FY MID-YEAR BUDGET UPDATE

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1 FY MID-YEAR BUDGET UPDATE Presenters: Dave Millican, Special Advisor Joseph Lillio, Chief Financial Officer February 9,

2 BUDGET PRESENTATION OUTLINE Recap of 1 st Quarter Update Review Recap of FY 15/16 Budget Reduction / Goals General Fund Mid-Year Update Finance Staffing Plan Conclusion 2

3 RECAP OF 1 ST QUARTER REVIEW 3

4 RECAP OF GENERAL FUND 1 ST QUARTER REVIEW 4

5 RECAP OF GENERAL FUND 1 ST QUARTER REVIEW Revenues were on target in 1 st Quarter; TOT anticipated to come in $400k over budget projection; Adjustment to be made at mid-year. Sales Tax: Sales Tax was tracking on target $3.5 Million 1x revenue anticipated: Council to discuss in January Expenditures: Expenses tracked below budget. 5

6 RECAP OF FY 15/16 BUDGET REDUCTION GOALS 6

7 RECAP OF FY 15/16 BUDGET REDUCTION 1 ST QUARTER BUDGET REDUCTIONS GOAL UPDATE GOAL Achieved 1st Quarter TOTAL % ACHIEVED ELIMININATING VACANCY MANAGEMENT (4,200,000) (4,200,000) 100% CAPITAL OUTLAY INCREASES (PURCHASE OF POLICE VEHICLES) 484, ,972 95% EFFICIENCY SAVINGS (621,786) (395,565) 64% DEPARTMENTAL BUDGET INCREASES / REDUCTION (4,400,000) (1,157,895) 26% PROPOSED EMPLOYEE CONCESSION (4,000,000) - 0% (12,737,226) (5,293,488) 42% 7

8 MID-YEAR UPDATE OF FY 15/16 BUDGET REDUCTION GOALS 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $4.2M Elimination Vacancy Management Achieved $4.2M Target Budget Goal Achieved at Mid-Year $622K Efficiency Savings Achieved $622K 100% $4.4m Departmental Proposed Achieved $3.2M 72% Achieved Mid-Year FY15-16 $4M Employee Concession To be Achieved Via Council's Approved Plan December 15,2015 to fill $4M Gap TOTAL % ACHIEVED BUDGET REDUCTIONS GOAL UPDATE GOAL Achieved 1st Quarter Changes from 1st Quarter ELIMININATING VACANCY MANAGEMENT (4,200,000) (4,200,000) (4,200,000) - 100% CAPITAL OUTLAY INCREASES (PURCHASE OF POLICE VEHICLES) 484, , , % EFFICIENCY SAVINGS (621,786) (395,565) (621,786) (226,221) 100% DEPARTMENTAL BUDGET INCREASES / REDUCTION (4,400,000) (1,157,895) (3,210,046) (2,052,151) 72% PROPOSED EMPLOYEE CONCESSION (4,000,000) - - 0% (12,737,226) (5,753,460) (7,547,272) (1,793,812) 59% 8

9 FY 15/16 $4.4 M TARGET REDUCTIONS: STATUS UPDATE DEPARTMENT/ PROGRAM FY 15/16 CHANGES IN THE MID-YEAR UPDATE ACHIEVED % ADOPTED TO BUDGET DATE Carnegie Art Museum ($ 40,469) ($ 40,469) 100% City Attorney $ 112,088 $ 112, % City Clerk ($ 7,989) ($ 7,989) 100% City Manager s Office ($ 60,583) ($ 38,219) 63% City Treasurer ($ 18,640) ($ 18,640) 100% Convention and Visitors Bureau ($ 70,000) ($ 70,000) 100% Development Services ($ 387,500) ($ 271,349) 70% Economic Community Development $ 5,000 $ 5, % Fire ($1,091,960) ($377,480) 35% General Services ($ 672,382) ($ 620,680) 92% Human Resources $ 472,231 $ 472, % Library ($ 259,098) ($ 182,460) 70% Non-Departmental ($ 128,000) ($ 128,000) 100% Performing Art Center Contribution ($ 172,898) ($ 172,898) 100% Police ($1,151,970) ($994,970) 86% Recreation & Community Services ($ 981,597) ($ 876,211) 89% General Fund Total (+/-) ($4,453,767) ($3, 210,046) 72% 9

10 APPROVED PLAN TO FILL $4 MILLION GAP 10

11 APPROVED PLAN TO FILL THE $4 MILLION GAP EXPENDITURE REDUCTION RECOMMENDATIONS TOTAL Departmental Budget Reductions (Without layoff & Partial Service Impact) $ 1,286,910 Strategic Position Recruitment Freezes for Remainder of Year $ 1,012,821 Reduce Transfer to Traffic Safety Fund $ 300,000 Top Management Begins paying 5% employee share of PERS (1/2016-6/2016) $ 41,000 SUBTOTAL EXPENDITURES: $2,640,731 USE OF 1X REVENUE RECOMMENDATIONS Anticipated Increases in Transient Occupancy Tax (TOT) Revenue $ 400,000 Anticipated Increases from Property Tax Secured $ 200,000 Anticipated Increases from Property Supplemental Tax $ 150,000 Anticipated Increases from Deed Transfer Tax $ 150,000 Anticipated Increases from Franchise Tax-SC Gas & Edison $ 261,500 Anticipated Increases Other Reimbursements (Police Agreements) $ 171,769 Anticipated Increases from Snack Bar & Concession Sales $ 26,000 *ANTICIPATED REVENUE INCREASES REPRESENT 1% OF TOTAL ADOPTED REVENUES SUBTOTAL OF 1X USE OF REVENUE: $1,359,269 * TOTAL EXPENDITURE REDUCTION & USE OF 1X REVENUE: $4,000,000 11

12 FY15-16 GENERAL FUND MID-YEAR UPDATE 12

13 MID-YEAR UPDATE: FY 15/16 GENERAL FUND REVENUES BUDGET = $115.5M FY15-16 Adopted Revenue Budget Fines & Forfeitures 2% Franchises 3% Other Fees & Charges 17% Service Fees & Charges 6% Transient Occupancy Tax 4% Business License Tax 5% $27.2M or 24% Sales Tax $46.6M or 40% Property Tax *76% of revenues are driven by general and local economy and derived from taxes controlled by voters which included Property Tax, Sales Tax, TOT, Business License, and Franchises Property Tax Sales Tax Business License Tax Transient Occupancy Tax Franchises Service Fees & Charges Fines & Forfeitures Other Fees & Charges 13

14 MID-YEAR UPDATE: FY 15/16 GENERAL FUND REVENUES ESTIMATES = $119.1M FY15-16 Revenue Budget compared Revenue Year-End Estimates 50,000,000 45,000,000 $46.6M $47.6M 40,000,000 35,000,000 30,000,000 $27.2M 25,000,000 20,000,000 15,000,000 $26.6M $19.1M $18.9M 10,000,000 5,000,000 - Property Tax Sales Tax Other Fees & Charges FY15-16 Adopted Budget $7.1M $6.7M Service Fees & Charges $5.5M $5.2M Business License Tax $4.3M $4.7M Transient Occupancy Tax $3.3M Franchises FY15-16 Year-End Estimates $3.6M $2.3M $3.5M $2.2M Fines & Forfeitures One-Time Successor Agency Loan Payment 14

15 FY15-16 ESTIMATES ASSUMPTION How Did We Prepare Them? Long and short-term trends: four major revenues Fiscal and economic data developed by HDL, LAO, County Assessor, and State Department of Finance. Economic forecasts and trends. Department Interviews and trend analysis 15

16 PROPERTY TAX: RATE OF CHANGE 8% Property Tax Rate of Changes from FY07-08 to FY % FY % FY15-16 Estimated 6% 4% FY % FY % 2% 0% FY % FY % -2% -4% STARTING FY07-08 FY % FY10-11, -3% -6% 16

17 PROPERTY TAX OVER LAST 10 YEARS 50 Property Tax Over 10 Years (in Millions) Average Annual Increase is.63% Over the period of 8 years, the actual average increase of annual growth is.63% $38.8 M $41.5 M $42.1 M $40.3 M $39.1 M $40 M $41.2 M $42.1 M $44.7 M $47.6 M FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 Estimated Actuals 17

18 SALES TAX OVER LAST 10 YEARS SALES TAX (in Millions) excluding Measure O Average Change 2% Over the period of 10 years, the average annual rate of growth is.33% FY14-15 spike in Sales Tax included County overpayment from Fillmore Adjustment FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 Adopted Budget FY15-16 Estimated Actuals 18

19 FY 15/16 SALES TAX BY MAJOR CATEGORY FY15-16 ESTIMATED ACTUALS FOR GROSS SALES TAX BY MAJOR INDUSTRY GROUP Fuel/Service Stations $2.7M 9% State/County Pools $3.1M 11% Building/Construction $1.8M 6% Restaurants/Hotels $2.9M 10% Food/Drugs $1.3M 5% General Consumer Goods $6.9M 24% Auto/Transportation $6.6M 23% Business/Industry $3.6M 12% 19

20 SALES TAX RECENT TRENDS 3rd QTR 2014 vs. 3rd Qtr 2015 Auto/Transportation 8% Building/Construction 6% Business/Industry -1% Food/Drugs 10% Fuel/Service Stations -14% General Consumer Goods 3% Restaurants/Hotels 2% -15% -10% -5% 0% 5% 10% 15% Source: HDL or Hinderliter, de Llamas & Associates 20

21 FRANCHISE TAX OVER 10-YEARS Franchises (in Millions) FY09-10, spike was due to catch up adjustment from Southern California Gas Tax FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 Adopted Budget FY15-16 Estimated Actuals 21

22 BUSINESS LICENSE TAX OVER 10-YEARS 6.50 Business License Tax (in Millions) In Feb 2011, Council adopted Ordinance to convert renewal of business tax license from July 1 to monthly based on anniversary month of business FY06-07 FY07-08 FY08-09 FY09-10 FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 Adopted Budget FY15-16 Estimated Actuals 22

23 FY 15/16 GENERAL FUND REVENUE: YEAR-END ESTIMATED ACTUALS = $119.1M FY15-16 Estimated Actuals (in Millions) Sales Tax $26.6M 22% One-Time Successor Agency Loan Payment $3.5M 3% Transient Occupancy Tax $4.7M 4% Fines & Forfeitures $2.3M 2% Franchises $3.6M 3% Service Fees & Charges $6.67M 6% Business License Tax $5.2M 4% Other Fees & Charges $18.9M 16% Property Tax $47.6M 40% 23

24 FY 15/16 GENERAL FUND EXPENDITURES TOTAL = $115.5M FY15-16 Adopted Operating Budget by Departments Debt & Transfer to Other Funds $10.2M 9% Other Departments $11.4M 10% Library $4.3M Recreation 4% $4.8M 4% General Services $9.5M 8% Development Services $6.3M 5% Fire $15.4M 13% Police $53.6M 46% Public Safety is 80% of all Funds comprising of : 60% General Fund 9% Carman Override 7% Measure O 4% Other Funds (such as CUPA Operating Funds and Grant Funds) 24

25 FY 15/16 GENERAL FUND YEAR-END ESTIMATES OF $117.1M 60,000,000 50,000,000 $53.6M $52.6M* FY15-16 Revised Budget $117.7M compared to Year-End Estimated Actuals of $117.1M $52.8M 40,000,000 * Included Code Compliance Shift of Budget in amount of $1,124,865 from Police to Development Services 30,000,000 **Includes Implementation Initiatives from 1x Proceeds and offset of $4.6M reflected in Non-Departmental 20,000,000 10,000,000 $15.4M $15.1M $14.9 M $6.3M $7.1M* $7.1 M $9.5M $9.2M $8.8 M $4.3M $4.2M $4.8M $4.5M $4.2 M $4.4 M $10.2M $10.5 M $10.6 M $14.4M** - Police Fire Development General Services Library Recreation Debt & Transfer Other Services to Other Funds Departments FY15-16 Original Budget FY15-16 Revised Budget FY15-16 Year-End Estimates * Included Code Compliance Shift of Budget in amount of $1,124,865 from Police to Development Services **Includes Implementation Initiatives from 1x Proceeds and offset of $4.6M reflected in Non-Departmental $11.4M $14.2 M 25

26 RECOMMENDED GENERAL FUND BUDGET AUGMENTATION USE OF 1X REVENUE $ One-Time Revenue of Proceeds of Successor Agency Loan Payment approved by Department of Finance $ 3,502, Council recognized $177,444 for Labor Attorney Contract Council recognized $100,00 for Internal Audit Phase I Previously Approved: $ 177,444 $ 100,000 $ 277,444 IT Master Plan Phase I Class & Comp Study Phase I Class & Comp Study Phase 1 Fleet Management Review and Study Professional Legal Assistance with the IRS Audit Legal Assistance with IRS Audit Development of the FY16-17 Budget Current Building Maintenance and Repair Plan Approved on 1/26/16: $ 427,000 $ 50,000 $ 15,000 $ 15,000 $ 25,000 $ 175,000 $ 100,000 $ 807,000 TOTAL APPROPRIATED FROM 1X SUCCESSOR AGENCY LOAN PAYMENT $1,084,444 26

27 GENERAL FUND MID-YEAR SUMMARY (PRIOR TO AUGMENTATION REQUEST) General Fund Budget Summary ($ in Millions) FY Adopted Budget FY Augmentation to Budget FY Proposed Revised Budget FY Estimated Year-End Variance % Changes Beginning Cash (Preliminary Audit) $ $ Revenues Property Tax % Sales Tax (0.56) -2% Franchises % Business License Tax (0.24) -4% Transient Occupancy Tax % Deed Transfer Tax % Building Fees & Permits (0.28) -16% Other Revenue (0.34) -1% One-Time Successor Agency Loan Payment Total Revenues % Expenditures by Department Development Services 7.41 (0.35) (0.27) -4% Fire (0.24) (0.47) -3% General Services 9.47 (0.23) (0.64) -7% Library 4.26 (0.04) (0.10) -2% Police (0.71) (0.46) -1% Recreation 4.82 (0.30) (0.43) -9% Other Departmnets (pre-finance Staffing Plan) (0.75) (0.68) -5% Non-Departmental % Total Expenditures % Net Annual Activity (0.00) (0.02) (0.02) 1.98 Ending Cash Balance (0.02)

28 ESTIMATED CHANGE OF GENERAL FUND FOR FY15-16 Adopted Budget $ 115.2M $4M MOU Offset M 1x Augmentation from Successor Agency Loan Payment M General Fund Transfer LMD# M Proposed Revised Budget $ M * Included Code Compliance Shift of Budget in amount of $1,124,865 from Police to Development Services **Includes Implementation Initiatives from 1x Proceeds and offset of $4.6M reflected in Non-Departmental FY15-16 Estimated Actuals $ M Net Annual Activity $ 1.98M Finance Staffing Plan -.18M Proposed Net Annual Activity $ 1.70M February 9,

29 GENERAL FUND MID-YEAR FY15-16 ESTIMATE General Fund Budget Summary ($ in Millions) FY Adopted Budget FY Augmentation to Budget FY Proposed Revised Budget FY Estimated Year-End Variance % Changes Beginning Cash $ $ Revenues Property Tax % Sales Tax (0.56) -2% Franchises % Business License Tax (0.24) -4% Transient Occupancy Tax % Deed Transfer Tax % Building Fees & Permits (0.28) -16% Other Revenue (0.34) -1% One-Time Successor Agency Loan Payment Total Revenues % Expenditures by Department Development Services 7.41 (0.35) (0.27) -4% Fire (0.24) (0.47) -3% General Services 9.47 (0.23) (0.64) -7% Library 4.26 (0.04) (0.10) -2% Police (0.71) (0.46) -1% Recreation 4.82 (0.30) (0.43) -9% Other Departmnets (Finance Staffing Plan included) (0.56) (0.40) -3% Non-Departmental % Total Expenditures % Net Annual Activity (0.00) (0.21) (0.21) 1.70 Ending Cash Balance

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31 FY15-16 MID-YEAR REVIEW FINANCE STAFFING PLAN 31

32 QUALIFIED FINANCE PROFESSIONAL TEMPORARY STAFFING ASSISTANCE ACCOUNTING ITEMS REQUIRED Cash with Fiscal Agents & Investments Capital Assets Accounts Receivable Notes Receivable Federal and State Grands Interim CFO SPECIFIC TASKS Bank reconciliations, General cash pool, CDCSA cash pool, Schedule of FDIC Insurance & collateral on deposits, updated and complete treasury ratings, interest income allocation by fund List of procedures, summary of capital assets (including construction in progress), capital asset detail, detail of construction in progress List of procedures, A/R reconciliations by fund for all funds, A/R aging for utilities Schedule of notes receivable, reconciled to general ledger, notes receivable agreements including amortization schedules, analysis of bad debt/collectability Reconciliation of grants received/receivable Day to Day operations and implementation of key organizational assessment recommendations while recruitment is underway 32

33 QUALIFIED FINANCE PROFESSIONAL TEMPORARY STAFFING ASSISTANCE Temporary Finance Assistance needed for: Audit Assistance Operational Help Grant administration CFO Assistance Total Cost $220,000 - $96,000 offset by salary savings Net Cost = $124,000 February 9,

34 PROPOSED ADDITIONAL FTE S FINANCE DEPARTMENT CFO ADMIN SUPPORT ASSISTANT CFO FINANCIAL RESOURCES DIVISION BUDGET DIVISION GENERAL ACCOUNTING DIVISION UTILITIES DIVISION ORG. ASSESSMENT IMPLEMENTATION (IAP) - ERP MAD ADMINISTRATOR FINANCIAL ANALYST SENIOR ACCOUNTANT FINANCIAL ANALYST ACCOUNTING TECHNICIAN 34

35 MID-YEAR FY15-16 PROPOSED FINANCE STAFFING PLAN As identified in the Organizational Assessment Plan, there is a need to increase staffing levels Departmental capacity issues as confirmed by independent auditors and the Chief Financial Officer Lack of analyst and senior positions to perform the most complex accounting functions Lack of technology to support increasing demands for transparency and reliable information Combination of these factors is resulting in inefficient and ineffective results for all stakeholders Proposed reorg will assist with implementation of compliance in internal controls and a business model that strives to implement government finance best practices 35

36 FINANCE DEPARTMENT PERMANENT STAFFING NEEDS PROPOSED ADDITIONAL FTE S FOR FY 15/16 FTE POSITION/ TITLE TOTAL ANNUAL SALARY & BENEFITS BY FUND GF UTILITIES LMD ONGOING ANNUAL COST *FY 15/16 BUDGET IMPACT 1 Assistant CFO $198, $198,760 $ 15,565 1 Senior Accountant $112, $112,765 $ 18,795 2 Financial Analyst I $88,700 $88,700 0 $177,400 ** $ 29,570 1 Accounting Tech I $86, $ 86,725 $ 13,855 1 MAD Administrator 0 0 $120,000 $120,000 $ 0 6 TOTAL $486,950 $88,700 $120,000 $695,650 ***$ 77,785 * Based on start date of May 1, 2016 (Cost of 2 months this fiscal year) ** $14,785 for 1 Financial Analyst to be allocated between Water 40%, Wastewater 40% and ER 20% **** $77,785 total FY 15/16 budget augmentation request ($63,000 GF and $14,785 Utilities) *** (w/exception of Assist CFO = 1 mo.) 36

37 FY15-16 MID-YEAR REVIEW NEXT STEP 37

38 FY15-16 MID-YEAR REVIEW NEXT STEPS Staff will provide Enterprise Funds Updates in March. Audit Findings Measure O Citizen Oversight 38

39 STAFF RECOMMENDATION 1. RECEIVE FISCAL YEAR 15/16 MID-YEAR GF BUDGET UPDATE; 2. APPROVE THE BUDGET ADJUSTMENTS AND APPROPRIATIONS TO FY 15/16, AND 3. APPROVE THE STAFF RECOMMENDATIONS FOR TEMPORARY & PERMANENT STAFFING NEEDS 39

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