The City Council received the mid-year budget review at the Tuesday, Feb. 6 meeting. The council also approved several budget amendments. Technically, the council did this by unanimously approving a single motion.
Finance Director Matt Baker presented the mid-year budget review and proposed budget amendments.
At the end of his presentation, Baker said the amendments to the General Fund would probably total less than $200,000. In the Harbor Fund, he said the amendments probably total less than $75,000 or $80,000.
Baker said he would expect the surplus in revenues over budget to cover the requested amendments.
He noted that it was a $30 to $40 million budget.
Review highlights
“Operating revenues right now are on track to exceed budget estimates,” Baker said.
He said that was more the case for the General Fund than the Harbor Fund.
Both funds are on track or slightly ahead of where staff had estimated they would be.
Staff had a number of requested amendments.
“A number of accounts we have for storm damage due to the storms in the first half of the year already kind of met their budgeted amounts and with the January storms and the February storms we’re expecting additional expenditures in those accounts,” Baker said.
The Finance Department expects some contract increases and Finance Department staff want to get ahead of schedule on that.
“Our capital outlays are are significantly less than where we had budgeted for the full year,” Baker said.
He said there were some capital (construction and maintenance) projects that might get shifted to the next fiscal year.
Transient Occupancy Tax (also known as a short-term rental or hotel bed tax) was budgeted at $7 million, according to Baker. As of December 31, the city had received $4.5 million.
“July, August, September tends to be our busiest quarter, so we would be expect to be more than 50% as of December 31st,” Baker said.
“But something else to keep in mind is the December visitor driven revenues would not be reflected in these numbers because those wouldn’t be due until the end of January,” Baker said.
“So we’re really looking at five months worth of revenues, but at the same time it’s the busier of the months that are being captured,” Baker said. He said sales tax were budgeted at $1.4 million. He said the city had received 41.4% of that, but there’s a two-month lag with sales tax, so those would be tax revenues through October.
He said the city would get property tax payments in January.
Baker said on the expenditure side, Avalon is more or less in line with where the city would expect to be.
According to Baker, Avalon has more expenditures in the second half of the year and tend not to be as large as in the July, August, September, which are Avalon’s busiest months.
Baker said labor was a big driver of the Fire Department’s budget.
Two of the budget amendments he discussed were Training and Travel and Storm Damage.
Baker said the city budgeted $50,000 for storm damage. As of Dec. 31, the city spent $49,000 of which $44,000 was spent on just removing debris along the K-rails on Pebbly Beach Road.
In prior years, Avalon had been spending about $50,000 a year on storm damage, according to Baker. He said staff was requesting an amendment of $125,000 in storm damage in the General Fund.
Councilmember Lisa Lavelle said the council should probably budget up to $100,000 or $120,000 for future years.
“That’s something we should probably look at,” Baker said.
He said he was probably too conservative with that account.
Harbor Fund
Revenues are on track to meet the budget estimates, according to Baker.
Cross channel wharfage was below the previous two fiscal years. He said August 2023 was dragging down cross channel wharfage.He said Avalon was seeing gains on the cruise ship wharfage.
“Each month ship occupancy rates have been reported above 100%,” Baker said.
“Again, you can get above 100% because it assumes two passengers per cabin and if you have three in a cabin that’s how you get over that 100% number,” Baker said.
“And because of that, if that trend were to continue we would be up in Cruise Ship wharfage by about $300,000, so that covers the shortage we’re looking at potentially in cross channel Wharfage,” Baker said.
Finance Director Baker said Avalon was seeing double-digit revenue growth in cruise ship activity. “The flip side of that is that it does make us more dependent on that cruise ship as a revenue source,” Baker said.
Mayor Anni Marshall asked if that was just subtracted out the Prop H money.
Baker said that was just the city’s collection.
Baker said staff was requesting a budget amendment increasing the waterfront trash contract by $15,000. That was for anticipated contract increases, he said.
City Manager David Maistros said Avalon did go out to bid on that.
Another budget amendment staff was requesting was for fuel dock permits and testing.
“We had an inspection last year that found a faulty sensor, I believe, in one of our fuel docks and so while we do lease out the operations, there are still certain expenditures we’re responsible for,” Baker said.
General Fund Capital projects
Baker said the city made the last payment for the Joe Machado Field loan repayment.
“Now the process is to start setting money aside for when we need to refurbish that field because at some point we will need to rehab it,” Baker said.
“Not in the next couple of years, hopefully, but just to keep that in mind,” Baker said.
He said staff will be requesting a budget amendment of about $17,000.
The next budget update will be in April.
