2009-06-02 5-A Power PointLong Range Financial Forecast for
the City of Alameda
2009 - 2019
Prepared by The Fiscal Sustainability Committee
June 2009
Overview of Topics
~ Fiscal Sustainability Committee: Who, What, How
~ The Big Picture: 10 Year Projection
~ Key Areas of Concern
~ Closing the Gap
~ Conclusions
2
Fiscal Sustainability Committee (FSC)
•Appointed August 2008
•Chaired by City Treasurer Kevin Kennedy
•Comprised of 12 members of our residential and business community
The purpose of the Fiscal Sustainability
Committee (FSC) is to review all aspects
of the city financial practices and
develop information for the Alameda City
Council on best financial practices which
will facilitate developing sustainable
future fiscal policy and making decisions
about resource allocation.
3
Long Range Financial Forecast: Purpose
Projects future fiscal results of continuing current
levels of service and policies
Identifies financial trends, shortfalls, and issues so
that the City can proactively address them
~ Provides education to the citizens of Alameda about
the conditions we face and the financial choices that
need to be made
4
Background and Current Environment
Total City FY 2008/09 Budget =
$213,825,234
The vast majority of the total
budget funds are dedicated to
specific and unchangeable
tasks
General Fund = $75.9 million
The General Fund is
~ unrestricted and support
primarily administrative, public
safety, public works, recreation
and parks, and, in part library
services.
5
~ $75.9 M
How This Work Was Done
^ Reports from Finance and Development staff
~ Review of specific departments or areas
~ Review of currently published economic indicators
and local financial trends
~ Identification of risks and/or under funding
Development of a ten year projection of revenue and
expenses including areas of previous underFunding
6
Current Environment
~ Recession + high unemployment rates + collapse of
real estate markets + decrease in spending = a
potentially protracted downturn expected to last at
least another 12 - 18 months
~ Shortfall projections have forced a layoff of more than
10% of city's staff across departments to achieve a
projected balanced budget for the next 12-24 months
~ Decisions by the state in turning around their budget
shortfalls will impact the city by redirection of
normally received funds or delays in receipt of funds
7
Ten Year Financial Forecast Model
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Four Key Areas of Concern
^ Costs vs. Revenue Growth Imbalances
^ Pensions
^ Reserves
^ Deferred Maintenance
9
Costs vs. Revenue Growth
Imbalances
10
The Gap
The Annual Gap Approaches $25 Million in 10 Years
Even If Necessary Reserves Are Not Set Aside, the Annual Gap
740,000 Is Nearly $10 Million
120,U00
~. o~t~ - ~~f~o~~
Real Casts ~d+~e~e~~ing 19r~~ertun~e~
100,000 .pert h~2nts
~~
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- , . Sources o~f F~~ds
~~ _ .•.
60,00
'~'~~r 5 1~~ar ~ 0
~0,00~ ~~ ~~.~~
Current ~~r ~e~cit ~~ 9.741 ~ 4.742
urnr~~laEev~e De~i~c~t ~5~. ~22~.665~
20,000
11
2 08 X009 ~~010 ~0~ ~ ~~1 ~ X0'13 ~U'14 X01 ~ Z'01 ~ 2U~ ~' ~:U'18 ~~1~ ~0~0
Costs Growing Faster Than Revenues
-~Ge~eral Inflaltion -R.9edical Inflation
~5~U*~6
'I 50°,b
14C}~6
50'96
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2U°DS 2~0~ X14 3U'I'I 201 ~ 2613 X01 d X61 ~a ~U'I ~ 1 ~ ~4'I S 2019 ~~~U
12
Property Transfer Tax Revenue Growth
vs. CaIPERS Rate Increases
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13
Pensions
14
Retiree Pension and Benefits
Miscellaneous public Safety Employee
Employee
Pension Formula 2% x Years Of Service x 3% x Years Of Service x
high salary high salary
Normal Retirement 55 50
Age
PEMHCA Minimum City pays full premiums for
Medical Benefit Employer Contribution qualifying retiree and
spouse
Dental Benefit None City pays all costs for
retiree
15
Benefit Costs Relative to Salary
U10 compensation ost of New Hire
Nan-Public Safety Police
Base salary
PERK (Retirement}
h~ledical & ~~~lisc.
Ret. ~~Jledical
Tots! Cast to Reserve
Fire
10Q°~b
30.83°~b
21.95°~b
5.10%
~~~~~~ ~ ~~~~~ ~ ~~~~d
16
Other Post Employment Benefits (OPEB)
Liability Over Time
$200,000
$175,000
$150,000
$125,000
$100,000
$75,000
$50,000
$25,000
$- '~
2007
2012 2017 2022 2027 2032
fPay-As-You-Go Full Pre-Funding ~ 5 Year Phase-In
2037
17
OPEB Payments Over Time
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$-
2007/08 2012/13
2017/18 2022/23 2027/28 2032/33
fPay-As-You-Go Full Pre-Funding ~ 5 Year Phase-In
2037/38
18
Workforce Eligibility for Retirement
~ 5 }~e~r~
Re~air~i~g
55~+a
~i~l~
19
Options Regarding OPEB Current and
Future Liability
GASB 45 requirements:
State of California
Bartel Associates LLC
GASB 45 was instigated by the
Governmental Accounting Standards
Board (GASB) in July 2004 because of
the growing concern over the potential
magnitude of government employer
obligations for post-employment
benefits. GASB 45 will:
1. Recognize the cost of OPEB
benefits in the period when
services are received.
2. Provide information about the
actuarial liabilities for the
promised benefits.
3. Provide information useful in
assessing potential demands on
future cash flows.
recommendations:
"Recommendation 1: Public agencies
providing OPEB benefits should adopt
prefunding as their policy. As a policy,
prefunding OPEB benefits is just as
important as prefunding pensions. The
ultimate goal of a prefunding policy
should be to achieve full funding."
recommendations:
1. Do Nothing: Continue pay-as-you-
go
2. Pre-fund into Irrevocable Trust
3. Change benefit
Funding Pensions and Retiree Healthcare for Public Employees- A Report of the Public Employee Post-Employment Benefits
Commission ,December 2007
20
Reserves
21
Reserve Balance: General Fund
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22
Terre 8# I~ a~a.nr~ 1 ~.ir~l ~+1 ~ 43~~
Replacement Cost vs. Current
Depreciation
.~,~00,000
.OOO,OUO
1 <<<00,000~
'I.000.~00
C V V~ V V V
~0~7 ~~0~ X005+ ~C10 X011 ~01~ ~01~ ~01~ ~01~ ~~1~ ~C17 ~U1° ~01~ ~0~~
^ Current Gee ~reciatio n Re coo ~reryr ~r ~ en ~r~ I .~~ min ^ Libra r~ ~'~A R~creatio n a n ~ Pa rks. ~ Pu ~lic 7~'~o rks ^~ Police ^ Fire
23
Maintaining Adequate Reserves: Workers'
Comp and Other Funds
Deficits have been identified in some Internal Service Funds
^ Worker's Compensation
^ Technology
^ Unemployment
Staff has an ambitious goal of resolving these defecits within the
next 24 months
~ Staff has made "General Financial Policies and Guiding
Principals" recommendations that address funding reserves at
adequate levels going forward: Internal Service Funds should be
included in that policy
24
Deferred Maintenance
25
Maintenance Costs Over Next 10 Years
From General Fund
~4l~ldUU}41U41
~ ~~.ooo,nao
so;ooo,oao
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ParW: Fields and Pathways
Park & pity' Bld~s
Recreational Facilities
^.AD.+4 Transition ~ Compliance
^ Street Landscaping
^ C~ncrete'.~'ark
Streets
~~~~_
^
~~~~~~
26
Additional Maintenance Cost Over Next
10 Years in Non- General Fund Areas
~~~,aoo,oon
7~U,000,~~0
705,GG0,0~0
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~h~rtfall ~n general Fund
~~,aoo,ooo ~ , ~re~s
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~~
_4
2070 2 71 2072 2x13 2014 2 15 2016 2017 2078 2 19 2 20
~vlisc~llaneous
^ Sewer
^ Storm Drainage
^ Transit Facilities
^ Traffic Gontral Devices
27
Cost of Deferred Maintenance
Pavement Life Cycle
. Pavement
Condition
Crack Seal ($1.00/ Linear Foot)
40% drop in
Excellent Quality
(75)
Very Good (70)
ivio ui
pavement life
Recommended
Treatment
Slurry Seal ($2.00)/ SQ.YD.)
Thin Overlay ($12.00/SQ.YD.)
Good (50) I 40% drop
in Quality
Poor (25)
12%
of life
Thick Overlay ($20.00/SQ.YD.)
Reconstruction ($66.00-
$88.00/SQ.YD.)
Very Poor (0)
4 8 12
Pavement Age (Years)
16 20
28
Closing the Gap
29
Close the Gap by Increasing Revenue
Increase Number of Big Box Stores on
the Island
~~
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,,,
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,,,
^
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1 Big Box Store =Approximately
$400,000 per year
Would need 36 Big Box stores this
year
Would need 62 Big Box stores by
2020
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Close the Gap Through a Parcel Tax
City has 18,464 parcels
To close 2010 gap ~ Parcel Tax = $780
To close 2020 gap ~ Parcel Tax = $1,338
~ o
31
Close Gap by Cutting Expenses
Starting Deficits 2010-2020
0,000}
(9 0.000;,
(1~~,OOQ}
l"~4,Q00}
~• ~ ~ ~ ti~
1
32
C4J 14J LlJ~~ ClJ~C ClJ~J L~4JIY L~4J~~ L4J~U ClJ~f C1J~41 ClJIJ C4JL l/
Close Gap by Cutting Expenses
Stop Funding Libraries
I,C~VUV~
(90,000 r
[1~•,Q00~
(2U,000~
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L.
33
L1+14+ L4+~1 C4+~C. L~1+~.3 Ll+~~ £4+1~ L4+1~ C4+If LI+IU LI+IJ £4+L 1+
Close Gap by Cutting Expenses
AND Stop Funding Rec &
Parks And All Related
Maintenance
(`,ORO f
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34
~~i~ ~~~~ ~~~~ z~i~ t~i~ t~i~ t~~~ ~~i~ t~i~ ~~i~ t~~~
Close Gap by Cutting Expenses
AND Close Entire Administration
of City Government
0.000
f`,000~
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(1`.,000}
I I ~ ~ I ~ ~ ~ ~ I I ~ ~ I ~ I I I ~ I
(20.000} ~ J - 1 I_ ~ ~_~ i ~ L ~ ~ ~ I ~ I I ~ I
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35
Conclusions
36
No Easy Answers
No single solution will solve the problem
^ A combination of solutions is needed
37
Public Input is Critical
^ Because this is likely to involve some elements of
business development, new revenues, and service
reductions, the public must play an active role in the
discussion
~ The FSC will hold public forums for all citizens to
hear this information over the next month
38
Fiscal Sustainability is Achievable
~ Before remedies are tried, the problem must first be
identified
~ With the work of this Committee, the first step has
been taken toward achieving "fiscal sustainability" -
identifying the problems
~ Armed with this knowledge, the City can now move
forward in taking appropriate actions to ensure our
community remains afinancially-strong and desirable
place to live
39
Questions?
40