Credit Presentation of the City of Los Angeles Richard H. Llewellyn Jr., City Administrative Officer

Transcription

1 Credit Presentation of the City of Los Angeles Richard H. Llewellyn Jr., City Administrative Officer Presentation by Ben Ceja, Assistant City Administrative Officer March 19, 2018

2 Disclaimer This Investors Presentation is provided as of March 15, 2018 as part of the Los Angeles 4th Regional Investors Conference 2018 organized by the City of Los Angeles ( City ). If you are viewing this presentation after March 15, 2018, there may have been events that occurred subsequent to such date that may have a material adverse effect on the financial information that is presented herein, and the City has not undertaken any obligation to update this Investor Presentation. All financial data and other information provided herein are not guaranteed as to completeness or accuracy and are subject to change without notice. This presentation is for general information only. This Investors Presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or other financial instrument, or to adopt any investment strategy. Any offer or solicitation with respect to the purchase or sale of any security will be made solely by means of an Official Statement, which describes the actual terms of such securities. This Investor Presentation is not an Official Statement. In no event shall the City be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction mentioned herein. The City makes no representations as to the legal, tax, credit or accounting treatment of any transaction mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You should consult with your own advisors as to such matters and the consequences of the purchase and ownership of any security. Nothing in this Investors Presentation constitutes a commitment by the City. This Investors Presentation contains certain forward-looking statements. The achievement of certain results or other expectations contained in any forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Although the City believes that such expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The City is not obligated and has not undertaken any obligation to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur. 1

3 Executive Summary Overview of the City of Los Angeles Adopted Budget Summary and Update Focus on Infrastructure Policy Initiatives and Priorities Budget Outlook Considerations Debt Management 2

4 Overview of the City of Los Angeles City Governance Structure Elected Officials o Mayor: Elected at-large to 4 year term; eligible for 2 terms o City Council: Full-time Council consisting of 15 members elected to 4 year terms; eligible for 3 terms o Controller o City Attorney 38 City Departments manage public safety, sanitation, public works, homelessness, cultural, and recreational issues o In addition, 3 independent Proprietary Department: Airports, Harbor, and Water and Power; and o 2 pension departments, Los Angeles City Employees Retirement System (LACERS) and the Fire and Police Pension System (LAFPP) Founded in 1781, second largest City in the US Population of approximately 4.04 million as of January 2018, approximately 39% of the County 15 Council Districts within the City with average population of 260,000 residents Area of 470 square miles 3

5 Adopted Budget Summary Budget Component Budget ($ Millions) Adopted Adopted Percent Change General Fund $ 5,576.4 $ 5, % Special Funds $ 3,200.6 $ 3, % Total $ 8,777.0 $ 9, % $600.0 Major financial policy targets o Appropriated 1.28% of General Fund to capital improvements, exceeding target of at least 1% Budget Reserves (Reserve Fund, Budget Stabilization Fund, and UB Reserves) As of July 1 Actuals o o o Reserve Fund at 6.08% of General Fund revenues, above the 5% policy level Nominal deposits to the Budget Stabilization Fund, but $75 million of growth in economically sensitive tax revenues are budgeted for capital improvements Applied all one-time revenues ($65 million) for onetime expenditures ($108 million) 10.46% 12.00% $ % 9.11% 7.92% 8.05% 10.00% $ % $Millions $300.0 $ % 3.49% 4.23% 4.52% 5.31% 6.00% 4.00% $ % $ Emergency Reserve Contingency Reserve Budget Stabilization Fund UB Reserves Total Percentage of General Fund 0.00% 4 Source: City of Los Angeles, Office of the City Administrative Officer

6 Staffing Remains Below Peak Levels 5 Source: City of Los Angeles, Office of the City Administrative Officer

7 Revenue Trends and Growth Actual General Fund revenues in exceeded the adopted budget by $52.4 million and prior year revenue by $294.7 million Total General Fund Revenue for through is forecast to increase at an average of 3.4% annually Seven General Fund Taxes % Change from Prior Year 15% 12% 9% 6% 3% 0% -3% Property (including VLF), Utility, Business, Sales, Hotel, Documentary and Parking Taxes % change -- Left Scale 7 General Fund Taxes ($Billions) -- Right Scale $ Billions -6% Fiscal Year Ending Sources of General Fund Revenue for Fiscal Year Major General Fund Revenues, 71.4% Licenses, Permits, Fees and Fines, 18.0% Power Revenue Transfer, 5.0% Parking Fines, 3.0% Miscellaneous Revenue, 2.0% Transfers from Special and Reserve Funds, 1.0% 6

8 Adopted Budget Update Strong Reserves Began with Reserve Fund of 6.08% and total reserves of 8.05%, both above budget At Mid-Year, the Reserve Fund totals 6.24%, with total reserves of 7.95% Committed to maintaining a Reserve Fund above 5% Revenues Based on data through January 2018, revenue is $28.3 million above plan due to Property Taxes, ex-cra remittances, Business Taxes, Sales Taxes, and Transient Occupancy Tax Potential shortfalls in Utility Users Taxes and Documentary Transfer Taxes exist that may bring total revenues closer to plan Expenditures Fire emergencies caused cash-flow shortfalls in Fire Department due to delayed reimbursements Workers Compensation expenses above budgeted amount Based on Mid-Year adjustments and recommended future actions, remaining overexpenditures are under $30 million 7

9 Focus on Infrastructure Sidewalk Repair o $1.4 billion over 30 years; $31 million a year with 15.3% increase every 5 years o 60.5 sidewalk miles repaired since March 2015 Street Reconstruction o Annual pavement preservation program aimed at maintaining the Pavement Condition Index o Recommending $80 million for first Complete Streets Projects that incorporate reconstruction, with Vision Zero goals, sidewalk improvements, and Green Streets elements Clean Water o Proposition O (GO Bonds): 43 projects of which 26 have been completed and 17 active o Several Stormwater Projects to address Total Maximum Daily Load ( TMDL ) limits initiated in Affordable Housing o Estimated need is approximately 4,000 units a year: o Linkage Fee adopted to create a funding mechanism to increase the supply of affordable workforce housing in the City o Leveraging Federal funds and Tax Credits, CA Cap and Trade competitive grant awards, and new state $75 fee on mortgage refinances and other real estate transactions o Commitment to invest $200 million over 10 years to produce 4,000 units of Accessible Rental Housing 8

10 Policy Initiatives and Priorities Homelessness City voters approved $1.2 billion in bonds to build Permanent Supportive Housing over 10 years First bond issuance in 2017 County voters approved $355 million for homeless services City and County signed historic MOU to provide services in housing built by City Vision Zero Mission is to end all traffic deaths and serious injuries by 2025 Focus on High Injury Network of streets accounting for the majority of deaths HOLLYWOOD & HIGHLAND PEDESTRIAN SCRAMBLE 9 Source: City of Los Angeles, Office of the City Administrative Officer

11 Policy Initiatives and Priorities Public Safety Ongoing recruitment and hiring of Fire and Police personnel reflecting the diversity and values of Los Angeles residents Process underway for selection and appointment of new Police Chief to lead Department of over 10,000 Sworn Officers and approximately 3,000 civilians Transit County voters approved Measure M for $860 million annually; City share is approximately $42 million, gradually increasing based on sales tax growth within the County New State Gas Tax legislation (SB1) provides additional funds for City transportation needs 2028 Summer Olympics International Olympic Committee selected the City to host the 2028 Summer Olympic and Paralympic Games 10

12 Budget Outlook Considerations: Pensions and OPEB City fully funds both pension and OPEB Annual Required Contributions Funding for OPEB began in Both pension systems reduced their investment rates to 7.25%, which will impact City contributions beginning in ; LACERS may consider further reduction in to 7.00% Impact to the General Fund will be based on the Contribution Rates that include the investment rate as well as other factors such as economic and demographic assumptions 11 Source: City of Los Angeles, Office of the City Administrative Officer

13 Budget Outlook Considerations: Labor Relations Labor Contracts 41 individual MOUs covering 36,400 full-time City employees (including Airports & Harbor) 22 Labor Unions/ Employee Associations 800 non-represented employees Contract Status New LAPPL MOU certified by Union and expected to be considered by Council next month Beginning negations for Coalition MOU, which expire June 30, 2018 Organization Full-Time Employees Represented Number of Bargaining Units Los Angeles Police Protective League (LAPPL) 9,896 1 Status of Memorandum of Understanding Current Contract expires 6/30/18 New Contract expires 7/31/2019 United Firefighters of Los Angeles City 3,231 1 Contract expires 6/30/19 Coalition of LA City Unions 15, Contracts expire 6/30/18 Engineers and Architects Association 4,937 4 Contracts expire 6/22/19 Municipal Construction Inspectors Association Contract expires 6/22/19 12

14 Disciplined, Policy-Driven Debt Management Over a third of the City s direct debt is supported by property and special tax receipts Outstanding Direct Debt as of January 1, 2018 Total: $2.25 Billion (Voter-Approved in Blue) MICLA Equipment Leases 19% General Obligation Bonds 31% 74.8% of the City s net direct debt will be retired over the next 10 years MICLA Real Property Leases 49% Judgment Obligation Bonds 1% Debt Category Ratings (F/K/M/S&P)* Outstanding* General Obligation Bonds AA/AA/Aa2/AA- $ 700,210,100 Judgment Obligation Bonds A+/- -/A1/AA 22,545,000 MICLA - Real Property A+/AA-/Aa3/AA- 1,103,236,203 MICLA - Capital Equipment A+/AA-/Aa3/AA- 426,234,731 MICLA - Commercial Paper Program F1+/- -/P-1/A ,200,000 Solid Waste Resource Revenue Bonds AA-/AA/Aa2/A+ 178,720,000 Wastewater System Senior Revenue Bonds AA+/AA+/Aa2/AA+ 1,050,760,000 Wastewater System Subordinate Revenue Bonds AA/AA/Aa3/AA 1,629,370,000 * Outstanding as of January 1, Ratings as of February 23, Source: City of Los Angeles, Office of the City Administrative Officer

15 Debt Charts By policy, debt service is limited to 15% of general revenues for all direct debt and 6% for non-voter approved debt Current ratio of Voter & Non-Voter Approved Debt is 5.70% Current ratio of Non- Voter Approved Debt is 4.02% Debt Service Amount (000's) Amount (000's) $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50, % 5.70% 3.95% 4.02% Voter Approved and Non-Voter Approved Debt 6.47% 6.42% 4.32% 4.18% 6.18% 6.00% Non-Voter Approved Debt 3.93% 3.77% 15% General Revenues 5.24% 4.71% 6% General Revenues 3.11% 4.65% Fiscal Year General Obligation Bonds** Remaining General Obligation Authorization** 15% of GF Rev. 2.67% 2.67% $ Fiscal Year Convention Center Current MICLAs & Other Leases Commercial Paper Future MICLAs (CP Refundings) Judgment Obligation Bonds 14 Source: City of Los Angeles, Office of the City Administrative Officer

16 Debt Calendar Proposed Schedule of Bond Issuances as of March 13, 2018 Expected Estimated Bond Issuance Sale Date Amount Solid Waste Resources Revenue Bond, Series 2018-A May 2018 $87 million General Obligation Bonds, Series 2018 June 2018 $100 million Tax and Revenue Anticipation Notes 2018 June 2018 $1.6 billion Other Transactions The City s Wastewater System Commercial Paper program letters of credit expire in December 2018 A request for proposal for credit providers and remarketing agents The City s MICLA Convention Center Commercial Program letter of credit expires in November 2018 A request for proposal for credit providers and remarketing agents 15

17 Investor Relations Contact Information The CAO s investor relations website is a centralized source of information that aggregates useful materials for ease of access, including links to other information 200 N. Main Street City Hall East, Room 1500 Los Angeles, CA (213) cao.debt@lacity.org Web: Richard H. Llewellyn, Jr. City Administrative Officer Ben Ceja Assistant City Administrative Officer Natalie R. Brill Chief of Debt Management Source: City of Los Angeles, Office of the City Administrative Officer 16