REPORT TO COUNCIL
SUBJECT
Title
Action on Monthly Financial Status Report for May 2023 and Monthly Investment Reports for May and June 2023 and Approve Related Budget Amendment
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency
BACKGROUND
In compliance with the Charter of the City of Santa Clara and the adopted Investment Policy, the monthly financial report for May 2023 and monthly investment reports for May 2023 and June 2023 are submitted for your information. The financial reviews as of May 31, 2023 provide a year-to-date financial update to the City Council for fiscal year 2022/23. The analysis of the revenues collected and all expenditures measures the level of adherence to the established resource allocation plan and allows the City to monitor and project revenues and expenditures throughout the year.
The Adopted Budget incorporates the estimated revenues and planned expenditures for all funds. The attached Financial Status Report provides the budget to actual revenue and expenditure summaries for the General Fund, Special Revenue Funds and Enterprise Operating Funds, as well as expenditure summary for Capital Improvement Funds and Fund Reserve Balances. Any significant variances are explained in the report.
In accordance with City Council Policy 051 - Donations to the City, included in these reports are monthly activity and annual summary of donations received by department. Although the requirement of the policy is to report quarterly, in its ongoing effort to streamline reporting, the City will include this information monthly in the financial status report.
DISCUSSION
Monthly Financial Status Report (Attachment 1)
The attached reports summarize the City’s financial performance as of May 31, 2023 (Attachment 1). Financial analysis for these reports is provided for the General Fund, select Special Revenue Funds, Enterprise Operating Funds, and Capital Improvement Funds.
Attachment 1 shows that General Fund revenues at 91.1% of the budget through May 2023. General Fund revenues are currently tracking to end the year above the budgeted estimate due to strong performance in a number of categories, including transient occupancy tax, sales tax, use of money and property, transfers from City utilities, and miscellaneous revenues.
As shown in Attachment 1, General Fund departmental expenditures were at 84% of budget through May 2023. This reflects savings from vacant positions as well as savings generated from cost-control measures. Expenditures are expected to end the year below budget.
As shown in Attachment 1, total revenues for Enterprise Funds (Electric, Water, Sewer, Cemetery, Solid Waste, and Water Recycling) were at 89.3% of the budget through May 31, 2023, while total expenses were at 86.1%.
In the month of May, donations of $3,500 were received, leaving the total donations at $39,155.
There continues to be uncertainty regarding the national economic outlook. Given this level of uncertainty, the December 2022, March 2023 and June 2023 UCLA Anderson Forecasts presented a two-scenario approach: recession scenario and no recession scenario. In its August 2023 forecast, The Conference Board predicts a short and shallow recession with a contraction in the fourth quarter 2023 and the first quarter 2024. In that forecast, The Conference Board acknowledges that the likelihood of a ‘soft landing’ is rising but still believes that the very short and shallow recession is the more likely scenario.
On a national level, the unemployment rate changed little from 3.7% in May 2023 to 3.6% in June 2023. The unemployment rate has ranged from 3.4% to 3.7% since March 2022, which is in line with the pre-pandemic unemployment rate of 3.5%. In June, the number of unemployed persons increased slightly to 6.0 million, which is marginally higher than the pre-pandemic level of 5.7 million. In the “advance” estimate for the second quarter 2023, the Gross Domestic Product (GDP) increased at an annual rate of 2.4%, following a GDP increase of 2.0% in the first quarter 2023.
The California unemployment rate increased slightly from 4.5% in May 2023 to 4.6% in June 2023 and was up from 3.9% in June 2022. Between June 2022 and June 2023, total nonfarm jobs in California increased by 397,400 jobs (a 2.2% increase). The unadjusted unemployment rate in the San José-Sunnyvale-Santa Clara Metropolitan Statistical Area (MSA) was 3.7% in June 2023, up from a revised 3.3% in May 2023, and above the June 2022 level of 2.7% and the February 2020 pre-pandemic level of 2.6%. Between June 2022 and June 2023, employment in this region increased by 32,900 jobs, or 2.8%.
Staff will bring forward an analysis of the General Fund revenues and expenditures and the City’s overall financial performance through June 30, 2023 at a later date as part of the Budgetary Year-End Report.
Monthly Investment Report (Attachments 2 and 3)
All securities held by the City of Santa Clara as of May 31 and June 30, 2023 were in compliance with the City’s Investment Policy Statement regarding current market strategy and long-term goals and objectives. All securities held are rated “A” or higher by two nationally recognized rating agencies. There is adequate cash flow and maturity of investments to meet the City’s needs for the next six months.
The City’s investment strategy for May and June 2023 was to invest funds not required to meet current obligations in securities listed in the prevailing Investment Policy Statement, with maturities not to exceed five years form the date of purchase. This strategy ensures safety of the City’s funds, provides liquidity to meet the City’s cash needs, and with a reasonable securities portfolio return of 2.12% in May and 2.16% in June.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
FISCAL IMPACT
From time to time, adjustments to the budget are required to reflect new information, align budgets with actual revenues and expenses, and correct for inadvertent errors. Attachment 4 includes a recommended budget action in the Vehicle Replacement Fund to increase the appropriation for vehicle purchases to account for cost increases and an action in the Electric Utility Capital Fund to increase the Transmission System Reinforcement project for an easement acquisition associated with the South Loop.
COORDINATION
This report has been coordinated with the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov mailto:clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Note and file the Monthly Financial Status Report for May 2023 and Monthly Investment Reports for May and June 2023 as presented and Approve the Related Budget Amendment (five affirmative Council votes required for the use of unused balances).
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jōvan D. Grogan, City Manager
ATTACHMENTS
1. Monthly Financial Status Report - May 2023
2. Monthly Investment Report - May 2023
3. Monthly Investment Report - June 2023
4. FY 2023/24 Budget Amendments