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HomeMy WebLinkAboutStudy Session #1 - Supplemental Communication - PowerPoint CCity of Huntington Beach FISCAL YEAR 2018/19 PROPOSED BUDGET "The Challenge of Change" April 16, 2018 Presented by the Finance Department FY 2018/19 Proposed Budget Overview FY 2018/19 Proposed Budget Highlights General Fund Overview Status of General Fund Reserves Discussion of Pension Costs and Unfunded Liabilities CIP and Infrastructure Budget Summary FY 2018/19 Budget Calendar Cash Flow Overview 2 "The Challenge of Change" The FY 18/19 Proposed Budget Highlights: First year of the new July to June Fiscal Year Period Essentially a Status Quo General Fund Budget Committing 55% of Budget to Public Safety Dedicating 15% of the General Fund to Infrastructure Being Proactive by Preparing for Rising Pension Costs Keeping the Citywide Head Count Flat No Across -the -Board Salary Increases FY 2018/19 Proposed Budget The FY 2018/19 Proposed All Funds Budget totals $373.1 million, a $11.8 million, or 3.27% increase from the FY 2017/18 Adopted Budget Of this amount, $8.0 million is due to increased investments in City streets, facilities and parks Net of these capital investments, the increase to the All Funds budget is only $3.8 million, or 1.1 percent The FY 2018/19 Proposed General Fund Budget totals $228.4 million, a $4.4 million, or 2% increase from the FY 2017/18 Adopted Budget FY 2018/19 General Fund Highlight;. Use of the Police Facility and miscellaneous set -aside (one-time monies previously set aside for the Animal Shelter) FY 2018/19 General Fund Overview Balanced General Fund Budget for FY 2018/19 A modest General Fund revenue increase of 1% is projected Will need to be closely monitored during the year No increases to Citywide headcount are included in the budget Fixed cost increases such as PERS ($2.2 million), elections ($110,000), and contracts are included ($0.8 million) Equipment replacement funding totals $5.0 million The 15% Charter requirement for Infrastructure is met Strong financial and emergency reserves of $61 million To prepare for future pension cost increases, no significant . enhancements are included in the Budget at this time FY 2018/19 General Fund Revenue $226.2 Million Other Revenue. $1.4ty1- 1n Non -Operating Chargesfar Current Services, Revenue,$0.5M, 0% $25.OM, it°b �� Property Tax, $85.9M, 38% Revenue from Other Agencies, $2.9M, 1°.� Use of Money & Property. $17.1M, 8Y� Fines & Forfeitures, $4.3M, 2% License & Permits, $7.6M, 3% Utility Users Tax, $18.4M, 8% Transient Occupancy Taxi � $13.5M, 6% Franchises, $6.6M, 3% Sales Tax J... 19% 7 General Fund Revenue Highlights Total General Fund projected revenue is $226.2 million, reflecting a 1% increase from the current year • Property Tax is estimated at $85.9 million, an increase of 2.2 million, or 2.7%, due to higher assessed values ■ Transient Occupancy Tax continues to grow, reaching an estimated $13.4 million next year, an increase of 7.7% Sales Tax continues to grow at a slower rate than prior years, estimated at $43 million, an increase of 3.6% Licenses and permits are projected at $7.6 million, or 3.75% less as the pace of new development drops Utility Users' Tax revenue is projected at $18.4 million, a slight increase of 1.3%, due to credits for energy conservation and bundled cell services Public Safety r L / rmr171 1. 3R71 Public Safety Police and Fire = 55% of General Fund Fire Emergency Repo,,,. $32,995,750 po' Flre -Medical Program. I Dispatch/ProPel,y/F.,d—./CSi $6,022.262 /Recprda/Adm.p 6..., j $16,328,475 fire Preventlan. „ Police lnveat.geions, 52,058,730 �,{ t •; c • ,515,378.777 Fire -Marine Safety $5,54��. Fire-EOC/Admen, $1,259,7% \� police Unllorm/Patrol, $45,199,723 ,,. 4/16/2018 i; Quality of Life Quality of Life All Funds Street and Neighborhood Rehabilitation Projects • Arterial Rehabilitation ($6,680,923) • Street Improvements ($2,900,000) ■ Concrete sidewalks, curb and gutters ($250,000) Park Improvements • Central Park Restrooms ($1,000,000) ■ Central Park Improvements ($400,000) • Sports Complex Turf Replacement ($194,000) • Murdy Park Improvements ($477,000) Facilities Improvements Central Library Restrooms ($315,000) Police Lower Level Renovations ($2,000,000) 14 FY 2018/19 Long Term Financial Sustainabilit Economic and Financial Sustainability The City is self -insured for workers' compensation and general liability claims and payments up to the first $1 million per claim HB is one of five agencies in the Big Independent Cities Excess Pool (BICEP) for excess insurance The Proposed Budget provides sufficient funding for the General Liability Fund to address annual pay -as -you go and long-term liabilities as of 9/30/17 The budget also provides $250k in recurring annual funding for the City's share (20-25 percent) of BICEP's pooled self-insurance reserve of $1 million per claim The $11.1 million Workers' Compensation unfunded liability increased by $6.0 million; this reflects a 41% funded status for an unfunded liability amount of $17.1 million 16 4/16/2018 Economic Uncertainties 25,011 25,011 25,011 Litigation Reserves 900 Equipment Replacement 8,295 8,295 8,295 Redevelopment Dissolution 1,323 1,080 1,080 General Plan Maintenance 720 232 380 Capital Improvement Reserve (CIR) 7,936 8,046 8,046 Senior Center Debt Service Reserve 2,000 2,000 2,000 CalPERS "One Equals Five" Plan 500 CaIPERS Rate Increase 1,287 1,287 1,637 CityView Replacement 989 1,028 1,028 Animal Control Shelter 1,500 1,685 City Facility Security Enhancements 350 Sand Replenishment and Park Improvements 365 650 200 Section 115 Trust 1,000 500 500 Triple Flip 3,745 2,118 Police Facility Enhancements 2,000 Strategic Planning Initiatives 558 Other Fund Balance` 12,716 9,288 8,327 Total Fund Balance $64,792 $62,947 $61,180 25,01 2,11 FY 2018/19 Police Unfunded Requests Police Department 5.0 FTE Police Officers ($1.3 million) as follows: 1 .0 additional Detective to assist with extremely high caseloads 2.0 Police Officers in Patrol to augment services during peak periods 2.0 Police Officers to increase efforts of the Homeless Task Force and address challenges posed by the growing homeless population Pension Costs and Unfunded Liabilities 19 20 Infl inrIed Liabilities Overviell! "Net Pension and/or Unfunded Liability amounts ore not cons ton t and are subject to annual change for market conditions, demographics and actuarial methodology. The Net Pension Liability is based on COIPERS' GA66 68 actuarial valuations as c f lune 30, 2017. 21 CaIPERS Discount Rate Change The CalPERS Board reduced the estimated earnings rate of its investment portfolio from 7.5% to 7.0% The additional cost to the City may be $3.3 million to $5.4 million more per year This equals a potential $22 million to $25 million increase in pension costs over the next six years The phase -in begins with the rates effective July 1, 2018 As a result, the City started to plan for these increased costs Amended the fiscal year to a July - June period Allows the City to participate in the CalPERS pre -payment option, saving an estimated $900,000 in UAL costs per year 22 CaIPERS Discount Rate Change Rising CalPERS Costs: CalPERS Discount Rate Change Cumulative Six -Year Estimated Increase $53.5M $43.7M 4fV1 7 $32.5M rYI� ryWN 4 rYVf/lo FV70/21 I iI/11 I,?,/?1 A,1 P.�.,aed Vmjw( d Nd Pel"-d t t u Wat 51-- from FV 16/17 23 Rising Pension Costs and What We Are Doing About It The "25 to 10" Plan implemented in FY 2013/14 will payoff the unfunded liability for the Retiree Medical Plan in 10 years and save taxpayers $7 million The "16 to 10" Plan was implemented in FY 2013/14 to payoff the unfunded liability for the Supplemental Retirement Plan in 10 years saving taxpayers $9 million The "One Equals Five" plan added in FY 2014/15 contributes $1 million extra per year to reduce pension liabilities, potentially saving taxpayers $54 million , The "One Equals Five" annual payment is not funded in the FY 2018/19 Proposed Budget 24 Being Proactive Pays Off The City began pre -paying its unfunded liabilities in some of its plans as early as five years ago (in FY 12/13) Four years ago, in FY 2013/14, the City created formal plans Those plans have improved the funded status of two of the City's three retiree benefit plans considerably As a result, the unfunded liability for the Retiree Medical - Miscellaneous Plan has been paid off In FY 2015/16 the City created a new Section 115 Trust with a $2.5 million contribution. As a result, the unfunded liability in the Retiree Supplemental Plan may be paid off in two years This has placed the City in a much better position than most to prepare for rising CalPERS pensions costs 25 Budget Balancing Options Successful Ballot Measures in CA Cities: Sales Tax, Public Safety Sales Tax Business License Tax Utility Users' Tax, Transient Occupancy Tax Other - Cannabis Increasing Current Fees/Fines Increase Animal Licensing Fees to Full Cost Recovery Increase Cost Recovery in Master Fee and Charges Schedule Parking Meter Fees Commercial Refuse Franchise Fee New Fees/Fines PEG (Public, Educational and Government Access) and Franchise Fees Dark Fiber Leasing Fees, Storm Drain Assessment Budget Reductions 1% to 3% Across the Board Negotiate additional employee CalPERS Pick Ups 26 Infrastructure and CIP �SND�-a R „c P� Capital Improvement Program (All Funds) $24,717,523 Park Funds, 6% Gas Tax/Prop 42, 13% RMRA, 13%_ Water Funds, 18% General Fund, 21%! I I Grants/Other, 1%JI Measure M, 8% Sevier Fi Infrastructure Section 617 of the Charter requires that the City spend 15 percent of General Fund revenue on infrastructure This calculation is based on a 5-year rolling average The FY 2018/19 General Fund Budget exceeds the 15% Infrastructure requirement The General Fund contains approximately $39.8 million in spending for infrastructure improvements and maintenance Included in this amount is $5.2 million in new capital projects for concrete, arterial roadway, turf fields, police facility improvements, park improvements, and other projects Roadway projects help maintain/reach a PCI of 80 or "Good" FY 7018/19 Proposed Budget Recap The FY 2018/19 Proposed Budget theme "The Challenge of Change" implements the new fiscal year change while ensuring funding for essential services FY 2018/19 Proposed Budget provides majority of funding for public safety Funds infrastructure improvements to roadways, parks, facilities and other capital assets CalPERS Discount Rate Change will impact the City over the next 3-6 years W Rising CaIPERS costs will continue to strain annual budgets Caution must be exercised to determine the City's future course 29 30 FY 2018/19 Proposed Budget Calendar Date Item April 16, 2018 FY 2018/19 Proposed Budget Study Session May 7, 2018 FY 2018/19 Budget Balancing Study Session May 21, 2018 FY 2018/19 CIP Study Session FY 2018/19 Budget Adoption: City Council Public Hearing June 4, 2018 FY 2018/19 Budget Adoption: City Council Public Hearing _- (Alternate Adoption Date) July 1, 2018 Fiscal Year 2018/19 Begins Cash Flow Projecti Development Process Coordinated with Finance Department Received Public Works CIP Projections through December of 2018 CalPERS 2018 UAL pre -pay for July is offset by investments maturing July 2018 Assumptions based on current information, past three-year averages, current budget, current debt schedules, payroll schedule for 2018, review of bank cash flow Goal to maintain minimum of $20 million in liquidity on a monthly basis I Conservative approach to liquidity forecasting Cash Flow Projections: All Funds Receipts & Disburseme 4/16/2018 18