FY 2022/23 Year-End Budget
Adjustments for City’s Unfunded
Liabilities and Year-End Audit Entries
City Council Meeting
November 7, 2023
1 Background
Finance Department is working on the year-end closing process Year-End Budget adjustments for FY 2022/23 are required to close FY 2022/23 FY 2022/23 is projected to end with a $16.2M General Fund surplus primarily due to one- time spikes in natural gas prices during Winter 2022-23 and increased Natural Gas and Electric rates resulting in higher Utility Tax and Franchise Fees, as well as Transient Occupancy Tax and Emergency Management Services (EMS) revenues performing better than anticipated
Opportunity to fund the City’s unfunded liabilities –aligning with the City Council’s Strategic goal of Fiscal Stability
2 Funded Status as of
6/30/2023
Unfunded Liabilities
as of 6/30/2023
Description
45%$24.4MWorkers’ Compensation
65%$7.2MGeneral Liability
88%$8.8MRetiree Supplemental
89%$168.3MCalPERS UAL
$208.7MTotal
Strategic Plan Goals
FY 2023-27 Strategic Plan adopted by City Council on October 3, 2023 Eight Overarching Goals to achieve over the next four years Additional financial resources are required to successfully implement unfunded Plan Goals 3 • One Stop Shop
• World-Class Beach Facilities
• Fleet Capital Replacement Plan
• Mobility Master Plan
• 311 System Implementation
• Community-wide Risk Reduction
Program
• PCH Relinquishment
• LA28 as Host City/Olympic Village
• Public Safety Infrastructure
Improvements
• Comprehensive Homeless Response
Plan
• Infrastructure Report Card
Workers’ Compensation
California Workers’ Compensation law provides state mandated benefits to employees for work-related illness or injury
City is self-insured up to $1 million per claim.
Benefits may include payments for medical treatment, salary continuation, Total Temporary Disability (TTD) benefits, and permanent disability benefits. $1.3 million increase in Worker’s Compensation liability primarily due to claims driven by rising medical costs and an expanded list of injuries that are presumed to be work related under California law, such as post-traumatic stress.
Recommended Transfer: $1.5M
$ / %Description
$44.1MTotal WC Liability 6/30/2023
$1.3MIncrease in WC Liability FY 2022/23
45%Funded Status without Transfer ($19.7M)
48%Funded Status with Transfer ($21.0M)
$1.5MRecommended Transfer
General Liability
City is self-insured up to $1 million per claim with $25M in excess coverage per claim/occurrence
$7.1 million increase in General Liability primarily due to liability adjustments made to two large claims
Recommended Transfer: $4.5M
$ / %Description
$20.6MTotal General Liability 6/30/2023
$7.1MIncrease in Liability FY 2022/23
65%Funded Status without Transfer ($13.4M)
87%Funded Status with Transfer ($17.9M)
$4.5MRecommended Transfer
Retiree Supplemental
The City administers a supplemental single-employer defined benefit retirement plan for employees hired prior to 1997
The plan pays a supplemental retirement benefit in addition to benefits from CalPERS Investment held separately in the Supplemental Retirement Trust (SRT) and is managed by the City’s Investment Custodian and subject to Investment Policy set by the SRT board Recommended Transfer: $4.62M –minimum required to avoid drawing funds from Trust Net SRT Liab
(Asset)
SRT AssetSRT
Liab
Funded
Status
Date
$15.2M$59.0M$74.2M79.6%6/30/2022
$8.8M$63.8M$72.6M87.9%6/30/2023 w/o Transfer
$4.2M$68.4M$72.6M94.3%6/30/2023 w/Transfer
Central Library Transformer
Replacement
The electrical equipment at the Central Library failed as of April 14, 2023 resulting in the Library’s closure to staff and patrons.
Temporary power is being supplied through rental equipment while design for custom built switchgear and permanent replacement equipment is ordered and delivered. The preliminary cost for the replacement and installation of the new transformer is estimated to be $2M. Due to increased cost of labor and materials, the final cost may be higher.
During FY 2022/23, Council authorized the use of $3.2M in HB Recovery funding for emergency repairs, infrastructure cost increases, and unscheduled replacement of park equipment.
To preserve the remaining HB Recovery balance of $10.9M, a transfer of $2M from the General Fund to the Infrastructure Fund is recommended to fund the library transformer replacement.
General Fund Adjustments Summary
Recommended transfers totaling $12.62M from the General Fund in FY 2022/23 to fund the City’s unfunded liabilities as listed below – aligning with the City Council Strategic goal of Fiscal Stability.
Estimated FY 2022/23 surplus after appropriation $3.6M (subject to change) AmountFund
$1,500,000Worker’s Compensation
4,500,000General Liability
4,620,000Retiree Supplemental
2,000,000Infrastructure Fund
$12,620,000Total
Other Fund Adjustments
9 Hotel/Motel Business Improvement District Fund (709)
$102k to align budget with actual FY 2022/23 revenues and expenditures. The Hotel/Motel BID Fund is a pass‐thru fund in which the City collects self‐assessed revenues of 4% from the participating hotels and motels and submits them to Visit Huntington Beach per the BID’s agreement.
Downtown Business Improvement District Fund (710)
$9k to align budget with actual FY 2022/23 revenues and expenditures. The Downtown BID Fund is a pass‐thru fund in which the City collects self‐assessed revenues from all Downtown merchants and remits the funds back to the District per the BID’s agreement.
Other Fund Adjustments
10 Bella Terra Parking Structure (711)
$8k to align budget with actual FY 2022/23 expenditures. The City owns the parking structure in the Bella Terra retail center . The City collects a maintenance fee from the owners of the center through a special assessment which is used to fund maintenance and operation expenditures for the structure.
Community Development
$64k Revolving Loan Fund transfer to CDBG Fund to properly code funding & $217K HOME Fund transfer to the proper grant year
Questions?