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ACCEPT THE FISCAL YEAR 2023-24 THIRD QUARTER BUDGET STATUS UPDATE AND AUTHORIZE BUDGET AMENDMENTS
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Accept this budget status report on the unaudited results through the third quarter of Fiscal Year (FY) 2023-24.
2. Authorize a budget amendment to increase expenditure appropriation by $1,496,767 from the Development Services Fund (220) balance to cover operating budget.
3. Authorize the continuation of up to $6,815,016 in FY 2023-24 budget appropriations to FY 2024-25 for the completion of identified programs.
It is further recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of the resolution.
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Summary
City staff analyzes the City’s expenditures and revenues quarterly and provides reports to the City Council and the public to increase transparency, make financial recommendations in response to financial activities, and perform routine financial operations that require Council’s authority to complete.
At the end of the third quarter, it would be expected that actuals would be at around 75% of the budget. As of March 31, 2024, General Fund revenues are at approximately 62% of the anticipated budget. This is due to the timing of receipts. Tax remittances are usually remitted from the collection agencies to the City any time from 60 - 90 days after the period closes.
Expenditures are largely at 57% utilization, with $194.6 million of the $341.4 million General Fund budget being spent down. The main factors driving this level of underutilizations are salary savings from vacant positions and project expenditures not yet being fully allocated to the funding source - project expenditures for the year are usually fully allocated by the fourth quarter.
DISCUSSION
Background
One of the strategic initiatives developed to support the City’s long-term fiscal sustainability was to provide regular analysis and reporting of the City’s financial status. As a result, the Council and the public should anticipate quarterly reports. The mid-year quarters are not fully closed or audited, so it is expected that these numbers may change in the fourth quarter report as departments and Accounting reconcile their books and complete closing entries.
Present Situation
General Fund Revenues
The General Fund Revenues are detailed in Attachment B. Overall, Revenues are coming in at approximately 62% of revenues, which is generally consistent with previous third quarter results due to the timing of receipt of certain revenue streams.
General Tax Revenues make up 91% of the budgeted revenues in the General Fund. Staff expect that remittances from the collection agencies can take up to 90 days to post to the General Fund; as such, only first and second quarter sales tax revenues are reflected in this report. Taking this into consideration, the sales tax appears to be coming in slightly over budget, at 60.6% utilization. Property taxes are remitted to the City each year by San Joaquin County in January and April. Receipts for the first nine months are about 55.1% of the annual estimate. These timing issues are normal and expected and will be adjusted by the fourth quarter report.
The other revenues are largely proceeding as expected or slightly higher. These amounts generally do not contribute to the low utilization, as they make up only 9% of General Fund revenues. Overall, revenues are coming in as expected. After higher-than-expected revenues in the past several years, the City, under the advice of its tax consultants, is anticipating some cooling in tax revenue.
General Fund Expenditures
The General Fund Expenditures are detailed in Attachment A, with summary revenue amounts populated from Attachment B, for an estimated ending fund balance based on staff’s understanding of the City’s current fiscal climate. Expenditures are currently at 57% budget utilization; this is due to several factors.
Salary Savings Across the Board have resulted in mild-to-moderate savings in most program expenditures. Several departments continue to experience staff vacancies. As of March 31, 2024, 1,473 out of 1,801 authorized positions had been filled Citywide, with 165 sworn and 59 civilian public safety positions vacant. The fourth quarter budget update report will reflect the Measure A reauthorization changes approved by Council, which took effect April 1, 2024. As a result, on a going forward basis, the vacancy numbers will look different.
The city has made comprehensive efforts to recruit and retain positions in a highly competitive environment, including expanding benefits and wellness efforts for employees. The City’s Office of Performance and Data Analytics continues to collect data and advising on data-driven solutions to hiring and retention.
Timing with Multi-Year Program and Capital Improvement Expenditures has resulted in those items being understated in the third quarter. Economic Development and Capital improvement lines both show underutilization due to new contracts that have not been fully spent down yet. For instance, approximately $2.0 million in budget in the economic development fund will be reprogrammed in a future period for use in the land acquisition and redevelopment fund. Likewise, Capital Improvement expenditures will not be allocated to the funding sources until year-end close, resulting in what appears to be only a 9% utilization. In addition, much of the Capital Improvement budget of approximately $42.5 million is reserved for future years’ expenditures.
Other Major Funds
Attachment C summarizes the FY 2023-24 unaudited third quarter ending results for other significant City funds. Year-to-date activity shown on Attachment C is similar to the General Fund in that revenues and expenses can be seasonal and subject to irregular schedules. Funds are coming in at around 70% budget utilization, with some exceptions - such as Measure W and M tax revenue, which has understated revenue due to similar reasons to the General Fund taxes described above. Likewise, debt service transactions are not expended in any regular pattern but instead by the scheduled due dates to bondholders. In addition, other transactions have not yet been posted through the third quarter.
In most cases, the other funds all experienced revenue at or greater than expected and expenditures below what was expected budget. No action is required to balance these funds currently.
Continuation of FY 2022-23 Appropriations
Pursuant to Section 1908 of the City Charter, operating budget appropriations lapse at the end of each fiscal year if not expended or encumbered. With this requirement in place, programs lose funding at year end unless Council takes action to continue the appropriation into the following fiscal year. Following a review of budgets and activities in FY 2023-24, departments have identified funded programs that could not be encumbered or completed prior to the end of the fiscal year on June 30, 2024. To complete these programs, it is recommended that the FY 2023-24 budgets identified in the table below be continued to FY 2024-25 to complete the specific programs listed in the following table. Budget balances for each program will be reviewed and only available balances will be continued to FY 2024-25. Of the total $6.8 million, $1.0 million are for previously approved Council Priority projects.
|
Description |
Department |
Fund |
Not to Exceed Amount |
|
Cisco Traffic Core Replacement |
Information Technology |
Technology ISF |
400,000 |
|
Professional Services for configuration and installation of Traffic Core Replacement |
Information Technology |
Technology ISF |
100,000 |
|
Cisco Traffic Signal Infrastructure |
Information Technology |
Technology ISF |
300,000 |
|
Pilot Gun Buy back program- Council priority project |
Police |
General Fund |
35,435 |
|
Retention and Recruitment |
Human Resources |
General Fund |
1,000,000 |
|
Restore three (3) park restrooms and replace 8 apparatus doors at two (2) fire stations |
Public Works |
General Fund |
144,000 |
|
Purchase of 71 marked and unmarked Police vehicles |
Public Works |
Fleet ISF |
2,283,225 |
|
Transportation Services for Program Outings |
Community Services |
Recreation Fund |
55,000 |
|
Gym Floor resurfacing |
Community Services |
Recreation Fund |
26,875 |
|
Gym Floor resurfacing |
Community Services |
Measure M |
5,000 |
|
Youth Services Grants |
Community Services |
Recreation Fund |
86,434 |
|
Stockton Arts Council |
Community Services |
Recreation Fund |
49,662 |
|
Archive Project for Chavez Library |
Community Services |
Library Fund |
35,100 |
|
Library Self Check Machine Purchase - Tech Logic |
Community Services |
Measure M |
94,740 |
|
Library Self Check Machine Purchase - Tech Logic |
Community Services |
Library Fund (County Funded) |
104,000 |
|
Summer Reading Books |
Community Services |
Library Fund (County Funded) |
25,669 |
|
Summer Reading Books |
Community Services |
Library Fund |
6,082 |
|
Summer Reading Books |
Community Services |
Measure M |
6,297 |
|
Navigation Center |
Economic Development |
General Fund |
1,000,000 |
|
Broken Windows Program |
Economic Development |
General Fund |
200,419 |
|
Elections |
Non-Departmental |
General Fund |
750,000 |
|
City Council Discretionary Funds |
City Council |
General Fund |
90,000 |
|
Mayor Discretionary Funds |
City Council |
General Fund |
17,078 |
|
Total |
|
|
6,815,016 |
FINANCIAL SUMMARY
This report provides an analysis of FY 2023-24 third quarter budget status results. The unaudited 9-month period review indicates General Fund revenue increases and expenditure savings are estimated to result in a year-end balance that can fully fund the Working Capital Reserve and mostly fund the Known Contingency Reserve.
Following are the budget amendments and transactions needed to complete the recommended actions:
1. Accept this budget status report on the unaudited results of the third quarter of FY 2023-24.
2. Increase FY 2023-24 expenditure appropriate in the Development Services Fund (220) by $1,496,767 from fund balance to cover the Community Development FY 2023-24 Operating Budget as an administrative correction to the FY 2023-24 Original Budget.
Attachment A - FY 2023-24 General Fund Third Quarter Budget Update
Attachment B - FY 2023-24 General Fund Third Quarter Revenue Summary
Attachment C - FY 2023-24 Third Quarter for Other Major Funds