Budgeting inSimi Valley

February 2014

Agenda• Budget 101

o Budget Structureo Budget Process Overview

• Budget 102o The City’s Fiscal Environmento City Fiscal Policies and Practiceso Department Budget Prepo In Conclusion… Your Role

• Questions and Answers

What is the Annual Budget?

• Like at home, it is a spending PLAN for the next yearo Circumstances change over the yearo The budget changes frequently as items are added or

deleted (Supplemental Budget Requests)• City fiscal year is July 1 to June 30• Ideally, the budget should be a

prioritization of resourceso This is the idea of Priority Based Budgetingo “What is most important gets funded”

Simi Valley Budget Structure

VOCAB: Fund Accounting

• Fund accounting is an accounting system used by government and non-profits which emphasizes accountability rather than profitability

• A fund is a self-balancing set of accounts, segregated for specific purposes in accordance with laws and regulations.

VOCAB: Fund Types

• General Fund = general government• Internal Service Fund = provides service to

internal customers• Enterprise Fund = internal “businesses” that

should be self-supporting; revenues usually paid by customers/ratepayers

• Special Revenue Fund = specific, segregated revenue stream

• Capital Fund = for capital purchases and projects

What’s In Our Budget?

GENERAL FUNDPolice

Public WorksEnvironmental Svcs.

Community Svcs.Admin. Svcs.City Attorney

City Administration

TRANSIT

WATER

SANITATION

PARKS =RSRPD

FIRE =VENTURA COUNTY

SCHOOLS =SVUSD

Pop Quiz:

How Big is our Budget?• For Fiscal Year 2013-14

o Total Budget is over $175 Milliono This includes $10 Million for capital

projectsoGeneral Fund is $66 MillionoOver 130 individual fundsoGoverned by federal and state law,

GFOA and GASB accounting standards

General Fund Revenues

FY13-14 Revenue Sources as Percent of Total

Transfers In - 12.9%

Other Revenues - 1.2%

Service Charges - 1.8%

Grants - 0.3%

From Other Govts. - 0.4%

Use of Money & Property - 0.6%

Fines & Forfeitures - 1%

Licenses & Permits - 2.1%

Taxes & Franchises - 79.7%

General Fund ExpendituresFY 2013-14 Expenditures Net of Reim-

bursements

Transfers Out - 13.3%

Non-Dept. - 7.4%

Police Dept. - 38.4%

Public Works - 17.6%

Env. Svcs. - 6.5%

Comm. Svcs. - 5%

Admin. Svcs. - 6.2%

City Attorney - 1.3%

City Admin. - 4.3%

What Does it Pay For?

Salaries & Benefits =

80.7%

Supplies & Materials =

9.5% Services = 9.0%

Other Documents• Comprehensive Annual Financial Report (CAFR)

o Like financial statements for private company showing year-end situation

o CAVEAT: different fund groupings than budget (per requirements); tough to compare

o Extremely useful notes; READ IT for the detail

• Supporting Documento Provides justification/explanation for any increases in budget

line itemso Includes requests for additions and proposed reductions to the

budget for that year

Capital Improvement Program (CIP)• We prepare a five-year “Capital Improvement Program”

(CIP) book with the spending plan for capital itemso Since they are most costly, it makes sense to plan ahead

• Capital Projects = large projects, often constructed and budgeted over multiple yearso $5,000 for vehicles, machinery & equipmento $25,000 for infrastructure & building improvementso $50,000 for buildingso $100,000 for intangibles (such as computer software and

licenses)• The current year of the CIP is included in the annual

budget

Capital Projects

Transportation Sanitation Waterworks Technology Municipal Build-ings and Grounds

Transit Vehicles$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000 $70,243,400

$39,841,000 $43,109,000

$4,311,900 $5,761,300 $5,005,700

FIVE-YEAR CAPITAL IMPROVEMENT PROGRAMSUMMARY BY CATEGORY

$168,272,300

CIP SummaryCategory Prior Years 2013-14 2014-15 2015-16 2016-17 2017-18 Total

Prior Years 2013-14 2014-15 2015-16 2016-17 2017-18 Total Municipal Buildings and Grounds $4,586,300 $875,000 $75,000 $75,000 $75,000 $75,000 $5,761,300

Sanitation 2,536,000 1,850,000 6,025,000 7,620,000 10,750,000 11,060,000 39,841,000

Technology 1,298,800 440,900 1,214,400 1,041,200 316,600 0 4,311,900

Transit Vehicles 3,445,700 0 0 660,000 0 900,000 5,005,700

Transportation 7,808,600 1,785,500 13,365,800 26,753,500 12,045,000 8,485,000 70,243,400

Waterworks 6,033,000 4,224,000 8,353,000 13,739,000 8,495,000 2,265,000 43,109,000

CITYWIDE TOTAL $25,708,400 $9,175,400 $29,033,200 $49,888,700 $31,681,600 $22,785,000 $168,272,300

Fiscal Year

CIP Project Breakdown Category/Project Prior Years 2013-14 2014-15 2015-16 2016-17 2017-18 Total Waterworks District Projects

Emergency Generators Program 600,000 400,000 200,000 200,000 200,000 0 1,600,000First Street Water Line Replacement 90,000 1,100,000 0 0 0 0 1,190,000Interior Tank Recoating 0 340,000 265,000 265,000 265,000 265,000 1,400,000Knolls Zone Water Facilities 1,268,000 0 0 220,000 2,200,000 0 3,688,000Los Angeles Ave Pipeline Replacement 700,000 110,000 0 0 0 0 810,000Recycled Water Projects 3,250,000 1,950,000 6,200,000 10,590,000 3,705,000 0 25,695,000Tapo Street Pump Station Replacement 0 0 342,000 214,000 0 0 556,000Water Facility and Cost of Service Evaluation 0 200,000 0 0 0 0 200,000Water Line Extension in County Line Road $0 $4,000 $96,000 $0 $0 $0 $100,000Water Main Replacement Program 0 0 1,000,000 2,000,000 2,000,000 2,000,000 7,000,000Water Storage Mixing Systems 125,000 120,000 250,000 250,000 125,000 0 870,000

Total For Category $6,033,000 $4,224,000 $8,353,000 $13,739,000 $8,495,000 $2,265,000 $43,109,000

VOCAB: “Fund Balance”

• Fund Balance = a measure of resources available in the fund, the difference between assets and liabilities

Year 1 Year 2 Year 3Revenues $500,000 $250,000 $500,000Expenditures ($100,000) ($300,000) ($200,000)Net $400,000 ($50,000) $300,000

Fund balance $400,000 $350,000 $650,000

VOCAB: Reserves• If the budget is for your checking account, reserves

are like your savings account• Reserves are funds accumulated for use in

emergencyo The City’s “rainy day fund”

• Reserves are restricted (held for specific uses) and unrestricted (available for use)

• City Council policy is to maintain at least 17% operating expenditures as unrestricted reserves (two months’ expenditures)o 17% is recommended by GAAP

Budget Process Overview

How is the Budget Prepared?

• Departments submit information to Budget Officer

• Budget Officer compiles• City Manager reviews, adds, and subtracts• City Manager submits preliminary base

budget to City Council• Council deliberates and makes decisions• Council adopts balanced budget• Fiscal year starts on July 1st of each year

Budget Timeline

BUDGET TASKS January February March April May JuneRequest baseline info from HR/RiskUpdate to Vehicle ScheduleBudget kickoff with departmentsMid-Year Budget Report to CouncilDept Budget Meetings with CMDraft budget to CouncilBudget hearing/adoption/upload

BUDGET TASKS July August September October November DecemberBudget hearing/adoption/uploadSubmit Application for Budget AwardFirst Quarter Report to CouncilUpdate City Cost Allocation Plan

Budget is a Living Document

• It is adopted in balanced form in July• As soon as Council approves a

supplemental, we are in imbalance again• The numbers change with every item

going to Council• Key for departments to plan ahead as

much as possible and include things in the budget

Moving toward Priority Based Budgeting

• Tie budget/goals to City prioritieso Strategic Plano Council goals

• Keep base budget for existing operations o Add for new itemso Subtract for reduction

• Begin evaluating City programs for valueo Cost recoveryo Mandateo Demand

Cost Allocation Plan (CAP)

• Prepared annually• Determines amount charged to

departments for indirect costs• For example:

o the cost of the Human Resources Division is charged to other departments based upon number of authorized regular positions

o The cost of the City Attorney’s Office is charged to other departments based upon number of Council agenda items prepared

Vehicle Replacement Plan• Keep rolling inventory of vehicle stock• Have set replacement schedule; departments

charged each year for portion of replacement costo Example: Department with $40,000 vehicle with 10 year

replacement life is charged $4,000 each year it is in service so $40,000 is available upon replacement

• If vehicle deferred for replacement past its life, there is no charge to the department

• Each year Budget Officer recommends which to replace and which to defer; City Manager makes final decision

City’s Fiscal Environment

Overview

• The City’s overall financial position is very strong with excellent reserveso Regular reserves + former Lighting

Maintenance District on top + receivables (money due us)

• Water, Wastewater, and Transit Utilities need attentiono No fee increases in several years while costs have riseno Infrastructure projects are being deferredo General Fund subsidy to Transit

Overview (continued)

• General Fund (operating) deficit last yearo Expenditures greater than revenues o Why? Primarily revenue drops in past few years

• City has limited ability to raise revenues (Prop 13, Prop 218)

• 81% of General Fund is salaries and benefits…

o Some overspending by depts.

Revenues Hit Hard

FY 02-03

FY 03-04

FY 04-05

FY 05-06

FY 06-07

FY 07-08

FY 08-09

FY 09-10

FY 10-11

FY 11-12

FY 12-13

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$20,000,000

City of Simi Valley Sales Tax History

Overview (continued)• Does not mean City is going bankrupt

o But… THIS IS NOT SUSTAINABLE!o We have plan to address but some solutions

take time• How are we addressing this?

o Cuts to budgets and staffing in pasto Held on raises until this yearo Been carefully tapping reserves to balance the

budget; planned, with full disclosure to Councilo Operational changes and reducing subsidies

Result = General Fund Deficit

FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18$40,000,000

$45,000,000

$50,000,000

$55,000,000

$60,000,000

$65,000,000

$70,000,000

$75,000,000

$80,000,000

$85,000,000

Actual and Projected General Fund Balance

Revenues Expenditures

Five Year GF Forecast

• Try to project revenues and expenditures• Adjust over time with known changes

o Update to include costs/savings of recent negotiations with labor groups, development changes, etc.

• Use as a long-range budget plan

Five Year GF Forecast

ESTIMATE BUDGET PROJECTIONPROJECTIONPROJECTIONPROJECTION2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

REVENUESTaxes And Franchises $49,976,500 $50,879,400 $51,612,200 $52,526,400 $56,216,300 $58,221,300Licenses And Permits 1,339,600 1,337,700 1,363,900 1,364,600 1,496,200 1,553,100Fines And Forfeitures 605,000 616,000 627,300 638,800 449,000 455,500Use Of Money & Property 400,300 399,300 430,400 431,200 419,700 431,700From Other Governments 258,300 262,200 267,400 268,400 273,800 277,800Grants 170,700 161,700 161,700 161,700 172,200 181,500Service Charges 1,003,400 1,131,700 1,070,700 1,079,900 1,257,300 1,300,800Other Revenues 793,300 786,500 787,300 793,400 983,100 995,100Transfers In 7,573,800 8,276,800 8,372,500 8,591,600 8,848,800 9,094,700 Total Revenues 62,120,900 63,851,300 64,693,400 65,856,000 70,116,400 72,511,500

EXPENDITURESPersonnel 49,936,992 53,539,100 57,151,400 59,068,800 61,238,600 63,501,400Supplies/Materials 5,842,089 6,292,500 6,364,200 6,314,200 6,314,200 6,364,200Services 5,508,760 5,971,600 5,891,800 5,891,800 5,891,800 5,891,800Capital Outlay 98,100 7,000 20,000 20,000 20,000 20,000Transfers to Other Funds 9,554,600 10,099,800 10,896,300 11,372,500 12,244,400 12,872,200Reimbursed Expenses (11,185,900) (9,607,100) (8,964,000) (9,098,500) (9,234,900) (9,373,300) Total Expenditures 59,754,641 66,302,900 71,359,700 73,568,800 76,474,100 79,276,300

Revenues Less Expenditures $2,366,259 ($2,451,600) ($6,666,300) ($7,712,800) ($6,357,700) ($6,764,800)

Note: The City Council's policy is to adopt a balanced budget each year. This policy is in place to maintain a General Fund Balance (reserves) of at least $37.5 million. The reserves are maintained at the recommended level to provide sufficient financial resources to respond to catastrophic events such as fires and earthquakes, to address other unanticipated liabilities, and to set aside funds for needed future major technology and capital projects.

SUMMARY REVENUES AND EXPENDITURES DATA FIVE-YEAR GENERAL FUND FINANCIAL PROJECTION

The View for FY14-15

• Ended FY 2012-13 with ~$400,000 deficit in General Fund

• Revenues up slightly in FY 2013-14, primarily thanks to one-time bumps

• Expenditures up and impact of raises will begin to be felt

• Council will direct 10% reduction target again

• In summary: We are still at the edge and need to remain conservative.

Priority Based Budgeting• We will be making an incremental move to

PBB over the next few years• Current concept is baseline budget plus

any approved enhancements less any approved reductions

• Future, based on evaluation of City programs; that which is important gets funded o What’s the “priority” for funding? Must have, need to

have, nice to have…

City Fiscal Policies and Procedures

City Account Numbers• City account number structure example:

100 – 1505 – 44010Fund = General Fund Cost Center = AS Admin G/L (line item)= Professional Services

• Capital Projects also have Internal Order (I/O) Number, e.g. 950380 (Minor Streets FY 13-14o Keeps track of that project separatelyo They will need both the City account number AND the

Internal Order

Chart of Accounts

• The BIBLE of finance and budgeting!• List of funds, cost centers (divisions), and

line items to be used for various purposes• Found at W:Citywide Forms/Chart of

Accounts

Supplemental Budget Request (SBR)• Form used to request

changes to the Budget• Found on W:/Citywide

Forms (Word and Excel versions available)

• Need BOTH sides – revenues and expenditures

• If with agenda item to Council, goes with staff report

• If administrative, goes directly to Budget Officer

Budget Control

• PLEASE READ POLICY A-29 (provided)• Budget control is at the fund level except for

General Fund• For General Fund, at the Department level• Interfund moves and all changes to

Revenues/Expenditures must go to Council• City Manager can make administrative

amendments that don’t impact fund balance• Line item transfers can occur

administratively (Budget Officer)

Budget Processing

• Always charge items to the correct codes (not just where there is money)o This helps you know how to budget next yearo This provides transparent, useful info on

spending• No work can occur until budget is

authorized• Donations of $500 or more should be

handled through Supplemental Budget Request (add to revenue and budget side)

Department Budget Prep

Department Duties:

• Review salaries and benefits info provided by Budget Officer and verify/adjusto Most important since biggest part of budget!

• Enter estimated actual for current year and requested new budget amounts

• Prepare narratives/descriptions• Review authorized staffing numbers/titles• Prepare charts and materials for City Manager

Meetings• Appear at public meeting and Council to answer

questions and justify requests

Where to Get Info?

• SAP Financial Systemo 100% *best* source for accurate information

• Use RHOSKEN variants for department/fund budgets

• City budget and financial documents (online or hard copy)

• OpenGov.com isn’t as accurate; only updated twice per yearo Useful for trends over time

How to Project the Future?• Analyze the Past

o Chart past budget vs. actual experienceo Track percentage changeso Look at timing of revenues/expenditureso Identify known changes for next year and adjust accordingly

• Read about trendso For statewide, www.californiacityfinance.org is excellent!o Commercial News Outletso Economic updates (Cal Lutheran, etc.)

• Include staffo Ask them for input for next year’s budget and items that might

impact it• Make your best guess!

In Conclusion…

Your Role• You are a steward of the public’s money; take that

role seriouslyo Would you do the same thing with your own money?o Would you like this to be on the front page of the newspaper?

• Read and follow the City’s fiscal and budget policies• It is your responsibility to monitor your own budget• Stay within your budget• Any increase in expenditures requires Council

approvalo Even the City Manager can’t increase budget without approval

Questions?

Rebekka HoskenBudget Officer

rhosken@simivalley.orgx6328