CCMIN060413 - Laserfiche WebLink

16. Review of the Two-Year Operating Budget (2013/14FY and 2014/15FY) and the Four Year Capital Improvement Program (2013/14FY) thru 2016/17FY) Finance Director Wagner presented the Two-Year Operating Budget, which begins July 1, 2013 and ends June 30, 2015. Ms. Wagner provided a PowerPoint presentation on the budget as it relates to the General Fund, Enterprise Funds, Internal Services Funds and Special Revenue Funds. She reviewed a 10 year history of General Fund revenues, which are projected at $92.4 million in 2013/14FY and $94.5 million in 2014/15FY. Taxes (property, sales, hotel/motel, and business license) make up approximately 83% of General Fund revenues, followed by revenues from community services, development services, inter-fund charges, franchise fees, fines and interest income. She provided a 17 year history on secured property tax and a 20 year history on sales tax revenues, noting that both tend follow the tenor of the broader economy and that tax revenues are expected to increase modestly but steadily over the term of the budget. She then discussed General Fund expenditures, noting that while the City was able to reduce personnel expenditures through attrition, those same expenditures have grown over the last 5 years as a result of increased personnel benefit costs. She explained that personnel costs account for approximately 77% ($70 million) of General Fund expenditures while non-personnel expenditures account for the remaining 23%. She provided a 15 year history of personnel versus non-personnel expenditures, noting that the former continues to increase over the 2 year budget period. Salaries, which are projected to increase 3.5% in 2013/14FY and again in 2014/15FY, make up approximately 60% of personnel costs. She noted that these estimates include all existing MOUs but no assumptions for increases after the expiration of current labor contracts. Benefits, which make up the remaining 40% of personnel related expenditures, include PERS contributions, retiree medical costs (OPEB), workers compensation and medical benefits. She noted that the 2013/14FY numbers have been confirmed by CaIPERS but the 2014/15FY values are an estimate only. It is also common knowledge that those rates will increase substantially in the 2015/16FY. These increases are partially offset by employees continuing to pick up the Employer Paid Member Contribution, which all employees will be paying 100% of by December 1, 2013. She also noted anticipated increases in health insurance premiums, which Kaiser has confirmed will be 14% in 2013/14FY and has estimated at 10% for 2014/15FY. Non- personnel costs have remained relatively flat since 2009/10FY and are projected to decrease slightly (3.2%) over the 2 year budget. General Fund transfers have been adjusted to reflect pay off of the golf course service debt, which was replaced with payments into the CIP program for the Bernal Park project. General Fund Reserves, which totaled $25.2 million in 2010/11FY and 2011/12FY have decreased substantially to $12.163 million since paying off the golf course debt and are projected to remain at the level over the 2 year budget. Staff is recommending that the 10% Reserve for Economic Uncertainty and smaller undesignated reserve be combined to create a 13% Reserve for Economic Uncertainties, with the long term goal of increasing that to 20% of annual operating revenues. Ms. Wagner reviewed the Water Operations and Maintenance Fund, which is projected to decrease slightly from its $5.7 million 2012/13FY ending balance over the 2 year budget, which is largely due to the addition of an OSC Assistant Director Position that will be funded by both the Water and Sewer Funds. The Sewer Fund is projected to end the current fiscal year at $3.9 million and experience a slight positive net in operating revenues over the next budget term. The Golf Course Operating Fund started the year with a balance of $1.19 million, which was used to pay off the bonds this last quarter. Staff does anticipate ending the year with a small balance that will be maintained over the next 2 years. Ms. Wagner noted that while the staff report indicates a projected decrease in revenues, this is relative to 2012/13FY projections and not actual revenues. Major changes to the fund in this budget cycle relate to the debt service payoff, which means there will be no General Fund subsidy and any net operating income from golf operation will be transferred back to the General Fund to pay down the loan it made during its development. City Council Minutes Page 12 of 16 June 4, 2013