3. Public Comments (This section of the agenda is for audience comments for items NOT on the agenda.)

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1 AGENDA CITY OF RANCHO PALOS VERDES NOTICE OF MEETING OF THE FINANCE ADVISORY COMMITTEE APRIL 11, 2018 POINT VICENTE INTERPRETIVE CENTER, SUNSET ROOM PALOS VERDES DRIVE WEST 7:00 PM CALL TO ORDER 1. Roll Call 2. Approval of Agenda 3. Public Comments (This section of the agenda is for audience comments for items NOT on the agenda.) 4. Approval of Draft Minutes for the meeting conducted March 01, 2018 Recommendation: Approve the Minutes of March 01, FY18-19 Budget Assumptions Recommendation: Receive and file 6. FY18-19 Budget Assumptions for City s Five-Year Model Recommendation: Receive and file 7. Treasury/Investment Updates Recommendation: Receive and file 8. Committee Members/Mayor s Breakfast Report 9. Director of Finance Report Recommendation: Receive and file Adjournment: American with Disabilities Act: In compliance with the Americans with Disabilities Act of 1990, if you require a disability-related modification or accommodation to attend or participate in this meeting, including auxiliary aids or services, please call the City Clerk s Office at at least 48 hours prior to the meeting. NOTE: Staff reports are available for inspection at City Hall, Hawthorne Boulevard during regular business hours, 7:30 A.M. to 5:30 P.M. Monday Thursday and 7:30 A.M. to 4:30 P.M. on Friday. Materials related to an item on this Agenda submitted to the Committee after distribution of the agenda packet are available for public inspection in the Finance Department at Hawthorne Boulevard, Rancho Palos Verdes during regular business hours. Written materials, including s, submitted to the City are public records and may be posted on the City s website. Accordingly, you may wish to omit personal information from your oral presentation or written materials as it may become part of the public record regarding an agendized item. Materials related to an item on this Agenda submitted to the Finance Advisory Committee after distribution of the agenda packet are available for public inspection at the front counter of the lobby of the City Hall Administration Building at Hawthorne Boulevard, Rancho Palos Verdes during normal business hours. You can also view the agenda and staff reports at the City s website

2 DRAFT MINUTES CITY OF RANCHO PALOS VERDES FINANCE ADVISORY COMMITTEE (FAC) MARCH 01, 2018 Chair Santarosa called the meeting to order at 7:02 p.m. at City Hall Community Room Hawthorne Boulevard for the purpose of conducting business pursuant to the Agenda. Roll call was answered as follows: PRESENT: Chair Ron Santarosa, Regina Horton, Krista Johnson John MacAllister ABSENT: Vice-Chair Dollard, John Stillo City Staff: Deborah Cullen, Vina Ramos APPROVAL OF AGENDA Member MacAllister moved for approval of the agenda and Member Johnson seconded the motion. The motion passed by acclamation. PUBLIC COMMENTS FOR ITEMS NOT ON THE AGENDA None. APPROVAL OF DRAFT MINUTES FOR THE MEETING CONDUCTED January 18, 2018 Member MacAllister moved for approval of the agenda. Member Johnson seconded the motion. The motion passed unanimously by acclamation. Brown Act Presentation from Elena Gerli, Deputy City Attorney Elena Gerli, Deputy City Attorney presented the Brown Act and Committee Rules and Procedures. In the presentation, Ms. Gerli pointed out that from work or personal and texting may be subject to public disclosure under the Public Records Act. Ms. Gerli also mentioned that an agenda is required for each regular or adjourned meeting, action or discussion of any item not appearing on the posted agenda is generally prohibited, posted within 72 hours, and it must include brief description sufficient to inform public of the nature of each item. For closed session items, Ms. Gerli added that confidentiality applies, must reconvene in open session and make any required disclosure, and it cannot discuss funds, funding priorities, or budget, salaries, and contract negotiations (unless labor negotiations). Finally, Gerli explained that public has the right to talk about anything they want that s not on the agenda, typically at the start of the meeting. Members of the public also get to speak on every item as it comes up before deliberation are made. FAC Minutes March 01, 2018 Page 1 of 4

3 Portuguese Bend Feasibility Study Update Director Cullen provided an update on the City s Portuguese Bend Feasibility Study. In July 2017, the City Council approved a contract with Daniel B. Stevens & Associates (DBS&A) to prepare the study update to identify the most effective means of removing water as contributing factor to the continuing slope failure in the area. Additionally, DBS&A will include the Natural Communities Conservation Plan (NCCP) document review. Director Cullen also reported that there were four (4) public workshops held to seek input from the public on goals and possible solutions to remediate the PB Landslide. The topics during the community workshops include identifying goals, surface and subsurface water runoff, surfzone erosion, and ground water. Director Cullen also mentioned that the public discussed the acreage of habitat loss and proposed project work areas. In closing, Director Cullen reported that the process will continue and that there will be on-going public workshops. Member MacAllister moved for approval for receive and file. Member Johnson seconded the motion. The motion passed unanimously by acclamation. Fiscal Year Comprehensive Annual Financial Report Director Cullen provided an overview of the City s FY CAFR and the results of the financial audit performed by Vavrinek, Trine, Day & Co (VTD). The City received an unqualified (clean) opinion and VTD did not issue the City a Management Letter, a letter that is intended to call attention to issues involving City s internal control system. Director Cullen also reported that VTD conducted an exit interview with the Council sub-committee on February 13, The City s Net Position at June 30, 2017 is $224.4 million, an increase of $3.3 million comparing to June 30, The increase is attributed to Capital Assets including construction in progress and infrastructure projects. The General Fund Balance had a beginning balance of $15,068,099 and ended the year in the amount of $16,825,403. The unassigned fund balance is 15.7 million or 67% of the GF expenditures, which is above the 50% reserve policy. The balance includes Revenues of $29,259,666 less Operating Expenditures of $23,304,965 totaling $5,954,701 of Excess of Revenues Over Expenditures. The total transfers in FY is $190,000 and transfers out of $4,387,397. The majority of the transfers were for the Capital Improvement Fund. Director Cullen also reported that as of June 30, 2017, the City s financial statement reported a liability of $9.6 million for the City s GASB 68 Unfunded Liability. The liability increased by $2 million to prior year primarily due to a change in assumption regarding the discount rate. Member MacAllister moved for approval for receive and file. Member Johnson seconded the motion. The motion passed unanimously by acclamation. FAC Minutes March 01, 2018 Page 2 of 4

4 Fiscal Year CalPERS Actuarial Valuation Director Cullen reported that the CalPERS Board of Administration approved lowering the discount rate assumption over the next three years. The long-term rate of return will be reduced from 7.5 percent to 7 percent. Based on this data, there will be an increase on the City s contribution costs beginning FY The City s normal cost for Tier 1 will increase to %, an increase of $0.499% to prior year; Tier 2 will be at 7.634%, an increase of 0.434%; and Tier 3 will be at 6.824%, an increase of 0.291%. For the City s annual payment for the unfunded liability, the City s rate for FY for Tier 1 is $613,118, an increase of $117,334 to prior year; Tier 2 is $1,413, an increase of $1,215; and Tier 3 is $1,011, an increase of $921. Director Cullen also reported that the funded ratio for Tier 1 is at 70.70%, Tier 2 at 90.30%, and Tier 3 funded at 89.90%. Member Johnson moved for approval for receive and file. Member Horton seconded the motion. The motion passed unanimously by acclamation. Fiscal Year Mid-Year Review Director Cullen presented a brief overview of the City s Mid-Year report. The estimated year-end Unreserved/Undesignated Fund Balance is $1.8 million, an increase of $300,000 from the budgeted amount of $1.3 million. The City s revenues are estimated to end the year at $29.8 million, a decrease of over $400,000 when compared to the budgeted amount of $30.2 million. The decrease is from Transfer Occupancy Tax (TOT), Permit Revenues, Utility Users Tax, and Other Revenues for user fees. Member Johnson wanted more clarification on the Permit Revenues. Director Cullen reported that based on forecast from Community Development, a lot of the projects value are smaller compared to previous year. The City s expenditures are estimated to end the year at $26.8, a decrease of about $600,000 when compared to the budgeted amount of $27.4 million. The decrease is mainly from savings in the Salaries & Benefits category. However, some of the savings will be offset by the over budget line items in the Non- Personnel categories including Legal Services for $530,000, $135,000 of Maintenance & Repair Services, $109,300 of Supplies & Materials. FAC Minutes March 01, 2018 Page 3 of 4

5 For transfers, Director Cullen reported that the transfers to TOT is expected to end the year with no changes at $4.5 million, which includes the $900,000 of TOT transferred to Public Safety s contract. In closing, Director Cullen announced the FY Budget Calendar: April 12, 2018 for Budget Workshop, May 15, 2018 for Preliminary Budget, June 5, 2018 for Budget Hearing, and June 19, 2018 for Budget Adoption. Member Johnson moved for approval for receive and file. Member Horton seconded the motion. The motion passed unanimously by acclamation. Treasury/Investment Updates Director Cullen reported that overall cash ending January 2018 is $62.2 million. Of this amount, Vining Sparks is $24.8 or 40%, Yield at 1.1%, LAIF is $23.8 million or 38% with current Yield at1.35%, Bank of the West is $9.6 million or 15%, and Malaga Bank is $4 million or 7%. Member Johnson moved for approval for receive and file. Member Horton seconded the motion. The motion passed unanimously by acclamation. Reports: Committee Members and Mayor s Breakfast Chair Santarosa attended the last Mayor s breakfast and reported that topics included City Hall Subcommittee and issues related to the wireless telecommunications. Director of Finance Report Director Cullen reported that IMAC s project list is currently being updated and Director Elias Sassoon is listing the projects with funding sources. ADJOURNMENT Chair Santarosa ordered the meeting adjourned at 9:01 p.m. Romolo Santarosa, Chair, Finance Advisory Committee ATTEST: Vina Ramos, Recording Staff FAC Minutes March 01, 2018 Page 4 of 4

6 MEMORANDUM TO: HONORABLE CHAIR & MEMBERS OF THE FINANCE ADVISORY COMMITTEE FROM: DEBORAH CULLEN, DIRECTOR OF FINANCE DATE: APRIL 11, 2018 SUBJECT: General Fund FY Year-End and FY Preliminary Budget RECOMMENDATION Receive and file information regarding the General Fund FY Year-End and FY Preliminary Budget BACKGROUND & DISCUSSION The Staff Report to the City Council for the April 12, 2018 meeting is attached.

7 RANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 04/12/2018 AGENDA REPORT AGENDA HEADING: Regular Business AGENDA DESCRIPTION: Consideration and possible action regarding the General Fund FY Year-end and FY Preliminary Budget. RECOMMENDED COUNCIL ACTION: (1) Provide Staff direction to develop the Fiscal Year Preliminary Budget. FISCAL IMPACT: None Amount Budgeted: Additional Appropriation: Account Number(s): N/A N/A N/A ORIGINATED BY: Trang Nguyen, Deputy Finance Director REVIEWED BY: Deborah Cullen, Director of Finance APPROVED BY: Doug Willmore, City Manager BACKGROUND AND DISCUSSION: Staff has updated the FY year-end projections for expenditures and revenues, with an emphasis on the General Fund. Additionally, this analysis assists in planning for resources and funding needed for FY In preparation of the FY Preliminary Budget, meetings were held between the Department Heads and the City Manager, Deputy City Manager and Director of Finance to discuss service or program changes to the zero-based budget. Based on the discussions from these meetings, staff prepared this report and the related presentation for the Budget Workshop. General Fund Revenues Fiscal Year Updated Year-End Estimates Currently, Staff is estimating that General Fund revenues will end the year slightly under the revised budget by 0.06% or ($19,000), excluding transfers in. This is a positive change of almost $466,000 from the yearend projections that were presented at midyear primarily due to a quicker than expected reimbursement of $150,000 for the storm damage repairs, an increase of $130,000 in license & permits revenue and an increase of $180,000 miscellaneous revenues. The chart and table below outlines the year-end estimates for revenues compared to the revised budget by categories.

8 Graph 1 FY General Fund Major Revenue Types YE Estimates Compared to Revised Budget Table 1 FY Revised FY Estimate Estimate vs. Revised PROPERTY TAX $ 12,746,100 $ 12,779,760 $ 33,660 TOT 6,040,000 5,816,000 (224,000) SALES TAX 2,580,200 2,560,700 (19,500) LICENSE & PERMITS 2,321,100 2,265,952 (55,148) FRANCHISE TAX 2,112,800 2,024,900 (87,900) UUT 1,871,100 1,875,244 4,144 OTHER/MISC REVENUES 1,351,200 1,573, ,910 OTHER TAXES 1,184,800 1,292, ,676 Subtotal 30,207,300 30,188,142 (19,158) TRANSFER IN 230, ,000 - Total Revenues $ 30,437,300 $ 30,418,142 $ (19,158)

9 Below is a summary of the major revenue categories: Property Tax is currently 0.3% or $33,600 over the revised budget and an increase of 3.5% or almost $434,000 over last year actuals. Property Taxes FY Actual Revenue: $12,345,821 FY Revised Budget: $12,746,100 FY Year-end Estimate: $12,779,760 Transient Occupancy Tax (TOT) is currently estimated to end the year under the revised budget by 3.7% or ($224,000) and an increase of about 3.8% or $215,000 over last year actuals. This year-end estimate is based on the latest industry information along with Staff s analysis. Staff will continue to monitor TOT and will make any necessary adjustments after the third-quarter. Transient Occupancy Tax FY Actual Revenue: $5,600,867 FY Revised Budget: $6,040,000 FY Year-end Estimate: $5,816,000 Sales and Use Tax is estimated to end the year slightly under the revised budget by 0.8% or ($19,500) and an increase of approximately 4% or $98,300 over last year actuals. This year-end estimate is based on the latest information provided by the City s consultant and industry trend. Sales and Use Tax FY Actual Revenue: $2,462,447 FY Revised Budget: $2,580,200 FY Year-end Estimate: $2,560,700 License and Permit category is currently estimated to end the year under revised budget by 2.38% or about ($55,000) and an increase of about 5.8% or $125,000 over last year actuals. This revenue source is difficult to predict and can vary widely from year to year. Permits are driven by the weather, economy, trends in home improvement, lending rates, turnover rate of housing stock and the availability of contractors. Licenses and Permits FY Actual Revenue: $2,140,505 FY Revised Budget: $2,321,000 FY Year-end Estimate: $2,265,952

10 Franchise Tax is currently tracking for a decrease of approximately 4% or ($88,000) over the revised budget and an increase of approximately 2% or $40,000 over last year actuals. Franchise Taxes FY Actual Revenue: $1,984,787 FY Revised Budget: $2,112,800 FY Year-end Estimate: $2,024,900 Utility User Tax (UUT) is currently estimated to end the year 0.22% or $4,000 over the revised budget and an increase of 5.6% or almost $100,000 over last year actuals. UUT is dependent on outside factors including: weather conditions, consumption of utilities, the price of natural gas and rate increases, all of which cannot be predicted over the long-term with certainty. Based on these factors, Staff uses historical data, information available pertaining to the price of natural gas and the projected increases estimated by the Bureau of Labor Statistics for the Consumer Price Index for All Urban Consumers (CPI-U). UUT FY Actual Revenue: $1,775,433 FY Revised Budget: $1,871,100 FY Year-end Estimate: $1,875,244 Other/Miscellaneous Revenues consists of rental and leases, interest, donations and other miscellaneous revenues in the General Fund. This revenue stream is currently estimated to end the year over the revised budget by 16.4% or about $222,000 and approximately 6% or ($107,000) less compared to last year actuals. This revenue source is also difficult to predict and can vary widely from year to year. The increase to budget this year is due to FEMA reimbursement to General Fund for the work performed during the storm the City experienced last year. Other/Miscellaneous Revenues FY Actual Revenue: $1,680,347 FY Revised Budget: $1,351,200 FY Year-end Estimate: $1,573,110 Other Taxes consisted of Business License Tax and Golf Tax. This revenue is currently tracking for an increase of approximately 9% or $107,600 over the revised budget and an increase of 1.8% or approximately $23,000 over last year actuals. The increase is from Business License Tax is due to the increase in gross receipts reported from businesses not from rate increase or new businesses.

11 Other Taxes FY Actual Revenue: $1,269,366 FY Revised Budget: $1,184,800 FY Year-end Estimate: $1,292,476 General Fund Expenditures Fiscal Year Year-End Estimates Currently, Staff is estimating that General Fund expenditures will end the year approximately 0.5% or ($154,200) under the revised budget, excluding transfers and the details of this underrun are explained below. The chart and table below outlines the year-end estimates for expenditures compared to the revised budget by categories. Graph 2 FY General Fund Expenditures YE Estimates Compared to Revised Budget

12 Table 2 FY FY Estimates Revised Estimates vs. Revised SALARIES $ 7,817,500 $ 7,016,400 $ (801,100) BENEFITS 2,599,288 2,558,974 (40,314) LEGAL 925,000 1,455, ,000 SHERIFF 6,135,200 6,135,200 0 SHERIFF-PRESERVE 567, ,000 0 PROFESSIONAL/TECH 5,041,102 4,904,674 (136,428) REPAIR/MAINT 1,557,700 1,909, ,500 SUPPLIES 2,230,124 2,230, OTHER/MISC 569, ,925 (57,975) Operating Expenditures 27,442,813 27,288,580 (154,233) TRANSFER OUT 4,813,500 4,813,500 0 Total General Fund Expenditures $ 32,256,313 $ 32,102,080 $ (154,233) As stated above, the General Fund operating expenditures are estimated to come in under budget by approximately ($154,200), excluding transfers out. Below is the list of major variances between year-end estimates and budget. Salaries and Benefits are estimated to end the year 12% or ($840,000) under budget due to vacancies. This is a mixture of existing vacancies that have not been filled during the year and a few new vacancies due to internal promotions. Below is a list of current vacancies, the asterisks represent vacancies due to internal promotions that occurred during this fiscal year? 1. Two (2) Associate Planners* 2. Maintenance Supervisor 3. Two (2) Administrative Assistant 4. Two (2) Associate Engineer* 5. Deputy Director of Public Works 6. Maintenance Superintendent 7. Administrative Analyst II* Legal Services are estimated to end the year at 57% or $530,000 over budget. Based on information from the City Attorney, franchise cable, personnel issues and litigation are the primary drivers of this overrun. The City Attorney stated that part of the franchise cable fees are scheduled to be reimbursed by Crown Castle and those will get credited against this account. Staff will continue to monitor this category and will provide an update with the preliminary budget. Professional/Technical Services are projected to end the year approximately 2.7% or ($136,000) under budget. The savings are from professional contracts not needed in City Administration and Public Works.

13 Maintenance and Repair Services are estimated to end the year over budget by approximately 22.6% or $351,500. This increase is attributed to emergency activities, after hour incidents, increase in water usage, increase in parks repair and maintenance, increase in stormwater maintenance activities and an increase in traffic maintenance activities. Other/Miscellaneous is estimated to end the year under budget by approximately 21.5% or ($58,000). This is largely due to postponing training and meetings due to vacancies and increased workload. General Fund Fiscal Year Estimated Ending Fund Balance Below is an updated Unreserved/Undesignated General Fund balance or excess surplus at the end of FY This fund balance estimate is based on year-end projections and will be updated after the third quarter reconciliation. Currently, the estimated excess unrestricted reserve is over $1.5 million, which is net of the required 50% Policy Reserve. This is decrease of almost $280,000 from what was reported at mid-year on March 6, This decrease is due to an increase in year-end estimates for expenditures. FY General Fund Balance Summary Table 3 FY Additional FY Year-end Adopted Budget Appropriation Revised Budget Estimates Beginning Fund Balance $ 16,852,403 $ - $ 16,852,403 $ 16,852,403 Add: Revenues 30,207,300-30,207,300 30,188,142 Add: Transfers In 230, , ,000 Subtotal 47,289,703-47,289,703 47,270,545 Less: Expenditures (25,604,300) (1,838,513) (27,442,813) (27,288,580) Less: Transfers Out to CIP (4,526,000) - (4,526,000) (4,526,000) Less: Transfers Out (287,500) - (287,500) (287,500) Subtotal (30,417,800) (1,838,513) (32,256,313) (32,102,080) Ending Fund Balance 16,871,903-15,033,390 15,168,465 Reserve Policy (50% of budgeted expenditures) 12,802,150-13,721,407 13,644,290 Excess Unrestricted Reserve $ 4,069,753 $ - $ 1,311,983 $ 1,524,175 General Fund Fiscal Year Proposed Budget For the proposed budget, Staff has factored in several revenue and expenditure assumptions to the modified zero-based budget as outlined below.

14 FY Revenue Assumptions Staff is estimating General Fund revenues to increase by approximately 1.9% or $565,800 compared to the FY revised budget and 1.9% or $585,000 to the year-end estimated, excluding transfers in. The majority of the projected increase is driven by increases in estimated property taxes, miscellaneous revenues and other taxes. Below is the projected amounts as compared to the FY17-18 year-end estimate. Property Tax is anticipated to increase 5.1% or $659,200 over the year-end estimate. Property Tax continues to be the largest and historically the most stable revenue source in the City growing by inflation as set by the Consumer Price Index (CPI), capped at 2% in addition to the increased assessed values from sales and home remodeling. Additional Prop 8 parcels whose values were re-captured to pre-recession levels, and projected transfer of ownership in FY Prop 8 allows the property to be temporarily reassessed at the lower value during a decline in the housing market. However, as the value of the property rises, the assessed value and resulting property taxes may increase more than 2 percent a year up to the annually adjusted Proposition 13 cap of 2%. In the past 21 years, the lowest annual change in assessed property tax has been 1.24%, while the average annual change has been 5.30%. Property Taxes FY Actual Revenue: $12,345,821 FY Year-end Estimate: $12,779,760 FY Proposed Budget: $13,439,000 Transient Occupancy Tax (TOT) is currently estimated to increase by 0.1% or $7,100 to the year-end estimate. This revenue is forecasted based on the latest industry information along with Staff s analysis. The revenue stream is a combination of lower than expected estimates from the smaller hotels and a roll forward of last year s estimate for the Terranea Resort. Transient Occupancy Tax FY Actual Revenue: $5,600,867 FY Year-end Estimate: $5,816,000 FY Proposed Budget: $5,823,100 Sales and Use Tax is expected to remain relatively flat in FY According to the City's Sales Tax consultant (HdL), the lack of revenue growth is being driven by a decline in general consumer goods as more brick and mortar retailers continue to offer deep discounts to compete with online competition.

15 Sales and Use Tax FY Actual Revenue: $2,580,200 FY Year-end Estimate: $2,560,700 FY Proposed Budget: $2,561,300 License and Permits this revenue source can fluctuate from year to year based on the economy and can vary widely from year to year. Staff uses historical trends and economic indicators to estimate this revenue stream. Currently, this category is expected to increase by 1% or $24,300 to yearend estimates. Licenses and Permits FY Actual Revenue: $2,140,505 FY Year-end Estimate: $2,265,952 FY Proposed Budget: $2,290,300 Franchise Tax is expected remain the same to year-end estimate. The City receives payments from franchisees for the use of the municipality right of way. The City receives a majority of this revenue stream from Southern California Edison and Southern California Gas Company. The main drivers for this revenue are consumption and the price of natural gas. Staff uses historical data and industry projections for this revenue estimate. Franchise Taxes FY Actual Revenue: $1,984,787 FY Year-end Estimate: $2,024,900 FY Proposed Budget: $2,024,900 Utility User Tax (UUT) is projected to increase by 2.5% or $46,400 to year-end estimate. UUT is dependent on outside factors including: weather conditions, consumption of utilities, the price of natural gas and rate increases, all of which cannot be predicted over the long-term with certainty. Based on these factors, Staff uses historical data, information available pertaining to the price of natural gas and the projected increases estimated by the Bureau of Labor Statistics for the Consumer Price Index for All Urban Consumers (CPI-U). UUT FY Actual Revenue: $1,775,433 FY Year-end Estimate: $1,875,244 FY Proposed Budget: $1,921,600

16 Other/Miscellaneous Revenues consists of rental and leases, interest, donations and other miscellaneous revenues in the General Fund. This revenue source is also difficult to predict and can vary widely from year to year. This revenue source is expected to decrease by 9.6% or ($150,600) from year-end estimate for the one-time reimbursement received from FEMA in FY Other/Miscellaneous Revenues FY Actual Revenue: $1,680,347 FY Year-end Estimate: $1,573,110 FY Proposed Budget: $1,422,500 Other Taxes consists of Business License Tax and Golf Tax and is projected to decrease by 0.2% or $2,100 from year-end estimate. Although Business License Tax grew in FY due to increases in gross receipts Staff is not anticipating any additional increase in gross receipts for the upcoming fiscal year. The decrease is due to Golf Tax. Other Taxes FY Actual Revenue: $1,269,366 FY Year-end Estimate: $1,292,476 FY Proposed Budget $1,290,400 The chart below has built in the revenue assumptions listed above and compares the FY revised budget to FY year-end estimates and to the FY proposed budget estimates.

17 FY Proposed General Fund Revenues Graph 3 Property Tax continues to be the largest and historically the most stable revenue source in the City and this revenue source makes up 44% of the total General Fund revenue. TOT is the next largest revenue source at 19% of total revenues. The pie chart below shows the General Fund Revenues by type and their respective contribution in percentage (%) terms to the overall total. The Other Taxes category consists of Business License Tax and Golf Tax.

18 FY Proposed General Fund Revenues Graph 4 FY General Fund Expenditure Assumptions Staff is estimating a decrease of approximately 0.1% or ($38,600) to the FY revised budget and an increase of 0.4% or $115,700 from year-end estimate, excluding transfers out. The proposed budget is showing a decrease to revised budget due to the Purchase Orders carried forward and continuing appropriations from last fiscal year that totaled $1.8 million and are reported in the revised budget number. The following are assumptions used to prepare General Fund proposed expenditures in FY : Personnel Costs Salaries: 1. COLA increase of 2% 2. An average merit increase of 2.5% for RPVEA Association and Management/Confidential 3. Position reclassification a. Changing Maintenance Supervisor to Permit Technician b. Changing Administrative Assistant to Staff Assistant

19 Benefits: 1. Cal-PERS Normal Costs Tier %, an increase of 0.5% Tier %, an increase of 0.4% Tier %, an increase of 0.3% 2. Cal-PERS Unfunded Liabilities Tier %, an increase of 12.6% Tier %, an increase of 0.02% Tier %, an increase of 0.3% 3. Health Benefits 5% Non-Personnel Costs Sheriff Contract % increase in the cost of a Deputy Sheriff Service Unit % cost for Bonus I Deputy units from the FY rates % contribution to the Liability Trust Fund that is administered by the County of Los Angeles Preserve-Sheriff % increase in the cost of a Deputy Sheriff Service Unit % contribution to the Liability Trust Fund that is administered by the County of Los Angeles Supplies decreased by 43% or ($962,000) from revised budget from one-time expenditures such as ALPR, HOA grant and vehicles purchased on FY Parks Improvement/maintenance 1. Playground equipment repair/maintenance increase of $65, Ball fields maintenance increase of $60, Eastview Dog Park maintenance increase of $20,000 The chart below has built in the expenditure assumptions listed above and compares the FY revised budget to FY year-end estimates and to the FY proposed budget.

20 FY Proposed General Fund Expenditures Graph 5 Transfers out In FY Council directed Staff to reduce the TOT transfer out to the Capital Improvement Fund by the same amount as the increase in Public Safety. For FY , Staff is estimating TOT from Terranea to be $5.6 million. Based on this estimate, the TOT transfer to Capital Improvement Fund will be scheduled as follows: Projected TOT Revenue from Terranea $5,613,000 Less FY Public Safety increase ($893,000) Less FY Public Safety increase ($200,500) Proposed TOT transfer to CIP $4,519,500 Other miscellaneous transfer includes $20,000 to the Improvement Authority Portuguese Bend and $25,000 to the Improvement Authority Abalone Cove.

21 Below is an updated fund balance for the General Fund at the end of FY based on the current year-end estimates and assumptions. While the City still has revenues that support the core expenditures the increases in the Sheriff contract, legal expenses, CalPERS unfunded liability and the General Liability Insurance are significantly reducing the excess reserve year over year. Table 4 FY Estimated Fund Balance Beginning Fund 7/1/2018 $ 15,168,465 Add: Proposed Revenues 30,773,100 Add: Proposed Transfers In 220,000 Subtotal 46,161,565 Less: Proposed Expenditures (27,404,237) Less: Proposed Transfers to CIP (4,519,700) Less: Proposed Misc.Transfers (45,000) Subtotal (31,968,937) Ending Fund 6/30/ ,192,628 13,702,119 Reserve Policy (50% of budgeted expenditures) Excess Unrestricted Reserve $ 490,510 FY Capital Improvement Projects Below is a list of capital projects and proposed cost by funding type. This list was presented and ranked by IMAC on March 8, 2018 and presented to Planning Commission on April 10, The projects were ranked by staff and IMAC and were given either a 1, 2 or 3. Projects with a ranking of 1 are considered a high priority and a ranking of 3 are low priority. More information will be presented at the Budget Workshop by the Public Works Department.

22 Table 5 Capital Improvement Beautification Propropositio Proposition A Measure R Hesse Parking Lot Improvements and Lighting Project - Design 100,000 Ladera Linda Community Center - Construction 300,000 Lower Hesse Improvement Phase 2 - Construction 900,000 Lower Hesse Improvement Phase 2 - Design 100,000 Abalone Cove Sewer System Rate Study and Rehabilitation Program 250,000 Citywide ADA Transition Plan 290,000 Coastal Bluff Fence Replacement Program 200,000 Pavement Management Program Biennial Update 120,000 Residential Roadways Rehabilitation Program - Area 3 & 4 Design 500,000 Residential Roadways Rehabilitation Program - Area 8 Construction 3,500,000 Annual Portuguese Bend Landslide Area Resurfacing Program 600,000 Silver Spur Rd. Transit Improvement Project - Phase 1 Design 50,000 Silver Spur Rd. Transit Improvement Project - Phase 2 Construction 450,000 Annual Sidewalk New/Replacement Program 250,000 TOTAL COSTS FOR #1 RANKED PROJECTS 6,260, , , ,000 Hawthorne Blvd. Beautification Project - Design 200,000 Storm Drain Deficiency Improvement Program - Design * + 250,000 TOTAL COSTS FOR #2 RANKED PROJECT 250, , Bubbles Restoration and Installation 75,000 TOTAL COSTS FOR #3 RANKED PROJECTS 75, TOTAL FOR ALL PROJECTS 6,585, , , , ,000 CONCLUSION Currently, Staff is estimating that the General Fund will end FY with an excess surplus of over $1.5 million and is currently estimating about $0.5 million surplus at the end of FY The FY General Fund Preliminary Budget will be prepared with the assumptions detailed in this report and any modifications or changes directed from the City Council. The Preliminary Budget including all funds will be presented at the regularly schedule Council meeting on May 15 th.