Year-End FY Financial Review October 28, 2009

2 Presentation Tonight Overview - Revenue - Expenditures - Other Liabilities General Fund - Reserves Other Funds

3 Overview - Results are very positive, reflecting some one-time events and conservative projections. - Large budget commitments will come due shortly that will tap these revenue gains. - Revenues came in $2.8 million higher than the amended budget. - Operating expenditures came in $.5 million below budget, prior to capital improvements or other transfers out to other funds.

4 General Fund General Fund Revenue Increases Due to One-time Events Sales Taxes Hotel Taxes Property Taxes (delay in negative housing assessments) $400,000 $240,000 $665,000 (collection of past-due delinquencies) $1.3 million (Non-recurring “triple flip” increase from prior year; Mis-allocation from State for SFO sales, corrected in 09-10)

5 General Fund Possible On-going Revenues Commercial Parking Taxes Motor Vehicle In-Lieu Fees Transfers In (larger pass-throughs from supplemental growth in RDA) $200,000 $800,000 $300,000 (Based on State allocation that reflects positive property tax growth in 07-08) $1.3 million (budgeted conservatively based on overall Hotel Tax-TOT-decline)

6 General Fund Expenditures Positive Year-End Expenditures came in $0.5 million (.1%) lower than Amended Budget Budget amendment is needed to keep positive fund balance in the Storm Water Fund ($100,000 Transfer from General Fund) (prior to Transfers Out and CIP)

7 General Fund – Other Liabilities Other Post Employment Benefits (OPEB) FY is the first year the City is required to report its liability for retiree health costs, under new accounting rules. Like many cities, South San Francisco only funds current retirees’ health premiums, but not current employees’ future costs.

8 General Fund – Other Liabilities Other Post Employment Benefits (OPEB) The OPEB liability is the amount we need to set aside to fund retiree health costs. (Like PERS retirement costs, where we set aside dollars while employees are working so there are sufficient funds upon employees’ retirements to fund their retirement obligations) Total OPEB Liability $59 million (calculated by Bartel Associates in required actuarial study)

9 While we are not required to fund OPEB, what happens if we don’t? - Each year’s retiree health premiums will grow at an even higher rate and will take a growing share of the General Fund budget over time. - If we continue to pay only the equivalent of interest on the obligation (current year premiums), we do not reduce the principal on the obligation (current employees’ liability).

10 General Fund – Other Liabilities Other Post Employment Benefits (OPEB) FY Additional Contribution$0.5 million Total Set-Aside as of $5.5 million (almost 10% of total OPEB liability, reflects about 1 ½ years of the annual set aside…… …Annual Set-Aside Needed $3.38 million (to pay down the liability over 30 years) No Set-Aside Budgeted in (Staff will address liability and funding in separate staff report in the near future)

11 General Fund Reserves Undesignated Reserve $6.2 million Total Discretionary Reserves$16.5 million Year-End (in line with City Reserve Policy)

12 Other Funds Increase in Tax Increment $4.2 million Redevelopment Agency Funds (due to year-end supplemental payment) Increased 20% set-aside to the Housing Fund, and pass-throughs to other local agencies

13 Other Funds Sewer Impact Fee Fund—Trust Fund under AB 1600 guidelines Development Fees have slowed dramatically as the recession has slowed new building. Sewer Impact Fee Fund will show negative fund balance - - until development comes in

Questions?