11

Montgomery County, Maryland

ECONOMIC INDICATORS Montgomery County Council

Department of Finance

April 10, 2015

National Economic Indicators

3

BEA reported that real GDP increased 2.2 percent during the fourth quarter

of last year. Over 50 economists surveyed by The Wall Street Journal

expect GDP to increase approximately 2.8 percent on average

in calendar year (CY) 2015.

-2.7%

2.0%

-1.9%

-8.2%

-5.4%

-0.5%

1.3%

3.9%

1.7%

3.9%

2.7% 2.5%

-1.5%

2.9%

0.8%

4.6%

2.3%1.6%

2.5%

0.1%

2.7%

1.8%

4.5%

3.5%

-2.1%

4.6%5.0%

2.2% 2.3%3.0% 3.0% 2.9%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2008

:I

2008

:II

2008

:III

2008

:IV

2009

:I

2009

:II

2009

:III

2009

:IV

2010

:I

2010

:II

2010

:III

2010

:IV

2011

:I

2011

:II

2011

:III

2011

:IV

2012

:I

2012

:II

2012

:III

2012

:IV

2013

:I

2013

:II

2013

:III

2013

:IV

2014

:I

2014

:II

2014

:III

2014

:IV

2015

:I (

est.

)

2015

:II

(est

.)

2015

:III

(es

t.)

2015

:IV

(es

t.)

Per

cen

t C

han

ge

Year:Quarter

Percent Change in Real GDP

SOURCE: Bureau of Economic Analysis, U.S. Department of Commerce. Hatched bars from Wall Street Journal survey

conducted March 2015.

NOTE: Percent changes are at annual rates.

4

On March 18th, the Federal Reserve (FOMC) decided to keep its target range for

the federal funds rate at 0.00 to 0.25 percent. The futures market anticipates no

changes to the target range through the remainder of this fiscal year

but expects two rate increases of 25 basis points each during FY2016.

0.00%0.25%0.50%0.75%1.00%1.25%1.50%1.75%2.00%2.25%2.50%2.75%3.00%3.25%3.50%3.75%4.00%

Jan-0

8M

ar-

08

May

-08

Jul-

08

Sep-0

8N

ov-0

8Ja

n-0

9M

ar-

09

May

-09

Jul-

09

Sep-0

9N

ov-0

9Ja

n-1

0M

ar-

10

May

-10

Jul-

10

Sep-1

0N

ov-1

0Ja

n-1

1M

ar-

11

May

-11

Jul-

11

Sep-1

1N

ov-1

1Ja

n-1

2M

ar-

12

May

-12

Jul-

12

Sep-1

2N

ov-1

2Ja

n-1

3M

ar-

13

May

-13

Jul-

13

Sep-1

3N

ov-1

3Ja

n-1

4M

ar-

14

May

-14

Jul-

14

Sep-1

4N

ov-1

4Ja

n-1

5M

ar-

15

May

-15

Jul-

15

Sep-1

5N

ov-1

5Ja

n-1

6M

ar-

16

May

-16

Fed

Fu

nd

s R

ate

Date

Effective Federal Funds Rate (solid bars) and

Federal Funds Futures (hatched bars)

SOURCES: Federal Reserve Bank of Saint Louis (solid bars) and the

Chicago Board of Trade (hatched bars) as of March 20, 2015

5

The stock market experienced a modest performance in CY2014

compared to CY2003. Four major indices increased between 3.53 percent

(Russell 2000) and 13.40 percent (NASDAQ) over the previous year.

3.15%

-0.61%

16.29%

6.43%

-33.84%

18.82%

11.02%5.53% 7.26%

26.50%

7.52%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Pct.

Ch

g.

Calendar Year

Annual Percent Change in DJIA

8.99% 3.00%13.62%

3.53%

-38.49%

23.45%

12.78%

-0.0032%

13.41%

29.60%

11.39%

-50.00%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Pct.

Ch

g.

Calendar Year

Annual Percent Change in S&P 500

8.59% 1.37% 9.52% 9.81%

-40.54%

43.89%

16.91%

-1.80%

15.91%

38.32%

13.40%

-50.00%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Pct.

Ch

g.

Calendar Year

Annual Percent Change in NASDAQ

17.00%3.32%

17.00%

-2.75%

-34.80%

25.22% 25.31%

-5.45%

14.63%

37.00%

3.53%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Pct.

Ch

g.

Calendar Year

Annual Percent Change in Russell 2000

Regional Economic Indicators

7

Real gross regional product decreased 0.82 percent in CY2013

according to the Bureau of Economic Analysis.CRA estimates growth in real GRP in the Washington area to increase 1.40

percent this year and 3.20 percent by CY2019.

2.12% 2.23%

-0.01%

3.14%

1.69%

0.60%

-0.82%

0.70%

1.40%1.90%

2.40%2.90%

3.20%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2007

2008

2009

2010

2011

2012

2013

2014

est

.

2015

est

.

2016

est

.

2017

est

.

2018

est

.

2019

est

.

Perc

en

t C

han

ge

Caledar Year

Percent Change in Real Gross Regional Product

(Washington MSA)

SOURCES: Bureau of Economic Analysis, U.S. Department of CommerceCenter for Regional Analysis, George Mason University (hatched columns)

8

Payroll employment in the Washington area stood at

3.112 million in CY2014.Employment increased by 18,900 (↑0.6%) from CY2013 to CY2014 to reach

3.112 million and was at an all time high.

2,935.3

2,985.43,008.8 3,021.7

2,970.7 2,981.7

3,025.1

3,064.73,092.7

3,111.6

2,800

2,850

2,900

2,950

3,000

3,050

3,100

3,150

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Non

farm

Pay

roll

Empl

oym

ent

(tho

usan

ds)

Calendar Year

Washington Metropolitan Area Nonfarm Payroll Employment (thousands)

SOURCE: Bureau of Labor Statistics, U.S. Department of Labor

Real gross regional product for the Maryland suburban division of the

Washington MSA decreased 0.30 percent in CY2013 according to CRA.

Growth in real GRP in the division is expected to increase

1.40 percent this year and 3.50 percent by CY2019.

3.60%

1.40%

-1.20%

3.30%

1.25%0.71%

-0.30%

0.60%

1.40%1.90%

2.60%

3.40% 3.50%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

2007

2008

2009

2010

2011

2012

2013

2014

est

.

2015

est

.

2016

est

.

2017

est

.

2018

est

.

2019

est

.

Perc

ent C

han

ge

Calendar Year

Percent Change in Real Gross Regional Product (Suburban Maryland)

SOURCE: Center for Regional Analysis, George Mason University

9

10

Payroll employment in the Silver Spring-Rockville-Frederick

metropolitan division was 575,500 in CY2014.Employment increased 4,400 (↑0.8%) from CY2013 to CY2014 and reached a

level that was last experienced in CY2006 and CY2007.

568.2

575.2 575.3572.7

558.8 557.7

562.7566.3

571.1

575.5

545.0

550.0

555.0

560.0

565.0

570.0

575.0

580.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Non

farm

Pay

roll

Empl

oym

ent

(tho

usan

ds)

Calendar Year

Silver Spring-Rockville-Frederick Nonfarm Payroll Employment (thousands)

SOURCE: Bureau of Labor Statistics, U.S. Department of Labor

11

The percent change in the consumer price index (CPI) remained

virtually unchanged in CY2014 compared to CY2013.Overall for the Washington-Baltimore consolidated region the CPI increased 1.54 percent in

CY2014. For the calendar year 2013, the index increased 1.52 percent compared to 3.34

percent in CY2011 and 2.20 percent in CY2012.

4.02%3.62% 3.62%

4.52%

0.23%

1.72%

3.34%

2.20%

1.52% 1.54%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Per

cen

t C

han

ge

Calendar Year

Annual Percent Change in the Consumer Price Index - All Items (Washington-Baltimore-CMSA)

SOURCE: Bureau of Labor Statistics, U.S. Department of Labor

12

As measured by the S&P/Case-Shiller Home Price Index®,

home prices for the Washington metropolitan area increased

4.7 percent in CY2014.However, the index remained 16.0 percent below its peak in CY2006.

232.77247.19

231.75

195.25174.23 182.44 181.71 185.62

198.40 207.69

0.00

50.00

100.00

150.00

200.00

250.00

300.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ind

ex

Calendar Year

S&P/Case-Shiller® Home Price Index Washington MSA

NOTE: S&P/Case-Shiller price index is a registered trademark of Standard and Poor's

Montgomery County

Economic Indicators

14

ECONOMIC INDICATOR

DASHBOARD

LATEST DATA

REVENUE

AFFECTED

EXPLANATION COMPARISON DIRECTION

INFLATION 1.54%

2014

Property Taxes Key determinant of property tax revenues at the Charter Limit

2013: 1.52%

2012: 2.20%

UNEMPLOYMENT

RATE

4.5%

2014

Income Taxes Indicates overall health of the job market

2013: 5.1%

2012: 5.3%

RESIDENT

EMPLOYMENT

507,172

2014

Income Taxes Primary determinant of income tax receipts

2013: 507,370

2012: 506,271

PAYROLL

EMPLOYMENT

(Estimated)

474,570

2014

Income Taxes Another determinant of income tax receipts

2013: 472,840

2012: 470,300

STOCK MARKET -

S&P 500

2,058.90

December 31st: 2014

Income Taxes Key determinant of capital gains portion of the income tax

December 31st:

2013: 1,848.36

2012: 1,426.19

HOME SALES 10,976

2014

Transfer/

Recordation Taxes

Indicates activity affecting receipts

2013: 11,461

2012: 10,156

HOME PRICES

(Median Price Sold)

$400,000

2014

Transfer/

Recordation Taxes

Taxes are based on values, affects amount of taxes collected

2013: $400,000

2012: $367,125

FEDERAL FUNDS RATE 0.15%

Feb. 2015

Investment

Income

County’s return on

investments closely correlated with the Fed Fund rates

Feb. 2014: 0.07%

Feb. 2013: 0.15%

15

Resident employment in Montgomery County stood

at 507,172 in CY2014.Resident employment (household survey) decreased 0.04 percent from

507,370 in CY2013 but was the second highest level in ten years.

488,676

495,926 496,401499,705

494,565496,195

502,350

506,271 507,370 507,172

475,000

480,000

485,000

490,000

495,000

500,000

505,000

510,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Re

sid

en

t E

mp

loym

en

t

Calendar Year

Resident Employment (Montgomery County)

SOURCES: Bureau of Labor Statistics, U.S. Department of LaborMontgomery County Department of Finance

16

The unemployment rate was down in CY2014.The unemployment rate declined from 5.1 percent in CY2013 to 4.5 percent in

CY2014 but remained above the low unemployment rates experienced between

CY2005 and CY2008.

3.1% 2.9% 2.6%3.2%

5.3%5.7%

5.3% 5.3% 5.1%4.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Un

em

plo

yme

nt

Ra

tes

Calendar Year

Unemployment Rates (Montgomery County)

SOURCES: Bureau of Labor Statistics, U.S. Department of LaborMontgomery County Department of Finance

1717

Home sales decreased 4.2 percent in CY2014.Total sales of existing homes increased 6.4 percent in CY2012 and 12.8

percent in CY2013.

16,911

13,495

10,3568,519

10,375 10,408 9,500 10,15611,461 10,976

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

An

nu

al

Sa

les

Calendar Year

EXISTING HOME SALES (Montgomery County)

SOURCES: Metropolitan Regional Information System, Inc.Montgomery County Department of Finance

1818

Median home sales prices at $400,000 did not change in CY2014.With the sales of existing homes in the County decreasing 4.2 percent in 2014, the

median sales price remained constant, which followed an increase of 4.9 percent

in CY2012 and 9.0 percent in CY2013.

$425,000 $439,000 $444,000$395,000

$340,000 $350,000 $350,000 $367,125$400,000 $400,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Med

ian

Pri

ce

Calendar Year

Median Home Sales Price

Montgomery County

SOURCES: Metropolitan Regional Information System, Inc.

Montgomery County Department of Finance

19

Construction of new residential properties (units) was down

almost 5.9 percent in CY2014.Construction of single-family homes was down 10.9 percent and the construction of new

multi-family units decreased 3.7 percent.

3,424 3,2693,933

2,134 966

2,036

2,823 2,608

5,2464,936

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

0

1,000

2,000

3,000

4,000

5,000

6,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Va

lue

($

tho

us

an

ds

)

Un

its

Calendar Year

Number of New Residential Starts (Units) and Value (Montgomery County)

Res_Units Res_Value

SOURCES: McGraw-Hill Construction and Montgomery County Department of Finance

20

Single-family construction (units) decreased in CY2014 but was the

second highest level during the past ten years.Since CY2005, the construction of new single-family homes declined from nearly 1,220 units to

645 units in CY2010. Between CY2011 and CY2014, annual construction of single-family

homes averaged nearly 1,250 units per year compared to an annual average of 920 units

between CY2005 and CY2010.

1,217

8671,054 967

775645

782

1,088

1,6461,469

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Sta

rts

(Un

its)

Calendar Year

Number of Single-Family Residential Starts (Units) Montgomery County

SOURCE: McGraw-Hill Construction

21

Construction of multi-family units was up significantly in

CY2013 and CY2014 at an annual average of over 3,530 units.From CY2005 to CY2007, construction of multi-family units averaged nearly 2,500 units per

year. With the housing crash, construction declined significantly in CY 2008 and CY2009.

Since then, construction rebounded and by CY2014 construction reached nearly 3,500 units.

2,207 2,4022,879

1,167

191

1,391

2,0411,520

3,600 3,467

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Sta

rts

(Un

its)

Calendar Year

Number of New Multi-Family Residential Starts (Units) Montgomery County

SOURCE: McGraw-Hill Construction

222222

Income Tax VolatilityYear-over-year percent changes in the income tax are volatile and

sensitive to economic events especially capital gains in Montgomery

County.

6.7%10.6%

12.8% 12.7%8.8%

10.9%

-8.3%-3.3%

4.3%

24.0%

8.9% 7.4% 8.8%

-11.9%

-4.9%

7.2% 6.2%10.0%

-3.8%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Pc

t. C

hg

.

Tax Year

Annual Percent Change in lncome Tax Revenues from Withholdings, Estimated Payments, October 15 Filings, and Revenue Adjustments

Stock Market Collapse and "Great Recession"

Rate increase from 2.95% to 3.2%

Beginning of Three-year Stock Market Decline and Recession

23

Real Property ReassessmentsAfter four consecutive years of declines, the reassessment rate for real property

increased over the past three years. However the rate of 18.7 percent for levy year

2015 (FY2016) was largely attributed to the 34.4 percent increase for “commercial”

property, while residential property increased 11.5 percent.

17.0%15.0%

26.0%28.0%

44.0%

60.0%

42.0%

18.0%

-7.9%-3.1%

3.5%5.5%

3.0% 1.1% 2.7%6.4%

13.5%21.8%

36.3%

51.8%

65.0%63.3%

43.4%

16.2%

-10.6%-17.0%

-14.5%

-8.6%

4.1%

11.0%18.7%

-0.4

-0.2

0

0.2

0.4

0.6

0.8

-0.4

-0.2

0

0.2

0.4

0.6

0.8

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

Av

era

ge

Ra

te

Rea

sses

smen

t R

ate

Levy Year

Real Property Reassessments by Levy Year

(Three-Year Phase-In)

Montgomery County

Triennial Reassessment Average

Historical Average:

17.9%

SOURCE: State Department of Assessments and Taxation

24

Total taxable assessments are estimated to increase in FY2016.Prior to FY2014, taxable assessments declined a total of $9.6 billion from FY2011 to FY2013

estimate. That is the largest two-year decline in the past twenty-eight fiscal years. That

decline is a result of the decreases in the reassessment rates for residential properties

over prior four levy years. Since FY2013, taxable assessments are expected to increase a total

of $13.2 billion over the three year period.

$125.711$142.306

$158.133 $167.097 $167.791 $162.197 $158.273 $159.892 $164.700 $171.470

$0.000

$20.000

$40.000

$60.000

$80.000

$100.000

$120.000

$140.000

$160.000

$180.000

$200.000

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 est. FY 2016 est.

Ta

xa

ble

As

se

ss

me

nts

($

bil

lio

ns

)

Fiscal Year

Real Property Taxable Assessments (Montgomery County)

25

SUMMARY

• The County’s unemployment rate in January was 4.3 percent and down from the 4.7 percent in January last year. However, the decrease in the County’s resident employment in 2014 could provide a challenge to the County’s income tax revenues through the remainder of this fiscal year.

• Sales of existing homes in the County decreased 4.2 percent in CY2014 and median prices did not change. Both rates suggest that the housing market struggled to maintain a steady increase in both sales and prices over prior years. However, the housing market is expected to rebound in sales and prices during CY2015 from its poor performance in CY2014 and in future years such that the transfer and recordation taxes should rebound in the current and future fiscal years.

• Inflation for the Washington-Baltimore region was 1.54 percent in 2014 –essentially the same increase in CY2013. Prices decreased 0.2 percent in January of this year – the first year-over-year decrease in January since BLS began publishing monthly data for the Baltimore-Washington region in 1997. Lower inflation will have an impact on property tax revenue growth due to the Charter Limit.