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HomeMy WebLinkAbout5.4 Fiscal Year 2022-23 4th Quarter Financial Review and Additional Special Designation of General Fund Reservesr DUBLIN CALIFORNIA STAFF REPORT CITY COUNCIL DATE: November 7, 2023 TO: Honorable Mayor and City Councilmembers FROM: Linda Smith, City Manager Agenda Item 5.4 SU B.ECT: Fiscal Year 2022-23 4th Quarter Financial Review and Additional Special Designation of General Fund Reserves Prepared by: Jay Baksa, Finance Director EXECUTIVE SUMMARY: The City Council will receive a financial report on the fourth quarter of Fiscal Year 2022-23 and consider amendments to the General Fund reserve designations. STAFF RECOMMENDATION: Adopt the Resolution Authorizing Additional Special Designations of General Fund Reserves for Fiscal Year 2022-23 and confirm additional General Fund reserve designations as of June 30, 2023. FINANCIAL IMPACT: City Council confirmation of General Fund reserve designations will not alter amounts received or spent but will allow Staff to close the Fiscal Year 2022-23 financial books. Total General Fund reserves are projected at $249.7 million as of June 30, 2023, with $58.4 million in the unassigned cash flow reserve, representing seven months of the Fiscal Year 2023-24 Adopted General Fund Budget. All other funds comply with policies governing fund balance. DESCRIPTION: This report transmits the preliminary financial results of the Fiscal Year 2022-23 year-end, focusing on the General Fund. At this time, the numbers are essentially final, and though adjustments may happen as the audit is finalized, Staff does not expect substantial changes from the numbers in this report. The Annual Comprehensive Financial Report, which will be presented to the City Council at the second meeting in December, will contain the final audited results. Page 1 of 7 1 General Fund Overview (Attachment 2) General Fund operating revenues totaled $124.8 million in Fiscal Year 2022-23, an increase of $10.2 million over the prior year. Total revenues, including an accounting adjustment of unrealized gains/losses and transfers in, were $121.8 million, an increase of $22.4 million from the prior year. General Fund operating expenditures totaled $88.5 million, an increase of $7.6 million from the prior year. Total expenditures, including contributions to other funds, contributions/payments to retirement liabilities, and transfers out, were $96.0 million, an increase of $10.7 million over the prior year. Contributions to capital projects, retirement liabilities, and other funds totaled $7.4 million, an increase of $3.1 million from the prior year. The resulting impact on total General Fund Reserves was an increase of $25.9 million, as shown in Table 1. The year -over -year variances are explained in greater detail below. Table 1: General Fund Summary FY 2021-22 FY 2022-23 Total Reserves, Beginning of Year $209,764,495 $223,857,505 Revenues 114,650,434 124,787,119 Expenditures (80,931,058) (88,523,802) Net Operating Budget Impact 33,719,376 36,263,317 Transfers In 234,803 109,014 Unrealized Gain/Loss/Adjustments (15,525,055) (3,053,407) Transfers Out/Contribution to Other (4,336,114) (7,439,821) Total Reserves, End of Year $223,857,505 $249,736,608 Change from Prior Year $25,879,103 Specific revenue and expenditure changes (+/-$250,000 compared to Fiscal Year 2021-22 actuals and to the Fiscal Year 2022-23 amended budget) are discussed below. The General Fund Summary (Attachment 2) presents this data by major category. Revenues Property Tax (+$3,869,751 vs. prior year / + $2,593,139 vs. budget) Property Tax revenue in Fiscal Year 2022-23 increased along with a gain in net assessed valuation by $1.21 billion (6.1%) over the prior year. While Current Property Tax revenue was in line with the Amended Budget, Supplemental Property Tax payments as well as prior period payments were much higher than anticipated, coming in $1.7 million over the Amended Budget. Sales Tax (+$2,445,161 vs. prior year / +$1,502,065 vs. budget) It was originally thought that overall consumer spending would slow in Fiscal Year 2022-23, especially in the second half of the year, but sales activity continued to outpace forecasts. Development Revenue (-$1,603,940 vs. prior year / +$827,629 vs. budget) This category includes revenues associated with permits for new development (primarily building permits) as well as tenant improvements on current structures. It also includes fees for City Page 2 of 7 2 services, most typically zoning and plan checking services. The increase over budget was due to a higher level of activity on development projects than originally anticipated. Transient Occupancy Tax (TOT) (+$277,518 vs. prior year / +$133,093 vs. budget) The City continued to see the recovery of TOT revenue from the COVID-19 pandemic, with an increase of approximately 22% compared to the prior year. It should be noted that TOT revenue is currently at 75% of pre -pandemic levels. Other Taxes (+$171,023 vs. prior year / +$636,591 vs. budget) The net increase in Other Taxes over the prior year and current year budget was related to an increase in the Garbage Franchise Tax, driven primarily by an increase in construction activity. This increase was offset by a decrease in Property Transfer Tax, which fluctuates with the real estate market. Interest (+$3,094,156 vs. prior year / +$3,053,445 vs. budget) Interest earnings came in significantly higher than the prior year, due to the Federal Reserve raising interest rates nine times between June 2022 and July 2023. The Federal Funds Rate, which interest rates are benchmarked on, ranged between 0.75% to 1.00% when the Fiscal Year 2022- 23 budget was being prepared, and currently that rate ranges between 5.25% to 5.50%. While the City has historically budgeted interest relatively conservative, the rate at which interest rates increased was not anticipated. In addition to the increase in rates, the timing of expenditures on capital projects resulted in the General Fund's cash balance being higher than anticipated as well, with the combined effect resulting in interest revenue increasing $3.0 million over the Amended Budget. Rental & Leases (+$545,940 vs. prior year / +$540,395, vs. budget) Fiscal Year 2022-23 rental revenue reached a new high in facility, field, and sports court rentals, with rental activity at both the Shannon Center and The Wave exceeding expectations. Charges for Services (+$1,014,717 vs. prior year / +$1,919,942 vs. budget) The increase in Fiscal Year 2022-23 compared to the prior year is attributed primarily to a significant increase in Parks and Recreation programming. In addition, the annual Santa Rita Services payment was approximately $700k higher than the Amended Budget. This revenue is in reimbursement for the cost of Alameda County Fire's response to service calls from the Santa Rita jail. Other Revenue (+$419,979 vs. prior year / +$1,005,274 vs. budget) Many revenues in this category are non -recurring in nature, such as Community Benefit Payments or one-time adjustments. The net increase in Fiscal Year 2022-23 is due to the reimbursement of the City's annual fire services retiree health payment, as the plan is super funded. In addition, the City received funds for the reimbursement of multiple insurance claims, such as damage to police vehicles by third parties. Expenditures Salaries and Wages (+$1,055,159 vs. prior year /-$805,858 vs. budget) Staffing costs came in lower than budgeted due to a number of vacant positions and the timing of Page 3 of 7 3 hiring. The increase from the prior fiscal year was due to an increase in seasonal salaries due to growth in recreation activities. Seasonal salaries are now back to pre -pandemic levels as the City continues to expand its program offerings. Benefits (+$52,987 vs. prior year /-$780,785 vs. budget) Similar to salaries and wages, benefit costs came in lower than the budget because of vacant positions, but also due to lower retirement costs for employees new to the California Public Employees' Retirement System. Services and Supplies (+$648,612 vs. prior year /-$884,785 vs. budget) Expenditures for supplies and services in Fiscal Year 2022-23 were higher than the prior fiscal year due to increased recreation programming as well as an increase in insurance premiums. The City experienced savings in insurance claims costs, but this is due to timing of payments and these savings will be carried forward. The other savings of note were from lower -than -anticipated costs for repairs and maintenance of City -owned vehicles and facilities. Internal Service Funds (+$1,025,248 vs. prior year / -$0 vs. budget) Internal Service Fund charges increased from the prior fiscal year due to the addition of new software, most notably the City's new Enterprise Resource Planning system, as well as an increase in Information Technology staffing costs, as the City continues to modernize services and expand security initiatives. Utilities (+$486,485 vs. prior year /-$722,783 vs. budget) Utilities were higher than the prior year due to the full re -opening of all City facilities and increased activity within those facilities as well as increased usage of sports grounds and parks. Costs were lower than the Amended Budget however, as Staff budgeted water and electricity costs conservatively. Moreover, the City utilized less water than anticipated due to the wet and rainy winter. Contracted Services (+$4,080,616 vs. prior year /-$4,816,643 vs. budget) Compared to the prior year, contract expenditures came in higher mainly due to planned increases in police services, fire services, and maintenance contract costs. In addition, other contracted services increased due to the continued expansion of recreation programs whose costs are offset by revenues. Compared to the budget, the largest variances were in Other Contracted Services ($2.5 million under budget) which includes a variety of services across departments such as: City Attorney services, Administrative Services (sales tax and investment consulting), and Public Works (traffic signal consulting and maintenance and waste management). Of the amount remaining for Other Contracted Services, approximately $1.1 million will be carried over to Fiscal Year 2023-24 to continue projects that are underway. In addition, development -related contract expenditures were $1.4 million under budget, due to timing of work being performed. Capital Outlay (-$145.384 vs. prior year /-$451.011 vs. budget) Capital Outlay expenditures are typically one-time in nature, and they vary from year to year. These purchases were under budget by $450k in Fiscal Year 2022-23; of that amount, Page 4 of 7 4 approximately $355k will be carried over to complete furniture and vehicle purchases that were made or in the process of being made at the year end. Debt Service Payment (+$387,765 vs. prior year / -$0 vs. budget) The variance in debt service is attributed to the annual payment for the Energy Lease Revenue Bond. The payment in the prior fiscal year did not include a full year of interest owed, due to the timing of the sale of the bonds. Transfers Out for Capital Improvement Program (CIP) Projects The General Fund transferred out $1.95 million in Fiscal Year 2022-23 for capital project expenditures; of that amount, $937k was covered by Committed/Assigned Reserves. $32.8 million of the unspent capital project budget will be carried over to Fiscal Year 2023-24. Table 2 summarizes the CIP projects funded by the General Fund. Table 2: General Fund CIPs Project Amount Committed/Assigned Citywide Signal Communication Upgrade $ 1,037 Civic Center Rehabilitation 267,580 Dublin Heritage Park Cemetery Improvements 13,748 Electric Vehicle (EV) Charging Stations 161,609 Green Stormwater Infrastructure 307,646 Public Safety Complex - Police Services Building 86,178 Village Parkway Reconstruction 99,844 Subtotal - Committed/Assigned $ 937,641 Undesignated Alamo Creek Park & Assessment Dist. Fence Replacement $ 6,653 Audio Visual System Upgrade 8,749 Citywide Bicycle & Pedestrian Improvements 8,580 Citywide Energy Improvements 666,650 Downtown Dublin Street Grid Network 557 Dublin Standard Plans Update 54,866 Financial System Replacement 237,594 Imagine Playground at Dublin Sports 587 Resiliency and Disaster Preparedness 34,567 Subtotal - Undesignated $ 1,018,802 Total - General Fund Transfers Out to CIPs $ 1,956,443 Reserves (Attachment 3) In June 2023, based on estimated revenue and expenditures at that time, the City Council approved allocations to specific Committed and Assigned Reserves, shown in Table 3 below. With Page 5 of 7 5 the close of the financial books, Staff is recommending additional allocations as described below. This Staff Report also transmits a Resolution (Attachment 1) which confirms designations of additional Committed Reserves for Fiscal Year 2022-23, as City Council approval of Assigned Reserves is not necessary by resolution. Committed Reserves Advance to Public Facility Fee Reserve- Increase $1,606,916 On August 15th, the City Council approved the transfer of $1,196,416 from the Unassigned (Cash Flow) Reserve as well as a transfer of $410,500 from the Fallon Sports Park III Contingency Reserve to the Advance to Public Facility Fee Reserve, for a total increase of $1,606,916. This was done in conjunction with the award of the construction contract for the Wallis Ranch Community Park Project, in which the bids received where higher than originally estimated. With this transfer, the total Advance to Public Facility Fee Reserve will be $10.7 million, to be utilized to advance funds for the Wallis Ranch Community Park, Jordan Ranch Neighborhood Square and the Library Tenant Improvements. Downtown Public Improvement Reserve - Increase $5,000,000 In accordance with the City Council Strategy #1a: Continue support of the Downtown Preferred Vision and Downtown Dublin Specific Plan including improving visual and environmental quality and evaluating specific business uses, Staff recommends increasing this reserve by $5.0 million. This increase would be in addition to the $2.0 million increase approved in June 2023 and will bring the total reserve amount to $22.1 million. Economic Stability Reserve- Increase (Restore) $8,000,000 In March 2023, the City Council approved the re -assignment of the Economic Stability Reserve ($8.0 million) to the Dublin Boulevard Extension Advance Reserve, as the Eastern Dublin Transportation Impact Fee (EDTIF) program currently does not have sufficient cash flow to cover project costs. In light of the year-end surplus, Staff is comfortable recommending the restoration of that $8.0 million for the purpose of maintaining City service delivery during periods of severe operational deficits. Public Safety Reserve - Increase $2,000,000 In accordance with the City Council Strategy #5e: Support existing and innovative public safety efforts, Staff recommends increasing the Public Safety Reserve by $2.0 million. This reserve was created to fund the provision of public safety services in the future. Staff also recommends that the use of this reserve be expanded to include new technologies as well as new programs related to public safety. The increase will bring the total reserve amount to $4.6 million. Fallon Sports Park III Contingency Reserve - Decrease $410,500 On August 15th, the City Council approved the transfer of $410,500 from the Fallon Sports Park III Contingency Reserve. The Fallon Sports Park Phase 3 project was nearing completion and the projected budget savings were reallocated to the Wallis Ranch Community Park Project. The additional allocation, as well as reserve allocations for budget carryovers and per accounting rules and/or City policy, have been incorporated into the General Fund Reserves Summary Page 6 of 7 6 (Attachment 3). Table 3. Committed/Specific Assigned Reserve Recommendations Reserve Category FY22-23 June 2023 Total Adjustment Approval Q4 Adjustment Adjustment Type Committed Economic Stability One -Time Initiative - Capital Downtown Public Improvement Lease Revenue Bond Payment Advance to Public Facility Fee Public Safety Reserve Fallon Sports Park III Contingency Assigned Dublin Blvd Extension Advance ARPA Revenue Replacement Library Improvements Pension and OPEB Village Parkway Reconstruction STRATEGIC PLAN INITIATIVE: (8,000,000) (4,500,000) 2,000,000 1,000,000 22,500,000 324,308.50 1,000,000 1,000,000 5,000,000 8,000,000 5,000,000 1,606,916 2,000,000 (410,500) 0 (4,500,000) 7,000,000 1,000,000 1,606,916 2,000,000 (410,500) 22,500,000 324,309 1,000,000 1,000,000 5,000,000 Transfer/Add Transfer Add Add Transfer/Add Add Transfer Transfer/Add Add Add Add Add Strategic Objective la: Continue support of the Downtown Preferred Vision and Downtown Dublin Specific Plan including improving visual and environmental quality and evaluating specific business uses. Strategic Objective 5e: Support existing and innovative public safety efforts, like the DPS Behavioral Unit. NOTICING REQUIREMENTS/PUBLIC OUTREACH: The City Council Agenda was posted. ATTACHMENTS: 1) Resolution Authorizing Additional Special Designations of General Fund Reserves for Fiscal Year 2022-23 2) General Fund Summary FY 2022-23 3) General Fund Reserves Summary FY 2022-23 Page 7 of 7 7 Attachment I RESOLUTION NO. XX — 23 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN AUTHORIZING ADDITIONAL SPECIAL DESIGNATIONS OF GENERAL FUND RESERVES FOR FISCAL YEAR 2022-23 WHEREAS, the City's Fund Balance and Reserves Policy requires special fund balance allocations to be adopted by the City Council, and allows the City Council to take action prior to the end of the fiscal year to direct a specific assignment of the fund balance; and WHEREAS, Staff reviewed updated information regarding fund balance and estimated one-time revenues during the preparation of the Fiscal Year 2023-24 Budget; and WHEREAS, the City Council approved allocations to specific Committed Reserves and Assigned Reserves on June 6, 2023, based on estimated revenues and expenditures at that time. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby make additional special allocation of the Fiscal Year 2022-23 year-end balance to the Committed fund balance as follows: • Increase the Advance to Public Facility Fee by $1,606,916 • Increase the Economic Stability reserve by $8,000,000 • Increase the Downtown Public Improvement reserve by $5,000,000 • Increase the Public Safety Reserve by $2,000,000 • Decrease the Fallon Sports Park Contingency by $410,500 BE IT FURTHER RESOLVED that, any net resources remaining after special designations, and after meeting the Fund Balance and Reserves Policy requirements, will be left in the Unassigned (Available) Reserve. PASSED, APPROVED AND ADOPTED this 7th day of November 2023, by the following vote: AYES: NOES: ABSENT: ABSTAIN: Mayor ATTEST: City Clerk Reso. No. XX-23, Item X.X, Adopted XX/XX/2023 Page 1 of 1 8 Attachment 2 GENERAL FUND SUMMARY - Q4 FY 22-23 Actual 2021-22 Adopted 2022-23 Amended 2022-23 Revenues Property Tax Sales Tax Sales Tax Reimbursements Development Revenue Transient Occupancy Tax Other Taxes Licenses & Permits Fines & Penalties Interest Earnings Rentals and Leases Intergovernmental Charges for Services Community Benefit Payments Other Revenue Subtotal Revenues - Operating Transfers In Unrealized Gains/Losses/Adjustments total Revenues $55,186,388 26,456,903 (346,696) 9,803,444 1,255,575 7,025,567 354,643 70,714 2,269,289 1,647,882 324,519 8,022,099 50,000 2,452,034 $114,572,363 $312,874 (15,525,055) $99,360,182 55,163,000 26,400,000 (405,555) 7,686,854 1,400,000 6,560,000 351,373 85,000 1,510,000 1,477,330 290,000 6,511,604 0 1,680,156 $108,709,762 $77,900 $108,787,662 56,463,000 27,400,000 (405,555) 7,371,875 1,400,000 6,560,000 351,373 65,000 2,310,000 1,653,427 336,436 7,116,874 0 1,866,739 $112,489,169 $121,600 $112,610,769 Actual 2022-23 59,056,139 28,902,065 (321,750) 8,199,504 1,533,093 7,196,591 323,098 80,117 5,363,445 2,193,822 352,165 9,036,816 0 2,872,013 $124,787,119 $109,014 (3,053,407) $121,842,727 Expenditures Salaries & Wages Benefits Services & Supplies Internal Service Fund Charges Utilities Contracted Services Capital Outlay Debt Service Payment Contingency & Miscellaneous Subtotal Expenditures - Operating Operating Impact (REV-EXP) Transfer Outs & Contributions to Other Funds Transfers Out (CIPs) - Com./Assig. Reserve Transfers Out (CIPs) - Undesignated Contribution to OPEB/PERS Contribution to ISF & Other Subtotal - Transfers Out & Contributions $11,670,597 4,728,716 3,894,567 3,907,323 2,511,166 52,920,629 339,943 945,285 12,832 $80,931,057 $33,641,306 2,803,478 532,636 1,000,000 $4,336,114 $13,249,383 5,488,704 5,178,309 4,932,571 3,485,435 59,695,219 432,737 1,333,050 223,440 $94,018,847 $14,690,915 2,291,645 2,316,170 4,460,000 2,000,000 $11,067,815 $13,531,615 5,562,488 5,427,964 4,932,571 3,720,435 61,817,888 645,569 1,333,050 158,440 $97,130,019 $15,359,149 27,217,469 7,553,834 4,460,000 2,023,378 $41,254,681 $12,725,756 4,781,703 4,543,179 4,932,571 2,997,652 57,001,245 194,558 1,333,050 14,088 $88,523,802 $36,263,317 937,641 1,018,802 3,460,000 2,023,378 $7,439,821 Total Expenditures GF Impact (Include CIP & Transfers) $85,267,172 $105,086,662 $14,093,011 $3,701,000 $138,384,701 ($25,773,932) $95,963,623 $25,879,104 Contracted Services Detail Police Services Fire Services Maintenance Services (MCE) Development (CDD and PW) Other Contracted Services Total Contracted Services Actual 2021-22 $21,437,403 14,699,226 5,875,493 3,876,551 7,031,956 Adopted 2022-23 $23,985,730 15,311,310 7,220,710 4,312,851 8,864,618 Amended 2022-23 $23,761,422 15,471,310 7,220,710 4,744,278 10,620,169 Actual 2022-23 $23,229,695 15,223,132 7,149,032 3,360,003 8,039,383 $52,920,629 $59,695,219 $61,817,888 $57,001,245 9 FISCAL YEAR 2022-23 GENERAL FUND RESERVES Attachment 3 RESERVE DESCRIPTION on -Spendable Prepaid Expenses estricted Cemetery Endowment Developer Contribution - Downtown Developer Contr - Heritage Park Developer Contr - Nature Park Section 115 Trust - Pension Heritage Park Maintenance Committed Advance to Public Facility Fee Downtown Public Improvement Economic Stability Emergency Communications Fire Svcs Pension/OPEB Innovations & New Opportunity One -Time Initiative - Capital One -Time Initiative - Operating Public Safety Reserve Specific Committed Reserves Cemetery Expansion (CIP) Contribution to Public Facility Fee Cultural Arts Center (CIP) Don Biddle Park (CIP) Fallon Sports Park III Contingency Lease Revenue Bond Payoff Maintenance Facility (CIP) Utility Undergrounding (CIP) Actual 2021-22 $10,541 10,541 $4,261,640 60,000 1,490,000 19,000 60,000 1,882,640 750,000 Increase 2022-23 $62,492 62,492 Decrease 2022-23 Net Change ($5,682) ($5,682) (5,682) $62,492 (5,682) 62,492 Projected 2022-23 $4,859 4,859 $4,324,132 60,000 1,490,000 19,000 60,000 1,945,132 750,000 $73,346,367 $19,606,916 ($16,936,864) $2,670,052 $76,016,420 9,523,096 15,176,230 8,000,000 532,113 5,671,094 1,026,591 6,419,657 503,860 2,600,000 1,606,916 7,000,000 8,000,000 2,000,000 13,748 6,000,000 7,139,197 675,193 510,500 6,000,000 1,000,000 55,089 3,500,000 (382,843) (36, 643) (8,000,000) (3,460,000) (132,093) (4,501,037) (13, 748) (410, 500) 1,224,073 6,963,357 (3,460,000) (132,093) (4,501,037) 2,000,000 (13,748) (410,500) 1,000,000 10,747,169 22,139,587 8,000,000 532,113 2,211,094 894,498 1,918,620 503,860 4,600,000 0 6,000,000 7,139,197 675,193 100,000 7,000,000 55,089 3,500,000 Assigned $93,266,322 $32,753,982 ($977,007) $31,776,975 $125,043,297 Accrued Leave Catastrophic Loss CIP Carryovers Fiscally Responsible Adjustment Municipal Regional Permit Non -Streets CIP Commitments Operating Carryovers Parks and Streets Contingency Pension & OPEB Relocate Parks Dept Service Continuity Dublin Blvd Extension Advance Specific Assigned Reserves ARPA Revenue Replacement Climate Action Plan Contribution to ISF Facade Improvement Grants Library Tenant Improvement HVAC Replace. & Civic Ctr Improv. (CIP) Pavement Management Public Safety Complex (CIP) Village Pkwy Pavement Reconstruction Unassigned Unassigned -Unrealized Gains Unassigned (Available) TOTAL RESERVES 1,308,044 17,710,320 4,088,843 2,446,188 325,000 2,209,778 3,276,777 1,600,546 414,025 201,270 17,000,000 1,000,000 500,000 3,150,000 20,000,000 22,500,000 3,744 665,878 324,309 3,000,000 1,500,000 364,256 65,716 1,000,000 3,278,409 2,000,000 87,200 11,000,000 5,000,000 $52,972,635 (11,008,294) 63,980,929 $223,857,505 (6,538) (340, 627) (176,240) (6,538) 3,744 2,446,188 (340,627) 414,025 1,000,000 22,500,000 324,309 (176,240) 65,716 1,000,000 (267,580) (267,580) (86,178) (99,844) 4,900,156 (86,178) $17,919,553 ($26,544,287) ($8,624,734) (3,053,407) (3,053,407) $70,342,944 ($44,463,840) 1,301,506 17,714,064 6,535,032 325,000 1,869,152 3,276,777 2,014,571 201,270 18,000,000 500,000 3,150,000 42,500,000 990,187 2,823,760 1,500,000 429,972 1,000,000 3,010,829 2,000,000 1,022 15,900,156 $44,347,901 (14,061,701) 58,409,602 $25,879,104 $249,736,608 10