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Home My WebLink AboutFY 2015/2016 Mid-Year Budget Update - PowerPoint Presentatio City of Huntington Beach FY 2015/16 Mid-Year Budget Update Alta* 2, 206 Summary FY 2014/ 15 Audit and Year-End Results FY 2015/ 16 Mid-Year Update FY 2016/ 17 Preliminary Baseline Estimates Budget Challenges & Opportunities 2 FY 2014/15 Audit and Year-End Results FY 2014/15 Audit Results Auditing firm of Vavrinek, Trine, Day & Co., LLP audited the City's financial statements and internal controls FY 2014/15 Comprehensive Annual Financial Report (CAFR) received an Unmodified (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 29 years 4 FY 2014/15 Performance (Audited) Government-Wide Highlights: All Funds Description In Millions ASSETS Current Assets $216.6 Restricted Assets 89.6 Capital Assets 810.4 Total Assets 1,116.6 Deferred Outflows - Pensions 11.2 LIABILITIES Current Liabilities 21.1 Liabilities Payable from Restricted Assets 9.2 Long-Term Obligations* 432.4 Total Liabilities 462.8 Deferred Inflows - Pensions 22.8 TOTAL NET POSITION $642.2 *Long Term Obligation Reflects GASB 68 recording of Net Pension Liability of $336.2 million 5 GASB 68 Accounting & Financial Reporting for Pensions Revises and establishes new financial reporting requirements for governmental agencies that provide their employees with pension benefits. Requires governments to record the unfunded liabilities for public pension costs on the face of the financial statements — not only in the "Notes" section. This led to a significant reduction in the Total Net Position on the Balance Sheet of about $336 million. Prior to GASB 68, the Total Net Position would have been closer to $978 million. 6 GASB 68 Implementation The GASB 68 adjustment is being applied by all governmental entities nationwide. This adjustment impacts the City' s Enterprise Funds (e.g. Water, Sewer, Refuse) and Internal Service Fund (e.g. Workers ' Compensation) . For smaller funds, this has resulted in a negative Total Net Position (Refuse and HazMat) . Before i 68 CITY OF NONTINGTON BEACH STATEMENT OF NET POSRION SEPTEM&ER 311,Y074 pn Thousantlal CaevammerPel [Iwrmsrype A.43ETS AWritlae Activltlea Teal CasA am N�essunerris 5 Im,ss4 S 54,392 a 13A,92a R¢ceifeBka,Nal a5,xs aT4a 42,d91 ,AAnrarea to aucceesa Apancy y,ppp - tlyga a4entaies 1,291 1.2% Prep Ws 4,9Ta - 4.9Ta Oa+er Agpek 2,d11 - 2.411 GM!PO61dnIY0ym®m Be,ufils Assel 12,l61 1P.ra1 Bublebl A;]1B 61A3P ]6],ifi1 RaNclei Assets_ Cask arM borxhnmYe 1B.Y52 2y;IMI 4i,TW LashaM lmtlaMeMS MN FisCM Agea1 9.125 - 4,125 fleceraENs,Nel 1/.plt I/.%p real SemncmtlA®k ]9.%f n,%1 µale C�ilal Avams: Nen-CkpCar�abk ]59.688 25.8fA 3b1.4]1 Wpeclabk.Nei 59.52] 114.9a/ 415,404 TaMl fa'Plkl Aaeem 9G,1% 14grro YW,%6 Tak Aa%k Bd9.981 Lb,1al 1,ala.2t4 LIA&Lf11La Aaowk Payahle 8Y62 4,415 ID,61r Acsmd Payroll &WO 93 a,1&1 0.posits 1.2E8 1,%2 2,A51 aubleial 1A]a1 0.1Ye 19,T61 MabiliCios Payable Ydn Pesr,.ktm Aaaere: Acca,ms PaYNNe ].919 - 1,94a Accruetl fn[ereel Payabb 1% - 1BB nepaaik 2,411 2411 Tsml6lablllt'res Payable Aovn AearlcktlAmla d,SW 454a LmgTpm,ObIgdIM6'. Lmg-TCfm Odigalipq puB YVi[hin Olm Year 15,�82 XA t&.14B LapTaen OMigaiiern Wein Mare than Orle Peer 83,i92 1.T42 fi5.531 Telal LNngTnmr 9Mlgetlena 9Qfid4 Q90a 81,® real Llmm�tlea Bi,Hd e,zga fW,5A0 NE1 P961TION Nm lmsslment In Gplel A8861s g18,825 140.TIO r90,595 RblriCtatl far. Dr618enice 4;LqY 4,19 Ca4aal Pmjsalfi 5,T12 2T,W1 3Ai23 PWNC WaAs arq CmTmnurulY SeNwe Pmpsla xtW R4.19tl Telal NnWlneatl Nal PaMban a4A18 2y,851 B1,9tl9 UnmahicVetl .�,524 53,1W 14].a9D T�INeCPoytlaT �]�T SM,9al ;�,SG CIfY OF HUMTINGTON NEAGH STATEMENT OF NET PoSITION SEPTEMBER M,2X15 pn TnoustlnAs� Wwnmvntd 9udrrves-TYpb ASBETb M1Glntlea AaXN[fea TOYI [mM1 antl lnvnmenrs 6 9i3O]'2 5 5200 Racwxpav,Nal b.}64 541] t41.COB m 6uceessw Apncy �.� 1.16] Nlwnlalav - 1.156 1,156 PmSs[m - SNB (nnn Assns - 2.alt VYIIef PmL<mPIW menl XenEAte Nsel 128G9 Id W9 S�blolal ISi 159 59.MS P16801 Rm11Netl Psscls. qfn ae31meemexf xs,4}> 4e0% CuvM1 end lnxslmeeta MtM1 Fiactl ABaut 21.083 21.W3 Receesbma,XX t9wAQ TebI Pa YXMeamu 5f.511 P&8% Cpltal tlaf[u' li dgreciable 3fi5,R54 113E ]a"v 2e'2 L}prttieEla.NW NJ SM 191]96 TPIa[Fay?sl Ygz[Y 1a&a18 Tu[at Aaefs BB&dM 230.14! 1,t1B.Bi8 AEFEPRED ONTFLOW 9 OF PE`JdIPCE9 munae dmlewf Feleuem Penfnns 10.m9 TT 11,215 �ets Pevetle S.B55 aABI 1A916 Awrued PoyrW T,8)3 IR ]215 p ECaltx 1.998 11ffi 91T5 9uhmul 1L]TI &l4 21.136 WGNIm PryagOk RmIPC1e0AxiT9: Accmma Paycde X.Bt9 � G6ta 4fNee M[RfI Pa�IT 41) � 21P �pmm z,av aen Tom uaenNas Peyaele rem Rnfnueeanra a4ax u.vz 6tn4Tem�OOeWIrnS: LagTerm ONlpflms[Ae WkM1h Ona Yav 19,]t5 1.1]p IS.WS kmPR[m ddlgrtlmx A[x In lAe'emm One Yeea 18.T91 9% 80.3TT N@Pmslm LlatllNy 91 e.3f3 ]16M SSB.ZS9 TONI Lb[tp-Telm tNdlpNpt6 b9.599 4],6]6 191,]BS Teel Llaellliba s9,'0.3L9 9Af X$ e89.)Sa GEPEWRm INFLBWS OF R®OIiRCEa M14m41neowe Wle1a04o canyons $9.d9a f,)QX MET COXITd1 Nrt Fgs[menl rn lyplly ASFMs 615.513 193815 T59.176 Rminsled is Cen 9ewce S.Bt9 SGV Wplal F[gat. S.en 2edBB 19.B]a P.mbc WaBx ane temnu,ltT%r.ees prpeeb n,i]8 41.9]B ThdI PefXeme Nel Poftlm 32.1T0 2a0% Brl.]86 UrrtvWSIW (]N,F]81 ]8321 It88.29U1 Total XN Pa9tlon { etl.4hl { 199.0E { Y4,]]e �Ndezb 9inemel delemm�ls 23 FY 14115 General Fund Expenditures Amount Description (in millions) EXPENDITURES 4 Actual Citywide Departmental Expenditures $207.2 I Workers' Compensation Fund Transfer 2. 1 Section 115 Trust Transfer 1 .0 Total Expenditures $210. 10 FY 14115 General Fund Revenue Amount Description (in millions) General Fund Recurring Revenue $210.3 General Fund One-Time Revenue 2.8 Total General Fund Revenue $213. 1 Total Expenses (210.3) Available Year-End Fund Balance $2.8 11 FY 2014/15 General Fund Fund Balance Designation* Set aside $ 1 .5 million for the City's share of Orange County Animal Shelter construction costs $800K to the Capital Improvement Reserve $ 150K for sand replenishment $350K to enhance security at City facilities *Recommendations made at the Strategic Planning Retreat on January 28, 2016, and adopted by the City Council on March 7, 2016 12 General Fund Balance FY 2014/15 Audited (In Thousands) _ Fund Balance Category FY 12/13 FY 13/14 FY 14/15 Audited Audited Audited Economic Uncertainties $ 24,011 $25,011 $25,011 � Litigation Reserve 900 900 900 Equipment Replacement 8,295 8,295 8,295 Redevelopment Dissolution 1,323 1,323 1,323 Retiree Medical Unfunded Liability 698 - - General Plan Maintenance 720 720 720 Capital Improvement Reserve (CIR) 7,136 7,136 7,936 Senior Center Debt Service Reserve 2,000 2,000 2,000 CalPERS "One Equals Five Plan" 500 1,500 500 CalPERS Rate Increase - 1,287 1,287 CityView Replacement 695 889 Animal Control Shelter 1,500 City Facility Security Enhancements 350 Sand Replenishment and Park Improvements 366 Section 115 Trust 1,000 Encumbrances/Restricted/Prepaid Insurance 8,924 12,187 12,715 Total Fund Balance � � s 13 FY 2015/16 Mid-Year Update 14 FY 15/16 General Fund Budget Description In Millions FY 2015/16 Adopted Budget $216.7 Carry-Over Appropriations and Encumbrances 7.6 General Plan Contract 0.5 Mid-Year Budget Adjustments (May 2, 2016)* 0.0 FY 2015/16 Revised Budget $224.8 *Minor budget adjustment of$18k for new Senior Center maintenance costs is included in General Fund. 15 FY 15/16 General Fund Projection* Description (in millions) FY 2015/16 Revised Budget $224.8 Estimated General Fund Expenses 217.4 Mid-Year Budget Adjustments 0.0 l Total Estimated Expenses $217.4 Estimated General Fund Revenue (Recurring) 215.7 Estimated General Fund Revenue (One Time) 2.0 Total Estimated Revenue $217.7 Projected Year End Balance* $0.3 *This amount is only an estimate and is subject to change. 16 Mid-Year Budget Adjustments BUDGET ADJUSTMENTS Community Services - $18,000 for maintenance costs of new Senior Center facility (General Fund - partial year) Library Services - $122,000 for donations received BUDGET NEUTRAL Various Departments - $19,418 transfers to various departments EOC Fund 238 for El Nino Winter Storm expenses Transfers between funds to properly record expenses based on eligible expenses and funding in available grants 17 FY 2016/17 Preliminary Estimates 18 FY 2016/17 Financial Outlook ❑ U.S. GDP for the 1st Quarter of 2016 was slightly positive at 0.5%, a decline from the 4th Quarter of 2015, which was 1 .4%. ❑ The Los Angeles/Orange CPI is 1 .7% as of March 2016. ❑ Consumer Confidence Index declined moderately to 94.2 in April, as expectations regarding short term have moderated. ❑ The Index of Leading Economic Indicators was a negative -0.2% in April signaling a slowing down of the economy. ❑ California trade exports are down, impacting State's economy. ❑ Growth in the City's Transient Occupancy Tax has moderated. ❑ Projected local development revenue is expected to decline considerably next year by approximately $ 1 M to $2M. 19 FY 2016/17 Financial Outlook ❑ Preliminary analysis of FY 2016/17 projections indicates the need to "hold the line" in the City's General Fund Budget ❑ Revenue Projections o Slight to modest General Fund revenue projections of two percent overall, with varying percentages based on detailed review ❑ Pension and Other Fixed Cost Increases o Higher Ca1PERS Employer Rate Increases o Continuation of budgeted strategies to reduce unfunded liabilities o Workers' Compensation costs continue to rise ❑ User Fee Study and Review o The City's fees have not been updated since 2009 o Recommendations will be forthcoming 20 FY 2016/17 General Fund Budget Estimates (DRAFT Preliminary Baseline) FY 2016/17 is a "No Growth Budget" No Supplemental Forms provided No significant departmental enhancements included Flat staffing levels are recommended Revenue increases are projected, but are slight to modest Equipment Replacement at $5.0 million (flat) 15 % Infrastructure Charter requirement met 21 FY 2016/17 General Fund Estimates (DRAFT Preliminary Baseline) Fixed Cost Increases : Negotiated and projected labor contract costs included PERS rate increases of $3 .0 million 800 MHz funding of $ 1 million LED Streetlight Retrofit debt service $572k Software system maintenance contractual increases Animal Control contract increases 22 FY 2016/17 Preliminary C . General Fund Baseline Overview Description In Millions FY 2015/16 Adopted Budget $ 216.7 PLUS: ➢Ca1PERS Rate Increases 3.0 ➢Labor Contracts and Minimum Wage 3.1 Adjustment ➢Elections 0.1 ➢Reductions in Annual Bond Debt Service (1.5) ➢Elimination of One-Time Funding (0.5) ➢Animal Control Contract Increases 0.3 FY 2016/17 Preliminary Estimate (Expense) $ 221.2 Structural Increase to Baseline from FY 2015/16 +$4.5 % Increase to Baseline from FY 2015/16 +2.1% 23 FY 2016/17 Revenue (Preliminary Estimates) General Fund Revenue Estimate of $221.2 million, reflects an increase of $4.6 million, or 2.1 % Secured Property Tax, the largest property tax category, is estimated at $48 .5 million, an increase of 2.4% Sales Tax is estimated at $39.0 million, an increase of $3 .3 million based on a true up for the triple flip Transient Occupancy Tax is estimated at $ 10.5 million, reflecting a modest increase of 2.0% Planning and Building permit and plan check revenue is declining by approximately $ 1 million to $2 million. *Year over year increases as compared to FY 2015/16 Revised Projections. 24 Budget Challenges and Opportunities General Fund Requests and Needs Equipment Replacement Requests $ 8.7 million Capital Improvement Requests $ 13 .6 million Arterial Street PCI of 80 - Good $ 1 .2 million Residential Street PCI of 80 $ 3 .2 million Vol Information Technology Needs $ 10.0 million Storm Drain Needs $200.0 million 26 City's Aging Technology Systems The City has about 300 applications and systems across all 13 departments to perform critical operational functions The City has 1 ,400 internal users of these systems and 200,0000 external users Many of the City's software systems and programs are aging and in some cases are no longer compatible with other systems Due to the recession, many of the City's systems were not upgraded or replaced after their useful life was exhausted As a result, several systems are difficult to operate and may soon become unreliable Ensuring the City's software systems are well maintained, operable and reliable is essential to the City's functionality 27 Major Business Systems u Wam.Avn¢s,znls Major Business Systems Financials ERP +u+3FT Lab"rPmletll"n 1415 FY 15116FY H u"wn Fuow New Veda la oewea �� ra.Ra1° uvane momnN 1 ansFv SYmpro ve>roo raeaarc I".camera Ti.ef"q. snip senm�Finq asf9s Fr n�a� re"era aso-sns Payb 1nu Fr Ra�.aele aroartlaq PaSame urea Prmlhq Fas1e! 91I13 FT 4fY11 FY £n[eryrse FkA Real Eae[e M gmt Sp1em 1G15 FY Proovremenl Fi¢I 41113 FT t51'16fY Fu_I519em F�hwiis Inxnfory pgTg FT J S"miaamaaa 1319h FV 5ehn EIee.Payments Irtd JdSaMare 1ln3 FY 14ffi FY SpL Repoe 1 VP2 FT RPS Enterprise Lantl n an Paym°"' Managetlfenl(ELM) omen. Dire¢pevasn, wo-arraa".awa era M m�el vapmeam Exislln95ystems ReplaretnentlU P9raBe sorer ar Priady Level o-vereelm bluln . Hlgn pn"nery vamo-ae Fati warms � uvv�aaela vb�me"1 Fire Impe '°u ao-aam 8 nlgn pdo-nM Nor buaaetm cnstisn Repm@ wnm sv 5esrs "'This tliagram tloes NOT include public safety systems,wcb servers,inlrastructureservers,enterprise Na parcree upgraea apes that do not interact with JOE and miscellaneous rmmamentawsbme rsystemrs,dafabarsers and applications. 8 Sample of Aging Business Systems Supported1 Annual Sample Business No Longer Transaction Estimated Cost of Systems No replacement in 17 ME Financial Software years System ("upgrade" in 2014) $344.0 M Up to $5.0 M Kronos Payroll and Timekeeping System 9/30/2016 $165.0 M $0.1 M Cashiering System 12/31/2012 $168.0 M $1.2 M Citywide Permitting System (ELM) 12/31/2014 $10.0 M $3.2 M 12/31/2012 Utility Billing System (in progress) $60.0 M $1.2 M 29 I Pensions and Liabilities r,nvup�nr. ., w Plans to Reduce Unfunded Liabilities Actions Taken to Reduce Unfunded Liabilities Total Taxpayers' Estimated Savings* PARS Pre-Payment $59,606 7.75% Discount Rate Change to 7.50% — No Phase In 1,027,000 Retiree Supplemental "16 to 10" Plan 7A0,000 Retiree Medical "25 to 10" Plan 9,200,000 Early Payoff of Miscellaneous Retiree Medical TBD Subtotal $17,686,606 PERS "1 = 5" Plan (Safety) 53,680,116 Total $7193669722 * Actual performance will be based on market conditions and actuarial gains and losses during the amortization period. 31 Section 115 Trust Benefits In FY 2014/15, a year end transfer and deposit of $ 1 .0 million was made into a new Section 115 Trust Staff recommends the deposit of $ 1 .5 million more into Trust from existing sources (GF Reserve of $500K and "One Equals Five" current year budget of $ 1 .0 million) Highlights Provides alternative investment portfolios and risk tolerance levels Provides local control of funding, investments and payments Provides greater flexibility as it allows distributions to be made for all of the City's retiree benefit plans including: CalPERS (both Miscellaneous and Safety) Retiree Supplemental Plan Retiree Medical Plan (OPEB CERBT Plan with PERS) 32 FY 2016/17 Proposed Budget Calendar Proposed Date Item n March 10, 2016 Budget Kick-Off April 8, 2016 FY 2016/17 Budget Forms and Narratives Due May 2, 2016 FY 2015/16 Mid-Year Budget Study Session April 26 — June 2, 2016 FY 2016/17 Department Budget Meetings with City Manager July 18, 2016 FY 2016/17 Proposed Budget Study Session C September 6, 2016 FY 2016/17 Budget Adoption: City Council Public Hearing September 19, 2016 FY 2016/17 Budget Adoption: City Council Public Hearing (Alternate Adoption Date) October 1, 2016 Fiscal Year 2016/17 Begins i i I 33 Questions ? FY 2015/16 Mid-Year Budget Update .Mcuy 2, 206