FY 2009 First Quarter Update & Economic Impacts on the City’s Budget December 8, 2008
Download ReportTranscript FY 2009 First Quarter Update & Economic Impacts on the City’s Budget December 8, 2008
FY 2009 First Quarter Update & Economic Impacts on the City’s Budget
December 8, 2008
The Update
Overview Economic Climate & Trends FY 2009 Budget Update General Fund Revenue General Fund Expenditures FY 2010 & FY 2011 Forecast Budget Calendar 2
A Challenging Economic Outlook
National economic failure
Rapid financial sector collapse
• •
Restricted credit – no lending Property and auto sales dropping
Volatility & Uncertainty!
No certain solution in sight
3
Continued Economic Uncertainty – Bad News from the State
State deficit = $28B
•
$10B out-year deficits
Round #1 cuts to Berkeley = $1.75M
• •
Set aside $1.8M to buffer cuts Not a long-term solution
More cuts to come…
• •
Public & Mental Health programs Increased fee/charges to cities
E.g., DMV Administrative Costs
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FY09 1
st
QTR Indicates Downturn
Overall loss of revenue
Property Transfer Tax down 46%(-$1.5M+)
Sales Tax down 2.3% (-$500,000 so far)
Parking Meter revenue down 10% (-$500K)
Property Tax growth slowed
Permit Activity down
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Updated FY09 Revenue Projections
1 st QTR Report: Now: +$343K -$700K $1M swing = Volatile & Dynamic
Updating information continuously
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GF Revenue Forecast
Forecasted declines in:
• • •
Property Transfer Tax Sales Taxes Vehicle In-lieu Tax
Some Revenue Increases:
• •
UUT (offset by like cost increases) Interest Income (up now, but uncertain future)
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Property Transfer Tax Decline
Real estate market collapsed 50% Revenue DECLINE!
20,000,000 15,000,000 10,000,000 5,000,000 0 FY 05 FY 06 FY 07 TRANSFER TAX FY 08 FY 09
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Property Sales Tax Decline
Changes since last year (FY 2008):
Total Property Sales down 48%
Commercial Property Sales down by 88%
Residential Property Sales down by 27%
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Decline in Assessed Value Growth
10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 5.40% 2005 9.40% 2006 9.30% 2007 8.80% 2008 6.90% 2009 4.50% 2010
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How is our FY09 1
st
QTR Spending?
Generally within budget
Some potential General Fund problems:
•
Fire Department Overtime
• •
(Measure GG will help offset this) Police Department Overtime Recreation Division cost overrun
Other Revenue Fund problems:
•
Refuse Fund
• •
Mental Health & Public Health Funds Permit Service Center Fund
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FY 2010 & FY 2011 – Getting Ready
Proceed with Caution!
Revenues down State Uncertain Economy Uncertain Not a time for growth Capital expenditures down
Reductions Required for General Fund and other funds
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Policy Framework
1-time revenue for 1-time expenses
Long-term fiscal health
•
2-year budget
•
5-year planning
Prudent Reserve
Control labor costs – minimize layoffs
Manage unfunded liabilities
No new programs without new revenues or expenditure cuts
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1 st QTR GF Forecast FY 2009 – FY 2013
2,000,000 (2,000,000) (4,000,000) (6,000,000) (8,000,000)
FY2009 .3 FY2010 Fiscal Years FY2011 FY2012 (1.3) (1.55) (2.1)
Deficit growth with flat PERS rates & no action Excludes a number of possible influences FY2013 (2.58)
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A Delicate Balance
What if…..
• • • • The State takes more local revenue?
The economy continues to drop?
Transfer Tax declines further?
What if PERS rates increase 6%+?
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General Fund Reserve
Audited Beginning Cash Balance 6/30/08 Planned Expense of Cash Balance:
FY 2008 Carryover - Planned Expenses (mostly capital) FY 2009 Planned Use of the Reserve
Reserve Set-asides:
Utility Undergrounding Potential Liability Funding 5-Year Capital Plan '06-'10 (remaining) Set-aside for State economic uncertainty (FY 2009)
Cash Reserve for Emergencies: 29.78
(7.44) (1.81)
(0.80) (2.50) (0.60) (1.80)
(5.70) $ 14.83
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GF 5-Year Forecast
General Fund Forecast
(in millions)
Beginning Fund Balance Operating Surplus / Shortfall
Fund Balance Adjustment
Available Cash Fund Balance FY 2010 Projected $ 14.83
$ (1.31) FY 2011 FY 2012 FY 2013 Projected Projected Projected $ 13.52
$ (1.55) $ 11.97
$ (2.12) $ $ 9.84
(2.58) $ 13.52
$ 11.97
$ 9.84
$ 7.26
GF Reserve balance dips to $7.26M
•
if no action taken to remedy structural deficit
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CalPERS Losses Impact Berkeley
Dramatic portfolio losses (30% and dropping…)
Rate smoothing cannot absorb
Rates will increase by FY 2012
• •
2% - 6% of payroll Huge cost increase to Berkeley
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PERS Rate Increase = Big GF Deficit
PERS What ifs… Projected Deficit: with flat PERS rates FY 2012 Projected $ (2.12) FY 2013 Projected $ (2.58) PERS rate increase of 2% Resulting Deficit: PERS rate increase of 6% Resulting Deficit:
$ (1.40)
$ (3.52)
$ (1.45)
$ (4.03)
$ (4.20)
$ (7.72)
$ (4.34)
$ (8.37)
GF operating deficit of $4M -$8M if we do nothing Wipes out GF Reserve entirely!
Need to plan now!
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Capital Improvements - Funding Reduced
Reduce General Fund capital funding by 33%
Must finish current big projects
• • • • • Animal Shelter Ed Roberts Campus Brower/Oxford Center Center Street Garage Gilman Playing Fields 20
Some Good News
Measure GG: up to $3.6M annually
• • • • Fire and emergency services FRALS Ensure staffing and no closures Disaster preparedness
Measure FF: $26M (1-time)
• Library bond for branch improvements
Measure WW: $4.86M (1-time)
• regional parks bond 21
Other Fund Deficits
Projected Ending Fund Balance (in millions) Enterprise/Special Funds
Streetlight Assessment Refuse Fund Clean Storm Water Permit Service Center
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
0.17
-0.86
0.67
3.30
0.09
-7.04
-0.42
0.63
-0.38
-11.92
-0.82
-2.10
-0.72
-17.07
-1.67
-2.17
-0.74
-17.59
-1.72
-2.23
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Other Revenue Funds Face Deficits
Public and Mental Health Funds
• Expenditure reductions
Streetlight Assessment Fund
• Possible General Fund subsidy increase
Refuse Fund
• Rate increase in March 2009: 15-20%
Clean Storm Fund
• Ballot in FY 2010
Permit Service Center Fund
• Expenditure reductions 23
What are the Next Steps?
Plan for long term
Control costs Begin budget review
•
(January – March)
Council
Citizens Labor unions & employees
Mid-year Update on February 10
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Council Budget Planning
Focus on service areas
•
Impacts and Outcomes
Special Council workshops
• •
Adopt revised calendar Add some Council dates
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Budget Calendar & Workshops
Date
October 7, 2008 December 8 January 13, 2009 January 27 February 10 February 17 February 24 March 10 March 17 March 24 April 28
May 5
May 5 May 19 May - June June 2 June 9
June 23 Agenda
Consent Workshop Workshop Workshop Action Workshop Workshop Workshop Workshop Workshop Action
Workshop
Action Action n/a Action Action
Action Action/Topic
Adopt FY 2010 & FY 2011 Budget Development Calendar FY 2009 1st QTR Update & Economic Impacts Special Budget Workshop - Budget Overview FY 2010 & FY 2011 Priority Setting Overview FY 2009 Mid-year Update, FY 2010 & FY2011 Budget Forecast FY 2010 & FY 2011 Priority Setting FY 2010 & FY 2011 Priority Setting FY 2010 & FY 2011 Priority Setting FY 2010 & FY 2011 Priority Setting Capital Improvement Program Public Hearing on CDBG & ESG Annual Action Plan and proposed funding allocations to community agencies
FY 2010 & FY 2011Proposed Biennial Budget
Adopt funding allocations and Annual Action Plan for CDBG and ESG Public Hearing #1: Budget & Fees Community Meeting(s) Council recommendations on budget due to City Manager Public Hearing #2: Budget & Fees
Adopt FY 2010 & FY 2011 Biennial Budget & Tax Rates
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