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Midyear review: property tax gains, internal-service fund increases highlighted for council
Summary
Finance staff told the Budget and Finance Commission that stronger-than-expected assessed value growth could add about $1.2 million to the general fund and recommended no new programmed uses pending uncertainties including a $4.2 million unfunded liability due in 2025-26.
Stephanie Mayer of the Finance Department presented the city's midyear financial review and departmental reports for the fiscal year through Dec. 31, 2024, to the Budget and Finance Commission on Feb. 13.
Mayer told commissioners that property tax revenue and property tax in lieu of Vehicle License Fee (VLF) were stronger than projected, citing assessed-value growth of about 5.42% that supports an approximately $1.2 million recommended increase to the general fund revenue budget. She said other tax sources were expected to remain roughly flat for the fiscal year and noted that transient occupancy tax receipts were expected to materialize later in the year when receipts from the Marine Avenue hotels begin to post.
On charges for services and non-tax revenues, Mayer noted a modest increase in parking and ambulance fees (about $400,000 combined) and a timing-related shortfall in recreation program revenue tied to part-time staffing delays. She said the city's enterprise funds were tracking within expectations; the transit fund was below last year's level because the city did not purchase buses this year as it did in the prior year.
Mayer also summarized changes in internal-service funds. After reviewing 2023-24 actuals, the department proposed moderate increases to internal-service fund contributions, driven in part by higher liability insurance premiums, elevated energy costs for city facilities, and replenishment needs for recently replaced IT equipment. Mayer said the combined increase across those plans was about $3.2 million (roughly a 9% aggregate increase) and that staff expected those contributions to moderate in coming years.
Mayer called attention to two looming demands on the general fund: a CalPERS/unfunded liability payment of about $4.2 million scheduled for 2025-26 and continuing capital needs for harbor tidelands and uplands enterprise funds. Given those and other uncertainties, staff recommended that the council not commit the midyear balance to new programmed expenditures at this time.
Commissioners asked for department-level budget and expenditure reports. Mayer and staff said monthly department-by-department reports are already run for analysts and agreed to provide the commission with department-level revenue/expenditure reports (the department said January reports would be available the week following the meeting) and to place that material on the commission's March agenda for discussion.
A motion to receive and file the financial reporting through Dec. 31 and the midyear materials was made and approved.
