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Home My WebLink AboutCC 10-10-2023 Item No. 11. General Fund Sales Tax Repayment Reserve_Staff PresentationOctober 10, 2023 Sales Tax Repayment Reserve CC 10-10-2023 Item No. 11 CDTFA Audit Forecast Assumptions Forecast Balancing the Budget Next Steps and Recommended Action Agenda CDTFA Audit California Department of Tax and Fee Administration (CDTFA) Audit Letter received advising the City of the audit Dec. 2021 Letter received updating the City on the years the audit is covering May 2022 CDTFA advised the City of their decision verbally with dollar impacts to follow in 4-6 months Mar. 2023 •Efforts to limit impacts to City/County at the State level have been unsuccessful •Statewide changes to CDTFA regulations are proving difficult to impossible •Unfavorable decisions from the Office of Tax Appeals •Final resolution could be years away New Developments Forecast Assumptions Forecast Assumptions Adopted Budget (June 2023) •Facility debt paid off in FY 2029-30 •No additional development projects included •Recession (no growth) in FY 2024-25 and FY 2028-29 for all revenues •Minimal funding ($500k) for Special Projects •No transfers to Capital Reserve New Assumptions (Sept 2023) •Budget strategy shift from vacancies to service level reductions (SLR) •Revised sales tax forecast ($2M reduction from $11.4M to $9.4M) •Committed fund balance for CDTFA payback ($56.5M) for April 2021-June 2023 Forecast FY 2023-24 Adopted FY 2023-24 Amended Change General Fund Unassigned 44.1 3.6 (40.5) Capital Projects Reserve 10.0 - (10.0) Section 115 Pension Trust 17.2 17.2 - Economic Uncertainty Reserve 24.0 18.0 (6.0) Sales Tax Repayment Reserve - 56.5 56.5 Total $95.3 $95.3 - Capital Project Funds (420 & 429)$13.5 $13.5 - Sales Tax Repayment Reserve ($ In millions) $3.0M -$5.8M -$11.4M -$7.2M -$7.4M -$6.0M -$8.2M -$8.3M -$5.5M -$5.3M -$5.4M General Fund Annual Operating Surplus/(Deficit) Adopted Budget (June 2023) $3.1M -$8.1M -$10.3M -$8.6M -$9.3M -$8.4M -$11.2M -$11.9M -$10.7M -$11.9M -$12.9M General Fund Annual Operating Surplus/(Deficit) New Baseline (Sept 2023) Balancing the Budget •Ongoing budget reductions are needed •Reductions are estimated to be 23% of General Fund budgets •Need to identify expenditure reductions estimated at $15M •Need to identify revenue enhancements Balancing the Budget •Budget reduction proposals will be based on services impacted •Position reductions are an outcome •Exclusion of essential items (e.g., utilities, insurance) •Exclusion of cost-recovered programs •Exploring alternative service delivery models •Implementing strategic reductions •City as an employer of choice Service Reductions •Revenue Tax Measures •Sponsorships •Grants •Fee Increases Revenue Enhancements See page 190 of the Adopted Budget for more information Next Steps and Recommended Action Next Steps FY 2023-24 First Quarter Update Nov. 21 Council Budget Update (tentative) Jan. FY 2023-24 Mid- Year Update Feb. 27 Council Budget Update (tentative) Apr. FY 2024-25 Proposed Budget Study Session May 14 FY 2024-25 Final Budget Adoption June 18 Roadmap to FY 2024-25 Budget Adoption and Balancing Co u n c i l G o a l S e t t i n g / Wo r k P r o g r a m Budget Update 1st Quarter Report Budget Update -Mid-Year Report -CIP Fee Study & Revenue Tax Measures Budget Update -SLR Review #2 -Community Meeting Updates -Festivals & Fee Waivers FY 2024-25 Proposed Budget Community Funding FY 2024-25 Adopted Budget Bu d g e t U p d a t e Se r v i c e L e v e l R e d u c t i o n (S L R ) P r e v i e w October 2023 November 2023 January 2024 April 2024 June 2024 February 2024 December 2023 Community Budget Meeting #1 Council Goal Setting/ Work Program Commission/ Committee Feedback Labor Contracts (placeholder) March 2024 Budget Update 3rd Quarter Report May 2024 City Hall Update Community Budget Meeting #2 Budget Update -Audit Update -Committed Reserve Blackberry Farm Update •Approve an amendment to the City’s Committed, Unassigned Fund Balance, and Use of One Time Funds Policy to: •Create a General Fund Sales Tax Repayment Reserve with an initial allocation of $56.5 million •Authorize staff to increase the Sales Tax Repayment Reserve when the City receives additional sales tax revenue in dispute •Decrease the General Fund Capital Projects Reserve by $10.0 million •Decrease the General Fund Economic Uncertainty Reserve by $6.0 million Recommended Action Questions? Thank you!