Council Offsite Workshop Council Offsite Workshop FY 2012 and Beyond - - PowerPoint PPT Presentation

Council Offsite Workshop

City of Ann Arbor

Council Offsite Workshop

FY 2012 and Beyond y

Dec 2010

Economic Environment

• Outlook Serious implications for City

– Unemployment (Oct): Ann Arbor Area – 7.8% (prelim) Michigan – 12.8% (prelim) – State Shared Revenue – Flat – State’s Core Budget Issues – Unresolved – Investment Interest Rates – Near 0% – Operating Revenues Operating Revenues ‐ Net decline in property tax receipts – affects all millage funds ‐ Decline in Court fees and Parking Ticket receipts I d i G lf ti ‐ Improved revenue in Golf operations

– Utilities

‐ Largely flat demand – Stimulus Funds – Do not help recurring operations

City’s Financial Challenge

G l F d General Fund:

• Constrained Revenue
• Healthcare and Retiree Benefit Costs Increasing
• Budget Targets
• Budget Targets

‐ Align budget strategy with labor strategy ‐ Tighten assumptions so less likely to produce surplus

• Reductions Needed:

Reductions Needed: ‐ FY 12 & FY 13 require 2.5% ‐> 4.0%; higher reductions driven by healthcare ‐ 4.0% targeted reductions presume entire service unit is on old healthcare plan, which results in the incremental 1.5% reduction Utility Funds:

• Generally Flat Demand; reducing $ available for future capital
• Capital Improvements Still Needed

Solid Waste: Financially Struggling – Cost reduction strategy in place since

• 2004. Alternatives Study – in process.

G lf C Golf Courses:

• $ Results Improving but Still Not Self‐Sustaining

General Fund revenues are not projected to return to FY 2008 levels until 2015

General Fund Revenues

$82 $84 $86 $78 $80 $82 Millions $74 $76

2012 2013 Property tax rev: ‐0.5% +0.4% State Shared Rev Flat Flat Fees/Charges Flat Flat

$70 $72 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Fees/Charges Flat Flat DDA Transfer $2 Mil $2 Mil

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Planned High Low

Active Employee Healthcare Costs Cost / Employee / Year Cost / Employee / Year

$12,500

$10,178 $11,441

$10 000 $10,500 $11,000 $11,500 $12,000

$7,983 $8,953 $9,740 $8,648 $9,356 $8,486 $8,333

$ $8,000 $8,500 $9,000 $9,500 $10,000

$5,923 $6,382 $6,852 $6,362 $6,893

$5,500 $6,000 $6,500 $7,000 $7,500

$5,173 $5,173

$4,500 $5,000 $5,500 June 2003 June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010

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• Natl. Avg.

City As of Ann Arbor Plan Year ending June 30

Comparison of Healthcare Plan Design

City Plan – High Design / Low Design AFSCME Police Fire Employee Contributions High Design Low Design Single $44 $0 $0 $0 Contributions – (Monthly) Single: $44 Double: $100 $0 Family: $120 Deductible $300 / $600 $1000 / $225 per $250 / $500 $250 / $500 $2000 individual Office visit copay $10 $15 $15 $15 $15 Coinsurance 80% 100% 100% 100% Coinsurance 80% 100% 100% 100% Out of Pocket Max $1,200 / $2,400 / $2,500 $4,800 None None None Prescription $10 / $30 $20 / $40 2x Mail $10 / $25 1x Mail $10 / $25 1x Mail $10 / $20 1x Mail FY 12 Net Cost Per $10,686 $12,310 $13,121 $12,871 Net Cost Per Employee Per Year

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Pension system is 90% funded. Financial market meltdown increased on‐going contributions from 2009 levels to projected 2016 l l levels

Pension Contributions

(Total City) $20.0 $25.0

Assets (June 2010): $349 Mil. 90% Funded

$15.0 Required $ $10.0 q Contributions $‐ $5.0

Retiree healthcare (VEBA trust) overall 30% funded.

Retiree Healthcare Contributions

(Total City) $20.0 $25.0 ( y)

Assets (June 2010): $63 Mil. 30% Funded

$15.0 $20.0 Required Contributions $5 0 $10.0 $‐ $5.0

Significant Events on Horizon

• Settlement of Labor Contracts (AAPOA, COAM, IAFF, & AFSCME)

‐ Could result in departure of a significant number of experienced employees I d t t t ill t b d i th ‐ Increased contract costs will not be covered in the proposed Two Year Fiscal Plan.

• State Budget – Implications from how State resolves
• State Budget Implications from how State resolves

structural issues

• Federal Policy changes

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• Other ?

Questions