City Of MilpitasCity Of MilpitasBudget Study SessionBudget Study Session

April 1, 2014April 1, 2014

2

Accomplishments • Eliminated General Fund budget deficit from $12 million 2 years

ago to a balanced budget – combination of revenue increases and stringent cost reduction

• Managed the dissolution of RDA and took initial steps to replacelost funding for CIP by allocating any excess RDA property tax redistributions and General Fund revenue to a CIP Fund

• Business retention & recruitment / Service delivery - Flextronics & Nanosys expanded their businesses within Milpitas - New businesses relocated to Milpitas – SGI, Micron, FireEye

• Transit Area Plan– Updated Transit Area Impact Fee to finance the infrastructure

needed in the area – Established Community Facilities District assessment to mitigate the

fiscal impact of development on public services

3

FY 14-15 Budget Objectives

• Maintain City’s Core Services• Maximize overall organizational efficiency and cost

savings• Balance General Fund budget without using any

reserves by working with departments to reduce costs by $3.2 million from original budget requests

• Continue to develop a Strategic Plan to update City’s missions, values and goals to guide departments’ work plans

4

Fiscal Year 2014-15Changes in Funded Positions

Fund: 2 Police Officers (Partially funded by 2008 CFD) 1 Police Property Clerk 1 Fire Prevention Inspector (Funded by permit & inspection fees) 1 Assistant City Manager 1 Economic Development Manager 1 Recreation Services Manager 1 IS Director 1 Assistant Housing Planner (Funded by Housing Fund) 1 Maintenance Worker III (Funded by Water & Sewer Fund)

Defund: 1 System Administrator 1 Maintenance Worker II

5

Reorganization and Potential Program Change

• Public Work Inspection – Reassigned to Public Works/Engineering to maximize overall work efficiency.

• Preschool Program– Enrollment numbers trending down– Increased competition– Increased turn-over rate resulting in the increase of

staff administration costs

6

Fair Share Funding Proposal

• Services Provided to School District– School Resource Officer (SRO) - $208,000– Crossing Guards - $439,000– Maintenance of Russell school field - $72,000– Use of Sport Center Large Gym – estimated $34,000– Misc. facility and park rentals - $5,000

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Challenges• Dissolution of RDA • Unfunded PERS liabilities (as of 6/30/12)

• Public Safety - $85 million • Non-Safety - $52 million

• Unfunded Retiree Medical benefits (as of 6/30/13) • $36 million

• CIP projects in the next 4 years without identified funding sources

• Storm Drain projects - $12 million• Street projects - $10 million• Others - $11 million

• Benefits as a percentage of base salary remains high and rising

8

RPTTF Distributions To Date

$ 40,906100.0%TOTAL6,23415.2%ERAF

750.2%Bay Area Air Quality Mgmt District1,0402.5%Santa Clara Valley Water District1,2853.1%County School Services2,6416.5%SJ Evergreen Community College

16,28539.8%Milpitas Unified School District6,44915.8%City of Milpitas1,0462.6%County Library

$ 5,85114.3%Santa Clara County

Amount (in thousand)

PercentageTaxing Entities

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Employee CostBenefits as a % of Base Salary

PERS Cost = $9.3 million / Medical Cost = $6.9 millionrepresent 28% and 21% of base salary respectively

Union/GroupBase Salary

(in thousands)Benefits

(in thousands)% of Benefits to

Base Salary

Fire 5,994 4,889 81.6%MEA 2,572 2,213 86.0%MPOA 11,136 10,575 95.0%ProTech 5,393 2,919 54.1%Mid-Mgmt 3,686 1,812 49.2%Unrep-Misc 2,216 1,089 49.1%Unrep-Safety 1,985 1,238 62.4%Total 32,982 24,735 75.0%

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Employer PERS Contribution rates are expected to increase and remain high

15.14

26.24

14.41

22.78

14.93

23.08

15.37

22.88

14.59

21.68

14.97

24.16

18.63

29.57

19.77

30.18

21.12

32.93

25.57

35.10

27.30

37.20

29.00

39.20

30.70

41.30

32.50

43.40

34.20

45.40

0

5

10

15

20

25

30

35

40

45

50

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Misc Group Public Safety Group

Percent

------PROJECTED RATES------

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Medical Insurance Premium (Family)Averages 11% Increase Per Year Since 2002

546674

794922

10121121

12241322

13851479

1587

1738

19312085

0

500

1000

1500

2000

2500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Estimate 8%

increase

$

Monthly premium

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Retiree Medical Benefits Unfunded Liability

• Medical insurance increased higher than inflation and higher than investment return

• Investment return is also a major factor• Increased number of retirees higher than expected

enrolled in plan– 2005 - 125 retirees– 2007 - 156 retirees– 2009 – 178 retirees– 2011 – 206 retirees– 2013 – 271 retirees

• Only began funding in FY 2006-07 – on the right track

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Draft FY 14Draft FY 14--15 Budget15 Budget(Total of All Funds $119.5 Millions) (Total of All Funds $119.5 Millions)

Expenditures by CategoryExpenditures by Category

13% ($15.2M)

33% ($39.6M)

22% ($26.6M)

31% ($37.4M)

1% ($0.7M)

Salaries

Benefits

Contractual Svc& SuppliesCIP

Debt Service

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Draft FY14-15 Budget SummaryGeneral Fund

$ 71,228Total Estimated Revenues

$ 71,228Total Estimated Expenditures13,749Contractual Services & Supplies

$ 57,479Personnel Services

Estimated Expenditures

4,456Operating Transfers

12,940Other Revenue

11,377TOT & Other taxes

20,606Sales Tax

$ 21,849Property Tax

Amount(in thousands)Estimated Revenues

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Historical General Fund Revenues and Expenditures before Op. Transfers from other Funds

55.0

65.3

56.6

70.4

55.4

66.0

53.3

67.6

48.9

63.4

54.2

63.357.9

62.764.8

61.262.6

65.466.8

71.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY13 FY14 FY15

Revenue Expenditure

Millions

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Allocation of Sales Tax(Current Sales Tax Rate 8.75%)

VTA 2008 Measure B

0.125%

County Measure A, 0.125%

State, 6.50%

VTA 2000 Measure A

0.50%

1976 Transit 0.50%

City, 1.00%

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Sales Tax Cash Receipts By Fiscal Year(Not Adjusted for Inflation)

FY 14-15 Projected Sales Tax $20.6 million

16.2317.38

16.17 16.2515.27

16.99

19.420.91

20.0020.61

0

5

10

15

20

25

FY 06 FY 07 FY08 FY09 FY 10 FY11 FY12 FY13 FY14 FY15

(In millions)

---Estimated---

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Allocation of 1% Base Property Tax

County School

Services, 3%

County Library, 2%

City, 16%

County, 14% Community

College, 7%

School Districts,

40%

ERAF K-12/College,

15%

Special Districts,

3%

$789City’s Share at 16%

$4,930Net Property Tax

($70)($7,000)

Homeowner exemption

$5,000$500,000

1% TaxAssessed value

1% base property tax for a home with assessed value of $500,000:

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Property Tax Revenue By Fiscal Year(Not including RPTTF distributions)

FY 14-15 Projected Property Tax $18.3 million

14.42

15.7516.8

17.7517.15 16.65

16.0316.49

17.7318.35

0

2

4

6

8

10

12

14

16

18

20

FY 06 FY 07 FY08 FY09 FY 10 FY11 FY12 FY13 FY14 FY15

(In millions)

---Estimated---

20

8% Transient Occupancy Tax By Fiscal Year(Not Adjusted for Inflation)

FY 14-15 Projected TOT $7.1 million

4.54

5.15

5.76

4.444.23

4.9

5.65

6.34

6.917.11

0

1

2

3

4

5

6

7

8

FY 06 FY 07 FY08 FY09 FY 10 FY11 FY12 FY13 FY14 FY15

(In millions)

---Estimated---

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Allocation to Gen Government CIP FundTo Mitigate the loss of RDA funding

(2.7)Less: Funded CIP

0.6One-time settlement of Prop Tax Admin Fee2.8General Fund revenue in FY 12-13

Since dissolution RPTTF distributions $ 6.4One-time RDA loan repayment 3.6

FY 13-14 Estimated 2nd half of RPTTF distribution 1.6Subtotal 15.0

6/30/14 Estimated Remaining Balance $12.3

6/30/14 Estimated 2% TOT Fund Available Balance $ 8.0

In millions

*

**

* Loan payment is being contested by the County.

** Transfer to fund Streets projects in order to maintain PCI

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CIP Projects Without Identified FundingFY 2014-15 through FY 2018-19

(in millions)

Storm Drains Improvements – various projects $ 12.05Street Improvements – various projects 9.55Parks Improvements – various projects 6.50Community Improvement – Fire Station 2.50Community Improvement – other facilities 0.70

Water System Replacements 1.60Total $ 32.90

There are other long-term projects that are without funding sources that are not shown because they do not fall within the Five Year Plan

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Five Year General Fund Forecast(in millions)

(2.2)(1.8)(1.3) (0.6)(0.4) Operating Deficits

83.9 81.3 78.6 76.1 73.6Total Estimated Expenditures

15.2 15.014.6 14.314.0 Supplies & Contractual Services

27.426.0 24.7 23.522.2Benefits

$ 41.3$ 40.3$ 39.3$ 38.3$ 37.4 Salaries

81.779.5 77.3 75.573.2 Total Estimated Revenues

4.94.8 4.6 4.5 4.3 Operating Transfers

$ 76.7$ 74.7$ 72.7 $ 71.0$ 68.9 Revenues

FY19-20FY18-19FY17-18FY16-17FY15-16