Item 8.1: General Fund Long
Term Financial Plan for
2025-2034
November 28, 2023
General Fund
Long-Term Financial Plan
2 • Applies to General Fund only
• Projects funding surpluses/shortfalls
• Encourages discussion to proactively
address the City’s long-range funding
needs
• Not a budget, but highlights the need to
plan for the allocation of City resources for
continued delivery of core services at
current service levels
The General
Fund Long-Term
Financial Plan
(LTFP) serves as
a long-range
fiscal planning
tool
L TFP Framework
3 The Big Picture
• Time-Series Econometric Approach
– Vector autoregression captures historical relationships over time – Historical correlations are used to inform and predict the future • Top-Down Modeling Technique
– Forecast U.S. economy, from employment to output
– U.S. forecast guides California model
– California model used to guide San Diego
– San Diego model guides sub-regional forecast
– Forecasts of local population and labor force anchor city and county projections to growth dynamics of local area • Holistic Approach to Revenue Forecasting
– Incorporates broad macro trends in Nation/State
– Combines trends with local-specific performance
– Accounts for previous blips and under-/over-performance 4 National Outlook
5 National Outlook
6 -0.6%
2.7% 2.6% 2.2% 2.1%
4.9%
• U.S. Economy Far From a Downturn
– Solid GDP growth in 2023 fueled by
consumer spending and the tight labor
market
– Unemployment rate of 3.9% as of October
– Continued jobs growth (1.9% YoY in
October)
– Industrial production remains near record
highs
– Profit and wages are rising
– Household debt to disposable income ratio
same as pre-pandemic
– Inflation is easing
National Outlook
7 • Still, There are Headwinds
– More Fed tightening is likely
• Current upper bound of 5.5% on Fed Funds rate may not be restrictive enough to get inflation down to 2%
• Fed’s preferred inflation measure is currently at 3.4% • U.S. economy has weathered rate hikes over past year due to massive government stimulus during pandemic and excess consumer savings
– Limited interest rate stresses
• Sharp rise in cost of capital is causing stress, particularly in real estate • But that stress hasn’t spread to debt markets as overall delinquency rates are at record lows – Economy is at an inflection point
• We are coming off a surge in consumer spending and the decline in many indicators is also a reversion back to pre-pandemic levels and trends -- Fed actions could tip things into a recession, but that is not an imminent possibility right now California Outlook
8 California Outlook
9 • California a Leader in Jobs Creation
– More than 440,000 jobs added since the trough of the
pandemic
• Labor Market is still Strong
– Unemployment rate is 4.7% as of September, up from 4% a year ago, but still low from a historical view
• Home Prices Bouncing Back
– Median sale price for existing single-family homes is more than 40% above pre-pandemic peak (February 2020), and only 6.5% below pandemic peak (March 2022)
• California’s jobs growth a function of its size
– Modest employment growth translates into a large number of new jobs. In percentage terms, California has exhibited the slowest growth among “jobs states” (e.g., TX, FL, NC, WA, AZ, UT) and ranks near the middle of all states
• Lack of Housing Supply will continue to
constrain jobs growth and the labor force
San Diego County & Chula Vista
Housing Sector
10 • Higher interest rates have spurred declines in
transaction activity
• ”Lock-in” effect further slowing home sale activity
• Return to slow growth in 2024, stronger growth
anticipated in 2025 as mortgage rates ease further
• Prices have fallen from their pandemic peak, but
this is coming off rapid growth in 2021 and 2022
• Already low inventory, exacerbated by declining
sales, has already sent prices climbing again past the
pre-pandemic peak
• After weak growth of 1.3% in 2023, prices growth is
expected to accelerate to 6.7% in 2024
Regional Employment Growth From
Pre-Pandemic Peak
11 Local Labor Market at an Inflection Point
After Rapid Growth of Past Two Years
12 Putting the Decline in Consumer Spending
in Context
13 Summary
14 • A recession is not an imminent possibility
• The economy is coming back down to earth after the post-pandemic recovery
• While the labor market is cooling, this is coming off incredible growth during the past two years
• We’re on track for a soft landing; however, overzealous Fed tightening could tip things to a recession
• Overall slower growth is expected in 2024
• Home sales expected to return to growth in 2024 as mortgage rates level off to the 6%-6.5% range
L TFP Assumptions
• Current labor agreements
(MOUs)
• New facilities
• Planned commitments
• Sunset of Measure P Sales
Tax
• No economic
downturns/recessions
15 This Photo by Unknown Author is licensed under CC BY-SA
REVENUES
16 L TFP Revenue Assumptions
17 Revenue Category
FY 2025
Growth Rate
Compared to Adopted FY 2024 Budget
FY 2026 – FY 2034
Growth Rates
Property Tax 7.8% 6.4% – 4.0%
Motor Vehicle License Fee (MVLF) 5.5% 6.4% – 4.0%
Sales Tax 6.8% 4.3% – 3.0%
Measure P (Sales Tax) 8.3% 3.8%; Ends March 2027
Measure A (Sales Tax) 8.2% 4.3% – 3.0%
Franchise Fees 2.0% 2.0%
Transient Occupancy Tax (TOT) 4.7% 7.8% – 2.0%
Utility Users’ Tax (UUT) 0.5% 0.5%
Revenue Projections
(FY 2025 – FY 2029)
18 Revenue Projections
(FY 2030 – FY 2034)
19 EXPENDITURES
20 L TFP Expenditure Assumptions
21 Expenditure Category
FY 2025
Growth Rate
Compared to Adopted FY 2024
Budget
FY 2026
Growth Rate
FY 2027 – FY 2034
Growth Rate
Personnel Services 4.8% Various Various
Health Insurance 5.0% 5.0% 5.0%
Retirement 8.0% 2.3% (0.2)% - 2.6%
Supplies and Services (2.4)% 2.2% 1.9% - 2.7%
Utilities 4.4% 4.9% 4.9%
Internal Services 1.4% 2.0% 2.0%
Pension Related Costs
22 $12.0 $12.0 $12.2 $11.6 $11.9 $14.8
$12.8 $13.3
$13.1
$15.0 $17.8 $19.5
$0.7
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Actual
FY 2024
Adopted
Millions
Normal Costs POB Debt Service UAL Costs
Transfers Out
No Net Impact
Measure A
Measure P
RV Park Sales Tax
Transfers Out
Public Liability Trust
Debt Service
Section 115 Trust
Contribution
23 New Development Expenditures
• Bayfront Fire Station
• Otay Ranch Village 8 West
• Millenia Library
24 Expenditure Projections
(FY 2025 – FY 2029 in millions)
25 Expenditure Projections
(FY 2030 – FY 2034 in millions)
26 SUMMARY
27 Projection Summary
28 Adopted
FY FY FY FY FY FY FY FY FY FY FY
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Revenues
Major Discretionary Revenues 207.3 221.1 231.7 234.2 219.2 226.4 233.9 241.6 249.6 257.8 266.4 Other Revenues 50.9 50.3 52.0 51.8 52.5 52.8 52.9 53.7 54.5 55.3 56.2 New Development Revenues - 2.0 2.7 3.5 3.8 4.0 4.1 4.2 4.4 4.5 4.7 Total General Fund Revenues 258.2 273.4 286.4 289.4 275.6 283.2 290.9 299.5 308.4 317.7 327.2 Year-over-Year Change 5.9% 4.7% 1.1% -4.8% 2.8% 2.7% 3.0% 3.0% 3.0% 3.0% Expenditures
Personnel Services Expenditures 132.9 144.8 153.1 161.7 168.6 175.4 180.8 185.6 190.8 196.2 201.5 Other Expenditures 125.3 126.6 127.7 122.0 98.8 99.4 101.4 103.9 106.4 109.6 109.7 New Development Expenditures - 4.1 5.7 6.5 7.1 7.4 7.7 7.9 8.1 8.3 8.5 Total General Fund Expenditures 258.2 275.5 286.6 290.2 274.4 282.3 289.9 297.4 305.2 314.0 319.7 Year-over-Year Change 6.7% 4.0% 1.3% -5.4% 2.9% 2.7% 2.6% 2.6% 2.9% 1.8% General Fund Surplus / (Deficit) - (2.1) (0.2) (0.7) 1.1 1.0 1.0 2.1 3.2 3.6 7.5 -0.8% -0.1% -0.3% 0.4% 0.3% 0.3% 0.7% 1.0% 1.2% 2.3%
Forecasted (In Millions)
Surplus/(Deficit) as a % of Budget
Projection Summary
29 $250.0
$260.0
$270.0
$280.0
$290.0
$300.0
$310.0
$320.0
$330.0
$340.0
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
FY
2029
FY
2030
FY
2031
FY
2032
FY
2033
FY
2034
Millions
General Fund Forecast
Total General Fund Revenues Total General Fund Expenditures Item 8.1: General Fund Long
Term Financial Plan for
2025-2034
November 28, 2023