HomeMy WebLinkAbout09 YEAR-END UPDATE FOR FISCAL YEAR 2023-2024Docusign Envelope ID: C5E14E88-9E29-4329-AOE1-877BE86D4AE6
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` AGENDA REPORT
MEETING DATE:
TO:
FROM:
SUBJECT:
SUMMARY:
OCTOBER 15, 2024
ALDO E. SCHINDER, CITY MANAGER
Agenda Item 9
Reviewed: Initial
City Manager S
Finance Director
JENNIFER KING, FINANCE DIRECTOR/CITY TREASURER
YEAR-END UPDATE FOR FISCAL YEAR 2023-2024
This report provides the City Council with an update of the Fiscal Year 2023-2024 preliminary
operating results based on actual year-end revenues and expenditures. General Fund operating
revenues are approximately $4.5 million higher than the amended budget, whereas General Fund
expenditures are approximately $2.2 million lower than the amended budget.
The General Fund reserves, excluding impact of the North Hangar Fire Incident, are expected to
be at $30 million as of June 30, 2024 (or 32% of the General Fund's operating expenditures). This
reserve level exceeds the City Council's target reserve policy of 20%.
RECOMMENDATIONS:
It is recommended that the City Council:
1. Receive and file this report;
2. Approve supplemental appropriations incurred to operate various City programs and services
and related General Fund transfers identified in this report; and
3. Approve appropriations for carryover purchase orders identified in this report.
FISCAL IMPACT:
There are sufficient revenues or reserves in respective funds to fund the supplemental
appropriations, transfers, and carryover appropriations identified in this report.
CORRELATION TO THE STRATEGIC PLAN:
The recommendations correlate 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. Specifically, periodic review of the City's financial position supports prudent
management of public funds.
BACKGROUND AND DISCUSSION:
Docusign Envelope ID: C5E14E88-9E29-4329-AOE1-877BE86D4AE6
City Council Agenda Report
Fiscal Year 2023-2024 Year -End Update
October 15, 2024
Page 2 of 6
The mid -year budget review projected the General Fund revenues to be approximately $90 million
for Fiscal Year 2023-2024. However, now that the books have been closed, revenues (unaudited)
are approximately $4.5 million higher than the projection.
perating Revenues:
Sales Tax
Property Tax
Franchise Fees
Transient Occupancy Tax
Other Tax Revenue
Departmental Revenue
Use of Money & Property
Fines & Forfeitures
Transfers and Reimbursements*
Other Revenues**
Total Operating Revenues
on -Operating Revenues:
Navy Reimbursement
(A) (B) (B) - (A)
Actual Amended Actual Budget
22/23 Budaet 23/24 23/24 Variance
$35,434,121
$35,000,000
$35,403,145
$403,145
24,563,264
25,777,386
26,204,803
427,417
1,801,981
1,751,000
1,864,197
113,197
2,151,007
2,300,000
2,392,315
92,315
1,647,056
1,461,035
1,479,443
18,408
5,809,287
3,670,760
4,355,364
684,604
3,990,026
4,190,465
5,409,110
1,218,645
1,109,678
950,000
866,758
(83,242)
11,355,257
13,420,660
13,776,616
355,956
3,113,393
1,932,953
3,245,987
1,313,034
90,975,070
90,454,259
94,997,738
4,543,479
51
*The majority of transfers and reimbursements in the General Fund are related to ongoing program
costs and/or services funded by restricted funds.
**Other revenues include federal and state grants, street and curb permit revenue, and service
recovery charges, etc.
The higher -than -expected operating revenues are largely due to the following:
Departmental Revenue was approximately $684,000 higher than projected, which is largely
related to citywide building permit and plan check increases, cost recovery for one-time
development project, and an increase in contract classes and tennis lesson program
revenues.
Use of Money and Property was approximately $1.2 million higher than projected, which is
mostly attributable to increased investment earnings and rental revenues.
Other Revenue was $1.3 million higher than projected primarily due to several one-time
grants and reimbursements.
General Fund Expenditures
Docusign Envelope ID: C5E14E88-9E29-4329-AOE1-877BE86D4AE6
City Council Agenda Report
Fiscal Year 2023-2024 Year -End Update
October 15, 2024
Page 3 of 6
At Mid -Year, the General Fund's expenditures were projected to be $97 million for Fiscal Year 2023-
2024. Subsequently additional appropriation was approved to bring the amended budget for Fiscal
Year 2023-2024 to $97.9 million. Actual (unaudited) total expenditure amounted to $95.6 million,
which is approximately $2.2 million lower than projected. The Parks and Recreation Department
incurred higher program costs, which were offset by higher program revenues.
Actual
22/23
(A)
Amended
Budget 23/24
(B)
Actual
23/24
(A) - (B)
Budget
Variance
Operating Expenditures:
City Council
$50,262
$86,800
$62,155
$24,645
City Clerk
869,904
893,130
824,167
68,963
City Attorney
727,833
1,069,150
791,846
277,304
City Manager
904,984
1,007,300
799,676
207,624
Economic Development
1,198,671
1,983,134
2,020,954
(37,820)
Finance
1,784,663
1,957,578
1,891,450
66,128
Human Resources
1,169,671
1,264,413
1,300,707
(36,294)
Community Development
4,533,744
5,369,400
5,103,103
266,297
Public Works
14,734,048
16,172,456
16,075,086
97,370
Police Services
31,797,083
35,555,223
34,725,397
829,826
Fire Services
10,015,567
10,623,700
10,702,511
(78,811)
Parks and Recreation
5,229,968
5,459,944
5,649,983
(190,039)
Non -Departmental
14,937,212
16,449,206
15,694,720
754,486
Total Operating Expenditure
87,953,610
97,891,433
95,641,755
2,249,678
Non -Operating Expenditures:
Naw North Hanqar Fire
0
88,000,000
71,712,518
16,287,482
General Fund Reserves
From a long-term financial planning perspective, fund reserves provide resources to cover future
years where operating expenditures exceed operating revenues. The General Fund, as the City's
primary operating fund, has more exposure to changes in economic conditions, inflationary
adjustments, and increasing CalPERS pension costs, all of which have significant impacts on the
General Fund's fiscal health.
If the supplemental transfers identified in the report are approved, the General Fund reserves are
expected to be at $30 million as of June 30, 2024 (or 32% of the General Fund's operating
expenditures). This reserve level continues to exceed the City Council's target reserve policy of
20%.
Docusign Envelope ID: C5E14E88-9E29-4329-AOE1-877BE86D4AE6
City Council Agenda Report
Fiscal Year 2023-2024 Year -End Update
October 15, 2024
Page 4 of 6
It should also be noted that the amounts referenced in this report are unaudited. The financial
statement audit for Fiscal Year 2023-2024 is expected to be completed by December 2024. The
audited financial statements will be presented to the City Council upon its completion, which will
include audit -related adjustments (if any) that are identified by the City's auditors.
Water Enterprise Fund Review
The financial health of the Water Enterprise Fund has notably improved following the approved
rate adjustments in January 2024 and CIP bonds issued in February 2024. The actual (unaudited)
operating revenues totaled $22 million, which is 6% higher than Fiscal Year 2022-2023. The
actual (unaudited) operating expenses for Fiscal Year 2023-2024 totaled $20.4 million, resulted
in a net operating surplus $1.6 million before non -operating items, capital spendings, and debt
service costs. The positive operating result allows the Water Enterprise Fund to fulfill its bond
covenants while also replenishing its capital reserve for forthcoming water CIP projects.
Beginning Net Position
Add: Operating Revenue
Less: Operating Expenditures
Net Operating Change
Add: Non -Operating Revenue
Less: Capital Project Expenses
Less: Debt Service/Issuance Costs
Change in Net Position
(A)
Actual Amended
22/23 23/24
$13,111,533 $14,470,828
19,257,578 22,616,737
(B) (B) - (A)
Actual Budget
23/24 Variance
$14,470,828
22, 000,158
(20,032,168) (19,506,521) (20,408,596)
(774,590) 3,110,216 1,591,562
4,096,317 4,259,000 11,631,482
(630,278) (3,710,551) (617,315)
(1,332,154) (2,776,787) (1,567,433)
1,359,295 881,878 11,038,296
(616,579)
(902.075)
(1,518,654)
Request for Supplemental Appropriations, Transfers, and Carryover Appropriations
Supplemental Appropriations and Transfers
It is recommended that the City Council approve the following supplemental appropriations and
related transfers for the Fiscal Year 2023-2024. These expenditures were incurred as part of the
normal operations of the various City programs and services. Each fund (other than Funds 181 and
182) has sufficient revenues or reserves to offset the supplemental appropriations. Funds 181 and
182 will require supplemental transfers from the General Fund to augment its appropriation budget.
Docusign Envelope ID: C5E14E88-9E29-4329-AOE1-877BE86D4AE6
City Council Agenda Report
Fiscal Year 2023-2024 Year -End Update
October 15, 2024
Page 5 of 6
• Fund 142 Street Lighting Fund. Increase appropriation by $18,900 to account for higher
energy and repair costs for the service area. This increase in expenditure is offset by a
$220,000 increase in service assessment revenue.
• Fund 180 Special Events Fund. Increase appropriation by $53,900 to account for increased
program costs associated with the Chili Cook -off and Tiller Days events. This increase in
expenditure is offset by an increase in special event revenues.
• Fund 181 Worker's Compensation Fund. Increase appropriation by $92,100 to account for
increased claim costs. The fund does not have sufficient reserve for this appropriation.
Therefore, staff is requesting a supplemental transfer of $92,100 from the General Fund.
• Fund 182 Liability Fund. Increase appropriation by $100,000 to account for increased legal
costs associated with claims. The fund does not have sufficient reserve for this appropriation.
Therefore, staff is also requesting a supplemental transfer of $100,000 from the General
Fund.
• Fund 183 Unemployment Compensation Fund. Increase appropriation by $9,185 to account
for increased claim costs. The fund has sufficient reserve for this appropriation.
Carryover Appropriations
Staff recommends that the City Council approve the following appropriation items to be carried over
and added to the Fiscal Year 2024-2025 budget.
• Fund 100 General Fund — Professional services $201,634 for specific plan updates at the
Enderle Center and Tustin Market Place; and police equipment $13,133 that were ordered
but not received by June 30, 2024. Total impact to the General Fund's Fiscal Year 2024-
2025 budget is $214,767.
• Fund 141 Landscape and Lighting District Fund — Professional services $6,000 to complete
work related to the annual levy of assessments approved by the Council in June 2024.
• Fund 184 Equipment Replacement Fund — Vehicle, vehicle conversion packages, and
equipment purchase total $499,820 approved by the Council in Fiscal Year 2023-2024. This
total includes two Chevrolet 3500 Flatbed trucks and four Dodge Durango police pursuit -
rated vehicles that are on order, vehicle conversion packages reserved for the four police
vehicles, and equipment on order for fire station #43.
• Fund 189 Land Sale Proceeds Fund - Various ongoing professional services such as
architectural, engineering, surveying, mapping, designing, planning, and project
management at the Tustin Legacy area. It also includes consultant services for Legacy
Specific Plan amendments. Total impact to the Land Sale Proceeds Fund's Fiscal Year
2024-2025 budget is $908,968.
• Fund 200 Capital Improvement Program Fund — Police Department office remodeling
package $39,627 that was in progress on June 30, 2024.
Docusign Envelope ID: C5E14E88-9E29-4329-AOE1-877BE86D4AE6
City Council Agenda Report
Fiscal Year 2023-2024 Year -End Update
October 15, 2024
Page 6 of 6
Pension Update
The City's net pension liability was $92 million as of June 30, 2023, which is based on the most
recent CalPERS actuarial report issued in August 2024.
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. When the market experiences a
downturn, the net pension liability increases. CalPERS finished Fiscal Year 2022-2023 with a net
investment gain of 6.1 %, which was in line with the CalPERS pension plan's discount rate of 6.8%.
Therefore, the pension liability funding percentages for individual participant agencies, including the
City of Tustin, have little or no change compared to 2022.
The City is actively managing its pension liability by making additional discretionary paydowns to
CalPERS. Additionally, the City has also deposited funds into a separate Pension Trust, which is
held by Public Agency Retirement Services (PARS). The trust funds can be used to pay down
pension liability. As of June 30, 2024, the PARS Pension Trust had a balance of approximately $14
million, which brings the City's net pension liability to $78 million or 78% funded.
Signed by:
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Finance Director/City Treasurer