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AGENDA ITEM NO. 18.
CITY OF HAWTHORNE City Council AGENDA BILL For the meeting of 12/09/2025 Originating Department: Finance |
City Manager:
Department Head:
SUBJECT:
Review of the Quarter 1 Financial Report for Fiscal Year 2025-2026.
RECOMMENDED MOTION:
Staff recommends that the City Council receive, approve, and file the Quarter 1 Financial Report for Fiscal Year 2025-2026.
DISCUSSION:
This report provides the required Quarter 1 Financial Report for Fiscal Year 2023-2024.
Quarter 1 of Fiscal Year 2025-2026 Revenues
At this point in the fiscal year, staff compared the revenues received to date with prior year actuals and determined that revenues are on track with the projections that were adopted by the City Council in June 2025. Budgeted General Fund revenues are currently $11,398,858 compared to $11,682,996 during the same reporting period in FY 2024-25 (which reflects a 2.4% decrease); they are up about 17% in comparison to the same period in FY 2023-24.
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The most notable tax increases have been the Business License Tax of 88% and Transient Lodging Tax, which reflects an increase of 165%, compared to FY 24-25. The increase in TOT appears to be a timing issue. TOT audits have been processed over the last 2 years, and hotels are remitting payments in a more timely manner. Business License Tax collected during the 1st quarter is usually for delinquent payments from the prior fiscal year.
The City has also realized a 25% decrease in construction permits during the first quarter of the fiscal year. During the same quarter in FY 23-24, there was a 22% increase in construction permits.
Quarter 1 of Fiscal Year 2025-2026 Expenditures
General Fund expenditures are currently trending at 23.92% ($27,061,266) compared to 23.36% during the same reporting period in FY 24-25 and 23.05% in FY 23-24. This reflects an overall increase of 5.35% from Quarter 1 2024-25. Any time our General Fund expenditures as a whole are below 25% spending in the first quarter of the fiscal year, we consider that a success. For many years now, the direction from the City Manager and City Council has been to spend wisely and conservatively. The City needs to be ready, with sufficient cash balances, for any unexpected emergencies. Currently, the only program with expenditures exceeding 25% is the Non-Departmental program at 44.66%. This program includes payments for the Los Angeles County Fire contract. Almost 31% of the fees for FY 2025-26 have already been remitted for the Fire Contract. Fees for Fire services are paid in advance of the month the service is provided.
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General Fund Cash Balance
The required General Fund cash balance for Fiscal Year 2025-26 is $28,283,395, 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 September 30, 2025, this balance was $86,865,434. As of September 30, 2024, this same balance was $90,124,026. The reduction is due to greater than usual pending grant reimbursements.
As of September 30, 2025, the above balance includes interfund activity of ($19,860,543) for funds with deficit balances related to $700 K in Street Lighting, $2.7 M in Bond Payments, $1.2M in liability insurance payments, $1.8 in HUD funding, $2.4 M in grant reimbursable expenditures, and $9.3 in Park & Comm. Center Improvements, which are expected to be collected throughout the current fiscal year.
Investments
The total investment for City-held accounts is $127,411,465. Total General Fund investment earnings for Quarter 1 FY 2025-26 were $669,109. Compared to $1,223,459 during the same reporting period in FY 24-25, this represents a 45% decrease, primarily due to decreases in interest rates.
Quarter 1 of Fiscal Year 2025-2026 Revenues
At this point in the fiscal year, staff compared the revenues received to date with prior year actuals and determined that revenues are on track with the projections that were adopted by the City Council in June 2025. Budgeted General Fund revenues are currently $11,398,858 compared to $11,682,996 during the same reporting period in FY 2024-25 (which reflects a 2.4% decrease); they are up about 17% in comparison to the same period in FY 2023-24.
The most notable tax increases have been the Business License Tax of 88% and Transient Lodging Tax, which reflects an increase of 165%, compared to FY 24-25. The increase in TOT appears to be a timing issue. TOT audits have been processed over the last 2 years, and hotels are remitting payments in a more timely manner. Business License Tax collected during the 1st quarter is usually for delinquent payments from the prior fiscal year.
The City has also realized a 25% decrease in construction permits during the first quarter of the fiscal year. During the same quarter in FY 23-24, there was a 22% increase in construction permits.
Quarter 1 of Fiscal Year 2025-2026 Expenditures
General Fund expenditures are currently trending at 23.92% ($27,061,266) compared to 23.36% during the same reporting period in FY 24-25 and 23.05% in FY 23-24. This reflects an overall increase of 5.35% from Quarter 1 2024-25. Any time our General Fund expenditures as a whole are below 25% spending in the first quarter of the fiscal year, we consider that a success. For many years now, the direction from the City Manager and City Council has been to spend wisely and conservatively. The City needs to be ready, with sufficient cash balances, for any unexpected emergencies. Currently, the only program with expenditures exceeding 25% is the Non-Departmental program at 44.66%. This program includes payments for the Los Angeles County Fire contract. Almost 31% of the fees for FY 2025-26 have already been remitted for the Fire Contract. Fees for Fire services are paid in advance of the month the service is provided.
General Fund Cash Balance
The required General Fund cash balance for Fiscal Year 2025-26 is $28,283,395, 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 September 30, 2025, this balance was $86,865,434. As of September 30, 2024, this same balance was $90,124,026. The reduction is due to greater than usual pending grant reimbursements.
As of September 30, 2025, the above balance includes interfund activity of ($19,860,543) for funds with deficit balances related to $700 K in Street Lighting, $2.7 M in Bond Payments, $1.2M in liability insurance payments, $1.8 in HUD funding, $2.4 M in grant reimbursable expenditures, and $9.3 in Park & Comm. Center Improvements, which are expected to be collected throughout the current fiscal year.
Investments
The total investment for City-held accounts is $127,411,465. Total General Fund investment earnings for Quarter 1 FY 2025-26 were $669,109. Compared to $1,223,459 during the same reporting period in FY 24-25, this represents a 45% decrease, primarily due to decreases in interest rates.
ECONOMIC DEVELOPMENT STRATEGIC PLAN:
.
FISCAL IMPACT:
None.
NOTICING PROCEDURE:
72 hours posted notice pursuant to the Ralph M. Brown Act