Clark County Budget & Economic Outlook

July 22, 2015 Work Session: Board of Clark County

Councilors

Agenda

General Fund 2015-16 current budget overview

General Fund actual performance and trends through June 2015

General Fund status of reserves

National and local economic outlook

State Legislative Session impacts 2

Summary• Preliminary financial statements show

General Fund unassigned reserves at $24.8 million at the start of the 2015-2016 biennium.

•Starting Point

• The General Fund 2015-2016 current budget preserves the $23 million recommended level of unassigned reserves.

•Budget

• Reserves further improved in the first two quarters of 2015 due to departmental savings and revenues above forecast.

•Trends

• The budget is built on cautiously optimistic forecast assumptions; positive trends continue; some risks remain.

•Economy 3

2015 General Fund Revenue Trends: 2nd Quarter

Above Forecast Below Forecast$966,373 Sales tax ($314,802) Corrections revenue$852,808 Property tax + penalty and interest on delinquent property taxes

($258,877) Clerk fee collections

$180,542 Motor vehicle fees ($101,857) Net misc. other revenues$145,725 Recording fees$2,145,448 Total above forecast ($675,536) Total below forecast

Total January – June 2015: $1,469,912 above forecast

Overall revenues are 2.1% above forecast for the first six months of 2015.

Sales tax receipts, as well as property tax penalty and interest revenues, are ahead of forecast.

Corrections revenues (especially supervision fees) and Clerk collected fees are below forecast.

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2015-16 General Fund Unassigned Reserves (in millions)

Unassigned reserves as of January 2015 $24.8

Sales tax revenue from FY 2014 not yet transferred to the General Fund $1.1

Spring 2015 supplemental appropriation ($0.8)

January-June 2015 expense savings $1.4

January-June 2015 revenues above forecast $1.5

Total unassigned reserves July 1, 2015 $28.05

Outstanding Liabilities & Needs

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• Immediate Needs (2015)

• Telephone system replacement

• Document management system replacement

• Intermediate Needs (2016-2019)

• General Fund Parks maintenance and capital repairs

• Restore subsidy transfers eliminated in 2015-16

• Fund ERP/Oracle replacement or upgrade

• Unknowns

• Unanticipated expenditures

• Unforeseen decline or loss of revenues

Global Economy

Global economic growth is projected at 3.3 % in 2015, slightly lower than in 2014; followed by 3.8% growth in 2016.

Advanced economies (US, Canada, Japan, Eurozone) are forecasted to experience a gradual pickup, in contrast to a slowdown in emerging market and developing economies.

Downside risks to global growth, including geopolitical and economic factors, still outweigh upside risks. 7

National Economy

Economic Indicators

The national economy contracted 0.2% in the first quarter, due to a mix of factors: harsh winter, port closures, and lower capital expenditures in the oil sector.

However, the main drivers of consumption and investment are positive: improved labor market; higher consumer confidence; better financial conditions; lower fuel prices; strengthened housing market.

Economic forecasts calls for real GDP growth of close to 3% for 2015. GDP growth rate in the United States averaged 3.26% from 1947 until 2015.

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Clark County Economy Jobs: 5,400 jobs in the past 12 months, with a strong

annual growth rate of 3.7%.

Over the year, employment growth occurred in every major sector; the leading sectors were:

Professional and business services (up 1,000 jobs) Trade, transportation and utilities (up 900 jobs) Education and health services (up 900 positions) Leisure and hospitality (up 700 jobs)

Unemployment: County preliminary rate was 6.5% in June 2015, down from 7.3% in June 2014.

Comparative Growth Rates

US = 2.1%, WA State = 3.7%, Portland Metro = 3.6%

Comparative Unemployment Rates (Not seasonally adjusted)

US & WA State = 5.3% (June ) Portland Metro = 5.1% (May)

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Clark County Economy

10Jan-0

1

Sep-0

1

May

-02

Jan-0

3

Sep-0

3

May

-04

Jan-0

5

Sep-0

5

May

-06

Jan-0

7

Sep-0

7

May

-08

Jan-0

9

Sep-0

9

May

-10

Jan-1

1

Sep-1

1

May

-12

Jan-1

3

Sep-1

3

May

-14

Jan-1

50%

200%

400%

600%

800%

1000%

1200%

1400%

1600%

1800%

Monthly Unemployment Rates January 2001 - June 2015(not seasonally adjusted)

Clark County Portland MSA WA state

Clark County Economy• Countywide sales rose 13.8% in the firth quarter of

2015, compared with the first quarter of 2014. •Construction related sales were up 21%•Vehicles sales were up 19%

Taxable Retail Sales

• Issued countywide through May 2015, compared with the same months in 2014:

• Single family: 860, compared with 660 (30% increase)• Multi-family: 317, compared with 539 (41% decline, but still

far above average of 215)

• As of June 2015, the residential supply of homes for sale was 2.1 months. This is on the very low end (“normal” supply is 4-7 months).

• As of June 2015, the median home price was $275,000. Year-to-date, median price is up 10.6% (RMLS data).

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Clark County Economy

12

$-

$100

$200

$300

$400

$500

$600 Construction Related Taxable Retail Sales (in millions)

Q1 Q2 Q3 Q4

$-

$300

$600

$900

$1,200

$1,500 All Other Taxable Retail Sales (in millions)

Q1 Q2 Q3 Q4

Clark County Economy

Data and graph courtesy of Clark County Community Development

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$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000Unincorporated Non-Residential Building Permit Valuation

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Legacy Hospital ($49M)

3 Larger Projects - WSU Technology Bldg., Manor Congregate Care,

Pharmacy

Clark County Economy

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Dec-0

0

Jun-0

1

Dec-0

1

Jun-0

2

Dec-0

2

Jun-0

3

Dec-0

3

Jun-0

4

Dec-0

4

Jun-0

5

Dec-0

5

Jun-0

6

Dec-0

6

Jun-0

7

Dec-0

7

Jun-0

8

Dec-0

8

Jun-0

9

Dec-0

9

Jun-1

0

Dec-1

0

Jun-1

1

Dec-1

1

Jun-1

2

Dec-1

2

Jun-1

3

Dec-1

3

Jun-1

4

Dec-1

40

50

100

150

200

250

300

350

400

Clark County Single Family Residential Permits12 Month Rolling Average – through May 2015

Clark County Economy

January

Febru

ary

March April

May

June

July

August

September

October

November

December

-

100

200

300

400

500

600

700

800

900

5 Year History - Closed Home Sales(year-over-year increase through

June 2015)

2011 2012 2013 2014 2015

24%20%

33%

29% 12%

33%

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Clark County Economy

162000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 $-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Revenue collections are up 38% , year-over-year, for the first two quarters.

Historical REET Revenue Collections

2015 Legislative Session

2015-17 biennial budget, signed by the Governor in late June, included an increase in K-12 education funding in response to McCLeary decision

Remote seller sales tax nexus changes (ESSB 6138)

REET flexibility changes (EHB 2122)

Public Works Trust Fund “sweep”

Transportation project funding 17

Risks Remain

Weakness persists in some areas: New construction activity improved but it is

still weak Low real wage growth Small business confidence issues

Federal Reserve rate increase timing and impacts

Greek debt default concerns in Europe

Slowdown of economy in China

Geopolitical conflicts (Russia/Ukraine, conflict in Iraq and Syria)

U.S. dollar appreciation poses risks of balance sheet and funding risks for dollar debtors, especially in emerging market economies.

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Conclusions

The General Fund started FY 2015-16 with unassigned reserves of $24.8 million (above the recommended level of $23 million).

Current Clark County economic conditions moderately exceed revenue forecast assumptions. Accordingly, improving revenues and departmental savings place estimated unassigned reserves at $28 million as of July 1, 2015.

The improvement in fund balance will help the General Fund address pressing immediate needs for major infrastructure projects.

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