Third Quarter Financial Report Fiscal Year and. Mid-Term Budget Update - Fiscal Year June 15, 2015

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1 Third Quarter Financial Report Fiscal Year and Mid-Term Budget Update - Fiscal Year June 15,

2 Overview Economic Environment Fiscal Year Third Quarter Financial Report Fiscal Year Mid-Term Budget Update Review 7-Year Capital Improvement Program (CIP) 2

3 Overview (Continued) Tax Rates for General Obligation Bonds Appropriations Limit 3

4 Recommendations 1. Receive and file Fiscal Year Third Quarter Financial Report and approve the proposed adjustments; 2. Adopt the Resolution Amending the Fiscal Year Adopted Operating and Capital Improvement Budget; 3. Adopt the Resolution adopting the Seven-Year Capital improvement Program (CIP) for Fiscal Years ; 4

5 Recommendations, (Continued) 4. Adopt the Resolutions establishing the property tax rate for voter-approved bonded indebtedness (Open Space Measure D-1990 and Open Space Measure Y- 2008); and, 5. Adopt the Resolution establishing the appropriations limit for Fiscal Year

6 6

7 Economic Overview 46.6% in building permit valuations as compared to the same quarter last year 11.2% increase in Transient Occupancy Taxes received as compared to the same quarter last year 6.7 % increase in City s assessed valuation compared to last year 7

8 Retail Sales Quarter-Over-Quarter Year-Over-Year Oct. - Dec to Oct. - Dec Jan. - Dec to Jan. - Dec City of San Juan Capistrano South Coast Statewide City of San Juan Capistrano South Coast Statewide Total 0.1% 3.3% 2.9% 0.2% 3.8% 3.9% General Retail 0.5% 2.7% 2.4% 5.1% 2.1% 2.2% Food -0.8% 5.5% 5.4% 2.8% 5.8% 5.8% Transportation -2.0% 0.3% 0.6% -8.1% 3.0% 3.4% Constru 16.1% 10.1% 7.5% 7.5% 6.9% 6.0% Business To Business -6.4% 4.5% 2.9% 5.6% 4.8% 4.7% Auto -3.1% 7.9% 8.2% -12.0% 8.2% 8.2% Department Stores 0.3% 0.4% 0.7% 5.3% 0.1% 0.5% Restaur -2.8% 6.8% 6.9% 2.7% 6.7% 6.9% Bldg. Materialls-Retail 16.4% 5.8% 5.3% 12.1% 4.0% 3.3% Miscella -1.1% 1.4% 2.1% 6.7% 2.8% 3.7% Service Stations -5.6% -11.0% -10.9% 3.1% -2.9% -2.3% Florist/N 15.9% 2.8% -0.1% 8.4% 4.5% 3.5% Apparel Stores -3.8% 4.7% 3.7% -1.1% 4.1% 3.6% Leasing 14.4% 12.7% 11.6% 14.1% 12.7% 12.9% Bldg. Materialls-Wholesale 15.3% 14.1% 9.3% -1.5% 9.8% 8.5% Furnitur -20.5% 10.3% 7.4% 2.9% 4.6% 3.8% Food Markets -0.2% 2.1% 1.5% 0.5% 3.2% 2.7% Auto 10.6% 10.5% 10.6% 23.8% 6.4% 8.9% Auto Parts/Repair 7.3% 3.2% 6.4% 0.8% 2.1% 3.1% 8

9 Sales Tax $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $ Actual Actual Actual Actual Projected Projected 9

10 Assessed Valuation (1) $6,800 Millions $6,600 $6,400 $6,200 $6,000 $5,800 $5,818 $5,799 $5,833 $6,039 $6,443 $6, $5, $5,400 $5, (projected) $5,000 (1) Source: Orange County Auditor-Controller s Office 10

11 Property Tax 9,000,000 8,500,000 8,000,000 7,500,000 7,000,000 6,500, Actual Actual Actual Actual Projected Projected Note: Redevelopment property tax revenues have been excluded from Fiscal Years and actuals for comparison purposes. 11

12 Transient Occupancy Tax 800, , , , , , , , Actual Actual Actual Actual Projected Projected 12

13 Building Permits 1,200 1,138 1,130 1,138 1, # OF PERMITS FY FY FY FY FY FY * - year to date actual amount is 100.7% of prior year total for the year. 13

14 Building Permit Valuation Millions $43.2 M Comparison $54.5 M FY 13/14 FY 14/15 14

15 15

16 Third Quarter Overview The Fiscal Year Revised Budget is Balanced Revenues +/- Other Sources of Funds = Expenditures General Fund Contingency Reserve + Available Fund Balance is expected to be $11.7 million (49.0%) by June 30,

17 Third Quarter Overview Sewer Fund Contingency Reserve + Available Fund Balance expected to be $3.4 million (116.0%) by June 30, 2015 Water Enterprise Operations Funds deficit is reduced from $2.1 million to $1.0 million by June 30,

18 18

19 General Fund Revenue Comparison - FY $10,000,000 $9,000,000 $8,000, Actual $7,000,000 $6,000,000 $5,000, Actual $4,000,000 $3,000,000 $2,000,000 $1,000, Revised Budget $0 Property Taxes Sales Tax Other Taxes & Franchise Fees Other 19

20 General Fund Property tax $ 229,405 Electrical franchise fees 57,850 Class registration fees 10,730 Charges to other funds (5,625) Total Revenue Adjustments $ 292,360 20

21 General Fund Expenditures Budge to Actual Comparison Millions $0 $2 $4 $6 $8 $10 General Government Police Services Community Services Development Services Public Works/Utilities Transfers Out Amended Budget - FY 14/15 YTD Actual - FY 14/15 21

22 General Fund Realignment of staff resources $ 88,045 Credit card processing fees 5,000 Instructor payments for classes 6,975 Staff overtime 1,750 Total Expenditure Adjustments $ 101,770 22

23 General Fund Summary as of March 31, 2015 Description Adopted Budget 2014/15 Amended Budget 2014/15 YTD Actual 2014/15 Percent Realized 2014/15 Revised Projections 2014/15 Revenues $23,446,900 $23,709,670 $14,354, % $24,002,030 Continuing Appropriations - 231,660 9, ,660 Total Revenues & Continuing Appropriations 23,446,900 23,941,330 14,364,642 24,233,690 Expenditures 23,189,935 23,905,624 16,689, % 24,007,394 Revenues Over/(Under) Expenditures 256,965 35,706 (2,325,318) 226,296 Loan Repayment - Successor Agency 50,000 Contingency Reserve Balance, July 1 11,231,458 11,422,425 11,422,425 11,422,425 Contingency Reserve Balance, End of Period $11,488,423 $11,458,131 $ 9,097,107 $11,698,721 % of Operating Expenditures 49.0% 23

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25 Commodity Usage (Sales) Annual Projection FY 2014/15 Amended Budget 7,961 acre feet (AF) July 1, 2014, through March 31, 2015 Results: Year-to-Date Projection 6,198 AF Actual Usage (Sales) 6,174 AF > than 1% variance 25

26 Imported Domestic Water Projection Revised Projection FY 2014/15 (Q2) 4,999 AF July 1, 2014, through March 31, 2015 Results: Year-to-date projection 3,957 AF Actual 3,784 AF A decrease of 4.4% due to local well production and lower water loss 26

27 Groundwater Recovery Plant Production Annual Projection FY 2014/15 Amended Budget 3,000 AF July 1, 2014, through March 31, 2015 Results: Year-to-date projection 2,280 AF Actual production 2,174 AF 4.6% lower than City s projection. 27

28 Water Operations Funds No changes to production costs are proposed for this quarter. However, an expense adjustment of $161,470 is proposed for the realignment of staff resources in the Finance and Public Works/Utilities Departments. Revised operational revenue over expense projections, after funding capital projects are expected to be $1.1 million. 28

29 Water Operations Funds Summary as of March 31, 2015 Description Adopted Budget 2014/15 Amended Budget 2014/15 YTD Actual 2014/15 Percent Realized 2014/15 Revised Projections 2014/15 Total Revenues $ 20,347,070 $ 41,206,536 $36,140, % $ 41,206,536 Total Expenses (before capital) (17,710,520) (39,020,293) (34,194,005) 87.6% (39,181,763) Revenues Over/(Under) Expenses 2,636,550 2,186,243 1,946,862 2,024,773 Capital Project Funding (925,000) (925,000) (693,750) (925,000) Revenues Over/(Under) Expenses (after capital) 1,711,550 1,261,243 1,253,112 1,099,773 Fund Balance, July 1 (2,573,683) (2,114,736) (2,114,736) (2,114,736) Fund Balance, End of Period $ (862,133) $ (853,493) $ (861,624) $ (1,014,963) 29

30 Sewer Operations Fund An expense adjustment reducing expenses by $153,955 is proposed for the realignment of staff resources in the Public Works/Utilities Department. Revised operational revenue over expense projections, after funding capital projects are expected to be $11,

31 Sewer Operations Fund Summary as of March 31, 2015 Description Adopted Budget 2014/15 Amended Budget 2014/15 YTD Actual 2014/15 Percent Realized 2014/15 Revised Projections 2014/15 Total Revenues $ 3,416,080 $ 3,416,080 $ 2,631, % $ 3,416,080 Total Expenses (before capital) (3,025,825) (3,058,830) (1,485,389) 48.6% (2,904,875) Revenues Over/(Under) Expenses 390, ,250 1,146, ,205 Capital Project Funding (500,000) (500,000) (375,000) (500,000) Revenues Over/(Under) Expenses (after capital) (109,745) (142,750) 771,240 11,205 Fund Balance, July 1 2,738,910 3,357,647 3,357,647 3,357,647 Fund Balance, End of Period $ 2,629,165 $ 3,214,897 $ 4,128,887 $ 3,368,852 Available fund balance as % of operating expenses, excluding capital outlay % (Available balance = 50 % contingency reserve + available fund balance) 31

32 Capital Improvement Program as of March 31, 2015 Description Adopted Budget 2014/15 Amended Budget 2014/15 YTD Actual 2014/15 Percent Realized 2014/15 Proposed Third Quarter Adjustments Revised Budget 2014/15 Transportation $ 2,845,253 $ 7,260,569 $ 1,045, % $ 7,260,569 Parks and Open Space 990,244 3,699, , % $ 150,000 3,849,390 Buildings and Facilities 706, , % 750,000 Historic Preservation 453,320 12, % 453,320 Drainage 198, ,405 31, % 343,405 Water 346,764 2,861, , % 2,861,080 Sewer 2,284,820 9,432, , % 9,432,898 EXPENDITURE TOTAL $ 7,372,031 $24,800,662 $ 2,989, % $ 150,000 $ 24,950,662 As of March 31, 2015, an additional $3.1 million or 12.4% of the revised CIP budget is under contract for work currently underway. 32

33 Comments and Questions? 33

34 Recommendation Receive and file Fiscal Year Third Quarter Financial Report and approve the proposed adjustments. 34

35 Fiscal Year

36 Mid-Term Budget Update Key Highlights What Is Included Personnel Changes approved in February 2015 Utilities Engineer vs. Associate Engineer 13.5% increase in General Liability costs from the Fiscal Year Adopted Budget 36

37 Mid-Term Budget Update Key Highlights What Is Included (continued) Increase in Law Enforcement Costs Includes OC Sherriff s contract City share of fingerprinting system New City Attorney contract Annual flat fee of $420,000 per fiscal year for most services (excludes bond financing, reimbursable work and certain litigation) 37

38 Mid-Term Budget Update Key Highlights What Is Included (continued) New multi-year landscape maintenance contracts Funding available to start economic development program, public communications and/or enhancements to the City s website 38

39 Mid-Term Budget Update Key Highlights What Is Included (continued) Drought State mandate of 28% reduction in potable water production (from calendar year 2013) and customer usage (sales) Net Financial Impact* - Reduction of $1.07 million Reduced Groundwater Recovery Plant Production from 4,187 acre feet down to 1,475 acre feet Net Financial Impact* Reduction of $1.7 million *-Net Financial Impact is the loss of revenue net of any increase or decrease in costs. 39

40 Mid-Term Budget Update Key Highlights What Is Included (continued) $2.5 million increase to the City s Fiscal Year Capital Improvement Program Budget 40

41 Fiscal Year Overview The Fiscal Year Revised Budget is Balanced Revenues +/- Other Sources of Funds = Expenditures 41

42 Fiscal Year Overview General Fund Contingency Reserve + Available Fund Balance is projected to be: $11.9 million (47.7%) by June 30, 2016 Within City Council policy of 25%-50% of operating expenses Lower than original projection of $12.57 million (50.1%) by June 30, 2016, mainly due to more conservative development projections 42

43 Fiscal Year Overview Sewer Fund Contingency Reserve + Available Fund Balance projected to be: $2.8 million (85.1%) by June 30, 2016 Meets City Council policy of 25% - 50% of operating expenses Improvement from the original projection of $2.44 million (78.6%) by June 30, 2016 due to better results for FY and FY (projected) 43

44 Fiscal Year Overview Water Operations Funds is projected to be: deficit $667,388 by June 30, 2016 A reduction of $994,225 from the originally projected positive fund balance of $326,837 by June 30,

45 City-wide Revenues FY $71.4M Capital Improvement Program $15, % Debt Service Fund $2,341, % Water Enterprise Funds $19,251, % Sewer Enterprise Funds $4,103, % Special Revenue Funds $10,788, % Internal Service Funds $8,297, % Public Financing Authority $797, % General Funds $25,362, % Housing Authority $400, % 45

46 City-wide Expenditures FY $68.1M Capital Improvement Program $10,027, % Water Enterprise Funds $16,548, % Debt Service Fund $2,708, % Special Revenue Funds $722, % General Funds $25,231, % Housing Authority $331, % Sewer Enterprise Funds $3,280, % Internal Service Funds $8,494, % Public Financing Authority $797, % 46

47 47

48 General Fund Revenues by Type FY $25.2M Property Taxes $8,719, % Sales Tax $8,517, % Other Revenue $85, % Transfers In $410, % Fines & Forfeitures $1,140, % Use of Money & Property $426, % Current Services $733, % Licenses, Fees and Permits $2,492, % Other Taxes $1,232, % Franchise Fees $1,290, % Intergovernmental Other $61, % 48

49 $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 General Fund Revenue Comparison Actual Actual Revised Budget $2,000,000 $1,000,000 $0 Property Taxes Sales Tax Other Taxes & Franchise Fees Other Proposed Budget 49

50 General Fund Revenues Property taxes $ 519,075 Sales tax (598,345) Transient Occupancy Taxes 122,970 Franchise Fees 27,865 Licenses, Fees, and Permits (1,222,025) Charges to Other Funds 36,215 Other 14,060 Total revenue reductions $ (1,100,185) 50

51 General Fund Expenditures by Type FY $25.0M Public Works/Utilities $6,505, % Transfers Out $518, % City Council $148, % City Manager $1,394, % City Attorney $432, % City Clerk $539, % Development Services $2,432, % Finance $1,460, % Community Services $2,213, % Public Safety $9,379, % 51

52 General Fund Expenditures General Government Police Services Community Services Development Services Public Works/Utilities Transfers Out Millions $0 $2 $4 $6 $8 $10 Adopted - FY 15/16 Proposed - FY 15/16 52

53 General Fund Expenditures Impact of revised staffing plan $ (86,095) Contracted engineering services (181,710) General liability and property insura 116,795 Realignment of personnel budget 143,328 Law enforcement costs 78,130 City Attorney contract (20,000) Public Works maintenance (186,375) Other (22,945) Total expenditure reductions $ (158,872) 53

54 General Fund Summary Revised revenue projections over expenditures projections for this fiscal year are $145,740. General Fund contingency reserve is expected to be $11.9 million by June 30, 2016, or 47.7% which is within in the City Council guidelines of 25%-50%. Every $250,000 is equal to 1% of reserve balance. 54

55 General Fund Summary Description Adopted Budget 2015/16 Proposed Adjustments Proposed Budget 2015/16 Total Revenues $ 26,268,965 $ (1,100,185) $ 25,168,780 Total Expenditures 25,181,912 (158,872) 25,023,040 Revenues Over Expenditures 1,087,053 (941,313) 145,740 Successor Agency loan repayment - 50,000 50,000 Available Fund Balance, July 1 11,488, ,298 11,698,721 Available Fund Balance, End of Period $ 12,575,476 $ (681,015) $ 11,894,461 Available fund balance as % of operating expenses, excluding capital outlay. 50.1% 47.7% (Available balance = 50 % contingency reserve + available fund balance) 55

56 $14 General Fund Contingency Reserve $12 $11.4 $11.7 $11.9 $10 Millions $8 $6 $4.9 $6.3 $ % 48.6% 49.0% 47.7% $4 $2 23.1% 29.8% $ FY 10/11 Actual FY 11/12 Actual FY 12/13 Actual FY 13/14 Actual FY 14/15 Projected FY 15/16 Projected 56

57 57

58 Water Operations Funds The following funds represent the Water Operations Funds: Water Operations Fund (60) Debt Service Fund (61) Groundwater Recovery Plant (GWRP) Fund (62) Non-Potable Operations Fund (66) 58

59 Water Operations Funds Fiscal Year Impacts Drought conditions State mandated 28% reduction in water production, requiring lower customer usage (sales) Revenue loss from reduced sales GWRP local water supply reduction (1475 acre feet) GWRP reduced grant (subsidy) revenues IncreasedimportedwaterMWD/MWDOC Increased conservation efforts 59

60 Commodity Usage (Sales) FY Original Projection 7,347 AF Proposed Projection 6,208 AF Reduction of 1,139 AF potable water sales 60

61 Local Production Potable Water FY GWRP Projection Original Projection 4,187 AF Proposed Projection 1,475 AF Reduction of 2,712 AF Northwest Open Space Well Proposed Projection AF (original projection = 0) 61

62 Water Operations Funds Revenue Adjustments - FY Potable Non- Potable Total Reduction in sales $(2,234,695) $(2,234,695) GWRP Subsidy - MWD (678,120) (678,120) Property taxes 78,675 78,675 Other 7,125 7,125 Total revenue adjustments FY $(2,827,015) $ - $(2,360,565) 62

63 Water Operations Funds Expense Adjustments FY Potable Non-Potable Total GWRP operations cost $ (1,120,595) $(1,120,595) Imported potable and non-potable water 646,825 $ 48,485 $ 695,310 Savings - amending the 2002 SJBA Lease Agreement (360,095) $ (360,095) Savings - refunding 2002 and 2004 COPs (392,425) $ (392,425) Realignment of staff resources (63,835) (72,300) $ (136,135) Staff overtime and uniform costs 58,770 $ 58,770 Savings from meter reading contract (40,500) $ (40,500) Legal fees 25,000 $ 25,000 Other non-potable water operations costs 38,665 $ 38,665 Other potable operations cost (3,615) $ (3,615) Total Expense Adjustments FY $ (1,250,470) $ 14,850 $(1,235,620) 63

64 Water Operations Funds Net Financial Impact* FY Potable Non- Potable Total Operating Revenue Adjustments $ (2,827,015) $ - $ (2,827,015) Operating Expense Adjustments (1,250,470) 14,850 (1,235,620) *Change in Net Water Operating Revenues over Expenses FY $ (1,576,545) $ (14,850) $ (1,591,395) 64

65 Fiscal Impacts of Drought FY Financial Impacts of Drought GWRP - Reduced Production (1)* ($1,698,655) Reduced Usage (Sales) (2) ($1,066,271) Total Fiscal Impact of Drought ($2,764,926) Proposed Mitigations Local Well Production - NWOS Well (3)* $630,588 Debt Service Cost Savings - COPS Refinancing $392,425 Meter Reading Contract Savings $40,500 Increase in Property Tax Revenues $78,765 Other Adjustments $46,103 Total Proposed Mitigation $1,188,381 FY Net Financial Impact (Potable Operations) ($1,576,545) (1) Based on reduction of GWRP production from 4,187 to 1,475 acre feet annually. (2) Based on reduced customer usage (sales) of potable water to 5,513 annually which is 17% below projected usage. (3) Based on additional local well production of 727 acre feet annually. 65

66 Water Operations Funds Operating Revenues over Expenses are reduced from $3.5 million down to $1.9 million, and: Provide required debt service coverage at reduced level (2.23 times annual debt service costs down to 1.78) Provide funding for potable water capital replacement projects at a reduced level ($1.5 million down to $750,000 needed for current year obligations) Provide funding to the non-potable (recycled) improvement fund of $820,000, as planned to further reduce deficit and provide for new recycled water connections. 66

67 Water Operations Funds Continued Water Operations Funds deficit projected at ($667,388) as of June 30, 2016 Water Operations Funds Balance was originally projected to be positive by $326,837 as of June 30,

68 Water Operations Funds Description Adopted Budget FY 2015/16 Proposed Adjustments Revised Budget FY 2015/16 Total Operating Revenues $ 21,292,600 $ (2,827,015) $ 18,465,585 Total Operating Expenses (17,783,630) 1,235,620 (16,548,010) Operating Revenues Over/(Under) Expenses 3,508,970 (1,591,395) 1,917,575 Capital Replacement Project Funding - Potable (1,500,000) 750,000 (750,000) Capital Project Funding - Non-Potable (820,000) (820,000) Net Revenues Over/(Under) Expenses and Capital Project Funding 1,188,970 (841,395) 347,575 Fund Balance, July 1 (862,133) (152,830) (1,014,963) Fund Balance, End of Period $ 326,837 $ (994,225) $ (667,388) 68

69 Water Operations Deficit $1.0 ($1.0) -$1.0 -$0.7 Millions ($3.0) ($5.0) -$5.1 -$3.8 -$2.1 ($7.0) -$6.6 ($9.0) FY 10/11 Actual FY 11/12 Actual FY 12/13 Actual FY 13/14 Actual FY 14/15 Projected FY 15/16 Projected 69

70 Sewer Operations Fund Fund Balance Improved Adopted $2.44 million Proposed $2.79 million Revenues No proposed revisions Expenditures Increase $387,600 70

71 Sewer Operations Fund SOCWA operating costs $ 276,935 Contracted services 66,525 Realignment of personnel budget (160,505) Capital project funding 212,500 Other (7,855) Total proposed adjustments $ 387,600 71

72 Sewer Operations Sewer Operations Fund Summary Revised Description Adopted Budget FY 2015/16 Proposed Adjustments Budget (Proposed) FY 2015/16 Total Operating Revenues $ 3,416,080 $ - $ 3,416,080 Total Operating Expenditures (3,104,905) (175,100) (3,280,005) Operating Revenues Over/(Under) Expenses 311,175 (175,100) 136,075 Capital Replacement Project Funding (500,000) (212,500) (712,500) Revenues Over/(Under) Expenses (188,825) (387,600) (576,425) Fund Balance, July 1 2,629, ,687 3,368,852 Fund Balance, End of Period $ 2,440,340 $ 352,087 $ 2,792,427 Available fund balance as % of operating expenses, excluding capital outlay. 78.6% 85.1% (Available balance = 50 % contingency reserve + available fund balance) 72

73 Comments and Questions? 73

74 Seven-Year Capital improvement Program (CIP) for Fiscal Years

75 Recommendations 1. Adopt the Resolution Amending the Fiscal Year Adopted Operating and Capital Improvement Budget; 2. Adopt the Resolution adopting the Seven-Year Capital improvement Program (CIP) for Fiscal Years ; 75

76 General Obligation Bonds Tax Rate FY Open Space Measure D (1990) Tax levy $ per $100 of assessed valuation Open Space Measure Y (2008) - Tax levy $ per $100 of assessed valuation Both are reduced slightly from the Fiscal Year Adopted Budget projection due to city-wide increased assessed valuation. 76

77 Appropriations Limit FY Appropriations limitation for Fiscal Year is $69,401,790 Appropriation subject to the limit for Fiscal Year are $19,742,531 The City of San Juan Capistrano Budget Appropriations for Fiscal Year do not exceed the limitation 77

78 Recommendations 2. Adopt the Resolutions establishing the property tax rate for voter-approved bonded indebtedness (Open Space Measure D-1990 and Open Space Measure Y-2008); and, 3. Adopt the Resolution establishing the appropriations limit for Fiscal Year