HomeMy WebLinkAbout05/04/2010, B2 - INTERIM GENERAL FUND FIVE-YEAR FISCAL FORECAST n I� j
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CITY O F SAN LUIS O B I S P O
FROM: Katie Lichtig, City Manager }yrp
Bill Statler, Director of Finance& Information Technology
SUBJECT: INTERIM GENERAL FUND FIVE-YEAR FISCAL FORECAST
RECOMMENDATION
Review and discuss the results of the interim General Fund five-year fiscal forecast.
REPORT-IN-BRIEF
As discussed in greater detail below, the interim forecast provides an early, "reconnaissance"
level assessment of the challenges ahead using the mid=year budget review presented to the
Council on February 23, 2010 as the "baseline." Even with its limitations, the interim forecast
alerts us to the magnitude of the "climbs" ahead of us on our "financial sustainability journey,"
summarized as follows:
1. Core (Structural) Gap: 2011-13. Based on extending the results of the mid-year budget
review, we are facing an annual structural gap of about $3 million. Due to final bond
payments on two issues, this gap
is slightly less in the "out-years" 2011-16 Forecast:Core Budget Gap
(about $2.5 million). With CAPERS Rate increases and
Without Measure Y Revenues
2. Core Gap plus Retirement (1,000,000 ` —
Cost Increases: 2013-15. The (2.500,000) _
core gap grows even larger (4,000,000)z.-
beginning in 2013 — to $5 (5,500,000)
million — based on projected (7,000.000)
increases in employer (6,500.000)
contribution rates to the
(10,000;000)
California Public Employees
Retirement System (Ca1PERS). (,,,soo,000)
2011-12 2012-13 2013.14 2014-15 2015.16
0 Core Budget Gap O With CaIPERS mrease M Widow Measure Y
3. Core Gap plus Ca1PERS Less
Measure Y Revenues: 2015-16.
The annual gap grows to $11 million by 2015-16 if the current %2-cent general purpose sales
tax measure adopted by the voters in November 2006 (Measure Y) is not renewed by City
voters by November 2014.
What's this mean for the Financial Sustainability Journey ahead?
1. While one-time, "stop-gap" budget-balancers are needed now, they will not sustain the City
for the long run.
Bc�l—
Interim General Fund Five-Year Fiscal Forecast Page 2
2. This is the first time since the City began preparing forecasts many years ago that the results
are worse in the out-years than the first two-years. In the past, if we could balance the budget
in the first two years, we would achieve structural balance for the longer term.
3. However, this will not be the case in 2011-13: the problem gets larger in 2013-14; and much
larger in 2014-15 if voters do not renew Measure Y.
DISCUSSION
Overview
The City is embarked on a long-term financial sustainability journey; and the recently prepared
interim forecast is simply the first step on this journey. It is important to note that financial
sustainability is a journey with a goal, not a destination. It
is not an end in itself but a means to an end: providing the "if all difficulties were known
sustained fiscal capacity to deliver important services to at the outset of a long
our community. journey, most of us would
never start out at all."
In preparing for what is likely to be a long and difficult - Dan Rather
journey, our goal is to share information—early and often—
with the Council, employees and the community. This
journey isn't just about finances: it is also about nurturing a healthy organizational culture and
ensuring community confidence in our stewardship of the public resources that have been
entrusted to us.
And it isn't just about the General Fund: all of the City's funds, including the water, sewer,
parking, transit and golf enterprise funds, are on this journey as well. The enterprise funds
depend on support resources organized in the General Fund like accounting, payroll, liability
insurance, city clerk, legal services, human resources, fleet maintenance and information
technology; and the projected increases in retirement costs affect these funds as well. Stated
simply, we are one organization; and as such, while the interim forecast focuses on the General
Fund, we will need to take an organization-wide approach in meeting the financial challenges
ahead of us.
Why an "Interim" Forecast?
It has been the City's longstanding practice to prepare a comprehensive General Fund five-year
fiscal forecast as an integral part of the two-year goal-setting and budget process. While we still
plan to do so as part of the 2011-13 Financial Plan process, the interim forecast provides an early,
"reconnaissance" level assessment of the challenges ahead using the mid-year budget review
presented to the Council on February 23, 2010 as the"baseline."
Further refinements will come in the months ahead: the 2009-11 projections will be updated as
part of 2009-11 Financial Plan Supplement, which will be presented to the Council on June 15,
2010; and a more detailed forecast, with more comprehensive assumptions similar to forecasts
48a-a
Interim General Fund Five-Year Fiscal Forecast Page 3
prepared in the past as part of the Financial Plan process, will be prepared in Fall 2010 once we
have interim results for 2009-10.
Nonetheless, even with its limitations, the interim forecast alerts us to the magnitude of the
"climbs"ahead of us and provides a solid foundation and perspective for our journey.
Background
Where We've Been
Budget-balancing actions:.2009-11 Financial Plan. In light of the worst economic downturn
since the Great Depression, cities throughout-the State continue to be faced with severe fiscal
challenges unlike any since the
1930's. In responding to these 2009-11 Budget.Balancing Strategy
circumstances, the 2009-11
Financial Plan closed an $11.3 o Reserves
[3 Other 4%
million budget gap. As reflected Revenues
._
in the sidebar chart, expenditure 7%
reductions played the largest role
in the City's budget balancing o user Fee
actions, accounting for about 80% cost o
CP
of the overall solution. Recovery
11% Reductions
42%
Underlying economic
framework. The underlying expenditures:78%
economic framework for the a operating
2009-11 Financial Plan was the Prograft
"u-shaped"recovery that the 28% o Employee
UCSB Forecast concluded was Concessions
the "most likely" outcome. 8%
UCSB Forecast
Most Likely
O Steep Decline
® Modest Recovery
® Bottom Trough
We believe that this continues to be a useful framework for assessing our fiscal outlook.
However, now as then, there are two key questions:
1. How long will each of these three phases last?
2. And where are we currently along these three points: the steep decline? the bottom trough?
or the start of modest recovery?
Interim General Fund Five-Year Fiscal Forecast Page 4
The 2009-11 Financial Plan assumed that during 2009-10 we would enter the "trough" for key
General Fund revenues like sales tax and transient occupancy tax (TOT); and begin to see modest
recovery in 2010-11. As discussed in greater detail below, we believe that while we are close to
the bottom of the trough, we are not there yet; and won't be until at least the third quarter of
2009-10.
Where We Are Today
Mid-year budget review. The mid-year budget review presented to the Council on February 23,
2010 took a close look at actual results for the prior fiscal year (2008-09) and trends since the
2009-11 Financial Plan was adopted in June 2009. It showed that sales tax revenues, the City's
most important General Fund revenue source, were declining at rates greater than those projected
in the 2009-11 Financial Plan. As such, assuming that sales tax revenues would be flat for the
remainder of the fiscal year, with modest growth of 2% in 2010-11, the mid-year budget review
projected that over the two-year Financial Plan period, sales tax revenues would be $2.6 million
less than projected in the 2009-11 Financial Plan. (And as discussed below, with the recent
receipt of fourth quarter 2009 revenues, we know that we will need to revise 2009-11 sales tax
revenues downward again.)
The mid-year budget review also showed that important revenues like development review fees
would also come in at levels less than projected in the 2009-11 Financial Plan. Fortunately, due
to expenditure savings in 2008-09, beginning fund balances were $2.3 million better than
projected in the 2009-11 Financial Plan.
This one-time improvement offsets much but not all of the overall shortfall. In order to end
2009-11 with reserves at minimum policy levels that are 20% of operating expenditures, the mid-
year review called for a combination of operating or capital improvement plan (CIP) reductions
of$1.5 million, which would be presented for the Council's consideration as part of the 2009-11
Financial Plan Supplement in June 2010. It is important to note that this $1.5 million target is
not astatic number: if the 2009-11 budget gap grows further as refinements are made as part of
the 2009-11 Financial Plan Supplement, the needed amount of"stop-gap measures" will grow as
well. Based on what we know as of wiring this report, the Supplement will include at least $1.8
million of stop-gap measures.
It is also important to stress that the sole purpose of the $1.5 million in "stop-gap measures" is to
end 2009-11 with reserves at minimum policy levels: they are not intended to address the City's
longer-term structural balance. As noted in the mid-year budget review, this will be addressed
more comprehensively as part of the 2011-13 Financial Plan. On the other hand, this is an
important first step in following the "rule of holes:" when you find yourself in one, stop digging.
Moreover, any ongoing savings will carryover into 2011-13.
For more information about the findings and recommendations of the 2009-10 mid-year budget
review, it is available on the City's web site(see link at end of this report).
Implementing the Fiscal Health Contingency Plan "short-term" actions. In light of the
significant downturns in key revenues since the adoption of the 2009-11 Financial Plan, the mid=
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Interim General Fund Five-Year Fiscal Forecast Page 5
year budget review recommended implementing the City's Fiscal Health Contingency Plan. The
"triggers" for implementing the short-term budget actions in the plan include both economic
downturns in general or whenever there are two consecutive quarters of adverse fiscal results in
top five revenues. Both of these"triggers" have occurred. Accordingly, the following short-term
actions are now underway:
1. Hiring freeze. A hiring "chill" has been in place since the adoption of the Financial Plan in
June 2009. This is now a freeze at least until the Financial Plan Supplement is prepared in
June 2010, when we will have a better idea of the City's fiscal situation. The goal of the
hiring freeze is not just the short-tern
savings that result, but more importantly, to Fiscal Health Contingency Plan
also to preserve future options if the
problems continue to be ongoing. There are six key steps in the Fiscal
Health Contingency Plan; we are now
implementing the "short-term actions"
2. Travel and training chill City Manager as part of Step 4.
approval is now required for all Travel p Maintain minimum fund balance at
Authorizations.
policy levels.
3. Develop a plan to address budgetary ® Follow other key budget and fiscal
shortfalls, As noted above, this work is policies.
underway in developing $1.5 million in ® Monitor city's fiscal health on an
"stop-gap" measures to ensure that the ongoing basis.
General Fund ends 2009-11 with reserves at
minimum policy levels. Specific reduction O Assess the challenge:short or
recommendations will be presented to the long-term problem?
Council on June 15, 2010 as part of the ® Identify options.
2009-11 Financial Plan Supplement.
® Prepare and implement action plan.
4. Use of reserves Maintaining General Fund The Plan is available for review on the
balances at minimum policy levels provides City's web site (see link at end of this
the first line of defense in adverse report).
circumstances and allows for continued
operations while forming comprehensive
responses to longer term problems. Moreover, prudent reserves are important in responding
to the potential threat of natural disasters and other unforeseen circumstances, which are as
present in bad fiscal times as they are in good ones. While it is important to maintain prudent
reserves, there may be opportunities to strategically use reserves in the short term. The
amount of reserves to be dedicated to this purpose will be reviewed as part of the
comprehensive plan formulation identified above.
Recommendations for specific operating and CIP reductions in meeting the $1.5 million stop-gap
target and any use of reserves will be presented to the Council as part of the 2009-11 Financial
Plan Supplement. Longer-term solutions are likely to be developed as part of the 2011-13
Financial Plan process.
8� - 5
Interim General Fund Five-Year Fiscal Forecast Page 6
Purpose of the Interim Forecast and Its Limitations
As discussed above, the purpose of forecast is to provide an early assessment of the fiscal
challenges facing us. It shows that they are greater than assumed in the 2009-11 Financial Plan;
and based on recent sales tax results for the fourth "holiday" quarter in 2009, they are likely to be
even greater than reflected in the mid-year budget review, which in tum is the basis for the
interim forecast.
The interim forecast is not as detailed or comprehensive as the five-year forecast that will follow
in Fall 2010 as part of the 2009-11 Financial Plan process. And it is important to stress that it is
also not the budget document: it doesn't make revenue decisions; it doesn't make expenditure or
service priority decisions. Moreover, preparing an interim forecast carries with it the risk of
creating "golden numbers" that remain fixed in perceptions but are in fact subject to change as
actual results replace assumptions.
However, even with its limitations, the interim forecast alerts us to the "order of magnitude" of
the fiscal difficulties ahead of us, and provides a solid foundation and perspective for the
decisions we must make in preserving the City's fiscal health.
Key Interim Forecast Assumptions
The following summarizes the key assumptions in the interim forecast that determine its results:
1. "Baseline:"2009-10 Mid-Year Budget Review. The interim forecast is largely an extension
into the next five years of the revenues and expenditures shown for 2010-11 in the mid-year
budget review. As such, to the extent that the assumptions in the mid-year budget review
change with added information in preparing the 2009-11 Financial Plan Supplement, and
further change with the Fall 2010 forecast based on interim results for 2009-10, the interim
forecast results will change. Stated simply; as noted above, the interim forecast results are
not static: they will change as actual results, new trends and revised assumptions replace
those in the mid-year budget review.
2. Revenues and Operating Expenditures For the five-year forecast period (2011-16), both
operating costs and revenues are assumed to grow by 2% annually from 2010-11 levels.
Revenues include transfers-in from the gas tax and Proposition 42 funds; and operating
expenditures include transfers-out to the Golf Fund. The "stop-gap measures" of $1.5
million for 2009-11 are likely to reflect a combination of both operating and CIP reductions.
As such, it is uncertain how much, if any, of these savings will be ongoing. For this reason,
the $1.5 million in"stop-gap"measures are not recurring reductions in the interim forecast.
3. CIP Expenditure& The interim forecast assumes an
annual average of the 2009-11 CIP expenditures of =Two-Year
4,776,600
about $4.0 million as the "baseline," as summarized 3,275,600
in the sidebar chart. Like operating expenditures, this $4,026,100
"baseline" of$4,026,100 is projected to grow by 2%
annually.
Ba -�
Interim General Fund Five-Year Fiscal Forecast Page 7
4. Debt Service Costs. These are based on current debt service obligations: no new debt
financings are assumed in the interim forecast. In fact, costs go down in the out-years as final
payments'are made on two bond issues,resulting in reduced costs of$57,000 in 2013-14 with
the final payment on energy-saving projects in 2011-12; and reduced costs of $295,000 in
2014-15 with the final payment on the 1986 Lease-Revenue bonds in 2013-14.
5. State Budget Impacts. The interim forecast assumes no further State takeaways from cities
(but no restorations, either).
6. Fund Balance. The interim forecast assumes that fund balance is maintained at the
minimum policy level of 20% of operating expenditures as our first line of defense against
further economic downturns, State takeaways, natural disasters or other unexpected costs and
unforeseen circumstances.
Important Caveat
For 2009-11, fiscal results are likely to be worse in the 2009-11 Financial Plan Supplement than
shown in the interim forecast for several reasons.
Sales Tax Revenues. First and most importantly, we now know that sales tax revenues in the
holiday quarter were not flat— as assumed in the mid-year budget review (which is the basis for
the interim forecast) — but were
down by 4.9%. Same Quarter Sales Tax% Change:Last Ten Quarters
On the other hand, as reflected in -2.1% 3rd Qtr 2007
the sidebar chart, this reflects a 1.4v° 4th Qtr.2007
significant reduction in the rate -3.2% 1st Qtr 2008
of decline: each of the past ten A% 2nd Qtr 2008
-3.8% 3rd Qtr 2008
quarters has been down, with
percent declines in double digits 9.9% 4th Qtr 2008
1st Qtr 2009
for the last three quarters. While 2nd Qtr 2009
this shows we are not at the 131% 3rd Qtr 2009
bottom of the sales tax trough 9% 4th Qtr 2009
yet, the decrease in the rate
-18% -15% -12% -90/0 -6% -3% 0%
decline combined with a look at
Holiday 2009 quarter results by
type leads us to believe that we are close to the bottom.
As shown in the chart below (which compares fourth quarter results for 2009 and 2008 by type,
listed in order of importance), auto sales were virtually flat, reversing a three-year trend. And
while general consumer goods were down compared with last year, the fourth quarter in 2008
includes strong sales by Gottschalk's during its closeout. Adjusting for those (which will not
occur in the"base" in the next quarter), consumer goods would be flat as well.
Interim General Fund Five-Year Fiscal Forecast Page 8
What this means for 4th Qtr Sales Tax: 2009 v 2008 By Type
2009-11. Staff will need
7:5°h General Consumer Goods
to further revise our sales
tax estimates downward -0.6% Autos&Transportation
in the 2009-11 Financial 10.1% Restaurants&Hotels
Plan Supplement, which 0.3% Building&Construction
in turn means that 2% Fuel&Service.Stations
revenues in 2011-16 are
likely to be lower than the -490/9 Business&Industry
forecast. On the plus- -4.0% Food&Drugs
side, however, we believe -49% Total
that we are now close to -12% -s% -s% -3 0% 30/0
the bottom of the sales tax
trough, and modest recovery beginning in 2010-11 is likely.
TOT Revenues. The Mid-Year Budget Review estimated that TOT revenues in 2009-10 would
be down by 10% from the prior year and grow modestly by 2% in 2010-11. As shown in the
sidebar chart, year-to-date through
February 2010, TOT revenues are
Year-to-Date TOT Revenues: 2009 vs 2008 down by 10.1% compared with
-10.2% Jury same period last year; and down by
-16.1% August 6.5% in most recent month
(February). If most recent trends
4.0 6 September hold, we should meet our
-os^� October projections for 2009-10. However,
-20.8% November one month isn't a trend, especially
-10.3% December given the wide swings we have seen
January over the past eight months. And for
-6.5% February the assumption of even modest
-10.1% Year-to-Date growth of 2% in 2010-11 to remain
_ - valid, we will need to continuing
25% -20% -15% -10% -5% 0% signs of recovery in the remaining
months in 2009-10.
Other Revenues Based on year-to-date results, we are likely to lower our projections for mutual
aid revenues and development review fees in the 2009-11 Financial Plan Supplement.
On the other hand, there are some positives on the expenditure horizon: in 2010-11, we are likely
to see reduced costs for retiree health coverage, workers compensation insurance and contract
costs with the County for animal regulation services.
What about 2011-16?
While revised projections in the 2009-11 Financial Plan Supplement are likely to be worse than
shown in the interim forecast, it is possible that with a better-than-tepid recovery, key revenues
could be stronger in 2011-16 than projected in the interim forecast:
Interim General Fund Five-Year Fiscal Forecast Page 9
Sales Tax Revenues. The interim forecast does not reflect added sales tax revenues from Target,
which is under construction and may be open by Summer 2011. Additionally, a strong recovery
in new car sales, which is possible given its historically low base after three years of decline,
would result in higher sales tax revenues than the interim forecast.
TOT Revenues. The interim forecast does not reflect added revenues from the Chinatown,
Garden Street Terraces (which is still pending Council approval) or Hampton Suites Inn projects.
Combined with a stronger overall recovery than projected, these could result in better TOT
revenues than the interim forecast.
Property Taxes and Development Review Fees. With a stronger recovery in the housing market,
these revenues could also be better than assumed in the interim forecast.
Forecast Findings
"Core"Structural Budget Gap
As detailed in Attachment 1, the 2011-16 Forecast: Core Budget Gap
interim forecast shows that we Without CaIPERS Rate Increases/With Measure Y Revenues
start 2011-12 (only 14 months $0
from now) with a "core" -$500,000
structural gap of about $3 -$1,000,000
million. As shown in the sidebar -$1,500,000
chart, based on the assumptions 42,000,000
outlined above, the annual gap -$2.5001000
declines to about $2.5 million by
2016 (and beyond), largely due $3,000,000
to final payments on two bond -$3,500,000 - - - - -
issues by 2014-15. 2011-12 2012-13 2013.14 201415 2015-16
Impact of Ca1PERS Employer Rate Increases
On February 23, 2010, the Council received a comprehensive report on the City's Ca1PERS
retirement obligations. As reflected in the sidebar chart, this analysis showed that beginning in
2012-13, employer
Employer Contribution Rates:2009-11 Financial Plan contribution rates will
and Projected though 201415 increase significantly and
46% 47% continue to rise.
45%
38% By 2013-14, employer
3s%U
36% 36% contribution rates will
increase by 30% for both
25% � sworn ("safety") and non-
21% sworn "miscellaneous"% 19% ( )
employees from 2010-11
200310 2010.11 2011-12 2012-13 2013-14 201415 levels: from 36% of
e Safety ■Miscellaneous
payroll for safety
�a- 9
Interim General Fund Five-Year Fiscal Forecast Page 10
employees to 46%; and from 18% of payroll for miscellaneous employees to 23%. All other
things being equal (and as discussed below, they Won't be), this will result in annual increases in
General Fund costs of about $2.5 million in 2015-16. The chart below shows the impact of the
projected CalPERS employer
rate increases. In short, after
includin CaIPERS em 10 2011-16 Forecast: Budget Gap
g p yer With CaIPERS Rate Increases
rate increases, the "core gap"
grows to $5 million in 2013-14 (500,000)
and remains at that level
through 2016 (and beyond). (1,500,000)
Attachment 2rovides a more
P (2.00;000)
detailed look at the impact of r
these added costs on the "core" (3,500,000)
budget gap. (4,500,000)
Why "all things won't be (5,500,000)
2011-,2 2012-13 201314 2014-15 2015-16
equal." Every four years,
CalPERS performs an in-depth ❑Core Budget Gap o With CaIPERS Increase
review of its key actuarial
assumptions, which include mortality, salary increases, age at retirement, disability rates,
separation before retirement (for both vested and unvested employees) and investment yield
(discount rate).
Except for investment yield, which is currently assumed at 7.75% per year and will be reviewed
next year, CalPERS has just completed its evaluation of these factors. Not surprisingly, the new
assumptions result in employer rate increases, which CalPERS estimates will result in an
increase of 1% to 2% of payroll. For more information on the City's CalPERS obligations, the
February 23 report is available on the City's web site(see link at end of this report).
Added Impact if Measure Y Not Renewed by Voters
In November 2006, City voters 2011-16 Forecast Core Budget Gap
approved Measure Y, which With CaIPERS Rate Increases and
established a '/z-cent, general Without Measure Y Revenues
purpose sales tax that generates
(1,000,000)
about $5.3 million in added
revenues to the General Fund (2.500,000) - --
annually. Along with other (4,000,000)
accountability provisions, (5,500,000)
Measure Y revenues will (7,000,000)
"sunset" after eight years, in (8,500,000)
April 2015, unless renewed by (10,000,000)
voters by November 2014. As (11,500.000)
shown in the sidebar chart, the 2011-12 2012-13 2013-14 2014-15 2015-16
budget gap (including CalPERS p Core Budget Gap G With CaIPERS Increase 0 Without Measure Y
rate increases) grows to about
Ba /o
Interim General Fund Five-Year Fiscal Forecast Page 11
$11 million if Measure Y is not renewed by the voters by November 2014. As reflected in the
chart and in the more detailed analysis provided in Attachment 3, even though Measure Y was
adopted in November 2006, it did not become effective until April 1, 2007. Accordingly, it will
be effective until April 1, 2015. For this reason, the first full year of impact if Measure Y is not
renewed by the voters is 2015-16: in 2004-15, Measure Y revenues will be received for three-
quarters of the year.
SUMMARY Closing—the Gap
The interim forecast shows that we are facing: The forecast identifies "the gap"
facing us that we need to close to
1. A core "structural" annual budget gap of $3 ensure a balanced budget.
million in 2011-12. The City has always taken the
tough actions necessary to
2. That increases to $5 million annually by 2013-14 achieve a balanced budget and
due to Ca1PERS employer rate increases. because of this we have never
had a budget deficit.
3. And then to $11 million annually by 2015-16 if And given our longstanding
voters do not renew Measure Y by November commitment to responsible
2014, stewardship of the public
resources entrusted to us, we
Interim Forecast: Final Caveat expect to close this gap and have
balanced budgets in the future.
As discussed above, the City's long-term outlook is
more likely to be worse than better in Fall 2010 than
the interim forecast shows now. But even the interim forecast results show that the City is facing
serious challenges in 2011-12 and beyond; and these will be even worse if City voters do not
renew Measure Y by November 2014.
The Journey Ahead: What these Results Mean
The financial sustainability joumey ahead of us is about charting a course together to address a
significant structural gap that gets worse in two years; and much worse if City voters do not
renew Measure Y. And we are on a road we haven't traveled before: none of us have
experienced an economic downturn like this before. To be successful, the Council, staff and
community must navigate together as a team the long and winding road ahead of us—one that by
its nature is filled with unknown hazards and obstacles.
Key to Financial Sustainability
Charles Darwin observed that:
"It is not the strongest of the species that survive, nor the most intelligent, but the ones most
responsive to change. "
D
Interim General Fund Five-Year Fiscal Forecast Page 12
As we go forward on our financial sustainability journey, we will need to be flexible in
responding to new information and changed circumstances.
Next Steps on Our Journey
These include:
I. Continuing to openly and straightforwardly share information with employees, the Council
and our community.
2. Presenting stop-gap budget balancers for Council adoption in June with the 2009-11
Financial Plan Supplement.
3. Developing a long-term financial sustainability strategy for the organization.
As we embark on this journey, its success will depend on meaningfully engaging employees, the
Council and community in collaborative problem-solving. As part of this effort, the City
Manager plans to form an ad hoc advisory team of community and employee association leaders
to assist her in preparing recommendations to the Council by surfacing a wide range of options
and solutions in addressing the fiscal challenges facing us.
The success of this journey will also depend on bringing our values with us as we navigate
through the steep climbs, deep ravines and unexpected twists ahead of us: that we respect
differing opinions and remain focused on serving the San Luis Obispo community.
ATTACHMENTS
1. "Core" Structural Gap
2. "Core" Structural Gap Plus CaIPERS Rate Increases
3. "Core" Structural Gap Plus Ca1PERS Rate Increases Without Measure Y Revenues
AVAILABLE FOR REVIEW ON THE CITY'S WEB SITE
1. 2009-10 Mid-Year Budget Review: February23, 2010
www:slocitv.org,/finance/download/budgetO9-11/midyear2009-l 0.pdf
2. Fiscal Health Contingency Plan
www.slocity.org/finance/policies.asy
3. CaIPERS Retirement Costs: February 23, 2010
www.slocity.org/cityclerk/agendas/2010/0223 I 0/b4calpersretirementcosts.Ddf
G:\Budget Foldets\A. Financial Plans\2011-13 Financial Plan\2011-16 Fiscal ForecasWriterint Forecast, 3-31-10\5-4-10 Council Agenda
Report\CAR Interim Fiscal Forecast Results 5-4-10.doc
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■ ■
MAYOR'S COMMENTS ON MEETING WITH AUDITORS
In follow-up to the presentation of the City's audit results of its financial
statements last December, the Council received a packet of special
purpose.audits in mid-April that included the Transportation
Development Act audit, Whale Rock Commission audit, the Federal
Grant Awards Audit (commonly referred to as the "Single Audit") and
appropriations limit.
Audit standards for both the private and public sector require that
independent auditors communicate frankly with "those charged with
governance" about the City's financial management.
In implementing these standards in a manner consistent with its goals as
well as with the Brown Act, in November 2008 the Council formally
designated the Mayor to serve as its representative in communicating
with the City's independent auditors.
I met with Kathi Niffenegger, principal with the City's audit firm of
Glenn, Burdette Phillips and Bryson, on April 27, 2010 for this purpose.
I am pleased to report that the City continues to receive stellar audits;
and while there are findings and recommendations for improvement,
which City staff have already implemented, these are incidental to the
overall exceptionally well-managed finance operations of the City.