In this morning’s eBlog, we welcome the good news that as San Bernardino holds its FY2017 budget hearing tonight, it will hear of an unexpected budget surplus, creating the option to finance municipal bankruptcy related services—and, lo and behold—compliment the city’s pending plan of debt adjustment.
The Last Full Measure? The San Bernardino City Council is scheduled to review the bankrupt city’s proposed FY2017 budget this evening—as it closes out a year in which revenues exceeded projections, even as spending was less than budgeted—so that, tonight, the Council will consider a motion to move some $2 million of the unexpected surplus into the fund the city has set up to finance municipal bankruptcy related services. The current, adopted budget had been projected to achieve a surplus of $18,608 by the end of the fiscal year; however, that is now projected to grow to a surplus of $12 million—with the savings attributed primarily to the city’s large numbers of vacancies, according to the Finance Department, but also from a number of one-time moves, including a franchise fee of $5 million for the sale of the San Bernardino’s Integrated Waste Management operation, as well as: some $3.2 million in greater sales and use tax revenues than projected; $600,000 in higher utility user’s tax revenues, and $1.2 million in higher than projected transient occupancy tax revenues—with the transient occupancy tax revenue 46 percent higher than the city had projected and some 20 percent over last year, reflecting increased occupancy at nearly all hotels and motels.
Is the End in Sight? The good news on the budget front compliments the city’s Recovery Plan, which, as of mid-May, rests on four key areas of change and improvement by the City, all aimed at improving the fiscal position of the organization: 1) Efficiency improvements – largely regionalizing or contracting for services; 2) Debt and Other Post-Employment Benefits (OPEB) restructuring; 3) New revenue and tax increases / extensions; and 4) Organizational improvements. In the wake of the city’s adoption of its plan of debt adjustment or Recovery Plan, San Bernardino has posted on its municipal bankruptcy site the table below [http://www.ci.san-bernardino.ca.us/home_nav/chapter_9_bankruptcy/default.asp], which provides a summary of where the City currently stands with respect to the major elements of the Plan. This Table is based on Table 1 – Cost Savings and Revenue Enhancement Actions and Estimates (General Fund) in the May 2015 Recovery Plan. The table shows for each opportunity area the estimated economic benefit, a summary of actions taken towards implementation and the currently anticipated economic benefit either realized or planned. Of note is that implementation is complete or underway on all actions targeted for 2015. In addition, implementation of several elements targeted for 2016 are already underway.
|Cost Savings and Revenue Opportunities||Estimated Ongoing (Annual) Savings unless otherwise noted||Status|
|Regionalize or Contract fire and EMS services||$7,000,000 – 10,000,000||Implementing – Council voted to annex into San Bernardino County Fire District. Local Agency Formation Commission (LAFCO) assessed and approved annexation, subject to conditions of approval, which included an annual parcel tax of $148.32, and protest hearing/votes. Less than 5% of landowners and registered voters submitted protest votes, moving the annexation forward to the implementation stage. Based on LAFCO and City estimates net economic benefit to the City ranges from $7.4 to $12.0 million annually of which approximately $7.4 million is expected to come from landowners new parcel tax contribution. The higher savings estimate includes resumption of payments for facilities maintenance, equipment replacement and overhead support eliminated from City budget.|
|Contract business license administration||$650,000 to $900,000||Pending – Organizational analysis recommending moving function to Finance completed. RFP in development. Will be complete in 2016.|
|Contract fleet maintenance||$400,000||Pending – 2016|
|Contract soccer complex management and maintenance||$240,000 to $320,000||Completed. The City has contracted for the operation of the complex by a private vendor effective October 1, 2015. Annual savings are estimated at $300,000. Private vendor has begun a $1M renovation and established a new National Premiere Soccer League team.|
|Contract custodial maintenance||$150,000||Pending – 2016|
|Contract graffiti abatement||$132,600||Pending – 2016|
|Implement other efficiency improvements||$1,000,000 or more||Completed. Right of way maintenance and street-sweeping are being implemented with solid waste contracting.|
|Health care savings (retirees)||Up to $60 million in total savings||Completed. Actuarial report is being finalized.|
|General Secured Bond Obligations||$487,450||Implementing – Agreement has been reached. Documentation is underway.|
|General Unsecured Bond Obligations – Pension Obligation Bonds||Up to all but 1% of obligation or approximately $95 million||Implementing – City has reached agreement with creditor. Obligation reduced from $95.8 million to $50.7 million. Annual payments reduced from $3.3 to $4.7M per year to $1.0 to $2.5M per year|
|Restructuring of other creditor obligations||Up to $4,300,000 in total savings||Pending – Tentative agreement reached with holder of $527,490 lease purchase obligation|
|New Fee Revenue and Tax Adjustments|
|Seek reauthorization of the Measure Z sales tax in 2021 (requires voter approval)||$8,300,000||Pending – 2021. Police resources plan for rebuilding police capacity and improving public safety adopted by City Council|
|Perform a transient occupancy tax (TOT) audit||$200,000||Pending – 2016|
|Collect new waste management franchise fee (once service has been contracted)||$5,000,000||Completed. Council approved a contract with Burrtec. Service began April 1, 2016. Paid a $5M one-time fee plus will increase annual franchise payment to $5M from $2.2M. Sale of equipment nets City $12M.|
|Increase waste management franchise fee||$2,800,000||Completed. Will increase annual franchise payment to $5M from $2.2M.|
|Implement water/sewer utilities franchise fee||$1,050,000||Completed. New agreement adopted by City and Water Department.|
|Update master fees and charges schedule||$200,000||Pending – 2016|
|Implement program for collecting street sweeping parking violations||$200,000||Pending. Will be done in conjunction with move to private vendor – 2016|
|Implement compensation adjustments for all City employees||$400,000 and growing (2% adjustment for non-safety employees)||Completed. Agreements have been reached with all employee bargaining groups.|
|Provide resources to Charter Task Force and schedule election to consider revised Charter||$150,000 (one time cost)||Pending. A new draft charter is under development and has been reviewed at public meetings. Charter Committee to provide recommendations to Council in May and anticipate November 2016 election. Costs have been less than estimated|
|Organizational Improvements||Ongoing Costs||Implementation Schedule|
|Implement strategic planning initiatives||$1,000,000 to $3,000,000 depending on timing and ability to fund||Pending. Have completed Police Five Year Resources Plan which calls for additional investment of from $6.7M to $13.3M in annual funding over next five years starting in July 2016. Current model can only fund a portion of total needed|
|Rebuild corporate support functions||$100,000 with a one-time cost of $500,000||Pending. Organizational reviews in process and have preliminary observations and recommendations for Finance, Human Resources and Information Technology|
The third amended Disclosure Statement, Plan for the Adjustment of Debts and revised/new exhibits were filed with the bankruptcy court on May 27, 2016.