FY 2009 First Quarter Update & Economic Impacts on the City’s Budget December 8, 2008.
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Transcript of 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
2
The Update
Overview Economic Climate & Trends FY 2009 Budget Update
General Fund Revenue General Fund Expenditures
FY 2010 & FY 2011 Forecast Budget Calendar
3
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
4
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
5
FY09 1st 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
6
Updated FY09 Revenue Projections
1st QTR Report: +$343KNow: -$700K
$1M swing = Volatile & Dynamic
Updating information continuously
7
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)
8
Property Transfer Tax Decline
Real estate market collapsed 50% Revenue DECLINE!
0
5,000,000
10,000,000
15,000,000
20,000,000
FY 05 FY 06 FY 07 FY 08 FY 09
TRANSFER TAX
9
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%
10
Decline in Assessed Value Growth
5.40%
9.40%
9.30%
8.80%
6.90%
4.50%
0.00%1.00%2.00%3.00%4.00%5.00%6.00%
7.00%8.00%9.00%
10.00%
2005 2006 2007 2008 2009 2010
11
How is our FY09 1st 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
12
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
13
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
14
1st QTR GF Forecast FY 2009 – FY 2013
Deficit growth with flat PERS rates & no action Excludes a number of possible influences
.3
(2.58) (2.1) (1.55) (1.3)
(8,000,000)(6,000,000)(4,000,000)(2,000,000)
-2,000,000
FY2009 FY2010 FY2011 FY2012 FY2013
Fiscal Years
Su
rplu
s/(D
efic
it)
15
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%+?
16
General Fund Reserve
Audited Beginning Cash Balance 6/30/08 29.78
Planned Expense of Cash Balance:FY 2008 Carryover - Planned Expenses (mostly capital) (7.44)
FY 2009 Planned Use of the Reserve (1.81)
Reserve Set-asides: Utility Undergrounding (0.80)
Potential Liability Funding (2.50) 5-Year Capital Plan '06-'10 (remaining) (0.60) Set-aside for State economic uncertainty (FY 2009) (1.80)
(5.70) Cash Reserve for Emergencies: 14.83$
17
GF 5-Year Forecast
GF Reserve balance dips to $7.26M• if no action taken to remedy structural deficit
General Fund Forecast FY 2010 FY 2011 FY 2012 FY 2013
(in millions) Projected Projected Projected Projected
Beginning Fund Balance 14.83$ 13.52$ 11.97$ 9.84$
Operating Surplus / Shortfall (1.31)$ (1.55)$ (2.12)$ (2.58)$
Fund Balance Adjustment
Available Cash Fund Balance 13.52$ 11.97$ 9.84$ 7.26$
18
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
19
PERS Rate Increase = Big GF Deficit
FY 2012 FY 2013
PERS What ifs… Projected Projected
Projected Deficit: with flat PERS rates (2.12)$ (2.58)$
PERS rate increase of 2% (1.40)$ (1.45)$ Resulting Deficit: (3.52)$ (4.03)$
PERS rate increase of 6% (4.20)$ (4.34)$ Resulting Deficit: (7.72)$ (8.37)$
GF operating deficit of $4M -$8M if we do nothing Wipes out GF Reserve entirely! Need to plan now!
20
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
21
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
22
Other Fund Deficits
Projected Ending Fund Balance(in millions) FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Enterprise/Special FundsStreetlight Assessment 0.17 0.09 -0.38 -0.72 -0.74Refuse Fund -0.86 -7.04 -11.92 -17.07 -17.59Clean Storm Water 0.67 -0.42 -0.82 -1.67 -1.72Permit Service Center 3.30 0.63 -2.10 -2.17 -2.23
23
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
24
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
25
Council Budget Planning
Focus on service areas• Impacts and Outcomes
Special Council workshops• Adopt revised calendar• Add some Council dates
26
Budget Calendar & Workshops Date Agenda Action/Topic
October 7, 2008 Consent Adopt FY 2010 & FY 2011 Budget Development CalendarDecember 8 Workshop FY 2009 1st QTR Update & Economic Impacts
January 13, 2009 Workshop Special Budget Workshop - Budget OverviewJanuary 27 Workshop FY 2010 & FY 2011 Priority Setting Overview
February 10 Action FY 2009 Mid-year Update, FY 2010 & FY2011 Budget ForecastFebruary 17 Workshop FY 2010 & FY 2011 Priority SettingFebruary 24 Workshop FY 2010 & FY 2011 Priority Setting
March 10 Workshop FY 2010 & FY 2011 Priority SettingMarch 17 Workshop FY 2010 & FY 2011 Priority SettingMarch 24 Workshop Capital Improvement Program
April 28 Action Public Hearing on CDBG & ESG Annual Action Plan and proposed funding allocations to community agencies
May 5 Workshop FY 2010 & FY 2011Proposed Biennial BudgetMay 5 Action Adopt funding allocations and Annual Action Plan for CDBG and ESG
May 19 Action Public Hearing #1: Budget & FeesMay - June n/a Community Meeting(s)
June 2 Action Council recommendations on budget due to City ManagerJune 9 Action Public Hearing #2: Budget & Fees
June 23 Action Adopt FY 2010 & FY 2011 Biennial Budget & Tax Rates