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Home My WebLink AboutLong Term Financial Plan Update - Presentation by Director o i „ q tl , 1TV Of UNTIN ( TOH r;h Long�Term Financial Plan ,q SUPPLEMENTAL COM MUNICATION I! 11 FIBAugust 19, 2013 -�3 Meetkig Date: Agenda Item No. 4 HI;NTINGTON BEACH Summary ❑ Five-Year Plan Update ❑ General Fund Financial Outlook ➢ FY 2013/14 Proposed Budget Baseline ➢ Revenue Assumptions ➢ Expenditure Assumptions ➢ Unfunded Liabilities Review ➢ General Fund Reserves ➢ Risk Factors ➢ Strategic Planning Retreat Discussion ❑ Recommendations z Benefits of a Five-Year Plan H6NIVGttRJ BEACH • Build a financially resilient government through long- term financial planning J Improve long-term financial sustainability as required through the Strategic Plan LJ More time to effect change and adapt j Adds transparency and encourages involvement -1. Methods to determine the cost/benefits of decisions over the long-term Tool to help leaders balance demanding needs for: Enhanced or new services, infrastructure needs and financial reserves 3 �• R4 Basis of Estimates Hl.%TINGTOb BEACH ❑ Local and National Economic Indicators ❑ Orange County Assessor 's Office ❑ Property Tax and Sales Tax Consultants (HDL) ❑ Economic Forecasts (i.e., Chapman, Fullerton, and UCLA) ❑ CalPERS ' Actuarial Valuations ❑ Bartel Associates' AnalY ses and Recommendations ❑ Financial Advisor 's Input and Analysis (PFM) 4 $' d .iY NI fir.• Five-Year Plan August 19, 2013 s HL%;I,,aONEA(H General Fund Expenditure Baseline ❑ The Proposed General Fund Budget totals $ 193 .5 million, a 3 .9% increase from the FY 12/13 Adopted Budget ❑ For the first time in six years, the Proposed General Fund Budget is balanced for FY 13/ 14 with: No layoffs, position reductions, or defunded positions No departmental cuts MEW No service reductions LIMA" 6 z FY 2013/14 Baseline HININGT0 BEA('H General Fund Budget by Department City Clerk City Manager City Attorney 0.4% l.l% 1.2% Finance Library Services o City Council 2.2% 2.7/o 0.1% Human Resources 2.7% City Treasurer Information Services 0.1% 3.3% Planning and Building Police 3.3% 32.0% Community Services 4.6% Public Works 11.1% Fire 20.6% Non-Departmental 14.7% 7 Revenue Assumptions HIN1\61Oh BEG(H Property Tax will increase steadily by a modest 3 .5% annually in FY 14/15 and thereafter • Sales Tax will increase by 4.25% in FY 14/15 and FY 15/16, and stabilize at 4.0% in FY 16/17 • Transient Occupancy Tax is estimated at 4.0% annually Li Overall, General Fund revenue will increase on average by 2.8% per year over the next 5 years, or an additional $5 .7 million annually on average 8 : z Expenditure Assumptions H6VINGTE BEACH ❑ Baseline labor costs with no changes to the Table of Organization ❑ Existing employees' PERS pick-ups remain* ❑ Reflects projected CalPERS rate increases per Bartel Associates' analysis ❑ $ 1 million additional for Equipment Replacement for FY 13/14, and $500,000 thereafter until $6 million is reached in FY 17/18 ❑ $500,000 more for Infrastructure in FY 14/15, and thereafter, to meet the 15% infrastructure Charter requirement ❑ $ 1 million per year for 800 MHz interoperability project ❑ $500,000 per year for three years for the General Plan ❑ $516,000 per year for Affordable Care Act compliance ❑ $ 1 million in FY 14/15 and thereafter for the Senior Center Debt Service Payment *Assumes continuation of HBFA at 6.75% pick-up 9 Expenditure Assumptions p p NINI\GT(M BED(H (Ca1PERS Rate Increases) ❑ CalPERS costs will increase from $25 .6 million in FY 13/ 14 to $46.4 million in FY 19/20 Reflects impact of discount rate change from 7.75% to 7.50% (no phase-in) in FY 13/14 and a reduction to 7.25% in FY 15/16 Reflects impact of a significantly reduced payroll base Accounts for almost 50% of the total increase in the General Fund Budget in FY 13/14 Reflects shift from a 30-year rolling amortization to a 30-year fixed amortization period y Reflects a 5-year smoothing methodology versus the original 15-year smoothing y Reflects pension cost increases due to longer lifespans 10 7-Year Ca1PERS — All Funds MNTINCT :BWH Employer Contribution Increases (in millions) 90.9% $50.0 $45.0 $40.0 $35.0 $30.0 $25.0 — ■Misc $20.0 ■Safety $15.0 $10.0 $5.0 $- FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20 Summary considers 30-Year Rolling to Fixed Amortization, Direct Rate Smoothing, Mortality Study and 7.25%Discount Rate 11 Five-Year Plan Highlights MU ON'fACH (in thousands) Category Proposed Projected Projected Projected Projected FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 SALARIES 91,331 94,606 96,021 97,101 98,15 ALPERS 25,560 26,760 31,450 34,50C 37,75 WORKERS'COMP& OTHER BENEFITS 22,687 22,673 22,860 23,033 23,21 OPERATING &NON-OPERATING 46,963 47,509 47,956 45,843 45,585 INFRASTRUCTURE 3,000 3,50 4,000 4,500 5,00 EQUIPMENT 4,000 4,50 5,000 5,500 6,00 TOTALS 193,541 199,54 207,286 210,477 215,70 VENUES 1939541 1989791 204922 210934 216936 IR - Senior Center Debt 1,000 1,00 CHALLENGE)/SURPLUS 0 (242) (29062) (132) 65 12 Five-Year Plan Highlights HUSINGTON BEACH IJ The City's General Fund is benefiting from the national economic recovery J The City is well poised to benefit from this recovery through increased revenue However, the City's personnel cost is approximately 72% of the General Fund Budget J As such, fixed cost increases related to the existing payroll base will largely consume projected revenue increases J The most significant cost increases projected over the next 5 to 10 years are the City's pension costs due to CaIPERS ' rate changes 13 � it? HL V 14p7(M BEACH Five-Year Plan Highlights • Hence, projected revenue increases will primarily assist in funding increased pension costs ❑ FY 15/16 will be challenging as there is a projected $2. 1 million deficit due to the full implementation of PERS ' new rate changes ❑ The 5 Year Plan reflects the "Base Case" and does not reflect enhanced staffing levels or restored positions 14 � . Unfunded Liabilities August 19, 2013 Accomplishments HL%TINGTC%BEACH C(Paid off PARS liability in FY 12/13, two years ahead of schedule N(Increased payments to Retiree Medical Plan by a total of $981 ,000 over the past 3 years (above the ARC) N(Increased payment to Retiree Supplemental Plan by $969,000 in FY 11 /12 (above the ARC) Opted to budget full impact of discount rate change in Year One for PERS rate (FY 13/14) 16 Aj Plan to Reduce Unfunded Liabilities H6\TI\LT(M'BEA(:H ❑ The 5-Year Plan reflects a 5-pronged approach: "One Equals Five" Set-Aside for Ca1PERS r "25 to 10" Plan for Retiree Medical y "16 to 10" Plan for Retiree Supplemental Consider revision to Financial Reserve Policy as follows: 25% to Economic Uncertainties Reserve • 25% to Capital Improvement Reserve (CIR) • 25% to Pension Rate Stabilization Fund 25% for Infrastructure Fund As recommended by Bartel Associates, reduce unfunded pension liabilities by $ 1 .9 million year-end, if possible 17 "One Equals Five" Plan HG%TI\GTEM BEACH C a1PERS $25,000,000 ovBT 15 r eoTz 45M m Z a $20,000,000 ea N ow ' con��lb�� pdd�,onal$�M $15,000,000 �ycb Q v e O $10,000,000 0 u E $5,000,000 .. 00,000 FY 2013/14 FY 2014/15 FY 2015/16 --- FY 2016/17 FY 2017/18 18 "25 to 10" Plan HLNTINGTON BEACH Retiree Medical 12,000,000 $10 million 10,000,000 � Jr a 8,000,000 w .a a v 6,000,000 0 4,000,000 2,000,000 $9.2 million 0 FY 2011-12 FY 2015-16 FY 2020-21 FY 2025-26 FY 2030-31 FY 2035-36 Year 10 Year 25 Years to Eliminate Unfunded Liability —25-Year Amortization Expedited"25 to 10"Plan 19 1116 to 10" Plan aUMnNGTON HAtn Retiree Supplemental 40,000,000 $37 million 35,000,000 'O 30,000,000 - 25,000,000 a a 20,000,000 - - — - d a e 15,000,000 D 10,000,000 5,000,000 -- - -- - — -- $7.4 million I 0 — -- — FY 2011-12 FY 2014-15 FY 2017-18 FY 2020-21 FY 2023-24 FY 2026-27 Year 10 Year 16 Years to Eliminate Unfunded Liability 16-Year Amortization Expedited"16 to 10"Plan 20 Recommendations byJ Bartel Associates H6NTIN JON BEA(:H V Budget the full impact of the previous discount rate change (7.75% to 7.5%) in FY 2013/14 N Use extra one-time money to pay down unfunded liabilities Options to fund higher future pension costs include: Allocate/Find additional ongoing revenue to fully fund increasing future pension costs Negotiating to have employees pay more ((Utilize long-term financial plan to expedite full funding for increased CalPERS costs 21 General Fund Reserves August 19, 2013 General Fund Balance • 7 I H"rw`TCA BEACH (in thousands) Audited Estimated Estimated Estimated Fund Balance Category FY 11/12 FY 12/13 FY 13/14 FY 14/15 Economic Uncertainties 249011 245011 241011 24,011 Equipment Replacement 6,913 11,413 119413 119413 Capital Improvement Reserve 59970 59970 4,970 35970 PARS Obligation 4,701 Budget Stabilization Fund 31100 35100 35100 35100 Retiree Medical Unfunded Liability 698 Senior Center Debt Service 19000 19000 Litigation Reserve 900 1,900 1,900 15900 Other Fund Balance 81142 89253 89253 89253 Total Fund Balance 549435 54,647 549647 539647 23 Risk Factors Or"- lugust 19, 2013 Redevelopment Dissolution H6VINGT H BEACH p i ❑ Disallowed Items — Recurring Costs $ 836,000 ❑ Additional disallowances Low-Mod Housing DDR* $ 3,600,000 Non-Housing DDR (Other Funds) $ 8,8139384 General Fund Impact $ 5,078,834 $1794929218 *City filed litigation against the Department of Finance in FY 11/12 regarding the $3.6 million in Low-Mod Funds. 25 Strategic Planning Retreat Discussion Ilk i ugustl!, 2013 IW Strategic Planning Retreat Discussion K"""`ONB`°`N Funding for 3 Police Officers r At the August 2, 2013 Strategic Planning Retreat, the City Council requested options to fund three additional Police Officers in the FY 13/14 Proposed Budget 27 7 H6NTINGTON BEACH Police Officer Costing Assumptions: FT 1 3 1 3 Year 1 Year 2 Fully Burdened Cost without PERS 1669110 4985330 1661110 4985330 PERS 63170G 1919100 679360 20200 Total Cost* $ 2295810: $ 689,4301 233,470 $ 700,410 28 Funding Options HE.NTINGTON BEACH for 3 Police Officers r I Options 1 I Proposed Budget Option 1 800 MHz Interoperability Project $1 million Option 2 Affordable Care Act^ $516,000 Option 3 Capital Improvement Projects* $3 million ➢ Staff recommends Option 2 'One-time delay in Affordable Care Act implementation to January 1, 2015. *Balance to be funded by the CIR. 29 ITV Of UNTIN ( TOM 14 ( A mm Questions ? . ugust 19. 2013 HBPOA Police Officer Compensation August 19th, 2013 Gy�13 Oct to Dec Jan to Sept A B Base Pay 7274 7274 Holiday Pay 280 280 Uniform Allowance 108 108 Total Base Pay 7662 7662 Medicare = 1.45% 111 111 Workers Comp = 9.85% 716 716 Retiree Medical = 2.95% 215 215 PERS Reimburse = 4.75% 364 364 PERS A=35.012%, B=38.841% 2683 2976 Roll-Up Totals 4089 4382 A= 54.012, B = 57.841 Total Base Pay + Roll-Ups 11751 12044 Education & POST Certificates 3% = 218 6% =436 9% = 654 12% = 872 1343 1376 Longevity 10+ yrs = 5% = 363 20+ yrs = 10% = 737 1135 1163 Bi-lingual = 5% = 363 559 572 Non Compensation Benefits Single Two Party Family Health Insurance 471 942 1225 Dental 57.86 108.02 142.36 Vision 22.76 22.76 22.76 LTD 38 38 38 LTC 25 25 25 EAP 3.62 3.62 3.62 AD&D 1 1 1 Life Insurance 4.5 4.5 4.5 PERS 1959 Survivor Benefit 3.94 3.94 3.94 Total per Month 627.68 1148.84 1466.18 Total per Year 7536 13788 17592 c. c k Cost Calculations per Police Officer per Year August 19th, 2013 Oct to Dec Jan to Sept A B Cost per year per Officer Base Pay + Roll-Ups 11,751 12,044 Months X 3 X 9 35,253 108,396 143,649 Benefits 17,592 Total 161,241 Education + POST Certificates (12%) 1,343 1,376 with Roll-Ups Months X 3 X 9 4,029 12,384 16,413 Total 177,654 Longevity (10%) with Roll-Ups 1,135 1,163 Months X 3 X 9 3,405 10,467 13,872 Total 191,526 Bi-lingual (5%) with Roll-Ups 559 572 Months X 3 X 9 1,677 5,148 6,825 Total 198,351 Pilot (13%) with Roll-Ups 1455 1491 Months X 3 X 9 4,365 13,419 17,784 Total 216,135 a �