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UPDATED FIVE-YEAR FORECAST 1 City Council Meeting -- December 15, 2014 Presented by Brian Cochran, Finance Manager.

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Presentation on theme: "UPDATED FIVE-YEAR FORECAST 1 City Council Meeting -- December 15, 2014 Presented by Brian Cochran, Finance Manager."— Presentation transcript:

1 UPDATED FIVE-YEAR FORECAST 1 City Council Meeting -- December 15, 2014 Presented by Brian Cochran, Finance Manager

2 2 Uses a set of reasonable most likely assumptions to project revenue and expenditures over a five-year time horizon Assumes no new programs, staffing, or future Council actions Includes as much known information as possible – e.g., grants expiring, PERS rates for the upcoming year, any negotiated MOU changes, etc Intended as a planning tool Not a budget, not a labor relations plan

3 3 Economic growth (GDP) forecast 3% - 3.4% annually for the next 2 years Inflation forecast to stay in the 2% to 2.5% range over the next 2 years Potential for modest Fed rate increases spring-summer but we said that last year too Consumer spending projected to be strong Unemployment will continue declining; CA could be as low as 5.7% by 2016 Strong employment growth nationally Housing rebound will continue with significant growth in new housing starts Commercial construction projected to increase 8%+ over the next 2 years

4 4 Since 1945, average growth period about 5 yrs. Recession ended June 2009, 5 ½ yrs. into latest expansion Forecasts continue to project growth at least through 2015/16

5 5 Property tax increasing 5.2% this year; impact of escalating sales prices for homes that change hands One time audit/PTAF settlement revenues won’t repeat this year - $600k Sales Tax recent trends: Impact of new retail outside Novato should begin to flatten Positive trends in food products, auto sales, some retail categories Business to business continues poorly TOT growth continues – double digits the past 4 quarters Business License Tax growing as we implement past CPI escalators Third year of COPS grant – expiring during 2014/15 Quarterly Cash Receipts13Q213Q313Q414Q114Q214Q3 Novato8.5%5.5%-5.4%-3.1%-0.8%1.7% Marin Co5.0%9.6%8.3%2.3%9.4%4.2% Bay Area4.5%4.3%8.2%4.2%6.4%7.8% California6.6%3.4%8.7%3.7%4.0%6.2%

6 6 Revenue Assumptions 2014/15 $$2015/ / / / /20 Property / VLF 11,772, % Sales Tax 8,760, %3.00% All Other Taxes 4,148, %3.49%1.94%1.95% Charges for Services 2,612, % Licenses and Permits 1,005, % All Other 1,664, %0.98% TOTAL 29,964, %2.65%2.44%

7 7 Final 2013/14 results - $150,000 surplus 2014/15 budget integrated into the forecast Final collective bargaining agreements added for 14/15 and 15/16 – 1.5% COLA each year, changes to health cafeteria contributions, one-time fringe payments, and retention bonuses for police officers CalPERS changes and updated rates / actuarials (detailed on next slides) Sustainability one-time investments and long term infrastructure maintenance funds Overall: forecast reflects the choices in the Fiscal Sustainability Plan with the exception of ongoing revenue measure

8 8 Updated actuarial valuations for June 30, received in October Overall, plans are better funded (80%), unfunded liabilities are lower 2015/16 rates are first year of 5-year phase in of “direct rate smoothing” policy Miscellaneous rates slightly lower (0.8%) than expected Safety pool policy allocating unfunded liability has changed substantially; makes it difficult to compare rates Liability no longer allocated within the rates Each agency receives its own share of unfunded liability Paid as a lump sum amount Phased in over 5 years, amortized over a total of 30 years Overall change to forecast is $200k ongoing additional cost Goal is to shore up funding of plans, reduce volatility, pay off liabilities Future opportunities for paying off liabilities more quickly

9 9 Note: Assumptions listed are the baseline growth assumptions (or PERS rate assumptions) used in the expenditure forecast. They do not factor in one-time items, limited-term positions, grants expiring, etc. 2015/162016/172017/182018/192019/20 Salaries - MISC2.85% Salaries - SAFETY2.85% PERS - MISC Employer Contribution Rate15.97%17.40%19.20%21.10%22.00% PERS - SAFETY Employer Contribution Rate16.40%17.30% PERS - SAFETY Pool Unfunded Amortization $$ $688,971 $830,611 $980,138 $1,137,873 $1,304,196 PERS - SAFETY PEPRA Contribution Rate11.50% Other Benefits1.43% Contract / Consultant Services2.50% Materials / Supplies2.50% Liability / Risk Management5.00% Utilities5.00%

10 10 City of Novato - Five Year General Fund Forecast December 2014 Update - Five Year Forecast Actual Forecasted 2013/ / / / / / /20 Revenues 30,725,723 29,964,586 30,462,655 31,270,423 32,032,050 32,813,139 33,614,203 Transfers In 1,832,582 1,320,000 1,494,511 1,505,011 1,515,826 1,526,965 1,538,439 TOTAL REV'S & TRANSFERS IN 32,558,305 31,284,586 31,957,166 32,775,434 33,547,876 34,340,105 35,152,643 Expenditures 29,751,814 30,953,473 31,850,196 33,666,288 34,957,397 36,138,695 37,390,897 Position Vacancy / Savings Factor (500,000) Transfers Out 2,346,977 2,920,184 2,692,401 2,767,099 2,844,365 2,924,292 3,040,984 TOTAL EXP'S & TRANSFERS OUT 32,098,791 33,373,657 34,042,597 35,933,387 37,301,762 38,562,987 39,931,881 Operating Surplus / (Deficit) 459,514 (2,089,071) (2,085,431) (3,157,953) (3,753,886) (4,222,883) (4,779,238) Beginning Reserve Fund Balance 5,242,636 5,385,771 Use of Measure F/Reserves/New Revenues - Deficit Backfill - 2,089,071 2,085,431 3,157,953 3,753,886 4,222,883 4,779,238 Balance Sheet Adjustments (316,379) Ending Reserve Fund Balance 5,385,771 % of Expenditures18.10%17.40%16.91%16.00%15.41%14.90%14.40%

11 11 Revenue picture is improving – property, hotel, business taxes Broader retail / sales tax issues statewide (internet, services, etc) Novato’s impacts from new outside retail will last another few quarters Expenditure picture is as anticipated in the Fiscal Sustainability Plan CalPERS rate increases have mostly been anticipated via analysis from Bartel Associates completed 2 years ago New treatment of risk pools is a new wrinkle Downside business cycle risk exists – “all good things must come to an end” Success of MERA tax measure hopefully eliminates a risk Future local revenue measure critical to maintaining current services, staffing, and infrastructure maintenance


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