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Home My WebLink AboutStudy Session - Comprehensive Annual Financial Report (CAFAR p ry FY 2018/19 Mid-Year Budget ' r` U pdate 1 FL U N T I N_G_T_6 N 6 EACH C_A_ � Overview FY 2017/18 Audit and Year-End Results FY 2018/19 Mid Year Budget Update FY 2019/20 Budget Outlook Pensions and Unfunded Liabilities FY 2019/20 Budget Development Calendar FY 2017/18 Financial Results Audit and Year-End Overview Audit and Year-End Overview SUNS { FY 2017/18 Audit Results r Auditing firm of Davis Farr LLP audited the City's financial statements and internal ' controls Certificate of Achievement FY 2017/18 Comprehensive Annual I for in Financial Financial Report (CAFR) received an Reporting Unmodified (Clean) Audit Opinion City of Huntington Beach The City's CAM is award winning — California received the Government Finance Officers Fi—W Rep- Association's (GFOA) Excellence in Financial Reporting Award for 32 years Audit Results Reports issued: ► Comprehensive Annual Financial Report ► Issued "unmodified" opinion on December 18, 2018 ► Emphasis of Matter Paragraph in Opinion: ► Change in fiscal year ► Implementation of GASB 75: OPEB ► Prior period adjustments (footnote 16 and 17) ► AU-C 260 Letter:Auditor Communications ► AU-C 265 Letter: Internal Control Recommendations ► Appropriations Limit Agreed-Upon Procedures ► AQMD Report ► Single Audit Report(in progress) s Internal Controls ► Evaluated controls over key accounting cycles: ► Billing and Cash Receipting ► Purchasing and Cash Disbursements ► Payroll ► Banking ► Grant Management Recommendation related to audit adjustments detected during the audit process Recommendation to continue to evaluate strategies to improve the City's net position 6 Areas of Audit Focus in FY 17/18 Pension OPEB Testing of offsite Obligations Obligations cash receipting at Senior Center Confirmed loans Testing of Capital Testing of Federal receivable with Asset activities Highway Planning outside parties Grant Upcoming Auditing Standards - FY 18/19 — no major changes FY 19/20 — GASB 84: Fiduciary activities FY 20/21 — Changes accounting for capital and operating leases On the horizon — change in the government financial reporting model 2/19/2019 FY • Performance • • • • - Highlights: All Funds : - tion In Mill ASSETS Current and Other Assets $301.0 Capital Assets 842.7 Total Assets 1,143.7 Deferred Outflows-Pensions 100.1 LIABILITIES Current and Other Liabilities 25.2 Long-Term Obligations* 549.6 Total Liabilities 574.8 Deferred Inflows-Pensions 17.2 TOTAL NET POSITION $651.8 recording . recordingOPEB Liability$8.8 million Expenditures •Actual Citywide Departmental Expenditures $180.3 •Transfer to Section 115 Trust $1.0 •Increase in Workers'Compensation Claims and Legal Costs $1.2 •Increase in General Liability Claims and Costs $0.4 Total Estimated Expenditures $182.9 General Fund Recurring Revenue $182.1 General Fund One-Time Revenue $2.7 Total General Fund Revenue $184.8 Available Year-End Fund Balance $1.9 5 General Fund Balance FY 2017/18 Audited (In Thousands) FY 16/17 FY 17/18 Fund Balance 6tegory Audited Audited Audited Total ... 004 11 Committed,and Assigned Fund Balances Total Fund Balance 62,847 :0 63,738 ReportingSection 115 Trust Bank Balance - - 4,896 , Total with GASiS :0 Implementation for Section 115 Trust FY 2017/18 Budget Recap Adjusted 9-month fiscal year; October 1 to June 30t" Aligned future fiscal years with the State, County of Orange, majority of California cities, granting agencies and CalPERS; Allowed for the prepayment option of CAPERS unfunded liability; thereby saving $900K and to $1M+ in succeeding years; Transitioned the most expensive quarter (July to Sept) from FY 2017/18 into FY 2018/19; which Resulted in significant FY 2017/18 budgetary savings, particularly for the Safety departments. FY 2018/19 1 General Fund , Budget Overview FY 2018/19 Budget Update First year of the new July to June Fiscal Year Period Transition Year Expenditure trend in first half of the year Historically, summer months reflects higher spending Fiscal Prudence Active monitoring and control to ensure balanced budget 1% reduction targets requested (does not include personnel costs) Projected revenues & expenditures = $227.3 million Includes 1% target reductions requested for FY 2018/19 FY 2019/20 Budget Developmeni FY 2019/20 Challenges Rising CaIPERS costs will continue to strain annual budgets ► CaIPERS investment earnings ► Impending BICEP dissolution b- Police Facility Modernization Project Expiration of majority of labor bargaining group agreements Going on three years since last wage increase ► Macro economy ► Significant capital and infrastructure needs ► Minimum wage adjustments and associated salary compaction Economic Indicators The Dow Jones is down 5.95% this year, S&P down 6.89% , and NASDAQ down 4.87%, which is indicative of an economic slowdown. The CPI for the Los Angeles and Orange County in December 2018 declined 0.3% from last year. On a positive note, 3rd Quarter GDP increased 3.5% compared to 4.2% for the 2nd Quarter of 2018. New Home Sales for November 2018 were 7.7% below the revised November 2017 estimate. 17 FY 2019/20 Budget Development Baseline budget is flat No new FTEs Does not include employee compensation changes beyond what has already been negotiated 1% (total General Fund budget) reduction targets requested is .0 low Pensions and Unfunded Liabilities Projected Increases to City CaIPERS Costs (All Funds) s� _ •�� $21.1)$20.1 $40.0 s $17.2_ _ 51c z $20.0 -$30.4 $32.7 $34.7 536.0 $10.0 517.3 517.9 $19.3 $21.7 $23.0 $24.5 $27.5 FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19^ FY 19/20^ FY 2012V FY 21/22^ FY 22/23^ FY 23/24^ Actual Actual Actual Actual Adopted Budget Estimate Estimate Estimate Estimate Estimate S27.4 $28.2 S30.6 $34.3 $36.4 $38.7 S43.5 S48.1 S51.8 554.9 557.0 A Reflect Prepayment Discount 51 million/year 20 2/19/2019 CalPERS(Safety) 256,808 64.8% "1=5"Plan 20 Years CalPERS(Misc) 163,278 70.7% Standard PERS Plan 29 Years Subtotal 420,086 67.3% Retiree Medical (Safety) 8,803 63.0% "25 to 10"Plan 4 Years Retiree Medical(Misc) - 100% COMPLETE DONE Retiree Supplemental (w/Section 3,660 94.4% "16 to 10"Plan 4 Years 115) TOTAL 438,445 Long Term Financial ;,�_F'INANCIA ' M •,a!:< � ;boa, .e�casn... Planning 11 2/19/2019 Five-Year Financial Plan -General Fund (in thousands) Projected FY Projected FY Salaries 101,353 102,583 ' 103,482 104,390 105,260 106,278 106,833 CaIPERS Cost 36,338 40,787 44,999 48,426 61,322 53,303 66,240 Prepayment Discount (900) (1,000) (1,070) (1,110) (1,150) (1,190) (1,230) VOV CalPERS Growth 4,349 4,142 3,387 2,856 1,941 2,897 Other Benefits 28,628 29,887 30,176 30,646 30,910 31,426 31,977 Operating 41,972 41,264 41,790 42,328 42,879 43,302 43,729 Infrastructure 6,208 4,250 4,750 5,250 6,760 6,250 6,260 Equipment 6,000 5,000 6,000 5,000 6,000 5,000 6,000 Debt Service/Transfers 10,873 12,928 12,133 12,140 11,927 11,929 11,876 Total Expenditures 228,372 235,699 241,260 246,969 261,898 256,298 260,675 GR Recurring Revenue 228,372 232,767 237,751 242,877 248,177 253,483 268,376 (Challenge)/Surplus - (2,942) (3,509) (4,092) (3,721) (2,815) (2,299) YOY Revenue$ 4,385 6,661 5,709 4,929 4,400 4,377 ROM evenue% 23 Budget Strategic Plan Initiatives Potential uses of one-time funds in FY 2019/20 Technology projects 12 FY 2019/20 Proposed Budget Calendar FY 19120 CIP 8 FY 18119 Mid- Public Hearing: Year Proposed Budget FY 19120 Study Session Budget Adoption Begins Study Session February 19,2019 May 6,2019 June 3.2019 July 1,2019 April 15,2019 May 20.2019 June 17.2019 FY 19120 Proposed Public Hearing: Budget&Program Public Hearing Budget Based Budget Adoption Study Session (Alternate Date) 2s lie Questions