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Home My WebLink AboutMulti-Year Budget Update and Discussion - Presentation by Di SUPPLEMENTAL COMMUNICATION , Date: / -/ 7 - aoia Agenda 4em No. oo^) MULTI-YEAR BUDGET UPDATE AND DISCUSSION January 17, 2012 SUMMARY Recap of Last Year's Budget Performance — FY 10/11 (Unaudited) Update on Current Year — FY 11 /12, RDA and State Budget Long Term Financial Plan Update Review of Financial Policies and Reserves CityCouncil Direction and Next Steps p z FY 10/11 Budget Performance (Unaudited 9/30/11 ) r General Fund revenue projected at $ 185.3 million Includes both recurring and one-time revenue ($2. 1 million) General Fund expenditures, liabilities and loan repayments projected to total $ 179.5 million In addition: $1 .3 million to CIP reserve to fund additional street repairs and improvements $1 . 1 million set-aside to pay off PARS liability 3 years ahead of schedule $0.6 million set-aside for Worker's Comp. third-party claims account Results in estimated ear-end balance of 2.8 million or 1.5% of the Y $ General Fund* (Unaudited) FY 10/ 11 and FY11 / 12 Budget Accomplishments ➢ The City's efforts to cut costs and increase revenue over past 4-5 years have stabilized the General Fund Budget ➢ Tight fiscal controls and a culture of fiscal restraint have yielded positive results ➢ Labor concessions provided $2.0 million in FY 11/12 savings including PERS pick up of$1 .8 million ➢ Dipping into City's reserves not required to balance budget ➢ Fiscal prudence has resulted in reducing the City's liabilities ➢ Preliminary review as of December 2011 indicated FY 11/12 ending in W lance and FY 12/13 may not require additional cuts 4 r � �� ;; �� California Redevelopment Association � � Redevelo meat. Buildin Better Comrnurnt�es .a cw_ i�li External Factors Impacting City Budget (RDA) Supreme Court ruling in CRA vs. Matosantos - December 29, 2011 ► California Supreme Court decision upholds AB 1 X 26 and strikes down AB 1 X 27 ► Creates worst case scenario for City ► Does not allow for Redevelopment Agency to continue on a "pay to play" basis ► City/RDA will no longer receive approx. up to $10 million in tax increment annually ► All Redevelopment actions to be transferred to a successor agency (the City) on February 192012 ► League of California Cities and CRA working with State legislators to push back February 1 disbanding date in hope of reaching a compromise (AB 659 introduced by Padilla) Auk- External Factors Affecting Budget State facing a $9 billion budget deficit in FY 12/ 13 y Governor's Budget does not include additional direct cuts to cities at this time However, Governor's budget solutions dependent on $4 billion in new taxes on November 2012 ballot National and Regional economies continue to show signs of slow improvement Sales Tax TOT Unemployment ti 7 What is our multi-year outlook as a result ? e �1 �aw. " . ces e� 7 , _. Sion �0 . s Long Terre Financial Plan (LTFP) Assumptions : (Scenario 1 ) o Neutral labor costs adjustments No additional personnel RDA transfer is maintained o $ 1 .0 million additional for Equipment Replacement each year $ 1 .5 million more for Infrastructure in FY 12/13, and an additional $ 1 million each year thereafter, to meet the 15% infrastructure Charter requirement o Maintain status quo 40 Long Term Financial Flan (LTFP) Object Projected Adopted Projected Projected Projected Account Year-End Budget Budget Budget Budget FY 2010/11 FY 2011/12 FY 2012/13 FY 2013/14 FY 2014/15 SALARIES & 126,852,451 131,693,787 131,922,501 132,629,462 133,221,484 BENEFITS OPERATING 45,495,067 43,236,263 42,953,918 43,403,770 43,858,426 INFRASTRUCTURE 34,008 1,300,000 2,800,000 3,800,000 4,800,000 EQUIPMENT 933,098 3,000,000 4,000,000 5,000,000 6,000,000 ON-OPERATING 4,652,030 4,317,928 2,552,540 2,250,010 2,251,510 TOTALS 177,966,654 18395479978 18492289958 18790839242 19091319420 10 Long Term Financial Plan ( LTFP) Scenario 1 Actual Unaudited , Adopted* Projected Projected FY 09/10 FY10/11 I FY11/12 M i FY 13/14 FY 14/15 Revenues $179.0 $185.3 $182.8 $184.4 $185.9 $187.9 Expenditures and Liabilities $178.5 $183.3 $183.5 $184.2 $187.0 $190.1 Surplus/(Deficit) $0.5 $2.8 ($0.6) $0.2 ($1.1) ($2.1) *$1.3 million in street repairs from capital improvement reserves bftftm 11 Long Term Financial Plan (LTFP) Scenario 2 w/o RDA Transfer Unaudited Adopted Projected Projected Projected Revenues $179.0 $185.3 $182.8 $184.4 $185.9 $187.9 Expenditures and Liabilities $178.5 $183.3 $183.5 $184.2 $187.0 $190.1 Surplus/Deficit $0.5 $2.8 ($0.6) $0.2 ($1.1) ($2.1) RDA Transfer Estimated Property Taxes* $2.0 $2.0 $2.0 Surplus/Deficit $0.5 $2.8 ($0.6) ($2.7) ($4.0) ($5.0) * Actual property tax amounts are not yet available and may differ significantly. hftWIMM 12 review of Equipment 40 Deserves and Financial Policies 0 �FB !: •.g09 P . �'. 13 a Equipment Inventory and Deserves Update ► Current equipment reserves: $6.9 million ► Current annual equipment budget: $3 .0 million IM ... ► Long Term Financial Plan increases budget by $ 1 .0 million annually until $6.0 million is budgeted in FY 14/15 Nftwomw 14 Equipment Inventory and Reserves ► What are the City's equipment needs? Equipment Category Amortization Vehicles and Related Equipment #574 $ 51.1 million 10-15 Years I.S Department Equipment $ 31.6 million 5-10 Years All Other Equipment $ 65.2 million 10-20 Years Total $ 147.8 million - There is an estimated need of$9.5 million per year to maintain status quo assuming a 10 year average life of equipment - The current reserve of$6.9 million does not equal even 1 year of equipment replacements 15 Financial Policies Review* "Allocation of the audited General Fund unassigned fund balance will be done as follows if, and until, the Economic Uncertainties Reserve commitment is fully funded (i.e., two months of General Fund expenditures):" - 50% to Economic Uncertainties Reserve - 25% for Infrastructure Fund - 25% to Capital Improvement Reserve (CIR) Recommendation: One year waiver of Financial Reserve Policy given RDA Supreme Court Ruling MM *Source: Adopted FY 11112 Budget Page 426 16 Financial Accomplishments ► Three years of budget solutions have resulted in over $26.5 million in budget reductions ► Over 170 positions have been eliminated from the City's budget since FY 08/09 ► In addition, over 35 positions have been frozen or defunded in the Police, Fire and Community Services Departments over the past 2-3 years ► Increased and continuing employee pick ups reduced the FY 11/12 deficit by $1.8 million ► New Shared services agreements are generating $878,000 in new revenue ► $1.5 million will be saved over next three years by paying off PARS liability early ► Emergency reserves are intact providing greater safety net and AA- credit rating ► FY 12/13 General Fund Budget balanced, before State takeaways 17 Discussion and Council Direction ► Waive financial policy for 1 year in light of RDA ruling ► Deposit preliminary, unaudited estimated $2. 8 million fund balance into Budget Stabilization Fund to protect against State takeaways ► Approve repayment of remaining PARS liability of $4.5 million (RCA to City Council in February/March 2012) INftobw 18 Questions or Comments ` 19 4