Finance director presents audited financial report and midyear budget review; council hears sales-tax decline and cost-allocation plan

The city’s finance director presented the audited Comprehensive Annual Financial Report (ACFR) for the fiscal year ended June 30, 2024, and a midyear budget review. The auditor issued an unmodified (clean) opinion on the ACFR and the city expects a Government Finance Officers Association reporting award for meeting recognized reporting standards.

Staff explained the ACFR’s purpose — audited, historical financial statements and disclosures — and highlighted that an updated year-end close produced an increase in the general fund balance (from a previously reported $10.5 million to $11.5 million). The finance director reviewed the citywide financial position as of Dec. 31 (working capital and current-asset balances) and described major spending drivers (enterprise projects such as the recycled-water project and operating costs across public safety and internal-service funds).

On the revenue side, staff told council that city charges for services and grants remain significant; however, sales-tax receipts have been lower than the budgeted forecast, creating an estimated $2.6 million gap from projections in recent years. The director said the city has adjusted budgets in response and expects to manage through revised projections; he called the sales-tax shortfall "disappointing" but not yet cause for alarm.

Staff also presented the city’s indirect cost allocation plan (internal-service fund methodology) and explained how administrative costs, IT, garage, billing/dispatch and other central services are allocated to operating departments and partner agencies. The director said the current overall indirect allocation rate is just over 10 percent and explained that some high-cost commodities (for example, fuel and power purchases) are discounted in the allocation model to avoid passing volatile purchase costs into overhead allocations.

Council members asked about reserve levels, the recycled-water project reimbursements and potential near-term risks tied to federal grant uncertainty and broader economic trends. Staff said grants and reimbursements are being monitored, the previously authorized line of credit remains unused and that cash flow pressures from reimbursable grants have eased as reimbursements arrived.

Staff outlined next steps in the budget calendar and said departmental budget presentations will start at upcoming council meetings and the proposed budget will be brought forward in June.