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Page 1 of 8 Item #12 CITY COUNCIL AGENDA REPORT February 20, 2024 Finance TITLE: ACCEPT THE FY 2023/24 MID-YEAR BUDGET REPORT AND ADOPT A RESOLUTION APPROVING FY 2023/24 BUDGET AMENDMENTS SUMMARY The City follows a three-step operating budget process that starts with the approval of a two- year Budget (Budget); then after the first year of the Budget, the adoption of a Mid-Term Budget; and the adoption of Mid-Year Budget adjustments during each of the two years of the Budget. This report is the Mid-Year Budget report for the first year of the Budget that recommends adjustments to the FY 2023/24 Budget adopted by the Council on June 6, 2023. While these recommended changes primarily affect the General Fund, Water Fund, Sewer Fund, Golf Fund, and Internal Services Funds, some adjustments are also recommended to the Special Revenue Funds and Capital Projects Funds. Included in the recommended Mid- Year Budget are adjustments based on current information and projections related to various tax revenues, along with more up-to-date funding need analysis for various expenditure budget items since the adoption of the FY 2023/24 Budget. For this Mid-Year Budget cycle, the largest proposed expenditure adjustments are related to utility and professional services. Costs for electricity, water, and recycled water are all projected to increase more than previously estimated (based on rate increases along with more up-to-date usage projections). Details of the proposed adjustments can be found in the Discussion section of this report, and a complete summary of the adjustments for all funds is referenced as Exhibit A of the resolution, and provided as Attachment 2 to this report. RECOMMENDATION Adopt the attached resolution approving Mid-Year adjustments to the FY 2023/24 Budget. BACKGROUND Staff regularly monitors expenditures, cautiously forecasts revenues, and makes recommendations to address changes as quickly as possible to maintain a balanced budget. The Mid-Year Budget report helps staff address budget variances in a timely manner. DISCUSSION General Fund Overview As described below, staff recommends increasing revenue and expenditure totals by $13,000 and $9,000, respectively. As a result of these changes, staff expects the General Fund will have a $8,000 surplus. The use of program reserves for just over $420,000 is related to costs associated with City Council-approved contracts for the impact fee study and revenue measure consultants. Please note the Rainy Day Fund is not included in the table below. Page 192 of 228