CI TY OF LOS ANGELES Presented by Miguel A. Santana, City - - PowerPoint PPT Presentation

CI TY OF LOS ANGELES

Presented by Miguel A. Santana, City Administrative Officer February 26, 2014

This Investor Presentation is provided as of February 26, 2014 as part of the Los Angeles 2nd Regional Investor Conference 2014

• rganized by the City of Los Angeles (“City”) with respect to the City of Los Angeles. If you are viewing this presentation after

February 26, 2014, there may have been events that occurred subsequent to such date that may have a material adverse effect on the financial information that is presented herein, and the City has not undertaken any obligation to update this Investor Presentation. All financial data and other information provided herein are not guaranteed as to completeness or accuracy and are subject to change without notice. This Investor Presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or

• ther financial instrument, or to adopt any investment strategy. Any offer or solicitation with respect to the purchase or sale of any

security will be made solely by means of an Official Statement, which describes the actual terms of such securities. This Investor Presentation is not an Official Statement. In no event shall the City be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction mentioned herein. The City makes no representations as to the legal, tax, credit or accounting treatment of any transaction mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You should consult with your own advisors as to such matters and the consequences of the purchase and ownership of any security. Nothing in this Investor Presentation constitutes a commitment by the City. This Investor Presentation contains certain forward-looking statements. The achievement of certain results or other expectations contained in any forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Although the City believes that such expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The City is not obligated and has not undertaken any obligation to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur.

1

Disclaimer

Credit Ratings

• Standard & Poor’s Credit Review of the City of Los Angeles affirmed its AA- (Stable) rating for

General Obligation Bonds

• Current Ratings - Stable (Moody’s/S&P/Fitch)
• GOs: Aa2/AA-/AA-
• MICLA LRBs:
• Real Property: A2/A+/A+
• Equipment: A3/A+/A+

Credit Ratings Affirmed

Source: City of Los Angeles, Office of the City Administrative Officer

2

Current 2013-14 Financial Status

Source: City of Los Angeles, Office of the City Administrative Officer

3

Fiscal Year 2013-14 Budget Component Amount ($ Millions) Authorized Positions City Budget $7,686 31,880 General Fund $4,867 Special Funds $2,819 Proprietary Department Budgets Airports $4,383 3,566 Harbor $1,071 994 Water and Power $7,200 9,986 Grants and Other Non-Budgeted $1,337 Total City Government $20,586 46,426

• Actual General Fund revenues in 2012-13 exceeded 2012-13 Budget by $116.7 million
• 2012-13 revenues have returned to pre-recession levels
• 4.8%

0.8% 1.9% 7.0% 3.3% 1.5 2.0 2.5 3.0 3.5 4.0

• 10%
• 5%

0% 5% 10% 15% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 $ Billions % Change from Year Ago Fiscal Year Ending

Seven General Fund Taxes

% change -- Left Scale 7 General Fund Taxes ($Billions) -- Right Scale Pre-recession Level

Property (includes VLF and ex-CRA receipts), Utility, Business, Sales, Hotel, Documentary and Parking Taxes Estimates Actuals

Major General Fund Revenues have Stabilized and are Diversified

7 Major General Fund Revenues, 72.0% Licenses, Permits, Fees and Fines, 17.0% Power Revenue Transfer, 5.0% Parking Fines, 3.0% Miscellaneous Revenue, 2.0% Transfers from Special Fund, 1.0%

Sources of General Fund Revenue for Fiscal Year 2013-14

4

Source: City of Los Angeles, Office of the City Administrative Officer

Record High Reserve Balances

In 2013-14, the Reserve Fund exceeded the City’s policy goal of 5% of General Fund revenues

5

Source: City of Los Angeles, Office of the City Administrative Officer

$113 $145 $159 $179 $114 $166 $152 $171 $201 $233 $327

0% 1% 2% 3% 4% 5% 6% 7% 50 100 150 200 250 300 350 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $Millions Fiscal Year

Reserve Fund Balances – Actual Balances ($ in millions)

Reserve Fund Balance Available, July 1st July 1 Balance as % of the General Fund

$785.4 $707.9 $597.9 $483.5 $437.2 $520.1 $571.7 $722.6*

0% 5% 10% 15% 20% 25% 100 200 300 400 500 600 700 800 900 2006 2007 2008 2009 2010 2011 2012 2013 $Millions Fiscal Year

GASB 54 General Fund Balance ($ in millions)

Unassigned - Reserve Fund Unassigned - Other Assigned Non-spendable Total Fund Balance as % of GF Revenues Reserve Fund as % of GF Revenues

GASB 54 Reserve Balances

The City has restated prior year fund balances to conform with GASB 54

• First implemented in

fiscal year 2011 CAFR

• For the third year in a row, Reserve balances based on GASB 54 have increased

in dollars and as a percentage of revenues

6

Source: City of Los Angeles, Office of the City Administrative Officer *Preliminary , subject to change

(14%)

Civilian workforce has been maintained near its lowest point in more than three decades

13,758 14,244 13,706 21,701 22,929 18,187 35,459 35,879 35,974 35,415 36,156 36,667 37,173 36,971 35,864 32,965 32,274 31,816 31,893

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fiscal Year

Authorized City Staffing

(Not Including Proprietary Departments) Police (Sworn and Civilian) Others

• Total staffing is currently 5,280 positions (14%) lower than its peak in 2007-08
• 2013-14 Adopted Budget maintains 2012-13 staffing levels for both sworn and

civilian employees

Authorized City Staffing

7

Source: City of Los Angeles, Office of the City Administrative Officer

Labor Relations

8

Source: City of Los Angeles, Office of the City Administrative Officer

City has taken significant actions to reduce its personnel- related expenditure pressures

• LACERS Tier 2 - Effective July 1, 2013
• Defined benefit plan
• Member contribution rate variable based on actuarial reports
• Retirement factor reduced from 2.16% per year to 2.0% per year
• Normal retirement age increased to 65
• Final average salary based on 36 months rather than 12 months
• Retiree health subsidy excludes dependents
• LAFPP Tier 6 - Effective July 1, 2011
• Defined benefit plan
• Member contribution rate increased to 11%, including 2% for retiree health
• Retirement factor reduced to require longer service
• Final average salary based on 24 months rather than 12 months

0% 25% 50% 75% 100% 2008-09 2009-10 2010-11 2011-12 2012-13

Other Post-Employment Benefits Funded Ratio

Fire and Police Pension Plan L.A. City Employees' Retirement System Los Angeles Department of Water and Power

Pension and OPEB Funded Ratios

0% 25% 50% 75% 100% 2008-09 2009-10 2010-11 2011-12 2012-13

Pension Systems’ Funded Ratio

Fire and Police Pension Plan L.A. City Employees' Retirement System Los Angeles Department of Water and Power 9

• City fully funds both

pension and OPEB Annual Required Contributions

• Funding for OPEB

began in 1989-90

• Pension Systems’

2012-13 Funded Ratios: 69% to 83%

• OPEB 2012-13

Funded Ratios: 39% to 72%

Source: City of Los Angeles, Office of the City Administrative Officer; Los Angeles Department of Water and Power

Pension Contributions

411 382 424 468 486 537 617 670 745 789 342 367 403 444 469 506 576 643 683 721 948 999 1,094 1,213 1,275 848 943 1,046 1,127 1,190

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 2012 - 2013 2013 - 2014 2014 - 2015 2015 - 2016 2016 - 2017

Estimated Future City Contributions to Pensions ($ in millions)

LACERS Pre-Pension Reform Forecast FPPS Pre-Pension Reform Forecast LACERS Current Forecast (7/1/13) FPPS Current Forecast (7/1/13) 10 LA City Employees’ Retirement Fund (LACERS) Fire and Police Pension Fund (FPPS)

Source: City of Los Angeles, Office of the City Administrative Officer

• Pension reform has

lowered pension and OPEB liabilities from prior forecasts

• Increased employee

contribution towards retirement health benefits from 0% to 2% (sworn) and 4% (civilian)

Illustrations of Pension and OPEB Contribution Rates (Assuming Contributions Made on 7/15) 2013-14 2014-15 2015-16 2016-17 2017-18 LA City Employees’ Retirement Fund 25.33% 26.56% 28.57% 29.65% 28.73% Fire and Police Pension Fund 44.40% 47.94% 50.17% 52.27% 51.35%

Source: Segal Consulting, January 2014, as commissioned by the City Administrative Officer (assumed market return of 7.75%)

Multi-Year Budget Outlook

Four-year 2013-14 General Fund Budget Outlook

$4,879 $5,014 $5,156 $5,285 $4,550 $4,867 $5,120 $5,216 $5,341 $5,368

4,400 4,500 4,600 4,700 4,800 4,900 5,000 5,100 5,200 5,300 5,400 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 $Millions Fiscal Year

Four Year Budget Outlook 2013-14 to 2017-18

Revenues Expenditures

($242) ($201) ($184) ($83)

11

Source: City of Los Angeles, Office of the City Administrative Officer

• Retiree Health Subsidy Case (Los Angeles City Attorney

Association v. City)

• Furlough Case (Los Angeles City Attorney Association v.

City)

• Telephone Users’ Tax Case (Ardon v. City)
• Sidewalks Case (Wilits v. City)

Update on Litigation

Resolution of major lawsuits but other large potential liabilities remain

12

Source: City of Los Angeles, Office of the City Administrative Officer

Outstanding Direct Debt as of January 1, 2014

Total: $2.78 Billion

(Voter-Approved in Blue) General Obligation Bonds , 35.7% Landscaping Assessment Bonds, 0.7% Equipment Leases, 11.5% Convention Center, 12.6% Other Real Property Leases, 37.6% Judgment Obligation Bonds, 1.8%

Disciplined, Policy-Driven Debt Management

Debt Issuance Calendar* Estimated Amount* Estimated Date* Municipal Improvement Corporation of Los Angeles Lease Revenue Bonds (New Money and Refunding) $91 Million March 2014 Landscape and Lighting District 96-1 Assessment Refunding Bonds $18 Million May 2014 TRANs 2014 $1.4 Billion June 2014 General Obligation Bonds 2014A $60.5 Million August 2014 General Obligation Refunding Bonds 2014B $50 Million August 2014

*Subject to change

• By policy, debt

service is limited to 15% of revenues for all direct debt and 6% for non-voted debt

• Over a third of the

City’s direct debt is supported by property and special tax receipts

• 68% of the City’s net

direct debt will be retired over the next ten years

13

Source: City of Los Angeles, Office of the City Administrative Officer

Investor Relations

The City Administrative Officer’s investor relations website is a centralized source of information

Aggregates useful materials for ease of access, including links to:

• Financial disclosures (CAFR, Appendix A)
• Financial policies
• Various presentations (including investor and credit presentations)
• Continuing Disclosure documents; CUSIP numbers for use on EMMA
• Adopted budget, budget memo and current/completed budget deliberations
• Financial Status Reports
• Upcoming issuance calendar
• Rating summary and relevant recent rating reports
• Remainder of CAO’s website for additional information

Source: City of Los Angeles, Office of the City Administrative Officer

14

• The City’s Adopted Budget is based on conservative revenue assumptions
• The City addressed budget gaps primarily through ongoing solutions
• The City has implemented pension reform
• The 2013-14 Adopted Budget provides flexibility for uncertainties
• Reserve balances of over $400 million (8.2% of general fund revenues)
• Solve problems each quarter

Challenges

• Projected future gaps
• Pension and OPEB cost mitigation
• Focus on service restoration needs to be balanced with resources
• External factors’ (i.e. federal government) impact on economy

Strengths and Challenges

Strengths

15

Source: City of Los Angeles, Office of the City Administrative Officer