Westminster City Council
SUBJECT
Title
Fiscal Year 2024-25 Midyear Budget Review.
End
From: Erin Backs, Finance Director
Requested by: Administration
Prepared by: Erin Backs, Finance Director
____________________________________________________________
RECOMMENDED ACTION
Recommendation
Receive and file the report.
end
BACKGROUND
The City Council approved the fiscal year (FY) 2024-25 budget on June 26, 2024. The FY 2024-25 Adopted Budget includes a number of special revenue, capital project, enterprise and internal service funds; however, this report will focus only on the General Fund which is the main operating fund of the city. The report contains information on General Fund resources and expenditures throughout the 2nd quarter of FY 2024-25, which is the period between July 1, 2024, and December 31, 2024.
Top Revenues
The top revenue sources for the City’s General Fund are sales tax, transaction use tax (TUT), property tax, utility users’ tax and charges for service which combined make up 87% of total General Fund revenue. Current projections for FY 2024-25 show total revenues above budgeted numbers by $1.9 million. Sales tax/TUT is projected to be lower than budgeted by $455 thousand while charges are up $1.9 million.
FY 2024-25 revenues are budgeted at $86.6 million and are currently projected to be $88.5 million at year end. We have received $29.1 million in revenue in the General Fund or 34% as of December 31, 2024.
Sales Tax/Transaction Use Tax
The following charts from the City’s sales tax consultant HdL Companies represent 3rd quarter calendar year sales, July 2024 through September 2024. The first chart shows sales tax year-over-year receipts down 1% compared to the third quarter sales in the prior year. General consumer goods had slight increases at electronics/appliance and jewelry stores but were down overall by 4.9%. Service stations saw a decrease in returns of 5.8% as increased fuel supply stabilized. The building-construction category experienced reductions of 20.5% primarily due to a recent business closure in this sector. The auto-transportation sector reported increases of 5.1%, and food and drugs category was up 3.8%. The largest growth was in the state and county pools category, up 10.1% due to excellent returns of several businesses in the pool. Net of aberrations, taxable sales for all of Orange County and the state declined 2.3% over the same period.
Sales and Use Tax
The following 2 charts show the category year-over-year changes for the transaction use tax, Measures Y and E. There is no category for state and county pools because the TUT generated from online sales is directly allocated to the city. Westminster’s voter-approved Measure Y transaction use tax generated $3.8 million, down 3% compared to the 3rd quarter of 2023. The first quarter of collections for Measure E generated $1.8 million. Collections of a new tax are typically lower as it takes a few quarters to make sure businesses are collecting the new rate.
Transaction Use Tax - Measure Y
Transaction Use Tax - Measure E
Sales tax and TUT receipts are remitted to the City in arrears, so the quarter totals shown in the table below represent four months of receipts from the California Department of Tax and Fee Administration (CDTFA). Projections from the City’s sales tax consultant, HdL Companies, anticipate FY 2024-25 receipts to be $5.6 million above the actual received in FY 2023-24 primarily due to the additional TUT, Measure E. This is still a very early estimate as we have only received the four months of receipts for FY 2024-25. However, this projection would result in sales tax and TUT receipts $455 thousand below budget.
|
|
Budget 2024-25 |
YTD Q2 Actual 2024-25 |
% of Budget |
Prior Year Q2 Actual 2023-24 |
Increase/ (Decrease) from PY |
|
Sales and Use Tax |
$18,234,000 |
$6,052,246 |
33.2% |
$5,894,051 |
$158,196 |
|
Transaction Use Tax |
22,347,000 |
7,482,378 |
33.5% |
4,968,175 |
2,514,203 |
|
Total |
$40,581,000 |
$13,534,624 |
33.4% |
$10,862,225 |
$2,672,399 |
Property Tax
Property tax revenue is below the prior fiscal year at the end of the 2nd quarter. Based on the estimates from the County of Orange tax ledger, this revenue source will come in about $33 thousand above budget. This is very early in the fiscal year as most of the revenue from property tax receipts is received in January and April.
|
|
Budget 2024-25 |
YTD Q2 Actual 2024-25 |
% of Budget |
Prior Year Q2 Actual 2023-24 |
Increase/ (Decrease) from PY |
|
Property Tax |
$21,155,500 |
$1,115,448 |
5.3% |
$1,291,523 |
($176,075) |
Utility Users Tax
Utility Users Tax is higher than the prior year by $213 thousand and is projected to come in higher than budget by $48 thousand. The actual cost received for FY 2023-24 was $5.4 million and the projection for FY 2024-25 is $5.8 million.
|
|
Budget 2024-25 |
YTD Q2 Actual 2024-25 |
% of Budget |
Prior Year Q2 Actual 2023-24 |
Increase/ (Decrease) from PY |
|
Utility Users Tax |
$5,800,000 |
$2,490,106 |
42.9% |
$2,277,432 |
$212,674 |
Charges for Service
Charges for services are positive for FY 2024-25. This is primarily due to the increase in ambulance services charges which are up $322 thousand compared to FY 2023-24. Planning, building and engineering fees are projected $550 thousand over budget. Charges for services receipts to date are 8.7% above this time last year and overall projections to year-end are favorable at $1.9 million higher than budget. The actual cost for FY 2023-24 was $9.6 million and the projection for FY 2024-25 is $10 million. This revenue category is dependent on the economy and development within the city.
|
|
Budget 2024-25 |
YTD Q2 Actual 2024-25 |
% of Budget |
Prior Year Q2 Actual 2023-24 |
Increase/ (Decrease) from PY |
|
Charges for Service |
$8,104,000 |
$4,398,550 |
54.3% |
$4,046,819 |
$351,731 |
Expenditures
General Fund expenditures are below budget. Expenditures for the 2nd quarter of FY 2024-25 are $6 million higher than the prior fiscal year at the same time. This is due to timing of payroll, higher PERS unfunded liability costs, increases in contractual expenditures and increases in department charges from internal services funds.
|
|
Budget 2024-25 |
YTD Q2 Actual 2024-25 |
% of Budget |
Prior Year Q2 Actual 2023-24 |
Increase/ (Decrease) from PY |
|
Expenditures |
$86,993,868 |
$51,009,593 |
57.6% |
$45,042,957 |
$5,966,637 |
Midyear projections show general fund expenditures ending the year $2 million under budget. This is primarily due to the large number of vacancies in the city. At the time of this report, there were 24 vacant positions, 18 in the general fund. The savings realized from these vacancies are offset by the increase in overtime and part-time staffing to cover the shortages. Any increase in costs between now and the end of the year will reduce these savings.
FY 2024-25 expenditures are budgeted at $87 million and currently projected to be $85 million at year end. We have spent $51 million in the General Fund or 57.6% as of December 31, 2024.
The net anticipated increase in fund balance or addition to reserves for FY 2024-25 is $2 million, which is $3.9 million better than the budget amount. This is only a projection. The economy, increased costs for goods and services, unexpected expenditures and filled vacancies will impact on how the fiscal year ends.
|
|
Actual 2023-24 |
Budget 2024-25 |
Estimated Actual 2024-25 |
Increase/ (Decrease) from Budget |
|
Beginning Balance |
$37,943,268 |
$44,347,681 |
$44,347,681 |
$0 |
|
Change |
6,404,413 |
(1,910,446) |
1,974,893 |
3,885,340 |
|
Ending Balance |
$44,347,681 |
$42,437,234 |
$46,322,574 |
$3,885,340 |
FISCAL IMPACT
There are no budget adjustments requested at this time. The next review will be provided as part of the budget process.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
FY 2024-25 projections are lower than budget numbers as of December 31, 2024, so no budget adjustments are requested at this time. The General Fund is projected to end the year with an increase to fund balance of $2 million which is $3.9 million better than anticipated at the time of budget adoption. Revenue is projected to come in $1.9 million higher than budgeted and expenditures are projected at $2 million under budget. The savings of $2 million in expenditure is primarily due to vacancies and as we fill these positions, the savings will be eliminated. The next update will be part of the FY 2025-26 budget process. The FY 2025-26 budget process has already started, and study sessions are projected to begin in May 2025. The discussion will include updated projections for FY 2024-25, FY 2025-26 proposed budget numbers and capital project allocations for council consideration.
ATTACHMENTS
1. General Fund Revenue/Expenditure Summary
REVIEWED BY
Erin Backs, Finance Director
Christian Bettenhausen, City Attorney
Christine Cordon, City Manager