HomeMy WebLinkAbout2008 Long Term Financial Plan City Council Study Session - L CITY OF HUNTINGTON BEACH
- INTER-DEPARTMENTAL COMMUNICATION
FINANCE DEPARTMENT
TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
FROM: DAN T. VILLELLA, CPA
VIA: PAUL EMERY, INTERIM CITY ADMINISTRATOR
DATE: AUGUST 6, 2008
CC: FINANCE BOARD AND EXECUTIVE TEAM
SUBJECT: LONG TERM FINANCIAL PLAN
As part of the Strategic Plan adopted by the City Council in 2006, Finance staff in
conjunction with the Finance Board was directed to develop a Long Term
Financial Plan (LTFP). The goal of this plan was to create long-term financial
strategies for funding backlogged capital and maintenance projects while
ensuring sufficient reserves to withstand major revenue fluctuations in order to
provide city services during economic downturns.
On March 3, 2008, the draft LTFP was presented to the City Council by the
consultant, Public Financial Management (PFM). At that time, Council conveyed
concern over the sustainability of revenue assumptions included in the LTFP.
The attached document addresses those concerns by including scenarios
depicting stagnant and decreasing property and sales tax revenue in the Risk
Analysis section of the document. Under both scenarios, the fund balance of the
General Fund would begin to decrease immediately. After in-depth analysis of
revenue projections as part of the fiscal year 2008/09 budget preparation
process, both Public Financial Management and Finance staff support the
revenue assumptions incorporated into the LTFP. These assumptions result in
the enhancement of General Fund reserves in both the short and long term.
The Long Term Financial Plan has already proven to be a valuable tool in
determining the long term effects of financial decisions made today. It is
intended to be a dynamic model that will continually be updated and monitored
as major financial decisions are made. If you have any questions, please do not
hesitate to contact me.
DTV/jl
Attachment
2007- 08
Long-Tenn Financial Plan
City of Hw BaAh
April 28, 2008
Prepared for the
City of Huntington Beach
Public Financial Management
Table ®f Contents
Page
I.Executive Summary........................................................................................1
Summary of 2008 Financial Plan...............................................................1
CityStrategic Plan........................................................................................3
City Infrastructure Needs...........................................................................4
Integration with Annual Budget................................................................4
RiskFactors..................................................................................................4
II.Projected Revenues and Expenditures......................................................6
General Fund Projections..........................................................................6
Special Revenue Fund Projections............................................................7
III.Infrastructure Needs...................................................................................9
Five-Year Capital Improvement Program...............................................9
IIlVP........................................................................................................... 10
Infrastructure Funding Capacity............................................................ 13
Debt Capacity Analysis............................................................................ 14
IV.New Funding Sources.............................................................................. 17
New Funding Strategies...........................................................................17
V.Risk Analysis...............................................................................................21
ContingencyPlanning..............................................................................24
Appendix I:Revenue and Expenditure Assumptions...................................i
General Fund Revenues..............................................................................i
General Fund Expenditures......................................................................ix
Special Revenue Fund Revenues and Expenditures...........................xin
Ten-Year Summary Schedules.............................................................xviii
1® Executive Summary
The Long-Term Financial Plan(the"LTFP") is a 10-year plan for the City of Huntington
Beach(the"City")that identifies a strategy to fund a maximum level of capital projects,
create a prudent level of reserves, and maintain an acceptable level of municipal
services.
The 2008 LTFP is the City's first formal long-term financial plan. The preparation of the
LTFP is a goal identified in the City's 2006 Strategic Plan. The LTFP includes the City's
General Fund and Special Revenue funds, but does not include the City's enterprise
funds. The City intends to utilize the information in the LTFP as part of its annual budget
development and update the LTFP each year.
Summary of 2008 Financial Plan
2006-07 End-of-Year Financial Results
The City ended its fiscal year 2006-07 with continued growth in its largest revenues.
General Fund revenues were$9.1 million higher than the prior year(a 5.5% increase),
while General Fund expenditures were$8.9 million above the prior year(a 5.4%
increase). General Fund revenues exceeded expenditures by$3.2 million for the fiscal
year, increasing the end-of-year General Fund balance to$43.8 million.
The City's Special Revenue Fund revenues included in the LTFP are comprised of state
subventions, local transportation sales tax, and developer fees. Those funds that support
ongoing programs—the Gas Tax, Measure M, and RDA Debt Service—experienced
modest to strong annual revenue growth in FY 2006-07 of 0.3%, 4.0%, 10.1%
respectively.
City of Huntington Beach—2007-08 Long Term Financial Plan
FY 2006-07 LTFP SPECIAL REVENUE FUNDS
MAJOR REVENUES
Change
FY 2006-07 From
Major Total Prior
Fund Revenue Revenue Year
Air Quality Fund State subvention $242,615 1.6%
Traffic Impact Traffic impact fees 317,299 -25.7%
Gas Tax Fund State gas tax 3,612,854 0.3%
Park Acquisition and Development Developer fees 1,383,208 130.0%
Drainage Developer fees 80,258 -36.1%
Measure M Fund County sales tax 2,543,911 4.0%
Library Development Developer fees 254,844 -13.9%
RDA Lease income 549,166 16.1%
Debt Service HBPFA Transfer in 6,429,105 -2.1%
RDA Debt Service Property tax increment 15,018,990 10.1%
Projected Revenue and Expenditures
The LTFP includes a baseline 10-year projection of revenues and expenditures used to
evaluate the City's future financial condition and capacity to fund infrastructure needs.
The growth assumptions in the baseline projection are based primarily on historical
growth, a 3%general inflation rate, and existing City contractual obligations(e.g. labor
agreements and debt service).
For the City's General Fund, total revenues are projected to increase at a moderate rate
of 2.7% to 5.2%over the next ten years, down from the 7.8% rate experienced over the
last three years. Revenue projections for the first five years are tempered due to an
expected slowing of property value appreciation and conservative assumptions regarding
growth in the local economy. Projected General Fund expenditures(excluding capital
and non-operating expenses) increase, on average, at a 3.5% annual rate, which is
slightly less than the growth rate of revenues. Expenditures are driven primarily by salary
and benefit costs. The City has entered into labor agreements with each of its bargaining
units that results in approximately 2%to 5% annual increases in salary cost. The LTFP
assumes that salary and benefit costs will grow at a comparable rate at the end of the
existing agreements.
Although there is expected slower growth in General Fund revenues over the next five
years, projected General Fund revenues are greater than recurring expenditures
(excluding capital and non-operating expenses). Projected General Fund revenues
exceed recurring expenditures by$6.0 million in FY 2008-09, steadily increasing to$41.4
million in FY 2016-17. The excess of recurring revenues over recurring expenditures can
serve as a funding source for City infrastructure in addition to the infrastructure included
City of Huntington Beach—2007-08 Long-Term Financial Plan J 2
in the City's five-year CIP. The LTFP includes$127.4 million of City infrastructure
expenditures funded from the General Fund (including$102.9 million of[IMP projects
starting in FY 2011-12).
The following table identifies the City's baseline projection of operating revenue and
expenditures(i.e. recurring revenues and expenditures), equipment and vehicle and
infrastructure expenditures, and fund balance for the General Fund.
CITY OF HUNTINGTON BEACH
PROJECTED GENERAL FUND REVENUES, EXPENDITURES, AND FUND BALANCE
(Dollars in Millions)
00
Revenue $185.0 $190.1 $197.8 $206.8 $216.1 $227.0 $238.2 $250.3 $263.2 $276.8
Expenditures 178.5 184.1 189.3 194.6 200.1 206.7 213.6 220.7 227.9 235.4
Revenues Over
Expenditures $6.5 $6.0 $8.5 $12.2 $16.1 $20.3 $24.6 $29.7 $35.3 $41.4
Equipment and Vehicles 9.1 7.3 7.0 7.2 7.4 7.6 7.9 8.1 8.4 8.6
Infrastructure 0.6 2.4 2.4 2.5 7.1 13.1 14.7 27.4 28.2 29.1
Fund Balance $40.6 $37.0 $36.1 $38.5 $40.1 $39.6 $41.6 $35.8 $34.4 $38.2
For the City's Special Revenue Funds, a larger proportion of the revenues are available
to fund capital expenditures, in contrast to the General Fund which must support much of
the City's operating expenditures. The LTFP includes funding from Special Revenue
Funds for$70.9 million of capital expenditures, including$36.1 million currently included
in the City's five-year CIP.
Infrastructure Needs
The amount of public infrastructure(defined as long-lived capital assets)that is funded in
the LTFP includes only a portion of the"needs" identified by the City. As is the case for
many governmental agencies, infrastructure needs must consider the limited availability
of public resources. The LTFP attempts to fund the most critical needs in the City,
including those that impact public safety or help avoid more costly future reconstruction
projects. For those needs that cannot be met, the City must prioritize its unfunded
projects and identify new revenue sources or other strategy to address the most pressing
needs.
City Strategic Plan
The City Council adopted the City of Huntington Beach Strategic Plan in August 2006.
The Strategic Plan identified the City's priorities for goals and projects for the next five
years, including the following financial goals.
Create a long term financial strategy for funding the City's backlog of capital
projects and ensure the City has sufficient reserves to withstand major revenue
fluctuations.
City of Huntington Beach-2007-08 Long-Term Financial Planf 3
• Understand the financial implications of decisions before they are made and
disclose the fiscal impacts of the"pension crisis."
The LTFP addresses the financial goals of the Strategic Plan through the development of
10-year revenue and expenditure projections. The projected expenditures include a
maximum amount of Capital projects that can be funded with a prudent level of debt,
while maintaining recommended reserve balances, as well as conservative estimates of
the City's liability for employee pension and other benefit costs. The LTFP also includes
several revenue projection scenarios in order that the City can evaluate the financial risks
of revenue fluctuations and the adequacy of its reserves.
City Infrastructure Needs
The City identified $70.1 million of infrastructure expenditures, excluding water and sewer
funds, in its most recent CIP. However, this amount is based on funding availability and
does not encompass all of the City's infrastructure needs. As part of the LTFP, the City
has identified an additional $304.3 million (in year-of-expenditure dollars)of infrastructure
needs that are currently unfunded. The baseline LTFP identifies funding for$137.7
million of these additional infrastructure needs, leaving the balance unfunded. In the
event the City wishes to fund the unfunded balance, a portion could be paid from debt
financing, which would leverage future City revenues, or attempt to implement new
funding sources, such as assessment districts or a possible stormwater user charge.
Integration with Annual Budget
The LTFP is linked to the City's Annual Budget as its uses the budget as a source of data
and, in turn, helps craft budget decisions. The revenues, expenditures, and fund
balances in the City Budget are used as a starting point for the projections in the LTFP.
The LTFP projections help the City better evaluate the long-term financial impact of
current budget decisions, as the LTFP identifies future expenditure requirements given
current budget spending and the impact of policy decisions that affect future expenditure
growth.
Risk Factors
The projected revenues, expenditures, and fund balances in the LTFP are a"baseline"
scenario, given the City's current set of assumptions. Inevitably, actual revenues and
expenditures will differ from the LTFP projections, as there are inherent risks in local
government financial projections. Indeed, there are several risk factors that could
significantly reduce growth in City revenues or increase certain recurring expenditures.
The State and the rest of the nation are currently experiencing a major retraction in
housing values that has the potential to reduce future growth in property tax revenue(the
City's largest revenue source). Declining housing prices also have the potential to
negatively impact the broader regional economy, which could reduce City sales tax
growth. Although, historically, the region's housing and economic slowdowns have been
relatively short-term, the potential result of these risk factors(and others)could
City of Huntington Beach—2007-08 Long-Term Financial Plan f 4
substantially restrict the City's ability to fund its infrastructure needs and ongoing City
services.
City of Huntington Beach—2007-08 Long-Term Financial Plan J 5
IIo Projected Revenues and Expenditures
In the baseline projection, City General Fund revenues exceed recurring expenditures
over the ten-year period of the LTFP, providing a moderate amount of"net income"for
capital expenditures. The baseline projection of the City's Special Revenue Fund
revenues assumes steady growth over the term of the LTFP that will generate a sufficient
amount of funding for recurring expenditures, the current five-year CIP, and an additional
$34.8 million for City infrastructure needs.
General Fund Projections
Revenues
Projected General Fund revenues increase at a 4.6% average annual rate over the ten-
year LTFP horizon. The projected growth rate for the City's primary General Fund
revenue, property tax, is less than the 5-year historical growth rate, reflecting an
expectation of slower real property appreciation. Sales tax growth is expected to be in-
line with the 5-year historical rate, as the potential for slowing sales with existing retailers
may be offset with sales from new retail outlets. The following table shows the historical
and projected growth rates for the City's primary General Fund revenues.
PRIMARY GENERAL FUND REVENUES
HISTORICAL AND PROJECTED GROWTH RATES
5-Year 10-Year
Historical Projected
Average Average
Growth Growth
Revenue Rate Rate Notes
Property tax[1] 8.1% 5.7% Slower projected growth during next
three years
Sales tax[2] 4.4% 4.3% A 5%growth rate starting in FY
2009-10;several new retail
developments may have positive
impact
Utility users taxes 4.1% 4.5% City expects steady future utility user
charge growth
Other revenues 3.5% Most other City revenues grow at
general inflation rate
Notes:
[1]—Historical average reflects property tax net of the"triple-flip,"which since FY 2003-04
replaces sales tax with property tax,and"in-lieu VLF,"which since FY 2003-04 replaces vehicle
license fee revenue with property tax.
[2]—Historical average reflects 1%and local safety sales tax revenue plus the triple flip
replacement of sales tax with property tax.
City of Huntington Beach—2007-08 Long-Term Financial Plan! 6
Expenditures
Projected General Fund expenditures are assumed to grow at various rates, including
historical averages and those rates set in contractual obligations, such as labor
agreements. In total, the City's projected operating expenditures, excluding capital and
non-operating expenditures, are assumed to grow at an annual rate of 3.5%over the next
ten years. The primary component of the City's General Fund expenditures, salary and
benefits (which represent 70%of General Fund expenditures in FY 2007-08), grow at an
average 3.4% rate based on existing labor agreements. The General Fund expenditures
do not reflect any changes in City staffing needed for any additional City programs or
level of service, or from attrition. The following table shows the historical and projected
General Fund growth rates for major expenditure categories.
PRIMARY GENERAL FUND EXPENDITURES
HISTORICAL AND PROJECTED GROWTH RATES
5-Year 10-Year
Historical Projected
Average Average
Growth Growth
Expenditures Rate Rate Notes
Salaries 4.7% 3.4% Agreements for most employees
through FY 2009-10;all future
increase at comparable rate after
end of existing agreement
Benefits 16.6% 3.4% Large historical increases due to
growth in CALPERS employer cost
Operating Expenses 10.5% 3.5% Large growth in repair and
maintenance;City assumes future
growth at slightly above inflation
Capital Equipment and 4.1% 3.0% Expenditures will be highly variable
Vehicles due to nature of vehicle and
equipment purchases
Special Revenue Fund Projections
The LTFP is limited to the following Special Revenue Funds:
• Air Quality Fund
• Traffic Impact
• Gas Tax Fund
• Park Acquisition and Development
• Drainage
City of Huntington Beach—2007-08 Long-Term Financial Plan 1 7
• Measure M Fund
• Library Development
• RDA
• Debt Service HBPFA
• RDA Debt Service
A detailed discussion of each major General Fund and Special Revenue Fund Revenue
and Expenditure is included in Appendix I.
City of Huntington Beach—2007-08 Long-Term Financial Plan f 8
III® Idrastructure Needs
The City determines its immediate infrastructure needs as part of the five-year Capital
Improvement Program ("CIP")that is updated each year. The improvements in the CIP
are based on needs identified in system master planning documents, or that help achieve
other Strategic Plan or policy objectives. The CIP also considers funding availability.
The LTFP includes the FY 2007-08 through FY 2011-12 CIP expenditures and funding
sources, for those expenditures funded from the General Fund and LTFP Special
Revenue Funds.
In addition to the CIP, the City undertook an extensive review of its long-term
infrastructure needs in 2000 as part of the Integrated Infrastructure Management
Program ("IIMP"). The IIMP estimated the total cost of the City's infrastructure needs at
$1.384 billion. The City has updated the IIMP infrastructure needs as part of the LTFP
and has identified capital expenditures that could be completed over the next ten years.
The LTFP attempts to fund a maximum amount of the IIMP infrastructure from available
resources identified in the baseline revenue and expenditure projections and within
prudent financial constraints, in the event the City chooses to use debt financing. The
LTFP also evaluates the potential to use new funding sources for specific infrastructure
categories.
Five-Year Capital Improvement Program
The City annually prepares a five-year CIP that identifies costs and funding sources for
capital projects in excess of$50,000. The City's current five-year CIP(FY 2007-08
through FY 2011-2012) identifies$70.1 million of new General Fund and LTFP special
revenue fund capital appropriations. Current year appropriations are funded primarily
from grants, and the Measure M, Gas Tax, and Traffic Impact Fee funds. The General
Fund Capital Improvement Reserve, which is a portion of the General Fund balance and
not a budget item, is expected to fund just 3%, or$822,000, of FY 2007-08 new capital
appropriations. The following table shows the General Fund and LTFP Special Revenue
Fund CIP that is included in the LTFP.
City of Huntington Beach—2007-08 Long-Term Financial Plan 9
CITY OF HWNTINGTON BEACH
FIVE-YEAR CAPITAL IMPROVEMENT PROGRAM
INCLUDED IN LONG-TERM FINANCIAL PLAN
(Dollars inMillions)
Category:
Drainage&Storm Quality $uu $1.2 $oa $oJ $uo $*.0
Facilities 2.1 01 0.1 0.2 0.2 2.6
mmuhunmvous 2.8 1.0 1.0 1.0 1.0 6.8
Parks&Beaches 10.7 15a uu Vo 00 26.2
Street&Transportation 11.* 7.3 aa 3.5 aa 29.7
Total $29.5 *usu $n.s $a.* $*J *70.1
Funding Source:
onnoru|rumu[l] $1.e $0.0 $0.0 $0.0 $0.0 $1.0
Air Quality 0.3 02 0.0 0.0 0.0 0.4
Traffic Impact 2.9 0.7 0.0 0.0 uu o.s
Gas Tax 2.8 aa 2.5 2.5 o.* 12.8
Park Acquisition 02 0.9 0.0 0.0 0.0 11
Measure 4.1 2.3 2.0 2.0 2.0 12,4
Library Development uu 0.0 0.0 0.0 0.0 0.0
Redevelopment Fund 0.2 2.6 0.0 0.0 0.0 2.8
CupA 0.0 0.0 0.0 Ou ou 0.0
FineMoo 0.6 0.0 0.0 0.0 0.0 0.6
Library Equipment 0.2 0.0 0.0 0.0 0.0 02
Grants/Other 16J 15.e 1.0 ua 0.2 34.6
Total $zo.s $25.0 $sa $e.4 $*J $70.1
[1]-Includes"Infrastructure Fund and Capital Reserve Fund"
The largest expenditure in the CIP is for the construction of the 45,000 square foot Senior
Canter planned in the Huntington Central Park area. The project will be built by the
Pacific City developer, in-lieu of developer fees, and there is no direct funding
requirement by the City. Other large expenditures include$18.5 million for the City's
Arterial Highway Rehabilitation pnugnom, which will improve sections ofMcFadden,
Graham, Garfield and Yorktown. Costs associated with these improvements are funded
from Gas Tax and Measure K8 revmnumm, and are included in the Cih/e Pavement
Management Plan.
IMP
|n20UO. the City prepared the Integrated Infrastructure Management Program report.
which identified infrastructure needs in the City over the next 2O-yaoro for roads,traffic
improvements, sb»nnwmbor. and parks. The report identified two separate areas ofCity
infrastructure needs: construction of new capital plant and mtructunaa, and the
replacement and rehabilitation of existing infrastructure. |n total, the City projected that
the cost of new capital construction projects was$331 million and rehabilitation and
replacement projects was$826 million. AddhionaUy, the City estimated that maintenance
City mHuntington Beach-20o7-0o Long-Term Financial Plan| 10
of existing capital would require$427 million in funding, with the majority of funds($301.2
million)coming from the General Fund.
Of the total$1.384 billion of infrastructure funding needs in the IIMP(including new
capital, replacement and rehabilitation capital, and capital maintenance), the City
identified a total of$525 million of potential funding sources(including the General Fund,
Gas Tax Fund, and Measure M Fund), resulting in a shortfall of$859 million. The
following table shows the estimated 20-year infrastructure cost(in 2000 dollars)and
shortfall identified in the IIMP.
limp
20-YEAR INFRASTRUCTURE COSTS AND SHORTFALL
(Year 2000 Dollars, in Millions)
Component Amount
Arterial Highways $172
Traffic Signals 39
Bridges 8
Storm Drains 128
Parks 112
Buildings 174
Landscape Medians 20
Local Streets 99
Alleys 35
Parking Lots 15
Sidewalk/Curb/Gutters 82
Wastewater 128
Drainage Pump Stations 142
Highway Block Walls 46
Playgrounds 2
Beach Facilities 27
Fleet/Equipment 63
Traffic Signs&Striping 13
Trees/Landscape 57
Street Sweeping 22
Total $1,384
Available Funds (525)
Shortfall $859
limp Update
The City has identified an updated list of unfunded infrastructure needs for the purposes
of the LTFP. The following table shows the estimated cost and schedule for the City's
unfunded infrastructure needs over the next nine years.' The City estimates that
infrastructure investments totaling$304.3 million (including 3% inflation)are needed over
the term of the LTFP. The City's unfunded infrastructure needs include replacement of
'The 1&year of the IIMP update extends past the final year of the LTFP. p
City of Huntington Beach—2007-08 Long-Term Financial Planf &�
stormwater pump stations, residential concrete replacement, street pavement and
rehabilitation, bridge improvements, alleyway improvements, replacement of block walls,
and improvements to City buildings. The following table shows the annual cost of the
City's unfunded infrastructure needs through FY 2016-17.
CITY OF HUNTINGTON BEACH
UNFUNDED INFRASTRUCTURE NEEDS
FY 2008-09 THROUGH FY 2016-17
(Dollars in Millions)
,... s.,.::. n,.....-.
"08-0919-12,:""Wf 3 13,14
Drainage $4.1 $9.5 $10.9 $11.3 $11.6 $11.9 $12.3 $12.7 $13.0 $97.4
Residential Concrete 6.4 7.7 7.9 8.2 5.5 5.7 5.8 6.0 6.2 59.4
Residential Pavement 0.9 1.1 1.0 0.9 0.6 0.6 0.6 0.6 0.7 6.9
Arterial Highways 7.2 11.0 12.5 13.5 6.4 6.6 6.8 7.1 7.3 78.3
Alleys,Lots,Block Walls 3.9 2.8 2.9 3.0 3.1 3.2 3.4 3.2 3.3 28.6
Buildings/Facilities 2.8 3.4 3.6 3.1 2.9 2.4 2.5 2.5 2.6 25.8
Parks/Playgrounds 0.8 0.8 0.8 0.8 0.9 0.9 0.9 1.0 1.0 7.8
Total $26.1 $36.3 $39.5 $40.7 $30.9 $31.2 $32.3 $33.1 $34.1 $304.3
The City has identified a priority ranking of the unfunded infrastructure projects included
in the IIMP update. The LTFP allocates available funding to the projects with the highest
priority. The following table shows the unfunded infrastructure projects, estimated cost in
2008 dollars, and the priority ranking.
CITY OF HUNTINGTON BEACH
PRIORITY OF UNFUNDED INFRASTRUCTURE PROJECTS
(Dollars in Millions)
Caitegory k Pro ect': I IS:H.::. RA un P;irivri�t
Drainage Heil Pump Station Construction $8.0 1
Drainage Replace Existing Pump Stations $85.0 2
Residential Concrete Petition Streets as of December 2007 $20.0 3
Arterial Highways Including Bridges Arterial Rehabilitation $47.0 4
Buildings/Facilities Buildings and Structures $21.9 5
Arterial Highways Including Bridges City Owned Bridges $21.3 6
Residential Concrete Downtown Street Light Replacement $9.0 7
Residential Concrete Non-tree related concrete requests $7.5 8
Alleys/Parking Lots/Block Walls Block walls $18.0 9
Arterial Highways Including Bridges Arterial Slurry $5.8 10
Residential Pavement Overlay/Reconstruction Backlog 2005-2007 $3.6 11
Buildings/Facilities ADA Transition Plan $2.5 12
Alleys/Parking Lots/Block Walls Alleys $5.0 13
Parks/Playgrounds Park lighting $1.5 14
Residential Pavement Overlay/Reconstruction Ongoing $3.0 15
Residential Concrete Non-petition streets 30%of city $20.0 16
Alleys/Parking Lots/Block Walls Parking lots(9 lots) $2.2 17
Parks/Playgrounds Play equipment replacement $1.0 18
Parks/Playgrounds Turf and landscape replacement $5.0 19
City of Huntington Beach-2007-08 Long-Term Financial Plan f 12
Infrastructure Funding Capacity
The LTFP allocates special purpose revenues to the unfunded infrastructure needs to the
extent the funds are available. The General Fund is used to fund any remaining
infrastructure needs.
The LTFP estimates that there is capacity in the major special purpose funds—Gas Tax
and Measure M—for approximately$34.8 million of the unfunded infrastructure needs.
The LTFP uses Measure M revenue to fund$17.4 million of an estimated$25.4 million
need for the Petition Streets(priority#3)and Gas Tax revenue to fund $17.4 million of an
estimated $55.9 million need for the Arterial Rehabilitation (priority#4). The expenditures
are made starting in FY 2013-14,which is just after the term of the current five-year CIP.
The General Fund has capacity to support$102.9 million of infrastructure projects and
funds the Heil Pump Station Construction (priority#1)and most of the Existing Pump
Station replacements (priority#2). Expenditures are made for these projects starting in
FY 2011-12.
The following table shows the assumed funding sources for the [IMP infrastructure needs
and the cost of those projects that remain unfunded.
City of Huntington Beach—2007-08 Long-Term Financial Plan' iJ
CITY OF HUNTINGTON BEACH
QKAP INFRASTRUCTURE NEEDS
FY 2008-09 THROUGH FY 2016-17
(Dollars in Millions)
Drainage
General Fund $4.5 $10.* *11.e $24.6 $oso $26.1 $102.9
Unfunded ' ' ' - ' ' '
Residential Concrete
Gas Tax ' - *.0 4.e *1 2.6 $17.4
Measure ' ' ' - ' - ' '
Unfunded
Residential Pavement
Gas Tax
Measure ' ' ' ' - - ' '
Unfunded 0/3 11 1� 0� �0 OO �O �0 OJ ��9
Arterial Highways
Traffic Impact ' ' - ' - ' ' - -
Gas Tax ' ' ' ' - - '
Measure - ' - - 4.2 5.5 4.4 3.3 $17.4
General Fund ' - ' - - - '
Unfunded zr 11.0 12.5 ma ** 2.4 1.2 2.7 4.0 $60e
Alleys,Lots,Block Walls
Gas Tax ' ' ' ' - -
Measure
General Fund - ' - - ' ' - '
unmnuou 3.9 2.8 oy 3.0 3.1 3.2 3.4 3.2 ua $28.6
Buildmgs/Facilities
General Fund - ' - ' -
unmnuou 2.8 3.4 3.6 3.1 2.9 2.4 2.5 2.5 2.6 $uso
General Fund ' - ' - - ' -
Unfunded 0.8 0.8 0.8 Oo KV 0.8 0.9 1/0 1.0 $7.8
Total *17.9 $oua $242 $uoa $25.1 $asu $49a $50.8 $49J $305a
[1]-The total exceeds the initial$304.3 million estimate for IIMP projects due to the delay of certain projects and resulting
additional inflation.
Potential new revenues that can fund the unfunded balance of infrastructure needs are
discussed in section ^|V. New Funding Sources."
��"���K��^����t", �����`8~~�~ Capacity�~.=�.�"^"
The City can accelerate the completion of a portion of its unfunded infrastructure needs
through debt financing. The City has two primary repayment sources for bond financing
-theGmnmna| FundondGasTaxrevenueo. The City'o other special purpose funds
(included in the LTFP)do not likely have the size or reliability to support publicly issued
debt. The unfunded infrastructure could also be financed with bonds secured by a new
revenue source, such aaa property assessment ur new utility charge.
City m Huntington Beach-uoor-0u Long-Term Financial Plan| 14
General Fund Capacity
There are several financial indicators that can measure the City's General Fund debt
capacity, or ability to issue additional debt. The most direct indication,which is used in
the LTFP, is to demonstrate that projected revenues, after payment of other costs, are
sufficient to pay debt service. The LTFP demonstrates that, upon the issuance in FY
2009-10 of$75 million in General Fund-supported bonds(i.e. lease revenue bonds or
certificates of participation), the General Fund could support$3.7 million of additional
interest-only payments through FY 2016-17 and would maintain an ending fund balance
of at least$33.5 million in each year. The use of interest-only payments is shown in the
LTFP as the City's existing debt service decreases over time, and the amortization of
principal for any new bonds in later years results in more level aggregate debt service.
The delay in principal amortization results in more total interest on the new bonds, but
helps maintain the current level of General Fund reserves, including the reserve for
economic uncertainties(7% reserve)and the second tier reserve. The following chart
City of Huntington Beach
General Fund Supported Annual Debt Service
$12.0
$10.0
$8.0
E
$6.0
$4.0
3..
w
$2.0 ;3 R
b
$0.0
O O N N N N N N N N N N M M M M M M M M M M
O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O
N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N
01997 Series 02000 Series A 02001 Series A 02001 Series B ®Series 2004 OSeries 2010
shows annual debt service on existing General Fund-supported debt and an additional
$75 million of new debt.
The use of General-Fund supported debt increases the amount of City infrastructure that
can be funded in the LTFP by$44.4 million. The bonds would finance$52.9 million of
unfunded IMP infrastructure needs and would allow for pay-as-you-go funding of an
additional$84.8 million.
city of Huntington Beach-2007-08 Long-Term Financial Plan' 1J
Gas Tax Fund Debt Capacity
The City can accelerate the funding of various street improvement projects through the
issuance of debt secured by the Gas Tax. The use of Gas Tax debt would allow the City
to fund a portion of the unfunded infrastructure needs that would not otherwise be
possible during the term of the 2008 LTFP. The Gas Tax has a sufficient size and history
of stable payment from the State that allows the revenue to be used as security for debt.
Based on the City's historical receipt of Gas Tax, the LTFP estimates that 25-year Gas
Tax bonds could fund approximately$30 million of street improvement projects, including
those identified in the five-year CIP, such as the Safe Routes to Schools, and currently
unfunded IIMP projects, such as additional Arterial Rehabilitation.
City of Huntington Beach—2007-08 Long-Term Financial Plan I 16
IV. New Funding Sources
This section identifies new funding sources that have the potential to fund a portion of the
infrastructure needs (the unfunded balance)that is not funded in the LTFP. The new
funding sources are based on strategies that have been effectively used by other local
government for the specific types of unfunded projects.
In addition, this section estimates the revenue potential from two existing funding sources
that the City could attempt to increase—the voter-approved property tax for safety
benefits (which is not currently imposed at the maximum rate)and the accelerated
repayment of an $85.1 million loan to the City redevelopment agency.
New Funding Strategies
As the City has limited ability to increase its General Fund and special purpose fund
revenues, there is a limited amount of infrastructure that can be funded from existing
revenues. There is, however, a potential to fund certain categories of infrastructure from
new funding sources. Potential new funding sources for the City's infrastructure include:
assessment districts, a stormwater assessment, and a stormwater user charge.
Assessment districts are particularly well-suited for infrastructure that benefits specific
residents. City infrastructure of this type includes the sidewalk replacement, alley
improvements, and reconstruction of block walls. The stormwater assessment is a type
of assessment that is levied citywide and has been used with limited success in
California. There are unique constraints that affect stormwater funding, which has
necessitated the use of a stormwater assessment. The stormwater user charge,
although not currently available to the City(given restrictions enacted as part of
Proposition 218), may be a future possibility in the event the State amends the
constitution to allow such a user charge.
Assessment Districts
An assessment district is a bounded area where benefit assessments are levied on the
property owners within the district for the funding of public purposes, including
infrastructure. The City has used an assessment district in the past to help fund
wastewater infrastructure in the Reservoir Hill area.
A unique feature of assessment districts is that the assessment is proportional to the
benefit provided from the use of funds. A common use of assessment districts is the
funding of public infrastructure, such as streets, water and sewer laterals, and street
lighting within the entire district. Potential projects on the unfunded infrastructure needs
list that are well-suited for assessment district funding are local street improvements,
sidewalks, alleys, and block walls.
The process to implement an assessment district involves the identification of the project
cost, method for allocating the assessment, and approval of the majority of property
owners.
City of Huntington Beach—2007-08 Long-Term Financial Plan f 17
The use of an assessment district may be a realistic alternative in the event that affected
residents support the proposed infrastructure and the City determines that available
General Fund and Special Revenue Fund revenues should be spent on other priorities.
Stormwater Assessments
The cities of San Clemente and Rancho Palos Verdes have, subsequent to the passage
of Proposition 218, obtained approval to levy user fees for stormwater management
costs. The user fees are"property-related fees" as defined by Proposition 218 and
required majority approval of the property owners subject to the fee. A summary of the
user fee and the funded stormwater costs for the cities of San Clemente and Rancho
Palos Verde are provided in the following table.
+� user I`ee
City of San Clemente $2.96 per"drainage residential unit"(per
Urban Runoff Management Fee month)
Undeveloped,graded parcel=.5 DRU plus additional.1 DRU per acre in excess of 2 acres
Single-family residential parcel=1 DRU
Multifamily residential parcel=.8 DRU per residential unit
Nonresidential developed property=10 DRU per acre or fraction thereof
Implementation Date:January 2003
Stormwater Projects:Clean,inspect storm drains and catch basins
City of Rancho Palos Verde $86.00 per ERU(per year)
Storm Drain User Fee
1.(Parcel Area)x(Impervious Percentage)=Drainage units
2.(Drainage Units)_(0.118)=Equivalent residential units(ERUs)
3.(ERUs)x(the annual rate per ERU)=the annual storm drain user fee.
Implementation Date:Fiscal year 2006-07;protest in process
Stormwater Projects:Replace storm drains;storm drain re-lining
A significant benefit of the stormwater assessment is the lower voter threshold in
comparison to general obligation bonds or special taxes. The stormwater assessment is
subject to majority approval (and protest)as opposed to the 2/3rds voter approval for
general obligation bonds and special taxes.
In the event the City pursues and is successful in obtaining voter approval for a
stormwater assessment, the Drainage projects that are funded in the LTFP could be
accelerated or General Fund revenues would be freed for other purposes including the
funding of other infrastructure needs.
City of Huntington Beach—2007-08 Long-Term Financial Plan j 18
Stormwater User Charge
A financing alternative that would have a significant impact on the amount of funds
available for stormwater and urban runoff management infrastructure is a user fee or
charge that is exempt from the Proposition 218 voter approval requirement. User
charges for water, sewer, power, gas, and solid waste are exempt from the Proposition
218 voter requirement, even if the fees are"property-related,"and have historically
proven to be a highly reliable funding source for California utilities.
Conceptually, a stormwater user fee would be levied on property owners within a city,
and would be sufficient to fund the capital and operating costs of stormwater and urban
runoff management. Such a user charge would be similar to utility charges. The main
impediment to the implementation of a stormwater user fee is the State constitution
requirement that any"property-related fee" is approved by a majority of property owners
subject to the tax or 2/3rds of all voters.
Legislators have attempted to change state law in order to eliminate the prohibition
against a stormwater user charge. The most recent attempt is State Constitutional
Amendment("SCA") 12 (Torlakson and Yee), which is a proposed constitutional
amendment that is currently being considered at the capitol. SCA 12 would allow cities
and counties to implement fees and charges for stormwater and urban runoff
management programs without having to meet the voter approval requirement for
property-related fees.
Although the City cannot currently impose a stormwater user charge, such a charge may
become possible, and should be considered when developing a strategy for the City's
Drainage infrastructure needs.
Property Tax Override
In accordance with the Revenue and Taxation Code, the City can collect a property tax in
excess of the 1%general property tax(a property tax"override")of no greater than
$.0493 per$100 of assessed value or the amount needed to pay for City retirement
benefits available prior to the passage of Proposition 13. The City currently levies a
property tax override of$.008 per$100,which generates about$2.0 million per year.
The City estimated in August 2007 that the cost of providing pre-Proposition 13 benefits
is$7.3 million, or$.02958 per$100. The City could levy an amount up to the maximum
property tax override, which would generate an additional$5.3 million per year for the
General Fund that could be used for remaining unfunded infrastructure needs.
Repayment of Redevelopment Agency Loan
The City has advanced funds to its Redevelopment Agency that accrues interest at 5.6%.
The outstanding loan balance is$85.1 million as of October 1, 2007. There is no fixed
repayment schedule for the loan. The Redevelopment Agency has budgeted a loan
payment amount of$4 million for FY 2007-08,which is sufficient to pay interest only. In
the event that the Redevelopment Agency has available tax increment funding during the
City of Huntington Beach—2007-08 Long-Term Financial Plan 119
term of the LTFP, the City could seek an accelerated repayment of the loan and use such
funds for remaining unfunded infrastructure needs.
City of Huntington Beach—2007-08 Long-Term Financial Plan 2®
V. Risk Analysis
The City's major revenues can exhibit significant variability, and there is a high likelihood
that future values will differ from those projected in the LTFP. This section evaluates the
impact on the LTFP of the following 2 scenarios of projected revenues in order to assess
the City's financial risks and adequacy of reserves:
1. Property tax growth of 0%for 3 years, increasing to 3.7%thereafter.
2. Same as scenario 1, with sales tax growth of-5%for 1 year, increasing to 2.5%
thereafter.
The scenarios have been identified based on recently reported governmental economic
statistics that show declining housing values and sales, regional economic forecasts that
predict a cooling economy and reduced taxable sales, and a review of historical
assessed value and taxable sales within the City.
Pension Crisis
The risk analysis does not evaluate the fiscal impacts of the"pension crisis." This is
because the City's pension does not have the same characteristics as those pensions
currently in crisis. The City of San Diego pension exemplifies those local government
pensions in crisis. In the late 1990s, the City of San Diego,which has its own pension
system (managed by an elected and appointed board of trustees), knowingly under-
funded its pension, incurred a significant pension liability, and failed to adequately
disclose the magnitude of the funding shortfall. The City of San Diego continues to have
a large pension liability that will require substantial ongoing annual contributions.
Conversely, the City of Huntington Beach pension is administered by the California Public
Employees' Retirement System ("Ca1PERS"), which sets the actuarially determined City
contribution and manages the pension investments. Because the City's pension is
administered by an independent plan that sets the City's contribution amount, there is
much less risk the City will take actions that would substantially under-fund its pension
obligation.
The City also provides additional pension coverage to all employees hired prior to
December 1997 and post-employment medical insurance to all retirees who have a
minimum of 10 years of service or are granted a disability retirement. The City currently
contributes 100% of the required contribution for supplement pension coverage and
125% of the required contribution for post-employment medical insurance.
Scenario 1:Zero Property Tax Growth
Property tax is the City's largest revenue source and is based on residential and
commercial property values in the City. Home sales in the City declined precipitously
over the last half of 2007, and several academic institutions now project declining
property values within Orange County. The following table shows recent forecasts of
Orange County home values from local academic institutions. Each of the institutions
forecast decreases in countywide property values of at least 4% during 2008. 1
City of Huntington Beach—2007-08 Long-Term Financial Plan( 2 A
COUNTY OF ORANGE
2008 HOME VALUE FORECASTS
2008
Change in
Home Date of
Institution Values Forecast
University of California,Los Angeles -4.0%to-7.0% October 2007
California State University,Fullerton -5.0% October 2007
Chapman University -4.8% December 2007
Source:
The City previously experienced a decline in assessed value in FY 1999-00. Prior to that,
property tax values fell in FY 1996-97 and FY 1993-94. The following table shows
historical City assessed value from FY 1991-92 to FY 2006-07.
CITY OF HUNTINGTON BEACH
HISTORICAL ASSESSED VALUE
FY 1991-92 THROUGH FY 2006-07
(Dollars in Billions)
Assessed Annual%
Year Value Change
1991-92 $11.3
1992-93 $11.9 4.9%
1993-94 $11.9 -0.1%
1994-95 $12.3 3.7%
1995-96 $12.4 0.4%
1996-97 $12.3 -0.4%
1997-98 $12.9 4.5%
1998-99 $14.0 8.7%
1999-00 $14.0 -0.1%
2000-01 $16.5 17.9%
2001-02 $16.8 1.9%
2002-03 $18.8 11.8%
2003-04 $18.9 0.7%
2004-05 $20.4 8.0%
2005-06 $21.7 6.4%
2006-07 $23.8 9.5%
Over the last 25 years,the ten year period that exhibited the lowest assessed value
growth rate was 1990 to 2000, where values grew an average of 3.7% per year.
Scenario 1 represents an outcome somewhat similar to this period of stagnating property
City of Huntington Beach-2007-08 Long-Term Financial Plan 22
values. Under Scenario 1, property tax revenue would have zero growth over the three
year period FY 2008-09 through FY 2011-12 and recover to 3.7%annual growth
thereafter.2
The following chart shows the General Fund revenues, expenditures, and fund balance
under Scenario 1. Expenditures would exceed revenues for the next 7 years and the
General Fund balance would gradually decline over the term of the LTFP to$18.9 million
by FY 2013-14. The scenario does not include funding for any[IMP infrastructure needs
or additional debt financing. Given the relatively small projected fund balance, which
would not maintain minimum reserves, the City would likely need to reduce future
General Fund expenditures under this scenario.
Scenario 1
Projected General Fund Revenues,Expenditures and Fund Balance
(Dollars in Millions)
$270 $70
$260
$250 $60
$240
$230 $50
$220
$210 $40
$200
$190 $30
$180
_1
$170 $20
$160 ,
$150 $10
$140 x ;
$130 $-
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
=FundBalance Expenditures -+h-Revenues
Scenario 2: Decrease in Sales Tax
Under Scenario 2, property tax growth is the same as Scenario 1, but also sales tax
revenue decreases by 5% in FY 2008-09, recovering to 2.5% thereafter.s Since 1989,
the ten year period that had the slowest rate of growth in taxable sales was 1989 to 1999,
which averaged 2.5%growth per year.
The impact of the reduced sales tax in combination with a slowdown in property tax
growth would, without offsetting expenditure reductions, cause the General Fund balance
2 Property tax revenues for the purposes of Scenario 1 include secured,unsecured,and supplemental
components,as well as the property tax for VLF-reimbursement,but exclude the"triple flip"property tax for
sales tax reimbursement-
3 Sales tax revenues for the purposes of Scenario 2 include the 1%local allocation and"triple flip"
reimbursement,but exclude the Proposition 172 public safety tax. 2
City of Huntington Beach-2007-08 Long-Term Financial Plan( 23
to decline in each year, resulting in a negative balance in FY 2014-15. Under this
scenario, the City would need to significantly reduce its General Fund expenditures by FY
2014-15, including ongoing or recurring operating expenditures.
Scenario 2
Projected General Fund Revenues,Expenditures and Fund Balance
(Dollars in Millions)
$270 $45
$260 $40
$250
$35
$240 $30
$230
$25
$210 $20
$200 $15
$190 3, illl
$10
$180 Wy
N j3 9' $5
$170iiNo
$160
$150 $(5)
$140 $(10)
$130 $(15)
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Fund Balance —0 Expenditures — Revenues
Contingency Planning
Both Scenario 1 and 2 show reduced or negative projected fund balances for the City's
General Fund and, under these conditions, the City would likely need to reduce its
expenditures in order to offset the projected decline in revenues. The LTFP does not
identify a contingency financial plan that would help address the projected budget deficits
under either scenario. In the event that revenues are significantly less than those
assumed in the baseline LTFP, the City should attempt to develop a contingency plan
that identifies specific revenue enhancement or cost reduction initiatives that would close
the budgetary gap.
City of Huntington Beach—2007-08 Long-Term Financial Plan 124
Appendix I: Revenue and Expenditure
Assumptions
Appendix 1: Revenue and Expenditure Assumptions
General Fund Revenues
The City collects a broad set of revenues that provide a diverse funding source for City services. The City's largest revenues have exhibited
strong growth over the last 5 years, as the City has benefited from a healthy regional economy, rising property values, and several new successful
commercial developments. Future City revenues are expected to continue to grow, albeit at a more moderate rate. The region has experienced
slowing revenue growth in recent months and several governmental agencies, including the State and County of Orange, have tempered prior
long-range revenue forecasts.
The table below summarizes the ten-year forecast of the City's largest General Fund and Special Revenue Fund revenues that is used in the Long
Range Financial Plan. On average, City General Fund revenues are projected to grow at an annual rate of 4.6% over the next ten years.
Category 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2 16-17
Property Tax $65,001,000 $66,670,920 $69,842,647 $73,725,064 $77,874,783 $82,912,178 $88,291,145 $94,035,288 $100,169,857 $106,721,858
Sales Tax 26,060,000 25,727,500 27,013,875 28,364,569 29,782,797 31,278,167 32,848,631 34,497,964 36,230,125 38,049,275
Utility Users'Tax 23,125,000 23,678,750 24,786,613 25,951,561 27,176,739 28,465,470 29,821,268 31,247,851 32,749,148 34,329,315
Franchises 8,080,000 8,094,700 8,354,215 8,622,812 8,600,810 8,888,539 9,186,338 9,494,559 9,813,569 10,143,744
Transient Occupancy Tax 6,500,000 7,455,000 7,939,575 8,455,647 9,047,543 9,726,108 10,455,567 11,239,734 12,082,714 12,988,918
Licenses and Permits 9,051,200 8,234,288 8,042,631 8,302,306 8,571,667 8,851,083 9,140,938 9,441,630 9,753,573 10,077,197
Fines and Forfeitures 4,968,800 4,833,683 4,974,543 5,120,333 5,271,225 5,427,398 5,589,037 5,756,333 5,929,483 6,108,694
Use of Property and Money 14,126,000 15,579,680 16,273,201 16,999,144 17,851,867 18,750,538 19,361,112 20,349,550 21,391,921 22,491,309
Revenue from Other Agencies 5,564,500 5,106,100 5,173,576 5,243,065 5,314,632 5,388,348 5,464,283 5,542,512 5,623,111 5,706,160
Charges for Current Services 15,721,876 17,515,458 18,106,593 18,718,418 19,351,657 20,007,060 20,685,401 21,387,484 22,114,141 22,866,230
Other Revenues 1,212,000 1,781,500 1,840,600 1,850,019 1,859,767 1,869,856 1,880,298 1,891,106 1,902,293 1,913,870
Non-Operating Revenue 5,636,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428
Total Revenues $185,046,804 $190,114,007 $197,784,497 $206,789,365 $216,139,915 $227,001,172 $238,160,446 $250,320,440 $263,196,362 $276,832,999
Annual Percent Change - 2.7% 4.0% 4.6% 4.5% 5.0% 4.9% 5.1% 5.1% 5.2%
Appendix I:Revenue and Expenditure Assumptionsl i
Property Tax Revenues (FY 2007-08: $65,001,000—35.1% of total General Fund revenues)
Property tax revenues constitute the largest single component of the City's revenues. As shown in the following table, City property tax revenues
have been highly variable over the last five years. In FY 2004-05, property tax revenues increased by over 42%, while the revenue increase was
4% in 2006-07. The large variability is due to the State's "triple flip," which replaced a portion of the City's share of sales tax revenue with property
tax revenue. Moreover, beginning in FY 2003-04, the City began receiving replacement revenues from the State for the Vehicle License Fee in
the form of property tax revenues. Without triple flip and VLF replacement funds, the City's property tax revenue increased from 7% to 14%
annually, including a 9% increase between FY 2003-04 and 2004-05. Excluding triple flip and VLF replacement funds, the average annual
increase between FY 2002-03 and 2007-08 was 8.1%.
2002-03 2003-04 2004-05 2005.06 2006-07 2007-08
Actual Actual Actual Actual Actual Budget
Property Tax Revenue $29,688,213 $33,798,795 $48,118,935 $55,167,632 $57,385,511 $65,001,000
Percent Increase Over Prior Year - 13,85% 42,37% 14.65% 4.02% 13.27%
The City anticipates annual growth in property tax revenues of 2.8%for FY 2008-09 and from 5.0% to 7.0%for FY 2009-10 through FY 2016-17.
The City's tempered forecast reflects a weakening housing market, but also considers existing assessed valuation within the City relative to
market prices. A large portion of the City's housing stock is currently assessed at below market values and a general decrease in home prices
may not result in a proportional decrease on assessed value and property tax revenue. The City's projected increases are, on average, larger
than the statewide property tax forecast by the California State Legislative Analyst's Office("LAO"). The LAO projects statewide property tax
revenue increases of 6% in FY 2007-08, 3% in FY 2009-10, and approximately 6% in both FY 2010-11 and 2011-12.4
2007-08 20 8-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Property Tax Revenue $65,001,000 $66,670,920 $69,842,647 $73,725,064 $77,874,783 $82,912,178 $88,291,145 $94,035,288 $100,169,857 $106,721,858
Annual Percentage Change - 2.6% 4.8% 5.6% 5.6% 6.5% 6.5% 6.5% 6.5% 6.5%
4 lbid
Appendix I:Revenue and Expenditure Assumptions) iJl
Sales Tax(FY 2007-08: $26,060,000— 14.1% of total General Fund revenues)
The City's sales tax revenues have fluctuated significantly between FY 2002-03 and FY 2006-07, ranging from $26.1 million in FY 2003-04 to
$22.1 million in FY 2004-05, The volatility in the City's sales tax revenue is largely due to the State's"triple flip,"which requires that 25% of the
City's sales tax revenues are replaced with property tax revenues. If"triple flip" sales tax revenues are included, annual City sales tax increases
ranged from 2.1% to 9.3%, and average 4.4%for the period.
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Actual Actual Actual Actual Actual Budaet
Sales Tax Revenue $25,881,662 $26,101,472 $22,121,793 $24,002,662 $23,724,067 $26,060,000
Percent Increase Over Prior Year 0.85% -15.25% 8.50% -1.16% 9.85%
Triple-Flip Reimbursement 758,713 5,305,884 5,977,287 6,160,000 7,300,000
The City anticipates that growth in the sales tax base will be driven by new commercial developments, including The Strand, Pacific City, Toyota of
Huntington Beach, and Bella Terra II. The City projects that the 1% local sales tax revenue will grow at 5% starting in FY 2009-10. The California
State Legislative Analyst's Office has projected that, statewide, sales tax revenues will increase approximately 5% per year through FY 2012-13.5
The Chapman University Economic Forecast Update projects taxable sales growth in California to be 2.8% in 2008.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013.14 2014-15 2015-16 2016-17
Sales Tax Revenue $26,060,000 $25,727,500 $27,013,875 $28,364,569 $29,782,797 $31,278,167 $32,848,631 $34,497,964 $36,230,125 $38,049,275
Annual Percentage Change - -1.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
5"California's Fiscal Outlook." California State Legislative Analyst's Office. November 2007.
Appendix I:Revenue and Expenditure Assumptions) 111
Utilities Users' Tax(FY 2007-08: $23,125,000®12.5%of total General Fund revenues)
The City of Huntington Beach imposes a utilities tax on the users of telephone services, electricity, gas, water, and video within City boundaries.
In FY 2007-08, Utility Users' Tax revenue is anticipated to total $23.1 million. Utility Users' Tax revenue grew moderately between FY 2002-03
and FY 2006-07 at an average annual rate of 4.1%.
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Actual Actual Actual Actual Actual Budaet
Utility Users'Tax Revenue $18,309,686 $19,424,209 $20,004,400 $21,169,513 $21,478,698 $23,125,000
Percent Increase Over Prior Year - 6.09% 2.99% 5.82% 1.46% 7.66%
Utility Users' Tax revenue is expected to increase proportionately to increases in utility rates. Historically, Utility Users' Tax revenues have
increased by approximately 4% statewide and in the City of Huntington Beach.s The City projects Utility Users' Tax revenue increases of 3.0% per
year for gas and telephone service and 6.0% per year for water, electricity, and cable service.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Utility Users'Tax Revenue $23,125,000 $23,678,750 $24,786,613 $25,951,561 $27,176,739 $28,465,470 $29,821,268 $31,247,851 $32,749,148 $34,329,315
Annual Percentage Change - 2.4% 4.7% 4.7% 4.7% 4.7% 4.8% 4.8% 4.8% 4.8%
6 California State Controller's Office Website. hftp://www.sco.ca.ciov. Accessed 11/24/07. Historical trend data include FY 1991-92 through FY 2004-05.
Appendix I:Revenue and Expenditure Assumptionsl 1V
Transient Occupancy Tax(FY 2007-08: $6,500,000—3.5%of total General Fund revenues)
The City of Huntington Beach imposes a Transient Occupancy Tax upon all hotel stays within City boundaries. Transient Occupancy Tax
revenues account for approximately 3.5% of the City's revenues. Transient Occupancy Tax revenues grew dramatically between FY 2002-03 and
2004-05, including an increase of 72.3% in FY 2004-05. The revenue growth is primarily attributable to the allocation of RDA revenue to the City.
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Actual Actual Actual Actual Actual Budge
Transient Occupancy Tax Revenue $1,972,786 $3,171,090 $5,464,077 $5,948,888 $6,573,507 $6,500,000
Percent Increase Over Prior Year - 60.74% 72.31% 8.87% 10.50% -1.12%
The City anticipates that transient occupancy tax revenue will increase by 6.5% to 7.5% per year going forward, which is forecasted using
historical trend data and projected increases in the number of available hotel rooms in the City.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Transient Occupancy Tax Revenue $6,500,000 $7,455,000 $7,939,575 $8,455,647 $9,047,543 $9,726,108 $10,455,567 $11,239,734 $12,082,714 $12,988,918
Annual Percentage Change - 14.7% 6.5% 6.5% 7.0% 7.5% 7.5% 7.5% 7.5% 7.5%
Appendix I:Revenue and Expenditure Assumptions I V
License and Permit Revenue(FY 2007-08: $9,051,200—4.9%of total GF revenues)
License and permit revenue include licenses for businesses or other services. Licenses provided by the City include Business Licenses, Oil Wells
Tax Licenses, and Bicycle Licenses. Between FY 2002-03 and FY 2006-07, license and permit revenues increased an average of 12.6% per
year.
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Actual Actual Actual Actual Actual Budget
License and Permit Revenue $6,531,965 $7,732,499 $7,432,476 $7,208,576 $10,026,027 $9,051,200
Percent Increase Over Prior Year - 18.38% -3.88% -3.01% 39.08% -9 72%
Going forward, the City anticipates license and permit revenues will grow approximately 3.2%to 3.3% per year.
20 7-08 2008-09 200 -10 2010-11 2011-12 2012-13 2013.14 2014-15 2015-16 2016-17
License and Permit Revenue $9,051,200 $8,234,288 $8,042,631 $8,302,306 $8,571,667 $8,851,083 $9,140,938 $9,441,630 $9,753,573 $10,077,197
Annual Percentage Change - -9.0% -2.3% 3.2% 3.2% 3.3% 3.3% 3.3% 3.3% 3.3%
Fines and Forfeitures (FY 2007-08: $4,968,800—2.7% of total GF revenues)
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Actual Actual Actual Actual Actual Budoet
Fines and Forfeitures Revenue $3,814,676 $4,341,584 $4,364,523 $4,287,723 $4,165,046 $4,968,800
Percent Increase Over Prior Year - 13.81% 0.53% -1.76% -2.86% 19.30%
The City receives revenue from fines relating to parking and traffic infractions, library fines, and compensation for the trigger of false alarms. The
amount of fines and forfeitures revenues has increased substantially over the last 5 years. The City of Huntington Beach projects increases in
revenue from parking fines of 3% per year going forward. The City has tasked additional personnel to this area, which has been a driver in
revenue increases. All other fines and forfeitures are anticipated to increase at about 3.0% per year.
2007-08 2008-09 2009-10 2010.11 2011-12 2012-13 2013-14 0 14-15 2015-16 2016-17
Revenue from Fines and Forfeitures $4,968,800 $4,833,683 $4,974,543 $5,120,333 $5,271,225 $5,427,398 $5,589,037 $5,756,333 $5,929,483 $6,108,694
Annual Percentage Change - -2.7% 2.9% 2.9% 2.9% 3.0% 3.0% 3.0% 3.0% 3.0%
Appendix I:Revenue and Expenditure Assumptionsl Vi
Use of Property and Money(FY 2007-08: $14,126,000—7.6%of total GF revenues)
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Actual Actual Actual Actual Actual Budaet
Revenue from the Use of Property and Money $10,825,516 $8,923,749 $9,891,264 $12,084,259 $14,059,563 $14,126,000
Percent Increase Over Prior Year - -17.57% 10.84% 22.17% 16.35% 0.47%
The City receives revenue from interest on funds in the general and special revenue funds. Revenue from the use of property and money
constitutes almost 8% of General Fund revenues, and is projected to total $14.1 million in FY 2007-08. Revenues from this source have been
forecasted to grow between 3% to 5%.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2 14-15 2015-16 2016-17
Use of Property&Money Revenue $14,126,000 $15,579,680 $16,273,201 $16,999,144 $17,851,867 $18,750,538 $19,361,112 $20,349,550 $21,391,921 $22,491,309
Annual Percentage Change - 10.3% 4.5% 4.5% 5.0% 5.0% 3.3% 5.1% 5.1% 5.1%
Revenue from Other Agencies (FY 2007-08: $5,564,500—3.0%of total GF revenues)
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Actual Actual Actual Actual Actual Bud et
Revenue from Other Agencies $10,885,557 $10,146,274 $6,807,830 $5,318,012 $5,300,366 $5,564,500
Percent Increase Over Prior Year - -6.79% -32.90% -21.88% -0.33% 4.98%
Revenue from other agencies primarily constitutes grants and subventions from state and federal sources, and is budgeted at$5.6 million in FY
2007-08. Specific revenues include revenue from State agencies, revenue from federal agencies, revenue from county agencies, West Orange
County Water Board revenue, and revenue from unspecified agencies. Forecasted revenues are assumed to grow at 1.3% to 1.5%.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Revenue from Other Agencies $5,564,500 $5,106,100 $5,173,576 $5,243,065 $5,314,632 $5,388,348 $5,464,283 $5,542,512 $5,623,111 $5,706,160
Annual Percentage Change -8.2% 1.3% 1.3% 1.4% 1 A% 1.4% 1.4% 1.5% 1.5%
Appendix I:Revenue and Expenditure Assumptions) Vii
Charges for Current Services (FY 2007-08: $15,721,876—8.5%of total GF revenues)
The City charges for a range of services, including residential water, sanitation, and landscaping services. As shown in the following table, the
amount of revenue from Charges for Current Services has generally increased from FY 2002-03 to 2006-07, but decreased in FY 2004-05.
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Actual Actual Actual Actual Actual Budget
Charges for Current Services Revenue $9,184,034 $11,164,651 $10,755,829 $13,875,795 $15,695,293 $15,721,876
Percent Increase Over Prior Year - 21.57% -3.66% 29.01% - 13.11% 0.17%
The City conducted a comprehensive review of fees during calendar year 2005, which resulted in a large number of the City's fees being changed
to adequately reflect services provided. The City's fees are not indexed for inflation and are not automatically increased. The City expects to
conduct a cost allocation study at the end of FY 2007-08 that will, among other things, determine the amount of overhead that can be allocated to
the cost of various City services. The City does not expect that it will recover a greater proportion of costs from fees in the future, or that a greater
proportion of overhead will be allocated to its fees for service. Consequently, all fees are projected to rise at 2.9% to 3.4% per year.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 20 6-17
Charges for Current Services Rev. $15,721,876 $17,515,458 $18,106,593 $18,718,418 $19,351,657 $20,007,060 $20,685,401 $21,387,484 $22,114,141 $22,866,230
Annual Percentage Change - 11.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4%
Other Revenue(FY 2007-08: $1,212,000—0.65%of total GF revenues)
Due to the size, scope, and indeterminate nature of these revenues, inflation has been used to forecast increases in the"Other Revenue"
category.
Appendix I:Revenue and Expenditure Assumptions) Vlll
General Fund Expenditures
The City budgeted $188.1 million in spending for FY 2007-08, with a largest proportion of spending in the Personal Services category. Personal
Services expenditures are anticipated to total $132.4 million, or over 70% of all General Fund expenditures in the FY 2007-08 budget. Personal
services expenditures are, to a large extent, a function of labor bargaining agreements (i.e. memorandum of understanding)that determine annual
salary increases. Other major expenditures include operating expenses, comprised of utility costs, equipment, and supplies, and "capital
expenditures." The General Fund capital expenditures are generally equipment and vehicles expenditures and not"infrastructure," as defined in
the LTFP.
Personal Services Expenditures
Personal Services expenditures, which are comprised of salaries and benefits for employees, are anticipated to increase from $132.4 million in FY
2007-08 to$179.5 million in FY 2016-17, an average annual increase of 3.4% per year. Personal Service expenditures were forecast using the
growth rates in the City's existing Memoranda of Understanding and current and forecasted employee totals.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Salaries $88,507,461 $89,967,983 $92,617,478 $95,318,736 $98,106,205 $102,030,454 $106,111,673 $110,356,140 $114,770,386 $119,361,202
Termination Payments 2,100,000 2,623,500 2,728,440 2,837,578 2,951,081 3,069,123 3,191,888 3,319,563 3,452,345 3,590,438
Benefits 41,818,249 42,665,384 44,191,918 45,774,111 47,414,027 49,112,695 50,872,220 52,694,783 54,582,641 56,538,134
Total Personal Services $132,425,710 $135,256,867 $139,537,836 $143,930,425 $148,471,313 $154,212,272 $160,175,781 $166,370,486 $172,805,372 $179,489,774
Annual Percent Change - 2.1% 3.2% 3.1% 3.2% 3.9% 3.9% 3.9% 3.9% 3.9%
Appendix I:Revenue and Expenditure Assumptions I ix
Salaries
Salary expenditure forecasts are based upon formula contained in existing labor agreements with the City's employee unions. The City has
negotiated annual salary increases through Memoranda of Understanding ("MOUs")with each of its bargaining units. The agreements provide
guaranteed increases through, in some cases, the 2011-12 fiscal year. These MOUs are discussed in detail below.
At the end of the term of the MOUs, projected salaries increase at 4% per year.
Memoranda of Understanding
Bargaining Unit Period Covered Positions Covered Salary Increases
Huntington Beach Police Officer's April 1,2006 and March 31,2010 Communications Operators and 2%increase in salary effective
Association Supervisors,Detention Officers and October 12007,followed by
Nurses,Detention Shift Supervisors, increases of 2.5%biannually,
and Police Recruits,Officers and effective April 1 and October 1 of
Sergeants each year
Huntington Beach Municipal July 1,2007 through June 30,2012 3%on September 1,2007;2%on
Employees'Association July 1,2008 through July 1,2010;
2.5%on July 1,2011
Huntington Beach Management December 20,2006 through 4.5%in 2006,4.5%in 2007,2%in
Employees'Organization December 19,2011 2008 through 2010;effective
December 20 each year
Huntington Beach Firefighters October 1,2007 through September Firefighter,Fire Engineer,Firefighter 2.5%on September 25,2007;2.5%
Association 30,2010 Paramedic,Fire Protection on March 24,2008;3%on
Specialist,Fire Captain, Deputy Fire September 23,2008;2.5%on March
Marshall 23,2009;3%on September 22,
2009;2%on March 22,2010;2%on
September 21,2010;2.5%on March
22,2011
Huntington Beach Police July 1,2006 through June 30,2010 Police Lieutenant,Police Captain 4%in 2007,5%in 2008,3.25%for
Management Association Lieutenants and 2.5%for Captains in
2009,3.75%for Lieutenants and
3.0%for Captains in 2010;effective
July 1 each year
Marine Safety Officers'Association October 1,2006 through September Marine Safety Officer I,Marine 5%in 2007,4.5%in 2008,and 5%in
30,2009 Safety Officer II,Marine Safety 2009,effective each October 1
Lieutenant
Huntington Beach Fire Management July 1,2006 through June 30,2008 Fire Battalion Chief, Fire Division 7%on October 1,2006;7.25%on
Association Chief July 1,2007
Appendix]:Revenue and Expenditure Assumptions) X
Benefits
Benefit expenditures to City employees are projected to increase 15.3% in FY 2007-08, and increase 3,58% after FY 2008-09. Benefits includes
retirement supplements, workers' compensation outlays, deferred compensation, FICA payments, and other miscellaneous benefits.
The City contributes to the California Public Employees' Retirement System (CalPERS), a defined benefit pension plan, on behalf of its
employees. CalPERS provides retirement, disability, death, and cost-of-living adjustment benefits to covered employees. The City provides both
employee and employer contributions; employee contributions are made by the employee, but effectively reimbursed by the City. The employer
rate is actuarially defined and set by CalPERS.
The City provides additional pension coverage to all employees hired prior to 1997. As of September 30, 2007, this defined benefit plan covered
546 of the City's 1,134 active employees. The City funds a pension trust fund for this program, and contributes 3.68% of total payroll.
The City has agreed to pay post-employment medical insurance to all retirees who have a minimum of 10 years of service or are granted a
disability retirement. As of September 30, 2007, 1,044 employees were covered by this program, which required an annual contribution from the
City of approximately$1.7 million. The City's actual contribution was $2.6 million.
Operating Expenditures
Operating expenditures for the City of Huntington Beach comprise approximately 23% of the City's annual General Fund budget. Large areas of
expenditure include equipment and supplies, repair and maintenance of existing assets, professional services, and insurance. In FY 2007-08,
operating expenditures are budgeted at$43.8 million, and are projected to grow to$59.8 million in FY 2016-17. Operating expenditures are
largely projected to increase at an assumed inflation rate of 3.0%, with the exception of Utility Expenses, which are projected to increase by 3.5%
per annum (consistent with the projection of City utility revenues).
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Operating Expenditures $43,763,853 $46,956,501 $48,396,388 $49,880,563 $51,410,394 $52,987,289 $54,612,701 $56,288,128 $58,015,114 $59,795,252
Annual Percent Change - 7.3% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1%
Appendix I:Revenue and Expenditure Assumptionsl Xi
Capital Expenditures
Capital expenditures account for approximately 5% of General Fund expenditures, and are budgeted at$9.6 million in FY 2007-08. This category
includes those expenditures that the City has earmarked as having any capital use.
The City of Huntington Beach has two distinct capital programs. The first is supported by the City's General Fund and budgeted annually, while
the second is funded by a capital reserve account, and is a product of the City's Five-Year Capital Improvement Program ("CIP"). For this reason,
capital expenditures budgeted from the General Fund may not be congruent with the City's CIP.
The General Fund capital expenditures, excluding IMP infrastructure, are projected to grow at an assumed 3% annual growth rate. It should be
noted the City has an Equipment Replacement Program, which attempts to ensure that all City equipment is up-to-date and in proper states of
repair. Purchases through this program consider the age and wear of all City equipment. Capital Expenditures also include"unfunded," or IMP
infrastructure beginning in FY 2008-09, which total $102.9 million.
22007-08 2008-09 2009-10 2010-11 02 11-12 2012-13 2013-14 2014-15 2015-16 2016-17
Capital Expenditures $9,625,831 $9,638,829 $9,427,994 $9,710,834 $14,504,194 $20,735,690 $22,551,813 $35,527,106 $36,592,920 $37,690,707
Annual Percent Change 0.1% -2.2% 3.0% 49,4% 43.0% 8.8% 57.5% 3.0% 3.0%
Appendix]:Revenue and Expenditure Assumptions I Xii
Special Revenue Fund .Revenues and Expenditures
The City of Huntington Beach maintains a number of special purpose funds that account for the expenditure of restricted revenues. In total,
.revenues received through these funds are anticipated to total $53.9 million in FY 2007-08. Of the City's special purpose funds, the LTFP includes
the Air Quality, Traffic Impact, Gas Tax, Park Acquisition and Development, Drainage, Measure M, Library Development, RDA, Debt Service
HBPFA, and RDA Debt Service.
Gas Tax Fund
The City's Gas Tax Fund accounts for gas tax revenues from the State of California as its primary source of revenue. In accordance with the
provisions of the Streets and Highways Code, the City receives earmarked gas tax revenues on the sale of fuel, which are distributed on a per
capita basis to all cities in the State. Gas Tax Fund revenues totaled $7.2 million in FY 2007-08, including several one-time receipts. The City
expects that its population will grow at a proportionally lower rate than the rest of the State. The City's population is projected to increase by
approximately 7.5% over the 15-year period 2005 and 2020, which is an average annual growth rate of 0.48%.' Projected gas tax revenue is
generally expected to grow at 3% per year.
2007-08 2008-09 2009-10 2010-11 2011-12 2012.13 2013-14 2014-15 2015-16 2016.17
Gas Tax Fund $7,238,000 $4,571,130 $4,708,254 $4,849,491 $4,994,965 $5,144,803 $5,299,135 $5,458,098 $5,621,829 $5,790,472
Annual Percent Change - -36.8% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Expenditures are primarily for transportation projects in the City. In FY 2007-08, expenditures are budgeted at$5.0 million, and are comprised of
$940,000 in salaries and benefits, $215,000 for equipment, supplies, repairs and maintenance, $2.7 million for improvements to existing capital
facilities, and$1.1 million for non-operating expenditures. Future Gas Tax Fund expenditures are comprised primarily of projects identified in the
5-year CIP or the IIMP list of infrastructure needs.
2007-08 2008-09 2009-10 2010.11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Gas Tax Fund Expenditures $5,011,532 $4,837,472 $4,872,716 $4,908,773 $4,945,969 $2,493,906 $7,319,852 $7,514,744 $7,715,874 $5,313,897
SCAG 2004,Growth Forecast.
Appendix I:Revenue and Expenditure Assumptionsl xiii
Debt Service HBPFA Fund
Revenue received into the HBPFA Fund is used to fund the costs of debt service on outstanding HBPFA bonds. Debt Service HBPFA Fund
revenues are approximately$6.3 million in FY 2007-08. The Huntington Beach Public Financing Authority("HBPFA") is a corporation created in
March 1988 as a conduit issuer of debt that has financed improvements and capital spending for the City and Redevelopment Agency. Revenue
in this fund is largely transfers from other funds and business units for the repayment of debt for various projects.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Debt Service HBPFA Fund $6,340,000 $6,354,835 $6,352,029 $6,045,652 $6,050,902 $6,052,695 $6,048,873 $6,049,379 $6,048,331 $4,532,089
Annual Percent Change - - - - - - - - -
The City's Public Finance Authority Debt Service Fund is tasked with paying debt service on outstanding debt for the City's Public Finance
Authority. Future expenditures are equal to outstanding debt service on HBPFA bonds.
2007-08 2008-09 2009-10 2010-11 2011.12 2012-13 2013-14 2014-15 2015-16 2016-17
Debt Service HBPFA Fund
Expenditures $6,340,000 $6,354,835 $6,352,029 $6,045,652 $6,050,902 $6,052,695 $6,048,873 $6,049,379 $6,048,331 $4,532,089
Appendix I:Revenue and Expenditure Assumptions) Xiv
Traffic Impact Fund
The Traffic Impact Fund was created to ensure that City streets and highways are provided with the funds necessary to meet required levels of
service and to mitigate congestion. The primary source of revenue is developer fees and the use of property and money. Future revenues are
projected to increase at approximately the rate of inflation. Revenue in FY 2007-08 is comprised of a large amount of one-time receipts that are
not expected to reoccur.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Traffic Impact Fund $6,103,000 $772,165 $791,819 $811,976 $832,646 $853,845 $875,586 $897,881 $920,746 $944,196
Annual Percent Change - -87.3% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
The City receives revenues from developer fees and the use of money and property, which is used for traffic mitigation projects in the City. The
City has budgeted expenditures of$5.7 million in FY 2007-08 from the Traffic Impact Fund. Of this amount, approximately$347,000 will be spent
on salaries and benefits, $400,000 on professional services, $4.6 million on the purchase and improvements of land, and $425,000 on non-
operating expenses. Projected expenditures include projects in the current five-year CIP.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Traffic Impact Fund Expenditures $5,773,128 $1,568,737 $912,817 $927,224 $942,083 $961,032 $980,685 $1,001,067 $1,022,207 $1,044,133
Measure M Fund
Measure M is a half-cent, voter-approved sales tax levied within Orange County. Revenue is used for street improvements and various
transportation improvements. Measure M revenue is projected to increase at the rate of inflation, or 3.0% annually. The Orange County
Transportation Authority long term financial plan expects that Measure M sales tax will increase at an average annual rate of 2.1%.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-1 2013-14 2014-15 2015-16 2016-17
Measure M Fund Revenues $2,524,000 $2,599,710 $2,677,691 $2,758,011 $2,840,741 $2,925,952 $3,013,719 $3,104,119 $3,197,231 $3,293,136
Annual Percent Change - 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Expenditures in this fund are budgeted at$4.2 million in FY 2007-08 and generally include projects identified in the five-year CIP and a portion of
the IIMP infrastructure needs. FY 2007-08 expenses are comprised of personal services costs ($132,235), repairs and maintenance costs
($25,000), and improvements to capital facilities($4,050,000).
Appendix I:Revenue and Expenditure Assumptions I XV
2007-08 2008-09 2009-10 2010-11 9011-12-12 2012-13 2013-14 2014-15 2015-16 2016-17
Measure M Fund Expenditures $4,207,235 $2,460,546 $2,165,354 $2,170,274 $2,175,351 $3,078,766 $3,171,100 $4,188,610 $4,314,242 $1,181.712
Air Quality Fund
The City of Huntington Beach receives revenue from the California State Air Resources Board, which is based primarily upon the State's
registration fee receipts, and is distributed on a per capita basis. Revenues from this fund are used primarily on public works projects throughout
the City. In FY 2007-08, the City anticipates that the Air Quality Fund will expend $50,000 in personal services expenditures, $41,500 in operating
expenses, and $350,000 in capital expenditures. No additional capital expenditures are included beyond FY 2007-08.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Air Quality Fund Expenditures $441,500 $347,798 $168,119 $173,616 $179,297 $185,167 $191,233 $197,502 $203,979 $210,673
Park Acquisitions and Development Fund
The City has budgeted $2.6 million for acquisition of new and the development of existing parks and beaches within the City in FY 2007-08. Of
this amount, approximately$174,000 will be spent on salaries and benefits, $964,000 on operating expenditures, $1.1 million on the purchase of
land, and $375,000 on non-operating expenditures. Revenues for this fund are primarily derived from fees, grants and donations. Costs related to
the acquisition and development of parks is expected to grow at an average annual rate of approximately 4.5%.
2007-08, 2008-09 2009-1 02 10-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Park Acquisitions and Development
Fund Expenditures $2,667,254 $1,455,053 $562,848 $570,832 $579,066 $589,332 $599,973 $611,002 $622,436 $634,288
Library Development Fund
The City of Huntington Beach projects $457,720 in expenditures from the City's Library Development Fund in FY 2007-08. Of this amount,
approximately$315,000 will be spent on equipment and supplies, and $142,000 on repairs and maintenance of existing assets. Expenditures are
anticipated to grow to $615,353 by FY 2016-17, based on an average annual growth rate of 3.0%.
2007-08 2008-09 2009-10 2 10-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Library Development Fund Expenditures $457,720 $485,765 $500,338 $515,348 $530,809 $546,733 $563,135 $580,029 $597,430 $615,353
RDA Fund
The City of Huntington Beach anticipates outlays related to several redevelopment activities in the City. In FY 2007-08, expenditures related to
this fund totaled $1.7 million, and are projected to grow at an average rate of 3.0% per year, to$2.7 million in FY 2016-17. FY 2007-08
Appendix I:Revenue and Expenditure Assumptions) XVl
expenditures include$804,314 in personal services costs, and $977,000 in operating expenses. Of this latter amount, a large proportion
($865,000, or 88.5%)will be spent on professional services costs.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
RDA Fund Expenditures $1,781,314 $4,678,298 $2,191,868 $2,257,128 $2,324,392 $2,402,101 $2,482,455 $2,565,545 $2,651,467 $2,740,319
RDA Debt Service Fund
The RDA Debt Service Fund is the largest of the City's special revenue funds and accounts for the receipt and expenditure of incremental property
tax revenue within the city's redevelopment agency project area. FY 2007-08 revenues are anticipated to be$15.9 million. Future incremental
property tax revenues are projected to grow at the same rate as the City's General Fund property taxes.
2007-08 2008-09 2009-10 2010-11 2011.12 2012-13 2013-14 2014-15 2015-16 2016-17
RDA Debt Service Fund $15,915,000 $16,360,408 $17,176,059 $18,202,963 $19,291,371 $20,636,589 $22,075,818 $23,615,633 $25,263,069 $27,025,657
Annual Percent Change - 2.8% 5.0% 6.0% 6.0% 7.0% 7.0% 7.0% 7.0% 7.0%
The City's RDA Debt Service Fund was created to pay debt service on outstanding debt for the City's Redevelopment Agency. In FY 2007-08,
expenditures related to this category totaled $23.8 million. The RDA has also identified other redevelopment needs that are included in projected
expenditures.
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
RDA Debt Service Fund
Expenditures $23,828,756 $13,715,695 $14,085,961 $14,536,147 $15,023,754 $15,606,248 $16,229,729 $16,886,604 $17,616,329 $18,371,931
Appendix I:Revenue and Expenditure Assumptions I XV11
�
| xviii
CHARGES FOR CURRENT SVC
PUBLIC WORKS 1,519,000 1,556,880 1,611,371 1,667,769 1,726,141 1,786,556 1,949,085 1,913,803 1,980,786 2,050,114
BUILDING 2,503,000 2,633,280 2,725,445 2,820,835 2,919,565 3,021,749 3,127,511 3,236,973 3,350,268 3,467,527
LIBRARY 42,700 467,700 482,575 497,971 S13,905 530,397 547,467 565,134 583,419 602,344
SPECIAL CITY SVCS 533,500 $28,675 843,235 $58,304 873,901 890,044 906,752 924,G45 941,943 960,467
RECREATIONAL CLASSES 3,508,000 3,852,320 3,987451 4,126,701 4,271,136 4,420,626 4,575,348 4,735,485 4,901,227 5,072,770
SPECIAL EVENTS 75,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000
UTIILITYCHARGES 83,000 86,320 89,341 92,468 95,705 99,054 102,521 106,109 109,823 113,667
AMBULANCE CHARGES
EMERGENCY RESPONSE 35,000 35,000 35,000 35,000 35,000 35,OD0 35,000 35,000 35,000 35,000
HAZMAT FEES 23,000 23,920 24,757 25,624 26,521 27,449 28,409 29,404 30,433 31,498
FIRE 510,000 746,720 772,855 799,905 827,902 856,878 886,869 9171910 950,036 983,288
_ MISCELLANEOUS 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500 15,500
PROP FUND CHARGE 378,176 393,303 407,069 421,X6 436,062 451,324 467:121 4831470 500,391 517,905
PROP FUND CHARGE-FIREMED 576,064 599,107 620,075 641,778 664,240 687,489 711,551 736,455 762,331 788,909
PROP FUND CHARGE-EMERALD COVE 12,650 13456 13,616 14,093 14,586 15,097 15,625 16,172 16,738 17,324
PROP FUND CHARGE•WATER 4,224,069 4,393,032 4,546,788 4,705,925 4,870,633 5,041,105 5,217,544 5,400,158 5,589,163 5,784,784
PROP FUND CHARGE-WMP 257,440 287,738 277,108 286,807 296,845 307,235 317,988 329,118 340,637 352,559
PROP FUND CHARGE-REFUSE 519,795 540,587 1 559,507 579,090 599,358 620,336 642,048 664,519 687,777 711,850
PROP FUND CHARGE•OVE 12,768 13,279 13,743 14,224 14,722 15,238 15,771 16,323 16,894 17,486
PROP FUND CHARGE SEWER 893,214 928,943 981,458 995,108 1,029,835 1,085,983 1103,292 1,141,908 1,1811874 1,223,240
TOTAL CHARGES FOR CURRENT SVC $ 15,721.876 $ 17,515,458 $ 18,106,593 $ 18,718,418 $ 19,351,657 $ 20,007,060 $ 20!685,401 $ 21,387,484 $ 22,114,141 $ 22,866,230
OTHER REVENUE
SALES 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000
GENERALSALES 72,000 71,500 71,500 71,500 71,500 71,500 71,500 71,500 71,500 71,500
DONATIONS
SPONSORSHIPS 80,000
REIMBURSABLES 285,000 665,000 665,000 665,000 665,000 665,000 665,000 665,000 665,000 665,000
SETTLEMENTS 15,000
OTHER 580,000 845,000 904400 913,519 923,267 933,356 943,798 954,606 965,793 977,370
TOTAL OTHER REVENUE $ 1,212,000 $ 1,781,500 $ 1,840,600 $ 1,850,019 $ 1,859,767 $ 1,869,856 $ 1,880,298 $ 1,881,106 $ 1,902,293 $ 1,913,870
NON-OPERATING REVENUE
OPERATING TRANSFERS IN 5,636,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428 5,436,428
PROCEEDS OF LONG TERM DEBT
PRIOR PERIOD ADJUSTMENT
JOINT VENTURE INCOME
CONTRIBUTIONS RECEIVED
TOTAL NON-OPERATING REVENUE $ 51636,428 $ 5,436,428 $ 5,438,428 $ �5,43%428 $ 5,436,42$ $ 5,436,428 $ 5,436,428 $ 5,436,428 $ 5,436,428 $ 5,436,428
Appendix I:Revenue and Expenditure Assumptions I XiX
PERSONAL SERVICES
SALARIES,PERMANENT 75,156,251 76,180,233 78,278,217 80,406,906 $2,596,861 85,900,736 89,336,765 92,910,236 96,626,645 100,491,711
SALARIES,TEMPORARY 4,815,328 4,208,103 4,374,347 4,549,321 4,731,294 4,920,548 5,117,388 5,322,082 5,534,945 5,756,343
SALARIES,OVERTIME 8,535,884 9,581,647 9,964,913 10,363,509 10,778,050 Si,209,172 11,657,540 12,123,842 12,608,798 13,113,149
TERMINATION PAYOUTS 2,300,000 2,623,500 2,728,440 2,837,578 2,951,081 3,069,123 3,191,888 3,319563 3,452,345 3,590,438
BENEFITS 41,818,248 42,665,384 44,191,918 45,774,111 47,414,027 49,112,695 50,872,220 52,694,783 54,582,641 56,538,134
TOTAL PERSONAL SERVICES $ 132,425,710 $ 135,256,867 $ 139,537,836 $ 143,930,425 $ 148,471,313 $ 154,212,272 $ 160,175,781 $ 2.66,370,486 $ 172,805,372 $ 179,489,774
OPERATING EXPENSES
UTILITIES 6,176,840 6,238,367 6,456,710 6,682,695 6,916,589 7,168,670 7,409,223 7,668,546 7,936,945 8,214,738
EQUIPMENT&SUPPLIES 6,857,791 7,312,233 7,531,600 7,757,548 7,990,275 8,229,983 8,476,883 8,731,189 8,993,125 9,262,91$
REPAIRS&MAINTENANCE 8,526,314 8,954,238 9,222,863 9,499,549 8,784,535 10,078,071 =380,414 30,691,826 11,012,581 11,342,958
CONFERENCES&TRAINING 1,138,444 1,099,363 1432,344 1,166,314 1,201.,303 1,237,342 1,274,463 1,31$697 1,352,078 1,392,640
PROFESSIONAL SERVICES 5,173,145 7,153,477 7,368,081 7,589,124 7,816,797 8,051,301 8,292,840 8,541,625 8,797,874 9,081,810
OTHER CONTRACT SERVICES 4,454,956 4,784,334 4,927,864 5,075,700 5,227,971 5,384,810 5,546,354 5,712,746 5,884427 6,060,651
RENTAL EXPENSE 1.,373,245 1,393,118 1,434,912 1,477,959 1,522,298 1,567,967 1,615,006 1,663,466 1,713,360 1,764,761
CLAIMS EXPENSE 2,126,000 2,i90,928 2,256,656 2,324,355 2,394,086 2,465,909 2,639,886 2,616,083 2,694,565 2,775,402
INSURANCE 3,220,000 3t0251574 3,116,341 3,209,831 3,306,128 3,405,310 $507,469 3,612,693 3,721,074 3,832,706
CONTRIBUTION TO PRIVATE AGENCY 850,000 883,704 714,516 735,951 758,029 780,770 804,193 828,319 853,169 878,764
PAYMENTS TO OTHER GOVERNMENTS 2,881,062 2,9671494 3,056,519 3,148,214 3,242,661 3,339,940 3,440,139 3,543,343 3,649,643 3,759,132
INTERDEPARTMENTAL CHARGES
EXPENSE ALLOWANCES 353,831 357.142 387,858 378,892 390,258 401,988 414,025 426,448 438,239 452,417
OTHER EXPENSES 833,425 788,532 810,128 834,432 859,485 885,248 911,808 839,160 987,335 898,355
TOTAL OPERATING EXPENSES IS 43,763,853 $ 46,956,501 $ 48,396,388 $ 49,880,563 IS 51,430,394 $ 52,987,289 $ 54,612,701 $ 56,288,128 $ 58,015,114 $ 59,795,252
CAPITAL EXPENDITURES
LAND PURCHASE
IMPROVEMENTS 666,820 2,359,218 2,429,995 2,502,896 7,OB0,017 13,088,788 14,675,504 27,414,507 28,236,942 29,084,051
EQUIPMENT 6,158,970 4,133,956 4,267,975 4,385,714 4,517,285 4,652,804 4,792,388 4,936,160 5,084,244 5,236,772
VEHICLES 2,459,200 2,661,675 2,241,525 2,308,771 2,378,034 2,449,375 2,522,856 2,598,542 2,676,498 2,756,793
SOFTWARE•CAPITAL 442,041 483,980 498,500 513,455 528,858 544,724 561,066 577,898 595,235 813.082
CAPITALIZED PP&E OFFSET
TOTAL CAPITAL EXPENDITURES $ 9,625,831 $ 9,638,829 $ 9,427,994 $ 99710,834 $ 14,504,194 $ 20,735,690 $ 22,551,813 $ 35,527406 $ 38,592,920 $ 37,680,707
NON-OPERATING EXPENSES
DEBT SERVICE EXPENSES
PASS THROUGH PAYMENTS
TRANSFERS TO OTHER FUNDS 8,885,500 8,885,500 8,886,500 8,885,500 6,865,500 61866,500 6,865,500 6,865,500 6,865,500 6,866,500
PAYROLL CHARGES (4,550,406) (5,005,447) (5,505,991) (6,056,590) (6,662,249) (7,328,474) (8,061,322) (8,867,454) (9,754,199) (10,729,619)
DEPRECIATION
LOANS MADE
TOTAL NON-OPERATING EXPENSES $ 2,315,094 $ 1,860,053 1$ 1,359,509 $ 808,910 $ 203,251 $ (462,974)$ (1,195,822) $ (2.001.954) $ (2,888,699) $ (3,864,319)
Appendix I:Revenue and Expenditure Assumptions I XX
131-
Summary for All Funds
'2007-, 2 7
QXO
200"O:�: 1OWS MW:�'M A
VIP
n Pro UP
I ECEM
General Fund
I
a n"
Total Revenues 185,046,804 19OA14,007 197,784,497 206,789,365 216,139,915 227,001,172 238,160,446 250,320,440 263,196,362 276,832,999
Total Expenditure 188,130,488 193,712,251 200,586,01 208,059,482 218,317,901 231,201,027 239,873,223 259,912,516 268,253,456 278,473,489
7I.ndBalance 1$ 40,61.2,316 $ 37=4,072 $ 34,212,467 1$ 32,942,350 $ 30,764,364 $ 26,564,509 $ 24,851,732 $ 15,259,657 $ 10,202,664 $ 8,562,074
Air Quality Fund
Total Revenues 273,000 2 289��62 298,314 7 316,482 1 325. 7.6 N:i7 U5 356,203
10 22 i �.g, i oi
441,500 J85,i67 1 2 ::�7:Total Expenditure 347 798 73 ?2 9"1 1 :92 1,97 Z2 1 210,673
Fund Balance $ 638,500 $ 571,892 1$ 693,3991$ 818,097 1$ 946,064 1$ 1,077,378 1$ 1,212,121 1$ 1,350,375 1$ 1,492,224 1$ 1,637,754
Traffic Impact I
Total Revenues 6,03,000 �.'r17 7 1 791,80 811,976 832,646 853,845 875,686 897,881 920,746 944,196
Total Expenditure 5,773,128 1,668,737
737 912,817 927,224 942,083 961,032 980,685 1,001,067 1,022,207 1,044,133
Fund Balance $ 6,021,872 $ 5,225,299 $ 5,104,302 $ 4,989,053 $ 4,879,617 $ 4,772,430 $ 4,667,331 $ 4,564,144 $ 4,462,684 $ 4,362,746
Gas Tax Fund
Total Revenues 7,238,000 4,574,994,965
9N 65 5,144,803 :�2Ei 131 5,458,098 5,621,829 10,472
7�4 r'i 74 7:1
70 254 7i 74
5,01.1,532 2 Total Expenditure 4,.37 72 �4:2:7:1.6 �4:%::�7973 1:94�::69 2,493,906 1 7 52 5,313,897
Fund Balance 4,059,468 $ 3,793,126 $ 3,628,663 $ 3,569,381 $ 3,618,377 $ 6,269,273 1$ 4,248,556 1$ 2,191,910 1$ 97,8661$ 574,440
Park Acquisition and Development
Total Revenues 763,000 772,306 792,107 S121419 833,254 854,626 876,548 899,034 922,101 945,761
Total Expenditure 2,667,254 t,455,053 562,848 570,832 579,066 589,332 599,973 611,002 622,436 634,288
Fund Balance $ 486,746 $ (196,003) $ 33,256 $ 274,843 $ 529,030 $ 794,324 $ 1,070,899 1$ 1,358,931 $ 1,658,596 $ 1,970,069
Drainage
Total Revenues 77,000 79,060 81,1.76 83,348 85,579 87,871 90,224 92,641 95,123 97,672
Total Expenditure - - - - -
Fund Balance $ (600,000) $ (520,940)1$ (439,764) $ (356,416) $ (270,837) $ (:1.82,966) $ (92,742) $ (101) $ 96,022 $ 192.694
Measure M Fund
Total Revenues 2,524,000 2,599,7 11 74 2:�8.40 741 2�M�9:2 00 1 N 3,293,136
7,
2 758:9 :35, 6
Total Expenditure 4,207,235 '0 2:00 2 3 1. �4�1 2,4.0,.46 �2:�:I 6 5 4:3.7:1.72 519 �'730:17!�O 4�. 3,472,575
Fund Balance $ 1,258,765. $ 1,397,929 $ 1,910,266 $ 2,498,003 $ 3,163,393 $ 5,907,449 $ 4,553,297 $ 1,927,246 $ 487,7311$ 308,292
Library Development
Total Revenues 457,000 41::4 7:5 :9 2492,329
N 329 504,703 517,388 530,392 543,724 557,391 571,401
457,720 O�i 5: 25'348 563,135 580,029 61.5,353
Total Expenditure 48 5 3 546,733 597,430
Fund Balance $ 356,280 $ 339,000 $ 318,921 $ 295,902 $ 269,796 $ 240,451 $ 207,708 $ 171,403 $ 131,364 $ 87,413
RDA
Total Revenues 1,721,000 1,772,680 i i i �112iS 706 5 9 %7 1,994,832 2,064,620 2,116,201 2,179,628 2,244,956
2,191,868
i �,:6ii i 4
Total Expenditure 1,781,314 2�:�2:T�!192 2:32 Z2 2,402,101 2,482,455 2,565,545 2,651,467 2,740,319
Fund Balance 24,139,686 $ 21,233,968 $ 20,867,807 $ 20,491,104 $ 20,103,495 $ 19,696,226 1$ 19,268,392 Is 18,819,048 1$ 18,347,209 1$ 17,851,845
Debt Svc HbpIa
7 048:iM -4,-1,32,0.9
2 6,or,2,69: -661M�873
6,052,69 6 4,532,089
B M 6,340,000 0::9 6,048,873
6:04B M9 6,048,331 Total Revenues 6,320,000 fl
Total Expenditure �i3:44:23: :INNON-9 66,046,652
�60�4 55 -5.2 :�00:. O�2
Fund Balance $ 7,180,000 $ 7,180,000 1$ 7,180,000,1$ 7,180,000 1$ 7,180,000 1$ 7,180,000 $ 7,180,000 1$ 7,180,000 1$ 7,180,000 $ 7,180,000
Rda Hb Debt Svc Project Area I
Total Revenues 16,915,000 16,360:4 19,2ft,37i 23,615,633 25,263,069 i698 V:6176,059 1.11,202,963 20,636,589 22,075,SiS 27,025,667
Total Expenditure 23,828,756 13,71 9, 1
4 .5,961 14,536,147 15,023,764 0,606,248 16,229,729 16,886,604 17,616,329 18,371,931
Fund Balance $ (7,913,756) $ (5,269,043)1$ (2,178,944) $ 1,487,872 $ 6,755,489 $ 10,786,830 $ 16,631,919 $ 23,360,947 $ 31,007,688 $ 39,661,414
Appendix 1:Revenue and Expenditure Assumptions I Xxi
RECEIVED FROk
AS PUBI IC fiEC ° A:r-r "C A�CIL MEETING
OF
Q
T C ERK OFFICE
A L FLYNH,CITY CLERK,
20U' 8 LonA" Termlo%loftl
FinaticidAO& I PlEmpin
,#Iw& m
Ulty Council toSession
March 3, 20
Background
® TFP addresses financial goals in Strategic Plan
- create a strategy for funding petal projects
- ensure City has sufficient reserves
- understand financial implications of decisions
disclose fiscal 'impacts of the "pension crisis"
Components of the LTFP
• Ten-year projections for General Fund and select special
revenue funds
• Estimated infrastructure needs over the next 10-years
• New funding sources for infrastructure needs
• Analysis of potential drop in revenues
IZ
Ten Year Projections
Ten-Year General Fund
$300 .W.... --_r..-.........
_.
I
$280 - - - _-
$260 -- -
$240 - -- -
I
$220 -
$180 - -- - - - -- -
$160
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Revenues Expenditures, excl. capital
4
Ueneral Fund ReAssumptions
• Property tax grows at 2.6% to 6.5%
• Sales tax declines 1 . % in FY 2 ®0 grows at 5.0%
thereafter
n average, General Fund revenues increase at a 4. %
annual rate
5
General Fund Expeitu re tssu m pdo
® Salaries grow at 2® % through FY 2 11 -1 , based on
existing ; 4.0% growth thereafter
® Benefits grow 3.6% per year
® n average, General Fund expenditures, excluding
capital and non-operating costs, increase at a 3.5%
annual rate
6
Special Revenue Fund Forecast
• Major funds include Gas Tax, Measure IVI, and RDA Fund
• Gas Tax and Measure M grow at 3.0%
• Gas Tax and Measure !VB funds have $81 .7 million of
expenditures
- 5-year CIP
- $30.2 million of additional infrastructure
Infrastructure Needs
Funded Infrastructure
• LTFP includes $148.0 million for infrastructure
- $117.8 million from General Fund
- $30.2 million from Gas Tax and Measure M funds
• 5-Year CIP is fully funded ($70. 1 million)
• IIMP is partially funded ($123.5 million of $304.3 million)
9
limp
• The Integrated Infrastructure Management Program
report (2000) identified 20-year infrastructure need
- $1 .3 billion total need
- $859.0 million shortfall
• Unfunded infrastructure in the IIMP has been updated for
LTFP
110
Tot,, Unfunded/lIMP 9-Yea0
Needs ( I I r in mIlli s)
Parks/Playgrounds,
$7.8
Buildings/Facilities,
$25.8
Alleys, Lots, Block
Walls, $28.6
F Drainage, $97.4
�r � � � �r$x� { ,
a 11 f✓f
Y ,y
ra�
f E �kI
Arterial Highways,
$78.3
Residential Concrete,
Residential $59.4
Pavement, $6.9
11
1IMFOInfrastructure Includefin LTFP (doll r in
millions)
Buildings/Facilities,
$0.0 Parks/Playgrounds,
Alleys, Lots, Block $5.2
Walls, $0.0
3
Arterial Highways,
$33.9
"
Drainage, $61.5
s F
Residential �t .
Pavement, $0.0 '°
Residential Concrete,
$22.8
12
i
utebt Financing
• Debt financing can add $44.4 million of General Fun
13
infrastructure funding
• General Fund projections demonstrate that $75.0 million
of lease revenue bon is "affordable"
• Gas Tax can support ®0 million bond issue
• Debt financing accelerates project delivery but results in
a fixed obligation
13
Strategies to Address Infrastructure shortfall
• Prioritize most pressing needs; delay other projects until
funding is available
• Attempt to implement new funding sources
14
New Revenues
New Revenues for Infrastructure
• Possible new revenues depend on the specific type of
infrastructure
• Most new revenues anrill require at least majority voter
approval
• City can increase revenue from existing sources:
- property tax override
- RDA loan
16
PoAntial New Revenues blknfrastructure
Category
fVevv Revenue Infrastructure
Assessment Districts sidewalk replacement, alley
improvements, block walls
Stormwater Assessments S$orrmdrain pump stations
Stormwater User Charge Storrndrain pump stations
Property Tax Override All
RDA Loan All
117
Risk Analysis
Rationale for Risk Analysis
• Possibility that revenues outside City's control will
decrease
• Possibility that expenditure growth will be greater than
expected
• Financial Projections are highly variable
19
Historical l In billions
$25.0 $23.8
$21,7
$20.4
$20.0 $18.8 $18.9
i
$16.5 $16.8
$15.0 $14.0 $14.0
11.3 $11.9 $11.9
$12.3 $12.4 $12.3 $12.9
$10.0
i
$5.0
$0.0 --
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
20
nistorical Taxable Sales (in millions)
$3,500.0
$3,000.0 $2,914
$2,644 $2,663 $2,787
$2 500.0 $2,383 $2,473
$2,296 $2,334
$2,195
'
$1 895
$2,000.0 � A
ii" .:.
$1 ,500.0 -
b
of flu
$1 ,000.0
f
$500.0
f ,
x ;
.; Am
$0.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
21
bcenario 1 Flat PropertyGrowth
Scenario 1
Projected General Fund Revenues, Expenditures and Fund Balance
$270 (Dollars in Millions)
0
$260 -- - - --
$250 /y
$240
$230
$220
$21 U
$200 _
$19077
_4r
$170 - - -
$160 -_ -
s
t
$150
3�6
$140
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Fund Balance Expenditures Revenues
22
Scenario c in
Scenario 2
Projected General Fund Revenues, Expenditures and Fund Balance
$270 (Dollars in Millions)
$260 - - __
$250
$240
$230777
_.
$220 _ -
$210 - -- -
-. 3k
�f
$200 ---- - -- _
yF
$190 - -
$180 - -
$170 b _.
y�f
$160 -
$150 -
�7�t�'
$140 ;
$130
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
F Fund Balance Expenditures Revenues
23
Additional
• State u get deficit could reset in loss of city property
tax revenue
® City may be sheltered from most aspects of "pension
crisis'
24
Next Steps