ࡱ> %(@ / 0DArialngsRomantt5 0DTimes New Romantt5 0 DWingdingsRomantt5 0@0.  @n?" dd@  @@`` ( 8 ))  !"#$,-./02114 0AA@8ʚ;ʚ;g4GdGd] 0ppp@ <4dddd@w 0t5 <4!d!d@x 0t_9___PPT10 6___PPT9{EParameters for Budget Development Recommended Fiscal Restraint Policy*F",#  AFinal Report from City Council Finance Committee January 25, 2006BB BackgroundJCouncilman Sapp introduced a proposal that city spending should be constrained by inflationary growth as defined by the CPI-U Under his proposal, the City Manager would develop a FY 2007 budget by going back to  base year FY 2001 and only allowing each future year FY budget to grow by the CPI-U for that year The proposal was received by Council and forwarded to the Council Finance Committee for its review and commentZ BackgroundThe Council Finance Committee discussed the matter at its November 21, 2005 meeting and decided to form a subcommittee to deal with the matter more fully The subcommittee was chaired by Dr. Jesse Hughes and also included Councilman Gilliland, Scott Seymour, Mary Bunting Asst. City Manager, Chris Snead Budget Director The subcommittee met on two occasions November 28, 2005 December 12, 2005 <eZ$ZZe$ BackgroundInterim reports were given to: Council on December 14, 2005 Finance Committee on December 19, 2005 The Interim reports were met with general agreement so more detailed work exploring the actual implication of the proposed policy if it had actually been applied in the past could be done The subcommittee met again on January 6, 2005 to review this work and with the full Finance Committee on January 19th & 23rd for review of all materials and final recommendationhDnD/  6Recommendation ComponentsTax revenue from real estate revenue, net of new construction, from one fiscal year to the next should be limited to an inflationary factor.ld Recommendation ComponentsThat inflationary factor should be the higher of either the consumer price index for urban dwellers (CPI-U) or resident income growth (RI).2ld'  _ Recommendation ComponentsIf there is a need to exceed this inflationary growth, the City Manager and City Council need to explicitly explain the budget factors causing that need so the public can understand it. ld Recommendation Components3This is a financial guideline not financial policy. 4ld4 Recommendation ComponentscThe committee did not support the concept of rolling back the real estate revenues from past years. dldd ,-.28FY 06 Explanatory Factors: How the Excess Money Was Used99#Amount of real estate revenue over target growth of 4%: $9,135,380 Extra funds provided to schools over 4% growth (for 7% teacher salary increases): $2,636,424 8% wage adjustment for police/fire: $2,400,000 Debt service for new bond issue: $3,000,000 Required increases in 911: $ 511,000 Required increase in HRT: $ 435,000 Elderly tax freeze program: $ 500,000 5 new police officers: $ 375,000 TOTAL NEW/ABOVE INFLATION COSTS: $9,857,424 CPxPP4PPPCx43Recommended Wording of Proposed Financial GuidelineCReal estate tax revenue growth, net of new construction, from one fiscal year to the next shall be limited to the equivalent percentage increase in an inflationary growth factor as measured by either the consumer price index for urban dwellers (CPI-U) or resident income growth (RI); whichever is greater in any given year. 3Recommended Wording of Proposed Financial Guideline,To the extent that budgetary needs require real estate revenues to grow faster than this factor, the Manager and Council shall explicitly explain the budget driving factors causing this so that residents may have a concise and clear understanding of the need to deviate from this financial guideline..An Example of the Proposed Financial GuidelinevIf rising real estate assessments, net of new construction, increase real estate tax revenues 20% and the higher of CPI-U or RI is 5%, thus creating a 15% differential of  excess revenues , then the Council shall reduce the real estate tax rate such that the effective real estate tax rate allows for no more than a 5% increase. Any deviation from this guideline requires a detailed list of the programs requiring use of the  excess revenue. Z Next StepsrThe full Finance Committee approved this wording at its January 19th and 23rd meetings The City Manager will address Council momentarily on staff s views of this recommended policy Council is being asked to consider adopting this recommended financial guideline Council can either approve the policy today, after conversation OR Staff can schedule it for evening session presentation and vote on February 8th if that is Council s preferenceApB  AM !/!"#$%/01  0` Ot{h______` M <ff33̙3` +ffO=ff̙H7` fff3f̙` Tff33ff` 0Ky{kOz` )R{f` GiIfff̙fR` ̙|̙3f` 3ff~>?" dd@'?lFd@  nK'o`P( n?" dd@   @@``PT     o (`0p>>  '((  ZB  c $D"`   6 "M }  X Click to edit Master title style!!  (  0 "; `  RClick to edit Master text styles Second level Third level Fourth level Fifth level!    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Z* H  0.k ? 3380___PPT10.i 0% P@(  @ @ N< kk z%    |*0 K%%KKpp @ N kk  @%   ~*0 K%%KKpp @ T kk z    |*0 K%%KKpp @ T< kk  @   ~*0 K%%KKppH @ 0.k ? ̙3380___PPT10.p0 0  0(  x  c $w7 @f 7 x  c $x7wQ  7 H  0޽h ? 3380___PPT10.T{$  0 `$(  r  S 7M }  7 r  S L7; `P 7 H  0޽h ? 3ff~80___PPT10.Tpޤ0  0 p0(  x  c $r7M }  7 x  c $,; `P 7 H  0޽h ? 3ff~80___PPT10.Tpޤ0  0 P`0(  `x ` c $D7M }  7 x ` c $7; `P 7 H ` 0޽h ? 3ff~80___PPT10.Tpޤ:  0 `d:(  dr d S D7M }  7  d S @ ` 7 "h_H d 0޽h ? 3ff~80___PPT10.; F  0 pF(  px p c $XPM }  P  p c $ P` P "h_H p 0޽h ? 3ff~80___PPT10.; F  0 phF(  hx h c $PM }  P  h c $ P P "h_H h 0޽h ? 3ff~80___PPT10.; F  0 tF(  tx t c $T!PM }  P  t c $'P P "h_H t 0޽h ? 3ff~80___PPT10.; F  0 xF(  xx x c $.PM }  P  x c $2PP P "h_H x 0޽h ? 3ff~80___PPT10.;  0 E=(  v pz  # #""@J   <AP?pu z  V$579  @@``  <JP? u pz  V$560  @@``  <`SP?u z  V$488  @@``  <@]P?u z  gReal Estate Tax Revenue  @@``  <hNP?puu  X$1,625  @@``  <8oP? upu  X$1,544  @@``   <xP?u u  X$1,393  @@``   <ЀP?uu  ] Local Revenue  @@``   <lP?puu Y182,400  @@``   <{P? upu Y142,800  @@``   <dP?u u X97,800  @@``  <P?uu Z Population    @@``  <P?ppu ^ Newport News    @@``  <0P? ppu YHampton  @@``  <LP?p u \ Portsmouth    @@``  <LP?pu Z   @@```B  0o ?ppZB  s *1 ?uuZB  s *1 ?uuZB  s *1 ?u u `B  0o ?z z `B  0o ?pz ZB  s *1 ?pz ZB  s *1 ? p z ZB  s *1 ?pppz `B  0o ?pz   0P l6PER CAPITA KEY COMPARATIVE FINANCIAL INDICATORS (2004)7(27H  0޽h ? 3380___PPT10.!0Ӎ 0 WO(  v pz  # #""@J   <5?pu z  X$4,171  @@``  <>? u pz  X$1,982  @@``  <XG?u z  X$3,549  @@``  <O?u z  ] Unfunded Debt  @@``  <`B?puu  X$3,123  @@``  <a? upu  X$3,101  @@``   <j?u u  X$3,563  @@``   <ds?uu  oTotal Expenditures & Transfers    @@``   <}?puu X$2,807  @@``   <ln? upu X$2,815  @@``   <?u u X$2,850  @@``  <?uu `O&M Expenditures  @@``  <?ppu ^ Newport News    @@``  <Ī? ppu YHampton  @@``  <೰?p u \ Portsmouth    @@``  <༰?pu Z   @@```B  0o ?ppZB  s *1 ?uuZB  s *1 ?uuZB  s *1 ?u u `B  0o ?z z `B  0o ?pz ZB  s *1 ?pz ZB  s *1 ? p z ZB  s *1 ?pppz `B  0o ?pz   0 l6PER CAPITA KEY COMPARATIVE FINANCIAL INDICATORS (2004)7(27H  0޽h ? 3380___PPT10.!0Ӎ(  0 01((    0h`  ^*RETROACTIVE ANALYSIS ON BUDGET OF PROPOSAL+ 2+*  O` 1 #"2&@O `  <r4? `  V4.0%  @@``  <|4?    V4.1%  @@``  <H4?   7Weighted Inflationary Average for Resident Income Index88  @@``  <4 ?"`5 `  [ 9,135,380    @@``  <4 ?"` 5   u 3,419,655     @@``   <4 ?"` 5   3Real Estate Taxes Over Budget Using Resident Income44  @@``   <L4? ` V2.4%  @@``   <ȴ4?  V2.4%  @@``   <4?   }-Weighted Inflationary Average for CPI-U Index..  @@``   <\4?V`5  \ 84,483,870    @@``  <4? V5  \ 77,814,836    @@``  <@4? V 5  9Real Estate Taxes Based on Proposal Using Resident Income::  @@``  <4?w`V \ 93,619,250    @@``  <4? wV \ 81,234,490    @@``  <4? w V u%Net Approved for Real Estate Revenue&&  @@``  <D7?`w [ 1,080,300    @@``  <, 7? w Y704,914  @@``  <7?  w 2Less Real Estate Tax Revenue from New Construction33  @@``  <7?` ] 94,699,550     @@``  <7?  \ 81,939,404    @@``  <<(7?   t$Council Approved Real Estate Revenue%%  @@``  <87?O` V2006  @@``  <$B7? O V2005  @@``  <J7? O  Z   @@```B  0o ? O`OZB  s *1 ? `ZB  s *1 ? `ZB  s *1 ? w`wZB   s *1 ? V`V`B ! 01 ? 5 `5 `B " 0o ? `ZB # s *1 ? O 5 ZB $ s *1 ?O5 `B % 0o ?  ` ZB & s *1 ?  ` `B ' 0o ? 5  `B ( 0o ? O 5 `B ) 0o ?  `B * 01 ? 5  ZB + s *1 ?  `B , 01 ?5  ZB - s *1 ? `B . 0o ?`5 ` `B / 0o ?`O`5 `B 0 0o ?` `H  0޽h ? 3380___PPT10. ! $  0 @$(  r  S h~M }   r  S 8c;   H  0޽h ? 3ff~80___PPT10.!S$  0 l$(  lr l S ѰM }   r l S 4; `  H l 0޽h ? 3ff~80___PPT10.< 9$  0 @$(  r  S M }   r  S X; `  H  0޽h ? 3ff~80___PPT10.j `[0  0 |0(  |x | c $M }   x | c $; `  H | 0޽h ? 3ff~80___PPT10.< 9$  0 $(  r  S , M }   r  S  ; `P   H  0޽h ? 3ff~80___PPT10.Y `zr 0 bZ(  X  C XK   Z  S 8  )   ~Some revenues grow faster than inflation  and it is desirous for them to do so as their growth reduces pressure on the real estate tax rate& for example Sales, meals, lodging, and amusement taxes are often paid by non-residents and are discretionary spending decisions by residents Revenues from federal/state government Fees and/or charges for services The committee felt we should not artificially constrain these revenues from growing naturallyZ^P  F  ] H  0.k ? 3380___PPT10.i 0 0 >6(  X  C XK   6  S P  )   @We found no one ideal index to govern revenues or expenses The CPI-U represents a bundle of household purchasing decisions the relative weight of these goods differs from what buying decisions a government makes the index does not necessarily include such governmental functions as safety and education, water quality and crime Resident income growth represents the increase of Hampton residents wages, etc. this may better reflect the needs of government in some years as 90% of the school budget and 60% of the city budget are salaries of workers who desire wage increasest{P  r  P  H  0.k ? 3380___PPT10.j z-F 0 V(  X  C XK     S i  )   XInflationary growth would maintain the status quo. However, if residents want new or expanded services  or the federal and/or state governments mandate new expenses  the inflationary guideline may not be manageable. A clear and concise explanation for the factors which cause a budget outside of this parameter would enable the public and Council to have better dialogue about spending choices."$ H  0.k ? 3380___PPT10.j mQ* 0  :(  X  C XK     S {  )   <This is not intended to be a restrictive policy on par with the City s debt and fund balance financial policies. Those policies are used by the Council  and New York rating agencies  for determining the City s creditworthiness. The rating agencies very closely monitor compliance. Since it is possible that federal or state mandates, or the community s desires for new programs (such as new school construction as an example) would require increases beyond an inflationary factor, we recommend this be a guideline not a hard-fast policy. The key, again, would be in the explanation and community dialogue provided as outlined previously."$ H  0.k ? 3380___PPT10.j @;q 0 <40(  X  C XK   4  S   )   bUltimately, this would be an issue for Council to determine. However, it was our belief that it would be second-guessing prior Council s determinations as to the appropriate balance of available revenues and community needs. In past years, we were able to isolate the expenditures which grew faster than inflation to specific programs, mandates or needs (examples: teacher or public safety salary increases above inflation; new police officers & firefighters; new community centers & cultural institutions; etc.) A roll-back would also negatively effect the School System as nearly 65% of the residential real estate revenues accrue to their benefit via the local school funding formula.Pc$$c   H  0.k ? 3380___PPT10.j pY1 0 d\(  d  c $XK   P  s *`  )   Inflationary Growth Maintains the Status Quo Maintaining the status quo is adequate if the city budget is properly funded in the first place and/or AND/OR If that is what the Citizenry/Council desiresH  0.k ? 3380___PPT10./! 1/ 0 d\(  d  c $XK   P  s *  )   Inflationary Growth Maintains the Status Quo Maintaining the status quo is adequate if the city budget is properly funded in the first place and/or AND/OR If that is what the Citizenry/Council desiresH  0.k ? 3380___PPT10./! 1/` 0 p(  d  c $XK     s *  )   ZWhat if Status Quo Isn t Enough? If it is determined that the status quo is inadequate for whatever reason, then inflationary growth will be inadequate. Further, state or federal mandates may put undue pressure on the budget forcing spending in excess of inflationary revenue growth Finally, community needs or desires (ex. 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