REPORT TO COUNCIL
SUBJECT
Title
Action on Monthly Financial Status and Investment Reports for February 2024 and Approval of Related Budget Amendments
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 February 2024 are submitted for your information. The financial review as of February 29, 2024 provides a year-to-date financial update to the City Council for fiscal year 2023/24. The analysis of the revenues collected and all expenditures measures the level of adherence to the established budget and allows the City to monitor and project revenues and expenditures throughout the year.
The FY 2023/24 Budget incorporates the estimated revenues and planned expenditures for all funds. The attached Financial Status Report provides the actual revenue and expenditure summaries for the General Fund, Special Revenue Funds, and Enterprise Operating Funds. The Report also includes an 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, these reports include monthly activity and annual summary of donations received by each department. Although the requirement of the policy is to report quarterly, the City will provide this information monthly in the Financial Status Report.
DISCUSSION
Monthly Financial Status Report (Attachment 1)
The attached report summarizes the City’s financial performance as of February 29, 2024 (Attachment 1). This report contains financial analysis for the General Fund, select Special Revenue Funds, Enterprise Operating Funds, and Capital Improvement Program Funds.
Attachment 1 shows that General Fund revenues (excluding transfers) are at 55.7% of the budget through February 2024. While General Fund revenues appear to be below the year-to-date par level, this is primarily due to the timing of payments. Overall, revenues are tracking within estimated levels through February. Excluding transfers, General Fund expenditures are tracking within budget at 63.4% of budget through February 2024. With the exception of the Fire Department, departments are tracking at or below the par level through February. The Fire Department is tracking above budget due to higher overtime expenditures related to the backfill for absences as well as higher compensatory time off payments. Expenditures are currently tracking to end the year approximately $1.5 - $2.0 million above budget. While the Fire Department will continue to monitor its budget and work with the Finance Department and the City Manager’s Office to identify any options to partially mitigate the overage, a budget adjustment is expected to be brought forward before the end of the fiscal year.
As shown in Attachment 1, total revenues for Enterprise Funds (Electric, Water, Sewer, Cemetery, Solid Waste, and Water Recycling) were at 46.7% of budget through February. Total expenses were at 53.7% in February, which are within budgeted levels.
In the month of February, donations of $1,000 were received, bringing total donations to $117,321.
While there are varying forecasts, economic growth continues but is expected to be constrained in 2024. The March 2024 UCLA Anderson Forecast assumes no recession but does expect slower growth in 2024 as a result of the impact of higher interest rates on consumption, housing and business investment. In its February 2024 update to its forecast, The Conference Board also predicts no recession, but it expects consumer spending growth to cool and for overall GDP growth to slow to under 1% in the second and third quarters of 2024.
On a national level, the unemployment rate increased from 3.7% in January 2024 to 3.9% in February 2024. In February, the number of unemployed persons increased totaled 6.5 million, up from 6.1 million in January 2024. In the fourth quarter 2023, the Gross Domestic Product (GDP) increased at an annual rate of 3.4% according to the “third” estimate released by the Bureau of Economic Analysis. This follows a GDP increase of 4.9% in the third quarter 2023.
The California unemployment rate increased slightly from 5.2% in January 2024 to 5.3% in February 2024 and was up from 4.5% in February 2023. The unadjusted unemployment rate in the San José-Sunnyvale-Santa Clara Metropolitan Statistical Area (MSA) remained unchanged at 4.4% between February and January 2024, but above the February 2023 level of 3.2%.
Staff will continue to closely monitor the General Fund 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 February 29, 2024 were in compliance with the City’s Investment Policy Statement in terms of 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 February 2024 was to invest funds not required to meet current obligations in securities listed in the prevailing Investment Policy Statement. This strategy ensures safety of the City’s funds, provides liquidity to meet the City’s cash needs, and has a reasonable portfolio return of 3.1% in February.
ENVIRONMENTAL REVIEW
The actions being considered do not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to section 15378(b)(4) of Title 14 of the California Code of Regulations in that they are fiscal activities that do not involve any commitment to any specific project which may result in a potential significant physical impact on the environment.
FISCAL IMPACT
From time to time, budget adjustments are necessary to reflect new information, align budgets with actual revenues and expenses, and correct errors. The recommended budget adjustments are described in Attachment 3 and summarized below:
• General Fund - recognizes $563 in developer contribution revenue and appropriates the funding to the Public Works Department for inspection work performed outside of regular working hours.
• Convention Center Capital Fund - recognizes a $200,000 transfer from the Convention Center Enterprise Fund and $6,032 in other agencies revenue from insurance reimbursements and appropriates the funding to the Santa Clara Convention Center Condition Assessment Repair project.
• Convention Center Enterprise Fund - transfers $200,000 to the Santa Clara Convention Center Condition Assessment Repair project in the Convention Center Capital Fund.
• Solid Waste Fund - recognizes $351,102 in CalRecycle SB 1383 Grant revenue to assist in the implementation of regulatory requirements associated with SB 1383 and allocates the funding to the ending fund balance.
The table below summarizes the net budget change in revenue and expenditure for each fund impacted by the recommended budget amendments.
|
FY 2023/24 Recommended Budget Amendments |
|
Fund Name |
Revenue |
Expenditure |
|
General Fund |
$563 |
$563 |
|
Convention Center Capital Fund |
$206,032 |
$206,032 |
|
Convention Center Enterprise Fund |
$0 |
$0 |
|
(net-zero shift of $200k from fund |
|
|
|
balance) |
|
|
|
Solid Waste Fund |
$351,102 |
$351,102 |
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
1. Note and file the Monthly Financial Status Report and Monthly Investment Report for February 2024 as presented; and
2. Approve the following FY 2023/24 Budget Amendments:
a. Recognize developer contribution revenue in the amount of $563 in the General Fund and appropriate to the Public Works Department (five affirmative Council votes required to appropriate additional revenue);
b. Recognize a transfer from the Convention Center Enterprise Fund in the amount of $200,000 and recognize other revenue in the amount of $6,032 in the Convention Center Capital Fund and appropriate to the Santa Clara Convention Center Condition Assessment Repair Project (five affirmative Council votes required to appropriate additional revenue);
c. Transfer $200,000 from the Convention Center Enterprise Fund to the Convention Center Capital Fund, offset by a decrease in the unrestricted ending fund balance in the amount of $200,000 (five affirmative Council votes required for the use of unused balances); and
d. Recognize CalRecycle SB 1383 Grant revenue in the amount of $351,102 in the Solid Waste Fund and allocate the funding to ending fund balance (five affirmative Council votes required to appropriate additional revenue).
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Monthly Financial Status Report - February 2024
2. Monthly Investment Report - February 2024
3. FY 2023/24 Budget Amendments