Financial & Budget Outlook City Council Strategic Planning Retreat March 19, 2012 Pueblo, Colorado

Financial & Budget Outlook National & State Economies at a Glance Selected Variables Consumer Price Index (CPI) - Up in 2011  Energy Prices up sharply Consumer Spending/Retail Sales – Up  Nearly 71% of National GDP  Nearly 80% of Local Economy Unemployment Rate – Up  Local unemployment rate: 10.6% in Jan 2012  State Average: 7.8% Savings Rate – Down Housing Starts – Down in 2011 ( from 88 to 48)  Outlook for Optimistic Government Spending – Down

Financial & Budget Outlook City’s Major Fiscal Challenges Structural Deficit Outdated Tax Base Cost of Energy – Fuel and Utilities Shift in Demographics  Aging Population  Regional Migration Infrastructure  Deferred Maintenance  Unsustainable Patterns Economic Development Focus - Direct Results High Rate of Unemployment  Potential Job Loss in the Wind Energy Manufacturing Industry

Financial & Budget Outlook Personal per capita Income Pueblo MSA vs. State of Colorado YEARPueblo MSAState of ColoradoPueblo MSA as a percent of the State of Colorado 1970 $3,323$4, % 1980 $8,717$10, % 1990 $14,217$19, % 2000 $23,453$33, % 2009 $31,613$41, %

Financial & Budget Outlook

City’s Personnel Cost vs. General Tax Revenue

Financial & Budget Outlook

General Fund Salaries Change ( ) Salaries General Government 4,551,8684,785,0944,791,3625,113,4415,517,057 Police15,564,90816,340,65817,391,62816,942,58117,054,973 Fire8,807,0609,002,6879,484,8159,807,9499,949,247 Public Works3,546,4433,685,0223,386,2323,241,8403,262,966 Parks2,357,3572,175,3812,159,8412,255,2752,350,825 Total34,827,63635,988,84237,213,87937,361,08638,135,068

Financial & Budget Outlook General Fund Benefits Change ( ) Benefits General Government 1,241,2551,341,6331,388,5111,514,1721,694,603 Police5,933,3496,271,9765,545,2445,659,8726,888,464 Fire3,645,0003,760,5163,886,5223,881,1824,141,476 Public Works1,220,0021,263,2121,214,8141,233,1691,331,006 Parks679,388646,214682,120717,639782,743 Total12,718,99413,283,55112,717,21113,006,03514,838,292

Financial & Budget Outlook

General Fund Cost of Personnel as a percent of total Expenditure Percent of Personnel Cost relative to total Expenditure 69%68%66%67%70% Funds General Government12% 13% Police44%45% 44%45% Fire26%25%26%27%26% Public Works10% 9% Parks6% Non-Departmental2% 1% Public Safety vs. Non- Public Safety Funds Public Safety70% 71% Non-Public Safety28% 27%28% Non-Departmental2% 1%

Financial & Budget Outlook City’s Personnel Cost vs. General Tax Revenue

Financial & Budget Outlook City’s Backlog of Infrastructure Projects According to the 2012 Budget and estimates of Capital Improvement Projects ( ), the City Staff have identified a minimum backlog of more than $100 million of unfunded infrastructure and capital improvement projects/needs

Financial & Budget Outlook Budget & Financial Planning Direction by the City Council 2011 Strategic Planning Retreat Protect primary services of the City government; Carry on the City Council’s Mission of returning the City to full prosperity and invest in a stronger and more resilient community; Identify community nuisances and ensure responsive City services; Maintain the non-departmental and non-profit sector funding levels in the 2012 budget; and Complete the total compensation review for all City staff and develop a plan to implement recommended changes

FINANCIAL & BUDGET OUTLOOK General Fund Revenue and Expenditure Summary Actual 2010 Actual 2011 Estimate 2012 Adopted BEGINNING FUND BALANCE 15,203,899 19,061,099 15,241,071 13,843,950 PLUS: Total Revenues & Transfers In 80,673,592 72,815,105 75,488,645 74,282,423 LESS: Total Expenditures & Transfers Out 76,816,392 76,635,133 76,885,766 77,901,430 Increase (Decrease in Fund Balance 3,857,200 (3,820,028) (1,397,121) (3,619,007) ENDING FUND BALANCE 19,061,099 15,241,071 13,843,950 10,224,943 Total Reserves & Designations 11,376,847 10,729,913 10,118,577 10,220,143 AVAILABLE FUND BALANCE 7,684,252 4,511,158 3,725,373 4,800

Financial & Budget Outlook Sales Tax+2% - $800K Black Hills Property Tax - $750K Reserves – ($3.6M) Old Hire Police Pension – ($1.0M) Health Insurance – ($700K) ERP/IT Lease Purchase – ($445K) Fuel - ($250K) Step Increases – ($300K) USAF Contract (?) – ($500K) D-60 Contract – ($160K) Parking Garage – ($50K) Total projected unfunded shortfall – ($5.5M) Preliminary Estimate of Significant Changes (increase) 2013 Proposed GF Budget compared to the 2012 GF Budget estimate

Financial & Budget Outlook Preliminary Estimate of Significant Changes (increase) 2014 Proposed GF Budget compared to the 2013 GF Budget estimate Sales Tax+1% - $408K Reserves – ($5.5M) Health Insurance – ($700K) General Liability Insurance – ($200K) Step Increases – ($300k) Fuel - (?) Old Hire Police – (?) Total projected unfunded shortfall – ($6.3M)

Financial & Budget Outlook Preliminary Estimate of Significant Changes (increase) 2015 Proposed GF Budget compared to the 2014 GF Budget estimate Sales Tax+1% - $412K Reserves – ($6.3M) Police Old Hire Pension – ($1.0M) Health Insurance – ($700K) General Liability Insurance – ($200K) Step Increases – ($300k) Total projected unfunded shortfall – ($8.0M)

Financial & Budget Outlook Short-term Cost Containment tactics to overcome Budget Deficits Freeze Wages (has not been implemented across the board) Freeze Annual Step Increases Freeze Vacancies Reduce Compensation Reduce Maintenance & Operating Expenditures Remove Capital Expenditure & Infrastructure Replacements Cap City Contributions and/or Increase Share of Employee Health Benefits Reduction In Force (RIF) Use of Reserves – Not Recommended

Financial & Budget Outlook Strategies to Address Structural (revenue/expenditure) Imbalance Identify essential services of local government Identify a data driven compensation package for ALL City employees Explore public private partnerships Diversify revenue sources Restructure and consolidate resources/services Create fiscal priorities by programs Maintain adequate reserves Engage in long-term financial planning Target permanent budget cuts Improve political acceptability by educating the community about shifting resources and essential services

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