TO: LINDA REICH, CITY MANAGER
FROM: ROB BURNS, DIRECTOR OF FINANCE
SUBJECT
title
Fiscal Year 2023-24 Mid-Year Financial Review.
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RECOMMENDATION
recommendation
1) Receive and file the Financial Review Status Report; 2) appropriate $372,000 from the unappropriated reserves of the General Fund, $110,000 from the unappropriated reserves of the Landscape & Lighting District Fund, $20,000 of unappropriated reserves of the Enterprise Funds; $60,000 of unappropriated reserves from the Sewer Lift Station Fund, $550,000 from the unappropriated reserves of the Insurance Liability Fund and $260,500 from the unappropriated reserves of the Building Management Fund; 3) approve contract amendments for Bureau Veritas Technical Assessments, Hinderliter De Llamas & Associates, Data Ticket, Engineering Resources of Southern California, Kimley Horn, PMK Associates, Transtech Engineering, and Z & K Consultants; 4) approve an increase to the Purchase Orders for Am-Tec Total Security, Anser Advisory Management, Chino Basin Desalter Authority, Dave Bang Associates, Dunn Edwards, E.I. Computer Systems, Ferguson, InfoSend, Inland Empire Utilities Agency (IEUA), Monument ROW, RHA Architects-Landscape, and Tarkett USA; and 5) authorize the City Manager to execute all necessary documents on behalf of the City.
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FISCAL IMPACT
Requires an appropriation of $372,000 from the unappropriated reserves of the General Fund; $110,000 from the unappropriated reserves of the Landscape & Lighting District Fund, $20,000 of unappropriated reserves of the Enterprise Funds; $60,000 of unappropriated reserves from the Sewer Lift Station Fund, $550,000 from the unappropriated reserves of the Insurance Liability Fund and $260,500 from the unappropriated reserves of the Building Management Fund. There are sufficient fund balances available for these purposes.
CITY OF CHINO MISSION / VISION / VALUES / STRATEGIC ISSUES
The recommendation detailed above further the City’s values and strategic issues that serve as key pillars on which identified priorities, goals, and action plans are built, by fostering:
• Financial Stability
• Responsible Long-Range Planning
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Revenue: |
Expenditure: See Attached Schedule |
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BACKGROUND
Each year, staff presents to the citizens of Chino and the City Council a financial review of the current fiscal year. This year’s financial review covers the current fiscal year through the end of February 2022, and includes all areas of operation, with an emphasis on the City’s General Fund. Finance staff met with each department to review and analyze both operating revenues and expenditures to evaluate and identify potential changes from the Fiscal Year (FY) 2023-24 adopted budget.
ISSUES/ANALYSIS
General Fund
The mid-year analysis closely examined the City’s three major revenue sources of Sales Tax, Property Tax, and Development Related Revenue.
Property Tax revenue for FY 2023-24 is anticipated to be $37.3 million for an increase of $3.0 million over the current budget. The two largest increases are coming from Property Tax In-Lieu of VLF of $900,000 and from RDA Elimination revenues of $700,000. These increases are the result of the sale and or reassessments of numerous large industrial properties located in the city. These changes contributed to a total Net Taxable Value increase of 12.8% for FY 2023-24.
Sales Tax revenue for FY 2023-24 is anticipated to be under budget by $2.5 million for a total of $34.5 million. Sales tax receipts across all of California have softened during calendar year 2023. The first three quarters of 2023 in California were down 1.93% year-to-date. San Bernardino County totals for year-to-date 2023 are down 4.70%, with Chino being down 8.56% over the same period. This softening is largely the result of the Federal Reserve increasing interest rates to reduce inflation, by reducing economy activity.
One-time Development Revenue was budgeted at $11.1 million for FY 2023-24. Development activity has slowed substantially due to higher mortgage interest rates, resulting in anticipated development revenues of only $7.3 million, or $3.8 million under the adopted budget.
Due to the higher interest rates that are impacting Sales Tax and Development Revenue, interest income is anticipated to be $1.2 million higher than the adopted budget. This will help offset some of the aforementioned losses. In total, it is anticipated that General Fund Revenues will be approximately $1.3 million under budget for FY 2023-24.
All Other Funds
A review of revenues and expenditures in all operating funds was made, measuring them against both the adopted budget amounts, as well as a comparison of the same time last year. These operating funds include: Special Revenue, Internal Service, Development Impact Funds, and Enterprise Funds. Revenues and expenditures for these operating funds are within budgeted amounts except as noted below.
Appropriation Adjustments
As part of the financial review of revenues and expenditures, staff has identified areas of operations that changed after the adoption of the FY 2023-24 Budget. Staff is requesting the following appropriations of revenues and/or expenditures to reflect these changes:
General Fund
Appropriate $110,000 of expenditures with the Chino Valley Fire District. The City’s contract with the Fire District is based on property taxes received by the City. As indicated previously, property tax receipts have increased which has caused a similar increase in the City’s obligation to the Fire District.
Landscape and Lighting Fund
Appropriate $110,000 of expenditures for additional electricity costs for parks and city facilities.
Various Enterprise Funds
Appropriate $20,000 of expenditures for additional monthly processing services for InfoSend, the City’s utility billing service. This expense is allocated to all enterprise funds based on a prorate basis.
Sewer Lift Station Fund
Appropriate $40,000 of expenditures to IEUA for maintenance costs and $20,000 of expenditures to SCE for additional electricity costs.
Liability Insurance Fund
Appropriate $550,000 to Aleshire & Wynder LLP for additional legal expenses for general liability claims.
Building Management Fund
Appropriate $185,000 of expenditures to SCE for additional city building electricity costs.
Appropriate $40,000 for unanticipated repairs to city facilities including the Paseo Del Sol Plaza staircase as well as resealing the skylights at the Police Department building.
Appropriate $25,500 and create a project number for building related repair expenses for the Cultural Arts building (formerly known as the T-Shirt Shop).
Appropriate $10,000 with Am-Tec Total Security for security systems repairs and replacement parts.
Contract Amendments with Appropriations
As part of the financial review of revenues and expenditures, staff has identified the following appropriations requiring contract amendments as they exceed $50,000. Staff is requesting contract amendments and appropriations to reflect these changes:
General Fund
Approve a contract amendment with Bureau Veritas North America, increasing the existing contract by $150,000 to a total of $400,000. This change is requested due to additional plan check services being requested by developers. This cost is offset by additional plan check fees.
Approve a contract amendment with Engineering Resources of Southern California, increasing the existing contract by $100,000 to a total of $350,000. This change is requested due to additional plan check services being requested by developers. This cost is offset by additional plan check fees.
Approve a contract amendment with Data Ticket increasing the existing contract by $12,000 to a total of $104,500. This change is requested for additional processing services for city-wide parking and administrative citations. (Development Services Department).
Contract Amendments without Appropriations
As part of the financial review of revenues and expenditures, staff has identified the following appropriations, requiring contract amendments as they exceed $50,000. Staff is requesting contract amendments to reflect these changes:
General Fund
Approve a contract amendment with Kimley Horn, increasing the existing contract by $75,000 to a total of $105,000. This change is requested due to additional support needed for the Housing Element Certification.
Approve a contract amendment with Hinderliter De Llamas & Associates, increasing the existing contract by $40,000 to a total of $100,000. This change is requested due to additional audit recovery services.
Approve a contract amendment with PMK Associates, increasing the existing contract by $10,000 to a total of $60,000. This change is requested due to additional traffic plan checking services in the transportation division.
Approve a contract amendment with Data Ticket increasing the existing contract by $12,000 to a total of $104,500. This change is requested for additional processing services for city-wide parking and administrative citations. (Police Department).
Various Funds
Approve a contract amendment with Z & K Consultants, increasing the existing contract by $150,000 to a total of $1,050,000. This change is requested for additional CIP project and construction management services.
Approve a contract amendment with Transtech Engineers, increasing the existing contract by $100,000 to a total of $750,000. This change is requested for additional CIP Management Services.
Purchase Order Increases
As part of the financial review of expenditures, staff has identified the following purchases to specific vendors that are anticipated to exceed amounts authorized by City Council. These requests increase the purchase order only; no additional appropriation is required as these expenditures are within the adopted FY 2023-24 budgeted appropriations:
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Vendor |
Purpose |
Increase Amount |
Total P.O. Amount |
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Am-Tec Total Security |
Purchase of POD cameras/parts |
$50,000 |
$184,032 |
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Anser Advisory Management |
CIP project management |
$50,000 |
$100,000 |
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Chino Basin Desalter Authority |
Water purchases |
$1,045,000 |
$6,510,000 |
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Dave Bang Associates |
Park equipment & materials |
$10,000 |
$60,000 |
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Dunn Edwards |
Painting and material supplies |
$50,000 |
$100,000 |
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E.I. Computer Systems |
POD camera software license |
$10,000 |
$60,000 |
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Ferguson |
Replace batteries |
$40,000 |
$90,000 |
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InfoSend |
Increased mailing inserts |
$10,000 |
$215,000 |
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Inland Empire Utilities Agency |
Additional pass-through costs |
$580,000 |
$13,873,985 |
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Monument ROW |
Additional right-of-way costs |
$12,000 |
$62,000 |
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RHA Architects-Landscaping |
Additional design services |
$132,920 |
$732,920 |
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Tarkett USA |
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$13,000 |
$63,000 |
CONCLUSION
Property tax and interest income are increasing, which will partially off-set the decreases in both sales tax and development revenues. Total additional appropriations to the General Fund are $372,000 for FY 2023-24; therefore, actual expenditures appear to be on track with the adopted FY 2023-24 budget.
The additional appropriations and contract amendments contained in this staff report will assist staff in continuing to service the needs of the community during this fiscal year.
RB:hm
Attachment: Exhibit 1 Mid-Year 2023-24