OVERVIEW PROPOSED BUDGET. Richard H. Llewellyn, Jr. Interim City Administrative Officer Proposed Budget April 26, 2017 OF THE

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OVERVIEW OF THE 2017-18 PROPOSED BUDGET Richard H.

1 OVERVIEW OF THE PROPOSED BUDGET Richard H. Llewellyn, Jr. Interim City Administrative Officer

2 SUMMARY Budget Overview Financial Policy Compliance Expenditures: Key investments and concerns Revenues: Levels and concerns Four-Year Budget Outlook

3 BUDGET OVERVIEW TOTAL PROPOSED CITY GOVERNMENT Appropriations ($ Millions) Authorized Positions* I.Proprietary Departments Airports $ 5, ,927 Harbor $ 1, Water and Power $ 8, ,650 Total $ 15, ,576 II.General City Budget General Fund $ 5, ,964** Special Funds $ 3, ,355 Total $ 9, ,319 III.Grants and other Non-Budgeted Funds Total $ 1, ** * Regular positions. ** Sworn staff represents 59 percent of General Fund positions. Grand Total $ 25, ,895

4 BUDGET OVERVIEW Budget ($ Millions) Authorized Positions Budget Component Adopted Proposed Percent Change Adopted Proposed Percent Change General Fund $ 5,576.4 $ 5, % 22,866 22, % Special Funds $ 3,200.6 $ 3, % 10,239 10, % Total $ 8,777.0 $ 9, % 33,105 33, %

BUDGET SUMMARY UNRESTRICTED REVENUE ($4.8 BILLION) () Police 52.8% Library 4.7% Recreation & Parks 5.7% City Attorney 3.2% Fire 17.2% Unrestricted Revenues are 51.7% of the City Budget.

5 BUDGET SUMMARY UNRESTRICTED REVENUE ($4.8 BILLION) () Police 52.8% Library 4.7% Recreation & Parks 5.7% City Attorney 3.2% Fire 17.2% Unrestricted Revenues are 51.7% of the City Budget. Restricted Revenues (48.3%) include those from grants, fee supported and reimbursed programs, and special funds. Other 7.7% Public Works Sanitation Street Services Transportation Engineering Board Contract Admin. Capital Improvements Building & Safety Planning 8.7%

6 FINANCIAL POLICY COMPLIANCE Policy Reserve Fund at least 5% of General Fund Budget Stabilization Fund contribution if growth of seven economically sensitive taxes is over 3.4% Compliance July 1 at $294 million, or 5.09% $75 million in tax growth used for infrastructure Capital investment at 1% of General Fund Investment of 1.29% or $75 million All one-time revenues used for one-time expenditures $31 million in one-time revenues for $70 million in one-time expenditures Debt service ceiling from non-voter approved debt of 6% of General Revenues 4.32% in Proposed Budget, and expected to remain below 6% throughout 7-year projections

7 Millions FINANCIAL POLICY COMPLIANCE BUDGET RESERVES (Reserve Fund, Budget Stabilization Fund, and UB Reserves) $500.0 $450.0 $400.0 $ % 7.19% 8.72% 7.88% 6.90% 10.00% 9.00% 8.00% 7.00% $ % 4.98% 6.00% $250.0 $ % 3.22% 4.05% 5.00% 4.00% $ % $ % $ % $ (Proposed) Emergency Reserve Contingency Reserve Budget Stabilization Fund 0.00% UB Reserves Total Percentage of General Fund

8 Millions FINANCIAL POLICY COMPLIANCE $100.0 $90.0 CAPITAL INVESTMENT AS PERCENTAGE OF GENERAL FUND REVENUE 1.60% 1.80% 1.60% $ % 1.29% 1.40% $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $- 1.13% $ % $ % $ % 0.15% 0.15% 0.15% $9.1 $6.4 $6.5 $ % 1.07% $51.7 $54.8 $74.7 $89.5 $ (Proposed) 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Total GF Capital Investment 1% Spending Level

9 FINANCIAL POLICY COMPLIANCE ONE-TIME REVENUES VS. ONE-TIME EXPENDITURES (Proposed Budget) $200 $180 $160 $140 $120 $100 $80 $60 $53 $103 $66 $83 $146 $88 $181 $110 $156 $156 $118 $121 $70 $40 $20 $18 $35 $31 $ One Time Revenues One Time Expenditures

10 Debt Service Amount (000's) FINANCIAL POLICY COMPLIANCE $450,000 NON-VOTER APPROVED DEBT (April 2017) $400,000 $350,000 $300,000 6% General Revenues For every 0.1%, approximately $55 million in project funding may be issued (at 5.5% over 15 years). $250,000 $200, % 4.32% 4.43% 4.30% 4.04% 3.87% 3.14% 2.56% 2.56% $150,000 $100,000 $50,000 $ Fiscal Year Convention Center Current MICLAs Commercial Paper Future MICLAs (CP Refundings) Judgment Obligation Bonds

11 EXPENDITURES: KEY INVESTMENTS Addressed Obligations $40 million for increased liabilities Employee-related cost increases: $120 million for salaries, $17 million for pensions, $12 for workers comp, and $42 for health and other benefits $35.9 million for Accessible Housing Program, per settlement $31 million for Sidewalks $121 million for LAPD overtime Continuation of Police and Fire hiring $131 million commitment to fighting homelessness (does not include sale of surplus property) New Programs $89.1 for homeless housing and facilities from Measure HHH $42.0 for roads and infrastructure from Measure M $23.4 for road reconstruction from increased Gas Tax (SB 1) $0.8 for Department of Cannabis Regulation Increased Services 24 positions and $0.8 million to reduce community plan cycle to six years $2 million for graffiti abatement $2.9 million for one Clean Streets Team and two HOPE Teams

12 EXPENDITURES: CONCERNS Potential Areas of Expenditure Shortfall $53 million in achievable but significant expenditure reductions $40 million increase for Liability Claims is a positive step, but still below actual expenditures in and Limited Sources Available in Case of Shortfall Reserve Fund at 5.09% on July 1, 2017, just above policy level and projected to drop to 4.63% by June 30, $10 million in Unappropriated Balance Reserve for Mid-Year Adjustments provides only limited protection.

13 REVENUES: LEVELS General Fund revenues increased by $202.8 million from to Major changes include: Source Amount (Millions) Property Tax $44.6 Assumes 5.8% growth from Revised License, Permits, Fees, and Fines $102.9 $52 million for LAPD/MTA contract, $31 million from special fund reimbursements, and $12 million from billboard leases Electric Users Tax $25.0 Estimate provided by the Department of Water and Power Transient Occupancy Tax Power Revenue Transfer $35.5 $33.7 from Short-term rentals ($48.5) Estimate assumed in the proposed Department of Water and Power budget Franchise Income $15.6 $15.6 million from solid waste collection franchise

14 % Change from Year Ago REVENUES: LEVELS 25% SEVEN GENERAL FUND TAXES (Property (includes VLF), Utility, Business, Sales, Hotel, Documentary, and Parking Taxes) % % % 5% $ Billions 0% 2.5-5% % Fiscal Year Ending 1.5 % change -- Left Scale 7 General Fund Taxes ($Billions) -- Right Scale

15 REVENUES: CONCERNS Revenues that are dependent on currently pending policy decisions: $12 million Billboards $34 million AirBnB $8.1 million Gas Franchise Fees $15.6 million Solid Waste Franchise $10 million Linkage Fee (to the Affordable Housing Trust Fund)

16 Millions THE OUTLOOK FOUR-YEAR BUDGET OUTLOOK () $6,500 $6,444 $10 $6,336 $6,300 $6,219 ($69) $6,454 $6,100 $6,018 ($129) $6,267 $6,090 $5,900 $5,779 ($104) $5,915 $5, $5, Revenues Expenditures

17 $1,400 $1,200 $1,000 THE OUTLOOK: PENSIONS COSTS $800 $600 $400 $435 GENERAL FUND CONTRIBUTIONS TO LACERS AND LAFPP $623 (Actual Amounts ; Proposed ; Projected *) * Projections are based on a study commissioned by the CAO. Impact of increased rate of return assumption based on rule of thumb that 0.25% reduction increases cost by 3.0% of covered payroll. $666 $639 $653 $725 $793 $848 $944 $1,037 $1,058 $1,075 $1,085 $1,231 $1,300 $1,316 $1,311 $200 $- LACERS LAFPP Impact of Decrease in Assumed Rate of Return by 0.25% Total

18 THE OUTLOOK: PENSIONS COSTS 25.0% PERCENT OF GENERAL FUND USED FOR LACERS/LAFPP CONTRIBUTION 20.0% 15.0% 14.2% 15.0% 14.0% 14.8% 16.6% 18.1% 18.6% 19.4% 20.2% 19.6% 19.3% 18.8% 11.0% 10.0% 5.0% 0.0% (Proposed)

PROPOSED BUDGET

OVERVIEW OF THE 2018-19 PROPOSED BUDGET Richard H. Llewellyn, Jr. City Administrative Officer SUMMARY Budget Overview Revenues: Levels and Concerns Expenditures: Staffing, Pensions, and Concerns Financial