The Annual Comprehensive Financial Report

City of Upland Financial Analysis (Fiscal Year Ended June 30, 2024) Overall Summary The City of Upland experienced a mixed financial performance in the fiscal year ended June 30, 2024. There was an overall increase in net position, driven by revenue growth and improved reserve funding. However, significant challenges remain, particularly related to deferred maintenance on infrastructure, and rising pension liabilities. Key Positives Increase in Total Net Position: The City's total net position increased by $18.8 million (or 4.3%) to $454.2 million. This indicates improved financial health. Sales Tax Revenue Growth: Sales tax revenue increased significantly by 15.5%, or $3.3 million. This was primarily due to a full year of operations for a new auto dealership, and also includes the recognition of significant one-time money from the correction of underreporting in the prior year. Property Tax Revenue Growth: Property tax increased by 7.4%, or $1.5 million, driven by increased home values and property transfers. Investment Income Increase: Investment income saw an increase of $2.3 million as the result of investments in higher interest rate fixed securities as historically low interest rate securities mature, in addition to investment increases in Local Agency Investment Fund (LAIF) and California Asset Management Pool (CAMP). Governmental Fund Balance Increase: The combined ending fund balances for governmental funds increased by $3.5 million to $77.0 million. Enterprise Funds Improved Total Net Position: Enterprise funds reported combined total net position of $182.4 million, an increase of $4.8 million. General Fund Health: The General Fund's fund balance increased by $8.1 million from the prior year to $17.8 million. Improved Reserve Funding: intentional setting aside of funds for the pension stabilization reserve (45%), infrastructure improvement reserve (30%), building replacement reserve (15%) and general plan update reserve (5%), ARPA Funding Utilization: $4.8 million of ARPA funds were spent on public safety enhancements, upgraded technology systems, park improvements and infrastructure projects. Key Negatives and Challenges Deferred Maintenance: Years of deferred maintenance are taking their toll on City infrastructure and facilities. Service levels in a number of areas do not meet the standards residents expect and deserve. Increased Pension Liability: CalPERS' -6.1% return for FY 2021/22 and the corresponding increase of over $40 million in pension liability, the City will be faced with significant increases in required pension payments beginning in FY 2024/25. Housing Fund Decrease: Housing Funds fund balance decreased $0.5 million or 4.0% over prior year as a result of expenses related to building acquisitions and improvement expenses increasing. Solid Waste Utility Fund Decrease: The Solid Waste Utility Fund net position decreased approximately $0.3 million or 41.0%. Dependence on One-Time Revenue: Projections by HdL predict Fiscal Year 2024/25 sales tax revenue to exceed Fiscal Year 2023/24's revenue due to a one-time sales tax adjustment. Capital Assets and Debt Administration Capital Asset Increase: The City's investment in capital assets increased by $13.4 million. Government activities capital assets increased by $8.9 million and Business-type activities increased by $4.5 million. Debt Increase: Total outstanding debt increased by $4.3 million, with an overall increase of $2.6 million in bond and loan payable. Long-Term Liabilities: - A high Net Pension Liability, Claims Payable, and Multifamily Housing Rev. Bonds contribute to Long-Term Debt. Additional Key Points: Budgetary Control: Actual expenditures for the General Fund were $1.0 million less than final budgeted amounts. The City's internal control over financial reporting is an integral part of that audit performed in accordance with Government Auditing Standards. The United States' economy is estimated to have grown by 2.7% in 2024 compared to the same quarter a year ago largely due to consumers making and spending more.