1) Federal sequestration cuts will reduce funding for many of San Antonio's federally-funded city grant programs by 5.1-8.2%, potentially impacting $7-11 million of the city's FY2014 budget. 2) Air traffic control towers at San Antonio airports face closures or reduced hours. 3) Build America Bond subsidies will be cut by 8.7%, costing San Antonio $166,000 in FY2013. Changes to municipal bond tax exemption could also increase city borrowing costs.

1. Impact of Federal
Sequestration on City of
San Antonio Budget
City Council “B”
Session
March 6, 2013
Presented by
Maria Villagómez,
Budget Director

2. Agenda
1. Sequestration Overview
2. Effect of Sequestration on City Of
San Antonio
– Impact on Federally-Funded City
Grant Programs
– Impact on Airport Operations
– Impact on Build America Bonds (BABs)
3. Potential Federal Tax Legislation
changes impacting Municipal Bonds
2

3. Sequestration Overview
• Sequestration is a series of automatic cuts
that reduces the budgets of most federal
agencies and programs
• Budget Control Act of 2011 mandated
sequestration effective January 2, 2013 if
Congress could not reduce federal deficit by
$1.2 Trillion over 10 years
3

4. Sequestration Overview
• January 2, 2013: American
Taxpayer Relief Act of 2012 -
Congress authorized two-
month delay of Sequestration
deadline
• March 1, 2013: Sequestration
signed into law
– $85 Billion annually in
Federal cuts over 10 years
4

5. March 1st Sequestration Cuts
$85 Billion annually in Federal cuts over 10 years
$90.0
$42.5 Billion: Discretionary
$80.0 Non-Defense Spending
$70.0  $ 26.4 Billion in cuts to
Domestic Programs through
$60.0
which local governments
$50.0 receive much of their federal
$40.0
funding including San Antonio
$30.0
$20.0
$42.5 Billion: Discretionary
$10.0 Defense Funding
$0.0 5
1

6. March 1st Sequestration Cuts
• City of San Antonio could be negatively
impacted through
–loss of funding in Federal grants
–Operational impact to International
and Stinson Airports
–Less Federal subsidy for Build
America Bonds (BABs)
6

7. Impact to City of San Antonio Grants
• City currently receives approximately $150
Million in Federal Grants annually
• Of the $150 Million, 16 grants totaling $140
Million could be affected by sequestration
• Majority of impact would not be realized until
the City’s FY 2014 Budget
• City funding could be reduced:
– $1.7 Million in FY 2013 and
– $7 to $11 Million in FY 2014
7

8. Impact to City of San Antonio Grants
• Most discretionary domestic (non-defense)
programs would face a 5.1% to 8.2% reduction
• No available guidance from federal government on
what specific discretionary programs would be
reduced by 5.1%
• Amounts presented today are projections based on
City’s current allocation and known percentage
reductions
• Final amounts determined by Federal and/or State
Agencies and may result in higher or lower
amounts
8

9. Impact to City of San Antonio Grants
City Grant Program Summary FY 2013 FY 2014
Estimated Estimated
($ in Millions) Reduction Reduction
Human Services Programs $1.7 $5.7 to $8.8
Health Services Programs $0 $0.5 to $0.9
Neighborhood Services
$0 $0.8 to $1.3
Programs
Public Safety Programs $0 $0.2 to $0.3
Total Estimated Reduction $1.7 $7 to $11
9

10. San Antonio FY 2013 City Budget Impact
• Human Services Programs – $1.7 Million
Projected
Key Program Funding Level FY 2013 FY 2013
($ in Millions) Budget Reduction
Amount
Child Care & Development Block
$46.05 $1.6
Grant
Community Services Development
$1.86 $0.1
Block Grant (CSBG)
10

11. San Antonio FY 2014 City Budget Impact
• Human Services Programs - $5.7 to $8.8 Million
Key Program Funding Level Projected
FY 2013
FY 2014 Reduction
($ in Millions) Budget
Amount
Head Start *
$56.89 $2.90 to $4.44
2014 school year begins July 1, 2013
Child Care & Development Block
$46.05 $2.35 to $3.78
Grant
Community Services Development
$1.86 $0.09 to $0.14
Block Grant (CSBG)
11

12. San Antonio FY 2014 City Budget Impact
• Human Services Programs - $5.7 to $8.8 Million
Projected
Key Program Funding Level FY 2013 FY 2014
($ in Millions) Budget Reduction
Amount
Comprehensive Nutrition &
$2.04 $0.10 to $0.16
Transportation Programs for Seniors
Emergency Solutions Grant (ESG) $1.15 $0.06 to $0.09
Housing Opportunities for Persons
$1.19 $0.06 to $0.10
with AIDS (HOPWA)
12

13. San Antonio FY 2014 City Budget Impact
• Health Services Programs - $0.5 to $0.9 Million
Projected
Key Program Funding Level FY 2013 FY 2014
($ in Millions) Budget Reduction
Amount
Women, Infants and Children’s
$6.38 $0.33 to $0.52
(WIC) Supplemental Nutrition
Health Grants:
• Immunization Program
• Healthy Start Initiative $3.98 $0.20 to $0.33
• TB Prevention & Control
• STD Program
13

14. San Antonio FY 2014 City Budget Impact
• Neighborhood Services Programs - $0.8 to $1.3
Million
Projected
Key Program Funding Level FY 2013 FY 2014
($ in Millions) Budget Reduction
Amount
Community Development
$11.56 $0.59 to $0.95
Block Grant (CDBG)
HOME Investment Partnership
$3.87 $0.20 to $0.32
Grant (HOME)
14

15. San Antonio FY 2014 City Budget Impact
• Public Safety Programs - $0.2 to $0.3 Million
Key Program Funding Projected
Level FY 2013 FY 2014
Budget Reduction
($ in Millions) Amount
Homeland Security State and
$1.82 $0.09 to $0.15
Local Programs
Department of Justice
$0.48 $0.02 to $0.04
Enforcement Grants
Public Health Emergency
$1.71 $0.09 to $0.14
Preparedness
15

16. Impact on San Antonio Airports
• Federal Aviation Administration
(FAA) plans to reduce $600 million
through September 2013
• Cuts could lead to full-time and
nighttime closures of traffic
control towers and furloughs
of FAA staff including
security screeners and
custom officers
16

17. Stinson Municipal Airport
• Sequestration would cut funding for air traffic control
contract at Stinson Municipal Airport and require full
utilization of Universal Communication System
(UNICOM)
• Today, air traffic control tower is operated from 7 A.M to
10 P.M. daily by federal contract. During non-staffed
hours, pilots use UNICOM system to monitor and make
announcements at airport (i.e. landing on certain
runway)
• Reduction could potentially be implemented April 1,
2013
17

18. Build America Bonds
• Effective March 1, 2013 subsidy payments to
issuers of Build America Bonds would be
reduced by 8.7%
• Potential impact to San Antonio of $166,000 in
less federal subsidy in FY 2013
• FY 2013 Expected Subsidy before cut: $1.9
Million
• Sequestration reduction rate applies to current
FY 2013 only
18

19. Tax Exempt Status of Municipal Bonds
• Not part of Sequestration, upcoming deficit
reduction and tax reform discussions may
impact tax exempt status of Municipal Bonds
Interest
• Municipal bond interest
currently exempt from federal
taxation
• Reduction or elimination of tax
exemption caps would result in
higher interest rates and
borrowing costs to City
19

20. Summary
• City of San Antonio could be negatively
impact through
– Less funding in Federal Grants
– Operational Impact at International and
Stinson Airports
– Less Federal Subsidy for Build America
Bonds (BABs)
20

21. Impact of Federal
Sequestration on City of San
Antonio Budget
Presented by
Maria Villagómez,
Budget Director
City Council “B” Session
March 6, 2013