TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: Tanner Benson, Financial Analyst
SUBJECT:
title
Fiscal Year 2024/25 Year End Report and Approve Appropriations for Carryover of Unspent Amounts from FY 2024/25 to FY 2025/26
end
RECOMMENDATION
recommendation
Receive and file the report;
Amend the Fiscal Year 2025/26 Operating Budget to include the Fiscal Year 2024/25 Carryover Request; and
Receive and file the list of Fiscal Year 2024/25 Write Off of Uncollectible Accounts Receivable in accordance with the Uncollectible Accounts Receivable Policy.
body
PRIOR ACTION/VOTE
On June 6, 2023, the City Council, the Boards of Directors of the Murrieta Fire District (MFD), the Community Services District (CSD), the Murrieta Library District (MLD), the Housing Authority (HA), and the City Council acting as Successor to the Redevelopment Agency (SA), adopted joint Resolution Nos. 23-4671, MFD 23-219, CSD 23-276, MLB 23-17, RSA 23-29, and MHA 23-43) approving the Operating Budgets for Fiscal Years 2023/24 and 2024/25 (Vote: 4-0-1).
On August 20, 2024, the Boards of Directors of the MFD, CSD, MLD, SA, and the HA approved amendments to the Fiscal Year 2024/25 Operating Budget (Vote: 5-0).
On November 19, 2024, the Boards of Directors of the MFD, CSD, MLD, SA, and the HA approved amendments to the Fiscal Year 2024/25 Operating Budget (Vote: 5-0).
On March 4, 2025, the Boards of Directors of the MFD, CSD, MLD, SA, and the HA approved amendments to the Fiscal Year 2024/25 Operating Budget (Vote: 5-0).
On June 17, 2025, the Boards of Directors of the MFD, CSD, MLD, SA, and the HA approved amendments to the Fiscal Year 2024/25 Operating Budget (Vote: 5-0).
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
DISCUSSION
Summary of General Fund and Measure T Results
In FY 2024/25, both the General Fund and Measure T Fund closed the year with a surplus. The General Fund outperformed expectations, shifting from a projected $2.6 million deficit to an estimated $8.5 million operating surplus, driven primarily by higher-than-expected Sales Tax revenue when compared to the amended budget, property tax, investment earnings, intergovernmental reimbursements, and significant savings of approximately $5.2 million in personnel and operating costs.
Similarly, the Measure T Fund ended the year with a positive operating result, contributing approximately $2.8 million to Unassigned Fund Balance, despite higher-than-budgeted personnel costs and required support to the Fire District. Sales Tax revenue was higher than the amended budget, but lower than the adopted budget. Overall, these results reflect prudent fiscal management, conservative budgeting, and continued revenue resilience, which together strengthened the City’s financial stability heading into FY 2025/26.
Now that the fiscal year has closed and the City’s final operating results are known, staff will return to the City Council with requests to consider certain program and capital needs that were deferred during adoption of the FY 2025/26 and FY 2026/27 Biennial Budget. These budget requests will be evaluated in the context of City Council priorities and service enhancements.
Citywide
Budgets are fiscal projections based on known and anticipated future revenues and expenditure obligations. Staff monitors and analyzes actual revenues and expenditures against projections throughout the Fiscal Year (FY) and provides quarterly reports to the City Council, City Manager, and department directors. The quarterly reports may also include recommended budget amendments as needed. This report aims to provide consistent financial updates by summarizing the Citywide financial operating results for the FY that ended June 30, 2025. This report presents a Citywide Summary, and it also includes an overview of the General Fund and Measure T Fund. The final results for the remaining major funds, which include the Fire District, Community Services District, and Murrieta Library funds, are included in Attachment 1. Details for each General Ledger account are included in Attachment 2.
The totals presented herein for FY 2024/25 summarize the actual revenues and expenditures compared to the corresponding Adopted and Amended Budget amounts for the year. However, please note that when this report was prepared and analyzed, the independent external audit for FY 2024/25 had yet to be concluded. As a result, the actual amounts may change should accounting adjustments be necessary before finalizing the audit. This report also includes carryover budget requests for appropriation of specific FY 2024/25 encumbrances into the FY 2025/26 budget for goods and services that were not received or provided by June 30 but remain necessary.
The financial operating activities for the year exceeded expectations due to a combination of increased revenues and both planned and unplanned budgetary expenditure savings. Multiple factors contributed to ending the year on a positive note, including higher-than-anticipated revenues from investment earnings and other revenue sources. Additionally, savings were achieved primarily through budgetary expenditure savings under the general Operations & Maintenance category.
The Citywide amended budget for revenue was $195,199,602, while actual revenue received was $207,286,259. Revenue exceeded the amended budget by $12,086,657.
The Citywide amended expenditure budget totaled $179,778,709, while actual expenditures were $190,427,117. Of the total actual expenditures, $16,264,463 was attributable to Capital Improvement Plan (CIP) projects. During this fiscal year, $1,902,025 in CIP budget was established. The resulting variance of $14,362,438 may appear to reflect an over-expenditure; however, it represents CIP budget appropriations that were established in the prior fiscal year.
When comparing actual revenue to actual expenditures, revenues ended the year higher than anticipated, which resulted in an operating surplus of roughly $16.8 million for all funds. While these results appear impressive from a citywide perspective, the surplus is distributed among more than 100 funds. An overview of some of the significant citywide impacts, as well as information on General Fund and Measure T, will be provided later in this report.
It is essential to reiterate that the figures listed in this report are subject to change due to the time at which this report was prepared and the completion of the annual audit of the City's financial records and the Annual Comprehensive Financial Report (ACFR).
The following table summarizes the unaudited Revenue and Expenditures of all City funds through June 30, 2025. A complete Budget-to-Actual listing of all accounts and funds is included in Attachment 2.
Citywide Revenues
The two areas of revenue that were higher than the amended budget were Sales Tax and Other Miscellaneous Revenues. The discussion regarding Sales Tax will be addressed later in the report under General Fund and Measure T.
• In FY 2024/25, the City received approximately $46.8 million in Other Miscellaneous Revenues, which exceeded the anticipated revenue by 31% or $11.1 million over projections. The most significant contribution was from the following:
o Revenues received from Grant Funding, Special Program Reimbursement, and funding received from other Governmental Agencies exceed projections by $5,675,313. This amount is a combination of accounts that exceeded the budget and those that came in under budget.
§ Approximately $2 million in accounts that were over budget. The primary sources include Measure A and SB1 funds, as well as Strike Team reimbursements for providing mutual aid to other jurisdictions, and reimbursements received for dispatch services, which exceeded expectations.
§ $9.2 million received in accounts that did not have an established budget. The most significant amount was for recognized grant revenues for funds received in a prior fiscal year.
§ Approximately $5.6 million in accounts that were under budget from grant revenue funds that reflected the full amount of a multi-year grant or for revenues awaiting reimbursement.
o $3,332,799 for the Governmental Accounting Standards Board (GASB) 31 entry. This will be discussed later in the General Fund section of the report.
o Investment earnings were over projections by $1,133,502. Investment earnings exceeded expectations in FY 2024/25; however, with the recent interest rate reductions from the Federal Reserve, the City expects its investment earnings to normalize.
o Development Impact Fees (DIF) exceeded projections by $549,519. The Adopted Budget was decreased by approximately $1 million due to the introduction of a new regulation allowing developers to postpone payment of DIF fees until the project's completion, instead of at permit issuance.
Citywide Expenditures
Citywide expenditures ended the year being over budget by $10,648,408. The most significant budgetary overage came from Capital Improvement Plan expenditures. Excluding Capital Improvement Plan expenditures, citywide expenditures were under budget by approximately $3.7 million, with Operations & Maintenance (O&M) having the most significant budgetary savings.
• Personnel Costs ended the year just under the Amended Budget by $361,824. A large contributor to Personnel Costs ending the year in line with the budget was the use of the Vacancy Factor to account for the fact that not all authorized positions within the workforce will be filled at all times, due to factors like turnover, hiring delays, or vacancies caused by employee retirements or resignations. In total, we included $3.6 million, or 3.5% (three point five percent), of the Personnel Budget as a Vacancy Factor. Had we not included a Vacancy Factor, Personnel Costs would have been nearly $4 million under budget.
• The O&M costs were $2.4 million or 4% less than the Amended Budget. This is the net amount of underbudget and overbudget accounts. Some of the more significant savings were achieved in the following O&M categories.
o The Contract Services account categories had net budgetary savings of approximately $5 million. These services are generally related to plan checks, inspections, design, and project management services. Professional Services are for specialized tasks that staff cannot perform, or for services that are needed to supplement staff's workload due to its high volume. The savings were realized through various grants that had not fully expended their entire allocation, amounting to approximately $2.6 million. The Planning, Building & Safety, Non-Departmental, and National Pollutant Discharge Elimination System (NPDES) Fund, as well as IT, had additional savings of just over $2.3 million, contributing to the overall savings in this category. These savings resulted from anticipated services that were either no longer needed or that could not be completed before the end of the fiscal year.
o General Liability and Workers’ Compensation Claims were lower than expected, resulting in budgetary savings. General Liability Claims had budgetary savings of $54,894, and Worker’s Compensation Claims had budgetary savings of $4,724,214. This is due to the time when claims are paid and the severity of the claims.
• Although the overall O&M was under budget, the expenditure category did have some accounts that were over budget. The largest of these expenditures was $5.9 million funded by the American Rescue Plan Act (ARPA). These costs utilized the remaining ARPA funds-whose original budget was not carried forward in the operating budget-to support eligible water and wastewater projects for the Western Municipal Water District.
• CIP expenditures are budgeted in the Capital Improvement Budget, which is budgeted in a sub-ledger of the Operating Budget; however, when CIP Projects incur expenses, the expenditures are reflected on the General Ledger and appear in the total expenditures to date. The CIP Budget provides for the significant maintenance or replacement of existing public facilities and assets, as well as the construction or acquisition of new ones. Funding for these expenditures typically utilizes fund balance set aside for Capital Projects of Special Revenue Funds. These expenditures have been categorized separately to distinguish them from the Operating Budget.
• The Allocation, or Internal Service Charges, ended the FY $1,101,615 under budget. The budgetary savings were from a true-up reconciliation of the Information Technology (IT) Internal Service Fund financial activities. The budgetary savings within this fund were credited back to each contributing fund.
The Transfers Out and Transfers In categories were over budget by $916,773. One major contributor to the transfers being over budget is the transfer from Measure T to the Fire District, which required an additional $1.3 million to make the fund whole. The Transfer from Measure T to the Community Service District (CSD) was under budget by $730,702. The remaining difference leading to the budget overage is due to Operating Transfers to Landscape and Lighting Districts and lettered CSD Zone funds that did not have sufficient revenues to cover their expenses, which are “trued-up” at the end of the FY to make their funds whole.
General Fund
The General Fund is the City’s main operating fund. Most City services are funded by the General Fund, such as police and code enforcement services, maintenance of city streets and facilities, community events, economic development, planning, building and engineering services, and the City’s general administration. Likewise, this fund is where all general taxes are collected to fund those services.
FY 2024/25 involved significant budget adjustments, including reductions in key revenue sources, such as Sales Tax, Charges for Services, Licenses and Permits, and Transient Occupancy Tax (TOT), alongside increases in Personnel Costs driven by approved labor agreements and higher Operations and Maintenance expenses. To address this, departments proposed 10% budget reductions, and all revenue sources were reviewed for potential increases. Ultimately, the fiscal year closed with an $8.5 million surplus, supported by year-end budgetary savings and stronger-than-anticipated revenue collections.
General Fund Revenues
Two main areas in General Fund revenues came in greater than expected: Sales Tax and Other Miscellaneous Revenues. Sales Tax exceeded the amended budget by $464,653. Other Misc. Revenue ended the year at $5,039,898, over projections. The most significant contribution was from the following:
• Sales Tax slightly increased by $464,653 or 2% over the Amended Budget. The Adopted Budget for Sales Tax was initially budgeted based on the assumption of a steady rise in Sales Tax when the Biennial Budget was adopted in June 2023. During the third-quarter budget update, staff evaluated year-to-date revenues and sought approval from the City Council to decrease the Sales Tax budget. The budget reduction coincided with the general economy's downturn, which was caused by an extended period of high interest rates and new Tariffs. These affected sales of both new and used automobiles, as well as sales of general consumer goods. Had the budget not been adjusted, Sales Tax would have been short approximately $2.7 million.
• $3,279,938, for the GASB 31 entry. Rather than actual revenue, this is a required accounting transaction that documents the difference between the book value (or the amount the City paid for its investments) and the market value (the amount they would be worth if the City sold them on June 30). This transaction is then reversed on July 1.
• The City has an agreement with the City of Menifee, where the City of Murrieta provides Police Dispatch support and is reimbursed for those services. This revenue line exceeded the projected budget by $905,300, due to two (2) factors. First, payment was received for prior-year services at the start of the fiscal year. Second, the agreement was amended to include additional services, which increased the amount of reimbursement the City received.
• Investment Earnings exceeded estimates by $597,618. At the Third-Quarter update, the original budget was increased to $5 million, but ultimately ended at $5.5 million. Staff anticipates an additional interest rate reduction from the Federal Reserve and maintains a conservative budget for Investment Earnings.
• Non-Distributable Investment Earnings exceeded estimates by $148,157. This accounts for interest from the loan payments received on the former Strechform building and the investment earnings from the Section 115 Pension Trust Fund.
General Fund Expenditures
• Personnel Costs came in 4% (four percent), or $2,252,120, under budget. This is primarily due to vacancies in authorized positions throughout the General Fund in Building, Public Works, Engineering, the City Manager’s Office, Finance, the Police Department, and Planning. Additionally, the City implemented a Vacancy Factor of $2 million to help offset vacancies due to turnover, promotions, and other position changes that may leave salary budgets underutilized. Without the Vacancy Factor, the City would have been approximately $4.3 million under budget.
• Operations & Maintenance came in 12% or $ 1,652,222, under budget.
o In total, Contract Services came in approximately $1.6 million under budget. These savings came from several departments. The most significant departmental savings are listed below:
§ The Planning Department added budget at Mid-Year for Phase 2 of the General Plan update, which was subsequently delayed to the following fiscal year. Additionally, savings were realized from not utilizing on-call consultants, resulting in total budgetary savings of $706,184;
§ Homeless Services were enhanced by grant funding that allowed for additional services to be provided that exceeded the services provided by the General Fund, resulting in savings of $371,113;
§ Building & Safety for plan check and inspection services that were not needed, totaling $209,710;
§ Non-Departmental budget for special legal services that were not utilized during the year, totaling $297,604; and
§ The remaining savings were spread out among several departments across various expenditure categories.
• Capital Outlay came in at 68% of the budgeted amount, resulting in $666,883 in savings. The most significant budgetary savings come from the following:
o $249,033, for the purchase of vehicles and upfitting police vehicles, is requested to be carried over to FY 2025/26 because the goods were not received before the end of the FY; and
o Reclassified payments for a Motorola Lease to Debt Service accounts were made to comply with Governmental Accounting Standard Board (GASB) Accounting Standards No. 87, which resulted in the appearance of a $439,799 decrease in Capital Outlay.
• Allocations were 10%, or $760,538, under budget. Internal Service Charges for Information Services were trued-up at the end of the year based on actual expenses.
Measure T
In November 2018, the residents of the City of Murrieta approved Measure T, establishing a one percent (1%) general-purpose transaction and use tax within the City. Measure T funds services, including, but not limited to, police services such as neighborhood police patrols and crime prevention programs to help prevent gang activity and drug-related crimes; improved fire protection and paramedic services and reduced response times to 911 emergencies; repairing potholes, local streets, public buildings, and keeping public areas clean, well-maintained, and free of graffiti. Measure T also funds the operating shortfalls for the Murrieta Fire & Rescue, Community Services District, and the Murrieta Public Library.
Based on the Amended Budget, the City anticipated a contribution of $4.970,031 to Unassigned Fund Balance; however, due to higher Personnel Costs and accounting for CIP expenditures, the fund ended the year with a smaller surplus than anticipated, contributing $2,793,340 to Unassigned Fund Balance.
Measure T Revenues
Measure T Revenues ended the year two percent (2%) over budget. Similar to the Sales Tax budget for the General Fund, during the third-quarter budget update, staff evaluated year-to-date revenues and sought approval from the City Council to decrease the Sales Tax budget. Had the budget not been adjusted, Sales Tax would have been short approximately $3.1 million.
Measure T Expenditures
Personnel Costs end the year over budget by $1,371,357, or 11%. While regular salaries were under budget by $131,795 and CalPERS retirement costs were budgeted higher than needed by $151,985, several other categories were also over budget. The most significant contributors were:
• Overtime expenses within Fire Operations and Prevention were over budget by $350,809, due to participation in Strike Teams providing wildfire mutual aid to other jurisdictions. The State reimbursed these expenses, but those reimbursements were deposited into the Fire District Fund.
• Workers’ Compensation costs were over budget by $412,682. The biennial budget was calculated using estimated figures based on historical costs and was not updated after the actual costs were known.
• As mentioned in the Citywide and General Fund sections, the City implemented a Vacancy Factor. Measure T had a Vacancy Factor of $739,579. Without the Vacancy Factor, the City would have still been over budget, but only by $631,778.
Operations & Maintenance was 12%, or $272,654, under budget. The final amount was a combination of budgetary overruns and budgetary savings. Much of the budgetary savings came from various categories, including Building Maintenance for Fire, Leased Vehicles for Public Works, and Landscape Maintenance in CSD Maintenance. Conversely, the greatest budgetary overages stemmed from the reclassification of two Police Department service subscriptions, as discussed in the Capital Outlay section below.
Capital Outlay was $626,908 under budget, due to budgetary savings in several areas, including most significantly:
• Reclassification of two Police Department service subscriptions for Axon and Flock to Debt Service accounts, consistent with GASB Accounting Standard No. 96, resulting in the appearance of a $486,541 decrease in Capital Outlay and an equal increase in O&M; and
• $133,000 in savings from the delayed replacement of the generator at Fire Station 3.
The variance in Transfers Out was discussed in the Citywide discussion at the beginning of the report. Please see Attachment 1 to review the Budget to Actual summaries for Fire, CSD, and Library.
Estimated Components of Fund Balance
In accordance with GASB Statement Number 54, each fund balance is categorized primarily based on the extent of its resource usage constraint. The table below displays the anticipated variations in each fund balance category within the General Fund and Measure T Fund from June 30, 2024, to June 30, 2025.
The balances are not only reliant on the operational outcomes (i.e., the difference between Revenues and Expenditures) but also on the changes in other fund balance categories such as long-term note receivables, inventory, annual debt service payments, capital projects, and unspent appropriations carried over to the succeeding FY. As mentioned earlier, the amounts are subject to change until the external audit and the City's FY 2024/25 financial statements have been completed. Below is a classification of the General Fund and Measure T fund balances. The fund balance classifications for the remaining major funds (Fire, CSD, and Library) are listed in Attachment 3. The estimated fund balances for all funds are also listed in Attachment 4.
For the General Fund, the most significant changes in the fund balance classifications are attributed to Committed and Unassigned.
• The Restricted fund balance of the General Fund has increased by approximately 51.59%, or $70,869, to $208,240. Best practices recommend setting aside one year’s worth of the City’s debt service payments. The primary reason for this increase is due to an increase in the annual Debt Service payments.
• The Committed fund balance of the General Fund has increased by approximately 6.5% to $39,571,376. The primary reason for this increase is the allocation to the Operating Reserves and Capital Improvement Projects.
• Unassigned Fund Balance increased by 18.85%, which brings the estimated Unassigned Fund Balance to $40,982,694. This increase in Unassigned Fund Balance is due to revenues ending higher than expenditures by $8.5 million. The Unassigned Fund Balance was used to fund increases in Operating Reserves, maintaining it at 30%. General Fund Unassigned was also set aside for Capital Projects.
For the Measure T Fund, the most significant changes in the fund balance classifications are attributed to Committed and Unassigned.
• The Committed Fund Balance decreased by 7.46%, or $3,238,832. While Operating Reserves increased by $626,487 and Continuing Appropriations for open encumbrances increased by $141,312, many of the other Committed reserve accounts remained the same, except for funds set aside for Capital Improvement Projects, which reduced by $2,686,630, $900,000 appropriated from the Fire Facility Repair Reserve for concrete repairs and water and sewer line hook-up at Fire Station 1, and $420,000 in Facility and Fleet Reserves.
• The Unassigned Fund Balance increased by 41.84%, or $6,055,561, which brings the estimated Unassigned Fund Balance for Measure T to $20,529,401. This increase in Unassigned Fund Balance can primarily be attributed to Measure T’s revenues ending higher than expenditures by approximately $2.7 million. The increase is also attributable to $2.6 million in unfunded capital projects as part of the CIP budget adoption, along with net contributions to and use of reserves of approximately $700,000.
Requested Carryover (Rollover) FY 2024/25 Budget Appropriations to FY 2025/26
Purchase Orders (POs) are used to procure goods and services required for operating activities and/or specific projects. If the projects remain unfinished by the end of the fiscal year the PO was established, the remaining budget and PO can be carried over to the following year with City Council authorization. Staff identified projects that were not completed during FY 2024/25 due to various reasons, such as timing, staffing, workload reprioritization, or projects spanning multiple years. Most of the PO carryover requests, accounting for 89%, are related to CIP projects, while the remaining 11% are from Operations.
The requested budget amounts for carryover are currently unspent and classified as Committed Fund Balance in FY 2024/25. A summary by fund number is presented below to provide an overview of the carryover requests. For detailed information, please refer to Attachment 5.
Write Off of Uncollectible Accounts Receivable
On June 3, 2025, at its regularly scheduled meeting, the City Council adopted Resolution No. 25-4834 rescinding Resolution No. 08-1916 and updating the Uncollectible Accounts Receivable (AR) Policy to an administrative policy. In accordance with the updated policy, staff completed the established procedures for writing off uncollectable accounts for a specific group of delinquent accounts and requested approval from the appropriate authorized official with signature authority for the write-off of these accounts as of June 30, 2025. In accordance with the policy, the Director of Finance shall provide an annual report to the City Council summarizing all write-offs. This report to City Council will fulfill this policy requirement. For detailed information on the accounts written off, their respective amounts, and the measures taken to recoup the funds, please refer to Attachment 6. The summary of approved write-offs for FY 2024/25 is as follows:
|
Signature Authority |
Amount |
|
City Manager |
$26,400 |
|
Director of Finance |
$19,550 |
|
Total FY 2024/25 AR Write-Offs |
$45,950 |
FISCAL IMPACT
The action related to the carryover of unspent appropriations has no fiscal impact. The previously authorized expenditures will simply be spent in a later period, which only affects the timing of cash flow.
ATTACHMENTS
ATT 1 - FY 2024/25 Budget to Actual Report - Major Funds
ATT 2 - FY 2024/25 Budget to Actual Report - All Funds
ATT 3 - Components of Fund Balance (Estimated)
ATT 4 - Fund Balances for All Funds (Estimated)
ATT 5 - FY 2024/25 Carryover Requests by General Ledger Account and Purchase Order
ATT 6 - FY 2024/25 Annual Write-Off Detail