Update on City of Cloverdale’s
Two-Year Budget Process
A formally articulated budget and sound fiscal policies provide the foundation for assuring the City’s long-term fiscal sustainability while allowing the city to fund essential city services such as Police, Park and street functions as well as much needed infrastructure improvements. In the coming months of 2024, the City Council and staff will be embarking on preparation of a new two-year budget for the new fiscal year starting on July 1, 2024. The new budget will cover the periods of July 1, 2024 through June 30, 2025 and July 1, 2025 through June 30, 2026. This article will provide an update on the City’s budget for the current fiscal year, the current audit in process and development of a new two-year budget.
Overview of Current Budget
- In June 2022, the City Council adopted a two-year budget that covered the period of July 1, 2022 through June 30, 2024 referred to collectively as the Fiscal Year (FY) 2022-24 Budget. The City’s Budget identifies expenditures and revenues for a series of funds including the General Fund, Water and Wastewater Enterprise Funds and a series of special funds and revenues dedicated to specific purposes including Lighting and Landscape Assessment District funds, gas taxes, development impact fees from new development, Measure M (Local sales tax revenue for road improvements), and retirement funds.
- The FY 2023-24 adopted budget identifies $19.8 Million in total operating revenue and $19.5 million in total operating expenses in FY 2023-24.
- The City’s General Fund, identified revenue of $7.49 Million and expenses of $9.32 Million.
- The annual operating deficit was closed with fund balance (the City’s savings account).
- The FY 2023-24 budget will expire June 30, 2024.
Annual Independent Auditors Report
The City’s financial statements (balance sheet and income statement) for FY 2022-23 that concluded on June 30 2023 are currently being reviewed by the City’s Independent Auditor. The audited financial statements will be presented to the City Council in early February 2024. The Independent Auditors’s Report will consist of a series of financial statements. The components include:
- The government-wide financial statements which include the Statement of Net Position and the Statement of Activities and report information about the City as a whole including all assets and liabilities using the accrual basis of accounting. This type of accounting is similar to the accounting used by most private sector companies.
- Fund financial statements describe how City services are financed in the short term as well as what resources are available for future spending. Fund financial statements also report the City’s operations in more detail than the government-wide statements by providing information about the City’s most significant funds.
The Independent Auditors Report will provide a picture of the City’s financial health and help to determine whether the current fiscal year’s activities contributed positively to the overall financial well-being and help to inform the development of the budgets for the upcoming fiscal year. A copy of past audits can be found at the following link on the City’s website: https://www.cloverdale.net/70/Forms-Fees
Development of New Two-Year Budget for Fiscal Year 2024-2025 and 2025-2026
Starting in early 2024, the City Council with the assistance of City staff will begin developing a new two-year budget for FY 2024-2025 and FY 2025-2026. The budget is expected to fund all City operations, projects, and programs and provide a plan for revenues and expenditures within each fund.
Our budget development process is a structured sequence of steps designed to ensure careful planning, allocation, and management of financial resources. Here’s a condensed overview of the City’s budget process:
Preparation:
- Needs Assessment: The City Council and City staff Identify and assess the needs and priorities of the community. This involves input from the City Council, City staff, local businesses and organizations and residents. The City Council will hold a workshop in early 2024 to discuss key budget goals and City priorities. Improvements in local infrastructure (parks, streets, water and wastewater) continue to be a high priority.
- Revenue Projections: As part of the budget development process, the City’s Finance staff will estimate the expected revenues from various sources including sales, property and hotel (TOT) taxes, city fees, and federal, state, and local grants. The revenue projection will inform the budget development process. Once revenue forecasts are established, they become a crucial input for budget planning. The city’s Finance staff use revenue forecasts to provide a recommendation to the City Council on the allocation of funds to different departments and programs, set spending priorities, and ensure that projected expenditures align with expected revenues. A detailed discussion of major revenue sources will be provided in next month’s Cloverdale Connect article.
Drafting the Budget:
- Departmental Requests: Departments submit their budget requests, outlining their financial needs for the upcoming fiscal year. The budget requests developed by the City staff are intended to address mandatory requirements as well as discretionary projects. An example of a mandatory expenditure is chlorine for our Water and Wastewater Treatment Plant. Discretionary budget expenses refer to the portion of a budget that is flexible and can be allocated at the discretion of the governing body or decision-makers within an organization. These expenses are not fixed and are typically non-essential in nature, meaning they are not mandatory or required for the organization’s basic operations.
- Budget Formulation: The finance department works with departmental heads to develop a comprehensive budget proposal. The budget proposal will ultimately be submitted to the City Council and made available for public review.
- Balancing the Budget: The City is required to adopt a balanced budget to ensure that expenditures do not exceed anticipated revenues. In the last few budget cycles, it has been necessary to utilize a portion of the fund balance (the City’s savings account) to fully fund city operations.
Review and Approval:
- Public Input: Throughout the budget process, transparency, accountability, and public participation are essential elements to ensure that the budget reflects the needs and priorities of the community. Review of the draft budget is typically conducted by the City Council meeting starting in April. During the budget review meeting, the City Council and the public are able to review the draft budget and provide input and feedback on proposed expenditures and initiatives.
- Approval: The draft final budget is typically presented to the City Council at their last meeting in May and finalized at their first meeting in early June prior to start of the new fiscal year. Once the budget is adopted, it becomes the official financial plan for the fiscal year.
Please keep your eye out for additional information about the City’s budget. In next month’s article, the City will continue to provide updates on the City’s budget with a focus on key revenue sources including Property Taxes, Sales Taxes, Utility User Taxes and local hotel taxes.
For more information about the City’s budget, you are encouraged to visit the City’s website:
https://www.cloverdale.net/482/Budgets
