082206 Financial OverviewCity of Virginia Beach
Financial Overview as
of 22 August 2006
1
Projected FY06
Year End Fund Balance
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Fund Balance for 30 June 2006 estimated at
$120.9M
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$120.9M is 12.6% of projected 2007 revenues
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Council Policy is to maintain a fund balance of
10% to 12% of subsequent year’s revenue
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Original FY06 budget projected Fund Balance of
$98.5M
Policy General Amount
LevelFund
Available
12%$115.2M$ 5.7M
11%$105.6M$15.3M
10%$ 96.0M$24.9M
2
Close-out continues as we reconcile accounts
Possible uses of FY06
Year End Fund Balance
Requires a future Council decision
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Buy down debt –create capacity –lower interest costs
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Risk Management –potential losses
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Replenish Site Acquisition budget line item
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Unfunded Liabilities for Retiree Health Care
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Design charettes for future projects
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Replacement Reserve for City facilities
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Increase road maintenance funding
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Top Priorities from Unfunded Requirements (UFR) Lists
(Commitments & Obligations and CIP Requested But Unfunded)
?
Revisit previous discussion for year end fund use
3
Summary of Outstanding Indebtedness
June 30, 2006
Amount
DescriptionSourceFY06FY05
General Obligation Bonds
Schools Full Faith & Credit 271,481,099277,910,224
General GovernmentFull Faith & Credit 273,702,274237,961,558
Public Facility Revenue Annual Appropriation279,265,000288,890,000
Bonds
Leases and Other Debt Annual Appropriation15,222,21116,341,549
Agriculture Reserve PrgmFull Faith Credit /Strips22,643,42622,342,090
Revenue Bonds
Water & SewerRevenues of Enterprise 137,393,893106,969,614
Funds
Stormwater Revenues of Enterprise 12,168,33612,929,436
Funds
Total Debt1,011,876,239963,344,471
Less: Revenue/Other 172,205,655142,241,140
Support
Net Tax Supported Debt 839,670,584821,103,331
4
Outstanding Debt By Purpose
June 30, 2006
Agriculture
Reserve Program
General
2.24%
Government
56.15%
Storm Water
1.20%
Water and Sewer
13.58%
Schools
26.83%
* Total Debt $1,011,876,239
5
Debt Indicators
Summary of Debt Management Policies
June 30, 2006
Estimated
Ratio DescriptionEstablished FY06FY05
Guidelines
Annual Debt Service to GeneralNo greater than 8.0%
7.18
Government Expenditures10.0%
Overall Net Debt to Estimated Full No greater than 2.6%
2.53
Value3.5%
*
Overall Net Debt Per CapitaNo greater than $1,887
1,921
$2,400
Overall Net Debt Per Capita to Per No greater than 5.5%
5.58
Capita Personal Income6.5%
*
In FY10 of current CIP this rises to $2,275
Current Capacity for use of Long term Debt
(shared with Schools)
Cumulative
FY07$88K
FY08$3.7M
FY09$18.6M
FY10$31.1M
6
FY11$58.7M
$89.0M
FY12
FY 08
Upcoming Budget & CIP
nd
authorized as 2year of
the biennial budget
appropriation required
7
Operating Budget Revenue Sources
Biennial FY07 & FY08
Other Revenues
General Sales
10.0%
Real Estate
Tax
Taxes
3.3%
28.3%
Federal
Revenues
6.5%
Personal
Commonwealth
Property Taxes
Revenues
7.8%
29.5%
Charges for
Business License
Services
Tax
Utility Tax
9.2%
2.5% 8
2.9%
Local Revenue Dedications
*
* assessment growth
within each TIF/SS District
*
*
*
9
Remainder of Revenues and those not dedicated flow into the General Fund
EXPENDITURES
FY07-08 Major Categories
FY 2007-08 Major Categories
$863.5M
Reserves
8%
Debt Service
$72M*
* Includes $45.8M = rollover compensation
11%
$95M
Capital
1%
$6M
Personnel
$392M
45%
$299M
Operations
35%
PersonnelOperationsCapitalDebt ServiceReserves
FY07-08 Personnel Costs
FY 2007-08 Personnel Costs
$391.6M**
Health Insurance
7.53%
Miscellaneous Fringe
Benefits
0.22%
Life Insurance
0.82%
**Does not include $45.8M rollover
compensation in reserves (salary & health)
Retirement
11.48%
F.I.C.A
5.54%
Other Personnel Costs
1.94%
Full-Time
66.97%
Overtime
2.26%
Part-Time
3.24%
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Full-TimePart-TimeOvertime
Other Personnel CostsF.I.C.ARetirement
Life InsuranceHealth InsuranceMiscellaneous Fringe Benefits
FY08 Compensation
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Compensation is 50% of the City budget
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Salary adjustment costs have been increasing faster than
CPI and ECI (graph follows)
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GASB 45 impact on Unfunded Liabilities in both
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Pension (VRS)
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Retiree Health Insurance
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Fully City funded VRS contribution
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Fully City funded single member health care contribution
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Market Survey used to assist recruitment of competent &
competitive workforce
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New City employees = 1,057 in last seven years
11
Comparison of VB Compensation Growth
to the Consumer Price Index and Employment Cost Index
VB compensation captures growth (merits, promotions, compression),
employee turnover (salary changes) and benefit contribution changes
220
200
180
Index of Change
VB Compensation
160
140
ECI
120
CPI
100
FY 98FY 99FY 00FY 01FY 02FY 03FY 04FY 05FY 06FY 07FY 08
VB CompensationCPI-UECI-State & Local
Employment Cost Index (ECI) is a measure of the change in
cost of labor (both wages and benefits), free from the influence
of employment shifts among occupations and industries
Consumer Price Index (CPI) includes over 400 items in the marketbasket of
goods and services. Its applicability to government wages is limited
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EXPENDITURES
FY07-08 Operational Costs
$299.2M
FY 2007-08 Operational Costs
Depreciation / Bad Debt
0.14%
Capital Projects
15.89%
Land Structures
Contractual Services
0.78%
29.88%
Leases and Rentals
1.54%
Internal Services
10.53%
Other Charges
41.24%
Contractual ServicesInternal ServicesOther ChargesLeases and Rentals
Land StructuresCapital ProjectsDepreciation / Bad Debt
FY07-08 Reserve for Contingencies
FY 2007-08 Reserve for Contingencies
$71.4M
Regular
Other
4.80%
2.28%
Rolling Stock Replacements
2.51%
Future Capital Projects
19.87%
Salary Compensation
54.33%
Future Commitments
7.64%
Health Insurance
8.57%
Salary CompensationHealth InsuranceFuture CommitmentsFuture Capital Projects
13
Rolling Stock ReplacementsRegularOther
Comparison of Annual Tax Impact on the
“Average Family”
Adopted FY 2006-07 Budget for Virginia Beach and
Other Cities
VirginiaChesa-NorfolkPorts-SuffolkHamp-New-
BeachpeakeMouthtonport
Taxes
News
RE tax rate $0.99 $1.11 $1.27 $1.36 $0.94 $1.14 $1.20
Real Estate Tax$2,182$2,447$2,800$2,998$2,072$2,513$2,646
Personal Property Tax461.76509.18499.20624.00530.40530.40530.40
Electricity Utility Tax36.0045.0045.0040.8036.0036.0036.96
Gas Utility Tax36.0022.5618.0036.0036.0028.8018.12
Telephone, E911, 67.20105.00110.4096.0066.0074.2873.49
Right of Way
Water Utility Tax36.00None67.5084.00NoneNoneNone
Restaurant Tax209.69209.69229.66229.66209.69229.66229.66
Admissions Tax27.0027.0027.0027.0027.0027.0020.25
Vehicle License Tax52.0046.0052.0050.0040.0056.0052.00
Storm Water Utility Tax62.4230.6091.2060.00None43.2052.20
Residential Refuse FeeNoneNone208.74264.00None204.00211.92
Cable Franchise & 18.0018.0043.2043.2010.8043.2043.20
Utility Tax
Total Tax Impact$3,188$3,460$4,192$4,553$3,028$3,786$3,914
Assumptions:
Real Estate Rate based on the average sale price of $220,500 that may represent a typical home value for the
respective cities based on fourth quarter, 2005 sales data from the National Association of Realtors;
Chesapeake taxes reflect mosquito control district rates since majority of residents reside in one.
Personal Property Rate on 2 cars: $10,000 and $6,000 (retail while tax rates are applied to loan value,
estimated as 78% of retail).
Utility Taxes: Based on following monthly bills: Electric at $100; Gas at $50; Telephone at $25; Water and
Sanitary Sewer at $70 bimonthly; Cable at $30.
Restaurant and Admissions: Based on the national average household spending for these items-reported by
the Bureau of Labor Statistics.
Telephone Utility: includes E911 tax and Right-of-Way fee for Telecommunications.
Vehicle License: 2 cars, each under 4,000 pounds.
Residential Refuse: Average of all rates for Hampton and NewportNews.
Sources: “A Survey of the Level of Major Local Revenue Sources in ThirteenVirginia Cities and Counties for
Fiscal Year 2005-06, City of Chesapeake and the Bureau of Labor Statistics. (Suffolk’s rates are proposed until
an official vote by City Council)
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BUDGET: Setting the Mark for FY08
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FY2008 budget based on 13.6% assessment growth
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Emerging as @ 20.9%. Adds $32.5Min Revenue
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1¢= $5.4M in FY08; $2.65M for City share
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The RE Tax rate drives the revenue stream
99¢
2007
Holding 2008 budget steady,
$32.5M
revenue increase from
Hi
93¢
assessment growth nets 6¢.
2008
CUTS
+5% in RE tax revenue, +2.6%
$21.6M
89¢
inflation, +1% for new growth
ADDS
Lo 82.6¢
Zero tax increase ($56.2M cut
to expenditures)
93¢?89¢= $21.6M
4¢= $10.6M reduction
to the City budget
From 2007 to 2008
if RE rate at:total budget grows:
99¢7.8%
15
93¢5.8%
89¢4.5%
BUDGET: Setting the Mark for FY08
In adhering to a biennial budget process it is anticipated the
FY08 appropriation will be an executive summary to the
authorized biennial which include a list of changes.
Council budget policy requires us
to look at ways to lower the RE
How to find
rate in order to offset the
4¢= $10.6M
additional revenue caused by the
growth in assessments greater
than projected by the budget.
Without cutting services/programs, where in
the budget can we look to make reductions?
(operations-compensation-debt service)
Order of Magnitude
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Total City funded contribution to VRS: $ 50M
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Total City funded member contribution for healthcare: $35.8M
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Market Salary Survey adjustments: $8M
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1.5% General increase and 3.0% Merit increase:$10.9M
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Compression adjustments: $4.7M
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Health Care Contribution increase:$1.7M
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Overtime: $8.9M
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Contracted Services: $89.4M
16
?
Debt Service: $95M
Capital Improvement Projects
by Type
FY07 = $214.6M
Renovation/
Rehabilitation,
34.0%
Other, 6.2%
Replacement,
15.8%
New Facility, 17.6%
Study/Design, 1.1%
Expansion, 22.0%
Equipment, 3.3%
FY08 = $182.5M
17
Capital Budget Resourcing
FY07 = $214.6M
Local Revenue
16.9%
State Revenue
18.5%
Utility Revenue
6.2%
Other Revenue
1.8%
Fund Balance
12.1%
Bonds
Utility Bonds
34.5%
10.0%
18
City/School Revenue
Sharing Formula
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Splits the seven fastest growing and most stable
revenues between the City and School Systems
? Real Estate Tax? Cellular Telephone Tax
? Personal Property Tax? Business License Tax
? General Sales Tax? Utility Taxes
? Cable Franchise Fee
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51.79% goes to Schools and 48.21% to the City
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Provides a stable local revenue platform for school
planning
This year provided $365 million in local revenue
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Council policy requires that formula revenues go to
? pay debt service on school debt;
? provide at least $1 million in cash to the School CIP;
? Remainder to school operating budget.
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Formula is adjusted annually to reflect City Council
Actions
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Revenues are “trued-up”at the end of each fiscal year to
19
reflect actual collections
School Formula Issue:
Declining Student Enrollment
September 30 Actual and
March 31 Average Daily Membership
80,000
78,000
Number of Students
76,000
74,000
72,000
70,000
68,000
66,000
97989900010203040506 0708
(proj)(proj)
Fiscal Year
30-Sep31-Mar
Does not reflect the significant increase in cost per student
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or the rising cost to replace infrastructure
BUDGET PROCESS
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Routinely share financial status with Council.
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Maintain biennial process for both the Operational and CIP
budgets. Allow leadership to focus on other priorities.
•Operational -Conduct a revenue and expenditure review
and adjustment for the second year.
•CIP –Review prioritization and start years –do not add a
sixth year to CIP in the second year of the biennium.
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Provide an awareness of the City Assessor’s forecasts.
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Establish prioritized Unfunded Requirements, UFR, list for
making end of year fund balance decisions and framing year of
execution “pay-as-you-go”strategy. (Use Commitments &
Obligations list to assist Council).
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Begin discussions early on the real estate rate for the City
Manager’s budget submission. Allows Council to focus their
budget approval process on specific concerns.
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Establish process for quarterly departmental program budget
reviews presented to Council. Will keep Council familiarized
with Departmental programs and hot topic issues.
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Continue annual preparation of the 5 year financial forecast.
21
DEBT
as of June 30, 2006, City of Virginia Beach holds
$1.012B in outstanding debt
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Routinely share debt indicator status with Council to
receive direction and to keep advised.
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Assess capacity sufficiency to support CIP strategy.
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Evaluate impact of potential decisions to expand debt
indicators.
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Develop a “pay-as-you-go”strategy to compliment
long term debt.
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Discuss emerging concern regarding pressure for City
to take on additional debt via the use of a CDA ,
Community Development Authority.
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Your Questions
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