Financial Summaries & Forecast
FY 2021-22 Budget
This section of the Budget provides additional analysis based on historical trends and a projection of future revenues and expenditures. Included are schedules showing five years of actual revenues and expenditures data for all funds. The General Fund comprises the most significant component of the Town's financial base. A five-year General Fund projection was prepared. The projection is a high-level forecast that can be used as a financial planning tool.
Historical Revenue and Expenditures (All Funds)
The expenditures (expenses) shown below consists of only operating expenditures, including debt service. Overall, the Town has successfully maintained its operating expenditures, plus debt service, below the annual revenues. Even in the midst of the Covid-19 pandemic, the Town managed to come below the operating budget of $16.3 million by $570,000, projecting to end the year at $15.7 million. In addition to not filling key vacant positions and deferring spending during the year, the Town also received $2.0 million more in revenues than expected because of the Wayfair decision as discussed in the Budget Overview section.
General Fund Revenue & Expenditure Trend (including transfers)
General Fund Forecast and Assumptions
To understand the potential financial challenges to the Town in the next five years, this section of the budget will focus on the General Fund. General Fund represents 85 percent of total Town operations and subsidizes the Sewer Funds and Capital Improvement Funds. Additionally, this section is organized to show the financial impact of status quo and potential solutions. These solutions will require further analysis and City Council authorization.
General Fund Expenditure Forecast
- Salaries, wages & benefits is the largest expenditure category for the General Fund. This expenditure category includes contributions to address future unfunded liabilities as they are related to OPEB, pension, and accrued leave payout at separation (retirement and voluntary separation). The five-year projection builds in a 3% escalation for salaries and wages and 5% escalation for other benefits. The 3% escalation for salaries and wages does not include COLA adjustment but rather reflects step increase resulted from positive performance evaluation.
- Professional & Contractual Service and Supplies & Services categories are the next largest categories in the General Fund. The projection applies a 3% or 5% escalation depending on the nature of the services.
General Fund Revenue & Expenditure Forecast (including operating transfers)
Adding revenues to the discussion, the projection below shows the gap between the expenditure and revenue lines widen over time. Note, this is assuming no changes to revenue streams or operating structure.
Potential Options to Mitigate Insolvency
The Town has been vigilant in the last few years in preparing for the next economic downturn. Changes made include funding of OPEB and pension trust above the pay-as-you-go level, setting aside funds for capital improvements to avoid rising construction costs from deferred maintenance and improvements, working closely with local businesses to promote economic development, completing a user fee study which raised permit fees, and successfully passed a voter-approved Transient Occupancy Tax (TOT). Contributions to the 115 Trust funds and capital improvement funds can be used as part of the budget stabilization strategy to free up General Fund revenues for other essential Town services and operations. The new permit fees are accounted for in the projections, above. The TOT was established in preparation for when a hotel/motel is developed in Town.
Additionally, the 2020-22 Strategic Plan (adopted prior to the start of the Covid-19 pandemic) includes a plan to diversify revenue sources and promote economic development. The FY 2021-22 Budget included appropriation to engage consultants in these matters.
COST CONTAINMENT AND REDUCTION
In addition to revenue measures, cost containment and reduction measures are considered. Below is a list of potential cost reduction measures:
- Salary & Wages. The Town is currently at the final year of the 3 year labor contract, which included a "reopener" clause in the event the Town faces a operating deficit in FY 2021-22. The FY 2021-22 budget shows a Town-wide operating deficit and assumes the last two COLA adjustment are not implemented. However, it is still very challenging to attract and retain qualified employees in the greater Bay Area/Silicon Valley. The Town will need to balance pay increases to attract and retain qualified individuals and the related operating cost. A potential solution is restructuring the organizational chart.
- Pension & OPEB. The Town may decide to “pay as you go” for both Pension and OPEB. However, this measure will handicap the Town in meeting its future unfunded liabilities.
- Supplies and Contractual Services. Colma contracts out permit processing services, facilities and landscape maintenance, and insurance. For the most part, there is a minimal contingency budget in this category. The Town may reduce the annual budget to be $100,000 less than the projection but it may impact processing time and facility maintenance and minor repairs may be deferred.
- Capital Improvement Fund Contribution. The Town may limit the maximum General Fund transfer of $500,000 per year to Capital Improvement Fund (31) through FY 2026-27 and zero transfers thereafter.
- Parking Enforcement Program. Once the Grant Reserve fund is depleted, projected for FY 2022-23, the Town’s parking enforcement program may need to be altered to avoid General Fund Subsidy.
- Sewer Operation and Capital Funds. The above projections assume a General Fund subsidy of $150,000 to $200,000 per year to subsidize the sewer operation, plus capital improvements. To eliminate the General Fund subsidy, the Sewer Funds can be fully self-funded and an increase in sewer fees will be required. The fees will have to be established as part of a Sewer Fee Study and complete the Proposition 218 process.
- Vehicle Purchase (Capital Outlay). The FY 2021-22 Budget includes an annual Departmental Budget transfer of $250,000 to the Fleet Replacement Fund (61) to meet vehicle the replacement schedule. In future years, we may have to delay vehicle replacement and reduce the annual contribution.
- Budget Stabilization Reserve. To keep Unassigned General Fund in the black, Budget Stabilization may need to remain at $12.0 million, despite the Town’s reserve policy to set aside 100 percent of the prior year’s operating budget as Budget Stabilization.
Closely monitoring revenues and expenditures and completing the revenue initiative and economic development projects in the 2020-2022 Strategic Plan will be an important part of the strategy to bridge the revenue and expenditure gap.
Other measures to consider include making supplemental contributions to CalPERS directly during the next economic downturn to reduce the overall pension liability, looking at the benefit of leasing the Town fleet, rather than purchase, negotiating shared medical premium cost with employees, considering new revenue measures, increasing rental income, changing the Town’s investment portfolio, and investing in the Town’s business community and business corridors to enhance or prolong economic viability within Town.
The tables and charts below include financial summaries for all Town funds by Fund Categories: General Funds, Special Revenues and Debt Service Funds, Capital Improvement Funds, Internal Service Fund, and Enterprise Funds.
General Fund (11, 12, 19) - Major Fund
General Fund Category consists of three separation fund numbers. The fund was separated for reporting and tracking purposes. For audit reporting purposes, they are consolidated to form the General Fund Category.
- 11: General Fund - For the purpose of tracking funding and cost of ongoing operation and unrestricted revenues. The expenditure and use of General Funds are discretionary after appropriation by the City Council to the extent there are no local policies or laws that impose any special conditions.
- 12: General Fund Reserves - For the purpose of segregating committed reserve funds approved by the City Council in the Town Budget.
- 19: Emergency Operation - For the purpose of tracking emergency operation.
Special Revenue and Debt Funds - Nonmajor Fund
Special Revenues and Debt Funds category consists of grant funding and debt transactions.
The following grant funds are allocated and distributed to the Town annually and are intended for specific use.
- 21: Gas Tax - For the purpose of receiving gas tax collected and distributed by the State of California. Gas Tax Fund is designated for ongoing traffic signal and street lighting contract services as well as street capital projects as authorized by the gas tax requirement.
- 22: Measure A - For the purpose of receiving Measure A collected and distributed by the San Mateo County Transportation Authority. This is a county-wide voter-approved sales tax measure designed to improve transit and relieve traffic congestion. A portion of the Measure A funds are distributed directly to cities on a per-capita basis and the use is limited to eligible street capital improvements.
- 23: Transportation Grant - For the purpose of recording various Federal, State and county grants for major bikeway, pedestrian, and roadway capital improvement projects. Grants are generally reimbursable in nature and require the Town to pay the contract cost, first.
- 26: Measure W - For the purpose of receiving Measure W collected and distributed by the San Mateo County Transportation Authority. This is a county-wide voter-approved sales tax measure designed to improve transit and relieve traffic congestion. A portion of the Measure W funds are distributed directly to cities on a per-capita basis and the use is limited to eligible street capital improvements.
- 27: Police Grants - For the purpose of revenue associated with one-time or limited-term Police grants that have restricted uses. This includes a distribution associated with State criminal justice realignment funds. Other one-time Police-related grants are also accounted for in this fund. The Public Safety Grants Fund is designated by the Town as Fund #27. Expenditures from this fund will finance the majority of costs associated with specialized Police training and homeless outreach services.
- 29: Citizens’ Option for Public Safety - For the purpose of revenue associated with Police grants that have restricted uses and may be on-going. This includes an annual State distribution from the Supplemental Law Enforcement Services Fund (SLESF), which must be used for front-line law enforcement activities. Expenditures from this fund will finance the majority of costs associated with the Police - Community Services Division including a Community Services Officer (CSO) position.
The following funds are collected from development agreements.
- 24: Park in-Lieu - For the purpose of receiving Parks in Lieu fees and disbursing funds for Town parks and recreational facilities.
- 25: Housing Impact - For the purpose of receiving Housing Impact fees paid by developers and disbursing funds for affordable housing purposes.
The following fund is debt service funds.
- 43: COPS Debt Services - For the purpose of tracking the payment of interest and principal associated with the 2015 Town Hall Campus Renovation COP and related administrative expenses. This is the only debt the Town currently has outstanding.
Capital Improvement Funds
- 31: Capital Improvement - For the purpose of tracking the funding and cost of capital improvement projects that are not related to improvements to streets (Fund 32), sewer (Fund 82), Verano property (Fund 83), and Creekside Villas property (Fund 83). Fund 31 also reserves as the general Capital Reserve fund. This is categorized as a major fund in the audited financial statements.
- 32: Street Capital - For the purpose of tracking the funding and cost of Street Capital Improvement Projects. This fund includes grant reimbursements revenues to offset eligible street and roadway constructions.
Internal Service Fund
- 61: Vehicle/Fleet Replacement - For the purpose of accumulated funds over time to provide for the replacement of the Town fleet used by Police, Public Works, Recreation and Administration. Annual charges based on the usable life and cost of vehicles and the public works fleet are recorded as expenses within the operating departments. The future replacement of these vehicles and the fleet is financed from reserves accumulated in this fund. The Fleet Replacement Fund is reported as a enterprise fund.
Enterprise Fund includes two sewer funds and one for city properties. For budgeting purposes, these funds are budgeted on modified accrual basis. For audited financial report purpose, these funds are reported in full accrual basis.
- 81: Sewer Operating - For the purpose of tracking the operating and maintenance cost of the Town’s Sewer System and to streamline quarterly and annual compliance reporting
- 82: Sewer Capital - For the purpose of tracking the funding and cost of Sewer Capital Improvement project, and to establish the sewer system needs of the Town.
- 83: City Properties - For the purpose of tracking the lease and rental of City properties, expenses for the maintenance of City properties, and depreciation.
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