HomeMy WebLinkAbout01-26-2013 fiscal outlook 121812 forecastSection 9
Background Material s
FISCAL OUTLOOK :
DECEMBER 18, 2012 FORECAST
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General Fun d
Five Year Forecast : 2013-1 8
Projecting a Slow and Steady Recovery
October 2012
General Fund Five Year Forecast : 2013-1 8
TABLE OF CONTENT S
INTRODUCTION General Fund Revenue Sources 18
Overview General Fund Expenditure s
- Staffing Expenditures
2 1
Purpose and Summary of Forecast Findings 1 - Operating Program Expenditure s
Where We 've Been 2 - Capital Improvement Progra m
Revenue Forecast 3 - Debt Service Obligatio n
Expenditure Forecast 5
Summary 7 Revenues Compared with Expenditures : Last 15 Years 2 7
Synopsis of Major Assumptions Supplemental Historical Information :
- Sales Tax
2 8
Demographic Trends 9 -Property Tax & Property Tax in Lieu of VL FExpenditures9- Development Review Fee sKey Revenues 9
Fund Balance 10 Beacon Economics Revenue Forecas t
FIVE YEAR FORECAST SUMMARY
Appendix A
Forecast of Revenues, Expenditures and Changes in Fund Balance 1 1
Forecast Assumption s
Forecast of Revenue, Expenditures and Changes in Fund Balance
1 2
Without Measure Y Renewa l
HISTORICAL TRENDS
1 3
Overview 1 5
Population and Housing Trends 1 6
Cost of Living Information 17
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S S
OVERVIE W
PURPOSE AND SUMMARY OF FORECAST FINDING S
PURPOSE :
The purpose of this forecast is to assess the General Fund's ability ove r
the next five years—on an "order of magnitude" basis—to do five things :
1.Deliver current service levels .
2.Maintain the City's existing infrastructure and facilities based on pas t
funding levels .
3.Preserve the City's long-term fiscal health by aligning operatin g
revenues and expenditures .
4.Maintain fund balance at policy levels .
5.Reinvest in the General Fund supported Capital Improvemen t
Program, particularly in areas that are underfunded such a s
infrastructure maintenance, fleet replacement, Informatio n
Technology replacement, and facilities maintenance .
The forecast does this by projecting likely revenues and subtracting fro m
them operating costs, debt service and the capital improvement pla n
(CIP). If positive, the balance remaining is available for Council decision o n
whether to build reserves to guard against future financial uncertainties o r
fund increased investment in maintaining infrastructure, new capita l
improvement or operating initiatives . If negative, the balance shows a
likely "budget gap" that requires corrective action .
It is important to stress that this forecast is not a budget .
The forecast does not make expenditure decisions or formally adop t
revenue numbers . Its sole purpose is to provide context for considerin g
the City's ability to continue current services, maintain existing asset s
and/or fund new initiatives . Ultimately, this forecast cannot answer th e
question : "can we afford new initiatives?" This is a basic question o f
priorities . Funding new initiatives within existing resources would require
reductions elsewhere to do so . As a result, making trade-offs an d
determining priorities is a key aspect of the budget process . The forecas t
is a helpful tool in this regard because it provides an important framewor k
for decision-making by projecting the revenues that will likely be availabl e
in the future to cover the cost of maintaining current service levels .
SUMMARY OF FINDINGS :
The City has made great strides on the path to fiscal sustainability sinc e
the last formal update to the General Fund Five-Year Fiscal Forecast tw o
years ago . This forecast conclude s
that the City is no longer facin g
continuing long term structura l
budget gaps of the nature projecte d
in the five-year forecast of two years
ago .However, it should be note d
that forecasted balances woul d
obviously be reduced by over $7 million and create a gap betwee n
revenues and expenditures after 2014-15 if Measure Y is not reauthorize d
by the voters in November 2014 . If Measure Y is not reauthorized, thos e
revenues would cease to be collected in April 2015 . The impact of tha t
potential loss is shown in a separate fiscal forecast on page 12 .
Why is the forecast better than what was expected two years ago ?
There are two primary reasons why the continuing budget gap projecte d
two years ago has been eliminated . The first is that revenue declines hav e
been reversed, although economic uncertainty remains . The second i s
cost containment measures taken by the Council to reduce both near-an d
long-term expenses .
On the revenue side, key revenue sources such as sales tax and Transien t
Occupancy Tax (TOT) have rebounded and have been growing for the pas t
three years with TOT exceeding its pre-recession peak in 2011-12 . Th e
forecast projects continued moderate growth in these sources . Afte r
three years of minor declines, property tax revenue will return to positiv e
growth in 2012-13 with very modest increases in the future . Othe r
PROGR[:SS ON [III .
LISCA L
Sl 5 'AlNAI3ILIT Y
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OVERVIEW
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revenue sources are projected to grow modestly throughout the forecas t
period reflecting a long and slow recovery . While the revenue picture i s
positive, especially compared to the recent past, the rate of increase s
projected is less than the rates seen in previous periods of economi c
growth . In other words growth will be "slow and steady" as opposed t o
the rapid recovery seen in previous economic rebounds .
On the cost side of the equation, the Council took decisive action t o
reduce expenditures with the adoption of the 2011-13 Financial Plan . Thi s
was in addition to actions taken during previous financial plans to reduc e
costs and address the budget gap . Most recently, these expenditur e
reductions have been accomplished by controlling operating costs ,
reducing staffing levels, negotiating personnel compensation reductions,
and constraining investment in the Capital Improvement Program . For th e
longer term, the City has achieved second tier pension formulas wit h
reduced benefits for all new City employees . This is a critical piece t o
containing costs for future hires who are already PERS members becaus e
State pension reform only establishes reduced pension formulas for ne w
PERS members . Together these actions will help mitigate future pensio n
cost increases, which have and will continue to be a major cost driver an d
source of uncertainty . Both revenue and expenditure trends will b e
discussed in greater detail later in this report .
Additionally, the City engaged in two bond refinancings to take advantag e
of low interest rates to reduce debt service payments during the 2011-1 2
fiscal year . In both cases the City received an AA+ implied Genera l
Obligation bond rating from Fitch Rating Services and the City compare s
favorably on many indices with certain AAA rated cities .
WHERE WE'VE BEE N
Since the City's journey to financial sustainability has been on-going, it wil l
be helpful to review where we have been and the steps the City has take n
in response to the constant changes in our financial condition .
In the 2009-11 Financial Plan, Council responded to declining revenue s
caused by the severe recession and unanticipated staffing cost increases
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with actions to reduce the budget by $11 .3 million . While reserves an d
added revenues played an important role, about 80% of the budget -
balancing strategy again relied upon expenditure reductions with the bul k
provided by CIP reductions . Reductions from 3-11% by department wer e
imposed with the deepest reductions occurring in the suppor t
departments . These reductions included 17 .2 regular positions and 6 .4
temporary full time equivalent (FTE) positions in the General Fund . Thi s
also included salary deferrals by employees totaling nearly $1 million .
The 2009-11 Financial Plan Supplement (2010-11 budget) include d
additional cuts of almost $1 million in operating expenses and almost $2
million in CIP reductions .
Budget-Balancing in the Current 2011-13 Financial Plan .
The 2011-13 Financial Plan focused on permanent, on-going changes a s
much as possible, with departmental operating budgets and employe e
concessions being the two largest elements of the budget balancin g
strategy . Revenue enhancements were also part of the strategy, but wer e
limited due to recognition that the City's long-term sustainability depend s
more on cost control than on development of new revenue sources .
Therefore the 2011-13 Financial Plan included ongoing employe e
concessions totaling $3 .1 million in all funds, or $2 .6 million in the Genera l
Fund, as indicated in the chart below . This financial objective set th e
stage for Council labor relations objectives that included pension refor m
and a 6 .8% reduction in employee total compensation . The City reache d
Council's labor relations objectives through negotiated agreement with al l
of its bargaining units, exceeding the financial objective when th e
personnel compensation reductions are fully implemented . These saving s
are being phased in over time, and the forecast reflects this approach .
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OVERVIEW
General Fund Budget Balancin g
Element s
Revenue enhancements
2011-1 2
$ 301,300
2012-1 3
$ 351,30 0
Operating budget reductions 1,812,000 1,956,00 0
Employee concessions 1,300,000 2,600,00 0
Operational efficiencies /NOBBs 50,000 100,000
Fiscal Health Contingency Plan Elements Still Activ e
Twice since 2008, the City has implemented actions in its fiscal healt h
contingency plan . The first implementation was in response to th e
adverse financial impacts of the binding arbitration decision (bindin g
arbitration has since been eliminated through a Charter amendmen t
approved by City voters on August 30, 2011). Actions were again take n
due to the significant downturns in revenues in 2009-10, which included a
hiring freeze . Presently, a "hiring chill" remains in place requiring the Cit y
Manager to approve all hiring actions including backfilling budgete d
vacant positions . The City Manager's judicious use of the "chill" ha s
resulted in considerable salary savings without the potentially arbitrar y
impact on operations that can be caused by a full hiring freeze .
Reserve Levels Have Been Maintaine d
The City has also made strategic use of its reserve fund as lower operatin g
expenditures produced a proportionally smaller reserve requirement .
Reserves have been maintained at or above policy levels of 20 %
throughout the financial difficulties of the last several years . Audite d
results for 2010-11 and preliminary results for 2011-12 reflect the Cit y
achieved higher than expected revenues and expenditure savings resultin g
in higher than projected fund balances .
REVENUE FORECAS T
Reset of Revenue Bas e
Beginning in 2008, the United States experienced the deepest and longes t
recession since the Great Depression . The housing bubble burst wa s
followed by a crisis in the financial markets, high levels of unemploymen t
and a sharp decline in consumer spending . During that time, several o f
the City's top revenues declined or at best stayed flat . Sales tax (includin g
Measure Y), property tax and transient occupancy tax (TOT) account fo r
about two-thirds of all funding sources in the General Fund . Thes e
sources have begun to recover at varying rates . Overall, the curren t
recovery can be characterized as "slow and steady ." The recovery ha s
been accompanied by a great deal of uncertainty and ongoing fear that a
double dip recession could be caused by a variety of unresolved economi c
issues, including the federal "fiscal cliff and an uncertain economi c
climate in Europe . This long slow recovery with low growth rates an d
continued uncertainty is often referred to as the "new normal ." It als o
means that revenue forecasts must be understood in context . Because o f
the various uncertainties associated with the current economic recovery ,
staff has erred on the conservative side when making these projections .
Sources used in developing revenue projections for the forecast includ e
long and short-term trends in key City revenues, data from the Centra l
Coast Economic Forecast project ; information developed by the Stat e
Legislative Analyst and the State Department of Finance ; and material s
prepared by the League of California Cities and State Controller's Office .
To assist in improving the reliability of revenue forecasts, staff ha s
engaged the services of Beacon Economics to provide professiona l
forecasts (Appendix A) for a number of key revenues sources . Beacon's
projections will be discussed in the applicable narrative discussions below .
Ultimately, the revenue projections in this forecast reflect staff's bes t
judgment about the performance of the local economy during the nex t
five years and how it will affect the City's General Fund revenues .
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OVERVIEW
Forecast
Sales Tax.For the last two fiscal years the City's growth estimates fo r
Sales Tax revenue have been exceeded . These estimates were las t
updated as part of the 2011-13 Financial Plan and 2012-13 budget . Th e
current years' growth rate projection is 4 .5%, and 3 .5%, 3% and 3% annua l
increases through 2015-16 . The following table includes the City's mos t
recently approved sales tax growth projections, along with projection s
provided by Beacon Economics and HdL, the City's sales tax advisor . The
data indicates varying degrees of confidence in taxable sales growth ove r
the forecast period . Staff recommends using HdL's growth assumptions i n
the current forecast calculation, consistent with our conservativ e
approach to projecting revenues during this uncertain economic recovery .
Sales Tax Growth Projection s
2016-17 2017-1 8
Staff
2013-1 4
3 .5%
2014-1 5
3 .0%
2015-1 6
3 .0 %
HdL 5 .0%4 .0%4 .0%4 .0 %
Beacon 5 .0%6 .4%8 .0%7 .8%6 .6%
In addition to overall growth, the forecast includes assumptions related t o
new sales tax outlets that will enhance total revenues . This includes th e
Airport Area Annexation agreement, Garden Street Terraces developmen t
project, as well as expectations for the Chinatown development project .
Measure Y.The growth projections for Measure Y revenue, the local half -
cent sales tax, are the same as identified in the previous table for all sale s
tax revenue . This document includes a forecast of revenue, expenditure s
and changes in fund balance without Measure Y renewal . It should b e
noted that if Measure Y is not renewed, revenue from the half-cent sale s
tax would no longer be collected effective April 1, 2015 . This reduction i n
revenue would affect the last three months of the 2013-15 Financial Pla n
period, and the last three years of the forecast . As shown in the forecast ,
if Measure Y is not renewed a negative gap between revenues an d
expenditures would begin in 2014-15 and grow to $19 .7 million in 2017 -
18 . Actual consideration of the tradeoffs that would be required t o
balance the budget if the half-cent sales tax is eliminated will be
considered beginning in January 2014, with decisions by the City Council i n
June 2014 . This schedule gives the Council and the community th e
opportunity to consider this question separately and independently fro m
the vast number of policy questions to be considered as part of the 2013 -
15 Financial Plan adoption .
TOT Revenues.Revenues from transient occupancy tax (TOT) ended 2011 -
12 up 7 .8% from the prior year, reaching $5,222,000 . This surpassed th e
2007-08 pre-recession peak of $5,054,700 by over 3%. TOT has benefitte d
from the extensive marketing efforts of the Tourism Busines s
Improvement District and the community promotions program . Havin g
achieved and surpassed the pre-recession peak, staff expects the rate o f
growth to moderate some . The market has recently seen growth in bot h
room rates and the number of rooms available with the opening in Ma y
2012 of the 84-room Hampton Inn, and the October 2012 opening of th e
17-room Granada Hotel .
Current projections include the anticipated effect of Monterey Place (1 1
rooms) in 2014-15 and the Garden Street Terraces project (48 rooms )
beginning in 2015-16 . Staff has revised the dates for receiving TOT fro m
these hotel properties to reflect the latest information on developmen t
plans received by the Community Development Department .
Based on the analysis provided by Beacon Economics staff is projectin g
net TOT revenue growth of :
Transient Occupancy Tax Growth Projection s
2016-17 2017-1 82013-14 2014-15 2015-1 6
4 .4%2 .6%7 .62%3 .6%3 .8%
Property Taxes .Property tax revenues in 2011-12 were $8 .4 million, down
less than 1% from the prior year and marking the third year of smal l
declines . Since its 2008-09 peak, property tax revenue has declined 4 .8%,
far less than most communities in California . The declines reflect ongoin g
revaluations of properties by the County Assessor's office in light o f
market price declines . Based on preliminary data from the Assessor, staff
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OVERVIE W
projected a return to growth, albeit very modest, in property tax revenue s
beginning in 2012-13 .
Based on data provided by Beacon Economics on growth in assesse d
valuation, staff projects the following through the forecast period :
Property Tax Growth Projections
2013-14 2014-15 2015-16 2016-17 2017-1 8
2 .0%2 .6%3 .1%3 .6%4 .1%
Grants .The forecast does not reflect the receipt of any "competitive "
grant revenues over the next five years . However, our experience tells u s
that we will undoubtedly be successful in obtaining grants, but these ar e
for restricted purposes, and are usually for new facilities an d
infrastructure, not the "maintenance-only" projects assumed in th e
forecast .
Other "formula grant" programs like Community Development Bloc k
Grants will help in achieving CIP goals . However, their use is highl y
restricted by the granting agencies and in the case of State grants, canno t
be relied upon . Again, these are largely for new facilities an d
infrastructure, not the "maintenance-only" projects included in th e
forecast . As such, the forecast does not include any funding from thes e
sources .
Development Impact Fees .These are subject to changes in th e
construction market, over which the City has no control . Depending upo n
growth that occurs in the community over the next five years ,
transportation impact fees will generate funds to help offset funding fo r
transportation improvements . However, these revenues are restricte d
solely to funding improvements related to new development . On a muc h
smaller scale, the City also receives park in-lieu fees, which are als o
restricted to funding improvements related to park facilities to suppor t
new development . Because of these restrictions they are not included i n
this forecast .
EXPENDITURE FORECAS T
Operating Costs
Based on requests from Council, staff has broken down the forecast o f
operating expenses between staffing and non-staffing costs . This is logica l
because most City services, such as law enforcement and building permi t
inspections, are provided by City staff . It is also helpful to organiz e
operating costs in this way because the factors driving staffing cos t
increases, such as retirement costs, are completely different and warran t
much greater analysis than non-staffing operating costs .
Operating Costs - Staffing
Basic Compensation .Staffing costs have represented up to 80% of tota l
operating expenditures in the General Fund and have for several year s
been the driving force behind increases in the costs of providing Cit y
services . This has primarily been a function of rising retirement cost s
driven by substantial increases in the employer contribution rate s
required by the California Public Employees Retirement System, known a s
CaIPERS or simply PERS .
As mentioned above, the City Council included a projection of $2 .6 millio n
in annualized reductions in personnel compensation in the General Fun d
($3 .1 million in all funds) as part of the 2011-13 Financial Plan . The pla n
anticipated achieving $1 .3 million in savings during the 2011-12 year an d
the full $2 .6 million in each year thereafter . Achieving the annual saving s
goal required substantial negotiation with each bargaining unit an d
ultimately resulted in a variety of phased in approaches to achieve th e
desired reduction . The last phased in reduction will occur in July 2014 an d
the forecast reflects these phased in reductions through the 2014-15 fisca l
year.
Reductions in compensation were achieved in a variety of ways ,
depending upon the bargaining unit . However, all employees will pay th e
full Member contribution to PERS (8%or 9%) by July 2014 . Further, non e
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OVERVIEW
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of the labor agreements or compensation resolutions include any sort o f
cost of living adjustments for salaries during the term (through the end o f
December 2014 or 2015). Considering it will be at least four years tha t
most employee classifications have not been adjusted, staff forecasts tha t
compensation will increase at the assumed rate of inflation for the 2015 -
16 year and beyond .
PERS Retirement Costs . In the previous 2011-16 forecast, staff projecte d
fairly high increases in PERS employer contribution rates over the forecas t
period based on the rapid rises seen in preceding years and th e
knowledge that PERS was reviewing and likely changing a number o f
assumptions that would increase rates . Several of those assumptio n
changes have come to pass, most notably the change in the rate of retur n
on investments from 7 .75% to 7 .50%. The City recently received its PER S
Annual Valuation Reports with official rates for 2013-14 and projecte d
rates for 2014-15 for Safety and out to 2015-16 for Miscellaneou s
employees .
The rates for 2013-14 reflect the impact of the PERS board action to
reduce the assumed rate of return, although PERS is phasing in thi s
impact, as it has many other adjustments in the last ten years . Th e
projected rates for 2014-15 and beyond incorporate the impact of th e
poor rate of return earned specifically in 2011-12 . While the employe r
contribution rates in the recent reports are higher than PERS' last officia l
projections, they are close to or within the assumptions used by the Cit y
when it lasted updated the forecast in June 2012 for the 2011-13 Financia l
Plan Supplement . These increases are incorporated into the staffing cos t
line on the forecast . Staff has also allowed for further increases in PER S
rates for the forecast years beyond PERS official projections .
One of the City's key cost containment objectives achieved through th e
round of labor negotiations completed during 2012 was pension reform ,
specifically the achievement of lower second tier pension formulas for Cit y
employees that increase the "normal" retirement age and calculat e
benefits on the average of three years of compensation instead of th e
single highest year . The State also adopted new pension formulas throug h
the Public Employees Pension Reform Act (PEPRA) effective January 1 ,
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2013 . However, the PEPRA formulas only apply to new employees wh o
are also new to PERS .
Consequently all new personnel hired by the City will fall into eithe r
asecond tier, or third "PEPRA" tier , both of which are lower than th e
City's current retirement benefits . Future retirement costs will b e
impacted by rates of turnover in the City's workforce as new employee s
receiving lower benefits with lower costs, replace current employees .
Thus, the savings to the City will increase over time . An actuarial study b y
John Bartel and Associates was conducted for the City in 2011 fo r
purposes of estimating second tier savings . PERS provided estimate d
employer contribution rates for the City's approved second tier formulas .
Unfortunately, PERS will not provide the City an estimated third tier rat e
until after this forecast . However, given the formulas involved one ca n
expect the third tier cost to be somewhat, but not substantially, less tha n
the second tier rates . Further,based on past experience it is likely mos t
new hires will be hired into the second tier . As a result, staff ha s
projected retirement costs and used second tier rates for all projecte d
turnover. The forecast provides a line for savings from CaIPERS decrease s
from second tier savings under Expenditures and Other Uses .
Other Post Employment Benefit (OPEB) costs .Unlike many cities, the Cit y
of San Luis Obispo faces a fairly stable cost outlook for its OPE B
obligations . Since 2008 the City pays its full Annual Required Contributio n
(ARC) to the CERBT Trust run by PERS to cover future retiree healt h
benefits, and is rapidly reducing the future liability for this benefit . Base d
on the latest biennial actuarial report received during 2012, the Cit y 's cost
for the next two years will increase from $536,000 to $558,000 an d
$576,000 respectively, with future increases projected at a similar rate .
Overall, the efforts undertaken to control staffing costs in the short- an d
long-term appear to be successful . Ultimately, the savings from ne w
retirement tiers will depend on turnover as well as the contribution rate s
required by PERS, but total staffing costs are projected to grow by les s
than inflation during the forecast period .
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OVERVIE W
Operating Costs — Non-Staffin g
As the economy has stabilized and recovery taken hold, prices non -
staffing operating costs have begun to rise . City staff has been workin g
hard to identify areas where efficiencies can be made through improve d
work processes, use of technology, etc . and this effort will help moderate
costs to some extent .
Accordingly, the forecast assumes non-staffing operating costs wil l
increase in each forecast year by the assumptions for population growt h
and inflation combined .
Infrastructure and Facilities Maintenanc e
As discussed in the 2011-16 fiscal forecast, the estimated cost o f
adequately maintaining, repairing or replacing existing General Fun d
facilities, infrastructure and equipment is about $8 .8 million annually .
This excludes any enhancements or "betterments ." To place this i n
context, the average General Fund CIP expenditures for the last 15 year s
have been about $4 million annually, and the average for the last tw o
years is a similar amount . The budget for the General Fund CIP wa s
reduced to $2 .4 million for 2010-11 and increased to $3 .7 million in 2011 -
12 .
For purposes of this Fiscal Forecast, staff has used the numbers fro m
Appendix B of the 2011-13 Financial Plan, which is the approved CIP pla n
through 2015-16 . While these numbers could, and very likely will, chang e
through the adoption of 2013-15 Financial Plan, the previously approved
plan is a logical place to start for forecast purposes . The average increas e
in CIP spending shown in the last Fiscal Forecast was about 15%. For th e
two additional years included in this forecast, staff has continued t o
assume investment growth in the CIP by this percentage each year .
One of the Council's Other Important Objectives for 2011-13 has been t o
increase infrastructure maintenance and investment . This goal wil l
continue to be important to the City's fiscal well-being, since failure t o
maintain critical infrastructure often results in higher costs down the road .
To accomplish this, staff has proposed setting aside funding for majo r
replacements, such as fleet, information technology and major facilities .
The forecast assumes progressively increasing amounts will be transferre d
into funds specifically established for these purposes . Although initia l
investments in these funds will not cover the full cost of replacing thes e
critical and expensive components, it is a good start toward creatin g
fiscally sustainable replacement programs .
Debt Service Cost s
During 2011-12, the City successfully refinanced 2001 Series C leas e
revenue bonds to achieve a lower interest rate and save $65,000 annuall y
in debt service costs to the General Fund . Staff and the City's financia l
advisor will remain open to any potential opportunities for further saving s
that may present themselves if interest rates remain low and other bon d
issues become eligible . The City has incurred no new General Fund debt
since the 2011-16 forecast and has no current plans calling for Genera l
Fund related debt during the forecast period . As a result, debt servic e
costs are projected to remain stable after declining by approximatel y
$295,000 in 2014-15 when the final payment on a 1986 bond issue i s
made .
SUMMARY
The City enters the 2013-15 Financial Planning period in substantiall y
better condition both long and short term than in previous financial pla n
periods . However, it still faces many challenges as well as continue d
economic uncertainty .
The City continues to have substantial advantages compared with man y
communities in California due to :
1.A balanced 2012-13 budget and reserves above minimum policy level s
2.Strong financial systems and procedures in plac e
3.Strong Council leadershi p
4.Committed and engaged citizens
OVERVIE W
5.Excellent organization and capable staf f
6.Great tradition of responsible stewardshi p
This "civic infrastructure" is simply not in place in many other cities and i t
will serve San Luis Obispo well in successfully meeting the fiscal challenge s
ahead .
Moreover, the fact remains that in good times or bad, the fundamenta l
policy questions posed by the budget process are the same : of all th e
things we want to do in making our community an even better place t o
live, work and play, which are the most important? And what are th e
resource trade-offs we have to make to do them ?
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SYNOPSIS OF MAJOR TREND S
DEMOGRAPHIC TREND S
1.Population and Housing.Population grows by 0 .25% per year fo r
each of the years in the forecast .
2.Inflation . Grows by 2 .40% in 2013-14 ; 2 .50% 2014-15 ; 2 .50% in 2015 -
16 ; 2 .5% in 2016-17 ; and by 2 .5% in 2017-18 .
EXPENDITURESSPSIMIIIIM I
1.Operating Expenditures - Staffing .Uses the adopted budget for 2012 -
13, reduced for the phased in implementation of concessions amon g
the various bargaining groups . Grows 0 .67% in 2013-14 and 1 .25% i n
2014-15 reflective of possible upward adjustments for units wit h
contracts that will expire December 2013 . Grows by inflation fo r
2015-16, 2016-17 and 2017-18 .
2.Operating Expenditures — Non-Staffing .Uses the adopted 2012-1 3
budget as the base and assumes increases based on combined growt h
rates for population and inflation .
3.CIP Expenditures.Based on the five-year CIP plan approved a s
Appendix B of the 2011-13 Financial Plan for the years through 2015 -
16 and assumes an increase of 15% for 2016-17 and 2017-18 .
4.Debt Service .The forecast includes current debt service obligation s
and the final debt service payment in 2012-13 for bonds issued i n
1986, which reduces debt service costs by about $295,000 in 2013-14 .
KEY REVENUES
Top Dozen General Fund Revenue s
These "Top Dozen" sources account for about 95% of total projecte d
General Fund revenues .
1.Sales Tax.Grows by rates projected by HdL and incorporates specifi c
factors such as Airport Area Annexation Agreement, Chinatown, an d
Garden Street Terraces . Measure Y and Proposition 172 revenues ar e
projected to grow by the same factors .
2.Property Tax .As projected by Beacon Economics, grows by 1 .4% i n
2013-14; by 2 .7% in 2014-15 ; by 3 .0% in 2015-16 ; by 3 .4% in 2016-1 7
and by 3 .9% in 2017-18 .
3.Transient Occupancy Tax .As projected by Beacon Economics, grow s
by 4 .4% in 2013-14 ; by 2 .7% in 2014-15 ; by 3 .3% in 2015-16 ; by 3 .6%
in 2016-17 and by 3 .8% in 2017-18 . Incorporates projections for th e
net impact of Garden Street Terraces beginning in 2015-16 .
4.Utility Users Tax .As projected by Beacon Economics, grows by 0 .8 %
in 2013-14 ; by 1 .1% in 2014-15 ; by 1 .5% in 2015-16 ; by 2 .8% in 2016-
17 and 3 .1% in 2017-18 . Passage of Measure D-12 projected to be
revenue neutral .
5.Property Tax in Lieu of Vehicle License Fees .Grows by the same rat e
as property tax revenues throughout the forecast period .
6.Business Tax.As projected by Beacon Economics, grows by 2 .0% i n
2013-14 ; by 2 .1% in 2014-15 ; by 2 .3% in 2015-16 ; by 2 .6% in 2016-1 7
and 2 .8% in 2017-18 .
7.Franchise Fees .Grows by combination of population and inflatio n
throughout the forecast period .
A
SYNOPSIS OF MAJOR TREND S
8.Gas Tax Subventions.Grows by population throughout the forecas t
period .
9.Development Review Fees .Grows by 3%in 2013-14 and 4 %
thereafter based on Beacon Economics projection for building permi t
activity adjusted for estimated timing of development review activity
by Community Development Department .
10.Recreation Fees .Grows by population and inflation throughout th e
forecast period .
11.Other Fees.Grows by population and inflation throughout th e
forecast period .
12.Investments.Based on 2 .5%yields and estimated available fun d
balance .
Special Revenue Assumption s
1.Proposition 42 Revenues .Beginning in 2010-11,the State will replac e
Proposition 42 revenues with additional Gas Tax revenues pursuant t o
Revenue & Taxation Code Section 7360 .The City should receive abou t
$500,000 annually from these transportation-restricted revenues .
2.Mutual Aid Reimbursements .The forecast makes no assumptions fo r
the receipt of mutual aid revenues . This revenue results when Fire
personnel respond to significant events (usually wildland fires) fo r
which the City receives reimbursement from Federal or State sources .
Response to these types of events is volatile and difficult to predict .
While the City almost always receives some level of revenue from thi s
source each year, including substantial amounts in some years, ther e
are years where very little net revenue is received and it is unwise t o
build the forecast based on these revenues .
3.State Budget Impacts.The forecast assumes no further adverse stat e
budget actions during the forecast period . With the passage o f
Propositions 30 and 39 at the November 2012 election, the state 's
budget outlook has improved . On November 14; 2012,the Legislativ e
Analyst Office (LAO) released information projecting the smalles t
budget in many years for the current year and small surpluses for th e
out-years based on current reduced spending plans in place . Whil e
the state is hardly in good financial shape, the prospect of further cut s
that would affect the City or local state agencies upon which the loca l
economy depends are substantially less than in previous years .
4.Federal Fiscal Cliff —In the same report mentioned in the abov e
paragraph, the State LAO states that Congress' failure to deal with th e
issues referred to as the "Fiscal Cliff" could result in economi c
conditions differing materially from those forecasted . This means tha t
"autopilot" actions referred to in the term "Fiscal Cliff" could affec t
the economic growth upon which the forecast is based . This does no t
account for unfunded Federal mandates that may trickle down to th e
local level .
FUND BALANC E
The forecast assumes that the policy for maintaining fund balance at a
minimum of 20%of operating expenditures will be adhered to throughou t
the forecast period . As previously discussed, this document includes a
forecast of revenue, expenditures and changes in fund balance withou t
Measure Y renewal . In order to achieve the fund balance called for by th e
City's reserve policy in this scenario, significant reductions in expenditure s
would have to occur to offset the loss of Measure Y revenue .
•••
S S
GENERAL FUND FIVE YEAR FISCAL FORECAST : 2013-1 8
2010-11 2011-12 2012-13 2012-13 ,.FOgrtffT,..
Actual Prelim Actual_Budget Estimated 2013-14 2014-15 2015-16 2016-17 2017-1 8
2013-15 Financial Plan
AVAILABLE FUND BALANCE, BEGINNING OF YEAR
REVENUES &OTHER SOURCES
Taxes
11,114,100 12,907,900 10,963,800 13,623,200 14,783,800 14,816,700 14,996,800 15,703,700 16,414,300
Sales Tax - General (Based on "effective" 1% tax rate)12,098,600 13,200,200 13,528,000 13,794,200 14,483,900 15,063,300 15,863,000 16,497,500 17,157,400
Measure V 1/2% Note : 2014-15/15-16 Estimates assume renewal 5,616,300 6,237,500 6,279,800 6,562,400 6,890,500 7,166,100 7,551,300 7,853,400 8,167,500
Sales Tax - Proposition 172 271,300 307,400 284,600 284,600 298,800 310,800 327,300 340,400 354,000
Property Tax 8,441,100 8,367,000 8,370,200 8,370,200 8,487,400 8,716,600 8,978,100 9,283,400 9,645,500
Property Tax in lieu of VLF 3,551,100 3,492,400 3,551,000 3,551,000 3,600,700 3,697,900 3,808,800 3,938,300 4,091,900
Transient Occupancy Tax 4,844,200 5,222,000 5,395,000 5,395,000 5,632,400 5,784,500 6,225,400 6,449,500 6,694,600
Utility Users Tax 4,592,300 4,584,100 4,938,100 4,721,600 4,759,400 4,811,800 4,884,000 5,020,800 5,176,40 0
Franchise Fees 2,352,100 2,462,300 2,523,000 2,523,000 2,591,100 2,663,700 2,738,300 2,815,000 2,893,80 0
Business Tax 1,797,800 1,837,500 1,923,100 2,060,000 2,101,200 2,145,300 2,194,600 2,251,700 2,314,70 0
Real Property Transfer Ta x
Subventions & Grants
133,700 144,000 180,000 180,000 183,600 187,300 191,000 194,800 200,30 0
Vehicle License In-Lieu Fees (VLF)205,600 45,600 ------
Gas Tax/TDA/TBID Transfers In 1,658,400 1,387,500 1,281,100 1,281,100 1,284,300 1,287,500 1,290,700 1,293,900 1,297,100
Other Subventions & Grant s
Service Charges
590,400 564,300 321,500 450,000 300,000 306,000 312,100 318,300 324,700
Development Review Fees 1,668,000 2,453,800 2,035,800 2,085,800 2,148,400 2,234,300 2,323,700 2,416,600 2,513,300
Recreation Fees 1,300,700 1,741,700 1,532,500 1,532,500 1,573,900 1,618,000 1,663,300 1,709,900 1,757,800
Other Service Charge s
Other Revenues
2,018,400 2,089,800 1,880,600 1,880,600 1,931,400 1,985,500 2,041,100 2,098,300 2,157,100
Fines & Forfeitures 171,400 174,300 162,600 162,600 167,000 171,700 176,500 181,400 186,500
Interest Earnings and Rents 549,900 581,700 695,500 695,500 674,000 689,000 697,100 708,700 724,700
Other Revenues 179,300 86,500 75,000 475,000 75,000 75,000 100,000 100,000 100,000
Total Revenues 52,040,600 54,979,600
_
54,957,400 56,005,100 57,183,000 58,914,300 61,366,300 63,471,900 65,757,300
EXPENDITURES &OTHER USES
Operating Programs - Staffing related costs (net of reimb trans & est savings 34,719,800 36,272,500 35,945,400 35,945,400 36,738,900 37,016,800 37,887,200 38,831,200 39,747,600
CaIPERS decreases (2nd tier savings)(51,400)(104,100)(506,700)(677,400)(861,100 )
Operating Programs - Non-staffing related costs (net of estimated savings)9,994,100 11,331,800 12,198,200 12,198,200 12,527,600 12,878,400 13,239,000 13,609,700 13,990,800
Transfers to Golf, CDBG *372,800 45,000 45,000 45,000 45,000 45,000 45,000 45,000
Debt Service 3,023,200 2,437,200 2,637,500 2,637,500 2,637,500 2,342,500 2,342,500 2,342,500 2,342,500
Capital Improvement Plan - Equipment Replacement (Fleet)-500,000 500,000 500,000 700,000 900,000 1,000,000 1,100,000 1,200,000
Capital Improvement Plan - Equipment Replacement (IT)200,000 200,000 350,000 700,000 800,000 800,000 800,000
Capital Improvement Plan - Major Facility Replacement 200,000 600,000 800,000 900,000 1,000,000
Capital Improvement Plan - All other CIP 2,136,900 3,722,800 3,273,400 3,318,400 4,002,500 4,355,600 5,052,400 5,810,300 6,681,800
Total Expenditures 50,246,800 54,264,300 54,799,500 54,844,500 57,150,100 58,734,200 60,659,400 62,761,300 64,946,60 0
Revenues Over (Under) Expenditures 1,793,800 715,300 157,900 1,160,600 32,900 180,100 706,900 710,600 810,700
FUND BALANCE, END OF YEAR 12,907,900 13,623,200 11,121,700 14,783,800 14,816,700 14,996,800 15,703,700 16,414,300 17,225,00 0
Reserve @20% of Operating Costs 8,942,800 9,520,900 9,628,700 9,628,700 9,843,000 9,958,200 10,123,900 10,352,700 10,575,50 0
Reserve above/(below)paltry Intl 3065,100 4402.$09 10 498,090 BA-KM ,»(00400 .,..#b 60(i ,.8,676,900 ,"8,061,690 6,046,640
* Beginning in 2011-12 Golf activities are reflected in the General Fund, therefore no transfer to the Golf Fund is required in subsequent years .
2013-18 Five Year Fiscal Forecast Worksheet Assumption s
Population and Inflation :
Adjusted population increase estimates based on SLOCOG projections and adjusted based on known housing projects with input from th e
Community Development Department . Adjusted inflation estimates based on CPI estimates provided by Beacon Economic . It should be note d
that these estimates are lower than the BLS estimates on line but higher than the projections used in the most recent forecast .
PERS Cost s
Miscellaneou s
Assumes that second tier employees will begin to be hired during the 2012-13 year .
The employer rate for Miscellaneous Employees will not change until the 2015-16 year based on PERS letter . The City will ultimately benefi t
from the reduced cost of 2 nd tier employees hired prior to the 15-16 year but the employer rate will not be affected until 2015-16 due to the la g
in PERS setting the rate . The 14-15 rate will be set based on the City 's valuation report as of June 30, 2012 and no second tier employees wer e
on board then .
Assumes that third tier (new PERS members falling under PEPRA) will begin to be hired after Jan 1 2013 .
Although PERS indicates that they may allow for separate rates they initially intend to have a blended rate for each agency that incorporates th e
effect of the PEPRA tier .
Safety
Second Tier employees should result in an immediate second tier rate due to the fact that they go immediately into a different pool . Becaus e
Fire and Police will have different second tier formulas, they will have separate rates . Third (PEPRA) tier safety employees (those hired as ne w
PERS members after Jan 1, 2013 will have the same pool formula for fire and police .
The Bartel second tier analysis provided to the City in July 2011, projected at the time that the City's workforce would migrate to a second tier a t
the below rate based on percentage payroll .
•
2013-18 Five Year Fiscal Forecast Worksheet Assumption s
Miscellaneous :Safety :
Year 1 6 .89%4 .58%
Year 2 12 .67%9 .22 %
Year 3 18 .02%14 .45%
Year 4 23 .28 19 .22%
Year 5 28 .59 24 .28%
With the advent of PEPRA there will in effect be a third tier for new PERS members . Lateral hires from other agencies who were PERS member s
prior to January 1, 2013 will be hired under the City's newly adopted second tiers . This means that for forecasting purposes it is necessary t o
split the above rates of turnover in estimates for payroll percentages in a second and third tier . This can be done based on the City's past hirin g
experience .
For example the HR Department estimates that 60% of Miscellaneous and 90% of Safety employees are later hires from other public agencie s
who already have PERS or reciprocal coverage .
1 3
GENERAL FUND FIVE YEAR FISCAL FORECAST : 2013-1 8
ASSUMES MEASURE Y SUNSETS MARCH 31, 201 5
2010-11 2011-12 2012 .13 2012-13 _ceREAl?_
Actual Prelim Actual Budget Estimated 2013-14 2014-15 2015-16 2016-17 2017-1 8
2013-15 Financial Plan
AVAILABLE FUND BALANCE, BEGINNING OF YEA R
REVENUES &OTHER SOURCES
Taxes
11,114,100 12,907,900 10,963,800 13,623,200 14,783,800 14,816,700 12,296,800 5,452,400 (1,690,400 )
Sales Tax - General (Based on "effective" 1% tax rate)12,098,600 13,200,200 13,528,000 13,794,200 14,483,900 15,063,300 15,863,000 16,497,500 17,157,40 0
Measure Y 1/2% Note : assumes sunset March 31,2015 5,616,300 6,237,500 6,279,800 6,562,400 6,890,500 4,466,100
Sales Tax - Proposition 172 271,300 307,400 284,600 284,600 298,800 310,800 327,300 340,400 354,00 0
Property Tax 8,441,100 8,367,000 8,370,200 8,370,200 8,487,400 8,716,600 8,978,100 9,283,400 9,645,50 0
Property Tax in lieu of VLF 3,551,100 3,492,400 3,551,000 3,551,000 3,600,700 3,697,900 3,808,800 3,938,300 4,091,90 0
Transient Occupancy Tax 4,844,200 5,222,000 5,395,000 5,395,000 5,632,400 5,784,500 6,225,400 6,449,500 6,694,60 0
Utility Users Tax 4,592,300 4,584,100 4,938,100 4,721,600 4,759,400 4,811,800 4,884,000 5,020,800 5,176,40 0
Franchise Fees 2,352,100 2,462,300 2,523,000 2,523,000 2,591,100 2,663,700 2,738,300 2,815,000 2,893,800
Business Tax 1,797,800 1,837,500 1,923,100 2,060,000 2,101,200 2,145,300 2,194,600 2,251,700 2,314,700
Real Property Transfer Ta x
Subventions & Grants
133,700 144,000 180,000 180,000 183,600 187,300 191,000 194,800 200,300
Vehicle License In-Lieu Fees (VLF)205,600 45,600 ------
GasTax/TDA/TBID Transfers In 1,658,400 1,387,500 1,281,100 1,281,100 1,284,300 1,287,500 1,290,700 1,293,900 1,297,10 0
Other Subventions & Grant s
Service Charges
590,400 564,300 321,500 450,000 300,000 306,000 312,100 318,300 324,700
Development Review Fees 1,668,000 2,453,800 2,035,800 2,085,800 2,148,400 2,234,300 2,323,700 2,416,600 2,513,30 0
Recreation Fees 1,300,700 1,741,700 1,532,500 1,532,500 1,573,900 1,618,000 1,663,300 1,709,900 1,757,80 0
Other Service Charge s
Other Revenues
2,018,400 2,089,800 1,880,600 1,880,600 1,931,400 1,985,500 2,041,100 2,098,300 2,157,10 0
Fines & Forfeitures 171,400 174,300 162,600 162,600 167,000 171,700 176,500 181,400 186,50 0
Interest Earnings and Rents 549,900 581,700 695,500 695,500 674,000 689,000 697,100 708,700 724,70 0
Other Revenues 179,300 86,500 75,000 475,000 75,000 75,000 100,000 100,000 100,00 0
Total Revenues 52,040,600 54,979,600 54,957,400 56,005,100 57,183,000 56,214,300 53,815,000 55,618,500 57,589,800
EXPENDITURES &OTHER USE S
Operating Programs - Staffing related costs (net of reimb trans & est savings 34,719,800 36,272,500 35,945,400 35,945,400 36,738,900 37,016,800 37,887,200 38,831,200 39,747,600
CaIPERS decreases (2nd tier savings)(51,400)(104,100)(506,700)(677,400)(861,100)
Operating Programs - Non-staffing related costs (net of estimated savings)9,994,100 11,331,800 12,198,200 12,198,200 12,527,600 12,878,400 13,239,000 13,609,700 13,990,800
Transfers to Golf, CDBG *372,800 45,000 45,000 45,000 45,000 45,000 45,000 45,000
Debt Service 3,023,200 2,437,200 2,637,500 2,637,500 2,637,500 2,342,500 2,342,500 2,342,500 2,342,500
Capital Improvement Plan - Equipment Replacement (Fleet)-500,000 500,000 500,000 700,000 900,000 1,000,000 1,100,000 1,200,000
Capital Improvement Plan - Equipment Replacement (IT)200,000 200,000 350,000 700,000 800,000 800,000 800,000
Capital Improvement Plan - Major Facility Replacement 200,000 600,000 800,000 900,000 1,000,000
Capital Improvement Plan - All other CIP 2,136,900 3,722,800 3,273,400 3,318,400 4,002,500 4,355,600 5,052,400 5,810,300 6,681,800
Total Expenditures 50,246,800 54,264,300 54,799,500 54,844,500 57,150,100 58,734,200 60,659,400 62,761,300 64,946,600
Revenues Over (Under) Expenditures 1,793,800 715,300 157,900 1,160,600 32,900 (2,519,900)(6,844,400)(7,142,800)(7,356,800)
FUND BALANCE, END OF YEAR 12,907,900 13,623,200 11,121,700 14,783,800 14,816,700 12,296,800 5,452,400 (1,690,400)(9,047,200 )
Reserve @ 20% of Operating Costs 8,942,800 9,520,900 9,628,700 9,628,700 9,843,000 9,958,200 10,123,900 10,352,700 10,575,500
Resew above/(below) policy level 3,965,100 4,102,900 1,493,000 5,155,100 4,973,700 .2,338,600 (4,671,500) (12,043,100)(19,622,700)
* Beginning in 2011-12 Golf activities are reflected in the General Fund, therefore no transfer to the Golf Fund is required in subsequent years .
•••
•
HISTORICAL TRENDS
OVERVIE W
In order to establish its five-year forecast, the City looks at historical trends to make informed decisions about its projections . Understanding where we've com e
from helps us identify trends and make adjustments to reach the desired fiscal outcome . The following information is an essential part of the fiscal forecast an d
highlights important information that has and will influence the City's past, current, and future standing . In preparing the five-year forecast, the following historica l
trends were reviewed :
POPULATION, HOUSING, COST OF LIVING page 1 5
-Annual growth rates for the past 15 year s
-Compound annual growth rates for the past 15 year s
OVERVIEW OF GENERAL FUND REVENUE SOURCES page 1 8
Actual Revenues for the fiscal year ended June 30, 2012 (unaudited )
-Major revenue trends for the past 15 year s
o Actua l
o Adjusted for increases in population and cost of living
o Major General Fund Revenue Sources — actual & adjusted for increases in Population and Cost of Livin g
•Sales Tax & Sales Tax Measure Y
•Property Tax & Property Tax in Lieu of VL F
•Transient Occupancy Tax
•Utility User Ta x
•Subventio n
•Vehicle Licens e
•Business Tax & License s
•Franchise Fee s
▪Gas Ta x
GENERAL FUND OPERATING PROGRAM EXPENDITURES page 2 1
Last 15 years — actual and adjusted for increases in population and cost of livin g
•Public Safety : Police & Fire
•Transportatio n
•Leisure, Cultural, & Social Service s
▪Community Developmen t
▪General Governmen t
•Total Operating Program Expenditure s
SUPPLEMENTAL INFORMATION page 2 8
15
HISTORICAL TREND S
Populatio n
The population in San Luis Obispo has grown during most of the past 1 5
years at a steady pace with no major increases . 2000 is the only year tha t
shows a significant increase when the population jumped by 4% fro m
42,446 to 44,174 . This most likely reflects a reporting anomaly as th e
increases were generally below 1% in population growth and reached a
population of 45,308 in 2012 .
Annual Population Change : Last 15 Years
Housing Unit s
Housing units have also experienced a steady increase with two mor e
significant growth spurts in 2001 (2 .6% / 484 Units) and in 200 5
(1 .8% / 345 Units). Over the past 15 years, the Cit y's housing unit inventor y
has grown by 2,021 units from 18,642 to 20,663 .
Annual Housing Change : Last 15 Years
5 .0 %
4 .0 %
3 .0%
2 .0%
1 .0%ts
m 0 .0%
U -1 .0 %c -2 .0 %
u -3 .0 %a -4 .0 %
-5 .0 %
-6 .0%COOm)Ol0)O0N ON
NON
CO0N
V0N
lr )0N
CO00N
h
0N
CO
ON
0)
0N
O
ON 0N
N
0N
5.0 %
4 .5 %
4 .0 %
3 .5%
3 .0%
2 .5%
2 .0%
1 .5%
1 .0 %
0 .5 %
0 .0%i
co
m a)a,
OO ONo
N
N ON gN ON
ON O
N ON ON
N
Annual Growth Rate -Populatio n
Last 2 Years 0 .4%
Last 5 Years 0 .4%
Last 10 Years 0.2%
Last 15 Years 0.5%
Annual Growth Rate -Housing Units
Last 2 Years 0 .7%
Last 5 Years 0 .6%
Last 10 Years 0.6%
Last 15 Years 0.7%
•S •
S S
CONSUMER PRICE INDEX (CPI )
The City uses several CPI regions depending on the application . The City's
rates and fee structure is increased annually by the U .S . City Average (Al l
Urban Consumers CPI), but many of the labor agreements use the Souther n
California (Los Angeles-Riverside-Orange) or Northern California (Sa n
Francisco, Oakland, San lose) CPI . The following summarizes the changes i n
CPI for those regions over the past 15 years .
Annual Growth Rate - CPL:U.S Annual Growth Rate - CPI : Compoun d
Last 2 Years 2 .3%Last 2 Years 2 .7%
Last 5 Years 2 .3%Last 5 Years 2 .7 %
Last 10 Years 2 .5%Last 10 Years 2 .7 %
Last 15 Years 2 .4%Last 15 Years 2 .9%
Percent Change in Consumer Price Index : Last 15 Years
7 .0 %
6 .0%
O O O ON P0^^II N
—U5 :CPI-U „m'~*•m So Calif : CPI-U No . Calif. CPI-U
Annual Growth Rate -CPI: So. California Annual Growth Rate – No . California
Last 2 Years 1 .9%Last 2 Years 2 .4%
Last 5 Years 1 .9%Last 5 Years 2 .1%
Last 10 Years 2 .7%Last 10 Years 2 .2%
Last 15 Years 2 .6%Last 15 Years 2 .8%
-1 .0%
4 .0 %
2 .0%
0 .0%
5 .0 %
3 .0%
1 .0%
co o csi co co N-
Of am) O O O O O O O ON^L ^.N Ne.N N
17
GENERAL FUND REVENUE SOURCE S
The City receives income from two different revenue sources . Nine majo r
sources come through tax money and the remainder from service fees th e
City levies . Below is a listing of those income streams and how they pertai n
to the overall General Fund budget . For an in-depth explanation of revenu e
allocation, see supplemental information on page 26 . It should be note d
that 2008 was the first year with full Measure Y funding as marked in th e
tables with an asterisk .
Major Sources of Tax Mane
Revenue Source & Taxation Entity % of budget per 6/30/1 2
Sales Tax - State 24%
Sales Tax - Measure Y - Local 11 %
Property Tax - County 15%
Property Tax - Lieu of VLF*6%
Utility User Tax - Local 8 %
Transient Occupancy Tax - Local 9 %
Franchise Fees - Local 4 %
Business Tax & Licenses - Local 3 %
Gas Tax / TDA -2%
Historical Trends in Revenue Source s
Major Tax Revenue : 15-Year Dat a
Major Sources : 15 Year Trend s
Fiscal Year Percen t
Ending Amount Chang e
1998 22,154,400 7.3 %
1999 23,185,000 4 .7 %
2000 25,609,500 10.5 %
2001 27,298,600 6 .6 %
2002 28,722,000 5 .2 %
2003 29,541,400 2 .9 %
2004 31,285,600 5 .9%
2005 32,712,500 4 .6 %
2006 34,747,300 6 .2 %
2007 39,906,100 14.8 %
2008*45,562,500 14.2 %
2009 44,158,000 -3.1 %
2010 42,496,300 -3 .8 %
2011 44,413,200 4 .5 %
All Revenue Sources : 15-Year Tren d
Services Charges
Fee % of budget per 6/30/12
Development Review Fee 4%
Recreation Fees 3 %
Other Service Charges 4 %
Use of Money & Property 2 %
Subventions & Grants 2 %
Fines & Forfeitures 1 %
Other Sources**2 %
15- Year Data - Average Annual
Growth Rate
Actual Adjusted *
Last Year 5 .3%2 .2 %
Last 2 Years 4 .9%2 .1 %
Last 5 Years 3 .4%0 .7 %
Last 10 Years 5 .1%2 .4%
Last 15 Years 5 .7%2 .7%
Fiscal Year Percent
Ending Amount Chang e
1998 26,944,300 24 .1 %
1999 28,397,000 5 .4%
2000 29,906,000 5 .3 %
2001 30,977,000 3 .6%
2002 35,769,300 15 .5%
2003 35,522,000 -0.7%
2004 37,777,500 6.3 %
2005 37,953,900 0 .5 %
2006 44,376,900 16 .9 %
2007 45,165,700 1 .8 %
2008*54,152,000 19 .9 %
2009 53,745,600 -0 .8 %
2010 49,265,700 -8 .3 %
2011 50,382,200 2 .3%
2012 54,976,800 9 .1%
*Adjusted for compoun d
changes in population and CP I
to reflect "True" growth i n
revenue .
•••
Individual Revenue Sources by Type -15-year Data
Sales Tax excluding Measure Y**Property Tax**
Fiscal Yea r
Ending Amount
Percen t
Change
Fiscal Year Percent
Ending Amount Change
1998 7,521,100 9 .5%1998 3,966,300 2 .4%
1999 8,099,000 7 .7%1999 4,169,300 5 .1 %
2000 9,283,400 14 .6%2000 4,501,300 8 .0%
2001 9,516,400 2 .5%2001 4,799,800 6 .6%
2002 10,099,200 6 .1%2002 5,219,000 8 .7 %
2003 10,179,300 0 .8%2003 5,584,200 7 .0 %
2004 11,294,300 11 .0%2004 6,069,600 8.7 %
2005 11,745,400 4 .0%2005 6,630,600 9.2 %
2006 12,675,900 7 .9%2006 7,519,600 13.4 %
2007 13,993,800 10 .4%2007 8,255,000 9.8 %
2008 13,581,700 -2 .9%2008 8,374,200 1 .4 %
2009 12,070,700 -11 .1%2009 8,788,400 4.9 %
2010 10,723,900 -11 .2%2010 8,579,300 -2 .4 %
2011 12,098,600 12 .8%2011 8,441,100 -1 .6 %
2012 13,200,200 9 .1%2012 8,367,000 -0.9%
Annual Growth Rate
Actual Adjusted *
Last Year -0.9%-3 .8 %
Last 2 Years -1 .2%-3 .8 %
Last 5 Years 0.3%-2 .3 %
Last 10 Years 5 .0%2 .2 %
Last 15 Years 5 .4%2 .3 %
Transient Occupancy Tax (TOT)Utility Users Ta x
Fiscal Yea r
Ending Amount
Percen t
Change
Fiscal Yea r
Ending Amount
Percen t
Change
1998 3,002,900 5 .5%1998 2,991,400 5 .8%
1999 3,256,800 8 .5%1999 2,943,400 -1 .6 %
2000 3,582,700 10.0%2000 3,079,100 4.6 %
2001 3,920,200 9 .4%2001 3,425,200 11 .2 %
2002 3,790,300 -3 .3%2002 3,532,300 3 .1 %
2003 3,840,800 1 .3%2003 3,666,200 3.8 %
2004 3,922,200 2 .1%2004 3,669,200 0 .1 %
2005 4,079,800 4 .0%2005 3,670,200 0 .0%
2006 4,539,200 11 .3%2006 3,947,300 7 .5 %
2007 4,786,000 5 .4%2007 4,096,100 3 .8%
2008 5,054,700 5 .6%2008 4,177,700 2 .0%
2009 4,679,500 -7 .4%2009 4,358,500 4 .3%
2010 4,496,100 -3 .9%2010 4,862,400 11 .6%
2011 4,844,200 7 .7%2011 4,592,300 -5 .6%
2012 5,222,000 7 .8%2012 4,584,100 -0 .2%
Annual Growth Rate
Actual Adjusted *
Last Year -0 .2%-3 .1 %
Last 2 Years -2 .9%-5 .4 %
Last 5 Years 2 .4%-0.2 %
Last 10 Years 2 .7%0.0 %
Last 15 Years 3 .4%0.4 %
Annual Growth Rate
Actual Adjusted *
Last Year 9.1%5 .9%
Last 2 Years 11 .0%8 .1%
Last 5 Years -0.7%-3 .2%
Last 10 Years 3.1%0 .4%
Last 15 Years 4.7%1 .7%
Annual Growth Rate
Actual Adjusted *
Last Year 7 .8%4 .6 %
Last 2 Years 7 .8%5 .0 %
Last 5 Years 2 .0%-0 .7 %
Last 10 Years 3 .4%0 .7 %
Last 15 Years 4 .3%1 .3%
Sales Tax: Measure V***Footnote s
* Adjusted for compound changes in population and CPI to reflect "true" changes in revenue .
** See supplemental analysis on page 28 for significant changes in the underlying factors .
*** See summary of Measure & uses- Measure Y FAQ s
Fiscal Yea r
Ending Amount
Percen t
Change
2007 1,000,000 N A
2008 5,996,600 499 .7%
2009 5,641,400 -5 .9%
2010 5,252,500 -6 .9%
2011 5,616,300 6 .9 %
2012 6,237,500 11.1 %
1 9
Individual Revenue Sources by Type - 15-year Data - continue d
VLF in Excess*Business Tax
Fiscal Yea r
Ending Amount
Percen t
Change
Fiscal Yea r
Ending Amount
Percen t
Chang e
1998 1,829,300 7 .9%1998 1,069,600 18 .1 %
1999 1,928,800 5 .4%1999 1,041,500 -2 .6%
2000 2,130,900 10 .5%2000 1,107,800 6 .4%
2001 2,297,700 7 .8%2001 1,275,200 15 .1%
2002 2,467,400 7 .4%2002 1,355,900 6 .3%
2003 2,621,600 6 .2%2003 1,429,900 5 .5%
2004 2,013,300 -23 .2%2004 1,475,100 3 .2%
2005 2,187,000 8.6%2005 1,518,800 3 .0%
2006 955,600 -56 .3%2006 1,578,000 3 .9 %
2007 296,700 -69 .0%2007 1,706,700 8 .2 %
2008 190,300 -35 .9%2008 1,866,400 9 .4 %
2009 166,500 -12 .5%2009 1,878,500 0 .6 %
2010 135,000 -18 .9%2010 1,830,100 -2 .6 %
2011 205,600 52 .3%2011 1,797,800 -1 .8%
2012**45,600 -77 .8%2012 1,837,500 2 .2%
Annual Growth Rate
Actual Adjusted***
Last Year 2 .2%-0.8%
Last 2 Years 0 .2%-2 .4 %
Last 5 Years 1 .6%-1 .1 %
Last 10 Years 3 .2%0 .4 %
Last 15 Years 5 .0%2 .0 %
Property Tax in Lieu of VLF1
Fiscal Year Percen t
Ending Amount Chang e
2006 1,530,800 N A
2007 3,061,500 100 .0%
2008 3,280,100 7 .1%
2009 3,504,700 6 .8%
2010 3,565,100 1 .7%
2011 3,551,100 -0 .4%
2012 3,492,400 -1 .7 %
Franchise Fees Gas Tax & TD A
Fiscal Yea r
Ending Amount
Percent
Change
Fiscal Yea r
Ending Amount
Percen t
Chang e
1998 889,900 5 .8%1998 883,900 11 .8%
1999 883,900 -0 .7%1999 862,300 -2 .4 %
2000 1,089,600 23 .3%2000 834,700 -3 .2 %
2001 1,211,800 11 .2%2001 852,300 2 .1 %
2002 1,388,100 14 .5%2002 869,800 2 .1 %
2003 1,356,200 -2 .3%2003 863,200 -0 .8 %
2004 1,967,800 45 .1%2004 874,100 1 .3 %
2005 2,005,600 1 .9%2005 875,100 0.1 %
2006 2,101,300 4 .8%2006 855,200 -2 .3 %
2007 2,153,700 2 .5%2007 853,300 -0.2 %
2008 2,361,700 9.7%2008 869,400 1 .9 %
2009 2,439,400 3 .3%2009 796,900 -8.3 %
2010 2,396,700 -1 .8%2010 790,200 -0.8 %
2011 2,352,100 -1 .9%2011 1,119,700 41.7 %
2012 2,462,300 4 .7%2012 1,346,000 20 .2 %
Annual Growth Rate Annual Growth Rate
Actual Adjusted***Actual Adjusted***
Last Year 4 .7%1 .6%Last Year 20 .2%16 .7%
Last 2 Years 1 .4%-1 .2%Last 2 Years 31 .0%27 .5 %
Last 5 Years 2 .8%0 .1%Last 5 Years 10 .9%8 .0%
Last 10 Years 6 .6%3 .8%Last 10 Years 5 .3%2 .5%
Last 15 Years 8 .0%4 .9%Last 15 Years 4 .2%1 .2%
Footnotes :
* See supplemental analysis on page 28 for significant changes in the underlying factors .
**Previously anticipated VLF will be eliminated after 2012 : however,it will continue to provide a smal l
source of revenue due to the collection of associated fees and penalties.
***Adjusted data for compound changes in population and CPI in order to reflect "true" changes i n
revenue .
1. In March 2010, the State began swapping Prop 42 revenues (State sales tax on gas)with allocation s
from the gas excise tax .
Annual Growth Rate
Actual Adjusted***
Last Year -77 .8%-78 .5 %
Last 2 Years -12 .8%-15 .0 %
Last 5 Years -18.6%-20 .7 %
Last 10 Years -22.6%-24 .7 %
Last 15 Years -12 .5%-15 .0%
•
GENERAL FUND OPERATING PROGRAM EXPENDITURE S
The following information provides an overview as to how the City used it s
revenues to provide City services, invested in capital improvement projects ,
and fulfilled its debt service requirements . As with the revenue data, 1 5
years of expenditures are listed for comparison .
General Fund Operating Expenditures *
15 Year Trends
Fiscal Yea r
Ending Amount
Percent
Chang e
1998 20,730,90 0
1999 22,497,000 8 .5 %
2000 23,747,500 5 .6 %
2001 25,324,200 6 .6 %
2002 28,158,700 11 .2%
2003 30,404,800 8 .0%
2004 33,245,900 9 .3%
2005 34,182,800 2 .8 %
2006 35,771,100 4 .6%
2007 39,515,300 10 .5%
2008**45,810,900 15 .9%
2009 48,192,900 5 .2%
2010 46,150,900 -4 .2%
2011 44,713,900 -3 .1%
2012 47,212,100 5 .6%
* Excludes transfers to other funds .
** Includes Measure Y for a full year in 2007-08.
Average Annual Growth Rate**
Actual Adjusted *
5 .6%2 .5%
1 .2%-1.4%
3 .9%1.2%
5 .5%2.7%
6 .2%3.1%
* Adjusted for compound changes in population and cost of living (CPI )
in order to reflect "true" growth in expenditures .
**includes Measure Y for a full year in 2007-08.
Last Yea r
Last 2 Years
Last 5 Years
Last 10 Years
Last 15 Years
Operating Costs Per Capita : Last 15 Years
OJ O O N r,V N CO r CO O)0O) O O O O O O O O O O O0) 0) O O O O O O O O O O O ON N N N N N N N N N N N
Fiscal Year Endin g
UACtual ■Current Dollars
$1,200$1,150$1,100$1,050$1,00 0$950$90 0$85 0$80 0$75 0$70 0$65 0$60 0$55 0$50 0$45 0$400 N
0
TO AL:,$47212,100 100%
Public Safet y
Transportatio n
Leisure, Cultural & Social Service s
Community Developmen t
General Governmen t
General Fund Operating Expenditures :Actual
Fiscal Yea r
Ended June 30, 201 2
(unaudited)
23,953,200 51 %
2,865,100 6 %
6,704,200 14%
5,514,400 12 %
8,175,200 17 %
Percent
Actual of Tota l
2 1
Staffing Expenditure s
As a service organization, the City 's largest and most expensive asset is th e
people providing the services . The following charts provide an overview o f
the cost percentage of staffing compared to the overall expenditure .
General Fund Staffing Costs as Percentage of Operating Expense s
15 Year Trends
Fiscal Year Percent of
Ending Actual Adjusted *Operatin g
1998 16,794,900 23,557,000 72 %
1999 17,820,500 24,584,800 71 %
2000 18,580,100 24,949,400 71 %
2001 19,894,200 25,752,800 71 %
2002 22,265,100 28,496,400 72 %
2003 23,979,300 29,913,400 72%
2004 26,875,000 32,892,100 73%
2005 28,093,700 33,392,000 75%
2006 29,591,000 33,823,700 75%
2007 32,053,800 35,896,600 74 %
2008 38,226,300 41,044,800 77 %
2009 41,144,300 44,178,000 79 %
2010 40,288,600 42,141,300 80 %
2011 39,227,500 40,375,000 80 %
2012 40,047,392 40,047,400 79%
The City has five general program areas through which services ar e
provided . Below is a chart illustrating the cost as a percentage of overal l
expenditure as it pertains to those programs .
General Fund Actual 2011-1 2
Operating Costs By Function : $47 .2 Millio n
■ Public Safety
51 %
O Leisure ,
Cultural &
Social Service s
14%
• Transportation
6%
* Adjusted data for compound changes in population and CPI in order to reflect "true" changes i n
revenue .
Staffing Costs as a Percentage of Operating Expense s
85 %
80 %
75 %
70 %
65%T 7 .._.-r 7 ..1 I 1---l-
0)c)P)
~tititi°°y ti°°~ ti°°p ti°°y °6 ti°°^ti~'~ ti°°°ti°'°
%
y
•••
/
Operating Program Expenditure s
The following data represents the expenditures by operating program ove r
the past 15 years . The data includes comparisons with increases i n
population and inflation .
Public Safety: Police
Fiscal Year Percen t
Ending Amount Change
1998 6,086,900 -0 .5 %
1999 6,417,400 5 .4 %
2000 6,901,900 7 .5 %
2001 7,340,700 6 .4 %
2002 7,990,700 8 .9 %
2003 8,822,800 10 .4 %
2004 9,758,100 10 .6%
2005 10,121,500 3 .7%
2006 10,948,000 8 .2%
2007 11,240,400 2 .7%
2008*14,901,300 32 .6%
2009 15,194,200 2 .0%
2010 14,525,400 -4 .4%
2011 14,019,900 -3 .5%
2012 14,029,600 0 .1%
* Reflects result of binding arbitratio n
Annual Growth Rate
Actual Adjusted *
Last Year 0 .1%-2 .9%
Last 2 Years -1 .7%-4 .3 %
Last 5 Years 5 .3%2 .6 %
Last 10 Years 6 .2%3 .4%
Last 15 Years 6 .0%3.0%
Public Safety : Fir e
Fiscal Year Percent
Ending Amount*Change
1998 4,302,300 -2 .9%
1999 4,729,000 9 .9%
2000 4,581,900 -3 .1%
2001 4,841,200 5 .7%
2002 5,906,500 22 .0%
2003 6,505,200 10 .1%
2004 7,495,900 15 .2 %
2005 7,702,700 2 .8%
2006 8,299,000 7 .7 %
2007 9,419,200 13 .5 %
2008 10,154,600 7 .8 %
2009 10,808,200 6 .4%
2010 9,678,400 -10 .5 %
2011 9,486,200 -2 .0%
2012 9,923,600 4 .6 %
*Includes Mutual Aid expenses which var y
widely
Annual Growth Rate
Actual Adjusted *
Last Year 4 .6%1 .6 %
Last 2 Years 1 .3%-1 .3 %
Last 5 Years 1 .3%-1.4 %
Last 10 Years 5 .6%2.8 %
Last 15 Years 5 .8%2 .8%
Transportation ***
Fiscal Year Percent
Ending Amount Change
1998 1,401,200 -10 .5 %
1999 1,497,700 6 .9%
2000 1,501,100 0 .2 %
2001 1,659,700 10 .6%
2002 1,954,100 17 .7 %
2003 2,015,900 3 .2 %
2004 1,854,200 -8 .0%
2005 2,020,300 9 .0%
2006 1,967,800 -2 .6%
2007 2,173,500 10 .5 %
2008 2,539,800 16 .9 %
2009 3,224,200 26 .9 %
2010 3,019,700 -6 .3 %
2011 2,901,900 -3 .9 %
2012 2,865,100 -1 .3 %
Annual Growth Rate
Actual Adjusted *
Last Year -1 .3%-4 .2 %
Last 2 Years -2 .6%-5 .1 %
Last 5 Years 6 .5%3 .7 %
Last 10 Years 4 .4%1 .7 %
Last 15 Years 4 .6%1 .6%
* Adjusted for compound changes in population and cost of living (CPI) in orde r
to reflect "true" growth in expenditures
***1989-90 through 1998-99 adjusted for changes
in budgeting far contract street sealing costs ;
effective 2000-01, now shown as CIP expenditures .
23
Operating Program Expenditures - continue d
Leisure, Cultural & Social Services Community Developmen t
Fiscal Year Percent Fiscal Year Percent
Ending Amount Change Ending Amount Change
1998 3,177,500 -1 .4%1998 2,762,800 9 .5%
1999 3,308,200 4 .1%1999 3,162,600 14 .5 %
2000 3,822,100 15 .5%2000 3,102,100 -1 .9 %
2001 4,113,300 7 .6%2001 3,501,200 12 .9 %
2002 4,540,000 10.4%2002 3,852,000 10.0 %
2003 4,753,800 4.7%2003 3,925,000 1 .9 %
2004 4,896,400 3.0%2004 4,420,600 12 .6 %
2005 5,145,500 5 .1%2005 4,360,000 -1.4%
2006 5,280,500 2 .6%2006 4,308,400 -1 .2 %
2007 5,705,000 8 .0%2007 4,897,800 13 .7%
2008 6,398,600 12 .2%2008 5,510,900 12 .5 %
2009 6,598,900 3 .1%2009 5,576,200 1 .2%
2010 6,279,900 -4 .8%2010 5,394,000 -3 .3%
2011 6,268,700 -0 .2%2011 5,309,000 -1 .6%
2012 6,704,200 6 .9%2012 5,514,400 3 .9%
Annual Growth Rate Annual Growth Rate
Actual Adjusted *
Last Year 3.9%0.8 %
Last 2 Years 1.1%-1 .5 %
Last 5 Years 2.5%-0.1 %
Last 10 Years 3 .8%1 .1 %
Last 15 Years 5 .6%2 .5%
General Government Total
Fiscal Yea r
Ending Amount
Percen t
Change
Fiscal Yea r
Ending Amount
Percent
Change
1998 5,445,300 1998 20,730,90 0
1999 5,934,400 9.0%1999 22,497,000 8 .5 %
2000 6,429,300 8.3%2000 23,747,500 5 .6%
2001 6,525,800 1.5%2001 25,324,200 6 .6%
2002 6,811,300 4 .4%2002 28,158,700 11 .2 %
2003 7,364,600 8 .1%2003 30,404,800 8 .0%
2004 8,194,600 11 .3%2004 33,245,900 9 .3%
2005 8,263,200 0 .8%2005 34,182,800 2 .8%
2006 8,557,400 3 .6%2006 35,771,100 4 .6%
2007 9,866,100 15 .3%2007 39,515,300 10.5%
2008 10,381,000 5 .2%2008 45,810,900 15 .9%
2009 11,002,000 6 .0%2009 48,192,900 5 .2 %
2010 11,517,500 4 .7%2010 46,150,900 -4.2 %
2011 11,178,100 -2 .9%2011 44,713,900 -3 .1 %
2012 11,950,100 6 .9%2012 47,212,100 5.6 %
Annual Growth Rate
Actual Adjusted *
Last Year 21 .5%18.0 %
Last 2 Years 7 .1%4.3 %
Last 5 Years 6.5%3.7 %
Last 10 Years 8.0%5 .1 %
Last 15 Years 7 .1%4 .1%
*Adjusted for compound changes in population and cost of living (CPI) i n
order to reflect "true" growth in expenditure s
Actual Adjusted *
Last Year 6 .9%3 .8 %
Last 2 Years 3 .4%0 .7 %
Last 5 Years 3 .4%0 .8%
Last 10 Years 4 .1%1 .3 %
Last 15 Years 5 .1%2 .1%
Annual Growth Rate
Actual Adjusted *
Last Year 5 .6%2 .5 %
Last 2 Years 1 .2%-1 .4 %
Last 5 Years 3 .9%1 .2 %
Last 10 Years 5 .5%2 .7 %
Last 15 Years 6 .2%3 .1 %
•S •
S
Capital Improvement Program (CIP )
Every year, the City establishes a capital improvement program to maintai n
and improve its infrastructure .The following data provides the investmen t
levels over the past 15 years .
General Fund CIP Expenditures : 15 Year Trend s
Excluding Debt Financed Projects and Fleet Replacement s
Fiscal Year Ending Actual Adjusted *$11,000,000
1998 3,581,300 5,023,200 $10,000,00019994,734,300 6,531,300
2000 5,521,400 7,414,100 $9,000,000
2001 6,131,200 7,936,800 $8,000,000
2002 4,829,300 6,180,900 $7,000,000
2003 2,856,400 3,563,300 $6,000,000
2004 3,388,700 4,147,400 $5,000,00020051,807,100 2,147,900
2006 2008 reflects availability 2,354,100 2,690,800 $4,000,000
2007 of Measure Y Funding 2,961,700 3,316,800 $3,000,000
2008**10,390,500 11,156,600 $2,000,000
2009 4,083,100 4,384,200 $1,000,00020103,876,900 4,055,200
2011 2,136,900 2,199,400 $0
2012 3,722,800 3,722,800
10-Year Historic CIP Expenditures
* New Publi c
Safety
Communication s
Cente r
* Measure Y
fundin g
LLLL i
2003 2005 2007 2009 201 1
General Fund CIP Project Expenditures : Last 10 Years •CIP •Fleet& Equipment Replacements
Equipmen t
Fiscal Year Ending CIP
Replace m e
nts
Tota l
(Actual)Adjusted*Average Annual General Fund CIP Expendtures*•
2003 2,856,400 486,700 3,343,100 4,170,400 Actual Adjusted *
2004 3,388,700 433,700 3,822,400 4,678,200 Last Year 3,722,800 3,722,80 0
2005 1,807,100 458,700 2,265,800 2,693,100
'2006 2,354,100 483,800 2,837,900 3,243,800 Last 2 Years 2,929,900 2,961,10 0
2007 2,961,700 498,300 3,460,000 3,874,800
2008"10,390, 500 1,109, 000 11,499,500 12, 347,400 Last 5 Years 4,842,000 5,103,60 0
2009 4,083,100 550,000 4,633,100 4,974,700 Last 10 Years 3,757,800 4,138,40 020103,876,900 79,100 3,956,000 4,137,900
2011 2,136,900 0 2,136,900 2,199,400 Last 15 Years 4,158,400 4,964,70 0
2012 3,722,800 500,000 4,222,800 4,222,800 * Ad/usredfor changes in cost of living (CPI) from 2012
**Includes Measure Y for a full year in 2007-08 .*Adjusted for changes in cost of living (CPI)from 201 2
**Reflects backlog of projects, Measure Yfunds,and the new Public Safety Communications Cente l
2 5
Debt Service Obligations — General Fun d
Debt service obligations have remained a small part of the General Fun d
over the past 15 years . The City continues to exercise a conservativ e
approach to debt financing, as well as a constant review of payments an d
possible term improvement whenever practical .
1998 1,312,600 25,399,000 5 .2 %
999 1,311,100 27,867,200 4 .7 %
2000 1,209,000 33,130,800 3 .6 %
2001 2,075,600 34,077,500 6 .1 %
2002 1,715,200 34,834,600 4 .9%
2003 1,696,100 34,415,600 4 .9%
004 1,760,200 36,872,400 4.8%
005 1,672,600 38,325,500 4.4%
006 1,620,300 43,164,400 3.8%
2007 2,083,500 49,649,600 4 .2%
2008 2,078,000 54,152,000 3 .8 %
2009 2,075,800 53,354,700 3 .9 %
2010 2,908,700 49,265,700 5 .9 %
2011 3,023,200 50,382,200 6 .0%
2012 2 705,200 53,592 100 5 .0%
* Excludes transfers in from Gas Tax, TDA and other funds .
The City's debt management policies state that :
"In evaluating debt capacity, general-purpose annual debt service payment s
should generally not exceed 10% of General Fund revenues ;in no case
should they exceed 15%."
The following chart illustrates the City's performance as to the ratio of deb t
service to operating revenues which is consistently below policy :
General Fund Debt Service Obligation s
Last 15 Fiscal Years
Ratio of Debt Service to Operating Revenues
14.0 %
12 .0%
10 .0%
8 .0%
6 .0%
4 .0%
2 .0%
0.0%n a u o r-o o O O 0O O O O ON N N N N
Fiscal Year Ending
mma,m 0NoN 0N
co
N 0N
O
S
REVENUE COMPARED WITH EXPENDITURE S
The graphs and information below compare General Fund total revenue s
with total expenditures over the past 15 years . When the revenue line i s
equal to the expenditures, the budget is balanced . If revenues are above ,
the City has a budget surplus . If the opposite occurs, the City faces a budge t
gap . The data shows how even the earlier years were balanced and that i n
2008 a significant budget gap of $5 .7 million developed . This necessitate d
drastic expenditure cuts in order to balance the budget . In 2011, Cit y
revenues slightly exceeded expenditures for the first time since 2006 . I t
should be noted that the sharp increase in both revenues and expenditure s
in 2008 were related to the passage of Measure Y which provided almost $6
million annually in additional revenues .
Revenues Vs Expenditures : Last Five Year s
$63,500,000
$60,500,00 0
$57,500,00 0
$54,500,00 0
$51,500,00 0
$48,500,00 0
$45,500,00 0
$42,500,000
--+--Revenues —um—Expenditure s
O00N
A00N
O
N
N0
Revenues Vs Expenditures : Last 15 Years
$63,500,000
$60,500,000
$57,500,000
$54,500,000
$51,500,000
$48,500,000
$45,500,000
$42,500,000
$39,500,000
$36,500,000
$33,500,000
$30,500,000
$27,500,000
$24,500,000
$21,500,000
$18,500,000
$15,500,000
$12,500,000
A--
0)o
000) 0 oor N N
O O 0 0 N.0N N 0 0 0 0
O N
N N N
0)N
00N
ON
+--Revenues III—Expenditures
27
SUPPLEMENTAL HISTORICAL INFORMATION : SALES TA X
As mentioned earlier, several major revenue sources have uniqu e
characteristics or have undergone changes during prior years that must b e
considered when making five-year projections . These include Sales Tax an d
Property Tax, Property Tax In Lieu of Vehicle License Fees (VLF) an d
Development Review Fees .
While sales taxes are usually generated on a "situs" basis (city or count y
unincorporated area where the sale takes place), there are a variety of retai l
transactions that are allocated on a "pool" basis because the State Board o f
Equalization believes that it would be too difficult to do otherwise . Thes e
are generally known as "use taxes ." A significant portion of the City's sale s
tax revenues come from the "pool" - between 10% and 15%. Allocation s
from the pool are made in proportion to a city's or county's share of situ s
revenues ; as such, we receive about 35% of County pool revenues . Whil e
used car sales between private parties are a large component of the pool fo r
all cities in the State, we have a unique situation in San Luis Obispo due t o
the Diablo Canyon power plant : it is a large sales tax generator, and all o f
these revenues go into the County pool . These revenues are especiall y
pronounced during reactor refueling, which occurs about every 14 to 1 6
months .
However, beginning in 1997, the State Board of Equalization changed it s
allocation procedures . Now, any individual transaction in excess of
$500,000 that would otherwise be distributed through the pool is allocate d
on a situs basis . We initially estimated that this change would result in a
loss to the City of about $180,000 on an annualized basis . However, it turn s
out that this is more difficult to project than we originally thought becaus e
we did not lose all Diablo Canyon revenues - just those with a value greate r
than $500,000 per transaction . Cumulatively, it appears that sales activity a t
Diablo Canyon for individual transactions under $500,000 remains high . Thi s
is reflected in pool revenues from 1998-2006, when they either increased o r
remained relatively constant rather than decreased sharply as we woul d
have otherwise expected . After declining between 2006 and 2010, thes e
pool revenues are on the rise again .
Sales Tax excluding Pool Revenue s
Fiscal Year Percent
Ending Amount Change
1998 6,670,162 8.9 %
1999 7,181,100 7 .7 %
2000 7,931,259 10 .4 %
2001 8,684,124 9 .5 %
2002 8,977,858 3 .4%
2003 9,395,665 4 .7%
2004 10,268,463 9 .3%
2005 10,751,879 4 .7%
2006 11,876,204 10 .5%
2007 12,442,687 4 .8%
2008 12,214,902 -1 .8 %
2009 11,358,444 -7 .0 %
2010 10,415,560 -8 .3 %
2011 11,029,231 5 .9 %
2012 12,107,702 9.8%
Because the pool is such a large portion of the City's total sales revenue s
and is so volatile based on factors unrelated to the City's retail base,a
better indicator of trends is sales tax revenue excluding pool allocations . T o
put the significance of this in perspective, the adjacent chart summarize s
City pool sales tax revenues for the past fifteen fiscal years .
"Pool" Sales Tax Revenues : Last 15 Years=II MImmuINPIIIIIIIII111111111111111¢I m 0 - N o V N Co n of 0 0 Na, 0 0 0 0 0 0 0 0 0 0 00 0) 0 0 0 0 0 0 0 0 0 0 0 0 0,-N N N N N N N N N N N N N
Fiscal Year Endin g
$1,500,000
$1,350,000
$1,200,000
$1,050,00 0
$900,00 0
$750,00 0
$600,000
•
Sales Tax Revenues : Divers e
The City's Sales Tax revenues come from several different busines s
categories, each of which performs very differently in response to economi c
conditions . The chart below shows our Sales Tax revenues by major busines s
category for the previous five years . It also shows the percent of tota l
revenue generated by each category and the percent change in each
category in FY 2011-12 . As noted on the graph, our largest and most volatil e
business category is general consumer goods . The graph also shows th e
other six categories and the relative volatility of each .
In making Sales Tax projections, the historical performance of each of th e
categories and the various economic factors currently influencing them ar e
taken into consideration .
Sales Tax by Major Industry Group
$1 .400KOercr.l Con.Goods
Count 95 1
Autos And TranspodMon 51 .200K
Count 192
Rastunanls And Hotels $1,000KCourt Y9
Fuel And Service Station s
Count 23 1800K
Building And Constructio n
Co .82 1600K
easiness AMlndunory
Cost 538
$400K
Food And Drug s
Count 67
00K
10 K
10 20 30 40 10 20 30 40 10 20 30 IQ 1 0
09 09 09 09 10 10 10 10 11 11 11 11 12
Sales Tax Revenues by Type : Last Five Fiscal Years
Fiscal Yea r
2007-08 2008-09 2009-10 2010-11 2011-12
Autos & Transportation 2,615,226 2,045,854 1,826,041 2,025,718 2,172,35 1
Building & Construction 1,103,656 1,060,860 969,473 1,025,685 1,076,98 6
Business & Industry 909,072 814,122 724,884 722,163 823,27 6
Food & Drugs 735,216 735,168 708,609 704,867 734,380
Fuel & Service Stations 1,104,119 1,072,616 883,851 1,173,539 1,419,19 4
General Consumer Goods 4,400,803 4,319,227 4,010,555 4,076,226 4,483,070
Restaurants & Hotels 1,347,262 1,310,561 1,293,069 1,301,032 1,398,553
Transfers & Unidentified (452)36 (922)-(108 )
Total 12,214,902 11,358,444 10,415,560 11,029,230 12,107,702
Sales Tax By Type : 2011-1 2
a Fuel &
Servic e
Station s
12%
29
Property Ta x
Property Tax has been the revenue most affected by voter initiatives an d
legislative actions over the years . With approval of Proposition 13 in 1978 ,
Property Tax revenues were reduced by two-thirds and thereafter limited t o
2% annual increases or changes to the Consumer Price Index, whichever i s
less . When properties change hands or are improved, the base for assessin g
the tax (the "assessed value") is increased or decreased to reflect th e
current market value .
Although the Property Tax is strictly a local revenue and is shared by cities ,
counties, school districts and special districts, it is collected and allocated i n
accordance with State law . In the early 1990s, the State legislatur e
permanently shifted a larger portion of the Property Tax to schools . Thi s
shift was made to the State's Educational Revenue Augmentation Fun d
(ERAF) to backfill a portion of the State's obligation for school funding . Thi s
original "ERAF shift" resulted in an ongoing annual loss to the City o f
approximately $2 million that could be used for property-related basi c
services .
In FY 2004-05 and FY 2005-06, the State shifted an additional $1 .5 millio n
over the two years from the City's Property Tax to the ERAF as part of a
solution to its ongoing budget crisis . This was a one-time shift which ende d
in FY 2006-07 . Also included as part of the State Budget deal with loca l
governments at that time was a permanent reduction in the VLF rate and a n
increase to our Property Tax base to make up for the reduced revenues a s
discussed below .
Property Tax In Lieu of VL F
Included in the State budget deal with local governments in FY 2004-05 wa s
a permanent redistribution of two of the City's revenue sources . Under thi s
agreement, the Vehicle License Fee (VLF) rate for cities was permanentl y
reduced from 2% to 0 .65%. For FY 2004-05, the VLF that the City would hav e
gotten at the 2% rate was calculated and this amount was added to ou r
Property Tax base . In FY 2005-06, the City began to receive our portion o f
the VLF revenues at the new low rate . Meanwhile, our Property Tax bas e
reflects the new, permanent base . This Property Tax base grows in th e
•
future according to current economic conditions . It should be noted that th e
VLF/Property Tax shift results in a cash flow and earnings loss to the Cit y
because Property Tax is paid twice a year while VLF was paid monthly .
However, it should also be noted that Property Tax has historically grown a t
a faster pace than that experienced by the VLF . Effective July 1, 2011, a s
part of the Legislature's efforts to solve the state's chronic budget problems ,
VLF revenue to cities was eliminated and permanently shifted to fund la w
enforcement grants . As a result, the City should expect to receive very lo w
VLF revenues (from fees and penalties) in 2012-13 and future years .
••
/
S •S
Development Review Fees : Last Five Year s
Development Review Fees are a General Fund revenue source that ar e
particularly sensitive to the condition of the larger economy . Planning Fee s
are at the lowest level in five years . Building Fees reached a four-year hig h
in 2012 but are still below 2008 levels . Engineering Fees, specificall y
infrastructure plan check and inspection fees, can vary widely from year t o
year, based on the amount of development activity and the stages tha t
projects are in during the construction process in a given year . After a shar p
decline in 2009, Fire plan check and inspection fees have been rising slightl y
each year . Below are charts that show annual receipts by type of fee for th e
last five years .
Planning Fees
Fiscal Year Ending Revenu e
2008 809,30 0
2009 591,90 0
2010 429,60 0
2011 500,40 0
2012 392,00 0
Five Year Average $544,600
Development Review Fees : Last 5 Years
$4,000,00 0
$3,500,00 0
$3,000,00 0
$2,500,00 0
$2,000,00 0
$1,500,00 0
$1,000,00 0
$500,000
$0
2008 2009 2010 2011 201 2
Fiscal Year Endin g
'Actual ■2012 Dollars
Building
Fiscal Year Ending Revenu e
2008 1,372,300
2009 775,100
2010 829,000
2011 724,800
2012 924,600
Five Year Average $925,200
Engineerin g
Fiscal Year Ending Revenu e
2008 363,70 0
2009 322,80 0
2010 959,70 0
2011 319,90 0
2012 987,60 0
Five Year Average $590,700
Total
Fiscal Year Ending Revenu e
2008 2,705,600
2009 1,752,600
2010 2,322,000
2011 1,668,000
2012 2,453,800
Five Year Average $2,180,400
Fir e
Fiscal Year Ending Revenu e
2008 160,300
2009 62,800
2010 103,700
2011 122,900
2012 149,600
Five Year Average $119,900
Adjusted *
2,905,100
1,881,800
2,428,800
1,716,800
2,453,80 0
$2,277,30 0
* Adjusted for changes in cost of living (CPIJ from 2012
3 1