HomeMy WebLinkAbout03 - SS-1 - Attachment 2 - 5/10/2016CITY OF COSTA MESA, CALIFORNIA
Attachment 2
FY 2016-17 OPERATING & CAPITAL BUDGET IN BRIEF
The Fiscal Year 2016-17 Preliminary Budget reflects the operating and capital spending plans for the General
Fund, Special Revenue Funds, Capital Project Funds, and Internal Service Funds. The total preliminary budget
for all funds is $144.6 million, a decrease of $9.6 million, or 6.2% compared to the adopted budget for FY 15-16.
Table 1 illustrates these amounts.
TABLE 1
PRELIMINARY BUDGET -ALL FUNDS
Appropriations Adopted Preliminary Increase/(Decrease) FY 16-17
All Funds FY 15-16 FY 16-17 Amount Percent % of total
Operating Budget
$ 119,009,800
$ 120,809,731
$ 1,799,931
1.5%
83.6%
Transfers Out
9,416,140
7,752,242
(1,663,898)
-17.7%
5.4%
Capital Budget
25,763,929
15,994,334
(9,769,595)
-37.9%
11.1%
Total
$ 154,189,869
$ 144,556,307
$ (9,633,562)
-6.2%
100.0%
GENERAL FUND BUDGET OVERVIEW
For all governmental funds, the General Fund comprises 90.7% of the operating budget and 80.1% of the
operating and capital budget. Therefore, the succeeding discussion will focus primarily on the General Fund.
The preliminary General Fund budget is $117 million, an increase of $2.2 million, or 1.9% compared to the FY 15-
16 adopted budget. Table 2 below illustrates the components and the changes of the preliminary budget as
compared to the prior year's budget.
TABLE 2
Expenditure Category
Salaries & Benefits
Maint. & Operations
Fixed Assets
Transfers Out
Total
GENERAL FUND OPERATING BUDGET
Adopted Preliminary Increase/(Decrease) FY 16-17I
FY 15-16 FY 16-17 Amount Percent % of total
$ 78,892,688 $ 80,926,283 $ 2,033,595
27,202,418 28,442,090 1,239,672
91,654 255,572 163,918
9,016,140 7,752,242 (1,263,898)
$ 115,202,900 $ 117,376,187 $ 2,173,287
2.6% 68.9%
4.6% 24.2%
178.8% 0.2%
-14.0% 6.6%
1.9% 100.0%
Salaries & Benefits: Budgeted personnel costs increased by $2 million, or 2.6%. This increase is attributed to a
number of factors including merit increases, change in retirement rates and recent approval of the Costa Mesa
Police Association memorandum of understanding. Budgeted positions are set at the level of personnel needed to
continue providing expected levels of services to the community.
CITY OF COSTA MESA, CALIFORNIA
Attachment 2
Maintenance & Operations (M&O): The maintenance and operations category includes such things as: office
supplies; office equipment; electricity, gas and water for all City owned property including parks, medians, street
lights and traffic signals; principal and interest payments on outstanding City debt. The preliminary budget for
maintenance and operations accounts is $28.4 million, a net increase of $1.2 million or 4.6% compared to the FY
15-16 adopted budget. Nearly half of the increase is attributed to general liability costs with the remainder of the
increase found in consulting, landscaping and sprinkler maintenance and repair.
Transfers Out: The preliminary budget includes an operating transfer out of 5% of General Fund Revenues, to
fund various Capital Improvement Projects. In addition, another 1.5% of General Fund Revenues is dedicated to
Capital Facilities Projects.
The total preliminary FY 16-17 General Fund estimated revenue is $117 million, a decrease of $0.8 million or
0.68% compared to projected revenues for FY 15-16. Table 3 illustrates the General Fund revenue sources that
fund City services.
TABLE 3
GENERAL FUND ESTIMATED REVENUES
Projected
Preliminary
Increase/(Decrease)
FY 16-17
Revenue Source
FY 15-16
FY 16-17
Amount
Percent
% of total
Taxes
$ 95,772,143
$ 94,962,112
$ (810,031)
-0.8%
80.9%
Licenses & Permits
2,433,063
2,173,933
(259,130)
-10.7%
1.9%
Fines & Forteitures
1,556,315
1,475,000
(81,315)
-5.2%
1.3%
Use of Money & Property
3,275,132
3,164,021
(111,111)
-3.4%
2.7%
Other Governmental Agencies
10,292,409
10,678,708
386,299
3.8%
9.1%
Fees & Charges for Services
3,865,600
3,848,306
(17,294)
-0.4%
3.3%
Other Revenue
979,506
1,074,107
94,601
9.7%
0.9%
Total
$ 118,174,168
$ 117,376,187
$ (797,981)
-0.7%
100.0%
Note: Excludes Transfers In
Revenues: The City has been experiencing increases in Sales Tax, Property Tax, Transient Occupancy Tax
(TOT) and Building Permit revenue up to and including the current fiscal year. The outlook for these revenues for
FY 16-17 is more modest growth and in some cases, some slowing.
Property Tax, Sales Tax, Transient Occupancy Tax, and Franchise Fees are projected to grow modestly. Sales
Tax is the largest revenue source and is estimated at $54.6 million, or 46.5% of the total General Fund revenues
estimated for FY 16-17.
The overall estimated decline of 0.7% in revenues is driven by two main factors. Part of the historical Sales &
Use Tax revenue includes the backfill from the State in the form of property taxes (accounted for as Sales Tax In -
Lieu). This backfill from the State is the result of the "triple flip", which was approved by the voters in 2004 under
Proposition 57 to finance the State's Fiscal Recovery Bonds. Under this Proposition, the State took one fourth of
the local agencies' sales tax and backfilled it with a like amount in property taxes from the Educational Revenue
Augmentation Fund (ERAF). FY 15-16 is the last year of the triple flip and the projected revenues include nearly
$3.5 million in a final "true -up" payment. While this causes the FY 16-17 amounts to appear to be declining, the
core amount of Sales Tax is projected to increase by 3.4% for FY 16-17. Costa Mesa's sales tax base remains
strong with South Coast Plaza; the Harbor Boulevard of Cars; a host of other retailers throughout the City; a
variety of restaurants and hotels; and major businesses and industries located within the City.
CITY OF COSTA MESA, CALIFORNIA
Attachment 2
Graph 1 illustrates the categories of businesses and industries that generated sales tax revenue for the City in
calendar year 2015. (Source: HdL)
GRAPH 1
Restaurants And Hotels
11.3%
General Consumer Goods
48.6%
City of Costa Mesa
Autos And Transportation
19.1%
Building And Construction
4.8%
Business And Industry
8.0%
Food And Drugs
3.5%
Fuel And Service Stations
4.6%
For FY 16-17, estimated revenue from Property Taxes is $25.9 million, which represents 22.1% of the total
General Fund revenue. This estimate is an increase of $442,523 or 1.7% over the projected revenue for FY 15-
16. The City is expecting an increase in revenue due to: property values increasing over the prior year; resale
activity, and new construction being added to the property tax roll. Included in the estimates are Secured
Property Tax at $23.7 million; Unsecured Taxes at $800,417; Supplemental Taxes at $500,000; Homeowner's
Exemption ($7,000 of assessed value is exempt from property tax, which is made up by State subvention) at
$157,584; Delinquent Taxes at $50,000; and $750,000 derived from Property Transfers (assessed at 55 cents for
every $500 of market value at the time of transfer — half of this amount or 27.5 cents goes to the County).
For FY 16-17, preliminary estimated revenue from Motor Vehicle License Fee (VLF) is $9.9 million, which
represents 8.4% of the total General Fund revenue. This estimate reflects an increase of $218,102, or 2.3% from
the projected revenue in FY 15-16. The increase is due to the estimate from the VLF Swap which includes an
increase based on the projected increases in assessed property values.
Transient Occupancy Tax (TOT) is the City's fourth largest revenue source. For FY 16-17, estimated revenue
from TOT is $8.5 million, which represents 7.3% of the total General Fund revenue. The projected amount
reflects an increase of $44,260, or 0.5% from the current year projected revenue. Since 2010, the City has seen a
continued increase in TOT revenue when compared to the prior year.
For FY 16-17, preliminary estimated revenue from all Franchise Fees is $5.0 million, which represents 4.2% of
total General Fund revenues. The projected amounts reflect a decrease of $61,678, or 1.2% from the projected in
FY 15-16.
Descriptions, assumptions, and a ten-year historical trend on the General Fund revenue sources by major
categories can be found in the following Summaries of Financial Data section of this book.
CITY OF COSTA MESA, CALIFORNIA
Attachment 2
OTHER GOVERNMENTAL FUNDS
To gain a better understanding of the budget as a whole, the General Fund budget is compared to the entire
budget covering all governmental funds. The Operating Transfers Out are excluded from this comparison to
avoid duplicate counting of resources. Table 4 illustrates this relationship.
TABLE 4
GOVERNMENTAL FUNDS PRELIMINARY BUDGET
INTERNAL SERVICE FUNDS
The City uses Internal Service Funds to account for the following activities:
a) Equipment Replacement Fund (ERF) — This fund accounts for fleet services provided by the Maintenance
Services Division to the user -departments. For FY 16-17, the preliminary budget is $3.0 million and the estimated
revenue is $784,725. The difference will be provided from the accumulated fund balance. The funding necessary
to replace vehicles is accumulated in the ERF over a number of years based upon an established replacement
schedule. Among the items scheduled for replacement are five police patrol vehicles, as well as replacement of
aging support vehicles for fire, development services, public services, and parks vehicles, as well as two new
code enforcement vehicles. All will be purchased without incurring additional City debt.
Under the Internal Service Funds method of accounting for fleet services, user -departments are charged monthly
internal rent. This rent is split into the estimated cost for future replacement vehicles and actual maintenance
charges, including fuel. Staff uses an inflationary factor compounded annually to determine the estimated future
replacement cost divided by the estimated life of the vehicles. Maintenance charges are based on actual usage
of fuel and service, including labor, materials, and overhead costs.
b) Self -Insurance Fund — This fund accounts for the Risk Management Program dealing with workers'
compensation, general liability, and unemployment insurance. The FY 16-17 preliminary budget totals $4.7
million, $444,669, or 10% over the current adopted budget.
The City currently contracts with separate vendors for workers' compensation and managed care services that
historically were handled together. Since the City has separated the two, it has been able to take advantage of
competitive rates and additional cost savings on medical expenses.
The unemployment insurance portion is based on actual payments to the State Employment Development
Department (EDD), which processes the claims for unemployment benefits on behalf of the City. The City
reimburses the EDD on a quarterly basis. Departments are charged back based on an established formula.
Adopted
Preliminary
Increase/(Decrease)
FY 16-17
Fund Types
FY 15-16
FY 16-17
Amount
Percent
% of total
General Fund *
$ 106,586,760
$ 109,623,945
$ 3,037,185
2.8%
75.8%
Special Revenue Funds
14,156,416
9,966,172
(4,190,244)
-29.6%
6.9%
Capital Project Funds
24,757,280
17,316,608
(7,440,672)
-30.1%
12.0%
Internal Service Funds
8,689,413
7,649,582
(1,039,831)
-12.0%
5.3%
Total
$ 154,189,869
$ 144,556,307
$ (9,633,562)
-6.2%
100.0%
* Excludes Transfers Out
INTERNAL SERVICE FUNDS
The City uses Internal Service Funds to account for the following activities:
a) Equipment Replacement Fund (ERF) — This fund accounts for fleet services provided by the Maintenance
Services Division to the user -departments. For FY 16-17, the preliminary budget is $3.0 million and the estimated
revenue is $784,725. The difference will be provided from the accumulated fund balance. The funding necessary
to replace vehicles is accumulated in the ERF over a number of years based upon an established replacement
schedule. Among the items scheduled for replacement are five police patrol vehicles, as well as replacement of
aging support vehicles for fire, development services, public services, and parks vehicles, as well as two new
code enforcement vehicles. All will be purchased without incurring additional City debt.
Under the Internal Service Funds method of accounting for fleet services, user -departments are charged monthly
internal rent. This rent is split into the estimated cost for future replacement vehicles and actual maintenance
charges, including fuel. Staff uses an inflationary factor compounded annually to determine the estimated future
replacement cost divided by the estimated life of the vehicles. Maintenance charges are based on actual usage
of fuel and service, including labor, materials, and overhead costs.
b) Self -Insurance Fund — This fund accounts for the Risk Management Program dealing with workers'
compensation, general liability, and unemployment insurance. The FY 16-17 preliminary budget totals $4.7
million, $444,669, or 10% over the current adopted budget.
The City currently contracts with separate vendors for workers' compensation and managed care services that
historically were handled together. Since the City has separated the two, it has been able to take advantage of
competitive rates and additional cost savings on medical expenses.
The unemployment insurance portion is based on actual payments to the State Employment Development
Department (EDD), which processes the claims for unemployment benefits on behalf of the City. The City
reimburses the EDD on a quarterly basis. Departments are charged back based on an established formula.
CITY OF COSTA MESA, CALIFORNIA
Attachment 2
Revenues for the Self -Insurance Fund come from the internal charges to the user -departments based on
historical costs of incurred losses, insurance premiums, and other services provided by the Risk Management
Division. Internal charges include a $250,000 surcharge as the beginning of a multi-year plan to rebuild the
balance in this fund.
CAPITAL IMPROVEMENT PROJECTS
The City's Seven -Year Capital Improvement Program (CIP) is listed at the end of the Capital Improvement
Program section of this budget book. This section provides comprehensive, detailed information on the capital
projects that the City plans to undertake in the coming fiscal year and beyond. It also contains a summary listing
of recommended projects by funding source. Please refer to Table 2 in the Budget Message preceding this
section for the summary of capital project amounts by program category.
The following graph illustrates how much the City has expended to improve and maintain its infrastructure
including streets; curbs and sidewalks; storm drains; traffic operations; parks, parkways, and medians; and
buildings and facilities. Over the last 10 years, the City spent/appropriated approximately $133 million or an
average of $13.3 million a year for capital improvements.
GRAPH 2
1.1_► a I r_► 4I►►►I 9:191►J 4LVA 14►19 a:1■11:14i 9X4» 011911.111 *1
$30,000,000
$25,000,000
$25.8M
$20,000,000 $17.0M' ,16.OM
$16.8M
$15,000,000 $12.5M
$11.2M1� $10.7M
$10,000,000 $7.5M
$5,000,000
$8.4M
9M
, , 1b a��� 1a�a� aa� ��a` tied aiv
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4 4�ti
CITY OF COSTA MESA, CALIFORNIA
Attachment 2
Use of fund balances: During times of emergency or due to other needs, the City may utilize its general
operating reserve (which is part of the "designated" fund balance) if circumstances warrant, as defined in the
Costa Mesa Municipal Code Section 2-205 et seq. The General Fund balance is distinguished from other fund
balances. The fund balances of the Special Revenue Funds and Capital Projects Funds are earmarked for
specific uses based upon the criteria for which these funds were established. These types of funds may
accumulate monies over a period of one or more years for future appropriations. Then, when the City is ready
and able to embark upon a capital improvement project or special program that meets the specific requirements
for the use of the funds, appropriations from fund balances may be used.
A summary schedule of estimated available fund balances for all funds is found at the beginning of the
Summaries of Financial Data section. Table 5 lists the estimated fund balances to be used to support the FY 16-
17 preliminary budget.
TA121 C G
Fund Name
ESTIMATED FUND BALANCES TO BE USED
Gas Tax Fund
Prop. 172 Fund
AQMD Fund
Park Dev. Fees Fund
Suppl. Law Enf. Svcs. Fund
Traffic Impact Fees Fund
Equipment Replacement Fund
Total
Projected Bal. Projected Bal. Amount
07/01/2016 06/30/2017 To Be Used Percent
$ 597,265 $
49,707 $
547,558
91.7%
33,152
13,136
20,016
60.4%
89,773
(102,717)
192,490
214.4%
(2,159,871)
(2,179,919)
20,048
-0.9%
16,996
(44,543)
61,539
362.1%
3,415,491
2,860,491
555,000
16.2%
7,747,911
5,565,494
2,182,417
28.2%
$ 9,740,717 $
6,161,649 $
3,579,068
36.7%