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Home My WebLink AboutMINUTES - 09282010 - SD.3RECOMMENDATION(S): ACCEPT attached report of preliminary close-out figures for fiscal year 2009/10. FISCAL IMPACT: This report is for informational purposes only and has no fiscal impact. BACKGROUND: The report is attached. CONSEQUENCE OF NEGATIVE ACTION: This report is for informational purposes only and has no action. CHILDREN'S IMPACT STATEMENT: None. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 09/28/2010 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS Contact: Lisa Driscoll, County Finance Director, 925-335-1023 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: September 28, 2010 David J. Twa, County Administrator and Clerk of the Board of Supervisors By: , Deputy cc: Steve Ybarra, Auditor-Controller, Bill Pollacek, Treasurer-Tax Collector SD. 3 To:Board of Supervisors From:David Twa, County Administrator Date:September 28, 2010 Contra Costa County Subject:Preliminary Year-End Close-Out Report FY 2009-10 ATTACHMENTS FY 2009-10 Preliminary Close-Out Report Preliminary Year‐End Close‐Out Report FY 2009/10 1 This report is in response to the Board of Supervisors’ request for annual year-end reports that monitor the implementation of the County’s fiscal policies and position. Fiscal Year 2009-10 was a challenging year for many reasons. Perhaps the most significant challenge was that it followed FY 2008-09 during which the Board of Supervisors took significant actions to reduce the County and Special District budgets by over $90 million. It was especially important that the budget process begin as early as possible to provide department heads with enough time to fully explore their options, therefore the County Administrator advised the Board of Supervisors to be prepared to adopt the Fiscal Year 2009-10 Budget on March 31, 2009 and to consider layoff resolutions on April 7, 2009 to carry out necessary actions to balance the Fiscal Year 2009-10 Budget. Contra Costa County has long focused on its mission of providing public services which improve the quality of life of our residents and the economic viability of our businesses. As the County completed Fiscal Year 2008-09 and moved into Fiscal Year 2009-10, national, State and local events made it apparent that the pursuit of the public service mission would again be seriously challenged. Nonetheless, the County Administrator again affirmed the four major areas of focus: improving the County’s fiscal health; providing services more efficiently and effectively; improving the County’s credibility; and developing greater use of teams and partnerships to address issues. Focusing on these areas for improvement allowed the County to better manage its resources, lower its expense growth, improve its revenues, and build reserves. The Fiscal Year 2009-10 Budget was approved by the Board of Supervisors on March 31, 2009. The Board closed the projected General Fund gap between prior-year baseline requirements and Fiscal Year 2009-10 revenue projections of approximately $58.2 million. The budget assumed a 5% decline in assessed valuation, based upon a weak residential housing market and actions taken by the County Assessor to reduce property valuations pursuant to Proposition 8, and negative growth in sales tax and Proposition 172 public safety sales taxes. The $58.2 million General Fund budget gap, which was net of a retirement expense decrease (in the amount of $19.5 million) resulted in significant impacts upon County operations, including $49.4 million in reduced services. The Board of Supervisors adopted lay-offs effective April 30 in order to achieve a two month savings in Fiscal Year 2008-09 and a full 12 month savings in Fiscal Year 2009-10. Additionally, in order to address the structural imbalance in the budget and the expected continuation of budget pressure into Fiscal Year 2010-11 and beyond, the County negotiated employee compensation concessions in the form of six furlough days in each of Fiscal Year 2009-10 and Fiscal Year 2010-11 for most represented employees and all unrepresented management personnel. Total savings as a result of the furloughs based upon a 2.31% reduction of base salary was projected to be $8.4 million in the two fiscal years. The compensation concessions were adopted on July 21, 2009 by the Board of Supervisors along with significant modifications to health care premium subsidies. In August, the County Administrator advised department heads that additional budget reductions would be necessary, in part due to a steeper decline in assessed valuation (-7.19%) compared to a 5% decline assumed in the Fiscal Year 2009-10 Budget. On October 6, the Board adopted over $11 million in General Fund departmental funding reductions to rebalance the Fiscal Year 2009-10 Budget. Of this amount, $8.8 million was due to reduced revenue projections and $4.5 million from a reduction in property tax revenue. Prelimina The Boa pursuant Supervis County’s Unreserv however Fiscal Ye impleme County c additiona the budg departme County, w The char last ten y projected included. Unreser We have change i 2004/05 reserves Board ma fiscal pol depicts th ary Year‐End rd of Superv t to the Coun ors’ adopted total and U ved General , achieved it ear 2009/10 nted. Althou continued to al declines in et remained ents have co we will conti rt below show years. The fig d trajectory o . rved Fund B e used the sa n Unreserve preliminary had fallen to ade significa icy promotin he County’s d Close‐Out visors review nty's formal f d General Fu nreserved G Fund goal o ts informal g marked the gh the year face severa n the econom d essentially ontinued to p nue our stat ws the chan gures for FY of our expen Chan Balance ame format, ed General F close-out pr o 5.5% and ant changes ng the Count Unreserved Report FY 2 wed and adju fiscal policie und Reserve General Fund of 5% of eac oal of 10%, fourth full ye began with al significant my (interest balanced, d provide publ ted focus. nge in the Ge Y 2009-10, p nditures and nge in Gene in the chart Fund Balanc resentation t that the traje in fiscal pol ty’s reserve d General Fu 2009/10 2 usted the FY es including b e policy esta d balance. T ch year’s pro which is mo ear of opera a balanced challenges rates and pr due to consta ic service w eneral Fund presented in revenues as eral Fund A below, for th ce, as a perc o the Board ectory for FY icy. As was of 8.6% in F und balance Y 2009/10 Bu budget, rese ablished spe The County h ojected reven ore prudent f ations where budget, as w including lab roperty taxes ant monitorin ith ever dec revenue an millions, ref ssumed in th Actual Statu he last seve centage of to , it was repo Y 2005/06 w noted above FY 2009/10. as a percen udget throug erve, and de ecific goals re has exceede nue. The Co for a County our fiscal po was stated s bor negotiati s). Despite t ng and adjus lining servic d expenditu flect unaudite he 2010/11 B s eral years to otal revenue orted that ge was less than e, changes w The chart b ntage of reve ghout the ye ebt. The Boa egarding the ed the minim ounty has no y of this size. olicies had b supra, the ions and these challe stment. Our ce hours. As re lines over ed data. Th Budget are a reflect the . In the FY eneral fund n 4% unless were made i below graphi enue includi ear ard of e mum ot . been nges a r the he also the in cally ng a Prelimina projectio amount, ratio is p 2009/10 Relative Pursuant annually and repo through t performa the ‘Perc measure impact of valuation As has b these two compare While the the rating comparis Even wit same do due to th of the Co demonst addition, serious a when the ary Year‐End n for FY 201 the unreserv resented as than in FY 2 Debt Burde t to the Coun calculates c orts the resul the use of de ance to other centages of T s of the fina f unforeseen n due to real been stated b o measures. d to its Calif e compariso g agencies e sons to coun h the County uble-A credi e County’s a ounty’s wealt rated track r the County’ and expensiv e global finan d Close‐Out 10/11 based ved fund bal a percentag 2008/09. en nty’s Debt M certain debt f lts in the ann ebt ratios pro r borrowers. Total and Un ncial flexibili n events and estate mark before, the C . It should b fornia cohort n to Californ evaluate the nties nationw y’s relatively it ratings tha adherence to th and asses record in ma s conservat ve disruption ncial crisis w Report FY 2 upon minim lance actual ge of total G Management factors and nual Debt Re ovides a con Two of the nreserved G ity of the Co d emergenci ket cycles, e County’s cur be noted that ts than when nia counties County rela wide are critic y weak perfo at stronger-p o its financia ssed valuati anaging diffic ive fixed-rate ns in the var was emergin 2009/10 3 mal encroach ly fell by $6 eneral Fund Policy, the debt burden eport. Meas nvenient way most comm General Fund ounty, i.e. the es such as e etc. rrent perform t the gaps a n compared on the surfa ative to a bro cally importa ormance, the performing co al managem on demogra cult econom e debt portfo iable rate m g. The Cou hment of Fun million in FY d revenue wh Debt Afforda n ratios, com uring the Co y to compare on debt ratio d Balance’. T e ability of th earthquakes mance does re not as wid against larg ace would ap oader univers ant. e County has ounties main ent policies, aphics, and t ic cycles like olio shielded arket that be nty will cont nd Balance. Y 2009/10; h hich was $6 ability Adviso mpares them ounty’s debt e the County os applied to These ratios he County to s, sudden dr not meet the de when the ge counties n ppear to be m se of countie s been able ntain. This a , to the unde to the Count e the presen d the County egan in the F tinue to work As a dollar however, the 3 million les ory Committ to benchma performanc y’s credit o counties a s are importa o absorb the rops in asses e benchmark e County is nationwide. more releva es and, thus to maintain achievement erlying streng ty’s nt one. In y from the Fall of 2007 k toward r e s FY tee arks ce re ant ssed k on nt, s, the the t is gth Preliminary Year‐End Close‐Out Report FY 2009/10 4 improving its comparative credit performance so that the gap between the County and its cohort counties will be further reduced. Important elements under the County’s control that would reduce the gap include: increasing the unreserved General Fund balance percentage from the Fiscal Year 2009-10 level of (8.6%) more toward the California cohort median (17.2%); continuing to issue debt prudently and structuring debt issues conservatively to achieve low borrowing costs and maximum Federal and State reimbursements, as required under the Policy; maximizing the County’s opportunity to earn allowable arbitrage interest earnings on all indentured funds (such as reserve funds), a practice the County has implemented with the assistance of a registered investment advisor; and monitoring the market for refunding opportunities to reduce debt service costs for capital projects and pension costs. The charts presented next provide a closer look at the County versus its California cohorts on the fund balance benchmarks. The County’s Unreserved Fund Balance as a Percentage of Revenues was the second lowest among the counties. Sacramento County actually recorded a negative balance. The County’s Total Fund Balance as a Percentage of Revenues was the second lowest among the counties. Alameda, Los Angeles, San Bernardino, Santa Clara and San Diego Counties performed above the national mean. Unreserved Fund Balance as % of Revenues (as of June 30, 2009) -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Alameda Contra Costa Los Angeles Orange Riverside Sacramento San Bernardino Santa Clara San Diego CA Cohort Median is 17.2% Moody's Median for Metropolitan CA Counties is 11.5% Preliminary Year‐End Close‐Out Report FY 2009/10 5 The chart below shows the relative debt burden among the County’s cohort. The County had the second highest annual debt service burden among the counties as measured by Annual General Fund Debt Service as a Percent of General Fund Revenues. It should be noted that the data in the chart does not reflect Federal and/or State reimbursement offsets to debt service, so many of the counties may be closer to the non-Pension Obligation Bond counties (Orange) than the chart suggests. Despite these observations, the County’s debt burden is still among the highest of the counties. Total Fund Balance as % of General Fund Revenues (as of June 30, 2009) 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% Alameda Contra Costa Los Angeles Orange Riverside Sacramento San Bernardino Santa Clara San Diego CA Cohort Median is 20.4% Moody's Median for Metropolitan CA Counties is 18.3% Preliminary Year‐End Close‐Out Report FY 2009/10 6 Conclusion In conclusion, the County Administrator’s Office is pleased with the County’s FY 2009-10 ending fiscal condition. Especially considering the challenges faced in the beginning of the year. The County’s goal continues to be building reserves and the commitment to issuing debt only when absolutely necessary and is optimistic for the longer term even in these trying times given the Board’s commitment to fiscal stability. The continued practice of implementing budget re- balancing plans mid-year, suggests that in FY 2010/11 the County will reduce reliance on reserves and move into FY 2011/12 with a balanced budget. These trends notwithstanding, more will need to be done for the County to successfully address its fiscal challenges. Annual General Fund Debt Service Burden as Percent of GF Revenues (as of June 30, 2009) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Alameda Contra Costa Los Angeles Orange Riverside Sacramento San Bernardino Santa Clara San Diego CA Cohort Median is 5.0%