2023 Second Quarter Financial Report

The Financial Report for the City of Arvada provides an unaudited overview of the major funds and how their revenues and expenditures performed in comparison to budget. This is not meant to be a complete accounting, but rather a quick look at the highlights

The global and national economies seem to be on the precipice of recession with credit card debt, home owner debt, car loan debt and the national debt at alltime highs. With the short term Fed Funds rate now sitting at 5.25-5.50% (the highest number in 22 years) after the Feds raised rates again in July, anything on credit is going to cost significantly more than it did just 18 short months ago. The yield curve between the 2-year and 10-year continues to be inverted and show no signs of changing. Historically, this has been a predictor of a recession with the average time to a recession of 18 months. The curve first inverted in March of 2022, 16 months ago.

As has been the case in the past, the consumer continues to keep a possible recession at bay. Gross Domestic Product (GDP) grew at 2.4% for the second quarter, up from 2.0% in the first quarter. This was far stronger than what was expected by forecasters. Spending was wide spread but a big chunk of the increase was from services, including vacation travel, restaurants and of course, Taylor Swift concerts. Not to be left behind, business investment rebounded along with an increase in state and local government spending.

Inflation has slowed, with the second quarter increase sitting at 2.6%. This is down from the revised number of 4.1% in the first quarter and the 7.2% felt in the first half of last year. While inflation has slowed, we are still a long way away from the Fed’s goal of 2.0%. Unemployment continues to remain low, sitting at 3.6%. Even though new job production has slowed, market participation rate has remained steady and current available jobs still outnumber workers looking at almost 1.5 times. Will the Fed’s manage the flow of money appropriately to get the hopeful, “soft landing”, or will the large credit card bills and consumer debt be too much for the economy to overcome. Only time will tell.

At the State level, the economy continues to be strong with growth exceeding expectations for the second quarter. Unemployment is very low, ending June at 2.8%. Housing price increases had slowed in the first quarter but returned to a growth pattern in the second quarter driving overall inflation to increase at over 5.1%. Wage growth accelerated in the second quarter as competition for qualified workers remains high.

Locally, General Fund revenues are keeping pace with inflation with the overall increase for the year sitting at 2.5%. Sales tax collections are performing better, up 6.3% year over year. The largest increases are in the Merchant Wholesalers, Internet Retailers and Limited Service Restaurants categories. The largest decreases are in Furniture Stores and Liquor Stores. As inflations continues to cool, sales tax revenues should slow down.

Auto Use, Building Use and General Use are all down compared to last year. While some of this is expected, for example Building Use due to large one-time construction projects started in 2022, these are categories that will need to be monitored as the year progresses.

Overall General Fund expenditures increased 32.0% over last year. The largest increase, over $9 million dollars, is the transfer to the Capital Improvement Fund. These same transfers happened in the 3rd quarter last year. The other large increase is related to pay and benefits. In 2022, pay was frozen until August 1 and then increased. This year, the increases happened January 1. Expenditures are

In Line With

budget.

The golf courses and restaurants continue to experience a revival. Rounds are up 9.2% with golf revenues up over 21.2%. The rainy weather did not deter play. Not to be outdone, the restaurants revenues are up over 24.2%. The biggest challenge continues to be staffing, requiring management to jump in and do jobs such as cart cleaning, range picking, dish washing, cooking and serving.

One capital project is discussed on this quarter – Lake Arbor Lake Renovation. Please take the opportunity to read the write-up on this restoration project that is a partnership with Mile High Flood District to improve the water quality and bank stabilization of the 40-acre lake.

The citizens of Arvada passed Ballot Issue 3F in November of 2018, approving a sales and use tax bond to fund the widening of Ralston Road from Yukon to Garrison and the widening and creation of an underpass on 72nd Avenue from Kipling to Ward. Please see the project detail pages (pages 26-27) in the document for detailed updates.

As the City prepares for the revised 2023-2024 budget, revenues continue to exceed budget and expenditures are in line minus capital projects. The majority of the funds have healthy reserves and exceed the City Council’s required fund balance reserve. An enhanced focus on core services and defining expected levels of service will be a major part of the budget process. If, and when, the pending recession hits Arvada, the City is financially prepared.

The City’s property tax mill levy rate for 2023 was 4.31 mills. Residents paid $175.15 in City property taxes on the medium home price of $620,000

For 31 straight years, Arvada has received the Tree City USA Award from the @arborday for our commitment to the City’s urban forest.

For the 3rd straight year, Arvada has received the @arborday Growth Award for higher levels of tree care and community engagement.