San Clemente Trends Analysis

8/13/2019 San Clemente Trends Analysis

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Financial Trend AnalysisLTFP2008

39

Objective

AnumberoffinancialindicatorsareanalyzedutilizingtheInternationalCityManagement

Associations(ICMA)guidelinescontainedinEvaluatingFinancialCondition. Theanalysisof

theseindicatorsisdesignedtopresentinformationonthefiscalhealthoftheCityofSan

Clementeas

part

of

the

Long

Term

Financial

Plan.

This

annual

financial

trend

analysis

focuses

ontheCity'sGeneralFund.

Background

The Citys financial trends are analyzed annually with many factors utilized in order to

understandthefinancialconditionoftheCityofSanClemente. Thesefactorsinclude:

TheeconomicconditionoftheCityandthesurroundingregion; Types and amounts of revenues and whether they are sufficient and the right mix to

supportthepopulationasitcontinuestogrow;

Expenditure levels and whether these expenditures are sufficient to provide the desiredlevelofservicescurrentlyandastheCitycontinuestogrow;

FundbalancesanddebtlevelsandtheirimpactuponcurrentCityfinancialresources.Thisreportexaminestheseissuesandothersindeterminingthecurrentfinancialconditionof

theCityofSanClemente. TheCitysadoptedfiscalpolicieshavebeenconsideredinconnection

withthisanalysis.

DatausedindevelopingthisfinancialtrendreportwasprimarilydrawnfromtheCitys

ComprehensiveAnnualFinancialReportsforfiscalyears200203through200607.

Consequently,

all

trends

are

based

on

data

available

as

of

June

30,

2007,

and

do

not

incorporateanychangesthathaveoccurredsincethattime.

ExecutiveSummary

ThefinancialtrendsthatfollowprovideCityCouncilandAdministrationwithinsightintothe

overallfinancialpositionoftheCitybyanalyzingtheCitysGeneralFund. Thisanalysismakesit

possibletoidentifyspecificareaswherenewpoliciesshouldbeimplementedorexistingones

revised. Oneofthefollowingratingshasbeenassignedtoeachofthetwentyoneindicators:


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Favorable(F): This trend ispositivewith respect to theCity's goals,policies, and

nationalcriteria.

Caution(C): This favorable rating indicates that a trend is in compliance with

adopted fiscal policies or anticipated results. This indicator may

changefrom

apositive

rating

in

the

near

future.

Warning(W): This rating indicates that a trend has changed from a positive

directionandisgoinginadirectionthatmayhaveanadverseeffect

ontheCity'sfinancialcondition. Thisrating isalsousedto indicate

that, although a trendmay appear tobe favorable, it isnot yet in

conformancewiththeCitysadoptedfiscalpolicies.

Unfavorable(U): Thistrendisnegative,andthereisanimmediateneedfortheCityto

takecorrectiveaction.

Asummaryoftheindicatorsanalyzedandtheratingassignedtoeachislistedbelow. Thepast

tentrendreportsarepresentedandidentifystrengthsandweaknessesoftheCitysfinancial

conditionand

to

illustrate

any

positive

or

negative

changes.


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OverviewoftheCitysFinancialConditionThe2008LongTermFinancialPlanincludestheanalysisoftwentyonetrends. Threeindicators

receivedawarningrating.Noindicatorsreceivedanunfavorablerating. Intotal,thesecurrent

yearresultsareadecreasefromtheprioryearwhenfourindicatorsreceivedcautionratings.

However,becauseofthecommitmenttofinancialplanning,fundingofnecessaryreserves,and

costreductionandstreamliningeffortsmadebymanyoftheCitysdepartmentstheCityhas

Indicator 08 07 06 05 04 03 02 01 00 99

RevenuesPerCapita F F/C F/C W W F F F F F

PropertyTax

RevenuesF

F

F

F

F

F

F

F

F

F

PropertyValues F F F F F F F F F F

ElasticRevenues W F/C F F F F F F F F

SalesTaxRevenues F F F F F F F F F F

License&Permit

Revenues

W F F/C F F F F F F F

Comm.Develop.

Charges

W F/C F F F F F F F F

Intergovernmental

Revenues

F F F F F F F F F F

OneTime

Revenues

F

F

F

F

F

F

F

F

F

F

RevenueOverage F F F F F F F F F F

Population F F F F F/C F F F F F

ExpendituresPer

Capita

F F/C F F F F/C F F F F

ExpendituresBy

Function

F F F F/C F/C N/A N/A N/A N/A N/A

EmployeesPer

Capita

F F F F F F F F U U

FringeBenefits F F F F/C F F F F F F

Capital

Outlay

F

F

F

F

F

F

F

F

F

F

OperatingPosition F F F F F F/C F F F F

Indicator 08 07 06 05 04 03 02 01 00 99

DebtService F F F F F F F F F F

AccumulatedComp.

Absences

F F F F F F F/C F/C F/C F

FundBalance F F F F F F F F F F

LiquidityRatio F F F F F F F F F F


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alreadytakentheinitiativetoanalyzethesewarningsignsandimprovethefiscalhealthofthe

Cityforthefuture.

RatingchangesThere

were

five

trend

changes

from

the

last

fiscal

year,

with

two

of

the

changes

in

apositive

directionandthreeinanegativedirection. ThepositivechangeswereinRevenuesperCapitaandExpenditurespercapita,whichshowedimprovementfromlastyear. Thenegativechangeswere:

`ElasticRevenuesDowngradetoWarning License&PermitRevenuesDowngradetoWarning CommunityDevelopmentChargesDowngradetoWarning

RatingdiscussionThethreeindicatorsattheWarninglevelreflecttheCitystransitionfromafastgrowing,high

developmentarea

to

aCity

that

is

stabilizing

its

growth

as

development

slows.

RevenuesperCapitahaschangedfromafavorable/cautiontoafavorableratingforFY200607asrevenuecontinuestogrow,populationgrowthhasslowedwithdevelopmentthroughoutthe

City.TheslowdownindevelopmenthasstartedtoallowtheCitytaxrevenuestorealizethese

populationandgrowthincreases.

ExpendituresPerCapitachangedfromafavorable/cautionratingtoafavorableratingduetoexpenditureskeepingupwiththegrowthoftheCity.However,theCityaspartofits

developmentneedstocontinuetomonitortheeffectsofparkdevelopmentandoperational

costs.AParkDepreciationpaperisincludedinthisyearslongtermfinancialplantopresent

alternativesto

fund

future

capital

and

maintenance

costs

related

to

park

infrastructure.

Expendituresshouldcontinuetostabilizeinthefuture;ifnot,thiscouldsignalthattheCitys

servicedemandshaveincreasedonapercapitabasisandthistrendmaybedowngraded.

ElasticRevenuesaremadeupofsalestax,transientoccupancytaxes,andlicensesandpermits.TheserevenuesreceiveaWarningratingfollowingthethirdconsecutivedecreaseandthe

secondyearbelowthehistoricalaverage.Althoughthetotalactualamountsforcommunity

developmentservicechargesandlicensesandpermitsaregreaterthantheoriginalbudget

amounts,thisdifferencewasstilllessthantheprioryear,duetotheCityapproachingbuildout

andthedelayoftheMarbleheadCoastaldevelopment.

LicensesandPermitsneedtobemonitoredonanongoingbasis. LicensesandPermitswereanticipatedtodecreaseinconstructionpermitsandinspectionfeesandtheserevenueswillcontinuetodecrease,exceptfortheMarbleheadCoastalrelatedactivity,infutureyears.This

trendreceivesaWarningratingduetoacontinualdeclineindevelopmentandthedelayofthe

MarbleheadCoastalproject.

CommunityDevelopmentServiceChargesalsoreceivesawarningratingduetoadeclineindevelopmentastheCitynearsbuildoutandlevelingoutofservicecharges.


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RevenueTrendAnalysis

ComparisonofRevenuesbySource

FY200203vs.FY200607

Comments: Thesecharts,whichcomparecurrentrevenuesourcestothosefiveyearsago,

showsignificantchangesintherevenuepercentagesbysourceforGeneralFundrevenuesin

thePropertytax,Intergovernmental,ServicechargesandLicenseandPermitcategories.

Propertytaxrevenuesincreasedfrom31%inFY200203to46%inFY200607duetoachange

inpropertytaxlegislationthatstartedinthe200405fiscalyear,andincreasesinhousingprices


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andnewdevelopmentintheCity. Thechangeinlegislationincreasedpropertytaxesby$4.9

millionanddecreasedtheCitysmotorvehiclelicensefeesbythesameamount,thereby

decreasingtheintergovernmentalpercentagefrom9%in200203to2%in200607. (See

RevenueandFeeAnalysisissuepaper.)Thedecreaseinlicensesandpermitsfrom10%in2002

03to

6%

in

2006

07

is

due

to

declining

construction

permit

fees

as

anticipated.

Service

charges

decreasedfrom15%in200203to9%in200607duetolowerplanninginspectionfeesasa

resultofslowingdevelopmentintheCity.

RevenuesPerCapita

Finding: FAVORABLE. Revenuespercapitainbothchartsreflectanincreasewhenanalyzing

actualamountsandconstantdollarsforFY200607. Thistrendhaschangedtofavorablefrom


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afavorable/cautionratingintheprioryearasrevenuescontinuetogrowwhilethepopulation

growthratehasslowed.Revenuespercapita,inactualdollars,experiencedgrowthfromFY

200506of7.16%(includingonetimerevenues)and7.92%(excludingonetimerevenues)

relatedtoincreasesinactualpropertytaxrevenues. Inconstantdollarstheincreasewas6.67%

(includingone

time

revenues)

and

7.31%

(excluding

one

time

revenues)

due

to

the

actual

dollar

growthrateexceedinginflationgrowthof2.92%.

Comments: Thefirstchartwhichincludesonetimerevenuesshowsanupwardtrendfrom

$698to$748inactualdollarsandanincreasefrom$601to$641inconstantdollars. Total

revenuesforFY200607increasedwiththeCitysmajorrevenuecategoryofpropertytaxes

increasingby$2.5million. Thispropertytaxincreaseincludesthepropertytaxshiftofmotor

vehiclefeesthatstartedinFY200405.Thisincreasedpropertytaxrevenuesby$1.0million

fromtheFY200506withtotalERAFpropertytaxesof$4.9million. Theoverallincreasein

revenuesfarexceededinflationgrowthduringthelastyear.

Thesecondchart(whichexcludesonetimerevenues)showsanincreaseinactualdollarsfrom

$682to$736fromFY200506andanincreaseinconstantdollarsfrom$588to$631. The

approachofexcludingonetimerevenuesisarealisticapproachtoanalyzingrevenuessincethe

Cityonlyappliesonetimerevenuesagainstonetimeexpenditures,includingreservetransfers,

inaccordancewiththeCitysFiscalPolicy. GeneralFundrevenuesremainstable,andthe

favorable/cautiontrendhasbeenchangedtofavorableduetorevenuesexceedinginflation

growth.


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PropertyTaxRevenues

Finding:FAVORABLE. PropertytaxrevenuesshowedasignificantincreaseforFY200607,

continuingaverypositivetrend,asindicatedinthegraphabove.

Comments: Propertytaxrevenuesincreasedby$2.6millionor12.4%inactualdollars,andincrease11.8%inconstantdollarsendingtheyear$2.1millionabovethepriorfiscalyear. The

actualdollarincreaseistheresultofanadditional$1.0millioninpropertytaxesreceivedinlieu

ofmotorvehiclefeesand$1.6millionrelatedtonewhomesalesandincreasedproperty

valuations. Thisindicatorreceivesafavorableratingfortheeleventhconsecutiveyear.


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PropertyValues

Finding:FAVORABLE.

Property

values

showed

apositive

growth

rate

for

the

eleventh

consecutiveyearinFY200607.

Comments: Thegrowthrateinpropertyvaluesasapercentageratefromthepreviousyearin

actualdollarsshowsanincreaseof13.7%. Asaresultofthepositivechanges,thisindicator

remainsfavorable. Thisindicatorwillcontinuetobecloselymonitoredduetothesignificant

impactinpropertytaxrevenuesontheCitysGeneralFund.

PersonalpropertyinCaliforniaissubjecttoabasiclevyequaltoonepercentoftheassessed

value.Thepropertytaxsharecanfluctuatebetweencitieswithinacounty.TheCityofSanClemente

receives

$0.153

of

each

property

tax

dollar

collected

within

the

City.

The

following

graphshowsthedistributionofthetotalpropertytaxlevyforeachpropertytaxdollarpaidfor

theCity.


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ThechartaboveshowstheportioneachrespectivegovernmentagencyreceivesofthetypicalOrangeCountypropertytaxdollar.


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ElasticRevenues

(SalesTax,TransientOccupancyTax,LicenseandPermits,andCommunityDevelopment

ServiceCharges)

Finding:WARNING. Elasticrevenues,asapercentageoftotalrevenues,showadecreasefromFY

200506toFY200607whichisthethirdconsecutivedecrease. Actualelasticrevenues

decreased$179,665,whileoperatingrevenuesincreasedby$4.6million. Awarningratingis

assignedduetoadecreaseinrevenueof$268,645incommunitydevelopmentservicecharges

and$488,109fromlicensesandpermits;however,salestaxesincreasedby7.1%or$479,588.

Comments:

Elastic

revenues,

as

a

percentage

of

total

revenues,

decreased

from

28.8%

in

FY

200506to25.8%inFY200607andisbelowthehistoricalaverageof31.0%fromFY199596to

FY19992000.Thiswastheresultofa$268,645,or14%,dropincommunitydevelopment

servicechargesandadropinlicensesandpermitsof$488,109,or14.9%. Awarningratinghas

beenassignedbecauseofthedecreasesincommunitydevelopmentservicechargesand

licensesandpermitsfromthepreviousyear. Detailsconcerningeachmajorelasticrevenue

sourcecanbefoundinthefollowingpages.


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SalesTaxRevenues

Finding: FAVORABLE. Assummarizedinthechartabove,salestaxrevenuesshowedanincrease

of$479,588,or7.1%inactualdollarsoverthepriorfiscalyear. Inconstantdollars,theincrease

amountedto$382,081,or6.5%,whichishigherthantheinflationrate.

Comments: Assummarizedinthechart,salestaxrevenueshavegraduallyincreasedoverthe

pastfiveyearsinactualandconstantdollars. Infact,actualdollarsincreased32.9%and

constantdollarsincreased16.7%fromsalestaxrevenuesrecordedinFY200203. These

increasesboostsalestaxrevenuetoaneighteenyearhighinactualdollarsandtheresultisa

continuedfavorablerating.TheCityofSanClementesalestaxesareranked22nd

outof35

OrangeCounty

cities.

ThechartbelowshowshowCaliforniaSalesTaxisdistributed:


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LicenseandPermitRevenues

Finding:WARNING. Licenseandpermitrevenuesdecreasedinactualdollarsintheamountof

$488,109or14.9%fromthepriorfiscalyear. Theconstantdollardecreaseregisteredat

$432,528or15.4%fromFY200506. Thisindicatorreceivedawarningratingtoreflectthe

changetoadownwardtrendinactualdollars.

Comments: Whileconstructionpermitrevenuedecreased$558,626,or27.3%overthepast

year,businesslicenseincomeincreasedfromtheprioryearby$66,741or6.3%. Awarning

ratinghasbeenassignedbasedonthedevelopmentactivitydecreasecausingadownwardshift

inelasticrevenues.ItshouldbenotedthattheCityprojectsdevelopmentalrevenues,suchas

licenseand

permit

fees

conservatively

due

to

the

timing

of

projects

entering

the

building

permitstagewhichcannotalwaysbepredictedaccurately.Althoughthesedecreaseswere

anticipatedduringthemidyearadjustmentstheamountsforpermitswerebelowtheCitys

originalanticipatedbudgetforFY200607.


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CommunityDevelopmentServiceChargesRevenues

Finding:WARNING. Totalcommunitydevelopmentservicechargesdecreasedby14%,or

$268,645fromtheprioryear.Thisrepresentsthesecondconsecutiveyearofdecreases. This

trendisassignedawarningratingduetothedeclineindevelopmentastheCitynearsbuild

out;thelevelingoftheservicecharges;andthepossibleeffectsoftherevenuefeestructure

review.

Comments: Othercommunitydevelopmentrevenues,suchasplancheckfeesandzoning

applicationfeesaccountformostofthe$268,645decrease. Althoughthetotalactualamounts

forcommunitydevelopmentservicechargesaregreaterthantheoriginalbudgetamounts,this

difference

was

still

less

than

the

prior

year,

due

to

the

City

approaching

build

out

and

the

delay

oftheMarbleheadCoastaldevelopment.


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IntergovernmentalRevenues

Finding:FAVORABLE. GeneralFundIntergovernmentalrevenues,asapercentageofoperating

revenuesflattenedoutto2.2%inFY200607.

Comments: Byanalyzingintergovernmentalrevenuesasapercentageofoperatingrevenues,

theCitycandeterminetheextentofitsdependenceuponresourcesfromothergovernments.

Excessivedependenceonthistypeofrevenuecanbedetrimentaltothefinancialhealthofthe

CityasthefactorscontrollingtheirdistributionarebeyondtheCityscontrol. TheCityslargest

intergovernmentalrevenueismotorvehicletaxwhichmakesup33%ofthetotal

intergovernmentalcategory. Motorvehicletaxdeclinedin2004duetolegislativeactionthat

transferred

motor

vehicle

fees

to

the

state.

The

City

receives

property

tax

dollars

in

lieu

of

the

motorvehiclefeeswhichstartedinFY200405. Motorvehiclefeesreceivedasinlieuproperty

taxestotaled$3.8millioninFY200506and$4.9millioninFY200607,whichwouldhavemade

theintergovernmentalpercentages10.2%and11.8%,respectively,whichwouldstillhave

supportingthefavorablerating.


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OneTimeRevenues

Finding: FAVORABLE. Onetimerevenues,asapercentageoftotalGeneralFundrevenues,

equaled2.12%inFY200607,aslightincreasefromtheprioryear.

Comments: Onetimerevenuesincreasedby$264,941fromthepriorfiscalyear. FY200607

onetimerevenuesof$1.1millioninclude$920,246ofgrantfunds. Inaccordancewiththe

CitysFiscalPolicy,onetimerevenuesarenotutilizedforoperatingexpenditures.Therefore,

thisindicatormaintainsafavorablerating.


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RevenueOverage

Finding:FAVORABLE.

Actual

revenues

exceeded

budget

by

$1.9

million

for

fiscal

year

2006

07

andendswithapositiverevenuepositionoverbudgetby3.85%. TheCityexperienced

revenuesinexcessofbudgetintaxrevenueinthefollowingcategories:propertytaxes($1.5

million),salestaxes($0.3million),andtransientoccupancytaxes($0.2million). Thistrend

continuestoreceiveafavorableratingsinceitmaintainsalevelabovetheICMAbasisofa

shortageof5%ormoreforanunfavorablerating.

Comments: Thistrendbeganthefiveyearanalysiswithapositiverevenuepositionof7.03%

andendedFY200607at3.85%. TheCitycontinuestomonitoritsrevenuesthroughtheannual

budgetandlongtermfinancialplanningprocessesinordertomoreaccuratelyforecastits

revenues. ItshouldbenotedthattheCityprojectsdevelopmentrevenues,suchaslicenseand

permitfees,conservatively,asthetimingofprojectsenteringthebuildingpermitstagecannotalwaysbepredicted.


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Population

Finding:FAVORABLE. TheCityspopulationgrowth,anaverageof4.54%overthelastfiveyears,

isconsideredfavorablebecausethisgrowthhasbeenplannedandcontrolled. Growthfrom

200506to200607was1.65%,whichindicatestheCitysgrowthpatterncontinuestoslow.

Comments:Theexactrelationshipbetweenpopulationchangeandothereconomicand

demographicfactorsisuncertain. However,asuddenincreaseinpopulationcancreate

immediatepressuresfornewcapitalexpendituresandhigherlevelsofservice. Conversely,a

rapiddeclineinpopulationallowsforasmallertaxbaseforspreadingCitycoststhatcannotbe

reducedintheshortrun. TheplannedgrowthisallowingtheCitytheopportunitytoensure

thatthecostofservicingnewresidentsdoesnotexceedtheCitysabilitytogeneratenew

revenues,thatthelevelofbusinessactivitygrowsalongwiththeincreaseinresidentialdevelopment,andthatthegrowthdoesnotstrainthesewersystemcapacity,trafficcirculation,

andoffstreetparking. Additionally,increasedpopulationgeneratesincreasedexpenditures

overtimesuchaspublicsafety(i.e.additionalfirestations,increasedpolice,etc.).


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ExpendituresTrendAnalysis

ExpendituresPer

Capita

Finding: FAVORABLE. Expenditurespercapitainbothchartsreflectanincreasewhenanalyzing

actualandconstantdollarsforthepastfiscalyearwhencomparedtotheprioryear.Thistrend

haschangedfromafavorable/cautionratingtoafavorableratingduetoexpenditureskeeping

upwithgrowthoftheCity.

Comments: Thefirstchartwhichincludesonetimeexpendituresshowsanincreasefrom$675

to$785inpercapitaactualdollarsandanincreasefrom$582to$673inpercapitaconstant

dollars.Thisreflectstheincreaseinactualdollarsof$8.1millionandtheincreaseinconstant

dollarsof$6.8millionwhencomparedFY200506.TheincreaseinactualdollarswasinCity

general($6.3million),beaches,parksandrecreation($0.8million),police($0.5million),fire

($0.3million),andgeneralgovernment($0.2million). TheincreaseintheCitygeneralisdueto


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aonetime$8.1millioncontributiontotheParksAcquisitionandDevelopmentFund,ofwhich

$7.7millionwillgotowardthefurtherdevelopmentofLaPata/VistaHermosaSportsParkand

$400,000isacontributiontoSteedMemorialPark.Theotherportionoftheincreaseis

primarilyduetoanincreaseinbeaches,parksandrecreationservicesinFY200607by$.8

millionmainly

to

fund

increased

contractual

activities

which

are

not

offset

by

revenues.

The

increaseof$836,225or5.5%inpoliceandfireexpendituresisduetonegotiatedincreasesas

partofthepoliceandfirecontractswiththeCountyofOrange.

Thesecondchart(whichexcludesonetimeexpenditures)showsanincreaseinactualdollars

from$538to$571andanincreaseinconstantdollarsfrom$624to$665.Theapproachof

excludingonetimeexpendituresisarealisticapproachsincetheCityappliesonetime

expenditurestoonetimerevenuesinaccordancewiththeCitysFiscalPolicy.


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ComparisonofExpendituresbyFunction

200203vs.200607

Finding: FAVORABLE. Expendituresbyfunction,asapercentageofthetotalGeneralFund

expenditures(excludingdebtservice,interfundtransfers,andcapitaloutlay),didnotchange

significantly.

Comments:These

charts

indicate

that

most

expenditure

categories

have

remained

stable,

with

onlyminorincreasesanddecreasesinpercentages. Beaches,ParksandRecreationwhile

experiencingexpendituregrowthhasalsoexperiencedgrowthinclassrevenues.Community

DevelopmentdecreaseisduetotheslowingofdevelopmentastheCitynearsbuildout.

PublicSafety38%

GeneralGovernment

14%

CommunityDevelopment

28%

Beaches,Parks&

Recreation

20%

200203


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transfershadnotbeenincludedinFY200607,contractualserviceswouldhaveincreasedin

percentagefromFY200203to55%whileinterfundamountswouldhavedecreasedto11%.

Thepersonnelcategorydecreasedfrom27%to25%ofexpenditures. Personnelcostsasa

percentageof

total

expenditures

have

decreased

from

five

years

ago.

These

costs

are

analyzed

inmoredetailintheEmployeesperCapitatrendandtheFringeBenefittrend. Thesetrends

showthatemployeegrowthremainedstablewithpopulationgrowthandfringebenefitscosts

overthelasttwoyearshavestabilizedduetoretirementcontributionpercentageslevelingover

thelasttwoyears.

EmployeesPerCapita

Finding:FAVORABLE. Employeespercapitahaveremainedrelativelystableoverthelastfive

years;however,ithasincreasedslightlyfromFY200506duetoaslightincreaseinthenumber

ofemployeesandapopulationincrease.

Comments: ThisindicatorisawardedafavorableratingasgrowthinFullTimeEquivalents

(FTEs)keepupwithserviceleveldemands. Thistrendwillbecloselymonitoredtoinsurethe

Citysabilitytosupportcurrentandfutureservicelevels.


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FringeBenefits

Finding: FAVORABLE. Fringebenefits(includingsocialsecuritybenefits),asapercentageof

GeneralFundsalariesandwages,decreasedslightlyfrom40.7%to40.1%. Fringebenefits

(excludingsocialsecuritybenefits)showacorrespondingdecreasewhencomparedtoFY2005

06.Thisindicatesalevelingoffringebenefitcostsresultinginafavorablerating.

Comments:

The

largest

component

of

the

benefit

percentage

is

the

contribution

to

the

Citys

definedbenefitretirementprogram. Theretirementcontributionamounthasincreased,but

thepercentofpayhasremainedflatduetoastableinterestrateenvironment. Anotherbenefit

changeresultedfromthe200304negotiationswiththeCityemployeeswhichincreased

medicalbenefitcostsfortheCityinFY200405. However,inFY200506theamountwas

capped. Inaddition,workerscompensationrateshavedecreasedfromtheprioryear,

althoughthesechangesresultedinonlyasmallportionofthebenefitpercentagechange.


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CapitalOutlay

Finding:FAVORABLE.

Capital

outlay

expenditures

increased

by

$1.3

million,

or

34.5%,

from

the

200506fiscalyear. Capitaloutlayexpenditurestotaled$1.6million.

Comments: Spendingoncapitaloutlayhasincreasedduetoseveralmaintenancecontractual

servicesaccountsandprojectsintheGeneralfundbeingmovedfromthecontractualservices

accountcategorytothecapitaloutlaycategoryduringtheFY07/08budgetprocesstobetter

reflectcapitalwithregardstomaintenanceandcapitalstudiesintheGeneralfund.

TheCapitalEquipmentReplacementReservewasestablishedinFY199495. Thisreservefund

willensurethatobsoleteandwornequipmentisreplacedinaccordancewiththeCitys

preventivemaintenanceprogram. Thistrendreceivesafavorableratingforthetwelfth

consecutiveyearbecauseofthecontinuedcommitmenttoupgradingcapitalassets,whichimprovestheefficiencyofCityoperations.


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64

OperatingPosition

Finding: FAVORABLE. Anoperatingsurplusiswhenrevenuesexceedexpenditures,conversely

whenexpendituresexceedrevenuesthereisanoperatingdeficit. FY200607finishedwithan

operatingsurplusof11.5%,anincreasefrom2.8%,whencalculatedasapercentageofGeneral

Fundrevenues.

Comments: TheCityendedFY200607withanoperatingsurplus. Theexpendituresusedto

calculatethissurplusdoesnotincludeaonetimecapitalcontributionof$8.1milliontotheParksAcquisitionandDevelopmentFund,ofwhich$7.7millionwillgotowardthefurther

developmentofLaPata/VistaHermosaSportsPark. Thistrendreceivesafavorableratingdue

tothepositiveoperatingpositionandcontinuedincreaseinrevenues.


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DebtService

Finding: FAVORABLE. GeneralFunddebtservicereceivesafavorableratingasithasremained

immaterial(lessthan1%)incomparisontototalrevenuesoverthelastelevenyears. Credit

ratingfirmsgenerallyviewdebtserviceasunfavorableifdebtservicepaymentsexceed20%of

netoperatingrevenues. Standard&Poors,anindependentfirmthatissuesratings,reaffirmed

theCityofSanClementescreditratingofAAin2005.

Comments: TheCitysdebtservicecostwasduetothepayoffoftheoutstandingbalanceofits

capitalizedleasewithCityNationalBankforthepurchaseofenergyefficiencyequipmentfor

severalCitybuildingsin200304. Theleasewasnotdueuntil2006butwaspaidoffearlyasa

moneysavingmeasure.

Additionally,itshouldbenotedthatthedebtservicefortheNegocioBuildingbonds,theCitys

streetassessmentbonds,andcapitalequipmentleasesareaccountedforinaseparatefunds,

andarenotpartofthisanalysis.


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66

AccumulatedCompensatedAbsences

Finding:FAVORABLE. Thisindicatorreceivesafavorablerating,consistentwiththeprioryear.

TheCitysaverageannualpaymentsforterminatedemployeesaccumulatedcompensated

absencesamounttoonehalfoftheaccruedleavereservebalance. Whiletheaccumulated

compensatedabsenceshaveshownincreasesoverthelastfiveyears,thereserveiscontinually

fundedtoinsureanadequatereserve,asoutlinedintheLongTermFinancialPlansReserve

section.

Comments:At

June

30,

2007,

the

balance

of

the

liability

for

compensated

absences

was

$2.08

millionconsistingof$1.1millionforvacation,$0.9millionforsickleave,and$74,000for

compensatorytime. Thisisanincreaseof$153,558,or7.9%fromtheprioryearsliabilityof

$1.9million. TheincreaseisduetoanincreasenumberofCityemployeesintheGeneralFund

andanincreaseof3.75%forcostoflivinginFY200607.

TheAccruedLeaveReservewasestablishedtopayaccruedemployeebenefitsforGeneralFund

employeeswhoterminateduringtheyear. InFY200607,theGeneralFundcontinuedits

annualcontributiontotheAccruedLeaveReserveFundwithanamountof$230,000forthe

paymentofaccruedleaveforterminatedemployees. AsofJune30,2007theAccruedLeave

Reservebalance

was

$486,261.


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67

FundBalance

Finding: FAVORABLE. Unreservedfundbalancereferstothosedollarsavailableforuseinthe

eventofafinancialemergency,shorttermrevenuefluctuationsoraneconomicdownturn. The

Cityattempts

to

operate

each

year

at

asurplus

to

ensure

the

maintenance

of

adequate

reserve

levels.

Comments: Unreservedfundbalanceexcludinglongtermreceivablereservesdeclined12.3%

inFY200607asapercentageoftotalrevenues. AlthoughtherewasadecreaseinFY200607,

thestablepositionoftheCitysGeneralFundisdisplayedbyyearsoflargeunreservedfund

balancesasapercentageofoperatingrevenues.

CityCounciladoptedafiscalpolicyrequiringthatemergencyreservesbesetat8%ofGeneral

Fundoperatingexpenditures. IncludedwithinthetotalFY200607unreservedfundbalancesof

$19.0million

are

undesignated

funds

of

$15.5

million

and

designated

funds

of

$3.5

million

for

theGeneralFundEmergencyReserve. Theannualcontributiontotheemergencyreserveis

discussedindetailintheReserveAnalysissectionoftheLTFP. Inaddition,theunreservedfund

balancehasbeenusedtosupportonetimeprojects/costsandreservetransfers.

ThefollowingtablesummarizestheGeneralFundyearendundesignatedfundbalanceandthe

amounttransferredfortheLaPata/VistaHermosaSportsParkProjectduringthepastfivefiscal

years:FiscalYear GeneralFundBalance

(undesignated)

Amounttransferredto

project

200203 $14,408,404

2003

04

$16,862,480

$61,562

200405 $21,146,531

200506 $18,296,959

200607* $15,475,231 $7,650,000

*TheFY200607actualendingfundbalanceexceededtheprojectedendingfundbalance

amountof$12,718,242by$2,756,989.


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LiquidityRatio

Finding: FAVORABLE. InFY200607,theCitysliquidityratioremainspositiveat6.2:1. Credit

ratingfirmsconsideraratioof1:1favorable. TheCitys6.2:1currentassettocurrentliability

ratioisconsideredexcellent.

Comments: LiquiditymeasurestheCitysabilitytomeetshorttermobligations. Liquidityis

measuredbycomparingcurrentassetstocurrentliabilities. Currentassetsincludecash,short

terminvestments,accountsreceivableandotherassetsthatcanbereadilyconvertedtocash.

Currentliabilitiesincludeaccountspayable,accruedwages,accruedexpensesandall

obligations

that

can

be

immediately

demanded

for

payment.

Documents

San Clemente Trends Analysis