CC SR 20160405 01 - Budget WorkshopRANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 04/11/2016
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA DESCRIPTION:
Consideration and possible action regarding the General Fund FY 2015-2016 Year-end
and FY 2016-2017 Preliminary Budget and the FY 2016-2017 Capital Improvement
Budget.
RECOMMENDED COUNCIL ACTION:
(1) Provide Staff direction to develop the Fiscal Year 2016-2017 Preliminary Budget
and Capital Improvement Budget.
FISCAL IMPACT: None
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Trang Nguyen, Deputy Finance Director'
REVIEWED BY: Deborah Cullen, Director of Finance
APPROVED BY: Doug Willmore, City Manager fM�'
BACKGROUND AND DISCUSSION:
Staff has prepared FY 2015-2016 year-end projections for expenditures and revenues,
with an emphasis on the General Fund. During the review of the year-end estimates
Staff identified any areas above or below budget. Additionally, this analysis assists in
planning for resources and funding needed for FY 2016-2017.
In preparation of the FY 2016-2017 Preliminary Budget, meetings with City Department
Heads are being held with the City Manager, Deputy City Manager and Director of
Finance to discuss service or program changes to the baseline budget. During the
Budget Workshop staff will be prepared to present for discussion the results of those
meetings. Additionally, the Five -Year Capital Improvement Budget will be presented.
1
General Fund Revenues—Fiscal Year 2015-2016 Year -End Estimates
Currently, Staff is estimating that General Fund revenues will end the year 1.20% or
$334,764 over the adopted budget. Below is a summary of the major revenue
categories:
Property Tax is currently 1.80% under adopted budget or $211,887. Compared to the
same period last year, property tax decreased 0.6% or $65,545 due to the current
assessed values.
Property Taxes
FY 2014-2015 Actual Revenue: $11,609,213
FY 2015-2016 Adopted Budget: $11,755,555
FY 2015-2016 Year-end Estimate: $11,543,668
Transient Occupancy Tax (TOT) is currently estimated to end the year 2.5% or
$124,582 over the adopted budget. Compared to the same period last year, TOT
increased by 7% or $338,852 due to the uptick in revenue in rental occupancies at
Terranea. The resort has been open almost 7 years, and the growth rate of TOT year -
over -year has been positive every year. This year-end estimate is based on the latest
industry information. Staff will continue to monitor and report any changes due to the
economic conditions at year-end.
Transient Occupancy Tax
FY 2014-2015 Actual Revenue: $4,812,130
FY 2015-2016 Adopted Budget: $5,026,400
FY 2015-2016 Year-end Estimate: $5,150,982
Utility User Tax (UUT) like Franchise tax is dependent on outside factors such as
weather conditions, the price of natural gas and rate increases, which cannot be
predicted over the long-term with any accuracy. Historically, Staff has assumed that
UUT will increase by the CPI for urban consumers, as projected by the Congressional
Budget Office. However, with the exception of water-based revenue, Staff has
estimated that UUT will remain relatively unchanged as rates are expected to remain
flat. Staff has assumed a 4.2% increase or $78,012 over the adopted budget.
Comparing to the same period last year, UUT decreased 1.7% or $32,659 less than FY
2014-15 actuals.
UUT
FY 2014-2015 Actual Revenue: $1,972,671
FY 2015-2016 Adopted Budget: $1,862,000
FY 2015-2016 Year-end Estimate: $1,940,012
2
License and Permit revenues are difficult to predict and can vary widely from year to
year. Permits are driven by the weather, economy, trends in home improvement,
lending rates, turnover rate of housing stock and the availability of contractors. License
and Permit revenues are projected to end the year approximately 11.7% or $252,658
over budget. Comparing to the same period last year, Licenses and Permits decreased
by 4% or $101,016 less.
Licenses and Permits
FY 2014-2015 Actual Revenue: $2,513,774
FY 2015-2016 Adopted Budget: $2,160,100
FY 2015-2016 Yearend Estimate: $2,412,758
FY2015-16 General Fund Major Revenue Types
Graph 1 YE Estimates Compared to Adopted Budget
12.0 Estimated to end the year $335,000 over budget
0
10.0
8.o
•
4.0
2.0
0.0
Property Sales Tax TOT UUT Licenses
Tax and Permits
■ FY15-16 Adopted Budget ■ FY15-16 YE Estimates
3
General Fund Expenditures—Fiscal Year 2015-2016 Year -End Estimates
Currently, Staff is estimating that General Fund expenditures will end the year 1.8% or
$382,000 under the adopted budget. The chart and table below outline year-end
estimates for expenditures compared to the adopted budget by department.
FY2015-16 General Fund Expenditures
Graph 2 YE Estimates Compared to Adopted Budget
Estimatea to end the year $382,000 under budget
8.0
6.0
4.0
2.0 '
Salaries Benefits Prof/Tech Law Other
Enforcement
2015-16 Adopted Budget 2015-16 YE Estimates
FY2015-16 General Fund Expenditures
Table 7 Adopted Budget vs. Year-end Estimates
The savings from City Administration is due primarily to salary savings and Tier 1
pension benefit savings. Savings in City Attorney and Public Safety Departments are
due to contract changes and savings in Public Works is due to programs that have not
been fully implemented. The increases in Community Development and Recreation and
ki
FY 2016 ADOPTED
FY 2016 YEAR-END
DEPARTMENT
BUDGET
ESTIMATE
VARIANCE
CITY ADMINISTRATION
$5,392,375
$5,310,246
($82,129)
CITY ATTORNEY
1,030,000
760,000
($270,000)
PUBLIC SAFETY
5,279,500
5,220,700
($58,800)
COMMUNITY DEVELOPMENT
2,685,779
2,766,343
$80,564
PUBLIC WORKS
4,554,063
4,151,281
($402,782)
RECREATION & PARKS
1,995,031
2,119,620
$124,589
NON -DEPARTMENTAL
226,067
$226,067
TOTAL
$20,936,748
$20,554,257
($382,491)
The savings from City Administration is due primarily to salary savings and Tier 1
pension benefit savings. Savings in City Attorney and Public Safety Departments are
due to contract changes and savings in Public Works is due to programs that have not
been fully implemented. The increases in Community Development and Recreation and
ki
Parks were for new programs implemented during FY 2015-16. Expenditures in Non -
department was for UUT refunds and vacation payout for retirement or employee
separation.
General Fund—Fiscal Year 2015-2016 Estimated Ending Fund Balance
Below is the calculation for the estimated Unreserved/Undesignated General Fund
Balance or excess surplus at the end of FY 2015-16. The estimated excess surplus is
$1.8 million, an increase of $1.1 million from the mid -year projection. This is net of the
required 50% Policy Reserve.
FY2015-16 General Fund Balance Summary
Table 2 (in millions)
Beginning Fund Balance
$15.1
Add: Revenues & Transfers In
28.4
Subtotal
43.5
Less: Expenditures, Transfers Out, Restricted amounts
-28.7
Less: Prior Year Favorable Expenditure Variance
(Transferred to CIP)
-2.2
Estimated Ending Balance @ 6/30/2016
12.6
Less: 50% Policy Reserve
-10.8
Unreserved/Undesignated Fund Balance
1.8
General Fund—Fiscal Year 2016-2017 Preliminary Budget
For the 2016-2017 preliminary budget, Staff has factored in several revenue and
expenditure assumptions to the modified zero -based budget as outlined below.
FY 2016-2017 Revenue Assumptions
Staff is expecting the following increases to General Fund revenues in
FY2016-2017 as compared to the FY 2015-2016 Adopted Budget:
• Property Tax-- increase of 0.41 % or $48,200
• Sales and Use Tax-- increase of 2.60% or $53,800
• Transient Occupancy Tax-- increase of 9.32% $468,600
• Utility User Tax-- increase of 6.44% or $119,900
• Licenses and Permits-- increase of 2.40% or $54,500
• Overall, General Fund revenues will increase 2.2% or $619,600
��
The chart below has built in the revenue assumptions listed above and compares the
FY2015-2016 adopted budget to FY2015-2016 year estimates and to the FY2016-2017
preliminary budget estimates.
FY 2016-2017 Proposed General Fund Revenues
Graph 3
14.0
12.0
� 10.0
g.0
6.o
4.0
2.0
0.0
FY 15-16 Adopted Budget $27.9
Property Sales Tax TOT UUT Licenses Other
Tax and revenue
Permits
■ FY15-16 Adopted Budget ■ FY15-16 YE Estimates FY16-17 Budget
on
This pie chart breaks -down the General Revenues by type and their respective
contribution in percentage (%) terms to the overall total. Included in the Other Taxes
category is Business License Tax, Sales and Use Tax, Franchise Tax, Golf Tax and
Utility Users Tax.
Graph 4
FY 2016-2017 Proposed General Fund Revenues
Other Taxes Charges for
27 Services
Property Tax 1%
41% 0_'."_41VWLWW
Transient
Occupancy Tax
19%
Other Revenue
/ Rents &
Leases
4%
Licenses
FY 2016-2017 Expenditure Assumptions
Staff is estimating the following increases to General Fund expenditures in FY 2016-
2017:
• CalPERS Pension Rate increase of 10.83% or $87,000
• 2% COLA increase of $114,300
• Average 2% Merit increase of $72,600
• Health Benefits increase of 6% or $45,000
• Non -Personnel increase of 4.79% or $594,200
• Law Enforcement increase of 17.8% or $940,500
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