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HomeMy WebLinkAboutFinance Department provided an overview of the highlights of -MEOW= � -MEJEEMEEk.- ti City of Huntington Beach 9�GF �ScI FY 2016/17 Proposed Budget Long-Term Financial Plan Update September 6, 2016 d" Summary ➢ Overview of FY 2016/17 Proposed Budget ➢ General Fund Five-Year Projections ❖Expenditure Assumptions ❖Revenue Assumptions ❖Base Case and Stress Test ➢ Budget Calendar and Recap mar o +�,op t!I n Overview of FY 2016/17 Proposed Budget 1 Y AM&- i "Back to Basics" ➢ FY 2016/17 is a "Back to Basics" Budget ➢ Only minimal contractual increases are included ➢ Essentially flat staffing levels are recommended, with a few minor exceptions ➢ FY 2016/17 Proposed Budget focuses on core services :. ■ Public Safety ■ Infrastructure ■ Quality of Life Programs ■ Financial Sustainability 3 9 P FY 2016/17 Proposed Budget ➢ The Proposed All Funds Budget totals $345.5 million, a $387K or 0. 1 % increase from the FY 2015/16 Adopted Budget ➢ The Proposed General Fund Budget totals $220.4 million, a $3 .7 million, or 1 .7% increase from the FY 2015/16 Adopted Budget FY 2016/17 General Fund Highlights FY 2015/16 FY 2016/17 I escri Adopted Budget Proposed Budget Amount °Io Change ption (in millions) (in millions) Change General Fund Revenues $216.7 $220.4 $3.7 1.7% General Fund Expenses 216.7 220.4 $3.7 1.7% Surplus/(Deficit) $0.0 $0.0 $0.0 0.0% - 6 t'A FY 2016/17 General Fund Overview ➢ Balanced General Fund Budget for FY 2016/17 ➢ A slight General Fund revenue increase of 1 .7% is projected ➢ Fixed cost increases such as PERS ($2.8 million), Workers' Compensation, insurance premiums and utilities are included ➢ Equipment replacement funding of $5.0 million ➢ Increase of funding for Police Department — Animal Control Services $315K ➢ 15% Charter requirement for Infrastructure is met Jill& - - --- - General Fund Revenue Highlights ➢ Total General Fund projected revenue is $220.4 million, reflecting a 1.7% increase from the current year adopted budget ➢ Property Tax is estimated at $80. 1 million, a decrease of $4.0 million due to the State's elimination of the Triple Flip ➢ Transient Occupancy Tax continues to grow albeit slightly, reaching an estimated $10.5 million next year, an increase of 2.0% ➢ Sales Tax is projected at $41.4 million, essentially flat, not including the backfill for the Triple Flip ➢ Licenses and permits are down by -14% as the pace of new development begins to normalize ➢ UtilityUsers Tax revenue is projected to decline b -4. 1% due to energy p J Y conservation efforts and bundled phone services FY 2016/17 General Fund Highlights Description In Millions FY 2015/16 Adopted Budget $216.7 PLUS: Ca1PERS Rate Increases 2.8 Labor Contracts and Minimum Wage Adjustments 3.3 Reduction in Annual Bond Debt Service (1.2) General Liability Insurance 0.4 Increase in Citywide Attrition Estimate (0.5) Animal Control Contract Increases 0.3 Savings due to Unfunded Liability Plans (1.2) Utility Savings due to Citywide Energy Efficiencies (0.3) One-Time City Election Costs 0.1 FY 2015/16 Baseline $220.4 Structural Increases to Baseline from FY 2015/16 +$3.7 °Io Increase to Baseline from FY 2015/16 +1.7% Public Safety Police and Fire = 54 % of General Fund City City City City Council Clerk Manager Attorney Library Human 0.4% 11% 12% Services Resources 0.2% 2.1 City 2.7% Finance Treasurer 2.7% Police 0.1% Information 33.6% Services q 3.1% Community Development 3.3% Community Services 4.5% Public Works 10.4% IV Non-Departmental Fire - 13.8% 20.8% •I II Public Safety - Police Police Department Amount AL Animal Control Services 3159,000 Part Time Student Worker Cadets 549,000 Overtime Impact of Negotiated Labor Contracts 1129,948 Equipment Replacement — Helicopter Upgrade 4859,150 Equipment Replacement — Fleet Vehicles 8439,000 Building Enhancement Renovations 5709,000 $2,380,098 Public Safety = Fire Fire Department Amount Metro Cities JPA and CUPA Fund Offset 90,059 EOC Citywide Training (i.e., NIMS, RACES, and CERT certifications) 51,000 Overtime and Minimum Wage Impact 122,956 Equipment Replacement — Refurbish Oil Wells 122,700 Equipment Replacement — Emergency Transport Gurneys 108,328 Lease Financing for New Fire Engine and Ambulance, ($1.0 M) 200,000 Equipment, Emergency Alerting System and EOC Renovation 397,000 $1,092,04 12 Police Officer Staffing Recap Sworn Officer Staffing Total Funded FTEs Total Funded Sworn Officers in FY 2012/2013 207.0 Additional Officers Funded in FY 2013/2014 +5.0 Additional Officers Funded in FY 2014/2015 +2.0 Additional Officers Funded in FY 2015/2016 +8.0 Adopted Budget +2.0 Revised Budget +6.0 Total Funded Sworn Officers I 222.0 Increase Since FY 2012/13 +15.0 _ - - 13 Quality of Life ➢ Increase funding for new Senior Center maintenance ($76,000) ➢ Repair and maintenance of beach facilities ($70,000) ➢ Sand Replenishment Project — Huntington Harbour ($200,000) ➢ Repair of various beach facilities — restroom doors, parking meter housing, and trash receptacles at the pier ($ 105,000) ➢ Park Improvements — Edison Playground ($ 110,000), Murdy Park Sports Field ($50,000), Central Park Tot Lot (85,000) , and Bartlett Park ($ 100,000) ➢ Park & Beaches Rehabilitation Projects — Beach Service Road ($ 150,000), Central Park East ($200,000) - -- - - - 14 Economic and Financial Sustainability ➢ To ensure strong internal controls, replaces aged Citywide Cashiering System that is no longer supported by the vendor ($569k) ➢ Provides full funding for the City's annual (pay-as- you-go) Workers ' Compensation costs ➢ Includes $500K towards reducing the $ 11 .9 million Workers' Compensation unfunded liability ➢ At this funding level, the Workers ' Compensation unfunded liability will be paid off in 22 — 24 years Economic and Financial Sustainability • The Proposed Budget continues funding for unfunded liabilities: ■ The "25 to 10" Plan for Retiree Medical ■ The "16 to 10" Plan for Retiree Supplemental ■ Ca1PERS "One Equals Five" Plan ■ Pension Rate Stabilization Program • Plans above will help maintain AAA Fitch Rating "The 'AAA' IDR reflects the city's strong operating performance, low long-term liability burden, moderate fixed costs, and robust reserves. The tax base and economic fundamentals supporting the city's strong recent revenue performance will likely continue to position the city well, and Fitch expects it to continue controlling expenditures and focusing on paying down pension and OPEB liabilities." — Fitch Ratings, June 23, 2016 l FY 2016/17 Staffing Changes • City Attorney Department ➢ 1 .0 FTE — Community Prosecutor • Community Development Department ➢ 0.5 FTE — Code Enforcement Officer II — net neutral impact, offset by downgrading 2.0 vacant positions • Community Services Department i ➢ 1 .0 FTE — Funding of a previously defunded position — Community Services Recreation Supervisor* *Funded by Parks Funds, not the General Fund l Capital Improvement Program (All Funds) ➢ FY 2016/17 CIP includes $24.4 million in projects (All Funds) ➢ Included in the CIP is $3.6 million in General Fund support for infrastructure ➢ LeBard School Site funding of $667,000 for Year Two (split funding from General Fund and park development fees) ➢ Concrete, arterial roadway, sand replenishment, beach service road rehabilitation, beach facilities repair and other projects ➢ The FY 2016/17 General Fund Budget exceeds the 15% � Infrastructure requirement ➢ Roadway projects help maintain a PCI of 76 or "Good" k4,_ --J - _ 18 _. r User Fee Study and Review ➢ The City recently completed an updated User Fee Study ➢ Certain fees are recommended to increase, decrease, be eliminated, and others are new ➢ A phased-in approach is recommended for some fees ➢ Overall, the Citywide rate of recovery is recommended at 74% ➢ A Study Session was held on August 15, 2016 and the study was referred to the Finance Commission for review ➢ The Finance Commission met on August 24, 2016 with staff from all Departments citywide and requested specific additional information ➢ A Special Meeting will be held on September 7, 2016 (and a tentative meeting has also been scheduled for September 14, 2016) for a response to City Council FY 2016/17 Proposed Budget Recap ➢ Prioritizes funding for Public Safety at 54% of the Proposed Budget ➢ Provides funding for quality of life enhancements at libraries, parks and beaches ➢ Funds infrastructure improvements to roadways, parks, facilities and other capital assets ➢ Enhances compliance with procedures and regulations promoting further financial sustainability mar o +�,op t!I n LONG-TERM FINANCIAL PLAN ^f, 4 i 21 Benefits of a Five-Year Plan ➢ Builds a financially resilient government through long-term financial planning ➢ Improves long-term financial sustainability as required through the Strategic Plan ➢ Provides time to effect change and adapt to changing conditions ➢ Adds transparency and encourages involvement ➢ Creates methods to determine the costs/benefits of decisions over the long-term ➢ Implements a tool to help leaders balance competing demands for enhanced or new services, additional staff, infrastructure needs and financial reserves - -- - - -- - - - z2 Five-Year Plan Highlights ➢ The City's personnel costs comprise approximately 73% of the General Fund Budget ➢ As such fixed cost increases related to the existing PY a roll base will largely consume projected revenue increases ➢ The most significant cost increases projected over the next 5 to 10 years are the City's pension costs ➢ CalPERS' low investment return in June 2016 of 0.61 % will increase out-year costs ➢ Hence projected revenue increases will primarily assist in P J P Y funding increased pension costs ➢ Please note these are estimates for discussion purposes only and are subject to change - - - - 23 Base Case Expenditure Assumptions ➢ Projections include two separate scenarios (base and stress test) ➢ Essentially flat staffing levels over the next five years ➢ Equipment Replacement funding of $500K annually until $7.OM is reached ➢ Infrastructure increases to $4.5M in FY 17/18, and increases by $500K starting in FY19/20 and capping out at $6.OM by FY 20/21 ➢ Adds $1.2M in FY 20/21 for residential street repair and a PCI of 80 ➢ Reflects projected Ca1PERS cost increases based on future rates ➢ Includes projected impact of Ca1PERS poor recent investment performance ➢ Includes continued funding for all plans to reduce unfunded liabilities ➢ Does NOT include a plan to reduce Workers' Comp $11.9M liability ➢ Does not anticipate additional bonded projects or capital leases Revenue Assumptions ➢ In depth review of the City s General Fund revenue over the past 10 years was conducted (2004/05 through 2014/15) ➢ One-time revenues were removed to isolate growth patterns for recurring revenue streams only ➢ The smoothed, average annual rate of growth for recurring revenue for the past 10 years is approximately 2.87% ➢ The 2.87% historical annual rate of growth is included in the "Base Case" assumption for out-year revenue growth ➢ Other assumptions are in the Stress Testing scenario to develop options for discussion mar o +�,op t!I n FIVE-YEAR PROJECTION SCENARIOS 26 l Base Case (in thousands) Category Proposed Projected Projected Projected Projected &:[:FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 Salaries 100,297 101,582 102,645 103,201 103,830 a1PERS 32,466 35,049 37,572 39,546 40,298 a1PERS 6/30/16 Shortfall 2,000 2,000 2,000 Other Benefits 27,500 27,961 28,272 28,591 28,930 Operating 44,274 45,367 46,518 47,644 48,832 Infrastructure 3,604 4,500 4,500 5,000 6,000 Street PCI of 80 1,200 Equipment 5,221 5,500 6,000 6,500 7,000 Debt Service 7,068 6,115 6,394 5,309 4,897 Total Expenditures 220,430 226,074 233,9 237,7 ,, 242,987 Total Revenues 220,430 226,756 233,264 239,959 246,846 YOY$ 6,326 6,508 6,695 6,887 YOY% 2.87% 2.87% 2.87% 2.87% (Challen e)/Sur lus 682 1 (637) 2,168 3,859 - - - - - 27 Stress Test (Mild Recession) Category Proposed Projected Projected Projected Projected FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 ism EMR- hanges to Base: Suspend "1=5" Safety Plan 1,000 - - - - nfrastructure Flat at $3M 3,604 3,000 3,000 3,000 4,000 Equipment Flat at $5M 5,221 5,000 5,000 5,000 5,000 Annual Savings Needed (3,956) (5,509) (2,100) Total Expenditur 220,430 222,402 225,047 225,700 231,861 Total Revenues 220,430 218,446 219,538 223,600 231,985 YOY% (0.90%) 0.50% 1.85% 3.75% Challenge)/Surplus - (3,956) (5,509) (2,100) 124 Departmental Targets -2% -2% -1% mar o +�,op t!I n Citywide Long Term Needs 29 Other Funding Gaps and Challenges ➢ The Five-Year Plan reflects the continuation of existing plans to reduce liabilities ➢ A challenge still remains in funding a plan to reduce the City's Workers' Compensation liabilities of $ 11 .9M ➢ The City's infrastructure needs for maintenance and repair exceed $ 160M ➢ The City's storm drain system requires $200M in upgrades ➢ A plan needs to be developed for the ongoing maintenance and replacement of the City's complex technology systems Future Considerations ➢ If General Fund revenue exceeds baseline estimates, the City should consider budgeting $500K per year to address the Workers' Compensation liabilities of $ 11 .9M ➢ Over the next five years, incremental increases to the General Fund CIP would help address the City's $ 160M infrastructure funding shortfall as well as storm drain needs ➢ Ongoing funding will need to be identified for the ongoing maintenance and replacement of the City's technology systems ➢ As one-time funds become available, the City should consider these unfunded needs as a priority t f jdK- - - 3-1 Recap ➢ The City will continue to face significant increases in PERS Employer contribution rates ➢ The Five-Year Plan is a tool to determine how current and future decisions will impact the City's General Fund budget ➢ The economy is cyclical; hence, it is prudent to examine the impacts of a potential future economic downturn and remain vigilant ➢ All of these scenarios are estimates only and are subject to change for factors completely beyond the City's control ➢ As/if additional General Fund revenue become available, infrastructure, Workers' Compensation, and technology needs should be addressed Questions ? 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