Review of the Mid-Year Financial Report for Fiscal Year 2024-2025.
 

Staff recommends that the City Council receive, approve, and file the Mid-Year Financial Report for Fiscal Year 2024-2025.

This report reviews the City’s budget and financial condition at the mid-year point of FY 2024-25.  Staff recommendations to maintain the City’s operational effectiveness and financial health are proposed for the City Council’s consideration.  In addition, a mid-year review is a recommended best practice by the Government Finance Officers Association (GFOA).

Mid-Year Fiscal Year 2024-2025 Revenues
At this point in the fiscal year, staff has compared revenues received to date with prior year actuals and determined that several revenue categories have dropped below budget estimates.  Staff has reviewed the results with the City consultants, and recommendations for specific revenue line reductions are included in the mid-year appropriation change file. General Fund revenues are currently $33,721,561 compared to $32,877,142 during the same reporting period in FY 2023-24, which reflects a 2.57% increase, or about $844 thousand dollars.  Prior to FY 2023-24, City revenue increases were in the double digits.

For over 2 years, economists have warned of a possible recession.  This did not materialize, but the slowdown we see today is being described as a soft landing, bringing down inflation without a recession. This downward trend is expected to continue through fiscal year 2025-26, with anticipated growth beginning early 2026.
 





  



The most notable changes in taxes have been Business License Tax decrease of 72%, and Utility Users Tax increase of 27%.  Property Taxes reflected an increase of 7%, while revenue from the use of money and property increased by 96% in FY 24-25.   Business License Tax collected during the first half of the year is usually for delinquent payments from the prior fiscal year.  Due to a slowing economy, the city shows an overall decrease in revenue from Sales Tax of 4% and Transient Occupancy Tax of 6%.  With respect to Transient Occupancy Tax (“TOT”), this revenue source is wholly dependent on visitors to the City of Hawthorne.  Hotels saw decreases in tourist and business travel. 

The City’s construction permit revenue has not fully rebounded in FY 24-25 but the city realized a 118% increase in construction permit revenues during the first half of FY 24-25, a decrease of 42% in FY 23-24, a decrease of 7% in FY 22-23, an increase of 16% in FY 21-22, and a 50% decrease FY 20-21.  This fluctuation in permit revenue relates to effects from COVID-19 and the economic slowdown.  During this period, more commercial construction applications were submitted in comparison to prior fiscal year.  The estimate from our Building Manager shows that 81 commercial applications were received from July to December 2024, 72 commercial applications were received in FY 2023, 102 commercial applications were received in FY 2022, and 46 commercial applications were received during this same period in 2021.

The City of Hawthorne has been fortunate to have a stable and diverse economic base, which has somewhat shielded its economy from downturns in any one specific revenue category. Despite the slowing economy, the city shows a total revenue increase of 2.57%.

Mid-Year Fiscal Year 2024-2025 Expenditures
General Fund expenditures are currently trending at 46.95%, with $51.6 M spent as of December 31, 2024.  Any time our General Fund expenditures as a whole are below 50% spending in the first quarter of the fiscal year, we consider that a success.  For many years, the direction from the City Manager, as well as the City Council, has been to spend wisely and conservatively.  At this time, the specific line items with expenditures over 50% are personnel overtime, fire contract, maintenance & operations, and operating transfers out.  

Personnel overtime, when combined with regular salaries and benefits, brings the total percentage for both to 45.59%.  Training for Sworn personnel is required every 2 years and approved MOU increases were implemented in July.  As a result, overtime increased in fiscal year 2025.  Overtime is also used to backfill for the shortages in staffing.  In addition to the backfill of full-time positions, Hawthorne PD has been providing support at Sofi Stadium.  The overtime worked for Inglewood is fully reimbursable.  

Maintenance and Operations is above normal due to additional expenditures related to Information Technology purchases and ARPA funded programs.  Fire contract and Operating transfers are above 50% due to the timing of invoices and bond/liability payments. 



General Fund Cash Balance
The required General Fund cash balance for Fiscal Year 2024-25 is $27,487,466, as required by Section O of HMC 2.04.040, which is the average of 3 months of operating expenditures for the current Fiscal Year.  As of December 31, 2024, this balance was $86,693,489.  As of December 31, 2023, this same balance was $83,028,362.

The above balance, as of December 31, 2023, includes interfund activity of ($12,289,060) for funds with deficit balances related to Bond Payments, liability insurance payments, and grant reimbursable expenditures, which are expected to be collected throughout the current fiscal year. 

Investments
The total investments for City held accounts is $125,064,468.  Total General Fund investment earnings through Quarter 2 FY 2024-25 were $2,182,950.  When compared to $1,116,368 during the same reporting period in FY 23-24, this reflects a 96% increase.
 

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None.

72 hours posted notice pursuant to the Ralph M. Brown Act