TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: Jennifer Terry, Finance Manager
SUBJECT:
title
Fiscal Year 2024/25 Second Quarter Financial Status Report
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RECOMMENDATION
recommendation
Accept and file the report;
Amend the Fiscal Year 2024/25 Operating Budget as referenced in the Fiscal Impact section of this report; and
Approve the updated Schedule of Authorized Positions.
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PRIOR ACTION/VOTE
On June 6, 2023, the City Council, and the Boards of Directors of the Murrieta Fire District, Community Services District, Murrieta Library District, Housing Authority, and the City Council acting as Successor to the Redevelopment Agency adopted a series of Resolutions (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 (FY 2023/24 and 2024/25 (Vote: 4-0-1).
Subsequently, the City Council and the Boards of Directors of the MFD, CSD, MLD, SA, and the HA approved amendments to the Fiscal Year 2024/25 Operating Budget on August 20, 2024, November 19, 2024, and December 3, 2024 (Vote: 5-0)
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
BACKGROUND
The City of Murrieta adopts a biennial budget every two years, starting in odd-numbered years, with a fiscal year from July 1 to June 30. The Government Finance Officers Association (GFOA) advises that all governments implement a formal process for comparing budget to actual results to monitor financial performance. To comply with these best management practices, staff prepares quarterly budget reports for City Council’s review and consideration. These reports ensure transparency and present opportunities for staff to adjust the Operating Budget based on trends analyzed. This report serves three purposes:
1) Provide a Fiscal Year 2024/25 Budget Update for the Second Quarter (also called “Mid-Year”) of the Fiscal Year (July 1 - December 31, 2024);
2) Request appropriations to adjust various revenue and expenditure budgets detailed in
Attachment 2; and
3) Request approval of the updated Schedule of Authorized Positions.
The Mid-Year Budget Update Report typically includes appropriations to true up revenues and expenditures needed for the remainder of the fiscal year. However, the City Council approved two significant updates to the revenue and expenditure budgets on August 20, 2024, and November 19, 2024. This Mid-Year Budget Update includes a few changes to revenues and expenditures that will be discussed later in the report. The table below provides a Citywide Summary of revenues collected through December 31, 2024. The discussion regarding expenditures will follow the revenue discussion.
As of December 31, 2024, the City had collected $58,070,691, which is approximately 31% of the $186,423,506 Amended Revenue Budget. Some revenues, such as Property Taxes and Special Assessments, are not received monthly, unlike expenses for routine services and personnel, which can be anticipated monthly. Therefore, the General Fund and other funds with certain semiannual revenue collections will not track at 50% of the budget through the first six months of the Fiscal Year. The first collections of Property Taxes and Special Assessments are received in late January; hence, these revenues will be reflected in the Third Quarter Budget Update.
• Sales Tax receipts are collected on a two-month delay. As of December 31, 2024, Sales Tax receipts have been collected through November 2024. For the first five months of collections, Sales Tax receipts have remained relatively flat compared to last year. Staff budgeted Sales Taxes to be three percent (3%) higher than the actual revenue for the Fiscal Year 2023/24. Staff will continue to monitor the collections and include an adjustment to the budget, if necessary, in the Third Quarter Budget Update.
• Other Miscellaneous Revenues are trending higher than customarily collected at the mid-way point in the Fiscal Year. The ongoing higher interest rates, particularly with the City’s sweep account, are generating increased interest earnings from investment accounts.
• This revenue category also includes miscellaneous revenues, revenues from other agencies, and grant-related revenue, which fluctuates annually.
o Included in the requested adjustments to the Operating Budget is a request to increase the interest earnings budgets across all funds to coincide with actual collections through December 31. Additionally, there are requests to adjust other miscellaneous revenue accounts based on year-to-date actuals.
• Charges for Services include revenues collected for specific benefits, government services, regulatory needs, or use of government property. Internal Service Charges, for services provided to all City departments by the Risk Management and Information Technology divisions, are included in this category. Excluding the Charges for Services for Internal Services, the remainder of the Charges for Services (e.g., plan check, inspection, and recreation fees) are on target, with 57% of the revenue collected.
• Similar to the delay with collection of Sales Taxes, Franchise Taxes are also collected on a delay, which is why only 18% has been collected so far this year. The remaining revenue sources are tracking close to or as expected.
The table below summarizes the Citywide Expenditures through December 31, 2024:
The City's Amended Expenditure Budget is $179,863,334, of which $87,623,656, approximately 49%, was spent as of December 31, 2024.
• Personnel expenditures are slightly behind the mid-year point, at 46%, due to some unfilled positions. However, the year-to-date actuals are still above the previous year's expenditures due to increases in personnel costs associated with approved labor memorandums of understanding (MOUs).
• Operations and Maintenance (O&M) expenditures are 47% of the amended budget, which is expected, due to some irregular expenditures each month.
• Capital Outlay expenditures are typically one-time purchases. As of December 31, 2024, Capital Outlay Expenditures budgeted for the Operating Budget have consumed 55% of the Amended Budget.
• Capital Improvement Plan (CIP) projects are included in the Capital Improvement Budget. Since the CIP budget can span multiple fiscal years, the reported CIP expenditures may reflect funds from the budget approved in the previous fiscal year. The CIP Budget provides for the maintenance or replacement of existing public facilities and assets and the construction or acquisition of new ones. Funding for these expenditures typically utilizes reserves set aside for Capital Projects from Special Revenue Funds. These expenditures have been categorized separately to signify that the expenditures are different from the Operating Budget.
• The allocations, also known as the Internal Services Charges, are aligned with the proposed budget through the mid-year point. If necessary, staff will propose an adjustment at year-end upon reconciliation of the Risk Management and Information Technology Funds.
Attachment 2 includes details for the Second Quarter Revenue and Expenditures by General Ledger Account through December 31, 2024.
Second Quarter Adjustments
There are four primary reasons for the requested Second Quarter Budget Adjustments: 1) adjusting Special Revenues in line with Fiscal Year 2024/25 actuals; 2) department-initiated budget adjustments (i.e., based on actual costs, missed PO rollover requests, and personnel updates as described below; 3) for Phase 2 of the General Plan Update; and 4) updating the salary savings rate as a result of unfilled or vacant positions.
The proposed Citywide all-funds net adjustments include a decrease in expenditures of $1,070,204 and an increase in revenues of $3,326,508. The following table provides a summary of the proposed Citywide adjustments:
Staffing Changes
The proposed action will increase the Schedule of Authorized Positions by a count of 0.5 Full-Time Equivalent (FTE) for FY 2024/25, bringing the FY 2024/25 count of positions to 469.09 FTE positions (Attachment 4). The increase of 0.5 FTE includes a position title change and the addition of a limited-term part-time dispatcher to increase operational efficiency and effectiveness. Budgetary savings from vacant positions within the Communications Division of the Police Department will cover the cost of the limited-term part-time dispatcher. The purpose of the reclassification of the vacant Recreation Coordinator position to a Senior Recreation Coordinator position is to hire an incumbent that can work at a higher level, more independently, allowing for greater decision-making to offset the workload of the Recreation Supervisor, who coordinates all special events held by the City, providing greater capacity and enabling that position to also work at a higher level. The requested change for this position is included in the budget amendments included in this report. The table below summarizes the requested changes:
Fund Balance and Reserves
The General Fund is proposed to have an Unassigned Fund Balance of $27,649,181 at the end of the Fiscal Year, subject to additional requests to the City Council for the use of Unassigned Fund Balance for the remainder of FY 2024/25 and changes in other fund balance categories. This balance takes into account a $3.9 million negative variance between revenues and expenditures (or use of Unassigned Fund Balance) and an $833,670 planned contribution to reserves to replenish the Operating Reserves. Measure T is expected to have a contribution to the Unassigned Fund Balance of $3.2 million and a $626,487 planned contribution to reserves to replenish the Operating Reserves. The variances in Unassigned Fund Balance for the Fire, Community Services, and Library Districts were addressed by increasing their operating transfers from Measure T. Below is a summarized version of this information. A complete list of the overall changes by fund is included in Attachment 3.
FISCAL IMPACT
The proposed Citywide all-funds combined amendments for the Second Quarter of the Fiscal Year 2024/25 Operating Budget include reductions in expenditures of $1,070,204. Similarly, the proposed amendments to the revenues are an increase of $3,326,508. A comprehensive list of the requested appropriations by the General Ledger account is included in Attachment 2.
ATTACHMENTS
1. Fiscal Year 2024/25 Budget to Actual Report - All Funds through the Second Quarter
2. Fiscal Year 2024/25 Second Quarter Proposed Budget Adjustments
3. Fiscal Year 2024/25 Summary of Major Funds
4. Updated Fiscal Year 2024/25 Schedule of Authorized Positions
5. Estimated Ending Fund Balance