Agenda Item Wording:
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Receive the Annual Comprehensive Financial Report (ACFR) for the City of Visalia for the 2021-22 fiscal year.
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Deadline for Action: 2/6/2023
Submitting Department: Finance and Technology Services
Contact Name and Phone Number: Kari Williams 559-713-4298
Department Recommendation:
It is recommended that the City Council acknowledges receipt of the ACFR for the year ended June 30, 2022 and provide comments as appropriate.
Background Discussion:
The attached Fiscal Year (FY) 2021-22 ACFR represents the City’s financial, operational, and current economic condition for the fiscal year ending June 30, 2022. The City’s financial statements for this period have been audited by The PUN Group, Certified Public Accountants, the City’s independent auditing firm. Their Independent Auditors Report has been incorporated into the ACFR document. This item is presented to the City Council each year for review and acknowledgement.
State law requires the City of Visalia to prepare a complete set of audited financial statements. The attached 2021-22 ACFR fulfills this requirement.
The City’s Independent Auditors, The PUN Group, have audited the City’s financial statements prepared by finance staff for the fiscal year ended June 30, 2022 and have provided an unqualified (clean) opinion. An unqualified opinion concludes that the ACFR presents fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City; and the respective changes in financial position.
There were no audit findings for fiscal year 2021-22.
The ACFR is prepared annually in accordance with generally accepted accounting principles (GAAP) and reporting standards established by the national Governmental Accounting Standards Board (GASB), as verified during the independent auditor’s examination. The June 30, 2022 ACFR continues to comply with the GASB reporting standards.
The financial statement information and audit opinion, as well as additional narrative and statistical information, is presented within the ACFR. Below is a listing of the different sections in the report:
• Transmittal Letter by the City Manager and Finance Director
• Independent Auditor’s Report
• Management’s Discussion and Analysis
• Government-wide Financial Statements
• Fund Financial Statements
• Notes to Basic Financial Statements
• Required Supplementary Information
• Supplementary Information: Combining Statements and Budgetary Comparison Schedules
• Statistical Section
• Compliance Section
The City issues copies of its ACFR to financial institutions and credit rating agencies for use in evaluating the City’s financial position, as well as to the City Council, City Management, and interested citizens. The City’s ACFR will also be available on the City’s web site.
The Government Finance Officers Association of the United States and Canada (GFOA) awards a Certificate of Achievement for Excellence in Financial Reporting which is only valid for a period of one year. The City recently received this award for the prior fiscal year (2020-21) and has now received the award for excellence in financial reporting for 36 consecutive years. The current report has been submitted and is under consideration for award. City staff believes the current report continues to exceed financial reporting standards.
New Reporting Requirements
The following Governmental Accounting Standards Board (GASB) Statements have been implemented and have had an effect on the current financial statements:
GASB Statement No. 87, Leases
The objective of the Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. The provisions of this statement are effective for fiscal year 2021-22. The City has implemented this statement for the June 30, 2022 year end.
The following Governmental Accounting Standards Board (GASB) Statements are effective for this fiscal year but had no effect on the current financial statements:
GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period
The objectives of this statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. The provisions of this statement are effective for fiscal year 2021-22. There was no effect on the financial statements as a result of implementing this statement.
GASB Statement No. 92, Omnibus 2020
The objectives of this statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics. The provisions of this statement are effective for fiscal year 2021-22. There was no effect on the financial statements as a result of implementing this statement.
GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation
The primary objectives of this statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. The provisions of this statement are effective for fiscal year 2021-22; paragraphs 4 and 5 were effective in fiscal year 2019-20. There was no effect on the financial statements as a result of implementing this statement.
Additional GASB Statement Reporting Requirement Items
From time to time, there are some GASB statement reporting requirements that the City is obligated to do that have a material impact on the financial statements. This year, two reporting requirements had a significant effect on the financial statements.
GASB Statement No. 31 requires the City to adjust investments held at year end to the fair market value of those investments as of June 30. This adjustment is an accounting entry and can increase or decrease the value of those investments held by the City with the offset effecting interest earnings for the year (Uses of Money and Property). This in no way affects current cash or the cash the City expects to receive for those investments when they mature, as the City holds their investments to maturity. This year’s fair market value adjustment was a very large decrease of $16.6 million which resulted in negative interest earnings for the year. This decrease was mainly a result of the Federal Open Market Committee’s (FOMC) swift increases to the Federal Funds Rate of 1.50% at the end of the fiscal year after two years of rates being held at 0.00 - 0.25%. The Federal Funds Rate has a significant impact on the value of the types of investments the City can purchase for its portfolio.
GASB Statement No. 68 requires the City to record and adjust any net pension liability it may have as well as any pension related components. Any adjustment from year to year, whether positive or negative, is offset to pension expense. The information used to make these pension related adjustments is based on the prior fiscal year and is calculated and received from CalPERS annually. This year’s adjustment to the net pension liability and other pension related components was a large reduction to the net pension liability which resulted in a large decrease to pension expense for the year of $13.7 million. This was mainly due to CalPERS earning 21.3% on their investments for the reporting period which was fiscal year 2020-21.
Overall, for the fiscal year, these two reporting requirements, combined, had a net accounting decrease in City-wide fund balance of $2.9 million, which was allocated out across all funds.
Financial Statements
The financial statements are separated into Governmental and Enterprise (Business) type funds. Governmental Funds and Enterprise funds have different methods of accounting. Table 1 - Governmental and Enterprise Funds shows these differences.
Table 1- Governmental and Enterprise Funds
Governmental Funds
Governmental funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses. This basis focuses on (1) how cash and other financial assets can be readily converted to available resources and (2) the balances left at year-end that are available for spending. Capital assets and other long-lived assets along with long-term liabilities are not presented in the Governmental Fund Financial Statements. The City uses governmental funds to account for the General Fund (which includes the Emergency Reserve Fund), Measure N, Housing and Community Grants, Housing Successor, American Rescue Plan, Transportation, Civic Center, as well as many other special revenue and capital project funds such as Measure T and Measure R.
2021-22 ACFR Summary
Fiscal year 2021-22 saw significant growth in all major revenue categories for Visalia, except for one, as prices for goods and services were greatly affected by high inflation that was occurring in the country as well as the continued economic rebound from the COVID-19 pandemic. The California consumer price index stood at 8.3% at the end of June 2022. Employment in the country remained strong as the national unemployment rate as of June 2022 was at 3.6%, below the natural unemployment rate of 4% that the Federal Open Market Committee likes to see.
Fiscal year 2021-22 ended the year with an overall increase of $11.5 million in the total economic-sensitive revenue category for the General Fund as shown in Table 2 - Economic Sensitive Revenues.
Table 2 - GF Economic Sensitive Revenues
(as shown in the Financial Statements)
Sales Tax grew at 21% for fiscal year 2021-22, mainly due to the high inflation rate that occurred during the fiscal year as well as the new businesses that were opened. The main areas of the growth in Sales Tax for Visalia were in General Retail (department stores, apparel stores) which grew $2.9 million; Business to Business (office equipment, industry) which grew $1.3 million; Food Products (restaurants, food markets, liquor stores) which grew $.9 million; and Transportation (auto sales, service stations) which grew $.7 million. Property Tax continued its growth trend increasing 7% as existing houses sales, new development, and property values increased in Visalia. Travel remained a priority for people in fiscal year 2021-22 as Transient Occupancy Tax (TOT) revenue had an increase of 38% as compared to last year. Franchise Fee revenue increased 13% in fiscal year 2020-21 mainly due to increases in gas and electric revenue as the City continued to have new development as well as the utility companies increased fees to their customers. Business License revenue decreased slightly at -1% as compared to last year. Business License revenue was up more than normal last year as several businesses were remitting prior year delinquencies to bring their accounts current for fiscal year 2020-21 so that they were eligible for various COVID-19 relief programs.
At June 30, 2022, Visalia had 12,953 licensed businesses operating in the City, a net increase of 448 as compared to last year. These businesses include private manufacturing, technology research, retail and service businesses, educational services, healthcare and social assistance, consulting, arts and entertainment, hospitality services, along with non-profit institutions.
Fiscal year 2021-22 had continued strong growth in the main General Fund revenue categories of Sales Tax, Property Tax, and Other Taxes, which consists of Transient Occupancy Tax and Franchise Fee revenue. It seems that consumers continued to put money into the economy in fiscal year 2021-22 possibly as a result of remaining funds available to them from COVID-19 pandemic relief received from both the Federal and State governments. Also contributing to the growth in revenues was the increase in inflation over the last year. The inflation rate in California was at 8.3% on June 30, 2022 and was high for most of the fiscal year averaging 6.70%. With careful management, the City was able to continue to provide service enhancements, infrastructure improvements, and increases in employee compensation. As shown in Table 3 - General Fund Statement of Revenues & Expenditures, the General Fund ended the year with a change in fund balance and surplus of $15.70 million. Contributing to the surplus was not only the growth in the main General Fund revenue categories, but also in charges for services (engineering fees and recreation programs) as these fees were up $2.1 million when compared to the prior year as development activity continued to be active and we had a full year of recreation programs operating. Offsetting the large revenue growth this fiscal year, total expenditures were up $4.7 million as compared to last year as the City had increases in employee compensation of 4%, which also affects pension obligations, as well as increases in operating costs due to a full year’s operation of recreation programs and increases in most all other costs due to inflation.
Table 3 - General Fund Statement of Revenues & Expenditures
(in millions)
The General Fund revenues came in over expenditures by $25.4 million. The Expenditures category included capital projects which totaled $1.7 million. The category Other Financing Sources and Uses of $9.6 million includes transfers out to Risk $5.0 million (operations), Convention Center $1.9 million ($0.6 million operations + $0.2 million capital set-aside + $1.1 million debt), Animal Control $1.6 million ($1.0 million operations + $0.6 million debt), Baseball $0.4 million ($0.1 million operations + $0.3 million capital), and Debt service funds $0.7 million (debt).
Once you take Revenues minus Expenditures less Other Financing Uses, the General Fund had a change in fund balance/surplus of $15.7 million. Of the surplus, $1.5 million was transferred to the Emergency Reserve Fund and $14.2 million was transferred to the Civic Center Reserve Fund as per the current Council Policy on surpluses. The current General Fund emergency reserves replenishment policy states that any revenues in excess of actual expenditures would continue to be deposited in the emergency reserve to maintain the reserve at 25% of operating expenditures and then all remaining surplus is to be deposited into the Civic Center Reserve Fund.
This is the ninth consecutive year that the General Fund has ended the year with a surplus. However, we must remember that the balance between revenues and expenditures in the General Fund can be volatile from year to year. The City must continue to monitor increasing operating costs (i.e., rising pension costs, health, technology), the economy for a possible downturn (recession) due to continued high inflation rates as well as the ending of COVID-19 stimulus packages, and continue to seek new opportunities to increase tax base revenues to maintain fiscal sustainability.
The General Fund’s fund balance (including the emergency reserve) is $53.8 million at fiscal year-end. It is important to remember that fund balance is not cash. Fund balance is the amount left after liabilities are subtracted from assets. A positive fund balance means that there are more assets than liabilities; a negative fund balance means just the opposite. The General Fund’s fund balance is split into the following categories (2021-22 ACFR pg 91):
Ø Nonspendable Fund Balance - $1.6 million for items such prepaids, deposits, supplies, long term receivables and advances to other funds.
Ø Restricted Fund Balance - There are currently no restricted fund balances.
Ø Committed Fund Balance - $17.6 million for Council authorized encumbrances (contracts awarded that are not paid out) and specific purposes such as the Emergency Reserve (currently at $17.4 million, 25% of the General Fund’s operating costs).
Ø Assigned Fund Balance - $27.9 million for advances to custodial funds, capital projects that have been budgeted but not started, CalPERS unfunded liability payment for FY 2022-23 and the Successor Agency Note.
Ø Unassigned Fund Balance - $6.7 million is primarily used for three reasons:
1. Grants - To temporarily advance one time expenditures which are awaiting grant funds. The City receives many grants, and typically, funds that have grants will need a cash advance due to the timing of the grant reimbursements and the crossing of fiscal years. Grant advances are typically paid back within 1-2 years.
2. Impact Fees - To advance money in order to keep moving forward on large projects. When advances happen, the amount of the advance is transferred out of unassigned fund balance to assigned fund balance. When the advances are paid back to the general fund those amounts are transferred back to the unassigned fund balance. If the money is not available to advance from the unassigned funds then the money would need to come from the committed funds that have been set aside for emergency reserves or capital projects. This is not ideal because this could postpone projects or cause there to not be enough in reserves for when it is needed. Advances for capital projects are typically paid back over larger periods of time (5-10 years). For example, the fire impact fees assisted with the construction of stations 55 and received an advance that was recently paid back. Also, the police impact fees are projected to need an advance of $1.5 million to make the VECC debt payments for the life of the debt which will be fully paid off in 2029.
3. Prior Year Adjustments - The City financial statements are a summary of the year and are comprised of many numbers, categories, funds, objects and task numbers. As staff continues to audit numbers and compare to prior years, accounting errors are found and need to be adjusted. For example, expenditures for FY 2021-22 may have been coded to FY 2022-23 and are found when reviewing FY 2022-23. In addition, the Financials include receivables that may be written off due to bad debt or fees waived once they have complied with City regulations. If the Unassigned Fund Balance category did not exist, these adjustments would need to come from the committed funds that have been set aside for emergency reserves or capital projects.
4. However, these funds may be considered a part of the Emergency Reserves and at the end of the fiscal year, at Council’s discretion, can be added to the Emergency Reserves or any other designation. Staff does not recommend depleting this category because, in the end, using committed funds that have been set aside for emergency reserves or capital projects is not ideal for advancing for grant reimbursements, capital projects, and prior year adjustments. This would cause the Emergency Reserves or any other fund to increase and decrease as accounting adjustments are made and money is borrowed leaving uncertainty in the amount available at any given time.
As shown in Table 4 - General Fund Emergency Reserves, the Emergency Reserves ending balance for FY 2021-22 was at $17.4 million which meets the Council policy level of 25% of operating expenditures.
Table 4 - General Fund Emergency Reserves
Other Governmental Funds
• The Measure N fund (FY 2021-22 ACFR: page 34 & 38) is used to account for the half-cent sales tax override approved by the citizens of Visalia in November 2016 which funds increased City essential services of Police, Fire, Streets and Parks. Measure N saw an overall increase in revenues of $1.8 million. The increase includes sales tax of $2.8 million offset by a decrease in use of money and property of $1.0 million due to the annual fair market value adjustment to investments (GASB31). The Measure N Fund’s fund balance increased $7.6 million to $37.3 million as a result of revenues exceeding expenditures for the year.
• The Housing & Community Grants fund (FY 2021-22 ACFR: page 34 & 38) accounts for the Community Development Block Grants (CDBG), Home Investment Partnership Program (HOME) and Neighborhood Stabilization Program (NSP) Grant funds. Also included are the Substandard Housing and Vehicle Abatement funds. The fund’s assets include $14.5 million in notes and loans receivable. The notes and loans receivable are for housing assistance through the various grant programs as well as past rental rehabilitation loans. Housing & Community Grant’s fund balance increased $0.7 million to $16.1 million as a result of revenues exceeded expenditures for the year.
• The Housing Successor Agency fund (FY 2021-22 ACFR: page 34 & 38) was part of the former Redevelopment Agency. The principal assets of the housing successor are notes from past loans from the City to receiving parties for affordable housing projects. The majority of these notes will be forgiven if the receiving party maintains the projects built with those monies at affordable levels for 45 years for single family units and 55 years for multi-family units. Revenues of $0.5 million included residual payments and regular scheduled note payments. This money is used for programs as intended or used for future programs or projects.
The Housing Successor will receive two types of limited payments in the future. One of the payments will be for a loan given from the Low/Mod funds to Redevelopment from past State take-aways balance of $0.8 million to be paid back based on availability of residual receipts. There were $0.5 million in residual receipts for FY 21/22. The other limited revenue source will be 20% of any loan repayments the City receives for past advances made to the former Redevelopment Agency by the General Fund until those advances are paid off. Otherwise, the Housing Successor has no significant ongoing revenues.
• The American Rescue Plan fund (FY 2021-22 ACFR: page 35 & 39) is used to account for the American Rescue Plan Act federal grant funding. Monies can only be used according to the plan guidelines. The funds’ assets include $28.5 million in unearned revenue. The American Rescue Plan Fund’s balance is $67K.
• The Transportation fund (FY 2021-22 ACFR: page 35 & 39) is used to account for the financing and construction of new streets, roads, and various new transportation infrastructure and facilities. Funding is provided by Transportation Impact Fees. The Transportation fund’s fund balance increased $3.1 million to $19.5 million as a result of revenues exceeding capital projects for the year.
• The Civic Center fund (FY 2021-22 ACFR: page 35 & 39) is used to account for the construction of the Civic Center and related capital improvement projects. Revenue is collected from land sales, one time monies as incentive revenues and General Fund surplus or other transfers authorized by City Council. The Civic Center Fund’s balance increased $14.1 million mainly due to a transfer of surplus from the General Fund of $14.2 million.
• All Other Governmental Funds (FY 2021-22 ACFR: page 35 & 39) (referred to as Non-Major Funds) are not presented separately in the Basic Financial Statements but are individually presented in Supplementary Information. Combined they received $36.9 million in revenue and have a combined Fund Balance at year-end of $93.2 million. The larger funds in this category include Special Service Districts at $12.5 million, Measure T Fire at $6.9 million, Measure T Police at $6.8 million, Measure R local at $10.3 million, Highway Users at $13.3 million, and Government Facilities Impact Fee at $8.7 million.
Business Type Funds
Enterprise Funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the Water Reclamation Facility, Storm Sewer Maintenance, Solid Waste, and Transit, which are considered to be Major Funds of the City and Convention Center, Airport, Building Safety, and Animal Control which are considered to be Non-Major Funds of the City.
Enterprise funds also recognize the net pension liability as required by GASB 68. As a result, annual adjustments are required to adjust to the net pension liability being reported by CalPERS for our employee retirement plans. Changes in the net pension liability occur as a result of annual actuarial valuations performed by CalPERS on our plans, investment earnings for the year, and changes to pension formula assumptions made by CalPERS. These annual GASB 68 adjustments to the net pension liability affect the Salaries, Wages and Employee Benefits line item reported under Operating Expenses (pages 46 and 47) as any adjustment is made to pension expense. Below is a brief summary of changes for each Enterprise Fund's revenues and expenditures. These summaries are comparing each Fund to last fiscal year.
• Water Reclamation Facility (FY 2021-22 ACFR: page 44 & 46) Operating revenues increased $3.1 million due to a combination of increases in industrial fees of $1.7 million, front footage fees of $0.2 million, trunk line capacity fees of $0.2 million, services provided of $0.1 million and residential fees of $1.0 million which are mainly due to the prior year having a change in utility bill due dates for all accounts to the 30th of the month, offset by decreases in restaurant fees of $0.1 million.
Operating expenses increased by $2.4 million mainly due to increases in capital related activity of $1.8 million compared to the prior year, utility expenses of $1.1 million, chemical expenses of $0.3 million, bad debt expenses of $0.1 million, and allocated expenses and services provided of $0.3 million, with decreases in equipment supply and maintenance repair of $0.2 million, contracted professional services of $0.2 million for farming services and salaries and benefits of $0.9 million due to vacancies and the annual pension adjustments.
• Storm Sewer Maintenance (FY 2021-22 ACFR: page 44 & 46) Operating revenues had a slight increase of $3K. Operating expenses decreased by $0.2 million including decreases in capital related activity of $0.4 million, offset by increases in maintenance and operations expenses of $0.1 million consisting of allocated expenses and services provided, and salaries and benefits of $43K due to the annual pension adjustments.
• Solid Waste (FY 2021-22 ACFR: page 44 & 46) Operating revenues increased $1.1 million mainly due to increases in single family fee revenue of $0.1 million, multifamily fee revenue of $0.1 million, commercial recycling fee revenue of $0.2 million and commercial fee revenue of $0.8 million offset by a decrease in CNG fuel rebates of $0.1 million due to the timing of receiving the fuel rebate.
Operating expenses increased by $1.9 million mainly due to an increase of capital related activity of $1.0 million, depreciation expense of $0.5 million, and salaries and benefits of $0.4 million mainly due to vacancies and the annual pension adjustments.
• Transit (FY 2021-22 ACFR: page 44 & 46) Operating revenues increased $0.3 million from last year. Increases were seen in Charges for Services of $1.5 million, Sequoia Shuttle internal operations reimbursement from the National Parks Service of $0.7 million (as the Sequoia Shuttle resumed regular operation), farebox sales of $0.2 million and ticket sales of $0.1 million as ridership fees were no longer being suspended from the COVID-19 pandemic. Increases were also seen in carbon credits of $0.1 million due to a timing issue of federal reimbursements, offset by a decrease in CNG sales of $0.1 million. In addition, operating grant revenue decreased $1.3 million due to the prior year receiving COVID grant funding.
Operating expenses increased by $2.3 million mainly due to increases in maintenance and operations for scheduled increases for bus contracted services and Sequoia shuttle resuming operation after COVID shutdown of $1.6 million, allocated expenses and services provided of $0.4 million, CNG fuel of $0.5 million, utility expenses of $0.1 million, revenue share expense of $0.1 million due to increased advertising, and depreciation of $0.2 million, offset by decreases in salaries and benefits of $0.2 due to annual pension adjustments and capital related activity of $0.4 million.
• Convention Center (FY 2021-22 ACFR: page 44 & 46) Operating revenues increased by $1.0 million as COVID19 restrictions were lifted. As operations and events were allowed by the state to reopen on June 15, 2021, increases were mainly seen in conference room rental of $0.8 million, and food and bar sales of $0.2 million.
Operating expenses decreased by $1.2 million mainly due to the annual pension adjustments offset by increases in salaries and benefits of $0.6 million due to increased staffing levels, and maintenance and operations of $0.2 million due to the increase in events as compared to the prior year.
• Airport (FY 2021-22 ACFR: page 45 & 47) Operating revenues increased by $0.5 million mainly due to increases in fuel sales of $0.5 million, hanger rentals of $60K, and utility (electric) fee of $23K, offset by decreases for “into plane” fuel sales of $16K and fuel flowage fees of $16K.
Operating expenses decreased by $0.6 million mainly due to a decrease in capital related activity of $1.2 million, offset by increases in maintenance and operations for aviation fuel of $0.5 million and allocated expenses and services provided of $0.1 million with a decrease in salaries and benefits of $0.1 million due to the annual pension adjustments.
• Building Safety (FY 2021-22 ACFR: page 45 & 47) Operating revenues increased by $0.8 million due to an overall increase in construction permits compared to prior years activity.
Operating expenses decreased by $0.4 million including decreases in salaries and benefits of $0.6 million due to vacancies and the annual pension adjustments with increases in maintenance and operations expenses of $0.2 million mainly due to computer software support of $0.1 million and professional & specialized services for consulting of $0.2 million offset by a decrease in capital related activity of $0.1 million.
• Animal Control (FY 2021-22 ACFR: page 45 & 47) Operating revenues decreased by $59K as a result of decreased activity for services provided to Tulare of $25K as they no longer required animal disposal services. In addition, decreases in license fees of $19K, tax rolled fees of $18K, and grant/contributions funding of $43K, were offset by increases in administration, fines of $29K, kennel fees of $9K, facility/shelter fee of $5K and penalty/late charges of $3K.
Operating expenses decreased by $30K mainly due to a decrease in salaries and benefits of $71K due to vacancies and the annual pension adjustments with an increase in maintenance and operations expenses of $41K consisting of allocated expenses and services provided of $57K, and capital related activity of $14K offset by a decrease in bad debt expense of $25K.
• Internal Service Funds (FY 2021-22 ACFR: page 166 & 168) There are several funds designed to set aside resources to pay for replacement of vehicles and computers as well as insurance costs. Fiscal Year 2021-22 revenues exceeded expenditures by $3.5 million which leaves fund balances of $38.6 million. he IT Fund holds assets for the General Fund and charges depreciation to the General Fund divisions for the assets being used for future replacement. Asset contributions totaled $2.3 million for Fiscal Year 2021-22 which included vehicle replacements, computer replacements, equipment, and software.
There are three business funds that have Council authorized subsidies, the Convention Center ($0.6 million operations + $0.2 million capital set-aside + $1.1 million debt), Animal Control ($1.0 million operations + $0.6 million debt), and Baseball ($0.1 million operations + $0.3 million capital) which are shown on the financial statements and notes as transfers. Subsidies are not paid back. All other funds receive an advance when revenues don’t cover operations. Advances are made from the General Fund which requires reimbursement and charges the investment rate plus 1%. All advances are shown in the ACFR on page 79.
Summary
Governmental Funds had a change in fund balance of $42.3 million, Emergency Reserves continue to be at the policy level of 25% of operating expenditures with a balance of $17.4 million, and the Business Type Funds (excluding the Internal Service Funds) had an overall change in net position of $13.9 million. In addition, fiscal year 2021-22 met the City Council budget goals of gradually rebuilding the organization by restoring resources, increasing funding levels for Capital Improvement Projects, increasing resources directed at maintaining City facilities, maintaining Emergency Reserves, and handling increasing pension costs.
Overall, the City is in a good financial condition that will help us withstand a future recession.
Fiscal Impact: N/A
Prior Council Action: N/A
Alternatives: N/A
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to accept the Fiscal Year 2021-22 Annual Comprehensive Financial Report (ACFR).
end
Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments: Annual Comprehensive Financial Report (ACFR) for Fiscal Year Ended June 30, 2022.