16-0523_BOYS & GIRLS CLUBS OF CAPISTRANO VALLEY_C1_PowerPoint (Budget Workshop)1
BUDGET WORKSHOP
FISCAL YEARS
2016-2017 AND 2017-2018
•Financial trends
•Current financial status
•Budget challenges
•Measures to balance the budget
•Overview of the proposed Capital
Improvement Program
2
What We Will Cover in
this Workshop
•Make changes based on
direction of City Council
•Finalize budget document
•City Council adopts budget on
June 21
3
What Happens After
This Workshop
Property Taxes
(20%)
Sales Taxes
(16%)
Fees & Permits
(8%) Debt
Assessments
(5%)
Water Fees
(34%)
Sewer Fees
(6%)
Other (11%)
4
Citywide Operating
Revenues
Property Taxes
(37%)
Sales Tax (32%)
Franchise Taxes
(5%)
Fees & Permits
(10%)
Fines &
Interfund
Charges (7%)
Other (9%)
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General Fund Revenues
Citywide Operating
Expenditures
6
Public Works/Utilities,
59.2%
Public Safety, 18.1%
Finance , 5.7%
Development
Services , 4.9%
City Manager , 4.6%
Community
Services , 4.1%
City Attorney, 1.9%
City Clerk, 1.2%
City Council, 0.3%
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General Fund Expenditures
General
Government
17.2%
Public Safety
37.7%
Community
Services
8.9%
Development
Services
9.7%
Public
Works/Utilities
24.6%
Transfers Out
1.9%
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Property Tax Revenues
$7.7 $7.6 $7.9 $8.1
$8.7 $9.3 $9.8 $10.1
$-
$2
$4
$6
$8
$10
$12
FY 10/11
Actual
FY 11/12
Actual
FY 12/13
Actual
FY 13/14
Actual
FY 14/15
Actual
FY 15/16
Projected
FY 16/17
Projected
FY 17/18
Projected
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Sales Tax Revenues
$5.6
$6.5
$7.5 $7.8 $7.7
$8.4 $8.4 $8.7 $8.9 $9.1 $9.4
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
FY 10/11
Actual
FY 11/12
Actual
FY 12/13
Actual
FY 13/14
Actual
FY 14/15
Actual
FY 15/16
Projected
FY 16/17
Projected
FY 17/18
Projected
FY 18/19
Projected
FY 19/20
Projected
FY 20/21
Projected
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Where Does the City’s Sales Tax
Come From?
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Auto &
Transportation
(29%)
Consumer
Goods (26%)
County Pool
(online, etc.)
(12%)
Restaurants
(11%)
Other (22%)
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Building and Development
Fees and Permits
$3.7
$1.8
$5.2
$4.0
$6.8
$3.4
$6.8
$8.7
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
FY 10/11
Actual
FY 11/12
Actual
FY 12/13
Actual
FY 13/14
Actual
FY 14/15
Actual
FY 15/16
Projected
FY 16/17
Projected
FY 17/18
Projected
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General Fund Contingency Reserve
$4.9
$6.3
$8.6
$11.4 $12.2 $11.5 $11.7 $11.8
23.1%
29.8%
38.1%
48.1%
47.1%
44.6% 45.2% 44.5%
$-
$2
$4
$6
$8
$10
$12
$14
FY 10/11
Actual
FY 11/12
Actual
FY 12/13
Actual
FY 13/14
Actual
FY 14/15
Actual
FY 15/16
Projected
FY 16/17
Projected
FY 17/18
Projected
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Projected General Fund Results for
Fiscal Year 2015/16
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1. Contingency Reserve – Balance at July 1, 2015 $12,177,118
2. Budgeted revenues 26,268,965
3. Budgeted expenditures (25,181,912)
4. Development fee revenue less than budgeted (1,957,860)
5. Development services expenditures less than budgeted 514,120
6. Sales taxes less than budgeted (674,940)
7. Property taxes more than budgeted 1,128,780
8. Legal fees more than budgeted (492,850)
9. Additional legal expense for SOCRE project (274,640)
10. Other 26,235
11. Contingency Reserve – Balance at June 30, 2016 $11,533,016
•Property taxes – based on information from City’s
consultant (Hdl Coren & Cone). Takes into account
projected sales in the secondary market.
•Sales taxes – based on information from City’s
consultant (Hdl Coren & Cone).
•Development related fees and permits – based on
projections of private development activity.
•Franchise taxes – based on 3-year average.
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Revenue Assumptions
•Department costs– based on projections to provide
existing levels of service
•Sheriff contract costs – For Fiscal Year 2016-17, based on
information from the County of Orange. For Fiscal Year
2017-18, a 5% estimated increase was used.
•Salary costs – For Fiscal Year 2016-17, 3% increase due to
MOU provisions.
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Expenditure Assumptions
•Pension costs – 3% increase based on three year average.
•Medical insurance premiums – 11% increase per year
from the level of actual costs currently being paid (based
on two year average)
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Expenditure Assumptions
Post-recessionary growth of sales tax revenues have been
modest due to continued consumer caution
Once built out, development related revenues (presently
at 10% of General Fund budget) will drop off
30% increase in prevailing wage rate for public works
contracts will impact costs for next year
33% of General Fund budget is determined by the
County of Orange (Sheriff’s Department)
Significant litigation expenses
Budgetary Challenges of the
City of San Juan Capistrano
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The City has limited resources and staffing
The priorities determined by City Council in the Strategic
Planning Workshop guided staff in the resource allocation
decisions that are reflected in the proposed budget
Limited Resources and
Limited Staffing
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Improve Street Maintenance and Rehabilitation
Implement Water Reorganization
Renegotiate Riding Park Lease/Increased Public
Access
Design and Construct Northwest Open Space Park
Resolve Water Lawsuits
Resolve Land Use Lawsuits
Transition to District Elections
Actively Oppose SDGE Substation Project
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Key Priorities
Encourage Quality Commercial Development
Expand Recycled Water to Riding Park
Process Hotel Projects (2)
Sell City-Owned Downtown Parcels and Lower Rosan
Negotiate Landfill Host City Cooperative Agreement
Process Pacifica San Juan Development
Fill Vacancies and Improve Morale
Resolve “Ghost Train” Issue
Implement Records Management Program
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Priorities (cont.)
The City successfully negotiated with the County of
Orange additional annual revenues of over $600,000
to mitigate impacts associated with location of a
County landfill within the city
In accordance with the City’s strategic priorities,
this money has been dedicated to street
rehabilitation projects
Application of Landfill
Agreement Funds
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Additional deputies
Additional Code Enforcement Officers
Any new full-time personnel
Reducing unfunded pension liability
Building reserves
New parks or City facilities (except NWOS)
Etc.
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What’s Not Funded?
The City Manager met with the management team of each
department:
Every line item in that department was scrutinized
Increases in proposed spending were challenged
Details and information were provided to the City Manager
to support that spending in significant categories reflected a
prudent use of City resources
Ensuring a Balanced Budget
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The proposed budget reflects the following considerations to eliminate the $1.5 million excess of General Fund expenditures over revenues that was initially identified at the start of the budget process:
Ensuring a Balanced Budget
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2016/17 2017/18
Removed new positions/reclassifications requested by City
Departments (selected part-time positions were approved)
$390,000
390,000
Removed funding for building, furniture, and equipment
depreciation
410,000
410,000
Use of Gas Tax Funds to reimburse General Fund for street
maintenance costs that will be paid by the General Fund
each year
470,000
345,000
Delay of IT upgrades 160,000 100,000
Removed Pepperdine PRYDE program from budget $59,000 59,000
Proposed Positions Changes Change in FTEs
Change in Part-Time Employees
Safety and Emergency Services Manager –
Public Safety 0.40
Project Manager – Development Services 0.38
Park Monitor – Community Services 0.29
Total Change in Number of Part-time Employees 1.07
Proposed Added Part-time
Positions
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General Fund Forecast
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$24.5
$25.0
$25.5
$26.0
$26.5
$27.0
$27.5
$28.0
$28.5
$29.0
$29.5
$30.0
$30.5
$31.0
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Fiscal Year
General Fund Revenues
General Fund Expenditures
Opportunities Ahead…
New hotels
Commercial development opportunities
Property tax
Sales tax
Mitigation fees/public amenities
Downtown redevelopment
OC Waste agreement (landfill mitigation)
Expiration of judgment obligation bonds
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Proposed General Fund
Reserve Targets
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Recommended Reserves
Target
Proposed
Reallocation
of Current
Balance
1. Cash flow reserve (20% of annual budget) $5,000,000 5,000,000
2. Economic uncertainty reserve (40%) 10,000,000 7,500,000
3.
Other contingencies reserve
(legal/disaster/unexpected) – (10%)
2,500,000
1,000,000
4. Pension contribution reserve (10%) 2,500,000
5. Capital replacement reserve (10%) 2,500,000
Total $22,500,000 13,500,000
First installment of property taxes is not received until
December
For most California cities, cash outflows exceed inflows for
the first five months of each fiscal year
This creates the need for a “cash flow” reserve
Based on our analysis of this pattern here at SJC, the
amount required for this reserve is $5,000,000.
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Need for Cash Flow Reserve
The economy is cyclical
The timing of the next economic downturn is not known
The next downturn may not be as deep or last as long as the
most recent economic down-turn
Some reserve is prudent to mitigate the need for deep cuts in
services in the event of an economic downturn
Funding for this reserve must be balanced against other
needs of the City to which our limited resources must be
applied
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Economic Uncertainty Reserve
There are other situations that can create an unexpected
need for resources, including:
Litigation
Urgent unexpected infrastructure repair and maintenance
Natural disasters
An urgent initiative identified by City Council
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Other Contingencies Reserve
The funds in this reserve can be used for the following:
Set aside funds to offset possible future increases in
OCERS annual contribution requirements
Set aside funds to accelerate pay-down of City’s
pension obligation
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Pension Contribution Reserve
Funds for capital replacement are accumulated in various
funds of a city
Some cities set aside additional funds in the General Fund
for capital replacement to augment the funding provided in
other funds
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Capital Replacement Reserve
Legal costs in excess of $800,000 were paid by the
Water Fund in the 2015/16 fiscal year
The City’s drought ordinance and water conservation
programs have reduced water sales
Rate increases from the Water Fund’s five-year rate
study are being phased in over five years (creating
budgetary challenges in earlier years of
implementation)
Debt coverage requirement
Budget Challenges for the Water Fund
34
Fiscal Year 2016/17 – To balance the Water Fund budget
in Fiscal Year 2016/17, the proposed budget reflects a one
year postponement of the annual installment payments
made by the Water Fund to repay money borrowed from
the Sewer Fund (which funded rebates to water utility
customers).
Fiscal Year 2017/18 – The proposed budget for the Water
Fund’s Fiscal Year 2017/18 budget reflects the resumption
of annual Sewer Fund loan repayments (as a result of the
benefits realized from the continued phase-in of rate
increases from the Water Fund’s five year rate study).
Water Fund
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Sewer Fund – Sewer service charges are used to pay
sewer system operating costs
Debt Service Fund – Voter-approved debt assessments
collected on the tax rolls are used to pay general
obligation bond debt service; transfers from the General
Fund are used to pay debt service on the City’s
judgment obligation bonds
SONGS Fund – Funds from Edison will be used to pay
for a safety and emergency services manager, training,
and a variety of other safety and disaster preparedness
expenses.
Other Funds
36
Housing In-lieu Fee Fund – Funds are accumulated
for affordable housing projects.
Capital Improvement Funds – A number of City
funds are used to accumulate resources to fund the
City’s capital improvement program. Tab 4 of the
Budget Workshop binder sets forth the spending
proposed for those projects in accordance with
direction provided by City Council at the Strategic
Planning Workshop that was held in April 2016.
Other Funds
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Steve May, Director of Public Works and Utilities, will
review the portion of the proposed budget that addresses
the City’s capital improvement program
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Capital Improvement Program