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2023 02 02 FAC Special Meeting0aiAt(v � GEM of the DESERT — NOTICE AND CALL OF SPECIAL MEETING OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION TO THE MEMBERS OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION AND TO THE COMMISSION SECRETARY: NOTICE IS HEREBY GIVEN that a Special Meeting of the La Quinta Financial Advisory Commission is hereby called to be held on Thursday, February 2, 2023, starting at 4:00 p.m.; at La Quinta City Hall located at 78495 Calle Tampico, La Quinta, CA 92253 for the following purpose: CONSENT CALENDAR 1. APPROVE MEETING MINUTES DATED DECEMBER 14, 2022 2. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED OCTOBER 31, 2022 3. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED NOVEMBER 30, 2022 BUSINESS SESSION 1. DISCUSS AND APPROVE THE CHANGE FOR THE FINANCIAL ADVISORY COMMISSION'S REGULAR QUARTERLY MEETING START TIME FROM 4:00 P.M. TO 3:00 P.M. 2. RECEIVE AND FILE FISCAL YEAR 2021/22 GENERAL FUND YEAR-END BUDGET REPORT 3. REVIEW RESERVE ANALYSIS REPORT AND GENERAL FUND BALANCE AND RESERVES POLICY AND APPROVE TO RECOMMEND FOR CITY COUNCIL CONSIDERATION 4. APPROVE THE FINANCIAL ADVISORY COMMISSION SUBCOMMITTEE RECOMMENDATIONS ON OUTSTANDING PENSION OBLIGATIONS FOR CITY COUNCIL CONSIDERATION DEPARTMENTAL REPORTS 1. FINANCE DEPARTMENT CURRENT AND FUTURE INITIATIVES 2. THIRD QUARTER 2022 (JULY-SEPTEMBER) SALES TAX UPDATE FOR THE CITY OF LA QUINTA FINANCIAL ADVISORY COMMISSION Page 1 of 2 FEBRUARY 2, 2023 SPECIAL MEETING Dated: January 27, 2023 Attest: Jessica Delgado, Management Assistant /s/ W. Richard Mills W. Richard Mills, Chairperson DECLARATION OF POSTING I. Jessica Delgado, Management Assistant, do hereby declare that the foregoing notice for the La Quinta Financial Advisory Commission Special Meeting of February 2, 2023, was posted on the outside entry to the Council Chamber at 78495 Calle Tampico, and on the bulletin boards at 51321 Avenida Bermudas and 78630 Highway 111 on January 27, 2023 Jessica Delgado, Management Assistant FINANCIAL ADVISORY COMMISSION SPECIAL MEETING Dated: January 27, 2023 Page 2 of 2 FEBRUARY 2, 2023 — Cx�Cx+i of the f}E.,�IrR'I' Financial Advisory Commission agendas and staff reports are now available on the City's web page: www.iaguintaca.gov SPECIA1 MEETING FINANCIAL ADVISORY COMMISSION AGENDA CITY HALL COUNCIL CHAMBER, 78495 Calle Tampico, La Quinta THURSDAY, FEBRUARY 2, 2023 AT 4:00 P.M. Members of the public may listen to this meeting by tuning -in live via https://Iaquinta.12milesout.com/video/live. CALL TO ORDER Roll Call: Commissioners: Anderson, Batavick, Dorsey, Luettjohann, Mast, Way and Chair Mills PLEDGE OF ALLEGIANCE PUBLIC COMMENTS — INSTRUCTIONS Members of the public wanting to address the Commission, either for a specific agenda item or matters not on the agenda are requested to follow the instructions listed below: WRITTEN PUBLIC COMMENTS can be provided either in -person during the meeting by submitting 15 copies to the Commission Secretary, it is requested that this takes place prior to the beginning of the meeting; or can be emailed in advance to ]Delgado@LaQuintaCA.gov, no later than 12:00 p.m., on the day of the meeting. Written public comments will be distributed to the Commission, made public, and will be incorporated into the public record of the meeting, but will not be read during the meeting unless, upon the request of the Chair, a brief summary of public comments is asked to be reported. If written public comments are emailed, the email subject line must clearly state ""Written Comments" and should include: 1) full name, 2) city of residence, and 3) subject matter. FINANCIAL ADVISORY COMMISSION AGENDA Page 1 of 4 FEBRUARY 2, 2023 SPECIAL MEETING VERBAL PUBLIC COMMENTS can be provided in -person during the meeting by completing a "Request to Speak" form and submitting it to the Commission Secretary; it is requested that this takes place prior to the beginning of the meeting. Please limit your comments to three (3) minutes (or approximately 350 words). Members of the public shall be called upon to speak by the Chair. In accordance with City Council Resolution No. 2022-028, a one-time additional speaker time donation of three (3) minutes per individual is permitted; please note that the member of the public donating time must: 1) submit this in writing to the Commission Secretary by completing a "Request to Speak" form noting the name of the person to whom time is being donated to, and 2) be present at the time the speaker provides verbal comments. Verbal public comments are defined as comments provided in the speakers' own voice and may not include video or sound recordings of the speaker or of other individuals or entities, unless permitted by the Chair. Public speakers may elect to use printed presentation materials to aid their comments; 15 copies of such printed materials shall be provided to the Commission Secretary to be disseminated to Commission, made public, and incorporated into the public record of the meeting; it is requested that the printed materials are provided prior to the beginning of the meeting. There shall be no use of Chamber resources and technology to display visual or audible presentations during public comments, unless permitted by the Presiding Officer. All writings or documents, including but not limited to emails and attachments to emails, submitted to the City regarding any item(s) listed or not listed on this agenda are public records. All information in such writings and documents is subject to disclosure as being in the public domain and subject to search and review by electronic means, including but not limited to the City's Internet Web site and any other Internet Web -based platform or other Web -based form of communication. All information in such writings and documents similarly is subject to disclosure pursuant to the California Public Records Act [Government Code § 6250 et seq.]. PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA At this time, members of the public may address the Commission on any matter not listed on the agenda pursuant to the "Public Comments - Instructions" listed above. The Commission values your comments; however, in accordance with State law, no action shall be taken on any item not appearing on the agenda unless it is an emergency item authorized by the Brown Act [Government Code § 54954.2(b)]. CONFIRMATION OF AGENDA FINANCIAL ADVISORY COMMISSION AGENDA Page 2 of 4 FEBRUARY 2, 2023 SPECIAL MEETING ANNOUNCEMENTS, PRESENTATIONS AND WRITTEN COMMUNICATIONS - None CONSENT CALENDAR NOTE: Consent Calendar items are routine in nature and can be approved by one motion. 1. APPROVE MEETING MINUTES DATED DECEMBER 14, 2022 2. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED OCTOBER 31, 2022 3. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED NOVEMBER 30, 2022 BUSINESS SESSION 1. DISCUSS AND APPROVE THE CHANGE FOR THE FINANCIAL ADVISORY COMMISSION'S REGULAR QUARTERLY MEETING START TIME FROM 4:00 P.M. TO 3:00 P.M. 2. RECEIVE AND FILE FISCAL YEAR 2021/22 GENERAL FUND YEAR-END BUDGET REPORT 3. REVIEW RESERVE ANALYSIS REPORT AND GENERAL FUND BALANCE AND RESERVES POLICY AND APPROVE TO RECOMMEND FOR CITY COUNCIL CONSIDERATION 4. APPROVE THE FINANCIAL ADVISORY COMMISSION SUBCOMMITTEE RECOMMENDATIONS ON OUTSTANDING PENSION OBLIGATIONS FOR CITY COUNCIL CONSIDERATION STUDY SESSION- None DEPARTMENTAL REPORTS 1. FINANCE DEPARTMENT CURRENT AND FUTURE INITIATIVES 2. THIRD QUARTER 2022 (DULY-SEPTEMBER) SALES TAX UPDATE FOR THE CITY OF LA QUINTA COMMISSIONERS' ITEMS ADJOURNMENT The next regular quarterly meeting of the La Quinta Financial Advisory Commission will be held May 10, 2023, commencing at 4:00 p.m. at the La Quinta City Hall Council Chamber, 78-495 Calle Tampico, La Quinta, CA 92253. FINANCIAL ADVISORY COMMISSION AGENDA Page 3 of 4 FEBRUARY 2, 2023 SPECIAL MEETING DECLARATION OF POSTING I. Jessica Delgado, Management Assistant, of the City of La Quinta, do hereby declare that the foregoing Agenda for the Commission special meeting on February 2, 2023 was posted on the City's website, near the entrance to the Council Chamber at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and 51-321 Avenida Bermudas, on January 27, 2023 DATED: January 27, 2023 Jessica Delgado, Management Assistant City of La Quinta, California Public Notices • The La Quinta City Hall Council Chamber is handicapped accessible. If special equipment is needed for the hearing impaired, please contact the Commission Secretary at (760) 777-7150, twenty-four (24) hours in advance of the meeting and accommodations will be made. • If background material is to be presented to the Commission during a Commission meeting, please be advised that 15 copies of all documents, exhibits, etc., must be supplied to the Commission Secretary for distribution. It is requested that this takes place prior to the beginning of the meeting. FINANCIAL ADVISORY COMMISSION AGENDA Page 4 of 4 FEBRUARY 2, 2023 SPECIAL MEETING CONSENT CALENDAR ITEM NO. 1 FINANCIAL ADVISORY COMMISSION SPECIAL MEETING MINUTES WEDNESDAY, DECEMBER 14, 2022 CALL TO ORDER A special meeting of the La Quinta Financial Advisory Commission (Commission) was called to order at 10:00 a.m. by Chair Mills. PRESENT: Commissioners Anderson, Batavick, Dorsey, Mast, Way and Chair Mills ABSENT: Commissioner Luettjohann STAFF PRESENT: Finance Director Martinez, Financial Services Analyst Hallick, Account Technician Batuta, and Management Assistant Delgado PLEDGE OF ALLEGIANCE Commissioner Way led the audience in the Pledge of Allegiance. PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA - None CONFIRMATION OF AGENDA Staff requested that Study Session Item No. 1 "Discuss Reserve Analysis Review and Draft Report" be moved up and considered before the Business Session items. The Commission concurred. ANNOUNCEMENTS, PRESENTATIONS, AND WRITTEN COMMUNICATIONS - None CONSENT CALENDAR ITEMS 1. APPROVE MEETING MINUTES DATED NOVEMBER 9, 2022 2. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED JUNE 30, 2022 3. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED SEPTEMBER 30, 2022 FINANCIAL ADVISORY COMMISSION MINUTES Page 1 of 4 DECEMBER 14, 2022 SPECIAL MEETING 4. RECEIVE AND FILE FIRST QUARTER FISCAL YEAR 2022/23 TREASURY REPORTS FOR JULY, AUGUST, SEPTEMBER 2022 CONSENT CALENDAR ITEM NO. 2 and 3 - discussion The Commission inquired about the following expenditure listed under the top five non -general fund expenditures for the Revenue and Expenditure Reports dated June 30, 2022, and September 30, 2022: • Visit Greater Palm Springs - Financial Services Analyst Hallick explained that the City has a joint powers agreement with Visit Greater Palm Springs and a portion of the City's transient occupancy tax based on a percentage is expended to them for marketing tourism purposes. CONSENT CALENDAR ITEM NO .4 - discussion The Commission inquired about the investments listed on Attachment 1 with 0% earnings. Financial Services Analyst Hallick explained that these are either investments that have overall return rates (gain/loss) but not interest rates, or treasury discount notes. Motion - A motion was made and seconded by Commissioners Batavick/Dorsey to approve the Consent Calendar as submitted. Motion passed: yes - 6, noes - 0, abstain - 0, absent - 1 (Luettjohann). STUDY SESSION > > > taken out of Agenda order 1. DISCUSS RESERVE ANALYSIS REVIEW AND DRAFT REPORT (REPORT) Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. The Commission and staff discussed the City's natural disaster insurance coverage and related annual premiums; cash flow budget revenues reserves and unassigned fund balance; the subcommittee's recommendations for the City to make additional payments towards the City's unfunded pension liability with California Public Employees Retirement System Agency (CalPERS); fluctuations of CalPERS annualized returns over the years; and the City's timeframe for routine review of the Reserves Policy. Financial Services Analyst Hallick explained the difference between levels of pension unfunded liability and the timeline for taking the unfunded liability payment subcommittee recommendations to Council for consideration and direction as a study session item. FINANCIAL ADVISORY COMMISSION MINUTES Page 2 of 4 DECEMBER 14, 2022 SPECIAL MEETING Discussion followed on the Commission's recommendations for changes to the Report. BUSINESS SESSION>>> taken out of Agenda order 1. RECEIVE AND FILE THE ANNUAL MEASURE G SALES TAX OVERSIGHT COMPLIANCE REPORT (REPORT) FOR FISCAL YEAR 2021/22 Finance Director Martinez presented the staff report, which is on file in the Finance Department. Finance Director Martinez thanked the subcommittee, which consisted of Commissioners Batavick and Luettjohann, for their time, recommendations, and thorough review of the Report. The subcommittee provided an overview of the Report review process and thanked all the residents for their continuing support and investment in the community. The Commission and staff discussed the use of Measure G unassigned reserves to prefund the Dune Palms Bridge project to avoid delay of construction that was approved by Council on February 15, 2022. Staff mentioned the Highway Bridge Program being oversubscribed and by prefunding this project, the City will move up on the priority list to be reimbursed by Caltrans. As the project is completed by phase, the City will request reimbursement of funds expended. Motion - A motion was made and seconded by Commissioners Way/Mast to receive and file the annual Measure G Sales Tax Oversight Compliance Report for fiscal year 2021/22. Motion passed: yes - 6, noes - 0, abstain - 0, absent - 1 (Luettjohann). 2. APPOINT TWO FINANCIAL ADVISORY COMMISSIONERS TO SERVE ON THE FISCAL YEAR 2023/24 GENERAL FUND OPERATING BUDGET SUBCOMMITTEE Finance Director Martinez presented the staff report, which is on file in the Finance Department. Commissioners Mast and Way expressed their interest to serve on the fiscal year 2023/24 general fund operating budget subcommittee. FINANCIAL ADVISORY COMMISSION MINUTES Page 3 of 4 DECEMBER 14, 2022 SPECIAL MEETING Motion - A motion was made and seconded by Commissioners Dorsey/Batavick to appoint Commissioners Mast and Way to serve on the fiscal year 2023/24 general fund operating budget subcommittee. Motion passed: yes - 6, noes - 0, abstain - 0, absent - 1 (Luettjohann). 3. APPOINT TWO FINANCIAL ADVISORY COMMISSIONERS TO FORM A 10-YEAR FINANCIAL PROJECTIONS TASK FORCE Finance Director Martinez presented the staff report, which is on file in the Finance Department. Commissioners Anderson, Batavick, and Dorsey expressed their interest to serve on the subcommittee to form a 10-year financial projections task force. Motion - A motion was made and seconded by Commissioners Way/Mast to appoint Commissioners Anderson, Batavick and Dorsey to serve on the subcommittee to form a 10-year financial projections task force. Motion passed: yes - 6, noes - 0, abstain - 0, absent - 1 (Luettjohann). DEPARTMENTAL REPORTS All reports are on file in the Finance Department. 1. FINANCE DEPARTMENT CURRENT AND FUTURE INITIATIVES COMMISSIONERS' ITEMS The Commission discussed changing the Commission regular meeting time from 4:00 p.m. to an earlier time. ADJOURNMENT There being no further business, it was moved and seconded by Commissioners Dorsey/Anderson to adjourn this meeting at 11:30 a.m. Motion passed: yes - 6, noes - 0, abstain - 0, absent - 1 (Luettjohann). Respectfully submitted, Jessica Delgado, Management Assistant City of La Quinta, California FINANCIAL ADVISORY COMMISSION MINUTES Page 4 of 4 DECEMBER 14, 2022 SPECIAL MEETINr CONSENT CALENDAR ITEM NO. 2 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: February 2, 2023 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED OCTOBER 31, 2022 RECOMMENDATION Receive and file revenue and expenditure report dated October 31, 2022. EXECUTIVE SUMMARY • The report summarizes the City's year-to-date (YTD) revenues and period expenditures for October 2022 (Attachment 1). These reports are also reviewed by the City Council. FISCAL IMPACT - None BACKGROUND/ANALYSIS Below is a summary of the column headers used on the Revenue and Expenditure Summary Reports: Original Total Budget - represents revenue and expenditure budgets the Council adopted in June 2022 for fiscal year 2022/23. Current Total Budget - represents original adopted budgets plus any Council approved budget amendments from throughout the year, including carryovers from the prior fiscal year. Period Activity - represents actual revenues received and expenditures outlaid in the reporting month. Fiscal Activity - represents actual revenues received and expenditures outlaid YTD. Variance Favorable/(Unfavorable) - represents the dollar difference between YTD collections/expenditures and the current budgeted amount. Percent Used - represents the percentage activity as compared to budget YTD. October 2022 Revenues Comparison to Last Year Percent of Percent of MTD YTD Budget YTD Budget General Fund (GF) $ 4,062,602 $ 9,437,967 13.81% $ 9,185,876 15.62% All Funds $ 5,662,853 $ 19,450,978 10.94% $ 15,204,788 16.97% October 2022 Expenditures Comparison to Last Year Percent of Percent of MTD YTD Budget YTD Budget General Fund $ 3,900,924 $ 11,098,988 11.10% $ 9,929,585 18.00% Payroll (GF) $ 1,738,178 $ 5,136,947 37.23% $ 3,660,691 32.31% All Funds $ 5,515,756 $ 34,399,342 16.23% $ 16,118,448 18.64% General Fund Non -General Fund Measure G Sales Tax $ 1,328,947 Allocated Interest $ 260,092 Sales Tax $ 1,138,925 SilverRock Green Fees $ 209,320 Transient Occupancy (Hotel) Tax $ 665,337 County Sales Tax (Measure A) $ 162,812 Fire Service Credit $ 241,064 Gas Tax $ 155,444 Franchise Tax- Burrtec $ 85,192 Developer Impact Fees- Transportation $ 154,485 General Fund Non -General Fund Sheriff Contract (August) $ 1,290,993 Capital Improvement Program (CIP) - Construction(') $ 463,360 X-Park Programming (Oct. -Dec.) $ 71,347 SilverRock Maintenance $ 318,680 Contract Legal Services $ 65,495 CIP - Professional Services(2) $ 88,308 Parks Landscape Maintenance $ 60,804 CIP - Design(3) $ 87,131 Animal Shelter Contract Service (Aug. & Sept.) $ 55,841 Lighting & Landscape Maintenance $ 69,905 (')CIP Construction: Construction expenses for Dune Palms Bridge, Jefferson/Ave. 53 roundabout, traffic control project, and SRR event site wi-fi. (Z)CIP Professional Services: Consulting expenses associated with management of multiple ongoing capital improvement projects. (3)CIP Design: Design services for Dune Palms bridge, cultural campus, and landscaping projects. The revenue report includes revenues and transfers into funds from other funds (income items). Revenues are not received uniformly throughout the year, resulting in peaks and valleys. For example, large property tax payments are usually received in December and May. Similarly, Redevelopment Property Tax Trust Fund payments are typically received in January and June. Any timing imbalance of revenue receipts versus expenditures is funded from the City's cash flow reserve. The expenditure report includes expenditures and transfers out to other funds. Unlike revenues, expenditures are more likely to be consistent from month to month. However, large debt service payments or CIP expenditures can cause swings. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Claudia Martinez, Finance Director Attachment 1: Revenue and Expenditure Report for October 31, 2022 ta QaiKra FINANCE Fund 101 - GENERAL FUND 105 - DISASTER RECOVERY FUND 201 - GAS TAX FUND 202 - LIBRARY & MUSEUM FUND 203 - PUBLIC SAFETY FUND (MEASU 210 - FEDERAL ASSISTANCE FUND 212 - SLESA (COPS) FUND 215 - LIGHTING & LANDSCAPING FU 220-QUIMBYFUND 221 - AB 939 - CALRECYCLE FUND 223 - MEASURE A FUND 225 - INFRASTRUCTURE FUND 226-EMERGENCY MANAGEMENT 227 - STATE HOMELAND SECURITY I 230 - CASp FUND, AB 1379 231 - SUCCESSOR AGCY PA 1 RORF 235 - 50 COAST AIR QUALITY FUND 237 - SUCCESSOR AGCY PA 1 ADMII` 241 - HOUSING AUTHORITY 243 - RDA LOW -MOD HOUSING FUI` 247 - ECONOMIC DEVELOPMENT FL 249 - SA 2011 LOW/MOD BOND FUI 250-TRANSPORTATION DIF FUND 251 - PARKS & REC DIF FUND 252 - CIVIC CENTER DIF FUND 253 - LIBRARY DEVELOPMENT DIF 254 - COMMUNITY & CULTURAL CEI 255 - STREET FACILITY DIF FUND 256 - PARK FACILITY DIF FUND 257 - FIRE PROTECTION DIF 259 - MAINTENANCE FACILITIES DIF 270 - ART IN PUBLIC PLACES FUND 275 - LQ PUBLIC SAFETY OFFICER 299 - INTEREST ALLOCATION FUND 310 - LQ FINANCE AUTHORITY DEBT 401 - CAPITAL IMPROVEMENT PRO( 405 - SA PA 1 CAPITAL IMPRV FUND 501 - FACILITY & FLEET REPLACEMEI 502 - INFORMATION TECHNOLOGY 503 - PARK EQUIP & FACILITY FUND 504 - INSURANCE FUND 601 - SILVERROCK RESORT 602 - SILVERROCK GOLF RESERVE 760 - SUPPLEMENTAL PENSION PLA 761-CERBT OPEB TRUST 762 - PARS PENSION TRUST Report Total: ATTACHMENT 1 For Fiscal: 2022/23 Period Ending: 10/31/2022 Revenue Summary Variance Original Current Period Fiscal Favorable Percent Total Budget Total Budget Activity Activity (Unfavorable) Used 68,321,100 68,321,100 4,062,602 9,437,967 -58,883,133 13.81% 5,003,505 5,003,505 0 4,990,403 -13,102 99.74% 2,691,011 2,691,011 155,444 404,750 -2,286,261 15.04% 2,867,000 2,867,000 238 -4,788 -2,871,788 0.17% 2,000 2,000 0 -157 -2,157 7.83% 156,000 156,000 0 -1 -156,001 0.00% 101,000 101,000 73,605 73,365 -27,635 72.64% 2,483,300 2,483,300 29,114 28,681 -2,454,619 1.15% 25,000 25,000 0 0 -25,000 0.00% 64,000 64,000 7,559 13,789 -50,211 21.55% 1,875,000 1,875,000 162,812 315,406 -1,559,594 16.82% 0 0 0 -12 -12 0.00% 12,100 12,100 0 0 -12,100 0.00% 5,000 5,000 0 4,896 -104 97.92% 20,200 20,200 1,612 6,059 -14,141 30.00% 0 0 7 4,587 4,587 0.00% 54,400 54,400 0 -28 -54,428 0.05% 0 0 0 -116 -116 0.00% 1,451,500 1,451,500 110,325 520,221 -931,279 35.84% 20,000 20,000 0 -2,155 -22,155 10.77% 15,000 15,000 4,706 8,504 -6,496 56.70% 25,000 25,000 0 6,323 -18,677 25.29% 1,020,000 1,020,000 154,485 477,118 -542,882 46.78% 501,000 501,000 81,510 245,347 -255,653 48.97% 301,000 301,000 47,740 144,036 -156,964 47.85% 75,000 75,000 15,365 46,331 -28,669 61.77% 152,000 152,000 37,000 111,163 -40,837 73.13% 10,000 10,000 0 -48 -10,048 0.48% 0 0 0 -4 -4 0.00% 101,000 101,000 14,323 43,142 -57,858 42.72% 75,500 75,500 12,075 37,101 -38,399 49.14% 153,000 153,000 -612 13,137 -139,863 8.59% 2,200 2,200 0 -32 -2,232 1.45% 0 0 260,092 983,135 983,135 0.00% 1,100 1,100 0 0 -1,100 0.00% 13,136,811 79,798,757 78,793 78,793 -79,719,964 0.10% 1,000 1,000 0 -4 -1,004 0.38% 1,685,000 1,685,000 0 413,776 -1,271,224 24.56% 2,256,708 2,256,708 2,679 564,543 -1,692,165 25.02% 470,000 470,000 0 110,115 -359,885 23.43% 1,020,400 1,020,400 0 254,727 -765,673 24.96% 4,865,453 4,865,453 212,687 564,497 -4,300,956 11.60% 79,000 79,000 0 -344 -79,344 0.44% 5,500 5,500 0 -54 -5,554 0.98% 10,000 10,000 0 -131,500 -141,500 1,315.00% 100,000 100,000 138,693 -311,693 -411,693 311.69% 111,213,788 177,875,734 5,662,853 19,450,978 -158,424,756 10.94% Accounts are subject to adjusting entries and audit. The City's Annual Comprehensive Financial Report published annually, is the best resource for all final audited numbers. Page 1 of 3 For Fiscal: 2022/23 Period Ending: 10/31/2022 Expenditure Summary Variance Original Current Period Fiscal Favorable Percent Fund Total Budget Total Budget Activity Activity (Unfavorable) Used 101 - GENERAL FUND 64,651,274 99,999,036 3,900,924 11,098,988 88,900,048 11.10% 201 - GAS TAX FUND 2,687,351 3,703,799 40,424 358,651 3,345,148 9.68% 202 - LIBRARY & MUSEUM FUND 1,909,146 4,725,851 23,336 141,181 4,584,670 2.99% 210 - FEDERAL ASSISTANCE FUND 152,600 339,977 0 0 339,977 0.00% 212 - SLESA (COPS) FUND 100,000 100,000 2,020 7,019 92,981 7.02% 215 - LIGHTING & LANDSCAPING FU 2,465,376 2,465,376 170,123 589,010 1,876,366 23.89% 220-QUIMBYFUND 0 466,967 0 0 466,967 0.00% 221 - AB 939 - CALRECYCLE FUND 150,000 150,000 10,627 56,659 93,341 37.77% 223 - MEASURE A FUND 3,882,000 5,843,145 0 33,703 5,809,442 0.58% 226 - EMERGENCY MANAGEMENT F 12,000 12,000 0 9,750 2,250 81.25% 227 -STATE HOMELAND SECURITY 1 5,000 5,000 0 4,312 688 86.25% 230 - CASp FUND, AB 1379 5,500 5,500 0 0 5,500 0.00% 231 - SUCCESSOR AGCY PA 1 RORF 0 0 0 14,973,153 -14,973,153 0.00% 235 - SO COAST AIR QUALITY FUND 46,500 46,500 766 2,138 44,362 4.60% 237 - SUCCESSOR AGCY PA 1 ADMII` 0 0 0 1,600 -1,600 0.00% 241 - HOUSING AUTHORITY 1,712,670 1,712,670 93,361 453,008 1,259,662 26.45% 243 - RDA LOW -MOD HOUSING FUG 250,000 250,000 0 255,000 -5,000 102.00% 244 - HOUSING GRANTS (Multiple) 0 0 0 96,157 -96,157 0.00% 247 - ECONOMIC DEVELOPMENT FL 21,500 21,500 0 0 21,500 0.00% 249 - SA 2011 LOW/MOD BOND FUI 20,000 20,000 0 1,605 18,395 8.03% 250-TRANSPORTATION DIF FUND 500,000 1,916,757 0 400,000 1,516,757 20.87% 251 - PARKS & REC DIF FUND 500,000 500,000 0 0 500,000 0.00% 252 - CIVIC CENTER DIF FUND 250,000 250,000 0 0 250,000 0.00% 253 - LIBRARY DEVELOPMENT DIF 15,000 15,000 0 0 15,000 0.00% 254 - COMMUNITY & CULTURAL CEI 0 125,000 0 0 125,000 0.00% 270 - ART IN PUBLIC PLACES FUND 177,000 389,465 12,666 25,832 363,633 6.63% 310 - LQ FINANCE AUTHORITY DEBT 1,100 1,100 0 0 1,100 0.00% 401 - CAPITAL IMPROVEMENT PRO( 13,136,811 78,519,094 650,084 2,423,612 76,095,482 3.09% 501 - FACILITY & FLEET REPLACEMEI 1,608,750 1,740,714 68,636 464,394 1,276,319 26.68% 502 - INFORMATION TECHNOLOGY 2,258,054 2,258,054 85,850 644,665 1,613,389 28.55% 503 - PARK EQUIP & FACILITY FUND 545,000 545,000 0 79,201 465,799 14.53% 504 - INSURANCE FUND 984,100 984,100 1,451 892,633 91,467 90.71% 601 - SILVERROCK RESORT 4,782,135 4,782,135 451,174 1,355,815 3,426,320 28.35% 760 - SUPPLEMENTAL PENSION PLA 12,850 12,850 0 12,833 17 99.87% 761 - CERBT OPEB TRUST 1,500 1,500 0 390 1,110 25.98% 762 - PARS PENSION TRUST 55,000 55,000 4,317 18,033 36,967 32.79% Report Total: 102,898,217 211,963,090 5,515,756 34,399,342 177,563,748 16.23% Accounts are subject to adjusting entries and audit. The City's Annual Comprehensive Financial Report published annually, is the best resource for all final audited numbers. Page 2 of 3 Fund Descriptions Fund # Name Notes 101 General Fund The primary fund of the City used to account for all revenue and expenditures of the City; a broad range of municipal activities are provided through this fund. Accounts for use of one-time federal funding designed to deliver relief to American workers and aid in 105 Disaster Recovery Fund the economic recovery iin the wake of COVID-19. The American Rescue Plan Act (ARPA) was passed by Congress in 2021 to provide fiscal recovery funds to state and local governments. 201 Gas Tax Fund Gasoline sales tax allocations received from the State which are restricted to street -related expenditures. 202 Library and Museum Fund Revenues from property taxes and related expenditures for library and museum services. 203 Public Safety Fund General Fund Measure G sales tax revenue set aside for public safety expenditures. 210 Federal Assistance Fund Community Development Block Grant (CDBG) received from the federal government and the expenditures of those resources. 212 SLESF (COPS) Fund Supplemental Law Enforcement Services Funds (SLESF) received from the State for law enforcement activities. Also known as Citizen's Option for Public Safety (COPS). 215 Lighting & Landscaping Fund Special assessments levied on real property for city-wide lighting and landscape maintenance/improvements and the expenditures of those resources. 220 Quimby Fund Developer fees received under the provisions of the Quimby Act for park development and improvements. 221 AB939 Fund/Cal Recycle Franchise fees collected from the city waste hauler that are used to reduce waste sent to landfills through recycling efforts. Assembly Bill (AB) 939. 223 Measure A Fund County sales tax allocations which are restricted to street -related expenditures. 224 TUMF Fund Developer -paid Transportation Uniform Mitigation Fees (TUMF) utilized for traffic projects in Riverside Countv. 225 Infrastructure Fund Developer fees for the acquisition, construction or improvement of the City's infrastructure as defined by Resolution 226 Emergency Mgmt. Performance Grant (EMPG) Federal Emergency Management Agency (FEMA) grant for emergency preparedness. 227 State Homeland Security Programs (SHSP) Federal Emergency Management Agency (FEMA) grant for emergency preparedness. 230 CASP Fund, AB1379 / SB1186 Certified Access Specialist (CASp) program fees for ADA Accessibility Improvements; derived from Business License renewals. Assemblv Bill (AB) 1379 and Senate Bill (SB) 1186. Successor Agency (SA) Project Area (PA) 1 Redevelopment Obligation Retirement Fund (RORF) for 231 Successor Agency PA 1 RORF Fund Redevelopment Property Tax Trust Fund (RPTTF) taxes received for debt service payments on recoanized obligations of the former Redevelopment Aaencv (RDA). 235 SO Coast Air Quality Fund (AB2766, PM10) Contributions from the South Coast Air Quality Management District. Uses are limited to the reduction and control of airborne pollutants. Assembly Bill (AB) 2766. 237 Successor Agency PA 1 Admin Fund Successor Agency (SA) Project Area (PA) 1 for administration of the Recognized Obligation Payment Schedule (ROPS) associated with the former Redevelopment Aaencv (RDA). 241 Housing Authority Activities of the Housing Authority which is to promote and provide quality affordable housing. 243 RDA Low -Moderate Housing Fund Activities of the Housing Authority which is to promote and provide quality affordable housing. Accounts for RDA loan rei)avments (20 /o for Housing) and housing programs,. 244 Housing Grants Activites related Local Early Action Planning (LEAP) and SB2 grants for housing planning and development. 247 Economic Development Fund Proceeds from sale of City -owned land and transfers from General Fund for future economic development. 249 SA 2011 Low/Mod Bond Fund Successor Agency (SA) low/moderate housing fund; 2011 bonds refinanced in 2016. 250 Transportation DIF Fund Developer impact fees collected for specific public improvements - transportation related. 251 Parks & Rec. DIF Fund Developer impact fees collected for specific public improvements - parks and recreation. 252 Civic Center DIF Fund Developer impact fees collected for specific public improvements - Civic Center. 253 Library Development DIF Fund Developer impact fees collected for specific public improvements - library. 254 Community Center DIF Fund Developer impact fees collected for specific public improvements - community center. 255 Street Facility DIF Fund Developer impact fees collected for specific public improvements - streets. 256 Park Facility DIF Fund Developer impact fees collected for specific public improvements - parks. 257 Fire Protection DIF Fund Developer impact fees collected for specific public improvements - fire protection. 259 Maintenance Facilities DIF Fund Developer impact fees collected for specific public improvements - maintenance facilities. 270 Art In Public Places Fund Developer fees collected in lieu of art placement; utilized for acquisition, installation and maintenance of public artworks. 275 LQ Public Safety Officer Fund Annual transfer in from General Fund; distributed to public safety officers disabled or killed in the line of duty. 299 Interest Allocation Fund Interest earned on investments. 310 LQ Finance Authority Debt Service Fund Accounted for the debt service the Financing Authority's outstanding debt and any related reporting reauirements. This bond was fully paid in October 2018. 401 Capital Improvement Program Fund Planning, design, and construction of various capital projects throughout the City. 405 SA PA 1 Capital Improvement Fund Successor Agency (SA) Project Area (PA) 1 bond proceeds restricted by the bond indenture covenants. Used for SilverRock infrastructure improvements. 501 Equipment Replacement Fund Internal Service Fund for vehicles, heavy equipment, and related facilities. 502 Information Technology Fund Internal Service Fund for computer hardware and software and phone systems. 503 Park Equipment & Facility Fund Internal Service Fund for park equipment and facilities. 504 Insurance Fund Internal Service Fund for city-wide insurance coverages. 601 SilverRock Resort Fund Enterprise Fund for activities of the city -owned golf course. 602 SilverRock Golf Reserve Fund Enterprise Fund for golf course reserves for capital improvements. 760 Supplemental Pension Plan (PARS Account) Supplemental pension savings plan for excess retiree benefits to general employees of the City. 761 Other Post Benefit Obligation Trust (OPEB) For retiree medical benefits and unfunded liabilities. 762 Pension Trust Benefit (PARS Account) For all pension -related benefits and unfunded liabilities. Page 3 of 3 CONSENT CALENDAR ITEM NO. 3 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: February 2, 2023 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED NOVEMBER 30, 2022 RECOMMENDATION Receive and file revenue and expenditure report dated November 30, 2022. EXECUTIVE SUMMARY • The report summarizes the City's year-to-date (YTD) revenues and period expenditures for November 2022 (Attachment 1). These reports are also reviewed by the City Council. FISCAL IMPACT - None BACKGROUND/ANALYSIS Below is a summary of the column headers used on the Revenue and Expenditure Summary Reports: Original Total Budget - represents revenue and expenditure budgets the Council adopted in June 2022 for fiscal year 2022/23. Current Total Budget - represents original adopted budgets plus any Council approved budget amendments from throughout the year, including carryovers from the prior fiscal year. Period Activity - represents actual revenues received and expenditures outlaid in the reporting month. Fiscal Activity - represents actual revenues received and expenditures outlaid YTD. Variance Favorable/(Unfavorable) - represents the dollar difference between YTD collections/expenditures and the current budgeted amount. Percent Used - represents the percentage activity as compared to budget YTD. November 2022 Revenues Comparison to Last Year Percent of Percent of YTD Budget YTD Budget General Fund (GF) $ 3,308,041 $ 12,746,008 18.66% $ 13,600,587 23.13% All Funds $ 4,548,098 $ 23,999,076 13.49% $ 22,270,754 24.86% November 2022 Expenditures Comparison to Last Year Percent of Percent of YTD Budget YTD Budget General Fund $ 2,278,064 $ 13,377,053 13.38% $ 11,297,560 20.48% Payroll (GF) $ 713,506 $ 5,850,453 42.40% $ 4,297,379 37.93% All Funds $ 3,953,269 $ 38,352,611 18.09% $ 32,695,901 37.81% Top Five Revenue/Income Sources for November General Fund Non -General Fund Transient Occupancy (Hotel) Tax $ 975,419 SilverRock Green Fees $ 464,605 Measure G Sales Tax $ 858,514 Allocated Interest $ 203,681 Sales Tax $ 405,447 Community Development Block Grant (CDBG) $ 169,546 Property Tax $ 309,716 Gas Tax $ 154,831 Franchise Tax- Cable Television 163,745 1 Developer Impact Fees- Transportation 52,117 Top Five Expenditures/Outlays for November General Fund Non -General Fund Sheriff Contract (Sept.) $ 1,210,009 Capital Improvement Program (CIP) - Construction(l) $ 622,840 Parks Landscape Maintenance $ 60,804 SilverRock Maintenance $ 212,227 Marketing and Tourism Promotions $ 47,548 Vehicles, Purchased $ 132,906 Plan Checks $ 22,276 Lighting & Landscape Maintenance $ 69,905 Electric Utilities 20,994 IT Machinery & Equipment(2) 36,864 (1)CIP Construction: Construction expenses for Jefferson/Ave. 53 roundabout, traffic control project, SRR event site wi-fi, X-park landscaping and parkway landscape conversion projects. (z)Audio-Visual equipment for Council chambers upgrade. The revenue report includes revenues and transfers into funds from other funds (income items). Revenues are not received uniformly throughout the year, resulting in peaks and valleys. For example, large property tax payments are usually received in December and May. Similarly, Redevelopment Property Tax Trust Fund payments are typically received in January and June. Any timing imbalance of revenue receipts versus expenditures is funded from the City's cash flow reserve. The expenditure report includes expenditures and transfers out to other funds. Unlike revenues, expenditures are more likely to be consistent from month to month. However, large debt service payments or CIP expenditures can cause swings. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Claudia Martinez, Finance Director Attachment 1: Revenue and Expenditure Report for November 30, 2022 ta QaiKra FINANCE Fund 101 - GENERAL FUND 105 - DISASTER RECOVERY FUND 201 - GAS TAX FUND 202 - LIBRARY & MUSEUM FUND 203 - PUBLIC SAFETY FUND (MEASU 210 - FEDERAL ASSISTANCE FUND 212 - SLESA (COPS) FUND 215 - LIGHTING & LANDSCAPING FU 220-QUIMBYFUND 221 - AB 939 - CALRECYCLE FUND 223 - MEASURE A FUND 225 - INFRASTRUCTURE FUND 226-EMERGENCY MANAGEMENT 227 - STATE HOMELAND SECURITY I 230 - CASp FUND, AB 1379 231 - SUCCESSOR AGCY PA 1 RORF 235 - 50 COAST AIR QUALITY FUND 237 - SUCCESSOR AGCY PA 1 ADMII` 241 - HOUSING AUTHORITY 243 - RDA LOW -MOD HOUSING FUI` 247 - ECONOMIC DEVELOPMENT FL 249 - SA 2011 LOW/MOD BOND FUI 250-TRANSPORTATION DIF FUND 251 - PARKS & REC DIF FUND 252 - CIVIC CENTER DIF FUND 253 - LIBRARY DEVELOPMENT DIF 254 - COMMUNITY & CULTURAL CEI 255 - STREET FACILITY DIF FUND 256 - PARK FACILITY DIF FUND 257 - FIRE PROTECTION DIF 259 - MAINTENANCE FACILITIES DIF 270 - ART IN PUBLIC PLACES FUND 275 - LQ PUBLIC SAFETY OFFICER 299 - INTEREST ALLOCATION FUND 310 - LQ FINANCE AUTHORITY DEBT 401 - CAPITAL IMPROVEMENT PRO( 405 - SA PA 1 CAPITAL IMPRV FUND 501 - FACILITY & FLEET REPLACEMEI 502 - INFORMATION TECHNOLOGY 503 - PARK EQUIP & FACILITY FUND 504 - INSURANCE FUND 601 - SILVERROCK RESORT 602 - SILVERROCK GOLF RESERVE 760 - SUPPLEMENTAL PENSION PLA 761-CERBT OPEB TRUST 762 - PARS PENSION TRUST Report Total: ATTACHMENT 1 For Fiscal: 2022/23 Period Ending: 11/30/2022 Revenue Summary Variance Original Current Period Fiscal Favorable Percent Total Budget Total Budget Activity Activity (Unfavorable) Used 68,321,100 68,321,100 3,308,041 12,746,008 -55,575,092 18.66% 5,003,505 5,003,505 0 4,990,403 -13,102 99.74% 2,691,011 2,691,011 154,831 559,581 -2,131,430 20.79% 2,867,000 2,867,000 82 -4,706 -2,871,706 0.16% 2,000 2,000 0 -157 -2,157 7.83% 156,000 156,000 169,546 169,545 13,545 108.68 % 101,000 101,000 8,333 81,698 -19,302 80.89% 2,483,300 2,483,300 0 28,681 -2,454,619 1.15% 25,000 25,000 0 0 -25,000 0.00% 64,000 64,000 0 13,789 -50,211 21.55% 1,875,000 1,875,000 0 315,406 -1,559,594 16.82% 0 0 0 -12 -12 0.00% 12,100 12,100 0 0 -12,100 0.00% 5,000 5,000 0 4,896 -104 97.92% 20,200 20,200 1,700 7,759 -12,441 38.41% 0 0 9 4,597 4,597 0.00% 54,400 54,400 0 -28 -54,428 0.05% 0 0 0 -116 -116 0.00% 1,451,500 1,451,500 27,165 547,386 -904,114 37.71% 20,000 20,000 0 -2,155 -22,155 10.77% 15,000 15,000 6,456 14,960 -40 99.74% 25,000 25,000 1,106 7,429 -17,571 29.71% 1,020,000 1,020,000 52,117 529,235 -490,765 51.89% 501,000 501,000 27,378 272,725 -228,275 54.44% 301,000 301,000 15,990 160,026 -140,974 53.16% 75,000 75,000 5,161 51,492 -23,508 68.66% 152,000 152,000 12,428 123,591 -28,409 81.31% 10,000 10,000 0 -48 -10,048 0.48% 0 0 0 -4 -4 0.00% 101,000 101,000 4,797 47,939 -53,061 47.46% 75,500 75,500 4,069 41,170 -34,330 54.53% 153,000 153,000 3,250 16,387 -136,613 10.71% 2,200 2,200 0 -32 -2,232 1.45% 0 0 203,681 1,186,816 1,186,816 0.00% 1,100 1,100 0 0 -1,100 0.00% 13,136,811 79,798,757 0 78,793 -79,719,964 0.10% 1,000 1,000 0 -4 -1,004 0.38% 1,685,000 1,685,000 0 413,776 -1,271,224 24.56% 2,256,708 2,256,708 2,629 567,172 -1,689,536 25.13% 470,000 470,000 0 110,115 -359,885 23.43% 1,020,400 1,020,400 0 254,727 -765,673 24.96% 4,865,453 4,865,453 539,328 1,103,825 -3,761,628 22.69% 79,000 79,000 0 -344 -79,344 0.44% 5,500 5,500 0 -54 -5,554 0.98% 10,000 10,000 0 -131,500 -141,500 1,315.00% 100,000 100,000 0 -311,693 -411,693 311.69% 111,213,788 177,875,734 4,548,098 23,999,076 -153,876,658 13.49% Accounts are subject to adjusting entries and audit. The City's Annual Comprehensive Financial Report published annually, is the best resource for all final audited numbers. Page 1 of 3 Budget Report No Decimals CC RevExp For Fiscal: 2022/23 Period Ending: 11/30/2022 Fund Summary Variance Original Current Period Fiscal Favorable Percent Fund Total Budget Total Budget Activity Activity (Unfavorable) Used 101 - GENERAL FUND 64,651,274 99,999,036 2,278,064 13,377,053 86,621,983 13.38% 201 - GAS TAX FUND 2,687,351 3,703,799 37,123 395,775 3,308,025 10.69% 202 - LIBRARY & MUSEUM FUND 1,909,146 4,725,851 18,957 160,138 4,565,713 3.39% 210 - FEDERAL ASSISTANCE FUND 152,600 339,977 0 0 339,977 0.00% 212 - SLESA (COPS) FUND 100,000 100,000 5,151 12,170 87,830 12.17% 215 - LIGHTING & LANDSCAPING FU 2,465,376 2,465,376 150,613 739,623 1,725,753 30.00% 220-QUIMBYFUND 0 466,967 0 0 466,967 0.00% 221 - AB 939 - CALRECYCLE FUND 150,000 150,000 3,568 60,228 89,772 40.15% 223 - MEASURE A FUND 3,882,000 5,843,145 0 33,703 5,809,442 0.58% 226 - EMERGENCY MANAGEMENT F 12,000 12,000 0 9,750 2,250 81.25% 227 -STATE HOMELAND SECURITY 1 5,000 5,000 0 4,312 688 86.25% 230 - CASp FUND, AB 1379 5,500 5,500 0 0 5,500 0.00% 231 - SUCCESSOR AGCY PA 1 RORF 0 0 0 14,973,153 -14,973,153 0.00% 235 - SO COAST AIR QUALITY FUND 46,500 46,500 985 3,123 43,377 6.72% 237 - SUCCESSOR AGCY PA 1 ADMII` 0 0 0 1,600 -1,600 0.00% 241 - HOUSING AUTHORITY 1,712,670 1,712,670 52,089 505,097 1,207,573 29.49% 243 - RDA LOW -MOD HOUSING FUI` 250,000 250,000 0 255,000 -5,000 102.00% 244 - HOUSING GRANTS (Multiple) 0 0 895 97,052 -97,052 0.00% 247 - ECONOMIC DEVELOPMENT FL 21,500 21,500 1,000 1,000 20,500 4.65% 249 - SA 2011 LOW/MOD BOND FUI 20,000 20,000 9,800 11,405 8,595 57.03% 250-TRANSPORTATION DIF FUND 500,000 1,916,757 0 400,000 1,516,757 20.87% 251 - PARKS & REC DIF FUND 500,000 500,000 0 0 500,000 0.00% 252 - CIVIC CENTER DIF FUND 250,000 250,000 0 0 250,000 0.00% 253 - LIBRARY DEVELOPMENT DIF 15,000 15,000 0 0 15,000 0.00% 254 - COMMUNITY & CULTURAL CEI 0 125,000 0 0 125,000 0.00% 270 - ART IN PUBLIC PLACES FUND 177,000 389,465 0 25,832 363,633 6.63% 310 - LQ FINANCE AUTHORITY DEBT 1,100 1,100 0 0 1,100 0.00% 401 - CAPITAL IMPROVEMENT PRO( 13,136,811 78,519,094 660,929 3,084,541 75,434,553 3.93% 501 - FACILITY & FLEET REPLACEMEI 1,608,750 1,740,714 167,727 632,122 1,108,592 36.31% 502 - INFORMATION TECHNOLOGY 2,258,054 2,258,054 60,266 704,931 1,553,123 31.22% 503 - PARK EQUIP & FACILITY FUND 545,000 545,000 0 79,201 465,799 14.53% 504 - INSURANCE FUND 984,100 984,100 0 892,633 91,467 90.71% 601 - SILVERROCK RESORT 4,782,135 4,782,135 506,099 1,861,914 2,920,221 38.93% 760 - SUPPLEMENTAL PENSION PLA 12,850 12,850 0 12,833 17 99.87% 761 - CERBT OPEB TRUST 1,500 1,500 0 390 1,110 25.98% 762 - PARS PENSION TRUST 55,000 55,000 0 18,033 36,967 32.79% Report Total: 102,898,217 211,963,090 3,953,269 38,352,611 173,610,479 18.09% Accounts are subject to adjusting entries and audit. The City's Annual Comprehensive Financial Report published annually, is the best resource for all final audited numbers. Page 2 of 3 Fund Descriptions Fund # Name Notes 101 General Fund The primary fund of the City used to account for all revenue and expenditures of the City; a broad range of municipal activities are provided through this fund. Accounts for use of one-time federal funding designed to deliver relief to American workers and aid in 105 Disaster Recovery Fund the economic recovery iin the wake of COVID-19. The American Rescue Plan Act (ARPA) was passed by Congress in 2021 to provide fiscal recovery funds to state and local governments. 201 Gas Tax Fund Gasoline sales tax allocations received from the State which are restricted to street -related expenditures. 202 Library and Museum Fund Revenues from property taxes and related expenditures for library and museum services. 203 Public Safety Fund General Fund Measure G sales tax revenue set aside for public safety expenditures. 210 Federal Assistance Fund Community Development Block Grant (CDBG) received from the federal government and the expenditures of those resources. 212 SLESF (COPS) Fund Supplemental Law Enforcement Services Funds (SLESF) received from the State for law enforcement activities. Also known as Citizen's Option for Public Safety (COPS). 215 Lighting & Landscaping Fund Special assessments levied on real property for city-wide lighting and landscape maintenance/improvements and the expenditures of those resources. 220 Quimby Fund Developer fees received under the provisions of the Quimby Act for park development and improvements. 221 AB939 Fund/Cal Recycle Franchise fees collected from the city waste hauler that are used to reduce waste sent to landfills through recycling efforts. Assembly Bill (AB) 939. 223 Measure A Fund County sales tax allocations which are restricted to street -related expenditures. 224 TUMF Fund Developer -paid Transportation Uniform Mitigation Fees (TUMF) utilized for traffic projects in Riverside Countv. 225 Infrastructure Fund Developer fees for the acquisition, construction or improvement of the City's infrastructure as defined by Resolution 226 Emergency Mgmt. Performance Grant (EMPG) Federal Emergency Management Agency (FEMA) grant for emergency preparedness. 227 State Homeland Security Programs (SHSP) Federal Emergency Management Agency (FEMA) grant for emergency preparedness. 230 CASP Fund, AB1379 / SB1186 Certified Access Specialist (CASp) program fees for ADA Accessibility Improvements; derived from Business License renewals. Assemblv Bill (AB) 1379 and Senate Bill (SB) 1186. Successor Agency (SA) Project Area (PA) 1 Redevelopment Obligation Retirement Fund (RORF) for 231 Successor Agency PA 1 RORF Fund Redevelopment Property Tax Trust Fund (RPTTF) taxes received for debt service payments on recoanized obligations of the former Redevelopment Aaencv (RDA). 235 SO Coast Air Quality Fund (AB2766, PM10) Contributions from the South Coast Air Quality Management District. Uses are limited to the reduction and control of airborne pollutants. Assembly Bill (AB) 2766. 237 Successor Agency PA 1 Admin Fund Successor Agency (SA) Project Area (PA) 1 for administration of the Recognized Obligation Payment Schedule (ROPS) associated with the former Redevelopment Aaencv (RDA). 241 Housing Authority Activities of the Housing Authority which is to promote and provide quality affordable housing. 243 RDA Low -Moderate Housing Fund Activities of the Housing Authority which is to promote and provide quality affordable housing. Accounts for RDA loan rei)avments (20 /o for Housing) and housing programs,. 244 Housing Grants Activites related Local Early Action Planning (LEAP) and SB2 grants for housing planning and development. 247 Economic Development Fund Proceeds from sale of City -owned land and transfers from General Fund for future economic development. 249 SA 2011 Low/Mod Bond Fund Successor Agency (SA) low/moderate housing fund; 2011 bonds refinanced in 2016. 250 Transportation DIF Fund Developer impact fees collected for specific public improvements - transportation related. 251 Parks & Rec. DIF Fund Developer impact fees collected for specific public improvements - parks and recreation. 252 Civic Center DIF Fund Developer impact fees collected for specific public improvements - Civic Center. 253 Library Development DIF Fund Developer impact fees collected for specific public improvements - library. 254 Community Center DIF Fund Developer impact fees collected for specific public improvements - community center. 255 Street Facility DIF Fund Developer impact fees collected for specific public improvements - streets. 256 Park Facility DIF Fund Developer impact fees collected for specific public improvements - parks. 257 Fire Protection DIF Fund Developer impact fees collected for specific public improvements - fire protection. 259 Maintenance Facilities DIF Fund Developer impact fees collected for specific public improvements - maintenance facilities. 270 Art In Public Places Fund Developer fees collected in lieu of art placement; utilized for acquisition, installation and maintenance of public artworks. 275 LQ Public Safety Officer Fund Annual transfer in from General Fund; distributed to public safety officers disabled or killed in the line of duty. 299 Interest Allocation Fund Interest earned on investments. 310 LQ Finance Authority Debt Service Fund Accounted for the debt service the Financing Authority's outstanding debt and any related reporting reauirements. This bond was fully paid in October 2018. 401 Capital Improvement Program Fund Planning, design, and construction of various capital projects throughout the City. 405 SA PA 1 Capital Improvement Fund Successor Agency (SA) Project Area (PA) 1 bond proceeds restricted by the bond indenture covenants. Used for SilverRock infrastructure improvements. 501 Equipment Replacement Fund Internal Service Fund for vehicles, heavy equipment, and related facilities. 502 Information Technology Fund Internal Service Fund for computer hardware and software and phone systems. 503 Park Equipment & Facility Fund Internal Service Fund for park equipment and facilities. 504 Insurance Fund Internal Service Fund for city-wide insurance coverages. 601 SilverRock Resort Fund Enterprise Fund for activities of the city -owned golf course. 602 SilverRock Golf Reserve Fund Enterprise Fund for golf course reserves for capital improvements. 760 Supplemental Pension Plan (PARS Account) Supplemental pension savings plan for excess retiree benefits to general employees of the City. 761 Other Post Benefit Obligation Trust (OPEB) For retiree medical benefits and unfunded liabilities. 762 Pension Trust Benefit (PARS Account) For all pension -related benefits and unfunded liabilities. Page 3 of 3 City of La Quinta BUSINESS SESSION ITEM NO. 1 FINANCIAL ADVISORY COMMISSION MEETING' February 2, 2023 STAFF REPORT AGENDA TITLE: DISCUSS AND APPROVE THE CHANGE FOR THE FINANCIAL ADVISORY COMMISSION'S REGULAR QUARTERLY MEETING START TIME FROM 4:00 P.M. TO 3:00 P.M. RECOMMENDATION Approve the change for the Financial Advisory Commission's regular quarterly meeting start time from 4:00 p.m. to 3:00 p.m. EXECUTIVE SUMMARI • During Commissioner Item's at the December 14, 2022 Financial Advisory Commission (FAC) special meeting the FAC discussed changing the start time for FAC meetings. The FAC meets quarterly, and the time change does not affect another Commission's meeting. FISCAL IMPACT - None. BACKGROUND/ANALYSIS At the December 14, 2022, special Commission meeting, during Commissioner Items the Commission expressed interest in assessing the Commission's preference for a change in the start time of their regular quarterly meetings. City staff requests that the Commission make a formal decision to request the change in start time to 3:00 p.m. commencing with the Commissions next scheduled meeting. A department report will be prepared for the City Council regarding the decision of the Commission to request a change in the start time of the regular meetings. ALTERNATIVES The Commission may continue to have their regular quarterly meetings start at 4:00 p.m. Prepared by: Jessica Delgado, Management Assistant Approved by: Claudia Martinez, Finance Director BUSINESS SESSION ITEM NO. 2 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: February 2, 2023 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE FISCAL YEAR 2021/22 GENERAL FUND YEAR-END BUDGET REPORT AND APPROVE THE AMENDED BUDGET CARRYOVERS RECOMMENDATION Receive and file Fiscal Year 2021/22 General Fund Year -End Budget Report and approve the amended budget carryovers from 2021/22 to 2022/23. EXECUTIVE SUMMARY • After closing the prior fiscal year, Finance presents a year-end summary that compares the final budget to actual transactions. • Revenue was nearly $7.7 million higher than budgeted. • Expenditures (including approved carryovers from 2020/21 into 2021/22) were $37.1 million under budget. Of these savings, approximately $31.9 million will be carried over to 2022/23 for General Fund capital improvements and operations, and $226,385 was allocated to Measure G reserves for net savings of $5.1 million.. • The City Council was presented this report on December 20, 2022. FISCAL IMPACT Amended budget carryovers from 2021/22 to 2022/23 total $32,973,647 for all Funds and are funded with budgetary savings from 2021/22. CARRYOVER TOTALS BY FUND ESTIMATED REVISED General Fund (101) - Operating $ 1,404,100 $ 1,209,100 General Fund (101) - Capital Improvements $ 15,000,000 $ 30,761,847 Lighting & Landscape Fund (215) $ 300,000 $ 157,000 RDA Low -Mod Housing Fund (243) $ - $ 55,000 Housing Grants Fund (244) $ - $ 90,000 Art in Public Places Fund (270) $ 24,000 $ 36,700 Facility and Fleet Replacement Fund (501) $ 335,000 $ 344,000 Information Technology Fund (502) $ 100,000 $ 100,000 Park Equipment & Facility Fund (503) $ 90,000 $ 200,000 SilverRock Resort Fund (601) $ - $ 20,000 OVERS BY FUND $ 17,253,100 $ 32,973,647 BACKGROUND/ANALYSIS The Fiscal Year 2021/22 General Fund Year -End Budget Report (Report) focuses on the General Fund. Revenues were over budget by $7,723,190 mostly due to tax revenues. Overall, most department expenditures were under budget with total savings of $37,106,393. Of these savings, $31,970,947 will be carried over to 2022/23 for multi -year capital projects and operations. Revenues, expenditures, carryovers, reserve balances, and a year -over -year comparison are discussed in the Fiscal Year 2021/22 General Fund Year -End Budget Report (Attachment 1). ALTERNATIVES The Commission may request additional information regarding this Report. Prepared by: Claudia Martinez, Finance Director Approved by: Jon McMillen, City Manager Attachment: 1. Fiscal Year 2021/22 General Fund Year -End Budget Report ATTACHMENT 1 ca Qaigra C;AUFORNIA FISCAL YEAR 2021/22 GENERAL FUND YEAR-END BUDGET REPORT OVERVIEW The City oversees multiple sources of funds which are reported in the Annual Comprehensive Financial Report (ACFR) issued annually and presented at a public meeting shortly thereafter. This Fiscal Year 2021/22 Budget Report (Report) focuses on the General Fund and summarizes the overall financial activities of fiscal year (FY) 2021/22 and the City's financial position through June 30, 2022. The chart below provides a summary comparison of the FY 2021/22 final budget versus actual revenues and expenses. Operational Revenues BudgetFinal 72,377,532 80,100,722 * 7,723,190 Capital/Operational Carryovers 14,640,959 14,640,959 - Measure G Reserves 7,468,061 7,468,061 - CIP Savings/Use of Reserves 10,123,350 10,123,350 - Total Revenues 104,609,902 112,333,092 7,723,190 Operational/CIP Expenses Multi -Year Capital Improvements 35,491,882 4,415,303 (31,076,579) Operational 53,448,766 47,418,952 * 6 029 814 88,940,648 51,834,255 (37,106,393) Expenses Before Carryovers Plus Carryovers to 2022/23 Multi -Year Capital Improvements 30,761,847 30,761,847 Operational 1,209,100 1,209,100 88,940,648 83,805,202 (5,135,446) Adjusted Expenditures Plus Measure G Reserves 3,578,644 226,385 (3,35 259 92,519292 84,031,587(8,487,705) Total Ex enditures Surplus/ (Deficit) After Carryovers 12,090,610 28,301,505 16,210,895 *Reduced by non -cash transactions described in the 2021/22 Year -End Budget Report The General Fund is fiscally resilient, with strong reserves, revenues exceeding budgetary projections, and expenditure savings. Moving forward, supporting the economic health and safety of the community and employees remains a high priority in the decision -making process for the City. As the City continues to remain fiscally strong, staff will closely monitor economic conditions as we face ongoing inflationary pressures and will make recommendations as necessary. Operational revenues were $7,723,190 over budget, and expenses after adjustments, carryovers, and reserve savings were $8,487,705 under budget resulting in a budget surplus of $16,210,895. Measure G Reserves and Use of Assigned Reserves in the amount of $14,936,122 is being used to fund the Highway Bridge Program advanced construction funding for the Dune Palms Bridge project. REVENUE VARIANCES As detailed in Exhibit A and summarized on the chart below, most General Fund revenues experienced positive variances when compared to the final budget. General Fund Revenues 2021/22 2021/22 Variance Variance Final Tax Revenue Budget 58,047,000 Actuals 63,010,284 4,963,284 9% Licenses & Permits 3,572,000 4,521,424 949,424 27% Intergovernmental 8,099,422 8,636,751 537,329 7% Charges for Services 876,010 1,625,339 749,329 86% Fines, Forfeitures & Abatements 609,000 657,589 48,589 8% Use of Money & Property 545,000 (2,876,934) (3,421,934) -628% Miscellaneous/Transfers In 629,100 1,049,059 419,959 67% Total Revenues 72,377,532 76,623,512 4,245,980 6% Investments Fair Market Value Adjustment 3,964,823 3,964,823 RDA Loan Interest Earned, Extraordinary Gain (487,613) (487,613) 3,477,210 3,477,210 Total Adjusted Revenues 72,377,532 80,100,722 7,723,190 • Taxes represent 82% of all General Fund revenues and include the three largest funding sources for the City - sales taxes $28,204,906, transient occupancy taxes (TOT) $17,055,601, and property taxes $9,674,674. Combined, these top three revenues account for $54,935,181 or 87% of all taxes. • Licenses and permits continued to overperform as a result of new housing projects accelerating as residential and commercial property values rise. In addition, lumber prices have decreased from prior year highs which has resulted in additional demand for projects. • Use of Money and Property includes the annual fair market value adjustment to the City's investments. In FY 2021/22 the portfolio holdings were valued less than book value due to market conditions, therefore a negative adjustment in the amount of $3,964,823 was recorded. The City's investments have a five-year horizon with laddered maturities. The City has worked diligently to leverage highly restricted investments under volatile market conditions. On June 30, 2021, the portfolio was earning a 0.95% rate of return and on June 30, 2022 the return was 0.79%. • Miscellaneous and Transfers In revenue includes $487,613 to record the annual former Redevelopment Agency loan repayment interest earned in FY 2021/22. The loan repayments are structured to pay all principal first, then interest. Each year the City records the payment received and interest earned in accordance with the State Department of Finance approved loan repayment schedule. This amount is also reduced from revenues as an adjustment because it is earned, but not received until a future date. EXPENSE VARIANCES General Fund expenses are summarized in the chart below by department, and details by department and expense category are located in Exhibit B. Overall, despite inflationary impacts on the economy, most departments remained within budget. Savings were derived from the prudent management of contract and professional services, as well as salary and benefits savings from vacant positions. General Fund Expenditures 2021/22 2021/22 Variance Carryovers City Council Final Budget 302,200 Actuals 251,153 (51,047) to 2022/23 - City Manager 1,096,000 796,578 (299,422) City Attorney 796,000 370,189 (425,811) - Human Resources 411,000 269,015 (141,985) 53,700 City Clerk 667,200 586,861 (80,339) - Finance 1,444,100 1,241,161 (202,939) - Centralized Services 41,547,054 9,738,291 (31,808,763) 30,961,847 Police 17,865,100 16,868,265 (996,835) 22,900 Fire 8,582,275 8,008,530 (573,745) 443,100 Community Resources Admin. 888,500 661,768 (226,732) - Wellness Center Operations 677,900 612,277 (65,623) - Recreational Programs & Events 1,078,300 640,734 (437,566) 240,000 Parks Maintenance 2,656,900 2,445,674 (211,226) 14,000 Marketing & Community Relations 1,540,900 1,389,343 (151,557) 10,000 Public Buildings 1,378,700 1,374,563 (4,137) - Design & Development Admin. 746,200 816,867 70,667 Planning 748,600 559,340 (189,260) Building 1,094,800 960,672 (134,128) Code Compliance/Animal Control 1,559,320 1,312,923 (246,397) The Hub 1,066,000 834,387 (231,613) Public Works Administration 739,900 535,839 (204,061) Public Works Dev. Services 448,200 374,998 (73,202) Streets 503,600 426,354 (77,246) - Engineering Services 1,101,900 758,472 (343,428) 225,400 Total Operating/CIP Expenditures 88,940,648 51,834,255 (37,106,393) 31,970,947 Carryovers to 2022123 Estimated Actual Variance Capital Improvements 30,761,847 30,761,847 Operational 1 209 100 1,209,100 Total Carryovers - 31,970,947 31,970,947 Adjusted Expenditures before Reserves Plus Ma -'- r P.--- 88,940,648 3,578,644 :0 226,385 (3,352,259) • Centralized Services (CS) represents the largest budget variance in the amount of $31.8 million. CS captures citywide expenses such as pension liabilities, retiree medical benefits, and transfers out to other funds such as the Gas Tax Fund for street improvements, Lighting and Landscape Fund, SilverRock Golf Course Fund, Public Safety Fund, Economic Development Fund and the Capital Improvement Project Fund. This department also has the greatest amount of carryovers to FY 2022/23 to fund multi -year capital improvement projects in the amount of $30,961,847 as detailed in Exhibit C, which is largely attributed to the one-time advance funding for the Dune Palms Bridge project. The majority of capital improvement carryover funding ($16,788,709 or 55%) is provided from Measure G sales tax revenue. • To ensure funds are available for critical services such as Police and Fire, the City budget incorporates the rates originally disclosed by the County. FY 2021/22 savings are derived from enhancing and modifying resources post pandemic. o For Police services, savings of $996,835 were a result of prudent management of contract service costs, along with carryovers totaling $22,900 for vehicle equipment upgrades. o For Fire services, savings of $573,745 include $443,100 for vehicle equipment upgrades and emergency operations center equipment which are being carried over to FY 2022/23, the remaining $130,645 were the result of prudent management of contract service costs. • The Recreational Programs and Events savings of $437,566 were a result of postponed citywide events combined with reduced staffing including carryovers totaling $240,000. • The Design and Development Administration department had an overage of $70,667 due to additional staffing needed due to vacancies and an unanticipated increase in credit card fees. • The Engineering Services department savings of $343,428 were derived from contract service savings and La Quinta's share of the CVAG Art & Music Line in the amount of $225,400 which is being carried over to FY 2022/23. Operational carryovers, detailed in Exhibit D, from FY 2021/22 to FY 2022/23 decreased by $195,000 from the original anticipated amount of $1,404,100 to $1,209,100. Carryovers allow for operational flexibility due to the unforeseen impacts of inflation brought on by supply chain issues, increased consumer demand, and interest rate fluctuations. Funds not being carried over are recognized as Unassigned Reserve Fund balance in the General Fund. CIP revenue commitments are reflected in assigned reserves and operational carryovers are noted in committed reserves. RESERVES The chart below depicts reserve balances by category and the value change from June 30, 2021 to June 30, 2022. These reserve balances reflect the financial health of the City at fiscal -year end. • Non -spendable balance decreased by a total of $2,133,531 and included a slight increase in prepaid costs. The FY 2021/22 Redevelopment Agency loan repayment of $2,642,888 and interest earnings of $487,613 resulted in a decrease of $2,155,275 in Due from Other Governments. • The Due from Other Governments balance of $21,915,347 represents the principal ($10,428,388) and interest ($11,486,959) owed to the General Fund (80% of total loan repayments). Non -spendable reserves cannot be used to fund ongoing operations and primarily represent commitments due to the General Fund. • Restricted reserves are limited to funds held in a Section 115 Pension Trust set aside to fund the City's pension obligations. The trust balance resulted in a decrease in total value of $1,244,034 due to financial market conditions. • Committed reserves decreased by $770 due to operational carryovers as detailed in Exhibit D. At this time, all four of the City's reserve categories (Natural Disaster, Economic Disaster, Cash Flow and Capital Replacement) are fully funded to policy targets. The Finance department in conjunction with the Financial Advisory Commission are currently reviewing the Reserve Policy to update target levels which will be presented to Council during the FY 2022/23 Mid - Year Budget report. • An increase of $17.3 million in assigned reserves was primarily due to multi -year capital improvement project funding of $17,330,758, which includes the one-time advance funding for the Dune Palms Bridge project. The 2022/23 Mid -Year Budget report will be presented to Council by March of 2023. The Mid -Year Budget Report may include funding options for Council to consider an allocation of unassigned reserves into Restricted or Committed reserve categories based on recommendations from the Reserve Policy update, as well as options for paying down the unfunded pension liability. In addition, staff will continue to monitor current economic impacts and operating expenses and request additional reserve funding if necessary. MEASURE G SUMMARY The Financial Advisory Commission oversees and audits the use of Measure G sales tax revenues and prepares the annual Measure G Sales Tax Oversight Report. The summary below provides a preview of the revenues and expenditures to date. The Measure G reserve balance ended the fiscal year at $15,355,043. Fiscal Year (FY) 2016/17 Actual $ 1,462,650 2017/18 Actual 9,967,657 2018/19 Actual 10,958,118 2019/20 Actual 10,310,526 2020/21 Actual 12,594,389 2021/22 Actual 15,615,802 TOTAL $ 60,909,142 Fiscal Year Project Description Operational Capital Reserves Total by Year 2016/17 Eisenhower Dr. Retention Basin 750,000 X-Park Funding 712,650 1,462,650 2017/18 Public Safety Fund 300,000 North La Quinta Landscape Improvements 1,802,576 Citywide Drainage Enhancements 2,407,373 La Quinta Village Road Diet Project 1,972,158 X-Park Funding 147,350 Alongi Building Improvements 800,000 SilverRock Event Site 321,900 SilverRock Event Site 244,700 Alongi Building at SilverRock Event Site 160,000 SilverRock Event Site 290,000 SilverRock Event Site Retention Basin 10,000 SilverRock Event Site Retention Basin 427,250 Measure G Reserves 2017/18 1,084,350 9,967,657 2018/19 Public Safety Fund 850,000 Public Safety Contract Services 2,100,000 Citywide Drainage Enhancements 194,730 North La Quinta Landscape Improvements 2,129,613 SilverRock Event Site 1,300,000 Measure G Reserves 2018/19 4,383,775 10,958,118 2019/20 Public Safety Contract Services 2,750,000 Corporate Yard Administration/Crew Quarters 411,013 Highway 111 Corridor Improvements 1,000,000 North La Quinta Landscape Improvements 3,703,369 Village Art Plaza Promenade 310,000 Measure G Reserves 2019/20 2,136,144 10,310,526 2020/21 Public Safety Contract Services 4,545,000 X-Park Landscaping 275,000 Highway 111 Corridor Improvements 250,000 Measure G Reserves 2020/21 7,524,389 12,594,389 2021/22 Public Safety Contract Services 5,163,000 Landscape Renovation Improvements 1,408,356 Highway 111 Corridor Improvements 1,000,000 Fritz Burns Park Improvements 350,000 Allocate Advance Bridge Funding 7,468,061 Measure G Reserves 2021/22 226,385 15,615,802 $ 60,909,142 TOTAL $ 15,708,000 $ 29,846,099 $ 15,355,043 26% 49% 25% The FY 2021/22 Year -End Budget Report provides the City Council and residents with an overview of significant variances and reflects the City's commitment to fiscal discipline and transparency. As impacts from the uncertainties of the economy are ever -changing, the City will need to continue to make fiscally responsible and strategic decisions to address the financial challenges ahead. Questions regarding this report may be directed to the Finance Department by calling 760-777-7150 or by email at finance@laquintaca.gov. i CITY OF LA QUINTA GENERAL FUND REVENUE DETAILS BY CATEGORY 2020/21 2021/22 Actuals Original Budget EXHIBIT A 2021/22 YEAR-END BUDGET REPORT 2021/22 2021/22 Final Budget Actuals 101 - GENERAL FUND 310 - Tax Revenues 101-0000-40310 Property Tax Revenue 2,578,492 2,605,000 2,605,000 2,741,127 101-0000-40311 No -Low City Property Tax 4,769,373 4,706,000 4,706,000 4,805,049 101-0000-40315 RPTTF Pass Through 1,884,546 1,616,000 2,016,000 2,128,498 101-0000-41320 State Sales Tax 10,729,160 10,000,000 11,500,000 12,589,104 101-0000-41326 Measure G Sales Tax 12,594,389 11,500,000 13,500,000 15,615,802 101-0000-41327 Document Transfer Tax 1,568,997 750,000 1,240,000 1,352,585 101-0000-41400 TOT - Hotels 4,545,117 5,000,000 9,000,000 9,448,099 101-0000-41401 TOT - Short Term Vac. Rentals 6,213,353 3,000,000 6,700,000 7,144,654 101-0000-41402 TOT - Bed and Breakfast 69,987 90,000 90,000 104,426 101-0000-41416 TOT - Resort Fees 243,520 250,000 250,000 358,422 101-0000-41505 Franchise Taxes - Burrtec 894,559 785,000 785,000 966,467 101-0000-41508 Southern California Gas Franchise 173,961 140,000 140,000 206,498 101-0000-41509 Cable Television Franchise Fee 644,058 650,000 650,000 676,143 101-0000-41510 Communications Franchise Fees 229,886 250,000 250,000 210,081 101-0000-41800 Property Tax in Lieu of VLF 4,376,455 4,615,000 4,615,000 4,663,327 310 - Tax Revenues Totals: 51,515,856 45,957,000 58,047,000 63,010,284 320 - Licenses & Permits 101-0000-41411 STVR Inspection Fee 5,850 9,000 9,000 1,300 101-0000-41415 STVR Registration Fee 355,690 894,000 894,000 1,022,050 101-0000-41600 Business Licenses 373,801 350,000 350,000 378,882 101-0000-41602 STVR Business Licenses 0 0 0 57,824 101-0000-41610 Film Permits 2,800 1,000 1,000 1,428 101-0000-42400 Building Permits 437,209 210,000 1,050,000 1,185,352 101-0000-42401 Plumbing Permits 75,101 90,000 165,000 201,028 101-0000-42402 Mechanical Permits 90,394 100,000 175,000 198,643 101-0000-42403 Electrical Permits 65,016 80,000 80,000 159,331 101-0000-42404 Miscellaneous Permits 216,745 180,000 180,000 312,182 101-0000-42405 Garage Sale Permits 3,630 5,000 5,000 5,670 101-0000-42406 Golf Cart Permits 250 0 0 0 101-0000-42408 Grading Permits 18,237 10,000 10,000 66,928 101-0000-42410 Driveway Permits 0 1,000 1,000 0 101-0000-42420 Fire Plan Review Fee 55,610 60,000 60,000 99,228 101-0000-42421 Fire Inspection Fee 60,030 40,000 40,000 119,607 101-0000-42430 Transportation Permits 2,850 2,000 2,000 1,151 101-0000-42431 Conditional Use Permits 8,828 10,000 10,000 29,573 101-0000-42433 Minor Use Permit 5,400 5,000 5,000 13,564 101-0000-42434 Sign Permit 11,616 15,000 15,000 26,161 101-0000-42435 Site Development Permit 56,228 40,000 40,000 72,028 101-0000-42436 Final Landscaping Plans 5,313 12,000 12,000 24,901 101-0000-42437 Development Agreement 6,154 0 0 3,446 101-0000-42439 Temporary Use Permit 800 10,000 10,000 36,588 101-0000-43632 Public Works Permits 154,626 120,000 450,000 493,861 101-0000-43638 NPDES Inspections 12,431 8,000 8,000 10,697 320 - Licenses & Permits Totals: 2,024,611 2,252,000 3,572,000 4,521,424 330 - Intergovernmental 101-0000-41710 State Gov't Revenue 502,034 0 203,322 0 101-0000-42500 Fire Service Credit 7,591,078 7,047,900 7,047,900 7,587,538 101-0000-42501 Fire Service Reserves 70,110 800,200 570,200 561,645 101-0000-43100 FEMA 0 0 0 24,516 101-0000-43633 CSA 152 Assessments 367,882 400,000 275,000 460,052 101-0000-43634 CVWD 17,859 0 0 0 101-0000-43650 Contributions from Other Agencie! 3,000 3,000 3,000 3,000 330 - Intergovernmental Totals: 8,551,963 8,251,100 8,099,422 8,636,751 340 - Charges for Services 101-0000-42200 Leisure Enrichment 6,891 16,200 16,200 11,658 101-0000-42202 Gift Shop 84 0 0 0 101-0000-42210 Youth Sports 0 16,200 16,200 41,045 101-0000-42211 Adult Sports 75 2,160 2,160 5,755 101-0000-42212 Facility Rentals (50) 12,600 12,600 7,301 Unaudited, final amounts will be reported in the 2021/22 Financial Statements CITY OF LA QUINTA EXHIBIT A GENERAL FUND REVENUE DETAILS BY CATEGORY 2021/22 YEAR-END BUDGET REPORT 2020/21 2021/22 2021/22 2021/22 Actuals Original Budget Final Budget Actuals 101-0000-42213 Special Events 0 7,200 7,200 0 101-0000-42214 Wellness Center Leisure Enrichme 6,979 19,800 19,800 12,652 101-0000-42216 Wellness Center Special Events 0 550 550 (105) 101-0000-42218 Wellness Center Memberships 10,425 54,000 54,000 52,260 101-0000-42300 Cash Over/Short 2,296 0 0 1,363 101-0000-42303 NSF Charges 95 200 200 25 101-0000-42412 Minor Adjustment, Plan Checks 38,000 3,000 3,000 28,324 101-0000-42415 Tentative Tract Map 55,357 25,000 25,000 25,414 101-0000-42416 Digitization/Records Management 29,685 20,000 20,000 53,188 101-0000-42417 Modification by Applicant 4,400 2,000 2,000 5,712 101-0000-42440 Appeals - Permits, Licenses, Proje 8,750 6,000 6,000 1,725 101-0000-42441 Planning Compliance Review 405 0 0 0 101-0000-42443 Zone Change 1,052 10,000 10,000 21,772 101-0000-42445 Environmental Assessment 11,753 5,000 5,000 5,635 101-0000-42446 General Plan Amendment 0 10,000 10,000 10,465 101-0000-42447 Home Occupations 9,750 8,000 8,000 10,039 101-0000-42448 Tentative Parcel Map 3,005 15,000 15,000 5,224 101-0000-42451 Specific Plan 14,329 10,000 10,000 4,946 101-0000-42460 Pre -Application Review 9,016 5,000 5,000 11,798 101-0000-42600 Building Plan Check Fees 521,451 475,000 475,000 929,874 101-0000-42610 SMIP Fees 498 600 600 554 101-0000-42615 CBSC Administrative Fees 473 500 500 410 101-0000-42810 Public Works Dev. Plan Check Fee 225,852 150,000 150,000 334,644 101-0000-43631 CVMSHCP Admin Fee 1,787 2,000 2,000 8,603 101-0000-43635 VGPS TBID Admin Fee 0 0 0 35,057 340 - Charges for Services Totals: 962,358 876,010 876,010 1,625,339 350 - Fines, Forfeitures & Abatements 101-0000-42700 Administrative Citations 504,205 60,000 375,000 400,708 101-0000-42701 Lot Abatement 5,812 5,000 5,000 188 101-0000-42702 Vehicle Abatement 33,669 30,000 30,000 47,293 101-0000-42703 Vehicle Impound Fee 67,962 50,000 50,000 50,870 101-0000-42705 Motor Vehicle Code Fines 110,045 110,000 110,000 62,927 101-0000-42706 Parking Violations 48,726 20,000 20,000 29,183 101-0000-42707 Misc Fines 941 1,000 1,000 9,413 101-0000-42708 Graffiti Removal 8,246 5,000 5,000 8,675 101-0000-42709 False Alarm Fees - Police 0 10,000 10,000 32,295 101-0000-42710 False Alarm Fees - Fire (600) 3,000 31000 16,038 350 - Fines, Forfeitures & Abatements Totals: 779,006 294,000 609,000 657,589 360 - Use of Money & Property 101-0000-41900 Allocated Interest 897,509 400,000 400,000 931,973 101-0000-41910 GASB 31 Interest (666,023) * 0 0 (3,964,823) 101-0000-42120 Lease Revenue 147,720 145,000 145,000 155,915 360 - Use of Money & Property Totals: 379,206 545,000 545,000 (2,876,934) 370 - Miscellaneous 101-0000-41410 Zoning Change Mitigation Fees 419,472 400,000 400,000 287,773 101-0000-41504 AMR Compliance 0 20,000 20,000 21,632 101-0000-41507 Burrtec Admin Cost Reimburseme 113,041 114,000 114,000 181,278 101-0000-42000 Insurance Recoveries 3,196 5,000 5,000 3,448 101-0000-42140 Sales of Publications & Materials 15 100 100 30 101-0000-42301 Miscellaneous Revenue 1,233 40,000 40,000 3,557 101-0000-42305 Miscellaneous Reimbursements 104,930 50,000 50,000 62,243 101-0000-45000 Sale of Other Assets 0 0 0 1,486 101-0000-48500 Extraordinary Gain 591,946 * 0 0 487,613 370 - Miscellaneous Totals: 1,233,835 629,100 629,100 1,049,059 101 - GENERAL FUND Totals: 65,446,835 58,804,210 72,377,532 76,623,512 Non -Cash Transactions Adjusted Operating Revenues 74,077 65,520,912 3,477,210 80,100,722 Unaudited, final amounts will be reported in the 2021/22 Financial Statements *Non -Cash Transactions CITY OF LA QUINTA EXHIBIT B GENERAL FUND EXPENSE SUMMARY BY DEPARTMENT 2021/22 YEAR-END BUDGET REPORT 2020/21 2021/22 2021/22 2021/22 Actuals Original Budget Final Budget Actuals 1001 - City Council 233,538 302,200 302,200 251,153 Salaries and Benefits 228,115 276,700 276,700 233,149 Maintenance & Operations 5,423 25,500 25,500 18,004 1002 - City Manager 669,515 1,076,000 1,096,000 796,578 Salaries and Benefits 468,904 496,100 496,100 500,384 Contract Services 44,029 100,000 120,000 89,320 Maintenance & Operations 92,882 115,000 115,000 95,974 Other Expenses 0 300,000 300,000 46,000 Internal Service Charges 63,700 64,900 64,900 64,900 1003 - City Attorney 457,354 696,000 796,000 370,189 Contract Services 457,354 696,000 796,000 370,189 1004 - Human Resources 215,251 376,000 411,000 269,015 Salaries and Benefits 149,396 183,000 198,000 175,125 Contract Services 9,906 90,000 90,000 28,107 Maintenance & Operations 37,150 83,900 103,900 46,683 Internal Service Charges 18,800 19,100 19,100 19,100 1005 - City Clerk 494,173 625,200 667,200 586,861 Salaries and Benefits 346,786 444,600 464,600 446,644 Contract Services 62,728 90,000 102,000 48,057 Maintenance & Operations 11,660 16,200 26,200 17,760 Internal Service Charges 73,000 74,400 74,400 74,400 1006 - Finance 1,304,355 1,444,100 1,444,100 1,241,161 Salaries and Benefits 986,090 1,060,400 1,060,400 940,346 Contract Services 139,743 190,000 190,000 117,464 Maintenance & Operations 11,922 25,200 25,200 14,851 Internal Service Charges 166,600 168,500 168,500 168,500 1007 - Central Services 9,503,897 10,458,206 41,547,054 9,738,291 Salaries and Benefits 2,192,550 2,163,100 4,279,100 3,773,246 Maintenance & Operations 154,011 208,200 378,200 166,068 Other Expenses 40,291 0 0 0 Capital Expenses 371,760 410,000 613,322 599,125 Internal Service Charges 702,900 784,550 784,550 784,550 Transfers Out 6,042,385 6,892,356 35,491,882 4,415,303 2001 - Police 16,479,907 17,855,100 17,865,100 16,868,265 Contract Services 16,395,945 17,706,000 17,706,000 16,745,378 Maintenance & Operations 14,594 18,000 18,000 7,428 Utilities 14,968 20,000 20,000 17,348 Capital Expenses 0 50,000 60,000 37,010 Internal Service Charges 54,400 61,100 61,100 61,100 2002 - Fire 7,037,802 7,660,800 8,582,275 8,008,530 Salaries and Benefits 270,532 288,600 313,600 263,818 Contract Services 6,164,684 6,988,000 6,988,000 6,962,420 Maintenance & Operations 51,326 148,100 148,100 115,487 Utilities 70,552 71,500 77,000 80,798 Capital Expenses 57,472 45,000 573,000 103,395 Internal Service Charges 110,200 119,600 119,600 119,600 Transfers Out 313,037 0 362,975 363,012 3001 - Community Resources Administration 699,783 808,500 888,500 661,768 Salaries and Benefits 494,944 520,900 520,900 513,569 Contract Services 12,646 72,000 92,000 38,081 Maintenance & Operations 126,692 148,800 208,800 43,318 Internal Service Charges 65,500 66,800 66,800 66,800 3002 - Wellness Center Operations 495,568 597,900 677,900 612,277 Salaries and Benefits 374,073 411,200 491,200 476,972 Unaudited, final amounts will be reported in the 2021/22 Financial Statements CITY OF LA QUINTA EXHIBIT B GENERAL FUND EXPENSE SUMMARY BY DEPARTMENT 2021/22 YEAR-END BUDGET REPORT 2020/21 2021/22 2021/22 2021/22 Actuals Original Budget Final Budget Actuals Contract Services 13,875 48,000 48,000 21,545 Maintenance & Operations 29,119 56,700 56,700 31,761 Internal Service Charges 78,500 82,000 82,000 82,000 3003 - Recreation Programs & Special Events 208,501 908,300 1,078,300 640,734 Salaries and Benefits 77,563 167,600 197,600 101,002 Contract Services 23,678 310,000 330,000 243,964 Maintenance & Operations 57,250 377,500 497,500 242,568 Other Expenses 1,610 0 0 0 Internal Service Charges 48,400 53,200 53,200 53,200 3005 - Parks Maintenance 1,782,193 2,530,900 2,656,900 2,445,674 Salaries and Benefits 348,682 355,900 355,900 340,651 Contract Services 455,927 603,600 603,600 582,436 Maintenance & Operations 376,216 634,000 697,000 634,026 Utilities 292,167 452,500 515,500 403,660 Internal Service Charges 309,200 484,900 484,900 484,900 3007 - Marketing & Community Relations 1,105,482 1,325,900 1,540,900 1,389,343 Salaries and Benefits 224,786 244,000 244,000 238,729 Contract Services 223,963 234,100 449,100 436,633 Maintenance & Operations 619,232 809,600 809,600 675,781 Internal Service Charges 37,500 38,200 38,200 38,200 3008 - Public Buildings 1,119,812 1,321,200 1,378,700 1,374,563 Salaries and Benefits 465,083 499,600 499,600 506,901 Contract Services 159,208 215,500 215,500 207,930 Maintenance & Operations 115,158 178,100 193,100 187,230 Utilities 145,363 156,000 198,500 200,502 Internal Service Charges 235,000 272,000 272,000 272,000 6001 - Design & Development Administration 639,565 656,200 746,200 816,867 Salaries and Benefits 392,319 383,500 383,500 448,748 Contract Services 130,192 120,000 210,000 222,248 Maintenance & Operations 1,753 10,300 10,300 3,471 Internal Service Charges 115,300 142,400 142,400 142,400 6002 - Planning 520,082 678,600 748,600 559,340 Salaries and Benefits 355,610 392,800 392,800 376,017 Contract Services 93,147 210,000 280,000 113,128 Maintenance & Operations 15,126 18,600 18,600 12,995 Internal Service Charges 56,200 57,200 57,200 57,200 6003 - Building 717,997 919,800 1,094,800 960,672 Salaries and Benefits 485,828 608,800 633,800 547,698 Contract Services 92,067 140,000 290,000 246,380 Maintenance & Operations 2,102 7,500 7,500 3,095 Internal Service Charges 138,000 163,500 163,500 163,500 6004 - Code Compliance/Animal Control 1,138,317 1,506,320 1,559,320 1,312,923 Salaries and Benefits 648,166 814,620 842,620 686,027 Contract Services 265,571 408,500 433,500 349,121 Maintenance & Operations 8,580 15,300 15,300 9,874 Internal Service Charges 216,000 267,900 267,900 267,900 6006 - The Hub 830,952 986,000 1,066,000 834,387 Salaries and Benefits 580,499 691,300 761,300 600,711 Contract Services 114,027 150,000 160,000 95,036 Maintenance & Operations 5,426 11,200 11,200 5,140 Internal Service Charges 131,000 133,500 133,500 133,500 7001 - Public Works Administration 509,466 739,900 739,900 535,839 Salaries and Benefits 432,718 505,100 505,100 454,607 Contract Services 1,254 150,000 150,000 0 Unaudited, final amounts will be reported in the 2021/22 Financial Statements CITY OF LA QUINTA EXHIBIT B GENERAL FUND EXPENSE SUMMARY BY DEPARTMENT 2021/22 YEAR-END BUDGET REPORT 2020/21 2021/22 2021/22 2021/22 Actuals Original Budget Final Budget Actuals Maintenance & Operations 594 8,500 8,500 4,932 Internal Service Charges 74,900 76,300 76,300 76,300 7002 - Public Works Development Services 354,895 431,200 448,200 374,998 Salaries and Benefits 142,493 158,300 158,300 147,359 Contract Services 162,958 200,000 215,000 155,250 Maintenance & Operations 1,044 2,700 4,700 2,189 Internal Service Charges 48,400 70,200 70,200 70,200 7003 - Streets 437,000 496,600 503,600 426,354 Salaries and Benefits 293,784 328,400 328,400 277,298 Contract Services 58,389 80,000 80,000 64,753 Maintenance & Operations 17,369 26,000 33,000 27,104 Other Expenses 0 5,000 5,000 0 Capital Expenses 11,257 0 0 0 Internal Service Charges 56,200 57,200 57,200 57,200 7006 - Engineering Services 640,737 761,800 1,101,900 758,472 Salaries and Benefits 300,006 335,300 335,300 322,004 Contract Services 276,711 360,000 375,000 271,577 Maintenance & Operations 7,820 9,300 10,300 9,002 Other Expenses 0 0 324,100 98,689 Internal Service Charges 56,200 57,200 57,200 57,200 GENERAL FUND EXPENSES 47,596,141 55,162,726 88,940,648 51,834,255 Unaudited, final amounts will be reported in the 2021/22 Financial Statements EXHIBIT C GENERAL FUND Capital Improvement Project Carryovers from 2021/22 to 2022/23 Project # Project Name General Fund Measure G TOTAL 111205 Dune Palms Bridge Improvements 8,001,949 7,468,061 15,470,010 2122DRA Citywide Drainage Enhancements 942,727 - 942,727 2122ADA ADA Improvements 40,000 - 40,000 2122PMP Pavement Management 2,276,271 - 2,276,271 2122STI Sidewalk Improvements 95,012 - 95,012 201603 Landscape Renovations 131,782 6,369,879 6,501,661 201606 Civic Center Campus Lake 522,740 - 522,740 201608 SilverRock Event Space - - - 201704 Eisenhower Retention Basin - - - 201709 Ave. 53/3efferson Roundabout 630,650 - 630,650 201805 Corporate Yard Admin. Offices - 355,240 355,240 201901 Village Art Plaza Promenade - 308,208 308,208 201905 Highway 111 Corridor - 1,785,296 1,785,296 201907 Fire Station 70 Revitalization - - - 201908 Citywide Catch Basin Modifications 250,000 - 250,000 201923 Washington St. at Ave. 50 74,785 - 74,785 202007 SilverRock Retention Basin Soil Stabilization - 206,196 206,196 202102 Fritz Burns Park Improvements - 295,828 295,828 202210 Moon River Drive Pavement Rehabilitation (48,074) - (48,074) 202217 Storm Drain Maintenance 583,585 - 583,585 SAVINGS Prior CIP Project Savings 436,725 - 436,725 999902 Jefferson Interchange 34,987 - 34,987 TOTAL $ 13,973,138 $ 16,788,709 $ 30,761,847 45% 55% 100% (Negative balances represent temporary funding until grants are received EXHIBIT D AMENDED CARRYOVERS Estimated carryovers from the 2021/22 to 2022/23 budget were estimated based on projected invoices in the Spring of 2022. Upon completion of the final audit, Finance verifies account balances and carryovers and amended carryovers will be added to the 2022/23 budget. Revised Continuing Appropriations/Carryovers from 2021/22 to 2022/23 1 Description/Program Account Number Account Name Estimated Revised Class and Compensation study Marketing efforts to attract group business to hotels Vehicle purchase/improvements Vehicle purchase/improvements Emergency Operations Center equipment Postponement of citywide events X-Park programming Park landscape Improvements & tree removal Additional marketing materials La Quinta's share of the CVAG Art & Music Line Park lighting upgrades Homelessness assistance Software licenses Gold Star Family Monument Vehicle upgrades Vehicle purchase/improvements Heavy machinery/equipment purchase Council Chambers A/V equipment Playground replacement Lake pump repairs 101-1004-60103 Professional Services $ 60,000 $ 53,700 101-1007-60536 TOT Resort Rebate Program $ 200,000 $ 200,000 101-2001-71031 Vehicles $ 40,000 $ 22,900 101-2002-71031 Vehicles $ 40,000 $ 43,100 101-2002-80101 Machinery & Equipment $ 400,000 $ 400,000 101-3003-60149 Community Experiences $ 150,000 $ 180,000 101-3003-60190 X-Park Programming $ 90,000 $ 60,000 101-3005-60691 Maintenance/Services $ 100,000 $ 14,000 101-3007-60461 Marketing and Tourism Promotions $ - $ 10,000 101-7006-60480 Contributions to Other Agencies $ 324,100 $ 225,400 GENERAL FUND CARRYOVERS $ 1,404,100 $ 1,209,100 215-7004-60431 Materials & Supplies $ 300,000 $ 157,000 243-0000-60532 Homelessness Assistance $ - $ 55,000 244-0000-60301 Software Licenses $ - $ 90,000 270-0000-74800 Art Purchases $ 24,000 $ 36,700 501-0000-60675 Parts, Accessories, and Uplifts $ - $ 65,000 501-0000-71031 Vehicles, Purchased $ 135,000 $ 79,000 501-0000-80100 Machinery & Equipment $ 200,000 $ 200,000 502-0000-80100 Machinery & Equipment $ 100,000 $ 100,000 503-0000-71060 Parks $ 90,000 $ 200,000 601-0000-80100 Machinery & Equipment $ - $ 20,000 SPECIAL FUNDS CARRYOVERS $ 849,000 $ 1,002,700 TOTAL CARRYOVERS FOR ALL FUNDS $ 2,253,100 $ 2,211,800 NOTE: In June 2022 when the budget is adopted, all carryovers are estimates based on projected invoices to end fiscal year 2021122. Upon completion of the final audit, Finance verifies account balances and makes additional carryover recommendations based on current budgetary needs. In no event shall a carryover exceed the revised per account amount above. BUSINESS SESSION ITEM NO. 3 City of La Quints FINANCIAL ADVISORY COMMISSION MEETING: February 2, 2023 STAFF REPORT AGENDA TI I LL_ REVIEW RESERVE ANALYSIS REPORT AND GENERAL FUND BALANCE AND RESERVES POLICY AND APPROVE TO RECOMMEND FOR CITY COUNCIL CONSIDERATION RECOMMENDATION Approve to recommend the Reserve Analysis Report and General Fund Balance and Reserves Policy for City Council consideration. EXECUTIVE SUMMARY • In 2018 the City Council adopted a General Fund Balance and Reserves Policy (the Policy). • The Policy is reviewed periodically to ensure reserve targets are appropriate for current fiscal conditions. • The subcommittee has prepared a Reserve Analysis Report (the Report) and corresponding Policy updates and requests approval to present to City Council. FISCAL IMPACT - None. BACKGROUND/ANALYSIS During the 2017/18 budget process City Council requested an analysis of the City's reserves. Three members of the Financial Advisory Commission (FAC) joined staff in an in-depth analysis with additional hours of independent research. From this study, the Policy was created and subsequently adopted by City Council in May 2018. In order to conduct a review of the Policy, in October 2022 the FAC appointed three members to serve on a subcommittee (Commissioners Ellen Way, Keith Dorsey, and Brian Anderson). Working with staff, the subcommittee reviewed: • the current reserve policy and funding • reserve categories • best practices recommended by accounting standards boards • mitigation risks, including a review of insurance policies A draft of the Report was reviewed and discussed at the FAC meeting on December 14, 2022 and feedback was incorporated into the document. After obtaining the final pieces of information needed for the risk assessment, the Report was updated and the Policy revised to correspond with the following recommendations: • Increase the Natural Disaster Emergency Reserves target by $5 million for a total of $15 million. • Increase the Economic Downturn Reserves target by $2 million to $13 million. • Increase the Capital Improvement Reserves target by $2 million to $12 million. • Utilize a portion of the Pension Trust to pay down pension liability, and change target to reflect the then -current amount of unfunded liability as reported annually by the CalPERS actuarial reports, or a minimum of $5 million. • Utilize a portion of the Unassigned Reserves to pay down pension liability, and change target to reflect the then -current equivalent amount of two months of operating budget, or a minimum of $8 million. The Reserve Analysis Report and draft of the Reserves Policy is attached for review and discussion. ALTERNATIVES The FAC may approve as presented, incorporate changes, or request further review. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Claudia Martinez, Finance Director Attachment 1: Reserve Analysis Report Attachment 2: Draft Reserves Policy, redlined Attachment 3: Draft Reserves Policy, redlines accepted ATTACHMENT 1 CALIFORNIA Reserve Policy Analysis Report Financial Advisory Commission Reserve Policy Subcommittee February 2023 This Page Intentionally Left Blank Contents ExecutiveSummary......................................................................................................1 1.0 Financial Advisory Commission & Reserve Analysis Subcommittee ............. 2 1.1 Reserve Policy Subcommittee.............................................................................. 2 2.0 Reserve Policy....................................................................................................2 2.1 Background.................................................................................................................... 2 2.2 Current Reserve Policy............................................................................................ 3 2.4 Long -Term Financial Projections............................................................................ 4 3.0 General Fund Reserves..................................................................................... 5 3.1 Emergency Reserves............................................................................................... 5 3.1.1 Natural Disasters....................................................................................................... 5 3.1.2 Economic Downturns................................................................................................. 6 3.2 Cash Flow Reserves................................................................................................. 8 3.3 Capital Improvement Reserves................................................................................ 9 3.4 Unfunded Pension Liability.....................................................................................10 TOC-i City of La Quinta Financial Advisory Commission Reserve Policy Sub -Committee Draft Report Executive Summary In 2017, at the direction of City Council, the Financial Advisory Commission (FAC) conducted an analysis and developed a General Fund Balance and Reserves Policy (the Policy) which was adopted in May 2018. The Policy was created after comprehensive research and analysis. The City's long-term financial projection model was employed to identify annual funding levels, and the Government Finance Officer Association's (GFOA) structured assessment model was used to analyze the degree to which the City is vulnerable to specific risk factors such as extreme events, revenue and expenditure volatility, leverage, liquidity, and growth. These financial forecasting tools will continue to be utilized to monitor reserve levels and assess future reserve adjustment recommendations. At a special meeting of the FAC on October 5, 2022 the FAC appointed Commissioners Brian Anderson, Keith Dorsey, and Ellen Way to serve on a sub -committee to analyze and recommend updates to the City's Policy. The Reserves Policy Subcommittee met with City Finance Staff on multiple occasions. The Subcommittee focused on utilizing the previously established methodology and other governmental best practices to determine the appropriate reserve levels based on the past several years' actual events and financial results, as well as the current and projected economic conditions. The draft recommendations were reviewed by the FAC on December 14, 2022. Updates have been incorporated into this report, and these final recommendations are being presented to the FAC for approval to move forward with presenting to City Council for their consideration. Recommendations The following is a summary of the recommendations for the Reserve Policy update: 1. Continue to utilize Long -Term Financial Projections to evaluate the City's financial condition and update it annually. 2. Natural Disaster Emergency Reserves: a. Utilize a comprehensive Asset/Risk/Insurance/Government Funding Study to set this reserve level. b. Increase target by $5 million to $15 million. 3. Economic Downturn Reserves: Increase target by $2 million to $13 million. 4. Cash Flow Reserves: Cash flow reserve target to remain at a minimum of $5 million or 10% of the current operating budgeted revenues. 5. Capital Improvement Reserves Increase target by $2 million to $12 million based on CPI increases since last study. 6. Pension Trust. Keep an appropriate level of funding in the pension trust to cover any unfunded liability as reported on the annual CalPERS Actuarial Valuation. At a minimum, the pension trust target should be set at $5.0 million. 7. Unassigned Reserves. Utilized to fund the recommended reserve and pension trust targets, as well as one-time operating expenses or projects at the discretion of the Council. Current target is to maintain at a minimum of $8.0 million with the option to set the target based on the Government Finance Officers Association (GFOA) guidelines of 2 months of operating budget, which would increase this to approximately $11 million. 1.0 Background 1.0 Financial Advisory Commission & Reserve Analysis Subcommittee The principal functions of the FAC are: (1) review at least annually the City's investment policy and recommend appropriate changes; (2) review monthly treasury reports and note compliance with the investment policy and adequacy of cash and investments for anticipated obligations; (3) receive and consider other reports provided by the City Treasurer; (4) meet with the independent auditor after completion of the annual audit of the city's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls, and findings for cash and investment activities; (5) review annually the revenue derived from the one percent (1 %) transactions and use tax (Measure G) instituted by voters in November 2016 to ensure these funds are used to provide services, programs and capital projects in the City, and (6) serve as a resource for the City treasurer on matters such as proposed investments, internal controls, use of financial institutions, custodians, brokers and dealers. The current FAC members include: Richard (Dick) Mills (Chairman), Keith Dorsey (Vice - Chairman), George Batavick, Ellen Way, Brian Anderson, Justin Luettjohann, and Shelley Mast. 1.1 Reserve Policy Subcommittee At a special FAC meeting on October 5, 2022, the FAC appointed Brian Anderson, Keith Dorsey, and Ellen Way to serve on a sub -committee to analyze and recommend updates to the City's Reserve Policy. 2.0 Reserve Policy 2.1 Background The Governmental Accounting Standards Board (GASB) is the organization that establishes standards for accounting and financial reporting for state and local governments. GASB provides that it is common practice for governments to put aside resources to be used in a financial emergency or for cash flow purposes. Reserve funds are crucial to the financial viability and stability of a municipality. Strong reserve funds serve to: • manage cash flows and volatility in revenue and expenditures • address unexpected economic fluctuations with long-term solutions • provide needed money if a municipality should find itself facing unexpected financial difficulties • reduce the cost of borrowing money. There is no guidance for a "maximum" reserve limit, but rather each organization should evaluate reserves depending upon their unique circumstances. There will always be more needs and unanticipated events than there are resources; therefore, governments must balance the need to be fiscally responsible with what are reasonable reserves. The amount of reserves a municipality maintains is determined by the community's risk tolerance; a low -risk tolerance will result in higher reserves while a high -risk tolerance will result in lower reserves. Financial reserves provide the City with financial flexibility and strength to deal with planned and unplanned expenditures. Reserve levels must balance realistic financial need and risk. The Reserve Policy should strive to establish reserve levels that are not over or under -funded, specify the intended use of reserves, and the replenishment of underfunded reserves. 2.2 Current Reserve Policy The current Reserve Policy includes the following Fund Balance Descriptions: • Non -spendable: not available to fund operating expenditures of the organization because they are in the form of land and receivables. • Restricted: limited to special purpose funds such as Measure A (transportation), Gas Tax Fund (streets) and Quimby Funds (parks). Restricted funds are subject to external constraints imposed by covenants or laws which cannot be changed by the City. • Committed: cash flow (currently working capital), emergency, and operating carryovers. Committed funds are subject to constraints imposed by formal government action (such as a resolution or ordinance) • Assigned: constrained by the City's intent to use funds for public safety or capital projects. Constraints on assigned funds can be more easily removed or modified than those imposed on committed reserves. • Unassigned (Unappropriated): net reserves available after satisfying the other reserve categories which may be appropriated at the will of the governing body. Figure 1 depicts the Current General Fund Reserve/Fund Balances. Fiaure 1 Category As of 6/30/2022 Target _ Funding Committed Reserves Natural Disaster $ 10,000,000 $ 10,000,000 Economic Downturn $ 11,000,000 $ 11,000,000 Cash Flow $ 5,000,000 $ 5,000,000 Capital Replacement $ 10,000,000 $ 10,000,000 Sub Total $ 36,000,000 $ 36,000,000 Restricted Pension Trust $ 10,000,000 $ 10,137,888 Unassigned Measure G Unassigned $ $ 8,000,000 - $ $ 33,893,325 15,355,043 Grand Total $ 54,000,000 $ 95,386,256 • Unassigned fund balance based on unaudited financial statements 2.3 Guiding Principles, City of La Quinta Reserves The City follows these budgetary and cash management principles: • One-time revenues should not be utilized for on -going expenditures. One-time revenues should be put into reserves or appropriated for one-time expenditures. • Expenditure planning for facility improvements, equipment replacement, and information technology should be part of the on -going budget process utilizing internal service funds. • When authorizing the use of reserves, developing a plan to replenish those reserves should also be considered. • The Reserve Policy can be amended by resolution and requires a 4/5' approval of the Council. 2.4 Long -Term Financial Projections Long-term financial projections are essential to aid in determining the fiscal health of the City. Since 2016, the City has presented financial projections to the Council and our citizens. The projections are updated annually by City staff along with a separate subcommittee of FAC members. The long-term projections provide a method for the City to periodically analyze its financial condition as new information becomes available. Assumptions and methodology used can vary year over year based on current economic conditions, future impacts that are reasonably known, and best practices recommended by municipal finance organizations. Recommendation: Continue to utilize the long-term projections to evaluate the City's financial outlook. The long-term projections should be updated as needed to adapt to changing financial conditions. 4 3.0 General Fund Reserves The subcommittee worked within the already established methodology to determine the appropriate reserve levels, but also explored utilizing a percentage -based methodology as recommended by the GFOA. The processes establish a rationale and protocol that allows for a review of reserves based on actual economic conditions as needed. 3.1 Emergency Reserves As defined in the City's municipal code (§ 2.20.020 A), the terms emergency or disaster mean: " The actual or threatened existence of conditions of disaster or of extreme peril to the safety of persons and property within this City caused by such conditions as air pollution, fire, flood, storm, epidemic, riot, earthquake or other conditions, including conditions resulting from war or imminent threat of war but other than conditions resulting from a labor controversy, which conditions are or are likely to be beyond the control of the services, regular personnel, equipment and facilities of the City and which may require the combined forces of other political jurisdictions to combat." In 2018, it was determined that the City should have an emergency reserve with two subcomponents, since fiscal emergencies can be caused by natural disasters or swings in the economy. 3.1.1 Natural Disasters The Natural Disaster Emergency Reserves will provide funding for damage caused by floods, earthquakes, and other natural disasters. The determination of the level of this reserve component required the following analysis: 1. Capital Asset Inventory & Valuation: What do we have and what is it worth? 2. Capital Asset Risk Assessment: Which assets are more critical in a disaster? 3. Insurance Coverage: How do we evaluate risk versus premium? 4. Government Disaster Funding: How much will federal, state and/or county government contribute in a disaster? City staff maintains an asset list for the purposes of analyzing risk and determining insurance coverage. In an emergency, individual assets with insurance coverage do not qualify for federal or state reimbursement. Furthermore, federal reimbursement is limited to 75% and state reimbursement is limited to 18.75% of total expenditures. Based on current insurance coverage and these reimbursement limits, the potential city liability could be almost $27 million if a major disaster were to occur. Critical assets that are not covered by insurance or government natural disaster funding should be considered for 100% reserve funding. Other assets may be considered for 50% reserve funding, for a total recommended reserve of $15 million. Figure 2 summarizes the City's assets and estimated funding sources for replacement. Figure 2 Earthquake or Reserves to Cover Remaining Flood - Per Estimated Replacement Costs Funding Sources Cost Occurrence Limit Estimated State- CA Percent of City Natural Disaster Replacement Current Disaster City Responsibility Reserve Asset Value Coverage FEMA Assistance Act Responsibility to Cover Amount Parks 29,482,004 - 22,111,503 5,527,876 1,842,625 50% 921,313 75.00% 18.75% 6.25% City Buildings 45,849,593 10,000,000 26,887,195 6,721,799 2,240,600 100% 2,240,600 22% 58.64% 14.66% 4.89% SilverRock 7,247,125 - 5,435,344 1,358,836 452,945 50% 226,473 75.00% 18.75% 6.25% Streets, Signals, 346,580,659 259,935,494 64,983,874 21,661,291 50% 10,830,646 Signs, Landscaping 75.00% 18.75% 6.25% Fleet Vehicles 2,929,381 2,197,036 549,259 183,086 100% 183,086 75.00% 18.75% 6.25% Housing Assets 6,960,483 5,220,362 1,305,091 435,030 100% 435,030 75.00% 18.75% 6.25% TOTALS 439,049,245 321,786,934 80,446,733 26,815,578 14,837,147 Currently, the per occurrence flood and earthquake coverage limit is $10 million. The committee feels this warrants a review and City staff is currently working on a full insurance review including obtaining quotes for potential changes. Recommendation: Increase the Natural Disaster Emergency Reserves by $5.0 million to $15.0 million. 3.1.2 Economic Downturns The Economic Downturn Reserves will provide funding to respond to a downturn in the economy. To establish this reserve level, the City's financial data was analyzed from 2008 to 2022 as this period included the Great Recession (generally 2007-2009), the loss of Redevelopment Agencies (2011-2012), and the economic downturn as a result of the COVID-19 pandemic initial lockdowns (2020). Figure 3 plots revenue, expenditures, and net income during this period. In each of the economic dips, the City's revenue declined between $5.0 and $6.0 million. In each case, the City was able to mitigate the losses due to healthy budget surpluses in prior years (unassigned reserves) or through expense reductions. However, there is no guarantee in future years that this would be possible. Since inflationary pressures have increased the pricing for capital improvement as well as for operational expenditures, losses will be more difficult to mitigate. Rather than only looking at past years, the committee recommends that the current reserve level be increased by $2.0 million to adjust for the Consumer Price Index (CPI). The CPI computes and publishes index values, which are normalized to equal 100 in a chosen base period, which for the All Urban Consumers (CPI-U) in area Riverside -San Bernardino -Ontario was December 2017. Index values can be interpreted as representing an estimate of the price level relative to the base period. Percent change in the index is an estimate of the percent change in the price level over the period in question. Figure 4 shows the increase in the CPI-U for the period covering January -June of each of the past 5 fiscal years since policy adoption as applied to the original target of $11 million. Figure 3 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 City of La Quinta-Revenues-Expenditures & Net Income Actual FY2008-2022 -Revenue -Expenses-Netlncome $(10,000,000) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Applied to Economic Fiscal Percent Downturn Year Jan -June Year change Reserves 2017 $ 11,000,000 2018 102.023 17-18 Adopted 2019 104.998 18-19 2.92% $ 11,321,200 2020 107.068 19-20 1.97% $ 11,544,228 2021 111.588 20-21 4.22% $ 12,031,394 2022 122.018 21-22 9.35% $ 13,156,329 Source: https://data. bls.gov/times eries/CUURS49CSAO?amp%253bdata_tool=XGtable&outp ut_view =data&include_ graphs=true Access to this reserve should be granted for economic stabilization as a direct result of volatile economic conditions such as during periods of unanticipated economic downturns or spikes in operating costs. Use of emergency reserves due to economic pressures should be limited to maintaining essential day-to-day services, such as public safety or responding to adverse circumstances, while the City formulates a longer -term strategy. Recommendation: Increase the Economic Downturn Reserves by $2.0 million to $13 million. 3.2 Cash Flow Reserves The cash flow reserves cover the inherent mismatch of revenues versus expenditures due primarily to tax revenue receipts. Figure 5 depicts the cash flow imbalances over a period of 6 years from 2017-2022 whereby revenues are not received uniformly throughout the year, which results in peaks and valleys in the total revenue receipts. For example, large property tax payments are usually received in December and May. Similarly, transient occupancy tax payments increase during months with large festivals and events. It was formerly recommended that the Cash Flow Reserve be updated annually by calculating the prior fiscal year monthly surplus/(deficit) of revenues versus expenditures; with the largest cumulative deficit becoming the updated Cash Flow Reserve. However, as the chart shows, whether looking at the General Fund (GF) general ledger revenue and expenditure totals by month, or at the banking total debits and credits, the cash flow imbalances vary widely from year to year. For FY 2021/22 this analysis yielded a $7.1 million cash flow imbalance, while the average imbalance over the past 6 years has only been $3.2 million Figure 5 s- $(1,000,000) $(2,000,000) $(3,000,000) $(4,000,000) $(5,000,000) $(6,000,000) $(7,000,000) $(8,000,000) Cash Flow 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Average GF Cumulative Variance Banking Cumulative Variance 109.Budget A more straightforward approach would be to utilize the GFOA recommendations of a percentage of operating revenues being reserved for cash flow needs. Under this approach, the reserve target would be 10% of budgeted revenues, which would produce a much more stable reserve target, currently averaging $5.1 million (see grey line in Figure 5). Recommendation: Utilize the GFOA recommendation of 10% of budgeted revenue as the target, with a minimum of $5.0 million. 3.3 Capital Improvement Reserves Pages 51-52 from the FY 2021/22 Annual Comprehensive Financial Report (ACFR) describes the City's capital assets. Figure 6 below summarizes the Depreciable Assets from this information. Figure 6 Balance as Depreciable Assets of 6/30/2022 ($ Millions) Total Assets 339.6 Less Accumulated Depreciation 192.2 Net Capital Assets 147.4 Annual Depreciation 9.3 The total ten-year Capital Improvement Program (CIP) budget includes minimum funding to secure Measure A and Gas Tax revenue for road improvements ($1.5 million annually). Capital expenses are typically supplemented with restricted funds such as those for road improvements, Quimby Funds for parks, developer impact fees (DIF), and grant funds. In addition to the General Fund, the City also maintains revenue and expenditure projections on these additional CIP funding sources. When adopted, the initial recommendation was to match annual depreciation with capital spending and establish a Capital Replacement Reserve to set aside funds to supplement any funding gaps, particularly in Special Revenue Fund revenues as these can vary significantly from year to year. As costs have increased over the years since adoption, the committee recommends increasing this reserve by $2M to adjust for the CPI index (previously descried in the Economic Downturn section of the report) as shown in Figure 7. rigure i Applied to Capital Fiscal Percent Improvement Year Jan -June Year change Reserves 2017 $ 10,000,000 2018 102.023 17-18 Adopted 2019 104.998 18-19 2.92% $ 10,292,000 2020 107.068 19-20 1.97% $ 10,494,752 2021 111.588 20-21 4.22% $ 10,937,631 2022 122.018 21-22 9.35% $ 11,960,299 Source: https://data.bls.gov/tirrieseries/CUURS49CSAO?amp`/`253bdata tool=XGtable&outp ut_view =data&include_graphs=true Recommendation: Increase Capital Replacement Reserve by $2.0 million to $12 million. 9 3.4 Unfunded Pension Liability As of June 30, 2021, the CalPERS Unfunded Liability was $10.2 million (calculated with a 6.8% discount rate), however, the CalPERS Net Pension Liability is a moving target and is dependent on the CalPERS discount rate and actual market returns. City staff and a separate FAC subcommittee have studied the pension liability based on the 2021 actuarial reports and have recommended that the City pay down the unfunded liability with a mix of pension trust funds and unassigned reserves. Eliminating or reducing the CalPERS Net Pension Liability is prudent as it will improve the financial condition of the City and send a message that the City is addressing this issue in a fiscally responsible manner. By continuing to fund a pension trust, the City could retain funds that would be available to pay future unfunded pension liability payments that may arise due to market conditions or changes to the discount rate. In general, paying earlier reduces long-term pension costs because additional contributions have more time to compound investment returns, reducing the need for future contributions. The extent to which any additional contributions would lower future payments would depend largely on realized investment returns. Recommendation: Retain the established Pension Trust with a flexible target balance being the unfunded liability as it appears on each year's Ca1PER's actuarial reports, with a minimum of $5.0 million regardless of unfunded liability balance. 10 ATTACHMENT 2 Formatted: Font: (Default) Arial, 12 pt 0 Qwkra — GEM afnc, DESERT T ecaQ&(U CALIFORNIA City of La Quinta General Fund Balance and Reserves Policy Formatted: Font: (Default) Arial I. Purpose. This is the General Fund Balance and Reserves Policy (Policy) of - Formatted: Font•. (Default) Arial, 12 pt the City of La Quinta (City); it defines the City's fund balance and reserve categories, Formatted: Heading 1 identifies the need for reserves, and outlines the importance of maintaining the integrity of uses and funding amounts. —The Policy also guides the City Council and staff when planning for contingencies, supports the City's credit rating, and ensures cash availability. - - Formatted: Heading 1, Adjust space between Latin and Asian text, Adjust space between Asian text and numbers accountability, and enhancing our Citizen's quality of life. it also aligns with the Gity's- - Commented [RH1]: Moved to "General Policy" Section II. ]-Scope. This policy applies to the City's General Fund; all Committed, Assigned, and Unassigned funds available as reported annually on the balance sheet in the City's Annual Comprehensive Financial Report (ACFR) III. General Policv. The Dolicv of the Citv is to maintain Reserves at an adeauate level to address the community's needs through all contingencies. This Policy aligns with the organization's values -of fiscal responsibility. maintaining a safe community. fostering a thriving economy, continuous transparency and accountability, and enhancing our Citizen's quality of life. it also alOGRS wi+h +The City's budgetary guiding principles -state that one-time revenues should not be utilized for on -going expenditures: instead. they should be deposited into reserves or appropriated for one-time expenditures. Additionally, allocations for capital improvements, equipment replacement. and infrastructure investment should be part of the annual budaet Drocess throuah appropriations to Internal Service Funds - - Formatted: Heading 1, Adjust space between Latin and Asian text, Adjust space between Asian text and numbers used te aRalyze the degree to whiGh the City 06 VU'Rerable to speGifiG risk faGtE)FS SUGh as extreme eveRtS, reVeRue and expeRditure volatility, leverage, liquidity, and growth. l Commented [RH2]: Moved to Reserve Analysis Report Formatted: Font: (Default) Arial, 12 pt, Font color: Auto IV HI —Definitions. The GovernmentpiAccounting Standards Board (GASB) Statement Formatted: Font: (Default)Arial, 12 pt No. 54 defines fund balance as follows: Formatted: Font. (Default) Arial, 12 pt Formatted: Heading 1 A. Nonspendable Fund Balance: The nonspendable fund balance Formatted: Heading 2, Indent: Left: 0°, Adjust space classification includes amounts that cannot be spent because the are either a between Latin and Asian text, Adjust space between Asian p Y ( ) text and numbers not in spendable form or (b) legally or contractually required to be maintained intact. The criterion includes items that are not expected to be converted to cash, for example, inventories and prepaid amounts. It also includes the long-term amount of loans and notes receivable, as well as property acquired for resale. B. Restricted Fund Balance: Amounts that are restricted to specific purposes should be reported as restricted fund balance. Fund balance should be reported as restricted when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. C. Committed Fund Balance: Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision -making authority should be reported as committed fund balance. Those committed amounts cannot be used for any other purpose unless the government removes or changes the specified use by taking the same type of action (for example, legislation, resolution, ordinance) it employed to previously commit those amounts. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. D. Assigned Fund Balance: Amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed, should be reported as assigned fund balance. Intent should be expressed by (a) the governing body itself or (b) a body or official to which the governing body has delegated the authority to assign amounts to be used for specific purposes. _-The nature of the actions necessary to remove or modify an assignment is not as prescriptive as it is with regard to the committed fund balance classification. Constraints imposed on the use of assigned amounts are more easily removed or modified than those imposed on amounts that are classified as committed. E. Unassigned Fund Balance: Unassigned fund balance is the residual classification for the General Fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. The General Fund should be the only fund that reports a positive unassigned fund balance amount. V. PI—City's Reserve Categories and Targets Committed, assigned, and unassigned - - - Formatted: Heading 1 fund balance categories combined make up the "unrestricted" fund balance,- which is the total amount that is either unconstrained or the constraints are self-imposed and can be modified by Council. As such, the following reserve categories would be classified as committed or assigned (with the exception of the pension reserves, which once placed in trust would be reported as a Fib aRestricted Reserves), and the remaining unassigned fund balance would be available for appropriation. Targets have been established for each category and will be periodically reviewed to ensure adequate levels. A. Natural Disaster Emergency Reserves: May be utilized for the preparation, recovery, and restoration of services before, during and/or after a natural disaster (such as flood, earthquake, etc.) as defined by City Code §2.20.020. The target is -of $a-015•,000,000 and- v^n° be reviewed every five (5) years b _wasFormatted: Font: (Default) Arial, 12 pt determined by conducting a risk analysis of all City assets, insurance levels, and Formatted: Font: (Default) Arial, 12 pt potential federal/state contributions towards disaster recovery efforts. B. Economic Downturn Reserves: May be used in such instances as a - - - Formatted: Heading 2, Outline numbered + Level: 2 + Numbering Style: A, B, C, ... + Start at: 1 + Alignment: Left + declared national, state, or regional recession; loss of a major (top 10) revenue- Aligned at: 0.5^+Indent at: 0.5" generating business; or a natural disaster resulting in a significant decline in revenues. These reserves may also be used if overall revenues decrease or expenses increase by more than 10% of the previous year's actual revenues or expenditures. The target is -of $1413•,000,000— was based on a 10 yeadong-term analysis of - — Formatted: Font: (Default) Arial, 12 pt J the revenue and expenditure flows (which included the financial impacts of the Formatted: Font. (Default) Arial, 12 pt Great Recession, the loss of Redevelopment Agencies, and the COVID 19 Formatted: Heading 2 pandemic,) as well as the application of the Consumer Price Index (CPI) - Formatted: Font: (Default) Arial, 12 pt increases to the original base target. The target will he evaluated again in the event of another signifiE;ant eGonerniE; downturn. -- Formatted: Font: (Default) Arial, 12 pt C. Cash Flow Reserves: This reserve category is maintained to have - - Formatted: Heading 2, Indent: Left: 0" adequate cash on hand to account for the uneven receipt of revenue. For example, property tax accounts for a large percentage of annual revenue, the bulk of which is not remitted until December and May of each year. The forgo+ is $5 nnn nnn and- udn ll he determined oni tally by analyZing the prier .-.. - - Formatted: Heading 2 ' fisgal r by mnth and gaIG dating the largest r u latiye dpfigit hefiaeon 0 eperatiRg e eRditures r edThe target for the Cash Flow Reserves is 10% of the each year's revenue budget, or a minimum of $5,000,000,. Formatted: Font: (Default) Arial, 12 pt D. Capital Improvement Reserves: This category will fund capital assets ---- -- Formatted: Heading 2, Indent: Left: 0" and infrastructure rehabilitation, improvement, and replacement. The target is -_of $4-012,000,000 apMs based on annual depreciation of assets as ' Formatted: Font: (Default) Arial, 12 pt well as a CPI increase as described above Formatted: Font•. (Default) Arial, 12 pt E. Unfunded Pension Liability: This reserve will be maintained in an Formatted: Heading z irrevocable trust and may be used to fund future pension obligations such as Formatted: Font: (Default) Arial, 12 pt annual pension fund payments, unfunded pension liability payments, and/or any Formatted: Heading z, Indent: Left: 0" additional contributions to pay down the unfunded liability. The target is $10,000,098 the amount of the unfunded liability on the most recent' — Formatted: Heading z CalPERS actuarial reports, or a minimum of $5,000,000 ,-a_Rdand-w+l-be o� all was determined through a review of the as GaIPERS updates +hoar art-iAri-1 r r f- wh:nh A, Mine the City's unfunded pension liability and annual contributions. VI. Unassigned Fund Balance. The City wi=l4-may +4aiRtaiR—retain a minimum of - ---( Formatted: Font. (Default) Arial, 12 pt the equivalent of two months of general fund budgeted operating expenditures, or a Formatted: Heading 1, Outline numbered + Level: 1 + Numbering Style: I, II, III, ... + Start at: 1 + Alignment: Left minimum of $8,000,000$�000-,090-in unassigned fund balance which could fund +Aligned at: 0.19" + Indent at: 0.19" one-time expenditures or capital expenses at the City Council's discretion. VII. Measure G Reserves. The City has a local district transactions tax of 1 % known as Measure G. The City monitors Measure G activity and, excess revenues over Formatted: Font: (Default)Arial, 12 pt expenditures are recorded as Reserves on the City's Balance Sheet. These funds can also be used for one-time expenditures or capital expenses at the City Council's discretion and are subject to annual reporting and oversight by the Financial Advisory Commission (FAC). Vill. VLAuthority Over Reserves. At Council direction, reserves may be utilized for - --- Formatted: Heading 1 their intended purpose as defined herein. The Policy may be amended by Council resolution and requires a 4/5th approval ("supermajority"). IX. `41 Building to Target and Replenishments. City Council adoption of this Policy will establish these reserve GategeFinn and the funding targets. Going forward, the City Council shall annually review each reserve category and funding level during the mid -year budget process, once the anmual finanniol statements .reACFR is published and final fund balances are known. -Funds will generally come from excess revenues over expenditures, one-time revenues, or specific departmental savings over budgeted expenditures, and may be allocated to each reserve category as directed by Council until the target level is reached. -Once all targets are reached, funds would remain in the unassigned fund balance.- Likewise, upon use of any reserves, the categories will be replenished back to target in a similar manner. X. Policy Review. This policy shall be reviewed every five (5) years to assess the - - Formatted: Heading 1 City's then --current financial condition, risks, and the adequacy of current target levels. . Formatted: Font: (Default) Arial Formatted: Font: (Default) Arial, 12 pt ATTACHMENT 3 act CALIFORNIA City of La Quinta General Fund Balance and Reserves Policy I. Purpose. This is the General Fund Balance and Reserves Policy (Policy) of the City of La Quinta (City); it defines the City's fund balance and reserve categories, identifies the need for reserves, and outlines the importance of maintaining the integrity of uses and funding amounts. The Policy also guides the City Council and staff when planning for contingencies, supports the City's credit rating, and ensures cash availability. II. Scope. This policy applies to the City's General Fund; all Committed, Assigned, and Unassigned funds available as reported annually on the balance sheet in the City's Annual Comprehensive Financial Report (ACFR). III. General Policy. The policy of the City is to maintain Reserves at an adequate level to address the community's needs through all contingencies. This Policy aligns with the organization's values of fiscal responsibility, maintaining a safe community, fostering a thriving economy, continuous transparency and accountability, and enhancing our Citizen's quality of life. The City's budgetary guiding principles state that one-time revenues should not be utilized for on -going expenditures; instead, they should be deposited into reserves or appropriated for one-time expenditures. Additionally, allocations for capital improvements, equipment replacement, and infrastructure investment should be part of the annual budget process through appropriations to Internal Service Funds. IV. Definitions. The Governmental Accounting Standards Board (GASB) Statement No. 54 defines fund balance as follows: A. Nonspendable Fund Balance: The nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. The criterion includes items that are not expected to be converted to cash, for example, inventories and prepaid amounts. It also includes the long-term amount of loans and notes receivable, as well as property acquired for resale. B. Restricted Fund Balance: Amounts that are restricted to specific purposes should be reported as restricted fund balance. Fund balance should be reported as restricted when constraints placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. C. Committed Fund Balance: Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision -making authority should be reported as committed fund balance. Those committed amounts cannot be used for any other purpose unless the government removes or changes the specified use by taking the same type of action (for example, legislation, resolution, ordinance) it employed to previously commit those amounts. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. D. Assigned Fund Balance: Amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed, should be reported as assigned fund balance. Intent should be expressed by (a) the governing body itself or (b) a body or official to which the governing body has delegated the authority to assign amounts to be used for specific purposes. The nature of the actions necessary to remove or modify an assignment is not as prescriptive as it is with regard to the committed fund balance classification. Constraints imposed on the use of assigned amounts are more easily removed or modified than those imposed on amounts that are classified as committed. E. Unassigned Fund Balance: Unassigned fund balance is the residual classification for the General Fund. This classification represents the fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. The General Fund should be the only fund that reports a positive unassigned fund balance amount. V. City's Reserve Categories and Targets Committed, assigned, and unassigned fund balance categories combined make up the "unrestricted" fund balance, which is the total amount that is either unconstrained or the constraints are self-imposed and can be modified by Council. As such, the following reserve categories would be classified as committed or assigned (with the exception of the pension reserves, which once placed in trust would be reported as a Restricted Reserves), and the remaining unassigned fund balance would be available for appropriation. Targets have been established for each category and will be periodically reviewed to ensure adequate levels. A. Natural Disaster Emergency Reserves: May be utilized for the preparation, recovery, and restoration of services before, during and/or after a natural disaster (such as flood, earthquake, etc.) as defined by City Code §2.20.020. The target of $15,000,000 was determined by conducting a risk analysis of all City assets, insurance levels, and potential federal/state contributions towards disaster recovery efforts. B. Economic Downturn Reserves: May be used in such instances as a declared national, state, or regional recession; loss of a major (top 10) revenue - generating business; or a natural disaster resulting in a significant decline in revenues. These reserves may also be used if overall revenues decrease, or expenses increase, by more than 10% of the previous year's actual revenues or expenditures. The target of $13,000,000 was based on a long-term analysis of the revenue and expenditure flows (which included the financial impacts of the Great Recession, the loss of Redevelopment Agencies, and the COVID 19 pandemic) as well as the application of the Consumer Price Index (CPI) increases to the original base target. C. Cash Flow Reserves: This reserve category is maintained to have adequate cash on hand to account for the uneven receipt of revenue. For example, property tax accounts for a large percentage of annual revenue, the bulk of which is not remitted until December and May of each year. The target for the Cash Flow Reserves is 10% of each year's revenue budget, or a minimum of $5,000,000. D. Capital Improvement Reserves: This category will fund capital assets and infrastructure rehabilitation, improvement, and replacement. The target of $12,000,000 is based on annual depreciation of assets as well as a CPI increase as described above. 3 E. Unfunded Pension Liability: This reserve will be maintained in an irrevocable trust and may be used to fund future pension obligations such as annual pension fund payments, unfunded pension liability payments, and/or any additional contributions to pay down the unfunded liability. The target is the amount of the unfunded liability on the most recent CalPERS actuarial reports, or a minimum of $5,000,000, and was determined through a review of the City's unfunded pension liability and annual contributions. VI. Unassigned Fund Balance. The City may retain the equivalent of two months of general fund budgeted operating expenditures, or a minimum of $8,000,000 in unassigned fund balance which could fund one-time expenditures or capital expenses at the City Council's discretion. VII. Measure G Reserves. The City has a local district transactions tax of 1 % known as Measure G. The City monitors Measure G activity and excess revenues over expenditures are recorded as Reserves on the City's Balance Sheet. These funds can also be used for one-time expenditures or capital expenses at the City Council's discretion and are subject to annual reporting and oversight by the Financial Advisory Commission (FAC). Vill. Authority Over Reserves. At Council direction, reserves may be utilized for their intended purpose as defined herein. The Policy may be amended by Council resolution and requires a 4/5th approval ("supermajority"). IX. Building to Target and Replenishments. City Council adoption of this Policy will establish the funding targets. Going forward, the City Council shall annually review each reserve category and funding level during the mid -year budget process, once the ACFR is published and final fund balances are known. Funds will generally come from excess revenues over expenditures, one-time revenues, or specific departmental savings over budgeted expenditures, and may be allocated to each reserve category as directed by Council until the target level is reached. Once all targets are reached, funds remain in the unassigned fund balance. Likewise, upon use of any reserves, the categories will be replenished back to target in a similar manner. X. Policy Review. This policy shall be reviewed every five (5) years to assess the City's then -current financial condition, risks, and the adequacy of current target levels. 4 BUSINESS SESSION ITEM NO. 4 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: February 2, 2023 STAFF REPORT AGENDA TITLE: APPROVE THE FINANCIAL ADVISORY COMMISSION SUBCOMMITTEE RECOMMENDATIONS ON OUTSTANDING PENSION OBLIGATIONS FOR CITY COUNCIL CONSIDERATION RECOMMENDATION Approve the Financial Advisory Commission Subcommittee recommendations on outstanding pension obligations for City Council consideration. EXECUTIVE SUMMARY • As of June 30, 2021, the City's CalPERS Actuarial Report for the Classic Plan reported unfunded liabilities of $10,258,228. • As of December 31, 2022, the City's pension trust had a balance of $10,005,834. • Financial Advisory Commission (FAC) formed a subcommittee to review the City's outstanding pension obligations and provide recommendations for City Council's consideration. FISCAL IMPACT Accelerating payments to California Public Employees' Retirement System (CaIPERS) could impact the General Fund budget, reserves, and/or pension trust balances. BACKGROUND/ANALYSIS In 2020, the FAC appointed two Commissioners to review the City's outstanding pension obligations. As a result of their findings, the FAC recommended, and City Council agreed, to continue to pay down the City's unfunded liability as fiscal conditions allowed. The City has made Additional Discretionary Payments (ADPs) toward the unfunded liability of just over $1.0 million in fiscal 2020/21, $2.5 million in fiscal 2021/22, and $1.0 million in fiscal 2022/23. iwaitional uiscrexionary rayments to ,awrKo Fiscal Year Classic Tier Tier 2 PEPRA Tier Total 2018/19 $ - $ 15,353 $ 22,060 $ 37,413 2019/20 $ - $ 20,000 $ 10,000 $ 30,000 2020/21 $ 1,000,000 $ 6,419 $ 57,345 $ 1,063,764 2021 /22 $ 2,500,000 $ 2,500,000 2022/23 $ 1,000,000 $ 1,000,000 TOTAL $ 4,500,000 $ 41,772 $ 89,405 $ 4,631,177 On August 24, 2022, the FAC appointed Commissioners Anderson and Dorsey to complete an updated study of the pension obligations. The subcommittee met twice to review and discuss the CalPERS system overall, current market value and plan funded status, benefit tiers available at the City, PARS Pension Trust balance and fund performance, and options to pay down the pension unfunded liability. On October 5, 2022 the entire FAC reviewed the subcommittee's findings and recommendations, as summarized in Attachment 1. While the FAC generally agreed with the findings that the pension unfunded liability should be paid, it was recommended that the full Reserves Analysis study be completed first, in order to assess the City's fiscal health and measure the ability to pay down the pension liability in the context of other reserve category needs. The draft Reserves Analysis was reviewed in December and is now complete; the findings are also being considered at this meeting. The subcommittee's recommendation to pay down the full $10.2 million liability as of the June 30, 2021 actuarial valuation still stands, given the City's current financial solvency. The subcommittee is aware that the June 30, 2022 actuarial report, to be published in August 2023, will show an increase in the unfunded liability amount based on negative market returns for that fiscal year as well as increases to pension liabilities due mostly to inflation. This report will also not reflect the $1.0 million sent to CalPERS this fiscal year or the recommended ADP as a result of this study. However, the June 30, 2023 report will reflect these payments and will be available August 2024. RECOMMENDATIONS • Send an ADP to CalPERS utilizing unassigned reserves in the amount of $5.2 million. • Send an ADP to CalPERS utilizing pension trust funds in the amount of $5.0 million. • Consider ongoing ADPs as fiscal conditions allow and based on market conditions, changes to demographics, and future actuarial reports' unfunded liability balances. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Claudia Martinez, Finance Director Attachment: 1. Fiscal Year 2022/23 Pension Subcommittee Findings ta Qaigta CALIFORNIA ATTACHMENT 1 Fiscal Year 2022/23 Pension Subcommittee Findings summary of Financial Advisory Commission (FAC) Subcommittee On August 24, 2022, the FAC appointed Commissioners Anderson and Dorsey to review the City's outstanding pension obligations with the City's Financial Services Analyst and the Finance Director. This report summarizes key findings of the subcommittee. The subcommittee reviewed and discussed the following items: • CalPERS overview and how pensions are funded • Total Public Employee Retirement Fund (PERF) market value and annualized returns • Benefit tiers available at the City of La Quinta (City) and current funding status of each • Pension terminology • Pension trust performance and fees • How the assets in the pension trust can be applied to outstanding pension obligations • How extra payments to CalPERS are applied to outstanding pension obligations • CalPERS Actuarial Reports for the City's three pension tiers CaIPERS Public Employees' Retirement Fund (PERF) As of June 30, 2021, the funded status of the CalPERS PERF is approximately 80%, with total assets of $477.3 billion. Annual investment returns from 2012 to 2021 have been as high as 21.3% and as low as 0.1%. Along with other factors, CalPERS uses long-term investment returns to assist in their determination of the discount rate, which is currently 6.8% CalPERS pension dollars paid to retirees come from investment earnings as well as employer and employee contributions to the fund, as illustrated below: t Goo 294 111 CaWERStmenti CaIPERS CaIPERS earnings irrvningst - .f" employers members - City of LA Quinta Pension Plans The City of La Quinta has three active pension plans with CaIPERs. • Classic: This plan covers members who were first employed at the City prior to January 1, 2013. • Tier 2: Covers members who were Classic at another participating agency, but have since transferred to the City. • PEPRA: The Public Employees Pension Reform Act that went into effect January 1, 2013 covers members who first joined CalPERS after that date. Classic Tier Tier 2 PEPRA Tier Hire Date On and before 12/31/2012 On and after 12/17/2012 On and after 1/1/2013 Benefit Formula 2.5% at age 55 2% at age 60 2% at age 62 Benefit Vesting Schedule 5 years of service 5 years of service 5 years of service Benefit Payments monthly for life monthly for life monthly for life Retirement Age 50 and up 50 and up 52 and up Required employee contribution rate 7.960% 6.930% 7.750% Required employer contribution rate 14.060% 10.100% 7.680% Number of Active Members* 22 7 58 Number of Retired Members* 118 2 0 * As of June 30, 2021 from CalPERS valuation reports. CaIPERS Actuarial Reports Actuarial reports are provided each year around August to each member agency. The most recent reports, issued in August 2022 are for fiscal year ending June 30, 2021. The City receives three reports, one for each pension plan tier. CalPERS actuarial reports include the following information: • Employer unfunded accrued liability payment projections for five years • Employer normal cost rates for bi-weekly payroll calculations • Employee bi-weekly payroll contribution rate for the next two years • Funded ratio of each pension tier • Summarized amortization schedule for each tier's unfunded liability • Amortization schedule alternatives when applicable • Funding history • Discount rate sensitivity analysis • Hypothetical plan termination liability calculations The most current reports reflect the plans' funded status as follows: Classic Tier Tier 2 PEPRA Tier Entry Age Normal Accrued Liability $54,300,788 $925,328 $2,912,438 Plan's Market Value of Assets $44,042,560 $1,013,126 $3,184,276 Unfunded Accrued Liability $10,258,228 -$87,798 -$271,838 Funded Ratio 81.10% 109.50% 109.30% Pension Trust Performance and Uses The City established a Section 115 pension trust in August 2019 to set aside money for the City's pension obligation, with an initial contribution of $6,540,000. An additional contribution of $3,640,000 was made in fiscal year 2019/20. The pension trust balance as of December 31, 2022, was $10,005,834. PARS Pension Trust Balance $12,000,000 $11,500,000 $11,000,000 $10,500,000 $10,000,000 Sgrwo,000 $9,000 po0 p The section 115 Trust addresses the City's pension obligations by accumulating assets to reduce the net pension liability. However, in accordance with generally accepted accounting principles, the assets in the Section 115 Trust are not considered to have present service capacity as plan assets and are therefore considered restricted assets of the City in the General Fund rather than pension plan assets. The assets held in trust will be considered pension plan assets at the time they are transferred out of the Trust into the pension plan with CalPERS. Investments are in a moderately conservative investment strategy which has dual goals of current income and capital appreciation. A major portion of the assets are committed to income producing securities; therefore, market fluctuations are expected. The City also pays management fees for the pension trust, which total $179,313 inception -to -date as of December 31, 2022. Annualized returns for both the trust and the PERF are shown below: Annualized Returns As of June 30, 2022 PARS Trust CaIPERS YTD -10.69% -6.10% 3-years 1.86% 6.00% 5-years 3.14% 6.70% 10- ears 4.11 % 7.70% Additional Discretionary Payments to CaIPERS Additional contributions made directly to CalPERS can be applied to specific tiers and amortization bases within tiers. The greatest interest rate savings are derived from the agency choosing to apply additional payments to the highest balance with the longest amortization period. For the past several years, the City has been sending additional payments from savings directly to CalPERS as follows: ►naruonai uiscreiionary vaymenis io L airtrca Fiscal Year Classic Tier Tier 2 PEPRA Tier Total 2018/19 $ - $ 15,353 $ 22,060 $ 37,413 2019/20 $ - $ 20,000 $ 10,000 $ 30,000 2020/21 $ 1,000,000 $ 6,419 $ 57,345 $ 1,063,764 2021/22 $ 2,500,000 $ 2,500,000 2022/23 $ 1,000,000 $ 1,000,000 TOTAL $ 4,500,000 $ 41,772 $ 89,405 $ 4,631,177 According to the most recent actuarial report, the payments over an 11-year time frame starting with the June 2023 balance would total just over $9.0 million, of which $2.6 is interest. Sending additional payments towards the unfunded liability saves the City interest over the long term. CALPERS ACTUARIAL VALUATION - June 30, 2021 Miscella neaLs Plan of the City of La Quints CalPERS Ia: 2186535n78 Amortization Schedule Cu rrent Amortisation Schedule Date Balance Payment and Alternatives Alternate Schedules 10 Year Amortisation 5 Year Amortization Balance Payment Balance Payment 6/3012023 6,5113,921 93N,275 6,503,921 887,731 6,516,921 1,526,706 6/3012024 5,984,804 913,294 6,026,718 837,781 5,368,427 1,526,7[)6 6/3012025 5,447,936 859,129 5,521,2{)2 887,782 4,155,721) 1,526,7[)7 6/3012026 4,9311,538 601,419 4,979,174 837,782 2,8611,548 1,526,7t)7 6/3012027 4,437,594 723,797 4,400,288 837,782 1,477,304 1,526,7t)6 6/3012028 3,991,35❑ 754,714 3,782,ta37 887,781 6/30/2029 3,482,81❑ 786,499 3,121,746 887,781 6/30/2030 2,9116,843 819,172 2,416,556 887,782 6/30/2031 2,257,943 852,765 1,663,412 887,782 6/3012032 1,53{1,2m] 83(1,82{) 659,{)54 887 781 6/3012033 775,649 801,587 Interest 1 Savings if Unfunded 6/30/2034 Liability is Paid TOta i 9,07 3,471 8,877,815 7,533,532 Interest Paid 2,569,550 2,373,894 1,129,611 Estinidted Savings 195,656 1,439,939 Recommendations • Send an ADP to CalPERS utilizing unassigned reserves. Given the City's current fiscal position, the subcommittee recommends using unassigned reserves. • Send an ADP to CaIPERS utilizing pension trust funds. Given the higher long-term investment returns and to save on investment management fees, the subcommittee also recommends using pension trust funds. • Consider ongoing ADPs as fiscal conditions allow, based on market conditions and future actuarial reports' unfunded liability balances. As of the currently available actuarial reports (June 30, 2021), the Classic Tier has an unfunded liability of $10,258,228. Taking into consideration the current balance in the pension trust, the market returns of both the trust and the PERF, and the fees associated with retaining the money in the trust fund, the subcommittee recommends using a portion of the trust funds to pay down the unfunded liability. As needed, additional payments could be included in the General Fund budget for consideration each fiscal year. The subcommittee is aware that based on current unfavorable economic conditions, the unfunded liability is likely to continue to rise before the effect of the ADPs are recognized. As economic conditions improve the funding picture will also improve, noting the considerable lag time between actual events and the publishing of the actuarial reports which delays visibility to those improvements. For example, if the recommended ADP from this report is made, the effect will not be seen until the June 30, 2023 actuarial report which will be published in August 2024. DEPARTMENTAL REPORT ITEM NO. 1 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING DEPARTMENT REPORT TO: Members of the Financial Advisory Commission FROM. Claudia Martinez, Finance Director DATE: February 2, 2023 SUBJECT: FINANCE DEPARTMENT CURRENT AND FUTURE INITIATIVES In addition to items presented as staff reports, the Finance Department would like to provide updates on the following matters. CITY OF LA QUINTA'S 2023 COMMUNITY WORKSHOP • The City's 2023 Community Workshop will be held on Wednesday, February 15, 2023 at the La Quinta Wellness Center - 78450 Avenida La Fonda - from 5:00 p.m. to 7:00 p.m. Learn more at www.LaQuintaCa.gov/CommunityWorkshop. 2023 Community Workshop Save the Date Wednesday, February 15 5-7 PM La Quinta Wellness Center 76450 Avenida La Fonda AUDIT & FINANCIAL REPORTING • Citywide Comprehensive fiscal year 2021/22 Audit - in progress • Filed the City's Annual State Controller's Reports for the City and the Finance Authority for fiscal year 2021/22 COMMITTEE UPDATES • FY 2023/24 General Fund Operating Budget (Commissioners Mast and Way) o Kick-off meeting to be scheduled in February • 10-Year Projection Task Force (Commissioners Anderson, Batavick, and Dorsey) o Conducted initial meeting on January 20, 2023 • Auditing Services Selection Committee o Review committee will be selected at next meeting It is important to note the items mentioned in this update are in addition to the daily functions of the Finance Department, which include, but are not limited to, staff report writing/review, payroll, accounts payable, accounts receivable, revenue processing, journal entries, capital accounting, project accounting, purchasing, investing, cash/treasury management, bank reconciliations, budgeting, research and analysis, staff training and development, and general financial support for all City departments. DEPARTMENTAL REPORT ITEM NO. 2 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING DEPARTMENT REPORT TO: Members of the Financial Advisory Commission FROM: Rosemary Hallick, Financial Services Analyst DATE: February 2, 2023 SUBJECT: THIRD QUARTER 2022 (JULY-SEPTEMBER) SALES TAX UPDATE FOR THE CITY OF LA QUINTA The attached report was prepared by consultants HdL Companies as an update of sales tax receipts for third quarter sales from July to September 2022. • La Quinta's overall adjusted sales tax receipts for major industry groups decreased 2.0%, which compared to Riverside County with a 10.7% increase and the state with an 8.0% increase. The decrease was in part driven by a one-time payment in the same quarter for the previous year. Other sectors that were down include Restaurants and Hotels, Autos and Transportation, and the County Pool. Details may be found in the attached Sales Tax Update prepared by HdL. • The City's sales -per -capita remains higher than both the county and state averages. Per Capita Sales La Quinta Riverside County Southern California California 30 40 10 20 30 40 10 20 30 40 10 20 19 19 20 20 20 20 21 21 21 21 22 22 Periods shown reflect the period in which the sales occurred - Point of Sale • General consumer goods (such as department stores) made up 37% of sales tax revenue and 39% of Measure G revenue. • Autos and transportation made up 10% of sales tax revenue and 16% of Measure G revenue. • The City continues to benefit from online purchasing in the form the County pool share, which was 14% of our sales tax revenue. $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 30 22 Autos and Tran sportation------] Building and Construction Business and Industry F.ie and Se-tiiv2 Stations 12% 3022 Percent of Total Food and Drugs Business [- and Industry 5% %4 14% State and County Pools Restaurants and Hotels 3Q22 Percent of Total Fuel and Food Service and Stations Drugs gq, Restaurants and 12% Hotels 1 B°Ja NL 16 Autos 4V Morap and Transportation Building and Construction Sales Tax General Consumer Goods Measure G General Consumer Goods The City continuously monitors local development, economic conditions, impacts on travel and trade, and legislative and judicial news for any potential changes to sales tax collections. The City's fiscal year 2022/23 budget was conservatively forecast based on known information as of Spring 2022, and may be subject to budget adjustments throughout the year. Fiscal year 2022/23 budget and year-to-date sales tax collections are shown in the chart below. Quarter Payment Bradley Burns 33060 Measure G 520 MG % of BB 3 July 2022 Advance $ 899,897 $ 1,100,441 122.29% 3 August 2022 Advance $ 1,138,925 $ 1,328,947 116.68% 3 September 2022 -3rd Qtr Payment $ 405,447 $ 858,514 211.74% 3 Total 2022 $ 2,444,270 $ 3,287,902 134.51% 4 October 2022 Advance $ 1,228,968 $ 1,455,913 118.47% 4 November 2022 Advance $ 1,028,053 $ 1,236,285 120.25% 4 December 2022 3rd Qtr Payment 4 Total 2022 $ 2,257,021 $ 2,692,197 119.28% FY 2022/23 Total YTD $ 4,701,291 $ 5,980,100 127.20% FY 2022/23 Current Budget 11,000,000 13,500,000 122.73% Attachment 1: HdL Q3 2022 Sales Tax Update CITY OF LA QUINTA SALES TAX UPDATE 3Q 2022 (JULY - SEPTEMBER) 'Allocation aberrations have been adjusted to reflect sales activity $1,000,000 $800,000 $600,000 $400,000 $zoo,o00 General Restaurants Consumer and Goods Hotels IN SALES TAX BY MAJOR BUSINESS GROUP County Building Autos Fuel and Food and State and and Service and Pools Construction Transportation Stations Drugs CITY OF LA QUINTA HIGHLIGHTS La Quinta's receipts from July through are tampering down demand for autos - September were 3.1% below the third sales transportation. period in 2021. Excluding reporting aberrations, actual sales were down 2%. Revenue from food -drugs decreased as 72% of consumers report that they're purchasing fewer Fuel prices began to level out in 3Q22, yet items because of concern over elevated grocery Southern California still remained an average inflation. of $1.15 higher than last year. The building - construction industry continues to rebound after The City's share of the countywide use tax COVID-19, owingto investment in the transport, pool decreased 3.8% when compared to the electricity, housing, and manufacturing sectors. same period in the prior year. Measure G, the City's voter -approved transactions and use tax, Higher prices for general consumer goods brought in an additional $3,292,856 in revenue forced consumers to look for promotions, seek led by sales from the general consumer goods less expensive items, and cut back on overall and building -construction categories. purchases. Restaurants report fewer guest as increased Net of aberrations, taxable sales for all of menu prices keep customers focused on Riverside County grew 10.7% over the lower priced eateries. Higher interest rates comparable time period; the Southern California region was up 8.1%. 4a"&(V D,SIsr T Legend Q3 2021 * • Q3 2022* Business and Industry ( D TOP 25 PRODUCERS Arco AM PM Lowes Best Buy Marshalls Circle K McDonald's Costco Ross Floor & Decor Stater Bros G & M Oil Target Genesis/Hyundai of La TJ Maxx Quinta Torre Nissan Hobby Lobby Tower Mart Home Depot Ulta Beauty In N Out Burger Walmart Supercenter Kohls La Quinta Chevrolet & Cadillac La Quinta Resort & Club La Quinta Shell HdP Companies Published by HdL Companies in Winter 2023 www.hdlcompanies.com 1888.861.0220 (S) STATEWIDE RESULTS Local one cent sales and use tax for sales occurring July through September was 8% higher than the same quarter one year ago after adjusting for accounting anomalies and back payments from previous quarters. These returns mark another strong period of growth for the California spending economy. Even as the Federal Reserve Board continued ramping up interest rates in an effort to curb the larger concern of inflation, consumers maintained purchases on multiple fronts, especially automobiles. Surprisingly, new car dealers experienced 10% gains over the comparable period in 2021. Limited inventory and demand for higher mileage vehicles including electric and hybrid models helped support growth. In addition, the increased cost of used vehicles has pushed many into the new vehicle market; in contrast, sales of recreation vehicles and auto leasing activity remained soft. For Californians, the summer of 2022 had the highest gas prices on record; subsequently fuel and service stations receipts jumped 21%. Commuters and summer travel remained steady, yet overall consumption still trails pre -pandemic levels by approximately 13%. Although the Russia - Ukraine conflict initially caused a dramatic shift in global crude oil markets, prices have begun to pull back closer to historical norms. Restaurants experienced a strong uptick as increased menu prices, consistent desire to dine out and strong tourism contributed to this favorable news. Just as important, theme parks, leisure -entertainment venues and hotels pushed positive momentum back to 2019 levels. With tightening profit margins and sustained labor concerns, future improvement could be slowed compared to the last two years. Busy contractors and plumbing -electrical suppliers boosted the building -construction sector. Solid residential and commercial housing prices persisted despite recent interest rate hikes. Tenant improvements further support spending activity as businesses assess future office needs. With statewide new housing requirements and federal infrastructure funding on the horizon, current forecasts stay optimistic. Steady investment in capital equipment coupled with the overall increased price of goods enhanced both business -industry and countywide use tax pool allocations. For the second straight quarter, fuel sales linked to discount department stores propped up general consumer goods Cons.Goods results. Otherwise, retailers experienced flat to decreased receipts as many apparel categories, home furnishings and sporting goods struggled to keep pace with the prior year. As consumers balanced summer opportunities and higher prices, in-store shopping appears to have taken a temporary back seat. Sustained price increases and interest rate hikes certainly have consumers contemplating where to spend their dollars. However, historically low statewide unemployment rates and the recovery of the national stock markets from declines earlier this year leave modest optimism heading into 2023. Fuel iers :taurants 6 Os/Trans. 0 *ADJUSTED FOR ECONOMIC DATA La Quinta County HdL State Business Type Q3'22* Change Change Change Casual Dining 178.4 -1.4%40 3.9%0 10.2%0 Service Stations 131.9 13.6%0 14.5%0 18.6%0 Electronics/Appliance Stores 94.9 -2.4%40 -3.2%40 3.6%0 Quick -Service Restaurants 82.2 2.8%0 1.3%0 4.0%0 Family Apparel 64.5 -3.0%© -5.2%© -1.7%40 Specialty Stores 60.0 2.4% © 2.1 % © 4.1 %© Grocery Stores 59.2 -2.2%40 4.8%0 3.1%0 Home Furnishings 35.0 -41.0%40 -8.4%40 -6.2%4) Fast -Casual Restaurants 32.0 -3.4%40 1.5%0 6.0%0 Leisure/Entertainment 31.4 -36.0%4) 2.8%0 23.9%0 *Allocation aberrations have been adiusted to reflect sales activity *In thousands of dollars HAND OUTS FAC SPECIAL MEETING FEBRUARY 2, 2023 BUSINESS SESSION ITEM NO. 4 - HAND OUT 1 APPROVE THE FINANCIAL ADVISORY COMMISSION SUBCOMMITTEE RECOMMENDATIONS ON OUTSTANDING PENSION OBLIGATIONS FOR CITY COUCIL CONSIDERATION - PROVIDED BY STAFF Projected payments From 2021 Actuarial Adjusted t include ADP Projected new payments, including all previously Valuation Report. Reflects from 10/ /2 of $1.0 i ncluding all previously made ADPs, 2021-22 ADPs of $2.5 million made made ADPs, based on Investment Loss, and $10.0 in 2021-22 m million million 2021-22 Investment Loss million ADP in April 2023 Payment Year Balance Payment Balance Payment Balance Payment Balance Payment 2023-24 6,503,919 930,274 5,455,597 930,274 12,245,111 930,274 2,081,685 284,149 2024-25 5,984,802 913,294 4,865,194 878,352 12,116,395 1,034,214 1,929,589 284,149 2025-26 5,447,934 859,129 4,288,303 823,597 11,871,512 1,135,322 1,767,150 284,149 2026-27 4,930,536 801,419 3,728,770 765,283 11,505,488 1,232,870 1,593,665 284,149 2027-28 4,437,592 723,797 3,191,450 687,038 11,013,761 1,310,487 1,408,383 284,149 2028-29 3,991,348 754,714 2,698,456 717,317 10,408,386 1,496,629 1,210,502 284,149 2029-30 3,482,808 786,499 2,140,647 748,445 9,569,479 1,527,757 999,165 284,149 2030-31 2,906,841 819,172 1,512,739 780,444 8,641,359 1,559,756 773,458 284,149 2031-32 2,257,941 852,765 809,062 813,341 7,617,055 1,592,653 532,402 284,149 2032-33 1,530,198 830,820 23,539 24,326 6,489,103 1,569,997 274,954 284,149 2033-34 775,647 801,585 - 5,307,862 1,036,761 - 2034-35 - 4,597,366 973,406 2035-36 3,904,029 880,448 2036-37 3,259,612 727,473 2037-38 2,729,466 630,373 2038-39 2,263,616 527,567 2039-40 1,872,332 443,988 2040-41 1,540,815 384,946 2041-42 1,247,771 363,222 2042-43 957,250 259,571 2043-44 754,092 779,309 Total Payments 9,073,468 8,168,417 21,397,023 13,841,488 Interest 2,569,550 13,228,606 Interest Savings (905,051)1 1(7,555,535) These numbers are estimates only, as provided by the CalPERS actuarial office In January 2023. These are not audited numbers and are subject to change based on many other factors such as final investment performance for fiscal 2022, or changes in termination rates, mortality rates, salary increases, inflation assumptions, or any other factor that would affect the City's Entry Age Accrued Liability or Present Value of Expected Benefits. The next CalPERS actuarial report reflecting the official June 30, 2022 valuations will publish in August 2023. POWER POINTS FAC SPECIAL MEETING FEBRUARY 2, 2023 Financial Advisory Commission Special Meeting 2/2/2023 Financial Advisory Commission Special Meeting 2/2/2023 Business Session Item No. 2 RECEIVE AND FILE FISCAL YEAR 2021/22 GENERAL FUND YEAR-END BUDGET REPORT �, •774 1 ' [ P y ' a µ; C A 4 I '' Wi. Report Content - - W"" Revenues Expenditures Carryovers Reserve Summary Exhibits 2/2/2023 Carryovers to 2022/23 Capital Improvements ■ Total $30,761,847 ■ For 21 Projects including CIP Savings, detailed in Exhibit C Operating ■ Total $1,209,100 Other Funds ■ Total $1,002,700 Reserve/Fund Balance I As of June 30, 2021 1 As of June 30, 2022 1 Chancie in Value Prepaid Costs 25,246 .0 21,744 Land Held for Resale 5,403,652 5,403,652 - Advances to Other Due from Other Governments 24,070,622 29,499,520 27r365r989 (2,133r53l) Restricted 7W Committed Operational Carryovers 1,209,870 1,209,100 (770) Cash Flow Reserve 5,000,000 5,000,000 M Natural Disaster Reserve 10,000,000 10,000,000 W Economic Disaster 11,000,000 11,000,000 Capital Replacement Reserve 10,000,000 10,000,000 - Total Committed 37,209,870 37,209,100 (770) Assigned Public Safety Fire Services 11,423,931 11,183,821 (240,110) Measure G Sales Tax 15,128,658 15,355,043 226,385 Capital Projects 13,431,089 30,761,847 17,330,758 Total Assigned 39,983,678 1 57,300,711 17,317,033 Measure G Summary ■ FY 21-22 Measure G Revenue: $15.6 million ■ Revenues since inception: $60.9 million Discussion & Questions ■ Fiscally healthy & well managed resources ■ Build reserves & improve resiliency ■ Focus on capital improvements, infrastructure and paying down pension plan i S, —csa�Na. ni � 2/2/2023 11 FPa Emergency Reserves- Natural Disaster • Capital Assets -What do we own and what is it worth • Risk- How much insurance coverage • Natural Disaster Funding- How much does the State or Federal Gov't contribute • Recommend increasing target by $5.0 million to $15.0 million Emergency Reserves -Economic Downturn • City has mitigated previous downturns by adjusting expenditures or with budget surpluses/reserves • Using the current $11.0 million and applying an annual CPI adjustment to years since policy inception, the subcommittee recommends a $2.0 million increase to $13.0 million Cash Flow Reserves • Previously utilized revenue to expenditure analysis to review cumulative deficits • Percentage of budget method reduces fluctuations in the number • Subcommittee recommends keeping a $5.0 million minimum target for this category, with the ability to set at 10% of the revenue budget Capital Replacement Reserves • Used to fund capital projects • Using the current $10.0 million and applying an annual CPI adjustment to years since policy inception, the subcommittee recommends a $2.0 million increase to $12.0 million Unfunded Pension Liability • FAC pension subcommittee recommendation to pay off the City's UAL with a combination of unassigned reserves and pension trust • This subcommittee supports those findings and recommends a minimum target of $5 million for the pension trust • Review the unfunded liability annually and adjust pension trust as needed Unassigned Reserves • Set initially at $8 million minimum • Subcommittee recommends keeping an $8.0 million minimum target for this category, with the ability to set at the equivalent of 2 months of the operating budget Unassigned Reserves Projected Balance Numbers are rounded to the nearest 100 thousand. CityCouncil staffreports for the uses of unassigned reserves can be found on the Citys website: Dune Palms Bridge 10/18/2022, Hwy 111 property from Blackpoint 1/17/2023, and Eisenhower Drive property from Cathcart 1/17/2023. Funds appropriated to the Dune Palms Bridge project are for advance construction funding and are a)pected to be reimbursed in the future. Chart is for illustrative purposes only and presumes all targets are adopted as recommended and fully funded by City Council. However, City Council may adopt targets and fund gradually over time, may adopt targets different from these recommendations, or not make any changes to the curent targets. Financial Advisory Commission Special Meeting 2/2/2023 Business Session Item No. 4 APPROVE THE FINANCIAL ADVISORY COMMISSION SUBCOMMITTEE RECOMMENDATIONS ON OUTSTANDING PENSION OBLIGATIONS FOR CITY COUNCIL CONSIDERATION Benefit Tiers/Plan Types • Classic: Employees hired on or before December 31, 2012. — Benefit formula: 2.5% at 55 • PEPRA: Public Employees Pension Reform Act, all employees hired on or after January 1, 2013. — Benefit formula: 2% at 62 • Tier 2: The City offers a tier for Classic employees coming from other agencies. — Benefit formula: 2% at 60 Classic Plan Stats • Unfunded Liability: $10.2 million as of June 2021 • Required UAL Contribution FY 23/24: $930,275 • Normal Cost: 14.06% of payroll • 22 Active and 118 Retired Members PEPRA and Tier 2 • Both are super -funded as of June 2021 • No UAL contributions for FY 23/24 • Normal costs 10.1 % for Tier 2 and 7.68% for PEPRA • Tier 2 has only 7 active members and 2 retirees • PEPRA has 58 active members and no retirees, but this plan will continue to grow 2/2/2023 25 Ul 13 2/2/2023 27 Annualized Returr.. As of June 30, 2022 Poi Annual Returns 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -INM 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 ■ Annual Returns CAPERS ■Annual Returns HignWadc Capital I - 2022 14 2/2/2023 29 15 The Financial Advisory Commission's Next Regular Quarterly Meeting is on May 10, 2023