REPORT TO COUNCIL
SUBJECT
Title
Action on Monthly Financial Status and Investment Reports for January 2024 and to Approve the 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 January 2024 are submitted for your information. The financial review as of January 31, 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 January 31, 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 49.3% of the budget through January 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 January. General Fund departmental expenditures are tracking within budget at 55% of budget through January 2024. With the exception of the Fire Department, departments are tracking at or below the par level through January. 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 $2.5 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 40.6% of budget through January. Total expenses were at 47.6% in January, which are within budgeted levels.
In the month of January, donations of $550 were received, bringing total donations to $116,321.
Some U.S. economic forecasts have shown improvement, moving away from recession predictions but still predicting weaker growth in 2024. The December 2023 UCLA Anderson Forecast assumes no recession, shifting from its “recession” and “no recession” scenarios presented in prior quarters. While no recession is predicted, higher interest rates are expected to restrain growth in 2024. 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 remained unchanged at 3.7% between December 2023 and January 2024. In January, the number of unemployed persons slightly decreased to 6.1 million from 6.3 million. In the fourth quarter 2023, the Gross Domestic Product (GDP) increased at an annual rate of 3.2% according to the “second” 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 5.1% in December 2023 to 5.2% in January 2024 and was up from 4.5% in January 2023. The unadjusted unemployment rate in the San José-Sunnyvale-Santa Clara Metropolitan Statistical Area (MSA) was 4.4% in January 2024, up from a revised 4.0% in December 2023, and above the January 2023 level of 3.1%.
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 January 31, 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 January 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 January.
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 $208,500 in fire ambulance transport revenue and $67,306 in fire wildland deployment reimbursements and appropriates the funding to the Fire Department ($275,806).
• Convention Center Enterprise Fund - implements technical corrections to align the management incentive fee ($181,159) and property insurance costs ($280,583) to the appropriate expenditure line items within the Convention Center Enterprise Fund per the Management Agreement.
• Electric Utility Capital Fund/Water Utility Capital Fund/Public Buildings Capital Fund - decreases the Electric Yard Buildings and Grounds Project in the Electric Utility Capital Fund ($37,900) and the Buildings and Grounds Project ($254,900) in the Water Utility Capital Fund and transfers the funding to the Stationary Standby Generators Project ($292,800) in the Public Buildings Capital Fund.
• Fire Department Capital Fund - reallocates $138,000 from the Diesel Exhaust Removal Systems Project to the new Fire Station Washer and Dryers Project ($72,000) and the new Fire Station 3 Sprinklers Project ($66,000) that have been identified by the Fire Department as higher priority projects.
• Fire Development Services Fund - recognizes $135,940 in additional development fee revenue and increases the Fire Department’s overtime allocation for expedited plan review and fire permit inspection services.
• Library Operating Grant Trust Fund - recognizes and appropriates grant funding of $10,210 for the Pacific Library Partnership California Library Services Act Distribution of Funds program that is used to support the Library Department’s Link+ subscription, which is an inter-library loan service.
• Sewer Utility Capital Fund -Increases the Sanitary Sewer System Improvements Project in the amount of $4.45 million to carryover project funding from FY 2022/23 for construction costs and increases the S.J. - S.C. Regional Wastewater Facility Project by $20,000 based on the City of San Jose’s most recent estimate. These actions are offset by a reduction to the unrestricted fund balance of $4.47 million.
• Solid Waste Capital Fund/Solid Waste Fund - transfers $353,000 from the Solid Waste Fund to the Sanitary Landfill Development - Post Closure Project in the Solid Waste Capital Fund to account for repairs required following the storms that have caused surface ponding and damage to the underground landfill gas collection system.
• Water Utility Capital Fund - Increases the Distribution System Replacement and Restoration Project in the amount of $2.1 million to account for increased replacement activity and increased materials costs and increases the Tank Rehabilitation Project in the amount of $10,000 for additional costs associated with coating and lining the City’s water tanks. These actions are offset by a reduction to the unrestricted fund balance of $2.11 million.
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 |
$275,806 |
$275,806 |
|
Convention Center Enterprise Fund (net-zero adjustment of $461K from reallocations and fund balance) |
$0 |
$0 |
|
Electric Utility Capital Fund (net-zero adjustment of $38K from existing project) |
$0 |
$0 |
|
Fire Department Capital Fund (net-zero adjustment of $138K from existing project) |
$0 |
$0 |
|
Fire Development Services Fund |
$135,940 |
$135,940 |
|
Library Operating Grant Trust Fund |
$10,210 |
$10,210 |
|
Public Buildings Capital Fund |
$292,800 |
$292,800 |
|
Sewer Utility Capital Fund (net-zero adjustment of $4.5 million from fund balance) |
$0 |
$0 |
|
Solid Waste Capital Fund |
$353,000 |
$353,000 |
|
Solid Waste Fund (net-zero adjustment of $353K from fund balance) |
$0 |
$0 |
|
Water Utility Capital Fund (net-zero adjustment of $255K from existing project and $2.1 million from fund balance) |
$0 |
$0 |
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 January 2024 as presented; and
2. Approve the following FY 2023/24 Budget Amendments:
a. Recognize ambulance transport revenue in the amount of $208,500 and wildland deployment reimbursements in the amount of $67,306 in the General Fund and appropriate to the Fire Department (five affirmative Council votes required to appropriate additional revenue);
b. Implement technical adjustments in the Convention Center Enterprise Fund to align with the Management Agreement, including reallocating $367,851 from the Indirect Expenses appropriation and $93,891 from the unrestricted ending fund balance to the Interfund Services appropriation for property insurance costs in the amount of $280,583 and to the Materials, Services, and Supplies appropriation for the management incentive fee in the amount of $181,159 (majority affirmative Council votes required);
c. Increase the Stationary Standby Generators Project by $292,800 in the Public Buildings Capital Fund, offset by a transfer from the Electric Utility Capital Fund in the amount of $37,900 that is funded by a reduction in the Electric Yard Buildings and Grounds Project and a transfer from the Water Utility Capital Fund in the amount of $254,900 that is funded by a reduction to the Buildings and Grounds Project (five affirmative Council votes required to appropriate additional revenue);
d. Establish the Fire Station Washer and Dryers Project in the amount of $72,000 and the Fire Station 3 Sprinklers Project in the amount of $66,000 in the Fire Department Capital Fund, offset by a decrease to the Diesel Exhaust Removal Systems Project in the amount of $138,000 (majority affirmative Council votes required);
e. Recognize and appropriate Other Fees for Services in the Fire Development Services Fund in the amount of $135,940 for Fire Department overtime to support development services (five affirmative Council votes required to appropriate additional revenue);
f. Recognize and appropriate grant funding in the Library Operating Grant Trust Fund in the amount of $10,210 for the Pacific Library Partnership California Library Services Act Distribution of Funds grant (five affirmative Council votes required to appropriate additional revenue);
g. Increase the Sanitary Sewer System Improvements Project in the amount of $4,450,000 and the S.J.-S.C. Regional Wastewater Facility Project in the amount of $20,000 in the Sewer Utility Capital Fund, offset by a decrease in the unrestricted ending fund balance in the amount of $4,470,000 (five affirmative Council votes required for the use of unused balances);
h. Transfer $353,000 from the Solid Waste Fund to the Sanitary Landfill Development - Post Closure Project in the Solid Waste Capital Fund to account for repairs required following the storms (five affirmative Council votes required to appropriate additional revenue); and
i. Increase the Distribution System Replacement and Restoration Project by $2,100,000 and the Tank Rehabilitation Project by $10,000 in the Water Utility Capital Fund, offset by a decrease to the unrestricted ending fund balance of $2,110,000 (five affirmative Council votes required for the use of unused balances).
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Monthly Financial Status Report - January 2024
2. Monthly Investment Report - January 2024
3. FY 2023/24 Budget Amendments