1 Overview of Financial Forecast
Model and Fiscal Outlook
February 4, 2025
2/4/2025
8 (25-053)
2 Presentation – Table of Contents
• Purpose of a Forecast Model
• Baseline Forecast & Model Assumptions
• Major Drivers & Indexes
Understanding the
City’s Forecast Model
• Revenue & Expense Trends
• Annual Operating Surplus/Deficit
• Fund Balance
10-Year Baseline
Forecast
• Changed Assumptions
• Baseline vs. Scenario ComparisonScenario Forecast
• Strengths & Opportunities
• Challenges & ConcernsFiscal Outlook
3 UFI – Financial Advisors & Consultants
Financial Forecast Modeling
- Forecast modeling for California
municipalities since 2012.
- UFI currently provides active forecasting
services to fifteen municipalities in
California, including the following:
- City of Alameda
- City of Corona
- City of Culver City
- City of El Segundo
- City of Ontario
- City of Pomona
Financial Advisory Services
- UFI is a full-service financial advisory firm
that has served California municipalities
since 1972.
- The leading municipal advisor since 2011
based on number financings
4 UNDERSTANDING CITY’S FORECAST MODEL
5 Developing a Forecast Model
Standardized Revenue & Expense Categories.
Model uses standardized revenue and expense
categories that correlate with available
economic data, projections, and variables
appropriate for driving municipal forecasts.
Integration of City’s Historical Financial Data.
Model integrates 10 years of annual financial
data from the City’s general ledger.
Baseline Forecast with Fund Balance Allocation.
Model produces a 10-year baseline forecast of
revenues, expenses, cash flows and fund
balance for purposes of analysis and
comparison with “what-if” scenario forecasts.
“What-if” Scenario Forecasts, Including Built-in
Modules. Model enables the City to create
“what-if” scenario forecasts to compare against
the baseline, allowing the City to make more
informed and fiscally sustainable financial
decisions.
Tailored Forecasting
Algorithms
UFI uses econometric data from
Moody’s Analytics, U.S. Précis® Metro
forecast service, combined with a
variety of city, regional and state
financial projections and indicators to
create forecasting algorithms that
drive each revenue and expense
category in the City’s baseline
forecast.
The econometric data is statistically
correlated with outputs from the
City’s historical financial data to
create four custom forecast trendlines
(aggressive, average, conservative and
pessimistic).
6 Huntington Beach Forecast – General Assumptions
• City’s baseline forecast built around FY 2025
General Fund budget adopted by the City
Council.
• Base Salaries. Includes current MOUs with
long-term assumption that average annual
growth aligns with CalPERS growth
assumption (2.85% per annum).
• CalPERS UAL. Incorporates amortized loss
basis from FY22 (-6.2% return) and gain basis
from FY23 (+9.5%).
• Homeless Program. Assumes General Fund
will pickup program costs beginning FY26.
• ROPS Waterfront Revenues. Treated as one-
time revenues used for one-time expenses.
What is a “Baseline” Forecast?
Neutral, fiscal assessment and
decision-making tool that
establishes a common
understanding of the City’s status
quo fiscal outlook:
“If the City makes no changes to its
organization, operations or service
levels, and there are no significant
external economic impacts to the
City (other than what’s known
today), what is the predicted
condition of the City’s finances over
the next ten years?”
7 Huntington Beach Forecast – Fiscal Issues Not In Model • Underfunding of Equip. Replacement.
City’s projected schedule for annual
equipment replacement is currently
underfunded.
• Underfunding of Critical Infrastructure.
City’s recent Infrastructure Report Card
identified critical infrastructure projects
that are currently unfunded.
• Restoration of Departmental Cuts. In
prior years, operating cuts have been
made to various departments affecting
service delivery and/or quality.
• EMS Revenue Risks. Revenues from the
Voluntary Rate Range Intergovt. Transfer
Program (VRRP IGT) that helps offset
EMS service costs to Medi-Cal patients
is vulnerable to changes in federal
appropriations and addtl. participants.
What-If Forecasting Enhances
Prioritization & Accountability
California cities operate within a
highly-constrained revenue
environment. With no rate-making
authority and no taxing authority
without voter approval, cities must
largely operate within an existing
revenue structure. This makes revenue
forecasting essential for good fiscal
management.
However, revenue forecasting alone is
insufficient. Forecast modeling with
“what-if” scenario capacity enables
cities to evaluate and align competing
community priorities with constrained
revenue capacity, enhancing
accountability based on transparent
and deliverable outcomes.
8 Huntington Beach Forecast - Major Drivers & Indexes
Key Categories & % of Total Historical
AAGR
Forecast
Trendline
Forecast
AAGR
Revenues 4.18% 3.03%
Property Taxes (35%) 5.41% average 3.96%
Sales & Use Tax (17%) 3.72% average 3.10%
Cost Recovery & Earnings (12%) 2.74% average 2.62%
Permits, Fees & Charges (11%) 2.84% average/consv. 1.26% Utility User Tax (7%) 1.76% average 1.74%
Expenses 4.34% 2.70%
Salaries & Wages (40%) 2.83% MOU or 2.85% 2.95%
Transfers Out* (17%) 27.77% -- 2.43%
Pension (Normal & UAL) (12%) 0.87% average 3.26%
Benefits (excl. pension) (11%) 4.71% 2 x CPI 4.11%
Supplies & Equipment (8%) 2.00% average 2.61%
* Transfers Out include Equipment Fund, Infrastructure Fund, Self-Insurance Fund and Homeless Program 9 10-YEAR BASELINE FORECAST
10 Baseline Forecast – 10-Year Projections (2025-35)
BASELINE FORECAST CURRENT
FISCAL YEAR FORECAST FISCAL YEARS
-1 0 1 2 3 4 5 6 7 8 9 10
Category/Type Trendline
(expand columns to include prior fiscal years)
Forecast
AAGR FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035
REVENUES
1 Property Taxes (incl. VLF In-Lieu) 4.05% 105,665,647$ 108,087,472$ 112,722,110$ 117,364,341$ 121,975,344$ 126,428,753$ 131,721,180$ 137,128,896$ 142,826,281$ 148,434,943$ 154,411,518$ 160,732,255$ 2 Sales & Use Taxes 3.10% 51,421,440 53,488,453 55,254,756 56,976,501 58,694,841 60,431,265 62,306,990 64,208,970 66,230,964 68,192,651 70,309,115 72,569,839 3 Utility User Tax (UUT) 1.74% 23,282,648 23,000,000 23,398,448 23,794,717 24,176,558 24,579,680 25,001,564 25,433,717 25,894,028 26,338,928 26,819,904 27,327,435 4 Transient Occupancy Tax (TOT) 3.26% 17,398,883 16,780,000 17,457,781 18,099,547 18,870,220 19,406,309 19,998,012 20,593,036 21,218,239 21,814,570 22,452,142 23,126,022 5 Business License/Operations Tax 0.19% 2,900,681 2,705,000 2,719,048 2,728,596 2,735,984 2,741,342 2,744,957 2,748,130 2,750,131 2,752,420 2,755,160 2,756,604 6 Other Taxes or Assessments 2.91% 1,654,805 1,565,000 1,649,427 1,739,911 1,792,289 1,845,765 1,889,400 1,930,259 1,968,109 2,005,663 2,043,432 2,082,250 7 Franchise Fees 3.02% 9,704,587 10,620,000 10,872,577 11,123,269 11,370,031 11,712,073 12,081,321 12,469,652 12,896,936 13,321,183 13,794,242 14,301,678 8 Permits, Fees & Chrgs. for Service 1.26% 30,539,144 33,225,232 33,928,676 34,389,501 34,755,859 35,179,270 35,592,669 35,977,072 36,348,360 36,760,364 37,221,596 37,670,772 9 Cost Recovery, Earnings & Misc. 2.62% 39,667,092 37,936,706 39,055,162 40,205,118 41,233,217 42,289,827 43,375,279 44,473,319 45,605,566 46,737,922 47,912,222 49,124,852 10 Annual Transfers In & Variable Revenues 0.31% 6,068,195 7,012,816 7,033,891 7,054,939 7,075,125 7,095,549 7,116,887 7,138,564 7,161,752 7,183,854 7,207,932 7,233,749 11 One-Time Revenues, Transfers & Adjustments 9,779,076 7,274,566 6,742,718 2,400,000 2,400,000 2,400,000 2,400,000 1,689,515 - - - - (Less One-Time Revenues, Transfers & Adjustments) (9,779,076) (7,274,566) (6,742,718) (2,400,000) (2,400,000) (2,400,000) (2,400,000) (1,689,515) - - - - TOTAL BASELINE REVENUES 3.03% 288,303,122$ 294,420,679$ 304,091,877$ 313,476,440$ 322,679,467$ 331,709,834$ 341,828,260$ 352,101,614$ 362,900,365$ 373,542,498$ 384,927,266$ 396,925,456$
EXPENSES
20 Salaries & Wages 2.95% 115,193,719$ 120,490,673$ 125,241,976$ 128,723,998$ 132,392,632$ 136,165,822$ 140,046,548$ 144,037,875$ 148,142,954$ 152,365,028$ 156,707,432$ 161,173,593$ 21 Benefits 4.11% 30,376,698 33,257,010 35,186,312 36,642,481 38,144,932 39,679,403 41,244,027 42,835,513 44,462,506 46,153,865 47,915,295 49,749,505 22 Pension & OPEB 3.26% 36,741,128 36,043,034 41,913,930 44,818,873 47,753,102 50,685,006 50,117,471 49,398,883 49,285,604 49,206,695 49,115,200 49,008,392 23 Contractual Services (labor) 3.29% 20,875,786 22,834,822 23,589,990 24,418,848 25,214,529 26,010,106 26,874,847 27,756,162 28,676,597 29,587,428 30,547,368 31,553,061 24 Operating Supp. & Equip. (non-labor) 2.61% 23,142,438 23,504,181 24,160,509 24,869,936 25,560,955 26,232,960 26,888,754 27,555,869 28,247,910 28,935,424 29,653,717 30,400,501 25 Insurance & Liability 2.45% 75 500,000 513,070 526,123 538,642 551,309 564,542 577,985 592,366 606,073 621,005 637,016 26 Debt Service -13.44% 7,250,503 6,503,248 6,152,681 6,148,446 5,470,406 5,468,885 5,325,921 3,920,794 2,961,644 1,072,844 1,066,900 1,065,900 27 Capital Asset Investments (non-CIP) 118,466 - - - - - - - - - - - 28 General Admin, Overhead & Cost Allocation 1.55% 3,343,454 5,220,920 5,309,492 5,397,557 5,483,732 5,569,554 5,655,870 5,741,622 5,828,325 5,914,425 6,001,275 6,089,019 29 Annual Transfers Out & Variable Expenses 1.79% 47,629,102 51,416,393 49,367,371 50,602,165 51,796,400 52,990,857 54,272,449 55,574,094 56,957,103 58,292,539 59,737,092 61,275,680 30 One-Time Expenses, Transfers & Adjustments 7,597,695 225,000 6,742,718 2,400,000 2,400,000 2,400,000 2,400,000 1,689,515 - - - - (Less One-Time Expenses & Adjustments) (7,601,245) (525,000) (6,742,718) (2,400,000) (2,400,000) (2,400,000) (2,400,000) (1,689,515) - - - - TOTAL BASELINE EXPENSES 2.70% 284,667,818$ 299,470,281$ 311,435,332$ 322,148,426$ 332,355,330$ 343,353,902$ 350,990,429$ 357,398,796$ 365,155,008$ 372,134,319$ 381,365,284$ 390,952,668$ FUND(S) BALANCE - END OF FY $ 132,319,000 134,018,964$ 126,675,509$ 118,003,523$ 108,327,659$ 96,683,592$ 87,521,423$ 82,224,240$ 79,969,597$ 81,377,776$ 84,939,757$ 90,912,545$ Non-spendable 148,000 148,000 148,000 148,000 148,000 148,000 148,000 148,000 148,000 148,000 148,000 148,000 Restricted 21,670,000 21,670,000 21,670,000 21,670,000 21,670,000 21,670,000 21,670,000 21,670,000 21,670,000 21,670,000 21,670,000 21,670,000 Committed 52,023,000 52,844,714 54,838,889 56,624,404 58,325,555 60,158,650 61,431,405 60,406,240 58,151,597 59,559,776 63,121,757 68,091,778 Assigned 58,478,000 58,478,000 50,018,620 39,561,118 28,184,104 14,706,941 4,272,018 - - - - 1,002,767 Other Fiscal Policies (% of Total Expenses) - - - - - - - - - - - - [reserved] (% of Total Expenses) - - - - - - - - - - - - UNDESIGNATED FUND BALANCE -$ 878,251$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 11 $150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
Total Revenues & Expenses
10-Year Prior and Baseline Forecast
Surplus/Deficit Baseline Revenues 1-Time Revenues
Baseline Expenses 1-Time Expenses
Baseline Forecast – Revenue & Expenses Trends
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
12 $(15,000,000)
$(10,000,000)
$(5,000,000)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
Annual Operating Surplus/(Deficit)
10-Year Prior and Baseline Forecast
Baseline Forecast – Annual Surplus/(Deficit)
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
13 (60,000,000)
(50,000,000)
(40,000,000)
(30,000,000)
(20,000,000)
(10,000,000)
-
10,000,000
Cumulative Operating Surplus/(Deficit)
Baseline Forecast
Baseline Forecast – Cumulative Surplus/(Deficit)
Annual Operating
Deficits Until FY 2033
Debt Obligations
Expire ($4.5m/yr.)
14 $-
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
Year End Fund Balance & Allocation
10-Year Prior and Baseline Forecast
Non-spendable Restricted Committed Assigned Undesignated Baseline Forecast – Fund Balance Impact
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
15 SCENARIO FORECAST
16 Scenario Forecast – Changed Assumptions
1. ROPS Waterfront Revenues. Assumes remaining one-time ROPS Waterfront Revenues of $18 million are used to pay ongoing General Fund operating expenses between FY 2026 and FY 2031 (instead of being used for one-time expenses).
2. Pension (UAL) Management. Assumes two additional
payments to CalPERS to prepay/reduce City’s increased UAL. $5 million at end of FY 2025 and $5 million at end of FY 2026. Saves General Fund $15 million over the forecast
period.
17 $150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
Total Revenues & Expenses
10-Year Prior and Baseline Forecast
Surplus/Deficit Baseline Revenues 1-Time Revenues
Baseline Expenses 1-Time Expenses
Baseline Forecast – Revenue & Expenses Trends
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
18 $150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
Total Revenues & Expenses
10-Year Prior and Scenario Forecast
Surplus/Deficit Baseline Revenues 1-Time Revenues
Baseline Expenses 1-Time Expenses
Scenario Forecast – Fund Balance Impact
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
19 $(15,000,000)
$(10,000,000)
$(5,000,000)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
Annual Operating Surplus/(Deficit)
10-Year Prior and Baseline Forecast
Baseline Forecast – Annual Surplus/(Deficit)
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
20 $(15,000,000)
$(10,000,000)
$(5,000,000)
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
Annual Operating Surplus/(Deficit)
10-Year Prior with Scenario vs. Baseline Forecast
Scenarios Forecast Baseline Forecast
Scenario Forecast – Annual Surplus/(Deficit)
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
21 (60,000,000)
(50,000,000)
(40,000,000)
(30,000,000)
(20,000,000)
(10,000,000)
-
10,000,000
Cumulative Operating Surplus/(Deficit)
Baseline Forecast
Baseline Forecast – Cumulative Surplus/(Deficit)
Annual Operating
Deficits Until FY 2033
Debt Obligations
Expire ($4.5m/yr.)
22 (60,000,000)
(50,000,000)
(40,000,000)
(30,000,000)
(20,000,000)
(10,000,000)
-
10,000,000
Cumulative Operating Surplus/(Deficit)
Scenario vs. Baseline Forecast
Scenarios - Cumulative Surplus/(Deficit) Baseline - Cumulative Surplus/(Deficit) Scenario Forecast – Cumulative Surplus/(Deficit)
Annual Operating
Deficits Until FY 2033
Debt Obligations
Expire ($4.5m/yr.)
23 $-
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
Year End Fund Balance & Allocation
10-Year Prior and Baseline Forecast
Non-spendable Restricted Committed Assigned Undesignated Baseline Forecast – Fund Balance Impact
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
24 $-
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
Year End Fund Balance & Allocation
10-Year Prior with Scenario vs. Baseline Forecast
Non-spendable Restricted Committed
Assigned Undesignated Baseline Forecast
Scenario Forecast – Fund Balance Impact
Covid-19
Pandemic
& Recovery
ARPA Local Fiscal
Recovery Funds
Annual Operating
Deficits Until FY 2033
Growth in Transfers Out
(infra., equip., liability)
Debt Obligations
Expire ($4.5m/yr.)
25 FISCAL OUTLOOK
26 Fiscal Outlook – Strengths & Opportunities
Revenue Diversity
• Good diversity of tax
base and not overly
reliant on any single-
source of revenue.
• Still unused local
sales tax capacity.
• Baseline revenues
projected to grow
slightly faster than
baseline expenses.
Fitch rated City is
72 nd percentile for
economic metrics.
Debt Service
• Current debt service
primarily for
equipment and
facility related leases
(except for POB).
• Expiring annual debt
service creates fiscal
capacity in later
years of forecast for
strategic investment.
Fitch put City mid-
range for long-term
liability burden.
Reserves
• Total General Fund
reserves at 37% of
baseline expenses.
Contributed to “AAA”
financial resiliency
rating by Fitch.
• Baseline forecast
projects dip to 20%.
• Mitigation of annual
deficits during first
half of forecast is
important to reserve
maintenance.
27 Fiscal Outlook – Challenges & Concerns
Annual Operating
Deficits/Fund
Balance
• Annual operating
deficits through FY33
caused by current
gap between
revenues/expenses +
new UAL.
• Opportunities to
reduce annual
transfer for equip. &
infra.; spread costs
through financing.
Pension
Management
• Rising UAL converted
to level debt service
with POB in FY21.
• CalPERS -6.2% FY22
returns created
significant new
unfunded liability.
• Use of City’s pension
reserves to
proactively manage
UAL is opportunity
for solid savings.
Labor Costs
• City’s historical labor
cost growth has
been moderate.
• Salaries & Wages
2.83% prior and
forecasted at
2.95%.
• Continued good
management of
labor/benefit costs
critical to sustain
fiscal health (over
50% of expenses).
28 QUESTIONS?