Budget Presentation City of Sierra Madre FY 2017-18
Future Budget Concerns 1. Budget Process 2. Increased Personnel Costs, Contracts, & Pension 3. Debt Obligations & Loans in Water Enterprise 4. Water Utility Operations 5. 2017/18 Budget 2
Budget Process Zero-Based Budget • Line by line review of all expenditures (actual vs. budget) • Focus on priorities & strategies, not history (reinvest savings) • One-time vs. on-going expenditures (lotto winnings) • On-going revenues pay for on-going costs (Excess Water Penalties) • Prioritize 3Ps--Public Safety, Public Work, Parks & Rec (& Library) 3
Budget Process 2017-18 Sierra Madre Budget Principles • This is a process, not an event (3 years to sustainability) • Expenditures reduced to offset planned increases • On-going costs must shrink & while one-time costs increase • EX) Infrastructure, public safety equipment • Reduce government costs without asking for a tax increase from voters 4
Future Budget Concerns 1. Budget Process 2. Increased Personnel Costs, Contracts, & Pension 3. Debt Obligations & Loans in Water Enterprise 4. Water Utility Operations 5. 2017/18 Budget 5
Increased Personnel Costs-Salaries Salary Increases for FY2017-18: POA pay increase of 6% • $130,000 General Government pay increase of 2.3% • $143,600 ($77,400 GF) 6
Increased Costs – Budget & Contracts Wage Increase (Approved in Nov. 2016, not budgeted) Paramedic • $64,000 Library Community Services • $2,400 Budget FY 2016-17 Budget balanced with Fund Balance (one-time) • $54,600 Contracts Change to prevailing wage, grounds maintenance • $25,000 7
Increased Personnel Costs-Pension The Unfunded Accrued Liability (UAL) is: • actual gains or losses vs. expected experience (reality vs. projections) • caused because benefits paid are greater than funds invested UAL Calculation(s): • recalculation (Fall of 2017) will likely lead to greater liability • the UAL is designed to eliminate liability overtime ( IF assumptions don’t change) 8
Increased Personnel Costs-Pension • The City’s Total Pension Liability is $ 10,678,000 (approx 75% funded) • The City’s Unfunded Accrued Liability (UAL) will increase by 40% over next 6 years • The 2017-18 pension expense is $727,510 • The 2022-23 pension expense will be $1,030,400 • UAL Expected Annual Increases: • FY 17-18 $102,350 • FY 18-19 $143,300 • FY 19-20 $151,138 • FY 20-21 $96,354 • The Board calculates numbers again in Fall of 17 and numbers will likely increase 9
Increased Personnel Costs-Pension 3 rd largest GF Department $1,400,000 $1,200,000 $1,220,651 $1,000,000 $1,030,422 $800,000 $727,510 $600,000 $400,000 $200,000 $- FY16-17 FY17-18 FY18-19 FY19-20 FY20-21 FY21-22 FY22-23 10
Future Budget Concerns 1. Budget Process 2. Increased Personnel Costs, Contracts, & Pension 3. Debt Obligations & Loans in Water Enterprise 4. Water Utility Operations 5. 2017/18 Budget 11
Sierra Madre Water Revenue Parity Bonds, Series 2003 - Original Issue $6,750,000 $3,500,000 $3,000,000 $771,680 $1,310,850 $2,500,000 $2,000,000 $138,663 $1,500,000 $1,000,000 Interest Only Payments from 2003-2019 ($4,628,289 to date ) $500,000 $315,720 $331,595 $339,345 $339,345 $339,345 $- 2017 2018 2019 2020 2021 2022-26 2027-31 2032-34 12 Principal Interest
Sierra Madre Water Revenue Parity Bonds, Series 2003 - Original Issue $6,750,000 $900,000 $800,000 $700,000 $600,000 $500,000 $315,720 $331,595 $400,000 $300,000 $200,000 $339,345 $339,345 $339,345 $325,000 $310,000 $100,000 $- 2017 2018 2019 2020 2021 13 Principal Interest
Sierra Madre Water Revenue Refunding Bonds, Series 1998A-Original Issue $6,740,000 $900,000 $800,000 $700,000 $600,000 $500,000 $12,375 $36,500 $59,500 $400,000 $300,000 $495,000 $470,000 $450,000 $200,000 $100,000 $- 2017 2018 2019 Principal Interest 14
Near Term Debt Obligations (Bonds) -Water $900,000 $848,845 $845,845 $846,720 $800,000 $700,000 $663,190 $600,000 $631,440 $500,000 $400,000 $300,000 $200,000 $100,000 $- 15 2017 2018 2019 2020 2021
Water Enterprise Debt Obligations, Near-Term (Bonds and Loans) $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- 2017 2018 2019 2020 2021 16 Principal Interest Loans
Water Enterprise Operations Debt Excess 62% 22% Water Charge 16% 0% 20% 40% 60% 80% 100% 17
Water Enterprise Health Indicators Health is determined by debt, revenue stability, & asset condition 1. Debt Service • Currently debt equals more than 22% of Water revenues through 2020 2. Revenue Stability • 16% of revenue collected is non-repeatable (excess water charge) 3. Future Cost of Infrastructure • Hydrology report will show need for critical maintenance & replacement 18
Future Budget Concerns 1. Budget Process 2. Increased Personnel Costs, Costs, & Pension 3. Debt Obligations & Loans in Water Enterprise 4. Water Utility Operations 5. 2017/18 Budget 19
Water Utility Operations 6,000,000 5,275,770 5,000,000 4,851,466 4,000,000 3,000,000 2,000,000 1,000,000 - 2015 2016 2017 2018 2019 2020 2021 2022 Total Operating Revenues Total Operating Expenditures 20
Leak Repair (Cost) $180,000 480 $155,975 430 $160,000 380 $140,000 $118,908 330 $120,000 280 $100,000 230 $80,000 180 $60,000 130 $40,000 80 $19,451 $19,084 $20,000 $9,175 30 $- -20 2012 2013 2014 2015 2016 2017 (Est.) Cost:$94,000 -$176,000 Cost and Number of Leaks Leaks: 256-480 21 Cost to Repair Leaks Number of Leaks
Leak Repair (Cost in Time) 4320 2 FTE 3825 2916 1 FTE 477 468 225 2012 2013 2014 2015 2016 2017 (Estimated)
Leak Repair (Value) $1,000,000 $900,000 $811,556 $800,000 $700,000 $600,000 $503,037 $500,000 $400,000 $300,000 $200,000 $100,000 $- 2015 2016 23
Percent Water Loss of Total 100% 90% 80% 70% 60% 50% 40% 30% 20% 29% 21% 10% 0% 2015 2016 24
Future Budget Concerns 1. Budget Process 2. Increased Personnel Costs, Contracts, & Pension 3. Debt Obligations & Loans in Water Enterprise 4. Water Utility Operations 5. 2017/18 Budget 25
2017/18 Budget (General Fund) Past budgets reduced same year costs, while increasing future year costs • EX) Public Safety Equipment (Computers, Radios, Vests) • EX) Valve Maintenance Program (Water) • EX) Using reserves to balance budget ($54,600) Costs will continue to increase and likely accelerate • Ex) Pension/UAL General Fund budget must reduce expenditures to stay the same • Ex) Employee raises, pension obligations, contract increases 26
2017/18 Budget (Water) Water Enterprise • Revenue stability is uncertain based on current rate model (84%/16%) • Debt currently comprises 22% of revenue annually through 2020 • Hydrology report will show infrastructure in need of maintenance/replacement • City needs to start making “100 year” decisions • Debt Management (Refinance, Water Cash Flow, General Fund Reserves) 27
2017/18 Budget Moving forward, services must align with financial realities • Do “more with less” is actually “do less with less” Council will provide direction for FY2018/19 budget for: • Water, Fire, Library, General Government Budget process will reduce costs, not ask the voters to approve a tax increase 28
Thank you 29
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