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Office of the City Manager January 28, 2011

Fiscal Outlook Presentation. Office of the City Manager January 28, 2011. Agenda. Economic Environment State Budget Update City Revenues General Fund Operating Expenditures Expenditure Pressures Solutions for Restoring Funding. Economic Environment.

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Office of the City Manager January 28, 2011

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  1. Fiscal Outlook Presentation Office of the City Manager January 28, 2011

  2. Agenda • Economic Environment • State Budget Update • City Revenues • General Fund Operating Expenditures • Expenditure Pressures • Solutions for Restoring Funding

  3. Economic Environment • Economy improving, but slow recovery to lower base • Unemployment remains high • Housing market stabilizing but vulnerable

  4. State Budget Update Governor’s Proposed Budget $14 billion in revenue solutions $12.5 billion in cuts Potential elimination of RDAs Staff continuously monitoring for changes

  5. City Revenues Property Tax Sales tax Development-related revenues Transient Occupancy Tax Recovery already planned into the budget

  6. General Fund Operating Expenditures * * Includes $560K for Salary Increase Budget Mod

  7. Expenditure PressuresRising Employee Compensation General Fund Salaries & Benefits Non-Personnel Costs

  8. Pension Costs vs. Sales Tax Revenue

  9. Expenditure PressuresFuture CalPERS Rates Potential interest rate change 7.75% to 7.5% Significant cost increase 3.8% for Safety - $1.3M 2.3% for Miscellaneous - $1.4M Board to decide in February or March Staff evaluating long-term rates and impact

  10. Expenditure Pressures Unfunded Building/Infrastructure Needs $2M annual funding set-aside removed from FY 2004/05 budget Without that cut, there would be $14M more available now No funds set aside for existing building infrastructure

  11. Expenditure Pressures Deteriorating street/roadway conditions Pavement Condition Index (PCI) decrease from 85 (2006) to 75 (2010) Current annual funding = $3.1M PCI of 80 -> optimal cost/benefit for maintenance To get back to 80: extra $2.5M / yr (5 yrs) To maintain: extra $750K / yr (ongoing)

  12. Expenditure Pressures High Cost of Deferred Maintenance Could have spent an additional $3.8M in last 5 years to maintain PCI at 80 Restoring PCI to 80 will now cost $12.5M Cost of 5 year delay = $8.7M Continued PCI drops will result in major costs Costs increase exponentially $19.5M for major overlay and restoration in 5 years if no additional funding added

  13. Addressing Street & Infrastructure Deficiencies Pay Me Now or Pay Me Later Every year of delay increases total cost to fix Funding Needed = $100M over 20 years $42M short-term (first 10 yrs) Infrastructure $25M, Streets $17M $58M long-term (second 10 yrs) Infrastructure $47.5M, Streets $10.5M

  14. A Solution for Restoring Funding Two-tier pension + 2% PERS contribution = $47M over 20 years Safety: 3% @ 55 Misc: 2% @ 55 Salary Increases =$56M over 20 years : 0% in FYs 2012/13 and 2013/14 Holding BSF to $8M balance = $103M total

  15. Many options for restoring funding: Reallocate a portion of budgeted, non-contractual salary increases from 20-year plan Restructure pension and/or funding plan Reduce General Fund transfers $3.7M to Community Recreation Fund annually Implement prioritization of non-core services Revenue enhancements UUT, Assessment Districts, Fees Other Solutions

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