Balanced Budget Adequate Reserves Employee Pension Obligations

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1 Budget Issues and Recommendations

2 Key Financial Objectives Balanced Budget Adequate Reserves Employee Pension Obligations

3 Financial Areas of Concern Unfunded pension/retirement related obligations. Long term deferred city wide maintenance. Long term deferred city wide capital replacements and improvements. Inadequate revenues to support the cost of providing services, programs, and maintenance to the community. Recurring general Fund deficit spending. Recurring General Fund reserve spending.

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5 Pension, Health, Other Retirement Unfunded Obligations (Bartel) CalPERS Unfunded Liability $18.9M City share plus additional amount paid on behalf of Employees: Safety 3% of salary (expires 2022 increasing to 9%) + special pays Miscellaneous 8% of salary + special pays City Paid Social Security/Medicare Negotiated Benefit (96/112 FT employees $532,000 annually) Retiree Health $2.48 Accrued Liability (Unfunded PEMCHA & Police Retiree Health) Pension Obligation Bonds (POBs) Outstanding Balance of $6.4 Million Dollars

6 Funding Pension Liabilities Recommendation (Bartel): POB Series A1 Bonds 2017: Allocate the full annual payment ($700K) of Series A1 toward funding existing and future Pension/Retirement related obligations Establish an Irrevocable Pension Trust Restricted to Pension related expenditures or retiree health costs (OPEB). Advantages Money earns higher interest than an Internal Service Fund yields. Allows for varied annual contributions based on ability to fund. Secures current and future employee pensions and OPEB by creating a formal savings plan. Can be used when/if /f pension costs (CalPERS) costs spike. Disadvantage Once deposited monies cant be accessed for unqualified pension or OPEB expenses.

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8 California League of Cities: Financial Distress & Operating Deficits A government is in financial distress if it has a continuing imbalance between its level of financial commitments and its available financial resources over time. If revenues and spending are not brought into balance, financial distress can progress into financial crisis, when the government is unable to meet its financial obligations. General fund operating deficits fii may be an indication i that the government s financial condition is unsustainably out of balance and that corrections to bring the finances into a sustainable condition are not occurring. Though an operating deficit in any one year may not be a cause for concern, frequent and increasing deficits may indicate that the governments activities are not sustainable within the revenues available over time.

9 California i League of CA Cities: Financial Distress Indicators Port Hueneme City has recurring General Fund operating deficits. General Fund Reserves are decreasing over multiple/consecutive years. Cash and short term investments are decreasing. General Fund fixed costs, salaries and benefits are increasing over multiple years at a rate faster than revenue growth. General Fund is subsidizing other enterprises or special funds. The General Fund budget has been balanced repeatedly with reserves, selling assets, deferring asset maintenance. General Fund pension liabilities, OPEB, or other non salary benefits have been repeatedly deferred or costs have not been determined, disclosed or actuarially funded. Public service levels are far below standards needed in this community. Out of 13 indicators on the LCC Checklist, 8 are indicated for Port Hueneme.

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12 General Fund Expenditures FY 2014/15 72% of $16.8 million GF budget is personnel costs $6.72M Salaries $2.52M Benefits $2.86 M Retirement Costs $4.7M Maintenance & Ops PERS 17% Benefits 15% Salaries 40%, $12.1 Million Personnel Cost Source: FY 14/15 Adopted Budget

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14 Addressing GF Anticipated i t dsh Shortfall 2015/16 ($1.1M) and 2016/17 ($1.5M) Operation Changes Proposed Operational Changes: 2015/16 Elimination of some vacant positions Consolidate job duties/add new classifications Downsize to one K 9 Unit Contract out Building Inspection services Delay hiring for some future vacancies Continue to evaluate every department and every program for efficiency and savings. Potential 2015/16 Savings $534,000 (on going) Potential 2015/16 Shortfall $566,000 (on going)

15 Addressing GF Anticipated i t dsh Shortfall 2015/16 and 2016/17($566K $966K) $966K) Use Reserves (recommended only as a temporary measure for FY shortfall) Labor negotiations Retirement/Pension Other Benefits Further staffing/service level reductions Reduce existing GF staffing levels (Layoffs) Reduce street and median maintenance (not recommended ) Reduce park and facilities maintenance (not recommended) Reduce capital replacement (not recommended) )

16 Addressing GF Anticipated Shortfall 2015/16 and 2016/17($566K $966K) $966K) Contract out additional municipal services New Revenue Opportunities Real Estate Assets Develop Valuation/Marketing Plan Sell outright One time money (not recommended) New Development/Development Agreement w/high yield property tax/sales tax/tot Ground lease of vacant properties (On going revenue stream) Seek New Grant funding (competitive process) May require matching city funds or on going maintenance obligation May require consultant services to assist in application process May be available for a limited duration May have restriction that it be for New Program/Service

17 Addressing GF Anticipated i dsh Shortfall 2015/16 and 2016/17($566K $966K) General or Special Tax Measures (recommended for 2016 General Election only) Parcel Tax Special Tax Business License Update Sales Tax Increase Assessment District

18 Staff Recommendations General Fund Budget 2 Year Plan FY 2015/16 Target $1.1M FY 2016/17 Target $966K Additional 1. Approve current staffing 2015/16 recommended staffing reduction recommendation reduction ($534,000 savings). ($534,000 savings) 1. Additional staffing reductions to 2. Direct additional staffing address deficit reductions to address deficit (</= $566,000 savings) Labor negotiations Contracting services savings 3. Direct the use of GF Reserves for 4. New revenues (business license any remaining deficit (/ (</= $566,000 subsidy) 4. Direct Tax Measure(s) for 2016 General Election Not applicable unless successful and may not apply until 2017/18 enforcement, real estate, grants, other) 5. Use of GF Reserves, only if temporary (Tax Measure revenue cut in 2017/18)

19 Funding Pension Liabilities Recommendation (Staff/Bartel): Irrevocable Pension Trust Restricted to Pension related ltdexpenditures or retiree health costs. Allocate full $700K until trust funded at adequate level. Rebuild Reserves once funded via Council Policy on percentage distribution of funds. Pension Obligations/Reserves/Operating Percentages

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