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HomeMy WebLinkAboutSS03 - Budget Overview 2000-2001CA, City of NeWport. Beach 'VV P 701 2000-01 Budget outlook 3 , -.1' Total City Revenues by Source (Fiscal Year 200041) 6rterprlse Fund Property Taxes Revenue 23% 17% v f A+�{vFY4�• § LlCens Permits ] %- f Intergovernmental O C" Revenue 6% �. Charges for Services $alea 6Other Taxes R 27% Fines, Forfeitures, 6 Penalties ]% Use of Money & Propirerty erty Other Revenue exc 6% City Budget First talk about revenues, then expenditures This is total revenues • Includes Enterprise Fund business activities, such as Water and Sewer • Projected to be $124.3 million FY2000 -01, down slightly from current year (due to year to year variations in external funding for capital projects) Next slide shows only General Fund, which is where most of the "action" in City Finances takes place. The General Fund funds such items as Public Safety, Recreation, Library, Public Works, Community Development, etc. 2 General Fund Revenues by Source (Fiscal Year 2000 -01) Other Reven 6% Use of Money and Property 6% Fines, Forfeitures, Penalties 4% Char 10q° Intergovernmental Licenses and Permits 6% 2% Over 500 total revenue sources. Sales and Other Taxes 36% • General Fund projected to be $85.1 million, up 3.27% over current year • Top two General Fund revenue sources for Newport Beach are property taxes and sales taxes. Varies widely in other Cities. • Occasional problem with this scenario: Need to react to State policy changes. Healthy reserves therefore a priority consideration. • Philosophical issue addressed by Council each year: Which services should be supported by fees, as opposed to tax revenue, and how much. • Some unusual things about Newport: No trash collection fee -- therefore cost must be 100% covered by tax revenue. No utility users tax. On the other hand, high property values /property tax base. 93 Orange County CITY OF NEWPORT BEACH transportation Allocation of 7.5% Sales Tax Improvements 6% County Transit Programs 3% City where Purchase i! Made 13% Sales tax is projected to be $18.65 million, up 3% from the current year. As recently as 1992 -93, the City's sales tax was only $10.1 million. This represents an 85% increase over that period. Slide shows how much of locally generated sales tax actually remains local. Most goes to the State General Fund. 4 CITY OF NEWPORT BEACH Sales Tax Contribution of Selected Geographic Areas Twelve MoMhv Ending with Third 0wrter 1999 Fashion Island Airport Corona del Mar Newport Pier Balboa Island Balboa Pier Industrial West 274 $- $600,000 $1,000,000 $1,600,000 $2,000,000 $2,600,000 53,000.000 $3,600,000 $4,000,000 This slide shows the relative sales tax contribution by business activity in selected geographic areas of the City. The figures do not add up to the total, because only the major areas are represented. 5 $3,676 $2,146. 13 4393,077 $251,S21 $198,:32 $1390 d= $128, 0 274 $- $600,000 $1,000,000 $1,600,000 $2,000,000 $2,600,000 53,000.000 $3,600,000 $4,000,000 This slide shows the relative sales tax contribution by business activity in selected geographic areas of the City. The figures do not add up to the total, because only the major areas are represented. 5 CRY OF NEWPORT BEACH Local Sales Tax by Economic Segment T.M. McMM1 hn.Y E.dip TnIM 0-u ., IM 161Lwxes ♦Vf0 ZLL6MM 19.LYlYYR 5ltvEi YrusuYYrs Yn�a I av ®Tav . LncLE6111S SSM1111YYPRYSCE M MA/ E LG916 Llfirt M51N 661VRP.r1Al6 16RGTYNIrmC18 I RpMMK81I WREICI6 waYrlvc rYEm I . YDZELUHT;6RILi1 i RwYI.iLSYfiM I RSl11MC ®IWSM •LL011ES6 �EwLmL wvrmvart '. IS'AYr EIYETYY i RmYYRi�161E L;uWS1aB I 0 SW.000 1.000.000 1.SW.W] 1.0W.000 2500.000 ].DM.000 35C0.000 Additional Information about Sales Tax This slide shows Sales Tax contributions by economic segment. The City's 400 restaurants are the largest single sales tax generator (19 %), followed by the five car dealers (12 %) and the five department stores (I I %) The top 8% of the sales tax contributors generate 43% of the revenue. 3 CITY OF NEWPORT BEACH Ten Sales Tax Producers, (in alphabetical order) Bloomingdales BMW Sterling Motors Circuit City David L. Cunningham Inc. DVI Financial Services Fletcher Jones Four Seasons Newport Auto Center Neiman- Marcus Robinsons -May This information is as of Third Quarter, 1999. It varies over time. CITY OF NEWPORT BEACH Distribution of Property Tax Clty 9Wf M., L..I H F Mi..Nn.... d.mai 1}% QengeC uni S.nlMtlan 01.1 ax C...t C..Mu Mt, Ll.hlul 11% C 11% S.L..Id Oehict b% • Property Taxes, including secured, unsecured, redemptions, and property transfer taxes, are projected to be $25.8 million next year, which is an increase of 3.65% over the current year. • The City's portion is 17% of the total. The chart shows the Distribution of Property tax. • City and Schools are the largest recipients, but a lot of other entities also receive property taxes. • These numbers are overall averages; situation actually varies parcel by parcel. ERAF discussion. The state withdrew money from Schools in mid 90's to deal with economic slump. Backfilled schools by creating local "ERAF" fund, which was paid for locally. The funds diverted from the city did not go to the Newport -Mesa USD since they were a basic aid district. During that time, NB, and Orange County, were having their own problems dealing with the economic slowdown - -not to mention the OC Bankruptcy. As it turned out, the biggest impact on NB revenues in a long time was not the BK or the Econ slowdown, it was the State's actions. $3.5 million per year, and growing. To date, approx. $27 million has been diverted. Some return of the funds, on a one year basis, is proposed for next year. Nothing certain. Property Tax Numbers (1999-00) Total Number of Parcels 27,567 Gross Property Value $13,958,301,838 Number of Residential Parcels (80.79% of total) 25,438 Total Residential Value $10,917,041,860 Single Family Home Value Increase 1998 -99 12.58% Multifamily Home Value Increase 1998 -99 7.71% Commercial Industrial Parcels 1363 Commercial Industrial Value $2,570,177,204 Commercial Value Increase 1998 -99 5.44% Industrial Value Change 1998 -99 - 84.40% This shows some interesting figures regarding Newport Beach property composition and values. Of special interest to us is the fact that the four largest commercial property owners are requesting value reductions that total $738,000,000. This would result in an annual property tax revenue loss of approximately 1.2 million dollars to the City. 01 Refer to Revenue Summary of the Budget Detail Book (Page 4 of the Summaries Section) 10 Total City Expenditures by Function IRSUI year 2000AJI C.pXY lmpmv.m.nt. b% r FnUrptlu Op.rNbn. 5 ttx Cunur6 me Communny 0.wbpm.nt J% V WOIb Wwk.' _ N% wan: vl.n Jsx Have talked about where the money comes from, now will shift into where it goes. This chart does show total City - -not just general fund -- spending. • Total City expenditures, including capital projects, are approximately $134.5 million, an increase of $12.5 million over 1999 -2000, due to several major capital improvements such as the Bonita Canyon Park, and significant road and water projects. • Total General Fund operating expenditures are up slightly ($79.5 million) from revised estimates for 1999 -2000 ($78.5 million), (1.3 %), primarily due to negotiated employee salary adjustments. Most departmental M & O, and Capital budgets have remained flat. • Total City expenditures, including capital projects, are approximately $134.5 million, an increase of $12.5 million over 1999 -2000. -Six new positions are being recommended in the proposed budget Marine Safety Supervisor Fire Inspector (partially offset by a reduction in contract inspection services) Refuse Inspector/Recycling Coordinator (offset by increase in recycling charge) Electrician I (partially offset by a reduction in contract electrical work) Traffic Engineering Technician Librarian I Focus is on public safety (Police, Fire, and Marine); as well as capital improvements. Essential services. Total City Expenditures by Class Fiscal Year 2000 -01 Salaries and Benefits 't S•-f 5 3?''i'- 49% pfK U1_, 'fax Capital ` 4 Im pravem ents ". 24% G' Capital Outlay Maintenance and 1% Other Charges Operation 2% 24% When we look at expenditures by class, it is easy to see that most of what we provide is services by employees, and those are primarily public safety and general services (trash pickup, beach cleaning, and a variety of other services), as well as public works and utilities. This kind of breakdown can be just a little bit misleading because some of the employees are working on capital improvements, but the cost shows up as salaries and benefits. 12 This shows ten year trend of revenues and expenditures. A few things to point out: Most years revenues are ahead of expenditures. That's good, of course. During the early nineties, that changed, primarily due to the economic slowdown and the State's ERAF action. It changed again recently, due to the fact that sometimes revenue for major projects is received all in one year, but the actual spending goes on for several years. If the chart went back a few years, you would get a better feel for how dramatic the turn down was. 13 Governmental Revenues and Expenditures (Last Ten Fiscal Years) $140 _. --- .._.__ .__....._..._.__.........___- a Revenues j K; $120 - --M Expenditures '^ $100 ._- W O O $80 `O c $60 O _ tF Q $za s0 1991 -92 1992 -93 1993 -94 1994 -95 1995 -96 199697 1997 -98 1998 -99 1999 -00 2000 -01 This shows ten year trend of revenues and expenditures. A few things to point out: Most years revenues are ahead of expenditures. That's good, of course. During the early nineties, that changed, primarily due to the economic slowdown and the State's ERAF action. It changed again recently, due to the fact that sometimes revenue for major projects is received all in one year, but the actual spending goes on for several years. If the chart went back a few years, you would get a better feel for how dramatic the turn down was. 13 This chart shows the effects of the ERAF shift (through 1998 -99). The dark blue line, representing total assessed valuation, flattens out and even drops a little during the recession. However, the blue bars, representing City Property Tax receipts, go down substantially more - -due to State shift. This is significant because • City services have to be maintained • Very difficult to raise revenues at the local level, especially when economy is down anyway. 14 CITY OF NEWPORT BEACH Property Tax Collections/Total Assessed Valuation e•.nv+�rmq j 575,000 516,000 = Property Tax Collections Total Assessed Valuation 514,000 g s 670,000 $17.000 E e o _ 515,000 - 510.000 ° 58,000 p oa yy a a f 510,000 $6,000 ° m 64,000 a Q 55,000 0 a S2,000 60 50 1995 -90 199091 1991.94 1999.94 199194 199495 1995% 19%97 199798 1990.99 FiSeal Year This chart shows the effects of the ERAF shift (through 1998 -99). The dark blue line, representing total assessed valuation, flattens out and even drops a little during the recession. However, the blue bars, representing City Property Tax receipts, go down substantially more - -due to State shift. This is significant because • City services have to be maintained • Very difficult to raise revenues at the local level, especially when economy is down anyway. 14 Public Safety Expenditures/Tax Revenues 50.0 O Revenue from Property Tax 45.0 g Sales Tax 40.0 —*—Public Safety Expenditures 35.0° c 30.0 `0 25.0 w 3. °- 20.0. 15.0 10.0±,. x:' u; 5.0 0.0 1990 -91 1991 -92 1992 -93 1993 -94 1994 -95 1995 -96 1996 -97 1997 -98 1998 -99 1999 -00 2000 -01 Fiscal Year Old Rule of Thumb: Property and Sales tax revenue should more than cover public safety expenditures, or we are in trouble. In the mid - nineties, we were not able to do that. Once again, the tax shift was the culprit. 15 CITY OF NEWPORT BEACH Selected Comparisons With Other Orange County Cities Fiscal Year 1996 -97 Per Capita Revenues nmount Rank Rank Total Revenue $101,761,579 6 3 General Revenue S 51,566,084 7 2 Functional Revenue S 50,214,771 5 3 Property Tax S 16,289,466 4 4 Sales Tax S 13,655,616 a 6 Transient Occupancy Tax 5 7,053,397 2 4 Expenditures Total Expenditures 5108,864,323 4 2 Public Safety S 37,988,843 4 1 Cullum and Leisure S 13,208,848 6 3 General Government S 6,442,703 7 3 Community Development S 6,432,650 6 8 This slide shows a recent comparison of major revenue and expenditure categories with other Orange County Cities. The first column shows the total ranking by amount while the second column shows the relative per capita ranking. • Note that the City of Newport Beach is ranked number 3 in total revenue per capita. • However the City only ranks number 6 in Sales Tax per capita. • Also, the City's ranking actually falls in Transient Occupancy Tax per capita as compared to other Orange County Cities. • Note that the City ranks number 2 in the County in total expenditures per capita. • Note that the City of Newport Beach ranks number one in Public Safety expenditures per capita. 16 780 760 740 720 700 680 660 640 620 600 Number of Full Time Employees 1990 -91 1991 -92 1992 -93 1993 -94 1994 -95 1995 -96 1996 -97 1997 -99 1999 -99 199"0 2000 -01 This indicates one response to the money crunch in the mid nineties. In general, Cities are slower to react to economic changes than private sector entities, in part due to the fact that they are government, which is slow by nature - -but also due to the fact that services must be continued. To a certain extent, organizations tend to get fat, and an event like this can be healthy. But this one went too far. One of the results of this experience was that the City Council revised and strengthened the City's Reserve Policy in order to insure that we have sufficient funds to be able to react to the next economic downturn in an orderly fashion. More on that later. 17 Refer to Expenditure Summary or the Budget Detail Book (Page 19 of the Summaries Section) E. The City's effort to control the growth of JWA has been intense and ongoing. 19 Airport Growth Control Spending 2500 2000 — W 0 1500 -- - -- - `o O C h 1000 0 0 F 500 — -- N m 9 < m N m m 1� m 0 m m m m m 0 m m m m 0 m m 0 m OOi m ONi Obi Opi ONi Omi Oni m m cO Fiscal Year The City's effort to control the growth of JWA has been intense and ongoing. 19 CITY OF NEWPORT BEACH Replaces derenorated 6 inch cast iron water pipelines orginally consouced Key Capital Improvement Projects For 2000 -01 Replacement in the 19a0s and 1960'5. Cost Project Title Description FY 00-01 West Coast Highway sound Wall Glass Replacement 012.200 so hot glass panels in the sound wall along West Street 6 Bikeway Improvements Replacement Coast Highway S 100.000 Five year pryttl to implement streatscapa improvements, and upgrade of Balboa Pier Parking Ion- Design phase only in FY 00/01 • total project cost Drainage Improvements Balboa Village Plan is -67.6 minion S 100.000 Replacement of concrete desk. lisp Cleaning facllites. dnnking fountains, Ten projects address pavement motor maintenance, and pavement over ays benches, signage, and communications B electrical services. Fire service Pavement Management Program Balboa Pier Rehabilitation watermainwillbeaddad. (CISpn Sepsament) S 1.1501000 Replacement of concrete deck. Ideguam boat ramp accessway fish Four year project to design and construct Bonita Canyon Sports Park, The cleaning facilaies, drinking fountains benches, signals, and Bonita Canyon Park Development Newport Pier Rehabilitation communications S electrical services. (Oil Sort Sehlemen0 S 950.000 Water Transmission Main to Corona Provides for Me replacement of deteriorating water mains from Big Canyon del Mar Reservoir to Corona del Mar. S 2100,000 Corona Highlands Water Mein Replaces derenorated 6 inch cast iron water pipelines orginally consouced Replacement in the 19a0s and 1960'5. S 12901000 Resurfacing and modification of streets and Bikeways at varous City Street 6 Bikeway Improvements locations. S sco' 0 Balboa Blvd. Reconstruction and Drainage Improvements Four proje cis address improvements along Balboa Blvd, S 310,000 Ten projects address pavement motor maintenance, and pavement over ays Pavement Management Program at various locations throughout me City. S 3225,000 Four year project to design and construct Bonita Canyon Sports Park, The Bonita Canyon Park Development project includes mandams, Basketball and tennis courts, S 5.912.000 This is a list of ten capital projects that we thought might be of the most interest to members of the group. There are actually a total of 147 Capital projects proposed for next year, with a total value of $25.9 million. 0111 TOPICS OF SPECIAL INTEREST Bay Issues /Clean Water Proposed Redistribution of Sales Tax Taxation of Internet Sales Work Force Stability and Training Status of Reserves • Bay Issues: • Sales Tax Redistribution: Proposed legislation would gradually redistribute sales tax revenue to Cities and Geographic areas based on population rather than site of purchase. The goal is to reduce the "fiscalization of land use decisions" by local governments. Since Newport Beach has 2% of Orange County's population, yet the City generates 4% of taxable sales, we are concerned about this proposed change. • Taxation of Internet Sales (or rather, lack of it): Proposed legislation would simply preclude taxation of Internet sales transactions. But it isn't simple. As currently proposed, the legislation would encourage all retailers to put an Internet terminal by the cash register, and conduct even face to face transactions across the Internet. It would essentially dismantle the current sales tax structure. Sales Tax is our second largest revenue source. Without some other source of revenue to fill in this gap, the proposal would result in a significant disruption of City Services. (More notes on next page) 21 End of PrePared comments. Questions?