HomeMy WebLinkAbout01 PROPOSED FISCAL YEAR 2019-2021 BIENNIAL BUDGETMEETING DATE: JUNE 4, 2019
TO: MATTHEW S. WEST, CITY MANAGER
FROM: JOHN A. BUCHANAN, FINANCE DIRECTOR
SUBJECT: PROPOSED FISCAL YEAR 2019-2021 BIENNIAL BUDGET
SUMMARY:
The following is an executive summary of the proposed Fiscal Year 2019-2021 Biennial
Budget. The revenues and expenditures projections for the next two fiscal years have
been updated to reflect the latest economic information available to the City.
RECOMMENDATION:
Pleasure of the City Council.
CORRELATION TO THE STRATEGIC PLAN:
The recommendation correlates to the City's strategic plan by implementing Goal C,
strategy #3, develop and communicate a comprehensive set of financial policies and their
purpose to strengthen financial practices.
FISCAL IMPACT:
The proposed Fiscal Year 2019-2021 Biennial Budget reflects the various operating and
capital funds. Each department reviewed its areas of responsibility and provided
projections that are presented in the proposed budget. The projected FY 2019-20
expenditures for all funds are $217,341,742, which is $27,125,915 greater than the
project FY 2018-19 expenditures of $190,215,827. The projected FY 2020-21
expenditures for all funds are $146,394,440, which is $70,947,302 less than the FY 2019-
20. The difference in expenditures from fiscal year to fiscal year is associated with the
capital expenditures. At Mid -Year, staff anticipated roughly $30M in capital expenditures
rolling over to FY 2019-20.
The following discussion will focus on significant changes that are projected to impact
various funds of the City.
Proposed Fiscal Year 2019-2021 Biennial Budget Page 2
June 4, 2019
GENERALFUND
FY 2019-21 General Fund Projections
The projected General Fund Revenues for the FY 2019-21 Biennial Budget are
$68,277,405 (FY 2019-20) and $69,536,710 (FY 2020-21). These amounts reflect an
increase of $1,625,275 (FY 2019-20) and $2,884,580 (FY 2020-21) over the current fiscal
year. The increased revenues in FY 2019-20 are associated with higher projected
revenues associated with transient occupancy tax, rental income, and Transfers in from
various other funds, which include Land Proceeds Fund (Fund 189). These increases
are offset by declines in sales tax and permit & plan check fees. The increased revenues
in FY 2020-21 are associated with higher sales and property taxes, which are offset by
declines in Transfers in from other funds.
The City's two largest on-going revenues sources are sales and property taxes. The
gross property tax revenue for the FY 2019-21 Biennial Budget, associated with the basic
levy (1 %), is projected to be $11,052,800 (FY 2019-20) and $11,442,600 (FY 2020-21).
These amounts reflect a decline of $322,400 in FY 2019-20, but an increase of $67,400
in FY 2020-21 over the current fiscal year. Property tax revenues from all sources (basic
levy, property tax in lieu of VLF (Vehicle License Fee), property tax from former tax
increment and in -lieu property tax) for the FY 2019-21 Biennial Budget are projected to
be $21,229,516 (FY 2019-20) and $21,918,393 (FY 2020-21). These amounts reflect a
decline of $52,168 in FY 2019-20, but an increase of $636,709 in FY 2020-21 over the
current fiscal year.
GENERAL FUND PROPERTY TAX REVENUE
N $25,000
0
z
va $20,000
$2,057
$15,000
$10,14
$10,000
$5,000
$0
17-18
TOTALREVENUE: $19,800
$2,058
$2,059
$2,059
Residual &
$11,375
$11,053
$11,443 Other Prop Tax
Basic Levy
a
$8,268
In Lieu of VLF
19
18-19
19-20 Projected
20-21 Projected
$21,432
$21,380
$22,068
Figure 1: Shows various property tax revenues in the General Fund
Gross sales tax revenue for FY 2019-20 and FY 2020-21 is projected to be $24,958,600
and $25,272,600, respectively. These amounts reflect a decline of $341,400 (FY 2019-
Proposed Fiscal Year 2019-2021 Biennial Budget
June 4, 2019
Page 3
20) and $27,400 (FY 2020-21) from the current year projected sales tax revenue of
$25,300,000. The reasons for the decline in sales tax revenues are associated with
declines in the categories of autos & transportation and fuel & service stations. Despite
the solid economy, signs of strain are building as recent data indicates a record number
of Americans are 90 -days or more behind on their car loans.
The graph below illustrates the volatile nature of sales tax revenues.
Sales Tax Revenue & % Change in Sales Tax
N $25,400
v
c
M
c $25,200
L
H
t� $25,000
$24,800
v
M
Ln $24,600
$24,400 $24,400
$24,200
1.3%
19-20
17-18
18-19
Sales Tax
$24,575,479
$25,300,000
--*--% Change
-0.8%
2.9%
1.3%
19-20
20-21
Projected
Projected
$24,958,600
$25,272,600
-1.3%
1.3
Figure 2: Shows the sales tax revenue and percentage change in this revenue from FY 2017-18 through FY 2020-21
3.5
3.0
2.5
0.5% W
c
0.0% _
u
0.5% '00-
-1.0%
1.5%
-2.0%
The projected General Fund expenditures for the FY 2019-21 Biennial Budget are
$70,069,868 (FY 2019-20) and $72,001,209 (FY 2020-21). These amounts reflect a
decline of $617,551 in FY 2019-20, but an increase of $1,313,790 in FY 2020-21 over the
current fiscal year. The current fiscal year expenditures include costs for the operation of
the Temporary Homeless Shelter and the security camera project at the Civic Center.
The General Fund Fund Balance for the FY 2019-21 Biennial Budget is projected to be
$16,867,095 (FY 2019-20) and $14,402,596 (FY 2020-21). These amounts represent
24% (FY 2019-20) and 20% (FY 2020-21) of General Fund operating expenditures, which
meet the City Council's minimum Reserve Policy of 20% for the General Fund.
The City's unfunded accrued liability (UAL) with CalPERS as of the June 30, 2017
valuation date for both Miscellaneous and Safety plans is $62,671,168. The City's
Proposed Fiscal Year 2019-2021 Biennial Budget
June 4, 2019
Page 4
unfunded actuarial accrued liability for other post -employment benefits (OPEB) as of the
June 30, 2015 valuation date is $13,892,607. The City actively pursues various solutions
to reduce the unfunded liability for employee pensions with CalPERS and for retiree
medical benefits. As such, on April 18, 2017, the City Council authorized the participation
in the Public Agency Retirement Services (PARS) Post -Employment Benefits Trust
Program (Section 115 Trust), which could be used to pre -fund pension and retiree health
care obligations. In order to move towards achieving the goal of paying off the unfunded
liabilities within 15 years, the FY 2019-21 Biennial Budget include additional unfunded
actuarial liabilities payments to PERS in the amount of $3.3M per fiscal year from the
Land Proceeds Fund (Fund 189). This amount represents roughly 5% of the total
unfunded liabilities. In addition, the FY 2019-21 Biennial Budget include additional
contributions in the amount of $500,000 from the Land Proceeds Fund (Fund 189) to pre -
fund the City's Section 115 OPEB Trust at PARS, which offsets the City's OPEB unfunded
liabilities. This amount represents roughly 4% of the total unfunded liabilities.
The graph below projects the payoff of the pension UAL with additional discretionary
payments (ADP) of roughly $3 M per year for the next 14 years. The first payment was
remitted to CalPERS in the current fiscal year. Future budgets would need to identify
future funding sources in order to maintain the projected payoff, as shown below.
Pension UAL Balance with Additional
Discretionary Payment
0 $70
$60
$50
$40
$30
$20
$10
co O N 1:T W co O N 1:T W co O N 1:T W 00 O
rl N N N N N m m m m m 17 17 17 17 17 Ln
r_ rn �4 m Ln r_ rn �4 m Ln r_ rn �4 m Ln r_ rn
.4 .4 N N N N N m m m m m 1:T 1:T 1:T 1:T 1:T
O O O O O O O O O O O O O O O O O
N N N N N N N N N N N N N N N N N
Original Balance UAL Balance with ADP
Figure 3: Shows the projected payoff of the Pension UAL with additional discretionary payments
Proposed Fiscal Year 2019-2021 Biennial Budget
June 4, 2019
OTHER SIGNIFICANT FUNDS
Capital Projects Fund
Page 5
The City's capital projects program for the FY 2019-21 Biennial Budget for all funds, which
are funded through developer deposits, grants, special revenue sources (i.e. Measure M2
Fair -share, Gas Tax, Community Development Block Grant, Bonds, etc.), land proceeds,
backbone fee program, and Water Enterprise are projected to be $107 M over this two-
year timeframe.
Capital Proiect Expenditures by Category
Category
Proposed
FY 2019-20
Proposed
FY 2020-21
Flood Control Facilities
$0
$0.2 M
Park Facilities
$1.9 M
$1.0 M
Public Facilities
$11.4 M
$0.8 M
Traffic Control Facilities
$5.3 M
$0.2 M
Transportation Facilities
$10.6 M
$0.4 M
Legacy Development
$50.5 M
$12.0 M
Water Facilities
$10.4 M
$2.5 M
$90.1 M
$17.0 M
Table 1: Shows the capital project expenditures by category for the FY 2019-21 Biennial Budget
Capital projects for the FY 2019-21 Biennial Budget include the Veterans Sports Park,
Main Street improvements, Peters Canyon Channel, Simon Reservoir, infrastructure on
Neighborhood D South, and others as outlined in the City's Seven -Year Capital
Improvement Plan (CIP).
Community Development Block Grants (CDBG)
The projected CDBG revenues for the FY 2019-21 Biennial Budget are $1,448,900 (FY
2019-20) and $552,900 (FY 2020-21). These amounts reflect a decline of $326,939 in
FY 2019-20 and $1,222,939 in FY 2020-21. The nature of on-going CDBG programs
may result in the skewing of expenditures from year to year. Some years will have much
greater activity due to capital improvements as funds have been accumulated for major
projects. The City receives CDBG funds on a reimbursement basis as funds are
expended on approved programs.
Proposed Fiscal Year 2019-2021 Biennial Budget Page 6
June 4, 2019
Measure M2 Funds
Measure M2 Funds include Measure M2 Fair -share, and project specific Competitive
Funds. Measure M2 funded capital improvement expenditures for the FY 2019-21
Biennial Budget are projected to be $5,220,969 over this two-year timeframe. The
projects that are partially funded through Measure M2 include traffic signal equipment
upgrades, signal synchronization, Main Street improvements, catch basins, detention
basin landscaping, road improvements, median landscape rehabilitation, and Main street
improvements.
Park Development Fund
The Park Development Fund expenditures for the FY 2019-21 Biennial Budget are
projected to be $2,063,978. The Park Development Funds Fund Balance at year-end are
projected to be $2,328,843 for FY 2019-20 and $2,551,579 for FY 2020-21. The funds
are to be used for future park developments that include park picnic shelter
improvements, acquisition of additional park space in the southwest quadrant of the City,
and playground renovations.
Tustin Community Redevelopment Agency / Successor Agency
The Successor Agency to the former TCRDA was formed on February 1, 2012 as the
TCRDA was dissolved by AB X1 26. The Successor Agency is tasked with winding down
the former TCRDA. The Successor Agency can pay only those enforceable obligations
that are on the Recognized Obligation Payment Schedule (ROPS) that have been
approved by California Department of Finance (DoF). Previously, ROPS were prepared
for six (6) month increments, however the revised HSC section 34177.7 (o) allows the
ROPS to be prepared for one year starting with Fiscal Year 2016-17. The Successor
Agency submitted the Last and Final ROPS to the DoF on May 30, 2018. In a
determination letter dated September 4, 2018, the DoF approved the Agency's Last and
Final ROPS. The FY 2019-20 ROPS has enforceable obligations of $3,936,201. The FY
2010-21 ROPS has enforceable obligations of $3,929,585.
Water Enterprise
The projected Water Enterprise Fund revenue for the FY 2019-21 Biennial Budget is
$16,919,000 per year. The projected operating expenditures for the Biennial Budget are
$18,522,230 (FY 2019-20) and $18,964,950 (FY 2020-21). The projected operating Fund
Balance is $7,435,952 (FY 2019-20) and $5,390,002 (FY 2020-21), which will be used
Proposed Fiscal Year 2019-2021 Biennial Budget
June 4, 2019
Page 7
for operating reserves, meeting debt service requirements, and funding future capital
replacements. At a future meeting, staff will be returning to City Council with an updated
financial plan for the Water Enterprise.
Risk Management Funds
The Risk Management Fund as represented in this report is a summary of the Liability,
Workers' Compensation, and Unemployment Funds. The City is a member of the
California Insurance Pool Authority (CIPA), a risk -sharing pool made up of twelve Cities
for both liability and workers' compensation coverage. The City is self-insured for the first
$250,000 of each liability claim (this is referred to as a self-insured retention) and the first
$400,000 of each workers' compensation claim. The City is fully self-insured for all
unemployment claims. The Risk Management Funds Fund Balance was established
based on actuarial analysis and the City's ability to fund it. The projected combined Fund
Balance for the FY 2019-21 Biennial budget for all three Risk Management Funds is
$3,695,853 (FY 2019-20) and $3,453,436 (FY 2020-21).
Special Events Fund
The Special Events Fund includes the Tustin Street Fair, Tustin Tiller Days, and a variety
of other community events. The projected expenditures for the FY 2019-21 Biennial
Budget are projected to be $383,553 per fiscal year. The Special Events Fund Balance
is projected to be $433,554 (FY 2019-20) and $454,001 (FY 2020-21).
ECONOMIC / OTHER CONSIDERATIONS
Staff will continue to monitor Sales Tax and Property Tax trends throughout the fiscal year
as these revenues represent 68% of General Fund revenues. Staff will prioritize the City's
goals and objectives based on City Council policy direction, as well as potential actions
by the State that could have negative impacts on the City's future financial condition.
Proposed Fiscal Year 2019-2021 Biennial Budget
June 4, 2019
John .Buchanan
ce Director
I
Glenda Babbitt
Management Analyst
Page 8
Sean Tran
Deputy Finance Director — Admin Svs
Attachments: Proposed Fiscal Year 2019-2021 Biennial Budget
Fiscal Year 2019-2020 Capital Improvement Program