HONORABLE MAYOR & CITY COUNCIL MEMBiS DENNIS McLEAN, DIRECTOR OF FINANCE & INFORMATION TECHNOLOGY DATE: SUBJECT: REVIEWED:

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1 CfTYOF MEMORANDUM TO: FROM: HONORABLE MAYOR & CITY COUNCIL MEMBiS DENNIS McLEAN, DIRECTOR OF FINANCE & INFORMATION TECHNOLOGY DATE: SUBJECT: REVIEWED: JUNE 3, 2014 DRAFT 2014 FIVE-YEAR FINANCIAL CAROLYNN PETRU, ACTING CITY MANAGER Project Manager: Kathryn Downs, Deputy Director of Finance & Information Technology ~ U[) RECOMMENDATION 1. Receive and file the draft 2014 Five-Year Financial Model (2014 Model); and 2. Provide any direction to Staff regarding any assumptions contained within the 2014 Model. EXECUTIVE SUMMARY The 2014 Model is based on the draft budget and the draft 2014 Five-Year Capital Improvement Plan. The City Council will also review those draft documents on the June 3, 2014 agenda. Any changes made by the City Council will be incorporated into the final 2014 Model. The 2014 Model indicates that the General Fund Reserve may fall below the policy threshold level (50% of annual expenditures) in. By year 5, the estimated General Fund Reserve may decrease to $9.7 million ($1.4 million below the City Council's policy level). The primary driver behind this trend is the updated cost estimates for residential street rehabilitation in reaction to the current bid market, and to provide for projects that address all associated improvements in a neighborhood (e.g. curb & gutter, sidewalks, etc.). To provide the proposed level of residential street rehabilitation, future budgets may need adjustments to remain balanced and preserve the General Fund Reserve. Restricted revenue, expenditure savings, and the accumulated Street Maintenance Fund 5-1

2 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 2of11 balance has been sufficient in recent years to provide for right-of-way maintenance. The General Fund has not made a subsidy to that program since FY However, it appears that beginning in, the General Fund will need to resume annual subsidies. The estimated annual subsidy ranges from $432,000 to $462,000 in years 2 through 5 of the 2014 Model. Public Works Staff has proposed capital improvement projects for the next five years to be funded with a combination of restricted money and the Capital Improvement Projects (CIP) Reserve. The CIP Reserve is annually replenished with General Fund transfers equal to transient occupancy tax and prior year General Fund expenditure savings per City Council policy. After inclusion of the proposed projects, the estimated ending CIP Reserve in year 5 is $3.3 million. The City Council's Reserve Policy requires the CIP Reserve to be maintained with a minimum of $3 million for emergency projects. The draft 2014 Capital Improvement Plan includes a minimum cost estimate of $28.3 million for projects that remain unfunded. The storm drain user fee sunsets in. With additional proposed storm drain expenditures and the loss of a dedicated revenue source, an estimated $3.1 million of subsidies may be needed over the next five years to maintain a minimum program of storm drain lining and maintenance. Unless the City's voters approve a renewal of the fee, the subsidy will come from the CIP Reserve (General Fund money). Storm drain projects with a total minimum cost estimate of $9.4 million (in 2005 dollars) remain unfunded, including the Altamira Canyon drainage project in the landslide area. Additionally, new high-priority storm drain projects may be identified once the ongoing update of the Master Plan of Drainage is completed during the next year. INTRODUCTION Overview The 2014 Model is a financial schedule prepared by the Finance and Information Technology Department (see Exhibits A through D). City Council Policy No. 18 requires preparation of the Mod~I. The 2014 Model includes all funds of the City and its component unit, the Rancho Palos Verdes Improvement Authority. Compliance with Legislative Review Requirements Utility Users Tax Legislative Review Municipal Code Section requires that the City Manager submit to the City Council an analysis of the revenues derived from the Utility User Tax (UUT) annually. Based on the needs of the City, the City Council shall determine if any modification to the tax rate is appropriate or if the UUT is unnecessary. The tax rate cannot be increased without a majority vote of the residents of the City during a Municipal Election. The review required by this section is scheduled to be completed by the City Council on June 17,

3 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 3of11 The current estimate of UUT revenue is $2.7 million (or approximately 10% of total General Fund revenue). Based upon the operating and capital needs of the City, including unfunded infrastructure rehabilitation projects, Staff recommends that the current UUT rate of 3% continues to be a necessary General Fund revenue source to provide current program service levels and CIP funding. Golf Tax Legislative Review Municipal Code Section requires a legislative review of GolfTaxeveryfouryears, to be completed prior to the adoption of the budget prepared for the corresponding next fiscal year. The Golf Tax ordinance directs the City Council to determine, based on the needs of the City, if any modification to the tax rate is necessary or if the tax should be repealed. The City Council performed the required legislative review in 2013 and determined that the Golf Tax is necessary and that the current rate of 10% be maintained. The next legislative review is required during The current estimate of golf tax revenue is $0.4 million. Based upon the operating needs of the City, Staff recommends that the current Golf Tax rate of 10% continues to be a necessary General Fund revenue source to provide current program service levels and CIP funding. Format of the 2014 Model The 2014 Model includes the presentation of: ~ Actual and revenue, expenditures and ending fund balances for all funds; ~ The final adjusted budget and the calculated budget variance for revenue, expenditures and ending fund balances for all funds; ~ The revised budget; and ~ The working draft of the budget as the first year of the 2014 Model (Economic Assumptions described below). The 2014 Model includes the segregation of funds as follows: ~ General Fund - The General Fund balance represents the City's unrestricted reserve monies. These monies may be used for any City expenditure, including general operations of the City. ~ Funds restricted by action of the City Council - The fund balances of these funds represent monies restricted by City Council action for a particular purpose. The funds were initiated with transfers from the General Fund. These monies may be returned to the General Fund or used for other purposes (e.g. infrastructure projects) upon the action of the City Council. ~ Funds restricted by law or external agencies - The fund balances of these funds represent monies restricted by law or external agencies, such as the Federal Government, State of California, or Los Angeles County. These monies can only be 5-3

4 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 4of11 used for the purpose outlined by the restricting agency in accordance with the terms and conditions set by legislation and voter ballot measures. The 2014 Model includes several schedules organized as follows: Exhibit A Exhibit B Exhibit C Exhibit D One Page Summary Five-Year Financial Model 2014 Five-Year Financial Model by Fund Working Draft Capital Improvement Project Expenditures Water Quality Flood Protection (WQFP) Storm Drain Program Expenses It should be noted that future economic activity, legislation and policy decisions, as well as any oth~r unforeseen circumstances could affect the City's revenue stream and expenditures during any of the years presented in the 2014 Model. DISCUSSION The following assumptions have been made during preparation of the 2014 Model. Economic Assumptions 1. The 2014 Model is based upon the draft 2014 Capital Improvement Plan and the draft budget, with one-time expenditures removed for subsequent years. The increase of the Consumer Price Index (CPI) for urban consumers, as projected by the Congressional Budget Office, was applied to expenditures in each subsequent year of the 2014 Model. The draft budget includes employee compensation at current levels for all authorized positions, including the positions added by City Council on March 18, 2014 (increased to 61 full-time positions). About 29% of General Fund uses (expenditures and transfers to other funds) represents the cost of employee compensation. Any changes to employee compensation are subject to negotiation between the employee association and the City. Staff cannot predict the outcome of those negotiations. Therefore, although the 2014 Model assumes that employee compensation will continue to increase by CPI (the same assumption for all other expenditures of the City), the actual compensation level is uncertain and will not be determined until the negotiation process is complete. 2. Sales tax is generally expected to increase by the CPI for urban consumers, as projected by the Congressional Budget Office. 3. Based upon an analysis of property transfers between July 2013 and mid-march 2014, it appears that the City's assessed values will grow by 3.45% (1.45% for the properties transferred and 2.00% for all other properties). The City's property assessments have grown at an average rate of 2.9% over the last five years (from 5-4

5 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 5of11 FY08-09 through ). Based on this continued growth and the low ratio of assessment value to market value in the City, Staff has assumed that property tax will continue to grow at a rate of 3.5% annually for the remaining 4 years of the 2014 Model. 4. The Los Angeles County Sheriff's Department (Sheriff) has advised Staff to expect a 2.6% increase in contract rates for. The Sheriff's contract is the single largest expenditure in the General Fund, and has grown by an average of 1.2% over the last five years. Staff has assumed a continued 2% average growth rate over the next five years. The Sheriff's contract requires a contribution to the Sheriff's liability trust fund equivalent to 4% of the contract cost. The Sheriff has advised Staff to expect the contribution to the liability trust fund to increase to 5% of the contract cost beginning January 1, 2015, to 6% on July 1, 2015, and finally normalizing at 5.5% on July 1, Staff expects the City will become a participating jurisdiction in the Los Angeles Regional Interoperable Communications System (LA-RICS). As such, the City may be required to pay a small annual administrative fee (currently estimated at about $4,500). In addition, the Sheriff may pass through its cost of participation to the City as early as. The pass-thru cost is unknown at this time. The LA-RICS Board met on May 28, 2014 and agreed on a 180-day "opt-out" period for participating agencies, based on a funding plan that is expected to be released on or about June 2, As cost estimates are not currently available and may require analysis before the City can decide whether to participate in LA-RICS, no cost assumptions have been included in the draft budget and the 2014 Model. 5. Permit revenues comprised about 7.9% of General Fund revenue. Permit fees are based on the fully burdened hourly rate of Staff multiplied by the estimated time to provide the service, as the law requires that permit fees cannot exceed the City's cost. Although Staff expects that another cost based fee study will be completed during the next five years, Staff cannot predict the impact of that study or the resulting City Council action to set fee rates. Therefore, Staff has not included any assumed increases in permit fee rates for the 2014 Model. Permit revenue is also based on the volume of development activity in the City, which has increased over the last year. Based upon the fact that the City is mostly built out and permit activity levels are unpredictable, Staff has not included any assumed increases or decreases in permit activity for the 2014 Model. 6. About 86% of the City's cash is invested with the state's Local Agency Investment Fund (LAIF), which is an actively managed portfolio. The LAIF investment earnings rate has hovered around 26 basis points during. For the 2014 Model, Staff has assumed an investment earnings rate that is the 3-month U.S. Treasury Rate 5-5

6 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 6of11 as projected by the Congressional Budget Office. 7. UUT and franchise tax are dependent on outside factors such as weather conditions and rate increases, which cannot be predicted over the long-term with any accuracy. Therefore, Staff has assumed that UUT and franchise tax will increase by the CPI for urban consumers, as projected by the Congressional Budget Office. Over the past 10 years, franchise tax has increased an average of 5.9% per year; and UUT has increased an average of 3.2% per year. Some of this increase is attributable to the opening of the Terranea Resort. Using the CPI is a conservative method of estimating these future revenues. 8. Transient Occupancy Tax (TOT) accounted for about 14.8% of the City's General Fund revenue. Per the City Council's Reserve Policy, amounts equivalent to' TOT are transferred to the CIP Reserve each year as a funding source for infrastructure improvements. The City receives most of its TOT revenue from the Terranea Resort, which opened in Now that the Resort has been open almost 5 years, Staff has observed that the growth rate of TOT has been slowing. Staff has conservatively assumed that TOT will continue to grow by CPI for urban consumers, as projected by the Congressional Budget Office for the 2014 Model. Other Assumptions Specific to the 2014 Model 9. As part of the state's solutions to its budget problems in 2004, it developed a mechanism referred to as the "triple-flip" whereby the City began receiving an additional share of property tax in lieu of 25% of the City's sales tax revenue. The triple-flip mechanism ends in. Staff has assumed that the revenue source will revert back to sales tax for, with no net impact to the General Fund. 10. Pursuant to state redevelopment dissolution law, on January 31, 2012 the Rancho Palos Verdes Redevelopment Agency (RDA) was dissolved. The City elected to serve as the Successor Agency to the former RDA. The City's General Fund loaned money to the former RDA for landslide mitigation projects and administration. As of June 30, 2013, the outstanding loan balance (including accrued interest) was $12.1 million. The Successor Agency has completed the steps necessary for the City's loan to become a recognized obligation with small repayments beginning in. Based upon the repayment formula outlined in state law, a maximum of $72,915 may be repaid during. Staff has included this amount as repayment revenue in the General Fund for all five years of the 2014 Model; however actual repayments will be based upon the availability of redevelopment property tax revenue. Separately, as part of administering the Successor Agency and supporting the activities of the Oversight Board representing various taxing entities, the City receives reimbursement of administrative costs (staff time, legal fees, etc.). The annual reimbursement is currently estimated to be $100,000. Beginning in FY16-5-6

7 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 7of11 17, individual oversight boards will be consolidated into a single county-wide oversight board. Staff has assumed that the administrative reimbursement will be reduced to $50,000 beginning in, as City resources needed to support dissolution activities are expected to decrease upon cessation of the local Oversight Board. 11. The General Fund provides subsidies to a number of funds, as the restricted funding sources for those activities are insufficient to provide for the current level of maintenance. A. Dedicated restricted revenue (e.g. state-apportioned highway users' tax and locally levied street landscape assessments) is insufficient to fund right-ofway maintenance. The accumulated Street Maintenance fund balance is sufficient to provide for the revenue shortfall through. However, beginning in, the General Fund must subsidize the Street Maintenance Fund increasing from $432,000 to $462,000 by. B. The Improvement Authority's Portuguese Bend Fund will continue to require an annual General Fund subsidy of about $40,000. There is no other source of revenue for maintenance activities in the Portuguese Bend portion of the landslide area. C. The Improvement Authority's Abalone Cove Fund will continue to require an annual General Fund subsidy of about $35,000. The interest earnings on the $1 million non-spendable fund balance required by the Horan Agreement is not sufficient to pay for maintenance of dewatering wells in the Abalone Cove portion of the landslide area. The Horan Agreement is the 1987 settlement of a lawsuit related to the City's active landslide. D. The Abalone Cove Sewer District will continue to require an annual General Fund subsidy of $50,700. Property assessments are not sufficient to maintain the unique system that provides for 110 developed parcels in an active landslide area. E. The Habitat Restoration Fund accounts for the management, maintenance, and monitoring of the City's open space. The fund receives occasional habitat mitigation revenue from outside sources, but does not have a consistent annual funding source. Therefore, a General Fund subsidy is necessary. The City's Natural Communities Conservation Plan (NCCP) requires the fund balance to grow by $10,000 each year (plus accrued interest) for 50 years to provide a future endowment for maintenance of habitat. is the 1 oth year of this 50-year period. The growth of the endowment is also provided for by the General Fund. Annual subsidies are expected to range from $157,000 to $171,000 during the course of the 2014 Model. The City recently received a $1.9 million settlement from Southern 5-7

8 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 8of11 California Edison for the August 2009 Portuguese Bend Fire. This amount will be reduced by legal and other administrative expenses incurred by both the City and the Palos Verdes Peninsula Land Conservancy (PVPLC); and the balance will be deposited into the City's Habitat Restoration Fund, in accordance with the City's letter of intent dated July 20, 2011 addressed to the PVPLC. F. As part of its development agreement with the City, the developer of the Subregion 1 tract (now Oceanfront Estates) was required to dedicate open space to the City and provide a $750,000 endowment for future maintenance of that open space. The interest earnings from the non-spendable endowment are not sufficient to provide for the current level of maintenance, which necessitates an annual General Fund subsidy of about $46, The City uses an Equipment Replacement Fund to centralize accounting for purchase and maintenance of the City's capitalized equipment (items with costs of $5,000 or more, including the City's computer network), and to accumulate money for the replacement of capitalized equipment. Various programs within the General Fund are charged with an allocation of Equipment Replacement Fund expenses. The City Council's Reserve Policy requires the fund balance be maintained at a level equivalent to the estimated replacement cost of the capitalized equipment. 13. The City's employee pension plan includes 3 tiers of benefits based upon local pension reform and state pension reform, as follows: A. 1st Tier - those employed prior to September 23, 2011; B. 2nd Tier - those hired after January 1, 2013 who previously participated in a reciprocating California public employee pension system; and C. 3rd Tier - new hires who do not meet second-tier requirements. CalPERS has set the employer contribution rates for. Based upon additional information from CalPERS, Staff has estimated employer contribution rates for years 2 through 5 of the 2014 Model % 8.005% 6.250% < % 8.600% 6.250% % % 6.250% % % 6.250% % % 6.250% The 2013 employee turnover rate was 14%. For purposes of the 2014 Model, Staff has assumed that employee turnover will continue at the rate of 3 full-time positions per year (a turnover rate of about 5%); and that 2 positions will begin earning 2nd 5-8

9 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 9of11 Tier benefits, and 1 position will begin earning 3rd Tier benefits. Based on those assumptions, estimated full-time employee participation in each Tier has been calculated as follows. ~1~Jt~J1~:1w1~11~~i\~~11m1111Ji~:1m1;1t1 ~11t.~11~1~;:\iliii!t: Blending the employer contribution rates for each Tier with estimated employee participation results in the following composite rates used for the 2014 Model % % % % % Employers with less than 100 active employees, such as the City, were placed into a CalPERS risk pool in On May 22, 2014, the CalPERS Board approved changes to the existing risk pooling structure. The changes will impact the employer contribution rate beginning with. In short, CalPERS will combine all risk pools into one pool for Miscellaneous employees, and one pool for Public Safety employees. Cal PERS Staff estimated the impact to member agencies' contribution rates using data from the June 30, 2012 Actuarial Valuation. The City's employer contribution rate would theoretically decrease from % to an estimated %, resulting in a decrease of about $53,000 to the annual employer contribution. The actual impact to the City's employer contribution rate will be calculated with the June 30, 2013 Actuarial Valuation, which will set the rate for. Staff expects to receive the June 30, 2013 Actuarial Valuation by November Until more information is received, Staff has not included any reductions to the contribution rates calculated above and included in the 2014 Model. 14. The 2014 Model indicates that Proposition A money accumulates over the next 5 years (transit expenditures are less than the restricted revenue received). The City has the ability to exchange unused Proposition A money for General Fund money. The current market rate appears to be about 75 cents on the dollar. If the City were to exchange $700,000 of Proposition A money at the end of year 5, perhaps about $525,000 of General Fund money would be received. Proposition A money could 5-9

10 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 10of11 also be used in the future to fund capital spending requests from Palos Verdes Peninsula Transit Authority (e.g. purchase new buses). Capital Spending Assumptions 15. Staff has included recommended projects to repair and improve the City's infrastructure that will require funding from the City's General Fund (either directly or through the CIP Reserve) over the course of the 2014 Model. City Council approves projects one year at a time with the annual budget process, and has not yet approved the projects proposed for years 2 through 5 of the 2014 Model. A. As part of the draft 2014 Five-Year Capital Improvement Plan, Staff has recommended project expenditures totaling $26.9 million over four years ( through ) to be funded from the CIP Reserve. As noted previously, per the City Council's Reserve Policy, amounts equivalent to the City's TOT revenue are transferred to the CIP Reserve each year to provide for infrastructure improvements. Exhibit C-2 of the 2014 Model reconciles the Cl P Reserve balance since its inception in FY08-09 through, the last year of the 2014 Model. The schedule identifies specific projects and the amounts that are recommended for CIP Reserve funding. Each of these projects addresses a legal mandate, a safety concern, a matching contribution for a grant-funded project, or a City Council priority. B. The draft 2014 Five-Year Capital Improvement Plan contains quantified projects that were not included for recommended funding from the CIP Reserve. The estimated total costs of these projects starts at $28.3 million, and included projects that address safety issues and City Council priorities. 16. The City's storm drain user fee sunsets in. Until then, Staff has assumed that the fee will increase by 2% annually. Each year, the City Council may reduce or eliminate the fee, maintain the current fee, or increase the fee by a maximum of the lesser of CPI or 2%. Once the fee sunsets, the accumulated fund balance is expected to provide for one additional year of storm drain lining () and two additional years of maintenance ( and ). Unfunded CIP Projects include more than $14 million of known, quantified storm drain projects. None of the unfunded storm drain projects are expected to be performed prior to the sunset of the Fee in One of the unfunded projects is Altamira Canyon, originally estimated at $1.75 million. Based on ongoing evaluation of this drainage system, Public Works Staff is confident that the actual cost of this project will far exceed the original estimate. Staff expects that with an update of the Storm Drain Master Plan, more projects will be identified and added to the list of unfunded projects in the City's Five-Year Capital Improvement Plan. On May 29, 2013, the City's Storm Drain Oversight Committee prepared its annual report that included the following statement: 5-10

11 DRAFT 2014 FIVE-YEAR FINANCIAL June 3, 2014 Page 11 of 11 "Taking note of the historic importance of the User Fee collections in funding critical WQFP projects, the Committee again recommends that planning begin now for reliable funding of the City's storm drain system beyond June 30, 2016, when the Storm Drain User Fee sunsets. The Committee recommends that such funding be strategically developed now while there is still time to plan rather than waiting for another crisis." Attachment: Draft 2014 Five-Year Financial Model 5-11

12 CITY OF RANCHO PALOS VERDES 2014 FIVE-YEAR FINANCIAL EXHIBIT A Fund Balance Estimated Resources Estimated Appropriations Fund Balance Fund Balance Fund Balance Fund Balance Fund Balance Fund 6/30/2014 Transfers In Expenditures Transfers Out 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 Unrestricted GENERAL 11,626,014 26,548, ,000 (20,490,439) (7,584,506) 10,307,300 9,863,355 9,875,770 9,664,955 9,710,762 Restricted by Council Action BEAUTIFICATION FUND 316, (224,000) 93, CIP 7,889, ,483 9,403,806 (9,335,000) (820,000) 7,696,980 9,501,480 9,899,180 8,507,080 3,323,080 EQUIPMENT REPLACEMENT 1,914, ,500 - (1,013,585) - 1,795,635 1,695,135 1,617,535 1,545,035 1,466,835 BUILDING REPLACEMENT 943,405 2, , , ,605 1,023,605 1,061,005 EMPLOYEE BENEFITS 111,461 2,131,990 - (2,131,750) - 111, , , , ,341 Subtotal 11,176,248 3,587,763 9,403,806 (12,480,335) (1,044,000) 10,643,482 12,268,691 12,620,991 11,196,651 5,976,261 Restricted by Law or External Agencies STREET MAINTENANCE 734,989 1,125,262 1,096,000 (2,387,779) - 568, , , , , ACT 65, ,140 - (78,300) (200,000) 45,292 29,232 17,012 8,032 2,222 EL PRADO LIGHTING 19,950 1,940 - (1,000) - 20,890 22,080 23,640 25,400 27,230 CDBG - 197,687 - (197,687) ACT 1,607, ,500 - (449,100) (99,000) 1,587,906 1,586,106 1,608,206 1,638,906 1,667,606 WASTE REDUCTION 365, ,800 - (177,650) (50,000) 360, , , , ,759 AIR QUALITY MANAGEMENT 97,658 50,210 - (50,000) - 97,868 99, , , ,828 PROPOSITION C 363, , (691,000) 284, , ,980 73,660 5,050 PROPOSITION A ,443 - (596,823) (48,000) 93, , , , ,684 PUBLIC SAFETY GRANTS 20, , (100,000) 20,440 20,730 21,350 22,130 22,940 MEASURE R 685, , (1,000,000) 146, , ,599 57,549 11,249 HABITAT RESTORATION 206, ,000 (159,689) - 204, , , , ,172 SUBREGION 1 MAINTENANCE 784,001 1,700 46,000 (67,500) - 764, , , , ,501 MEASURE A 44, , (105,000) 44,212 44,832 46,172 47,862 0 ABALONE COVE SEWER DISTRICT 35,086 55,160 50,700 (105,700) - 35,246 34,726 33,566 31,146 27,106 GINSBURG CULTURAL ARTS BUILDING 119, , , , , ,240 DONOR RESTRICTED CONTRIBUTIONS 844,668 1, ,518 58,418 60,168 62,368 64,648 QUIMBY 7, , (835,000) LOW-MOD INCOME HOUSING 12, ,411 12,411 12,411 12,411 12,411 AFFORDABLE HOUSING IN LIEU 499,898 1, , , , , ,178 ENVIRONMENTAL EXCISE TAX 63,165 77, (100,000) 41,144 31,724 22,674 13,504 3,994 BIKEWAYS WATER QUALITY/FLOOD PROTECTION 271,416 1,356, ,000 (2,304,996) - 142, ,109 67,635 40,135 11,635 IMPROV AUTH - PORTUGUESE BEND 292, ,000 (97,600) - 235, , ,202 69,712 9,652 IMPROV AUTH - ABALONE COVE 59,908 2,300 35,000 (70,300) - 26,908 5,508 2,508 5,208 7,308 Subtotal 7,202,834 6,725,427 2,244,700 (6,744,124) (3,228,000) 6,200,837 5,978,357 5,438,123 5,425,583 5,343,461 GRAND TOTAL 30,005,096 36,861,421 11,856,506 (39,714,898) (11,856,506) 27,151,619 28,110,403 27,934,884 26,287,189 21,030,

13 PAGE 1 % Increase % Increase % Increase % Increase % Increase % Increase % Increase % Increase % Increase % Increase ECONOMIC INPUT S (a-p): Maximum Property Assessment Increase (a) N/A N/A N/A N/A N/A 2.0% 2.0% 2.0% 2.0% 2.0% Increase Factor (%) Expenditures (b) N/A N/A N/A N/A N/A 1.9% 2.1% 2.2% 2.4% 2.4% Consumer Price Index (%) (c) N/A N/A N/A N/A N/A 1.9% 2.1% 2.2% 2.4% 2.4% Sales Tax (%) (d) N/A N/A N/A N/A N/A 1.9% 2.1% 2.2% 2.4% 2.4% Property Taxes (%) (e) N/A N/A N/A N/A N/A 3.45% 3.5% 3.5% 3.5% 3.5% Sheriff Contract (%) (f) N/A N/A N/A N/A N/A 3.0% 2.0% 2.0% 2.0% 2.0% Permit (%) (g) N/A N/A N/A N/A N/A 0.0% 0.0% 0.0% 0.0% 0.0% Investment Interest (%) (h) N/A N/A N/A N/A N/A 0.22% 1.41% 3.00% 3.65% 3.65% Utility Users Tax/Franchise Tax (%) (i) N/A N/A N/A N/A N/A 1.9% 2.1% 2.2% 2.4% 2.4% 5-13

14 PAGE 2 SUMMARY OF ENDING UNRESERVED FUND PAGE BALANCES UNRESTRICTED FUND (101) General Fund 6 12,464,441 18,229,778 14,370,257 (3,859,521) 11,626,014 10,307,300 9,863,355 9,875,770 9,664,955 9,710,762 RESTRICTED BY COUNCIL ACTION (212) Beautification Fund 1,065, ,753 1,003, , ,971 93, (330) CIP Fund 8 15,406,941 17,146,043 11,565,617 (5,580,426) 7,889,691 7,696,980 9,501,480 9,899,180 8,507,080 3,323,080 (681) Equipment Replacement Fund 9 2,584,089 2,482,289 2,584, ,731 1,914,720 1,795,635 1,695,135 1,617,535 1,545,035 1,466,835 (686) Building Replacement Fund , , ,605 (1,023) 943, , , ,605 1,023,605 1,061,005 (685) Employee Benefits Fund 11 90,743 30, ,371 81, , , , , , ,341 SUBTOTAL 20,090,263 21,112,796 16,204,744 (4,908,052) 11,176,248 10,643,482 12,268,691 12,620,991 11,196,651 5,976,261 RESTRICTED BY LAW OR EXTERNAL AGENCIES City Funds (202) Street Maintenance Fund 12 1,056,896 1,219, ,473 (304,664) 734, , , , , ,253 (203) 1972 Act Landscape & Lighting Fund 13 78,079 63,469 70,062 6,593 65,452 45,292 29,232 17,012 8,032 2,222 (209) El Prado Lighting Fund 14 16,774 17,754 19,000 1,246 19,950 20,890 22,080 23,640 25,400 27,230 (310) CDBG Fund 15 (42,447) 22,338 0 (22,338) (211) 1911 Act Street Lighting Fund 16 1,670,384 1,468,784 1,709, ,822 1,607,506 1,587,906 1,586,106 1,608,206 1,638,906 1,667,606 (213) Waste Reduction Fund , , , , , , , , , ,759 (214) Air Quality Management Fund ,187 91, ,298 60,621 97,658 97,868 99, , , ,828 (215) Proposition C (Streets/Transit) Fund 19 1,341,811 33,894 1,592,363 1,558, , , , ,980 73,660 5,050 (216) Proposition A (Transit) Fund , , ,991 77, , , , , ,684 (217) Public Safety Grants 21 20, ,400 19,812 20,400 20,440 20,730 21,350 22,130 22,940 (220) Measure R , , , , , , , ,599 57,549 11,249 (222) Habitat Restoration Fund - NCCP , , ,641 36, , , , , , ,172 (223) Subregion 1 Maintenance Fund , , ,701 19, , , , , , ,501 (224) Measure A Cap. & Maint. Funds (65,685) (65,515) (197,638) (132,123) 44,112 44,212 44,832 46,172 47,862 0 (225) Abalone Cove Sewer District Fund ,271 26,771 35,906 9,135 35,086 35,246 34,726 33,566 31,146 27,106 (227) Ginsburg Cultural Arts Building Fund , , ,890 (380) 119, , , , , ,240 (228) Donor Restricted Contributions Fund , , , , , ,518 58,418 60,168 62,368 64,648 (334) Quimby Fund , ,505 29,084 7, (336) Low-Moderate Income Housing Fund ,411 12,411 12,411 12,411 12,411 12,411 12,411 12,411 (337) Affordable Housing In-Lieu Fund , , , , , , , , ,178 (338) Environmental Excise Tax (EET) Fund , , , ,356 63,165 41,144 31,724 22,674 13,504 3,994 (340) Bikeways (TDA Article 3) Fund ,054 61, (501) Water Quality & Flood Protection Fund ,531,615 17,051,412 9,727,246 (7,324,166) 271, , ,109 67,635 40,135 11,635 Improvement Authority Funds (285) Improvement Authority - Portuguese Bend , , ,012 67, , , , ,202 69,712 9,652 (795) Improvement Authority - Abalone Cove ,814 98, ,543 9,729 59,908 26,908 5,508 2,508 5,208 7,308 SUBTOTAL 11,597,005 23,290,255 19,043,759 (4,246,496) 7,202,834 6,200,837 5,978,357 5,438,123 5,425,583 5,343,461 GRAND TOTAL - ALL FUNDS INCLUDED 44,151,709 62,632,829 49,618,760 (13,014,069) 30,005,096 27,151,619 28,110,403 27,934,884 26,287,189 21,030,

15 PAGE 3 GENERAL FUND REVENUE DETAIL Property taxes (e) 6,075,623 6,254,800 6,300,110 45,310 6,630,000 6,863,100 7,103,300 7,351,900 7,609,200 7,875,500 Property taxes In-Lieu of VLF (e) 3,605,510 3,694,230 3,694, ,890,000 4,024,200 4,165,000 4,310,800 4,461,700 4,617,900 Property taxes In-Lieu of Sales Tax (d) 541, , , , , , , Sales and use tax (d) 1,448,508 1,552,200 1,589,104 36,904 1,640,000 1,671,500 1,706,600 1,743,400 2,365,600 2,422,800 Property transfer tax (e) 272, , ,373 86, , , , , , ,900 Business license tax (c) 700, , ,481 19, , , , , , ,800 Transient occupancy tax (c) 3,349,015 3,611,074 3,790, ,285 3,948,700 4,024,500 4,109,000 4,197,700 4,296,600 4,400,500 Franchise taxes (i) 1,881,163 1,917,000 1,906,613 (10,387) 1,779,000 1,813,200 1,851,300 1,891,300 1,935,900 1,982,700 Utility user tax (i) 2,333,440 2,385,000 2,480,966 95,966 2,610,000 2,660,100 2,716,000 2,774,600 2,840,000 2,908,700 Golf tax (c) 398, , ,015 (25,985) 404, , , , , ,200 SUBTOTAL TAXES 20,606,160 21,280,212 21,707, ,947 22,566,700 23,158,300 23,794,100 24,462,500 25,178,000 25,923,000 Animal control fees (g) 33,752 52,200 32,644 (19,556) 35,000 30,000 30,000 30,000 30,000 30,000 Right of way & parking permits (g) 63,650 66,700 80,398 13,698 72,400 72,400 72,400 72,400 72,400 72,400 Building and safety permits & geology fees (g) 1,307,445 1,363,600 1,518, ,890 1,317,500 1,317,500 1,317,500 1,317,500 1,317,500 1,317,500 Planning permits (g) 354, , ,010 57, , , , , , ,500 Film permits (g) 45,575 45,000 41,313 (3,687) 45,000 45,000 45,000 45,000 45,000 45,000 Massage Permits (g) 941 2, (2,756) SUBTOTAL LICENSES & PERMITS 1,806,148 1,827,400 2,026, ,599 1,786,900 1,862,400 1,862,400 1,862,400 1,862,400 1,862,400 Miscellaneous court fines (c) 147,684 77, ,186 28, , , , , , ,000 False alarm fines 7,300 8,200 6,000 (2,200) 5,500 5,500 5,500 5,500 5,500 5,500 Tow fees (c) 4, ,346 5,346 5,000 5,100 5,200 5,300 5,400 5,500 SUBTOTAL FINES & FORFEITURES 159,488 85, ,532 31, , , , , , ,000 Property & Monopole Leases (c) 151, , ,354 32, , , , , , ,800 Facility rentals - PVIC (c) 209, , ,406 24, , , , , , ,600 Facility rentals - Other (c) 121, , ,744 (4,256) 86, , , , , ,800 Parking lot fees 59,451 58,000 67,259 9,259 98,000 98,000 98,000 98,000 98,000 98,000 PVIC gift shop (c) 98, , , , , , , , ,400 Interest earnings (h) 46,421 60,000 41,945 (18,055) 53,790 26, , , , ,480 SUBTOTAL USE OF MONEY & PROPERTY 686, , ,514 44, , , ,940 1,060,200 1,143,670 1,152,080 Engineering fees (g) 60,239 40,000 42,989 2,989 35,000 35,000 35,000 35,000 35,000 35,000 Recreation fees (c) 11,909 9,600 18,254 8,654 18,700 18,700 19,100 19,500 20,000 20,500 Sale of Signs/Services (g) 5,901 7,700 10,925 3,225 8,000 8,000 8,000 8,000 8,000 8,000 Administration of Successor Agency 38,000 80,000 62,139 (17,861) 80, , ,000 50,000 50,000 50,000 Interfund charges for services (a) 154, , , , , , , , ,600 SUBTOTAL CHARGES FOR SERVICES 270, , ,707 (2,993) 297, , , , , ,100 Grant income 6,365 22,312 44,437 22,125 27, SUBTOTAL REVENUES FROM OTHER AGENCIES 6,365 22,312 44,437 22,125 27, Donations (c) 32,369 21,300 22,670 1,370 17,100 25,000 25,500 26,100 26,700 27,300 Repayment of City Loan to former RDA ,915 72,915 72,915 72,915 72,915 Other miscellaneous (c) 103,190 62, , ,194 15, ,606 15,600 15,900 16,300 16,700 SUBTOTAL OTHER REVENUES 135,559 84, , ,564 32, , , , , ,915 TOTAL GENERAL FUND REVENUES 23,670,857 24,231,864 25,531,952 1,300,088 25,572,690 26,548,231 27,098,355 27,897,015 28,703,385 29,464,

16 PAGE 4 GENERAL FUND EXPENDITURE DETAIL City Council (b) 133, , ,802 5, , , , , , ,100 City Manager (b) 995,275 1,718,227 1,694,526 23, ,900 1,035, , ,400 1,010,700 1,035,100 Legal Services (b) 1,057,102 1,045, ,324 52,676 1,045,000 1,045,000 1,066,900 1,089,900 1,115,600 1,142,600 City Clerk (b) 503, , ,468 1, , , , , , ,500 Community Outreach (b) 102, ,400 93,588 11,812 80,574 86,099 42,200 43,100 44,100 45,200 RPV TV (b) 109, , , , , , , , ,200 Risk Management (b) 660, , , , , , ,300 Personnel (b) 294, , ,035 60, , , , , , ,500 Finance (b) 1,341,972 1,290,000 1,284,651 5,349 1,419,700 1,417,000 1,446,800 1,478,000 1,512,800 1,549,400 Information Technology - Data (b) 356, , ,980 5, , , , , , ,700 Information Technology - Voice (b) 69,218 88,400 80,834 7,566 99,300 96,000 98, , , ,000 SUBTOTAL ADMINISTRATION 5,624,776 5,574,760 5,400, ,074 5,868,074 5,918,599 5,945,500 5,889,800 6,212,800 6,178,600 Public Safety - Sheriff Services (f) 3,957,051 4,174,000 4,154,039 19,961 4,254,200 4,306,900 4,456,100 4,523,800 4,614,300 4,706,600 Special Safety Programs (b) 24, ,500 54,610 49, ,500 92,400 94,300 96,300 98, ,000 Animal Control (b) 55,862 88,250 49,204 39,046 88,000 85,000 86,800 88,700 90,800 93,000 Emergency Preparedness (b) 140, ,902 89, , , , , , , ,100 SUBTOTAL PUBLIC SAFETY 4,177,926 4,568,652 4,347, ,879 4,682,800 4,754,200 4,912,800 4,990,300 5,091,800 5,195,700 Public Works Administration (Staffing, Project Management and Engineering) (b) 1,974,634 1,960,425 1,940,470 19,955 2,076,000 2,232,250 2,354,800 2,405,600 2,609,600 2,672,700 Traffic Management (b) 139, , ,000 41, , , , , , ,200 Storm Water Quality (NPDES Compliance) (b) 92, , ,201 70, , , , , , ,300 Public Building Maintenance (b) 491, , , , , , , , , ,600 Parks Maintenance (b) 1,012,060 1,284,000 1,005, ,713 1,351,130 1,361,100 1,308,000 1,336,200 1,367,700 1,400,800 Sewer Maintenance (b) 13,307 88,000 13,246 74,754 68,000 68,000 69,400 70,900 72,600 74,400 SUBTOTAL PUBLIC WORKS 3,723,884 4,373,725 3,727, ,769 4,793,230 4,985,650 5,084,300 5,194,000 5,463,800 5,596,000 Planning (b) 1,302,440 1,357,218 1,337,343 19,875 1,315,840 1,505,040 1,499,500 1,531,900 1,568,000 1,605,900 Building & Safety Services (b) 574, , ,933 40, , , , , , ,000 Code Enforcement (b) 187, , ,363 14, , , , , , ,100 View Restoration/Preservation (b) 324, , ,351 1, , , , , , ,100 Natural Community Conservation Planning (NCCP) 2,380 9,280 9, Geology (Privately Initiated Projects) (g) 88, , ,441 14, , , , , , ,000 SUBTOTAL COMMUNITY DEVELOPMENT 2,479,898 2,679,635 2,587,711 91,924 2,732,740 3,011,540 3,037,600 3,103,200 3,176,400 3,253,100 Recreation Administration (Staffing, Park Rangers) (b) 555, , ,155 59, , , , , , ,800 Recreation Facilities (b) 448, , ,492 1, , , , , , ,400 Special Events (b) 45, , ,675 11,326 88,350 93,250 95,200 97,300 99, ,000 Pt. Vicente Interpretive Center (PVIC) (b) 356, , , , , , , , ,900 REACH (b) 48,036 48,000 43,410 4,590 39,100 42,200 43,100 44,000 45,000 46,100 Recreation Support Services (Reception & Other) (b) ,500 50,500 51,600 52,800 54,100 SUBTOTAL RECREATION & PARKS 1,454,414 1,613,201 1,536,790 76,411 1,601,675 1,820,450 1,921,000 1,962,500 2,008,700 2,057,300 NON-DEPARTMENTAL 0 500, , TOTAL GENERAL FUND EXPENDITURES 17,460,898 19,309,973 17,600,916 1,709,057 19,678,519 20,490,439 20,901,200 21,139,800 21,953,500 22,280,700 GENERAL FUND NET BEFORE TRANSFERS 6,209,959 4,921,891 7,931,036 3,009,144 5,894,171 6,057,792 6,197,155 6,757,215 6,749,885 7,183,

17 PAGE 5 GENERAL FUND TRANSFER DETAIL GENERAL FUND TRANSFERS IN: From Measure A Maint 100, ,000 82,000 (18,000) 105, , , , ,000 49,612 From Public Safety Grants fund 100, , , , , , , , ,000 From Waste Reduction 0 12,000 12, ,000 3,000 3,000 3,000 3,000 3,000 From Employee Benefits 340, Total General Fund Transfers In 540, , ,000 (18,000) 210, , , , , ,612 GENERAL FUND TRANSFERS OUT: To CIP fund 5,472,272 6,451,668 6,550,256 (98,588) 8,094,725 7,255,806 6,082,400 6,171,100 6,370,000 6,473,900 To Street Maintenance Fund (b) , , , ,000 To CDBG 0 0 9,302 (9,302) To Improvement Authority Portuguese Bend (b) 60, , , ,000 40,000 41,000 42,000 43,000 44,000 To Improvement Authority Abalone Cove (b) ,000 35,000 36,000 37,000 38,000 39,000 To Abalone Cove Sewer District 10,700 10,700 10, ,700 50,700 50,700 50,700 50,700 50,700 To Habitat Restoration (b) 90,000 90,000 90, , , , , , ,000 To Subregion 1 Maintenance Fund (b) 60,000 65,000 65, ,000 46,000 47,000 48,000 49,000 50,000 Total General Fund Transfers Out 5,692,972 6,723,368 6,831,258 (107,890) 8,446,425 7,584,506 6,849,100 6,952,800 7,168,700 7,290,600 Net Activity 1,056,987 (1,589,477) 1,293,778 2,883,254 (2,342,254) (1,318,714) (443,945) 12,415 (210,815) 45,

18 PAGE 6 GENERAL FUND SUMMARY Beginning Fund Balance 18,900,260 19,957,249 19,957, ,508,251 12,165,997 10,847,283 10,403,338 10,415,753 10,204,938 Plus: 23,670,857 24,231,864 25,531,952 1,300,088 25,572,690 26,548,231 27,098,355 27,897,015 28,703,385 29,464,495 Less: Expenditures (17,460,898) (19,309,973) (17,600,916) 1,709,057 (19,678,519) (20,490,439) (20,901,200) (21,139,800) (21,953,500) (22,280,700) Plus: Transfers In 540, , ,000 (18,000) 210, , , , , ,612 Less: Transfers Out (5,692,972) (6,723,368) (6,831,258) (107,890) (8,446,425) (7,584,506) (6,849,100) (6,952,800) (7,168,700) (7,290,600) Extraordinary Item 0 0 (6,742,776) (6,742,776) Ending Fund Balance 19,957,249 18,367,772 14,508,251 (3,859,522) 12,165,997 10,847,283 10,403,338 10,415,753 10,204,938 10,250,745 Less Non-Spendable, Restricted, Committed & Assigned: Long-Term Advance to RDA (Principal Only) 6,742, Continuing Appropriations , , , , , ,989 Inventory & Other 750, , , , , , , , ,994 Unassigned Fund Balance (Available for Spending) 12,464,441 18,229,778 14,370,257 (3,859,522) 11,626,014 10,307,300 9,863,355 9,875,770 9,664,955 9,710,762 Policy Reserve Threshold (50% of Expenditures) 8,730,449 9,654,987 8,800,458 (854,529) 9,839,260 10,245,220 10,450,600 10,569,900 10,976,750 11,140,350 Excess/(Deficient) General Fund Reserves 3,733,992 8,574,792 5,569,799 (3,004,994) 1,786,755 62,081 (587,245) (694,130) (1,311,795) (1,429,588) 5-18

19 PAGE 7 BEAUTIFICATION FUND DETAIL (Fund-212) Beautification revenue 0 132, ,999 15, Interest earnings (h) 311,734 2,060 3,263 1,203 1, , Total Revenue 311, , ,262 17,202 1, , Expenditures Personnel services 15, Operations & maintenance 4,500 20,100 20,614 (514) Total Expenditures 20,223 20,100 20,614 (514) BEAUTIFICATION FUND NET BEFORE TRANSFERS 291, , ,648 16,688 1, , Transfers Out To CIP fund - Street Improvements (median projects) 26, , , , To Street Maintenance fund (median maintenance) (b) 116, , , , ,000 94, Total Transfers Out 142, , , , , ,000 94, BEAUTIFICATION FUND SUMMARY Beginning Fund Balance 916,782 1,065,483 1,065, ,003, ,971 93, Plus: 311, , ,262 17,202 1, , Less: Expenditures (20,223) (20,100) (20,614) (514) Less: Transfers Out (142,810) (666,690) (193,000) 473,690 (687,690) (224,000) (94,981) Ending Fund Balance 1,065, ,753 1,003, , ,971 93,

20 PAGE 8 CIP FUND DETAIL (Fund-330) Capital Grants & Contributions 139,340 4,085, ,678 (3,946,489) 3,343, , , ,000 1,600,000 1,700,000 Interest earnings (h) 36,780 42,300 44,678 2,378 20,400 17, , , , ,500 Total CIP Fund Revenue 176,120 4,127, ,356 (3,944,111) 3,364, , , ,000 1,961,300 2,010,500 Expenditures Total CIP Fund Expenditures (see Exhibit C) 2,939,431 2,752,656 2,511, ,985 18,740,987 9,335,000 5,985,300 6,895,000 9,900,000 13,845,000 CIP FUND NET BEFORE TRANSFERS (2,763,311) 1,374,811 (2,328,315) (3,703,126) (15,376,677) (8,776,517) (5,004,500) (6,200,000) (7,938,700) (11,834,500) Transfers In From General fund 5,472,272 8,457,300 6,550,256 (1,907,044) 8,094,725 7,255,806 6,082,400 6,171,100 6,370,000 6,473,900 From Street Maintenance fund 52, From Waste Reduction fund 70, From Measure R fund 628, ,000 1,000, ,000, , ,000 From Measure A Capital/Maintenance fund 0 150, , From Proposition C fund 240, ,208 78,208 1,298, , , , , ,000 From Proposition A fund ,000 48, From Building Replacement 30, From Bikeways fund 0 0 1,536 1,536 95, ,600 26,600 26,600 26,600 From Quimby fund , , From EET fund 0 50,000 0 (50,000) 350, ,000 35,000 35,000 35,000 35,000 From Donor Restricted Contributions rund , From Water Quality & Flood Protection fund , From Beautification fund 26, , Total Transfers In 6,520,472 8,657,300 6,780,000 (1,877,300) 11,700,751 9,403,806 7,109,000 7,397,700 7,146,600 7,250,500 Transfers Out - fund ,293,009 8,293, , , , , ,000 Total Transfers Out 0 8,293,009 8,293, , , , , ,000 CIP FUND SUMMARY Beginning Fund Balance 11,649,780 15,406,941 15,406, ,565,617 7,889,691 7,696,980 9,501,480 9,899,180 8,507,080 Plus: 176,120 4,127, ,356 (3,944,111) 3,364, , , ,000 1,961,300 2,010,500 Less: Expenditures (2,939,431) (2,752,656) (2,511,671) 240,985 (18,740,987) (9,335,000) (5,985,300) (6,895,000) (9,900,000) (13,845,000) Plus: Transfers In 6,520,472 8,657,300 6,780,000 (1,877,300) 11,700,751 9,403,806 7,109,000 7,397,700 7,146,600 7,250,500 Less: Transfers Out 0 (8,293,009) (8,293,009) 0 0 (820,000) (300,000) (800,000) (600,000) (600,000) Fund Balance 15,406,941 17,146,043 11,565,617 (5,580,426) 7,889,691 7,696,980 9,501,480 9,899,180 8,507,080 3,323,080 Minimum Emergency Projects Reserve 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 Excess Reserve for Future Projects 12,406,941 8,565,617 4,889,691 4,696,980 6,501,480 6,899,180 5,507, ,