FINANCIAL REPORT 2nd Quarter FY 2016-17 Presentation to the Board of Supervisors February 28, 2017 Good Morning Chair, Members of the Board Meegan Jessee, Deputy CAO. Before you this morning is the financial report for the 2nd quarter of the fiscal year which ended Dec 31st, 2016.

Overview Economy – Slow & Steady Expansion Expenditures – On Track Revenues – Discretionary Revenues Slightly Lower than Anticipated Budget Outlook – Increasing Cost Pressures Cash Balances – Healthy The quarterly report includes an update on economic trends, expenditures and revenues, the budget outlook, an update on current cash balances and debt totals.

Gross Domestic Product (GDP) - 1.9% Annualized Growth in the 2nd Quarter First on the economy … GDP growth in the 2nd quarter was 1.9% down from 3.5% in the first quarter. The 2016 calendar year GDP increased by 1.6% compared to 2.6% in 2015.

Consumer Price Index (CPI) - 0.84% increase in the 2nd Quarter The Consumer Price Index increased 0.84% in the 2nd quarter. The largest growth in prices was seen in gasoline and housing. The CPI has increased each month since June 2016 and for the 2016 calendar year inflation increased by 2.1%

Consumer Confidence Index - Increased from 104.1 to 113.7 in the 2nd Quarter Consumer confidence rose during the second quarter of 2016-17 from 104.1 to 113.7. Consumer confidence is now higher then the pre-recession high of 111.9 in July 2007.

The unemployment rate continues to be low The unemployment rate continues to be low. The state’s unemployment rate declined to 5.0% compared to 5.7% a year ago. Butte County’s unemployment rate ended the second quarter at 6.3% compared to 6.0% a year ago.

Building Activity Continued Improvement Statewide, the three month period ending in December saw an average of 8,778 housing starts per month up 7,669 the preceding three month period. Here in Butte County we saw an average of 214 building permits per month in the 2nd quarter, compared to an average of 218 per month during the same time period last year.

Moving to expenditures … Moving to expenditures …. The County has spent 38% of it’s budget through the second quarter which is in line with expectations

If we drill down to look at just General Fund departments budgets as shown on the slide, General Fund departments have spent 41% of there budgets which is slightly ahead of prior years which ranged from 38% to 41%.

Countywide revenue thru the end of December was at 38%, aside from an anomaly last year this is consistent with prior years. Countywide revenue can be broken down into two components – General Purpose Revenue and Departmental Revenue.

Looking specifically at General Purpose revenue current trends indicate we may be a couple hundred thousand short of projections at year end. This is due to a combination of less than anticipated property tax revenues, public safety sales tax revenues and property tax administration revenues. We’ll continue to monitor this over the coming months.

Moving to General Fund departmental revenues, you can see by the slide that revenues look very consistent with prior years.

Budget Outlook Financial Outlook – stable w/modest revenue growth Increasing Cost Pressures IHSS State Budget Proposal Increasing CalPERS Costs Increasing Pay The county continues to be financial stable and we are expecting modest revenue growth to continue. We are seeing increasing cost pressures related to the Governor’s budget proposal related to the In Home Supportive Services (IHSS) program. Recent changes to pension assumptions made by the CalPERS board in response to lack luster investment earnings that will, over time, significantly increase the County’s pension costs (up to $15 million by 2024-25). Finally the County has signed multi-year deals with most of the county’s bargaining units at increase pay by 10% over three years. In preparation for the 2017-18 Recommended budget and for these anticipated cost increases departments are preparing a number of budget scenarios include a base scenario with a 0.80% increase in County costs as well as reduction and expansion scenarios so that we can proactively prepare for the increases to come. Department budget requests are due to Administration in early March. Admin staff will analyze the requests. The Chief Administrative Officer’s recommended budget will be presented to your board in early June.

Moving to cash. General fund cash continues to look good Moving to cash. General fund cash continues to look good. At the end of the quarter the gen fund had $24.4 million in cash, consistent with prior years.

Finally, moving to debt, the slide shows are current debt obligations. That concludes my comments. I’ll be happy to answer any questions you may have.