City of Culver City, California
City Council Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council receive a report by the City Manager regarding the
Comprehensive Financial Plan, and discuss and give direction to staff regarding
included options of revenue enhancement and cost reduction recommendations.
BACKGROUND:
The Comprehensive Financial Plan (Plan) presented to the City Council tonight
includes a 10-year financial forecast along with numerous feasible revenue
enhancement and cost reduction options. The Plan is prepared under the City
Manager’s direction, with a team effort including the Budget and Finance
Subcommittee, and the support of all City department heads.
The forecasting in the Plan is extended from the traditional 5-year projection to a 10-
year plan. The Plan is prepared to project the City’s financial condition based on the
existing service levels and future revenue and expenditure trends. The Plan includes
all City funds, and the financial impact which occurs between funds can be updated to
show the overall city-wide financial picture. The Plan should be used as a
management tool to identify any short- or long-term financial issues. This long-range
approach will allow the City Council to address structural problems and related issues.
It will also facilitate the implementation of revenue enhancement options as well as
cost control/reduction opportunities to address these fiscal issues that require longer
than the existing one-year budget cycle. The Plan is intended to serve as a working
document and will be updated annually. It will be a valuable tool for the City Council
to assess any fiscal implications and resolve any short-term issues when they surface.
The Plan also helps to demonstrate to other levels of government that the City is
vigilant in managing its financial affairs.
Meeting Date: 03/05/2007 Item Number: A-7
AGENDA ITEM: Discussion of Comprehensive Financial Plan
Contact Person/Dept.: Marlee Chang,
City Controller
Phone Number: (310) 253-6011
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [X] Attachments: [X]
Public Notification:
Master Notification (02/22/07) (Re-noticed on 03/01/07)
Department Approval:
Marlee Chang (02/22/07)
City Attorney Approval:
Carol Schwab (by H. Iker) (02/22/07)
City Controller Approval:
Marlee Chang (02/22/07)
City Manager Approval:
Jerry B. Fulwood (02/22/2007)City of Culver City, California
City Council Agenda Item Report
A draft financial policy is being prepared and will be reviewed by the executive
management team for their input. The final policy recommendation will be presented
to the City Council during the budget study sessions starting in May 2007.
DISCUSSION:
This Plan presents detailed revenue and expenditure projections based on historical
trends and includes projected costs with which to provide the highest level of services
to our community. The detailed worksheets are attached for your review. It is evident
the fundamental issue is the projected City’s General Fund expenditure increases will
outpace its revenue resources; the projected deficit will escalate each year if no action
is taken. The largest increases are attributed to the increase of medical insurance and
pension costs. Consequently, the options for decision-making and policy direction are
provided for City Council’s review and consideration.
Currently, MOU negotiations have been successfully completed and implemented for
five of the six bargaining groups for the next two to three fiscal years. With the
adoption of the current MOUs, the City demonstrated its commitment to retaining high-
caliber staff in order to continue providing a high level of City services to the
community. Likewise it is important to evaluate and ensure the work programs are
accomplished for the community with the resources necessary to achieve them. As
the City Manager has previously stated, the City is at a juncture of making crucial
decisions on its short- and long-term financial plan.
The audited Annual Financial Report has been completed by the City Treasurer’s
Office for fiscal year 2005-06 and shows the City currently has a healthy General Fund
reserve. However, it is important to realize that the majority of the reserve is a result
of one-time revenue receipts (such as proceeds from the Warner lot sale)
accumulated over time. Keep in mind the recurring revenues must support the
recurring operating expenditures.
The City is still facing difficulty funding on-going needs for the following:
1. Maintenance of City’s streets, street lights and facilities - further deferment
of the maintenance schedule for these needs will eventually cost the City
more money in future years. If the funding is not available at the time when
it is absolutely needed, the condition of the deterioration will worsen. Public
Works and PR&CS are currently conducting studies to assess the condition
of City-owned buildings and parks. It is anticipated the final findings will be
presented to the City Council in the near future when the studies are
completed;City of Culver City, California
City Council Agenda Item Report
2. The City has budgeted its appropriations at around the 96% level in recent
years; it would be prudent to raise it to 100%. This recommendation will be
included in the updated financial policy for City Council’s consideration and
discussion. For fiscal 2007-08 and 2008-09, the proposed budgeted level
will be 97%.
3. Continue to build up Self-Insurance Fund reserve. Staff is assessing the
appropriate reserve level and the recommendation of the reserve
percentage will be included in the financial policy for your consideration; and
4. Set aside funding for future payment of retiree medical insurance (according
to preliminary estimate within five years the cost of this expenditure will
double from $3.1 million to $6.2 million). The GASB 45 (Governmental
Accounting Standards Board issued Statement No. 45) generally requires
that state and local governmental employers account for and report the
annual cost of Post Employment Benefits Other Than Pensions (OPEB).
The City will report this cost and obligation in fiscal 2007-08. There is no
funding requirement at this time; however, staff recommends the City start
to set aside at least $100,000 each fiscal year starting in fiscal 2007-08, and
also establish a funding level in the financial policy. CalPERS is one
organization that is currently providing a “pre-funding” plan (irrevocable
trust) which enables participating employers the ability to set-aside funding
for this growing liability need. Currently, staff is reviewing the available
financing options and will present the findings to the City Council when
available.
In order to provide the best service to our community, departments submitted their
proposed additional operational needs for the next five years. These items also have
a direct impact to the City’s financial condition; they are summarized below and the
details information is described in attachments D and E.
1. Build adequate resources for all departments to provide best services to our
community;
2. Identify steady funding source for equipment replacement and
establishment of a refreshment program;
3. Set aside funding for major acquisitions, such as: replacing the financial
system, infrastructure repairs, computer server replacements, and
Enterprise Application Interface (EAI);
4. Additional capital project funding for projects such as street repair, building
construction, etc;
5. Set aside funding to meet State Mandated Stormwater Cleanup requirement
(NPDES/TMDL).City of Culver City, California
City Council Agenda Item Report
OPTIONS FOR CITY COUNCIL’S CONSIDERATION
Currently, the City’s recurring revenue is not sufficient to cover all these proposed on-
going funding needs; therefore, the City must formulate a plan and take action
accordingly in order to accommodate these needs. The forecasted revenues do
include projected economic development revenue increases as revealed in the study
by Keyser Marston.
The projected structural operating gap is anticipated to grow up to $7 million over the
next ten years. To fill this gap and cover the additional recommended enhancements
identified by departments (approximately $10 million ongoing), the City Council will
need to take decisive action. The following are financial options for City Council
consideration to assist in accommodating these needs:
1. The City continues to implement Best Management Practices. Some
suggestions are included in the Cost-Reduction and Revenue-Enhancement
Recommendations (staff is working on items that were identified for review
[i.e. updating the Purchasing Policy, Financial Policy, etc.] and this effort will
be continued);
2. Fees and Charges study may generate approximately $750,000 of on-going
revenue; this amount will be greater if the City Council approved a more
aggressive cost recovery rate (the Study is at the final stage and the report
will be presented to the City Council in April, 2007);
3. Consideration to increase 0.25% of Sales Tax (Transaction Fee), which will
generate approximately $4.5 million annually in additional on-going revenue
(requires majority approval of eligible voters at a General Election);
4. Consideration of increase in the Transient Occupancy Tax (TOT) from 12%
to 14%, which will generate approximately $360,000 annually of on-going
revenue (requires majority approval of eligible voters at a General
Election);
5. Consideration of a Fire Paramedic Assessment District, which will generate
approximately $1.6 million annually (requires majority approval by affected
parties based on the number of returned mail-in ballots);
6. Consideration of a Fire Suppression Special Assessment District, which will
generate on-going revenue (requires majority approval by affected parties
based on the number of returned mail-in ballots);
7. Consideration of Safety Salary Initiative Assessment, which will generate
revenue as needed (requires majority approval by affected parties based
on the number of returned mail-in ballots);City of Culver City, California
City Council Agenda Item Report
8. Consideration of General Purpose Ad Valorem Tax, which will generate on-
going revenues (requires majority approval of eligible voters at a General
Election);
9. Consideration of a Tree-trimming Benefit Assessment District, which will
generate on-going revenue (requires majority approval by affected parties
based on the number of returned mail-in ballots);
10.Consideration of a Landscape and Maintenance Benefit Assessment
District, which will generate on-going revenue (requires majority approval
by affected parties based on the number of returned mail-in ballots);
11.Consideration of a Streetlight Benefit Assessment District, which will
generate on-going revenue (requires majority approval by affected parties
based on the number of returned mail-in ballots);
12.Consideration of a Stormwater Utility Surcharge, which will generate on-
going revenue (requires majority approval by affected parties based on the
number of returned mail-in ballots);
13.Consideration of issuing General Obligation bond for infrastructure deferred
maintenance funding needs, which will generate one-time revenue (requires
majority approval of eligible voters at a General Election);
14.Consideration of increased Business Tax, which will generate on-going
revenue (requires majority approval of eligible voters at a General
Election);
15.Consideration of Ballot approval to protect City’s Utility User’s Tax, which
will secure on-going revenue (requires majority approval of eligible voters
at a General Election);
16.Consideration of raising Utility User’s Tax rate, which will generate on-going
revenue (requires majority approval of eligible voters at a General
Election);
17.Consideration of increasing various Fines, which will generate on-going
revenue (requires amending municipal code);
18.Consideration of increasing Parking Meter rates, which will generate on-
going revenue;
19.Consideration of implementation of an Admission Tax, which will generate
on-going revenue (requires majority approval of eligible voters at a General
Election);
20.Direct staff to evaluate the feasibility of various options for healthcare cost
containment including researching various healthcare providers; explore the
possibility of implementation of a two-tier employee benefit system (i.e. City of Culver City, California
City Council Agenda Item Report
cafeteria plan that is not precluded by CalPers) prior to the next MOU
negotiations (requires future research and analysis);
NOTE: Implementation of any of the above items that require voter approval will take
approximately 9-12 months of lead time for staff to complete all necessary research
and preparation.
FISCAL IMPACT
If the City Council directs staff to pursue any of the above options which require voter
approval, there will be contract services costs for a financial and/or public relations
consultant to assist the City with the process. The contract service cost will be
determined by the type of tax/special assessment and scope of services (e.g. will
there be polling, public education, engineering study, etc.).
ATTACHMENTS:
Comprehensive Financial Plan
o Cost Reduction Subcommittee – Report of Findings
o Revenue Enhancement Subcommittee – Report of Findings
Level II Summarized Needs for General Fund
Level III Summarized Needs for General Fund
MOTION:
That the City Council:
1. Receive and file the Comprehensive Financial Plan;
2. Approve the concept of the Comprehensive Financial Plan;
3. Discuss and direct staff to prepare and bring back additional information from
items listed above for further consideration and implementation;
or
4. Direct staff to prepare and bring back additional information on items not listed
in this report for further consideration.
Level II – Departmental Operational Needs
1. Personnel costs (estimated average $4 million annually):
a. Fire Safety – Increase six Paramedics for anticipated increase in
service calls, and nine Firefighters to maintain Class 1 status;
b. Police Safety – Add three Police Officers, one Police
Communication Operator, two IT Analysts, one Management
Analyst, one Park Enforcement Officer, and two Jailer positions
to keep up with the demand due to the projected daytime
population increase in next five years;
c. Treasurer – add two Accounting positions;
d. Community Development – add one Plan Checker/Building
Inspector;
e. Public Works – Add one Engineering Inspector and one
Secretary (NPDES requirement), one Street Light Technician,
one Traffic Signal Technician, one Associate Engineer (Waste
Discharge requirement), and one Parking Meter Technician; and
f. Salary upgrade/reclassification for some classifications
requested by various departments.
2. Capital Outlay (estimated $2.5 million one-time expenditure):
a. Police - Taser Electronic Discharge;
b. Fire – Computer Aided Dispatch (CAD)/Mobile Data Computer
(MDC) for initial upgrade/purchase and maintenance costs
(Grant funding may be available);
c. Fire – Various safety equipment, such as rescue apparatus,
holmatto tool, etc.;
d. Communications - Radio Subscriber Replacement (Grant
funding may be available);
e. Communications – Outfitting Culver City Fire department
vehicles with MDC (Grant funding may be available); and
f. IT – Phone/voicemail replacement and computer purchases.
3. Contract service/consultant service (one-time expenditure in various
years):
a. Treasurer – GASB 45 Audit Requirement ($30,000);
b. IT – Increased Repair & Maintenance Service Cost ($ 74,000
with 17% annual increase);
Level II – Departmental Operational Needs
(Continued)
c. City Clerk – Election Cost ($80,000 bi-annually);
d. Personnel – MOU Contract Negotiations ($150,000 over three
years);
e. Fire – Infrastructure Maintenance Contract, Annual ICIS
Membership Dues and Annual Software Service with Motorola
($110,000); and
f. Graffiti Abatement – Increase to accommodate rise in materials
and supplies ($250,000 over five years).
4. Projected capital project funding (one-time construction cost
average $1 million annually):
a. Street pavement, curbcuts, alley reconstruction;
b. Street light and traffic light upgrades/replacements; and
c. Underground storage tank remediation/removal.
5. Set aside funding for deferred maintenance need (target for
average of $1 million annually):
a. Estimated $500,000 (preliminary) for facility maintenance;
b. Estimated $135,000 (preliminary) for parks maintenance needs
c. IT hardware and software purchase.
6. Build up reserve fund for Self-Insurance Fund (estimated to
increase the reserve amount from current $3 million to $5 million):
a. Proposed a $200,000 annual allocation to all departments/funds
Level III – Departmental Needs for Increased Services
1. Personnel costs (estimated average $3.5 million annually):
a. Treasurer – add one Sr. Accountant, one Accountant, one
Accounting Technician, and one Sr. Account Clerk;
b. City Attorney/Code Enforcement – add one Code Enforcement
Supervisor position, and one Code Enforcement Officer position;
c. Budget & Finance – add one Management Analyst;
d. Purchasing – add two Warehouse Workers if Equipment
Maintenance expands operation to 24 hours;
e. Personnel – add one Personnel Analyst, and one Personnel
Technician;
f. Park Security – add two Park Patrol Officer positions;
g. Police – add seven Police Officers, one Crime Analyst, one
Community and Media Liaison, and one Janitor;
h. Fire – add three Fire Captains, one Emergency Preparedness
Coordinator, one Fire Inspector, and one Radio Communication
Technician;
i. Community Development – one Cultural Affairs Intern, three
Management Analysts;
j. Public Works – add two Associate Engineers (for CIP projects,
add two Associate Engineers (for Sewer projects), and one
Engineering Document and Drawing Tech, and one Facilities
Maintenance Worker.
2. Capital Outlay (estimated $3.3 million one-time expenditure):
a. Various office furniture, computers, etc., for requested new
positions;
b. Park Security – two new vehicles ($25,000 each, $3,300
amortization and garage charges annually);
c. Police – Mobile Data Computer System for Police vehicles (15 x
$7,000 = $105,000), Mobile Video Camera Recording System
(15 x $7,000 = $105,000), miscellaneous vehicles, ICIS Radio
upgrades (cost unknown at this time), Automated License Plate
Recognition System;
d. Fire – Additional Service Bay, MCI Trailers, Thermal Imagers,
Paramedic Rescue;
Level III – Departmental Needs for Increased Services
(Continued)
e. Fire Communications – Back-up Radio Dispatch System, Back-
up Dispatching Stations at expanded EOC, Two-way Radio
Interoperability Device; and
f. Public Works – Replace locking mechanisms on all parking
meters ($250,000 over five years).
3. Contract service/consultant service (one-time expenditure in various
years):
a. Personnel – Classification Study ($20,000); and
b. Public Works – Increase cleaning service contract ($40,000
annually);
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Table of Contents
1. General Fund
a. Narrative
b. Worksheet
2. Refuse Fund
a. Narrative
b. Worksheet
3. Transit Fund
a. Narrative
b. Worksheet
4. Sewer Fund
a. Narrative
b. Worksheet
5. Equipment Replacement Fund
a. Narrative
b. Worksheet
6. Equipment Maintenance Fund
a. Narrative
b. Worksheet
7. Self Insurance Fund
a. Narrative
b. Worksheet
8. Innovation Fund
a. Worksheet
9. Landscape Maintenance Fund
a. Worksheet
10. Operating Grants Fund
a. Narrative
b. Worksheet
11. Capital Projects Fund
a. Narrative
b. Worksheet
12. Props A&C Funds
a. Narrative
b. Worksheet
13. Section 8 Fund
a. Narrative
b. Worksheet
14. Redevelopment Agency
(including Bond Funds and
Housing Fund)
a. Narrative
15. Revenue Enhancement Report
16. Cost Reduction Report Comprehensive Financial Plan – General Fund
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
for the
GENERAL FUND
PURPOSE
The purpose of this Comprehensive Financial Plan is to provide the first step
in developing a city-wide ten-year perspective on the financial condition of
each of the City’s major appropriated funds. It is intended to be a planning
tool to aid capital and operating budget decision-making by providing insight
into the long-term implications of today’s policy choices and budgetary
decisions. To that end, this entire document includes long-range forecasts of
revenues and expenditures, financial issues, economic trends, and resource
choices for the General Fund and other City Funds.
INTRODUCTION
The City of Culver City was incorporated in 1917, operates under a charter
originally adopted in 1947, 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 40,500, 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 688 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|
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 2006-07 is approximately $123 million
(excluding internal service funds), with a General Fund Budget of
approximately $76 million. Public Safety expenditures account for
approximately 54% of the General Fund budget.
BACKGROUND
The financial environment that municipal governments operate in has
changed drastically over the last 10-15 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
|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 – General Fund
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 (i.e. hurricanes and
tsunamis) 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, have severely limited financial resources available for
the City’s day-to-day operations, including maintenance, capital projects, and
unfunded future liabilities.
In the past few years, Culver City has experienced the same challenges as a
number of California cities and was forced to take drastic measures, including
reductions in personnel, which subsequently impacted the service level to
residents. Culver City is striving to solidify its financial future and address
many of the looming issues before the City’s options become severely limited.
To accomplish this, the City needs to develop a plan that lays out the myriad
of financial needs and options to meet those needs.
This document discusses the current economic environment the City is
operating in and identifies the revenue constraints and basic operational
expenses that must be met. This Comprehensive Financial Plan also
|1010| For example: GASB 34 required cities to track and report fixed assets and GASB 45 will require cities to report
retiree medical benefits as a liability.
includes operational needs that departments have identified in order to
maintain the current level of service over the next five years and into the
future.
ECONOMIC OVERVIEW
BACKGROUND
Before being able to predict where the economy is going, it is imperative to
understand where the economy has been and what events have led us to the
current economic situation. For the most part, the US economy has been
strong over the last 25 years. In fact, there have only been two recessions in
that time period, both of which lasted less than a year (1991 and 2001). The
1990’s and early 2000’s marked a long economic expansion, a burgeoning
stock market that seemed to be heading skyward forever, and strong
consumer confidence in both the economic and the political environment.
The California economy was also booming! After a slow recovery from the
recession in the early 1990’s, California’s economy exploded. By the late
1990’s and early 2000’s, California made up about 1/8
th
of the U.S. economy
and ranked as the 6
th
largest economy in the world; behind only Japan,
Germany, the U.K., and France (and the U.S. of course).
The technology Industry was hot and was a key driver that propelled an
exponential increase in personal wealth for many Californians. The California
Public Employee Retirement System (CalPERS) experienced such great
returns on investments in the late 1990’s that they informed cities that
pension plans were super-funded and the CalPERS rate for the Employer
portion would remain zero for many years into the future. As a result, most
cities granted increased retirement benefits for employees.
2Comprehensive Financial Plan – General Fund
Unfortunately, that would all change with the ushering in of the new millennia.
The bursting of the stock market bubble and the terrorist attacks on the World
Trade Center had severe economic impacts, resulting in a recession in 2001.
Since then, the economy has experienced a modest recovery. Investors are
more tentative with
their money, and both
the NYSE and
NASDAQ have been
restored to more
historic “real” stock
valuations.
California was hit
hard by the bursting
stock market. The
High-Tech sector was
a source of wealth for
many Californians.
Many of those Californians experienced a rapid decline in wealth and the
Gross State Product was significantly impacted. However, thanks to the
diversity of California’s economy (see pie chart below) the decline was
relatively short-lived and the state economy began to bounce back quickly.
State and municipal govern-
ments were also hit by the
economic slowdown that began
in 2001. Along with a reduction
in tax revenue that
accompanies a recessionary
business cycle, California
experienced double digit
percentage increases in
medical costs, which in-turn
helped to inflate workers’ compensation costs. CalPERS investments burst
with the stock market bubble, turning a super-funded situation into an under-
funded situation. As a result, CalPERS rates for employees (i.e. city and
state agencies) skyrocketed. In 2004-05, the rate for Culver City was raised
from 0% to 6.686% for Miscellaneous employees and from 9.728% to
24.405% for the Public Safety employees.
Leading Economic Indicators
National
0%
1%
2%
3%
4%
5%
6%
7%
8%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
GDP
Unemployment
CPI-U
Recession
The state began to run large
budget deficits. In order to
secure funding for
programs, the state
legislature shifted money
away from municipal
government and into their
own coffers. This put a
significant strain on
municipalities as they had to
figure out ways to deal with
the double whammy of rising
costs (mostly personnel related) and reduced revenues. Many cities had to
reduce benefits and resort to layoffs.
Leading Economic Indicators
Los Angeles County
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
In 2002-03 and 2003-04, Culver City did have to reduce positions and the
performance indicators reflected the impact to the service level in those
years. With a stabilizing state budget and the restoration of the state take-
aways in 2006-07, Culver City has the opportunity to reassess its workforce
level and expects to make some restructuring decisions to enhance the
efficiency of the organization. However, the City is currently still facing
difficulty in recruiting some professional positions particularly in our
Information Technology and Accounting areas. It is mainly due to the
competitiveness of the pay rate with other agencies, and has become crucial
for the City to address this issue among other financial issues.
10%
(Source: California Legislative Analyst Office)
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Recession
GDP
Unemployment
CPI-U
(Source: U.S. Department of Commerce, Bureau of Economic Analysis; U.S. Department of Labor,
Bureau of Labor Statistics)
(Source: U.S. Department of Commerce, Bureau of Economic Analysis; Rand Corp.;
U.S. Department of Labor, Bureau of Labor Statistics)
Share of State Employment in 2004
3Comprehensive Financial Plan – General Fund
OUTLOOK
The consensus among most forecasters is that the national and state
economies will experience growth over the next year; however, there are a
number of factors that are placing significant pressure on the economy, most
notably: 1) fluctuating oil prices, 2) a slowing of sales in the housing market,
and 3) increased threat of terrorism.
Depending on how these three factors play out over the coming months,
consumer confidence could be negatively affected. Rising energy and raw
material costs and the increased cost to borrow money reduces a consumer’s
disposable income. Recently, unstable world events have had a volatile
effect on the stock market, which may also begin to have an adverse impact
on consumer confidence and disposable income. As consumers’ disposable
income subsides and they begin to lose confidence in the economy, they tend
to save their money rather than spend it. The City’s single largest source of
revenue (i.e. sales tax) is highly dependent on consumer confidence and
consumer spending.
A slowing housing market impacts property values, which in turn impacts the
property tax revenues of the City and, more significantly, the Redevelopment
Agency. Declining housing property values also impacts residents’ overall
wealth. A reduction in wealth may encourage consumers to save rather than
spend and cause residents to become averse to paying additional taxes,
which may be needed to maintain service levels.
Community investment has been one of the main reasons that the City has
been able to weather the storm. A number of high profile projects initiated by
the Redevelopment Agency, including the downtown construction of Pacific
Theatres and the Cardiff, Ince, and Watseka parking structures, as well as the
renovation of Kirk Douglas Theatre have helped to attract people and
businesses to Culver City.
Future projects, such as downtown Parcel B and development associated
with the Washington/National specific plan area centered around the
proposed METRO EXPO Light Rail Station, will ensure that Culver City
remains a hot spot on the West side. The realignment of Washington
Boulevard from Culver Boulevard at Main Street to Ince is expected to be
completed in 18 – 24 months. This project will create an area for a plaza, and
allow for further development of retail shops.
Another major project funded partially by the Redevelopment Agency is the
new Fire Station #3 being constructed in the Fox Hills area. The current Fire
Station #3 on Segrell Way is too small to maintain current and future needs.
The new station will consist of two-stories and be 12,156 sq. ft. for Fire
Department staff dormitories, offices, ancillary uses, and apparatus room.
Construction is scheduled to begin in calendar 2007, with completion to take
approximately 12 – 16 months from the start date.
All of these investments in the community have paid off, and are expected to
continue to pay off, by keeping Culver City’s revenues strong, especially
sales, property, and business license taxes.
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
The worksheets for the ten-year forecasts of revenues and expenditures are
included as attachments to this report. The worksheets include the projected
revenues from all of the City’s revenue sources and appropriations for all City
funds over the next ten years.
As part of the exercise in developing the Comprehensive Financial Plan, staff
created three scenarios: Most Likely, Optimistic, and Pessimistic. These
three scenarios were used in order to calculate revenue percentages, and
charts have been included in this document showing percentages over the
next five years. The basic description for each scenario is:
4Comprehensive Financial Plan – General Fund
Most Likely – This scenario is based on current historical percentage
growth to forecast revenues over the next ten years. It is calculated
using a “business as usual” approach.
Optimistic – This scenario is based on revenues coming in at a higher
than expected rate due to such actions as an upswing in the economy
and new development.
Pessimistic – This scenario is based on revenues coming in at a lower
rate due to such unknowns as a downturn in the economy or other
losses of revenue.
The following section of this report identifies the methodology and
assumptions used in developing these forecasts. There is also a brief
discussion and analysis of a number of specific revenues and expenditures.
FORECASTING METHODOLOGY: REVENUES
In order to develop a reasonable ten-year forecast of General Fund revenues,
it is important to analyze past data to establish a trend over time. Therefore,
ten years of actual data (1994-95 through 2004-05) and two years of
budgeted data (2005-06 and 2006-07) were collected. In order to get a
complete picture of the trends, a number of statistical analysis techniques
were considered, including calculating linear time trend models (i.e.
regression) and average annual growth rates over the ten year period. The
average annual growth rate served as the basis for the forecast, with
adjustments being made as appropriate to more closely reflect the current
state of the economy.
Using the average annual growth rate methodology produces a somewhat
conservative growth rate by smoothing out extraordinary revenue gains and
dips. A limitation of this methodology is it does not account for structural
changes in revenue generation, such as a new tax being implemented during
the time period or a significant change in the economic base. To capture
some of the structural changes, staff has adjusted the appropriate revenues
up or down accordingly.
Staff also worked with Keyser Marston Associates, a real estate firm, who
provided the City with revenue projections based on identified projects that
were most likely to be developed within the City during the next ten years,
and also for those that had been completed during fiscal 2006-07. The report
has been included with this package for City Council’s information. A major
outcome of the projections showed that, in most cases, the methodology used
by staff to project the revenue for the plan is fairly close to the results
provided by the consultant, within a reasonable margin of variance. For this
reason, staff has only included additional Transient Occupancy Tax (TOT)
revenues that are above staff’s original projections as they are from new
development and are significantly above forecasted base revenue trends. It
is important to note that these are not definite revenues as the developments
are not yet completed. If the projects do come to fruition, though, the
additional revenues are expected to be an additional $355,000 beginning in
2008-09, and another $1.1 million beginning in 2009-10.
Additionally, because of the economic uncertainty over the next five to ten
years, data from the separate scenarios were used to reflect anticipated
economic trends. Each of the three scenarios, Most Likely, Optimistic, and
Pessimistic, were developed using different underlying assumptions about the
overall state of the economy during the next five to ten years.
The underlying assumption for the “Most Likely” scenario is that the overall
economy will remain relatively stable and things will continue as-is for the
next ten years. Despite looming economic pressures (i.e. increasing oil
prices, slowing housing market, and increasing interest rates), the Most Likely
scenario assumes that an increase in some revenues (e.g. fees and charges,
new development impact fees, etc.) will be sufficient to cover poorer
performing revenues. Overall, the Most Likely scenario assumes General
5Comprehensive Financial Plan – General Fund
Fund revenues will grow at approximately 4% per year, which is consistent
with the average annual growth rate over the last ten years.
The underlying assumption for the “Optimistic” scenario is that current
economic pressures will not have a significant impact on revenues and the
economy will experience modest growth over the next five years. The
Optimistic scenario assumes that the current economic pressures will be
short-lived and the City and State economies are robust enough to weather
the storm. Overall, the annual average growth rate of General Fund revenues
will be approximately 5.5%.
Although this scenario truly is optimistic, it is not unreasonable. Since 1990,
there have been periods in which the average annual growth rate of the
General Fund revenues has exceeded 5.5%. Despite indications that the
economy may take a turn for the worse, some top economists are cautiously
predicting modest economic growth in the next couple of years.
The underlying assumption for the “Pessimistic” scenario is that high energy
and raw material costs, a slowing housing market, increased interest rates,
and/or an unexpected disaster will have a sustained negative impact on
national, state, and local economies. The average annual growth rate in a
Pessimistic scenario is approximately 3%, which is less than the CPI average
of 3.4% over the last five years. Although the City may experience some
nominal growth, it would be less than inflation, resulting in negative growth in
real terms.
These three scenarios have been calculated with the realization that the
actual revenue receipts in any given year should fall somewhere in between
Pessimistic and Optimistic. However, taking into account the City’s diligent
investment in the community and the economic base over the past few years,
the City is in a good position to realize revenues somewhere in between Most
Likely and Optimistic.
BACKGROUND OF FORECAST
Over the past five years, there have been a number of circumstances that
have created a somewhat hostile revenue environment for cities. In 2000, the
stock market bubble burst; then on September 11, 2001 the World Trade
Center in New York was attacked. The sequential timing of these two events
had severe economic implications. As was the case across the nation, the
resulting economic downturn was a severe hit to the City’s General Fund; a
hit which took almost two years from which to recover.
Then, just when the
General Fund began to
recover, the California
Legislature decided to
divert revenues that many
cities rely on to fund on-
going operations (i.e. sales
tax, property tax, and
vehicle license fees) into
the state’s coffers in an
effort to address the
state’s financial woes.
This put an additional
strain on the City’s
resources.
General Fund Revenues
50,000
60,000
70,000
80,000
90,000
100,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
(000's)
Actual Revenue Optimistic
Most Likely Pessimistic
Projected 5 year Annual Average Growth Rate
Pessimistic: 3.2%, Most-Likely: 4.1%, Optimistic: 5.5%
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 diversions will be
restored.
As a result of voter approval of Proposition 1A in 2004, the revenue forecasts
for the next five to ten years assume the state will not take away any more of
6Comprehensive Financial Plan – General Fund
the City’s revenues. However, there is pending legislation that has the
potential for future confiscation of revenues by the state, including a state-
wide franchise fee program that gives the state more control over franchise
fee 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 the City’s
single largest source of
revenue. Despite mod-
erate economic growth
over the last five years,
sales tax revenues have
been strong; growing at an
average annual rate of
approximately 5% since
2000-01. This is a result
of the City’s investment in
the community and the
Redevelopment Agency’s success in reducing blighted areas within the City,
which has helped to attract business and expand the economic base.
Culver City is fortunate to have a diverse economic base, which includes
retail sales outlets, automobile dealerships, restaurants, manufacturing, and
the entertainment industry. A diverse economic base is beneficial as it helps
to lessen the blow in poor economic conditions.
Based on the City’s continued commitment to community investment through
redevelopment and economic development activities, it is expected that sales
tax revenues will continue to be strong. However, sales tax is volatile as it is
highly dependent on the economy and consumer confidence. As previously
discussed, current economic conditions may have an adverse impact on
consumer confidence and disposable income. Consequently, sales tax
projections shown in this chart over the next five years are relatively
conservative.
Transient Occupancy Tax (TOT)
Transient Occupancy tax is levied on occupied hotel/motel rooms and is
currently 12% of the room rate; therefore, TOT revenues are directly related
to the health of the travel industry. Over the last five years, TOT revenues
have been highly volatile. There was a 22% drop in TOT revenue between
2000-01 and 2001-02, followed by a 30% increase in revenues the following
year, followed by another decline of 16% between 2002-03 and 2003-04.
Events such as September 11th or large hotel closures, which have an
adverse impact on people’s travel habits, also have an adverse impact on
TOT revenues.
Sales Tax Revenues
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
(000's)
Actual Revenue Optimistic
Most Likely Pessimistic
Since 2002-03, TOT
revenues have stabilized
somewhat and current
hotel renovation projects
are expected to continue
to generate stable rev-
enues. This forecast has
assumed moderate TOT
growth over the next five
years, and also includes
new TOT based on
anticipated development
discussed previously.
Transient Occupancy Tax Revenues
1,600
1,800
2,000
2,200
2,400
2,600
2,800
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
(000's)
Projected 5 year Annual Average Growth Rate
Pessimistic: 3%, Most-Likely: 4%, Optimistic: 6%
Actual Revenue Optimistic
Most Likely P essimistic
Projected 5 year Annual Average Growth Rate
Pessimistic: 3%, Most-Likely: 3.5%, Optimistic: 4.5%
7Comprehensive Financial Plan – General Fund
Utility User’s Tax
Utility User’s Taxes (UUT) are levied on a number of utilities, including
electric, gas, water, telephone, and cable. Currently, Culver City’s UUT rate
is 11% of utility charges. UUT revenues have remained relatively consistent
over the last ten years and are dependent on utility rates and consumption.
However, there is not necessarily a high positive correlation between utility
rates and UUT revenues. Instead, there is a slight negative correlation as
higher utility rates often encourage consumers to conserve use.
Despite recent in-
creases in some utility
rates, it is not expected
that the City will realize
a corresponding in-
crease in UUT rev-
enues. In fact, recent
actions by the IRS to
discontinue collecting
certain telephone utility
related taxes have
jeopardized the
collection of certain utility taxes for many California cities, including Culver
City. It may take a few years to sort out the legal issues, but there is a
potential for loss of a significant portion of the City’s UUT revenues. Because
nothing is clear at this point, the potential loss has not been factored into the
forecast. In addition, there has been recent increased popularity of solar
energy which may also impact our City’s UUT revenue; however, the degree
of the impact is still unknown at this time and further research is needed to
determine the true effect.
Property Tax and Real Property Transfer Tax
Over the last decade,
and especially in the
past five years,
southern California
has experienced a
population boom.
The housing supply
has not been able to
keep up with the
rapid increase in pop-
ulation. As a result,
real estate has been
at a premium. Prop
13, passed by the
voters in 1978,
capped the property tax rate at 1% of assessed values and permitted a
maximum 2% increase in assessed value annually. As a result, the assessed
value of many properties is well below market value. Property values are re-
assessed when there is a transfer of ownership.
Property Tax Revenues
1,000
2,000
000
4,000
5,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
(000's)
Culver City’s property
tax revenue has grown
relatively consistently
over the past five
years, averaging an
annual growth rate of
approximately 8%.
Recently, there have
been signs of a slowing
housing market. As a
result, both Property
Tax and Real Property
3,
Projected 5 year Annual Average Growth Rate
Pessimistic: 2.5%, Most-Likely: 3.5%, Optimistic: 4.5%
Projected 5 year Annual Average Growth Rate
Pessimistic: 6%, Most-Likely: 7%, Optimistic: 10%
Utility Users' Tax Revenues
10,000
11,000
12,000
13,000
14,000
15,000
16,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
(000's)
Actual Revenue Optimistic
Most Likely Pessimistic
Actual Revenue Optimistic
Most Likely Pessim istic
Projected 5 year Annual Average Growth Rate
Pessimistic: 5%, Most-Likely: 7%, Optimistic: 9%
Real Property Transfer Tax Revenues
800
1,480
2,160
2,840
3,520
4,200
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
(000's)
Actual Revenue Optimistic
Most Likely Pessimistic
8Comprehensive Financial Plan – General Fund
Transfer tax revenues are projected to slow somewhat over the next five
years, with a “Most-Likely” projection of 7%. It is expected that, despite the
potential for a slowing housing market, current development activities will help
to sustain property values in Culver City over the next five years.
Business Tax
All entities conducting
businesses 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 grow-
ing economic base in
the City. During the
2006-07 budget prep-
aration process,
Business Certificate application fees were reviewed. As a result, the City
Council approved an increase to the Business Certificate application fees,
which had not been
increased since the
early 1990’s. This
should generate some
additional on-going
revenue for the City.
All Other Revenue
All other revenues
make up approx-
imately 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 will be
performed by an outside consultant. This will aid the City in establishing a
baseline for all current fees and charges as well as recommend possible new
fees that the City may consider in order to adequately recoup the cost of
providing certain services. It is expected that this study will result in some
additional revenue for the City.
Business License Revenues
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
(000's)
Actual Revenue Optimistic
Most Likely Pessimistic
EXPENDITURES
Culver City has been able to
maintain a moderate- to high-
level of service to its
residents, even during the
very difficult fiscal times
mentioned previously in this
report. Over the last 30+
years, the City has grown
both economically and in
population, which constantly
places pressure on the available resources the City is able to use in order to
maintain services which positively contribute to the quality of life for its
residents. Above is a chart showing the City’s General Fund expenditures in
constant dollars going back to 1975. The chart jumps in five-year intervals
and then gives actual yearly data from 2000-01 until 2004-05.
General Fund Expenditures- Constant Dollars
$9.3
$11.0
$14.3
$16.4
$15.5
$16.6
$19.4
$18.2
$18.4
$18.1
$8
$11
$14
$17
$20
1975-76 1980-81 1985-86 1990-91 1995-96 2000-01 2001-02 2002-03 2003-04 2004-05
Fiscal Year
Millions
Projected 5 year Annual Average Growth Rate
Pessimistic: 4%, Most-Likely: 5%, Optimistic: 6%
Charges for Services Revenues
5,500
7,000
8,500
10,000
11,500
13,000
00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
(000's
FORECASTING METHODOLOGY: EXPENDITURES
For this analysis a combination of historical trends, assumptions, and
judgments were taken into consideration when forecasting the base-line for
expenditure growth over the next ten years. The conclusion was to use an
average growth rate based on anticipated increases over the next ten years.
Since personnel costs are the major portion of the City’s General Fund
)
Actual Revenue Optimistic
Most Likely Pessimistic
Projected 5 year Annual Average Growth Rate
Pessimistic: 3%, Most-Likely: 5.5%, Optimistic: 7%
9Comprehensive Financial Plan – 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 which are 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 assump-
tions for the
Comprehensive Finan-
cial Plan, the base
expenditure information
was kept the same for
the initial three
scenarios (Most Likely,
Optimistic, Pessimistic)
in order to have a
“constant” for comparison purposes with revenues. This base enabled staff to
measure the gap between anticipated revenues and expenditures, and also
measure the additional amount of funds needed in order to meet the needs of
the Level I, Level II and Level III expenditures which will be discussed shortly.
As can be seen in the graph, the City currently does not have the resources
necessary to maintain its existing 30% reserve policy starting in the next few
years.
PERSONNEL COSTS
Approximately 80%, or $61 million, of the City’s Adopted Fiscal 2006-07
General Fund operating budget is attributable to personnel costs. The City
just recently negotiated Memorandums of Understanding (MOUs) with five of
its six bargaining
groups, and is in active
negotiations with the
sixth. During nego-
tiations, it was a
challenge to forecast
with certainty what the
overall personnel costs
growth will be over the
next five to ten years.
With the recent
adoption of the most
current MOUs, the
personnel costs and
percentages were
incorporated into the Plan to give the most up-to-date forecast information.
This information incorporates salary, retirement, medical, and other
negotiated personnel cost increases.
Salaries and Benefits - Last Five Years of Audited Actuals
$33.2
$35.0
$36.2
$36.4
$36.9
$38.6
$9.2
$10.8
$12.6
$13.2
$17.8
$21.4
$0
$10
$20
$30
$40
$50
$60
$70
Actual
2000-01
Actual
2001-02
Actual
2002-03
Actual
2003-04
Actual
2004-05
Adjusted
Budget
2005-06
Millions
Salaries Benefits
Operating Revenues and Expenditures
$74.8
$77.7
$80.9
$83.4
$87.9
$91.5
$95.3
$99.2
$103.3
$107.6
$112.1
$74.91
$78.47
$82.67
$87.43
$91.67
$97.05
$103.14
$109.84
$115.74
$122.22
$129.02
$65
$75
$85
$95
$105
$115
$125
$135
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Millions
Revenues Expenditures
The City has a unique situation with its public safety salary increases based
on an initiative that was approved by voters in the 1950’s. The Safety Salary
Initiative ties Culver City public safety employee salary increases to those of
the LAPD and LA County Sherriff’s salary increases. As mentioned
previously, public safety makes up 54% of the General Fund budget. Cost-of-
living adjustments for Public Safety personnel historically have grown at a
much faster pace than Miscellaneous personnel. Pension costs are also
significantly higher for public safety personnel than for miscellaneous
employees.
As can be seen by the graph, benefits have grown at a much faster pace than
salary over the last six years. This is mostly attributable to increasing medical
costs and escalating pension costs.
10Comprehensive Financial Plan – General Fund
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 PERS and also
negotiated increased retire-
ment benefits with all six of its
bargaining groups, just like
many other cities. When the
economy went down, PERS
costs shot up and left Culver
City, and many other cities,
scrambling to cover the
increased costs. The above graph shows the increased retirement costs over
the last six years.
Medical costs continue to grow at a faster pace than many personnel costs.
The City received estimates from CalPERS for the 2007 medical insurance
premiums which show them to be approximately 12% higher than 2006
premiums. Culver City also offers full medical coverage for its retirees and
their beneficiaries. It is evident the City needs to find options/solutions for
healthcare cost containment.
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 for the past three years. Historically, this increase
had been approximately three percent per year, based on an average CPI
rate. Not including this increase has caused the City to lag in necessary
funds to cover its operating and maintenance needs, and a three and one-half
percent increase has been incorporated into the projections for the next
fifteen years.
General Fund Retirement (PERS) Actuals
$8.46
$8.23
$7.18
$2.95
$3.25
$2.51
$2.21
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
Actual
2000-01
Actual
2001-02
Actual
2002-03
Actual
2003-04
Actual
2004-05
Actual
(Unaudited)
2005-06
Budgeted
2006-07
Millions
MAJOR ISSUES
Culver City, like many cities in California, has been hit hard with increasing
costs that it has little or no control over. These costs include medical
insurance premiums, pension costs, and worker’s compensation. In addition
to these ever-increasing costs, the City is also facing major deferred
maintenance and unfunded liability issues. In 2005, the City had a $24 million
unfunded pension liability. PERS has initiated “smoothing” techniques that
will enable the City to stabilize the annual pension payment and avoid the
peak and valley in pension rates experienced previously; however, our Safety
pension plan shows a trend of increasing future unfunded liability due to this
“smoothing” methodology. This issue needs to be addressed in the near
future.
The City recently received the 2007-08 PERS percentage rates, which are
slightly higher than 2006-07 rates.
LEVEL I, II AND III EXPENDITURES
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. The tables below show the identified expenditure amounts
for the first five years by category.
Level I Expenditures are to increase Department’s operating and
maintenance budgets to bring them current with inflation and to “catch-up”
after not having increases for the last three years. The table below assumes
the total amount will be achieved over the next two fiscal years (half in 2007-
08, and half in 2008-09):
11Comprehensive Financial Plan – General Fund
Level I Expenditures
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
O & M (Catch-Up) 0 604,000 604,000 0 0 0
$0 $604,000 $604,000 $0 $0 $0
Level II Expenditures are those expenditures which Department Heads felt
are necessary in order to maintain the current level of service to the City’s
residents and in-house customers. They include staffing increases/
reclassifications, capital outlay purchases, necessary increases in operating
and maintenance needs, and those expenditures that are anticipated or
expected to be needed in the coming years to meet the increased needs of
the City. It also includes some deferred maintenance needs and technology
replacement needs. The City is currently in the process of assessing its
facilities in order to develop an up-to-date schedule for deferred maintenance.
Level II Expenditures
(does not include capital improvement)
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Personnel Expenses 0 1,192,459 2,246,838 3,853,236 4,250,202 4,453,953
Capital Outlay 0 259,500 95,000 286,300 2,753,000 369,500
O & M 0 254,813 317,616 362,577 380,063 350,494
$0 $1,706,772 $2,659,454 $4,502,113 $7,383,265 $5,173,947
Level III Expenditures include those expenditures Departments would like to
have in order for the City to offer enhanced or increased services and
programs to the community and its in-house customers. These expenditures
include increased personnel, and additional capital outlay items.
Level III Expenditures
(does not include deferred maintenance or capital improvement)
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Personnel Expenses 34,414 1,973,752 2,207,609 4,273,151 4,618,886 4,825,286
Capital Outlay 2,800 471,000 270,924 303,355 2,092,270 125,086
O & M 18,952 249,904 273,954 258,126 262,422 266,848
$56,166 $2,694,656 $2,752,487 $4,834,631 $6,973,579 $5,217,220
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.
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.
REVIEW AND AMEND THE CITY’S FINANCIAL POLICY
Culver City’s current financial policy, Council Policy Statement Number 5002,
was first adopted in 1995. The purpose, as stated in the policy, is to establish
long and short range financial policies for the City. The guidelines contained
in this policy have not been reviewed in a number of years. Staff
recommends that this policy be updated and expanded to cover a wider range
of policies and procedures. This will improve the City’s fiscal stability by
helping City officials make financial decisions and plan fiscal strategy with a
12Comprehensive Financial Plan – General Fund
consistent approach. Adherence to adopted financial policies promotes
sound financial management, which can lead to improvement in bond ratings,
a lower cost of capital, and a minimum of unexpected impacts upon taxpayers
and users of public services.
Attached to this report are draft policies for consideration by the City Council
to help ensure continued financial stability of the City. It is intended that these
policies will be reviewed on an annual basis with the City’s budget process.
Currently, the staff is working with the City Council Budget and Finance
Subcommittee to review this policy and will present any recommendations to
the City Council in the next phase of this process.
REVENUE ENHANCEMENT/COST REDUCTION OPTIONS
Staff and the City Council Budget and Finance Subcommittee have met
regularly to discuss all options available to the City to maintain financial
health. Many of these options require policy adoption and action by the City
Council in order to implement.
For a more detailed discussion of revenue enhancement and cost reduction
options, please see the attached reports from the Revenue Enhancement and
Cost Reduction Subcommittees.
13Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
GENERAL FUND (101) - Beginning Balance 27,761,000 26,595,000 29,600,000 29,541,000 28,603,000 30,845,000 29,697,000 26,956,000 22,351,000 17,054,000 10,887,000
Fiscal Year Net Change
Total Recurring Revenue 69,177,000 72,111,000 75,275,000 77,884,000 82,223,000 85,883,000 89,722,000 93,750,000 97,978,000 102,415,000 107,073,000
Total Interfund Transfers (Admin. Charges) 5,574,000 5,741,000 5,913,000 6,061,000 6,303,000 6,492,000 6,687,000 6,888,000 7,095,000 7,308,000 7,527,000
Total Projected Economic Development 0 0 335,000 1,331,000 1,391,000 1,440,000 1,490,000 1,543,000 1,597,000 1,653,000 1,711,000
Update Fee and Charges 0 1,000,000 1,040,000 1,082,000 1,125,000 1,170,000 1,217,000 1,266,000 1,317,000 1,370,000 1,425,000
Total One-Time Revenue 644,000 2,620,000 0 0 2,200,000 000000
Total Revenue Projection 75,395,000 81,472,000 82,563,000 86,358,000 93,242,000 94,985,000 99,116,000 103,447,000 107,987,000 112,746,000 117,736,000
Total Recurring Expenditures 74,913,000 78,387,000 82,622,000 87,216,000 91,000,000 96,053,000 101,857,000 107,972,000 113,284,000 118,833,000 124,632,000
Total One-Time Expenditures 1,648,000 80,000 0 80,000 0 80,000 0 80,000 0 80,000 0
Total Expenditures Projection 76,561,000 78,467,000 82,622,000 87,296,000 91,000,000 96,133,000 101,857,000 108,052,000 113,284,000 118,913,000 124,632,000
Total FY Recurring Operating Surplus/Deficit (162,000) 465,000 (59,000) (858,000) 42,000 (1,068,000) (2,741,000) (4,525,000) (5,297,000) (6,087,000) (6,896,000)
General Fund - Ending Balance (Operating) 26,595,000 29,600,000 29,541,000 28,603,000 30,845,000 29,697,000 26,956,000 22,351,000 17,054,000 10,887,000 3,991,000
General Reserve Percentage (Recurring)
35.50% 37.76% 35.75% 32.80% 33.90% 30.92% 26.46% 20.70% 15.05% 9.16% 3.20%
General Fund - Balance (Carried Forward) 26,595,000 29,465,000 24,398,200 17,461,400 10,328,500 (5,197,500) (18,305,700) (33,133,200) (49,092,000) (66,379,100) (84,880,500)
Total Deferred Maintenance* 00000000000
Total Unfunded Capital* 00000000000
Total Deferred Maintenance & Unfunded Capital
Projection 00000000000
Subtotal Fund Balance 26,595,000 29,465,000 24,398,200 17,461,400 10,328,500 (5,197,500) (18,305,700) (33,133,200) (49,092,000) (66,379,100) (84,880,500)
Expenditures Pending Approval
Total Level I 0 604,000 604,000 00000000
Total Level II 79,000 1,707,800 2,650,800 4,485,900 7,332,000 5,087,200 4,870,500 5,092,800 5,328,100 5,578,400 5,844,900
Total Level III 56,000 2,696,000 2,744,000 4,889,000 7,046,000 5,280,000 5,352,000 5,569,000 5,792,000 6,027,000 6,271,000
Total Expenditures Pending Approval 135,000 5,007,800 5,998,800 9,374,900 14,378,000 10,367,200 10,222,500 10,661,800 11,120,100 11,605,400 12,115,900
General Fund - Ending Balance (ALL) 26,460,000 24,457,200 18,399,400 8,086,500 (4,049,500) (15,564,700) (28,528,200) (43,795,000) (60,212,100) (77,984,500) (96,996,400)
General Reserve Percentage (Recurring)
35.32% 31.20% 22.27% 9.27% -4.45% -16.20% -28.01% -40.56% -53.15% -65.63% -77.83%
Culver City
February 22, 2007
* These numbers will be validated in the near future when the facility assessment study is completed.Comprehensive Financial Plan – Refuse Fund
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
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 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 bi-weekly 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, 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.
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. |10 10|2,000
4,000
6,000
8,000
10,000
Thousands
2001-02 2002-03 2003-04 2004-05 2005-06
Refuse Fund Revenues and Expenditures
Revenues Expenditures
1Comprehensive Financial Plan – Refuse Fund
The following year, rates were increased again (6% residential, 10%
commercial). To cover prior year deficits and restore the Fund’s reserve,
rates were increased again for all customers in 2005-06 (8%) and 2006-07
(6%). This was not enough, though, to cover expenses. Additionally, it is
necessary to begin setting aside funds for future anticipated increases in solid
waste disposal costs.
Refuse Rate Increases
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Residential C ommercial
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 7% to 8% per year over the
next twenty years. Currently, disposal costs represent approximately 15% of
the operating costs of the Public Works Department Sanitation Division.
In addition to increasing personnel costs and disposal costs discussed above,
the other costs to provide municipal waste services continue to increase as
well. The Refuse Fund maintains a fleet of large sanitation trucks and heavy
equipment, which require a more rigorous maintenance and replacement
schedule. A number of sanitation vehicles are scheduled for retirement in
2007-08. Per the City’s policy, these trucks will be replaced with trucks fueled
by Compressed Natural Gas (CNG), which are much cleaner and better for
the environment than diesel. Culver City is proud to be a leader in purchasing
environmentally responsible vehicles; however, the cost to purchase CNG
powered vehicles is greater than traditional diesel powered vehicles. As more
vehicles are manufactured due to mandate requirements, the cost is expected
to decrease. This may not happen, though, for a few more years.
Currently, the additional cost for CNG vehicles runs about 25% more than
traditional diesel-powered vehicles. Future rate increases will be necessary
to ensure the financial stability of the refuse operation, 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
fuel prices, the limited availability of raw materials has greatly increased the
price of steel. This has made 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 8% over the next
twenty years. The refuse fund expenditure projections take into account
these projected disposal costs increases.
2Comprehensive Financial Plan – Refuse Fund
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
An important focus of the Refuse Fund over the next few years has to be
improving its overall fiscal health to eliminate the fund’s negative balance and
develop a reserve. Additionally, the capital and operational needs of the
Refuse fund that have been deferred over the last few years will have to be
phased in on a priority basis as the revenue generated by fees for service
allow. While increasing the fees is a necessity, we need to be cognizant of
the effect it will have on Culver City residents and commercial businesses in
the City.
DISCUSSION OF REVENUE PROJECTIONS
In order to restore 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 an increase of
approximately 10% per year for the next three fiscal years. If these revenue
increases are realized and current expenditures stay within the anticipated
growth forecast, then the Refuse Fund should have a positive fund balance
by 2009-10.
After 2009-10 the rate increases are planned to be lowered to 5% per fiscal
year. This will be reviewed in the future to ensure that these increases are
sufficient to keep pace with operating costs. It is quite likely rates may be
needed to be kept at a 10% 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% across the board,
with the exception of medical premiums. Medical premiums are forecasted to
increase 12.5% in fiscal 2007-08, with small adjustments downward in
subsequent years. Operating and maintenance expenses are forecasted to
grow 3.5% per year. The exception to this could be garage expenses and
amortization charges to the Equipment Replacement Fund. Fuel prices have
become a large issue for all Funds that utilize vehicles in their operations.
These expenses are difficult to forecast, and for the purpose of this analysis
have had the same 3.5% growth rate associated with them.
A major challenge facing the Refuse Fund is identifying and receiving funding
in order to cover needed upgrades and expansion of its operations.
Anticipated upgrades and expanded services are discussed below:
• Commercial Routes require the addition of another Roll-off
Driver and Truck as well as 10 bins. The increased demand for
commercial roll-off service in the community makes this
necessary. This will be implemented in 2007-08. An additional
Roll-Off Truck and Laborer are required in 2010-11.
• Transfer Station through-put tonnage increase from a maximum
of 500 tpd to 750 tpd and is scheduled for implementation in
2008-09. This will allow increased revenue generation through
the transfer station and will require additional long hauling which
is currently projected to be handled through contract. Also, an
additional Heavy Equipment Operator will be required for
expanded hours of operation at the Transfer Station. In 2014-15
the Transfer Station through-put 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.
3Comprehensive Financial Plan – Refuse Fund
• Capital Improvements needs over the next several years
include in-ground scales for out-bound trucks, repairs to the
perimeter fencing, repairs to the Transfer Station fire
sprinkler system, and implementation of storm water
pollution prevention measures at the Transfer Station.
• Residential Recycling will be enhanced to once a week
collection beginning in 2009-10. This will require an additional
Side-Loader Truck and Driver.
• 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 added in 2007-08. The
Collector will be an up-graded Laborer. A Front-Loader Truck will
be added in 2007-08.
• Field Supervisor Position will be added in 2007-08 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 in 2007-08 and
expanding to the Roll-Off and Long Haul Trucks in 2008-09
followed by remaining vehicles in 2009-10.
• Route Audits are proposed for 2008-09 after GPS system
implementation which will allow for easier analysis of routes.
• Drive Cams will be installed in 2010-11 to provide valuable data
for managers to help drivers develop safer driving habits.
Implementation of Level II measures is projected to increase the funds
negative balance in first two years with the fund balance becoming
positive in fiscal 2012-13.
4Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
REFUSE FUND (202) - Beginning Balance (652,000) (1,221,000) (1,495,000) (904,000) 325,000 1,730,000 3,550,000 5,588,000 7,864,000 10,596,000 13,614,000
Fiscal Year Net Change
Total Recurring Revenue 10,411,000 11,453,000 12,599,000 13,858,000 14,690,000 15,570,000 16,503,000 17,493,000 18,543,000 19,655,000 20,836,000
Total Recurring Revenue - Level 2 0 0 355,000 366,000 377,000 613,000 633,000 653,000 869,000 894,000 920,000
Total One-Time Revenue 00000000000
Total Revenue Projection 10,411,000 11,453,000 12,954,000 14,224,000 15,067,000 16,183,000 17,136,000 18,146,000 19,412,000 20,549,000 21,756,000
Total Recurring Expenditures 10,980,000 11,767,000 12,403,000 13,035,000 13,702,000 14,403,000 15,138,000 15,910,000 16,720,000 17,571,000 18,463,000
Total Recurring Expenditures - Level 2 0 (40,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000)
Total One-Time Expenditures 00000000000
Total Expenditures Projection 10,980,000 11,727,000 12,363,000 12,995,000 13,662,000 14,363,000 15,098,000 15,870,000 16,680,000 17,531,000 18,423,000
Total Refuse FY Operating Surplus/Deficit (569,000) (274,000) 591,000 1,229,000 1,405,000 1,820,000 2,038,000 2,276,000 2,732,000 3,018,000 3,333,000
Refuse Fund - Ending Balance (Operating) (1,221,000) (1,495,000) (904,000) 325,000 1,730,000 3,550,000 5,588,000 7,864,000 10,596,000 13,614,000 16,947,000
Reserve Percentage (Recurring)
-11.12% -12.71% -7.29% 2.49% 12.63% 24.65% 36.91% 49.43% 63.37% 77.48% 91.79%
Refuse Fund - Balance (Carried Forward) (1,221,000) (1,534,000) (1,433,000) (809,000) (268,000) 531,000 1,779,000 3,246,000 4,748,000 5,817,000 7,872,000
Total Deferred Maintenance 00000000000
Total Unfunded Capital 00000000000
Total Deferred Maintenance & Unfunded Capital
Projection 00000000000
Subtotal Fund Balance (1,221,000) (1,534,000) (1,433,000) (809,000) (268,000) 531,000 1,779,000 3,246,000 4,748,000 5,817,000 7,872,000
Expenditures Pending Approval
Total Level I 00000000000
Total Level II 39,000 490,000 605,000 864,000 1,021,000 790,000 809,000 1,230,000 1,949,000 1,278,000 1,307,000
Total Level III 00000000000
Total Expenditures Pending Approval 39,000 490,000 605,000 864,000 1,021,000 790,000 809,000 1,230,000 1,949,000 1,278,000 1,307,000
Refuse Fund - Ending Balance (ALL) (1,260,000) (2,024,000) (2,038,000) (1,673,000) (1,289,000) (259,000) 970,000 2,016,000 2,799,000 4,539,000 6,565,000
Reserve Percentage (Recurring)
-11.48% -17.20% -16.43% -12.83% -9.41% -1.80% 6.41% 12.67% 16.74% 25.83% 35.56%Comprehensive Financial Plan – Transit Fund
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
for the
Transit Fund
INTRODUCTION
The Transit Fund is an Enterprise Fund that was established to provide
efficient and effective public transportation services and high quality, low cost
equipment maintenance services to the City of Culver City. The Culver City
Municipal Bus Line, aka Culver CityBus, provides public transit services on
seven regular routes throughout Culver City and the surrounding area and
services a number of major employment, health, commercial, educational,
and recreational centers in the area.
The Transportation Department is responsible for providing administration
and oversight of Transit Fund operations. The Transportation Department
also oversees the City’s regional transportation planning activities and
administers both the Equipment Replacement Fund and the activities of the
Equipment Maintenance Division, which is responsible for equipment and
vehicle maintenance. A more in-depth discussion of the Equipment
Replacement Fund is included in the Equipment Replacement Fund section
of this report.
As an Enterprise Fund, the Transit Fund charges customers for the provision
of services via bus fares. However, the majority of the Fund’s revenues are
derived from other funding sources, including grants and appropriations from
the state and federal governments.
Operating expenses include the cost of providing service, administrative
expenses, and acquiring, replacing, and maintaining capital assets (e.g.
maintaining and replacing the Bus Fleet). Since the Transit Fund is highly
subsidized by other governmental agencies, their ability to increase or
decrease bus fares to raise revenue is highly restricted. Currently,
Transportation Department staff is working with regional transportation
agencies to discuss a change in the formula for calculating bus fares.
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).
1Comprehensive Financial Plan – Transit Fund |10 10|5,000
10,000
15,000
20,000
Thousands
2001-02 2002-03 2003-04 2004-05 2005-06
Transit Fund Revenues and Expenditures
Revenues Expenditures
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).
Consequently, depending on those
agency’s priorities, funding may be
highly variable from year to year.
Unlike the Refuse and Sewer
Enterprise Funds, the Transit Fund
currently does not have the flexibility
to increase fares to cover increased
expenditures.
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
Thousands
2001-02 2002-03 2003-04 2004-05 2005-06
Transit Fund Revenue Sources
Non Operating
From Other Agencies
Passenger Fares
Nevertheless, public transportation and traffic and congestion relief have
been one of California’s top priorities over the last decade. The Transit
Fund’s current financial position should allow it to continue to provide a high
level of service to the Westside communities for years to come.
ECONOMIC OVERVIEW
With the population explosion in California over the last 10 – 15 years, dealing
with the related increase in traffic and congestion has become one of the
biggest challenges faced by Californians. As such, voters have approved a
few funding sources that are specifically dedicated to funding transportation
projects and public transportation operations. Propositions A & C are both
sales taxes that have been approved by Los Angeles County voters. Since
these funding sources are sales taxes, they are economically sensitive (see
the Prop A & C section of this report for more information); however, they are
much more stable than the alternative of relying on an annual appropriation
from the state legislature.
In addition to Prop A & C, there are a number of state and federal grants
programs that are used for transit operations. These funds are allocated
annually and are subject to the existing political and economic climate. With
an increasing number of federal dollars being diverted towards homeland
security and the war in Iraq, the amount of funds available for transportation
related projects and programs may begin to shrink in the near future.
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
The Transit Fund is facing similar fiscal issues as the General Fund. Due to
the ever-changing variables associated with these issues, it is difficult to
realistically foresee more than two or three years into the future for certain
funding sources, and even less in some cases. As was mentioned
previously, the Transit Fund currently has a healthy reserve and would be
able to stave off any unforeseen expenses that may occur in the very near
future. Since the Transit Fund is heavily dependant on outside funding
sources, it is imperative that it maintains sound oversight of its spending.
2Comprehensive Financial Plan – Transit Fund
DISCUSSION OF REVENUE PROJECTIONS
Assumptions that were made in this analysis after fiscal 2007 include a 3.8%
to 4.0% growth in local revenues, and a modest 3.0% growth in fare box
revenues. Currently, fare box prices cannot be increased without the
reduction or loss of funding from the Metropolitan Transit Authority (MTA).
State Transit Assistance (STA) spillover funds ($961,000 in fiscal 2007-08)
will be eliminated after fiscal 2008-09. These funds were used for one-time
expenditures and not for any ongoing expenses. There is uncertainty as to
whether Municipal Operator Services Improvement Program (MOSIP) funds
will continue to be funded after fiscal 2006-07 which may amount to the loss
of revenue of approximately $800,000 annually.
The Transit Fund is anticipating a little over $200,000 in funds relating to new
bus services to Playa Vista from 2008-2018. These funds are anticipated to
be ongoing at a growth rate of 3.0% per fiscal year, and will assist in covering
ongoing expenditures.
Infrastructure Bond 1B Funds are expected to be allocated during Fiscal 2008
through 2012. These bond monies will assist in funding capital projects and
one-time expenditures. Anticipated funding will be $2.1 million per fiscal year.
With the estimated forecast of revenues over the next few fiscal years, it was
also taken into consideration that the Formula Allocation Procedure employed
by the MTA to distribute local and state transit funding will not change during
this time. Each year, though, that the MTA has rising costs and insufficient
funds to cover them, new formulas are devised to redistribute funding
amongst the surrounding transit agencies. Needless to say, when this
happens the Transit Fund has to adjust its expenditure and revenue
assumptions accordingly.
Most of the revenues received from other agencies are projected to remain
growing at a fairly constant rate. However, it should be noted that some of
those funds can be subject to change in the amount or eligibility at the will of
those agencies.
DISCUSSION OF EXPENDITURE PROJECTIONS
To the extent possible, recurring operating expenditures are covered with
recurring revenues. Personnel costs are estimated to grow 4.0% per current
MOU negotiations, with medical premiums growing at 12.5% in fiscal 2007-
08, and slightly less in subsequent years. Ongoing operating and
maintenance costs are estimated to grow at approximately 3.5%. STA Funds
can be used for operating expenses, and continued receipt of these funds is
subject to an annual test based on expense growth versus the Consumer
Price Index (CPI). Fortunately, the Transit Fund has been able to continue to
receive these funds and expect to receive them in the future. (These STA
Funds do not include the spillover amount that will be discontinued after
2008-09.)
The Transit Fund currently reimburses the General Fund for administrative
charges, which increases between 3% - 4% per year primarily due to
personnel cost increases. The administrative charges, or indirect costs, are
determined through the Cost Allocation Plan prepared each year, which
meets the compliance of Federal and State grants reimbursement guidelines.
The Cost Allocation Plan allocates costs of services and programs to using
Departments and Enterprise Funds based on the level of services received.
Some of these services include payroll processing, information technology,
financial, and communications services.
3Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
TRANSIT FUND (203) - Beginning Balance 6,982,000 7,867,000 9,910,000 12,885,000 13,505,000 13,772,000 11,550,000 8,926,000 5,885,000 2,415,000 (1,498,000)
Fiscal Year Net Change
Total Recurring Revenue 16,564,000 16,715,000 16,520,000 17,027,000 17,572,000 18,117,000 18,681,000 19,266,000 19,872,000 20,498,000 21,146,000
Total One-Time Revenue 0 2,100,000 4,100,000 2,100,000 2,100,000 000000
Total Revenue Projection 16,564,000 18,815,000 20,620,000 19,127,000 19,672,000 18,117,000 18,681,000 19,266,000 19,872,000 20,498,000 21,146,000
Total Recurring Expenditures 15,679,000 16,772,000 17,645,000 18,507,000 19,405,000 20,339,000 21,305,000 22,307,000 23,342,000 24,411,000 25,514,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 15,679,000 16,772,000 17,645,000 18,507,000 19,405,000 20,339,000 21,305,000 22,307,000 23,342,000 24,411,000 25,514,000
Total Transit FY Operating Surplus/Deficit 885,000 2,043,000 2,975,000 620,000 267,000 (2,222,000) (2,624,000) (3,041,000) (3,470,000) (3,913,000) (4,368,000)
Transit Fund - Ending Balance (Operating) 7,867,000 9,910,000 12,885,000 13,505,000 13,772,000 11,550,000 8,926,000 5,885,000 2,415,000 (1,498,000) (5,866,000)
Reserve Percentage (Recurring)
50.18% 59.09% 73.02% 72.97% 70.97% 56.79% 41.90% 26.38% 10.35% -6.14% -22.99%
Transit Fund - Balance (Carried Forward) 7,867,000 7,967,000 9,649,000 6,937,000 (1,682,000) (3,933,000) (9,067,000) (12,207,000) (15,873,000) (25,662,000) (30,038,000)
Total Deferred Maintenance 00000000000
Total Unfunded Capital 00000000000
Total Deferred Maintenance & Unfunded Capital Projectio 00000000000
Subtotal Fund Balance 7,867,000 7,967,000 9,649,000 6,937,000 (1,682,000) (3,933,000) (9,067,000) (12,207,000) (15,873,000) (25,662,000) (30,038,000)
Expenditures Pending Approval
Total Level I 00000000000
Total Level II 1,943,000 1,293,000 3,332,000 8,886,000 29,000 2,510,000 99,000 196,000 5,876,000 8,000 33,000
Total Level III 00000000000
Total Expenditures Pending Approval 1,943,000 1,293,000 3,332,000 8,886,000 29,000 2,510,000 99,000 196,000 5,876,000 8,000 33,000
Transit Fund - Ending Balance (ALL) 5,924,000 6,674,000 6,317,000 (1,949,000) (1,711,000) (6,443,000) (9,166,000) (12,403,000) (21,749,000) (25,670,000) (30,071,000)
Reserve Percentage (Recurring)
37.78% 39.79% 35.80% -10.53% -8.82% -31.68% -43.02% -55.60% -93.18% -105.16% -117.86%Comprehensive Financial Plan – Sewer Fund
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
for the
Sewer Fund
INTRODUCTION
The Sewer Fund is an Enterprise Fund that was established to provide for
conveyance, treatment, maintenance and repair services for the City’s sewer
system. The sewer crew of the Public Works Department Operations and
Maintenance Division is funded by the sewer fund and is responsible for
maintaining the City’s system of subsurface gravity and pressurized sewer
lines, sewer gauging devices, and sewage lift stations, including the pumps
and auxiliary equipment.
|10 10|2,000
4,000
6,000
8,000
10,000
Thousands
2001 -02 2002-03 2003-04 2004-05 2005-06
Sewer Fund Revenues and Expenditures
Revenues Expenditures
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.
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 rate increases in
each subsequent fiscal year, including 2006-07.
ECONOMIC OVERVIEW
Despite the rate increases, the Sewer Fund will operate at a slight deficit in
2006-07. This is due primarily to significant increases in charges for waste
disposal. Sewer charges from the City of Los Angeles for use of the Hyperion
Treatment Plant increased by 46% in 2006-07. Large increases in sewer
charges are expected to continue for the next few years. Additionally, the
City must comply with new Waste Discharge Requirements set by the State
Water Resources Control Board.
Sewer Fund Wastewater Rates
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Currently, the Sewer Fund has a
healthy reserve balance;
however, there is a projected
operating deficit in 2006-07. In
order to avoid depleting the
Sewer Fund’s reserve balance,
it is anticipated that additional
fee increases of 10% per year
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
1Comprehensive Financial Plan – Sewer Fund
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. 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 10% rate of
growth. This is consistent with past history, and places a steady increase in
fees on users per year rather than hitting them with larger increases every
few years. This increase is enough to cover ongoing operating and
maintenance increases, but will not be sufficient to cover ongoing sewer
capital projects.
The current fund balance, of which the majority is from the Wastewater
Facility Bonds, has been used to cover capital costs relating to sewer
projects. If the anticipated projects are completed, this funding will be
exhausted in 2011-12. The main jump in cost indicated on the worksheet is
the possible application cost (estimated at $25 million and spread over five
years) and other costs to join the LA County Sanitation District. In exploring
this option, the City is looking at the possibility of future savings by removing
itself from the Amalgamated Cities Agreement with Los Angeles.
Membership in the LA County Sanitation District would also provide the City
with representation that it currently lacks under the Amalgamated Cities
agreement. This idea is still in the conception phase. Staff is currently
studying this option and more specific cost information will be available in the
future. It was placed in the Level II Expenditures section as a place marker.
If this item were taken out of the worksheet, funding would be available for a
several more years to fund sewer capital projects.
DISCUSSION OF EXPENDITURE PROJECTIONS
Personnel costs are estimated to increase 4.0% per year, with medical
insurance premiums to increase at a higher rate of 12.5% in fiscal 2007-08,
with slight percentage adjustments downward in subsequent years. General
operating and maintenance costs are anticipated to grow 3.5%. 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
at a normal level of between $1.875 and $2 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.
2Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
SEWER FUND (204) - Beginning Balance 23,790,000 23,635,000 24,619,000 25,952,000 28,000,000 30,820,000 34,505,000 40,985,000 48,666,000 57,682,000 68,184,000
Fiscal Year Net Change
Total Recurring Revenue 8,599,000 9,459,000 10,406,000 11,446,000 12,591,000 13,850,000 15,235,000 16,759,000 18,435,000 20,279,000 22,307,000
Total One-Time Revenue 00000000000
Total Revenue Projection 8,599,000 9,459,000 10,406,000 11,446,000 12,591,000 13,850,000 15,235,000 16,759,000 18,435,000 20,279,000 22,307,000
Total Recurring Expenditures 8,754,000 8,475,000 9,073,000 9,398,000 9,771,000 10,165,000 8,755,000 9,078,000 9,419,000 9,777,000 10,153,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 8,754,000 8,475,000 9,073,000 9,398,000 9,771,000 10,165,000 8,755,000 9,078,000 9,419,000 9,777,000 10,153,000
Total Sewer FY Operating Surplus/Deficit (155,000) 984,000 1,333,000 2,048,000 2,820,000 3,685,000 6,480,000 7,681,000 9,016,000 10,502,000 12,154,000
Sewer Fund - Ending Balance (Operating) 23,635,000 24,619,000 25,952,000 28,000,000 30,820,000 34,505,000 40,985,000 48,666,000 57,682,000 68,184,000 80,338,000
Reserve Percentage (Recurring)
269.99% 290.49% 286.04% 297.94% 315.42% 339.45% 468.13% 536.09% 612.40% 697.39% 791.27%
Sewer Fund - Balance (Carried Forward) 23,635,000 18,912,000 17,708,000 14,117,000 11,641,000 10,072,000 7,329,000 7,700,000 9,487,000 12,400,000 17,340,000
Total Deferred Maintenance 00000000000
Total Unfunded Capital 5,347,000 0 1,950,000 00000000
Total Deferred Maintenance & Unfunded Capital
Projection 5,347,000 0 1,950,000 00000000
Subtotal Fund Balance 18,288,000 18,912,000 15,758,000 14,117,000 11,641,000 10,072,000 7,329,000 7,700,000 9,487,000 12,400,000 17,340,000
Expenditures Pending Approval
Total Level I 00000000000
Total Level II 360,000 2,537,000 3,689,000 5,296,000 5,254,000 9,223,000 7,310,000 7,229,000 7,589,000 7,214,000 2,208,000
Total Level III 00000000000
Total Expenditures Pending Approval 360,000 2,537,000 3,689,000 5,296,000 5,254,000 9,223,000 7,310,000 7,229,000 7,589,000 7,214,000 2,208,000
Sewer Fund - Ending Balance (ALL) 17,928,000 16,375,000 12,069,000 8,821,000 6,387,000 849,000 19,000 471,000 1,898,000 5,186,000 15,132,000
Reserve Percentage (Recurring)
204.80% 193.22% 133.02% 93.86% 65.37% 8.35% 0.22% 5.19% 20.15% 53.04% 149.04%CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
for the
Equipment Replacement Fund
INTRODUCTION
The Equipment Replacement Fund (ERF) was established as a mechanism
to ensure adequate funding for the replacement of the City’s fleet of vehicles.
The fund is overseen by the Equipment Maintenance and Fleet Services
Division (EMFS) and City Controller’s Office.
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 City Controller’s Office. The Division works in conjunction
with Purchasing when removing vehicles and equipment from permanent
service in the disposal process. Usual methods for disposal are through
auctions whereby the City can better use its resources in allowing an auction
company to have the responsibility of shipping and selling the City’s old
vehicles and equipment.
The City obtains funds for the future replacement of vehicles and equipment
through periodic rental rate charges (amortization) to the using departments
and/or divisions over the expected life cycle of each unit. The City Treasurer
invests the funds and credits interest or dividend earnings into the fund. The
City Treasurer also places the residual (disposal) value of the assets back
into the fund after the sale is finalized.
The ERF is self-supporting and is the main vehicle for budgeting and
providing adequate funding for all vehicles and equipment for the City. The
Equipment Maintenance Division establishes useful life (life cycles) for all
types of vehicles and equipment that are incorporated into the technical
amortization schedule managed by staff in the City Controller’s Office. This
amortization schedule guides departments in their annual cost for purchase-
ownership and replacement costs for vehicles and equipment at the
termination of the life cycle. This also becomes the fiscal budget for all City
vehicle assets, except for vehicles in the Transportation Department (i.e.
buses).
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 City Controller’s Office add the vehicles and equipment into
the main asset inventory systems (fleet management and accounting
systems), establishes an estimated useful life, calculates the future
replacement costs, that includes 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
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
1completed, 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.
Aid the departments with a budget forecast
Discuss necessary operational equipment needs
The Transportation Department, through the Equipment Maintenance
Division, has established a City Council ERF Sub-Committee to inform the
City Council of the ERF process and those equipment and vehicles eligible for
replacement. A meeting is held each year during the budget preparation
process with our ERF Sub-Committee and all departments that have vehicles
for replacement to review the list of candidates, evaluate the
recommendations, discuss any issues about the process or equipment, and
approve the recommendations.
ECONOMIC OVERVIEW
In fiscal 2005-06, $1 million was “loaned” from the Equipment Replacement
Fund to the Self-Insurance Fund to help cover a shortfall and assist in
establishing a fund balance in this Fund. Once the Self-Insurance Fund is
able to maintain a stable fund balance, this funding will be repaid to the
Equipment Replacement Fund.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
The Equipment Replacement Fund has continued to maintain a healthy fund
balance for several years. This is mainly attributable to close oversight by the
Equipment Maintenance Division and the City Controller’s Office.
The strategy already in place for this Fund will continue to be administered.
The Ten (10) Year Forecast shows a continued healthy operation and is not
recommended to be changed.
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, which were recently
delivered to the City and will be placed in service soon.
2DISCUSSION 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 Ten (10) Year Forecast for
Expenditures is based on anticipated replacements in upcoming fiscal years.
There are several Refuse vehicles that are anticipated for replacement in
2007-08, and the Refuse Division and the Equipment Maintenance and Fleet
Services Division will evaluate these vehicles to see if replacements are
indeed necessary in 2007-08. There are also several vehicles that have been
carried from prior years that were not recommended for replacement in those
years.
As can be seen from the main worksheet for this fund, there is ample funding
to cover purchases in fiscal 2007-08 and subsequent years.
3Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
EQUIPMENT REPLACEMENT FUND (307) - Beginning Bala 10,798,000 11,475,000 8,460,000 8,661,000 7,281,000 7,880,000 8,978,000 10,017,000 11,147,000 12,884,000 14,033,000
Fiscal Year Net Change
Total Recurring Revenue 1,897,000 1,853,000 1,911,000 1,972,000 2,035,000 2,100,000 2,167,000 2,236,000 2,309,000 2,384,000 2,462,000
Total One-Time Revenue 00000000000
Total Revenue Projection 1,897,000 1,853,000 1,911,000 1,972,000 2,035,000 2,100,000 2,167,000 2,236,000 2,309,000 2,384,000 2,462,000
Total Recurring Expenditures 1,220,000 4,868,000 1,710,000 3,352,000 1,436,000 1,002,000 1,128,000 1,106,000 572,000 1,235,000 466,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 1,220,000 4,868,000 1,710,000 3,352,000 1,436,000 1,002,000 1,128,000 1,106,000 572,000 1,235,000 466,000
Total ERF FY Operating Surplus/Deficit 677,000 (3,015,000) 201,000 (1,380,000) 599,000 1,098,000 1,039,000 1,130,000 1,737,000 1,149,000 1,996,000
ERF Fund - Ending Balance (Operating) 11,475,000 8,460,000 8,661,000 7,281,000 7,880,000 8,978,000 10,017,000 11,147,000 12,884,000 14,033,000 16,029,000
Reserve Percentage (Recurring)
940.57% 173.79% 506.49% 217.21% 548.75% 896.01% 888.03% 1007.87% 2252.45% 1136.28% 3439.70%Comprehensive Financial Plan – Equipment Maintenance and Fleet Services Fund
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
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 City Controller’s Office, is responsible
for the administration and operation of the Equipment Replacement Fund.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Thousands
2001-02 2002-03 2003-04 2004-05 2005-06
Equipment Maintenance Fund Major Cost Centers
Personnel Svcs Petroleum Products Repairs and Maintenance
|10 10|1,000
2,000
3,000
4,000
5,000
6,000
Thousands
2001-02 2002-03 2003-04 2004-05 2005-06
Equip Maint Fund Revenues and Expenditures
Revenues Expenditures
The Equipment Maintenance and Fleet Services Division is a full-service
operation that provides maintenance, repair, welding and asset replacement
services for the City. The primary objective of the Equipment Maintenance
Division is to provide fleet maintenance services that maximize equipment
availability and reli-
ability at the lowest
possible cost to all
users. As an internal
service fund, all
personnel and oper-
ating costs for the
division are allocated to
user departments
based on their actual
use of services.
BACKGROUND
The Equipment Maintenance and Fleet Services Division maintains a
nationally recognized fleet that is a leader in environmental friendliness. All of
the Culver CityBus’s vehicles (transit buses), and many of the large refuse
vehicles, are powered by clean burning CNG, which is much more
environmentally responsible than traditional diesel power. However, they are
also more complex and costly to maintain as they require parts that are not as
readily available at this time and a workforce with an enhanced set of skills.
The purchase of CNG vehicles has caused the costs to the Fund to increase
dramatically over the past
few years.
The three major cost
centers that drive costs in
the Equipment Mainte-
nance Division are
personnel costs, petroleum
costs (including natural gas
and unleaded and diesel
fuel), and repairs &
maintenance on vehicles
and equipment.
Over the past four years, expenditures in the equipment maintenance fund
have increased an average of almost 13% per year. This is due mainly to
increases in petroleum prices and personnel costs, which have increased an
average of 23% and 10% per year, respectively, over the last four years.
Increases in personnel costs have included adjustments in salaries for certain
positions to bring them more in line with the market, and additional technical
staff.
1Comprehensive Financial Plan – Equipment Maintenance and Fleet Services Fund
The following section provides a brief discussion of economic overview, and
the projected revenues and expenditures for the Equipment Maintenance
Fund.
ECONOMIC OVERVIEW
The biggest challenge facing the Equipment Maintenance Fund over the next
few years is dealing with increased costs of raw materials (i.e. steel) and
energy (i.e. fuel). While oil prices have somewhat stabilized since the
summer, they are still dramatically higher than one or two years ago. Since
oil is a finite resource, the supply will continue to dwindle, which will continue
to drive up prices over the long run.
As alternative energy vehicles (including CNG) become more available,
economies of scale dictate that costs to operate and maintain those vehicles
will decrease. With much of the Culver City fleet being converted to, or
replaced by, CNG powered vehicles, it is hoped that a drop in CNG costs will
offset increases in oil prices. However, until CNG vehicles become more
accessible and widespread, petroleum costs in this fund are expected to
continue to increase.
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
The basic premise of an Internal Service Fund is to charge out for services
rendered to user departments to recoup these costs. The ideal outcome is to
have revenues and expenditures offset each other at the end of a fiscal year.
Hourly rates are calculated based on current overhead (personnel, utilities,
workers compensation rates, fuel, etc.), and charged to Divisions based on
work performed.
Currently, the Division is working on a Business Plan to assist them in
determining what needs they require in order to continue to provide a high-
level of service to their users, and what revenue increases will be necessary
to meet these needs. This information will be presented at a later date. As
this report is updated, the new information from the Business Plan will be
incorporated.
DISCUSSION OF REVENUE PROJECTIONS
Recurring revenue is based directly on anticipated expenditures for a fiscal
year. Each year rates are reviewed to see if they maintain an acceptable
level of coverage over expenditures and are adjusted accordingly. In many
cases, charge-outs to Departments for services do not cover all expenses of
the Division. This has contributed to the current deficit in this Fund. The
Charge for Services (Garage Charges) will be evaluated for the coming year
to close the deficit gap by fiscal 2009-10. Currently, if Charges for Services
can be increased by approximately 7% for the next two fiscal years, this
should assist in closing the gap, all things held equal.
DISCUSSION OF EXPENDITURE PROJECTIONS
Personnel costs are estimated to grow at a 4.0% growth, with medical
insurance premiums estimated to grow at 12.5% in fiscal 2007-08, and then
slightly less in subsequent years. Ongoing operating and maintenance costs
are anticipated to increase at an estimated 3.5% overall (depending largely
on petroleum costs).
Included in the operating and maintenance costs are fuel charges, which may
grow at a faster rate.
2Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
EQUIPMENT MAINT. FUND (308) - Beginning Balance (585,000) (585,000) (450,000) (174,000) 146,000 471,000 805,000 1,152,000 1,516,000 1,903,000 2,317,000
Fiscal Year Net Change
Total Recurring Revenue 6,351,000 6,773,000 7,222,000 7,583,000 7,919,000 8,270,000 8,636,000 9,019,000 9,419,000 9,837,000 10,274,000
Total One-Time Revenue 00000000000
Total Revenue Projection 6,351,000 6,773,000 7,222,000 7,583,000 7,919,000 8,270,000 8,636,000 9,019,000 9,419,000 9,837,000 10,274,000
Total Recurring Expenditures 6,351,000 6,638,000 6,946,000 7,263,000 7,594,000 7,936,000 8,289,000 8,655,000 9,032,000 9,423,000 9,825,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 6,351,000 6,638,000 6,946,000 7,263,000 7,594,000 7,936,000 8,289,000 8,655,000 9,032,000 9,423,000 9,825,000
Total Equip. Maint. FY Operating Surplus/Deficit 0 135,000 276,000 320,000 325,000 334,000 347,000 364,000 387,000 414,000 449,000
Equip. Maint. Fund - Ending Balance (Operating) (585,000) (450,000) (174,000) 146,000 471,000 805,000 1,152,000 1,516,000 1,903,000 2,317,000 2,766,000
Reserve Percentage (Recurring)
-9.21% -6.78% -2.51% 2.01% 6.20% 10.14% 13.90% 17.52% 21.07% 24.59% 28.15%
Equip. Maint. Fund - Balance (Carried Forward) (585,000) (483,000) (478,000) (579,000) (798,000) (993,000) (1,196,000) (1,404,000) (1,611,000) (1,814,000) (2,006,000)
Total Deferred Maintenance 00000000000
Total Unfunded Capital 00000000000
Total Deferred Maintenance & Unfunded Capital Projection 00000000000
Subtotal Fund Balance (585,000) (483,000) (478,000) (579,000) (798,000) (993,000) (1,196,000) (1,404,000) (1,611,000) (1,814,000) (2,006,000)
Expenditures Pending Approval
Total Level I 00000000000
Total Level II 0 128,000 421,000 439,000 529,000 550,000 572,000 594,000 617,000 641,000 666,000
Total Level III 33,000 143,000 0 105,000 0000000
Total Expenditures Pending Approval 33,000 271,000 421,000 544,000 529,000 550,000 572,000 594,000 617,000 641,000 666,000
Equip. Maint. Fund - Ending Balance (ALL) (618,000) (754,000) (899,000) (1,123,000) (1,327,000) (1,543,000) (1,768,000) (1,998,000) (2,228,000) (2,455,000) (2,672,000)
Reserve Percentage (Recurring)
-9.73% -11.36% -12.94% -15.46% -17.47% -19.44% -21.33% -23.08% -24.67% -26.05% -27.20%Comprehensive Financial Plan – Self Insurance Fund REVISED January 19, 2007
1
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
for the
Self Insurance Fund
INTRODUCTION
The Self Insurance Fund is an internal service fund that was established to
pay administration costs for the risk management program; pay salary
continuance costs for employees injured at work; pay workers’ compensation
and liability claims costs; and secure excess insurance policies to protect the
City’s assets. As an internal service fund, all costs for the Self Insurance
Fund are allocated to all operating departments using a formula that equitably
distributes costs based on each department’s actual use (i.e. experience
rating).
The City is self-insured for general liability and workers’ compensation and
has been a member of the Independent Cities Risk Management Authority
(ICRMA), a Joint Powers Authority risk sharing pool, for more than 20 years.
The ICRMA provides a number of training classes throughout the year and
services the City’s three main insurance programs; excess General Liability,
excess Workers’ Compensation, and All-Risk Property.
BACKGROUND
The two largest cost centers within the Self Insurance Fund are workers’
comp related expenses and insurance premium costs. Over the past five
years, both the workers’ comp and insurance industries have experience
significant increases. Insurance premiums have been on the rise since
September 11, 2001. Subsequent natural disasters, such as hurricanes
Katrina and Wilma, have
caused insurance companies
to re-evaluate their risks in
other natural disaster prone
areas, especially Southern
California. Prior to September
11
th
, the City’s insurance
premiums were approximately
$300,000 annually. Today,
the City’s cost for insurance
premiums, excluding medical
premiums, exceeds $1.3
million. This has placed
added pressures on City
resources.
Additionally, workers’ compensation costs experienced large increases over
the past five years. With double digit increases in medical costs and a
system that was considered by many to be broken, the rapid increase in costs
were not unique to Culver City and it caused a state-wide evaluation of the
workers’ compensation system. Lawmakers recognized that the system
needed to be “fixed” and passed a large scale reform package in April 2004
(SB 899). SB899 has helped to reduce costs and stabilize the workers’
compensation system somewhat; however, the costs for Culver City continue
to be in the millions of dollars.
There were a few years when the City was facing a tight timeframe to balance
its General Fund budget, and the allocation percentages for the worker’s
compensation charge and/or liability reserve charge to all departments/funds
were reduced based on the projected sufficient reserve cash balance in the
SIF. Historically, those charges were calculated based on the salary of the
positions; consequently, if there were vacancies, the charges were not fully
collected into the SIF. In addition to these two factors, staff was exploring
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Thousands
2002-03 2003-04 2004-05 2005-06 2006-07
Cost Centers for Self Insurance Fund
Administration Salary Continuance
Insurance Premiums Liability Claims
Work Comp Claims Unemployment ClaimsComprehensive Financial Plan – Self Insurance Fund REVISED January 19, 2007
2
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. A new allocation formula – based on a department’s
experience rather than payroll – was created and implemented in fiscal year
2006-07.
Over the past year, the entire Risk Management program has been re-
evaluated. New staff has been hired and a more hands-on approach to
claims management has been implemented. During the 2006-07 program
year, the Division is recruiting a full time professional Risk Manager and a
Request for Proposals will be issued for third party claims administration
services, which has not happened for more than five years. Also, a review of
the City’s insurance program is expected to take place over the next 18
months.
The City must continue to implement best management practices to reduce
insurance costs and the frequency and cost of workers’ compensation claims;
however, the Self Insurance program is moving in the right direction. Due to
increased claims management and with the help of legislative improvements
to the system, the City has already experienced a decrease in workers’
compensation related expenses. As a result, the program has come in under
budget for fiscal year 2005-06 and is expected to increase the reserve cash
balance to approximately $3.9 million.
ECONOMIC OVERVIEW
As previously mentioned, many of the Self Insurance Fund’s costs are driven
by factors outside of the City’s control, including increased medical costs and
the state of the insurance industry. For example, the 2006-07 policy year saw
a dramatic increase in All Risk Property insurance. The earthquake
insurance market collapsed as many insurance carriers dropped out of the
market and stopped offering earthquake insurance. This was driven by three
main factors: huge losses experienced by property insurance companies from
hurricanes Katrina and Wilma, the introduction of new modeling software to
estimate loss risks from natural disasters, and the 100 year anniversary of the
San Francisco earthquake. With many providers leaving the earthquake
market, the remaining few insurers had less price competition and demanded
higher premiums and offered less coverage.
In the workers’ compensation arena, there are two major components driving
costs; medical cost inflation and legal challenges to the new legislation.
Medical costs are expected to continue to increase as the baby boomer
generation ages and require increased medical services. This will continue to
put pressure on medical costs and consequently the costs to provide medical
care to injured workers.
There have also been many legal challenges and ballot initiatives to overturn
many cost containing measures included in SB 899. For the most part, these
challenges have been relatively unsuccessful; however, a changing political
environment may jeopardize the improvements to the system achieved by SB
899.
BACKGROUND
The graph on the right illustrates the
dramatic increase in Self Insurance fund
costs in the early 2000’s, hitting a high
mark in 2002-03. Costs have since
decreased; however, they are still above
what they were prior to 2002-03. As
previously discussed, the main drivers for
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
Thousands
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Total Self Insurance Fund ExpendituresComprehensive Financial Plan – Self Insurance Fund REVISED January 19, 2007
3
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 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. This new allocation formula will ensure that
each department pays their fair share of self insurance costs.
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 is
currently in the midst of recruiting for the full-time Risk Manager position.
Once that position is filled, the division will have a full compliment of four (4)
full time staff, including a Risk Manager, 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. It is assumed that the costs for this
division will increase consistent with MOU increases, approximately 4%.
Salary Continuance – When an employee is injured on duty (IOD) and must
miss work as a result, the City will pay that employee’s full salary up to one
year for public safety (per the Labor Code) and six months for general
employees. During the period of time the employee is off work due to an
injury, their salary and benefits are paid from the Self Insurance Fund rather
than their respective department. This is to allow the department the option
to use salary savings to hire temporary help until the injured employee
returns. It is expected that, with increased claims management and
preventative safety programs, salary continuance costs should decrease
slightly over the next few years before leveling off and increasing consistent
with MOU negotiated increases.
Insurance Premiums – Insurance premiums are widely variable from year to
year. It is projected that the increase in insurance premiums will be slightly
more than inflation (5% per year). Comprehensive Financial Plan – Self Insurance Fund REVISED January 19, 2007
4
Liability Claims – It is almost impossible to accurately predict liability claims
costs from year to year. However, historically claims costs have remained
relatively stable. Therefore, liability claims costs are projected to be
consistent with the projected inflation rate (3.5%).
Workers’ Compensation Claims – Similar to Liability claims, it is extremely
difficult to accurately predict workers’ comp claims costs from year to year.
Based on the recent evaluation of the program, it is projected that costs may
be reduced further over the next few years before they stabilize. It is
projected that workers’ compensation claims will decrease approximately 2%
per year for the next five years before leveling off and increasing
commensurate with projected inflation (3.5%).
Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
RISK MANAGEMENT FUND (309) - Beginning Balance 3,992,000 3,125,000 3,390,800 3,691,400 3,991,800 4,292,000 4,492,000 4,691,800 4,891,400 4,991,800 5,091,000
Fiscal Year Net Change
Total Recurring Revenue 7,515,000 7,813,000 8,230,000 8,633,000 9,052,000 9,493,000 9,955,000 10,440,000 10,951,000 11,482,000 12,040,000
Total One-Time Revenue 0 200,000 200,000 200,000 200,000 100,000 100,000 100,000 0 0 0
Total Revenue Projection 7,515,000 8,013,000 8,430,000 8,833,000 9,252,000 9,593,000 10,055,000 10,540,000 10,951,000 11,482,000 12,040,000
Total Recurring Expenditures 7,382,000 7,747,200 8,129,400 8,532,600 8,951,800 9,393,000 9,855,200 10,340,400 10,850,600 11,382,800 11,940,000
Total One-Time Expenditures 1,000,000 0000000000
Total Expenditures Projection 8,382,000 7,747,200 8,129,400 8,532,600 8,951,800 9,393,000 9,855,200 10,340,400 10,850,600 11,382,800 11,940,000
Total Risk Mgmt FY Operating Surplus/Deficit (867,000) 265,800 300,600 300,400 300,200 200,000 199,800 199,600 100,400 99,200 100,000
Risk Mgmt Fund - Ending Balance (Operating) 3,125,000 3,390,800 3,691,400 3,991,800 4,292,000 4,492,000 4,691,800 4,891,400 4,991,800 5,091,000 5,191,000
Reserve Percentage (Recurring)
42.33% 43.77% 45.41% 46.78% 47.95% 47.82% 47.61% 47.30% 46.00% 44.73% 43.48%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
INNOVATION FUND (312) - Beginning Balance 541,000 541,000 541,000 541,000 541,000 541,000 541,000 541,000 541,000 541,000 541,000
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 00000000000
Total Revenue Projection 00000000000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 00000000000
Total Innovation FY Operating Surplus/Deficit 00000000000
Innovation Fund - Ending Balance (Operating) 541,000 541,000 541,000 541,000 541,000 541,000 541,000 541,000 541,000 541,000 541,000
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%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
Landscape Maint. District (425) - Beginning Bal 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Fiscal Year Net Change
Total Recurring Revenue 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000
Total One-Time Revenue 00000000000
Total Revenue Projection 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000
Total Recurring Expenditures 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000 47,000
Total Landscape Maint. Dist. FY Operating Surplus/Deficit 00000000000
Landscape Maint. Dist - Ending Bal (Operating) 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Reserve Percentage (Recurring)
117.02% 117.02% 117.02% 117.02% 117.02% 117.02% 117.02% 117.02% 117.02% 117.02% 117.02%Comprehensive Financial Plan – Operating Grant Funds
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
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.
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.
1Comprehensive Financial Plan – Operating Grant Funds
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
authorities (usually the Federal or State government) annual appropriation.
With an increased amount of funds being appropriated for the war in Iraq,
domestic funding for grants and other federally funded programs may begin to
shrink.
This has been made apparent as the CDBG program was nearly eliminated
entirely from the Federal budget last year. In response to public opposition,
the CDBG program was ultimately funded in the Federal budget; however, the
funds were reduced significantly from the prior year. It is expected that, in
light of current world events, many grant funds will be directed towards
homeland security and defense type activities. As a result, there may be
additional grant opportunities for public safety related activities in the future.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
Because of the many variables that come into play with grant funding, it is
very difficult to project any type of ongoing forecast or trend. Many of the
operating grants the City receives are for one-time items and purchases of
which most are special equipment. These one-time operating grants are
listed on the Ten (10) Year Forecast in fiscal 2006-07, but do not show any
funding in future years. Only historical on-going operating grants are shown.
More often than not, operating grants are “reimbursable,” meaning the City
must spend (front) the money first and then submit the paperwork to be
reimbursed by the granting authority. This creates a lag between the time the
expense goes out and the reimbursement comes in. In a perfect situation the
operating grant balance would be zero, but because of the reimbursable
status of most grants, a negative balance is created until the funding is
received from the granting authority.
For purposes of forecasting both ongoing operating grant revenues and
expenditures, the Senior Nutrition Program, Paratransit Services, Retired
Senior Volunteer Program (RSVP), Disability Services, La Ballona Creek
Bikeway, and Air Quality Programs are the only Divisions showing ongoing
funding. Historically, these have had dedicated grant funding sources;
although, any grant funding can be discontinued or reduced from one year to
another.
For a few of the Divisions listed below, General Fund monies are used to
offset 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.
2Comprehensive Financial Plan – Operating Grant Funds
DISCUSSION OF REVENUE PROJECTIONS
The Senior Nutrition Division receives its funding mainly from the County of
Los Angeles. This funding is approved on a three to four year basis, and will
be coming up for renewal this year. There is no indication at this time that the
City will receive a lower amount than it currently receives, and is lobbying to
receive an increased amount due to the number of meals served.
The Paratransit Services Division is mainly funded using Prop A Incentive
funding, County Paratransit Reimbursement, and Prop C funding. The
County Paratransit Reimbursement contract is up in 2008, and will be open to
discussion with the County Department of Public Works. There is no
indication at this time that funding will be reduced for this program. Funding
for all except the Prop A Incentive funding was kept at a 4% growth per year
for forecasting purposes. The Prop A Incentive funding is projected to grow
by 2.1% per year. This may change in the future, but is not possible to
predict.
The Retired Senior Volunteer Program (RSVP) is only grant funded by
approximately one-third. The other portion is covered by the General Fund.
The Corporation for National and Community Service designates funding for
senior volunteer programs, and just renewed this funding for a three-year
cycle.
The Disability Services Specialist is funded using Community Development
Block Grant (CDBG) monies. As was discussed earlier, this funding has been
reduced the last several years, and has the possibility of being eliminated in
the future. Each year the funding is reduced, the General Fund has picked up
the difference. Currently, the grant pays 45% of the Specialist’s position in
fiscal 2006-07. Actual program expenditure including supplies and part-time
personnel are supported by the General Fund.
For the four Divisions just discussed, strategies are currently being developed
to address potential grant funding shortfalls and possible restructuring of the
programs and were not included in this document. It is highly likely that these
strategies will be introduced and presented during the upcoming budget
process.
AB 2766 funding, which funds our Air Quality Programs Division, is
expected to continue to be received, and is projected to grow by
approximately 0.5% per year. The current per-year amount of funding is
approximately $40,000 and is roughly based on the City’s residential
population (approximately $1 per resident [$1 x 40,000 = $40,000]).
Currently, there is no legislation that is expected to change this formula.
Funding for the La Ballona Creek Bikeway is received from the
Transportation Development Act Article 3 – Bicycle and Pedestrian Funds.
This funding is granted to municipalities on a per capita basis and varies
slightly from year-to-year. This funding helps cover some of the personnel
expenses of our Public Works personnel who assist in maintaining the
Bikeway. For revenue projections, this funding source has been held steady
at the current funding amount. There is currently no formula or calculation to
determine the amount to be allocated from year-to-year.
All other grant revenues shown in fiscal 2006-07 have been identified as one-
time grants, and are not carried forward in projections.
DISCUSSION OF EXPENDITURE PROJECTIONS
Expenditures for personnel costs are forecasted to grow 4% per year, and
medical insurance costs are forecasted to grow 12.5% in fiscal 2007-08, with
slight reductions in percentage increases in subsequent years. Operating
and maintenance costs are forecasted to grow by 3.5% per year. Ongoing
personnel expenditures are found in the Senior Nutrition Division, Paratransit
3Comprehensive Financial Plan – Operating Grant Funds
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.
4Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
GRANTS OPERATING FUND (414) - Beginning Balance (821,000) (1,024,000) (1,250,000) (1,507,000) (1,796,000) (2,119,000) (2,477,000) (2,871,000) (3,300,000) (3,765,000) (4,268,000)
Fiscal Year Net Change
Total Recurring Revenue 1,616,000 775,000 785,000 796,000 806,000 817,000 828,000 840,000 851,000 863,000 876,000
Total One-Time Revenue 00000000000
Total Revenue Projection 1,616,000 775,000 785,000 796,000 806,000 817,000 828,000 840,000 851,000 863,000 876,000
Total Recurring Expenditures 1,819,000 1,001,000 1,042,000 1,085,000 1,129,000 1,175,000 1,222,000 1,269,000 1,316,000 1,366,000 1,415,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 1,819,000 1,001,000 1,042,000 1,085,000 1,129,000 1,175,000 1,222,000 1,269,000 1,316,000 1,366,000 1,415,000
Total Grants Op FY Operating Surplus/Deficit (203,000) (226,000) (257,000) (289,000) (323,000) (358,000) (394,000) (429,000) (465,000) (503,000) (539,000)
Grants Operating Fund - Ending Balance (Operating) (1,024,000) (1,250,000) (1,507,000) (1,796,000) (2,119,000) (2,477,000) (2,871,000) (3,300,000) (3,765,000) (4,268,000) (4,807,000)
Reserve Percentage (Recurring)
-56.29% -124.88% -144.63% -165.53% -187.69% -210.81% -234.94% -260.05% -286.09% -312.45% -339.72%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
CDBG-Operating (427) - Beginning Balance 3,000 5,000 4,000 0 (7,000) (17,000) (30,000) (48,000) (71,000) (99,000) (132,000)
Fiscal Year Net Change
Total Recurring Revenue 79,000 79,000 79,000 79,000 79,000 79,000 79,000 79,000 79,000 79,000 79,000
Total One-Time Revenue 00000000000
Total Revenue Projection 79,000 79,000 79,000 79,000 79,000 79,000 79,000 79,000 79,000 79,000 79,000
Total Recurring Expenditures 77,000 80,000 83,000 86,000 89,000 92,000 97,000 102,000 107,000 112,000 118,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 77,000 80,000 83,000 86,000 89,000 92,000 97,000 102,000 107,000 112,000 118,000
Total CDBG-Operating FY Operating Surplus/Deficit 2,000 (1,000) (4,000) (7,000) (10,000) (13,000) (18,000) (23,000) (28,000) (33,000) (39,000)
CDBG-Operating - Ending Balance (Operating) 5,000 4,000 0 (7,000) (17,000) (30,000) (48,000) (71,000) (99,000) (132,000) (171,000)
Reserve Percentage (Recurring)
6.49% 5.00% 0.00% -8.14% -19.10% -32.61% -49.48% -69.61% -92.52% -117.86% -144.92%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
CDBG-Capital (428) - Beginning Balance 00000000000
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 58,000 0000000000
Total Revenue Projection 58,000 0000000000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 58,000 0000000000
Total Expenditures Projection 58,000 0000000000
Total CDBG-Capital FY Capital Surplus/Deficit 00000000000
CDBG-Capital - Ending Balance (Capital) 00000000000
Reserve Percentage (One-time)
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Comprehensive Financial Plan – Capital Projects Fund
1|10 10|1,000
2,000
3,000
4,000
5,000
6,000
Thousands
2002-03
2003-04
2004 -05
2005 -06
2006-07
Capital Improvement Annual Appropriations
Capital Grants
Capital Improvements
Park Facilities Fund
Gas Tax
Comm Dev Fund
Art in Public Places
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
for the
Capital Projects Funds
INTRODUCTION
The Capital Projects Funds were established to address the City’s various
capital and infrastructure improvement needs that are above and beyond the
annual operating budget. Capital Improvement Projects (CIP) are critical as
they represent an investment in the betterment of the community and are the
City’s main tool to prevent the increase of future deferred maintenance costs,
including street paving, streetlight upgrades, and sewer system upgrades.
BACKGROUND
The City has established a five-year Capital Improvement Plan which is
reviewed and updated annually. The Capital Improvement Plan is a
comprehensive document that identifies the City’s capital improvement
needs, potential funding sources for each need, a five-year projection of the
project cost, and any ongoing 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 that the
project will continue to
deteriorate, ultimately
increasing the total
maintenance cost. In
short, the longer
maintenance is put off,
the more it will end up
costing the City in the
future.
With substantially increasing operational costs, funding available for Capital
Projects has shrunk over the last few years. The above graph 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. Comprehensive Financial Plan – Capital Projects Fund
2
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
Availability of funding for capital projects varies annually based on the
financial condition of the General Fund. Often times, the City relies on one-
time revenues received in previous fiscal years to fund capital projects. With
no consistent funding stream, it is difficult to project how much funding will be
available from year to year. At this time, only projects identified as high
priority in the five-year Capital Improvement Plan are included.
There is a facility assessment study being conducted that will identify the
maintenance needs of most City building facilities over the next twelve (12)
years. That study is expected to be completed over the next few months.
Similarly, a park assessment study is underway and should be completed
within the next year. Once the results of both of those studies have been
finalized, they will be incorporated into the Comprehensive Financial Plan.
Additionally, the City has identified a number of infrastructure maintenance
needs and has begun to quantify those needs by developing the following:
? Pavement Management System
? Building Infrastructure Master Plan
? Computer Replacement Fund
? NPDES/TMDL – (A CIP project has been created for this program to act as a
funding source for mandated storm water cleanup issues, but the actual
amount needed is still unknown at this point.
DISCUSSION OF REVENUE PROJECTIONS
As mentioned above, one of the City’s greatest challenges has been to
identify a steady revenue stream for capital projects. There are a number of
other options for funding capital projects, including grant opportunities and
issuing bonds. However, these options do not result in a stable, ongoing,
long term revenue stream for capital projects. One of the policy challenges
that will need to be addressed in the upcoming years is how to establish a
revenue stream that will support the large backlog of capital project needs
and ensure that, in the future, the City is able to consistently fund all
necessary capital projects in order to reduce the current identified
maintenance and operating costs.
CAPITAL GRANTS
It is the City’s policy to apply for grants that are directed toward achieving and
maximizing external financial resources while protecting the integrity of the
City’s operating budget and long-term financial condition. When
contemplating a grant application, the applying department must consider the
fiscal impact and shall complete a financial analysis to measure the cost and
benefit of the grant activity. If the cost of administering the proposed grant
exceeds the grant amount or the matching requirement causes excessive
burden on the City’s financial resources, or the grant funded project creates
significant ongoing operating costs, the department should choose not to
apply.
Grant funds for capital projects are appropriated, in most cases, only after a
signed contract with the granting agency is received and a copy is forwarded
to the Budget & Finance Division. Once the money is appropriated, it is the
responsible department’s obligation to ensure that all requirements and
timelines set forth in the grant agreement are satisfied until the project is
completed and all grant funds have been received. The department is also
responsible for following the policies and procedures laid out in the City’s
“Administrative Procedures for Grant Submission and Management.” The
Budget & Finance Division is currently working with the City Treasurer’s
Office to monitor the project activities and meet with the team quarterly for
reimbursement tracking purposes.
Comprehensive Financial Plan – Capital Projects Fund
3
Federal and State Grants are an important source of funds that the City can
use to leverage its own money and maximize the number of capital projects
that can be funded in any given year. However, many grants have strict
procedures that must be followed or the City risks not being able to collect
funds once the project has been completed. Therefore, the City must be
diligent in adhering to requirements of the grant agreement to ensure the
most effective and efficient use of resources.
The Community Development (New Development Impact) Fund receives
its funding from fees collected on new non-residential development in excess
of 5,000 square feet. These fees are used to finance street improvements,
traffic controls and traffic management projects. Currently there is a small
amount of funding available in this fund. It is difficult to forecast future funding
since it depends on actual development. Appropriations for expenditures are
not budgeted above available revenue.
The Gas Tax Fund, also known as the Highway User’s Tax, is a dedicated
funding source that is generated from the $0.18 state tax per gallon of
gasoline, diesel, and use fuel. This amount was set by legislative action in
the mid-1990’s, and has not changed since. Regardless of the price of a
gallon of fuel, this amount stays the same. The City receives roughly about
$750,000 per year in Gas Tax monies. While the City would like to receive
increased funding in this category, it would take State legislative action in
order to raise the tax per gallon amount.
The Improvement & Acquisition (I & A) Fund is funded mainly by one-time
and audited surplus monies in the General Fund. In the recent past, most of
the funding has been from one-time monies. Also, developer fees or other
specific one-time general CIP monies, such as monies from Playa Vista, have
been used to fund specific projects related directly or in part to projects
affecting or in relation to the developer or grantor.
In fiscal year 2006-07, the General Fund expects to pay for a significant
amount of appropriation commitment from the prior year’s budget allocation.
There were several projects that had not been completed and thus carried
over to this fiscal year.
There is approximately $2 million being appropriated for the development and
building of the new Fire Station #3 in the Fox Hills area. One million dollars is
anticipated to be received from the future sale of the three lots housing the
existing Fire Station #3 on Segrell Way, and the other $1 million is a “loan”
from the General Fund approved by the City Council. At the time the “loan”
was approved, it was hoped that “grant” funding could be found to pay it back.
Consequently, this $2 million may require General Fund funding.
DISCUSSION OF EXPENDITURE PROJECTIONS
As previously mentioned, funds were approved in fiscal 2005-06 to initiate an
assessment of City-owned and maintained buildings as well as an
assessment of parks and park facilities. The building assessment is under
way and expected to be completed within the next few months. Once that
assessment is completed, it will be incorporated into this financial plan.
The Pavement Management Plan calculates the current backlog for street
paving at approximately $19.4 million. This would bring the condition of the
City’s streets up to an acceptable level. Approximately $2.5 million is needed
in the coming fiscal year just to keep the backlog at the current level ($19.4
million). Currently, $1.0 million is appropriated for fiscal 2006-07. Also, per a
ballot measure approved in November 2006, it is also anticipated that the City
will receive approximately $1.3 million in additional funding for street
purposes. This funding has not been included in the worksheets at this time.
As with all deferred maintenance, the further in the future a street is
repaired/repaved, the more it will cost.
Comprehensive Financial Plan – Capital Projects Fund
4
In fiscal 2005-06, the City started the process of setting aside funds for
pavement, slurry seal, and computer/technology replacement. This was
accomplished by using one-time funds from new development activities in the
General Fund. Currently, there is no dedicated revenue stream for these
activities; therefore, the City will need to rely on available one-time monies to
continue funding these items. A policy is being proposed to address this
issue, and is included in the list of draft policies for Council review and
approval.
One of the largest capital project expenses facing the City is related to State-
mandated cleanup of pollutants resulting from stormwater and urban runoff,
specifically those that enter Ballona Creek and empty into Santa Monica Bay.
This cleanup effort is an unfunded mandate by the State.
The City’s National Pollutant Discharge Elimination System (NPDES)
program was established to support the implementation of the Los Angeles
County Municipal Stormwater NPDES Permit, and to comply with federal and
state environmental (surface water quality) laws. This program covers all
stormwater (and urban runoff) pollution prevention and mitigation issues
including the stormwater plan check reviews, public outreach, commercial
and industrial stormwater inspections, attending meetings, providing staff
training, responding to complaints, applying for and managing grants, and
managing the Transportation Yard and Transfer Station’s General Industrial
Stormwater NPDES Permits.
In-house staff was hired at the beginning of 2005 to manage the
NPDES/Stormwater Program. The stormwater program manager oversees
all of the stormwater issues within the City, including the public facilities,
construction sites, businesses, and residential areas. With the adoption of
total maximum daily loads (TMDLs) (surface water quality limits with strict
quantitative limitations), all the municipalities in Los Angeles County (and
across the state) are facing a situation where they may incur millions of
dollars in financial obligations to satisfy the regulations over the coming
decade. Beginning in 2005-06, the City is setting aside funds in the Capital
Improvement Plan to address NPDES issues. More funds will need to be set-
aside in order to meet the growing costs of this mandate.
The Art Fund is a dedicated funding source, and among other things is for
the design, acquisition, commission, installation, improvement, maintenance
and insurance of an art work; the sponsoring and/or support of performing
arts; and for the acquisition and improvement of real property for the purpose
of displaying art work. The Art Fund currently has a healthy reserve and
receives its funding from developers who elect to give the City 1% of their
development/construction costs rather than install artwork themselves.
Depending on the scope of a project, this can amount to a large sum.
In the near future, anticipated expenditures are well within the level of
available and expected revenues. Each year this is evaluated to ensure that
funding is available for the proposed projects and administrative costs.
As mentioned previously in the revenue section, Gas Tax funding can only be
used for street and road related purposes. This includes street and traffic
light projects. Currently the City utilizes almost the full amount of funding
received each year for Capital Projects, and also transfers a portion to the
General Fund to pay for street related operating expenses. This funding has
also been used as a matching source of funding for grants. It is not
anticipated the City will receive a larger amount of revenue from this source,
which would be dependent on a State legislative action.
Parks Facility Funding is received by the City from developments that do
not include “green space” as part of the development. This funding source
has not been a large source of revenue for the City in many years, and is
used specifically on Park projects, such as park rehabilitation and
improvements. When available, this funding has also been used as a
matching source for grants awarded to the City. Currently, budgeted and
projected expenditures do not exceed the available revenue amount. Comprehensive Financial Plan – Capital Projects Fund
5
The Improvement and Acquisition (I & A) Fund funds projects that are
general or administrative in use. The available funding has been limited in
previous years, and is mainly received from audited surpluses and one-time
monies from the General Fund.
The Parking Fund receives its funding from meter monies and filming
permits. A portion of this funding is transferred into the General Fund to
cover parking and street related costs as part of General Fund operation.
This funding has also been used for capital projects related to installation of
parking meters.
Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
ARTS FUND (413) - Beginning Balance 732,000 567,000 167,000 145,000 78,000 111,000 126,000 141,000 29,000 42,000 (95,000)
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 329,000 165,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Total Revenue Projection 329,000 165,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 494,000 565,000 177,000 222,000 122,000 140,000 140,000 267,000 142,000 292,000 167,000
Total Expenditures Projection 494,000 565,000 177,000 222,000 122,000 140,000 140,000 267,000 142,000 292,000 167,000
Total Arts Fund FY Operating Surplus/Deficit (165,000) (400,000) (22,000) (67,000) 33,000 15,000 15,000 (112,000) 13,000 (137,000) (12,000)
Arts Fund - Ending Balance (Operating) 567,000 167,000 145,000 78,000 111,000 126,000 141,000 29,000 42,000 (95,000) (107,000)
Reserve Percentage (One-time)
114.78% 29.56% 81.92% 35.14% 90.98% 90.00% 100.71% 10.86% 29.58% -32.53% -64.07%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
ASSET SEIZURES (416) - Beginning Balance 964,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 00000000000
Total Revenue Projection 00000000000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 953,000 0000000000
Total Expenditures Projection 953,000 0000000000
Total Asset Seizures FY Operating Surplus/Deficit (953,000) 0000000000
Asset Seizures - Ending Balance (Operating) 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Reserve Percentage (One-time)
1.15% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
NEW DEVELOPMENT IMPACT (417) - Beginning Balance 128,000 62,000 65,000 68,000 71,000 74,000 77,000 80,000 83,000 86,000 89,000
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Total Revenue Projection 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 69,000 0000000000
Total Expenditures Projection 69,000 0000000000
Total New Dev Imp FY Operating Surplus/Deficit (66,000) 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
New Dev Imp - Ending Balance (Operating) 62,000 65,000 68,000 71,000 74,000 77,000 80,000 83,000 86,000 89,000 92,000
Reserve Percentage (One-time)
89.86% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
GAS TAX (418) - Beginning Balance 1,230,000 0 670,000 1,340,000 2,010,000 2,760,000 3,510,000 4,260,000 5,010,000 5,760,000 6,510,000
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000
Total Revenue Projection 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 1,980,000 80,000 80,000 80,000 0000000
Total Expenditures Projection 1,980,000 80,000 80,000 80,000 0000000
Total Gas Tax Fund FY Operating Surplus/Deficit (1,230,000) 670,000 670,000 670,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000
Gas Tax Fund - Ending Balance (Operating) 0 670,000 1,340,000 2,010,000 2,760,000 3,510,000 4,260,000 5,010,000 5,760,000 6,510,000 7,260,000
Reserve Percentage (One-time)
0.00% 837.50% 1675.00% 2512.50% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
Parks (419) - Beginning Balance 193,000 28,000 (622,000) (939,000) (934,000) (929,000) (924,000) (919,000) (914,000) (909,000) (904,000)
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Total Revenue Projection 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 170,000 655,000 322,000 00000000
Total Expenditures Projection 170,000 655,000 322,000 00000000
Total Parks Fund FY Operating Surplus/Deficit (165,000) (650,000) (317,000) 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Parks Fund - Ending Balance (Operating) 28,000 (622,000) (939,000) (934,000) (929,000) (924,000) (919,000) (914,000) (909,000) (904,000) (899,000)
Reserve Percentage (One-time)
16.47% -94.96% -291.61% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
Improvements & Acquisition (420) - Beginning Balance 698,000 (3,000,000) (4,475,000) (6,280,000) (8,195,000) (10,360,000) (12,525,000) (14,690,000) (16,855,000) (19,020,000) (21,185,000)
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 1,843,000 360,000 360,000 360,000 360,000 360,000 360,000 360,000 360,000 360,000 360,000
Total Revenue Projection 1,843,000 360,000 360,000 360,000 360,000 360,000 360,000 360,000 360,000 360,000 360,000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 5,541,000 1,835,000 2,165,000 2,275,000 2,525,000 2,525,000 2,525,000 2,525,000 2,525,000 2,525,000 2,525,000
Total Expenditures Projection 5,541,000 1,835,000 2,165,000 2,275,000 2,525,000 2,525,000 2,525,000 2,525,000 2,525,000 2,525,000 2,525,000
Total I & A Fund FY Operating Surplus/Deficit (3,698,000) (1,475,000) (1,805,000) (1,915,000) (2,165,000) (2,165,000) (2,165,000) (2,165,000) (2,165,000) (2,165,000) (2,165,000)
I & A Fund - Ending Balance (Operating) (3,000,000) (4,475,000) (6,280,000) (8,195,000) (10,360,000) (12,525,000) (14,690,000) (16,855,000) (19,020,000) (21,185,000) (23,350,000)
Reserve Percentage (One-time)
-54.14% -243.87% -290.07% -360.22% -410.30% -496.04% -581.78% -667.52% -753.27% -839.01% -924.75%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
Parking Improvement (421) - Beginning Balance 816,000 841,000 838,000 860,000 908,000 1,053,000 1,226,000 1,428,000 1,659,000 1,920,000 2,212,000
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 822,000 847,000 872,000 898,000 925,000 953,000 982,000 1,011,000 1,041,000 1,072,000 1,104,000
Total Revenue Projection 822,000 847,000 872,000 898,000 925,000 953,000 982,000 1,011,000 1,041,000 1,072,000 1,104,000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 797,000 850,000 850,000 850,000 780,000 780,000 780,000 780,000 780,000 780,000 780,000
Total Expenditures Projection 797,000 850,000 850,000 850,000 780,000 780,000 780,000 780,000 780,000 780,000 780,000
Total Parking Fund FY Operating Surplus/Deficit 25,000 (3,000) 22,000 48,000 145,000 173,000 202,000 231,000 261,000 292,000 324,000
Parking Fund - Ending Balance (Operating) 841,000 838,000 860,000 908,000 1,053,000 1,226,000 1,428,000 1,659,000 1,920,000 2,212,000 2,536,000
Reserve Percentage (One-time)
105.52% 98.59% 101.18% 106.82% 135.00% 157.18% 183.08% 212.69% 246.15% 283.59% 325.13%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
Capital Grants (423) - Beginning Balance (2,168,000) (4,205,000) (9,747,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000)
Fiscal Year Net Change
Total Recurring Revenue 00000000000
Total One-Time Revenue 170,000 0000000000
Total Revenue Projection 170,000 0000000000
Total Recurring Expenditures 00000000000
Total One-Time Expenditures 2,207,000 5,542,000 13,200,000 00000000
Total Expenditures Projection 2,207,000 5,542,000 13,200,000 00000000
Total Capital Grants FY Operating Surplus/Deficit (2,037,000) (5,542,000) (13,200,000) 00000000
Capital Grants - Ending Balance (Operating) (4,205,000) (9,747,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000) (22,947,000)
Reserve Percentage (One-time)
-190.53% -175.88% -173.84% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00% -100.00%
1|10 10|100
200
300
400
500
600
700
Thousands
2003-04
2004-05
2005-06
2006-07
Estimated Prop A & C Allocations
for Culver City
Prop A Prop C
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
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 1% tax on retail sales in Los Angeles County. The collection of
this tax is administered by the County, which returns 25% of the collections to
cities within the County. The balance of Proposition A tax funds are used for
rail development (35%) and discretionary purposes (40%). Almost the entire
discretionary portion is used to fund bus serviced provided by Metro and 16
other municipal bus operators within the County.
Proposition C sales tax, approved by voters in 1990, is an additional one-half
of 1% tax on retail sales in Los Angeles County. The balance of Prop C tax
funds are allocated to the construction and operation of the bus transit and
rail system (40%), expansion of rail and bus security (5%), construction of
commuter rail transit centers, park and ride lots, and freeway bus stops
(10%), and other transit-related improvements to freeways and state
highways (25%).
Each year, more than $1 billion is generated in local transportation revenue.
BACKGROUND
As a condition of voter approval, twenty-five percent of the Proposition A tax
revenues and twenty percent of the Proposition C tax revenues are
earmarked for the Local Return Programs to be used by cities and the County
of Los Angeles in developing
and/or improving local public
transit, paratransit and related
transportation infrastructure.
Local Return funds are
allocated and distributed
monthly to jurisdictions on a
"per capita" basis by Metro.
Most of these funds are
expended on street
improvement projects and
maintenance and improvement
to the Transportation facility.
Additionally, Culver City is eligible to receive additional Prop A and C funds
because it operates its own bus line. Most of the additional money is used for
Transportation Department operations.
ECONOMIC OVERVIEW
Per voter approval, a portion of Prop A and C money is distributed to cities
based on population; therefore, both of those funding sources are relatively
stable. Any attempt to alter these funding sources would need voter
approval. Given the current state of transportation in California, especially
Southern California, it seems unlikely that voters would choose to reduce
funding for transportation related projects in the near future. However, since
Prop A and C are both sales taxes, they are economically sensitive.
Although sales taxes are economically sensitive, the diversity of the Los
Angeles County economy makes Prop A and C taxes less subject to large
annual swings in collections. Some communities may experience a decrease
2|10 10|200
400
600
800
1,000
1,200
1,400
Thousands
2001-02
2002-03
2003-04
2004-05
2005-06
Prop A & C Annual Expenditures
Prop A Prop C
in sales tax while others experience an increase. Overall, the Los Angeles
County economy is relatively robust, which helps to create an environment for
a relatively stable funding source in Prop A and C sales tax receipts. A more
in-depth economic outlook for sales tax is included in the “Economic
Overview” section of the General Fund’s Comprehensive Financial Strategy.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
Since Prop A & C are sales taxes, those funding sources are projected to be
similar to the City’s sales tax projections over the next ten years (i.e.
approximately 4% per year). The graph below shows the annual Prop A &
Prop C expenditures for the past five years. Prop A & C funds may be carried
over if the entire amount received is not expended in the same fiscal year. As
a result, there are some peaks and 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 ten
year projection, revenues are
equal to expenditures. As
previously mentioned, Prop A
& C receipts are projected to
increase commensurate with
the City’s sales tax receipts (approximately 4%). Therefore, Prop A & C
expenditures are projected to increase at a 4% rate as well. Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
Prop A (415) - Beginning Balance 790,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000
Fiscal Year Net Change
Total Recurring Revenue 632,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Total One-Time Revenue 00000000000
Total Revenue Projection 632,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Total Recurring Expenditures 632,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 632,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Total Prop A FY Operating Surplus/Deficit 00000000000
Prop A - Ending Balance (Operating) 790,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000 790,000
Reserve Percentage (Recurring)
125.00% 158.00% 158.00% 158.00% 158.00% 158.00% 158.00% 158.00% 158.00% 158.00% 158.00%Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
Prop C (424) - Beginning Balance 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000
Fiscal Year Net Change
Total Recurring Revenue 774,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Total One-Time Revenue 00000000000
Total Revenue Projection 774,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Total Recurring Expenditures 774,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 774,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000
Total Prop C FY Operating Surplus/Deficit 00000000000
Prop C - Ending Balance (Operating) 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000 1,398,000
Reserve Percentage (Recurring)
180.62% 279.60% 279.60% 279.60% 279.60% 279.60% 279.60% 279.60% 279.60% 279.60% 279.60%Comprehensive Financial Plan – Section 8/Low Moderate Income Housing Fund
1
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
for
Section 8/Low Moderate Income Housing Fund
INTRODUCTION
Section 8 is a type of Federal assistance provided by the United States
Federal government dedicated to sponsoring subsidized housing for low-
income families and individuals. The Housing Agency in the Community
Development Department is responsible for managing and administering
Culver City’s Section 8 Housing Choice Voucher Program (HCVP) to provide
rental subsidies for very low-income households.
The Housing Agency contracts with HUD to provide funding for approximately
384 families. The Division closely monitors all applicable Federal regulations
to insure compliance. The Division inspects units annually and negotiates
property upgrades with owners.
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.
Currently, the two main Section 8 programs are tenant-based vouchers and
project-based vouchers. In the tenant-based program, eligible families with a
certificate or voucher find and lease a unit and pay a portion of a reasonable
rent. Their portion is based on income, generally around 30%. The local
housing authority pays the owner the remaining rent, capped by the Fair
Market Rent (FMR) or a fixed percentage thereof. The local housing authority
determines the reasonable rent and the FMR is determined by the U.S.
Department of Housing and Urban Development (HUD).
Local housing authorities
can also choose to project-
base up to 25% of their
vouchers. Project based
vouchers are linked to a
particular apartment, not an
individual family. Eligible
families pay 30% of their
income for rent while living
in the apartment, but cannot
take the voucher with them if
they move.
Whether a voucher is tenant-based or project-based, all subsidized units must
meet federal Housing Quality Standards, ensuring that the family has a
healthy and safe place to live. Currently, there are no time limits for family
participation in the program, though occasionally reform bills are introduced in
Congress that suggest imposing time limits on the program. |10 10|500
1,000
1,500
2,000
2,500
3,000
Thousands
2001 -02 2002-03 2003-04 2004-05 2005-06
Section 8 Revenues and Expenditures
Revenues ExpendituresComprehensive Financial Plan – Section 8/Low Moderate Income Housing Fund
2
In many localities, the waiting lists for Section 8 vouchers may be thousands
of families long, with waits of three to five years. Families who participate in
the program must abide by a series of rules and regulations, often referred to
as “family obligations,” in order to maintain their voucher. In recent years, the
HUD Office of the Inspector General has spent more time and money on
fraud detection and prevention.
ECONOMIC OVERVIEW
The housing market boom over the last five years has made housing
assistance programs for low-to-moderate income families increasingly
important. In fact, there are a number of programs that the Culver City
Housing Agency has had to discontinue because they are no longer feasible
given the extremely high cost of housing and the affordability gap, including
the Mortgage Assistance Program (MAP); however, there have been
indications that the housing and real estate market is softening.
While a softening real estate market is good news for prospective buyers, it
may put upward pressure on the rental market. As families sell their homes,
they may need to move into an apartment, either temporarily or on a long
term basis. This decreases the rental property supply and drives prices
upward.
Additionally, Section 8 funding is variable from year-to-year based on annual
appropriation of Congress. With an increased amount of funds being
appropriated for the war in Iraq, domestic funding for grants and other
federally funded programs may begin to shrink. Depending on the federal
government’s financial situation and priorities, there is a possibility that
Section 8 funds will shrink which has been the case the last few years.
PROJECTIONS AND ANALYSIS OF EXPENDITURES
OVERVIEW
A more detailed policy discussion of the Housing Fund’s finances, including
the Section 8 program, will be initiated with the Redevelopment Agency Board
in the upcoming months. The outcome of these discussions will be included
in the 2007-08 Comprehensive Financial Plan.
Revenues and expenditures for Section 8 Housing are based on available
Section 8 funding, mainly received through HUD. For this reason, Revenues
and Expenditures are shown to offset each other. Expenditures are never
budgeted at a higher rate than known revenues.
DISCUSSION OF REVENUE PROJECTIONS
Because of the uncertainty of continued HUD funding, revenue projections
are shown to grow at the same growth rate as expenditures. As mentioned
above, the Section 8 Housing budget is prepared based on available HUD
funding. This fund also currently has a positive fund balance to cover any
revenue shortfall during a given fiscal year in case HUD funding is not fully
received, or expenses run over projections due to uncontrollable
circumstances.
DISCUSSION OF EXPENDITURE PROJECTIONS
Expenditure growth is based on anticipated personnel cost increases of 4%,
general operating and maintenance cost increases of 3.5%, and medical
insurance cost increases of up to 12.5% per year. The Housing Services and
Rent Subsidy Payments, which make up the majority of the Division, have
been held at a steady rate.
Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Culver City
February 22, 2007
Section 8 Housing (426) - Beginning Balance 757,000 804,000 847,000 885,000 918,000 946,000 969,000 987,000 1,000,000 1,008,000 1,010,000
Fiscal Year Net Change
Total Recurring Revenue 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000
Total One-Time Revenue 00000000000
Total Revenue Projection 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000 2,555,000
Total Recurring Expenditures 2,508,000 2,512,000 2,517,000 2,522,000 2,527,000 2,532,000 2,537,000 2,542,000 2,547,000 2,553,000 2,559,000
Total One-Time Expenditures 00000000000
Total Expenditures Projection 2,508,000 2,512,000 2,517,000 2,522,000 2,527,000 2,532,000 2,537,000 2,542,000 2,547,000 2,553,000 2,559,000
Total Section 8 Housing FY Operating Surplus/Deficit 47,000 43,000 38,000 33,000 28,000 23,000 18,000 13,000 8,000 2,000 (4,000)
Section 8 Housing - Ending Balance (Operating) 804,000 847,000 885,000 918,000 946,000 969,000 987,000 1,000,000 1,008,000 1,010,000 1,006,000
Reserve Percentage (Recurring)
32.06% 33.72% 35.16% 36.40% 37.44% 38.27% 38.90% 39.34% 39.58% 39.56% 39.31%Comprehensive Financial Plan – Redevelopment Agency
1
CITY OF CULVER CITY
COMPREHENSIVE FINANCIAL STRATEGY
for the
Redevelopment Agency
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 Redevelopment Project. In 1971, Project Areas 1
and 2 were formed. These project areas generally encompass the area south
of Playa Ave and the Industrial areas of Jefferson Blvd, respectively. Project
Area 3 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, 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,
constructing three parking structures and a movie theater downtown,
renovation of the Kirk Douglas Theater, and the Fox Hills Mall, the Heritage
Classics Homes, and the renovation of many small businesses throughout the
project area.
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.
Comprehensive Financial Plan – Redevelopment Agency
2
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
California Median Home Prices
1985 - 2004
Nominal Adjusted* (2000 dollars)
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.
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
Source: California Association of Realtors; Bureau of Labor statistics CPI Inflation Calculator Comprehensive Financial Plan – Redevelopment Agency
3
newly assessed value will then increase on a yearly basis, not to exceed two
percent (2%) per year.
1
The strong market over the past five to ten years encouraged property
construction, 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.
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 consensus among most forecasters is that the national and state
economies will experience growth over the next year; however, there are a
number of factors that are placing significant pressure on the economy, most
notably: 1) spiking oil prices, 2) a slowing housing market, 3) continually
|1010| California Tax Data: www.californiataxdata.com/A_Free_Resources/history.asp, visited 10/19/2006
increasing interest rates by the Federal Reserve Board to fend off inflation,
and 4) increase threat of terrorism.
As of the date of this report, oil prices have stabilized somewhat (although it is
still above $2.50 per gallon) and the Federal Reserve Board has alleviated
some fears of inflation by not raising the Federal Reserve interest rate after
their last few meetings. However, the housing market continues to level off.
New housing starts peaked in early 2006 and have been dropping off
modestly since. It is expected that new housing starts will continue to decline
over the next few quarters.|1010|
A slowing housing market may have an impact on property values, which in
turn could have an impact on the Redevelopment Agency’s tax increment
revenues. Poor tax increment receipts may make it increasingly important for
the Redevelopment Agency to leverage tax increment funds with private
market funds to get the most bang for the buck.
PROJECTIONS AND ANALYSIS OF REVENUES AND EXPENDITURES
OVERVIEW
The worksheets for the ten-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
|1010| Mid-Year Update: 2006-07 Economic Forecast & Industry Outlook for Southern California; Los
Angeles Economic Development Corporation; http://www.laedc.org/reports/Forecast-2006-07.pdf |10 10|5,000
10,000
15,000
20,000
25,000
30,000
000's
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Tax Increment Receipts
Component Area 1 Component Area 2 Component Area 3 Component Area 4Comprehensive Financial Plan – Redevelopment Agency
4
Tax Increment|10 10|5,000,000
1 0,000,000
1 5,000,000
20,000,000
25,000,000
30,000,000
35,000,000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
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 over the last five years
have resulted in strong tax
increment receipts, which have
grown 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.
Despite a slowing property and real estate market, tax increment receipts are
expected to remain relatively strong; growing at an average rate of
approximately 4.5% over the next six years. This is mainly a function of a
number of current construction and development projects that are underway
and expected to hit the Assessor’s tax rolls within the next three to five years.
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.
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. The
state has not required that Agency’s make ERAF payments in 2006-Comprehensive Financial Plan – Redevelopment Agency
5
07; however, ERAF payments could be re-instituted at any time
depending on the condition of the State’s budget.
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.
Under Development Projects/Programs – Under development
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.
Comprehensive Financial Plan – Redevelopment Agency
6|10 10|10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
000's
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
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
BOND FUNDS
As previously discussed, another financing option available to the Agency is
to issue debt 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. 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 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 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.
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
outcome of these discussions will be included in the 2007-08 Comprehensive
Financial Plan.
Page 1 of 11
January 18, 2007
Comprehensive Financial Plan
Revenue Enhancement Subcommittee
REPORT OF FINDINGS
INTRODUCTION
Over the past few months, the Revenue Enhancement Subcommittee has met on
several occasions to brainstorm and generate ideas for enhancing the City’s revenue.
In addition to the ideas proposed by members of the Subcommittee, ideas were also
solicited from City staff. Two of the City’s bargaining groups (CCMG and CCEA)
submitted revenue enhancement/cost reduction proposals during the MOU negotiations
and an “All Employees” email was sent out. The Subcommittee took all proposals
seriously and reviewed and considered the merits of every proposal.
The following report summarizes the revenue generating proposals that the
Subcommittee received. While not every proposal is included in this report, the
Subcommittee has attempted to present the most feasible options for the City Council’s
consideration. These options are presented in two categories: 1) Ballot Options &
Approval Process, and 2) Policy Driven Options. Each option is followed by a brief
description and the additional annual revenue that may be generated, if implemented.
BALLOT OPTIONS & APPROVAL PROCESS
Options:
1. Increase Transient Occupancy Tax (TOT, aka hotel tax)
2. Increase Sales Tax 0.25% (Transaction Tax)
3. Create Additional Benefit Assessment Districts
a. Paramedic Benefit Assessment District (via Parcel Assessment)
b. Benefit Assessment District for landscaping, tree trimming, streetlights,
etc.
4. Issue General Obligation Bond for Capital Projects
Approval Process – Taxes
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. Page 2 of 11
January 18, 2007
Additionally, if the City Council selects either of the above options (1 and 2), 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 2008. Reviewing what state
and county level tax issues may appear on the same ballot will be one important area of
analysis.
Approval Process – Assessment Districts
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.
Public 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
General 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 rates adds $15 in
tax to that rate. A 2% increase to the TOT would add $2.50 in taxes. Many nearby
cities have increased their TOT rates over the last three years, as noted below.
Area TOT rates:
Los Angeles: 14%
Santa Monica: 14%
Beverly Hills: 14%
West Hollywood: 14%
Culver City: 12%
Page 3 of 11
January 18, 2007
Option 2: Increase Sales Tax 0.25% (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%. 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 a Culver City resident
purchasing merchandise in another jurisdiction.
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.
In Los Angeles County, all cities have an 8.25% sales and use tax rate, with the
exception of the City of Avalon, which has an additional .50% transaction tax for a total
sales and transaction tax of 8.75%. In the entire state, only Alameda County (8.75%),
San Francisco County (8.50%), and the cities of Richmond (8.75%), Clovis (8.275%),
Avalon (8.75%), and Scotts Valley (8.50%) exceed a total transaction tax rate of 8.25%.
Attached is a summary report of the statewide election results of local sales tax
measures from November 2006 and a list of cities that had adopted transaction taxes
prior to the November election.
Option 3: Benefit Assessment District
Benefit Assessment 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 Benefit Assessment District that could be implemented city-
wide would be a Paramedic Benefit Assessment (which would be administered as a
parcel assessment). Other Benefit Assessment Districts could be implemented for tree-
trimming, streetlights, parks, and landscaping. These may be able to be city-wide, or Page 4 of 11
January 18, 2007
implemented on a smaller neighborhood-by-neighborhood basis depending on
benefit/need. The annual cost to assess allocations on anything other than a city-wide
basis is higher.
The intent of a Benefit Assessment District is to recover the cost of providing a high
level of service. For example, if a contract with a tree-trimming company to increase the
frequency that certain types of trees are trimmed costs $800,000 per year, then the goal
would be to equitably spread the cost of that contract among the businesses and
residents that directly benefit from that service.
Option 4: 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, issuing a bond must be approved by
the voters.
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).
Page 5 of 11
January 18, 2007
Fiscal Impact:
Below are the additional annual revenue projections that may be generated for each of
the ballot measure options:
1. Increase TOT 2% (from 12% to 14%)* $360,000
2. Increase Sales Tax 0.25% (from 8.25% to 8.50%) $4,500,000
3. Benefit Assessment Districts
a. Paramedic Benefit Assessment District**
b. City-wide Tree-trimming Assessment District
$1,600,000
$800,000
4. Issue Bond for Capital Improvements TBD
* This estimate is based on the City’s current supply of rooms. There are proposed developments in the
Washington/National area that could greatly increase this estimate if the developments materialize as
currently proposed.
** This program currently generates approximately $1,000,000 in ambulance billings.
Recommendation:
It is recommended that the City Council direct staff to begin the process of researching
any of the above options that best fit the financial needs of the City. Additionally, if the
City Council directs staff to pursue any of the above options, a decision would need to
be made to hold a special election in November 2007 or wait until the April 2008 general
municipal election.
Page 6 of 11
January 18, 2007
POLICY DRIVEN OPTIONS
Options:
1. Review and Update City Fees & Charges
2. Privatize Graphics Services
3. Increase Utilization of Vet’s Memorial Building
4. Advertise in/on City Vehicles
5. Sponsorship of City-owned Property/Programs/Events
6. Lease City Property for Special Events (e.g. weddings @ City Hall)
7. Review Parking Rates at All City Structures and Meters
8. Increase City’s Fines (e.g. Parking and Impound Citations)
9. Increase e-Commerce (online billing)
10. Create Online “Property Room” for Asset Seizure Auctions
11. Host a Regional Youth Sporting Event
The options presented in this section do not require voter approval; however, they do
require a policy decision 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
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.
A comprehensive review of the City’s fees and charges by a consultant is currently
underway. This review is expected to be completed in February and presented to
Council prior to fiscal year 2007-08 budget adoption.
Fiscal impact is unknown at this time. The consultant will be providing a report to City
Council in April 2007. At that time, staff will have a better estimate for the fiscal impact.
Option 2: Privatize Graphic Services
The City could lease the space currently occupied by the Graphic Services division to a
private parcel/graphics service (e.g. Fed Ex, Kinko’s, UPS, Xerox, etc.). The City could
also lease/reserve a certain number of spaces on P-1 for customers of that service.
City Hall’s location in the downtown area and proximity to an existing U.S. Post Office
may make it a desirable location for a private graphics services company.
Currently, the Graphic Services division has a budget of approximately $430,000, which
includes personnel costs, postage, lease payments and maintenance for the City’s
multi-functional copy machines, and paper for the City’s printers and photocopy
machines. Personnel costs in the Graphic Services division are approximately
$137,000. If Council is interested in this option, staff needs to further research the costs
of contracting out those services. Page 7 of 11
January 18, 2007
An additional graphics/mail room related policy issue that the City may explore is to
require those parties requesting information from the City via mail (e.g. old agenda
reports, police reports, City Budget, etc.) include a self addressed stamped envelope for
the documents to be returned. This would save staff time in preparing envelopes and
mailing labels and paying for the return postage.
Option 3: Increase Utilization of Vet’s Memorial Building
The City has a number of rooms in the Teen Center, Vet’s Memorial Building (VMB),
and the Senior Center that are available to rent for meetings and special events. Many
of the rooms in the Teen Center and Senior Center are used for City programming
during normal business hours. However, most of the rooms in VMB are available during
normal business hours. Currently, the City does an excellent job of leasing out as
many of the rooms as possible.
An upgrade to VMB may make it more attractive to potential users and more
competitive with surrounding rental facilities. Increasing utilization would increase
revenue, but it would also increase expenditures associated with cleaning and
maintaining a highly utilized facility.
If the City Council is interested in this option, staff needs to further research the City’s
potential return on investment. However, a significant monetary commitment to capital
improvements at VMB would be necessary in order to maximize utilization and
revenues derived from room rental fees, which could be funded with general obligation
bonds.
Option 4: Advertise In/On City Property
The City and Enterprise funds may be able to realize significant revenue generation by
selling advertising space in/on City property, especially the City’s rolling stock.
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 addition to Culver CityBus, the City could also explore the possibility of selling
exterior advertising space on other rolling stock, including public works vehicles.
There are a number of vendors that coordinate and administer the ad sales for the City.
If the City Council would like to further explore this option, staff can contact one of these
vendors for preliminary estimates on revenue generation. Even if it is determined that
Enterprise fund income must stay with that fund, the health of these funds is critical for
their continued ability to pay allocated administrative costs to the General Fund.
Option 5: Sponsorship of City-owned Programs/Events
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, Farmers’ Market, Culver City
Music Festival, Music in the Chambers, and “The Art of…” speaker series. Despite the Page 8 of 11
January 18, 2007
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 off-set 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.
Option 6: Lease City Property for Special Events (e.g. Weddings @ City Hall)
The City has a number of beautiful locations that may potentially be used for special
events and private functions. For example, the City Hall courtyard may provide a
beautiful backdrop for a wedding reception or retirement party. Much like VMB is rented
for these types of functions, the City may be able to rent other City owned property for
special events.
The fiscal impact is unknown. However, if there is some sort of mechanism in place
when requests are received, the City may be able to generate some additional rental
revenue (a few thousand dollars??).
Option 7: Review Parking Rates at all City Structures and Meters
Culver City owns and operates a number of parking structures 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. The unified parking strategy includes 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 9: Increase City’s Fines (e.g. Parking and Impound Citations)
The City may consider reviewing fines and forfeitures to make sure they are in line with
surrounding cities.
Increasing the parking and impound fees would require amending the municipal code.
However, depending on how much rates were increased, it could result in a significant
increase in fines and forfeitures revenues.
Page 9 of 11
January 18, 2007
Option 10: Increase e-Commerce (online billing) and e-FFiciency
Increase the use of technology to generate and distribute financial reports to
Department Heads, City Council, and the public, and maximize the use of e-commerce.
Overall, it is expected that increased use of technology will increase efficiency and
productivity.
The Information Technology department is working with the City Treasurer’s Office and
the City Controller’s Office to develop a suite of financial reports to be used as tools for
sound financial management. The City Treasurer’s Office, the City Attorney’s Office
and IT are also working on an e-commerce program, which will increase the efficiency
and effectiveness of revenue collection, reduce paperwork, and expedite the application
process.
Option 11: Create Online “Property Room” for Asset Seizure Auctions
Asset Seizure is a power afforded to government agencies which allows them to seize
property that is believed to be related to criminal conduct; the tactic is commonly used in
drug cases. The Culver City Police Department, as part of detecting and preventing
criminal activity and apprehending criminals, has accumulated an inventory of seized
property, from bicycles to computer equipment. The City currently contracts with a
vendor who sells or disposes of the property on the City’s behalf.
With the increase in popularity of internet consumerism and online auction sites such as
e-Bay, the City may be able to reach a wider audience and, consequently, sell more
inventory at a more competitive price. At this time, more research will need to be done
into the legal and operational procedures involved in auctioning off seized property
online.
In order to determine a possible fiscal impact, staff needs to do more research into the
current process and what percentage of seized property is sold versus what is
discarded. Because online auctions generally reach more people, some additional
revenue may be generated if there is an increase in the percentage of items that are
sold.
Selling property using an online auction site does have a cost and would require staff
commitment. For example, the auction site generally charges a fee to list the item,
which is usually a percentage of the listing price (usually about 5-6%). Staff would need
to photograph the property and go through the process of listing it online, which includes
posting digital pictures and writing a description of the item being auctioned. Once the
item has been purchased, it must be boxed up and shipped. The buyer will typically pay
for a portion of the shipping and handling costs, but not the staff time associated with
shipping the item.
There are small businesses that will sell items on auction sites for you (the famous “We
Sell It On EBAY” stores). These businesses do all the work, from listing to shipping.
However, they generally take 15-20% of the final selling price as a fee for their services.
Page 10 of 11
January 18, 2007
This policy option may not be a large revenue generator; however, it may be more
advantageous from an efficiency standpoint.
Option 12: Host a Regional Sports Tournament
Hosting a state or regional youth sports championship (e.g. aquatics or basketball) is an
economic driver that would bring people and money into the City. These events are
often a full weekend, with large numbers of people coming from great distances. Staff
to man the event is usually provided by the sponsoring organization and parent
volunteers. The City would benefit from participants, parents, and officials that are
staying in area hotels (TOT) and sales tax generated from dining out and shopping
while in the area. It would also be a good marketing tool for the City to build some
goodwill.
Culver City had a marathon a number of years ago which had similar benefits for the
City. Where the marathon was cumbersome and disruptive due to the large number of
surface streets that needed to be closed, a youth sports championship would be much
less disruptive. There would be some logistical challenges in dealing with the increased
traffic and parking during a “championship” weekend. If the Council directs staff to
pursue this option, more research will be done to check the feasibility and calculate the
economic benefits and direct and indirect costs.
Page 11 of 11
January 18, 2007
Fiscal Impact:
Many of the policy options would require a significant amount of research to determine
their feasibility. Prior to investing a large amount of time into research every option,
staff would like to get direction from the Council on those options that they feel are most
feasible for implementation.
1. Review and Update City Fees & Charges
2. Privatize Graphics Services
3. Increase Utilization of Vet’s Memorial Building
4. Advertise In/On City Vehicles
5. Sponsorship of City-owned Property/Programs
6. Lease City Property for Special Events
7. Review Parking Rates at All City Structures & Meters
8. Charge for Use of Parks
9. Increase City’s Fines
10. Increase e-Commerce and Online Billing
11. Create Online “Property Room” for Asset Seizure
Auctions
12. Host a Regional Sports Tournament
Recommendation:
It is recommended that the City Council review each of the policy driven options and
direct staff to begin the process of researching any of the above options that best fit the
financial goals of the City.
Page 1 of 4
January 18, 2007
Comprehensive Financial Plan
Cost Reduction Subcommittee
REPORT OF FINDINGS
INTRODUCTION
Over the past few months, the Cost Reduction Subcommittee has met on several
occasions to brainstorm and generate ideas for reducing the City’s costs and increasing
operational efficiency. In addition to the ideas proposed by members of the
subcommittee, cost reduction proposals submitted by two of the City’s bargaining
groups (CCMG and CCEA) during MOU negotiations were reviewed. The
subcommittee took all proposals seriously and reviewed and considered the merits of
every proposal.
The following report summarizes the cost reduction proposals that the Committee
received. While not every proposal is included in this report, the subcommittee has
attempted to present the most feasible options for the City Council’s consideration.
Many of the cost reduction proposals contained in this report are operational efficiency
issues. The City Manager plans to work diligently with each Department Head to take a
long hard look at the organizational structure and operational processes in each area.
COST REDUCTION OPTIONS
Options:
1. Review and Evaluate the City’s Organizational Efficiency
2. Staff Certain Public Safety Positions with Civilians
3. Reduce Overtime and Shift Trades
4. Flexible Compensation & Benefit Plans
• Two tiered PERS program for new hires
• Medical Insurance Outside of PERS
• Cafeteria Plan for Medical Insurance
5. Explore Photovoltaic Panels (Solar Energy) at City Hall
6. Reconsider the City’s Call Back Policy
7. Reduce Subsidies to Special Events (e.g. Car Show and Fiesta La Ballona)
8. Tighten Policy for use of City Credit Cards
9. Tighten Up & Enforce Central Purchasing Policy Page 2 of 4
January 18, 2007
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
are a number of areas in which the City can take advantage of technological
advancements 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 work-flow and lines of communication between and within operating
departments.
Some efficient programs/practices that staff has already begun to develop and
implement include a two year budget cycle, customer relationship management
software, enhanced software for generating financial management reports, and the
establishment of e-commerce capabilities.
The City Managers office will continue to work with Department Heads to explore
methods to further increase organizational and operational efficiency.
Option 2: 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. The City
Manager’s Office will continue to work with the public safety departments to staff
positions with civilians where appropriate.
Option 3: Reduce Overtime and Shift Trades
Overtime costs for the General Fund are approximately $1.4 million (excluding Constant
Staffing for the Fire Department, which is $1.2 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 night meeting may agree with
his/her supervisor to start work later in the morning rather than be paid overtime for the
night meeting.
Option 4: 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:
• Two tiered PERS program for new hires
• Medical Insurance Outside of PERS
• Cafeteria Plan for Medical Insurance
Page 3 of 4
January 18, 2007
Option 5: Explore Solar Energy at City Hall
Photovoltaic (PV) energy is a solar power technology that uses solar cells or solar
photovoltaic arrays to convert energy from the sun into electricity. Solar powered
pocket calculators are an example of a common everyday use of this technology.
Solar arrays are increasingly incorporated into new domestic and industrial buildings as
a principal or ancillary source of electrical power. Typically, an array is incorporated into
the roof or walls of a building, roof tiles can now even be purchased with an integrated
PV cell. Arrays can also be retrofitted into existing buildings; in this case they are
usually fitted on top of the existing roof structure. Alternatively, an array can be located
separately from the building but connected by cable to supply power for the building.
Large-scale incentive programs, offering financial incentives like the ability to sell
excess electricity back to the public grid (aka feed-in or grid-tied), have greatly
accelerated the pace of solar PV installations in many countries, including the US. Grid-
tied systems represent the largest growth area. In the US, with incentives from state
governments, power companies and the federal government, growth is expected to
climb.
Net metering programs are one type of incentive driving growth in solar panel use. Net
metering allows electricity customers to get credit for any extra power they send back
into the grid. Grid-connected systems are connected to the utility grid through a direct
current to alternating current (DC-AC) inverter. When the load required in the building is
more than that supplied by the PV array, electricity will be drawn from the grid.
Conversely, when the PV array is generating more power than is needed in the building
then electricity will be exported to the grid.
The most important issue with solar panels is cost. Because of much increased
demand, the price of silicon used for most panels is now experiencing upward pressure.
This has caused developers to start using other materials and thinner silicon to keep
cost down. Due to economies of scale, solar panels get less costly as people use and
buy more — as manufacturers increase production, the cost is expected to continue to
drop in the years to come. As of early 2006, the average cost per installed watt was
about $6.50 to $7.50, including panels, inverters, mounts, and electrical items.
In the short run, installing photovoltaic panels at City Hall would be a capital investment;
However, between the decrease in energy bills and possibility of credits from a net
metering program, the PV array could pay for itself in 10 to 15 years and save the City a
lot of money in the long run.
Option 6: Reconsider the City’s Call Back Policy
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. electrical) 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. Page 4 of 4
January 18, 2007
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.
Option 7: Reduce Subsidies to Special Events
There are a number of special community events that the City subsidizes either through
a direct contribution or in-kind services. Some of these events include Fiesta La
Ballona, Culver City Car Show, and Summer Sunset Music Festivals. 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. For example, Fiesta La Ballona
generates sufficient revenue through vendor rentals and donations that a monetary
contribution from the City may no longer be necessary.
Option 8: Tighten Policy for Use of City Credit Cards
Staff is currently reviewing the City’s purchasing card policy to tighten up controls.
Option 9: Tighten Up and Enforce Central Purchasing Policy
With the increased use of purchasing cards and a desire by departments for more
flexibility in choosing specific vendors and products, purchasing has become less
centralized over the past few years. Having a strong central purchasing operation
allows the City to take advantage of discounts for bulk purchases and bulk deliveries.
However, in exchange for lower prices, procuring products through purchasing may limit
the brand name products available to the departments and may take an extra day or
two to receive, which requires more advanced planning by staff.
Recommendation:
It is recommended that the City Council review each of the cost reduction options and
direct staff to begin the process of researching any of the above options that best fit the
financial goals of the City.