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LTC 243-2023 Fiscal Year 2023 Second Quarter AnalysisMIAMI BEACH OFFICE OF THE CITY MANAGER LTC NO. 243-2023 LETTER TO COMMISSION TO: FROM: Honorable Mayor Dan Gelber and Members of the City Commission Alina T. Hudak, City Manag� DATE: May 25, 2023 Uf \ SUBJECT: Fiscal Year 2023 Second Quarter Analysis The purpose of this Letter to Commission (L TC) is to provide the Mayor and City Commission with the status of the Fiscal Year (FY) 2023 operating budget as of the second quarter ending March 31, 2023. In addition, this analysis includes projections through the fiscal year ending September 30, 2023. It is important to note that certain assumptions for both revenues and expenditures have been made in these projections, which will continue to be refined and adjusted as additional information becomes available. SUMMARY Based on the second quarter of the current fiscal year (FY 2023), revenue and expenditure projections through September 30, 2023 for the General Fund reflect a year-end surplus of approximately $11.3 million, which is an increase of $3.3 million over the surplus projected as of the first quarter of the current fiscal year of $8.0 million. Similarly, the 2% Resort Tax Fund reflects a projected year-end surplus of approximately $6. 7 million, which is an increase of $4.6 million over the surplus projected as of the first quarter of the current fiscal year of $2.1 million. This analysis is a preliminary projection based on experience during the first six months of the current fiscal year, which is not a definitive indication of the experience for the remainder of the current fiscal year. However, it does provide an initial glance in identifying any potential concerns and/or opportunities later in the fiscal year. The preliminary FY 2024-2028 Capital Improvement Plan (CIP), as summarized by the City Administration at the FY 2024 Commission Budget Workshop on May 11, 2023, reflected approximately $1.1 billion in capital project needs over the next five years. In addition, based on the City's adopted financial policies regarding the Capital Reserve Fund and Capital funding, the City Administration is also recommending that funds be set aside for evaluation through the FY 2024 budget process. As a result, and as presented at the FY 2024 Commission Budget Workshop on May 11, 2023, the City Administration is recommending holding aside as much of the $11.3 million General Fund surplus as possible for capital funding needs. There have been several priority initiatives identified by the City Commission and City Administration that have significant funding impacts. To the L e tt e r to C o m m issio n -- F iscal Ye a r 2 0 2 3 S e co n d Q u a rt er A n a ly sis P a g e 2 o f 13 extent possible, it is recommended that requests, especially those with recurring impacts, be evaluated for funding as part of the FY 2024 budget development process. Similarly, the City Administration is recommending that the projected 2% Resort Tax Fund year- end surplus of $6. 7 million be set-aside to fund additional tourism-eligible expenditures in the General Fund and one-time enhancements that may be considered during the FY 2024 budget development process, if realized at year-end. RESERVES The General Fund reserve as of September 30, 2022 is $95. 7 million, or 25.0%, which equals 3 months of reserves based on the FY 2023 adopted budget. The reserve policy for the General Fund is a required 2 months and a goal of 3 months pursuant to Resolution No. 2019-30954 that was adopted by the City Commission on September 11, 2019. The Resort Tax reserve as of September 30, 2022 is $37.8 million, or 50.0%, which equals 6 months of reserves based on the FY 2023 adopted budget. The reserve policy for the 2% Resort Tax Fund is a minimum of 2 months and a goal of 6 months pursuant to Resolution No. 2019- 30664 that was adopted by the City Commission on January 16, 2019. Additional funding requirements for these reserves are being evaluated as part of the FY 2024 budget development process. ANALYSIS All General Fund, Enterprise Funds, Internal Services Funds, and Special Revenue Funds budgets are projected to be at or below their current amended budgets as of year-end with revenues projected to be equivalent to or in excess of expenditures, except for specific General Fund departments, the Convention Center Enterprise Fund, and the Risk Management Internal Service Fund that have been detailed further in the forthcoming second quarter analysis. GENERAL FUND Second Quarter Status An analysis of the actual six-month operating revenues and expenses for the period October 1, 2022 through March 31, 2023 reveals an operating budget surplus of approximately $111.2 million. While the actual surplus as of March 31, 2023 may seem unusual when compared to the projection for the current fiscal year ending September 30, 2023, it should be noted that the City receives a large percentage of its annual ad valorem property tax revenues during the first six months of the fiscal year. For FY 2023, ad valorem property tax revenues represent approximately 59.3% of total budgeted revenues adopted and 70.3% of actual revenues collected during the first six months of the current fiscal year. As of March 31, 2023, total revenues collected in the General Fund were 71.4% of the current FY 2023 amended budget, or $286.2 million. Conversely, expenditures were 43. 7% of the current FY 2023 amended budget, or $174.9 million. There are often delays in expenditures until the close- out of the fiscal year. L e tt e r to C o m m is s io n - Fis c a l Ye a r 2 0 2 3 S e c o n d Q u a rt e r A n a ly s is P a g e 3 o f 1 3 FY 2023 Budget 1/2 of Amended Actuals as of Variance from 1/2 Genera l Fund Adopted Budget Am ended Budget Budget 03/31/23 Amended Budget Over / (Un der) Reven ues $ 382,618,000 $ 400,587,000 $ 200,293,500 $ 286,17 7,212 $ 85,883,712 Expenditures $ 382,618,000 $ 400,587,000 $ 200,293,500 $ 174,943,098 $ (25,350,402) Excess of Revenues Over/(Under) Expenditures $ 111,234,115 Year-End Projections Year-end operating revenues and expenditures projected through September 30, 2023 provide a more realistic indication of any estimated year-end surpluses or shortfalls as of this point in time. While actual revenues and expenses reflected in this analysis are as of March 31, 2023, these projections incorporate more current information available. A summary of the preliminary General Fund revenues and expenditures as of March 31, 2023 with projections through September 30, 2023 reflects a projected year-end surplus of approximately $11.3 million. The Administration recommends these funds be set-aside as follows, as presented at the FY 2024 Commission Budget Workshop on May 11, 2023, if realized at year- end. FY 2023 Budget Genera l Fund Adopted Budget Am ended Budget Pro jected Difference % Over / (Under) Reven ues $ 382,618,000 $ 400,587,000 $ 404,859,000 $ 4,272,000 1.1% Expenditures $ 382,618,000 $ 400,587,000 $ 393,570,000 $ (7,017,000) -1.8% Excess of Revenues Over/(Under) Expenditures $ 11,289,000 2.8% M id-Year FY 2023 Approp riations Appro ved by Co m m ission to date 4,650,000 Addt'I Hom el ess Tru st Set-aside (April 28, 2023 Co m m ission m eeting) 1,000,000 Capital Pro ject Need s, Replacem ent of Vehicles & Equipm ent, and 5,639,000 Gen eral Fund Reserve Requi rem ents Excess of Revenues Over/(Under) Expenditures] $ 0 0.0% Operating Revenues As of March 31, 2023, actual operating revenues collected were approximately 71.4% of the current amended budget, or $286.2 million, with operating revenues through fiscal year-end September 30, 2023 projected at $404.9 million, which is approximately 1.1%, or $4.3 million, above the current amended budget. As previously mentioned, these projections are not only based on experience during the first six months of the fiscal year, but also other more current information available. Property tax collections for FY 2023 are being projected at 95.0% of total property taxes assessed, which is consistent with the original adopted budget and allows for discounts and a level of adjustment for appeals that is consistent with historical levels. The impact of these appeals and adjustments realized for the FY 2023 budget will be provided by the Miami-Dade County Property Appraiser in July 2023 when the City's certified property values are received. General Fund revenues by category with projected variances to budget in excess of 10.0%, or $300,000, are further explained below: L e tt e r to C o m m iss io n - Fis cal Ye a r 2 0 2 3 S e c o n d Q u a rt e r A n a ly sis P a g e 4 o f 13 Other Taxes - This catego ry includ es fr anchise taxes fo r gas and electric, as w ell as utility taxe s fo r te lep hone , ele ctricity, and ga s and is pro jected to be above the current am ended bud g e t by 3.1%, or $82 3 ,0 00, prim arily due to fr anchise and utility taxes fo r electricity, gas, an d te lep hon e tre n d ing highe r tha n orig inally anticipated based on current econom ic activity. Licenses and Permits - This categ o ry include s business tax receipts, licenses/special use pe rm its, and outdo or din ing concession pro gram revenues and is pro jected to be above the cu rre nt am e n d e d bu dg e t by 1.9%, or $36 2 ,000 , prim arily due to increased revenues from the re ce ntly ap p ro ve d outdo o r dining concession pro gram that w as im plem ented in FY 2023, as w e ll as fire , plan n ing, and public w o rks pla ns review serv ices that continue to trend higher tha n an ticip a te d fr o m ongo ing real estate and econom ic developm ent activity. Charges for Services - Th is categ o ry includes revenues fr om activities and pro gram s off ere d by the Pa rks and R ecreation D e p a rt m ent such as after school and sum m er classes, as w e ll as the op e ra tio ns of the M iam i B e ach and Norm andy Shores golf courses, public sa fety , pa ssp o rt , am b u la nce/rescue, and lot clearing serv ices, and is pro jected to be above the cu rre nt am en d e d budg et by 14 .4 %, or $2.2 m illion, prim arily due to golf course operations at bo th the M iam i B e a ch and N o rm andy S ho res golf courses that continue to trend higher tha n orig in ally an ticip ated base d on current econom ic and tourism -related activity, as w ell as ad m in istra tive fee s co lle cted by the C ity fo r police off-duty serv ices pro vided that are trending ab o ve prio r yea r le ve ls. Fines and Forfeits - Th is catego ry, am ong othe r things, includes traff ic fines, parking fines, fire dep a rt m en t vio la tio n s and false ala rm fees, and code enfo rcem ent fines and is projected to be ab o ve the cu rre nt am e nde d budg e t by 49.4 %, or $625,000, prim arily due to code enfo rce m en t viola tio ns and fire depa rt m ent false alarm fees trending higher than budget and prior ye a rs. Rents and Leases - This category include s revenues fr om various rentals and leases of C ity ow ne d pro p ert ie s. FY 20 23 collectio ns are pro jected to be 5.6%, or $395,000, above the curre n t am en d e d bu dg e t prim a rily du e to revenues fr om several of the City's leases trending highe r than bu d g e ted sin ce reven ues collected by the City fo r som e of its leases and rentals are ba se d o n a pe rce ntage of tena nts' sa les. Fo r a de ta il of G en era l Fun d revenue s by catego ry , refer to the attached Exhibit A. Operating Expenditures A s of M ar ch 3 1, 20 2 3, actua l expe nse s w ere 43 .7 %, or $174.9 m illion, of the current am ended bu d g e t w ith op eratin g expe n d itures thro ug h fiscal year-end Septem ber 30, 2023 projected at $3 9 3 .6 m illion , w h ich is ap proxim a tely $7 .0 m illio n below the current am ended budget. A s pre v io us ly m ention e d , the se proje ctions are ba sed on an analysis of the first six m onths of the fisca l ye a r, as w e ll as m ore current inform a tion availa ble. G e n e ra l F u n d exp e n d itures by de pa rt m ent proje cted to exceed budget or w ith variances to budget in exce ss of 10 .0%, or $3 0 0 ,0 0 0 , are furt he r explained below : City Attorney - Th e de pa rt m ent is proje cted to be below the current am ended budget by 5 .9%, o r $4 4 8 ,00 0 , prim a rily due to pro jected savings in personnel serv ices expenditures, re su ltin g fr o m va ca nt po sitio ns in the current fiscal year that the City A ttorn ey's Offi ce is in the pro c e ss of try in g to fill w ith qua lifie d ca nd ida tes based on current needs. L e tt e r to C o m m issi o n -- Fis cal Ye a r 2 0 2 3 S e co n d Q u a rt er A n a lysis P a g e 5 o f 13 City Attorney FY 2023 FY 2023 Projected vs Amended Budget Projected Amended % Over / (Under) Budget Variance Expenditures $ 7,654,000 $ 7,206,000 $ (448,000) -5.9% P ark s & R e cre a tio n - The department is projected to be 2.9%, or $1.3 million, below the current amended budget primarily due to projected savings in personnel services expenditures resulting from numerous full-time and part-time budgeted positions that have been and/or remain vacant in the current fiscal year due to challenges in the recruitment of qualified candidates based on current department needs. Parks & Recreation FY 2023 FY 2023 Projected vs Amended Budget Projected Amended % Over / (Under) Budget Variance Expenditures $ 43,936,000 $ 42,677,000 $ (1,259,000) -2.9% P u b lic W o rk s - The department is projected to be below the current amended budget by 9.5%, or $1.6 million, resulting from savings anticipated in grounds maintenance services, as well as personnel services expenditures due to numerous vacancies for budgeted full-time positions within the department's Engineering, Streets and Street Lighting, and Greenspace Management divisions due to challenges in the recruitment of qualified candidates based on current department needs. Public Works FY 2023 FY 2023 Projected vs Amended Budget Projected Amended % Over / (Under) Budget Variance Expenditures $ 17,021,000 $ 15,402,000 $ (1,619,000) -9.5% F ire - The department is projected to be above the current amended budget by 2.2%, or $2.2 million, resulting from additional personnel services expenditures associated with the collective bargaining agreements that were approved by the City Commission. It is important to note that while the department is projected to exceed its current amended budget, funding totaling approximately $5. 7 million was budgeted in a centralized account within the Citywide Accounts budget since approval of all the collective bargaining agreements was pending at the time that the FY 2023 budgets were adopted by the City Commission. Should these projections be realized, an appropriate budget amendment will be recommended at year-end. Fire FY 2023 FY 2023 Projected vs Amended Budget Projected Amended % Over / (Under) Budget Variance Expenditures $ 102,036,000 $ 104,267,000 $ 2,231,000 2.2% C ityw id e A c c o unts - Citywide Accounts are a category of budgeted expenditures related to the City's overall operations that are not readily identifiable to any specific department. These accounts are projected to be 13.4%, or approximately $3. 7 million, below the current amended budget, primarily due to the amount allocated for collective bargaining in the FY 2023 operating budget. With the ratification of all the collective bargaining agreements during FY 2023, the projected expenditures associated with the collective bargaining agreements are L e tt e r to C o m m is s io n - Fis c al Ye a r 2 0 2 3 S e c o n d Q u a rt e r A n a ly s is P a g e 6 o f 1 3 be ing acco un ted fo r in the ap pro priate G e neral Fund depart m ents' pro jections. Citywide Accounts FY 2023 FY 2023 Projected vs A m e nded B udget P rojected Am ended % O ver / (Under) Budget V ariance E xp end itu res $ 27 ,417,000 $ 23,732,000 $ (3,685,000) -13.4 % W h ile the ab o ve-liste d G e n eral Fund de part m ents com prise those pro jected to exceed their cu rre n t am end e d bud g e ts or w ith significa nt varia nce s to budget in excess of 10.0%, or $300,000, a ll o the r G e ne ra l F u n d dep a rt m e nts are proje cted to have savings at year-end that m ay be re a lign e d w ithin the G enera l Fund to add ress any depart m ent overages pro jected above, should th e se pro je ctio ns be re a lize d at yea r-e nd . The se pro jections w ill continue to be further refined as a d d ition a l info rm a tio n be co m es available. F o r a de ta il of G e ne ra l Fu n d expe nditures by depa rt m ent, refer to the attached Exhibit A ENTERPRISE FUNDS T h e C ity acco u nts fo r tho se go ods and se rv ices pro vided by a part icular depart m ent to extern al us e rs fo r w hich a fe e is charg e d as Enterprise Fund s. T he C ity's Sanitation, W ater, Storm W ater, S e w e r, Pa rking , C o n ve ntion C e nte r, and B uild ing op e rations com prise this category of Pro prietary F u n d s. A n a n a ly sis of the actual first six m o nths of ope rating expenses fo r the period O ct ob er 1, 2022 th ro u gh M arch 31, 20 2 3 reve a ls that all Enterprise Funds have actual expenses that are less than o n e half of the ir curre n t FY 202 3 am ende d budge ts. It is im port ant to note that this is not re p re sentative of typica l tre n ds fo r a full fiscal yea r as there is often a lag in processing of e xp e n diture s, pa rt icularly tho se bille d by outside entities fo r services pro vided. NTERPRISE FUNDS Sanitation Sewer Storm Water Water Parking Building Convention Center FY 2023 Adoted Budaet 23,860,000 57,396,000 34,103,000 36,577,000 46,617,000 17,993,000 29,407,000 FY 2023 Amended Bud et 24,821,000 59,180,000 36,030,000 39,932,000 47,458,000 18,090,000 29,607,000 1/2 Adopted Budget 11,930,000 28,698,000 17,051,500 18,288,500 23,308,500 8,996,500 14,703,500 1/2 Amended Bud et 12,410,500 29,590,000 18,015,000 19,966.000 23,729,000 9,045,000 14,803,500 Revenues as of 03131/23 12,635,105 29,470,854 16,961,661 19,246,505 25,764,650 8,634,476 18,104,421 Ex enditures as of 03/31123 11,037,652 25,452,225 11,408,238 17,269,404 15,089,045 7,851,467 6,981,774 Expenditures Above/(Below) 112 Amended Budget (1,372,848) (4,137,775) (6,606,762) (2,696,596) (8,639,955) (1,193,533) (7,821,726) % Variance -5.5% -7.0% -18.3% -6.8% -18.2% -6.6% -26.4% Y e a r-e n d op e ratin g reve n u e and expe nditure proje ctions thro ugh Septem ber 30, 2023 provide a m ore re a listic ind icatio n of any anticipated year-e nd surpluses or shortfalls as of this point in tim e. W h ile the actua l reve n u e s an d expe nses prese nted above are as of M arch 31, 2023, the year- e n d p ro jectio n s in co rpo ra te m ore current info rm a tio n available. R e v e n u e s fo r all E nte rp rise Funds are pro jected to be equivalent to or in excess of expenditures a s of ye a r-e n d . In addition , all E nterprise Fund budg e ts are pro jected to be under budget, except fo r C o n ve ntio n C e nte r Fu n d ope ra tio ns. Both reve n ues and expenditures fo r the Convention C en te r F u n d are projecte d to be above budge t, as furt her detailed below . L e tt e r to C o m m is s io n - Fis c al Ye a r 2 0 2 3 S e c o n d Q u a rt e r A n a ly s is P a g e 7 of 13 ENTERPRISE FUNDS Sanitation Sewer Storm Water Water Parking Building Convention Center FY 2023 Adopted Budget 23,860,000 57,396,000 34,103,000 36,577,000 46,617,000 17,993,000 29,407,000 FY 2023 Amended Budget 24,821,000 59,180,000 36,030,000 39,932,000 47,458,000 18,090,000 29,607,000 FY 2023 Projections: Charges for Services 22,445,500 60,728,000 35,155,000 39,396,000 47,928,000 15,534,000 24,131,000 Other 2,262,500 1,924,000 1,267,000 2,435,000 2,395,000 1,579,000 25,534,000 FY 2023 Revenue Proiections 24,708,000 62,652,000 36,422.000 41,831,000 50,323,000 17,113,000 49,665,000 $ Over/(Under) Amended Budget (113,000) 3,472,000 392,000 1,899,000 2,865,000 (977,000) 20,058,000 % Over/(Under) Amended Budaet -0.5% 5.9% 1.1% 4.8% 6.0% -5.4% 67.7% FY 2023 Exoenditure Proiections 24,708,000 58,770,000 36,002,000 39,334,000 45,716,000 17,113,000 33,223,000 $ Over/(Under) Amended Budget (113,000) (410,000) (28,000) (598,000) (1,742,000) (977,000) 3,616,000 % Over/(Under) Amended Budaet -0.5% -0.7% -0.1% -1.5% -3.7% -5.4% 12.2% Revenues Over/(Under) Expenditures 0 3,882,000 420,000 2,497,000 4,607,000 0 16,442,000 Convention Center - The Convention Center Fund budget is projected to be above the current amended budget by approximately $3. 7 million, or 12.2%, primarily due to an increase in the number of events from 44 that were originally anticipated for FY 2023 when the budget was developed for FY 2023 to 55 currently scheduled to be held this fiscal year. Although expenditures are projected to exceed the current amended budget primarily due to the increase in the number of events, revenues are also projected to exceed the current amended budget resulting in a projected surplus of approximately $16.4 million that would be available to be set aside for renewal and replacement of Convention Center assets and/or future operating and other expenditure obligations should these projections be realized at year-end. It is important to note that while a portion of the projected surplus is attributed to the projected increase in revenues resulting from the additional events anticipated for the current fiscal year, a significant portion is attributed to the Convention Development Tax (CDT) bonus of $16.1 million that is anticipated to be received by the City for FY 2023 from a portion of the increased Convention Development Tax receipts collected by Miami-Dade County in accordance with the Amended lnterlocal Cooperation Agreement that was approved by the City Commission on November 19, 2014, through Resolution No. 2014-28836. Due to changes in the scheduling of events, the surplus projected as of the second quarter may vary as of year-end; therefore, the Convention Center's operations will continue to be monitored over the coming months. These projections will continue to be refined further, as additional information becomes available. INTERNAL SERVICE FUNDS The City accounts for goods and services provided by one department to other departments citywide on a cost reimbursement basis as Internal Service Funds. Central Services, Fleet Management, Information Technology, Property Management, Risk Management (Self Insurance), Medical and Dental, and the Office of the Inspector General comprise this category of Proprietary Funds. An analysis of the actual first six months of operating revenues and expenses for the period October 1, 2022 through March 31, 2023 reveals that all Internal Service Funds have actual expenses that are less than one half of their current FY 2023 amended budgets. Similar to the Enterprise Funds, this is not representative of typical trends for a full fiscal year as there is often a lag in processing of expenditures, particularly those billed by outside entities for services provided. L e tt e r to C o m m iss io n - Fis c a l Ye a r 2 0 2 3 S e c o n d Q u a rt e r A n a ly sis P a g e 8 o f 13 INTERNAL SERVICE FUNDS Central Fleet Information Inspector Property Risk Medical & Dental Services Management Technology General Management Management Insurance FY 2023 Ad opted Budget 1,044 ,000 17,761,000 19,821,000 1,726,00 0 12,072,000 23,846,000 46,159,000 FY 2023 Am en ded Budget 1,064 ,000 24,928,000 20,694,000 2,180,00 0 12,849,000 24,862,000 46,159,000 112 Adopted Budget 522,000 8,880,500 9,910,500 863,00 0 6,036,000 11,923,000 23,079,500 1/2 Am ended Budget 532,000 12,464,000 10,34 7,000 1,090,00 0 6,424,500 12,431,000 23,079,500 Revenues as of 03/31/23 526,790 5,972,526 9,325,571 864 ,06 5 5,916,977 11,846,702 21,240,488 Expenditures as of 03/31/23 439,601 3,558,746 8,190,783 809,00 8 5,077,382 9,089,457 19,864,849 Expenditures Abo ve/(Below) 1/2 Am ended Budget (92,399) (8,90 5,254) (2,156,217) (280,99 2) (1,347,118) (3,341,543) (3,214,651) % Variance -8.7% -35.7% -10.4% -12.9% -10.5% -13.4% -7.0% Year-end operating revenue and expenditure projections through September 30, 2023 provide a more realistic indication of any anticipated year-end surpluses or shortfalls as of this point in time. While the actual revenues and expenses presented above are as of March 31, 2023, the year- end projections incorporate more current information available. Revenues for all Internal Service Funds are projected to be equivalent to or in excess of expenditures as of year-end. In addition, all Internal Service Fund budgets are projected to be under budget, except for the Risk Management that is further detailed below. INTERNAL SERVICE FUNDS Central Fleet Information Inspector Property Risk Medical & Dental Services Management Technology General Management Management Insurance FY 2023 Ad opted Budget 1,044 ,000 17,761,000 19,821,000 1,726,000 12,072,000 23,846,000 46,159,000 FY 2023 Am ended Budaet 1,064 ,000 24,928,000 20,694,000 2,180,00 0 12,849,000 24,862,000 46,159,000 FY 2023 Projections : Charges for Services 1,016,000 16,936,000 18,565,000 1,724,000 11,772,000 22,721,000 0 Other 33,000 7,731,000 1,857,000 374,000 806,000 4,766,000 45,385,000 FY 2023 Revenue Proiections 1,04 9,000 24,66 7,000 20,422,000 2,098,00 0 12,578,000 27,487,000 45,385,000 $ Over/(Under) Amended Budget (15,000) (261,000) (272,000) (82,000) (271,000) 2,625,000 (774,000) % Over/(Under) Am en ded Budaet -1.4% -1.0% -1.3% -3.8% -2.1% 10.6% -1.7% FY 2023 Exoenditure Proiec tions 1,049,000 24,66 7,000 20,422.00 0 2,09 8,000 12,578,000 27,487,000 45,385,000 $ Over/(Under) Amended Budget (15,000) (261,000) (272,000) (82,000) (271,000) 2,625,000 (774,000) % Over/(Under) Am en ded Budaet -1.4% -1.0% -1.3% -3.8% -2.1% 10.6% -1.7% Revenues Over/(Under) Expenditures 0 0 0 0 0 0 0 Risk Management - The City's actuary has advised that this fund is projected to be 10.6%, or $2.6 million, above the current amended budget, primarily due to unforeseen increases in tort claims incurred but not reported (IBNR) and case reserves that are trending higher than originally budgeted for the current year based on the most recent actuarial forecasts. This material change in the City's tort liability exposure in the 2' quarter of FY 2023 may be largely due to the impacts of HB 837, the comprehensive Tort Reform bill that Governor Desantis signed into law and which took effect on March 24, 2023. Specifically, just before the law went into effect, the City experienced a wave of approximately 30 new tort cases filed against the City on March 21, 2023, March 22, 2023, and March 23, 2023, including, without limitation, a wrongful death action. This extraordinary, one-time surge in case filings was consistent with the statewide increase in tort case filings by plaintiffs seeking to avoid the application of the new law before it went into effect. Since claims can fluctuate, these trends will continue to be monitored over the coming months and the projections for the current year will be refined accordingly. If the trend continues at the current level for the remainder of the fiscal year, any overage realized at year-end will be addressed with the use of prior year fund balance in the Risk Management Fund that includes in excess of $40.0 million projected to be set aside for claims IBNR and case reserves in accordance with City's self-insurance obligations arising under GASS standards and Florida law. In the long-term, the City anticipates that it will benefit L e tte r to C o m m issio n - Fis cal Ye a r 2 0 2 3 S e co n d Q u a rt er A n a ly sis P a g e 9 o f 13 fro m the pro spective lim itations set fo rth in the new Tort Reform bill, and that the new law will reduce the City's tort liability exposure over tim e. These pro jections w ill continue to be refined as additional info rm ation becomes available. SPECIAL REVENUE FUNDS S pecial R evenue Funds consist of revenues and expenditures which are legally restricted or com m itted fo r specific purposes, other than debt service and/or capital pro jects. Special Revenue Funds incl ude R esort Tax, as well as Transportation and People's Transportation Plan (PTP) Fund oper a tions, 7" Stre et G ara ge opera tions , 5" & Al ton G ara ge operations, the Tourism and Hospitality Scholarship Pro gram , Info rm ation and Communications Technology Fund, Education C om pact Fund, Franchise W aste Haulers and Sustainability Contributions, the Residential Housing Pro gram , Red Li ght Cam era Pro gram operations, Em ergency 911 Fund, M iami Beach C ultural Arts Counci l, Norm andy Shores and the City's three Security G uard Special Taxing Districts (B iscayne Point, Biscayne Beach, and Allison Island), Miami City Ballet, Art in Public Places (A iPP) operations, Tree Preserv ation and Comm emorative Tree Trust Fund, Beachfront C oncession Initiatives Pro gram , Beach Renourishm ent, Resiliency, Sustainability and Resiliency, and Biscayne Bay Protection Trust Funds, Police Unclaimed Pro perty and Crash Report Sales Funds, Police C onfiscation Trust Funds (Federal and State), Police Training and School R esources Fund, and the A dopt-a-Bench Pro gram . A n analysis of the actual first six months of operating revenues and expenses for the period of O ctober 1, 2022 thro ugh March 31, 2023 reveals that all Special Revenue Funds have actual expenses that are less than one half of their current FY 2023 am ended budgets primarily due to exp endi tures th at are typical ly incurre d in th e latter part of the fiscal year, except for the 5" & Al ton G arage Fund and Police Unclaim ed Pro perty Fund that incurred one-time costs during the first six m onths of the fiscal year. Li ke other funds, it is important to note that actuals incurred thro ugh M arch 31, 2023 are not typically representative of trends for a full fiscal year. Year-end operating revenue and expenditure pro jections through September 30, 2023 pro vide a more realistic indication of any anticipated year-end surpluses or shortfalls as of this point in time. W hile the actual revenues and expenses presented above are as of March 31, 2023, the year- end pro jections incorporate m ore current info rm ation available. R evenues fo r all Special Revenue Funds are pro jected to be equivalent to or in excess of expenditures as of year-end. In addition, all Special Revenue Funds are projected to be below budget. RESORT TAX FUND The City's Resort Tax Fund is prim arily supported by taxes collected pursuant to Chapter 67-930 (Section 6) of the Law s of Florida, as am ended, and Section 5.03 of the City of Miami Beach Charter, as am ended. This legislation authorizes the use of Resort Taxes for the pro motion of the tourism industry , w hich includes, but is not restricted to the following: Publicity, advertising, news bureau, pro m otional events, convention bureau activities, capital impro vements and the maintenance of all physical assets in connection therew ith; and for the payment of the reasonable and necessary expenses of collecting, handling, and pro cessing of said tax. Typically, the City has considered the fo llow ing services as "Services Related to the Pro motion of Tourism :" L e tte r to C o m m is sio n - F is c a l Ye a r 2 0 2 3 S e c o n d Q u a rt e r A n a ly sis P a g e 1 0 o f 1 3 • Police O fficers serv ing entertainm ent areas • A portion of Fire Rescue serv ices from Fire St ation s 1& 2 • O cean R escue serv ices • S idew alk pressure cleaning in South, Middle and North Beach visitor areas • South Beach sanitation • Enhanced Code Com pliance/Enfo rcem ent provided to respond to evening entertainment area violations and staffing of special events • O ther C ode Com pliance/Enforcem ent activities in tourism and visitor re lated faci lities/areas • Tourism and Cultural Developm ent Departm ent and the Cultural Arts Council • Museum s and Theatres (G arden Center, Bass Museum, Colony and Byro n Carlyle Theatres) • G olf courses (net of revenues) • Mem orial Day and other special event costs • Hom eless serv ices • July 4", Vi sitor Center fundi ng, Holiday Light s, MDPL, Oran g e Bowl , etc. T hese allow able uses have led to increased tourism -related activities, such as special events including A rt Basel and the Air and Sea Show . 2% Resort Tax Based on the first six m onths of actual collections, total tw o percent Resort Tax revenues for FY 2023 are pro jected to be 9.7%, or $7.4 m illion, above the current amended budget as of year- end, w ith the rem aining m onths in the current fiscal year conserv atively projected at approximately 93.0% of FY 2022 collections based on trends. Total tw o percent R esort Tax expenditures are projected to be 0.9%, or $723,000, abo ve the current am ended budget as of year-end, due to a $881,000 incr e ase in the combined contributions to the M iam i Beach Visitor and Convention Authority (VCA) and Greater Miami C onvention & V isitors Bureau (G M CVB) that are based on a percentage of two percent Resort T ax collections and pro jected above budget. This is partially offset by a $158,000 decrease attributed to personnel-related savings from several vacancies that specific departm ents funded by the R esort Tax Fund are in the pro cess of trying to fill, as well as other miscellaneous departm ental expenditures fo r tourism -related operations. 1% Resort Tax (Quality of Life) T he pro ceeds of the one percent bed tax, as adopted thro ugh Resolution No. 2018-30512, an d continuing in FY 2023, unle ss am ended by the City Com mission, are to be utilized as follows: 60% allocated fo r Transportation initiatives in tourist-related areas; 10% allocated equally among North Beach, Middle Beach and South Beach fo r capital projects that enhance Miami Beach's tourist related areas; and 10% allocated to various arts and cultural programs. O ne percent bed tax revenues are projected to be 10.3%, or $1.8 m illion, above the current am ended budget as of year-end. Concurrently, since transfers for Tra nsportation initiatives in tourism -related areas, North, Middle, and South Beach quality of life projects, and the Cultural Art s C ouncil fo r various arts and cultural pro gram s are based on the one percent bed tax revenues, expenditures are equally pro jected to be 10.3%, or $1.8 m illion, above the current L e tt e r to C o m m iss io n - Fis c a l Ye a r 2 0 2 3 S e co n d Q u a rt e r A n a ly sis P a g e 1 1 o f 13 amended budget as of year-end, of which $1.1 million is allocated to Transportation initiatives in tourism-related areas, $540,000 is allocated to North, Middle, and South Beach quality of life projects equally, and $180,000 is allocated to the Cultural Arts Council for various arts and cultural programs. 1% Resort Tax (Convention Center) The proceeds of the additional one percent bed tax levied solely for the purposes of expanding, enlarging, renovating, and/or improving the Miami Beach Convention Center, including debt service related thereto, as well as providing Capital Renewal and Replacement funding for the Miami Beach Convention Center, are similarly projected to be 10.3%, or $1.8 million, above the current amended budget as of year-end. Since the proceeds of the additional one percent bed tax must first provide for the payment of debt service and any excess, based on proceeds, be set- aside for Capital Renewal and Replacement funding for the Miami Beach Convention Center, additional one percent bed tax expenditures are also projected to be 10.3%, or $1.8 million, above the current amended budget as of year-end. Total Resort Tax Overall, due to actual Resort Tax collections exceeding budget for the six months of the fiscal year and collections for the remaining months of the current fiscal year conservatively projected at approximately 93.0% of FY 2022 collections based on trends, combined Resort Tax revenues are projected to be 9.9%, or $11.0 million, above the current amended budget as of year-end, while expenditures are projected to be 3.9%, or $4.3 million, above the current amended budget resulting in a projected surplus of approximately $6.7 million. The City Administration recommends these funds be set-aside to fund additional tourism-eligible expenditures in the General Fund and one-time enhancements that may be considered during the FY 2024 budget development process, if realized at year-end, as presented at the FY 2024 Commission Budget Workshop on May 11,2023. FY2023 FY2023 % Actual of Over/(Under) % Actuals as of Over/(Under) Adopted Amended 03/31/23 Amended Amended Amended Budget Budget Budget Budget Budget Revenues 2% Resort Tax 71,499,000 71,499,000 35,469,501 49.6% 77.618,000 6,119,000 8.6% Miscellaneous Revenues 251,000 251,000 361,159 143.9% 1,523,000 1,272,000 506.8% Fund Balance/Retained Earnings/PY Surplus 3,955,000 4,819,000 0 0.0% 4,819,000 0 0.0% 1% Resort Tax (QOL) 17,372,000 17,372,000 8,542.916 49.2% 19,169,000 1,797.000 10.3% Additional 1% Resort Tax for Convention Center 17,372,000 17,372,000 8,542,916 49.2% 19,169,000 1,797,000 10.3% Total Revenues 110,449,000 111,313,000 52,916,492 47.5% 122,298,000 10,985,000 9.9% Expenditures General Fund Contribution 39,227,000 39,227,000 19,613,500 50.0% 39,227,000 0 0.0% Sanitation Fund Contribution 3,969,000 3,969,000 1,984,500 50.0% 3,969,000 0 0.0% Contribution to GMCVB 8,864,000 8,864,000 2,968,687 33.5% 9,452,000 588,000 6.6% Contribution to VCA 3,433,000 3,433,000 1,278,555 37.2% 3,726,000 293,000 8.5% Contribution to Mt. Sinai 1,000,000 1,000,000 0 0.0% 1,000,000 0 0.0% Other Operating/Other Uses 19,002,000 19,740,700 7,551,745 38.3% 19,661,400 (79,300) -0.4% Marketing 210,000 335,300 43,668 13.0% 256,600 (78,700) -23.5% Transfer to NB, MB, SB Capital, Transp, and Ats (Q0L) 17,372,000 17,372,000 8,542.916 49.2% 19,169,000 1,797.000 10.3% Addt'l 1 % Conv. Center Debt Service & Ca, Ren & Re I. 17,372.000 17,372,000 0 0.0% 19,169,000 1,797,000 10.3% Total Ex nditures 110,449,000 111,313,000 41,983,572 37.7% 115,630,000 4,317,000 3.9% Excess of Revenues Over/ Under Ex nditures 0 0 10,932,920 6,668,000 6,668,000 L e tt e r to C o m m issio n - Fis c a l Ye a r 2 0 2 3 S e c o n d Q u a rt e r A n a ly sis P a g e 12 o f 13 CONCLUSION All General Fund, Enterprise Funds, Internal Service Funds, and Special Revenue Funds budgets are projected to be at or below their current amended budgets as of year-end with revenues projected to be equivalent to or in excess of expenditures, except for the specific General Fund Departments, the Convention Center Enterprise Fund, and Risk Management Internal Service Fund detailed further in the analysis above. The current year budgets will continue to be proactively monitored between now and the development of the third quarter projections, as well as during the continuing development of the FY 2024 budget. ATH/JG/TOS Letter to Commission - Fiscal Year 2023 Second Quarter Analysis Page 13 of 13 EXHIBIT A FY 20 23 FY 20 23 % Actu al of Over/(Under) % Act uals as of Over/(Under) Ad opt ed Ame nde d 03/31/23 Ame nde d Amended Amended Budg et Budget Budg et Budget Budget REVENUES Ad Valorem Taxes 220,605 ,0 00 220 ,6 0 5 ,000 19 5,091,184 88.4 % 220,605,000 0 0.0% Ad Va lor em Ta xe s - P a y-As -Y ou -Go C a pita l 3,974 ,000 3,9 74 ,000 3,9 74,000 10 0.0% 3,974,000 0 0.0% Ad Valor em Tax es - C ap ital R en e w al & R ep l acem en t 1,944 ,000 1,9 44 ,000 1,944 ,000 10 0.0% 1,944 ,000 0 0.0% Ad Valorem Tax es - Norm andy Shores 282 ,000 28 2 ,000 282,000 10 0.0% 282,000 0 0.0% O th e r Ta xe s 25 ,0 10 ,000 26 ,6 6 0,000 11,54 0,5 13 43.3% 27,48 3,000 823,000 3.1% Licenses and Permits 18 ,04 0,000 18 ,84 3 ,000 12 ,292,4 27 65.2% 19 ,205,000 362,000 1.9% Intergovernmental 14 ,17 5 ,000 14 ,2 25 ,000 5,742,58 6 40.4 % 14 ,228,000 3,000 0.0% Ch ar g es for S er i ce s 14 ,48 9 ,000 15 ,0 2 2 ,000 10 ,43 4,94 1 69.5% 17 ,17 8,000 2,15 6,000 14.4% Fines and Forfeitures 1,2 64 ,000 1,2 64 ,000 1,0 16 ,50 9 80.4 % 1,889,000 625,000 49.4 % In te rest 5,5 77 ,000 5,5 77 ,000 6,624,9 71 118 .8% 5,674,000 97,000 1.7% Rents and Leases 6,96 7 ,000 7,0 6 7 ,000 4,17 6,243 1.0% 7,4 62,000 395,000 5.6% Mscellaneous 15 ,56 6,0 00 15 ,75 3,000 6,762,837 42.9 % 15 ,56 4,000 (18 9,000) -1.2% O th e r-R e so rt T ax C o n trib utio n 39,2 27 ,0 00 39 ,2 2 7 ,000 19 ,6 13 ,50 0 50 .0% 39,227,000 0 0.0% O th e r-N o n -O p e ra tin g R e ven u e s 13 ,90 5 ,000 13 ,9 0 5 ,000 6,681,50 0 48 .1% 13 ,90 5,000 0 0.0% Fu n d B a la n ce /R e ta ine d E ar ni n as /P Y S u lus 1,5 93 ,0 00 16 ,2 3 9 ,000 0 0.0% 16 ,239,000 0 0.0% TOTAL REVENUES 38 2,618,000 40 0,68 7,000 286,177,212 71.4% 404,869,000 4,272,00 0 1.1% EXPENDITURES Mayor & Commission 2,809 ,0 00 2,8 09 ,000 1,304,883 46.5% 2,768,000 (41,000) -1.5% C ity Man a g er 4,290 ,0 00 4,2 90 ,000 1,839,882 42.9% 4,112 ,000 (17 8,000) -4 .1% Marketing and Communications 2,9 13 ,0 00 2,9 8 3 ,000 1,236,634 41.5% 2,9 75,000 (8,000) -0.3% O ffi ce of Ma n a g e m e nt a n d B ud g e t 1,6 78,0 00 1,6 78,000 703,238 41.9% 1,531,000 (14 7,000) -8.8% Org. Dev Performance Initiatives 1,944 ,0 00 3,34 6 ,000 796,15 6 23.8% 3,276,000 (70,00 0) -2.1% Finance 7,768 ,0 00 8,0 4 2,000 3,788,908 47.1% 7,939,000 (10 3,000) -1.3% Procurement 3,0 15 ,0 00 3,10 1,000 1,353,009 43 .6% 2,939,000 (16 2,000) -5.2% Human Resources/Labor Relations 3,12 4 ,0 00 3,12 4 ,000 1,3 15,4 15 42.1% 2,954 ,000 (17 0,000) -5.4% C ity Clerk 1,9 14 ,0 00 2,0 8 1,000 894 ,711 43.0% 2,053,000 (28,000) -1.3% C ity At to rn e y 7,0 10 ,0 00 7,6 54 ,0 00 2,981,16 2 38.9% 7,206,000 (44 8,000) -5.9% Housing & Community Services 4,29 1,0 00 6,14 8 ,000 1,794 ,798 29.2% 5,853,000 (295,000) -4.8% Planning 5,790 ,0 00 6,0 74 ,000 2,4 26,904 40 .0% 5,810 ,000 (264,000) -4.3% En viron ment & Sustainability 2,13 9 ,0 00 2,3 8 6 ,000 46 5,94 2 19 .5% 2,362,000 (24,000) -1.0% Tourism and Culture 3,56 6,0 00 3,6 6 1,000 1,303,548 35.6% 3,653,000 (8 ,000) -0.2% Economic Development 2,5 71,0 00 2,9 9 3,000 84 3,995 28.2% 2,898,000 (95,000) -3.2% C o d e C o m p lia n ce 6,8 72,0 00 6,8 8 6,000 3,394 ,851 49.3% 6,795,000 (9 1,000) -1.3% P ar k s & R e cre a tio n (in c lu d in g G o lf co urs e s) 42,998 ,0 00 43 ,9 3 6 ,000 17 ,733,72 4 40 .4% 42,677,000 (1,259,000) -2.9% P ro p er t y Ma n a g em en t 3,69 8,0 00 3,84 8 ,000 1,794 ,144 46 .6% 3,77 0,000 (78,000) -2.0% P ub lic W o rk s 16 ,08 6,0 00 17 ,0 2 1,000 6,622,622 38.9% 15 ,4 02,000 (1,6 19 ,000) -9.5% C a p ita l Im p ro ve m e nt P ro je cts 5,8 38,0 00 6,0 0 3 ,000 2,6 32,984 43.9% 5,745,000 (258,000) -4.3% Police 13 0 ,19 5,0 00 13 3 ,0 7 0,000 63,268,206 47.5% 13 2,853,000 (217 ,000) -0.2% Fire 10 0 ,2 20 ,0 00 10 2 ,0 3 6 ,000 51,4 08,43 9 50.4% 10 4 ,267,000 2,231,000 2.2% C ityw id e (n e t of in d ivi d u a l item s bel o w ): 15 ,389 ,0 00 19 ,8 17 ,000 3,938,944 19 .9% 16 ,13 2,000 (3,685,000) -18.6% Normandy Shores 28 2,0 00 28 2 ,000 0 0.0% 282,000 0 0.0% C a p ita l R en e w al & R ep la cem en t 1,944 ,0 00 1,9 44 ,000 0 0.0% 1,944 ,000 0 0.0% hn fo & C om m Te ch n o lo g y Fun d 300 ,0 00 30 0,000 0 0.0% 300,000 0 0.0% C a p ita l R e se rv e F un d 0 1,10 0,000 1,10 0,000 10 0.0% 1,10 0,000 0 0.0% P a v-As -Y ou -Go C a ita l Fun d 3,9 74 ,0 00 3,9 74 ,000 0 0.0% 3,974,000 0 0.0% TOTAL EXPENDITURES 38 2,618,000 40 0,658 7,000 174,943,098 43.7% 393,570,000 (7,017,000) -1.8% EXCESS OF REVENUES OVER/ UNDER EXPENDITURES 0 0 111,234,116 27.8% 11,28 9,000 11,28 9,000