May 2025 Financial Update: Larger than budgeted fund balances expected at year end

Bottom Line: Larger than budgeted fund balances expected at year end

All six of the Town’s major funds are estimates to end the fiscal year with balances greater than budgeted. This conclusion is based on a staff presentation to the town's Budget and Finance Commission

in August. The estimates are based on fund balance positions as of May.   

Delayed spending and savings drives most reported results

A larger than planned fund ending fund balance does not mean the Town is operating more efficiently or being more fiscally responsible. This is because the cash balances also reflect the timing of receiving and paying funds. Because the Town uses cash basis accounting, lower spending may simply mean that a project or service has been completed but payment has not yet been made; or that work has not yet started. For example, some capital projects in the Capital Fund have rolled into the next fiscal year, and certain road preservation projects in the Highway Fund and equipment purchases in the Water Utility Fund are being delayed.

General Fund: Lower revenues and expenditures

The General Fund pays for most day-to-day Town operations, excluding spending by the Water Department and the Stormwater Utility Fund. It also provides to other  funds, such as the Capital Fund and the Community Center Fund. Its performance therefore matters. General Fund revenues are down about 4% year over year, driven mainly by lower-than-expected construction sales tax revenues. This is despite licenses and permits exceeding the annual budget, with 106 single-family permits issued through May. Expenditures are tracking under budget due to unfilled positions and operations and maintenance savings. The Town now expects to use about $2.3 million of fund balance instead of the planned $4.1 million, leaving reserves about $4.4 million above the 30% Council policy threshold.

Highway Fund: Delayed road projects boost fund balance
Revenues in the Highway Fund are at 83% of budget. Highway User Revenue Fund receipts are slightly below plan, but higher right-of-way permit fees and insurance recoveries help offset that shortfall. The fund also receives quarterly transfers from the Capital Fund, totaling $4 million for the year. On the spending side, savings are expected in personnel, street and traffic signal maintenance, and several capital projects. Equipment and road work came in under budget, including the Magee Road and La Cañada Drive mill and overlay projects. The Town Council also shifted funds from a planned truck purchase to a less expensive crack seal machine, producing additional savings. Instead of a $365,000 change in fund balance as budgeted, the fund is now projected to add about $870,000 by year-end. 

Community Center Fund: Better than planned revenues balanced, somewhat, by greater than planned spending
Revenues in the Community Center Fund are ahead of budget, reaching 105%. Golf activity is strong, with 111,115 rounds played through May, an increase of 8.2% from last year. Town revenues from dues, recreation programs, and rentals are also higher than expected. Expenses are running over budget due to higher labor, utility, and credit card costs, as well as increased personnel costs. Even so, instead of using $115,000 from the Community Center Fund balance as planned, the fund is now projected to add about $750,000, ending the year with a balance of $2.6 million. These results include a transfer from the General Fund of $3.59 million, projected to reach $3.9 million by year-end (June). The Community Center Fund also transferred $1.72 million to cover debt service on the $25 million Parks and Recreation bond.”

Capital Fund: Rolling some projects into next year
Revenues in the Capital Fund are at 85% of budget through May. These include a $1 million state grant for the Naranja Park pump track and skatepark, $5.35 million in transfers from the General Fund, and higher-than-expected interest earnings. On the spending side, only $4.5 million of the $10.3 million budgeted for capital outlays has been used, as several projects will roll into the next fiscal year. Transfers out include funding for road work into the Highway Fund and $2.2 million set aside for the Vistoso Trails Nature Preserve and transit vehicles in the Grants Fund. Instead of using $5 million of fund balance as planned, the fund is now projected to use only about $400,000, leaving an ending balance of $11.7 million. 

Water Utility Funds: Increases revenue...some cost savings
Revenues in the Water Utility Fund are expected to slightly exceed budget, helped by reclaimed water sales, service fees, and higher interest earnings. Loan proceeds total about $7.2 million compared to $8 million budgeted. On the expense side, savings are coming from staff vacancies, lower costs for CAP water deliveries, and reduced system maintenance. Capital outlays are also running below plan. Debt service payments were made as scheduled, and transfers are being used to fund regional water projects such as the Northwest Recharge, Recovery, and Delivery System. Instead of the $2.3 million increase that was budgeted, the fund is now projected to grow by about $6.2 million, ending the year with a balance of $15.5 million.

Stormwater Utility Fund: Spending timing impacts fund balance
Revenues in the Stormwater Utility Fund are on track, with fee collections near budget and interest earnings well above expectations. A FEMA grant for $210,000 for the Sierra Wash project will roll into the next fiscal year. On the expense side, savings are coming from vacancies and lower costs for vehicle and equipment repairs, field supplies, and gasoline. The Sierra Wash project had a budget of $735,000 but is now estimated to cost about $380,000 by year-end . Instead of using $432,000 of fund balance as budgeted, the fund is expected to use only about $127,000, ending the year with a balance of $936,000.

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