Transcript Presentation (PDF)

FY 2009 Second Quarter Update
and
FY 2010 & FY 2011 Forecast
February 10, 2009
The Update
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


Uncertain Economic Climate
State Budget – No Good News
FY 2009 2nd QTR Update
FY 2010 & FY 2011 Forecast


Budget Process & Calendar
Economic Development
Local stimulus
 Council comment on direction

2
An Uncertain Economic Outlook
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
National economy still failing
Rapid financial sector collapse
Restricted credit – no lending
 Property and auto sales dropping

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
Unemployment at 10% soon
CA Retail Vacancies

2001 = 6%
2009 = 13%
3
An Uncertain Economic Outlook


2-3 year recovery?
Perhaps a different kind of recovery?
V
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L shaped path
Personal income for goods down
Retail industry shrinking


versus
(thousands of shopping malls to close)
Property tax growth slowed
4
Federal Stimulus Hopes

The House version includes…
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$31B to states, local governments & non-profits
• Investments for infrastructure
• Emergency assistance to families & individuals
• $1B in new, 1-time CDBG funding
The Senate version may be different
No new CDBG funding
 No meaningful affordable housing funds

5
Bad News from the State
-$17B FY 2009
-$25B FY 2010
-$42B Deficit (23% of budget!)
 Cash flow problems (funding deferrals)
 Potential State solutions
 Cuts to Health & Redevelopment
 Bond against lottery
 Sales tax temporary increase
 Spending cap
 Need budget reform
6
More Bad News from the State

More State cuts now…

Parking Fines – new legislation
•
•
Loss of $3/citation = loss of $1M/year
Increase fines to recoup loss
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DMV fees & reduced City revenue
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Frozen CIP & transportation funding
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Health & mental health grant
reimbursements
We are managing State cuts through
immediate expenditure reductions.
7
FY09 2nd QTR Results Worsen
Overall revenue loss of - $2.4M
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Property Transfer Tax down 45% (-$3.0M)
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Sales Tax down 2.6% (-$500,000)
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Parking Meter revenue down 7% (-$400K)
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Property Tax growth slowed
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Permit Activity down
8
GF Revenue Forecast
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Declines:
Property Transfer Tax
 Sales Taxes
 Vehicle In-lieu Tax
 Parking Fines

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Increases:
Transient Occupancy Tax
 Ambulance Fees
 Other Revenue
 And property tax is still growing…

9
Property Transfer Tax Decline
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Real estate market collapsed
45% Revenue DECLINE
20,000,000
15,000,000
10,000,000
5,000,000
0
FY 05
FY 06
FY 07
FY 08
FY 09
TRANSFER TAX
10
Property Sales Tax Decline
Changes since last year (FY 2008):

Total Property Sales down 45%
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Commercial Property Sales down 77%
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Residential Property Sales down 31%
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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%
9.30%
8.80%
9.40%
6.90%
5.40%
4.50%
2005
2006
2007
2008
2009
2010
12
Immediate Actions
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Hiring Freeze
Deferring capital projects

(pending State $)
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Limit overtime spending
Limiting non-essential expenses
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Passage of Measure GG helps now

fully fund Fire Department staffing
 prevent fire station closures

13
How is FY09 2nd QTR spending?
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Hiring freeze = salary savings
Savings help offset revenue losses
General Fund
- $2.37M revenue
+$2.28M savings
(-$90K gap)
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Next 6 months uncertain
State budget?
 Federal stimulus?

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No budget increases
14
FY 2010 & FY 2011 Outlook
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Revenues down
State uncertain
Economy uncertain
Not a time for growth
Available capital funding reduced
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Reductions needed for all funds
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15
Policy Framework
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1-time revenue for 1-time expenses
Long-term fiscal health
2-year budget
 5-year planning (focus on year 3 impacts)
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Prudent Reserve
Control labor costs – minimize layoffs
Manage unfunded liabilities
No new programs without new revenues
or expenditure cuts
Balance grant and enterprise funds
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2-YR Budget…3-YR Problem
PERS rate spike in FY 2012
Revised 3-Year Forecast - Not Balanced
(in millions)
FY 2010
Projected Revenue
$146.50
Projected Expenses
$149.20
Balance
($2.70)
With PERS Rate Increase
Revised Balance
($2.70)
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FY 2011
FY 2012
$149.50
$152.30
$153.20
$158.30
($3.70)
($6.00)
$3.00
($3.70)
($9.00)
Need GF reductions over 3 years of 6%
Year 3 reflects PERS rate spike
Assumes CIP funding reductions
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Other Revenue Funds Face Deficits
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Public and Mental Health Funds
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Streetlight Assessment Fund
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Rate increase in FY 2010: 15-30%
Clean Storm Fund
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Possible General Fund subsidy increase
Refuse Fund

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Expenditure cuts
Ballot in FY 2010
Permit Service Center Fund

Expenditure cuts
18
What are the Next Steps?
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Plan for long term
Control costs
Continued budget review
Discuss with labor unions & employees
Council workshops focus on…
key program areas
 performance outcomes

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Prepare for Federal stimulus package
19
Goals & Values
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Maintain City’s long-term fiscal health
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Provide quality services to residents
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Recognize the exceptional work our
employees do
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Budget Calendar & Workshops
Date
Agenda
February 10
Action
Action/Topic
FY 2009 Mid-year Update, FY 2010/FY2011 Forecast &
Program Focus: Economic Development
February 17 Workshop Budget Update & Program Focus: Environment
February 24 Workshop Budget Update & Program Focus: Public Health
March 10 Workshop Budget Update & Program Focus: Youth Services
Budget Update & Program Focus: Transportation, Library,
March 17 Workshop
Administrative Services
March 24 Workshop
April 21
Action
Council Feedback on Budget Priorities &
Program Focus: Capital Improvement Program
Public Hearing on CDBG/ESG Annual Action Plan and proposed
allocations to community agencies
May 5 Workshop FY 2010 & FY 2011 Proposed Biennial Budget
May 5
Action
Adopt funding allocations and Annual Action Plan for CDBG and
ESG
May 19
Action
Public Hearing #1: Budget & Fees
May - June
n/a
Community Meeting(s) on the Proposed Budget
June 2
June 9
Action
Action
Council recommendations on budget to City Manager
Public Hearing #2: Budget & Fees
June 23
Action
Adopt FY 2010 & FY 2011 Biennial Budget & Tax Rates
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Program Focus: Economic Development

Regional economy is struggling
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What are Berkeley impacts?
 Business downturn
 Job losses
 What can we do locally?

Council comments on direction
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