HomeMy WebLinkAbout2025 03-04 CC AGENDA PKT - SPECIAL - BUDGET WORKSHOP
AGENDA
Budget Workshop
City Council Chamber - 1243 National City
Boulevard, National City, CA
Ron Morrison, Mayor
Marcus Bush, Vice-Mayor – District 4 Benjamin A. Martinez, City Manager
Luz Molina, Councilmember- District 1 Barry J. Schultz, City Attorney
Jose Rodriguez, Councilmember -District 2 Shelley Chapel, MMC, City Clerk
Ditas Yamane, Councilmember – District 3
_______________________________________________________________________
The City Council also sits as the City of National City Community Development Commission, Housing Authority,
Joint Powers Financing Authority, and Successor Agency to the Community Development Commission as the
National City Redevelopment Agency
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in advance of the meeting.
AGENDA
Budget Workshop
City Council Chamber - 1243 National City
Boulevard, National City, CA
Ron Morrison, Mayor
Marcus Bush, Vice-Mayor – District 4 Benjamin A. Martinez, City Manager
Luz Molina, Councilmember- District 1 Barry J. Schultz, City Attorney
Jose Rodriguez, Councilmember -District 2 Shelley Chapel, MMC, City Clerk
Ditas Yamane, Councilmember – District 3
_______________________________________________________________________
The City Council also sits as the City of National City Community Development Commission, Housing Authority,
Joint Powers Financing Authority, and Successor Agency to the Community Development Commission as the
National City Redevelopment Agency
Gracias por participar en las reuniones del gobierno local y del Consejo de la Ciudad de National
City.
Reuniones: Las reuniones regulares del Consejo Municipal se llevan a cabo el primer y tercer
martes del mes a las 6:00 p.m. La reunión especial de sesión privada y los talleres pueden ser el
mismo día, la hora de inicio se basa en las necesidades. Consulte las agendas especiales para
conocer los horarios.
Ubicación: Las reuniones regulares del Concejo Municipal se llevan a cabo en la Cámara del
Consejo ubicada en el Ayuntamiento, 1243 National City Boulevard, National City, CA 91950, las
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A PARTIR DEL 1 DE ENERO DE 2023
Todas las contribuciones a los candidatos y funcionarios electos actuales deben autoinformar una
Declaración de contribución de campaña a un concejal de más de $ 250 en el último año (a partir
del 1 de enero de 2023). Este informe puede incluirse en el Recibo del orador de comentarios
públicos que se completará antes de la reunión del Concejo Municipal
Servicios de interpretación en español: Los servicios de interpretación en español están
disponibles, comuníquese con el Secretario de la Ciudad antes del inicio de la reunión para
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Título II de la Ley de Discapacidades Americanas: En cumplimiento con la Ley de Discapacidades
Americanas de 1990, las personas con discapacidad pueden solicitar una agenda en formatos
alternativos apropiados según lo requerido por el Título II. Cualquier persona con una
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dirigir dicha solicitud a la Oficina del Secretario de la Ciudad (619) 336 -4228 al menos 24 horas
antes de la reunión.
AGENDA
City Council Workshop
Tuesday, March 4, 2025, 4:00 p.m.
City Council Chamber - 1243 National City Boulevard
National City, CA
Pages
1.CALL TO ORDER
2.ROLL CALL
3.PLEDGE OF ALLEGIANCE
4.PUBLIC COMMENT (Public Comment will be Restricted to Agenda Items Only)
5.STAFF REPORT
5.1 Fiscal Year 2025 Mid-Year Budget Status Report 2
Recommendation:
Accept the Report and Adopt the Resolution Authorizing Budget Adjustments
as Detailed in Exhibit A.
6.ADJOURNMENT
AGENDA REPORT
Department: Finance
Prepared by: Bruce Foltz, Finance Director
Meeting Date: Tuesday, March 4, 2025
Approved by: Benjamin A. Martinez, City Manager
SUBJECT:
Fiscal Year 2025 Mid-Year Budget Status Report
RECOMMENDATION:
Accept the Report and Adopt the Resolution Authorizing Budget Adjustments as Detailed in
Exhibit A.
BOARD/COMMISSION/COMMITTEE PRIOR ACTION:
Not Applicable.
EXPLANATION:
Summary
This report provides a mid-year look at the status of the City’s Fiscal Year 2025 General Fund
Budget. This report also recommends various budget adjustments for Fiscal Year 2025.
The adopted Fiscal Year 2025 General Fund Budget estimated a use of General Fund unassigned
fund balance of $4.9 million. Based on a revised analysis of year-to-date actual revenues and
expenditures, and projected financial activity through year-end, approximately $3.4 million of the
unassigned fund balance is projected to be used at year-end. The following sections of this report
will discuss the significant factors leading to this outcome.
Revenues
For fiscal year 2025, General Fund revenues are expected to exceed the amounts budgeted by
$1.1 million. The projected variances by revenue category are shown in Table A.
Table A
General Fund Revenues Fiscal Year 2025
Revenue Category Original Budget Revised Budget FY25 Projected variance variance%
Sales & Use Tax 23,546,598$ 23,546,598$ 23,407,858$ (138,740)$ -0.6%
Dist Trans & Use Tax 15,951,000$ 15,951,000$ 15,995,295$ 44,295$ 0.3%
Property Tax 2,698,756$ 2,698,756$ 2,698,756$ -$ 0.0%
Prop Tax in Lieu-VLF 9,006,320$ 9,006,320$ 9,273,778$ 267,458$ 3.0%
Other Revenues 18,726,595$ 18,821,635$ 19,758,011$ 936,376$ 5.0%
Transfers In 5,500$ 5,500$ 5,500$ -$ 0.0%
Grand Total 69,934,769$ 70,029,809$ 71,139,198$ 1,109,389$ 1.6%
Page 2 of 9
General Fund Revenues Fiscal Year 2025
The General Fund’s primary sources of revenue are the sales & use tax, the district transactions
& use tax, property tax in lieu of vehicle license fees, and property taxes. Projections are based
on a combination of year-to-date and historical data, input from the City’s sales tax consultant,
and information obtained from the State of California and County of San Diego.
Sales / District & Use Taxes: The budgeted amounts for Sales & Use tax and District
Transactions Tax were based on projections provided by the City’s sales tax consultant in
April of 2024. Their latest Sales Tax projections, based on sales receipts from July through
September 2024, show a $139,000 decrease from their original estimate. The City’s sales
revenues were 5.9% lower than the same period in 2023 due to lower-than-expected
receipts and a one-time tax boost from a facility expansion project received in calendar
year 2023.
Lower petroleum product prices, and a continued decline in new auto sales compared to
last year were the main contributors to the decrease in taxable sales. However, the recent
opening of a used car dealership and a casual dining restaurant were positive
developments.
Measure D, the City’s voter-approved district tax, performed similarly to the Bradley-Burns
results previously discussed and is projected to finish $44,000 above the budgeted level.
Combined, sales related revenues are projected to finish $94,000 below budget.
The sales tax consultant is scheduled to give their next update in April, where any new
developments will be incorporated into revised sales tax projections, which will be included
in the third quarter budget report. More information can be found in the National City Sales
Tax Newsletter, “Exhibit B” attached to this report.
Property Tax revenue is trending as expected and is anticipated to meet the budgeted
amount.
Property Tax in Lieu of Vehicle License Fees (VLF) is based on a formula that applies the
City-wide increase in assessed property values to the prior year’s allocation. The exact
increase in assessed values was not known at the time the budget was prepared, but the
final amount is estimated to be $267,000 more than budgeted.
Revenues in the “Other Revenues” category are made up of department program revenues and
revenues that fall outside the major revenue categories. Other Revenues are expected to end
the year above budget by $936,000, which is attributable to a combination of projected positive
and negative variances in the various individual accounts. Contributing to the positive variance
are $1.0 in investment earnings, $500,000 in overtime reimbursements, and $267,000 in
reimbursements related to the Stardust Inn remediation project.
These increases are partially offset by anticipated shortfalls in Fire Inspection revenue due to a
strategic shift from inspections to community education ($415,000), a decrease in swimming pool
revenue ($280,000), and lower than anticipated cannabis revenue ($150,000).
General Fund Expenditures Fiscal Year 2025
Expenditure totals at year-end are currently projected to be below budget by $3.0 million. T he
variances by expenditure category are shown in Table B.
Table B
Page 3 of 9
General Fund Expenditures Fiscal Year 2025
Personnel costs make up about 67% of the General Fund’s budget. Using a variety of strategic
cost savings measures, as well as vacancies resulting from attrition and turnover, personnel
services are anticipated to be within the revised budget at fiscal-year-end.
Maintenance & Operations expenditures are projected to be $538,000 below budget overall, with
anticipated savings coming from a combination of Building Department professional services
($200,000), Engineering/Public Works legal and contract services ($170,000), and the Stardust
Inn remediation project finishing underbudget ($169,000).
Capital Outlay and Capital Improvements are generally projected as being entirely spent, with
unused funds being carried over to the next fiscal year. However, Engineering/Public Works has
identified previously programmed General Fund appropriations that will be shifted to ARPA
funding. This will result in $2.0 million savings to the General Fund
For Internal Service Charges, all amounts budgeted are projected to be spent, although at year-
end actual expenditures of the service provider funds will be reviewed for savings and charges
will be adjusted accordingly.
Transfers Out from the General Fund are anticipated to be $475,000 lower than budgeted due to
budget reduction measures taken by funds that receive partial funding from the General Fund.
These measures include deferral of a tree trimming truck purchase and the delay of tree trimming
staff in the Parks Fund ($400,000), and salary savings from a vacant Principal Librarian in the
Library Fund ($75,000).
Staff will continue to monitor all revenues and expenditures and will provide updates in the third
quarter budget status report and in conjunction with the fiscal year 2026 budget development
process.
Net Impact on Unassigned Fund Balance
Table C below combines the revenue and expenditure projections discussed above to display the
impact of those projections on unassigned fund balance. Unassigned fund balance is considered
to be one of the City’s reserves and has a maintenance target level of 10% of the City’s General
Fund operating budget. Amounts above the target level may be used to augment other reserves
or for one-time expenditures. As noted in the summary at the beginning of this report, the FY 2025
adopted anticipated $4.9 million use of unassigned fund balance. The adjusted budget column,
however, shows a use of $7.5 million in fund balance. After adjusting for the difference between
the projected actual revenues and expenditures, the result is a projected $3.4 million (shown in
bold) use of unassigned fund balance at fiscal year-end
Expenditure Category Original Budget Revised Budget FY25 Projected variance variance%
Personnel Services 49,874,268$ 51,265,557$ 51,265,557$ -$ 0.0%
Maint & Operations 7,692,431$ 8,417,958$ 7,879,334$ 538,624$ 6.4%
Capital Outlay 3,216,000$ 3,216,000$ 1,216,000$ 2,000,000$ 62.2%
Debt Services 543,623$ 543,623$ 543,623$ -$ 0.0%
Internal Svc Chgs 10,305,890$ 10,305,890$ 10,305,890$ -$ 0.0%
Special Paymnts 70,000$ 520,000$ 520,000$ -$ 0.0%
Transfers Out 3,152,725$ 3,247,765$ 2,772,765$ 475,000$ 14.6%
Grand Total 74,854,937$ 77,516,793$ 74,503,169$ 3,013,624$ 3.9%
Page 4 of 9
Table C
General Fund Impact on Fund Balance Fiscal Year 2025
BUDGET ADJUSTMENTS
During the mid-year budget review process, the Finance Department, in conjunction with City
department staff, identified budget adjustments necessary due to expenses unanticipated during
the annual budgeting process, as well as adjustments to align the budget with projected actuals.
The attached schedule (“Exhibit ‘A’”) details the recommended adjustments. The
recommendation section below provides a summary of those adjustments by fund.
FINANCIAL STATEMENT:
The recommended budget adjustments will result in an appropriations reduction of $3,013,624 in
the General Fund, as well as increased revenue of $1,109,389.
RELATED CITY COUNCIL 2020-2025 STRATEGIC PLAN GOAL:
Balanced Budget and Economic Development
ENVIRONMENTAL REVIEW:
This is not a project under CEQA, and is therefore, not subject to environmental review.
CCR15378; PRC 21065.
PUBLIC NOTIFICATION:
The Agenda Report was posted at least 72 hours before the Regular Meeting date and time, and
24 hours before a Special Meeting in accordance with the Ralph M. Brown Act
ORDINANCE:
Not Applicable
EXHIBITS:
Exhibit A – Budget Adjustment Detail
Exhibit B – National City Sales Tax Newsletter
Exhibit C – Resolution
Adopted Budget
Adjusted
Budget
Projected
Actuals
Variance
Above/(below)
Adjusted
Budget
Total Revenues 69,934,769$ $ 70,029,809 71,139,198$ 1,109,389$
Total Expenditures 74,854,937 77,516,793 74,503,169 (3,013,624)
Gain in (Use of) Fund Balance (4,920,168)$ (7,486,984)$ (3,363,971)$ 4,123,013$
Gain in (Use of) Assigned FB
Gain in (Use of) Unassigned FB (4,920,168) (7,486,984) (3,363,971) 4,123,013$
Total (4,920,168)$ (7,486,984)$ (3,363,971)$ 4,123,013$
Recommended
Expenditure
Adjustments
Recommended
Revenue
Adjustments
Net impact on
fund balance
General Fund (3,013,624)$ $ 1,109,389 4,123,013$
Housing Choice Voucher Fund 2,141,000$ 2,060,000$ (81,000)$
Public Liability Fund 151,000 (151,000)$
Page 5 of 9
Fund Expenditure Revenue Net
General Fund
Fire
Increase Fire Reimbursements 500,000$ (500,000)$
Fire Total 500,000$ (500,000)$
Non-Departmental
Increase VLF Revenues 267,458$ (267,458)$
Increase Interest Income 1,000,000$ (1,000,000)$
Decrease Sales Tax Revenue (94,445)$ 94,445$
Decrease Cannabis Business Fee (150,000)$ 150,000$
Reduce Transfer to Park Maint. & Library Fund (475,000)$ (475,000)$
Shift Capital Improvement Projects to ARPA funding (2,000,000)$ (2,000,000)$
Non-Departmental Total (2,475,000)$ 1,023,013$ (3,498,013)$
Neighborhood Services
Savings and Reimbursement for Stardust Inn project (168,624)$ 281,376$ (450,000)$
Neighborhood Services Total (168,624)$ 281,376$ (450,000)$
Building
Decrease Fire Inspection Service (415,000)$ 415,000$
Reduction in Contract Services (170,000)$ (170,000)$
Building Total (170,000)$ (415,000)$ 245,000$
PW/Engineering
Reduction in Contract Services (200,000)$ (200,000)$
PW/Engineering Total (200,000)$ (200,000)$
Community Services
Decrease Swimming Pool Revenue (280,000)$ 280,000$
Community Services Total (280,000)$ 280,000$
General Fund Total (3,013,624)$ 1,109,389$ (4,123,013)$
Public Liability Fund
Human Resources
Greater than anticipated Excess Workers' Compensation cost 151,000$ 151,000$
Human Resources Total 151,000$ 151,000$
Public Liability Fund Total 151,000$ 151,000$
Housing Choice Voucher Fund
Housing
Housing PHA Conference and the NSPIRE training for HCV inspections 1,000$ 1,000$
To cover projected Housing Assistance Payments 800,000$ 800,000$ -$
To cover projected Portable Vouchers Paid and admin expenses 660,000$ 660,000$ -$
To cover projected Portability In expenses 80,000$ 80,000$
To cover projectedEmergency Housing Voucher expenses 600,000$ 600,000$ -$
Housing Total 2,141,000$ 2,060,000$ 81,000$
Housing Choice Voucher Fund Total 2,141,000$ 2,060,000$ 81,000$
Grand Total (721,624)$ 3,169,389$ (3,891,013)$
EXHIBIT A
Q2 Budget Adjustment Recommendations
Fiscal Year 2025
Page 6 of 9
www.hdlcompanies.com | 888.861.0220
Q3 2023*
Q3 2024*
Legend
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
SALES TAX BY MAJOR BUSINESS GROUP*Allocation aberrations have been adjusted to reflect sales activity
Autos
and
Transportation
General
Consumer
Goods
County
and State
Pools
Restaurants
and
Hotels
Building
and
Construction
Fuel and
Service
Stations
Business
and
Industry
Food
and
Drugs
TOP 25 PRODUCERSNATIONAL CITY HIGHLIGHTS
Published by HdL Companies in Winter 2025
ABC Supply Co
Ball Mitsubishi
Burlington
Calportland Company
Dalton Hyundai National City
Dalton Subaru National City
Dalton Toyota National City
Hd Supply White Cap
Honor Buick Gmc
Ineos Grenadier San Diego
Macy’s
Mossy Nissan
National City Auto Center
National City Volkswagen
Perry Chrysler Dodge Jeep Ram
Perry Ford
Probuild Company
Ron Baker Chevrolet
Ross
Speedway Express
Stars & Stripes
Target
Walmart Supercenter
Wescott Mazda
Westair Gases & Equipment
SALES TAX UPDATE
NATIONAL CITY
3Q 2024 (JULY - SEPTEMBER)
National City’s receipts from July through
September were 7.5% lower than the
same period in 2023. Excluding reporting
anomalies, actual sales decreased by
5.9%.
Last year, the City received a significant
tax boost from a facility expansion project
by a local business-industry taxpayer,
making comparisons difficult and largely
contributing to the overall decline.
This year, lower petroleum product prices,
compared to last year’s high levels driven
by OPEC production cuts and geopolitical
conflicts, also negatively impacted tax
receipts for local fuel and service stations.
New car sales continued to decline as
consumers remained cautious due to
high prices, financing costs, elevated
auto insurance premiums, and tight credit
conditions.
However, the recent opening of a new
used car dealership and a casual dining
restaurant were positive developments.
Measure D, the City’s voter-approved
district tax, performed similarly to
the Bradley-Burns results previously
discussed.
Net of anomalies, taxable sales for all of
San Diego County declined by 2.3% over
the comparable period, with the Southern
California region also down by 2.3%.
TOTAL:
-4.9%
$4,027,237
Measure D
TOTAL:$ 5,741,275
-5.9%-2.3%-2.3%
COUNTY STATE
NATIONAL CITY
3Q2024
Page 7 of 9
TOP NON-CONFIDENTIAL BUSINESS TYPES
Q3 '24*National CityBusiness Type Change Change ChangeCountyHdL State
-7.9%-8.9%-4.5% 1,272.3 New Motor Vehicle Dealers
1.1%0.2%2.4% 373.8 Quick-Service Restaurants
-12.8%-10.6%-13.8% 319.9 Service Stations
1.1%2.6%19.6% 285.7 Casual Dining
-0.2%0.6%1.2% 249.3 Family Apparel
-4.2%-1.9%-14.2% 200.4 Building Materials
3.3%6.5%43.3% 197.5 Used Automotive Dealers
-5.2%-2.0%-7.1% 118.5 Department Stores
11.2%12.1%6.4% 110.0 Auto Lease
-1.6%-0.8%7.7% 95.5 Shoe Stores
*Allocation aberrations have been adjusted to reflect sales activity *In thousands of dollars
$0
$2,000
$4,000
$6,000
$8,000
National City
Q3
21
Q3
24
Q3
22
Q3
23
County California
SALES PER CAPITA*
*ADJUSTED FORECONOMIC DATA
SALES TAX UPDATENATIONAL CITY3Q 2024
STATEWIDE RESULTS
California’s local one cent sales and use tax
receipts during the months of July through
September were 2.3% lower than the
same quarter one year ago after adjusting
for accounting anomalies. The calendar
year third quarter traditionally is noted for
pleasant weather and statewide tourism;
however, taxes fell when compared to a
year ago. As such, it also means a weak
start of the 2024-25 fiscal year for many
California agencies.
Once again, autos-transportation receipts
took a hit and declined 4.8%. This period
marks the seventh consecutive quarter of
downturn for the sector. While used autos
returns and leasing activity have improved,
revenues from new car sales struggled due
to sustained high interest rates, tightened
credit standards, and increased cost of
auto insurance. As such, inventories for
many dealers remain elevated, applying
downward pressure on prices and growth
into 2025.
The summer season is usually an
advantageous time for home repairs and
construction work, however, this industry
is also struggling with high consumer
interest rates and limited access to equity
for homeowners. New projects remain
sidelined as developers await more
favorable investment conditions.
Brick-and-mortar general consumer
retailers pulled back 3.8% - worsened by
lower gas prices. Consumers appear more
interested in lower priced/discounted items
vs higher priced/luxury goods, forcing
merchants to again consider inventory
needs. Additionally, competition from
online merchants is as fierce as ever, as
shoppers look for greater value. With
holiday shopping around the corner, local
store expectations remain soft.
Fuel generating taxpayers had a rough
quarter; a combination of consumption
declines and falling fuel prices thrust
comparisons down by 13%. Further
contraction of national drug store locations
coupled with the steady fall from cannabis
merchants dating back to 2021, caused a
decrease of 2.8% in the food-drugs category.
Expect similar percentage declines for the
upcoming end of 2024 quarter.
Although statewide tourism appears to
have improved over 2023, revenue from
restaurants experienced only a modest gain
of 0.7%, which included a dramatic drop
from fine dining establishments – consistent
with spending trends in other sectors. State
mandated minimum wage requirements
remained a challenge, with higher menu
prices reducing patron visits.
These sluggish results solidify 2024 as a
down year. Recent reductions to the Fed
Funds Rate aren’t considered to help until
later in 2025. Agencies should expect
fiscal year 2024-25 sales taxes to stay flat
or decline slightly as sluggish economic
conditions leave consumers cautious in their
spending patterns, especially for big ticket
items and discretionary products.
Page 8 of 9
RESOLUTION NO. 2025 -
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY, CALIFORNIA,
AUTHORIZING VARIOUS FISCAL YEAR 2025 BUDGET ADJUSTMENTS
WHEREAS, on June 4, 2024, the City Council of the City of National City adopted
Resolution No. 2024-60, adopting the budget for fiscal year 2025; and
WHEREAS, as part of the 2nd quarter review process, the Finance Department projected
actual revenues and expenditures through the end of fiscal year 2025; and
WHEREAS, the 2nd quarter budget review was presented to the City Council and
members of the public on March 4, 2025; and
WHEREAS, the City Manager has requested approval of the recommended 2nd quarter
budget adjustments (“Exhibit A”).
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF NATIONAL CITY,
CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE, AND ORDER AS FOLLOWS:
Section 1: That the City Council hereby authorizes the City Manager to make the
recommended adjustments to the Fiscal Year 2025 Budget as shown in Exhibit A.
Section 2: That the City Clerk shall certify to the passage and adoption of this
Resolution and enter it into the book of original Resolutions.
PASSED and ADOPTED this 4th day of March, 2025.
Ron Morrison, Mayor
ATTEST:
Shelley Chapel, MMC, City Clerk
APPROVED AS TO FORM:
Barry J. Schultz, City Attorney
Page 9 of 9