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HomeMy WebLinkAboutFive Year ForecastCity of Virginia Beach Five-Year Forecast FY 2026-27 to FY 2030-31 November 18, 2025 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 •Highlight policy decisions that will need School Board and City Council consideration 2 Economic Outlook Presented to: Virginia Beach City Council Nikki Johnson Regional Economist, HRPDC November 2025 3 U.S. Real Gross Domestic Product Annualized Percent Change from the Previous Quarter, Q1 2018 – Q2 2025 Source: Bureau of Economic Analysis, HRPDC. 2.8%3.6% -0.6% 3.8% -30% -20% -10% 0% 10% 20% 30% 40% Q1-2018 Q1-2019 Q1-2020 Q1-2021 Q1-2022 Q1-2023 Q1-2024 Q1-2025Annualized Percent Change4 3.0% Fed’s Target Rate 0% 2% 4% 6% 8% 10% Sep-15 Sep-17 Sep-19 Sep-21 Sep-23 Sep-25Year-Over-Year ChangeAll Items Core Inflation (Ex. Food & Energy) U.S. Monthly Inflation September 2015 – September 2025 Source: Bureau of Labor Statistics CPI-U, HRPDC. Seasonally adjusted data. 5 104.4 104.8 104.4 104.7 100.1 102.6 102.0 85 88 91 94 97 100 103 106 109 Feb-20 Feb-21 Feb-22 Feb-23 Feb-24 Feb-25Index (Feb. 2020=100)United States Virginia Hampton Roads Civilian Payroll Employment (Jobs) Index February 2020 – August 2025 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 6 7 Source: Bureau of Labor Statistics, HRPDC. Non-seasonally adjusted data. -3,200 -2,000 -1,700 -1,500 1,000 1,400 1,800 3,300 -4,000 -3,000 -2,000 -1,000 0 1,000 2,000 3,000 4,000 Manufacturing Federal Government Administrative & Support & Waste Management Retail Trade Finance & Insurance Real Estate & Rental & Leasing Wholesale Trade Mining, Logging & Construction Other Services Transportation, Warehousing, & Utilities Information Management of Companies & Enterprises State Government Local Government Private Educational Services Professional, Scientific, & Technical Services Leisure & Hospitality Health Care & Social Assistance Change in Number of Jobs Hampton Roads Industry Payroll Employment (Jobs) August 2024 – August 2025 8 Hampton Roads Civilian Labor Force and Employment August 2019 – August 2025 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 838,512 855,383 836,216 862,391 882,023 866,652 720,000 760,000 800,000 840,000 880,000 920,000 Aug-19 Aug-20 Aug-21 Aug-22 Aug-23 Aug-24 Aug-25IndividualsEmploymentLabor Force 9 Virginia Beach Civilian Labor Force and Employment August 2019 – August 2025 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 228,068 228,658 223,520 234,397 235,086 230,711 195,000 205,000 215,000 225,000 235,000 245,000 Aug-19 Aug-20 Aug-21 Aug-22 Aug-23 Aug-24 Aug-25IndividualsEmploymentLabor Force 10 Unemployment Rate August 2018 – August 2025 Source: Bureau of Labor Statistics, HRPDC. Seasonally adjusted data. 2.7%2.9% 3.2% 4.2%4.3% 2% 4% 6% 8% 10% 12% 14% Aug-18 Aug-19 Aug-20 Aug-21 Aug-22 Aug-23 Aug-24 Aug-25Unemployment RateHampton Roads Virginia Beach United States 11 Hampton Roads Home Sales September 2016 – September 2025 Source: Redfin and HRPDC. Seasonally adjusted data. 2,214 2,499 3,465 1,947 2,089 1,500 2,000 2,500 3,000 3,500 4,000 Sep-16 Sep-18 Sep-20 Sep-22 Sep-24Homes Sold12 Virginia Beach Residential Units Sold YTD September 2015 – YTD September 2025 Source: Redfin and HRPDC. Non-seasonally adjusted data. 10,344 12,170 15,212 8,793 9,337 0 4,000 8,000 12,000 16,000 20,000 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Units Sold13 FHFA Home Price Index (HPI) Q1 2010 – Q2 2025 Source: U.S. Federal Housing Finance Agency, All-Transactions house price index, HRPDC. 136.2 196.5 216.1 119.1 167.9 188.0 107.5 149.8 166.8 85 115 145 175 205 235 2010 2015 2020 2025Index (Q1 2010 = 100)United States Virginia Hampton Roads 14 Virginia Beach Median Sales Price of Existing Homes YTD September 2014 – YTD September 2025 $239,038 $271,449 $365,000 $400,000 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Median PriceSource: Redfin and HRPDC. Non-seasonally adjusted data.15 Hampton Roads Months’ Supply of Housing Inventory September 2015 – September 2025 1.2 3.3 2.7 1.0 2.3 0 2 4 6 8 Sep-15 Sep-17 Sep-19 Sep-21 Sep-23 Sep-25Months SupplyUnited States Hampton Roads MSA Source: Redfin and HRPDC. Seasonally adjusted data.16 Federal Shifts & Regional Exposure •Federal job and contract cuts, along with the recent shutdown, are already slowing regional growth and will continue to weigh on the outlook. •Tariff pressures are starting to appear in prices, though the full impact will likely take more time to materialize. •Higher defense spending, especially in shipbuilding, is likely to provide a boost to the Hampton Roads economy. •Net international migration has been the largest contributor of recent population growth in both Virginia Beach and Hampton Roads. •The economy is slowing but stable, though policy and economic uncertainty cloud the horizon. 17 Thanks! Nikki Johnson Email: njohnson@hrpdcva.gov 18 City of Virginia Beach Five-Year Forecast Kevin Chatellier Director of Budget and Management Services 19 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” 20 Real Estate –Assessment Change 21 -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Residential Commercial Projections Real Estate – Disabled Veterans Tax Relief Program 22 $27,710,788 $35,373,086 $44,612,542 $111,990,285 $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25 FY 26 FY 27 FY 28 FY 29 FY 30 FY 31 Disabled Veterans (Actual)Disabled Veterans (Projected) Real Estate – Elderly and Disabled Exemption/Freeze Program 23 $17,206,388 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25 FY 26 FY 27 FY 28 FY 29 FY 30 Elderly/Disabled Elderly/Disabled Projection Personal Property Tax Revenue 24 $220,601,034 $228,751,822 $257,462,191 $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 $300,000,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Budget Actual Projection Business Professional Occupational License (BPOL) Revenue 25 $67,166,505 $71,447,567 $77,337,145 $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 $90,000,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Budget Actual Projection General Sales Tax Revenue 26 $97,846,775 $101,263,558 $113,973,027 $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 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Budget Actual Projection Cigarette Tax Revenue 27 $6,074,935 $4,945,038 $4,027,764 $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Budget Actual Projection Restaurant Meals Tax Revenue 28 $111,422,843 $115,398,697 $129,882,250 $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 $140,000,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Budget Actual Projection Hotel Room Percentage Tax 29 $45,973,846 $46,409,020 $52,233,761 $0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Budget Actual Projection Baseline Expenditure Assumptions •Personnel •Compensation – assumed 3% increase annually to match “steps” •Virginia Retirement System Rates – assumed 1.5% rate increase every other year. FY 2027 = 20.48% •Health Insurance – assumed 8% 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 held flat in the outyears 30 Baseline Forecast GENERAL FUND FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Baseline Revenue 1,559,191,910 1,580,373,131 1,620,855,758 1,662,759,114 1,696,512,100 1,731,092,392 Baseline Expenditures 1,559,191,910 1,591,398,587 1,640,245,968 1,696,090,235 1,742,804,867 1,803,683,075 Difference 0 (11,025,456)(19,390,210)(33,331,122)(46,292,768)(72,590,682) 31 0% 2.07% 3.07% 3.40% 2.75% 3.49% 0% 1.36% 2.56%2.59%2.03%2.04% -2% -1% 0% 1% 2% 3% 4% FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Expenditures Revenue Salaries and Fringes as Budget Driver 32 $- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 YOY Personnel Cost compared to YOY Revenue Growth Personnel Revenue Growth- Less SFF Health Insurance as a Future Budget Driver 33 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Est. FY 2026 Revenue 64,559,264 63,946,756 63,963,474 64,551,050 70,432,417 73,042,372 74,608,048 Expenditures 55,053,210 61,004,675 67,477,586 62,131,086 75,466,998 76,691,810 82,827,155 Difference 9,506,054 2,942,081 (3,514,112)2,419,964 (5,034,581)(3,649,438)(8,219,106) Cumulative Fund Balance 34,108,236 37,050,317 33,536,205 35,956,169 30,921,588 27,272,150 19,053,044 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Est. FY 2026 Employee/Employer Con.63,771,757 63,514,592 63,578,103 63,872,377 68,997,339 71,202,558 72,963,774 % Employer 78%78%79%80%82%82%83% % Employee 22%22%21%20%18%18%17% Unknowns Excluded from Baseline Scenario •State and Federal Revenue Reductions •Supplemental Nutrition Assistance Program (SNAP) •Human Services – Medicaid •Housing Federal Programs •Impact of Tariffs on price of goods 34 Baseline Forecast- Scenario of a Sustainable Cut GENERAL FUND FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Baseline Revenue 1,559,191,910 1,580,373,131 1,620,855,758 1,662,759,114 1,696,512,100 1,731,092,392 Baseline Expenditures 1,559,191,910 1,591,398,587 1,640,245,968 1,696,090,235 1,742,804,867 1,803,683,075 Reduction -(11,025,456)(11,025,456)(11,025,456)(11,025,456)(11,025,456) Difference - -(8,341,159)(22,305,665)(35,267,311)(61,565,227) 35 Virginia Beach City Public Schools Five -Year Forecast Crystal Pate Chief Financial Officer 36 Mission, Vision, Core Values 37 •Mission: Empower every student to become a life-long learner and engaged global citizen •Vision: Every student is achieving at maximum potential •Core Values: Put students first, seek growth, be open to change, do great work together, value differences Compass to 2030 Overview 38 •Unified division-wide direction •Anchored by the VBCPS Future-Ready Profile •Guides strategic investment and decision making •Articulates the division’s goals 1.Challenge and support each student to excel and be future-ready 2.Enhance well-being, resilience, and responsibility 3.Value and invest in staff 4.Partner with families and the community to support students 5.Advance organizational excellence Student Performance Highlights 39 •On-time-graduation rate of 96.9% (2025 cohort) •Low dropout rate of 2.2% (2025 cohort) •Exceeded state passing rates in all SOL subjects •Top regional performance in reading, writing, science, and history •In 2024-2025, 35% of high school students enrolled in Advanced Placement (AP) courses and 74% of the AP exams taken by VBCPS students were awarded a score of 3 or higher Student Performance Highlights 40 •Students earned 14,540 industry credentials across 130+ different approved credentialing exams (2024–2025) •3,200+ students completed approximately 44,000 work-based learning hours, contributing an economic impact of over $550,000 (2024-2025) Five-Year-Forecast Overview 41 •Expenditures exceed revenue growth •Projected deficits for FY2027 through FY2031 •Planning tool for long-term sustainability •No balancing solutions yet; guides future decisions Students and Characteristics 42 12.28% 12.57% 12.91% 13.43% 13.78% 14.20% 11.0% 11.5% 12.0% 12.5% 13.0% 13.5% 14.0% 14.5%2020-212021-222022-232023-242024-252025-26Students with Disabilities 2.28% 2.89% 3.30% 3.66% 4.04%4.05% 0% 1% 2% 3% 4% 5%2020-212021-222022-232023-242024-252025-26English Language Learners 41.13% 43.60% 45.94%45.79%45.51% 41.83% 38% 39% 40% 41% 42% 43% 44% 45% 46% 47%2020-212021-222022-232023-242024-252025-26Economically Disadvantaged Students 63,771 63,434 62,848 62,281 61,517 57,000 58,000 59,000 60,000 61,000 62,000 63,000 64,000 65,000 2026-272027-282028-292029-302030-31Projected Student Enrollment K-12 Preschool, SECEP Baseline Revenue Assumptions FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenue Sharing Formula +1.5%+2.8%+2.8%+2.2%+2.2% State +3.0%+3.0%+3.0%+3.0%+3.0% Sales Tax +0.5%+0.5%+0.5%+0.5%+0.5% Federal +5.1%---- Other Local +22.4%+20.2%+18.3%+16.8%+15.5% 43 Baseline Revenue Assumptions 44 $0 $100,000,000 $200,000,000 $300,000,000 $400,000,000 $500,000,000 $600,000,000 $700,000,000 FY 2026-27 Forecast FY 2027-28 Forecast FY 2028-29 Forecast FY 2029-30 Forecast FY 2030-31 Forecast VBCPS Baseline Revenue Revenue Sharing Formula State Revenue State Shared Sales Tax Federal Revenue Other Local Key Budget Assumptions—Expenditures FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Salary Increase *+3.0% +3.0%+3.0%+3.0%+3.0% Employer Health Insurance +13.5%+9.0%+9.0%+9.0%+9.0% Employer VRS +1.0%-+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 +$500,000 +$500,000 * These increases are not a guarantee but a placeholder for future consideration by the School Board as part of the annual bu dget process. 45 •3% annual salary placeholder •Employer health insurance +13.5% for FY27, +9% annually through FY2031 •Rising debt service and PAYGO •3% inflation assumption Key Budget Assumptions — Expenditures 46 $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 FY 2026-27 Forecast FY 2027-28 Forecast FY 2028-29 Forecast FY 2029-30 Forecast FY 2030-31 Forecast VBCPS Expenditure Assumptions Personnel Services*Fringe Benefits Non-Personnel PAYGO Debt Service Transfers to Other Funds VBCPS Baseline Forecast FY27 FY28 FY29 FY30 FY31 Revenue $1,087,831,763 $1,117,606,390 $1,148,417,417 $1,176,341,149 $1,205,095,645 Expenditures $1,107,831,266 $1,145,493,727 $1,191,957,858 $1,236,868,269 $1,294,261,592 Baseline ($19,999,503)($27,887,337)($43,540,441)($60,527,120)($89,165,947) 47 VBCPS Baseline Forecast 48 1,050,000,000 1,100,000,000 1,150,000,000 1,200,000,000 1,250,000,000 1,300,000,000 1,350,000,000 FY27 FY28 FY29 FY30 FY31 VBCPS Baseline Forecast Revenues Expenditures Key Budget Pressures •Compensation competitiveness •Health fund reserve rebuilding •Princess Anne High School replacement project •Declining enrollment and rising student needs •Uncertainty surrounding future federal K–12 education funding and potential reforms •Conclusion of ALL In Virginia supplementary state funding 49 Strategic Financial Management •Balanced budget as required by state law •Data-driven planning and stakeholder engagement •Remaining flexible and adaptive to economic change •Strengthen Health fund reserves 50 What Could Change? •Adjustments to the State SOQ funding formula (JLARC) •Adjustments to benefits rates in the new biennium •Rising healthcare trends and costs •New State and Federal mandates •New School Board priorities •Increasing debt service obligations for CIP •Escalating Operating expenditures (utilities, fuel, contractual obligations) 51 Closing •Balancing today’s needs with tomorrow’s vision •Commitment to fiscal responsibility and student success •Continued investment in people, programs, and facilities •Partnership with City and community to sustain excellence 52