Five Year Forecast FY 2014 THROUGH FY 2018 Purpose TO FORECAST THE - PowerPoint PPT Presentation

Five Year Forecast FY 2014 THROUGH FY 2018

Purpose  TO FORECAST THE OUTCOMES OF EXISTING LAWS, POLICIES, GUIDANCE, AND TRENDS  TO EXPLORE WHAT THOSE OUTCOMES WILL LIKELY MEAN TO CITY/SCHOOL FINANCES  TO PROVIDE INFORMATION TO THE CITY COUNCIL AND SCHOOL BOARD TO GUIDE POLICY DECISIONS 2

Economy 3

Risks in the Next Five Years • Fiscal Cliff – Federal Deficit – Sequestration – Tax Hikes • States ability to support transportation and education funding requirements • European Debt Crisis – Global Economy & Banking 4

Real Gross Domestic Product 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% Source: US Bureau of Economic Analysis Year-Quarter 5

100 120 140 160 Source: The Conference Board Consumer Confidence 20 40 60 80 0 Jul-99 Oct-99 136.2 Jan-00 50 90 144.7 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 > 90 indicates stable economy < 50 indicates contracting economy Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 61.4 Oct-03 Jan-04 Apr-04 105.7 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 85.2 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 111.9 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 25.3 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 6

Consumer Price Index 6.0% 5.0% 4.0% 3.0% Projected 2.0% 1.0% 0.0% -1.0% -2.0% All Items Core CPI Source: Bureau of Economic Analysis and the Congressional Budget Office Note: Core inflation does not include energy or food 7

Comparison of Unemployment 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Calendar Year Virginia Beach Virginia Beach Metropolitan Statistical Area Virginia United States Source: US Bureau of Labor Statistics and the Congressional Budget Office 8

Labor Force in the Military 12.0% 11.0% 8.0% 5.9% 5.0% 4.4% 4.1% 4.0% 2.9% 2.8% 2.7% 0.0% Source: US Census Bureau, American Community Survey 9

Median Household Income $80,000 $65,776 $64,614 $64,212 $58,545 $61,333 $61,462 $59,298 $60,000 $40,000 $20,000 $0 2005 2006 2007 2008 2009 2010 2011 Calendar Year United States State of Virginia Virginia Beach - MSA Virginia Beach Source: US Census Bureau, American Community Survey 10

Residential Building Permits 3,000 2,500 2,000 Permits Issued 1,500 1,000 500 Through 0 September Calendar Year Source: Virginia Beach Planning Department 11

Revenues 12

Conditions for Next Five Years Favorable Unfavorable • Consumer confidence • Defense spending • State budget ended with a • Federal cuts to social surplus last two years programs • Housing market trends • Potential for Federal tax • Tourism continues to strengthen increases • Local employment is improving • Potential for relocation of • Economy-based local taxes are Naval units/ships improving • Dedicated Real Estate taxes for • Continued reduction in State education and road support to education and construction localities 13

Change in Assessed Values 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Fiscal Year Source: Real Estate Assessor’s Office 14

Estimated Months of Supply of Short Sales & REOs Existing Homes Based on Average Sales in the Last 12 Months in Hampton Roads: 2007-2012* 70 60 Months of Supply- 50 Short Sales 40 Months of Supply- REOs 30 20 10 0 2007 2008 2009 2010 2011 2012 Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed. *Data are through September 2012 15

Average Price of Existing Short Sale, REOs, and Non- Distressed Residential Homes Sold Hampton Roads: 2006-2012* Short Sale REO Price price as a as a Percent of Percent of Price of Price of Non- Non- Non- Short Distressed Distressed Distressed Year Sales Sales REO Sales Sales Sales 2006 $250,254 $241,666 $120,817 96.6 48.3 2007 $261,723 $237,897 $163,421 90.9 62.4 2008 $255,852 $239,110 $184,462 93.5 72.1 2009 $243,902 $239,913 $164,229 98.4 67.3 2010 $251,572 $231,211 $151,612 91.9 60.3 2011 $236,358 $212,967 $135,304 90.1 57.3 2012* $238,886 $188,852 $135,693 79.1 56.8 Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed. REOs represent Bank Owned Homes. * Information provided here is for YTD September 2012. 16

Real Estate Revenue $520.0 $500.0 $480.0 $460.0 $440.0 Millions $420.0 $400.0 $380.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Real Estate - General Fund Delinquencies & Interest TIF's & SSD's Public Service Source: Department of Management Services and the City Real Estate Assessor’s Office 17

Personal Property Revenue $180.0 $160.0 $140.0 $120.0 $100.0 $80.0 Millions $60.0 $40.0 $20.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Delinquent and Interest on Delinquent PP/Other Machinery & Tools Business Equipment Public Service Personal Property Personal Property Vehicles Personal Property Paid By the Commonwealth Source: Commissioner of the Revenue and Department of Management Services 18

General Sales Beginning in September 2013, Amazon has agreed to collect state sales tax on $100.0 its Virginia customers. $80.0 $60.0 Millions $40.0 $20.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services 19

Utility Taxes $60.0 $50.0 $40.0 $30.0 Millions $20.0 $10.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services and the Virginia Department of Taxation 20

Business License (BPOL) $60.0 $50.0 $40.0 Millions $30.0 $20.0 $10.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services 21

Cable Franchise Revenue $10.0 $8.0 $6.0 Millions $4.0 $2.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services 22

Automobile License Revenue $12.0 $10.0 $8.0 $6.0 Millions $4.0 $2.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services 23

Cigarette Tax Revenue $15.0 $12.0 $9.0 Millions $6.0 $3.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services 24

Amusement Tax Revenue $8.0 $6.0 Millions $4.0 $2.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services 25

Hotel Tax Revenue $35.0 $30.0 $25.0 $20.0 Millions $15.0 $10.0 $5.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services 26

Restaurant Tax Revenue $80.0 $70.0 $60.0 $50.0 Millions $40.0 $30.0 $20.0 $10.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year Source: Department of Management Services 27

Use of Fund Balance $60.0 $50.0 $40.0 Millions $30.0 $20.0 $10.0 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year City Schools Source: Department of Management Services 28

Summary of Revenues • Real Estate assessments are projected to fall in the early years of the forecast, but growth in all other tax revenues basically make up the lost real estate tax revenue. • As the economy strengthens so shall our revenues. • How the Federal Budget resolves itself is our biggest threat. 29

Budget Drivers 30

VRS Reforms • Mandated Shift of 1% to employees beginning in FY 2013 and for the next four years – offset with mandated 1% pay raise. • Unfunded Liability for Teachers pension is estimated at over $800 million and for city employees at over $600 million. – General Assembly has been artificially lowering the VRS rate for teachers to aid their budget. – VRS Board actuarially sets rate for city employees. – Beginning with the FY 2013 CAFR the City must show these unfunded liabilities on our balance sheet. 31

Federal Health Care Reform • Beginning in January 2014 we must: – Cover part-time employees working 30 or more hours per week (the forecast assumes this will add 91 employees to health care coverage). – Pick up employees who do not currently have health insurance (the forecast assumes 50% of the roughly 2500 opt-outs will choose city health insurance rather than an exchange). – Pay reinsurance fees estimated at $60 per member (estimated to add nearly $2 million to the plan costs). • Intended to bring down health care costs and cover more people. 32

SPSA Tipping Fee • As a part of the City’s agreement with SPSA we have had a reimbursement for a capped tipping fee, the value of which has been roughly $10 million annually. • Beginning in FY 2015, this cap is eliminated resulting in a loss of revenue to Solid Waste of $10 million. • In FY 2018 SPSA as we know it will cease to exist. 33