Agenda Date: 05/21/2024
Subject:
Title
2024 Mid-year Budget Update
Body
|
From: |
James L. Becklenberg, City Manager |
|
Prepared by: |
Tiffany Hooten, Finance Director |
|
Presentations: |
James L. Becklenberg, City Manager |
|
|
Tiffany Hooten, Finance Director |
PURPOSE:
Staff will be providing an update on the 2024 Budget which sets the stage for the preparation of the 2025 Budget and long-term financial planning.
LONG-TERM OUTCOME(S) SERVED:
High Quality Governance
DISCUSSION:
At the May 14, 2024 council study session, an overview of the strategic plan was shared with city council. The strategic plan is a guiding document for the long-range vision for the city. This plan links the comprehensive plan, Envision Littleton, and the annual budget cycle. This plan plays a pivotal role in informing the city’s annual budget cycle.
As city leadership begins the 2025 budget cycle, staff would like to provide an update on 2024 budget trends as well as the unaudited results of the 2023 fiscal year. These two years are the foundation of the development of the 2025 budget and budget philosophy. By providing an understanding of what, if any, funds are available for the ensuing budget year, staff can align those resources with strategic initiatives and further ensure resources are optimally allocated.
2023 Results
In reviewing 2023 results (unaudited) and excluding the one-time Rocket booster contribution and expenditures, General Fund revenues were higher than in 2022 by $2.9M or 5.6%. Expenditures were higher than 2022 by $4.9M or 9.8%. The ending Fund balance was $21.8M.
While the change in fund balance for 2023 was higher than estimated, a key trend that initially presented itself mid-year 2023 was a slight decline in retail sales tax. It was initially thought to be inconsistent fluctuations in sales tax revenues and would correct itself in 2023; however, this decline continued through the end of 2023. The estimated 2023 retail sales tax revenues were $41.2M and the actual 2023 retail sales tax revenues were $39.3. This was a decline of $1.9M in 2023.
Why is this important? In the first half of 2023, retail sales tax was increasing which provided the basis for the 2024 budgeted retail sales tax revenues. It is necessary to update the 2024 retail sales tax estimates based on this downward trend.
2024 Budget Trends and Revisions
During the development of the 2024 budget, an increase of $4.4% for retail sales tax was projected based on the first half of 2023 retail sales tax revenues. It has become evident in the first quarter of 2024, that this downward trend is likely to continue. To better help understand the financial impact of this change, staff has revised the 2024 revenue estimates, as well as provided revisions to expenditures to reflect known savings.
Additionally, this revision for decreased retail sales tax revenues in 2024 has a compounding negative effect each year thereafter in the five-year financial plan resulting in a lower fund balance percentage to operating expenditures in 2028 of 17% compared to 27% in the 2024 budget. The city’s fund balance target range, by policy, is 18%-25%.
Why is this important? This downward revision of retail sales tax revenues provides the foundation of the development of the 2025 budget and budget philosophy.
2025 Budget Principles
The 2024 budget provided much needed additions to the budget through reallocations and new strategies allowing continued progress on council goals. Incorporating the downward trend in retail sales tax in 2024 provides guidance for the development of the 2025 budget principles.
The 2025 budget principles will focus on:
• Continuing implementation of the critical needs and expanded service levels provided in the 2024 budget in areas such as public safety, development services, and several other areas.
• Incorporating the strategic plan and align the budget with council’s strategic initiatives.
• Policy questions will be reflective of accomplishing the 2-3 year initiatives by providing forecasting of necessary resources to realize those strategies and workplans; most notably, those resources are staff capacity and funding.
• Enhancing project details of long-term capital planning and assuring capital budget alignment with council’s priorities.
Focusing on the areas above will allow the city to systematically achieve the community’s long-range vision for Littleton.
BACKGROUND:
The preparation of the budget is an annual process and includes varying levels of the entire organization.
Prior Actions or Discussions
The city’s budget is discussed at several budget sessions throughout the year.
FISCAL IMPACTS:
At this time, there are no fiscal impacts and will present themselves as staff develops the 2025 budget in alignment with strategic priorities.
STAFF RECOMMENDATION:
N/A
ALTERNATIVES:
N/A
PROPOSED MOTION:
Proposed Motion
N/A