City of Ann Arbor Council Offsite Workshop 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 ‐ Improved revenue in Golf operations I d i G lf ti – Utilities ‐ Largely flat demand – Stimulus Funds – Do not help recurring operations
City’s Financial Challenge G General Fund: l F d • 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 $86 $84 $82 $82 $80 Millions $78 2012 2013 $76 Property tax rev: ‐ 0.5% +0.4% State Shared Rev Flat Flat $74 Fees/Charges Fees/Charges Flat Flat Flat Flat $72 DDA Transfer $2 Mil $2 Mil $70 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Planned High Low 4
Active Employee Healthcare Costs Cost / Employee / Year Cost / Employee / Year $12,500 $12,000 $11,500 $11,441 $11,000 $10,500 $10,178 $10 000 $10,000 $9,740 $9,500 $9,356 $9,000 $8,486 $8,953 $8,648 $8,500 $8,000 $7,983 $8,333 $7,500 $ $7,000 $6,893 $6,852 $6,500 $6,362 $6,382 $6,000 $5,923 $5,500 $5,500 $5,173 $5,173 $5,000 $4,500 June 2003 June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010 Natl. Avg. City As of Ann Arbor Plan Year ending June 30 5
Comparison of Healthcare Plan Design City Plan – High Design / AFSCME Police Fire Low Design Employee High Design Low Design $0 $0 $0 Contributions Contributions – Single $44 Single: $44 (Monthly) 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 Coinsurance 80% 80% 100% 100% 100% 100% 100% 100% Out of Pocket Max $1,200 / $2,400 / None None None $2,500 $4,800 Prescription $10 / $30 $20 / $40 $10 / $25 $10 / $25 $10 / $20 2x Mail 1x Mail 1x Mail 1x Mail FY 12 $10,686 $12,310 $13,121 $12,871 Net Cost Per Net Cost Per Employee Per Year 6
Pension system is 90% funded. Financial market meltdown increased on ‐ going contributions from 2009 levels to projected 2016 l levels l Pension Contributions (Total City) $25.0 Assets (June 2010): $349 Mil. 90% Funded $20.0 $15.0 Required q Contributions $10.0 $ $5.0 $ ‐
Retiree healthcare (VEBA trust) overall 30% funded. Retiree Healthcare Contributions (Total City) ( y) $25.0 Assets (June 2010): $63 Mil. 30% Funded $20.0 $20.0 Required Contributions $15.0 $10.0 $5 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 ‐ Increased contract costs will not be covered in the I d t t t ill t b d i th proposed Two Year Fiscal Plan. • State Budget – Implications from how State resolves • State Budget Implications from how State resolves structural issues • Federal Policy changes y g • Other ?
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