FIVE YEAR FORECAST FY 2014-15 THROUGH FY 2018-19

NOVEMBER 19, 2013

Catheryn Whitesell, Director Budget and Management Services Farrell Hanzaker, Chief Financial Officer Virginia Beach City Public Schools

Overall Economic Outlook

2

Percent Change in Real GDP (Gross Domestic Product)

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

2004

q220

04q3

2004

q420

05q1

2005

q220

05q3

2005

q420

06q1

2006

q220

06q3

2006

q420

07q1

2007

q220

07q3

2007

q420

08q1

2008

q220

08q3

2008

q420

09q1

2009

q220

09q3

2009

q420

10q1

2010

q220

10q3

2010

q420

11q1

2011

q220

11q3

2011

q420

12q1

2012

q220

12q3

2012

q420

13q1

2013

q220

1420

1520

1620

1720

1820

19

Year-Quarter

Source: US Bureau of Economic Analysis (Projection – Congressional Budget Office) 3

Hampton Roads GMA vs. US GDP

4

Hampton Roads Nominal GMP Ranking

Year

Gross Regional Product (GMP)

in Billions

Rank out of 281 MSAs

2001 $52,342 39

2002 $55,721 38

2003 $59,577 37

2004 $63,305 39

2005 $67,927 38

2006 $72,294 39

2007 $75,994 39

2008 $77,503 40

2009 $78,464 38

2010 $80,031 39

2011 $81,642 39

2012 $84,836 39 Source: Bureau of Economic Analysis, HRPDC 5

Sequestration Impact

6

Defense Spending in Hampton Roads (includes federal civilian and military personnel and procurement)

$10.2

$12.1 $13.1

$13.9 $14.9

$15.7 $16.5

$17.4

$19.1 $19.8

$20.7 $21.6 $22.0

$21.1

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Calendar Year

Source: US Department of Defense, Old Dominion University, 2013 State of the Region Report

In B

illio

ns

Forecast Estimate

7

Consumer Confidence

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Source: The Conference Board

8

Projected

Consumer Price Index (CPI)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Calendar Year

All Items Core CPISource: Congressional Budget Office

*Note: Core Inflation does not include food or energy costs

*

9

Average Monthly Unemployment Rate Through August*

5.3 5.7

7.2 7.5

6.1

7.0 6.6

5.5

7.5

0.0

2.0

4.0

6.0

8.0

10.0

VirginiaBeach

Chesapeake Norfolk Portsmouth Suffolk Hampton NewportNews

State ofVirginia

UnitedStates

Perc

ent

* Note: The US Unemployment Rate is through October Source: Bureau of Labor Statistics 10

Change In Virginia Beach Employment by Industry

-1,000 -500 0 500 1,000 1,500 2,000

ConstructionManufacturingWholesale TradeRetail TradeTransportation & WarehousingInformationFinance & InsuranceReal EstateProfessional, Scientific and TechnicalManagementAdministative and Support & Waste MgmtEducational ServicesHealth Care & Social AssistanceArts & Entertain,entHospitalityOther PrivateFederal GovernmentState GovernmentLocal Government (City + Schools)

2013 to 2012 First Quarter Comparison

Source: Virginia Employment Commission 11

Median Household Income – Virginia Beach

$58,545 $61,333 $61,462

$65,776

$59,298

$64,212 $64,614 $61,626

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

2005 2006 2007 2008 2009 2010 2011 2012Calendar Year

Virginia Beach United States State of Virginia Virginia Beach - MSA

Source: US Census Bureau, American Community Survey 12

Revenues 13

Average Change in Assessments and Tax Rate

$0.977

$1.032 $1.090

$1.140 $1.188

$1.220

$1.196

$1.024 $0.990

$0.890 $0.950

$0.930

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Residential Commercial Tax Rate

Ass

essm

ent C

hang

e

Fiscal Years 14

Real Estate Tax Revenue

$506.3 $499.3

$473.6

$460.3

$474.3

$462.9 $470.7

$479.9 $489.3

$499.0 $508.9

$400.0

$430.0

$460.0

$490.0

$520.0

$550.0

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Mill

ions

15

Each penny on the tax rate in 2015 will generate $4.87 million

Personal Property Tax Revenue

*Note: Machinery & Tools tax effectively eliminated by City Council in FY 2013 by setting the rate at one-millionth of a cent per $100 of assessed value.

Vehi

cles

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

Fiscal Year

Personal Property Personal Property Paid By the CommonwealthPersonal Property Vehicles Public Service Personal PropertyBusiness Equipment Machinery & Tools*

16

General Sales/State Share Sales Tax

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Mill

ions

General Sales Tax State Share Sales Tax (Schools)

17

Business, Professional, Occupational License (BPOL)

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Mill

ions

18

Hotel and Restaurant Tax Revenue

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

Fiscal Year Hotel Restaurant

19

Charges for Services

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Mill

ions

City Schools20

Fund Balance

$22.2 $17.9

$22.2 $17.6

$3.8 $6.2 $5.8 $5.5 $4.7 $4.4

$8.5

$33.3

$34.7

$35.3

$24.4 $24.7

$21.5 $14.5

$9.4 $7.4

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Mill

ions

City Schools

Forecast Period

21

Total Revenue

Adopted FY 2014

Forecast FY 2015

Forecast FY 2016

Forecast FY 2017

Forecast FY 2018

Forecast FY 2019

City $ 940.9 $ 950.5 $ 964.6 $ 980.1 $ 999.5 $ 1,021.7

Schools $ 839.5 $ 850.8 $ 860.1 $ 866.7 $ 876.0 $ 888.3

Total Revenue $1,780.4 $1,801.3 $ 1,824.7 $ 1,846.8 $ 1,875.5 $ 1,910.0

22

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

Fiscal Year

City Schools

Expenditures 23

Salaries

$321.5 $313.3 $320.8 $323.3 $336.2 $341.0 $345.6 $350.6 $351.2 $351.2

$480.7 $470.0 $493.3 $468.7 $467.1 $473.0 $479.0 $485.0 $485.0 $485.0

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

$900.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

Fiscal Year City Schools

24

Fringe Benefits

$108.9 $109.3 $112.6 $129.4 $127.9 $136.7 $138.1 $146.3 $150.2 $159.1

$158.5 $134.5 $148.4

$174.6 $171.4 $182.7 $183.7

$193.9 $198.3 $203.0

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

Fiscal Year

City Schools 25

Operating Costs

$302.7 $304.1 $325.2 $311.9 $315.0 $322.2 $327.7 $331.9 $337.1 $343.6

$194.4 $179.9 $166.6 $159.5 $157.8 $152.6 $154.5 $156.3 $158.2 $160.1

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

City Schools

26

Pay-As-You-Go

$54.9

$33.7 $41.3

$45.7 $51.6

$47.9 $49.1 $50.7 $49.3 $48.2

$0.6

$1.0 $1.0 $1.0 $1.0

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

Fiscal Year City Schools

27

Debt Service

$102.2 $103.3 $103.8 $111.0 $110.2 $120.6 $127.5 $136.4 $142.0 $145.0

$44.2 $43.9 $44.8 $44.7 $43.1

$44.2 $45.5

$46.8 $46.7 $45.6

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

Fiscal Year

City Schools 28

Total City and School Forecast

$1,703.8

$1,768.8 $1,801.3

$1,846.8

$1,910.0 $1,828.1

$1,906.2 $1,949.0

$1,500.0

$1,600.0

$1,700.0

$1,800.0

$1,900.0

$2,000.0

$2,100.0

$2,200.0

$2,300.0

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

Revenue Expenditures

Mill

ions

Deficit in 2015 is projected to be $26.8 million. Nearly $20 million less than last year’s deficit.

29

Next Steps

Present a balanced Budget and CIP in March

Work with the General Assembly to: strengthen sales tax in terms of capturing internet sales and

service related sales Understand the need to replace any local revenues eliminated by

State actions. Efforts to eliminate BPOL could cost us $43 million Recognize as a State obligation part of the unfunded liability for

the teacher’s pension rather than assigning 100% of it to localities

Work regionally to diversify our economy, build on current assets at EVMS, the ODU Modeling and Simulation Center and our technical and certificate programs.

30