1. BUDGET WORKSHOP
February 15, 2017

2. Mid-Year Review – FY 2016-17 Budget update as of December 31, 2016
Revenues mostly on track with budget estimates
Projected year-end expenditures and ending fund balances are overstated - assume CIP’s will be 100% spent
Treasurer’s Report for quarter ended December 31, 2016
Portfolio totals $103,771,068
Average yield = 1.06%
Net income realized for quarter = $284,702
Budget appropriation adjustments
Adjust grant estimates to reflect actual amounts awarded
Reduces total City appropriations by $659,266
Requires City Council approval

3. Mid-Year Review – FY 2016-17 General Fund Revenue 2015-16 2016-17
(in 000’s)
Actual
Budgeted
Projected
Taxes
$65,275
$66,249
$67,189
Licenses & Permits
1,877
1,867
1,872
Fines & Penalties
1,256
1,200
1,295
Use of Money & Property
8,668
8,352
8,645
Other Agencies
770
665
Charges for Service
6,689
6,384
7,001
Miscellaneous
518
4,534
530
Total
$85,053
$89,251
$87,197

4. Mid-Year Review – FY 2016-17 General Fund Expenditures 2015-16 2016-17
(in 000’s)
Actual
Budgeted
Projected
City Council
$448
$459
City Manager/Clerk
1,150
1,281
Administrative Services
1,727
1,923
General Government
881
422
Human Resources
933
724
Fire
18,898
19,505
Police
42,197
44,125
Community Development
4,585
4,241
4,472
Public Works
7,236
7,152
Parks & Recreation
5,684
5,653
Library
3,692
3,936
Total
$87,432
$89,420
$89,651

5. Mid-Year Review – FY 2016-17 General Fund Projections Fiscal Year-End
Total Revenues
$85,053
$87,197
Transfers In
580
824
Total Expenditures
87,432
89,651
Transfers Out
___ 606
__762
Fund Balance
$14,893
$12,502
10% Reserve Requirement
$8,743
$8,965

6. 5-Year Forecast – General Funds
16-17
17-18
18-19
19-20
20-21
21-22
Beginning Fund Balance
14,893
12,502
10,285
7,783
4,773
1,774
Revenues
87,198
89,819
92,952
96,318
99,481
103,165
Transfers In
824
550
Total Revenues
88,021
90,369
93,502
96,868
100,031
103,715
Expenditures
89,651
92,586
96,003
99,879
103,030
105,260
Transfers Out
762
Total Expenditures
90,413
Ending Fund Balance
240
10% reserve requirement
8,965
9,259
9,600
9,988
10,303
10,526

7. Budget Forecast Assumptions
PERS Rates will increase significantly over the next five years due to reduction of discount rate from 7.5% to 7.0%
(Discount rate is the annual rate used to discount the value of future payouts to today’s dollars – rate is tied to expected investment returns.)
No growth in expenditures other than PERS and health care costs
Operating costs have been kept artificially low since recession
Average annual revenue growth of 3% (historical)
Annual fee increases are included in revenue – will need to be removed if not adopted
No new revenue sources

8. General Fund Balance

9. 2017-18 Budget Preview Challenges & Opportunities
General Fund structural deficit
Aging infrastructure and equipment
Lack of revenue/funding sources
Increasing PERS rates
Unfunded OPEB liability
Health Insurance Reopener
Labor Contracts
Surplus Property
Utilization of Fixed Assets

10. City’s Response to the Recession
Fullerton began to realize effects in
Cut General Fund expenditures by $12.9 million, or 16%
Reduced staffing levels by 80.6 positions
Negotiated CalPERS benefit reductions
Employee cost-sharing of benefits
Cut internal service fund allocations (including vehicle replacement by 50%)
Hiring freeze and operating cost reductions
Limited equipment acquisitions
Fire Management staffing changes
City continues to maintain operational costs at artificially low and unsustainable levels

11. Comparison 2008 To 2016 Description 2007-08 2015-16 Change
Salaries & Wages
$42,385,150
$41,305,857
$-1,079,293
Benefits
18,401,405
22,331,379
3,929,974
Services & Supplies
11,582,949
11,418,658
-164,291
ISF Allocations
8,185,450
11,588,497
3,403,047
Capital Outlay & Other
-358,244
787,387
Total Expenditures
$80,196,710
$87,431,778
Total Revenues
$76,952,853
$85,052,982

12. Staffing Changes Department 2007-08 2015-16 %
City Council/City Manager
14.7
13.0
11.6%
Administrative Services
40.3
33.0
10.5%
Human Resources
10.1
8.85
12.4%
Fire
95.5
92.0
3.2%
Police
233.0
217.0
6.9%
Community Development
38.0
28.0
28.0%
Public Works
216.0
200.0
7.4%
Parks and Recreation
30.5
22.0
27.9%
Library
28.4
23.8
16.2%
Subtotal
706.5
637.7
Part-Time Hours
190,334
165,840
FTEs
91.5
79.7
12.9%
TOTAL
798.0
717.4
10.1%

13. General Fund Revenue & Expenditures

14. PERS Rates Employer Rates 2007-08 2016-17 Miscellaneous 8.406% 18.036%
Safety % %
Discount Rate lowered from 7.75% to 7.5% in
Discount Rate lowered in Dec to 7.0% to be phased in over 5 years:
Employer Rates*
Miscellaneous % %
Safety % %
*Estimates from PERS Actuary

15. Balancing the General Fund Budget
Must be done expeditiously to preserve fund balance
New and increased revenue sources are necessary
Can not be balanced with more cuts without severely impacting services, including public safety
City exists to provide services
Employee costs comprise 75% of GF expenditures
Reduction of staffing results in reduction of services

16. Balancing the General Fund Budget
Example of $3 million ongoing structural deficit:
Equates to across-the-board cuts of 3.5% per department
Police & Fire budgets total 71% of General Fund
A 3.5% reduction in P.D. = $1.5 million, or 9 Officers
A 3.5% reduction in Fire = $683,000 or 4.5 Firefighters
If public safety exempt from cuts, all other departments would be subject to an 11.5% reduction, resulting in closures

17. Council Policy Decisions
Adopt a one-year budget for FY to allow for time to evaluate and develop options
Develop fiscal strategy prior to June 30, 2018 to:
Generate new revenue sources
Economic Development
Business Improvement District
New/increased fees and/or taxes
Evaluate service levels and reassess delivery options
Identify employee recruitment, retention and negotiation strategies
Develop funding strategies
OPEB (Other Post-Employment Benefits)
Infrastructure and equipment
Risk Management

18. CONCLUSION