FIVE YEAR FORECAST FY THROUGH FY

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1 FIVE YEAR FORECAST FY THROUGH FY NOVEMBER 19, 2013 Catheryn Whitesell, Director Budget and Management Services Farrell Hanzaker, Chief Financial Officer Virginia Beach City Public Schools

2 Overall Economic Outlook 2

3 Percent Change in Real GDP (Gross Domestic Product) q2 2004q3 2004q4 2005q1 2005q2 2005q3 2005q4 2006q1 2006q2 2006q3 2006q4 2007q1 2007q2 2007q3 2007q4 2008q1 2008q2 2008q3 2008q4 2009q1 2009q2 2009q3 2009q4 2010q1 2010q2 2010q3 2010q4 2011q1 2011q2 2011q3 2011q4 2012q1 2012q2 2012q3 2012q4 2013q1 2013q Year-Quarter Source: US Bureau of Economic Analysis (Projection Congressional Budget Office) 3

4 Hampton Roads GMA vs. US GDP 4

5 Hampton Roads Nominal GMP Ranking Year Source: Bureau of Economic Analysis, HRPDC Gross Regional Product (GMP) in Billions Rank out of 281 MSAs 2001 $52, $55, $59, $63, $67, $72, $75, $77, $78, $80, $81, $84,

6 Sequestration Impact 6

7 Defense Spending in Hampton Roads (includes federal civilian and military personnel and procurement) $25.0 In Billions $20.0 $15.0 $10.0 $10.2 $12.1 $13.1 $13.9 $14.9 $15.7 $16.5 $17.4 $19.1 $19.8 $20.7 $21.6 $22.0 $21.1 $5.0 $ Estimate Calendar Year Forecast Source: US Department of Defense, Old Dominion University, 2013 State of the Region Report 7

8 Consumer Confidence Source: The Conference Board 8

9 Consumer Price Index (CPI) Projected Source: Congressional Budget Office Calendar Year All Items Core CPI * *Note: Core Inflation does not include food or energy costs 9

10 Average Monthly Unemployment Rate Through August* 10.0 Percent Virginia Beach Chesapeake Norfolk Portsmouth Suffolk Hampton Newport News State of Virginia United States * Note: The US Unemployment Rate is through October Source: Bureau of Labor Statistics 10

11 Change In Virginia Beach Employment by Industry 2013 to 2012 First Quarter Comparison Local Government (City + Schools) State Government Federal Government Other Private Hospitality Arts & Entertain,ent Health Care & Social Assistance Educational Services Administative and Support & Waste Mgmt Management Professional, Scientific and Technical Real Estate Finance & Insurance Information Transportation & Warehousing Retail Trade Wholesale Trade Manufacturing Construction -1, ,000 1,500 2,000 Source: Virginia Employment Commission 11

12 Median Household Income Virginia Beach $70,000 $60,000 $58,545 $61,333 $61,462 $65,776 $59,298 $64,212 $64,614 $61,626 $50,000 $40,000 $30,000 $20,000 $10,000 $ Calendar Year Virginia Beach United States State of Virginia Virginia Beach - MSA Source: US Census Bureau, American Community Survey 12

13 13 Revenues

14 Average Change in Assessments and Tax Rate % $1.032 $0.977 $1.140 $1.090 $1.188 $1.220 $1.196 $1.024 $0.990 $0.890 $0.950 $ % 15.0% 10.0% 5.0% Assessment Change % % Fiscal Years Residential Commercial Tax Rate -10.0% 14

15 Real Estate Tax Revenue $550.0 Each penny on the tax rate in 2015 will generate $4.87 million Millions $520.0 $490.0 $460.0 $506.3 $499.3 $473.6 $460.3 $474.3 $462.9 $470.7 $479.9 $489.3 $499.0 $508.9 $430.0 $400.0 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY

16 Personal Property Tax Revenue $160.0 $140.0 $120.0 $100.0 Millions $80.0 $60.0 $40.0 $20.0 Vehicles $ Fiscal Year Personal Property Personal Property Vehicles Business Equipment Personal Property Paid By the Commonwealth Public Service Personal Property Machinery & Tools* *Note: Machinery & Tools tax effectively eliminated by City Council in FY 2013 by setting the rate at one-millionth of a cent per $100 of assessed value. 16

17 General Sales/State Share Sales Tax $90.0 $80.0 $70.0 $60.0 $50.0 Millions $40.0 $30.0 $20.0 $10.0 $0.0 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 General Sales Tax State Share Sales Tax (Schools) 17

18 Business, Professional, Occupational License (BPOL) $60.0 $50.0 $40.0 Millions $30.0 $20.0 $10.0 $0.0 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY

19 Hotel and Restaurant Tax Revenue Millions $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $ Fiscal Year Hotel Restaurant 19

20 Charges for Services $350.0 $300.0 $250.0 Millions $200.0 $150.0 $100.0 $50.0 $0.0 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 City Schools 20

21 Fund Balance $60.0 $50.0 Forecast Period $40.0 $34.7 $33.3 $35.3 Millions $30.0 $8.5 $20.0 $24.4 $24.7 $21.5 $10.0 $22.2 $17.9 $22.2 $17.6 $14.5 $9.4 $7.4 $0.0 $3.8 $6.2 $5.8 $5.5 $4.7 $4.4 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 City Schools 21

22 Total Revenue Adopted FY 2014 Forecast FY 2015 Forecast FY 2016 Forecast FY 2017 Forecast FY 2018 Forecast FY 2019 City $ $ $ $ $ $ 1,021.7 Schools $ $ $ $ $ $ Total Revenue $1,780.4 $1,801.3 $ 1,824.7 $ 1,846.8 $ 1,875.5 $ 1,910.0 $2,500.0 $2,000.0 $1,500.0 Millions $1,000.0 $500.0 $ Fiscal Year City Schools 22

23 23 Expenditures

24 Salaries $900.0 $800.0 $700.0 Millions $600.0 $500.0 $400.0 $300.0 $480.7 $470.0 $493.3 $468.7 $467.1 $473.0 $479.0 $485.0 $485.0 $485.0 $200.0 $100.0 $0.0 $321.5 $313.3 $320.8 $323.3 $336.2 $341.0 $345.6 $350.6 $351.2 $ Fiscal Year City Schools 24

25 Fringe Benefits $400.0 $350.0 $300.0 Millions $250.0 $200.0 $150.0 $158.5 $134.5 $148.4 $174.6 $171.4 $182.7 $183.7 $193.9 $198.3 $203.0 $100.0 $50.0 $108.9 $109.3 $112.6 $129.4 $127.9 $136.7 $138.1 $146.3 $150.2 $159.1 $ Fiscal Year City Schools 25

26 Operating Costs $600.0 $500.0 $400.0 $194.4 $179.9 $166.6 $159.5 $157.8 $152.6 $154.5 $156.3 $158.2 $160.1 Millions $300.0 $200.0 $100.0 $302.7 $304.1 $325.2 $311.9 $315.0 $322.2 $327.7 $331.9 $337.1 $343.6 $ City Schools 26

27 Pay-As-You-Go $60.0 $50.0 $1.0 $1.0 $1.0 $1.0 $40.0 $0.6 Millions $30.0 $20.0 $54.9 $33.7 $41.3 $45.7 $51.6 $47.9 $49.1 $50.7 $49.3 $48.2 $10.0 $ Fiscal Year City Schools 27

28 Debt Service $250.0 $200.0 Millions $150.0 $100.0 $50.0 $44.2 $43.9 $44.8 $44.7 $43.1 $102.2 $103.3 $103.8 $111.0 $110.2 $46.8 $46.7 $45.6 $45.5 $44.2 $120.6 $127.5 $136.4 $142.0 $145.0 $ Fiscal Year City Schools 28

29 Total City and School Forecast $2,300.0 $2,200.0 $2,100.0 Deficit in 2015 is projected to be $26.8 million. Nearly $20 million less than last year s deficit. Millions $2,000.0 $1,900.0 $1,800.0 $1,700.0 $1,703.8 $1,768.8 $1,828.1 $1,801.3 $1,906.2 $1,846.8 $1,949.0 $1,910.0 $1,600.0 $1,500.0 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Revenue Expenditures 29

30 Next Steps Present a balanced Budget and CIP in March Work with the General Assembly to: strengthen sales tax in terms of capturing internet sales and service related sales Understand the need to replace any local revenues eliminated by State actions. Efforts to eliminate BPOL could cost us $43 million Recognize as a State obligation part of the unfunded liability for the teacher s pension rather than assigning 100% of it to localities Work regionally to diversify our economy, build on current assets at EVMS, the ODU Modeling and Simulation Center and our technical and certificate programs. 30