1. Board of Directors Finance & Investment Committee 5/5/17
FY 2017/2018 Budget Review
Board of Directors
Finance & Investment Committee
5/5/17
FY 2017/2018 Budget Review

2. FY 2017/2018 Budget Agenda Action Items
General Assumptions/Key Drivers
Financial Summary
Budget Detail
Operating Statements (Detailed Hand Out)
Capital Expense and Funding (Hand out)
Cash Flow & Long Term Liabilities
Reserve Funding
Issues/Recap
FY 2017/2018 Budget Review

3. FY 2017/2018 Budget Action Items
Seeking Approval of:
FY 2017/2018 Operating Budget
Operating Contribution of $558,309
Reported Net Contribution of $1,008,309
Individual Corporate Donations in excess of $2,500
Capital Funding
FY 2017/2018 Capital Request - $2,179,880
FY 2016/2017 Unbudgeted Expenditures -$30,000
$51,102 FY 2015/2016 Budgeted Carryover
Reserve Funding Schedule
See separate Donation Sheet.
- Items included in G&A and some part of contracted donations.
FY 2017/2018 Budget Review

4. FY 2017/2018 Budget General Assumptions
Enrollment Flat per Campus Forecast
General price increases in most areas
Executing to contracts in place
96% occupancy rate for Housing
All known rate increases accounted for
5-10% for Health Insurance, WC, insurance, etc.
PERS Adjustment this year
Campus/Product cost escalation
Per EO-1000
Utilities?
1) Operating hours and volumes similar to current year but expanding for Housing
2) Housing peaked in 2014 and FY15/16. Fy16/17 at 2,560/2460
3) Student rate increases selective by department area
5) Cost/Price escalation of 5+%, EO-1000
6)PERS – Escalating payment profile for unfunded liability
VEBA – off Balance Sheet
Campus Utilities unknown but planned at FY16/17 campus plan.
FY 2017/2018 Budget Review

5. FY 2017/2018 Budget Key Activities/Drivers
$300K Wage Impact
New Residential Dining Plan
Starbucks Contract renewal
Papa John’s Pizza Concept
Ongoing Activities
Textbook Sales – Projected 4% increase
Amazon Locker
Campus Print Shop Management
Textbooks down Year-over-Year. Optimism prevails.
FY 2017/2018 Budget Review

6. FY 2017/2018 Budget Key Activities – Labor Impact
Estimated $200K Minimum Wage Impact
Implementation date – January1, 2018
Annual Impact of $375K
$125K Full Time/Part Time
$250K Student Wages
$25K California Exempt Minimum Impact
2X Minimum Wage - $45,760
13 Employees (Ave 4.8% increase)
$80K - Staff Labor Pool Increase
2% - Employee
Minimum Wage to $ Escalation in future years. Jan 19 =$12.00
FLSA Pending next year.
Key Staffing – IT tech but no Accounting Manager Replacement
FY 2017/2018 Budget Review

7. FY 2017/2018 Budget Minimum Wage Administration
California Minimum Wage Increase
$11.00/hour on January 1,2018 (period 7)
City of Long Beach has adopted same rate
Effects all Students, Hourly, and Temporary employees
Tiered Increase for those between $ $12.50
Budget Guideline for hourly rate adjustments
$ $10.99  $11.00 (up to 4.8% Escalation)
$ $11.49  $11.55 (up to 4.9% Escalation)
$ $11.99  $12.05 (up to 4.7% Escalation)
$ $12.49  $12.55 (up to 4.6% Escalation)
FY 2017/2018 Budget Review

8. FY 2017/2018 Budget Key Activities – Other Financial
$148,333 Interest Expense for Outpost
Plus $95,000 Principal
PERS Minimum Unfunded Liability Payment
$286,399 – July 2017
$359,464 – July 2018
Estimated 5% Investment Return
Incentive Comp placeholder in G&A
Zero $ VEBA Funding – No O/S impact
Off Balance Sheet - Year 7 of 7 year plan
$450K investment
$400K IC placeholder
Post Retirement Liability projection will take its course
FY 2017/2018 Budget Review

9. OPERATING STATEMENTS (see Hand out)

10. FY 2017/2018 Budget Divisional Operating Statement
Forecast based on March Actuals w/ PERS adjustments. Budget projection optimistic given Res Dining volume decline.
Revised Division to match future reporting
Separated C-Store from Bookstore – Moved to Retail Dining Director
Combined Computer Store with Bookstore – Staffing synergy
Reporting Retail Dining and Residential Dining separately
FY 2017/2018 Budget Review

11. FY 2017/2018 Budget Summary Operating Statement
Forecast is based on March YTD Actuals and remaining budget w/adjustments
Key activities include
Min Wage increase
Residential Dining Plan changes
Flat enrollment
Give/take investment differences
Amazon Locker Program
Physical Inventory slated for June
Sales Forecast assumes consistent enrollment with ongoing business for Bookstore, C-Store/Cash food,
100%? Residential at 2,555
New contract with no price increase
Declining Balance Plan eliminated: will pick back up some sales
Limited Summer Residency programs
Computer Store optimistic but minimum margin impact
Textbooks in year-over-year decline
Starbuck up for relicensing
ID Card Pass Thru – No changes anticipated
Margin Challenges
Minimum wage impact on market
Escalating wholesale Price Increase i.e. Food eroding margins
Competition/Technology transition within Bookstore
No pricing increase on Res Hall plan
EXPENSE
Minimum Wage Impact
- Minimum/none Staffing replacement
2% labor pool increase
- Beach on 2nd St continued Rent/Management reduction
- Depreciation uptick due to major projects (Amazon, Accounting, Cameras). Pending Starbucks, Outpost Patio
C&R
Grad Merchandise
Print Shop Management
FY 2017/2018 Budget Review

12. FY 2017/2018 Budget Division 2 - G&A
Corporate Donations Flat
Approval Action (See detail)
Contains Employee/Retiree Related Expense
$400,000 Incentive place holder
$510,000 Medical Retiree Health
Staffing Flat
System Upgrades/Depreciation
Equivalent 11.9% rate
10.8% Net of IC
9.4% Net of IC/Retiree Medical
IT staffing tech
No Accounting Manager replacement
- Ongoing benefit cost increase
- Includes Herff-Jones Pass thru
EO-1000 Campus increase. $222 + $36K Rent $258K Includes Mary/Carmen costs and IT support plus and new Switches.
FY 2016/2017 Budget Review

13. Corporate Donations Over $2,500@ Approval Required
All Other Donations in the $500-$1,500 Range
Jewels of the night, HFHM, Athletics, Alumni, Relay for Life, etc.
$97,500 Coke Sponsorship included in Athletics Contract
$90,000 National Merit Scholar/Faculty in Residence Meal Plan donation part of Residential Dining Contract
Added President Scholars – Approved for FY16/17 per BOD
Increased Shops Student donations to $15K
-Excludes Textbook Scholarship Pass Thru Funds
Herrf-Jones, US Foods
The Rest of monies raised is directly paid to Foundation
FY 2017/2018 Budget Review

14. FY 2017/2018 Budget Bookstore/Computer Store
Sales Flat at $16.2M
Textbook Projection up
Year-Over-Year Textbook decline of 5%
Steady Retail growth
Commencement
Computer Store opportunities with campus
Campus Print Shop Management
Amazon Locker
Printshop EO-1000 , $145K
Amazon 5 year plan
Facilities cost/compliance eroding anticipated revenues
$175K Guarantee, Depreciation $137K.
Credit Card processing affiliated with specific POS
Limited selection with who to go with
FY 2017/2018 Budget Review

15. FY 2017/2018 Budget Bookstore/Computer Store Sales Trend
Combined Bookstore/Computer Store
FY 2017/2018 Budget Review

16. FY 2017/2018 Budget Convenience Stores
C-Stores at Capacity/Sell Through
Sales Flat at $3,260,029
Incremental pricing increase
Declining Balance plan eliminated
POS/PCI Costs/Depreciation
New Hardware in place
Inventory System Implementation
FY 2017/2018 Budget Review

17. FY 2017/2018 Budget Retail Dining - Division 491
4% Sales Growth Across the Board
Campus Saturation of offerings
Loosing Declining Balance meal plan $’s
Offset by new Flex Offering
Papa John’s concept at Outpost
Starbucks Refresh
Market Pricing/Cost Challenged
Large percentage of Minimum wage employees
High Credit Card fees and Facilities Cost
Flat enrollment
FY 2017/2018 Budget Review

18. FY 2017/2018 Budget Residential Dining
Planned Occupancy of 2,550 Residents
New Meal Plan agreement in place
No increase in base plans
Elimination of Declining Balance Plan
Additional offering of Flex Dollars
Anticipated 96% full occupancy around 2,550
2016 Fall/2017 Spring 2,538/2,463?
New Agreement
- Declining Balance Eliminated
- New Flex Offering -
Large staffing of min wage employees
- Shops Contributes Faculty (12) and NM (14) Scholar Plans (up to)
FY 2017/2018 Budget Review

19. FY 2017/2018 Budget Division 5-ID Card Office
Pass-Through program to Campus
No P&L Impact
Blackboard Contract renewal with CO
Off Campus Vendor program Minimal
New Meal Plan Flex Offering administration
FY 2017/2018 Budget Review

20. CAPITAL FUNDING
APPROVAL REQUIRED
(See Hand out)

21. FY 2017/2018 Budget Capital Summary
FY 2017/2018 Budget Review

22. FY 2017/2018 Budget FY2016/2017 Capital Status
Current Year Expenditures of $798K
Anticipate $73K for the balance of the year
Key Major Projects aborted/deferred
$100K - Food Truck, Health dept. challenges
$275K - Outpost Patio/Seating moved to FY17/18
Action Item – Approval Required
Unbudgeted item(s) -$30,000
Carry Over - $51,102 (Reference only)
- See memos
FY 2017/2018 Budget Review

23. FY 2017/2018 Budget Capital Funding Request
ACTION ITEM
Requesting Capital funds of $2,179,880
Approval Required*
See Memo (detail)
Key Projects planned
Starbucks Renewal
Outpost Patio
Papa John’s
Japanese Garden
Server Room
See Memo
FY 2017/2018 Budget Review

24. Cash flow

25. FY 2017/2018 Budget Cash Flow Projecting Negative Cash flow - $413K
Considers entire Capital budget
$400K-$600K subject to delay
Capital Investment exceeds Depreciation
5% Investment return factored in
VEBA Trust Funding complete per plan
Current Balance at $4,849K
Projected FY17/18 holdings of $5,129K
Initial Plan assumed $5.3M balance after 7 Years
Ongoing PERS Unfunded Liability Payments
FAS 106 Audit in process for year-end
FY 2017/2018 Budget Review

26. FY 2017/2018 Budget FYE Cash Flow Projection
Negative Cash flow Anticipated subject to Capital Spending
FY 2017/2018 Budget Review

27. FY 2017/2018 Budget Cash/Investment Balance Trend
Cash/Investments benefited from FY2016/2017 Investments
- Added $1.5M since Gains from investment
- Excludes VEBA – Off Balance sheet
FY 2017/2018 Budget Review

28. Long term liabilities

29. FY 2017/2018 Budget Long Term Liabilities
Liabilities spiked this year
PERS Unfunded Liability YE estimate - $4,753,987
$783,494 Increase based on Actuarial and 7% discount rate
$286,399 Payment required in July - Annual increase
Ongoing 30 year Term
Other Term Options available (See PERS report)
SRB Principal ($3.5M) pay down<$95K/year near term
2016 Refunding saves $500K over the remaining term (2039)
Medical Post Retirement liability past its peak
Currently at $3,861,913
VEBA Funding Plan mitigating long term exposure
Bond is $3.3M plus $200K unamortized deferred refinancing.
FY 2017/2018 Budget Review

30. FY2017/2018 Budget Long Term Liabilities
Post Retirement Liability will be abated by VEBA long term
PERS is at a 30 year pay down schedule with an assumed 7% rate
FY 2017/2018 Budget Review

31. FY2017/2018 Budget Long Term Liabilities
FY 2017/20187 Budget Review

32. FY2017/2018 Budget VEBA Trend 7 Year-$4M Investment/$5.3M Target
Post Retirement Liability will be abated by VEBA long term
Dollar Cost Ave but offset by lower returns
FY 2017/2018 Budget Review

33. FY2017/2018 Budget Long Term Assets\Liabilities Comparison
Addressed Key Liabilities but still treading water
Operating in leveraged mode
Need to set aside reserves for rebuilding
FY 2017/2018 Budget Review

34. Cash Designation & Liquidity
Reserves

35. FY2017/2018 Budget Reserve Planning
Per Policy accommodations made for:
Working Capital
Annual Capital Replacement /Major Maintenance
Adequate funds on hand for Midterm Support
Planned negative Cash Flow in FY2017/18
Assumes large Capital investment plan
VEBA funding (Off Balance Sheet)
Assumes no additional investment
Completed Year 7 of 7 year plan
See Policy for Controller reporting requirements and thresholds.
Working Capital targeted at 8% of expenses = $2.7M
Reserve Funding Opportunities are:
VEBA – 1 year or so funding continuum, turn over to TPA
Alumni Center/Catering Kitchen
Designate/Grow funds for early Bond payoff – 2 year assessment
Pay down PERS Unfunded Liability
Develop long term plan for UDP Renovation
FY 2017/2018 Budget Review

36. FY2017/2018 Budget Reserve Planning (Cont’d)
PERS Unfunded Liability largest debt/risk
Charged Interest exceeding Operating ROI
No Future set aside funding in place
Need to start reserving and/or Designate Funds for long term rebuild
PERS assumes 7% earnings. Net Contribution and Investment policy much lower.
Reserve Funding Opportunities are:
VEBA – 1 year or so funding continuum, turn over to TPA
Alumni Center/Catering Kitchen
Designate/Grow funds for early Bond payoff – 2 year assessment
Pay down PERS Unfunded Liability
Develop long term plan for UDP Renovation
FY 2017/2018 Budget Review

37. FY 2017/2018 Budget Reserve Matrix
Per Reserve Policy definitions/Requirements we’ve satisfied the need for Operating Statement items.
-FY2016/2017 is done hence zero WC. $2.7M estimated for FY2017/18
Beach Club Deposits $460K$250K. Increased due to Flex $’s
Paying as we go for all:
Facilities/Capital Replacement & Major Repair Funding accommodated through depreciation
Vacation/Holiday payout - Unrestricted. Ongoing accrual/Pay-out
Unemployment Insurance (UIT) held with CSURMA
Post Medical current year premiums being paid through Operating Statement
- Overall liability is being addressed through VEBA and future returns on investment.
SMIF held at Wells Fargo already in a separate account – Not restricted or designated but isolated
FY 2017/2018 Budget Review

38. FY 2017/2018 Budget Reserve Funding Opportunities
All but Facilities are recorded on the Balance Sheet
Provisioning and recognized various liabilities. Paying down on some:
- Facilities Infrastructure pending
- Vacation/Holiday is partially designated on the asset side in name only
SRB Funding Payments – Finite pay down schedule
Refunding save $500K in interest over the remaining 22 years.
10 year Bond Call again.
VEBA assumes funding to initial commitment only – Future unfunded liability paid from VEBA investment returns
Beach Club is ongoing projected average with holding increasing due to Flex $’s
Liability is being addressed regularly. Could designate percentage of funds if balance increased dramatically.
SMIF – No liability unless we run out of cash and need to call in the account
FY 2017/2018 Budget Review

39. FY 2017/2018 Budget Issues and Concerns
Ongoing Wage and Compliance Impact
CA minimum wage trend to $15/hour by 2022
High Credit Card fees/PCI Compliance
Aging Facilities/High Repair Costs
Major Capital Projects Pending with little ROI
Saturated Food Services Market
Textbook Sales Trend Flat
Escalating PERS unfunded liability
Address Long Term Debt/Assumed rate
PERS based on optimistic fund returns
FY 2017/2018 Budget Review

40. FY 2017/2018 Budget Summary Wrap-up
Good Financial shape heading into FY2017/18
Adequate funding and reserves in place
Realistic targets set towards optimism
Accounted for Labor increases and Contract Rates
No Growth opportunity in Retail Dining/C-Stores
Market Saturation prevails without a Master Food Plan
Net Operating Cash Flow Potentially Negative
Debt Service Impacting Operations
Reserve for Future Re-Build
Focus on process/Systems
FY 2016/2017 Budget Review

41. End Slide
FY 2015/2016 Budget Review

42. Back Up Files
Hidden Slides
FY 2016/2017 Budget Review

43. FY 2017/2018 Budget Financial Details (Hand-outs)
Financial Detail Back-up
Hidden Slides for Audit Back-up
See Hand Outs
FY2017/2018 Annual OS Forecast by Division
FY2016/2017 Additional Capital Expenditure Memo
FY2017/2018 Capital Budget Request
Enrollment History
PERS Liability Extract
Reserve Document Do
FY 2017/2018 Budget Review

44. CSULB Enrollment
FY Review

45. PERS Unfunded Liability Funding (Excludes PEPRA)
FY 2017/2018 Budget Review

46. PERS Unfunded Liability Alternate Amortization Schedule
FY 2016/2017 Budget Review

47. Reserve Policy Extract
Policy
As part of the annual budget process the Forty-Niner Shops will evaluate the need for reserve funds and establish and/or revise funding levels as appropriate. The plan to build and maintain the recommended reserves will be integrated into and approved as part of the annual operating plan.
At the end of each fiscal year, the Forty-Niner Shops Controller will prepare a financial report of the reserve contributions made during the fiscal year. The report will be included as part of the year-end financial statement approval process. All expenditures from the reserve accounts require the approval or ratification of the Forty-Niner Shops Board of Directors.
Reserve accounts will consist of the following categories subject to change as approved by the Forty-Niner Shops Finance & Investment Committee:
A. Working Capital
B. Capital Replacement
C. Major Maintenance and Repair/Capital Renovation and Upgrade
D. New Projects and Planned Future Operations
E. Designated Fund – Funds for specific purposes as directed by the Board
F. Reserve for special projects as needed
Items A thru D are required expenses under CSU Executive Order 994 while items E and F are funds designated under Legal guidelines and Company Board discretion respectively
Adequacy of reserves does not require that funds be individually segregated for restricted use, but provides assurance that sufficient funds are available to accommodate routine as well as unexpected needs of the Forty-Niner Shops.
FY 2017/2018 Budget Review