City of Culver City, California
City Council Agenda Item Report
PH1-1
RECOMMENDATION:
Staff recommends the City Council receive an update of the Comprehensive Financial
Plan (Plan), discuss the CFP, and direct staff as deemed appropriate.
BACKGROUND:
The Updated Plan being presented to the City Council tonight includes a fifteen-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 in January 2008. The Plan continues to show the trend of recurring
expenditures out-pacing recurring revenues, as was presented in the last Plan. The
current economic realities have only moved this problem closer and made the gap
larger. 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 some of the historical research originally done in preparation of the Plans
presented to Council in 2007 and 2008. This data was combined with updated
financial information from the Fiscal 2008-09 and Fiscal 2009-10 budget process, and
mid-year adjusted financial information as of December 31, 2008.
Meeting Date: 03/09/09 Item Number: PH-1
AGENDA ITEM: Discussion of an Update to the Comprehensive Financial Plan
and Direction to Staff as Deemed Appropriate.
Contact Person/Dept.: Jeff Muir, Chief
Financial Officer
Phone Number: 310-253-5865
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [X] Action Item: [] Attachments: [X]
Public Notification:
Master E-Mail Notification List (03/04/09); Culver City Employees Association, Culver
City Management Group, Culver City Fire Management Group, Culver City Firefighters
Local 1927, AFL-CIO, Culver City Police Officers Association, and Culver City Police
Management Group on 03/05/09; Mail notice through USPS to Culver City Homeowners
Associations, and Culver City Civic Organizations on 03/05/09
Department Approval:
Jeff Muir (03/03/09)
City Attorney Approval:
Carol Schwab (by H. Baker) (03/03/09)
Chief Financial Officer Approval:
Jeff Muir (03/03/09)
City Manager Approval:
Jerry B. Fulwood (03/05/09) City of Culver City, California
City Council Agenda Item Report
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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 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
City’s current UUT. In April 2008, Culver City voters overwhelming supported
modernizing the City’s UUT ordinance.
The City Council also directed staff to return with more information on the issues
identified in the Plan that were faced by the Fire Department. In December 2007, the
City Council was given a report addressing the current Fire Service level issue. The
issue had re-surfaced as a result of the bankruptcy filing of Brotman Hospital which
materialized after the Council had considered revenue enhancing options on June 18,
2007. At that time, the City Council directed staff to seek consulting services to
investigate forming a Special Financing District to potentially fund a third paramedic
rescue unit. A contract was awarded in January 2008, just as the economy began to
contract. Staff did some preliminary analysis with the consultant, however, it was
decided that, due to mitigating economic factors, it would be in the City’s best interest
to put formation of a Special Financing District on hold in favor of a more
comprehensive solution to addressing the City’s financial challenges, including cost
recovery and recouping revenue. Since then, the economy has continued to contract,
making a comprehensive approach even more imperative.
DISCUSSION:
The updated Plan being presented tonight includes adjusted budget information
incorporating City Council approved actions for fiscal 2008-09 and detailed revenue
and expenditure projections through fiscal 2023-24. It is important to note that
forecasting five years is difficult in and of itself, and projections beyond that are staff’s
best estimate based on current and historical trends. This information was derived
from historical trends for both revenues, which has been adjusted based on current
economic trends, and expenditures, including remaining MOU negotiated items. The
City has been able to balance revenues with expenditures over the last few years due
to higher than anticipated ongoing revenues and some one-time revenues (including
new development activity and land sale proceeds). Based on current information, the
City will show a slight operational deficit in fiscal 2008-09, and is estimated to face an
approximate $4 million deficit in fiscal 2009-10, which grows into the future.
The City has been diligent in ensuring that one-time revenues are only used to fund
one-time expenditures. Due to the slowdown of development activity this fiscal year, it
is doubtful the City will meet its one-time revenue projections, and steps should be City of Culver City, California
City Council Agenda Item Report
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developed to reduce or stop the purchases of one-time items, such as departmental
supplies, unless an exception is authorized by the City Manager. It is also clear the
underlying fundamental issue of recurring expenditures outpacing recurring revenues
has not been solved and is a major issue facing the City. Lower than anticipated
revenues in fiscal 2009-10 contribute to the gap next year, but even if the revenues
were to grow at historical rates, expenditures would still outpace revenues. This
projected deficit will continue to grow unless direct and decisive action is taken.
Preliminary figures show the General Fund Reserve as having a healthy balance
through the remainder of Fiscal 2008-09. 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 new development activity), 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.
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:
• Placement of a measure on the April 2008 ballot that asked Culver City voters
to approve modernizing the City’s Utility User’s Tax Ordinance, which passed
overwhelmingly. The UUT currently generates revenue of approximately $14.5
million a year.
• Creation of a team of staff, including members of all six of the City’s bargaining
units, to evaluate the feasibility of various options for healthcare cost
containment including researching various healthcare providers (in process and
meeting with bargaining groups).
• Continuation of implementation of Best Management Practices throughout City
Departments.
Current Economic Issues Facing the City
As with information presented in previous reports, the economy has been a major
factor with regards to the City’s financial issues. Culver City has not yet seen the
slowdown in Property Tax revenues other cities and counties are experiencing, and if
they are to be seen, they most likely will not occur until fiscal 2010-11. Projections
included in the fifteen-year projections do include a slowdown in this tax category,
though, over the next couple of years. Real Property Transfer Tax has also
experienced a slowdown, especially due to a slowdown in turnover in the commercial City of Culver City, California
City Council Agenda Item Report
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real estate market. This category also anticipates low growth over the next couple of
years.
For Culver City, sales tax is the major revenue issue facing the General Fund in the
upcoming couple of fiscal years. On average, sales tax is over 20% of the General
Fund. Over the past eighteen months, the drop in sales tax revenues has been
significant, and fiscal 2009-10 will continue this trend. Not all of the decline is
attributed to the lower than normal retail sales, but also to the loss of some major
sales tax generators in the City, which include Albertson Oldsmobile, Karl Storz
Endoscopy, Circuit City, and Hooman Automotive Group. Along with sales tax, these
business losses contribute to a loss of business tax and utility tax revenue also.
Base sales tax revenues, as reported in the mid-year report, were adjusted down by
approximately $1 million given actual receipts received through December 31, 2008.
Given this information, along with the prior and new business closings, projections for
fiscal year 2009-10 show an additional reduction in sales tax receipts. Westfield
Shopping Mall should be completed in October 2009, and even with this completion
and new Target, it will not be enough to raise sales tax estimates for the coming fiscal
year.
The uncertainty of the State Budget has created concern, although with the approval
of a Spending Plan and Budget in February, city and county general revenues were
basically not touched. Schools and Transportation took the biggest hits, along with
Redevelopment Agencies that also had funding taken from them this year. The
State’s Plan does rely on voter approval of some items in order for it to be completely
fulfilled, and this will be known after the May 19, 2009 special election.
Staff continues to monitor state budget issues, and will keep City Council and
Executive Management informed of any new information.
Future (Long-term) Issues Facing the City
In November 2007, 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 Governmental Accounting Standards
Board (GASB) Statement No. 45 reporting. The primary purpose of this study was to
determine the long-term costs of the City’s medical insurance for retirees. The report
was provided to the City and presented to the Budget & Finance Subcommittee. A
presentation was given to the full City Council in May 2008. The report analyzed the
cost to provide the benefits currently offered over the next thirty years, based on
current active and retired employees, and using actuarial assumptions and trends.
City of Culver City, California
City Council Agenda Item Report
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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 mere fraction of the amount to
fully fund the expected actuary-recommended contribution. The City currently funds
this benefit on a pay-as-you-go basis, and the actual amount expended for Fiscal Year
2007-08 was $3.51 million. The report shows that this cost will continuously rise at a
fairly significant rate, doubling from the current amount by 2017 and reaching almost
$14 million per year at the end of the thirty years. If the City wanted to pre-fund this
benefit today, it will need to invest $105 million with a 7.75% rate-of-return (similar to
what CalPERS assumes for their portfolio), or $208 million if it earned 4% (the
approximate earnings rate for the City’s investment portfolio). If the City chooses to
fund the benefit pursuant to GASB 45 over the thirty years, and deposits funds
annually into an irrevocable trust fund, it will require $7.4 million annually in a trust
earning 7.75% (lower earnings would require a higher amount). This means basically
doubling the current amount the City pays.
While there is not a legal requirement to fund this amount, the problem is that in about
ten years this is the amount the City will need to fund on a pay-as-you-go basis, and it
will only go up from there. Additionally, the City will be required to report the
difference between the Actuarially Required Contribution and what it actually funds
beginning with the 2008-09 audited financial statements, which could affect the City’s
future credit rating and cost of borrowing.
Sufficient funding for deferred maintenance continues to be a struggle for many cities,
including Culver City. For the past few fiscal years, 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
continues to be in process. Two infrastructure studies were conducted last year (i.e.
Facility Maintenance study and Park Facility Maintenance study) 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 maintenance, immediate
repair needs, and an annual reserve cost to amortize large costs (i.e. roof
replacement) over a number of years. By utilizing data from this study, funds were
appropriated in the fiscal 2007-08 and 2008-09 Capital Improvement Budgets in the I
& A Fund for some immediate repairs using available fund balance from the General
Fund reserve. This study will again be used as a planning tool for the upcoming
budget review.
General Fund Scenarios in Updated Plan
There are five financial scenarios included in the Plan for the General Fund. Four are
scenarios showing potential forecasts based on different projections, and one
(Scenario 5) is for illustrative purposes only. The scenarios are as follows:
City of Culver City, California
City Council Agenda Item Report
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Scenario 1 Summary
This scenario displays what staff believes to be the most realistic financial projection.
It uses the adjusted budget information as of December 31, 2008, which includes all
adjustments that have been made since July 1, 2008, including encumbrance
carryovers, as the base information for fiscal 2008-09. Added to fiscal 2008-09 is the
reduction of $1 million for the potential loss of the entire investment amount of the
Lehman Brothers bond due to their bankruptcy in August 2008; potential savings from
the “pull-back” measures implemented by the City Manager in October; and mid-year
adjustments discussed in the mid-year report that include reductions in Sales Tax,
Property Tax, and State VLF Fee.
Fiscal 2009-10 takes into account the continued downturn in the economy that is
forecast to remain in place through the remainder of calendar 2009, and into the
beginning of calendar 2010. Given information received in October and November
from CalPERS, there is a very real possibility the City will see large increases in its
retirement rates beginning in fiscal 2011-12. This projected increase has been
included for all funds with personnel related costs, and is also included in all other
scenarios. For the General Fund the estimated annual increase begins with an
estimated $1.3 million hit in fiscal 2011-12.
It is important to note this Scenario does not include any funding towards the City’s
OPEB related funding needs, which amount to approximately $7 million annually for
the General Fund.
The General Fund reserve remains above the 30% policy threshold through fiscal
2009-10 at approximately 34.5%, but fiscal 2010-11 sees it drop drastically to 27.0%.
It continues to drop until it becomes negative in fiscal 2014-15. It is a goal of the City
to maintain a general operating reserve of, at a minimum, 25% of projected General
Fund operating expenditures for each fiscal year and an additional 5% emergency
situations (excluding debt service, fund transfers, and encumbered funds). If the
reserve were ever to fall below the 30% threshold, the City must implement measures
to restore the reserve per City Council policy.
Scenario 2 Summary
Scenario 2 includes all information from Scenario 1, and adds one additional issue:
the gradual annual funding set-aside for future related funding liability related to
OPEB. The current study conducted by our consultants, AON, revealed the City had
an unfunded liability of approximately $200 million related to retirement health
benefits. Currently the City is on a pay-as-you-go basis for retiree health benefits, but
sets nothing aside for future retiree medical liability. The identified amount that should
be set-aside, above and beyond the pay-as-you-go amount, on an annual basis is $7
million. Scenario 2 shows the gradual set-aside starting at $1 million in 2009-10, $2 City of Culver City, California
City Council Agenda Item Report
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million in 2010-11, 4$ in 2011-12, $6 million in 2012-13, and then the full $7 million
from fiscal 2013-14 forward.
The General Fund reserve percentage would be 33.4% in Fiscal 2009-10 with this
additional set-aside, 23.6% in fiscal 2010-11, and 11.1% in fiscal 2011-12. Fiscal
2012-13 shows the General Fund going into negative territory.
Scenario 3 Summary
Scenario 3 includes the base information from prior scenarios for fiscal 2008-09.
Beginning in fiscal 2009-10 it leaves revenues the same, increases the Excess
Appropriation limit up to 96.5% and adds back the 3% CPI increase to operating and
maintenance expenditures. These two adjustments, which were removed during the
budget process last year for the approved fiscal 2009-10 budget, add back
approximately $1 million to the overall expenditure amount. With this adjustment, the
General Fund reserve percentage gets dangerously close to the required 30%
threshold. The OPEB set-aside amount is also contained in this scenario.
Scenario 4 Summary
Scenario 4 includes various potential budget reduction options that could be used to
help the City balance the budget over the next several fiscal years. Most of the items
are one-time, short-term items that are meant to bridge the gap until fiscal 2011-12
when it is hoped the general economic conditions, not only locally but throughout the
state, nation and world, will have improved. If no new revenue sources are introduced
by fiscal 2011-12, the need for layoffs will be nearly certain.
Scenario 5 Summary
Scenario 5 is for illustrative purposes to show where the City’s finances would stand if
it budgeted at 100% of appropriations. It is clear the City has a ways to go before it
will be able to cover the 100% of its budgeted recurring appropriations with budgeted
recurring revenues.
OTHER FUND INFORMATION
Enterprise Funds-
Refuse Fund - Many of the same economic pressures constraining the General Fund
are also impacting the Refuse Fund. Escalating personnel costs, fluctuating fuel
prices, and the limited availability of raw materials, which has greatly increased the
price of steel, are a few of the major issues placing pressure on the fund. This
increase in steel has made new bins, replacement parts for older vehicles, and the
purchase of new vehicles more expensive.
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 City of Culver City, California
City Council Agenda Item Report
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landfills to rail haul disposal to more distant locations occurs. The refuse fund
expenditure projections take into account these projected disposal costs increases. In
order to restore the financial health of the Refuse Fund, commercial and residential
waste removal fees will need to be increased over the next few years. The revenue
projections assume that there will be no increase in fiscal 2009-10, and an increase of
approximately 4% per year for the next two fiscal years after that. If these revenue
increases are realized and current expenditures stay within the anticipated growth
forecast, then the Refuse Fund should continue to have a positive fund balance from
2009-10 on.
Transit Fund - The Transit Fund is also 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. It is clear, though, that beginning in
fiscal 2010-11 a gap occurs between revenues and expenditures and needs to be
addressed. Transit funding is one of the more volatile financing sources because it
relies mainly on funding sources from other agencies, such as the federal and state
government. Given the current events of the past year or two with funding being
shifted or taken away, it is near impossible to predict what funds will still be available
in future years. New revenue sources, fare increases, and service cuts will likely be
considered in order to help the expenditures to meet revenues.
Sewer Fund – The Public Works Department is gearing up to do a full Sewer Capital
Improvement Study in the coming months. Current analysis shows the Sewer Fund to
be in good shape. There was no increase in sewer operating charge rates for fiscal
2008-09, and projections in the forecast do show slight increases beginning in fiscal
2010-11 to cover operating & maintenance cost increases. Further information will be
presented on the Sewer Fund during the budget process when the capital project
study is finalized.
Other Funds – Other City funds are operating well, and further information will be
discussed during the upcoming budget process.
FISCAL ANALYSIS:
Included as an Appendix to the Comprehensive Financial Plan is a Long-Term
Financial Options Summary report (Attachment 2). This report is a compilation of a
number of revenue enhancement and cost reduction ideas that have been collected
over the last few years from staff research and input from the bargaining units, City
Council subcommittees, and various staff task forces and subcommittees that have
been convened to discuss financial matters. There is a brief discussion for each City of Culver City, California
City Council Agenda Item Report
PH1-9
option that provides a basic description of the option, the potential fiscal impact, and
the process for implementing the option, if applicable. At the end of the report, there
are also a few short-term cost reduction options identified by the Culver City
Management Group (CCMG). The Chief Financial Officer would like to thank CCMG
for providing some ideas in response to a request sent to all the bargaining groups in
November 2008.
While implementing at least some of the options provided in the Financial Options
Summary is imperative to the long term financial health of the City, the impact of
implementing those options would not be realized for at least one year or more in most
cases. Additionally, even though the long term impact of most of the options
contained in that summary report are significant, the initial short term impact is
relatively minor.
The City has a fundamental problem in that its ongoing revenues are not sufficient to
support its ongoing costs based on current service levels, and required staffing. Even
if and when the economy improves, the City still shows a structural deficit. While there
are certainly some short-term solutions the City can implement to get through the next
year, the City is at a crossroads where some difficult decisions must be made.
At this juncture, the City must focus on surviving in the short term without losing sight
of the long term goals. Tough short term decisions must be made while, concurrently,
strategies to address long term needs are developed. Staff will continue to work with
the City Council Budget & Finance Subcommittee to develop the long term strategy
and with the City Manager’s Office to tackle the short term difficulties. Staff requests
that the City Council carefully review the Long Term Financial Options Summary that
is included as an Appendix to the Plan (beginning on page 129) and provide feedback
to the CFO or colleagues on the Budget & Finance Subcommittee as soon as possible
so that the process of developing a long-term strategy can begin. Many of these
options will require substantial staff effort, and therefore it is important to have input on
those items the City Council is supportive of.
There is no direct additional fiscal impact associated with the presentation of 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
City of Culver City, California
City Council Agenda Item Report
PH1-10
MOTION:
That the City Council:
1. Receive and file the Updated Comprehensive Financial Master Plan; and
2. Direct staff as deemed appropriate.
MEETING DATE: 03/09/09
AGENDA ITEM: Discussion of an Update to the Comprehensive Financial Plan and
Direction to Staff as Deemed Appropriate.
ATTACHMENTS
Pages
1. Updated Comprehensive Financial Plan 1 - 128
2. Financial Options Summary Report 129 - 145
Comprehensive Financial Plan
February 2009 Table of Contents Page
Introduction
General Fund
Narrative
Projection Worksheets
Scenario 1
One-time Revenues
Scenario 2
Scenario 3
Scenario 4
Scenario 5
Refuse Fund
Narrative
Projection Worksheet
Transit Fund
Narrative
Projection Worksheet
Sewer Fund
Narrative
Projection Worksheet
Equipment Replacement Fund
Narrative
Projection Worksheet
Equipment Maintenance Fund
Narrative
Projection Worksheet
Self Insurance Fund
Narrative
Projection Worksheet
Operating Grants Fund
Narrative
Projection Worksheets
Grants Operating
CDBG Operating
1
7
25
26
27
28
29
30
33
39
41
47
49
53
55
59
61
65
67
73
75
81
82
Table of Contents
Capital Projects Fund
Narrative
Projection Worksheets
Arts Fund
Asset Seizures Fund
New Development Impact Fund
Gas Tax Fund
Parks Improvement Fund
Improvements & Acquisitions Fund
Parking Improvement Fund
Grants – Capital
CDBG – Capital
Props A&C Funds
Narrative
Projection Worksheets
Prop A
Prop C
Section 8 Fund
Narrative
Projection Worksheet
Innovation Fund
Projection Worksheet
Landscape Maintenance District
Projection Worksheet
Redevelopment Agency , Low/Moderate Income
Housing Fund, and Bond Funds
Narrative
Projection Worksheets
Tax-Exempt Bond Funds
Low/Mod Income Housing Fund
Unrestricted Funds
Financial Options Summary Report
Page
83
91
92
93
94
95
96
97
98
99
101
105
106
107
111
113
115
117
125
126
127
129
CITY 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 2008-09 and 2009-10 budget process as well as other City
Council programs and projects approved after the budget was adopted but prior to
January 31, 2008.
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 40,700, 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 714 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.
1Comprehensive Financial Plan Update – Introduction
February 2009
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 2008-09 is approximately $148 million (excluding
internal service funds), with a General Fund budget of approximately $85.6 million.
Public Safety expenditures account for approximately 52% of the General Fund budget.
BACKGROUND
The financial environment that municipal governments operate in has changed
drastically over the last twenty-five 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.
As in past presentations of the Comprehensive Financial Plan, the 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 requires cities to
report retirement benefits, including retiree medical benefits, as a liability.
2Comprehensive Financial Plan Update – Introduction
February 2009
ECONOMIC OVERVIEW
WHAT A DIFFERENCE A YEAR MAKES
Last year at this time, there were a number of pressures threatening the economy,
including fluctuating oil prices, a slowing housing market, the Writers’ Guild strike, and a
projected $14 billion shortfall in the state budget. However, the consensus among
economists was that the national and state economies would experience slow growth in
the upcoming year. There were faint whispers of a possible recession, but almost
nobody expected what was to come.
Throughout the spring and summer, home foreclosures continued to escalate as
homeowners were unable to make their loan payments. This had a ripple effect that
has been felt throughout the economy and continues to threaten the Country’s
economic stability. The first companies to feel the impact were construction companies
as new home construction dropped off dramatically. This resulted in a large loss of jobs
in the construction industry.
The next companies to feel the impact were small to medium sized financial institutions,
who experienced cash flow problems and began to recognize large losses due to an
increasing number of loan income that they were losing due to foreclosures. Many
economists still thought this would be contained to smaller institutions as the “to big to
fail” financial institutions were presumably well diversified and therefore protected
against an increase in bad mortgage debt.
As foreclosures continued through the summer, larger banks and financial institutions
that had invested in mortgage backed securities began to experience significant losses.
This led to the merger or failure of a number of large financial institutions that had
previously been though of as the most financially stable institutions in the Country.
Institutions such as Lehman Brothers, JP Morgan, Morgan Stanley, Wachovia,
Washington Mutual, AIG, among others, all needed to be bailed out through merger,
federal assistance, or bankruptcy protection. This resulted in a large loss of jobs in the
financial industry.
In addition to the mounting job losses, there were other negative consequences that
materialized as a result of these failing financial institutions. The most significant short-
term impact was that banks tightened their lending practices to the point that the credit
market all but disappeared. This impacted the housing market as consumers interested
in taking advantage of affordable housing prices and plenty of housing supply had
trouble getting a loan, which made any sort of potential turnaround in the housing
market very difficult.
An equally significant impact of the disappearing credit market is the impact on
businesses, large and small, ability to access lines of credit that are necessary to keep
a business running. A part of doing business is having access to a line of credit to
manage cash flow and be sure that all business liabilities can be met on a monthly
3Comprehensive Financial Plan Update – Introduction
February 2009
basis. As the lines of credit are restricted or dry up, businesses must use any reserve
funds they may have. As those reserve funds are used up, they must cut costs or close
their doors altogether, putting more people out of work.
The failing institutions also caused consternation with investors and the stock market,
causing the extreme volatility on Wall Street. In June, the Dow Jones Industrial
Average (DJIA) index was still hovering above 12,000 points. Since the collapse of the
financial sector in the U.S. and abroad, the DJIA is currently hovering around 8,000 and
500 point swings (both positive and negative) is not uncommon. For many people, a
30% drop in the stock market means a 30% drop in overall wealth and a 30% drop in
retirement savings.
In previous down markets, people could still rely on their home as a source of wealth to
draw money from in tough times, but in many areas, home values had also dropped 20
– 30%. To make up for this across the board decline in wealth, many people have
turned to traditional saving and have pulled back on their spending practices. The
combination of increased job loss and increased saving, has caused the economy as a
whole to retract. As spending decreases, many companies are experiencing declining
revenues, especially in auto, retail, and tourism industries. The declining revenues
have led to even more large scale layoffs, especially in the auto industry.
The federal government took unprecedented steps to attempt to stop the bleeding by
arranging takeovers of failing banks and by approving a $700 billion bailout package for
banks to try to loosen up the credit markets and get money moving again, but this has
yet to have a significant impact. Currently, a second stimulus package is making its
way through the federal government, and is hoped to further spur assistance for
business and the general populace.
As it stands today, the credit market is still very tight, the stock market is still extremely
volatile, unemployment continues to rise, businesses are closing in record numbers,
and the housing market is still very weak as foreclosures continue to be a problem.
OUTLOOK
The consensus among most experts is that we are in a recession that will, by most
accounts, last through the end of 2009 and may continue into 2010. Also, by most
accounts, we have not yet hit bottom. Many economists, including the UCLA Anderson
Forecast|1010|, expect things to get worse before they get better.
Over the next year, we expect to see a correction in a number of areas that will
effectively weed out riskier financial vehicles in favor of more conservative conventional
vehicles. In the financial sector, this weeding out process has already begun. The
failure and merger of “weaker” financial institutions has led to the consolidation of larger,
|1010| Information reported at the UCLA Anderson Forecast Conference held on December 11, 2008 reports
that the outlook for California calls for a very weak first three quarters of 2009, with the glimmer of a
recovery in the fourth quarter.
4Comprehensive Financial Plan Update – Introduction
February 2009
better leveraged banks such as the JPMorgan-Chase-Wamu merger, Wells Fargo-
Wachovia merger, and Bank of America’s acquisition of Countrywide and Merrill Lynch
(just to name a few of the larger mergers).
As these banks become more financially stable, and the federal bailout begins to take
effect, the credit markets should begin to loosen as banks become more willing to give
loans.
On the real estate side, the price correction that California is experiencing will lure new
buyers into the market, who will slowly start to buy down the large housing supply as
loans become more readily available. On the commercial side, businesses that were
financially stable enough to survive through the tough times will have more financial
options available as well. Commercial development should start up again to meet an
increasing demand. All of this will create jobs and begin to stabilize the economy.
However, this will be a long painful process that may last more than a year.
We also expect the post recession economy to look very different from the pre-
recession economy. In the years leading up to this period, the US was experiencing a
very gluttonous economy where the average American spent more than 98% of their
income and saved less than 2%. This was an incredible boost to the economy as it
pushed the value of almost all consumer goods up. But in the end, this level of
consumerism was unsustainable. We expect the post recession economy to return to a
more historical level of consumer spending. In the mid-1980’s, Americans spent closer
to 91% of their income and saved the remaining 9 or 10%. In a post-recession America,
a savings rate in the neighborhood of 5% seems a little more realistic and sustainable.
ECONOMY ’S IMPACT ON CULVER CITY
So what does this all mean for Culver City? In the short term, revenues are expected to
experience a significant downward adjustment. Culver City’s two largest sources of
revenue, Sales Tax and Business Tax (which is based primarily on businesses’ gross
receipts), are based almost entirely on consumer spending. The immediate pull back
on consumer spending is expected to have a big effect on the City’s revenues. The City
is already experiencing a decline in Sales Tax revenue and based on preliminary
estimates of slow retail sales over the holiday season, further loss of Sales Tax revenue
is expected. In the long term, if consumers do change their behavior and begin to save
a larger portion of their income, the City’s base Sales Tax and Business Tax projections
will need to be adjusted downward to account for that change.
The credit crunch is also having an impact on a number of development projects that
are having trouble securing construction financing. Already, two large development
projects are being delayed due to the credit crunch, which will have an impact on the
City’s immediate plan check and development permit related fees and charges. Culver
City is fortunate to have a number of large construction projects already under
development, which should help the City through the next few months. Since most
development projects span a number of years between the initial planning stages and
the construction stage, the projects currently under development were initiated years
5Comprehensive Financial Plan Update – Introduction
February 2009
ago. Since many developers are holding back until the economy shows some signs of
recovery, the City may not experience a slowdown in development related fees and
charges for 6 to 12 months. However, some negative impact is expected. A discussion
of each revenue source and the five-year projection is included in latter sections of this
report.
STATE BUDGET IMPACT ON CULVER CITY
On September 23, 2008, 85 days after the beginning of the fiscal year, the state
legislature finally reached an agreement on a budget for FY 2008-09. The state did not
take revenues from cities; however, they diverted $350 million in redevelopment agency
revenues in the form of an ERAF shift, which requires redevelopment agencies to fund
a portion of the state’s public education funding obligation. Culver City Redevelopment
Agency’s ERAF payment in FY 2008-09 will be approximately $2.25 million. At this
point, this is only a one-year payment.
The predictions that the state budget was a very weak document did not take long to
become reality. Consequently, the governor released a proposed change to the FY
2008-09 budget just six weeks after it was finally adopted. Due to a shortage in
revenues and the condition of the economy, the governor’s office, with concurrence
from the Legislative Analyst’s Office, estimated a budget deficit of over $42 billion
through June 2010.
On February 19, 2009 the State Legislature, after a grueling number of meetings, finally
approved a Spending Plan and Budget to bridge the $42 billion gap for the remainder of
fiscal 2008-09 and the full year of fiscal 2009-10. The governor followed the next day
by signing the package, but not without vetoing approximately $1 billion in line items.
The Plan includes approximately $12.8 billion in revenue increase, $15.1 in cuts, $5
billion in potential borrowing against future lottery revenues, $6 billion in bonds to pay
for expenses in this fiscal year, and various other items. Those taking the biggest hit in
the Plan are schools, the disabled, and seniors. Cities and counties were left relatively
untouched from deferred or shifted funding. Transportation did have STA funding for
fiscal 2008-09 taken, as well as this funding source being diverted permanently
beginning in fiscal 2009-10. The MTA will be backfilling the eliminated funding for the
remainder of fiscal 2008-09. Fiscal 2009-10 will be a new challenge, and could
potentially be offset by the additional monies from the ½ cent Measure R.
Significant items to note in the Plan include the increase of one-percent to the state
sales tax percentage; increase in the Vehicle License Fee from 0.65% to 1.15%, of
which a portion will be dedicated to local law enforcement; and continued one-day-a-
month furloughs for 238,000 state workers through June 2010. Also, many of the items
in the plan will require voter approval at a special election to be held on May 19, 2009 in
order to continue for longer than two years, or to be implemented at all (i.e. borrowing
against future lottery revenue).
Even with a Plan in place, there is still uncertainty in the air if it will be successful.
6
General Fund
Narrative and Projection Worksheets
CITY 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 City Clerk; Human Resources; City
Attorney; Finance; Information Technology; and Non-Departmental. The 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 2008-09 HIGHLIGHTS
During fiscal 2008-09, a few departments initiated new programs and many purchased
enhancement items approved during the budget process. There was also the continued
implementation of many on-going programs and enhancements, which will improve the
effectiveness and efficiency of City operations. What follows are some of the major
highlights from fiscal year 2008-09:
o Initiated a two-year pilot program for an Animal Services Officer within the
Police Department. The pilot program includes one full-time position, as well
as maintaining an agreement with the County of Los Angeles to provide
services during unstaffed hours. The new position will be staffed by the end
of the fiscal year.
o Contracted with spcaLA for animal sheltering services.
7Comprehensive Financial Plan Update – General Fund
February 2009
o Negotiated two year MOU extensions with the Culver City Fire Fighters
Association and the Culver City Fire Management Group.
o Initiated a nation-wide recruitment for a new City Manager.
o Continued implementation of the Public Safety Records Management
System. Currently in training phase. The new system will increase
operational efficiency and reporting capabilities.
o Implemented online renewal and payment of business tax certificates. The
new system provides added convenience for business owners, as well
enabling staff to focus on enforcement and auditing.
o Continued involvement in the Exposition Light Rail project. Construction of
Phase 1 (Downtown Los Angeles to Culver City) is expected to be completed
in 2010.
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
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 projections based on five scenarios that are presented
at the end of the General Fund section.
FORECASTING METHODOLOGY: REVENUES
The current economic climate makes projecting revenues a very challenging endeavor.
In prior years, the major revenues were forecast by looking at ten-year trends and
adjusted for current variables. This year, the task is much more difficult because so
many external economic factors affect the City?s revenues. Because it is highly likely
that most revenues will not continue to grow at recent rates, staff looked at how revenue
streams were affected during previous recessions. The last three recessions took place
during years: 1980-82, 1991-93, and 2001-02. This recession is deeper and broader
than the previous three downturns and the forecasts reflect this assumption.
The underlying assumption in these forecasts is that the economy will continue to
struggle until late 2009 or early 2010. Once a recovery begins, it will be long and drawn
out. This projection matches the prevalent view among economists and experts.
Many factors may negatively affect the assumptions that were made in these forecasts.
The most variable factor in these forecasts is the state of the economy and if the
economic situation deteriorates any further, revenues could decline more than
anticipated.
8Comprehensive Financial Plan Update – General Fund
February 2009
BACKGROUND OF FORECAST
Over the past ten years, there have been a number of circumstances that have created
a hostile environment for municipal revenues. 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. 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 primary General Fund revenues.
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 Culver City?s single largest source of revenue and accounts for
approximately 20% of adopted revenues for fiscal year 2008-09. Sales tax revenue is a
volatile revenue source and even though Culver City has a diverse economic base, the
City has seen large sales tax revenue swings in the past. In fiscal year 2007-08, sales
tax revenue dipped for the first time since 2001-02. In recent months consumer
spending has contracted significantly and the City has lost major sales tax generators;
revenues will decline in fiscal years 2008-09 and 2009-10.
October through December was reported to be one the worst periods in decades for
auto sales and general retail sales. With the current renovation of the Westfield
Shopping Center and general overall downturn in the economy, general retail sales
through the remainder of calendar 2009 are expected to drop even lower than originally
anticipated. Also, the unanticipated closing of the Hooman Automotive Group and the
loss of the Albertson Chevrolet over a year ago, coupled with extremely poor auto sales
during the past several months, resulted in a sharp decline of one of the major sales tax
categories. In addition, the upcoming closure of Circuit City will affect receipts
beginning in fiscal year 2009-10.
9Comprehensive Financial Plan Update – General Fund
February 2009
Sales tax revenue for fiscal year 2008-09 is anticipated to decline more than 7.5%, and
a further, smaller decline is expected in fiscal year 2009-10. During the mid-year
budget presentation a budget amendment will be proposed reducing the base sales tax
amount by $975,000 to reflect this
expected decline in fiscal 2008-09.
Quantitatively, this recession results in
sales tax revenue dropping from a high
of $18.1 million in fiscal year 2006-07 to
an anticipated low of $16.3 million in
fiscal year 2009-10. This trend will
continue until the economy recovers and
consumer spending picks up again. If
the economic recovery begins in late
2009 or early 2010, sales tax revenues
should begin growing again by fiscal year 2010-11. However, the economic recovery is
expected to be long and drawn out, so projections for 2011-12 and beyond are
conservative. With the loss of some large retail businesses such as new auto sales and
electronic sales, the recovery will also take longer unless the City is able to attract
businesses that will take their place.
Transient Occupancy Tax (TOT)
Transient Occupancy tax is levied on occupied hotel/motel rooms and is currently 12%
of the room rate. Over the last ten 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 and then in 2003-04, revenues
declined 16%. Events such as September
11th or the closure of large hotel have an
adverse impact on TOT revenues.
Through December 2008, TOT receipts for
the current fiscal year are 24.5% ahead of
receipts at this point last year. This is
because one of the major hotels was
closed for most of last fiscal year.
Excluding the closed hotel, TOT receipts are 7.3% lower than the receipts at this point
last year. Based on informal reports from hotels, this trend will worsen in upcoming
months. Budget projections were adjusted and it is expected that TOT revenues will
drop 5% during this fiscal year. Revenues are expected to drop again in fiscal year
2009-10 and then stabilize in fiscal year 2010-11.
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 |10 10|500
1,000
1,500
2,000
2,500
3,000
3,500
(000's)
Transient Occupancy Tax
Actual Revenue Budgeted Revenue Projected Revenue|10 10|5,000
10,000
15,000
20,000
25,000
(000's)
Sales Tax Revenue
Actual Revenue Budgeted Revenue Projected Revenue
10Comprehensive Financial Plan Update – General Fund
February 2009
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.
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. In response, Culver City
placed a measure on the April 2008 ballot
for voter consideration to modernize the
ordinance pertaining to this item. The measure passed overwhelmingly.
Additionally, in November, Golden State Water Company changed their rate structure to
encourage conservation. The base rate was lowered, but now there is an additional tier
of charges for above-average users. It is difficult to project how this will affect water
UUT revenues.
Fortunately, UUT revenue is much more stable than other major revenues. Economic
fluctuations have less impact on UUTs because residents still need electricity, gas,
water, etc. Over the last ten years, UUT revenues have grown at an average annual
rate of 3.08%. However, because of the recession, we are expecting the growth of UUT
revenue to slow down to an annual rate of 1.0%-2.0% for the next two years. As the
economy recovers, UUT revenues are expected to return to a normal annual increase of
3.0%
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 at the time of
purchase 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.
|10 10|3,000
6,000
9,000
12,000
15,000
18,000
(000's)
Utility Users Tax
Actual Revenue Budgeted Revenue Projected Revenue|10 10|500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
(000's)
Property Tax
Actual Revenue Budgeted Revenue Projected Revenue
11Comprehensive Financial Plan Update – General Fund
February 2009
Culver City?s property tax revenue has grown relatively consistently over the past five
years, averaging a growth rate of approximately 8% annually. Recently, there has been
a significant slowdown in the housing market, and especially in the commercial real
estate market. As a result, both Property Tax and Real Property Transfer Tax revenues
are projected to slow over the next five years.
Property Tax revenue is expected to grow at
a 3-4% over the next few years. However, if
the annual change in CPI falls below 2%,
property tax revenues could be greatly
affected. A large percentage of the property
in the City was purchased at a lower price
than the current market prices. The tax on
these properties increases at the rate of
CPI, not to exceed 2%. Additionally, if the
CPI becomes negative, taxes on all existing
property will decrease. The Federal Reserve and the Treasury are acting to fend off
deflation, but due to the large decline in real estate and capital markets, deflation is a
real threat. Real Property Transfer Tax revenues are heavily dependent on high value
real estate transactions and during the current recession, the number of real estate
transactions has dropped dramatically. Real Property Transfer Tax revenue is expected
to drop dramatically in 2008-09 and begin recovering in late 2009-10 or early 2010-11.
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. However, most businesses are
taxed on their gross receipts, so business
tax revenue is expected to decline due to the
current recession. In fiscal year 2008-09,
revenue is expected remain relatively flat
because revenue from a new audit program, should offset any decline in tax receipts
from existing tax-paying businesses. The purpose of the audit is to identify non-
compliant businesses.
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 |10 10|500
1,000
1,500
2,000
2,500
3,000
3,500
(000's)
Real Property Transfer Tax
Actual Revenue Budgeted Revenue Projected Revenue|10 10|2,000
4,000
6,000
8,000
10,000
12,000
14,000
(000's)
Business Tax Revenue
Actual Revenue Budgeted Revenue Projected Revenue
12Comprehensive Financial Plan Update – General Fund
February 2009
services. Each fiscal year, charges and fees will increase by approximately 4% until the
costs of providing a service are fully recovered.
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 ability of
the City to maintain services that contributes
to the high quality of life of 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 audited actual
yearly data from 2000-01 until 2007-08.
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 fifteen years. The conclusion was to use an average growth rate
based on anticipated increases over the next fifteen 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 couple of years.
$9.3
$11.0
$14.3
$16.4
$15.5
$16.6
$18.1
$18.4
$18.1
$19.3 $19.7 $20.0
$20.3
$8
$11
$14
$17
$20
$23
75-76 80-81 85-86 90-91 95-96 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08
Millions
Fiscal Year
General Fund Expenditures- Constant Dollars
13Comprehensive Financial Plan Update – General Fund
February 2009
PERSONNEL COSTS
Approximately 83.6%, or $71.6 million, of the
City?s Adopted Fiscal 2008-09 General Fund
operating budget is attributable to personnel
costs. The City currently has Memorandums
of Understanding (MOUs) with all six
bargaining groups. During prior negotiations,
it was a challenge to forecast with certainty
what the overall personnel costs growth would
be over the next five years, not to mention the
next fifteen. With the adoption of the most
current MOUs, the personnel costs and
percentages were incorporated into the Plan through the adopted budget for 2008-09.
Miscellaneous employees have one more year of set increases through fiscal 2009-10.
This information incorporates salary, retirement, medical, and other negotiated
personnel cost increases.
In December 2008, the Culver City Fire Management Group and Culver City Firefighters
Association agreed to extend their existing MOU?s for two years to December 31, 2010,
with the City agreeing to implement a 48/96 schedule for the Fire Department. A factor
not affected by the extension of the MOU is the automatic continuation of the Safety
Salary Initiative.
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 Sheriff?s salary increases. As mentioned previously, public safety makes up
approximately 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, along with 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
$35.0
$36.2
$36.4
$36.9
$37.6
$40.6
$41.8
$44.7
$10.8
$12.6
$13.2
$17.8
$20.8
$22.4
$23.8
$24.8
$0
$10
$20
$30
$40
$50
$60
$70
$80
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Adopted
2008-09
Millions
General Fund Salaries and Benefits - Last 7 Years of Audited Actuals
Benefits Salaries
14Comprehensive Financial Plan Update – General Fund
February 2009
avoid these huge fluctuations to members in
the future. Even slight fluctuations in
percentages, though, can amount to hundreds
of thousands of dollars.
The increases for retirement contributions from
year-to-year have fluctuated, and estimates for
future years are based on estimated
percentages received from CalPERS one year
in advance. The actual percentage increase
for fiscal 2009-10 was received in October 2008 and will result in an estimated
$165,000 increase from the General Fund approved budget amount for fiscal 2009-10.
Also, given the dismal market activity this past year, which looks to continue, CalPERS
has informed agencies that beginning in fiscal 2011-12 they can expect to see hefty
increases in their retirement rates to make up for the poor performance currently being
experienced. We have built in an approximate 3% increase for retirement costs
beginning in fiscal 2011-12 for all funds given this information. For the General Fund
this equates to approximately a $1.3 million annual increase.
Medical costs continue to grow at a faster pace than many other personnel costs. The
City received estimates from CalPERS for the 2009 medical insurance premiums, which
show them to be approximately 3.6% - 8.0% higher than 2008 premiums, based on
specific plans. Culver City also offers medical coverage for its retirees and their
beneficiaries. It is evident the City must find a solution to contain rising costs of
healthcare. 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
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 even its basic
operating and maintenance needs. A three percent increase for operating and
maintenance was included in the 2007-08 and 2008-09 budgets. The approved budget
for fiscal 2009-10 does not include a three percent CPI increase in order to help offset a
portion of the expected deficit, but subsequent years show the return of the three
percent increase beginning in 2010-11.
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
$2.51
$3.25
$2.95
$7.18
$8.23
$8.30
$9.42
$10.07
$-
$2
$4
$6
$8
$10
$12
Actual
2001-02
Actual
2002-03
Actual
2003-04
Actual
2004-05
Actual
2005-06
Actual
2006-07
Actual
2007-08
Adjusted
Budget
2008-09
Millions
General Fund Retirement (PERS) Actuals
15Comprehensive Financial Plan Update – General Fund
February 2009
is also facing major deferred maintenance and unfunded liability issues. Per the most
recent actuarial valuation received from CalPERS, the City has a $40 million unfunded
pension liability ($14.2 million – Miscellaneous, and $25.8 – Safety). CalPERS 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. There is also the looming issue of a rate increase
beginning in fiscal 2011-12 due to poor investment returns. This issue continues to be
addressed.
As mentioned previously, the City recently received the 2009-10 PERS percentage
rates. Both Miscellaneous contribution rates and Public Safety rates increased slightly.
The aggregate percentage amount is also higher than 2008-09. The 2009-10 approved
budget amount falls short by about $165,000 due to the actual percentage rates
received from CalPERS. This will be revisited when the fiscal 2009-10 budget is
reviewed in the upcoming months for the two-year rolling budget process.
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 of 2007, 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 Governmental Accounting Standards
Board (GASB) Statement No. 45 reporting. The primary purpose of this study was to
determine the long-term costs of the City?s medical insurance for retirees. The report
was provided to the City and presented to the Budget & Finance Subcommittee. A
presentation was given to the full City Council in May 2008. The report analyzed the
cost to provide the benefits currently offered over the next thirty years, based on current
active and retired employees, and using actuarial assumptions and trends. 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. The City currently
funds this benefit on a pay-as-you-go basis, and the actual amount expended for Fiscal
Year 2007-08 was $3.51 million. The report shows that this cost will continuously rise at
a fairly significant rate, doubling from the current amount by 2017 and reaching almost
$14 million per year at the end of the thirty years. If the City wanted to pre-fund this
benefit today, it will need to invest $105 million with a 7.75% rate-of-return (similar to
what CalPERS assumes for their portfolio), or $208 million if it earned 4% (the
approximate earnings rate for the City?s investment portfolio). If the City chooses to
fund the benefit pursuant to GASB 45 over the thirty years, and deposits funds annually
into an irrevocable trust fund, it will require $7.4 million annually in a trust earning 7.75%
(lower earnings would require a higher amount). This means basically doubling the
16Comprehensive Financial Plan Update – General Fund
February 2009
current amount the City pays. While there is not a legal requirement to fund this
amount, the problem is that in about ten years this is the amount the City will need to
fund on a pay-as-you-go basis, and it will only go up from there. Additionally, the City
will be required to report the difference between the Actuarial Required Contribution and
what it actually funds on its financial statements
It should be noted that the approved $100,000 is only a mere fraction of the amount to
fully fund the expected actuary-recommended contribution. This figure would be
inclusive of the current costs paid by the City for retiree medical of approximately $3.7
million, and would therefore result in an additional requirement of $7+ million per year.
While GASB 45 does not require funding the liability (it requires only reporting the
liability on the City?s 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.
Discussions of General Fund assumptions have included beginning funding for OPEB in
the following amounts:
Fiscal Year Amount
2009-10 $1,000,000
2010-11 $2,000,000
2011-12 $4,000,000
2012-13 $6,000,000
2013-14 (continued ?) $7,000,000
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. Staff is researching what other cities are doing,
and this information will be provided soon as it was not able to be finalized for inclusion
in this report.
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, 2008-09, and 2009-10 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; approximately $1,757,000 in fiscal 2008-09;
and approximately $572,000 are projected in fiscal 2009-10. Given the current financial
situation, the projections for fiscal 2009-10 will need to be revisited.
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
17Comprehensive Financial Plan Update – General Fund
February 2009
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 facilities.
These assessments continue to be used as a basis for financial needs. 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
the City?s building infrastructure is $480,000 beginning in fiscal 2007-08, with an
annual inflationary increase of 4%. In fiscal 2008-09, a little over $450,000 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 2008-09, 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 $20 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 $2.0 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.
08-09 09-10 10-11 11-12 12-13 13-14
Deferred Maint.* $2.60 $2.63 $2.65 $2.68 $2.70 $2.73
Unfunded Capital* $28.00 ? ? ? ? ?
Total* $30.60 $2.63 $2.65 $2.68 $2.70 $2.73
* Amounts shown in millions.
18Comprehensive Financial Plan Update – General Fund
February 2009
SCENARIOS DISCUSSION
Following are four scenarios for discussion, and one for illustration. The first (Scenario
1) takes the most realistic approach, with conservative revenue and expenditure
projections given the turn of the current economy and recent closure of businesses.
This scenario includes information from the adjusted 2008-09 budget and updated
forecast information for fiscal year 2009-10, which includes a 96% approved excess
appropriation amount and roll-back of the 3% CPI increase to operating and
maintenance (O & M). The second (Scenario 2) includes information from Scenario 1
and adds gradual annual payments for the City?s OPEB related funding needs. The
third (Scenario 3) includes information from Scenario 1 and Scenario 2, except it
reduces the Excess Appropriation amount to 96.5% and adds back the 3% CPI O & M
increase. The fourth scenario (Scenario 4) reduces Miscellaneous employee COLA?s
for Fiscal 2009-10 and 2010-11, and reduces estimate of Public Safety COLA to 2%.
Scenario 5 is to show where the City would be if it were to budget 100% of its
appropriations.
GENERAL FUND SCENARIO 1:
This scenario takes the adjusted budget information as of December 31, 2008, which
includes all adjustments that have been made since July 1, 2008 including
encumbrances carryover, and uses it as the base information for fiscal 2008-09. Added
to fiscal 2008-09 is the reduction of $1 million for the potential loss of the entire
investment amount of the Lehman Brothers bond due to their bankruptcy in August
2008; potential savings from the “pull-back” measures implemented by the City
Manager in October; and mid-year adjustments discussed in the mid-year report that
include reductions in Sales Tax, Property Tax, and State VLF Fee.
Prior to the closing of the books for mid-year and the extremely recent news of business
closures, it was believed the City stood a good chance of weathering fiscal 2008-09
relatively okay. With the “pull-back” measures put in place in October, the projections
looked solid to end the year slightly in the black. In the midst of the recent news of
business closings, and the bleaker news of the continuing steep decline in the
economy, it is now believed fiscal 2008-09 will be short by approximately $500,000.
Fiscal 2009-10 takes into account the continued downturn in the economy that is
forecast to remain in place through the remainder of calendar 2009, and into the
beginning of calendar 2010. There is much speculation by many camps about when the
national – and global – economic picture will start turning around, and the City continues
to take a conservative approach when projecting financial information. Given
information received in October and November from CalPERS, there is a very real
possibility the City will see large increases in its retirement rates beginning in fiscal
2011-12. The recent downturn in the market coupled with poor investment decisions
has severely affected the financial health of the CalPERS portfolio. If the poor market
performance continues, which it is expected to do for a good portion of this calendar
year, CalPERS will not meet its projections, and thus will have to pass on higher rate
19Comprehensive Financial Plan Update – General Fund
February 2009
increases to its contributing agencies. This projected increase has been included for all
funds with personnel related costs, and is also included in all other scenarios. For the
General Fund the estimated annual increase begins with an estimated $1.3 million hit in
fiscal 2011-12 and is shown growing by estimated COLA increases thereafter.
This fifteen (15) year forecast shows what staff believes to be the most realistic picture
given information that is currently known. It is important to note this Scenario does not
include any funding towards the City?s OPEB related funding needs, which amount to
approximately $7 million annually for the General Fund.
Through fiscal 2009-10 the General Fund reserve still remains above the 30% policy
threshold at approximately 34.5%, but fiscal 2010-11 sees it drop drastically to 27.0%.
After this it continues to drop until it is negative in fiscal 2014-15. The reduction of
revenues due to the economy and loss of business is not the only cause of this
reduction. The City?s recurring expenditures have been growing at a faster rate than
recurring revenues for years, and the gap is becoming more pronounced. The
structural deficit that has been discussed in previous years is upon us.
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,
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, and other large capital
improvement projects (i.e. Fire Station #3). Several of the larger one-time revenues
received from the last few fiscal years are listed on the spreadsheet to show the extent
of the total amount the City has received, and also proposed revenues anticipated in
fiscal 2008-09 and 2009-10.
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.
During the Mid-year budget update it is being proposed to reduce two categories that
are often categorized as containing funds classified as one-time. These are the
Commercial Industrial Development Tax and Real Property Transfer Tax. The
Commercial Industrial Development Tax has seen dramatic upticks in revenues given
new development activity the last several years, but is proposed to have a $300,000
negative mid-year adjustment for fiscal 2008-09. Several of the new developments
noted for this fiscal year have not moved forward due to the difficulty of the developers
20Comprehensive Financial Plan Update – General Fund
February 2009
in securing financing. The Real Property Transfer Tax is proposed to have a $200,000
negative mid-year adjustment, and has seen a slowdown due to the low number of
property sales – especially in the commercial real estate market.
GENERAL FUND SCENARIO 2:
This Scenario includes all information from Scenario 1, and adds one additional issue:
the gradual annual funding set-aside for future related funding liability related to OPEB.
The current study conducted by our consultants, AON, revealed the City had an
unfunded liability of approximately $200 million related to retirement health benefits.
Currently the City pays retiree health benefits on a pay-as-you-go basis, but sets
nothing aside for future liability. The identified amount from AON that should be set-
aside on an annual basis is $7 million. Scenario 2 shows the gradual set-aside starting
at $1 million in 2009-10, $2 million in 2010-11, 4$ in 2011-12, $6 million in 2012-13, and
then the full $7 million from fiscal 2013-14 forward.
The General Fund reserve percentage would be 33.4% in Fiscal 2009-10 with this
additional set-aside, 23.6% in fiscal 2010-11, and 11.1% in fiscal 2011-12. Fiscal 2012-
13 shows the General Fund going into negative territory.
GENERAL FUND SCENARIO 3:
This scenario includes the base information from prior scenarios for fiscal 2008-09.
Beginning in fiscal 2009-10 it leaves revenues the same, and increases the Excess
Appropriation limit up to 96.5% and adds back the 3% CPI increase to operating and
maintenance expenditures. These two adjustments, which were removed during the
budget process last year for the approved fiscal 2009-10 budget, add back
approximately $1 million to the overall expenditure amount. The General Fund reserve
percentage gets dangerously close to the required 30% threshold. The OPEB set-aside
amount is also contained in this scenario.
GENERAL FUND SCENARIO 4:
Scenario 4 includes various potential budget reduction options that could be used to
help the City balance the budget over the next several fiscal years. Most of the items
are one-time, short-term items that are meant to bridge the gap until fiscal 2011-12
when it is hoped the general economic conditions, not only locally but throughout the
state, nation and world, will have improved.
Items used as potential cost reductions or revenue enhancements to bridge the gap in
this Scenario include: elimination of temporary agency employees; reduce use of part-
time employees; reduce Training & Education by 50% across all Departments; reduce
Employee Service Award budget; transfer $1 million from the Equipment Replacement
Fund in both fiscal 2009-10 and 2010-11; transfer $275,000 from the Innovation Fund in
both fiscal 2009-10 and 2010-11; defer the General Plan study currently budgeted in the
Community Development budget; defer 2009-10 CIP Projects or de-allocate certain
21Comprehensive Financial Plan Update – General Fund
February 2009
carryover amounts; negotiate savings measures with bargaining groups (e.g. furloughs,
salary increase deferrals, etc.); implement Retirement Incentive Program; review
parking rates city-wide; and extending parking meter hours in certain areas.
These are ideas brought forth to help balance the budget of the next two fiscal years in-
lieu of implementing deep service cuts up front, that may or may not be necessary right
away. If no new revenue sources are introduced by fiscal 2011-12, the need for layoffs
will be nearly certain.
GENERAL FUND SCENARIO 5:
Scenario 5 is for illustrative purposes to show where the City?s finances would stand if it
budgeted at 100% of appropriations. It is clear the City has a ways to go before it will
be able to cover 100% of its budgeted recurring appropriations with budgeted recurring
revenues. It is important to understand that budgeting at less than 100% means the
City could never be truly „fully staffed? without significantly going over its budget.
CONCLUSION:
When the first Comprehensive Financial Plan was presented in early 2007, far prior to
the financial issues which currently plague the nation, the City already showed a
looming structural deficit. The bad economy has only made this situation worse and
moved it closer. The City has a fundamental problem in that its ongoing revenues are
not sufficient to support its ongoing costs based on current service levels, and required
staffing. Even if and when the economy improves, the City still shows a structural
deficit. While there are certainly some short-term solutions the City can implement to
get through the next year, the City is at a crossroads where some difficult decisions
must be made. If the current level of services throughout the City are what the
community values, then it will be necessary to increase our tax base to support this. If
the community wants the City to live within its current tax base, then service level
adjustments have to be made. These are the simple, fundamental decisions that any
business must face.
22Comprehensive Financial Plan Update
February 2009
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23Comprehensive Financial Plan Update
February 2009
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24
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
GENERAL FUND (101) - Preliminary
Beginning Balance 34,219 33,272 29,361 23,927 17,672 10,698 3,363 (4,642) (12,910) (21,883) (33,038) (43,885) (58,254) (71,780) (85,960) (100,712)
Fiscal Year Net Change
Total Recurring Revenue 75,665 74,669 77,262 81,322 84,622 88,232 92,072 96,099 100,315 104,735 112,206 114,174 120,268 125,327 130,621 136,160
Total Interfund Transfers (Admin.
Charges) 6,029 6,373 6,628 6,893 7,169 7,384 7,606 7,834 8,069 8,311 8,560 8,817 9,082 9,354 9,635 9,924
Loss of Investment (Lehman Bond)
[one-time] (1,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 3,947 1,850 56 225 225 225 225 225 225 225 225 225 225 225 225 225
Total Revenue Projection 84,641 82,892 83,946 88,440 92,016 95,841 99,903 104,158 108,609 113,271 120,991 123,216 129,575 134,906 140,481 146,309
Total Recurring Expenditures 84,112 84,971 88,315 93,550 97,925 102,031 106,843 111,281 116,517 123,281 130,773 136,440 142,036 147,941 154,168 160,761
Pull-Back Measures (Est. Recurring
Exp. Savings) (1,900) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 3,276 1,832 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145
Total Expenditures Projection 85,488 86,803 89,380 94,695 98,990 103,176 107,908 112,426 117,582 124,426 131,838 137,585 143,101 149,086 155,233 161,906
Total FY Recurring Operating
Surplus/Deficit (518) (3,929) (4,425) (5,335) (6,134) (6,415) (7,165) (7,348) (8,133) (10,235) (10,007) (13,449) (12,686) (13,260) (13,912) (14,677)
Current Set-aside for OPEB 100
General Fund - Preliminary Ending
Balance (Operating)* 33,272 29,361 23,927 17,672 10,698 3,363 (4,642) (12,910) (21,883) (33,038) (43,885) (58,254) (71,780) (85,960) (100,712) (116,309)
General Fund Reserve Percentage
(Recurring) 39.56% 34.55% 27.09% 18.89% 10.92% 3.30% -4.34% -11.60% -18.78% -26.80% -33.56% -42.70% -50.54% -58.10% -65.33% -72.35%
General Fund Reserve Percentage
(Not Including One-time Revenues) 34.86% 32.38% 27.03% 18.65% 10.69% 3.08% -4.56% -11.80% -18.97% -26.98% -33.73% -42.86% -50.69% -58.26% -65.47% -72.49%
General Fund - Balance (Carried
Forward) 33,272 26,760 11,701 (4,204) (20,854) (37,892) (55,628) (73,656) (92,419) (113,395) (134,096) (158,353) (181,802) (205,942) (230,693) (256,329)
Total Deferred Maintenance** 2,601 2,625 2,650 2,676 2,703 2,731 2,760 2,790 2,821 2,854 2,888 2,923 2,960 2,999 3,039 3,080
Potential Annual Payments for OPEB
Related Funding Needs 0 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Total Deferred Maintenance &
Unfunded Capital Projection 2,601 9,625 9,650 9,676 9,703 9,731 9,760 9,790 9,821 9,854 9,888 9,923 9,960 9,999 10,039 10,080
General Fund - Ending Balance (ALL) 30,671 17,135 2,051 (13,880) (30,557) (47,623) (65,388) (83,446) (102,240) (123,249) (143,984) (168,276) (191,762) (215,941) (240,732) (266,409)
General Reserve Percentage
(Recurring) 36.46% 20.17% 2.32% -14.84% -31.20% -46.68% -61.20% -74.99% -87.75% -99.97% -110.10% -123.33% -135.01% -145.96% -156.15% -165.72%
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
25
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
* 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
Receipts from Cable UUT Audit (07-08) 106,788
Receipts in Com/Ind Dev Tax from
significant development activity (07-08) 1,757,275
Pymnt of Interest for Warner Parking Lot
Sale (07-08) 436,608
Bldg Permit Fee from significant dvlpmnt
activity (07-08) 533,000
Sub-total Prior Years 8,184,975
Payments included in current and future year projections include:
Estimated One-time (08-09) [includes final
payment from Warner Parking Lot of
$2,947,104.] 3,947,000
Estimated One-time (09-10) 1,850,000
Sub-total 12,131,975 1,850,000
** Includes buildings, streets and parks.
26
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
GENERAL FUND (101) - Preliminary
Beginning Balance 34,219 33,272 28,361 20,927 10,672 (2,302) (16,637) (31,642) (46,910) (62,883) (81,038) (98,885) (120,254) (140,780) (161,960) (183,712)
Fiscal Year Net Change
Total Recurring Revenue 75,665 74,669 77,262 81,322 84,622 88,232 92,072 96,099 100,315 104,735 112,206 114,174 120,268 125,327 130,621 136,160
Total Interfund Transfers (Admin.
Charges) 6,029 6,373 6,628 6,893 7,169 7,384 7,606 7,834 8,069 8,311 8,560 8,817 9,082 9,354 9,635 9,924
Loss of Investment (Lehman Bond)
[one-time] (1,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 3,947 1,850 56 225 225 225 225 225 225 225 225 225 225 225 225 225
Total Revenue Projection 84,641 82,892 83,946 88,440 92,016 95,841 99,903 104,158 108,609 113,271 120,991 123,216 129,575 134,906 140,481 146,309
Total Recurring Expenditures 84,112 84,971 88,315 93,550 97,925 102,031 106,843 111,281 116,517 123,281 130,773 136,440 142,036 147,941 154,168 160,761
Potential Annual Payments for OPEB
Related Funding Needs 1,000 2,000 4,000 6,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Pull-Back Measures (Est. Recurring
Exp. Savings) (1,900) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 3,276 1,832 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145
Total Expenditures Projection 85,488 87,803 91,380 98,695 104,990 110,176 114,908 119,426 124,582 131,426 138,838 144,585 150,101 156,086 162,233 168,906
Total FY Recurring Operating
Surplus/Deficit (518) (4,929) (6,425) (9,335) (12,134) (13,415) (14,165) (14,348) (15,133) (17,235) (17,007) (20,449) (19,686) (20,260) (13,912) (14,677)
Current Set-aside for OPEB 100
General Fund - Preliminary Ending
Balance (Operating)* 33,272 28,361 20,927 10,672 (2,302) (16,637) (31,642) (46,910) (62,883) (81,038) (98,885) (120,254) (140,780) (161,960) (183,712) (206,309)
General Fund Reserve Percentage
(Recurring) 39.56% 33.38% 23.70% 11.41% -2.35% -16.31% -29.62% -42.15% -53.97% -65.73% -75.62% -88.14% -99.12% -109.48% -119.16% -128.33%
General Fund Reserve Percentage (Not
Including One-time Revenues) 34.86% 31.20% 23.63% 11.17% -2.58% -16.53% -29.83% -42.36% -54.16% -65.92% -75.79% -88.30% -99.27% -109.63% -119.31% -128.47%
General Fund - Balance (Carried
Forward) 33,272 25,760 15,701 2,796 (12,854) (29,892) (58,125) (87,102) (117,293) (150,201) (183,365) (220,641) (257,698) (296,071) (335,712) (376,237)
Total Deferred Maintenance** 2,601 2,625 2,650 2,676 2,703 2,731 2,760 2,790 2,821 2,854 2,888 2,923 2,960 2,999 3,039 3,080
Total Deferred Maintenance &
Unfunded Capital Projection 2,601 2,625 2,650 2,676 2,703 2,731 2,760 2,790 2,821 2,854 2,888 2,923 2,960 2,999 3,039 3,080
General Fund - Ending Balance (ALL) 30,671 23,135 13,051 120 (15,557) (43,120) (71,834) (101,320) (132,046) (165,518) (199,272) (237,172) (274,891) (313,960) (353,640) (394,206)
General Reserve Percentage
(Recurring) 36.46% 27.23% 14.78% 0.13% -15.89% -42.26% -67.23% -91.05% -113.33% -134.26% -152.38% -173.83% -193.54% -212.22% -229.39% -245.21%
Culver City - SCENARIO 2
February 2009
- - - - -- - - - - - - - - - Estimated 10-Year- - - - - - - - - - - - - > -- - - - - - - - - - - - - - Estimated 15-Year- - - - - - - - - - - - - >
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - -- - - - - - - - - - - - >
27Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
GENERAL FUND (101) - Preliminary
Beginning Balance 34,219 33,272 27,422 18,956 7,461 (6,794) (22,453) (37,458) (52,726) (68,699) (86,854) (104,701) (126,070) (146,596) (167,776) (189,528)
Fiscal Year Net Change
Total Recurring Revenue 75,665 74,669 77,262 81,322 84,622 88,232 92,072 96,099 100,315 104,735 112,206 114,174 120,268 125,327 130,621 136,160
Total Interfund Transfers (Admin.
Charges) 6,029 6,373 6,628 6,893 7,169 7,384 7,606 7,834 8,069 8,311 8,560 8,817 9,082 9,354 9,635 9,924
Loss of Investment (Lehman Bond) [one-
time] (1,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 3,947 1,850 0 0 0 0 225 225 225 225 225 225 225 225 225 225
Total Revenue Projection 84,641 82,892 83,890 88,215 91,791 95,616 99,903 104,158 108,609 113,271 120,991 123,216 129,575 134,906 140,481 146,309
Total Recurring Expenditures 84,112 85,910 89,291 94,565 98,981 103,129 106,843 111,281 116,517 123,281 130,773 136,440 142,036 147,941 154,168 160,761
Potential Annual Payments for OPEB
Related Funding Needs 1,000 2,000 4,000 6,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Pull-Back Measures (Est. Recurring
Exp. Savings) (1,900) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 3,276 1,832 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145
Total Expenditures Projection 85,488 88,742 92,356 99,710 106,046 111,274 114,908 119,426 124,582 131,426 138,838 144,585 150,101 156,086 162,233 168,906
Total FY Recurring Operating
Surplus/Deficit (518) (5,868) (7,401) (10,350) (13,190) (14,513) (14,165) (14,348) (15,133) (17,235) (17,007) (20,449) (19,686) (20,260) (20,912) (21,677)
Current Set-aside for OPEB 100
General Fund - Preliminary Ending
Balance (Operating)* 33,272 27,422 18,956 7,461 (6,794) (22,453) (37,458) (52,726) (68,699) (86,854) (104,701) (126,070) (146,596) (167,776) (189,528) (212,125)
General Fund Reserve Percentage
(Recurring) 39.56% 31.92% 21.23% 7.89% -6.86% -21.77% -35.06% -47.38% -58.96% -70.45% -80.06% -92.40% -103.21% -113.41% -122.94% -131.95%
General Fund Reserve Percentage
(Not Including One-time Revenues) 34.86% 29.77% 21.23% 7.89% -6.86% -21.77% -35.27% -47.58% -59.15% -70.63% -80.23% -92.56% -103.37% -113.56% -123.08% -132.09%
General Fund - Balance (Carried
Forward) 33,272 24,821 13,730 (415) (17,346) (35,708) (63,940) (92,918) (123,109) (156,017) (189,181) (226,457) (263,513) (301,887) (341,527) (382,053)
Total Deferred Maintenance** 2,601 2,625 2,650 2,676 2,703 2,731 2,760 2,790 2,821 2,854 2,888 2,923 2,960 2,999 3,039 3,080
Total Deferred Maintenance &
Unfunded Capital Projection 2,601 2,625 2,650 2,676 2,703 2,731 2,760 2,790 2,821 2,854 2,888 2,923 2,960 2,999 3,039 3,080
General Fund - Ending Balance (ALL) 30,671 22,196 11,080 (3,091) (20,049) (48,935) (77,650) (107,136) (137,862) (171,334) (205,088) (242,987) (280,707) (319,775) (359,456) (400,022)
General Reserve Percentage
(Recurring) 36.46% 25.84% 12.41% -3.27% -20.26% -47.45% -72.68% -96.28% -118.32% -138.98% -156.83% -178.09% -197.63% -216.15% -233.16% -248.83%
Culver City - SCENARIO 3
February 2009
(dollars shown in thousands)
- - - - - - - - - - - - - - - - Estimated 10-Year- - - - - - - - - - - - - - - > - - - - - - - - - - - - - - - - Estimated 15-Year- - - - - - - - - - - - - - - > < - - - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - - - >
(dollars shown in thousands) (dollars shown in thousands)
28
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
GENERAL FUND (101) - Preliminary
Beginning Balance 34,219 33,772 33,790 32,781 28,311 21,562 14,452 6,672 (1,371) (10,119) (21,049) (31,671) (45,815) (59,116) (73,071) (87,598)
Fiscal Year Net Change
Total Recurring Revenue 75,665 74,669 77,262 81,322 84,622 88,232 92,072 96,099 100,315 104,735 112,206 114,174 120,268 125,327 130,621 136,160
Total Interfund Transfers (Admin.
Charges) 6,029 6,373 6,628 6,893 7,169 7,384 7,606 7,834 8,069 8,311 8,560 8,817 9,082 9,354 9,635 9,924
Loss of Investment (Lehman Bond) [one-
time] (1,000) 000000000000000
Potential Budget Balancing Revenue
Enhnacement Options 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Total One-Time Revenue 3,947 1,850 56 225 225 225 225 225 225 225 225 225 225 225 225 225
Total Revenue Projection 84,641 83,117 84,171 88,665 92,241 96,066 100,128 104,383 108,834 113,496 121,216 123,441 129,800 135,131 140,706 146,534
Total Recurring Expenditures 84,112 84,971 88,315 93,550 97,925 102,031 106,843 111,281 116,517 123,281 130,773 136,440 142,036 147,941 154,168 160,761
Pull-Back Measures (Est. Recurring Exp.
Savings) (1,900) 000000000000000
Potential Budget Balancing Reduction
Options (500) (3,704) (4,200) (1,560) 0 0 0 0 0 0 000000
Total One-Time Expenditures 3,276 1,832 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145
Total Expenditures Projection 84,988 83,099 85,180 93,135 98,990 103,176 107,908 112,426 117,582 124,426 131,838 137,585 143,101 149,086 155,233 161,906
Total FY Recurring Operating
Surplus/Deficit (18) 0 0 (3,550) (5,909) (6,190) (6,940) (7,123) (7,908) (10,010) (9,782) (13,224) (12,461) (13,035) (13,687) (14,452)
Current Set-aside for OPEB 100
General Fund - Preliminary Ending
Balance (Operating)* 33,772 33,790 32,781 28,311 21,562 14,452 6,672 (1,371) (10,119) (21,049) (31,671) (45,815) (59,116) (73,071) (87,598) (102,970)
General Fund Reserve Percentage
(Recurring) 40.15% 39.77% 37.12% 30.26% 22.02% 14.16% 6.24% -1.23% -8.68% -17.07% -24.22% -33.58% -41.62% -49.39% -56.82% -64.05%
General Fund Reserve Percentage
(Not Including One-time Revenues) 35.46% 37.59% 37.05% 30.02% 21.79% 13.94% 6.03% -1.43% -8.88% -17.26% -24.39% -33.74% -41.78% -49.54% -56.97% -64.19%
General Fund - Balance (Carried
Forward) 33,772 31,189 20,555 6,435 (9,990) (26,803) (44,314) (62,117) (80,655) (101,406) (121,882) (145,914) (169,138) (193,053) (217,579) (242,990)
Total Deferred Maintenance** 2,601 2,625 2,650 2,676 2,703 2,731 2,760 2,790 2,821 2,854 2,888 2,923 2,960 2,999 3,039 3,080
Potential Annual Payments for OPEB
Related Funding Needs 0 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Total Deferred Maintenance &
Unfunded Capital Projection 2,601 9,625 9,650 9,676 9,703 9,731 9,760 9,790 9,821 9,854 9,888 9,923 9,960 9,999 10,039 10,080
General Fund - Ending Balance (ALL) 31,171 21,564 10,905 (3,241) (19,693) (36,534) (54,074) (71,907) (90,476) (111,260) (131,770) (155,837) (179,098) (203,052) (227,618) (253,070)
General Reserve Percentage
(Recurring) 37.06% 25.38% 12.35% -3.46% -20.11% -35.81% -50.61% -64.62% -77.65% -90.25% -100.76% -114.22% -126.09% -137.25% -147.64% -157.42%
Culver City - SCENARIO 4
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
29Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
GENERAL FUND (101) - Preliminary
Beginning Balance 34,219 30,222 21,278 10,651 (2,444) (17,881) (34,785) (49,790) (65,058) (81,031) (99,186) (117,033) (138,402) (158,928) (180,108) (201,860)
Fiscal Year Net Change
Total Recurring Revenue 75,665 74,669 77,262 81,322 84,622 88,232 92,072 96,099 100,315 104,735 112,206 114,174 120,268 125,327 130,621 136,160
Total Interfund Transfers (Admin. Charges) 6,029 6,373 6,628 6,893 7,169 7,384 7,606 7,834 8,069 8,311 8,560 8,817 9,082 9,354 9,635 9,924
Loss of Investment (Lehman Bond) [one-time] (1,000) 0 0 0000000000000
Total One-Time Revenue 3,947 1,850 56 225 225 225 225 225 225 225 225 225 225 225 225 225
Total Revenue Projection 84,641 82,892 83,946 88,440 92,016 95,841 99,903 104,158 108,609 113,271 120,991 123,216 129,575 134,906 140,481 146,309
Total Recurring Expenditures 87,162 89,004 91,508 96,390 100,388 104,600 106,843 111,281 116,517 123,281 130,773 136,440 142,036 147,941 154,168 160,761
Potential Annual Payments for OPEB Related
Funding Needs 1,000 2,000 4,000 6,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Pull-Back Measures (Est. Recurring Exp.
Savings) (1,900) 0 0 0000000000000
Total One-Time Expenditures 3,276 1,832 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145 1,065 1,145
Total Expenditures Projection 88,538 91,836 94,573 101,535 107,453 112,745 114,908 119,426 124,582 131,426 138,838 144,585 150,101 156,086 162,233 168,906
Total FY Recurring Operating Surplus/Deficit (3,568) (8,962) (9,618) (12,175) (14,597) (15,984) (14,165) (14,348) (15,133) (17,235) (17,007) (20,449) (19,686) (20,260) (13,912) (14,677)
Current Set-aside for OPEB 100
General Fund - Preliminary Ending Balance
(Operating)* 30,222 21,278 10,651 (2,444) (17,881) (34,785) (49,790) (65,058) (81,031) (99,186) (117,033) (138,402) (158,928) (180,108) (201,860) (224,457)
General Fund Reserve Percentage
(Recurring) 34.67% 23.91% 11.64% -2.54% -17.81% -33.25% -46.60% -58.46% -69.54% -80.45% -89.49% -101.44% -111.89% -121.74% -130.93% -139.62%
General Fund Reserve Percentage (Not
Including One-time Revenues) 30.15% 21.83% 11.58% -2.77% -18.04% -33.47% -46.81% -58.66% -69.74% -80.64% -89.66% -101.60% -112.05% -121.89% -131.08% -139.76%
General Fund - Balance (Carried Forward) 30,222 18,677 5,425 (10,320) (28,433) (48,040) (65,776) (83,804) (102,567) (123,543) (144,244) (168,501) (191,950) (216,090) (240,841) (266,477)
Total Deferred Maintenance** 2,601 2,625 2,650 2,676 2,703 2,731 2,760 2,790 2,821 2,854 2,888 2,923 2,960 2,999 3,039 3,080
Total Deferred Maintenance & Unfunded
Capital Projection 2,601 2,625 2,650 2,676 2,703 2,731 2,760 2,790 2,821 2,854 2,888 2,923 2,960 2,999 3,039 3,080
General Fund - Ending Balance (ALL) 27,621 16,052 2,775 (12,996) (31,136) (50,771) (68,536) (86,594) (105,388) (126,397) (147,132) (171,424) (194,910) (219,089) (243,880) (269,557)
General Reserve Percentage (Recurring) 31.69% 18.04% 3.03% -13.48% -31.02% -48.54% -64.15% -77.82% -90.45% -102.53% -112.51% -125.64% -137.23% -148.09% -158.19% -167.68%
Culver City - SCENARIO 5
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - -- - - - - - - - - Estimated 5-Year- - - -- - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 10-Year- - - - - - - - - - - - - - > - - - - - - - - - - - - - - - Estimated 15-Year- - - - - - - - - - - - - - >
30Comprehensive Financial Plan Update
February 2009
THIS PAGE INTENTIONALLY LEFT BLANK
31Comprehensive Financial Plan Update
February 2009
THIS PAGE INTENTIONALLY LEFT BLANK
32
Refuse Fund
Narrative and Projection Worksheet
CITY 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 dispose of non-hazardous solid wastes to
material processors for reuse or recycling and transfer all other materials to disposal
sites. 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.
The refuse collection operation is responsible for the administration of the City’s street
sweeping contract and the removal of solid waste from the residential, commercial, and
industrial areas of the City. 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
removing and storing 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.
33Comprehensive Financial Plan – Refuse Fund
February 2009
FISCAL YEAR 2008-09 HIGHLIGHTS
The Adopted 2008-09 Budget includes funding for several capital project upgrades to
the transfer station, which include:
? Patching the Transfer Station Floor
? Transfer Station Stairwell and Locker Room Rehab
? Transfer Station Office A/C Repair
? Replacement of Transfer Station Axle Scales
BACKGROUND
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%). For fiscal 2008-09, the rates
have been increased 4% for all
customers and are expected to be
enough to cover all expenses for the
year.
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 that is taken to the
Sanitation District landfills (which handles the majority of the City’s refuse) will increase
at a rate of approximately 14% per year over the next sixteen years. Currently, disposal
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Refuse Rate Increases
Residential Commercial|10 10|2,000
4,000
6,000
8,000
10,000
12,000
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Refuse Fund Revenues and Expenditures
Revenues Expenditures
34Comprehensive Financial Plan – Refuse Fund
February 2009
costs represent approximately 17% 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
were replaced in fiscal 2007-08. Per the City’s policy, these trucks were 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. Fortunately, the purchase price of a few
of these vehicles was able to be offset with grant monies obtained through the hard
work of the Equipment Maintenance Division.
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, and will be captured when the new purchase price of
the vehicle is entered into the worksheet amortization calculation.
ECONOMIC OVERVIEW
Many of the same economic pressures constraining the General Fund are also
impacting the Refuse Fund. Aside from escalating personnel costs and fluctuating 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 14% over the
next sixteen years. The refuse fund expenditure projections take into account these
projected disposal costs increases.
35Comprehensive Financial Plan – Refuse Fund
February 2009
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 the financial health of the Refuse Fund, commercial and residential
waste removal fees will need to be increased over the next few years. The revenue
projections assume that there will be no increase in fiscal 2009-10, and an increase of
approximately 4% per year for the next two fiscal years after that. If these revenue
increases are realized and current expenditures stay within the anticipated growth
forecast, then the Refuse Fund should continue to have a positive fund balance from
2009-10 on.
After 2009-10 the rate increases are planned to be 4% or 6% 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 be needed to be kept at a 4.7% increase per
year for longer than the projected three years 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.
DISCUSSION OF EXPENDITURE PROJECTIONS
Personnel expenditures are forecasted to increase 4.0% through fiscal 2009-10 given
current MOU agreements. Conservative projections for personnel costs have been
included for the remaining fiscal years in this fifteen-year forecast. The exception to this
is medical premiums. Medical premiums are forecast to increase 11.1% in fiscal 2009-
10, with small adjustments downward in subsequent years. Operating and maintenance
expenses are forecasted to grow 3.0% 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. New refuse vehicles have recently been
purchased, which will increase the annual Equipment Replacement Fund contribution
from the Refuse Fund.
36Comprehensive Financial Plan – Refuse Fund
February 2009
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:
Transfer Station through-put tonnage increase from a maximum of 500 tpd
to 750 tpd and is scheduled for implementation in 2010-11. 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 will 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
installing a closed-circuit motion-sensing camera surveillance system,
installing sorting equipment on the Transfer Station floor, 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 2010-11. A Rear-Loader Truck
was put into service in 2007-08.
Field Supervisor Position is proposed to be added in 2010-11 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.
Implementation of these measures is projected to increase the funds negative
balance in the first year with the fund balance becoming positive in fiscal 2009-10.
37Comprehensive Financial Plan – Refuse Fund
February 2009
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38
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
REFUSE FUND (202) - Preliminary
Beginning Balance (80) (45) 323 611 706 918 1,229 1,866 2,343 2,639 2,735 2,606 2,225 1,568 607 (307)
Fiscal Year Net Change
Total Recurring Revenue 11,590 11,846 12,318 12,808 13,574 14,116 14,961 15,558 16,177 16,823 17,493 18,191 18,915 19,671 20,848 21,679
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 11,590 11,846 12,318 12,808 13,574 14,357 15,405 16,015 16,647 17,306 17,990 18,702 19,440 20,211 21,403 22,250
Total Recurring Expenditures 11,445 11,478 12,030 12,713 13,362 14,046 14,768 15,538 16,351 17,210 18,119 19,083 20,097 21,172 22,317 23,534
Total One-Time Expenditures 110 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 11,555 11,478 12,030 12,713 13,362 14,046 14,768 15,538 16,351 17,210 18,119 19,083 20,097 21,172 22,317 23,534
Total Refuse FY Operating
Surplus/Deficit 35 368 288 95 212 311 637 477 296 96 (129) (381) (657) (961) (914) (1,284)
Refuse Fund - Preliminary Ending
Balance (Operating) (45) 323 611 706 918 1,229 1,866 2,343 2,639 2,735 2,606 2,225 1,568 607 (307) (1,591)
Reserve Percentage (Recurring) -0.39% 2.82% 5.08% 5.56% 6.87% 8.75% 12.64% 15.08% 16.14% 15.89% 14.38% 11.66% 7.80% 2.87% -1.37% -6.76%
39Comprehensive Financial Plan Update
February 2009
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40
Transit Fund
Narrative and Projection Worksheet
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Transit Enterprise 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, fare revenues do not approach the cost of operations. 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 currently
has plans to increase fares in July 2009.
FISCAL YEAR 2008-09 HIGHLIGHTS
The Adopted 2008-09 Budget contains funding for a number of enhancements,
including:
? Expansion of Line 7, including seven additional full-time and 4 additional part-
time bus operator positions;
? Purchase of additional new buses to accommodate the Line 7 expansion;
? Sepulveda Blvd Traffic Relief Study;
? New bus stop furniture and transit security cameras and training material.
41Comprehensive Financial Plan – Transit Fund
February 2009
|10 10|4,000
8,000
12,000
16,000
20,000
24,000
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Transit Fund Revenues and Expenditures
Revenues Expenditures
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 Blair Hills, Century
City, Culver City, Mar Vista, Marina del Rey, Palms, Venice, Venice Beach, West Los
Angeles, Westchester, and Westwood.
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
most 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), State
Transit Grants, and Proposition A & C
money (see Prop A & C section of this
report for more information). In November
2008, voters in LA County approved
Measure R, which will provide additional
funds for capital projects and operations
beginning in FY 2009-10.
Depending on the funding agency’s
priorities, funding may be highly variable
from year to year.
While, public transportation and traffic and congestion relief has been one of California’s
top priorities over the last decade, the current state budget crisis has shifted
transportation away from its priorities. |10 10|4,000
8,000
12,000
16,000
20,000
24,000
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Transit Fund Revenue Sources
Non Operating From Other Agencies Passenger Fares
42Comprehensive Financial Plan – Transit Fund
February 2009
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 November 2008, Los Angeles County voters approved Measure R, which is a ½ cent
Sales Tax to finance new transportation related capital projects, accelerate those
projects already in the pipeline, and provide additional funding for transportation
operations. It is expected that Culver City will begin receiving Measure R funds in the
second half of fiscal year 2009-10. This additional funding is important to the continued
fiscal health of Culver CityBus.
In addition to Props A, C and Measure R, there are a number of state and federal grants
programs that are used for transit operations. These funds are allocated annually and
are often subject to the existing political and economic climate.
In September, the California legislature finally adopted a budget for FY 2008-09, 85
days past the constitutional deadline. Although the adopted budget did not include
taking any city revenues, there was a massive cut to State Transit Assistance funds that
funds a portion of the Culver CityBus. With the additional projected state budget deficit,
the transportation funding is looking to be cut again, with the Governor proposing to
eliminate the State Transit Assistance funds all together after this fiscal year.
As a result of the weak economy, there is also a projected decrease in sales tax
revenue at the state and local level. While the level of funding has been set by the
County for transit funds in FY 2008-09, it is likely that there will be a significant dip in
funding levels for state and local funds in FY 2009-10.
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
43Comprehensive Financial Plan – Transit Fund
February 2009
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 Year 2008-09 include a 10%
decrease in local revenues. State Transit Assistance (STA) spillover funds ($961,000
allocated to Culver City in fiscal 2007-08) will be eliminated after fiscal 2008-09. The
passage of the new sales tax Measure R, will help to fill in the gap of the eliminated
STA funds, however, during FY 2009-10, Culver City will likely not receive a full year’s
worth of funding. Due to the decrease in the overall local sales tax revenues, a fare
increase will be considered within the next year in order to raise revenues to meet
expenditures. Several of the County municipal operators have recently raised their
fares.
The Transit Fund is anticipating just under $1 million a year in funds relating to new bus
services to Playa Vista during the first three years of Playa Vista’s expansion.
Infrastructure Bond 1B Funds have been expected to be allocated during Fiscal 2008
through 2012. These bond monies will hopefully assist in funding capital projects and
one-time expenditures. Anticipated funding should be a total of $8 million. Thus far,
Culver City has been allocated $2 million of those funds through two years.
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
through fiscal 2009-10. Conservative projections for personnel costs have been
included for the remaining fiscal years in this fifteen-year forecast. The exception to this
is medical premiums. Medical premiums are forecasted to increase 11.1% in fiscal
2009-10, with small adjustments downward in subsequent years. Ongoing operating
and maintenance costs are estimated to grow at approximately 3.0%.
Costs were also projected to increase due to a new Bus Rapid program along
Sepulveda Blvd. and the extension of Line 7. Those projects may need to be deferred
until additional funding has been identified.
The Transit Fund currently reimburses the General Fund for administrative charges,
which normally increase anywhere between 3% - 5% 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
44Comprehensive Financial Plan – Transit Fund
February 2009
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.
It is clear, though, that beginning in fiscal 2010-11 a gap occurs between revenues and
expenditures and needs to be addressed. Transit funding is one of the more volatile
financing sources because it relies mainly on funding sources from other agencies, such
as the federal and state government. Given the current events of the past year or two
with funding being shifted or taken away, it is near impossible to predict what funds will
still be available in future years. New revenue sources, fare increases, and service cuts
will likely be considered in order to help the expenditures to meet revenues.
45Comprehensive Financial Plan – Transit Fund
February 2009
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46
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
TRANSIT FUND (203) - Preliminary
Beginning Balance 8,030 9,027 11,199 10,584 9,280 12,752 12,825 14,775 17,138 14,903 11,173 6,416 901 (5,400) (2,570) (10,606)
Fiscal Year Net Change
Total Recurring Revenue 19,925 24,128 17,650 17,980 18,390 18,783 20,089 20,531 20,985 20,604 20,732 21,194 21,670 22,159 22,660 23,177
Total One-Time Revenue 4,753 11,568 1,456 1,456 6,716 3,856 5,400 6,400 2,420 2,420 2,430 2,430 2,430 12,400 2,430 2,430
Total Revenue Projection 24,678 35,696 19,106 19,436 25,106 22,639 25,489 26,931 23,405 23,024 23,162 23,624 24,100 34,559 25,090 25,607
Total Recurring Expenditures 17,635 23,089 19,721 20,740 21,634 22,566 23,539 24,568 25,640 26,754 27,919 29,139 30,401 31,729 33,126 34,599
Total One-Time Expenditures 6,046 10,435 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 23,681 33,524 19,721 20,740 21,634 22,566 23,539 24,568 25,640 26,754 27,919 29,139 30,401 31,729 33,126 34,599
Total Transit FY Operating
Surplus/Deficit 2,290 1,039 (2,071) (2,760) 3,472 73 1,950 2,363 (2,235) (3,730) (4,757) (5,515) (6,301) 2,830 (8,036) (8,992)
Transit Fund - Preliminary Ending
Balance (Operating) 9,027 11,199 10,584 9,280 12,752 12,825 14,775 17,138 14,903 11,173 6,416 901 (5,400) (2,570) (10,606) (19,598)
Reserve Percentage (Recurring) 51.19% 48.50% 53.67% 44.74% 58.94% 56.83% 62.77% 69.76% 58.12% 41.76% 22.98% 3.09% -17.76% -8.10% -32.02% -56.64%
47Comprehensive Financial Plan Update
February 2009
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48
Sewer Fund
Narrative and Projection Worksheet
CITY 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 Public
Works Department oversees 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.
FISCAL YEAR 2008-09 HIGHLIGHTS
The Adopted 2008-09 Budget includes funding for one (1) additional sub-drain worker
and $3,455,000 for sewer repair and pump station improvement projects. After six
consecutive years of rate increases, the Sewer User’s charge was not increased in FY
2008-09.
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
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 |10 10|2,000
4,000
6,000
8,000
10,000
12,000
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Sewer Fund Revenues and Expenditures
(Expenditures exclude Capital Projects)
Revenues Expenditures
49Comprehensive Financial Plan – Sewer Fund
February 2009
rate increases in each subsequent fiscal year, including 2007-08. FY 2008-09 will be the
first year in six years that the wastewater fees were not increased.
ECONOMIC OVERVIEW
After a few years of large increases in sewer charges from the City of Los Angeles for
use of the Hyperion Treatment Plant, charges decreased in FY 2007-08 by 20% because
the City of LA received alternate funding to complete some capital upgrades to the
Hyperion system. As a result, the City received a credit. In fiscal 2008-09 the City
received another large credit based on an audit performed by LA City. This audit
reviewed billings to Culver City for the last three fiscal years and resulted in a credit of
approximately $1.7 million which was used to offset this year’s payment. Sewer charges
to LA City are expected to again increase over the next few fiscal years. Additionally, the
City must comply with new Waste Discharge Requirements set by the State Water
Resources Control Board.
Currently, the Sewer Fund has a
healthy reserve balance. Due to
the reduction in sewer charges
from the City of LA in 2007-08, the
Sewer User’s charges were not
increased in 2008-09. However, in
order to avoid depleting the Sewer
Fund’s reserve balance, it is
anticipated that additional fee
increases will be necessary in
future fiscal years. If the projected
charges from the City of Los
Angeles are realized, and the City fully complies with the new Waste Discharge
Requirements, future deficits in the Sewer Fund may be unavoidable without a significant
increase in wastewater fees.
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, and subsequently refunded in 1999. 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
beginning in fiscal 2010-11. This is not as steep an increase as the most recent
increases and places a steady increase in fees on users per year rather than hitting them
1992-93 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Sewer Fund Wastewater Rates
50Comprehensive Financial Plan – Sewer Fund
February 2009
with larger increases every few years. This increase is enough to cover ongoing
operating and maintenance increases (assuming that Hyperion charges from the City of
LA do not increase too significantly), but will not be sufficient to cover ongoing sewer
capital projects. The Public Works Department is currently in the process of researching
and developing a full Sewer Capital Improvement Study over the next couple of months.
Further, in-depth information will be presented during the upcoming budget process to
complement the information contained in this report.
DISCUSSION OF EXPENDITURE PROJECTIONS
Personnel expenditures are forecasted to increase 4.0% through fiscal 2009-10 given
current MOU agreements. Conservative projections for personnel costs have been
included for the remaining fiscal years in this fifteen-year forecast. The exception to this
is medical premiums. Medical premiums are forecast to increase 11.1% in fiscal 2009-
10, with small adjustments downward in subsequent years. General operating and
maintenance costs are anticipated to grow 3%. As mentioned previously, charges for the
City’s portion of the Hyperion Wastewater Treatment Plant are increased each year
according to the 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 and range
from $3.15 million to $5.1 million per year. 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.
51Comprehensive Financial Plan – Sewer Fund
February 2009
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52
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
SEWER FUND (204) - Preliminary
Beginning Balance 24,462 21,326 19,466 15,143 10,885 6,408 7,006 7,571 8,099 8,585 9,020 9,403 9,728 9,993 10,191 10,314
Fiscal Year Net Change
Total Recurring Revenue 9,897 9,922 9,918 10,119 10,304 10,493 10,686 10,883 11,084 11,289 11,498 11,711 11,928 12,149 12,375 12,605
Total One-Time Revenue 0000000000000000
Total Revenue Projection 9,897 9,922 9,918 10,119 10,304 10,493 10,686 10,883 11,084 11,289 11,498 11,711 11,928 12,149 12,375 12,605
Total Recurring Expenditures 8,505 8,632 9,071 9,557 9,681 9,895 10,121 10,355 10,598 10,854 11,115 11,386 11,663 11,951 12,252 12,567
Total One-Time Expenditures 4,528 3,150 5,170 4,820 5,100 0 0 0 0 0 000000
Total Expenditures Projection 13,033 11,782 14,241 14,377 14,781 9,895 10,121 10,355 10,598 10,854 11,115 11,386 11,663 11,951 12,252 12,567
Total Sewer FY Operating Surplus/Deficit 1,392 1,290 847 562 623 598 565 528 486 435 383 325 265 198 123 38
Sewer Fund - Preliminary Ending
Balance (Operating) 21,326 19,466 15,143 10,885 6,408 7,006 7,571 8,099 8,585 9,020 9,403 9,728 9,993 10,191 10,314 10,352
Reserve Percentage (Recurring) 250.75% 225.51% 166.94% 113.90% 66.19% 70.81% 74.81% 78.22% 81.01% 83.11% 84.60% 85.44% 85.68% 85.28% 84.18% 82.38%
53Comprehensive Financial Plan Update
February 2009
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54
Equipment
Replacement Fund
Narrative and Projection Worksheet
CITY 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 and other assets.
The fund is overseen by the Equipment Maintenance and Fleet Services Division
(EMFS) and the Finance/Administration & Budget Division.
FISCAL YEAR 2008-09 HIGHLIGHTS
The ERF fund has continued to maintain an appropriate fund balance for several years.
In a continued effort to reduce costs for operating departments, funding for the ERF
fund was again slightly reduced for 2008-09. Amortization charges to the affected
General Fund operating departments remained at the 75% funding level. The ERF fund
charges are reviewed annually to ensure that the fund remains healthy.
In 2008-09, there are a number of vehicles that are scheduled for replacement
including:
? 12 Police Department vehicles (including 3 detective units and 5 black & whites)
? 3 Fire Department vehicles (sedans)
? 4 Semi-trucks in the Refuse Division
? 1 Passenger Van in the Parks, Recreation & Community Services Department
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 Finance/Administration &
Budget Division. 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
over the expected life cycle of each unit. The Finance Department invests the funds
55Comprehensive Financial Plan – Equipment Replacement Fund
February 2009
and credits interest or dividend earnings into the fund. The Finance Department also
places the residual (disposal) value of the assets back into the fund after the sale is
finalized.
The ERF fund is self-supporting and is the main resource for budgeting and providing
adequate funding for all vehicles (except transit buses) 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 Finance/Administration & Budget Division. 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), and vehicles purchased with other sources of
funding such as Asset Seizure monies or grant monies.
Using departments justify and budget for the initial procurement of all capital assets.
When the City receives new equipment, the Equipment Maintenance Division and the
Finance/Administration & Budget Division add the vehicles and equipment into the main
asset inventory systems (fleet management and accounting systems), establishes an
estimated useful life and calculates the future replacement costs which include
adjustments for CPI and inflation, then establishes the amortization schedule for the
new piece of equipment.
The Equipment Maintenance Division will communicate on an annual basis (or as
required) 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:
? Review the list of equipment candidates
? Decide further whether to replace or retain the recommended vehicles and
equipment.
56Comprehensive Financial Plan – Equipment Replacement Fund
February 2009
? 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. It is not foreseen this will
occur in the near future, though, due to the Risk Management fund having to transfer
$3.6 million to the Improvement & Acquisition fund to cover the costs of the Cranks hill
slide project. There is the possibility of this funding being reimbursed to the Self-
Insurance fund by FEMA and OES, but not with a certainty.
In fiscal 2008-09, $1,250,000 was transferred from the ERF fund balance to the
Improvement & Acquisition fund to pay for the replacement of the City’s antiquated
telephone system.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
The Equipment Replacement Fund has
continued to maintain an appropriate fund
balance for several years. This is mainly
attributable to close oversight by the
Equipment Maintenance Division and the
Finance/Administration & Budget Division.
The strategy already in place for this Fund
will continue to be administered. The Fifteen
(15) 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
2004 2005 2006 2007 2008
(000's)
Equipment Replacement Fund Cash Balance
57Comprehensive Financial Plan – Equipment Replacement Fund
February 2009
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
unanticipated or emergency replacements when authorized. This was the case with the
early replacement purchase of three (3) Fire Engines a few years ago.
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 rate is charged to the using
Division.
The amounts currently showing on the Fifteen (15) Year Forecast for Expenditures is
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 2009-
10 and subsequent years.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
(000's)
Equip Replacement Fund Revenues and Expenditures
Revenues Expenditures
58
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
EQUIPMENT REPLACEMENT FUND
(307) - Preliminary Beginning Balance 11,553 10,771 7,970 8,367 9,170 9,960 10,999 10,297 11,014 12,540 11,590 11,875 13,256 13,730 13,948 14,289
Fiscal Year Net Change
Total Recurring Revenue 2,044 2,044 2,103 2,165 2,229 2,295 2,363 2,434 2,509 2,586 2,666 2,748 2,833 2,921 3,012 3,106
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 2,044 2,044 2,103 2,165 2,229 2,295 2,363 2,434 2,509 2,586 2,666 2,748 2,833 2,921 3,012 3,106
Total Recurring Expenditures 1,532 4,845 1,706 1,362 1,439 1,256 3,065 1,717 983 3,536 2,381 1,367 2,359 2,703 2,671 2,684
Total One-Time Expenditures 1,294 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 2,826 4,845 1,706 1,362 1,439 1,256 3,065 1,717 983 3,536 2,381 1,367 2,359 2,703 2,671 2,684
Total ERF FY Operating
Surplus/Deficit (782) (2,801) 397 803 790 1,039 (702) 717 1,526 (950) 285 1,381 474 218 341 422
ERF Fund - Preliminary Ending
Balance (Operating) 10,771 7,970 8,367 9,170 9,960 10,999 10,297 11,014 12,540 11,590 11,875 13,256 13,730 13,948 14,289 14,711
Reserve Percentage (Recurring) 703.08% 164.50% 490.45% 673.29% 692.16% 875.73% 335.96% 641.48% 1275.70% 327.78% 498.75% 969.73% 582.03% 516.02% 534.97% 548.11%
59Comprehensive Financial Plan Update
February 2009
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60
Equipment Maintenance
and Fleet Services Fund
Narrative and Projection Worksheet CITY 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 Finance Department, is responsible for the administration and operation of the
Equipment Replacement Fund.
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 2008-09 HIGHLIGHTS
The Adopted 2008-09 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 2008-09 includes:
? Continue to be recognized as one of North America’s Top 100 Fleets and have
been ranked within the top 20 fleets over the past four years.
? Continue to monitor and apply the Division’s new Safety Awareness and
Employee Recognition Programs
? Maintain and monitor the new Automatic Vehicle Locator (AVL) system
? Initiate the Maximus InfoCenter Fleet Management system to reduce data entry,
improve reporting capabilities, and integrate the billing process.
|10 10|1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Equip Maint Fund Revenues and Expenditures
Revenues Expenditures
61Comprehensive Financial Plan Update – Equipment Maintenance and Fleet Services Fund
February 2009
BACKGROUND
The Equipment Maintenance and Fleet Services Division is a nationally recognized fleet
that is a leader in environmental technology, emissions reduction programs and
technical workforce. All of the Culver CityBus vehicles (transit buses), and many of the
large refuse vehicles, and many other fleet vehicles are powered by clean burning
compressed natural gas (CNG), which is much more environmentally responsible than
traditional diesel power. We are mandated to purchase alternative fuel powered
equipment when replacing diesel vehicles. Our fuel of choice is CNG and this
technology is more complex to properly maintain than traditional types of fuels.
Acquisition costs are higher than that of fossil fuels, and slightly more costly to maintain.
The Division is well trained in the application and maintenance of our CNG fleet with a
workforce that has an enhanced set of technical skill sets.
The three major cost centers that drive costs in the Equipment Maintenance Division
are personnel costs, petroleum costs (including unleaded gasoline and diesel fuel), and
repairs and maintenance on vehicles and equipment with an escalation in material and
vehicle parts costs.
Over the past five years,
expenditures in the equipment
maintenance fund have increased
an average of almost 8.2% per year.
This is due mainly to increases in
petroleum prices and personnel
costs, which have increased an
average of 15.1% and 9.7% per
year, respectively, over the last five
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
Wildly fluctuating oil prices are reverberating throughout the economy. The price of oil
soared to almost $150 per barrel in the summer of 2008 before plummeting to $40 per
barrel in recent weeks. This market chaos makes projecting expenditures a difficult
endeavor.
What we do know is that as alternative energy vehicles (including CNG) become more
widely used, economies of scale dictate that costs to operate (fuel costs) and maintain |10 10|500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Equipment Maintenance Fund Major Cost Centers
Personnel Svcs Petroleum Products Repairs and Maintenance
62Comprehensive Financial Plan Update – Equipment Maintenance and Fleet Services Fund
February 2009
those vehicles will decrease. With much of the Culver City fleet being converted to, or
replaced by, CNG powered vehicles, it is anticipated that costs will start to decline.
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 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, and
general operating, etc.), and charged to Divisions based on services requested and
work performed.
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 (Equipment
Maintenance 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 at a 4.0% rate for fiscal 2009-10, with medical insurance
premiums estimated to grow at approximately 11.1%% in fiscal 2009-10, 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). Conservative projections for personnel costs have been included for the
remaining fiscal years in this fifteen-year forecast.
Included in the operating and maintenance costs are fuel charges, which may grow at a
faster rate. The Division continues to monitor the price of all fuels to determine the best
price when fuel is purchased.
63Comprehensive Financial Plan Update – Equipment Maintenance and Fleet Services Fund
February 2009
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64
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
EQUIPMENT MAINT. FUND (308) -
Preliminary Beginning Balance (736) (138) 298 665 883 1,044 1,175 1,301 1,386 1,428 1,507 1,626 1,790 2,009 2,285 2,617
Fiscal Year Net Change
Total Recurring Revenue 7,803 7,959 8,200 8,449 8,743 9,083 9,438 9,807 10,191 10,676 11,185 11,721 12,284 12,876 13,498 14,151
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 7,803 7,959 8,200 8,449 8,743 9,083 9,438 9,807 10,191 10,676 11,185 11,721 12,284 12,876 13,498 14,151
Total Recurring Expenditures 7,205 7,523 7,833 8,231 8,582 8,952 9,312 9,722 10,149 10,597 11,066 11,557 12,065 12,600 13,166 13,760
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 7,205 7,523 7,833 8,231 8,582 8,952 9,312 9,722 10,149 10,597 11,066 11,557 12,065 12,600 13,166 13,760
Total Equip. Maint. FY Operating
Surplus/Deficit 598 436 367 218 161 131 126 85 42 79 119 164 219 276 332 391
Equip. Maint. Fund - Preliminary
Ending Balance (Operating) (138) 298 665 883 1,044 1,175 1,301 1,386 1,428 1,507 1,626 1,790 2,009 2,285 2,617 3,008
Reserve Percentage (Recurring) -1.92% 3.96% 8.49% 10.72% 12.16% 13.12% 13.97% 14.25% 14.07% 14.22% 14.69% 15.49% 16.65% 18.13% 19.87% 21.86%
65Comprehensive Financial Plan Update
February 2009
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66
Self Insurance Fund
Narrative and Projection Worksheet
CITY 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, salary continuance costs for
employees injured at work, workers’ compensation and liability claims costs, and excess
insurance premiums to protect the City’s assets. As an internal service fund, all costs
for the Self Insurance Fund are allocated among operating departments using a formula
that equitably distributes costs based on each department’s 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 2008-09 HIGHLIGHTS
The focus for the Self Insurance Fund in FY 2008-09 is on rebuilding the fund’s reserve
balance after a number of large settlement related costs, including $3.6 million to repair
the Cranks/Tellefson hillside, have severely reduced the fund’s cash reserve in case of
another large settlement. The Adopted 2008-09 Self Insurance Fund operating budget
increased by less than 1% from the previous year’s budget due to a projected reduction
in costs in insurance and claims costs. Budget highlights for 2008-09 include:
? Increase Salary Continuance budget by 33% to reflect an increase in employee
lost time experienced in FY 2007-08.
? Slight decrease in excess insurance premiums.
BACKGROUND
The two largest cost centers within the Self Insurance Fund are insurance premiums
and workers’ comp related expenses. From 2001 through 2007, insurance costs
increased significantly due to a number of factors outside of the City’s control, including
9/11 and subsequent natural disasters, such as hurricanes Katrina and Wilma. These
events caused insurance companies to re-evaluate their risks in other natural disaster
prone areas, especially Southern California. Prior to 9/11, the City’s insurance
premiums were approximately $300,000 annually. Today, the City’s cost for insurance
67Comprehensive Financial Plan Update – Self Insurance Fund REVISED January 19, 2007
February 2009
premiums, excluding medical premiums, exceeds $1.3 million. This has placed added
pressures on City resources.
Workers’ compensation costs also experienced large increases from 2001 through
2005. 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 by 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. This
new methodology has been successful in stabilizing SIF revenues and reflecting the
“true risk cost” for each division.
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 each fiscal year since 2005-06 with a
reserve cash balance to approximately $1.8 million.
|10 10|1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Self Insurance Fund Revenues and Expenditures
Revenues Expenditures
68Comprehensive Financial Plan Update – Self Insurance Fund REVISED January 19, 2007
February 2009
ECONOMIC OVERVIEW
As previously mentioned, many of the Self Insurance Fund’s costs are driven by factors
outside of the City’s control, including medical costs, changes in state and federal
legislation, 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. The earthquake market
has since stabilized as more insurers have entered the market, but premiums still
remain relatively high and coverage limits relatively low.
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.
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 |10 10|1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Self Insurance Fund Expenditures
Expenditures
69Comprehensive Financial Plan Update – Self Insurance Fund REVISED January 19, 2007
February 2009
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.
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 premium 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.
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
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 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 Management is
funded by the Self-Insurance Fund. Personnel costs are estimated to grow 4.0% per |10 10|1,000
2,000
3,000
4,000
5,000
6,000
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Self Insurance Fund Major Cost Centers
Administration Salary Continuance Insurance Premiums Claims Expense
70Comprehensive Financial Plan Update – Self Insurance Fund REVISED January 19, 2007
February 2009
current MOU negotiations through fiscal 2009-10. Conservative projections for
personnel costs have been included for the remaining fiscal years in this fifteen-year
forecast. The exception to this is medical premiums. Medical premiums are forecasted
to increase 11.1% in fiscal 2009-10, with small adjustments downward in subsequent
years. Ongoing operating and maintenance costs are estimated to grow at
approximately 3.0%.
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.
However, through the ICRMA, the City was able to mitigate this variability somewhat by
securing a two year pricing structure from insurance carriers for the 2008-09 and 2009-
10 policy years. In addition, the insurance market softened somewhat in 2007-08,
resulting in very competitive renewal premiums that are guaranteed for two fiscal years.
Overall, insurance costs decreased by approximately 4% from 2007-08 to 2008-09, and
insurance costs will remain flat in 2009-10. After FY 2009-10, 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 over a
five year period. 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 three years before leveling off and
increasing commensurate with projected inflation (3.5%).
71Comprehensive Financial Plan Update – Self Insurance Fund REVISED January 19, 2007
February 2009
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72
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
RISK MANAGEMENT FUND (309) -
Preliminary Beginning Balance 1,813 1,692 1,637 1,877 2,120 2,368 2,620 2,877 3,039 3,206 3,378 3,555 3,739 3,928 4,123 4,324
Fiscal Year Net Change
Total Recurring Revenue 7,330 7,336 7,795 8,084 8,372 8,675 8,987 9,310 9,646 9,995 10,357 10,734 11,120 11,521 11,938 12,372
Total One-Time Revenue 0 0 100 100 100 100 100 0 0 0 0 0 0 0 0 0
Total Revenue Projection 7,330 7,336 7,895 8,184 8,472 8,775 9,087 9,310 9,646 9,995 10,357 10,734 11,120 11,521 11,938 12,372
Total Recurring Expenditures 7,450 7,391 7,655 7,941 8,225 8,522 8,830 9,148 9,479 9,823 10,180 10,550 10,931 11,326 11,737 12,165
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 7,450 7,391 7,655 7,941 8,225 8,522 8,830 9,148 9,479 9,823 10,180 10,550 10,931 11,326 11,737 12,165
Total Risk Mgmt FY Operating
Surplus/Deficit (120) (55) 240 243 247 253 257 162 167 172 177 184 189 195 201 207
Risk Mgmt Fund - Preliminary Ending
Balance (Operating) 1,692 1,637 1,877 2,120 2,368 2,620 2,877 3,039 3,206 3,378 3,555 3,739 3,928 4,123 4,324 4,531
Reserve Percentage (Recurring) 22.72% 22.15% 24.52% 26.70% 28.79% 30.75% 32.58% 33.22% 33.82% 34.38% 34.92% 35.44% 35.93% 36.40% 36.84% 37.24%
73Comprehensive Financial Plan Update
February 2009
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74
Operating Grants Fund
Narrative and Projection Worksheets
CITY 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 2008-09 HIGHLIGHTS
The Adopted 2008-09 Budget continues funding for CDBG, the Senior Nutrition
Program, Paratransit Services, Retired Seniors Volunteer Program, COPS, La Ballona
Bikeway, and Air Quality Programs.
75Comprehensive Financial Plan Update – Operating Grant Funds
February 2009
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, State or County government) annual appropriation. With an
increased amount of funds being appropriated for the war in Iraq and the and other
uses due to the downturn of the economy, domestic funding for grants and other
federally funded programs is shrinking.
76Comprehensive Financial Plan Update – Operating Grant Funds
February 2009
The variable nature of grant funding was made apparent when the CDBG program was
nearly eliminated 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 and have been reduced in each
subsequent year. In recent years, grant funding has been directed towards homeland
security and defense type activities, but now that a new administration is in place,
Federal funding for other grant types may begin to increase.
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 Fifteen (15) Year Forecast in fiscal
2008-09 and in some cases for 2009-10, 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. Staff from Accounting
and participating departments have done a good job in keeping this time difference to a
minimum. In fiscal 2009-10, this process will be thoroughly analyzed to see if there are
further streamlining procedures that can be implemented to ensure the City receives
funds as soon as possible.
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 was recently
77Comprehensive Financial Plan Update – Operating Grant Funds
February 2009
renewed. The City was able to secure 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 was up in 2008, and discussed with the County Department of
Public Works. The funding was continued 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
renewed this funding for a three-year cycle in fiscal 2007-08.
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 47% of the Specialist’s position in fiscal 2008-09. Actual
program expenditures 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 expected that these strategies will be
introduced and presented during the upcoming 2009-10 and 2010-11 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 2008-09 have been identified as one-time
grants, and are not carried forward in projections.
78Comprehensive Financial Plan Update – Operating Grant Funds
February 2009
DISCUSSION OF EXPENDITURE PROJECTIONS
Personnel expenditures are forecasted to increase 4.0% through fiscal 2009-10 given
current MOU agreements. Conservative projections for personnel costs have been
included for the remaining fiscal years in this fifteen-year forecast. Operating and
maintenance costs are forecasted to grow by 3.0% 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.
79Comprehensive Financial Plan Update – Operating Grant Funds
February 2009
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80
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
GRANTS OPERATING FUND (414) -
Preliminary Beginning Balance (272) (239) (298) (291) (292) (289) (282) (271) (258) (244) (227) (205) (181) (157) (131) (104)
Fiscal Year Net Change
Total Recurring Revenue 1,513 1,083 1,089 1,128 1,167 1,208 1,250 1,295 1,341 1,389 1,439 1,491 1,544 1,599 1,656 1,715
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 1,513 1,083 1,089 1,128 1,167 1,208 1,250 1,295 1,341 1,389 1,439 1,491 1,544 1,599 1,656 1,715
Total Recurring Expenditures 1,480 1,143 1,081 1,129 1,164 1,201 1,238 1,282 1,327 1,371 1,417 1,467 1,519 1,573 1,629 1,687
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 1,480 1,143 1,081 1,129 1,164 1,201 1,238 1,282 1,327 1,371 1,417 1,467 1,519 1,573 1,629 1,687
Total Grants Op FY Operating
Surplus/Deficit 33 (60) 8 (1) 3 7 12 13 14 18 22 24 25 26 27 28
Grants Operating Fund - Preliminary
Ending Balance (Operating) (239) (298) (291) (292) (289) (282) (271) (258) (244) (227) (205) (181) (157) (131) (104) (76)
Reserve Percentage (Recurring) -16.12% -26.10% -26.87% -25.84% -24.83% -23.51% -21.86% -20.12% -18.41% -16.53% -14.46% -12.35% -10.30% -8.31% -6.39% -4.53%
81
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
CDBG-Operating (427) - Preliminary
Beginning Balance 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Fiscal Year Net Change
Total Recurring Revenue 70 73 74 76 79 82 85 89 93 97 101 107 113 119 126 133
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 70 73 74 76 79 82 85 89 93 97 101 107 113 119 126 133
Total Recurring Expenditures 70 72 74 76 79 82 85 89 93 97 101 107 113 119 126 133
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 70 72 74 76 79 82 85 89 93 97 101 107 113 119 126 133
Total CDBG-Operating FY Operating
Surplus/Deficit 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0
CDBG-Operating - Preliminary Ending
Balance (Operating) 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Reserve Percentage (Recurring) 1.43% 2.78% 2.70% 2.63% 2.53% 2.44% 2.35% 2.25% 2.15% 2.06% 1.98% 1.87% 1.77% 1.68% 1.59% 1.50%
82
Capital Projects Fund
Narrative and Projection Worksheets
CITY 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 through physical infrastructure and service
improvements. CIPs are also the City’s main tool to address current deferred
maintenance costs for street paving, streetlight upgrades, and facility maintenance, etc.
FISCAL YEAR 2008-09 HIGHLIGHTS
The Adopted 2008-09 CIP Budget includes new funding for a number of projects that
begin to address some critical deferred maintenance issues.
Facility Maintenance and Park Projects
Building Repairs ($225,000)
Sepulveda Streetscape ($351,000)
Underground Storage Tank Replacement ($105,000)
Upgrade Park Irrigation System and Resurface Sports Courts ($10,000)
Drainage Swale at Culver City Park ($30,000)
Street and Sidewalk Repair and Maintenance
Minor Pavement and Concrete Improvement Program ($50,000)
Residential Paving Program ($150,000)
Prop 1B Street Repair Funding ($656,112)
Culver Blvd Resurfacing ($401,045)
Duquesne Blvd Widening ($60,000)
Overland Ave/Jefferson Blvd Capacity Enhancement ($60,000)
Curb, Gutter, Sidewalk Replacement ($50,000)
Traffic Improvement
Traffic Signal Replacement/Upgrade ($10,000)
Neighborhood Traffic Management Plan ($60,000)
Traffic Signal @ Washington/McLaughlin ($300,000)
Other Significant Projects
Technology Equipment and Software ($251,000)
Telephone System Replacement ($1,250,000)
Sewer system upgrade projects ($3,705,000)
83Comprehensive Financial Plan Update – Capital Projects Fund
February 2009
Additionally, a number of major projects have been completed, or are scheduled to be
completed, in fiscal year 2008-09. Some of the highlights include:
Fire Station #3
Public Safety Records Management System
Street Repaving Projects:
o Culver Blvd (Sepulveda Blvd to Elenda)
More street repaving projects were originally planned; however, due to the state
freezing many grant funds and their inability to sell Prop 1B bonds at this time, many of
the street projects have been delayed until funding becomes available again.
BACKGROUND
The City has established a five-year Capital Improvement Plan that 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.
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 the projects will continue to deteriorate, ultimately increasing the total
84Comprehensive Financial Plan Update – Capital Projects Fund
February 2009 |10 10|2,000
4,000
6,000
8,000
10,000
03-04 04-05 05-06 06-07 07-08 08-09 09-10
(000's)
Capital Improvement Annual Appropriations
Capital Grants
General Fund CIP
Park Facilities Fund
Gas Tax
Comm Dev Fund
Art in Public Places
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.
Additionally, due to the financial problems
being experienced by the state, a number of
CIP projects that are being funded by state grants will be delayed. Some of the projects
effected at this time include the Bill Botts Baseball Field Lighting Project (P-869),
Ballona Creek Bikepath Enhancement (P-900), Sepulveda Blvd Streetscape Project (P-
797), and a Stormwater Discharge Program grant (p-497). Grant funding for these
projects has been suspended until the state is able to fix their substantial cash flow and
budget problems.
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. The City has been able to transfer approximately $1
million a year from the General Fund for the last few years to the capital projects fund
due to one-time revenues received in previous fiscal years, but this is only due to some
major one-time development occurring in the City. 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 study is used as a
guide to assist in appropriating building maintenance funding each fiscal year. Similarly,
a park assessment study was conducted, and results from the report are used to assist
with funding needs during the budget process for parks.
The City is not in a position at this time to set aside the needed amount of funding each
year identified in the study. Funding was appropriated in fiscal 2008-09 that should
meet the needs of current maintenance, but does not sufficiently address deferred
maintenance or set aside funds for known improvements that will be needed in the near
future (e.g. carpet replacement at City Hall).
85Comprehensive Financial Plan Update – Capital Projects Fund
February 2009
Additionally, the City has identified a number of other infrastructure maintenance needs
and has begun to quantify those needs by developing the following:
Pavement Management System
Building Infrastructure Master Plan
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 total 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.
In compliance with the City’s Financial Policies, grant funds for capital projects are
appropriated only after a signed contract with the granting agency is received and a
copy is forwarded to the Finance Department. 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.”
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 continue to be diligent in adhering to requirements of the grant
agreement to ensure the most effective and efficient use of resources. Additionally, as
86Comprehensive Financial Plan Update – Capital Projects Fund
February 2009
previously mentioned, economic troubles have impacted the availability of grant funds
and caused many granting agencies to delay grant reimbursement payments. This has
caused staff to stop work on those effected projects until the funding becomes available
again.
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 may only be used to finance street improvements, traffic controls and traffic
management projects. Currently there is a small amount of funding available in this
fund because many projects are statutorily exempt from paying this fee per the
Municipal Code (e.g. parking structures and developments that have a Development
Agreement with the Redevelopment Agency are exempt). Actual receipts are related to
the level of development in the City at any given time, therefore, it is difficult to forecast
future receipts. However, 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 per gallon state tax on gasoline and diesel 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 $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 per gallon tax rate.
During fiscal 2007-08 the State deferred several months worth of this funding source,
which caused the City to delay some much needed capital projects. There is a high
probability the State will again defer this funding (currently seven months is being
discussed) in fiscal 2008-09 and part of 2009-10, which will again cause the City to
delay or cancel capital projects. The aggregate amount of potentially deferred gas tax
funds being discussed is approximately $401,000.
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 General Fund revenues such as developer fees or land sale
proceeds. Additionally, the City will receive mitigation funds from large scale
development that can be used to fund capital projects that mitigate an impact from a
specific new development. Funding varies based on available one-time General Fund
receipts.
DISCUSSION OF EXPENDITURE PROJECTIONS
The Pavement Management Plan calculates the current backlog for street paving at
approximately $20 million. This would bring the condition of the City’s streets up to an
acceptable level. Approximately $2.0 million is needed annually just to keep the
backlog at the current level ($20 million). Approximately $3.1 million is appropriated
(includes new appropriations of $1.5 million in 2008-09 and $500,000 in 2009-10 plus
87Comprehensive Financial Plan Update – Capital Projects Fund
February 2009
$1.1 million in carryover funds) for street and alley improvements through fiscal 2009-
10. Also, per a state ballot measure approved in November 2006 (Proposition 1B), the
City received $656,000 for street repair in FY 2007-08. The City was anticipating
another $606,428 in FY 2008-09; however, due to the state’s financial troubles and
difficulty selling municipal bonds in the current economic environment, it is expected
that receipt of those funds will also be delayed.
In fiscal 2005-06, the City started the process of setting aside annual maintenance
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. However, there is no dedicated revenue stream for these activities; therefore, the
City will need to rely on available one-time monies to continue funding these items. In
FY 2008-09, a total of $200,000 was appropriated for ongoing paving and slurry seal
activities and $131,200 was appropriated for computer/technology replacement (not
including the $150,000 appropriated in the “computer replacement fund” 30724100).
This amount is nowhere near the level of funding needed to adequately address the
deferred maintenance need and, as revenues tighten over the next few years, funding
may not be available to continue setting aside funds annually.
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 City’s financial policy 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. Although the total cost of this
effort is not yet known, it will be a significant sum of money. Since this is a regional
issue, staff will work with surrounding affected agencies to develop a regional funding
mechanism. This cleanup effort is an unfunded mandate by the State.
The Art Fund is a dedicated funding source for: design, acquisition, commission,
installation, improvement, maintenance and insurance of public art work; sponsorship
and/or financial support of performing arts; and 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 pay 1% of their
88Comprehensive Financial Plan Update – Capital Projects Fund
February 2009
development/construction costs rather than install artwork themselves, as required by
the Municipal Code. Depending on the scope of a project, this can amount to a large
sum. Appropriations vary based on the level of development activity in the City at any
given time.
In the near future, anticipated expenditures are 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 maintenance operations as well
as street and traffic light capital projects. Currently, the City utilizes the full amount of
funding received each year for Capital Projects and to offset street related operating
expenses in the General Fund. This funding is often used as a source of matching
funds for capital grants. Despite the volatility of gas prices, it is not anticipated the City
will receive a larger amount of revenue from this source because it is a flat tax levied
per gallon. Changing the tax would require State legislative action.
Parks Facility Funding is received by the City from new residential development that
does not include “green space” as part of the project. This funding source has not been
a large source of revenue for the City in many years, and must be used specifically for
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.
Appropriations vary based on the level of development activity in the City at any given
time. Currently, budgeted and projected expenditures do not exceed the available
revenue amount.
The Improvement and Acquisition (I & A) Fund is the primary funding source for
capital projects. The I&A fund is funded almost exclusively using General Fund reserve
money and therefore funds general type capital projects that are not funded by another
dedicated funding source. I & A funds are also used to supplement funding for capital
projects that receive insufficient funding from other funding sources. Appropriations
vary based on projected one-time General Fund receipts.
The Parking Fund receives its funding from parking meter receipts and street film
permits. A portion of this funding is transferred into the General Fund to cover General
Fund operational expenses for parking and street related activities. This funding has
also been used for capital projects related to installation of parking meters and other
parking related capital projects. Since parking is a fixed commodity, Parking Fund
receipts are relatively stable and only grow as parking meter rates increase.
89Comprehensive Financial Plan Update – Capital Projects Fund
February 2009
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90
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
ARTS FUND (413) - Preliminary
Beginning Balance 879 (61) (80) (18) 44 106 168 230 292 354 416 478 540 602 664 726
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 556 165 115 115 115 115 115 115 115 115 115 115 115 115 115 115
Total Revenue Projection 556 165 115 115 115 115 115 115 115 115 115 115 115 115 115 115
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 1,140 184 53 53 53 53 53 53 53 53 53 53 53 53 53 53
Total Expenditures Projection 1,140 184 53 53 53 53 53 53 53 53 53 53 53 53 53 53
Total Arts Fund FY Operating
Surplus/Deficit (584) (19) 62 62 62 62 62 62 62 62 62 62 62 62 62 62
Arts Fund - Preliminary Ending
Balance (Operating) 295 (80) (18) 44 106 168 230 292 354 416 478 540 602 664 726 788
Reserve Percentage (One-time) 25.86% -43.48% -33.96% 83.02% 200.00% 316.98% 433.96% 550.94% 667.92% 784.91% 901.89% 1018.87% 1135.85% 1252.83% 1369.81% 1486.79%
91
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
ASSET SEIZURES (416) - Preliminary
Beginning Balance 1,099 364 364 364 364 364 364 364 364 364 364 364 364 364 364 364
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 735 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 735 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Asset Seizures FY Operating
Surplus/Deficit (735) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Asset Seizures - Preliminary Ending
Balance (Operating) 364 364 364 364 364 364 364 364 364 364 364 364 364 364 364 364
Reserve Percentage (One-time) 49.51% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
92
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
NEW DEVELOPMENT IMPACT (417) -
Preliminary Beginning Balance 284 256 259 260 261 262 263 264 265 266 267 268 269 270 271 272
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 3 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Total Revenue Projection 3 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 31 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 31 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total New Dev Imp FY Operating
Surplus/Deficit (28) 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1
New Dev Imp - Preliminary Ending
Balance (Operating) 256 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273
Reserve Percentage (One-time) 827.39% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
93
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
GAS TAX (418) - Preliminary Beginning
Balance 787 73 179 85 491 897 1,303 1,709 2,115 2,521 2,927 3,333 3,739 4,145 4,551 4,957
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 756 756 756 756 756 756 756 756 756 756 756 756 756 756 756 756
Total Revenue Projection 756 756 756 756 756 756 756 756 756 756 756 756 756 756 756 756
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 1,470 650 850 350 350 350 350 350 350 350 350 350 350 350 350 350
Total Expenditures Projection 1,470 650 850 350 350 350 350 350 350 350 350 350 350 350 350 350
Total Gas Tax Fund FY Operating
Surplus/Deficit (714) 106 (94) 406 406 406 406 406 406 406 406 406 406 406 406 406
Gas Tax Fund - Preliminary Ending
Balance (Operating) 73 179 85 491 897 1,303 1,709 2,115 2,521 2,927 3,333 3,739 4,145 4,551 4,957 5,363
Reserve Percentage (One-time) 4.96% 27.53% 9.99% 140.27% 256.27% 372.27% 488.27% 604.27% 720.27% 836.27% 952.27% 1068.27% 1184.27% 1300.27% 1416.27% 1532.27%
94
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
Parks (419) - Preliminary Beginning
Balance 330 228 274 270 156 212 268 324 380 436 492 548 604 660 716 772
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 56 56 56 56 56 56 56 56 56 56 56 56 56 56 56 56
Total Revenue Projection 56 56 56 56 56 56 56 56 56 56 56 56 56 56 56 56
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 158 10 60 170 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 158 10 60 170 0 0 0 0 0 0 0 0 0 0 0 0
Total Parks Fund FY Operating
Surplus/Deficit (102) 46 (4) (114) 56 56 56 56 56 56 56 56 56 56 56 56
Parks Fund - Preliminary Ending
Balance (Operating) 228 274 270 156 212 268 324 380 436 492 548 604 660 716 772 828
Reserve Percentage (One-time) 144.51% 2743.27% 450.55% 91.96% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
95
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
Improvements & Acquisition (420) -
Preliminary Beginning Balance 2,649 (5,816) (5,606) (8,786) (11,844) (14,529) (14,124) (12,754) (11,384) (10,014) (8,644) (7,274) (5,904) (4,534) (3,164) (1,794)
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 2,815 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370
Total Revenue Projection 2,815 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 11,280 1,160 4,550 4,428 4,055 965 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 11,280 1,160 4,550 4,428 4,055 965 0 0 0 0 0 0 0 0 0 0
Total I & A Fund FY Operating
Surplus/Deficit (8,465) 210 (3,180) (3,058) (2,685) 405 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370 1,370
I & A Fund - Preliminary Ending
Balance (Operating) (5,816) (5,606) (8,786) (11,844) (14,529) (14,124) (12,754) (11,384) (10,014) (8,644) (7,274) (5,904) (4,534) (3,164) (1,794) (424)
Reserve Percentage (One-time) -51.56% -483.28% -193.10% -267.48% -358.30% -1463.63% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
96
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
Parking Improvement (421) - Preliminary
Beginning Balance 1,321 1,489 1,698 1,936 2,204 2,503 2,834 3,198 3,596 4,029 4,498 5,004 5,548 6,131 6,754 7,377
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 983 989 1,018 1,048 1,079 1,111 1,144 1,178 1,213 1,249 1,286 1,324 1,363 1,403 1,403 1,403
Total Revenue Projection 983 989 1,018 1,048 1,079 1,111 1,144 1,178 1,213 1,249 1,286 1,324 1,363 1,403 1,403 1,403
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 815 780 780 780 780 780 780 780 780 780 780 780 780 780 780 780
Total Expenditures Projection 815 780 780 780 780 780 780 780 780 780 780 780 780 780 780 780
Total Parking Fund FY Operating
Surplus/Deficit 168 209 238 268 299 331 364 398 433 469 506 544 583 623 623 623
Parking Fund - Preliminary Ending
Balance (Operating) 1,489 1,698 1,936 2,204 2,503 2,834 3,198 3,596 4,029 4,498 5,004 5,548 6,131 6,754 7,377 8,000
Reserve Percentage (One-time) 182.72% 217.71% 248.23% 282.59% 320.92% 363.35% 410.02% 461.05% 516.56% 576.69% 641.56% 711.30% 786.05% 865.92% 945.79% 1025.66%
97
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
Capital Grants (423) - Preliminary
Beginning Balance (17) (7) 3 2 2 2 2 2 2 2 2 2 2 2 2 2
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 4,870 21 5,184 11 11 11 11 11 11 11 11 11 11 11 11 11
Total Revenue Projection 4,870 21 5,184 11 11 11 11 11 11 11 11 11 11 11 11 11
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 4,860 11 5,185 11 11 11 11 11 11 11 11 11 11 11 11 11
Total Expenditures Projection 4,860 11 5,185 11 11 11 11 11 11 11 11 11 11 11 11 11
Total Capital Grants FY Operating
Surplus/Deficit 10 10 (1) 0 0 0 0 0 0 0 0 0 0 0 0 0
Capital Grants - Preliminary Ending
Balance (Operating) (7) 3 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Reserve Percentage (One-time) -0.14% 26.87% 0.04% 17.78% 17.78% 17.78% 17.78% 17.78% 17.78% 17.78% 17.78% 17.78% 17.78% 17.78% 17.78% 17.78%
98
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
CDBG-Capital (428) - Preliminary
Beginning Balance (19) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49)
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 228 181 210 194 177 177 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 228 181 210 194 177 177 0 0 0 0 0 0 0 0 0 0
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 258 181 210 194 177 177 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 258 181 210 194 177 177 0 0 0 0 0 0 0 0 0 0
Total CDBG-Capital FY Capital
Surplus/Deficit (30) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
CDBG-Capital - Preliminary Ending
Balance (Capital) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49) (49)
Reserve Percentage (One-time) -19.11% -27.23% -23.47% -25.41% -27.85% -27.85% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00%
99Comprehensive Financial Plan Update
February 2009
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100
Proposition A & C Funds
Narrative and Projection Worksheets
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Proposition A & C Funds
INTRODUCTION
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 one
percent (0.5%) 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 one
percent (0.5%) 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 2008-09 HIGHLIGHTS
The Adopted 2008-09 Budget includes Prop A funding in the amount of $662,000, which
represents a 1.2% increase from the prior year, and Prop C funding in the amount of
$721,959, which represents a 33% increase from the prior year. The increase in Prop C
funds is primarily the result of a decrease in funds received in 2007-08, which offset the
additional funds that were received in 2006-07 for transit projects. Fiscal Year 2008-09
represents a return to a more normal allocation.
BACKGROUND and ECONOMIC OVERVIEW
As a condition of voter approval, 25% of the Proposition A tax revenues and 20% 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.
101Comprehensive Financial Plan Update – Prop A & C Funds
February 2009
|10 10|500
1,000
1,500
2,000
2,500
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Prop A & C Revenues
Prop A Prop C
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. A portion of the Prop
C funding also helps offset costs
of the City’s Paratransit program.
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. In fact, LA County voters
approved an additional half cent sales tax in November 2008 to fund transportation
projects in the County (known as Measure R). This illustrates southern Californians’
support of transportation initiatives
and should help increase
transportation revenues.
However, since Prop A and C are
both sales taxes, they are
economically sensitive, which may
offset any potential increase
gained by the ½ cent increase.
The diversity of the Los Angeles
County economy makes it
relatively robust, which helps to
create an environment for a
relatively stable funding source in
Prop A and C sales tax receipts.
However, the economy as a whole (i.e. federal, state, and local) is currently contracting,
which will have a negative impact on these revenues. A more in-depth economic
outlook for sales tax is included in the “Economic Overview” section of the General
Fund’s Comprehensive Financial Strategy.
|10 10|200
400
600
800
1,000
1,200
1,400
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Prop A & C Expenditures
Prop A Prop C
102Comprehensive Financial Plan Update – Prop A & C Funds
February 2009
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 projection trends over the next fifteen years. The graph above
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 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 fifteen-year projection, revenues are equal to
expenditures.
103Comprehensive Financial Plan Update – Prop A & C Funds
February 2009
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104
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
Prop A (415) - Preliminary Beginning
Balance 940 940 940 940 940 940 940 940 940 940 940 940 940 940 940 940
Fiscal Year Net Change
Total Recurring Revenue 662 669 676 690 718 747 777 808 840 874 909 945 983 1,022 1,063 1,106
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 662 669 676 690 718 747 777 808 840 874 909 945 983 1,022 1,063 1,106
Total Recurring Expenditures 662 669 676 690 718 747 777 808 840 874 909 945 983 1,022 1,063 1,106
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 662 669 676 690 718 747 777 808 840 874 909 945 983 1,022 1,063 1,106
Total Prop A FY Operating
Surplus/Deficit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Prop A - Preliminary Ending Balance
(Operating) 940 940 940 940 940 940 940 940 940 940 940 940 940 940 940 940
Reserve Percentage (Recurring) 141.99% 140.50% 139.05% 136.23% 130.92% 125.83% 120.97% 116.33% 111.90% 107.55% 103.41% 99.47% 95.62% 91.97% 88.43% 84.99%
105
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
Prop C (424) - Preliminary Beginning
Balance 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223
Fiscal Year Net Change
Total Recurring Revenue 722 742 749 764 795 827 860 894 930 967 1,006 1,046 1,088 1,132 1,177 1,224
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 722 742 749 764 795 827 860 894 930 967 1,006 1,046 1,088 1,132 1,177 1,224
Total Recurring Expenditures 722 742 749 764 795 827 860 894 930 967 1,006 1,046 1,088 1,132 1,177 1,224
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 722 742 749 764 795 827 860 894 930 967 1,006 1,046 1,088 1,132 1,177 1,224
Total Prop C FY Operating
Surplus/Deficit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Prop C - Preliminary Ending Balance
(Operating) 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223 1,223
Reserve Percentage (Recurring) 169.38% 164.82% 163.28% 160.07% 153.83% 147.88% 142.20% 136.80% 131.50% 126.47% 121.57% 116.92% 112.40% 108.03% 103.90% 99.91%
106
Section 8 Fund
Narrative and Projection Worksheet
CITY 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 more than 300 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 2008-09 HIGHLIGHTS
The Adopted 2008-09 Budget includes funding to continue to support the Section 8
program. Some additions to the Section 8 work program in 2008-09 include:
? Utilize new Housing Market and Outreach Campaign slogan “Culture of Home”;
? Host roundtable discussion with various housing agencies throughout the region;
? Host the fall Housing Agency Management Association meeting; and
? Submit a Family Self Sufficiency Grant application to HUD to fund case
management services.
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.
107Comprehensive Financial Plan Update– Section 8/Low Moderate Income Housing Fund
February 2009
Currently, the two primary 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 prior to the current downturn made housing assistance
programs for low-to-moderate income families increasingly important. In fact, there
were a number of programs that the Culver City Housing Agency had to discontinue,
such as the Mortgage Assistance Program (MAP), because they were no longer
feasible given the extremely high cost of housing and the affordability gap. However, the
current declining housing market may make these programs feasible once again.
While the declining real estate market is good news for prospective buyers, it may put
upward pressure on the rental market. As families sell or lose 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.
Additionally, Section 8 funding is variable from year-to-year based on annual
appropriation of Congress. Depending on the federal government’s financial situation
and priorities, there is a possibility that Section 8 funds will shrink. However, the current
economic situation has made the need for housing assistance programs such as
Section 8 imperative to help an increasing number of Americans meet their basic
housing needs during this economic contraction.
108Comprehensive Financial Plan Update– Section 8/Low Moderate Income Housing Fund
February 2009
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
A more detailed policy discussion of the
Housing Fund’s finances, including the
Section 8 program, has been initiated
with the Redevelopment Agency Board
through the Comprehensive Housing
Strategy.
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 not
budgeted at a higher rate than available 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
Personnel costs are estimated to grow 4.0% per current MOU negotiations through
fiscal 2009-10. Conservative projections have been included for personnel costs for the
remaining fiscal years in this fifteen-year forecast. The exception to this is medical
premiums. Medical premiums are forecasted to increase 11.1% in fiscal 2009-10, with
small adjustments downward in subsequent years. Ongoing operating and
maintenance costs are estimated to grow at approximately 3.0%.
|10 10|500
1,000
1,500
2,000
2,500
3,000
2003-04 2004-05 2005-06 2006-07 2007-08 Adjusted
2008-09
(000's)
Section 8 Revenues and Expenditures
Revenues Expenditures
109Comprehensive Financial Plan Update– Section 8/Low Moderate Income Housing Fund
February 2009
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110
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
Section 8 Housing (426) - Preliminary
Beginning Balance 1,677 1,498 1,460 1,427 1,396 1,368 1,345 1,324 1,308 1,296 1,288 1,285 1,286 1,294 1,307 1,325
Fiscal Year Net Change
Total Recurring Revenue 2,054 2,119 2,129 2,139 2,150 2,161 2,172 2,184 2,196 2,209 2,222 2,236 2,251 2,266 2,282 2,299
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 2,054 2,119 2,129 2,139 2,150 2,161 2,172 2,184 2,196 2,209 2,222 2,236 2,251 2,266 2,282 2,299
Total Recurring Expenditures 2,233 2,156 2,162 2,170 2,177 2,184 2,192 2,200 2,208 2,216 2,225 2,234 2,243 2,253 2,263 2,275
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 2,233 2,156 2,162 2,170 2,177 2,184 2,192 2,200 2,208 2,216 2,225 2,234 2,243 2,253 2,263 2,275
Total Section 8 Housing FY Operating
Surplus/Deficit (179) (37) (33) (31) (27) (23) (20) (16) (12) (7) (3) 2 8 13 19 24
Section 8 Housing - Preliminary
Ending Balance (Operating) 1,498 1,460 1,427 1,396 1,368 1,345 1,324 1,308 1,296 1,288 1,285 1,286 1,294 1,307 1,325 1,349
Reserve Percentage (Recurring) 67.07% 67.73% 66.00% 64.31% 62.84% 61.57% 60.41% 59.45% 58.67% 58.13% 57.74% 57.58% 57.68% 57.99% 58.55% 59.28%
111Comprehensive Financial Plan Update
February 2009
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112
Innovation Fund
Projection Worksheet
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
INNOVATION FUND (312) - Preliminary
Beginning Balance 532 532 532 532 532 532 532 532 532 532 532 532 532 532 532 532
Fiscal Year Net Change
Total Recurring Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Recurring Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Innovation FY Operating
Surplus/Deficit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Innovation Fund - Preliminary
Ending Balance (Operating) 532 532 532 532 532 532 532 532 532 532 532 532 532 532 532 532
Reserve Percentage (Recurring) 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
113Comprehensive Financial Plan Update
February 2009
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114
Landscape Maintenance
District Fund
Narrative and Projection Worksheet
Adjusted
Description 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Culver City - SCENARIO 1
February 2009
(dollars shown in thousands) (dollars shown in thousands) (dollars shown in thousands)
< - - - - - - - - - - - - - Estimated 5-Year- - - - - - - - - - - - - - > - - - - - - - - - -- - - - - Estimated 10-Year- - - - - - - - - - - - - > - - - - - - - - - - - - - - Estimated 15-Year- - - - - - -- - - - - - - >
Landscape Maint. District (425) -
Preliminary Beginning Balance 82 82 82 82 82 82 82 82 82 82 82 82 82 82 82 82
Fiscal Year Net Change
Total Recurring Revenue 47 47 47 47 47 47 47 47 47 47 47 47 47 47 47 47
Total One-Time Revenue 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Revenue Projection 47 47 47 47 47 47 47 47 47 47 47 47 47 47 47 47
Total Recurring Expenditures 47 47 47 47 47 47 47 47 47 47 47 47 47 47 47 47
Total One-Time Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Expenditures Projection 47 47 47 47 47 47 47 47 47 47 47 47 47 47 47 47
Total Landscape Maint. Dist. FY
Operating Surplus/Deficit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Landscape Maint. Dist - Preliminary
Ending Balance (Operating) 82 82 82 82 82 82 82 82 82 82 82 82 82 82 82 82
Reserve Percentage (Recurring) 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31% 175.31%
115Comprehensive Financial Plan Update
February 2009
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116
Redevelopment
Agency, Low/Moderate
Income Housing Fund,
and Bond Funds
Narrative and Projection Worksheets
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
for the
Redevelopment Agency, Low/Moderate Income Housing
Fund and Bonds Fund
INTRODUCTION
Redevelopment is a locally driven activity that assists local governments in revitalizing
their communities. Redevelopment encourages new development, creates jobs and
generates tax revenues in declining urbanized areas by developing partnerships
between local governments and private entities. Over 400 California cities and counties
have activated Redevelopment Agencies. Redevelopment Agencies are locally created
and adopted so they can respond to a community’s unique needs and vision, most often
by adopting a redevelopment plan for a designated redevelopment project area.
BACKGROUND
The Culver City Redevelopment Agency (the “Agency”) was established on February 8,
1971, pursuant to the State of California Health and Safety Code, Section 33000,
entitled Community Redevelopment Law. Its purpose is to carry out plans to improve,
rehabilitate and redevelop physically and economically blighted areas and provide more
affordable housing units within the City of Culver City. The State Health and Safety
Code provides that upon the approval of a redevelopment plan, property taxes levied on
future incremental increases in the assessed value within the designated project area
will be paid to the redevelopment agency until all indebtedness incurred to finance the
project area has been paid.
The Culver City City Council declared
itself to be the governing body of the
Agency and functions as the Agency’s
Board of Directors. The Agency is
staffed by employees of the City and the
Agency reimburses the City for the cost
of these and other services provided to
the Agency.
The Culver City Redevelopment Agency
originally established three project
areas, which were merged and
expanded to create the present-day
project, known as the Culver City
117Comprehensive Financial Plan – Redevelopment Agency
February 2009
Redevelopment Project. In 1971, Project Areas 1 (Blue) and 2 (Yellow) were formed.
These project areas generally encompass the area south of Playa Ave and the
Industrial areas of Jefferson Blvd, respectively. Project Area 3 (Red) was formed in
1975 and generally consists of the Downtown area and Hayden Tract. In 1998, the
three Projects were merged and various non-contiguous areas were added (Green),
including portions of Sepulveda Blvd and Washington Blvd between Sepulveda and
Lincoln. The three former individual project areas and the added territory are known as
Component Areas 1 through 4 respectively.
The Agency has three critical objectives: eliminate blight, create jobs, and provide
affordable housing. Over the last 35 years, the Agency has undertaken pivotal projects
that have met these objectives and enhanced the economic health and property value in
the Culver City community. Some of these projects include funding a number of
infrastructure improvements (e.g. constructing three parking structures and a movie
theater downtown), renovation of the Kirk Douglas Theater, and provide various levels
of development assistance to Westfield Fox Hills Mall, the Heritage Classics Homes,
and many small businesses throughout the project areas.
Additionally, there are a number of exciting projects that the Agency is currently
spearheading, including further expansion of the Town Plaza area downtown,
revitalizing the area surrounding the future site of the Expo light rail station at
Washington and National, and funding for the construction of a new Fire Station #3.
ECONOMIC OVERVIEW
To achieve its stated objectives, the Agency has two primary financing sources: tax
increment and debt issuance (i.e. Bonds), both of which are economically sensitive.
Tax increment is based on the incremental increase in property tax values above a base
year; therefore, tax increment revenues can be sensitive to ebbs and flows in the
economy and property values.
The amount of bond proceeds that the Agency receives is dependent on interest rates
at the time of bond issuance. If interest rates are high when the bonds are sold, then
the Agency will pay more interest to bond holders and receive less in proceeds. If the
inverse is true and interest rates are low when the Agency decides to issue debt, then
the Agency will receive more proceeds and pay less interest to bond holders. Bond
proceeds are available to finance a wide variety of activities.
The following sections will provide a brief background of property values and interest
rates in California as well as a brief outlook for the future based on current economic
conditions.
118Comprehensive Financial Plan – Redevelopment Agency
February 2009
BACKGROUND
The primary financing source for implementing redevelopment projects is tax increment,
which are property tax revenues in excess of the property tax revenue collected at a
base year. The base year is the year prior to the adoption of a redevelopment plan for a
particular component area. Since tax increment is the Agency’s primary financing
source, redevelopment revenues are almost entirely dependent on local property values
and the real estate market.
The real estate market in the U.S. has been strong since the mid-1990’s. In California,
housing prices have experienced astronomical increases over the past five years. This
increase was fueled by extremely low interest rates and creative financing that
decreased monthly payments, including financial institutions’ willingness to extend loan
terms beyond the standard 30 years to 40 and 50 year terms; the ability to finance
100% of the housing cost without having a down-payment; and adjustable rate interest
only loans.
Proposition 13
Proposition 13 had a significant impact on the way that property in California is valued
and taxed. Prior to the adoption of Prop 13 in 1978, property taxes could increase
dramatically from year to year based on the assessed value of the property. During the
seventies, the real estate market experienced dramatic growth and an escalation in
property values. Because assessors were required to keep assessed values current,
property taxes skyrocketed at a substantial rate.
As a result, California residents put Proposition 13 on the ballot. Prop 13 re-defined the
methodology that County assessors’ could use in calculating the value of property and
placed limits on the amount of property tax that could be collected. As a result of Prop
13, the assessed value of property cannot exceed the 1975-76 assessed value, which is
subject to an annual increase commensurate with the Consumer Price Index (CPI) or
two percent (2%), whichever is less. If a transfer in ownership takes place or
improvements are made, the property is subject to reassessment at current market
value. The newly assessed value will then increase on a yearly basis, not to exceed
two percent (2%) per year.
Prior to the current downturn, the real estate
market had been gaining strength since the
mid-1990’s, which encouraged property
development, speculation and investment.
All of this activity caused many properties to
be reassessed at market value, which often
times results in a dramatic increase in
property taxes collected from that property.
This is a boost for tax increment receipts.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Tax Increment
Actual Receipts (in 000's)
Component Area 1 Component Area 2
Component Area 3 Component Area 4
119Comprehensive Financial Plan – Redevelopment Agency
February 2009
Culver City experienced strong tax increment growth over that period. Many of the tax
increment funds were used to issue debt for infrastructure projects (e.g. downtown
parking structures) or leveraged against a private developer’s funds. This strong tax
increment growth helped to revitalize the downtown area as well as other blighted areas
of Culver City.
The following section discusses the economic outlook over the next five to ten years
and the potential impact on the Redevelopment Agency’s tax increment resources.
OUTLOOK
The economy has been in a recession since December 2007, which has significantly
slowed, almost to a halt, property sales, renovation/remodel, and development activity.
It is expected that the housing market will continue to lose value before it bottoms out
and begins to recover towards the end of 2009. However, the widespread impact of this
current recession (i.e. it has not been contained to one industry or one sector, every
facet of the economy has been impacted) will most likely result in a fundamental shift in
the economy. Over the past ten plus years, the U.S. economy was driven by
consumers who spent more than 99% of their income and saved less than 1%. This will
begin to change as consumers begin to realize that this is not sustainable. As the
savings rate increases, money is being taken out of the consumer economy. With
people spending less, a price adjustment, especially for very large ticket items such as
property and real estate, is inevitable.
The price adjustment has already begun to impact business’ bottom lines and they are
shedding hundreds of thousands of employees every month to cut costs, which further
decreases consumers’ buying power, further effecting business’ bottom lines, and so-on
and so-forth. Until this cycle is broken, the economy will continue to be in trouble.
The virtual shutdown of the credit markets, which were the first markets hit by the
dramatic increase in foreclosures, is effecting developers ability to secure construction
financing. As a result, there are a number of projects in Culver City that have been
delayed until the credit markets loosen and they can secure financing. This is going to
have a significant impact on tax increment receipts over the next few years.
Tax increment receipts lag a full year, which means that in FY 2008-09 the RDA is
receiving property tax revenues based on calendar year 2007 values. The dramatic dip
in property values did not begin in most of LA County until the middle of calendar year
2008. Although the Agency is still experiencing very strong tax increment growth
beyond the 2% statutory rate, that will begin to diminish in FY 2009-10. As a result,
projections over the next 5 years show only a 2% statutory growth plus some value from
additional projects that are expected to be completed within the next few years (e.g.
Westfield renovation and Sony Studios expansion).
120Comprehensive Financial Plan – Redevelopment Agency
February 2009
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
The worksheets for the fifteen-year forecasts of revenues and expenditures are included
as attachments to this report. The worksheets are based on revenue projections
provided by the Agency’s fiscal consultant, Keyser Marston Associates (KMA), and
expenditure projections provided by Agency and Budget staff.
Keyser Marston takes a conservative approach to projecting tax increment receipts.
Projects that are currently under way are factored into future projections and all other
assessed values are projected to increase at the statutory limit of two (2) percent per
year. The projections also take into account the effect on tax increment receipts as
project areas expire and increasing statutory pass through payments.
Expenditures have been projected by staff based on the most current information
regarding current and potential projects.
DISCUSSION OF SPECIFIC REVENUE PROJECTIONS
Tax Increment
Tax increment is the Redevelopment Agency’s
primary source of revenue. It accounts for
approximately 90% of the Agency’s ongoing
revenue. California’s strong property market
prior to 2007 resulted in strong tax increment
receipts, which grew by an average of 10.5% per
year since 1999-2000. Also, the proactive
approach by the Agency to identify and reduce
blighted areas of the City has paid off in the form
of increased tax increment.
As previously discussed, despite the fact the Agency is still experiencing very strong tax
increment growth; it will begin to slow in FY 2009-10. As a result, projections over the
next 5 years show only a 2% statutory growth plus some value from additional projects
that are expected to be completed within the next few years (e.g. Westfield renovation
and Sony Studios expansion).
Other Revenues
The remainder of ongoing Agency revenues is derived mainly from operating a number
of properties, including the Ince, Cardiff, and Watseka parking structures and the Pacific
Theatres. Occasionally, one-time revenue is also generated from the sale of property
owned by the Redevelopment Agency.
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
Tax Increment
Actual Tax Increment Projected Tax Increment
121Comprehensive Financial Plan – Redevelopment Agency
February 2009
EXPENDITURES
To identify the nature of the Agency’s expenditures, staff has divided them into a five
categories. These categories are:
1. Debt Service and Statutory Indebtedness
2. Administrative Costs
3. Ongoing Projects/Programs
4. Under Development Projects/Programs
5. Potential Projects/Programs
Debt Service and Statutory Indebtedness – Expenditures grouped into this category
consist of:
A. Debt Service payments. Debt Service Payments include all principal and interest
payments on all outstanding bond issues and all are based on interest rates at
the time of bond issuance, therefore the payment amounts are a known quantity;
and
B. Indebtedness that the Redevelopment Agency is statutorily obligated to pay such
as the 20% housing set-aside requirement, statutory pass through agreement
payments, and Education Revenue Augmentation Fund (ERAF) payments.
Housing set-aside and statutory pass through payments are calculated as a set
percentage of the total tax increment that the Agency receives in any given year.
Consequently, those payment amounts are dependant on tax increment
projections. In FY 2008-09, the state has required redevelopment agencies to
make ERAF payments ($2.25 million for CCRA). At this point, it is a one year
payment; however, there have been proposals in the legislature to make this
payment permanent. The California Redevelopment Association has filed a
lawsuit alleging that ERAF shifts are constitutionally illegal per Prop 1A passed
by California voters in 2004 that protects local revenues. The outcome of this
lawsuit is still pending. Since there are still a number of unknowns associated
with ERAF, only the known 2008-09 requirement is included in the projection.
Administrative Costs – The Administrative costs category includes the salaries and
benefits for the Redevelopment and Economic Development divisions, general supplies
and operations expenses, contract services, and reimbursement costs that the Agency
pays to the City for a number of positions that are impacted by redevelopment activities
(e.g. planning staff, code enforcement staff, building and safety staff, etc.).
Administrative costs are basically the Agency’s day to day operating costs.
Ongoing Projects/Programs – This expenditure category consists of the ongoing
projects and programs managed by the Agency. This includes the costs for
management activities for Agency owned and/or operated properties (e.g. downtown
parking structures, and the Pacific Theaters) and many cultural affairs type programs,
including Music in the Chambers, “The Art of…” speaker series, Farmer’s Market, and
the Culver City Music Festival.
122Comprehensive Financial Plan – Redevelopment Agency
February 2009
Current Projects/Programs – Current projects/programs have been presented and
considered by the Agency Board and are in varying stages of implementation (i.e.
planning, demolition, construction, or project closeout stage). Once these
projects/programs are completed, there will be no associated direct ongoing cost
assumed by the Agency. Expenditures in this category are subject to change as
projects progress due to a variety of project specific factors.
Potential Projects/Programs – Potential projects/programs are in the exploratory
stages of development, i.e. staff is researching potential projects that community
investors and community members may be interested in implementing. For the most
part, costs in this category are to identify projects in certain areas that may ultimately be
brought before the Agency Board for consideration. Once a potential program is
approved by the Agency Board, it becomes a current project/program. This is the most
dynamic and changing expenditure category.
HOUSING SET-ASIDE FUND
Community Redevelopment Law mandates that 20% of the Redevelopment Agency’s
tax increment receipts must be set-aside and used to facilitate housing opportunities
and rehabilitation for low-to-moderate income residents. Various financial incentives
and mechanisms are provided for the purpose of improving and preserving the
affordable housing stock and encouraging first time home ownership.
A more detailed policy discussion of the Housing Fund’s finances will be initiated with
the Redevelopment Agency Board in the upcoming months. The 15 year projection
includes funds for potential projects to be identified and discussed with the Agency
Board as opportunities present themselves.
BOND FUNDS
As previously discussed, the Agency also raises funds to finance various projects by
selling bonds. Issuing debt pledges future tax increment receipts to pay the debt
service (i.e. principal and interest) to bond
holders. Basically, issuing debt gives the
Agency a lump sum of cash to use for
projects now, which will be paid off in the
future.
There are two types of bonds that the
Agency can sell; tax exempt bonds and
taxable bonds. In a normal credit market,
tax exempt bonds are cheaper to issue and
attractive in the bond market as they are
not subject to capital gains taxes. The
trade off is that proceeds from tax exempt
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
Bond Issues and Debt Service Payments
New Bond Issue:
New Proceeds
Bond Refinance: No
New Proceeds
Bond Refinance: No
New Proceeds
New Bond Issue:
New Proceeds
123Comprehensive Financial Plan – Redevelopment Agency
February 2009
bonds have greater restrictions on their use. They can mainly be used for capital
infrastructure improvements and certain types of property acquisitions.
Taxable bonds are typically more expensive to issue since the interest rate is higher
than on tax exempt bonds; however, proceeds from taxable bonds are unrestricted and
may be used for a much wider variety of projects.
To date, the Agency has limited its bond issues to the restrictive tax exempt bonds. As
illustrated in the Bond Fund cash flow, it is expected that bond proceeds will be
expended over the next few years on a number of capital improvement, infrastructure,
and property acquisition projects.
124Adjusted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected
ANNUAL CASH FLOW 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Beginning Fund Balance 21,850 6,533 2,123 1,772 1,818 1,865 1,913 1,962 2,012 2,064 2,117 2,171 2,227 2,283 2,341 2,400
Interest Income 359 110 49 46 47 48 49 50 52 53 54 56 56 58 59 61
Total Revenues 359 110 49 46 47 48 49 50 52 53 54 56 56 58 59 61
Expenditures
SubTotal Component Area 1 1,639 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
SubTotal Component Area 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
SubTotal Component Area 3 4,524 1,170 400 0 0 0 0 0 0 0 0 0 0 0 0 0
SubTotal Component Area 4 2,913 350 0 0 0 0 0 0 0 0 0 0 0 0 0 0
SubTotal Potential Projects 6,600 3,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Bond Expenditures 15,676 4,520 400 0 0 0 0 0 0 0 0 0 0 0 0 0
Ending Fund Balance 6,533 2,123 1,772 1,818 1,865 1,913 1,962 2,012 2,064 2,117 2,171 2,227 2,283 2,341 2,400 2,461
REDEVELOPMENT AGENCY
TAX EXEMPT BOND FUNDS: 15 YEAR CASH FLOW SUMMARY (000's Omitted)
125Adjusted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected
ANNUAL CASH FLOW 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24
Beginning Fund Balance 19,000 20,953 22,639 24,700 26,954 29,732 32,787 36,392 40,000 43,440 46,943 50,489 54,075 57,699 61,358 65,050
REVENUES
Tax Increment Set-Aside
Revenue 6,592 6,728 7,233 7,557 8,216 8,626 9,313 9,520 9,715 9,931 10,134 10,341 10,552 10,768 10,988 11,212
Other Revenues 953 682 703 729 757 792 830 875 700 743 787 831 876 921 967 1,013
Total Housing Revenues 7,545 7,410 7,936 8,286 8,973 9,418 10,143 10,395 10,415 10,674 10,921 11,172 11,428 11,689 11,955 12,225
EXPENDITURES
Subtotal Admin Expenditures 2,918 2,984 3,078 3,175 3,276 3,381 3,490 3,603 3,721 3,844 3,972 4,105 4,243 4,386 4,535 4,690
Subtotal Ongoing Expenditures 2,424 2,739 2,797 2,857 2,919 2,983 3,048 3,184 3,254 3,327 3,403 3,481 3,561 3,644 3,728 3,816
Potential Projects 250 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total Housing Expenditures 5,593 5,724 5,875 6,032 6,195 6,364 6,538 6,787 6,975 7,171 7,375 7,586 7,804 8,030 8,263 8,506
Projected Annual Surplus/(Deficit) 1,953 1,687 2,061 2,254 2,778 3,054 3,605 3,608 3,440 3,503 3,546 3,586 3,624 3,659 3,692 3,719
Ending Fund Balance 20,953 22,639 24,700 26,954 29,732 32,787 36,392 40,000 43,440 46,943 50,489 54,075 57,699 61,358 65,050 68,768
CULVER CITY REDEVELOPMENT AGENCY
LOW/MODERATE INCOME HOUSING FUND: 15-YEAR CASH FLOW SUMMARY (000's Omitted)
126Adjusted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected
ANNUAL CASH FLOW 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2022-23 2023-24
Beginning Unrestricted
Fund Balance 10,771 2,431 8,436 6,440 4,895 4,605 5,037 7,271 12,116 17,447 23,077 33,161 48,848 65,783 82,339
RDA REVENUES
Tax Increment Revenue 33,620 34,315 36,886 38,542 41,903 43,994 47,496 48,554 49,549 50,647 51,682 52,739 53,816 54,916 56,037
Other Ongoing Revenue 3,437 3,519 3,649 3,687 3,751 3,837 4,055 4,286 4,589 4,895 5,308 5,926 6,681 5,814 6,001
One-time Revenue
(includes Property Sale) 5,900 10,600 200 200 0 0 0 0 0 0 0 0 0 0 0
TOTAL RDA REVENUES 42,957 48,433 40,735 42,429 45,654 47,831 51,551 52,840 54,138 55,542 56,990 58,665 60,497 60,730 62,038
ERAF (based on CRA
estimate) 2,252 2,297 2,343 2,390 2,438 2,486 2,536 2,587 2,639 2,691 2,745 2,800 2,856 2,913 2,971
Subtotal -- Admin/General
Expenditures 44,098 34,948 36,387 37,484 39,373 40,673 43,020 41,535 42,178 43,110 43,773 41,570 42,123 42,701 43,307
Subtotal -- Ongoing
Programs/Projects 4,340 4,661 4,774 4,890 5,010 5,133 4,674 4,805 4,940 5,079 1,376 1,408 1,439 1,472 1,506
Subtotal -- Current Projects 1,341 1,998 1,570 1,600 1,561 1,592 1,624 1,656 1,689 1,723 1,757 0 0 0 0
Subtotal -- Potential
Projects 1,517 821 0 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL EXPENDITURES 51,297 42,429 42,731 43,974 45,943 47,398 49,317 47,995 48,807 49,912 46,906 42,978 43,562 44,173 44,813
Ongoing Rev - Onging
Expenditures
686 (1,776) (626) (145) 1,271 2,024 3,858 6,501 7,020 7,353 11,841 15,687 16,935 16,556 17,224
Total Projected Annual
Surplus/Deficit (8,340) 6,005 (1,996) (1,545) (290) 432 2,234 4,845 5,331 5,630 10,084 15,687 16,935 16,556 17,224
Ending Unrestricted
Fund Balance 2,431 8,436 6,440 4,895 4,605 5,037 7,271 12,116 17,447 23,077 33,161 48,848 65,783 82,339 99,563
CULVER CITY REDEVELOPMENT AGENCY
UNRESTRICTED FUNDS: 15 YEAR CASH FLOW SUMMARY (000's Omitted)
127Comprehensive Financial Plan Update
February 2009
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128
Financial Options
Summary Report
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY UPDATE
Long-Term Financial Options Summary
Report of Findings
INTRODUCTION
Over the past few years, the City has placed an emphasis on long-term financial
planning to further improve the long-term fiscal health of the City. The City has taken a
number of steps to achieve this longer term view, including implementing a two-year
rolling budget and developing a Comprehensive Financial Plan that includes a 5- to 15-
year projection for each of the City’s funds and provides a discussion of current and
future year financial issues facing each fund.
During this time, staff has identified and researched a number of potential revenue
enhancement and cost reducing items that will help to solidify the City’s long-term
finances. Many of these ideas have been collected from suggestions by employees,
bargaining groups, staff task forces and City Council subcommittees that have been
formed to address the City’s financial condition.
The following report summarizes the revenue generating and cost reducing items that
have been received by staff over the years. While not every idea is included in this
report, staff has attempted to present the most feasible options for the City Council’s
consideration. Each option is followed by a brief description and, if known, the
additional annual revenue or cost reduction that may be achieved if implemented.
REVENUE ENHANCEMENT OPTIONS
The revenue enhancement options are presented in two categories: 1) Ballot Options,
and 2) Policy Driven Options.
BALLOT OPTIONS
1. Increase Transient Occupancy Tax (TOT, aka hotel tax)
2. Increase Sales Tax (Transaction Tax)
3. Create Parking Tax
4. General Purpose Ad Valorem Property Tax
5. Create Admissions Tax
6. Review/Increase Business Tax
7. Create Additional Special Financing Districts
a. Community Facilities District for Paramedic Services, Street and Alley
repair, or other infrastructure improvements.
b. Benefit Assessment District for Fire Suppression, Landscaping, Tree
Trimming, Streetlights, etc.
8. Issue General Obligation Bond for Capital Projects
9. Issue Pension Obligation Bond
February 2009 129Approval Process – Taxes (Options 1 – 6)
Proposition 218, enacted in 1996, limited local government’s ability to raise taxes and
create assessment districts. The State Constitution (approved by voters as Props 13
and 218) requires that special taxes (i.e. earmarked for a certain purpose) require two-
thirds voter approval and general taxes (non-earmarked) require a simple majority voter
approval. Prop 218, much like Prop 13 before it, fundamentally changed the control of
local government funding and greatly complicated the process involved in implementing
an increase in taxes.
Therefore, the tax options noted above would need approval by the electorate. Placing
an item on the ballot would require a significant effort by the City not only in staff time,
but also in consultation expenses related to public education and polling. While the law
is fairly strict on what cities may spend on public education and polling during an
election campaign, activities that take place prior to placing an item on the ballot are
generally more allowable.
Additionally, if the City Council selects any of the tax options (1 – 4), it should be noted
that, per state law, such a ballot measure must be part of the City’s general election
ballot. The City’s next general election is in April 2010. Reviewing what state and
county level tax issues may appear on the same ballot will be one important area of
analysis.
The current national, statewide and local economic problems will make a revenue
increasing ballot item that much more difficult to have approved. Locally, there is
discussion by the school district of a local parcel tax for education. The California
teachers union is indicating they may seek a statewide 1% sales tax increase for
education. Part of the Governor’s budget solution involves a three year increase to the
State sales tax of 1.5%. Any of these items taking place prior to the City going to ballot,
or even concurrently will decrease the City’s chances of having such a measure
approved.
Approval Process – Special Financing Districts (Options 7a and 7b)
Another result of Prop 218 was the extensive process required before a city can create
an assessment district. For the assessment options listed above, the City would be
required to prepare reports describing the amount of the assessments, per parcel, and
the benefits to be received by those assessments. The City would be required to hold
public hearings to review the possible assessments. Formal written notice of the
assessments, along with ballots, must be sent to all those who would be subject to the
assessments. The City could only impose the assessment if a majority of those
returning ballots approve the assessment. No increase to an existing assessment can
occur without going through a similar process.
While community facility districts (CFD) vary from assessment districts slightly, the
formation and approval process is very similar. The biggest difference in the approval
process between an assessment district and a CFD is an assessment district requires
approval by 50% of the affected property owners that return a ballot. A CFD requires
approval by 67% of registered voters in the proposed district that return a ballot.
February 2009 130Public education and campaign requirements and restrictions similar to those imposed
on ballot measures for tax increases would apply to the assessment process.
Approval Process – General Obligation Bond and Pension Obligation Bond
(Options 8 – 9)
General obligation and pension obligation bonds must be approved at a general or
special election by a majority of electors voting at that election. Public education and
campaign requirements and restrictions similar to those imposed on ballot measures for
tax increases would apply to the election where the voters would be asked to approve
the general obligation bonds.
Option 1: Increase Transient 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. The current Transient Occupancy Tax (TOT)
rate is 12%. An increase in TOT would slightly increase the taxes that area hotel
customers would pay to stay in Culver City. Currently, the average nightly room rate for
Culver City hotels is $125, not including taxes. The current 12% TOT rate adds $15 in
tax to that rate. A 2% increase to the TOT would add $2.50 for a total of $16.50 in
taxes. Many nearby cities have increased their TOT rates over the last few years, as
noted below.
Area TOT rates:
Los Angeles: 14%
Santa Monica: 14%
Beverly Hills: 14%
West Hollywood: 14%
Culver City: 12%
Based on current TOT receipts, increasing the TOT by 2% would increase revenues by
approximately $420,000. If a hotel is included in the future Washington/National Transit
Oriented Development site, this additional 2% may be significant.
Option 2: Increase Sales Tax (Transaction Tax)
In 1969, the State Legislature first authorized counties to seek voter approval of special
transaction and use tax districts. Shortly thereafter, the Legislature also began granting
permission to specific cities to seek voter consideration of a District Tax. In January
2004, the requirement that cities first obtain permission from the State Legislature was
dropped and cities were authorized to go directly to their voters for transaction and use
taxes in multiples of 0.25%. Currently, the combined district transactions tax rates in
any county cannot exceed a total rate of 9.25%.
With the exception of certain goods sold to operators of common carrier aircraft, a
transaction and use tax is imposed on the same goods and merchandise as the local
sales and use tax. However, the sales and use tax is generally allocated to the
jurisdiction where the sale is negotiated or order taken, while the transaction and use
tax is allocated to the district where the goods are delivered or placed into use. As
outlined below, this is an important distinction as it relates to Culver City residents
purchasing merchandise in another jurisdiction.
February 2009 131
For “walk-in” retail stores, the Board of Equalization generally assumes that the
merchandise will be used within the district where the store is located, unless the
retailer is asked to ship the merchandise outside the district as part of the sale. For
merchandise that is shipped, the transaction tax is levied based on the district to which
the merchandise is being shipped. Therefore, Culver City residents and businesses
would pay the additional transaction tax.
Sellers or lessors of vehicles, vessels or licensed aircraft are required to collect the
transaction tax for the district where the conveyance is to be registered. Therefore,
residents cannot escape the tax by purchasing from a dealer outside Culver City as
dealers statewide must collect transaction taxes based on the location of the
registration, not the location of the purchase.
With the approval of Measure R in November 2008, the base sales tax for all LA County
cities will be 8.75% sales and use tax rate. Recently, a number of LA County cities
have successfully added a transaction tax for their jurisdictions, including the Cities of
Avalon (0.50%), Inglewood (0.50%) and South Gate (1.0%). Some early budget
proposals by the state include a 1.5% increase in the existing sales tax, which would
push all cities in LA County above the 9.25% cap. Legislation will most likely be drafted
to address this potential conflict.
Based on current receipts, each 0.25% increase to the transaction tax would generate
$3.5 to $4 million.
Option 3: Create Parking Tax
A parking tax is a tax levied on the rental of public and private non-residential parking
spaces for the privilege of occupying space in a parking facility|1010| in the City. Generally,
a parking tax is calculated as a percentage of the monthly lease amount for that space.
Examples of some surrounding parking taxes are as follows:
Sample Parking Tax rates:
Los Angeles: 10% ($74 million in FY 05-06)
Santa Monica: 10% ($6.8 million in FY 05-06)
Inglewood: 10% ($250,000 in FY 05-06)
San Francisco: 25% ($36 million in FY 05-06)
To determine the amount of money generated by a parking tax, an in-depth analysis
would need to be conducted on the number of spaces in the City and the rental rates
charged for those spaces. However, assuming there was a 10% parking tax in effect in
FY 2007-08, approximately $110,000 would have been generated from the City’s three
parking structures alone.
|1010| Definition of parking facility as defined in the LA City municipal code – any outdoor space or uncovered
plot, street, lot, parcel, yard or enclosure, or any portion thereof, or any building or structure, or any
portion thereof, where or in which a motor vehicle may be parked, stored, housed or kept, for which any
charge is made.
February 2009 132Option 4: Create Ad Valorem Tax or Parcel Tax
An ad valorem tax is a tax based on the value of the property being taxed (e.g. 1.0% of
assessed value) while a parcel tax is typically a per parcel tax that can be levied in a
variety of ways, including a flat per parcel tax or a tax rate based on land use (i.e.
commercial vs. residential) or parcel size. Examples of property based taxes include
the 1.0% property tax levy, voter approved debt (such as school revenue bonds),
special financing/assessment districts, parcel taxes, etc.
Culver City contains approximately 13,500 parcels with a total assessed value
(including redevelopment areas) of approximately $6.9 billion ($3.1 billion City; $3.8
billion RDA). Proposition 13 limits the ad valorem tax on real property to 1% of the full
cash value (i.e. assessed value) except for certain voter approved charges, such as the
voter approved debt and special financing districts mentioned above. Therefore, the
City could not levy an ad valorem tax in addition to the current 1.0% ad valorem tax that
is already levied. With regards to a special financing district or a parcel tax, levying a
charge of $100 per parcel would generate approximately $1.35 million annually and is
subject to voter approval.
Option 5: Create Admissions Tax
An Admissions Tax is a tax on admission tickets sold for events held within the City and
is typically applied to larger capacity venues (e.g. race track, sporting venue, large live
theater, etc.). The general idea behind an admissions tax is, due to the large number of
people coming into the City for a particular event, a significant impact on the City’s
infrastructure and staffing is created. The purpose of the tax is to recover some of the
costs related to that impact.
Sample Admissions Tax rates:
Los Angeles:
• 6% on gross receipts attributable to distribution of tickets of admission to or attendance at events
of the 1984 Olympic Games.
Inglewood:
• $0.45 per admission for Horse Racing (adjusted annually by CPI);
• $0.56 per admission for live sporting events, theater events, musical events, etc. (adjusted
annually by CPI);
• 10% of admission price for venues with seating capacity of greater than 25,000.
Pasadena:
• Tax on admission to Rose Bowl equal to 5 cents per dollar admission price but not to exceed 50
cents.
Due to the relative scarcity of large venues, there are few surrounding cities that have
an admissions tax in place. The City of LA charged an admission tax for ticket sales for
the events of the 1984 Olympics and Inglewood has an admission tax that is mainly
applicable to Hollywood Park and the former LA Forum. Although Culver City does
have live theater venues, such as Culver Theater, they are very small venues that
would generate very little revenue.
February 2009 133Option 6: Review/Increase Business Tax (submitted by CCMG)
As a requirement for conducting business in Culver City, every business must apply for
and receive a business tax certificate and pay the application fee, the required business
tax, and any applicable permit fees. Currently, the application fee is $65 and the tax
amount is approximately 0.1% of a business’ gross receipts.
Over the last few years, the Finance Department has been focused on increasing
compliance and more aggressively collecting revenues due to the City. Currently, the
Finance Department is working with a consultant to conduct a business tax audit to
ensure that businesses are complying with this requirement. The consultant will also be
working with the City to review the current business tax structure and process and make
recommendations on possible ways to simplify the tax structure and streamline the
collection process to ensure greater compliance. Increasing compliance will result in
increased revenue without having to adjust the amount of the tax. The consultant will
help determine if Culver City’s business tax is in line with other cities business tax
amounts.
Option 7a and 7b: Special Financing Districts
Special Financing Districts, such as benefit assessment districts or community facilities
districts, are intended to charge those whose property is receiving a direct and
measurable City service where the relative “benefit” to the property owner can be
computed. One type of Special Assessment District is a Benefit Assessment District,
which is administered as a parcel assessment and is used to fund the provision of a
particular service in a particular area. Benefit Assessment Districts can be formed to
fund fire suppression services, tree-trimming, streetlights, parks, and landscaping.
Benefit Assessment Districts require a nexus between the additional benefit being
provided and the actual cost to provide that benefit. Creating these districts is basically
a method to increase service in a particular area without increasing costs to the City.
Assessment Districts cannot be used to pay for services that the City is currently
providing, therefore, there is no net financial impact on the City’s General Fund when a
Benefit Assessment District is created.
Another form of a Special Financing District is a Mello-Roos Community Facilities
District, which allows funding of the construction or acquisition of real or tangible
property with a useful life of five years or more (e.g. streets, sewers, etc.). It also allows
financing of police and fire services, including personnel costs, to accommodate the
growing needs of an area. A Community Facilities District is a special tax levied
annually on each parcel.
While both forms of special financing districts are a way to increase service without
increasing costs, only the CFD can be used to actually offset costs of an existing
service and reduce costs for the General Fund. The City has hired a consultant to
assist with special district formation services and, based on their early assessments, the
City may be able to raise $1.3 to $1.5 million annually to pay for paramedic services.
However, the consultant recommends the use of a polling agency to get a better idea
from residents regarding their priorities and willingness to pay additional taxes to fund
services.
February 2009 134Option 8: Issue General Obligation Bond
Another financing option is to issue general obligation bonds. General obligation bonds
are bonds that are legally backed by the full faith and credit of the issuing government.
The government is legally obligated to use its full taxing power, if necessary, to repay
the debt. Basically, issuing debt gives the City a lump sum of cash now to use for
capital projects, which will be paid off, with interest, in the future.
Because the City is legally obligated to repay the bond, which includes raising taxes if
the City cannot meet its debt service payments, registered voters must approve issuing
a bond.
The primary advantage to using general obligation bonds is the associated low interest
costs. Since the bonds are legally backed by the full faith and credit of the issuer, they
are considered very low risk for the investor; consequently, they usually sell at the
lowest rates of interest. The bond issue is often less complex then other types of bonds
so administrative costs are less in preparing the issue.
A final advantage to general obligation bonds arises from the necessity of receiving
approval through a bond referendum. The vote confirms popular support for the
project(s) being financed.
There are also disadvantages to issuing general obligation bonds, including the
possibility that the voters will not approve the bond referendum. If a bond referendum is
not approved, City Council will need to find other ways to finance needed projects.
Additionally, repayment of the debt will tie up the City’s revenues for 20 or 30 years to
pay the required debt service (i.e. principal and interest payments on the bonds).
Option 9: Issue Pension Obligation Bond
A Pension Obligation Bond is similar to a General Obligation Bond; with the exception
that the bond proceeds received must be invested and used to pay the issuing entities
pension obligation. For example, the City could issue a $100 million POB and invest
that in a trust with PERS (one of many options). The annual investment returns would
be used to offset the City’s pay-as-you-go payment. In return, the City would have a
steady annual debt service obligation.
Because the City is legally obligated to pay the bond’s debt service, which includes
raising taxes if the City cannot meet its debt service payments, the voters also must
approve issuing a POB, which, like a General Obligation Bond, confirms popular
support for the obligation being financed.
The disadvantages to issuing a Pension Obligation Bond are similar to the
disadvantages to issuing a General Obligation Bond outlined above.
February 2009 135POLICY DRIVEN OPTIONS
Options:
1. Review and Update City Fees & Charges Annually
2. Review Development Impact Fees
3. Implement Aggressive Fee/Tax Collection Strategies
4. Privatize Parking Meter Operations and Meter Enforcement
5. Advertise in/on City Vehicles
6. Sponsorship of City-owned Property/Programs/Events
7. Review Parking Rates at All City Structures and Meters
8. Establish Employee Suggestion Incentive Program
9. Establish Stormwater Fund to Capture Mandated Costs
The options presented in this section do not require voter approval; however, they do
require policy direction by the Council. Some of these options may be more popular or
feasible than others. The following provides a brief description and analysis of each
option as well as a discussion of the fiscal impact.
Option 1: Review and Update City Fees & Charges Annually (submitted by CCMG)
There are some service fees and charges the City collects that do not fall under the
restrictions set forth in Proposition 218, and the City must regularly review and update
these fees and charges as applicable to cover and recoup the costs associated with the
services being given. General Fund service charges, though, cannot exceed the cost of
service, including overhead.
In FY 2006-07, City Council approved a comprehensive review of the City’s fees and
charges by a consultant. This study resulted in the City Council adopting higher fees for
FY 2007-08 to increase the overall cost recovery level. Subsequently, staff worked with
the City Council Budget & Finance Subcommittee to set a multi-year cost recovery
policy to recover close to 100% of the cost of many fee based activities.
The fees and charges schedule is updated, reviewed and approved by City Council
annually to insure proper cost recovery levels. Now that staff has clear direction on the
City Council’s desire to increase cost recovery levels on existing fees, staff will begin
reviewing the fee structure in certain areas as well as explore possible new fees and
charges. For example, the Parks, Recreation, and Community Services Department is
taking a much closer look at their fee structure and whether or not it is the most effective
structure for their operations. PRCS is reviewing the structure of pool fees, facility
rental fees, skateboard park fees, etc. to evaluate possible new fee structures.
Additionally, staff is exploring the possibility of placing a surcharge on certain fees,
similar to the technology surcharge placed on certain development related fees, to help
fund the City’s Other Post Employment Benefits (OPEB) obligation. At this point, staff is
still exploring the legal and operational issues related to this type of surcharge. Once
those issues have been vetted, information will be provided to City Council.
February 2009 136A comprehensive fee study by an outside consultant should be conducted
approximately every five years. In FY 2011-12, staff will explore engaging a consultant
to do a comprehensive review of the City’s fees and cost recovery percentages.
Option 2: Review Development Impact Fees
Subsequent to the annual review of the General Fund user fees and charges in June
2008, City Council requested information on the development related taxes and impact
fees that the City levies. An agenda item containing that information was presented to
City Council on August 25, 2008. At that meeting, City Council directed staff to resume
charging a Condominium Tax that was already in the City’s Municipal Code but, for
some reason, had not been charged historically. The City Council also directed staff to
do an analysis of a ‘typical project’ to compare the amount of fees and taxes charged for
a typical project in Culver City versus surrounding cities. The Community Development
Department is finalizing that analysis and a full report will be provided to City Council
shortly.
Option 3: Implement Aggressive Fee/Tax Collection Strategies (submitted by CCMG)
Under the direction of the City Council and City Manager, the City has taken steps to
more diligently collect monies and implemented processes to collect funds more
efficiently. Some of the steps that have been taken over the last few years include:
• Drafting and implementing a grants management policy to ensure that grant
funds are collected in a timely manner and do not expire;
• Billing for the annual Fire Inspection and Outdoor Dining Permit fees have been
moved to the Finance Department to improve collections;
• New contract approval procedures that require the Finance Department to sign
off on all contracts with vendors that do business with the City to ensure that they
have a business tax certificate before the contract can be fully executed and
signed by the City Manager;
• The City has begun taking credit card and online payments for certain services,
such as business tax renewal payments, recreation classes, and parking tickets;
• A business tax audit is being performed by an outside consultant to increase
compliance with the City’s Business Tax;
• Online payments are being developed for building permits;
• Periodic audits on property and sales tax remittances from the County are
performed by the HdL to ensure that the City is receiving proper payments;
• Periodic audits are performed related to the City’s franchise agreements with the
cable company and various oil pipelines.
Improving revenue collection and streamlining collection processes continues to be one
of the City’s top priorities. The Finance Department is continually working with staff
from other departments to identify opportunities to increase revenue collection.
Increased revenue collection is a best management practice that does not require
specific direction from City Council. As programs are identified and implemented, the
City Council will be informed and, depending on the program, may need to provide
direction to staff.
February 2009 137Option 4: Privatize Parking Meter Operations and Meter Enforcement
Parking meter operations and enforcement are services that are historically operated by
municipalities. Over the last few years, some cities have recognized a benefit to
privatizing these activities through a public-private venture or by contracting these
services to a third party. In this particular area, privatization has the potential to
simultaneously enhance revenue and reduce costs while maintaining or increasing the
level of service. More research needs to be done to fully vet the potential benefits and
drawbacks. Staff is looking for direction from the City Council to bring this item back for
consideration at a future meeting.
Option 5: Advertise In/On City Property (submitted by CCMG)
The City and Enterprise funds may be able to generate some revenue by selling
advertising space in/on City property, especially the City’s rolling stock. The most
obvious potential candidate for selling ad space is Culver CityBus. In addition to Culver
CityBus, the City could also explore the possibility of selling exterior advertising space
on other rolling stock, including public works vehicles.
Currently, the MTA sells advertising space on the exterior of its buses as well as in
designated interior locations. MTA also offers video advertising shown on video
monitors inside each bus.
In the past, Transit staff has contacted vendors that coordinate and administer ad sales
to explore the potential amount of revenue that could be generated. Due to the
relatively small population reached by advertising on Culver CityBus (as compared to
larger transit operators like MTA and Big Blue Bus), potential ad revenues would be
limited. The ad sales vendor had also indicated that, due to the limited reach of Culver
CityBus, ad revenues might not justify the capital expenditure to install video monitors
on the buses. Bus wraps generate the most amount of revenue. However, to generate
that revenue, Culver CityBus would sacrifice some of its signature brand recognition
because the bus wrap would cover the entire bus, making it less distinguishable from
other transit providers.
If the City Council would like to further explore this option, staff can do some additional
research and agendize the item for future discussion.
Option 6: Sponsorship of City-owned Programs/Events/Facilities (submitted by CCMG)
The City manages and staffs a number of events and programs that are offered free of
charge to the public, including the Fiesta La Ballona (entrance is free, but vendors do
pay a fee to set up a booth), Farmers’ Market, Culver City Music Festival, Music in the
Chambers, and “The Art of…” speaker series. Despite the growing popularity of many
of these programs, the funds available to manage them continue to diminish.
In some cases, programs are sponsored by a business or organization that contributes
money in exchange for name recognition. However, the City could increase its efforts to
solicit monetary or in-kind sponsorships to offset some of the costs of running these
programs. Increasing efforts to solicit sponsorship for community events is a policy
decision that, if directed, staff may begin to implement immediately.
February 2009 138
Additionally, the City may consider soliciting corporate sponsorships in exchange for
naming rights at certain City facilities (such as Vet’s Memorial Building, teen center, or
various facilities at City parks). If the City Council were interested in pursuing naming
rights, a policy would need to be drafted and presented to City Council to ensure
consistency and transparency in the process.
Option 7: Review Parking Rates at all City Structures and Meters
Culver City and the Redevelopment Agency own and operate a number of parking
structures and lots to encourage better traffic flow and address some of the parking
issues that most southern California communities face. As parking becomes a scarce
resource, parking rates throughout the region continue to rise, as do costs associated
with operating a parking structure.
In an effort to create a unified parking strategy throughout the City, and especially in the
downtown area, the Redevelopment Agency and Community Development Department
are bringing forward a number of policy options for the City Council to consider over the
next few months, including a comprehensive parking study to review available parking,
parking rates, parking operations, and parking equipment and make recommendations.
A unified parking strategy will then be developed to include policy options for the Ince,
Watseka, Cardiff, and City Hall parking structures, pricing options for parking meters
downtown, and reviewing the City’s zoning requirements as they relate to parking in the
downtown area.
Option 8: Establish Employee Suggestion Incentive Program
Employees are sometimes the best resource for new innovative revenue enhancing
and/or cost reducing suggestions since they know the City’s operations best and are
experts in their field. Many organizations have developed some form of employee
suggestion program that offers some incentive ranging from recognition to days off to
potentially significant bonuses based on the value of the suggestion. The effectiveness
of a program like this is often directly related to the desirability of the incentive or reward
being offered. Depending on the size and scope of a potential program, it may also
need to be negotiated with the bargaining groups if there is an impact on employee
salary or benefits.
Option 9: Establish Stormwater Enterprise Fund to Recover Mandated Costs
See Cost Reduction Option 8(h) on page 16 of this report for more information.
February 2009 139COST REDUCTION OPTIONS
Over the last few years, a great number of cost reduction options have been identified
through suggestions submitted by City Council members, the bargaining groups,
members of various task forces and subcommittees, and staff research. CCMG
submitted some additional cost reduction proposals in December in response to a
request to all the bargaining groups by the Chief Financial Officer. The current task
force reviewed all ideas and considered the merits of every proposal. The following
options identify the most creative and feasible of those ideas.
Options:
1. Review and Evaluate the City’s Organizational Efficiency
2. Flexible Compensation & Benefit Plans
a. Two tiered PERS program for new hires
b. Cafeteria Plan for Medical Insurance
3. Staff Certain Public Safety Positions with Civilians
4. Reduce Overtime and Shift Trades
5. Reconsider the City’s Call Back Policy
6. Reduce Subsidies to Special Events (e.g. MLK, Car Show and Taste of the Nation)
7. Streamline Public Notification
8. Explore Public Private Partnership Opportunities
a. Solar power installations on City facilities
b. Streetlight maintenance
c. Street maintenance
d. Sewer Pump Station improvements
e. Parking meter operations
f. Parking enforcement
g. Construct municipal parking structure
h. Stormwater treatment
9. Short-term Options submitted by CCMG
a. Moratorium on non-self supporting programs;
b. Moratorium on non-essential capital projects;
c. Moratorium on the City’s Animal Control Program.
Option 1: Review and Evaluate the City’s Organizational Efficiency
The elimination of positions that took place as part of the budget cutbacks in fiscal
years 2002-03 and 2003-04 has placed an additional burden on current staff.
Consequently, it is more important than ever that all operating departments are
“working smarter not harder” in order to maximize efficiency and productivity. There
may be technological advancements that the City can take advantage of to increase
revenue collection and facilitate the flow of information leading to an even greater
level of efficiency and productivity. Additionally, the City should evaluate its
organizational efficiency and internal procedures to ensure effective workflow and
lines of communication between and within operating departments.
In difficult financial times, it is more important than ever to be able to do more with
less as a cost containment measure. Organizational efficiency is a best management
practice, as such; the City Manager’s office will continue to work with Department
February 2009 140Heads to explore methods to further increase organizational and operational
efficiency. The new City Manager may have further ideas in this area.
Option 2: Flexible Benefits and Compensation Packages
Prior to the next MOU negotiations, the subcommittee recommends that the City look
into the following benefit related cost containment measures:
a. Two tiered PERS program for new hires
b. Cafeteria Plan for Medical Insurance
Option 3: Staff Certain Positions in the Police and Fire Departments with Civilians
With the implementation of the 2006-07 Budget, the Police Department has begun the
process of staffing certain positions with civilians rather than sworn personnel. As
lieutenants have retired over the last two years, 5 of those positions have been replaced
with non-sworn personnel. This saves the City money because the salaries for the non-
sworn positions are typically lower, the retirement costs are less, and it reduces the
City’s long term OPEB obligation. The City Manager’s Office will continue to work with
the public safety departments to staff positions with civilians where appropriate.
Option 4: Reduce Overtime and Shift Trades (submitted by CCMG)
Overtime costs for the General Fund are approximately $1.5 million (excluding Constant
Staffing for the Fire Department, which is an additional $1.4 million). Some overtime is
unavoidable, as emergencies and special situations will arise that require employees to
work beyond their regular schedule. However, one possible way to manage overtime is
to encourage flexible scheduling between the manager and employee. For example,
with adequate advance notice, an employee who needs to attend a work related
meeting after hours might agree with his/her supervisor to start work later in the morning
rather than be paid overtime for the meeting.
Option 5: Reconsider the City’s Call Back Policy (submitted by CCMG)
The City may want to review and update its call-back policy and limit standing pay to
those positions that are truly needed in emergencies (i.e. electricians) and eliminate
other positions (i.e. painters) whose services may not be required on a time-critical
basis. A similar analysis of the necessity for “beeper pay” may also be conducted.
Alternately, the City may wish to allow departments to designate a certain number of
call back slots, which can be filled based on expected conditions or usual problems
rather than designating specific trades or positions.
This is an MOU item and will need to be negotiated with the CCEA bargaining unit
during upcoming MOU negotiations.
Option 6: Reduce Subsidies to Special Events (submitted by CCMG)
There are a number of special community events that the City and/or Redevelopment
Agency subsidize either through a direct contribution or in-kind services. Some of these
February 2009 141events include the Martin Luther King celebration, Culver City Car Show, and Taste of
the Nation. Some of these events have grown in popularity to the point that they are
revenue neutral for the organizations that operate them; therefore, the City can reduce
its direct monetary contribution without having to downsize the event.
Option 7: Streamline Public Notification (submitted by CCMG)
Over the past few years, the City has significantly increased public notification, which
has had an impact on staff time and costs for mailing and other forms of notification.
The current practice of sending out mass mailings on an almost weekly basis is very
inefficient and costly. A more streamlined process could save valuable staff time and
money. One possibility suggested by CCMG is to send a mailing to all Culver City
households on a periodic basis (annually, semi-annually, quarterly, etc.) notifying them
of the many ways that they can stay informed. This mailing could include web
addresses, phone numbers, PEG channels, meeting times, master notification email list,
etc. that will allow any citizen who chooses to remain in touch with the City. Providing
this mailing should replace all special purpose notification, limiting notification to those
required by law.
Option 8: Explore Public Private Partnership Opportunities
An emerging trend for certain large infrastructure projects in the U.S. is the use of Public
Private Partnerships (PPP). PPPs are not new, as many Culver City projects are public
private partnerships to a certain extent. Most street and sewer work is bid out to private
contractors and managed by City staff. In this traditional model, the contractor is
typically responsible for designing and building the project while the City is responsible
for financing and operating the project once construction is complete.
Another PPP model that shifts even more responsibility to the private sector is the
Design-Build-Finance-Operate (DBFO) model. This arrangement has been used more
often in Europe, but is now gaining traction in the U.S. Basically, the responsibility for
designing, building, financing, and operating the project is all shifted to the private
sector. In return, the public agency typically pays a fixed annually payment to the
private operator. The idea is the annual payments made by the public agency would be
less than the cost to the public agency if they were to do the work in-house; while the
private company would garner a profit by taking advantage of the efficiency and cost
savings of the private sector.
a. Solar Power installations on City facilities – Solar power is gaining momentum as
a viable green energy alternative and is also a good fit for a public-private
partnership. Solar power requires a significant initial capital investment for
installation. There are private companies that work with cities to construct and
install the photovoltaic system and amortize the cost over a 30-year period, for
example. Basically, the City would have a debt service payment for 30 years.
The idea is that the annual debt service will be funded through cost savings from
using less energy. Cost savings may be minimal at first, but as energy costs
increase over time, cost savings would also increase.
b. Streetlight Maintenance – Approximately 1,000 of the City’s 3,000 streetlights are
the high voltage series circuit, which are much less energy efficient than newer
February 2009 142multiple circuit lights. As funds become available, the City has been upgrading to
energy efficient low voltage parallel circuit streetlights. However, due to recent
budget constraints, this process has been very slow. Streetlight replacement and
maintenance may be a candidate for the DBFO model with a private company
responsible for replacing and maintaining all of the streetlights over a certain time
period with compensation based on 1) the initial replacement of all streetlights
and 2) a performance schedule for the ongoing maintenance of streetlights.
Similar to the solar power model, cost savings from the increased energy
efficiency may be used to fund the annual payments.
c. Street Maintenance – The City is responsible for maintaining approximately 94
miles of roads and alleyways. Currently, there is a backlog of approximately $20
million in street maintenance work that needs to be done to bring all of the City’s
streets to an “A” level. That amount is in addition to the ongoing costs to keep
the streets maintained at their current level. There may be potential for a private
company to assume the responsibility for addressing the backlog of street
resurfacing and maintaining the City’s streets for a fixed annual payment. There
would still need to be a certain level of oversight, interaction, and cooperation
between the private company and the City with certain required performance
measures that must be met. The City may be interested in hearing from private
companies that are set up to do this type of work to explore whether or not this
type of arrangement is even feasible.
d. Sewer Pump Station Improvements – the City operates a system of sewer
pipelines and pump stations that convey sewage from Culver City properties to
the Hyperion Sewer System and charges a user fee for the service. The City
may explore the possibility of charging a private company with the responsibility
for capital improvements, operations, and maintenance of the sewer system.
The user fee would be the source of funding for the operating contract.
e. Parking Meter Operations – the City’s parking meter infrastructure is in need of a
major facelift. Most of the parking meters in the City use older technology, which
are more subject to theft, damage, fraud, etc. than the newer meter technologies.
Since parking meters generate quantifiable revenue, parking meter operations
are a prime candidate for a DBFO structure. Under the DBFO structure, a
private company would be responsible for securing financing to replace and
upgrade all of the City’s parking meters (and possibly install additional meters at
the City’s direction), replace and upgrade those meters, provide ongoing
maintenance on the meters, and collect meter revenue. The meter revenue
would be the revenue stream to fund the ongoing contract with the private
company for providing all of these services. In addition to the upgraded meters,
the City may realize staff savings since all of the parking meter related services
(except enforcement, see below) would be contracted out.
f. Parking Enforcement – Currently, the City employs parking enforcement officers
to issue citations for parking infractions. Some cities have realized savings by
contracting these services to a private company. Enforcement is a key
component to making any potential parking meter program successful. With
effective enforcement, the meters will generate increased revenue and parking
would become more efficient as they would be used for short-term parking, as
February 2009 143intended, instead of long-term parking. Depending on the expertise of private
industry, this may be added to the meter installation, maintenance and collection
activities discussed above, or it may be considered separately.
g. Parking Structure Construction – Parking is a major issue in Southern California.
For any area to remain vibrant and successful, adequate parking is a must. The
Redevelopment Agency had the vision to construct the three downtown parking
structures in anticipation of increased use. However, more parking is needed,
not just in downtown, but in other areas of the City, particularly the Hayden Tract
and Washington/National. Since there is a dedicated revenue stream through
daily and monthly parking fees, construction of new parking structures are
potential candidates for public private partnerships.
h. Stormwater Treatment – Over the last few years, there have been a number of
federal and state environmental quality laws enacted that require greatly
enhanced regional and local stormwater treatment efforts. These requirements
include public outreach, commercial and industrial stormwater inspections, and
management of the local NPDES permit program. All of these additional
mandates have resulted in increased compliance related costs, which are
anticipated to increase significantly as certain compliance deadlines approach.
Some cities have established Stormwater Enterprise funds to fund certain
stormwater related programs through user charges established through City
Council actions. The City currently charges user fees for Local Stormwater
Pollution Prevention Plan and Standard Urban Stormwater Mitigation Plan review
fees that reviewed and approved annually by City Council. These are currently
General Fund user fees. Staff is exploring the possibility of creating an
Enterprise Fund specifically for stormwater treatment purposes and expanding
the number and scope of stormwater user fees that are charged. There are also
capital funds (P-497) currently appropriated to establish a reserve for stormwater
related projects that may potentially be rolled into an Enterprise Fund. If
consistent fee revenue can be generated, stormwater treatment may also be a
candidate for a public-private partnership arrangement.
California’s Governor is a proponent of these public-private arrangements and, as part
of his Strategic Growth Plan, has a website dedicated to providing real examples of
“Performance Based Infrastructure.” Many state agencies are currently soliciting
opportunities for public private partnerships.
Additionally, the City of Beverly Hills recently used the DBFO model for their reverse
osmosis water treatment plant and a 30,000-square-foot public works building. Beverly
Hills had been purchasing all of its drinking water from the Metropolitan Water District of
Southern California. Beverly Hills was looking for a cost-effective and comprehensive
approach to build both a water treatment facility and a much-needed public works
facility. They were approached with, and implemented, an all-inclusive integrated water
management approach offering seamless services in design, construction, project
finance, and operations. The project is funded with water user fees and is the first
design-build-finance-operate (DBFO) water facility in California.
In order to get additional information on potential public-private partnership projects,
staff will pursue a meeting with a firm specializing in facilitating these types of
February 2009 144arrangements. Staff hopes to get some indication as to the feasibility of a public-private
partnership in Culver City, especially as it relates to the projects identified above. After
meeting with the firm, staff will be in a better position to determine whether this type of
partnership may be a possibility in Culver City at this time.
Option 9: Short-term Options submitted by CCMG
In addition to the long term ideas submitted by CCMG, a number of short term options
were also submitted to cut costs. These options include:
a. Moratorium on non-self supporting programs – Place a moratorium on increasing
a subsidized City service or creating new programs unless there is a revenue
stream that offsets the entire cost of the increase or new program.
b. Moratorium on non-essential capital projects – Current capital projects should be
reviewed and those projects that are not absolutely necessary should be
delayed.
c. Moratorium on the City’s Animal Control Program – This is a very costly program
that will be highly subsidized by the General Fund even with the fees that have
been adopted.
February 2009 145