Transcript Financial Trends in Yolo County

Financial Trends in Yolo
County 2003 - 2012
Budget Hearings
Board of Supervisors
June 11, 2013, Woodland, CA
Howard Newens, C.I.A., C.P.A.
Auditor-Controller and Treasurer-Tax Collector
1
Table of Contents
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U.S. Economy
California Economy
Yolo County Economy & Trends
Financial Performance
Financial Condition
Challenges & Solutions
2
State of the U.S. Economy
Data from U.S. Bureau of Econ. Analysis and the Federal Reserve Bank
3
GDP has remained in safe
territory . . .
National Economic Trends – Fed Reserve Bank, 5/30/13
Shaded bars represent recession periods
. . . but it’s still a 2% economy with no solid growth in the forecast
4
Interest rates remain at record
low . . .
National Economic Trends – Fed Reserve Bank, 5/30/13
. . . and are intended to spur consumer and corporate spending
5
Unemployment is declining . . .
. . . but this is due largely to decreased labor force
participation; hence, employment has not picked up.
6
Corporations are thriving . . .
. . . but, despite record profits, they are
returning cash to owners rather than investing.
7
Housing market continues to
recover well
8
Government deficits are being
resolved
Note how Receipts
and Expenditures
are coming
together
9
California Economy
California is still the Golden State
10
Employment forecast is upbeat
Employment is
expected to exceed
pre-recession level
by 2015
Beacon Economics is the contracted economist for the State Controller
11
Housing market is driving
growth
Sales are expected
to reach a plateau
by 2014 while
prices will
continue to rise
12
Yolo County Economy & Trends
13
County population has stabilized
County Population
205,000
Average annual
growth: 1.2%
200,000
195,000
190,000
185,000
180,000
175,000
170,000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
21,000 additional
residents during
the decade
14
Unemployment is still at a historic
high
15
Values remain stable near prerecession level
TOTAL ASSESSED VALUES
Assesed Values (in $billion)
25
20
15
10
5
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Average annual growth:5.9%
16
County workforce has stabilized at
record low
Population served per FTE
Total County FTEs
160
2,000
140
120
1,600
100
1,200
80
60
800
40
20
400
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
County managed growth by increasing productivity,
reallocating human resources, and reducing services.
17
County budget declined steadily
since Recession
County Budget per Capita
Total County Budget
$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$-
360
$ Millions
340
320
300
280
260
240
220
200
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Note that that the economy’s impact on counties has a two-year lag
18
Financial Performance Through
the Years
REVENUES
EXPENDITURES
FUND BALANCES
19
County reversed an unhealthy
fiscal trend in 2009 . . .
All Funds Financial Results
300
250
Total Revenues
Dollars (in million)
200
150
Total Expenses
Budgetary reductions
100
50
Change in Net Assets
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(50)
. . . when severe budgetary reductions helped control expenses
20
The general fund has significantly
improved
GF borrows from Landfill Fund
Tobacco funds
securitization
General Fund Financial Results
30
25
20
Dollars (in millions)
15
10
5
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
-5
-10
2012
GF loans to
others
-15
-20
Revenues Over Expenditures
Net Transfers
Change in Fund Balance
21
County continues to rely heavily on
state & federal aid . . .
Revenues
180
State & Federal
Aid
Charges for
Services
Property Taxes
160
140
Dollars (in $million)
120
100
80
60
40
$700
20
Revenues Per Capita
$600
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
$500
$400
. . . while property taxes have
remained near the 2006 level. . .
. . . revenue/capita has
continued to decline
$300
$200
$100
$0
22
Major expenses have been curbed
since 2009. . .
Public Protection
Expenses
Public Assistance
100
90
Health & Sanitation
80
General
Government
Dollars (in $million)
70
60
50
40
30
20
$700
10
$600
-
$500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Expenditures Per Capita
$400
$300
$200
$100
. . . and expenditure/capita has declined
$0
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Financial Condition at Year-end
ASSETS
LIABILITIES
FUND BALANCES
24
Net assets have gradually declined
Total Assets - Total Liabilities = Net Assets
350
300
5 buildings were
added in four years
Total Assets
250
In $Millions
200
Net Assets
150
Total Liabilities
100
OPEB health care obligations
added to liabilities
50
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Net assets indicate the level of financial health in the long run
25
Unrestricted net assets have been
depleted
Composition of Net Assets
250
New capital assets since
2004-9:
200
•Infrastructure: $15.2M
•Juvenile Hall: $12.3M
Dollars (in$million)
150
•Probation Admin: $2.3M
•Boat storage: $2.4 M
100
•Health Bldg: $19.7M
50
•Landfill bldgs: $4.4M
•Jail & Libraries: $12.9M
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(50)
(100)
Invested in Capital Assets
Restricted Net Assets
Unrestricted Net Assets
Unrestricted net assets turned negative due to rapid increase in
health care (OPEB) liabilities
26
County reversed liquidity trend
through cost cutting
Liquidity: ratio of liquid assets to current liabilities
Percentages of liquid assets to current liabilities
350%
300%
250%
Recession
200%
150%
100%
50%
0%
2002 / 2003 2003 / 2004 2004 / 2005 2005 / 2006 2006 / 2007 2007 / 2008 2008 / 2009 2009 / 2010 2010 / 2011 2011 / 2012
Fiscal Year
Liquidity was never at risk, i.e. never dipped below 100%
27
OPEB liability has caused a rapid
rise in long-term liabilities
Composition of Liabilities
160
140
Dollars (in $million)
120
100
80
OPEB
obligation
accounts for
$61M or 57%
of LT debts
60
40
20
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Fiscal Year
Long-term Liabilities
Current Liabilities
Note that the unfunded actuarially accrued liability is $138 million; of
this, $61 million is booked as the OPEB obligation of the County
28
Debt service for hard debt has
remained very low
Percentage of Debt Service to Operating Expenditures
5.00%
Percentages of Net Direct Debt Service
4.50%
4.00%
3.50%
3.00%
2.50%
Pay-off
lease for
Health
building
New $26 M
solar
project Dec
2012*
2.00%
1.50%
1.00%
0.50%
0.00%
2002 / 2003 2003 / 2004 2004 / 2005 2005 / 2006 2006 / 2007 2007 / 2008 2008 / 2009 2009 / 2010 2010 / 2011 2011 / 2012
Debt benchmark is 8% of expenditures. The County averages at 1%
*Note that on 12/12/12 the County issued $26 million COP debt for the new solar project.
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Debt burden per capita is light
$160
Davis
Library
bonds
Lease of
Health
building
$140
Health building
paid off; new loan
for solar panel
Debt amount Per Capita
$120
$100
$80
$60
$40
$20
$0
2002 / 2003
2003 / 2004
2004 / 2005
2005 / 2006
2006 / 2007 2007 / 2008
Fiscal Year
2008 / 2009
2009 / 2010
2010 / 2011
2011 / 2012
Debt burden per capita is significantly below the $1,000 policy threshold
30
Values support larger debt
capacity
Long Term Debt as a % of Assessed Values
3.00%
The County selfimposed limit is 3%
Percentages of Long-term Debt
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2002 / 2003
2003 / 2004
2004 / 2005
2005 / 2006
2006 / 2007
2007 / 2008
2008 / 2009
2009 / 2010
2010 / 2011
2011 / 2012
The tax base can support more debt
31
Unfunded pension liability continues
to rise, though not yet booked
Unfunded Pension Liability as % of Payroll
180%
Pension benefit
was increased
from 2% to
2.5%
Percentages of Salaries & Wages
160%
140%
120%
100%
80%
60%
40%
20%
0%
2002 / 2003
2003 / 2004
2004 / 2005
2005 / 2006
2006 / 2007
2007 / 2008
2008 / 2009
2009 / 2010
2010 / 2011
Implementation of Pension Reform is helping to curb this trend.
However, on 6/30/15 the County is required to book an estimated $140M liability
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OPEB liability is being
addressed
Unfunded OPEB Liability as % of Payroll
Percentages of Salaries & Wages (OPEB)
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
2007 / 2008
2009 / 2010
2011 / 2012
County’s shrinking workforce and negotiated caps helped reduce the liability
33
Fund balances have mostly
remained in positive territory
Other Govt Funds:
Realignment funds,
Capital projects,
Library, Roads,
Tribal, CSAs, Child
Support, Cache
Creek Mgt, IHSS,
etc.
Fund Balances at year-end
45
40
35
In $ Million
30
25
20
15
10
5
(5)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(10)
Other Governmental Funds
Tobacco Securitization
Public Safety
General Fund
Unearned Revenues - Dev. Fees & Grants
Mental Health Managed Care
The General Fund has bounced back from its sharp dive
following the Recession
34
Unrestricted fund balances are
being rebuilt
Unrestricted Fund Balances as % of Net Operating Revenues
Percentages of Unrestricted Fund Balances
16%
Long-term
financial
planning begun
14%
12%
10%
8%
6%
4%
2%
0%
2002 / 2003
2003 / 2004
2004 / 2005
2005 / 2006
2006 / 2007 2007 / 2008
Fiscal Year
2008 / 2009
2009 / 2010
2010 / 2011
2011 / 2012
Reserves are being set aside to cover future costs and emergency
35
General reserve is building up
as planned
General Reserve target balances
Millions
8
7
Actual
balance at
4/30/13
$4.9 million
Recommended
minimum
$6.8 million
6
5
4
3
2
1
2011-12
2012-13
2013-14
2014-15
2015-16
Recommended balance will be achieved in three years
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Challenges & Solutions
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Fiscal solutions achieved
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Addressed past deficits
Rebuilt & protected the general fund
Established & implemented a reserve policy
Strengthened financial policies
Assessed financial management structure
38
County credit rating has
potential for upgrade to A Conditions for upgrade:
 Long-term structural balance in budget
 Stable General Fund
 Other funds less reliant on General Fund
support
 Adequate reserves
 Conditions being gradually achieved
by implementing financial
sustainability plan
39
Work in progress
 Developing world-class financial
services
 Upgrading financial systems
 Studying financial staff needs
 Developing capital improvement plan
(including infrastructure)
40
Remaining challenges
 Strategy for reducing unfunded liabilities:
 Pension
 OPEB
 Strategy for controlling health care costs
(employees and retirees)
 Financing plan for CIP
 Incl. $305 million deferred road maintenance
 Long-range financial forecasts
 Strategies for long-range fiscal balance
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End
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