HomeMy WebLinkAboutSupporting Documents-Addressing The FY2012 Budget GapFrom: Thompson, Priscilla
To: Hannon. Todd; Hernandez, Julia D.; Martinez. Maribel
Subject: FW: Copy of Presentation
Date: Tuesday, September 20, 2011 1:07:42 PM
Attachments: Presentation for Sept 14th FINAL.pdf
Importance: High
For our records. This is the presentation made by Budget Director Alfonso and entered into the
record at the 9/14/11 meeting for SP.1, File ID 11-008544.
PwiscA 74 T oOrpso/r, CNC
City Clerk
(305) 250-5370
fax (305) 858-1610
From: Alfonso, Daniel J.
Sent: Wednesday, September 14, 2011 4:39 PM
To: Thompson, Priscilla
Subject: Copy of Presentation
Here is the Presentation;
Regards;
Daniel J. Alfonso
Director, Strategic Planning Budgeting & Performance
City of Miami
444 SW 2nd Avenue (Suite 516)
Miami, FL 33130
Mobile: 305-803-7394
Office : 305-416-1585
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City of Miami
Addressing the FY2012 Budget Gap
September 14, 2011
Agenda
■ Economic Overview
• Addressing the FY2012 Budget Gap
2
Economic O vervie w
Economic Overview
■ Earlier this year, the major credit rating agencies cited 2011
as the "toughest year yet" for cities nationally
■ As 2011 has unfolded, economic recovery from the worst
recession of the post -War era is now looking increasingly
weak and uncertain
■ In Miami, these challenges have been compounded by a
more severe regional economic downturn than experienced
by the nation as a whole
■ As a result, while underlying cost pressures continue to rise,
City of Miami revenues are still below the levels of FY2006
■ These immediate pressures driven by the economic
downturn are over and above significant and ongoing
structural fiscal issues facing the public sector overall
4
1:0 GP
rife
1e41111 MIf$ r
11 11
i# R.
Context: Toughest Year Yet
• Two years ago, Moody's Investors
Service for the first time assigned
a negative outlook to the U.S. local
government sector nationally, and
reaffirmed this continuing negative
outlook in a March 2011 report
calling this "the toughest year for
local governments since the
economic downturn began"
• Among the principal factors cited
by Moody's:
— Lag between assessments
and property tax collection
— Ripple effect from fiscal
problems faced by states
— Tougher budgeting choices,
as less difficult options have
been exhausted
For the first time since 1979, year -over -year local property
tax revenues nationally are forecast to decline in 2011
FIGURE 5
Recession Finally Hits Property Taxes
Local government property tax receipts, calendar year % change
10 —
8 -
6
4
-2
4
I -I -I -I -I -I -I -I -I -I -I -I -I
78 81 84 87 90 93 96 99 02 05 08 11F
Sources: Census Bureau, National League of Cities
This chart estimates local government property tax revenues in fiscal 2011 as posting the first year -aver -year decline since fiscal 1979.
Source: "2011 Sector Outlook for U.S. Local Governments"— Toughest Year Yet, Moody's
Investor Service, March 17, 2011
Meanwhile, on the expenditure side of local
government budgets, health and pension
benefit cost pressures continue to rise
5
,. r" City of Miami Revenues
FY 2005 - FY 2012 (Projected)
• Even with new fee increases adopted for FY2011, City of Miami revenues in
FY2011 are projected to end this year below the levels reached five years earlier
— and to drop even lower in FY2012 with no further adjustments
$600, 000, 000
$500, 000, 000
$400, 000, 000
$300, 000, 000
$200, 000, 000
$100,000,000
$553,009,038
$549,251 735
$519,968 339
$503,367,359
di-
440,881,182
FY 2005
* - Projected
$505,535 707
n $485,769 023
$470,927,500
FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011* FY 2012*
6
Worsening Economic News
• Nationally, recovery has been weaker
than previously anticipated, and has
worsened over the course of the year
• In July 2010, as the City's FY2011
Budget was being developed, the
federal Office of Management and
Budget (OMB) was forecasting 4.0%
growth in real Gross Domestic Product
(GDP) nationally for 2011 Q4-Q4
• In February 2011, just before Moody's
predicted the toughest year yet for
local governments, the OMB forecast
was revised downward to 3.1%
• In the September 2011 OMB Mid -
Session Review, the 2011 Q4-Q4
forecast was further reduced to 2.4%
based on data through June — and to
1.6% in an alternative forecast based
on data through August
Headwinds
The White House revised its economic projections to account
for turbulence over the Vast two months.
Based on data through June 0 Based on data through August
CHANGE IN REAL GDP*
4°U
UNEMPLOYMENT RATE"
10%
9
8
1 7
0
l I
2010 2011 2012 2010 2011 2012
...Fourth quarter, Change from previous year
I.Annual average Source: Office of Management and Budget
Chart Source: Wall Street Journal, "White House Downshifts
on Jobs, Growth," John D. McKinnon (9/2/2011)
7
Housing Bubble Collapse
The U.S. housing
market remains well
below prerecession
levels, with seasonally
adjusted prices down
nearly 32% from 2006
home price highs
Home prices in the
Miami region as of
June 2011 are down
even more sharply than
the nation overall —
49.7% below the levels
of June 2006 — and
down 5.1 % from June
2010
2x1
191
13J
111
S&P/Case-Shiller U.S. National Home Price Index
- - - - L S National, index lei (left)
LS National, %diya {it)
60
1988
Netimely, home Pious end heal
•
to thei 2083 Ieuels
Record low decline of 18.9%in
200001 {said Me)
1998 1992 1994 199E 1999 2000 2002 2004 20013 2008 2010 2012
Source! S&I' Indices and Fiaern
Source: Standard and Poor's Case-Shiller Home Price
Index, August 30, 2011
8
20%6
15%
10%
5%
0%
25%
NO GP
rife
..[110 110.1l$
11 11
1 # R.
Jobs Remain a Concern
• In August 2011, the U.S.
economy produced zero net jobs
• While this figure was marginally
distorted by one-time factors,
overall job recovery remains
extraordinarily weak relative to
past economic downturns, and is
not keeping pace with overall
population growth
• As of August, the U.S.
unemployment rate was still at
9.1% (and would be 16.1%
including discouraged and
underemployed workers)
• Florida unemployment was even
higher at 10.7% as of July.
Miami -Dade County was at
12.5%, The City of Miami was at
13.3%
Cumulative change in nonfarm Employment -to -population
payrolls since each recession began ratio
AUGUST I -5.0%
AUGUST 58.2
6;'¢66%
1981=
1982
0
- 2007-
..
1991
MDIlTHS AFTER RECESSION START
56
'Source, E.hbor CKpt. via Moody's Analytic,
Chart Source: Wall Street Journal, "Job Growth Grinds to a Halt,"
Sudeep Reddy (9/3/2011); all data seasonally adjusted
Source for Unemployment Data: Bureau of Labor Statistics, national
and state data seasonally adjusted; county and city data available on
an unadjusted basis.
9
Miami Economy
■ The Miami regional economy has not only experienced an even more severe
downturn as a result of the recession than the nation as a whole, but the City's
residents continue to face significantly greater economic stress
Unemployment (July 2007 to July 2011)
Single Family Home Prices (Change
June 2006 —June 2011)
Median Household Income
4.7%to9.1%
5.3% to 13.3%
-31.6% -49.7%
$50,221
$28,999
Poverty Rate
14.3% 26.5%
Sources: Unemployment data from the BLS Local Area Unemployment Statistics (City -specific, most recent available is July 2011
preliminary, not seasonally adjusted; 2011 national data also shown for July for consistency of comparison, seasonally adjusted);
Home value data from Standard & Poor's Case-Shiller Home Price Index data, Miami Metropolitan Area and 20-City Composite, as
of June 2011 (seasonally adjusted, most recent available); Median Household Income and Poverty data from the 2009 American
Community Survey 1-Year Estimates (most recent available)
10
Structural Budget Challenges
• Ongoing public sector fiscal challenges
are not just cyclical, and few public
employers will grow their way out of
trouble even with stronger economic
recovery than now anticipated
• The U.S. Government Accountability
Office (GAO) has developed a
simulation model for the state and local
sector as an entirety, projecting
significant fiscal gaps absent corrective
action, due largely to:
Flat revenues as % of GDP
- Healthcare and retiree costs rising
faster than the overall economy
• GAO calculated that closing the
structural fiscal gap would require
action equivalent to a 12.5%
reduction in state and local
government recurring expenditures
Fiyure 1: State and Local operating Elalarti a r1e;tsure, as a Perc ntage or Gross
0orne.stjc Product;
Percentage 01 GDP
6
4
2
_2
_n
Surplus
(F):IltN Deland
Geilott
�;r�gaqr: Delan[��
21:05 2010 2015 2020 2025 2020 2025 2040 2045 2050 20E-5 2060
Year
w $tingGalence.4FrII2011
sauca:GhG.lnublhns, upda lad AprI2011.
Source: United States Government Accountability Office, "State and Local
Governments' Fiscal Outlook: April 2011 Update"
11
1l 11
▪ 1) R.
Miami Workforce Costs
As a Percentage of Recurring Revenues
■ As Miami began to run operating
deficits at the end of the last decade,
workforce costs as a percentage of
recurring revenues rose to
unsustainable levels
■ Without corrective action, the City's
spending on employee wages and
benefits was projected to grow to
101%in FY2011
■ With adoption of the City's proposals
last year, personnel costs are
projected to end FY2011 at 78% of
recurring revenues
■ As underlying cost pressures
continue to build while revenue
growth remains weak, workforce
costs are projected to again consume
a growing share of City resources in
FY2012 unless further cost
containment measures are adopted
101%
87%
82%
78% 11
79.6%
FY 2009 FY 2010 FY2011 FY2011 FY2012 FY2012
(w/ no action (projected (no concess.) (w/ concess.)
taken) actual)
12
NO GP
110.1l$
11 11
1 # R.
Widespread Cuts Nationally and Regionally
■ Similar to the City of Miami ($499.3 million General Fund Budget), governments both
nationally and regionally are taking difficult steps to address these cyclical and structural
pressures:
• City of Los Angeles, CA ($4.4 billion General Fund): Since FY2008, the City has
eliminated more than 4,200 positions, hundreds by layoff, and the Mayor is proposing
nearly 700 more position cuts for FY2012
City of Rockford, IL ($112.8 million General Fund): Illinois' third largest City has
removed more than 900 street lights, and plans to eliminate a total of 2,400, to save on
utility bills
■ City of North Miami Beach, FL ($49.2 million General Fund): The recently
approved budget of North Miami Beach includes layoffs for 17 police officers and
seven police department civilians to help fill a $7.5 million shortfall expected in FY2012
• City of Hialeah, FL ($122.7 million General Fund): To address its current budget
shortfall, the City of Hialeah is seeking $4 million in concessions from its fire union;
absent these concessions, over 100 City firefighters are proposed to be laid off in the
coming months
■ Miami -Dade County, FL ($1.7 billion General Fund): To address a FY2012 shortfall
of over $400 million (across tax -supported funds - $1.8 billion total), the County is
proposing the reduction of approximately 500 vacant and 700 filled positions, as well
as $239 million in union concessions
13
General Fund Balance
11 FY2007 - FY2011 (Projected)
• While revenues have declined sharply since FY2007, expenditure reductions
through FY2010 did not keep pace. As a result, Fund Balance eroded from nearly
$100.5 million in FY2007 to $13.4 million in FY2010
• Without Commission action, Miami's costs were projected to further increase in
FY2011, while City revenues remained in decline. As a result — even with last
year's revenue enhancement package — the City's would have seen a severe
deficit by the end of FY2011 absent the workforce expenditure savings adopted
• Even with the adjustment for the City's workforce expenditures, Miami's reserve
levels remain below recommended levels — equivalent to less than two weeks of
projected expenditures
■ As the City's finances stabilize, it will be critical to rebuild adequate Fund Balance
City of Miami Fund Balance: FY 07 - FY 11 (Projected)
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011*
Net Income
$553,009,038
$549,251,751
$519,306,337
$505,535,707
$485,769,023
Net Expenses
$578,815,407
$556,124,447
$572,911,198
$532,065,924
$485,506,636
Ending Fund Balance
$100,450,145
$93,577,449
$39,972,588
$13,442,370
$13,704,757
Source: FY2007 through FY2009 — City of Miami CAFRs; FY2010-FY2011 unadjusted and adjusted - City of Miami, Office
of Strategic Planning, Budgeting, and Performance. "FY2011 projected
14
Addressing the
FY2O12 Budget Gap
0,, of
r Summary of Current Status and Strategies for
ot'10 Closingthe Revenue vs. Expense Gap
#R�p
• A gap between revenue and expense for FY2011-12 is
anticipated; how large is the shortfall?
• What are the major revenue adjustments that have helped to
close the shortfall?
• What are some of the expense reductions that have helped in
closing the shortfall?
• What tentative bargaining agreements are in place, and what
impact will they have on the shortfall?
• What is the value of Options that may be imposed on the FOP?
• What other Options were/are available to the FOP?
16
0,, of
r Summary of Current Status and Strategies for
ot'10 Closingthe Revenue vs. Expense Gap
#R�p
• At the meeting of June 23, 2011, the estimated Stated Revenue (53,747,500)
vs. Expense Gap for FY2011-12 was:
• In July, the FPL Franchise Fee estimate decreased due to the (1,020,000)
anticipated fuel rebate and lower consumption:
• On July 21, 2011, the State released revised CST projections: (6,714,600)
■ On August 31, 2011, the Revenue Estimating Conference (1,075,900)
Committee recommended revisions to various line items based on
current performance:
Subtotal of negative fiscal impacts:
(62,558,000)
17
Summary of Current Status and Strategies for
oti1`"��y Closingthe Revenue vs. Expense Gap
p
Adjustments that have reduced the shortfall
(Revenue Improvements)
• A correction in the CRA Tax Increment computation and new construction
value added to the tax roll yielded additional revenue after the rollback
computation
■ State estimates for Local Option Gas Tax Distributions improved
• State estimate for Local Revenue Sharing and Half -Cent Distribution
improved
■ City revenue for Building Permits and Solid Waste improved, allowing an
increase in the forecast
■ Red Light Camera revenue
■ Retiree Health Plan contributions increased from 50% to 75% of cost
• Increased Public Facility revenue (Rowing Club, Burn Notice, Flagstone,
Marinas)
■ NET Office revenue improvements
Total Revenue Improvement
1,600,600
1,270,300
558,200
3,309,700
2,500,000
1,125,000
892,000
335,000
11,590,800
18
to,Summary of Current Status and Strategies for
the Revenue vs. Ex ense �#R�� Closing p Gap
Adjustments to reduce the shortfall (Expenditure Reductions)
• All vacant civilian and Fire Rescue sworn positions frozen or eliminated
• All vacant Police sworn positions funded at 50%
• Updated Risk Management information on Property Insurance, cost lowered
• Elimination of Transfers to Capital for Fire Rescue Apparatus purchase and
Facility Maintenance
• Reduction to Special Pay Reserve in NDA; reserve in use to cover separation
related costs ($8 million still in reserve)
• Contribution to ARRA Grant, IAFF Retiree Health Plan, Miscellaneous Items
• Other adjustments to departmental personnel and operating expenses:
— General Government
— Planning & Development
— Public Works
— Public Safety
— Public Facilities, Parks, Risk and Grants
— Other Miscellaneous Expense Adjustments
Total Expenditure Reductions
7,411,700
2,427,900
6,168,800
6,224,500
2,000,000
(767,000)
2,348,400
151,300
682,000
845,100
723,300
570,000
28,786,000
19
0,, of
r Summary of Current Status and Strategies for
ot'10 Closingthe Revenue vs. Expense Gap
#R�p
Overall Revenue vs. Expense Gap (62,558,000)
Reduced by improved revenue outlook 11,590,800
Further reduced by expense reductions 28,786,000
Balance to be resolved (22,181,200)
20
0,, of
r Summary of Current Status and Strategies for
•tieilulf
"` Closing the Revenue vs. Expense Gap
{R t
4ti
FY 2011-12 Total Revenue by Category
The current total estimated revenue is $471 million.
$81,565,000
$1,500,000
$36,350,000
$215,449,900
Property Taxes
Franchise Fees and Other Taxes
Interest
Transfer -In
Fines and Forfeitures*
Intergovernmental Revenue
Licenses and Permits*
Other Revenues*
Charges for Services*
21
``""' r' � Summary of Current Status and Strategies for
��'1`'`�'y Closingthe Revenue vs. Expense Gap
p
FY 2011-12 Total Expenditures by Category
$11,377,400
$25,476,800
Salary and Fringe (Excluding Pay
Out Reserve)
Pension & Insurance
$246,167,300
Other Operating Exp. Excluding
Reserve
Contingency, Revenue, and Pay
Out Reserve
Interfund Transfers
Based on the relative size of the expense categories,
gap closure requires evaluating workforce expenditures
(Total expenses $493 million)
22
Summary of Current Status and Strategies for
oti1`"��y Closingthe Revenue vs. Expense Gap
p
Bargaining Unit Agreements (preliminarily accepted terms)
• IAFF — Allow funds from section 175 SHARE account to be provided to 4,865,000
FIPO, reducing City contribution
■ IAFF — Eliminate requirement to conduct training in overtime and reduce 1,740,000
minimum staffing
• IAFF — Allow the elimination or freeze of currently vacant Fire Fighter 1,500,000
positions
■ IAFF — No contribution by the City to the Retiree Health Plan 365,000
• IAFF — Charge staff that take cars home 70,800
Subtotal International Association of Fire Fighters (IAFF) 8,540,800
• AFSCME 1907 — Forego three holidays (three furlough days) 660,000
■ AFSCME 1907 — Eliminate Auto Allowance for 13 unit employees 38,000
• AFSCME 1907 and Unclassified Emp. — Those who have a 24-hour vehicle 150,000
will pay based on where they live
• AFSCME 1907 and Unclassified Emp. — Increase co -pay for primary care 900,000
physician and specialists
Subtotal AFSCME 1907 and Unclassified Employees 1,748,000
Subtotal for Remaining Gap (11,892,400)
23
Summary of Current Status and Strategies for
oti1`"��y Closingthe Revenue vs. Expense Gap
p
Negotiate agreement or impose reductions — FOP
• FOP — Special pay supplements (i.e. SWAT, Dog Handler, Crime 3,700,000
Prevention, etc.)
■ FOP — Defund General Fund transfer to Capital for purchase of police cars 3,695,000
■ FOP — Uniforms and physicals 1,300,000
• FOP — Charge officers living outside of the City for taking home their cars 1,049,000
• FOP — Apply FLSA rules for overtime 779,000
■ Eliminate Night Shift Pay 288,000
■ Forego three holidays (Saving from Holiday Overtime) 228,000
• FOP — Forego the three Holidays same as AFSCME 912,000
Subtotal FOP — The above may be imposed by Commission Action 11,951,000
24
FOP Supplemental Pays
■ City Proposal: Eliminate FOP Supplemental pays
■ Estimated Impact:$3.7 million
Pay Supplement
Bomb Squad
$57.70 biweekly
Certified Underwater 5.00%
CJIS Instructor Cert 2.00%
Comm Complaint Room 5.00%
Crime Prevention
$103.85 biweekly
Crisis Intervention 2.50%
Field Training Officer $57.70 biweekly
Investigator Pay $57.70 biweekly
Neighborhood Resource Officers
$57.70 biweekly
Senior Uniform Patrol Officer $57.70 biweekly
Sr Uniform Patrol Sgt $57.70 biweekly
SWAT Police $57.70 biweekly
Est. Total Annual Cost
$10,501
$33,956
$34,450
$43,447
$2,870,20€
$126,797
$96,012
$103,513
$39,005
$211,528
$57,650
$67,509
25
..[110 110.1l$
11 11
! S}
1 # R.
FOP Take -Home Vehicles
■ City Proposal: Charge a monthly fee for FOP take-home vehicles based on
area of residence
— Residing within the City of Miami — No fee
— Residing outside of Miami, but within Dade County - $100/month
— Residing in Broward County - $150/month
— Residing in Palm Beach or Monroe County - $250/month
■ Estimated Impact: $1.0 million
Monthly
Rate
Number of
Vehicles
Estimated Annual
Value
City of Miami
Dade County (Outside Miami)
Broward County
Palm Beach or Monroe County
TOTAL
$0
$100
$150
$250
97
586
187
3
873
$0
$703,000
$337,000
$9,000
$1,049,000
26
0,, of
r Summary of Current Status and Strategies for
Closingthe Revenue vs. Expense Gap
p
To close the gap that remains (11,892,400)
What combination of FOP bargaining unit negotiation /
imposition will achieve budget balance?
FOP options that can be imposed - total 11,951,000
27