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CC 2024-05-14_09c Third Quarter Status Report MEMORANDUM TO: City Council FROM: Nicole Valentine, Administrative Services Director SUBJECT: Fiscal Year 2023-24 Third Quarter Status Report and Budget Adjustment Requests DATE: May 14, 2024 RECOMMENDATION: Consider, receive, and file the Fiscal Year (FY) 2023-24 Third Quarter Financial Status IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: Preparation of the Third Quarter Report requires staff time within the existing work plan and budget for the Administrative Services Department. At the end of the third quarter, FY 2023-24 revenues for the Consolidated General Fund were $15.8 million, or one 8.5 million, and below the Budget Target by approximately $815,047, or three percent (3%). The City Council is being asked to approve two budget adjustments. The budget adjustments are reappropriating funds between Capital Improvement Program (CIP) projects and does not request additional funding. BACKGROUND: Each fiscal year the City Council adopts a budget, which commits government resources and services to possible for everyone who lives, works, and visits here. The Third Quarter Report is the third of four financial performance reports that staff will present to the City Council during the 2023-24 fiscal year. The purpose of the FY 2023-24 Third Quarter Report is to: Compare third quarter revenues received and expenditures incurred to the third financial performance; Provide explanations for key account variances and identify any potential trends that might impact financial planning; and Item 9.c. City Council Fiscal Year 2023-24 Third Quarter Status Report and Budget Adjustment Requests May 14, 2024 Page 2 Provide other key third quarter information including headcount statistics, status of Capital Improvement Projects, and Budget Adjustment Requests that have not previously been approved. The Third Quarter Report also includes a section regarding Budget Adjustments Requests. This section summarizes individual budget adjustments approved by the City Council during the third quarter, as well as administrative adjustments completed by staff. Additionally, this section of the report includes new Budget Adjustment Requests not otherwise addressed in previous City Council agenda items. Approval will enable the City to complete important work items and meet the needs of the community. ANALYSIS OF ISSUES: Third Quarter (Q3) Revenue and Expenditures Compared to Prior Year Table 1 - Current Year Q3 Actuals Compared to Prior Year Q3 Actuals Third Quarter Third Quarter FY 2023-24FY 2022-23Variance Revenue 15,803,762 15,955,718 (151,956) Expenditures 18,523,174 16,596,946 1,926,228 The Consolidated General Fund shown in Table 1 is the primary operating fund of the City and accounts for resources and services traditionally associated with government. The Consolidated General Fund provides administrative, financial, police protection, community development, public works, fire, and recreation services to the community and other funds. The Consolidated General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund. The City has historically reported on the Consolidated General Fund separately from the Measure O 2006 auditors traditionally combine this information in the Annual Comprehensive Financial Report. The Measure O 2006 Sales Tax Fund accounts for the revenues derived from Measure O 2006, a local 1/2% sales tax approved by the City's voters in November 2006. Measure O 2006 included advisory measures when passed, providing direction on the uses to which the funding should be allocated. To ensure accountability, the measure included a provision requiring the City to publish and distribute an annual report to each household on the revenues and expenditures from the sales tax proceeds. To aid in the collection and reporting of this information, the City has accounted for this fund in a separate account. This report presents information for the Consolidated General Fund that includes Measure O 2006 Tax Fund revenues and expenditures. Consolidated General Fund revenues at the third quarter of this year were approximately $151,956 lower than the Item 9.c. City Council Fiscal Year 2023-24 Third Quarter Status Report and Budget Adjustment Requests May 14, 2024 Page 3 third quarter of the prior year. Expenditures were approximately $1.9 million higher at the end of the third quarter of the current fiscal year versus the third quarter of the prior year. A more thorough explanation of third quarter variances is set forth in the attached financial report. The following is a summary of the third quarter variances between the two fiscal years. Third Quarter (Q3) Revenue and Expenditures Compared to Target Table 2 - Current Year Q3 Actuals Compared to Target FY 2023-24 Third FY 2023-24 Third Quarter TargetQuarter ActualsVariance Revenue 16,076,604 15,803,762 (272,842) Expenditures 19,338,223 18,523,176 (815,047) Table 2 above compares third quarter actual results to the budgeted Target. Third Quarter actual revenue was short of the Target by $272,842. Third Quarter actual expenditures were short of the Target by approximately $815,047. A more thorough explanation of third quarter variances is set forth in the attached financial report. Expenditures (approximately $815,047) Actual third quarter expenditures were $815,047 under the Target. Some of the more significant savings occurred in Police, Public Works, Community Development, and City Administration Departments. The Third Quarter Report includes greater detail regarding the causes for the expenditure variances in these departments. Section 5 of the Third Quarter Report includes a new update on the Goal Status Reports to Council, that includes the and Capital Improvement Plan. This information is provided to keep the City Council apprised of the status of the Goal Status Reports and includes progress towards completing Major City Goals and Capital Improvement Plan. Budget Adjustments Staff identified two budget adjustments that are requested as described in more detail below: Capital Improvement Program: Reallocate $10,000 from the 2022 Pavement Management Program to the Corrugated Metal Pipe (CMP) project this fiscal year will enable the City to capitalize on the presence of a contractor with video equipment completing work on the sewer trenchless repair project to gather information necessary for FY 2024-25 CMP lining scheduled for next fiscal year. Using this contractor will save mobilization costs for both evaluation and construction and enables staff to create a larger lining construction project that includes lining both sewer and storm drain lines. A larger project will attract more contractors to the bidding process and will result in a more cost-efficient result. Item 9.c. City Council Fiscal Year 2023-24 Third Quarter Status Report and Budget Adjustment Requests May 14, 2024 Page 4 Capital Improvement Program: Reallocate $291,200 from the Phased Main Replacement under Highway 101 to Crossing Upgrade project that has not yet started to the other two Phased Main Replacement projects that are near completion or expected to be completed in the ARPA deadline timeframe. This shift of project funding would ensure that the ARPA funds allocated to water infrastructure would be spent as anticipated. The table below shows the current allocation and proposed allocation: Water Infrastructure ProjectsCurrentProposed Phased Main Replacement Fair Oaks - Elm to Alder 480,250 705,500 Cornwall St - S. Halcyon to El Camino Real 578,700 644,650 Highway 101 Crossing Upgrade - El Camino Real to W. Branch 291,200 1,350,150 1,350,150 ALTERNATIVES: The following alternatives are provided for the City 1. Receive and file the Fiscal Year 2023-24 Third Quarter Financial Status Report and approve Two Budget Adjustment Requests; 2. Receive and file the FY 2023-24 Third Quarter Financial Status Report and do not approve the Budget Adjustment Requests and provide further direction to staff; 3. Provide other direction to staff regarding the FY 2023-24 Third Quarter Financial Status Report and the Two Budget Adjustment Requests; or 4. Provide other direction to staff. ADVANTAGES: third quarter of FY 2023-24. Approval of the requested budget adjustment will enable staff to continue providing high quality services to the organization and to the public. DISADVANTAGES: No disadvantages have been identified at this time. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted at City H Government Code Section 54954.2. ATTACHMENTS: 1. Fiscal Year 2023-24 Third Quarter Financial Status Report Item 9.c. ATTACHMENT 1 City of Arroyo Grande Fiscal Year 2023-24 ThirdQuarterFinancial Status Report INTRODUCTION The following reporttheend of thethirdquarter for Fiscal Year(FY) 2023-24. The purpose of this report is to update the public and the City Council on financial position at the end of the thirdquarterof the fiscal year andcompare actual results to theprior year and the budgeted Target,ormance. The thirdquartertimeframe is July 1 through March 31, 2024. The financial report is organized in the following sections: Section 1 an overview of Cat the ENSURING FISCAL end of the thirdquarter ofFY 2023-24. This includes a STABILITY: comparison of thirdquarter results between the current and prior year. In addition, thirdquarter results will be compared to the budgeted Target. As part of the analysis, In Fall 2020, the City Council brief explanations of significant revenue and expenditure established a goal to ensure variancesare included. financial stability for the organization throughout the Section 2 a listing of any personnel changes occurring planning, budgeting, and during the thirdquarter and a summary of headcount by expenditure process, including department. This section also includes calculated vacancy rate. preparation and presentation of year-end and quarterly Section 3 an update on the Capital Improvement financial reports. Projects(CIP)managed by the Public Works and Community Development Departments. This section includes CIP that were completed in the thirdquarter along with their final costs. Section 4 a listing of Budget Amendment Requests previously approved by Council and completedin thethirdquarterof the fiscal year, as well as a list of additional budget adjustments that are being presented to Council along with the thirdquarter report for consideration and approval. Section 5 an update on the Goal Status Reports to Council that includes progress towards completing Major City Goals and Capital Improvement Plan. Page 1 ATTACHMENT 1 SECTION 1: OVERVIEW OF FINANCIAL POSITION CITY FUND STRUCTURE The overall City budget is comprised of many individual funds, which are categorized below. This financial report will focus primarily on the Consolidated General Fund but will also report on all Governmental Funds. Consolidated General Fund The Consolidated General Fund is the primary operating fund of the City, which accounts for resources and services traditionally associated with government. The Consolidated General Fund provides administrative, financial, police protection, community development, public works, fire, and recreation services to the community and other funds. The Consolidated General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund. The City has historically reported on the Consolidated General Fund separately from the Measure O 2006 traditionally combine this information in the Annual Comprehensive Financial Report (ACFR). The Measure O 2006 Sales Tax Fund accounts for the revenues derived from Measure O 2006, a local 1/2% sales tax approved by the City's voters in November 2006. Measure O 2006 included advisory measures when passed providing direction on the uses to which the funding should be allocated. To ensure accountability, the measure included a provision requiring the City to publish and distribute an annual report to each household on the revenues and expenditures from the sales tax proceeds. To aid in the collection and reporting of this information, the City has accounted for this fund in a separate account. This report will present information for the Consolidated General Fund that includes Measure O 2006 Sales Tax Fund revenues and expenditures. Special Revenue Funds Special revenue funds are used to account and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Debt Service Funds This fund is used to account for the accumulation of resources and payment of long-term debt principal interest. This includes the USDA loan issued by the City to finance the relocation of City Hall. Enterprise Funds - An enterprise fund is a separate accounting and financial reporting mechanism for which revenues and expenditures are segregated into a fund with financial statements separate from all other governmental activities. These funds include Water and Sewer services provided to City residents. Private Purpose Fund The private-purpose fund was created to hold the assets of the former Redevelopment Agency of the City of Arroyo Grande until they are distributed. Agency Funds Agency funds are funds that the City holds on behalf of another entity. Currently, there are three Agency funds. One is the Sanitation District fund, which accounts for the receipt and remittance of wastewater processing fees on behalf of the South San Luis Obispo County Sanitation District. The second is the Downtown Parking Fund, which collects assessments from Arroyo Grande Village merchants within the boundaries of the Parking and Business Improvement Area for maintenance of the Village parking lots. The third is the San Luis Obispo Tourism Marketing District Page 2 ATTACHMENT 1 (SLOTMD) Fund, which accounts for the receipt and remittance of assessments collected from lodging operators on behalf of the SLOTMD. The following chart below ALL FUNDS GOVERNMENTAL FUNDSPROPRIETORY FUNDSFIDUCIARY FUNDS Legislative & Information ServicesFire Protection Impact FeesCity Hall Debt ServiceSewerSuccessor Agency to RDADowntown Parking Administrative ServicesPublic Access TelevisionSewer FacilitySanitation Distribution Community DevelopmentPolice Protection Impact WaterSan Luis Obispo Tourism Police DepartmentPark DevelopmentWater Facility Marketing District Recreation ServicesPark ImprovementLopez Water (SLOTMD) Public WorksRecreation Community Center Local Sales Tax FundGrace Lane Assessment District Parkside Assessment District Street (Gas Tax) Traffic Signalization Traffic Circulation Transportation Facility Impact Transportation In-Lieu Water Neutralization In-Lieu Affordable Housing Tourism Business Improvement Dist. Water Availability CDBG Grant Fund American Rescue Plan Act (ARPA) State COPS Block Grant CURRENT YEAR ACTUALS COMPARED TO PRIOR YEAR Table 1 below reflects revenue and expenditure patterns through the end of the third quarter of FY 2023-24 and compares the current quarter results against the results for all Governmental Consolidated General Fund. The totals in the table reflect the third quarter actuals for both revenue and expenditures, . Table 1 Governmental Funds Third Quarter Third Quarter FY 2023-24FY 2022-23Variance Revenue$ 21,192,964$ 21,647,913$ (454,949) Expenditures$ 20,015,280$ 18,123,752$ 1,891,528 Consolidated General Fund Third Quarter Third Quarter FY 2023-24FY 2022-23Variance Revenue$ 15,803,762$ 15,955,718$ (151,956) Expenditures$ 18,523,174$ 16,596,946$ 1,926,228 and the Consolidated General Fund and provides a comparison between third quarter results for the current and prior year for both revenue and expenditures. Governmental Funds and Consolidated General Fund revenue and expenditures for the third quarter of this year are generally on Target with prior year. The Governmental Funds category includes Special Revenue Funds, Debt Service Funds, as well as the Consolidated General Fund. Page 3 ATTACHMENT 1 Governmental Funds At the endof the thirdquarter ofFY 2023-24, Governmental Fund revenue was - 2%, or $454,949 lower than prior year, and expenditures were higher by 5% or $1.9 million. The majority of the revenue and expenditure variances in Governmental Funds were attributed to variances within the Consolidated General Fund and the American Rescue Plan Act (ARPA) Fund, which is separate from the Consolidated General Fund and not otherwise addressed in this report. The Governmental Funds category includes the Consolidated General Fund as well as other Special Revenue Funds. The Consolidated General Fund and ARPA Fund variances are explained as follows: Consolidated General Fund - The Consolidated General Fund is the primary operating fund of the City and accounts for resources and services traditionally associated with government. Consolidated General Fund revenue in the third quarter was 4%, or $151,956 lower than the third quarter of the prior year. Expenditures increased by 14%, or $1.9 million higher than the third quarter of the prior year. The majority of the variance between the two fiscal years is related to increased costs of one- time payments for Liability and Property Insurance, CalPERS Unfunded Accrued Liability, and Workers Compensation. ARPA Fund The ARPA Fund was created to help separately track funding provided pursuant to the American Rescue Plan Act. This Act is intended to provide financial aid to families, governments, businesses, schools, non-profits and others impacted by the COVID-19 public health crisis. To date the City has received the full amount allocated totaling $4,300,241. In FY 2021-22 expenditures incurred totaled $604,246. In FY 2022-23 expenditures incurred totaled $745,837 the remaining $2,950,158 is currently recognized as revenue in FY 2023-24. CONSOLIDATED GENERAL FUND IMPACTS The following discussion focConsolidated General Fund performance. Chart 1 starts off with a simple overview of Consolidated General Fund performance compared to the Target. Next are expenditures by category (Table 2). This is followed by a summarized look at FY 2023-24 third quarter actual expenditures compared to the Target (Table 3). Lastly, a discussion of Consolidated General Fund revenue is included, which compares third quarter actual results to the Target (Table 4). Using the Target as a comparator against actual results provides a simplified method to evaluate performance for each quarter. The Target for revenues does not use the 75% Target but a Target of 64.6% that more accurately reflects the anticipated revenues to be received in the third quarter of the fiscal year. Revenue realization is typically low at the end of the third quarter of the fiscal year due to the timing of receipt of major tax revenues, the time lag involved in billing cycles, and the receipt of actual third quarter financial results will be compared to both the prior third quarter and the budgeted Target. The Target for expenditures is calculated as three-fourths (75%) of the FY 2023-24 Budget and represents the 9-month period from July 2023 through March 2024, except for the Non-Departmental Annual Payments line that has a Target of the full budget and the Measure O 2006 Sales Tax Fund CIP allocation line that has a Target of zero as the allocation is completed in the fourth quarter. This approach decreased the Target from 75% to 59.4% for the third quarter. Page 4 ATTACHMENT 1 Chart 1 Chart 1 shows a simple comparison of actualthirdquarter revenue and expenditures to the Target. The actualthirdquarter ConsolidatedGeneral Fund revenue ismorelessthe budgeted Targetby $272,842, which is not unusual since revenue realization is typically lowerthan the Target through the thirdquarter due to the time lag involved in billing cycles and the receipt of reimbursements. Likewise, actual expenditures through thirdquarter totaled $18.5million, or 57 the Target by $815,047. A more detailed discussionon Consolidated General Fund revenue and expenditurevariancesis included laterin this report. Table 2 Table2reflects major expenditurecost FY 2023-24% of categories within the Consolidated Expenditure CategoryQ3 ActualsActuals General Fund. This chart is intended to Personnel Costs$ 9,567,04551.7% explain where the Citywere Operating Costs 8,269,25044.6% spentduring thethirdquarter. Within Debt Service 301,3651.6% the total expenditures of $9.5million, Capital Outlay 128,0440.7% 51.7% sareassociated Transfers Out 257,4721.4% with personnel, 44.6% with operating Total$ 18,523,176 and maintenance,1.6 debt service,0.7% for Capital Outlay, and 1.4% with transfers to otherfunds. Table3reflectsthethirdquarterstatus of all ConsolidatedGeneral Fund operating departments. Some departments include multiple divisions. The divisions areconsolidated under their respective department, rather than reflected individuallywithin the table. Page 5 ATTACHMENT 1 Table 3ConsolidatedGeneral Fund Expenditures by Department Consolidated General Fund Department Variances - Third Quarter Consolidated General Fund 2023-24 2023-24 Q3 2023-24 Q3 Dollar % Department Adjusted TargetActualsFav/(Unfav)Fav/(Unfav) City Administration $ 1,751,100$ 1,313,325$ 1,124,129 $ 189,19611% Legislative & Information Services 449,460 337,095 295,701 41,394 9% Measure O 2006 Sales Tax Fund 1,269,800 952,350 1,163,271 (210,921) -17% Measure O 2006 CIP Allocation 7,715,691 - - -0% Administration Services 5,297,212 3,972,909 4,570,537 (597,628) -11% Non-Departmental Annual Payments 2,836,525 2,836,525 2,756,790 79,735 3% Community Development 1,996,822 1,497,617 1,100,787 396,83020% Police Department 6,905,599 5,179,200 4,691,440 487,7607% Recreation Services 901,370 676,028 657,026 19,002 2% Public Works 3,430,898 2,573,174 2,163,495 409,67912% TOTAL EXPEDITURES 32,554,477 19,338,223 18,523,176 815,0473% Overall, third quarter expenditures were $815,047 under the Target. The majority of City departments were under their spending Targets, except for Administrative Services and Measure O 2006 Sales Tax Fund. Some of the more significant savings occurred in the Police, Public Works, Community Development, and City Administration Departments. A more detailed explanation of key expenditure variances by individual department/division is provided below. KEY EXPENDITURE VARIANCES FOR INDIVIDUAL DIVISIONS/DEPARTMENTS FOR FISCAL YEAR 2023-24 Department: Police Services Police Services includes the functions of Administration, Division: Various (4201, 4203, 4204, 4209) Patrol Services, Support Services and the Office of Issue: Overall savings in salaries and Traffic Safety (OTS) Grant for Traffic/DUI Enforcement benefits and contractual services Program. For simplicity, Police Services will be analyzed Impact to Consolidated General Fund: in total rather than by individual divisions. Some of the $487,760 savings more significant variances include: The Police Department currently has had vacancies throughout the fiscal year and one medical leave, resulting in labor savings of approximately $346,000. The contract with the County Sheriff Department for dispatch services is paid semiannually in the months of January and June. Payments for these services will not be made until the third and fourth quarters, resulting in a third quarter favorable variance to the Target of $124,250. Department: Public Works The Public Works Department includes the functions of Division: Various (4213, 4301, 4305, 4307, Government Buildings, Engineering, Auto Shop, 4420, 4430) Administration, Park Maintenance, and Soto Sports Issue: Overall savings in salaries and Complex Divisions within the Consolidated General contractual services Fund. The majority of the favorable variance in this Impact to Consolidated General Fund: department can be attributed to salary savings. For $409,679 savings simplicity. Some of the more significant variances Page 6 ATTACHMENT 1 include: The Public Works Administration Division had a vacant Public Works Director/Assistant City Manager position and had a vacant Assistant Capital Projects Manager the first half of the fiscal year additionally one employee is on medical leave resulting in labor savings of approximately $181,200. The Parks Division has $50,000 for Tree removal support at $50,000 for Open Space Fuel Management that will be completed in the fourth quarter of this fiscal year. The Parks Division has savings of approximately $160,000 related to the replacement of a bucket truck that has not yet been purchased. Department: Community Development The Community Development Department includes the Division: Various (4130, 4212) functions of Planning and Building & Safety Divisions. Issue: Overall savings in salaries and The majority of the favorable variance in this contractual services department can be attributed to salary savings and Impact to Consolidated General Fund: lower spending in contractual services. Some of the $396,830 savings more significant variances include: The vacancy of the Building Permit Technician position during the first half of the fiscal year resulted in a portion of the Divisions overall labor savings totaling approximately $65,000. The Building Division contractual services has a variance of $121,300 related to the timing of services contractor. The February and March invoices were not received until April resulting in a favorable variance. Minimal contractual services for the Planning Division were incurred through third quarter resulting in $180,984 of favorability to the Target. The following table will summarize where these savings occurred: Planning Contractual ServicesBudgetTargetExpendituresVariance Comprehensive General Plan Update 418,182 313,637 155,011 158,626 On-Call Environmental Review Services 25,000 18,750 - 18,750 On-Call Planning Services and Misc. Planning Studies 15,000 11,250 7,642 3,608 458,182 343,637 162,653 180,984 Department: City Administration The City Administration Department includes the Division: Various (4001, 4002, 4003, 4099, functions of City Council, City Attorney, Retirees, City 4101, 4110) Manager, and Human Resources Divisions within the Issue: Overall savings in contractual services Consolidated General Fund. The majority of the Impact to Consolidated General Fund: favorable variance in this department can be attributed $189,196 savings to lower spending in contractual services. Some of the more significant variances include: The Legislative & Information Services Division had a vacant Deputy City Clerk/Communications Coordinator position for the first half of the fiscal year resulting in labor savings of approximately $24,000. Minimal contractual services for the City Manager Division were incurred through third quarter resulting in $18,750 of favorability to the Target related to the Economic Development Consultant budgeted to begin in the second half of the fiscal year. Page 7 ATTACHMENT 1 The City Council Division has a variance of $56,250 related to the timing of the Community Services Grant program and $16,125 related to the Retraining Scholarship Program being completed in the fourth quarter of the fiscal year. The Administrative Services Department includes the Department: Administrative Services Division: Various (4120, 4140) This budget included 75% of the funding for quarterly Issue: Overall savings in Transfers Out to payments to the Five Cities Fire Authority (FCFA) for the CIP Projects and debt service Fire Service. The fourth quarter payment Impact to Consolidated General Fund: was paid at the end of March, inadvertently creating an $597,628 overage unfavorable variance. Department: Measure O-06 Sales & Use Tax This fund accounts for the revenues derived from Fund Measure O-06, a local 1/2% sales tax approved by the Division: Fund 218 City's voters in November This budget included 25% of Issue: Overall savings in Transfers Out to the funding for quarterly payments to the Five Cities CIP Projects and debt service Impact to Consolidated General Fund: The fourth quarter payment was paid at the end of $210,921 overage March, inadvertently creating an unfavorable variance. KEY REVENUE VARIANCES BY ACCOUNT FOR THE THIRD QUARTER Table 4 Consolidated General Fund Revenue Consolidated General Fund Revenue Variances - Third Quarter FY 2023-24 FY 2023-24 FY 2023-24 Dollar % REVENUE BY CATEGORY BudgetQ3 TargetQ3 Actuals(Unfav)/FavFav/(Unfav) Property Tax$ 6,327,486$ 4,218,324$ 4,528,923 $ 310,5995% Sales Tax 5,268,158 3,073,092 2,621,045 (452,047)-9% Measure O-06 Sales & Use Tax 2,962,000 1,727,833 1,707,910 (19,923)-1% Transient Occ. Tax 1,545,000 1,030,000 908,866 (121,134)-8% Property Tax in Lieu of VLF 2,001,300 1,000,650 1,064,557 63,9073% Franchise Fees 795,600 530,400 454,814 (75,586)-10% License & Permit Fees 579,500 434,625 470,699 36,0746% User Fees 521,500 391,125 638,148 247,023 47% Planning Fees 371,500 278,625 377,663 99,03827% Recreation Fees 415,867 311,900 402,453 90,55322% Transfers In 3,114,066 2,335,550 2,066,256 (269,294)-9% Other Revenue 992,640 744,480 562,428 (182,052)-18% TOTAL 24,894,617$ 16,076,604 15,803,762 (272,842)-1% As reflected in Table 4, third quarter actual revenue was short of the Target by $272,842. This table uses a Target of 64.6% that more accurately reflects the anticipated revenues to be received in the third quarter of the fiscal year. Revenue realization is typically low at the end of the third quarter of the fiscal year due to the time lag involved in billing cycles and the receipt of reimbursements. A more detailed discussion is included below to help explain actual revenue variances through the third quarter compared to the Target. Page 8 ATTACHMENT 1 Property Tax tax is billed on a fiscal year (July 1- June 30) basis and is payable in two (2) annual installments. Property owners typically receive their first property tax bill at the end of September or early October, with a due date of November 1st. The majority of property tax related to the first installment was received in December 2023. The second property tax bill installment is received in April 2024 and will be included in the fourth quarter report. Property tax typically represents around 26 The Target is based on eight months of Property Tax revenue. Actual revenue received in this category was higher than the Target. Sales Tax and Measure O 2006 Sales Tax Fund Sales tax is lower than anticipated, while Measure O 2006 Sales Tax realization through third quarter is on track. Actual sales tax revenue received through third quarter was $2.6 million and Measure O 2006 Sales Tax revenue received through third quarter was $1.7 million which represents seven months of payments (July-January). The Target is also based on seven months of revenue, taking into account the timing of anticipated payments. Transient Occupancy Tax (TOT) TOT revenue is reflecting a $121,134 unfavorable variance to the Target. The Target and actual TOT revenue represents only eight months of TOT receipts due to the payments. Property Tax in Lieu of Vehicle License Fees (VLF) Property tax in lieu of VLF is received in two installments during the fiscal year. Typically, the revenue is received in the months of January (3rd quarter) and June (4th quarter). The Target for this revenue is 50% at the end of the third quarter of the fiscal year. Franchise Fees Only eight months of Waste Water Connection franchise fees were received through third quarter. In addition, Charter Communications franchise fees earned in the third quarter will not be paid and received until the fourth quarter. In light of the timing of payments, the Target is based on eight months of revenue. Without the Charter communications franchise fee receipts, the actual revenue at the end of the third quarter is lower than the Target by $75,586. License & Permit Fees, User Fees, and Planning Fees License and permit revenue is above the Target by $36,074. User fee revenue is above the Target by $247,023. Planning revenue exceeded the Target by $99,038. The Target is based on 75% or nine category is customer driven and fluctuates over the course of a year as well as year over year based on demand. Recreation Fees Recreation revenue is above the Target by $90,553. The Target is based on nine Other Revenues This revenue category includes business license tax, fines, revenue from other government agencies, charges for services and any other revenues accounts received in the consolidated general fund. The largest variance in this category is related to three revenue accounts. The revenue from other government agencies accounts for the SB 1090 funds earmarked for use of the Page 9 ATTACHMENT 1 general plan update. Once these funds are spent for this project, the revenue will be recognized at that time, resulting in a revenue shortfall to the Target of approximately $280,000. SECTION 2: POSITION CHANGES AND HEADCOUNT NUMBERS POSITION ALLOCATION CHANGES MADE BY THE CITY COUNCIL (2nd Quarter) None made during this quarter. FULL TIME EQUIVALENT (FTE) BY DEPARTMENT PERMANENT STAFF ONLY The following table reflects FTE staffing by department. The table only includes permanent staff and does not include part-time or temporary staffing. While departments may hire part-time staff on a regular or seasonal basis, they are not included in the analysis below. Adopted Budget Vacancies % of DepartmentVacant Positions (3rd Qtr)Total City Manager & Human Resources 3 - 4% Administrative Services 7 - 9% Community Development 10 - 13% Legislative & Info Services 2 - 3% Police Officer (3) Police Services 29 3 37% Engineering Inspector Public Works 24 1 31% Recreation Services 3 - 4% Total 78 4 100% EMPLOYEE VACANCY RATE the third quarter of FY 2023-24 was 5.1%. This equates to two vacant positions. The vacancy rate tracks the number of permanent vacant positions at the end of the quarter in comparison to the total number of permanent positions available. Unlike a turnover rate, which tracks employees that separated during the period, the vacancy rate only looks at vacancies at the end of period. The costs associated with turnover includes the cost of advertising new positions, training, overtime, lowered productivity, and workload balance. Page 10 ATTACHMENT 1 SECTION 3:UPDATE ON COMPLETED CAPITAL PROJECTS This information is provided to keep the Council Improvement Projects (CIP). Page 11 ATTACHMENT 1 SECTION 4: APPROPRIATION TRANSFERS AND BUDGET ADJUSTMENTS Administrative and Previously-Approved Third Quarter Budget Adjustments The following third quarter budget adjustments were previously approved by Council or are classified as administrative and not requiring Council approval. Administrative Services Department: Appropriated funds for 6 budget adjustments reviewed in the Second Quarter Financial Status Report. The overall impact to the budget increased the Consolidated General Fund expenditures by $185,310, COPS Fund expenditures of $25,000, Water Fund expenditures of $13,975, and Sewer Fund expenditures of $20,000, as reflected in the following table: General COPS Water Sewer Fund RequestRevenueExpenditureFund ImpactFund Fund Impact Building Contractual Services 123,700 185,000 23,000 - - - City Attorney Contract Costs - 150,000 150,000 - - - Escribe Webcasting Module - 12,310 12,310 - - - Police Equipment - 25,000 - 25,000 - - Central Coast Blue (CCB) Operating Costs - 13,975 - - 13,975 - Lift Station #1 Pump Repair - 20,000 - - - 20,000 Totals 123,700 406,285 185,310 25,000 13,975 20,000 Approved at the February 27, 2024, City Council meeting, Item 9.b. Additional Requested Third Quarter Budget Adjustments In addition to the administrative budget adjustments previously-approved by the City Council during the third quarter, two budget adjustment is proposed for approval along with the review and receipt of this report. Capital Improvement Program: Reallocate $10,000 from the 2022 Pavement Management Program to the Corrugated Metal Pipe (CMP) project this fiscal year will enable the City to capitalize on the presence of a contractor with video equipment completing work on the sewer trenchless repair project to gather information necessary for FY 2024-25 CMP lining scheduled for next fiscal year. Using this contractor will save mobilization costs for both evaluation and construction and enables us to create a larger lining construction project that includes lining both sewer and storm drain lines. A larger project will attract more contractors to the bidding process and will result in a more cost-efficient result. Capital Improvement Program: Reallocate $291,200 from the Phased Main Replacement under Highway 101 to Crossing Upgrade project that has not yet started to the other two Phased Main Replacement projects that are near completion or expected to be completed in the ARPA deadline timeframe. This shift of project funding would ensure that the ARPA funds allocated to water infrastructure would be spent as anticipated. The table below shows the Current allocation and proposed allocation: Water Infrastructure ProjectsCurrentProposed Phased Main Replacement Fair Oaks - Elm to Alder 480,250 705,500 Cornwall St - S. Halcyon to El Camino Real 578,700 644,650 Highway 101 Crossing Upgrade - El Camino Real to W. Branch 291,200 1,350,150 1,350,150 Page 12 ATTACHMENT 1 SECTION 5: UPDATE ON MAJOR CITY GOALS AND CAPITAL IMPROVEMENT PLAN This information is provided to keep the Council apprised of the status of the Goal Status Reports to Council that includes progress towards completing Major City Goals and Capital Improvement Plan. These reports present updates and communications about the status of City projects, goals, and performance measures. The four major goals are: Funding Support a thriving community through fiscal responsibility, economic development efforts, and additional and alternative revenue streams. Fire Services Implement operational and fire and emergency service delivery improvements through the Five Cities Fire Authority, and complete the transition of services to Oceano due to its exit from the Authority. Infrastructure Invest in and complete critical infrastructure projects throughout the City through the strategic prioritization of projects based on available resources. General Plan Update Prioritize and complete major work efforts for the comprehensive General Plan update to provide a vision and framework for future development within the City. for purposes of defining each department. Key CMOCity Manager's Office ASAdministrative Services Legislative and Information Services LIS PDPolice Department PWPublic Works RecRecreation Services FireFive Cities Fire Authority CDCommunity Development Page 13 ATTACHMENT 1 14 Page ATTACHMENT 1 15 Page ATTACHMENT 1 16 Page ATTACHMENT 1 17 Page