1. 1 Financial Trends in Yolo County 2003 - 2012 Budget Hearings Board of Supervisors June 11, 2013, Woodland, CA Howard Newens, C.I.A., C.P.A. Auditor-Controller and Treasurer-Tax Collector

2. 2 Table of Contents  U.S. Economy  California Economy  Yolo County Economy & Trends  Financial Performance  Financial Condition  Challenges & Solutions

3. 3 State of the U.S. Economy Data from U.S. Bureau of Econ. Analysis and the Federal Reserve Bank

4. GDP has remained in safe territory... 4... but it’s still a 2% economy with no solid growth in the forecast National Economic Trends – Fed Reserve Bank, 5/30/13 Shaded bars represent recession periods

5. Interest rates remain at record low... 5... and are intended to spur consumer and corporate spending National Economic Trends – Fed Reserve Bank, 5/30/13

6. Unemployment is declining... 6... but this is due largely to decreased labor force participation; hence, employment has not picked up.

7. Corporations are thriving... 7... but, despite record profits, they are returning cash to owners rather than investing.

8. Housing market continues to recover well 8

9. Government deficits are being resolved 9 Note how Receipts and Expenditures are coming together

10. California Economy 10 California is still the Golden State

11. Employment forecast is upbeat 11 Employment is expected to exceed pre-recession level by 2015 Beacon Economics is the contracted economist for the State Controller

12. Housing market is driving growth 12 Sales are expected to reach a plateau by 2014 while prices will continue to rise

13. 13 Yolo County Economy & Trends

14. 14 County population has stabilized Average annual growth: 1.2% 21,000 additional residents during the decade

15. 15 Unemployment is still at a historic high

16. 16 Values remain stable near pre- recession level Average annual growth:5.9%

17. 17 County workforce has stabilized at record low County managed growth by increasing productivity, reallocating human resources, and reducing services.

18. 18 County budget declined steadily since Recession Note that that the economy’s impact on counties has a two-year lag

19. Financial Performance Through the Years 19 REVENUES EXPENDITURES FUND BALANCES

20. 20 County reversed an unhealthy fiscal trend in 2009...... when severe budgetary reductions helped control expenses Budgetary reductions

21. 21 The general fund has significantly improved Tobacco funds securitization GF borrows from Landfill Fund GF loans to others

22. 22 County continues to rely heavily on state & federal aid...... while property taxes have remained near the 2006 level...... revenue/capita has continued to decline

23. 23 Major expenses have been curbed since 2009...... and expenditure/capita has declined

24. 24 Financial Condition at Year-end ASSETS LIABILITIES FUND BALANCES

25. 25 Net assets have gradually declined OPEB health care obligations added to liabilities 5 buildings were added in four years Net assets indicate the level of financial health in the long run

26. 26 Unrestricted net assets have been depleted New capital assets since 2004-9: Infrastructure: $15.2M Juvenile Hall: $12.3M Probation Admin: $2.3M Boat storage: $2.4 M Health Bldg: $19.7M Landfill bldgs: $4.4M Jail & Libraries: $12.9M Unrestricted net assets turned negative due to rapid increase in health care (OPEB) liabilities

27. County reversed liquidity trend through cost cutting 27 Liquidity was never at risk, i.e. never dipped below 100%

28. 28 OPEB liability has caused a rapid rise in long-term liabilities OPEB obligation accounts for $61M or 57% of LT debts Note that the unfunded actuarially accrued liability is $138 million; of this, $61 million is booked as the OPEB obligation of the County

29. Debt service for hard debt has remained very low 29 Debt benchmark is 8% of expenditures. The County averages at 1% *Note that on 12/12/12 the County issued $26 million COP debt for the new solar project. New $26 M solar project Dec 2012*

30. Debt burden per capita is light 30 Debt burden per capita is significantly below the $1,000 policy threshold

31. Values support larger debt capacity 31 The tax base can support more debt The County self- imposed limit is 3%

32. 32 Unfunded pension liability continues to rise, though not yet booked Implementation of Pension Reform is helping to curb this trend. However, on 6/30/15 the County is required to book an estimated $140M liability

33. OPEB liability is being addressed 33 County’s shrinking workforce and negotiated caps helped reduce the liability

34. 34 Fund balances have mostly remained in positive territory Other Govt Funds: Realignment funds, Capital projects, Library, Roads, Tribal, CSAs, Child Support, Cache Creek Mgt, IHSS, etc. The General Fund has bounced back from its sharp dive following the Recession

35. Unrestricted fund balances are being rebuilt 35 Long-term financial planning begun Reserves are being set aside to cover future costs and emergency

36. General reserve is building up as planned 36 Recommended balance will be achieved in three years

37. Challenges & Solutions 37

38. 38 Fiscal solutions achieved Addressed past deficits Rebuilt & protected the general fund Established & implemented a reserve policy Strengthened financial policies Assessed financial management structure

39. County credit rating has potential for upgrade to A-  Conditions for upgrade: Long-term structural balance in budget Stable General Fund Other funds less reliant on General Fund support Adequate reserves  Conditions being gradually achieved by implementing financial sustainability plan 39

40. Work in progress  Developing world-class financial services  Upgrading financial systems  Studying financial staff needs  Developing capital improvement plan (including infrastructure) 40

41. Remaining challenges  Strategy for reducing unfunded liabilities:  Pension  OPEB  Strategy for controlling health care costs (employees and retirees)  Financing plan for CIP  Incl. $305 million deferred road maintenance  Long-range financial forecasts  Strategies for long-range fiscal balance 41

42. 42 End