HomeMy WebLinkAbout12-16-2014 B1 PresentationGeneral Fund
Five Year Fiscal Forecast 2015-20
2015-17 Financial Plan – 1st Semi-Annual Update
December 16, 2014
1
Recommendation
Review and discuss the results of the General Fund
Five-Year Fiscal Forecast for 2015-20
2
Presentation Overview
Purpose of the Forecast
Summary of Findings
Revenue Forecast
Expenditure Forecast
Forecast Results and Fund Balance
3
Purpose of the Forecast
The purpose of the Five-Year Fiscal forecast
is to assess the General Fund’s ability over
the next five years to accomplish the
following:
1.Deliver current service levels;
2.Maintain existing infrastructure & facilities;
3.Preserve the City’s long-term fiscal health by aligning
revenues with expenditures;
4.Maintain fund balance at policy levels; and
5.Reinvest in the General Fund supported Capital
Improvement Program, particularly in areas that are
underfunded such as infrastructure maintenance, fleet
replacement, IT replacement, and facilities maintenance.
To provide context and background as goals
and priorities are established
4
What is the 5-Year Fiscal Forecast?
The forecast is primarily a planning tool
It evaluates current and future fiscal conditions to
guide decisions about goals, policies, and programs
It is not the budget
The forecast sets the stage for the upcoming budget
process but it does not represent formally adopted
revenues or expenditures.
5
Summary of Forecast Findings
Forecast indicates that the City is benefiting from a
continuously improving economy
Growth in all major revenue sources
Very significant fiscal challenges are expected over
the next five years
Rapidly escalating insurance and employee benefit costs
Changes in retirement funding formula
The City is positioned to cover these escalating costs
while also identifying opportunities to make new
investments in our community. This is due to:
Improved Economic Condition
Fiscally responsible actions taken to control costs
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7
General Fund Revenues
Unaudited results from 2013-14 show that revenues
were $2.2 million or 3.7% over budget
Forecast projects 2014-15 revenues to increase by
$3.6 million or 5.9% over the adopted budget in June
Half of this growth reflects continued increases in
Development Review Fees
All major revenues have experienced steady growth in
recent years with most significant increases in Sales
Tax, TOT, and Development Review Fees
The forecast reflects these trends going forward
8
Sales Tax General Sales tax has
increased by an average of 9%
or $1.17 M the past 4 years
Forecast projects 2.2% growth
in 2014-15
Projection tempered by declines
in Food & Drug Sales, Fuel &
Service Stations
2015-16 is impacted by end of
“Triple Flip” sales tax for
property tax exchange
One-time deduction $320,000
Approximately 3% growth
projected in 2016-17 and beyond
Measure Y/G projection mirrors
General Sales Tax projection
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8,000
10,000
12,000
14,000
16,000
18,000
General Sales Tax ($ in 000's)
Projected Actual
Transient Occupancy
Tax (TOT) TOT is benefiting from a
vibrant tourism industry
throughout the region
Reflects TBID & community
promotions program impact
Average TOT growth of 8%
over the past four years
Forecast projects 7.5% growth
in 2014-15
Between 4% to 5% growth is
projected for the following
years
10
Development Review Fees
There continues to be a high volume of development
applications and calls for inspection in the community
$4.2 million in fees were collected in 2013-14,
representing a 62% increase over 2012-13
The forecast projects continued growth in development
review fees
Projections based on building permit valuation estimates
provided by Beacon Economics
Fees paid at the time of an application represent a
prepayment for work to be completed in the
development review process
Forecast projects 75% of revenue growth will be allocated to
operating budget to provide service
11
Development Review Fee Forecast
Development Review Fee Forecast
with Comparison to June 2014 Fiscal Forecast ($ in 000’s)
Fiscal Year
June
Forecast
Current
Forecast Variance
75%
Allocation
FY 14 -15 3,396 5,206 1,810 1,358
FY 15 -16 2,578 4,115 1,537 1,153
FY 16 -17 2,581 4,527 1,946 1,460
FY 17 -18 2,584 5,260 2,676 2,007
FY 18 -19 2,584 6,044 3,460 2,595
FY 19 -20 2,584 6,775 4,191 3,143
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Expenditure Forecast
Significant fiscal challenges are expected in the
upcoming years and are reflected in the forecast
Rapidly escalating cost of insurance and employee
benefit programs including
CalPERS Retirement
Increased costs for retrospective insurance
Retiree health program
Increases in development services revenues are
projected to result in increased operating costs to
match the demand for service
Forecast projects increased investments in the CIP
compared to the previous forecast
Potential changes in operating budgets are reflected
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Retirement Costs and the
Unfunded Liability
The California Public Employees Retirement System
(CalPERS) is implementing a new retirement funding
plan in 2015-16 which includes a strategy to have
unfunded liabilities fully amortized in 30 years
The strategy includes a 5 year ramp up/down
whereby costs increase rapidly beginning in 2015-16
The forecast projects CalPERS costs to increase by
an average of 8% per year
By 2019-20 this results in a $3.9 million increase over the
current year
Increase is attributable to the unfunded liability funding
component of the annual required contribution
14
Fiscal Forecast: Estimate of PERS Normal
Costs vs Unfunded Liability (UAL) Payments
15
Retrospective Insurance Liabilities
The forecast projects a $1.1 million General Fund deposit is required in 2015-16 for a retrospective adjustment for worker’s compensation and general liability insurance based on preliminary information provided by the California Joint Powers Insurance Authority (CJPIA)
This cost is identified as a designated reserve in 2014-15
These programs are reviewed annually and require retrospective adjustments until all claims are closed
While CJPIA developed a new funding model designed to eliminate retrospective adjustments in the future, this applies only to plan years after 2012-13
The forecast includes an additional $1.32 million designated reserve in order to help guard against costs of this nature in the future
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Insurance Benefit Fund Transfer
The Insurance Benefit Fund was established with a
plan to set aside monies for future retirement cost
increases. The amount of the planned transfer was
1% salaries in 2014-15 and 2% in future years
Now that CalPERS has provided more detailed
information about retirement costs, staff recommends
discontinuing the future transfer for this purpose in
order to avoid double counting the change in
retirement costs
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Capital Improvement Plan (CIP)
One of the Council’s continuing Other Important Objectives
is to “Enhance maintenance of City infrastructure”
The CIP will reflect a balance of projects that repair, replace
or enhance existing facilities, equipment and infrastructure;
and projects that expand or add to the City’s infrastructure
This update of the fiscal forecast indicates an ability to
better that investment over the next five years
CIP Expenditures Excluding Debt Service:
Current vs Prior Forecast ($ in 000s)
Column1 2015-16 2016-17 2017-18 2018-19 2019-20 5 Year Total
Current Forecast
5,645 5,928 6,197 6,571 7,125 31,466
June Forecast
4,720 4,892 6,201 6,201 6,201 28,215
Increase / (Decrease)
925 1,036 (4) 370 924 3,251
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CIP Expenditures Including Debt Service
The following chart shows the value of all forecast transfers
that support CIP, including debt service.
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Fiscal Forecast: Transfers to CIP ($ in 000’s)
CIP Debt Svc CIP (June Forecast)
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Operating Expenditures
Forecast uses the 2014-15 adopted budget as the
base, net of $6.7 million in one-time expenditures
Growth of 4.2% is projected in 2014-15 with
incremental increases of 2.5% in the following years
Growth in operating costs is projected for a range of
potential costs including:
Increases in standard operating costs such as utilities
Changes in non-staffing budgets which were reduced
during the recession and not fully restored
Increases in contract services based on negotiated terms
Potential changes in staffing costs due to overtime
factors, contractual obligations, and insurance costs.
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Forecast Results and Fund Balance
As a result of an improved economic condition,
combined with fiscally responsible actions to reduce
costs in recent years, the forecast shows that the City
is well positioned to:
Cover the rapidly escalating insurance and employee
benefits costs
Identify opportunities to make new and important
investments in our community
In 2014-15 the fund balance is projected to be $4.4
million in excess of the reserve requirement
This amount is projected to increase slightly in future
years as shown on the following slide
The majority of this amount is available for one-time
funding only
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Summary of Forecast 22
$ in 000’s Forecast
Column1 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Total Revenues 64,209 64,919 67,835 70,781 73,745 76,721
Total Expenditures 66,606 65,315 66,757 69,997 72,419 75,416
Revenues Over/(Under) Expenses, net of
one-time use of reserves 2,175 728 1,079 784 1,326 1,306
One Time use of Reserves (4,572) (1,124) - - - -
Ending Fund Balance 18,400 18,004 19,083 19,867 21,193 22,499
Reserve @ 20% Operating Costs 11,216 11,384 11,542 12,136 12,566 13,177
Adj for Debt Svc Reserve (332) (332) (332) (332) (332) (332)
Encumbrance & Designated Reserve (2,444) (1,320) (1,320) (1,320) (1,320) (1,320)
Reserve Over/(Under) Policy Level 4,409 4,969 5,890 6,079 6,975 7,670
Change In 20% Reserve Level - 168 158 594 430 611
Undesignated and Available 4,409 560 921 190 896 695
Summary of Forecast Findings
Forecast indicates that the City is benefiting from a
continuously improving economy
Growth in all major revenue sources
Very significant fiscal challenges are expected over
the next five years
Rapidly escalating insurance and employee benefit costs
Changes in retirement funding formula
The City is positioned to cover these escalating costs
while also identifying opportunities to make new
investments in our community. This is due to:
Improved Economic Condition
Fiscally responsible actions taken to control costs
23
Recommendation
Review and discuss the results of the General Fund
Five-Year Fiscal Forecast for 2015-20
24
Appendix 25
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$ in 000's Actual Actual Budget Projected
2012-13 2013-14 2014-15 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Use of One Time Reserves
CJPIA 14-15 Payment (2,065) (2,065)
Special Projects Manager SOPC
(196)
(196)
Encumbrance & Carryover (1,843)
Dev Svc 13-14 Revenue Appropriation
(468)
CJPIA 15-16 Payment (1,124)
Total One Time Use of Reserve (4,572) (1,124)
Encumbrance & Designated
Reserves
Encumbrance & Carryover
(1,768) (1,843)
Dev Services Revenue Appropriation
(468)
CJPIA 14-15 Payment (2,065)
Special Projects Manager SOPC
(196)
Measure Y Contingency (1,700) (1,700)
CJPIA 15-16 Payment (1,124)
CJPIA Set Aside (1,320) (1,320) (1,320) (1,320) (1,320) (1,320)
Total Designated Reserve
(1,768) (6,272) (1,700) (2,444) (1,320) (1,320) (1,320) (1,320) (1,320)
Designated Reserves & Uses