BUDGET OVERVIEW 2012-13 1
Declining Real Estate Values Revenues expected to decline by $700,000 Residential property taxable values down almost 10% for 2012-13 fiscal year Reduces taxes paid by residents in July and Dec Overall residential values having fallen by almost 40% since 2008-09 An average home worth $100,000 in 2008 would now be worth about $60,000. 2
Personal Property Tax The State of Michigan is considering eliminating the personal property tax Legislation has been introduced Initially it only affects small filers Eventually eliminate industrial personal property Fairly long transition period Negatively affect local governments and schools more than the State About 18.5% of City s taxable value is from personal property taxes 50% of that is Industrial 3
Fire Collaboration Proposal Fire collaboration expected to save $350,000 in first year Collaboration will save additional amounts in future years as revenues continue to decline Without collaboration, the $350,000 gap in the proposed budget will need to be filled by additional organizational reductions recommended by the City Manager 4
Garbage and Solid Waste Fund Current services continued for 2012-13 but contract changes will be needed for 2013-14 Property taxes no longer sufficient to provide all services Weekly trash pickup and recycling and public area pickup proposed to continue for 2012-13 Street sweeping reduced and moved to Streets funds Brush program reduced and moved to General Fund 5
Summary of Current and Prior Compensation Reductions New hires after 7-1-08 - In new hybrid pension plan New hires after 7-1-08 No retiree health care, now in HCSP Employee pension contribution increased by 3% points effective July 1, 2011 (example to 6% for non union) 1% points effective July 1, 2012 (example to 7% for non union) 1% points effective July 1, 2013 (example to 8% for non union) City is now self insured for health care, reducing costs Increased co-pays and deductibles for current employees and retirees Reduced pension costs by reducing vacation accumulation 6
Employee Complement Changes Eliminate 4 positions across the City for 2012-13 Add 2 police officers for 2012-13 Total eliminated positions is now a net 90 since 2002 Eliminated 19 Administrators and Supervisors Eliminated 71 other positions Workforce has declined from 328 to 238 Decrease of over 25% 7
Workforce Reductions (Positions by Department) Fire 14 Police 5 DPW (Utilities/Streets) 28 Dispatch 11 Finance 5 Parks/Forestry/Cemetery 11.5 Legal 2 City Manager 1 Human Resources 1.5 Engineering 1 Community Dev/Inspection 4 Information Technology 3 Recreation 2 Clerk 1 Total Reductions 90 8
Number of Full-time Employees 330 320 310 300 290 280 270 260 250 240 230 321 317 303 305 302 292 259 254 249 240 238 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Using filled jobs prior to 2010, budgeted jobs thereafter, jobs held vacant to reduce costs during intervening periods 9
BUDGET OVERVIEW GENERAL FUND Revenue and Expenditure Details for 2012-13 10
General Fund Revenue Components $9.0 $8.0 $7.0 $6.0 Millions $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 00-01 02-03 04-05 06-07 08-09 10-11 12-13 bgt 01-02 03-04 05-06 07-08 09-10 11-12 est Income Tax Property Tax Revenue Sharing 11
Property Taxes for Homeowner (Using $100,000 Value in 2008) $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,455 $1,523 $1,558 $1,504 $1,347 $1,285 $1,160 $1,100 $1,000 2006 2007 2008 2009 2010 2011 2012 12
General Fund Revenue and Operating Expense $30.0 $25.0 $20.0 Millions $15.0 $10.0 $5.0 $0.0 00-01 02-03 04-05 06-07 08-09 10-11 12-13 bgt 01-02 03-04 05-06 07-08 09-10 11-12 est Revenue Operating Expense Capital & Transfers Inflation 13
BUDGET OVERVIEW WATER AND WASTEWATER FUNDS 2012-13 14
Combined Utility Funds $25.0 $20.0 Millions $15.0 $10.0 $5.0 $0.0 6-30-09 6-30-10 6-30-11 6-30-13 budget 6-30-12 budget Revenue Expense 15
Share of Usage and Revenue 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Usage Water Rev Sewer Rev Total Rev Port Huron Townships 16
OVERVIEW PROJECTED UTILITY FUND REVENUES AND EXPENSES Projection 1 Without Rate Increases Projection 2 With Rate Increases 17
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REVENUE GAP Once savings are depleted, there will be a revenue gap: Gap estimated to be about $6 million in 2015-16 Gap expected to be over $7 million by 2018-19 Progress being made, lower than prior estimates Savings appear to last one year longer - to 2014-15 Revenue difference now 40% to 50% to cover gap That gap is as large as the largest General Fund activity as follows: 21
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Projection 2 With Rate Increase Eliminate Revenue Gap A projected 6% to 6.5% annual increase will increase rates more gradually and will: Eliminate revenue gap in 2015-16 Allow savings to last until revenues match expenses Avoid 40% to 50% rate increase in 2015-16 Limit adjustment to approximately $3 to $4 per month Rate increase may be reduced or eliminated in 2019-20 and beyond as debt service peaks All other assumptions remain the same 23
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Comparison to Other Utilities Compared monthly City utility cost to: Natural Gas Electricity Cable TV Looked at prior nine years of rates Used actual Comcast cost for digital starter Used typical usage amounts and actual residential billings for DTE and SEMCO 25
Monthly Utility Rate Comparison $140 $120 $100 $80 $60 $40 $20 2004 2005 2006 2007 2008 2009 2010 2011 2012 Gas Electric Cable Water 26
Comparison to Other Communities Looked at average quarterly utility billings Called similar cities around the State (central cities that provide their own utility services) Called several St. Clair County communities Used 2,000 cubic feet per quarter as base for calculation ease (slightly larger than City s 1,730 average) 27
Average Utility Bills (2,000 Cu Ft) City Quarterly Monthly Bay City $ 287.21 $95.74 Sault St. Marie 253.39 84.46 Saginaw 236.93 78.98 Lansing 217.33 72.44 Mount Clemens 174.55 58.18 Grand Rapids 174.06 58.02 PORT HURON (proposed) $ 173.08 $57.69 Ann Arbor* 169.88 56.63 Portage 155.84 51.95 Battle Creek 125.83 41.94 Midland 122.26 40.75 Jackson* 109.94 36.65 Monroe 105.69 35.23 Holland 101.43 33.81 Muskegon 85.21 28.40 Kalamazoo 63.82 21.27 *Includes storm water fee Higher Lower 28
Average Utility Bills (2,000 Cu Ft) City/Township Quarterly Monthly Cottrellville Township $ 282.88 $ 94.29 St. Clair Township 246.14 82.05 Marine City 182.41 60.80 Clay Township 174.40 58.13 Port Huron (proposed) $ 173.08 $ 57.69 St. Clair (w/o remote read) 161.10 53.70 Algonac 158.35 52.78 St. Clair (with remote read) 154.70 51.57 Marysville 153.38 51.13 East China Township 144.37 48.12 Port Huron Township 129.60 43.20 Fort Gratiot Township 129.30 43.10 Kimball Township 122.80 40.93 Higher Lower 29
BUDGET OVERVIEW 2012-13 30