CITY COUNCIL STAFF REPORT
Meeting Date: May 20, 2024
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. ___-24 APPROVING THE LONG-TERM FINANCIAL PLAN FOR FISCAL YEAR 2024/2025 THROUGH FISCAL YEAR 2028/2029
SYNOPSIS
When the City Council updated its goals in September 2013, it adopted the objective to “establish a long-term financial plan” as part of the goal of a “City that is financially sound.” The City published its first long-term financial plan (LTFP) in August 2015. This Long-Term Financial Plan for Fiscal Year 2024/2025 through Fiscal Year 2028/2029 is the City’s third LTFP.
DISCUSSION
Background
The purpose of the LTFP is to create awareness regarding the financial challenges and opportunities that the City could possibly face and to inform the City’s financial and operational decision-making, in order to account for such possibilities.
Analysis
The City’s LTFP for Fiscal Year 2024/2025 through Fiscal Year 2028/2029 addresses the revenues and expenditures for the General Fund over a five-year period and has 10 years of historical information.
Based on the direction received from the Budget Committee on February 21, 2024, staff has prepared a Long Term Financial Plan for Fiscal Year (FY) 2024/2025 through FY 2028/2029.
In previous years the LTFP was done along with the Biennial Budget. This year, staff is preparing the LTFP sooner, so that this document can be used as a planning document to assist and inform decision makers with goal setting and/or to assess financial challenges as they prepare the upcoming budget. The LTFP uses the Fiscal Year 2023/2024 Budget as the base line and then incorporates the approved assumptions, so staff could provide this information sooner to the Budget Committee and City Council. At its meeting of April 20, 2024, the Budget Committee approved the draft LTFP and forwarded it to the City Council with recommendation to approve.
The financial challenge the City continues to face is unfunded pension liabilities. The City has taken steps to address this challenge by adopting a Section 115 Trust, making an initial contribution of $1 million, and approving a funding policy to make additional contributions in fiscal years when General Fund revenue exceeds expenditures. This pension savings account will grow over time, unless the City Council provides direction to spend it sooner. In the previous Adopted LTFP FY 2018/2019 - FY 2023 and FY 2022/23 - FY2023/2024 Biennial Budget, this has been and continues to be the City’s largest liability and the reason for growing annual deficits. The City has been financially prudent by setting up pension savings accounts and agreeing to reasonable labor increases. Also, the City has been able to offset the budget deficits due to economic improvement from sales tax revenues, federal funding from the pandemic, and staffing vacancies due to retirements. Unfortunately, the financial challenge based on the assumptions is that the deficit continues to grow from $2.3 million to $3.8 million from FY 2024/2025 to FY 2028/2029 (see Executive Summary pp.1-2).
The following table illustrates the issue of the growing unfunded pension liability (see Summary and Next Steps p.39). Also, staff has provided the forecast using CalPERS pension tool to show the next 15 fiscal years (see p.24), and material reduction in this payment is not expected to occur until FY 2037/2038. This table also shows General Fund revenue and expenditures before the pension liability payments and the impact afterwards:
GENERAL FUND
($) THOUSANDS
FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29
Adopted Forecast Forecast Forecast Forecast Forecast
Revenues $30,607 $31,152 $32,102 $33,129 $34,193 $35,293 Expenditures (not including UAL
expense) $27,898 $28,835 $29,852 $30,859 $31,899 $32,976 Surplus $2,709 $2,317 $2,250 $2,270 $2,294 $2,317
UAL Expenditures $3,872 $4,590 $4,940 $5,282 $5,564 $6,137 (Deficit) ($1,163) ($2,273) ($2,690) ($3,012) ($3,270) ($3,820) Beginning Fund Balance $13,786 $12,623 $10,351 $7,661 $4,649 $1,379 Ending Fund Balance $12,623 $10,351 $7,661 $4,649 $1,379 ($2,442) At the April 2024 meeting, the Budget Committee requested that Staff prepare an updated table with estimated revenues and expenditures. The main change is a decrease in expenditures due to salary savings in the City Manager’s Office ($0.3 million) and Police Department ($0.6 million). The summary table is shown below and in the LTFP (see p.39):
GENERAL FUND
($) THOUSANDS
FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29
Revised Estimate Forecast Forecast Forecast Forecast Forecast Revenues $30,426 $31,152 $32,102 $33,129 $34,193 $35,293 Expenditures (not including
UAL expense) $26,640 $28,835 $29,852 $30,859 $31,899 $32,976 Surplus $3,786 $2,317 $2,250 $2,270 $2,294 $2,317
UAL Expenditures $3,872 $4,590 $4,940 $5,282 $5,564 $6,137 (Deficit) ($86) ($2,273) ($2,690) ($3,012) ($3,270) ($3,820) Beginning Fund Balance $13,786 $13,700 $11,428 $8,738 $5,726 $2,455 Ending Fund Balance $13,700 $11,428 $8,738 $5,726 $2,455 ($1,365) Term Unfunded Actuarial Liability Payment (PP.24)
FISCAL IMPACT
Approving the LTFP does not have any specific fiscal impact to the City.
PUBLIC CONTACT
Public Contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Library, and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Adopt the resolution approving the proposed Long-Term Financial Plan for Fiscal Year 2024/2025 through Fiscal Year 2028/2029.
ALTERNATIVES TO RECOMMENDED ACTION
Do not adopt the resolution and provide direction to staff.
ATTACHMENT(S):
Proposed Resolution
Exhibit 1 – Long-Term Financial Plan Fiscal Year 2024/25 through Fiscal Year 2028/29
Prepared by: Erick Cheung, Finance Manager
Approved by: Ethan Bindernagel, City Manager