TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Director of Finance
PREPARED BY: Geovanny Calvopina, Financial Analyst
SUBJECT: Fiscal Year 2023/24 Second Quarter Financial Status Report
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RECOMMENDATION
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Receive and file the report;
Authorize an appropriation using Measure T Facility Repair Reserves for CIP project 21035 in the amount of $83,000; and
Approve the Updated Schedule of Authorized Positions List.
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PRIOR ACTION/VOTE
On June 6, 2023, the City Council, the Boards of Directors of the Murrieta Fire District, the Community Services District, the Murrieta Library District, and the 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).
On August 15, 2023, the City Council, the Boards of Directors of the Murrieta Fire District, the Community Services District, the Murrieta Library District, and the Housing Authority, and the City Council acting as Successor to the Redevelopment Agency, adopted a series of Resolutions (23-4699, MFD 23-221, CSD 23-278, MLB 23-18, and RSA 23-30) approving the Capital Budget for Fiscal Year 2023/24 (Vote: 5-0).
On November 21, 2023, the City Council, the Boards of Directors of the Murrieta Fire District, Community Services District, Murrieta Library District, Murrieta Housing Authority, and Redevelopment Successor Agency approved the Fiscal Year 2023/24 Operating and Capital Budget First Quarter Budget Adjustments. (Vote: 5-0).
On December 5, 2023, the City Council, the Boards of Directors of the Murrieta Fire District, Community Services District, Murrieta Library District, Murrieta Housing Authority, and Redevelopment Successor Agency approved the Fiscal Year 2022/23 Year End Report and Carryover Appropriations to FY 2023/24. (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 that runs 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 the 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 Second Quarter (or Mid-Year) Budget Update Report serves three purposes:
1. Provide a Fiscal Year 2023/24 Budget Update through the Second Quarter of the Fiscal Year (July 1 - December 31, 2023);
2. Requests authorization for the planned use of Measure T Facility Repair Reserves that were intended for CIP 21035; and
3. Requests approval of the Updated Schedule of Authorized Positions List.
The Mid-Year Budget Update Report typically includes appropriation requests to true up revenues and expenditures through the remainder of the fiscal year. However, staff has delayed those budgetary requests this year to allow for more time for Finance staff to monitor key revenue sources. Sales Tax, Charges for Services, Property Transfer Tax, and Transient Occupancy Tax (TOT) receipts are trending lower than budgeted. Staff will provide a thorough update as well as recommendations for budgetary adjustments as part of the Third Quarter Update.
The table below provides a Citywide Summary of Revenue and Expenditures through December 31, 2023.
As of December 31, 2023, the City's amended budget for FY 2023/24 will utilize approximately $6.1 million of unassigned fund balance in various funds as a result of different budget amendments approved since the budget adoption. During the First Quarter Budget Update, the City Council approved approximately $6.8 million in expenditure amendments. The First Quarter Budget adjustments were primarily related to non-discretionary costs (i.e., salary, benefits) due to the subsequently approved Memorandums of Understanding (MOU) for staff and expenditures not factored into the Adopted Budget, such as property acquisition, Santa Stops program, and other one-time expenses.
Additionally, during the Year-End Budget Update for FY 2022/23, approximately $3.9 million in revenue and approximately $14.1 million in expenditures were carried over to FY 2023/24 between operating and capital budgets. These carryovers were for ongoing capital improvement projects, projects funded through grants, and for purchases that were ordered but not received prior to the end of the fiscal year. Moreover, between July 2023 and December 2023, City Council actions resulted in further amendments to both revenue and expenditure budgets. There is a brief discussion about unassigned fund balances in this report, on page 7. The table below summarizes the budget adjustments previously approved for FY 2023/24.
A summary of the City’s major operating funds amended budget to actuals is attached to this report (Attachment 1).
The table below summarizes the Citywide Revenues collected through December 31, 2023
As of December 31, 2023, the City has collected $58,453,802, which is approximately 32% of the $180,486,578 Amended Revenue Budget. Some revenues, such as property taxes and special assessments, are not received monthly, unlike expenses for services that can be anticipated monthly such as salaries and ongoing maintenance contracts. Therefore, the General Fund, as well as 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 Special Taxes and Special Assessments are received in late January; hence, these revenues will be reflected in the next Budget Update.
The graph above shows some of the key revenue sources that will be discussed further in detail in this report.
• Other Miscellaneous Revenue is slightly higher than the previous year’s figures. The higher interest rates primarily associated with the City’s sweep account which is generating higher interest earnings from our investment accounts. This revenue category also includes Grant-related revenue which fluctuates annually.
• Sales Tax receipts have remained flat compared to last year, which is resulting in lower than budgeted sales tax receipts. In addition, the sales tax forecast and budget are impacted by the delay of certain business openings. Therefore, we will be proposing updates to this revenue source during the Third Quarter Budget Update.
• Charges for Services include revenues collected for specific benefits, government services, regulatory needs, or use of government property. Internal Service Charges are for services provided to all city departments by Risk Management and Information Services are included in this category. Excluding the Charges for Services Internal Services, we are experiencing a slight decrease compared to last year. This revenue category will continue to be monitored. Depending on collections through March 2024, staff may propose a reduction as part of the Third Quarter Budget Update.
• The remaining revenue sources have all tracked as expected, and some are even tracking higher than what was budgeted based on the mid-year point in the Fiscal Year. Consequently, staff will be proposing changes in a variety of revenue sources as part of the next budget update.
The table below summarizes the Citywide Expenditures through December 31, 2023.
The City has an Amended Expenditure Budget of $186,655,851, out of which $79,104,398, or approximately 42% has been spent as of December 31, 2023, as shown in the table above.
The graph above shows the Year-To-Date actual for the City's main expenditure categories:
• Personnel expenditures are slightly behind the mid-year point at 43% due to some unfilled positions but are still above the previous year's expenditures due to increases in the number of new authorized positions for the current Fiscal Year and the increase in personnel costs associated with approved labor MOUs.
• Operations & Maintenance (O&M) expenditures are at 44% of the budget, which is expected due to some expenditures not being consistent each month.
• Capital Outlay expenditures are typically one-time purchases and may not reflect 50% of the budget at the mid-year point. As of December 31, Capital Outlay expenditures have consumed 24% of the Amended Budget.
The detail for the Second Quarter Revenue and Expenditures by General Ledger Account through December 31, 2023, is included in Attachment 2.
Staffing Changes
Staff regularly brings the Schedule of Authorized Positions to adjust for new positions and new titles assigned to current positions. This Schedule adds one (1) Full-Time Equivalent (FTE) for FY 2023/24, and FY 2024/25, bringing the FY 2024/25 total to 477.09 FTE positions (Attachment 4). This list includes a combination of additions, position title changes, and the reclassification of one position that is necessary as part of a structural realignment of the organization intended to increase operational efficiency and effectiveness. The budgetary changes for the FY 2023/24 positions will be reflected in the proposed Third Quarter Budget Update and are summarized in the table below.
Fund Balance and Reserves
The General Fund is proposed to have a use of Unassigned Fund Balance of $20,649,474 at the end of the Fiscal Year. Of that, $5.98 million is a negative variance between revenues and expenditures (or a use of Unassigned Fund Balance) and $14.6 million is a combination of contributions to reserves of $18.6 million and use of reserves in the amount of $4 million. Measure T is also expected to have a use of Unassigned Fund Balance of $13,787,859. Of that, $46,846 is a positive variance between revenues and expenditures (or contribution to Unassigned Fund Balance) which includes an allocation of $1.7 million to Capital Improvement Plan Projects and $13.8 million is a combination of contributions to reserves of $14.3 million and use of reserves in the amount of $533,000. The variances in Unassigned Fund Balance for the Fire, Community Services, and Library Districts will be addressed as part of a future update. Below is a summarized version of this information. A complete list of the overall changes by fund is included in
Attachment 3.
This Mid-Year update includes appropriating Measure T Facility Repair Reserves for CIP project 21035. This project was included in the adoption of the Capital Budget for Fiscal Year 2023/24; however, staff did not request to appropriate the set aside funding at time of adoption.
FISCAL IMPACT
Establish appropriation using Measure T Facility Repair Reserves earmarked for CIP project 21035 in the amount of $83,000.
ATTACHMENTS
1. FY 2023/24 Second Quarter Budget to Actual Report - Major Funds
2. FY 2023/24 Second Quarter Budget to Actual Report - All Funds
3. Fund Balances for All Funds (Estimated)
4. Updated Fiscal Year 2023/24 Authorized Position List