TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Onyx Jones, Interim Finance Director
Libby Bretthauer, Financial Services Manager
Marcelo Serrano, Budget and Financial Analyst
SUBJECT:Title
Fiscal Year 2025 Mid-Year Budget Report Including Funding Appropriations and Staffing Adjustments; and Fiscal Year 2026 Budget Development Calendar (Partially Budgeted) (Interim Finance Director Jones).
(Estimated Time: 30 Mins.)
A) RECEIVE REPORT
B) APPROPRIATE FUNDS
C) APPROVE STAFFING ADJUSTMENTS
Body
_________________________________________________________
RECOMMENDATION:
Staff recommends that the City Council: 1) receive the Mid-Year Budget Report for Fiscal Year (FY) 2025 and FY 2026 budget development calendar; 2) appropriate $1,198,568 along with an adjustment to revenues of $1,978,651 from the General Fund; 3) appropriate $1,699,414 from Other Funds as identified in Attachment #1; and 4)
approve staffing adjustments as identified in Attachment #1.
FISCAL IMPLICATIONS:
Every January, City staff analyzes fiscal year-to-date activity and prepares mid-year projections for revenues and expenditures to evaluate potential budget variances and forecast year-end results. This report focuses on those mid-year projections and explains budget variances to provide a current representation of the City’s fiscal position.
Current trends indicate that General Fund revenues are estimated to come in over the adjusted budget by $1,978,651 (2.0%). General Fund expenditures are projected to be $1,198,568 (1.2%) over the adjusted budget, resulting in an operational deficit of approximately $351,750. Attachment # 1 provides detail on the projected General Fund revenues and expenditures through the end of the Fiscal Year (to June 30, 2025).
Budgeted year-end transfers to other funds will also impact General Fund balance. Totaling approximately $4.1 million, these transfers support operations in the Street Lighting & Landscape Fund, capital projects in the Capital Improvement Program (CIP) Fund and the Pension Stabilization Fund.
Considering year-end revenue and expenditure projections, and these transfers included in the Adopted Budget, the unreserved General Fund balance is projected to be approximately $8.7 million at fiscal year-end.
BACKGROUND:
City Council adopted the FY 2025 Budget on June 4, 2024, with an estimated General Fund operating budget surplus of $508,264. During the November 19, 2024 City Council meeting, a Budget Update for the first Quarter of FY 2025 was presented. City Council has the authority to approve additional appropriations throughout the fiscal year. To date, net budget adjustments approved by the City Council and encumbrances carried forward from the prior year resulted in an adjusted General Fund budget deficit of $1,131,833.
DISCUSSION:
The City Council and staff respond to the community’s needs through the allocation of resources. The budget is both a spending plan for the City’s available financial resources and the legal authority for City departments to spend these budgeted appropriations on goods and services that align with public priorities and meet the needs of Manhattan Beach residents.
Funding essential operations and capital priorities will be further discussed during the FY 2026 budget process.
In the current fiscal year, General Fund revenues are estimated to come in over the adjusted budget by just under $2.0 million (2.0%). Expenditures are projected to be around $1.2 million (1.2%) over the adjusted budget (the adjusted budget includes City Council-approved amendments during the current year as well as encumbrances carried forward from the prior year).
When comparing estimated year-end revenues and expenditures irrespective of the budget, expenditures are expected to exceed revenues by $351,750.
|
FY 2025 Adopted Revenues |
$98,993,155 |
|
FY 2025 Adopted Expenditures |
98,484,891 |
|
Adopted Surplus/(Deficit) |
$508,264 |
|
|
|
|
Net Budget Adjustments to date |
(1,640,097) |
|
FY 2025 Adjusted Budget Surplus/(Deficit) |
($1,131,833) |
|
Projected Revenues over Budget |
1,978,651 |
|
Projected Operating Expenditures over Budget |
(1,198,568) |
|
Projected General Fund Surplus/(Deficit) |
($351,750) |
FY 2025 Recommended Budget Adjustments
To align the Budget with year-end projections, staff is proposing the City Council authorize the following adjustments to Revenues and Expenditures in FY 2025. These mid-year budget adjustments, which are described in detail in Attachment #1, have been identified by staff as time-sensitive priorities.
General Fund proposed adjustments is a net surplus of $780,083, which reduces the anticipated deficit at year-end.
GENERAL FUND
|
Measure MMB Local TUT |
$1,200,000 |
|
Fire Mutual Aid Reimbursement |
475,000 |
|
Business License Tax |
303,651 |
|
Total GF Revenue Adjustments |
$1,978,651 |
|
Fire Mutual Aid Reimbursement |
$450,000 |
|
Utilities - Electricity |
302,329 |
|
Fire Overtime Sworn (IOD) |
150,109 |
|
Development Impact Fee Study |
70,325 |
|
Parking Lot 3 Analysis |
67,212 |
|
Ground Lease Negotiation & Fiscal Analysis |
65,000 |
|
Density Bonus Application Review Consultant |
60,000 |
|
Add Accountant |
33,593* |
|
Change Admin Assistant to Executive Assistant |
- |
|
Total GF Expenditure Adjustments |
$1,198,568 |
*Prorated
OTHER FUNDS
|
Insurance Fund |
Liability Claims Paid |
$1,500,000 |
|
Proposition A Fund |
Parking Lot 3 Closure - Summer Shuttle Services |
74,000 |
|
Police Safety Grants Fund |
Police Overtime - LA IMPACT |
70,000 |
|
Information Tech. Fund |
Multi-Factor Authentication |
40,000 |
|
Water Fund |
Upgrade Water Supervisor to Water Superintendent |
15,732* |
|
Measure M Fund |
Parking Lot 3 Closure - Leased Parking Spaces |
6,200 |
|
Building & Operations Fund |
Change Maint. Supervisor to Project Coordinator |
(6,518)* |
|
Total Other Funds Expenditure Adjustments |
$1,699,414 |
*Prorated
Five Year Forecast
As part of the budget process, staff is currently refining a five-year financial forecast and growth factor projections for both revenues and expenditures to estimate long-term fiscal sustainability. The City’s Financial Policies and fund transfers, such as the allocation of budgetary savings derived from the issuance of Pension Obligation Bonds (POB), will also be reviewed with the Finance Subcommittee at a future meeting. According to the City’s Pension Policy, the current distribution of estimated annual savings from the issuance of POBs allocates 40% to the CIP Fund and 60% to a Section 115 Trust for future pension costs. Additional policy recommendations, including the allocation of new Measure MMB Local TUT funds, will be thoroughly reviewed with the Finance Subcommittee and presented to the City Council during the FY 2026 Proposed Budget presentation in May.
FY 2026 Budget Development Calendar
After reviewing requests from each Department and input from the Workplan and Budget Priorities Community Meeting on February 25, 2025, a Proposed Budget for FY 2026 will be prepared and presented to City Council on May 6. Following this initial presentation, one or more City Council Budget Study Sessions will be held on May 13 and 27 (tentative dates) with an additional opportunity to discuss the budget at the City Council meeting on May 20. The public hearing and budget adoption is scheduled for June 3, 2025, before the new fiscal year begins on July 1. The FY 2026 budget timeline is attached.
PUBLIC OUTREACH:
On February 11, 2025, the City launched a community budget online survey. The survey is being communicated through the City website, emails, social media and signage around City parks and facilities. City staff will also be attending the Farmers Market and visiting various community groups to target in-person outreach to these established groups.
Future opportunities for public input include May 6, 2025, when the FY 2026 Proposed Budget is presented to the City Council, and during subsequent City Council Budget Study Sessions tentatively scheduled for May 13 and 27, as well as at the City Council meeting on May 20. Questions and comments may also be submitted anytime via email to Budget@manhattanbeach.gov <mailto:Budget@manhattanbeach.gov>.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it consists of an administrative activity of government that will not result in direct or indirect physical changes in the environment. Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Fiscal Year 2025 Mid-Year Budget Report
2. Fiscal Year 2026 Budget Timeline
3. PowerPoint Presentation