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Home My WebLink AboutSupplemental Communication - Study Session #2 - FY 2016-17 M 5/1/2017 FY 2016/17 Mid Year Budget Update May 1, 2017 Presented by thIFin De Overview ❑ FY 2015/16 Audit and Year End Results ❑ FY 2016/17 Mid Year Budget Update ❑ FY 2017/18 Preliminary Forecast SUPPLEMENTAL GOMMUNICATION Mee#ng Data: 5— -l - ao l 7- Agenda(tern No.: S #•Z- 1 5/1/2017 FY 2015/16 Financial Results Audit and Year End Overview E; 5% FY 2015/16 Audit Results o Auditing,firm of Davis Farr LLP audited the City's financial statements and internal controls o FY 2015/16 Comprehensive Annual Financial Report (CAFR) received an Unmodified (Clean) Audit Opinion o The City's CAFR is award winning - has received the Government Finance Officers Association's (GFOA) Excellence in Financial Reporting Award for 30 years,. 4 2 5/1/2017 Audit Results o Reports issued: > Comprehensive Annual Financial Report > SAS 114 Letter: Auditor Communications > Appropriations Limit Agreed-Upon Procedures > AQMD Report o Reports in progress > SAS 115 Letter: Internal Control Recommendations > Single Audit Report o Issued "unmodified" opinion on financial statements on March 30, 2017 5 Areas of Audit Focus in FY 15/16 Purchasing Compliance Testing Implementation Y of Fair Vaiue a • b 3 5/1/2017 Upcoming Accounting Changes o GASB 77: Tax Abatement Disclosures > Year Ending,September 30, 2017 > Disclosure of tax sharing agreements with developers and others o GASB 75: Other Post Employment Benefits > Year Ending September 30, 2018 > Unfunded actuarial accrued liability will be recorded in the financial statements instead of only disclosed in the Notes FY 2015/16 Performance (Audited) Government-Wide Highlights: All Funds ASSETS Current and Other Assets $295.6 Capital Assets 824.2 z LIABILITIES Current and Other Liabilities 20.6 Long-Term Obligations* 508.6 *Reflects GASB 68 recording of Net Pension Liability of$401.2 million 8 4 5/1/2017 GASB 68 Accounting & Financial Reporting for Pensions o Revises and establishes new financial reporting requirements for governmental agencies that provide their employees with pension benefits. o Requires governments to record the unfunded liabilities for public pension costs on the face of the financial statements - not only in the "Notes" section. o The GASB 68 adjustment is being applied by all governmental entities nationwide:. o Two types of actuary pension reports from,CaIPERS > GASB 68 Accounting Valuation Report used to comply with governmental accounting standards. > Actuarial Valuation Report used to determine annual required employer contribution. 9 FY 2015/16 General Fund Actual Expenditures �._ . EXPENDITURES Actual Citywide Departmental Expenditures $215.2 General Liability Internal Service Fund Transfer 7.0 Section 115 Trust Transfer 2.5 Technology Infrastructure Fund Transfer 0.8 io 5 5/1/2017 FY 2015/16 General Fund Actual Revenue General Fund Recurring Revenue $215.8 Triple Flip Windfall(One Time) 4.5 Other General Fund One-Time Revenue 3.3 11 FY 2015/16 General Fund Actual Highlights F .; WN4 1 Total Sources of Funds -Total General Fund Revenue $223.6 -Use of General Fund Set-Asides for Section 115 Trust 1.5 -Use of Redevelopment Dissolution Set-Aside to fund expenses disallowed by DOF 0.2 -Use of Park Improvement Set-Aside for Central.Park 0.2 Total 225.5 Total General Fund Expenditures (225.5) MUMAY29,16i _ s 12 6 5/1/2017 General Fund Balance FY 2015/16 Audited (In Thousands) Economic Uncertainties $25,011 $25,011 $25,011 Litigation Reserve 900 900 - Equipment Replacement 8,295 8,295 8,295 Redevelopment Dissolution 1,323 1,323 1,080 General Plan Maintenance 720 720 232 Capital Improvement Reserve(CIR) 7,136 7,936 8,046 Senior Center Debt Service Reserve 2,000 2,000 2,000 CaIPERS"One Equals Five Plan" 1,500 500 - CaIPERS Rate Increase 1,287 1,287 1,287 City View Replacement 695 889 1,028 Animal Control Shelter - 1,500 1,685 City Facility Security Enhancements - 350 - Sand Replenishment and Park Improvements - 366, 650 Section 115 Trust - 1,000 500' Triple Flip - - ;3,745 Encumbrances/Restricted/Prepaid Insurance 12,187 12,715 9,288 � ,dM J "fit 13 FY 2016/17 Mid Year Update 4 r , �c 7 5/1/2017 FY 2016/17 General Fund Adopted Budget Overview General Fund Revenues $220.4 Total Sources of Funds $220.4 General Fund Expenses 220.4 Total Uses of Funds $220.4 Surplus/(Deficit), $0.0 FY 2016/17 General Fund Highlights • The General Fund Budget was adopted on September 6, 2016 • A slight General Fund revenue increase of 1.7%was projected at budget adoption ➢ This is being monitored closely given softening of economy ➢ Example,Parking revenue coming in lower than budgeted • More than half of the budget is for Public Safety • 15%Charter requirement for Infrastructure is met • Strong financial and emergency reserves of$62 million 8 5/1/2017 Economic Indicators ❑ 15t Quarter,GDP figures released Friday show a slowing of the economy at 0.7 percent, a sharp decline from the 2.1 percent rate growth in the previous quarter ❑ On a positive note,the CPI for L.A.and Orange County in March was up 2.7%from last year ❑ Also,the Dow Jones is up 5.96%this year, S&P up 7.4%and NASDAQ up 12.3%,which is positive , ❑ New orders for manufactured goods were up 1% in February 'Preliminary General Fund Revenue Estimates ❑ Hotel Tax revenue is expected to perform better than budgeted by approximately$988,000 ❑ Property Tax revenue is performing better than budgeted by $260,000 ❑ However, sales taxes are coming in lower than anticipated by about$1.6 million ❑ Parking revenues are down by$465,000 due to cold weather and less visitation to local beaches ❑ Development activity is also down by approximately$800,000 ❑ Utility Users Tax revenues are down by about $600,000 9 5/1/2017 FY 2016/17 General Fund Mid-Year Review (as of March 31,2017) General Fund Revenues $217.5 Total Sources of Funds $217.5 General Fund Expenses 219.1 Total Uses of Funds $219.1 Preliminary Estimated Challenge: -$1.6 - As a%of GF Budget -0.7% Recap ❑ Fiscal Year 2016/17 Budget is showing signs of weakness ❑ PIERS Discount Rate Change will impact City over next 3-7 years ❑ Rising CalPERS costs will continue to strain annual budgets ❑ Governor's Budget does not reflect cuts to cities; however,the State legislature has not finalized it yet ❑ Federal HUD/CDBG Funding elimination is proposed ❑ Caution must be exercised in developing the FY 17/18 Budget ❑ A plan must be developed to address$23M-$29M PERS hit to the budget (approx. $4.51VI to$61VI per year) ❑ The FY 2017/18 Proposed Budget recommendation is to implement a "Status Quo" Budget 10 5/1/2017 Rising Pension Costs and What We Are Doing About It ❑ The"25 to 10" Plan was implemented in FY 2013/14 to 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 ❑ In FY 2015/16 the City created anew Section 115 Trust with a $2.5 million contribution and paid off an equal amount of Safety pension costs in the Retiree Supplemental:Plan Next Steps Timeline ❑ May 2017—Ca1PERS Discount Rate Change Overview ❑ May 2017— FY 2016/17 Mid-Year Budget Update ❑ July 2017—FY 2017/18 Proposed Budget Recommendations ❑ August 2017—Budget Study Session(s) (Tentative) ❑ October 1, 2017—New Fiscal Year Begins ❑ February 2018—CalPERS ALM (Asset and Liability Management) Review My 11 5/1/2017 QUESTIONS? h�a 12