REPORT TO COUNCIL
SUBJECT
Title
Action on FY 2024/25 Budget Year-End Report and Approval of Related Budget Amendments
Report
EXECUTIVE SUMMARY
To close out each fiscal year, a Budget Year-End Report is prepared that reconciles funds based on actual year-end performance and brings forward associated budget adjustments. This report includes changes to fund balances assumed in the development of the FY 2025/26 budget, other adjustments to account for needed changes resulting from actual year-end performance, and recommendations to allocate any additional fund balance above the amounts assumed in the budget or balancing actions if those fund balances drop below the levels assumed in the budget.
This report provides the year-end financial condition of the City of Santa Clara on a budgetary basis for the fiscal year ended June 30, 2025, and a summary of year-end performance for the General Fund, Special Revenue Funds, Enterprise Funds, Internal Service Funds, Debt Service Funds, and Capital Funds. The report includes the recommended approval of a limited number of FY 2024/25 budget amendments to address expenditure overages at year-end, FY 2025/26 budget amendments necessary based on the final FY 2024/25 results, capital project carryover adjustments, and the recommended allocation of the General Fund fund balance.
In FY 2024/25, the City’s General Fund revenues ended the year above the budgeted estimate and expenditures were below budget, generating additional fund balance available for allocation. Performance in other funds typically met or exceeded expectations.
BACKGROUND
The budgetary year-end close process accounts for the year-end revenues and expenditures as well as the resulting ending reserves and fund balances for each budgeted fund. The funds are reconciled to the budgetary fund balances in the Annual Comprehensive Financial Report (ACFR).
This report includes the following recommended budget adjustments:
1) Required budget ratifications due to over-expended appropriations in FY 2024/25 (Attachment 1); and
2) FY 2025/26 budget actions, including reconciliations of carryover capital projects, grants, special revenue funds, and donation funds; revisions to the starting FY 2025/26 fund balances and reserves based on the actual FY 2024/25 year-end performance; and any other necessary adjustments (Attachment 2).
In addition to the budget actions, this report includes tables that summarize the revenue and expenditure performance by fund (Attachment 3) and a summary of the fund balance adjustments in each fund (Attachment 4).
Section 1305 of the Charter of the City of Santa Clara, entitled 'Budget - Appropriations,' states that:
…from the effective date of the budget, the several amounts stated therein as proposed expenditures shall be and become appropriated to the several departments, offices and agencies for the respective objects and purposes therein named; all appropriations shall lapse at the end of the fiscal year to the extent that they shall not have been expended or lawfully encumbered; and at any meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by the affirmative votes of at least five members so as to authorize the transfer of unused balances appropriated for one purpose to another purpose, or to appropriate available revenue not included in the budget.
Because appropriations lapse at the end of each fiscal year, it is necessary to carryover funds to complete capital projects and other projects and to account for grants and donations. Adjustments to the fund balance amounts assumed in the adopted budget are also necessary based on the actual prior year-end results. This includes the allocation of any additional fund balance above the amounts assumed in the budget or balancing actions if those fund balances drop below the levels assumed in the budget.
Each year as part of budget development and budget close-out, staff also reviews the reserve balances, including the General Fund Budget Stabilization Reserve and the Capital Projects Reserve as well as reserve levels in other funds. Per Council Policy, the Budget Stabilization Reserve target is set to cover operations for three months (25% of General Fund expenses) and the Capital Projects Reserve target is set at a minimum balance of $5.0 million with a goal of having sufficient funds to fund capital projects included in the City’s biennial capital budget and five-year CIP.
DISCUSSION
This report includes a brief summary of budget to actual revenue and expenditure/ expense performance for the General Fund, Special Revenue Funds, Internal Service Funds, and Enterprise Funds.
Information is also included regarding the recommended budget amendments, the impact of FY 2024/25 performance on the General Fund, necessary ratifications to address FY 2024/25 expenditure overages, a summary of the unfunded retirement liability and Pension Stabilization Reserve, and the status of General Fund and other reserves.
General Fund
Overall, General Fund revenues exceeded the budget while expenditures ended the year below budget in FY 2024/25. The General Fund ended the year with resources of $41.3 million available for distribution. Budget actions are recommended to allocate those additional funds.
General Fund Revenues
In FY 2024/25, actual revenues and transfers of $362.3 million were $33.0 million (10.0%) above the budget of $329.2 million as shown in Table 1 below. Revenues exceeded the budget in all categories except the Other Revenue due to the categorization of actual revenues between categories (Other Revenue/Rent). The Stadium performance rent for FY 2022/23 and FY 2023/24 was budgeted in Other Revenue but was recorded in the Rents category. The categories with the largest positive variances include Sales Tax ($10.5 million), Interest ($6.2 million), Other Fees for Services ($4.1 million), and Transient Occupancy Tax ($4.1 million). It is important to note that $4.9 million of the excess revenues in the Licenses and Permits, Other Fees for Services, and Interest categories was allocated to reserves (e.g. Advanced Planning Fee Reserve, the Technology Fee Reserve, and the Pension Stabilization Reserve), resulting in net additional revenue of $28.1 million.
Table 1 - FY 2024/25 General Fund Revenues and Transfers In
Final Budget vs. Actual
Following is a discussion of the performance in the major revenue categories.
• Property Tax - receipts of $95.9 million were $1.4 million (1.5%) above the budgeted estimate of $94.5 million. This collection level was 5.8% above the FY 2023/24 level of $90.7 million, reflecting solid growth in the secured and unsecured property tax categories, partially offset by a decline in the supplemental property tax category.
There continues to be a legal challenge on the distribution of the property tax related to the Education Revenue Augmentation Fund (under Proposition 98, a portion of property tax receipts are allocated to the ERAF beginning in 1992 and once there are sufficient funds in ERAF to fulfill the obligation to the school districts, excess funds are returned to the taxing entities that contributed the funding). The County of Santa Clara currently recommends setting aside 18% of the excess ERAF receipts which has been incorporated in the Adopted Budget. These funds have been set aside in a reserve that was established in FY 2022/23.
• Sales Tax - The sales tax category, which includes general sales tax and public safety sales tax proceeds, totaled $79.4 million. This collection level was $10.5 million (15.3%) above the budgeted estimate of $68.8 million and 28.5% above the prior year level of $61.8 million. The significant increase from the prior year was primarily the result of increases in business-to-business (up 46%). This category accounted for 44% of the sales tax revenue in FY 2024/25, up from 38% in FY 2023/24. Other categories that experienced growth in FY 2024/25 include Construction (up 14.5%), Transportation (up 4.9%), and Food Products (up 0.8%). The General Retail category decreased 5.4% in FY 2024/25.
• Transient Occupancy Tax (TOT) - TOT receipts totaled $27.0 million in FY 2024/25, exceeding the budget estimate of $22.9 million, the FY 2023/24 receipts of $22.3 million, and the FY 2022/23 receipts of $19.0 million. The increase in receipts is due in part to the TOT rate increases that went into effect in January 2024 (1%) and January 2025 (1%).
• Other Taxes - This category includes franchise fees and the documentary transfer tax. In FY 2024/25, receipts totaled $7.0 million, which was 1.0% above the budget of $6.95 million. Documentary transfer taxes of $1.6 million were at the budgeted estimate of $1.6 million and above the prior year level of $1.4 million. Franchise fees ended the fiscal year at $5.45 million, which was 1.8% above the budget estimate of $5.35 million and 1.4% above the FY 2023/24 collection level of $5.37 million.
• Licenses and Permits - Receipts totaled $10.1 million, which was $1.2 million above the budgeted estimate of $8.9 million. This was primarily due to advanced planning revenues of $1.4 million that had not been estimated in this category. The advanced planning revenues are allocated to the Advanced Planning Reserve. Business tax receipts totaled $5.8 million, slightly below the budgeted estimate of $6.0 million.
• Fines and Penalties - Revenues totaled $2.4 million, exceeding the budgeted estimate of $1.5 million due to higher than budgeted municipal fines and late fees. Actual collections were slightly below the FY 2023/24 receipts of $2.6 million primarily due to lower late fees.
• State Revenues/Other Agencies Revenue - State revenues totaled $369,000, exceeding the budget of $312,000 due to higher Motor Vehicle In-Lieu fees. Other Agencies revenue totaled $5.1 million, exceeding the budgeted estimate of $4.5 million due primarily to Fire mutual aid reimbursements and the distribution of lease revenue from the Santa Clara Redevelopment Successor Agency.
• Other Fees for Services - This category encompasses various fees and reimbursements, such as those collected for plan check and zoning, engineering, fire prevention, stadium activities, interdepartmental services, the cost allocation plan, and recreational activities. Revenues totaling $47.8 million ended the year above the final budget of $43.7 million due primarily to higher receipts in interdepartmental services, the technology fee, fire hazardous generation fees, and recreation fees. The higher collections in these areas were partially offset by lower than budgeted receipts in the engineering fees and planning and zoning fees categories. The FY 2024/25 revenues exceeded the FY 2023/24 collection level of $44.4 million, with the largest positive variances in the interdepartmental services, cost allocation plan reimbursements, stadium-related reimbursements (including Host Committee reimbursements of $549,000), and recreation fees. The planning and zoning fees and engineering fees decreased from FY 2023/24 to FY 2024/25.
• Interest Earnings - Earnings totaled $12.4 million and consisted of General Fund interest earning of $9.4 million and investment earnings in the Pension Trust Fund of $3.0 million (reflected as an increase to the Pension Stabilization Reserve). The General Fund interest earnings of $12.4 million exceeded the budgeted estimate of $6.2 million (the budget figure does not reflect the earnings allocated to the Pension Stabilization Reserve). This collection level was above the FY 2023/24 level of $6.9 million and the FY 2022/23 level of $4.4 million. The yields on the City’s portfolio were up in FY 2024/25 (e.g., June 2025 securities portfolio yield of 4.16%, versus the June 2024 securities portfolio yield of 3.35% and the June 2023 yield of 2.16%).
• Rents - Rent revenues totaled $25.3 million, exceeding the budgeted estimate of $18.6 million by $6.8 million. The positive variance was due to the booking of the Stadium performance rent revenue for FY 2022/23 and FY 2023/24 of $7.3 million in this category versus the budgeted category of Other Revenue.
• Other Revenue - This category totaled $7.0 million, which was $7.3 million below the budget estimate of $14.3 million. The negative variance was due to the booking of the Stadium performance rent revenue for FY 2022/23 and FY 2023/24 of $7.3 million in the Rents category versus the budgeted category of Other Revenue.
• Transfer from Silicon Valley Power (SVP) - Revenues are directly related to the revenues collected by the City’s Electric Utility Department. Per the City’s charter, SVP pays 5% of their gross cash revenues to the General Fund. Based on SVP’s actual cash revenue collections through June 30, 2025, the City’s General Fund received $38.9 million, which was above the budgeted estimate of $34.5 million and $5.8 million (17.3%) above the FY 2023/24 receipts of $33.1 million.
• Transfers From Other Funds - Transfers of $3.7 million were consistent with the budget.
General Fund Expenditures
In FY 2024/25, actual expenditures of $319.1 million were $14.8 million below the final budget of $333.8 million. The FY 2025/26 Adopted Budget assumed expenditure savings and carryovers of $1.6 million in FY 2024/25 for use in FY 2025/26; factoring out those savings, expenditures ended the year with net savings of $13.2 million.
The detailed comparison of budget to actual expenditures are shown in Tables 2 and 3 below, with Table 2 showing the expenditures by department and Table 3 showing expenditures by category (e.g., salaries; materials, services and supplies; and transfers).
Table 2 - FY 2024/25 General Fund Expenditures and Transfers To
Final Budget vs. Actual by Department
In evaluating the expenditures by department, all departments remained within their General Fund appropriations. The largest savings were generated in Non-Departmental, the City Manager’s Office, and the Parks and Recreation, Fire, Public Works, Police, and Human Resources Departments.
• Non-Departmental - this category includes expenditures that are not attributable to a single department but a function of the City is general and includes Stadium-related expenses that are reimbursed. Expenditures ended the year $4.5 million under budget, with the savings in miscellaneous services and supplies ($1.6 million), insurance costs ($1.1 million), stadium programs ($1.4 million of which $1.2 million was due to lower personnel costs), and advertising and community promotion ($0.3 million). It should be noted that Non-Departmental savings of $1.3 million were assumed as part of the FY 2025/26 Budget adoption and carried over to FY 2025/26 for bond implementation costs ($1.0 million), employee recognition ($200,000), IT analysis ($100,000), and community grants ($21,170).
• City Manager’s Office - year end savings totaled $1.5 million. Of this amount, $0.9 million reflects savings in the materials, services, and supplies category, primarily under contractual services ($0.5 million) and maintenance savings ($0.3 million). Additional savings of $0.6 million were recognized under the personnel services category.
• Parks and Recreation - the department ended the year with $2.1 million in savings. Of this amount, $1.9 million reflects savings in the personnel budget. Additional savings of $0.2 million were recognized under the materials, services, and supplies category.
• Fire - department expenditures were $1.9 million below the budget. Personnel expenditures were $1.0 million below budget, primarily due to lower retirement costs. Additionally, the department realized $0.9 million in non-personnel savings. It should be noted that the Fire Department would have exceeded its budget if a year-end adjustment was not approved as part of the FY 2024/25 April Monthly Financial Report. To address a potential overage related to minimum staffing overtime and separation payouts, additional funding of $3.0 million was added to the budget ($1.7 million in General Fund funding, $0.9 million from ambulance transport revenue, and $0.4 million from mutual aid reimbursements).
• Public Works - departmental expenditures were $1.5 million below the budget. This included salary and benefit savings of $0.3 million and non-personnel savings of $1.2 million. The non-personnel categories with the largest savings were maintenance ($0.5 million) and contractual services ($0.4 million).
• Police - departmental expenditures were $1.2 million below budget, primarily in the personnel category. Salary and benefits savings of $4.0 million were offset by higher expenditures in other categories including compensatory time off and separation payouts ($2.4 million), as-needed staffing costs ($0.3 million), and materials, services, and supplies ($0.1 million).
• Human Resources - departmental expenditures were $0.7 million below the budget. This included salary and benefit savings of $0.2 million and non-personnel savings of $0.5 million. The non-personnel savings were primarily in the contractual services category ($0.47 million). As part of the FY 2025/26 budget adoption, contractual services funding of $250,000 was carried over for safety evaluations and labor negotiations.
Table 3 - FY 2024/25 General Fund Expenditures and Transfers To
Final Budget vs. Actual by Category
When evaluating the expenditures by category, the personnel-related expenditures were $6.4 million below budget while the non-personnel expenditures were $8.4 million below budget.
Personnel expenditures totaled $218.4 million and were $6.4 million below budget, with savings primarily in the benefits categories (retirement and health costs). FY 2024/25 personnel expenditures were 6.7% above the FY 2023/24 expenditure level of $204.6 million.
Materials, Services, Supplies and Capital Outlay expenditures and encumbrances totaled $40.8 million and ended the year $8.4 million, or 17%, below the budget of $49.2 million. The majority of the savings were generated in the Materials, Services and Supplies category. The FY 2025/26 Adopted Budget assumed FY 2024/25 expenditure savings of $158,000 would be available to fund the following: Library materials ($145,000) and minor adjustments to the Mayor and City Council Offices and City Clerk’s Office budgets to reflect increases approved by the City Council on May 13, 2025 as part of Report to Council 25-373. In addition, $1.6 million of savings in FY 2024/25 was assumed and carried over to FY 2025/26 for the following: bond implementation costs ($1.0 million), contractual services for safety evaluations and labor negotiations ($250,000), employee recognition ($200,000), IT analysis ($100,000), and community grants carryover ($21,170). Factoring out the $1.7 million of assumed uses of FY 2024/25 savings, Materials, Services and Supplies expenditure savings totaled $6.7 million.
Transfers of $29.4 million occurred as budgeted.
Recommended Use of General Fund FY 2024/25 Fund Balance
Recommended budget adjustments will allocate the $41.3 million in additional General Fund fund balance. These actions are summarized below and detailed in Attachment 2.
Table 4 - Recommended General Fund Budget Actions
|
Recommended Adjustments |
$ Impact |
|
Fund Balance Reconciliation (adjusts for FY 2024/25 year-end additional revenues and expenditure savings) |
$41.32 M |
|
Recommended Adjustments |
|
|
Transfer to the Public Buildings Capital Fund/Civic Center Campus Future Needs/Relocation |
$20.35 M |
|
Capital Projects Reserve (for use in FY 2026/27 and FY 2027/28 Capital Budget development) |
$13.00 M |
|
Pension Trust Reserve (1% of GF unfunded liability/bring reserve to 8.0% of liability, other funds have a target of 11%) |
$4.60 M |
|
Budget Stabilization Reserve (brings reserve to 25% of expenditures based on Amended Budget) |
$1.30 M |
|
General Obligation Bond Projects Furniture, Fixtures and Equipment (ineligible for bond proceeds) |
$1.00 M |
|
City Manager's Office/Non-Departmental Carryovers (Climate Action Plan - $50K, Organizational Reviews - $250K, employee recognition -$100K, 49ers Community Grants1 - $9K) |
$0.41 M |
|
Commerce/Peddler's Plaza property maintenance and one-time repairs |
$0.35 M |
|
Transfer to the Vehicle Replacement Fund (Fire Department vehicles funded from mutual aid revenues received in FY 2024/25) |
$0.27 M |
|
Eliminate transfer from the Electric Utility Fund (cost covered in the CAP) |
$0.21 M |
|
Transfer to Fire Operating Grant Trust Fund - $193K (SAFER grant reconciliation) and the Police Operating Grant Trust Fund - $6K |
$0.20 M |
|
Transfer to the Parks Capital Fund/Youth Sports Park Improvements project (true up rent payments received in FY 2024/25) |
$0.03 M |
|
Capital Projects Reserve (Increase CPR from project savings at the end of FY 2024/25) |
$0.02 M |
|
Transfer to the Streets and Highways Capital Fund/Tree Replacement Project - allocate fee revenue received in FY 2024/25 |
$0.01 M |
|
Human Resources Department - allocate FY 2024/25 Flexible Spending Account forfeiture funds to support employee wellness |
$0.01 M |
|
Transfer from Capital Funds to return capital project savings to Capital Projects Reserve |
($0.02 M) |
|
Transfer from the PW Capital Projects Management Fund (return FY 2024/25 savings) |
($0.20 M) |
|
FEMA reimbursement for Covid-Related expenses |
($0.36 M) |
|
Ending Fund Balance (set aside funds to address funding needs that arise during FY 2025/26) |
$0.14 M |
|
Total Adjustments to Allocate Additional Fund Balance |
$41.32 M |
1 On June 4, 2024, an initial grant funding agreement with the Forty Niners SC Stadium Company was approved to provide $200,000 annually for an initial three years to the Santa Clara community. As part of the FY 2025/26 Budget adoption, $21,170 was carried over from FY 2024/25 to FY 2025/26. This report carries over the remaining portion of grant commitment that has not yet been disbursed.
Capital Projects, Grants, Donations and Other Carryover Reconciliation
Estimates were used to carryover unspent Capital Improvement Program (CIP) funds from FY 2024/25 to FY 2025/26 during the adoption of the FY 2025/26 budget. Attachment 2 includes the reconciliation of those project carryover true-up amounts based on actual year-end activity totaling a carryover increase of $23.4 million. When combined with the capital project carryovers included in the FY 2025/26 budget adopted in June 2025, the capital project carryovers to FY 2025/26 total $423.8 million.
Attachment 2 also includes amendments to certain capital projects, totaling $24.1 million. In addition to the year-end true-up amounts and amendments for capital projects, the appropriation carryover of donations and reimbursements of $2.3 million, grants of $3.0 million, and other expenditures that are neither donations nor grants of $0.6 million are also included in Attachment 2.
Other Funds
Attachment 3 - Summary of Revenue and Expenditure Performance summarizes budget to actual performance for the City’s General Fund, Special Revenue Funds, Enterprise Funds, Internal Service Funds, Debt Service Funds, Other Agency Funds, and Capital Funds. By default, year-end savings in the other funds revert to fund balances or are re-appropriated to the next year’s budget through the recommended carryover of expenditures. Any recommended FY 2025/26 budget adjustments are included in Attachment 2 and a summary of the fund balance reconciliations is included in Attachment 4. Following are highlights of the FY 2024/25 performance of other City funds.
Enterprise Funds
Enterprise funds are used to finance and account for operations and activities performed by designated departments in the City or through third-party agreements. The operating revenues and expenses result from providing services and producing and delivering goods in connection with an enterprise fund’s principal ongoing operations. Principal operating revenues of the City’s enterprise funds are charges to customers for services. Operating expenses for the City's enterprise funds include the costs of sales and services, administrative expenses and maintenance of capital assets. Following is a discussion of select Enterprise Funds.
Convention Center Enterprise Fund
The Convention Center Enterprise Fund accounts for the operations of the City’s Convention Center through third-party agreements. The FY 2024/25 final budget reflects the operating budget of the concession’s vendor, the operations management vendor, as well as the City. In FY 2024/25, revenues of $18.9 million were $0.3 million above the budgeted estimate of $18.6 million, while expenditures, transfers, and encumbrances of $18.2 million ended the year $3.1 million below the final budget of $21.3 million. The FY 2024/25 ending fund balance, including reserves, of $8.6 million was $3.6 million above the estimated level of $5.0 million used to develop the FY 2025/26 budget.
Electric Utility Fund
The Electric Utility Fund accounts for the operation and maintenance of the City’s electric utility service. This fund receives majority of its revenues from user service charges collected from residential, commercial, and industrial customers.
In FY 2024/25, total revenues and transfers of $855.4 million were above the budget of $781.2 million by $74.2 million, primarily as a result of higher than estimated Charges for Services, Interest, and Other Revenue. Customer Service Charges totaled $740.9 million, reflecting an increase of 13.2% from the $654.5 million received in FY 2023/24; this revenue level was $39.2 million above the budget of $701.7 million. When compared to the prior year, total revenues of $813.8 million were up $100.9 million, or 14.1%, from the $712.9 million received in FY 2023/24. Transfers of $41.6 million occurred as budgeted.
Expenditures, including encumbrances and transfers, of $711.4 million were $16.2 million below the budget of $727.6 million. This is attributed primarily to savings in salaries and benefits due to vacancies. Expenditures were 11.2% above the FY2023/24 level of $640.0 million.
The total unrestricted fund balance and reserves ended the year at $571.5 million, which was $48.4 million higher than the estimates used to develop the FY 2025/26 budget.
Sewer Utility Fund
The Sewer Utility Fund accounts for the maintenance of the City’s sewer lines and related facilities. These services are provided on a user charge basis to residences and businesses, which is the primary source of revenue for this fund. Revenue receipts totaled $56.9 million, which was $9.8 million above the budgeted estimate of $47.1 million primarily in the Other Agencies Revenue and Charges for Services categories. The Other Agencies category ending the year $5.9 million above the budget due to the return of funding from the City of San José for the Regional Wastewater Facility capital project. This reflects the reconciliation of the City of Santa Clara’s share of the actual project costs from the prior year.
Actual expenditures, including encumbrances and transfers to other funds totaled $51.5 million, slightly exceeding the final budget of $51.3 million. Expenditures ended the year $238,238 over the budgeted estimate, primarily in the Materials, Services, and Supplies category. This is mainly attributable to higher than anticipated maintenance expenses due to significant maintenance required at the Northside Pump Station. A budget ratification to correct the FY 2024/25 overage is included in Attachment 1 of this report.
The total unrestricted fund balance and reserves ended the year at $40.7 million, which was $2.0 million higher than the estimates used to develop the FY 2025/26 budget.
Solid Waste Fund
The Solid Waste Fund accounts for the operations of the City’s solid waste collection and disposal system. This fund receives the majority of its revenues from user service charges and other fees for street sweeping, household hazardous waste, and Clean-Up Campaign services. FY 2024/25 revenues and transfers of $41.1 million ended below the budget of $41.7 million by $0.6 million, primarily due to lower refuse collection charges. Expenditures, including encumbrances and transfers, of $44.97 million ended the year slightly below the budget of $45.01 million. The total unrestricted fund balance and reserves ended the year at $12.1 million, which was $0.5 million below the amended budget. The negative unrestricted fund balance of $0.5 million will be offset by reducing the Operations and Maintenance reserve.
Water Utility Fund
The Water Utility Fund accounts for the operation of the City’s water utility services. These services are provided on a user charge basis to residences and businesses, which is its primary source of revenue. In 2024/25 revenues and expenditures both ended above budget. Revenues ended the year $3.2 million above the budgeted estimate of $64.1 million, primarily in the charges for services and other fees for services categories. Expenditures ended the year $2.7 million above the budgeted estimate in the resource/production category. A FY 2024/25 budget ratification is recommended to correct the expenditure overage, offset by charges for services and other fees for services.
The total unrestricted fund balance and reserves ended the year at $20.1 million, which was $2.5 million lower than the estimates used to develop the FY 2025/26 budget.
Special Revenue Funds
Special Revenue Funds are established to account for specific revenue sources that are legally restricted or committed to particular purposes. Following is a discussion of the development services funds.
Building Development Services Fund
This fund accounts for building development-related fee revenue and associated development services costs.
In FY 2024/25, revenues totaled $18.5 million, which was $2.3 million above the budgeted estimate of $16.2 million. This was primarily due to higher plan check and sign fee collections and interest earnings. Expenditures and encumbrances in FY 2024/25 totaled $17.4 million, which was $0.2 million lower than the budget of $17.6 million.
Based on actual FY 2024/25 revenue and expenditures, the ending fund balance ended the year $1.1 million above the estimate used to develop the FY 2025/26 Adopted Budget.
Fire Development Services Fund
This fund accounts for fire development-related fee revenue and associated development services costs.
Revenues in FY 2024/25 of $4.2 million ended the year $0.7 million above the budgeted estimate of $3.5 million. Expenditures, transfers and encumbrances of $3.5 million ended $0.1 million below the budget of $3.6 million.
The unrestricted ending fund balance of $3.2 million was $0.8 million above the estimate used to develop the FY 2025/26 Adopted Budget. Beginning in FY 2025/26, Fire CUPA development revenues and expenditures are tracked separately in the Fire CUPA Fund.
Required FY 2024/25 Budget Ratifications
Based on the City Charter, the legal appropriation control is designated at the department or office level within a fund. In certain Internal Service and Special Revenue Funds, appropriations are allocated by function rather than departments or offices. In these funds, the appropriation control is at the fund level. Below the appropriation level are expenditure categories and line items. In many cases, actual expenditures may exceed the categories or line items within a department; however, savings from other categories and line items within the same department and fund may offset these overages (for example, savings due to staff vacancies may be offset by an increase in contractual services).
Attachment 1 - FY 2024/25 Budget Amendments describes the appropriations that exceeded the appropriation control authority and are recommended to be adjusted in order to meet the legal appropriation control limit. There were overages in four appropriations totaling $2.9 million in four funds, which were offset by available fund balance and revenues in all funds.
Unfunded Retirement Liability
As summarized in Table 5, the Pension Stabilization Reserves in the various funds totaled $53.5 million at the end of FY 2024/25. Per the City’s Budget and Fiscal Policies, the goal is to increase the reserve levels by 1% of the unfunded pension liability each year with a targeted level of 11% by the end of FY 2025/26.
Based on the FY 2024/25 year-end performance, all funds except the General Fund meet the 11% target in FY 2025/26. A contribution of $4.6 million to the pension trust fund is recommended in the General Fund to bring the reserve level to 8% of the unfunded liability. The General Fund has a lower funded percentage because additional contributions were not made in some of the prior fiscal years due to the significant budget challenges. In total, reserve levels are projected at $58.1 million, or approximately 8.7% of the City’s pension liability amount, based on the figures to be reported in the Consolidated Annual Financial Report GASB 68 Report.
Table 5 - Summary of Unfunded Retirement Liability and Pension Stabilization Reserve
Status of Selected Reserves
As shown in Table 6 below, there is an overall increase in the City’s selected reserves in FY 2025/26. From the FY 2024/25 Actual to the FY 2025/26 Amended Budget, the net increase of $103 million was primarily the result of increases to the Reserves in the Electric Utility Fund and the General Fund Budget Stabilization Reserve. The recommended actions in the Year-End Report adjust various reserves, resulting in an increase of $27.6 million. This primarily reflects recommended budget actions to increase the General Fund Capital Projects Reserve and the Pension Trust Reserves.
Table 6 - Summary of Selected Reserves
($ in millions)
* Other Utility Funds include the Water, Sewer, Recycled Water and Solid Waste funds.
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
The fiscal impact of each fund’s results is discussed in detail in the body of this report and attachments. This report includes detailed descriptions of recommended budget amendments (Attachment 1 and 2); summary of year-end performance for the General Fund, Special Revenue Funds, Enterprise Funds, Internal Service Funds, Debt Service Funds, Other Agency Funds, and Capital Funds as described in the body of this report (see Attachment 3 tables for other funds details); and a summary of beginning and ending fund balance adjustments for each fund due to actual results (Attachment 4). Approval of Budget Amendments included in Attachments 1 and 2 is recommended in this report.
COORDINATION
This report was 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 or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Note and file the FY 2024/25 Budget Year-End Report.
2. Approve the FY 2024/25 Budget Amendments to address necessary budget ratifications totaling $2,948,287 in four funds as set forth in Attachment 1 of this report (five affirmative Council votes required for revenue actions and the use of unused balances as noted for each item in Attachment 1).
3. Approve the FY 2025/26 Budget Amendments, as set forth in Attachment 2. This includes actions in the General Fund to distribute excess funding from the close-out of FY 2024/25, as detailed below (five affirmative Council votes required to appropriate additional revenue and for the use of unused balances):
a. Increase the transfer to the Public Buildings Capital Fund for a new Civic Center Campus Future Needs/Relocation project in the amount of $20,350,000, offset by an increase to the Beginning Fund Balance;
b. Increase the Capital Projects Reserve in the amount of $13,000,000, offset by an increase to the Beginning Fund Balance;
c. Increase the Pension Stabilization Reserve in the amount of $4,599,593, offset by an increase to the Beginning Fund Balance;
d. Increase the Budget Stabilization Reserve in the amount of $1,305,540, offset by an increase to the Beginning Fund Balance and transfers from other funds;
e. Increase the transfer to the General Government Capital Fund by $1,000,000 for a new Measure I Furniture, Fixtures and Equipment project, offset by an increase to the Beginning Fund Balance;
f. Increase the transfer to the Public Buildings Capital fund by $350,000 for the Commerce/Peddler’s Maintenance project, offset by an increase to the Beginning Fund Balance;
g. Increase the transfer to the Vehicle Replacement Fund in the amount of $274,000 to cover Fire Department vehicle costs, offset by an increase to the Beginning Fund Balance;
h. Eliminate the transfer from the Electric Utility Fund in the amount of $205,262 that was budgeted to partially offset the cost of a Deputy City Attorney position as this cost was factored into the Cost Allocation Plan, offset by an increase to the Beginning Fund Balance;
i. Increase the City Manager’s Office budget by $300,000 to carry over unspent funds for the Climate Action Plan dashboard and organizational reviews, offset by an increase to the Beginning Fund Balance;
j. Increase the Non-Departmental budget by $108,729 to carry over unspent community grant funds from the Forty Niners SC Stadium Company and for employee recognition, offset by an increase to the Beginning Fund Balance;
k. Increase the transfer to the Parks and Recreation Capital Fund by $33,820 for the Youth Sports Park Improvements project to true up the Youth Sports Park facility rental revenue received in FY 2024/25, offset by an increase to the Beginning Fund Balance;
l. Increase the transfer to the Streets and Highways Capital Fund by $12,407 for the Tree Replacement Project to allocate planning zoning fees received in FY 2024/25, offset by an increase to Beginning Fund Balance;
m. Establish a transfer to the Fire Operating Grant Trust Fund in the amount of $193,388 as a reconciling adjustment for the Staffing for Adequate Fire and Emergency Response (SAFER) grant, offset by an increase to the Beginning Fund Balance;
n. Establish a transfer to the Police Operating Grant Trust Fund in the amount of $5,910 to cover expenses that were ineligible for grant reimbursement, offset by an increase to the Beginning Fund Balance;
o. Increase the Human Resources Department budget by $5,348 to appropriate Flexible Spending Account forfeiture funds received in FY 2024/25 to wellness activities, offset by an increase to the Beginning Fund Balance;
p. Increase the transfer from the Fire Department Capital Fund in the amount of $18,764 to return capital project savings and increase the Capital Projects Reserve by $18,764;
q. Increase the transfer from the General Government Capital Fund in the amount of $9,540 to return capital project savings from the Downtown Master Plan Implementation project and increase the Land Sale Reserve by $9,540;
r. Increase the transfer from the General Government Capital Fund in the amount of $444 to return capital project savings and increase the Capital Projects Reserve by $444;
s. Increase the Rents revenue estimate by $428,400 and establish a transfer to the Convention Center Enterprise Fund in the amount of $428,400 to reflect a technical change in the accounting for the ballroom lease rent from the Hyatt;
t. Recognize Beginning Fund Balance - Restricted for Prepayments in the amount of $19,278 and increase the Public Works Department appropriation for remaining developer deposits for third party plan review and inspections;
u. Increase the transfer from the Public Works Capital Projects Management Fund in the amount of $201,743 to return FY 2024/25 savings;
v. Recognize a transfer from the Other City Departments Operating Grant Trust Fund in the amount of $359,768 to recognize FEMA reimbursements for Covid-related expenses; and
w. Increase the Unrestricted Ending Fund Balance by $141,402 to set aside funds to address funding needs that arise during FY 2025/26.
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. FY 2024/25 Budget Amendments
2. FY 2025/26 Budget Amendments
3. Summary of Revenue and Expenditure Performance
4. Summary of Fund Balance Adjustments