City of Los Altos, CA

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1 City of Los Altos, CA 10-Year General Fund Forecast Presented by: Susan Stark Prepared by: Russ Branson PFM, Director 50 California Street, Suite 2300 San Francisco, CA 94111

2 Total Fund Balances Millions $20.0 $18.0 $16.0 $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 GF Reserves Available: $6.7M + $4.8M = $11.5M 20% Policy Reserve Unassigned Fund Balances June 30, 2015 CAFR OPEB (Retiree Health) PERS Reserve Technology Reserve Real Property & Comm. Facilities Set-aside Inventory & Encumb. Nonmajor(Gas Tax etc) $7.2 Non-GF Capital $4.7 Park In-Lieu $5.9 General Fund $34.8M $6.7 $4.8 $2.0 $0.6 $1.5 $18.8 $0.4 Non-GF Public Financial Management, Inc. 2

3 General Fund Revenues Fiscal Year 2017 Budget Property taxes account for 50.7% of total FY17 revenues of $37.7 million Other taxes make up the next largest revenue sources at 24.8% Budgeted FY17 General Fund Revenues Transfers In 0.4% Fees 22.9% Income 0.6% Miscellaneous 0.5% Fees comprise 22.9% of total revenue Collectively, these three revenue categories, which are also linked to broader economic conditions, make up 98% of total General Fund revenues Other Tax 24.8% Property Tax 50.7% Public Financial Management, Inc. 3

4 General Fund Revenues Property Taxes Compound annual growth rate of 5.7% from FY10 to FY17 7.2% since FY14 $25.0 Property Taxes FY10-FY17 (budget) Millions $20.0 $15.0 $13.1 $12.8 $13.3 $14.1 $15.6 $17.5 $18.2 $19.2 $10.0 $5.0 $0.0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Source: City of Los Altos; Note: Includes current secured, unsecured, and supplemental and in-lieu of VLF Public Financial Management, Inc. 4

5 General Fund Revenues Sales Taxes Sales taxes increased over 5.3% year over year FY10 - FY17 NOTE: FY16 was end of Trip Flip Two-year increase from FY15 to FY17 is consistent with average longterm increases Sales Taxes FY10 - FY17 (projected) $3.5 $3.2 $3.0 $2.5 $2.7 $2.9 $2.8 $2.9 $2.7 Millions $2.5 $2.0 $2.2 $1.5 $1.0 $0.5 $0.0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Source: City of Los Altos Sales Taxes Triple Flip 1/2 Cent Extension Public Financial Management, Inc. 5

6 Baseline Revenue Forecast Assumptions Key Revenue Forecast Assumptions: Overall Stable and Moderate Growth of 2.76%/year FY18-FY26 Secured Property Taxes: 4.5% annually provides conservative projection. Sales Taxes: HDL Sales Tax projection rates increase 2.8% to 3.9% per year through FY22. UUT and TOT: Rates vary between 0% and 2% per year based on recent growth rates and expectations for expansion. TOT has grown recently with the addition of hotel rooms, but is held constant for the near future. User Charges: Recreation fees are projected to grow at 2% per year; however, planning and building fees have been held constant. Public Financial Management, Inc. 6

7 General Fund Expenses Fiscal Year 2017 Budget Salaries and benefits account for 54.1% of total General Fund expenditures in FY17 (Note: Fire service is provided by contract and is included in Services & Supplies) Services and Supplies expenses ranging from professional services to liability insurance comprised 38.6% of the FY17 budget Services & Supplies 38.6% General Fund Expenses FY17 Budget Capital Outlay 7.2% Salaries & Benefits 54.1% Remaining expenses for capital vary significantly from year-to-year Public Financial Management, Inc. 7

8 Baseline Expense Forecast Assumptions Key Expense Forecast Assumptions: Overall Growth of 3.63%/year FY18-FY26 Salaries: Includes known contracted raises, then 2% annually (salary growth includes costs from step increases) PERS: Grows an average of 5.8% per year based on changes in salaries and the unfunded liability. The normal cost percent remains unchanged through FY26 Group Health Insurance: Increase 7.5% per year based current MOUs and expected medical inflation Other revenue and expense items include conservative estimates from 0% to 2% Public Financial Management, Inc. 8

9 10-Year Forecast The following slides summarizes the baseline forecast, reflecting: The City s Operating Surplus or Deficit Cumulative Funds Available for CIP Transfer FY17 FY26 Assumes continuation of current programs and financial policies It does not reflect the impact of setting aside revenue for long-term unfunded liabilities, such as: Deferred capital maintenance Future building and parks recapitalization costs Investment in other public capital projects Public Financial Management, Inc. 9

10 Baseline Forecast Operating Surplus / (Deficit) Based on the assumptions shown on previous slides: Los Altos shows a steady decline in its operating surplus absent corrective action Due primarily to increased salary and benefit costs, and fire contract costs $3,000,000 Los Altos Baseline Forecast Net Revenue $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 Note: General Fund baseline does not include transfer to Capital Fund (reflected in FY17 budget) Public Financial Management, Inc. 10

11 Baseline Forecast CIP Transfer The City can retain a 20% operating reserve while transferring surplus reserves to the Capital Improvement Fund starting in FY17 Cumulative revenues available for CIP transfer total $21.1 million from FY17 to FY26 $14,000,000 Los Altos Baseline Model Projected Fund Balance with CIP Transfer $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 Assigned GF Fund Balance Transfer to Capital Fund 20% GF Fund Balance Reserve Note: FY17 transfer includes unassigned General Fund amounts from FY15 and FY16 Public Financial Management, Inc. 11

12 What Will Change the Forecast? The economy Changes to revenues (either up or down) will change the City s budget future PERS rates and the impacts of future market returns and actuarial assumptions Council decisions on spending Total compensation (salaries, active and retiree health care, pension, leave, etc.) The number of staff needed to maintain service levels Long-term facilities rehabilitation (asset recapitalization) Spending on new Citywide facilities Voter-approved taxes or assessments Local-option taxes must be approved by voters, and could include sales tax, hotel tax, utility users tax, or business license tax Assessments must be property-related and are subject to Prop. 218 Attraction of new or expanded businesses and retention of existing Expansion of retail sales outlets or hotels Public Financial Management, Inc. 12

13 Total Fund Balances Millions $20.0 $18.0 $16.0 $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 GF Reserves Available: $6.7M + $4.8M = $11.5M 20% Policy Reserve Unassigned Fund Balances June 30, 2015 CAFR OPEB (Retiree Health) PERS Reserve Technology Reserve Real Property & Comm. Facilities Set-aside Inventory & Encumb. Nonmajor(Gas Tax etc) $7.2 Non-GF Capital $4.7 Park In-Lieu $5.9 General Fund $34.8M $6.7 $4.8 $2.0 $0.6 $1.5 $18.8 $0.4 Non-GF Public Financial Management, Inc. 13

City of Richmond Multi-Year Budget Update. December 15, 2015

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