Finance Department

Presentation to the City of Houston Budget and Fiscal Affairs Committee

FY2012 Budget Overview and

General Fund Five Year Forecast

May 31, 2011

Kelly Dowe, Director

2

Table of Contents

Section Page

Fiscal Year 2012 Budget Overview 3General Fund Budget Revenues 5General Fund Budget Expenditures 12

General Fund Five Year Plan 18Five Year Plan Revenues 20Five Year Plan Expenditures 21Five Year Management Strategies

24

3

Fiscal Year 2012 - Budget Overview

• Budget balanced without use of pension obligation bonds or fund balance for the first time since Fiscal Year 2004.

• Departmental budgets approximately 4% to 27% lower than FY2011 spending levels.

• Overall budget is approximately $100 million lower than FY2011 Current Budget.

• Preserves public safety as the top priority for the City.• Includes $10 million transfer from Houston First Limited

Government Corporation.• Presentation includes adjustments to HPD and HFD

budgets that were not available when the budget was printed.

Summary Of All Funds

4

General Fund1,913,600

54%Water & Sewer913,003

25%

Aviation420,274

12%

Other Funds317,570

9%

FY2011 Current Budget Expenditure of $3,564,447

($ Thousands)

General Fund1,815,659

49%

Water & Sewer937,585

25%

Aviation430,651

12%

Other Funds511,917

14%

FY2012 Proposed Budget Expenditure of $3,695,812

($ Thousands)

5

General Fund Revenues

Property Tax$850,712

48%

Sales Tax$490,883

27%

Franchise Fees

$190,303 11%

Other Revenue$254,956

14%

Property Tax$842,478

48%

Sales Tax$518,912

29%

Franchise Fees

$190,230 11%

Other Revenue$209,228

12%

FY2012 Total Budgeted Revenues of $1,760,848

($ Thousands)

FY2011 Total Estimated Revenues of $1,786,854

($ Thousands)

6

General Fund Revenues FY2003 - FY2012

(in $Thous)2003

Actual2004

Actual2005

Actual2006

Actual2007

Actual2008

Actual2009

Actual2010

Actual2011

Estimates2012

Proposed

Property Tax 636,028$ 660,999$ 671,294$ 705,952$ 748,792$ 830,889$ 890,088$ 892,865$ 850,712$ 842,478$

Sales Tax 322,538$ 347,982$ 370,583$ 422,598$ 461,417$ 495,173$ 507,103$ 468,965$ 490,883$ 518,912$

Franchise Fees 160,674$ 161,378$ 162,262$ 186,508$ 189,551$ 190,196$ 190,322$ 190,869$ 190,303$ 190,230$

Other Revenue 231,499$ 229,851$ 245,937$ 237,554$ 255,522$ 245,480$ 236,760$ 229,448$ 254,956$ 209,228$

Total GF Revenues 1,350,739$ 1,400,211$ 1,450,076$ 1,552,611$ 1,655,281$ 1,761,737$ 1,824,272$ 1,782,147$ 1,786,854$ 1,760,848$

Change YOY ($) -$ 49,471$ 49,866$ 102,535$ 102,670$ 106,456$ 62,535$ (42,125)$ 4,707$ (26,006)$

Change YOY (%) 0.00% 3.66% 3.56% 7.07% 6.61% 6.43% 3.55% -2.31% 0.26% -1.46%

$1,350,739 $1,400,211$1,450,076

$1,552,611

$1,655,281

$1,761,737$1,824,272

$1,782,147 $1,786,854 $1,760,848

$400,000

$650,000

$900,000

$1,150,000

$1,400,000

$1,650,000

2003 Actual

2004 Actual

2005 Actual

2006 Actual

2007 Actual

2008 Actual

2009 Actual

2010 Actual

2011 Estimates

2012 Proposed

Other Revenue

Franchise Fees

Sales Tax

Property Tax

Fiscal Year

Ge

ne

ral

Fu

nd

Re

ve

nu

es

($

Th

ou

s)

7

Property Tax Revenue

• Assumptions: – Decline in property tax revenue of 1.0%,

$8.2 million lower than FY2011. – No change in the current tax rate ($0.63875

per $100 valuation).– Collection rate of 96.9%.– Net of tax increment zone payments.

8

Trends in Property Tax Revenues FY2009 - FY2012

(in $Thous)2003

Actual2004

Actual2005

Actual2006

Actual2007

Actual2008

Actual2009

Actual2010

Actual2011

Estimates2012

Proposed

Property Tax Revenues

Adopted Budget 654,070$ 662,741$ 671,553$ 690,246$ 730,520$ 796,368$ 878,486$ 909,715$ 846,136$ 842,478$

Actual/ Projected 636,028$ 660,999$ 671,294$ 705,952$ 748,792$ 830,889$ 890,088$ 892,865$ 850,712$ 842,478$

Variance Over/(Under) (18,042)$ (1,742)$ (259)$ 15,706$ 18,272$ 34,521$ 11,602$ (16,850)$ 4,576$ -$

$878,486

$909,715

$846,136 $842,478

$890,088 $892,865

$850,712

$842,478

$800,000

$820,000

$840,000

$860,000

$880,000

$900,000

$920,000

2009 Actual

2010 Actual

2011 Estimates

2012 Proposed

Adopted Budget

Actual/ Projected

Fiscal Year

To

tal P

rop

erty

Ta

x R

ev

enu

es (

$Th

ou

s)

9

Sales Tax Revenue

• Assumptions: – Positive growth trend in FY2012 of 5.7%,

$28.0 million higher than FY2011. – Continued positive year-over-year

employment growth.– Oil at or above $70/barrel.

10

Trends in Sales Tax Revenues FY2009 - FY2012

(in $Thous)2003

Actual2004

Actual2005

Actual2006

Actual2007

Actual2008

Actual2009

Actual2010

Actual2011

Estimates2012

Proposed

Sales Tax Revenues

Adopted Budget 361,087$ 329,657$ 371,548$ 395,845$ 431,219$ 477,217$ 526,723$ 507,300$ 473,754$ 518,912$

Actual/ Projected 322,538$ 347,982$ 370,583$ 422,598$ 461,417$ 495,173$ 507,103$ 468,965$ 490,883$ 518,912$

Variance (Over/Under) (38,549)$ 18,325$ (965)$ 26,753$ 30,198$ 17,956$ (19,620)$ (38,335)$ 17,129$ -$

$526,723

$507,300

$473,754

$518,912

$507,103

$468,965

$490,883

$518,912

$430,000

$440,000

$450,000

$460,000

$470,000

$480,000

$490,000

$500,000

$510,000

$520,000

$530,000

2009 Actual

2010 Actual

2011 Estimates

2012 Proposed

Adopted Budget

Actual/ Projected

Fiscal Year

To

tal S

ales

Tax

Rev

enu

es (

$Th

ou

s)

11

Other Revenues and Sources of Funds

• Assumptions: – Sale of Land of $13.6 million

• Approximately the same amount as in FY2011 transactions

• $10.7 million in non-right-of-way properties– Transfers of $27.1 million:

• $17.1 million transfers from Combined Utility System for debt repayment

• $10.0 million from Houston First consolidation– Ongoing transfers of $14.2 million:

• $9.2 million from Parking Management, $2.2 million from Auto Dealers, $2.5 million from Building Inspection, and $340,000 from other funds

– No drawdown in fund balance.

General Fund Expenditures

12

Development & Maint Svcs: General Services, Planning & Development, Public Works, Solid Waste, Municipal Courts, and HEC

Human & Cultural Svcs: Convention & Entertainment, Health & Human Services, Housing, Library, and Parks

Administrative Svcs: Administration and Regulatory Affairs, Controller, City Council, City Secretary ,Finance, Human Resources,

Information Technology Legal, Mayor's Office, Office of Business Opportunity

Police$663,461 39.19%

Fire$448,812 26.51%

Development & Maint Svcs$243,349 14.37%

Human & Cultural Svcs

$146,061 8.63%

Administrative Svcs

$100,571 5.94%

General Government

$90,679 5.36%

FY2011 Current Budget Expenditures of $1,692,933

($ Thousands)

Police$640,741 40.40%

Fire$419,309 26.44%

Development & Maint Svcs,

$191,277 , 12.06%

Human & Cultural Svcs

$133,322 8.41%

Administrative Svcs

$98,926 6.24%

General Government

$102,384 6.46%

FY2012 Proposed Budget Expenditures of $1,585,959

($ Thousands)

13

General Fund Expenditures FY2003 - FY2012 (Including Debt Service)

(in $Thous)

2003 Actual

2004 Actual

2005 Actual

2006 Actual

2007 Actual

2008 Actual

2009 Actual

2010 Actual

2011 Estimates

2012 Proposed

Public Safety 743,101$ 764,583$ 797,198$ 871,097$ 952,057$ 1,017,398$ 1,091,223$ 1,109,811$ 1,123,444$ 1,071,601$

Non-Public Safety 459,259$ 471,749$ 482,681$ 497,649$ 507,019$ 550,086$ 577,477$ 566,556$ 569,318$ 514,358$

Debt Service 178,000$ 165,000$ 188,000$ 195,000$ 209,000$ 209,350$ 232,948$ 240,020$ 220,838$ 229,700$

Expenses 1,380,360$ 1,401,332$ 1,467,879$ 1,563,746$ 1,668,076$ 1,776,834$ 1,901,648$ 1,916,387$ 1,913,600$ 1,815,659$

Change YOY ($) 20,972$ 66,547$ 95,867$ 104,330$ 108,758$ 124,814$ 14,739$ (2,787)$ (97,941)$

Change YOY (%) 1.52% 4.75% 6.53% 6.67% 6.52% 7.02% 0.78% -0.15% -5.12%

$1,380,360 $1,401,332$1,467,879

$1,563,746

$1,668,076

$1,776,834

$1,901,648 $1,916,387 $1,913,600

$1,815,659

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

2003 Actual

2004 Actual

2005 Actual

2006 Actual

2007 Actual

2008 Actual

2009 Actual

2010 Actual

2011 Estimates

2012 Proposed

Debt Service

Non-Public Safety

Public Safety

Fiscal Year

Gen

era

l F

un

d E

xp

en

dit

ure

s (

$ T

ho

us)

14

Expenditures Summary

• No pay increases.• Savings in Health Benefits from implementation of new contract. • Includes termination pay allowances of $5.4 million.• Reflects decreases in HR and IT costs resulting from

consolidations.• Fleet costs budgeted conservatively with no change in FY2012

costs.• Police:

– Deferred pension contribution of $17 million.– No layoffs for classified and jail employees.

• Fire: – Deferred termination pay and other pays.– Pension rate of 23.9%.– No layoffs of classified personnel pending ratification of new

collective bargaining agreement.

15

General Fund Full-Time Equivalents

6,736.2 6,505.3 4,799.2

5,260.7 5,081.1

5,041.1

3,940.0 3,867.3

3,776.8

-

2,000.0

4,000.0

6,000.0

8,000.0

10,000.0

12,000.0

14,000.0

16,000.0

18,000.0

FY2010 Actual FY2011 Current FY2012 Proposed

FT

E (

Nu

mb

er)

Fire-Classified

Police-Classified

Civilian

15,936.9

13,617.1

15,453.7

16

General Fund Pension Contributions FY2003 - FY2012

( in $Thous)2003

Actual2004

Actual2005

Actual2006

Actual2007

Actual2008

Actual2009

Actual2010

Actual2011

Estimate2012

Proposed

HMEPS 23,524 29,317 34,437 32,501 33,932 35,278 37,994 40,017 40,256 35,533

HFFRF* 27,772 28,325 32,699 48,738 51,984 53,981 70,506 74,299 76,503 59,845

HPOPS 34,532 36,523 36,502 52,697 57,597 62,627 67,495 72,669 77,566 65,566

Pension Contributions 85,828$ 94,165$ 103,638$ 133,936$ 143,513$ 151,886$ 175,995$ 186,984$ 194,325$ 160,945$

Change YOY ($) 8,337$ 9,473$ 30,298$ 9,577$ 8,373$ 24,109$ 10,989$ 7,341$ (33,380)$

Change YOY (%) 9.71% 10.06% 29.23% 7.15% 5.83% 15.87% 6.24% 3.93% -17.18%

* HFFRF pending final adjustments based on staffing changes resulting from collective bargaining agreement.

$85,828$94,165

$103,638

$133,936

$145,513 $151,886

$175,995

$186,984$194,325

$160,945

-

50,000

100,000

150,000

200,000

250,000

2003 Actual

2004 Actual

2005 Actual

2006 Actual

2007 Actual

2008 Actual

2009 Actual

2010 Actual

2011 Estimate

2012 Proposed

HPOPS

HFFRF*

HMEPS

Pe

ns

ion

Co

ntr

ibu

tio

n (

$ T

ho

us)

Fiscal Year

17

General Fund Unassigned Ending Fund Balance FY2002 - FY2012

2002 Actual

2003 Actual

2004 Actual

2005 Actual

2006 Actual

2007 Actual

2008 Actual

2009 Actual

2010 Actual

2011 Estimate

2012 Proposed

EOY GF Balance $80,335 $83,027 $88,659 $120,042 $175,832 $234,535 $253,514 $236,275 $165,383 $102,646 $102,644

5% Fund Balance $68,138 $69,018 $70,067 $73,394 $78,187 $83,404 $88,842 $95,082 $95,819 $95,680 $90,783

$80,335 $83,027 $88,659

$120,042

$175,832

$234,535

$253,514

$236,275

$165,383

$102,646 $102,644

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

EOY GF Balance

5% Fund Balance

En

din

g F

un

d B

ala

nce (

$T

ho

us)

Fiscal Year

Finance Department

General Fund Five Year PlanFY2012 – FY2016

19

Overview

• This 5-year plan is based on the FY2012 Proposed Budget.

• Expenditures include legal mandates, staffing for new facilities, and contractual escalators.

• Capital outlay/equipment acquisition are not included.

• Includes debt service for capital projects but no new drainage debt issuance.

20

Revenue Summary($ Thousands)

SummaryFY2011

EstimatesFY2012

ProjectionFY2013

ProjectionFY2014

ProjectionFY2015

ProjectionFY2016

Projection

Property Tax Revenues 850,712 842,478 866,906 905,282 947,604 987,584 Sales Tax 490,883 518,912 555,236 588,217 624,510 649,491 Franchise Revenue 190,303 190,230 191,192 192,264 193,446 195,380 Other Revenues 254,956 209,229 213,034 217,206 221,670 226,104 Total Revenues 1,786,854 1,760,849 1,826,369 1,902,970 1,987,231 2,058,559

Property Tax Revenues -0.97% 2.90% 4.43% 4.68% 4.22%Sales Tax 5.71% 7.00% 5.94% 6.17% 4.00%Franchise Revenue -0.04% 0.51% 0.56% 0.61% 1.00%Other Revenues -17.94% 1.82% 1.96% 2.06% 2.00%Total Percentage Change -1.46% 3.72% 4.19% 4.43% 3.59%Total Revenue Change (26,005) 65,520 76,601 84,261 71,328

Expenditure Summary ($ Thousands)

21

Cost CategoriesFY2011

EstimatesFY2012

ProjectionFY2013

ProjectionFY2014

ProjectionFY2015

ProjectionFY2016

Projection

Prior Year Actual/Operating Budget 1,648,478 1,692,762 1,585,958 1,617,740 1,675,457 1,742,852

Budget Reduction (11,468) (61,913) - - - - Civilian Compensation and Health Benefits 19,472 13,197 263 11,493 11,870 12,266 Police Personnel & Programs 3,949 (6,111) 24,482 18,564 20,488 39,486 Fire Personnel & Programs 21,067 (9,147) 727 19,220 29,269 (8,069) Other Departmental Adjustments (552) (43,879) 1,640 1,535 1,536 1,536 Contracts & General Government 7,110 (1,463) (2,679) 4,486 1,741 4,974 Energy Costs 4,707 2,511 2,349 2,419 2,492 2,567 Rainy Day Fund Reimbursement - - 5,000 - - -

Expenditures Increase/Decrease 44,285 (106,805) 31,782 57,717 67,396 52,759

Total Operating Expenditures 1,692,762 1,585,958 1,617,740 1,675,457 1,742,852 1,795,612

Percentage Change -6.31% 2.00% 3.57% 4.02% 3.03%Expenditure Change (106,805) 31,782 57,717 67,396 52,759

22

Expenditures Details

• Health benefits increases by approximately 5% each year.

• Police increases based on the HPOU agreement.• Fire increases also based on the recent

negotiation. • Includes Rainy Day Fund reimbursement of $5

million per year beginning in FY2013.• Pension increases:

– HMEPS: 2% per year FY2013-16.– HPOPS: $10 million per year FY2013-16.– HFFRF: Assumes contribution rate increases to 36.3%

in FY2014.

23

Revenue & Expenditure Summary ($ Thousands)

FY2011 Estimates

FY2012 Projection

FY2013 Projection

FY2014 Projection

FY2015 Projection

FY2016 Projection

Beginning Balance 165,383 102,645 102,645 102,645 102,645 102,644

Property Tax Revenues 850,712 842,478 866,906 905,282 947,604 987,584 Sales Tax 490,883 518,912 555,236 588,217 624,510 649,491 Franchise Revenue 190,303 190,230 191,192 192,264 193,446 195,380 Other Revenues 254,956 209,229 213,034 217,206 221,670 226,104 Transfers/Sale of Assets 44,009 54,809 35,182 10,978 11,283 11,283

Total Revenues and Other Sources 1,830,863 1,815,658 1,861,551 1,913,948 1,998,514 2,069,842

Total Operating Expenditures 1,692,762 1,585,958 1,617,740 1,675,457 1,742,852 1,795,612 Transfers for Debt Service 232,545 229,700 256,100 274,100 274,100 274,100 Transfer for Fleet/Equipment Debt to Departments (11,707) - - - - -

Total Expenditures 1,913,600 1,815,658 1,873,840 1,949,557 2,016,952 2,069,712

Fund Balance Drawdown 82,738 - - - - (130) Net Activity (The Gap) - - (12,289) (35,609) (18,438) -

Change in Assigned Fund Balance 20,000 - - - - -

Ending Fund Balance* 102,645 102,645 102,645 102,645 102,644 102,774

Fund Balance as Percent of Expenditures (less Debt) 6.06% 6.47% 6.34% 6.13% 5.89% 5.72%

* Fund Balance figures assume gap is eliminated in each fiscal year.

24

Five Year Management Strategies

• Continued efforts to improve collection of current and past due balances owed to the City.

• Full implementation of Kronos, Fleet consolidation and IT consolidation.

• On-going negotiation of Fire cost savings as agreed upon in collective bargaining agreement.

• Pension reform for new employees. • Continued efforts to cut costs and improve

productivity within departments. • Continued efforts to lower health benefits cost

increases.