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Confident CAFR:
Good Results

Tom McGreal | Stratford Court

 

The City of Del Mar just issued its June 30, 2013 Comprehensive Annual Financial Report (CAFR). It shows a continuation of prudent financial management practices that are serving the community well.

The City’s Assets total $97.7 million with only $11 million in Liabilities resulting in Total Net Position of $86.7 million. During the fiscal year 2013 Revenues exceeded Expenditures by $7.9 million, which increased the Net Position by almost 10%. Most of this increase is attributed to Grants and Contributions related to the Torrey Pines Bridge.

General Fund Revenues increased to $11.9 million (or 3.87%), while expenses increased to $12.1 million resulting in a small deficit. It should be noted that these Expenses include the one-time cost of paying off The CalPERS Side Fund Liability in the amount of $2.1million, which will save the City significant future interest costs.
Del Mar is one of the few Cities in the region with continued increases in the assessed valuation of properties over the past few years. As a result Property Tax Revenues increased 5.9%. Del Mar also experienced increased occupancy rates for its hotels, which resulted in increased Transient Occupancy Taxes of 7.4%. The improving economy resulted in increased Sales Taxes of 2.8%. These tax revenues represent 67% of General Fund Revenues, so year to year growth in these categories of 5.6% is good news.

Del Mar operates with a solid set of policies and practices including the requirement that the City maintain a 10% Contingency reserve and a $500,000 Revenue Reserve as hedges against unexpected expenses or events. The City also complies with the Finnell Plan, which is designed to ensure that there is sufficient money to fund Capital Improvement Projects. At year end the General Fund Contingency Reserve is $2.1 million.

Del Mar is also preparing to implement new stricter accounting rules on reporting for public pensions. In fiscal year 2014 / 2015 the City of Del Mar will implement the new GASB 68, which requires that all municipalities including Del Mar show its unfunded pension liability on the balance sheet for the first time. It is estimated that Del Mar will have Net Pension Liability of approximately $11 million.

Fortunately, Del Mar has already taken some important steps in addressing the pension challenges. The payoff of the CalPERS Side Fund Liability was the first good step. In 2013 the Council also adopted a new Pension Reserve Policy, which is designed to fully fund the Unfunded Liability under the CalPERS pension pools over the next 15 years. These actions make Del Mar a leader in addressing City pension challenges.

The City is also working with the Finance Committee on an assessment of its debt capacity as part of the planning process for the City Hall project. This entails a thirty-year financial forecast of revenues, expenditures, capital improvement projects, contingency reserves and the new pension reserves. This will provide the City with a clear picture of available cash flows under several different scenarios. This kind of long term outlook is essential in making sound decisions about long term capital projects like a new City Hall.

Del Mar’s current financial position and conservative financial policies provide the City with a good foundation as we move ahead.


 

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