OCEANSIDE — City Council approved the city’s five-year financial forecast, which projects general fund surpluses for the next five years, at its Jan. 23 meeting.
The purpose of the five-year financial forecast is to look at the city’s general fund revenues and expenditures to identify financial trends, changes in expenditures and to project the cost of maintaining current service levels.
The forecast does this by projecting the fiscal results over the next five years to see what the city’s financial future could look like if revenues and costs stay the same.
The five-year forecast is neither a budget for the city nor is it a proposed financial plan for city or council objectives.
The current adopted budget for Fiscal Year 2018-2019 demonstrates the city will have a surplus of $1.12 million after receiving $152.86 million in revenues and spending $151.74 million in expenditures.
The forecast projects a surplus of $2.87 million in FY 2019-2020, and an even higher surplus of $2.93 million the following fiscal year.
The surplus in FY 2021-2022 is projected to drop to $1.59 million, to $1.20 million in FY 2022-2023 and then rise again to $2.58 million in FY 2023-2024.
According to Oceanside’s Financial Services Director Jane McPherson, who presented the five-year forecast to City Council on Jan. 23, the forecast assumed static conditions and does not include new programs with the exception of adding operating costs for the El Corazon pool beginning in FY 2021-2022.
It also includes all known and negotiated personnel costs and “place holders” for outlying years, 12 percent of budgeted expenditures for Healthy City Reserves and all required funding for restricted funds such as workers’ compensation and risk management.
FY 2018-2019 forms a basis used for FY 2019-2020 expenditure numbers, and FY 2019-2020 includes a 2 percent increase to maintenance and operations.
FY 2019-2020’s $2.87 surplus will allow for “minor net new ongoing costs and availability for some one-time items,” according to McPherson’s presentation.
According to the forecast, increases to California Public Employees’ Retirement System (CalPERS) costs are an ongoing concern for the city after its discount rate was lowered over a three-year period from 7.5 percent to 7 percent in December 2016. CalPERS net-new costs increases are expected to be $10.87 million for the city over the next five years.
Funds have been set aside since FY 2015-2016 to help address these rising CalPERS costs, and to date the general fund has accumulated $8.1 million to “help cope with rapidly increasing CalPERS costs.”
While that $8.1 million isn’t a “fix,” the forecast notes the money can serve as a “one-time cushion” as the city works through budgets annually to align revenues and expenditures.
Additionally, an IRS Section 115 Trust was created in FY 2017-2018 to earmark funds to be used only for CalPERS expenses, which to date has had $10 million deposited into it.
The forecast recommends $1 million of the $8.1 million set aside for CalPERS be used for FY 2022-2023 to cover planned expenditures.
Currently, 12 percent of the general fund operating expenditures ($19.71 million) is committed to pay for city costs, while the unassigned fund balance available for future capital projects or other city projects and services is $1.2 million as of June 30, 2018.
This unassigned balance cannot be used for ongoing operating expenditures.
Measure X, which was approved by voters in November to raise the city’s sales tax by a half-cent over a period of seven years beginning April 1, was not included in the five-year forecast.
The measure’s revenues, projected to be $11.2 million annually, and expenditures will be kept in a separate fund.
Measure X’s funds will be used to help the city maintain the quality of city services such as crime and gang prevention, 911-response and street maintenance, according to the forecast.
The city tried to reduce costs by laying off more than 100 employees, deferring street and infrastructure maintenance and cutting back on basic city services, but additional revenue sources were needed to maintain and improve service levels.
McPherson said the city will continue to scrutinize all replacement hiring, to continue having employees pick up a greater portion of retirement costs through collective bargaining, to decline additional new programs without a revenue source and to continue implementing City Council policies to assist in paying down CalPERS unfunded liability, which is 50 percent of the general fund year-end surplus and a third of the earned interest, for debt reduction.