2. 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
4. 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
5. 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
6. 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
7. 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
8. 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
9. GENERAL FUND FY 2013/14
REVENUES & EXPENDITURES
Deficit
$2,673,400
$56,743,600
REVENUES
$59,417,000
EXPENDITURES
9
10. 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
11. 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
13. 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
14. 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
15. 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
16. 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
17. 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
18. 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
20. 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
21. 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
23. 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
Editor's Notes
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.
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%.<NEXT SLIDE>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%.