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May 14 th, 2008 County of Henrico, Virginia. Henrico County, Virginia Financial Issues Facing Henrico County Economic Overview Current Local Government.

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Presentation on theme: "May 14 th, 2008 County of Henrico, Virginia. Henrico County, Virginia Financial Issues Facing Henrico County Economic Overview Current Local Government."— Presentation transcript:

1 May 14 th, 2008 County of Henrico, Virginia

2 Henrico County, Virginia Financial Issues Facing Henrico County Economic Overview Current Local Government Issues Keeping Up With Growth

3 Henrico County, VA Economic Overview Uncertainty in National Economy Real Estate – National Real Estate – State and Regional

4 Economic Overview Uncertainty in the National Economy News from the first few months of 2008: –Consumer confidence at lowest point since –Home foreclosures soar to an all-time high in the final quarter of Delinquency rate for all mortgages nationwide climbed to nearly 6.0 percent in the quarter. –Employers slashed 63,000 jobs in February 2008, the most in five years –Dollar slides to record lows in March –Oil prices at record levels

5 Economic Overview INFLATION – 4.3%* increase marks highest jump in CPI-U since 1991 – Core up 2.5%* (minus food & energy) – Gasoline index up 30.4%* *Note: Current year increases are measured from January 07 to January 08

6 Economic Overview UNEMPLOYMENT – After three years of steady decline, 2007 average national unemployment showed no improvement. – Virginia and Henrico County remained steady year over year.

7 Economic Overview CONSUMER CONFIDENCE – Has dipped significantly since July – February 2008 level lowest since 2003.

8 Economic Overview Real Estate – National News Home foreclosures at an all-time high in the final quarter of Construction spending experienced the largest decrease in 14 years from December 2007 to January 2008, and it continues to fall. Median price of a single-family home fell 5.1 percent from Jan to Jan Single-family home sales fell 22.4 percent from Jan to Jan

9 Economic Overview Real Estate – State and Regional News In 2007, the number of houses sold fell: –15 percent in Virginia. –12 percent for the Richmond region. Virginia saw a slight increase in home prices – median price increased 1.2 percent. Home prices in the Richmond area increased by an average of 5.8 percent in Richmond Metro Area ranks 95 th in the top 100 metro areas in the nation in number of foreclosures.

10 Henrico County, VA Current Local Government Issues Overview State Budget Shortfall

11 Current Local Government Budget Issues Every locality in Virginia has different local issues that are typically confronted each year in the budget process. No “one size fits all” summary. There are some overall similarities and concerns that local governments share. Henrico County’s recent experience is likely indicative of some of these overall concerns.

12 Current Local Government Budget Issues In the past five years, Henrico County’s fixed costs have increased significantly. –Personnel cost increases including health care, Virginia Retirement System and Retirement and Group Life benefits –Increases in fuel – gasoline, diesel –Heating cost increases – natural gas and electricity

13 Current Local Government Budget Issues Construction costs have exploded between 2003 and 2007, due to costs of energy and raw materials. Operational costs of new facilities continue to increase. Cost of providing critical public services – Education and Public Safety far exceeds any factor that considers population growth and inflation.

14 Current Local Government Budget Issues At the same time, the Virginia General Assembly continues to “examine” appropriate levels of local government taxation while mandates on local services continue. –Capping of PPTRA reimbursements –Some State funding reduced in recent years has yet to be restored. –Continued concern within the legislature regarding the local taxation of Real Estate. –State mandates continue on local services – most recently in the form of additional local match requirements (CSA, Victim Witness Program).

15 Current Local Government Budget Issues And finally…GASB –45 and its implications for local government. –For Henrico County - $6.4 million in the FY budget. –FY $6.73 million

16 Current Local Government Budget Issues On February 12, 2008, Governor Kaine revised revenue forecasts for the second time. The revised revenue projection impacted the current FY2008 budget as well as the Biennial Budget. In FY2008, the State projects a budget shortfall totaling $980 million. For FY2009 & FY2010, the State projects a budget shortfall totaling $1.05 billion. State Budget Shortfall

17 The shortfall in FY2008 is largely due to the over-estimation of revenues by the State (Recordation Tax, Interest on Investments, and Corporate Income Tax). The State anticipated a continued boom in real estate and the economy, which were reflected in their revenue estimates. Current Local Government Budget Issues State Budget Shortfall (cont’d)

18 With the original revenue forecast, the Governor announced that State agencies would face a funding reduction of approximately 5.0 percent in the current fiscal year. In his revised revenue forecast, the Governor asked many agencies to absorb an additional 3.5 percent reduction. These reductions will likely impact localities as State agency funding and local funding is intertwined in many cases. Current Local Government Budget Issues

19 State Budget Shortfall (cont’d) FY Adopted Budget % of Henrico’s General Fund revenues are State revenues. Emphasis on conservative posture continues. Current Local Government Budget Issues

20 Financial Issues Facing Henrico County Keeping Up With Growth Henrico County Statistics Fixed Costs Increases Infrastructure Costs

21 Summary of Henrico County’s General Information Henrico County’s population has grown by approximately 2.0 percent a year since the 1970’s. In the past 20 years, the school age population has grown by about 2.5 percent per annum. The County has kept pace with infrastructure needs and service level demands by developing and adhering to multi-year financial plans. By adhering to these multi-year plans and maintaining strict expenditure controls, the County has been able to reduce its Real Estate Tax rates over time.

22 Population versus Average Daily Membership (ADM) Note: FY2008 is estimated. Henrico County Statistics

23 Annual Increases in Student Population Henrico County Statistics

24 General Government Employees Number per 1,000 residents FY85-FY08 Henrico County Statistics

25 Schools by Type Current statistics do not include 3 Specialty centers. Henrico County Statistics

26 Number of Fire Stations Henrico County Statistics

27 Library Facilities Henrico County Statistics

28 Recreation Facilities * 2008 Figure includes 17 recreation & community centers, and 61 shelters Henrico County Statistics

29 County of Henrico Real Estate Tax Rate Real Estate Tax Rate: Per $100 of Assessed Valuation. Henrico County Statistics

30 Counties in the United States with AAA/AAA/Aaa GO Bond Ratings Arlington County, VA Baltimore County, MD Chesterfield, County, VA Cobb County, GA DuPage County, Ill. Fairfax County, VA Forsyth County, NC Greenville County, SC Gwinnet County, GA Hennepin County, MN Henrico County, VA Howard County, MD Kent County, MI Mecklenburg County, NC Monmouth County, NJ Montgomery County, MD New Castle County, DE Palm Beach County, FL Salt Lake County, UT St. Louis County, MO Wake County, NC

31 Millions The FY budget amounts reflect current estimates. Health Care Cost to County FY to FY Fixed Cost Increases

32 Millions VRS Costs FY to FY Fixed Cost Increases

33 Millions Gasoline and Diesel Costs: All Funds FY to FY Fixed Cost Increases

34 “Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions”. Became effective with FY budget – Bond Rating implications. Will require annual payments to a Fiduciary Fund (Trust Fund) of approximately 2 pennies of our tax rate. Henrico County has fully funded GASB 45 requirements in the budget, although this new cost will have a continual impact on budgetary flexibility. GASB 45

35 Infrastructure Costs As noted, in the past 20 years, the number of students in Henrico’s school system has increased by about 2.5% per year. –Over the past 5 years, average yearly increase in students has been approximately 700. Maintaining adequate public infrastructure (schools, fire stations, roads, parks and libraries) is a continuing issue for the County of Henrico. The Five Year CIP is the tool used to plan for these facilities.

36 Infrastructure Costs In the past five years, the County has had two major General Obligation Bond Referenda that have been approved by the voters. –November, 2000: $237.0 million –March, 2005:$349.3 million

37 Infrastructure Cost Summary Maintaining current levels of service (schools, fire stations, EMS, roads, etc) will continue to require new capital infrastructure. Cost of land. Costs of construction have increased significantly in past 24 months. Uncertainty in the municipal bond market

38 Infrastructure Cost Summary Virginia localities – limited revenue generation tools. Effective multi-year planning is paramount. Lately, developing and adhering to multi-year financial plans has been made more difficult due to State funding reductions, alterations of local revenue sources, and the lack of a State budget having been adopted. State = 37.2% of Henrico’s General Fund revenues. Thank you

39 County of Henrico, Virginia May 14 th, 2008


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