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November 28, 2023
ITEM TITLE
Long-Term Financial Plan: Accept the General Fund Long-Term Financial Plan for Fiscal Years 2025-2034 Report Number: 23-0256
Location: No specific geographic location
Department: Finance
Environmental Notice : The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Accept the General Fund Long-Term Financial Plan – Fiscal Years 2025-2034 report
SUMMARY
The City of Chula Vista Fiscal Years 2025 – 2034 General Fund Long-Term Financial Plan (LTFP) serves as a long-range fiscal planning tool to identify financial trends, identify projected budgetary surpluses or shortfalls, and encourage discussion to proactively address the City’s long-range needs. The goal of the LTFP is to assess the City’s ability over the term of the plan to: maintain current or expand service levels; preserve the City’s long-term fiscal health; and strategically maintain the City’s reserve funds to meet the City’s reserve policies thresholds. The LTFP served as a guideline for the development of the current Fiscal Year (FY) 2023- 24 General Fund budget but is only applicable for the City’s General Fund. Information related to the City’s non-General Fund funds can be found on the City’s website within the FY 2023-24 Adopted Budget.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the proposed activity consists of a governmental fiscal/administrative activity which does not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA.
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BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable
DISCUSSION
The City of Chula Vista Fiscal Years 2025 – 2034 General Fund LTFP serves as a long -range fiscal planning tool to identify financial trends, identify projected budgetary surpluses or shortfalls, and encourage discussion to proactively address the City’s long -range needs. The LTFP focuses on baseline revenues and expenditures that are essential for the City to achieve the City’s strategic goals over the next ten years. These goals include:
• Providing the highest level of municipal services based upon available resources • Maintaining safe and appealing neighborhoods
• Providing funding for City infrastructure
• Continuing to expand the City’s economic development and financial base
In development of the LTFP projections, staff reviewed historical budgeted and actual figures, reviewed current data, and researched current financial trends. City staff also worked closely with the economic consulting firm Beacon Economics to develop the economic assumptions and growth rates for Property Tax, Sales Tax, Measure P Sales Tax, and Measure A Sales Tax revenues, as well general economic conditions.
It is important to emphasize that the LTFP is not a budget. It does not make expenditure decisions but rather highlights the need to prioritize the allocation of City resources to ensure the continuation of core City services. The purpose of the plan is to provide the City Council, key stakeholders, and the public an overview of the City’s fiscal he alth based on various financial and service level assumptions over the next ten years; and allow for the discussion of necessary steps to be initiated during the development and implementation of future budgets. The LTFP is intended to look beyond the annual budget cycle and serve as a planning tool to bring a long -term perspective to the budget process. Should projected expenditures exceed projected revenues in any given year; the City Manager will need to identify steps to mitigate the shortfalls prior to presenting a balanced budget to the City Council for consideration during the annual budget development process.
Summary of Financial Projections
Based on projections from the LTFP, overall General Fund revenues are anticipated to increase from FY 2025 to FY 2027. However, General Fund revenues are anticipated to decrease in FY 2028 from prior years due to the scheduled conclusion of the voter approved Measure P Sales Tax. FY 2027 includes a partial year of Measure P revenues and FY 2028 is the first full year of excluding Measure P revenues from the General Fund revenue totals. The projected revenues also include revenues from the Measure A Sales tax approved by Chula Vista voters in FY 2019. Revenues from Measure A are continued throughout the term of the LTFP as this sales tax does not have sunset date. General Fund revenues resume the trend of moderate increases from prior years in FY 2029.
General Fund expenditures are anticipated to increase through FY 2027 and decrease slightly in FY 2028 due to the scheduled conclusion of Measure P Sales Tax and the elimination of the related transfers out from the General Fund to the Measure P Sales Tax Fund. In FY 2029, General Fund expenditures are anticipated to resume increasing through the term of the LTFP.
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Based on baseline projections required to maintain current service levels in the General Fund, growth in expenditures is anticipated to outpace the growth in revenues from Fiscal Year 2025 to Fiscal Year 2027.
This structural shortfall is projected for t he first three years of the ten -year LTFP period. As shown on the following summary table, the overall General Fund shortfall is projected to fluctuate beginning in FY 2025 at approximately $2.1 million and ending in FY 2027 at approximately $0.7 million. General Fund surpluses are projected for FY 2028 at $1.1 million through 2034 at $7.5 million.
The following table presents the 10-year financial forecast for the General Fund for FY 2025 through FY 2034.
Additional information related to forecasted revenues and expenditures is provided within the attached report.
Adopted
(In Millions)
Forecasted (In Millions)
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 (1)
$207.3
$221.1
$231.7
$234.2
$219.2
$226.4
$233.9
$241.6
$249.6
$257.8
$266.4
Other Revenues (2) 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 (3)
-
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 (4) 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 (3)
-
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)
$0.0
$(2.1)
$(0.2)
$(0.7)
$1.1
$1.0
$1.0
$2.1
$3.2
$3.6
$7.5
Surplus/(Deficit) as a
% of Budget
(0.8)% (0.1)% (0.3)% 0.4% 0.3% 0.3% 0.7% 1.0% 1.2% 2.3% 1) Major Discretionary Revenues is the total of the following budget revenue categories: Property Tax, Sales Tax, Measure P Sales Tax, Measure A Sales Tax, Property Tax in lieu of Vehicle License Fees (VLF), Franchise Fees, Transient Occupancy Tax (TOT), and Utility Users’ Tax (UUT).
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2) Other Revenues is the total of the following budget revenue categories: Development Revenue, Licenses and Permits, Fines, Forfeitures & Penalties, Use of Money and Property, Other Local Taxes, Police Grants, Other Agency Revenue, Charges for Services, Inte rfund Reimbursements, Other Revenues - Miscellaneous, and Transfers from Other Funds.
3) New Development Revenues & New Development Expenditures include revenues and expenditures projected for the Otay Ranch Village 8 West Development, Millenia Library and Bayfront Fire Station anticipated to come online during the LTFP term.
4) Other Expenditures is the total of the following expenditure categories: Supplies and Services, Utilities, Other Expenses, Equipment, Internal Services, and Transfers/Debt Service.
It should be noted the projections within the LTFP do not incorporate any economic downturn during the LTFP period. Any economic downturn, depending upon the breath and duration of the downturn, would negatively impact the projections within the LTFP.
LTFP Report Outline (Attachment 1)
The LTFP report includes a brief overview of the current economic environment and information on potential factors that could impact the City’s fiscal position in the near-term and long-term.
Following the economic updates, information will be provided on the major revenue and expenditure categories shown within the LTFP. This information will provide brief descriptions of the revenues and expenditures, assumptions, and highlight certain factors which could impact th e revenues and expenditure projections.
Financial projections for the term of the LTFP will be presented following the highlighted revenues and expenditures. Significant results of the financial projections will be noted following the financial table.
Finally, the LTFP presents potential mitigation actions for discussion. No single, specific action is identified as a solution to resolving the City’s projected shortfalls. Based upon discussion and input from the City Council and the public, City staff ca n develop additional information related to the identified actions for consideration.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property h oldings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
There is no current year fiscal impact related to this report on the General Fund.
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ONGOING FISCAL IMPACT
Staff will monitor and incorporate impacts to the General Fund LTFP in future quarterly budget monitoring reports to the City Council.
ATTACHMENTS
1. Fiscal Years 2025-2034 General Fund Long-Term Financial Plan Staff Contact: Sarah Schoen, Director of Finance/Treasurer Ed Prendell, Budget and Analysis Manager