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FY 2009 Second Quarter Update and FY 2010 & FY 2011 Forecast

FY 2009 Second Quarter Update and FY 2010 & FY 2011 Forecast. February 10, 2009. The Update. Uncertain Economic Climate State Budget – No Good News FY 2009 2 nd QTR Update FY 2010 & FY 2011 Forecast Budget Process & Calendar Economic Development Local stimulus

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FY 2009 Second Quarter Update and FY 2010 & FY 2011 Forecast

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  1. FY 2009 Second Quarter Update andFY 2010 & FY 2011 Forecast February 10, 2009

  2. The Update • 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

  3. An Uncertain Economic Outlook • National economy still failing • Rapid financial sector collapse • Restricted credit – no lending • Property and auto sales dropping • Unemployment at 10% soon • CA Retail Vacancies • 2001 = 6% 2009 = 13%

  4. An Uncertain Economic Outlook • 2-3 year recovery? • Perhaps a different kind of recovery? V versus L shaped path • Personal income for goods down • Retail industry shrinking • (thousands of shopping malls to close) • Property tax growth slowed

  5. Federal Stimulus Hopes • The House version includes… • $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

  6. 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

  7. 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 • DMV fees & reduced City revenue • Frozen CIP & transportation funding • Health & mental health grant reimbursements We are managing State cuts through immediate expenditure reductions.

  8. FY09 2nd QTR Results Worsen Overall revenue loss of - $2.4M • Property Transfer Tax down 45% (-$3.0M) • Sales Tax down 2.6% (-$500,000) • Parking Meter revenue down 7% (-$400K) • Property Tax growth slowed • Permit Activity down

  9. GF Revenue Forecast • Declines: • Property Transfer Tax • Sales Taxes • Vehicle In-lieu Tax • Parking Fines • Increases: • Transient Occupancy Tax • Ambulance Fees • Other Revenue • And property tax is still growing…

  10. Property Transfer Tax Decline • Real estate market collapsed • 45% Revenue DECLINE

  11. Property Sales Tax Decline Changes since last year (FY 2008): • Total Property Sales down 45% • Commercial Property Sales down 77% • Residential Property Sales down 31%

  12. Decline in Assessed Value Growth

  13. Immediate Actions • Hiring Freeze • Deferring capital projects • (pending State $) • Limit overtime spending • Limiting non-essential expenses • Passage of Measure GG helps now • fully fund Fire Department staffing • prevent fire station closures

  14. How is FY09 2nd QTR spending? • Hiring freeze = salary savings • Savings help offset revenue losses General Fund - $2.37M revenue +$2.28M savings (-$90K gap) • Next 6 months uncertain • State budget? • Federal stimulus? • No budget increases

  15. FY 2010 & FY 2011 Outlook • Revenues down • State uncertain • Economy uncertain • Not a time for growth • Available capital funding reduced • Reductions needed for all funds

  16. Policy Framework • 1-time revenue for 1-time expenses • Long-term fiscal health • 2-year budget • 5-year planning (focus on year 3 impacts) • Prudent Reserve • Control labor costs – minimize layoffs • Manage unfunded liabilities • No new programs without new revenues or expenditure cuts • Balance grant and enterprise funds

  17. 2-YR Budget…3-YR ProblemPERS rate spike in FY 2012 • Need GF reductions over 3 years of 6% • Year 3 reflects PERS rate spike • Assumes CIP funding reductions

  18. Other Revenue Funds Face Deficits • Public and Mental Health Funds • Expenditure cuts • Streetlight Assessment Fund • Possible General Fund subsidy increase • Refuse Fund • Rate increase in FY 2010: 15-30% • Clean Storm Fund • Ballot in FY 2010 • Permit Service Center Fund • Expenditure cuts

  19. What are the Next Steps? • Plan for long term • Control costs • Continued budget review • Discuss with labor unions & employees • Council workshops focus on… • key program areas • performance outcomes • Prepare for Federal stimulus package

  20. Goals & Values • Maintain City’s long-term fiscal health • Provide quality services to residents • Recognize the exceptional work our employees do

  21. Budget Calendar & Workshops

  22. Program Focus: Economic Development • Regional economy is struggling • What are Berkeley impacts? • Business downturn • Job losses • What can we do locally? • Council comments on direction

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