REPORT TO COUNCIL
SUBJECT
Title
Action on Monthly Financial Status and Investment Reports for January 2023, Approve the Related Budget Amendments, and Approve the Deletion of Two Part Time Librarian Positions and Addition of One Full Time Librarian Position in the Library Department
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 and monthly investment report for January 2023 are submitted for your information. The financial review as of January 31, 2023 provide a year-to-date financial update to the City Council for the current fiscal year. The analysis of the revenues collected and all expenditures measures the level of adherence to the annual budget 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 this report is a 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 includes this information monthly in the financial status report.
DISCUSSION
Monthly Financial Status Report (Attachment 1)
The attached report summarizes the City’s financial performances as of January 31, 2023. Financial analysis is provided for the General Fund, select Special Revenue Funds, Enterprise Operating Funds, and Capital Improvement Funds.
Attachment 1 shows that General Fund revenues (excluding transfers) were at 55% of the budget through January 2023 and are tracking to end the year above budget.
General Fund departmental expenditures were at 53.7% of budget through January 2023. Several cost-control measures that were implemented in FY 2019/20 remain in place to generate expenditure savings. These measures include a hiring freeze and controls around overtime, as-needed staff, marketing, travel, technology and vehicle purchases. With these 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 53% of the budget through January 2023, while total expenses were at 49% of the budget.
In the month of January, the City received $512 in donations, bringing total donations for FY 2022/23 to $34,159.
Concerns remain regarding the state of the economy, and there continues to be a tremendous amount of uncertainty. Given this level of uncertainty, the December 2022 UCLA Forecast presented a two-scenario economic forecast: a recession scenario and a no recession scenario. The February 2023 National Association for Business Economics (NABE) Outlook Survey found significant divergence regarding the outlook for the U.S. economy: “estimates of inflation-adjusted gross domestic product or real GDP, inflation, labor market indicators, and interest rates are all widely diffused, likely reflecting a variety of options on the fate of the economy - ranging from recession to soft landing to robust growth.” While the Conference Board in its February 2023 release forecasts a recession starting in early 2023, with economic weakness intensifying and spreading more widely throughout the US economy over the coming months.
On a national level, the unemployment rate remained fairly flat at 3.4% in January 2023, compared to 3.5% in December 2022. This rate was well below the record setting high of 14.7% in April 2020, and consistent with the pre-pandemic unemployment rate of 3.5%. In January, the number of unemployed persons remained unchanged at 5.7 million. This unemployment figure matched the pre-pandemic level of 5.7 million. In the fourth quarter 2022 second estimate, the Gross Domestic Product (GDP) increased by 2.7% as a result of deceleration in nonresidential fixed investment, decreases in exports and consumer spending as well as downturns in State and local government spending.
After the State’s largest increase in the unemployment rate in April 2020, the California unemployment rate remained flat at 4.1% between November and December 2022. The December 2022 rate is lower compared to the 5.8% rate in December 2021. California has now regained all of the 2.76 million nonfarm jobs lost due to COVID-19 in March and April 2020. The State has also now outpaced the country as a whole in terms of job growth by 0.6%. The unadjusted unemployment rate in the San Jose-Sunnyvale-Santa Clara Metropolitan Statistical Area (MSA) decreased slightly from 2.4% in November 2022 to 2.1% in December 2022.
Staff will continue to closely monitor the General Fund revenues and the City’s overall financial performance as the fiscal year progresses.
Monthly Investment Report (Attachment 2)
All securities held by the City of Santa Clara as of January 31, 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 January 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 portfolio return of 1.91% in January.
Library Department Position Change
The Library Department currently has two vacant part-time Librarian positions that are recommended to be deleted and replaced with the addition of one full-time Librarian position. By adding the full-time position, the Department expects to be able to more easily recruit for and retain a permanent employee. The Library would be able to better support operational needs with a full-time librarian position that would be considered a “community” librarian, who would focus on supporting all service desks (not just primarily youth and adult services) and could support programming for all ages.
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. Recommended budget amendments are detailed in Attachment 3. The position change recommended in the Library Department will have an ongoing impact of approximately $10,000 annually; however, no budget amendment is recommended as the Department has savings to absorb the cost this fiscal year.
In the General Fund, several actions are recommended to increase revenue estimates and the corresponding appropriations in the Parks and Recreation and Fire Departments, as well as the Stadium Operations budget. A transfer from the Parks and Recreation Capital Fund to the General Fund Land Sale Reserve is recommended for the Reed and Grant Sports Park loan repayment. There is also an action to recognize a transfer from the Fire Operating Grant Trust Fund, reflecting savings from a City match.
Budget amendments are also recommended in several other funds. In the Fire Operating Grant Trust Fund, actions are included to reduce the Assistance to Firefighters grant appropriation as well as to recognize and appropriate funding for USAR Training. Budget actions to recognize and appropriate grant funds and donations are recommended in the Library Operating Grant Trust Fund, the Parks and Recreation Operating Grant Trust Fund, and the Public Donations Fund. In the Electric Utility Capital Fund and Street Lighting Capital Fund, budget actions are recommended to reduce various capital project budgets to align with updated project timelines and return the funding to the Electric Utility Fund. In the Housing Authority Fund, a budget action is recommended to add contractual services funding to support a contract amendment and extension for work on the HOME American Rescue Plan program, offset by reimbursement revenue. In the City Affordable Housing Fund, an action to appropriate funding for a loan disbursement is also recommended. In the Parks and Recreation Department Capital Fund, actions are recommended to recognize Mitigation Fee Act revenue and to allocate those funds to repay the Reed and Grant Sports Park loan, to create a Parkland Acquisition project, to increase the Park Impact Fees Monitoring project, to replace the funding source for a portion of the grant funding for the Central Park Magical Bridge Playground, and to increase the ending fund balance.
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 and Investment Reports for January 2023 as presented, Approve the Related Budget Amendments, and Approve the Deletion of Two Part Time Librarian Positions and Addition of One Full Time Librarian Position in the Library Department (five affirmative Council votes required to appropriate additional revenue or for the use of unused balances).
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Office of the City Manager
ATTACHMENTS
1. Monthly Financial Status Report January 2023
2. Monthly Investment Report January 2023
3. FY 2022/23 Budget Amendments