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HomeMy WebLinkAboutNOVEMBER 26, 2024 SPECIAL FORMAL SESSION MINUTES s r e VIRGINIA BEACH CITY COUNCIL Virginia Beach, Virginia November 26, 2024 Mayor Robert M. Dyer called to order the CITY COUNCIL SPECIAL FORMAL SESSION in Building 19, Tuesday,November 26, 2024, at 12:30 P.M. Council Members Present: Michael F. Berlucchi, Mayor Robert M. Dyer, Robert W "Worth" Remick, Dr. Amelia N.Ross-Hammond,David Hutcheson,Joashua F. `Joash"Schulman, Vice Mayor Rosemary Wilson and Sabrina D. Wooten Council Members Absent: Chris Taylor Barbara M. Henley—Arrived at 12:38 P.M. Jennifer Rouse—Arrived at 12:45 P.M. School Board Members Present: Beverly M. Anderson, Kathleen J. Brown, Michael R. Callan, David Culpepper, Jennifer S. Franklin, Dr. Alveta J. Green, Kimberly A. Melnyk and Trenace B. Riggs School Board Members Absent: Victoria C. Manning,Jessica L. Owens and Carolyn D. Weems 2 MAYOR'S CALL FOR SPECIAL FORMAL SESSION ITEM#76391 'HONORABLE MEMBERS OF CITY COUNCIL In accordance with the Virginia Beach City Code Section 2-21, and by the authority vested in me as Mayor of the City of Virginia Beach,I hereby call for a SPECIAL FORMAL SESSION of the VIRGINIA BEACH CITY COUNCIL Tuesday,November 26,2024 12:30 P.M. Building 19,Municipal Complex 2416 Courthouse Drive Virginia Beach, VA The purpose of this SPEC24L FORMAL SESSION is to allow the City Council/School Board Joint Workshop for the Five-Year Forecast. Sincerely, Robert M. Dyer Mayor" cc: City Manager City Attorney City Clerk Deputy City Managers FOIA Officer Communications Office November 26, 2024 G1Nu'-B c 0 G� City of Vi rgi nia. B each 2 Zo�q uuc - v d OF OUR NAS%ON`' virginiabeach.gov ROBERT.M."BOBBY"DYER MUNICIPAL CENTER MAYOR BUILDING 1 2401 COURTHOUSE DRIVE VIRGINIA BEACH,VIRGINIA 23456-9000 (757)385-4581 CELL:(757)749-4659 bdver aAvbaov.com November 21, 2024 HONORABLE MEMBERS OF CITY COUNCIL In accordance with the Virginia Beach City Code Section 2-21, and by the authority vested in me as Mayor of the City of Virginia Beach, I hereby call for a SPECIAL FORMAL SESSION of the VIRGINIA BEACH CITY COUNCIL Tuesday,November 26, 2024 12:30 P.M. Building 19,Municipal Complex 2416 Courthouse Drive Virginia Beach, VA The purpose of this SPECIAL FORMAL SESSION is to allow the City Council/School Board Joint Workshop for the Five-Year Forecast. Sincerely, �0J�-c./ Robert M. Dyer Mayor cc: City Manager City Attorney City Clerk Deputy City Managers FOIA Officer Communications Office ��`Glr11A B�qc� , City of Virgiriia Beach r- Op OUR NNV%3 virginiabeach.gov CHRIS TAYLOR CELL:(757)840-5859 COUNCIL MEMBER EMAIL:chtaylorAvbgov.com DISTRICT 8 November 26, 2024 HONORABLE MAYOR MEMBERS OF CITY COUNCIL Dear Colleagues, I will be unable to attend both of the scheduled City Council meetings today, November 26, 2024. Sincerely, Chris Taylor 2401 COURTHOUSE DRIVE,SUITE 2116,VIRGINIA BEACH,VIRGINIA 23456 3 CITY COUNCIL/SCHOOL BOARD JOINT SESSION FIVE YEAR FORECAST ITEM#76392 12:32 P.M. Mayor Dyer welcomed Nikki Johnson, Regional Economist — Hampton Roads Planning District Commission, Kevin Chatellier, Director — Budget & Management Services and Crystal Pate, Chief Financial Officer— VBCPS. Mr. Chatellier expressed his appreciation to City Council for their continued support and distributed a copy of the presentation, attached hereto and made apart of the record. Mayor Dyer expressed his appreciation to Ms.Johnson,Mr. Chatellier and Ms. Pate for the presentation. November 26, 2024 ttr I 1 1 v ��..x s K r, OF 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 HAMPTON ROADS HAMPTON ROADS , -PDC TPo Economic Outlook Presented to: Virginia Beach City Council Nikki Johnson Regional Economist, HRPDC November 2024 U.S. Real Gross Domestic Product Annualized Percent Change from the Previous Quarter, Q 1 2018 — Q3 2024 40% 30% 20% an _ u 10% 2.8% 4.4% 2.8% Ion M M 0 M M M a 0/o ■ a, N -10% c a -20% -30% -40% Q1-2018 Q1-2019 Q1-2020 Q1-2021 Q1-2022 Q1-2023 Q1-2024 Source: Bureau of Economic Analysis, HRPDC. 4 U.S. Monthly Inflation January 2010 - October 2024 10% 9.0% —All Items Core Inflation (Ex. Food & Energy) 8% a� an .M 6% U L M L 4% v O M 0% -2% Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 Jan-22 Jan-24 Source: Bureau of Labor Statistics CPI-U, HRPDC. Seasonally adjusted data. Hampton Roads Civilian Payroll Employment (Jobs) September 2018 — September 2024 840,000 829,000 820,000 800,000 793,700 780,000 0 760,000 740,000 720,000 700,000 700,800 680,000 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. Civilian Payroll Employment (Jobs) Index February 2020 — October 2024 109 ----,United States —Virginia Hampton Roads 106 104.4 0 103 � --M- -104.0 N 100 .c 97 x i 94 f r"� 91 88 85 Feb-20 Sep-20 Apr-21 Nov-21 Jun-22 Jan-23 Aug-23 Mar-24 Oct-24 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 7 Hampton Roads Industry Payroll Employment (Jobs) October 2019 — October 2024 Mining, Logging & Construction 6,800 Professional, Scientific, & Technical Services 6,400 Health Care & Social Assistance 6,300 Transportation, Warehousing, & Utilities 4,600 Finance & Insurance Federal Government �■■w Manufacturing Private Educational Services Management of Companies & Enterprises Wholesale Trade Other Services Real Estate & Rental & Leasing Local Government Leisure & Hospitality Administrative & Support & Waste Management -1,200 Information -1,300 State Government -1,800 Retail Trade -4,200 -5,000 -3,000 -1,000 1,000 3,000 5,000 7,000 Change in Number of Jobs Source: Bureau of Labor Statistics, HRPDC. Non-seasonally adjusted data. Hampton Roads Civilian Labor Force and Employment September 2018 — September 2024 920,000 888,822 880,000 865,080 3 840,000 ..a :a 800,000 Employment —Labor Force 760,000 720,000 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 9 Virginia Beach Civilian Labor Force and Employment September 2018 — September 2024 255,000 Employment —Labor Force 245,000 241,178 234,778 235,000 225,000 215,000 205,000 195,000 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 10 Unemployment Rate September 2018 — September 2024 14% 12% Hampton Roads --Virginia Beach United States M c 10% w E o µ \ a 8% aEi 4.1% 4/o 2.8% 2% Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 11 Hampton Roads Home Sales October 2010 — October 2024 New Construction ■ Existing Homes 3,668 3,500 3,000 2,673 �°, 2,500 2,135 E 2,000 = 1,331 1,500 1,000 500 Oct-10 Oct-12 Oct-14 Oct-16 Oct-18 Oct-20 Oct-22 Oct-24 Source: Real Estate Information Network (REIN), HRPDC. Seasonally adjusted data. 14 Virginia Beach Residential Units Sold YTD October 2010 — YTD October 2024 9,000 8,419 8,000 7,000 6,000 4,831 0 5,000 4,359 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Real Estate Information Network (REIN), HRPDC. 1 FHFA Home Price Index (HPI) Q 1 2010 — Q2 2024 a, United States Virginia --Hampton Roads 209.1 205 190 0 180.4 0 175 168.7rq 0 160 - 0 N � 145 136.3 x 130 119.2 115 100 85 Q1-2010 Q1-2012 Q1-2014 Q1-2016 Q1-2018 Q1-2020 Q1-2022 Q1-2024 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 $450,000 $400,000 $378,250 $350,000 $300,000 $268,000 a� a $250,000 $237,200 v $200,000 $150,000 $100,000 $50,000 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Real Estate Information Network (REIN), HRPDC. Hampton Roads Months' Supply of Housing Inventory October 2012 — October 2024 7 6.8 6 � 5 a a N 4 s 0 2.9 5 3 2.2 2 1 1.0 0 Oct-12 Oct-14 Oct-16 Oct-18 Oct-20 Oct-22 Oct-24 Source: Real Estate Information Network (REIN), HRPDC. Seasonally adjusted data 16 HAMPTON ROADSHAMPTON POADS PDC$,, TPO Thanks .1 Nikki Johnson Email: njohnson@hrpdcva.gov City of Virginia Beach Five-Year Forecast Kevin Chatellier Director of Budget and Management Services 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" OZ uoiI:)a(oad ,_ jenpV— I@Spng.._ 0£OZ Ad 6ZOZ Ad 8ZOZ Ad LZOZ Ad 9ZOZ Ad SZOZ Ad bZOZ Ad £ZOZ Ad ZZOZ Ad TZOZ Ad OZOZ Ad 6TOZ Ad 0$ 000`000`00T$ 000`000`OOZ$ 000`000`00£$ 000`000`OOb$ 000`000`005$ 000`000`009$ 000`000`OOL$ ._ W T8L$ 000`000`006$ W TT8$ W 6T6$ 000`000`000`T$ xel Olels`3 lead Personal PropertyTax $300,000,000 $220.6 M $248 M $250,000,000 $200,000,000 $206.7 M $150,000,000 own $100,000,000 $50,000,000 $0 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) $72.7 M $80,000,000 $67.2 M $70,000,000 $62.6 M $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 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 $120,000,000 $110 M $110,000,000 $97.8 M $100,000,000 _. $90,000,000 $80,000,000 $93.2 M $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 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 $14,000,000 $12,000,000 $10,000,000 a $8,000,000 $6,000,000 $6.9 M $4,000,000 $4.6 M $2,000,000 $0 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 •wsr 24 Restaurant Meals Tax $112.9 M $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 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 $60,000,000 $47.6 M $53.6 M $47.6 M $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 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 Telecom m u n ication $25,000,000 $20,000,000 ,��,,,�,, ■ $15,000,000 $16.4 M $15.5 M $13.5 M $10,000,000 $5,000,000 $0 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 MAW Baseline Expenditure Assumptions • Personnel • Compensation- assumed 3% increase annually to match "steps" • Virginia Retirement System (VPS) 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 Baseline Forecast 5% 3.90% 4% 3.14% 2.62% 2.63% 2.69% 3% 3.42 2% 2.55 2.43% 2.35% 2.36 1% 0% 0% -1% -2% 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) 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 Virginia Beach City Public Schools Five-Year Forecast Crystal Pate Chief Financial Officer Baseline Revenue Assumptions 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 W W A A A A A A A A 00 lD O 1-+ N W A tf� 01 V o 0 0 0 0 0 0 o V1 Ol O1 0 01 a,, On O1 `O O F+ N W to Ol A O O O O O O O O F+ 2019-2020 w m rn 0 2025-26 N 0 l0 O 2020-2021 0 W (fl 3 n� 0 p� 2026-27 o rr00 C 2021-2022 � C m Q�G °- . v � w y 2027-28 N 2022-2023 a <' 3 { 3 � O 2028-29 OrQ 00 2023-2024 Ln M m Uq N � 2029-30 � 2024-2025 Ln N X O F+ N W A In 0 0 0 0 0 0 N 2019-2020 w o� N 2019-2020 a m o N 2020-2021 w C LA 2020-2021 00 B r m " N 2021-2022 0 o C 2021-2022 CfQ o S 2022-2023 o r o 2022-2023 v w m 2023-2024 v" w m 2023-2024 wtA 0 A 2024-2025 w 2024-2025 0000 0 :1J :u Key Budget Assumptions—Expenditures 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. VBCPS Baseline Forecast 11 . : INKINT,M.' ' FY . • , 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 $11125,012,952 $1,165,460,025 $1,204,189,055 Baseline ($8,065,339) ($18,270,367) ($23,399,326) ($36,404,723) ($46,905,211) VBCPS Baseline Forecast- cont. VBCPS Baseline Forecast $1,250,000,000 $1,200,000,000 $1,150,000,000 $1,100,000,000 $1,050,000,000 $1,000,000,000 $950,000,000 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Forecast Forecast Forecast Forecast Forecast Revenue ■Expenditures 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) Revenue Considerations Impacting Future VBCPS Program Decisions VBCPS Programs Total • • 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 $617,316 Board 11/12/2024 TOTAL Annual Costs $43,080,280 'Mr CIP Means of Financing and Debt Service Kevin Chatellier Director of Budget and Management Services 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 • Authorized- legally appropriated as a source • Backed by the full faith and credit of the city of funding • Annual legal limit$10 million + Principal Retirement • Included in debt metric calculations • Issued- bonds sold in the market to investors • Public Facility Revenue Bonds (PFRBs) with agreed upon repayment over time with • Subject to annual appropriations interest • Typically used for TIP funded projects • Included in debt metric calculations Relationship Between Operating Budget and CIP Operating Budget • Pay-As- You-Go 0 Funding Source • Debt Service 9 Bonds (Issued/Sold) 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. School-FY 2024-25 City- General Fund Operating Budget 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) City and School Programmed Bonds in CIP 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" Project Example: Timeline of Impact $10 Million Appropriated Project A L for "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) $10 Million Bonds Issued/Sold for "Project A" Operating Budget Year 1 Year 2 Year 3 Year 4 Year 5 Debt Service $ - $ - $ - $ 1,000,000 $ 1,000,000 Debt Service Hits Operating Budget for "Project A" -77-777 monitoringPlanning and 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 Patio- remain above 50% • Planning use of bonds should only occur if a sustainable means of supporting the annual debt service payment is identified Questions/Discussion 4 ADJOURNMENT ITEM#76393 Mayor Robert M. Dyer DECLARED the City Council SPECIAL FORMAL SESSION ADJOURNED at 2:12 P.M. Teii . teliu Chief Deputy City Clerk ands Barnes Robert M. Dyer City Clerk,MM Mayor City of Virginia Beach Virginia November 26, 2024