City of Culver City, California
Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council (1) receive and file the Fiscal Year 2013/2014
Mid-Year Budget Monitoring Report, (2) receive and file the General Fund
Financial Forecast and (3) approve related budget amendments.
A budget amendment requires a 4/5
ths
vote.
BACKGROUND / DISCUSSION:
The attached Mid-Year Budget Monitoring Report (Mid-Year Report) presents the
City Council with a snapshot of General Fund, Enterprise Fund and Internal
Service Fund expenditures and revenues through the first half of Fiscal Year
2013/2014 which began on July 1, 2013. Other City funds are performing within
expectations and are not a part of this report. The attached General Fund
Financial Forecast (Forecast) takes the mid-year projections and forecasts
revenues and expenditures out to Fiscal Year 2020/2021. The Forecast provides
details of the various assumptions used to arrive at the revenue and expenditure
estimates.
FISCAL ANALYSIS:
The Mid-Year Report provides detail into General Fund revenues received and
expenditures disbursed through December 31, 2013, as well as adjusted
projections through the end of the Fiscal Year (to June 30, 2014). General Fund
Meeting Date: 02/24/2014 Item Number: A-2
CITY COUNCIL AGENDA ITEM: FOUR-FIFTHS VOTE REQUIREMENT – (1) Receipt
and Filing of the Fiscal Year 2013/2014 Mid-Year General Fund Budget Monitoring
Report, (2) Receipt and Filing of the General Fund Financial Forecast, and (3)
Approval of Proposed Budget Amendments.
Contact Person/Dept.: Jeff Muir, CFO,
Finance Department
Phone Number: (310) 253-5865
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [X] Attachments: [X]
Public Notification: (Email) Meetings and Agendas – City Council (02/18/14); (Email)
Ongoing Topics – Fiscal and Budget Issues (02/18/14)
Department Approval:
Jeff Muir (02/17/14)
City Attorney Approval:
Carol Schwab (by H. Baker) (02/18/14)
Chief Financial Officer Approval:
Jeff Muir (02/17/14)
City Manager Approval:
John M. Nachbar (02/18/14) City of Culver City, California
Agenda Item Report
expenditures through December 31, 2013 are $41.731 million, or 45.75% of
current revised budget projections. General Fund revenues through December
31, 2013 are $31.202 million, or 33.25% of current revised budget projections.
Both General Fund revenues and expenditures are higher when compared to this
same point in time in the prior fiscal year.
Full year General Fund projections for Fiscal Year 2013/2014 show total
estimated revenues at $93.84 million, $3.56 more than the current revised
budget total. Total expenditures are estimated at $91.23 million, $2.38 less than
the current budget. The projected ending result for the General Fund is a surplus
of $2.61 million, an improvement over the $0.98 million deficit as estimated in the
City Council Adopted Budget for Fiscal Year 2013/2014.
For the first time in a number of years, the General Fund Financial Forecast
shows revenues covering expenditures until the final year, when rising costs are
currently projected to surpass revenues. The Forecast document has been
significantly revised from prior years, and contains much further detail.
Generally, revenues are projected to increase by an average of 2.5% annually,
with continued gradual growth in the economy. The Forecast does not make any
assumption for another recession during this time. The Forecast also assumes
the same staffing levels approved for Fiscal Year 2013/2014 stay in place. For
budgetary purposes, cost-of-living adjustments are assumed at 2% per year for
safety employees, and 1.5% per year for non-safety employees. Significant
increases to pension costs are assumed based on the latest actuarial information
provided by CalPERS. For the most part, other expenditure categories are
assumed to grow at a 2% inflationary rate. Further details are provided in the
Forecast document.
Several factors must be considered when reviewing the Forecast:
• A number of developments, both private and former Redevelopment
Agency projects, are assumed to come ‘on line’ during the course of this
projection.
• Measure Y, which is estimated to provide slightly over $10 million per
year in General Fund revenue by the end of the Forecast, sunsets on
March 31, 2023.
• There is no assumption for further potential General Fund impacts from
the dissolution of the former Culver City Redevelopment Agency.
Staff will make a presentation of the report and also discuss in more detail future
policy discussions on whether and how to use General Fund reserves in excess
of the 30% Contingency Reserve. City of Culver City, California
Agenda Item Report
ATTACHMENTS:
Attachment 1 – Fiscal Year 2013/2014 Mid-Year Budget Monitoring Report
Attachment 2 – Proposed Budget Amendments
Attachment 3 – General Fund Financial Forecast
MOTION:
That the City Council:
(1) Receive and file the Fiscal 2013/2014 Mid-Year Report as provided in
Attachment 1;
and
(2) Approve the Budget Amendments as proposed in Attachment 2.
A budget amendment requires a 4/5
ths
vote.
and
(3) Receive and file the General Fund Financial Forecast as provided in
Attachment 3.
MEETING DATE: February 24, 2014
AGENDA ITEM: Receipt and Filing of the Fiscal Year 2013/2014 Mid-Year
General Fund Budget Monitoring Report, and (2) Approval of
Proposed Budget Amendments.
ATTACHMENTS
Pages
1. Culver City Mid-Year Budget Report 2 – 10
2. Recommended Adjustments by Line Item 11 – 14
3. General Fund Financial Forecast 15 – 66
City of Culver City
MID-YEAR BUDGET REPORT
FISCAL YEAR 2013-14
Through December 31, 2013
2INTRODUCTION
This Mid-Year Budget Report presents an overview of the City’s operating revenues and expenditures
for the first half of Fiscal Year 2013-14 as compared to budgeted amounts , explaining any notable
aberrations or t rends in the numbers . The revenue and expenditure information in this report is
organized into two sections: General Fund and Other Major Funds.
An important component to the ongoing management of the City’s annual budget process, the Mid-
Year Budget R eport’s purpose is thre efold. First, it illustrates the City’s focus on monitoring its
revenues and expenditures, with the intent to proactively respond to unanticipated changes or
emerging trends. Secondly, and equally important, the report is to provide fiscal transparency of City
finances as the City is ultimately accountable to its residents for the use of revenue. Finally, an
important reason to provide such information is that it serves as a starting point for preparing the FY
2014-15 Budget.
The close of December encompasses the first six months of the City’s fiscal year, presenting an ideal
point of analysis to determine the viability of the adopted budget , or if and where adjustments should
be considered. The Finance Department Staff has reviewed all line items and compared actual
results against budget expectations, historical trends, seasonality and other known factors affecting
either revenue or spending streams to determine if recommendations for reduct ions or increases
should be made. As the defined mid- point of the fiscal year, although the presumed expectation is
that most categories should be at 50%, City revenues historically lag expenditures at this point in the
fiscal year because of year -end accounting adjustments to major revenues and because the bulk of
the property tax and business licenses revenues are received later in the fiscal year.
REPORT HIGHLIGHTS:
• A notable new revenue source for the City is the Measure Y – Sales Tax. In November 2012,
Culver City voters approved Measure Y which increased the City’s sales tax by one half cent
beginning April 2013. Measure Y – Sales Tax revenues are on pace with expectations for
the second quarter of FY 2013-14. The year-end revenue total is projected at $7.8 million.
• The City’s overall general fund operating revenues are above expectations for the first half of
FY 2013-14. General Fund Operating Revenues through December are $31.202 million, or
18.28% than the same period last year . Analysis suggests the City’s overall General Fund
revenues are expected to outpace the current revised budget total for the fiscal year . It is
therefore recommended budgeted revenues be increased by $3,563,588 to $93,836,848.
• General Fund Expenditures through December total $41.731 million, or 12.75% higher than
the same period last year.
• A brief mid-year overview is included in this report for Enterprise Funds and Internal Service
Funds, both of which appear to be operating within expectations. Additional requests include
an update to the Equipment Replacement Fund of $30,000 to implement a new Chair
Replacement Program and an increase to Sewer Fund revenues in the amount of $624,618.92
per the revised Engineering Report.
The following pages present the detailed discussion of the City’s Mid-Year actual results and
recommendations by revenue and expenditure categories.
3GENERAL FUND
GENERAL FUND REVENUES
At the time of the Fiscal Year 2013- 14 Adopted Budget, it was estimated that revenues would be
mostly level with FY 2012-13, with overall increases attributable chiefly to the addition of the
Measure-Y Sales Tax and the sale of two City-owned properties. This estimate marked the first time
in a number of years where recurring revenues would cover ongoing expenditures. As of the
December 31, 2013, General Fund operating revenues are displaying modest growth, exceeding
estimated revenues with receipts totaling $31.202 million, or 33.25% of the current revised revenue
budget at the close of the 2
nd
Quarter. This percentage is less than the 50% one would presume as
the mid-year total due to payments received in July and/or August for many of the major revenue
categories such as sales tax, utility taxes, property tax, transient occupancy tax and business tax
being accrued back to the prior fiscal year. Receipts through December 2013 are $4.8 million, or
18.3%, higher than the same period last y ear, with increases largely driven by Charges for Services,
Licenses and Permits, and Business Taxes.
The table below displays the comparison between revenues received as of December 31
st
for th e
current and prior fiscal year:
2012-13
REVENUE AS
OF 12/31/2012
2012-13
REVENUE
TOTAL
2013-14
REVENUE AS
OF 12/31/2013
2013-14
REVISED
BUDGET TOTAL
PROJECTED
REVENUES
2013-14
Property Tax 1,481,751 6,291,986 1,507,560 4,225,000 4,025,000
Sales Tax 4,529,522 18,095,663 4,629,416 18,821,614 18,821,614
Sales Tax - Measure Y 0 1,163,591 1,818,944 7,800,000 7,800,000
Public Safety Sales Tax (PSAF) 122,369 338,601 163,715 350,000 350,000
Business Tax 408,159 10,253,802 475,437 10,050,000 10,300,000
Franchise Tax 336,875 1,399,727 326,349 1,350,000 1,350,000
Real Property Transfer Tax 599,363 2,382,116 794,318 1,500,000 1,500,000
Electricity UUT 2,859,534 5,976,520 3,054,192 6,000,000 6,100,000
Gas UUT 280,979 978,089 315,678 1,000,000 950,000
Water UUT 602,962 1,252,729 824,001 1,200,000 1,300,000
Telecomm UUT 2,471,468 5,396,223 2,080,599 5,550,000 5,250,000
Cable UUT 211,592 915,247 282,811 750,000 900,000
Transient Occupancy Tax (TOT) 2,215,074 5,195,349 2,389,493 5,000,000 5,250,000
Commercial/Industrial Dev. Tax 196,484 405,100 709,654 450,000 950,000
Licenses and Permits 1,290,306 2,604,208 2,083,986 2,579,000 3,500,000
Intergovernmental 15,371 3,495,781 33,425 3,565,506 3,565,506
Charges for Services 3,344,525 7,270,433 3,824,963 6,954,315 7,400,000
Fines and Forfeitures 1,279,431 3,543,606 1,796,424 3,507,000 4,000,000
Use of Money & Property 588,436 1,425,760 611,561 1,597,000 1,500,000
Interfund Revenues 2,132,379 4,588,157 1,938,003 3,851,498 3,851,498
Transfers In 1,431,823 2,407,298 1,541,615 2,723,230 2,723,230
Other Revenues 89,274 950,291 126,602 1,449,098 2,450,000
26,487,678 86,330,279 31,328,746 90,273,260 93,836,848
GENERAL FUND REVENUES
4
? Property Tax – As of the close of the 2
nd
Quarter, the City has received $1.51 million in
Property Tax, which is slightly higher at 1.7% more than this point last year. However, last
year’s total included a significant one- time payment from the Successor Agency that is not
expected to recur this year. Additionally, a lawsuit between the Los Angeles Unified School
District and Los Angeles County reached conclusions that will further decrease the amount
normally expected from the Successor Agency. Due to this, the recommendation is to reduce
the Property Tax budget by $200,000 to $4.025 million.
? Sales Tax – Sales Tax receipts as of current mid-year exceed prior year mid-year totals by
2.2%. Only 24.6% of the budget ed revenues have been received because at this point in the
fiscal year only four months of receipts have been recorded. In accordance with government
accounting standards, sales tax r evenues received in July and August are moved back to the
prior fiscal year because the actual transactions took place in the prior year.
? Sales Tax - Measure Y – In the November 2012 election, Culver City voters approved a sales
tax increase which went into effect in April 2013. The City is on track to achieve t he current
revised budgeted total of $7.8 million in Measure – Y revenue.
It is important to note in the upcoming years, the additional revenue generated from the
Measure-Y Sales Tax will be instrumental in helping to balance the City’s budget . However,
the sales tax increase sunsets in nine years (March 31, 2023) ; so unless extended the
additional revenue does not fully address the City’s structural deficit. As evinced in the
General Fund Financial Forecast: FY 2014-15 - FY 2020-21 Report, the City must continue
strides to manage revenues in an efficient and sustainable manner , and control expenses
accordingly in order to continue progress toward long-term fiscal health.
? Business Tax – Business Tax renewals are due by the end of February . As of December
31
st
, a higher than normal rate of renewals have been received for this time of year. Revenues
have increased by 16.5% compared to this same period last year and it is anticipated to
outperform the budget projection. It is therefore recommended that the Business Tax revenue
budget be increased by $250,000.
? Utility Users Taxes (UUT) – Most Utility Users Taxes are outperforming revenues received
compared with the same period last year. In accordance with the same accounting standards
that apply to sales tax receipts, UUT receipts in July are moved back to the prior fiscal year, so
at this point in the year only five months of receipts have been recorded. With accrual
calculations taken into account, receipts have grown in all UUT areas with Gas and Telecom
UUTs as exceptions.
Gas UUT is performing lower than the same levels last year, and receipts are lower than
projected in the Adopted Budget. Therefore, it is recommended that the Gas UUT projection
be reduced by $50,000. Similarly, Telecom UUT is performing lower than the same levels as
last year, and receipts have not grown as much as expected. Therefore, it is recommended
that the Telecom UUT budget be reduced by $300,000.
It is further recommended that the Electricity UUT projection be increased by $100,000; Water
UUT increased by $100,000; and Cable UUT increased by $150,000. These increases align
with growth rates as noted for each UUT area and will essentially offset the reduced revenue
projections from Gas and Telecom UUTs.
5
? Transient Occupancy Tax (TOT) – In April 2012, Culver City voters approved a measure to
increase the Transient Occupancy Tax (TOT) from 12% to 14% . Due to increased occupancy
rates coupled with the higher tax rates, current year receipts are $2,389,493 or 7.9% higher
than this point last year.
In accordance with the same accounting standards that apply to UUT receipts, receipts in July
are moved back to the prior year, so at this point in the year five months of receipts have been
recorded. Based on the growth in receipts, it is recommended that the TOT budget be
increased by $250,000.
? Real Property Transfer Tax – Real Property Transfer Tax is difficult to predict as it relies on
high value property sales, which fluctuate tremendously from month to month. At this point in
the fiscal year, receipts are 32.5% higher than they were at this point last year; however, this
may have no bearing on the remainder of the year. For this reason, no recommendations are
being made in this area at this time beyond continued monitoring of this account.
? Commercial/Industrial Development Tax – Compared to last year, Commercial/ Industrial
Development Tax receipts have increased by $ 513,170 or 111.11%, exceeding the total
budgeted amount for the entire year. This is reflective of an overall increase in construction
activity. With the revised budget already achieved, it is recommended that the budget for
Commercial/Industrial Development Tax be increased by $500,000.
? Licenses & Permits – Like the Commercial /Industrial Development Tax, Licenses and
Permits revenue is driven by residential and commercial construction activity. Mid-year
revenues total $2.084 million which accounts for 81% of the adopted budget total, surpassing
last year’s mid-year total by 61%. Due to the increased construction activity, it is recommended
that the budget for Licenses and Permits be increased by $921,000.
? Intergovernmental Revenue – Intergovernmental revenue is mostly comprised of the motor
vehicle license fees from the State Department of Motor Vehicles. The majority of this revenue
is received in January and May.
? Charges for Services – The Charges for Services category is comprised of a variety of
revenues ranging from recreation fees to police services and plan checks. At this point in the
year, overall revenues are 14.4% higher than last year . Building permit fees received are
already at 119% of total budget revenues for the year as of the close of December . Due to
increased construction activity, it is recommended that Charges for Services be increased by
$445,685.
? Fines and Forfeitures – Fines and Forfeitures category is primarily comprised of red light
camera violations and moving violations written by Culver City traffic enforcement , and parking
violations written by Culver City parking enforcement. Current year revenue is $516,993 higher
than this point last year. It is recommended that F ines & Forfeitures budget be increased by
$493,000.
? Use of Money and Property – Use of Money and Property includes interest income and
income from the rental of city property . Overall this category is in line with previous year
receipts for this period. Because of this, it is recommended that the Money & Property budget
be reduced by $97,000 to better align with the ending FY 2012-13 revenue total.
6
? Other Revenues – Other Revenues is comprised of loan payments, land sale proceeds,
donations and miscellaneous revenues. There is currently $1 million budgeted for the sale of
two City -owned properties. Originally proposed for sale last year, the amount was adjusted
down from $2 million to $1 million in the current year budget to account for the risk of the sale
not being realized. With the increased probability of both properties being sold, i t is
recommended that the budget for Land Sale Proceeds account be adjusted to original
estimates – an increase of $1 million.
The recommended Mid-Year revenue adjustments total $3.56 million in increases above the current
revised budget.
GENERAL FUND EXPENDITURES
Overall, General Fund expenditures through mid-year are $41.73 million or 45.75% of projected
appropriations, which is slightly higher when compared to this point last fiscal year.
The table below provides a comparison between the first six months of Fiscal Year 2013-14 and
Fiscal Year 2012-13:
Total expenditures are $4.7 million or 12.8% higher than this point last year. The mid-year expended
average for Departments is 45.8% of budgeted expenditures. There are only a few departments that
are outside of the normal percentage range for mid- year expenditures. This is mainly due to the
timing of expenses during the year:
• The Information Technology department is slightly over the 50% mark at mid-year due to the
majority of funding for annual software license fees being expended in the first six months.
2012-13
EXPENDITURE AS
OF 12/31/2012
2012-13
EXPENDITURE
TOTAL
2013-14
EXPENDITURE AS
OF 12/31/2013
2013-14
REVISED
BUDGET TOTAL
2013-14
PROJECTED
EXPENDITURES
ADMINISTRATION 579,031 1,283,248 619,256 1,334,685 1,324,095
CITY CLERK 135,873 355,336 137,789 420,548 417,745
CITY ATTORNEY 653,899 1,685,020 830,117 1,832,018 1,763,819
FINANCE 1,964,238 4,414,704 2,064,735 4,789,345 4,604,170
HUMAN RESOURCES 491,323 1,090,615 565,881 1,179,380 1,135,650
INFORMATION TECH. 1,254,752 2,703,103 1,564,094 3,107,559 3,105,302
PARKS, REC. & COMMUNITY SVCS 2,940,282 6,403,661 3,115,130 7,110,407 6,784,812
POLICE DEPARTMENT 13,255,174 29,227,373 14,272,165 33,048,439 31,810,778
FIRE DEPARTMENT 7,584,759 16,987,109 8,089,334 18,167,136 18,036,873
COMMUNITY DEVELOPMENT 2,361,219 5,314,945 2,610,543 6,019,464 5,887,703
PUBLIC WORKS 4,179,354 9,201,039 4,343,069 10,159,704 9,818,795
NON-DEPARTMENTAL 1,339,353 2,977,273 1,500,983 3,729,208 3,829,504
Transfers 272,133 572,649 2,017,525 2,570,491 2,572,932
Retiree Health Pre-funding - 1,983,167 - 137,800 137,800
TOTAL EXPENDITURES 37,011,390 84,199,242 41,730,621 93,606,183 91,229,978
GENERAL FUND EXPENDITURES
7
• The City Clerk’s Office is significantly under the current average due to expenses for the
upcoming City Council election not being expended yet. These expenses will be shown in the
latter six months of the fiscal year.
Based on the number of vacancies and spending trends, it is projected that the current year General
Fund expenditures will total $91. 23 million. This is $2. 38 million lower than the Adjusted Budget and
8.3% higher than the total expenditures last fiscal year. The increase from last year is mainly due to
employee bargaining group MOU changes, employer paid retirement increases, an increased
contribution to the retiree health prefunding trust fund, and a transfer to the Successor Agency in the
amount of $1,462,118 in order for the Successor Agency to satisfy requirements necessary to receive
a ‘Finding of Completion’ from the Department of Finance
OTHER MAJOR FUNDS
A brief overview follows for the City’s Enterprise and Internal Service Funds.
ENTERPRISE FUNDS
The City has three Enterprise Funds : Refuse, Transportation, and Sewer, which account for the
provision of direct services to the general public where all or a substantial portion of the costs
involved are paid in the form of user charges or fees for such services.
• Refuse Disposal Fund was established to account for the operation of the City's refuse
disposal, transfer station operation, recycling efforts, and street sweeping services.
• Transportation Fund is used to account for the operation, as well as the capital assets,
of the City's Municipal Bus Lines. Other funding assistance comes from FTA Section 9
(Federal-Capital), TDA and STA (Capital and Operating), and Proposition A and
Proposition C.
• Sewer Fund is used to account for revenues collected through sewer charge fees and
sewer facilities charges. These funds are used for expenditures related to the operation
and maintenance of sewer disposal facilities, capital projects, and debt service on
bonds for sewer facility improvements.
At mid -year, the Refuse Fund expenditures are $5.468 million, or 41.6% of adjusted budget
appropriations. This is approximately 2% ahead of expenditures at this time last year. A contributing
factor to the low overall mid- year expenditure percentage is Refuse Disposal Fees being less than
anticipated (33.2% of budget). Personnel costs are at 45.6% of budget at mid-year, and are expected
to come in slightly below projections . The overall projected year-end expenditures are expected to
come in at approximately 95.8% of the revised budget.
Refuse Disposal Fee receipts at mid- year are $1.38 million, or 39.8% of budgeted revenues. The
payment from the County of Los Angeles for Refuse Fees that brings us to half -way point has been
recorded in January. Bin Service and Tonnage Charges are recorded at higher than 50% on average
at mid -year and are driven by increased home improvement and development activity. Overall
Refuse Fund revenues are on track and are expected to be fully realized at fiscal year-end.
8The Transportation Fund mid- year expenditures are $9.92 million, or 25.1% of adjusted budget
appropriations. This is approximately 3% ahead of expenditures at this time last year.
The Transportation Fund currently has $14.77 million appropriated for capital outlay items. As of mid-
year, only 0.5% of these funds have been expended. By year-end $3.3 million should be expended
on the purchase of new transit buses, and approximately $1.2 million on various capital projects,
which include facility capital projects and IT related capital items. The remainder of budgeted capital
projects will be carried over to FY 2014-15. These include: CNG Station Compressor Project, Bus
Signal Priority Project, Bus Stop Furnishings, and continued facility capital projects.
Transportation Fund revenues are $7.25 million or 23% of projected receipts. Much of this revenue
will be received once expenditures for capital items are expended. Transportation Fund revenues are
mostly a combination of Federal, State and Local funding sources along with farebox revenues.
Mid-year Sewer Fund operating expenditures are approximately $3.03 million, or 37% of adjusted
budget appropriations. The low expenditure percentage at mid- year is mostly due to a lower than
estimated payment to the City of Los Angeles for the Hyperion Treatment Plant. Personnel costs are
at 45.2% of revised projections.
Sewer Fund revenues at mid -year are $3.83 million, or 47% of budget. Sewer operating receipts
from property taxes have been recorded in January, which brings the receipts to 55.02% of budgeted
revenues. Sewer Fund revenues are also on track to be fully realized at fiscal year -end. Updates to
the Engineering Report from consultants at NBS recommend that revenues be increased by
$624,618.92.
INTERNAL SERVICE FUNDS
The Internal Service Funds are used to account for services and commodities furnished by
designated funds of the City to user departments of the City.
• Equipment Replacement Fund is used to hold annual replacement payments from
designated user departments and to use those funds to purchase equipment for general
City purposes.
• Equipment Maintenance & Fleet Services (EMFS) Fund accounts for all activities of
the City's central equipment maintenance operations, the costs of which are distributed
among designated user departments.
• Self-Insurance Fund receives and disburses funds pertaining to the public liability and
workers' compensation insurance programs. It also funds the Employee Disability (IOD)
program for employee long-term work-related disabilities.
• Central Stores accounts for the timely purchase of needed materials, supplies and auto
parts in advance of actual need. Departments are billed as items are issued for use.
At mid-year, Equipment Replacement Fund expenditures are $874,000, or 32.7% of adjusted budget
appropriations. This amount is entirely associated with vehicle/equipment purchases. The total
revised budget appropriation amount of $2.67 million is projected to be expended by year end for the
City Council approved vehicle/equipment purchases for FY 2013-14.
9Equipment Replacement revenues, which are the contributions from the various funds for
replacement costs, will be fully recognized at year -end. These are recorded on a monthly basis, and
at mid-year are 50.0% of budget. A new Chair Replacement Program throughout City Hall is being
presented for implementation in the current fiscal year. The recommended expenditure increase is
$30,000 to cover estimated costs.
The EMFS Fund mid- year expenditures are $3.33 million, or 41.9% of adjusted budget
appropriations. The low percentage is mostly due to fuel expenditures in the amount of $537,700
being 33.1% of revised budget appropriations at mid-year.
EMFS Fund revenues are on track to be fully realized at fiscal year-end. All expenditures will be
covered to ensure this Fund continues to operate in a financially prudent manner.
The Self-Insurance Fund (SIF) expenditures at mid-year are $3.8 million, or 48.0% of adjusted budget
appropriations. This is 16.2% ahead of last year at this time. The increase is attributable to
claims/settlements being 87% higher than this point last year.
Personnel expenditures are significantly down at mid- year at $304,000, or 27.7% of adjusted budget
appropriations. At this point last year, personnel expenditures were $517,000. The decrease is
mainly due to a lower number of injured-on-duty (IOD) incidents in FY 2013-14. Insurance premiums
are slightly higher than the adjusted budget appropriations, but overall expenditures are projected to
be within adjusted budget appropriations at year-end.
In order to reestablish the SIF fund reserves, an additional $1 million was allocated between the
various funds who contribute to the S IF fund. Revenues for the SIF Fund are on track and will be
fully realized at fiscal year-end.
The Central Stores Fund operations continue to be on track for FY 2013-14. Continued streamlining
of purchasing practices and policies has enabled the City to save time and money by centralizing
various purchases.
CONCLUSION
General Fund projections for Fiscal Year 2013- 14 show total estimated revenues at $93.84 million,
$3.56 more than the current revised budget total. Total expenditures are estimated at $91.23 million,
$2.38 less than the revised budget. The projected ending result for the General Fund is a surplus of
$2.61 million, an improvement over the $1.63 million estimated deficit in the Adopted Budget. There
are currently no recommended changes in other City funds beyond continued monitoring.
The number of General Fund revenue budget increases can be assumed as indication of Culver
City’s rebounding economy. This Mid-Year Budget Monitoring Report illustrates sustained year-over-
year growth in building activity, higher occupancy rates at hotels, rising property values, and
increased retail sales. These signs of progress, however, come following years of fiscal challenges
and distress. Continued monitoring of resources is yet a priority to ensure adequate funding for City
services, public facilities, and infrastructure necessary to meet the community’s present and future
needs. This report should be considered in conjunction with the General Fund Financial Forecast,
which takes a longer-term view of the City’s financial position.
10DESCRIPTION AMOUNT
EXPENDITURES - GENERAL FUND
Adjustments to Part-time Salaries for Afterschool Programs (10130233.411200) 5,400 $
Adjustments to Part-time Salaries for Rec & Enrichment Programs (10130212.411200) 3,250 $
Adjustments to Part-time Salaries for Youth Center Programs (10130260.411200) 10,300 $
Increase to budget for Economic Development to cover contractual obligations
(10150120.619800) 125,000 $
TOTAL GENERAL FUND EXPENDITURE CHANGES 143,950 $
EXPENDITURES - OTHER FUNDS
Additional budget needed to implement Chair Replacement Program (30716100.740100) 30,000 $
TOTAL OTHER FUND EXPENDITURE CHANGES 298,950 $
DESCRIPTION AMOUNT
REVENUES - GENERAL FUND
Increase UUT-Electricity budget due to higher than projected revenues (10114400.312100) 100,000 $
Decrease UUT-Gas budget due to lower than projected revenues (10114400.312110) (50,000) $
Increase UUT-Water budget due to higher than projected revenues (10114400.312120) 100,000 $
Decrease UUT-Telecommunications budget due to lower than projected revenues
(10114400.312130) (300,000) $
Increase UUT-Cable TV budget due to higher than projected revenues (10114400.312140) 150,000 $
Increase Business License Fee budget due to higher than projected revenues (10114400.315110) 125,000 $
Increase Business License Penalties budget due to higher than projected revenues
(10114400.315120) 125,000 $
Increase Transient Occupancy Tax budget due to increased taxes and growth in receipts
(10114400.318000) 250,000 $
Decrease Tax Increment-Pass-Through budget due to litigation impacting revenues
(10116100.311220) (200,000) $
MID-YEAR RECOMMENDED EXPENDITURE CHANGES
MID-YEAR RECOMMENDED REVENUE CHANGES
11DESCRIPTION AMOUNT
Increase Comm Industrial Develop Tax budget due to increased construction activity
(10116100.319000) 500,000 $
Increase Filming Permit budget due to higher than projected revenues (10130200.326000) 50,000 $
Increase Building Permits budget due to increased construction activity (10150150.321000) 497,200 $
Increase Bldg Standards Admin Surcharge budget due to higher than projected revenues
(10150150.321010) 2,500 $
Increase Other License & Permits - Bldg budget due to increased construction activity
(10150150.321100) 28,000 $
Increase Electric Permits budget due to increased construction activity (10150150.322000) 65,000 $
Increase Residential Building Records budget due to higher than projected revenues
(10150150.323000) 18,000 $
Increase Plumbing and Heating budget due to increased construction activity (10150150.324000) 150,000 $
Increase Outdoor Dining Permit budget due to higher than projected revenues
(10160150.331200) 100,300 $
Increase House Moving Permits budget due to higher than projected revenues
(10160210.332000) 10,000 $
Increase Court Fines - General budget due to higher than projected revenues (10140200.338100) 281,714 $
Increase Vehicle Code Fines budget due to higher than projected revenues (10140200.338200) 211,286 $
Increase Passport Processing Fee budget due to higher than projected revenues
(10111100.353100) 18,000 $
Increase Pool Rental & Passes budget due to higher than projected revenues (10130220.365520) 55,000 $
Increase After School Program budget due to higher than projected revenues (10130233.365150) 32,000 $
12DESCRIPTION AMOUNT
Increase Plan Check Fees budget due to increased construction activity (10145600.371300) 50,000 $
Increase Plan Check Fees budget due to increased construction activity (10150150.371300) 290,685 $
Decrease Interest Income budget due to lower than projected revenues (10116100.382000) (97,000) $
Increase Miscellaneous Revenue budget due to higher than projected revenues
(10111100.386100) 902 $
Increase Land Sale Proceeds budget due to increased probability of property sales
(10116100.386350) 1,000,000 $
TOTAL GENERAL FUND REVENUE CHANGE 3,563,587 $
REVENUES - OTHER FUNDS
Increase Sewer Operting Fees per revised engineering report from NBS (20460300.357100) 624,619 $
TOTAL OTHER FUND REVENUE CHANGE 624,619 $
1314GENERAL FUND
FINANCIAL FORECAST
FY 2014-15 - FY 2020-21
CITY OF CULVER CITY, CALIFORNIA
A current and long-range assessment of
financial conditions and costs for City Services
15
16
CITY OF CULVER CITY
General Fund Financial Forecast
Fiscal Year 2014-15 To 2020-21
PREPARED BY:
FINANCE DEPARTMENT
JEFF S MUIR, CHIEF FINANCIAL OFFICER
MARY V. NOLLER, BUDGET & FINANCIAL OPERATIONS MANAGER
ERICA McADOO, SENIOR BUDGET MANAGEMENT ANALYST
February 24, 2014
17
18
CITY OF CULVER CITY
GENERAL FUND FINANCIAL
FORECAST FY 2014-15 – FY 2020-21
TABLE OF CONTENTS
DESCRIPTION PAGE
GENERAL FUND FORECAST
FORECAST OVERVIEW ……………………………………………………………………………………………………. 1
FORECAST ASSUMPTIONS ……………………………………………………………………………………………. 3
FORECAST SCHEDULE …………………………………………………………………………………………………… 5
REVENUES ……………………………………………………………………………………………………………………. 7
ADDITIONAL EXPENDITURES/POLICY ISSUES…………………………………………………………………33
FINANCIAL RESERVE FUNDS ………………………………………………………………………………………….34
ECONOMIC PERSPECTIVE & OUTLOOK……………………………………………………………………………. 35
19
20
OVERVIEW AND
SUMMARY
21
22OVERVIEW AND SUMMARY
The General Fund Financial Forecast provides a current and long- range financial assessment
addressing revenues, City services and programs, and financial reserve policies. The primary
objective of the Forecast is to provide the City Council and the community with an early financial
assessment and identify significant issues that need to be addressed in the budget development
process. While typically the forecast looks out five years, the scope of this forecast has been
extended out to FY 2020- 21 in order to fully capture known increases in pension funding
contributions.
The forecast information presented in this document combines projected resources, current
service expenditures, and mandated expenditures to illustrate the financial impact to the
General Fund and the ending balances for the fund. Recent revenue trends and economic
assumptions (many of which can be found in the Economic Outlook section of this document)
are used to develop these figures. Service expenditures required to sustain the current (FY
2013-14) level of services are used throughout the forecast period based in part on the rate of
inflation. The net result of this combined data highlights any adjustments needed over the
forecast period to maintain a balanced budget as required by City policy and state law. Many of
the assumptions, projections, and cost estimates within this document are based on early and
preliminary information that will be refined and changed as the FY 2014 -15 Proposed Operating
Budget is developed and presented to City Council.
GENERAL FUND
During the forecast period, total General Fund revenue is expected to change annually at rates
ranging from a 1.4% reduction to 4.4% growth, with an overall average of 2.54% annual growth.
The FY 2013-14 revenue forecast estimate is approximately $3.6 million higher than the current
year revised budget, or an overall increase of 4%. Some significant increases in certain
revenue categories that are not projected to be recurring account for a large portion of this
increase. The rate of revenue change forecasted in FY 2014-15 over the FY 2013-14 Estimated
Revenues is actually a 1.7% reduction, after factoring out certain non -recurring items (in
particular, $2 million for sale of properties). Revenue growth beyond FY 2014- 15 is forecasted
at rates of 3.9% in FY 2015-16, 4.4% in FY 2016-17, 2.0% in FY 2017-18, 2.6% in FY 2018-19,
2.3% in FY 2019-20 and 1.2% in FY 2020-21.
Projections show that while revenue growth gradually increases over the forecast period, cost
drivers over the same period will cause expenditures to catch up to, and exceed revenue growth
by the end of the projection. This increased growth in expenditures over the forecast per iod is
primarily due to increased costs for pensions (a certainty), anticipated cost-of-living increases,
and anticipated general inflation in operating and maintenance accounts. The General Fund
Forecast Schedule calls out additional revenues assumed as certain development projects are
expected to come online throughout the forecast period. These revenues are further
categorized into one-time and operating. The expenditures section shows the aggregate annual
projected expenditures required to sustain the current FY 2013 -14 level of services, with the
assumptions provided later in this document. Displayed separately are transfer s for
23infrastructure projects and assumed one- time expenditure costs. The additional
expenditures/policy issues section includes amounts to illustrate the impacts of funding
anticipated debt service costs for storm water discharge requirements from the General Fund.
Also listed, for illustration purposes, are additional amounts towards infrastructure projects to
reduce deferred maintenance, and increased pre- funding towards long -term liabilities. These
items will be further considered and evaluated during the FY 2014- 15 Budget Process and are
shown in the schedule only to provide estimated impact s to the General Fund Available Fund
Balance, and aid with the discussion for the potential uses of reserves in excess of the
Contingency Reserve requirement.
In FY 2013- 14, the General Fund Adopted Budget assumed using $982,407 in reserves in
addition to anticipated revenues to cover expenditures. After review of six months of actual
revenue and expenditure trends and other updated information, estimated improvements to
revenues and modest expenditure savings result in an estimated $2.622 million surplus for the
year. This should improve the total financial reserves of the General Fund to approximately
$45.562 million, $18.709 million in excess of the 30% Contingency Reserve requirement.
Specific FY 2013- 14 assumptions and projections are further detailed in the separate Fiscal
Year 2013-14 Mid-Year Report.
Utilizing economic and other data, General Fund revenues and expenditures have been
forecasted out to FY 2020- 21. This is expected to be the final year of major increases to
pension costs due to phased in changes to actuarial assumptions and practices by CalPERS.
The forecast shows that while revenues are expected to outpace expenditures during the next
several years, by the end of the forecast period cost increases will drive the General Fund into a
slight annual deficit situatio n. It is also critical to note that the forecast does not assume a
recession. Finally, Measure Y is set to sunset on March 31, 2023. This represents an
estimated $10.3 million in annual revenues by the end of the forecast.
This forecast argues for continued vigilance in controlling costs, encouraging economic
development and a focus on maintaining service levels.
24FORECAST METHODOLOGIES AND ASSUMPTIONS
REVENUES
The Finance Department works with departments responsible for administering the services
and/or collecting the associated revenues to develop revenue projections based on an analysis
of various factors. These include historical trends, current economic conditions, projected
economic activity, and any known future factors. Revenue projections do not include fee or rate
increases and are based on current service levels. More information on assumptions and other
factors is available in the detailed revenue category analysis.
EXPENDITURES
Expenditures assumed in the Forecast are based on the current service level, or funding
needed to provide today’s level of recurring City services. FY 2013- 14 expenditure estimates
are based on an analysis of current fiscal year expenditure trends by using six months of actual
expenditures to project estimated expenditure levels at the end of FY 2013-14. The FY 2014-15
base projection modifies current service costs for price changes and assumes the removal of
one-time improvements. Inflation rates are also used to project certain non- personal services
expenditures derived from Consumer Price Index (CPI) projections for each year from FY 2014-
15 through FY 2020- 21 (See Economic Outlook section for more detail on CPI projections
used).
Cost-of-living adjustments for safety personnel (police and fire) are controlled by the Salary
Initiative Ordinance (SIO), which provides that Culver City safety personnel receive one- half of
salary adjustments provided by the City of Los Angeles and one- half of salary adjustments
provided by the County of Los Angeles. Historically (prior to the recession), SIO increases
averaged about 3% per year. Due to rising pension costs faced by all governments, including
the City of Los Angeles and the County of Los Angeles, the SIO assumption for safety through
this projection is 2% annually. While non- safety employees have not had cost -of-living
adjustments the last few years, an assumption of 1.5% per year is built into this projection .
Inflation in the City’s contribution towards wellness benefits (health, dental, vision and life
insurances) is estimated at the full 4% annual cap included in the bargaining agreements.
Of most significance are increases in the employer contribution rates to CalPERS. Based on
the most recent actuarial report issued by CalPERS, these rates are expected to rise between
FY 2014-15 through FY 2020-21 from 19.1% to 25.2% for non-safety, and from 39.2% to 52.4%
for safety. Based on further actuarial and mortality changes currently being adopted by
CalPERS, another 3.6% increase is estimated over this time for non -safety, and another 7.1%
for safety.
Change assumptions for each expenditure category and CalPERS employer rates are listed
below.
25
Category 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Non-Safety COLA % 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Safety COLA % 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Non-Safety PERS Employer Rate Projection from CalPERS 19.06% 20.30% 21.50% 22.70% 24.00% 25.20% 25.20%
Safety PERS Employer Rate Projection from CalPERS 39.23% 41.90% 44.50% 47.10% 49.70% 52.40% 52.40%
Non-Safety Additional PERS for Mortality, etc. 0.00% 0.00% 0.72% 1.44% 2.16% 2.88% 3.60%
Safety Additional PERS for Mortality, etc. 0.00% 0.00% 1.42% 2.84% 4.26% 5.68% 7.10%
Health Insurance Inflation Rate 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Workers' Comp -15.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Retiree Medical Insurance 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
OPEB Pre-Funding 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Office Supplies & Exp 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Travel / Training / Dues 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Public Notices / Ads 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Repair / Maintenance 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Other O&M 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Equipment Maintenance Charges 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Equipment Amortization Charges 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Legal Services 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Contract Services 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Property Insurance Premiums 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Liability Reserve Charges -15.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Capital 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Other 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Transfers 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
26
GENERAL FUND
FORECAST
27
28GENERAL FUND FORECAST
2013-14
Estimate
2014-15
Projection
2015-16
Projection
2016-17
Projection
2017-18
Projection
2018-19
Projection
2019-20
Projection
2020-21
Projection
RESOURCES
Beginning Balance (Excluding Contingency Reserve) 17,830 18,709 16,921 15,821 14,337 11,567 8,206 3,759
CURRENT REVENUES
Operating Revenue 91,837 92,421 94,811 97,275 100,531 102,922 105,965 108,764
Additional Operating Rev from Development 0 69 342 1,129 261 738 490 0
One-Time Revenue - Development 0 78 997 1,975 1,600 1,400 1,020 0
One-Time Revenue - Sale of Properties 2,000 0 0 0 0 0 0 0
TOTAL CURRENT REVENUES 93,837 92,568 96,150 100,379 102,392 105,060 107,475 108,764
EXPENDITURES
Current Service 89,509 91,441 94,076 97,160 100,376 103,708 107,139 109,836
Infrastructure / Facilities Projects 943 1,000 1,000 1,000 1,000 1,000 1,000 1,000
One-time Costs - Elections & Other 763 250 325 250 325 250 325 250
1% Assumed Savings - Vacancies, O&M, etc. 0 (914) (941) (972) (1,004) (1,037) (1,071) (1,098)
TOTAL EXPENDITURES 91,215 91,776 94,460 97,438 100,697 103,921 107,393 109,988
ANNUAL SURPLUS / (DEFICIT) 2,622 792 1,690 2,942 1,695 1,139 82 (1,225)
ADDITIONAL EXPENDITURES/POLICY ISSUES
Storm Water Discharge Requirements 3,500 3,500 3,500 3,500 3,500
Increased Infrastructure Funding 1,000 1,000
Increased Pre-Funding of Long-Term Liabilities 1,000 1,000
Additional Expenditures 0 2,000 2,000 3,500 3,500 3,500 3,500 3,500
CONTINGENCY RESERVE REQUIREMENT 26,853 27,432 28,223 29,148 30,113 31,112 32,142 32,951
ENDING AVAILABLE BALANCE 18,709 16,921 15,821 14,337 11,567 8,206 3,759 (1,775)
General Fund Forecast [in thousands]
29GENERAL FUND FORECAST SCHEDULE EXPLANATION
BEGINNING BALANCE
“Beginning Balance” reflects the amount of funds available for use at the beginning of the fiscal
year. The balance is the result of the net prior year-end revenues-to-expenditures, except in
years projected to have a negative ending balance. The Beginning Balance does not include
the City’s Contingency Reserve.
CURRENT REVENUES
“Current Revenues” highlights the Operating Revenue – including taxes and all other
sources, including fines and fees and other charges for current service. Also included are
projected additional operating revenues to be added in future years as a result of specific
developments. Projections for one -time revenues also associated with development or other
occurrences are also included.
EXPENDITURES
“Current Service” shows the aggregate annual projected expenditures required to sustain the
current FY 2013-14 level of services throughout the forecast period. Separately listed are the
projected minimum annual contributions towards needed infrastructure and facilities capital
improvement projects. Additionally, an anticipated amount for miscellaneous one- time
expenditure needs is factored in. Lastly, an assumption of 1% of annual expenditure savings
against the projected budget amount due to position vacancies, unexpended Operations and
Maintenance funding, etc., is included.
ADDITIONAL EXPENDITURE/POLICY ISSUES
These are the incremental cost of various items outside of the standard operating budget that
are to be considered during policy discussions.
CONTINGENCY RESERVE REQUIREMENT
Represents the required General Fund Contingency Reserve amount based on thirty percent of
Current Service and Infrastructure/Facilities Projects expenditures.
ENDING AVAILABLE BALANCE
Represents fund balance in excess of the Contingency Reserve Requirement. This amount can
be appropriated towards one- time purposes by the City Council, pursuant to City financial
policies.
30GENERAL FUND REVENUES
Looking Back
Over the past ten years, General Fund Revenues have grown at an average rate of 3.5%, after
factoring out land sale proceeds. However, during this period there was great volatility, with
the housing bubble fueling revenue gains that were unrealistic in the long- term. The Great
Recession saw revenues reduced and then flat for several years. Fiscal Year 2012- 13 saw
total General Fund revenues recover to the pre- recession high from Fiscal Year 2007- 08. The
graphs below represent the ten year history of total General Fund revenues, as well as the
year-to-year changes.
$0
$20
$40
$60
$80
$100
Thousands
General Fund Revenues
(excluding Land Sale Proceeds)
6.4%
9.5%
7.4%
7.5%
-7.3%
0.7%
1.1%
-2.1%
8.2%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
General Fund Revenues
Year-to-year % Change
31Looking Forward
The FY 2013- 14 revenue forecast estimate is approximately $3.6 million higher than the
current year revised budget, or an overall increase of 4%. Some significant increases in
certain revenue categories that are not projected to be recurring account for a large portion of
this increase. Over the forecast period, these revenues are expected to increase at an
average annual rate of 2.54%, with annual rates of change ranging from negative 1.35% in FY
2014-15 (over the FY 2013-14 estimate) to a high of 4.4% in FY 2017-18.
General Fund Forecast of Current Revenues
(in thousands)
The table below represents a consolidated view of the assumed rates of change in each revenue
category over the course of the forecast. This data is repeated in each individual revenue category
section.
2013-14
Estimate
2014-15
Projection
2015-16
Projection
2016-17
Projection
2017-18
Projection
2018-19
Projection
2019-20
Projection
2020-21
Projection
Property Tax 4,025 4,428 4,871 5,017 5,168 5,297 5,403 5,511
Sales Tax 18,822 19,311 20,007 20,843 21,613 22,283 23,166 23,899
Measure Y 7,800 8,304 8,603 8,962 9,294 9,582 9,961 10,277
PSAF Tax 350 359 371 383 395 407 419 432
Business License Tax 10,300 10,532 10,773 11,071 11,496 11,925 12,273 12,589
Franchise Tax 1,350 1,370 1,391 1,412 1,433 1,454 1,476 1,498
Real Prop. Transfer Tax 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500
UT. User Tax (Elect.) 6,100 6,283 6,492 6,681 6,910 7,118 7,323 7,504
UT. User Tax (Gas) 950 979 1,012 1,041 1,077 1,109 1,141 1,169
UT. User Tax (Water) 1,300 1,326 1,357 1,396 1,444 1,488 1,531 1,569
UT. User Tax (TEL) 5,250 5,040 4,838 4,644 4,458 4,280 4,152 4,027
UT. User Tax (Cable TV) 900 882 856 822 789 765 750 735
Transient Occupancy Tax 5,250 5,408 5,570 5,737 6,575 6,707 7,217 7,737
Comm/Ind. Dev. Tax 950 450 450 450 450 450 450 450
Licenses and Permits 3,500 3,150 3,245 3,342 3,442 3,545 3,651 3,761
Intergovernmental 3,566 3,619 3,673 3,728 3,784 3,841 3,899 3,957
Charges For Service 7,400 6,660 6,860 7,066 7,278 7,496 7,721 7,953
Fines and Forfeitures 4,000 4,120 4,244 4,371 4,502 4,637 4,776 4,919
Use Of Money And Property 1,500 1,530 1,561 1,592 1,624 1,656 1,689 1,723
Interfund Revenues 3,851 3,929 4,008 4,088 4,170 4,253 4,338 4,425
Other Revenues 450 450 450 450 450 450 450 450
Transfers In 2,723 2,791 2,679 2,679 2,679 2,679 2,679 2,679
Operating Revenue Sub-total 91,837 92,421 94,811 97,275 100,531 102,922 105,965 108,764
Recurring New Development Revenues
Sales Tax 38 209 120 208 37
Business Tax 4 54 172 167 78 39
Transient Occupancy Tax 709 368 368
UUT 27 79 128 94 84 46
Additional Operating Revenue 0 69 342 1,129 261 738 490 0
0.71% 2.88% 3.42% 2.43% 2.85% 2.70% 2.17%
One-Time Revenues
One-Time Development Permit Fees 78 997 1,975 1,600 1,400 1,020
Property Sale Proceeds 2,000
TOTAL GF REVENUES 93,837 92,568 96,150 100,379 102,392 105,060 107,475 108,764
32
REVENUES 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Property Tax 10.00% 10.00% 3.00% 3.00% 2.50% 2.00% 2.00%
Sales Tax 2.60% 3.40% 3.10% 3.10% 3.10% 3.00% 3.00%
PSAF TAX 2.60% 3.40% 3.10% 3.10% 3.10% 3.00% 3.00%
Business License Tax 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25%
Franchise Tax 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Real Property Transfer Tax 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Utility Users Tax - Electricity 3.00% 3.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Utility Users Tax - Gas 3.00% 3.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Utility Users Tax - Water 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Utility Users Tax - Telecomm -4.00% -4.00% -4.00% -4.00% -4.00% -3.00% -3.00%
Utility Users Tax - Cable TV -2.00% -3.00% -4.00% -4.00% -3.00% -2.00% -2.00%
Transient Occupancy Tax 3.00% 3.00% 3.00% 2.00% 2.00% 2.00% 2.00%
Commercial/Industrial Dev Tax -52.60% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Licenses and Permits -10.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Intergovernmental 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Charges for Services -10.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Fines and Forfeitures 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Use of Money and Property 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Interfund Revenues 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Other Revenues 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Transfers-In 2.50% -4.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Annual Projected % Change 3.95% -1.35% 3.87% 4.40% 2.00% 2.61% 2.30%
33PROPERTY TAX
The valuation of property in the City is determined by the Los Angeles County Tax Assessor,
except for public utility property which is assessed by the State Board of Equalization. The County
levies a base tax of one percent of assessed valuation (subject to annual growth limitations of two
percent). In 1993, the state passed legislation that resulted in the transfer of property tax
revenues to schools from cities and counties. This transfer resulted in the City's share of property
tax revenues being reduced to about 10.5 percent of the one percent County levy. The graph
below represents the breakdown of a property tax dollar in a non- redevelopment project area (Tax
District #1 refers to the City):
Also included in the Property Tax revenue category is the City’s share of pass -through payments
of incremental property taxes generated by the former Redevelopment Agency (now Successor
Agency). The on -going portion of this revenue is expected to decrease based on a recent
decision in a lawsuit between the Los Angeles Unified School District and Los Angeles County.
Additionally, as part of the redevelopment dissolution process, any property tax revenues
allocated to the Successor Agency in excess of required obligation payments over a six month
period are distributed to the various taxing entities. When this occurs, the City will receive i ts
10.5% share of such distributions. A large distribution occurred in Fiscal Year 2012- 13, but this is
considered one-time revenue as it cannot be counted on to recur.
34
Property Tax revenues are remitted by the County based on actual payments. There can be
minor fluctuation year-to-year based on late payments. Therefore, reviewing the City’s assessed
valuation is a better predictor than actual Property Tax receipts from year-to-year.
A significant recovery in the housing market returned assessed valuation growth in FY 2013- 14 to
over 5%. It is expected that this level of growth will begin to taper off in FY 2014- 15 and trend
back down towards the 2% inflationary assumption over the span of the forecast. However, it is
also anticipated that annual property tax transfers from the Successor Agency to the Culver City
Redevelopment Agency will increase in FY 2014-15 and FY 2015-16, and carry forward.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
10% 10% 3% 3% 2.5% 2% 2%
|10 10|500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Assessed Valuation
($ Millions)
7.0%
8.1%
6.7%
6.4%
2.1%
-0.2%
2.1%
1.7%
5.5%
Assessed Valuation
(Year-to-Year Percentage Change)
35SALES TAX
Bradley-Burns Sales Tax
In accordance with the California Revenue and Taxation Code, the Bradley -Burns Uniform Local
Sales and Use Tax Law, the State of California imposes an 7.5 percent sales and use tax on all
taxable sales in the City. The City receives 1.0 percent of the transactions subject to the sales and
use tax. An additional 0.5 percent is authorized by "Proposition A", another 0.5 percent by
"Proposition C," and another 0.5 percent by “Measure R”, all of which are levied within Los
Angeles County for various transportation purposes. The breakdown is represented by the
following graph:
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
Thousands
Sales Tax Revenues
(Total $)
36
Sales Tax is the City's largest revenue source representing approximately 20.4 percent of
estimated Fiscal Year 2013-14 General Fund revenue. This revenue source is very volatile based
on economic conditions. This is evidenced by the dramatic drops during the recession.
Significant recovery has occurred, and modest growth is projected during the balance of the
projection, based on input from the City’s sales tax consultant.
Public Safety Sales Tax (PSAF)
The City also receives one- half percent levy of the Public Safety Sales Tax, approved by the
voters in November 1993. For FY 2013- 14, revenues are estimated to be $350,000. Changes in
this revenue source are forecasted at the same level as sales tax.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
2.6% 3.4% 3.1% 3.1% 3.1% 3% 3%
2.5%
3.9%
5.4%
-1.5%
-10.7%
-10.6%
13.1%
4.8%
6.6%
4.0%
Sales Tax Revenues
(Year-to-Year Percentage Change)
37MEASURE Y
In November 2012, Culver City residents overwhelming voted for a 10- year ½ cent Transactions
and Use Tax. Measure Y took effect on April 1, 2013. With the exception of certain goods sold to
operators of common carrier aircraft, the transactions and use tax is imposed on the same goods
and merchandise as the local sales and use tax. However, where the Bradley -Burns Sales and
Use Tax is generally allocated to the jurisdiction where the sale is negotiated or the order is taken ,
the transactions and use tax is allocated to the district where the goods are delivered or placed
into use. This results in the receipts from Measure Y being slightly less than half of the Bradley -
Burns receipts. Measure Y receipts are forecasted as a factor of the Bradley -Burns amount. The
estimated factor used for the duration of the forecast was developed in conjunction with the City’s
sales tax consultant.
Projected Percentage of Bradley-Burns
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
43% 43% 43% 43% 43% 43% 43%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
2011-12 2012-13 2013-14E
Thousands
Sales Tax - Measure Y Revenues
(Total $)
38BUSINESS LICENSE TAX
Culver City Municipal Code requires a tax certificate as a prerequisite for conducting businesses,
trades or professions in the City. The Code further imposes an annual tax for the privilege of
conducting such businesses at different rates, depending on the type of business. Generally, this
revenue is projected to change at a level similar to Sales Tax.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Thousands
Business Tax Revenues
(Total $)
9.6%
5.7%
0.6%
-1.4%
-10.6%
-5.0%
4.1%
9.0%
-3.5%
3.4%
Business Tax Revenues
(Year-to-Year Percentage Change)
39FRANCHISE TAX
The City imposes fees on gas, electric, cable television and oil pipeline companies for the privilege
of using City streets. Although there is year -to-year variation, this revenue has consistently
remained between $1.2 million and $1.4 million for the last eight years.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Thousands
Franchise Tax Revenues
(Total $)
3.6%
4.4%
7.4% 10.8%
3.6%
-8.4%
4.1%
-1.2%
3.3%
0.5%
Franchise Tax Revenues
(Year-to-Year Percentage Change)
40REAL PROPERTY TRANSFER TAX
The Culver City Municipal Code authorizes the imposition of a transfer tax on real property sold in
the city. The rate is $2.25 per $500 of purchase value. This source of revenue can fluctuate
dramatically based on the real estate market. Because of this a flat amount of $1.5 million per
year is the base assumption.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
0% 0% 0% 0% 0% 0% 0%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Thousands
Real Property Tax Revenues
(Total $)
-12.9%
6.3%
8.2%
4.5%
8.8%
-12.3%
5.5%
-5.7%
10.1%
-3.6%
Real Property Tax Revenues
(Year-to-Year Percentage Change)
41UTILITY USERS TAX (UUT)
As authorized by the Culver City Municipal Code, an 11.0 percent utility tax is levied on electricity,
water, gas, cable TV, and both wired and cellular/mobile telephone service. Utility taxes are
collectively the second largest revenue source for the General Fund. Seasonal and annual
weather fluctuations can impact utility consumption. Generally, the combination of consumption
and cost are expected to increase in the coming years for electricity, natural gas and water,
resulting in modest annual increases in UUT revenues. However, dramatic technology and
consumption changes in the telephone and cable television industries are expected to result in
consistent reductions in revenue in future years.
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Thousands
UUT- Electricity Tax Revenues
(Total $)
-22.0%
23.5%
38.9%
4.1%
9.4%
9.4%
-11.8%
20.0%
48.9%
-36.0%
UUT-Electricty Tax Revenues
(Year-to-Year Percentage Change)
42
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Thousands
UUT- Gas Tax Revenues
(Total $)
0.0%
10.6%
12.1%
-2.7% -0.8%
-2.3%
4.4%
-3.4%
2.6%
2.1%
UUT - Gas Tax Revenues
(Year-to-Year Percentage Change)
43
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Thousands
UUT- Water Tax Revenues
(Total $)
14.7%
0.3%
15.8%
3.6%
7.0%
1.6%
14.9%
1.9%
0.9%
3.8%
UUT - Water Tax Revenues
(Year-to-Year Percentage Change)
44
$4,400
$4,600
$4,800
$5,000
$5,200
$5,400
$5,600
$5,800
Thousands
UUT- Telecom Tax Revenues
(Total $)
-3.2%
-1.4%
-2.2%
4.6%
7.8%
1.1%
-3.2%
3.3%
-3.7%
-2.7%
UUT - Telecom Revenues
(Year-to-Year Percentage Change)
45
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
Electricity 3% 3% 2% 2% 2% 2% 2%
Gas 3% 3% 2% 2% 2% 2% 2%
Water 2% 2% 2% 2% 2% 2% 2%
Telecom -4% -4% -4% -4% -4% -3% -3%
Cable -2% -3% -4% -4% -3% -2% -2%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Thousands
UUT- Cable Tax Revenues
(Total $)
18.7%
3.3%
9.2%
21.4%
-8.1%
-5.7%
12.2%
-1.4%
23.0%
-1.7%
UUT - Cable Revenues
(Year-to-Year Percentage Change)
46TRANSIENT OCCUPANCY TAX (TOT)
The Culver City Municipal Code authorizes the City to levy a tax for the privilege of occupying
lodgings on a transient basis. In April 2012, Culver City residents approved a ballot measure that
increased the rate from 12.0 percent to 14.0 percent (a 16.67% rate increase), to be consistent
with surrounding cities. This revenue source performed at a record level in FY 2012- 13, with a
37% increase over the prior year. This was well beyond the 16.67% increase in the tax rate.
Tourism has improved in the region, with occupancy and nightly room rates both rising.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
3% 3% 3% 2% 2% 2% 2%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
Thousands
Transient Occupancy Tax (TOT)
Revenues
(Total $)
7.4%
16.4%
11.8%
2.5%
-69.1%
6.7%
53.9%
12.4%
37.5%
-37.0%
Transient Occupancy Tax (TOT)
Revenues
(Year-to-Year Percentage Change)
47COMMERCIAL/INDUSTRIAL DEVELOPMENT TAX
In 1990, Culver City imposed a general tax on all commercial/industrial development in the City.
The rate is $25 for the first $250,000 in building permit valuation and 1.5 percent of valuation
thereafter. This is a tax that varies wildly from year-to-year depending on the level and type of new
development activity that occurs in a given year, as evidenced by the graph below . The baseline
estimate for this tax will be set at a flat $450,000 for the duration of the projection.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
-52.6% 0% 0% 0% 0% 0% 0%
$0
$500
$1,000
$1,500
$2,000
$2,500
Thousands
Commercial/Industrial Tax
Revenues
(Total $)
6.4%
16.0%
39.5%
-12.5%
4.4%
0.8%
10.7%
15.1%
37.4%
1.1%
Commercial/Industrial Revenues
(Year-to-Year Percentage Change)
48LICENSES AND PERMITS
The California Government Code and the State Constitution give cities the authority to assess
certain license and permit fees as a means of recovering the cost of regulating various activities.
Examples include building, electrical and plumbing permits, filming permits, taxi permits and police
alarm permits.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
-10% 3% 3% 3% 3% 3% 3%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Thousands
License & Permits Tax Revenues
(Total $)
87.2%
578.8%
-63.4%
287.8%
-77.3%
-61.0% -37.8%
71.5%
98.1%
134.5%
License & Permits Revenues
(Year-to-Year Percentage Change)
49INTERGOVERNMENTAL
The primary revenue included in this category (approximately 98% of the total) is the state
allocated motor vehicle in- lieu tax. Section 11005 of the State Revenue and Taxation Code
imposes an annual license fee that was equivalent to 2.0 percent of the market value of motor
vehicles before recent rate decreases enacted by the state. The code also specifies that 81.25
percent of the revenues are to be divided equally between cities and counties and apportioned on
the basis of population. This revenue performs relatively consistently year-to-year.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Thousands
Intergovernmental Revenues
(Total $)
12.3%
4.4%
7.1%
1.6%
-17.3%
13.5%
5.4%
-32.8%
15.6%
12.9%
Intergovernmental Revenues
(Year-to-Year Percentage Change)
50CHARGES FOR SERVICES
Service charges or fees are imposed on the user for a specialized service provided by the City
under the rationale that benefiting parties should pay for the cost of that service rather than the
general public. Examples of such services include various recreation program and facility rental
fees, plan check fees and hazardous material fees. Increased development activity and demand
for recreational facilities and programs has this revenue category trending upwards.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
-10% 3% 3% 3% 3% 3% 3%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Thousands
Charges for Services - Revenues
(Total $)
51.6%
1572.8%
-94.1%
187.1%
528.6%
-79.3%
2223.5%
-89.9%
-36.8%
157.8%
Charges for Services - Revenues
(Year-to-Year Percentage Change)
51FINES AND FORFEITURES
The California Vehicle and Penal Codes impose fines and penalties for traffic violations and
vehicular parking. The Culver City Municipal Code also imposes certain fines for parking
violations. Moving violations (including the Photo Enforcement Program) are collected by the
County of Los Angeles Superior Court and a portion distributed to the City, less a retainer for costs
of administration. The City is responsible for parking fine collection. Significant street projects
closed a number of Photo Enforcement intersections in prior years, but these systems are back
online and revenues are trending back to their previous levels.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
3% 3% 3% 3% 3% 3% 3%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
Thousands
Fines & Forfeitures Tax
Revenues
(Total $)
14.4%
57.6%
-9.1%
56.7%
-22.7%
7.0%
-8.0%
23.9%
4.9%
34.4%
Fines & Forfeitures Revenues
(Year-to-Year Percentage Change)
52USE OF MONEY AND PROPERTY
This category of revenue includes interest earnings and lease income. The City pools its available
cash from various funds and invests in differing instruments allowed under the City's Investment
Policy approved by the City Council. These earnings have suffered dramatically based on record
low interest rates for several years. Earnings are allocated to various funds on the basis of
proportionate balances. In FY 2012-13, lease income from the Pacific Theaters was added to this
category.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
2% 2% 2% 2% 2% 2% 2%
$0
$2,000
$4,000
$6,000
$8,000
Thousands
Use of Money/Prop
(Total $)
13.9%
8.6%
1.1%
13.3%
3.5% 8.0%
-5.8%
-26.6%
-38.5%
-16.1%
Use of Money/Prop
(Year-to-Year Percentage Change)
53INTERFUND TRANSFERS
Revenues in this area are generally from repayments for city-wide overhead service costs. Culver
City utilizes this category to monitor funds received from interagency billings and recovering the
cost of providing general administrative and indirect services to other funds. This category
included transfers from the former Redevelopment Agency for services provided by the General
Fund. FY 2012-13 represents the first full year without such reimbursements.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
2% 2% 2% 2% 2% 2% 2%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Thousands
Interfund Transfers - Revenues
(Total $)
13.9%
8.6%
1.1%
13.3%
3.5%
8.0%
-5.8%
-26.6%
-38.5%
-16.1%
Interfund Transfers - Revenues
(Year-to-Year Percentage Change)
54TRANSFERS IN
Transfers-In are revenues from the movement of resources between funds to pay for specific
activities. For any one transaction, the transfer -in and the transfer -out is classified in the same
way, so that the total transfers-in for the entire municipality equal the total transfers-out.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
2.5% -4% 0% 0% 0% 0% 0%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Thousands
Transfers In - Revenues
(Total $)
-7.1%
444.3%
-77.7%
-2.4%
7.9%
149.7%
-34.6%
-36.3%
39.9%
13.1%
Transfers In - Revenues
(Year-to-Year Percentage Change)
55OTHER REVENUES
Other Revenues are generally proceeds that are one- time amounts not classified in any of the
above-discussed revenue classifications. The significant spike in FY 2010-11 involved the sale of
a City property.
Projected Annual Rates of Change
FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21
0% 0% 0% 0% 0% 0% 0%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Thousands
Other Revenues
(Total $)
75.5%
-12.5%
3.6%
3.7%
4.9% 6.0%
-0.5%
-1.5%
1.0%
2.0%
Other Revenues
(Year-to-Year Percentage Change)
56ADDITIONAL EXPENDITURES / POLICY ISSUES
In addition to funding current service levels, the City Council will also need to consider allocating
funding for additional items in the coming years.
Storm Water Discharge Requirements
Culver City, along with other public agencies, is subject to meeting requirements under the
National Pollutant Discharge Elimination System (NPDES) permit program. The new Municipally
Separate Storm Sewer (MS4) Permit imposes severe restrictions on Total Maximum Daily Loads
(TMDLs) for certain pollutants, eight of which affect Culver City. Compliance with these TMDLs
will be very difficult to meet, and extremely costly. It is currently estimated that the City may be
responsible for as much as $50 million in needed infrastructure investments to comply. The
forecast includes a debt service estimate for financing these improvements through a bond issue,
if the General Fund were responsible for servicing the debt. It also includes several hundred
thousand dollars annually for operating and maintenance costs. Staff will be working to identify
alternative financing methods so that the General Fund is not responsible for the costs. Absent
such an alternative, the debt service amount was included to show the effect on fund balance
over the forecast period.
Additional Infrastructure Funding
A significant backlog of infrastructure and facility improvements (deferred maintenance) due to
lack of funding exists, and has been documented in prior budget s and forecasts. With fund
balance available in excess of the required Contingency Reserve, the City Council may explore
increased annual funding towards such projects. Identifying a future revenue stream, or
dedicating more General Fund resources, will ultimately be required.
Additional Pre-funding of Long-Term Liabilities
With significant long- term liabilities for pension and retiree medical costs, the City Council may
explore utilizing fund balance in excess of the required Contingency Reserve towards increased
pre-funding of these benefits, to save future interest costs. It is estimated by the City’s actuary
that each additional $1 million contributed towards pension liabilities now equals $5 million in
taxpayer savings over twenty -five years. Similar, although slightly less, savings could be
achieved by additional pre-funding into the retiree medical trust fund.
57FINANCIAL RESERVES
The establishment and maintenance of appropriate reserves within the General Fund is critical
to prudent financial management. The Government Finance Officers Association (GFOA)
recommends that local governments, regardless of size, maintain a General Fund financial
reserve amount of no less than one (8%) to two months (17%) of operating expenditures. The
City’s policy is to maintain a Contingency Reserve of thirty percent (30%). GFOA also lists
increased levels of reserves as a factor credit rating agencies use to determine a municipality’s
creditworthiness.
As indicated on the main forecast page, total financial reserve levels are currently at
approximately 53%, and are forecasted to remain at this level throughout the forecast. The
Contingency Reserve will only be utilized to meet one or more of the following events:
• A catastrophic loss of critical infrastructure requiring an expenditure of greater than or
equal to five percent (5%) of the General Fund, Operating Budget, as defined above.
• A State o r Federally declared state of emergency where the City response or related
City loss is greater than or equal to five percent (5%) of the General Fund, Operating
Budget.
• Any settlement arising from a claim or judgment where the loss exceeds the City’s
insured policy coverage by an amount greater than or equal to five percent (5%) of the
General Fund, Operating Budget.
• Deviation from budgeted revenue projections in the top three General Fund revenue
categories, namely, Sales Taxes, Utility Users’ Taxes and Business Taxes in a
cumulative amount greater than or equal to five percent (5%) of the General Fund,
Operating Budget.
• Any action by another government that eliminates or shifts revenues from the City
amounting to greater than or equal to five percent (5%) of the General Fund, Operating
Budget.
• Inability of the City to meet its debt service obligations in any given year.
• Any combination of factors 1) a.- f. amounting to greater than or equal to five percent
(5%) of the General Fund, Operating Budget in any one fiscal year.
•
Use of the Contingency Reserve must be approved by the City Council. Should the
Contingency Reserve commitment be used, the City Manager shall present a plan to City
Council to replenish the reserve within five years. Reserves beyond this level may be used for
one-time expenditure purposes or to pay down long-term liabilities, in accordance with the City’s
financial policies.
58
ECONOMIC
OUTLOOK &
PERSPECTIVE
59
60ECONOMIC OUTLOOK
OVERVIEW
A forecast of the City’s finances recognizes that the City’s fiscal health is directly linked to the
success of the local, national, and global economies. In light of this relationship, the
fiscal projections provided in this document are based, in large part, upon an analysis of
historical and current economic trends. The historical data and forecast projections are
provided by government and private organizations. This section provides projections for
the local and national economies, which support the fiscal projections presented in this
document.
INFLATION
The Consumer Price Index (CPI), commonly referred to as the inflation rate, measures the
average price change for a market basket of consumer goods and services. This basket of
goods contains a wide array of items, ranging from food and gasoline to college tuition and
medical supplies. The CPI does not, however, include investments such as stocks or real
estate.
The Bureau of Labor Statistics has classified each expenditure item in this basket of goods into
more than 200 categories. Each one of these categories is cataloged into eight major groups, as
shown in the adjacent figure. For example, gasoline is listed under the transportation category
and makes up 5.2% of the basket of goods.
The Consumer Price Index is used as the inflationary factor for specific non-personnel services
expenditures to develop the General Fund and other fund’s budget forecast. This allows the City
to plan for possible increases in certain commodities and other costs in the coming years by
taking into account rising prices.
Transportation,
18%
Housing, 46%
Education &
Communication,
7%
Food & Beverage,
16%
Medical Care, 6%
Apparel, 4%
Other, 3%
61Additionally, CPI also serves as a cost of living index. After reviewing data from the
State Department of Finance, the Los Angeles Economic Development
Corporation, and the UCLA Andersen Forecast, the projections for CPI have been
developed and modified to reflect the City’s budget cycle based on a fiscal year from July 1 to
June 30.
Source: Department of Labor
REGIONAL ECONOMIC CONDITIONS
The following information is an excerpt from the Los Angeles County Economic Development
Corporation’s 2013-2014 Mid-Year Economic Forecast & Industry Outlook, prepared by the
The Kyser Center for Economic Research.
With nearly 10 million residents, Los Angeles County is the most populous county in the
nation. Its population is larger than that of 42 states. If it were a country, it would have the 21st
largest economy in the world, just ahead of Iran and just behind Switzerland.
Los Angeles County carried momentum from a strong second half of last year into the first half
of this year, with year -to-year percentage job gains that outpaced the nation and the state.
Many local industries added jobs since the start of the year. The unemployment rate has fallen
rapidly so far this year, dropping into single -digit territory for the first time since late 2008.
Housing prices have experienced hefty increases since the start of the year. All in all, the first
half of 2013 brought significant and much needed improvements in the local economy.
Employment
During the first five months of this year, nonfarm jobs in Los Angeles County increased at an
average year-to-year rate of 1.9%, on par with the state and ahead of the 1.6% growth rate
nationally. Total nonfarm employment for the county averaged 3.91 million during the first five
62months of the year, the highest level since 2008. Job gains over the past several months
drove the county unemployment rate down from 10.8% in May 2012 to 9.2% this past May,
but a normal unemployment rate (7.0% to 7.5%) is still years away.
Average employment through the first five months of 2013 rose in all private sector industries,
except for manufacturing. The largest gains were in leisure and hospitality (the second largest
private sector industry by employment in the county), professional, scientific, and technical
services (the county’s fifth largest by employment), and administrative and support se rvices.
Health care and social assistance (the county’s largest industry by employment) continued its
long-term trend of job gains. These four industries accounted for four out of five jobs created
during the first part of 2013. Construction also added a significant number of jobs and
experienced the largest year -to-year percentage gain at 11.6%. Following the trend of recent
years, both manufacturing and government sector jobs lost ground.
Entertainment and Trade
The entertainment industry and the transportation and trade industry are two of the most
visible industries in Los Angeles County. The motion picture and sound recording sector
accounts for most of the county’s entertainment industry employment. Motion picture and
sound recording jobs have been more volatile than usual since the start of the year, beginning
the year with a January employment figure of 106,500, rising to 131,600 in March, and
dropping to 112,100 in May. Part of this volatility is typical of the seasonal employment
patterns found in the industry from one year to the next. Nevertheless, average industry
employment since the start of the year was 120,500, 3.3% higher compared to a year earlier.
Industry job gains reflect an increase in industry activity: On- location film production thr ough
the first two quarters of this year rose 13.1% compared to the same time a year earlier.
International trade passing through the ports and LAX depends on the condition of both the
national and global economies. The San Pedro Bay ports of Los Angeles and Long Beach are
the two largest container ports in the nation and Los Angeles International Airport (LAX) is one
of the busiest air cargo terminals in the nation. Much of the nation’s imported consumer goods
from Asia and the Pacific Rim enter the United States through the twin ports. The number of
TEUs (twenty-foot equivalent units) moving through the ports during the first half of this year
increased by 2.5% over the first half of 2012. For all of 2013, a gain of 2.2% is projected to
14.4 million TEUs. If achieved, TEU throughput would be at its highest level since 2008, but
still fall short of the pre- recession peak of 15.8 million units in 2006. The value of two- way
trade through the Los Angeles Customs District (LACD) is a broader measure of trade
volume. LACD two-way trade rose to a record of $403.4 billion last year. Year -to-date through
May, trade is up by 1.6%, with a slight increase expected for all of this year. As economies
around the globe (including the U.S.) accelerate in 2014, two-way trade will also pick up.
Professional Services and Technology
The professional, scientific, and technical services industry is the fifth largest in Los Angeles
County. Firms in this industry employ a wide array of professionals, including architects,
engineers, and attorneys. It is an important but often overlooked source of highly
63compensated jobs in the local economy. Industry employment stood at 267,000 in 2012, up
3.5% from a year earlier. Growth is expected to continue in this sector over the next two
years, with projected gains of over 9,000 jobs this year and nearly 12,000 jobs next year.
The technology sector, which includes manufacturing and service industries in aerospace,
information technology, electronics, and biomedical technology, employed 184,000 workers in
2012, up 2.4% from a year earlier. Like the professional, scientific, and technical services
industry, it is a source of highly compensated jobs in the local economy. From January
through May of this year, average employment in this sector rose 1.8% and is expected to
post modest gains this year and next.
Conclusion
The Los Angeles County economy will continue to advance on many fronts through the rest of
this year and into 2014. Population should cross the 10 million threshold in 2014, while
nonfarm jobs in Los Angeles County should grow by 1.7% for all of this year and 1.3% 2014.
Even so, it may be 2015 or 2016 before nonfarm employment exceeds the pre-recession peak
of 4.12 million reached in 2007. The largest gains for 2013 are expected in leisure and
hospitality, health care, professional, scientific and technical services, and construction. Job
losses will continue in manufacturing, but government jobs may end the year roughly flat, with
a slight gain expected next year.
With these employment gains, total personal income will also grow. A 2.1% gain is expected
this year and a 4.9% increase is projected for 2014. Similarly, taxable retail sales will increase
by 3.1% this year and by 3.8% next year, following a 10.3% surge in 2012.
While the general outlook is positive, there are concerns about the impact of federal budget
cuts on specific segments of the local economy. In particular, defense -related cuts may lead
to civilian job losses locally. It remains to be seen whether these cuts will be implemented and
how deeply they will affect the local aerospace industry.
64
65
66