CC SR 20230406 01 - Midyear Report
CITY COUNCIL MEETING DATE: 04/06/2023
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA TITLE:
Consideration and possible action to receive and file the Fiscal Year 2022 -23 Mid-Year
Financial Report and year-end estimates.
RECOMMENDED COUNCIL ACTION:
1) Receive and file the FY 2022-23 Mid-Year Financial Report and year-end
estimates.
FISCAL IMPACT: None
Current Budget: Revenues: $35,737,000
Transfers In: $ 300,000
Expenditures: $32,476,700
Transfers Out: $ 6,588,900
ORIGINATED BY: Jason Loya, Senior Administrative Analyst
Vina Ramos, Deputy Director of Finance
REVIEWED BY: Trang Nguyen, Director of Finance
APPROVED BY: Ara Mihranian, AICP, City Manager
BACKGROUND:
The mid-year financial report for the General Fund as of December 31, 2022, is presented
tonight to the City Council. This report compares revenues and expenditures for the first
six months of the fiscal year (July-December) relative to the same point in time last year.
Additionally, Staff examines the mid-year results to develop the projected year-end
estimates for FY 2022-23, also presented this evening.
Through the month ending December, Staff estimates the fund balance for General Fund
is almost $30.3 million, including transfers out. This is an increase of $2.9 million or 11%
over the estimated ending fund balance from the revised budget. A fter applying the City
Council Reserve Policy of 50% of the operating budget, the estimated unrestricted excess
reserve is $15.1 million, which is an increase of approximately $2.7 million or 22% of the
estimated unrestricted excess reserve on June 30, 2022.
General Fund revenues are estimated to end the year at approximately $1.5 million, or
4%, higher than the revised budget. Expenditures are estimated to end the year at
1
approximately $1.4 million or 4% lower than budget . A detailed analysis highlighting the
major changes will be presented in this report.
DISCUSSION:
General Fund Revenue
The General Fund has received $18.1 million, or 50%, of budgeted revenues through
mid-year FY 2022-23, including transfers. Compared annually, total General Fund
revenues increased by $2.5 million, or 16%, for the month ending December. The
increase is primarily attributed to major revenue sources, including TOT, Sales Tax, and
Other Taxes & Miscellaneous Revenues. An overview of the annual changes for each
major revenue source between FY 2021-22 and FY 2022-23 is presented in Table 1.
Table 1: Annual Percent Change – Dec. 2021 vs Dec. 2022
Table 2 on the next page highlights the percentage of revenues received through mid -
year relative to the FY 2022-23 revised budget. Cash inflows for each revenue source are
received at various months due to the timing of disbursements. In all cases, the proportion
of actuals received by this point in the fiscal year is consistent with historical trends.
However, it’s also worth noting that future economic activity, legislation, policy changes,
and any unforeseen circumstances may impact current projections.
FY 2021-22 FY 2022-23
Revenue Source Mid-Year
Actuals
Mid-Year
Actuals
Property Tax 7,002,600$ 7,241,635$ 239,035$ 3%
Transient Occupancy Tax 2,777,000 3,627,478 850,478 31%
Sales Tax 1,084,200 1,531,135 446,935 41%
Permits & Fees 1,422,200 1,750,406 328,206 23%
Franchise Tax 711,600 671,911 (39,689) -6%
Utility Users Tax 1,167,800 1,369,522 201,722 17%
Other Taxes & Misc. Revenues 1,246,900 1,762,646 515,746 41%
Subtotal 15,412,300 17,954,734 2,542,434 16%
Transfers In 175,000 150,000 (25,000) -14%
Total Revenues $ 15,587,300 $ 18,104,734 $ 2,517,434 16%
Annual Percent
Change
2
Table 2: FY 2022-23 Mid-Year Revenues Received
Chart 1 encompasses the FY 2022-23 mid-year report by comparing monthly cumulative
totals for the month ending December against the revised budget, year-end estimates,
and prior year actuals. As observed, the $18.1 million of revenues received exceeded the
budget by nearly $2.3 million, or 14%. The projected FY 2022-23 year-end estimates from
January through June are also on pace to outperform both the revised budget and prior
year actuals month-over-month. In total, General Fund revenues are estimated to re ach
$37.6 million, an increase over the budget and prior year actuals of approximately 4%.
Chart 1: Monthly Cumulative GF Revenue Comparison
Revenue Source Revised
Budget
Mid-Year
Actuals
%
Received
Property Tax 16,406,800$ 7,241,635$ 44%
Transient Occupancy Tax 5,750,100 3,627,478 63%
Sales Tax 2,687,200 1,531,135 57%
Permits & Fees 3,077,600 1,750,406 57%
Franchise Tax 2,150,000 671,911 31%
Utility Users Tax 2,201,200 1,369,522 62%
Other Taxes & Misc. Revenues 3,464,100 1,762,646 51%
Subtotal 35,737,000 17,954,734 50%
Transfers In 300,000 150,000 50%
Total Revenues $ 36,037,000 $ 18,104,734 50%
FY 2022-23
3
Table 3 below provides a similar summary of revenue sources but with emphasis on each
revenue stream. Year-end estimates are based on current assumptions and will be
reviewed through the remaining months of the fiscal year. Any material changes will be
noted and presented to the City Council in May.
Table 3: FY 2022-23 Revised Budget vs. Year-End Estimate
Staff has provided a detailed discussion and analysis of the General Fund ’s major
revenue sources below.
Property Tax
Through mid-year, property tax revenues reached a total of $7.2 million and rose
$239,035, or 3%, higher than a year ago. FY 2022 -23 year-end revenues are currently
projected to rise slightly above budget by $34,000 based on the latest estimates provided
by the City’s property tax consultant. Although year-end projections are relatively flat, all
indicators suggest that revenues will continue forward on a positive trend based on the
sales activity and property values in the calendar year.
Transient Occupancy Tax (TOT)
Notable increases in TOT revenue began during the second half of FY 2021 -22 and
continued through the first half of FY 2022 -23. As of the month ending December, TOT
revenues totaled $3.6 million, with 97% of the amount generated by Terranea R esort.
Total revenues grew by $850,478, or 31% when compared to December 2021. TOT
revenues are expected to sustain the current trend and end the year at almost $6.6
million. The notable increase of $823,700, or 14 %, over budget is largely related to the
continued rebound in the hotel sector. Coupled with higher prices and pent-up consumer
Revenue Source Revised
Budget
Mid-Year
Actuals
Year-End
Estimates
Property Tax 16,406,800$ 7,241,635$ 16,440,800$ 34,000$ 0%
Transient Occupancy Tax 5,750,100 3,627,478 6,573,800 823,700$ 14%
Sales Tax 2,687,200 1,531,135 2,844,400 157,200$ 6%
Permits & Fees 3,077,600 1,750,406 3,425,200 347,600$ 11%
Franchise Tax 2,150,000 671,911 2,150,000 -$ 0%
Utility Users Tax 2,201,200 1,369,522 2,431,800 230,600$ 10%
Other Taxes & Misc. Revenues 3,464,100 1,762,646 3,400,500 (63,600)$ -2%
Subtotal 35,737,000 17,954,734 37,266,500 1,529,500 4%
Transfers In 300,000 150,000 300,000 -$ 0%
Total Revenues $ 36,037,000 $ 18,104,734 $ 37,566,500 $ 1,529,500 4%
FY 2022-23
Variance to YE
Estimate
4
demand, revenue from Terranea has increased above historical actuals and remains
strong going into the end of the fiscal year.
Sales Tax
Higher prices due to persistent inflation have also proven favorable for sales tax
revenues. Mid-year actuals totaled $1.5 million and demonstrated an increase of
$446,935, or 41%, over December 2021. Sales tax revenues experienced a strong and
notable rebound during the second half of the last fiscal year, which continued well into
the current fiscal year. However, the latest forecasts suggest a decline in consumer
spending over the remainder of the FY 2022-23 fiscal year. Growth assumptions have
been slightly lowered; however, year-end estimates are still projected to total $2.8 million
in revenue and outperform the revised budget by $157,200, or 6%.
Permits and Fees
General Fund revenues generated by permits and fees totaled nearly $1.8 million as of
the month ending December. Total revenues grew by $328,206, or 23%, compared to the
same period one year ago. As it stands, the latest assumptions indicate that the current
trend will continue through June and end the year with revenues increasing to $3.4 million.
The FY 2022-23 year-end estimates are anticipated to grow by $347,600, or 11%, above
the revised budget.
Franchise Tax
Franchise tax is levied on the providers of utility, refuse, and cable services in exchange
for using the City’s rights-of-way. Franchise tax revenues totaled $671,911 at mid-year
and declined by -6%, or $39,689, compared annually. Based on historical figures, a larger
proportion of total revenues in this category are received during the second part of the
fiscal year. The timing of revenues received between December and January is another
factor to consider. As such, Staff anticipates that year-end revenues will meet the
budgeted amount and will remain informed regarding material changes in projections.
Utility Users Tax (UUT)
At mid-year, the City received just under $1.4 million in UUT revenue, an increase of
$201,722, or 17%, over the amount received at this time last fiscal year. This revenue
source is primarily driven by weather conditions, utility rates, and consumption. Moreover,
the City has received 62% of the $2.2 million budgeted revenue. Staff estimates to end
the year just over $2.4 million, an increase of $230,600, or 10%, above budget. Staff will
monitor revenue trends for the remainder of the fiscal year and modify the year-end
estimate, if necessary, during the third quarter review.
Other Taxes and Miscellaneous Revenue
Through the month ending December, revenues totaled approximately $1.8 million and
rose by $515,746, or 41%, when compared annually. Contributors to growth within this
5
revenue source include the golf tax, rentals and leases, and interest earnings. For golf
tax, inflationary pressure on prices has increased the taxable values and led to higher
revenues to date. Revenue from rentals and leases has also risen due to the return to
normal activity levels and facilities usage. As a result of rising interest rates, interest
earnings on short-term investments are also rising. By year-end, total revenues are
estimated to fall slightly below budget by -2%. The $3.4 million expected by year-end is
under budget by $63,600 and can be difficult to project due to the variety of sources.
However, changes to the latest projection will be monitored and included in the third
quarter report.
General Fund Expenditures
As of December 31, 2022, the total for the General Fund expenditures is approximately
$17.1 million or 44% of the total budget, including transfers out. Compared to the same
period last year, total expenditures are higher by $4.2 million or 33%. The major increases
are summarized below.
Personnel Costs
At the end of the second quarter, salaries ended at approximately $3.6 million, or 38% of
the FY 2022-23 revised budget. Compared to the prior year, this category is
approximately $45,300 or 1% higher. The variance is in line with the budget in FY 2022-
23, mainly due to the cost-of-living adjustments, vacancies, and employee retention
incentives that were paid in the first quarter of the fiscal year pursuant to the City’s labor
employee agreements.
Next, the benefits ended at approximately $1.5 million or 44% of the FY 2022-23 revised
budget. As anticipated, the benefits are $253,200 or 20% higher due to the new rates for
health benefits and an increase in payment for CalPERS’ annual unfunded liability
payment.
Non-Personnel Costs
At the end of the second quarter, the non -personnel category ended at approximately
$8.7 million or 49% of the FY 2022-23 revised budget. This category includes legal
services, the Los Angeles Sheriff’s Department contract, repairs and maintenance,
professional and technical, supplies, training and conferences, and miscellaneous
expenses. Overall, non-personnel costs increased by approximately $2.3 million or 35%
compared to the same period last year as highlighted below.
• An increase of $932,000 or 720% is from Capital Outlay from the Purchase and
Sale Agreement and Joint Escrow Instructions to purchase and manage certain
real properties commonly known as the Lower Filiorum and Plumtree properties.
• A difference in timing for invoice disbursements, such as the monthly invoice from
the Los Angeles County Sheriff’s Department in the amount of $669,200 or 23%
and $165,800 or 89% for insurance premiums.
6
• An increase of $234,200 or 30% in repairs and maintenance. This is consistent
with the agreed upon rates with vendors for FY 2022-23 and budget plans such as
tennis court resurfacing, building maintenance, and park maintenance.
• An increase of $333,100 or 39% in professional and technical, supplies, training,
and other expenditures. The growth supports the anticipated activities in FY 2022-
23 such as the City’s 50th Anniversary celebration, purchasing of operating
supplies, setting aside equipment replacement funds for a future purchase, and
resuming attendance for in-person training and conferences.
• A slight increase of $30,000 or 7% in Legal services due to an increase in litigation
services.
Transfers-Out
This category accounts for the General Fund transfers to CIP, Subregion One and the
Portuguese Bend Improvement Authority, for a total of $5.3 million. At the end of the
second quarter, transfers-out is $2.6 million or 50% of the FY 2022-23 revised budget.
Compared to the prior year, transfers out increased by $1.7 million or 167%. The increase
is from the Transfers-Out to Capital Infrastructure Program (CIP) Fund, mainly from the
projected increase in Transient Occupancy Taxes.
Overall, Table 4 provides a view of the mid-year expenditures by category, along with the
total spent to budget. Additionally, Chart 2 compares the General Fund’s second quarter
of FY 2021-22 and FY 2022-23 by category.
Table 4: FY 2022-23 General Fund Status Report – Expenditures by Category
FY 2021-22 FY 2022-23
Expenditure Type Mid-Year
Actuals
Mid-Year
Actuals
Salaries $3,562,978 $3,608,279 $45,301 1%
Benefits 1,248,756 1,501,953 253,197 20%
Sheriff's Contract 2,879,410 3,548,646 669,236 23%
Legal Services 430,085 460,239 30,154 7%
Supplies 217,743 222,743 5,000 2%
Professional and Technical 1,164,050 1,218,656 54,606 5%
Repairs and Maintenance 772,008 1,006,187 234,179 30%
Training/Conference 94,070 124,824 30,754 33%
Misc. Expense
Capital Outlay 129,439 1,061,394 931,955 720%
Equipment Replacement Charges 77,100 146,100 69,000 89%
General Liabilities Insurance 185,757 351,521 165,764 89%
Utilities 412,426 365,806 -46,620 -11%
Other 89,745 203,945 114,200 127%
Subtotal 11,263,567 13,820,293 2,556,726 23%
Transfers-Out 994,250 2,649,700 1,655,450 167%
Total Expenditures 12,257,817 16,469,993 4,212,176 34%
Transfers-Out to CIP (Ladera Linda)444,750 444,750 0 0%
Transfers-Out to Pension 200,000 200,000 0 0%
Total Expenditures (after prior year
surplus transfers per CC's policy)$12,902,567 $17,114,743 $4,212,176 33%
Annual Percent Change
7
Chart 2: Mid-Year General Fund Expenditures – Revised Budget vs. Mid-Year
Year-End Outlook for Expenditures
As illustrated in Table 5 on the next page, overall, at the end of the second quarter, the
General Fund is trending to end the year lower than estimated by $1.4 million or 4% over
FY 2021-22 revised budget after transfers out. Similar to the same process as the
previous years, Staff recommends continuing to monitor the third quarter expenses and
submit any proposed budget adjustments, if needed, in the preliminary budget report.
8
Table 5: Second Quarter General Fund Expenditures: Year-End Estimates
The following highlights the expenditure year-end assumptions.
Personnel Costs
As illustrated in Table 5, the salaries and benefits account for $12.8 million or 33% of the
total revised budget, including transfers. At the end of the second quarter, Staff projects
to end the year at approximately $10.9 million. As highlighted below, this is $1.9 million
or 15% lower than the revised budget, primarily from vacant positions that were opened
for recruitment but not filled, and there were also vacant positions that were filled later in
the fiscal year.
• Administration:
• Deputy City Clerk – vacant since July 2022; 75% funded
• Human Resources Analyst – vacant since October 2022
• City of Rancho Palos Verdes Internship Program – vacant; estimated
to start in Spring 2023
• Community Development Department:
• Associate Planner – filled in January 2023
• Senior Planner – vacant since January 2023
• Assistant Planner - filled in January 2023
FY 2022-23
Expenditure Type Revised
Budget Mid-Year
Actuals
YE Estimates
Salaries $9,392,920 $3,608,279 $7,876,100 ($1,516,820)-16%
Benefits 3,411,900 1,501,953 3,033,100 (378,800)-11%
Sheriff's Contract 7,254,000 3,548,646 7,140,000 (114,000)-2%
Legal Services 940,000 460,239 900,000 (40,000)-4%
Supplies 621,028 222,743 583,700 (37,328)-6%
Professional and Technical 3,733,990 1,218,656 3,775,000 41,010 1%
Repairs and Maintenance 3,279,428 1,006,187 3,061,900 (217,528)-7%
Training/Conference 380,543 124,824 288,000 (92,543)-24%
Misc. Expense
Capital Outlay 1,090,115 1,061,394 1,089,000 (1,115)0%
Equipment Replacement Charges 292,200 146,100 290,900 (1,300)0%
General Liabilities Insurance 840,000 351,521 703,100 (136,900)-16%
Utilities 671,300 365,806 926,400 255,100 38%
Other 569,250 203,945 618,700 49,450 9%
Subtotal 32,476,674 13,820,293 30,285,900 (2,190,774)-7%
Transfers-Out 5,299,400 2,649,700 6,115,200 815,800 15%
Total Expenditures 37,776,074 16,469,993 36,401,100 (1,374,974)-4%
Transfers-Out to CIP (Ladera Linda)889,500 444,750 889,500 0 0%
Transfers-Out to Pension 400,000 200,000 400,000 0 0%
Total Expenditures (after prior year
surplus transfers per CC's policy)$39,065,574 $17,114,743 $37,690,600 ($1,374,974)-4%
Variance to YE
Estimates
9
• GIS Coordinator – vacant; utilizing consultant services
• Public Works Department:
• Deputy Director – filled in October 2022
• Senior Engineer (2 positions) – vacant
• Associate Engineer (2 positions) – vacant
• Assistant Engineer - vacant
• Project Manager – filled in February 2023
• Administrative Assistant - vacant
• Recreation and Parks:
• Part-time Park Rangers/Parking Enforcement – vacant, filled in January
2023
• Various part-time Recreation Leader positions in the Recreation and Parks
Department - vacant
Lastly, the personnel category also includes year-end estimates for vacation buyouts of
$75,000 and temporary help utilizing professional and technical services . Based on the
current information available, Staff estimates $391,000 of personnel savings for
temporary staff augmentation. Staff will monitor the need for services and, if necessary,
modify the year-end estimate during the third quarter review.
Non-Personnel Costs
Non-personnel accounts for $19.7 million or 50% of the total revised budget, including
transfers. At the end of the second quarter, Staff projects to end the year at approximately
$19.4 million, which is $295,000 or 2% under the revised budget.
The estimated year-end unspent budget of approximately $640,700 is a combination of
lower expenditures than estimated and a delay in completing budgeted projects due to
Citywide vacancies. Two of the key projects included in the FY 2022-23 budget
experiencing delays are the hydroseeding at park facilities , and the State mandated
Safety Element Update. Staff anticipates continuing unfinished projects in FY 2023 -24
and will return at a future date for the City Council’s consideration.
Moreover, as demonstrated in Table 5, the unspent budget summarized above is offset
by other non-personnel costs that are anticipated to go over budget. One category that is
trending to surpass the revised budget by $255,100 is utilities. This is mainly from higher
water rates and higher water usage compared to the prior year. The increase in usage is
mainly due to the goal of improving the appearance of the City’s parks, medians, and City
roadways and as a response to the public’s requests.
Transfers-Out
Transfers-Out to CIP and other funds account for $6.6 million or 17% of the total revised
budget. At the end of the year, Staff projects the transfers out at $7.4 million, an increase
of $815,800 or 12% over the revised budget. Of this amount, $4.7 million of Transfers-
10
Out to CIP is based on the anticipated increase in revenues in TOT minus the cumulative
public safety increases. The remaining Transfers-Out of $2.7 million, are estimated to end
the year as budgeted. These transfers are:
• $1,364,200 for the CIP as additional transfers approved by the City Council to
bolster the funding for infrastructure projects;
• $889,500 for the CIP as additional transfers to supplement the annual loan
payment for the Ladera Linda Community Park;
• $400,000 for the Employee Service Pension Fund in accordance with the Pension
Guidelines to help mitigate the rising costs of unfunded actuarial liability;
• $50,000 for Improvement Authority Portuguese Bend; and
• $15,000 for the Subregion One Maintenance Fund .
FY 2022-23 General Fund – Fund Balance
Overall, as shown in Table 6 on the next page, Staff estimates the fund balance for the
General Fund on June 30, 2023 to be almost $30.3 million, including transfers out. The
estimated fund balance is projected to increase by almost $2.9 million or 11% from the
revised budget. After applying the City Council Reserve Policy of 50% of the operating
budget, the estimated unrestricted excess reserve is $15.1 million, which is an increase
of approximately $3.1 million or 26% from the revised budget.
11
Table 6: FY 2022-23 General Fund – Fund Balance Summary
CONCLUSION:
Staff has reviewed all revenues and expenditures at mid -year for FY 2022-23, with an
emphasis on the General Fund, to determine if the current budget is on target with the
actuals at mid-year and the year-end estimates. At the close of the first six months of the
fiscal year, Staff projects General Fund revenues to end the year at $37.6 million, an
increase of $1.5 million or 4% above the revised budget, including transfers. The year-
over-year increase is largely attributed to the estimated growth in TOT revenues. Given
its current trajectory, TOT revenues are on pace to end the year 14% higher than the
revised budget and total nearly $6.6 million. General Fund revenues have performed well
overall and will be monitored through the fiscal year’s end.
For expenditures, Staff estimates to end the year at $37.7 million after transfers. Of this
amount, a scheduled transfer of $889,500 to CIP for the annual interest expense payment
for the Ladera Linda Community Park Project in accordance with the City Council Reserve
Policy and a one-time transfer of $400,000 to the Employee Pension Service Fund in
accordance with the City’s Pension Guidelines. Moreover, compared to the FY 2021-22
revised budget, the expenditures are ending the year lower by almost $1.4 million or 4%.
The majority of the estimated underspent budget amounts are from unfilled vacant
positions and for services that are not projected to start by year-end due to Citywide
vacancies. Therefore, as a result of the positive trends in revenues along with ending the
year with lower expenditures than estimated, the fund balance for General Fund will end
the year at $30.3 million, an increase of $2.9 million or 11% over the revised budget. A fter
applying the City Council Reserve Policy of 50% of the opera ting budget, the estimated
General Fund
FY 2022-23
Revised Budget
FY 2022-23
Year-End
Estimates
Estimated Beginning Fund Balance - 7/1/2022 30,391,900 30,391,900
Add: Revenues 35,737,000 37,266,500 1,529,500 4%
Add: Transfers-In 300,000 300,000 - 0%
Total Revenues 36,037,000 37,566,500 1,529,500 4%
Less: Expenditures (32,476,674) (30,285,900) (2,190,774)-7%
Less: Transfers to TOT (3,870,200) (4,686,000) 815,800 21%
Less: Transfers to CIP - Additional (1,364,200) (1,364,200) - 0%
Less: Other Transfers-Out (65,000) (65,000) - 0%
Less: Additional Transfers - CIP Ladera (PY Surplus) (889,500) (889,500)- 0%
Less: Transfers to Pension (PY Surplus) (400,000) (400,000)- 0%
Total Expenditures (39,065,574) (37,690,600) (1,374,974) -4%
Estimated Ending Fund Balance - 6/30/2023 27,363,326 30,267,800 2,904,474 11%
Less: 50% Reserve Policy (15,363,800) (15,142,950) (220,850)-1%
Estimated Unrestricted Excess/(Deficit) Reserve - 06/30/23 11,999,526 15,124,850 3,125,324 26%
Increase/(Decrease)
from Revised Budget
12
unrestricted excess reserve for General Fund on June 30, 2023, would be $15.1 million,
an increase of approximately $3.1 million or 26% over the revised budget.
In closing, similar to the same process as the previous years, Sta ff recommends
continuing to monitor the revenues and expenses and submitting any proposed budget
adjustments in the preliminary budget report in May 2023.
13