2019-20 PROPOSED BUDGETcao.lacity.org/budget19-20/2019-20CAO_Proposed_Budget...2019-20 Proposed...

2019-20 Proposed BudgetApril 30, 2019

Richard H. Llewellyn, Jr.City Administrative Officer

OVERVIEW OF THE

2019-20 PROPOSED BUDGET


SUMMARY

• Budget Overview• Revenues

– Major General Fund Changes– Growth Trends– Caveats and Estimate Limitations

• Expenditures– Appropriation of Unrestricted Revenue– Highlights– Staffing– Pensions and Other Retiree Benefits– Areas for Consideration

• Financial Policy Compliance• Four-Year Budget Outlook• Ratings


BUDGET OVERVIEW

**

TOTAL 2018-19 CITY GOVERNMENT

Appropriations ($ Millions)

Authorized Positions

I.Proprietary DepartmentsAirports $ 8,116.6 $ 3,908 Harbor $ 1,597.8 $ 999 Water and Power $ 9,335.2 $ 11,263

Total $ 19,049.6 $ 16,170

II.General City BudgetGeneral Fund $ 6,530.1 $ 24,434 *Special Funds $ 4,117.9 $ 12,367

Total $ 10,648.0 $ 36,801

III.Grants and other Non-Budgeted FundsTotal $ 1,612.0 -

Grand Total $ 31,309.6 52,971

*Sworn staff represents 56 percent of General Fund positions.


BUDGET OVERVIEW

Budget ($ Millions) Authorized PositionsBudget

ComponentAdopted 2018-19

Proposed 2019-20

Percent Change

Adopted 2018-19

Proposed 2019-20

Percent Change

General Fund $ 6,190.6 $ 6,530.1 5.5% 24,101 24,434 1.4%

Special Funds $ 3,709.2 $ 4,117.9 11.0% 12,059 12,367 2.6%

Total $ 9,899.8 $ 10,648.0 7.6% 36,160 36,801 1.8%


General Fund revenues increased by $339.5 million (5.5%) from the 2018-19 Adopted Budget to the 2019-20 Proposed Budget. Major changes include:

REVENUES: MAJOR GENERAL FUND CHANGES

SourceAmount (Millions)

Property Tax $152.1 Assumes 6.0% growth

License, Permits, Fees, and Fines

$58.8 From increased special fund reimbursements, increased LAPD/MTAreimbursements, and new or increased tobacco, ambulance, and e-payable receipts.

Electricity Users Tax $35.8 Based on DWP estimates, adjusted to reflect uncollectable receipts.

Communications Users Tax ($25.2) Continued decline due to loss of subscriptions and price competition

Sales Tax $33.5 Continued 3.7% growth, with additional increases from cannabis and a court decision on out-of-state e-sales.

Business Tax $64.9 4.2% growth, bolstered by $64.4 million in total receipts from cannabis, of which $14.2 is one-time.

Transient Occupancy Tax $4.5 $2.1 growth from hotels; $2.4 growth in short-term rentals, which assumes continued growth tempered by implementation of the new Home-Sharing Policy.

Documentary Transfer Tax ($2.6) While this can be highly volatile, we expect stability next year.

Parking Fines ($18.1) Parking fines continue to decline.


REVENUES: GROWTH TRENDS

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

-10%

-5%

0%

5%

10%

15%

20%

25%

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Billion DollarsPe

rcen

t Cha

nge

from

Prio

r Yea

r

Fiscal Year Ending

GROWTH OF SEVEN GENERAL FUND TAXES

Percent change -- Left Scale Average Percent Growth 7 General Fund Taxes ($Billions) -- Right Scale

(Property (includes VLF), Utility Users, Business, Sales, Transient Occupancy, Documentary, and Parking Occupancy)


REVENUES: CAVEATS AND ESTIMATE LIMITATIONS

Estimates for the following revenue sources are based on our best estimates, but are uncertain:• Cannabis receipts, in both Business and Sales Tax – Due to the lack

of historical data.• Short-Term Rentals – Due to the unknown impact of the

implementation of the Home-Sharing Policy in July 2019.• Gas Tax – Short in 2018-19 and continues to be unpredictable.


EXPENDITURES: APPROPRIATION OF UNRESTRICTED REVENUE

Fire16.7%

Police52.5% Library

4.7% Recreation & Parks5.7%

City Attorney3.2%

Other8.5%

Public WorksSanitation

Street ServicesTransportation

EngineeringBoard

Contract Admin.Capital Improvements

Building & SafetyPlanning

8.7%

UNRESTRICTED REVENUES* ($5.3 BILLION)

*Unrestricted Revenues are 50.1% of the City Budget. Restricted Revenues (49.9%) include those from grants, fee-supported and reimbursed programs, and special funds.


EXPENDITURES: HIGHLIGHTS

The proposed expenditure levels address some recurring spending challenges and increase key investments:• Liability Claims – Continued at $100 million ($80 million in the Account,

$20 million in the UB), meeting anticipated spending.• Police Overtime – Increased by $47 million in the LAPD ($3.5 for A Bridge

Home and $10 million for cannabis enforcement). An additional $5 million in the UB for A Bridge Home sites.

• Infrastructure: Increased investment driven by Measure M ($37.5 million), Measure W ($42.8 Measure W), and full-year funding for SDRF ($70.5 million). The General Fund appropriation is down $27 million.

• Homelessness – Total spending increase of $43 million to $422 million driven by HEAP ($36 million), Proposition HHH projects ($6 million), and the General Fund ($3.5 million).


EXPENDITURES: STAFFING

21,610 22,324 22,723 22,929 22,718 21,85219,225 18,597 18,170 18,187 18,163 18,741 19,230 19,493 19,823 20,127

13,805 13,832 13,944 14,244 14,25314,012

13,740 13,677 13,647 13,706 13,712 13,835 13,875 13,882 13,937 14,006

35,415 36,156 36,667 37,173 36,97135,864

32,965 32,274 31,817 31,893 31,875 32,576 33,105 33,375 33,760 34,133

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20Proposed

AUTHORIZED CITY STAFFING*(Not Including Proprietary Departments)

All Others Police (Sworn and Civilian) Total* Regular Positions


EXPENDITURES: PENSIONS AND OTHER RETIREE BENEFITS

$435

$623 $666 $639 $653

$725 $793

$848

$944 $1,037

$1,058 $1,075 $1,086 $1,176

$1,264 $1,305 $1,318

$1,361 $1,406

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

Mill

ions

GENERAL FUND CONTRIBUTIONS TO LACERS AND LAFPP(Actual Amounts 2005-18; Adopted 2018-19, Proposed 2019-20, Projected 2020-24*)

City Employees' Retirement SystemFire and Police Pensions

* Projections are based on a study commissioned by the CAO.


EXPENDITURES: PENSIONS AND OTHER RETIREE BENEFITS

11.0%

14.2% 15.0%14.0% 14.8%

16.6%18.1%

18.6% 19.4% 20.2% 19.6% 19.3% 18.6% 19.0% 19.4%

7.3%9.3% 9.8% 9.0% 9.5%

10.7% 11.5% 11.7%12.3% 12.8% 12.3% 12.2%

11.7% 11.9% 11.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

PERCENT OF BUDGET USED FOR LACERS/LAFPP CONTRIBUTION

% General Fund Budget % General Fund and Special Fund Budget


Potential Areas of Expenditure Risk:• No funding is included for either sworn or civilian employee

compensation adjustments if they are approved through ongoing negotiations.

• Infrastructure needs exceed available funds, even as the budget complies with the capital policy and adds special funding for clean water and mobility projects.

• $31 million in departmental reductions require department heads to manage within budget.

EXPENDITURES: AREAS FOR CONSIDERATION


FINANCIAL POLICY COMPLIANCEPolicy Compliance

Reserve Fund at least 5% of General Fund

July 1 at $399 million, or 6.11%

Budget Stabilization Fund contribution if growth of seven economically sensitive taxes is over 3.4%

5.9% in growth offset by $77 million, $4 million contribution to Fund and $73 million for capital investment.• Non-compliant if growth threshold is 3.4% ($111 million)• Compliant if growth threshold is 4.5% ($62 million)

Capital investment at 1% of General Fund

Investment of 1.12% or $73 million

All one-time revenues used for one-time expenditures

$56 million in one-time revenues for $119 million in one-time expenditures

Debt service ceiling: 6% for non-voter approved and 15% for non-voter and voter approved of general receipts

• 3.94% for non-voter approved• 5.93% for non-voter and voter approved• Projected to remain below limits until at least 2026-27


FINANCIAL POLICY COMPLIANCE

4.23%

5.55%

3.22%

4.05%

4.98%

7.06% 7.19%7.80% 7.93%

7.09%

7.73%8.12%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20Proposed

Mill

ions

ADOPTED BUDGET RESERVES(Reserve Fund, Budget Stabilization Fund, and UB Reserves)

Emergency Reserve Contingency Reserve Budget Stabilization Fund

UB Reserves Total Percentage of General Fund



$48.9

$11.6

$24.6

$9.1 $6.4 $6.5 $6.8

$51.7

$54.8

$74.7

$89.5

$74.6

$100.4

$73.3 1.13%

0.26%

0.54%

0.21% 0.15% 0.15% 0.15%

1.06%

1.07%

1.38%

1.60%

1.28%

1.62%

1.12%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

$-

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

Mill

ions

CAPITAL INVESTMENTAS A PERCENTAGE OF GENERAL FUND REVENUE

Total GF Capital Investment 1% Spending Level



$53

$18

$66

$146

$181

$156

$118

$31

$49 $56

$103

$35

$83 $88

$110

$156

$121

$70

$110 $119

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

ONE-TIME REVENUES VS. ONE-TIME EXPENDITURESPROPOSED BUDGETS

One Time Revenues One Time Expenditures



3.99% 3.94% 3.84% 3.72%

3.10%2.67% 2.63% 2.60% 2.64%

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

2019 2020 2021 2022 2023 2024 2025 2026 2027

Debt

Ser

vice

Am

ount

(000

's)

Fiscal Year

NON-VOTER APPROVED DEBT

Convention Center Current MICLAs & Other Leases Commercial PaperFuture MICLAs (CP Refundings) Judgment Obligation Bonds

6% General Revenues*

*Projected revenue growth from 2020-21 through 2023-23 is 2.2%, 2.7%, 2.9%, and 2.8% respectively. Projected revenue growth from 2024-25 through 2026-27 is 2.9%.



5.92% 5.93% 5.76% 5.67% 4.93% 4.41% 4.28% 4.05% 4.10%

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

2019 2020 2021 2022 2023 2024 2025 2026 2027

Amou

nt (0

00's)

Fiscal Year

VOTER APPROVED AND NON-VOTER APPROVED DEBT

Non-Voter Approved Debt** General Obligation Bonds***

15% General Revenues*

*Projected revenue growth from 2020-21 through 2023-23 is 2.2%, 2.7%, 2.9%, and 2.8% respectively. Projected revenue growth from 2024-25 through 2026-27 is 2.9%.**Includes Judgment Obligation Bonds, Convention Center, MICLA bond issuances, and MICLA Commercial Paper and refundings.***Voter approved debt.


FOUR-YEAR BUDGET OUTLOOK

$6,530

$6,673

$6,852 $7,047

$7,247

$6,530

$6,666

$6,851

$7,012

$7,198

$7

$1

$35

$49

$6,500

$6,700

$6,900

$7,100

$7,300

2019-20 2020-21 2021-22 2022-23

Mill

ions

Revenues Expenditures


RATINGS

**

Rating Agency Rating Action Date of Action

Fitch Ratings AA- to AA April 2019

Kroll Bond Rating Agency AA to AA+ April 2019

Moody’s Investors Services Aa2 Affirmed June 2018

S&P Global Ratings AA Affirmed June 2018

Fitch and Kroll’s recent upgrades:• Fitch: “The upgrade…reflects the city’s strengthened operating performance,

resulting from some years of solid revenue growth largely outpacing managed expenditure growth. The city also benefits from a moderate debt burden and the highest level of gap-closing capacity.”

• Kroll: The City's "experienced leadership team, well-established financial management practices, and demonstrated history of proactive fiscal controls are evidenced by consistent financial strength, stable reserves, and strong liquidity."

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