HomeMy WebLinkAbout16 YEAR-END UPDATE FOR FISCAL YEAR 2021-22DocuSign Envelope ID: 38C6E60F-9E3E-4767-A10E-E78B9786B60D • AGENDA REPORT MEETING DATE: SEPTEMBER 20, 2022 TO: MATTHEW S. WEST, CITY MANAGER Agenda Item 16 Reviewed: IL5W City Manager Finance Director Sa FROM: JASON AL -IMAM, FINANCE DIRECTOR/CITY TREASURER SUBJECT: YEAR-END UPDATE FOR FISCAL YEAR 2021/22 SUMMARY: This report provides the City Council with an update on Fiscal Year 2021/22 based on actual year- end revenues and expenditures. General Fund operating revenues are approximately $2.2 million higher than projected, whereas General Fund expenditures are approximately $1.3 million lower than projected. Consequently, General Fund Reserves are approximately $3.5 million higher than expected at $31.8 million as of June 30, 2022 (or 38% of General Fund operating expenditures), and exceed the City Council's minimum reserve policy of 20%. RECOMMENDATION: It is recommended that the City Council receive and file this report and approve the interfund transfers set forth within this report, which provides for the reimbursement of eligible expenditures incurred in other funds. CORRELATION TO THE STRATEGIC PLAN: The recommendation correlates to the strategic plan by implementing Goal C, sustain long-term financial strength with adequate reserves and enhanced capacity to provide a sustainable level of City services. DISCUSSION: In May 2022, General Fund revenues were projected to be approximately $82.9 million for Fiscal Year 2021/22. However, now that the books have been closed, revenues are approximately $2.2 million higher than projected. DocuSign Envelope ID: 38C6E60F-9E3E-4767-A10E-E78B9786B60D Fiscal Year 2021/22 Year -End Update Page 2 of 4 *The majority of transfers and reimbursements in the General Fund are related to ongoing program costs and/or services funded by restricted funds. The better-than-expected revenues are largely due to the following: Sales & Use Tax Revenue was approximately $1.4 million better than projected, which is largely associated with Autos & Transportation, State & County Pools, Business & Industry, and Fuel & Service Stations. Departmental Revenue was approximately $573 thousand higher than projected, which is largely related to building permits, tennis and pickleball classes and court reservations, and youth camps and classes. Other Revenue was higher than projected due to various revenues and reimbursements, including, but not limited to, federal grants, state reimbursements, etc. General Fund Expenditures General Fund expenditures were projected at $79.1 million for 2021/22. Actual (unaudited) expenditures (including amounts encumbered and carried -over to Fiscal Year 2022/23) amounted to approximately $77.8 million, which is approximately $1.3 million (2%) lower than projected and largely relates to the Police Department. Police Department expenditures were approximately $1.1 million less than projected (approximately 4% of the department's operating budget) and is largely due to salary savings. General Fund Reserves General Fund Reserves were projected to be $28.3 million at June 30, 2022. However, actual General Fund Reserves are approximately $3.5 million higher and amount to $31.8 million at June 30, 2022, which is 38% of General Fund operating expenditures, and exceed the City Council's Projected Actual (Unaudited) Difference Sales & Use Tax $32,614,460 33,977,179 1,362,719 Property Tax 22,920,774 22,869,935 (50,839) Franchise Fees 1,708,669 1,692,772 (15,897) Transient Occupancy Tax 1,735,983 1,857,502 121,519 Other Tax Revenue 1,573,301 1,664,500 91,199 Departmental Revenue 3,946,133 4,518,706 572,573 Use of Money & Property 2,108,446 2,237,460 129,014 Transfers & Reimbursements* 13,977,444 13,477,826 (499,618) Other Revenue 2,333,428 2,782,608 449,180 *The majority of transfers and reimbursements in the General Fund are related to ongoing program costs and/or services funded by restricted funds. The better-than-expected revenues are largely due to the following: Sales & Use Tax Revenue was approximately $1.4 million better than projected, which is largely associated with Autos & Transportation, State & County Pools, Business & Industry, and Fuel & Service Stations. Departmental Revenue was approximately $573 thousand higher than projected, which is largely related to building permits, tennis and pickleball classes and court reservations, and youth camps and classes. Other Revenue was higher than projected due to various revenues and reimbursements, including, but not limited to, federal grants, state reimbursements, etc. General Fund Expenditures General Fund expenditures were projected at $79.1 million for 2021/22. Actual (unaudited) expenditures (including amounts encumbered and carried -over to Fiscal Year 2022/23) amounted to approximately $77.8 million, which is approximately $1.3 million (2%) lower than projected and largely relates to the Police Department. Police Department expenditures were approximately $1.1 million less than projected (approximately 4% of the department's operating budget) and is largely due to salary savings. General Fund Reserves General Fund Reserves were projected to be $28.3 million at June 30, 2022. However, actual General Fund Reserves are approximately $3.5 million higher and amount to $31.8 million at June 30, 2022, which is 38% of General Fund operating expenditures, and exceed the City Council's DocuSign Envelope ID: 38C6E60F-9E3E-4767-A10E-E78B9786B60D Fiscal Year 2021/22 Year -End Update Page 3 of 4 minimum reserve policy of 20% for the General Fund providing for the necessary level of reserves that are expected to be required to cover years where operating expenditures exceed operating revenues. It should be noted that the aforementioned amounts referenced within this report are unaudited. The financial statement audit for Fiscal Year 2021/22 is expected to be completed in December 2022. The audited financial statements will be brought forward to the City Council upon completion of the audit, which will identify audit related adjustments (if any) that are initiated by the City's auditors. Interfund Transfers It is recommended that the City Council approve the following interfund transfers, which provide for the reimbursement of eligible expenditures incurred in other funds. • Transfer $1,598,927 from the Measure M2 Fund to the Land Proceeds Fund for eligible Measure M2 expenditures. • Transfer $1,553,716 of amounts appropriated in the Land Proceeds Fund to the Measure M2 Fund. • Transfer $62,712 from the Measure M2 Fund to the Capital Projects Fund for eligible Measure M2 expenditures. • Transfer $44,871 from the Measure M2 Fund to the Gas Tax Fund for eligible Measure M2 expenditures. • Transfer $28,029 from the Special Tax B Fund to the General Fund for eligible Special Tax B expenditures. • Transfer $714 from the MCAS 2010 Capital Projects Fund to the Land Proceeds Fund for eligible costs associated with the former Marine Corps Air Station. Pension Update The City's net pension liability was $50 million as of June 30, 2021, which is based on the most recent CalPERS actuarial report issued in July 2022. The City's net pension liability represents the total liability for pension benefits earned by employees to date, offset by the market value of assets held by CalPERS on behalf of the City. When the market value of those assets rises, the net pension liability declines. In 2020/21, the assets held by CalPERS reflected a 21.3% return on investments, and resulted in a corresponding reduction in the City's net pension liability. The City's net pension liability decreased by $26 million in 2020/21, which is primarily due to 21.3% return on investments. However, it is important to note that CalPERS reported a preliminary 6.1% loss on investments in 2021/22, which is not reflected in the June 30, 2021 valuation. DocuSign Envelope ID: 38C6E60F-9E3E-4767-A10E-E78B9786B60D Fiscal Year 2021/22 Year -End Update Page 4 of 4 The City has also deposited funds into a separate Pension Trust, which is held by Public Agency Retirement Services (PARS). The PARS Pension Trust has a balance of approximately $8 million, which brings the City's net pension liability to $42 million, which is 87% funded. Budget -In -Brief On June 21, 2022, the City Council adopted the Annual Operating Budget and Capital Improvement Program for Fiscal Year 2022/23, which represents year two of the 2021-2023 Biennial Budget. The budget is a 253 -page document that provides a comprehensive funding plan for the year. A "Budget - In -Brief' has been prepared to provide an overview of the City's budget information in a user-friendly and manageable format for the public to read, which builds on the City's commitment to fiscal stewardship and transparency. The Budget -In -Brief also provides additional information related to: • Top 25 Sales Tax Producers • Property Tax Dollar Breakdown • Capital Improvement Projects • Tustin CARES Program (/DocuSignee�d�by:: Y'iNOIL W(r (�riG�aN- Jason A-3AFOC64AE... Finance Director/City Treasurer Attachment: Budget -In -Brief DocuSign Envelope ID: 38C6E60F-9E3E-4767-A10E-E78B9786B60D 20721=12023 BUDGET=1N=BR1EF ib "ri BUDGET OVERVIEW In June 2022, the City Council adopted the Budget and Capital Improvement Program for Fiscal Year 2022-2023, which represents year two of the 2021-2023 Biennial Budget. The Budget builds upon the City Council's goals set forth in the 2018-2023 Strategic Plan, which focuses on economic vitality, neighborhoods, public safety, financial strength, community relationships, and organizational excellence. GENERALFUND OPERATING REVENUES Sales Tax CProperty Tax c• Other (I OTransfers & Reimbursements 70% generated from property and sales tax. The balance is generated from City services, reimbursements, and other revenues & transfers. 2 mizoz DUE 2, 3 A S1 52% ($31.6M) The City of Tustin has been awarded the Certificate of Achievement for Excellence in G� Financial Reporting by the Government Finance Officers Association for the past 34 years. This is the highest form of recognition for governmental accounting and financial reporting. [AT TOP TUSTIN EMPLOYERS 1. Tustin Unified School District . . . . . . . . . . . . . . 2,933 2. Schools First Federal Credit Union . . . . . . . . . . . 1,082 3. Costco Wholesale Corporation . . . . . . . . . . . . . . 658 4. New American Funding . . . . . . . . . . . . . . . . . . 578 5. Foothill Regional Medical Center . . . . . . . . . . . . . 575 6. City of Tustin . . . . . . . . . . . . . . . . . . . . . . . . 406 7. Youngs Market Company . . . . . . . . . . . . . . . . . 350 8. Avid Bioservices, Inc .. . . . . . . . . . . . . . . . . . . . 282 9. Kaiser Foundation Hospitals . . . . . . . . . . . . . . . . 200 10. Logomark Inc . . . . . . . . . . . . . . . . . . . . . . . . .196 TOP SALES TAX PRODUCERS (ALPHABETICAL ORDER) 1. AutoNation Ford 2. AutoNation Infiniti Q 3. Best Buy 4. Chevron 5. Costco 6. Home Depot 7. Jewelry Exchange 8. Lowes 9. Marshalls 10. Micro Center 11. Nissan of Tustin 12. Nordstrom Rack 13. REI 14. Shell 15. Target 16. TJ Maxx 17. Total Wine & More 18. Toyota Lease Trust 19. Tustin Acura 20. Tustin Buick GMC 21. Tustin Cadillac 22. Tustin Chrysler Jeep Dodge 23. Tustin Hyundai/Mazda 24. Tustin Lexus 25. Tustin Toyota Find more Budget Details at https://www.tustinca.org/1085/City-Budgets 1712711 rim TUSTIN LEGACY DOG PARK Tustin has gone to the dogs! Located in Tustin Legacy Park, Tustin's first dog park will provide fenced large and small dog areas with plenty of space for exercise and making fur -ends. Both areas will include two -gate entry systems, play amenities, and shade and seating areas. If that weren't pawesome enough, the dog park will also include lighting, an informational kiosk, and a dog memorial area. rs.i.. LEGACY ANNEX Adjacent to Veterans Sports Park, the Annex is a City of Tustin satellite site home to staff from both the Police Department and the Parks and Recreation Department. The planned improvements for the Parks and Recreation portion of this project will include enhanced office and storage space and a reception/lobby area that will provide Legacy residents with a nearby connection point where they can interact with staff to register for classes, reserve facilities, and get their questions answered. The Police Department's planned renovations include a substation that will house the offices of the Traffic Unit and Community Resources Unit. There will also be a front counter staffed with a Police Services Officer during the daytime hours where the public can access services such as obtaining copies of police reports, signing off citations and other needs.