Long
-
Term
Financial
Forecast
January 17, 2023
ATTACHMENT 2
Roadmap
•
Introduction
•
Big Picture
•
Historical
Comparison
•
Preliminary Long
-
Term Findings
–
Key Assumptions
–
Results
2 ATTACHMENT 2
The Big Picture
•
Revenues have recovered from pandemic
lows
•
Expenditures have continued to increase
and are projected to be higher than
revenues in future years
–
Inflation
–
Labor Costs
–
Self
-
Funded Insurances
3 ATTACHMENT 2
50 60
70 80
90 100
110
120
FY19 Actual
FY20 Actual
FY21 Actual
FY22 Actual
FY23 Budget
Millions
Operating Revenue
Expenditures
General Fund Financial Status
4 Operating Revenue only shown; does not include one
-
time revenues
used to balance the General Fund in FY20 through FY23
FY23 Projected Revenue: $114.6 M
ATTACHMENT 2
Financial Status: FY 2022/23
•
Sales Tax and Transient Occupancy Tax
have recovered and continue to grow
•
Inflation and labor costs are rising rapidly
•
One
-
Time dollars have been used since
FY20 to balance the General Fund
•
General Fund Reserves are still fully
funded
5 ATTACHMENT 2
Long
-
Term Financial Forecast
•
Components
–
Financial Trend Analysis
–
6 Year History
•
Rapid growth out of last recession can skew
analysis of current trends
•
For many categories, FY20 and FY21 amounts
were outliers that had to be disregarded in the
analysis
–
Financial Forecast
–
5 Years Forward
•
Economic Assumptions
•
Anticipated Development
•
Three Revenue Scenarios
–
Most Likely, Optimistic, Pessimistic
6 ATTACHMENT 2
Historical Revenue
•
Property Tax: average annual increase of 6.4% from FY13 –
FY22
•
Sales Tax: average annual increase of 5.9% from FY13
–
FY22
•
TOT: average annual increase of 11.0% from FY13
–
FY22
•
Timeframe includes 5 new hotels and 1 hotel expansion
7 0
5 10
15 20
25 30
35 40
45 FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Millions
Primary Revenue Sources
Property Tax
Sales Tax
Transient Occupancy Tax
ATTACHMENT 2
The Forecast….
ATTACHMENT 2
The Forecast….
ATTACHMENT 2
The Forecast….
•
Is a model that shows us what
MIGHT happen in the future
•
Revenue estimates based on our
current best guess of economic
outlook
•
Expenditure estimates based on
historical growth rates
what
happens if we keep doing what we’ve
been doing
ATTACHMENT 2
What is the forecast?
•
A set of reasonable, most likely assumptions
about future revenues and expenditures based
on current budget/trends
•
Changes to assumptions
Changes in the
forecast
•
GFOA best practice for fiscal management
•
Planning Tool
–
Allows us to model future impacts of current budget
decisions
–
Allows us to see surplus / deficit trends over time
–
Assists us with making changes needed to avoid future
deficits
ATTACHMENT 2
The Forecast….
•
Is
not
a budget
–
Council has final authority to
establish the budget and amend it as needed
•
Is
not
a labor relations plan
–
Collective
bargaining is a separate process from
forecasting; assumptions in the forecast are for
modeling purposes only
•
Is
not
a set of promises
–
COLA increase
assumptions, operating budget growth
assumptions, etc. are for modeling purposes only
•
Is
not
set in stone
–
Assumptions are changed
over time in response to a variety of factors and
trends
ATTACHMENT 2
Forecast
•
What’s Included
–
Economic Assumptions
–
Major Development Currently Underway plus
Anticipated Growth
–
Transfers Based on Current Fiscal Policy
•
What’s Not Included
–
ARPA Funding
–
New Positions
–
Funding for Current Unfunded Needs
–
New or Enhanced Programs / Services
13 ATTACHMENT 2
Forecast Assumptions
Annual Revenue Growth Rates
•
Property Tax: 4.0% throughout forecast
•
Sales Tax: 3.2% average annual growth
•
Transient Occupancy Tax
–
2.0% average annual growth for existing
development; same as pre
-
pandemic growth
–
Estimated projected new development
14 ATTACHMENT 2
Property, Sales & TOT Revenue
Most Likely Scenario
15 0
10 20
30 40
50 60
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
M
illions
Primary Revenue Sources
Property Tax
Sales Tax
Transient Occupancy Tax
ATTACHMENT 2
Most Likely Revenue Forecast
16 97.2
89.3 86.7
101.9
108.6
118.0
122.4
127.5
132.0
136.5
0 20
40 60
80 100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Property Tax
Transient Occupancy Tax (TOT)
Sales Tax
Other Revenues
Transfers In
ATTACHMENT 2
Revenue Scenarios
•
Optimistic
–
Assumes ongoing economic activity at higher
levels than pre
-
pandemic; more hotel
development opening during forecast period
•
Pessimistic
–
Not a recession scenario
–
assumes slower
growth rates and less hotel development
17 ATTACHMENT 2
Revenue Uncertainty
18 80
90 100
110
120
130
140
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
Millions
Most Likely
ATTACHMENT 2
Revenue Uncertainty
19 80
90 100
110
120
130
140
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
Millions
Most Likely
ATTACHMENT 2
Forecast Assumptions
Annual Expenditure Growth Rates
•
Based on historical trends, core City services
•
Staffing: No new positions
•
Salaries & Wages: 4.35% combined rate for
COLA and step increases, based on current ratio
of employees at top step and 5
-
year average
Bay Area CPI
•
3.3% annual increase in healthcare/dental costs
•
4.3% average annual increase in CalPERS
normal costs (payroll)
•
CalPERS UAL payments peak in FY24 at
$14.2M, then gradually
reduce down
to $12.9M
in FY28
20 ATTACHMENT 2
Projected CalPERS Costs
General Fund Only
21 11.5
13.4 14.1
17.2 17.1
21.0 20.5
20.4 19.9
19.3 0
5 10
15 20
25 FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Normal Cost
UAL
ATTACHMENT 2
Projected CalPERS UAL
22 -
2 4
6 8
10 12
14 16
18 202
2-23
2023-24
2024-25
2025-26
2026-27
2027-28
2028-29
2029-30
2030-31
2031-32
2032-33
2033-34
2034-35
2035-36
2036-37
2037-38
2038-39
2039-40
2040-41
2041-42
2042-43
2043-44
2044-45
CalPERS UAL Projection; All City Funds
264 - Miscellaneous Plan
265 - Safety Plan
ATTACHMENT 2
Forecast Assumptions
Annual Expenditure Growth Rates
•
Semi
-
Discretionary
–
Services & Supplies:
9.4 %
•
Utilities, Property Tax Administration Fees, Software
Licenses, Payments to Other Agencies, etc.
–
Internal Services: Fleet 4.4%, Risk 11.7%
•
Discretionary
–
Services & Supplies: 2.6%
•
Professional Services, General Supplies,
Travel/Training, etc.
–
Transfer to Sidewalks Program: $0.9
million/year
23 ATTACHMENT 2
Forecast Assumptions
Annual Expenditure Growth Rates
•
Transfers Out per Fiscal Policy
–
CIP Facilities Reserve: 2% of Operating
Budget
–
CIP General Fund Reserve: 1% of Operating
Budget, plus $0.10 million for the General Plan
–
Equipment Replacement Reserve: $0.15
million/year
–
General Fund Reserves: bring balances up to
equal 14% (Emergency), 5% (Operating), or
1% (Contingency) of Operating Budget
24 ATTACHMENT 2
Expenditure Forecast
25 59.3
60.3 57.4
61.5 67.7
73.7 76.3
79.5 82.8
86.2 -
20 40
60 80
100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Salaries & Benefits
ATTACHMENT 2
Expenditure Forecast
26 8.2
9.3 10.2
11.7 12.4
14.2 13.7
13.6 13.3
12.9 -
20 40
60 80
100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Salaries & Benefits
PERS UAL
ATTACHMENT 2
Expenditure Forecast
27 5.8
6.8 6.9
8.2 7.4
8.1 8.8
9.6 10.5
11.5 -
20 40
60 80
100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Salaries & Benefits
PERS UAL
Semi-Discretionary Exp
ATTACHMENT 2
Expenditure Forecast
28 7.7
7.4 5.8
6.9 10.0
10.3 10.5
10.8 11.1
11.4 -
20 40
60 80
100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Salaries & Benefits
PERS UAL
Semi-Discretionary Exp
Discretionary Exp
ATTACHMENT 2
Expenditure Forecast
29 5.6
6.6 6.8
7.5 8.9
9.6 10.4
11.2 12.2
13.3 -
20 40
60 80
100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Salaries & Benefits
PERS UAL
Semi-Discretionary Exp
Discretionary Exp
Internal Services
ATTACHMENT 2
Expenditure Forecast
30 7.2
5.1 5.6
4.8 4.6
5.5 5.3
5.7 5.9
6.1 -
20 40
60 80
100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Salaries & Benefits
PERS UAL
Semi-Discretionary Exp
Discretionary Exp
Internal Services
Transfers Out
ATTACHMENT 2
Expenditure Forecast
31 93.8
95.4 92.6
100.6
110.8
114.1
121.4
125.0
130.5
135.9
141.4
-
20 40
60 80
100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY23
Est
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
Salaries & Benefits
PERS UAL
Semi-Discretionary Exp
Discretionary Exp
Internal Services
Transfers Out
ATTACHMENT 2
Revenues & Expenditures
32 -
20 40
60 80
100
120
140
160
FY19
Actual
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Budget
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
Millions
ATTACHMENT 2
Usage of General Fund Reserves
33 0
5 10
15 20
25 30
FY24
Proj
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
M
illions
General Fund Reserves
General Fund Reserves
Reserves w/Optimistic Revenue
Reserves w/Pessimistic Revenue
ATTACHMENT 2
•
Revenues are recovering but expect slower
growth in the next few years
•
Potential future impacts from economic
slowdown, continued COVID
-
19 variants, etc.
•
Expenditures have grown at a rapid pace; if
growth continues at this rate City will experience
operating deficits
•
Reserves are sufficient to cover deficits, but
would need a plan to replenish reserves
34 Summary
ATTACHMENT 2
What’s Next?
•
January 31: City Council will be asked to set
budget priorities at their workshop
•
February 21: FY23 Mid
-
Year Report; will update
revenue budgets
•
City Staff will then compile recommendations
based on Council priorities for the FY 2023/24
and FY 2024/25 budget cycle. Going forward will
continue to use the Forecast and Mid
-
Year
Report to evaluate revenue and adjust budgets
as needed if growth differs from expectations.
35 ATTACHMENT 2
Comments / Questions?
36 ATTACHMENT 2
End of Presentation
37 ATTACHMENT 2