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Home My WebLink AboutII. A. FIVE YEAR FORECAST 11262024City of Virginia Beach Five- Year Forecast 1 Annual Purpose of Five-Year Forecast •Provide an overview of the current financial condition of the city •Forecast revenues and expenditures for select City funds •Review Virginia Beach City School’s Operating Fund •Highlighted policy decisions that will need City Council consideration 2 Economic Outlook Presented to: Virginia Beach City Council Nikki Johnson Regional Economist, HRPDC November 2024 3 U.S. Real Gross Domestic Product Annualized Percent Change from the Previous Quarter, Q1 2018 – Q3 2024 2.8%4.4%2.8% -40% -30% -20% -10% 0% 10% 20% 30% 40% Q1-2018 Q1-2019 Q1-2020 Q1-2021 Q1-2022 Q1-2023 Q1-2024Annualized Percent ChangeSource: Bureau of Economic Analysis, HRPDC.4 U.S. Monthly Inflation January 2010 – October 2024 9.0% 2.6% 3.3% -2% 0% 2% 4% 6% 8% 10% Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22 Jan-24Year-Over-Year ChangeAll Items Core Inflation (Ex. Food & Energy) Source: Bureau of Labor Statistics CPI-U, HRPDC. Seasonally adjusted data. 5 Hampton Roads Civilian Payroll Employment (Jobs) September 2018 – September 2024 793,700 700,800 829,000 680,000 700,000 720,000 740,000 760,000 780,000 800,000 820,000 840,000 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24Jobs Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 6 Civilian Payroll Employment (Jobs) Index February 2020 – October 2024 104.4 104.0 103.3 85 88 91 94 97 100 103 106 109 Feb-20 Sep-20 Apr-21 Nov-21 Jun-22 Jan-23 Aug-23 Mar-24 Oct-24Index (Feb. 2020=100)United States Virginia Hampton Roads Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 7 Hampton Roads Industry Payroll Employment (Jobs) October 2019 – October 2024 -4,200 -1,800 -1,300 -1,200 4,600 6,300 6,400 6,800 -5,000 -3,000 -1,000 1,000 3,000 5,000 7,000 Retail Trade State Government Information Administrative & Support & Waste Management Leisure & Hospitality Local Government Real Estate & Rental & Leasing Other Services Wholesale Trade Management of Companies & Enterprises Private Educational Services Manufacturing Federal Government Finance & Insurance Transportation, Warehousing, & Utilities Health Care & Social Assistance Professional, Scientific, & Technical Services Mining, Logging & Construction Change in Number of Jobs Source: Bureau of Labor Statistics, HRPDC. Non-seasonally adjusted data. 8 Hampton Roads Civilian Labor Force and Employment September 2018 – September 2024 841,579 861,320 865,080 888,822 720,000 760,000 800,000 840,000 880,000 920,000 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24IndividualsEmploymentLabor Force Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 9 Virginia Beach Civilian Labor Force and Employment September 2018 – September 2024 229,099 234,559 234,778 241,178 195,000 205,000 215,000 225,000 235,000 245,000 255,000 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24IndividualsEmploymentLabor Force Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 10 Unemployment Rate September 2018 – September 2024 3.2% 2.8% 4.1% 2% 4% 6% 8% 10% 12% 14% Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24Unemployment RateHampton Roads Virginia Beach United States Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 11 Hampton Roads Home Sales October 2010 – October 2024 1,331 2,673 3,668 2,135 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Oct-10 Oct-12 Oct-14 Oct-16 Oct-18 Oct-20 Oct-22 Oct-24Homes SoldNew Construction Existing Homes Source: Real Estate Information Network (REIN), HRPDC. Seasonally adjusted data. 12 Virginia Beach Residential Units Sold YTD October 2010 – YTD October 2024 4,359 8,419 4,831 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024Units SoldSource: Real Estate Information Network (REIN), HRPDC.13 FHFA Home Price Index (HPI) Q1 2010 – Q2 2024 136.3 197.4 209.1 119.2 168.7 180.4 107.5 150.3 157.6 85 100 115 130 145 160 175 190 205 220 Q1-2010 Q1-2012 Q1-2014 Q1-2016 Q1-2018 Q1-2020 Q1-2022 Q1-2024Index (Q1 2010 = 100)United States Virginia Hampton Roads Source: U.S. Federal Housing Finance Agency, All-Transactions house price index, HRPDC. 14 Virginia Beach Median Sales Price of Existing Homes YTD September 2010 – YTD September 2024 $237,200 $268,000 $378,250 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024Median PriceSource: Real Estate Information Network (REIN), HRPDC.15 Hampton Roads Months’ Supply of Housing Inventory October 2012 – October 2024 6.8 2.9 1.0 2.2 0 1 2 3 4 5 6 7 8 Oct-12 Oct-14 Oct-16 Oct-18 Oct-20 Oct-22 Oct-24Months SupplySource: Real Estate Information Network (REIN), HRPDC. Seasonally adjusted data 16 Thanks! Nikki Johnson Email: njohnson@hrpdcva.gov 17 City of Virginia Beach Five-Year Forecast Kevin Chatellier Director of Budget and Management Services 18 Baseline Revenue Assumptions •Assume all current policies and tax rates remain in place •Estimated growth determined by historical trends •Revenue Sharing Formula between City and Schools extended “as is” 19 Real Estate Tax $781 M $811 M $919 M $0 $100,000,000 $200,000,000 $300,000,000 $400,000,000 $500,000,000 $600,000,000 $700,000,000 $800,000,000 $900,000,000 $1,000,000,000 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Budget Actual Projection 20 Personal Property Tax $206.7 M $220.6 M $248 M $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 $300,000,000 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Budget Actual Projection 21 Business Professional Occupational License (BPOL) $62.6 M $67.2 M $72.7 M $0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Budget Actual Projection 22 General Sales Tax $93.2 M $97.8 M $110 M $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000 $100,000,000 $110,000,000 $120,000,000 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Budget Actual Projection 23 Cigarette Tax $6.9 M $6 M $4.6 M $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Budget Actual Projection 24 Restaurant Meals Tax $96.5 M $99.4 M $112.9 M $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Budget Actual Projection 25 Hotel Room Tax $47.6 M $47.6 M $53.6 M $- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Budget Actual Projection 26 Telecommunication $16.4 M $15.5 M $13.5 M $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Budget Actual Projection 27 Baseline Expenditure Assumptions •Personnel •Compensation- assumed 3% increase annually to match “steps” •Virginia Retirement System (VRS) Rates- assumed 1.5% rate increase every other year •Health Insurance- assumed 3% employer contribution increase •Vacancies- fully uploaded personnel without reflection of attrition •Operating Accounts •Inflation to both operating and capital accounts assumed (3%) •Increased by amount of known contractual increases (Adobe, Microsoft, Salesforce, ServiceNow, Auto parts/labor, etc.) •Debt Service is held flat 28 Baseline Forecast 0% 3.90% 2.62%2.63% 3.14% 2.69% 0% 3.42% 2.55%2.43%2.35%2.36% -2% -1% 0% 1% 2% 3% 4% 5% FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Expenditures Revenue GENERAL FUND FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Baseline Revenue 1,479,465,247 1,530,029,240 1,569,087,904 1,607,147,595 1,644,899,713 1,683,677,527 Baseline Expenditures 1,479,465,247 1,537,102,250 1,577,352,386 1,618,826,556 1,669,608,028 1,714,550,908 Difference -(7,073,010)(8,264,482) (11,678,961) (24,708,315) (30,873,381) 29 Excluded from Baseline Scenario •Direction to explore affordability and implementation of: •Potential impact of market salary survey implementation- TBD •30 Additional Firefighters- $3.1 million •Annualized cost for enhanced public safety screenings- $1.1 million •Parks after Dark Programs- 2 Parks- $750,000 30 Virginia Beach City Public Schools Five-Year Forecast Crystal Pate Chief Financial Officer 31 Baseline Revenue Assumptions FY26 FY27 FY28 FY29 FY30 Revenue Sharing Formula +4.1%+2.8%+2.6%+2.5%+2.5% State +6.32%+3.0%+3.0%+3.0%+3.0% Sales Tax +0.9%+0.5%+0.5%+0.5%+0.5% Federal ----- Other Local +$75,000 +$75,000 +$75,000 +$75,000 +$75,000 32 Students and Characteristics 64,193 63,689 63,201 62,855 62,652 59,000 60,000 61,000 62,000 63,000 64,000 65,000 66,000 2025-262026-272027-282028-292029-30*Projected Student Enrollment 12.14%12.28% 12.57% 12.91% 13.43% 13.78% 11% 12% 12% 13% 13% 14% 14%2019-20202020-20212021-20222022-20232023-20242024-2025Students with Disabilities 41.23%41.13% 43.60% 45.94%45.79%45.51% 38% 39% 40% 41% 42% 43% 44% 45% 46% 47%2019-20202020-20212021-20222022-20232023-20242024-2025Economically Disadvantaged Students 2.33%2.28% 2.89% 3.30% 3.66% 4.04% 0% 1% 2% 3% 4% 5%2019-20202020-20212021-20222022-20232023-20242024-2025English Language Learners 33 Key Budget Assumptions—Expenditures FY26 FY27 FY28 FY29 FY30 Salary Increase *+3.0% +3.0%+3.0%+3.0%+3.0% Employer Health Insurance +15.0%+5.0%+5.0%+5.0%+5.0% Employer VRS -+1.0%-+1.0%- Inflation +3.0%+3.0%+3.0%+3.0%+3.0% PAYGO Funding +$1,000,000 +$1,000,000 +$1,000,000 +$1,000,000 +$1,000,000 * These increases are not a guarantee but a placeholder for future consideration by the School Board as part of the annual budget process. 34 VBCPS Baseline Forecast FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Revenue $1,047,089,892 $1,074,384,841 $1,101,613,626 $1,129,055,302 $1,157,283,844 Expenditures $1,055,155,231 $1,092,655,208 $1,125,012,952 $1,165,460,025 $1,204,189,055 Baseline ($8,065,339)($18,270,367)($23,399,326)($36,404,723)($46,905,211) 35 VBCPS Baseline Forecast- cont. $950,000,000 $1,000,000,000 $1,050,000,000 $1,100,000,000 $1,150,000,000 $1,200,000,000 $1,250,000,000 FY 2025-26 Forecast FY 2026-27 Forecast FY 2027-28 Forecast FY 2028-29 Forecast FY 2029-30 Forecast VBCPS Baseline Forecast Revenue Expenditures 36 What Could Change? •Adjustments to the State SOQ funding formula (JLARC) •Adjustments to Federal funding of Title I, Title II and Title IV •Rising healthcare trends and costs •New State and Federal Mandates •New School Board priorities •Employee Compensation •Increasing Debt Service Obligations for CIP •Escalating Operating Expenditures (Utilities, Fuel, Contractual Obligations) 37 Revenue Considerations Impacting Future VBCPS Program Decisions VBCPS Programs Total Cost to operate Six Academies (BHS, FCHS, KVHS, LHS, SHS, THS)$6,404,341 Two Advanced Academic Programs (OLHS & PAHS)$2,108,549 Advanced Technology Center $3,921,626 Technical and Career Education Center $6,151,734 Green Run Collegiate Charter $4,328,057 Environmental Sciences Program at the Brock Center $395,642 Old Donation School $13,356,140 Governors School for the Arts $1,138,975 Adult Learning Center $2,490,416 An Achievable Dream Academy $2,167,484 NEW CTE course programs presented to the School Board 11/12/2024 $617,316 TOTAL Annual Costs $43,080,280 38 CIP Means of Financing and Debt Service Kevin Chatellier Director of Budget and Management Services 39 Means of Financing—Terminology Pay-as-you-go •Transfer of current year estimated revenue to support a CIP appropriation Fund Balance •Transfer of fund balance or retained earning to support a CIP appropriation Bonds •Charter Bonds •Backed by the full faith and credit of the city •Annual legal limit $10 million + Principal Retirement •Included in debt metric calculations •Public Facility Revenue Bonds (PFRBs) •Subject to annual appropriations •Typically used for TIP funded projects •Included in debt metric calculations •Authorized- legally appropriated as a source of funding •Issued- bonds sold in the market to investors with agreed upon repayment over time with interest 40 Relationship Between Operating Budget and CIP Operating Budget •Pay-As- You-Go •Debt Service CIP •Funding Source •Bonds (Issued/Sold) 41 How Much Impact on Operating Budget? •Current year budgeted revenues support: •Pay-as-you-go- transfer immediate July 1st beginning of Fiscal Year •Debt Service- payment for bonds previously issued for executed projects. FY 2024-25 Budget City- General Fund School- Operating Fund Budget $ 952,901,940 $ 1,001,712,123 Pay-as-you-go $ (33,869,056)$ (3,000,000) Debt Service $ (63,095,110)$ (50,071,611) 42 City and School Programmed Bonds in CIP FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 GO $ 67,876,279 $ 72,606,855 $ 78,270,594 $ 60,689,004 $ 67,097,242 $ 59,399,300 PFRB $ 21,726,540 $ 32,142,637 $ 15,050,000 $ 14,550,000 $ 14,550,000 $ 14,550,000 Total $ 89,602,819 $ 104,749,492 $ 93,320,594 $ 75,239,004 $ 81,647,242 $ 73,949,300 •Bonds as programmed in the CIP are not Debt Service Payments but the appropriation of bonds for project execution to begin •Bonds issuances do not occur exactly as programmed/appropriated each year of the CIP. •The City does not typically “forward issue” but instead “reimburses” 43 Project Example: Timeline of Impact Project A CIP Fund Year 1 Year 2 Year 3 Year 4 Year 5 Total Budget $ 10,000,000 $ - $ - $ - $ - $ 10,000,000 Expenditures $ (2,000,000)$ (5,000,000)$ (3,000,000)$ - $ - $(10,000,000) Operating Budget Year 1 Year 2 Year 3 Year 4 Year 5 Debt Service $ - $ - $ - $ 1,000,000 $ 1,000,000 $10 Million Appropriated for “Project A” $10 Million Bonds Issued/Sold for “Project A” Debt Service Hits Operating Budget for “Project A” 44 Monitoring and Planning for Bonds used in the CIP •Assume all bonds programmed are going to be issued/sold at a future point in time resulting in Operating Budget Debt Service Payment •Driven by project execution •Overall City/School combined debt reflected in City’s Debt Metrics •Debt Service % of Operating Budget- Not exceed 10% •Net Debt to Assessed Value- Not exceed 3% •Fixed Cost to Gen. Gov’t Expenditures- Not exceed 20% •Payout Ratio- remain above 50% •Planning use of bonds should only occur if a sustainable means of supporting the annual debt service payment is identified 45 Questions/Discussion 46