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Home My WebLink AboutE-10 Staff Report - Q4 FY2223 Council Staff Rpt-3-25-24CONSENT ITEM E-10 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR OF ADMINISTRATIVE SERVICES DATE: APRIL 1, 2024 SUBJECT: FISCAL YEAR 2022/23 FORTH QUARTER FINANCIAL REPORT ENDING JUNE 30, 2023 BACKGROUND: In an effort to be more transparent and to provide an opportunity to evaluate the City's fiscal health, the Administrative Services Department has prepared a quarterly financial report. This report summarizes the third quarter budget-to-actual analysis for the City’s General Fund, Gas Tax, Fire Safety Special Revenue funds, the Sewer Enterprise fund, and major Internal Services funds including Risk Management/Liability and Information Technology. The proposed action consists of receiving, reviewing and filing the quarterly financial report. RECOMMENDATION: Staff recommends the City Council take the following action: 1) Receive, review, and file the FY 2022/23 fourth quarter financial report ending June 30, 2023. ANALYSIS: Attached is the quarterly financial report for the major non-utility funds to provide the City Council and public an update on the City’s financial position. Included in the report are the statuses of the General Fund, Gas Tax, Fire Safety Special Revenue Funds, Sewer Enterprise Fund, and Risk Management/Liability and Information Technology Internal Services funds. Approved City Council April 1, 2024 4th Quarter Financial Report April 1, 2024 Page 2 FISCAL IMPACT: The 4th Quarter FY2022/23 financial report is unaudited, but provided to review the fiscal position of the City. Details of the revenue and expenditure budget adjustments are outlined in the attached quarterly financial report. Staff will continue to closely monitor the fiscal impact, and if necessary, recommend revisions to the City Council as appropriate. Prepared By: Reviewed and Approved: Richard Lam Talika M. Johnson Budget & Revenue Manager Director of Administrative Services Reviewed and Approved: Sergio Gonzalez Manager Attachment: 1) Quarterly Financial Report – 4th Quarter, Ending June 30, 2023 p FY 2022/23 Quarterly Financial Report 4th Quarter, Ending June 30, 2023 OVERVIEW This financial report summarizes the City’s General Fund’s position for the 4th quarter of Fiscal Year 2022/23 (July 1, 2022 through June 30, 2023). Also, included are the major Special Revenue Funds: Gas Tax and Fire Safety; the Sewer Fund; and the major Internal Services Funds: Risk Management/Liability and Information Technology. The purpose of this report is to provide the City Council, City Management, and the Azusa community with an update on the City’s fiscal status based on the most recent financial information available. GENERAL FUND SUMMARY With the 4th quarter’s revised data, the projection through the end of the fourth quarter for total sources (revenues and transfers-in) are estimated to be $60.6M. The FY 2022-23 revenue budget is $3.87M less than the adopted budget primarily due to reduction of the Council approved mid-year adjustments of $5.97M in American Rescue Plan Act (ARPA) transfer since the revenue replacement funds were fully drawn down in the prior year. Total uses (expenditures and transfers-out) are estimated to be $79.11M and $10.39M higher primarily due to budget carryforward such as the $2.76M in Promenade, and also the self-insurance transfers of $5.3M approved by Council at the last mid-year review. A B C Adopted Budget 2022-23 Revised Budget 2022-23 Variance (B - A) Beginning Estimated Fund Balance $ 41.22 $ 41.22 * $ - Plus Revenues 62.45 57.83 ** (4.62) Transfers In 2.02 2.78 0.76 Total 2022-23 Sources 64.47 60.60 (3.87) Less Expenditures 61.98 66.83 ** 4.85 Transfers Out 6.74 12.28 5.54 Total FY 2022-23 Uses 68.72 79.11 10.39 Expenses in (excess)/below Exp-FY 2022-23 (4.25) (18.51) (14.26) Estimated Unassigned Fund balance before reserves 36.97 22.71 (14.26) Less: Internally Restricted Reserves Funds set aside for OPEB Trust 1.50 1.50 - ARPA funds set aside for Homelessness 1.96 1.96 Budget Stabilization & Catastrophic Reserve 16.56 16.56 *** - Capital & Infrastructure Replacement Reserve 2.00 2.00 *** - Insurance Reserve 2.50 2.50 *** - Retiree Benefits Reserve 2.00 2.00 *** - Available Fund Balance $ 10.45 $ (3.81) $ (14.26) *Unaudited **Financial Data as of 1/17/24 - Q4 FY2223 ***Established Updated Reserves - Per 10-25-21 Council Approval to Increase Reserves - Original Reserved Policy was approved under Resolution# 2020-037 Table 1 Budget vs. Estimated Actual (in millions) Attachment 1 FY 2022-23 Quarterly Financial Report Attachment 1 4 th Quarter, Ending June 30, 2023 Page 2 of 6 The 4th quarter’s revenues ended the year at the 112.4% mark. The charts and explanation below will go over each of the revenue categories in details. GENERAL FUND REVENUES Table 2 shows actual collections for the major revenue sources and the percent collected compared to the adjusted budget. Table 3 shows that revenues came in at $330,725 lower than the same period last year and $5.0M over projected revenues. Increased economic activities resulted in higher sales tax, TUT, other taxes. Charge for services improved due to more request for design reviews, higher rental inspection fees due to performing a higher number of rental inspections, and the City also received higher than forecasted revenues from planning consultant revenue sharing agreement. UUT increased due to higher usage and higher winter gas prices. Money and Property use increased due to higher demand for facilities rentals including the senior center, woman’s club, aquatic facilities, and recreation facilities. In addition, the City received higher interest income as a result of the higher Federal Reserve Fund rate. While there was an increase in nearly every revenue category, the overall decrease in revenues was a result of one-time ARPA funds received in FY 2021-22. Revenue Collection by Source As of 06/30/23 Chart 1 Revenues Collected by Source Quarter Ending: 06/30/22 vs. 06/30/23 FY 2022-23 Actual % of REVENUE Adjusted Budget YTD 06/30/23 Adj. Budget Property Tax $14,544,731 $14,763,907 101.5% Sales Tax 8,085,572 8,283,132 102.4% Transaction Use Tax 7,182,635 7,403,641 103.1% UUT Tax 3,000,000 4,271,865 142.4% Other Taxes 11,782,937 13,383,623 113.6% Charges for Services 6,020,965 6,339,368 105.3% Cost Reimbursement 2,834,572 4,138,598 146.0% Fines & Penalties 1,283,250 1,572,953 122.6% License & Permits 2,998,283 3,083,237 102.8% Miscellaneous 210,874 (919,802) -436.2% Money & Property Use 2,658,189 3,307,483 124.4% Total Revenues $60,602,008 $65,628,004 108.3% Table 2: YTD % of Budget Actual Actual Increase/ REVENUE YTD 06/30/2022 YTD 06/30/2023 (Decrease) Property Tax $14,153,967 $14,763,907 $609,940 Sales Tax 8,268,517 8,283,132 14,615 Transaction Use Tax 7,284,114 7,403,641 119,527 Utility User Tax 3,450,039 4,271,865 821,826 Other Taxes 11,328,333 13,383,623 2,055,290 Charges for Services 5,888,149 6,339,368 451,219 Cost Reimbursement 9,203,451 4,138,598 (5,064,853) Fines & Penalties 1,646,068 1,572,953 (73,115) License & Permits 3,296,270 3,083,237 (213,034) Miscellaneous (1,037,666) (919,802) 117,863 Money & Property Use 2,477,487 3,307,483 829,996 Total Revenues $65,958,729 $65,628,004 ($330,725) Table 3: Year-to-Year Comparison FY 2022-23 Quarterly Financial Report Attachment 1 4 th Quarter, Ending June 30, 2023 Page 3 of 6 Property Tax collection of Property tax revenues came in at 101.5% of the adjusted budget. The revenues compared to the same period last fiscal year was higher by $609,940 primarily due to a net taxable assessed value increase of 2.0% CPI adjustments and also increased assessed value as result of transfer ownership. The majority of the property tax collections are received in four payments in December, January, April and May of each calendar year. Sales Tax collections are at 102.4% of the adjusted budget. The local economy and businesses reflected stable business activities. The slightly higher collection of sales tax revenues in Q4 FY 2022-23 compared to the same period last year reflected positive consumer sentiments. Transaction Use Tax (TUT) collections are at 103.1% of the adjusted budget. Similar to the Sales Tax, the local economy and businesses have reflected stabled business activities. The slightly higher collection of TUT revenues in Q4 FY 2022-23 compared to the same period last year reflected positive consumer sentiments. Utility User’s Tax collections are at 142.4% of the adjusted budget. This percentage is reflective of the consumption of utility services such as gas, electric and water. The UUT was also impacted by the higher commodity prices this past winter especially the uptick in Gas prices during the winter months. The revenues were higher compared to the same period last year due mainly to the higher commodity prices. Other Taxes collections are at 113.6% of the adjusted budget. Other taxes are comprised mainly of transient occupancy tax (TOT), franchise/landfill, land excavation, material recovery facility, other franchise fees, and hazardous waste fees. Other Taxes are higher in comparison to the same period last year mainly due to higher franchise fees, allowable increases in the enterprise agreements, and higher hazardous waste tax. Charges for Services collections are at 105.3% of the adjusted budget. Revenues are collected as services are rendered and is slightly higher than the budgeted forecast. This revenue source was higher compared to the same period last year due to the timing of the development projects, and greater demand for government services. Cost reimbursement collections are at 146.0% of the adjusted budget. Revenues are collected based on various reimbursement agreements. In addition, there is a $1.31M transfer in revenue to the General Funds increasing the overall total revenue in this category, but it is offsetted by the use of the capital & infrastructure replacement departments expenditures in the same amount. Cost reimbursement revenues are lower when compared to the same period last year mainly due to the one time use of $7.34M in ARPA funds in FY 2021- 22 mainly for public safety. Fines and Penalties collections are at 122.6% of the adjusted budget due to the timing of when the fines are collected. The fines are higher due to the timing of when the payouts were distributed. This revenue source was slightly lower compared to the same period last year due to the uncollected fines incurred that will hopefully be recovered in the future. License and Permits collections are at 102.8% of the adjusted budget. This is mainly due to the timing of development activities and when the licenses and permit fees are issued. Miscellaneous collections are -436.2% of the adjusted budget primarily due to asset market valuation loss, which may fluctuate from year-to-year depending on market conditions at time of closing out the fiscal year. The FY 2022-23 market loss was significantly lower than prior year. The miscellaneous revenues in general represent a small percentage of the general fund revenues and are dependent on items such as metal recycling and other miscellaneous sources that do not come in as a regular revenue stream. Money and Property Use collections are at 124.4% of the adjusted budget. The Q4 FY2022-23 revenues are pacing above target mainly due to higher interest rate yield. The Q4 Revenues and when compared to the same period last year were pacing higher due to higher interest rates from the City’s investment and greater demand from facilities rentals including Women's Club, Senior Centers, recreation facilities, and Aquatic Facilities. FY 2022-23 Quarterly Financial Report Attachment 1 4 th Quarter, Ending June 30, 2023 Page 4 of 6 GENERAL FUND EXPENDITURES Expenditures by Category As of 06/30/23 The expenditures outlined in Table 4 are pacing at 73.3% of the 4th quarter budget. The personnel budget came in at 102.2% of the revised budget, and it is pacing very close to the budget. The Personnel costs were higher in Q4 of FY 2022-23 compared to the same period last year on table 5 primarily due to cola adjustments and higher benefits costs. Operating costs (including special capital improvement projects) came in at 59.4% of the revised budget due to the timing of $13.0M in major capital improvement projects being in early stages. Operating costs was higher in Q4 of FY 2022-23 quarter compared to the same period last year in table 5 and is primarily due to higher transfers to cover deficits in internal services and self-insurance funds approved by Council at the last mid-year review. DEPARTMENT EXPENDITURES At the end of the 4rd quarter, actuals for some of the departments are tracking at or below the 100% 4rd quarter mark of the adjusted budget. Some departments with CIP projects are pacing lower due to the timing of the projects including $4M for the senior center remodel and $750,000 woman’s club under Community Resources, $3M for Memorial Park improvement, $2M for Library improvement, $1mil for sidewalk improvement, $785,000 for downtown improvements, $750,000 for the dog park, and $750K for the scout house under Public Works. Economic & Comm Dev is pacing low due to the timing of the development projects. Table 6 Chart 2 Expenditures by Department % of Budget by Department As of 06/30/23 as of 06/30/23 FY 22-23 Actual % of EXPENDITURE Working Budget YTE 06/30/23 Adopted Personnel 25,704,687 26,280,668 102.2% Operating 53,404,626 31,740,110 59.4% Total Expenditures $79,109,313 $58,020,779 73.3% Table 4: YTE % of Budget Actual Actual Increase/ EXPENDITURE YTD 06/30/22 YTD 06/30/23 (Decrease) Personnel 23,665,075 26,280,668 $2,615,593 Operating 21,392,212 31,740,110 10,347,898 Total Expenditures $45,057,287 $58,020,779 $12,963,491 Table 5: Year-to-Year Comparison 2022/23 Actual EXPENDITURE Adj. Budget YTD 06/30/23 % of Budget Council $250,835 $169,972 67.8% City Clerk 669,430 579,338 86.5% City Attorney 372,160 295,490 79.4% City Treasurer 173,380 136,844 78.9% Administration 1,747,833 933,873 53.4% Finance 1,561,570 1,793,449 114.8% Economic & Comm. Dev.7,749,651 2,672,668 34.5% Human Resources 827,272 747,521 90.4% Library 3,465,560 1,365,574 39.4% Public Safety 22,142,585 20,240,437 91.4% Public Works 12,177,429 4,504,290 37.0% Community Resources 7,594,988 2,417,066 31.8% City-Wide 20,376,620 22,164,257 108.8% Total Expenditure $79,109,313 $58,020,779 73.3% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% FY 2022-23 Quarterly Financial Report Attachment 1 4 th Quarter, Ending June 30, 2023 Page 5 of 6 MAJOR SPECIAL REVENUE, SEWER AND INTERNAL SERVICES FUNDS SUMMARY The major Special Revenue funds including the Gas Tax, Fire Safety fund, Sewer Fund, and the major Internal Services funds such as Risk Management/Liability and Information Technology funds are reflected below. Table 7: Major Special Revenue and Internal Services Fund Revenues Table 8: Major Special and Internal Service Fund Expenditures Chart 3 Major Special Revenue & Internal Services Funds Revenues by Funds Ending 06/30/23 Chart 4 Major Special Revenue & Internal Services Funds Expenditures by Funds Ending 06/30/23 2022-23 Actual % of REVENUE Adjusted Budget YTD 06/30/23 Adj. Budget Gas Tax Fund $1,494,234 $1,357,136 90.8% Fire Safety 6,340,707 6,340,707 100.0% Sewer Fund 3,075,000 3,693,461 120.1% Risk Mgmt/Liab Fund 9,032,386 7,061,330 78.2% IT Fund 2,311,265 2,427,150 105.0% Total Revenues $22,253,592 $20,879,784 93.8% 2022-23 Actual % of EXPENDITURE Adjusted Budget YTD 06/30/23 Adj. Budget Gas Tax Fund $1,397,690 $1,372,578 98.2% Fire Safety 6,340,707 5,959,693 94.0% Sewer Fund 3,711,865 2,524,693 68.0% Risk Mgmt/Liab Fund 4,926,488 4,349,528 88.3% IT Fund 2,818,517 2,359,072 83.7% Total Expenditures $19,195,267 $16,565,564 86.3% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Gas Tax Fund Fire Safety Sewer Fund Risk Mgmt/Liab Fund IT Fund 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Gas Tax Fund Fire Safety Sewer Fund Risk Mgmt/Liab Fund IT Fund FY 2022-23 Quarterly Financial Report Attachment 1 4 th Quarter, Ending June 30, 2023 Page 6 of 6 Gas Tax Fund Gas Tax revenues are pacing at 90.8% of the 4th quarter FY 2022-23 adjusted budget, and the expenditures are tracking at 98.2%. Revenues are slightly lower due to the timing of when the revenues are distributed by the State. Fire Safety Fund Fire Safety Fund’s operating revenues are pacing at 100.0% of revenues. The expenditures are pacing at 94.0% for the 4th quarter. Sewer Fund Sewer year-to-date operating revenues are 120.1% of the adjusted budget. Expenditures are pacing slightly lower than the 4th quarter end mark at 68.8% due to the timing of the various projects. Risk Management Fund The revenues for the Risk Management Funds are at 78.2%. The expenditures are at 88.3% of the adjusted budget due to the timing of when claims are paid out. Information Technology Fund The Information Technology Fund revenues for the 3rd quarter are pacing at 105.0%. Its allocations are recorded twice a year, in December and June. The expenditures are pacing at 83.7% and consistent with the timing of the various IT projects.