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Item # 13
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
December 17, 2024
TOPIC: Fiscal Year 2023-2024 General Fund Results
AGENDA TITLE
Fiscal Year 2023-24 General Fund Results
RECOMMENDED ACTION
1. Receive and file this informational report.
2. Approve proposed General Fund appropriation adjustments as detailed in
Exhibit 1 (Requires two-thirds vote).
GOVERNMENT CODE §84308 APPLIES: No
DISCUSSION
The City's independent auditors have completed their fieldwork for the fiscal year
ending June 30, 2024, and the City anticipates issuing its financial statements later in
December 2024. Staff intends to present the City Council with an informational report
detailing the audited financial statements and related findings after the new year.
This report provides early information on General Fund performance for FY 2023-24
(FY23-24) and includes requests for multiple appropriation adjustments, as well as the
formal closure of the Engineering Services Fund. If the City Council approves the
recommendations in this report, the remaining spendable General Fund balance in
excess of the 18% Reserve requirement is $16.3 million, which is available for one-time
spending. Staff recommends leaving that amount in the General Fund balance for
consideration during the FY2025-26 annual budget process that starts with "Early
Direction" from the City Council scheduled for March 18, 2025. The City has a
significant list of unfunded capital improvement projects, including future Civic Center
development, and staff recommends an approach where all competing needs are
identified prior to the City Council providing direction for use of the one-time funding
source.
On November 19, staff reported that for FY23-24, the City realized both revenues
exceeding initial estimates and expenditure savings. General Fund revenues exceeded
estimates by $13.5 million, after adjusting for non -cash items such as fair market value
adjustments and year-end entries. This represents a 3% increase over the adjusted
Fiscal Year 2023-2024 General Fund Results
December 17, 2024
Page 2
estimates and aligns with the City's policy of using a conservative approach in revenue
estimation. Additionally, General Fund expenditures resulted in total savings of $7.5
million.
FY23-24 General Fund Results
These positive variances have resulted in a spendable General Fund balance of $20.3
million, in excess of the 18% General Fund Reserve balance of $73.2 million. With the
proposed closure of the Engineering Services Fund and the recommended
appropriation requests outlined in this report, the spendable fund balance would
decrease to $16.3 million.
While many General Fund revenues exceeded conservative estimates and several
departments realized expenditure savings, the following factors were the most
significant contributors to the $20.3 million spendable balance.
Revenues
• The Business Tax exceeded estimates, generating an additional $0.8 million
above the adjusted budget of $16 million, as reported in the FY 23-24 First
Quarter Budget Update presented on November 7, 2023.
• Property Tax surpassed revenue estimates by $0.6 million due to ongoing
growth in assessed valuations. This rate of growth is not expected to continue
in FY2024-25.
• Investment earnings for the fiscal year exceeded estimates, generating an
additional $0.9 million above the adjusted budget of $4.9 million, as reported
in the FY 2023-24 Third Quarter Budget Update presented on June 4, 2024.
• The General Fund collected $1 million more than the $8.4 million budget in
Indirect Costs, primarily due to increased personnel salaries charged to
restricted -money programs.
• Refuse Franchise Fee revenues for FY 23-24 exceeded the $8 million
estimate and minimum annual payment required by agreement by $1.5
million, driven by higher -than -anticipated gross receipts from directly billed
customers. Under the City's Franchise Fee agreement, the waste hauler is
obligated to remit either a minimum annual payment of $8 million or 17.9% of
gross receipts, whichever is greater.
• Cannabis revenues exceeded estimates, generating an additional $3 million
of one-time revenue following the implementation of corrections to the tax
calculations for prior periods.
• Charges for services generated $2.2 million more than expected, primarily
due to Paramedic Service Charges, Planning and Building revenues, and
increases to Parks and Recreation's zoo revenue and recreational program
offerings. As reported in the FY 23-24 Third Quarter Budget Update on June
4, 2024, the City continues to receive increased reimbursements for Medicare
and Medi-Cal transports. The Third Quarter Report also included a budget
Fiscal Year 2023-2024 General Fund Results
December 17, 2024
Page 3
reduction for Plan Check revenue, caused by an anticipated slowdown in the
first half of the fiscal year. However, activity unexpectedly picked up late in
the fiscal year. A $1 increase in zoo ticket prices, paired with an increase of
program offerings, led to recreation related revenue surpassing budget by
more than $0.8 million.
Expenditures
• The FY 23-24 non -departmental budget included $8.7 million for employee
negotiations, consisting of an original set -aside of $6.4 million and an
additional $2.3 million carried over from unspent FY 2022-23 funds. Of this
total, $4.8 million was utilized to meet actual Memorandum of Understanding
(MOU) requirements, and $1.3 million was used for budget rebalancing, as
presented in the Third Quarter Report on June 4, 2024. This resulted in $2.6
million in budgetary savings within the non -departmental section.
• The City Attorney's Office, Human Resources, and Finance had combined
vacancy and contractual savings of $2.5 million.
• The Fire Facilities Fund (Fund 120) absorbed nearly $0.6 million in deferred
maintenance expenses for the City's fire stations, freeing up General Fund
resources.
• Community Development had both contractual savings and a remaining
balance in the Resident's Vehicle Incentive Program which was phased out in
FY23-24 totaling $0.8 million.
Requested FY23-24 Appropriations
Library
While the Main Library is closed for renovations, the City offers an eLibrary service to
patrons (Hoopla), including e-books, audio books, movies, and other digital content. The
City's cost of Hoopla is based on usage, which has skyrocketed during library closure.
Staff requests a one-time funding allocation of $40,000 to ensure the City can continue
to provide Hoopla through April 2026, the scheduled re -opening date of the Main
Library.
In preparation for the library construction projects, the collections of materials have
been organized and evaluated. Many books and other items were worn due to
prolonged use and sun damage. In addition to ensuring the library has a sufficient
collection on the shelves after construction is complete, staff needs a back -room
inventory in anticipation of significant lending upon re -opening. Staff requests a one-
time funding allocation of $375,000 to re -build the library's inventory of books and other
lending materials.
Building Maintenance
The Building Maintenance Division budgets for routine operating expenses such as
janitorial services, security, and daily maintenance. Recently, two unexpected expenses
Fiscal Year 2023-2024 General Fund Results
December 17, 2024
Page 4
occurred that were not included in the budget, including $100,000 for elevator repairs in
the Fleet Division and $140,000 for necessary fire panel repairs. Staff is requesting a
one-time funding allocation of $240,000 to cover these critical, unanticipated repairs.
Parks Projects in Progress
Due to a process -related oversight, $555,600 in carryovers were not included in the
October 1, 2024 request for the carry-over of unspent amounts from FY23-24 to FY24-
25. As a result, Public Works is requesting to re -budget unspent FY23-24 appropriations
totaling $555,600 to complete the design and construction phases for the following
parks projects:
• Cool pavement treatment at Madison and Campesino Parks
• El Salvador Park concession stand
• Edna Park and restroom improvements
• Thornton Park playground
Enaineerina Services Division Fund Close -Out
On December 19, 2023, staff reported that the Engineering Services Division has been
managing a negative fund balance for several years. To address this issue and prepare
for the fund's eventual closure, the City Council approved a FY 2024-25 annual budget
allocation within the General Fund to cover overhead costs and staff time that cannot be
billed to projects or developer deposits.
At this stage, staff is requesting authorization to transfer all related expenditures and
revenues from the Engineering Services Division fund to the General Fund to close the
fund. An additional $1.25 million allocation is required to fully address the negative fund
balance from FY 23-24, which resulted from unanticipated costs. This one-time funding
allows for a clean closure of the fund.
Although the Engineering Services fund has a budget of approximately $6.7 million, only
$5.4 million will shift to the General Fund due to indirect cost recovery. The General
Fund charges overhead costs to other funds, including the Engineering Services fund.
These overhead costs are for accounting, legal assistance, and contract processing. By
moving Engineering Services to the General Fund, the General Fund will not charge
itself for these indirect overhead services.
The City's General Fund Reserve policy requires maintaining a reserve balance equal
to 18% of annual recurring revenue. With an anticipated $5.4 million increase of
General Fund recurring revenue from the Engineering Services Division, the 18%
Reserve must increase by $977,371. This action ensures compliance with the reserve
policy, further supporting the City's fiscal stability.
Contribution to Section 115 Trust for Pension Stabilization
In line with the City Council approved Unfunded Employee Pension Liability Cost
Reduction Policy, staff recommends a one-time $2 million contribution of the excess
Fiscal Year 2023-2024 General Fund Results
December 17, 2024
Page 5
spendable General Fund balance to the Section 115 Trust for pension stabilization. Per
the policy, when the General Fund balance exceeds the reserve policy requirement, the
City may consider an additional deposit to address unfunded pension liabilities. This
deposit is part of the overall Section 115 Trust strategy, which helps mitigate
fluctuations in future contributions caused by differences in actual plan performance and
changes to actuarial assumptions made by CalPERS.
The following table includes these proposed appropriations, along with an updated
summary of the General Fund budget for the current fiscal year, which accounts for the
additional reserve requirement.
FY2024-25 General Fund Summary
FY24-251st
Quarter Budget
Update
FY23-24 Year-
End Results
Proposed
December 17
Adjustments
Updated
Estimates
Estimated Beginning Balance at
July 1, 2024
109,495,834
20,349,223
129,845,057
Revenue Estimate
406,543,143
5,429,840
411,972,983
Appropriated Spending
(406,907,411)
(7,890,440)
(414,797,851)
Pension Trust Set Aside
(34,565,751)
(2,000,000)
(36,565,751)
Estimated Ending Balance at June
30, 2025
74,565,815
20,349,223
(4,460,600)
90,454,438
Less: 18% Reserve'
73,173,121
977,371
74,150,492
Estimated Spendable Balance
1,392,694
20,349,223
(5,437,971)
16,303,946
1$15,803 in recognized revenue approved by City Council on September 19, 2024 is one-time money. The City's
18% reserve policy applies to annual recurring revenue only.
ENVIRONMENTAL IMPACT
There is no environmental impact associated with this action.
FISCAL IMPACT
Exhibit 1 outlines the line -item changes to revenue estimates resulting from the closure
of the Engineering Services Fund, along with the recommended appropriation
adjustments discussed in this Staff Report. These adjustments result in a $2.46 million
increase in General Fund appropriations, funded by a one-time allocation from the
spendable fund balance. Additionally, the proposed adjustments include the transfer of
revenues and corresponding expenditures from the Engineering Services activity to the
General Fund, each totaling $5.4 million, bringing the total appropriation request to
$7.89 million.
The $2 million deposit to the 115 Trust is reflected in the FY 2024-25 General Fund
Summary table. While this deposit reduces the estimated spendable balance, it is
excluded from Exhibit 1 as it represents a financial transfer rather than a direct
appropriation adjustment.
Fiscal Year 2023-2024 General Fund Results
December 17, 2024
Page 6
EXHIBIT
Line Item Changes to Revenue Estimates and Recommended Appropriation
Adjustments
Submitted By: Kathryn Downs, FMSA Executive Director
Approved By: Alvaro Nunez, City Manager
Description Account Revenue Spending
Engineering Services (Fund 086) Closure Appropriation
Adjustments
Reduction to Indirect Cost Recovery revenue budget due to Fund 086
closure 01102002-57901 (1,304,600)
Fund 086 revenue moving to General Fund (CIP Construction Permit
Oversight Deposits) 01117002-51709 50,000
Fund 086 revenue moving to General Fund (Charges to Departments) 01117002-56000 6,634,140
Fund 086 revenue moving to General Fund (Engineering Cost
Allocation) 01117002-56300 10,000
Fund 086 revenue moving to General Fund (Expense Reimbursement -
Condemn Deposit) 01117002-57006 38,000
Fund 086 revenue moving to General Fund (Miscellaneous Recoveries) 01117002-57010 300
Fund 086 revenue moving to General Fund (Expense Reimbursement -
Condemn Deposit) 01117002-58005 2,000
Fund 086 revenue moving to General Fund (CIP Construction Permit
Oversight Deposits) 08617002-51709 (50,000)
Fund 086 revenue moving to General Fund (Charges to Departments) 08617002-56000 (6,634,140)
Fund 086 revenue moving to General Fund (Engineering Cost
Allocation) 08617002-56300 (10,000)
Fund 086 revenue moving to General Fund (Expense Reimbursement -
Condemn Deposit) 08617002-57006 (38,000)
Fund 086 revenue moving to General Fund (Miscellaneous Recoveries)
08617002-57010
(300)
Fund 086 revenue moving to General Fund (Expense Reimbursement -
Condemn Deposit)
08617002-58005
(2,000)
Fund 086 expenses moving to General Fund (Salaries & Wages)
08617613-61XXX
(4,014,381)
Fund 086 expenses moving to General Fund (Contracted Services)
08617613-62XXX
(196,909)
Fund 086 expenses moving to General Fund (Commodities)
08617613-63XXX
(71,810)
Fund 086 expenses moving to General Fund (Fixed Charges)
08617613-65XXX
(2,119,210)
Fund 086 expenses moving to General Fund (Capital/Leases)
08617613-66511
(9,000)
Description Account Revenue Spending
Fund 086 expenses moving to General Fund (Debt Service) 08617613-67XXX (209,920)
08617613-68000-
Fund 086 expenses moving to General Fund (Interfund Transfer) 404 (113,210)
Fund 086 expenses moving to General Fund (Salaries & Wages) 01117612-61XXX 4,014,381
Fund 086 expenses moving to General Fund (Contracted Services)
Fund 086 expenses moving to General Fund (Commodities)
Fund 086 expenses moving to General Fund (Fixed Charges)
Fund 086 expenses moving to General Fund (Capital/Leases)
Fund 086 expenses moving to General Fund (Debt Service)
Fund 086 expenses moving to General Fund (Interfund Transfer)
Engineering Services (Fund 086) closure
Engineering Services (Fund 086) closure
Engineering Services Expenditures & Revenues to Close Fund Sub -
Total
Reduction to Indirect Cost Recovery for Expenditures & Revenues
budget due to Engineering Services Fund closure
Engineering Services Expenditures & Revenues Sub -Total to General
Fund
Other General Fund Adjustments
Park Improvement Projects
Books & other lending services
eLibrary services (Hoopla)
Building Maintenance unanticipated elevator and fire panel repairs
Other General Fund Adjustments Sub -Total
01117612-62XXX
01117612-63XXX
01117612-65XXX
01117612-66511
01117612-67XXX
01117612-68000-
404
01106019-68000-
086
08617002-59000-
011
01117652-66220
01111110-66600
01111190-66511
01117607-62300
196,909
71,810
814,610
9,000
209,920
113,210
1,250,000
1,250,000
(6,734,440) (6,734,440)
(1,304,600) -
6,734,440 5,429,840
555,600
375,000
40,000
240,000
1,210,600
Total Revenue Adjustments to General Fund 5,429,840
Total Expenditure Adjustments to General Fund 7,890,440