Budget and Fiscal Affairs Committee meeting.

I'm Sally Alcorn, Chair of the Budget and Fiscal Affairs Committee.

I'm joined by my Vice Chair, Mario Castillo, Councilmember Joaquin Martinez, Vice Mayor Pro Tem Amy Peck, Mayor Pro Tem Martha Castex Tatum, Councilmember Julian Ramirez, Councilmember Abby Kamen, Councilmember Willie Davis, staff from Councilmember Mary Nan Huffman's office, and staff from Councilmember Plummer's office online.

So we have a full agenda, so we'll get right to it.

We'll start with the monthly financial report.

So I think we're going to have Will Jones present, Deputy Controller and Melissa Dubowski, Finance Director.

Okay, you ready for me?

Ready?

Okay.

Uh good morning, Madam Chair, Council members of staff.

I'm here today to present the monthly financial report for the period ending July 31st, 2025.

In the general fund, the controller's office is projecting an ending fund balance of $328.1 million or $12.9% of expenditures less debt service and pay as you go.

This is $17.5 million lower than the projection of the Finance Department, and the difference is due to a lower revenue projection.

Based on our current projections, the fund balance will be approximately $137.6 million above the city's target of holding $7.5% of total expenditures excluding debt.

The FY26 beginning fund balance is $8.1 million higher than the FY25 ending fund balance reported in June.

The increase is due to year-in adjustments to revenues and expenditures that will continue until we finalize the annual comprehensive financial report.

For the general fund revenue, we have increased our revenue projection by $55 million from our FY 2026 trends report as follows.

Property tax increase by $43.9 million, and this is due to the census population that came after the proposed budget and after we presented our trends report, which is reflected in the adopted budget now.

Transfers from other funds increased by $9.6 million, primarily due to recovery of the $380 reimbursements from TERS 24.

Again, this was something we projected in June.

We're just now showing reflecting that in our uh this first MOFAR and direct interfund increase by $1.3 million to reflect higher reimbursements from airport for police services following pay raises.

On the expenditure side, we're making no changes, and we're also making no changes on the enterprise funds for commercial paper and bonds.

The city's practice has been to maintain no more than 20 percent of the total outstanding debt from each type of debt and variable rate structure, which is in line with rating agency's guidance of 25 percent.

From time to time, the city's enterprise credits have exceeded this threshold on an interim basis as they have undertaken large capital improvement projects or major expansions.

Uh thank you.

Good morning.

This is the 1 plus 11 financial report for the period ending July 31, 2025.

Fiscal year 26 projections are based on one month of actual results and 11 months of projections.

Looking back on fiscal year 25, um, in accordance with government accounting standards for governmental funds, the final uh revenues for FY25 will include revenues earned through June 30th, only if they are collected by the end of August.

So those items are still pending, um pending the finalization of the annual comprehensive financial report.

So uh expenditures also continue to be uh were continued to be recorded until um August 31st.

So based on the revenues and expenditures so far for fiscal year 25, the current preliminary undesignated fund balance for the general fund is 422 million, which is the same as our June MOFAR projection.

And so as I mentioned, the results are not final until the publication of the ACFR, which will be sometime probably in December.

So moving to fiscal year 26, our revenue and expenditure projections remain at budget.

Um just an update on the sales tax, sales tax receipts for June, and this is um again, this kind of goes to the prior year still, but um sales tax receipts for June uh were $7.6 million higher than the same period last year, which is about 9.9 percent higher than the same period last year.

So we are going to continue to monitor sales tax, of course, as we enter uh FY26.

We're currently projecting the ending fund balance to be $345.6 million, which is $40.7 million higher than the adopted budget, and is 13.6 percent of estimated expenditures, not including debt service and pay as you go projects.

And that uh the fund balance represents 155 million above that minimum of holding 7.5 percent.

For the enterprise special revenue and other funds, we are not projecting any changes at this time.

That concludes my report.

Thank you very much.

Director, on the sales tax numbers, does that does that include are we did are they deducting the amount member is that happening yet?

So the audit um the audit that we talked about a couple months ago, um we still haven't heard back from the state on their final results.

The State Comptroller's Office was sending it to a higher level of review internally just to make sure that they had the right number.

What they had indicated to us is it was going to be around 25 million dollars.

Right.

And what we've talked about preliminarily with them is um once we do have to start paying back the audit finding, spreading it over, I think a believe it's a 43 month period, which comes out to about $600,000 a month.

We haven't started that payment yet, but it is something that we continue to monitor and you anticipate that being in the next few months or who knows, whenever they get it figured out.

We do stay in regular contact with them.

We reach out to them at least once a month to talk to them about it.

Sure.

I was also going to ask about SB 10 and and what and what's going on I know that in October we'll be approving a tax rate, and I know you guys are busy calculating anything.

Um will feel free to opine also.

But um colleagues, as you know, at this at the State Legislature, they're considering a change to the voter approved tax rate from three and a half percent.

Then you go to the voters to two and a half percent.

And just wanted um wanted to get your input on on how that, if that does um come to fruition, how that might affect our numbers.

Sure.

So um whatever uh changes the legislature makes with this pending legislation uh won't impact the tax rate that we adopt this year, would impact the tax rate for the following year.

Um but just in terms looking historically, we did an analysis to see if our um state cap multiplier was two and a half percent instead of three and a half percent.

What would that have meant for us?