had been received. Much of this revenue comes from franchise taxes paid by utility companies, which is typically received in the latter part of the fiscal year.
Licenses and Permits - Revenues from public works, grading, and building permits totaled $1,240,982 at December 31, 2023. Current year revenues reflect an increase of $320,630 over revenues of $920,352 through the second quarter of the prior year. This increase is attributed to continued growth in residential and college development and fee increases that went into effect at the beginning of the fiscal year for building and grading permits issued by the City.
Fines and Forfeitures - Revenues from parking, traffic, and code enforcement citations amounted to $271,962 at December 31, 2023. At the same point in the prior year, revenues totaled $186,556. Current year revenues reflect an increase over the prior year of 45.78%. This increase is due to increased collections of Code Enforcement Citations amounting to $62,842 over the prior year for the same period and increased collections of Traffic Fines amounting to $22,378 over the prior year for the same period. Increased Traffic Fines are due to the increase in staffing of our Traffic Bureau, with three motorcycle officers now assigned to traffic enforcement.
Charges for Services - Revenues through the end of the second quarter totaled $754,283, compared with prior year revenues for the same period of $783,780. These revenues represent a decrease of 3.76% over the prior year.
General Fund expenditures and transfers out for 2023-24 were originally budgeted at $31,140,874. The adjusted budget of $32,856,907 represents amendments to the budget for carryover of funds from the prior year for projects that were not completed and additional appropriations approved by City Council through the second quarter.
The table below shows 2023-24 General Fund expenditures and transfers out as of December 31, 2023:
At December 31, 2023, the total General Fund expenditures and transfers out amounted to $16,866,706 or 51.33% of the adjusted budget for the year. Given that one would reasonably expect 50% of the budget to have been expended at this point in the fiscal year, results to date show that the City should remain within budgetary constraints. Staff will review General Fund expenditures in the third quarter of this fiscal year to recommend budget adjustments if necessary.
Of the City’s operating departments, General Services, with 115.66% of its budget expended, exceeded the 50% threshold for the second quarter. This was primarily due to the full annual payment in July of approximately $3.6 million towards the City’s general liability, workers’ compensation, earthquake and property insurance deposits for the year. These costs are distributed throughout the year to the City’s operating departments, and it is expected that by the end of the fiscal year, General Services’ expenditures will be in line with the budget.
All other departments expended between 41.28% and 50.96% of their General Fund budgets through the second quarter of 2023-24. Given these year-to-date figures, General Fund expenditures appear likely to remain within budgeted amounts for these departments for the full-year.
Special Revenue Funds
Special Revenue Funds include those funds whose revenues are committed to specific purposes or projects. The City has twenty-three Special Revenue Funds that provide funding for a variety of activities, including supplemental public safety services, the operation of the City’s impound lot, street repairs and upgrades, transportation programs, landscaping and streetlight maintenance, the senior meal program, housing rehabilitation, and economic development.
Revenues for the City’s Special Revenue Funds totaled $4,884,005 compared with a full-year adjusted budget of $11,464,285. Receipts through December 31, 2023 represent 42.60% of the budget for the full-year.
Expenditures for the Special Revenue Funds total $5,127,360 against a full-year adjusted budget of $17,278,321. These figures represent 29.68% of the 2023-24 budget expended through December 31, 2023. The budget for the Special Revenue Funds was increased from the original adopted budget of $15,008,186 to $17,278,321 due to carryovers for contributions related to unspent capital project budgets from prior fiscal year and allocations of ARPA funds approved by the City Council. Other major special revenue funds that contributed to the increase in adjusted budget included State Gas Tax (resurfacing of non-residential streets), Measure R (sidewalk mitigation and accessibility improvements), and Park Dedication Fund (improvements to city parks). Special Revenue Funds’ expenditures through December 31 indicate that they will not exceed budgetary constraints by the end of the year.
Capital Projects Funds
Capital Projects Funds are restricted in use to the funding of general capital projects not part of Special Revenue Funds. The City has three active capital projects funds.
Revenues to date in the City’s Capital Projects Funds totaled $412,647 at December 31, 2023. These revenues represent 57.65% of the full-year adjusted budget of $715,742. Much of the revenue received relates to reimbursements for grant-funded capital projects.
The adjusted budget for Capital Project Funds, amounts to $1,153,683 and is higher than the original budget of $506,050 mostly due to the carryover of unspent budget and allocations approved by the City Council in the amount of $647,633 for the improvements to the facility at the Police Department and the City Hall’s roof replacement. Expenditures in the Capital Projects Funds stand at $503,646 as of December 31, 2023. This represents 43.66% of the full-year budget. It is anticipated that the Capital Projects Funds expenditures will end the year within the constraints of the current budget.
Enterprise Funds
The City operates four Enterprise Funds to provide transportation, sewer, sanitation, and cemetery services. The activities of these funds are intended to be supported solely by revenues from fees charged for services provided.
At December 31, 2023, the City’s Enterprise Funds had generated revenues of $5,409,430 versus estimated revenues for 2023-24 of $10,846,356. These revenues represent 49.87% of full-year budgeted revenues for the year. All the City’s Enterprise Funds are on track to meet budgetary revenue estimates by the end of the fiscal year.
Expenditures in the Enterprise Funds stand at $4,762,799 as of December 31, 2023. This represents 44.62% of the full-year adjusted budget of $10,675,297. Given year-to-date expenditures, it is anticipated that the Enterprise Fund expenditures will end the year within the constraints of the current budget.
Internal Service Funds
The City’s Internal Service Funds provide motor fleet and technology services to support the City’s operating departments. Revenues for Internal Service Funds come from fees charged internally to each department for services provided.
At December 31, 2023, Internal Service Fund revenues totaled $1,108,034 out of a total revenue budget of $2,497,302. This amounted to 44.37% of the full-year budget.
Expenditures through the end of the second quarter of the fiscal year totaled $1,652,127, representing 55.25% of the full-year budget of $2,990,069. Internal Service Fund expenditures are expected to remain within budgeted amounts for the full-year.
Debt Service/Successor Agency Funds
In addition to the funds already discussed, the City also operates a Debt Service Fund and a Successor Agency Fund. The Debt Service Fund, as its name suggests, is used to account for the expenditure of funds to make payments on outstanding debt obligations of the City. The Successor Agency Fund was established in the wake of the dissolution of redevelopment agencies in California to begin the wind down of the affairs of the former Claremont Redevelopment Agency.
Revenues in the Debt Service/Successor Agency Funds amounted to $27,785 at December 31, 2023, representing 0.83% of the full-year budget of $3,367,368. The bulk of the revenues in the Successor Agency/Debt Service Funds come from property tax remittances received in January and June of each fiscal year, and transfers in processed at the end of the fiscal year.
Expenditures totaled $2,854,966 out of a budgeted $3,367,367, representing 84.78% of the full-year budget. This included the repurchase of the full balance of the City’s outstanding Pension Obligation Bonds which was approved by the City Council in November of 2023.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: General Plan and the 2022-24 Budget.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by:
Jeremy Starkey
Finance Director