Finance Department

Presentation to the City of Houston Budget and Fiscal Affairs Committee

FY2011 Budget Overview and

General Fund Five Year Scenario

May 17, 2010

Michelle Mitchell, Director

2

Table of Contents

Section Page

Fiscal Year 2011 Budget Overview 3General Fund Budget Revenues 9General Fund Budget Expenditures 17Management Strategies 31

General Fund Five Year Plan 34Five Year Plan Revenues 36Five Year Plan Expenditures 44Debt Service 49Five Year Management Strategies 50

Finance Department

Fiscal Year 2011 Budget Overview

4

Overview

• This budget overview highlights financial challenges in all departments.

• Demonstrates effect of the recession.• Highlights structural financial imbalances

to be addressed through accelerated use of process reengineering and consolidation.

5

Houston Employment(Not Seasonally Adjusted)

Source: Texas Workforce Commission

2,420.0

2,440.0

2,460.0

2,480.0

2,500.0

2,520.0

2,540.0

2,560.0

2,580.0

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10

Feb

-10

Mar

-10

Em

plo

ymen

t (T

ho

usa

nd

s)

-4.5%

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

Yea

r O

ver

Yea

r %

Ch

ang

e

Employment

% Change

6

Rotary Rig CountMonthly Working U.S.

994.5

1,044.4

1,479.4

800.0

900.0

1,000.0

1,100.0

1,200.0

1,300.0

1,400.0

1,500.0

1,600.0

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

Month

Avera

ge R

igs

Source: Baker Hughes

7

Summary Of All Funds ($ Millions)

FY2010 Current FY2011 Proposed Budget Budget

SOURCES OF FUNDS Beginning Fund Balances 797.5 691.1Revenues & Other Sources 3,369.3 3,431.3

Total Available Resources 4,166.8 4,122.4

USES OF FUNDS Operating Expenditures 2,595.8 2,580.7Revenue Supported Debt Service 508.3 574.6General Obligation Debt Service 275.0 250.6Transfer to Other Funds 84.6 93.2Capital Improvement Funds 50.9 38.2Ending Fund Balances 652.2 585.1

Total Budget 4,166.8 4,122.4Change (44.4)% Change -1.1%

FY2010 Adopted Total Budget = $4,008.3

Note:FY2010 Adopted Total Budget = $4,008.3% Change FY2010 Adopted to FY2010 Current Budget = 3.95%% Change FY2010 Adopted to FY2011 Proposed = 2.85%

8

Summary Of All Funds

FY2011 Total Budgeted Expenditures of

$3,537,284

FY2010 Total Current Budget Expenditures of

$3,514,658

Other Funds, $323,709

Aviation, $416,704

Water & Sewer, $856,060

General Fund, $1,918,185 Water & Sewer,

$912,804

Aviation, $414,018

Other Funds, $320,379

General Fund, $1,890,083

Note:FY2010 Adopted Total Budget Expenditures = $3,575.7% Change FY2010 Adopted to FY2010 Current Budget = -1.7%% Change FY2010 Adopted to FY2011 Proposed = -1.1%

(Including Debt Service, $ Thousands)

Change = $22,626% Change = 0.64%

Finance Department

General Fund Budget Revenues

10

Others12.94%

Franchise Fees10.72%

Sales Tax25.99%

Property Tax50.35%

Others14.83%

Franchise Fees10.65%

Sales Tax26.75%

Property Tax47.77%

General Fund Revenues($ Thousands)

FY2011 Total Revenues of $1,771,365

FY2010 Total Estimated Revenues of $1,769,989

Change = $1,376% Change =0.08%

Note:FY2010 Adopted Budget Revenues = 1,843,781% Change FY2010 Adopted to FY2010 Estimate = -4.0%% Change FY2010 Adopted to FY2011 Proposed = -3.9%

11

General Fund Revenues FY2002-FY2011

(in $Thous) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Property Tax 612,834$ 636,028$ 660,999$ 671,294$ 705,952$ 748,792$ 830,889$ 890,088$ 891,216$ 846,136$

Sales Tax 341,952$ 322,538$ 347,982$ 370,583$ 422,598$ 461,417$ 495,173$ 507,103$ 460,000$ 473,754$

Franchise Fees 175,359$ 160,674$ 161,378$ 162,262$ 186,508$ 189,551$ 190,196$ 190,322$ 189,687$ 188,736$

Other Revenue 238,548$ 231,499$ 229,851$ 245,937$ 237,554$ 255,522$ 245,480$ 236,760$ 229,086$ 262,739$

Total GF Revenues 1,368,694$ 1,350,739$ 1,400,211$ 1,450,076$ 1,552,611$ 1,655,281$ 1,761,737$ 1,824,272$ 1,769,989$ 1,771,365$

Change YOY ($) (17,954)$ 49,471$ 49,866$ 102,535$ 102,670$ 106,456$ 62,535$ (54,283)$ 1,375$

Change YOY (%) -1.31% 3.66% 3.56% 7.07% 6.61% 6.43% 3.55% -2.98% 0.08%

48%50%49%47%45% 45%46%

47% 47%45%

27% 26% 28%

28%

28%27%

26%25%24% 25%

11%11%10%

11%

11%12%

11% 12%

12%13%

17% 17% 16%

17%

15%

15%

14%13%

13% 15%

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Fiscal Year

Property Tax Sales Tax

Franchise Fees Other Revenue

Actual Estimate

Gen

eral

Fun

d R

even

ues

($T

hous

) $1,368,694 $1,400,211$1,450,076

$1,552,611

$1,655,281

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

$1,769,989 $1,771,365

Proposed

$1,350,739

12

Property Tax Revenue

• We assume decline in property tax revenue of 5.06%, $45.1 million lower than FY2010.

• We assume no change in the current tax rate ($0.63875 per $100 valuation).

• We assume collection rate of 96.6%.• We assume $15.2 billion in TIRZ taxable value

(10.6% of City taxable value).• Revenue is net of tax increment zone payments

and includes delinquent collections.

13

Trends in Property Tax Revenues FY2008-FY2011

(in $Thous) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Property Tax Revenues Estimate Proposed

Adopted Budget 624,438$ 654,070$ 662,741$ 671,553$ 690,246$ 730,520$ 796,368$ 878,486$ 909,715$

Actual/ Projected 612,834$ 636,028$ 660,999$ 671,294$ 705,952$ 748,792$ 830,889$ 890,088$ 891,216$ 846,136$

Variance Over/(Under) (11,604)$ (18,042)$ (1,742)$ (259)$ 15,706$ 18,272$ 34,521$ 11,602$ (18,499)$

$830,889 $846,136

$796,368

$909,715$878,486 $891,216$890,088

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

Fiscal Year

AdoptedBudget

Actual/Projected

Tot

al P

rope

rty

Tax

Rev

enue

s ($

Tho

us)

Estimate Proposed2010 201120092008

14

Sales Tax Revenue

• We assume a small recovery in sales tax revenues of 2.99% in FY2011, $13.8 million higher than FY2010.

• We assume 12 new Limited Purpose Annexations in FY2011.

15

Trends in Sales Tax Revenues FY2008-FY2011

(in $Thous) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Sales Tax Revenues Estimate Proposed

Adopted Budget 344,859$ 361,087$ 329,657$ 371,548$ 395,845$ 431,219$ 477,217$ 526,723$ 507,300$

Actual/ Projected 341,952$ 322,538$ 347,982$ 370,583$ 422,598$ 461,417$ 495,173$ 507,103$ 460,000$ 473,754$

Variance (Over/Under) (2,907)$ (38,549)$ 18,325$ (965)$ 26,753$ 30,198$ 17,956$ (19,620)$ (47,300)$

$526,723$507,300

$495,173$507,103

$460,000$477,217 $473,754

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

Fiscal Year

AdoptedBudget

Actual/Projected

Actual

Tot

al S

ales

Tax

Rev

enue

s ($

Tho

us)

Estimate Proposed2008 201120102009

16

Other Revenues and Sources of Funds

• We assume asset sales of approximately $43.5 million (includes routine right-of-way transactions).

• Includes revenue target of $15 million to be achieved through a review of user fees.

• We assume transfer from excess Ike funds in the amount of $13.5 million.

• We assume replenishment of Rainy Day Fund to $20 million, but it will become part of the undesignated year-end fund balance.

• We assume $53.9 million drawdown in fund balance.

Finance Department

General Fund Budget Expenditures

18

Expenditure Comparison ($ Millions)

General Fund Expenditure Other than Debt

FY2010 Current Budget 1,678.2FY2010 Adopted Budget 1,694.0

Change (15.8)% Change -0.93%

FY2011 Proposed Budget 1,669.2FY2010 Current Budget 1,678.2

Change (8.9)% Change -0.53%

19

General Fund Expenditures by Category FY2010-FY2011 (Excluding Debt Service)

$662,742

$153,932

$431,399

$211,751

$133,603

$79,145

$666,611

$441,082

$212,603

$152,896$138,814

$57,240

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Fire Department Police Department Development &Maintenance

Services

Human & CulturalServices

AdministrativeServices

General Government

Exp

ense

s ($

Tho

us)

FY2010 Estimate

FY2011 Proposed

Note: 1. Development & Maintenance Services includes: General Services, Planning & Development, Public Works, and Solid Waste Departments; Human & Cultural Services includes: Convention & Entertainment, Health, Housing, Library, and Parks Departments; Administrative Services includes: Administration and Regulatory Affairs, Affirmative Action, City Controller, City Secretary, Finance, Human Resources, Information Technology, Legal and Mayor's Office.2. For the purpose of this slide, Municipal Courts and Houston Emergency Center, part of Public Safety, are included in Administrative Services.

20

General Fund Expenses FY2002-FY2011 (Including Debt Service)

59%58%57%57%

57%56%

54%55% 54% 52%

29%30%30%

31%

30%

32%

33%34%33%35%

12% 13% 12%13%

12%

13%

12%

12% 13% 12%

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 Est 2011 Proposed

Fiscal Year

Debt Service*

Non-Public Safety

Public Safety

Actual

Gen

eral

Fun

d E

xpen

ses

($ T

hous

)

$1,912,592$1,901,648

$1,776,834

$1,668,076

$1,563,746

$1,467,879

$1,401,332$1,380,360$1,362,767

$1,890,084

(in $Thous) 2002 2003 2004 2005 2006 2007 2008 2009 2010 Est 2011 Proposed

Public Safety 715,347$ 743,101$ 764,583$ 797,198$ 871,097$ 952,057$ 1,017,398$ 1,091,223$ 1,105,334$ 1,118,925$

Non-Public Safety 478,656$ 459,259$ 471,749$ 482,681$ 497,649$ 507,019$ 550,086$ 577,477$ 567,238$ 550,321$

Debt Service* 168,764$ 178,000$ 165,000$ 188,000$ 195,000$ 209,000$ 209,350$ 232,948$ 240,020$ 220,838$

Expenses 1,362,767$ 1,380,360$ 1,401,332$ 1,467,879$ 1,563,746$ 1,668,076$ 1,776,834$ 1,901,648$ 1,912,592$ 1,890,084$

Change YOY ($) 17,593$ 20,972$ 66,547$ 95,867$ 104,330$ 108,758$ 124,814$ 10,944$ (22,508)$

Change YOY (%) 1.29% 1.52% 4.75% 6.53% 6.67% 6.52% 7.02% 0.58% -1.18%

*Note: Departmental Transfers to Debt Service for Equipment are included as Public Safety and Non-Public Safety Department Expenses.

21

Expenditures Summary

• All pay increases in the total amount of $30.7 million have been met per contract for all three employee groups.

• We assume an increase in pension contribution for municipal and classified employees in the total amount of $12.2 million.

• We assume an increase in health benefits for all employees in the amount of $6.8 million.

• We assume $2 million in operating costs for new facilities.

22

General Fund Public Safety Expenditures FY2002- FY2011

(in $Thous) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Police 443,749$ 449,624$ 473,223$ 498,187$ 535,504$ 581,787$ 618,304$ 657,225$ 662,742$ 666,611$

Fire 271,598$ 279,618$ 281,525$ 291,352$ 327,323$ 360,542$ 388,352$ 422,718$ 431,399$ 441,082$

HEC* 13,859$ 9,835$ 7,659$ 8,270$ 9,728$ 10,742$ 11,280$ 11,193$ 11,232$

Public Safety 715,347$ 743,101$ 764,583$ 797,198$ 871,097$ 952,057$ 1,017,398$ 1,091,223$ 1,105,334$ 1,118,925$

Change YOY ($) 27,754$ 21,482$ 32,615$ 73,899$ 80,960$ 65,341$ 73,825$ 14,111$ 13,591$

Change YOY (%) 2.89% 4.27% 9.27% 9.29% 6.86% 7.26% 1.29% 1.23%

*Note: The Houston Emergency Center was created in 2004

General Fund Public Safety Expenditures FY2002-FY2011

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Fiscal Year

Police

Fire

HEC*

Actual Proposed

Publ

ic S

afet

y E

xpen

ses

($

Tho

us)

Estimate

23

Highlights – Police

• Two new cadet classes will be added (140 cadets). The total number of officers will increase from 5,173 to 5,303, net of attrition.

• Includes classified pay increase of 2% in the amount of $8.3 million per contract.

• Includes funding for 8 additional inspectors for Neighborhood Protection and have identified at least 35 officers to be moved to the street from administrative positions.

• Overtime in the amount of $5.6 million funded through TIRZ, an increase of $1.6 million.

• Assumes reduction in General Fund discretionary spending of 1.8%, or $12.3 million.

• The projection does not include funding from Grant Funds and Other Special Funds.

24

Police Full Time Equivalent Staffing Growth (All Funds, FTEs/Not Headcount, Includes Overtime)

1,640

6,394 6,3956,570

55

1,6081,5901,3191,2491,1861,242

5,152 5,2095,322 5,418 5,412

5,534 5,606

7,246

6,737

7,0017,142

9314122019021863

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

FY2005 FY2006 FY2007 FY2008 FY2009 Actual FY2010 Est FY2011 Proposed

Fu

ll T

ime

Eq

uiv

ale

nts

Civilian Classified Total City Budget Grant Overtime FTE's*FY11 Grant FTE is preliminary

25

Highlights – Fire

• We assume three new cadet classes will add 125 firefighters. Fire classified staffing will decrease by 29, as a result of attrition, to 3,876.

• We assume an increase per the contractual agreement for Fire classified for $10.2 million (3.75% in July; 2% in January).

• Pension plan contribution rate stays at 29.4%, higher than the actuarially required rate of 24.1% (cost to the City of $14.0 million).

• Assumes reduction in discretionary spending of 1.5%, or $5.4 million.

26

Other Highlights

• We assume an increase in pension contribution for municipal employees in the amount of $2.5 million.

• We assume a pay increase for municipal employees in the total amount of $12.2 million (3% base pay, 1.25% pay for performance).

• We assume a reduction of discretionary spending consisting of 3% for most departments and 1% for City Secretary and City Council ($10.3 million total).

• We assume a savings in Solid Waste landfill fees in the amount of $1.0 million.

27

General Fund Health Benefits Expense COH Contribution as a Percent of Payroll*

( in $Thous) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Payroll 620,291$ 620,534$ 598,534$ 611,166$ 623,470$ 660,481$ 698,971$ 746,591$ 780,570$ 800,211$

Change YOY 0.04% -3.55% 2.11% 2.01% 5.94% 5.83% 6.81% 4.55% 2.52%

Health Benefits 89,369$ 99,094$ 111,469$ 122,643$ 127,717$ 136,542$ 140,566$ 155,018$ 165,207$ 166,855$

Change YOY 10.88% 12.49% 10.02% 4.14% 6.91% 2.95% 10.28% 6.57% 1.00%

*Note: Health Expense includes only City contributions for HMO, PPO, and Medicare Advantage Health Care Plans and Payroll includes only Base Salary Pay

21%21% 20% 21% 20% 20% 19% 16% 14% 14%

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Fiscal Year

Health Benefits Payroll (Base Pay)

Actual

Gen

eral

Fun

d Pa

yrol

l Exp

ense

s (

$ T

hous

)

$780,570

$746,591

$698,971

$660,481$623,470

$611,166$598,534$620,534$620,291

$800,211

Estimate Proposed

28

General Fund Full-Time Equivalents

6,664.67,006.36,904.3

5,042.5 4,983.4 5,082.1

3,909.93,929.63,861.1

-

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

FY2009 Actual FY2010 Current FY2011 Proposed

FTE

(N

umbe

r)

Fire-Classified

Police-Classified

Civilian

15,807.9 15,656.615,919.3

29

General Fund Pension Contributions FY2002-FY2011(Excludes $300 million for Municipal Pension Fund in FY2009)

(in $Thous) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

HMEPS 24,812$ 23,524$ 29,317$ 34,437$ 32,501$ 33,932$ 35,278$ 37,994$ 39,968$ 40,366$

HFPS 27,979$ 27,772$ 28,325$ 32,699$ 48,738$ 51,984$ 53,981$ 70,506$ 73,612$ 76,171$

HPOPS 32,551$ 34,532$ 36,523$ 36,502$ 52,697$ 57,597$ 62,627$ 67,495$ 72,666$ 77,666$

Pension Contributions 85,342$ 85,828$ 94,165$ 103,638$ 133,936$ 143,513$ 151,886$ 175,995$ 186,246$ 194,203$

Change YOY ($) 486$ 8,337$ 9,473$ 30,298$ 9,577$ 8,373$ 24,109$ 10,251$ 7,957$

Change YOY (%) 0.57% 9.71% 10.06% 29.23% 7.15% 5.83% 15.87% 5.82% 4.27%

General Fund Pension Contributions FY2002-FY2011

Exclusive of $300 million for Municipal Pension Fund in FY2009

$-

$50,000

$100,000

$150,000

$200,000

$250,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Fiscal Year

HMEPS

HFPS

HPOPS

ActualEstimate

Pen

sion

Con

trib

utio

ns (

$ T

hous

)

$151,886

$143,513

$133,936

$103,638

$94,165

$85,828$85,342

$175,995

$186,246

$194,203

Proposed

30

Management Strategies

• We assume a Management Initiative Savings target of $22 million to be achieved from:– Consolidations of Human Resources, Fuel,

Fleet Management, Payroll and Information Technology.

– Restructuring of purchasing and inventory of parts utilizing NAPA citywide and reduction of take home vehicles to cut down on maintenance costs.

– Managing city facility hours of operation more effectively.

– Continued re-negotiations of contracts.• Identify full cost of service recovery opportunities.• Identify further cost cutting initiatives and

implement through process improvements.

31

General Fund Debt Service FY2002- FY2011(Includes Departmental Transfers to Debt Service for Fleet and Other Equipment)

$232,545

$254,600 $251,198

$229,600

$209,000

$195,000

$188,000

$165,000

$178,000

$168,764$162,000

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Fiscal Year

Actual Estimate

Deb

t Ser

vice

($

Tho

us)

Budget

32

General Fund Undesignated Ending Fund Balance FY2002-FY2011

Finance Department

General Fund Five Year PlanFY2011 – FY2015

34

Overview

• This 5-year plan is based on the FY2011 Proposed Budget.

• This plan highlights the financial issues facing us over the next five years and illustrates the choices we must make.

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

• Capital outlay/equipment acquisition are not included.

• Assumes debt service for capital projects.

Finance Department

Five Year Plan Revenues

36

Revenue Summary($ Thousands)

SummaryFY2010 Estimate

FY2011 Projection

FY2012 Projection

FY2013 Projection

FY2014 Projection

FY2015 Projection

Property Tax Revenues 891,216 846,136 836,292 848,627 879,158 933,431Sales Tax 460,000 473,754 498,531 527,047 556,773 591,682Franchise Revenue 189,687 188,736 190,360 192,046 193,795 195,609Other Revenues 229,085 262,738 269,293 277,804 287,330 297,806

Total Revenues 1,769,988 1,771,364 1,794,476 1,845,524 1,917,055 2,018,528

Percentage Increase 0.08% 1.30% 2.84% 3.88% 5.29%Revenue Increase 1,376 23,112 51,048 71,531 101,472

37

Revenue Projections

• Property Tax Revenues– $45.1 million or 5.06% decrease in FY2011.– Assumes 1.16% decrease in FY2012, 1.48% increase

in FY2013, 3.60% increase in FY2014 and 6.17% increase in FY2015.

– Assumes current tax rate of $0.63875 per $100 of assessed valuation.

• Sales Tax Revenues – $13.8 million or 2.99% increase in FY2011.– Assumes 5.23% increase in FY2012, 5.72% in

FY2013, 5.64% in FY2014 and 6.27% in FY2015.– Assumes LPA portion of revenue continue to grow

faster than overall revenue.

38

Revenue Projections

• Franchise Revenues– Electric franchise revenues increase by $1.2 million or

approximately 1% in FY2011.– Gas franchise revenues assume a relatively flat growth

in FY2011 with an increase of 1.0% per year thereafter.– Telephone franchise revenues decline 4.13% in FY2011

and reflect approximately 1.75% decline in growth per year.

– Other franchise revenues decline 1.30% in FY2011 with an increase of 3.25% per year thereafter.

39

Revenue Projections

• Industrial Assessments– During FY2010, assessments dropped 12.7%;

assumes decrease of 4.0% in FY2011. – Assumes decrease of 1.0% in FY2012, increase of

1.50% in FY2013 and 3% per year thereafter.

• Intergovernmental– Assumes additional $22 million in METRO

reimbursement offset by a decrease of $8 million in CIP Interfund.

40

Revenue Projections

• Licenses & Permits– Assumes 0.06% decline in FY2011, 3.50% growth in

FY2012 and 2% growth thereafter.

• Charges for Services– Assumes 2.88% growth in FY2011 and 2.5% growth

thereafter.

41

Revenue Projections

• Direct Interfund Charges– Assumes decline of 9.2% in FY2011 due to METRO

funding and 4.55% growth thereafter due to interfund Police and Fire service to Airport.

• Municipal Courts Fines & Forfeits– Assumes slight increase of 0.38% in FY2011 and 2%

growth thereafter.

• Miscellaneous– Assumes $15 million in management initiative through

review of user fees.

42

Revenue Projections($ Thousands)

SummaryFY2010 Estimate

FY2011 Projection

FY2012 Projection

FY2013 Projection

FY2014 Projection

FY2015 Projection

Property Tax 891,216 846,136 836,292 848,627 879,158 933,431Industrial Assessments 16,664 16,000 15,840 16,078 16,560 17,057Sales Tax 460,000 473,754 498,531 527,047 556,773 591,682Other Taxes 10,483 10,796 11,228 11,871 12,540 13,326Electric Franchise 96,985 98,151 99,623 101,118 102,634 104,174Telephone Franchise 47,982 46,000 45,195 44,404 43,627 42,864Gas Franchise 21,727 21,890 22,109 22,330 22,553 22,779Other Franchise 22,993 22,695 23,433 24,194 24,980 25,792Licenses & Permits 17,217 17,206 17,808 18,164 18,528 18,898Intergovernmental 31,875 54,199 54,908 55,781 56,917 58,329Other Charges for Services 33,267 34,224 35,080 35,957 36,856 37,777Direct Interfund 49,329 44,783 46,818 48,946 51,171 53,497Indirect Interfund 16,503 16,454 17,202 17,984 18,801 19,656Muni Courts Fines & Forfeits 36,464 36,602 37,334 38,081 38,842 39,619Other Fines & Forfeits 1,901 2,320 2,552 2,807 3,088 3,397Interest 6,750 6,750 6,885 8,262 9,914 11,897Miscellaneous 8,632 23,403 23,637 23,873 24,112 24,353

Total Revenue 1,769,988 1,771,364 1,794,476 1,845,524 1,917,055 2,018,528

Percentage Increase 0.1% 1.3% 2.8% 3.9% 5.3%Revenue Increase 1,376 23,112 51,048 71,531 101,472

Finance Department

Five Year Plan Expenditures

44

Expenditure Summary ($ Thousands)

Cost Categories

FY2010 Adopted Budget

FY2010 Estimate

FY2011 Projection

FY2012 Projection

FY2013 Projection

FY2014 Projection

FY2015 Projection

Prior Year Actual / Operating Budget 1,668,700 1,672,574 1,669,245 1,662,123 1,674,278 1,681,648FY2010 Adopted Budget 1,693,976

Prior Year Adjustment 35,276 0 65 0 0 0 0Civilian Compensation 0 0 14,703 2,596 2,500 2,500 2,500Health Benefits 0 0 6,832 8,974 9,422 9,894 10,388Police Personnel & Programs 0 0 5,574 8,281 15,966 15,859 15,859Fire Personnel & Programs 0 3,700 15,035 (3,778) 1,868 4,055 2,206Other Department Adjustments 0 124 3,443 970 1,250 1,500 1,500Contracts and General Government 0 (5,809) (287) 3,749 1,043 9,144 6,505Energy Costs 0 491 2,172 2,280 2,349 2,419 2,492Internal Service Fund Transfer 0 0 (2,873) (2,194) (2,243) (3,000) (3,000)Public Safety 0 (13,393) (10,673) 0 0 0 0Police Overtime Moved to Special Funds 0 0 (1,625) 0 0 0 0Non-Public Safety 0 (16,516) (13,694) 0 0 0 0Management Initiative Savings (10,000) 10,000 (22,000) (28,000) (20,000) (35,000) 0

Expenditures Increase/(Decrease) 25,276 (21,403) (3,329) (7,122) 12,155 7,370 38,450

Total Operating Expenditures 1,693,976 1,672,574 1,669,245 1,662,123 1,674,278 1,681,648 1,720,098

Percentage Increase In Operating Expenditures -0.20% -0.43% 0.73% 0.44% 2.29%Increase In Operating Expenditures (3,329) (7,122) 12,155 7,370 38,450

Note: 1. FY2011 Projection includes prior year adjustment (0.7% reduction and general appropriation)

45

Cost Increases

• Compensation increases as a result of contracted pay increases for civilian and classified employees.

• Health benefits increases: $6.8 million in FY2011, $9.0 million in FY2012 million, $9.4 million in FY2013, $9.9 million in FY2014, $10.4 million in FY2015.

• Police Department increases associated with recent staffing growth, contract increases, and pension payment increases.

46

Cost Management

• Decrease solid waste landfill fees by 1 million in FY2011 and $500,000 thereafter.

• Limit operating costs for new facilities to $2.0 million in FY2011, $1.0 million in FY2012, $1.5 million in FY2013 and $1.0 million per year thereafter.

47

Revenue & Expenditure Summary ($ Thousands)

FY2010 Estimate

FY2011 Projection

FY2012 Projection

FY2013 Projection

FY2014 Projection

FY2015 Projection

Beginning Balance 236,275 159,535 125,603 125,603 125,603 125,603

Property Tax Revenues 891,216 846,136 836,292 848,627 879,158 933,431Sales Tax 460,000 473,754 498,531 527,047 556,773 591,682Franchise Revenue 189,687 188,736 190,360 192,046 193,795 195,609Other Revenues 229,085 262,738 269,293 277,804 287,330 297,806Proceeds of Pension Bonds 20,000 0 0 0 0 0Transfers / Sale of Assets 45,861 64,786 27,447 11,784 12,118 12,464Total Revenues and Other Sources 1,835,849 1,836,150 1,821,922 1,857,308 1,929,174 2,030,992

Total Operating Expenditures 1,672,574 1,669,245 1,662,122 1,674,277 1,681,648 1,720,098Transfers for Debt Service 254,600 232,545 259,700 266,100 274,100 274,100Transfers for Fleet/Equipment Debt to Departments (14,580) (11,707) (9,513) (7,270) (5,270) (5,270)Total Expenditures 1,912,594 1,890,083 1,912,309 1,933,107 1,950,478 1,988,928

Fund Balance Drawdown 76,745 53,932 0 0 0 0Net Activity (The Gap) 0 (0) (90,387) (75,800) (21,305) 42,063

Change in Restricted Fund Balance 0 20,000 0 0 0 0

Ending Fund Balance 159,535 125,603 125,603 125,603 125,603 167,667

Fund Balance as Percent of Expenditures (less debt) 9.50% 7.50% 7.60% 7.50% 7.50% 9.70%

48

Debt Service ($ Thousands)

FY2010 Estimate

FY2011 Projection

FY2012 Projection

FY2013 Projection

FY2014 Projection

FY2015 Projection

Assessed Value 140,352,256 133,521,277 131,574,919 133,568,226 138,502,147 147,273,167Growth Rate Assumed 0.95% -5.13% -1.50% 1.60% 3.87% 6.61%

Tax Rate for Debt Service 0.18150 0.17411 0.19214 0.19022 0.18931 0.17860Tax Rate for Operations 0.45725 0.46464 0.44661 0.44853 0.44944 0.46015Total Tax Rate 0.63875 0.63875 0.63875 0.63875 0.63875 0.63875

Assumed Collection Rate 96.9% 96.6% 96.8% 96.8% 96.8% 96.8%Delinquent & Rebate 22,524 22,494 22,559 22,559 22,559 22,559Total Tax Revenue 891,216$ 846,136$ 836,292$ 848,627$ 879,158$ 933,431$

Percentage Change -5.1% -1.2% 1.5% 3.6% 6.2%Property Tax Revenue Change (45,080)$ (9,844)$ 12,335$ 30,531$ 54,273$

49

Five Year Management Strategies

• Identify further cost-cutting and productivity improvements within departments

• Maintain the capital improvement plan and continue to keep it affordable.

• Identify revenue collection improvement opportunities.

• Explore refinancing opportunities of the general obligation debt, reducing the amount of increase for the next few years