County of San Diego Rating Agency Presentation May 2004
County of San Diego
Walt Ekard, Chief Administrative Officer
Donald F. Steuer, Chief Financial Officer
Tracy Sandoval , Auditor and Controller/Assistant Chief Financial Officer
Janel Pehau, Director, Office of Financial Planning
Lisa Keller-Chiodo, Capital Finance Manager
Group Finance Directors
Jill Serrano, Group Finance Director ,
Terry Hogan, Group Finance Director ,
Health & Human Services Agency
Ray Fernandez, Group Finance Director ,
Land Use & Environment
Jerry Hughs, Group Finance Director ,
Michelle Bush, Group Finance Director ,
Finance & General Government
Introductions Treasurer-Tax Collector Dan McAllister, Treasurer-Tax Collector Auditor and Controller Christopher Gilmore, Deputy Controller
Mission Statement and Strategic Initiatives
“ To provide the residents of San Diego County with superior County services in terms of quality, timeliness and value in order to improve the region’s Quality of Life.”
Improving Opportunities for Kids
Protect the Environment
Promoting Safe & Livable Communities
Recognitions of Excellence
General Management System (GMS):
San Diego County Taxpayers Association: 2003 Grand Golden Watchdog Award
CSAC: 2003 Challenge Award
NACo: 2003 Achievement Award - Best in Class - Risk Management for Workers’ Compensation
NACo: 2003 Achievement Award for Pension Obligation Bonds
GFOA: Distinguished Budget Presentation and Certificate of Achievement for Excellence in Financial Reporting
Strategic Initiative Recognition:
NACo: 2004 Acts of Caring Awards Program-Criminal Justice
CSAC: 2003 California Community Partnership Award
American Planning Association California Chapter: 2003 State Planning Award
The County’s previous and current actions demonstrate its ability to make difficult decisions to cut spending and retain a structurally balanced budget, while still meeting its obligations to taxpayers and residents of the County.
The County is well-positioned to manage the challenges presented by the State of California’s fiscal crisis.
Table Of Contents
Economic Overview & Highlights
Financial Results & Fiscal Year 04-05 & 05-06 Operational Plan
County Retirement System & Pension Obligation Bonds
County Investment Pool
2004-05 Tax and Revenue Anticipation Notes
Long-Term Bonded Debt
1. Economic Overview & Highlights
San Diego is a Place People Want to Go
PETCO Park opened in April 2004
San Diego Convention Center is celebrating 15 years in the community
$10 billion in economic impact
Generated more than 7.4 million hotel room nights
San Diego ranked as #1 for Spring and Summer Travel Destination
Location Location Location
Statewide job growth
Strong job market, with County unemployment (3.9%) below State (6.2%) and National (5.8%) forecasts
Diverse High-Tech Center
San Diego County has experienced positive economic growth every year since 1994.
If San Diego were a separate country it would rank as the 30th largest economy in the world, equal in economic output to Finland or Thailand.
San Diego has the largest number of military personnel in the nation.
Construction Housing Boom
Increase in Housing prices (Average Price $518,650)
Property Tax Base has increased 9% a year since 1997.
2. Financial Results & Fiscal Year 04-05 & 05-06 Operational Plan
Financial Highlights FY 2003-04
VLF revenues are expected to be under budget by $45.0 million
All other general purpose revenues are projected to be $16.0 million higher than budget
Firestorm 2003: County committed appropriations of $22.6m, $18m has been approved and $3.7m has been received
Amount not included as part of Fund Balance or resources for FY 04-05
$39m of unappropriated fund balance
General Fund Financial Results * Balances for the year ended June 30, 2001 were significantly affected by the implementation of GASB 33, which requires equity that was previously classified in certain agency funds to be consolidated with the General Fund . ** As reported in the Third Quarter Fund Balance Report.
Conservative Budgeting & Strong Financial Performance (1) Third Quarter Fund Balance Report for each respective fiscal year, Excess Ongoing Revenues over Ongoing Expenditures
Reserves and Resources ($000s)
Structural Cost Increases
Property Tax Shift
Categorical Program Impacts
Dependence on State Government
Challenges for the Future
Financial Highlights FY 2004-05
The County’s operational plan built on the January 9, 2004 governor’s budget.
County will retain the general reserve of $55.5 million and will appropriate an operational contingency reserve of $11 million.
The plan includes the final two years of five-year salaries and benefits agreements for most of the County’s bargaining units.
Retirement costs have been incorporated into the County’s cost structure.
$ 3.96 Billion – by fund 3% decrease Fiscal Year 04-05 Proposed Operational Budget
$2.763 Billion Appropriations (in millions) Revenues (in millions) County maintains balanced budget. FY 04-05 General Fund Proposed Operational Budget
By Source – (in millions) 0.8% decrease General Purpose Revenue of $630.2M – 2.5% decrease General Fund Revenue Composition
FY 04-05 General Fund Detail
Mission Statement : Provide all County residents with the highest levels of public safety and security.
Provide law enforcement services to over 800,000 residents in the unincorporated areas and nine contract cities; Operate 7 jails
Prosecute approximately 50,000 felony and misdemeanor crimes, including consumer and welfare fraud
Supervise more than 20,000 juvenile and adult offenders sentenced to probation by the Court
Provide legal representation to indigent persons
Collect and disburse approximately $150 million in child support payments
Operation of new Juvenile Detention Facility
Participate in development of a Regional Intelligence Center
Increased focus on sex offenders, gang violence, adult offender literacy and prevention of youth exposure to violence.
Health and Human Services Agency
Mission Statement: . Make people's lives safer, healthier and self sufficient by managing essential services
Strengthen Child Welfare Services by managing to achieve state and federal accountability outcomes
Ensure that 75% of foster youth achieve high school completion.
Achieve total of 225,000 children enrolled in health insurance coverage.
Place 4,000 Welfare-to-Work participants monthly in unsubsidized employment
Begin integration of mental health and alcohol and drug services into a behavioral health system
Provide Food Stamp benefits to more than 30,000 households.
Prevent the spread of communicable diseases such as AIDS and TB.
Land Use and Environment Group
MISSION STATEMENT: To unify the County’s efforts in environmental preservation, quality of life, economic development, recreation, and infrastructure development and maintenance.
KIDS: Commitment to Prevention and Diversion
Build the Spring Valley Teen Center
Support kids in 4-H, mentoring and Critical Hours programs
SAFE & LIVABLE COMMUNITIES: Preserve the Infrastructure
Seek full state and federal reimbursement of costs resulting from Firestorm 200, and develop grant proposals to help fund fire recovery efforts
Continue collection of household hazard waste
Detect agriculture pests early
Leverage County resources for outside funding for open space acquisition.
Complete public review of General Plan 2020 Environmental Impact Report, and present it to the Board of supervisors for approval
Complete North County Multiple Species Conservation Program Environmental Impact Report
Continue to improve watershed protection and stormwater quality
Preserve open space for public use
Revise rules to further reduce emission from gasoline stations, solvents, engines and gas turbines to continue ozone attainment
Community Services Group
Mission Statement : To provide cost effective and responsive services to our customers—the public and County departments. These services are provided with an emphasis on customer satisfaction, quality, and value.
Sustain commitment to major maintenance
Reengineered facilities maintenance to improve efficiency and reduce total costs
Continue investments in energy-saving technologies
Provide funding to assist revitalization of lower-income neighborhoods
Apply innovative procurement methods to reduce costs to County departments
Successfully conduct November General Election
Finance and General Government Group
Mission Statement: To provide timely, accurate, efficient and effective financial, legislative and general government services to County residents, other local public agencies, county departments and individual County employees that are consistent with federal, State and local requirements.
Provide accounting, audit, budget, payroll and collection services.
Establish values and maintain records on all taxable property within the County.
Make available to the public all vital records.
Remain a critical revenue generator for the County.
Provide investment and treasury services to the County as well as school districts, cities, and special districts.
Deploy Human Resources and Financial Systems.
Manage IT Outsourcing Contract.
Present full disclosure of financial transactions through recurring reports.
State Mandates Payments – SB-90
Increase in IDEA funds
ERAF effect shifts from $55m to $28m
Impact of May Revised Budget
3. County Retirement System & Pension Obligation Bonds
San Diego County Employees’ Retirement Association was established July 1, 1939 under the provisions of the County Employees’ Retirement Law of 1937
18,434 active members as of fiscal year ending June 30, 2003
10,280 retired members
3,790 deferred members
Current year activity:
Tri-annual experience review
County Retirement System
Ensure that the County Retirement System is appropriately funded.
Pay the full annual contribution required by the Retirement System’s Actuary.
Take advantage of low interest rates to lower Unfunded Actuarial Accrued Liability (UAAL) and save money by periodically issuing POBs.
Minimize risk of over-funding pension system by targeting maximum funding ratio of 90%-95%.
Maximize flexibility to prepay and refinance future UAAL.
Actuarial Report as of 6/30/2003 released in April 2004:
Reflects new UAAL of $1.4 billion (75.5% funded)
Does not include sizable investment gains achieved since June 30, 2003
Board of Supervisors authorized CFO to pursue issuance of pension obligation bonds.
County has retained its own actuary to assist in matters relating to retirement funding.
SDCERA Goals for FY 04-05
Take advantage of favorable interest rates to achieve cost savings
Target near-term funding ratio of 80%
Consistent with Strategic Plan, continue to use available one-time, operating surpluses to retire POBs or other County debt
Economic Defeasance of 1994 POBs budgeted for FY04-05. Escrow can be collapsed and funds redirected if needed
Structure financing to achieve ongoing savings
Not a near-term budgetary fix
Include optimized mix of fixed and floating rate bonds
Consistent with County Long-Term Debt Policy
2004 POBs – Preliminary Financing Plan
2004 POBs – Historical Perspective 1 Assumes market rates as of May 7, 2004. Actual rates may vary. 2 2002 POBs had $100 million of unhedged ARS while 2004 POBs assume $60 million of unhedged ARS at conservative benchmark variable rates. 3 10-yr T-note yield as of May 7, 2004.
Date Activity May 19 Rating Agency Presentations June 7 Receive Ratings June 8 Receive Credit Enhancement Bids June 15 Board Meeting to Approve Transaction Mail POS June 22 Price Transaction June 29 Closing * Preliminary, subject to change. 2004 POBs Financing Schedule*
4. County Investment Pool
Low weighted average maturity
65% of securities mature within 1 year
Portfolio focus is Safety, Liquidity, Return
Weighted average yield of 1.60%
High Credit Quality
High credit quality (100% of securities are rated AAA or A-1/P-1/F-1)
Strong cash flow model
Investment Pool Strength and Stability
Key Pool Highlights – Pool Participants
County of San Diego,
K-12 school districts, and
various special districts and accounts controlled by the County Board of Supervisors.
fire districts, and
Various special districts
As of March 31, 2004
Community Colleges fall somewhere between Mandatory and Voluntary Participants. While they have the ability to invest funds outside of the County Treasury, they receive banking, checking, and investment services from the County.
Asset Allocation As of March 31, 2004
Key Pool Highlights - Credit Quality The Pool is limited to buying corporate and medium-term notes of issuers rated AAA or better when the maturity is beyond one year, whereas the Code allows for buying corporate and medium-term notes of issuers rated A or better. The following pie chart displays the percentage breakdown of credit exposure for the Pool. As of March 31, 2004
5. 2004-05 Tax and Revenue Anticipation Notes
Preliminary Size = $360 million
Includes maximum cash deficit and working capital reserve
Provides additional low cost, liquidity in light of State budget challenges
Mitigates any potential need for supplemental or internal borrowing
12 or 13-month maturity - to be determined
Investment of Note Proceeds and Set-asides
Investment Agreement vs. County Pool - to be determined
Flexible Pricing Schedule
Navigate around technical imbalances that may be caused by State
2003-2004 Tax and Revenue Anticipation Notes
2004-2005 General Fund Cashflow In thousands
2003-2004 General Fund Actual/Estimated Cashflow In thousands
AS OF 05/13/2004
Available Cash for Short Term Interfund Borrowing
Date Activity May 11 County Board Approves Financing May 24 Receive Ratings May 25 Post / Mail Preliminary Official Statement June 1 Price Transaction (Tentative) July 1 Closing * Preliminary, subject to change. TRANs Financing Schedule*
6. Long Term Bonded Debt
32% of debt COPS
68% pertains to Pension Obligation Bonds
County pays down various long-term obligations
1993 Series A
1993 Vista Refunding
Long-Term General Fund Bonded Debt
Debt Profile Outstanding Certificates of Participation Outstanding Certificates of Participation & Pension Obligation Bonds
General Fund Debt County Debt Service Burden * = 4.20% Debt Service Burden with offsets = 2.92% Debt Service Burden net of POB’s = 2.01% * Total Debt Payments/(General Fund Revenue – Fund Balance)
7. Closing Remarks
County continues to exercise fiscal prudence and uses reserves properly in times of economic slowdown
Consistent with its strategic plan and financial objectives, the County has maintained a structurally balanced budget
Absorb the emergent events of FY 2003-2004
County continues to maintain adequate cash position
County is well positioned to manage future challenges, including economic slowdown, potential impact of State budgetary actions, and changing demands of our citizens