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HomeMy WebLinkAboutFin Voter-Approved Tax Oversight Annual Report 2023-24____________________________________________________________________________________ FOR CITY CLERK ONLY Council Meeting: February 3, 2025 Disposition: Accepted Report Agenda Item No: 4.b Meeting Date: February 3, 2025 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance Prepared by: Shawn Plate Finance Manager City Manager’s Approval _______________ TOPIC: VOTER-APPROVED TAX OVERSIGHT SUBJECT: VOTER-APPROVED TAX OVERSIGHT COMMITTEE ANNUAL REPORT FOR FISCAL YEAR (FY) 2023-24 RECOMMENDATION: Staff recommends that the City Council accept the fiscal year (FY) 2023-24 Annual Report from the Voter- Approved Tax Oversight Committee. BACKGROUND: The Voter-Approved Tax Oversight Committee was formed in September 2022 to consolidate oversight of the City’s voter-approved tax measures into one five-member committee. The Committee provides independent oversight of all San Rafael voter-approved tax measures, Measures D, E, G, and R, to ensure the funds have been expended in accordance with the authorized purposes and prepares and submits to the City Council an annual report on the audited expenditures and revenues from each tax measure from the previous fiscal year. At the October 24, 2024, meeting, the Committee received unaudited financial information for each voter- approved tax measure under its purview. At their December 17, 2024, meeting, the Committee reviewed the final audited fiscal year (FY) 2023-24 financial results for Measures D, E, G, and R and provided supplemental information responsive to requests made by the Committee at the October meeting. There were no changes to the financial statements related to any of the referenced funding sources between the unaudited data presented at the October 24, 2024, meeting and the audited financial information presented at the December 17, 2024, meeting. Furthermore, at its December 17, 2024, meeting, the Committee considered a draft of its annual report to the City Council, as required by the Committee’s charter, and approved forwarding the annual report to the City Council via this agenda item (See Attachment 1). SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 ANALYSIS: Measure D: Library Parcel Tax In 2016, San Rafael voters renewed an annual parcel tax to fund the San Rafael Public Library's opening hours and services. As a special-purpose tax, Measure D revenues can only be spent on library services in San Rafael to maintain hours of operation and provide services, equipment, programs, and materials. Measure D is scheduled to expire in 2027. The audited financial statements for FY 2023-24 report Measure D revenues of $1,183,140, expenditures of $1,164,340, and an ending fund balance of $852,746. The accumulation of fund balance results from two primary factors: vacant staff positions funded by Measure D and underspending on various line items over the life of the ballot measure. The audited capital set aside fund balance was $100,338. This capital set aside was earmarked for new and improved library facilities as directed by the City Council as part of the previous Measure C and was capped at $500,000. Measure G: Cannabis Business Tax In 2018, San Rafael voters approved Measure G, a business excise tax on cannabis businesses. Measure G allows for a tax on cannabis businesses operating in the City of up to 8% on gross receipts and taxes different types of businesses at different rates. Current rates can be found on the City’s website. Measure G funds can be used for a variety of purposes, including police and fire services, street repair and improvements, and enhancing community centers. Measure G does not have an expiration date. During FY 2023-24, total revenues reported in the Measure G Fund (216) were $237,420, including $215,231 in tax revenues and $22,189 in interest earnings. Expenditures charged to Measure G for the fiscal year totaled $117,023. The decrease in Measure G revenues from FY 2022-23 to FY 2023-24 can be attributed to ongoing challenges in the cannabis market as well as the temporary decrease in the cannabis tax rate from 4% to 2% for delivery non-storefront license types, effective January 1, 2023. For FY 2024-25, staff budgeted $225,000 in Cannabis Industry Tax revenues and $170,386 in expenditures. On January 27, 2023, the San Rafael City Council committed the majority of the existing fund balance of $968,251 to support the pilot Specialized Assistance For Everyone (SAFE) Team, which began in late FY 2022-23. The program has been initially supported using funds from the City’s opioid settlement and grant funds, after which cannabis tax revenues are being utilized. Staff plan to return to the City Council at mid-year based on actual program needs and adjust transfers out to support the program’s operations. Measure E: Essential Facilities Transactions and Use Tax (0.75%) San Rafael voters passed Measure E in 2013. Measure E is a three-quarter cent general purpose transactions and use tax that supports essential facilities in San Rafael, including critical improvements to our public safety facilities. Construction of the Public Safety Center was completed in 2020, and a variety of other facility construction and improvements are underway. Measure E is scheduled to expire in 2034. During FY 2023-24, the City collected a total of $14,361,735 of Measure E revenues. The majority of Measure E tax proceeds ($9,574,490) are considered discretionary general fund revenues. This funding makes up a significant portion of the City’s General Fund revenues, which support the general government, including public safety, community development, and library/recreation programs and services. The City does not track expenditures specific to Measure E revenues collected within the General Fund. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 For FY 2023-24, $4,787,245 in tax proceeds (one-third) represents funding earmarked for essential facilities. Most of the funds allocated for essential facilities are utilized to pay debt service for the Public Safety Center, totaling $4,398,250. Since debt service payments are presently budgeted within the General Fund, the remaining portion of Measure E funds earmarked for essential facilities, net of debt service payments, are in turn transferred to the Measure E – Essential Facilities Fund (420). For FY 2023- 24, $384,188 was transferred to the Essential Facilities Fund. The FY 2023-24 budget included $3,367,904 in Capital Project appropriations within the Essential Facilities Fund. Capital expenditures recorded at year-end totaled $580,082, or $2,787,822 below budget. Capital expenditures included funding to complete renovations at Fire Stations 54 and 55 and re- purposing of space within City Hall. The fund balance is anticipated to be carried over to complete projects identified in the Phase 1 Essential Facilities Master Plan. For FY 2024-25, staff budgeted for total Measure E revenues of $14,520,000 based on projections from HdL. A transfer of $353,500, net of debt service payments, is budgeted within the Essential Facilities Fund for FY 2024-25. The FY 2024-25 Capital Budget includes appropriations of $858,961 to support ongoing projects as well as a new project to upgrade the Public Safety Building antennae and communications network. In addition, per the discussion at the Committee meeting on October 22, staff has included information related to the debt service schedule for the bonds being supported through Measure E. For more information related to the Measure E strategic plan approved by the City Council in 2015, see the following link: https://www.cityofsanrafael.org/documents/essential-facilities-strategic-plan-volume-1/ Measure R: Transactions and Use Tax (0.25%) Measure R was passed in 2020 by San Rafael voters. Measure R is a one-quarter cent general purpose transactions and use tax, often referred to as a local sales tax. Funds from this measure go to the General Fund and support a variety of City operations, including public works, recreation and library, administrative services, and public safety. Measure R is scheduled to expire in 2030. FY 2023-24 was the third full fiscal year of Measure R tax receipts, during which $4,713,640 of revenues were received. For FY 2024-25, staff has budgeted $4,840,000 in Measure R revenues based on projections from the City’s sales tax consultants, HdL. COMMENTS: During the Committee’s review of FY 2023-24 financial information subject to the Committee’s purview, several comments and questions arose related to the Committee’s charter, for which the Committee has asked for clarification. In response, staff will review the current bylaws of the Voter-Approved Tax Oversight Committee and work with the Committee to determine if any revisions to the bylaws are needed. FISCAL IMPACT: Receipt of the FY 2023-24 Annual Report has no fiscal impact. OPTIONS: The City Council has the following options to consider on this matter: 1. Receive the report. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 4 2. Take no action. 3. Direct staff to return with more information. RECOMMENDED ACTION: Staff recommends that the City Council accept the fiscal year (FY) 2023-24 Annual Report from the Voter- Approved Tax Oversight Committee. ATTACHMENTS: 1. Voter-Approved Tax Oversight Committee Annual Report (FY2023-24), dated December 17, 2024 2. Voter-Approved Tax Oversight Committee Bylaws Agenda Item #5 City of San Rafael Voter-Approved Tax Oversight Committee (VATOC) Annual Report December 17, 2024 The City of San Rafael Voter-Approved Tax Oversight Committee met on December 17, 2024, and received a detailed report from City of San Rafael staff on the receipt and expenditure of funds during the fiscal year July 1, 2023 to June 30, 2024 pursuant to voter-approved Measure D (Library Parcel Tax), Measure E (Essential Facilities Transactions and Use Tax), Measure R (General Purpose Transactions and Use Tax), and Measure G (Cannabis Business Tax). Voter-Approved Tax Oversight Committee is required to review the collection, expenditure, and prioritization of the use of these funds, and report to the City Council and the community annually on the expenditures under Guidelines and Policy adopted by the San Rafael City Council. After review, the Voter-Approved Tax Oversight Committee finds that these funds were properly allocated in accordance with the Measures and approved guidelines. Tracey Broadman Charles 'Chuck' Friede {; fl__ k~ L Caleb Mcwaters M /. Carsten Andersen Stephen Roth J a pilt'JJ l<tit!J Voter Approved Tax Oversight Committee Bylaws Page 1 of 2 VOTER APPROVED TAX OVERSIGHT COMMITTEE BYLAWS ARTICLE I. NAME AND PURPOSE Section 1.1. Name. The name of this body shall be the City of San Rafael Voter Approved Tax Oversight Committee, hereinafter referred to as the “Committee.” Section 1.2. Purpose. The Committee’s purpose is to review the collection and expenditure of voter approved tax revenues collected under the authority of voter-approved City tax measures and Resolution 15118 adopted by the San Rafael City Council on September 6 , 2022. Section 1.3. Committee Responsibility. The Committee’s authority is oversight only. The responsibilities and duties of the Committee shall be limited to: 1.2 Review expenditures of Measure tax revenues to ensure the monies have been expended in accordance with the authorized municipal purposes of each Measure. To complete this review, the Committee shall: 1.2.1 Understand allowable expenses of each existing Measure’s tax funds (as identified in the enacting Municipal Ordinance) 1.2.2 Review documentation from City Council and from City Council-appointed advisory committees that pertain to the prioritization of use of each Measure’s tax funds. 1.2.3 Review annual reports prepared by the City’s Finance Department that track the receipt and spending of each Measure’s tax funds. 1.2.4 Prepare and submit to the City Council and the community an annual public report on the expenditures of each Measure’s tax revenues for the previous fiscal year. 1.2.5 Fulfill the final responsibilities of each Measure’s responsibilities at the Measure’s termination, repeal or extension: Before submitting a final report: Review and report on the final expenditures of each Measure during the previous fiscal year, through its termination, to ensure that monies have been expended consistent with the authorized purposes of the Measure. The Committee shall not: 1. Have any budgetary decision authority, shall not allocate financial res ources, and shall not make budget or service recommendations to the City Council. 2. Have authority to direct, nor shall it direct, City staff or officials. Voter Approved Tax Oversight Committee Bylaws Page 2 of 2 ARTICLE II. MEMBERSHIP Section 2.1. Number of Members. The Voter Approved Tax Oversight Committee shall consist of five (5) voting members. Section 2.2. Eligibility. Members of the Committee shall be at last 18 years of age and reside within the City limits. Section 2.3. Appointment of Committee Members. Members shall be appointed by the City Council. Appointments shall be published on the website for the City of San Rafael in accordance with Government Code Section 54973, as amended from time to time . Section 2.4. Terms of Appointment. Each member shall serve a minimum term of four (4) years. An effort will be made to ensure that the terms are staggered, and not all of the appointments expire in the same year. Section 2.5. Term Limits. Members shall be limited to two (2) consecutive four -year terms. Additional terms may be served if there is a break between terms. Section 2.6. Absence and Removal. An unexcused absence from two (2) consecutive Committee meetings without notification to the Staff Liaison will constitute an immediate vacancy and shall be considered a voluntary resignation from the Committee. Previously dismissed Committee members may be eligible for reappointment. Section 2.7. Compensation. Members shall serve without compensation. ARTICLE III. MEETINGS Section 3.1. Time and date of Regular Meeting. Notification of meeting place, date, and time shall be rendered to the public through posting on the City of San Rafael website.