SR 01-24-2017 8B
Ci ty Council
Housing Authority
Redevelopment Successor Agency
Report
C ity Council Meeting : January 24, 2017
Agenda Item: 8.B
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To: Housing Authority, Redevelopment Successor Agency, Mayor and City
Council
From: Gigi Decavalles -Hughes, Director , Finance Department, Budget
Donna Peter, Director, Human Resources Department, Susan Cline, Director,
Public Works Department
Subject: F ive -Year Financial Forecast and Fiscal Year (FY) 2016 -17 Midyear Budget
Recommended Action
Staff recommends that the City Council, Housing Authority, and Successor Agency to
the Santa Monica Redevelopment Agency:
1. Appropriate FY 2016 -17 midyear expenditur e and revenue budget adjustments
as detailed in the report .
Staff also recommends that the City Council:
1. Review and provide policy direction on the FY 2017 -18 through FY 2021 -22 Five -
Year Financial Forecast and direct staff to proceed with developing a fi scally
sustainable budget strategy;
2. Adopt a resolution establishing classification and salary rates for various
positions;
3. Approve the position and classification changes;
4. Authorize the City Manager to accept a grant award in the amount of $38,000
from the California State Library for the California Library Literacy Services
program;
5. Authorize the City Manager to accept a grant award in the amount of $1,000 from
Centro Latino for Literacy for the Leamos (Let’s Read) @ the Library project; and
6. Receive public comment on federal Community Development Block Grant
(CDBG) and Home Investment Partne rship Act (HOME) Program funds.
Executive Summary
The FY 2017 -18 through FY 2021 -22 Five -Year Financial Forecast informs the Council
and community of the City’s current and projected fiscal status as the City enters the
FY 2017 -19 Biennial Budget preparation process. Every six months, staff updates the
five -year forecast to reflect known and potential factors that will have an impact on the
City’s financial position. Thi s tool allows Council to understand the level to which
revenues can adequately cover new ongoing initiatives, or, more critically, to make
course corrections if necessary to avoid a shortfall. Most cities do not plan beyond the
next budget year and very f ew have utilized as detailed a future forecast of revenues
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and expenses. This has been crucial in establishing and maintaining not only the City’s
AAA credit rating, but avoiding crisis management through long -term planning.
The forecast reflects the imp act of Consumer Price Index (CPI) and labor cost increases
without new programs or staffing. Staff has completed a series of best to worst case
forecast scenarios to provide a range of impacts that the General Fund may be required
to withstand. In the prob able scenario, General Fund expenditures slightly exceed
projected revenues as early as FY 2017 -18 and the structural deficit reaches $16.4
million by FY 2021 -22. In the best case, General Fund revenues would exceed
expenditures throughout the forecast per iod, while the worst case shows a shortfall of
approximately $7.9 million in FY 2017 -18 that increases to approximately $25.1 million
in FY 2021 -22. To eliminate current and out -year projected shortfalls and also maintain
a healthy level of General Fund re serves, staff recommends a budget strategy that
seeks to rein in personnel cost growth and focus resources on the City’s Strategic Goals
and key priorities.
A discussion of other funds and any potential changes in their financial status is also
included i n this report. Generally, these funds are projected to have positive fund
balances over the course of the next biennial budget period.
Proposed FY 2016 -17 midyear adjustments result in a $2.5 million, or a 0.3% increase
over the citywide revenue budget, a nd expenditure adjustments result in a net
$24.5 million or a 3.9%% increase over the citywide expenditure budget.
This report also includes a staff recommendation to accept two literacy grants for the
Santa Monica Public Library.
Finally, the City must hold two public hearings prior to the adoption of a One -Year
Action Plan allocating federal CDBG and HOME Program funds. This public hearing will
satisfy one of the two meeting requirements to receive public input and
recommendations for the Proposed FY 20 17 -18 Action Plan. The City will hold another
public hearing prior to the adoption of the Proposed FY 2017 -18 Action Plan.
Background
On June 14, 2016 (Attachment D), Council adopted the FY 2016 -17 Budget as the
second year of the FY 2015 -17 Biennial Budg et; and adopted the first year and
approved the second year of the FY 2016 -18 Biennial Capital Improvement Program
Budget. On October 25, 2016 (Attachment E), Council approved certain revisions to the
FY 2016 -17 Adopted Budget that adjusted expenditures an d staffing. Since October,
staff completed a midyear review of all revenues and expenditures and is proposing
budget adjustments for programs, activities, and revenues that have changed
significantly. These adjustments will align the FY 2016 -17 Revised Bud get with current
operations.
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Discussion
Economic Update
The national economy continues to show strength . The economic growth of 3.5 % in the
third quarter was the highest quarterly increase in two years . Most economists are
projecting growth in the 2.5 % range annually over the 201 7 -201 8 time period.
Unemployment is at its lowest level in eight years. Inflation , while showing some signs
of increase, is expected to remain relatively low through at least 201 8 . T he housing
market also continues to exhibit s trength that is expected to continue for at least the
next two years. T he Federal Reserve increased interest rates in December for the first
time in a year, and has indicated that two to four additional increases are anticipated in
2017. The economy is not without risks , however . The current period of expansion is
one of the longest without a recession on record, the world economy is showing signs of
strain and the new presidential administration also creates uncertainty.
The State economy recovered st rongly from the “Great Recession.” Growth in
household incomes is exceeding the national average. However, during that time, the
State budget has also expanded in an attempt to correct long term issues. However,
after several years of strong growth, State revenues are beginning to fall short of
projections. According to the Governor’s FY 2017 -18 Proposed Budget, an operating
deficit of nearly $2 billion will occur next fiscal year with on -going deficits in the same
range in the future unless corrective act ion is taken. While the budget does propose
corrective actions, the possibility of a recession in the next few years poses additional
significant risks to the State Budget.
Santa Monica ’s economy remains relatively strong due in large part to its geogra phic
location and i ts diversified tax revenue base. Revenue will be helped by the opening of
three new hotels over the next several years. However, there are signs of moderation
in the local economy’s growth rate. Also, as with the State and national e conomies, the
threat of a recession could significantly alter revenue projections. More information on
some of the City’s key revenue sources is provided below.
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Property values in the City remain the third highest in Los Angeles County for a City
wit h the 19 th largest population . The FY 201 6 -1 7 assessed value increase was 6 .5 %
after a 6 % gain the previous year. Moderate increases of 3 -4% are projected over the
five -year forecast period.
Sales Tax receipts are expected to moderate due to sluggish g rowth in regional
household income, a national shift from buying goods to purchasing services and the
growth of online purchases. Projected annual growth is 3 -3.5% for the first two years of
the forecast before falling to less than 3% annually for the rem ainder of the forecast
period.
Tourism, which provides a major stimulus to the local economy by creating jobs and
producing revenues, continues to exhibit strength. Transient Occupancy Taxes have
increased at an average annual rate of 9.3% over the last six years, and revenues are
expected to continue having healthy increases over the forecast period, primarily
reflecting the addition of three new hotels during the forecast. One area of uncertainty
over the forecast period is the impact of new registrat ion requirements for home share
hosting platforms.
Business License Taxes are expected to show some weakness in FY 2016 -17 and
FY 2017 -18, reflecting the loss of several of the largest taxpayers due to relocations ,
before resuming a moderate growth rate o f just under 3% for the remainder of the
forecast period. Utility Users Tax revenues are relatively flat over the forecast period as
revenues from telecommunication services continue to drop. Parking Facility Taxes are
expected to grow by approximately 2% per year over the forecast period . And interest
rates, which fell to historically low levels over the last seven years, significantly
impacting the City’s investment income, have begun to increase . While a gradual
increase is expected over the forecast period, rates are still expected to remain at
relatively low levels .
General Fund Five -Year Financial Forecast
Projected Fund Balance
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Staff has completed three forecast scenarios that contemplate Best, Probable, and
Worst Case impacts on the General Fun d. The chart below shows the three forecast
scenarios.
The Probable scenario, which serves as the baseline for the forecast, shows the
General Fund experiencing a potential shortfall of $0.2 million in FY 2017 -18, that
increases to $16.4 million in FY 2021 -22. This scenario is most impacted by new
developments in the cost of retirement contributions and workers’ compensation costs,
which are discussed below. As in the past, health care costs also play a large role in
increasing costs of operations.
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In the Best Case scenario, bolstered by higher increases in revenues, the General
Fund fiscal condition would be positive throughout the forecast period. In the Worst
Case scenario, which shows the effects of a possible recession, the General Fund
would expe rience a shortfall of $7.9 million in FY 2017 -18 that would increase
significantly to $25.1 million in FY 2021 -22.
Assumptions
Factors in all scenarios include midyear changes as noted below, as well as the
following assumptions:
Revenue Growth Assumptio ns
General Fund revenues are projected to increase by an average of 3.6% annually over
the next five years. However, a significant portion of the growth relates to the three new
hotels set to open during the period as well as the transaction and use tax i ncrease
approved by voters in November 2016 (Measure GSH), which is anticipated to be used
for affordable housing and education purposes. Removing the impact of these items,
the projected baseline growth rate is closer to 2.6% annually. The baseline fore cast
assumes no recession during the forecast period. In the Best Case scenario, revenues
would grow at a slightly higher rate approximating a 1% increase . In the Worst Case
scenario, showing the potential effects of a recession, revenues would experience a 2%
decrease.
Expenditure Growth Assumptions
All scenarios assume cost increases at the anticipated rate of the Consumer Price Index
(CPI), which is anticipated to be 2.2% in FY 2017 -18 and 2.4% in FYs 2018 -22. The
overall rate of growth for expenditu res is 4.7%. Almost three -quarters of the General
Fund operating budget is composed of labor costs, and a number of these costs,
including retirement, health insurance and workers’ compensation, increase at a rate
that is higher than the CPI and represent significant budgetary challenges in the years
to come. As in past years where the forecast shows an upcoming structural deficit, staff
will work as part of the Biennial Budget process to realign spending in order ensure that
the City’s FY 2017 -19 budget p rovides a financially sustainable plan.
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Retirement Costs
The cost of pension contributions represents an ever -increasing share of local
government costs, and the City has taken actions over the past several years to
counteract these increases. Among the se actions has been an increase in the amount
that employees are required to pay towards their future benefits. At this time,
Miscellaneous employees contribute up to 30% of the total contribution rate towards the
cost of their retirement benefits, while P olice Officers Association employees contribute
up to 20% and Firefighters Local 1109 IAFF employees contribute up to 29%. Also, the
City has used savings to pay down $31.4 million of its unfunded liability, and follows a
policy to pay down approximately $1.3 million of its unfunded liability each year. These
payments lower the City’s annual contribution costs over time. In addition, the City takes
advantage of a program offered by CalPERS that allows cities prepaying a portion of
their total contribution a t the beginning of the fiscal year to receive a discount on the
amount owed. The net savings to the City of these discounts has been approximately
$10.6 million through the current fiscal year.
Despite these measures, the cost of retirement continues to ri se. In December 2016,
the California Public Employees’ Retirement System (CalPERS) announced that it
would lower its investment portfolio growth assumptions from 7.5% to 7.0% over three
years. For public agencies like the City of Santa Monica, the new disc ount rate of
7.375% would take effect July 1, 2018. The discount rate would decrease to 7.25%
effective July 1, 2019 and 7.0% effective July 1, 2020. Based on information from
CalPERS, staff estimates that the adjustment would result in an additional incre ase of
$1.8 million to General Fund retirement costs in FY 2018 -19, increasing to $12.6 million
in FY 2021 -22. This change has had a severe impact on the five year projections . The
City’s unfunded pension liability of $387 million, along with the ratchet ing down of
investment earning projections , represents the most serious long -term threat to fiscal
sustainability, not just in Santa Monica, but for public agencies in California. It will
require the City to make adjustments, including realigning staffing needs by examining
the need for positions that have been vacant for long periods of time, and seeking
additional employee cost sharing contributions during future labor negotiations.
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Workers’ Compensation Costs
Under the Probable Case scenario, workers’ compensation costs are anticipated to
increase by 10% beginning in FY 2017 -18. This increase represents another severe and
unanticipated impact on the City’s operating expenses as previous forecasts projected a
5% annual rate of increase. The change is du e to continued increases in the number of
claims filed and higher permanent and temporary disability expenses. These increases
are due to the City’s aging workforce and increases in State -mandated permanent
disability rates. The City continues to implemen t programs to contain workers’
compensation costs, yet these projects will take some years to yield results. An
Information Item published on December 12, 2016 discusses these programs. The
actuarial study conducted for the Citywide Workers’ Compensation Self -Insurance Fund
for FY 2017 -18 shows that the City will need to increase its contribution from $13.4
million to $20.5 million to maintain a responsible funding level to cover prior and current
claims. The General Fund is responsible for absorbing roug hly half of the $7.1 million
increase, and the balance will be apportioned amongst the City’s non -General Funds.
The forecast includes $7.2 million from FY 2014 -15 savings reserved in the General
Fund fund balance to offset increased workers’ compensation costs over four years
($1.8 million a year) starting in FY 2015 -16. The impact of the costs with no offset is
reflected beginning in FY 2019 -20.
Healthcare Costs
Under the Probable Case scenario, healthcare costs for employees are anticipated to
increase by 7.8 -9% in FY 2017 -18 depending on the healthcare plans used by
employees. While the rate of increase continues to exceed Consumer Price Index
changes, the projected annual growth rates of healthcare costs have held relatively
steady over the past 5 yea rs of the forecast. Staff has eliminated the Cadillac Tax
associated with the Affordable Care Act pending anticipated legislative changes
impacting the Act.
Pension costs, workers comp costs and healthcare costs are all directly related to the
City’s lon g -standing policies of providing a broad range of high -quality services using
City personnel. In the future, choices will need to be made about how to achieve
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community outcomes in ways that are fiscally sustainable. The next two -year budget
cycle repres ents the opportunity to begin this shift in ways that minimize disruption and
provide the maximum opportunity to continue to improve the efficiency of services
without continuing to expand the size of City staff.
Other Funds
Other major funds included in the Five -Year Financial Forecast fall into two categories:
1) funds that operate with sufficient revenues to sustain necessary operating and capital
needs; and 2) funds that have a structural deficit where ongoing revenues are not
sufficient to cover ongoi ng expenditures.
Self -Sustaining Enterprise Funds
Enterprise funds that historically rely on sufficient revenues to support necessary
operations include the Water, Wastewater, Resource Recovery and Recycling (RRR)
and Big Blue Bus (BBB) funds.
The Water and Wastewater Funds have sufficient revenues to cover current operations,
due to rate increases in Water Fund that will allow the implementation of the
Sustainable Water Master Plan while also maintaining reserve levels. The Wastewater
Fund continues to h ave adequate revenues and reserves to meet current operational
and capital expenditures.
The Resource Recovery and Recycling (RRR) Fund will maintain a positive fund
balance until FY 2019 -20 as expenditure projections continue to outpace revenues.
There a re several upcoming proposals that may potentially have a substantial impact on
the financial stability of the fund, including the piloting of a residential wet/dry collection
system, expanding the commercial “rot or not” program, the Fund’s share of costs to
complete the Corporate Yards project, and the displacement of the recycling contractor
at the Corporate Yards that will result in additional costs for transporting the City -
collected recycling material to an offsite location. Staff will continue to mon itor fund
performance and consider the need for a rate increase in the future.
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The BBB Fund will maintain a positive fund balance over the next five years. While
expenditures continue to rise, BBB, like most transit agencies in the country, continues
to b e confronted with reduced ridership. BBB staff continues to develop strategies to
improve ridership. The additional revenue from the voter -approved Measure M, which
allocates an additional ½ cent sales tax to transportation agencies in order to improve
tra ffic congestion, keep fares affordable and improve bus systems, will help offset the
reduction in farebox revenue, the reduction of more than 1/3 of the annual revenue that
BBB historically receives from the State Transit Assistance (STA) program due to th e
reduction in diesel fuel sales in the State, and the increase in operating costs
associated with new service and new programs to offset Workers’ Compensation and
liability costs. BBB will continue to monitor the fund balance as these funds are
additional ly used to fund BBB’s capital improvement plan.
The Beach Fund will also generate adequate revenues to sustain their operations
throughout the next five years. With the implementation of the green burial program, the
Cemetery Fund will maintain a positive fund balance over the next five years.
With the new Airport City Owned Fixed Based Operation (FBO), the Airport Fund is
currently showing a shortfall as early as FY 2017 -18 pending the completion of staff
work to establish FBO revenue projections. Addit ional revenues from the elimination of
Master Leases and the escalation of rental rates to match market conditions are
anticipated to contribute additional revenues to the fund. If additional revenue targets
are not met, capital improvement projects will n eed to be evaluated to ensure self -
sufficiency of the fund. Necessary adjustments will be made during the budget process
to insure that the fund will have a positive balance in FY 2017 -18.
Staff projects the Pier Fund to be self -sustaining through the end of FY 2016 -17. Capital
needs that are unable to be funded by the Pier Fund during the forecast period must
compete with capital needs addressed through the General Fund.
Funds Requiring General Fund Subsidies
The Housing Authority Fund has a projected op erating structural deficit of $600,000 -
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$850,000 annually throughout the forecast period. This assumes a continuation of the
current funding levels and that HUD funding to the housing authorities will not be
reduced.
Midyear Budget Adjustments
At midyear , staff recommends revenue budget changes based on actual performance
and new information, and proposes adjustments to the expenditure budget as
necessary to most effectively maintain operations.
Revenue Adjustments – General Fund
The FY 201 6 -1 7 Midyear R eview includes a number of recommende d revenue
adjustments, resulting in a net increase of $5.5 million . However, only $2.1 million of
the increase is expected to be on -going. Significant increases include:
$3.6 million in property taxes
$1.8 million in Documentary Transfer Taxes
$1.8 million in Transaction and Use taxes from Measure GSH
$1.2 million in Transient Occupancy Taxes
$1.5 million from various miscellaneous fees and parking revenues
$0.8 million in indirect overhead charges to other funds
Par tially offsetting the increases are decreases in Utility Users Taxes (-$2.0 million);
Sales Taxes (-$1.3 million); Investment Income (-$1.2 million); and Parking Facility
Taxes (-$0.7 million).
Revenue Adjustments – Other Funds
A full listing of revenue adjustments is included in Attachment A. Significant revenue
adjustments in other funds include:
Special Revenue Source (04) Fund - decrease of $2.0 million primarily due to
timing changes in developer agreement payments.
Water (25) Fund – increase of $1 .2 million primarily from water sales due to
increased water usage as the State eased mandatory conservation restrictions ,
and an increase in meter service installations.
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Wastewater (31) Fund – increase of $1.2 million primarily due to increase in
sewer service charges due to increased water usage.
Airport (33) Fund - decrease of $1.5 million due to an adjustment in the
calculation of new land leases.
Stormwater Management (34) Fund – increase of $1.2 million due to an increase
to Stormwater In -Lieu Fees, partially offset by a decrease in Sale of Recycled
Water revenues.
Big Blue Bus (41) Fund – decrease of $3.5 million primarily due to decrease in
passenger revenues as ridership patterns continue to fluctuate since the opening
of Expo.
Operating Expenditure and Staffing Adjustments – General Fund
Proposed General Fund operating expenditure appropriations total $2.9 million.
Significant appropriations include:
$1.9 million to reflect the transfer of voter -approved Measure GSH funds to the
Santa Mon ica -Malibu Unified School District and for the affordable housing
program ;
$0.1 million to reflect an increase of 2 .25 FTE due to operational changes. Net
changes include the addition of a 0.25 FTE Fire Equipment Specialist in the Fire
Department to creat e a full -time position for the administration of the vehicle
maintenance program, the addition of a 1.0 FTE Family Victim Advocate position
in the City Attorney ’s Office, and the addition of 1.0 FTE Executive Administrative
Assistant position in the Inform ation Systems Department;
$0.3 million to increase the overtime budget for the Office of Emergency
Management; and
$0.2 million to reflect an increase in the subsidy to the Housing Authority Fund.
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Operating Expenditure and Staffing Adjustments – Other Fun ds
Proposed midyear appropriations include a net $0.1 million decrease in other funds.
Significant changes reflected in the request including the following:
$0.9 million to reflect the transfer of voter -approved Measure GSH funds to the
Special Revenue Fun d for affordable housing;
$0.2 million to reflect an increase of 1.0 FTE Senior Development Analyst in the
Housing and Economic Development Department (paid using dedicated
affordable housing funding in the Special Revenue Fund) to assist with the
administ ration of housing production and preservation projects, an increase of
1.0 FTE Civil Engineer in the Water Fund to oversee water main replacement
projects, and an increase of 1.0 FTE Custodian in the Pier Fund to accommodate
additional workload ;
Other fund s will increase by $0.8 million to reimburse the General Fund for
indirect costs based on the revised cost allocation plan;
The Miscellaneous Grants Fund expenditures will increase by $0.6 million to
reflect two new literacy grants and adjustments to the H ousehold Hazardous
Waste Grant and Los Angeles County Prop A O&M reimbursement programs.
Capital Improvement Program Budget Adjustments
The Midyear changes to the FY 2016 -17 Capital Improvement Program (CIP) budget
are largely non -General Fund affordable housing budget appropriations and other minor
changes, which result in a total net increase to the CIP budget of approximately $22.2
million. The changes do not include any major new projects, as the FY 2016 -18 Biennial
Capital Improvement Program was rec ently adopted in June 2016. Budget changes are
detailed in Attachment A , and the most significant changes are summarized below.
Approximately $20.3 million in recent revenues related to affordable housing are being
budgeted in various CIP accounts to be utilized for the preservation and production of
affordable housing as opportunities become available. The most significant source is
approximately $14.5 million in profit participation payments from the sales of Civic
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Center Village condos. Remaining fund s include $4.7 million in repayments received
from City -Redevelopment Agency loans, which Council committed to be set aside for
the production and preservation of affordable housing, as well as smaller amounts of
affordable housing commercial linkage fees, affordable housing production program in -
lieu developer fees, and TORCA loan repayments.
Other CIP budget increases include budgeting water demand mitigation fee revenues
for water conservation measures; augmenting the project budget for a water systems
software application to provide a mobile version for staff to use in the field; budgeting
Metro grant funds to supplement bus replacement funding; and programming local
return funds for BBB to complete a comprehensive post -study of the Expo Light Rail
Inte gration and to fund bus stop improvements. In addition, sales tax Prop C local return
funds will be budgeted to create peak hour dedicated bus lanes on Lincoln Boulevard,
per Council’s direction on November 24, 2015 (Attachment D ). Budget reductions
inclu de deferring and therefore eliminating the current -year budget for 17 th Street bike
and pedestrian projects because the project s will be completed in FY 2018 -19 when
additional grant funds are available.
Acceptance of Literacy Grants
California Library L iteracy Services (CLLS), a program of the California State Library,
supports Californians by providing services to low literacy adults and their families
through California public libraries. The Santa Monica Public Library recently received a
grant of $38,000 to support its adult literacy program. These funds would help the
Library address the community’s need for basic adult literacy programs by hiring a
Literacy Library Program Assistant who will coordinate and train volunteer literacy
coaches and purchas e program supplies. Staff is requesting authorization to accept
funds for this grant.
Centro Latino for Literacy, a non -profit organization, provides a pre -literacy program to
non -literate, Spanish speaking adults. The Santa Monica Public Library recently
received a grant of $1,000 to support its Leamos (Let’s Read) @ the Library project.
These funds allow the Library to provide a web -based course, test vouchers and
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program materials to support adult learners. Staff is requesting authorization to accept
fu nds for this grant.
Community Development Block Grant (CDBG) and Home Investment Partnership Act
(HOME) Program
To receive federal Community Development Block Grant (CDBG) and Home Investment
Partnership Act (HOME) Program grant funds, the City must prepa re a nd submit a
Council -approved One -Year Action Plan to HUD by May 15, 2017. The Action Plan
outlines how the funds will be expended and confirms that the funded activities are
consistent with the City’s Five -Year Consolidated Plan adopted by Council on M ay 12,
2015. The City must hold two public hearings prior to the adoption of a One -Year Action
Plan allocating federal CDBG and HOME Program funds. This public hearing will satisfy
one of the two meeting requirements to receive public input and recommendat ions for
the Proposed FY 2017 -18 Action Plan. The City will hold another public hearing prior to
the adoption of the Proposed FY 2017 -18 Action Plan.
Building the FY 2017 -19 Biennial Budget
Over the next several months, staff will prepare the FY 2017 -19 P roposed Biennial
Budget, as well as the FY 2017 -18 exception -based CIP Budget (this will be the second
year of the FY 2016 -18 Biennial CIP Budget). Staff plans to present City spending in
t he FY 2017 -19 Biennial Budget in the context o f the Civic Wellbein g F ramework , which
will connect h ow the City’s programs and projects aim to improve the experience of
living in Santa Monica. The Budget will introduce a cohesive framework that brings
together the elements of the wellbeing dimensions, strategic goals, an d sustainability,
and will lay the groundwork for performance measurement. Council will devote more
time to the Civic Wellbeing Framework at its upcoming Retreat on January 28, 2017 .
The Proposed Biennial Budget will be submitted to Council and availab le for public
review prior to the Budget Study Sessions on May 23 -24, 2017 at which point staff will
present department budget presentations to the Council. Council will convene a public
hearing on June 27, 2017 to consider, receive public comment, make re visions to, and
adopt the first year and approve the second year of the Biennial Budget. Staff seeks
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community input on the Biennial Budget. Members of the public can provide comments
for consideration during the budgeting process by sending an email to
council mtgitems@smgov.net or by giving public testimony at the May study sessions
and June 27 public hearing. Boards, Commissions, and Task Forces historically make
their recommendations and priorities known t hrough written communication to the
Council, and staff encourages these groups to continue this practice.
Financial Impacts and Budget Actions
Recommended FY 2016 -17 midyear budget adjustments result in a $2.5 million, or a
0.3% increase over the citywide revenue budget, and expenditure adjustments results in
a net $24.5 million or a 3.9% increase over the citywide expenditure budget. Detail for
FY 2016 -17 midyear adjustments is in Attachment A.
Prepared By: Susan Lai, Budget Manager
Approved
Forwarde d to Council
Attachments:
A. Budget Adjustments FY 2016 -17
B. Resolution
C. Position and Classification Changes
D. November 24, 2015 Staff Report
E. Written Comments
F. Powerpoint Presentation
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G. Powerpoint Presentation
January 24, 2017
Five -Year Financial Forecast
&
FY 2016 -17 Midyear B udget
Forecast
2
•5 year projection
•16 Funds reviewed
•Focus on General Fund
•Based on:
•Best estimates on revenues
•Known spending needs
•F inancial impact of external factors
Economic Conditions
•Recession ahead?
•New administration
•Some risks to S tate economy/ budget
•Leveling in some Santa Monica revenues
3
Major considerations
•Personnel Costs
•Retirement d iscount rate: 7.5% lowered to 7.0%
•Workers’ compensation: $3.5M; 10% growth
•Medical premium increases
•Large Infrastructure Projects
4
REVENUES
$5.5M
•$2.1M ongoing
•Tax revenues
•Fees & parking
•Overhead payments
CAPITAL
PROJECTS
-$0.6M
•Project closeouts
•Computer
replacement
ONGOING
OPERATING
$2.9M
•Measure GSH
•2.25FTE net
•OEM overtime
•Housing Fund
FY 2016 -17 Midyear adjustments -
General Fund
5
6
Probable
Worst
Best
-$16.4M
$0.3M
-$25.1M
General Fund Five -Year Forecast
Other Funds Status
•Self -S ustaining
•Wastewater, Water , BBB, Beach, Cemetery
•Watch/Adjust
•RRR, Airport Fund
•Requiring Subsidy
•Pier, Housing
7
REVENUES
-$2.9M
•-Developer
agreements
•+Water/
Wastewater
•-BBB fare revenue
CAPITAL
PROJECTS
$23.2M
•Affordable housing
($20.3M)
•Water conservation
•Bus improvements,
Expo study
ONGOING
OPERATING
-$0.4M
•-Measure GSH
•+ 3.0FTE
Midyear adjustments -Other Funds
8
Council
Study
Session
Develop
FY 2017 -19 Budget
Review
FY 2017 -18
CIP Budget
Midyear
Report /
Forecast
Budget
Adoption
Biennial budget process
January 2017 Jan -April 2017 May 26 -27, 2017 June 23, 2017
Framework
10
•Receive the forecast & direct staff on budget strategy
•Approve midyear adjustments, position and classification changes
•Adopt a resolution establishing classification and salary rates
•Authorize City Manager to accept grant awards
•Receive public comments for CDBG/ HOME funding plans
Recommended Actions
Reference:
Resolution No. 11017
(CCS)