A Projection of City and School System Finances Agenda Forecast - - PowerPoint PPT Presentation

FY 2013-2017

A Projection of City and School System Finances

Agenda

• Forecast Presentation
• Economy
• Current Formula Revenues
• School Forecast
• City Forecast
• Conclusion and Threats
• Ways to Modify the Forecast
• Voting Software

2

Economy

3

Consumer Price Index

4

• 1.0%
• 0.5%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Proj 2012 Proj

All Items Core CPI

Sources: Actual data from Bureau of Economic Analysis; Projections from Mesirow Financial Themes on the Economy

Projected

Consumer Confidence

90 50

20 40 60 80 100 120 140 160 Jul-99 Feb-00 Sep-00 Apr-01 Nov-01 Jun-02 Jan-03 Aug-03 Mar-04 Oct-04 May-05 Dec-05 Jul-06 Feb-07 Sep-07 Apr-08 Nov-08 Jun-09 Jan-10 Aug-10 Mar-11 Oct-11

Source: The Conference Board

5

Unemployment Rates

6 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Calendar Year

Virginia Beach Hampton Roads Virginia United States

Source: Bureau of Labor Statistics and the Congressional Budget Office

Virginia Beach Defense Spending

7 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Billions Fiscal Year

Projected

• 10.0%
• 5.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Fiscal Year

Real Estate Assessments

Six straight years of declining real estate values, a drop of 23.6% from 2010 to 2015

8

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

Formula Revenues

These revenues are currently shared 51.3% to School System and 48.7% to the City

10

Real Estate Revenue

11 $300.0 $350.0 $400.0 $450.0 $500.0 $550.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year Real Estate - General Fund Delinquencies & Interest on Delinquent TIF's & SSD's Public Service

Projected

Personal Property

$0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millions Fiscal Year

Personal Property Paid by Commonwealth Personal Property Vehicles Public Service Personal Property Business Equipment Machinery & Tools Delinquent and Interest on Deliquent PP/Other

Projected

12 vehicles

General Sales Tax

$40.0 $44.0 $48.0 $52.0 $56.0 $60.0 $64.0 $68.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millions

Fiscal Year

13

Utility Taxes

(includes VA Telecom m unications but not E911)

$10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millions Fiscal Year

14

Business License Tax

$20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0 $55.0 $60.0 $65.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millions Fiscal Year

15

Cable Franchise Tax

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 16

School Forecast

17

Local Support

Current Form ula

$200.0 $240.0 $280.0 $320.0 $360.0 $400.0 $440.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Projected

18

Local Composite Index

0.3 0.35 0.4 0.45 2008 2009 2010 2011 2012 Fiscal Year Virginia Beach State Average 19

Federal & State Revenue

$0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year State Federal

Projected

20

Fees and Charges

$0.0 $10.0 $20.0 $30.0 $40.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 21

Student Enrollment

60,000 64,000 68,000 72,000 76,000 80,000

School Year

22

School Salaries

$450.0 $470.0 $490.0 $510.0 $530.0 $550.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 23

School VRS Rate

0.0% 6.0% 12.0% 18.0% 24.0% 30.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year

Projected

24

Health Insurance

Costs and Percentage of Full-Tim e Salaries

25 $- $20 $40 $60 $80 $100 $120 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millions

10% 14% 16% 17% 18% 19%

School Operating Expenditures

$0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 $200.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 26

School Debt Service

27 $35.0 $38.0 $41.0 $44.0 $47.0 $50.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

School Pay-go

28

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Total School Expenditures

$0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Salaries Fringes Other Operating Expenditures

29

School Forecast

$-49.3 m $-67.8 m

30 $740 $760 $780 $800 $820 $840 $860 $880 $900 $920 $940 $960 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions

Revenue Expenditure

City Forecast

31

Formula Revenues

City Portion

32 $210.0 $260.0 $310.0 $360.0 $410.0 $460.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Projected

Denotes the $9.2 million in RSF retained by City and replaced with School fund balance.

Automobile License Revenue

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 33

Cigarette Tax

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 34

Amusement Tax

$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 35

Hotel Tax

$0.0 $4.0 $8.0 $12.0 $16.0 $20.0 $24.0 $28.0 $32.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 36

Restaurant Meals Tax

$0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 37

VA Telecommunications – E911

$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 38

Other Local Taxes

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year City Tax on Deeds City Tax on Wills Bank Net Capital

Projected

39

Fees and Charges

$0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Projected

40

State & Federal

$0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year State Federal

Projected

41

City Salaries

42 $250.0 $270.0 $290.0 $310.0 $330.0 $350.0 $370.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

City VRS Rates

Includes both Retirem ent and Life Insurance rates

0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0% 28.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 VRS Rate Fiscal Year

Projected

43

$0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Health Insurance

Costs and Percentage of Full-Tim e Salaries

44

12.5% 15.1% 18.1% 19.7% 21.0% 22.6%

Risk Management

$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year 45

SPSA Cost

$0.0 $5.0 $10.0 $15.0 $20.0 $25.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Estimated Solid Waste Tipping Fee - $125.00 Estimated Solid Waste Tipping Fee - $65.35

46

Debt Service

All City debt excluding Schools

$0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Projected

47

City Pay-go

48 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year

Total City Expenditures

$309 $320 $319 $313 $320 $322 $323 $325 $325 $325 $108 $112 $111 $110 $112 $131 $139 $150 $154 $164 $443 $450 $455 $440 $457 $464 $491 $501 $526 $536 $0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 $1,200.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year Operating Fringes Salary 49

Projected

City Forecast

$700.0 $750.0 $800.0 $850.0 $900.0 $950.0 $1,000.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year Revenue Expenditures

$-98.1 m $-40.8 m

50

Conclusions & Threats

51

$-165.9 m

Combined Forecast

Projected

52 $1,550.0 $1,600.0 $1,650.0 $1,700.0 $1,750.0 $1,800.0 $1,850.0 $1,900.0 $1,950.0 $2,000.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Millions Fiscal Year Revenue Expenditure $-90.1 m

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,

Driver (in millions) 2013 2014 2015 2016 2017 Projected Deficit $90.1 $132.3 $157.6 $168.5 $165.9 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 $1.1 $1.1 $11.5 $11.5

Base Deficit $21.6 $15.5 ($3.2) ($23.4) ($51.7)

53

Real Estate Revenue

54

$250 $300 $350 $400 $450 $500 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Millions $0.94

$0.97

$1.1964 $1.0239 $0.99 $0.89 $0.89 $0.89 $0.89 $0.89 $0.89 $0.89 $0.89 $0.89 $0.89

$1.00 $1.00 $1.00

$1.22

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.

Gap FY 2011-12 Real Estate Revenue FY13: $21 million FY14: $34 million FY15: $46 million FY16: $46 million FY17: $42 million

Health Care Fund

No change in employer contribution in 5 years Projected

55 $- $50 $100 $150 $200 $250

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millions

Claims GASB45 Revenue

Calendar Years

Combined VRS Rate Increases

56

0% 1% 2% 3% 4% 5% 6% 7% 2013 2014 2015 2016 2017 Schools City

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 coverage)

57

Options to Address the Deficits

• Retirem ent

– Seek General Assembly options

• Defined contribution
• Current employees to pay 5%

– Require all new employees to pay 5%

• 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 tipping fees – Reduce services (end curbside recycling) – Privatize collection

58

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 Maxim um Daily

Load (TMDL)

59

Ways to Modify the Forecast

Voting Software

60

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.

61

Revenue Question:

Over the next 5 years do you believe the economy will:

62

1 2 3 4

0% 0% 0% 0%

• 1. Beat the

forecast

• 2. Remain within

forecast assumptions

• 3. Get worse
• 4. Unsure

Revenue Question:

25% of all our revenue comes from the

• State. Do you think that over the forecast

period the State will:

1 2 3

0% 0% 0%

• 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

63

Revenue Question:

9% of all our revenue is Federal. Do you think that over the forecast period the Federal government will:

1 2 3

0% 0% 0%

• 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

64

Expenditure Question:

City and Schools continuously improve

• efficiency. Do you believe that they can

continue to do so?

1 2 3

0% 0% 0%

65

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

Expenditure Question:

Should the City and School system set aside funding to ensure compensation remains competitive?

1 2 3 4

0% 0% 0% 0%

66

1. No additional funding should be provided until the economy improves 2. Set aside 1% of total payroll each year of the forecast 3. Decrease funding for total compensation by 1% each year 4. Need to wait to see what service reductions may need to be made with the Budget

Expenditure 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 …

67

1 2 3

0% 0% 0%

1. Aggressive, VRS investments should help mitigate the increases. 2. Low given the unfunded status of pension liabilities. 3. Just about right.

Expenditure 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 …

68

1 2 3 4

0% 0% 0% 0%

1. Reduce the employer contribution. 2. Maintain the 80% coverage no matter the cost. 3. Increase the employer contribution. 4. Implement a program to encourage wellness thereby reducing costs.

Expenditure Question:

What single service is likely to experience the most increase in demand

• ver the next 5 years and should be

considered for increased funding?

69

1 2 3 4

0% 0% 0% 0%

• 1. Public Safety
• 2. Education K-12
• 3. Human Service

programs

• 4. Infrastructure

maintenance

Expenditure Question:

Overall, expenditures in the forecast are:

1 2 3 4

0% 0% 0% 0%

70

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

Discussion Question:

The most significant threat to the financial position of the City and Schools in the next 18 months is:

1 2 3 4 5

0% 0% 0% 0% 0%

71

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

Conclusion

• The economy is improving although very

slowly.

• Federal and State budget reductions will

affect programs and revenues, they are beyond our control.

72