75A - PH 2013-2015_BUDGET_SUMMARY

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Fragile Two -year Budget The forecast places the City's budget position as fragile at best. Bad decisions can impact the City's current balanced position and may aggravate the City's budget position upon conclusion of the two year budget cycle. With a national economy that at times appears to be growing, as reflected by an improved housing market and gains in employment, the economy could easily hit a bump in the road such as the 0.2 percent reduction in consumer spending (April 2013) which is the lowest rating since May of 2012. This has resulted in some economists reducing their growth forecasts and the Federal Chairman paying close attention in case it needs to respond to a slowing economy. At the local level Chapman University projects only a 2.1 percent growth in the gross domestic product for calendar year 2013. Although Orange County housing is starting to show some strength with home values expected to rise 6.8 percent, home values are still well below pre - recessionary levels. Overall, there is still expressed concern over the budget and fiscal policy coming out of Sacramento, Washington, and especially the continued slow growth in Europe and a potential severe downturn in China. As such, the forecast for the City assumes moderate revenue growth. It captures the realities of a CALPERS system that also experienced tremendous losses in its portfolio that will result in increases to the City's retirement cost of almost $7.8 million or over 50% in the next three years. These factors are captured in the recommended budget. In addition, rates are projected to increase by at least 100% by fiscal year 2019 -20. The proposed Citywide budget for fiscal year 2013 -14 is $428,431,328 and $390,913,585 for fiscal year 2014 -15 and incorporates all funded appropriations related to the General Fund, Internal Service, Enterprise, Special, Capital Improvement Program and Community Development Funds. When compared to the prior year, the Citywide budget has increased approximately 4.5% (or $18.5M), primarily due to the increased Capital Improvement Program funding and higher General Fund spending tied to the end of the negotiated deferrals and costs associated with updating the general plan and zoning ordinance. The General Fund budget supports those functions most commonly associated with city government: police, fire, recreation, library, planning and building, street maintenance, and general city administration. The City has grown tremendously over the last 20 years along with the services required. According to the State Department of Finance, Santa Ana's population in January 2013 was 329,915 which is over a 50 percent increase over the past 20+ years. For fiscal year 2013 -14, the General Fund budget is $205.71M and $204.5 for fiscal year 2014 -15. Public safety continues to receive the highest allocation making up over 70% (or $144M when excluding debt service) of the 2013 -14 General Fund budget. The General Fund's six largest tax revenues make up over 71 percent of the overall revenue sources (the equivalent of $146.31M), Those tax revenue sources are Sales Tax (19.8 %), Property Tax (17.8 %), Property Tax in Lieu of Motor Vehicle Fees (12.6 %), Utility Users Tax (11.7 %), Business Tax (5.3 %) and Hotel Visitors Tax (3.8 %). As previously indicated one of the budget assumptions included in the budget model is for the departments to reorganize structure based on what the City can afford which included eliminating the backlog of funded and unfunded vacancies. As a result the proposed budget decreases the full -time employee count by an additional 155 positions for a total workforce allocation of 1049. This brings