HomeMy WebLinkAbout2007/06/07 Item 2
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City Of Chula Vista
City Manager's Office
276 Fourth Avenue
Chula Vista, Ca 91910
619.409.5282- 619.585.5612 Fax
MEMO
CllY OF
CHUlA VISfA
DATE:
May 31, 2007
TO:
FROM:
Honorable Mayor and Council ~
Jim Thomson, Interim City Manager II
Ed Van Eenoo, Director of Budget and Analysis Z:v
VIA:
SUBJECT:
Fiscal Year 2007-2008 Proposed Budget Presentation
Item 2 on the agenda for the June 7, 2007 meeting of the City Council is a
presentation on the following documents/reports:
1. Five Year Financial Forecast Report
2. Fiscal Year 2007-08 Proposed Capital Improvement Program
3. Fiscal Year 2007-08 Proposed Budget
4. City Council Budget Report
The Five Year Financial Forecast Report and the City Council Budget Report are
included with this packet of information. The Fiscal Year 2007-08 Proposed Capital
Improvement Program and the Fiscal Year 2007-08 Proposed Budget were
submitted to Council on May 24, 2007 under separate cover.
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June 1, 2007
Honorable Mayor and City Council:
This is the second year that the Finance Department has issued the Five Year Financial Forecast
Report. The purpose of this report is to assess the General Fund's ability over the next five years
to continue current service levels based on anticipated growth.
Can we afford new initiatives? Simply stated, this is a fundamental question of priorities, not of
financial capacity. Based on projected expenditures and revenues, funding major initiatives will
require trade offs during the budget process. While we anticipate that the budget balancing
challenges facing us will be difficult, as stated by Economic Planning Systems (EPS) who
conducted an Independent Financial Review (IFR) for the City of Chula Vista,
"the circumstances faced by the City are entirely manageable;
while there are existing and future challenges to be faced, the
prospects for the City are very sound given regional market
conditions, related development opportunities and the
investments the City has made. "
EPS concluded that the fiscal sustainability and well-being of the City of Chula Vista will depend on
the City Council:
. Fully recognizing revenue limitations and risks,
. Achieving economic development objectives,
. Establishing clear expenditure priorities, and
. Balancing decisions regarding capital improvements, staffing levels and compensation, and
services against conservative revenue forecasts.
1 ~-9
The main purpose of the forecast and Long Term Financial Plan (L TFP) is to serve as a tool for the
City Council to achieve the objectives listed above. In essence, it is an annual check up with the
long-term goal of staying fiscally healthy. The L TFP would also assist with the issue of fiscal
fragmentation, which occurs when significant projects or plans, such as departmental strategic
plans, are being brought forward for Council consideration. The creation of a L TFP is one of the
strategic goals of the Finance Department, which would address some of this fragmentation and
provide a long-term perspective as projects or funding requests are being considered.
It is important to stress that this forecast is not a budget. It does not make expenditure decisions
but does assess the need to prioritize the allocation of City resources. The purpose of the forecast
is to provide an overview of the City's fiscal health based on various assumptions over the next five
years.
The Government Finance Officers Association (GFOA) recognizes the importance of combining
the forecasting of revenues and expenditures into a single financial forecast. The GFOA also
recommends that a government should have a financial planning process that assesses long-term
financial implications of current and proposed policies, programs, and assumptions that develop
appropriate strategies to achieve its goals.
The Finance Department will continue to update the five-year forecast report as projections are
refined. This forecast will serve as the foundation for the City's Long Term Financial Plan and
will serve as a funding basis for the operating and capital budgets. During the coming fiscal year
it is anticipated that the scope of the forecast will be expanded to cover a ten-year period and
include other City funds such as the sewer funds, transportation funds and capital project funds to
assess the ability over the long-term to maintain existing infrastructure and assets.
KEY ASSUMPTIONS
The General Fund forecast is built upon a set of assumptions about the future economic
environment impacting ongoing revenues and expenditures. Some of the key assumptions used to
prepare this report are as follows:
. The regional economies will continue at a moderate rate of growth, with relatively low
inflation, slightly higher interest rates and low unemployment.
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. City sales tax revenues will continue to grow at healthy rates for most of the forecast
period. The additional revenues generated by the Otay Ranch Town Center, expansion of
the Auto Park and additional commercial centers in the east will add to the base throughout
this forecast period.
. City population will continue to increase but at lower rates than during the past five years.
. There will be significantly less housing development during fiscal years 2007-08 and 2008-
09, and in 2009-10 the forecast assumes that it will improve but at much lower rates than
experienced during the past 10 years. During fiscal years 2007-08 and 2008-09 residential
building permits are forecasted at 1,200 per year. Beginning in fiscal year 2009-1 0 to 2011-
12 residential permits are projected at 1,600 per year.
. Expenditures related to negotiated salary increases are reflected in the forecast through
fiscal year 2009-10 when the term of the current Memorandums of Understanding expire.
No additional salary adjustments are assumed beyond the current MOUs. Starting in fiscal
year 2010-11, a 1 % citywide salary increase would cost about $1.3 million per year.
. The Mid-Management Study and Non-Management Classification Study to be brought
forward for Council consideration on June 5, 2007 are assumed to be approved, resulting in
a fiscal impact of approximately $180,000 beginning in fiscal year 2008-09.
. There is no future funding assumed for the frozen positions which were identified as part of
balancing the fiscal year 2007-08 City Manager's proposed budget.
. Franchise Fee revenue projections assume the continued operation of the South Bay
Power Plant throughout the forecast period. The closure of the South Bay Power Plant
would reduce General Fund revenues by approximately $2.5 million per year.
. The additional staffing and other costs required by the Regional Water Quality Control
Board stormwater permit are assumed, but no state reimbursement is assumed for the
unfunded state mandate.
. No further State takeaways are assumed in the projections.
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FISCAL SUMMARY
The Council's General Fund minimum reserve level policy of 8%, which became effective in 1996,
was established to prudently protect the fiscal solvency of the City. Reserves are important in
order to mitigate the negative impact on revenues from economic fluctuations, to withstand State
budget grabs and to fund unforeseen expenditure requirements.
As evidenced by the following chart, the General Fund reserves were at an all time high of $31.2
million or 28.5% of the operating budget at the end of fiscal year 2001-02. The City's General
Fund reserves placed the City in the enviable position to withstand the State's revenue cuts during
fiscal years 2004-05 and 2005-06 and provided the City with the opportunity to reinvest back into
the community. At the end of fiscal year 2005-06, the General Fund available reserves were $14.9
million or 8.8% of the operating budget, just above the 8% policy level adopted by Council.
General Fund Reserves
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
1989 1991
1993 1995 1997 1999 2001
2003 2005 2007 2009 2011
'Council reserve policy was adopted in 1996. Reserves for fiscal years reflected as of June 30.
Reserves for fiscal years 2006-07 to 2011-12 are based on projections. (Blue reflects $4.8 million
budget gap in fiscal year 2008-09 and ongoing impacts) (Yellow reflects reserves with balanced fiscal
year 2008-09 budget). Both scenarios are discussed under the Reserve Summary section of report.
The reduction in reserves, $16.3 million over a four-year period, occurred due to a combination of
significant State revenue takeaways, mid-year appropriations and the slow down in the housing
market as summarized below:
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. State revenue takeaways ($3.5 million Vehicle License Fee Gap and $1.8 ERAF III) - $5.3
million
. Fire Department staffing, Fire Station and equipment enhancements - $3.8 million
. Purchase of Oxford Property for development of Harbor Side Park - $2.3 million
. Unanticipated litigation and workers compensation costs - $2.1 million
. Fire Department Computer Aided Dispatch Center - $1.8 million
. Municipal Utility Study/Franchise Negotiations - $1.4 million
. University Study - $1.0 million
. Police Department mid-year appropriation requests of $1.7 million, which included funding
for the first phase of the Police Strategic Plan and a CalPERS calculation adjustment and
projected revenue shortfalls of $1.2 million related to State takeaways of booking fees and
grant related reductions.
. Revenue shortfalls of $3.3 million in the Development Services Departments.
. Offsetting some of these impacts was a transfer of $3.4 million from the Equipment
Replacement Fund and Technology Replacement Fund per Council action in fiscal year
2005-06.
Based on the most current projections we anticipate the available fund balance to be $13.1 million
or 8% at the end of fiscal year 2006-07, which is right at the Council reserve policy of 8%. This is
a projected reduction of $1.8 million in reserves from the beginning of fiscal year 2006-07. The
anticipated reduction in is primarily due to the following:
. Projected shortfalls in development related revenues of approximately $3.3 million as a
result of the continued slow down in the housing market.
. Tax revenue shortfalls of approximately $1.7 million primarily in utility users tax, franchise
fees and real property transfer tax.
. Departmental revenue shortfalls of approximately $2.1 million primarily due to lower than
anticipated recreation classes, grant revenues and reimbursable staff time.
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. Net mid-year appropriations of $616,222 of which $450,000 was related to the Fire
Department overtime, which staff determined was under budgeted based on an analysis
recently presented to Council.
The fiscal impacts related to these items will be largely offset through the mid-year contingency
plan initiated by the City Manager. The plan identified departmental savings and implemented the
active management of vacant positions resulting in projected expenditure savings of approximately
$5.9 million which will mitigate significant impacts to the reserves.
FISCAL OUTLOOK (THE BOTTOM LINE)
Very few cities in the State are involved in the number of major projects and growth that Chula
Vista is experiencing. Due to the number of sianificant chanaes on the City's horizon. it is
unrealistic to base our proiections solelv on historical trends. Therefore, various assumptions
regarding residential and commercial development, economic forecasting and anticipated events
are included in this forecast. Base revenues are adjusted to reflect updated projections. Base
expenditures are adjusted for approved salary and benefit enhancements negotiated with the
various bargaining groups and any mid-year appropriations with ongoing budgetary impacts.
The General Fund major discretionary revenues are projected to increase by an annual average of
4.0% during the next five-year period. This compares to a historical annual average growth rate of
10%, over the past five years. Expenditures are projected to grow at an annual average rate of
4.1 % over the same time frame, as compared to historical annual average rates of 8.1 % over the
past five years.
Current projections indicate additional base budget reductions and/or revenue enhancements of
approximately $4.8 million will be required in fiscal year 2008-09 in order to avoid further impacting
reserves. If the City fails to make the necessary long-term budget adjustments, reserves are
currently projected to drop to approximately $1.3 million (or .7% of the operating budget) by fiscal
year 2011-12. Assuming long-term corrective actions are made to balance the fiscal year 2008-09
budget process, reserves are projected to remain at or slightly below the City Council's 8%
minimum reserve level policy through fiscal year 2009-10 and to begin increasing significantly
thereafter coinciding with the expiration of the current Memorandums of Understanding with the
City's four employee bargaining groups as well as the final debt service payment related to the
Pension Obligation Bonds scheduled for fiscal year 2011-12. It should be noted that no salary
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increases are assumed starting in fiscal year 2010-11. Beginning in fiscal year 2010-11, a 1%
citywide salary increase would cost about $1.3 million per year.
The forecast also assesses the ability to fund new initiatives such as the opening of the Rancho del
Rey Library and additional public safety positions initially grant funded but becoming a General
Fund obligation beginning in fiscal year 2008-09. These items are included under major initiatives
for informational and discussion purposes:
. Projected operating costs for the Rancho Del Rey Library ($0.3 million beginning in fiscal
year 2008-09 and increasing to $0.6 million in fiscal year 2009-10)
. Four Public Safety positions (1 Traffic Sergeant and 3 Peace Officers) which will initially be
100% grant funded but become a General Fund obligation beginning in fiscal year 2008-09.
. Additional park maintenance staff due to anticipated opening of All Seasons Park in Otay
Ranch Village 7 in fiscal year 2008-09 ($81,000).
Projected Reserves Summary (If Further Reductions Are Not Made)
(Reflects $4.8 million budget gap in fiscal year 2008-09 and ongoing impacts) (In Millions)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Actual Actual Est. Est. Forecast Forecast Forecast Forecast
Revenues $137.8 $157.8 $164.9 $164.2 $170.3 $178.0 $185.8 $193.2
Expenditures/Fund Balance Adj.{Note 1) ($143.2) ($160.8) ($166.7) ($164.2) ($175.1) ($182.8) ($187.9) ($193.3)
Subtotal DeficiVSurplus ($5.4) ($0.2) ($1.8) $0.0 ($4.8) ($4.8) ($2.1) ($01)
General Fund Reserves $15.1 $14.9 $13.1 $13.1 $8.3 $3.5 $1.4 $1.3
Projected R.rves 9.7% 8.8% 8.0% 8,0% 4;7% 1.9% 0.7% 0.7%
Major Initiatives (Note 2):
RDR Library(Qperations) ($0.3) ($0.6) ($0.6) ($0.6)
Public Safety Staffing ($0.3) ($0.5) ($0.5) ($0.5)
Park Maintenance ($0.1) ($01) ($0.1) ($0.1)
Additional impact to Reserves ($0.7) ($1.1) ($1.2) ($1.2)
General Fund Reserves (Note 3) $7.6 $2.4 $0.2 $0.1
Projected R.rves (Including Majodn~lative.) 9.7% 8.8% 8.0% 8.0% 4.4% 1.3% 0.1% 0.0%
Notes:
1) General Fund reserves based on the various assumptions discussed in the forecast report. Does not assume funding for any frozen positions
or one time savings which helped balance the fiscal year 2007.08 budget which would add an additional $3.2 million to the budgetary gap
in fiscal year 2008-09. Also does not assume any further salary increases beyond the current MOUs. Beginning in fiscal 2010.11, a 1 %
citywide salary increase would cost approximately $1.3 million/yr. Forecast assumes funding for Classification Studies.
2) Major Initiatives listed for informational purposes only. Staff reports discussing fiscal impacts will be brought forward at time of Council consideration.
3) Forecasted General Fund reserves reflecting projected impacts of major initiatives listed above.
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Projected Reserves Summary
(Reflects balanced fiscal year 2008-09 budget)
(In Millions)
2005 2006 2007 2008 2009 2010 2011 2012
Actual Actual Est. Est. Forecast Forecast Forecast Forecast
Revenues $137.8 $157.8 $164.9 $164.2 $170.3 $178.0 $185.8 $193.2
Expenditures/Fund Balance Adj. (Note 1) ($143.2) ($160.8) ($166.7) ($164.2) ($170.3) ($177.8) ($182.9) ($188.2)
Subtotal DeficiUSurplus ($5.4) ($0.2) ($1.8) $0.0 $0.0 $0.2 $2.9 $5.0
General Fund Reserves $15.1 $14.9 $13.1 $13.1 $13.1 $13.3 $16.2 $21.2
Projected Reserves 9.7% 8.8% 8.0% 8.0% 7.7% 7.5% 8.9% 11.3%
Major Initiatives (Note2):
RDR Library(Operations) ($0.3) ($0.6) ($0.6) ($0.6)
Public Safety Staffing ($0.3) ($0.5) ($05) ($0.5)
Park Maintenance ($0.1) ($0.1) ($0.1) ($0.1)
Additional impact to Reserves ($0.7) ($1.1) ($1.2) ($1.2)
General Fund Reserves (Note 3) $12.4 $12.2 $15.0 $20.0
Projected Reserves (Including Major Initiatives) 9.7% 8.8% 8.0% 8.0% 7.3% 6.8% 8.2% 10.6%
Notes:
1) General Fund reserves based on the various assumptions discussed in the forecast report. Does not assume funding for any frozen positions
or one time savings which helped balance the fiscal year 2007~08 budget which would add an additional $3.2 million to the budgetary gap
in fiscal year 2008-09. Also does not assume any further salary increases beyond the current MOUs. Beginning in fiscal 2010.11, a 1%
citywide salary increase would cost approximately $1.3 million/yr. Forecast assumes funding for Classification Studies.
2) Major Initiatives listed for informational purposes only. Staff reports discussing fiscal impacts will be brought forward at time of Council consideration.
3) Forecasted General Fund reserves reflecting projected impacts of major initiatives listed above.
It is important to keep in mind that this is a forecast made at a time when the City continues to
experience significant change. The information provided here should be used primarily as an
indicator of the relative health of the General Fund over the next five years and is intended to
serve as a tool to provide Council with the insight to address upcoming initiatives. This report
will be provided to Council at the beginning of each calendar year prior to the priority setting
budgetary workshop or as major initiatives are proposed. The five-year forecast is also
intended to serve as a planning tool to bring a long-term perspective to the budget process.
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!Jim Thomson
Interim City Manager
1,2A~o~~
Director of Finance/Treasurer
Attachments:
Attachment A - Five-Year Financial Outlook Report
Attachment B - Projected Reserves Summary (If Further Reductions Are Not Made)
Attachment C - Projected Reserve Summary (Reflects Balanced Budget for Fiscal Year 2008-09)
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AtTACHMIiSNTA
INTRODUCTION
The goal of the Five-Year Financial Forecast is to assess the City's ability over the next five years
to continue current service levels based on projected growth, preserving our long-term fiscal health
by aligning operating revenues and costs, and maintaining reserves at the Council policy level of
8%.
It is important to stress that this forecast is not a budget. It doesn't make expenditure decisions but
does assess the need to prioritize the allocation of City resources. The purpose of the forecast is
to provide an overview of the City's fiscal health based on various assumptions over the next five
years and provide the City Council, management and the Citizens of Chula Vista with a "heads up"
on the financial outlook beyond the budget cycle.
The Government Finance Officers Association (GFOA) recognizes the importance of combining
the forecasting of revenues and expenditures into a single financial forecast. The GFOA also
recommends that a government should have a financial planning process that assesses long-term
financial implications of current and proposed policies, programs, and assumptions that develop
appropriate strategies to achieve its goals.
FINANCIAL FOCUS
The focus of the Five-Year Financial Forecast Report (forecast) is the General Fund. The General
Fund is the City's operating fund which pays for public safety services, libraries, parks, recreation
and administration. All the major discretionary revenues such as Property Taxes, Sales Taxes and
Motor Vehicle License Fees are accounted for within the General Fund. The forecast reflects final
audited figures for fiscal years 2004-05, 2005-06, estimated figures for fiscal year 2006-07, 2007-
08 and forecasted figures for fiscal years 2008-09 through 2011-12.
The Finance Department will continue working with the various departments to update the forecast
as projections are refined. This forecast will serve as the foundation for the City's Long Term
Financial Plan (L TFP), which will have a 1 O-year outlook. The L TFP will ultimately include not only
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
the General Fund but the Redevelopment Funds, Development Impact Funds, Sewer Funds and
various other funds which are key components that play into the City's long term financial viability.
ECONOMIC AND DEMOGRAPHIC ASSUMPTIONS
POPULATION AND HOUSING
Over the past five years the population in Chula Vista has grown at an average 4% per year. Due
to the slow down in residential development, population growth is assumed at 2% per year
throughout the forecast period. Chula Vista remains as the 14th largest California city in population.
Year-to-year population growth is a useful factor in predicting increases in other revenue
categories, such as Franchise Fees and Business Licenses.
The population forecast is derived using the number of homes constructed. The California State
Department of Finance (OaF) estimates that Chula Vista has an average of 3.036 persons per
household. Assuming that this factor is accurate and remains valid over the next five years, and
assuming a 3.01 % vacancy rate, Chula Vista can expect a total population of approximately
250,439 persons by the end of 2012.
This is estimated as follows:
. The California State Department of Finance (OaF) estimated a Chula Vista population of
227,723 as of January 1, 2007.
. The recently updated General Plan identified the capacity for an additional 30,000 units
throughout the City through build out.
. An additional 1 ,448 units were occupied in calendar year 2006.
. Over the next decade residential (and related population) growth rates are expected to be,
on average, below the growth experienced during calendar years 1998 - 2005.
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
Chula Vista Population
275
250 .
. .
.
III 225 . .
.
"C .
C .
III 200 .
III .
:::s
0 175 .
oJ: .
l- .
150. . .
125
100
97 9S 99 00 01 02 03 04 05 06 07 OS" 09" 10" 11" 12"
"Population data for 1997 to 2007 reflects California Department of Finance comprehensively revised population figures
as of January 1 st. The 2008 to 2012 population estimates assume an average growth rate of 1.6%.
INFLATION (CONSUMER PRICE INDEX)-Inflation is a measure of the increase in cost
of goods and services. Inflation impacts many revenues, such as rents and leases, and most
expenditure categories throughout the five-year forecast and is projected to average 3% per year.
GENERAL FUND FORECASTED REVENUES
Revenue estimates contained in this forecast are based on the assumptions discussed below. The
revenue projections assume that no major economic downturns occur within the next five years
and that development will continue but at a significantly slower pace.
One of the City's strengths has been its diversified revenue base. A diversified revenue base
lessens the impact fluctuations in specific economic sectors have on the City's ability to provide
services. Although we maintain a diversified revenue base, it will be imperative to the continued
fiscal sustainability of the City to focus on increasing our Sales Tax revenue base.
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
General Fund Revenues
180
160
140
120
100
80
60
40
20
FY 03 Actual FY 04 Actual
.Sales Tax
. Development Rev.
III Franchise Fees
. Charges for Services
FY 05 Actual FY 06 Actual
. Property Taxes
.Interfund Reimb.
. Utility Users Taxes
o Other Local Taxes
FY 07 Estimated FY 08 Estimated
o Motor Vehicle Licenses
. Transfers In
OTOT
ill Other Revenue
SALES TAXES
Prior to fiscal year 2004-05, the City received 1 % in sales and use tax revenue from all taxable
retail sales occurring within the City limits. Beginning in fiscal year 2004-05, the State reduced the
local allocation by 0.25% and applied these funds as security for the State's Economic Recovery
Bonds. The State committed to replacing the 0.25% sales tax revenues dollar-for-dollar in local
property taxes from the County Educational Revenue Augmentation Fund (ERAF). For forecasting
and comparison purposes, sales tax revenues are projected at the full 1 % rate.
Sales tax revenues are collected by the State at a rate of 7.75% for the San Diego County region.
The sales tax revenues are then allocated based on the following rates:
State
State Fiscal Recovery Fund (Economic Recovery Bonds)
Local Jurisdiction (City or County of place of sale or use)
Local Transportation Fund (County of place of sale/use)
Local San Diego County Transnet Funding
6.00%
025%
0.75%
0.25%
0.50%
Sales tax revenue is highly sensitive to economic conditions, and reflects the factors that drive
taxable sales, including the levels of unemployment, consumer confidence, per-capita income, and
business investment. In addition, the proximity to the Mexican border and the number of
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
transactions related to cross border shopping also makes the City's sales tax revenues particularly
susceptible to volatility if a downturn in the Mexican economy were to occur.
Sales and use tax revenue is the City's single largest discretionary revenue source, accounting for
19% of total projected revenue for the General Fund in fiscal year 2006-07. During fiscal years
2004-05 and 2005-06 sales tax revenues increased by 10.2% and 13.2% respectively, primarily
due to increased population and the opening of several new commercial centers in the eastern
section of the City.
Growth in sales tax revenue has averaged 7% per year over the past five years and is projected to
increase at an average of 8% over the forecast period due to the recent opening of several
commercial centers such as the Otay Ranch Town Center, Eastlake Design Center and the
Crossings Commercial Center as well as the anticipated opening of the Eastlake Village Walk. The
opening and continued expansions of these centers over the next five years create a great
potential to generate significant new sales tax revenues to the City. Overall, approximately $11.4
million in new sales tax revenues are projected by fiscal year 2011-12. The sales tax projections
included assume that there will be no major downturns in the economy.
Sales Tax Revenues
Ul $45
~ $40
:!; $35
$30
$25
$20
$15
$10
$5
$0
20%
15%
10%
5%
0%
-5%
FY 89 FY 91 FY 93 FY 95 FY 97 FY 99 FY 01 FY 03 FY 05 FY 07 FY 09 FY 11
1_ Sales Tax -% Growth I
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
Actual Actual Estimated Estimated Forecast Forecast Forecast Forecast
Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Sales Tax $23,600 $26,716 $30,997 $35,078 $36,832 $38,673 $40,607 $42,434
(In thousands) 000
% Change 10.2% 13.2% 16.0% 13.2% 5.0% 5.0% 5.0% 4.5%
As noted on the following chart, sales tax on a per capita basis for the City is $106 compared to the
County average of $139 and the State average of $141. This comparison indicates that the City's
residents spend a high percentage of retail dollars elsewhere, especially considering that a healthy
share of our sales and use tax revenues are generated by cross-border shoppers.
Sales Taxes Per Capita
$350
$300
$250
$200
County Average $139/State Average$141
$150
$100
$50
$-
Carfsbad Chula Vista
$241 $106
. General Retail
o Construction
Del Mar EI Cajon Escondida
$326 $220 $205
. Food products
o Business to Business
Imperial National
Beach $25 City $243
DTransportation
. Miscellaneous
San Diego
$152
As reflected in the following chart, the City is making strides in capturing sales tax revenues which
were being lost to neighboring cities, but it is clear that the City must continue to place a high
priority on developing its retail business base by focusing on projects such as the expansion of the
Auto Park and the development of the Eastern Urban Center and the Bayfront in order to tap into
the opportunities to capture a greater share of the sales tax base.
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
Sales Tax Comparison
(San Diego County Cities)
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
.Chula Vista
_ San Diego
. Coronado
. EI Cajon
Escondido
Third Quarter Comparison (FY 2006 to FY 2007)
~, Imperial Beach _ Vista Solana Beach
_ Santee - Carlsbad II San Marcos
_ San Diego County Oceanside ~ Del Mar
Poway . Lemon Grove . Encinitas
_ La Mesa National City
PROPERTY TAXES
Under Proposition 13, which was enacted in 1979, property taxes for general government
purposes are limited to 1 % of the market value of the property assessed. Assessment of property
tax, as well as collection and apportionment of tax revenues are all functions performed by the
County. Increases in assessed values to reflect current market values are only allowed when
property changes hands or when the property is improved. Otherwise, annual assessment value
increases are limited to 2% or the increase in the consumer price index, whichever is lower.
Based on recent projections provided by the County Assessors Office, assessed values in Chula
Vista increased by 21% in fiscal year 2005-06 and 15.43% in fiscal year 2006-07. Property taxes
continue to grow countywide but at much slower rates than in previous years. The pace of new
and existing home sales slowed dramatically and is anticipated to continue the trend of slow growth
into fiscal years 2007-08 and 2008-09. Property tax revenue projections will continue to be
conservative pending the continued cooling down in the housing market.
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
Proposition 1A: In November 2004, the voters of California approved Proposition 1A, an
amendment to the California state constitution intended to restore predictability and stability to local
government budgets. The proposition included revenue and mandate protections for cities,
counties and special districts revenues. The agreement includes the permanent elimination of the
Vehicle License Fee backfill (fee reduction from 2% to .65%) and replacement with a like amount of
property tax revenues with the exception of a two-year contribution of $1.3 billion each year by
local governments to be used towards solving the State's budgetary deficit. The City of Chula
Vista's share of the two-year contribution was $18 million in both fiscal year 2004-05 and fiscal
year 2005-06. For comparison purposes, the property tax revenues reflected below include the full
receipt of property taxes without the State takeaway.
Actual Actual Estimated Estimated Forecast Forecast Forecast Forecast
Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Property Tax $ 19,934 $ 23,992 $ 27,649 $ 30,250 $ 32,280 $ 34,451 $36,771 $39,253
(In thousands) 000
% Change 22% 20% 15.0% 9.4% 6.7% 6.7% 6.7% 6.7%
... For comparison purposes, the property tax revenue assumes receipt of the $1.8 million in State takeaways in each of fiscal year
2004-05 and 2005-06.
Historical Change in Assessed Value
and Projected out Five Years
25%
20% .
. .
15%
. . . . ...
. ..
10% ... A ..
A .. ... .
. . . . .
5% . .
, .
0% .. ..
1995199619971998199920002001200220032004 2005 2006 2007 2008 2009 2010 20112012
I · Chula Vista & County Overall I
FRANCHISE FEES
Franchise fee revenues are generated from public utility sources such as San Diego Gas & Electric
(2% on gas and 1.25% on electricity), trash collection franchises (9.05% fee), and cable franchises
(5% fee) conducting business within City limits. SDG&E is the single largest generator of franchise
fees and accounts for approximately 50% of the total franchise revenues, which are received semi-
8
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
annually, in March and August. SDG&E collects the franchise fee from Chula Vista customers and
through a municipal surcharge imposed on the South Bay Power Plant based on their usage of
natural gas. Due to the volatility of the price of natural gas and fluctuation in usage, this
component is difficult to project. Trash franchise fees and cable fees are more predictable due to
the fixed rates charged and the monthly and quarterly receipt of the revenues respectively.
Revenue growth is projected based on population and inflation factors.
Historical Franchise Fee Revenues
and Projected out Five Years
.. $9.0
c $8.0
~
:E $7.0
$6.0
$5.0
$4.0 -
$3.0 .
$2.0
$1.0
$-
-
,& ,&
,& ,&
- ,& ;.
. - - - - -
,& -
,& ;. .
-
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
I · Trash/Cable - Energy I
Actual Actual Estimated Estimated Forecast Forecast Forecast Forecast
Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Franchise Fees $ 9,838 $ 9,493 $ 10,529 $ 10,450 $ 10,554 $ 10,660 $ 10,767 $10,874
(In thousands) 000
% Change 25.8% -3.5% 10.9% -0.7% 1.0% 1.0% 1.0% 1.0%
"Projections do not assume the potential revenue impacts related to the decommissioning of the
South Bay Power Plant.
MOTOR VEHICLE LICENSE FEE (VLF)
The Vehicle License Fee (VLF) revenue has gone through many changes in the past few years.
The fee was initially established back in 1948 and directed to local government. The State had
previously assessed a 2% of value VLF on car registrants on behalf of local governments. In May
2004, in an attempt to assist with the State's fiscal crisis, the State dropped the VLF fee from 2% to
9
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
.65%. Except for the first three months of fiscal year 2004-05, the State back-filled this fee
reduction with other State funds, keeping local government revenue whole.
Beginning in fiscal year 2004-05, the local government share of VLF has narrowed. Cities continue
to receive 65% portion of the fee directly from the State, but this amount is now net of County
realignment and administrative reductions. The State backfills the gap created by the fee reduction
from 2% to .65% with an additional allocation of local property tax from County ERAF funds,
referred to as the VLF swap. After 2006, the VLF swap was valued at the original 2005 amount,
and increased by the jurisdiction's annual growth in assessed valuation. These changes in
valuation are reflected in the five-year forecast.
Actual Actual Estimated Estimated Forecast Forecast Forecast Forecast
Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
VLF
(In thousands) $13,941 $ 14,968 $ 17,864 $ 19,373 $ 20,658 $ 22,030 $23,498 $24,627
000
% Change 11.2% 7.0% 19% 8.4% 6.6% 6.6% 6.7% 4.8%
*Adjusted to account for the $3.4 million VLF repayment related to the 2004 State funding gap.
**After fiscal year 2005-06, 67% of the total VLF revenues are adjusted based on the City's assessed value growth.
UTILITY USERS TAX
The City adopted its Utility Users Tax (UUT) in 1978. The City of Chula Vista imposes a UUT on
the use of telecom at the rate of 5% of gross receipts, which represents 66% of the total UUT
revenues received, The UUT on natural gas services is $0.00919 per therm and $0.00250 per
kilowatt on electricity services, which equates to approximately a 1% tax.
UUT revenues are projected to grow using population factors and are adjusted downward to
account for market saturation in the wireless telecom sector due to the shift in usage of landline
telephones to cellular telephones and to internet and other private-network communications.
SDG&E is the predominant energy provider with dozens of telecommunications providers. UUT is
received on a monthly basis from the various providers.
Total UUT revenues received in fiscal year 2005-06 were $6.4 million, of which $2.2 million was
from energy and $4.2 million was from telecommunications. Some large telecommunications
providers and taxpayers have taken the position that the UUT does not apply to long distance,
10
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
VolP (voice over internet), and cellular phone charges. The City will continue to monitor legislation
which may require adjustments to the assumptions used in the forecast.
Actual Actual Estimated Estimated Forecast Forecast Forecast Forecast
Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Utility Users
(In thousands) $ 6,580 $ 6,363 $6,618 $ 6,683 $6,756 $ 6,830 $6,926 $7,022
000
% Change 17.0% -3.3% 4.0% 1.0% 1.1% 1.1% 1.4% 1.4%
TRANSIENT OCCUPANCY TAX (TOT)
The current TOT rate in the City is 10% and generated approximately $2.2 million in revenues
during fiscal year 2005-06. This represented approximately 2% of total General Fund revenues.
The potential for significant revenue growth is feasible provided quality hotels are built in the City.
The ability to generate increased TOT revenues are also being reviewed in conjunction with
proposed Baytront developments but this forecast does not assume new hotels are built and
opened in the forecast period.
Actual Actual Estimated Estimated Forecast Forecast Forecast Forecast
Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
TOT $ 2,269 $ 2,336 $ 2,582 $ 2,672 $ 2,753 $ 2,835 $ 2,920 $ 3,008
(In thousands) 000
% Change 5.1% 3.0% 10.5% 3.5% 3.0% 3.0% 3.0% 3.0%
DEVELOPMENT RELATED REVENUES
Development related revenues consist of two categories: development processing fee revenues
and deposit based revenues. Development processing fee revenues include building permits,
planning fees, other building department fees, and engineering fees. Deposit based revenues are
generated through staff time reimbursements related to specific projects.
Development revenues are increasing from $11.8 million to $14.5 million in fiscal year 2007-08, an
increase of $2.6 million, or 22.4%. The increased revenues are chiefly the result of a recent
increase in development related permit fees, as calculated in the MAXIMUS Fee Study. Approved
in January of 2007, these new fees are projected to generate an additional $2.4 million in
revenues, assuming the permitting of 1,200 residential units annually. The remaining $200,000
results from a projected increase in residential development from 1,000 units in fiscal year 2006-07,
to 1,200 units in fiscal year 2007-08.
11
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
For forecasting purposes during fiscal years 2009-10 to 2011-12, a figure of 1,600 residential units
per year are being used to projected development related revenues. This is consistent with the
recommendation issued by Economic Planning Systems as part of the Independent Financial
Review Report, "For purposes of budgeting forecasting, a figure of 1,600 residential units per year
is a sound estimate for the next ten-year period, although annual rates will vary around this
number."
Development Activity
Residential Building Permits Issued
By Fiscal Year
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
1998
2000
2002
2004
2006
2008
2010
2012
.Single Family
D Multi-Family
Actual Building Permits issued from fiscal year 1997-98 to 2005-06. Forecasted Building Permits issued from fiscal
year 2006-07 to 2011-12.
FORECASTED EXPENDITURES
PERSONNEL SERVICES
Salary and Benefits: Since fiscal year 2001-02, the City has added 194.52 permanent, full time,
benefited positions. This equates to an 18.35% increase in authorized staffing levels during this
period. The majority of these positions have been in the areas of public safety (103.52 new
positions representing a 24% increase) and development and maintenance services (74.25
positions representing a 19.2% increase). Council authorized salary adjustments are reflected in
the forecast. As part of the City Manager proposed operating budget for fiscal year 2007-08, a total
of 35.25 positions are being deleted and 10 positions are frozen and not funded. The forecast
does not assume funding for any of these positions throughout the forecast period. Based on the
forecast, funding these positions will likely require tradeoffs during the budget process. The
12
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
forecast does assume a 1 % increase in the overall personnel category to account for increases in
workers compensation costs. No adjustments to salaries beyond the current MOUs are reflected in
the forecast. Beginning in fiscal year 2010-11, a 1 % citywide salary increase is estimated to cost
approximately $1.3 million per year.
Summary of MOU Salary Increases
January 2006 to January 2010
Effective Date IAFF POA MiSe
January 2006 8.00% 10.00% 3.00%
January 2007 2.00% 4.00% 3.00%
July 2007 2.00% - -
January 2008 400% 3.00% 4.00%
January 2009 4.00% 4.00% 4.00%
Januarv 2010 4.00% 4.00% 4.00%
IAFF -International Association of Fire Fighters
POA - Police Officers Association
MiSe - Miscellaneous Group includes all non-public safety benefited positions.
Califomia Public Employees Retirement System (CaIPERS): The large increase in PERS costs
was by far the greatest fiscal challenge the City has faced during the past five years. The two key
factors driving the increased costs were the significant investment losses experienced by CalPERS
and enhanced benefits during the same time period. Currently, the payments made to the
retirement system equal 16% of the City's General Fund.
The CalPERS pooled investment returns of -7.2% for fiscal year 2000-01, -6.0% for fiscal year
2002, 4.0% for fiscal year 2002-03 have each produced actuarial losses compared to the
investment return assumptions of 8.25% for those years. Because of the asset smoothing method,
only a portion of the total loss for these years has been reflected in our employer contribution rates
through 2007-08. The budgetary impacts caused by the increased employer contribution rates
have been significant. The City's employer contribution rates rose from 0% for public safety and
0% for miscellaneous in fiscal year 2001-02, during a time the City was "super funded", to 22.3%
and 18.3% respectively in fiscal year 2007-08.
This translates into an increase of $21.3 million in budgeted PERS contributions - from $6.5 million
in fiscal year 2001-02 to $27.8 million in fiscal year 2007-08 (these figures include employer
contribution, city-paid employee contribution, and Pension Obligation Bond). The vast majority of
this increase is related directly to the CalPERS investment losses previously discussed.
13
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
CalPERS Historical Market Value Rates of Return
Relative to Assumed Investment Return of 7.75%
31.00%
23.25%
15.50%
7.75%
0.00%
-7.75%
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ N N N N N N N N
W m w w w w w w w w w w W woo 0 0 0 0 0 0
~ 00 00 00 W W W W w m w W W ID 0 0 000 0 0 0
m ~ 00 w 0 ~ N W ~ rn m ~ 00 ID 0 ~ N W ~ rn m ~
Note: Beginning in fiscal year 2005-06, the estimated rate of return used by
CarPERS in calculating employer contribution rates will be 7.75%.
As defined by CaIPERS, "Retirement benefits are funded through contributions paid by contracting
employers, member contributions, and earnings from CalPERS investments. Employer
contribution rates are determined by periodic actuarial valuations under State law. The actuarial
valuations are based on the benefit formulas the agency provides and the employee groups
covered. These contribution amounts are expressed as a percentage of active member payroll
reported to CaIPERS."
The following table reflects the actual and forecasted employer contribution rates. The actual rates
were calculated by CalPERS and the forecasted rates were provided by the City's CalPERS
consultant Bartel & Associates. These rates were used in forecasting future retirement benefit
costs included in this report.
Employer CalPERS Contribution Rates
Actual and Projected
Actual Actual Estimated Estimated Forecast Forecast Forecast Forecast
Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Public Safety 22.1% 23.3% 21.1% 22.3% 23.5% 24.0% 24.5% 25.0%
Miscellaneous 16.0% 20.1% 18.5% 18.3% 18.1% 18.1% 18.2% 18.3%
(1) CalPERS provided the 2008 employer contribution rates and are included in the base
budget. Rates for 2009 - 2012 are projected.
(2) Rates do not reflect additional costs incurred to repay City's Pension Obligation Bonds
which are scheduled to be paid off in 2012.
(3) Based on the Annual Valuation Report issued on October 4. 2006. the funded status for the
Public Safety Group and Miscellaneous Group combined was 82% in actuarial value and 84% in
market value.
14
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
Health Insurance Premiums: Kaiser and PacifiCare insurance premiums have increased an
average of 10.8% per year since the beginning of fiscal year 2001-02. The annual budget for
flexible spending accounts has increased from $6.3 million in fiscal year 2001-02 to $12.3 million in
fiscal year 2007-08. Included in the forecast are assumptions that premiums will continue to
increase at an average rate of 10% per year.
DEBT SERVICE
Over the past five years the City has issued $143 million in debt used to fund several major capital
projects such as the new public works yard, police facility and the expansion of the Civic Center.
The debt service payments for these capital projects are funded out of various sources such as the
General Fund, Residential Construction Fund and Development Impact Fee.
The General Fund's annual debt service "commitment" is projected to be approximately $13.7
million, or approximately 7.8% of the projected General Fund operating budget for fiscal year 2007-
08. This continues to be within the City Council's debt service limit policy of 10%. However, it must
be noted that although this amount is a General Fund commitment, only $6.2 million is actually
projected to be paid out of the General Fund, which represents approximately 3.6% of the
projected General Fund operating budget. The remaining $7.5 million is paid from other sources
such as development fees, tax increment revenues and residential construction taxes.
It is important to note that the final debt service payment related to the 1994 Pension Obligation
Bonds will occur in fiscal year 2011-12, which is approximately $2.5 million per year.
Sched. Pmt Interest Debt Service Fundinq Source
Par Amount FY 07-08 Rate GF PFDIF RCT ASF
2000 COP- Public Works Yard $23,730,000 $1,867,453 5.14% 41% 59%
2000 COP - 800 MHz $1,525,000 $255,469 5.14% 25% 21% 54%
2002 COP - Police Facility $60,145,000 $3,914,146 4.93% 56% 44%
2004 COP - Civic Center Phase I $26,692,417 $2,392,155 4.65% 18% 82%
2004 COP- Infrastructure Improvements $10,547,583 $677,536 4.65% 100%
2006 COP - Civic Center Phase II $18,155,000 $744,000 4.32% 11% 89%
2006 COP- Nature Center $2,170,000 $159,000 4.32% 100%
Total $142,965,000
Major Facility Financing - Debt Service Obligations
GF- General Fund
PFDIF- Public Facilities Impact Fee Fund
RCT-Residential Construction Tax
ASF- Asset Seizure Funds
15
;2-;)5
FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
Annual Debt Service Payments
Millions
$14.0
$12.0
$10.0
$8.0
$60
$4.0
$2.0
$-
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
o General Fund
. Non General Fund
FINDINGS AND CONCLUSIONS
As discussed in the Independent Financial Review Report prepared by Economic Planning
Systems (EPS), "During the last decade, the City of Chula Vista has successfully managed a very
rapid growth rate, requiring a substantial effort involved with planning, administering, and investing
in necessary infrastructure and expansion of municipal services. As the City is transitioning from a
sustained period of high growth and development to a more stable level, it faces many transitional
issues. Slowing revenue growth and continued cost growth create a significant set of challenges,
compounded by current budget conditions, to achieving a fiscally sustainable city. While there are
existing and future challenges to be faced, the prospects for the City are very sound given regional
market conditions, local development opportunities, the ex1ensive capital investments that have
been made, and the capabilities of City staff."
During these transitional times and environment of economic uncertainty, financial planning is
always a prudent activity and development of a long-term financial plan is essential to sound fiscal
management The plan is not able to predict with certainty the City's fiscal future, rather it will
serve as a tool to highlight significant issues or problems that must be addressed if the City's goal
of maintaining fiscal sustainability over the long term is to be achieved.
MAJOR INITIATIVES
It should be noted that this report has focused on the City's ability to provide for operating service
programs that are currently in effect using existing sources of revenue. As the City continues to
grow, additional parks, public facilities and roads will need to be added in order to maintain service
16 ;2-;;)&
FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
levels mandated by the Growth Management Ordinance. Based on the five year forecast report,
funding for any new programs or other major initiatives will require trade ofts during the budget
process.
Included under major initiatives in the forecast summary below are anticipated operating costs
related to the opening of the Rancho Del Rey Library. Construction costs related to this project will
be funded from the Public Facilities Development Impact Fees. Also included under major
initiatives are costs related to funding four public safety positions which are initially fully funded by
grants but become a General Fund obligation beginning in fiscal year 2008-09. These items are
anticipated to be brought forward for Council consideration in the near future.
Projected Reserves Summary (If Further Reductions Are Not Made)
(Reflects $4.8 million budget gap in fiscal year 2008-09 and ongoing impacts)
(In Millions)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Actual Actual Est. Est. Forecast Forecast Forecast Forecast
Revenues $137.8 $157.8 $164.9 $164.2 $170.3 $178.0 $185.8 $193.2
Expenditures/Fund Balance Adj.(Note 1) ($143.2) ($160.8) ($166.7) ($164.2) ($175.1) ($182.8) ($187.9) ($193.3)
Subtotal Deficit/Surplus ($5.4) ($0.2) ($1.8) $0.0 ($4.8) ($4.8) ($2.1) ($0.1)
General Fund Reserves $15.1 $14.9 $13.1 $13.1 $8.3 $3.5 $1.4 $1.3
Projected R<\ferves 9.7% 8:8% 8.0% 8.0% 4.7% 1.9% 0.7% 0.7%
Major Initiatives (Note 2):
RDR Library(Operations) ($0.3) ($0.6) ($06) ($0.6)
Public Safety Staffing ($0.3) ($0.5) ($0.5) ($0.5)
Park Maintenance ($0.1) ($0.1) ($0.1) ($0.1)
Additional impact to Reserves ($0.7) ($1.1) ($1.2) ($1.2)
General Fund Reserves (Note 3) $7.6 $2.4 $0.2 $0.1
Projected R*rves(lncluding Major Initiatives) 9.7% 8,8% 8.0% 8.0% 4.4% 1.3% 0.1% 0.0%
Notes:
1) General Fund reserves based on the various assumptions discussed in the forecast report. Does not assume funding for any frozen positions
or one time savings which helped balance the fiscal year 2007-08 budget which would add an additional $3.2 million to the budgetary gap
in fiscal year 2008-09. Also does not assume any further salary increases beyond the current MQUs. Beginning in fiscal 2010-11 , a 1%
citywide salary increase would cost approximately $1.3 million/yr. Forecast assumes funding for Classification Studies.
2) Major Initiatives listed for infonnational purposes only. Staff reports discussing fiscal impacts will be brought forward at time of Council consideration.
3) Forecasted General Fund reserves reflecting projected impacts of major initiatives listed above.
17
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
Projected Reserves Summary
(Reflects balanced fiscal year 2008-09 budget)
(In Millions)
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Actual Actual Est. Est. Forecast Forecast Forecast Forecast
Revenues $137.8 $157.8 $164.9 $164.2 $170.3 $178.0 $185.8 $193.2
Expenditures/Fund Balance Adj. (Note 1) ($143.2) ($160.8) ($166.7) ($164.2) ($170.3) ($177.8) ($182.9) ($188.2)
Subtotal Deficit/Surplus ($5.4) ($0.2) ($1.8) $0.0 $0.0 $0.2 $2.9 $5.0
General Fund Reserves $15.1 $14.9 $13.1 $13.1 $13.1 $13.3 $16.2 $21.2
Projected Reserves 9.7% 8.8% 8.0% 8.0% 7.7% 7.5% 8.9% 11.3%
Major Initiatives (Note2):
RDR Library(Qperations) ($0.3) ($0.6) ($0.6) ($0.6)
Public Safety Staffing ($0.3) ($0.5) ($0.5) ($0.5)
Park Maintenance ($0.1) ($0.1) ($0.1) ($0.1)
Additional impact to Reserves ($0.7) ($1.1) ($1.2) ($1.2)
General Fund Reserves (Note 3) $12.4 $12.2 $15.0 $20.0
Projected Reserves (Including Major Initiatives) 9.7% 8.8% 8.0% 8.0% 7.3% 6.8% 8.2% 10.6%
Notes:
1) General Fund reserves based on the various assumptions discussed in the forecast report. Does not assume funding for any frozen positions
or one time savings which helped balance the fiscal year 2007-08 budget which would add an additional $3.2 million to the budgetary gap
in fiscal year 2008-09. Also does not assume any further salary increases beyond the current MOUs. Beginning in fiscal 2010-11, a 1 %
citywide salary increase would cost approximately $1.3 million/yr. Forecast assumes funding for Classification Studies.
2) Major Initiatives listed for informational purposes only. Staff reports discussing fiscal impacts will be brought forward at time of Council consideration.
3) Forecasted General Fund reserves reflecting projected impacts of major initiatives listed above.
18
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FIVE YEAR FORECAST
FISCAL YEARS 2008-2012
-
(10 YEAR. OUTLOOK)
As stated previously, very few cities, if any, in the State have as much going on as we do here
in Chula Vista. As part of the Finance Department's Business Strategic Plan, staff set a goal
to prepare a long-term financial plan with a 10-year outlook. The first step in the financial
planning process is to build the foundation, which consists of a five-year financial forecast.
As stated by the Government Finance Officers Association, "A long-term financial plan can be
defined as a plan that identifies fiscal issues and opportunities, establishes fiscal policies and
goals, examines fiscal trends, produces a financial forecast, and provides for feasible
solutions." The long-term financial plan will include fiscal impact assumptions regarding
several major projects currently under review such as the Bayfront Master Plan, Fire Facilities
Master Plan, Ambulance Life Support Study and various departmental strategic planning
documents. The plan will include projections using quantitative methodologies, anticipated
events as well as historical data.
The long-term financial plan will also include a contingency plan to address fiscal challenges
that the City may face due to unanticipated swings in the economy, further State funding cuts
or other unforeseen events. It will also look ahead to the point when the City will become a
mature stabilized community resulting in a decline of development related revenue and
adjusting for a slower base revenue growth. Ultimately the goal of strategic planning, as
stated in the Governmental Finance Officers Association Recommended Practices Guide, is to
"influence the future rather than simply preparing or adapting to it".
"Financial health considers the municipality's ability to provide services necessary to the community on an ongoing basis
without erosion of fiscal position"
from Moody's approach to Local Government Financial Analysis, January 2002
19 :;L--;;; q
Projected Reserves Summary (If Further Reductions Are Not Made)
(Reflects $4.8 million budget gap in fiscal year 2008-09 and on-going impacts)
(In Millions)
Key Variable Sensitivity Analysis
City of Chula Vista - General Fund
Pro forma Scenarios - 5-Year Forecast Summary
Revenue Categories
Prooertv Taxes
Sales Tax (Based on Eff_ 1% Tax Rate
Franchise Fees
Utility Users Taxes
Transient Occupancy Taxes
Other Local Taxes
Oevelooment Revenue
Licenses and Permits
Fines, Forfeitures & Penalties
Use of Money and Property
Motor Vehicle License Fees
Police Grants
Other Aaenev Revenue
Char es for Services
Intenund Reimbursements
Other Revenues - Miscellaneous
Transfers From Other Funds
Total Revenue
FY04I05
Actual
$
18,134,869 $
23,600,000
9,837,800
6,579,578
2 268,944
3,624,377
12.412,393
545,525
824,901
2,055,387
13941204
2,328,002
3,291,082
5,174,706
13,970,518
3,468,098
15,706,199
$137,763,583
Exoenditure Cateaories
Personnel Services
PERS
Supplies and Services
Utilities
Other Exoenses
E ui ment Ca ital not CIP
T ransfers/Debt Service
Capital Improvement Projects
Non-CIP Pro"ect Expenditures
Fund Balance Adjustments
Total Expenditures
$91,233,318
19,775,237
18940516
4,540,055
1,185,838
1 439743
3,683,574
1,249,582
147,655
$142,195,518
Adjustment to Fund Balance
$
(971,029) $
Net Impact to Reserves
($5,402,964)
$15,147,040
9,7%
Available General Fund Reserves
R_ as . % of ProjoctodExpenclilQrao
FY 05/06
Actual
22192789 $
26,715,515
9,492,759
6 363,446
2,336,204
3,357,772
12,674667
670,304
1,144189
1,497921
18,354,839
2,934 405
4,127,011
5,106,540
16865735
2,701,453
21,274,416
$157,809,965
$102,855,278
24 779 344
19,008,192
4,509,959
2002,836
851,674
5,238426
1,466,149
115,102
$160,826,959
2,799,365 $
($217,629)
$14929,410
U%
FY 06107
Estimated
27,649,041 $
30,997,040
10528835
6,617,984
2,581,975
3,263,851
10,959,214
556 877
1,534,819
2,211,603
17 864,139
3,971,205
3,313,624
6 349 867
15,077,755
2,594,827
18,850,749
$164,923,405
$112,965,882
26,401,826
19,930956
5 435 320
(6,553,349)
879514
6,534,007
1,141,982
2238
$166,738,376
($1,014,971)
$13,114,440
ILl)%
FY 07108
Base Budget
30,250317 $
35 077 840
10,449,988
6,682703
2,672,344
3,276,670
14,452167
868,500
1,951,331
2431659
19,373,416
951,802
3 589 469
6,539,408
11,857,860
3191,157
10,616,544
$164,233,175
$107,754,144
25,980 596
18333,719
5,167,371
719755
88,480
6,092,110
97,000
$164,233,175
$
$13,114440
$.0%
FY 08/09
Estimated
32280,212 $
36,831,732
10,554488
6,756,066
2,752,514
3014970
15,063,993
894,555
2009871
2,489,624
20,657,794
842 346
2,967,525
6,580,617
12715074
2,937,216
10,908,025
$170,256,621
$113,041 776
27,539432
18,883,731
5 322 392
3,769,477
91,134
6320199
97,000
$175,065,141
$
$0
($4,808,520)
FY 09110
Estimated
34,450,664 $
38673319
10,660,033
6,830,383
2,835,090
3,071,419
16,005993
921 392
1,914,612
2,558,218
22 030 644
749,238
3,058,904
6 803 030
13,200,175
2,959,402
11,258,974
$177,981,489
$118,316,052
29,191,798
19450242
5,482,064
3,804 842
93,868
6,366,769
97000
$182,802,635
$
($4,021,146)
$3,484,774
1.lI%
FY10111
Estimated
36771,475 $
40,606,985
10,766633
6926,008
2,920,142
3,129222
16,256,742
949,033
1,973908
2,628,751
23,498,129
739 238
3153,586
7,030,222
13,629628
3,185,170
11,625,322
$185,790,195
$120,741010
30 943 306
20,033,750
5,646 526
3841,975
96,684
6491 652
97,000
$187,891,903
$
($2,101,700)
$1,383066
0.7%
FY11112
Estimated
39,253,132
42,434,299
10,874,299
7,022,972
3,007,747
3,188,415
16512148
977,504
2,035,048
2,701 281
24,627,343
734,238
3,251,692
7265,345
14,074,516
3,233,684
12,007,808
$193,201,472
$123,314,398
32,799904
20 634 762
5,815,922
3 880 965
99,585
6,617,411
97 000
$193,259,947
$
($58,475)
$1,324,591
0.7%
General Fund reserves based on the various assumptions discussed in the forecast report. Does not assume
funding for any frozen positions or one time savings which helped balance the fiscal year 2007-08 budget which
would add an additional $3.2 million to the budgetary gap in fiscal year 2008-09. Also does not assume any
further salary increases beyond the current MOUs. Beginning in fiscal year 2010-11, a 1% citywide salary
increase would cost approximately $1.3 million/yr. Forecast assumes funding for Classification Studies.
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Five-Year Summary
$8,305,920
4.7%
OJ
MuniCast 2.4 - City of Chula Vista - RevMay2007L TFP.xls OS/2912007
Projected Reserved Summary
(Reflects balanced fiscal year 2008-09 budget)
(In Mill ions)
Key Variable Sensitivity Analysis
City of Chula Vista - General Fund
Pro forma Scenarios - 5.Year Forecast Summary
FY 04105 FY 05106 FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY10/11 FY11112
Revenue Cateaories Actual Actual Estimated Base Budget Estimated Estimated Estimated Estimated
Prooertv Taxes $ 18,134,869 $ 22,192,789 $ 27,649,041 $ 30,250,317 $ 32,280,212 $ 34,450,664 $ 36,771,475 $ 39,253,132
Sales Tax (Based on Eft. 1% Tax Rate) 23,600,000 26,715,515 30,997,040 35,077,840 36,831,732 38,673,319 40,606985 42,434,299
Franchise Fees 9 837 800 9,492 759 10,528835 10,449988 10,554 488 10,660,033 10,766,633 10,874,299
Utility Users Taxes 6,579,578 6,363,446 6,617,984 6,682,703 6,756,066 6,830,383 6,926,008 7,022,972
Transient Occupancy Taxes 2,268,944 2,336,204 2,581,975 2,672,344 2752,514 2,835,090 2920 142 3,007,747
Other local Taxes 3,624 377 3,357 772 3,263851 3,276670 3,014970 3,071,419 3,129,222 3,188,415
Develooment Revenue 12,412,393 12,674,667 10,959,214 14,452,167 15,063,993 16,005,993 16,256,742 16512148
licenses and Permits 545,525 670,304 556,877 868,500 894,555 921,392 949 033 977,504
Fines, Forfeitures & Penalties 824 901 1144,189 1,534819 1,951,331 2,009871 1,914,612 1 973,908 2,035,048
Use of Money and Property 2,055,387 1,497,921 2,211,603 2,431,659 2,489,624 2,558,218 2,628,751 2,701,281
Motor Vehicle license Fees 13,941,204 18,354,839 17,864,139 19,373,416 20,657,794 22,030,644 23,498,129 24 627 343
Police Grants 2,328 002 2 934,405 3971 205 951 802 842 346 749238 739 238 734,238
Other Aaencv Revenue 3,291,082 4,127,011 3,313,624 3,589,469 2,967,525 3,058,904 3,153,586 3,251,692
Charaes for Services 5,174,706 5,106,540 6,349,867 6,539,408 6,580,617 6,803,030 7,030,222 7 265,345
Interfund Reimbursements 13,970518 16865,735 15,077 755 11857860 12715074 13,200,175 13629628 14,074,516
Other Revenues - Miscellaneous 3,468,098 2,701,453 2,594,827 3,191,157 2,937,216 2,959,402 3,185,170 3,233,684
Transfers From Other Funds 15,706,199 21,274,416 18,850,749 10,616,544 10,908,025 11,258,974 11,625,322 12,007,808
Total Revenue $137,763,583 $157,809,965 $164,923,405 $164,233,175 $170,256,621 $177,981,489 $185,790,195 $193,201,472
Exoenditure Cateaories
Personnel Services $91233318 $102855278 $112965882 $107754144 $108241776 $113,324,052 $115,699090 $118,222,059
PERS 19,775,237 24,779,344 26,401,826 25,980,596 27,539,432 29,191,798 30,943,306 32,799,904
Supplies and Services 18,940,516 19,008,192 19,930,956 18,333,719 18,883,731 19,450,242 20,033 750 20634,762
Utilities 4 540 055 4 509 959 5 435 320 5167,371 5,322392 5,482,064 5,646,526 5,815,922
Other Exoenses 1,185,838 2,002,836 {6,553,349 719,755 3,769,477 3,804,842 3,841,975 3 880 965
Eouioment (Caoital not CIP) 1,439,743 851 674 879514 88,480 82614 93 868 96 684 99,585
T ransferslDebl Service 3,683,574 5,238,426 6,534,007 6,092,110 6,320,199 6,366,769 6,491,652 6,617,411
Ca itallm rovement Proiects 1,249,582 1,466,149 1,141,982 97,000 97,000 97,000 97 000 97,000
Non-CIP Pro"ecl Expenditures 147655 115102 2238 - - -
Fund Balance Adjustments - - -
Total Ex enditures $142,195,518 $160,826,959 $166,738,376 $164,233,175 $170,256,621 $177,810,635 $182,849,983 $188,167,608
Adjustment to Fund Balance $ (971,029) $ 2,799,365 $ $ - $ - $ - $ $
Net Impact to Reserves ($5,402,964) ($217,629) ($1,814,971) $0 $0 $170,854 $2,940,212 $5,033,864
Available General Fund Reserves $15,147,040 $14,929,410 $13,114,440 $13,114,440 $13,114,440 $13,285,294 $16,225,506 $21,259,370
" ,
R--.... % 01 Projac"'~ &.7% 8.l1% I\.lI% 8.0% 7.7% 7.$% 8.9% 1U%
Note:
General Fund reserves based on the various assumptions discussed in the forecast report. Ooes not assume
funding for any frozen positions or one time savings which helped balance the fiscal year 2007-08 budget which
would add an additional $3.2 million to the budgetary gap in the fiscal year 2008-09. Also does not assume any
further salary increases beyond the current MOUs. Beginning in fiscal 2010-11, a 1% citywide salary increase
would cost approximately $1.3 million/yr. Forecast assumes funding for Classification Studies.
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Five- Year Summary
MuniCast 2.4 - City of Chula Vista - RevMay2007L TFP.xls 05129/2007
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- - -
City Of Chula Vista
City Manager's Office
276 Fourth Avenue
Chula Vista, Ca 91910
619.409.5282 - 619.585.5612 Fax
MEMO
CI1Y Of
CHUlA VISTA
DATE:
May 31, 2007
TO:
FROM:
Honorable Mayor and Council
/:
Jim Thomson, Interim City Manager JI
Ed Van Eenoo, Director of Budget and Analysis ~
VIA:
SUBJECT:
Fiscal Year 2007-08 Proposed Mayor and Council Budget
Attached is a copy of the fiscal year 2007-08 proposed budget for the Mayor and
Council. The proposed Mayor and Council budget for fiscal year 2007-08 totals
$1,545,614 - a $93,000 reduction from the current fiscal year due primarily to the
elimination of the Intergovernmental Affairs Coordinator position, Pursuant to the
recommendation of the Council Budget Subcommittee at their February 23 meeting
and the direction from the full Council at the March 1 budget workshop, the Mayor
and Council budget has been split into the following units:
. Department Administration - $294.060
This amount includes a personnel services budget of $167,571 for the
Executive Secretary and Office Specialist and a services and supplies budget
of $128,489. The services and supplies budget is primarily for expenditures
not specific to any Council member such as the annual State of the City
Address, the Boards and Commissions recognition event, membership in the
League of Cities, and office-wide printing and supply costs,
. City Council members - $157.193 per Council member
This amount includes $82,109 for the salary and benefits of one
Councilmember, a budget of $58,510 per Councilmember for Council aides,
and $16,574 per Council member for services and supplies. The Council aide
budget is based upon the cost of one full-time benefited aide but can
alternatively be used to fund one or more hourly aides. With the exception of
office wide administrative expenses, the Mayor and Council services and
supplies budget was generally divided 10% for Administration, 30% for the
Mayor, and 15% to each Council member pursuant to Council direction given
at the March 1 budget workshop,
;:2 - 3 d--.
Fiscal Year 2007-08 Budget Update
5/31/2007
. Mavor - $622.782
This amount includes a personnel services budget of $590,134 and a services
supplies budget of $32,648. The personnel services budget is comprised of
salary and benefits for the Mayor and the following full-time support positions:
Chief of Staff, Constituent Services Manager, and Coastal/Environmental
Policy Consultant.
Should you have any questions, I can be reached at extension 3067.
cc: Dan Forster, Chief of Staff
Natalie Flores, Executive Secretary
c? - 33
Page 2
City Council Administration - 01110
Object Description FY 20 7-08 Propose
6001 Salaries $ 100,821
6005 Wages - Hourly $ 5,677
6101 Overtime - Regular $ 1,803
6122 Differential - Bilingual $ 1,200
6151 Sick in Lieu $ 547
6201 Flex/Insurance $ 19,489
6221 PERS $ 29,540
6222 PARS $ 213
6231 Medicare $ 1,580
6281 Workers Comp $ 4,700
Total Personnel ServIces $ 165,571
6301 Other Professional Services $ 20,000
6521 Promotional Expense $ 31,026
6531 Printing & Binding $ 7,244
6533 Postage $ 284
6541 Travel/Conf/Mtgs $ 5,186
6542 Membership/Dues $ 57,046
6801 Office SUPl?Iies $ 6,259
Total Services and Supplies $ 127,045
6571 Phone Service $ 1 ,444
Total Utilities $ 1,444
Total City Council Administration $ 294,060
d-3'1-
Council Seat #1 - 01120 and 01121
bject Description FY 2 -08 Proposed
6001 Salaries $ 85,480
6153 Car Allowance $ 6,600
6201 Flex/Insurance $ 22,554
6221 PERS $ 24,735
6231 Medicare $ 1,250
Personnel Services $ 140,619
6506 Cell Phone Service $ 500
6531 Printing & Binding $ 1,867
6533 Postage $ 428
6541 Travel/Conf/Mtgs $ 7,779
6883 Other Commodities $ 6,000
Services and Supplies $ 16,574
Total Council Seat #1 $ 157,193
d~35
Council Seat #2 - 01130 and 01131
bJeet Oeser ption Y 2007-08 Proposed
6001 Salaries $ 85,480
6153 Car Allowance $ 6,600
6201 Flex/Insurance $ 22,554
6221 PERS $ 24,735
6231 Medicare $ 1,250
Personnel Services $ 140,619
6506 Cell Phone Service $ 500
6531 Printing & Binding $ 1,867
6533 Postage $ 428
6541 Travel/Conf/Mtgs $ 7,779
6883 Other Commodities $ 6,000
Services and Supplies $ 16,574
Total Council Seat #2 $ 157,193
;2- 3~
Council Seat #3 - 01140 and 01141
Object Description FY 2007-08 Proposed
6001
6153
6201
6221
6231
6506
6531
6533
6541
6883
Salaries
Car Allowance
Flex/Insurance
PERS
Medicare
Personnel Services
$
$
$
$
$
$
$
$
$
$
$
$
Cell Phone Service
Printing & Binding
Postage
T ravel/Conf/Mtgs
Other Commodities
Services and Supplies
Total Council Seat #3
$
;)-31
85,480
6,600
22,554
24,735
1,250
140,619
500
1,867
428
7,779
6,000
16,574
157,193
Council Seat #4 - 01150 and 01151
Object escription 007-08 Proposed
6001
6153
6201
6221
6231
Salaries
Car Allowance
Flex/Insurance
PERS
Medicare
Personnel Services
$
$
$
$
$
$
85,480
6,600
22,554
24,735
1,250
140,619
6506 Cell Phone Service $ 500
6531 Printing & Binding $ 1,867
6533 Postage $ 428
6541 Travel/Conf/Mtgs $ 7,779
6883 Other Commodities $ 6,000
Services and Supplies $ 16,574
Total Council Seat #4 $ 157,193
:;;'-3'6
"
Mayor - 01160
bject escr ption 2007-08 Proposed
6001
6151
6153
6201
6221
6231
6251
$
$
$
$
$
$
$
400,221
1,200
16,800
47,731
115,767
5,881
2,533
6506 Cell Phone Service $ 500
6531 Printing & Binding $ 3,734
6533 Postage $ 856
6541 T ravel/Conf/Mtgs $ 15,558
6883 Other Commodities $ 12,000
Services and Supplies $ 32,648
Total Mayor $ 622,782
d,39