County of San Mateo, CA Budget Analysis

Transcription

1 County of San Mateo, CA Budget Analysis Assessment of Budget Data FY 2005/05-FY 2008/09 By: Jacob Lile

2 Introduction This paper will examine the fiscal policy of San Mateo County using budget information gathered by the analyst. Specifically this paper will analyze trends in budget formation and execution between FY 2005 and FY 2010, a critique of the proposed FY 2011 will also be included. The analyst will make recommendations for further action based on the analysis provided in this document. All information for this paper was gathered from the San Mateo County Budget Central Website and may be viewed here: 2a0/?vgnextoid=5ef59d3ed51b8210VgnVCM aRCRD&vgnextchannel=3ef59d3e d51b8210vgnvcm a &vgnextfmt=divisionslanding History and Background Located just south of San Francisco, and north of San Jose, San Mateo County is known for its moderate climate, breathtaking views of the Pacific Ocean and San Francisco Bay and has generally enjoyed a robust economy. San Mateo County was established in 1856 when it separated from San Francisco County. Its original economy was based on logging, meat packing, ship building and salt production. After the end of the Second World War the county s population doubled in the space of 10 years and new cities were incorporated to handle the influx of residents. As this occurred, electronics emerged as a leading component of the local economy with stockyards and steel mills being replaced with light manufacturing plants and industrial parks. With ample jobs and enjoyable weather the population continued to grow.

3 During the 1980 s and 1990 s San Mateo County gave birth to some of the leading innovations in biotechnology and computer software innovations claiming a rightful stake in what is known as silicon valley. San Mateo is home to Genentech, Oracle, Sun Microsystems and EA Games just to name a few. San Mateo County also boasts the second largest airport in California which opened a $1 billion international terminal in the year 2000 to promote international commerce with Pacific Rim countries. The current population is about 718,000; one third of whom are foreign born. Eighty five point three percent of adults over 25 have graduated high school; 39 percent hold a bachelor s degree. Median household income in 2008 was $84,879. The current median home price is $570,000 (down 7.36 percent from 2010). Sixty one point four percent of homes are owner occupied. The county is governed by a Board of Supervisors, directly elected by the public. Reporting to the Board is the County Manager, David Borsch. Mr. Borsch supervises the three Deputy County Managers who each supervise County Department Heads (see Figure 1 of the San Mateo County organizational chart). The mission of the County, as stated on their website is: San Mateo County government protects and enhances the health, safety, welfare, and natural resources of the community; and provides quality services that benefit and enrich the lives of the people of this community. We are committed to: The highest standards of public service; A common vision of responsiveness; The highest standards of ethical conduct; Treating people with respect and dignity.

4 Budget Process In recent years, San Mateo County has moved toward an outcomes-bases budgeting format. It is predicated on a document written in 2001 called Shared Vision In this document San Mateo County outlined its goals and priorities and grouped them into five broad categories; Healthy Community, Prosperous Community, Livable Community, Environmentally Conscious Community, and Collaborative Community. Each department must align themselves with one of these categories. For example, the Department of Public Health would fall under Healthy Community; Transportation and Road Maintenance would fall under Livable Community. The fiscal year begins July 1 st, however the budget process starts much sooner. In December the County Supervisors hold structural budget deficit workshops, a practice they have done since By late January a mid-year financial status report is issued to the Board and budget instructions are sent to department heads. Departments submit their program plans to the County Manager s Office in and soon after meet with the County Manager in February. It is important to note that Departments are not submitting a budget at this time. Rather, they are submitting a proposal of what they intend to do in the upcoming year. In San Mateo County the emphasis is not one what your plant to spend, but what impact you intend to make. Finalized budget packets are submitted in April with a final budget meeting scheduled later that month. A recommended budget is prepared and submitted to the Board of Supervisors in late May.

5 This budget is made available to the citizenry and deliberations are held in June. After public comment, the budget is adopted by July first. In September, after the State budget is approved, revisions may be made. Throughout the year the budget is monitored on a continuous basis. See Figure 2 for the San Mateo County budget process displayed graphically. Expenditure As evidenced from the budget, San Mateo County s priorities are in the areas of public protection, public assistance, and health (see Figure 3). Spending increased steadily from FY 2004/05 to FY 2007/08 and though it dipped slightly in 2008/09, but did not drop below 2006/07 levels (see Figure 4). Per capita expenditures are in step with countywide expenditures, increasing with a slight decrease in 2008/09 (see Figures five and six). San Mateo County prepares an outcomes based program budget; therefore there is no aggregate data on personnel spending. However, the current number of County employees is shrinking due to a hiring freeze instituted in 2007 (see figures seven and eight taken from the Recommended 2010/11 Budget). Revenue San Mateo County relies heavily on support from the State of California, the second largest revenue steam is through property taxes, followed by charges for service (see Figure nine). It is interesting to note that though the State of California, San Mateo County included, has seen a high number of foreclosures resulting in vacant homes and reduced property taxes. However, the amount of property tax has increased steadily during this five year reporting period.

6 Capital Budgeting and Debt San Mateo County is currently paying on debts accrued in several capital projects. The Coyote Point Marina Project borrowed $2.25 Million in 1979 for the construction of a marina in this County owned and operated park. The Breakwater Project was started in 2000 with $1.2 Million. More recently (2007) the County borrowed $4 Million in for the construction of Hangars at the San Carlos and Halfmoon Bay airports. Two of the County s projects have been completely paid off; the 2004 Lease Revenue Bonds and the Energy Efficiency Project. These were paid off in 2008 (see Figure 10). The current county debt stands at $45,910,785. This is down from $115,843,362 in FY 2004/05. Per capita debt has dropped from $ to $63.85 (see Figures 11 and 12). San Mateo County has a firm debt policy. In 1997, the County Board of Supervisors adopted the Debt Limit Ordinance. This states that the debt limit is applicable only to non-voter approved debt that is the obligation of the County. This includes lease revenue. It does not include any voter approved debt or any debts of agencies, whether governed by the Board of Supervisors or not. The Debt Limit Ordinance provides that the annual debt limit shall not exceed the amount of debt which can be serviced by an amount not to exceed four percent (4%) of the average annual County budget for the current and the preceding four fiscal years. The annual debt limit, once established, may be exceeded only by a four-fifths vote of the Board of Supervisors

7 and upon a finding that such action is necessary and in the best interests of the County and its citizens. Reserve Policy The Board of Supervisors approved the County Reserves Policy in April 1999 and revised it on Tuesday, February 9, 2010 to align the policy with the current fiscal environment. The policy states that the County will avoid operating deficits that are created through dependency on one-time funding for ongoing expenditures. Funds will only be borrowed for capital expenses or one-time projects. The policy also establishes minimum requirements for Departmental Reserves, General Fund Appropriation for Contingencies, Reserves for Countywide Capital Improvements and Reserves for Countywide Automation Projects. It also provides guidelines for the use of these funds. The policy states that departments shall maintain reserves at a minimum of two percent of net appropriations. Any department must obtain approval from the County Manager s Office prior to using their reserve to a point which puts them in the position of falling below the two percent requirement. Approval of funding reserves below the two percent requirement would be contingent upon review and approval of a multi-year financial plan that details how the department intends to replenish their reserves to the two percent level within three years

8 GFOA Evaluation In FY 2009, the last time that the Government Finance Officer s Association (GFOA) reviewed county budgets, San Mateo County was granted this prestigious award. (see Figure 13). The GFOA is a professional association of state and local finance officers in the United States and Canada. The GFOA helps to set the standard of excellence in public finance by reviewing public budgets and issuing awards. Based on this analyst s evaluating of the recommended FY 2010/11 San Mateo County budget using the GFOA scoring guide the County receives an overall rating of proficient. The budget was relatively easy to access for the everyday citizen and all information was provided through links on a single webpage. However, thorough analysis required visiting and revisiting multiple locations. Completion of the GFOA scoring sheet took over six hours, proving it to be a rigorous scoring device. See Attachment 1 for the scoring sheet. General descriptions in the budget were fairly easy to understand and there were clear expression of goals and intended outcomes. What was unclear was whether there were anticipated costs and or savings associated with any capital improvement projects. Discussion and Recommendations San Mateo County is faced with some tough decisions. The last three county budgets have only been balanced by spending a combined $248 million in reserves. The current budget gap is $82 million and is expected to grow to grow to $106 million my FY 2014/15 without intervention.

9 Additionally their Investment Pool sustained a loss of $155 million during FY due to the Lehman Brothers bankruptcy. Analysis of staffing showed San Mateo County to have a higher ratio of managers to employees than other Bay area counties. There are 5.6 employees for every manager in San Mateo County, as opposed to 9.6 employees for each manager in Santa Clara County, or 8.8 to each manager in Contra Costa County. Therefore it is recommended to maintain the hiring freeze until 2015 and reduce the current management staff. San Mateo County s pension system, SamCERA, is currently underfunded by $1 billion and the county s contribution per employee will increase from 23% of compensation in 2011 to 41.7% in It is recommended that the County increase the retirement age to 60 (currently at 55 or after 20 years of service) and require employees to contribute more. A 2010 Grand Jury report indicated that the County Vehicle Fleet had one car for every six employees. It is recommended that San Mateo County reduce the size of the fleet and lease some vehicles to smaller cities for a fee.

10 Appendix: Tables, Charts and Graphs Figure 1: San Mateo County Organizational Chart (borrowed from the Recommended FY 2010/11 Budget)

11 Figure 2: San Mateo County Budget Process (borrowed from the Recommended FY 2010/11 Budget)

12 Expenditure Expenditure Figure 4: Trend Analysis of County Expenditure: 1,000,000, ,000, ,000, ,000, ,000,000 San Mateo County Expenditure Trend 500,000, ,000, ,000, ,000, ,000, / / / / /09 Series1 719,411, ,072, ,651, ,777, ,662,606 Figure 5: Trend Analysis of Per Capita Expenditure San Mateo County Per Capita Expenditure Trend / / / / /09 Series

13 Figure 6: Per Capita Spending San Mateo County Expenditure Per Capita 2004/ / / / /09 Population 692, , , , ,989 Expenditure 719,411, ,072, ,651, ,777, ,662,606 Expenditure per Capita Figure 7: Change in Authorized Positions: All Departments (borrowed from the Recommended FY 2010/11 Budget)

14 Figure 8: Personnel Costs as a Percentage of Department Budget: All Departments (borrowed from the Recommended FY 2010/11 Budget)

15 Debt Figure 10: Capital Debt Payment Schedule Long-Term Debt 2004/ / / / /09 State Construction Loans Coyote Point Marina ($2,250,000) 465, , , , ,233 Breakwater Project ($1,200,00) 764, , , , ,689 Construction of Hangars 4,000,000 3,811,581 (4,000,000) Water Resources Program 134, , ,987 84,810 67,048 ($409,992) Other Long-Term Debt Energy Efficiency Project 99,396 72,618 44,573 15, Lease Revenue Bonds 7,430,000 7,000,000 4,730,000 2,390,000 0 Compensated Absences 92,610,548 30,675,721 30,827,698 32,139,588 33,392,216 Compensated Absences 14,329,701 6,632,250 7,068,502 7,369,143 7,773,108 (Enterprise) Total Expenditure 115,834,362 45,743,762 43,784,044 46,939,436 45,910,875 Figure 11: Debt Per Capita San Mateo County Debt Per Capita 2004/ / / / /09 Population 692, , , , ,989 Total Debt 115,834,362 45,743,762 43,784,044 46,939,436 45,910,875 Debt per Capita Figure 12: San Mateo County Debt Trend Analysis San Mateo County Debt Trend Analysis 140,000, ,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000, / / / / /09 Series1 115,834,362 45,743,762 43,784,044 46,939,436 45,910,875

16 Figure 13: GFOA Award 2009

17 Attachment 1: GFOA Scoring Sheet