The purpose of this agenda item is to provide an update regarding the Fiscal Year 2024-2025 budget based upon the revenues received and expenses incurred through the first five months of the fiscal year (July 1 – November 30, 2024). In addition, staff recommends Council approve budget amendments.

Revenue

The City’s three major sources of revenue are property taxes, sales and use taxes, and transient occupancy taxes.  The City received its first tranche of property taxes in December 2024.  Property taxes received to date total $5.2 million, which is 60% of the total budgeted property tax revenue.  The State remits sales and use taxes on a quarterly basis.  The State sales taxes received to date include receipts for the July – September quarter plus an advance for the October – December quarter.  The remaining quarterly balance will be received in February 2024.  The $1.6 million received in State Sales Tax thus far aligns with budget projections.  Measure C local sales tax of approximately $2.7 million also aligns with budget projections thus far, with receipts for November and December to be received in January and February 2025 respectively.  Transient occupancy tax (TOT) revenue of approximately $4.2 million is currently outpacing its budget target as the revenue to date reflects remittance from the reporting periods of July and October 2024.  Revenue from Charges for Services totals approximately $1.1 million (44% of the budget) while Other Revenue (which includes Business License Renewals) totals approximately $2.3 million, or 78% of budget.  Both revenues align with budget projections.

A summary of revenues to date is as follows:

Expenditures

The City’s largest expenditure category is salaries and benefits, which account for 37% of the Fiscal Year 2024-2025 Adopted Budget.  For the period of July through November, the salaries and benefits expenditures, inclusive of the annual Worker’s Compensation insurance premium, total $5.3 million.  These expenditures represent 33% of the total budgeted salaries and benefits expense and generally align with budget projections (see discussion of overtime below).  Services and supplies expenditures total $5.2 million, or 42% of the budget.  The City paid the annual unfunded pension liability (UAL) payment of approximately $2.4 million in July and will be making the $1 million payment to the Section 115 trust in March 2025.  Debt service principal payments have all been executed for Fiscal Year 2024-2025.  Capital expenses currently reflect spending on 23 active projects, including the Sunset Center window and City Hall roof replacements, Stream/Drainage Improvements, Police Building project analysis, and the San Antonio walkway rebuild.  An additional $1.2 million is currently encumbered within Capital Outlay and the remaining budget is available for adopted CIP projects. Worker Comp claims expenditures are below budgeted expenditures.  

A summary of expenditures to date is as follows:

Budget Adjustments

 
Revenue

 
Ambulance Services (-$177,000): Based on current ambulance operations, the budget for ambulance services revenues is overstated and should be reduced.

 
Planning & Building Permits (-$203,000 total): Based on permit activity year-to-date, the budget for permit revenue for the fiscal year is overstated and should be reduced.

 
Traffic Safety Violations ($64,000): Based on year to date activity, the budget for traffic safety vioations is understated and should be increased.

 
Interest & Investment Earnings ($122,000): Based on year to date activity, the budget for interest income is understated and should be increased.

 
Expenses

 
Ambulance ($167,480): Additional funds are needed for Overtime and Vehicle Maintenance costs.  Overtime costs are forecast to exceed budget as staffing shortages are covered with overtime hours, and vehicle maintenance costs have escalated as the old Ambulance continues to require repairs while the City waits for its replacement (current scheduled to be received in the fall). 

 
Fire ($86,600):  Additional funds are needed for Vehicle Maintenance costs and to reimburse the City of Monterey for fire services and a Jaws of Life purchased for the fire engine.

 
Police ($268,000): Additional funds are needed for Overtime and Vehicle Maintenance costs.  Overtime costs have exceeded budget and are forecast to continue to do so as vacant positions are filled but will continue to require training.  Likewise training and contract services costs are exceeding budget as a number of new recruits are brought on-line in the next few months.  Finally, Vehicle costs are exceeding budget.

 
Non-Departmental ($55,000): An increase in the budget for utilities costs is needed in order to fund projected budget shortfalls.

 
PERS UAL (-$75,865): A decrease in the budget for payment of the unfunded pension liability is due to the City realizing savings over the budgeted amount.  

 
Capital Outlay

 
Sunset Center Retaining Wall Project ($400,000): Based on the condition of the wall, it is recommended that the City Council consider adding this project to the current year’s project list.

 
Sunset Center Elevator Modernization ($50,000): The elevator system at the Sunset Center is a significant aging asset.  This project will utilize experts who originally built the elevators in order to determine how best to repair or replace this asset in the safest and most cost effective way.

Tax revenues through the November/December timeframe are generally running ahead of budgeted to-date amounts.  Based on the gains realized, the City anticipates that it will have adequate funds available to meet the above $194,000 revenue, $501,215 expense and $450,000 Capital outlay needs.  As a result, there is no net change to the Fiscal Year 2024-2025 budget for operational needs.