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Public outreach program overview  city financial situation   update for public 10-17-13
 

Public outreach program overview city financial situation update for public 10-17-13

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  • 60% - Police and Fire11% - Public Works14% - Recreation, Parks & Library15% - Administration
  • So from the previous slide we saw that 41.3 Million GF revenues comes from taxes.If we look at this revenues by sources to further drill down to identify where the revenues are generated we identify businesses and consumers. 61% or $25.6 million is generated by the business sector ---through BLT Property Tax and UUT39% is generated by consumers which includes the residential property tax of 2% or 1.2 millionSo here we see that although when we look at revenues by type it appears that we have equally proportioned pieces but upon analysis we see that 2/3rds of the GF taxes come from the business sector. And to further drill down we receive 1/3 or $14M from the top 10 businesses in the City.This analysis exposes risks inherent in our revenue model. The City is heavily dependent on the revenues generated from the business sector.
  • This overreliance on the business sector creates volatility and risk in core revenues. ONE BUSINESS LEAVES, WE’RE BACK TO SQUARE ONE.
  • The Green line track revenues, net of transfers and the Red line tracks total expenditures. History: From 1999 through 2002, the city was able to report annual surpluses, which amounted to about $24 million; even after earmarking funds for capital and infrastructure projects, such as Douglass and Fire Station #2.The surpluses were banked and subsequently transferred to the Economic Uncertainty Fund. As we move further to the center of this graph, the section in green highlights the years of ongoing deficits. Of significance to note, in FY 07/08, we made our first OPEB payment which increased expenditures by $2.4 million. In that same year, we recorded a $4 million investment loss. 2009 was the second year of the downturn in the economy, losing approximately $2.4 million from the decrease in the price of natural gas; In that year, the price of natural gas dropped by more than 60%. The city had to rely on almost $5 million in transfers from other funds. Fortunately, the Economic Uncertainty Fund had a healthy balance accumulated in previous years. The Workers’ Comp and General Liability funds also contributed one-time monies from accumulated reserves.In 2010, the City’s Sales Tax decreased by $2.6 million from the year before, in addition to a $1.2 million loss in franchise tax, which is indexed on the price of natural gas, as well as a slowdown in building and the results in plan check fees. In this year, the General fund relied on $7.7 million in transfers from other funds, including the Economic Uncertainty and Equipment Replacement to reduce the deficit. The City also responded to the reduction in revenues by implementing cost-cutting measures. In the adopted budget, $2 million in reductions in personnel and discretionary spending were identified. By year-end, the reductions had reached $5 million through employee concessions, golden handshakes (and freezing 34 vacant positions). Equipment Replacement costs were also deferred this year, which enabled us to save approx. $1.4 million.2011 saw a slight recovery in revenues; yet not enough to meet current expenditures. The City pulled $2.1 million from the Equipment Replacement fund to help balance the budget; Also, employees gave back 12.83% in salary and benefit concessions, which totalled approximately $3.4 million. Lastly, an additional 16 vacant positions were frozen, which enabled the City to save approx $1.7 million. 2012 started looking a bit better for the City, and we were able to book $3.3 million in additional revenues. Despite that, the City tried to contain its costs by reducing its staffing an additional 12 positions, bringing FTE’s down from 318 in 2008 to 256 by the end of the year. The City also asked employees to concede 3% of salaries towards pension contributions.
  • The Green line track revenues, net of transfers and the Red line tracks total expenditures. History: From 1999 through 2002, the city was able to report annual surpluses, which amounted to about $24 million; even after earmarking funds for capital and infrastructure projects, such as Douglass and Fire Station #2.The surpluses were banked and subsequently transferred to the Economic Uncertainty Fund. As we move further to the center of this graph, the section in green highlights the years of ongoing deficits. Of significance to note, in FY 07/08, we made our first OPEB payment which increased expenditures by $2.4 million. In that same year, we recorded a $4 million investment loss. 2009 was the second year of the downturn in the economy, losing approximately $2.4 million from the decrease in the price of natural gas; In that year, the price of natural gas dropped by more than 60%. The city had to rely on almost $5 million in transfers from other funds. Fortunately, the Economic Uncertainty Fund had a healthy balance accumulated in previous years. The Workers’ Comp and General Liability funds also contributed one-time monies from accumulated reserves.In 2010, the City’s Sales Tax decreased by $2.6 million from the year before, in addition to a $1.2 million loss in franchise tax, which is indexed on the price of natural gas, as well as a slowdown in building and the results in plan check fees. In this year, the General fund relied on $7.7 million in transfers from other funds, including the Economic Uncertainty and Equipment Replacement to reduce the deficit. The City also responded to the reduction in revenues by implementing cost-cutting measures. In the adopted budget, $2 million in reductions in personnel and discretionary spending were identified. By year-end, the reductions had reached $5 million through employee concessions, golden handshakes (and freezing 34 vacant positions). Equipment Replacement costs were also deferred this year, which enabled us to save approx. $1.4 million.2011 saw a slight recovery in revenues; yet not enough to meet current expenditures. The City pulled $2.1 million from the Equipment Replacement fund to help balance the budget; Also, employees gave back 12.83% in salary and benefit concessions, which totalled approximately $3.4 million. Lastly, an additional 16 vacant positions were frozen, which enabled the City to save approx $1.7 million. 2012 started looking a bit better for the City, and we were able to book $3.3 million in additional revenues. Despite that, the City tried to contain its costs by reducing its staffing an additional 12 positions, bringing FTE’s down from 318 in 2008 to 256 by the end of the year. The City also asked employees to concede 3% of salaries towards pension contributions.
  • The Green line track revenues, net of transfers and the Red line tracks total expenditures. History: From 1999 through 2002, the city was able to report annual surpluses, which amounted to about $24 million; even after earmarking funds for capital and infrastructure projects, such as Douglass and Fire Station #2.The surpluses were banked and subsequently transferred to the Economic Uncertainty Fund. As we move further to the center of this graph, the section in green highlights the years of ongoing deficits. Of significance to note, in FY 07/08, we made our first OPEB payment which increased expenditures by $2.4 million. In that same year, we recorded a $4 million investment loss. 2009 was the second year of the downturn in the economy, losing approximately $2.4 million from the decrease in the price of natural gas; In that year, the price of natural gas dropped by more than 60%. The city had to rely on almost $5 million in transfers from other funds. Fortunately, the Economic Uncertainty Fund had a healthy balance accumulated in previous years. The Workers’ Comp and General Liability funds also contributed one-time monies from accumulated reserves.In 2010, the City’s Sales Tax decreased by $2.6 million from the year before, in addition to a $1.2 million loss in franchise tax, which is indexed on the price of natural gas, as well as a slowdown in building and the results in plan check fees. In this year, the General fund relied on $7.7 million in transfers from other funds, including the Economic Uncertainty and Equipment Replacement to reduce the deficit. The City also responded to the reduction in revenues by implementing cost-cutting measures. In the adopted budget, $2 million in reductions in personnel and discretionary spending were identified. By year-end, the reductions had reached $5 million through employee concessions, golden handshakes (and freezing 34 vacant positions). Equipment Replacement costs were also deferred this year, which enabled us to save approx. $1.4 million.2011 saw a slight recovery in revenues; yet not enough to meet current expenditures. The City pulled $2.1 million from the Equipment Replacement fund to help balance the budget; Also, employees gave back 12.83% in salary and benefit concessions, which totalled approximately $3.4 million. Lastly, an additional 16 vacant positions were frozen, which enabled the City to save approx $1.7 million. 2012 started looking a bit better for the City, and we were able to book $3.3 million in additional revenues. Despite that, the City tried to contain its costs by reducing its staffing an additional 12 positions, bringing FTE’s down from 318 in 2008 to 256 by the end of the year. The City also asked employees to concede 3% of salaries towards pension contributions.
  • Utility User Tax Increase – 1% increase: $1,000,000TOT – 1% increase: $637,500Business License Tax: Eliminate Sales Tax Credit: $1,400,000
  • THIS GRAPH SHOWS THE GAS, ELECTRIC & WATER UUT RATES IN THE SURROUNDING AREAS. THE CITIES OF INGLEWOOD, SANTA MONICA AND LOS ANGELES ARE ALL AT ABOUT 10%, THE AVERAGE IN OUR LOCAL AREA IS ABOUT 7%.Residential: Long BeachRedondoHawthorneCulver CityInglewoodSanta MonicaLos Angeles
  • THIS GRAPH SHOWS THE TOT RATES IN THE SURROUNDING AREAS. THE CITIES OF INGLEWOOD, SANTA MONICA AND LOS ANGELES ARE ALL AT ABOUT 14%, THE AVERAGE IN OUR LOCAL AREA IS ABOUT 12%. Culver City just successfully raised theirs to 14%.
  • WATER TAX GOES TO GENERAL FUND

Public outreach program overview  city financial situation   update for public 10-17-13 Public outreach program overview city financial situation update for public 10-17-13 Presentation Transcript

  • CITY FINANCIAL SITUATION AND OPTIONS FOR THE FUTURE OCTOBER 2013 1
  • AGENDA How are City funds spent? How are City services funded? Why do we have a future deficit? What steps have been taken to reduce expenditures in recent years? • What are the City’s options for dealing with the deficit? • Questions/Comments • • • • 2
  • CITY SERVICES • • • • • • • • Police Department Fire Department City Library Recreation and Parks Public Works Planning & Building Safety Administration Elected Officials 3
  • HOW WILL YOUR DOLLAR BE SPENT IN 2014? $59,417,000 60% Salaries – 47% $27,890,700 11% 14% Benefits – 31% $18,317,000 15% Nonpersonnel – 22% $13,209,300 4
  • HOW WILL CITY SERVICES BE FUNDED IN 2014? $56,743,600 LICENSES AND PERMITS, $1,477,500 , 3% OTHER REVENUE $2,799,800 5% FEES FOR SERVICES $4,215,900 7% TRANSFERS FROM OTHER FUNDS, $400,000 , 1% INTEREST INCOME $240,000 0% CHEVRON TRA $5,906,900 10% TAXES $41,703,500 74% 5
  • TAXPAYER ANALYSIS OF $41.7M GENERAL FUND REVENUES Residential Taxes 2% $1,200,000 TOT $5,125,000 TAXES, $41, 703,500 Consumer 36% Sales Tax $9,726,500 BLT $10,294,500 Business 62% UUT $10,026,800 Prop Tax $5,337,500 Top 10 businesses pay 1/3 or, $14 Million 6
  • Property Tax Breakdown * Average assessed value of a singlefamily unit in El Segundo is $482,000 Property Value: $ 500,000 $ Payment to County: Los Angeles County $0.53 City's Tax Apportionment: Portion to City: X 5,000 6.32% $ 316 Educational Aug. Fund Impound $0.14 El Segundo Unified School District, $0.11 * L.A. County (88 Cities) Avg: 11% $0.06 $0.06 $0.04 7
  • How Will Your Dollar Be Spent in 2014? $102 Fire Dept. $88 Police Dept. P u b l i c W o r k s $316 $36 L i b r a r y Rec./Parks $29 $47 $14 Admin. 8
  • GENERAL FUND FY 2013/14 REVENUES & EXPENDITURES Deficit $2,673,400 $56,743,600 REVENUES $59,417,000 EXPENDITURES 9
  • WHAT DOES THE FUTURE LOOK LIKE? 2014-2015 FORECAST REVENUES EXPENDITURES SURPLUS/(SHORTFALL): Increase to Expenditures for Capital Infrastructure SHORTFALL: $ 57,685,585 61,288,387 (3,602,802) $ 2,000,000 (5,602,802) 2015-2016 FORECAST $ 59,045,675 62,496,903 (3,451,227) $ 2,000,000 (5,451,227) 2016-2017 FORECAST $ 60,271,924 63,172,708 (2,900,784) $ 2,000,000 (4,900,784) Expenditures Revenues 2013-2014 2014-2015 2015-2016 2016-2017 10
  • WHAT IS PREVENTING A STRUCTURALLY BALANCED BUDGET?  Stagnant Tax Revenues  Price of Natural Gas impacting core tax revenues  Slow Property Tax Recovery (Commercial)  No significant projected increases in other revenues  Heavy Dependence on the Business Sector  62% of Tax Revenues come from Businesses  Volatility and Risk  Revenue needs diversification  Rising Benefit Costs have offset employee concessions 11
  • A BIT OF HISTORY GENERAL FUND 12
  • GENERAL FUND HISTORY REVENUES, NET OF TRANSFERS EXPENDITURES, NET OF TRANSFERS 8-yr surplus: $33 MM 13 2017 2016 2015 2014 Without Chevron TRA 2013 2012 2011 2010 2009 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 2008 DEFICIT PERIOD Beginning Business License Tax Reductions
  • GENERAL FUND HISTORY 2009: Cost of Living (COLA) increase given to all employees $3 Million Additional Reduction in 2011: - Saved 12.83% in Salaries & Benefits through employee furloughs - Offered Additional Early Retirements - Froze Additional 16 positions, for a total vacancy of 50 positions $5.1 Million Reduction in 2010: - Froze 34 vacant position created through attrition - Offered Early Retirements - Negotiated health cost-sharing with employee groups - Outsourced 911 Dispatch - Reduced mandatory staffing in Fire Dept., resulting in a savings of $1.8 Million in OT $4 million loss on investment portfolio $ 2.4 million loss from price of natural gas $2.6 million loss from Sales Tax $1.2 million loss from Franchise Tax 2012: -Negotiated pension cost-sharing with employees Froze Additional 12 positions, for a total vacancy of 62 positions, or 20% of total staffing Balanced with: $19.3 million from Econ Uncertainty $5.9 million in Developer Fees $4.4 million from Capital Designations 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 14
  • GENERAL FUND HISTORY REVENUES, NET OF TRANSFERS EXPENDITURES, NET OF TRANSFERS 8-yr surplus: $33 MM 15 2017 2016 2015 2014 2013 Without Chevron TRA 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 DEFICIT PERIOD
  • 3-Year Forecast Budget Balancing Options Option 1 Reduce Compensation, Staffing & Service Levels Reduce School Support Services 22 FT positions 28 PT positions = 8% Reduction in Salaries & Benefits 1% Comp - $440k Option 2 Option 3 Outsource Services Raise Revenues (tax increases) County Fire County Sheriff County Library UUT TOT Business License Parking Tax 16
  • RECOMMENDATIONS TO ADDRESS FINANCIAL STABILITY • Ongoing Cost Containment • Economic Development • Tax Measures: • Utility User Tax Increase (UUT) • “Hotel Tax” - Transient Occupancy Tax (TOT) • Business License Tax (BLT) 17
  • GAS, ELECTRIC & WATER UTILITY USERS’ TAX 12% City of El Segundo Charges Commercial Only; All Others Charge Commercial and Residential 10% Average 7% 8% 6% 4% 3% 2% 0% 18
  • HOTEL (VISITOR)TAX (TOT) Average 12% 14% 12% 10% 8% 8% 6% 4% 2% 0% 19
  • ESTIMATED VALUE OF PROPOSED TAX MEASURES UUT: (Elec., Gas, Telecom., Water) 1% Increase Value: Hotel (Visitor) Tax (TOT): $1,401,200 $637,500 Residential UUT (Elec., Gas, Telecom., Water): $342,350** **ANNUAL ESTIMATED Residential UUT Impact per household: $48.84 (Based on 7010 units not currently paying UUT) 20
  • BUSINESS LICENSE TAX 2013 SALES TAX CREDITS (NOT INCLUDING CHEVRON) TOTAL $1,105,500 254 out of 4,160 businesses take the Sales Tax Credits Manufacturing Other Retail 21
  • ESTIMATED POTENTIAL PARKING TAX REVENUES ASSUMING 10% PARKING TAX • Airport Parking (Long-term Parking): $295,000 • Transient (Visitor), Validation, & Valet Parking: $346,400 • Monthly Tenant Parking: $516,900 TOTAL: $1,158,300 22
  • Tax measures • All would require a ballot measure; must have 50% of the votes plus one to pass. • Next regular election – April 2014 • Council would need to agendize and vote on tax measures in the Fall 2013 • The earliest we would see any new revenues would be July 2014. 23