2024-03-19 CC Agenda Packet - ITEM D12 - Overview of Financial Forecast ModelOverview of Financial Forecast
Model and Fiscal Outlook
March 19, 2024
�l1UFI
['iIrIIIcial .tiululiuiiti
• Purpose of a Forecast Model
• Baseline Forecast & Model Assumptions
• Major Drivers & Indexes
• Revenue & Expense Trends
• Annual Operating Surplus/Deficit
• Fund Balance
ForecastScenario
• Changed Assumptions
• Baseline vs. Scenario Comparison
Fiscal Outlook • Strengths & Opportunities
• Challenges & Concerns
I�UFI -
.. 2
UFI — Financial Advisors & Consultants
Financial Forecast Modeling
- Forecast modeling for California
municipalities since 2012.
- UFI currently provides active forecasting
services to fifteen municipalities,
including the following:
- City of Alameda
- City of Corona
- City of Culver City
- City of Menifee
- City of Ontario
- City of Pomona
- City of South San Francisco
Financial Advisory Services
- UFI is a full -service financial advisory firm
that has served California municipalities
since 1972.
- The leading municipal advisor since 2011
based on number financings
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UNDERSTANDING CITY'S FORECAST MODEL
✓ Standardized Revenue & Expense Categories.
Model uses standardized revenue and expense
categories that correlate with available
economic data, projections, and variables
appropriate for driving municipal forecasts.
✓ Integration of City's Historical Financial Data.
Model integrates 10 years of annual financial
data from the City's general ledger.
✓ Baseline Forecast with Fund Balance Allocation.
Model produces a 10-year baseline forecast of
revenues, expenses, cash flows and fund
balance for purposes of analysis and
comparison with "what -if" scenario forecasts.
✓ "What -if" Scenario Forecasts, Including Built-in
Modules. Model enables the City to create
"what -if" scenario forecasts to compare against
the baseline, allowing the City to make more
informed and fiscally sustainable financial
decisions.
11UFI
5
Tailored Forecasting
Algorithms
UFI uses econometric data from
Moody's Analytics, U.S. Precis' Metro
forecast service, combined with a
variety of city, regional and state
financial projections and indicators to
create forecasting algorithms that
drive each revenue and expense
category in the City's baseline
forecast.
The econometric data is statistically
correlated with outputs from the
City's historical financial data to
create four custom forecast trendlines
(aggressive, average, conservative and
pessimistic).
Eli Y 0k
S'c CC
• City's baseline forecast built around FY
2024 General Fund budget adopted by
the City Council.
• General Fund transfer to CIP only $1
million annually (prior 10-year average).
• Includes revenues and expenses
associated with Topgolf development.
• Chevron Tax Resolution Agreement
(TRA) set at prior 10-year average +CPI.
• Incorporates CaIPERS UAL amortized
loss basis from FY22 -6.2% return.
What is a "Baseline" Forecast?
Neutral, fiscal assessment and
decision -making tool that
establishes a common
understanding of the City's status
quo fiscal outlook:
"If the City makes no changes to its
organization, operations or service
levels, and there are no significant
external economic impacts to the
City (other than what's known
today), what is the predicted
condition of the City's finances over
the next ten years?"
GII�K Y OA
O
� i sEGu�O
Revenues
4.37%
3.07%
Sales & Use Tax (17%)
5.41 °o
average
3.96%
Business License/Ops. Tax (16%)
1.78°o
average
1.66%
TOT (14°0)
11.07%
average
4.06%
Property Taxes & VLF (in -lieu) (14°0)
5.41 °o
average
3.96%
Utility User Tax (12°0)
4.50%
average
2.39%
Expenses
5.54%
2.46%
Salaries & Wages (38°0)
2.33°o
fixed @ 2.75°0
2.75%
Benefits (excl. pension) (10%)
4.74%
2 x CPI
3.76%
Contractual Services (14%)
7.479r
average
3.36%
Pension (Normal & UAL) (10%)
-6. 63%
--
8.91 %
s•rc�-
10-YEAR BASELINE FORECAST
OU F I
CURRENT
FISCALYEAR FORECAST FISCALYEARS
-1 0 1 2 3 41 5 6 7 8 9 30
CarteganyMp. Trencillneclude FAAGR FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2020 FY 2029 FY 2DW FY 2031 FY 2032 FY 2033 FY 2034
(expand mlumnsto Include prlorflsol years) AAGR
REVENUES
1 Property Taxes(incl. VLF In -Lieu) _—�'--
2 Sales &Use Taxes-'-
3 Utility User Tax(UUT) _�---
4 Transient Occupancy Tax (TOT)
5 Business License/Operations Tax ��---
6 Other Taxes or Assessments
7 Franchise Fees
8 Permits, Fees&Chrgs. for5ervice-
9 Cost Recovery, Earnings & Misc.
10 V.-Ishr Revenues E Annual T7 0ons In
11 One -Time Revenues&Adjustments
(Less One -Time Revenues&Adjustments)
TOTAL BASELINE REVENUES
12
Salaries&Wages _— —
13
Benefits
14
Pension &OP EB
15
Contractual Services (labor)
16
Operating Supp. &Equip. (non -labor)
17
Insurance & Liability —�
18
Debt Service
19
Capital Asset Investments(non-CIP) •- --•
20
Cost Allocation/Internal Charges
21
Variable Expenses& Annual Transfers Out
22
One -Time Expenses&Adjustments
(Less One -Time Expenses&Adjustments) -
TOTAL BASELINE EXPENSES
Net One
-Time &Adjustments+ Encumbrances ,
ANNUAL OPERATING SURPLUS/(DEFICIT)
Adjustment- Audited Net Change in Fund Balance
FUND(5) BALANCE- END OF FY
3 96-A $ 12,611,051 $
12,539,805 $
13,073,156 S
13,625,035 S 14,174,186 S
14,756,070 S 15,338,609 $ 15,933,117 S 16,540,369 S 17,182,216 S 17,813,172 S 18,484,652
237-A
17,424,472
14,750,000
15,168,045
15,626,260
16,064,994
16,520,724
16,981,615
17,444,363
17,910,177
18,397,900
18,882,406
19,393,561
239-A
11,972,721
10,634,000
10,869,508
11,219,579
11,517,481
11,812,566
12,073,350
12,339,482
12,610,937
12,896,315
13,174,662
13,468,629
4.06%
14,143,605
12,750,000
13,492,073
14,086,049
14,610,408
15,153,423
15,751,592
16,362,053
16,985,599
17,644,673
18,292,561
18,982,064
166%
12,748,377
14,256,000
14,526,732
14,823,471
15,103,938
15,379,607
15,620,553
15,866,281
16,096,737
16,328,247
16,564,941
16,807,803
197-A
206,741
300,000
289,639
317,482
331,612
349,587
355,565
358,878
360,424
361,397
361,996
362,567
3 14-A
5,738,792
4,200,ODD
4,315,110
4,431,062
4,536,952
4,644,603
4,812,085
4,983,204
5,158,11A0
5,343,805
5,525,860
5,720,336
162-A
9,194,326
7,598,311
7,821,502
8,045,966
8,201,608
8,356,130
8,439,546
8,524,864
8,618,393
0,708,424
8,810,444
8,917,390
341-A
6,200,272
5,545,008
5,754,541
5,966,042
6,157,777
6,357,783
6,571,313
6,790,725
7,015, 834
7,256,518
7,494,166
7,750,361
5 81%
6,058,757
5,590,386
7,955,668
8,109,311
8,241,090
8,377,223
6,522,295
8,669,943
8,820,404
8,983,164
9,138,178
9,307,545
46,636
MOOD
-
-
(48,636)
(132,OI11)
_
3.07%
$ 96,299,113 $ 88,163,510 $ 93,265,975 $
96,250,256 $ 98,939,947 $ 101,707,717 $ 104,466,524 $ 307,272,930 $ 110,116,955 $ 113,107,660 $ 116,058,387 $ 119,194,908
275-A
$ 32,022,757 S
36,481,220 S
37,484,453 5
38,515,276 5
39,574,446 S
40,662,743 $
41,780,969 $ 42,929,945 $
44,110,519 S
45,323,558 S
46,569,956 S
47,950,630
3.76%
12,380,135
12,914,394
13,574,036
14,100,947
14,594,217
15,098,945
15,628,736 16,187,657
16,766,878
17,393,535
18,012,022
18,686,094
8 91%
4,947,753
4,565,554
5,846,602
6,805,725
7,536,773
8,270,709
9,711,012 9,839,936
9,969,759
10,104,397
10,242,509
10,384,177
3 36%
10,504,676
13,207,921
13,726,437
14,238,668
14,703,909
15,182,668
15,684,961 16,196,290
16,717,368
17,270,194
17,908,610
18,384,337
2 87%
6,267,880
6,391,013
6,595,021
6,798,131
6,982,689
7,174,392
7,375,535 7,581,999
7,794,136
8,020,501
8,241,922
8,479,125
2 15%
1,884,002
1,8201000
1,865,389
1,909,391
1,946,947
1,985,733
2,027,167 2,069,361
2,112,383
2,158,987
2,203,292
2,251,773
003-A
9,799,943
9,807,706
9,813,206
9,813,345
9,811,290
9,819,222
9,823,837 9,824,632
9,822,549
9,826,156
9,834,172
9,835,532
0.16%
1,634,336
2,349,623
2,358,081
2,365,107
2,368,612
2,371,891
2,375,477 2,378,549
2,381,102
2,384,154
2,385,404
2,387,264
-5.40%
4,145,420
7,632,500
2,630,000
2,654,939
2,679,116
2,751,751
2,773,062 2,795,828
2,819,012
2,842,650
2,925,457
2,949, 800
(57,620)
1,104,947
-
57,610
(1,10g947)
_
2.46%
$ 83,586,903 $ 95,169,930 $
93,893,227 $
97,201,532 $
100,198,000 $ 103,308,056 $
107,180,755 $ 109,804,199 $ 112,493,705 $ 115,324,133 $ 118,223,344 $ 121,208,733
106,256
(972,947)
-
-
S 12,816,467 $
(7,979,367) $
(627,252) $
(951,2761 $
(1,248,054) 5
(2,600,339) $
I2,714,231) $ (2,531,289) $
I;376,750) $
I2221,473) $
(2,164,957) $
lL
S 53,868,816 $ 45,889,448 $ 45,262,197 5 44,310,921 $ 43,062,868 $ 41,462,529 $ 38,748,297 $ 36,217,008 $ 33,840,259 $ 31,618,796 $ 29,453,829 $ 27,440,004
9
$200,000,000
$180,000,000
$160,000,000
$140,000, 000
$120, 0 00, 000
$100,000,000
$80,000,000
Total Revenues & Expenses
10-Year Prior and Baseline Forecast
.a
POB Issuance j
Great Recession
Recovery
$60,000,000
$40,000,000
$20,000,000
Covid-19 Pandemic
t'
Small Annual
Operating Deficits
Throughout Forecast
$o
Oy4' OHO O`1'O O'1'ti 41 0�, OrL� Op OHO O11 O�`b O`l'� O''O
AT 'AT AT JT JT JT J- JT J-J�'
�C F � F F � F 1 l F F F F F F ti 4
Surplus/Deficit --*—Baseline Revenues - - -1-Time Revenues
Baseline Expenses 1-Time Expenses
_ o
1 s•ec;u
Annual Operating Surplus/(Deficit)
10-Year Prior and Baseline Forecast
$15,000,000 +25% YOY in Sales,
UUT & TOT Revenues
$10,000,000 Great Recession
Recovery Small Annual
Operating Deficits
$5,000,000 ` Throughout Forecast
$
$(5,000,000)
�.` $8 million
Covid-19 Pandemic transfer to CIP
$(10,000,000)
OyRO'L�I O,� O,LS O-�o 0 , O�� OHO O'P O.� O.0�5
O
.Q
Year End Fund Balance & Allocation
10-Year Prior and Baseline Forecast
$60,000,000 +25% YOY in Sales, ;
$8 million
UUT & TOT Revenues I / transfer to CIP
$ 50, 000, 000
$40,000,000
$30,000,000
$20,000,000
$10,000,000
$
Great Recession
Recovery
Covid-19 Pandemic
Small Annual
Operating Deficits
Throughout Forecast
•ZO, LO�� �0�� LQ�� �n�� ,��`� AT ,�61 LOV ,L<>L� Lt>G� LO�� yOL� �OL� ,�6T L6, �6-, Lz'LO',L LO'''�
■ Non -spendable ■ Restricted F Assigned
■ Reserve - Economic Reserve - General Undesignated
IUFI
12
P
�UFI
SCENARIO FORECAST
13
1. Property Tax i-.:evenue. Recent update from HdL indicates
the City may rece-ve an additional $992,000 in Fro -lerty Tax
and VLF revenue tFar-i F ro�ecte-' currently in FY24 Budget
numbers
2. Pension (UAL) Management. Include annual ADP to CaIPERS
of $910,000 to prepay/reduce City's new UAL. Amount is
equivalent to Topgolf lease revenue designated for Pension
115 Trust.
�iUFI
14
Total Revenues & Expenses
Baseline Forecast
$200,000,000 �}
$180,000,000 POB Issuance !
i
$160,000,000 !
f i
$140,000,000
i
$120,000,000 Great Recession
Recovery ! i
$100,000,000 \ i
i
' 1
$80,000,000
$60,000,000
$40,000,000 V
$20,000,000 Covid-19 Pandemic
Small Annual
Operating Deficits
Throughout Forecast
16.
$0
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qk
Surplus/Deficit
Baseline Expenses
—* Baseline Revenues
1-Time Expenses
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- - -1-Time Revenues
Total Revenues & Expenses
Scenario Forecast
$200,000,000
$180,000,000 POB Issuance
f
$160,000,000
$140,000,000
$120,000,000 Great Recession j +
Recovery j
$100,000,000 +
+
$80,000,000 , 1
$60,000,000 0--
$40,000,000 V
$20,000,000 Covid-19 Pandemic
Small Annual
Operating Surpluses
Throughout Forecast
$0
�o,�` lqk �D,hIQA 'L��� ��,1 ��,� lqk ti��� Tlqk ��� ti��1 �0�'ti lqk ti��3 lqk ���,� lqk ti��h T006 Vqk �0'1 ti��� lqk IV lqk 10QA .�0 P.,�'y f1'L P�� -e
,qk
.,\\MW Surplus/Deficit
Baseline Expenses
* Baseline Revenues
1-Time Expenses
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16
- - -1-Time Revenues
Annual Operating Surplus/(Deficit)
Baseline Forecast
$15,000,000 +25% YOY in Sales,
UUT & TOT Revenues
$10,000,000 Great Recession
Recovery
$5,000,000
$(5,000,000)
Covid-19 Pandemic
Small Annual
Operating Deficits
Throughout Forecast
e
'�— $8 million
transfer to CIP
$(10,000,000)
ti�1� ti�1� ti��� ti��1 ti��� ti��3 ti��� ti��h ti��� ti��� ti��� ti6T IV ti��1 ti��� ti��� ti���
qk qk
GAT Y pR,
I�
Annual Operating Surplus/(Deficit)
Scenario Forecast
$15,000,000 +25% YOY in Sales,
UUT & TOT Revenues
$10,000,000 Great Recession
Recovery
$5,000,000 •
Small Annual
Operating Surpluses
Throughout Forecast
$(5,000,000)
$S millior
Covid-19 Pandemic :..r transfer to CIF
$ (10,000,000 )
ti��h Iqk ti��� ti��� Iqk ti��� Iqk ti��� qk ti��o qk ti��� Iqk ti��� qk ti��3 Iqk tio�� ti��y Iqk ti��� Iqk (91 titi490 qk ti(9� Iqk ti�3� Iqk ti��� Iqk ti�3� ti��3 ti�vo
Iqk
■ Scenarios Forecast
c:r Baseline Forecast
T�O
$60,000,000
$s0,000,000
Year End Fund Balance & Allocation
Baseline Forecast
+25% YOY in Sales,
UUT & TOT Revenues
Great Recession
$40,000,000 Recovery
$30,000,000
$20,000,000
$10,000,000
$
10.
$S million
1 transfer to CIP
i Small Annual
Operating Deficits
Throughout Forecast
Covid-19 Pandemic
■
Non -spendable
■ Restricted
Assigned
10
Reserve - Economic
Reserve - General
Undesignated
i
�c
• s•F.cu.
Year End Fund Balance & Allocation Small Annual
Scenario Forecast Operating Surpluses
$60'000'000 +25% YOY in Sales, Throughout Forecast
UUT & TOT Revenues .
$50,000,000
Great Recession '"'•••
$Z[0,000,000 Recovery �•,. •.,..•
$8 million
$30,000,000
transfer to CIP
•• ,
$20,000,000 •..•••
Covid-19 Pandemic
$10,000,000
t
ptia pti� pti�O p'11 p'y00 oti� ��3 Orb o'l`' D.L�o o.L'1 o.L� o.L°I 030 65N ��ti os�''�
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4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4
iml Non -spendable
Reserve - Economic
•••••• Baseline Forecast
9UFI
� Restricted
Reserve - General
20
Assigned
Undesignated
FISCAL OUTLOOK
Revenue Diversity
Good diversity of tax
base and not overly
reliant on any single -
source of revenue.
• Still unused local
sales tax capacity.
• Baseline revenues
projected to grow
slightly faster than
baseline costs.
• Business license tax
revenue
Reserves
• Reserves currently
fully funded with
undesignated fund
balance available for
some limited one-
time expenses.
• See next slide for
challenge of
changing annual
operating deficits to
surpluses to
maintain reserves
with funding for
new initiatives.
22
spa
Labor Costs
• City's historical labor
cost growth has
been moderate.
• Salaries & Wages
2.3% prior and
forecasted at
2.75%.
• Continued good
management of
labor/benefit costs
critical to sustain
fiscal health (almost
50% of expenses).
Contractual
Services
• 14% of city expenses.
• 7.5% AAGR over past
ten years with most
significant growth
post -pandemic.
• Adequate control of
contractual services
growth rate will be
important to long-
term fiscal health.
VUH
I.
Pension
Management
• Rising UAL converted
to level debt service
with POB.
• CalPERS -6.2% FY22
returns created
significant new
unfunded liability.
• Annual amount
($910k) designated
for proactive UAL
cost management.
23
Annual Operating
Deficits
• Slight but consistent
annual operating
deficits in Baseline
Forecast, driven by
new UAL.
• Some additional cost
management or
revenue would help
solidify surpluses for
long-term fiscal
stability and new
initiatives.
QUESTIONS?
may„