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FiscalOutlook:Challenges&Decisions

CityCouncilBudgetMeeting-March6,2012

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• LongBeachhasahistoryofbalancingthebudget

• Deficitsolutionsof$209millionandeliminationof811positionssince2004

• Anewfiscalrealityhasemerged

• Structuralchangesareneeded

Difficult,ButManageable,Times

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• Projectiondonelastyearshowedacombined$20mshortfallforFY13andFY14withthepotentialforasurplusinFY15,withpensionreform

• Anupdatedprojectionincreasestheshortfallto$23.4m

overtwoyearsand$26.1moverthreeyears

• Revenueweaknessisthekeyissueimpactingthenewprojection

• ForFY13,projectedexpenseshavedropped$9.4mfromlastprojection,due,inlargepart,topensionreform

• Butrevenuesaredown$11.8mfromlastprojection

ExpensesImproved,RevenueGotWorse

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Withoutaction,thestructuraldeficitgrowsto$26.1millionbyFY15

GeneralFundDeficit

$16,442

$23,497

$26,067 $25,427

($641)

$7,054

$2,571

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

FY13 FY14 FY15 FY16

(Thousands)

Cumulative Deficit Annual Deficit

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•

PoliceandFireemployeeassociationshaveagreedtosubstantialpensionreformcostsavingsofabout$6.0minFY13

• Havenotyetreachedagreementwithlargestemployee

associationthatwouldsaveanother$3.9mannually($12.2moverallfunds)

• TheStatecontrolledpensioncontributionrate(CalPERS)hastemporarilydeclinedbyabout$3m

• TheCityanditsoperationsstaywithinbudget

• Expenses have declined $9.4m from last projection

ExpenseSituationHasImproved

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• Anumberofmedium-sizedrevenuesareshowinglong-termweaknesses

• Utilityuserstelephonetaxdownduetochangingnatureof

phoneservice

• Pipelinefranchisefeedownduetolowpriceofnaturalgas

• RedevelopmentAgencypass-throughpropertytaxrevenue

(orequivalent)hasdeclined

• Revenues have declined $11.8m from last projection

RevenueSituationHasWorsened

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FY13ShortfallIncreasedby$2.4Million

• Expenseshavedeclined$9.4mfromlastprojection

• Revenueshavedeclined$11.8mfromlastprojection

 

Projectionswillbeperiodicallyupdated

FY13StructuralDeficit

CurrentProjection $16.4m

Aug.2011Projection $14.0m

Difference $ 2.4m

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• Pre-recessionrevenuegrowthunlikely

• Nationalandglobaleconomiesweak&vulnerable

• Financialfuturemaywellbeworsethancurrentlyprojected

• Uncertaintyconcerningunfundedandunderfundedexpenses,interfundexpenses,andpayincreasesinthefuture

•

Changingcommunityviewofgovernment–moredifficulttogetrevenueincreases

• Manycitiesareworseoff.OthershavenotbeenasfiscallyresponsibleasLongBeachanddon’thaveitsresources

 

ALong-TermProblem

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• Currentservicelevelsareunsustainable

• Citymustadapttoaneweconomicreality

TheBottomLine

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• Reducespendingandincreaseefficiency

• Expandrevenuebase

•Reducespendinggrowth

• Developandimplementalong-termfinancialandeconomicplanthatimprovesLongBeach’seconomicandfinancialhealth

ActionNeeded

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• Strategiesforfutureeconomicandrevenuegrowth

• Strategiesforbudgeting,prioritizing,andright-sizing

•

Approachestoprovidefinancialflexibilitytomeetadditionalchallengesandopportunities

Long-RangeFinancialPlanRecommended

Examplesofpotentialcontent:

-Addressinglossofsalestaxtoneighboringcities

-Analyzingthelong-termfinancialimpactofproposedCouncilactions

-Identifyingandaddressingcapitalneeds

-StrategiesthatincreaseCityrevenues

-Improvinginformationforsettingprioritiesandavoidingout-of-cyclebudgetspendingdecisions

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• Worldclassport-akeycomponentoftheeconomy

• AsuccessfulairportservingtheCity

•

ImprovementsanddevelopmentdonebytheformerRedevelopmentAgencyoftheCityofLongBeach

• Oilrevenues–avitalsourceofbothon-goingandone-timerevenue

• FiscaldisciplineexercisedbyCityCouncil 

BuildOnASolidFoundation

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• ActualFY14andFY15budgetreductionsmaybeworse,ratherthanbetter,thantheseprojections

• Determineserviceprioritiesforabudgetthatrequiresmajorcuts

 – Includesdeterminingthepolicestaffinglevelandwhentoconductanacademyaspartoftheoverallservicepriorities

ServicePriorities:DifficultDecisions

FY13 $16.4m(63%ofcuts)

FY14 $7.1m(27%ofcuts)

FY15 $2.6m(10%ofcuts)

3-Year Total $26.1m

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•

Abudgetapproachthatassignsbudgetreductionsinamannerthatkeepsservicesatthesamepercentageofthebudgetasthepreviousyear.Itmaintainsrelativepriorityofservicesastheavailabledollarschange

•

AdoptedinFY11torecognizethatpublicsafety,qualityoflife,andlegally-requiredadministrativefunctionsareallessentialtoahealthycity

• RecognizesthehighpriorityofPoliceandFire,butalso

recognizesthattheyarenottheCity’sonlypriority;otherservicesalsoimpactpublicsafety

• WithoutProportionateShare,PoliceandFirewereonatrendwheretheywouldeventuallybe100%ofthebudget

ProportionateShareIsValuable

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• ThebasicissuessupportingProportionateSharearestillpresent,but….

• ResourcesforservicesarenowreachingcriticallylowlevelsanditisappropriatetolookatwhetherProportionateShareshouldbeadjusted

• ThebudgetdevelopmentprocesswillprovidetheCityManagerwithinformationtoallowmodificationof

ProportionateShare

• TheCityManagerwillmodifyProportionateShare,ifdeemedappropriate,tobestmeetCouncil’sgoalsandpriorities 

ProportionateShareReview

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FY 13 FY 14 FY 153-Year

Reduction

Police $8.9M $4.1M $1.0M $14.0M

Fire 1.1M 1.3M 1.1M 3.5M

PublicWorks 1.7M 0.5M 0.2M 2.4M

Parks,Rec.&Marine 1.8M 0.4M 0.0M 2.2M

MayorandCouncil 0.3M 0.1M 0.0M 0.4M

LibraryServices 0.9M 0.2M 0.0M 1.1M

AllOthers 1.7M 0.5M 0.2M 2.4M

Total $16.4M $7.1M $2.6M $26.1M

3-YearTargets:ProportionateShare

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PoliceAndFireShareOfTheBudget

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ImpactOfExemptingPolice&Fire

8% 8%

9%

9%

7%

22%

25%

27%

23%

24%

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Parks, Rec,&Marine

Public Works Mayor andCouncil

Library Services Others

     M     i     l     l     i    o    n    s

Proport ionate Share Police & Fire Exempt

3-yearImpactsFromExemptingPolice&Fire:FY13–FY15

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• ProportionateShare

• Over3years,reductionis$1.1million

• ForGeneralFund(GF),equivalenttooperatingexpenseof3of11branchlibraries

• Police&FireExempt

• Over3years,reductionis$2.9million

• ForGF,equivalenttooperatingexpenseof8of11branch

libraries

EquivalentImpactsForLibrary

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• ProportionateShare

• Over3years,reductionis$2.3million

• ForGF,equivalentto50%ofthesidewalkprogramand100%oftreetrimmingcontract,graffitiremoval,andanydiscretionaryinfrastructurefunding

• Police&FireExempt• Over3years,reductionis$7.1million

• ForGF,equivalentto50%ofthesidewalkprogram,100%oftreetrimmingcontract,graffitiremoval,anydiscretionaryinfrastructurefunding,75%ofemergencystreetrepair,100%ofpotholerepair,curbpainting,lanestriping,signreplacement,trafficstudies,newsignaldesign&installation,newPreferentialParkingDistricts,andalladministrativestaffingoftheStormwaterManagementprogram

EquivalentImpactsForPublicWorks

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• ProportionateShare

• Over3years,reductionis$2.2million

• ForGF,equivalenttoeliminationofprogramcostsfor5ofthe10neighborhoodparksand5of11communityparks,whichprovideafterschoolandsummerprogrammingforyouthandteens.Reductioninpooloperations,seniorprograms,andyouthsports

Police&FireExempt

• Over3years,reductionis$6.3million

•

ForGF,equivalenttoeliminationofprogramcostsofall10neighborhood,all11communityparks,and2ofthe5regionalparks,whichprovideafterschoolandsummerprogrammingforyouthandteens.Includestheeliminationofpools,seniorprograms,culturalprograms,gyms,adaptiverecreation,andyouthsports

EquivalentImpactsForParks&Rec.

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• ProportionateShare

• After3years,reductionis$36,200

• Equivalenttotheexpensefor0.4FTE

• Police&FireExempt

•

After3years,reductionsis$110,000• Equivalenttotheexpensefor1.2FTE

EquivalentImpactsForCouncil

 Amounts are for each Council member’s budget 

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• DepartmentswillsubmitreductionslargeenoughtoprovideflexibilityfortheCityManagerastowhatprogramreductionsherecommends

• Alloperatingfundswillhavereductiontargetstoreflectthedifficultbudget,notjusttheGeneralFund

• Departmentswillidentifytheserviceimpactsofthereductions

• TheCityManagerwillrecommendservicereductionsandotheractionsthatbalancethebudget,consistentwithoverallCityCouncilgoalsandpriorities

FY13BudgetApproach

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PoliceAcademyOptions

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• Academiesreplacestafflostthroughattrition,uptotheprojectedbudgetedstaffinglevel

• AFireacademyhasbeeninitiatedbymanagementbecauseaFireacademywillnotresultinstaffingaboveprojectedbudgetedlevels

• APoliceacademyhasnotbeeninitiatedbymanagementbecausethereisnocertainwayoffundingaPoliceacademywithintheprojectedPolicebudget

Police&FireAcademyBackground

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• Option1:100%ofcost(tomaintainpolicestaffing)shiftedtootherdepartments

• Option2:50%ofcostshiftedtootherdepartments.One-timefundsmaysupplement

• Option3:100%ofcostfundedbynewtaxrevenue.One-timefundsmaysupplement

PoliceAcademyPlanConceptOptions

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PoliceStaffing

Option 1

100%

Cost Shifting

Option 2

Partial

Cost Shifting

Option 3

New

Revenue

Budgeted FTE 835 786 835

Additional Cuts

to Others$14M $6.5M $0

One-Time

Transition$0 $3.5M $22M

New Tax

Revenues$0 $0 $14M

FY13-FY15Cost&SourceOfFundsForPoliceStaffing

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• ThedecisionislikelybasedonbalancingthepolicestaffinglevelwiththerestofCityCouncil’sprioritiesandwithothercityservices

• ItisrecommendedthatCityCouncilmakethatdecisionduringthenormalbudgetadoptionprocess(September),whenthefinancialsituationandserviceprioritiescanbeconsideredatthesametime

• ASeptemberdecisiontoholdaPoliceacademymeansofficersonthestreetasearlyasOctober2013

PoliceAcademyRecommendation

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• ReviewedtheCity’sfiscaloutlook

• Identifiedrecommendedsteps:reducespending,increaserevenues,reducespendinggrowth,andimplementfinancialplan

• ReviewedtheFY13budgetapproach

• Presentedplanoptionsforthepoliceacademy

• WillkeepCityCouncilapprisedofdirectionandanyupdatetotheprojection

SummaryofDiscussion

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FiscalOutlook:

Challenges&DecisionsMarch6,2012