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Joint Meeting of the Fairfax County Board of Supervisors and the Fairfax County School Board: Budget Discussion on FY 2014, FY 2015, FY 2016
The Fairfax County Board of Supervisors and School Board held a joint budget meeting on November 26, 2013, discussing the fiscal years 2014 to 2016 amidst ongoing economic uncertainty from the Great Recession. The county faces projected budget shortfalls due to limited revenue growth, rising expenditure requirements, and continued impacts from federal budget decisions, resulting in significant unmet needs across various services. A multi-year budget strategy is necessary to address the challenges ahead, which include funding for schools, public safety, and essential services while ensuring sustainable financial practices.
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Joint Meeting of the Fairfax County Board of Supervisors and the Fairfax County School Board: Budget Discussion on FY 2014, FY 2015, FY 2016
- 1. Joint Meeting ofthe Fairfax County Board of Supervisors and the Fairfax County School Board Budget Discussion on FY 2014, FY 2015, FY 2016 NOVEMBER 26, 2013
- 2. Overview Continuing multi-yearbudget process Monitoring FY 2014, building FY 2015 and projecting FY 2016 Still rebounding from Great Recession Economic uncertainty is contributing to restrained revenue growth Limited flexibility in FY 2014 Combined with increasing spending requirements, County is facing budget shortfalls in both FY 2015 and FY 2016 Many unmet needs and investment requirements 2
- 3. Economic Outlook ECONOMIC CONDITIONSAND IMPACT ON COUNTY REVENUES 3
- 4. The Economic Picture: Priorto the Federal Shutdown National Economy • Slow national economic recovery (3rd quarter growth of 2.8%) • Unemployment rate of 7.2% as of September 2013 • Through August , national housing market recorded the highest annual increase since 2006 at 12.8% • Inflation remains in check, up 1.2% as of September Local Economy • Northern Virginia had 13,400 more jobs in August compared to the prior year • County’s unemployment rate is 4.1% (August 2013) • Housing market improving. Prices in the metro area are up 6.3%. • Retail sales declining. Sales Tax receipts are down 2.1% in FY 2014 4
- 5. Unknowns Lack oflong-term deal on the federal budget creates uncertainty and hurts the County’s economy Congress funded govt. operations only until Jan 15 and suspended debt ceiling until Feb 7 Automatic sequester still in effect Income loss during the sequester and the shutdown furloughs suppressed business and consumer demand Ripple effects on County’s revenues Sales tax receipts in the County have decreased for 4 consecutive months through November BPOL taxes – usually move in the same direction as sales taxes Hotel Taxes - occupancy and room rates from July – September fell 8% from the prior year Most importantly, has stagnated investment and expansion 5
- 6. General Fund Revenue AnnualPercent Change – General Fund Revenue FY 2000 – FY 2016 10% 7.20% 5% 3.49% 1.82% 1.09% 2.26% 1.77% 2.89% 2.91% 2015 2016 0.57% 0% -0.88% -5% 20002007 Average 2008 2009 2010 2011 2012 2013 2014 Projections – Fall 2013 Fiscal Year 6
- 7. Total Real EstateValues Expected to Rise 4.0% in FY 2015 and 3.8% in FY 2016 Residential Property Values Projected to rise 4.5% in FY 2015 and increase 4.0% in FY 2016 Non-Residential Property Values Projected to decline o.3% in FY 2015 and remain level in FY 2016 Sales of homes rising 12.3% during Vacancy rates as of mid-year 2013: the first 10 months of 2013 14.4%, 16.9% with sublets Average days on the market in Businesses are reducing the October was just 35 days, a drop of 10 days from the prior year Average price of homes sold up 8.5% through October amount of space they rent by consolidating space, releasing empty space previously held for future expansion Federal Mandate to “Freeze the Footprint” 7
- 8. Lingering Effects ofthe Great Recession Real Estate Assessed Values (in millions) Fiscal Year Residential Non-residential Total 2008 176,498 (peak) 52,001 228,499 2009 171,891 57,779 (peak) 229,670 2015 Forecast 161,663 53,614 215,277 The FY 2015 forecast indicates that: Residential values will still be 8.4% below their 2008 peak values A revenue loss of $161 million at the current tax rate Non-residential values will still be 7.2% below their 2009 peak values A revenue loss of $45 million at the current tax rate 8
- 9. Annual Growth in MajorRevenue Categories (Dollars in millions) FY 2012 FY 2013 FY 2014* FY 2015* FY 2016* Real Estate - Current Percent Change $2,039.0 1.5% $2,114.4 3.7% $2,207.6 4.4% $2,293.0 3.9% $2,379.0 3.8% Personal Property - Current Percent Change $514.5 2.6% $555.3 7.9% $553.6 (0.3%) $564.6 2.0% $575.9 2.0% Sales Tax Percent Change $162.8 5.2% $166.9 2.5% $162.4 (2.7)% $166.5 2.5% $170.6 2.5% BPOL Percent Change $149.7 3.2% $156.2 4.3% $153.0 (2.0)% $156.1 2.0% $159.2 2.0% Recordation & Deeds Percent Change $31.0 17.4% $33.7 8.5% $29.9 (11.3)% $29.9 0.0% $30.2 1.0% Transient Occupancy Tax Percent Change $19.6 6.7% $19.0 (3.0)% $17.1 (10.0)% $17.4 2.0% $17.9 3.0% Total General Fund 1.8% 3.5% 2.3% 2.9% 2.9% *Projections. FY 2014 represents revised estimates as of fall 2013 9
- 10. Budget Forecast LOOKING BACKOVER PAST 5 YEARS, UPDATE ON CURRENT YEAR AND PROJECTIONS FOR FY 2015-16 10
- 11. Restrained Growth sinceFY 2009 Since FY 2009, General Fund disbursements have increased only 7.0%, or about 1.4% annually Agency budgets have been cut over $170 million, not through cost avoidance Pay increases were frozen in FY 2010, FY 2011, FY 2014 and limited in FY 2012 Over 600 positions have been eliminated Agencies are managing Personnel budgets with assumed vacancy rates of over 8% Established a baseline level of core services in FY 2014 11
- 12. Where We WereOne Year Ago Board went to a multi-year budget approach Projecting shortfalls of $169 million and $274 million for FY 2014 and FY 2015, respectively Structural deficit of over $60 million based on one-time funding used to balance FY 2013 budget Board made difficult decisions to balance FY 2014 Eliminating employee pay increases Cutting agency budgets by over $13 million Reducing reliance on one-time balances Limiting growth in County transfer to Schools Limiting investments in capital renewal and IT Continuing commitment to appropriately fund reserves 12
- 13. FY 2014 Update Use of $15 million balance remaining at Carryover will be necessary to offset County requirements at Third Quarter, including: Reduced County revenues (Sales Tax, BPOL, Transient Occupancy Tax) Increased Workers Compensation liability Still maintain Sequestration and Litigation Reserves Impact of federal shutdown yet unknown 13
- 14. FY 2015-16 DisbursementRequirements Disbursements are projected to increase 3.93% for FY 2015 and 3.33% for FY 2016 based on: Increases in the Transfer for School Operating of 2% annually Approximately $25 million each year for Employee pay increases and additional funding for Benefits requirements, including health insurance and retirement Debt Service and Capital requirements Opening of new facilities, including the Wolftrap Fire Station, Providence Community Center, Mid-County Human Services Center, and Public Safety Headquarters Contract rate increases 14
- 15. Projected Disbursement Increases (OverPrior Year - in millions) FY 2015 FY 2016 $34.34 $35.03 $5.00 $5.00 Employee Pay Increases $25.37 $26.00 Retirement, Health Insurance, OPEB, Workers Compensation, Other $11.16 $16.45 County Debt Service $15.00 $5.00 Capital Renewal $16.50 $0.00 Public Safety $4.35 $9.80 Human Services $7.25 $6.20 New Facilities $7.46 $5.78 $12.93 $11.94 $3.16 $4.28 $142.52 $125.48 Schools Operating Transfer (2% Increase) Schools Debt Service • Includes $1.5 million for Turf Fields • Includes Wolftrap Fire Station, Providence Community Center, Mid-County Human Services Center, Public Safety Headquarters County Operations Revenue Stabilization/Managed Reserve TOTAL 15
- 16. FY 2015-16 ProjectedBudget Shortfalls FY 2015 Increased Revenue Required Disbursements/Reserves FY 2016 $120.6 $107.2 ($142.5) ($125.5) One-Time Balances used in FY 2014 ($17.5) -- Structural Imbalance from FY 2015 -- ($39.4) ($39.4) ($57.7) Projected Shortfall* * If the FY 2015 shortfall is solved with recurring funding, the FY 2016 shortfall will be reduced to $18.3 million. 16
- 17. Challenges Ahead Limitedrevenue growth caused by economic uncertainty resulting from government shutdown, sequestration and on-going budget and debt ceiling debates Unmet needs across County spectrum, including: Schools enrollment growth Capital investment for both County & Schools Public Safety Staffing Human Services (Early Childhood Development) Pay increases for both County and Schools Environmental, Stormwater Requirements Information Technology investments 17
- 18. Summary Must continuemulti-year approach Unmet needs must be discussed Additions to the budget must be sustainable Federal government actions/inactions have a major impact on our economy Economic development is critical Investments must be made 18
Editor's Notes
- #6 Sales taxes have decreased for 4 consecutive months (-0.7% in August, -0.5% in September, -6.6% in October and -0.5% November). YTD for FY 2014, sales tax is down 2.1% . Assumption is that December receipts for October retail sales will be down too. Budget estimate had assumed 2.7% growth. No current information on BPOL taxes as businesses don’t file until March. However, it could be expected that businesses’ gross receipts would be lower for the 2013 calendar year, due to the sequester and the federal government shutdown. Economic uncertainty also suppresses business and consumer demand for new vehicles, so personal property taxes could be affected. Transient Occupancy Taxes – lower travel-related spending due to the sequester and the shutdown puts downward pressure on hotel occupancy and room rates. Data from Smith Travel research shows hotel occupancy and room rates in Fairfax County down 8% for the period July – September. Other Categories: Cigarette Taxes are down 6%; Recordation Taxes (refinancings) down 5.7%.
- #9 County Property Values have not recovered to their pre-recession peaks. Values include equalization and growth. Values with Growth have increase every year since FY 2012The decreases in the property values were so steep that even though values are now growing, they are not growing enough to make up for the declines, much less at a rate to support significant increases . This is the New Normal Tax RatesFY 2008 $0.89FY 2009 $0.92FY 2010 $1.04FY 2011 $1.09FY 2012 $1.07FY 2013 $1.075FY 2014 $1.085The revenue loss at the residential peak tax rate (FY08) is $135 mThe revenue loss at the nonres peak tax rate (FY09) is $38 million
- #12 Total General Fund disbursements decrease in both FY 2010 and FY 2011Budgeted turnover (General Fund) rate was 3.4% in FY 2007Budgeted turnover (General Fund) peaked at 8.9% in FY 2011 – has held at 8.1% in FY 2013 and FY 2014Some agencies have double-digit budgeted turnover including: Land Development (17.1%), Cable (14.4%), Finance (11.8%), Sheriff (11.4%) Commonwealth’s Attorney (11.4%), Purchasing (11.2%), Parks (10.8%), Family Services (10.4%), Tax Admin (10.2%), Neighborhood & Community Services (10.1%), Circuit Court (10.0%)Budgeted turnover in all funds averages 7.7%, with highest in Elderly Housing (9.9%) and CSB (9.1%). Actual position turnover (General Fund) has averaged 10.2% over past 5 years
- #13 Schools % is at 52.7% in FY 2014One-Time balances used in FY 2013: $61.1 million FY 2014: $17.5 million FY 2015 (anticipated): $0In FY 2014:funded over $12 million for the full-year impact of FY 2013 compensation increasesSchool operating increase was 2%Cut agency budgets by over $13 million
- #14 Sequestration Reserve $7.7 millionLitigation Reserve - $30 million
- #15 Total disbursement increases are $141.09 mil in FY 2015, $124.27 mil in FY 2016Growth rates:County: 6.00% FY 2015 4.68% FY 2016Schools: 2.08% FY 2015 2.08% FY 2016Includes 2% increase in Operating Transfer and $5 million each year for School Debt Service