Budget PresentationCity of Sierra Madre FY 2017-18

Future Budget Concerns

1. Budget Process

2. Increased Personnel Costs, Contracts, & Pension

3. Debt Obligations & Loans in Water Enterprise

4. Water Utility Operations

5. 2017/18 Budget

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Budget Process

Zero-Based Budget• Line by line review of all expenditures (actual vs. budget)

• Focus on priorities & strategies, not history (reinvest savings)

• One-time vs. on-going expenditures (lotto winnings)• On-going revenues pay for on-going costs (Excess Water Penalties)

• Prioritize 3Ps--Public Safety, Public Work, Parks & Rec (& Library)

3

Budget Process

2017-18 Sierra Madre Budget Principles

• This is a process, not an event (3 years to sustainability)

• Expenditures reduced to offset planned increases

• On-going costs must shrink & while one-time costs increase• EX) Infrastructure, public safety equipment

• Reduce government costs without asking for a tax increase from voters

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Future Budget Concerns

1. Budget Process

2. Increased Personnel Costs, Contracts, & Pension

3. Debt Obligations & Loans in Water Enterprise

4. Water Utility Operations

5. 2017/18 Budget

5

Increased Personnel Costs-Salaries

Salary Increases for FY2017-18:

POA pay increase of 6%• $130,000

General Government pay increase of 2.3%• $143,600 ($77,400 GF)

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Increased Costs – Budget & Contracts

Wage Increase (Approved in Nov. 2016, not budgeted)

Paramedic• $64,000

Library Community Services• $2,400

Budget

FY 2016-17 Budget balanced with Fund Balance (one-time)• $54,600

Contracts

Change to prevailing wage, grounds maintenance• $25,000

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Increased Personnel Costs-Pension

The Unfunded Accrued Liability (UAL) is:• actual gains or losses vs. expected experience (reality vs. projections)

• caused because benefits paid are greater than funds invested

UAL Calculation(s):• recalculation (Fall of 2017) will likely lead to greater liability

• the UAL is designed to eliminate liability overtime (IF assumptions don’t change)

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Increased Personnel Costs-Pension

• The City’s Total Pension Liability is $10,678,000 (approx 75% funded)

• The City’s Unfunded Accrued Liability (UAL) will increase by 40% over next 6 years• The 2017-18 pension expense is $727,510

• The 2022-23 pension expense will be $1,030,400

• UAL Expected Annual Increases:• FY 17-18 $102,350

• FY 18-19 $143,300

• FY 19-20 $151,138

• FY 20-21 $96,354

• The Board calculates numbers again in Fall of 17 and numbers will likely increase

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Increased Personnel Costs-Pension

$727,510

$1,220,651

$1,030,422

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

FY16-17 FY17-18 FY18-19 FY19-20 FY20-21 FY21-22 FY22-23

3rd largest GF Department

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Future Budget Concerns

1. Budget Process

2. Increased Personnel Costs, Contracts, & Pension

3. Debt Obligations & Loans in Water Enterprise

4. Water Utility Operations

5. 2017/18 Budget

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$339,345 $339,345 $339,345

$331,595 $315,720

$1,310,850

$771,680

$138,663

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

2017 2018 2019 2020 2021 2022-26 2027-31 2032-34

Sierra Madre Water Revenue Parity Bonds, Series 2003 - Original Issue $6,750,000

Principal Interest

Interest Only Payments from 2003-2019

($4,628,289 to date)

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$310,000 $325,000 $339,345 $339,345 $339,345

$331,595 $315,720

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

2017 2018 2019 2020 2021

Sierra Madre Water Revenue Parity Bonds, Series 2003 - Original Issue $6,750,000

Principal Interest 13

$450,000 $470,000 $495,000

$59,500 $36,500 $12,375

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

2017 2018 2019

Sierra Madre Water Revenue Refunding Bonds, Series 1998A-Original Issue $6,740,000

Principal Interest 14

$848,845 $845,845 $846,720

$663,190 $631,440

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

2017 2018 2019 2020 2021

Near Term Debt Obligations (Bonds) -Water

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Water Enterprise Debt Obligations, Near-Term (Bonds and Loans)

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

2017 2018 2019 2020 2021

Principal Interest Loans 16

Water Enterprise

0% 20% 40% 60% 80% 100%

Debt

22%

Excess

Water

Charge

16%

Operations

62%

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Water Enterprise Health Indicators

Health is determined by debt, revenue stability, & asset condition

1. Debt Service • Currently debt equals more than 22% of Water revenues through 2020

2. Revenue Stability• 16% of revenue collected is non-repeatable (excess water charge)

3. Future Cost of Infrastructure• Hydrology report will show need for critical maintenance & replacement

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Future Budget Concerns

1. Budget Process

2. Increased Personnel Costs, Costs, & Pension

3. Debt Obligations & Loans in Water Enterprise

4. Water Utility Operations

5. 2017/18 Budget

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4,851,466

5,275,770

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2015 2016 2017 2018 2019 2020 2021 2022

Total Operating Revenues Total Operating Expenditures

Water Utility Operations

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$19,084 $19,451 $9,175

$118,908

$155,975

-20

30

80

130

180

230

280

330

380

430

480

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

2012 2013 2014 2015 2016 2017 (Est.)

Cost and Number of Leaks

Cost to Repair Leaks Number of LeaksLeaks: 256-480

Leak Repair (Cost)

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Cost:$94,000 -$176,000

Leak Repair (Cost in Time)

468 477225

2916

3825

4320

2012 2013 2014 2015 2016 2017 (Estimated)

1 FTE

2 FTE

Leak Repair (Value)

$811,556

$503,037

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

2015 2016 23

29%21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2016

Percent Water Loss of Total

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Future Budget Concerns

1. Budget Process

2. Increased Personnel Costs, Contracts, & Pension

3. Debt Obligations & Loans in Water Enterprise

4. Water Utility Operations

5. 2017/18 Budget

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2017/18 Budget (General Fund)

Past budgets reduced same year costs, while increasing future year costs

• EX) Public Safety Equipment (Computers, Radios, Vests)

• EX) Valve Maintenance Program (Water)

• EX) Using reserves to balance budget ($54,600)

Costs will continue to increase and likely accelerate

• Ex) Pension/UAL

General Fund budget must reduce expenditures to stay the same

• Ex) Employee raises, pension obligations, contract increases

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2017/18 Budget (Water)

Water Enterprise

• Revenue stability is uncertain based on current rate model (84%/16%)

• Debt currently comprises 22% of revenue annually through 2020

• Hydrology report will show infrastructure in need of maintenance/replacement

• City needs to start making “100 year” decisions• Debt Management (Refinance, Water Cash Flow, General Fund Reserves)

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2017/18 Budget

Moving forward, services must align with financial realities• Do “more with less” is actually “do less with less”

Council will provide direction for FY2018/19 budget for:• Water, Fire, Library, General Government

Budget process will reduce costs, not ask the voters to approve a tax increase

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Thank you

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