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3.07 FY 2021-22 Midyear Budget Review 8200 Westminster Boulevard City of Westminster Westminster, California 92683 Staff Report File #:22-77,Item #:3.7 Meeting Date: Westminster City Council SUBJECT FY 2021-22 Midyear Budget Review. From:Erin Backs, Finance Director Prepared by:Erin Backs, Finance Director ____________________________________________________________ RECOMMENDED ACTION Staffrecommends that theMayor and City Council receive and file the report. BACKGROUND nd Thisreportcontainsinformationonresourcesandexpendituresthroughthe2quarterofFY2021- 22, which is the period between July 1, 2021 and December 31, 2021. GENERAL FUND Top Revenues Thetoprevenuesourcesforthe ’sGeneralFundaresalestax,locallycontrolledtransactionuse salestax,propertytax,utility user’staxandchargesforservicewhichcombinedmakeup88%of totalGeneralFundrevenue.CurrentprojectionsforFY2020-21areinlinewithbudgetednumbers withtheexceptionofsalestax/transactionusetaxwhichisprojectedtobehigherthanbudgetedand investmentandrentalwhichareprojectedlowerthanbudget.Theinvestmentandrentalcategory includesinvestmentearningsandrentalincomefromcityownedproperties.Atyearend,thefinancial statementsincludeanaccountingentrytomarkinvestmentstomarketvalue.Thisentrygets reversedonJuly1.AsoftheendofDecember,thisentrylookslikeitwillreduceinterestearningby $1 million at year end which accounts for the drop shown in this category. City of WestminsterPage 1 of 5Printed on 3/3/2022 powered by Legistar™ File #:22-77,Item #:3.7 Meeting Date: FY2021-22revenuesarebudgetedat$66.7millionandcurrentlyprojectedtobe$70.7millionat yearend.Thecityhasreceived$22.7millioninrevenueintheGeneralFundor34%asofDecember 31, 2021. Sales Tax/Transaction Use Tax Thefollowingchartsfromthe City’ssalestaxconsultant,HdLCompanies,representthirdquarter calendaryearsalesfromJuly2021throughSeptember2021.Year-over-yearcomparisonshow Westminster’s receipts up 15.4% from the third quarter sales in the prior period. ThemajorincreasesareduetotheimpactsofCOVID-19intheprioryear.Salesfromdepartment stores,electronicsandappliances,andothergeneralconsumergoodsretailersrebounded26%as shoppersflockedbacktobrick-and-mortarstoresafterayearofpandemicprecautions.Casualdining restaurantsrebounded96%comparedtolastyear,whenmanyeaterieswereclosedforseating. Servicestationsalsoposteda56%improvementasgasolinepricesspikedabove$4.50pergallon and auto and transportation results increased 6% with gains capped by limited inventory. Thesecondchartshowsthecategorychangesforthetransactionusetax.Thereisnocategoryfor poolsbecausethetransactionusetaxgeneratedfromonlinesalesisallocateddirectlytothecity. Westminster’svoter-approvedMeasureSSadd-onsalestaxincreased19.9%,greaterthanthesales tax increase previously discussed, largely due to strong local demand for used cars by residents. Netofaberrations,taxablesalesforallofOrangeCounty,grew19.1%overthecomparabletime period; the Southern California region was up 19.9%. Sales and Use Tax City of WestminsterPage 2 of 5Printed on 3/3/2022 powered by Legistar™ File #:22-77,Item #:3.7 Meeting Date: Locally Controlled Funding - Transaction Use Sales Tax (Measure SS) SalestaxandtransactionusetaxreceiptsareremittedtotheCityinarrearssothequartertotals showninthetablebelowrepresentfourmonthsofreceiptsfromtheCaliforniaDepartmentofTaxand FeeAdministration(CDTFA).ProjectionsfromtheCity’ssalestaxconsultant,HdLCompanies, anticipateFY2021-22receiptstobe$3.3millionabovetheactualsreceivedforFY2020-21.Thisisa stillaveryearlyestimateaswehaveonlyreceivedthefourmonthsofreceiptsforFY2020-21. However, the increase would be $4.2 million higher than budgeted. ItisimportanttonotethatwhiletheserevenueprojectionslookveryfavorablefortheCity,thecurrent uncertaintyoftheeconomy;higherpricesforfuel;merchandiseandservicesdisplacingmoreof consumer’sdisposableincome;andexpectedinterestratehikesresultinginmorecostlyfinancingfor automobiles,homes,andconsumerloanscouldimpacttheseprojections.Inaddition,thelocally controlledtransactionusesalestaxexpiresinDecember2022,whichamountstoan$8milliondrop inrevenueforFY2022-23and$16millionstarting inFY2023-24significantlyincreasingtheCity’s budget shortage. YTD Q2Prior YearsIncrease/ BudgetActual% ofQ2 Actual(Decrease) 2021-222021-22Budget2020-21from PY Sales and Use Tax$ 17,413,000$ 6,682,541 38.4%$ 5,611,056 $ 1,071,485 Transaction Use Tax 13,729,000 5,402,99639.4% 4,566,083 836,914 $ 31,142,000$ 12,085,53738.8%$ 10,177,139$ 1,908,399 Property Tax Propertytaxrevenueistrendingslightlyhigherthanthepriorfiscalyear.Basedontheestimatesfrom theCountyofOrangetaxledger,thisrevenuesourcewillcomeinabout$200thousandabove budget.Againthisisveryearlyoninthefiscalyearasmostoftherevenuefrompropertytaxreceipts come in December and April. City of WestminsterPage 3 of 5Printed on 3/3/2022 powered by Legistar™ File #:22-77,Item #:3.7 Meeting Date: YTD Q2Prior YearsIncrease/ BudgetActual% ofQ2 Actual(Decrease) 2021-222021-22Budget2020-21from PY Property Tax$ 18,077,800$ 3,771,407 20.9%$ 3,475,395 $ 296,012 Utility Users Tax UtilityUsersTaxisslightlyhigherthantheprioryearandprojectedtocomeinhigherthanbudgetby $300thousand.Theactualreceivedfor2020-21was$4.5millionandtheprojectionfor2021-22is $4.6 million. YTD Q2Prior YearsIncrease/ BudgetActual% ofQ2 Actual(Decrease) 2021-222021-22Budget2020-21from PY Utility Users tax$ 4,300,000$ 1,932,315 44.9%$ 1,787,126 $ 145,190 Charges for Service ChargesforservicearelookingpositiveforFY2021-21.ThisispartlyduetotheCostRecovery StudyupdateadoptedinAugustof2021andthedevelopmentactivitywithintheCity.Receiptsto dateare9%abovethetimelastyearandoverallprojectionstoyearendarefavorable.Theactual receivedfor2020-21was$5.48millionandtheprojectionfor2021-22is$5.53million.Thisrevenue categoryisdependentontheeconomyanddevelopmentwithinthecitywithinthecity.As construction slows, revenue is reduced. YTD Q2Prior YearsIncrease/ BudgetActual% ofQ2 Actual(Decrease) 2021-222021-22Budget2020-21from PY Charges for Service$ 5,184,981$ 2,532,433 48.8%$ 2,314,163 $ 218,270 Expenditures nd GeneralFundexpendituresaretrackingonbudget.Expendituresforthe2quarterofFY2021-22 are$1.66millionoverthepriorfiscalyearatthesametime.ThisisduetotheincreaseinPERS costs and OCFA contract costs. YTD Q2Prior YearsIncrease/ BudgetActual% ofQ2 Actual(Decrease) 2021-222021-22Budget2020-21from PY Expenditures $ 67,989,080$ 39,801,266!58.5%!$ 38,141,841$ 1,659,425 Midyearprojectionsshowgeneralfundexpenditures$1.7millionunderbudget.Thisisprimarilydue tothelargenumberofvacanciesinthecity.Atbudgetadoptionwehad30vacantpositionsandas ofJanuarytherewere25vacantpositionsincluding10policeofficers.Thesavingsrealizedfrom thesevacanciesisoffsetbytheincreaseinovertimeandpart-timestaffingtocovertoshortages.Any increase in costs between now and the end of the year will reduce these savings. FY2021-22expendituresarebudgetedat$68millionandcurrentlyprojectedtobe$66.3millionat year end. We have spent $39.8 million in the General Fund or 59% as of December 31, 2021. ThenetanticipatedchangeinfundbalanceorcontributiontoreservesforFY2021-22is$4.37million whichis$5.7millionhigherthanthebudgetamount.Again,thisisonlyaprojection.Theuncertainty City of WestminsterPage 4 of 5Printed on 3/3/2022 powered by Legistar™ File #:22-77,Item #:3.7 Meeting Date: oftheeconomy,increasedcoststoconsumersforfuelandservices,reducedinventory,interestrate increase and inflation will impact how the fiscal year actually ends. FISCAL IMPACT rd Therearenobudgetadjustmentsrequestedatthistime.Thenextupdatewillinclude3quarteror nine months of data and will be provide as part of the annual budget review process. LEGAL REVIEW The City Attorney’s Office has reviewed and approved this report as to form. CONCLUSION TheFY2021-22budgetisinlinewithbudgetednumbersasofDecember31,2021.TheGeneral Fundisprojectedtoendtheyearwithanincreasetoreservesof$4.4million.Itisimportanttonote thatthisincreaseisaone-timesurplus,notanongoingsavings.Ofthisincrease$4millionis attributedtorevenueandspecifically$2.4milliontothetransactionusesalestaxwhichexpiresnext year.Thesavingsof$1.7millioninexpendituresisduetovacanciesandasfillthesepositions,the savings will be eliminated. ThenextupdatewillbepartoftheFY2022-23budgetreviewprocess.CityCouncilapprovedthetwo -yearbudgetinJuneof2021.TherevisedbudgetdiscussionwillincludeupdatedprojectionsforFY 2021-22,revisedbudgetnumbersforFY2022-23andcapitalprojectallocationsforcouncil consideration. ATTACHMENTS 1.General Fund Revenue/Expenditure Budget Summary REVIEWED BY Christian Bettenhausen, City Attorney Erin Backs, Finance Director Christine Cordon, Interim City Manager City of WestminsterPage 5 of 5Printed on 3/3/2022 powered by Legistar™