The Orinda Emergency Services Task Force has created a set of three financial reports to more clearly describe MOFD’s financial status than the reports which MOFD produces. These reports were presented to the MOFD Finance Committee on January 22, 2016.
Executive Balance Sheet This report was described in a previous posting on this site. Its features include:
- Separation of Operational assets and liabilities from those associated with Employee Benefits. The Employee Benefits so outweigh ($200 million of Liabilities) the Operations ($1.6 million of liabilities), that aggregating the two clouds the financial picture.
- Removal of accounting “gimmicks” existing in MOFD’s audited balance sheet as prescribed by the Government Accounting Standards Board (GASB). These include a $22 million asset and a $6 million liability that do not exist.
- Explicit disclosure of MOFD’s pension liabilities ($171 million) and assets ($142 million) as opposed to the GASB prescribed presentation of only the net ($29 million). Disclosing only the net position, even though the assets are not a legal offset to the liabilities, is a questionalble and dangerous practice.
- Disclosure not only of MOFD’s discounted liabilities ($171 million pension liabilities and $13 million retiree medical liabilities) but the underlying, un-discounted amounts ($615 million and $28 million respectively).
- An accurate assessment of total assets and liabilities ($162 million in assets; $207 million in liabilities; resulting in net liabilities of $45 million) as opposed to the GASB “fiction” of $41 million in assets and $64 million of liabilities resulting in net liabilities of $23 million.
- These values for fiscal year ending June 30, 2015 are then compared to prior years going back to 2010.
Executive Budget This report summarizes MOFD’s six page budget document into a single page.
- It displays all of MOFD’s revenue sources on ten lines as opposed to spreading the data across three pages (into three separate funds) in the MOFD budget document.
- It aggregates the costs into three main categories: employee compensation expenses (86% of the total), operating costs and transfers into the capital projects fund.
- It includes MOFD’s Pension Obligation Bond payment ($3 million) as an employee compensation expense, which it rightfully is. MOFD’s budget segregates this expense into a seperate Debt Service Fund (which currently is the only loan MOFD has).
- It compares the current fiscal year (2015/16) to the nine previous years back to 2006/07. The MOFD budget document only compares the current year with the prior year.
Long Range Financial Plan (LRFP) This report uses the same format as MOFD’s LRFP over the same term (15 years through 2030). The line items in the LRFP are approximately the same line items as those in the Executive Budget report (and ideally would be identical so the Budget, looking backward, could be the basis for the LRFP, looking forward). The main difference between the MOFD and Task Force LRFPs is a different set of assumptions for growth rate of revenues and expenses. In general:
- MOFD estimates revenue (property tax) growth below historic averages when the current state of the real estate market (market values being 170% of assessed values) indicate a significant increase over the next 15 years.
- MOFD estimates very moderate (0.5% salary growth; 0.5% medical cost growth; negative growth for pension costs) expense increases when historic inflation has been 2.5%.
- Despite the differences in growth rates, the MOFD and the Task Force analyses result in approximately the same result; an expected $100 million surplus by 2030 and a $15-20 million annual surplus after that. (This does not imply that utilizing appropriate growth rates are irrelevant).
The enormous projected surplus would indicate that MOFD has some serious strategic planning to do as to how to effectively employ that surplus. Over the past two decades, even though MOFD’s revenue has grown at twice the rate of inflation, all gains have gone to employee compensation. In fact, of MOFD’s estimated $320 million in total revenue since the district was formed in 1997, only about $50 million (15 percent) has gone to operations including capital expenses. MOFD currently owes $60 million in underfunded retirement benefit liabilities. This means that MOFD has spent or accrued more on employee compensation than it has received in total revenue over the past 19 years, even though that revenue has increased at twice the rate of inflation.
If, starting in 1998, MOFD had constrained its employee compensation growth rate to the rate of inflation, there would curently be a $6 million annual surplus for additional services and over the entire 19 years an additional $55 million could have been devoted to expanding the community's emergency services.
Will the next 15 years actually show a surplus which will be used for increased user services?
A spreadsheet version of the reports is available from this link.