CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Receive the 2024 Mid-Year Financial Report
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DEPARTMENT: Finance Department
SUBMITTED BY: Raymond Munch, Director
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
The Finance Department monitors revenues and expenditures throughout the year to identify trends that impact the annual budget and Capital Improvement Program (CIP). Regular financial reporting informs the City Council and the public on important issues related to the City's finances, including discussions around short-and long-term financial strategies.
This month’s report focuses on budget performance through the first seven months of 2024 and will discuss preparation of the 2025 annual budget.
The PowerPoint presentation will be made available with the Agenda Q&A that is posted prior to the meeting.
DISCUSSION:
Through July, budget performance aligns with expectations across most funds. Due to the budget's size and complexity, revenues and expenditures are summarized according to three major fund categories: Maintenance and Operating, Capital and Debt Service and Special Funds.
Staff measures year-to-date revenues and expenditures against three milestones: the full-year budget, a monthly projection based on five years of historical data, and the prior year’s year-to-date actual. These three measures allow for the budget to be analyzed against a single point in time (last year) and current expectations.
Revenues
Revenue through July across all funds totaled $286.94 million. This is a 2.2% increase over the same period in 2023, but 0.7% lower than the current year projection of $288.93 million. For an accurate comparison, these revenues do not include $20.26 million in bond proceeds for the Water Utility received in May.
While major revenue streams remain consistent with projections, some revenues are performing below expectations. Revenues in the Special Funds exceeded prior year actuals by 57%. The variance is a result of the new quarterly transfer to the Naper Settlement Fund from the Food and Beverage Fund, as well as the timing of other interfund transfers.
Revenue by Fund Category
|
|
2024 Budget |
YTD Actual |
% of Total Budget |
YTD Projection |
% of YTD Projection |
2023 YTD Actual |
Variance to 2023 (%) |
|
Maintenance & Operating |
$432.34 |
$238.09 |
55.1% |
$236.50 |
100.7% |
$230.39 |
3.3% |
|
Capital & Debt Service |
$121.63 |
$45.88 |
37.7% |
$31.07 |
147.7% |
$25.38 |
80.8% |
|
Special Funds |
$39.33 |
$23.24 |
59.1% |
$21.37 |
108.8% |
$24.87 |
-6.5% |
$ in millions
Below is a summary of major revenues and their performance against the current year-to-date projection and the same period last year.
State Shared Revenues
|
|
2024 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2023 YTD (%) |
|
Sales tax |
$47.43 |
$27.34 |
5.7% |
3.9% |
|
Income tax |
$25.12 |
$16.64 |
3.4% |
8.3% |
|
Motor fuel tax |
$6.57 |
$3.74 |
0.0% |
3.0% |
$ in millions
Sales and income tax revenues that support the City’s General Fund continue to be higher than expected and show strong growth year-over-year, an indication that the state and local economy remain strong. Motor fuel tax (MFT) aligns with projections and shows modest growth over the prior year largely due to the inflationary increase in the Transportation Renewal Fund portion of MFT.
Local Tax Revenues
|
|
2024 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2023 YTD (%) |
|
Hotel/motel tax |
$3.80 |
$2.28 |
-8.5% |
0.9% |
|
Food & beverage tax |
$7.42 |
$4.43 |
4.7% |
9.1% |
|
Real estate transfer tax |
$4.54 |
$2.41 |
-3.8% |
1.0% |
|
Home rule sales tax |
$19.73 |
$11.03 |
6.9% |
1.4% |
$ in millions
Hotel/motel tax remains lower than expected even though revenue is up slightly over 2023. It appears that growth has moderated when compared to the past two years. Food and beverage taxes are performing better than expected, with downtown revenue up 14.1% year-over-year. Real estate transfer tax revenue performed much better in the second quarter and is now 1.0% higher than in 2023.
Service Charges & Other Fees
|
|
2024 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2023 YTD (%) |
|
Electric charges |
$142.49 |
$80.14 |
-1.0% |
2.3% |
|
Water charges |
$49.42 |
$27.38 |
0.7% |
-0.8% |
|
Wastewater charges |
$30.26 |
$16.15 |
-8.1% |
3.5% |
|
Building permits/fees |
$1.31 |
$1.03 |
36.1% |
33.0% |
|
Commuter parking fees |
$0.90 |
$0.68 |
65.7% |
5.0% |
$ in millions
After making significant budget adjustments for 2024, electric charges are trending much closer to budget assumptions, and total revenue is up 2.3% from 2023. Water charges remain aligned with budget projections and with the prior year, while wastewater charges were lower than projected.
Two bright spots are building permits and commuter parking fees. Building permits and fees are about 36% higher than expected, largely driven by residential permits. Commuter parking fees were budgeted conservatively due to the uncertainty surrounding the move to daily fee parking. With parking demand increasing, parking fees are 65% higher than projected and 5.0% higher than last year. Those revenues have been trending up since the first quarter
Expenditures
Expenditures across all funds total $271.18 million. Total expenditures are 7.6% below current projections and 6.2% higher than the same point last year. Spending in the General Fund is aligned with projections. Electric Utility Fund expenditures are 1.7% higher than projected but remain slightly lower compared to last year. Expenditures in the Water Utility are lower than projected by 1.7% and 4.5% lower than the previous year.
Expenditures by Fund Category
|
|
2024 Budget |
YTD Actual |
% of Total Budget |
YTD Projection |
% of YTD Projection |
2023 YTD Actual |
Variance to 2023 |
|
Maintenance & Operating |
$429.31 |
$85.53 |
50.9% |
$217.98 |
100.2% |
$211.28 |
3.3% |
|
Capital & Debt Service |
$143.16 |
$32.80 |
22.9% |
$53.88 |
60.9% |
$23.03 |
42.4% |
|
Special Funds |
$41.27 |
20.04 |
48.6% |
$21.58 |
92.9% |
$20.96 |
-4.4% |
$ in millions
Below are some key factors tied to expenditure performance.
Personnel Costs
|
|
2024 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2023 YTD (%) |
|
Regular pay |
$110.17 |
$62.08 |
-2.3% |
4.9% |
|
Overtime pay |
$10.67 |
$5.83 |
-7.6% |
20.7% |
|
Employer contributions |
$48.73 |
$27.44 |
9.2% |
4.2% |
|
Insurance benefits |
$26.99 |
$15.68 |
-0.9% |
15.2% |
$ in millions
Regular pay is slightly lower than projected, with a year-to-date variance of -2.3%. However, it is 4.9% higher than the previous year, due to personnel additions and budgeted wage increases.
Overtime pay is 20.7% higher than the previous year, though it remains 7.6% below projections. Increases in overtime are mainly seen in public safety. Fire Department overtime is approximately 35% higher than expected to cover minimum staffing but is offset by lower-than-expected regular pay from personnel vacancies.
Employer benefit contributions are trending above budget, with a 9.2% variance from the year-to-date projections and an increase of 4.2% from 2023. This is driven mainly by increased contributions to the Police and Fire pensions and the timing of those contributions.
Insurance benefits and claims for healthcare and other related coverages are 15.2% higher than the previous year. Prior major medical claims, legal settlements and general liability claims have contributed to the overage.
Purchased Services
|
|
2024 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2023 YTD (%) |
|
Operational Services |
$10.76 |
$5.12 |
10.6% |
57.8% |
|
Architect & Engineering Services |
$13.01 |
$2.96 |
-56.2% |
96.8% |
|
Software & Hardware Maintenance |
$8.84 |
$5.31 |
3.3% |
33.1% |
$ in millions
Operational services total $5.12 million, an increase of 57.8% over the previous year. Increases were attributable to tree maintenance, landscaping, and streetlight maintenance. Significant underspend on snow removal operations was redirected to forestry services in the spring and summer.
Architect and engineering services are still trending below budget but have increased compared to last year. Design work continues to progress on capital projects.
Software and hardware maintenance is 3.3% above projections and has increased significantly compared to last year. The renewal costs for various software agreements have seen noticeable increases this year and the police body camera contract was paid earlier this year than last.
Purchased Items
|
|
2024 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2023 YTD (%) |
|
Operating Supplies |
$24.21 |
$10.88 |
-8.1% |
-23% |
|
Purchased Electric |
$103.52 |
$59.73 |
7.5% |
5.6% |
|
Purchased Water |
$30.10 |
$14.38 |
-3.1% |
-14.1% |
$ in millions
Purchased electricity costs are trending higher than expected. This is 7.5% higher than projected and represents an increase of nearly 6% from 2023. This remains partly attributable to the loss of cogenerated energy from INEOS, which stopped generating electricity at the end of 2023, increasing the City’s 2024 consumption from IMEA.
Purchased water costs declined 14% from the previous year, in line with reduced consumption. Rainfall this spring and summer has been far greater than in 2023, resulting in lower water sales.
Overall spending for operating supplies has decreased by 23% compared to last year with a few exceptions including, telephone costs, internet charges, and water and sewer charges. Large commodity costs, such as fuel, salt and equipment parts are lower than expected.
Capital Projects
|
|
2024 Budget |
YTD Actual |
Variance to YTD Projection (%) |
Variance to 2023 YTD (%) |
|
Infrastructure |
$101.89 |
$25.76 |
-39.0% |
13.9% |
|
Vehicles & Equipment |
$9.13 |
$3.15 |
30.3% |
48.9% |
|
Building Improvements |
$9.05 |
$3.15 |
-2.2% |
-24.9% |
|
Technology |
$12.52 |
$1.99 |
-53.7% |
230.6% |
|
Land |
$0.80 |
- |
- |
- |
$ in millions
Capital projects are progressing very well this year compared to last. Fewer projects have been delayed or deferred. Total expenditures for capital outlay are 15.2% higher than last year, although they continue to trend well under budget. Several major projects, including the North Aurora Underpass, the Public Safety Radio System and the Tollway Electric Substation, will not see much spending in 2024 even though they continue to make progress. Staff will provide more detail on projects that will carry over to 2025 in the September budget workshop.
2025 Budget Development
Development of the 2025 budget began in July. Staff is presently evaluating CIP submissions and finalizing operating budget requests. Once those budgets are submitted, they will undergo a two-step review process with the Finance Department and City Manager’s Office before presentation to the City Council. The proposed 2025 Annual Budget and Capital Improvement Program will be published on October 11, 2024. The information included in the proposed budget will be presented to the City Council and the community through a series of workshops tentatively scheduled for Tuesday, Sept. 24, Tuesday, Oct. 22 and Tuesday, Nov. 12.
Budget workshops will focus on several important topics, including:
• 2025-2029 Capital Improvement Program
• Electric and water utility rate recommendations
• Grocery tax repeal (2026) and long-term General Fund revenues
While staff’s development of the 2025 budget is largely driven by goals defined in the 2024 Priorities Plan update, City Council input is essential throughout the budget process. City Council members are encouraged to engage staff early in the budget process on topics of interest for the 2025 budget.
Summary
At the mid-point of the year, revenues and expenditures across most major operating funds are trending in line with budget projections. Aside from a recent court verdict, staff does not expect any significant deviations from the budget in the second half of the year.
A detailed budget report through July 31 is included as an attachment. That budget report was previously received by the City Council on the August 20 agenda.
FISCAL IMPACT:
N/A