Presentation on theme: "FY 2009 First Quarter Update & Economic Impacts on the City’s Budget December 8, 2008."— Presentation transcript:
FY 2009 First Quarter Update & Economic Impacts on the City’s Budget December 8, 2008
2 The Update Overview Economic Climate & Trends FY 2009 Budget Update General Fund Revenue General Fund Expenditures FY 2010 & FY 2011 Forecast Budget Calendar
3 A Challenging Economic Outlook National economic failure Rapid financial sector collapse Restricted credit – no lending Property and auto sales dropping Volatility & Uncertainty! No certain solution in sight
4 Continued Economic Uncertainty – Bad News from the State State deficit = $28B $10B out-year deficits Round #1 cuts to Berkeley = $1.75M Set aside $1.8M to buffer cuts Not a long-term solution More cuts to come… Public & Mental Health programs Increased fee/charges to cities E.g., DMV Administrative Costs
5 FY09 1 st QTR Indicates Downturn Overall loss of revenue Property Transfer Tax down 46%(-$1.5M+) Sales Tax down 2.3% (-$500,000 so far) Parking Meter revenue down 10% (-$500K) Property Tax growth slowed Permit Activity down
7 GF Revenue Forecast Forecasted declines in: Property Transfer Tax Sales Taxes Vehicle In-lieu Tax Some Revenue Increases: UUT (offset by like cost increases) Interest Income (up now, but uncertain future)
8 Property Transfer Tax Decline Real estate market collapsed 50% Revenue DECLINE!
9 Property Sales Tax Decline Changes since last year (FY 2008): Total Property Sales down 48% Commercial Property Sales down by 88% Residential Property Sales down by 27%
11 How is our FY09 1 st QTR Spending? Generally within budget Some potential General Fund problems: Fire Department Overtime (Measure GG will help offset this) Police Department Overtime Recreation Division cost overrun Other Revenue Fund problems: Refuse Fund Mental Health & Public Health Funds Permit Service Center Fund
12 FY 2010 & FY 2011 – Getting Ready Proceed with Caution! Revenues down State Uncertain Economy Uncertain Not a time for growth Capital expenditures down Reductions Required for General Fund and other funds
13 Policy Framework 1-time revenue for 1-time expenses Long-term fiscal health 2-year budget 5-year planning Prudent Reserve Control labor costs – minimize layoffs Manage unfunded liabilities No new programs without new revenues or expenditure cuts
14 1 st QTR GF Forecast FY 2009 – FY 2013 Deficit growth with flat PERS rates & no action Excludes a number of possible influences
15 A Delicate Balance What if….. The State takes more local revenue? The economy continues to drop? Transfer Tax declines further? What if PERS rates increase 6%+?
17 GF 5-Year Forecast GF Reserve balance dips to $7.26M if no action taken to remedy structural deficit
18 CalPERS Losses Impact Berkeley Dramatic portfolio losses (30% and dropping…) Rate smoothing cannot absorb Rates will increase by FY 2012 2% - 6% of payroll Huge cost increase to Berkeley
19 PERS Rate Increase = Big GF Deficit GF operating deficit of $4M -$8M if we do nothing Wipes out GF Reserve entirely! Need to plan now!
20 Capital Improvements - Funding Reduced Reduce General Fund capital funding by 33% Must finish current big projects Animal Shelter Ed Roberts Campus Brower/Oxford Center Center Street Garage Gilman Playing Fields
21 Some Good News Measure GG: up to $3.6M annually Fire and emergency services FRALS Ensure staffing and no closures Disaster preparedness Measure FF: $26M (1-time) Library bond for branch improvements Measure WW: $4.86M (1-time) regional parks bond
23 Other Revenue Funds Face Deficits Public and Mental Health Funds Expenditure reductions Streetlight Assessment Fund Possible General Fund subsidy increase Refuse Fund Rate increase in March 2009: 15-20% Clean Storm Fund Ballot in FY 2010 Permit Service Center Fund Expenditure reductions
24 What are the Next Steps? Plan for long term Control costs Begin budget review (January – March) Council Citizens Labor unions & employees Mid-year Update on February 10
25 Council Budget Planning Focus on service areas Impacts and Outcomes Special Council workshops Adopt revised calendar Add some Council dates