City of Huntington Beach FISCAL YEAR 2015/16 PROPOSED BUDGET JULY 20, 2015
FY 2015/16 PROPOSED BUDGET Making it Count 2
FY 2015/16 PROPOSED BUDGET Overview FY 2015/16 Proposed Budget Highlights Status of General Fund Reserves Discussion of Unfunded Liabilities FY 2015/16 State Budget Impacts Discussion of Budget Set-Aside Options FY 2015/16 Budget Calendar 3
Making It Count Every financial decision made today will have lasting impact for generations to come FY 2015/16 Proposed Budget maximizes limited resources by funding areas needing it most: Public Safety Quality of Life Programs Financial Sustainability Infrastructure 4
FY 2015/16 Proposed Budget The Proposed All Funds Budget totals $344.4 million, a $2.2 million or 0.6% increase from the FY 2014/15 Adopted Budget The Proposed General Fund Budget totals $216.5 million, a $6.6 million, or 3.1% increase from the FY 2014/15 Adopted Budget 5
FY 2015/16 General Fund Highlights Description FY 2014/15 Adopted Budget (in millions) FY 2015/16 Proposed Budget (in millions) General Fund Revenues $207.0 $216.5 Set-Asides* $3.4 $0.0 Total Sources of Funds 210.4 $216.5 General Fund Expenses $209.9 $216.5 Surplus/(Deficit) $0.5 $0.0 *Reflects the use of set asides created specifically for Senior Center construction. 6
FY 2015/16 General Fund Overview Balanced General Fund Budget for FY 2015/16 A General Fund revenue increase of 4.6% is projected A $3 million budget set-aside is included Fixed cost increases such as PERS, Workers Compensation, insurance premiums and utilities are included Equipment replacement funding is increased by $500,000 for a total of $5 million Increased funding and staffing for Public Safety and related capital equipment and technology investments ($4.0 million) 7
FY 2015/16 General Fund Revenue Total of $216.5 Million 8
General Fund Revenue Summary Total General Fund projected revenue is $216.5 million, reflecting a 4.6% increase from the current year Property Tax is estimated at $84.1 million, an increase of $4.1 million Transient Occupancy Tax continues to grow, reaching an estimated $10.3 million next year, an increase of $1.5 million Sales Tax is projected at $33.2 million, an increase of $4.4 million including a one-time accrual of $2.0 million Planning licenses and permits are down by -14.7% as revenues related to Pacific City are being paid in FY 2014/15 The annual Gas Tax transfer to the General Fund of -$900,000 is eliminated due to State cuts in Highway Users Tax revenue Water UUT revenue is projected to decline by over -20% due to the State s water restriction mandate 9
FY 2015/16 General Fund Highlights Description In Millions FY 2014/15 Adopted Budget (minus one-times)* $206.2 PLUS: CalPERS First Year of 5-Year Cost Increases 3.0 Merits, Skill Pays, Longevity, Increases 0.5 Workers Compensation Increases 0.2 Citywide Utilities Cost Increase 0.4 Two Police Officer positions 0.5 Increase in Debt Service and Tax Sharing Agreements 0.5 Equipment Replacement and CIP Budget Increases 0.7 Departmental Supplementals 1.5 Budget Set-Aside 3.0 FY 2015/16 Baseline $216.5 Increase to Baseline from FY 2014/15 +$10.3 * FY 2014/15 Adopted Budget of $209.9 minus $3.4 million in one-times 10
Making It Count Public Safety 11
Making it Count - Public Safety Public Safety Represents 53% of General Fund Police 32.5% City Council 0.2% City Treasurer 0.1% City Clerk 0.4% City Manager 1.0% City Attorney 1.1% Library Services 2.1% Finance 2.7% Human Resources 2.5% Information Services 3.2% Community Development 3.2% Community Services 4.4% Public Works 10.4% Fire 20.7% Non-Departmental 15.6% 12
Public Safety Highlights The FY 2015/16 Proposed Budget contains a creative funding approach that essentially adds five Police Officers to sworn and patrol related duties: First, it adds funding for two Police Officer positions; and Adds funding for three Community Services Officers, thereby freeing up three more Police Officers to patrol related activities Increases Police dispatch operations by two FTEs (offset by a commensurate reduction in Overtime) Adds $50,000 for a new Standard of Cover evaluation in Fire Increases funding for the Junior Lifeguard Program Provides for a new lease to purchase Fire Engine Emergency One 13
Public Safety Police Department Amount Fund Two Additional Police Officer Positions + uniform & equipment 456,530 Fund Three Community Services Officers 304,512 Fund Two Communication Operators (Cost Neutral) - Police Officer and Parking Control Officer to General Fund 201,578 OC Animal Control Contract Increases 100,000 Aircraft Upgrades and Increased Helicopter Fuel 595,933 Server Upgrades including Computer Forensic Lab 65,203 Fleet Replacement (26 units) 955,000 CIP Police Dept Lobby Security Project 250,000 Various transfers, exchanges to personnel costs 26,437 Total $2,955,193 14
Police Officer Staffing Recap Sworn Officer Staffing Positions Police Officers Added in FY 2013/2014 +5.0 Police Officers Added in FY 2014/2015 +2.0 Police Officers Added in FY 2015/2016* +5.0 Total Police Officers Added since FY 2012/13 +12.0 *FY 2015/16 Proposed Budget reflects a creative funding approach of funding two additional Police Officer positions, plus three Community Services Officers, thereby freeing up three Police Officers to conduct patrol or sworn duties. 15
Public Safety Fire Department Amount Lease Financing for new $775,000 Fire Engine; Year One 165,000 Increase Junior Lifeguard Program 50,000 Standards of Cover Evaluation 50,000 Increase Metro Cities Joint Powers Agreement 83,895 Medical Billing Contract Increase 21,132 Equipment and Supplies - SCUBA Dry Suits, Fire Hose, Defibrillators 190,160 Lifeguard Towers 103,000 Refurbish Oil Wells 105,400 Mobile Data Computers (35 units) 149,377 CIP Fire Station 8 Heil Renovation 158,100 Total $1,076,064 16
Making It Count Quality of Life 17
Quality of Life Re-title Planning and Building Department to Community Development Department Establishes a Deputy Director position (with no net increase in the Table of Organization) Provides funding to improve the beachgoing experience by increasing restroom cleaning during off-peak periods and providing new trash enclosures ($66,825) Increases funding for tree trimming new prevailing wage ($111,000) Renovates Central Library interior and entry doors, replaces 70 obsolete computers and increases materials budget ($335,000) Sand Replenishment Engineering Study at Huntington Harbor Beaches ($60,000) 18
Making It Count Economic & Financial Sustainability CITY OF HUNTINGTON BEACH FOR THE YEAR ENDED SEPTEMBER 30, 2012 CITY OF HUNTINGTON BEACH FISCAL YEAR 2013/2014 19
Economic and Financial Sustainability The Proposed Budget continues funding for the City s 3-pronged approach to reduce unfunded liabilities: The 25 to 10 Plan for Retiree Medical The 16 to 10 Plan for Retiree Supplemental CalPERS One Equals Five Plan The Proposed Budget provides full funding for the City s annual Workers Compensation Costs Includes $250k towards reducing the $9.2 million Workers Compensation unfunded liability Plans above will help maintain AAA Fitch Rating 20
Economic and Financial Sustainability To ensure compliance with Federal, IRS, Affordable Care Act, PERS and State laws (e.g. AB1522), a Senior Payroll Technician position is added An increase of $210,000 is included for Tax Sharing Agreements due to increased revenues: Sales Tax Agreement with Pinnacle Hotel Tax Agreement with Visit HB 21
General Fund Balance (In Thousands) Fund Balance Category FY 11/12 Audited FY 12/13 Audited FY 13/14 Audited FY 14/15 Estimate Economic Uncertainties $ 24,011 $ 24,011 $ 25,011 $ 25,011 Litigation Reserve 900 900 900 900 Budget Stabilization 3,100 - - - PARS Obligation 4,701 - - - Equipment Replacement 6,913 8,295 8,295 8,295 Redevelopment Dissolution - 1,323 1,323 823 Retiree Medical Unfunded Liability 698 698 - - General Plan Maintenance 323 720 720 720 Capital Improvement Reserve (CIR) 5,970 7,136 7,136 7,136 Senior Center Debt Service Reserve - 2,000 2,000 - CalPERS One Equals Five Plan - 500 1,500 500 CalPERS Rate Increase - - 1,287 1,287 Cityview Replacement - - 695 - Other Fund Balance/Encumbrance* 7,819 8,924 12,187 9,643 Total Fund Balance $ 54,435 $ 54,507 $ 61,054 $ 54,315 *Other Fund Balance includes Pre-paid insurance, Encumbrances, Non-Spendable and Other Restricted items. 22
Making It Count Challenges and Opportunities 23
FY 2014/15 FY 2015/16 State Budget (One Times) The FY 2015/16 State Budget includes $170 million in reimbursements to cities for unreimbursed State Mandates A total of $1.6 million is expected by September 30, 2014 FY 2015/16 In addition, a one-time triple flip payment of $4.5 million is expected in FY 2015/16 Staff recommends to not appropriate until funds are received 24
Making it Count Recommendations: Outright purchase of Fire Truck and/or Engine to reduce annual debt service by up to $470k over next five years Outright payment of a portion of 800 MHz project ($9M) Utilizing all or a portion of these funds to reduce annual debt service for citywide Streetlight Retrofit Creation of a Section 115 Trust to expedite the paydown of unfunded liabilities thereby reducing annual Plan contributions 25
Unfunded Liabilities Overview as of CAFR for 9/30/2014 Type of Liability Amount* (000) % Funded Plan to Eliminate Liability Timeline CalPERS (Safety) 187,796 67.2% 1=5 Plan 25 years CalPERS (Misc) 120,431 73.0% Standard PERS Plan 30 years Subtotal 308,227 69.7% Retiree Medical (Misc) 5,900 100.0% Payoff as of 9/30/14 Now Retiree Medical (Safety)** 8,924 TBD 25 to 10 Plan 10 years Retiree Supplemental 21,563 62.7% 16 to 10 Plan 10 years Workers Compensation 9,205 46.3% 10 in 10 Plan 10 years TOTAL 353,819 Based on 2013 Data* *Total unfunded liability amounts are not constant and are subject to change for market conditions, demographics and actuarial changes. **Retiree Medical PEHMCA unfunded liability will be recognized in FY 2014/15 CAFR as per new requirement of ASOP No. 6. 26
Funded FT Funded FTE vs YOY PERS Costs 3,300.00 3,000.00 PERS Costs Funded FTEs $32.2M 2,700.00 $28.9M 0) 2,400.00 $27.4M FTE Count PERS Costs ($10,000 2,100.00 1,800.00 $19.2M $19.9M $20.8M $23.4M $23.6M 1,500.00 1,200.00 900.00 600.00 1,143.00 1,141.30 1,000.50 972.00 923.00 937.75 948.25 956.75 FY 08/09 FY 09/10 FY 10/11 FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15/16 27
CalPERS Increases CalPERS costs will increase from $25.0 million in FY 2013/14 to $49.3 million by FY 2021/22 (eight years), a 97% increase Safety rate increases from 38.8% to 55.2% in eight years Misc rate increases from 21.4% to 34.7% in eight years These estimates DO NOT include the cost of recently negotiated or yet to be negotiated contracts Recent CalPERS discussions regarding portfolio Volatility will increase employer costs beyond amounts identified above If the assumed earnings rate changes from 7.5% to 7.0%, that 50 bps change will cost an additional $3.5 million per year 28
8-Year CalPERS Employer Rate Increases* (All Funds) (In Millions) $60.0 97% $50.0 $4.1 $2.3 $1.2 $4.0 $40.0 $30.0 $20.0 $9.2 $3.9 $11.1 $3.3 $12.4 $1.7 $13.3 $3.8 $15.0 $16.7 $18.6 $19.6 $20.2 Misc Safety from Prior Year $10.0 $15.8 $17.8 $19.8 $20.6 $22.7 $25.0 $27.2 $28.5 $29.1 $- FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 FY 21/22 $25.0 $28.9 $32.2 $33.9 $37.7 $41.7 $45.8 $48.1 $49.3 *Projections do not include fiscal impact of new negotiated contracts. 29
FY 2015/16 Proposed Budget Recap Increases funding for critical Public Safety services Essentially adds five Police Officers to sworn duties through a creative funding approach, plus two Dispatchers for a total of seven newly funded FTEs in the Police Department Provides funding for quality of life enhancements at libraries and beaches Eliminates two of the City s three retirement unfunded liabilities in 10 years* Funds infrastructure improvements to roadways, parks, facilities and other capital assets Enhances compliance with laws and regulations promoting further financial sustainability *Pending market conditions, no additional changes in actuarial methodologies, etc. 30
Making It Count Budget Set-Aside Options 31
FY 2015/16 Budget Set-Aside Options ($3.0 million Total) At the Monday, July 13, 2015, Strategic Planning Retreat, the Council directed staff to present options for the $3.0 million Budget Set-Aside This is the only discretionary funding available for budget additions The FY 2015/16 Proposed Budget for the General Fund, totaling $216.5 million, is structurally balanced General Fund revenue assumptions contained in the Proposed Budget are supported by economic conditions and revenue trends No additional revenue above this amount is anticipated Proposed General Fund spending for next year reflects a 3.1 percent increase which is above the May CPI of 1.1 percent One-time uses of the Budget Set-Aside would result in non-structural commitments, providing further flexibility in FY 2016/17 However, labor contracts are expiring September 30, 2015 32
FY 2015/16 Budget Set-Aside Options ($3.0 million Total) Debt/Cost Reduction Initiatives Fund a new Section 115 Trust to further expedite the pre-payment of unfunded liabilities (up to $3 million) Payoff of LeBard School Site Acquisition $2.2 million Perform an outright purchase of a portion of 800 MHz project in lieu of financing ($9 million total project cost, and only $3 million available) One-Time Uses Transfer an additional $1 million to the Infrastructure Fund Deposit funds into Economic Uncertainties Reserve to help meet twomonths Financial Policy (currently short by $10 million) Fund Central Park improvements totaling $1.5 million Invest new monies into technology systems and WiFi networks Increase staffing in-lieu-of additional compensation 33
Budget Calendar Proposed Date July 6, 2015 July 13, 2015 July 20, 2015 August 17, 2015 September 8, 2015 September 21, 2015 October 1, 2015 Item FY 2015/16 Proposed Budget Delivered to City Council FY 2015/16 Strategic Planning Retreat Budget Update FY 2015/16 Proposed Budget Presentation Long Term Financial Plan FY 2015/16 Budget Adoption City Council Public Hearing FY 2015/16 Budget Adoption (Alternate) Fiscal Year 2015/16 Begins 34
QUESTIONS? JULY 20, 2015