REPORT TO COUNCIL
SUBJECT
Title
Action on Monthly Financial Status and Investment Reports for March and April 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 reports and monthly investment reports for March 2024 and April 2024 are submitted for your information. The financial review as of March 31 and April 30, 2024 provide a year-to-date financial update to the City Council for fiscal year 2023/24. The revenue/expenditure analysis 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 Reports provide the actual revenue and expenditure summaries for the General Fund, Special Revenue Funds, and Enterprise Operating Funds. The Reports also include an expenditure summary for Capital Improvement Funds and Fund Reserve Balances. Any significant variances are explained in the reports.
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 Reports (Attachments 1 and 3)
The attached reports summarize the City’s financial performance as of March 31 and April 30, 2024 (Attachments 1 and 3). These reports contain 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 66.6% of the budget through March 2024, while Attachment 3 shows General Fund revenues at 82.2% through April 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 March and April. As shown in Attachments 1 and 3, General Fund expenditures, excluding transfers, were at 71% and 78.3% of budget through March and April 2024, respectively. With the exception of the Fire Department, City departments are tracking at or below the par level through both months. 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. Budget adjustments totaling $1.75 million are included in this report to address the Fire Department’s projected overage, a portion of which is offset by ambulance transport revenues and wildland reimbursement revenue.
As shown in Attachment 1, total revenues for Enterprise Funds (Electric, Water, Sewer, Cemetery, Solid Waste, and Water Recycling) were at 54.9% of budget through March. Total expenses were at 62.5% in March, which are within budgeted levels. In Attachment 3, the total revenues in the Enterprise Funds are tracking at 61.1% of budget, while total expenses are tracking at 67.5% of budget through April 30, 2024.
In the months of March and April, donations of $460 and $2,284 were received, respectively, bringing total donations to $121,566.
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 May 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 slightly from 3.8% in March 2024 to 3.9% in April 2024. In April, the number of unemployed persons totaled 6.5 million, a slight increase from 6.4 million in March. In the first quarter 2024, the Gross Domestic Product (GDP) increased at an annual rate of 1.3% according to the “second” estimate released by the Bureau of Economic Analysis. This follows a GDP increase of 3.4% in the fourth quarter 2023.
The California unemployment rate remained unchanged at 5.3% between March and April 2024 but was up from 4.5% in April 2023. The unadjusted unemployment rate in the San José-Sunnyvale-Santa Clara Metropolitan Statistical Area (MSA) decreased slightly from 4.2% in March to 3.9% in April 2024 but remains above the April 2023 level of 2.9%.
Monthly Investment Reports (Attachments 2 and 4)
All securities held by the City of Santa Clara as of March 31 and April 30, 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 March and April 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 3.11% in March and 3.22% in April.
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 5 and summarized below:
• General Fund - Increases various revenue estimates, including the Silicon Valley Power (SVP) Transfer, fines and penalties, and a transfer from the Engineering Operating Grant Trust Fund, partially offset by the elimination of a transfer from the Patrick Henry Drive Infrastructure Improvement Fund. Revenue actions with associated expenditure adjustments are recommended to account for stadium-related activity as well as Fire ambulance transport revenues and wildland reimbursements that offset higher Fire Department expenditures. Actions to address anticipated expenditure overages and technical adjustments include a transfer to the Public Building Capital Fund for the Triton Museum Repair and Modifications project, a transfer to the Related Santa Clara Developer Fund to cover prior year ineligible expenditures, and increases to the Fire Department and Mayor and Council budgets to address potential overages. Funding is also recommended for employee recognition. In addition, a shift of the funds budgeted for employee separation payouts to a new Accrued Liability Reserve is recommended. Amendments are included to replenish the Budget Stabilization Reserve and increase the Unrestricted Fund Balance to the levels assumed in the development of the FY 2024/25 Budget.
• Cemetery Fund/Perpetual Care Fund/Endowment Care Fund - increases the interest earnings revenue estimates in the Perpetual Care Fund and Endowment Care Fund and transfers those additional funds to the Cemetery Fund.
• Electric Utility Debt Service Fund/Electric Utility Capital Fund/Electric Utility Fund - eliminates bond proceeds that were budgeted in FY 2023/24 and several related transactions to align the project budgets with the updated debt service schedule and project timelines as well as updated funding sources. The addition of three new capital projects is also recommended. Additionally, Attachment 5 includes adjustments to the Electric Utility Fund revenue and expenditure estimates and Electric Utility reserves.
• Engineering Operating Grant Trust Fund - establishes a transfer to the General Fund to return funds that had previously been transferred to the Engineering Operating Grant Trust Fund for One Bay Area Grant (OBAG) expenditures that were not expected to be reimbursed. The City subsequently received OBAG reimbursements in FY 2023/24.
• Expendable Trust Fund - recognizes and appropriates reimbursements from the Silicon Valley Animal Control Agency for services provided by the Information Technology and Public Works Departments. A technical correction is also included to align seized asset funding to the proper source.
• Fire Department Capital Fund - reallocates funding from the Diesel Exhaust Removal Systems project to establish a higher priority Fire Station 2 Window Seismic Upgrades project.
• Fire Development Services Fund - increases the development-related fees for services revenue estimate and appropriates it to the overtime budget.
• Fire Operating Grant Trust Fund - recognizes various grant and reimbursement revenue and appropriates them to the corresponding grant program.
• Fleet Maintenance and Operations Fund - increases the materials, services, and supplies budget offset by a decrease to the unrestricted ending fund balance to cover higher costs for fuel, parts and contractual services, including costs to repair a fire engine involved in a traffic accident.
• Housing and Urban Development Fund - Recognizes additional program income received for CDBG and appropriates the funding to the CDBG Administration project to account for additional staff time spent on CDBG services.
• Parks and Recreation Capital Fund - recognizes Mitigation and Quimby Act revenue, appropriates a portion of this revenue to the Park Impact Fees Monitoring Project and Parkland Acquisition Project, and appropriates the remainder to unrestricted ending fund balance.
• Parks and Recreation Operating Grant Trust Fund - recognizes and appropriates a grant from the County of Santa Clara for fireworks display events to be held on July 4, 2024.
• Patrick Henry Drive Infrastructure Improvement Fund - reduces the impact fee revenue estimate and eliminates a corresponding transfer to the General Fund to reimburse for administrative costs as work is not anticipated and fees will not be received in FY 2023/24.
• Police Operating Grant Trust Fund - implements a technical correction to the seized asset appropriation to align the program with the corresponding funding source.
• Prefunded Plan Review Fund - recognizes developer contributions and appropriates it to the Kylli Project (3005 Democracy Way).
• Public Buildings Capital Fund - recognizes a transfer from the General Fund and appropriates the funding to the Triton Museum Repair and Modifications Project.
• Public Donations Fund - recognizes and appropriates donations received to the Senior Center’s Health and Wellness Case Management Program.
• Recycled Water Fund - increases the resource/production appropriation to align with increased activity for recycled water usage and decreases the Operations and Maintenance ending fund balance reserve.
• Related Santa Clara Developer Fund - transfers funding from the General Fund to cover prior year personnel costs that are not eligible for developer reimbursement.
• Sewer Utility Capital Fund - increases the San José - Santa Clara Regional Wastewater Facility project to align with the latest expenditure estimates from the City of San José and decreases the unrestricted ending fund balance.
• Solid Waste Capital Fund - eliminates the developer contributions revenue estimate as discussions with Related regarding reimbursement of landfill costs are ongoing. A transfer from the Solid Waste Fund and the use of unrestricted ending fund balance are recommended to offset the reduction in revenue. An action is also included to increase the Ending Fund Balance - Landfill Corrective Action Costs to reflect an updated inflation factor from CalRecycle.
• Solid Waste Fund - establishes a transfer to the Solid Waste Capital Fund to offset the reduction in developer contribution revenue and reallocates funding from the unrestricted ending fund balance to the Ending Fund Balance - Operations and Maintenance Reserve.
• Streets and Highways Capital Fund - recognizes a Transportation Development Act Article 3 allocation and appropriates the funding to the Annual Curb Ramp Installation Project.
• Water Utility Capital Fund - increases the SCADA Improvements Project to replenish project funding that was reallocated to another project in the Electric Utility Capital Fund and decreases the unrestricted 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
1. Note and file the Monthly Financial Status and Monthly Investment Reports for March and April 2024 as presented; and
2. Approve the FY 2023/24 Budget Amendments in the following funds (as detailed in Attachment 5):
a. In the General Fund, with a net impact of $5,315,610;
b. In the Cemetery Fund, with a net impact of $26,970;
c. In the Electric Utility Capital Fund, with a net impact of ($272,065,000);
d. In the Electric Utility Debt Service Fund, with a net impact of ($321,927,014);
e. In the Electric Utility Fund, with a net impact of $40,000,000;
f. In the Endowment Care Fund, with a net impact of $26,500;
g. In the Engineering Operating Grant Trust Fund, with a net impact of $279,147;
h. In the Expendable Trust Fund, with a net impact of $46,000;
i. In the Fire Department Capital Fund, with a net impact of $0;
j. In the Fire Development Services Fund, with a net impact of $133,027;
k. In the Fire Operating Grant Trust Fund, with a net impact of $95,113;
l. In the Fleet Maintenance and Operations Fund, with a net impact of $0;
m. In the Housing and Urban Development Fund, with a net impact of $13,012;
n. In the Parks and Recreation Capital Fund, with a net impact of $2,242,802;
o. In the Parks and Recreation Operating Grant Trust Fund, with a net impact of $5,000;
p. In the Patrick Henry Drive Infrastructure Improvement Fund, with a net impact of ($69,205);
q. In the Perpetual Care Fund, with a net impact of $470;
r. In the Police Operating Grant Trust Fund, with a net impact of $41,000;
s. In the Prefunded Plan Review Fund, with a net impact of $62,000;
t. In the Public Buildings Capital Fund, with a net impact of $24,000;
u. In the Public Donations Fund, with a net impact of $14,620;
v. In the Recycled Water Fund, with a net impact of $0;
w. In the Related Santa Clara Developer Fund, with a net impact of $0;
x. In the Sewer Utility Capital Fund, with a net impact of $0;
y. In the Solid Waste Capital Fund, with a net impact of ($244,000);
z. In the Solid Waste Fund, with a net impact of $0;
aa. In the Streets and Highways Capital Fund, with a net impact of $104,938; and
bb. In the Water Utility Capital Fund, with a net impact of $0.
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Monthly Financial Status Report - March 2024
2. Monthly Investment Report - March 2024
3. Monthly Financial Status Report - April 2024
4. Monthly Investment Report - April 2024
5. FY 2023/24 Budget Amendments