City projects $78 million revenue surplus but up to $20 million year-end deficit as personnel costs bite

Chairman Shook and the Finance Executive Committee heard a second-quarter FY25 financial status report that projects the city will end the fiscal year with roughly $78 million in revenue above the operating budget but as much as a $20 million year-end deficit after expenses, largely driven by personnel and public-safety costs.

The city—s funded budget was described at $889.6 million after a midyear adjustment that added $30 million from fund balance. "Revenues are projected to end the year with a surplus of $77,900,000," Lawrence Davis Jr., revenue chief for the Office of Revenue, told the committee, adding that property tax, local-option sales tax and hotel-motel tax are outperforming budget. "We—re benefiting from a favorable rate environment," Davis said.

The nut graf: while revenues are outperforming expectations across several categories, Finance staff warned that expense pressures particularly personnel and overtime in public safetyare large enough that, even after the midyear adjustment, the city could finish FY25 with a deficit unless additional controls or one-time revenues are identified.

Office of Finance Chief Mohammed Bala opened the presentation and said efforts on both revenues and expenses are underway. Sean Gabriel and other finance staff presented detail showing total revenues through December at about $560.5 million (63% of the funded total) with a projected year-end revenue forecast of $931.8 million. Key revenue drivers cited by Davis included:

- Property tax: projected to exceed budget by about $15.2 million, attributed to rising property values in Fulton and DeKalb counties. - Local-option sales tax: projected surplus of about $11.9 million, attributed to continued consumer spending and large sporting events. - Hotel-motel tax: projected to exceed budget by about $6.1 million, helped by newly developed hotels and tourism tied to major events.

On the expense side, Sean Gabriel highlighted a projected year-end expense total near $987 million, a $97 million variance from the funded budget. "Personnel accounts for about 85% of the overall year-end variance," Gabriel said, noting reclassifications to capital and trust funds reduce but do not eliminate the pressure. He told the committee that reclass activity lowered a personnel projection of $645 million to about $623 million.

Finance staff said public safety is the main driver of overtime and personnel overruns. Gabriel and Davis said Atlanta Police Department overtime targets and reduced extraordinary event demands should help lower overtime going forward. "One of the biggest drivers for overtime in the first half of the year was additional staff needs at the public-safety training facility," a finance presenter explained, adding that as operations stabilized, those overtime demands have diminished.

Courtney Knight, chief of treasury, debt and investments, briefed the committee on the city's debt and investment portfolios. Knight said the city has about $7.3 billion of debt outstanding, roughly half attributable to the Department of Aviation and about 35% to Watershed. He said the city achieved about $30 million of savings in the Watershed portfolio and $4 million for the Department of Parks and Recreation through refunding and restructuring. Knight added the investment portfolio was yielding just over 4.5% during the quarter.

Committee members questioned staff on specific controls and follow-up. Councilmember Hillis asked for a detailed list of ADA projects tied to Parks and Recreation funding and for an accounting of what had already been completed or was in progress; staff agreed to provide that list. Council members also asked for clarifications on the vacancy review board process; finance staff described the board as a scrutiny mechanism requiring business-case justification for refilling positions.

The presentation noted the midyear budget adjustment increased the funded budget figure and allowed use of fund balance for one-time items; staff said additional one-time revenue options are being explored and vacancy-review and encumbrance controls are in place as budgetary controls.

Ending: Committee members thanked finance staff for the briefing; no final policy decision was taken beyond noting the projections and ongoing controls. Staff will continue to monitor revenues and expenses and bring updates to subsequent meetings.