LODI CITY COUNCIL -
SPECIAL
Carnegie Forum
305 W. Pine Street
AGENDA - Special Meeting
Date: February 26, 2025
Time: 4:00 p.m.
Mayor Cameron Bregman
Mayor Pro Tempore Ramon Yepez
Councilmember Lisa Craig-Hensley
Councilmember Mikey Hothi
Councilmember Alan Nakanishi
Notice Regarding Public Comments
Public Comment may be submitted in the following ways:
• In-person
• Email – [email protected]
> Received no later than two hours prior to the meeting • Mail – City Clerk’s Office, P.O. Box 3006, Lodi, CA 95241 • Hand delivered to: City Clerk’s Office, 221 W. Pine Street, Lodi, CA 95240 > Received no later than two hours prior to the meeting Public comment received via email, mail, or hand delivery will be provided to the City Council and included in the official minutes record of the meeting, but will not be read aloud at the meeting.
A. Call to Order / Roll Call
B. Regular Calendar
B.1 Study Session on the City Long-Range Financial Forecast (CM) Attachment - PowerPoint PresentationAttachments:
C. Adjournment
Pursuant to Section 54954.2 (a) of the Government Code of the State of California, this agenda was posted at least 24 hours in advance of the scheduled meeting at a public place freely accessible to the public 24 hours a day.
______________________________
Olivia Nashed
City Clerk
1 City Council - Special AGENDA February 26, 2025
----------------------------------------------------------------------------------------------------------------------------------------------------- All staff reports or other written documentation relating to each item of business referred to on the agenda are on file in the Office of the City Clerk, located at 221 W. Pine Street, Lodi, and are available for public inspection .
Agendas and staff reports are also posted on the City’s website at www.lodi.gov. If requested, the agenda shall be made available in appropriate alternative formats to persons with a disability, as required by Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Sec. 12132), and the federal rules and regulations adopted in implementation thereof. To make a request for disability-related modification or accommodation contact the City Clerk’s Office as soon as possible and at least 24 hours prior to the meeting date. Language interpreter requests must be received at least 24 hours in advance of the meeting to help ensure availability. Contact Olivia Nashed at (209) 333-6702. Solicitudes de interpretación de idiomas deben ser recibidas por lo menos con 72 horas de anticipación a la reunión para ayudar a asegurar la disponibilidad. Llame a Olivia Nashed (209) 333-6702. ----------------------------------------------------------------------------------------------------------------------------------------------------- Meetings of the Lodi City Council are telecast on SJTV, Channel 26. The City of Lodi provides live and archived webcasts of regular City Council meetings. The webcasts can be found on the City's website at www .lodi.gov by clicking the meeting webcasts link. Members of the public may view and listen to the open session of this meeting at www.facebook.com/CityofLodi/.
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2 AGENDA ITEM B.1
COUNCIL COMMUNICATION
AGENDA TITLE:
Study Session on the City Long-Range Financial Forecast (CM) MEETING DATE:
February 26, 2025
PREPARED BY:
Bobby Magee, Interim Assistant City Manager
RECOMMENDED ACTION:
Study Session on the City Long-Range Financial Forecast.
BACKGROUND INFORMATION:
In October 2024, the City Council authorized an Agreement with Baker Tilly Advisory Group, LP, to provide Long-Range Financial Forecasting services. The purpose of this Council Study Session is to provide information about the City’s General Fund financial forecast and demonstrate this powerful tool.
Staff and Baker Tilly developed a presentation to discuss the current budget, potential budget updates, and the financial opportunities and risks facing the City.
STRATEGIC VISION:
3A. Fiscal Health: Promote City transparency & fiscal fluency.
FISCAL IMPACT:
There is no fiscal impact to receiving and filing the verbal report.
FUNDING AVAILABLE:
Not applicable.
_______________________________________
Scott R. Carney
City Manager
City of Lodi Printed on 2/20/2025Page 1 of 1
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3 City of Lodi
Long-Range Financial Forecast
Lodi City Council Study Session
February 26, 2025
Bob Leland, Special Advisor
Baker Tilly Advisory Group, LP
Model ver. 1.11 (2/14/25)
Baker Tilly Advisory Group, LP
4 Extensive Forecasting Experience
2 • Our Consultant’s Experience
• 50 years in state and local government
finance
• Finance Director for City of Fairfield
(26 years)
• Consultant with Management Partners
and Baker Tilly (13 years)
• Major projects include Stockton
bankruptcy, Town of Paradise recovery
• 43 years of hands-on experience with
long-range forecasting (created fiscal
models for 42 different local agencies
involving over 125 separate forecasts)
• Our Firm’s Experience
• Baker Tilly is the 10th largest
accounting/consulting firm in U.S.
• Public Sector practice works
exclusively with local governments
nationwide, including all the 20
largest California cities
• We’ve developed long-range fiscal
models for over 40 California cities in
the last 10 years
• Basis for our modeling approach was
developed during the extensive
bankruptcy litigation in City of
Stockton’s Chapter 9 proceeding
City retained Baker Tilly to (1) prepare a long-range forecast model to demonstrate impact of various financial scenarios on the General Fund, for ongoing use by the City, and (2) provide outside perspective on City financial assumptions and budgeting 5 Background
3 • Lodi was far-sighted in establishing a Sec. 115 Pension Trust • Provides added interest earnings, overall reserves much higher than most cities • Pension Trust an important level of security to employees that their benefits will ultimately be paid • Lodi has managed its fiscal affairs conservatively
• However, there are service improvements that should be considered for promoting quality of life, boosting local tax base, and improving accountability and productivity • Revenues have typically come in over budget, but by a lesser amount than expenditures have come in under budget
• Thus, ending balances have typically been higher than originally projected, but realistic estimates would give a clearer picture for fiscal planning purposes going forward • New forecast model is a powerful tool for long-range planning • Provides outside perspective and validation for key forecast assumptions, and reasonable expectation of resources available to the City over time • Many alternative scenarios can be examined; provides empirical rationale for important revenue decisions
• Use forecast model to determine timing and magnitude of major policy decisions about new cost commitments and funding mechanisms
6 Budget versus Actual
4 • Revenues have historically come in an
average of 4.8% over budget, but
revenues were actually very close to
budget from FY13-20, but less so since
FY21; only in FY22 were revenues under
budget
• Expenditures overall have historically come
in an average of 7.0% under budget, with
more volatility in recent years
• Personnel costs have been more accurate,
at an average of 3.4% under budget, while
non-personnel costs have been an average
of 11.8% under budget
CAGR=Compound Annual Growth Rate
Includes Funds 100, 101, 103
7 Forecasting Model Process
5 • Baseline Budget
Forecast shows future
inflated costs of
continuing current level
of service, and
projections of existing
revenue sources, using
realistic assumptions
• Potential Budget
Augmentations
identified by staff to
address unfunded
needs of the City are
incorporated into the
model and can be
switched on and off
+ =
• Forecast Model shows
the resulting revenue,
expense and fund
balance trends, and
can easily show the
impact of alternative
assumptions and
scenarios
8 City’s 5-Year Forecast in FY25 Budget
6 • City forecast ended
in FY30
• For comparison
purposes Baker Tilly
extended this to
FY34
• City forecast omitted
peaker plant related
transactions
• Annual shortfall of
$1-1.5 million, with
$6M cumulative
shortfall through
FY30
($ in millions) Bud Bud Proj Proj Proj Proj Proj
Lodi FY25 Budget FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 Property Tax/VLF 21.6 22.9 23.6 24.3 25.0 25.8 26.6 27.4 28.2 29.0 29.9 Sales Taxes 25.9 26.0 26.7 27.5 28.4 29.2 30.1 31.0 31.9 32.9 33.9 Other Taxes 5.9 6.2 6.4 6.5 6.7 6.9 7.2 7.4 7.6 7.8 8.1 EU PILOT 7.6 7.7 7.7 7.8 7.8 7.8 7.9 7.9 8.0 8.0 8.0 CFD Special Tax 0.9 1.0 1.0 1.1 1.1 1.2 1.2 1.2 1.2 1.2 1.3 Other Revenues* 6.6 7.1 7.3 7.4 7.6 7.7 7.9 8.0 8.2 8.3 8.5 Transfers In 7.7 9.0 9.5 9.9 10.3 10.7 11.2 11.6 12.1 12.6 13.1 Total Revenue 76.2 79.8 82.2 84.6 87.0 89.4 91.9 94.5 97.1 99.9 102.7 Personnel 53.7 55.8 58.3 59.7 61.2 62.8 64.3 66.0 67.6 69.3 71.0 Operations 9.0 10.7 11.5 12.3 13.1 14.0 14.9 15.9 17.0 18.1 19.3 Debt 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 Capital - - - - - - - - - - - Transfers Out** 12.1 12.1 12.3 12.4 12.6 12.8 13.0 13.1 13.3 13.5 13.7 Total Expenditures 76.1 79.8 83.2 85.6 88.1 90.7 93.4 96.2 99.1 102.1 105.3 Net Annual 0.2 - (1.0) (1.0) (1.2) (1.3) (1.5) (1.7) (2.0) (2.2) (2.6) Reserves (16%) 12.2 12.8 13.1 13.5 13.9 14.3 14.7 15.1 15.5 16.0 14.9 Pension Trust 17.4 16.8 15.4 14.0 12.4 10.7 8.8 6.6 4.2 1.5 - Other Restricted na na na na na na na na na na na
Available Balance - - - - - - - - - - - Total Fund Balance na na na na na na na na na na na
*Excludes $2.8M in DWR rent FY24-27 and $11.2M peaker plant purchase in FY28; excludes interest income **Operating transfers out to PRCS and Library counted as operations rather than Transfers Out Extension based on growth to FY30
Funds 100, 101, 103 9
Revised Baseline Forecast: Major Assumptions
• 2.0% COLAs plus 0.25% net merit increase offset by turnover savings (w/o labor market adjustments) • 3% vacancy rate (comparable to past experience)
• Maintain current FY25 staffing levels (does affect ability to respond to future workload increases) • Pension scenarios per CalPERS Pension Outlook, assumes 6.8% discount rate but lower average return of 6.2% (more conservative than CalPERS actuarial assumptions) • O&M expense grows at 2.5%
• Interest is 1.5% return on fund balance, 5% on Pension Trust portion • Moderate recessions starting FY27 on 7-year cycle thereafter • Property tax growth averages 4.3% per County assessed values • Sales tax averages 2.2% per 3Q24 HdL sales tax forecast • Transfers In from other funds grows from FY25 base; assumes no GF intrafund transfers in/out • FY26 GF capital outlay at $500K, starting FY26 transfer to Capital Improvements per historical average, $11.2M for peaker plant purchase in FY28; $2.8M rent payments from FY23-27 only • Debt service per debt maturity schedules
• Transfers to PRCS, Library and Comm Development as needed to maintain 10% balance in each fund 7 10
Revised Baseline Forecast (Baker Tilly, Feb 2025)
8 What has changed?
• FY24 actuals and FY25
midyear adjustments
(before new FTE)
• Higher property tax and
CFD, but lower sales
tax, higher personnel
cost, operations, capital
and transfers out
• Includes recession,
higher pension costs
• Revised forecast
includes DWR rent,
accumulation of
restricted reserves,
ultimate purchase of
peaker plant for
$11.2M
• Starting FY27 shortfalls
are higher than City 5-
year forecast
Funds 100, 101, 103
($ in millions) Act Est Proj Proj Proj Proj Proj Proj Proj Proj Proj Forecast Model FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 Property Tax/VLF 22.9 24.7 25.8 27.0 27.7 28.7 30.3 31.9 33.7 35.2 36.7 Sales Taxes 25.2 24.5 24.5 24.0 24.0 25.3 26.6 28.0 28.8 29.5 28.9 Other Taxes 6.1 6.5 6.7 6.8 6.9 7.1 7.4 7.6 7.8 7.9 8.0 EU PILOT 7.6 7.7 7.7 7.8 7.9 7.9 8.0 8.0 8.1 8.2 8.2 CFD Special Tax 0.9 1.0 1.1 1.2 1.4 1.5 1.6 1.8 1.9 2.1 2.2 Other Revenues 13.2 12.0 10.7 10.8 7.7 7.5 7.4 7.4 7.5 7.7 7.8 Transfers In 10.6 10.0 9.2 9.4 9.6 9.7 9.9 10.1 10.3 10.5 10.8 Total Revenue 86.6 86.4 85.8 86.9 85.0 87.7 91.1 94.9 98.1 101.1 102.5 Personnel 51.0 58.4 59.2 61.5 63.1 65.3 66.7 68.2 69.7 71.1 72.1 Operations 10.9 14.8 13.1 13.5 13.8 14.1 14.5 14.9 15.2 15.6 16.0 Debt 2.3 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 Capital 7.1 0.6 1.6 1.7 12.9 1.7 1.8 1.8 1.9 1.9 1.9 Transfers Out** 12.9 12.6 9.1 11.8 11.9 12.2 12.6 13.0 13.3 13.6 13.8 Total Expenditures 84.2 87.6 84.3 89.7 102.9 94.6 96.7 99.1 101.4 103.4 105.0 Net Annual 2.4 (1.2) 1.5 (2.7) (17.9) (6.8) (5.6) (4.2) (3.3) (2.4) (2.5) Reserves (16%) 13.2 13.8 13.7 13.9 13.6 11.6 6.2 2.0 - - - Pension Trust 19.4 16.8 16.4 10.7 4.3 - - - - - - Other Restricted 5.4 6.8 9.0 11.3 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Available Balance 7.1 6.6 6.3 6.9 6.9 6.4 6.2 6.2 4.9 2.5 0.0 Total Fund Balance 45.2 44.0 45.5 42.8 25.0 18.1 12.5 8.3 5.0 2.6 0.1 *Includes $2.8M in DWR rent FY24-27 and $11.2M peaker plant purchase in FY28; includes interest income **Includes operating transfers out to PRCS and Library (City 5-year forecast included these under Operations) 11 General Fund Revenue Forecast Comparisons
9 Revised baseline includes inflator, transfers,
new construction; FY25 Assessor value as base
Revised baseline reflects HdL short-term
projections and future recession
Revised baseline reflects historical growth
Forecasts are very close, revised baseline
includes recession impacts
Revised baseline assumes new housing units
are annexed to CFD, with 2% rate growth
Revised baseline includes interest, ARPA
See Appendix A for more information on revenues
12 General Fund Expenditure Forecast Comparisons
10 No significant change between forecasts Baseline assumes more conservative CalPERS rate of return, uses CalPERS Pension Outlook
FY25 budget includes one-time items
Baseline includes buying peaker plant in FY28 No significant change between forecasts Baseline forecast uses updated estimates based on forecast of PRCS and Library funds
See Appendix B for more information on expenditures
13 Comparison of City 5-Year Forecast to Revised Baseline Forecast 11 City’s 5-Year Forecast in FY25 Budget
(Extended to FY34)
Baker Tilly’s 10-Year
Revised Baseline Forecast
• Revised Baseline Forecast has initial higher balances, but larger shortfalls over long-term • Both forecasts are before budgetary changes relating to peaker plant acquisition, labor market adjustments, midyear adjustments for new positions, and the Access Center 14 Forecast Risks and Uncertainties
12 Favorable Impacts
• Higher vacancy rate reduces near-term
personnel costs
• Most likely source of improvement, but
also reduces productivity and ability to
deliver services
• Higher revenues in any given year
• Is revenue one-time or ongoing?
• Revenue related to timing of development,
or more pronounced economic cycle, just
shifts from one year to the next, and is not
an increase in base recurring revenues
• If higher rate of new development occurs,
ultimately costs may increase higher than
in forecast
• CalPERS experiences higher than
projected returns, thus reducing
unfunded accrued liability (UAL) costs
Unfavorable Impacts
• Earlier or greater magnitude of recession
• Will adversely affect cash flow in near-term
even with subsequent recovery
• CalPERS experiences lower than projected
returns, thus increasing UAL costs
• Pension costs are volatile and thus subject to
worse outcome despite more conservative
assumption in forecast than used by CalPERS
• UAL will still be paid down over long-run, but
costs may be higher in near-term and for longer
period than in forecast
• City adds staff or negotiates COLAs higher
than 2.0%, thus increasing costs
• City experiences emergency or other cost
increases beyond its control
• Are such costs one-time or ongoing?
15 Key Economic
Variables
Recessions
Pension Investment Returns
New Housing
16 Why We Include Recessions in Long-Term Forecast
14 • Recessions have occurred on average
every 6.8 years since 1927
• High correlation between recessions and
unemployment rate
• Adverse budget impacts to local
governments often lag term of “official”
recession period
• Recession causes vary but key issues are
timing and magnitude
• Impacts estimated using CA State Controller
data on city taxes, permits, licenses
• Covid pandemic was shortest economic
downturn at only two months, but very
sharp impact due to nationwide shutdown
17 Why We Plan on Lower CalPERS Investment Return
15 • CalPERS investments are volatile, and have been on slow overall downward trend over past 30 years
• When returns are lower, unfunded accrued liability
(UAL) costs increase to compensate for the loss;
when returns are higher, UAL costs are reduced over
time; rates are recomputed annually by CalPERS
• CalPERS plans to leverage its investments in private
equity (carries greater risk & volatility of return) to achieve 6.8% return; forecast assumes 6.2% returns
to be conservative
• Discount rate is investment rate of return assumed
by CalPERS
• Discount rate has been lowered several times over
past 45 years, from high of 8.75% to current 6.8%
• Following the 45-year linear trend of discount rates, in 20 years discount rate would theoretically be 6.0%
• However, forecast assumes the current 6.8% rate is
maintained; if discount rate is lowered, City costs will be higher in near-term, and lower in long-term
18 Pension Forecast: 6.8% Discount Rate/6.2% Average Return 16 • If returns are lower than
the discount rate, UAL
balance is reduced by
about two-thirds before it
begins to increase again
• Composite pension plan
funded status projected to
exceed 80% starting FY34
• Pension Trust eligible uses:
• Prepayment of UAL debt
to CalPERS (which reduces
pension costs over next 8-
23 years), or
• Reimbursement of
General Fund pension cost
(which increases available
balance immediately,
freeing up funding for
other purposes)
19 Pension Forecast: 6.8% Discount Rate/6.8% Average Return 17 • If return equals 6.8%
discount rate, UAL balance
is fully eliminated in FY45
• This is the current CalPERS
goal
• Composite pension plan
funded status projected to
exceed 80% starting FY33
• Under this scenario it does
not make sense to continue
to contribute to the
Pension Trust, or to prepay
additional UAL, as the UAL
would be paid off within 20
years in any event (and
such funds could be used to
meet other City needs)
20 Rationale for Projected Housing Growth
18 • New housing is a major factor in property
tax growth
• Charts compare historical new units
compared to current Regional Housing
Needs Allowance (RHNA) goal for Lodi
(3,909/9 years=460/year)
• Forecast assumes 250 units per year, which
is 54% of RHNA goal
Regional Housing Needs Allowance
21 Potential
Budget
Changes
Resulting Impact on
Baseline Budget Forecast
22 Peaker Plant Purchase & Rent
20 • The existing contract between the City and the Dept of Water Resources (DWR) pays the City $2.8M a year for five years (FY23-27); $560K is paid to PRCS annually and the remaining $2.24M is retained in restricted reserve until reaching $11.2M in FY27, where it is available to purchase the peaker plant in FY28; City long-range financial forecast excludes all peaker plant-related rent and purchase, but model baseline forecast includes rent through FY27 and the purchase cost • Alternative is to have Electric Utility pay for the plant purchase and thus free up General Fund (GF) resources; EU would then continue to pay rent to the GF at $2.8M plus CPI (assumes 2.5% growth) and any energy sales would go to EU, with no risk to the GF
Black= loss of resources (lower revenue/higher expense), Red=gain in resources (higher revenue/lower expense).
Transfers vary depending on the amount needed to keep PRCS, Library and Community Development funds at 10% reserve level, and changes in Pension Trust (which affects all these funds).
Major improvement in fund balance, pension
trust largely preserved
FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Operating Cost - - - (11,200) - - - - - - Transfers Out - - - - 283 201 5 (45) 13 23 Transfers In (CAP) - - - - - - - - - - Rev Loss/(Gain) - - - (2,870) (2,942) (3,015) (3,091) (3,168) (3,247) (3,328) Interest Loss/(Gain) - - - (211) (496) (718) (780) (782) (818) (862) Total Net Chng - - - (14,281) (3,155) (3,532) (3,865) (3,996) (4,052) (4,168)
NET GENERAL FUND COST IMPACT
($ in 000)
23 Labor Market Adjustments
21 • Gallagher compensation study has been prepared
• Desire is to move salary structure to median of
comparison agencies to help retain and recruit
employees in a tight labor market; impact varies by
position, and thus by bargaining unit and fund
• Assumes $1.1M cost to General Fund starting FY26
including increased support of PCRS and Library
funds); costs partially offset by higher cost allocation plan (CAP) transfers starting in year #2 (CAP based on
prior year actuals so one year delay in higher CAP
revenues)
Black= loss of resources (lower revenue/higher expense), Red=gain in resources (higher revenue/lower expense).
Transfers vary depending on the amount needed to keep PRCS, Library and Community Development funds at 10% reserve level, and changes in Pension Trust (which affects all these funds).
Balance drops to just above reserve goal
FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Operating Cost - 714 779 795 812 830 847 865 884 903 Transfers Out - 670 590 612 673 687 551 682 672 711 Transfers In (CAP) - (341) (348) (355) (362) (369) (377) (384) (392) (400) Rev Loss/(Gain) - - - - - - - - - - Interest Loss/(Gain) - 16 75 129 152 175 327 384 463 520 Total Net Chng - 1,059 1,096 1,181 1,274 1,323 1,348 1,547 1,627 1,734
NET GENERAL FUND COST IMPACT
($ in 000)
24 Additional Support Staff Positions
22 • City Manager has identified several positions to reorganize the Internal Services Department and to increase
accountability and productivity (costs below are
approximate and may vary based on ultimate job
descriptions and step at which position is filled); all are General Fund except as noted, with cost split 31% GF and 69% from other funds
• 2nd Assistant City Manager
• Finance Director
• Human Resources Director
• IT Deputy Director (replaces IT Manager position)
• Procurement Officer
• Customer Service Reps (2 Part-time positions)
• Two Planners (Community Development Fund)
Black= loss of resources (lower revenue/higher expense), Red=gain in resources (higher revenue/lower expense).
Transfers vary depending on the amount needed to keep PRCS, Library and Community Development funds at 10% reserve level, and changes in Pension Trust (which affects all these funds).
FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Operating Cost 81 428 461 472 482 493 504 515 527 539 Transfers Out - (4) (17) (17) (1) (7) (59) (18) 43 16 Transfers In (CAP) - - - - - - - - - - Rev Loss/(Gain) - - - - - - - - - - Interest Loss/(Gain) - 11 34 58 68 84 143 169 145 144 Total Net Chng 81 435 478 513 549 569 588 666 714 698
NET GENERAL FUND COST IMPACT
($ in 000)
Balance drops below reserve goal,
Pension Trust depleted
25 Access Center Emergency Shelter
23 • Access Center will provide extensive wraparound
services in addition to overnight shelter, meals, and
hygiene facilities; revised single-building plan to serve 100 (2022 point-in-time homeless count was 208)
• Forecast assumes facility is operational by FY26, with grant funding left over for half-year operation
• Assumes $1.4M new City cost in FY26, $2.8M in FY27,
with 2.5% growth thereafter (may be affected by timing
of construction and remaining grant funding)
• City should seek potential Medi-Cal reimbursements to reduce need for GF contribution, in which case net City cost would be less than $2.8M/year
Black= loss of resources (lower revenue/higher expense), Red=gain in resources (higher revenue/lower expense).
Transfers vary depending on the amount needed to keep PRCS, Library and Community Development funds at 10% reserve level, and changes in Pension Trust (which affects all these funds).
FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34
Operating Cost - - 1,400 2,835 2,906 2,979 3,053 3,129 3,208 3,288 Transfers Out - - - (65) (3) (259) 211 105 11 - Transfers In (CAP) - - - - - - - - - - Rev Loss/(Gain) - - - - - - - - - - Interest Loss/(Gain) - - 21 118 167 431 307 229 210 199 Total Net Chng - - 1,421 2,888 3,069 3,151 3,570 3,464 3,429 3,487
NET GENERAL FUND COST IMPACT
($ in 000)
Balance drops steadily, in deficit by FY32
26 City Lacks Sufficient
Resources to Fund All
Desired Budget
Augmentations Options for Additional
Resources
27 New Revenue Options
25 • Reimpose Business License Tax
• Loss of lawsuit is costing City $2.0M in FY25 dollars • Lodi currently ranks 219th out of 319 CA cities reporting Business License revenue • Requires majority voter approval to reinstate original tax • Revenue gain equivalent to 71% of Access Center operating cost • Increase Transient Occupancy Tax
• Current tax rate of 6% ranks among
lowest in the state; median rate is 10%
• Going to a 10% rate would raise
$2.4M, while a 12% rate would raise
$3.8M, on an ongoing basis
• Requires majority voter approval
• Revenue gain of 10% rate equivalent
to 100% of Access Center operating
cost
Lodi @6%
28 New Revenue Options (continued)
26 • Impose Added Local Sales Tax Rate
• Current total sales tax rate levied in
Lodi is 8.25%, with City receiving the
1% uniform tax rate plus 0.5% for
Measure L; the statewide median rate
is 8.75%
• Requires majority voter approval
• Adding a 0.25% rate would raise
$4.35M annually (FY26 dollars pre-
recession), while a 0.5% rate would
raise $8.7M Lodi @8.25%
median @8.75%
Stockton 9.00%
Lathrop 8.75%
Lodi 8.25%
Manteca 8.25%
Tracy 8.25%
Escalon 7.75%
Mountain House 7.75%
Ripon 7.75%
San Joaquin County 7.75%
San Joaquin County Sales Tax Rates
29 $2M BLT + 10% TOT Roughly Comparable to 0.25% Sales Tax 27 • New $2M Business License
Tax and increase in TOT to
10%
• Requires two separate
ballot measures
• Taxes not paid by general
public
• Charts assume both
approved on June 2026
ballot
• Added 0.25% Sales Tax
• Charts assume approval on
June 2026 ballot
• Assumes half-year
collection in first FY
• Recession impact starts in
FY27
• Tax paid by general public,
but generally good success
at the ballot
-- versus --
30 Next Steps Regarding Revenues
28 • Business License Tax is a staple of local govt finance in CA and Lodi should take steps to replace its lost BLT with a voter-approved measure as soon as possible • Likewise, a Transient Occupancy Tax rate of at least 10% is considered standard in CA and Lodi should consider a voter-approved increase to this level as soon as possible • These two steps would simply bring Lodi in line with State local government norms, and would stabilize the City’s fiscal position even with augmentations through FY34, and beyond that time additional fiscal capacity will be realized as pension costs level off and then begin to drop as UAL is repaid
• Alternatively, the City could consider a voter-approved increase in the Sales Tax as the current rate is below the statewide median and considerably below that in neighboring Stockton
• Additional revenues would be required to generate sufficient fiscal capacity to pay for additional staff to meet increasing workload demands; for example, adding two miscellaneous positions and one safety position annually would cost $5.6M a year by FY34, requiring an additional $2.5M in annual revenue starting FY28, to stabilize City reserves at ~$30M
31 Thank You!
Questions & Answers
Brief Demonstration of Live Model
32 30
33 Appendix A
General Fund
Revenues
Ten-Year Forecast of Major
Revenue Categories
Determines Likely
Available Resources
34 General Fund Revenue Forecasts
32 Property Tax
• 27.2% of General Fund revenue in FY24
• Actual revenues have averaged 3.4% over budget historically • FY25 based on County assessed values ($24.7M)
• Future growth assumes 2% Prop 13 inflator, 4% of parcels transfer ownership at 30% average growth, 250 housing units/year plus $7M non-residential value (new construction); average 4.5% growth • Trend is just below short-term trend of last 4 years (green line) Sales Taxes
• 30.9% of General Fund revenue in FY24 (1% statewide uniform rate, Measure L’s 0.5% rate, Prop 172 Public Safety Sales Tax) • Chart reflects receipt of Measure L revenues starting FY19 • Actual revenues have averaged 5.7% over budget historically • FY25 based on HdL forecast ($24.5M)
• Future growth assumes HdL forecast with moderate recession impacts in FY27 and every 7 years thereafter; average 1.8% growth FY25-34, but ongoing baseline growth (absent recessions) is 2.72%
• Trend is close to short-term trend (green line); long-term trend not relevant due to impact of Measure L
35 General Fund Revenue Forecasts
33 Electric Utility Payment in Lieu of Tax
• 9.1% of General Fund revenue in FY24
• Actual revenues have equaled the budget historically
• Revenue is very consistent, controlled by City
• FY25 per City budget
• Annual growth of 0.8%, follows long-term trend
Franchise Fees
• 3.5% of General Fund revenue in FY24
• Includes gas/electric, cable TV, waste removal
• Actual revenues have averaged 6.6% over budget historically • Boost in FY24 due to higher waste removal franchise fee • FY25 per City budget
• Overall annual growth of 2.2%, parallels long-term trend 36 General Fund Revenue Forecasts
34 Business License Tax
• 0.2% of General Fund revenue in FY24
• Actual revenues have averaged 1.7% over budget historically • Loss of lawsuit over establishment of BLT eliminated tax in FY23; replaced with an administrative fee
• FY25 per City Budget
• Annual growth of 2.0% with recession impact
CFD Special Tax
• 1.0% of General Fund revenue in FY24
• Assumes all new housing units are added to CFD, plus 2% annual rate increase; revenue will vary based on new housing annual construction and extent to which any new housing units are not annexed into the CFD
• Actual revenues have averaged 1.0% over budget historically • FY25 per City Budget
37 General Fund Revenue Forecasts
35 Other Taxes
• 3.0% of General Fund revenue in FY24; includes Transient Occupancy Tax, Real Property Transfer Tax, Card Room fee • Actual revenues have averaged 9.2% over budget historically • RPTT is volatile source; TOT experienced change in operators, no business during pandemic
• FY25 per City Budget
• Overall average growth rate of 2.4%
Intergovernmental (excluding VLF In-Lieu)
• 1.5% of General Fund revenue in FY24
• Revenues can be volatile and often are not anticipated in budget • FY25 based on budget
• Assumes ongoing $126K revenues from State sources
38 General Fund Revenue Forecasts
36 Police/Fire Dept Revenues
• 2.2% of General Fund revenue in FY24
• Revenues have been volatile historically
• Actual revenues have averaged 8.6% under budget
• FY25 per City Budget
• Decline in FY26 reflects one-time Fire grant received in FY25; ongoing growth thereafter averages 2%
• Growth parallels long-term trend
Public Works/Community Improvement Dept Revenues
• 1.5% of General Fund revenue in FY24
• Revenues have been volatile historically
• Actual revenues have averaged 11% over budget
• FY25 per City Budget
• Future growth averages 2%
39 General Fund Revenue Forecasts
37 Rental Income
• 4.5% of General Fund revenue in FY24
• Actual revenues have averaged 14.8% over budget historically • Includes $2.8M/year in FY23-28 from DWR for peaker plant • FY25 per City Budget
• Future growth averages 2.0% after end of rent from State Interest Income
• 5.1% of General Fund revenue in FY24
• Volatile source depending on investment yields; omits negative market value adjustment in FY22 as loss was not realized • FY25 uses conservative estimate (interest not budgeted), but $1.0M has been received as of January
• Forecast is 1.5% return on non-Pension Trust balance and 5% on Pension Trust balance; assumes no future market value
adjustments
40 General Fund Revenue Forecasts
38 Other Revenue
• 2.2% of General Fund revenue in FY24
• Includes fines, nondepartmental charges for service and miscellaneous revenue
• Actual revenues have averaged 2.6% under budget historically • FY25 per City Budget
• Future growth averages 1.5%
Transfers In
• 12.6% of General Fund revenue in FY24
• Transfers in consist primarily of charges to other funds under the cost allocation plan, and other reimbursements; previously CAP amounts were paid primarily by utility funds, but in FY25 the CAP was updated to apply to additional funds
• Actual revenues have averaged 1.4% over budget historically • FY25 per City Budget
• Future growth averages 2.5% growth after initial decline in FY26 41 Appendix B
General Fund
Expenses
Ten-Year Forecast of Major
Expense Categories
Determines Likely Future
Costs of Continuing Current
Service Levels
42 General Fund Personnel Expense
40 Salary/Part-time/Overtime/Labor Credits/Vacancy Savings • 35.7% of General Fund expense in FY24
• Actual expense has averaged 3.3% under budget historically, which is basis for long-term vacancy savings assumption • FY25 per City Budget except for salaries, which are based on revised personnel cost projections for funds 100 & 103
• Future growth averages 2.4%, near long-term trend
Pension
• 13.8% of General Fund revenue in FY24
• Includes normal costs and unfunded liability
• Actual expense has averaged 2.7% under budget historically • FY25 and future based on CalPERS’ Pension Outlook model using projected salaries and more conservative return (6.2%) than CalPERS projection of 6.8%
• 2.1% average future growth in expense, higher in near-term but leveling off by early 2030’s
43 General Fund Personnel Expense
41 Health
• 4.9% of General Fund expense in FY24
• Actual expense has averaged 7.7% under budget historically • FY25 based on revised personnel cost projections for funds 100 & 103
• Future growth averages 3.0% (same as historical growth), slowing from recent trend
• Higher vacancies will result in lower cost than projected Other Personnel Cost
• 6.0% of General Fund expense in FY24
• Actual expense has averaged 0.9% under budget historically • FY25 based on revised personnel cost projections for funds 100 & 103
• 2.5% average future growth in expense, near long-term trend 44 General Fund Other Expense
42 Contract/Professional Services
• 3.7% of General Fund expense in FY24
• Actual expense has averaged 15.3% under budget historically • Major increase in FY25 is one-time expenses per City Budget; previously expense was relatively consistent
• After decline in FY26 reflecting one-time expenses in FY25, future years grow at average 2.5%
Other Recurring O&M Expense
• 9.1% of General Fund revenue in FY24
• Actual expense has averaged 9.4% under budget
historically
• FY25 per City Budget
• 2.3% average future growth in expense, near long-term trend
45 General Fund Other Expense
43 Non-Recurring O&M/Capital/Debt Service (including Transfers) • 11.4% of General Fund expense in FY24
• Actual expense has averaged well over budget historically • FY25 per City Budget
• Future amounts assume debt service per maturity schedules, and capital of $1.65M/year with 2.5% growth
All Other Transfers Out
• 14.3% of General Fund revenue in FY24
• Actual expense has averaged well under budget historically • FY25 per City Budget
• Includes transfers to PRCS and Library funds, street projects, vehicle replacement, and intrafund transfers within the General Fund
• 1.4% average future growth in expense
46 Transfers Out by Receiving Fund
44 Note that scales of these charts differ
47