Proposed Fiscal Year 2018 Budget
Presentation Overview 1. Building on the Momentum 2. Fiscal Discipline 3. Challenges 4. Budget Overview 5. Bold Initiatives
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Thriving Economic Development Approximately 6,000 New Jobs Between Now and 2018
Norfolk Premium Outlets
The Main Hotel and Conference Center
Waterside District 3
Putting Residents to Work
4
Boosting Consumption-Based Revenue Meals/Hotel Tax
Sales Tax (amount shown in millions) +7.0% $33.6
(amount shown in millions)
+3.3% $34.7
$38.9
$41.1
$43.0
+3.3% $44.4
+1.7%
+5.2% $46.6
$47.4
2018
2019
+3.6% $31.4 $30.0
$30.3
$29.4
2014
2015
2016
2017
2018
Projected
2019
2014
2015
2016
2017
Projected
Projected growth of over $10 million from FY 2015 – FY 2019
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Norfolk is a Winning City - Today and Tomorrow Ten Traits of Winning Cities Positive Attitude
Shared Narrative
Big Tent
Livable Place
Safe and Sound
Millennial Magnet
Beyond Borders
Open Mind
Open Book
Caring Purpose 6
Presentation Overview 1. Building on the Momentum 2. Fiscal Discipline 3. Challenges 4. Budget Overview 5. Bold Initiatives
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Fiscal Discipline
Remaining Fiscally Disciplined Achieve Structural Balance
Increase Pay As You Go Capital Funding/Debt Reduction
Debt Affordability Measures • Debt as a percent of taxable assessed value not to exceed 3.5 percent • Debt service as a percent of the General Fund budget not to exceed 10 percent
Fully Fund Reserves
Unassigned General Fund Reserve Risk Management Reserve
Economic Downturn Reserve 8
Fiscal Discipline
Structurally Balanced • Proposed FY 2018 General Fund Budget is structurally balanced • Modest growth 2.2 percent
6 Fourth consecutive year Expenditures $853 Million
Revenues $853 Million
• Brought ongoing expenditure cost drivers in line to match modest revenue growth 9
Fiscal Discipline
Reserves Funded to Policy Goals Unassigned Reserve (5% Reserve) Target 5% of GF
Risk Management
Economic Downturn
FY 2017 $42.5
Target $5.0
FY 2017 $5.0
(amount shown in millions)
Target $5.0
FY 2017 $5.0
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Presentation Overview 1. Building on the Momentum 2. Fiscal Discipline 3. Challenges 4. Budget Overview 5. Bold Initiatives
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Challenges
Overcoming Challenges – Fiscal Stress
Real Estate Tax Rates* and Fiscal Stress High Second most Stress fiscally stressed city in Hampton Roads
$1.30 $1.15
Portsmouth Norfolk
$1.24
Above Average Stress
$1.22 $1.07
Hampton
Below Average Stress
Newport News
Suffolk
$1.05
$1.00
Chesapeake Virginia Beach
Tax-Exempt Real Estate and Fiscal Stress Locality
Tax-Exempt Real Estate
Stress Level
Portsmouth
43.7%
High Stress
Norfolk
37.6%
High Stress
Hampton
24.8%
High Stress
Newport News
21.8%
High Stress
Suffolk
9.8%
Above Average
Virginia Beach
17.4%
Below Average
Chesapeake
8.4%
Below Average
Source: Virginia Department of Taxation FY 2016 Annual Report
*Reflects FY 2018 Proposed real estate tax rates, except for Hampton (FY 2017 real estate tax rate). Chesapeake rate includes mosquito-controlled areas. Source: Commission on Local Government FY 2014 Report on Comparative Revenue Capacity, Revenue Effort, and Fiscal Stress of Virginia’s Cities and Counties (March 2016) 12
Challenges
Adjusting to the “New Normal� 10-Year Annual Growth Rate 2.1% 20-Year Annual Growth Rate 5.1% 30-Year Annual Growth Rate 4.7%
24.9%
Annual Change in Overall Real Estate Assessments Overall Real Estate Assessments have lagged historical averages
16.8%
17.5%
10.5% 7.8% 6.7%
5.9% 3.8% 2.2%
1.0% 0.8%
0.5%
2.2%
3.5% 3.2%
7.5%
4.0% 4.7%
5.8% 2.6% 0.5%
1.4%
2.3%
1.5% 1.7%
-0.3%
-3.1% -3.5%
-2.1%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Year
Source: Real Estate Assessor annual report (various years) and Real Estate Assessor FY 2018 projected growth on July 1, 2017 13
Challenges
Partnering to Address Regional Issues
• FY 2016 year-end true-up of $1.97 million Over 10 percent of HRT budget • Average true-up previous seven years was $85,000 • Allocated $700,000 in one-time funds in Proposed FY 2018 Budget to begin three-year true-up payment
• SPSA is working on a plan to remove excess leachate and upgrading leachate monitoring and pump control systems • SPSA member localities are receiving biweekly status updates • The city has kept the tipping fee budget at $125 / ton 14
Challenges
Managing Increasing Benefit Costs $2.9 million increase to Proposed FY 2018 Budget
Healthcare Cost
Retirement Cost $28.2 Five-in-Five Conversion
$25.8 $24.8
FY 2015 Actual
$29.6
$29.3
$26.9
$27.9
$25.6
FY 2016 Actual
Adopted FY 2017 Proposed FY 2018 Budget Budget
FY 2015 Actual
FY 2016 Actual
Adopted FY 2017 Proposed FY 2018 Budget Budget
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Note: Amounts reflect General Fund only and exclude Norfolk Public Schools
Challenges
Paying for Generational Projects • 10-year average* funding for General Capital Improvement Plan (CIP) $104.1 million • Anticipate growth of $6.2 million in debt service expenditures for FY 2019 • Maintenance CIP ranges between $25.0 and $30.0 million • Remaining within the debt affordability measures helps preserve current bond ratings
Cruise Terminal and Community Centers
Consolidated Courthouse Nine New Schools in 13 Years
Light Rail
Slover Library
* Average calculated based on FY 2007 – FY 2016
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Presentation Overview 1. Building on the Momentum 2. Fiscal Discipline 3. Challenges 4. Budget Overview 5. Bold Initiatives
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Budget Overview
Applying a Multi-Pronged Approach
Raise Revenue
Reduce Expenditures Become More Efficient Grow Economy Share Services and Leverage Resources
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Budget Overview
FY 2018 Balancing Strategies • Requested one-percent reduction strategies from departments • Analyzed citywide utilization of personnel funds to maximize savings from vacant positions • Completed an in-depth base budget analysis to allocate existing funds to match operational needs prior to beginning budget development • Evaluated healthcare plan offerings to mitigate cost increase 19
Budget Overview
FY 2018 Budget Proposal Process Starting Point
Base Budget Development
FY 2017 Adopted Budget
Remove one-time items
Annualize prior year actions
Adjust benefits, debt, contracts, new facilities, revenues
FY 2018 Preliminary Base Budget
Policy decisions
FY 2018 Proposed Budget
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Budget Overview
Proposed FY 2018 Budget Overview General Fund Revenue - $853.2 million • No new taxes • Total Revenue Growth $18.1 million • Over two-thirds of the growth comes from local taxes
• General Fund growth in line with other Hampton Roads cities
Real Estate $5.1
General Fund Revenue Growth 2.2%
Consumer Taxes $3.8
Local Taxes Total $12.1 67%
Other Taxes $3.2 State Aid $5.2 Net All Other $0.8
State Taxes $5.2 29% Net All Other $0.8 4%
FY 2017 Revenue Budget $835
FY 2018 (amounts shown in millions) Note: totals may not exactly add due to rounding
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Budget Overview
Proposed FY 2018 Budget Overview General Fund Expenditures One-time Undesignated $2.0 Enhancements $2.4
Policy Decisions
Total Expenditure Growth $18.1 million 2.2%
Technology Initiatives $2.2 Compensation $3.7
FY 2018 Base Budget
Adopted FY 2017 Budget $835.0 million
Nondiscretionary $12.8 contractual, debt service, annualize salary increase, benefits, inflationary
Remove FY 2017 One-Times $5.0 million
FY 2018 Starting Point $830.0 million $812.4 million
(amounts shown in millions) Note: totals may not exactly add due to rounding
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Budget Overview
Capital Improvement Plan Overview Capital Improvement Plan Adopted Budget and Planned Amounts (General Capital only)* FY 2018 - FY 2022 = $121.8 million
$180
Proposed FY 2018 CIP $26.3 million
$145.2
$150 $131.0
FY 2018 Planned $18.8 million
$120 ($ in millions)
Additional $7.5 million
$124.2 $121.5
$113.7
$102.2 $104.9 $88.8
$90
$60.4
$60
$49.4
$26.3 $29.7 $23.5 $21.5 $20.8
$30
$0
------Planned Amounts------
$43.4
2007
2008
2009
2010
2011
2012
2013
2014 2015 Fiscal Year
2016
2017
2018
2019
2020
2021
2022
* General Capital amounts excludes other CIP amounts such as, for Parking, Storm Water, Water and Wastewater. 23
Budget Overview
Striking the Right Balance
Bold Initiatives
Momentum
Fiscal Discipline
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Presentation Overview 1. Building on the Momentum 2. Fiscal Discipline 3. Challenges 4. Budget Overview 5. Bold Initiatives
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Bold Initiatives
Long-Term Stresses Provide Strategic Opportunity Living with Sea Level Rise
Resilience RESILIENCE
Balancing the Economic Portfolio
The city’s decision-making lens Deconcentrating Poverty
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Bold Initiatives
How to Stay Bold
Collaborative A Community that is‌
Connected Creative 27
Collaborative Regional Partnerships
Public (Local)
Public (Military) P4 Private
Partnership 28
Collaborative Providing Excellent Core Services
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Collaborative
Continuing ARMD Initiative for Team Norfolk • Two percent general wage increase (GWI) for city employees • Beginning January 2018 • Sixth consecutive year for a GWI of two percent
• Step increase for sworn Police and Fire-Rescue • Step increase and bonus for sworn Sheriff • Market-based adjustments for 16 classifications
FY 2018 $3.0 million
• Adjust living wage from $24,300 to $24,600 30
Collaborative
Investing in Refuse Collectors Compensation Enhancements Effective July 2017
Attract
Retain
Increases pay for all Refuse Collector positions
Establishes career progression opportunities
Average pay increase of 7.6%
Automatic promotion after meeting experience requirements
Motivate
FY 2018 $200,000
Develop
Places supervisory pay above the regional market average
Preserves apprentice training
Rewards strong job performance
Provides 17% increase in minimum pay upon training completion 31
Collaborative
Executing Phase II of the Public Safety Pay Plan • Provides step increase for sworn Police and Fire-Rescue • Average pay increase of 3.5 percent
• Addresses Police Officer compression • Positively impacts two-thirds of Police Officers
FY 2018 $680,000
• Adds compression adjustments for Police Sergeants • Positively impacts 50 percent of Police Sergeants
• Supports the continuation of Master Firefighter 32
Collaborative
One-time Retiree Supplement
• Cost supported by the General Fund • Initial eligibility plan was similar to FY 2017 • Retirees earning $30,000 or below with 15 years of service or disability
• Met with Retired City Employee Association
FY 2018 $600,000
• Revising eligibility plan • Present recommendations to City Council • Goal - ensure pool of beneficiaries represents, as best possible, career public servants 33
Connected
New Southside Library
Promoting Health, Happiness, and Well-being
STEM Academy
Connecting Southside Broad Creek Library Elizabeth River Trail Investing $500,000 in CIP over five years for Capital Campaign match
• Opening December 2017 • Invested $10.0 million in CIP • FY 2018 General Fund operating $463,000
• STEM Academy opened Fall 2016 • Invested $34.2 million in CIP • Southside Library opening Spring 2019 • Invested $6.3 million in CIP
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Connected Information Technology Vision To be an innovative and trusted partner in delivering technology solutions that improve employee productivity and service delivery, engage our residents, and promote business growth and educational opportunities.
Pay software license cost of $850,000 from the General Fund
Free up short-term financing of $1.0 million for computer replacement
$2.2 million Begin addressing IT backlog with ongoing General Fund support
Establish a Technology Reserve Fund of $1.35 million
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Connected
Using Data and Evidence to Improve Results
Open Data
Performance • Process efficiency • Linking resources to outcomes • Taking stock and improving
• Transparency • Accountability • Community engagement
Network of Partners • Expert technical support • Best practices • Collaboration and innovation 36
Creative The most inclusive, vibrant, and authentic urban waterfront in America
• Embrace the urban core
• Promote diverse experiences throughout the city • Attract new residents
Town Point Park The Port of Virginia
Sarah Constant Shrine Beach NEON District
Elizabeth River Trail
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Creative • Cultural facilities that are unique and excellent • Spend FY 2018 developing an investment plan • Public Amenities Fund used for investment in cultural facilities FY 2018 $1.0 million for capital improvements
Attucks Theater
Chrysler Museum of Art
Wells Theater
Harrison Opera House 38
Community Carrying Out Council’s Priorities
Housing Public Safety Education 39
Council Priority – Public Safety
Improving the Public Safety IT Infrastructure Replace radios and upgrade communication system
Replace 911 ComputerAided Dispatch System
FY 2018 $4.2 million
Upgrade Police Records Management System
Upgrade 911 Call Handling Equipment 40
Council Priority – Public Safety
Continuing Public Safety Resource Support Facilities $1.0 million • Maintain fire stations
Equipment $502,000
Fleet $3.4 million
• In-car video systems
• Ladder truck
• Police protective vests
• Pumper truck • Three ambulances
• Tasers • Ten utility vehicles • Lucas CPR devices
• 15 marked patrol cars • Medical supplies • Commercial extractors and dryers
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Council Priority – Education
Local Funding
Commitment to Education
$118.6 million in FY 2018
Per Pupil Expenditures
$65 million above required local effort (RLE)
$11,417 $11,185
$11,191
Virginia Beach
Newport News
$10,896
Starting Teacher Salary* Student Teacher Ratio
$43,622 - $51,344
$10,664
$10,764
$10,432
Highest in region
12.1 to 1
Lowest in region
Suffolk
Hampton
Chesapeake
Portsmouth
Norfolk
Source: Virginia Department of Education's Superintendent's Annual Report, 2015-2016
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*Source: Segal Waters Consulting 2016-17 Compensation Study Results
Council Priority – Education
$159 million Capital Investment in Education Opened Broad Creek
• Advanced FY 2018 school bus allocation of $1.0 million in FY 2017 for EPA Clean Diesel Rebate Program
• Proposed FY 2018 includes $2.0 million for school maintenance needs
Crossroads
Southside STEM
Under Construction
Camp Allen
Larchmont School photos courtesy of S.B. Ballard Construction Company website
Ocean View 43
Council Priority – Education
Moving Forward with Education • Great cities have great schools • Develop School Funding Formula in FY 2018 • Align interests • Incentivize efficiency • Share in city’s revenue growth 44
Council Priority – Housing Implementing Five-Year Housing and Poverty Strategies $112.7 million Ohio Creek NDRC Grant Implementation
$2.0 million Community Development CDBG*
$14.0 million Transform Newton Creek $8.7 million Housing Study Initiatives
$12.5 million Improve Neighborhoods Citywide
*Reflects FY 2018 only 45
Council Priority – Housing
Transforming Newton Creek Public Safety
Education
Housing
Resilience 46
Council Priority – Housing
Ongoing Flood Mitigation Strategies Storm Water Five-Year CIP $7.62
$4.82
$7.62
$4.82
$7.62
$4.82
$7.62
$4.82
$7.62
$4.82
Reduce neighborhood flooding $2.85 million Improve storm water quality $2.35 million Create citywide flooding reserve $1.32 million Improve system and facilities $1.1 million
FY 2018
FY 2019
FY 2020 Planned
FY 2021
FY 2022
Proposed 47
Proposed FY 2018 Budget Recap
Provide Excellent Core Services
Grow the Economy
Set the Table for Bold Moves
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Laying the Policy Groundwork for FY 2019 • Advance a comprehensive technology replacement strategy • Develop a school funding formula • Determine cultural facilities investment plan • Develop a strategy for transforming Newton Creek
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FY 2018 Budget Calendar Wednesday April 19, 2017, Granby High School 6:00 PM • Public Hearings on the Operating, Capital Improvement Plan, and HUD Grant
Tuesday April 25, 2017, Council Chamber 6:30 PM • Public Hearing on Real Estate Tax Increase (due to increased reassessment) • First City Council Work Session
Tuesday May 2, 2017 • Second City Council Work Session Tuesday May 9, 2017 • Third City Council Work Session
Tuesday May 23, 2017 • City Council Budget Adoption 50
Proposed FY 2018 Budget Breakdown Fund
FY 2018 Proposed Budget
General Fund
$853,176,054
Enterprise Funds
$142,121,764
Special Revenue Funds
$63,698,401
Internal Service Funds
$106,298,225
Total Operating Funds Capital Improvement Plan (All Funds, FY 2018 only)
Total Operating and Capital Funds Annual Plan for HUD Block Grants Total Financial Plan
$1,165,294,444 $83,579,933
$1,248,874,377 $5,405,297 $1,254,279,674 51
Shifting the Approach Housing
Public Safety
Education
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