HomeMy WebLinkAboutFY 2024/25 Year End Budget Adjustments, Year-End Audit Entri ��NTIN6 2000 Main Street,
Huntington Beach,CA
Cit of Huntington Beach 92648
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File #: 25-883 MEETING DATE: 11/18/2025
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Travis Hopkins, City Manager
VIA: Robert Torrez, Interim Chief Financial Officer
PREPARED BY: Zack Zithisakthanakul, Assistant Chief Financial Officer
Subject:
Approve FY 2024/25 Year-End Budget Adjustments, Year-End Audit Entries and Transfer
Recommendations
Statement of Issue:
The Finance Department is completing the year-end closing process for Fiscal Year 2024/25, which
began on July 1, 2024, and ended on June 30, 2025. Certain budgetary transfers are needed to
reconcile the budget with actual expenditures incurred; to comply with auditing, actuarial, accounting,
and legal requirements; and to align with City Council's strategic goal of fiscal stability. City Council
authorization is requested to perform these reconciliations in order to officially close Fiscal Year
2024/25.
Financial Impact:
1. Appropriation Increases: Appropriation increases of $94,195 are requested to reconcile the
budget with actual expenditures incurred in the Bella Terra Parking Structure Fund
(Attachment 1).
2. Appropriation and Inter-Fund Transfers (various funds): Appropriation increases and inter-fund
transfer authority of $301,906 are requested to reconcile the budget with actual expenditures
incurred in The CDBG and HOME Funds (Attachment 1).
3. Appropriation and Inter-Fund Transfers (General Fund): Authorization is requested for
appropriation and inter-fund transfers totaling $4,500,000 from the General Fund in the
following amounts:
• Transfer of$2,500,000 to the Workers' Compensation Fund; and
• Transfer of$2,000,000 to the Equipment Replacement Fund.
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File #: 25-883 MEETING DATE: 11/18/2025
Recommended Action:
A) Increase appropriations for the Fiscal Year 2024/25 Revised Budget by $94,195 in the funds and
amounts contained in Attachment 1 to reconcile the budget with actual expenses incurred; and,
B) Approve the $301,906 appropriations and transfers for the Fiscal Year 2024/25 Revised Budget in
the funds and by the amounts contained in Attachment 1; and,
C) Approve the appropriation and transfer of $4,500,000 into the Workers' Compensation, and the
Equipment Replacement Fund from the General Fund year-end balances (see Attachment 1).
Alternative Action(s):
Do not approve the recommended action, and direct staff accordingly.
Analysis:
The Fiscal Year 2024/25 Budget was adopted by City Council on June 4, 2024, for the fiscal year
beginning July 1, 2024. The Finance Department has compiled recommended budget adjustments to
cover additional costs and/or provide appropriations necessary to expend funds that have been
received for specific purposes. The requested adjustments will be funded by available revenue or
fund balances within each distinct fund.
The Finance Department is projecting an available General Fund surplus of $7.4 million for Fiscal
Year 2024/25. This projected surplus is primarily driven by stronger-than-expected revenues and one
-time receipts. Parking citation revenue increased from $4.24 million to $5.80 million, due to higher
enforcement activity and improved collection rates. The City also received a one-time $4 million
litigation settlement, contributing to the positive year-end position. In addition, investment interest
earnings exceeded budgeted estimates, reflecting higher interest rates and steady cash balances.
These combined factors, along with overall expenditure savings, have positioned the City to close the
fiscal year with a surplus.
In order to align with the City Council's Strategic Goal 2 - Fiscal Stability, staff is recommending the
allocation of year-end surplus funds to bolster the Workers' Compensation Fund and the Equipment
Replacement Fund. Both funds continue to experience rising costs due to inflationary pressures,
increasing claim severity, aging fleet and infrastructure, and higher replacement costs for vehicles,
technology, and safety equipment. Proactively dedicating surplus revenues to these reserves
strengthens the City's long-term financial position, reduces future reliance on the General Fund, and
ensures the City can meet its current and future obligations without disrupting service levels.
Sufficient funding in the City's General Fund in Fiscal Year 2024/25 is available for the recommended
funding detailed below.
Workers'Compensation:
California Workers' Compensation Law provides state mandated benefits to employees for work-
related illness or injury. Benefits may include payments for medical treatment, salary continuation,
Total Temporary Disability (TTD) benefits, and permanent disability benefits. The City is self-insured
for its workers' compensation program and is liable for all costs up to $1 million dollars per claim. The
costs related to claims are paid for by the City as the Employer.
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File #: 25-883 MEETING DATE: 11/18/2025
As of the most recent actuarial valuation dated June 30, 2025, the City's workers' compensation
liability is estimated at $66.7 million, reflecting an increase from the prior year. While several factors
may have contributed to the higher liability, the valuation confirms a continued upward trend in long-
term costs. To address this obligation and improve the overall funded status of the program, staff is
recommending an appropriation and transfer of$2,500,000 to the Workers' Compensation Fund. This
allocation will help offset the increase identified in the actuarial report and is expected to raise the
funded ratio from 48% to approximately 52%.
Equipment Replacement:
The City's fleet, technology systems, and major equipment continue to age, and replacement costs
have increased more quickly than existing funding levels. Several scheduled replacements have
been deferred in recent years to balance the operating budget, resulting in a growing backlog of
vehicles and equipment that are beyond their useful life. Setting aside additional funds now will
ensure the City can replace critical equipment in a timely manner, avoid higher repair and downtime
costs, and maintain continuity of essential public services. For these reasons, staff recommends
transferring $2,000,000 to the Equipment Replacement Fund to strengthen the balance available for
future replacements and reduce the risk of unplanned General Fund impacts.
Inter-Fund Transfers and Budget Adjustments (Other Funds):
Technical year-end budget adjustments to the Fiscal Year 2024/25 Revised Budget are requested to
align appropriations in certain funds with actual expenditures incurred through June 30, 2025, as
actual expenditures cannot exceed the appropriation amounts contained in the Revised Budget.
Adjustments are also required to ensure compliance with Generally Accepted Accounting Principles
(GAAP), Governmental Accounting Standards Board (GASB), and other regulatory, contractual or
legal requirements. Please note any appropriation increases are fully offset by commensurate
amounts of revenues, available cash, or fund balances in each fund.
Bella Terra Parking Structure Fund (711):
An appropriation increase of $94,195.91 is requested to align the budget with actual Fiscal Year
2024/25 revenues and expenditures. The City collects a maintenance fee from the owners of the
center which is used to fund maintenance and operations costs for the structure.
Revolving Loan and CDBG Funds (215 and 239):
An appropriation increase of $116,879.82 is requested to increase transfers out of the Revolving
Loan Fund (215) into the Community Development Block Grant (CDBG) Fund (239) to reconcile
funding with the Integrated Disbursement and Information Systems (IDIS) for the CDBG Program and
show use of program income.
HOME Funds (240 and 854):
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File #: 25-883 MEETING DATE: 11/18/2025
An appropriation increase of $185,026.26 is requested to increase transfers out of the HOME
Program 06 Fund (854) into the HOME Fund (240) to reconcile funding with the Integrated
Disbursement and Information Systems (IDIS) for the HOME Program and show use of program
income.
Environmental Status:
Pursuant to CEQA Guidelines Section 15378(b)(5), administrative activities of governments that will
not result in direct or indirect physical changes in the environment do not constitute a project.
Strategic Plan Goal:
Goal 2 - Fiscal Stability, Strategy A - Consider new revenue sources and opportunities to support the
City's priority initiatives and projects.
For details, visit www.huntingtonbeachca.gov/strategicplan.
Attachment(s):
1. Fiscal Year 2024/25 Year-End Appropriations and Inter-Fund Transfers.
2. PowerPoint Presentation.
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ATTACHMENT 1
Fiscal Year 2024/25 Appropriation Increases
APPROPRIATION INCREASE:
Dept Fund Name Amount
Non-Departmental 711 Bella Terra Parking Structure Fund 94,195.91
Total 94,195.91
APPROPRIATION AND TRANSFER INCREASE -OTHER FUNDS:
Dept From Name Amount To Fund Name
Community Development 215 Revolving Loan Fund 116,879.82 239 CDBG Fund
Community Development 854 HOME Program 06 Fund 185,026.26 240 HOME Fund
Total 301,906.08
APPROPRIATION AND TRANSFER INCREASE -GENERAL FUND:
Dept From Name Amount To Fund Name
Non-Departmental 100 General Fund 2,500,000.00 551 Workers' Compensation Fund
Non-Departmental 100 General Fund 2,000,000.00 324 Equipment Replacement
Total 4,500,000.00
291
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Background
➢ Finance Department is working on the year-end closing process.
➢ Year-End Budget adjustments for FY 2024/25 are required to close FY 2024/25.
➢ FY 2024/25 is projected to end with a $7.4M General Fund surplus. This projected surplus
is primarily driven by stronger-than-expected revenues and one-time receipts.
➢ Parking citation revenue increased from $4.24M to $5.80M, due to higher enforcement
activity and improved collection rates; and
➢ Received a one-time $4M litigation settlement, contributing to the positive year-end
position; and
➢ Investment interest earnings exceeded budgeted estimates, reflecting higher interest
rates and steady cash balances.
➢ Funding the City's Workers' Compensation and Equipment Replacement Fund — aligning
with the City Council's Strategic Goal of Fiscal Stability
293
Workers ' Compensation
➢ California Workers' Compensation Law provides state mandated benefits to employees for
work-related illness or injury.
➢ City is self-insured up to $1 M claim.
➢ Benefits may include payments for medical treatment, salary continuation, Total
Temporary Disability (TTD) benefits, and permanent disability benefits.
➢ $15.4M increase in Workers' Compensation liability primarily due to claims driven by rising
medical costs and an expanded list of injuries that are presumed to be work related under
California law.
➢ Recommended Transfer: $2.5M Description $ / %
Total WC Liability 6/30/2025 $66.7M
Increase in WC Liability FY2024/25 $15.4M
Funded Status without Transfer ($32.2M) 48.25%
Funded Status with Transfer ($34.7M) 52.06%
Recommended Transfer $2.5M
294
Equipment Replacement
➢ The City's fleet, technology systems, and major equipment are aging, and replacement
costs are rising faster than current funding levels.
➢ To balance prior operating budgets, several planned replacements were deferred, creating
a backlog of assets beyond their useful life.
➢ Without additional funding, the City risks higher repair costs, increased downtime, and
potential disruption to essential public service.
➢ Recommended Transfer: $2.0M
295
General Fund Adjustments Summary
➢ Recommended transfers totaling $4.50M from the General Fund in FY 2024/25 to fund the
City's unfunded Worker's Compensation liabilities and Equipment Replacement Fund as
listed below — aligning with the City Council Strategic Goal of Fiscal Stability.
➢ Estimated FY 2024/25 surplus after appropriation $2.9M (subject to change)
Fund Amount
Workers' Compensation $2,500,000
Equipment Replacement 2,000,000
Total $4,500,000
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Other Fund Adjustments
Bella Terra Parking Structure (711)
➢ $94k to align budget with actual FY 2024/25 expenditures. The City owns the
parking structure in the Bella Terra retail center. The City collects a maintenance
fee from the owners of the center through a special assessment which is used to
fund maintenance and operation expenditures for the structure.
Community Development
➢ $117k Revolving Loan Fund transfer to CDBG Fund to properly record usage of
program income.
➢ $185k HOME Program Fund to transfer to HOME Fund to properly record usage of
program income.
297
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