Long-Term
Financial
Forecast
Update
October 15, 2024
ATTACHMENT 1
Roadmap
• Introduction
• Big Picture
• Historical
Comparison
• Preliminary Long-
Term Findings
– Key Assumptions
– Results
ATTACHMENT 1
The Big Picture
• Revenue growth rates beginning to
plateau
• Expenditures have continued to increase
and are projected to be higher than
revenues in future years
– Inflation (Services & Supplies)
– Labor & Pension Costs
– Self-Funded Insurances
ATTACHMENT 1
General Fund Financial Status
Operating Revenue only shown; does not include one-time revenues used to balance the General Fund in FY20 through FY25
50 60
70 80
90 100
110
120
130
140
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Budget
Millions
Operating Revenue Expenditures
FY25 Budgeted Revenue: $125.7 M
ATTACHMENT 1
Financial Status Update
FY 2023/24
• Property and Sales Tax continues to grow
at a more moderate rate
• Transient Occupancy Tax has plateaued
• Inflation still a factor & labor costs
continue to rise
• One-Time dollars have been used since
FY20 to balance the General Fund
budget
• General Fund Reserves are still fully
funded
ATTACHMENT 1
Long-Term Financial Forecast
• Components
– Financial Trend Analysis – 5 Year (4 history +
current)
• Rapid growth out of last recession can skew
analysis of current trends
– Financial Forecast – 5 Years Forward
• Economic Assumptions
• Collaborative efforts with staff, professionals &
consultants
• Anticipated Development
ATTACHMENT 1
Historical Revenue
• Property Tax: average annual increase of 6.5% from FY15 – FY24 • Sales Tax: average annual increase of 3.8% from FY15 – FY24 • TOT: average annual increase of 7.1% from FY15 – FY24 • Timeframe includes 4 new hotels and 1 hotel expansion
45.9 22.7
29.5 0
5 10
15 20
25 30
35 40
45 50
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24
Millions
Primary Revenue Sources
Property Tax Sales Tax Transient Occupancy Tax
ATTACHMENT 1
The Forecast….
ATTACHMENT 1
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
– Actuarial data – UAL
ATTACHMENT 1
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 1
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 1
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
ATTACHMENT 1
Forecast Assumptions
Annual Revenue Growth Rates
• Property Tax: 4.0% throughout forecast
• Sales Tax: From 3.3% to 3.5% average
annual growth
• Transient Occupancy Tax
– From 2.5% average annual growth for existing
inventory to 1% in FY26 & 2% beyond
– FY24 Actual less than FY23
– Estimated projected new development
ATTACHMENT 1
Property, Sales & TOT Revenue
57.2 27.8
32.2 0
10 20
30 40
50 60
70 FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Primary Revenue Sources
Property Tax Sales Tax Transient Occupancy Tax
ATTACHMENT 1
Revenue Forecast
87.0 101.9
117.6
125.4 125.7 129.4 133.1 137.3 141.7 146.4
0 20
40 60
80 100
120
140
160
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Property Tax Transient Occupancy Tax (TOT) Sales Tax Other Revenues Transfers In ATTACHMENT 1
Forecast Assumptions
Annual Expenditure Growth Rates
• Based on historical trends, core City services
• Staffing: No new positions beyond FY25 budget
• Salaries & Wages: 3.7% combined rate for
COLA and step increases beyond MOUs
• 4.6% annual increase in healthcare/dental costs
• -2.1% average annual increase in CalPERS
normal costs (payroll)
• CalPERS UAL schedule increasing 6.7%
– Reflects rising annual costs, peaking in FY31 at $21M (GF)
ATTACHMENT 1
Projected CalPERS Costs
General Fund Only
14.1 17.2
16.3 19.1
20.7 22.8
24.0 24.9
26.6 27.1
0 5
10 15
20 25
30 FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Normal Cost UAL
ATTACHMENT 1
Projected CalPERS UAL
Prepayments - GF
5.4 6.2 7.0 7.4 7.8 8.4 8.6 8.8
8.0 8.5
9.5 10.2 10.7
11.7 11.9 12.2
0 5
10 15
20 25
FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31
Millions
GF Misc Prepayment Safety Prepayment
ATTACHMENT 1
Projected CalPERS UAL
All Funds
-
5 10
15 20
25 30
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
2045-46
2046-47
264 - Miscellaneous Plan 265 - Safety Plan
ATTACHMENT 1
Forecast Assumptions
Annual Expenditure Growth Rates
• Semi-Discretionary
– Services & Supplies: 9.7% - Capping at 5%
• Utilities, Property Tax Administration Fees, Software Licenses, Payments to Other Agencies, etc.
– Internal Services: Fleet 3.41%, Risk 15.3%
• Discretionary
– Services & Supplies: 4.3% - Capping at 3%
• Professional Services, General Supplies,
Travel/Training, etc.
– Transfer to Sidewalks Program: $0.9
million/year
ATTACHMENT 1
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
ATTACHMENT 1
Expenditure Forecast
57.4 61.5 66.5 72.1 76.6 80.1 83.1 86.2 89.5 92.9
-
20 40
60 80
100
120
140
160
180
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Salaries & Benefits
ATTACHMENT 1
Expenditure Forecast
10.2 11.7 11.9
13.4 14.7 16.5 17.6 18.4 20.1 20.6
-
20 40
60 80
100
120
140
160
180
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Salaries & Benefits PERS UAL
ATTACHMENT 1
Expenditure Forecast
6.9 8.2 7.9
8.8 8.9 9.4 9.8 10.3 10.8 11.4
-
20 40
60 80
100
120
140
160
180
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Salaries & Benefits PERS UAL Semi-Discretionary Exp
ATTACHMENT 1
Expenditure Forecast
5.8 6.9
9.7 10.0
12.8 13.2 13.5 13.9 14.3 14.7
-
20 40
60 80
100
120
140
160
180
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Salaries & Benefits PERS UAL Semi-Discretionary Exp Discretionary Exp ATTACHMENT 1
Expenditure Forecast
6.8 7.5
8.6 10.2
11.2 12.3 13.7
15.2 17.0 18.9
-
20 40
60 80
100
120
140
160
180
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Salaries & Benefits PERS UAL Semi-Discretionary Exp Discretionary Exp Internal Services ATTACHMENT 1
Expenditure Forecast
5.6 4.8
4.6 11.1
5.8 6.4
6.4 6.6
7.1 7.1
-
20 40
60 80
100
120
140
160
180
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Salaries & Benefits PERS UAL Semi-Discretionary Exp
Discretionary Exp Internal Services Transfers Out
ATTACHMENT 1
Expenditure Forecast
95.4 92.6
100.6
109.2
125.7 129.9
137.9
144.1 150.7
158.8
165.6
-
20 40
60 80
100
120
140
160
180
FY20
Actual
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Salaries & Benefits PERS UAL Semi-Discretionary Exp
Discretionary Exp Internal Services Transfers Out
ATTACHMENT 1
Revenues & Expenditures
92.5 105.4
119.9
127.6 130.7 132.4 136.1 140.3 144.7 149.4
-
20 40
60 80
100
120
140
160
180
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actuals
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
ATTACHMENT 1
Revenues & Expenditures
Includes continued use of one-time revenues through FY30 93 105
120
128 131 132 136 140 145 149
93 101
109
126 130
138
144
151
159
166
0 20
40 60
80 100
120
140
160
180
FY21
Actual
FY22
Actual
FY23
Actual
FY24
*Actual
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
ATTACHMENT 1
Usage of General Fund Reserves
(10)
(5)
-
5 10
15 20
25 30
FY25
Proj
FY26
Proj
FY27
Proj
FY28
Proj
FY29
Proj
FY30
Proj
Millions
Projected General Fund Reserve Balances
ATTACHMENT 1
• Revenues growth continues but beginning to
plateau
• Economic Uncertainty – VLF, ERAF & UAL
• Expenditures have grown at a rapid pace; if
growth continues at this rate City will experience
operating deficits and deplete all its GF reserves
• Reserves are no longer sufficient to cover
deficits, and should be utilized only as a last
resort
Summary
ATTACHMENT 1
What’s Next?
• November: FY24 End-of-Year Update
• January: Biennial Budget Kick-off
• January/February:
– End of Year Report/ACFR (FY 23/24)
– Mid-Year Report – revenue adjustments as needed
• May/June: Budget Workshop & Adoption
• 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.
ATTACHMENT 1
Comments / Questions?
ATTACHMENT 1
End of Presentation
ATTACHMENT 1