POPULAR ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDING JUNE 30, 2018

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1 POPULAR ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDING JUNE 30, 2018 CITY OF VIRGINIA BEACH, VIRGINIA

2 T A BLE OF CONTENTS INTRODUCTION 3 QUICK FACTS 4 CITY STATISTICS 5 VIRGINIA BEACH BY THE NUMBERS 6 CITY-WIDE REVENUES 7 CITY-WIDE REVENUES & EXPENSES 8 CITY-WIDE NET POSITION 9 CITY-WIDE LONG-TERM LIABILITIES 11 GENERAL FUND 13 PRIORITIES 15 YEAR IN REVIEW 16

3 INTRODUCTION The City of Virginia Beach Finance Department is proud to present the Popular Annual Financial Report (PAFR) for the fiscal year ended June 30, 2018.

3 3 INTRODUCTION The City of Virginia Beach Finance Department is proud to present the Popular Annual Financial Report (PAFR) for the fiscal year ended June 30, This is a short form report that provides summarized information about the City s financial activities. It is intended to give readers an overview of the City and its finances. The PAFR provides a picture of the City s general financial condition, including a brief analysis of where the City s revenues come from and where those dollars are spent. Every year, the City of Virginia Beach is required to produce a Comprehensive Annual Financial Report (CAFR) that provides detailed information about the City s finance position. It is prepared in conformance with generally accepted accounting principles (GAAP). The CAFR includes an audit from an independent firm of licensed certified public accountants. The information in this report is derived from the FY2018 CAFR; however, while this report provides a summary of financial information for the City and School Board, it does not provide detailed information on all of the City s funds or the Community Development component unit. To view the CAFR in its entirety, please visit:

4 QUICK FACTS VIRGINIA BEACH, FORMED JANUARY 1, 1963, IS THE LARGEST CITY IN THE COMMONWEALTH & 44TH LARGEST CITY IN THE COUNTRY. TOP 10 EMPLOYERS 1. City of Virginia Beach/Schools 2.

4 4 QUICK FACTS VIRGINIA BEACH, FORMED JANUARY 1, 1963, IS THE LARGEST CITY IN THE COMMONWEALTH & 44TH LARGEST CITY IN THE COUNTRY. TOP 10 EMPLOYERS 1. City of Virginia Beach/Schools 2. Naval Air Station Oceana and Dam Neck Annex 3. Sentara Healthcare 4. Joint Expeditionary Base Little Creek Ft. Story 5. GEICO General Insurance Company 6. Lynnhaven Mall 7. Gold Key/PHR Hotels and Resorts 8. STIHL Inc. 9. Amerigroup (Anthem) 10. Navy Exchange Service Command

5 5 STATISTICS GEOGRAPHY LAND SQ. MI. WATER 51.3 SQ. M I. DEMOGRAPHICS POPULATION 456,538 MEDIAN AGE 36.4 PER CAPITA PERSONAL INCOME 53,432 EDUCATION HIGH SCHOOL 22.2% SOME COLLEGE 10.6% ASSOCIATES DEGREE 10.6% BACHELORS DEGREE 22.5% GRADUATE DEGREE+ 11.8%

6 VIRGINIA BEACH BY THE NUMBERS POLICE 173,602 4 CALLS FOR SERVICE STATIONS FIRE 42,795 20 52 INSTANCES STATIONS FIRE TRUCKS CULTURE + RECREATION 10 7 5 PUBLIC LIBRARIES RECREATION CENTERS GOLF

6 6 VIRGINIA BEACH BY THE NUMBERS POLICE 173,602 4 CALLS FOR SERVICE STATIONS FIRE 42, INSTANCES STATIONS FIRE TRUCKS CULTURE + RECREATION PUBLIC LIBRARIES RECREATION CENTERS GOLF COURSES (CITY OWNED) PUBLIC WORKS 49,342 5, ,315 STREET LIGHTS MILES OF STREETS WASTE COLLECTION TRUCKS TONS OF GARBAGE COLLECTED EDUCATION ,091 ELEMENTARY SCHOOLS SECONDARY SCHOOLS SPECIALTY SCHOOLS STUDENTS ENROLLED

7 7 CITY-WIDE REVENUES 5% OTHER 61% TAXES APPROXIMATELY $1.6B IN REVENUES 19% CHARGES FOR SERVICES 11% OPERATING GRANTS 4% CAPITAL GRANTS OTHER $91 UTILITY $49 HOTEL + MEAL $ 103 REAL ESTATE $ 565 GENERAL SALES $64 PERSONAL PROPERTY $108 TAX REVENUES BY SOURCE (IN MILLIONS)

8 CITY-WIDE REVENUES & EXPENSES The City s financial activities in total are made up of two broad classifications: governmental and business-type activities. Additionally, there are two main sources of revenues: Program Revenues and General Revenues. Program Revenues include charges for services and program specific grants and contributions. General Revenues include property and other taxes, and other non-program specific revenue. Revenue for the City in FY2018 totaled $1.6B, an increase of $62.9M compared to FY2017. Total expenses for the City were $1.56B in FY2018, an increase of $33.4M compared to FY REVENUES GOVERNMENTAL ACTIVITIES CITY BUSINESS-TYPE ACTIVITIES SCHOOL BOARD TOTAL FY2018 TOTAL FY2017 Program Revenues $ 305 $ 246 $ 179 $ 730 $ 677 General Revenues 1, ,325 1,298 Total Revenues 1, ,055 1,975 EXPENSES General Government Education ,254 1,171 Public Safety Water + Sewer Stormwater Waste Management Other Total Expenses 1, ,310 2,222 Transfers In (Out) (23) Increase (Decrease) In Net Position Net Position - Beginning 2,492 1,088 (244) 3,336 3,214 Net Position - Ending $ 2,558 $ 1,155 $ (195) $ 3,518 $ 3,336

9 9 CITY-WIDE NET POSITION The City issues government-wide financial statements in its CAFR. These statements are designed to provide readers with a broad overview of the City. Included in this report is a Statement of Net Position. This statement defines net position as the difference between all assets and all liabilities. An important consideration in analyzing net position is not the amount itself, but rather the direction and speed at which it is increasing or decreasing. $ CITY-WIDE NET POSITION FY Net Position is the difference between what the City owns and what the City owes The City s Net Position has increased steadily, as shown Positive Net Position balances indicate a measure of financial stability. $ 3 FY 2013 FY2014 FY2015 FY2016 FY2017 FY2018 NET POSITION IS BROKEN DOWN INTO THREE MAJOR CATEGORIES 1NET INVESTMENT IN CAPITAL ASSETS: Amount invested in capital assets less accumulated depreciation and outstanding balance of any debt used for construction or acquisition of the assets. 2 3 RESTRICTED NET POSITION: Amounts that have legal restrictions on how these resources may be used. UNRESTRICTED NET POSITION: Remaining amounts that can be used to meet the City s ongoing obligation to various different creditors.

10 CITY-WIDE NET POSITION CITY ASSETS GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES SCHOOL BOARD TOTAL FY2018 TOTAL FY2017 Current Assets $ 836 $ 354 $ 199 $ 1,389 $ 1,265 Capital Assets 3,310

10 10 CITY-WIDE NET POSITION CITY ASSETS GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES SCHOOL BOARD TOTAL FY2018 TOTAL FY2017 Current Assets $ 836 $ 354 $ 199 $ 1,389 $ 1,265 Capital Assets 3,310 1, ,047 5,008 Deferred Outflows of Resources Total Assets + Deferred Outflows ,214 1, ,626 6,470 LIABILITIES Current Liabilities Long-Term Liabilities 1, ,754 2,884 Deferred Inflows of Resources Total Liabilities + Deferred Inflows , ,045 3,108 3,134 Net Investment in Capital Assets 2, ,712 3,671 Restricted Unrestricted (758) (317) (699) Total Net Position $ 2,558 $ 1,156 $ (195) $ 3,519 $ 3,583

11 11 CITY-WIDE LONG-TERM LIABILITIES CITY L ONG-TERM LIABILITIES (IN MILLIONS) GOVERNMENTAL A CTIVITIES A CTIVITIES SCHOOL BOARD TOTAL FY2018 TOTAL FY2017 General Obligation Bond $ 599 $ $ 599 $ 594 State Literary Fund Loans Public Facility Revenue Bonds Revenue Bonds Agriculture Reserve Program Landfill Liabilities Premium on Bonds Sold Net Pension Liability ,152 Net OPEB Liability Accrued Comp Leave Estimated Claims Total $ 1,529 $ 371 $ 854 $ 2,754 $ 2,884 At the end of FY2018, the City had $1.2B in bonds and notes outstanding and $677.6M in other liabilities, for a total of $1.9B, a net decrease of $61.9M from the prior year s balance of $2B. For the ninth consecutive year, all three major rating agencies, Standard & Poor s, Moody s Investor Service and Fitch Ratings, affirmed the City s Triple-A ratings on its general obligation bonds.

12 12 CITY-WIDE LONG-TERM LIABILITIES DEBT MANAGEMENT POLICIES The City has very conservative fiscal policies, especially in terms of debt. The State Constitution limits the amount of general obligation debt a governmental entity may issue to 10% of the total assessed value of real property. At the end of the fiscal year, the City s assessed value of real property was $56.5 billion, which makes the City s debt less than the current debt limitation of $5.5 billion. Below are the debt management policies adopted by City Council: DEBT INDICATOR RATIO DESCRIPTION ESTABLISHED STANDARD FY2018 FY2017 Annual Debt Service to General Governmental Expenditures No Greater Than 10.0% 7.7% 8.3% Overall Net Debt to Estimated Full Value No Greater Than 3.5% 1.7% 1.7% Overall Net Debt Per Capita No Greater Than $3,000 $2,042 $2,040 Overall Net Debt Per Capita to Per Capita Personal Income No Greater Than 6.5% 3.7% 3.8%

13 13 GENERAL FUND WHERE THE MONEY COMES FROM PERMITS, FEES, FINES + OTHER 2% CHARGES FOR SERVICES 5% SALES, UTILITY, BUSINESS LICENSE + OTHER TAXES 21% FROM COMMONWEALTH 14% PROPERTY TAXES 56% General Fund revenues of $1.147B were $6.3M over budget, an increase 4.4% ($48.7M) from the prior year. The General Fund is the general operating fund of the City which is used to account for all of the financial resources, except those REQUIRED to be accounted for in another fund. FROM FEDERAL 2% PUBLIC WORKS 6% WHERE THE MONEY GOES HUMAN SERVICES 10% DEBT SERVICE 4% TRANSFERS TO OTHER FUNDS 13% GENERAL GOVERNMENT 19% General Fund expenditures of $1,135M were 6.7% or ($81.5M) under budget. This is an increase of 6.5% or $69M from the prior year. EDUCATION 34% FIRE POLICE 9% Transfers to other funds include $66.4M to fund capital projects. 5%

14 14 GENERAL FUND RESTRICTED UNRESTRICTED Nonspendable Restricted Committed Assigned Unassigned are not in spendable form legally or contractually required to stay intact externally imposed by creditors, grantors, or City Ordinances must be used for specific purposes imposed by formal action of City Council may be redeployed for other purposes with appropriate due process to be used for specific purposes, but do no meet criteria to be classified as restricted or committed residual, spendable amounts not contained in other classifications GENERAL FUND - FUND BALANCE TOTAL FUND BALANCE FOR FY2018 WAS $230M, THE HIGHEST IN THE CITY S HISTORY THIS INCLUDES $217M IN UNRESTRICTED AND $13M IN RESTRICTED FUND BALANCE. 0 FY2014 FY2015 FY2016 FY2017 FY2018 UNRESTRICTED RESTRICTED

15 15 PRIORITIES To ensure Virginia Beach remains a preferred coastal city to attract residents, businesses and visitors, the City tries to balance its efforts and use of resources to sustain the important components that make the City livable and successful. 1. GROW THE LOCAL ECONOMY 2. CREATE A FINANCIALLY SUSTAINABLE CITY PROVIDING EXCELLENT SERVICES 3. IMPROVE THE TRANSPORTATION SYSTEM 4. REVITALIZE NEIGHBORHOODS + PLAN FOR THE FUTURE 5. BE A COMPETITIVE, FIRST CLASS RESORT FOR RESIDENTS, BUSINESSES + TOURISTS 6. BE THE SAFEST CITY IN THE NATION WE ARE AN INCLUSIVE COMMUNITY THAT IS WELCOMING AND EMPOWERS ALL OUR COMMUNITY HAS WORLD CLASS SCHOOLS AND EDUCATIONAL PROGRAMS DATA AND TECHNOLOGY IS USED TO ENHANCE COMMUNITY LIVABILITY, PROSPERITY AND SUSTAINABILITY CITY ASSETS AND INFRASTRUCTURE ARE WELL MAINTAINED AND MEET COMMUNITY EXPECTATIONS

16 YEAR IN REVIEW GROWING URBAN CENTER Block 9 (Phase VI) at Town Center opened

ONE OF THE SAFEST CITIES IN AMERICA Virginia Beach was named the 4th safest city

The City was also ranked the nation s safest metro area by Safewise.com.

Beach earned full accreditation from the Commonwealth of Virgina.

16 16 YEAR IN REVIEW GROWING URBAN CENTER Block 9 (Phase VI) at Town Center opened this year bringing Pottery Barn and Williams-Sonoma, as well as Zeiders American Dream Theater and 131 apartments. The block represents a $42M investment ($38M private and $4M public). ONE OF THE SAFEST CITIES IN AMERICA Virginia Beach was named the 4th safest city in America by Time Magazine. The City was also ranked the nation s safest metro area by Safewise.com. GREAT SCHOOLS For the second consecutive year, 100% of schools tested in Virginia Beach earned full accreditation from the Commonwealth of Virgina. ART TRANSFORMS THE BEACH The Rudee underpass was transformed from a dim pass-through to a magnificent Seashore Cathedral by international muralist Pepe Gaka. BUILDING BRIDGES The new, state-of-the-art Lesner Bridge was completed.

17 YEAR IN REVIEW LENDING A HAND More than 15,000 City volunteers served 1.

HOUSING RESOURCE CENTER OPENS The one-stop shop for services to assist families and individuals experiencing

It integrates a shelter, housing, health center, dining hall, learning facility, supportive services and community

TOURISM GROWTH 19 million day and overnight visitors enjoyed Virginia Beach a 7.3% increase over the previous year.

fastest broadband via the transatlantic cables.

17 17 YEAR IN REVIEW LENDING A HAND More than 15,000 City volunteers served 1.12 million hours which equates to $27,662,743, or 5.09 cents saved on the real estate tax rate. HOUSING RESOURCE CENTER OPENS The one-stop shop for services to assist families and individuals experiencing homelessness or a housing crisis opened to the public. It integrates a shelter, housing, health center, dining hall, learning facility, supportive services and community resources in a single facility, the first of its kind in the region. TOURISM GROWTH 19 million day and overnight visitors enjoyed Virginia Beach a 7.3% increase over the previous year. REGIONAL CONNECTIVITY Announced the first step toward connecting all five Southside cities to some of the world s fastest broadband via the transatlantic cables. The dark fiber, open access ring will be the foundation for economic expansion and a digitally-empowered region. The first path will connect Old Dominion University campuses in Virginia Beach and Norfolk. ICE, ICE BABY The Farmers Market electrical system was upgraded to support generators for special events, including the market s first outdoor ice skating rink.

18 CITY OF VIRGINIA BEACH, VIRGINIA POPULAR ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDING JUNE 30, 2018

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