HomeMy WebLinkAboutItem 7b - Fiscal Year 2022-23 Third Quarter Budget Review Item 7b
Department: Finance
Cost Center: 2002
For Agenda of: 5/16/2023
Placement: Business
Estimated Time: 30 minutes
FROM: Emily Jackson, Finance Director
Prepared By: Natalie Harnett, Principal Budget Analyst
SUBJECT: FISCAL YEAR 2022-23 THIRD QUARTER BUDGET REVIEW
RECOMMENDATION
Receive and file the Fiscal Year 2022-23 Third Quarter Budget report.
POLICY CONTEXT
Development and presentation of the quarterly reports conforms with the following
adopted Budget Policies:
Financial Plan Purpose and Organization- Goal Status Reports which
requires that the status of major program objectives be formally reported to the
Council on an ongoing, periodic basis.
Financial Reporting and Budget Administration- Interim Reporting which
requires the City to prepare and issue timely interim reports on the City’s fiscal
status to the Council and staff.
DISCUSSION
The accompanying Financial Report for the third quarter of FY 2022-23 (Attachment A)
provides a high-level overview of the City’s financial condition as of March 31, 202 3. The
attached report highlights revenue and expenditure actuals for the first nine months of the
fiscal year and an update on the Major City Goal (MCG) tasks and the Capital
Improvement Plan (CIP). The report’s focus is on the General Fund and each of the City’s
four enterprise funds. The report also provides an update on the City’s storm-related
expenditures.
Background
Section 1: General Fund Update: As of March 31, 2023, operating expenditures trend
on target with past years’ third quarters. Tax revenues continue to benefit from the swell
in tourism and consumer spending which picked up after the winter storms. Higher labor
and raw material costs along with inflationary pressures also drive taxable goods prices
upward and increase the City’s sales tax revenue. While some tax revenues are
exceeding projections, this will be partially offset by Development Review-related fee
revenues which are under-performing.
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Item 7b
Section 2: Enterprise Funds: The enterprise funds are also tracking in line with
projected budget and will likely end the year as stated in the adopted budget. The
combination of increased foot traffic downtown, more consistent staffing levels, expanded
enforcement hours, and properly functioning technology have greatly improved the
financial picture for Parking. In the Water and Sewer funds, inflationary pressures have
significantly increased the cost of doing business, but the proposed 2023 -25 rate
increases will help ensure the fund is maintaining 100% cost recovery.
Section 3: Major City Goal (MCG) Update: The City has made significant progress on
many of its MCG efforts. So far, twelve specific tasks have been completed and most
ongoing efforts are in progress.
Section 4: Capital Improvement Plan Update: The City has completed eleven CIP
projects between July 2022 and March 2023. Some of the major completed projects
include the Orcutt/Tank Farm Roundabout, Area 6 and 7 Curb Ramps, emergency repairs
at the creekbank along Pismo/Johnson, and the Fire Station 1 Roof Replacement. Some
of the major upcoming or active projects include the Calle Joaquin Lift Station
Replacement, the Cheng Park Revitalization, and the North Chorro Neighborhood
Greenway.
Section 5: Fund Balances: This section provides the current fund balances for all major
funds considering Council action to date.
Section 6: Outlook and Conclusion: Based on the third quarter results, the City is well
on its way to ending FY 2022-23 in a good financial condition; however, future
uncertainties remain around storm reimbursements, the looming recession, and the
impact of CalPERs investment losses which have increased unfunded pension liabilities.
Staff presented the Strategic Budget Direction report to Council on April 18, 2023 which
included updated five-year forecasts and assumptions behind the financial outlook.
Public Engagement
Public comment on this item can be provided to the City Council through written
correspondence prior to the meeting and through public testimony at the meeting. The
Third Quarter Financial Report for FY 2022-23 (Attachment A) will be posted on the City’s
website for public review.
CONCURRENCE
Operating departments review and monitor financial results on a regular basis.
Departmental fiscal officers reviewed the numbers and will be closely monitoring the
budget for the remainder of the year.
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Item 7b
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended
action in this report, because the action does not constitute a “Project” under CEQA
Guidelines Sec. 15378.
FISCAL IMPACT
Budgeted: Yes Budget Year: 2022-23
Funding Identified: Yes
Funding Sources
Total
Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ $ $ $
State
Federal
Fees
Other
Total N/A N/A N/A N/A
Fiscal Analysis:
The quarterly budget review reports on current revenue and expenditure trends to keep
the Council and the community informed about the City’s fiscal picture and program
efforts as adopted with the annual budget appropriation.
ATTACHMENTS
A – 2022-23 Third Quarter Budget Report
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1
Third Quarter Financial Report
Fiscal Year 2022-23
Introduction
This financial report provides an overview of the City’s financial position through the third quarter of fiscal
year 2022-23 (July 1 - March 31, 2023) for the General Fund and the four enterprise operating funds. It
also provides an update on the status of the City’s Capital Improvement Program (CIP) projects and
progress on Major City Goals. Notable milestones or trends within the third quarter are addressed and
detailed throughout the document. The report is broken down into the following sections:
General Fund Update
As of March 31, 2023, operating expenditures and revenues trend on target with past years’ third
quarters.
1
1 General Fund Update/
Storm Expenditure Update
2
Enterprise Funds
Update
3 Major City Goal
Update
4 Capital Improvement
Plan Update 6 Outlook and
Conclusion
$79.4
Million in
Revenues
(YTD)
$72.2
Million in
OpEx (YTD)
9 MCG
Tasks
Completed
in Q3
11 CIP
Projects
Completed
through Q3
5 Fund Balances
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2
General Fund Revenue
Sales and Use Tax (including Measure G): At the end of March 2023, about 67% of the City’s forecasted
sales tax revenue for this fiscal year had been collected; this is generally consistent with prior years, due
to the timing of disbursements from the California Department of Tax and Fee Administration (CDTFA).
The actuals noted above include sales taxes earned July 2022 through February 2023. Sales tax receipts
remained surprisingly strong despite the rainy third quarter and reduced TOT (discussed below). Higher
labor and raw material costs along with inflationary pressures drive taxable good prices upward and
increase the City’s sales tax revenue. However, higher prices reduce consumer demand and increase the
City’s own expenditure costs. As talk of a recession over the next 12 months grows, the City may see a
weakening of sales tax receipts by the beginning of FY 2023-24; staff will continue to closely monitor sales
tax trends and provide updates as necessary.
Property Tax: The City receives most of its property tax revenue in the 3rd and 4th quarters of the fiscal
year and the variable timing explains why current year receipts appear lower than last fiscal year. The
County recently sent the City updated property tax estimates and the current budget is still in line with
the mid-year estimates. As a reminder, the City participates in the “teeter” system for property tax
meaning that disbursements are generally provided two times a year and the City foregoes any potential
delinquency fees in exchange for the County advancing all due applicable property taxes.
Transient Occupancy Tax (TOT): The City uses a monthly TOT forecast to help develop the annual budget.
In the latter half of the fiscal year, staff expected an overall decline of about 4% compared to FY 2021-22.
Overall Q3 (January- March) TOT receipts were only about 2% lower than last year. Staff expect April
receipts to be strong as weather conditions improved, Cal Poly held its annual open house, and the “super
General Fund Revenues Q3 Actuals % Received Total Budget Q3 Actuals % Received
Variance
from prior
year
Tax & Franchise Revenue
1 Sales Tax: LRM G20 (July-Feb only)18,605,007$ 72%30,141,532$ 20,221,278$ 67.1%8.7%
2 Sales Tax: Bradley Burns (July-Feb only)14,612,545$ 70%21,524,304$ 14,780,256$ 68.7%1.1%
3 Property Tax 15,678,822$ 78%21,473,397$ 14,752,110$ 68.7%-5.9%
4 Safety Prop 172 397,306$ 81%497,000$ 421,301$ 84.8%6.0%
5 Transient Occupancy Tax 7,463,904$ 82%10,704,000$ 7,870,402$ 73.5%5.4%
6 Utility User Tax 4,113,205$ 76%5,544,000$ 4,452,678$ 80.3%8.3%
7 Business Tax*2,883,654$ 102%3,157,566$ 3,263,104$ 103.3%13.2%
8 Cannabis Tax 726,989$ 73%1,100,000$ 776,073$ 70.6%6.8%
9 Franchise Fees 1,354,911$ 86%1,800,000$ 1,795,637$ 99.8%32.5%
10 Gas Tax (Special Revenue Fund)848,619$ 69%1,305,634$ 943,964$ 72.3%11.2%
11 SB1 - Gas Tax (Special Revenue Fund)612,248$ 67%1,019,914$ 612,525$ 60.1%0.0%
12 Total Tax & Franchise Revenue 67,297,208$ 75%98,267,347$ 69,889,327$ 71%4%
13 Development Review 4,424,527$ 66%6,593,830$ 4,326,404$ 65.6%-2.2%
14 Fire 1,191,657$ 84%1,598,847$ 1,294,050$ 80.9%8.6%
15 Parks & Recreation 1,054,068$ 65%1,988,802$ 1,153,315$ 58.0%9.4%
16 Police 325,764$ 53%640,600$ 461,801$ 72.1%41.8%
17 Grants & Subventions 1,539,632$ 204%698,775$ 1,134,510$ 162.4%-26.3%
18 Business Licenses* (Incl Cannabis)585,758$ 102%622,911$ 670,302$ 107.6%14.4%
19 Other Revenue 672,026$ 59%(288,187)$ 491,501$ --26.9%
20 Total 77,090,641$ 76%110,122,924$ 79,421,210$ 72%3%
*Business license and tax certificate renewals are due before September 30th, therefore anticipated revenue for the year has been collected.
2021-22 2022-23
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3
bloom” brought in tourists from around the state. Barring any significant shifts in the last quarter, TOT
revenue is on track to meet current year projections.
Utility User Tax (UUT): UUT revenue is trending about 8% higher than last fiscal year; however, this is
likely due to the timing of receipts. Staff will continue to monitor this revenue stream over the next several
months.
Business Tax: The City collects business taxes at the beginning of the fiscal year in amounts based on the
gross receipts of the previous calendar year. FY 2022-23 business tax revenues are significantly higher
than the previous year because FY 2021-22 receipts were based on 2020, the year hardest hit by the
pandemic. When looking back to FY 2019-20 as the base year, business tax revenue grew by about 6.4%
or an average of approximately 3.2% per year. This is more than the City had assumed in its projections
but is in line with the spike in economic activity that is reflected in sales and tourism taxes.
Cannabis Tax: Monthly cannabis tax revenue has stayed very consistent since the second retail location
opened in April 2021. Given that the third retail business did not open as expected, staff adjusted the
budget from $1.4 million to $1.1 million at mid-year. Revenue is expected to reach the revised projection.
Franchise Fees: These are fees on privately owned utility companies and other businesses that use the
City's infrastructure during daily business. The fees are calculated based upon contracts with the
businesses. The City has collected all of the fees expected as of Q3 and is on track to meet its budget
projection for the year.
Gas Taxes: Both the Highway User Tax (line 10) and the SB1 Road Maintenance and Rehabilitation
Apportionment (line 11) are tracking as expected. The budget for FY 2022-23 is based on information
provided by the State. This revenue is based upon a fee per gallon of gas and is not based on gas prices.
Development Review: Staff adjusted the Development Review Budget downward significantly with the
2022-23 Supplemental Budget due to fewer planning applications and building permits across all
development types. Staff believe that supply chain issues, workforce constraints, and rising interest rates
are the main drivers slowing development. Given these factors, revenues may come in lower than
projected for the year; however, Development Review revenues tend to be “lumpy” (meaning large
projects with high fees have a high influence on total revenue collection), so a strong fourth quarter could
shift the overall outlook.
Parks & Recreation: Parks and Recreation saw a 26% decrease in year-to-date revenue compared to FY
2021-22. The main reasons for this are:
1. Youth Services: There was a shift in the timing of childcare registration payment receipts from July
to May and June of 2022 which meant that registration fees that normally would have been
collected early in FY 2022-23 were instead collected at the end of FY 2021-22. Since FY 2023-24
childcare registration will occur in April through June of FY 2022-23, there should not be any
impact to the annual budget. Additionally, the summer camp programs were restructured to
supplement San Luis Coastal Unified School District’s no-cost, full day summer school
programming. This reduced operating hours (and revenue) for the Department's summer camp
program, but also resulted in temporary salary savings.
2. Golf: The Golf Course experienced significant damage from the 2023 winter storms and the
facilities were closed for 53 days in Q3. This was due to excessive rain, course saturation and the
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closure of a public bridge on the course, which diverted traffic through the maintenance path,
which is not accessible during and after rain events.
3. Facilities: Library and other indoor rentals have not fully returned following COVID-related
disruptions in booking patterns.
Other Departmental Revenue (Police & Fire): Police and Fire department revenue are on track with
projections.
Grants and Subventions: Grant revenues fluctuate from year-to-year based on availability and award
success. In many cases, this revenue helps offset expenditures and is not budgeted for. One reason it is a
bit lower than last fiscal year is because of less Mutual Aid reimbursements as a result of the milder
wildfire seasons compared to recent years.
Business and Cannabis Licenses: Business license fees are on track with projections. Business licenses are
renewed at the beginning of the fiscal year; therefore, most of the revenue for the year has already been
collected.
Other Revenue: This budget is negative because staff assumed $1.5 million in negative earnings due to
the Fair Market Value (FMV) of the City’s financial assets. Year-to-date, overall earning have been better
than expected, but the conservative budget will provide a buffer for any fourth quarter losses.
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5
General Fund Expenditures
Overall expenditure trends are on track with budget. The tables below include year-to-date consumption
for FY 2022-23 compared to budget. The “Total Expenditures & Obligations” column includes both costs
that have already been incurred and costs that are obligated on purchase orders.
Table 2 - Expenditures by Type:
There are no significant variances out of concern in the General Fund. It is expected that contract services
and other operating expenses may track above 75% because annual purchase orders are set up at the
beginning of the year and the funds are considered “Obligated” from that point forward. Salaries and
benefits should track at a consistent level and at this point in the year, it would be normal to expect about
70-75% of the budget to be expended. The year-to-date actuals indicate there is about 5% salary savings
(2% higher than the forecast assumption of 3%). This is due to a high number of vacancies in many
departments and the activation of the Fiscal Health Contingency Plan which has slowed the filling of some
vacancies. The ability to generate savings in the current year will be critical to help offset the unbudgeted
storm expenditures.
Expenditure Type Total Budget Obligations Expenditures Total Obligations
& Expenditures
%
Consumed
1 Salaries 44,661,307$ -$ 31,622,571$ 31,622,571$ 70.8%
2 Retirement/Benefits 10,604,795$ -$ 7,114,189$ 7,114,189$ 67.1%
3 PERS Unfunded Liability 11,853,918$ -$ 11,853,918$ 11,853,918$ 100.0%
4 Contract Services 13,879,229$ 2,890,401$ 8,159,398$ 11,049,799$ 79.6%
5 Other OpEx 5,309,349$ 583,724$ 3,362,808$ 3,946,532$ 74.3%
6 Utilities 3,125,941$ 64,467$ 2,302,025$ 2,366,492$ 75.7%
7 Storm Expenditures -$ 1,849,076$ 2,471,765$ 4,320,841$
8 Grand Total 89,434,538$ 5,387,668$ 66,886,673$ 72,274,341$ 80.8%
FY 2022-23 (July -March)
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Table 3: Expenditures by Department:
As of the third quarter, there are no significant variances to point out in the General Fund departments.
Some of the smaller departments (such as HR) are trending high because the approved equity adjustment
parameters for SLOCEA and MME employees were not distributed throughout the individual departments
but instead budgeted for within “non-departmental” – this will balance out at year end. The Fire
Department is trending slightly high due to overtime expenditures; however, some of this is offset by
mutual aid revenue.
* Includes storm expenditures as well as approved equity adjustments for SLOCEA and MME employees.
Absent storm-related expenditures, the budget is only 9% spent and has a $3.2 million remaining balance.
Department Total Budget Obligations Expenditures Total Obligations
& Expenditures
%
Consumed
1 Public Safety
2 Police 21,324,150$ 256,387$ 16,631,092$ 16,887,479$ 79%
3 Fire 14,688,305$ 133,954$ 12,084,077$ 12,218,031$ 83%
4 Community Services Group (CSG)
5 CSG Admin 761,286$ 25,662$ 482,131$ 507,792$ 67%
6 CDD 8,057,756$ 618,730$ 5,374,322$ 5,993,052$ 74%
7 Public Works 17,489,546$ 1,198,239$ 12,503,500$ 13,701,739$ 78%
8 Parks & Recreation 5,304,336$ 102,084$ 3,659,724$ 3,761,808$ 71%
9 Solid Waste - AB 939 425,544$ 3,250$ 174,105$ 177,355$ 42%
10 Internal Services
11 Admin/IT 11,917,223$ 783,321$ 8,773,188$ 9,556,509$ 80%
12 City Attorney 1,583,981$ 217,280$ 978,546$ 1,195,826$ 75%
13 Finance 2,415,835$ 69,472$ 1,893,410$ 1,962,882$ 81%
14 Human Resources 1,954,160$ 112,049$ 1,565,400$ 1,677,448$ 86%
15 Non-Departmental*3,512,416$ 1,867,241$ 2,767,179$ 4,634,420$ 132%
16 Total 89,434,538$ 5,387,668$ 66,886,673$ 72,274,341$ 81%
FY 2022-23 (July -March)
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An Update on Storm Expenditures
As noted in prior budget reports, the significant storms that hit the San Luis Obispo area in January and
March required unanticipated expenditures to support emergency protective measures, remove debris
from the public right of way, and make repairs to damaged City infrastructure. The City will use its
operating reserve as needed in FY 2022-23 and FY 2023-24 to address these unbudgeted costs and will
replenish the reserve back to the 20% reserve level, consistent with policy requirements, in FY 2024-25
(or as soon as reimbursement is collected). The maximum reimbursement for eligible costs is 93.75%
(75% from FEMA and 18.75% from CalOES), meaning that the City will pay a minimum of 6.25% for certain
storm related costs. If full reimbursement of eligible costs (93.75%) is not achieved, reductions will be
made in future CIPs.
Regular staff time spent in response to a declared emergency is typically not reimbursable, but overtime
is. It is important to note that as of the writing of this report, the City is only eligible for reimbursement
of costs related to the January storms under Federal and State emergency declarations, meaning that we
are not yet eligible for costs incurred because of the March storms. Despite that, staff is continuing to
closely track and document costs related to the March storms, in the event that reimbursement becomes
available.
Costs Incurred to Date
Tables 4A and 4B below summarize costs related to the January and March storms to date, by FEMA
category (see notes about reimbursement rules for each category). The amounts in the tables below
represent costs incurred to date, but a small number of invoices related to work in response to the
immediate threats of the storms are still outstanding. Staff is currently working with FEMA to create
“projects” to submit costs for reimbursement, and based on feedback from FEMA, costs may shift
between categories as the purpose of the expenditures are further vetted with FEMA.
Table 4A: January Storm Costs
1 FEMA Category Amount Notes
2 A - Debris Removal $1,478,241 Eligible for 100% reimbursement for costs incurred
before 2/25/23.
3 B - Emergency Protective
Measures
$174,687
4 C - Roads & Bridges $1,702,978
5 D - Water Control
Facilities
$0
6 E - Buildings and
Equipment
$1,305
7 F – Utilities $0
8 G - Parks, Recreation, &
Other
$14,995
9 Z - Management Costs
(incurred)
$8,621 Eligible for 100% reimbursement for management
costs, up to 5% of total FEMA reimbursement amount.
10 Total $3,380,827 Paid or submitted for payment
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Table 4A: January Storm Costs
11 Staff Time Attributable to
Incident
Amount Notes
12 Staff Costs - Regular Time $400,361 Funding for regular staff time is included in the FY
2022-23 budget and is typically not reimbursable.
13 Staff Costs - Overtime $62,043 The budget includes an assumption of some overtime
costs for departments, but the budgeted amounts do
not factor in work related to the storm. Storm related
overtime could cause costs to exceed budget, which
could require use of the operating reserve.
14 Management Costs
(tracked)
$13,898 Eligible for 100% reimbursement for management
costs, up to 5% of total FEMA reimbursement amount.
15 Total $476,302 Funded through FY 2022-23 budget
16 Total Costs to Date $3,857,129
FEMA will reimburse a maximum of 75% of eligible expenditures and CalOES will reimburse a maximum of 75% of the
remaining 25% not reimbursed by FEMA (18.75%). This share of cost generally applies to expenditures above, unless
otherwise noted.
Table 4B: March Storm Costs
1 FEMA Category Amount Notes
2 A - Debris Removal $36,981
3 B - Emergency Protective Measures $26,677
4 C - Roads & Bridges $0
5 D - Water Control Facilities $0
6 E - Buildings and Equipment $0
7 F – Utilities $0
8 G - Parks, Recreation, & Other $0
9 Z - Management Costs (incurred) $0
10 Total $63,658 Paid or submitted for payment
11 Staff Time Attributable to Incident Notes
12 Staff Costs - Regular Time $40,616 Funding for regular staff time is included in
the FY 2022-23 budget and is typically not
reimbursable.
13 Staff Costs – Overtime $7,603 The budget includes an assumption of some
overtime costs for departments, but the
budgeted amounts do not factor in work
related to the storm. Storm related
overtime could cause costs to exceed
budget, which could require use of the
operating reserve.
14 Management Costs (tracked) $0
15 Total $48,219 Funded through FY 2022-23 budget
16 Total Costs to Date $111,877
The Federal and State disaster declarations for the March storms do not currently cover San Luis Obispo, so the City is not
eligible for reimbursement of costs by FEMA or CalOES under the California Disaster Assistance Act (CDAA). It is possible
that San Luis Obispo will eventually be covered and eligible for reimbursement, and staff is closely monitoring updates to
the list of covered counties.
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A description of FEMA categories is as follows:
A - Debris Removal - Debris removal must be in the public interest and necessary to: eliminate
immediate threats to lives, public health & safety, and/or eliminate immediate threats of significant
damage to improved public or private property. Debris includes: trees and woody debris, building
components, sand, mud, silt & gravel, removal of temporary levees.
B - Emergency Protective Measures - Search & rescue, security, emergency pumping, sandbagging,
detour & warning signs, EOC activation, emergency & temporary repairs, overhead power lines,
emergency medical facilities, emergency evacuations, activities undertaken before, during and
following a disaster to save lives, protect improved property.
C - Roads & Bridges - Roads: surfaces, bases, shoulders, ditches, drainage structures, low water
crossings. Bridges: decking & pavement, piers, girders, abutments, slope protection, approaches.
Slope failures.
D - Water Control Facilities - Dams and reservoirs, levees, engineered drainage, channels,
aqueducts, sediment basins, shore protective devices, irrigation facilities, pumping facilities.
E - Buildings and Equipment – Buildings, structural components, interior systems including:
electrical, mechanical and contents.
F - Utilities - Water treatment plants, power generation & distribution facilities, including: natural
gas systems, wind turbines, generators, substations, and power lines.
G - Parks, Recreation, & Other - Playground equipment, swimming pools, bath houses, tennis
courts, boat docks, piers, picnic tables, golf courses, fish hatcheries, mass transit facilities.
Z - Management Costs - For subrecipients, FEMA provides Public Assistance funding for
management costs based on actual costs incurred up to 5 percent of the Subrecipient’s total award
amount.
Estimated Future Costs
In addition to the costs incurred to date, Public Works estimates $4.3 million of future expense to make
high-priority permanent repairs to damage caused by the January and March storms. This estimate is
based on initial assessments of damages and will continue to be refined as staff are able to develop a
better understanding of the damages of scope of work to be done. In addition to the high-priority work,
Public Works estimates an additional $9.5 million of expense to address medium and low priority work.
Staff is currently in the process of identifying which of the medium and low priority work should be done,
based upon need, availability of funding, and eligibility for reimbursement.
The 2023-25 Financial Plan includes a recommended allocation of $2.75 million to address these damages
in FY 2023-24 (this funding supplements the $9 million use of operating reserve that has been
programmed into the long-term forecast ($4.5 million in both the current year and next) for a total $11.75
million allocation for storm related response and repairs. Based on unbudgeted costs incurred to date
and estimated future costs for high-priority projects, it is expected that the $11.75 million will be sufficient
to cover storm related costs to address high-priority needs. Staff will continue to closely track these costs
and will continue to provide periodic updates to Council as part of future quarterly reports.
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Enterprise Fund Update
Utilities: Water and Sewer Funds
The tables below include third quarter actuals for FY 2022-23 compared to the budget. The “Total
Expenditures & Obligations” column on the expenditure table includes both costs that have already been
incurred and costs that are obligated on purchase orders.
Table 5: Water and Sewer Revenue (Year-to-date)
Revenue: Due to the timing of utility billing, the amounts above reflect eight months of revenue. Relative
to projected revenues for fiscal year 2022-23, first quarter revenues put the Utilities department on track
to hit revenue targets. Compared to last fiscal year, water sales are down due to the rainy winter (reduced
irrigation) but compared to the budget, the fund is still on track to meet projections.
Expenditures: There are no significant variances to point out at this time. It is normal and expected that
contract services and other operating expenses track above 75% because annual purchase orders are set
up at the beginning of the year and the funds are considered “Obligated” from that point forward. Staffing
Water/Sewer Fund
Revenue Q3 Actuals % Received Total Budget Q3 Actuals % Received Variance from
prior year
601-Water Fund 17,188,341$ 70%25,605,018$ 16,388,406$ 64%-5%
602-Sewer Fund 13,849,276$ 62%20,604,910$ 14,460,281$ 70%4%
Grand Total 31,037,617$ 66%46,209,927$ 30,848,687$ 67%-1%
FY 2021-22 FY 2022-23
Table 6: Expenditure Type
by Fund Total Budget Obligations Expenditures Total Obligations
& Expenditures % Consumed
1 601-Water Fund
2 Salaries 3,785,132$ -$ 2,480,974$ 2,480,974$ 66%
3 Retirement/Benefits 856,001$ -$ 631,466$ 631,466$ 74%
4 Debt Service 2,442,558$ -$ 389,192$ 389,192$ 16%
5 PERS Unfunded Liability 698,149$ -$ 698,149$ 698,149$ 100%
6 Contract Services 11,970,558$ 541,412$ 8,904,577$ 9,445,990$ 79%
7 Other OpEx 1,524,493$ 366,241$ 810,488$ 1,176,729$ 77%
8 Utilities 698,125$ 13,690$ 488,873$ 502,563$ 72%
9 Water Fund Total 21,975,016$ 921,343$ 14,403,720$ 15,325,064$ 70%
10 602-Sewer Fund
11 Salaries 3,745,035$ -$ 2,385,996$ 2,385,996$ 64%
12 Retirement/Benefits 852,906$ -$ 602,019$ 602,019$ 71%
13 Debt Service 1,380,938$ -$ 1,201,280$ 1,201,280$ 87%
14 PERS Unfunded Liability 722,419$ -$ 722,419$ 722,419$ 100%
15 Contract Services 1,510,102$ 488,866$ 691,115$ 1,179,981$ 78%
16 Other OpEx 1,681,054$ 528,227$ 1,083,680$ 1,611,907$ 96%
17 Utilities 942,423$ 9,467$ 467,683$ 477,150$ 51%
18 Sewer Fund Total 10,834,876$ 1,026,560$ 7,154,192$ 8,180,752$ 76%
FY 2022-23 (July -March)
2
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11
should track at a consistent level and the actuals seen above are due to staffing vacancies and subsequent
savings during staffing transitions.
Parking Fund
The tables below include third quarter actuals for FY 2022-23 compared to budget projection. The “Total
Expenditures & Obligations” column on the expenditure table includes both costs that have already
been incurred and costs that are obligated on purchase orders.
Revenue: Parking revenues have returned to “normal” levels after decreases due to the impacts of the
COVID-19 pandemic. FY 2021-22 revenues were particularly low because of staffing shortages and lack of
resources needed to enforce parking. Additionally, the parking structure control systems were not
functioning correctly which led to some lost revenue. In FY 2022-23, the combination of increased foot
traffic downtown, more consistent staffing levels, expanded enforcement hours, and properly functioning
technology have greatly improved the revenue picture for Parking.
Expenditures: There are no significant variances to point out at this time. It is normal and expected that
contract services and other operating expenses track above 75% because annual purchase orders are set
up at the beginning of the year and the funds are considered “Obligated” from that point forward. Staffing
should track at a consistent level and the actuals seen above are due to staffing vacancies and subsequent
savings during staffing transitions.
Transit Fund
The tables below include third quarter actuals for FY 2022-23 compared to the projection. The “Actuals”
column includes both costs that have already been incurred and costs that are obligated on purchase
orders.
Table 7: Parking
Fund Revenue Q3 Actuals % Received Total Budget Q3 Actuals % Received Variance from
prior year
Parking Fund 4,000,263$ 88%6,530,750$ 5,635,200$ 86%41%
Grand Total 4,000,263$ 88%6,530,750$ 5,635,200$ 86%41%
FY 2021-22 FY 2022-23
Table 8: Expenditure Type Total Budget Obligations Expenditures Total Obligations
& Expenditures % Consumed
1 Salaries 1,358,826$ -$ 818,193$ 818,193$ 60%
2 Retirement/Benefits 331,097$ -$ 182,678$ 182,678$ 55%
3 Debt Service 851,577$ -$ 500,148$ 500,148$ 59%
4 PERS Unfunded Liability 227,997$ -$ 227,997$ 227,997$ 100%
5 Contract Services 882,592$ 356,556$ 507,307$ 863,863$ 98%
6 Other OpEx 367,107$ 43,863$ 348,187$ 392,050$ 107%
7 Utilities 221,933$ -$ 150,766$ 150,766$ 68%
8 Parking Fund Total 4,241,129$ 400,419$ 2,735,276$ 3,135,695$ 74%
FY 2022-23 (July -March)
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12
Revenue: The Transit program saw an 11% year-over-year increase in local bus fare revenue. This is vital
to secure State Transit Development Act (TDA) funds which require 20 percent of the programs’ operating
budget be generated from local revenue (fares, bus passes, and payment from Cal Poly). Most State and
Federal revenue will not be received until the end of the fiscal year. At this time, the Transit Fund is
tracking as expected for its annual revenues.
Expenditures: There are no significant variances to point out at this time. The Transit Fund’s largest
operational cost is for annual transportation services through its provider, First Transit. Since this purchase
order has been set up for the year, most (78%) of the Contract Services budget has been obligated.
Table 9 - Transit Fund Revenue Q3 Actuals % Received Total Budget Q3 Actuals %
Received
Variance from
prior year
Federal 149$ 0%11,547,838$ -$ 0%-100%
Local (Bus Fare)662,784$ 96%850,000$ 733,644$ 86%11%
Other Revenue/ Interest Revenue (18,530)$ -60%499,496$ 298,778$ 60%-1712%
State 1,193,805$ 44%2,663,080$ 1,527,196$ 57%28%
Grand Total 1,838,208$ 25%15,560,414$ 2,559,618$ 16%39%
FY 2021-22 FY 2022-23
Table 10: Expenditure
Type Total Budget Obligations Expenditures Total Obligations
& Expenditures % Consumed
1 Salaries 244,470$ -$ 106,268$ 106,268$ 43%
2 Retirement/Benefits 32,168$ -$ 16,647$ 16,647$ 52%
3 Debt Service -$ -$ -$ -$
4 PERS Unfunded Liability 29,477$ -$ 29,477$ 29,477$ 100%
5 Contract Services 3,648,029$ 1,150,529$ 1,694,145$ 2,844,674$ 78%
6 Other Operating Expenditures 379,049$ 48,864$ 272,731$ 321,594$ 85%
7 Transit Fund Total 4,333,194$ 1,199,393$ 2,119,268$ 3,318,661$ 77%
FY 2022-23 (July -March)
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13
Major City Goal Update
Table 11: Major City Goal Tasks with Completion Dates in FY 2022-23 Q3
Continued on next page.
On track Problems emerged with no solution yet
Task delayed or potential setbacks with workable solutions
StrategyTask
StatusCompletion
Date
Updated
Completion
Date
Comments (if applicable)
1.1 a. Establish a process for the City to recognize and
promote Minority-owned businesses.FY23 Q2 Complete
The process is complete and operating based
on the data that is available. The upcoming
update to the business license form will
provide additional insight and opportunities
to improve the process.
1.1
b. Implement protocols within the City’s Office of
Economic Development to reach out to existing and
new Minority-owned/operated businesses to learn
of their experiences operating in SLO, and to identify
ways the City can be of support.
FY23 Q2 Complete
The process is complete and operating based
on the data that is available. The upcoming
update to the business license form will
provide additional insight and opportunities
to improve the process.
1.1
g. Develop and implement a scorecard to track
visitation to key areas of the City, employment, DEI
economic efforts and other relevant economic
indicators.
FY23 Q3 Complete
The employment report from Beacon
Economics based on the Employment
Development Department confidential data is
programed to be completed twice per year
and is funded through the 23-25 budget. The
Economic Development scorecard is
completed and available on the City's
website. It will continue to updated and
improved over time.
2.7
g. Update City's formal Public Engagement & Noticing
(PEN) procedures as well as other public outreach,
input efforts to increase diverse participation.
Develop tactics and cost to implement
FY23 Q3 Complete Completed review and ready for Council for
endorsement May 2, 2023
2.1
h. Hire Interns - Cal Poly, Cuesta, community
candidates - .25 FTE - 2 positions Y1 @ midyear / 2 -
Y2, full year
FY23 Q3 Ongoing Cal Poly partnership will allow the City to hire
interns at no cost to the City.
2.4 a. Develop and Adopt Diversity Statement for the
Organization FY23 Q4 Ongoing The Diversity/DEI Statement will be adopted
with the DEI Strategic Plan development.
2.9 a.Establish a process for the City to recognize and
promote Minority-owned businesses FY23 Q2 Ongoing
Process to include demographic questionnarie
in the renewal business license is currently in
implementation.
2.9
b.Implement protocols within the City’s Office of
Economic Development to reach out to all existing
and new Minority-owned/operated businesses to
learn of their experiences operating in SLO, and to
identify ways the City can be of support.
FY23 Q2 Ongoing
Getting business licenses to be updated to
identify and provide support to minority-
owned/operated businesses.
2.7
m. Park major maintenance and repairs specific to
Cheng Park improvements and Mission Plaza railing
improvements.
FY23 Q3 FY24 Q1
Mission plaza railing improvements have been
made. Cheng Park revitalization to start in FY
2023-24 Q1.
Diversity, Equity, Inclusion
Economic Recovery, Resiliency & Fiscal Sustainability
3
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14
Table 11: Continued - Major City Goal Tasks with Completion Dates in FY 2022-23 Q3
On track Problems emerged with no solution yet
Task delayed or potential setbacks with workable solutions
StrategyTask
StatusCompletion
Date
Updated
Completion
Date
Comments (if applicable)
3.1 b. Flexible Density Program (HE Program 2.15)FY23 Q3 Complete Complete and City Council adopted Ordinance
on April 18, 2023.
3.6
b. Develop a Strategic Plan to guide a sustained
effort of engagement by regional partners, non-
profit partners, and community members to identify
and implement coordinated solutions to chronic
homelessness.
FY23 Q3 Complete Complete and City Council adopted March 21,
2023.
4.3
a. Working with the Coastal San Luis Resource
Conservation District, complete existing planning
efforts and pilot program implementation at Johnson
Ranch Open Space and City Farm intended to
improve soil health and remove and store carbon, as
called for at CAP Natural Solutions task 1.1.
FY23 Q2 Complete
4.4
a. Establish consistent mode split tracking and
reporting method, consistent with performance
monitoring recommendations as called for in the
Active Transportation Plan and CAP Connected
Communities task 1.1.
FY23 Q2 FY 24 Q1 Staff are preparing a performance monitoring
report for early summer of this year.
4.4
m. Widen Higuera Street from Bridge to Elks to
address collision trends by providing a center left-
turn lane and improve bicycle facilities.
FY23 Q2 FY 24 Q4
Construction start delayed due to right-of-way
negotiations with Caltrans. Current schedule
has start of construction in mid-2024.
4.4 q. Replace SLO Transit bus shelters to maintain a
quality environment for new and future transit users.FY23 Q2 Complete
Completed the replacement/relocation of the
bus stop at 40 Prado Road. Addiotional bus
shelter replacement will resume at the
beginning of FY 2024.
4.5
a. Complete the "Resilient SLO" planning project
(Safety Element Update and associated CEQA) to
assess community vulnerability to the impacts of
climate change and adopt a resilience policy
framework in the City's General Plan, as required by
California Senate Bill 379.
FY23 Q3 Complete Complete and City Council adopted January
17, 2023.
Housing and Homelessness
Climate Action, Open Space and Sustainable Transportation
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15
CIP Update – Completed and Ongoing
Table 12: Completed and Ongoing Construction Projects (July 2022 – April 2023)
ID#Project
Total Budget
(through FY
2022-23)
Estimated
Construction
Completion
Date
Additional Comments
1 2583 Greta Storm Drain Repair $ 128,428 Complete
2 Area 6 and 7 Curb Ramps $ 1,000,000 Complete
3 Silt Removal 2022 $ 405,829 Complete
4 40 Prado Bus Shelter Relocation $ 105,000 Complete
5 Fire Station 2 Bathroom Remodel $ 83,500 Complete
6 Tank Farm Road and Orcutt Roundabout $ 5,502,486 Complete
7 SLO Creek at Pismo/Johnson Emergency Repair $ 577,272 Complete
8 Fire Station 1 Administration and Fleet
Maintenance Roofing Replacement $ 671,919 Complete
9 City Hall Meeting Room Tenant Improvements $ 420,000 Complete
10 Walnut and Morro Strom Drain Repair $ 199,000 Complete
11 Groundwater Contamination Characterization
Project $ 5,320,593 Complete Construction Ongoing. Includes SWRCB Grant
Funds.
12 Calle Joaquin Lift Station Replacement $ 9,225,565 Q2 FY 23-24 Construction Ongoing
13 Wastewater Resource Recovery Facility Upgrade $ 143,376,754 Q2 FY 23-24 Construction Ongoing
14 Verde/Luneta/Ramona/Broad Sewer
Replacement $ 2,392,000 Q4 FY 22-23 Construction Ongoing
15 2022 Roadway Sealing $ 5,550,000 Q4 FY 22-23 Project in suspension until May 2023, due to
material delays.
16 Santa Rosa at Montery Intersection
Improvements $ 1,067,084 Q4 FY 22-23 Project in suspension until May 2023, due to
material delays.
17 Parks and Recreation Office Rehabilitation $ 605,000 Q4 FY 22-23
Construction is substantially completed, with
staff occupying the offices. Project will be
complete once delayed furniture and other
materials are recieved.
18
Cultural Arts District Parking Structure Phase 1A -
Dry Utility Undergrounding and Phase 1B - Site
Preparation
$ 9,778,889 Q1 FY 23-24
Phase 1A (Utility Relocation) is in the
Construction Phase. Phase 1B (Site Demolition)
has been awarded and will begin in May.
19 North Chorro Neighborhood Greenway $ 5,308,455 Q4 FY 23-24 Construction beginning April 2023.
20 Tank Farm and Orcutt Roundabout Off-site
Mitigation Planting $ 59,980 Q4 FY 22-23 Construction Ongoing
21 Railroad Safety Trail Fencing $ 350,000 Q4 FY 22-23 Construction to start following material delivery.
22 Water Treatment Plant Generator Improvement
Project at Facility 98 $ 6,489,425 Q4 FY 23-24 Construction to start following material delivery.
23 842 Palm Parking Structure Gateless Entry $ 175,000 Q4 FY 22-23 Construction to start following material delivery.
24 Transit Facility Electric Vehicle Charging
Infrastructure $ 1,059,183 Q3 FY 23-24
25 2022 Pedestrian Crossing Improvements $ 841,644 Q2 FY 23-24 Construction to start following material delivery.
26 North Broad Street Neighborhood Park $ 958,000 Q2 FY 23-24
27 Cheng Park Revitalization $ 500,000 Q1 FY 23-24
28 2023 Arterials $ 9,688,450 Q2 FY 23-24 FY 23-24 Capital Project.
Completed & Ongoing Construction Capital Projects (July 2022 - April 2023)
4
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16
Table 13: Status of Major Projects in Design
ID#Project
Total Budget
(through FY 2022-
23)
Estimated
Construction
Start Date
Additional Comments
29 Mission Plaza Restrooms and Kiosk Cafe $ 1,484,825 Q2 FY 23-24 Construction to begin following concerts in
the plaza series.
30 Cultural Arts District Parking Structure Phase 2 $ 9,778,889 Q1 FY 23-24
Budget reflects expenditures to date on
project phases. Phase 2 of the project is
currently in the Design Phase.
31 Mid-Higuera Bypass $ 872,301 Q3 FY 23-24 The majority of the project is funded with
County Zone 9 funding.
32 Prado Road Bridge and Road Widening $ 7,281,563 Q1 FY 24-25 Completion of CEQA document. Pursuing
permit packages, 60% plans
33 California and Taft Roundabout $ 450,085 Q1 FY 25-26
Right of way acquisition has delayed this
project. Design and ROW work is to be
funded in the FY 2023-24 CIP with
construction funding in FY 2025-26.
34 Prado Road Interchange $ 4,225,520 Q4 FY 25-26
Alternative analysis and environmental
document. Pursuing advertisement of
CEQA document and final project report
35 Public Safety Center $ 190,685 To Be
Determined
Project is moving forward with scoping
and conceptual design phase. Estimated
Construction Date pending scope and
budget availability.
Status of Major and Legacy Projects in Design
Page 842 of 1165
17
Fund Balances
Fund balance represents unspent expenditures, and revenues over expense brought forward from the
previous year (ending balance) in order to fund the next year’s budget. In the case of the enterprise funds,
the “Working Capital” is a shown below. Working Capital is equal to the fund’s current assets minus
current liabilities. The total balance includes reserved or restricted amounts.
Table 14: Fund Balance/Working Capital by Fund
101 - General Fund $ 19,665,073
601 - Water Fund $ 25,655,380
602 - Sewer Fund $ 41,205,584
611 - Parking Fund $ 13,895,890
621 - Transit Fund $ 1,308,205
Outlook and Conclusion
Fiscal year 2022-23 is shaping up to meet revenue projections, and measures such as the Fiscal Health
Contingency Plan which was activated on January 27, 2023 in order to address costs related to damages
caused by the January storms should create operating expenditure budget savings. These two factors will
set the City up for a strong start to fiscal year 2023-24. By the time the 2022-23 audited financials are
published in December 2023, there should be more clarity about economic conditions, thus putting
Council in an informed position on how to address any one-time budget allocations (if available).
Staff presented the Strategic Budget Direction report to Council on April 18, 2023 which included updated
five-year forecasts and a point-in-time financial outlook. Overall, the General Fund is in good financial
condition and will utilize its healthy reserve balance as needed to pay for storm related expenditures. The
additional CalPERS payments over the last five years have made a dent in the City’s unfunded pension
liability; however, the negative 7.5% investment return in 2022 severely impacted the CalPERs funded
status and will ultimately increase the City’s future unfunded liability payments.
6
5
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Page 844 of 1165
FY 2022-23 3rd Quarter Budget Review
May 16, 2023
1
Recommendations 2
Receive and file the Fiscal Year 2022-23 Third Quarter
Budget report.
Development and presentation of the quarterly reports conforms with the
following adopted Budget Policies:
•Financial Plan Purpose and Organization-Goal Status Reports
which requires that the status of major program objectives be formally
reported to the Council on an ongoing,periodic basis.
•Financial Reporting and Budget Administration-Interim
Reporting which requires the City to prepare and issue timely interim
reports on the City’s fiscal status to the Council and staff.
POLICY CONTEXT
Q3 Update: General Fund
3
$79.4 Million
in Revenues
(YTD)
$72.2 Million
in OpEx
(YTD)
9 MCG Tasks
Completed in
Q3
11 CIP
Projects
Completed
through Q3
•Tax revenue outperforming projections, but fees for service
underperforming projections
•Salary savings expected to exceed the 3% assumption used in the
budget.
•Some non-staffing savings expected; however, the impacts of
inflation on cost of services, supplies, and utilities will need to be
analyzed at year end
•Unbudgeted storm expenditures around $3.4 million
Revenue Overview Major Funds 4
•All funds currently on trend with budget
•Water sales are down due to the rainy winter (reduced irrigation) but
compared to the budget, the fund is still on track to meet projections
•Revenue picture for Parking has improved from combination of
increased foot traffic downtown, more consistent staffing levels,
expanded enforcement hours, and properly functioning technology
Fund FY22 Actuals FY 23 Actuals
% Received
(compared to
budget)
Variance from
prior year
General Fund $ 77,090,641 $ 79,421,210 72%3%
Water Fund $ 17,188,341 $ 16,388,406 64%-5%
Sewer Fund $ 13,849,276 $ 14,460,281 70%4%
Parking Fund $ 4,000,263 $ 5,635,200 86%41%
Transit Fund $ 1,838,208 $ 2,559,618 16%39%
Expenditure Overview Major Funds
Percent expended by type
Staffing
70%
Contract Services
80%
Other OpEx
80%
Utilities
70%
5
Fund Total Budget Total Consumption % Consumed
101-General Fund $ 89,434,538 $ 72,274,341 81%
601-Water Fund $ 21,975,016 $ 15,325,064 70%
602-Sewer Fund $ 10,834,876 $ 8,180,752 76%
611-Parking Fund $ 4,241,129 $ 3,135,695 74%
621-Transit Fund $ 4,333,194 $ 3,318,661 77%
Grand Total $ 130,818,754 $ 102,234,513 78%
Accomplishments
9 Major City Goal
tasks completed
•Updated the City’s Public Engagement & Noticing
Procedures (PEN) as well as other public outreach
efforts to increase diverse participation
•Flexible Density Program (HE Program 2.15)
adopted ordinance on April 18
•Homelessness Strategic Plan adopted on March 21
6
Capital Projects Completed in Q3:
City Hall Meeting Room Tenant Improvements
Walnut and Morro Storm Drain Repair
SLO Creek at Pismo/Johnson Emergency Repair
Storm Cost Update-Year to Date
January
Storms
Costs
March
Storm
Costs
Total
1 Debris Removal $1,478,241 $36,981 $1,515,222
2 Capital and Other Costs $1,902,586 $26,677 $1,515,222
3 Staff Costs $476,302 $48,219 $524,521
4 Costs to Date $3,857,129 $111,877 $3,969,006
5 Estimated future expenses for high priority
repairs based on initial assessment
$4,300,000
6 Minimum storm costs expected for
emergency response and priority projects
$8,269,006
7 Estimate included in forecast*$11,750,000
* Includes budget for CIP projects that may not be 100% reimbursable
7
Looking towards year end
Use any available undesignated fund balance to:
1.Replenish reserves to policy level
2.Make additional payment to CalPERs per policy
Longer term outlook:
Reassess and adjust unfunded liability pension forecast as part of the
2024-25 Supplement or 2025-27 Financial Plan.
Actuarial reports available for 2022-23
Clearer picture of economic outlook
Hedging against the unknowns
Debt Ceiling
Recession
Inflation
Natural disasters
8
Recommendations 9
Receive and file the Fiscal Year 2022-23 Third Quarter
Budget report.
Development and presentation of the quarterly reports conforms with the
following adopted Budget Policies:
•Financial Plan Purpose and Organization-Goal Status Reports
which requires that the status of major program objectives be formally
reported to the Council on an ongoing,periodic basis.
•Financial Reporting and Budget Administration-Interim
Reporting which requires the City to prepare and issue timely interim
reports on the City’s fiscal status to the Council and staff.
POLICY CONTEXT