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CC - ACTION ITEM: (1) Presentation on the Unaudited Fiscal Year-End 2023-2024 Report and the Fiscal Year 2024-2025 Mid-Year Budget Monitoring Report; (2) Receipt and Filing of the Unaudited Fiscal Year-End 2023-2024 Report and the Fiscal Year 2024-2025 Mid-Year Budget Monitoring Report; (3) Notification to Public Inviting Comment and Input for the Upcoming Proposed Budget for Fiscal Year 2025-2026; (4) Approval of Proposed Blanket Purchase Order Amendments; (5) Approval of Personnel Position Allocation Amendments; and (6) FOUR-FIFTHS VOTE REQUIREMENT: Approval of Proposed Budget Amendments.
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Meeting Date: February 24, 2025
Contact Person/Dept: Lisa Soghor/Finance Department
Phone Number: (310) 253-5865
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Attachments: Yes [X] No []
Public Notification: (Email) Meetings and Agendas - City Council (02/19/2025); (Email) Ongoing Topics - Fiscal and Budget Issues (02/19/2025)
Department Approval: Lisa Soghor, Chief Financial Officer (02/18/2025)
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RECOMMENDATION
Staff recommends the City Council (1) receive a presentation from staff on the Unaudited Fiscal Year-End 2023-2024 Report and Fiscal Year 2024-2025 Mid-Year Budget Monitoring Report; (2) receive and file the Unaudited Fiscal Year-End 2023-2024 Report and Fiscal Year 2024-2025 Mid-Year Budget Monitoring Report; (3) provide notification to the public inviting comment and input for the upcoming Proposed Budget for Fiscal Year 2025-2026; (4) approve proposed blanket purchase order amendments; (5) approve the personnel position allocation amendments; and (6) approve related budget amendments (budget amendment requires a four-fifths vote).
BACKGROUND/DISCUSSION
Unaudited Year-End Report for Fiscal Year 2023-2024
The Finance Department has prepared an Unaudited Fiscal Year-End 2023-2024 Report for the General Fund (Attachment 1). It is important to note that the City’s independent auditors have not yet completed their final review. This report is an overview of the City’s General Fund operating revenues and expenditures as compared to the Revised Budget adopted by the City Council. The City is projected to end Fiscal Year 2023-2024 with a $2 million reduction to the General Fund balance. This deficit is less than was predicted due to delays in implementation of projects. $13.9 million in Council-approved expenditures was carried forward to Fiscal Year 2024-2025.
Mid-Year Budget Monitoring Report for Fiscal Year 2024-2025
The attached Mid-Year Budget Monitoring Report (Attachment 2) presents the City Council with a snapshot of General Fund, Enterprise Funds and Internal Service Funds expenditures and revenues through the first half of Fiscal Year 2024-2025, which began on July 1, 2024. Special Revenue Funds are performing within expectations and are not a part of this report.
Notification Inviting Public Comment and Input
In keeping with the City Council’s strategic goals to promote public engagement and ensure long-term financial sustainability, the City is committed to being open and transparent in all matters, especially those involving the collection and expenditure of public funds. As such, the public is being provided this first of several opportunities to comment and offer input on the City’s upcoming Fiscal Year 2025-2026 proposed budget.
The City Manager’s Proposed Budget for Fiscal Year 2025-2026 is scheduled to be presented to the City Council on Monday, May 12, 2025. Leading up to the presentation of the proposed budget, there will be multiple opportunities for the public to provide input. The City will hold several public meetings dedicated to budget-related topics starting in March. This year, for the first time, the City will hold two community budget information sessions and workshops tentatively scheduled for March 11 and March 19 to provide an opportunity for members of the public to learn more about the budget and ask questions. There will also be multiple opportunities for public comment when the City Council discusses the proposed budget in May and June.
The public is also invited to submit comments and suggestions to the City at the following e-mail address: Budget.Priorities@culvercity.org.
Proposed Budget Amendments
At the midpoint of the fiscal year, departments review their expenditures and staffing levels and make requests to amend them as necessary. Finance staff evaluates those requests and presents them to the City Manager. There are no new General Fund positions being requested as part of the mid-year budget amendments. However, there are three proposed position reclassifications requested in order to better serve the needs of the departments. These are detailed in Attachment 4. The recommended Mid-Year adjustments are presented in Attachment 5.
After analyzing revenue trends, historical data and economic conditions, Finance staff recommends a net decrease in General Fund Revenue totaling $2,560,697. After review of Department requests, staff is proposing additional General Fund Expenditure appropriations totaling $1.75 million. These additional appropriations will provide one-time funding for select Capital Improvement Program (CIP) projects using funds from the Facilities Planning Reserve and the Recreational Facilities Reserve to maintain critical infrastructure and address projects that could not be deferred. The remaining one-time and ongoing appropriations requests will be offset by anticipated expenditure savings in the General Fund.
Proposed appropriations to Other Funds total approximately $2.8 million and include but are not limited to reclassifications of three existing staffing in the Transportation Department to better meet operational needs ($5,100), the addition of a limited-term position in the Self-Insurance Risk Management Fund to provide temporary support while existing staff is on leave (offset by salary savings), $1.0 million for Public Works increased ongoing costs associated with funding for trucking and end processor costs associated with processing additional waste from outside hauling agencies (entirely offset by additional revenues), $1.3 million to replace and maintain essential vehicles and equipment, $0.3 million associated with the Public Works cost sharing agreement with the City of Los Angeles for the Ballona Creek TMDL Project, and $0.2 million associated with adjustments to the Cultural Trust Fund budgets in accordance with the Culver City Municipal Code as well as to appropriate grant funds received this fiscal year.
Additionally, as part of the Mid-Year Budget process, staff is also proposing to close-out 18 Capital Improvement Program (CIP) projects that were completed on-time and under budget, totaling about $2.5 million in savings in Other Funds, of which $1.0 million will be returned to the General Fund. Staff is also proposing to close-out two additional CIP projects totaling $5.0 million since competitive grant award were not received. The net effect of all the proposed mid-year budget adjustments to Other Funds results in a $1.9 million reduction.
10-Year Forecast
As part of the budget process, the City maintains a Comprehensive Financial Plan for the General Fund using the City’s 10-year forecast. Using this tool, staff has prepared three forecast models each featuring a different future budget scenario and attached them for Council consideration.
Attachment 6 is based on the City’s current base revenues and expenditures with a modest inflator, assumed annual CIP expenditure of $5 million, full funding of the current homeless services, and the ½ cent sales tax currently imposed by Measure CC sunsetting in April 2033, and shows the City drawing upon its reserves to fund the ongoing structural deficit. The City’s General Fund reserves are reduced to $10.4 million by Fiscal Year 2034-2035.
Attachment 7 has the same inputs as Attachment 6 with the notable exception of the removal of all expenditures attributed to Wellness Village in Fiscal Year 2027-2028. This program, with estimated annual expenditures of approximately $4 million, was removed in anticipation of construction of an affordable housing project on the site. This expenditure was also removed starting in 2028 in the forecast prepared at the time of budget adoption. This forecast scenario shows that the City will annually draw from the reserves to a lesser extent, and the General Fund reserves are reduced to $46.2 million by Fiscal Year 2034-2035.
Attachment 8 has the same assumptions as Attachment 7 (Wellness Village expenses are removed in Fiscal Year 2027-2028) and shows the impact of a potential ¼ cent Transactions and Use Tax Measure in Fiscal Year 2025-2026. This forecast scenario shows that the new sales tax revenue eliminates the structural deficit in 2028 until the sunset of Measure CC in 2033. The City’s General Fund reserves are reduced to $109.4 million by Fiscal Year 2034-2035.
FISCAL ANALYSIS
The Mid-Year Budget Monitoring Report provides detail on the General Fund revenues received and expenditures disbursed through December 31, 2024, as well as the City’s adjusted budget projections through the end of the Fiscal Year (to June 30, 2025). General Fund expenditures through December 31, 2024 are $87.8 million, or 43% of the current Revised Budget amount of $202.8 million.
The proposed General Fund mid-year budget appropriation amendments total $1.75 million. This is primarily related to the one-time funding of various Capital Improvement Program (CIP) projects with Facilities Planning Reserve and Recreational Facilities Reserve funds to maintain critical infrastructure needs and projects that could not be deferred. The remaining one-time and ongoing requests were offset by anticipated expenditure savings. If approved, the projected General Fund expenditures for Fiscal Year 2024-2025 will be $204.5 million.
General Fund operating revenues through December 31, 2024 are $48.8 million, or 29% of current Revised Budget projections. Based on actual receipts and market trends, the City is now projected to receive a total of $167.8 million in General Fund operating revenues, $2,560,697 less than the current Revised Budget. Analysis of the current fiscal year suggests some of the City’s recurring General Fund revenues, specifically property tax, utility user’s tax, transient occupancy tax, franchise tax, intergovernmental revenues, and other miscellaneous revenues are expected to exceed the current Revised Budget, while others, including sales tax, real property transfer tax, licenses and permits, fines & forfeitures, cannabis business tax, and charges for services are expected to fall short, resulting in a net General Fund revenue reduction of $2,560,697.
As projected in the Adopted Budget, General Fund operating expenditures continue to exceed anticipated operating revenues. General Fund projections for Fiscal Year 2024-2025 show total estimated revenues at $167.8 million, approximately $2.6 million less than the current Revised Budget total. This anticipated revenue reduction coupled with the proposed use of $1.75 million from the Facilities Planning Reserve and the Recreational Facilities Reserve increases the City’s use of the General Fund Reserves for Fiscal Year 2024-2025. As part of the Adopted Budget for Fiscal Year 2024-2025 the City intended to draw down approximately $18.3 million from the General Fund Balance to address its $5.7 million structural budget shortfall and fund one-time capital projects. General Fund reserves were also needed to fund expenditures approved in the Revised Budget for Fiscal Year 2023-2024, that due to project timing and implementation, did not get completed. These Council-approved expenditures were carried-forward to Fiscal Year 2024-2025 in the amount of $13.9 million. As of a result of this reliance on the General Fund Reserve, the City is projected to end Fiscal Year 2024-2025 with $2.8 million in Unassigned Fund Balance.
If Council approves the budget amendments as recommended (requires a four-fifths vote), the City is projected to end Fiscal Year 2024-2025 with $2.8 million in Unassigned General Fund Balance as shown in the table below.
All proposed Mid-Year Adjustments are provided in detail in the attached Fiscal Year 2024-2025 Mid-Year Budget Monitoring Report (Attachment 2) and Proposed Budget Amendments (Attachment 5).
ATTACHMENTS
1. 2025-02-24_ATT_1 - Fiscal Year 2023-2024 - Unaudited Fiscal Year 2023-2024 Report
2. 2025-02-24_ATT_2 - Fiscal Year 2025-2026 Mid-Year Budget Monitoring Report
3. 2025-02-24_ATT_3 - Proposed Blanket Purchase Order Amendments
4. 2025-02-24_ATT_4 - Proposed Personnel Position Allocation Amendments
5. 2025-02-24_ATT_5 - Proposed Budget Amendments
6. 2025-02-24_ATT_6 - Financial Forecast Scenario 1
7. 2025-02-24_ATT_7 - Financial Forecast Scenario 2
8. 2025-02-24_ATT_8 - Financial Forecast Scenario 3
MOTION
That the City Council:
1. Receive a Presentation on the Unaudited Fiscal Year-End 2023-2024 Report and the Fiscal Year 2024-2025 Mid-Year Budget Monitoring Report; and
2. Receive and file the Unaudited Fiscal Year-End 2023-2024 Report as provided in Attachment 1 and the Fiscal Year 2024-2025 Mid-Year Report as provided in Attachment 2; and
3. Provide notification to public inviting comment and input for the upcoming Proposed Budget for Fiscal Year 2025-2026; and
4. Approve the Proposed Blanket Purchase Order Amendments as provided in Attachment 3; and.
5. Approve the Proposed Personnel Position Allocation Amendments as provided in Attachment 4; and
6. Approve the Budget Amendments as proposed in Attachment 5 (budget amendment requires a four-fifths vote).