The URL can be used to link to this page

Home My WebLink AboutSS3 - Budget UpdateNewport Beach City Council Budget Update ►ruary 23, 2010 Current Deficit = Structural What is a Structural Deficit? Revenue structure is not sufficient to maintain service levels and capital expenditures at current level for multiple years. Bottom line: — FY 2009 -10 = $8M gap FY 2010 -11 = about a $12M gap • Includes extraordinary expense — Rhine Channel — LNB Dredging — Corrective action required ,, How did we get here? • Our area into the Great Recession a little later than other regions. • Cities themselves are not leading economic indicators — they lag, typically about 2 years. • Impacts to city government less severe than other agencies, but still significant. • Recession dovetails with significant expenses in coming years: — CALPERS investment losses in 2008 -09 are estimated to substantially increase pension costs starting in 2011 -12 — Rhine Channel, LNB Dredging — a once every 70 years project. We anticipated revenue declines in FY 2009 — FY 2011, but it was slightly worse than anticipated. Current Outlook Original Budget 2010 2nd Qtr Revised Estimate 2010 Projection 2011 Projection 2012 Projection 2013 Projection 2014 Structural Deficit General Fund Contribution to UP (2,500,000) (2,500,000) (3,792,819) (5,073,722) (6,536,286) (8,253,566) Revenue Decline From 2008 -09 (7,300,000) (6,900,000) (3,500,000) 550,000 5,500,000 Early Retirement Incentive Plan 1,800,000 3,000,000 3,000,000 3,000,000 3,000,000 Extraordinary Tidelands CIP (4,000,000) Est. PERS Increase (2008 Equity Loss) (698,602) (2,859,773) (5,905,013) Projected Deficit (2,500,000) (8,000,000) (11,692,819) (6,272,324) (5,846,059) (5,658,579) 91 (Current Outlook) Property Taxes Sales Taxes Transient Occupancy Tax City (Current Outlook) Secured Property Taxes Sales Taxes Transient Occupancy Tax Assumed Percent Change 2009 -10 2010 -11 2011 -2012 2012 -2013 2013 -2014 2.28% -1.51% 1.79% 1.98% 3.40% - 10.43% 5.91% 3.0% 3.0% 3.0% -3.27% 4.00% 3.0% 3.0% 3.0% Current City Assumptions $ 2009 -10 2010 -11 2011 -2012 2012 -2013 2013 -2014 $ 1,596,616 $(1,080,456) $1,267,491 $1,427,381 $2,491,734 $(4,926,409) $ 2,481,878 $ 689,536 $ 710,222 $ 731,529 $ (364,861) $ 432,244 $ 337,150 $ 347,265 $ 357,683 Total City Revenues vs. Total Expenditures $175,000,000 $165,000,000 $155,000,000 $145,000,000 $135,000,000 $125,000,000 $115,000,000 $105,000,000 $95,000,000 $85,000,000 $75,000,000 2006 2007 2008 2009 2010 En. 2011 Proj. 2012 Proj. 2013 Proj. 2014 Proj. 0 Total General& Tide lands Fund Revenue 1 $144,398,677 $158,242,474 $168,991,870 $159,254,948 $152,373,232 $152,736,035 $156,189,032 $160,194,941 $165,162,688 deland ■ Total General Fund& Tis Expenditures $131,949,634 $140,967,532 $152,321,660 $159,068,544 $159,768,544 $163,861,363 $161,840,868 $165,464,603 $170,227,123 0 General Fund Revenues 23.3% rte. 7% ■ Property Taxes ■ Sales Taxes Transient Occupancy Taxes m Other Taxes All Other Sources 14 -00 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% 25 Year Assessed Property Value Growth --*—Assessed Value Growth Typical Budgeted Growth i r r � r / r r � N CO (D N OD m O N V ul O r N Q O N m V m m m m m m m O O O C) O O O O O .- O N M to (O n OD O Q CO V 6 6 r` Q) W O V r N m m m m m m m m m O O O O O O m m m m m m m m m O O O O O O O p O O O _ O N C\j — — — — - — O O [`J C\I 8 Annual % Change $70,000 a c � 560,000 O L H $50,000 $40,000 2006 ■ Total 1 $60,152,844 4.74% 2007 $63,003,057 Property Taxes �7 2.28% 4.06 x.46% 3.40% 1.79% 1.98% 2008 2009 2010 Est. 2011 Proj. 2012 Proj. 2013 Proj. 2014 Proj. $67,388,839 $70,126,680 $71,723,296 $70,642,840 $71,910,331 $73,337,712 $75,829,446 0' Sales Tax Revenue sharply declined in 2008 Modest growth from a low base beginning 2009 Sales Tax Trend Comparison r, 0.0r v -5.0% CY m m -10.0% 0 CL` 0 - 15.03'0 9 d M CL 20.090 0 u N Q -25.0% 10 Sales Tax with Sales Tax In Lieu (Restated to Eliminate Triple Flip Correction) $33,000,000 $30,000,000 4.60% 5.05% Annual % Change $27,000,000 (18.89 %) 3.00% 3.00% $24,000,000 * 5.91% 3.00% $21,000,000 $18,000,000 $15,000,000 $12,000,000 $9,000,000 $6,000,000 $3,000,000 50 2006 2007 2008 2009 2010 Est. 2011 Proj. 2012 Proj. 2013 Proj. 2014 Proj. ■Sales Taxes In Lieu (Triple Flip) $5,720,028 $7,348,253 $8,017,539 $6,303,113 $5,748,559 $6,392,273 $6,584,041 $6,781,562 $6,985,009 8 Sales Taxes $21,465,557 1$21,088,1181 $21,855,242 $17,925,956 $15,954,101 1$16,592,2651 $17,090,033 1$17,602,7341$18,130,816 11 $14,000,000 $12,500,000 -- $11,000,000 $9,5 — $8,0 $6,5 $5,0 Transient Occupancy Taxes Sharp decline in FY 09 Modest increases projected in FY 2011 Annual % Change 22.64% )U,000 )0,000 )0,000 )0,000 2006 2007 2008 2009 2010 Est. 21371 Pro). 2012 Proj. 2013 Proj. 2014 Proj. ■iota) $9,832,728 $12,059,008 $12,751,518 $11,170,956 $10,806,095 $11,238,339 $11,575,489 $11,922,754 $12,280,436 12 13 All Other Revenues & Other Local Taxes 7.74% $60,000,000 i Annual % Change 15.92% (10.94%) 2.74% (6.07 %) (2.98 %) 2.42% $50,000,000 - $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- 2006 2007 2008 2009 2010 Est 2011 Proj. 2012 Proj. 2013 Proj. 2014 Proj. ■All Other Revenue $4317551954 $50,211,938 $54,811,913 $48,327,709 $44,973,181 $43,408,318 $44,455,588 $45,862,290 $47,131,895 0 All Other Taxes $3,471,566 1 $4,532,100 $4,166,819 $4,200,534 $4,368,000 $4,462,000 $4,573,550 $4,687,889 $4,805,086 13 Early Retirement Incentive Program savings built into assumptions (about $3M annual savings) • PERS cost increases in 2012 = $700K; 2013 = $2.9M; 2014 = $5.9M • Facilities Financing Plan Contributions: 2011 = $3.8M; 2012 = $5.1M; 2013 = $6.5M; 2014 = $8.2M • Assumes no salary increases • Assumes no CPI adjustments for M &O • Assumes increased subsidy to Tidelands fund of $4M FY 2011 (Rhine Channel Project and LNB Dredging) 4 Retirement Contributions FY 2008 -09 investment losses recognized beginning FY 2012 $30,000,000 $25,000,000 Annual % Change ' 10.85% (0.57 %) $20,000,000 7.33% 5.52% $15,000,000 $10,000,000 $5,000,000 3.64% 13.82% 15 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ■ Employer $7,687,339 $9,832,895 $10,720,166 $10,722,164 $12,312,388 $13,166,055 $13,079,089 $13,549,852 $15,006,188 $17,058,266 ■ Employee Misc 0 0 0 $604,666 $1,284,197 $1,592,721 $1,590,166 $1,651,378 $1,840,739 $2,107,562 ■ EPMC $4,292,142 $4,587,416 $4,756,921 $5,005,016 $5,321,284 $6,211,718 $6,181,132 $6,408,971 $7,113,806 $8,106,968 15 LVVV VJ 1/V IYIIU II.UI "UMSI I 1 %� UI. UI 11 • 2009 -10 2% Budget Reduction • Some Capital Improvement Project Deferrals • Hiring Freeze on selected positions (others essential) • Early Retirement Incentive Program (ERIP) and organizational restructure with a view towards workforce reductions. • Cost - sharing of PERS pension benefits: • Good discussions with certain safety groups (NBFA and LMA) — results TBD. • In current MOU, "Misc" groups pay 3.42% towards pensions. • Seeking additional pension assistance in current and upcoming negotiations. • Many city facilities closed between the Christmas & New Year Holidays (appx. savings $100K in comp absences fund) • Budget task force and department directors' consensus - building. • Council's adoption of the Fiscal Sustainability Plan (Jan 2010) 16 FISCAL SUSTAI NABI LITY Bridging Organization for ,. "Our New Normal" Don't Jump! I v 1 V V Expenditures - short and long -term 2. Rethinking our CIP Approach 3. Appropriate Revenue Adjustments 4. Strategic use of Reserves 5. Restructuring - How it Fits In PERS and other benefit costs: • Cost - sharing with employees (FSP #13) • Contracting out services: • Street Sweeping (review pending) - FSP #9 • Beach Trash Bins (review pending) - FSP #9 • Controlling overtime costs, travel /training, and meals costs • Police /Fire /Lifeguards to contribute operational expenditure savings comparable to ERIP savings provided by non - safety departments • Eliminate/ consolidate positions or hold vacancies longer across the organization • Cancel inactive encumbrances, establish a budgetary control strategy for all encumbrances and contracts • Eliminate or re- negotiate consultant contracts: • Adjust tree - trimming cycle, work with existing contracts for landscaping, more. • Legislative advocacy contract • Look at suspending some special events and programs: • Academies, employee awards breakfast, Public Safety Day 19 What that Looks Like: 2009/10 Deficit Calculation FFP Contribution from Reserves Net Deficit Reductions in Expenses, Restructuring $ (8,000,000.00) $ 1, 206, 000.00 $ (6,794,000.00) Overfunds in some ISFs $ 600,000.00 Negotiated Salary Savings $ 500,000.00 Freed -up 2 -year old Encumbrances $ 230,000.00 Travel and Training Savings $ 170,000.00 Other computer, printer, phone use savings $ 200,000.00 CIP Actions - deferrals, remaining in accounts, more. $ 1,300,000.00 Transfers from Equip ISF (Sweepers, Beach Trash Trucks) $ 1,180,000.00 Additional Operational Savings (Safety) $ 1,500,000.00 LandfillFees - overfund $ 200,000.00 Planning -- Salary Savings $ 50,000.00 Recreation - M & O cuts $ 110,000.00 Building -- Operational savings, cuts $ 200,000.00 HR, AS, City Attorney, City Council -CMO savings $ 278,000.00 Library- Operational savings $ 155,000.00 Utilities - Operational savings, cuts $ 15,000.00 Suspend city office building waterdelivery $ 3,000.00 Special city events take a break $ 30,000.00 Shut -off non - essential street lights $ 8,000.00 Increased Revenues Balboa Parking Lot - peak period, weekend hike CDM Parking Lot -- peak period, weekend hike Parking Meters -- split the LB -HB difference Subtotal $ 6,729,000.00 10111 ■■■■■ 10,000.00 ffy MEN M ■ENEM 65,000.00 Total $ 6,794,000.00 10,000.00 ffy Subtotal $ 65,000.00 Total $ 6,794,000.00 What's • Benchmarking and performance measurement • Schedules and projects on -line (next screen) • Master Plans (or similar) • Water, Wastewater, FFP, Pavement, Storm Drains /Water Quality, Street Lights, Bridges, Beaches /Harbor /Piers, Park Facilities... • What could be improved: • Residual Fund Balances per project - where should they go? • Proposed CIP Reprogramming Fund for • Other projects that might need more resources • Un- or Underfunded Project List Items • How to prioritize items NOT on the Master Plans • Council assistance developing scoring or ranking criteria. 21 CITY OF Newport E� CIP y QPlanning Phase ci Design Phase L:j OConstruction Phase X51 ❑� Cor Plebon Phase b ❑ Closed Projects u ❑ Outside Agency Projects IF m a4b S Beach NOW CAPITAL IMPROVEMENT PROGRAM MAPPING APPLICATION UP ER� NF ORT RA ft F{ FIT SLF� TN.rnia? rr{ 5�-, -- IF I LANG u M PACIFIC OCEAN f, 5 Gr �C Increase fees where market suggests it: • Parking meters (halfway between Laguna and Huntington Beach) • Parking lots - peak weekends (State is $15 /day) • Look at other fees not reviewed in last io years or longer for CPI adjustments (FSP #ii) • Purchase agreements with major buyers to retain sales tax here. • Use the county -wide authorization amount for ambulance transports (likely to impact insurance companies the most). • Review receivables and take stronger actions re: collection of outstanding receivables (approx. $ZM) • Study TOT and discuss with Visit NB (18% of all TOT) • Establish a Council Policy on all special events (regarding fee waivers, waivers of GS - PD - Traffic Engineering costs, etc) • Conduct more frequent external audits. 23 About Reserves @ Home I lose my job I dip into savings to fill the gap My income declines I bet on getting a great new job I keep spending the same amount Oops! Bankruptcy, Foreclosure, Homelessness About Reserves @the City" Purchases slow, hotel occupancy falls, property values fall or flatten City dips into reserves to fill the gap City's income declines City bets on a robust, fast recovery City keeps spending the same amount City Manager loses job > His income declines Oops! About Reserves @the City Businesses slow, hotel stays fall, property value = flat. City retains savings for real emergencies City's income declines City assumes a slow, tentative recovery. City ratchets back spending, realigns its programs & purpose Fiscal Sustainability Council's policy F -2 provides for prudent stewardship of City funds and is important for bond ratings and fiscal stability • Reserve are designed for: • Strategic savings for long -term, pre - planned projects • Unforeseen financial emergencies • Review Reserves annually to determine if original intent still valid, report to Council on any recommending changes • PERS Reserve: • Established to smooth out volatile changes in PERS rates as a result of market changes, compensation changes, etc. • Recommend utilizing in FY 2012 -FY 2014 to offset 25% market losses which are causing significant increases in PERS costs in those years, will replenish in subsequent years when revenues exceed expenditures • Appropriation Reserve to fund FFP contributions: • $1.2 - 2.5M in FY 2010 • $2.1- 3.8M in FY 2011 27 ort -Term (aka Phase II): • Building - Planning - Public Works (FSP #8) • Post ERIP, fewer Single -Duty jobs mean: • More multi- tasking (FSP #8) • How can we maximize capacity within existing staff? • What about seasonal changes? • Earlier Council decisions on key priorities, projects • March, not June - should eliminate need for Checklist • Develop a scoring system for Council to prioritize vital projects • Strengthen existing polices: • Meals /Travel /Training • Cell Phones • Encumbrances • Contracting • Budget adjustments 4.1 eed to Review: • Fleet maintenance (FSP #8) • Facility maintenance (FSP #8) • How will Technology Change Us? (FSP #8) • Reduce paper, copying, printing, travel (FSP #8 & #io) • Reduce phone costs (FSP #io) • Class & Comp (FSP #13) • Class & Comp study citywide • Comp Philosophy • Tough decisions about (FSP #8) • ABLE • Labor and Pension Reform (FSP #13) • Flex schedules - Would a City Hall 9/8o be beneficial? me] • More flexible use of support and analytical capacity (FSP #8) • Especially in light of a pending move • How will we receive the public in the new city hall? • Printing (FSP #8 & 9) • Information Technology (FSP #8 & #9) • Consolidation and Cost Containment • ISF charges - each need re- evaluation • Vehicle Rates • Compensated Absences • Worker's Compensation • General Liability • Warehousing - Purchasing (FSP #8) 30 . . - -- -- - - -- _ -- ---, - --- --7 ------ -- a- - - ---- - - - - - - - - -J headed? • What will the State of California do? • New OASIS opens this fall - more staff there. • Pricing, timing on CIP projects in FFP, especially: • Civic Center • Sunset Ridge Park • Marina Park • Labor Negotiations • Need to stay competitive, but • Current pension system may be unsustainable. a What that Looks Like: 2010/11 Deficit Calculation FFP Contribution from Reserves Net Deficit Reductions in Expenses, Restructuring If Street Sweeping is contracted out Negotiated Salary Savings Public Works -- Position Eliminations Travel and Training Savings Other computer, printer, phone use savings Fire -- after retirements and reassignments GS -- Renegotiate landscape, tree trim contracts GS -- Street Maintenance Contracts (one -time) Police -- after retirements and reassignments Planning -- salary savings Recreation - M & O cuts Building -- operational savings, cuts HR, AS, City Attorney, City Council -CMO savings Library - operational savings Utilities - Operational savings, cuts Suspend city office building water delivery Special city events take a break Shut -off non - essential street lights Other TBD (negotiations, emp suggestions, more) Subtotal Increased Revenues Balboa Parking Lot- peak period, weekend hike CDM Parking Lot -- peak period, weekend hike Other Fees (incl Harbor) -- adjust some by CPI Parking Meters -- split the LB -HB difference of r09 �� Bill �1 r�1 4r 400,000.00 280,000.00 175,000.00 100,000.00 200,000.00 850,000.00 250,000.00 200,000.00 1,139,000.00 100,000.00 70,000.00 330,000.00 810,000.00 300,000.00 35,000.00 15,000.00 70,000.00 96,000.00 $ 7, 920, 000.00 Subtotal $ 1,680,000.00 Total $ 9,600,000.00 so off Be .. .. to oil Is .. .. Subtotal $ 1,680,000.00 Total $ 9,600,000.00