Three Year Plan Report

Transcription

1 Three Year Plan Report Presented by: Miguel A. Santana City Administrative Officer to the: Budget and Finance Committee April 13, 2015

2 WHERE HAVE WE BEEN? April 7, 2010 MOODY'S DOWNGRADES CITY OF LOS ANGELES G.O. RATING Moody s Investors Service has downgraded to Aa3, from Aa2, our rating of Los Angeles general obligation bonds.the downgrade primarily reflects the continued erosion of the city s historically betterthan average willingness and ability to quickly rebalance its budget mid year.the downgrade also partly reflects the likelihood that the city s general reserves at the end of the current fiscal year could be materially weaker than we had previously expected.los Angeles underestimated the full effect of the recession on its revenues and was slow in implementing planned cost savings for the current fiscal year.

3 WHAT HAVE WE ACCOMPLISHED? Fiscal Responsibility: Slow and Steady Growth 20% Seven General Fund Taxes % 4.0 % Change from Year Ago 10% 5% 0% -5% -3.7% -4.8% $ Billions -10% Fiscal Year Ending 1.5

4 WHAT HAVE WE ACCOMPLISHED? Fiscal Responsibility: Ratings Improvements 0.80% TRAN Interest Rates 0.70% 0.72% 0.60% Interest Rate 0.50% 0.40% 0.30% 0.44% 0.26% 0.20% 0.20% 0.17% 0.10% 0.11% 0.00% July 10, 2009 June 29, 2010 June 29, 2011 June 27, 2012 June 26, 2013 June 26, 2014 Sale Date

5 WHAT HAVE WE ACCOMPLISHED? Fiscal Responsibility: Structural Balance Four Year Budget Outlook Adopted Budget $5,700 $5,600 $5,500 $5,472 $5,648 $23 $5,525 $5,625 ($72) Millions $5,400 $5,300 $5,200 $5,138 $5,293 ($166) ($185) $5,287 $5,453 $5,100 $5,138 $5,127 $5,000 $4,900 $4, Revenues (Proposed) Expenditures (Proposed)

6 WHAT HAVE WE ACCOMPLISHED? Fiscal Responsibility: Healthy Reserves Reserve Fund Balance as of July 1 $ % $450.0 $ % 8.70% $ % 8.00% $350.0 $ % $ % Millions $250.0 $ % 3.46% 3.93% 4.59% $ % $ % 4.00% $150.0 $40.9 $0.5 $30.7 $0.5 $51.0 $80.1 $108.0 $192.8 $ % $ % $50.0 $125.2 $121.0 $120.3 $120.6 $125.1 $133.8 $ % $ % Emergency Reserve Amount Contingency Reserve Amount Budget Stabilization Fund Amount Total Percent of General Fund

7 WHAT HAVE WE ACCOMPLISHED? Fiscal Responsibility: Compliance with City Financial Policies $60.0 Proposed Capital Expenditure as Compared to Capital Investment Policy $50.0 $54.8 $40.0 $48.9 $51.7 Millions $30.0 $20.0 $31.5 $24.6 $10.0 $11.6 $9.1 $6.4 $6.5 $6.8 $ Proposed Amount Target Amount (1% of General Fund Rev.)

8 WHAT HAVE WE ACCOMPLISHED? Managing Legal Liabilities Made strides in addressing our outstanding legal liabilities: Willits v. City of Los Angeles: Ardon v. City of Los Angeles Romero v. City of Los Angeles Employee related litigation (e.g City Attorneys)

9 WHAT HAVE WE ACCOMPLISHED? Staffing Levels Authorized City Staffing (Not Including Proprietary Departments) 40,000 35, ,000 25,000 22,080 22,167 21,610 22,324 22,723 22,929 22,718 21,852 19,225 18,597 18,170 18,187 18,168 20,000 15,000 10,000 5,000 13,799 13,807 13,805 13,832 13,944 14,244 14,253 14,012 13,740 13,677 13,647 13,706 13, Police (Sworn and Civilian) All Others

10 WHAT HAVE WE ACCOMPLISHED? Pension Contributions Updated LAFPP/LACERS Contributions Projections (Source: Illustratrions of future City contributions prepared by Segal (actuary) as commissioned by the CAO.) $1,200.0 $1,181.4 $1,172.1 $1,150.0 $1,100.0 $1,050.0 $1,000.0 $1,036.5 $1,036.5 $1,118.3 $1,082.8 $35.5 $109.1 $1,072.3 $115.9 $1,056.2 $1,148.1 $1,018.4 $129.8 $950.0 Cumulative Four Year Savings: 6.9% $ Adopted Budget Projection Updated Projection

11 WHAT HAVE WE ACCOMPLISHED? Funded Ratios in Retirement Systems Projected Funded Ratio for LACERS and LAFPP (Pensions and Health) (Source: Illustrations of future funded ratios prepared by Segal (actuary) as commissioned by the CAO.) 100.0% 94.5% 90.0% 80.0% 77.3% 80.8% 83.5% 86.1% 88.5% 74.7% 76.6% 90.7% 92.7% 78.4% 80.2% 70.0% 69.1% 68.1% 70.3% 72.5% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% LACERS LAFPP

12 WHAT HAVE WE ACCOMPLISHED? Labor Partnerships Pension reform for future hires Lower starting salary Employee contributions to health care premiums Retiree health care contributions Control compensation by limiting COLAs

13 WHAT HAVE WE ACCOMPLISHED? December 11, 2014 MOODY'S UPGRADES CITY OF LOS ANGELES (CA) REAL PROPERTY AND EQUIPMENT LEASE BACKED OBLIGATIONS [Los Angeles] is well positioned to strengthen its strong credit profile given a resilient and growing tax base, a highly diverse economy, and gradually growing reserves. The city s strong financial management has curtailed expense growth, including significant pension cost in the wake of the Great Recession; prudently positioned the city to grow reserves with an expanding economy; and ultimately reversed the four year budget outlook from growing deficits to a declining trend.

14 WHERE ARE WE NOW? Employee costs continue to grow Pressure on restoring services increasing New litigation, including on power transfer

15 WHERE ARE WE NOW? Employee Costs $6,000 Portion of General Fund Dedicated to Employee Related Costs (Adopted Budget) 100% Millions $5,000 $4,000 $3,000 $3,947 $942 76% $4,339 $991 77% $4,438 $969 78% $4,554 $935 79% $4,400 $4,375 $4,386 $4,550 $1,043 $991 $917 $932 79% 80% 77% 76% $5,138 $4,867 $1,153 $1,071 78% 78% 95% 90% 85% 80% 75% 70% $2,000 $1,000 $3,005 $3,347 $3,469 $3,618 $3,357 $3,384 $3,469 $3,619 $3,796 $3,985 65% 60% 55% $ Employee Related Costs Expenses Percent Dedicated to Employee Costs 50%

16 WHERE ARE WE NOW? Average Cost Per Employee $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $96,384 Cost Per Employee: (Includes all sworn and civilian costs including salaries, overtime, pensions, benefits, and workers' compensation.) 8.6% $104, % $108, % $113, % 3.3% 3.5% $108, % $118, % 1.2% $124, % 2.7% $131, % 2.0% $135, % $144, % 1.1% 1.3% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% $40, % $20,000 $ 3.8% Total Cost Per Employee Percent Change CPI Change 4.0% 6.0%

17 WHERE ARE WE NOW? Drivers of Employee Costs Table 1: Salary and Pension Cost Increases, to Cost Cost Percent Cost Driver per Employee Per Employee Total Increase Increase Sworn Salaries $ 91,861 $110,302 $ 18,442 20% Sworn Pensions $ 12,226 $ 45,575 $ 33, % Civilian Salaries $ 56,882 $ 75,869 $ 18,987 33% Civilian Pensions $ 10,843 $ 19,960 $ 9,117 84% CPI 20%

18 WHERE SHOULD WE GO? Responsible Fiscal Management Maintain as a policy objective moving toward the elimination of the structural deficit. Cumulative Four Year Deficit by Year of Outlook (Fiscal Years Included in Outlook) $ FY 11 ( to ) FY 12 ( to ) FY 13 ( to ) FY 14 ( to ) FY 15 ( to ) $(200.0) Millions $(400.0) $(600.0) $(800.0) $(1,000.0) $(353.3) $(405.0) $(1,200.0) $(1,400.0) $(1,600.0) $(1,479.5) $(1,145.7) $(1,053.8)

19 WHERE SHOULD WE GO? Responsible Fiscal Management Establish priorities for the use of debt vs. cash. $180.0 $160.0 $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $ $28.1 $47.7 $46.1 $91.2 $83.0 $89.3 $55.6 $102.7 Funding Approved for MICLA Financing Adopted Budgets $41.3 $128.0 $29.7 $68.2 $28.7 $10.9 $9.0 $49.7 $28.5 $49.6 $66.6 $ Equipment Amount Real Property Amount Equipment Percent 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

20 WHERE SHOULD WE GO? Responsible Fiscal Management Transition to pay as you go for Police Department overtime. Sworn Overtime (OT) Amount Expended 2004 through 2015 (Non Reimbursable) Millions $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 $56.3 $66.4 $75.6 $78.7 $80.9 $32.4 $3.2 $5.5 $ (Estimated) $19.5 $ Hours Allowable Sworn Overtime Bank Amount Expended

21 WHERE SHOULD WE GO? Responsible Fiscal Management Grow reserves (Reserve Fund plus Budget Stabilization Fund) to 10 percent of General Fund revenue. Resolve major litigation. Limit the backfill of federal and other grant reductions.

22 WHERE SHOULD WE GO? Focus on Core Services Revise the Capital Investment Policy to add a five year investment plan and to focus on infrastructure quality goals rather than spending targets. Continue to implement the recommendations in the 2014 Fire Department deployment study by PA Consulting and move toward civilianization and the development of a new Standards of Cover study. Hire Detention Officers to staff jails so that Police Officers can return to the field; initiate a police workforce capacity study to expand these efforts throughout the Department s operations. Building from the strategic advisor s report on the City s information technology (IT) system, develop a strategic plan to identify specific projects in priority order and with defined funding requirements.

23 WHERE SHOULD WE GO? Sustainable Workforce Instruct the Personnel Department and the CAO to develop a comprehensive approach to succession planning Citywide. Eliminate managed hiring. City Employees by Generation Baby Boomers (Age 50 71), 49% Millennials (Age 14 34), 13% Generation X (Age 35 49), 37% The Greatest Generation (Age 72+), 1% 20 to 24 Years of Service, 8% City Employees by Years of Service 25+ Years of Service, 21% 10 to 19 Years of Service, 39% Less than 10 Years of Service, 31%

24 WHERE SHOULD WE GO? Strengthen Revenues Support the City s diverse revenue system by maintaining the unrestricted nature of the General Fund. General Fund Revenues by Category: Adopted Budget Tax Increment Impact on 1% Property Tax Transient Occupancy Tax 4% Documentary Transfer Tax 4% Power Revenue Transfer 5% Sales Tax 7% Business Tax 9% Parking Fines 3% Other 7% Utilities Users' Tax 12% CRA and Property Tax 33% Licenses, Permits, Fees, and Fines 16% Millions $1,200.0 $1,000.0 $800.0 $600.0 $400.0 $200.0 $ $1,168.1 $1,197.9 $1,207.7 $1,017.7 $58.8 $70.2 $48.0 $22.7 $1,109.3 $1,127.7 $1,159.7 $ % Property Tax (Adopted Budget) CRA Tax Increment