The URL can be used to link to this page

Home My WebLink About112007 Five Year Forecastúúöûñ ôøôþóÿòöþôø÷ òæéàéÖÚèåØéÕéíÜÛ×åââÞÜéÛéàÚÛåçàåèåëíàÚëæíââéàçéÛÚßìßÚæÚæéåÚÕßÙàëåâ íàêóëæßßâßíÜêíÛÚæéÕçÜíÞÞâé×åÚæâß×éÜÜéØéàÙéÛÜåÛåàçêéáíàêèßÜ ÛéÜØåëéÛíçåàçåàèÜíÛÚÜÙëÚÙÜéíàêÛÚíèèåàçÜéÝÙåÜéáéàÚÛÖÞéàêåÚÙÜéÛíÜé ÞÜßäéëÚéêÚßßÙÚÞíëéÜéØéàÙéÛåàÚæééíÜâÕÕéíÜÛßèÚæéèßÜéëíÛÚêÙé ÞÜéêßáåàíÚéâÕèßÜÚæéàééêÚßíêêÜéÛÛÿóÜéÝÙåÜéáéàÚÛíàêíçåàç åàèÜíÛÚÜÙëÚÙÜéÛÚæéçÜíÞæìéâß×åââÙÛÚÜíÚéÛÚæåÛÚÜéàê×åââàíÜÜß×åà î ×æéàÜéØéàÙéçÜß×ÚæìéçåàÛÚßãééÞÞíëé×åÚæéÖÞéàêåÚÙÜéçÜß×ÚæòæéëâßÛåàç ßèÚæéçíÞåÛêÙéáßÜéÚßéÖÚÜíßÜêåàíÜåâÕÜéÛÚÜåëÚéêéÖÞéàêåÚÙÜéíÛÛÙáÞÚåßàÛÚæíà ßÞÚåáåÛÚåëÜéØéàÙéíÛÛÙáÞÚåßàÛ âßìîðÞÝùìßèâí òæéèåÜÛÚÚ×ßÕéíÜÛßèÚæéèßÜéëíÛÚÞéÜåßêÛæß×êéèåëåÚÛßè áåââåßàåàÚæéèåÜÛÚ ÕéíÜíàê áåââåßàåàÚæéÛéëßàêòæéêéèåëåÚÛíÜéêÜåØéàìÕÚæéèßââß×åàçèßÙÜ ãéÕíÛÛÙáÞÚåßàÛ ôéíâÛÚíÚéÚíÖÜéØéàÙéÛíÜéÞÜßäéëÚéêÚßÜéÚÙÜàÚßáßÜéæåÛÚßÜåëçÜß×Úæ âéØéâÛ åÚÕíàêóëæßßâÛíÜéíÛÛÙáéêÚßèÙââÕèÙàêÚæéÿóÜéÝÙåÜéáéàÚèßÜ ÜéÚåÜééæéíâÚæëíÜé åÚÕíàêóëæßßâÛíÜéíêêÜéÛÛåàçáíÜãéÚìíÛéêëßáÞéàÛíÚåßàåÛÛÙéÛèßÜ ÚæéåÜéáÞâßÕééÛíàê òæéåÚÕåÛíÛÛÙáéêÚßÛéÚíÛåêéíàíêêåÚåßàíâáåââåßàåàÞíÕíÛÕßÙ çßèåàíàëåàçÚßíêêÜéÛÛÚæéìíëãâßçßèÜßíê×íÕÛíàêáÙàåëåÞíâèíëåâåÚÕ ëßàÛÚÜÙëÚåßàÜéÝÙåÜéáéàÚÛ ôéíâÛÚíÚéÚíÖÜéØéàÙéèßÜÚæéâíÛÚèßÙÜÕéíÜÛæíÛìééàÛåçàåèåëíàÚâÕæåçæéÜÚæíà æåÛÚßÜåëÚÜéàêÛíàêåÚÕßÙàëåâæíÛÜéÛÞßàêéê×åÚæÜíÚéÜéêÙëÚåßàÛßèÏßØéÜ ÚæéÞéÜåßêòæåÛÜéØéàÙéåÛÚæéÛåàçâéâíÜçéÛÚåàÚæéßÞéÜíÚåàçìÙêçéÚíàê ÛÙÞÞßÜÚÛáíàÕßèÚæéëßÜéÛéÜØåëéÛêéâåØéÜéêìÕÚæéåÚÕÛåÚÜéÚÙÜàÛÚßàßÜáíâ çÜß×ÚæÛéÜØåëéëßÛÚÛ×åââæíØéÚßíêäÙÛÚÚßÜéèâéëÚÚæåÛàé×ÜéíâåÚÕñàèßÜÚÙàíÚéâÕ ëßáÞßÙàêåàçÚæåÛÜéÛÚÜåëÚåßàåàÜéØéàÙéÛíÜéÚæÜéééÖÞéàêåÚÙÜéêÜåØéÜÛ íêêÜéÛÛåàçÚæéèÙàêåàçÜéÝÙåÜéáéàÚÛßèÿó VIRGINIA BEACH ECONOMY Despite some dire national economic forecasts and the city's previous housing hyperactivity, Virginia Beach's housing industry and local economic activity should return to normalcy. While disposable income diminishment and credit concerns will ripple through the national economy, these issues will have a minimal effect upon Virginia Beach's economy. Employment sustainability, military presence, per capita income, economic development, and tourism should act as buffers against these adverse trends. Civilian employment trends are robust in Virginia Beach and are offsetting military personnel reductions. With the exception of 2001, civilian employment growth substantially out-paced military downsizing trends. This trend is expected to continue. In Virginia Beach, military employment represents 9% of the city's total employment. 10,000 Virginia Beach Employment Growth Virginia Beach Employment ~~~:~~~. ~ 100,000 _ 50,000 o 5,000 (5,000) Source: HRPDC 1998 1999 2000 2001 2002 2003 2004 2005 1- Virginia Beach - Military - Ci~lian 1 1- Ci~lian - Military 1 Source: HRPDC Virginia Beach's per capita income has steadily grown. This is partially due to lucrative Department of Defense (000) contracts awarded to private enterprises. Between 2001 and 2006, Virginia Beach's per capita income has grown 27.8% exceeding the national growth rate of 15.5% and correlates strongly with Virginia's 21.7% growth. With the awarding of additional 000 contracts (see table below) and spinoff economic development, Virginia Beach's per capita growth should continue to grow between 15% and 25% over the next five years. Virginia Beach Business Entity T esom AMSEC SFA, Inc. Capstone Skanska Linxx Global Tech Systems Total 000 Awards 000 Award $53.3 million 31.5 million 35.0 million 15.5 million 15.0 million 8.5 million 47.9 million $206.7 million Annual per Capita Income $40,000 $35,000 $30,000 $25,000 2001 2002 2003 2004 2005 2006 1- Virginia Beach - Virginia - u.s. 1 Source: Bureau of Econom ic Analysis 3 Lastly, the worldwide dollar valuation decline should assist Virginia Beach's tourism industry. Within the U.S. and Canada, the receding nature of American disposable income and the decline of the dollar should make Virginia Beach an economically viable alternative vacation destination. 4 REVENUES This section will discuss the major revenues received to support School programs and City services. In addition, there will be some discussion around the effect of the Homestead Provision on government services. Overall, the percentage of revenue sources that comprise the total budget are not expected to change significantly. FY 2008 Local $1,117,120,519 $1,134,779,886 $1,170,444,542 $1,207,513,708 $1,249,063,298 $1,298,061,334 Revenue State $494,945,450 $506,977,406 $517,759,816 $534,884,466 $547,428,411 $567,303,105 Revenue Federal $111,028,405 $112,894,800 $116,311,809 $119,849,905 $123,658,221 $127,671,088 Revenue Total $1,723,094,374 $1,754,652,092 $1,804,516,167 $1,862,248,079 $1,920,149,930 $1,993,035,527 % 1.8% 2.8% 3.2% 3.1% 3.8% Increase Real Estate revenues are expected to increase much slower over the next five years compared to growth in more recent years. While the forecast still predicts an average increase for property values in Virginia Beach, it is considerably less than previous years. The table below shows the real estate revenue growth rates for the City and estimated rates in the future: Real Estate Revenue Growth* FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 9.0% 10.8% 3.6% 16.2% 6.4% 2.0% 3.0% 3.0% 4.0% 5.0% *This number excludes real estate revenue from TIFs For other revenues within the City/School revenue sharing formula: Personal Property, Business Licenses, Utility Taxes, and the Virginia Telecommunications Tax, are expected to decline slightly from FY 2008 to FY 2009. This decline is due to the following issues: 1) Personal property significantly under performed in the previous year. We expect this trend to continue through this fiscal year, and the decline from FY 2008 to FY 2009 reflects an adjustment in the trend. After FY 2009, the revenue is expected to return to historic growth patterns. 5 òæéðåÜçåàåíòéâéëßááÙàåëíÚåßàÛÚíÖ×æåëææíêìééà ÙàêéÜÞéÜèßÜáåàçêÙéÚßÚæéÞÜßëéÛÛëæíàçéåáÞâéáéàÚéêìÕÚæéóÚíÚé ÚßÛ×åÚëæèÜßáíâßëíâÚíÖÚßíóÚíÚéÚíÖåÛàß×íëæåéØåàçÜéØéàÙé àéÙÚÜíâåÚÕ×åÚæÚæéåÚÕÓÛ î âéØéâàíêäÙÛÚáéàÚåÛáíêéåà î ÚßÜéèâéëÚÚæåÛíàêæåÛÚßÜåëçÜß×ÚæÞíÚÚéÜàÛíÜéÙÛéêÚæéÜéíèÚéÜ òæéëßàÛÚÜÙëÚåßàíàêÜéÚíåâëíÚéçßÜåéÛßèö÷úÚíÖÙàêéÜÞéÜèßÜáéêåà î ö÷úÜéØéàÙéÛíÜéæåÛÚßÜåëíââÕØßâíÚåâéøé× ëßàÛÚÜÙëÚåßàíëÚåØåÚÕæíÛÛâß×éêíàêÚæåÛáíÕæíØéëéÜÚíåàâÕåáÞíëÚéê ö÷úÚíÖéÛòæéÜéáíÕìéÜéÞßÜÚåàçåÛÛÙéÛ×åÚæÛßáéëßàÛÚÜÙëÚåßà ÚÜíàÛíëÚåßàÛíàêíÙêåÚÛÜéÝÙåÜéáßÜéÚåáéÚßåàØéÛÚåçíÚéôéçíÜêåàç ÜéÚíåâÚæéÜéåÛàßëâéíÜéÖÞâíàíÚåßàèßÜÚæåÛÙàêéÜÞéÜèßÜáíàëé ÞíÜÚåëÙâíÜâÕÛåàëéÿéàéÜíâóíâéÛíêØíàëéêíÚíáßêéÛÚÜíÚéóÚíèè×åââ ëßàÚåàÙéåàØéÛÚåçíÚåàçÚæåÛåÛÛÙé òæéëßÜéÙÚåâåÚÕÚíÖéÛßàéâéëÚÜåëçíÛíàê×íÚéÜÞéÜèßÜáéêÛâåçæÚâÕ ÙàêéÜæåÛÚßÜåëíââéØéâÛòæéÛéÚíÖéÛÙÛÙíââÕèâÙëÚÙíÚé×åÚæåàíàíÜÜß× Üíàçéæß×éØéÜÚæéßØéÜíââÚÜéàêæíÛìééàÛâåçæÚâÕêß×à×íÜêòæåÛ ëßÙâêìéêÙéÚßåáÞÜßØéêéàéÜçÕéèèåëåéàëÕßèæéíÚåàçíàêëßßâåàç ÛÕÛÚéáÛýÚÛæßÙâêìéàßÚéêÚæíÚÛÚíèèíàíâÕÔéêíàêíëëßÙàÚéêèßÜÚæé ØíÜåíìâéåàèâÙéàëé×éíÚæéÜ EXPENDITURES The four main drivers of expenditures are personnel, operating costs, debt service, and pay-as-you-go for capital projects. The term "personnel costs" in this report relates to all expenditures associated with personnel, including both salaries and fringe benefits. Debt services are principal and interest payments for outstanding long-term obligations. Pay-as-you-go represents current revenues used for capital projects. Operating costs represent all other costs including office supplies, electricity, capital outlay, leases, fuel, uniforms, public safety equipment, etc. FY 2008 Personnel $1,075,294,170 $1,131,035,337 $1,166,783,544 $1,202,145,816 $1,237,989,290 $1,273,598,277 Operating Costs $451,518,472 $456,768,930 $470,499,993 $481,203,375 $491,867,232 $504,156,358 Debt Service $134,430,546 $142,487,113 $148,671,015 $155,480,105 $159,314,009 $161,977,272 Capital Projects $61,851,186 $73,769,574 $75,609,220 $75,804,337 $77,333,518 $78,051,200 (pay-go) Totals $1,723,094,374 $1,804,060,954 $1,861,563,772 $1,914,633,633 $1,966,504,049 $2,017,783,107 % Change 4.7% 3.2% 2.9% 2.7% 2.6% Personnel Costs 1) It is critical for both City and School programs that we are able to attract and retain qualified employees. To achieve that result our compensation package, salaries, and benefits must remain competitive in the market. Over the next five years, the following adjustments are assumed to maintain our workforce. The City's contributions to employee healthcare are projected to remain at $5,400 per employee. However, the City Manager has appointed a group of employees who are reviewing healthcare benefits and preparing to make recommendations on how to adjust for increasing healthcare costs. The School's contribution to health insurance has been estimated to hold steady during years FY 2008-09 and FY 2009-10 due to expected changes in the health plan, and increase by 8% and 4% in the following two years. 2) While both the City and School system participate in the Virginia Retirement System (VRS), the plans are managed separately by the State; therefore, the experience of each plan results in different assumptions over the forecast period. VRS rates are not expected to increase for the City over the period of the forecast. The retirement rate, including the life insurance rate for the City, is budgeted at 7 ðôóÜíÚéÛíÜééÖÞéëÚéêÚßåàëÜéíÛéÛâåçæÚâÕèßÜÚæéóëæßßâÛåà îíàê î íëæÕéíÜßèÚæéèßÜéëíÛÚíÛÛÙáéÛíçéàéÜíâÛíâíÜÕåàëÜéíÛéèßÜ åÚÕéáÞâßÕééÛíàêíáéÜåÚåàëÜéíÛéòæéóëæßßâÛæíØéíâÛß íÛÛÙáéêíåàëÜéíÛéèßÜÚæéåÜéáÞâßÕééÛéíëæÕéíÜ òæéÜéíÜéßàâÕàé×åÚÕÞßÛåÚåßàÛíêêéêåàÚæéèßÜéëíÛÚßØéÜÚæé àéÖÚèåØéÕéíÜÛòæéÛéÞßÛåÚåßàÛíÜéíÛÛßëåíÚéê×åÚæàé×èíëåâåÚåéÛ ÛëæéêÙâéêÚßëßáéßàâåàéåàÚæéíÞåÚíâýáÞÜßØéáéàÚöÜßçÜíáòæåÛ åàëâÙêéÛèåÜéèåçæÚéÜÛíêêéêåà îèßÜíàé×âíêêéÜÚÜÙëã×æéà Úæéòæíâåí åÜéóÚíÚåßàåÛÜéÞâíëéêíàêàé× òÛíêêéêåà î èßÜÚæéòäßåàÚâåìÜíÜÕòæéíÛÛÙáÞÚåßàßèàßàé×çéàéÜíâèÙàê éáÞâßÕééÛìéÕßàêÚæéÛé×åââÜéÝÙåÜéÛæåèÚåàçéáÞâßÕééÛèÜßáßàé ÛéÜØåëéíÜéíÚßíàßÚæéÜíÛêéáíàêèßÜëéÜÚíåàÛéÜØåëéÛ×åââåàëÜéíÛé ßØéÜÚæéèßÜéëíÛÚÞéÜåßêòæéóëæßßâÛæíØééÛÚåáíÚéêÚæíÚÛÚíèèåàç×åââ êéëâåàéÛâåçæÚâÕçåØéàÚæíÚÚæéÜíÚåßßèÛÚÙêéàÚÛÚßÚéíëæéÜÛÜéáíåàíÚ íàêéàÜßââáéàÚ×åââêéëâåàéÛâåçæÚâÕßØéÜÚæéèßÜéëíÛÚ áåââåßàíàêáåââåßàíÜéìÙêçéÚéêÜéÛÞéëÚåØéâÕåà î íàê îèßÜíáíÜãéÚÛíâíÜÕÛÙÜØéÕèßÜÚæéåÚÕÚßáíåàÚíåàáíÜãéÚ ëßáÞéÚåÚåØéàéÛÛòæéóëæßßâÛæíØéìÙêçéÚéêáåââåßàåà î èßÜíÞíÜÚåíâÕéíÜáíÜãéÚÛíâíÜÕÛÙÜØéÕ×åÚæÚæéèÙââÕéíÜëßÛÚåà î ßèíìßÙÚáåââåßà ààÙíâÿóëßÛÚÛèßÜÚæéåÚÕíÜééÛÚåáíÚéêíÚáåââåßàíàê áåââåßàèßÜóëæßßâÛòæéàé×íëÚÙíÜåíâÛÚÙêÕåÛêÙéìéèßÜéÚæéàé× ÕéíÜíàêìíÛéêßàëÙÜÜéàÚÚÜéàêåàæéíâÚæëíÜéëßÛÚÛÚæéÜéåÛí ÜéíÛßàíìâééÖÞéëÚíÚåßàÚæíÚÚæéÛéèåçÙÜéÛëßÙâêìéâß×éÜ âßìîðÞÝùìßèâí òßÚíâóíâíÜÕßÛÚÛòßÚíâöéÜÛßààéâßÛÚÛ òæéáéêåíàÛíâíÜÕåàÚæéåÚÕíÛßè÷ëÚßìéÜ åÛ íàêèßÜÚæéóëæßßâÓÛ åÛ ×æåëæêßàßÚåàëâÙêéìéàéèåÚÛòæéëÙÜÜéàÚêåÛÚÜåìÙÚåßàßèÛíâíÜåéÛèßÜ íââåÚÕéáÞâßÕééÛ úáìßðÝèãêâÞÝÞ òßÚíâßÞéÜíÚåàçíëëßÙàÚÛíÜéÞÜßäéëÚéêÚßçÜß×íÚßØéÜÚæéÞéÜåßêßèÚæé èßÜéëíÛÚòæåÛåÛâéÛÛÚæíàÚæéíØéÜíçéíààÙíâçÜß×ÚæÜíÚéßèèßÜÚæé ÞÜéØåßÙÛèåØéÕéíÜÛïæåâéÚæåÛêåèèéÜéàëéáíÕàßÚíÞÞéíÜÛåçàåèåëíàÚåÚåÛ åáÞßÜÚíàÚÚßÜéáéáìéÜÚæíÚßèÚßÚíâßÞéÜíÚåàçëßÛÚÛéÝÙíÚéÛÚßáåââåßàåà î ÷ÞéÜíÚåàçíëëßÙàÚÛèßÜÚæéåÚÕíÜééÖÞéëÚéêÚßåàëÜéíÛé íààÙíââÕßØéÜÚæé ÞéÜåßêßèÚæéèßÜéëíÛÚòæåÛåÛìéâß×ÚæéæåÛÚßÜåëíâåàëÜéíÛéÛßèÛééàåàÚæé ÞÜéØåßÙÛèåØéÕéíÜÛòæéóëæßßâÛßÞéÜíÚåàçíëëßÙàÚÛíÜééÖÞéëÚéêÚßåàëÜéíÛé íààÙíââÕßØéÜÚæéÞéÜåßêßèÚæéèßÜéëíÛÚ×æåëæåÛâéÛÛÚæíà ßèÚæé ÞÜéØåßÙÛèåØéÕéíÜÛßàÛÚÜíåàåàçÚæéÛéíëëßÙàÚÛÚßâéÛÛÚæíàæåÛÚßÜåëçÜß×Úæ×åââ ÜéÝÙåÜéåÚÕíàêóëæßßâÛÚßâßßãèßÜáéíàÛÚßåáÞÜßØééèèåëåéàëÕßÜíêäÙÛÚèßÜ ÛéÜØåëéêéâåØéÜÕ âßìîðÞÝùìßèâí àßÚæéÜÞÜßìâéáèßÜëßàÛÚÜíåàåàççÜß×ÚæßèßÞéÜíÚåàçíëëßÙàÚÛåÛÚæíÚëéÜÚíåà èåÖéêëßÛÚÛíÜéåàëÜéíÛåàçýÚéáÛÛÙëæíÛÙÚåâåÚåéÛëßàÚÜíëÚÛíàêèÙéâæíØéÛéÚ ÞÜåëéÛÚæíÚàééêÚßìéÞíåêòæåÛÜéÝÙåÜéÛßÚæéÜßÞéÜíÚåàçíëëßÙàÚÛÚßíìÛßÜì åàëÜéíÛéÛåàèåÖéêëßÛÚÛ ÷àééÖíáÞâéßèíèåÖéêßÞéÜíÚåàçëßÛÚÚæíÚìßÚæÚæéåÚÕíàêóëæßßâÛèíëéåÛÚæé ÞÜåëéßèèÙéâ òæéåÚÕßÞéÜíÚéÛÞßâåëéëíÜÛíáìÙâíàëéÛèåÜéÚÜÙëãÛÞÙìâåë×ßÜãÛÚÜÙëãÛ âíàêÛëíÞåàçØéæåëâéÛéÚëââßèÚæéÛéØéæåëâéÛàééêèÙéâÚßêéâåØéÜàéëéÛÛíÜÕ ÛéÜØåëéÛÛÚæéçÜíÞæåââÙÛÚÜíÚéÛÚæéåÚÕÓÛèÙéâìÙêçéÚæíÛåàëÜéíÛéêÛåàëé î ÚæßÙçæÚæéåàëÜéíÛéÛåàèÙéâÞÜåëéÛÛåàëéæíØéìééàçÜéíÚéÜ City has reduced fuel consumption (for both unleaded and diesel fuel) each year for the last three years from 2.13 million gallons in FY 2005 to 2.06 million gallons in FY 2007. Amount Budgeted Citywide for Fuel III $7 r::: $6 0 = $5 2 $4 $3 $2 $1 $0 02 03 04 05 06 07 Fiscal Year 11 þùþ ùþöýüùøúôüûöøú øüüùö ò×ßáíäßÜëíÚéçßÜåéÛåàÚæéìÙêçéÚÚæíÚÛÙÞÞßÜÚÚæéíÞåÚíâýáÞÜßØéáéàÚ öÜßçÜíáíÜéÞíÕçßíàêêéìÚÛéÜØåëéòæéÛéÚ×ßÛßÙÜëéÛßèèÙàêåàç over 205 partially funded and unfunded projects. If debt were solely used to finance these needs, our Debt Service per capita would be $6,897, far outstripping the $2,400 per capita limit. There are 60 partially funded projects. The breakdown of projects is as follows: Number of Partially Estimated Impact on Debt Funded Projects Remaining Cost Per Capita if Fully Funded Schools 9 $430,447,778 $990 Roadways 15 $321,633,806 $739 Buildings 8 $57,414,381 $132 Technology 2 $1,950,000 $4 Coastal 3 $8,186,540 $19 Economic Dev. 2 $6,220,510 $14 Water 10 $17,030,000 $39 Sewer 10 $21,570,000 $50 Stormwater $4,600,000 $11 TOTAL 60 $869,053,015 $1,998 With the current $2,400 debt per capita limit, Virginia Beach will be able to issue an additional $75 million of debt over the next five-year period or only 2.5% of the total identified need. For FY 2008-09, the City's debt per capita is projected to be $2,262. Over the next five years (FY 2008-09 to FY 2012-13), the maximum debt per capita will be $2,353 and the average debt per capita will be $2,297. If the debt per capita limit is raised, more of the backlog could be met. With each $100 increase in the debt per capita limit, an additional $52 million in new debt could be issued. So increasing the debt limit from the current $2,400 to $2,500 will result in an additional total of $127 million over the forecast period. 13 úûýõ÷þúû÷ ñ ñ ñ ñññ âßìîðÞÝùìßèâí øìÛìãÜìÞ åÚÕ óëæßßâÛ òßÚíâ ÙáìãíèÝÜßìÞ åÚÕ óëæßßâÛ òßÚíâ ôéØéàÙéÛ ÷ØéÜñàêéÜìÕ ÛëíàìéÛééàèÜßáÚæéÚíìâéíìßØéÚæéêéèåëåÚÛÛæß×àåàÚæåÛèßÜéëíÛÚíÜé ÛÙìÛÚíàÚåíââÕçÜéíÚéÜÚæíàÚæßÛéÛæß×àåàÞÜéØåßÙÛèßÜéëíÛÚÛòæéáíçàåÚÙêé éØéà×åÚæßÙÚÚæéÞßÚéàÚåíâåáÞíëÚßèíæßáéÛÚéíêÞÜßØåÛåßà×åââÜéÝÙåÜéíáíäßÜ ÛæåèÚåàæß×ìßÚæÚæéåÚÕíàêóëæßßâÛêéâåØéÜÛéÜØåëéÛèèßÜÚÛ×åââàééêÚßìé áíêéÚßáíàíçéëßÛÚÛ òæéëßàëâÙÛåßàÛÚæíÚëíàìéêÜí×àèÜßáÚæåÛèßÜéëíÛÚíÜé ÷ØéÜíââÚæéðåÜçåàåíéíëæéëßàßáÕ×åââÜéáíåàåàçßßêÛæíÞéßØéÜÚæé èßÜéëíÛÚÞéÜåßêòæéæßÙÛåàçáíÜãéÚæíÛëßßâéêÛåçàåèåëíàÚâÕìÙÚ×éêß àßÚéÖÞéëÚÚßÛééíÜéíâêéëâåàéåàØíâÙéÛíÛæíÛìééàÛééàéâÛé×æéÜéåà ÚæéëßÙàÚÜÕ éëíÙÛéßèÚæéÜéíâéÛÚíÚéáíÜãéÚÚæéÜéØéàÙéèÜßáÜéíâéÛÚíÚé×åââìéíÚ ßÜÛâåçæÚâÕìéâß×æåÛÚßÜåëçÜß×ÚæÚÜéàêÛòæåÛáéíàÛÚæíÚÜéØéàÙé×åââÜåÛé ßØéÜÚæéèßÜéëíÛÚÞéÜåßêìÙÚíÚâéØéâÛåàÚæéÜíàçé òæéýÛÛÙéÛÛÙÜÜßÙàêåàçÚæéÞßÚéàÚåíâæßáéÛÚéíêÞÜßØåÛåßà×åââÜéÝÙåÜé çÙåêíàëéèÜßáÚæéåÚÕßÙàëåâíàêÚæéóëæßßâßíÜêìéèßÜéÛÚíèèëíà ÜéèâéëÚÚæéåáÞíëÚßØéÜÚæéèßÜéëíÛÚÞéÜåßê òæéóÚíÚéìÙêçéÚåÛèÜíçåâéíàê×åÚæÚæéèßÜéëíÛÚÜéâÕåàçßàÜßÙçæâÕßè åÚÛÜéØéàÙéÛÚßëßáéèÜßáÚæéóÚíÚé×éàééêÚßìéëßàëéÜàéê×åÚæÚæéåÜ èåÛëíâæéíâÚæïæåâéÚæéèßÜéëíÛÚêßéÛíÛÛÙáéëßàÚåàÙéêçÜß×ÚæåàÚæåÛ ÜéØéàÙéÛÚÜéíáíêéëâåàéåàÚæåÛÜéØéàÙéëßÙâêæíØéêåÜéëÚÞÜßçÜíá åáÞíëÚÛßàëÜåÚåëíâÞÜßçÜíáÛåàéêÙëíÚåßàíàêæÙáíàÛéÜØåëéÛàßÚæéÜ ÜéâíÚéêëßàëéÜà×åÚæÚæéóÚíÚéìÙêçéÚåÛÚæéÞßÚéàÚåíâíÛÚæéåÜÜéÛßÙÜëéÛ become more restricted of shifting costs through mandates, from the state to localities. 5) The backlog of critical infrastructure for both the City and School System continues to grow. Both the City and Schools are placing current revenues into the CIP to maintain modernization and renewal programs; however, with the limited debt capacity, this commitment is having limited impact on the backlog. The sections following are provided to further discuss three key areas: 1) issues involved in the Homestead Provision; 2) the impact of State and Federal Mandates on the budget; and 3) the growth in the Operating Budget over the last ten years. 15 ù÷ úýþñöþúû÷ ÿ úü÷öòüùöþúû ÜßßìãÝ÷ÝðÝÜÞâëÿâäìÞÝìðíÙìäáÝèâã òæéðåÜçåàåíþßáéÛÚéíêÖéáÞÚåßà åÛÛëæéêÙâéêèßÜåÚÛÛéëßàêØßÚéìÕÚæéÿéàéÜíâÛÛéáìâÕ åàíâÞíÛÛíçéåÛ æåçæâÕíàÚåëåÞíÚéêíàêÚæéàÚæééíÜâåéÛÚÚæééÖéáÞÚåßàëíàìéÞâíëéêßàÚæé ìíââßÚåÛøßØéáìéÜýèÚæåÛâßëíâßÞÚåßàëßàÛÚåÚÙÚåßàíâíáéàêáéàÚåÛ íÞÞÜßØéêìÕÚæéØßÚéÜÛâßëíâçßØéÜàáéàÚÛ×åââæíØéÚæéßÞÚåßàÚßéÖéáÞÚÙÞÚß ÚæéèåÜÛÚßèß×àéÜßëëÙÞåéêÞÜåáíÜÕÜéÛåêéàÚåíâÞÜßÞéÜÚÕíàêèíÜáâíàê ÞÜßÞéÜÚÕèÜßáÚíÖíÚåßàìéçåààåàçåàÚæéÛéëßàêÕéíÜßèÚæéìåéààåíâìÙêçéÚ î òæéÛÞßàÛßÜåàçâéçåÛâíÚåßàóüôåÛØéÜÕìÜßíêåààíÚÙÜéýÚåÛ ÞßÛÛåìâéÚæíÚÚæéÿéàéÜíâÛÛéáìâÕëßÙâêÞÜßØåêéâßëíâåÚåéÛÚæéíÙÚæßÜåÚÕÚß åáÞßÛéíÚéàÙÜéëâíÙÛéåàÚæéâßëíâéàíìâåàçâéçåÛâíÚåßà ÙáìãíèÝÜßìøìíÜîÝèâãâßøìÛìãÜìþãîßìðÞì òæéèåÜÛÚÕéíÜåáÞâéáéàÚíÚåßàßè íæßáéÛÚéíêÞÜßØåÛåßàÞÜéÛéàÚÛêåèèåëÙâÚÞßâåëÕëæßåëéÛ ×æéÚæéÜÚßÜéêÙëé çßØéÜàáéàÚÛéÜØåëéÛ could initially face an alternative scenario In which their supply of homes increases and appreciation stagnates. Equity Issues: The implementation of the homestead provision would shrink the residential contribution to total real estate taxes, thereby increasing the reliance on commercial assessments. This change in composition, however, does not mean that the commercial tax burden has increased; business would be levied the same amount of real estate taxes with or without the adoption of a homestead provision. Some in the community have argued that residents have shouldered the burden of funding the government. It is true that approximately 87% of the real estate tax base is comprised of residential property, and this percentage has been elevated during the four-year period of unprecedented appreciation in residential property. The average effective appreciation (after tax rate reduction) of residential property during this period was 9.8% compared to 2.2% for commercial property. However, the business community contributes to taxes beyond real estate such as sales tax and business licenses. One strategy of producing a more equitable burden is to implement a homestead exemption, which only benefits residential property owners, but also raise the real estate tax rate sufficiently to partially or fully offset the homestead exemption. A partial offset would still reduce the residential real estate tax burden and raise the amount of taxes on business property owners. The actions of other neighboring cities, however, could have an impact on such a strategy. Such a strategy adopted in isolation could negatively impact the competitiveness as a business destination. States that Impose a Local Cap on Real Estate Assessment Growth and/or Limits on Property Tax Rates Generally Impose a Higher Total Tax Burden: Artificially truncating or limiting real estate taxes does not automatically translate into an overall reduction in the tax burden. As shown in the table on page twenty-one, thirty nine states impose a homestead exemption or some form of cap on the growth in real estate assessments or limit property tax rates; however, twenty-five of these states also impose an overall higher tax burden on their residents compared to Virginia. The states that do have an overall lower tax burden are predominately rural in nature and likely do not experience a high demand for services, benefit from a substantial presence of tourists to provide governmental revenues, or receive sizable severance taxes on oil extraction. This highlights an important point: state and local governments have various shared fiscal responsibilities in the delivery of governmental services. States that limit the growth in local real estate assessments often impose higher state income or sales taxes, so that the state and its localities can sufficiently fund services in lieu of higher local real estate taxes. Unfortunately, there is no dialogue on the state level of replacing lost real estate taxes with other state revenues. In addition to the issues surrounding unfunded mandates, 19 êéÚéÜåßÜíÚåßàåàèÙàêåàçæíÛßëëÙÜÜéêßØéÜÚæéâíÛÚÛéØéàÕéíÜÛêÙÜåàç×æåëæÚæé ÛÚíÚéÛåçàåèåëíàÚâÕÜéêÙëéêÚæéèßââß×åàçèåØéÜéØéàÙéÛÚßâßëíâçßØéÜàáéàÚ úí×àèßÜëéáéàÚ Ùàêåàç öÜßèåÚÛ úßëíâóæíÜéßèïåàéöÜßèåÚÛ ôéëßÜêíÚåßà éé óÚíÚéåêÚßúåìÜíÜåéÛ îÝÜðåÛÞãÝèîèáðÝìíøìÛìãÜìëâß ÷ìåìîÝìí ìãìßðå÷ÝðÝìøìÛìãÜì åÛëíâîéíÜ âÚæßÙçæÚæééëßàßáÕíàêÛÚíÚéèåàíàëéÛæíØéåáÞÜßØéêÛåàëéÚæéÜéëéÛÛåßàíÜÕ ÞéÜåßêÚæéÛéâßëíâçßØéÜàáéàÚÜéØéàÙéÛæíØéàßÚìééàÜéÛÚßÜéêÚßÞÜéØåßÙÛ âéØéâÛòæéíëëßáÞíàÕåàççÜíÞæëßáÞíÜéÛíëÚÙíâÜéØéàÙéÚßÚæéâéØéâÚæíÚ ×ßÙâêæíØéìééàíëæåéØéêåèÚæéÛéçÜé×ìÕÚæéÛíáéÜíÚéíÛÚæéÛÚíÚéÓÛçÜß×Úæ åàÚæéçéàéÜíâèÙàêëÚÙíâÜéØéàÙéÛíÜéáåââåßàìéâß×ÚæéíáßÙàÚìíÛéê ßàÚæéÛÚíÚéÓÛçéàéÜíâèÙàêçÜß×Úæ×æåëæéÝÙíÚéÛÚßëéàÚÛßàßÙÜÜéíâéÛÚíÚé ÚíÖÜíÚé States that Impose a Cap on Real Estate Assessments and/or Property Tax Limits and Rank in Terms of Total State/Local Tax Burden Rank Tax Burden Per Rank Tax Burden Per States $100 of Personal Income States $100 of Personal Income ("3" = highest) ("3" = highest) New York 3 Massachusetts 28 Ohio 5 Mississippi 29 Wisconsin 7 Colorado 30 Nebraska 9 Arizona 31 New Jersey 10 Georgia 32 Minnesota 11 Virginia (no caps/limits) 33 California 12 Missouri 34 Arkansas 13 Idaho 35 Michigan 14 Nevada 36 Kansas 15 Oregon 37 Washington 16 Florida 38 Louisiana 17 North Dakota 39 Iowa 18 New Mexico 40 North Carolina 19 Montana 41 West Virginia 21 Wyoming 42 Illinois 22 Texas 43 Maryland 23 South Dakota 44 Indiana 25 Oklahoma 45 South Carolina 26 Alabama 46 Utah 27 Alaska 50 Source: Tax Foundation and the National Conference of State Legislatures 21 öþú÷ü ÿüùöööûøýûö÷ éÚéÜáåàåàç×æéÚæéÜíÞÜßçÜíáåÛáíàêíÚéêåÛÛßáé×æíÚÛÙìäéëÚåØéòæé éêéÜíâÿßØéÜàáéàÚæíÛêéèåàéêíáíàêíÚéíÛíàÕÞÜßçÜíáåáÞßÛéêÙÞßà íàßÚæéÜâéØéâßèçßØéÜàáéàÚ×æåëæÚæíÚâéØéâßèçßØéÜàáéàÚæíÛàßëæßåëéìÙÚÚß åáÞâéáéàÚñàêéÜÚæåÛêéèåàåÚåßàøßæåâêúéèÚéæåàêåÛàßÚíèéêéÜíâáíàêíÚé ÛåàëéóÚíÚéÛæíØéíëæßåëéàßÚÚßëßáÞâÕ÷àÚæéßÚæéÜæíàêÙàêéÜÚæåÛ êéèåàåÚåßàÚæéåàëÜéíÛéÚßÚæéáåàåáÙá×íçé×ßÙâêìéëßàÛåêéÜéêíàÙàèÙàêéê áíàêíÚé òæéåÛÛÙéÛÙÜÜßÙàêåàçáíàêíÚéÛíâÛßåàØßâØéÛÚæéÞíÛÛåàçßèÚæéÒèåÛëíâìÙëãÑ ùíàêíÚéÛíÜéæíàêéêêß×àèÜßáÚæé éêéÜíâçßØéÜàáéàÚÚßÚæéÛÚíÚéÛèÜßáÚæé ÛÚíÚéÛÚßÚæéâßëíâåÚåéÛíàêèÜßáÚæéâßëíâåÚåéÛÚßëåÚåÔéàÛßÛÚÛíÜéÞíÛÛéêßàÚß ÚæéëåÚåÔéàÛåàÚæéèßÜáßèéåÚæéÜÜéêÙëéêÛéÜØåëéÛßÜåàëÜéíÛéêÚíÖéÛíàêèééÛßÜ ìßÚæ ïæéàÚæéóÚíÚéÓÛßááåÛÛåßàßàúßëíâÿßØéÜàáéàÚåêéàÚåèåéêíâåÛÚßè áíàêíÚéÛåáÞßÛéêßàâßëíâçßØéÜàáéàÚÛåàðåÜçåàåíÚæéÕÙÛéêÚæéêéèåàåÚåßàßè áíàêíÚéëßàÚíåàéêåàóéëÚåßà . Regulation of Optional Activity - These require compliance if a locality chooses to perform or provide a service. There may be no Federal or State aid associated with the compliance requirements. An example is the City's choice to provide computers in each library. While there is no requirement to provide those computers, once the computers are made available to the public, the Federal Child Online Protection Act requires that the City provide filters on those computers that protect minors from harmful material on the Internet. Calculating the costs associated with mandates can be complex because of issues such as the following: . Each mandate has a different cost in each locality affected by it. . Some mandates have very high costs, which can change (usually increase) over time. . Some mandates can be accomplished by using existing resources; therefore, the mandate may not involve additional costs but diverts local resources from local priorities to programs defined by the Federal or State Governments. Choice vs. Need Referring to the previously mentioned three basic types of mandates, some mandates are required by law while others involve "choices" made by local governments. Many localities choose to fund services and provide additional staffing for programs that have filtered down from the State, but as an optional mandate. For example, additional staff and salary supplements are provided to constitutional offices. Not funding this "optional" mandate would result in those offices being understaffed, and unable to provide needed services, the loss of valuable employees, and increased difficulty in recruiting employees. According to the recent State of the Region report, the Hampton Roads region may not be receiving its "fair" share of State government spending, including funding for education. The distribution of State expenditures for education is particularly disadvantageous to Hampton Roads in the areas of K-12 education. State legislators argue that the City of Virginia Beach receives much more State funding than we actually send back to the State in revenue, based on the State's Composite Index of Local Ability to Pay. This Index considers two components - average daily membership and population - and each locality's ability-to-pay is evaluated relative to all other localities' ability-to-pay. While Virginia Beach may return less revenue to the State than the City receives from the State, the cost to the City to implement State mandates far exceeds the amount of revenue received from the State in support of those mandates. Examples of mandates that result in a large expense to the City, only a portion of which is covered by State or Federal revenue, are shown as follows: 23 óíâíÜÕóÙÞÞâéáéàÚÛÚßßàÛÚåÚÙÚåßàíâ÷èèåëéÛ ú ñ öñ ùøöþû õ öøúóöÿøúüú ÷àéßèÚæéßàçßåàçêåÛëÙÛÛåßàÛåàâßëíâçßØéÜàáéàÚìÙêçéÚåàçåÛÚæéâéØéâíÚ ×æåëæçßØéÜàáéàÚíâìÙêçéÚÛÛæßÙâêçÜß×óßáéÛÙççéÛÚÚæíÚìÙêçéÚÛÛæßÙâê çÜß×ßàâÕìÕÚæéßàÛÙáéÜöÜåëéýàêéÖ ïåÚæÚæéÛéêéêåëíÚåßàÛÚæéåÚÕßÙàëåâæíÛìééàíìâéÚßáßØéèßÜ×íÜê åáÞßÜÚíàÚâßëíâåàåÚåíÚåØéÛâåãéáßêéÜàåÔåàçßÙÜÛëæßßâÛéÖÞíàêåàçßÙÜâßëíâ ÚÜíàÛÞßÜÚíÚåßààéÚ×ßÜãÞÜßÚéëÚåàçÚæéåÚÕÓÛÜéÛßÜÚíÜéí×åÚæÚæééíëæþÙÜÜåëíàé öÜßÚéëÚåßàöÜßäéëÚëßàÛÚÜÙëÚåàçÚæéàé×ßàØéàÚåßàéàÚéÜíàêÚæéöéÜèßÜáåàç ÜÚÛòæéíÚéÜÞÜéÛéÜØåàçßÞéàÛÞíëéíàêíçÜåëÙâÚÙÜíââíàêÛíàêÞÜßØåêåàçÚßÞ àßÚëæÜéëÜéíÚåßàëéàÚéÜÛÚßàíáéäÙÛÚíèé× òæéèßââß×åàçÚíìâéÛÙááíÜåÔéÛÚæéêéêåëíÚåßàÛíÛåàëâÙêéêåàÚæé î ìÙêçéÚ öðïåì îøéÚ÷ÞéÜíÚåàçÙêçéÚ ôßíêÛéêåëíÚåßà óëæßßâÛ÷ÞéÜíÚåàçÙêçéÚíàêýöéêåëíÚåßà ôéëÜéíÚåßàôöíàê÷ÞéàóÞíëé òÿý òöýöéíëæØéàÚÛíàêùíäßÜöÜßäéëÚÛ òý ÛíàêóóÛ ýÚåÛàßÚé×ßÜÚæÕÚæíÚÚæéêåèèéÜéàëéìéÚ×ééàÚæé îàéÚßÞéÜíÚåàçìÙêçéÚ íêäÙÛÚéêèßÜæßÙÛéæßâêçÜß×ÚæíàêÚæéçßØéÜàáéàÚÞÜåëéåàêéÖÚßÚíâåàç áåââåßàåÛàéíÜâÕéÝÙåØíâéàÚÚßÚæé îàéÚìÙêçéÚâéÛÛêéêåëíÚéêÜéØéàÙéÛ ÚßÚíâåàçäÙÛÚßØéÜ áåââåßàòæåÛ×ßÙâêåàêåëíÚéÚæíÚÚæéçÜß×ÚæßèçéàéÜíâ çßØéÜàáéàÚÛéÜØåëéÛêåêàßÚßÙÚÞíëéÚæéåàèâíÚåßàíÜÕÞÜéÛÛÙÜéíàêæßÙÛéæßâê çÜß×ÚæýàèíëÚíèÚéÜÚæéêéêåëíÚéêÜéØéàÙéÛíÜéàéÚÚéêßÙÚÚæéìÙêçéÚçÜé× áåââåßàâéÛÛÚæíà×ßÙâêæíØéìééàíàÚåëåÞíÚéê×æéàíëëßÙàÚåàçèßÜ çßØéÜàáéàÚåàèâíÚåßàíàêæßÙÛéæßâêçÜß×Úæ óß×æíÚêßéÛÚæåÛÜéíââÕÛíÕïæåâéÚæéëßÛÚßèçßØéÜàáéàÚåàëÜéíÛéêíÛí ÜéÛÙâÚßèÚæéêéêåëíÚåßàßèÜéØéàÙéÛÚÜéíáÛÚæéåÚÕßÙàëåâÙàêéÜÛÚßßêÚæíÚ åáÞßÜÚíàÚåàåÚåíÚåØéÛÚæíÚ×éÜéèÙàêéêìÕÚæéÛéÜéØéàÙéÛÚÜéíáÛ×ßÙâêàßÚæíØé áßØéêèßÜ×íÜê×åÚæßÙÚÚæéÛééíÜáíÜãéêèÙàêåàçÛßÙÜëéÛòæéåÚÕßÙàëåâ ëæßÛéÚßåàØéÛÚåàåàåÚåíÚåØéÛÚæíÚ×ßÙâêéàæíàëéßÙÜëßááÙàåÚÕùíàÕßèÚæéÛé êéêåëíÚåßàÛ×éÜéíÞÞÜßØéêØåíÜéèéÜéàêÙáÛ÷àëéÚæéêéêåëíÚåßàÛíÜééÖëâÙêéê èÜßáÚæéíàíâÕÛåÛÚæéëßÛÚßèçßØéÜàáéàÚÛéÜØåëéÛæíÛàßÚçÜß×àíÚéÖëéÛÛåØé ÜíÚéÛìÙÚÜíÚæéÜæíÛãéÞÚÞíëé×åÚæçßØéÜàáéàÚíâåàèâíÚåßàíàêæßÙÛéæßâê çÜß×ÚæòæåÛèíëÚåàêåëíÚéÛÚæíÚÚæéåÚÕæíÛìéëßáéáßÜéÛÚÜéíáâåàéêíàê éèèåëåéàÚÛåàëé î òæåÛåÛéÛÞéëåíââÕÞÜßàßÙàëéêÛåàëéÚæéìÙêçéÚíÜÕ çÜß×ÚæåàëâÙêéÛáíàÕàé×ÞÜßçÜíáÛíàêéàæíàëéêÛéÜØåëéÛÛåàëéÚæíÚÚåáé óéÜØåëéÛÛÙëæíÛíâíÜçéÛëíâéÜéëÕëâåàçÞÜßçÜíáíÛåçàåèåëíàÚâÕéàæíàëéêâßëíâ ëßàÚÜåìÙÚåßàÚßéêÙëíÚåßàíàêéàæíàëéáéàÚÛÚßÚæéáéÜçéàëÕôéÛÞßàÛé óÕÛÚéá×éÜéíââíêêéê×åÚæåàÚæíÚçéàéÜíâçßØéÜàáéàÚçÜß×Úæ øéÚÙêçéÚ÷ÞéÜíÚåàçÙêçéÚúéÛÛïíÚéÜíàêóé×éÜóÚíÚéíàê éêéÜíâôéØéàÙé ôéèéÜéàêÙáÛÚæíÚÞÜéëéêéêÚæéåÚÕóëæßßâ Ùàêåàç ßÜáÙâí It's also important to review the funding streams over time to determine whether the dedicated funding still meets the needs of the program. Over the past few years of unprecedented real estate assessment growth, City Council reduced several of the dedicated funding streams that were backed by real estate taxes, including the City/School revenue sharing formula, Agricultural Reserve Program, Outdoor Initiative funding, and funding dedicated to Recreation Centers. If the real estate tax rate dedicated to these programs had not been reduced, the revenue would have significantly outpaced the needs of the programs. City staff will continue to review dedicated funding streams to ensure that program needs and program resources remain in balance. Revenue projected in the five year forecast will be significantly less than the 4.98% CAGR over the last 20 years associated with the implicit price indicator and number of households. 27 INDIVIDUAL FORECASTS 28 ôèßêèãèðìðîéèÝØùÜïåèî÷îéââåÞ èÛìñìðßâßìîðÞÝ ñ Õñ ûâÛìäïìß ÜüíáéÛÿùéÜÜåââ óÙÞéÜåàÚéàêéàÚ Each year, City Administration presents to the City Council a five-year projection for planning purposes. The City Administration requests that the School Division prepare a forecast of expenditures for the forecast period. Revenue forecasts related to the Local Contribution have been provided by the City Office of Management Services. The application of the Revenue Sharing Policy permits the allocation of the local contribution between PAYGO CIP and the Operating Budget. The information presented in this report assumes the continuing allocation of $ 12,936,308 to CIP Pay As You Go funding. In addition to this amount to the CIP, there is an assumption that the Sandbridge TIP funds of approximately $4.6 million per year will continue to be allocated to the PAYGO each year. It should be kept in mind in reviewing this forecast that this is the administration's estimate of increases in costs and revenues for the forecast period. There are many unknowns at the time of this projection, such as new state or federal mandates, changes in Impact Aid funding, changes in the level of State funding, grant matches, and new School Board priorities. These items are not easily forecast nor are their effects on expenditures. The forecast is based upon the following assumptions: . Student enrollment is estimated to continue to decline over the forecast period, however the decline is moderating over this period. o Elementary enrollment is projected to begin to increase in FY 2009/10. . The forecast projected enrollment numbers are based upon the September 30, 2007 enrollment. . The enrollment used in the forecast is based upon preliminary estimates provided by the Demographer and should not be considered final projections. o The enrollment represented here may change in either direction, affecting all revenue and expenditure estimates presented. . State revenues are based upon the Average Daily Membership (ADM). . ADM is assumed to decline 1.0% from the September 30th projected enrollment to the March 31st ADM. Impact Aid Funding . Federal Impact Aid has been level funded and is contained in the appropriations for Health, Education, and Welfare. . Federal Impact Aid funding is always "current year" federal money. 30 o Not forward-funded like most other federal funds (grants) received by the division Department of Defense . Department of Defense funds have been level funded. . Funds are subject to re-appropriation each year via the Federal budget process. Sales Tax . Sales Tax has been estimated to increase by an estimated 3.0 % per year. (Note: The State revised the sales tax estimate downward for 2006-07 & 2007-08. State Basic Aid . This projection assumes no changes in any of the components of State funding. o Composite Index will be re-calculated with the state biennial budget. o Basic Aid projections are assumed to increase by 4.25% for the first year of a biennium and 2% the second year of the biennium. o Increases in the index will result in a shift of funding from the State to the City and a decrease in the index will result in a shift of funding from the City to the State. o No changes are projected in the SOQ standards. Local Contribution . The City Office of Management Services has provided the estimated total revenue for each of the forecasted years. . The City has also provided the Schools' portion of the revenue based on the Revenue Sharing Policy. . The numbers used are estimates only and could change in either direction. Programs o All current educational programs would continue during the forecast period. o No program additions or expansions have been included. o Changes in staffing levels due to changes in enrollment are reflected for each year in the forecast period (calculated at 22: 1). o The VRS retirement rate has been estimated to hold steady for the first three years of the forecast period and increase slightly the last two years. o The VRS life has been estimated at the current rate of 1.0% of payroll throughout the forecast period. o Total compensation increases during the forecast period include increases related to salaries and increases related to benefits. o An amount equivalent to 3.5% of payroll effective at the beginning of the fiscal year has been used for increases to salaries. Staffing VRS Retirement Rate VRS Life Compensation Increase 31 ùíÜãéÚóíâíÜÕ êäÙÛÚáéàÚÛ þöñúø÷ö CITY ONLY FORECAST The City's portion of the forecast is comprised of general city programs such as Police, Recreation, Landscape Maintenance, Trash Collection/Disposal, Libraries, and Constitutional Offices. It also includes the two utility enterprise funds of Storm Water and Water and Sewer. Assumptions made for the City forecast have been discussed previously in this report. It is important to remember that the revenue forecast does not assume any rate increases and that expenditure forecasts simply carry forward existing compensation practices and that operating costs have been held to below inflation levels. Costs for these general government programs, examined separately from the two utilities, will exceed the projected revenues over the forecast period, although the situation does improve as revenue growth exceeds the growth in expenditures beginning in FY 2011. General Government FY 2008 Revenues Expenditure DeficiUSurplus $742.8 $742.8 $749.4 $777.0 $-27.6 $771.8 $798.7 $-26.9 $799.3 $818.8 $-19.5 $828.4 $839.7 $-11.3 $862.2 $858.3 $3.9 Utilities The Storm Water and Water and Sewer Utilities are funded primarily through user fees. Both Utilities funds are projecting deficits in the future due to changes in Federal and State regulations. Primary among them is the Federal Consent Decree requirements that the Water and Sewer Utility must meet. Because these Utilities are funded through user fees, rates for water and sewer services as well as storm water management may need to be increased within the forecast period. 35 Storm Water FY 2008 Revenues $21,569,360 $21,647,595 $21,938,315 $22,234,118 $22,535,035 $22,614,754 Expenditure $21,569,360 $21,952,522 $22,202,204 $22,358,189 $22,663,723 $22,947,020 OeficiUSurplus $-304,927 $-263,889 $-124,071 $-128,688 $-332,266 Water and Sewer FY 2008 Revenues $96,760,000 $102,354,819 $106,592,260 $107,119,476 $107,569,001 $107,797,834 Expenditure $96,760,000 $100,196,845 $104,344,036 $108,381,234 $112,661,561 $116,993,347 OeficiUSurplus $2,157,974 $2,248,224 $ -1,261,758 $ -5,092,560 $-9,195,513 36