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Home My WebLink AboutItem 14 - 2018-19 PAFR DocumentPopular Annual Financial Report 2019Fiscal year ending June 30, 2019 FINANCIAL REPORT MESSAGE We are pleased to present the City of San Luis Obispo’s second Popular Annual Financial Report (PAFR).The PAFR is the condensed version of the 2019 Comprehensive Annual Financial Report (CAFR)which is a detailed account of the City’s financial statements,notes,schedules,and statistics.The CAFR was prepared in conformance with Generally Accepted Accounting Principles and audited by Badawi &Associates and received an unmodified (clean)opinion.A copy of the CAFR can be found on the City’s website at www.slocity.org/Finance. The PAFR is a summary of the financial position and statements of the City and shows where the dollars are spent to operate the City and where they come from.It is therefore an effort to inform citizens and other interested parties about the financial operations of the City in a simplified and easy-to-read format. Both documents are available on the City of San Luis Obispo Finance Department’s website at www.slocity.org/Finance Popular Annual Financial Report Contact Us: There are many ways to connect: Phone: 805-781-7100 www.slocity.org Facebook –City of San Luis Obispo Twitter -@slocity Financial Awards The City has received the following awards through the Government Finance Officer Association of the United States of America: Certificate of Recognition for Budget Preparation & Certificate of Achievement of Excellence in Financial Reporting CITY PROFILE San Luis Obispo became a Charter City in 1876. 46,548 Population (largest city in SLO County) 20,578 Total Housing Units $64,014 Median Household Income 60.9% In the Labor Force Water Supply Reservoirs: 10,392 AF Recycled Water: 238 AF ECONOMIC OUTLOOK Employment.Employment continues to be strong into 2020 with an unemployment rate close to history lows at 2.7%.Continued diversification in the job market with new businesses opening will continuingly offer a strong job market. This is especially true for the two dominating employment sectors of Leisure &Hospitality and Education &Health.With two new hotels in the heart of San Luis Obispo and several hotels in the planning and building phase,this sector will continue to attract job growth.The new French Hospital campus will equally offer opportunity for health-related employment opportunities. Sales Tax.Sales tax continues at very modest growth but is beginning to see larger discrepancies between the various sales tax elements.With the Wayfair decision,use tax is experiencing growth which in turn increases the City’s County pool allocation.The City’s half-cent measure provides for a strong transaction tax base slightly ahead of the Bradley-Burns sales tax. Tourism.Tourism and hospitality continue to play a large part of the economy in San Luis Obispo as is seen with the County airport reaching two years of record-breaking passenger levels and new flight being added constantly.Two new luxury hotels provide additional lodging in Downtown,providing a new segment to the City’s lodging industry. With low snow levels in the Sierras and worldwide health concerns lingering,this income sector might experience a strong summer and fall season. Popular Annual Financial Report Real Estate.The housing market has begun to show signs of slowing throughout California, it has remained strong in San Luis Obispo and inventory remains tight despite historically high construction activity.The upcoming years will show the influence of recent State legislation that make housing construction a major goal of the governor. Construction Activity.Continuing the trend from 2019,construction activity and with it the City’s development related services have reached all- time highs.Two community facility districts will go underway in 2020 and the Orcutt annexation area enters the final build-out phases. Overall,the economic forecast indicates modest growth relative to the local economy and should be beneficial for the City’s tax revenue projections in 2019-20.Continued vigilance is still warranted as uncertainties continue to develop with various influences on the economy,the stock markets,and consumer confidence. Additionally,along with its regional partners,the City continues to address the closure of the Diablo Canyon Power Plant and prepare for the impacts to the region due to significant loss of jobs and property taxes.This has nurtured stronger regional efforts with continued efforts into the future. STRATEGIC OBJECTIVES For the 2017-19 Financial Plan,the City Council adopted four major city goals and one other important objective.These goals were the core of the strategic objectives,initiatives,and work programs into 2018-19. Housing •Facilitate increased production of all housing types designed to be economically accessible to the area workforce and low and very low-income residents,through increased density and proximity to transportation corridors in alignment with the Climate Action Plan. Multi-Modal Transportation •Prioritize implementation of the Bicycle Master Plan,pedestrian safety and the Short-Range Transit Plan. Climate Action •Implement a Climate Action Plan,assess requirements to achieve a “net-zero carbon City” target,and implement cost-effective measures, including implementation of a Sustainability Coordinator and formation of a Green Team. Fiscal Sustainability &Responsibility •Continue to implement the City’s Fiscal Responsibility Philosophy with a focus on economic development and responsiveness, unfunded liabilities,and infrastructure financing. Downtown Vitality •Continue to improve safety,infrastructure investment,and maintenance in the Downtown and support the Downtown Association’s proposal to consider a Downtown Property Improvement District. Popular Annual Financial Report OPERATING INDICATORS AND STATISTICS Public Works Paved Streets. . . . . . . . . . . . . . . . .. . . . . .134 miles City Trees maintained. . . . . . . . . . . . . . . . . 20,000 Utilities Water Accounts. . . . . . . . . . . . . . . . . . . . . . 15,555 Water consumed (in acre fee). . . . . . . . . . . . 5,074 Public Safety Calls for service. . . . . . . . . . . . . . . . . . . . . . 37,825 Police Officers. . . . . . . . . . . . . . . . . . . . . . . . . 61.5 Traffic accidents. . . . . . . . . . . . . . . . . . . . . . . .623 Fire Fighters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Medical Responses. . . . . . . . . . . . . . . . . . . .3,715 Parks and Recreation Open Space Acres. . . . . . . . . . . . . . . . . . . . .4,040 Open Space Easement Acres. . . . . . . . . . . . 3,500 Trail mileage. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 City Triathlon Attendance. . . . . . . . . . . . . . . . . 869 Annual Aquatic Attendance. . . . . . . . . . . . . 87,690 Community Development Building Permits. . . . . . . . . . . . . . . . . . . . . . . . .758 Building Inspections. . . . . . . . . . . . . . . . . . .. 7,537 General Government Business Licenses issued. . . . . . . . . . . . . . . 9,962 FUND ACCOUNTING & FINANCIAL STATEMENTS The City’s financial structure is separated into governmental and business activities.Five major funds are administered and reported on.Each fund balances all revenues and expenditures to ensure that there is no immediate or emerging structural budget deficit. General Fund Special Revenue Funds Capital Outlay Fund Debt Service Fund Governmental Funds Water Fund Sewer Fund Parking Transit Fund Proprietary Funds Governmental Funds General Fund –This is the primary fund for the City. It accounts for revenues and expenditures associated with general operations of the City. Special Revenue Funds –These funds account for the proceeds of specific revenue sources that are restricted for special purposes such as the Tourism Business Improvement District Fund. Capital Outlay Fund –This fund accounts for the financial resources used for the construction and maintenance of the City’s infrastructure. Debt Service Fund –This fund accounts for the financial resources used for the repayment of debt. Proprietary Funds (Enterprise Funds) The City currently has four enterprise funds that are operated and accounted for much like a business.They pay for their operations from user rates and fees. ***************************************** FINANCIAL STATEMENTS The government-wide financial statements are designed to provide a long-term overview of the City’s finances.These statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities)from functions that recover all or a significant portion of their costs through user fees and charges (business-type activities).The governmental activities encompass administration, public safety,public works (streets and transportation),planning and development,culture and recreation,open space,City parks,housing, property and facilities services.The Business-type activities of the City include the water and wastewater utilities,parking,and transit. The fund financial statements provide a short-term perspective of individual funds. Popular Annual Financial Report 2018-19 GOVERNMENTAL FUND REVENUE Popular Annual Financial Report 2018-19 GOVERNMENTAL FUND EXPENDITURES Governmental revenues are mainly coming from taxes,service fees,and special revenue assessments.For the City of San Luis Obispo, 72%of its income stems from taxes.The charts below illustrate the income levels for 2018-19. 72% Taxes from revenue sources such as sales, property, transients, and utility users' tax. 22% Fees for services such as Development Review, Park & Recreation programs & Special Assessments. 6%Revenue from grants and investments. Public Safety $31,714,220 Community Development $10,677,334 Leisure, cultural, social Services $8,636,582 Debt Service $2,784,027 Capital Outlay $4,695,978 Transportation $3,495,909 General Government $13,769,778 LOCAL REVENUE MEASURE Popular Annual Financial Report Ongoing Commitment to Half Percent Sales Tax Measure Priorities (Essential Services Measure) The City remains committed to the priorities for the use of the half percent sales tax measure as identified by the community.They include public safety,senior services,code enforcement, neighborhood street paving,open space preservation,traffic congestion relief and flood protection. Half Percent Sales Tax Measure Expenditures 2018-19 Operating Capital Programs Projects*Total Preservation of Essential Services Public Safety $575,310 $ 25,901 $601,211 Community Development $269,025 $795,165 $1,064,190 Transportation $1,085,216 $3,366,119 $4,450,335 Leisure, cultural and social services $187,245 $492,825 $ 680,070 General Government -$1,368,994 $1,368,994 Total $ 2,116,796 $ 6,049,004 $ 8,165,800 Half Percent Sale Tax Measure Revenues & Uses Summary Revenues: Sales and use tax -Measure G 1/2 Cent add-on tax $ 8,325,230 Use of money and property $102,933 Total Revenues $8,428,163 Uses: Operating Programs $(2,116,796) Capital Projects $(6,049,004) Total Uses $(8,165,800) Excess of revenues over expenditures $262,363 Prior Sales Tax Measure Balance $6,067,359 Encumbered or designated for carryover for future year expenditures $(4,773,675) Net available for future year appropriations $ 1,556,047 Total expenditures during 2018-19 amounted to $12.9 million (including encumbrances and carryovers);the remaining balances of these resources are designated for future year expenditures.A more detailed schedule of half percent sales tax measure sources and uses is provided in the Financial Section of this report.The following table summarizes how the half percent sales tax measure funds were used during fiscal year 2018-19. 2018-19 PROPRIETARY FUND REVENUE Popular Annual Financial Report 2018-19 PROPRIETARY FUND EXPENDITURES Water Fund $ 24.1 Million Sewer Fund $19.3 million Parking Fund $5.6 million Transit Fund $3.8 million Service Charges $ 20,247,092 Impact Fees $ 3,745,666 Other Revenue $ 33,627 Non-Operating Revenue $ 195,949 Service Charges $ 16,969,246 Impact Fees $ 1,589,771 Other Revenue $ 115,530 Non-Operating Revenue $ 661,644 Service Charges $ 4,634,209 Fines & Forfeitures $ 783,116 Other Revenue $ 25,713 Non-Operating Revenue $ 194,965 Service Charges $ 759,450 Other Revenue $ 17,358 Non-Operating Revenue $ 3,046,719 Water Fund $20.1 million Parking Fund $3.75 million Transit Fund $ 4.3 million Sewer Fund $13.4 million Staffing $ 4,260,738 Services & Maint. $10,120,072 Contract Services $ 1,509,174 General Gov.$ 1,455,958 Depreciation $ 2,810,842 Staffing $ 4,322,289 Services & Maint. $ 2,422,702 Contract Services $ 245,300 General Gov.$ 1,768,405 Depreciation $ 4,725,546 Staffing $ 1,328,661 Services & Maint. $ 459,312 Contract Services $ 648,048 General Gov.$ 664,092 Depreciation $ 650,244 Staffing $ 4,260,738 Services & Maint. $ 3,745,666 Contract Services $ 33,627 General Gov.$ 1,455,958 Depreciation $ 2,810,842 Proprietary Funds also known as Enterprise Funds are fully funded through rates and fees paid for Services.The City has four proprietary funds providing water,sewer,parking,and transit services. Proprietary Funds rely solely on their income from rates and fees to provide services and maintain equipment and infrastructure such as treatment plants,distribution and collection systems, parking structures,and transit assets. Popular Annual Financial Report DEBT MANAGEMENT The City of San Luis Obispo is guided by its budget and fiscal policies when managing its debt. In accordance with the policy section “Capital Financing and Debt Management”: •The City’s debt capacity cannot exceed 15%of General Fund revenues. •Its direct debt will not exceed 2%of assessed valuations. •No more than 60%of capital improvement outlays will be funded from longer-term debt. Debt should only be incurred for one-time capital expenditures and not for on-going operations. Borrowing for one-time capital expenditures allows for the cost of the project to be spread out over the useful life of the asset and results in the cost being paid by future beneficiaries as well as current taxpayers. AAA •Extremely strong capacity to meet financial commitments. Highest rating. AA •Very strong capacity to meet financial commitments. A •Strong cpacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstance. BBB •Adequate capacity to met financial commitments, but more subject to adverse economic conditions. BB •Less vulnerable in the near-term, but faces major ongoiong uncertainties to adverse business, financial, and economic conditions. CCC •Currently vulnerable and dependent on favorable business, financial, and economic conditions to meet financial committments CC •Highly vulnerable; default has not yet occured, but it is expected to be a virtual certainty. C •Currently highly vulnerable to non- payment, and ultimate recovery is expected to be lower than that of higher rates obliations. The City’s bond issues are accompanied by a rating by Standard &Poor’s;one of the three large rating agencies together with Fitch and Moody’s Investors Service. With its 2018 refinancing of three different lease revenue bonds,Standard &Poor’s gave the City an AA rating. $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Debt Principal & Interest Payment GENERAL PARKING SEWER WATER 2018-19 Debt Payments General Fund $ 2,784,027.0 Water Fund $ 3,140,210.0 Sewer Fund $ 1,399,260.0 Parking Fund $ 1,026,136.0 CAPITAL PROJECTS HIGHLIGHTS The City’s infrastructure encompasses many elements. It ranges from City streets,bridges,and traffic related infrastructure to parks,playgrounds,swim center,and a municipal golf course.Maintaining and servicing this infrastructure is an integrate part of the City’s work programs and budget allocations.In 2018-19,the following amounts were dedicated to capital infrastructure maintenance and improvement: Popular Annual Financial Report Capital project expenditures during 2018-19 included: •$2.9 million for roadway improvements •$2.1 million for waterline replacements •$1.2 million for the Margarita sewer lift station •$1.7 million for acquisition &implementation of an ERP system. •$673,000 to purchase a fire truck for Fire Station 3 •$630,000 for upgrades to Parking Structures •$208,000 for Orcutt &Tank Farm roundabout design •$185,000 for the preservation of the Octagon barn •$146,000 for City/County Library improvements Water Fund $ 2.8 million Sewer Fund $4.7 million Parking Fund $650,244 Transit Fund $569,455 2018-19 CAPITAL INVESTMENTS $ 6.3 million Governmental Funds Popular Annual Financial Report 2018 Contact Information www.slocity.org Non-Emergency Police. . . . . 805-781-7312 Non-Emergency Fire. . . . . . . 805-781-7312 Public Works. . . . . . . . . . . . 805-781-7200 Corporation Yard. . . . . . . . . 805-781-7220 Parking. . . . . . . . . . . . . . . . . 805-781-7230 Parks & Recreation. . . . . . . 805-781-7300 Public Utilities. . . . . . . . . . . . 805-781-7215 City Administration. . . . . . . . 805-781-7123 City Clerk. . . . . . . . . . . . . . . 805-781-7100 Finance. . . . . . . . . . . . . . . . .805-781-7144 Business License . . . . . . . . .805-781-7134 Human Resources . . . . . . . .805-781-7250 City Council Heidi Harmon, Mayor Aaron Gomez, Vice Mayor Erica A. Stewart, Council Member Carlyn Christianson, Council Member Andy Pease, Council Member Derek Johnson, City Manager Brigitte Elke, Finance Director