HomeMy WebLinkAboutStaff Report 8676
City of Palo Alto (ID # 8676)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/5/2017
City of Palo Alto Page 1
Summary Title: FY2019 - FY2028 Long Range Financial Forecast & City
Pension Liabilities
Title: FY2019 - FY2028 Long Range Financial Forecast & City Pension
Liabilities
From: City Manager
Lead Department: Administrative Services
RECOMMENDATION
Staff recommends that the Finance Committee
1) review, comment, and forward the Fiscal Year 2019 to 2028 General Fund Long Range
Financial Forecast (Base Case) for City Council approval; and
2) review, comment and provide further direction on the City’s pension obligations and
assumptions informing the City’s calculation of pension liabilities and annual
contribution goals.
EXECUTIVE SUMMARY
The Fiscal Year (FY) 2019 2028 General Fund Long Range Financial Forecast (LRFF), marks the
beginning of the FY 2019 annual budget process. It includes projected General Fund financials
over the next ten years based on current City Council approved service levels as well as
alternative financial models. The current Base Case financial forecast projects a gap in the
General Fund of $2.6 million in FY 2019 and a range between annual gaps of up to $2.4 million
and surpluses of $8.8 million in the out years. The Base Case provides a launching point, a
forecast that can assist in gauging effects of major policy interventions against a likely “status
quo” version of the future. It assumes that the world continues to change and unfold in line
with current expectations.
It is from these projections that City staff will continue to review and refine to establish the FY
2019 Base Budget and direction will be provided to Departments on the FY 2019 budget
process. Based on this Forecast, it is anticipated that again guidance to prioritize spending will
be critical to ensure financial stability.
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Looking forward, the City is facing a number of pressures from the 2014 Council approved
Infrastructure Plan including a new public safety building, to the growing costs of pension
benefits, and the upcoming labor negotiations for many of the City’s largest employee units. A
containment strategy is necessary to maintain a manageable financial position and to address
these future financial challenges and any unforeseen program needs or the inevitable economic
downturn. This review and planning will be critical since the City is facing many requests and
has identified several key programs that the community would like to fund and complete.
Included in this report and subsequent documents are the following:
- Overview of the current financial status of the General Fund as of the FY 2018 Adopted
Budget
- Discussion of the current financial climate of the United States to the City of Palo Alto
- Review of the Base Case for the Long Range Financial Report including Revenue and
Expense modeling assumptions
- Alternative Scenarios as directed by the Finance Committee on October 17, 2017 (to be
issued in a subsequent report for the December 5, 2017 Finance Committee meeting)
- Continued discussion of the City’s Pension Liabilities
BACKGROUND
Annually the Office of Management and Budget produces a ten year Long Range Financial
Forecast that reflects staff’s best estimates on the projected revenues and expenditures over
the next ten years based on the information currently available. A comprehensive review of
the cost to provide current City Council approved service levels, including looking at current
contracts, updates to salaries and benefits based on the current population of employees and
the current labor contracts in effect, and review of the status of the current economy and
various economically sensitive revenues such as Sales Tax, Documentary Tax, Property Tax, and
Transient Occupancy Tax is completed to compile this report. This Forecast allows staff and
Council to look at both the short term and long term financial status of current service levels in
the General Fund and inform daily policy decisions and ongoing long term goals and challenges.
Since the great recession, the City has approved a number of strategies to mitigate rising costs,
especially to mitigate the rising increase in salaries and benefits. Strategies include: a second
pension tier, sharing in health plan cost increases between employees and the employer, and
cost of living freezes for four years. Most recently, the current labor agreements approved in
April 2016 not only assume employees paying their own CalPERS contribution, but also begin
cost sharing with the employees contributing between 1 percent and 3 percent of the City
contribution.
The City Council continues to invest in the community and approved significant improvements
in June 2014 with the Infrastructure Plan in the original amount of $125.8 million. However,
the projects identified in the plan are estimated to cost substantially more due to updated
designs, rising construction costs, and minimum and prevailing wage requirements. This is one
example of a number of known items that are not included in this Forecast.
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Palo Alto serves a diverse community with a broad range of unique services that adds to the
significant complexity of managing a balanced budget and healthy long range financial outlook.
The demands and conflicts emerging from our vibrant economy have heightened the intensity
of the “Palo Alto Process,” with new analyses and data generation demands, and deep dives
into complex problem solving within an engaged public process across a wide range of issues.
These forecast figures present staff with the challenge of prioritizing the growing needs of the
City with the long-term sustainability of these needs.
The Economy
The national economic outlook is healthy per key economic indicators. The 2018 forecasts for:
- gross domestic product (GDP) between mid-2 percent to low 3 percent;
- unemployment remaining around 4 percent which is currently at the lowest level in a
decade at 4.1 percent; and
- the CPI (consumer price index; aka inflation) is expected to be in the low 2 percent
though wage growth is tepid.
There’s great uncertainty on federal legislative actions (e.g. tax cut, health care change,
infrastructure spending, etc.) and their future economic impacts.
The local, regional and State economies are faring well. According to recent reports from the
Center for Continuing Study of the California Economy’s (CCSCE), the Bay Area led the State and
nationally with real (inflation adjusted) GDP growth of 5.2 percent in 2016. During the same
period San Jose led the state with a GDP increase of 5.9 percent with San Francisco-Oakland
metro area coming in second with a 5.4 percent; additional comparatives are shown in the
below CCSCE’s graph.
Source of above chart: CCSCE article “The Bay Area Led the State and Nation in GDP Growth in 2016”, September
2017
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Jobs grew between September 2016 to September 2017 by 1.4 percent in the Bay Area, 1.7
percent for California, and 1.2 percent for the U.S. The State’s unemployment in this period
declined to 5.1 percent, in the Bay Area to 3.3 percent while in San Jose to 3.3 percent and San
Francisco to 2.9 percent. The State’s job growth for the past 12 months (as of June 2017) was
slightly below the State’s average in several years due to significant lower growth in the Bay
Area. Though this recent trend is of concern, the expectation is this isn’t a sign of the California
and local economy heading into a protracted downturn or outright contraction in the coming
year. The State and local economies continue to have a diverse and favorable mix of businesses;
combined with a favorable location (Pacific Rim),the State and the local economies are well
positioned to benefit from future national growth though the Bay Area continues to face the
challenge of housing and transportation as an impediment to the growth.
With unemployment running low and the Silicon Valley geographically well positioned, Palo
Alto has been at the epicenter of growth that presents opportunities and challenges.
DISCUSSION
Included in this section are both the base case and alternative scenarios. As with all forecasts,
there is uncertainty regarding the revenue and expenditure estimates contained in this
document. For example, General Fund revenues may exceed or fall below expectations based
on changes in economic or non-economic conditions. Various cost elements can also vary from
year to year.
As is customary in the Forecast, and consistent with the direction provided by the Finance
Committee at the October 17, 2017 meeting, alternative forecasts have been developed to
model scenarios specific to alternative pension assumptions. However, the necessary
information was not available at the time of the printing of this report. Therefore, these
alternatives will be provided in a supplemental memorandum presented at places for the
December 5, 2017 Finance Committee.
Base Case
The following table displays the projected General Fund revenues and expenditures over the
next five years and the total cumulative surplus. In addition to the cumulative surplus, the
incremental surplus or shortfall (assuming each preceding surplus or shortfall is addressed
completely with ongoing solutions in the year it appears) for each year of the forecast is
included. Because it is the City’s goal to remain in balance on an ongoing basis, the incremental
figure is useful in that it shows the additional surplus and/or shortfall attributed to a particular
fiscal year. To the extent that a shortfall is not resolved or a surplus is not expended on an
ongoing basis, it is important to understand that the remaining budget gap or surplus will carry
over to the following year.
In this FY 2019-2028 Long Range Financial Forecast, gaps ranging from $2.6 million in FY 2019 to
a gap of $3.3 million in FY 2024 are forecast, with slight surpluses in the remaining four years.
As outlined above, if the City resolves the gap in FY 2019 of $2.6 million on an ongoing basis,
revenues are expected to meet expenses from FY 2020 through FY 2023.
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TABLE 1: FY 2019-2028 Long Range Financial Forecast
Adopted
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Total Revenue $207,042 $213,229 $221,638 $229,695 $237,623 $245,792 $253,881 $262,065 $269,898 $277,349 $285,652
3.0%3.9%3.6%3.5%3.4%3.3%3.2%3.0%2.8%3.0%
Total Expenditures $210,426 $215,780 $223,855 $232,045 $239,609 $246,919 $253,672 $260,223 $266,387 $270,488 $276,842
2.5%3.7%3.7%3.3%3.1%2.7%2.6%2.4%1.5%2.3%
Net One-Time Surplus/(Shortfall)($3,384)($2,551)($2,217)($2,350)($1,986)($1,127)$209 $1,842 $3,511 $6,861 $8,810
Cumulative Net Operating Margin (One-Time)$11,002
Net Operating Margin ($2,551)$334 ($133)$363 $859 $1,336 $1,634 $1,668 $3,350 $1,949
Cumulative Net Operating Margin $8,810
Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures.
TABLE 2: FY 2019-2028 Long Range Financial Forecast Net Operating Margin
City of Palo Alto Page 6
Revenue Assumptions
The City of Palo Alto tax revenues continue to parallel the local economy. The economic
information above is the foundation for the solid performance turned in by Palo Alto tax
revenues over the past two years. Steady receipts are expected to continue in FY 2018 and FY
2019. For all tax revenues, staff projects a $5.0 million or 4.2 percent revenue increase in FY
2019 over those now projected for FY 2018. Tax revenues constitute nearly 60 percent of
General Fund resources.
TABLE 3: FY 2019 - 2028 General Fund Revenue Forecast
Revenue & Other Sources
Adopted
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
CAGR 10
Years
Sales Taxes $31,458 $31,097 $32,217 $33,128 $34,026 $34,931 $35,842 $36,742 $37,598 $38,418 $39,379 2.3%
Property Taxes 41,927 45,120 47,996 50,890 53,816 56,792 59,846 63,000 66,245 69,624 73,133 5.7%
Transient Occupancy Tax- General Purpose 16,629 16,487 16,928 17,396 17,892 18,411 18,963 19,553 20,150 20,746 21,327 2.5%
Transient Occupancy Tax- Infrastructure 8,514 8,190 8,408 8,642 8,888 9,146 9,420 9,713 10,009 10,306 10,594 2.2%
Documentary Transfer Tax 6,930 7,207 7,396 7,596 7,805 8,025 8,255 8,499 8,736 8,976 9,210 2.9%
Utility Users Tax 13,867 15,970 16,220 16,562 16,929 17,279 17,620 17,965 18,313 18,652 19,000 3.2%
Other Taxes and Fines 2,060 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,863 -1.0%
Subtotal: Taxes 121,385 125,930 131,024 136,073 141,215 146,443 151,805 157,331 162,910 168,581 174,506 3.7%
Charges for Services 19,427 20,135 21,897 22,965 23,887 24,807 25,667 26,500 27,054 27,348 28,094 3.8%
Stanford Fire & Dispatch Services 7,070 7,265 7,601 7,914 8,197 8,467 8,701 8,918 9,132 9,296 9,358 2.8%
Permits and Licenses 8,837 8,876 8,987 9,092 9,182 9,274 9,358 9,440 9,493 9,520 9,593 0.8%
Return on Investments 1,024 1,166 1,197 1,230 1,266 1,304 1,346 1,390 1,432 1,475 1,519 4.0%
Rental Income 15,575 16,059 16,552 17,048 17,559 18,085 18,627 19,185 19,760 20,352 20,962 3.0%
From Other Agencies 688 539 539 539 539 539 539 539 539 539 539 -2.4%
Charges to Other Funds 11,076 11,432 11,376 11,895 12,364 12,890 13,308 13,701 13,931 14,009 14,250 2.6%
Other Revenue 1,169 2,070 2,089 2,069 2,089 2,109 2,130 2,151 2,173 2,195 2,217 6.6%
Total Non-Tax Revenue 64,866 67,542 70,238 72,752 75,082 77,475 79,675 81,825 83,514 84,732 86,532 2.9%
Operating Transfers-In 20,791 19,757 20,376 20,871 21,326 21,875 22,401 22,909 23,475 24,036 24,614 1.7%
BSR Contribution (One-Time)3,384
Golf Operating Loss Reserve Liquidation
Total Source of Funds $210,426 $213,229 $221,638 $229,695 $237,623 $245,792 $253,881 $262,065 $269,898 $277,349 $285,652
Sales Tax
Reflected in this Forecast is the continued erosion of brick and mortar receipts that is resulting
from steady growth in on-line retail sales and the completion of Stanford Hospital construction
projects which will reduce future sales (use) tax revenue. Updated activity and revenue figures
for FY 2018 show probable receipts of $29.8 million or flat compared to the prior year due to
on-line sales tax reporting adjustments, a significant decline in an irregular sales tax business
(art gallery), an upcoming business moving to another city (needing a larger location) and a
significant prior period negative (one-time) sales tax adjustment. Sales taxes are expected to
rise to $30.8 million in FY 2019, a 3.1 percent growth rate that is consistent with the compound
annual growth rate over the past ten years of 3.1 percent and City’s sales tax consultant’s
(MuniServices) forecast of 3.2 percent. Segments contributing to this growth include electronic
equipment, restaurants, and auto leases. Department store sales continue to experience
declines; should this trend accelerate this holiday season and not offset by online sales, the
above forecasted growth may need to be revised downward.
Property Tax
Palo Alto property tax revenues have continued to climb. They have risen from $36.6 million in
FY 2016 to $39.4 million in FY 2017 and are now projected to grow to $42.4 million in FY 2018
and to $45.1 million in FY 2019. The increase from FY 2018 to 2019 equals 6.5 percent or $2.8
million. The 6.5 percent growth rate is in sync with the growth rate over the past 10 years.
Staff estimates include excess ERAF funds. The first four months of FY 2018 property tax
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growth data, both in sales volume and price, are consistent with the prior year. According to a
September 30, 2017 posting concerning residential sales values, Zillow states they have gone up
8.3 percent over the past year and predicts they will rise 2.9 percent within the next year.
City staff meets with the County quarterly to obtain the latest data and estimates of “in-the-
fiscal-year” tax revenue. Over the past half-dozen years, County data and projections have
proven reliable. Staff uses the County information and local assessment data to produce its
forecast of property tax revenues.
Transient Occupancy Tax (TOT)
TOT receipts have moderated. Prior to last fiscal year, TOT realized double digit growth due the
recovering economy, Palo Alto voters approved the TOT tax increase from 12 percent to 14
percent to fund infrastructure needs, and the Council approved the new tax revenues from the
addition of the Hilton hotels, the Clement on El Camino Real, and the upgrade of the Quality Inn
into the Nest to be dedicated to Infrastructure as well. Revenues moved upward from $22.4
million in FY 2016 to $23.5 million in FY 2017. TOT for FY 2018 is expected to reach $24.1
million, $0.6 million or 2.6 percent above the FY 2017 actual. Projections for FY 2019 stand at
$24.8 million, $0.7 million or 2.6 percent above the estimate for FY 2018. Average occupancy
rates through the first three months of this FY are running at 82 percent compared to 84
percent in the same prior year period. During these periods, room rates have increased from
$258 to $266 per day or a 3.1 percent increase.
Utility User’s Tax (UUT)
The UUT is levied on electric, gas, and water consumption, as well as on telephone usage. In
total, FY 2018 revenues are estimated at $15.2 million and in FY 2019 at $15.7 million.
UUT telephone revenues rose from $4.6 million in FY 2016 to $5.5 million in FY 2017. This
revenue has realized double digit growth the prior two years despite the voter approved 0.25
percent decrease to a 4.75 percent rate in FY 2015. Without data from providers to understand
this steep increase, staff is projecting, somewhat conservatively though almost double the
historical average, $5.8 million in FY 2018 and $6.0 million in FY 2019.
UUT revenue from Utility sales came in at $8.7 million in FY 2017 and is anticipated to reach
nearly $9.4 million in FY 2018. Rate increases of 12 percent for electric and 4 percent for water
are the chief drivers of the revenue growth. This source is expected to rise to $9.7 million in FY
2019.
Documentary Transfer Tax
In FY 2015, documentary transfer taxes peaked at $10.1 million. This milestone was a
consequence of several large commercial transactions on Page Mill Road and in the Stanford
Research Park. Since that time, transfer taxes have returned to more “normal” levels such as
the $7.5 million earned in FY 2017. Given that revenue from July through November this FY is
running nearly 2.5 percent above the same period in FY 2017, staff will likely modify the
Adopted Budget at midyear from $6.9 million up to $7.1 million. For FY 2019, a slight uptick to
$7.3 million is estimated.
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As in past years, this revenue source is challenging to forecast since it is highly dependent on
sales volume and the mix of commercial and residential sales. The transactions through
September (176) are running higher than those through October of last year (166), the total
value of these transactions has increased by 2.5 percent. This confirms that the Palo Alto
housing market remains stable. In addition, data from this FY and the latter half of last FY
indicates that there have been few to no large commercial sales.
The strong performance in property, transient occupancy, and the utility user taxes bode well
for FY 2019 and there are no indications of an economic slowdown at this time. However, sales
and documentary taxes have weakened. This, along with a federal legislative economic
recovery uncertainties, merits close monitoring and a prudent spending plan.
Sources:
1. CCSCE September 2017 “The Bay Area Led the State and Nation in GDP Growth in 2016” Report
2. Bay Area Council Economic Institute October 2017 “Bay Area Job Watch” Report
Rental Income
Rental Income of $16.1 million primarily reflects rent from the City’s Enterprise Funds and the
Cubberley Community Center and reflects growth of approximately 3 percent from the FY 2018
Adopted Budget of $15.6 million. Growth of 3 percent reflects the current growth in the San
Francisco Bay Area CPI growth, which is the typical growth assumed in rental agreements.
Charges for Services & Permits and Licenses
Revenue for Charges for Services and Permits and Licenses of $27.4 million and $8.9 million
respectively are primarily driven by the cost to provide services to the community from
recreational activities to development activities. Therefore, revenues are significantly impacted
by personal service costs. Therefore revenues are modeled to grow in line with the average
increase in general salaries and benefits increases included in the Forecast.
Stanford Fire and Dispatch Services: The City has two separate agreements with Stanford
University to provide its response and emergency dispatch services. On October 8, 2013, the
City received a Notice of Termination letter from Stanford stating its intention to terminate the
contract with the City no sooner than one year and no later than two years from the date of
notice. Since this time, the City has continued to negotiate with Stanford to settle on a service
level and cost. This Forecast currently assumes the revised staffing deployment model as
approved by the City Council in October 2017 with growth rates in line with the average growth
of the Fire Department expenses over the ten-year forecast.
Charges to Other Funds
The preponderance of revenues in this category is General Fund administrative cost allocation
plan charges to the Enterprise and Internal Service Funds. Internal support departments such
as Administrative Services, Human Resources, and Council Appointees provide services to
enterprise and internal service funds. The costs for these services are recouped through the
administrative cost plan charges. The FY 2019 estimate for Charges to Other Funds of $11.4
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million reflects growth of 3.2 percent from the FY 2018 Adopted Budget of $11.1 million. This is
attributed to the assumed increases in salary and benefits costs. This Forecast includes
increases ranging between no growth to 4.3 percent each year based primarily on the modeled
increases in expenses such as salaries and benefits and contractual services.
Operating’s Transfers
Operating Transfers primarily include the equity transfer from the Electric and Gas funds. In
accordance with a methodology approved by the City Council in June 2009, the equity transfer
is calculated by applying a rate of return on the capital asset base of the Electric and Gas funds.
This rate of return is based on PG&E's rate of return on equity as approved by the California
Public Utilities Commission (CPUC). Using the Utility Department’s projections from the Electric
and Gas Five Year Financial Forecasts, as approved by the City Council in spring 2017, the equity
transfer from the Electric and Gas funds are projected to increase from $19.3 million in FY 2019
to $24.1 million in FY 2028. Overall Operating Transfers are estimated to decline slightly to
$20.6 million in FY 2019, a 0.9 percent reduction from the FY 2018 Adopted Budget level of
$20.8 million due to one-time adjustments.
Expense Assumptions
As part of developing the FY 2019 Forecast expenditure budget, the General Fund expense
categories have been adjusted by removing FY 2018 Adopted Budget one-time expenses and
updating major cost elements such as salary and benefits costs. The tables below display the
expense forecast and when compared to the FY 2018 Adopted Budget, growth of 2.6 percent is
expected in FY 2019, with growth ranging from 1.5 percent to 3.7 percent throughout the ten
year forecast.
TABLE 4: FY 2019-2028 General Fund Expense Forecast
Expenditures & Other Uses
Adopted
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
CAGR 10
Years
Salary 74,191$ 76,171$ 78,361$ 80,475$ 82,445$ 84,343$ 86,262$ 88,190$ 90,141$ 92,117$ 94,113$ 2.4%
Benefits 51,432 54,116 58,512 62,655 66,184 69,592 72,411 74,962 76,546 76,666 78,661 4.3%
Subtotal: Salary & Benefits 125,623 130,287 136,873 143,130 148,629 153,935 158,673 163,153 166,687 168,783 172,774 3.2%
Contract Services 18,984 19,202 19,581 19,899 20,307 20,711 21,129 21,548 21,981 22,427 22,876 1.9%
Supplies & Material 3,544 3,616 3,689 3,763 3,839 3,917 3,996 4,077 4,159 4,243 4,389 2.2%
General Expense 11,933 11,521 11,782 12,087 12,400 12,714 13,036 13,367 14,290 14,665 15,344 2.5%
Debt Service 432 801 569 573 572 573 574 575 570 570 572 2.9%
Rents & Leases 1,567 1,653 1,668 1,684 1,700 1,716 1,733 1,750 1,768 1,786 1,805 1.4%
Facilities & Equipment 517 481 491 501 511 521 531 542 552 563 575 1.1%
Allocated Charges 17,937 18,804 19,306 19,812 20,327 20,858 21,257 21,669 22,021 22,297 22,555 2.3%
Total Non Sal/Ben Before Transfers 54,914 56,078 57,087 58,319 59,655 61,010 62,257 63,528 65,342 66,553 68,116 2.2%
Operating Transfers-Out 4,908 4,404 4,301 4,394 4,493 4,492 4,584 4,678 4,774 4,838 4,904 0.0%
Transfer to Infrastructure - Base 16,467 16,822 17,187 17,561 17,945 18,337 18,739 19,152 19,575 20,009 20,455 2.2%
Transfer to Infrastructure - TOT 8,514 8,190 8,408 8,642 8,888 9,146 9,420 9,713 10,009 10,306 10,594 2.2%
Total Use of Funds $210,426 $215,780 $223,855 $232,045 $239,609 $246,919 $253,672 $260,223 $266,387 $270,488 $276,842 2.8%
Salary and Benefits
The table above (also available as an attachment) depicts the salaries and benefits costs for the
next ten years. Over the forecast period, the salaries and benefits costs gradually increase in
comparison to the total expenditure budget. In FY 2019, salaries and benefits costs represent
approximately 60 percent of the General Fund budget expenditures, increasing to 62 percent of
the General Fund budget expenditures by FY 2028.
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Salary
Consistent with the City’s salary budget methodology for recent budgets, positions are
budgeted at the actual rate of pay including benefits as of Fall 2017. Then, by position, salary
costs are updated in accordance with applicable Memorandum of Agreements (MOA) between
the City and its labor groups and the Management and Professional Personnel and Council
Appointees Compensation Plan. It is important to note that as of this Forecast, many
Memorandums of Agreement are near the end of their agreement term. The Forecast assumes
step increases for employees in applicable positions, including SEIU, IAFF, and PAPOA, as well as
merit increases for Management and Professional employees. General wage adjustments of 2%
are included in each year of the Forecast for all employees. This is consistent with prior Council
direction to use the 2 percent as a forecasting model not as a commitment to future
negotiations.
Benefits
Pension: The Forecast includes pension rates from CalPERs as of the June 30, 2016 valuation for
the City’s Miscellaneous and Safety plans for the first seven years of the Forecast, and modeled
by the City’s Actuary (Bartel Associates) for the final years of the Forecast noted by an asterisk.
This methodology is necessary as CalPERs only provides projected pension rates for the next
seven years. CalPERs has implemented some changes with significant impacts to the City’s
pension liability lowering the discount rate from 7.5 percent to 7.0 percent over three years.
The impact of this phase-in is discussed below. Concurrent to the preparation of this report,
Bartel Associates is preparing alternative scenarios that assume alternative discount rate
scenarios and the estimated impact to the City. It is anticipated that these alternative scenarios
will be detailed in a subsequent memorandum provided at places for the December 5, 2017
Finance Committee meeting. As shown in the table below, the FY 2019 pension contribution
rates for the Miscellaneous and Safety plans will increase from FY 2018. It should be noted that
the FY 2019 forecast does presume that employees will pick up 1% of the employer pension
cost for miscellaneous plan members, and that safety plan members will pick up 3% of the
employer pension cost.
For the miscellaneous plan, the projected pension contribution rate will increase 2.4 percent
from 30.2 percent in FY 2018 to 32.6 percent in FY 2019. This marks the beginning of the phase-
in of the lower discount rate, which continues in the next year, as the percentage increases
another 3.3 percent, from 32.6 percent to 35.9 percent, for the Miscellaneous plan. Subsequent
increases continue through FY 2025, to a high of 44.0 percent, as various factors are amortized
according to the CalPERs schedule. Based on the amortization schedule and other factors,
Bartel Associates does forecast a slight dip in pension costs for the Miscellaneous plan
beginning in FY 2026 at the discount rate of 7.0%.
The Safety plan follows a similar trend line, with the increases plateauing in the out years of the
Forecast. Initial increases of almost six percent year over year, from 49.7 percent in FY 2018 to
55.6 percent in FY 2019 to 61.5 percent in FY 2020, reflect the phase-in of the 7.0 percent
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discount rate instead of the previous 7.5 percent discount rate. This growth stabilizes in the out
years of the Forecast, but does continue to increase.
FY 2018-2028 Retirement Rates
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028
Miscellaneous 30.2 32.6 35.9 38.7 40.9 42.6 43.5 44.0 42.0* 38.4* 38.3*
Miscellaneous
EE Cost Share 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Safety 49.7 55.6 61.5 66.3 70.3 73.5 75.1 76.2 77.5* 78.0* 78.2*
Safety EE Cost
Share 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
As additional information is brought forward by Bartel Associates regarding alternative discount
rate modeling, the City will be able to have substantive conversations about its long term
pension strategy. The CalPERs board is also currently scheduled to discuss items that will
continue to affect the City of Palo Alto, including the Quadrennial Asset Liability Management
review. As direction from these conversations is issued from the CalPERs board it will be
incorporated into subsequent analysis as appropriate. For a brief summary of these initiatives
the Board is taking, the California Association of Counties issued this bulletin:
http://www.counties.org/csac-bulletin-article/calpers-considers-changes-impacting-employer-
contributions. Although it references Counties, it is equally pertinent and the same for Cities.
Retiree Medical: Retiree Medical is based on the most recent actuarial study prepared by
Bartel Associates, which is done every two years. The last actuarial study was done in FY 2016
and the City is currently undergoing an update to this study for FY 2018. The table below
details the cost to the General Fund for every year based on that actuarial study, excluding the
implied subsidy. Consistent with City Council direction, as recommended by staff, the City
continues to budget for the full payment of the Actuarial Determined Contribution (ADC) for
retiree healthcare. Since CalPERs blends active employees with pre-Medicare retirees and
charges the same medical premium, even though younger employees on average consume less
healthcare and thereby subsidize older employees and retirees, there is an implied subsidy that
effectively lowers the funding necessary to meet the ADC.
FY 2018- 2026 Retiree Medical General Fund Contributions
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
General Fund 9.8M 10.1M 10.4M 10.7M 10.9M 11.3M 11.7M 12.0M 12.5M
Bartel Associates is currently working on the next actuarial study for retiree healthcare which is
anticipated to be brought before the Finance Committee in the March/April 2018 timeframe.
That actuarial study will inform the development of the FY 2019 Proposed Operating Budget
that will be reviewed by the Finance Committee in May 2018. The Committee will have
opportunities to review the various assumptions used to determine the benefits and its costs.
City of Palo Alto Page 12
Unlike the pension trust, the Retiree Medical Trust has options that the City can choose from to
determine how quickly it funds its obligations.
Healthcare: Consistent with the most recent labor agreements between the City and its
bargaining units in the General Fund, the City’s contribution amounts towards medical costs for
employees are based on a flat rate contribution from the City, with the employee contributing
towards the remaining medical plan premium. This Forecast assumes an inflator of four
percent on healthcare costs to the City over the term of the Forecast, as well as four percent for
dental and vision costs through the Forecast.
Contract Services
This FY 2019 forecast assumes $19.2 million in contract services, a 1.1 percent increase from
the FY 2018 Adopted Budget of $19.0 million. This increase includes important contract
increases for contractual obligations already approved by the City Council, including the third
year of street trees and the latest janitorial services contract. Throughout the Forecast, a 2.0
percent annual escalator was modeled to capture anticipated growth in this expense category.
Expenses associated with anticipated contracts, such as to operate the newly renovated golf
course, that are still pending have not been incorporated into the Forecast.
Supplies and Materials
The FY 2018 Adopted Budget for the General Fund included $3.5 million for Supplies and
Materials, which is modeled to grow modestly to $3.6 million in FY 2019. An escalator of 2.0
percent was applied to this expense category to capture anticipated growth.
General Expense
This category includes costs for travel and meetings, telephone and non-city utilities,
contingency accounts, bank card service charges, and subsidies and grants provided through
the Human Services Resource Allocation Program (HSRAP). The FY 2018 Adopted Budget of $6.0
million included one-time costs for a parking study ($150,000), Fire Department Hiring and
Recruitment Costs ($50,000), Labor Negotiation Funding ($100,000), matching funds for a San
Mateo County Transit District Grant ($22,600) and a reserve for anticipated operating needs in
FY 2018 ($500,000). The FY 2019 forecast for this category excludes those items, partially offset
by an increase of 2.0 percent for modeling purposes; a decrease to $5.4 million is anticipated in
FY 2019. Increases of 2.0 percent were modeled in years beyond 2019 in the Forecast. These
figures do not include General Expenses for the Cubberley Lease, which is explained in further
detail below.
General Expense - Cubberley Lease: In FY 2015, the City and Palo Alto Unified School District
(PAUSD) agreed to an extension of the Cubberley Lease by five years starting January 1, 2015.
As part of the lease agreement, the City Council approved creation of a fund for Cubberley
infrastructure improvements. Based on the new lease, $1.9 million is transferred to the
Cubberley Property Infrastructure Fund annually for future infrastructure improvements.
Therefore, the $1.9 million is classified as an Operating Transfer Out which is discussed in
City of Palo Alto Page 13
further detail below. With the Cubberley infrastructure funds set aside, the FY 2019 Budget
includes $6.1 million for Cubberley Lease payments. In accordance with the lease agreement,
the Forecast assumes a 3.0 percent annual CPI increase for the lease payments to the PAUSD
for the Cubberley facility. The lease agreement period is five years and ends on December 30,
2020; however, for planning purposes in this Forecast, it is assumed that the agreement will
continue during the entire Forecast period.
Rents & Leases
The Rents & Leases expense category for FY 2019 is estimated to increase by 5.5 percent. from
$1.57 million in FY 2018 to $1.65 million in FY 2019. This growth slows significantly in FY 2020
and beyond to approximately 1.0 percent. The uptick from FY 2018 to FY 2019 is primarily
attributable to the increase for the lease for the Development Services Department at its new
location at 526 Bryant St ($74,000). In both FY 2019 and throughout the Forecast, an increase
of 3.0 percent is modeled where appropriate to capture anticipated increases in leases held by
the City.
Facilities and Equipment
The Facilities and Equipment expense category is expected to experience a slight decrease of
$36,000, from $517,000 to $481,000, from FY 2018 to FY 2019. This is the result of a one-time
expense of $45,000 in FY 2018 to buy two new gurneys for the fire department, partially offset
by a 2.0 percent increase to this expense category. Growth of 2.0 percent is modeled in later
years to capture anticipated increases.
Allocated Charges
Allocated Charges represent expense allocations by the City’s enterprise and internal service
funds for services and products they provide to General Fund departments. The FY 2018
Adopted Budget for the General Fund included $17.9 million for these expenses, including
utilities usage, general liability insurance, technology costs, vehicle equipment and replacement
costs and other charges. The allocated charges for technology costs in FY 2018 were subsidized
on a one-time basis by the use of excess fund balance in the technology fund, which is not
anticipated to continue in FY 2019. The FY 2019 charges of the Forecast updates the revenues
and expenses for these various allocations based on the information available at the time of the
Forecast development. FY 2019 is anticipated to experience an increase of 4.8 percent to a
total of $18.8 million. This increase is driven primarily by the restoration of the full allocation of
costs associated with the technology fund.
Operating Transfers Out
Operating Transfers Out include transfers from the General Fund to the Debt Service Fund, to
the Technology Fund, and to the Airport Fund. The transfer level for the FY 2018 Adopted
Budget is $4.9 million, which included a one-time transfer of $480,000 to the Technology Fund
for the Radio Infrastructure replacement capital project. In FY 2019, the Operating Transfers
Out are anticipated to be $4.4 million, decreasing further to $4.3 million in FY 2020 before
City of Palo Alto Page 14
starting to increase slightly in FY 2021 for the duration of the Forecast. The reason for the
decrease in FY 2020 is the elimination of a $200,000 transfer to the Airport Fund.
Transfer to Infrastructure
In FY 2018, the adopted General Fund transfer to the Capital Improvement Fund is $24.9
million, which includes the base transfer of $16.5 million and $8.5 million from additional
Transient Occupancy Tax (TOT) proceeds generated through a two percentage point TOT
increase as well as through the addition of new hotels. Incremental TOT increases from the
rate increase and new hotels are dedicated to the Capital Improvement Fund to support the
Infrastructure Plan, consistent with City Council direction. This category also includes the $1.9
million transfer to the Cubberley Property Infrastructure Fund, described earlier in this
document. This transfer remains flat in all out-years of this Forecast.
The transfers to the Capital Improvement Fund are anticipated to remain consistent with the FY
2018 Adopted Budget for the next few years, with slight increases annually over the forecast
period. Both the TOT and base transfers to the Capital Improvement Fund are anticipated to
increase by approximately 2.6 percent each year of the forecast period; however, due to lower
TOT revenue collected in FY 2017, the estimated TOT collection and transfer in FY 2019 is
approximately $0.7 million lower than the amount initially forecast for FY 2019 in the adopted
FY 2018-2023 Capital Improvement Program.
Budget Stabilization Reserve
The City's Budget Stabilization Reserve (BSR) serves as the primary General Fund reserve. By
policy, the BSR is maintained in the range of 15 to 20 percent of General Fund operating
expenditures, with a target of 18.5 percent. Any reduction to the reserve below 15 percent
requires City Council approval. At the discretion of the City Manager, any BSR balance above
18.5 percent may be transferred to the Infrastructure Reserve (IR), which was established to
provide funding for maintenance and rehabilitation of the City’s capital assets. The BSR is used
to fund unanticipated one-time costs as opposed to ongoing or recurring operating
expenditures. The City's intent is to fund ongoing programs and services with ongoing dollars.
This forecast assumes that the BSR meets or exceeds the Council approved minimum of 15
percent of anticipated expenses in any given year.
The City has held a long-standing practice of maintaining a BSR balance of no less than 15
percent of General Fund operating expenses. At the close of Fiscal Year 2017, the BSR is
anticipated to remain slightly above the 18.5 percent target at 18.7 percent or $39.3 million.
Establishing sound fiscal reserve policies have been a strong factor in the City being rated AAA
by rating agencies.
City of Palo Alto Page 15
Assumptions NOT Included in Forecast
It should be noted that this Forecast does not include a number of potential impacts to the FY
2018 projected budget and the out years of the Forecast. Below is a list of a number of items
not included (not intended to be a comprehensive list or in any priority order).
Labor negotiations: Four significant labor contracts expire June 30, 2018, Palo Alto Police
Officers Association (PAPOA), the International Association of Fire Fighters (IAFF), Fire Chiefs
Association (FCA), and Police Management Association (PAPMA); with the Service Employees
International Union (SEIU) expiring by the conclusion of calendar year 2018. Any agreements
reached between the City’s bargaining units will need to be incorporated into future budgets
and forecasts, as applicable.
Capital Infrastructure Plan: As referenced earlier, the June 2014 Council approved
Infrastructure Plan of $125.8 million in projects was based on construction and design costs
with data from 2012. As construction costs have increased and the City is required to pay
prevailing wages, the Plan is not sufficiently funded. Current estimates cited in the FY 2018
Adopted Capital Budget anticipate this Plan to cost $196 million (excluding salaries and benefits
and public art costs). In addition, this Forecast does not assume ongoing operating impacts as a
result of the Infrastructure Plan, but future forecasts will include operating cost impacts as the
specific projects are designed.
Parks Master Plan: the Parks Master Plan was finalized in 2017, however, when approved it
identified a need to develop a funding strategy. As such, this Forecast does not yet
contemplate the necessary investments to execute this plan.
Junior Museum and Zoo: In November 2014, the City Council directed staff to negotiate a
capital lease with the Friends of the Junior Museum and Zoo for the reconstruction of the
Junior Museum and Zoo. This Forecast does not assume any additional capital or ongoing
operating costs related to the renovated building and changes in programming as a result of the
new building.
Other Capital Improvement Projects: A number of both assets and planned projects remain on
the horizon, however, none have resulted in formalized capital improvement projects. Major
improvements such as update to the animal care shelter, rail grade separation, the former ITT
site, Foothills Park 7.7 acres, and the Boulware park potential acquisition are not factored into
the Forecast.
City owned assets operated by non-profit organizations: This Forecast does not include any
additional capital investments for the Avenidas Senior Center, the Palo Alto History Museum,
the Ventura Child Care Center, the Junior Museum and Zoo, or the Scout Building.
Cubberley Community Center Master Plan: The City Council has approved the start of the
Cubberley Community Center Master Plan process, however, costs in excess of the dedicated
City of Palo Alto Page 16
Cubberley infrastructure funding as agreed to between the PAUSD and the City are not
assumed in this Forecast. In addition, the lease agreement with the PAUSD is set to expire in
December 2019.
Loans for special projects: From time to time the City’s General Fund will assist other City
operations with modest cash flow loans to bridge fiscal years. For example, the City has
provided over $3 million in loans to the Airport Fund as it works to secure significant grant
funding from the Federal Aviation Administration (FAA) for capital improvement costs. It is
anticipated that other projects such as parking initiatives may need a similar type of short term
loan in order to fund the capital costs necessary to implement certain initiatives.
Cadillac Healthcare Federal Excise Tax: A 40 percent excise tax will be imposed on the value of
health insurance benefits that exceed a certain threshold. CalPERs may be able to design
healthcare premiums to stay below the threshold and discussions are in the preliminary stage.
Congress is also discussing possibly delaying or modifying this tax. If the tax is applicable, the
City may have to pay the tax.
CalPERs City contribution increases: Currently, CalPERS assumes an annual investment return of
7.0 percent. Further, the CalPERS Board approved a gradual de-risking strategy, which is
intended to reduce the assumed investment return to 6.5% over the next 20 years in the years
when CalPERS earns an investment on its portfolio in excess of 11.5%. This Forecast assumes
that CalPERS will meet the annual investment return. However, staff and the Finance
Committee are actively engaged in a conversation about investment return estimates for the
next ten years and strategies to supplement the current annual bill CalPERs provides the City
through mechanisms like providing additional funding to the City’s irrevocable Section 115
Pension Trust. This Forecast does not assume any additional level of funding above and beyond
the annual CalPERS contribution pending further Council direction.
Transient Occupancy Tax increases: The City is in the process of reviewing plans for an
additional hotels and increase in number of rooms. This Forecast does not assume any potential
Transient Occupancy Tax increases from any new hotels.
Tax revenue alignment with updated Comprehensive Plan: The City Council recently completed
updating its Comprehensive Plan, including the potential fiscal impact of various land use
scenarios. The fiscal impact of this plan and various land use scenarios are not factored into this
Forecast.
Changes in the local, regional, and national economy: This Forecast assumes a steadily growing
local economy. Any changes may have positive or negative impacts on economically sensitive
revenues such as Sales Tax and the Transient Occupancy Tax.
City of Palo Alto Page 17
City’s Pension Discussions Continued
Concurrent with the development of the FY 2019 Long Range Financial Report, and the start of
the FY 2019 annual budget process, the Finance Committee has been actively engaged in a
discussion with staff about the growing liabilities associated with pension benefits as directed
by the City Council in the adoption of the FY 2018 budget. To date, the City has made strides to
address these liabilities in a proactive manner both financially and through detailed discussion
on the variables that impact the calculation of liability levels.
The City Council took proactive steps in the last two years by 1) establishing a cost share with
employees for additional pick-up of the employer portion of pension contributions and 2)
establishing an irrevocable Section 115 pension trust fund of over $3 million. The Finance
Committee and staff have held two public discussions on September 19, 2017 and October 17,
2017 discussing the growing pension liability, the variables that impact it, and how we got here.
Most recently at the October 2017 meeting, the Finance Committee provided clear direction for
alternative assumptions to be included in the City’s Long Range Financial Report in addition to
the ongoing referrals from the September 2017 meeting. All parties agreed that a series of
meetings will be necessary to address these assumptions. Once the assumptions are
determined, the Committee will take up potential solutions and implications. Below is a
summary of the requested referrals and the status of them through conversation to date:
September 17, 2017:
1. Develop an easily understood explanation for a general audience articulating the City’s
pension discussion and variables that may impact it
Staff anticipate developing and refining this communication framework upon
further clarification of the desired variable assumptions in determining the City’s
pension liability.
2. Provide total cost per employee assuming an alternative discount rate
Staff provided this chart as part of the October 17, 2017 meeting with the current
phased in reduction to a 6.2 percent discount rate and plans to continue to provide
similar views as the Committee and Council continue discussions surrounding
alternative assumptions.
3. How best can the City utilize expert resources to further inform this pension discussion
Staff are currently in discussions with Stanford University on data sharing and
calculation modeling
4. Reexamine the FY 2018 Adopted Budget and adjust the General Fund expenses to reflect a
six (6) percent discount rate for the retirement system and compare this adjusted total
expense to the Adopted revenues
Staff provided this at the October 17, 2017 meeting
5. Provide the potential payment schedule should the City choose to accelerate the
amortization period (also known as “fresh start” or “refinancing the mortgage”)
Staff provided this as displayed in the June 30, 2016 CalPERs report and discussed
at the October 2017 Finance Committee meeting. It is anticipated that alternative
revisions to these schedules based on potentially different assumed discount rates
City of Palo Alto Page 18
may be necessary in the future as the Committee refines alternative liability
assumptions.
6. Provide employee compensation in tabular form including salary, benefits, unfunded
pension liability, unfunded retiree medical liability for each scenario
Pending, staff anticipates brining this back as part of further discussions
surrounding
October 17, 2017
Provide three alternative scenarios in the Long Range Financial Report: (1) Alternative with a
7.0 percent discount rate but without the current phase-in schedule as proposed by CalPERs,
(2) Alternative with a 6.2 percent discount rate without any phase in, and (3) in consultation
with the City Attorney’s Office, review and report back on the feasibility of data sharing as
requested by Stanford University to bring forward an alternative with a further reduced
discount rate as modeled by Stanford.
In addition, the Committee outlined clear next steps in the continued pension discussions. To
finalize the recommended assumptions for the calculation of the City’s Pension liability and
provide guidance to the City Manager on potential additional pension contribution funding
levels desired to be included in the FY 2019 budget process. Subsequent to identifying the
Council’s recommended assumptions, then being to discuss potential long standing financial
policies to address the pension liability to ensure the City is well positioned to fulfill the benefits
afforded to past, present, and future employees.
Conclusion
The FY 2019 Long Range Financial Forecast puts in perspective the growing desires and the
limited resources available to complete all in an expeditious fashion. It is a report of caution as
the City and its staff grapple with needing to prioritize resources and projects in order to
maintain the financial stability the City has historically maintained. A much more focused
approach to services and investments will be necessary. As the Committee and Council
continue to discuss major projects such as pension, infrastructure, grade separation, a constant
eye on thinking outside of the box and managing expectations will be key. The pension
obligation have not had a crowd out impact to City services to date, but prioritization of needs
and staying within the resources available will be key to having a sound financial future.
RESOURCE IMPACT
Financial implications from this report and input from the Finance Committee will be
considered in the City Manager’s development of the Proposed Fiscal Year 2019 budget.
ENVIRONMENTAL IMPACT
This report is not a project for the purposes of the California Environmental Quality Act.
Environmental review is not required.
Attachments:
Attachment A: Long Range Financial Report Revenue Tables
Attachment B: Long Range Financial Report Expense Tables
FY 2019-2028 Long Range Financial Forecast Revenue Table ATTACHMENT A
Revenue & Other Sources Adopted 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
CAGR 10
Years
Sales Taxes $31,458 $31,097 $32,217 $33,128 $34,026 $34,931 $35,842 $36,742 $37,598 $38,418 $39,379 2.3%
Property Taxes 41,927 45,120 47,996 50,890 53,816 56,792 59,846 63,000 66,245 69,624 73,133 5.7%
Transient Occupancy Tax- General Purpose 16,629 16,487 16,928 17,396 17,892 18,411 18,963 19,553 20,150 20,746 21,327 2.5%
Transient Occupancy Tax- Infrastructure 8,514 8,190 8,408 8,642 8,888 9,146 9,420 9,713 10,009 10,306 10,594 2.2%
Documentary Transfer Tax 6,930 7,207 7,396 7,596 7,805 8,025 8,255 8,499 8,736 8,976 9,210 2.9%
Utility Users Tax 13,867 15,970 16,220 16,562 16,929 17,279 17,620 17,965 18,313 18,652 19,000 3.2%
Other Taxes and Fines 2,060 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,863 -1.0%
Subtotal: Taxes 121,385 125,930 131,024 136,073 141,215 146,443 151,805 157,331 162,910 168,581 174,506 3.7%
Charges for Services 19,427 20,135 21,897 22,965 23,887 24,807 25,667 26,500 27,054 27,348 28,094 3.8%
Stanford Fire & Dispatch Services 7,070 7,265 7,601 7,914 8,197 8,467 8,701 8,918 9,132 9,296 9,358 2.8%
Permits and Licenses 8,837 8,876 8,987 9,092 9,182 9,274 9,358 9,440 9,493 9,520 9,593 0.8%
Return on Investments 1,024 1,166 1,197 1,230 1,266 1,304 1,346 1,390 1,432 1,475 1,519 4.0%
Rental Income 15,575 16,059 16,552 17,048 17,559 18,085 18,627 19,185 19,760 20,352 20,962 3.0%
From Other Agencies 688 539 539 539 539 539 539 539 539 539 539 -2.4%
Charges to Other Funds 11,076 11,432 11,376 11,895 12,364 12,890 13,308 13,701 13,931 14,009 14,250 2.6%
Other Revenue 1,169 2,070 2,089 2,069 2,089 2,109 2,130 2,151 2,173 2,195 2,217 6.6%
Total Non-Tax Revenue 64,866 67,542 70,238 72,752 75,082 77,475 79,675 81,825 83,514 84,732 86,532 2.9%
Operating Transfers-In 20,791 19,757 20,376 20,871 21,326 21,875 22,401 22,909 23,475 24,036 24,614 1.7%
BSR Contribution (One-Time)3,384
Golf Operating Loss Reserve Liquidation
Total Source of Funds $210,426 $213,229 $221,638 $229,695 $237,623 $245,792 $253,881 $262,065 $269,898 $277,349 $285,652
Revenue & Other Sources 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Sales Taxes -1.1%3.6%2.8%2.7%2.7%2.6%2.5%2.3%2.2%2.5%
Property Taxes 7.6%6.4%6.0%5.7%5.5%5.4%5.3%5.2%5.1%5.0%
Transient Occupancy Tax - General Purpose -0.9%2.7%2.8%2.9%2.9%3.0%3.1%3.1%3.0%2.8%
Transient Occupancy Tax - Infrastructure -3.8%2.7%2.8%2.8%2.9%3.0%3.1%3.0%3.0%2.8%
Documentary Transfer Tax 4.0%2.6%2.7%2.8%2.8%2.9%3.0%2.8%2.7%2.6%
Utility Users Tax 15.2%1.6%2.1%2.2%2.1%2.0%2.0%1.9%1.9%1.9%
Other Taxes and Fines -9.8%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.2%
Subtotal: Taxes 3.7%4.0%3.9%3.8%3.7%3.7%3.6%3.5%3.5%3.5%
Charges for Services 3.6%8.8%4.9%4.0%3.9%3.5%3.2%2.1%1.1%2.7%
Stanford Fire & Dispatch Services 3.2%4.6%4.1%3.6%3.3%2.8%2.5%2.4%1.8%0.7%
Permits and Licenses 0.4%1.3%1.2%1.0%1.0%0.9%0.9%0.6%0.3%0.8%
Return on Investments 13.9%2.7%2.8%2.9%3.0%3.2%3.3%3.0%3.0%3.0%
Rental Income 3.1%3.1%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%
From Other Agencies -21.7%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%
Charges to Other Funds 3.2%-0.5%4.6%3.9%4.3%3.2%3.0%1.7%0.6%1.7%
Other Revenue 77.1%0.9%-1.0%1.0%1.0%1.0%1.0%1.0%1.0%1.0%
Total Non-Tax Revenue 4.2%4.0%3.6%3.2%3.2%2.8%2.7%2.1%1.5%2.1%
Operating Transfers-In -5.0%3.1%2.4%2.2%2.6%2.4%2.3%2.5%2.4%2.4%
BSR Contribution (One-Time)
Golf Operating Loss Reserve Liquidation
Total Source of Funds 1.4%3.9%3.6%3.5%3.4%3.3%3.2%3.0%2.8%3.0%
FY 2019-2028 General Fund Long Range Financial Forecast Expense Table ATTACHMENT B
Expenditures & Other Uses
Adopted
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
CAGR 10
Years
Salary 74,191$ 76,171$ 78,361$ 80,475$ 82,445$ 84,343$ 86,262$ 88,190$ 90,141$ 92,117$ 94,113$ 2.4%
Benefits 51,432 54,116 58,512 62,655 66,184 69,592 72,411 74,962 76,546 76,666 78,661 4.3%
Subtotal: Salary & Benefits 125,623 130,287 136,873 143,130 148,629 153,935 158,673 163,153 166,687 168,783 172,774 3.2%
Contract Services 18,984 19,202 19,581 19,899 20,307 20,711 21,129 21,548 21,981 22,427 22,876 1.9%
Supplies & Material 3,544 3,616 3,689 3,763 3,839 3,917 3,996 4,077 4,159 4,243 4,389 2.2%
General Expense 11,933 11,521 11,782 12,087 12,400 12,714 13,036 13,367 14,290 14,665 15,344 2.5%
Debt Service 432 801 569 573 572 573 574 575 570 570 572 2.9%
Rents & Leases 1,567 1,653 1,668 1,684 1,700 1,716 1,733 1,750 1,768 1,786 1,805 1.4%
Facilities & Equipment 517 481 491 501 511 521 531 542 552 563 575 1.1%
Allocated Charges 17,937 18,804 19,306 19,812 20,327 20,858 21,257 21,669 22,021 22,297 22,555 2.3%
Total Non Sal/Ben Before Transfers 54,914 56,078 57,087 58,319 59,655 61,010 62,257 63,528 65,342 66,553 68,116 2.2%
Operating Transfers-Out 4,908 4,404 4,301 4,394 4,493 4,492 4,584 4,678 4,774 4,838 4,904 0.0%
Transfer to Infrastructure - Base 16,467 16,822 17,187 17,561 17,945 18,337 18,739 19,152 19,575 20,009 20,455 2.2%
Transfer to Infrastructure - TOT 8,514 8,190 8,408 8,642 8,888 9,146 9,420 9,713 10,009 10,306 10,594 2.2%
Total Use of Funds $210,426 $215,780 $223,855 $232,045 $239,609 $246,919 $253,672 $260,223 $266,387 $270,488 $276,842 2.8%
Expenditures & Other Uses
Adopted
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Salary N/A 2.7%2.9%2.7%2.4%2.3%2.3%2.2%2.2%2.2%2.2%
Benefits N/A 5.2%8.1%7.1%5.6%5.1%4.1%3.5%2.1%0.2%2.6%
Subtotal: Salary & Benefits N/A 3.7%5.1%4.6%3.8%3.6%3.1%2.8%2.2%1.3%2.4%
Contract Services N/A 1.1%2.0%1.6%2.0%2.0%2.0%2.0%2.0%2.0%2.0%
Supplies & Material N/A 2.0%2.0%2.0%2.0%2.0%2.0%2.0%2.0%2.0%3.4%
General Expense N/A -3.5%2.3%2.6%2.6%2.5%2.5%2.5%6.9%2.6%4.6%
Debt Service N/A 85.3%-28.9%0.7%-0.2%0.2%0.2%0.1%-0.8%0.0%0.4%
Rents & Leases N/A 5.5%0.9%0.9%0.9%1.0%1.0%1.0%1.0%1.0%1.1%
Facilities & Equipment N/A -6.9%2.0%2.0%2.0%2.0%2.0%2.0%2.0%2.0%2.0%
Allocated Charges N/A 4.8%2.7%2.6%2.6%2.6%1.9%1.9%1.6%1.3%1.2%
Total Non Sal/Ben Before Transfers N/A 2.1%1.8%2.2%2.3%2.3%2.0%2.0%2.9%1.9%2.3%
Operating Transfers-Out N/A -10.3%-2.3%2.2%2.3%0.0%2.1%2.1%2.1%1.3%1.4%
Transfer to Infrastructure - Base N/A 2.2%2.2%2.2%2.2%2.2%2.2%2.2%2.2%2.2%2.2%
Transfer to Infrastructure - TOT N/A -3.8%2.7%2.8%2.8%2.9%3.0%3.1%3.0%3.0%2.8%
Total Use of Funds N/A 2.5%3.7%3.7%3.3%3.1%2.7%2.6%2.4%1.5%2.3%