City of Culver City, California
City Council Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council receive an update of the Comprehensive
Financial Master Plan and discuss and direct staff as deemed appropriate.
BACKGROUND:
The Updated Comprehensive Financial Master Plan (Plan) being presented to the
City Council tonight includes a five-year forecast of revenues and expenditures. The
projections are based on updated assumptions and new events that have occurred
since the Plan was previously presented. The Plan shows the trend of recurring
expenditures out-pacing recurring revenues, as was presented in the last Plan.
The intent of the Plan is to provide a management tool that identifies short- and long-
term financial issues. Based on the information provided in the plan, financing
options and funding strategies can be developed for City Council’s consideration and
possible implementation. The Plan is intended to serve as a working document and
will be updated at least annually or more frequently as needed.
This updated Plan utilizes a good deal of historical research originally done in
preparation of the Plan presented to Council in 2007. This data was combined with
updated financial information from the last two-year budget process and subsequent
City Council approved appropriations mainly relating to capital improvement
projects. The Plan was first introduced and presented to City Council on March 5,
2007. At that meeting, City Council directed staff to gather additional information on
a number of the revenue enhancement options presented in the report. On June 18,
2007 staff presented the additional information to Council as requested. Due to the
Meeting Date: 01/22/08 Item Number: A-1
AGENDA ITEM: Presentation and Discussion of an Update of the Comprehensive
Financial Master Plan.
Contact Person/Dept.:
Mary Noller, Budget & Finance
Nick Kimball, Sr. Management Analyst
Phone Number:
(310) 253-6012,
(310) 253-6013
Fiscal Impact: Yes [ ] No [ X ] General Fund: Yes [ ] No [ X ]
Public Hearing: [ ] Action Item: [ ] Attachments: [ X ]
Public Notification:
Master Notification List (01/16/08);
Department Approval:
Jeff Muir (01/08/08)
City Attorney Approval:
Carol Schwab (by H. Baker) (01/08/08)
Fiscal Impact Review:
Jeff Muir (01/08/08)
City Manager Approval:
Jerry B. Fulwood (01/16/08) City of Culver City, California
City Council Agenda Item Report
urgency of the issue, the City Council directed staff to pursue the option of
modernizing the City’s Utility User’s Tax Ordinance to seek voters’ support for
maintaining and preserving the current City’s UUT. The UUT issue is still a high-
priority matter, but once resolved the focus must shift back to addressing the long-
term structural deficit.
On December 3, 2007, the City Council was given a report addressing the current
Fire Service level issue, which was originally presented as part of the Plan. The
issue had re-surfaced as a result of outside factors that had come to fruition after the
Council had considered revenue enhancing options on June 18
,
2007. The City
Council directed staff to seek consulting services to investigate forming a Special
Tax District to potentially fund a third paramedic rescue unit. An RFP was released
and responses were received on December 27, 2007 and are currently in the
process of being reviewed. Staff will continue to keep the City Council informed of
the progress of this item.
Land Use Planning and Density
A new concept being introduced with this update of the Plan is Land Use Planning
and Density issues and how they may affect the City in the future, both from a
development and financial standpoint. The areas and projects in which information
has been analyzed are the Washington/National site, the Fox Hills area, commercial
mixed use corridors, the proposed Entrada development, and Jefferson Blvd
development. These areas/projects have been identified by the Community
Development Department as underdeveloped areas that have significant land area
with potential for development or large projects.
The Washington/National site is the location of the new Expo light-rail project, which
is anticipated to open in 2010. Because of the unique circumstances inherent in this
site as a station on the regional light-rail system, this area has been considered for
transit oriented development. For the purposes of this update, some of the financial
information from other recent documents prepared as part of the evaluation of this
site has been used to demonstrate the potential financial impact of a development
project of this scope.
The Fox Hills area has significant land area and several locations that are
considered underdeveloped or underutilized and could potentially be redeveloped
using the mixed-use development concept or redeveloped as new office-park
development. There are a number of projects, including the construction of the
Symantec office building and the remodel of the Westfield Mall, which may be
catalysts for further redevelopment in the Fox Hills area. The Community
Development Department provided information on potential build out scenarios in
that area to demonstrate the potential for redevelopment. Based on that information, City of Culver City, California
City Council Agenda Item Report
staff worked with Keyser Marston Associates to estimate the potential financial
impact of that build out scenario.
There are also a number of underdeveloped and underutilized properties along the
commercial mixed use corridors in the City that would benefit from redevelopment
activities. Estimates were provided as to the amount of commercial/retail space and
dwelling units that could be constructed, assuming a 5% build out. The low level of
build out is attributed to the reduced level of investment in mixed use development
that may occur as a result of the reduced densities proposed in the draft mixed use
ordinance.
Lastly, there are a few larger commercial development projects that are currently
being proposed and are in the beginning planning stages, including the Entrada
building and Jefferson Blvd development. These projects have also been included
in the Land Use Planning and Density projection.
It is important to note that a mid-year report will be coming to City Council in early
February, which will include actual financial data through December 31, 2007. At
that time, this report will also be included to reflect the updated 2007-08 adjusted
budgeted amount plus any mid-year adjustments being recommended by staff.
DISCUSSION:
The updated Plan includes the adopted and approved appropriations for fiscal 2007-
08 and 2008-09, adjusted budgetary information based on City Council approved
actions for fiscal 2007-08, and detailed revenue and expenditure projections through
fiscal 2012-13. This information was derived from historical trends for both
revenues, which has been adjusted based on current economic trends, and
expenditures, including MOU negotiated items such as COLAs for the City’s six
bargaining groups and known safety salary initiative increases. The City has been
able to balance revenues with expenditures over the last few years due to higher
than anticipated on-going revenues and some one-time revenues (including land
sale proceeds). Based on current information, it is anticipated that the City will
continue to show operational balance (or modest surpluses) through fiscal 2008-09.
The City has been diligent in ensuring that one-time revenues are only used to fund
one-time expenditures. It is clear, though, that the underlying fundamental issue of
recurring expenditures outpacing recurring revenues has not been solved in the long
term projections. As shown in the Plan, beginning in FY 2009/2010, the projected
deficit will continue to grow unless direct and decisive action is taken.
City of Culver City, California
City Council Agenda Item Report
Preliminary figures do show the General Fund Reserve as having a healthy balance.
However, it is important to realize that a good portion of the reserve is a result of
one-time revenue receipts (such as proceeds from land sales), which have
accumulated over time. This has enabled additional funding to be approved by City
Council for significant capital improvement (one-time) projects, such as Fire Station
#3 ($1,527,000), and the Public Safety Records Management System ($1,622,098),
which otherwise might not have been funded. To help offset the additional funds
appropriated for the additional construction costs of the new Fire Station #3, there is
also one-time revenue of $1,000,000 in estimated land sale proceeds included in
fiscal 2008-09 from the sale of land where the existing Fire Station #3 is located.
Beginning in fiscal 2009-10, though, projections show the General Fund Reserve
dropping below the 30% threshold established by City Council Policy.
Moving Forward
The City has been making positive progress through discussion and/or approved
action on certain options and recommendations previously approved by City Council.
These include:
• Placing a measure on the April 2008 ballot that asks Culver City voters to
approve modernizing the City’s Utility User’s Tax Ordinance. The UUT
currently generates revenue of approximately $13.5 million a year.
• Approval for a study of a Parcel Tax to help fund additional paramedics in
order to maintain service levels. With the recent bankruptcy filing of
Brotman Medical Center and increased medical calls for service received
by the City’s Fire Department, the need for additional paramedics has
become an even higher priority for the City.
• Continue to implement Best Management Practices throughout City
Departments.
• Finalized and implemented a full, in-depth Fees and Charges study in
April 2007, which will generate approximately $715,000 of on-going
General Fund revenue beginning in fiscal 2007-08.
• Created a team of staff to evaluate the feasibility of various options for
healthcare cost containment including researching various healthcare
providers (in process).
• Strategic Workforce Planning.
Current Economic Issues Facing the City
The current slowdown in the housing market is a concern for the City, although not
as big as that for the State or other surrounding cities. Property Tax revenues for
the City are approximately 3.8% of General Fund revenues. Revenue projections for City of Culver City, California
City Council Agenda Item Report
Property Tax and Real Property Transfer Tax over the next few years have taken
into consideration the slowdown in the market and been kept at a very conservative
growth rate. Culver City is also not experiencing the same significant declines in
housing prices and sales as has been seen in other areas of Los Angeles County
and surrounding counties (e.g. Riverside and San Bernardino counties).
The current Writers’ Guild strike, which began on November 5, 2007, could
potentially have a significant negative impact on Culver City, as well as the
surrounding Los Angeles area economy. Culver City has two major studios, Sony
Studios and The Culver Studios, both of which are major economic entities within
the city. During the last strike in 1988, which lasted 22 weeks, it was estimated to
cost the LA area economy approximately $500 million. If a strike were to last that
long today, estimates put the loss to the area economy at approximately $1 billion.
The most visible sign of the strike for Culver City has been the less crowded
restaurants/shops in downtown during the daytime hours. However, the most
significant impact will be a slowdown of business-to-business activity as production
of new movie and television episodes ceases. Business to business sales activity is
a significant source of sales tax and business tax revenues for the City. Since major
production has only recently started to slow, it is unknown at this time what specific
impact the strike has had on the City’s revenues. Staff will closely monitor this
impact as the strike continues and as data becomes available.
Several weeks ago the State revealed an estimated $14 billion shortfall in its budget
next year. In the State of the State address by the Governor, this was confirmed
and the Governor revealed his plans to close the gap primarily through cuts to State
programs in his proposed FY 2008/09 budget. There was immediate reaction from
state legislative leaders against the proposed budget. Although the Governor’s
plans do not include diverting local government revenues or transportation monies,
these items may be placed on the table as further budget discussions ensue
between the parties. Proposition 1A does provide more protections to local
governments than in the past, but the Governor has already declared a ‘fiscal
emergency’ and with a two-thirds vote of the legislature the State can divert local
funds twice in any ten year period with certain other conditions. Proposition 1A
protections do not extend to redevelopment agencies. Staff will continue to monitor
this situation closely and keep City Council informed of any new information.
Future (Long-term) Issues Facing the City
The City Council recently approved a contract with Aon Consulting to perform an
actuarial study associated with the implementation of Governmental Accounting
Standards Board (GASB) Statement No. 45. This study will assist the City with
determining the long-term costs of the City’s other post-employment benefits City of Culver City, California
City Council Agenda Item Report
(OPEB) such as medical insurance for retirees. The actuarial analysis should be
completed in February and will be brought to City Council at that time for discussion
of financing strategies.
While many cites throughout the nation have not yet implemented a strategy to
address the issue of long-term heath care and pension liabilities, the City Council
has taken the initial steps. Beginning in fiscal 2007-08, the City Council approved
setting-aside $100,000 each fiscal year to start funding this long-term cost.
However, it should be noted that this amount will be only a fraction of the amount to
fully fund the expected actuary-recommended contribution. A little over one year
ago an actuary performed a summary analysis of Culver City data and estimated an
annual required contribution figure of $9.8 million. This figure would be inclusive of
the current costs paid by the City for retiree medical of approximately $3.4 million,
and would therefore result in an additional requirement of $6+ million per year.
While GASB 45 does not require funding of the liability (it requires only including the
liability on the City’s financial statements), any difference between the actuarially
computed contribution and the actual contribution will begin to reflect annually on the
City’s government-wide financial statements as a liability, which could affect its
future credit rating and cost of borrowing.
Sufficient funding for deferred maintenance is an ongoing struggle for many cities,
including Culver City. In fiscal 2007-08 and 2008-09, the City Council was able to
appropriate funding from the General Fund Fund Balance for one-time capital
improvement projects, but a long-term plan to fund outstanding deferred
maintenance is still in process. A study was conducted earlier this year that
identified how much the City will need to set-aside each year to enable it to meet
future facility maintenance needs. It identified funding needs for routine costs,
immediate repair costs, and annual reserve cost estimates. By utilizing data from
this study, funds were appropriated in the fiscal 2007-08 Capital Improvement
Budget in the I & A Fund for some immediate repairs using available fund balance
from the General Fund reserve. This study is currently being finalized, and will be
used as a planning tool for the upcoming budget review.
General Fund Scenarios in Updated Plan
There are four financial scenarios included in the Plan for the General Fund as
follows:
Scenario A Summary
The first scenario takes a business as usual approach, with relatively conservative
revenue and expenditure projections. Based on the current economic conditions, we
must take this conservative approach. It includes information from the two-year City of Culver City, California
City Council Agenda Item Report
budget process for 2007-08 and 2008-09, and other City Council actions approved
since July 1, 2007. As can be seen on the worksheet, beginning in fiscal 2009-10,
the General Fund Reserve percentage drops below 30% and is projected to
continue on a downward trend from there. This scenario represents that even
without factoring in costs for the OPEB contribution and deferred maintenance items
there will be a deficit between on-going revenues and expenditures.
Scenario B Summary
The second scenario includes all information contained in Scenario A and adds one
additional issue: the potential loss of a portion (Telecommunication) of the Utility
User’s Tax (UUT) revenues. Although the loss will not be immediate, the risk to the
City of a permanent loss of this revenue will exist. The outcome of current legal
challenges in other jurisdictions with similar language in their ordinances may set a
legal precedent which would impact Culver City’s revenue stream from this source.
If the legal challenges from other jurisdictions (1) were applicable to Culver City and
(2) were negative in their impact, it would result in a reduction of approximately $2.7
million in ongoing revenue.
On top of this, non-cellular (land-line) revenues from Telephone UUT have
consistently been dropping (an average decrease of more than $100,000 per year
since 2003-04) as more and more people have been moving towards wireless
phones and similar media for communications. The loss of the wireless portion of
the UUT ($2.7 million), coupled with the continuing decrease in land-line UUT
equates to a potential loss of close to $3 million per year in UUT revenues.
Since it is not known when, or if, the City would potentially lose this revenue, a
decision was made to show its loss in fiscal 2010-11. As can be seen from the
worksheet, this would decrease the General Fund Reserve percentage by over 3%
with further impacts in future fiscal years.
Scenario C Summary
The third scenario includes all information from Scenario A and adds additional
information based on potential land use policies (i.e. height and density
requirements) and economic development. Finance Department staff worked with
Community Development Department staff and consultants from Keyser Marston
Associates to identify areas with the greatest potential for development and to
estimate the financial impacts of proposed developments. The financial impact
included in the Plan represents the net difference between estimated increased
revenues generated from the project area and estimated increased service costs
from the resulting development. Please note that the estimates provided in Scenario
C are simply meant to demonstrate the impact of development on the City’s City of Culver City, California
City Council Agenda Item Report
finances. These estimates are based on potential development as envisioned by
staff based on current possibilities. The estimates do not necessarily represent
actual proposed or planned projects.
Based on figures from the analysis, if the City and Redevelopment Agency
aggressively pursued all of the potential developments identified, or substantially
similar developments, the City could ultimately see approximately $2 million per
year. While this does not fix the projected deficit problem, it does provide an avenue
outside of reducing services or increasing taxes to improve on-going revenues.
Substantial development is currently taking place outside the City along almost all
the borders, and while Culver City doesn’t see the positive economic impact from
this we feel the impacts. Progressive cities need to attract quality development in
order to see continued revenue growth. These projects would also likely generate
fairly significant one-time revenues such as development and impact fees.
Scenario D Summary
The fourth scenario includes all information from Scenario A and adds an additional
$2 million per year in costs to fund the required OPEB contribution beginning in
fiscal 2008-09, $4 million in 2009-10 and $6 million in 2010-11. As stated earlier, the
actuarial analysis will not be completed until February, so this figure is based on the
previous estimate of a $9.8 million annual required contribution. This is a very real
scenario, in that there is no question the City will be required to make a decision on
how it will address this matter. Whether the choice is made to fully fund the required
contribution or to ‘ease’ into the required amount over several years, this will have to
become part of the City’s upcoming operating budgets to fund retiree medical.
Future negotiations to reduce retiree medical contributions by the City could result in
lowering this number, but it will be calculated based on the current agreements.
Upcoming Decisions
The basic purpose of the updated Comprehensive Financial Plan is to show that the
City’s financial situation has been complicated by the various current economic
factors locally, statewide and nationally. The City has made great strides in
addressing a number of critical issues that will assist in the long-term financial
viability of the City, but the structural deficit still exists and deferred maintenance and
liability obligations have to be addressed. Quality development will assist the City in
‘bridging the gap’, but will not solve the problem.
The City Council has been presented with options previously that have sought to
address the issue of closing the gap between recurring revenues and recurring
expenditures. In basic terms, the solution to a structural deficit is to reduce costs,
enhance revenues, or some combination of the two. The majority of the City’s City of Culver City, California
City Council Agenda Item Report
expenditure budget is for personnel costs that provide direct or indirect services for
Culver City residents, businesses and visitors. Both the City Council and the Culver
City community take pride in the high level of service provided by City employees.
Given this pride and expectation, as well as reductions that have already been
required in the past, further staff and service reductions are not desirable. One area
that may need to be revisited is the budget enhancements approved in the two-year
budget that includes fiscal year 2008-09. Based on refined projections from the mid-
year budget review (which will be completed by early February), pulling back or
delaying some of these enhancements could become necessary.
The other alternative is enhancing revenues. Aggressively pursuing continued
‘smart’ development opportunities is one avenue towards this, but further resources
will be required. Within the upcoming months, the City Council will need to renew
discussions on what direction staff should pursue in addressing the structural deficit.
There are difficult decisions ahead, but Culver City is up to the challenge.
FISCAL ANALYSIS:
There is no additional fiscal impact associated with this staff report. If the City
Council directs staff to bring back information related to options for revenue
enhancements or cost reduction recommendations, there may be an associated
fiscal impact at that time.
ATTACHMENTS:
1. Updated Comprehensive Financial Plan
MOTION:
That the City Council:
1. Receive and file the Updated Comprehensive Financial Master Plan; and
2. Direct staff as deemed appropriate.
MEETING DATE: January 28, 2008
AGENDA ITEM : Presentation and Discussion of an Update of the
Comprehensive Financial Master Plan.
ATTACHMENTS
Pages
1. Comprehensive Financial Plan 1 – 108
Comprehensive
Financial Plan
Page 1 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
INTRODUCTION
PURPOSE
The purpose of this Updated Comprehensive Financial Plan is to provide a continuing
perspective on the financial condition of each of the City’s major appropriated funds. It
is intended to be a planning tool to aid on-going capital and operating budget decision-
making by providing insight into the long-term implications of today’s policy choices and
budgetary decisions.
Information contained in this updated financial plan includes items that were added and
approved during the fiscal 2007-08 and 2008-09 budget process, and also other City
Council approved programs and projects outside of the budget process.
INTRODUCTION/ABOUT THE CITY
The City of Culver City was incorporated in 1917, operates under a charter modified by
voters in 2006, and has a City Council/City Manager form of government. The five-
member City Council is elected at-large. The City is located on the Westside of Los
Angeles County, generally situated north of LAX, southeast of Santa Monica, south of
Beverly Hills and southwest of West Hollywood. The City is five (5) square miles with a
residential population slightly over 40,790, and a daytime population of approximately
60,000. Culver City is a full-service city with its own Police Department, Fire
Department, Municipal Bus Line, and Public Works Department, which includes a
Sanitation Division. The City has approximately 694 full-time employees.
The population of Culver City is broken down as follows: White (59%), African American
(12%), Asian (12%), Other (11%), and persons reporting two or more races (6%);
approximately 24% of the population reports being of Hispanic or Latino origin|1010|. The
median age of a Culver City resident is 38 years old; with 43% of the population over
age 45; 30% age 25-44; and 27% under the age of 24. The median household income
is $60,000, compared to a median household income of $41,500 for Los Angeles
County. Approximately 72% of Culver City residents have had at least some college
education, with 17% holding a graduate degree.|1010|
|1010| Hispanics may be of any race, so they are also included in applicable race categories. |1010| All information contained in this, and the previous paragraph is from the U.S. Census Bureau: 2000
Census Data.
Page 2 of 108Comprehensive Financial Plan Update – Introduction
Culver City has a strong economic base, with approximately 25% of the City being
zoned for commercial/industrial use. Culver City prides itself on being the “Heart of
Screenland,” with the film industry being an important part of Culver City’s identity;
however, there is also a strong presence in the department store, auto dealership,
business/industrial, and restaurant industries. Some large commercial businesses
located in the City include Sony Pictures Studios, Costco, Best Buy and Target.
The City’s total Adopted Budget for 2007-08 is approximately $134 million (excluding
internal service funds), with a General Fund budget of approximately $81 million. Public
Safety expenditures account for approximately 54% of the General Fund budget.
BACKGROUND
The financial environment that municipal governments operate in has changed
drastically over the last several years. Federal and state funding has decreased while
unfunded mandates have increased, forcing cities to become more financially
independent. State legislation and voter-initiated propositions (e.g. Prop 13, Prop 218)
have restricted the way cities raise revenues and levy taxes, forcing cities to become
more financially responsible by increasing efficiency and cost effectiveness. Changes
to financial reporting requirements by the Government Accounting Standards Board
(GASB) have increased financial transparency|1010|, forcing cities to be more financially
accountable. As a result, cities have had to make the tough decision of reducing certain
programs/services, contracting out their services, or finding other financing mechanisms
to maintain their finances in order to continue to provide the same level of service to
their residents.
In addition, a string of devastating natural disasters over the past few years (i.e.
hurricanes and tsunamis), recent devastating wildfires in California caused both by
nature and by human activity, and ever increasing threats to national security has taught
cities they will need to be prepared to deal with emergencies without relying heavily on
state and/or federal aid.
Double digit percentage increases in personnel costs, such as medical insurance
premiums, pension costs, retiree medical benefits, and workers’ compensation costs,
continue to severely limit the availability of financial resources for the City’s day-to-day
operations, including maintenance, capital projects, and unfunded future liabilities.
This document discusses the current economic environment the City is operating in and
identifies the revenue constraints and basic operational expenses that must be met. It
discusses potential positive and negative impacts facing the City, and how the City
might be affected should they be realized.
|1010| For example: GASB 34 required cities to track and report fixed assets and GASB 45 will require cities to
report retiree medical benefits as a liability.
2 Page 3 of 108Comprehensive Financial Plan Update – Introduction
ECONOMIC OVERVIEW 2007
BACKGROUND OVER THE LAST YEAR
The United States economy had several ups and downs during 2007. We saw the Dow
Jones Industrial Average break the 14,000 mark for the first time in history; then plunge
into the high 12,000’s just a short time later. The Federal Reserve cut rates by 0.25% in
December 2007, in hopes it would boost consumer confidence. A rate cut is not
expected to be enough to offset the ongoing housing slump, but it will hopefully ease
the impact on consumer spending, which accounts for approximately 70% of economic
activity. There is talk the Federal Reserve may again look at reducing the rate in the
near future.
To compound the impact of a slumping housing market, the Federal Reserve has also
been continually concerned with inflationary pressures. For the twelve months ended
November 30, 2007, the Consumer Price Index for all urban consumers (CPI-U)
increased 4.3%. As a point of reference, the last time CPI-U exceeded 4% on a year
over year basis (i.e. December to December) was in 1990 when it was 4.2%. Please
note that 1990 was the year prior to a recessionary business cycle|1010|. The Los Angeles
area (LA-Riverside-OC) CPI-U rose by 0.6% in November, following a 0.5% increase in
October. The overall LA area index is 4.2% higher than a year ago.
December 2007 marked the 52
nd
consecutive month of job growth in the US, but the
national unemployment rate rose from 4.7% in November to 5.0% in December. As of
November 2007, the Los Angeles area rate was 5.2% and the California unemployment
rate was 5.6%. These rates are slightly higher than a year ago, but employment
numbers continue to hold steady in California and hopefully will do so through this next
year. The national unemployment rate is causing greater concerns on the economic
front, though, and some economists are starting to lean more towards signs of a
recession than just a few months ago.
OUTLOOK
The consensus among most forecasters is that the national and state economies will
experience very little growth during the next year, if any. A number of factors are
placing significant pressure on the economy, most notably: 1) fluctuating oil prices, 2) a
major slowing of sales in the housing market, 3) Writers’ Guild strike, and 4) projected
$14+ billion shortfall in California state budget for fiscal 2008-09
Oil prices have continued to fluctuate over the past few years consistently edging higher
and higher, which drives up the cost of goods (most notably consumable goods) and
services, to consumers by increasing the cost of production and delivery. Recently
worldwide there have also been several oil-spill accidents that have contributed, though
slightly, to the oil situation.
|1010| Source: U.S. Department of Labor, Bureau of Labor Statistics
3 Page 4 of 108Comprehensive Financial Plan Update – Introduction
The recent “mortgage crisis,” which prompted a sharp increase in property foreclosures,
has further hurt an already slowing housing market. Many industry experts are unsure
of the length or magnitude of the mortgage problem; however, it has significantly
impacted the banking industry as many mortgage companies have filed for bankruptcy
or have been involved in a number of large consolidations (e.g. Bank of America’s
acquisition of Countrywide Home Loans). Additionally, most economists agree that the
mortgage crisis has impacted economies and stock markets worldwide.
Just recently a deal was announced by the Bush Administration that would assist
approximately 1.2 million homeowners nationwide whose rates are coming due for
adjustment to freeze their mortgage rates, thus heading off potential foreclosure or
bankruptcy. There is much controversy surrounding this deal, and it is unclear how
much of an effect it would have on the economy and affected homeowners in the long-
run.
The current Writers’ Guild strike, which began November 5, 2007, could potentially have
a significant negative impact on Culver City and the surrounding Los Angeles area
economy. Culver City has two major studios, Sony Studios and The Culver Studios,
both of which are major economic entities within the city. The last Writers’ Guild strike
in 1988, which lasted 22 weeks, was estimated to have cost the Los Angeles area
economy approximately $500 million in lost revenue. Presently, the entertainment
industry contributes an estimated $30 billion a year to the Los Angeles economy, or
about $80 million a day. Forecasters have estimated a strike today lasting as long as
the one 20 years ago could cost approximately $1 billion in lost revenues to the area.
A continued walkout does not affect only the writers. It also affects thousands of other
workers, from crew members and actors to talent agents and studio office employees.
Current reports suggest that most all scripted TV shows are expected to stop production
in mid-December, causing the loss of approximately 15,000 jobs and costing the Los
Angeles economy about $21 million a day in direct production spending.
The most visible sign of the strike for Culver City has been the less crowded restaurants
in downtown during the daytime hours. However, the most significant impact will be a
slowdown of business-to-business sales activity as production of new movie and
television episodes ceases. Business to business sales activity is a significant source
of sales tax and business tax revenues. Since major production has only recently
started to die down, it is unknown at this time to what degree the strike has had on the
City’s revenues. Staff will continue to follow this issue closely as data becomes
available.
In mid-December articles began to appear regarding the State facing a $14 billion
budget deficit and the Governor’s plans to declare a “fiscal emergency.” Some of the
factors contributing to this shortfall include:
4 Page 5 of 108Comprehensive Financial Plan Update – Introduction
A revised – and lower – current-year revenue forecast, driven in part by the
continuing slump in the housing sector and the ongoing effects of the subprime
mortgage collapse.
Increased firefighting costs related to this fall’s wildfires in Southern California.
Legal challenges that have delayed implementation of Indian gaming compacts.
Lower estimated local property tax revenues, which affect the state’s share of K-
14 school funding.
An appellate court decision in a lawsuit over teachers’ retirement funding.
In the State of the State address by the Governor, the Governor revealed his plans to
close the gap (the $14 billion represents approximately 12% of the State’s General
Fund) primarily through cuts to State programs in his proposed 2008-09 budget. There
was immediate Democratic reaction against the proposed budget. Although the
Governor’s proposed budget does not currently include diverting local government
revenues or transportation monies, these items may be placed on the table as further
budget discussions ensue between the parties. Proposition 1A, which was passed in
2004, does provide more protections to local governments than in the past, but the
Governor has already declared a “fiscal emergency” and with a two-thirds vote of the
State Legislature the State can divert funds from local governments twice in any ten
year period with certain other conditions. Propositions 1A protections do not extend to
Redevelopment Agencies, which means that the Redevelopment Agency may once
again be looking at diversions of tax increment.
Depending on how these and other factors play out over the coming months, consumer
confidence could be negatively affected. Rising energy and raw material costs and the
increased cost to borrow money reduces a consumer’s disposable income. As
consumers’ disposable income subsides and they begin to lose confidence in the
economy, they tend to save their money rather than spend it. The City’s single largest
source of revenue (i.e. sales tax) is highly dependent on consumer confidence and
consumer spending.
In addition to the negative impact on the economy, consumer confidence and
consumer’s overall wealth, the housing slowdown also impacts property values, which
in turn impacts the property tax revenues of the City and, to a greater extent, the
Redevelopment Agency. Declining housing property values also impacts residents’
overall wealth. A reduction in wealth may encourage consumers to save rather than
spend and cause residents to become averse to paying additional taxes, which may be
needed to maintain service levels.
To date, the West Los Angeles and Culver City areas have been relatively stable and
have not seen the sharp decline in housing prices that other areas have experienced
(e.g. Riverside and San Bernardino counties). However, a prolonged slowdown in the
housing market may put significant downward pressure on Culver City property values
in the future.
5 Page 6 of 108Comprehensive Financial Plan Update – Introduction
Community investment has been one of the main reasons that the City has been able to
weather the storm. A number of high profile projects initiated by the Redevelopment
Agency, including the downtown construction of Pacific Theatres and the Cardiff, Ince,
and Watseka parking structures, as well as the renovation of Kirk Douglas Theatre have
helped to attract people and businesses to Culver City.
The recent approval of the renovation and expansion of the Westfield Shopping Center
located in the Fox Hills area is anticipated to assist Culver City in bringing in increased
revenues in future years. There are plans to add an additional 167,000 sq. ft. to the
existing mall, which includes additional retail and restaurant areas. Currently there are
also plans for a Target store to move into the old Robinson’s May location of the mall,
and the anticipated opening of this store is for October 2009. Final renovations and
expansion of the entire mall are projected to be complete in fiscal 2010-11.
Future projects, such as downtown Parcel B and development associated with the
Washington/National specific plan area centered around the proposed METRO EXPO
Light Rail Station, will ensure that Culver City remains a hot spot on the West side. The
realignment of Washington Boulevard from Culver Boulevard at Main Street to Ince is
expected to be completed in April 2008. This project will create an area for a plaza, and
allow for further development of retail shops, which is expected to commence in the
near future.
Another major project funded partially by the Redevelopment Agency is the new Fire
Station #3 being constructed in the Fox Hills area. The current Fire Station #3 on
Segrell Way is too small to maintain current and future needs. The new station will
consist of two-stories and be 12,216 sq. ft. for Fire Department staff dormitories, offices,
ancillary uses, and apparatus room. Construction began in September 2007, with
completion scheduled to be in July 2008. An additional $1,527,000 was approved by
the City Council in June 2007 to fund increased construction costs for this project.
Further discussion is included later in this report.
All of these investments in the community have paid off, and are expected to continue to
pay off, by keeping Culver City’s revenues strong, especially sales, property, and
business license taxes.
REVIEW AND UPDATE OF THE CITY’S FINANCIAL POLICY
Culver City’s current financial policy, Council Policy Statement Number 5002, was first
adopted in 1995. The purpose, as stated in the policy, is to establish long- and short-
range financial policies for the City. The guidelines contained in this policy had not
been reviewed in a number of years, and staff recommended the policy be updated and
expanded to cover a wider range of policies and procedures. The updated policy was
subsequently adopted by City Council in July 2007. This will improve the City’s fiscal
stability by helping City officials make financial decisions and plan fiscal strategy with a
consistent approach. Adherence to adopted financial policies promotes sound financial
6 Page 7 of 108Comprehensive Financial Plan Update – Introduction
management, which can lead to improvement in bond ratings, a lower cost of capital,
and a minimum of unexpected impacts upon taxpayers and users of public services.
7 Page 8 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
GENERAL FUND
INTRODUCTION
The General Fund is the largest fund of the City. It is used to finance most of the basic
municipal functions including general administration, police, fire, community
development and parks, recreation and community services. The General Fund is used
to account for resources traditionally associated with government, which are not
required to be accounted for in another fund including property taxes, sales taxes,
business taxes, utility taxes, transient occupancy taxes, licenses and permits, and fines
and forfeits.
Departments within the General Fund are categorized as either General Administration
Departments or Operating Departments. Departments within General Administration
include: City Manager’s Office, which includes Budget & Finance and Human
Resources; City Clerk; City Attorney; City Treasurer; Information Technology; and Non-
Departmental. Operating Departments are: Parks, Recreation, and Community
Services; Police; Fire; Community Development; and Public Works.
Departments and Divisions within the General Fund rely on general taxes, such as
sales tax and utility taxes, as well as recouping costs from fees for services, such as
plan check fees and meeting room charges.
FISCAL YEAR 2007-08 HIGHLIGHTS
There were a number of enhancements approved during the fiscal 2007-08 budget
process, some of which are related to the reorganization of several departments. There
were also several on-going and one-time enhancements that were approved to enable
departments and divisions to improve the effectiveness and efficiency of service
delivery to residents and internal customers (other departments/divisions.) One-time
enhancements were approved based on one-time monies from prior fiscal years or
known receipts during fiscal 2007-08. Following are some of the major highlights of
fiscal 2007-08:
• Citywide Reorganization Plans include:
o Reducing three positions in the City Manager’s Office and reassigning
current staff to maximize resources. One Assistant City Manager will
assume the duties of the City Clerk after April 2008 when the position
will cease being an elected position. The other Assistant City Manager
Page 9 of 108Comprehensive Financial Plan Update – General Fund
will assume the duties of the Risk Manager. By consolidating these
duties and departments, it will allow the sharing of resources and
should realize cost savings for the City.
o Creation of a Finance Department. A newly created Chief Financial
Officer position will oversee the functions of City Controller and City
Treasurer. The City Treasurer’s position will cease as an elected
position after April 8, 2008. The consolidation of the Finance
Department requires relocating and combining the Budget and Finance
staff, and Purchasing administrative staff with the current City
Treasurer Department. This will improve efficiency and enhance the
financial operations.
o Creation of an Enforcement Services Division. An Enforcement
Division was created and placed under the direction of the Community
Development Director. This new division consolidates the functions of
the existing Code Enforcement and Park Patrol Divisions.
o Creation of a new Division in Public Works Department entitled
Environmental Programs and Operations. This division consists of
Refuse, Environmental Management, and Sewer Operations. This
division consolidates all of the environmental related functions and
takes some of the burden from the Engineering Division.
o Reallocation of positions within the Parks, Recreation and Community
Services Department so positions with similar functions are working
together more closely.
• Miscellaneous general classification positions that were identified in the salary
survey as being below market average were brought to within 5% of median,
per agreement with the Culver City Employee Association and Culver City
Management Group.
• Regular Part-time classifications in Parks, Recreation and Community
Services were approved salary increases to bring them more in-line with
neighboring cities. This was the first increase for these classifications in
several years.
• The City Council approved an actuarial study to identify the OPEB amount
associated with the City’s future retiree medical benefits.
• Implemented an updated fees and charges schedule, which better reflects the
City’s true cost of doing business.
• Approved the purchase of several departmental equipment items for Fire and
Police, such as:
o Portable Laser to provide high development in latent fingerprint
evidence.
o Electronic Parking Citation Writers.
o Digital Photographic Equipment for forensic lab
o Ninety (90) tasers
o Holmatro tool set and conversion kits for current inventory
o Five (5) thermal imagers
o Twenty (20) fire shelters
• Approved funding for a State Mandated Housing Element Update
2 Page 10 of 108Comprehensive Financial Plan Update – General Fund
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
The worksheets for the five-year forecasts of revenues and expenditures are included
as attachments to this report. The worksheets include the projected revenues from all
of the City’s revenue sources and appropriations for all City funds over the next five
years. The 2007-08 and 2008-09 information contained in the worksheets includes
appropriations adopted and approved by City Council during the last budget process in
June 2007. It also includes appropriations approved by City Council outside of the
budget process (i.e. capital improvement projects, etc.).
Using the methodology and assumptions described in the following section, staff
developed a five-year base projection of revenues and expenditures. Staff has also
prepared a number of alternate revenue and expenditure projections based on potential
loss of UUT revenue, future economic development/land use policy decisions, and
possible service level enhancements.
FORECASTING METHODOLOGY: REVENUES
In order to develop a reasonable five-year forecast of General Fund revenues, it is
important to analyze past data to establish a trend over time. Therefore, ten years of
actual data (1997-98 through 2006-07) and two years of budgeted data (2007-08 and
2008-09) were collected and analyzed. The average annual growth rate served as the
basis for the forecast, with adjustments being made as appropriate to more closely
reflect the current state of the economy. This was the same forecasting method used in
the first comprehensive financial plan, and was found to be the most accurate and
useful.
Using the average annual growth rate methodology produces a somewhat conservative
growth rate by smoothing out extraordinary revenue gains and dips. A limitation of this
methodology is it does not account for structural changes in revenue generation, such
as a new tax being implemented during the time period or a significant change in the
economic base. To capture some of the structural changes, staff has adjusted the
appropriate revenues up or down accordingly.
Staff also worked with Keyser Marston Associates, a real estate firm, who provided the
City with revenue projections based on development projects that were most likely to be
developed within the City during the next five years, and also for those that had been
completed during fiscal 2006-07. A major outcome of the projections showed that, in
most cases, the methodology used by staff to project the revenue for the plan is fairly
close to the results provided by the consultant, within a reasonable margin of variance.
The base revenue projection over the next five years is what staff considers to be “most
likely” based on current economic conditions. The underlying assumption for the most
likely scenario is that the overall economy will remain rather stale for the next couple of
fiscal years with a slight downturn factored in for 2009-10. Despite looming economic
3 Page 11 of 108Comprehensive Financial Plan Update – General Fund
pressures (i.e. state budget problems, increasing oil prices, slowing housing market,
increase foreclosure rate, and increasing interest rates), the most likely scenario
assumes that an increase in some revenues (e.g. fees and charges, new development
impact fees, etc.) will be sufficient to cover poorer performing revenues. Overall, the
most likely scenario assumes General Fund revenues will grow at approximately 4% per
year, which is consistent with the average annual growth rate over the last ten years,
which has also included downturns in the economy.
In addition to the most likely scenario, staff has included three additional scenarios.
One scenario includes the potential loss of a portion of the UUT revenues if the voters
do not approve modernizing the UUT ordinance at the April 2008 election. Another
scenario includes additional revenues based on land use (i.e. height and density
restrictions) policy decisions for different areas and projects in the City, which are the
Washington/National site, the Fox Hills area, commercial mixed use corridors, the
proposed Entrada development, and Jefferson Blvd development. The last scenario
includes an estimated annual required contribution for OPEB related payments, which
the City is required to begin reporting in fiscal 2007-08 per GASB Statement No. 45.
BACKGROUND OF FORECAST
Over the past five years, there have been a number of circumstances that have created
a somewhat hostile revenue environment for cities. In 2000, the stock market bubble
burst; then on September 11, 2001 the World Trade Center in New York was attacked.
The sequential timing of these two events had severe economic implications. As was
the case across the nation, the resulting economic downturn was a severe hit to the
City’s General Fund; a hit which took almost two years from which to recover.
Then, just when the General Fund began to recover, the California Legislature decided
to divert revenues that many cities rely on to fund on-going operations (i.e. sales tax,
property tax, and vehicle
license fees) into the
State’s coffers in an effort
to address the State’s
financial woes. This put
an additional strain on the
City’s resources.
In exchange for the loss of
revenue, cities were
successful in negotiating a
compromise with the
California governor to
support Proposition 1A, which made it much more difficult for the legislature to divert
City revenues in the future. In 2006-07, the take-away of the “ERAF” revenue diversion
that was initiated in 2004-05 was restored. For fiscal 2004-05 and 2005-06, the State
took approximately $971,000 each year from Culver City.
General Fund Revenues
50,000
60,000
70,000
80,000
90,000
100,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
(000's)
Actual Revenue Budgeted Revenue
Most Likely
4 Page 12 of 108Comprehensive Financial Plan Update – General Fund
As a result of voter approval of Proposition 1A in 2004, the revenue forecasts for the
next five years assume the state will not take away any more of the City’s revenues.
However, given the current $14+ billion state deficit projected by the Legislative
Analyst’s Office for fiscal 2008-09, the threat of state take-aways has resurfaced.
In the State of the State address, the Governor revealed his plans to close the projected
gap of $14+ billion primarily through cuts to state programs. The Governor’s proposed
2008-09 budget does not currently include diverting local government revenues or
transportation funds; however, these items may be placed on the table as further budget
discussions with the legislature ensue. Proposition 1A does provide for more
protections to local governments than in the past, but the Governor has already
declared a “fiscal emergency” and with a two-thirds vote of the legislature, the State can
divert local funds twice in any ten year period with certain other conditions.
If the State were to approve and exercise this provision and ultimately take away funds
from the City, it is recommended to utilize one-time funds wherever possible in order to
lessen the burden on the recurring revenues of the General Fund.
The following section discusses some of the City’s major revenues more in-depth and
provides information on the assumptions that were made in forecasting those revenues.
DISCUSSION OF SPECIFIC REVENUE PROJECTIONS
Sales Tax
Sales tax is the City’s single largest source of revenue, and is approximately 23% of
adopted revenues for fiscal 2007-08. Despite moderate economic growth over the last
five years, sales tax revenues have remained relatively strong; growing at an average
annual rate of approximately 5% since 2000-01. This is a result of the City’s investment
in the community and the Redevelopment Agency’s success in reducing blighted areas
within the City, which has helped to attract and retain business and expand the
economic base.
Culver City is fortunate to
have a diverse economic
base, which includes retail
sales outlets, automobile
dealerships, restaurants,
manufacturing, and the
entertainment industry. A
diverse economic base is
beneficial as it helps to
lessen the blow in poor
economic conditions.
Sales Tax Revenues
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
(000's)
Actual Revenue Budgeted Revenue
Projected Revenue
5 Page 13 of 108Comprehensive Financial Plan Update – General Fund
Based on the City’s continued commitment to community investment through
redevelopment and economic development activities, sales tax revenues have
remained relatively stable over the past few fiscal years. However, sales tax is volatile
as it is highly dependent on the economy and consumer confidence. As previously
discussed, current economic conditions may have an adverse impact on consumer
confidence and disposable income. Consequently, sales tax projections shown in this
chart over the next five years are relatively conservative and increase between 4% - 5%
per year. During the mid-year review, it will be recommended to decrease the sales tax
estimate by $450,000 in fiscal 2007-08 and by $400,000 in fiscal 2008-09. Due to the
current Writer’s Guild strike and state of the economy, this has been deemed a prudent
fiscal decision based on current sales tax revenue receipts to date. Higher than
anticipated one-time new development revenues in 2007-08 will assist in filling the gap
left by this adjustment.
Transient Occupancy Tax (TOT)
Transient Occupancy tax is levied on occupied hotel/motel rooms and is currently 12%
of the room rate. TOT revenues are directly related to the health of the travel industry.
Over the last five years,
TOT revenues have been
highly volatile. There was a
22% drop in TOT revenue
between 2000-01 and 2001-
02, followed by a 30%
increase in revenues the
following year, followed by
another decline of 16%
between 2002-03 and 2003-
04. Events such as
September 11th or large
hotel closures, which have
an adverse impact on
people’s travel habits, also have an adverse impact on TOT revenues.
Transient Occupancy Tax Revenues
1,600
2,000
2,400
2,800
3,200
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
(000's)
Actual Revenue Budgeted Revenue
Projected Revenue
Since 2002-03, TOT revenues have stabilized somewhat and current hotel renovation
projects are expected to continue to generate stable revenues. The spike in revenues
in 2006-07 was the result of a payment for back owed taxes due to a bankruptcy
settlement. This forecast has assumed moderate TOT growth over the next five years.
An issue regarding Transient Occupancy Taxes that will be monitored closely by staff in
future months deals with the collection of TOT from on-line booking services. A growing
portion of hotel bookings are being conducted through on-line booking services|1010|.
Guests who book such rooms online are charged the local TOT based on the marked-
up rate they pay, but the on-line company only remits to the hotelier the discounted
wholesale room rate and only the TOT collected on that lower rate. Hotels then pass on
|1010| A study done in 2005 estimated approximately 20% of hotel rooms were booked on-line. It is safe to
assume this percentage has increased in the last two years.
6 Page 14 of 108Comprehensive Financial Plan Update – General Fund
to the city the TOT they receive from the online booking company, but these amounts
are based on the wholesale rate charged to the booking company, not the full rate
charged to the room occupant. To date it is unknown how much revenue Culver City
may be getting “shortchanged,” and staff will closely monitor all activity associated with
this issue and take appropriate action to ensure the City receives its fair share of TOT
revenues.
It is important to note, though, that even with the above mentioned issue, TOT revenues
are expected to continue to remain steady over the next five years.
Utility User’s Tax
Utility User’s Taxes (UUT) are levied on a number of utilities, including electric, gas,
water, telephone, and cable. Currently, Culver City’s UUT rate is 11% of utility charges.
UUT revenues have remained relatively consistent over the last ten years and are
dependent on utility rates
and consumption. However,
there is not necessarily a
high positive correlation
between utility rates and
UUT revenues. Instead,
there is a slight negative
correlation as higher utility
rates often encourage
consumers to conserve use.
Despite recent increases in
some utility rates, it is not
expected that the City will
realize a corresponding increase in UUT revenues. Further complicating projections of
future UUT revenues is the status of the telephone UUT revenues. In May 2006, the
IRS discontinued collecting certain telephone utility related taxes, mainly as they apply
to cell phones. Since most cities in California with a UUT reference the IRS code to
define the tax base, this action by the IRS has jeopardized the collection of certain utility
taxes for many California cities, including Culver City. It may take a few years to sort
out the legal issues, but there is a potential for loss of a significant portion of the City’s
UUT revenues. In response, Culver City has placed a measure on the April 2008 ballot
for voter consideration to modernize the ordinance pertaining to this item.
Utility Users' Tax Revenues
10,000
11,000
12,000
13,000
14,000
15,000
16,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
(000's)
Actual Revenue Budgeted Revenue
Projected Revenue
Since the outcome of the election cannot be known at this time, the potential loss of this
revenue in future years has been factored into one of the scenarios under negative
impacts facing the City. In addition, there has been recent increased popularity of solar
energy, which also may impact the City’s UUT revenue; however, the degree of the
impact is still unknown at this time and further research is needed to determine the true
effect. The City budgeted funds in fiscal 2007-08 for a photovoltaic preliminary
engineering study. This study is in process.
7 Page 15 of 108Comprehensive Financial Plan Update – General Fund
Property Tax and
Real Property Transfer Tax
Over the last decade, and
especially in the past five years,
southern California experienced a
population boom. The housing
supply has not been able to keep
up with the rapid increase in
population. As a result, real
estate has been at a premium.
Prop 13, passed by the voters in
1978, capped the property tax
rate at 1% of assessed values
and permitted a maximum 2%
increase in assessed value annually. As a result, the assessed value of many
properties is well below market value. Property values are re-assessed when there is a
transfer of ownership.
Property Tax Revenues
1,000
2,000
3,000
4,000
5,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
(000's)
Actual Revenue Budgeted Revenue
Projected Revenue
Culver City’s property tax revenue
has grown relatively consistently
over the past five years, averaging
an annual growth rate of
approximately 8%. Recently, there
has been a significant slowdown in
the housing market. As a result,
both Property Tax and Real
Property Transfer Tax revenues
are projected to slow somewhat
over the next five years. A “Most-
Likely” projection for Property Tax
is approximately a 4% growth for 2009-10, and a slight increase to 5% in 2010-11 and
6% in 2011-12. Real Property Transfer Tax revenues are projected to increase 5% in
2009-10, stay steady in 2010-11 and increase to 6% beginning in 2011-12. It is
expected that despite the potential of a continued sluggish housing market, current
development activities will help to sustain property values in Culver City and the
Westside over the next five years, which should help in keeping Property Tax and Real
Property Transfer Tax revenues relatively stable.
Real Property Transfer Tax Revenues
800
1,480
2,160
2,840
3,520
4,200
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
(000's )
Actual Revenue Budgeted Revenue
Projected Revenue
8 Page 16 of 108Comprehensive Financial Plan Update – General Fund
Business Tax
All entities conducting business in
Culver City are required to pay a
Business Tax annually. This tax
has experienced relatively stable
growth over the past five years, a
testament to the growing economic
base in the City. During the 2006-
07 budget preparation process,
Business Certificate application
fees were reviewed. As a result,
the City Council approved an
increase to the Business Certificate
application fees, which had not
been increased since the early
1990’s. This should generate some additional on-going revenue for the City.
Business License Revenues
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13
(000's )
Actual Revenue Budgeted Revenue
Projected Revenue
All Other Revenue
All other revenues make up approximately 36% of the General Fund. The most
significant of which are Charges for Services. During 2006-07, a comprehensive user
fees and charges rate study was performed by an outside consultant. This aided the
City in establishing a baseline for all current fees and charges as well as recommended
new fees the City considered in order to adequately recoup the cost of providing certain
services. This study resulted in the increase of approximately $715,000 in additional
revenues to the City, mainly to recoup the cost of services performed.
EXPENDITURES
Culver City has been
able to maintain a
moderate- to high-level
of service to its
residents, even during
the very difficult fiscal
times mentioned
previously in this report.
Over the last 30+ years,
the City has grown both
economically and in
population, which constantly places pressure on the available resources the City is able
to use in order to maintain services that positively contribute to the quality of life for its
residents. Above is a chart showing the City’s General Fund expenditures in constant
dollars going back to 1975. The chart jumps in five-year intervals and then gives actual
yearly data from 2000-01 until 2005-06, and preliminary actual data for 2006-07.
General Fund Expenditures- Constant Dollars
$9.3
$11.0
$14.3
$16.4
$15.5
$16.6
$19.3
$20.0
$19.7
$18.1
$18.4
$18.1
$8
$1
n|1010|$14
$17
$20
75-76 80-81 85-86 90-91 95-96 00-01 01-02 02-03 03-04 04-05 05-06 06-07
Fiscal Year
Millio s
9 Page 17 of 108Comprehensive Financial Plan Update – General Fund
FORECASTING METHODOLOGY: EXPENDITURES
The expenditure forecasts were predicated on the goal of maintaining the present level
of City services, along with addressing service level changes and other new projects.
For this updated analysis a combination of historical trends, assumptions, and
judgments were taken into consideration when forecasting the base-line for expenditure
growth for the next five years. The conclusion was to use an average growth rate
based on anticipated increases over the next five years. Since personnel costs are the
major portion of the City’s General Fund expenditures, they were the driving force in
calculating the average percentage increase applied to expenditures for this analysis.
There are a few drawbacks in using an average growth rate to calculate expenditures,
especially on those tied to economic forces. While some expenses are driven by
economic forces, many are based on set increases from year to year, such as cost-of-
living adjustments which will be discussed further in the document.
While preparing and analyzing different scenarios and assumptions for the updated
Comprehensive Financial Plan, the base expenditure information was kept the same for
the different scenarios being discussed in order to have a “constant” for comparison
purposes with revenues. This base enables staff to measure the gap between
anticipated revenues and expenditures, and impacts, both positive and negative, which
have the potential of affecting the City in the near future. The City currently does not
have the resources necessary to maintain its existing 30% reserve policy starting in the
next few years.
PERSONNEL COSTS
Approximately 80%, or $65.8
million, of the City’s Adopted Fiscal
2007-08 General Fund operating
budget is attributable to personnel
costs. The City currently has
Memorandums of Understanding
(MOUs) with all six bargaining
groups, and will begin negotiations
again in 2008 with Fire Safety
personnel. During prior
negotiations, it was a challenge to
forecast with certainty what the
overall personnel costs growth
would be over the next five years.
With the adoption of the most
current MOUs, the personnel costs and percentages were incorporated into the Plan
through the adopted and approved budgets for 2007-08 and 2008-09 to give the most
up-to-date forecast information. This information incorporates salary, retirement,
medical, and other negotiated personnel cost increases.
GF Salaries and Benefits - Last 4 Years of Audited Actuals
$36.2
$36.4
$36.9
$37.6
$40.6
$42.0
$12.6
$13.2
$17.8
$20.8
$22.4
$23.8
$0
$10
$20
$30
$40
$50
$60
$70
2002-03 2003-04 2004-05 2005-06 Adjusted
2006-07
Adopted
2007-08
Millions
Salaries Benefits
10 Page 18 of 108Comprehensive Financial Plan Update – General Fund
The City has a unique situation with its public safety salary increases based on an
initiative that was approved by voters in the 1950’s. The Safety Salary Initiative ties
Culver City public safety employee salary increases to those of the LAPD and LA
County Sherriff’s salary increases. As mentioned previously, public safety makes up
54% of the General Fund budget. Cost-of-living adjustments for Public Safety
personnel historically have grown at a much faster pace than Miscellaneous personnel.
Pension costs are also significantly higher for public safety personnel than for
miscellaneous employees.
As can be seen by the graph, benefits have grown at a much faster pace than salary
over the last six years. This is mostly attributable to increasing medical costs and
escalating pension costs.
PENSION COSTS AND BENEFITS
As was mentioned previously in this document, pension costs have skyrocketed, not
only for public entities, but also for private entities. CalPERS had exceptionally good
years in the late 1990’s, which enabled
Culver City to become super-funded. At
that time, the City did not contribute to
CalPERS and also negotiated increased
retirement benefits with all six of its
bargaining groups, just like many other
cities. When the economy went down,
CalPERS costs shot up and left Culver
City, and many other cities, scrambling
to cover the increased costs. The above
graph shows the increased retirement
costs over the last six years. In 2006-
07, CalPERS adopted a new formula to
calculate member contributions using a
15 year smoothing methodology to avoid these huge fluctuations to members in the
future.
General Fund Retirement (PERS) Actuals
$9.43
$8.82
$8.23
$7.18
$2.95
$3.25
$2.51
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
Actual
2001-02
Actual
2002-03
Actual
2003-04
Actual
2004-05
Actual
2005-06
Adjusted
Budget
2006-07
Adopted
Budget
2007-08
M illion s
Medical costs continue to grow at a faster pace than many personnel costs. The City
received estimates from CalPERS for the 2008 medical insurance premiums which
show them to be approximately 12% higher than 2007 premiums. Culver City also
offers medical coverage for its retirees and their beneficiaries. It is evident the City
needs to find options/solutions for healthcare cost containment. During the last round of
labor negotiations, it was agreed upon by all bargaining groups that employees would
begin paying 5% of their medical insurance premiums. Employees who retired after
January 1, 2007 also will pay 5%. Retirees who retired prior to this date will still have
their full medical insurance premiums paid by the City.
OPERATING AND MAINTENANCE
In order for the City to balance its General Fund operating budget, the City did not
include any budgetary percentage increases to Department’s operating and
11 Page 19 of 108Comprehensive Financial Plan Update – General Fund
maintenance budgets during fiscal 2004-05 through 2006-07. Historically, this increase
had been approximately three percent per year, based on an average CPI rate. Not
including this increase caused the City to lag in necessary funds to cover its operating
and maintenance needs. A three percent increase for operating and maintenance was
included in the 2007-08 and 2008-09 budgets. A three and one-half percent increase
was incorporated into the projections for the remaining years.
MAJOR ISSUES
Culver City, like many cities in California, has been hit hard with increasing costs that it
has little or no control over. These costs include medical insurance premiums, pension
costs, and worker’s compensation. In addition to these ever-increasing costs, the City
is also facing major deferred maintenance and unfunded liability issues. In 2005, the
City had a $24 million unfunded pension liability. PERS has initiated “smoothing”
techniques that will enable the City to stabilize the annual pension payment and avoid
the peaks and valleys in pension rates experienced previously; however, our Safety
pension plan shows a trend of increasing future unfunded liability due to this
“smoothing” methodology. This issue needs to be addressed in the near future.
The City recently received the 2008-09 PERS percentage rates. Miscellaneous
contribution rates decreased slightly, and Public Safety rates increased. Overall,
though, the aggregate percentage amount is higher than 2007-08. The 2008-09
approved budget includes a slight overall increase in the PERS rate percentage, so this
new information did not impact forecasted numbers.
The City needs to create replacement funds that will enable it to meet ongoing needs
without sacrificing ongoing funding for current operating expenses. While the City has
been very proactive in meeting its upfront needs, it has not set-up a steady revenue
source for funding ongoing capital improvement projects, deferred maintenance and
growing unfunded liability for items such as future pension and retiree medical costs. In
order to start setting aside funds, the City needs to take decisive action. Consequently,
sufficient set-aside funding would be available when the obligation payment is due.
In November, the City Council approved a professional services contract with Aon
Consulting to conduct an actuarial study to determine the City’s outstanding unfunded
OPEB retiree liability with regards to GASB 45 reporting. This outstanding amount is
estimated to be in the millions of dollars. As a start, the City Council approved setting
aside $100,000 in the fiscal 2007-08 budget towards this unfunded liability until a study
could be formally conducted.
It should be noted that the approved $100,000 is only a fraction of the amount to fully
fund the expected actuary-recommended contribution. A little over one year ago an
atuary performed a summary analysis of Culver City data and estimated an annual
required contribution figure of $9.8 million. This figure would be inclusive of the current
costs paid by the City for retiree medical of approximately $3.4 million, and would
therefore result in an additional requirement of $6+ million per year. While GASB 45
does not require funding the liability (it requires only reporting the liability on the City’s
12 Page 20 of 108Comprehensive Financial Plan Update – General Fund
financial statements), the difference between the actuarially computed contribution and
the actual contribution will be reflected on the City’s audited financial statements as a
liability, which could affect the City’s future credit rating and cost of borrowing.
Once the final results of the actuarial study are received, staff will analyze the findings
and work with the appropriate staff members and Council subcommittees to come up
with recommendations for full City Council consideration. Staff members from Human
Resources, City Manager’s Office, Budget & Finance, and City Treasurer’s Department
have previously attended workshops on GASB 45 and OPEB related issues.
Information obtained from these workshops will also be used in correlation with the
consultant’s findings to determine the most practical and fiscally sound
recommendations to present for City Council consideration based on the City’s current
financial situation.
The City is also facing state mandates for Stormwater cleanup that are expected to cost
tens of millions of dollars to implement. The City needs to start making plans now on
what funding will be used so that the General Fund is not placed in the situation of
paying these ongoing mandated costs.
ADDITIONAL NEEDED RESOURCES
During the preparation of the first Comprehensive Financial Plan, staff met with
Departments to identify what resources were needed in order to continue to maintain
the current level of service, and what resources would be needed in the near future due
to anticipated service level increase or expected needs. During the budget process for
fiscal 2007-08 and 2008-09, some of these resources were approved and included in
the budget. Approximately $925,000 in on-going (personnel costs) and one-time costs
were included in fiscal 2007-08, and approximately $942,000 in fiscal 2008-09.
To rebuild the Self-Insurance Fund fund balance, an additional $500,000 is being
allocated among four funds beginning in fiscal 2008-09. The General Fund’s portion of
this amount is $445,000 (see Self Insurance Fund section of the Comprehensive
Financial Plan for a more detailed discussion of the fund’s balance). This amount drops
to $427,000 in 2009-10 and is anticipated to continue for another five years. This
amount is spread among General Fund departments using the same formula currently
used to calculate workers compensation and liability reserve charges, and is based on
an experience rate. The other funds that are part of the allocation to the rebuilding the
Self-Insurance Fund are the Refuse Fund, Sewer Fund, Redevelopment Agency, and
City Garage Fund.
DEFERRED MAINTENANCE, UNFUNDED CAPITAL NEEDS
During fiscal 2006-07, two assessment studies were completed that identified the City’s
annual deferred maintenance needs for building infrastructure and parks. Public Works
has a program that is updated on an as-needed basis for street infrastructure
maintenance.
Deferred Maintenance – Building: Per the assessment study on the City’s
building facilities, the annual amount recommended for deferred maintenance of
13 Page 21 of 108Comprehensive Financial Plan Update – General Fund
the City’s building infrastructure is $480,000 beginning in fiscal 2007-08, with an
annual inflationary increase of 4%. In fiscal 2007-08, approximately a little over
$400,000 was able to be budgeted for building maintenance capital improvement
projects. The Unfunded Capital need is approximately $4,015,000.
Deferred Maintenance – Parks: Per the assessment study of the City’s parks,
the annual amount recommended for deferred maintenance is $98,000 beginning
fiscal 2007-08, with an annual inflationary increase of 4%. The Unfunded Capital
Need is $868,000.
Deferred Maintenance – Streets: Currently the backlog of street repair is
approximately $18 million. This is significantly less than it was a few years ago,
and much of the success in reducing this backlog has been due to the fact the
City has been able to fund street repair with the use of General Fund funds, Gas
Tax funds, and Grant funds. The annual deferred maintenance need to maintain
this backlog is approximately $2.2 million.
Currently, the City does not have the resources necessary to fund the full amount of the
unfunded capital needs or the necessary deferred maintenance needs each fiscal year.
The preservation and growth of our revenue base needs to be a major focus in the
coming fiscal years so that an appropriate level of funding will be available to address
these needs.
07-08 08-09 09-10 10-11 11-12 12-13
Deferred Maint.* $2.78 $2.80 $2.83 $2.85 $2.88 $2.90
Unfunded Capital* $22.88
Total* $25.66 $2.80 $2.83 $2.85 $2.88 $2.90
* Amounts shown in millions.
SCENARIOS
Following are three scenarios for discussion. The first (Scenario A) takes a business as
usual approach, with conservative revenue and expenditure projections. This scenario
includes information from the 2007-08 and 2008-09 budget process and other City
Council approved items since July 1, 2007. The second (Scenario B) includes the
potential loss of cellular and wireless UUT revenues. The third (Scenario C) includes
future economic development and land use options. The fourth (Scenario D) includes
an estimated contribution if the City were to decide to fully fund retirement benefits as a
result of GASB 45.
GENERAL FUND SCENARIO A:
This scenario takes the base information for revenues and expenditures discussed
above and calculates it out five years from fiscal 2007-08. Fiscal 2008-09 does include
approved appropriations from the June 2007 budget process. Also included in this
scenario are additional appropriations, specifically in the one-time expenditure category,
14 Page 22 of 108Comprehensive Financial Plan Update – General Fund
which were approved outside of the budget process. Two of the major appropriations in
this category are:
$1,527,000 for additional construction costs for Fire Station #3 capital
improvement project, approved by City Council on June 18, 2007; and
$1,622,098 for a Public Safety Record Management System, approved by City
Council on November 14, 2007.
These items were funded by excess reserves in the General Fund, mainly due to
surplus and one-time revenues received in prior years. Proceeds expected from the
sale of the three lots currently housing the existing Station #3 is expected to help offset
the additional funding that was needed for the additional construction costs. For
purposes of forecasting, the proceeds from the sale are projected to be received in
fiscal 2008-09.
Anticipated new economic development revenues for Sales Tax are incorporated in
future fiscal years, beginning in fiscal 2009-10. These amounts include new revenues
from the Westfield Mall renovation and expansion, for which construction is set to begin
in early 2008. Projected completion of the mall renovation and expansion is marked for
fiscal 2009-10. Approximately 167,000 sq.ft. of new retail space is being added. The
additional Sales Tax revenue in fiscal 2009-10 is estimated to be $300,000, and is
counted for only six months of the fiscal year. Estimates grow to $800,000 for the full
year of fiscal 2010-11.
A large retailer scheduled to move into the Westfield Mall within the next 18 months is a
Target store. Culver City currently has an existing Target store located in a prime
location within the city, which has also historically maintained a healthy sales tax base.
Provisions need to be researched and analyzed in the very near future, though, in the
occurrence the current Target is closed or the location is sold and demolished for other
use. The City needs to put a plan in place that would guarantee protection of the
existing revenue base currently received from this location.
The fiscal 2007-08 and 2008-09 reserve percentage, including one-time revenues, is
above 30%, but this is not sustainable under current financial constraints. Beginning in
fiscal 2009-10 the projection shows this percentage falling to approximately 28.32%,
and to 24.21% in 2010-11. One-time revenue, such as the sale of land, is keeping the
percentage at a reasonable level. Recurring expenditures still outpace recurring
revenues, and will continue to do so over the five-year time-frame shown.
One-Time (Non-recurring) Revenues
A category of revenues that has received greater attention the last few years are those
categorized as one-time, or non-recurring, revenues. These are normally revenues that
do not occur on a regular basis, such as the sale of land (i.e. Warner Lot) or additional
revenue receipts from audit findings (i.e. Business License, TOT). The current General
Fund Fund Balance includes one-time revenues received by the City in prior years,
15 Page 23 of 108Comprehensive Financial Plan Update – General Fund
which has assisted the City in funding many one-time purchases (non-personnel related
costs), and also helped fund capital improvement projects, such as the Public Safety
RMS system recently approved by the City Council. Several of the larger one-time
revenues from the last few fiscal years are listed on the spreadsheet to show the extent
of the total amount the City has received.
City staff has been extremely thorough over the years in ensuring that one-time
revenues only cover one-time expenditures. Each budget year, one-time revenues are
forecast and used as a base when reviewing and approving necessary one-time
increases and/or enhancements to the City’s budget. It has never been the practice of
the City to have one-time revenues cover recurring expenditures
GENERAL FUND SCENARIO B:
This scenario includes all information from Scenario A, and adds one additional issue:
the potential loss of a portion of the Utility User’s Tax revenues if the voters do not
approve modernizing the Utility User’s Tax ordinance at the April 2008 election. Current
legal challenges in other jurisdictions could threaten the City’s revenue collected on
cellular and wireless charges. If the ordinance is not updated and the City was to lose
this revenue, the loss to the City would be approximately $3+ million a year. On top of
this, non-cellular (land-line) revenues from Telephone UUT have consistently been
dropping as more and more people have been moving toward wireless phones and
similar media for communications.
Since it is unknown if, or when, the City will lose this revenue, a decision was made to
show the potential loss beginning in fiscal 2010-11. The calculation of the reserve
percentage shows a drop of over 3.25% in this fiscal year from Scenario A. Regardless
of the year this might be lost, the approximate reduction is more than 3% of revenues.
GENERAL FUND SCENARIO C:
This scenario includes all information from Scenario A and adds additional information
based on potential land use policies (i.e. height and density requirements) and
economic development. The areas and projects in which information has been
analyzed are the Washington/National site, the Fox Hills area, commercial mixed use
corridors, the proposed Entrada development, and Jefferson Blvd development. These
areas/projects have been identified by the Community Development Department as
underdeveloped areas that have significant land area with potential for development or
large projects.
Consultants from Keyser Marston Associates estimated the financial impacts of
proposed developments based on information provided to them by Community
Development and Finance staff. The financial impact included in the Plan represents
the net difference between estimated increased revenues generated from the project
area and estimated increased service costs from the resulting development. Please
note that the estimates provided in Scenario C are simply meant to demonstrate the
16 Page 24 of 108Comprehensive Financial Plan Update – General Fund
impact of development on the City’s finances. These estimates are based on potential
development as envisioned by staff based on current possibilities. The estimates do not
necessarily represent actual proposed or planned projects.
Based on figures from the analysis, if the City and Redevelopment Agency aggressively
pursued all of the potential developments identified, or substantially similar
developments, the City could ultimately see a net increase in revenues of approximately
$2 million per year. While this does not fix the projected deficit problem, it does provide
an avenue outside of reducing services or increasing taxes to improve on-going
revenues. These projects would also likely generate fairly significant one-time revenues
such as development and impact fees. For purposes of this analysis, it is assumed the
additional revenues would be received incrementally over several years, with the first
year being 2009-10.
GENERAL FUND SCENARIO D:
The fourth scenario includes all information from Scenario A and adds in annual costs to
fund the OPEB contribution beginning in fiscal 2008-09. The actuarial analysis being
conducted by Aon Consulting will not be completed until February, so this final
calculation of the annual required contribution if the City were to fully fund the retirement
obligation is not known at this time. However, a little over one year ago an actuary
performed a summary analysis of Culver City data and estimated an annual required
contribution figure of $9.8 million. This figure would be inclusive of the current costs
paid by the City for retiree medical of approximately $3.4 million, and would therefore
result in an additional $6+ million per year. This is a very real scenario, in that there is
no question the City will be required to address this matter. The only fact that remains
to be seen is if the final actuarial analysis results in a dramatically different number than
the estimate, which is probably not likely.
For purposes of this scenario, the assumption is that the City would decide to fully-fund
the retirement obligation and elect to 'ease' into fully paying the additional $6+ million
over three years, with $2 million showing in fiscal 2008-09, $4 million showing in fiscal
2009-10 and $6 million showing in fiscal 2010-11. It is important to understand,
however, that any choice to pay less than the actuarially determined annual required
contribution will result in a requirement to record the difference as a liability on the City's
government-wide financial statements. In this case, there would be a $6 million liability
showing at the end of fiscal 2009-10.
There is currently no legal requirement to fully fund or fund any portion of the annual
required contribution; however, this increasing liability on the City's financial statements
will affect the City's credit rating and costs of borrowing. Future negotiations to reduce
retiree medical contributions by the City could result in lowering this number, but it will
be calculated based on the current agreements.
17 Page 25 of 108Includes implementation of Strategic Workforce Planning
SCENARIO A
Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
GENERAL FUND (101) - Preliminary
Beginning Balance 31,772,000 29,818,000 28,166,000 24,769,890 22,118,340 18,792,510
Fiscal Year Net Change
Total Recurring Revenue 72,932,000 76,254,000 78,834,000 82,667,000 86,268,000 90,105,000
Total Interfund Transfers (Admin.
Charges) 5,872,000 6,081,000 6,263,000 6,514,000 6,775,000 7,046,000
Projected New Westfield Revenue 0 0 300,000 800,000 840,000 882,000
Total One-Time Revenue 3,620,000 2,000,000 0 0 0 0
Total Revenue Projection 82,424,000 84,335,000 85,397,000 89,981,000 93,883,000 98,033,000
Total Recurring Expenditures 78,477,000 83,183,000 87,824,000 92,146,000 97,085,000 102,254,000
Reduce Personnel Costs 0.5%/year to
5% (Attrition/Best Mgmt Practice) 0 0 (364,890) (767,450) (1,210,170) (1,695,440)
Total One-Time Expenditures 5,801,000 2,704,000 1,234,000 1,154,000 1,234,000 1,154,000
Total Expenditures Projection 84,278,000 85,887,000 88,693,110 92,532,550 97,108,830 101,712,560
Total FY Recurring Operating
Surplus/Deficit 327,000 (848,000) (2,062,110) (1,397,550) (1,991,830) (2,525,560)
Current Set-aside for OPEB 100,000 100,000 100,000 100,000 100,000 100,000
General Fund - Preliminary Ending
Balance (Operating)* 29,818,000 28,166,000 24,769,890 22,118,340 18,792,510 15,012,950
General Fund Reserve Percentage
(Recurring)
38.00% 33.86% 28.32% 24.21% 19.60% 14.93%
General Fund Reserve Percentage
(Not Including One-time Revenues)
33.38% 31.46% 28.32% 24.21% 19.60% 14.93%
General Fund - Balance (Carried
Forward) 29,818,000 2,505,000 (3,692,110) (9,168,660) (15,344,490) (22,000,050)
Total Deferred Maintenance** 2,778,000 2,801,000 2,825,000 2,850,000 2,876,000 2,903,000
Total Unfunded Capital 22,883,000 0 0 0 0 0
Total Deferred Maintenance &
Unfunded Capital Projection 25,661,000 2,801,000 2,825,000 2,850,000 2,876,000 2,903,000
General Fund - Ending Balance (ALL) 4,157,000 (296,000) (6,517,110) (12,018,660) (18,220,490) (24,903,050)
General Reserve Percentage (Recurring)
5.30% -0.36% -7.42% -13.04% -18.77% -24.35%
* Identified one-time revenues previously received and recorded include:
1st payment from Warner Lot (05-06) 2,620,000
Receipts from TOT audit/other (06-07) 650,000
Loan Receivable from RDA (06-07) 505,818
Int. Income from Refunding Bonds (06-07) 500,000
Documentary Tax Audit Receipts (05-06) 313,086
Documentary Tax Audit Receipts (06-07) 762,400
Sub-total 5,351,304
** Includes buildings, streets and parks.
Culver City
January 16, 2008
Page 26 of 108Includes implementation of Strategic Workforce Planning
SCENARIO B
Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
GENERAL FUND (101) - Preliminary
Beginning Balance 31,772,000 29,818,000 28,166,000 24,769,890 19,118,340 12,747,510
Fiscal Year Net Change
Total Recurring Revenue 72,932,000 76,254,000 78,834,000 82,667,000 86,268,000 90,105,000
Total Interfund Transfers (Admin.
Charges) 5,872,000 6,081,000 6,263,000 6,514,000 6,775,000 7,046,000
Projected New Westfield Revenue 0 0 300,000 800,000 840,000 882,000
Total One-Time Revenue 3,620,000 2,000,000 0 0 0 0
Total Revenue Projection 82,424,000 84,335,000 85,397,000 89,981,000 93,883,000 98,033,000
Potential Loss of UUT 0 0 0 (3,000,000) (3,045,000) (3,090,675)
Revised Total Revenue Projection 82,424,000 84,335,000 85,397,000 86,981,000 90,838,000 94,942,325
Total Recurring Expenditures 78,477,000 83,183,000 87,824,000 92,146,000 97,085,000 102,254,000
Reduce Personnel Costs 0.5%/year to
5% (Attrition/Best Mgmt Practices) 0 0 (364,890) (767,450) (1,210,170) (1,695,440)
Total One-Time Expenditures 5,801,000 2,704,000 1,234,000 1,154,000 1,234,000 1,154,000
Total Expenditures Projection 84,278,000 85,887,000 88,693,110 92,532,550 97,108,830 101,712,560
Total FY Recurring Operating
Surplus/Deficit 327,000 (848,000) (2,062,110) (4,397,550) (5,036,830) (5,616,235)
Current Set-aside for OPEB 100,000 100,000 100,000 100,000 100,000 100,000
General Fund - Preliminary Ending
Balance (Operating) 29,818,000 28,166,000 24,769,890 19,118,340 12,747,510 5,877,275
General Reserve Percentage (Recurring)
38.00% 33.86% 28.32% 20.92% 13.30% 5.84%
General Fund Reserve Percentage
(Not Including One-time Revenues)
33.38% 31.46% 28.32% 20.92% 13.30% 5.84%
General Fund - Balance (Carried
Forward) 29,818,000 2,505,000 (3,692,110) (12,168,660) (21,389,490) (31,135,725)
Total Deferred Maintenance** 2,778,000 2,801,000 2,825,000 2,850,000 2,876,000 2,903,000
Total Unfunded Capital** 22,883,000 0 0 0 0 0
Total Deferred Maintenance &
Unfunded Capital Projection 25,661,000 2,801,000 2,825,000 2,850,000 2,876,000 2,903,000
General Fund - Ending Balance (ALL) 4,157,000 (296,000) (6,517,110) (15,018,660) (24,265,490) (34,038,725)
General Reserve Percentage (Recurring)
5.30% -0.36% -7.42% -16.30% -24.99% -33.29%
* Identified one-time revenues previously received and recorded include:
1st payment from Warner Lot (05-06) 2,620,000
Receipts from TOT audit/other (06-07) 650,000
Loan Receivable from RDA (06-07) 505,818
Int. Income from Refunding Bonds (06-07) 500,000
Documentary Tax Audit Receipts (05-06) 313,086
Documentary Tax Audit Receipts (06-07) 762,400
Sub-total 5,351,304
** Includes buildings, streets and parks.
Culver City
January 16, 2008
Page 27 of 108Includes implementation of Strategic Workforce Planning
SCENARIO C
Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
GENERAL FUND (101) - Preliminary
Beginning Balance 31,772,000 29,818,000 28,166,000 25,469,890 24,218,340 22,892,510
Fiscal Year Net Change
Total Recurring Revenue 72,932,000 76,254,000 78,834,000 82,667,000 86,268,000 90,105,000
Total Interfund Transfers (Admin.
Charges) 5,872,000 6,081,000 6,263,000 6,514,000 6,775,000 7,046,000
Projected New Westfield Revenue 0 0 300,000 800,000 840,000 882,000
Land-Use Planning and Density 0 0 700,000 1,400,000 2,000,000 2,080,000
Total One-Time Revenue 3,620,000 2,000,000 0 0 0 0
Total Revenue Projection 82,424,000 84,335,000 86,097,000 91,381,000 95,883,000 100,113,000
Total Recurring Expenditures 78,477,000 83,183,000 87,824,000 92,146,000 97,085,000 102,254,000
Reduce Personnel Costs 0.5%/year to
5% (Attrition/Best Mgmt Practices) 0 0 (364,890) (767,450) (1,210,170) (1,695,440)
Total One-Time Expenditures 5,801,000 2,704,000 1,234,000 1,154,000 1,234,000 1,154,000
Total Expenditures Projection 84,278,000 85,887,000 88,693,110 92,532,550 97,108,830 101,712,560
Total FY Recurring Operating
Surplus/Deficit 327,000 (848,000) (1,362,110) 2,450 8,170 (445,560)
Current Set-aside for OPEB 100,000 100,000 100,000 100,000 100,000 100,000
General Fund - Preliminary Ending
Balance (Operating) 29,818,000 28,166,000 25,469,890 24,218,340 22,892,510 21,192,950
General Reserve Percentage (Recurring)
38.00% 33.86% 29.12% 26.50% 23.88% 21.08%
General Fund Reserve Percentage
(Not Including One-time Revenues)
33.38% 31.46% 29.12% 26.50% 23.88% 21.08%
General Fund - Balance (Carried
Forward) 29,818,000 2,505,000 (2,992,110) (7,068,660) (11,244,490) (15,820,050)
Total Deferred Maintenance** 2,778,000 2,801,000 2,825,000 2,850,000 2,876,000 2,903,000
Total Unfunded Capital** 22,883,000 0 0 0 0 0
Total Deferred Maintenance &
Unfunded Capital Projection 25,661,000 2,801,000 2,825,000 2,850,000 2,876,000 2,903,000
General Fund - Ending Balance (ALL) 4,157,000 (296,000) (5,817,110) (9,918,660) (14,120,490) (18,723,050)
General Reserve Percentage (Recurring)
5.30% -0.36% -6.62% -10.76% -14.54% -18.31%
* Identified one-time revenues previously received and recorded include:
1st payment from Warner Lot (05-06) 2,620,000
Receipts from TOT audit/other (06-07) 650,000
Loan Receivable from RDA (06-07) 505,818
Int. Income from Refunding Bonds (06-07) 500,000
Documentary Tax Audit Receipts (05-06) 313,086
Documentary Tax Audit Receipts (06-07) 762,400
Sub-total 5,351,304
** Includes buildings, streets and parks.
Culver City
January 16, 2008
Page 28 of 108Includes implementation of Strategic Workforce Planning
SCENARIO D
Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
GENERAL FUND (101) - Preliminary
Beginning Balance 31,772,000 29,818,000 26,266,000 18,969,890 10,418,340 1,192,510
Fiscal Year Net Change
Total Recurring Revenue 72,932,000 76,254,000 78,834,000 82,667,000 86,268,000 90,105,000
Total Interfund Transfers (Admin.
Charges) 5,872,000 6,081,000 6,263,000 6,514,000 6,775,000 7,046,000
Projected New Westfield Revenue 0 0 300,000 800,000 840,000 882,000
Total One-Time Revenue 3,620,000 2,000,000 0 0 0 0
Total Revenue Projection 82,424,000 84,335,000 85,397,000 89,981,000 93,883,000 98,033,000
Total Recurring Expenditures 78,477,000 83,183,000 87,824,000 92,146,000 97,085,000 102,254,000
Reduce Personnel Costs 0.5%/year to
5% (Attrition/Best Mgmt Practices) 0 0 (364,890) (767,450) (1,210,170) (1,695,440)
Potential Annual Payments for OPEB
Related Funding Needs 100,000 2,000,000 4,000,000 6,000,000 6,000,000 6,000,000
Total One-Time Expenditures 5,801,000 2,704,000 1,234,000 1,154,000 1,234,000 1,154,000
Total Expenditures Projection 84,378,000 87,887,000 92,693,110 98,532,550 103,108,830 107,712,560
Total FY Recurring Operating
Surplus/Deficit 327,000 (2,848,000) (6,062,110) (7,397,550) (7,991,830) (8,525,560)
General Fund - Preliminary Ending
Balance (Operating) 29,818,000 26,266,000 18,969,890 10,418,340 1,192,510 (8,487,050)
General Reserve Percentage (Recurring)
38.00% 31.58% 21.69% 11.40% 1.24% -8.44%
General Fund Reserve Percentage
(Not Including One-time Revenues)
33.38% 29.17% 21.69% 11.40% 1.24% -8.44%
General Fund - Balance (Carried
Forward) 29,818,000 605,000 (9,492,110) (20,868,660) (32,944,490) (45,500,050)
Total Deferred Maintenance** 2,778,000 2,801,000 2,825,000 2,850,000 2,876,000 2,903,000
Total Unfunded Capital** 22,883,000 0 0 0 0 0
Total Deferred Maintenance &
Unfunded Capital Projection 25,661,000 2,801,000 2,825,000 2,850,000 2,876,000 2,903,000
General Fund - Ending Balance (ALL) 4,157,000 (2,196,000) (12,317,110) (23,718,660) (35,820,490) (48,403,050)
General Reserve Percentage (Recurring)
5.30% -2.64% -14.02% -25.74% -36.90% -47.34%
* Identified one-time revenues previously received and recorded include:
1st payment from Warner Lot (05-06) 2,620,000
Receipts from TOT audit/other (06-07) 650,000
Loan Receivable from RDA (06-07) 505,818
Int. Income from Refunding Bonds (06-07) 500,000
Documentary Tax Audit Receipts (05-06) 313,086
Documentary Tax Audit Receipts (06-07) 762,400
Sub-total 5,351,304
** Includes buildings, streets and parks.
Culver City
January 16, 2008
Page 29 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for
Refuse Fund
INTRODUCTION
The Refuse Fund is an Enterprise Fund that was established to provide for municipal
waste removal and recycling services from the residential, commercial, and industrial
areas of the City. The Refuse Fund also provides funds for a city-wide street sweeping
contract and operation of a transfer station to transport non-hazardous solid wastes to
material processors for reuse or recycling or to disposal sites as appropriate. The
refuse operation strives to provide efficient and effective municipal waste removal
services and recover the maximum volume of recyclable or reusable material from the
waste stream.
Residential crews provide weekly trash and recycling removal service to family
dwellings consisting of up to four units in size. Residents are billed annually for the
trash services through the LA County tax collection system.
Commercial collection crews provide scheduled and non-scheduled trash removal to all
businesses and multi-family residential units consisting of more than four units. The
commercial collection crews also service pedestrian receptacles located throughout the
City and remove large bulky items set out by residents and businesses. Businesses
and property managers are billed monthly for the commercial service that occurs during
the month.
The Transfer Station receives and processes non-hazardous municipal solid wastes
and transfers it to large transfer vehicles to be hauled to sanitary landfills or salvage or
recycling facilities. Personnel at the Transfer Station are also responsible for inspecting
wastes to determine if hazardous or toxic materials are in the waste stream and to
remove and store such materials for up to 90 days until disposal arrangements can be
made in accordance with Federal and State Regulations.
As an enterprise fund, the Refuse Fund charges customers for the provision of services.
Operating expenses include the cost of providing service, administrative expenses,
street-sweeping, recycling outreach, and acquiring, replacing, and maintaining capital
assets (e.g. maintenance of the Transfer Station and replacing old refuse vehicles). In
order to ensure that revenues are sufficient to cover operating costs, refuse removal
rates are reviewed annually and adjusted as necessary.
Page 30 of 108Comprehensive Financial Plan Update – Refuse Fund
FISCAL YEAR 2007-08 HIGHLIGHTS
The Adopted 2007-08 Budget includes a number of staffing changes to increase the
efficiency of the operations, including reclassifying a secretary position to an Associate
Analyst. Additionally, the 2007-08 budget includes:
10% increase in commercial and residential refuse disposal rates
Purchase of 6 new CNG Refuse Side Loader Trucks to replace older Trucks
(funding from Equipment Replacement Fund)
Funding to replace the in-ground scales for out-bound trucks
Residential Recycling will be enhanced to once a week collection beginning
in 2008
Remodeling of the Transfer Station office and repair to the roof at the
Transfer Station
BACKGROUND
Refuse Rate Increases
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Residential Commercial|10 10|2,000
4,000
6,000
8,000
10,000
12,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Refuse Fund Revenues and Expenditures
Revenues Expenditures
Prior to 2003-04, there had been
no increase in residential or
commercial refuse collection fees
for more than five years.
However, personnel costs, landfill
fees, fuel prices, and regulatory
fees continued to increase. As a
result, the Refuse fund was
operating at a deficit during the
early 2000’s. To address this
issue, a rate study was done prior
to the adoption of the 2003-04
budget and rates were increased
10% for residential customers and 6% for commercial customers.
The following year, rates were increased again (6% residential, 10% commercial). To
cover prior year deficits and restore the Fund’s reserve, rates have been continually
increased for all customers in 2005-06
(8%), 2006-07 (6%), and 2007-08 (10%).
Although the gap is closing, the Fund is
now faced with large, incremental
increases in solid waste disposal costs.
The County Sanitation District is
anticipating significant solid waste
disposal cost increases as local landfill
capacity is depleted over the next twenty
years. In order to smooth this transition,
the disposal charges for the City’s refuse
2 Page 31 of 108Comprehensive Financial Plan Update – Refuse Fund
that is taken to the Sanitation District landfills (which handles the majority of the City’s
refuse) will increase at a rate of approximately 10% to 12% per year over the next
twenty years. Currently, disposal costs represent approximately 15% of the operating
costs of the Public Works Department Sanitation Division.
In addition to increasing personnel costs and disposal costs discussed above, the other
costs to provide municipal waste services continue to increase as well. The Refuse
Fund maintains a fleet of large sanitation trucks and heavy equipment, which require a
more rigorous maintenance and replacement schedule. A number of sanitation vehicles
are scheduled for retirement in 2007-08. Per the City’s policy, these trucks will be
replaced with trucks fueled by Compressed Natural Gas (CNG), which are much
cleaner and better for the environment than diesel. Culver City is proud to be a leader
in purchasing environmentally responsible vehicles; however, the cost to purchase and
maintain CNG powered vehicles is greater than traditional diesel powered vehicles. As
more vehicles are manufactured due to mandate requirements, the cost is expected to
decrease. This may not happen, though, for a few more years.
Currently, the additional cost for CNG vehicles runs about 25% more than traditional
diesel-powered vehicles. Future rate increases will be necessary to ensure the financial
stability of the refuse operation.
ECONOMIC OVERVIEW
Many of the same economic pressures constraining the General Fund are also
impacting the Refuse Fund. Aside from escalating personnel costs and fuel prices, the
limited availability of raw materials has greatly increased the price of steel. This has
made new bins, replacement parts for older vehicles, and the purchase of new vehicles
more expensive.
Additionally, as mentioned earlier, local landfill capacity will be depleted over the next
twenty years. As a result, disposal costs will increase dramatically in the future as the
transition from local landfills to rail haul disposal to more distant locations occurs. To
account for and provide a smooth transition toward these dramatically increased waste
disposal costs, the County Sanitation District is increasing the disposal costs it charges
to its customers (such as Culver City) at an annual rate of approximately 11% over the
next twenty years. The refuse fund expenditure projections take into account these
projected disposal costs increases.
3 Page 32 of 108Comprehensive Financial Plan Update – Refuse Fund
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
An important focus of the Refuse Fund over the next few years has to be improving its
overall fiscal health to eliminate the fund’s negative balance and develop a reserve.
Additionally, the capital and operational needs of the Refuse fund that have been
deferred over the last few years will have to be phased in on a priority basis as the
revenue generated by fees for service allow. While increasing the fees is a necessity,
we need to be cognizant of the effect it will have on Culver City residents and
commercial businesses in the City.
DISCUSSION OF REVENUE PROJECTIONS
In order to restore and maintain the financial health of the Refuse Fund, commercial and
residential waste removal fees will need to continue to be increased in the future. The
revenue projections assume that there will be an increase of approximately 10% in FY
2008-09. With this increase and if current expenditures stay within the anticipated
growth forecast, then the Refuse Fund should have a positive fund balance by the end
of FY 2008-09.
After 2008-09 the rate increases are planned to be lowered to 5% per fiscal year. This
will be reviewed in the future to ensure that these increases are sufficient to keep pace
with operating costs. It is quite likely rates may need to be kept at a 10% increase per
year for longer than projected in order to assist in generating revenue to cover proposed
expanded operations and capital improvement needs for the Transfer Station to support
on-going and expanded operations. This largely depends on the outcome of
discussions currently underway with the City of Los Angeles or possible future
agreements with other third parties for joint use of the Transfer Station facilities.
DISCUSSION OF EXPENDITURE PROJECTIONS
Personnel expenditures are forecasted to increase 4.0% across the board, with the
exception of medical premiums. Medical premiums are forecasted to increase 12.5% in
fiscal 2007-08, with small adjustments downward in subsequent years. Operating and
maintenance expenses are forecasted to grow 3.5% per year. The exception to this
could be garage expenses and amortization charges to the Equipment Replacement
Fund. Fuel prices have become a large issue for all Funds that utilize vehicles in their
operations. These expenses are difficult to forecast, and for the purpose of this analysis
have had the same 3.5% growth rate associated with them.
A major challenge facing the Refuse Fund is identifying and receiving funding in order to
cover needed upgrades and expansion of its operations. Anticipated upgrades and
expanded services are discussed below:
4 Page 33 of 108Comprehensive Financial Plan Update – Refuse Fund
• Transfer Station through-put tonnage increase from a maximum of 500 tpd
to 750 tpd and is scheduled for implementation in 2008-09. This will allow
increased revenue generation through the transfer station and will require
additional long hauling which is currently projected to be handled through
contract. Also, an additional Heavy Equipment Operator will be required for
expanded hours of operation at the Transfer Station. In 2014-15 the
Transfer Station through-put is anticipated to be further expanded from 750
tpd to 900 tpd. This will provide for further revenue generation through the
Transfer Station and will require expanded contract operations, an
additional loader, Heavy Equipment Operator, and Laborer.
• Capital Improvements needs over the next several years include repairs to
the perimeter fencing, repairs to the Transfer Station fire sprinkler system,
and implementation of storm water pollution prevention measures at the
Transfer Station.
• Bulky Item/Illegal Dumps are an immediate need. To address the need for
more responsive bulky item and illegal dumping pickup, a Driver and
Collector will be proposed to be added in 2008-09. A Rear-Loader Truck
was put into service in 2007-08.
• Field Supervisor Position is proposed to be added in 2008-09 to address
code enforcement issues in the areas of scavenging, illegal dumping,
unauthorized bins and refuse services and to provide increased safety
monitoring.
• GPS Implementation is projected to be phased in over several years
beginning with the Commercial Fleet and Roll-Off Trucks in 2007-08 and
expanding to Long Haul Trucks in 2008-09 followed by remaining vehicles in
2009-10.
• Route Audits are proposed for 2008-09 after GPS system implementation
which will allow for easier analysis of routes.
• Drive Cams will be installed in 2010-11 to provide valuable data for
managers to help drivers develop safer driving habits.
Inclusion of these measures would increase the funds negative balance in the first
two years with the fund balance becoming positive in fiscal 2012-13. Further
analysis of these measures will be done in the coming year.
5 Page 34 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 35 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
REFUSE FUND (202) - Preliminary
Beginning Balance (198,000) 75,000 955,000 2,461,000 4,133,000 5,987,000
Fiscal Year Net Change
Total Recurring Revenue 11,484,000 12,499,000 13,749,000 14,575,000 15,451,000 16,378,000
Total One-Time Revenue 000 000
Total Revenue Projection 11,484,000 12,499,000 13,749,000 14,575,000 15,451,000 16,378,000
Total Recurring Expenditures 11,211,000 11,619,000 12,243,000 12,903,000 13,597,000 14,323,000
Total One-Time Expenditures 000 000
Total Expenditures Projection 11,211,000 11,619,000 12,243,000 12,903,000 13,597,000 14,323,000
Total Refuse FY Operating
Surplus/Deficit 273,000 880,000 1,506,000 1,672,000 1,854,000 2,055,000
Refuse Fund - Preliminary Ending
Balance (Operating) 75,000 955,000 2,461,000 4,133,000 5,987,000 8,042,000
Reserve Percentage (Recurring)
0.67% 8.22% 20.10% 32.03% 44.03% 56.15%
Page 36 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 37 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Transit Fund
INTRODUCTION
The Transit Fund is an Enterprise Fund that was established to provide efficient and
effective public transportation services and high quality, low cost equipment
maintenance services to the City of Culver City. The Culver City Municipal Bus Line,
aka Culver CityBus, provides public transit services on seven regular routes throughout
Culver City and the surrounding area and services a number of major employment,
health, commercial, educational, and recreational centers in the area.
The Transportation Department is responsible for providing administration and oversight
of Transit Fund operations. The Transportation Department also oversees the City’s
regional transportation planning activities and administers both the Equipment
Replacement Fund and the activities of the Equipment Maintenance Division, which is
responsible for equipment and vehicle maintenance. A more in-depth discussion of the
Equipment Replacement Fund is included in the Equipment Replacement Fund section
of this report.
As an Enterprise Fund, the Transit Fund charges customers for the provision of services
via bus fares. However, the majority of the Fund’s revenues are derived from other
funding sources, including grants and appropriations from the state and federal
governments.
Operating expenses include the cost of providing service, administrative expenses, and
acquiring, replacing, and maintaining capital assets (e.g. maintaining and replacing the
Bus Fleet). Since the Transit Fund is highly subsidized by other governmental
agencies, their ability to increase or decrease bus fares to raise revenue has historically
been highly restricted. This restriction was recently lifted, and Transportation may look
to increase fares sometime in the future.
FISCAL YEAR 2007-08 HIGHLIGHTS
The Adopted 2007-08 Budget contains funding for a number of programs and studies to
improve the efficiency and effectiveness of Culver CityBus, including:
A Line-by-Line Analysis to analyze the efficiency, effectiveness, and services
provided by the current transit system
A Service Plan to implement new service lines to new developments in and
around Culver City
Implementation of the Universal Fare System fareboxes and a Customer
Relations Management program
Page 38 of 108Comprehensive Financial Plan Update – Transit Fund
Additionally, the Transportation Department relies heavily on funding from county, state
and federal agencies. The FY 2007-08 State Budget negatively impacted the
Transportation Department by diverting most of the state’s gas tax “spillover” funds from
mass transit funds to pay for General Fund expenses, such as school buses and past
bond payments. By State law, the Transit Fund was set to receive more from the State
Transportation Assistance account prior to the passage of the State’s Budget.
Unfortunately, the State also diverted those funds in the future as well, so even if there
is no gas tax “spillover,” those funds will continue to be diverted from the transit uses
unless there is a permanent fix.
BACKGROUND
Culver CityBus is the second oldest municipally-owned bus line in the state of
California, with over 75 years of tradition and experience behind our service. Culver
CityBus was organized in 1928 by the late Mayor Reve E. Houck, with the aid of the
City Council, after a dispute with the Pacific Electric Railway over rising fares. Service
was initiated on March 4, 1928 when Mayor Houck drove a bus from Washington and
Rimpau Boulevards to Venice to inaugurate municipal bus service.
Today, Culver CityBus proudly serves
the Westside communities of Century
City, Culver City, Mar Vista, Marina del
Rey, Palms, Venice, Venice Beach,
West Los Angeles, Westchester, and
Westwood. |10 10|4,000
8,000
12,000
16,000
20,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Transit Fund Revenues and Expenditures
Revenues Expenditures
|10 10|4,000
8,000
12,000
16,000
20,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Transit Fund Revenue Sources
Non Operating
From Other Agencies
Passenger Fares
Culver CityBus is a nationally
recognized operation whose fleet was
recently ranked seventh of
approximately five hundred North American programs in the national trade magazine,
Fleet Equipment magazine. Culver CityBus is also a nationally recognized leader in
transportation technology (Smart Bus) and environmental friendliness with all of the
current fleet being fueled by compressed
natural gas (CNG).
Currently, the Transit Fund has a healthy
reserve and generally collects sufficient
revenues to cover annual operational
costs. However, the Transit Fund is highly
subsidized with funds from other agencies,
mostly county, state, and federal. In fact,
approximately eighty percent (80%) of the Fund’s revenues are from outside agencies.
The major sources of the Transit Fund are the Federal Transportation Administration
(FTA), the Transit Development Act, and Proposition A & C money (see Prop A & C
section of this report for more information).
2 Page 39 of 108Comprehensive Financial Plan Update – Transit Fund
Consequently, depending on those agency’s priorities, funding may be highly variable
from year to year. Until recently, the Transit Fund did not have the flexibility to increase
fares to cover increased expenditures. This restriction to increase fares has recently
been lifted and Transportation may consider an increase in fares in the future.
Nevertheless, public transportation and traffic and congestion relief have been one of
California’s top priorities over the last decade. The Transit Fund’s current financial
position should allow it to continue to provide a high level of service to the Westside
communities for years to come.
ECONOMIC OVERVIEW
With the population explosion in California over the last 10 – 15 years, dealing with the
related increase in traffic and congestion has become one of the biggest challenges
faced by Californians. As such, voters have approved a few funding sources that are
specifically dedicated to funding transportation projects and public transportation
operations. Propositions A & C are both sales taxes that have been approved by Los
Angeles County voters. Since these funding sources are sales taxes, they are
economically sensitive (see the Prop A & C section of this report for more information);
however, they are much more stable than the alternative of relying on an annual
appropriation from the state legislature.
In addition to Prop A & C, there are a number of state and federal grants programs that
are used for transit operations. These funds are allocated annually and are subject to
the existing political and economic climate. With an increasing number of federal
dollars being diverted towards homeland security and the war in Iraq, the amount of
funds available for transportation related projects and programs may begin to shrink in
the near future.
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
The Transit Fund is facing similar fiscal issues as the General Fund. Due to the ever-
changing variables associated with these issues, it is difficult to realistically foresee
more than two or three years into the future for certain funding sources, and even less
in some cases. As was mentioned previously, the Transit Fund currently has a healthy
reserve and would be able to stave off any unforeseen expenses that may occur in the
very near future. Since the Transit Fund is heavily dependant on outside funding
sources, it is imperative that it maintains sound oversight of its spending.
DISCUSSION OF REVENUE PROJECTIONS
Assumptions that were made in this analysis after fiscal 2007 include a 3.8% to 4.0%
growth in local revenues, and a modest 3.0% growth in fare box revenues.
3 Page 40 of 108Comprehensive Financial Plan Update – Transit Fund
The Transit Fund is anticipating a little over $900,000 a year in funds relating to new
bus services to Playa Vista from 2009-2011. These funds will assist in covering
ongoing expenditures.
Infrastructure Bond 1B Funds for Public Transit were expected to be allocated during
Fiscal 2008 through 2012 in the amount of $8.4 Million for Culver City. These bond
monies will primarily fund Culver City’s Aerial station and can be used towards other
transit capital expenses. However, FY 2008 Bond funds allocated to Culver City were
only $213,376. Since Metro received a disproportionately larger share of the funds, this
year, they have agreed to backfill projects with Prop A and C funds as well as for future
allocations.
With the estimated forecast of revenues over the next few fiscal years, it must also take
into consideration the Formula Allocation Procedure employed by Metro to distribute
local and state transit funding to all of the County’s Municipal Bus Operators. With
Metro’s fare increases in July 2007, much of the region’s funding will likely cause a shift
towards Metro, to the detriment of all of the other Municipal Operators, including Culver
City.
Most of the revenues received from other agencies are projected to remain growing at a
fairly constant rate. However, it should be noted that some of those funds can be
subject to change in the amount or eligibility at the will of those agencies.
DISCUSSION OF EXPENDITURE PROJECTIONS
To the extent possible, recurring operating expenditures are covered with recurring
revenues. Personnel costs are estimated to grow 4.0% per current MOU negotiations,
with medical premiums growing at 12.5% in fiscal 2007-08, and slightly less in
subsequent years. Ongoing operating and maintenance costs are estimated to grow at
approximately 3.5%. STA Funds can be used for operating expenses, and continued
use of these funds for operating expenses is subject to an annual test based on
expense growth versus the Consumer Price Index (CPI). Unfortunately, the Transit
Fund did not pass the annual test, but has been able to continue to receive these funds
for capital expenses.
The Transit Fund currently reimburses the General Fund for administrative charges,
which increases between 3% - 4% per year primarily due to personnel cost increases.
The administrative charges, or indirect costs, are determined through the Cost
Allocation Plan prepared each year, which meets the compliance of Federal and State
grants reimbursement guidelines. The Cost Allocation Plan allocates costs of services
and programs to using Departments and Enterprise Funds based on the level of
services received. Some of these services include payroll processing, information
technology, financial, and communications services.
4 Page 41 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
TRANSIT FUND (203) - Preliminary
Beginning Balance 8,562,000 6,503,000 11,220,000 12,561,000 13,510,000 14,029,000
Fiscal Year Net Change
Total Recurring Revenue 17,004,000 18,234,000 18,763,000 19,328,000 19,894,000 20,482,000
Total One-Time Revenue 3,539,000 5,289,000 2,300,000 2,300,000 2,300,000 1,400,000
Total Revenue Projection 20,543,000 23,523,000 21,063,000 21,628,000 22,194,000 21,882,000
Total Recurring Expenditures 16,174,000 18,806,000 19,722,000 20,679,000 21,675,000 22,709,000
Total One-Time Expenditures 6,428,000 0 0 0 0 0
Total Expenditures Projection 22,602,000 18,806,000 19,722,000 20,679,000 21,675,000 22,709,000
Total Transit FY Operating
Surplus/Deficit 4,369,000 4,717,000 1,341,000 949,000 519,000 (827,000)
Transit Fund - Preliminary Ending
Balance (Operating) 6,503,000 11,220,000 12,561,000 13,510,000 14,029,000 13,202,000
Reserve Percentage (Recurring)
40.21% 59.66% 63.69% 65.33% 64.72% 58.14%
Page 42 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 43 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Sewer Fund
INTRODUCTION
The Sewer Fund is an Enterprise Fund that was established to provide for conveyance,
treatment, maintenance and repair services for the City’s sewer system. The sewer crew
of the Public Works Department Operations and Maintenance Division is funded by the
sewer fund and is responsible for maintaining the City’s system of subsurface gravity and
pressurized sewer lines, sewer gauging devices, and sewage lift stations, including the
pumps and auxiliary equipment.
The City charges customers for the provision
of services through wastewater fees which
are collected by an annual property
assessment and deposited in the sewer fund.
In addition to the maintenance of the sewer
system in Culver City, the wastewater fees
are used to pay the debt service for the City’s
pro-rata share of a wastewater revenue bond
that was used to upgrade the Los Angeles
Hyperion Wastewater Treatment Plant to
meet EPA requirements. The Sewer Fund
also pays for the City of Culver City’s share of the Los Angeles Amalgamated Cities
Capital Improvement Program for conveyance of Culver City sewage to that Treatment
Plant. |10 10|2,000
4,000
6,000
8,000
10,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Sewer Fund Revenues and Expenditures
(Expenditures exclude Capital Projects)
Revenues Expenditures
FISCAL YEAR 2007-08 HIGHLIGHTS
The Adopted 2007-08 Budget includes a number of staffing changes to increase the
efficiency of the operations, including reclassifying a number of positions, adding a
Management Analyst (shared with the Refuse Fund), adding a Sr. Civil Engineer (shared
with the General Fund), and an Associate Engineer. Additionally, the 2007-08 Budget
includes:
10% increase in the Sewer Users’ Charge
$1,650,000 for sewer repair and pump station improvement projects
BACKGROUND
Prior to 2002-03, sewer wastewater fees had not been increased in more than ten years.
However, personnel and operational costs, waste disposal fees, and costs to comply with
state and federal mandates continued to increase. As a result, the Sewer Fund was
Page 44 of 108Comprehensive Financial Plan Update – Sewer Fund
operating at a deficit in the early 2000’s. To address this issue, a rate study was done
prior to the 2002-03 budget and wastewater rates were increased 10%. There have been
rate increases in each subsequent fiscal year, including 2007-08.
ECONOMIC OVERVIEW
Sewer charges from the City of Los Angeles for use of the Hyperion Treatment Plant
decreased by approximately 20% in 2007-08 from the prior year. Previously the City has
seen large increases, and these are expected to begin again in fiscal 2008-09 and
continue for the next few fiscal years. Additionally, the City must comply with new Waste
Discharge Requirements established by the State Water Resources Control Board.
Currently, the Sewer Fund has a healthy reserve
balance. No rate increase is anticipated for the
next two fiscal years (FY 08-09 and 09-10);
however, in order to avoid depleting the Sewer
Fund’s reserve balance, additional fee increases
of 4% per year will be necessary in future fiscal
years.
Sewer Fund Wastewater Rates
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
PROJECTIONS AND ANALYSIS OF
EXPENDITURES
OVERVIEW
The Sewer Fund maintains an extremely healthy fund balance due to Wastewater Facility
Bonds that were issued in 1992. These funds were used to fund the City’s share of
improvements to the Hyperion Wastewater treatment plant and to fund a local sewer
replacement program.
DISCUSSION OF REVENUE PROJECTIONS
Revenue projections for the Sewer Fund are held at a steady 4% rate of growth with the
exception of the next two years wherein revenue growth will be flat This places a steady
increase in fees on users per year rather than hitting them with larger increases every
few years. This increase is anticipated to be enough to cover ongoing operating and
maintenance increases as well as ongoing sewer capital projects.
The current fund balance, of which the majority is from the Wastewater Facility Bonds,
has been used to cover capital costs relating to sewer projects. If the anticipated projects
are completed, this funding will be exhausted in 2013-14 The main jump in cost
indicated on the worksheet is the possible application cost (estimated at $25 million and
spread over several years) and other costs to join the LA County Sanitation District. In
exploring this option, the City is looking at the possibility of future savings by removing
itself from the Amalgamated Cities Agreement with Los Angeles. Membership in the LA
County Sanitation District would also provide the City with representation that it currently
2 Page 45 of 108Comprehensive Financial Plan Update – Sewer Fund
lacks under the Amalgamated Cities agreement. This idea is still in the conception
phase. Staff is currently studying this option and more specific cost information will be
available in the future.
DISCUSSION OF EXPENDITURE PROJECTIONS
Personnel costs are estimated to increase 4.0% per year, with medical insurance
premiums to increase at a higher rate of 12.5% in fiscal 2007-08, with slight percentage
adjustments downward in subsequent years. General operating and maintenance costs
are anticipated to grow 3.0%. As mentioned previously, charges for the City’s portion of
the Hyperion Wastewater Treatment Plant are increased each year according to the
operating and capital improvement needs identified by the City of Los Angeles. While it
is anticipated that these increases will continue, it is difficult to determine by how much as
the increases have not been consistent from year to year and longer term projections
provided by the City of Los Angeles have not been reliable.
Locally, sewer Capital projects are planned and budgeted for each fiscal year at a normal
level of between $1.5 and $2 million per year. Additional annual funding will be required
if the City elects to consolidate sewer pump stations, an issue which is currently under
study, or, as mentioned earlier, if it elects to seek connection to the Los Angeles County
Sanitation District system. While there are unexpected sewer projects that occur, most
are planned in concurrence with street work occurring in the City. All feasible options are
taken into consideration to reduce disruption to residents while work is occurring.
The Sewer Fund currently reimburses the General Fund for administrative charges,
which increase between 3% - 4% per year primarily due to personnel cost increases.
The administrative charges, or indirect costs, are determined through the Cost Allocation
Plan prepared each year. The Cost Allocation Plan allocates costs of services and
programs to using Departments and Enterprise Funds based on the level of services
received. Some of these services include payroll processing, information technology,
financial, and communications services.
3 Page 46 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 47 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
SEWER FUND (204) - Preliminary
Beginning Balance 24,291,000 19,709,000 20,521,000 18,596,000 16,421,000 13,823,000
Fiscal Year Net Change
Total Recurring Revenue 9,122,000 10,303,000 9,756,000 10,141,000 10,540,000 10,956,000
Total One-Time Revenue 000 000
Total Revenue Projection 9,122,000 10,303,000 9,756,000 10,141,000 10,540,000 10,956,000
Total Recurring Expenditures 7,300,000 7,866,000 8,592,000 8,918,000 9,400,000 9,532,000
Total One-Time Expenditures 6,404,000 1,625,000 3,089,000 3,398,000 3,738,000 3,738,000
Total Expenditures Projection 13,704,000 9,491,000 11,681,000 12,316,000 13,138,000 13,270,000
Total Sewer FY Operating
Surplus/Deficit 1,822,000 2,437,000 1,164,000 1,223,000 1,140,000 1,424,000
Sewer Fund - Preliminary Ending
Balance (Operating) 19,709,000 20,521,000 18,596,000 16,421,000 13,823,000 11,509,000
Reserve Percentage (Recurring)
269.99% 260.88% 216.43% 184.13% 147.05% 120.74%
Page 48 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 49 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Equipment Replacement Fund
INTRODUCTION
The Equipment Replacement Fund (ERF) was established as a mechanism to ensure
adequate funding for the replacement of the City’s fleet of vehicles. The fund is
overseen by the Equipment Maintenance and Fleet Services Division (EMFS) and the
Budget & Finance Office.
FISCAL YEAR 2007-08 HIGHLIGHTS
The ERF has continued to maintain a healthy fund balance for several years; therefore,
in an effort to reduce costs for operating departments, funding for the ERF fund was
slightly reduced for 2007-08. Amortization charges to the effected General Fund
operating departments were reduced from 100% to 75%. The ERF fund charges will be
reviewed annually to ensure that the fund remains healthy.
In 2007-08, there are a number of vehicles that are scheduled for replacement
including:
12 Police Department vehicles (includes 6 black and whites)
1 Heavy Duty Dump Truck
6 Refuse Side Loader Trucks
BACKGROUND
The Equipment Maintenance and Fleet Services Division of the Transportation
Department retains ownership, and has primary responsibility (“cradle to grave”), of all
City equipment and vehicle assets. They also assist in overseeing the Equipment
Replacement Fund (ERF) working closely together with the Budget & Finance Office.
The Division works in conjunction with Purchasing when removing vehicles and
equipment from permanent service in the disposal process. Usual methods for disposal
are through auctions whereby the City can better use its resources in allowing an
auction company to have the responsibility of shipping and selling the City’s old vehicles
and equipment.
The City obtains funds for the future replacement of vehicles and equipment through
periodic rental rate charges (amortization) to the using departments and/or divisions
Page 50 of 108Comprehensive Financial Plan Update – Equipment Replacement Fund
over the expected life cycle of each unit. The City Treasurer invests the funds and
credits interest or dividend earnings into the fund. The City Treasurer also places the
residual (disposal) value of the assets back into the fund after the sale is finalized.
The ERF is self-supporting and is the
main vehicle for budgeting and
providing adequate funding for all
vehicles and equipment for the City.
The Equipment Maintenance Division
establishes useful life (life cycles) for
all types of vehicles and equipment
that are incorporated into the technical
amortization schedule managed by
staff in the Budget & Finance Office.
This amortization schedule guides
departments in their annual cost for purchase-ownership and replacement costs for
vehicles and equipment at the termination of the life cycle. This also becomes the fiscal
budget for all City vehicle assets, except for vehicles in the Transportation Department
(i.e. buses).
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Equip Replacement Fund Revenues and Expenditures
Revenues Expenditures
User departments justify and budget for the initial procurement of all capital assets.
When the City receives new equipment, the Equipment Maintenance Division and the
Budget & Finance Office add the vehicle and/or equipment into the main asset inventory
systems (i.e. fleet management and accounting systems), establish an estimated useful
life, calculate the future replacement costs, which include adjustments for CPI and
inflation, then establish an amortization schedule for the new piece of equipment.
The Equipment Maintenance Division will communicate on an annual basis with all City
Departments those vehicles and equipment that are eligible for replacement. This is
based on the termination of life cycles, which then enables those vehicles and
equipment to become replacement candidates. Life cycle analysis is the benchmark for
replacing equipment. Each year during budget preparation, the Equipment
Maintenance Division evaluates the vehicles and equipment that are eligible, or
requested to be replaced. During this period, departments are required to submit their
requests to replace or change their vehicles/equipment. Once the technical evaluations
have been completed, the Division then assembles a recommendation for replacement
including any new estimated purchase costs.
Because a particular piece of equipment is eligible for replacement (based on its useful
life and amortization cycles), does not automatically guarantee the replacement. Many
other factors go into the evaluation process to make certain the equipment is no longer
feasible to retain, or is otherwise unusable in its originally designed capacity relative to
the division’s mission. Age, mileage, repair history, current condition, forecasted repair
costs, depreciation and market value are included in the evaluation process. After the
vehicle evaluations have been completed, the Equipment Maintenance Division meets
and discusses the eligible equipment with the affected departments to:
2 Page 51 of 108Comprehensive Financial Plan Update – Equipment Replacement Fund
Review the list of equipment candidates
Decide further whether to replace or retain the recommended vehicles and
equipment.
Aid the departments with a budget forecast
Discuss necessary operational equipment needs
The Transportation Department, through the Equipment Maintenance Division, has
established a City Council ERF Sub-Committee to inform the City Council of the ERF
process and those equipment and vehicles eligible for replacement. A meeting is held
each year during the budget preparation process with our ERF Sub-Committee and all
departments that have vehicles for replacement to review the list of candidates,
evaluate the recommendations, discuss any issues about the process or equipment,
and approve the recommendations.
ECONOMIC OVERVIEW
In fiscal 2005-06, $1 million was “loaned” from the Equipment Replacement Fund to the
Self-Insurance Fund to help cover a shortfall and assist in establishing a fund balance in
this Fund. Once the Self-Insurance Fund is able to maintain a stable fund balance, this
funding will be repaid to the Equipment Replacement Fund.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
The Equipment Replacement Fund
has continued to maintain a healthy
fund balance for several years. This is
mainly attributable to close oversight
by the Equipment Maintenance
Division and the Budget & Finance
Division.
The strategy already in place for this
Fund will continue to be administered. The Five (5) Year Forecast shows a continued
healthy operation and is not recommended to be changed. |10 10|2,000
4,000
6,000
8,000
10,000
12,000
(000's)
2003 2004 2005 2006 2007
Equipment Replacement Fund Cash Balance
DISCUSSION OF REVENUE PROJECTIONS
The revenue projections for this fund are increased using a 3.5% inflation rate growth
factor for forecasting purposes. Once the actual replacement cost of a vehicle is
determined, this amount is entered into the spreadsheet. Until this time, an estimated
budgeted amount is used for calculation purposes. Yearly contribution amounts are
calculated based on this estimated future year replacement cost. Often vehicle
replacement costs are less than the budgeted amount, thus enabling the fund to cover
3 Page 52 of 108Comprehensive Financial Plan Update – Equipment Replacement Fund
unanticipated or emergency replacements when authorized. This was the case with the
early replacement purchase of three (3) Fire Engines, which were recently delivered to
the City and are currently in service.
DISCUSSION OF EXPENDITURE PROJECTIONS
Each vehicle is entered into the amortization spreadsheet with the actual cost of the
vehicle and estimated useful life. A formula is then calculated that gives the estimated
replacement cost based in part on a 3.5% inflation growth rate per year. Once a vehicle
has reached its useful life and is not recommended for replacement, only the 3.5%
inflation growth rate on the vehicle is charged to the user Division.
The amounts currently showing on the Five (5) Year Forecast for Expenditures are
based on anticipated replacements in upcoming fiscal years. As can be seen from the
main worksheet for this fund, there is ample funding to cover purchases in fiscal 2007-
08 and subsequent fiscal years.
4 Page 53 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
EQUIPMENT REPLACEMENT FUND
(307) - Preliminary Beginning Balance 10,654,000 9,552,000 11,335,000 9,936,000 10,515,000 11,592,000
Fiscal Year Net Change
Total Recurring Revenue 2,043,000 2,044,000 2,103,000 2,165,000 2,229,000 2,295,000
Total One-Time Revenue 000 000
Total Revenue Projection 2,043,000 2,044,000 2,103,000 2,165,000 2,229,000 2,295,000
Total Recurring Expenditures 3,145,000 261,000 3,502,000 1,586,000 1,152,000 1,278,000
Total One-Time Expenditures 000 000
Total Expenditures Projection 3,145,000 261,000 3,502,000 1,586,000 1,152,000 1,278,000
Total ERF FY Operating
Surplus/Deficit (1,102,000) 1,783,000 (1,399,000) 579,000 1,077,000 1,017,000
ERF Fund - Preliminary Ending
Balance (Operating) 9,552,000 11,335,000 9,936,000 10,515,000 11,592,000 12,609,000
Reserve Percentage (Recurring)
303.72% 4342.91% 283.72% 662.99% 1006.25% 986.62%
Page 54 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 55 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for
Equipment Maintenance and Fleet Services Fund
INTRODUCTION
The Equipment Maintenance and Fleet Services Division is an Internal Service Fund
that was created to provide the City with safe, efficient, and cost-effective equipment
and vehicle repair and replacement services. The Fleet Services Division, along with
the Budget & Finance Office, is responsible for the administration and operation of the
Equipment Replacement Fund.
|10 10|1,000
2,000
3,000
4,000
5,000
6,000
7,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Equip Maint Fund Revenues and Expenditures
Revenues Expenditures
The Equipment Maintenance and
Fleet Services Division is a full-
service operation that provides
maintenance, repair, welding and
asset replacement services for
the City. The primary objective of
the Equipment Maintenance
Division is to provide fleet
maintenance services that
maximize equipment availability
and reliability at the lowest
possible cost to all users. As an
internal service fund, all personnel and operating costs for the division are allocated to
user departments based on their actual use of services.
FISCAL YEAR 2007-08 HIGHLIGHTS
The Adopted 2007-08 Budget includes funding to continue to support the Division’s
extremely high level of service. The Equipment Maintenance and Fleet Services
division’s work program in 2007-08 includes:
Continue to be recognized as one of North America’s Top 100 Fleets (currently
Culver City is number 7)
Implement a new Employee Recognition Program in the Division
Install, maintain, and monitor the new Automatic Vehicle Locator (AVL) system
Develop a Business Plan to be used, in part, for the fleet certification program
Page 56 of 108Comprehensive Financial Plan Update – Equipment Maintenance and Fleet Services Fund
BACKGROUND
The Equipment Maintenance and Fleet Services Division maintains a nationally
recognized fleet that is a leader in environmental friendliness. All of the Culver CityBus’
vehicles (transit buses), and many of the large refuse vehicles, are powered by clean
burning CNG, which is much more environmentally responsible than traditional diesel
power. However, they are also more complex and costly to maintain as they require
parts that are not as readily available at this time and a workforce with an enhanced set
of skills. The purchase of CNG vehicles has caused the costs to the Fund to increase
dramatically over the past few years.
The three major cost centers that drive costs in the Equipment Maintenance Division
are personnel costs, petroleum costs (including natural gas and unleaded and diesel
fuel), and repairs & maintenance on vehicles and equipment.
|10 10|500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Equipment Maintenance Fund Major Cost Centers
Personnel Svcs Petroleum Products Repairs and Maintenance
Over the past four years,
expenditures in the equipment
maintenance fund have increased
an average of almost 11% per year.
This is due mainly to increases in
petroleum prices and personnel
costs, which have increased an
average of 18% and 11% per year,
respectively, over the last four
years. Increases in personnel
costs have included adjustments in
salaries for certain positions to bring
them more in line with the market, and additional technical staff.
The following section provides a brief discussion of economic overview, and the
projected revenues and expenditures for the Equipment Maintenance Fund.
ECONOMIC OVERVIEW
The biggest challenge facing the Equipment Maintenance Fund over the next few years
is dealing with increased costs of raw materials (i.e. steel) and energy (i.e. fuel). Oil
prices continue to increase, recently hitting a high of $100 per barrel for crude oil. Since
oil is a finite resource, the supply will continue to dwindle, which will continue to drive up
prices over the long run.
As alternative energy vehicles (including CNG) become more available, economies of
scale dictate that costs to operate and maintain those vehicles will decrease. With
much of the Culver City fleet being converted to, or replaced by, CNG powered
vehicles, it is hoped that a drop in CNG costs will offset increases in oil prices.
However, until CNG vehicles become more accessible and widespread, petroleum
costs in this fund are expected to continue to increase.
2 Page 57 of 108Comprehensive Financial Plan Update – Equipment Maintenance and Fleet Services Fund
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
The basic premise of an Internal Service Fund is to charge out for services rendered to
user departments to recoup these costs. The ideal outcome is to have revenues and
expenditures offset each other at the end of a fiscal year. Hourly rates are calculated
based on current overhead (personnel, utilities, workers compensation rates, fuel, etc.),
and charged to Divisions based on work performed.
Currently, the Division is working on a Business Plan to assist them in determining what
needs they require in order to continue to provide a high-level of service to their users,
and what revenue increases will be necessary to meet these needs. This information
will be presented at a later date. As this report is updated, new information from the
Business Plan will be incorporated.
DISCUSSION OF REVENUE PROJECTIONS
Recurring revenue is based directly on anticipated expenditures for a fiscal year. Each
year rates are reviewed to see if they maintain an acceptable level of coverage over
expenditures and are adjusted accordingly. In many cases, charge-outs to
Departments for services do not cover all expenses of the Division. This has
contributed to the current deficit in this Fund. The Charge for Services (Garage
Charges) will be evaluated for the coming year to close the deficit gap by fiscal 2010-11.
Currently, if Charges for Services can be increased by approximately 7% for the next
two fiscal years, this should assist in closing the gap, all things held equal.
DISCUSSION OF EXPENDITURE PROJECTIONS
Personnel costs are estimated to grow at a 4.0% rate, with medical insurance premiums
estimated to grow at approximately 12.5% in fiscal 2008-09, and then slightly less in
subsequent years. Ongoing operating and maintenance costs are anticipated to
increase at an estimated 4.0% overall (depending largely on petroleum costs).
Included in the operating and maintenance costs are fuel charges, which may grow at a
faster rate.
3 Page 58 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 59 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
EQUIPMENT MAINT. FUND (308) -
Preliminary Beginning Balance (706,000) (609,000) (452,000) (188,000) 148,000 565,000
Fiscal Year Net Change
Total Recurring Revenue 6,967,000 7,483,000 7,923,000 8,345,000 8,791,000 9,182,000
Total One-Time Revenue 000 000
Total Revenue Projection 6,967,000 7,483,000 7,923,000 8,345,000 8,791,000 9,182,000
Total Recurring Expenditures 6,870,000 7,326,000 7,659,000 8,009,000 8,374,000 8,751,000
Total One-Time Expenditures 000 000
Total Expenditures Projection 6,870,000 7,326,000 7,659,000 8,009,000 8,374,000 8,751,000
Total Equip. Maint. FY Operating
Surplus/Deficit 97,000 157,000 264,000 336,000 417,000 431,000
Equip. Maint. Fund - Preliminary
Ending Balance (Operating) (609,000) (452,000) (188,000) 148,000 565,000 996,000
Reserve Percentage (Recurring)
-8.86% -6.17% -2.45% 1.85% 6.75% 11.38%
Page 60 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 61 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Self Insurance Fund
INTRODUCTION
The Self Insurance Fund is an internal service fund that was established to pay
administration costs for the risk management program; pay salary continuance costs for
employees injured at work; pay workers’ compensation and liability claims costs; and
secure excess insurance policies to protect the City’s assets. As an internal service
fund, all costs for the Self Insurance Fund are allocated to all operating departments
using a formula that equitably distributes costs based on each department’s actual use
(i.e. experience rating).
The City is self-insured for general liability and workers’ compensation and has been a
member of the Independent Cities Risk Management Authority (ICRMA), a Joint Powers
Authority risk sharing pool, for more than 20 years. The ICRMA provides a number of
training classes throughout the year and services the City’s three main insurance
programs; excess General Liability, excess Workers’ Compensation, and All-Risk
Property.
FISCAL YEAR 2007-08 HIGHLIGHTS
For Fiscal Year 2007-08, the Risk Management division refined the allocation formula to
further improve the equity of the Self Insurance fund charges. The Adopted 2007-08
Self Insurance Fund operating budget decreased by 1% from the previous year due to a
projected reduction in costs. However, a transfer of $3.6 million from the fund reserve is
needed to cover costs associated with the Cranks/Tellefson hill slide litigation. Budget
highlights for 2007-08 include:
Reduce the Risk Manager position
Reduce Salary Continuance budget by 34% to reflect a decrease in employee
lost time
Transfer of $3.6 million to CIP to repair the Cranks/Tellefson hillside
No overall increase in insurance premiums
BACKGROUND
The two largest cost centers within the Self Insurance Fund are workers’ comp related
expenses and insurance premium costs. Over the past five years, both the workers’
comp and insurance industries have experience significant increases. Insurance
premiums have been on the rise since September 11, 2001. Subsequent natural
Page 62 of 108Comprehensive Financial Plan Update – Self Insurance Fund
disasters, such as hurricanes Katrina and Wilma, have caused insurance companies to
re-evaluate their risks in other natural disaster prone areas, especially Southern
California. Prior to September 11
th
, the City’s insurance premiums were approximately
$300,000 annually. Today, the City’s cost for insurance premiums, excluding medical
premiums, exceeds $1.3 million. This has placed added pressures on City resources.
Additionally, workers’ compensation costs experienced large increases over the past
five years. With double digit increases in medical costs and a system that was
considered by many to be broken, the rapid increase in costs were not unique to Culver
City and it caused a state-wide evaluation of the workers’ compensation system.
Lawmakers recognized that the system needed to be “fixed” and passed a large scale
reform package in April 2004 (SB 899). SB899 has helped to reduce costs and stabilize
the workers’ compensation system somewhat; however, the costs for Culver City
continue to be in the millions of dollars.
There were a few years when
the City was facing a tight
timeframe to balance its
General Fund budget, and the
allocation percentages for the
worker’s compensation charge
and/or liability reserve charge to
all departments/funds were
reduced based on the projected
sufficient reserve cash balance
in the SIF. Historically, those
charges were calculated based
on the salary of the positions;
consequently, if there were
vacancies, the charges were not
fully collected into the SIF. In addition to these two factors, staff was exploring another
financing mechanism for this fund; however, the option was not viable. As a result, the
cash reserves dropped significantly. In 2004-05, the cash reserve was just over $1
million.
In order to keep the Self Insurance Fund solvent, charges to departments were
increased approximately $2.7 million in 2005-06 (60% increase) and $1 million was
transferred into the Self Insurance Fund from the Equipment Replacement Fund.
In fiscal 2006-07, staff implemented a new formula that allocated expenses to
departments based entirely on actual experience over a five-year period rather than
payroll. For fiscal 2007-08 and 2008-09, staff has made further revisions to the
allocation formula to ensure an equitable distribution of costs (more detail provided in
the “Overview” section below).
|10 10|1,000
2,000
3,000
4,000
5,000
6,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Self Insurance Fund Major Cost Centers
Administration Salary Continuance Insurance Premiums Claims Expense
2 Page 63 of 108Comprehensive Financial Plan Update – Self Insurance Fund
The City will continue to implement best management practices to reduce insurance
costs and the frequency and cost of workers’ compensation claims; however, the Self
Insurance program is moving in the right direction. Due to increased claims
management and with the help of legislative improvements to the system, the City has
already experienced a decrease in workers’ compensation related expenses. As a
result, the program has come in under budget for fiscal years 2005-06 and 2006-07 and
has increased the reserve cash balance to approximately $5 million.
ECONOMIC OVERVIEW
As previously mentioned, many of the Self Insurance Fund’s costs are driven by factors
outside of the City’s control, including increased medical costs and the state of the
insurance industry. For example, the 2006-07 policy year saw a dramatic increase in All
Risk Property insurance. The earthquake insurance market collapsed as many
insurance carriers dropped out of the market and stopped offering earthquake
insurance. This was driven by three main factors: huge losses experienced by property
insurance companies from hurricanes Katrina and Wilma, the introduction of new
modeling software to estimate loss risks from natural disasters, and the 100 year
anniversary of the San Francisco earthquake. With many providers leaving the
earthquake market, the remaining few insurers had less price competition and
demanded higher premiums and offered less coverage.
In the workers’ compensation arena, there are two major components driving costs;
medical cost inflation and legal challenges to the new legislation. Medical costs are
expected to continue to increase as the baby boomer generation ages and require
increased medical services. This will continue to put pressure on medical costs and
consequently the costs to provide medical care to injured workers.
There have also been many legal challenges and ballot initiatives to overturn many cost
containing measures included in SB 899. For the most part, these challenges have
been relatively unsuccessful; however, a changing political environment may jeopardize
the improvements to the system achieved by SB 899.
BACKGROUND
The graph on the right illustrates the dramatic
increase in Self Insurance fund costs in the
early 2000’s, hitting a high mark in 2002-03.
Costs have since decreased; however, they
are still above what they were prior to 2002-03.
As previously discussed, the main drivers for
the increased costs are industry wide
increases in both insurance premiums and
workers’ compensation costs. The major cost
centers for the Self Insurance fund are
illustrated below.
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
Thousands
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Total Self Insurance Fund Expenditures
3 Page 64 of 108Comprehensive Financial Plan Update – Self Insurance Fund
During this five year period, the Self Insurance Fund’s cash reserve was used to fill the
gap between revenues and expenditures. To minimize the impact of these increases,
operating departments were not charged the full cost of the Self Insurance Fund. There
was already a significant strain on resources that led to staff reductions in 2003-04. If
the cash reserve had not been used to subsidize Self Insurance Fund’s operations,
there may have been a need to reduce staff even further. Now that the City’s financial
situation has somewhat stabilized, the City is focused on rebuilding the Self Insurance
Fund’s cash reserve to adequate levels by equitably charging all costs to operating
departments.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
Beginning in fiscal year 2006-07, staff implemented a formula to allocate all Self
Insurance Fund expenses to departments based on an experience rating rather than
payroll. In order to establish a relatively stable SIF charge and smooth out peaks and
valleys in claims and insurance costs for each department, the allocation formula is
based on a five year average of each department’s actual claims costs.
For fiscal 2007-08 and 2008-09, staff has
made further revisions to the allocation
formula to ensure an equitable distribution
of costs. Self Insurance costs will be
divided into two categories: 1) fixed costs
and 2) experience based costs. Fixed
costs are the administration costs
(personnel and operating costs) and
insurance costs. The fixed costs are
allocated to each division based on their portion of the City’s total salary expense.
Experience based costs are workers’ compensation and general liability claims
expenses and salary continuance costs. Experience based costs are allocated to each
division based on a five-year average of their actual experience. This revision will make
the Self Insurance Fund charges much more equitable and consistent with the method
private insurance companies use to allocate premiums. |10 10|1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Self Insurance Fund Revenues and Expenditures
Revenues Expenditures
DISCUSSION OF EXPENDITURE PROJECTIONS
Expenditures are projected by calculating the five year average percentage change in
each of the expenditure categories listed below:
1. Risk Management Administration
2. Salary Continuance for Injured Workers
3. Insurance Premiums
4. Liability Claims Costs
5. Workers’ Compensation Claims Costs
4 Page 65 of 108Comprehensive Financial Plan Update – Self Insurance Fund
The average percentage change for each category is reviewed and adjusted based on
future operational needs and program expectations.
Risk Management Admin – The Risk Management Administration division comprises
of staff and operations and maintenance costs. The Risk Manager position was
eliminated in the fiscal 2007-08 budget, and the duties have been placed under one of
the Assistant City Managers. The division currently has three (3) full time staff,
including a Safety & Claims Coordinator, Safety Officer, and Claims Technician.
Additionally, a number of positions in the City Attorney’s office are partially funded in
this division due to their involvement in managing the General Liability program. Also,
40% of the Assistance City Manager overseeing Risk Manager will be funded by the
Self-Insurance Fund. It is assumed that the costs for this division will increase
consistent with MOU increases, approximately 4%.
Salary Continuance – When an employee is injured on duty (IOD) and must miss work
as a result, the City will pay that employee’s full salary up to one year for public safety
(per the Labor Code) and six months for general employees. During the period of time
the employee is off work due to an injury, their salary and benefits are paid from the Self
Insurance Fund rather than their respective department. This is to allow the department
the option to use salary savings to hire temporary help until the injured employee
returns. It is expected that, with increased claims management and preventative safety
programs, salary continuance costs should decrease slightly over the next few years
before leveling off and increasing consistent with MOU negotiated increases.
Insurance Premiums – Insurance premiums are widely variable from year to year. It is
projected that the increase in insurance premiums will be slightly more than inflation
(5% per year).
Liability Claims – It is almost impossible to accurately predict liability claims costs from
year to year. However, historically claims costs have remained relatively stable.
Therefore, liability claims costs are projected to be consistent with the projected inflation
rate (3.5%).
Workers’ Compensation Claims – Similar to Liability claims, it is extremely difficult to
accurately predict workers’ comp claims costs from year to year. Based on the recent
evaluation of the program, it is projected that costs may be reduced further over the
next few years before they stabilize. It is projected that workers’ compensation claims
will decrease approximately 2% per year for the next five years before leveling off and
increasing commensurate with projected inflation (3.5%).
5 Page 66 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 67 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
RISK MANAGEMENT FUND (309) -
Preliminary Beginning Balance 5,028,000 2,725,900 2,800,300 3,020,800 3,241,400 3,361,100
Fiscal Year Net Change
Total Recurring Revenue 7,070,000 7,220,000 7,726,000 8,105,000 8,500,000 8,914,000
Total One-Time Revenue 200,000 200,000 200,000 200,000 100,000 100,000
Total Revenue Projection 7,270,000 7,420,000 7,926,000 8,305,000 8,600,000 9,014,000
Total Recurring Expenditures 9,572,100 7,345,600 7,705,500 8,084,400 8,480,300 8,893,300
Total One-Time Expenditures 000 000
Total Expenditures Projection 9,572,100 7,345,600 7,705,500 8,084,400 8,480,300 8,893,300
Total Risk Mgmt FY Operating
Surplus/Deficit (2,302,100) 74,400 220,500 220,600 119,700 120,700
Risk Mgmt Fund - Preliminary Ending
Balance (Operating) 2,725,900 2,800,300 3,020,800 3,241,400 3,361,100 3,481,800
Reserve Percentage (Recurring)
28.48% 38.12% 39.20% 40.09% 39.63% 39.15%
Page 68 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 69 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for
Operating Grant Funds
INTRODUCTION
The City has a number of operating grants that allow the City to provide a level of
service that may not otherwise be feasible, including the Community Development
Block Grant (CDBG), Senior Nutrition Program, and the COPS program. Operating
grants are used to fund personnel and operations costs for specific activities allowed by
the grant.
It is the City’s policy to apply for grants that are directed toward achieving and
maximizing external financial resources while protecting the integrity of the City’s
operating budget and long-term financial condition. When contemplating a grant
application, the applying department must consider the fiscal impact and shall complete
a financial analysis to measure the cost and benefit of the grant activity. If the cost of
administering the proposed grant exceeds the grant amount or the matching
requirement causes excessive burden on the City’s financial resources, or the grant
funded project creates significant ongoing operating costs, the department should
choose not to apply.
It is the responsible department’s obligation to ensure that all requirements and
timelines set forth in the grant agreement are satisfied. The department is also
responsible for following the policies and procedures laid out in the City’s
“Administrative Procedures for Grant Submission and Management.”
Federal and State Grants are an important source of funds that the City can use to
leverage its own money and maximize the level of service provided to the community.
Many operating grants have strict procedures that must be followed or the City risks not
being able to collect the funds. Therefore, the City must be diligent in adhering to
requirements of the grant agreement to ensure the most effective and efficient use of
resources.
FISCAL YEAR 2007-08 HIGHLIGHTS
The Adopted 2007-08 Budget continues funding for CDBG, the Senior Nutrition
Program, Paratransit Services, Retired Seniors Volunteer Program, COPS, La Ballona
Bikeway, and Air Quality Programs.
Page 70 of 108Comprehensive Financial Plan Update – Operating Grant Funds
BACKGROUND
Grant fund opportunities are variable from year-to-year. Some operating grants are
appropriated on a multi-year basis, but there is no guarantee that additional funds will
be available once the grant expires.
Currently, the City has a number of programs that are funded in whole or in part by
operating grants. These programs include the Disability Services Specialist through the
Community Development Block Grant (CDBG), Senior Nutrition Program, Paratransit
Services, Retired Seniors Volunteer Program, and the COPS program. The grant funds
are used to fund personnel and operating costs associated with the grant activity.
CDBG funds are used for projects that meet the needs of the community in low-
moderate income areas. CDBG funds are used to off-set personnel costs for managing
the CDBG program as well as continued funding of the Disability Services Specialist
and implementation of new projects that are approved by the CDBG Advisory
Committee, which is a citizen participation committee. The Disability Services Specialist
is a member of the Senior & Social Services Division.
The Senior Nutrition Program is administered by the Senior and Social Services
Division and provides seniors who are sixty years and older with hot lunches on-site,
home delivered meals to Culver City residents, telephone reassurance, and nutritional
education. This program is intended to be 100% funded by the grant and donations.
The Paratransit Services program provides transportation to people who cannot use
normal public transportation services. This is accomplished through deployment of City
vans and contracts with cab companies licensed to operate in Culver City. This
program is also intended to be 100% grant funded and is administered by the Senior
and Social Services Division.
The Retired Seniors Volunteer Program is also administered by the Senior and Social
Services Division. The mission of the program is to meet the critical needs of the
community through volunteerism and to provide citizens age 55 and above with
meaningful service opportunities that utilize their experiences, knowledge, skills, and
wisdom. In order to meet these goals, the program matches seniors with volunteer
opportunities in Culver City and surrounding areas.
ECONOMIC OVERVIEW
Operating Grant funding is variable from year-to-year based on the Granting Authority’s
(usually the Federal or State government) annual appropriation. With an increased
amount of funds being appropriated for the war in Iraq, domestic funding for grants and
other federally funded programs may begin to shrink.
2 Page 71 of 108Comprehensive Financial Plan Update – Operating Grant Funds
This has been made apparent as the CDBG program was nearly eliminated entirely
from the Federal budget for Fiscal 2006-07. In response to public opposition, the CDBG
program was ultimately funded in the Federal budget; however, the funds were reduced
significantly from the prior year. It is expected that, in light of current world events,
many grant funds will be directed towards homeland security and defense type
activities. As a result, there may be additional grant opportunities for public safety
related activities in the future.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
Because of the many variables that come into play with grant funding, it is very difficult
to project any type of ongoing forecast or trend. Many of the operating grants the City
receives are for one-time items and purchases of which most are special equipment.
These one-time operating grants are listed on the Five (5) Year Forecast in fiscal 2007-
08 and in some cases for 2008-09, but do not show any funding in future years. Only
historical on-going operating grants are shown.
More often than not, operating grants are “reimbursable,” meaning the City must spend
(front) the money first and then submit the paperwork to be reimbursed by the granting
authority. This creates a lag between the time the expense goes out and the
reimbursement comes in. In a perfect situation the operating grant balance would be
zero, but because of the reimbursable status of most grants, a negative balance is
created until the funding is received from the granting authority.
For purposes of forecasting both ongoing operating grant revenues and expenditures,
the Senior Nutrition Program, Paratransit Services, Retired Senior Volunteer
Program (RSVP), Disability Services, La Ballona Creek Bikeway, and Air Quality
Programs are the only Divisions showing ongoing funding. Historically, these have had
dedicated grant funding sources; although, any grant funding can be discontinued or
reduced from one year to another.
For a few of the Divisions listed below, General Fund monies are used to supplement
the grant to cover the entire cost of the program. It has been a goal of the City that all
grant-funded programs be self-sufficient, but this goal is not feasible in all cases and will
likely not be met in the near future.
DISCUSSION OF REVENUE PROJECTIONS
The Senior Nutrition Division receives its funding mainly from the County of Los
Angeles. This funding is approved on a three to four year basis, and will be coming up
for renewal this year. There is no indication at this time that the City will receive a lower
3 Page 72 of 108Comprehensive Financial Plan Update – Operating Grant Funds
amount than it currently receives, and is lobbying to receive an increased amount due to
the number of meals served.
The Paratransit Services Division is mainly funded using Prop A Incentive funding,
County Paratransit Reimbursement, and Prop C funding. The County Paratransit
Reimbursement contract is up in 2008, and will be open to discussion with the County
Department of Public Works. There is no indication at this time that funding will be
reduced for this program. Funding for all except the Prop A Incentive funding was kept
at a 4% growth per year for forecasting purposes. The Prop A Incentive funding is
projected to grow by 2.1% per year. This may change in the future, but is not possible
to predict.
The Retired Senior Volunteer Program (RSVP) is only grant funded by approximately
one-third. The other portion is covered by the General Fund. The Corporation for
National and Community Service designates funding for senior volunteer programs, and
just renewed this funding for a three-year cycle.
The Disability Services Specialist is funded using Community Development Block
Grant (CDBG) monies. As was discussed earlier, this funding has been reduced the
last several years, and has the possibility of being eliminated in the future. Each year
the funding is reduced, the General Fund has picked up the difference. Currently, the
grant pays approximately 50% of the Specialist’s position in fiscal 2007-08. Actual
program expenditure including supplies and part-time personnel are supported by the
General Fund.
For the four Divisions just discussed, strategies are currently being developed to
address potential grant funding shortfalls and possible restructuring of the programs and
were not included in this document. It is highly likely that these strategies will be
introduced and presented during the upcoming budget process.
AB 2766 funding, which funds our Air Quality Programs Division, is expected to
continue to be received, and is projected to grow by approximately 0.5% per year. The
current per-year amount of funding is approximately $40,000 and is roughly based on
the City’s residential population (approximately $1 per resident [$1 x 40,000 =
$40,000]). Currently, there is no legislation that is expected to change this formula.
Funding for the La Ballona Creek Bikeway is received from the Transportation
Development Act Article 3 – Bicycle and Pedestrian Funds. This funding is granted to
municipalities on a per capita basis and varies slightly from year-to-year. This funding
helps cover some of the personnel expenses of our Public Works personnel who assist
in maintaining the Bikeway. For revenue projections, this funding source has been held
steady at the current funding amount. There is currently no formula or calculation to
determine the amount to be allocated from year-to-year.
All other grant revenues shown in fiscal 2007-08 have been identified as one-time
grants, and are not carried forward in projections.
4 Page 73 of 108Comprehensive Financial Plan Update – Operating Grant Funds
DISCUSSION OF EXPENDITURE PROJECTIONS
Expenditures for personnel costs are forecasted to grow 4% per year, and medical
insurance costs are forecasted to grow 12.5% in fiscal 2008-09, with slight reductions in
percentage increases in subsequent years. Operating and maintenance costs are
forecasted to grow by 3.5% per year. Ongoing personnel expenditures are found in the
Senior Nutrition Division, Paratransit Division, Retired Senior Volunteer Program
(RSVP), and Disability Services Division.
Each budget year, grant-funded Divisions must be reviewed to determine the amount of
funding available. Grant funding is aggressively sought, and staff constantly keeps
abreast of any changes in funding that may occur from year to year. They actively seek
to at least maintain the current levels of grant funding. Appropriations for expenditures
are made based on identified available funding for the upcoming budget year. If there is
a gap between available funding and expenditures, all avenues are explored to close
the gap before General Fund money is used.
Expenditures in the Air Quality Programs Division are currently projected at a steady
rate. Funding in this Division is used for the City’s Rideshare program through AQMD,
and to help fund the additional cost of alternative-fuel vehicles, which is the policy of the
City to purchase when feasible and available.
The La Ballona Creek Bikeway expenditures are set against the available revenue
funding. Each year the City is contacted regarding the amount of funding it will receive
per the Transportation Development Act Article 3 for this program and budgets
accordingly.
5 Page 74 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 75 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
GRANTS OPERATING FUND (414) -
Preliminary Beginning Balance (287,000) (273,600) (292,500) (297,800) (329,100) (389,400)
Fiscal Year Net Change
Total Recurring Revenue 1,140,000 1,125,000 1,006,000 1,020,000 1,035,000 1,049,000
Total One-Time Revenue 000 000
Total Revenue Projection 1,140,000 1,125,000 1,006,000 1,020,000 1,035,000 1,049,000
Total Recurring Expenditures 1,126,600 1,143,900 1,011,300 1,051,300 1,095,300 1,139,300
Total One-Time Expenditures 000 000
Total Expenditures Projection 1,126,600 1,143,900 1,011,300 1,051,300 1,095,300 1,139,300
Total Grants Op FY Operating
Surplus/Deficit 13,400 (18,900) (5,300) (31,300) (60,300) (90,300)
Grants Operating Fund - Preliminary
Ending Balance (Operating) (273,600) (292,500) (297,800) (329,100) (389,400) (479,700)
Reserve Percentage (Recurring)
-24.29% -25.57% -29.45% -31.30% -35.55% -42.10%
Page 76 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
CDBG-Operating (427) - Preliminary
Beginning Balance 5,000 4,000 0 (7,000) (17,000) (30,000)
Fiscal Year Net Change
Total Recurring Revenue 79,000 79,000 79,000 79,000 79,000 79,000
Total One-Time Revenue 0 0 0 0 0 0
Total Revenue Projection 79,000 79,000 79,000 79,000 79,000 79,000
Total Recurring Expenditures 80,000 83,000 86,000 89,000 92,000 97,000
Total One-Time Expenditures 0 0 0 0 0 0
Total Expenditures Projection 80,000 83,000 86,000 89,000 92,000 97,000
Total CDBG-Operating FY Operating
Surplus/Deficit (1,000) (4,000) (7,000) (10,000) (13,000) (18,000)
CDBG-Operating - Preliminary
Ending Balance (Operating) 4,000 0 (7,000) (17,000) (30,000) (48,000)
Reserve Percentage (Recurring)
5.00% 0.00% -8.14% -19.10% -32.61% -49.48%
Page 77 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Capital Projects Funds
INTRODUCTION
The Capital Projects Funds were established to address the City’s various capital and
infrastructure improvement needs that are above and beyond the annual operating
budget. Capital Improvement Projects (CIP) are critical as they represent an investment
in the betterment of the community and are the City’s main tool to address current
deferred maintenance costs and prevent the increase of future deferred maintenance
costs, including street paving, streetlight upgrades, and facility maintenance.
FISCAL YEAR 2007-08 HIGHLIGHTS
The Adopted 2007-08 CIP Budget includes funding for a number of projects that begin
to address some critical deferred maintenance issues.
Facility and Equipment Maintenance
• Building Repairs ($265,000)
• Replacement of the A/C System at Police Station ($250,000)
• Park Facilities Improvement for deferred maintenance ($100,000)
• Playground Equipment Repair ($15,000)
• Replace Fencing at various parks and update Park Irrigation System ($30,000)
Street, Streetlight and Sidewalk Maintenance
• Minor Pavement and Concrete Improvement Program ($50,000)
• Residential Paving Program ($160,000)
• Median Island Rehab ($25,000)
• Street Light Upgrade ($380,000)
• Curb, Gutter, Sidewalk Repair ($100,000)
Traffic Improvement
• Traffic Signal Replacement/Upgrade ($10,000)
• Neighborhood Traffic Management Plan ($60,000)
• Fox Hills Area Traffic Signal Synchronization ($800,000)
Other Maintenance Projects
• Technology and Network Infrastructure ($100,000)
• Stormwater Discharge Program/NPDES ($1,352,000)
• Sewer system upgrade projects ($1,650,000)
Page 78 of 108Comprehensive Financial Plan Update – Capital Projects Fund
Approximately $1.6 million in capital funding has also been approved for a public safety
CAD/RMS/MDT system to increase information flow, reporting capabilities and
operational efficiency for the Police Department; and an additional $1.5 million was
approved for the construction of Fire Station #3, which is scheduled to be completed in
June 2008.
Additionally, a number of major projects have been completed, or are scheduled to be
completed, in fiscal year 2007-08. Some of the highlights include:
• Skateboard Park
• Dog Park Phase 2
• Police Department Firing Range
• Fire Station #3
• Sewer Improvement Projects
o Flaxton/Whitburn/Drakewood/Eveward
o Smiley/Blackwelder
o Cranks/Northgate
o Commonwealth Alley
o Carson Street
o Sewer Manhole Rehabilitation
BACKGROUND
The City has established a five-year Capital Improvement Plan which is reviewed and
updated annually. The Capital Improvement Plan is a comprehensive document that
identifies the City’s capital improvement needs, potential funding sources for each need,
a five-year projection of the project cost, and any ongoing operating and maintenance
costs associated with the project.
The plan is designed to provide basic public improvements, facilities, and services that
meet community needs and improve the quality of life for City residents. There are a
number of factors involved in the prioritization and selection of projects to be funded,
including:
Availability of funding;
Utilization of existing facilities;
Ability to meet projected, as well as existing, levels of need;
Elimination of conditions dangerous to the health, safety and welfare of the public;
Compliance with legal requirements;
Reduction of maintenance and operations costs;
Participation in Federal, State, Regional or Special District plans and programs;
Consistency with goals and policies of the City’s General Plan;
Promotion of environmental quality.
During the annual budget process, funding for projects identified in the Capital
Improvement Plan is appropriated based on the City’s priority.
2
Page 79 of 108Comprehensive Financial Plan Update – Capital Projects Fund
ECONOMIC OVERVIEW
BACKGROUND
Culver City has parks, streets, sidewalks, buildings, computers, etc., that must be
maintained on an ongoing basis. Over the last fifteen years or so, the City has been
unable to consistently generate sufficient funds to keep up with the annual maintenance
of its infrastructure. As a result, that
maintenance must be deferred to
future years, which means that the
project will continue to deteriorate,
ultimately increasing the total
maintenance cost. In short, the
longer maintenance is put off, the
more it will end up costing the City in
the future.
With substantially increasing
operational costs, funding available
for Capital Projects has shrunk over
the last few years. The graph to the
right illustrates the variability in available funding from year-to-year. Without a
consistent and reliable funding stream, many critical maintenance projects will continue
to be deferred. |10 10|2,000
4,000
6,000
8,000
10,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Capital Improvement Annual Appropriations
Capital Grants
Capital Impro vements
Park Facilities Fund
Gas Tax
Co mm Dev Fund
Art in Public Places
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
Availability of funding for capital projects varies annually based on the financial
condition of the General Fund. Often times, the City relies on one-time revenues
received in previous fiscal years to fund capital projects. With no consistent funding
stream, it is difficult to project how much funding will be available from year to year. At
this time, only projects identified as high priority in the five-year Capital Improvement
Plan are included.
A facility assessment study has been conducted that identified the maintenance needs
of most City building facilities over the next twelve (12) years. The draft study was used
as a guide to assist in appropriating funding for the fiscal 2007-08 budget year. The
study is currently being updated, and is expected to be reviewed again in February
2008. Similarly, a park assessment study was conducted, and results from the draft
report were used to assist with funding needs during the budget process for parks.
Additionally, the City has identified a number of infrastructure maintenance needs and
has begun to quantify those needs by developing the following:
? Pavement Management System
? Building Infrastructure Master Plan
3
Page 80 of 108Comprehensive Financial Plan Update – Capital Projects Fund
? Computer Replacement Fund
? NPDES/TMDL – (A CIP project has been created for this program to act as a funding
source for mandated storm water cleanup issues, but the actual amount needed is still
unknown at this point.
DISCUSSION OF REVENUE PROJECTIONS
As mentioned above, one of the City’s greatest challenges has been to identify a steady
revenue stream for capital projects. There are a number of other options for funding
capital projects, including grant opportunities and issuing bonds. However, these
options do not result in a stable, ongoing, long term revenue stream for capital projects.
One of the policy challenges that will need to be addressed in the upcoming years is
how to establish a revenue stream that will support the large backlog of capital project
needs and ensure that, in the future, the City is able to consistently fund all necessary
capital projects in order to reduce the current identified maintenance and operating
costs.
CAPITAL GRANTS
It is the City’s policy to apply for grants that are directed toward achieving and
maximizing external financial resources while protecting the integrity of the City’s
operating budget and long-term financial condition. When contemplating a grant
application, the applying department must consider the fiscal impact and shall complete
a financial analysis to measure the cost and benefit of the grant activity. If the cost of
administering the proposed grant exceeds the grant amount or the matching
requirement causes excessive burden on the City’s financial resources, or the grant
funded project creates significant ongoing operating costs, the department should
choose not to apply.
Grant funds for capital projects are appropriated, in most cases, only after a signed
contract with the granting agency is received and a copy is forwarded to the Budget &
Finance Division. Once the money is appropriated, it is the responsible department’s
obligation to ensure that all requirements and timelines set forth in the grant agreement
are satisfied until the project is completed and all grant funds have been received. The
department is also responsible for following the policies and procedures laid out in the
City’s “Administrative Procedures for Grant Submission and Management.” The Budget
& Finance Division is currently working with the City Treasurer’s Office to monitor the
project activities and meet with the team quarterly for reimbursement tracking purposes.
Federal and State Grants are an important source of funds that the City can use to
leverage its own money and maximize the number of capital projects that can be funded
in any given year. However, many grants have strict procedures that must be followed
or the City risks not being able to collect funds once the project has been completed.
Therefore, the City must be diligent in adhering to requirements of the grant agreement
to ensure the most effective and efficient use of resources.
4
Page 81 of 108Comprehensive Financial Plan Update – Capital Projects Fund
The Community Development (New Development Impact) Fund receives its funding
from fees collected on new non-residential development in excess of 5,000 square feet.
These fees are used to finance street improvements, traffic controls and traffic
management projects. Currently there is a small amount of funding available in this
fund. It is difficult to forecast future funding since it depends on actual development.
Appropriations for expenditures are not budgeted above available revenue.
The Gas Tax Fund, also known as the Highway User’s Tax, is a dedicated funding
source that is generated from the $0.18 state tax per gallon of gasoline, diesel, and use
fuel. This amount was set by legislative action in the mid-1990’s, and has not changed
since. Regardless of the price of a gallon of fuel, this amount stays the same. The City
receives roughly about $750,000 per year in Gas Tax monies. While the City would like
to receive increased funding in this category, it would take State legislative action in
order to raise the tax per gallon amount.
The Improvement & Acquisition (I & A) Fund is funded mainly by one-time and
audited surplus monies in the General Fund. In the recent past, most of the funding has
been from one-time monies. Also, developer fees or other specific one-time general
CIP monies, such as monies from Playa Vista, have been used to fund specific projects
related directly or in part to projects affecting or in relation to the developer or grantor.
There is approximately $3.5 million appropriated for the development and building of the
new Fire Station #3 in the Fox Hills area. One million dollars is anticipated to be
received from the future sale of the three lots housing the existing Fire Station #3 on
Segrell Way, and the other $1 million is a “loan” from the General Fund approved by the
City Council. At the time the “loan” was approved, it was hoped that grant funding could
be found to pay it back. Consequently, this $3.5 million may require General Fund
funding.
DISCUSSION OF EXPENDITURE PROJECTIONS
The Pavement Management Plan calculates the current backlog for street paving at
approximately $18.0 million. This would bring the condition of the City’s streets up to an
acceptable level. Approximately $2.2 million is needed annually just to keep the
backlog at the current level ($18.0 million). Approximately $2.4 million is appropriated
(includes new appropriations plus carryover funds) for street and alley improvements
through fiscal 2008-09. Also, per a state ballot measure approved in November 2006, it
is also anticipated that the City will receive approximately $1.3 million in additional
funding for street purposes. This funding has not been included in the worksheets at
this time. As with all deferred maintenance, the further in the future a street is
repaired/repaved, the more it will cost.
In fiscal 2005-06, the City started the process of setting aside funds for pavement,
slurry seal, and computer/technology replacement. This was accomplished by
using one-time funds from new development activities in the General Fund. Currently,
there is no dedicated revenue stream for these activities; therefore, the City will need to
5
Page 82 of 108Comprehensive Financial Plan Update – Capital Projects Fund
rely on available one-time monies to continue funding these items. In order to obtain
funding other than one-time monies for capital projects, the City needs to be cognizant
of all factors associated with the financing. A statement under “Capital Improvement
Project Policies” in the recently updated and subsequently adopted financial policies
addresses this issue and states:
“The City must carefully seek and analyze the appropriate type of
financing instrument appropriate for financing capital projects. Several
options are available – general obligation debt, fee-supported debt, fund
reserves, etc. All debt financing mechanisms shall be carefully considered
and analyzed for fiscal benefit and cost effectiveness. Long-term
borrowing shall be restricted to projects too large to be financed from
current revenues (pay-as-you-go). Where possible, special assessment,
revenue or other self-supporting bonds shall be used in lieu of general
obligation bonds.”
One of the largest capital project expenses facing the City is related to State-mandated
cleanup of pollutants resulting from stormwater and urban runoff, specifically those that
enter Ballona Creek and empty into Santa Monica Bay. This cleanup effort is an
unfunded mandate by the State.
The City’s National Pollutant Discharge Elimination System (NPDES) program was
established to support the implementation of the Los Angeles County Municipal
Stormwater NPDES Permit, and to comply with federal and state environmental
(surface water quality) laws. This program covers all stormwater (and urban runoff)
pollution prevention and mitigation issues including the stormwater plan check reviews,
public outreach, commercial and industrial stormwater inspections, attending meetings,
providing staff training, responding to complaints, applying for and managing grants,
and managing the Transportation Yard and Transfer Station’s General Industrial
Stormwater NPDES Permits.
In-house staff was hired at the beginning of 2005 to manage the NPDES/Stormwater
Program. The stormwater program manager oversees all of the stormwater issues
within the City, including the public facilities, construction sites, businesses, and
residential areas. With the adoption of total maximum daily loads (TMDLs) (surface
water quality limits with strict quantitative limitations), all the municipalities in Los
Angeles County (and across the state) are facing a situation where they may incur
millions of dollars in financial obligations to satisfy the regulations over the coming
decade. Beginning in 2005-06, the City is setting aside funds in the Capital
Improvement Plan to address NPDES issues. Additionally, the City has been awarded
a $1.25 million Prop 50 grant from the State for design and construction of various best
management practices devices to reduce storm water pollution. More funds will need to
be set-aside in order to meet the growing costs of this mandate.
The Art Fund is a dedicated funding source, and among other things is for the design,
acquisition, commission, installation, improvement, maintenance and insurance of an art
6
Page 83 of 108Comprehensive Financial Plan Update – Capital Projects Fund
work; the sponsoring and/or support of performing arts; and for the acquisition and
improvement of real property for the purpose of displaying art work. The Art Fund
currently has a healthy reserve and receives its funding from developers who elect to
give the City 1% of their development/construction costs rather than install artwork
themselves. Depending on the scope of a project, this can amount to a large sum.
In the near future, anticipated expenditures are well within the level of available and
expected revenues. Each year this is evaluated to ensure that funding is available for
the proposed projects and administrative costs.
As mentioned previously in the revenue section, Gas Tax funding can only be used for
street and road related purposes. This includes street and traffic light projects.
Currently the City utilizes almost the full amount of funding received each year for
Capital Projects, and also transfers a portion to the General Fund to pay for street
related operating expenses. This funding has also been used as a matching source of
funding for grants. It is not anticipated the City will receive a larger amount of revenue
from this source, which would be dependent on a State legislative action.
Parks Facility Funding is received by the City from developments that do not include
“green space” as part of the development. This funding source has not been a large
source of revenue for the City in many years, and is used specifically on Park projects,
such as park rehabilitation and improvements. When available, this funding has also
been used as a matching source for grants awarded to the City. Currently, budgeted
and projected expenditures do not exceed the available revenue amount.
The Improvement and Acquisition (I & A) Fund funds projects that are general or
administrative in use. The available funding has been limited in previous years, and is
mainly received from audited surpluses and one-time monies from the General Fund.
The Parking Fund receives its funding from meter monies and filming permits. A
portion of this funding is transferred into the General Fund to cover parking and street
related costs as part of General Fund operation. This funding has also been used for
capital projects related to installation of parking meters.
7
Page 84 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 85 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
ARTS FUND (413) - Preliminary
Beginning Balance 938,000 318,000 230,000 120,000 110,000 82,000
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 317,000 112,000 112,000 112,000 112,000 112,000
Total Revenue Projection 317,000 112,000 112,000 112,000 112,000 112,000
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 566,000 200,000 222,000 122,000 140,000 140,000
Total Expenditures Projection 566,000 200,000 222,000 122,000 140,000 140,000
Total Arts Fund FY Operating
Surplus/Deficit (249,000) (88,000) (110,000) (10,000) (28,000) (28,000)
Arts Fund - Preliminary Ending
Balance (Operating) 689,000 230,000 120,000 110,000 82,000 54,000
Reserve Percentage (One-time)
121.73% 115.00% 54.05% 90.16% 58.57% 38.57%
Page 86 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
ASSET SEIZURES (416) - Preliminary
Beginning Balance 1,022,000 74,000 74,000 74,000 74,000 74,000
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 0 0 0 0 0 0
Total Revenue Projection 0 0 0 0 0 0
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 948,000 0 0 0 0 0
Total Expenditures Projection 948,000 0 0 0 0 0
Total Asset Seizures FY Operating
Surplus/Deficit (948,000) 0 0 0 0 0
Asset Seizures - Preliminary Ending
Balance (Operating) 74,000 74,000 74,000 74,000 74,000 74,000
Reserve Percentage (One-time)
7.81% 100.00% 100.00% 100.00% 100.00% 100.00%
Page 87 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
NEW DEVELOPMENT IMPACT (417) -
Preliminary Beginning Balance 79,000 25,000 28,000 31,000 34,000 37,000
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 3,000 3,000 3,000 3,000 3,000 3,000
Total Revenue Projection 3,000 3,000 3,000 3,000 3,000 3,000
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 57,000 0 0 0 0 0
Total Expenditures Projection 57,000 0 0 0 0 0
Total New Dev Imp FY Operating
Surplus/Deficit (54,000) 3,000 3,000 3,000 3,000 3,000
New Dev Imp - Preliminary Ending
Balance (Operating) 25,000 28,000 31,000 34,000 37,000 40,000
Reserve Percentage (One-time)
43.86% 100.00% 100.00% 100.00% 100.00% 100.00%
Page 88 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
GAS TAX (418) - Preliminary Beginning
Balance 1,070,000 126,000 158,000 158,000 158,000 158,000
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 753,000 753,000 753,000 753,000 753,000 753,000
Total Revenue Projection 753,000 753,000 753,000 753,000 753,000 753,000
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 1,697,000 721,000 753,000 753,000 753,000 753,000
Total Expenditures Projection 1,697,000 721,000 753,000 753,000 753,000 753,000
Total Gas Tax Fund FY Operating
Surplus/Deficit (944,000) 32,000 0 0 0 0
Gas Tax Fund - Preliminary Ending
Balance (Operating) 126,000 158,000 158,000 158,000 158,000 158,000
Reserve Percentage (One-time)
7.42% 21.91% 20.98% 20.98% 20.98% 20.98%
Page 89 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
Parks (419) - Preliminary Beginning
Balance 250,000 218,000 208,000 223,000 238,000 253,000
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 40,000 25,000 25,000 25,000 25,000 25,000
Total Revenue Projection 40,000 25,000 25,000 25,000 25,000 25,000
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 72,000 35,000 10,000 10,000 10,000 10,000
Total Expenditures Projection 72,000 35,000 10,000 10,000 10,000 10,000
Total Parks Fund FY Operating
Surplus/Deficit (32,000) (10,000) 15,000 15,000 15,000 15,000
Parks Fund - Preliminary Ending
Balance (Operating) 218,000 208,000 223,000 238,000 253,000 268,000
Reserve Percentage (One-time)
302.78% 594.29% 2230.00% 2380.00% 2530.00% 2680.00%
Page 90 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
Improvements & Acquisition (420) -
Preliminary Beginning Balance 1,372,000 1,372,000 1,372,000 732,000 92,000 (548,000)
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 6,926,000 1,325,000 360,000 360,000 360,000 360,000
Total Revenue Projection 6,926,000 1,325,000 360,000 360,000 360,000 360,000
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 6,926,000 1,325,000 1,000,000 1,000,000 1,000,000 1,000,000
Total Expenditures Projection 6,926,000 1,325,000 1,000,000 1,000,000 1,000,000 1,000,000
Total I & A Fund FY Operating
Surplus/Deficit 0 0 (640,000) (640,000) (640,000) (640,000)
I & A Fund - Preliminary Ending
Balance (Operating) 1,372,000 1,372,000 732,000 92,000 (548,000) (1,188,000)
Reserve Percentage (One-time)
19.81% 103.55% 73.20% 9.20% -54.80% -118.80%
Page 91 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
Parking Improvement (421) -
Preliminary Beginning Balance 1,121,000 1,215,000 1,343,000 1,500,000 1,687,000 1,905,000
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 944,000 978,000 1,007,000 1,037,000 1,068,000 1,100,000
Total Revenue Projection 944,000 978,000 1,007,000 1,037,000 1,068,000 1,100,000
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 850,000 850,000 850,000 850,000 850,000 850,000
Total Expenditures Projection 850,000 850,000 850,000 850,000 850,000 850,000
Total Parking Fund FY Operating
Surplus/Deficit 94,000 128,000 157,000 187,000 218,000 250,000
Parking Fund - Preliminary Ending
Balance (Operating) 1,215,000 1,343,000 1,500,000 1,687,000 1,905,000 2,155,000
Reserve Percentage (One-time)
142.94% 158.00% 176.47% 198.47% 224.12% 253.53%
Page 92 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
Capital Grants (423) - Preliminary
Beginning Balance (370,000) (370,000) (370,000) (370,000) (370,000) (370,000)
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 1,930,000 11,000 0 0 0 0
Total Revenue Projection 1,930,000 11,000 0 0 0 0
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 1,930,000 11,000 0 0 0 0
Total Expenditures Projection 1,930,000 11,000 0 0 0 0
Total Capital Grants FY Operating
Surplus/Deficit 000 000
Capital Grants - Preliminary Ending
Balance (Operating) (370,000) (370,000) (370,000) (370,000) (370,000) (370,000)
Reserve Percentage (One-time)
-19.17% -3363.64% -100.00% -100.00% -100.00% -100.00%
Page 93 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
CDBG-Capital (428) - Preliminary
Beginning Balance (9,000) (9,000) (9,000) (9,000) (9,000) (9,000)
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 237,000 189,000 0 0 0 0
Total Revenue Projection 237,000 189,000 0 0 0 0
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 237,000 189,000 0 0 0 0
Total Expenditures Projection 237,000 189,000 0 0 0 0
Total CDBG-Capital FY Capital
Surplus/Deficit 000 000
CDBG-Capital - Preliminary Ending
Balance (Capital) (9,000) (9,000) (9,000) (9,000) (9,000) (9,000)
Reserve Percentage (One-time)
-3.80% -4.76% -100.00% -100.00% -100.00% -100.00%
Page 94 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 95 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Proposition A & C Funds
INTRODUCTION
|10 10|100
200
300
400
500
600
700
Thousands
2003-04
2004-05
2005-06
2006-07
Estimated Prop A & C Allocations
for Culver City
Prop A Prop C
Proposition A & C Funds are both voter
approved local sales taxes for
transportation-related activities. Proposition
A, approved by voters in 1980, is a one-half
of 1% tax on retail sales in Los Angeles
County. The collection of this tax is
administered by the County, which returns
25% of the collections to cities within the
County. The balance of Proposition A tax
funds are used for rail development (35%)
and discretionary purposes (40%). Almost
the entire discretionary portion is used to
fund bus service provided by Metro and 16
other municipal bus operators within the
County.
Proposition C sales tax, approved by voters in 1990, is an additional one-half of 1% tax
on retail sales in Los Angeles County. The balance of Prop C tax funds are allocated to
the construction and operation of the bus transit and rail system (40%), expansion of rail
and bus security (5%), construction of commuter rail transit centers, park and ride lots,
and freeway bus stops (10%), and other transit-related improvements to freeways and
state highways (25%).
Each year, more than $1 billion is generated in local transportation revenue.
FISCAL YEAR 2007-08 HIGHLIGHTS
The Adopted 2007-08 Budget includes Prop A funding in the amount of $669,442, which
represents a 5.9% increase from the prior year, and Prop C funding in the amount of
$542,911, which represents a 44% decrease from the prior year. The decrease in Prop
C funds is primarily the result of additional funds being received in 2006-07 for transit
projects.
Page 96 of 108Comprehensive Financial Plan Update – Prop A & C Funds
BACKGROUND
As a condition of voter approval, twenty-five percent of the Proposition A tax revenues
and twenty percent of the Proposition C tax revenues are earmarked for the Local
Return Programs to be used by cities and the County of Los Angeles in developing
and/or improving local public transit, paratransit and related transportation
infrastructure. Local Return funds are allocated and distributed monthly to jurisdictions
on a "per capita" basis by Metro. Most of these funds are expended on street
improvement projects and maintenance and improvement to the Transportation facility.
Additionally, Culver City is eligible to receive additional Prop A and C funds because it
operates its own bus line. Most of the additional money is used for Transportation
Department operations.
ECONOMIC OVERVIEW
Per voter approval, a portion of Prop A and C money is distributed to cities based on
population; therefore, both of those funding sources are relatively stable. Any attempt
to alter these funding sources would need voter approval. Given the current state of
transportation in California, especially Southern California, it seems unlikely that voters
would choose to reduce funding for transportation related projects in the near future.
However, since Prop A and C are both sales taxes, they are economically sensitive.
Although sales taxes are economically sensitive, the diversity of the Los Angeles
County economy makes Prop A and C taxes less subject to large annual swings in
collections. Some communities may experience a decrease in sales tax while others
experience an increase. Overall, the Los Angeles County economy is relatively robust,
which helps to create an environment for a relatively stable funding source in Prop A
and C sales tax receipts. A more in-depth economic outlook for sales tax is included in
the “Economic Overview” section of the General Fund’s Comprehensive Financial
Strategy.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
Since Prop A & C are sales taxes, those
funding sources are projected to be similar
to the City’s sales tax projections over the
next five years (i.e. approximately 4% per
year). The graph below shows the annual
Prop A & Prop C expenditures for the past
five years. Prop A & C funds may be
carried over if the entire amount received
is not expended in the same fiscal year.
As a result, there are some peaks and |10 10|200
400
600
800
1,000
1,200
1,400
Thousands
2001-02
2002-03
2003-04
2004-05
2005-06
Prop A & C Annual Expenditures
Prop A Prop C
2 Page 97 of 108Comprehensive Financial Plan Update – Prop A & C Funds
valleys in short term expenditures. However, over the long term, these peaks and
valleys average out.
The projections in the Comprehensive Financial Plan assume that all Prop A & C
monies received will be spent. Consequently, over the five year projection, revenues
are equal to expenditures. As previously mentioned, Prop A & C receipts are projected
to increase commensurate with the City’s sales tax receipts (approximately 4%).
Therefore, Prop A & C expenditures are projected to increase at a 4% rate as well.
3 Page 98 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 99 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
Prop A (415) - Preliminary Beginning
Balance 856,000 856,000 856,000 856,000 856,000 856,000
Fiscal Year Net Change
Total Recurring Revenue 669,000 692,000 720,000 749,000 779,000 810,000
Total One-Time Revenue 0 0 0 0 0 0
Total Revenue Projection 669,000 692,000 720,000 749,000 779,000 810,000
Total Recurring Expenditures 669,000 692,000 720,000 749,000 779,000 810,000
Total One-Time Expenditures 0 0 0 0 0 0
Total Expenditures Projection 669,000 692,000 720,000 749,000 779,000 810,000
Total Prop A FY Operating
Surplus/Deficit 000 000
Prop A - Preliminary Ending Balance
(Operating) 856,000 856,000 856,000 856,000 856,000 856,000
Reserve Percentage (Recurring)
127.95% 123.70% 118.89% 114.29% 109.88% 105.68%
Page 100 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
Prop C (424) - Preliminary Beginning
Balance 1,247,000 1,247,000 1,247,000 1,247,000 1,247,000 1,247,000
Fiscal Year Net Change
Total Recurring Revenue 543,000 562,000 584,000 607,000 631,000 656,000
Total One-Time Revenue 0 0 0 0 0 0
Total Revenue Projection 543,000 562,000 584,000 607,000 631,000 656,000
Total Recurring Expenditures 543,000 562,000 584,000 607,000 631,000 656,000
Total One-Time Expenditures 0 0 0 0 0 0
Total Expenditures Projection 543,000 562,000 584,000 607,000 631,000 656,000
Total Prop C FY Operating
Surplus/Deficit 000 000
Prop C - Preliminary Ending Balance
(Operating) 1,247,000 1,247,000 1,247,000 1,247,000 1,247,000 1,247,000
Reserve Percentage (Recurring)
229.65% 221.89% 213.53% 205.44% 197.62% 190.09%
Page 101 of 108CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for
Section 8/Low Moderate Income Housing Fund
INTRODUCTION
Section 8 is a type of Federal assistance provided by the United States Federal
government dedicated to sponsoring subsidized housing for low-income families and
individuals. The Housing Agency in the Community Development Department is
responsible for managing and administering Culver City’s Section 8 Housing Choice
Voucher Program (HCVP) to provide rental subsidies for very low-income households.
The Housing Agency contracts with HUD to provide funding for approximately 338
families. The Division closely monitors all applicable Federal regulations to insure
compliance. The Division inspects units annually and negotiates property upgrades
with owners.
FISCAL YEAR 2007-08 HIGHLIGHTS
The Adopted 2007-08 Budget includes funding to continue to support the Section 8
program. Additions to the Section 8 work program in 2007-08 include:
Purge of the Section 8 waiting list
Develop Public Relations and Outreach campaign
Meet with HUD LA Area field office to develop methods to improve lease-up rate
Work with HUD Office of Inspector General to develop fraud investigation policy
BACKGROUND
Federal housing assistance programs began during the Great Depression to address
the country’s housing crisis. In the 1960s and 1970s, the federal government created
subsidy programs to increase the production of low-income housing and to help low
income families pay their rent.
In the 1970s, studies showed that the major low income housing crises was no longer
substandard housing, but the high percentage of income spent on housing. In
response, Congress passed the Housing and Community Development Act of 1974,
which created the Section 8 program. In the Section 8 Program, tenants pay about
thirty percent of their income for rent, while the rest of the rent is paid with federal
money. The number of units a local housing authority can subsidize under its Section 8
programs is determined by Congressional funding.
Page 102 of 108Comprehensive Financial Plan Update– Section 8/Low Moderate Income Housing Fund |10 10|500
1,0 0 0
1,5 0 0
2,000
2,500
3,000
(000's)
2003-04 2004-05 2005-06 2006-07 2007-08
Section 8 Revenues and Expenditures
Revenues Expenditures
Currently, the two main Section 8
programs are tenant-based vouchers
and project-based vouchers. In the
tenant-based program, eligible families
with a certificate or voucher find and
lease a unit and pay a portion of a
reasonable rent. Their portion is based
on income, generally around 30%.
The local housing authority pays the
owner the remaining rent, capped by
the Fair Market Rent (FMR) or a fixed
percentage thereof. The local housing
authority determines the reasonable rent and the FMR is determined by the U.S.
Department of Housing and Urban Development (HUD).
Local housing authorities can also choose to project-base up to 25% of their vouchers.
Project based vouchers are linked to a particular apartment, not an individual family.
Eligible families pay 30% of their income for rent while living in the apartment, but
cannot take the voucher with them if they move.
Whether a voucher is tenant-based or project-based, all subsidized units must meet
federal Housing Quality Standards, ensuring that the family has a healthy and safe
place to live. Currently, there are no time limits for family participation in the program,
though occasionally reform bills are introduced in Congress that suggest imposing time
limits on the program.
In many localities, the waiting lists for Section 8 vouchers may be thousands of families
long, with waits of three to five years. Families who participate in the program must
abide by a series of rules and regulations, often referred to as “family obligations,” in
order to maintain their voucher. In recent years, the HUD Office of the Inspector
General has spent more time and money on fraud detection and prevention.
ECONOMIC OVERVIEW
The housing market boom over the last five years has made housing assistance
programs for low-to-moderate income families increasingly important. In fact, there are
a number of programs that the Culver City Housing Agency has had to discontinue
because they are no longer feasible given the extremely high cost of housing and the
affordability gap, including the Mortgage Assistance Program (MAP); however, there
have been indications that the housing and real estate market is softening.
While a softening real estate market is good news for prospective buyers, it may put
upward pressure on the rental market. As families sell their homes, they may need to
move into an apartment, either temporarily or on a long term basis. This decreases the
rental property supply and drives prices upward.
2 Page 103 of 108Comprehensive Financial Plan Update– Section 8/Low Moderate Income Housing Fund
Additionally, Section 8 funding is variable from year-to-year based on annual
appropriation of Congress. With an increased amount of funds being appropriated for
the war in Iraq, domestic funding for grants and other federally funded programs may
begin to shrink. Depending on the federal government’s financial situation and
priorities, there is a possibility that Section 8 funds will shrink which has been the case
the last few years.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
A more detailed policy discussion of the Housing Fund’s finances, including the Section
8 program, will be initiated with the Redevelopment Agency Board in the upcoming
months.
Revenues and expenditures for Section 8 Housing are based on available Section 8
funding, mainly received through HUD. For this reason, Revenues and Expenditures
are shown to offset each other. Expenditures are never budgeted at a higher rate than
known revenues.
DISCUSSION OF REVENUE PROJECTIONS
Because of the uncertainty of continued HUD funding, revenue projections are shown to
grow at the same growth rate as expenditures. As mentioned above, the Section 8
Housing budget is prepared based on available HUD funding. This fund also currently
has a positive fund balance to cover any revenue shortfall during a given fiscal year in
case HUD funding is not fully received, or expenses run over projections due to
uncontrollable circumstances.
DISCUSSION OF EXPENDITURE PROJECTIONS
Expenditure growth is based on anticipated personnel cost increases of 4.0%, general
operating and maintenance cost increases of 3.5%, and medical insurance cost
increases of up to 12.5% per year. The Housing Services and Rent Subsidy Payments,
which make up the majority of the Division, have been held at a steady rate.
3 Page 104 of 108
THIS PAGE INTENTIONALLY LEFT BLANK
Page 105 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
Section 8 Housing (426) - Preliminary
Beginning Balance 1,554,000 1,536,300 1,514,400 1,487,500 1,455,600 1,418,700
Fiscal Year Net Change
Total Recurring Revenue 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000
Total One-Time Revenue 0 0 0 0 0 0
Total Revenue Projection 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000
Total Recurring Expenditures 2,572,700 2,576,900 2,581,900 2,586,900 2,591,900 2,596,900
Total One-Time Expenditures 0 0 0 0 0 0
Total Expenditures Projection 2,572,700 2,576,900 2,581,900 2,586,900 2,591,900 2,596,900
Total Section 8 Housing FY Operating
Surplus/Deficit (17,700) (21,900) (26,900) (31,900) (36,900) (41,900)
Section 8 Housing - Preliminary
Ending Balance (Operating) 1,536,300 1,514,400 1,487,500 1,455,600 1,418,700 1,376,800
Reserve Percentage (Recurring)
59.72% 58.77% 57.61% 56.27% 54.74% 53.02%
Page 106 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
INNOVATION FUND (312) - Preliminary
Beginning Balance 570,000 570,000 570,000 570,000 570,000 570,000
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0
Total One-Time Revenue 0 0 0 0 0 0
Total Revenue Projection 0 0 0 0 0 0
Total Recurring Expenditures 0 0 0 0 0 0
Total One-Time Expenditures 0 0 0 0 0 0
Total Expenditures Projection 0 0 0 0 0 0
Total Innovation FY Operating
Surplus/Deficit 000 000
Innovation Fund - Preliminary
Ending Balance (Operating) 570,000 570,000 570,000 570,000 570,000 570,000
Reserve Percentage (Recurring)
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Page 107 of 108Description 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Culver City
January 16, 2008
Landscape Maint. District (425) -
Preliminary Beginning Balance 65,000 65,000 65,000 65,000 65,000 65,000
Fiscal Year Net Change
Total Recurring Revenue 47,000 47,000 47,000 47,000 47,000 47,000
Total One-Time Revenue 0 0 0 0 0 0
Total Revenue Projection 47,000 47,000 47,000 47,000 47,000 47,000
Total Recurring Expenditures 47,000 47,000 47,000 47,000 47,000 47,000
Total One-Time Expenditures 0 0 0 0 0 0
Total Expenditures Projection 47,000 47,000 47,000 47,000 47,000 47,000
Total Landscape Maint. Dist. FY
Operating Surplus/Deficit 000 000
Landscape Maint. Dist - Preliminary
Ending Balance (Operating) 65,000 65,000 65,000 65,000 65,000 65,000
Reserve Percentage (Recurring)
138.30% 138.30% 138.30% 138.30% 138.30% 138.30%
Page 108 of 108