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Home My WebLink AboutFinance Committee Agenda - May 11, 2017CITY OF NEWPORT BEACH FINANCE COMMITTEE AGENDA - Final 100 Civic Center Drive - Crystal Cove Conference Room, Bay 2D Thursday, May 11, 2017 - 3:00 PM Finance Committee Members: Diane Dixon, Chair / Council Member Kevin Muldoon, Mayor Will O'Neill, Council Member William Collopy, Committee Member Patti Gorczyca, Committee Member Joe Stapleton, Committee Member Larry Tucker, Committee Member Staff Members: Dave Kiff, City Manager Carol Jacobs, Assistant City Manager Dan Matusiewicz, Finance Director / Treasurer Steve Montano, Deputy Director, Finance Marlene Burns, Administrative Specialist to the Finance Director The Finance Committee meeting is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the Finance Committee agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be allowed to comment on agenda items before the Committee and items not on the agenda but are within the subject matter jurisdiction of the Finance Committee. The Chair may limit public comments to a reasonable amount of time, generally three (3) minutes per person. The City of Newport Beach’s goal is to comply with the Americans with Disabilities Act (ADA) in all respects. If, as an attendee or a participant at this meeting, you will need special assistance beyond what is normally provided, we will attempt to accommodate you in every reasonable manner. Please contact Dan Matusiewicz, Finance Director, at least forty-eight (48) hours prior to the meeting to inform us of your particular needs and to determine if accommodation is feasible at (949) 644-3123 or dmatusiewicz@newportbeachca.gov. NOTICE REGARDING PRESENTATIONS REQUIRING USE OF CITY EQUIPMENT Any presentation requiring the use of the City of Newport Beach’s equipment must be submitted to the Finance Department 24 hours prior to the scheduled meeting. I.CALL MEETING TO ORDER II.ROLL CALL III.PUBLIC COMMENTS Public comments are invited on agenda and non-agenda items generally considered to be within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for the record. The Finance Committee has the discretion to extend or shorten the speakers’ time limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all speakers. As a courtesy, please turn cell phones off or set them in the silent mode. IV.CONSENT CALENDAR May 11, 2017 Page 2 Finance Committee Meeting MINUTES OF APRIL 27, 2017A. Recommended Action: Approve and file. 4.0 DRAFT MINUTES 042717 V.CURRENT BUSINESS REVIEW OF FISCAL YEAR 2017-2018 PROPOSED BUDGETA. Summary: Staff will provide a broad overview of previous discussions concerning Proposed Fiscal Year 2017-2018 Operating Budget and Capital Budget and be prepared to answer Committee questions. Recommended Action: Review, comment on, and offer any suggestions about City Manager proposed 2017-2018 Operating and Capital Budget. Consider and discuss the Committee’s recommendations about the City Manager’s proposed budget to City Council. STAFF REPORT PENSION DISCUSSIONB. Summary: Agenda item reserved for any discussion regarding the status of the City's pension liability and/or the proposed budgetary pension funding approach. Recommended Action: No issues are pending, but questions and comments welcomed. ATTACHMENT UPDATE ON LONG-TERM FINANCIAL FORECASTC. Summary: Staff will review with the Committee an updated high-level long-term financial forecast including future assumptions and other key elements of the City’s finances. Recommended Action: Review and comment. May 11, 2017 Page 3 Finance Committee Meeting REVIEW OF FINANCE COMMITTEE WORK PLAND. Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Recommended Action: Review and comment. VI.FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) VII.ADJOURNMENT Finance Committee Meeting Minutes April 27, 2017 Page 1 of 8 CITY OF NEWPORT BEACH FINANCE COMMITTEE APRIL 27, 2017 MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:00 p.m. in the Crystal Cove Conference Room, Bay 2D, 100 Civic Center Drive, Newport Beach, California 92660. II. ROLL CALL PRESENT: Council Member Diane Dixon (Chair), Mayor Kevin Muldoon, Committee Member William Collopy, Committee Member Patti Gorczyca, Committee Member Joe Stapleton, and Committee Member Larry Tucker ABSENT (EXCUSED): Council Member Will O’Neill STAFF PRESENT: City Manager Dave Kiff, Assistant City Manager Carol Jacobs, Deputy City Manager Rob Houston, Finance Director/Treasurer Dan Matusiewicz, Deputy Finance Director Steve Montano, Budget Manager Susan Giangrande, Purchasing Agent Anthony Nguyen, Public Works/Finance Administrative Manager Jaime Copeland, Fire Chief Chip Duncan, Accounting Manager Rukshana Virany, Budget Analyst, Shannon Espinoza, Fire Administrative Manager Angela Velazquez, Public Works Director Dave Webb, Budget Analyst Tam Ho, Budget Analyst Katherine Warnke-Carpenter, and Administrative Specialist to the Finance Director Marlene Burns OUTSIDE ENTITITES: John Bartel, Bartel Associates LLC (via teleconference), and Jayson Schmitt, Chandler Asset Management MEMBERS OF THE PUBLIC: Jim Mosher III. PUBLIC COMMENTS Jim Mosher asked if the budget detail was available to the public. He stated the Council adopted new contracts for the City Manager, City Attorney and City Clerk. He suggested the public be allowed to review the employee goals and reviews but referenced a School District court case. Council Member Dixon stated the City had had a deferred compensation plan since 1980s. IV. CONSENT CALENDAR A. MINUTES OF APRIL 13, 2017 Recommended Action: Approve and file. Corrections were discussed. MOTION Committee Member Tucker moved and Committee Member Gorczyca seconded a motion to approve the corrected minutes of March 30, 2017. The motion carried unanimously. Finance Committee Meeting Minutes April 27, 2017 Page 2 of 8 V. CURRENT BUSINESS B. PENSION DISCUSSION Summary: Agenda item reserved for any discussion regarding the status of the City's pension liability and/or the proposed budgetary pension funding approach, including a discussion of the potential use of a Section 115 prefunding trust specific to the City’s pension liability management. Recommended Action: Discuss and comment. John Bartel presented a PowerPoint outlining the irrevocable supplemental pension trust. He stated the assets might not reduce GASB 68 net pension liability. Finance Director/Treasurer Matusiewicz further distinguished that, since the funds were placed in a trust, they are neither reported on the City’s balance sheet as net asset nor fund balance since the asset would be offset by a liability. Council Member Dixon asked if those funds were specifically tied to the pension. Mr. Bartel explained that the funds were irrevocable and could only be used to reimburse the City for contributions the City made to CalPERS or sent directly. He stated the objection from GASB was that benefit payments could not be made directly from the trust. Mr. Bartel stated investments would be significantly less restricted than City investments, could mitigate volatility, and would impact costs of CalPERS. He recommended the trust for those worried about volatility, where the contributions rates were headed and wanting to maintain budget flexibility. He did not recommend the trust for clients not worried about contribution volatility or if projected contributions did not create budget issues. He discussed the three providers and stated less than 70 agencies had set up trusts. Committee Member Gorczyca asked which California public agencies had created trusts. Mr. Bartel stated Irvine Ranch Water District was the first agency to set up a trust. He stated he would provide a list of other agencies. Committee Member Tucker asked why a trust was better to put in trust rather than just investing in CalPERS. Mr. Bartel stated the rate at CalPERS was not guaranteed and could be volatile. He stated the trust allowed more flexibility. In response to Mayor Muldoon, Mr. Bartel stated the trust offered more flexibility rather than control. Mayor Muldoon stated the use of funds was not flexible because it had to be used towards CalPERS. Mr. Bartel explained that, once money was given to CalPERS, the City did not have control over investment and future contributions. He stated the City controlled how the money was sent to CalPERS from the trust. Committee Member Tucker stated unfunded liabilities would continue to grow if the money was put in the trust. Mr. Bartel stated the money in the trust could be used to offset the unfunded liability contributions. He provided an example of how and when to send the money to CalPERS. Committee Member Collopy asked why Mr. Bartel anticipated lower earnings in the trust. Mr. Bartel stated he was not an investment advisor, rather an actuary. He stated private investments entities had higher expenses than CalPERS. Finance Director/Treasurer Matusiewicz stated Jayson Schmitt, Chandler Asset Management, was available to address differences in portfolio scale, investment horizon, and cost efficiencies. Finance Committee Meeting Minutes April 27, 2017 Page 3 of 8 Council Member Dixon discussed the 2016 CalPERS return and shift into more environmentally and politically correct investments. Mr. Bartel discussed the bill preventing CalPERS and CalSTRS from investing in certain types of investments. In response to Mayor Muldoon, Mr. Bartel discussed the Irvine Ranch Water District’s trust. Committee Member Tucker stated the money with CalPERS was supposed to be earning 7.5 percent and if it did not you have an experience loss that created another unfunded liability. Mr. Bartel provided an extreme example of paying money to CalPERS versus putting it in a trust. He stated he was not advocating the City start a trust, just explaining the flexibility. Finance Director/Treasurer Matusiewicz stated there were two options: 1) making a payment in excess of required amount which would be credited over 30 years; or 2) requesting the actuary apply the principal directly to the base which would reduce the principal. Mr. Bartel provided an example of the trust funds providing flexibility. Mayor Muldoon stated the trust was less useful for those not worried about contribution volatility. Committee Member Tucker stated he failed to see why it would be better to have the prefunding pension trust rather than paying down the unfunded liability. Committee Member Gorczyca stated she was under the impression that IRWD was looking at the trust in terms of asset management. She observed that the City similarly should look at the trust in the same way. Committee Member Tucker stated the trust would allow broader investments and more flexibility than what governmental agencies are ordinarily allowed to invest in. He stated the trust made more sense for IRWD. Council Member Dixon asked if there was a minimum payment on the unfunded liability. She stated it was necessary to discuss paying more than the minimum amount. City Manager Kiff stated the unfunded liability was accruing interest like any other debt obligation. Committee Member Gorczyca stated the City had been in the position to enter the fresh start and prepay but was starting to get to the point of sacrificing capital projects. She stated the unfunded pension was having a bearing on other budgetary obligations. She suggested exploring options that allow flexibility to accommodate budget changes on an annual basis. She stated money sent to CalPERS was gone, but the trust allowed the City to decide when to put it towards pension obligations. Finance Director/Treasurer Matusiewicz discussed previous efforts to obtain Committee consensus for a longer range portfolio for endowment funds, with a one to ten-year treasury agency bond strategy was perceived by the Committee as being too risky. Finance Director/Treasurer Matusiewicz explained selling assets from the 115 trust to provide to contributions to PERS may require the City to realize investment losses if there were a downturn in equity-based securities that are far more volatile than treasury and agency bonds. Mr. Bartel finished the PowerPoint presentation explaining the example of contribution rate projections. Council Member Dixon asked if the Committee wanted to set up a working group to review the matter and bring back a recommendation to the full Committee. Finance Committee Meeting Minutes April 27, 2017 Page 4 of 8 Mayor Muldoon stated he had basically made up his mind but would like to see actual numbers before finalizing his decision. Mr. Bartel stated he could work with the Finance Department on a Newport Beach specific example. Committee Member Gorczyca discussed the OPEB Section 115 Trust and requested reviewing the numbers again. Mr. Bartel stated he would compare CalPERS OPEB 115 Trust with PARS, PFM or Keenan. Committee Member Tucker discussed the need to determine if the capital funds or 25 percent safety net should be used for the unfunded liability. Committee Member Gorczyca stated the City could decide to what extent and when to use the 115 Trust. Mayor Muldoon discussed IRWD’s use of the Trust. Committee Member Gorczyca stated the tradeoffs needed to be considered. A. REVIEW OF FISCAL YEAR 2017-2018 PROPOSED BUDGET Summary: Staff will provide an overview of the Proposed Fiscal Year 2017-2018 Operating Budget and/or CIP. Recommended Action: Review and comment on City Manager recommendations and Finance Committee’s desired next steps. City Manager Kiff reviewed the budget book and presented a PowerPoint outlining sources and uses. In response to Council Member Dixon, Finance Director/Treasurer Matusiewicz explained the $1 million contribution to the contingency reserve. Deputy Finance Director Montano stated 25 percent of operating expenses needed to be set aside for the contingency reserve. Council Member Dixon requested the percent change over prior years. City Manager Kiff reviewed General Fund Revenue. Council Member Dixon discussed the changes since Fiscal Year 2016-2017. In response to Mayor Muldoon, City Manager Kiff explained anticipated reductions in sale tax revenues. He discussed the Irvine Company’s concerns about malls and shopping centers. He explained online sales tax returns. Finance Director/Treasurer Matusiewicz explained that online sales are either distributed through the County pool while others are distributed to the jurisdiction where the store is located depending on various circumstances. City Manager Kiff reviewed the Fiscal Year 2017-2018 General Fund Proposed Operating Expenditures by function and type. Council Member Dixon requested detail on the uncontrolled expenditures. In response to Committee Member Gorczyca, Finance Director/Treasurer Matusiewicz stated the debt service was not expended in the General Fund and pensions were shown in salaries and benefits. Committee Member Gorczyca requested information on changes to the budget. City Manager Kiff stated the unfunded liability at $276 million. Finance Director/Treasurer Matusiewicz stated the minimum 2016-2017 contribution rate was based on a $276 million UAL but with known experience losses, it is more realistic to assume a UAL of $353 million. He Finance Committee Meeting Minutes April 27, 2017 Page 5 of 8 explained his contribution projections included known losses that are not yet included in the current actuarial valuation. Committee Member Gorczyca discussed the City’s unfunded pension liability in 2007. Finance Director/Treasurer Matusiewicz stated the actuarial accrued liability (AAL) grew at compounded annual growth rate of 7.3 percent per year. Finance Director/Treasurer Matusiewicz explained the phase-in of new amortization bases and proposed 20 year level payment. He stated that a use of a Section 115 trust would increase our minimum contribution rate substantially. City Manager Kiff described the pension payment history. Finance Director/Treasurer Matusiewicz discussed the increase in employee contributions. In response to Council Member Dixon, City Manager Kiff explained payment of the employee’s share of CalPERS. He explained that 14 percent of pay was deducted for PERS payments. In response to Mayor Muldoon, City Manager Kiff discussed the impact of salary increases on pension contributions. In response to Committee Member Collopy, City Manager Kiff stated the budget proposed a 20-year-level pension payment that was already incorporated into the proposed budget. Committee Member Collopy stated the goal would be achieved if the contribution level could be maintained for five years. He stated the point was to not tie the hands of future Councils but the proposal would give a gift to future Council members. He expressed hope that it could be afforded for the next five years. Committee Member Stapleton, Finance Director/Treasurer Matusiewicz stated he could tell CalPERS where to apply the principal reduction to achieve the greatest payment efficiency. Mayor Muldoon left the meeting at this juncture, 4:32 p.m. Committee Member Collopy asked whether settlements on lawsuits and costs for counsel were billed to individual departments. Finance Director/Treasurer Matusiewicz stated each department was charged an annual insurance premium instead. Committee Member Collopy asked if that was sufficient to change behavior. City Manager Kiff discussed claims and the responsibility of the department. Finance Director/Treasurer Matusiewicz stated the claims were reviewed every five years or so to determine the appropriate allocation by department. Committee Member Collopy suggested the Human Resources Department review the matter. Deputy Finance Director Montano provided an overview of reserve status, three-year budget change for pensions, three-year budget change for CIP, and financial detail for the tidelands funds. Finance Director/Treasurer Matusiewicz referenced the annual Tidelands report, provided to the Committee, describes to how the tidelands expenses were allocated and reimbursed. In response to Council Member Council Member Dixon, City Manager Kiff explained that the anticipated Newport Uptown project payment would create a larger fund balance in the FFP earlier than anticipated. Public Works Director Webb described the CIP summaries and project sheets. He explained Appendix C. Finance Committee Meeting Minutes April 27, 2017 Page 6 of 8 In response to Committee Member Collopy, Public Works Director Webb discussed conversations regarding a dredging strategy and difficulties with dredging. Committee Member Stapleton discussed difficulties with not owning equipment and disposition of dredged material. Committee Member Collopy accepted that it was a difficult, but asked if there was an overarching strategy. City Manager Kiff indicated that to be the goal and discussed efforts to work with the Harbor Commission. He anticipated a strategy would be complete in the next eight to ten months. Council Member Dixon discussed the Council’s priority focus on dredging. Committee Member Collopy stated there were four budget line items for dredging but questioned the backup guidance for use of the funds. Public Works Director Webb explained the line items related to dredging. Public Works/Finance Administrative Manager Copeland stated the document compiled all the information into in one place. Council Member Dixon thanked staff for showing the total capital needs in one document. City Manager City Manager Kiff stated the Council would review the CIP plan at a detailed study session. He encouraged the Committee to thoroughly review the budget detail. Committee Member Collopy stated he would inform City Manager Kiff if he wanted a deep dive into any budget categories. Committee Member Tucker stated it was not within the Committee’s purview to recommend how to spend capital dollars. C. UPDATE ON LONG-TERM FINANCIAL FORECAST Summary: Staff will review with the Committee the updates of the high-level long-term financial forecast including future assumptions and other key elements of the City’s finances. Recommended Action: Review and comment. Deputy Finance Director Montano explained the fiscal forecast model. In response to Council Member Dixon, Deputy Finance Director Montano suggested a summary and chart be included in the financial budget document. Committee Member Collopy suggested building a model showing the reserves if the City did not level fund. He requested showing the payment beginning in 2023 if the City did not level fund the pension obligation. Deputy Finance Director Montano suggested the impact of not level funding the pension obligation is already an available scenario built into the model. Committee Member Gorczyca asked how longer-term pension was projected. Finance Director/Treasurer Matusiewicz stated it was not addressed in the model but the pension amortization model considered the risk of future investment returns of 6.5 percent and its impact. Committee Member Gorczyca asked for long-term pension projections along with earning. Finance Director/Treasurer Matusiewicz stated Mr. Bartel had previously provided the Committee with a financial forecast using stochastic investment results. He stated he Finance Committee Meeting Minutes April 27, 2017 Page 7 of 8 personally could not model random market variables, such as annual investment return; therefore, an annual analysis was necessary. Council Member Dixon stated the budget presented worst case scenarios. Committee Member Committee Member Tucker stated he had requested a series of assumed returns, showing a broad spectrum of a various rates of returns. Finance Director/Treasurer Matusiewicz explained that he took a static average rate of return for his forward projections. Committee Member Tucker requested data on a four percent return. Council Member Dixon requested the Committee be provided with the model. Deputy Finance Director Montano stated the model was in Excel but he could create a narrative including growth assumptions, what ifs, and charts. Council Member Dixon discussed the City of Sunnyvale’s 20-year projection. Committee Member Tucker requested something readily understandable be posted on the website. Committee Member Collopy requested the information be completed for the current proposed budget. In response to Committee Member Committee Member Tucker, Finance Director/Treasurer Matusiewicz proposed budget assumed moving to a 20-year level payment plan. City Manager Kiff stated the Council could assume a discount rate of less than seven percent. In response to Committee Member Tucker, Finance Director/Treasurer Matusiewicz stated the City’s current payment was $25 million. Committee Member Tucker requested showing 20 and 30-year payments. Committee Member Collopy requested also showing 25 years. Council Member Dixon suggested showing the minimum mandated payment. Finance Director/Treasurer Matusiewicz referenced Page 17. Council Member Dixon requested showing the minimum and proposed payment. Committee Member Tucker suggested including alternatives to show where the money went and how much was left over. Finance Director/Treasurer Matusiewicz stated that various contribution options were included in the model. Committee Member Tucker requested showing 20, 25 and 30 years. He stated he was inclined to suggest paying it off more quickly. Council Member Dixon anticipated an interesting Council discussion. City Manager Kiff stated it was the City Manager’s proposed budget, with staff’s professional recommendation. Committee Member Tucker stated the pension was the largest annual obligation. Council Member Dixon stated the capital budget was usually where debate ensued. Committee Member Gorczyca requested information on where pension payments came from. Finance Committee Meeting Minutes April 27, 2017 Page 8 of 8 City Manager Kiff stated residents had not yet seen a reduction in service. Council Member Dixon stated the City had been tightening its belt and not increasing head counts. D. REVIEW OF FINANCE COMMITTEE WORK PLAN Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Recommended Action: Review and comment. In response to Committee Member Tucker, City Manager Kiff stated the budget would be presented to the Council on June 13, 2017. Committee Member Tucker suggested the Committee finalize its recommendation on June 8, 2017. Assistant City Manager Jacobs stated the water rate study was time sensitive. Committee Member Stapleton and Committee Member Collopy indicated they were unavailable on June 8, 2017. Council Member Dixon discussed the upcoming agenda items for Committee consideration. Council Member Dixon suggested Jayson Schmitt, Chandler Asset Management, be invited back to provide input on June 29, 2017. VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) Deputy Finance Director Montano commended the Budget staff. VII. ADJOURNMENT The Finance Committee adjourned at 5:35 p.m. to the next regular meeting of the Finance Committee on May 11, 2017. Filed with these minutes are copies of all materials distributed at the meeting. The agenda for the Regular Meeting was posted on April 24, 2017, at 2:47 p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic Center Drive. Attest: ___________________________________ _____________________ Diane Dixon, Chair Date Finance Committee Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 1 of 9 CITY OF NEWPORT BEACH FINANCE COMMITTEE APRIL 27, 2017 MEETING MINUTES I.CALL MEETING TO ORDER The meeting was called to order at 3:00 p.m. in the Crystal Cove Conference Room, Bay 2D, 100Civic Center Drive, Newport Beach, California 92660. II.ROLL CALL PRESENT:Council Member Diane Dixon (Chair), Mayor Kevin Muldoon, Committee Member William Collopy, Committee Member Patti Gorczyca, Committee Member Joe Stapleton, and Committee Member Larry Tucker ABSENT (EXCUSED): Council Member Will O’Neill STAFF PRESENT: City Manager Dave Kiff, Assistant City Manager Carol Jacobs, Deputy City Manager Rob Houston, Finance Director/Treasurer Dan Matusiewicz, Deputy Finance Director Steve Montano, Budget Manager Susan Giangrande, Purchasing Agent Anthony Nguyen, Public Works/Finance Administrative Manager Jaime Copeland, Fire Chief Chip Duncan, Accounting Manager Rukshana Virany, Budget Analyst, Shannon Espinoza, Fire Administrative Manager Angela Velazquez, Public Works Director Dave Webb, Budget Analyst Tam Ho, Budget Analyst Katherine Warnke-Carpenter, and Administrative Specialist to the Finance Director Marlene Burns OUTSIDE ENTITITES: John Bartel, Bartel Associates LLC (via teleconference), and Jayson Schmitt, Chandler Asset Management MEMBERS OF THE PUBLIC: Jim Mosher asked if the budget detail was available to the public. He stated the Council adopted new contracts for the City Manager, City Attorney and City Clerk. He suggested the public be allowed to review the employee goals and reviews but referenced a School District court case. Council Member Dixon stated the City had had a deferred compensation plan since 1980s. III.PUBLIC COMMENTS Jim Mosher IV.CONSENT CALENDAR A.MINUTES OF APRIL 13, 2017Recommended Action: Approve and file. Corrections were discussed. MOTION Committee Member Tucker moved and Committee Member Gorczyca seconded a motion to approve the corrected minutes of March 30, 2017. The motion carried unanimously. Item No. 4A1 Minutes of April 27, 2017 Correspondence May 11, 2017 Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 2 of 9 V. CURRENT BUSINESS B. PENSION DISCUSSION Summary: Agenda item reserved for any discussion regarding the status of the City's pension liability and/or the proposed budgetary pension funding approach, including a discussion of the potential use of a Section 115 prefunding trust specific to the City’s pension liability management. Recommended Action: Discuss and comment. John Bartel presented a PowerPoint outlining the irrevocable supplemental pension trust. He stated the assets might not reduce GASB 68 net pension liability. Finance Director/Treasurer Matusiewicz further distinguished that, since the funds were placed in a trust, they are neither reported on the City’s balance sheet as net asset nor fund balance since the asset would be offset by a liability. Council Member Dixon asked if those funds were specifically tied to the pension. Mr. Bartel explained that the funds were irrevocable and could only be used to reimburse the City for contributions the City made to CalPERS or sent directly. He stated the objection from GASB was that benefit payments could not be made directly from the trust. Mr. Bartel stated investments would be significantly less restricted than City investments, could mitigate volatility, and would impact costs of CalPERS. He recommended the trust for those worried about volatility, where the contributions rates were headed and wanting to maintain budget flexibility. He did not recommend the trust for clients not worried about contribution volatility or if projected contributions did not create budget issues. He discussed the three providers and stated less than 70 agencies had set up trusts. Committee Member Gorczyca asked which California public agencies had created trusts. Mr. Bartel stated Irvine Ranch Water District was the first agency to set up a trust. He stated he would provide a list of other agencies. Committee Member Tucker asked why it might be preferablea trust was better to put money in trust rather than just paying the sum toinvesting in CalPERS. Mr. Bartel stated the rate at CalPERS was not guaranteed and could be volatile. He stated the trust allowed more flexibility. In response to Mayor Muldoon, Mr. Bartel stated the trust offered more flexibility rather than control. Mayor Muldoon stated the use of funds was not flexible because it had to be used towards CalPERS. Mr. Bartel explained that, once money was given to CalPERS, the City did not have control over investment and future contributions. He stated the City controlled how the money was sent to CalPERS from the trust. Committee Member Tucker stated that unfunded liabilities would continue to accrue interest at 7.5%grow if the money was put in the trust rather than paid to CalPERS. Mr. Bartel stated the money in the trust could be used to offset the unfunded liability contributions. He provided an example of how and when to send the money to CalPERS. Committee Member Collopy asked why Mr. Bartel anticipated lower earnings in the trust. Mr. Bartel stated he was not an investment advisor, rather an actuary. He stated private investments entities had higher expenses than CalPERS. Finance Director/Treasurer Matusiewicz stated Jayson Schmitt, Chandler Asset Management, was available to address differences in portfolio scale, investment horizon, and cost efficiencies. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 3 of 9 Council Member Dixon discussed the 2016 CalPERS return and shift into more environmentally and politically correct investments. Mr. Bartel discussed the bill preventing CalPERS and CalSTRS from investing in certain types of investments. In response to Mayor Muldoon, Mr. Bartel discussed the Irvine Ranch Water District’s trust. Committee Member Tucker explained thatstated the money that was supposed to be with CalPERS (i.e. unfunded liabilities) had an interest factor of 7.5% that had to be paid to CalPERS. And money that is with CalPERS iswas also supposed to be earning 7.5 percent. and iIf those earnings are not achieved,it did not you have there is an experience loss that createsd a furtheranother unfunded liability. So Committee Member Tucker wondered how it could be better to put money into a trust rather than paying the money to CalPERS to at least stop the accrual on the unfunded amount. Mr. Bartel provided an extreme example of paying money to CalPERS versus putting it in a trust. He stated he was not advocating the City start a trust, just explaining the flexibility. Finance Director/Treasurer Matusiewicz stated there were two options: 1) making a payment in excess of required amount which would be credited over 30 years; or 2) requesting the actuary apply the principal directly to the base which would reduce the principal. Mr. Bartel provided an example of the trust funds providing flexibility. Mayor Muldoon stated the trust was less useful for those not worried about contribution volatility. Committee Member Tucker stated he failed to see why it would be better to have the prefunding pension trust rather than paying down the unfunded liability. Committee Member Gorczyca stated she was under the impression that IRWD was looking at the trust in terms of asset management. She observed that the City similarly should look at the trust in the same way. Committee Member Tucker inquired if IRWD had unfunded liabilities and staff informed him they did not. Committee Member Tucker acknowledged Committee Gorczyca’s observation that some agencies usestated athe trust to would allow broader investments and more flexibility than what governmental agencies are ordinarily allowed to invest in. He stated athe trust made more sense for IRWD since it did not have unfunded liabilities it had to debt serve and the trust gave it flexibility to be more aggressive in its investments than if it held the money in its own accounts.. He noted the City of Newport Beach is not in the same position as IRWD. Council Member Dixon asked if there was a minimum payment on the unfunded liability. She stated it was necessary to discuss paying more than the minimum amount. City Manager Kiff stated the unfunded liability was accruing interest like any other debt obligation. Committee Member Gorczyca stated the City had been in the position to enter the fresh start and prepay but was starting to get to the point of sacrificing capital projects. She stated the unfunded pension was having a bearing on other budgetary obligations. She suggested exploring options that allow flexibility to accommodate budget changes on an annual basis. She stated money sent to CalPERS was gone, but the trust allowed the City to decide when to put it towards pension obligations. Finance Director/Treasurer Matusiewicz discussed previous efforts to obtain Committee consensus for a longer range portfolio for endowment funds, with a one to ten-year treasury agency bond strategy was perceived by the Committee as being too risky. Finance Director/Treasurer Matusiewicz explained selling assets from the 115 trust to provide to Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 4 of 9 contributions to PERS may require the City to realize investment losses if there were a downturn in equity-based securities that are far more volatile than treasury and agency bonds. Mr. Bartel finished the PowerPoint presentation explaining the example of contribution rate projections. Council Member Dixon asked if the Committee wanted to set up a working group to review the matter and bring back a recommendation to the full Committee. Mayor Muldoon stated he had basically made up his mind but would like to see actual numbers before finalizing his decision. Mr. Bartel stated he could work with the Finance Department on a Newport Beach specific example. Committee Member Gorczyca discussed the OPEB Section 115 Trust and requested reviewing the numbers again. Mr. Bartel stated he would compare CalPERS OPEB 115 Trust with PARS, PFM or Keenan. Committee Member Tucker noted that there could be a discussion about using some of the City’sdiscussed the need to determine if the capital funds or 25 percent safety net reserve funds for a trust so that it could earn a higher rate of return than it does currentlyshould be used for the unfunded liability. But that would mean that portion of the safety net would only be usable for pension purposes in the future. Committee Member Gorczyca stated the City could decide to what extent and when to use the 115 Trust. Mayor Muldoon discussed IRWD’s use of the Trust. Committee Member Gorczyca stated the tradeoffs needed to be considered. A. REVIEW OF FISCAL YEAR 2017-2018 PROPOSED BUDGET Summary: Staff will provide an overview of the Proposed Fiscal Year 2017-2018 Operating Budget and/or CIP. Recommended Action: Review and comment on City Manager recommendations and Finance Committee’s desired next steps. City Manager Kiff reviewed the budget book and presented a PowerPoint outlining sources and uses. In response to Council Member Dixon, Finance Director/Treasurer Matusiewicz explained the $1 million contribution to the contingency reserve. Deputy Finance Director Montano stated 25 percent of operating expenses needed to be set aside for the contingency reserve. Council Member Dixon requested the percent change over prior years. City Manager Kiff reviewed General Fund Revenue. Council Member Dixon discussed the changes since Fiscal Year 2016-2017. In response to Mayor Muldoon, City Manager Kiff explained anticipated reductions in sale tax revenues. He discussed the Irvine Company’s concerns about malls and shopping centers. He explained online sales tax returns. Finance Director/Treasurer Matusiewicz explained that online sales are either distributed through the County pool while others are distributed to the jurisdiction where the store is located depending on various circumstances. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 5 of 9 City Manager Kiff reviewed the Fiscal Year 2017-2018 General Fund Proposed Operating Expenditures by function and type. Council Member Dixon requested detail on the uncontrolled expenditures. In response to Committee Member Gorczyca, Finance Director/Treasurer Matusiewicz stated the debt service was not expended in the General Fund and pensions were shown in salaries and benefits. Committee Member Gorczyca requested information on changes to the budget. City Manager Kiff stated the unfunded liability at $276 million. Finance Director/Treasurer Matusiewicz stated the minimum 2016-2017 contribution rate was based on a $276 million UAL but with known experience losses, it is more realistic to assume a UAL of $353 million. He explained his contribution projections included known losses that are not yet included in the current actuarial valuation. Committee Member Gorczyca discussed the City’s unfunded pension liability in 2007. Finance Director/Treasurer Matusiewicz stated the actuarial accrued liability (AAL) grew at compounded annual growth rate of 7.3 percent per year. Finance Director/Treasurer Matusiewicz explained the phase-in of new amortization bases and proposed 20 year level payment. He stated that a use of a Section 115 trust would increase our minimum contribution rate substantially. City Manager Kiff described the pension payment history. Finance Director/Treasurer Matusiewicz discussed the increase in employee contributions. In response to Council Member Dixon, City Manager Kiff explained payment of the employee’s share of CalPERS. He explained that 14 percent of pay was deducted for PERS payments. In response to Mayor Muldoon, City Manager Kiff discussed the impact of salary increases on pension contributions. In response to Committee Member Collopy, City Manager Kiff stated the budget proposed a 20-year-level pension payment that was already incorporated into the proposed budget. Committee Member Collopy stated the goal would be achieved if the contribution level could be maintained for five years. He stated the point was to not tie the hands of future Councils but the proposal would give a gift to future Council members. He expressed hope that it could be afforded for the next five years. Committee Member Stapleton, Finance Director/Treasurer Matusiewicz stated he could tell CalPERS where to apply the principal reduction to achieve the greatest payment efficiency. Mayor Muldoon left the meeting at this juncture, 4:32 p.m. Committee Member Collopy asked whether settlements on lawsuits and costs for counsel were billed to individual departments. Finance Director/Treasurer Matusiewicz stated each department was charged an annual insurance premium instead. Committee Member Collopy asked if that was sufficient to change behavior. City Manager Kiff discussed claims and the responsibility of the department. Finance Director/Treasurer Matusiewicz stated the claims were reviewed every five years or so to determine the appropriate allocation by department. Committee Member Collopy suggested the Human Resources Department review the matter. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 6 of 9 Deputy Finance Director Montano provided an overview of reserve status, three-year budget change for pensions, three-year budget change for CIP, and financial detail for the tidelands funds. Finance Director/Treasurer Matusiewicz referenced the annual Tidelands report, provided to the Committee, describes to how the tidelands expenses were allocated and reimbursed. In response to Council Member Council Member Dixon, City Manager Kiff explained that the anticipated Newport Uptown project payment would create a larger fund balance in the FFP earlier than anticipated. Public Works Director Webb described the CIP summaries and project sheets. He explained Appendix C. In response to Committee Member Collopy, Public Works Director Webb discussed conversations regarding a dredging strategy and difficulties with dredging. Committee Member Stapleton discussed difficulties with not owning equipment and disposition of dredged material. Committee Member Collopy accepted that it was a difficult, but asked if there was an overarching strategy. City Manager Kiff indicated that to be the goal and discussed efforts to work with the Harbor Commission. He anticipated a strategy would be complete in the next eight to ten months. Council Member Dixon discussed the Council’s priority focus on dredging. Committee Member Collopy stated there were four budget line items for dredging but questioned the backup guidance for use of the funds. Public Works Director Webb explained the line items related to dredging. Public Works/Finance Administrative Manager Copeland stated the document compiled all the information into in one place. Council Member Dixon thanked staff for showing the total capital needs in one document. City Manager City Manager Kiff stated the Council would review the CIP plan at a detailed study session. He encouraged the Committee to thoroughly review the budget detail. Committee Member Collopy stated he would inform City Manager Kiff if he wanted a deep dive into any budget categories. Committee Member Tucker stated he did not believe itit was not within the Committee’s purview to recommend to the Council how to spend capital dollars, except to the extent capital dollars were needed to address work that could expose the City to liability if not performed. C. UPDATE ON LONG-TERM FINANCIAL FORECAST Summary: Staff will review with the Committee the updates of the high-level long-term financial forecast including future assumptions and other key elements of the City’s finances. Recommended Action: Review and comment. Deputy Finance Director Montano explained the fiscal forecast model. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 7 of 9 In response to Council Member Dixon, Deputy Finance Director Montano suggested a summary and chart be included in the financial budget document. Committee Member Collopy suggested building a model showing the reserves if the City did not level fund. He requested showing the payment beginning in 2023 if the City did not level fund the pension obligation. Deputy Finance Director Montano suggested the impact of not level funding the pension obligation is already an available scenario built into the model. Committee Member Gorczyca asked how longer-term pension was projected. Finance Director/Treasurer Matusiewicz stated it was not addressed in the model but the pension amortization model considered the risk of future investment returns of 6.5 percent and its impact. Committee Member Gorczyca asked for long-term pension projections along with earning. Finance Director/Treasurer Matusiewicz stated Mr. Bartel had previously provided the Committee with a financial forecast using stochastic investment results. He stated he personally could not model random market variables, such as annual investment return; therefore, an annual analysis was necessary. Council Member Dixon stated the budget presented worst case scenarios. Committee Member Committee Member Tucker stated he had requested a series of assumed returns, showing a broad spectrum of a various rates of returns. Finance Director/Treasurer Matusiewicz explained that he took a static average rate of return for his forward projections. Committee Member Tucker requested data on a four percent return so the model included a scenario in which returns were well below expectation so the Committee could see what that would mean. Council Member Dixon requested the Committee be provided with the model. Deputy Finance Director Montano stated the model was in Excel but he could create a narrative including growth assumptions, what ifs, and charts. Council Member Dixon discussed the City of Sunnyvale’s 20-year projection. Committee Member Tucker requested something readily understandable be posted on the website. Committee Member Collopy requested the information be completed for the current proposed budget. In response to Committee Member Committee Member Tucker, Finance Director/Treasurer Matusiewicz proposed budget assumed moving to a 20-year level payment plan. City Manager Kiff stated the Council could assume a discount rate of less than seven percent. In response to Committee Member Tucker, Finance Director/Treasurer Matusiewicz stated the City’s current payment was $25 million. Committee Member Tucker requested showing 20 and 30-year payments. Committee Member Collopy requested also showing 25 years. Council Member Dixon suggested showing the minimum mandated payment. Finance Director/Treasurer Matusiewicz referenced Page 17. Council Member Dixon requested showing the minimum and proposed payment. Committee Member Tucker suggested including alternatives to show where the money went and how much was left over. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 8 of 9 Finance Director/Treasurer Matusiewicz stated that various contribution options were included in the model. Committee Member Tucker requested showing 20, 25 and 30 years. He stated he was inclined to suggest paying it off more quickly. Council Member Dixon anticipated an interesting Council discussion. City Manager Kiff stated it was the City Manager’s proposed budget, with staff’s professional recommendation. Committee Member Tucker stated the pension was the largest annual obligation. Council Member Dixon stated the capital budget was usually where debate ensued. Committee Member Gorczyca requested information on where pension payments came from. City Manager Kiff stated residents had not yet seen a reduction in service. Council Member Dixon stated the City had been tightening its belt and not increasing head counts. D. REVIEW OF FINANCE COMMITTEE WORK PLAN Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Recommended Action: Review and comment. In response to Committee Member Tucker, City Manager Kiff stated the budget would be presented to the Council on June 13, 2017. Committee Member Tucker suggested the Committee finalize its recommendation on June 8, 2017. Assistant City Manager Jacobs stated the water rate study was time sensitive. Committee Member Stapleton and Committee Member Collopy indicated they were unavailable on June 8, 2017. Council Member Dixon discussed the upcoming agenda items for Committee consideration. Council Member Dixon suggested Jayson Schmitt, Chandler Asset Management, be invited back to provide input on June 29, 2017. VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) Deputy Finance Director Montano commended the Budget staff. VII. ADJOURNMENT The Finance Committee adjourned at 5:35 p.m. to the next regular meeting of the Finance Committee on May 11, 2017. Filed with these minutes are copies of all materials distributed at the meeting. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 9 of 9 The agenda for the Regular Meeting was posted on April 6, 2017, at 10:15 p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic Center Drive. Attest: ___________________________________ _____________________ Diane Dixon, Chair Date Finance Committee Item No. 4A2 Minutes of April 27, 2017 Correspondence May 11, 2017 CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT Agenda Item No. 5A May 11, 2017 TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE FROM: Finance Department Dan Matusiewicz, Finance Director (949) 644-3123, danm@newportbeachca.gov SUBJECT: FISCAL YEAR 2017-2018 PROPOSED BUDGET CONSIDERATION SUMMARY: Staff is pleased to answer additional questions concerning the City Manager’s Fiscal Year 2017-2018 Proposed Budget and supplemental budget material provided at the April 27, 2017 meeting. The City Manager’s Fiscal Year 2017-2018 Proposed Budget will be reviewed with a PowerPoint presentation during a joint City Council/Finance Committee study session on May 23, 2017. The City Council is scheduled to adopt the budget on June 13, 2017. RECOMMENDED ACTION: Staff recommends that the Finance Committee review and continue to discuss the City Manager’s proposed budget through June 8, 2017, and at that time, direct staff to bring the Fiscal Year 2017-2018 Proposed Budget for City Council Approval on June 13, 2017. DISCUSSION: The City Council and Finance Committee will review the budget during a joint study session on May 23, 2017. In accordance with the authorizing resolution (the “Resolution”) that formed, and identifies the roles and responsibilities of the Finance Committee, staff recommends that the Finance Committee recommend approval of the budget by the City Council on June 8, 2017. The Committee also may propose or comment upon other recommendations that would maximize the City’s revenues, minimizing the City’s cost to provide core services, and improve the budget process. Staff will incorporate any recommendations into existing policies, and/or propose new policies for further consideration by the Finance Committee and City Council at a later time. Staff will present a detailed report to the Finance Committee that describes the analysis of the City’s Long Range Fiscal Forecast (LRFF) on June 8, 2017. The proposed budget will be presented for adoption at the City Council regular meeting on June 13, 2017. Staff is pleased to answer additional questions concerning the City Manager’s Fiscal Year 2017-2018 Proposed Budget and the supplemental budget material provided at the April 27, 2017, meeting. Fiscal Year 2017-2018 Budget Consideration May 11, 2017 Page 2 The Fiscal Year 2017-2018 Proposed Budget for all funds is $320.7 million, which represents a 2.7 percent, or $8.8 million, decrease from the prior year revised budget. This change in the budget represents the net amount of both one-time decreases from the prior year and increases proposed for Fiscal Year 2017-2018. Decreases result from the elimination of one-time budget amendments and encumbrances for unspent appropriations from the prior year, especially in the Capital Improvement Program. Increases are the result of negotiated salary and benefit increases, increases in operating costs, and some growth due to new programs or enhancements to existing programs. New appropriations for capital improvement projects amount to $25 million and re-budgeted projects from the prior year amount to $38.6 million. Unlike the operating budget, capital improvement appropriations are expended over multiple fiscal years due to the unpredictable nature of large construction projects that require environmental review, coordination with outside entities (public utilities), and design/policy considerations. We estimate that total appropriations for capital projects will be approximately $64 million when the balance of encumbered funds are carried forward into Fiscal Year 2017-2018, as they are every year. Prior year carry forward capital appropriations are supported by the reserve for prior year encumbrances. General Fund The General Fund is the key operating fund within the City’s budget. The General Fund accounts for discretionary revenues and expenditures, while all other funds are used to account for enterprise activities, internal service activity, major capital improvement projects, and special revenue sources that are restricted for specific purposes. The General Fund budget as submitted is balanced and includes $209.3 million in operating revenues, $202.5 million in General Fund operating expenditures and $5.7 million in new General Fund Capital Improvement Plan Expenditures. Appropriations for operating expenditures are balanced in relation to projected revenue sources and will not over-rely on one-time revenue sources or reserves. The proposed budget adheres to Council guidance regarding the use of the $9.2 million in prior year surplus funds. Five million of the surplus will be allocated to harbor projects and the remainder will go towards paying down the City’s pension liability. 2016-17 Revised Expenditures 2017-18 Proposed Expenditures Variance Operating Budget $252.6 $257.0 1.7% CIP Projects $76.8 $63.7 -17.1% Total Budget $329.5 $320.7 -2.7% Summary of the FY 2017-18 Proposed Budget All Funds (Millions) 2016-17 Revised Budget 2017-18 Proposed Budget Variance Sources Prior Year Surplus $10.9 $9.2 -15.5% Operating Revenue $201.1 $209.3 4.1% Transfers In $7.3 $7.7 4.9% Set Asides $5.9 ($0.5)-108.8% Total Sources $225.1 $225.6 0.2% Uses Operating Expenditures $192.6 $202.5 5.2% Transfers Out $23.3 $22.8 -2.3% Total Uses $215.9 $225.3 4.4% Surplus/(Deficit)$9.2 $0.3 -96.9% Summary of the General Fund FY 2017-18 Proposed Budget (Millions) Fiscal Year 2017-2018 Budget Consideration May 11, 2017 Page 3 Resources Dedicated in Support of Long Term Obligations and Key Priorities Inter-fund Transfers or “transfers-in” total $7.7 million and include resources transferred from other funds, which are used to offset administrative and maintenance costs necessary to conduct particular projects or programs within the General Fund. The majority of transfers-in is from the Tidelands Fund to offset costs for activities, programs, or functions whose primary purpose benefit the Tidelands, such as Harbor Resources, Police, Fire/EMS, and lifeguarding. Remember that Newport Beach’s Tidelands include the ocean beaches, and the visitor use here is high, adding revenue but also causing significant expense in terms of police, lifeguard, and emergency medical response. In addition to departmental operating expenditures, transfers-out total $22.8 million to address long-term obligations in high priority areas including $8.5 million to the Facilities Financial Plan, $6.0 million to the Harbor & Beaches Capital Fund ($5 million from prior year surplus funds, done in conformance to the City’s surplus utilization policy), $5.4 million to the CIP Fund, $1.0 million for the contingency reserve, $1.0 million to the Facility Maintenance Plan, and $0.5 million to the Equipment Replacement Fund in support of the City’s share of the 800 MHz Countywide Coordinated Communications System (CCCS). The CCCS is Orange County's analog/digital trunked public safety radio communications system that provides radio communications services and interoperability among City and County law enforcement, fire services, public works and lifeguard/marine safety departments in Orange County. City Council Reserve Policy F-2 dictates that some portion of the funds available to the City be reserved or “set aside” for future use. Set asides for Fiscal Year 2017-2018 total $0.5 million for such things as oceanfront encroachment, PEG fees, and arts and culture reserves. The proposed budget also reaffirms our commitment to address long-term obligations. Fiscal Year 2017- 2018 will mark the third year of an accelerated plan to pay down the City’s unfunded pension liability within 19 years. With the lowering of the discount rate, the proposed budget also includes an additional $8.9 million to pay down the City’s unfunded liability faster. This additional contribution will result in a net economic benefit of $5.4 million compared to the default 30-year CalPERS payment plan. The proposed budget also commits significant resources to maintain, protect and improve the resources of Newport Harbor and Upper Newport Bay for life, recreation and commerce. Core functions include permit issuance and administration for pier, marina and mooring operations; coordination and execution of harbor dredging; regulatory compliance; sediment maintenance; and interagency coordination and planning. The City will invest $12.8 million towards this goal in Fiscal Year 2017-2018 with the following projects: • Abandoned /Surrendered Watercraft Abatement - $100,000 • American Legion Bulkhead - $1,000,000 • Balboa Island Seawall Cap - North / South Sides - $2,000,000 • Balboa Island Seawall Replacement - West End - $4,971,225 • Beach and Bay Sand Management - $150,000 • Bilge Pump-out Dock / Oil Collection Centers - $200,000 • Central Ave Public Pier / Street End Improvement - $725,562 • Grand Canal Dredging - $800,000 • Harbor Maintenance / Minor Improvements -$150,000 • Harbor Tide Gauge - $50,000 • Harbor-wide Dredging / Planning - $500,000 • Newport Pier Platform and Piles - $1,306,099 • Ocean Piers Inspection and Maintenance - $706,791 • Seawall Extensions - $150,000 In summary, the City Manager has proposed a budget that is balanced, does not rely on the use of reserves for operations, and has a continued focus on enhancing the community’s quality of life and safety. Fiscal Year 2017-2018 Budget Consideration May 11, 2017 Page 4 Prepared and Submitted by: /s/ Dan Matusiewicz _____________________________ Dan Matusiewicz Finance Director Val FYE Balance Year Payment Balance Year Payment Balance Year Payment Balance Year Payment 2015 2016 2016 2017 1 2017 2018 371,856,729$ 15 40,630,521$ 371,856,729$ 20 35,180,811$ 371,856,729$ 25 32,174,775$ 371,856,729$ 30 30,367,379$ 2 2018 2019 357,179,041$ 14 40,305,067$ 362,826,135$ 19 34,836,144$ 365,941,047$ 24 31,811,224$ 367,813,905$ 29 29,986,442$ 3 2019 2020 341,333,959$ 13 39,997,014$ 353,054,170$ 18 34,504,957$ 359,527,568$ 23 31,458,615$ 363,425,981$ 28 29,614,595$ 4 2020 2021 323,854,103$ 12 39,417,593$ 342,075,756$ 17 33,871,716$ 352,153,453$ 22 30,777,705$ 358,232,224$ 27 28,891,680$ 5 2021 2022 305,750,015$ 11 39,417,593$ 330,983,884$ 16 33,871,716$ 344,967,490$ 21 30,777,705$ 353,422,694$ 26 28,891,680$ 6 2022 2023 286,378,640$ 10 39,417,593$ 319,115,580$ 15 33,871,716$ 337,278,509$ 20 30,777,705$ 348,276,496$ 25 28,891,680$ 7 2023 2024 265,651,269$ 9 39,417,593$ 306,416,496$ 14 33,871,716$ 329,051,299$ 19 30,777,705$ 342,770,065$ 24 28,891,680$ 8 2024 2025 243,472,983$ 8 39,417,593$ 292,828,475$ 13 33,871,716$ 320,248,185$ 18 30,777,705$ 336,878,183$ 23 28,891,680$ 9 2025 2026 219,742,216$ 7 39,417,593$ 278,289,293$ 12 33,871,716$ 310,828,853$ 17 30,777,705$ 330,573,869$ 22 28,891,680$ 10 2026 2027 194,350,295$ 6 39,417,593$ 262,732,368$ 11 33,871,716$ 300,750,167$ 16 30,777,705$ 323,828,254$ 21 28,891,680$ 11 2027 2028 167,180,940$ 5 39,417,593$ 246,086,458$ 10 33,871,716$ 289,965,974$ 15 30,777,705$ 316,610,445$ 20 28,891,680$ 12 2028 2029 138,109,731$ 4 39,417,593$ 228,275,335$ 9 33,871,716$ 278,426,887$ 14 30,777,705$ 308,887,390$ 19 28,891,680$ 13 2029 2030 107,003,536$ 3 39,417,593$ 209,217,433$ 8 33,871,716$ 266,080,063$ 13 30,777,705$ 300,623,721$ 18 28,891,680$ 14 2030 2031 73,719,908$ 2 39,417,593$ 188,825,478$ 7 33,871,716$ 252,868,963$ 12 30,777,705$ 291,781,596$ 17 28,891,680$ 15 2031 2032 38,106,426$ 1 39,417,593$ 167,006,086$ 6 33,871,716$ 238,733,085$ 11 30,777,705$ 282,320,521$ 16 28,891,680$ 16 2032 2033 143,659,337$ 5 33,871,716$ 223,607,695$ 10 30,777,705$ 272,197,171$ 15 28,891,680$ 17 2033 2034 118,678,315$ 4 33,871,716$ 207,423,529$ 9 30,777,705$ 261,365,187$ 14 28,891,680$ 18 2034 2035 91,948,621$ 3 33,871,716$ 190,106,471$ 8 30,777,705$ 249,774,964$ 13 28,891,680$ 19 2035 2036 63,347,850$ 2 33,871,716$ 171,577,218$ 7 30,777,705$ 237,373,425$ 12 28,891,680$ 20 2036 2037 32,745,024$ 1 33,871,716$ 151,750,918$ 6 30,777,705$ 224,103,778$ 11 28,891,680$ 21 2037 2038 130,536,777$ 5 30,777,705$ 209,905,257$ 10 28,891,680$ 22 2038 2039 107,837,646$ 4 30,777,705$ 194,712,838$ 9 28,891,680$ 23 2039 2040 83,549,576$ 3 30,777,705$ 178,456,951$ 8 28,891,680$ 24 2040 2041 57,561,341$ 2 30,777,705$ 161,063,151$ 7 28,891,680$ 25 2041 2042 29,753,930$ 1 30,777,705$ 142,451,785$ 6 28,891,680$ 26 2042 2043 122,537,624$ 5 28,891,680$ 27 2043 2044 101,229,472$ 4 28,891,680$ 28 2044 2045 78,429,748$ 3 28,891,680$ 29 2045 2046 54,034,045$ 2 28,891,680$ 30 2046 2047 27,930,641$ 1 28,891,680$ Sum of Pmts 593,943,723$ Sum of Pmts 680,341,083$ Sum of Pmts 772,554,116$ Sum of Pmts 870,043,779$ NPV Pmts @ 3%$473,109,052 NPV Pmts @ 3%$506,685,140 NPV Pmts @ 3%$538,890,416 NPV Pmts @ 3%$569,415,886 NPV Savings Relative to 20 Yr Amort $33,576,088 NA ($32,205,276)($30,525,470) Pmt Diff after 3rd Year 5,545,877$ -$ (3,094,011)$ (1,886,025)$ * Assumes 3 Year reduction in the interest rate accrual from 7.5% to 7.0% 30 Year Level Amortization15 Year Level Amortization Amortization of Unfunded Pension Liability Level Dollar Amortization* Term Comparision 7% Discount Rate Assumption Base Assumption 20 Year Level Amortization 25 Year Level Amortization PROPOSED CHANGES BY COMMITTEE MEMBER TUCKER Finance Committee Meeting Minutes April 27, 2017 Page 1 of 9 CITY OF NEWPORT BEACH FINANCE COMMITTEE APRIL 27, 2017 MEETING MINUTES I.CALL MEETING TO ORDER The meeting was called to order at 3:00 p.m. in the Crystal Cove Conference Room, Bay 2D, 100Civic Center Drive, Newport Beach, California 92660. II.ROLL CALL PRESENT:Council Member Diane Dixon (Chair), Mayor Kevin Muldoon, Committee Member William Collopy, Committee Member Patti Gorczyca, Committee Member Joe Stapleton, and Committee Member Larry Tucker ABSENT (EXCUSED): Council Member Will O’Neill STAFF PRESENT: City Manager Dave Kiff, Assistant City Manager Carol Jacobs, Deputy City Manager Rob Houston, Finance Director/Treasurer Dan Matusiewicz, Deputy Finance Director Steve Montano, Budget Manager Susan Giangrande, Purchasing Agent Anthony Nguyen, Public Works/Finance Administrative Manager Jaime Copeland, Fire Chief Chip Duncan, Accounting Manager Rukshana Virany, Budget Analyst, Shannon Espinoza, Fire Administrative Manager Angela Velazquez, Public Works Director Dave Webb, Budget Analyst Tam Ho, Budget Analyst Katherine Warnke-Carpenter, and Administrative Specialist to the Finance Director Marlene Burns OUTSIDE ENTITITES: John Bartel, Bartel Associates LLC (via teleconference), and Jayson Schmitt, Chandler Asset Management MEMBERS OF THE PUBLIC: Jim Mosher asked if the budget detail was available to the public. He stated the Council adopted new contracts for the City Manager, City Attorney and City Clerk. He suggested the public be allowed to review the employee goals and reviews but referenced a School District court case. Council Member Dixon stated the City had had a deferred compensation plan since 1980s. III.PUBLIC COMMENTS Jim Mosher IV.CONSENT CALENDAR A.MINUTES OF APRIL 13, 2017Recommended Action: Approve and file. Corrections were discussed. MOTION Committee Member Tucker moved and Committee Member Gorczyca seconded a motion to approve the corrected minutes of March 30, 2017. The motion carried unanimously. Item No. 4A1 Draft Minutes of April 27, 2017 Correspondence May 11, 2017 Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 2 of 9 V. CURRENT BUSINESS B. PENSION DISCUSSION Summary: Agenda item reserved for any discussion regarding the status of the City's pension liability and/or the proposed budgetary pension funding approach, including a discussion of the potential use of a Section 115 prefunding trust specific to the City’s pension liability management. Recommended Action: Discuss and comment. John Bartel presented a PowerPoint outlining the irrevocable supplemental pension trust. He stated the assets might not reduce GASB 68 net pension liability. Finance Director/Treasurer Matusiewicz further distinguished that, since the funds were placed in a trust, they are neither reported on the City’s balance sheet as net asset nor fund balance since the asset would be offset by a liability. Council Member Dixon asked if those funds were specifically tied to the pension. Mr. Bartel explained that the funds were irrevocable and could only be used to reimburse the City for contributions the City made to CalPERS or sent directly. He stated the objection from GASB was that benefit payments could not be made directly from the trust. Mr. Bartel stated investments would be significantly less restricted than City investments, could mitigate volatility, and would impact costs of CalPERS. He recommended the trust for those worried about volatility, where the contributions rates were headed and wanting to maintain budget flexibility. He did not recommend the trust for clients not worried about contribution volatility or if projected contributions did not create budget issues. He discussed the three providers and stated less than 70 agencies had set up trusts. Committee Member Gorczyca asked which California public agencies had created trusts. Mr. Bartel stated Irvine Ranch Water District was the first agency to set up a trust. He stated he would provide a list of other agencies. Committee Member Tucker asked why it might be preferablea trust was better to put money in trust rather than just paying the sum toinvesting in CalPERS. Mr. Bartel stated the rate at CalPERS was not guaranteed and could be volatile. He stated the trust allowed more flexibility. In response to Mayor Muldoon, Mr. Bartel stated the trust offered more flexibility rather than control. Mayor Muldoon stated the use of funds was not flexible because it had to be used towards CalPERS. Mr. Bartel explained that, once money was given to CalPERS, the City did not have control over investment and future contributions. He stated the City controlled how the money was sent to CalPERS from the trust. Committee Member Tucker stated that unfunded liabilities would continue to accrue interest at 7.5%grow if the money was put in the trust rather than paid to CalPERS. Mr. Bartel stated the money in the trust could be used to offset the unfunded liability contributions. He provided an example of how and when to send the money to CalPERS. Committee Member Collopy asked why Mr. Bartel anticipated lower earnings in the trust. Mr. Bartel stated he was not an investment advisor, rather an actuary. He stated private investments entities had higher expenses than CalPERS. Finance Director/Treasurer Matusiewicz stated Jayson Schmitt, Chandler Asset Management, was available to address differences in portfolio scale, investment horizon, and cost efficiencies. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 3 of 9 Council Member Dixon discussed the 2016 CalPERS return and shift into more environmentally and politically correct investments. Mr. Bartel discussed the bill preventing CalPERS and CalSTRS from investing in certain types of investments. In response to Mayor Muldoon, Mr. Bartel discussed the Irvine Ranch Water District’s trust. Committee Member Tucker explained thatstated the money that was supposed to be with CalPERS (i.e. unfunded liabilities) had an interest factor of 7.5% that had to be paid to CalPERS. And money that is with CalPERS iswas also supposed to be earning 7.5 percent. and iIf those earnings are not achieved,it did not you have there is an experience loss that createsd a furtheranother unfunded liability. So Committee Member Tucker wondered how it could be better to put money into a trust rather than paying the money to CalPERS to at least stop the accrual on the unfunded amount. Mr. Bartel provided an extreme example of paying money to CalPERS versus putting it in a trust. He stated he was not advocating the City start a trust, just explaining the flexibility. Finance Director/Treasurer Matusiewicz stated there were two options: 1) making a payment in excess of required amount which would be credited over 30 years; or 2) requesting the actuary apply the principal directly to the base which would reduce the principal. Mr. Bartel provided an example of the trust funds providing flexibility. Mayor Muldoon stated the trust was less useful for those not worried about contribution volatility. Committee Member Tucker stated he failed to see why it would be better to have the prefunding pension trust rather than paying down the unfunded liability. Committee Member Gorczyca stated she was under the impression that IRWD was looking at the trust in terms of asset management. She observed that the City similarly should look at the trust in the same way. Committee Member Tucker inquired if IRWD had unfunded liabilities and staff informed him they did not. Committee Member Tucker acknowledged Committee Gorczyca’s observation that some agencies usestated athe trust to would allow broader investments and more flexibility than what governmental agencies are ordinarily allowed to invest in. He stated athe trust made more sense for IRWD since it did not have unfunded liabilities it had to debt serve and the trust gave it flexibility to be more aggressive in its investments than if it held the money in its own accounts.. He noted the City of Newport Beach is not in the same position as IRWD. Council Member Dixon asked if there was a minimum payment on the unfunded liability. She stated it was necessary to discuss paying more than the minimum amount. City Manager Kiff stated the unfunded liability was accruing interest like any other debt obligation. Committee Member Gorczyca stated the City had been in the position to enter the fresh start and prepay but was starting to get to the point of sacrificing capital projects. She stated the unfunded pension was having a bearing on other budgetary obligations. She suggested exploring options that allow flexibility to accommodate budget changes on an annual basis. She stated money sent to CalPERS was gone, but the trust allowed the City to decide when to put it towards pension obligations. Finance Director/Treasurer Matusiewicz discussed previous efforts to obtain Committee consensus for a longer range portfolio for endowment funds, with a one to ten-year treasury agency bond strategy was perceived by the Committee as being too risky. Finance Director/Treasurer Matusiewicz explained selling assets from the 115 trust to provide to Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 4 of 9 contributions to PERS may require the City to realize investment losses if there were a downturn in equity-based securities that are far more volatile than treasury and agency bonds. Mr. Bartel finished the PowerPoint presentation explaining the example of contribution rate projections. Council Member Dixon asked if the Committee wanted to set up a working group to review the matter and bring back a recommendation to the full Committee. Mayor Muldoon stated he had basically made up his mind but would like to see actual numbers before finalizing his decision. Mr. Bartel stated he could work with the Finance Department on a Newport Beach specific example. Committee Member Gorczyca discussed the OPEB Section 115 Trust and requested reviewing the numbers again. Mr. Bartel stated he would compare CalPERS OPEB 115 Trust with PARS, PFM or Keenan. Committee Member Tucker noted that there could be a discussion about using some of the City’sdiscussed the need to determine if the capital funds or 25 percent safety net reserve funds for a trust so that it could earn a higher rate of return than it does currentlyshould be used for the unfunded liability. But that would mean that portion of the safety net would only be usable for pension purposes in the future. Committee Member Gorczyca stated the City could decide to what extent and when to use the 115 Trust. Mayor Muldoon discussed IRWD’s use of the Trust. Committee Member Gorczyca stated the tradeoffs needed to be considered. A. REVIEW OF FISCAL YEAR 2017-2018 PROPOSED BUDGET Summary: Staff will provide an overview of the Proposed Fiscal Year 2017-2018 Operating Budget and/or CIP. Recommended Action: Review and comment on City Manager recommendations and Finance Committee’s desired next steps. City Manager Kiff reviewed the budget book and presented a PowerPoint outlining sources and uses. In response to Council Member Dixon, Finance Director/Treasurer Matusiewicz explained the $1 million contribution to the contingency reserve. Deputy Finance Director Montano stated 25 percent of operating expenses needed to be set aside for the contingency reserve. Council Member Dixon requested the percent change over prior years. City Manager Kiff reviewed General Fund Revenue. Council Member Dixon discussed the changes since Fiscal Year 2016-2017. In response to Mayor Muldoon, City Manager Kiff explained anticipated reductions in sale tax revenues. He discussed the Irvine Company’s concerns about malls and shopping centers. He explained online sales tax returns. Finance Director/Treasurer Matusiewicz explained that online sales are either distributed through the County pool while others are distributed to the jurisdiction where the store is located depending on various circumstances. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 5 of 9 City Manager Kiff reviewed the Fiscal Year 2017-2018 General Fund Proposed Operating Expenditures by function and type. Council Member Dixon requested detail on the uncontrolled expenditures. In response to Committee Member Gorczyca, Finance Director/Treasurer Matusiewicz stated the debt service was not expended in the General Fund and pensions were shown in salaries and benefits. Committee Member Gorczyca requested information on changes to the budget. City Manager Kiff stated the unfunded liability at $276 million. Finance Director/Treasurer Matusiewicz stated the minimum 2016-2017 contribution rate was based on a $276 million UAL but with known experience losses, it is more realistic to assume a UAL of $353 million. He explained his contribution projections included known losses that are not yet included in the current actuarial valuation. Committee Member Gorczyca discussed the City’s unfunded pension liability in 2007. Finance Director/Treasurer Matusiewicz stated the actuarial accrued liability (AAL) grew at compounded annual growth rate of 7.3 percent per year. Finance Director/Treasurer Matusiewicz explained the phase-in of new amortization bases and proposed 20 year level payment. He stated that a use of a Section 115 trust would increase our minimum contribution rate substantially. City Manager Kiff described the pension payment history. Finance Director/Treasurer Matusiewicz discussed the increase in employee contributions. In response to Council Member Dixon, City Manager Kiff explained payment of the employee’s share of CalPERS. He explained that 14 percent of pay was deducted for PERS payments. In response to Mayor Muldoon, City Manager Kiff discussed the impact of salary increases on pension contributions. In response to Committee Member Collopy, City Manager Kiff stated the budget proposed a 20-year-level pension payment that was already incorporated into the proposed budget. Committee Member Collopy stated the goal would be achieved if the contribution level could be maintained for five years. He stated the point was to not tie the hands of future Councils but the proposal would give a gift to future Council members. He expressed hope that it could be afforded for the next five years. Committee Member Stapleton, Finance Director/Treasurer Matusiewicz stated he could tell CalPERS where to apply the principal reduction to achieve the greatest payment efficiency. Mayor Muldoon left the meeting at this juncture, 4:32 p.m. Committee Member Collopy asked whether settlements on lawsuits and costs for counsel were billed to individual departments. Finance Director/Treasurer Matusiewicz stated each department was charged an annual insurance premium instead. Committee Member Collopy asked if that was sufficient to change behavior. City Manager Kiff discussed claims and the responsibility of the department. Finance Director/Treasurer Matusiewicz stated the claims were reviewed every five years or so to determine the appropriate allocation by department. Committee Member Collopy suggested the Human Resources Department review the matter. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 6 of 9 Deputy Finance Director Montano provided an overview of reserve status, three-year budget change for pensions, three-year budget change for CIP, and financial detail for the tidelands funds. Finance Director/Treasurer Matusiewicz referenced the annual Tidelands report, provided to the Committee, describes to how the tidelands expenses were allocated and reimbursed. In response to Council Member Council Member Dixon, City Manager Kiff explained that the anticipated Newport Uptown project payment would create a larger fund balance in the FFP earlier than anticipated. Public Works Director Webb described the CIP summaries and project sheets. He explained Appendix C. In response to Committee Member Collopy, Public Works Director Webb discussed conversations regarding a dredging strategy and difficulties with dredging. Committee Member Stapleton discussed difficulties with not owning equipment and disposition of dredged material. Committee Member Collopy accepted that it was a difficult, but asked if there was an overarching strategy. City Manager Kiff indicated that to be the goal and discussed efforts to work with the Harbor Commission. He anticipated a strategy would be complete in the next eight to ten months. Council Member Dixon discussed the Council’s priority focus on dredging. Committee Member Collopy stated there were four budget line items for dredging but questioned the backup guidance for use of the funds. Public Works Director Webb explained the line items related to dredging. Public Works/Finance Administrative Manager Copeland stated the document compiled all the information into in one place. Council Member Dixon thanked staff for showing the total capital needs in one document. City Manager City Manager Kiff stated the Council would review the CIP plan at a detailed study session. He encouraged the Committee to thoroughly review the budget detail. Committee Member Collopy stated he would inform City Manager Kiff if he wanted a deep dive into any budget categories. Committee Member Tucker stated he did not believe itit was not within the Committee’s purview to recommend to the Council how to spend capital dollars, except to the extent capital dollars were needed to address work that could expose the City to liability if not performed. C. UPDATE ON LONG-TERM FINANCIAL FORECAST Summary: Staff will review with the Committee the updates of the high-level long-term financial forecast including future assumptions and other key elements of the City’s finances. Recommended Action: Review and comment. Deputy Finance Director Montano explained the fiscal forecast model. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 7 of 9 In response to Council Member Dixon, Deputy Finance Director Montano suggested a summary and chart be included in the financial budget document. Committee Member Collopy suggested building a model showing the reserves if the City did not level fund. He requested showing the payment beginning in 2023 if the City did not level fund the pension obligation. Deputy Finance Director Montano suggested the impact of not level funding the pension obligation is already an available scenario built into the model. Committee Member Gorczyca asked how longer-term pension was projected. Finance Director/Treasurer Matusiewicz stated it was not addressed in the model but the pension amortization model considered the risk of future investment returns of 6.5 percent and its impact. Committee Member Gorczyca asked for long-term pension projections along with earning. Finance Director/Treasurer Matusiewicz stated Mr. Bartel had previously provided the Committee with a financial forecast using stochastic investment results. He stated he personally could not model random market variables, such as annual investment return; therefore, an annual analysis was necessary. Council Member Dixon stated the budget presented worst case scenarios. Committee Member Committee Member Tucker stated he had requested a series of assumed returns, showing a broad spectrum of a various rates of returns. Finance Director/Treasurer Matusiewicz explained that he took a static average rate of return for his forward projections. Committee Member Tucker requested data on a four percent return so the model included a scenario in which returns were well below expectation so the Committee could see what that would mean. Council Member Dixon requested the Committee be provided with the model. Deputy Finance Director Montano stated the model was in Excel but he could create a narrative including growth assumptions, what ifs, and charts. Council Member Dixon discussed the City of Sunnyvale’s 20-year projection. Committee Member Tucker requested something readily understandable be posted on the website. Committee Member Collopy requested the information be completed for the current proposed budget. In response to Committee Member Committee Member Tucker, Finance Director/Treasurer Matusiewicz proposed budget assumed moving to a 20-year level payment plan. City Manager Kiff stated the Council could assume a discount rate of less than seven percent. In response to Committee Member Tucker, Finance Director/Treasurer Matusiewicz stated the City’s current payment was $25 million. Committee Member Tucker requested showing 20 and 30-year payments. Committee Member Collopy requested also showing 25 years. Council Member Dixon suggested showing the minimum mandated payment. Finance Director/Treasurer Matusiewicz referenced Page 17. Council Member Dixon requested showing the minimum and proposed payment. Committee Member Tucker suggested including alternatives to show where the money went and how much was left over. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 8 of 9 Finance Director/Treasurer Matusiewicz stated that various contribution options were included in the model. Committee Member Tucker requested showing 20, 25 and 30 years. He stated he was inclined to suggest paying it off more quickly. Council Member Dixon anticipated an interesting Council discussion. City Manager Kiff stated it was the City Manager’s proposed budget, with staff’s professional recommendation. Committee Member Tucker stated the pension was the largest annual obligation. Council Member Dixon stated the capital budget was usually where debate ensued. Committee Member Gorczyca requested information on where pension payments came from. City Manager Kiff stated residents had not yet seen a reduction in service. Council Member Dixon stated the City had been tightening its belt and not increasing head counts. D. REVIEW OF FINANCE COMMITTEE WORK PLAN Summary: Staff will review with the Committee the agenda topics scheduled for the remainder of the calendar year. Recommended Action: Review and comment. In response to Committee Member Tucker, City Manager Kiff stated the budget would be presented to the Council on June 13, 2017. Committee Member Tucker suggested the Committee finalize its recommendation on June 8, 2017. Assistant City Manager Jacobs stated the water rate study was time sensitive. Committee Member Stapleton and Committee Member Collopy indicated they were unavailable on June 8, 2017. Council Member Dixon discussed the upcoming agenda items for Committee consideration. Council Member Dixon suggested Jayson Schmitt, Chandler Asset Management, be invited back to provide input on June 29, 2017. VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) Deputy Finance Director Montano commended the Budget staff. VII. ADJOURNMENT The Finance Committee adjourned at 5:35 p.m. to the next regular meeting of the Finance Committee on May 11, 2017. Filed with these minutes are copies of all materials distributed at the meeting. Comments as submitted by: Committee Member Larry Tucker Finance Committee Meeting Minutes April 27, 2017 Page 9 of 9 The agenda for the Regular Meeting was posted on April 6, 2017, at 10:15 p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic Center Drive. Attest: ___________________________________ _____________________ Diane Dixon, Chair Date Finance Committee Item No. 4A2 Minutes of April 27, 2017 Correspondence May 11, 2017 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/3/3 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/1/3 Yet, Schaaf’s recently released two-year budget, like those of her predecessor, lacks a meaningful strategy for addressing the city’s mounting employee retirement debt and long-term structural budget shortfalls. City voters 2 1/2 years ago elected a new mayor who, refreshingly, had a grasp on the city’s äscal problems. Since then, Libby Schaff has also had the good fortune of increased tax revenues from a roaring economic recovery. If ever there is a moment to begin putting Oakland’s municipal änances back on solid äscal footing, this is it. And Schaaf knows it. “I don’t think I did as much as I should have done in the last two years to create a tangible, long-term solution,” she quickly acknowledged in an interview Thursday. The mea culpa is appropriate, but the fact remains that the mayor has missed a critical opportunity. This budget proposal was her chance to show residents she would confront Oakland’s äscal challenges and to propose meaningful remedies to the City Council. What Schaaf gave them instead is more of the same: The clang you hear is Schaaf, like her predecessors, kicking the can down the road, pushing debt onto future generations. Making matters worse, for days after she released her budget proposal that clang was drowned out by outcry over Schaaf’s politically inept plan to use new soda tax revenues to help cover a budget shortfall. That would have been a legal use of the money but it would have violated a non-binding promise to voters. They were assured last fall that soda tax revenues would fund education programs about diseases related to sugar-sweetened beverages. The furor over the soda tax mounted for days until Schaaf wisely relented. Meanwhile, everyone lost focus of the bigger issue. While the $6 million in annual revenues from the soda tax is signiäcant, the city faces a projected $32 million general fund budget shortfall over the next two years. And without new income streams or budget cuts, that grows to a projected $47 million annual shortfall by the 2019-20 äscal year and $70 million two years later, according to the city’s äve-year forecast. Those numbers are driven in large part by the mayor’s and City Council’s refusal to control spending. Coming out of the recession, many cities moved cautiously to ensure expenditures didn’t get ahead of increasing revenues. Not Oakland. The year Schaaf took ofäce, the number of full-time city employees had dropped to 3,681, down 720 from the start of the Great Recession. Unfortunately, as the economy improved, rather than pay off debt and bring spending under control, Oakland rapidly hired back 500 workers. And the entire workforce received raises on top of existing free health insurance for employees and their dependents. Meanwhile, the city debt for employees’ pensions and retirement health care has increased in two years from $2.4 billion to about $2.8 billion, or an average $17,500 per household. Some of that will be covered by a hidden pension tax on property owners; the rest will fall to taxpayers for decades. The debt is exacerbated in part because the city underfunds its retiree health care program by at least $40 million a year. Schaaf has 70 Item No. 5A1 Review of Fiscal year 2017-2018 Proposed Budget Correspondence May 11, 2017 BREAKING NEWS The Latest: Pence says áring unrelated to Russia probe Opinion Borenstein: Clang! Schaaf budget plan continues Oakland can-kicking By DANIEL BORENSTEIN | dborenstein@bayareanewsgroup.com | Bay Area News Group PUBLISHED: May 5, 2017 at 10:40 am | UPDATED: May 5, 2017 at 6:09 pm The more things change, the more they stay the same in Oakland. 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/2/3 The debt is exacerbated in part because the city underfunds its retiree health care program by at least $40 million a year. Schaaf has repeatedly said Oakland cannot afford to close that gap because that would require making too many cuts to city services. But failure to address it will mean even more cuts in the future. Think of it like someone who doesn’t make minimum payments on credit cards. The problem only gets worse with time. More money will go toward paying off interest, leaving less for, in this case, city services. Because Oakland operates on a two-year budget cycle, this is the ärst spending plan Schaaf can truly call her own. Her ärst one was constrained by commitments and poor planning she inherited from her predecessor, Jean Quan. To be sure, Schaaf needs the City Council’s cooperation to address Oakland’s änancial predicament, and not one council member has demonstrated serious interest in doing so. But that’s not an excuse for Schaaf’s failure to lead. She has the bully pulpit, but she hasn’t used it to propose meaningful solutions. As long as she remains mum, the council will continue to ignore the problem. SUBSCRIBE TODAY!ALL ACCESS DIGITAL OFFER FOR JUST 99 CENTS! Daniel Borenstein Dan Borenstein is an award-winning columnist and editorial writer for the Bay Area News Group. He has worked for the East Bay Times and its afäliated newspapers since 1980, including previous assignments as political editor, Sacramento bureau editor, projects editor and assistant metro editor. A Bay Area native, he holds master’s degrees in public policy and journalism from University of California, Berkeley.  Follow Daniel Borenstein @BorensteinDan SPONSORED CONTENT Zuri A. Murrell, MD Explains Why No OneShould Get Colorectal Cancer By Zuri A. Murrell, MD, colorectal surgeon at the Cedars-Sinai Samuel Oschin Comprehensive Cancer Institute, is on a mission to prevent colorectal... Tags: Budgets,Daniel Borenstein,Government Pensions,Libby Schaaf,Oakland City Council 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/3/3 PE N S I O N I N V E S T M E N T R E T U R N S T R E S S TE S T O N G E N E R A L F U N D R E V E N U E S Wa t c h c o l o r s h e r e a n d % o f b u d g e t c o n s u m e d b y U A L h e r e . Gr e e n ‐ G r e a t Ye l l o w ‐ E l e v a t e d Re d ‐ D a n g e r Bla c k ‐ O r g a n i z a t i o n i n T r a u m a Mk t R e t u r n UAL U A L G F R e v P e r i o d M i n i m u m R e c o m m e n d e d 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 Cu r r e n t R e c o m m e n d e d G r o w t h V a l Y r P a y m e n t P a y m e n t 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 2 8 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 Pe r i o d F i s c a l Y r Sc h e d u l e S c h e d u l e 3% Ra t e Y e a r P l u s L o s s P l u s L o s s 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 28 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 2 0 3 4 2 0 3 5 2 0 3 6 1 2 0 1 7 12 . 4 % 12 . 4 % 20 0 , 0 0 0 , 0 0 0 24 , 7 0 1 , 5 9 3 $ 2 4 , 7 0 1 , 5 9 3 $ 2 2 0 1 8 12 . 2 % 16 . 4 % 20 6 , 0 0 0 , 0 0 0 25 , 0 4 5 , 7 7 6 $ 3 3 , 8 7 1 , 7 1 6 $ 3 2 0 1 9 12 . 6 % 16 . 0 % 21 2 , 1 8 0 , 0 0 0 26 , 8 0 2 , 1 8 9 $ 3 3 , 8 7 1 , 7 1 6 $ 4 2 0 2 0 13 . 1 % 15 . 5 % 21 8 , 5 4 5 , 4 0 0 28 , 6 2 8 , 5 8 6 $ 3 3 , 8 7 1 , 7 1 6 $ 5 2 0 2 1 13 . 5 % 15 . 0 % 22 5 , 1 0 1 , 7 6 2 30 , 4 9 1 , 4 7 1 $ 3 3 , 8 7 1 , 7 1 6 $ 6 2 0 2 2 14 . 5 % 14 . 6 % 23 1 , 8 5 4 , 8 1 5 33 , 5 1 8 , 7 1 7 $ 3 3 , 8 7 1 , 7 1 6 $ 7 2 0 2 3 15 . 2 % 14 . 2 % 23 8 , 8 1 0 , 4 5 9 36 , 2 5 4 , 8 4 6 $ 3 3 , 8 7 1 , 7 1 6 $ 8 2 0 2 4 15 . 2 % 13 . 8 % 24 5 , 9 7 4 , 7 7 3 37 , 2 8 0 , 7 6 9 $ 3 3 , 8 7 1 , 7 1 6 $ 9 2 0 2 5 15 . 1 % 13 . 4 % 25 3 , 3 5 4 , 0 1 6 38 , 3 3 4 , 7 5 4 $ 3 3 , 8 7 1 , 7 1 6 $ 10 2 0 2 6 15 . 1 % 13 . 0 % 26 0 , 9 5 4 , 6 3 7 39 , 4 1 7 , 5 3 7 $ 3 3 , 8 7 1 , 7 1 6 $ 11 2 0 2 7 15 . 1 % 12 . 6 % 26 8 , 7 8 3 , 2 7 6 40 , 5 2 9 , 8 7 4 $ 3 3 , 8 7 1 , 7 1 6 $ 12 2 0 2 8 15 . 1 % 12 . 2 % 27 6 , 8 4 6 , 7 7 4 41 , 6 7 2 , 5 4 0 $ 3 3 , 8 7 1 , 7 1 6 $ 13 2 0 2 9 15 . 0 % 11 . 9 % 28 5 , 1 5 2 , 1 7 7 42 , 8 4 6 , 3 2 9 $ 3 3 , 8 7 1 , 7 1 6 $ 14 2 0 3 0 15 . 0 % 11 . 5 % 29 3 , 7 0 6 , 7 4 3 44 , 0 5 2 , 0 5 6 $ 3 3 , 8 7 1 , 7 1 6 $ 15 2 0 3 1 15 . 0 % 11 . 2 % 30 2 , 5 1 7 , 9 4 5 45 , 2 9 0 , 5 5 6 $ 3 3 , 8 7 1 , 7 1 6 $ 16 2 0 3 2 14 . 9 % 10 . 9 % 31 1 , 5 9 3 , 4 8 3 46 , 5 6 2 , 6 8 6 $ 3 3 , 8 7 1 , 7 1 6 $ 17 2 0 3 3 14 . 9 % 10 . 6 % 32 0 , 9 4 1 , 2 8 8 47 , 8 6 9 , 3 2 6 $ 3 3 , 8 7 1 , 7 1 6 $ 18 2 0 3 4 14 . 9 % 10 . 2 % 33 0 , 5 6 9 , 5 2 6 49 , 2 1 1 , 3 7 5 $ 3 3 , 8 7 1 , 7 1 6 $ 19 2 0 3 5 2. 0 % 9. 9 % 34 0 , 4 8 6 , 6 1 2 6, 7 4 9 , 7 1 0 $ 3 3 , 87 1 , 7 1 6 $ 20 2 0 3 6 1. 5 % 9. 7 % 35 0 , 7 0 1 , 2 1 1 5, 3 2 4 , 6 5 0 $ 3 3 , 87 1 , 7 1 6 $ 21 2 0 3 7 1. 1 % 0. 0 % 36 1 , 2 2 2 , 2 4 7 3, 8 0 8 , 0 1 1 $ - $ 22 2 0 3 8 0. 6 % 0. 0 % 37 2 , 0 5 8 , 9 1 4 2, 1 9 5 , 5 8 2 $ - $ 23 2 0 3 9 0. 1 % 0. 0 % 38 3 , 2 2 0 , 6 8 2 48 2 , 9 8 1 $ - $ 24 2 0 4 0 0. 1 % 0. 0 % 39 4 , 7 1 7 , 3 0 2 49 7 , 4 7 0 $ - $ 25 2 0 4 1 0. 1 % 0. 0 % 40 6 , 5 5 8 , 8 2 1 51 2 , 3 9 4 $ - $ 26 2 0 4 2 0. 1 % 0. 0 % 41 8 , 7 5 5 , 5 8 6 52 7 , 7 6 6 $ - $ 27 2 0 4 3 0. 6 % 0. 0 % 43 1 , 3 1 8 , 2 5 4 2, 4 6 8 , 3 4 9 $ - $ 28 2 0 4 4 0. 8 % 0. 0 % 44 4 , 2 5 7 , 8 0 1 3, 6 9 8 , 0 0 8 $ - $ 29 2 0 4 5 0. 8 % 0. 0 % 45 7 , 5 8 5 , 5 3 5 3, 6 9 3 , 6 0 7 $ - $ 30 2 0 4 6 0. 8 % 0. 0 % 47 1 , 3 1 3 , 1 0 1 3, 6 8 5 , 6 1 5 $ - $ 31 2 0 4 7 0. 8 % 0. 0 % 48 5 , 4 5 2 , 4 9 4 3, 6 7 3 , 8 1 8 $ - $ 32 2 0 4 8 0. 3 % 0. 0 % 50 0 , 0 1 6 , 0 6 9 1, 4 2 6 , 6 8 4 $ - $ 33 2 0 4 9 0. 0 % 0. 0 % 51 5 , 0 1 6 , 5 5 1 34 2 0 5 0 0. 0 % 0. 0 % 53 0 , 4 6 7 , 0 4 8 35 2 0 5 1 0. 0 % 0. 0 % 54 6 , 3 8 1 , 0 5 9 36 2 0 5 2 0. 0 % 0. 0 % 56 2 , 7 7 2 , 4 9 1 37 2 0 5 3 0. 0 % 0. 0 % 57 9 , 6 5 5 , 6 6 6 38 2 0 5 4 0. 0 % 0. 0 % 59 7 , 0 4 5 , 3 3 6 39 2 0 5 5 0. 0 % 0. 0 % 61 4 , 9 5 6 , 6 9 6 40 2 0 5 6 0. 0 % 0. 0 % 63 3 , 4 0 5 , 3 9 7 Su m o f P a y m e n t s 7 1 7 , 2 5 5 , 6 2 6 6 6 8 , 2 6 4 , 1 9 5 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐‐ ‐ ‐ ‐‐‐‐‐ NP V @ 3 % 5 2 1 , 1 1 5 , 3 5 4 49 5 , 0 2 2 , 5 7 0 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐‐ ‐ ‐ ‐‐‐‐‐ Pr o j e c t e d S c e n a r i o Ot h e r A s s u m e d Re t u r n : Ac t u a l Se l e c t M a r k e t R e t u r n Ma r t k e t R e t u r n a t 6 . 0 % Ma r k e t R e t u r n a t 3 . 5 % Ma r k e t R e t u r n a t 1 . 0 % Ma r t k e t R e t u r n a t 7 . 5 % Ot h e r R e t u r n it e m N o . 5 B 1 Pe n s i o n D i s c u s s i o n Ad d i t i o n a l M a t e r i a l s R e c e i v e d Ma y 1 1 , 2 0 1 7 Wa t c h c o l o r s h e r e a n d % o f bu d g e t c o n s u m e d b y U A L h e r e . Gr e e n ‐ G r e a t Ye l l o w ‐ E l e v a t e d Re d ‐ D a n g e r Bla c k ‐ O r g a n i z a t i o n i n T r a u m a Mk t R e t u r n UAL U A L G F R e v P e r i o d M i n i m u m R e c o m m e n d e d 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 Cu r r e n t R e c o m m e n d e d G r o w t h V a l Y r P a y m e n t P a y m e n t 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 2 8 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 Pe r i o d F i s c a l Y r Sc h e d u l e S c h e d u l e 3% R a t e Y e a r P l u s L o s s P l u s L o s s 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 28 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 2 0 3 4 2 0 3 5 2 0 3 6 1 2 0 1 7 12 . 4 % 1 2 . 4 % 20 0 , 0 0 0 , 0 0 0 24 , 7 0 1 , 5 9 3 $ 2 4 , 7 0 1 , 5 9 3 $ 2 2 0 1 8 12 . 2 % 1 6 . 4 % 20 6 , 0 0 0 , 0 0 0 25 , 0 4 5 , 7 7 6 $ 3 3 , 8 7 1 , 7 1 6 $ 3 2 0 1 9 12 . 6 % 1 6 . 0 % 21 2 , 1 8 0 , 0 0 0 26 , 8 0 2 , 1 8 9 $ 3 3 , 8 7 1 , 7 1 6 $ 4 2 0 2 0 13 . 4 % 1 5 . 8 % 21 8 , 5 4 5 , 4 0 0 29 , 1 8 1 , 4 8 3 $ 3 4 , 4 2 4 , 6 1 2 $ 55 2 , 8 9 6 5 2 0 2 1 14 . 1 % 1 5 . 6 % 22 5 , 1 0 1 , 7 6 2 31 , 6 3 3 , 2 0 2 $ 3 5 , 0 1 3 , 4 4 6 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 0 2 2 15 . 2 % 1 5 . 4 % 23 1 , 8 5 4 , 8 1 5 35 , 2 8 7 , 5 5 6 $ 3 5 , 6 4 0 , 5 5 5 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 7 2 0 2 3 16 . 2 % 1 5 . 2 % 23 8 , 8 1 0 , 4 5 9 38 , 6 9 1 , 5 5 6 $ 3 6 , 3 0 8 , 4 2 6 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 8 2 0 2 4 16 . 4 % 1 5 . 1 % 24 5 , 9 7 4 , 7 7 3 40 , 4 2 8 , 7 6 1 $ 3 7 , 0 1 9 , 7 0 8 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 9 2 0 2 5 16 . 7 % 1 4 . 9 % 25 3 , 3 5 4 , 0 1 6 42 , 2 4 0 , 2 6 2 $ 3 7 , 7 7 7 , 2 2 4 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 10 2 0 2 6 16 . 9 % 1 4 . 8 % 26 0 , 9 5 4 , 6 3 7 44 , 1 2 9 , 7 9 9 $ 3 8 , 5 8 3 , 9 7 8 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 11 2 0 2 7 17 . 2 % 1 4 . 7 % 26 8 , 7 8 3 , 2 7 6 46 , 1 0 1 , 3 2 9 $ 3 9 , 4 4 3 , 1 7 1 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 12 2 0 2 8 17 . 4 % 1 4 . 6 % 27 6 , 8 4 6 , 7 7 4 48 , 1 5 9 , 0 3 6 $ 4 0 , 3 5 8 , 2 1 2 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 13 2 0 2 9 17 . 6 % 1 4 . 5 % 28 5 , 1 5 2 , 1 7 7 50 , 3 0 7 , 3 4 3 $ 4 1 , 3 3 2 , 7 3 0 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 14 2 0 3 0 17 . 9 % 1 4 . 4 % 29 3 , 7 0 6 , 7 4 3 52 , 5 5 0 , 9 3 2 $ 4 2 , 3 7 0 , 5 9 2 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 15 2 0 3 1 18 . 1 % 1 4 . 4 % 30 2 , 5 1 7 , 9 4 5 54 , 8 9 4 , 7 5 5 $ 4 3 , 4 7 5 , 9 1 5 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 16 2 0 3 2 18 . 4 % 1 4 . 3 % 31 1 , 5 9 3 , 4 8 3 57 , 3 4 4 , 0 5 5 $ 4 4 , 6 5 3 , 0 8 4 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 17 2 0 3 3 18 . 7 % 1 4 . 3 % 32 0 , 9 4 1 , 2 8 8 59 , 9 8 5 , 8 6 9 $ 4 5 , 9 8 8 , 2 5 9 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 18 2 0 3 4 19 . 0 % 1 4 . 3 % 33 0 , 5 6 9 , 5 2 6 62 , 7 4 9 , 8 7 9 $ 4 7 , 4 1 0 , 2 2 0 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 19 2 0 3 5 6. 4 % 1 4 . 4 % 34 0 , 4 8 6 , 6 1 2 21 , 8 0 2 , 6 0 3 $ 4 8 , 9 2 4 , 6 0 9 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 20 2 0 3 6 6. 3 % 1 4 . 4 % 35 0 , 7 0 1 , 2 1 1 21 , 9 9 0 , 3 6 6 $ 5 0 , 5 3 7 , 4 3 2 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 21 2 0 3 7 5. 7 % 4 . 6 % 36 1 , 2 2 2 , 2 4 7 20 , 4 7 3 , 7 2 8 $ 1 6 , 6 6 5 , 7 1 6 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 22 2 0 3 8 5. 1 % 4 . 5 % 37 2 , 0 5 8 , 9 1 4 18 , 8 6 1 , 2 9 9 $ 1 6 , 6 6 5 , 7 1 6 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 23 2 0 3 9 4. 5 % 4 . 3 % 38 3 , 2 2 0 , 6 8 2 17 , 1 4 8 , 6 9 7 $ 1 6 , 6 6 5 , 7 1 6 $ 55 2 , 8 9 6 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 24 2 0 4 0 4. 2 % 4 . 1 % 39 4 , 7 1 7 , 3 0 2 16 , 6 1 0 , 2 9 0 $ 1 6 , 1 1 2 , 8 2 0 $ 58 8 , 8 3 4 6 2 7 , 10 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 25 2 0 4 1 3. 9 % 3 . 8 % 40 6 , 5 5 8 , 8 2 1 16 , 0 3 6 , 3 8 0 $ 1 5 , 5 2 3 , 9 8 6 $ 62 7 , 1 0 9 6 6 7 , 87 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 26 2 0 4 2 3. 7 % 3 . 6 % 41 8 , 7 5 5 , 5 8 6 15 , 4 2 4 , 6 4 3 $ 1 4 , 8 9 6 , 8 7 7 $ 66 7 , 8 7 1 7 1 1 , 28 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 27 2 0 4 3 3. 9 % 3 . 3 % 43 1 , 3 1 8 , 2 5 4 16 , 6 9 7 , 3 5 5 $ 1 4 , 2 2 9 , 0 0 6 $ 71 1 , 2 8 2 7 5 7 , 51 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 28 2 0 4 4 3. 9 % 3 . 0 % 44 4 , 2 5 7 , 8 0 1 17 , 2 1 5 , 7 3 2 $ 1 3 , 5 1 7 , 7 2 4 $ 75 7 , 5 1 6 8 0 6 , 75 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 29 2 0 4 5 3. 6 % 2 . 8 % 45 7 , 5 8 5 , 5 3 5 16 , 4 5 3 , 8 1 6 $ 1 2 , 7 6 0 , 2 0 9 $ 80 6 , 7 5 4 8 5 9 , 19 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 30 2 0 4 6 3. 3 % 2 . 5 % 47 1 , 3 1 3 , 1 0 1 15 , 6 3 9 , 0 6 9 $ 1 1 , 9 5 3 , 4 5 4 $ 85 9 , 1 9 3 9 1 5 , 041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 31 2 0 4 7 3. 0 % 2 . 3 % 48 5 , 4 5 2 , 4 9 4 14 , 7 6 8 , 0 7 9 $ 1 1 , 0 9 4 , 2 6 1 $ 915,041 9 7 4 , 518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 32 2 0 4 8 2. 3 % 2 . 0 % 50 0 , 0 1 6 , 0 6 9 11 , 6 0 5 , 9 0 4 $ 1 0 , 1 7 9 , 2 2 0 $ 974,518 1 , 037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 33 2 0 4 9 0. 0 % 0 . 0 % 51 5 , 0 1 6 , 5 5 1 1,037,862 1 , 105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 34 2 0 5 0 0. 0 % 0 . 0 % 53 0 , 4 6 7 , 0 4 8 1,105,323 1 , 177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 35 2 0 5 1 0. 0 % 0 . 0 % 54 6 , 3 8 1 , 0 5 9 1,177,169 1 , 335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 36 2 0 5 2 0. 0 % 0 . 0 % 56 2 , 7 7 2 , 4 9 1 1,335,175 1 , 4 2 1 , 9 6 1 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 37 2 0 5 3 0. 0 % 0 . 0 % 57 9 , 6 5 5 , 6 6 6 1,421,961 1 , 5 1 4 , 3 8 8 1 , 6 1 2 , 8 2 4 38 2 0 5 4 0. 0 % 0 . 0 % 59 7 , 0 4 5 , 3 3 6 1,514,388 1 , 6 1 2 , 8 2 4 39 2 0 5 5 0. 0 % 0 . 0 % 61 4 , 9 5 6 , 6 9 6 1,612,824 40 2 0 5 6 0. 0 % 0 . 0 % 63 3 , 4 0 5 , 3 9 7 Su m o f P a y m e n t s 1 , 0 1 0 , 9 6 3 , 3 3 8 9 6 1 , 9 7 1 , 9 0 7 1 1 , 05 7 , 9 2 3 1 1 , 77 6 , 6 8 8 1 2 , 5 4 2 , 1 7 3 1 3 , 3 5 7 , 4 1 4 1 4 , 2 2 5 , 6 4 6 1 5 , 1 5 0 , 3 1 3 1 6 , 1 3 5 , 0 8 3 1 7 , 1 8 3 , 8 6 4 1 8 , 3 0 0 , 8 1 5 1 9 , 4 9 0 , 3 6 8 2 0 , 7 5 7 , 2 4 2 2 2 , 1 0 6 , 4 6 2 2 3 , 5 4 3 , 3 8 2 2 6 , 7 0 3 , 4 9 3 2 8 , 4 3 9 , 2 2 0 3 0 , 2 8 7 , 7 6 9 3 2 , 2 5 6 , 4 7 4 NP V @ 3 % 6 7 9 , 6 8 3 , 8 1 7 6 5 3 , 5 9 1 , 0 3 3 8 , 22 5 , 6 9 9 8 , 76 0 , 3 6 9 9 , 32 9 , 7 9 3 9 , 9 3 6 , 2 3 0 1 0 , 5 8 2 , 0 8 4 1 1 , 2 6 9 , 9 2 0 1 2 , 0 0 2 , 4 6 5 1 2 , 7 8 2 , 6 2 5 1 3 , 6 1 3 , 4 9 6 1 4 , 4 9 8 , 3 7 3 1 5 , 4 4 0 , 7 6 7 1 6 , 4 4 4 , 4 1 7 1 7 , 5 1 3 , 3 0 4 1 9 , 8 6 4 , 0 2 7 2 1 , 1 5 5 , 1 8 9 2 2 , 5 3 0 , 2 7 6 2 3 , 9 9 4 , 7 4 4 Pr o j e c t e d S c e n a r i o Ot h e r A s s u m e d Re t u r n : Ac t u a l Se l e c t M a r k e t R e t u r n 6. 5 0 % Ma r t k e t R e t u r n a t 6 . 0 % Ma r k e t R e t u r n a t 3 . 5 % Ma r k e t R e t u r n a t 1 . 0 % Ma r t k e t R e t u r n a t 7 . 5 % Ot h e r R e t u r n Wa t c h c o l o r s h e r e a n d % o f bu d g e t c o n s u m e d b y U A L h e r e . Gr e e n ‐ G r e a t Ye l l o w ‐ E l e v a t e d Re d ‐ D a n g e r Bla c k ‐ O r g a n i z a t i o n i n T r a u m a Mk t R e t u r n UAL U A L G F R e v P e r i o d M i n i m u m R e c o m m e n d e d 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 Cu r r e n t R e c o m m e n d e d G r o w t h V a l Y r P a y m e n t P a y m e n t 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 2 8 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 Pe r i o d F i s c a l Y r Sc h e d u l e S c h e d u l e 3% R a t e Y e a r P l u s L o s s P l u s L o s s 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 28 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 2 0 3 4 2 0 3 5 2 0 3 6 1 2 0 1 7 12 . 4 % 1 2 . 4 % 20 0 , 0 0 0 , 0 0 0 24 , 7 0 1 , 5 9 3 $ 2 4 , 7 0 1 , 5 9 3 $ 2 2 0 1 8 12 . 2 % 1 6 . 4 % 20 6 , 0 0 0 , 0 0 0 25 , 0 4 5 , 7 7 6 $ 3 3 , 8 7 1 , 7 1 6 $ 3 2 0 1 9 12 . 6 % 1 6 . 0 % 21 2 , 1 8 0 , 0 0 0 26 , 8 0 2 , 1 8 9 $ 3 3 , 8 7 1 , 7 1 6 $ 4 2 0 2 0 13 . 5 % 1 5 . 9 % 21 8 , 5 4 5 , 4 0 0 29 , 4 5 7 , 9 3 1 $ 3 4 , 7 0 1 , 0 6 0 $ 82 9 , 3 4 4 5 2 0 2 1 14 . 3 % 1 5 . 8 % 22 5 , 1 0 1 , 7 6 2 32 , 1 9 9 , 9 2 0 $ 3 5 , 5 8 0 , 1 6 5 $ 82 9 , 3 4 4 87 9 , 1 0 5 6 2 0 2 2 15 . 6 % 1 5 . 7 % 23 1 , 8 5 4 , 8 1 5 36 , 1 5 9 , 0 1 7 $ 3 6 , 5 1 2 , 0 1 6 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 7 2 0 2 3 16 . 7 % 1 5 . 7 % 23 8 , 8 1 0 , 4 5 9 39 , 8 8 2 , 9 0 8 $ 3 7 , 4 9 9 , 7 7 8 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 8 2 0 2 4 17 . 1 % 1 5 . 7 % 24 5 , 9 7 4 , 7 7 3 41 , 9 5 5 , 8 6 0 $ 3 8 , 5 4 6 , 8 0 6 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 9 2 0 2 5 17 . 4 % 1 5 . 7 % 25 3 , 3 5 4 , 0 1 6 44 , 1 1 9 , 6 9 4 $ 3 9 , 6 5 6 , 6 5 6 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 10 2 0 2 6 17 . 8 % 1 5 . 6 % 26 0 , 9 5 4 , 6 3 7 46 , 3 7 8 , 9 1 8 $ 4 0 , 8 3 3 , 0 9 7 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 11 2 0 2 7 18 . 1 % 1 5 . 7 % 26 8 , 7 8 3 , 2 7 6 48 , 7 3 8 , 2 8 2 $ 4 2 , 0 8 0 , 1 2 4 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 12 2 0 2 8 18 . 5 % 1 5 . 7 % 27 6 , 8 4 6 , 7 7 4 51 , 2 0 2 , 7 9 7 $ 4 3 , 4 0 1 , 9 7 2 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 13 2 0 2 9 18 . 9 % 1 5 . 7 % 28 5 , 1 5 2 , 1 7 7 53 , 7 7 7 , 7 4 5 $ 4 4 , 8 0 3 , 1 3 2 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 14 2 0 3 0 19 . 2 % 1 5 . 8 % 29 3 , 7 0 6 , 7 4 3 56 , 4 6 8 , 7 0 1 $ 4 6 , 2 8 8 , 3 6 1 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 15 2 0 3 1 19 . 6 % 1 5 . 8 % 30 2 , 5 1 7 , 9 4 5 59 , 2 8 1 , 5 4 4 $ 4 7 , 8 6 2 , 7 0 4 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 16 2 0 3 2 20 . 0 % 1 5 . 9 % 31 1 , 5 9 3 , 4 8 3 62 , 2 2 2 , 4 7 8 $ 4 9 , 5 3 1 , 5 0 8 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 17 2 0 3 3 20 . 4 % 16 . 0 % 32 0 , 9 4 1 , 2 8 8 65 , 4 0 4 , 1 8 5 $ 5 1 , 4 0 6 , 5 7 5 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 18 2 0 3 4 20 . 8 % 16 . 2 % 33 0 , 5 6 9 , 5 2 6 68 , 7 3 3 , 8 0 6 $ 5 3 , 3 9 4 , 1 4 7 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 19 2 0 3 5 8. 3 % 1 6 . 3 % 34 0 , 4 8 6 , 6 1 2 28 , 3 7 8 , 9 6 7 $ 5 5 , 5 0 0 , 9 7 3 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 20 2 0 3 6 8. 3 % 1 6 . 5 % 35 0 , 7 0 1 , 2 1 1 29 , 1 8 7 , 1 4 3 $ 5 7 , 7 3 4 , 2 0 9 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 21 2 0 3 7 7. 7 % 6 . 6 % 36 1 , 2 2 2 , 2 4 7 27 , 6 7 0 , 5 0 4 $ 2 3 , 8 6 2 , 4 9 3 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 22 2 0 3 8 7. 0 % 6 . 4 % 37 2 , 0 5 8 , 9 1 4 26 , 0 5 8 , 0 7 5 $ 2 3 , 8 6 2 , 4 9 3 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 23 2 0 3 9 6. 4 % 6 . 2 % 38 3 , 2 2 0 , 6 8 2 24 , 3 4 5 , 4 7 3 $ 2 3 , 8 6 2 , 4 9 3 $ 82 9 , 3 4 4 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 24 2 0 4 0 6. 0 % 5 . 8 % 39 4 , 7 1 7 , 3 0 2 23 , 5 3 0 , 6 1 9 $ 2 3 , 0 3 3 , 1 4 9 $ 87 9 , 1 0 5 9 3 1 , 85 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 25 2 0 4 1 5. 6 % 5 . 4 % 40 6 , 5 5 8 , 8 2 1 22 , 6 6 6 , 4 3 8 $ 2 2 , 1 5 4 , 0 4 4 $ 93 1 , 8 5 1 9 8 7 , 76 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 26 2 0 4 2 5. 2 % 5 . 1 % 41 8 , 7 5 5 , 5 8 6 21 , 7 4 9 , 9 5 8 $ 2 1 , 2 2 2 , 1 9 2 $ 98 7 , 7 6 2 1 , 04 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 27 2 0 4 3 5. 3 % 4 . 7 % 43 1 , 3 1 8 , 2 5 4 22 , 7 0 2 , 7 7 9 $ 2 0 , 2 3 4 , 4 3 0 $ 1,0 4 7 , 0 2 8 1 , 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 28 2 0 4 4 5. 2 % 4 . 3 % 44 4 , 2 5 7 , 8 0 1 22 , 8 8 5 , 4 1 0 $ 1 9 , 1 8 7 , 4 0 2 $ 1, 1 0 9 , 8 5 0 1 , 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 29 2 0 4 5 4. 8 % 4 . 0 % 45 7 , 5 8 5 , 5 3 5 21 , 7 7 1 , 1 6 0 $ 1 8 , 0 7 7 , 5 5 3 $ 1, 1 7 6 , 4 4 1 1 , 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 30 2 0 4 6 4. 4 % 3 . 6 % 47 1 , 3 1 3 , 1 0 1 20 , 5 8 6 , 7 2 7 $ 1 6 , 9 0 1 , 1 1 2 $ 1, 2 4 7 , 0 2 7 1 , 3 2 1 , 8 4 9 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 31 2 0 4 7 4. 0 % 3 . 2 % 48 5 , 4 5 2 , 4 9 4 19 , 3 2 7 , 9 0 3 $ 1 5 , 6 5 4 , 0 8 5 $ 1,321,849 1 , 4 0 1 , 1 6 0 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 32 2 0 4 8 3. 2 % 2 . 9 % 50 0 , 0 1 6 , 0 6 9 15 , 7 5 8 , 9 2 0 $ 1 4 , 3 3 2 , 2 3 6 $ 1,401,160 1 , 4 8 5 , 2 2 9 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 33 2 0 4 9 0. 0 % 0 . 0 % 51 5 , 0 1 6 , 5 5 1 1,485,229 1 , 574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 34 2 0 5 0 0. 0 % 0 . 0 % 53 0 , 4 6 7 , 0 4 8 1,574,343 1 , 668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 35 2 0 5 1 0. 0 % 0 . 0 % 54 6 , 3 8 1 , 0 5 9 1,668,804 1 , 875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 36 2 0 5 2 0. 0 % 0 . 0 % 56 2 , 7 7 2 , 4 9 1 1,875,068 1 , 9 8 7 , 5 7 2 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 37 2 0 5 3 0. 0 % 0 . 0 % 57 9 , 6 5 5 , 6 6 6 1,987,572 2 , 1 0 6 , 8 2 6 2 , 2 3 3 , 2 3 6 38 2 0 5 4 0. 0 % 0 . 0 % 59 7 , 0 4 5 , 3 3 6 2,106,826 2 , 2 3 3 , 2 3 6 39 2 0 5 5 0. 0 % 0 . 0 % 61 4 , 9 5 6 , 6 9 6 2,233,236 40 2 0 5 6 0. 0 % 0 . 0 % 63 3 , 4 0 5 , 3 9 7 Su m o f P a y m e n t s 1 , 1 3 9 , 1 5 3 , 4 2 1 1 , 0 9 0 , 1 6 1 , 9 9 1 1 6 , 5 8 6 , 8 8 5 1 7 , 58 2 , 0 9 8 1 8 , 6 3 7 , 0 2 3 1 9 , 7 5 5 , 2 4 5 2 0 , 9 4 0 , 5 6 0 2 2 , 1 9 6 , 9 9 3 2 3 , 5 2 8 , 8 1 3 2 4 , 9 4 0 , 5 4 1 2 6 , 4 3 6 , 9 7 4 2 8 , 0 2 3 , 1 9 2 2 9 , 7 0 4 , 5 8 4 3 1 , 4 8 6 , 8 5 9 3 3 , 3 7 6 , 0 7 1 3 7 , 5 0 1 , 3 5 3 3 9 , 7 5 1 , 4 3 4 4 2 , 1 3 6 , 5 2 0 4 4 , 6 6 4 , 7 1 1 NP V @ 3 % 7 4 9 , 5 0 1 , 4 6 3 7 2 3 , 4 0 8 , 6 7 9 1 2 , 33 8 , 5 4 8 1 3 , 07 8 , 8 6 1 1 3 , 8 6 3 , 5 9 2 1 4 , 6 9 5 , 4 0 8 1 5 , 5 7 7 , 1 3 2 1 6 , 5 1 1 , 7 6 0 1 7 , 5 0 2 , 4 6 6 1 8 , 5 5 2 , 6 1 4 1 9 , 6 6 5 , 7 7 1 2 0 , 8 4 5 , 7 1 7 2 2 , 0 9 6 , 4 6 0 2 3 , 4 2 2 , 2 4 8 2 4 , 8 2 7 , 5 8 2 2 7 , 8 9 6 , 2 7 2 2 9 , 5 7 0 , 0 4 8 3 1 , 3 4 4 , 2 5 1 3 3 , 2 2 4 , 9 0 6 Pr o j e c t e d S c e n a r i o Ot h e r A s s u m e d Re t u r n : Ac t u a l Se l e c t M a r k e t R e t u r n Ma r t k e t R e t u r n a t 6 . 0 % Ma r k e t R e t u r n a t 3 . 5 % Ma r k e t R e t u r n a t 1 . 0 % Ma r t k e t R e t u r n a t 7 . 5 % Ot h e r R e t u r n Wa t c h c o l o r s h e r e a n d % o f bu d g e t c o n s u m e d b y U A L h e r e . Gr e e n ‐ G r e a t Ye l l o w ‐ E l e v a t e d Re d ‐ D a n g e r Bla c k ‐ O r g a n i z a t i o n i n T r a u m a Mk t R e t u r n UAL U A L G F R e v P e r i o d M i n i m u m R e c o m m e n d e d 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 Cu r r e n t R e c o m m e n d e d G r o w t h V a l Y r P a y m e n t P a y m e n t 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 2 8 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 Pe r i o d F i s c a l Y r Sc h e d u l e S c h e d u l e 3% R a t e Y e a r P l u s L o s s P l u s L o s s 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 28 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 2 0 3 4 2 0 3 5 2 0 3 6 1 2 0 1 7 12 . 4 % 1 2 . 4 % 20 0 , 0 0 0 , 0 0 0 24 , 7 0 1 , 5 9 3 $ 2 4 , 7 0 1 , 5 9 3 $ 2 2 0 1 8 12 . 2 % 1 6 . 4 % 20 6 , 0 0 0 , 0 0 0 25 , 0 4 5 , 7 7 6 $ 3 3 , 8 7 1 , 7 1 6 $ 3 2 0 1 9 12 . 6 % 1 6 . 0 % 21 2 , 1 8 0 , 0 0 0 26 , 8 0 2 , 1 8 9 $ 3 3 , 8 7 1 , 7 1 6 $ 4 2 0 2 0 13 . 7 % 1 6 . 1 % 21 8 , 5 4 5 , 4 0 0 30 , 0 1 0 , 8 2 7 $ 3 5 , 2 5 3 , 9 5 6 $ 1, 3 8 2 , 2 4 0 5 2 0 2 1 14 . 8 % 1 6 . 3 % 22 5 , 1 0 1 , 7 6 2 33 , 3 2 5 , 0 6 4 $ 3 6 , 7 0 5 , 3 0 9 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 6 2 0 2 2 16 . 3 % 1 6 . 5 % 23 1 , 8 5 4 , 8 1 5 37 , 8 7 6 , 2 2 9 $ 3 8 , 2 2 9 , 2 2 9 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 7 2 0 2 3 17 . 7 % 1 6 . 7 % 23 8 , 8 1 0 , 4 5 9 42 , 2 1 2 , 4 7 5 $ 3 9 , 8 2 9 , 3 4 5 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 8 2 0 2 4 18 . 3 % 1 6 . 9 % 24 5 , 9 7 4 , 7 7 3 44 , 9 1 8 , 5 2 0 $ 4 1 , 5 0 9 , 4 6 7 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 9 2 0 2 5 18 . 8 % 1 7 . 1 % 25 3 , 3 5 4 , 0 1 6 47 , 7 3 6 , 6 3 3 $ 4 3 , 2 7 3 , 5 9 4 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 10 2 0 2 6 19 . 4 % 1 7 . 3 % 26 0 , 9 5 4 , 6 3 7 50 , 6 7 1 , 7 5 0 $ 4 5 , 1 2 5 , 9 2 9 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 11 2 0 2 7 20 . 0 % 1 7 . 5 % 26 8 , 7 8 3 , 2 7 6 53 , 7 2 9 , 0 3 8 $ 4 7 , 0 7 0 , 8 8 0 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 12 2 0 2 8 20 . 6 % 17 . 7 % 27 6 , 8 4 6 , 7 7 4 56 , 9 1 3 , 9 0 2 $ 4 9 , 1 1 3 , 0 7 8 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 13 2 0 2 9 21 . 1 % 18 . 0 % 28 5 , 1 5 2 , 1 7 7 60 , 2 3 2 , 0 0 0 $ 5 1 , 2 5 7 , 3 8 7 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 14 2 0 3 0 21 . 7 % 18 . 2 % 29 3 , 7 0 6 , 7 4 3 63 , 6 8 9 , 2 5 1 $ 5 3 , 5 0 8 , 9 1 1 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 15 2 0 3 1 22 . 2 % 18 . 5 % 30 2 , 5 1 7 , 9 4 5 67 , 2 9 1 , 8 5 1 $ 5 5 , 8 7 3 , 0 1 1 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 16 2 0 3 2 22 . 8 % 18 . 7 % 31 1 , 5 9 3 , 4 8 3 71 , 0 4 6 , 2 8 6 $ 5 8 , 3 5 5 , 3 1 6 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 17 2 0 3 3 23 . 4 % 19 . 0 % 32 0 , 9 4 1 , 2 8 8 75 , 0 8 9 , 6 6 7 $ 6 1 , 0 9 2 , 0 5 7 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 18 2 0 3 4 24 . 0 % 19 . 4 % 33 0 , 5 6 9 , 5 2 6 79 , 3 0 5 , 2 9 5 $ 6 3 , 9 6 5 , 6 3 6 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 19 2 0 3 5 11 . 7 % 1 9 . 7 % 34 0 , 4 8 6 , 6 1 2 39 , 8 6 0 , 8 8 7 $ 6 6 , 9 8 2 , 8 9 3 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 20 2 0 3 6 11 . 9 % 20 . 0 % 35 0 , 7 0 1 , 2 1 1 41 , 6 0 3 , 9 4 7 $ 7 0 , 1 5 1 , 0 1 4 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 21 2 0 3 7 11 . 1 % 1 0 . 0 % 36 1 , 2 2 2 , 2 4 7 40 , 0 8 7 , 3 0 9 $ 3 6 , 2 7 9 , 2 9 8 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 22 2 0 3 8 10 . 3 % 9 . 8 % 37 2 , 0 5 8 , 9 1 4 38 , 4 7 4 , 8 8 0 $ 3 6 , 2 7 9 , 2 9 8 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 23 2 0 3 9 9. 6 % 9 . 5 % 38 3 , 2 2 0 , 6 8 2 36 , 7 6 2 , 2 7 8 $ 3 6 , 2 7 9 , 2 9 8 $ 1, 3 8 2 , 2 4 0 1 , 45 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 24 2 0 4 0 9. 0 % 8 . 8 % 39 4 , 7 1 7 , 3 0 2 35 , 3 9 4 , 5 2 7 $ 3 4 , 8 9 7 , 0 5 7 $ 1, 4 5 1 , 3 5 2 1 , 52 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 25 2 0 4 1 8. 4 % 8 . 2 % 40 6 , 5 5 8 , 8 2 1 33 , 9 5 8 , 0 9 9 $ 3 3 , 4 4 5 , 7 0 5 $ 1, 5 2 3 , 9 2 0 1 , 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 26 2 0 4 2 7. 7 % 7 . 6 % 41 8 , 7 5 5 , 5 8 6 32 , 4 4 9 , 5 5 1 $ 3 1 , 9 2 1 , 7 8 5 $ 1, 6 0 0 , 1 1 6 1 , 6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 27 2 0 4 3 7. 6 % 7 . 0 % 43 1 , 3 1 8 , 2 5 4 32 , 7 9 0 , 0 1 8 $ 3 0 , 3 2 1 , 6 6 9 $ 1,6 8 0 , 1 2 2 1 , 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 28 2 0 4 4 7. 3 % 6 . 4 % 44 4 , 2 5 7 , 8 0 1 32 , 3 3 9 , 5 5 5 $ 2 8 , 6 4 1 , 5 4 7 $ 1, 7 6 4 , 1 2 8 1 , 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 29 2 0 4 5 6. 7 % 5 . 9 % 45 7 , 5 8 5 , 5 3 5 30 , 5 7 1 , 0 2 7 $ 2 6 , 8 7 7 , 4 1 9 $ 1, 8 5 2 , 3 3 4 1 , 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 30 2 0 4 6 6. 1 % 5 . 3 % 47 1 , 3 1 3 , 1 0 1 28 , 7 1 0 , 6 9 9 $ 2 5 , 0 2 5 , 0 8 5 $ 1, 9 4 4 , 9 5 1 2 , 0 4 2 , 1 9 9 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 31 2 0 4 7 5. 5 % 4 . 8 % 48 5 , 4 5 2 , 4 9 4 26 , 7 5 3 , 9 5 2 $ 2 3 , 0 8 0 , 1 3 4 $ 2,042,199 2 , 1 4 4 , 3 0 8 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 32 2 0 4 8 4. 5 % 4 . 2 % 50 0 , 0 1 6 , 0 6 9 22 , 4 6 4 , 6 1 9 $ 2 1 , 0 3 7 , 9 3 5 $ 2,144,308 2 , 2 5 1 , 5 2 4 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 33 2 0 4 9 0. 0 % 0 . 0 % 51 5 , 0 1 6 , 5 5 1 2,251,524 2 , 364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 34 2 0 5 0 0. 0 % 0 . 0 % 53 0 , 4 6 7 , 0 4 8 2,364,100 2 , 482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 35 2 0 5 1 0. 0 % 0 . 0 % 54 6 , 3 8 1 , 0 5 9 2,482,305 2 , 736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 36 2 0 5 2 0. 0 % 0 . 0 % 56 2 , 7 7 2 , 4 9 1 2,736,741 2 , 8 7 3 , 5 7 8 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 37 2 0 5 3 0. 0 % 0 . 0 % 57 9 , 6 5 5 , 6 6 6 2,873,578 3 , 0 1 7 , 2 5 7 3 , 1 6 8 , 1 2 0 38 2 0 5 4 0. 0 % 0 . 0 % 59 7 , 0 4 5 , 3 3 6 3,017,257 3 , 1 6 8 , 1 2 0 39 2 0 5 5 0. 0 % 0 . 0 % 61 4 , 9 5 6 , 6 9 6 3,168,120 40 2 0 5 6 0. 0 % 0 . 0 % 63 3 , 4 0 5 , 3 9 7 Su m o f P a y m e n t s 1 , 3 6 2 , 8 1 9 , 6 9 4 1 , 3 1 3 , 8 2 8 , 2 6 4 2 7 , 6 4 4 , 8 0 8 2 9 , 02 7 , 0 4 8 3 0 , 4 7 8 , 4 0 0 3 2 , 0 0 2 , 3 2 0 3 3 , 6 0 2 , 4 3 6 3 5 , 2 8 2 , 5 5 8 3 7 , 0 4 6 , 6 8 6 3 8 , 8 9 9 , 0 2 0 4 0 , 8 4 3 , 9 7 1 4 2 , 8 8 6 , 1 7 0 4 5 , 0 3 0 , 4 7 8 4 7 , 2 8 2 , 0 0 2 4 9 , 6 4 6 , 1 0 2 5 4 , 7 3 4 , 8 2 8 5 7 , 4 7 1 , 5 6 9 6 0 , 3 4 5 , 1 4 8 6 3 , 3 6 2 , 4 0 5 NP V @ 3 % 8 7 2 , 4 7 8 , 8 3 9 8 4 6 , 3 8 6 , 0 5 5 2 0 , 56 4 , 2 4 6 2 1 , 59 2 , 4 5 9 2 2 , 6 7 2 , 0 8 2 2 3 , 8 0 5 , 6 8 6 2 4 , 9 9 5 , 9 7 0 2 6 , 2 4 5 , 7 6 9 2 7 , 5 5 8 , 0 5 7 2 8 , 9 3 5 , 9 6 0 3 0 , 3 8 2 , 7 5 8 3 1 , 9 0 1 , 8 9 6 3 3 , 4 9 6 , 9 9 1 3 5 , 1 7 1 , 8 4 0 3 6 , 9 3 0 , 4 3 2 4 0 , 7 1 5 , 8 0 1 4 2 , 7 5 1 , 5 9 1 4 4 , 8 8 9 , 1 7 1 4 7 , 1 3 3 , 6 3 0 Pr o j e c t e d S c e n a r i o Ot h e r A s s u m e d Re t u r n : Ac t u a l Se l e c t M a r k e t R e t u r n 5. 0 0 % Ma r t k e t R e t u r n a t 6 . 0 % Ma r k e t R e t u r n a t 3 . 5 % Ma r k e t R e t u r n a t 1 . 0 % Ma r t k e t R e t u r n a t 7 . 5 % Ot h e r R e t u r n Wa t c h c o l o r s h e r e a n d % o f bu d g e t c o n s u m e d b y U A L h e r e . Gr e e n ‐ G r e a t Ye l l o w ‐ E l e v a t e d Re d ‐ D a n g e r Bla c k ‐ O r g a n i z a t i o n i n T r a u m a Mk t R e t u r n UAL U A L G F R e v P e r i o d M i n i m u m R e c o m m e n d e d 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 Cu r r e n t R e c o m m e n d e d G r o w t h V a l Y r P a y m e n t P a y m e n t 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 2 8 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 Pe r i o d F i s c a l Y r Sc h e d u l e S c h e d u l e 3% R a t e Y e a r P l u s L o s s P l u s L o s s 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 28 2 0 2 9 2 0 3 0 2 0 3 1 2 0 3 2 2 0 3 3 2 0 3 4 2 0 3 5 2 0 3 6 1 2 0 1 7 12 . 4 % 1 2 . 4 % 20 0 , 0 0 0 , 0 0 0 24 , 7 0 1 , 5 9 3 $ 2 4 , 7 0 1 , 5 9 3 $ 2 2 0 1 8 12 . 2 % 1 6 . 4 % 20 6 , 0 0 0 , 0 0 0 25 , 0 4 5 , 7 7 6 $ 3 3 , 8 7 1 , 7 1 6 $ 3 2 0 1 9 12 . 6 % 1 6 . 0 % 21 2 , 1 8 0 , 0 0 0 26 , 8 0 2 , 1 8 9 $ 3 3 , 8 7 1 , 7 1 6 $ 4 2 0 2 0 14 . 0 % 1 6 . 4 % 21 8 , 5 4 5 , 4 0 0 30 , 5 6 3 , 7 2 3 $ 3 5 , 8 0 6 , 8 5 2 $ 1, 9 3 5 , 1 3 7 5 2 0 2 1 15 . 3 % 1 6 . 8 % 22 5 , 1 0 1 , 7 6 2 34 , 4 3 9 , 1 5 0 $ 3 7 , 8 1 9 , 3 9 4 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 6 2 0 2 2 17 . 1 % 1 7 . 2 % 23 1 , 8 5 4 , 8 1 5 39 , 5 5 9 , 4 3 9 $ 3 9 , 9 1 2 , 4 3 8 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 7 2 0 2 3 18 . 6 % 1 7 . 6 % 23 8 , 8 1 0 , 4 5 9 44 , 4 7 2 , 3 3 3 $ 4 2 , 0 8 9 , 2 0 4 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 8 2 0 2 4 19 . 4 % 1 8 . 0 % 24 5 , 9 7 4 , 7 7 3 47 , 7 6 2 , 0 9 3 $ 4 4 , 3 5 3 , 0 4 0 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 9 2 0 2 5 20 . 2 % 18 . 4 % 25 3 , 3 5 4 , 0 1 6 51 , 1 7 0 , 4 6 7 $ 4 6 , 7 0 7 , 4 2 9 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 10 2 0 2 6 21 . 0 % 18 . 8 % 26 0 , 9 5 4 , 6 3 7 54 , 7 0 1 , 8 1 5 $ 4 9 , 1 5 5 , 9 9 4 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 11 2 0 2 7 21 . 7 % 19 . 2 % 26 8 , 7 8 3 , 2 7 6 58 , 3 6 0 , 6 6 0 $ 5 1 , 7 0 2 , 5 0 2 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 12 2 0 2 8 22 . 4 % 19 . 6 % 27 6 , 8 4 6 , 7 7 4 62 , 1 5 1 , 6 9 4 $ 5 4 , 3 5 0 , 8 7 0 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 13 2 0 2 9 23 . 2 % 2 0 . 0 % 28 5 , 1 5 2 , 1 7 7 66 , 0 7 9 , 7 8 5 $ 5 7 , 1 0 5 , 1 7 2 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 14 2 0 3 0 23 . 9 % 2 0 . 4 % 29 3 , 7 0 6 , 7 4 3 70 , 1 4 9 , 9 8 7 $ 5 9 , 9 6 9 , 6 4 7 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 15 2 0 3 1 24 . 6 % 2 0 . 8 % 30 2 , 5 1 7 , 9 4 5 74 , 3 6 7 , 5 4 1 $ 6 2 , 9 4 8 , 7 0 1 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 16 2 0 3 2 25 . 3 % 2 1 . 2 % 31 1 , 5 9 3 , 4 8 3 78 , 7 3 7 , 8 8 7 $ 6 6 , 0 4 6 , 9 1 7 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 17 2 0 3 3 26 . 0 % 2 1 . 6 % 32 0 , 9 4 1 , 2 8 8 83 , 3 9 5 , 5 5 7 $ 6 9 , 3 9 7 , 9 4 7 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 18 2 0 3 4 26 . 7 % 2 2 . 0 % 33 0 , 5 6 9 , 5 2 6 88 , 2 2 2 , 6 7 8 $ 7 2 , 8 8 3 , 0 1 9 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 19 2 0 3 5 14 . 5 % 22 . 5 % 34 0 , 4 8 6 , 6 1 2 49 , 3 8 5 , 4 8 7 $ 7 6 , 5 0 7 , 4 9 3 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 20 2 0 3 6 14 . 8 % 22 . 9 % 35 0 , 7 0 1 , 2 1 1 51 , 7 2 9 , 8 8 0 $ 8 0 , 2 7 6 , 9 4 7 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 21 2 0 3 7 13 . 9 % 1 2 . 8 % 36 1 , 2 2 2 , 2 4 7 50 , 2 1 3 , 2 4 2 $ 4 6 , 4 0 5 , 2 3 1 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 22 2 0 3 8 13 . 1 % 1 2 . 5 % 37 2 , 0 5 8 , 9 1 4 48 , 6 0 0 , 8 1 3 $ 4 6 , 4 0 5 , 2 3 1 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 23 2 0 3 9 12 . 2 % 1 2 . 1 % 38 3 , 2 2 0 , 6 8 2 46 , 8 8 8 , 2 1 1 $ 4 6 , 4 0 5 , 2 3 1 $ 1, 9 3 5 , 1 3 7 2 , 01 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 24 2 0 4 0 11 . 4 % 1 1 . 3 % 39 4 , 7 1 7 , 3 0 2 44 , 9 6 7 , 5 6 4 $ 4 4 , 4 7 0 , 0 9 4 $ 2, 0 1 2 , 5 4 2 2 , 09 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 25 2 0 4 1 10 . 6 % 1 0 . 4 % 40 6 , 5 5 8 , 8 2 1 42 , 9 6 9 , 9 4 6 $ 4 2 , 4 5 7 , 5 5 2 $ 2, 0 9 3 , 0 4 4 2 , 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 26 2 0 4 2 9. 8 % 9 . 6 % 41 8 , 7 5 5 , 5 8 6 40 , 8 9 2 , 2 7 4 $ 4 0 , 3 6 4 , 5 0 8 $ 2, 1 7 6 , 7 6 5 2 , 2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 27 2 0 4 3 9. 4 % 8 . 9 % 43 1 , 3 1 8 , 2 5 4 40 , 6 5 6 , 0 9 2 $ 3 8 , 1 8 7 , 7 4 3 $ 2,2 6 3 , 8 3 6 2 , 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 28 2 0 4 4 8. 9 % 8 . 1 % 44 4 , 2 5 7 , 8 0 1 39 , 6 2 1 , 9 1 5 $ 3 5 , 9 2 3 , 9 0 7 $ 2, 3 5 4 , 3 8 9 2 , 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 29 2 0 4 5 8. 1 % 7 . 3 % 45 7 , 5 8 5 , 5 3 5 37 , 2 6 3 , 1 2 5 $ 3 3 , 5 6 9 , 5 1 8 $ 2, 4 4 8 , 5 6 5 2 , 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 30 2 0 4 6 7. 4 % 6 . 6 % 47 1 , 3 1 3 , 1 0 1 34 , 8 0 6 , 5 6 7 $ 3 1 , 1 2 0 , 9 5 3 $ 2, 5 4 6 , 5 0 8 2 , 6 4 8 , 3 6 8 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 31 2 0 4 7 6. 6 % 5 . 9 % 48 5 , 4 5 2 , 4 9 4 32 , 2 4 8 , 2 6 3 $ 2 8 , 5 7 4 , 4 4 5 $ 2,648,368 2 , 7 5 4 , 3 0 3 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 32 2 0 4 8 5. 5 % 5 . 2 % 50 0 , 0 1 6 , 0 6 9 27 , 3 5 2 , 7 6 1 $ 2 5 , 9 2 6 , 0 7 7 $ 2,754,303 2 , 8 6 4 , 4 7 5 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 33 2 0 4 9 0. 0 % 0 . 0 % 51 5 , 0 1 6 , 5 5 1 2,864,475 2 , 979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 34 2 0 5 0 0. 0 % 0 . 0 % 53 0 , 4 6 7 , 0 4 8 2,979,054 3 , 098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 35 2 0 5 1 0. 0 % 0 . 0 % 54 6 , 3 8 1 , 0 5 9 3,098,216 3 , 351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 36 2 0 5 2 0. 0 % 0 . 0 % 56 2 , 7 7 2 , 4 9 1 3,351,030 3 , 4 8 5 , 0 7 2 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 37 2 0 5 3 0. 0 % 0 . 0 % 57 9 , 6 5 5 , 6 6 6 3,485,072 3 , 6 2 4 , 4 7 4 3 , 7 6 9 , 4 5 3 38 2 0 5 4 0. 0 % 0 . 0 % 59 7 , 0 4 5 , 3 3 6 3,624,474 3 , 7 6 9 , 4 5 3 39 2 0 5 5 0. 0 % 0 . 0 % 61 4 , 9 5 6 , 6 9 6 3,769,453 40 2 0 5 6 0. 0 % 0 . 0 % 63 3 , 4 0 5 , 3 9 7 Su m o f P a y m e n t s 1 , 5 4 8 , 2 8 0 , 5 0 9 1 , 4 9 9 , 2 8 9 , 0 7 9 3 8 , 7 0 2 , 7 3 1 4 0 , 25 0 , 8 4 0 4 1 , 8 6 0 , 8 7 3 4 3 , 5 3 5 , 3 0 8 4 5 , 2 7 6 , 7 2 1 4 7 , 0 8 7 , 7 8 9 4 8 , 9 7 1 , 3 0 1 5 0 , 9 3 0 , 1 5 3 5 2 , 9 6 7 , 3 5 9 5 5 , 0 8 6 , 0 5 4 5 7 , 2 8 9 , 4 9 6 5 9 , 5 8 1 , 0 7 6 6 1 , 9 6 4 , 3 1 9 6 7 , 0 2 0 , 6 0 7 6 9 , 7 0 1 , 4 3 1 7 2 , 4 8 9 , 4 8 8 7 5 , 3 8 9 , 0 6 8 NP V @ 3 % 9 7 5 , 9 2 0 , 7 9 4 9 4 9 , 8 2 8 , 0 1 0 2 8 , 78 9 , 9 4 5 2 9 , 94 1 , 5 4 3 3 1 , 1 3 9 , 2 0 5 3 2 , 3 8 4 , 7 7 3 3 3 , 6 8 0 , 1 6 4 3 5 , 0 2 7 , 3 7 0 3 6 , 4 2 8 , 4 6 5 3 7 , 8 8 5 , 6 0 4 3 9 , 4 0 1 , 0 2 8 4 0 , 9 7 7 , 0 6 9 4 2 , 6 1 6 , 1 5 2 4 4 , 3 2 0 , 7 9 8 4 6 , 0 9 3 , 6 3 0 4 9 , 8 5 4 , 8 7 0 5 1 , 8 4 9 , 0 6 5 5 3 , 9 2 3 , 0 2 7 5 6 , 0 7 9 , 9 4 8 Pr o j e c t e d S c e n a r i o Ot h e r A s s u m e d Re t u r n : Ac t u a l Se l e c t M a r k e t R e t u r n 4. 0 0 % Ma r t k e t R e t u r n a t 6 . 0 % Ma r k e t R e t u r n a t 3 . 5 % Ma r k e t R e t u r n a t 1 . 0 % Ma r t k e t R e t u r n a t 7 . 5 % Ot h e r R e t u r n It e m N o . 5 B 2 Pe n s i o n D i s c u s s i o n Ad d i t i o n a l M a t e r i a l R e c e i v e d Ma y 1 1 , 2 0 1 7 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/1/3 Yet, Schaaf’s recently released two-year budget, like those of her predecessor, lacks a meaningful strategy for addressing the city’s mounting employee retirement debt and long-term structural budget shortfalls. City voters 2 1/2 years ago elected a new mayor who, refreshingly, had a grasp on the city’s äscal problems. Since then, Libby Schaff has also had the good fortune of increased tax revenues from a roaring economic recovery. If ever there is a moment to begin putting Oakland’s municipal änances back on solid äscal footing, this is it. And Schaaf knows it. “I don’t think I did as much as I should have done in the last two years to create a tangible, long-term solution,” she quickly acknowledged in an interview Thursday. The mea culpa is appropriate, but the fact remains that the mayor has missed a critical opportunity. This budget proposal was her chance to show residents she would confront Oakland’s äscal challenges and to propose meaningful remedies to the City Council. What Schaaf gave them instead is more of the same: The clang you hear is Schaaf, like her predecessors, kicking the can down the road, pushing debt onto future generations. Making matters worse, for days after she released her budget proposal that clang was drowned out by outcry over Schaaf’s politically inept plan to use new soda tax revenues to help cover a budget shortfall. That would have been a legal use of the money but it would have violated a non-binding promise to voters. They were assured last fall that soda tax revenues would fund education programs about diseases related to sugar-sweetened beverages. The furor over the soda tax mounted for days until Schaaf wisely relented. Meanwhile, everyone lost focus of the bigger issue. While the $6 million in annual revenues from the soda tax is signiäcant, the city faces a projected $32 million general fund budget shortfall over the next two years. And without new income streams or budget cuts, that grows to a projected $47 million annual shortfall by the 2019-20 äscal year and $70 million two years later, according to the city’s äve-year forecast. Those numbers are driven in large part by the mayor’s and City Council’s refusal to control spending. Coming out of the recession, many cities moved cautiously to ensure expenditures didn’t get ahead of increasing revenues. Not Oakland. The year Schaaf took ofäce, the number of full-time city employees had dropped to 3,681, down 720 from the start of the Great Recession. Unfortunately, as the economy improved, rather than pay off debt and bring spending under control, Oakland rapidly hired back 500 workers. And the entire workforce received raises on top of existing free health insurance for employees and their dependents. Meanwhile, the city debt for employees’ pensions and retirement health care has increased in two years from $2.4 billion to about $2.8 billion, or an average $17,500 per household. Some of that will be covered by a hidden pension tax on property owners; the rest will fall to taxpayers for decades. The debt is exacerbated in part because the city underfunds its retiree health care program by at least $40 million a year. Schaaf has 70 Item No. 5B3 Pension Discussion Additional Materials Received May 11, 2017 BREAKING NEWS The Latest: Pence says áring unrelated to Russia probe Opinion Borenstein: Clang! Schaaf budget plan continues Oakland can-kicking By DANIEL BORENSTEIN | dborenstein@bayareanewsgroup.com | Bay Area News Group PUBLISHED: May 5, 2017 at 10:40 am | UPDATED: May 5, 2017 at 6:09 pm The more things change, the more they stay the same in Oakland. 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/2/3 The debt is exacerbated in part because the city underfunds its retiree health care program by at least $40 million a year. Schaaf has repeatedly said Oakland cannot afford to close that gap because that would require making too many cuts to city services. But failure to address it will mean even more cuts in the future. Think of it like someone who doesn’t make minimum payments on credit cards. The problem only gets worse with time. More money will go toward paying off interest, leaving less for, in this case, city services. Because Oakland operates on a two-year budget cycle, this is the ärst spending plan Schaaf can truly call her own. Her ärst one was constrained by commitments and poor planning she inherited from her predecessor, Jean Quan. To be sure, Schaaf needs the City Council’s cooperation to address Oakland’s änancial predicament, and not one council member has demonstrated serious interest in doing so. But that’s not an excuse for Schaaf’s failure to lead. She has the bully pulpit, but she hasn’t used it to propose meaningful solutions. As long as she remains mum, the council will continue to ignore the problem. SUBSCRIBE TODAY!ALL ACCESS DIGITAL OFFER FOR JUST 99 CENTS! Daniel Borenstein Dan Borenstein is an award-winning columnist and editorial writer for the Bay Area News Group. He has worked for the East Bay Times and its afäliated newspapers since 1980, including previous assignments as political editor, Sacramento bureau editor, projects editor and assistant metro editor. A Bay Area native, he holds master’s degrees in public policy and journalism from University of California, Berkeley.  Follow Daniel Borenstein @BorensteinDan SPONSORED CONTENT Zuri A. Murrell, MD Explains Why No OneShould Get Colorectal Cancer By Zuri A. Murrell, MD, colorectal surgeon at the Cedars-Sinai Samuel Oschin Comprehensive Cancer Institute, is on a mission to prevent colorectal... Tags: Budgets,Daniel Borenstein,Government Pensions,Libby Schaaf,Oakland City Council 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/3/3 1 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 GENERAL FUND LONG RANGE FINANCIAL FORECAST FISCAL YEARS 2018 to 2037 Item No. 5C1 Update on Long Term Financial Forecast Additional Materials Received May 11, 2017 2 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 The forecast methodology used for calculating changes from FY 2018 to FY 2037 is based on historical trends or using a Compounded Annual Growth Rate (CAGR) from FY 2005 to FY 2016. This rate is then adjusted based on staff’s knowledge of known one-time events and fiscal conservatism. By using the historical average growth rate that incorporates the up and down cycles over the past 11 years, there are no up or down cycles depicted in the base model. The CAGR approach provides an overview of the general trend where revenues and expenditures are grown in a linear fashion. In reality, year over year changes may deviate significantly positively or negatively. The Fiscal Year 2018 to 2037 General Fund Long Range Financial Forecast (LRFF), conservatively projects a modest surplus balance of $0.3 million in FY 2018. Surpluses are projected for the remaining years of the model. The City maintains a contingency reserve of over $47 million or 25% of operating expenditures to contend with normal and unexpected deviations in operating trends. Historically, the City has not has utilized its contingency reserve to balance its annual budgets due to conservative forecasts, but aggressive new plans may necessitate a minor use of reserves in the near term. General Fund Long Range Financial Forecast 2018-2037 The City is in excellent financial position relative to most other local agencies with a revenue base and reserves unparalleled by any similar size City in the County. However, the City is not without its fiscal EXECUTIVE SUMMARY 3 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 challenges. The City is confronting two significant financial hurdles in the near term. These include significant contribution increase to its CalPERS pension plans and the need to ramp-up savings to meet substantial near-term harbor improvements in accordance with a new and long overdue Harbor & Beaches master plan. The FY 2017-18 Capital Improvement Plan (CIP) consists of over $25 million in new appropriations ($5.4 million of which comes from the General Fund) and an estimated $38.6 million in re-budgeted funds to be carried forward from the current fiscal year for a total CIP budget of just over $63.6 million. An ongoing challenge is to avoid the “crowd-out” – where pension costs cause us to under-invest in roads, buildings, parks, community safety, and other community amenities. The FY 2018 Proposed Budget includes an additional $8.9 million to pay down the City’s unfunded pension liability faster. The proposed 20-year level-dollar payment schedule results in a net economic benefit to the City of $5.4 million and pays the obligation 10 years faster compared to the default 30 year CalPERS payment plan. In addition, as the City’s revenues grow, the level-dollar payment plan would result in pension expenditures representing a declining percent of the budget each year assuming all future actuarial assumptions are met. Through a several year process, a new Harbor & Beaches Master plan was developed with input by the Harbor and Finance Committees. Since this plan is long overdue and has sizable near-term needs, the forecast assumes a $5 million contribution from the prior year surplus as well a $1 million allocation of General Fund revenues in FY 2017-18. To meet the need of the Harbor & Beaches master plan, General Fund contributions are ramped-up to $6 million over the next five fiscal years. The City continues to explore new opportunities to deliver services more efficiently. Having healthy reserves provides additional budget flexibility to meet its budget challenges and allow for a reorganization period should a drastic change in revenue or expenditure patterns emerge. 4 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 Major Assumptions • An additional $8.9 million to pay down the City’s unfunded pension liability faster. • Annual regular full-time salary savings of 3.0% ($2.4 million in FY 2019) due to normal hiring and separation timing, as is typical every year. • General Fund annual transfers in support of:  CIP – approximately $5.4 million  Facilities Financial Plan – $8.5 million  Facilities Maintenance Plan - $1.0 million  The public safety 800 Mhz communication program – $0.5 million  Contingency Reserve contribution of $1 million – which reflects maintaining a contingency of 25% of operating expenditures, less any accelerated unfunded liability pension funding and transfers out  Harbor and Beaches Capital Plan – one-time transfer of $5 million in FY 2018 (from prior year surplus), plus an additional $1.0 M. In the next 10 years, General Fund contributions will be as follows and $4.5 million annually starting in 2028: 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 $2.5m $3.5m $4.5m $5.5m $6.0m $6.0m $5.5m $5.5m $5.5m $4.5m • Annual growth rate assumptions for all the major revenue and expenditure categories as indicated in the sections that follow. FORECAST 5 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 Revenues The methodology used for calculating changes from FY 2018 to FY 2037 is initially based on historical trends or using a Compounded Annual Growth Rate (CAGR) from FY 2005 to FY 2016. This methodology is adjusted (as indicated in the table to the right) based on staff’s knowledge of known one- time events and fiscal conservatism. By using the historical average growth rate that incorporates the up and down cycles over the past 11 years, there is no single year in which a downturn is depicted in the base model. Instead, past downturns (mainly the Great Recession), have been factored into the CAGR used to forecast future revenue streams. The CAGR approach provides an outlook of the general trend versus a specific annual forecast since revenues and expenditures are grown in a linear fashion, where in reality, year over year changes may deviate significantly positively or negatively. General Fund Revenue Growth 2005-2037 - 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Property Taxes Sales Taxes Transient Occupancy Taxes All Other One-time prior year $9.1 M surplus Annual Growth Rate Assumptions Compound Annual Growth Rate 2005-2016 ORIGINAL CAGR ADJUSTED CAGR PROPERTY TAXES 5.0%4.0% SALES TAXES 3.1%3.1% TRANSIENT OCCUPANCY TAX 7.8%5.0% OTHER TAXES 2.0%2.2% CHARGES FOR SERVICES 4.3%4.0% PROPERTY INCOME 8.0%5.0% LICENSES, PERMITS & FEES 4.2%4.0% FINES, FORFEITURES & PENALTIES 2.2%2.4% INTERGOVERNMENTAL TRANSFERS 0.5%0.5% PROPERTY INCOME AND INVESTMENT EARNINGS 0.1%0.1% MISCELLANEOUS REVENUES FLAT FLAT DONATIONS & CONTRIBUTIONS 3.3%3.3% SALE OF PROPERTY, EQUIPMENT AND MATERIALS 5.4%5.4% 6 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 Expenditures Annual Growth Rate Assumptions General Fund Exenditures 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Salaries and Benefits (non-pension)$66.1 $72.9 $76.4 $82.2 $90.1 $90.1 $88.6 $85.8 $90.6 $91.8 $94.1 10.2%4.8%7.6%9.6%0.0%-1.6%-3.2%5.6%1.3%2.5% Pension $12.0 $14.5 $15.5 $15.7 $17.6 $17.0 $16.2 $17.1 $17.3 $17.4 $26.1 20.4%7.2%1.4%12.2%-3.5%-4.6%5.3%1.2%0.6%49.9% Maintenance and Operations $26.3 $28.8 $32.8 $35.5 $34.8 $32.9 $33.2 $39.7 $40.9 $45.1 $46.8 9.6%13.6%8.3%-2.0%-5.3%0.8%19.9%2.8%10.4%3.8% Capital Equipment $1.0 $1.9 $4.1 $3.4 $2.8 $1.3 $1.3 $1.1 $0.9 $0.4 $1.1 83.6%119.9%-16.9%-17.5%-55.2%5.3%-16.9%-18.9%-60.0%196.1% Total $105.5 $118.0 $128.8 $136.8 $145.3 $141.2 $139.3 $143.7 $149.6 $154.6 $168.1 11.9%9.1%6.3%6.2%-2.8%-1.3%3.1%4.1%3.3%8.7% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Salaries and Benefits (non-pension)$103.0 $101.1 $107.4 $111.7 $116.2 $120.9 $125.8 $131.0 $136.4 $142.0 $147.9 9.4%-1.8%6.2%4.0%4.0%4.1%4.1%4.1%4.1%4.1%4.2% Pension $27.9 $29.7 $38.0 $37.3 $37.5 $37.6 $37.8 $38.0 $38.2 $38.4 $38.5 7.1%6.4%28.1%-1.9%0.4%0.4%0.5%0.5%0.5%0.5%0.5% Maintenance and Operations $48.7 $61.7 $56.3 $58.8 $61.5 $64.4 $67.4 $70.5 $73.8 $77.3 $80.9 4.0%26.6%-8.8%4.5%4.6%4.6%4.7%4.7%4.7%4.7%4.7% Capital Equipment $0.7 $1.0 $0.8 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 -31.6%41.8%-19.3%20.7%0.0%0.0%0.0%0.0%0.0%0.0%0.0% Total $180.4 $193.6 $202.5 $208.8 $216.2 $224.0 $232.0 $240.5 $249.4 $258.7 $268.4 7.3%7.3%4.6%3.1%3.5%3.6%3.6%3.7%3.7%3.7%3.8% 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Salaries and Benefits (non-pension)$154.1 $160.5 $167.3 $174.4 $181.8 $189.6 $197.7 $206.2 $215.2 $224.6 $234.4 4.2%4.2%4.2%4.2%4.3%4.3%4.3%4.3%4.3%4.4%4.4% Pension $38.7 $38.9 $39.2 $39.4 $39.6 $39.8 $40.1 $40.3 $40.6 $40.8 $41.1 0.5%0.5%0.5%0.6%0.6%0.6%0.6%0.6%0.6%0.6%0.7% Maintenance and Operations $84.7 $88.8 $93.0 $97.4 $102.0 $106.9 $112.0 $117.3 $123.0 $128.9 $135.1 4.7%4.7%4.7%4.7%4.8%4.8%4.8%4.8%4.8%4.8%4.8% Capital Equipment $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0% Total $278.6 $289.2 $300.4 $312.1 $324.4 $337.3 $350.8 $364.9 $379.7 $395.3 $411.6 3.8%3.8%3.9%3.9%3.9%4.0%4.0%4.0%4.1%4.1%4.1% Compound Annual Growth Rate 2005-2016 ORIGINAL CAGR ADJUSTED CAGR REGULAR SALARIES - MISCELLANEOUS 3.1%3.5% REGULAR SALARIES - PUBLIC SAFETY 3.4%4.0% PENSION - ALL ** HEALTH/DENTAL/VISION 7.8%7.0% OVERTIME PAYS 5.0%4.0% PERSONNEL INTERNAL SERVICE PREMIUMS 0.9%0.9% RETIREE HEALTH PROGRAM 0.4%2.0% OTHER BENEFITS 11.8%3.0% OTHER PAYS 0.9%0.9% PROFESSIONAL & CONTRACT SERVICES 5.7%5.0% O&M INTERNAL SERVICE PREMIUMS 7.9%5.0% MAINTENANCE & REPAIR 9.7%5.0% SUPPLIES & MATERIALS FLAT 1.0% INSURANCE, CLAIMS, JUDGMENTS AND LEGAL DEFE 10.3%5.0% UTILITIES 5.7%5.7% GENERAL EXPENSES 6.5%5.0% TRAVEL & TRAINING 3.0%2.0% GRANT OPERATING EXPENSES FLAT 1.0% CAPITAL OUTLAY FLAT 1.0% *Future pension projection based on normal cost growth of 3% and UAL based on 7% discount rate and level $ of pay. 7 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 Expenditure Growth 2005-2037 (excludes transfers-out) General Fund Exenditures 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Salaries and Benefits (non-pension)$66.1 $72.9 $76.4 $82.2 $90.1 $90.1 $88.6 $85.8 $90.6 $91.8 $94.1 10.2%4.8%7.6%9.6%0.0%-1.6%-3.2%5.6%1.3%2.5% Pension $12.0 $14.5 $15.5 $15.7 $17.6 $17.0 $16.2 $17.1 $17.3 $17.4 $26.1 20.4%7.2%1.4%12.2%-3.5%-4.6%5.3%1.2%0.6%49.9% Maintenance and Operations $26.3 $28.8 $32.8 $35.5 $34.8 $32.9 $33.2 $39.7 $40.9 $45.1 $46.8 9.6%13.6%8.3%-2.0%-5.3%0.8%19.9%2.8%10.4%3.8% Capital Equipment $1.0 $1.9 $4.1 $3.4 $2.8 $1.3 $1.3 $1.1 $0.9 $0.4 $1.1 83.6%119.9%-16.9%-17.5%-55.2%5.3%-16.9%-18.9%-60.0%196.1% Total $105.5 $118.0 $128.8 $136.8 $145.3 $141.2 $139.3 $143.7 $149.6 $154.6 $168.1 11.9%9.1%6.3%6.2%-2.8%-1.3%3.1%4.1%3.3%8.7% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Salaries and Benefits (non-pension)$103.0 $101.1 $107.4 $111.7 $116.2 $120.9 $125.8 $131.0 $136.4 $142.0 $147.9 9.4%-1.8%6.2%4.0%4.0%4.1%4.1%4.1%4.1%4.1%4.2% Pension $27.9 $29.7 $38.0 $37.3 $37.5 $37.6 $37.8 $38.0 $38.2 $38.4 $38.5 7.1%6.4%28.1%-1.9%0.4%0.4%0.5%0.5%0.5%0.5%0.5% Maintenance and Operations $48.7 $61.7 $56.3 $58.8 $61.5 $64.4 $67.4 $70.5 $73.8 $77.3 $80.9 4.0%26.6%-8.8%4.5%4.6%4.6%4.7%4.7%4.7%4.7%4.7% Capital Equipment $0.7 $1.0 $0.8 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 -31.6%41.8%-19.3%20.7%0.0%0.0%0.0%0.0%0.0%0.0%0.0% Total $180.4 $193.6 $202.5 $208.8 $216.2 $224.0 $232.0 $240.5 $249.4 $258.7 $268.4 7.3%7.3%4.6%3.1%3.5%3.6%3.6%3.7%3.7%3.7%3.8% 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Salaries and Benefits (non-pension)$154.1 $160.5 $167.3 $174.4 $181.8 $189.6 $197.7 $206.2 $215.2 $224.6 $234.4 4.2%4.2%4.2%4.2%4.3%4.3%4.3%4.3%4.3%4.4%4.4% Pension $38.7 $38.9 $39.2 $39.4 $39.6 $39.8 $40.1 $40.3 $40.6 $40.8 $41.1 0.5%0.5%0.5%0.6%0.6%0.6%0.6%0.6%0.6%0.6%0.7% Maintenance and Operations $84.7 $88.8 $93.0 $97.4 $102.0 $106.9 $112.0 $117.3 $123.0 $128.9 $135.1 4.7%4.7%4.7%4.7%4.8%4.8%4.8%4.8%4.8%4.8%4.8% Capital Equipment $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 $1.0 0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0% Total $278.6 $289.2 $300.4 $312.1 $324.4 $337.3 $350.8 $364.9 $379.7 $395.3 $411.6 3.8%3.8%3.9%3.9%3.9%4.0%4.0%4.0%4.1%4.1%4.1% 8 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 General Fund Revenues, Expenditures and Accumulated Surplus/(Deficit) The Fiscal Year 2018 to 2037 General Fund Long Range Financial Forecast (LRFF), projects a surplus balance of $0.3 million in FY 2018. Surpluses are projected for the remaining years of the model. General Fund Long Range Financial Forecast 2018-2037 Although revenue receipts have improved considerably since the Great Recession, future recessions or shifts in consumer habits (such as retail purchases or hotel stays) may alter the course of revenues and new patterns may emerge that differ significantly from our past results. Agencies dependent on traditional brick- and-mortar retail stores for a major portion of their sales tax will be facing new challenges in the coming year as merchants retrench and downsize to cope with a rapidly changing environment. Generational preferences for experiences over merchandise, plus the growing costs of health care, education and housing, are reducing discretionary spending for taxable goods while time challenged consumers are opting for the convenience of online shopping. Online sales accounted for 13.0% of all general consumer goods purchased in 2016 with a 9.2 % gain over calendar year 2015, while the growth in tax receipts from brick- and-mortar stores only grew 0.6%. RISKS TO CONSIDER AND CONCLUSION 9 | CITY OF NEWPORT BEACH LONG RANGE FINANCIAL FORECAST 2018 TO 2037 City of Newport Beach Sales Tax Receipts Q4 2015 Compared to Q4 2016 Newport Beach transient occupancy tax receipts may also suffer as the result of the new administration’s proposed travel ban. The latest data show that flight bookings, travel searches and other indicators of interest in U.S. travel have dropped, said Adam Sacks, president of Tourism Economics. “All of these together are painting this picture of a shift in travel patterns away from the U.S.,” he said. The strong U.S. dollar is one potential reason for slowing interest in international travel to the U.S. But Sacks said the political environment is a bigger issue. The assets necessary to fulfill our pension obligation are considerable so any shortfall in investment returns or change in assumed investment return can result in significant impact on the City’s unfunded pension obligation. Lower than expected investment results and CalPERS’ recent action to lower the annual expected investment rate of return increased the unfunded liability, but painted a truer picture of our net pension obligation. Consensus analysis by the investment community believes that CalPERS will continue to have difficulty achieving a 7.0 percent investment return in the near term so future losses may continue. For FY 2017 (July 1, 2016 – June 30, 2017) CalPERS is currently on track to beat its investment target. Source: HdL Item No. 5C2 Update on Long Term Financial Forecast Additional Materials Received May 11, 2017 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/1/3 Yet, Schaaf’s recently released two-year budget, like those of her predecessor, lacks a meaningful strategy for addressing the city’s mounting employee retirement debt and long-term structural budget shortfalls. City voters 2 1/2 years ago elected a new mayor who, refreshingly, had a grasp on the city’s äscal problems. Since then, Libby Schaff has also had the good fortune of increased tax revenues from a roaring economic recovery. If ever there is a moment to begin putting Oakland’s municipal änances back on solid äscal footing, this is it. And Schaaf knows it. “I don’t think I did as much as I should have done in the last two years to create a tangible, long-term solution,” she quickly acknowledged in an interview Thursday. The mea culpa is appropriate, but the fact remains that the mayor has missed a critical opportunity. This budget proposal was her chance to show residents she would confront Oakland’s äscal challenges and to propose meaningful remedies to the City Council. What Schaaf gave them instead is more of the same: The clang you hear is Schaaf, like her predecessors, kicking the can down the road, pushing debt onto future generations. Making matters worse, for days after she released her budget proposal that clang was drowned out by outcry over Schaaf’s politically inept plan to use new soda tax revenues to help cover a budget shortfall. That would have been a legal use of the money but it would have violated a non-binding promise to voters. They were assured last fall that soda tax revenues would fund education programs about diseases related to sugar-sweetened beverages. The furor over the soda tax mounted for days until Schaaf wisely relented. Meanwhile, everyone lost focus of the bigger issue. While the $6 million in annual revenues from the soda tax is signiäcant, the city faces a projected $32 million general fund budget shortfall over the next two years. And without new income streams or budget cuts, that grows to a projected $47 million annual shortfall by the 2019-20 äscal year and $70 million two years later, according to the city’s äve-year forecast. Those numbers are driven in large part by the mayor’s and City Council’s refusal to control spending. Coming out of the recession, many cities moved cautiously to ensure expenditures didn’t get ahead of increasing revenues. Not Oakland. The year Schaaf took ofäce, the number of full-time city employees had dropped to 3,681, down 720 from the start of the Great Recession. Unfortunately, as the economy improved, rather than pay off debt and bring spending under control, Oakland rapidly hired back 500 workers. And the entire workforce received raises on top of existing free health insurance for employees and their dependents. Meanwhile, the city debt for employees’ pensions and retirement health care has increased in two years from $2.4 billion to about $2.8 billion, or an average $17,500 per household. Some of that will be covered by a hidden pension tax on property owners; the rest will fall to taxpayers for decades. The debt is exacerbated in part because the city underfunds its retiree health care program by at least $40 million a year. Schaaf has 70 Item No. 5C3 Update on Long Term Financial Forecast Additional Materials Received May 11, 2017 BREAKING NEWS The Latest: Pence says áring unrelated to Russia probe Opinion Borenstein: Clang! Schaaf budget plan continues Oakland can-kicking By DANIEL BORENSTEIN | dborenstein@bayareanewsgroup.com | Bay Area News Group PUBLISHED: May 5, 2017 at 10:40 am | UPDATED: May 5, 2017 at 6:09 pm The more things change, the more they stay the same in Oakland. 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/2/3 The debt is exacerbated in part because the city underfunds its retiree health care program by at least $40 million a year. Schaaf has repeatedly said Oakland cannot afford to close that gap because that would require making too many cuts to city services. But failure to address it will mean even more cuts in the future. Think of it like someone who doesn’t make minimum payments on credit cards. The problem only gets worse with time. More money will go toward paying off interest, leaving less for, in this case, city services. Because Oakland operates on a two-year budget cycle, this is the ärst spending plan Schaaf can truly call her own. Her ärst one was constrained by commitments and poor planning she inherited from her predecessor, Jean Quan. To be sure, Schaaf needs the City Council’s cooperation to address Oakland’s änancial predicament, and not one council member has demonstrated serious interest in doing so. But that’s not an excuse for Schaaf’s failure to lead. She has the bully pulpit, but she hasn’t used it to propose meaningful solutions. As long as she remains mum, the council will continue to ignore the problem. SUBSCRIBE TODAY!ALL ACCESS DIGITAL OFFER FOR JUST 99 CENTS! Daniel Borenstein Dan Borenstein is an award-winning columnist and editorial writer for the Bay Area News Group. He has worked for the East Bay Times and its afäliated newspapers since 1980, including previous assignments as political editor, Sacramento bureau editor, projects editor and assistant metro editor. A Bay Area native, he holds master’s degrees in public policy and journalism from University of California, Berkeley.  Follow Daniel Borenstein @BorensteinDan SPONSORED CONTENT Zuri A. Murrell, MD Explains Why No OneShould Get Colorectal Cancer By Zuri A. Murrell, MD, colorectal surgeon at the Cedars-Sinai Samuel Oschin Comprehensive Cancer Institute, is on a mission to prevent colorectal... Tags: Budgets,Daniel Borenstein,Government Pensions,Libby Schaaf,Oakland City Council 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/3/3 Item No. 5D1 Review of Finance Committee Work Plan Additional Materials Received May 11, 2017 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/1/3 Yet, Schaaf’s recently released two-year budget, like those of her predecessor, lacks a meaningful strategy for addressing the city’s mounting employee retirement debt and long-term structural budget shortfalls. City voters 2 1/2 years ago elected a new mayor who, refreshingly, had a grasp on the city’s äscal problems. Since then, Libby Schaff has also had the good fortune of increased tax revenues from a roaring economic recovery. If ever there is a moment to begin putting Oakland’s municipal änances back on solid äscal footing, this is it. And Schaaf knows it. “I don’t think I did as much as I should have done in the last two years to create a tangible, long-term solution,” she quickly acknowledged in an interview Thursday. The mea culpa is appropriate, but the fact remains that the mayor has missed a critical opportunity. This budget proposal was her chance to show residents she would confront Oakland’s äscal challenges and to propose meaningful remedies to the City Council. What Schaaf gave them instead is more of the same: The clang you hear is Schaaf, like her predecessors, kicking the can down the road, pushing debt onto future generations. Making matters worse, for days after she released her budget proposal that clang was drowned out by outcry over Schaaf’s politically inept plan to use new soda tax revenues to help cover a budget shortfall. That would have been a legal use of the money but it would have violated a non-binding promise to voters. They were assured last fall that soda tax revenues would fund education programs about diseases related to sugar-sweetened beverages. The furor over the soda tax mounted for days until Schaaf wisely relented. Meanwhile, everyone lost focus of the bigger issue. While the $6 million in annual revenues from the soda tax is signiäcant, the city faces a projected $32 million general fund budget shortfall over the next two years. And without new income streams or budget cuts, that grows to a projected $47 million annual shortfall by the 2019-20 äscal year and $70 million two years later, according to the city’s äve-year forecast. Those numbers are driven in large part by the mayor’s and City Council’s refusal to control spending. Coming out of the recession, many cities moved cautiously to ensure expenditures didn’t get ahead of increasing revenues. Not Oakland. The year Schaaf took ofäce, the number of full-time city employees had dropped to 3,681, down 720 from the start of the Great Recession. Unfortunately, as the economy improved, rather than pay off debt and bring spending under control, Oakland rapidly hired back 500 workers. And the entire workforce received raises on top of existing free health insurance for employees and their dependents. Meanwhile, the city debt for employees’ pensions and retirement health care has increased in two years from $2.4 billion to about $2.8 billion, or an average $17,500 per household. Some of that will be covered by a hidden pension tax on property owners; the rest will fall to taxpayers for decades. The debt is exacerbated in part because the city underfunds its retiree health care program by at least $40 million a year. Schaaf has 70 Item No. 5D2 Review of Finance Committee Work Plan Additional Materials Received May 11, 2017 BREAKING NEWS The Latest: Pence says áring unrelated to Russia probe Opinion Borenstein: Clang! Schaaf budget plan continues Oakland can-kicking By DANIEL BORENSTEIN | dborenstein@bayareanewsgroup.com | Bay Area News Group PUBLISHED: May 5, 2017 at 10:40 am | UPDATED: May 5, 2017 at 6:09 pm The more things change, the more they stay the same in Oakland. 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/2/3 The debt is exacerbated in part because the city underfunds its retiree health care program by at least $40 million a year. Schaaf has repeatedly said Oakland cannot afford to close that gap because that would require making too many cuts to city services. But failure to address it will mean even more cuts in the future. Think of it like someone who doesn’t make minimum payments on credit cards. The problem only gets worse with time. More money will go toward paying off interest, leaving less for, in this case, city services. Because Oakland operates on a two-year budget cycle, this is the ärst spending plan Schaaf can truly call her own. Her ärst one was constrained by commitments and poor planning she inherited from her predecessor, Jean Quan. To be sure, Schaaf needs the City Council’s cooperation to address Oakland’s änancial predicament, and not one council member has demonstrated serious interest in doing so. But that’s not an excuse for Schaaf’s failure to lead. She has the bully pulpit, but she hasn’t used it to propose meaningful solutions. As long as she remains mum, the council will continue to ignore the problem. SUBSCRIBE TODAY!ALL ACCESS DIGITAL OFFER FOR JUST 99 CENTS! Daniel Borenstein Dan Borenstein is an award-winning columnist and editorial writer for the Bay Area News Group. He has worked for the East Bay Times and its afäliated newspapers since 1980, including previous assignments as political editor, Sacramento bureau editor, projects editor and assistant metro editor. A Bay Area native, he holds master’s degrees in public policy and journalism from University of California, Berkeley.  Follow Daniel Borenstein @BorensteinDan SPONSORED CONTENT Zuri A. Murrell, MD Explains Why No OneShould Get Colorectal Cancer By Zuri A. Murrell, MD, colorectal surgeon at the Cedars-Sinai Samuel Oschin Comprehensive Cancer Institute, is on a mission to prevent colorectal... Tags: Budgets,Daniel Borenstein,Government Pensions,Libby Schaaf,Oakland City Council 5/10/2017 Borenstein: Clang! Schaaf plan continues Oakland cankicking http://www.eastbaytimes.com/2017/05/05/borensteinclangschaafbudgetplancontinuesoaklandcankicking/3/3