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Home My WebLink AboutMINUTES - 10072008 - SD.6 Contra TO: BOARD OF SUPERVISORS _ FROM: DAVID TWA, ` s Costa County Administrator ;1;,° CasT'q COU24•�•� County DATE: October 7, 2008 SUBJECT: Preliminary Year-End Close-Out Report FY 2007-08 SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: ACCEPT report of preliminary close-out figures for fiscal year 2007/08. FINANCIAL IMPACT: This report is for informational purposes only and has no fiscal impact. BACKGROUND This report is in response to the Board of Supervisors' request for annual year-end reports that monitor the implementation of the Board's fiscal policies. The Board of Supervisors adopted the FY 2007/08 Recommended Budget on May 1, 2007, which balanced annual estimated expenditures with estimated revenues in the General Fund. This budget marked the third year after a significant turning point in the County's fiscal health, which took place due to the implementation of formal fiscal policies including budget, reserve, and debt. - The Board of Supervisors' adopted General Fund Reserve policy established specific goals .regarding the County's total and Unreserved General Fund balance. The County has exceeded the minimum Unreserved General Fund goal of 5% of each year's projected revenue and is close to achieving its informal goal of 10%, which is more pruden for a County of this size. CONTINUED ON ATTACHMENT: x YES SIGNATURE: ,J RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATIOWOF BOARD COMMITTEE APPROVE THER t. SIGNATURE(S): [ p ACTION OF BOARD ON �GT/l�t/ 7 QOQ APPROVED AS RECOMMENDED O)*W VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN AND ENTERED ON MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. UNANIMOUS(ABSENT L ) AYES: NOES: ABSENT: ABSTAIN: Contact: Lisa Driscoll 335-1023 Cc: County Administration ATTESTED - Auditor-Controller DAVID A,CLERK OF THE BOARD OFSUPERVISORS BY: DEPUTY Board of Supervisors October 7, 2008. Page 2 of 5 Fiscal Year 2007/08 marked the second full year of operations where our fiscal policies had been implemented. Although the year began with a balanced budget, the County faced several significant challenges including mid-year labor negotiation settlements and the meltdown of the housing market's impact on the economy (interest rates and property taxes). Despite this challenge the budget remained balanced. Our departments have continued to make tremendous progress in addressing specific administrative and service delivery goals this last year. As a County, we will continue our focus on Fiscal Health; Service Delivery Efficiency and Effectiveness; Team and Organizational Development; and Credibility Building and Public Education. Each of our departments has committed to these focus areas, and has additionally identified several new goals noted in their FY 2008/09 budgets, to help advance our County's service to the public in the future. The chart below',shows the change in the General Fund revenue and expenditure lines over the last seven years. We've also projected the trajectory of our expenditures and revenues as assumed in our 2008/09 Fiscal Budget2. Change in General Fund Actual Status 1,350 - 1,300 ,3501,300 1,250 - 1,200 - 1,150 - 1,100 - 1,050 - 1,00 ,2501,2001,1501,1001,0501,00 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Actual Actual Actual Actual Actual Actual Actual Projected Total Expenditures -M—Gross Revenue We have used the same format, in the chart below, for the last several years to reflect the change in Unreserved General Fund Balance, as a percentage of total revenue. During the FY 2004/05 preliminary close-out presentation to the Board, it was reported that general fund reserves had fallen to 5.5% and that the trajectory for FY 2005/06 was less than 4% unless the Board made significant changes in fiscal policy. As was noted above, changes were made in fiscal policy promoting the County's reserve growth to 8.3% in FY 2005/06, 9.1% in FY 2006/07, and 9.4% in FY 2007/08. The chart below graphically depicts the County's Unreserved General Figures in these charts for FY 2007/08 reflect unaudited data. All other figures are taken from the County's Comprehensive Annual Financial Report and the FY 2008/09 Adopted Budget. 2 As a caution, many factors can still impact current year projections including Federal-State legislation, shifts in revenue, unforeseen liabilities and claims, etc. Board of Supervisors October 7, 2008 Page 4 of 5 Unreserved Fund Balance as% of Revenues (as of June 30,2007) 35.0% 30.0% National Mean is 21.6% CA Cohort 25.0% Median is 20.7% 20.0% 15.0% 10.0% 5.0% 0.0% Alameda Contra Los Angeles Orange Riverside Sacramento San Santa Clara San Diego Costa Bernardino The County's Total Fund Balance as a Percentage of Revenues was the second lowest among the counties. Again, only Alameda, Santa Clara and San Diego Counties performed above the national mean. Total Fund Balance as%of General Fund Revenues (as of June 30,2007) 50.0% 45.0% 40.0 35.0% National CA Cohost Mean is Median is 23.5% 30.0% 26.3% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0 Alameda Contra Los Angeles Orange Riverside Sacramento San Santa Clara San Diego Costa Bernardino Board of Supervisors October 7, 2008 Page 3 of 5 Fund balance as a percentage of revenue including a projection for FY 2008/09 at the 2007/08 improved level given that our FY 2008/09 Budget is based upon no encroachment of Fund Balance. Unreserved Fund Balance As of June 30 of the Fiscal Year 14.0% 12.0% 10.0% 8.0% 6.0% - 4.0% - 2.0% .0%4.0%2.0% 0.0% 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Actual Actual Actual Actual Actual Actual Actual Projected Relative Debt Burden Pursuant to the County's Debt Management Policy, the Debt Affordability Advisory Committee annually calculates certain debt factors and debt burden ratios, compares them to benchmarks and reports the results in the annual Debt Report. Measuring the County's debt performance through the use of debt ratios provides a convenient way to compare the County's credit performance to other borrowers. Two of the most common debt ratios applied to counties are the 'Percentages of Total and Unreserved General Fund Balance'. These ratios are important measures of the financial flexibility of the County, i.e. the ability of the County to absorb the impact of unforeseen events and emergencies such as earthquakes, sudden drops in assessed valuation due to real estate market cycles, etc. The County's current performance does not meet the benchmark on these two measures. It should be noted that the gaps are not as wide when the County is compared to its California cohorts than when compared against large counties nationwide. While the comparison to California counties on the surface would appear to be more relevant, the Committee noted that the rating agencies evaluate the County relative to a broader universe of counties and, thus,.the comparisons to counties nationwide are critically important. The charts presented on the next page are from the Tamalpais Advisors, Inc. database that provides a closer look at the County versus its California cohorts on these two benchmarks. The County's Unreserved Fund Balance as a Percentage of Revenues was the second lowest among the counties. Only Alameda, Santa Clara and San Diego Counties performed above the national mean. Board of Supervisors October 7, 2008 Page 5 of 5 The chart below shows the relative debt burden among the County's cohort as of June 30, 2006, the latest data available as of this writing. 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. The three counties who have issued Pension Obligation Bonds also had the highest annual debt service burden. 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 and Santa Clara) than the chart suggests. In addition, Santa Clara County issued Pension Obligation Bonds in Fiscal Year 2006/07, so their relative debt burden is expected to be higher when the data for that fiscal year is compiled for our next Debt Report. Despite these observations, the County's debt burden is still among the highest of the counties. Annual General Fund Debt Service Burden as Percent of GF Revenues (as of June 30,2006) 9.0% 8.0% CA Cohort 7.0% Median is' 5.3% 6.0% 5.0% i 4.0% 3.0% ,j. 2.0% �I 1.0 0.0% Alameda Contra Los Angeles Orange Riverside Sacramento San Santa Clara San Diego Costa Bernardino In conclusion, the County Administrator's Office is pleased with the County's continuing progress toward building reserves and'the commitment to issuing debt only when absolutely necessary and is optimistic for the longer term given the Board's commitment to fiscal stability. The continued practice of spending in a year only what is earned in a year, suggests that in FY 2008/09 the County will again end the year with a.balance budget without relying on reserves. These trends notwithstanding, more will need to be done for the County to successfully address its fiscal challenges.