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Home My WebLink AboutFY 2011-2012 Mid-Year Report - Study Session 06-04-2012 Mid 6/5/2012 City of Huntington Beach FY 2011/12 Mid-Year Report TS COM' t s Summary ► Recap of FY 2010/11 Audit and Year-End Results ► FY 2011/12 Mid-Year Update ,,.,.. ~ �S VE NNNUAL COWILO,*%N0,011L"900 ► FY 2012/13 Budget and Long Term Financial Plan Update I ► Next Steps Z S ^ �4" 0".- a ,��) �� 6/5/2012 FY 2010/11 Audit Results ► Auditing firm of Macias, Gini & O'Connell audited City's financial performance and reports ► FY 2010/11 Comprehensive Annual Financial Report received an Unqualified (Clean)Audit Opinion ► The City's CAFR is award winning—has received the Government Finance Officers Association's(GFOA) Excellence in Financial Reporting Award for 25 years illow - 3 1 FY 2010/11 Performance (Audited) General Fund Revenue:$186.5 million Includes both recurring and one-time revenue($3.5 million) General Fund expenditures, liabilities and loan repayments: $179.3 million In addition: > $1.3 million to CIP reserve to fund additional street repairs in FY 2011/12 > $1.1 million set-aside for PARS liability > $0.6 million set-aside for Worker's Compensation third-party claims account > $0.8 million set-aside for Litigation settlement and payout > $0.75 million in net encumbrances and pre-paid insurance Results in remaining year-end balance of$2.7 million or 2% of the General Fund 4 NNW 6/5/2012 FY 2010/11 Year End Results ► Options discussed at January 2012 Study Session: • Deposit remaining fund balance into Budget Stabilization Fund • Continue with existing Financial Reserve Policy: - Save two months of General Fund expenditures;then, - 50%to Economic Uncertainties Reserve - 25%for infrastructure Fund - 25%to Capital Improvement Reserve(CIR) ► City Council directed staff to deposit fund balance into Economic Uncertainties reserve to address potential emergency circumstances, such as RDA elimination ftftwMwwM.- s General Fund Balance Un Thnu.am61 Economic Uncertainties 19,710 19,710 19,710 Economic Uncertainties-RDA Contingency* 0 2,695 2,695 Litigation Reserve 900 900 900 Litigation Settlement/Payout" 0 780 0 Equipment Replacement 6,913 6,913 6,913 Capital Projects 2,970 4,270 2,970 PARS Obligation 3,549 4,649 0 Other Fund Balance 7,310 8,661 7,461 Total Fund Balance•• 41,352 48,578 40,649 i Jj,i Economic Uncertatnues Reserve o actual EY 10 11(AER and held for resale of85.7 milltan transferred in fmm the former Redevelopment Agency. 6 3 6/5/2012 Potential Use of Reserves to Meet Critical Needs Prepayment of PARS Remaining Liability of$4.5 million(FY 12/13,FY 13/14 and FY 14/15); Payments of$1.5 million each P Transfer to Infrastructure Fund to help meet 15%charter requirement • FY 2011/12 year-end transfer of unspent funds in Public Works • FY 2012/13 transfer of$1.5 million currently projected to meet 15% requirement ► Utilize reserves to fund one-time purchases such as equipment ► Utilize reserves to end current year in balance due to State's M ection of RDA transfer of$4.9 million FY 2011/12 Mid-Year Update ► General Fund Overview ► FY 2011/12 Recap 8 4 6/5/2012 FY 2011/12 Overview k Current fiscal year was projected to end in balance... o However, on April 30, 2012 Redevelopment transfer of$4.9 million disallowed by the State ► $1.3 million in one-time debt service savings will help close the gap in this year only (one-time) ► $1.1 million in additional revenue from building permits, sales tax and TOT revenues, among others will help offset potential revenue loss o Remaining $2.5 million may be required from reserves to balance the General Fund 9 FY 2011/12 Recap ► Current fiscal year was projected to end in balance ► If$4.9 million in RDA cannot be retained, the following items will help mitigate the impact: $1.3 million in bond savings- one time only $1.1 million in revenue increases $1.3 million in CIP reserve to fund streets Expense reductions across departments ► However, we may need to dip into reserves by $1.2 million or more to end year in balance 1ftftM1MML 10 5 6/s/2012 FY 2012/13 Projected Budget � Long Term Financial Plan � Potential Challenges Ahead � Highlights of FY 12/13 State Budget—May Revise r Budget Timeline � Next Steps i1w -- - 11 Long Term Financial Plan Assumptions Assumptions: Neutral labor cost adjustments No additional personnel added to Table of Organization RDA transfer of$4.9 million is eliminated Employee Tax Override is maintained $1.0 million additional for Equipment Replacement each year through FY 2014/15 for a total of$6.0 million $1.5 million more for Infrastructure in FY 2012/13, and an additional $1 million each year thereafter,to meet the 15% infrastructure Charter requirement CalPERS'discount rate has changed from 7.75%to 7.5% Id loom 6 5 2012 Long Term Financial Plan Budget Budget Budget Budget Budget SCENARIO 1* FY 12/13 FY 13114 FY 14/15 FY 15/16 FY 16/17 Revenue 181,634,773 183,010,929 194,794,383 187.015,903 189.599.201 Expenditure 194.103,564 186.987.647 189.805A62 193,660.902 194,685.992 Challenge (2,468,791) (3,976,719) (5,021,079) (6,644,999) (5,086,791) SCENARIO 2 Annual challenge after (2,468,791) (3,976,719) (5,021,079) (6,644,999) (5,096,791) Structural Cuts in FY 12/13,and thereafter 468 791 3,976719 6.719 5.021.079 6 64i�`999 (1,507,927) (1,044,361) (1,623,920) 1,558,208 SCENAR103 Annual Challenge After Structural Cuts and Holding Equipmt Constant at S4M/FY (507,927) 955,639 376,080 3,558,208 'AssumesV 2 million,n 0v de Tax i Remains 3 Current Budget Scenario FY 2012/13: RDA Elimination and CalPERS Increase ► Loss of RDA Transfer to General Fund: $4.9 M ► CalPERS'Board approved lowering the discount rate from 7.75% to 7.50% • Year 1 impact: $280 thousand in FY 2012/13 for July-Sept 2012 • Year 2 impact: $1.8 million ► Net impact to the General Fund for FY 12/13: $2.5 M 14 7 6/5/2012 Impact of $2.5 million Challenge by Department Potential Reduction by Department City Council 1,100 City Manager 32,733 City Attorney 39,605 City Clerk 12,960 City Treasurer 2,443 Community Services 233,275 Economic Development 29,251 Finance 91,880 Fire' 210,548 HR 88,725 Info Svcs 107,078 Library 76,153 Planning&Bldg 113,178 Police 1,078,593 Public Works 382,479 TOTAL 2,500,000 'Cut reduced from S524,289 to$210,548 due to Constant Manning. Is $2.5 million Potential Service Impacts Preliminary items for FY 2012/13 include: i, Reduction of Police Department's Motor Traffic Unit (5.0 FTE: $845 K) o Elimination of Police Department's Public Fingerprinting Service and Other Non-Sworn Reductions ($234k) Public-Private Partnership Operating Model for Art Center ($300 K) i, Reduction of book purchases and research databases at Libraries ($70K) o Reduction of Citywide Landscape Maintenance and other public works service reductions ($384k) o Reduction in Planning & Building temp staff and services leading to longer processing times ($120K) Elimination of Utility User Tax Auditing services ($65K) Ifi 8 6/5/2012 $2.5 million Potential Service Impacts Preliminary items for FY 2012/13 include: ► Estimated Total of 37.5 positions eliminated • Full-Time: 17.7 FTE (5.0 FTE Potential Layoffs) • Part-Time: 19.8 Staff • TOTAL: 37.5 Positions ilow 17 Scenario A: Employee Override Tax Eliminated ► Departments initially identified $4.2 million in cuts in March 2012 ► Scenario A for informational purposes only currently ► Scenario A will be updated and presented in upcoming Study Sessions in August, September and October 2012 i8 9 6/5/2012 FY 2012/13 Budget Scenarios ScenarioA Scenario Scenario % Override RDA/Ca1PERS TOTAL Cut City Council 9,242 5,475 14,717 4.9% City Manager 47,868 28,358 76,226 4.9% City Attorney 66,854 39,605 106,459 4.9% City Clerk 21,877 12,960 34,837 4.9% City Treasurer 4,124 2,443 6,566 4.9% Comm Svcs 393,768 233,275 627,042 4.9% Econ Dev 49,375 29,251 78,626 4.9% Finance 155,093 91,880 246,972 4.90/a Fire* 355,405 210,548 565,954 1.7% HR 149,768 88,725 238,493 4.9% Info Svcs 180,748 107,078 287,826 4.9°/u Library 128,545 76,153 204,698 4.9% Planning&Bldg 191,044 H3,178 304,222 4.9% Police 1,820,665 1,078,593 2,899,258 4.9°/u Public Works 645,625 382,479 1,028,104 4.9% TOTAL 4,220,M 2,5M,000 6,720,000 43% 'Cut reduced from$524,289 to S210,548 due to Constant Manning. 19 Potential Budget Challenges ®® Employee Property Tax On Hold/Revisit in August Scenario $4.2M Override 2012 RDA Elimination/Ca1PERS FY 2012/13 Proposed Scenario B $2.5 M Discount Rate Change Budget All of the funding above is August/September/October Scenario C $6.7 M eliminated [November 2012 20 10 6/5/2012 FY 2012/13 State Budget Update ► May 16,2011 -Governor's May Revise unveiled ► State of California faces a$15.7 billion gap for Fiscal Year 12/13 versus the initial projection of$9.0 billion ► Governor Brown Proposes to close this gap with the following: $8.3 billion in cuts to state employee compensation(5%cut);welfare,health care;higher education and State court system cuts $5.9 billion in tax initiatives • Temporary Income Tax on highest income earners($250,000 for individuals;$500,000 for couples) • Temporary Quarter Sales Tax Increase from 7.25%to 7.50%(4 years) $1.5 billion in other onetime revenues/expense reductions im i Of this amount$1.0 billion is Redevelopment Agency and Low Income Housing Fund Balances Takeaway z FY 2012/13 State Budget Update ► In order to balance State Budget deficit, Governor Brown is proposing legislation to take Redevelopment and Low Income Housing(20% set-aside) fund balances from Cities (Trailer Bill) ► City staff will monitor progress of legislation and present updates at later Study Sessions ► Recommend City Council OgnOSe Trailer Bill zz 11 6/5/2012 FY 2012/13 BUDGET TIMELINE (Tentative) Present-June 30,2012 Internal Budget Development and Finalization July 16,2012 Proposed FY 2012/13 Budget to City Council Study Session August I,2012 CIP and Infrastructure Study Session August 31,2012 Charter Deadline to Submit Budget to City Council September 4,2012 Proposed Budget Adoption Date—I Meeting September 17,2012 Alternative Budget Adoption Date—2nd Meeting September 30,2011 Charter Deadline to Adopt the FY 2012/13 Budget October I,2012 New Fiscal Year Begins November 4,2012 Election Day-Employee Tax Override Ballot Measure 33 Next Steps Direction needed on potential use of Fund Balances for Fiscal Year 11/12 and 12/13 o Budget Strategy for FY 12/13 currently includes finding solutions to meet the current $2.5 million deficit o Second Round of Budget Solutions may take place during August/September/October 2012 o Negotiations still underway to potentially negotiate concessions 24 12 6/s/2012 40 Questions? 6bawa S 13 ,64f4jeK ✓&yulo.l�, Aa/27;b O.J C'6w'lk- — SUPPLEMENTAL V631IOA.1 'ate a COMMUNICATION sn.�d y ar-aao••� Cityof hem No. Huntington Beach FY 2011 /12 Mid-Year Report A TS COMP', L r Summary ► Recap of FY 2010/ 11 Audit and Year-End Results ► FY 2011 / 12 Mid-Year Update C h uF U.4"twa (,Id.�w. CONPREHENSIVE ANNU REPORT ► FY 2012/ 13 Budget and Long Term Financial Plan Update ► Next Steps FORFtS(iE 1S FR CDFD S[PTE)(BER W.-OIt Z FY 2010/11 Audit Results ► Auditing firm of Macias, Gini & O ' Connell audited City's financial performance and reports ► FY 2010/11 Comprehensive Annual Financial Report received an Unqualified (Clean) Audit Opinion ► The City's CAFR is award winning — has received the Government Finance Officers Association's (GFOA) Excellence in Financial Reporting Award for 25 years 3 FY 2010/11 Performance (Audited) r General Fund Revenue:$ 186.5 million Includes both recurring and one-time revenue ($3 .5 million) General Fund expenditures, liabilities and loan repayments: $ 179.3 million In addition: $ 1 .3 million to CIP reserve to fund additional street repairs in FY 2011/12 $ 1 . 1 million set-aside for PARS liability $0.6 million set-aside for Worker's Compensation third-party claims account $0.8 million set-aside for Litigation settlement and payout $0.75 million in net encumbrances and pre-paid insurance Results in remaining year-end balance of $2.7 million or 2% of the General Fund 4 FY 2010/11 Year End Results ► Options discussed at January 2012 Study Session: • Deposit remaining fund balance into Budget Stabilization Fund • Continue with existing Financial Reserve Policy: - Save two months of General Fund expenditures; then, - 50% to Economic Uncertainties Reserve - 25% for Infrastructure Fund - 25% to Capital Improvement Reserve (CIR) ► City Council directed staff to deposit fund balance into Economic Uncertainties reserve to address potential emergency circumstances, such as RDA elimination Noftabow - 5 General Fund Balance (In Thousands) Fund Balance CategoryI ' M FY Estimated Economic Uncertainties 19,710 195710 195710 Economic Uncertainties - RDA Contingency* 0 2,695 2,695 Litigation Reserve 900 900 900 Litigation Settlement/Payout* 0 780 0 Equipment Replacement 6,913 65913 61913 Capital Projects 2,970 49270 29970 PARS Obligation 3,549 4,649 0 Other Fund Balance 7,310 85661 7,461 Total Fund Balance ** 419352 489578 409649 ' Included in Economic Uncertainties Reserve in actual FY 10/11 CAFR. w6i ld for resale of$S.7 million transferred in from the former Redevelopment Agency. 6 Potential Use of Reserves to Meet Critical Needs ► Prepayment of PARS Remaining Liability of $4.5 million (FY 12/13, FY 13/14 and FY 14/15); Payments of $ 1 .5 million each ► Transfer to Infrastructure Fund to help meet 15% charter requirement • FY 2011/12 year-end transfer of unspent funds in Public Works • FY 2012/13 transfer of$1 .5 million currently projected to meet 15% requirement ► Utilize reserves to fund one-time purchases such as equipment ► Utilize reserves to end current year in balance due to State's rej ection of RDA transfer of $4.9 million FY 2011 / 12 Mid-Year Update ► General Fund Overview ► FY 2011 / 12 Recap 8 FY 2011 /12 Overview ► Current fiscal year was projected to end in balance. . . ► However, on April 30, 2012 Redevelopment transfer of $4.9 million disallowed by the State ► $ 1 .3 million in one-time debt service savings will help close the gap in this year only (one-time) ► $ 1 . 1 million in additional revenue from building permits, sales tax and TOT revenues, among others will help offset potential revenue loss Remaining $2.5 million may be required from reserves to balance the General Fund W9 FY 2011 /12 Recap ► Current fiscal year was projected to end in balance ► If $4.9 million in RDA cannot be retained, the following items will help mitigate the impact: $ 1 .3 million in bond savings- one time only $ 1 . 1 million in revenue increases $ 1 .3 million in CIP reserve to fund streets Expense reductions across departments ► However, we may need to dip into reserves by $ 1 .2 million or more to end year in balance 10 FY 2012/ 13 Projected Budget Long Term Financial Plan Potential Challenges Ahead Highlights of FY 12/13 State Budget — May Revise Budget Timeline Next Steps Long Term Financial Plan Assumptions Assumptions: Neutral labor cost adjustments No additional personnel added to Table of Organization RDA transfer of $4.9 million is eliminated Employee Tax Override is maintained $ 1 .0 million additional for Equipment Replacement each year through FY 2014/15 for a total of $6.0 million $ 1 .5 million more for Infrastructure in FY 2012/13, and an additional $ 1 million each year thereafter, to meet the 15% infrastructure Charter requirement CalPERS ' discount rate has changed from 7.75% to 7.5% 12 Long Terre Financial Plan Budget Budget Budget Budget Budget SCENARIO 1* FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 Revenue 181,634,773 183,010,929 184,784,383 187,015,903 189,599,201 Expenditure 184,103,564 186,987,647 189,805,462 193,660,902 194,685,992 Challenge (294689791) (399769719) (590219079) (69644,999) (590869791) SCENARIO 2 Annual challenge after (2,468,791) (3,976,719) (5,021,079) (6,644,999) (5,086,791) Structural Cuts in FY 12/13, and thereafter 2,468,791 3,976,719 5,021,079 6,644,999 (195079927) (1,044,361) (196239920) 195589208 SCENARIO 3 Annual Challenge After Structural Cuts and Holding Equipmt Constant at $4M / FY (5079927) 955,639 376,080 3,558,208 *Assumes $4.2 million in Override Tax Remains b113 Current Budget Scenario FY 2012/13 0 RDA Elimination and CaIPERS Increase ► Loss of RDA Transfer to General Fund: $4.9 M ► CalPERS ' Board approved lowering the discount rate from 7.75% to 7. 50% • Year 1 impact: $280 thousand in FY 2012/13 for July-Sept 2012 • Year 2 impact: $ 1 .8 million ► Net impact to the General Fund for FY 12/ 13 : $2.5 M 14 Impact of $2 .5 million Challenge by Department Potential Reduction by Department City Council 100 City Manager 32,733 City Attorney 395605 City Clerk 12,960 City Treasurer 2,443 Community Services 233,275 Economic Development 291251 Finance 91,880 Fire* 210,548 HR 88,725 Info Svcs 1079078 Library 769153 Planning & Bldg 113,178 Police 1,078,593 Public Works 382,479 TOTAL 295009000 * Cut reduced from $524,289 to $210,548 due to Constant Manning. is $2 .5 million Potential Service Impacts Preliminary items for FY 2012/13 include: ► Reduction of Police Department's Motor Traffic Unit (5 .0 FTE: $845 K) ► Elimination of Police Department's Public Fingerprinting Service and Other Non-Sworn Reductions ($234k) ► Public-Private Partnership Operating Model for Art Center ($300 K) ► Reduction of book purchases and research databases at Libraries ($70K) ► Reduction of Citywide Landscape Maintenance and other public works service reductions ($384k) ► Reduction in Planning & Building temp staff and services leading to longer processing times ($ 120K) ► Elimination of Utility User Tax Auditing services ($65K) 16 $2 .5 million Potential Service Impacts Preliminary items for FY 2012/13 include: ► Estimated Total of 37.5 positions eliminated • Full-Time: 17 .7 FTE (5 .0 FTE Potential Layoffs) • Part-Time : 19. 8 Staff • TOTAL : 37 .5 Positions Scenario A : Employee Override Tax Eliminated ► Departments initially identified $4.2 million in cuts in March 2012 ► Scenario A for informational purposes only currently ► Scenario A will be updated and presented in upcoming Study Sessions in August, September and October 2012 Nftmom 18 FY 2012/13 Budget Scenarios Scenario A Scenario B Scenario C % Override RDA/Ca1PERS TOTAL Cut City Council 9,242 5,475 141717 4.9% City Manager 47,868 28,358 76,226 4.9% City Attorney 66,854 39,605 106,459 4.9% City Clerk 21,877 123960 34,837 4.9% City Treasurer 4,124 23443 65566 4.9% Comm Svcs 3931768 2335275 6271042 4.9% Econ Dev 49,375 29,251 78,626 4.9% Finance 155,093 91,880 246,972 4.9% Fire* 355,405 210,548 565,954 1 .7% HR 149,768 88,725 238,493 4.9% Info Svcs 180,748 1079078 287,826 4.9% Library 1281545 769153 2049698 4.9% Planning & Bldg 191,044 1131178 3041222 4.9% Police 158201665 11078,593 2189%258 4.9% Public Works 645,625 382,479 1,028,104 4.9% TOTAL 492209000 215009000 617209000 4.3% W Cut reduced from $524,289 to $210,548 due to Constant Manning. 19 Potential Budget Challenges On Hold/Revisit in August Scenario A $4.2 M Employee Property Tax Override 2012 RDA Elimination/CalPERS FY 2012/13 Proposed Scenario B $2.5 M Discount Rate Change Budget All of the funding above is August/September/October Scenario C $6.7 M eliminated November 2012 :1 20 FY 2012/ 13 State Budget Update ► May 16, 2011 - Governor's May Revise unveiled ► State of California faces a $15.7 billion gap for Fiscal Year 12/13 versus the initial projection of $9.0 billion ► Governor Brown Proposes to close this gap with the following: $8.3 billion in cuts to state employee compensation (5% cut); welfare, health care; higher education and State court system cuts $5.9 billion in tax initiatives • Temporary Income Tax on highest income earners ($250,000 for individuals; $500,000 for couples) • Temporary Quarter Sales Tax Increase from 7.25% to 7.50% (4 years) $1.5 billion in other one time revenues/expense reductions • Of this amount $1.0 billion is Redevelopment Agency and Low Income Housing Fund Balances Takeaway 21 FY 2012/13 State Budget Update ► In order to balance State Budget deficit, Governor Brown is proposing legislation to take Redevelopment and Low Income Housing (20% set-aside) fund balances from Cities (Trailer Bill) City staff will monitor progress of legislation and present updates at later Study Sessions ► Recommend City Council Oppose Trailer Bill bft' ftM1MW 22 FY 2012/ 13 BUDGET TIMELINE (Tentative) Proposed Present - June 30, 2012 Internal Budget Development and Finalization July 16, 2012 Proposed FY 2012/13 Budget to City Council Study Session August 1, 2012 CIP and Infrastructure Study Session August 31, 2012 Charter Deadline to Submit Budget to City Council September 4, 2012 Proposed Budget Adoption Date — 1 st Meeting September 17, 2012 Alternative Budget Adoption Date — 2nd Meeting September 30, 2011 Charter Deadline to Adopt the FY 2012/13 Budget October 1, 2012 New Fiscal Year Begins November 4, 2012 Election Day- Employee Tax Override Ballot Measure L 23 Next Steps ► Direction needed on potential use of Fund Balances for Fiscal Year 11 /12 and 12/13 ► Budget Strategy for FY 12/13 currently includes finding solutions to meet the current $2.5 million deficit ► Second Round of Budget Solutions may take place during August/September/October 2012 ► Negotiations still underway to potentially negotiate concessions bbftbw� 24 1909,P� � Questions ? 25