City of Los Angeles Revenue Day. Pursuing a Balanced Approach Towards Fiscal Sustainability

Transcription

1 City of Los Angeles Revenue Day Pursuing a Balanced Approach Towards Fiscal Sustainability Presented by Miguel Santana City Administrative Officer h ~cy- August 10, 2011

2 Executive Summary 0 Our structural deficit requires a "Balanced Approach" solution which is focused on: ~ Expenditure Reductions );;> Revenue Enhancements o Over the last several years, the City has been focused on expenditure reductions and relying on one-time revenue enhancements to close the annual budget gap: );;> Expenditure reduction through workforce reductions (ERIP, layoffs, and hiring freezes) ).;> One-time revenues such as SPRF Transfer 0 While City revenues have generally stabilized, ongoing costs continue to rise and challenges to existing revenue sources threaten our General Fund: ~ Signs of growth in economically sensitive Sales Tax and TOT Revenues prior to recent events ).- Cost drivers continue to be pensions, healthcare, and compensation ).> Ardon Case, Prop 26, Tax Reform Proposals 0 We need to focus on revenue through the following strategy: ~ Maintain existing revenues ~ Maximize existing revenue sources ;;.. Raise revenues Y OF LOS NGELES EJ

3 Balanced Approach - Consistent with Three Year Plan Stable Reserve Fund Reduce or Eliminate General Fund Subsidies Maximize Flexible Funding Strengthen & Streamline Central Administration Functions & Contracting Process Re-evaluate Discretionary Programs Consolidate Services Evaluate and Redesign Core Services Partner with Nonprofits, Foundations and Private Sector Maximize City Assets Strengthen Core Functions Reduce the Size of the Workforce Reduce Healthcare and Workers' Compensation Costs Control Pensions and Retiree Health Costs Align Compensation Eliminate Furloughs through Concessions Pursue New Revenue A balanced approach to the budget is consistent with our Three Year Plan to Fiscal Sustainability. ITY OF LOS NG LES (!]

4 Balanced Approach - Addressing Revenues and Expenditures $5,400 The City has made strides in reducing the structural deficit by focusing on expenditure reductions. To help close the remaining, revenues must also be a focus. $5,200 $5,156 $5,000 -(/) s:::: 0 = $4,800 :ae 4:1}- $4,600 $4,400 $4,200 $4,375 $4, June 2011 Revenue Dec 2010 Revenue ~ June 2011 Expenditures _.,_ Dec 2010 Expenditures CITY 0 LOS NGELES (!]

5 Balanced Approach - Expenditure Reductions have been the focus 0 After 2 years of significant declines in the City budget, modest increases in ~ Most of the increase is in Special Funds, while General Fund budget remains relatively flat $8 $7 - $6 Iii $5 1: 0 = $4 m ~ $3 $2 $1 $0 2.3% $ General Fund 4.3% $ City Budgets Special Funds ~Annua l %Change % 4.0% 3.0% 2.0% 1.0% 0.0% (1.0%) (2.0%) - (3.0%) (4.0%) 0 City has reduced staffing by 13.2 /o from peak or about 4,900 less positions from levels. 40,000 35,000 30,000 Ill 25,000 s::::: 20,000 15,000 10,000 5,000 0 ',i:i "iii ~ 1.4% 37,173 22,929 0 _L_,_~ Police c::=j Al l Others Citywide Authorized Staffing (0.5%) 36,971 (3.0%) 35,864 (8.1%) 32,965 19, Annual% Change YOFLO (2.1%) 32, % 0.0% {2.0%} {4.0%) {6.0%) {8.0%) = _ {10.0%) NGELES 0

6 Taking Steps Towards a Balanced Approach Adopted Budget D Reflects the Four "Pillars" approach D Over 50% are ongoing solutions D However, only 6% of solutions are from ongoing revenue enhancements General Fund Budget Solutions to $336.3 Million Deficit Human Resources Benefit savings 5% ($16.5m) Maximization of special funds 8% ($27.2m) Reprioritization of.-( capital projects I i 11% ($37.8m) ;, Rec. and Parks utilities New revenue 5% ($15.9m) /6% ($18.6m) Parking revenue 5% ($16.7m)... Furloughs & concessions* 29% ($98. 4m) Other reductions 13% ($44.8m) -- Fire Dept. savings 6% ($19.4m) Police concessions 12% ($41.Om) *Projected labor concessions wi ll generate alternative savings that will significantly reduce furloughs. CITY OF OS NG LES (!]

7 Taking Steps Towards a Balanced Approach Adopted Budget D Adopted budget reflects the City's diversified General Fund revenue base Transient Adopted Budget Revenues Documentary Transfer Tax Occupancy Tax 2 % ($ 107 ) 3%{$136) ~~ Sales Tax % ($306) (Dollars in Millions) Parking Users' Tax 2% ($88) Property Tax /33% ($1,436) Business Tax 10% ($439) All Other 12% ($519) Utility Users' Tax 14% ($628) Licenses, Permits, Fees & Fines 17% ($725).. CITY OF LOS NG LES (!]

8 Adopted Budget Reflects Conservative Revenue Projections Property Tax $1,424,143 $1,436,363 $12, % Utility Users' Tax 624, ,832 2, % Licenses, Permits, Fees and Fines 710, ,092 15, % Business Tax 424, ,219 15, % Sales Tax 291, ,239 14, % Documentary Transfer Tax 102, ,000 5, % Residential Development Tax 1,500 1, % Transient Occupancy Tax 127, ,200 9, % Parking Users' Tax 84,000 88,200 4, % State Motor Vehicle License Fees 13,792 14, % All Other ,003 (11250} -0.3% Subtotal General Fund $4,298,539 $4,376,753 $78, % Transfer from Reserve Fund 3,617 8,939 5,322 Total General Fund $4,302,156 $4,385,692 $83, % Y OF LO ANGELES (2]

9 Focusing on Revenues - All General Fund Revenues Actual Budget 4,500 4,000 Ill s::.2 ::!!: ~ 3,500 3, Fiscal Year Ending total General Fund receipts finished 0.1% below the revised budget-- $5 million. Close. Projected growth in is 2%. OS GE s[!]

10 Focusing on Revenues - Major General Fund Taxes Property (includes VLF), Utility, Business, Sales, Hotel, Documentary and Parking Taxes 0 C) <(... co Cll >-...;... Cll C) c: co ~ 0.. ~ 10% 5% 0% -5% tj) c: 0 m ~ -10% Fiscal Year Ending -%, cl1ange -- Left Scale 7 General Fund Taxes ($Billions) -- Right Scale I Major General Fund taxes currently account for more than 70% of all General Fund revenue. The balance is fees. transfers from other funds. interest j income etc. The recession affected each of these major taxes and combined revenue from these sources declined by 4.9% in Based on ' receipts through the first three quarters of some accounts such as sales and business taxes appear to be recovering. but property and ; utility taxes are still below the prior-year level. Current estimates are that. in aggregate. these major taxes will not grow significantly until OS NG

11 Property Tax Actual Budget 1,600 1,400 1,200 f/1 1:: 0 ;; 1,000 ~ ~ f--- -,----,---r Fiscal Year Ending property tax finished 0.7% above the revised budget-- $10 million. YOF LOS G LES~

12 Licenses, Permits, and Fees Actual Budget /) c: -0 = 600 ~ Fiscal Year Ending Licenses, Permits, Fees finished 2.5% below the revised budget-- $18 million. I... CITY OF LOS ANGELES [!!]

13 Utility User's Tax Actual Budget 700 Ill r::::.2 ~ fh Fiscal Year Ending utility users' taxes finished 0.5% above the revised budget-- $3 million. All components--electricty, gas and communications- finished a little above the revised budget.... CITY OF LOSA G L S ~

14 Business Tax Actual Budget (/) c.q ~ 380 ~ Fiscal Year Ending business taxes finished 1.3% below the revised budget -- $6 million. This loss is nearly offset by a positive variance in the sales tax. 'Y OF OS NGE ES E!)

15 Sales Tax Actual Budget Fiscal Year Ending sales tax finished 1.7% above the revised budget-- $5 million. This positive variance is offset by a negative variance in the business tax. The decline in is a sh itt of 25% of the City sales tax to the property tax account. The new state budget provides that this shift, known as the triple-flip, will end in the current fiscal year. CITY OF LOS ANG LES E!)

16 Transient Occupancy Tax Actual Budget Ill c:.!2 120 ~ ia Fiscal Year Ending hotel tax finished 6% above the revised budget -- $8 million. There is upside potential for Cl Y OF- OS G LES@

17 Documentary Transfer Tax Actual Budget /) c: :E 140 ih I Fiscal Year Ending documentary transfer tax finished 1.6% below the revised budget -- $1.6 million. This is a very volatile account.,. CITY OF LO NG LES ~

18 Parking User's Tax Actual Budget Fiscal Year Ending parking users' tax finished 1% below the revised budget-- $0.8 million. Close.... CITY 0 LOS ANGEL~S E)

19 Parking Fines Actual Budget Ul 120 c: g :iii ~ t---- r - - -, - - -, , Fiscal Year Ending parking users' tax finished 0.2% below the revised budget -- $0.3 million. Close.. CITY 0 LOS NGEL 5 (2!1

20 Revenue Challenges Out of our direct control: D Large settlements or judgments D Questions and challenges on the legality of revenue sources (Water Transfer lost after such a challenge) D Revenue erosion from changing behavior or technology (Communication Users' Tax) D Economic factors such as a "Double Dip" recession D Obstacles for creating new revenue sources or increasing existing sources (Prop 218 & Prop 26) Within our direct control: D Not meeting targets due to program implementation delays, lack of enforcement, or - proper collection procedures D Revenue erosion or diversion from policy decisions '"' CITY OF LOS A G~LES E!)

21 Revenue Strategy Maintain existing revenue. Maximize existing revenue sources. Raise revenues. CITY 0 LOS ANGELES (ill

22 Revenue Strategy Maintain existing revenue. Existing Financial Policy: Any revenue reductions for both the General Fund and special funds shall only be approved as temporary adjustments with a sunset clause. Permanent revenue reductions should not implemented due to Proposition 218 restrictions that prohibit increasing revenue without voter approval. Additional Policy to Consider: If a permanent revenue reduction is being pursued, a replacement revenue should be identified, quantified, and approved prior to the permanent revenue reduction being implemented. Examples: Business Tax & Power Revenue Transfer I c TY OF LOS NGELES ~

23 Revenue Strategy Maximize existing revenue sources. Existing Financial Policy: Sufficient user charges and fees shall be pursued and levied to support the full cost of operations for which fees are charged, including all operating (direct and indirect) and capital costs... Maximize existing revenue sources through: Enhanced Enforcement Enhanced Collections Enhanced Asset Management Full-cost Recovery Implementation of the budget.. C TV OF LOS ANGEL S ~

24 Revenue Strategy Raise revenues. Existing Financial Policies: New and expanded unrestricted revenues sources should be first applied to support existing programs prior to funding new programs... The City will continuously seek new revenues and pursue a diverse revenue base to limit the dependence on one or only a few revenue sources. This revenue diversity will shelter the City from short-time fluctuations in any one revenue source. Raise revenues through: Ballot initiatives Raise rates on existing taxes Create a new tax/ revenue source Partnerships with non-profits and private sector One-time opportunities "' "' CITY OF LOS A GELES ~

25 Revenue Opportunities DTax Rate Increases to Existing Tax Source such as Parking Users' Tax, Transient Occupancy Tax, Documentary Transfer Tax, etc. D Enhanced Revenue Opportunities for Zoo under non-profit or private management D Enhanced Revenue Opportunities for Convention Center under non-profit or private management D New revenue sources subject to Prop 218 (i.e. Billboard Tax) D Parking Garages- Unsolicited Proposals ~ Cash ~ Leases.. :- CITY OF los ANGEL S ~