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HomeMy WebLinkAbout11152011 FIVE YEAR FORECAST11 /15/2011 Five Year Forecast FY 2013-2017 ~ nay.=ctia~ a~ ~~ a~sd sc~aoe .Sc~~i ~uzaoued • Forecast Presentation • Economy • Current Formula Revenues • School Forecast • City Forecast • Conclusion and Threats • Ways to Modify the Forecast • Voting Software 2 1 11 /15/2011 ~ ' ~~ Consumer Price Index 4.5% 4.0% 3.5% Projected 3.0% 2.5% _ 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% _ -1.0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 ^AIl Items oCore CPI Proj Proj Sources: Mtual data from Bureau of Economic Malysis, Protections fiom Meslrow Financial Themes on fhe Economy 4 2 11/15/2011 Consumer Confidence 1so - 140 - 120 100 - 80 - 60 40 20 - 0 O O O ~ N M M ~ d' u) u) O r n W W 01 O O O) O O O O O O O O O O O O O O O O O ~ N N ~ O ~ N ~ ~ U N N 7 ~ ~. Q > C C m ~ V ~ LL In Q Z -~ ~ Q ~ O ~ ~ O LL (n Q Z O ~ Q ~ ~ Source: The Confer ence Board Unemployment Rates 12.0% ~- 10.0% 8.0% 6.0% 4.0°/ 2.0% •~~~ __._. ~~_* 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Calendar Year ~+-Virginia Beach -Hampton Roads ~-Virginia -N-United States Source: Bureau of Lahor Statisf¢s and the Congressional Budget Office 6 3 11/15/2011 Virginia Beach Defense Spending $, 6.0 $,4.0 Projected $12.0 $10.0 p $8.0 m $6.0 $4.0 $2.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year Real Estate Assessments 25.0% zo.o°i° 15.0% 10.0% 5.0% o.o°r° -5.0% Six straight years of declining real estate V -10.0% °~o °~o rn rn rn rn o 0 0 ~ ~ rn m rn m rn rn o 0 0 0 0 0 N N N N N N Fiscal Year Q 4 11/15/2011 Economic Summary • Unemployment remains high ~~ • High business profits, but not hiring ._..,_ ~~~ ~ Inflation is rising • Consumer confidence is unpredictable • Stock market volatile ---- Housing still declining • Borrowing is tight %~ • Uncertainty 9 These revenues are currently shared 51.3 to School System and 48.x% to the City 5 11 /15/2011 `~ Real Estate Revenue $550.0 $500.0 $450.0 y $400.0 $350.0 $300.0 2008 2009 2010 2011 2012 Projected 2013 2014 2015 2016 2017 Fiscal Year ^ Real Estate -General Fund ~ Delinquencies & Interest on Delinquent TIF's & SSD's ^ Public Service Personal Property $160.0 $140.0 $120.0 , $100.0 . $80.0 $60.0 $40.0 $20.0 $0.0 2008 2009 2010 2011 20122013 2014 2015 2016 2 Fiscal Year ^ Personal Property Paid by Commonwealth o Personal Property Vehicles Public Service Personal Property ^ Business Equipment Machinery 8 Tools ^ Delinquent and Interest on Deliquent 6 General Sales Tax $64.0 . t S60.0 _ +~~~~- ~~• o $56.0 • ~~ ~ ~ i - .~ • ~ •~• $52.0 $48.0 .._ $44.0 $40.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 i ~ Fiscal Year ~, t! i 1: Utility Taxes (includes VA Telecommunications but not E911) $ao.o $35.0 $30.0 c $25.0 •~~~~~~~+• ~~~ $20.0 $15.0 _ ___ $10.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 11/15/2011 7 11/15/2011 1 Business License Tax $65.0 $60.0 $55.0 $50.0 . .~~• ~~~~ m $45.0 •~ • • c ~.~ ~ ~ o •• $40.0 $35.0 -• $30.0 $25.0 $20.0 ~/~ 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year Cable Franchise Tax $, 2.0 $, o.o $8.0 ,..~ C O $6.0 $4.0 $2.0 { $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 11/15/2011 she ~ Local Support Current Formula $440.0 $400.0 $360.0 N C O $320.0 $280.0 $240.0 $200.0 Projected 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 1 I 9 11/15/2011 ~ Local Composite Index 0.45 d' 0.4 __ 0.35 0.3 2008 2009 2010 2011 2012 f/~ Fiscal Year ^ Virginia Beach u State Average 19 Federal & State Revenue $450.0 $400.0 $350.0 $300.0 N o $250.0 ~ $200.0 $150.0 $100.0 $50.0 $0.0 10 ~ State ~ Federal 20 11/15/2011 Fees and Charges ~ $40.0 $30.0 • •~~ N •~~~~~~~~~~~~~~~~ C O $20.0 $10.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year Student Enrollment 80000 76.000 72,000 68,000 64,000 60,000 ~9 ~9 ~9 ~9 ~9 ~9 ~9 ~9 ~9 ~9 ~O `~D 20 20 `'O ?O ~D 20 20 20 20 ?O 20 20 `'O 20 `~D ~O Ap `9i 9? `9u' 'Qi 9S 9S 9> 9B '9.9 OD O~ ~? O~ OA OS, 06, ~~ ~~ Dy 1~ 7~ 7a ~~' ly 73. 76, 7) School Year 11 11/15/2011 School Salaries $550.0 ~'~,~ $530.0 $510.0 c ~ $490.0 $470.0 $450.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year School VRS Rate ~` 1 ~ 30.0% 5, ,, ~ . _ 24.0% ~.~ - ` Projected 1a.o°r° 12.o°r° 6.0 0.0% - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 12 11/15/2011 Health Insurance Costs and Percentage of Full-Time Salaries $120 $100 19% 181- ~ 16% 17~ ~ $80 14 N`o $60 10% $40 _ - - $20 $- 2008 2009 2010 20t1 2012 2013 2014 2015 2016 2017 School Operating Expenditures $200.0 $180.0 $160.0 ~ • $,40.0 - •w"~'••h..~...~ $, 20.0 - - - - -- $100.0 $80.0 $60.0 $40.0 $20.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 26 13 11/15/2011 School Debt Service $50.0 $47.0 •~~~~.~• $44.0 • ~~~~~~+ m c 0 ~ $41.0 $38.0 $35.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year School Pay-go $16.0 _ _---- _ __ $14.0 $12.0 $10.0 c _= $8.0 - $6.0 $4.0 $2.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 14 11/15/2011 Total School Expenditures $,,000.0 $800.0 $600.0 c 0 $400.0 $200.0 $0.0 2008 2009 2010 2011 2012 ~ 2013 2014 2015 2016 2017 Fiscal Year o Salaries © Fringes ^ Other Operating Expenditures 29 School Forecast $960 $940 $920 $900 $880 ~ $860 0 $840 $820 $800 $780 - $760 $740 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 tRevenue Expenditure 30 Projected E ~~~~. 15 Formula Revenues City Portion $460.0 Denotes the $9.2 million in RSF $410.0 retained by City and replaced with School fund balance. N ~ Projected o $360.0 $310.0 $260.0 $210.0 2008 2009 2010 2011 2012 2013 Fiscal Year 2014 2015 X016 2017 11/15/2011 16 11/15/2011 Automobile License Revenue $16.0 $14.0 $12.0 $10.0 ~ J•••~••~•.•~•~•!••• w - ~ o $8.0 -- $6.0 $4.0 $2.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 33 Cigarette Tax $16.0 $14.0 $12.0 $10.0 N C 4 $8.0 $6.0 $4.0 $2.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 17 11/15/2011 Amusement Tax $fi.o $7.0 $6.0 ~~~~ $s.o C _O $4.0 $3.0 $2.0 $1.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year Hotel Tax $32.0 $28.0 •••~•••~•••~•~•~•••! $24.0 $20.0 N C O $16.0 $12.0 $8.0 $4.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 18 11/15/2011 Restaurant Meals Tax $80.0 j„XJI $70.0 $60.0 •••.•••.~.~~~~~ $50.0 _ - __ - N C '~_ $40.0 ~ ~ $30.0 - $20.0 $10.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year VA Telecommunications - E911 $s.o - $7.0 o $4.0 - - $3.0 $2.0 $1.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 38 19 11/15/2011 Other Local Taxes $12.0 - _ -- $10.0 0 $s.o $s.o $4.0 $2.0 $0.0 2008 2009 2010 2011 2012 Fiscal Year ^ City Tax on Deeds ^ City Tax on W i Fees and Charges $300.0 $250.0 $200.0 o $150.0 $100.0 Projected Projected $50.0 $o.o ~ ~ ~ ~ 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 40 20 11 /15/2011 State & Federal 5160.0 51ao.o Projected -~ 5120.0 5100.0 C ~_ $80.0 $60.0 __. $40.0 i $20.0 - I 1 a I i ~~ ~ $0.0 ~ ~ 1 _ - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 { Fiscal Year o State o Federal 41 City Salaries $370.0 r $350.0 $330.0 C ~ ~~ ~ ~ ~ ~ ~ ~ ~ O $310.0 - $290.0 I~ $270.0 $250.0 ~ 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 /~ Fiscal Year 1 42 21 11/15/2011 City VRS Rates Includes both Retirement and Life Insurance rates 28.0% 24.0° 20.0% d 16.0% m j 12.0% 8.0% 4.0% 0.0% 2008 2009 Fiscal Year Health Insurance Costs and Percentage of Full-Time Salaries $70.0 •.+ ~• 22. $60.0 ~• • •21.0% *• • • 19.7% $50.0 •1 10 $40.0 ~ • c 0 $30.0 / 12.5% $20.0 $10.0 • 8. /o • •.• 15.1% $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 22 11/15/2011 Risk Management $25.00 - $20.00 ` • • ~~ • • o $15.00 ~•~ - • +~ • •• ~~ $10.00 ~ • ~ $5.00 $0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year SPSA Cost $25.0 Estimated Solid Waste Tipping Fee - $125.00 $20.0 ~'• • • • • • • $15.0 ~ c • o • ~~•••~ $10.0 ~~~~~• Estimated Solid Waste Tipping Fee - $65.35 $5.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 46 23 11/15/2011 Debt Service All City debt excluding Schools $140.0 Projected $1zo.o r $100.0 $80.0 0 $60.0 $40.0 $20.0 $0.0 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 / Fiscal Year City Pay-go $70.0 ~~. $60.0 • $50.0 ~~ • ~ ~ c ~ o_ ~• $40.0 $30.0 $20.0 $10.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year 24 11/15/2011 Total City Expenditures S 1.200.0 Projected S 1.000.0 $800.0 _ ~ c $600.0 0 $400.0 ~ is i ---~ $200.0 $309 $320 $319 $313 $320 $322 $323 $325 $325 $325 l J I I J _ $OO 2008 2009 2010 2011 2012 2013 2014 ' 2015 2016 2017 ~ Fiscal Year ~ ^Operating ^Fringes Salary 49 City Forecast •.^ $1,000.0 . ~ r' • • $-98.1 m $950.0 ~ ' ••~ $900.0. _ •~~.8m ~.•`•••~• •••.~.•~ ~ $850.0 0 $800.0 $750.0 $700.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year (Revenue (Expenditures 50 25 11/15/2011 eaHCfaaiw~ & 7lr~eeatc Combined Forecast Projected o° $2.000.0 $1,sso.o - '4 $1,soo.o $1,850.0 7 ~, $1,800.0 ~~ 0 $1,750.0 $1, 700.0 $1,650.0 $1,600.0 $1,550.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 /r Fiscal Year o Revenue ^ Expenditure 52 26 11/15/2011 Combined Deficit Drivers • The projected combined deficit for next year is $90.1 million and grows to over $165.0 million by year 2017; however, Projected Deficit 2 s ~ _ -- Less: Real Estate Loss $22.6 $35.7 $48.3 $48.3 $44.2 VRS Rates $26.3 $37.3 $54.5 $66.1 $84.0 Health Insurance $16.1 $38.3 $51.2 $60.5 $71.9 SPSA 0 $1.1 $1.1 $11.5 $11.5 Real Estate Revenue $500 $450 $400 c 0 ~ $350 I $300 $250 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Note: This graph reflects the real estate taxes that are subject to the School Funding Formula and other dedications and does not include the amounts related to the TIFs and SSDs. 54 27 11/15/2011 !~ Health Care Fund $250 - _ - ~~ Projecte~ $200 No change in employe ,~- ~__' contribution in 5 years $~50 $100 $50 $- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Calendar Years r•+Claims LGAS645 -Revenue Combined VRS Rate Increases 7°r° t 6% - •' S% _ __ 7 4% ~ Schools 3% ^ City 2% - 1% 0% '''I 2013 2014 2015 2016 2017 a 56 28 11/15/2011 Options to Address the Deficits • Real Estate Revenue -Increase the rate to maintain current tax bills -Reduce services to the community - Process Improvement Steering Committee • Health Care - Increase incentives to encourage healthy behavior thereby reducing costs - Cost shift to employees (coinsurance, copays, and premiums) - Make substantial changes to the plan design (reduce ,I coverage) r! 57 Options to Address the Deficits • Retirement - Seek General Assembly options • Defined contribution • Current employees to pay 5% - Require all new employees to pay S% • SPSA - Develop a strategy for what happens after 2018 when SPSA ends - Provide for routine increases in Solid Waste Fee to keep up with increases in tippingfees - Reduce services (end curbside recycling) - Privatize collection 29 11/15/2011 Threats to the Forecast • Federal Budget - "Super Committee's" decisions (or lack there of) could significantly impact both the City and Schools • Cuts to Defense spending • Cuts to Medicaid and Medicare • State Budget - Governor's call for State agencies to cut 2, 4, 6% - Potential for VRS changes - State shifting costs to localities - Redirecting local revenues to the State • Storm Water Total Maximum Daily LOad (TMDL) 59 ~~~~ ~ ~ ~ ~ Voting Software 30 11/15/2011 Instant Voting ~ This voting system is anonymous . • Wait until I say voting is open. • Press the number on your keypad that corresponds to your answer (the keypad will turn on when you push the button). • You can only select one answer. • We will let you know when voting is closed. • The results will display up here on the screen. • We will use the results from the voting to modify the forecast. Revenue Question: Over the next 5 years do you believe the economy will: 1. Beat the forecast 2. Remain within forecast assumptions 3. Get worse 4. Unsure /' of of o0 0/ / '-1 O Y 1 2 3 4 62 31 11/15/2011 12euenue Quesrion: 25 % of all our revenue comes from the State. Do you think that over the forecast ~, period the State will: 1. Increase its financial commitment to Schools and the City 2. Same commitment to Schools and the City as shown in forecast 3. Reduce its financial commitment to Schools and the City 2 3 Revenue Question: 9 % of all our revenue is Federal. Do you think that over the forecast period the Federal government will: 1. Increase its financial commitment to Schools and the City 2. Same commitment to Schools and the City as shown in forecast 3. Reduce its financial commitment to Schools and the City 1 2 3 32 11/15/2011 Expenditure Question: City and Schools continuously improve efficiency. Do you believe that they can !r1 continue to do so? 1. Easily, both can save an additional 1% 2. We should set a goal of reducing costs by 2% 3. No, while both should strive to remain efficient both have reached a point where choices among services would have to be made to reduce the budget 2 3 F,xpenditure Question: Should the City and School system set aside funding to ensure compensation ,~- remains competitive? 1. No additional funding should be ~~~ i provided until the economy improves 2. Set aside 1% of total payroll each year of the forecast 3. Decrease funding for total i compensation by 1% each year -1 4. Need to wait to see what service reductions may need to be made with the Budget 1 2 ; 4 6 33 11/15/2011 - F,xpenditure Question: Over the forecast period, VRS rates are anticipated to increase. Year 1 is somewhat set based on rates from VRS, but do you believe the growth in the out years is too ... 1. Aggressive, VRS investments should help mitigate the increases. 2. Low given the unfunded status of pension liabilities. 3. Just about right. o°ro _ o~ o°r° Gxpendihu•e Question: Maintaining the current 80% employer contribution to health care will require a 30% ' increase assuming the cost of health care increases by the projected 9%. Do you believe we ~_ -' should ... ~~' 1. Reduce the employer ' contribution. 2. Maintain the 80% coverage no matter the cost. -:I 3. Increase the employer contribution. 4. Implement a program to j'' encourage wellness era o0 o°ro a ~ thereby reducing costs. 1 2 3 4 34 11/15/2011 Expenditure Question: What single service is likely to experience the most increase in demand over the next 5 years and should be considered for increased funding? 1. Public Safety 2. Education K-12 3. Human Service programs __ 4. Infrastructure maintenance 0 0 0 0 1 2 3 4 69 Expenditure Question: Overall, expenditures in the forecast are: 1. Too conservative to maintain quality of life and address critical issues. Expenditures need to increase more. 2. Just about right given where the economy is likely to be. 3. Too optimistic, we should be able to reduce expenditures by focusing on core services. 4. Unsure 1 2 3 4 ~~ 35 11/15/2011 Discussion Question: The most significant threat to the financial position of the City and Schools ,~ in the next i8 months is: 1. State budget reductions due to the slow economy and the loss of the stimulus funds 2. Reductions in Federal defense spending 3. State elimination of local funding streams (Business License(BPOL) 4. Health care costs 5. VRS retirement costs ~ oss ono o% oro Conclusion • The economy is improving although very slowly. • Federal and State budget reductions will affect programs and revenues, they are beyond our control. 36