HomeMy WebLinkAbout05062013 City Council Work Session Notes - Library/Museum Budget Policy •
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SCLM BOND OPTIONS AND CONSIDERATIONS
The Bond
• Bond debt is$3,480,000, at 3.99%, over 25 years.
• Bond payments are interest only for FY 2014, at—$159,400, then interest plus principal at
$244,400 per year
• Bond represents approximately 1/3 of project cost; remainder paid through grants and
donations
• Bond is for capital costs only, and does not address operating costs
• This is a General Obligation bond, pledging the full faith and credit of the City.The Library is part
of the General Fund, with capital and operating costs paid from tax and revenue sharing receipts
and not from user-generated revenues through the sale of goods or services (i.e. not an
enterprise fund).
Payment options
• Do nothing and hope tax revenues increase to cover debt payments. Would require $6,250,000
increase in taxable sales, a 5.9% increase.
• Reduce funding to other General Fund uses by$250,000.
• Raise sales tax from 4%to 4.25%to generate additional $263,004 based on 2013 projected
sales. Requires software or administrative changes for businesses collecting tax and to KPB
remitting taxes to the City.
• Increase property tax revenue by raising property tax from 3.12 mills to 3.89 mills to generate
additional $249,681, a 24.7% increase of the City rate or a 9.5% increase of the aggregate
City/KPB/SBCFSA rate (3.89 +4.5 +0.5 = 8.89 mills).
• Some combination of the above.
1 . it
*TAF=Tax Authority Fund 2012 MILL RATE *TAG=Tax Authority Group
TAX YEAR 2012-FY 2013
TAG TAG TAG
TAF 10 SELDOVIA TAF 55 NIKISKI SENIOR TAF 68 ANCHOR POINT
10 Seldovia 4.60 55 Nikiski Sen. 0.20 FIRE/EMERGENCY
11 Seldovia RSA 0.75 50 Borough 4.50 68 Fire/Emergency 2.25
50 Borough 4.50 51 Cent.Hosp. 0.02 50 Borough 4.50
9.85 53 Nikiski Fire 3.00 52 South Hosp. 2.30
11 SELDOVIA RSA 54 No.Pen Rec. 1.00 67 Road Maint. 1.40
11 Seldovia RSA 0.75 67 Road Maint 1.40
50 Borough 4.50 10.45
67 Road Maint. 1.40 10.12 70 SOLDOTNA
6.65 57 BEAR CREEK FIRE 70 Soldotna 0.65
20 HOMER 57 Bear Creek Fire 2.25 50 Borough 4.50
20 Homer 4.50 43 Sew/Bear Cr.Flood 0.50 51 Cent.Hosp. 0.02
50 Borough 4.50 50 Borough 4.50 58 Cent.Emer.Ser. 2.65
52 So.Hospital 2.30 67 Road Maint. 1.40
11.30 7.82
21 HOMER ODLSA 8.65
20 Homer 4.50 58 CENTRAL EMERGENCY 80 KACHEMAK*
21 Homer ODLSA 9.6283 SERVICES 80 Kachemak 1.00
50 Borough 4.50 58 Cen.Emer.Ser. 2.65 50 Borough 4.50
52 So.Hospital 2.30 50 Borough 4.50 52 South Hosp. 2.30
20.9283 51 Cent.Hosp. 0.02
30 KENAI 67 Road Maint. 1.40 7.80
30 Kenai 3.85
50 Borough 4.50 8.57 81 KACHEMAK
51 Cent.Hosp. 0.02 EMERGENCY SERV.
8.37 81 CENTRAL HOSPITAL 81 Kachemak EMS 2.25
WEST 50 Borough 4.50
40 SEWARD 50 Borough 4.50 52 South Hosp. 2.30
40 Seward 3.12 51 Cent.Hosp. 0.02 67 Road Maint. 1.40
43 Sew/Bear Cr.Flood 0.50 67 Road Maint. 1.40
50 Borough 4.50 _ 10.45
8.12 5.92 20K Borough TAF's and Homer(20)!
41 SEWARD SPECIAL LAil other City TAF mills do not apyiy�
41 Seward Special 3.12
43 Sew/Bear Cr.Flood 0.50 63 CENTRAL HOSPITAL
50 Borough 4.50 EAST i ALL
W $OROI)GH TAPS
8.12 50 Borough 4 5C (20"&SHARD(40)
42 LOWELL POINT 51 Cent.Hosp. 0.02
EMERGENCY SERVICE 64 Cent.Pen.EMS 1.00 i `Kachemak City TAG 80-No tax on I
AREA 67 Road Maint. 1.40 ! personalyro2erttyi/t>'oats/aircraft I
42 Lowell PT.SA 0.00
43 Sew/Bear Cr Flood 0.50 6.92 i 100,000 PERSONAL EXEMPTION i
50 Borough 4.50 ALL BOROUGH TAF's
67 Road Maint. 1.40 64 CENTRAL PEN. i HOMER(20)&SOLDOTNA(70)_J
6.40 EMERGENCY MEDICAL
43 SEWARD-BEAR CREEK 64 Cent Pen.EMS 1.00 AIRCRAFT TAX: _-1
FLOOD SA 50 Borough 4.50 i FLAT TAX FOR ALL BOROUGH TAF'S, i
43 Sew/Bear Cr Flood 0.50 52 South Hosp. 2.30 SELDOVIA(10)&KENAI(30)(zero rate)
50 Borough 4.50 67 Road Maint. 1.40 Borough Flat Portion+City Flat Portion
67 Road Maint. 1.40 TAG'S 20,40,41 &70
6.40 9.20 Full value X TAF Millrate
52 SOUTH HOSPITAL Plus + Borou h Flat Portion
52 So.Hospital 2.30
50 Borough 4.50 65 SOUTH i BOAT TAX:
6.80 HOSPITAL/ROADS i FLAT TAX FOR ALL BOROUGH
53 NIKISKI FIRE 50 Borough 4.50 ;TAPS HOMER(20)&SOLDOTNA(70)
53 Nikiski Fire 3.00 52 South Hosp. 2.30 : Borough Flat Portion+City Flat Portion
50 Borough 4.50 67 Road Maint. 1.40 i TAG'S 10,40&41
51 Cent.Hosp. 0.02 i Full value X TAF Millrate PLUS(+)
54 No.Pen Rec. 1.00 8.20 i Borough Flat Portion
67 Road Maint. 1.40 i TAG 30 Class 1&2 Exempt and
i Class 3-7 Full value X TAF Millrate
9.92 67 KPB ROAD i PLUS(+)Borough Flat Portion
54 N.PENINSULA MAINTENANCE _._.._„__.__,_.,__,_,___,_„_„_„_,._.,_„
RECREATION 50 Borough 4.50 i Senior Exemptions:
54 No.Pen.Rec. 1 00 67 Road Maint. 1.40 i Borough 300,00 exempt unless Variable
50 Borough 4.50 i 10,20,30,40.41,70,80 upto 150,000 exempt
51 Cent.Hosp. 0 02 5.90 i over is Taxed at City TAF Rate
58 Cen.Emer.Ser. 2.65
67 Road Maint. 1.40 'TAF=Tax Authority Fund Disability Tax Credit:
*TAG=Tax Authority Group ) TAF 30 Kenai$250.00 �!
9.57 1 Borough TAPS$500.00
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Kenai Peninsula Borough
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
TAG AREA 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
10 SELDOVIA CITY 13.85 13.85 13.85 13.85 10.10 9.10 9.10 9.10 9.10 9.85
11 SELDOVIA REC SERVCE AREA 6.65
20 HOMER CITY 13.35 13.35 12.85 12.85 12.00 11.30 11.30 11.30 11.30 11.30
21 HOMER CITY - ODL SA 15.30 15.30 20.9283
30 KENAI CITY 12.10 12.10 12.10 12.10 11.00 9.90 9.00 8.37 8.37 8.37
40 SEWARD CITY 9.72 10.22 10.22 10.22 9.12 8.12 8.12 8.12 8.12 8.12
41 SEWARD CITY SPECIAL 9.72 10.22 10.22 10.22 9.12 8.12 8.12 8.12 8.12 8.12
42 LOWELL POINT EMERGENCY SA 9.85 10.25 10.25 10.25 9.05 8.15 8.15 8.15 6.40 6.40
43 SEWARD-BEAR CREEK FLOOD SA 8.50 8.50 8.50 7.30 6.40 6.40 6.40 6.40 6.40
52 SOUTH HOSPITAL 8.35 8.35 8.35 8.35 7.50 6.80 6.80 6.80 6.80 6.80
53 NIKISKI FIRE 11.90 12.30 12.30 13.00 11.80 10.80 10.40 9.92 9.92 9.92
54 NORTH PEN REC 12.20 12.35 12.35 12.35 11.35 10.25 9.85 9.37 9.37 9.57
55 NIKISKI SENIOR 12.05 12.45 12.50 13.20 12.00 11.00 10.60 10.12 10.12 10.12
57 BEAR CREEK FIRE 10.35 10.75 10.75 10.75 9.55 8.65 8.65 8.65 8.65 8.65
58 CENTRAL EMERGENCY 11.20 11.35 11.35 11.35 10.35 9.25 8.85, 8.37 8.37 8.57
61 CENTRAL HOSPITAL WEST 8.60 9.00 9.00 9.00 7.80 6.80 6.40 5.92 5.92 5.92
63 CENTRAL HOSPITAL EAST 9.60 10.00_ 10.00 10.00 8.80 7.80 7.40 6.92 6.92 6.92
64 CENTRAL PEN EMERGENCY MED 10.85 10.75 10.75 10.75 9.80 9.20 9.20 9.20 9.20 9.20
65 SOUTH HOSPITAL 9.85 9.75 9.75 9.75 8.80 8.20 8.20 8.20 8.20 8.20
67 KPB ROAD MAINTENANCE 8.10 8.00 8.00 8.00 6.80 5.90 5.90 5.90 5.90 5.90
68 ANCHOR POINT FIRE/EMERGENCY 11.85 11.75 11.75 11.75 10.80 9.95 9.80 9.80 10.45 10.45
70 SOLDOTNA CITY 11.35 11.60 11.60 11.60 10.70 9.50 9.10 8.62 8.12 7.82
80 KACHEMAK CITY 9.35 10.35 10.35 10.35 8.50 7.80 7.80 7.80 7.80 7.80
81 KACHEMAK EMERGENCY SRVS 11.60 11.50 11.50 11.50 10.55 9.95 9.95 10.45 10.45 10.45
MILL RATES by TAG.xlsx 6/18/2012
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SUMMARY BY JURISDICTION
low
Period Range : 1/1/2012 to 12/31/2012
Tax Type : STX Line Item : TAXABLE
Total %
Change
Change from Previous Year in from
ST Codes 1st 2nd 3rd 4th Total 1st 2nd 3rd 4th Previous
STX Quarter Quarter Quarter Quarter Qtr Qtr Qtr Qtr Year
Year 2012
Seldovia 750,734 993,129 1,242,197 687,289 3,673,349 3.82 % -6.60 % -7.62 % -4.12 % -4.53 %
Homer 25,581,332 45,330,788 59,910,853 29,663,054 160,486,027 3.99 % -0.44 % 0.79 % 2.12 % 1.18 %
Kenai 46,870,657 58,017,914 63,411,173 54,064,336 222,364,080 3.79 % 3.07 % 1.13 % 0.23 % 1.96 %
Seward 13,213,481 31,568,965 49,595,704 14,505,591 108,883,741- 11.20 % 5.66 % 2.57 % 6.57 % 4.97 %
Soldotna 49,627,126 63,001,777 85,468,372 59,428,566 257,525,841 7.16 % 5.85 % 2.83 % 1.47 % 4.04 %
Borough 172,251,678 261,404,687 358,539,680 197,538,531 989,734,576 6.16 % 2.82 % 1.88 % 0.83 % 2.63 %
Year 2011
Seldovia 723,142 1,063,309 1,344,701 716,891 3,848,043 5.24 % 0.48 % -8.75 % -0.37 % -2.29 %
Homer 24,598,655 45,530,609 59,441,237 29,046,387 158,616,888 6.54 % 7.02 % 4.42 % 5.08 % 5.60 %
Kenai 45,157,332 56,291,828 62,703,660 53,942,258 218,095,078 18.70 % -0.79 % 3.83 % 2.69 % 5.00 %
Seward 11,882,611 29,877,762 48,351,805 13,611,923 103,724,101 5.97 % 7.44 % 7.23 % 4.93 % 6.84 %
Soldotna 46,312,096 59,518,093 83,118,821 58,568,219 247,517,229 -4.79 % 6.46 % 7.49 % 6.32 % 4.46 %
Borough 162,251,699 254,236,514 351,932,891 195,908,187 964,329,291 7.40 % 5.90 % 7.00 % 7.13 % 6.80 %
Year 2010
Seldovia 687,164 1,058,249 1,473,586 719,554 3,938,553 -13.74 % 11.64 % 21.16 % -7.37 % 5.38 %
Homer 23,088,502 42,545,484 56,924,491 27,641,091 150,199,568 0.92 % 4.67 % 4.56 % 3.38 % 3.80 %
Kenai 38,043,781 56,742,710 60,392,230 52,527,012 207,705,733 1.98 % 21.10 % 19.20 % 24.57 % 17.35 %
Seward 11,213,031 27,809,429 45,089,653 12,972,721 97,084,834 4.86 % 4.97 % 9.49 % 3.93 % 6.86 %
Soldotna 48,640,987 55,906,963 77,325,620 55,085,264 236,958,834 2.12 % -8.23 % -5.82 % -6.11 % -4.96 %
Borough 151,077,558 240,075,659 328,907,331 182,863,336 902,923,884 -2.64 % 2.48 % 4.56 % 5.00 % 2.82 %
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City of Seward
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2012
LongRinge FtnanciI Forecast
1
Table of Contents
Introduction 3
Purpose of the Forecast 3
Developing the Forecast 3
Executive Summary 4
Economic Outlook 6
Five-Year Forecast 7
Long-Range Financial Forecast (Dollar Changes) 8
Long-Range Financial Forecast (Percentage Changes) 9
Key Drivers 10
Alternate Scenarios 1
Conclusion and Next Steps 14
Appendix 15
2
°a° I. INTRODUCTION
This document represents the first step in the process of developing a long-range fmancial plan for the City of
Seward. The recent transition to a biennial(two-year)budget enables the City to take a longer-term strategic
approach to strengthening the City's financial condition. The former single-year budgetary process
consumed considerable resources and lacked a focus on the long-term impacts of policy decisions. As a
result, decisions may have been made without a complete understanding of how services and/or
infrastructure will be paid for in the future, or how they will affect the City's financial strength. In
particular, insufficient attention has been paid to how the City will maintain and replace existing
infrastructure, and how it might address future risks and opportunities. By adopting a longer-term
perspective,we hope to ensure that decisions made today will be informed by a better understanding of their
potential impacts on future taxpayers, and will lead to a stronger fmancial condition for the City.
PURPOSE OF THE FORECAST
The Long-Range Financial Forecast provides a framework for examining the future impact of policy
decisions on the City's General Fund revenues and expenditures. Its purpose is to identify financial trends,
pending shortfalls,potential risks and opportunities,and other issues so that the City can take steps to address
them. Part of the analysis involves looking back over the past ten or more years to identify trends to provide
the opportunity for course correction before warning signs become systemic problems.
The Long-Range Financial Forecast (LRFF) is neither a budget nor a plan. It does not present a
comprehensive financial plan for achieving the City's objectives. Rather, it represents the first step in the
process of developing a long-range fmancial plan. At this stage, we look forward to the next five years to
estimate the impact of current policies on future revenues and expenditures. The next stage of the LRFF will
expand the forward-looking time-horizon to ten-years. The final stage will incorporate Council's
longer-term priorities and objectives into the fmancial forecast and then develop a long-range plan to achieve
those objectives.
DEVELOPING THE FORECAST
The Long-Range Financial Forecast focuses on the City's General Fund which is the main operating fund of
the City, used to account for services generally paid for by taxes and payments from other government
entities. The General Fund includes the following primary service categories: Public Safety; General
Government; Public Works; Parks and Recreation; Debt Service; and Library. This forecast does not
include the business-type entities of the City including the Small Boat Harbor, electric,water and wastewater
utilities, Seward Marine Industrial Center, and paid parking.
The City of Seward's transition to a biennial budget process allows the City to approve two consecutive
years' budgets in a single budgetary process, followed by a more in-depth review of budgetary issues in the
'off year. In this initial 'off year' of 2010, the City is developing its first long-range financial forecast
which will be improved and will ultimately evolve into a comprehensive long-range financial plan. In this
first year, the Forecast primarily examines the base case; what the General Fund looks like going forward,
assuming no structural changes are made to the budget. It essentially assumes the status quo in terms of
current City service levels and infrastructure,with a few exceptions. The Forecast can be easily modified to
demonstrate the impact of varying assumptions with respect to future changes in service levels,
infrastructure, debt obligations, etc.
In 2010,the administration is also pursuing a new initiative aimed at improving the capital budgeting process
with the goal of developing an itemized replacement schedule for all of the City's infrastructure assets,
3
including anticipated replacement costs. Next steps will involve developing strategies to fund replacement
of those assets. This initiative, once completed, will enable the new capital budget component to be rolled
into the long-range fmancial plan in the future, to ensure that a plan is in place to maintain and replace the
City's existing assets.
O°a
° H. EXECUTIVE SUMMARY
Over the past decade, the City has experienced positive and sustained growth in tourism, which has had a
positive impact on the economy of Seward, as well as on the finances of the City. The City has been able to
main existing service levels and to add or expand programs such as longer library hours, more DMV
coverage, a police officer in the schools, more staffmg at the Teen & Youth Center, new parks and
playgrounds,expanded information technology services and Community Development staffmg, addition of a
boards/commissions liaison, increased library staffing, among others. Overall, the City's revenues have
increased 42% over the past decade', and expenditures have increased 66%. The increase in expenditures
can be attributed to higher costs of personnel. Specifically, health insurance costs have risen 153% and
retirement costs by 607% in the past ten years.
Now the City is faced with a protracted downturn in the economy,which is having an adverse impact on the
City's primary source of revenue, sales tax, as well as on hotel/motel tax and campground fees. This is
resulting in a decline in tax revenues that support City programs and services. Many economic forecasters
expect the current downturn to last two or more years, although Seward has experienced slight upward
momentum since the trough of 2009. This will require the City to focus on addressing the fmancial
challenges before us, in order to maintain solid fmancial health.
There are a number of potential challenges in the near future, including:
0 Potential financial shortfalls in the healthcare system.
0 Lack of revenue source to pay for repairs to, and replacement of major City infrastructure
including roads, buildings, etc. and a current backlog of needs.
0 Lack of funding source to pay for new library/museum operating and debt service costs.
0 Potential change in State funding level for retirement system unfunded liabilities.
0 Ongoing operating losses at SMIC
0 Threats to the business community and City's revenue base resulting from reduced consumer
spending
In the past few years,the City has been actively working to maintain and enhance revenues. The harbor
has seen significant expansion, generating a larger economic pie for businesses operating in the harbor,
as well as the entire community. The opening of Seward Mountain Haven in 2009 is expected to
strengthen the financial stability of the community's healthcare system, once it reaches full occupancy.
Special utility contracts were offered to certain industrial users in the hopes of strengthening their
long-term economic viability, with the intent to eventually eliminate subsidies once the businesses
become economically viable. Continued low property lease rates have led to significant capital
investment and expansion by harbor businesses, and low property tax rates encourage property
ownership and higher property values. Expanded electrical sites on the waterfront have enhanced the
visitor camping experience, while generating additional revenue for the City.
The City has been working with the business community and the Chamber of Commerce to focus on
economic development and strengthen Seward's existing businesses. Community groups and City
departments have brought more conferences and competitive events to Seward, helping to support local
4
business. The City successfully protected the home porting of the new Sikuuliaq arctic research vessel
in Seward, enhancing research and education partnership opportunities, and creating local jobs.
Discussions are underway with the Coastal Villages Region Fund, with the hope of home porting a
number of fishing vessels in Seward, leading to further development of the Seward Marine Industrial
Center. The City lobbied for State funding to expand facilities at AVTEC, which strengthens our
workforce and enhances educational partnerships in the community and around the State. The City is
pursuing many initiatives aimed at strengthening the local economy, but more work is to be done to
ensure that small businesses can endure the current economic climate.
This five-year forecast assumes:
0 City service levels will be maintained at current levels, with the addition of a new
library/museum facility financed in 2012 and opened for business in 2013.
0 The State of Alaska will continue to pay retirement system contributions in excess of 22%
0 The local economy will continue to experience sluggish growth from 2010 through 2012, and
grow faster beginning in 2013.
0 Any healthcare system contribution requirements for operations or capital needs will come from
the hospital debt service fund and will not affect the General Fund.
0 The General Fund will continue the current practice of paying for annual SMIC deficits.
0 The General Fund will begin to repay the "loan"to the Electric Fund for contributions that fund
made to SMIC in the past, as approved by the City Council.
0 Any one-time State revenue sharing monies will be used for capital repairs and capital budget
needs associated with the General Fund.
The five-year forecast does not include:
0 Possible increases in PERS pension costs resulting from potential State reduction in retirement
contributions
0 Possible one-time start-up costs associated with any new model of healthcare clinic
0 Funding for unexpected shortfalls in any of the City's enterprise funds
0 Capital contributions toward major repairs or replacement of existing general government assets
This Long Range Financial Forecast demonstrates that the City must make some course corrections in
order to strengthen its overall financial condition and the condition of its physical assets. The Forecast
projects an initial gap of$827,546 in 2012 due,in part,to the following: lower tax revenues;a new loan
repayment to the electric fund;one-half the annual payment on a new library/museum general obligation
bond; restoration of full motor pool funding, and standard inflationary cost increases. Over time, the
gap widens to $1.7 million annually, as revenues fail to keep pace with increased costs, and the full
impacts of the new library/museum project come online".
While the status quo budget presents its own challenges, an even larger challenge comes from the need to
fund replacement of City infrastructure and assets. For more than ten years, the City has failed to
identify a mechanism to pay to replace its general government assets, counting instead on one-time State
revenues and state/federal grants to fund the capital budget, with minimal funding directed toward only
absolutely essential major infrastructure repairs. Given the magnitude of the federal budget deficit,
decreased political influence in Washington, D.C. and State budget challenges associated with declining
oil revenues, the City can no longer expect material assistance to repair and replace its own general
government infrastructure. At the end of 2009, the value of the City's governmental fixed assets was
approximately$70 million. The City should be setting aside more than$3.5 million per year to pay for
the eventual replacement of existing general government assets. A mechanism to finance a capital
replacement program must be part of any Long Range Financial Plan, to ensure the sustainability of
crucial City buildings and infrastructure.
5
A,
"' III. ECONOMIC OUTLOOK
In 2009, Seward felt the effects of the global recession in the form of a slowdown in tourism,jobs, and
retail sales. The economic slowdown resulted in reduced retail sales, fewer visitors spending money in
hotels, restaurants and beds and breakfast, and a reduction in residential construction activity. The
reduction in residential construction was offset by strong commercial (largely government sector)
construction activity due, in part, to federal stimulus spending. The City's tax revenues -- which
represent its primary source of funding for general government services -- fell by $602,526 or 10.8%.
Overall,taxable sales fell 13.2%in 2009,representing a reduction in revenue for local businesses of$3.6
million. Nationally, taxable sales fell 6.2% compared with 2008. Hotel/motel gross sales were down
21.2%,representing a reduction in revenues of$1.9 million for local lodging establishments. Passenger
fee revenues collected by the City were down by $156,555 from 2008, reflecting 44,730 fewer
passengers embarking on fishing charters and wildlife cruises. This loss in tourism activity precipitated
a reduction in the number of charter and lodging businesses, and the corresponding local jobs associated
with those businesses.
On a bright note, Alaska's unemployment rate in September was 7.8%, well behind the national
unemployment rate of 9.6% for the same period. And mortgage delinquencies in Alaska's largest
market (Anchorage and core Mat-Su) were at 2.75% in July, versus the national rate of 7.81%. The
local foreclosure rate in Alaska's largest market was 0.87% in July, well below the national rate of
3.13%. This data, combined with the 7.8% increase in Borough assessed property valuations for
Seward from 2008 to 2009, suggests that Seward and other Alaskan communities have been largely
insulated from the devastating impact that foreclosures and property devaluations have had on much of
the Lower 48 states, as well as on the communities which rely on those property values to generate
property tax revenues to sustain local government services.
Looking forward, economists point to a rise in Gross Domestic Product and manufacturing orders to
predict stabilization in the national economy, although job growth -- a key component in economic
recovery--has yet to materialize, and the economy remains sluggish. Two of the sectors hardest hit by
job losses are the financial sector and the construction industry, and some economists suggest that given
consolidation in the financial sector and ongoing concerns involving the banking industry, as well as the
lack of demand for construction and reduced access to financing, those markets may not rebound
anytime in the near future. While Alaska was not as hard hit by the housing crisis or the financial crisis
as much of the nation, it will very likely suffer significant effects from the loss of senior leadership in the
U.S. Senate, as construction dollars into Alaska shrink. This is likely to continue the downward
pressure on construction jobs in Alaska, which may have an adverse impact on employment in Seward.
It will also adversely impact the City's ability to rely on federal funding for infrastructure historically
paid for with federal grants.
Given economic activity through June, 2010, the pace of economic recovery appears to be rebounding
slowly in Seward. Through June, taxable sales are up 4.1%, representing an increase of$1,537,575
over 2009. Through September, passenger fee revenues are up $38,990, representing an increase of
11,140 passengers over the same period in 2009. While there is little empirical data upon which to
project Seward's unemployment rate or level of economic activity, a recent economic development
survey suggests that many local business respondents expect business to improve in the near future,over
2009 levels.
Economists are mixed however, in their expectations regarding the rate of economic recovery going
forward. Goldman Sachs points to the headwinds to private sector growth -- including excess vacant
6
housing, state and local budget stresses, lack of lending,reluctance to hire--suggesting a deceleration in
the growth of Gross Domestic Product down to 1.5% through 2011"'. Many economists who were
predicting higher GDP growth, such as Goldman Sachs, are reducing expectations based on the a number
of factors including the markets shifting toward a U.S. slowdown, the expectation that a European
sovereign crisis would bring volatility and increased financial risks, a lowering of bond yields, and
growing opposition to additional policy stimulus from either the U.S. Congress or the federal reserve.
Many observers suggest that as the federal stimulus funding programs phase out, the economy may
continue to sputter. Fewer jobs and lower consumer spending may impact Alaska if fewer people elect
to travel. While Seward has seen some signs of improvement over 2009, the future of Seward's
economy is unclear. These mixed economic signals provide the framework within which our
Long-Range Financial Forecast projections must be made. As a result,the Forecast estimates relatively
low growth in expenditures which will depend in large part, on inflationary or deflationary pressures in
the near future. Revenues are likewise projected to rise very slowly over the next five years, reaching
pre-recessionary levels in 2014.
IV. FIVE-YEAR FORECAST
The following tables show projections of General Fund revenues, expenditures, and interfund transfers from
2012 through 2016,generally assuming the status quo in terms of government service levels. The first table
reflects the year-over-year changes in dollar amounts,and the second in percentage-change amounts. These
two tables should be viewed as base case scenarios, assuming no structural changes are made over the next
five years to either General Fund revenue sources or service levels, and no changes are made to address the
major repair and/or replacement of governmental assets.
7
1'111HlUl.,lltL 1'V 1�1'Jl.110 I LV 1L-LV IU
LONG-RANGE FINANCIAL FORECAST(DOLLAR CHANCES)
2011 2012 2013 2014 2015 2016 Cumulative
Approved % % % % % %Change
Budget Change Change Change Change Change 2012-2016,
Revenues
Sales Tax 3,926,526 3,893,640' 4,049,386 4,191,114 4,337,803 4,554,693 661,053
Property Tax 1,014,913 997,152' 1,017,095' 1,064,899' 1,110,689" 1,158,449 161,297
Hotel/Motel Tax 308,652 226,234 239,808 251,079 262,880 275,235 49,001
Other Tax 76,500 85,771 86,629 87,495 88,370 89,254 3,483
Subtotal: Taxes 5,326,591 5,202,798 5,392,918 5,594,587 5,799,742 6,077,631 874,834
Licenses/Permits 170,810 174,226 181,195 185,725 190,368 195,127 20,901
Intergovernmental 931,500 991,500' 995,700' 999,942' 1,002,138" 1,006,551" 15,051
Charges for Services 2,541,823 2,701,007' 2,755,163 2,810,404 2,866,752 2,924,230 223,223
Other 286,650 78,250 98,250 108,250 118,250 128,250 50,000
TOTAL REVENUES 9,257,374 9,147,781 9,423,226 9,698,908 9,977,251 10,331,791 1,184,010
Expenditures
Salaries 3,885,306 3,999,923' 4,203,875' 4,320,196' 4,503,805' 4,717,735' 717,813
Insurance:Health and Workers Comp' 1,307,052 1,303,554 1,434,077' 1,541,633 1,657,255 1,781,549 477,995
Retirement Costs 849,770 879,983 960,884' 950,443 990,837 1,037,902 157,919
Other Benefits ' 496,234 514,595 519,359' 518,565 521,046 523,527 8,932
Subtotal Salaries and Benefits 6,538,362 6,698,055 7,118,195 7,330,837 7,672,942 8,060,713 1,362,659
Contracted Services 1,319,600 1,339,394 1,379,462' 1,413,948 1,456,367 1,500,058 160,664
Supplies and Materials 727,075 737,981 750,527 769,290 792,369 816,140 78,159
Rent and Leases 119,600 121,394 123,458 126,544 132,871` 136,857 15,463
Utilities 621,241 652,303 775,668' 814,452 855,174 897,933 245,630
General 199,505 222,798' 226,585 232,250 239,217 246,394 23,596
Capital Equipment and Debt Service 461,715 573,484' 633,484' 633,484 633,484 633,484 60,000
TOTAL EXPENDITURES 9,987,098 10,345,408 11,007,379 11,320,804 11,782,425 12,291,579 1,946,171
Interfund Transfers
Transfers from Other Funds:
Payments-in-lieu-of-taxes 1,260,882 1,286,100 1,311,822 1,324,940 1,338,189 1,351,571 65,472
Lobbying 72,600 72,600 72,600 72,600 72,600 72,600 -
Rents and leases 188,051 190,872 194,117 198,969 204,939 213,751 22,879
Hospital PERS loan 134,704 134,704 134,704 134,704 134,704 134,704 -
Other 543,768' 310,000 310,000 310,000 310,000 310,000 -
Transfers to Other Funds:
Hospital Debt Service 981,632 973,410 1,012,346 1,047,779 1,084,451 1,138,673 165,263
Harbor fish tax 365,000 420,000 424,200 439,153 441,349 445,762 25,762
SMIC Deficit 124,640 120,000 122,040 125,091 128,844 132,709 12,709
Electric loan - 110,784 110,784 110,784 110,784 110,784 -
NET TRANSFERS 728,733 370,081 353,872 3 18,4 07 295,004 254,698 292,085
Net Operating Surplus (Deficit) (991) (827,546) (1,230,281) (1,303,490) (1,510,170) (1,705,091)
Assumptions:
1) Library/museum bonds issued in 2012(debt service$120K per year)and new operating cost impacts show in 2013($261K
increase includes$164K additional personnel costs)
2) Restores motor pool contributions in 2012 to 2009 levels($160K increase).
3) Bonds on community center,sidewalks,and fire department air packs paid off 2011.
4) Banking contract increases costs$20K annually,reduction of$50K refine billing revenue,no gravel sales,no State revenue
sharing.
5) New GF loan repayment to Electric Fund for SMIC deficit begins in 2012($110,784)
6) All raw fish tax is transferred to Harbor Fund.
8
• FINANCIAL FORECAST 2012-2016
•
LONG-RANGE FINANCIAL FORECAST(PERCENT CHANGES)
2011 2012 2013 2014 2015 2016 Cumulative
Approved % % % % % %Change
Budget Change Change Change Change Change 2012-2016
Revenues
Sales Tax 3.1% -0.8% 4.0% 3.5% 3.5% 5.0%
Property Tax 2.2% -1.7% 2.0% 4.7% 4.3% 4.3%
Hotel/Motel Tax 2.0% -26.7% 6.0% 4.7% 4.7% 4.7%
Other Tax 0.0% 12.1% 1.0% 1.0% 1.0% 1.0%
Subtotal: Taxes 2.9% -2.3% 3.7% 3.7% 3.7% 4.8% 13.5%
Licenses/Permits 4.3% 2.0% 4.0% 2.5% 2.5% 2.5%
Intergovernmental -19.7% 6.4% 0.4% 0.4% 0.2% 0.4%
Charges for Services 3.1% 6.3% 2.0% 2.0% 2.0% 2.0%
Other -20.7% -72.7% 25.6% 10.2% 9.2% 8.5%
TOTAL REVENUES -0.8% -1.2% 3.0% 2.9% 2.9% 3.6% 11.2%
Expenditures
Salaries 2.9% 2.9% 5.1% 2.8% 4.3% 4.8%
Insurance:Health and Workers Comp 4.0% -0.3% 10.0% 7.5% 7.5% 7.5%
Retirement Costs 3.2% 3.6% 9.2% -1.1% 4.3% 4.8%
Other Benefits 4.9% 3.7% 0.9% -0.2% 0.5% 0.5%
Subtotal Salaries and Benefits 3.3% 2.4% 6.3% 3.0% 4.7% 5.1% 21.4%
Contracted Services -2.1% 1.5% 3.0% 2.5% 3.0% 3.0%
Supplies and Materials 1.1% 1.5% 1.7% 2.5% 3.0% 3.0%
Rent and Leases -18.4% 1.5% 1.7% 2.5% 5.0% 3.0%
Utilities 1.6% 5.0% 18.9% 5.0% 5.0% 5.0%
General 2.6% 11.7% 1.7% 2.5% 3.0% 3.0%o
Capital Equipment and Debt Service -0.4% 24.2% 10.5% 0.0%o 0.0%o 0.0%o
TOTAL EXPENDITURES 1.8% 3.6% 6.4% 2.8% 4.1% 43% 21.2%
Interfund Transfers
Transfers from Other Funds:
Payments-in-lieu-of-taxes 6.3% 2.0% 2.0% 1.0% 1.0%o 1.0%
Lobbying 10.0% 0.0% 0.0% 0.0%o 0.0%o 0.0%
Rents and leases 3.4% 1.5% 1.7% 2.5% 3.0%o 4.3%
Hospital PERS loan 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other -0.2% -43.0% 0.0% 0.0%o 0.0% 0.0%o
Transfers to Other Funds:
Hospital Debt Service 3.1% -0.8% 4.0% 3.5% 3.5% 5.0%
Harbor fish tax 0.0% 15.1% 1.0% 3.5% 0.5% 1.0%
SM IC Deficit 76.6% -3.7% 1.7% 2.5% 3.0% 3.0%
Electric loan -100.0% 0.0% 0.0% 0.0% 0.0%o 0.0%o
NET TRANSFERS 46.4% -49.2% -4.4% -10.0% -73% -13.7% -84.6%
9
WDa V. KEY DRIVERS
REVENUES:
Sales Tax
The Forecast assumes continued low growth in sales tax through 2012, followed by a rebound beginning in
2013, reaching pre-recession levels by 2014. Sales tax revenues fell by 13.4% in 2009, after eight
consecutive years of growth. So far through June, 2010, taxable sales have increased 4.1% over 2009,
demonstrating some level of resiliency. The sales tax estimates for 2012 were derived using actual 2009
data,projecting an increase of 4.1% for 2010,with an additional 2.0%in 2011 and 2.5% in 2012.
Property Tax
The Forecast assumes slower growth of property tax revenue in years 2012 and 2013 (2% each year), with
higher growth in years 2014 through 2016 (4.7%, 4.3%, 4.3% respectively). This is consistent with the
cyclical nature of Kenai Peninsula Borough property re-assessments, which occur approximately every five
years, and which occurred most recently in 2008. As we reach the end of the cycle, the rate of property tax
revenue growth slows,until the next round of assessments brings values more in line with the market. The
slower rate of initial growth is also supported by the weakened housing market, although Seward has not yet
experienced significant effects. Upward pressure on home prices may offset the weakened housing market
based on the persistent low interest rates resulting from actions by the Federal Reserve, since lower interest
rates make home ownership more affordable. On the other hand, tightened lending requirements may
continue to impact access to the markets for many homebuyers.
Hotel/Motel Tax
The Forecast assumes that revenues from overnight lodging in Seward will remain depressed through 2012
based on reduced visitor numbers. This is despite the recent increase in room supply resulting from new
construction and growth in the bed-and-breakfast sector. In 2009,hotel/motel tax revenues declined 21.2%
to 2005-levels,after five solid years of growth. In 2012,the Forecast reflects a 5%increase over 2009 actual
revenues, followed by an increase of 6.0% in 2013, and annual increases of 4.7%thereafter. The Forecast
does not assume that hotel/motel tax revenues reach pre-recession levels in the next five years due to a
combination of reduced consumer spending, the closure of some establishments suggesting lack of
confidence in a strong nightly rental recovery, and reduced rack pricing, upon which taxes are based.
Intergovernmental Revenue
Intergovernmental revenues are expected to remain constant, with the exception that State on-behalf
contributions for PERS and revenue sharing are not included in the Forecast. The State's contributions
on-behalf of the City for retirement costs in excess of 22%are not accounted for in either the expenditures or
the revenues in the Forecast. Once those are known each year, an appropriation is done to increase both the
budgeted revenues and expenditures to account for the State's payment. Likewise, revenue sharing is not
programmed into the Forecast since the likelihood of receiving State aid is unknown, and if it does occur, it
will be used for one-time capital expenditures, which have also not been programmed into the Forecast.
Since the intergovernmental revenue category consists primarily of jail contract revenues,dispatching for the
State troopers and the Kenai Peninsula Borough, liquor tax, and raw fish tax,the most likely future impact to
this revenue source would be limited to a change in the volume of fish caught and/or processed in Seward.
However,the net effect of a future change in raw fish tax will be zero to the General Fund,given that in 2010,
the General Fund began transferring 100% of the raw fish tax to the Harbor Enterprise Fund, and that
expectation is carried out over the next five-years in this Forecast.
10
Charges for Services
The bulk of Charges for services revenues are related to the allocation of General Fund costs to the enterprise
funds (approximately $1.6 million, or 67% of these revenues). To the extent that General Fund allocable
costs increase, so will this revenue category. The other large item in this revenue category is parks and
recreation revenues, comprising 23% of charges for services revenues. This portion of revenues will be
primarily impacted by the future trend of camping revenues, which depends on the level of tourism and
in-state travel.
Other Revenues
The other revenues category includes investment earnings, penalties and interest, and licenses/permit fees.
This category will be lower in 2012 and thereafter due to the loss of revenue associated with processing the
refuse billing for Alaska Waste, and investment earnings are expected to remain very low over the Forecast
period due to the historically low interest rate environment as well as anticipated unrealized investment
losses expected to materialize as interest rates rise.
EXPENDITURES:
Salary Costs
The primary purpose of the General Fund of the City is the provision of services, such as police and fire
protection, street clearing, building inspections, parks maintenance, recreation and library programs and
services, and other similar service programs. As such, salaries and benefits comprise 65% of all General
Fund expenditures. City employees work under a pay plan that offers merit increases for up to eight years of
an employee's career with the City. For each year a merit increase is awarded, the employee is eligible to
receive a merit increase of 2.5%. Employees at the end of their pay range are only eligible for pay increases
based an annual cost of living increase. The Forecast shows increases in salary expenses of between 2.9%
and 5.1%. In 2013, one component of the increase in salaries reflects the addition of$163,780 in added
personnel costs associated with bringing the new library/museum online. Otherwise,cost of living increases
are projected from 2012 through 2016 as 1.2%, 1.015%, 1.017%, 2.5% and 3.0%, respectively. Salary
increases above these percentages are attributed to estimated merit increases.
Benefit Costs
The Patient Protection and Affordable Care Act signed into law on March 23, 2010 primarily addresses
access to health insurance coverage and assures that all Americans who need coverage will be able to get
health insurance. It is not clear how the legislation will impact the cost of health insurance, especially
premiums and out-of-pocket expenses. Given that the City is in an experience-based cost pool, and that new
mandates require the expansion of coverage for dependents up to 26 years of age, the elimination of the
current $1.0 million lifetime benefit cap, and coverage of wellness initiatives, it is likely that the City may
continue to see a rise in healthcare costs for the foreseeable future. The Forecast assumes an annual increase
in health insurance costs of 7.5% for health and workers' compensation insurance. This estimate may be on
the low side. However, the City continues to share a portion of monthly premium costs with employees,
which provides some level of cost containment. In addition to inflationary healthcare cost increases, the
Forest in 2013 includes benefits attributed to new library/museum personnel.
Other Expenses
This category includes all non-personnel costs other than capital equipment and debt service. Generally
speaking,the Forecast estimates inflationary cost increases of 1.5%in 2012, 1.7%in 2013,2.5%in 2014,and
3.0% in 2015 and 2016. In the near future, given the historic low fed funds rate, it is not unreasonable to
expect a lower risk of inflation. However, experts can be found on both sides of the debate; some fearing
inflationary pressures, and others concerned just as much about deflation. In projecting the costs of
providing government services at today's service levels, we err here on the side of conservative cost
11
estimation. The Forecast estimates higher annual cost increases associated with utilities (5% per year), in
part due to recent City tariff increases as well as higher costs of telephone and communications. The higher
projected costs for contracted services and utilities in 2013 are related to the new library/museum.
Debt Service
Capital equipment and debt service costs are expected to rise in 2012 when the library/museum bond debt
service obligations begin. For the purposes of this study, an anticipated$1.5 million bond,plus bond issue
costs and bond reserves has been programmed in. At 4.5%interest over 25 years, annual debt service costs
are approximately$160,000. In addition, 2012 includes reinstatement of$160,000 in annual General Fund
contributions to the Motor Pool Fund,bringing contributions back to 2009 levels. Contributions were scaled
back in 2010 and 2011 in order to provide a soft-landing from the recessionary impact of lower tax revenues
on the General Fund. Two outstanding bonds (sidewalks and the Community Center)will mature in 2011,
as will the capital lease for fire department air packs. This reduces the anticipated debt service costs
beginning in 2012. No additional capital equipment or debt obligations are included in the Forecast.
It is unreasonable to assume that no capital repairs or replacement will be needed over the next five years,or
that the City does not need a comprehensive plan to address this issue. With nearly$70 million in general
government assets (historic cost), the City must develop a strategy for methodically funding replacement of
City infrastructure and assets. The motor pool is in place to ensure the availability of funding to replace
existing fleet vehicles and some heavy equipment. There is also a critical need to develop a plan to fund
major repairs and replacement going forward,since Seward is likely to see a decline in grant funding to cover
these costs in the future. A funding plan should establish basic criteria for paying for deferred maintenance,
road repairs, capital equipment, and new facilities. A plan might dictate, for example,that:maintenance and
repair will be funded 100%on a pay-as-you-go basis;'" new facilities and new road construction will be paid
for with 100% capital fmancing"; replacement of existing infrastructure will come through a capital
replacement fund, where annual contributions are set aside each year for replacement. Such basic criteria
will provide for more accurate estimates of future costs and ensure the physical condition of the City's plant
and infrastructure. Such a replacement plan is a critical component of the future Long Range Financial Plan.
'3* VI. ALTERNATE SCENARIOS
For the purpose of examining the magnitude of assumptions on future revenues and expenditures, staff
provides two alternative scenarios. The Optimistic Scenario assumes that the local economy will rebound
somewhat more quickly than projected in the Forecast, resulting in more visitors to Seward and therefore,
higher retail sales impacting sales tax, hotel/motel tax, and camping fees. It assumes that growth in these
areas (and in the area of property tax) picks up more quickly initially, and then equals the average growth
experienced over the past seven years, from 2003 through 2009.
12
If -
CIIYOF SEWARD
FINANCIAL FORECAST 2012-2016
LONG-RANGE FINANCIAL FORECAST MODEL-OPTIMISTIC SCENARIO
2011 2012 2013 2014 2015 2016 Cumulative
Approved % % % % % %Change
Budget Change Change Change Change Change 2012-2016
Revenues
Sales Tax 3,926,526 3,983,2731 4,182,436 4,391,558 4,698,967 5,027,895 1,044,622
Property Tax 1,014,913 1,036,180' 1,084,8801r 1,135,8691 1,189,255' 1,245,150 208,971
Hotel/Motel Tax 308,652 237,007 251,228 263,789 276,187 289,168 52,161
Other Tax 76,500 85,771 86,629 87,495 88,370 89,254 3,483
Total Tax Revenue 5,326,591 5,342,231 5,605,173 , 5,878,712 6,252,780 6,651,467 1,309,236
Total Non-Tax Revenue 3,930,783 3,957,411 4,043,019 , 4,120,040 4,196,419 4,276,455 319,044
TOTALREVINUES 9,257,374 9,299,642 9,648,191 9,998,751 10,449,199 10,927,922 1,628,281
Expenditures
Salaries ' 3,885,306 3,999,923' 4,203,8751 4,320,196' 4,503,805' 4,717,735' 717,813
Insurance:Health and Workers Comp' 1,307,052 1,303,554 1,434,077' 1,541,633 1,657,255 1,781,549 477,995
Retirement Costs 849,770 879,983 ' 960,884' 950,443 990,837 1,037,902 157,919
Other Benefits ' 496,234 514,595 519,3591 518,565 521,046 523,527 8,932
Subtotal Salaries and Benefits 6,538,362 6,698,055 7,118,195 7,330,837 7,672,942 8,060,713 1,362,659
Total Non-Salary Costs 3,448,736 3,634,9291 3,863,3401 3,947,8351 4,049,797 I 4,152,286 517,357
TOTAL EXPENDITURES 9,987,098 10,332,983 10,981,535 11,278,672 11,722,739 12,213,000 1,880,016
lnterfund Transfers
Trans fers from Other Funds: 2,200,005 1,994,275 I 2,023,242 I 2,041,213 I 2,060,432 I 2,082,626 88,351
Transfers to Other Funds: 1,471,272 1,646,602 1,702,633 1,772,918 1,855,719 1,946,229 299,627
NET TRANSFERS 728,733 347,673 320,609 268,296 204,713 136,397 687,604
Net Operating Surplus(Deficit) (991) (685,668) (1,012,734) (1,011,625) (1,068,827) (1,148,680)
The Pessimistic Scenario assumes that on average, revenues grow at the rate of 2%per year into the near
future, and that the cost of purchased services and supplies increases initially by 2%per year,and then by 3%
per year from 2014 through 2016. It assumes that utility costs rise 5%per year,and that health and workers'
compensation insurance costs rise 10%per year.
CITY OF SEWARD .
FINANCIAL FORECAST 2012-2016
LONG-RANGE FINANCIAL FORECAST MODEL-PESSIMISTIC SCENARIO
2011 2012 2013 2014 2015 2016 Cumulative
Approved % % % % % %Change
Budget Change Change Change Change Change 2012-2016
Revenues
Sales Tax 3,926,526 3,657,010' 3,730,150 3,804,753 3,880,848 3,958,465 301,455
Property Tax 1,014,913 1,004,9581 1,035,1061 1,066,160' 1,098,144' 1,131,089 126,131
Hotel/Motel Tax 308,652 226,234 230,759 235,374 240,081 244,883 18,649
Other Tax 76,500 85,771 86,629 87,495 88,370 89,254 3,483
Total Tax Revenue 5,326,591 4,973,973 5,082,644 5,193,782 5,307,444 5,423,691 449,718
Total Non-Tax Revenue 3,930,783 3,935,148 3,956,790 4,039,626 4,111,591 4,186,971 251,823
TOTAL REVENUES 9,257,374 8,909,120 9,039,434 9,233,408 9,419,035 9,610,662 701,541
Expenditures
Salaries ' 3,885,306 3,999,923' 4,243,2741 4,423,613' 4,633,735' 4,853,837' 853,915
Insurance:Health and Workers Conga 1,307,052 1,303,554 1,434,0771 1,577,485 1,735,233 1,908,756 605,202
Retirement Costs 849,770 879,983 969,552' 973,195 1,019,422 1,067,844 187,861
Other Benefits ' 496,234 514,595 519,359' 518,565 521,046 523,527 8,932
Subtotal Salaries and Benefits 6,538,362 6,698,055 7,166,262 7,492,858 7,909,436 8,353,965 1,655,910
Total Non-Salary Costs 3,448,736 3,659,283 3,908,616 4,022,383 4,140,339 4,262,648 603,366
TOTAL EXPENDITURES 9,987,098 10,357,337 11,074,878 11,515,241 12,049,775 12,616,613 2,259,276
Into fund Transfers
Transfers from Other Funds: 2,200,005 1,994,275 2,023,242 2,041,213 2,060,432 2,082,626 88,351
Transfers to Other Funds: 1,471,272 1,565,037 1,589,562 1,626,216 1,651,189 1,678,871 113,835
NET T'RANSFFRS 728,733 429,239 433,681 414,997 409,243 403,755 316,020
Net Operating Surplus(Deficit) (991) (1,018,978) (1,601,763) (1,866,836) (2,221,497) (2,602,197)
13
oaa
oUv o VI. CONCLUSIONS AND NEXT STEPS
The Long-Range Financial Forecast and the accompanying analysis, demonstrate that the City is wise to
examine the impact of today's policy decisions on future revenues and expenditures, in order to avoid
structural deficits and provide sufficient time to make course corrections that will strengthen the financial
condition of the City. Although the Forecast makes assumptions about the future during one of the most
volatile economic periods in our history, the analysis is no less valuable for the insight that it provides by
uncovering issues that require more in-depth study, and in identifying potential shortfalls before they occur.
This Forecast is the first step in the process of developing a Long Range Financial Plan. The document
identifies a number of logical next steps necessary to strengthen the City's fmancial condition, including the
following:
1) Expand the Forecast to cover a ten-year time horizon;
2) Staff and Council should work together now to formulate strategies to ensure a sustainable budget. This
will likely involve a combination of staffing efficiencies,reduced service levels, enhanced revenues, or a
combination of these strategies.
3) Before proceeding ahead to authorize construction of a new library/museum, the City must identify a
revenue source to pay for its operating and debt service costs. The City should resist the temptation to
construction new facilities and amenities without thoroughly examining the impact of those assets on
future budgets.
4) The City must develop a plan for funding major repairs and replacement of more than $70 million in
governmental assets;
5) Identify the City Council's long-term goals and objectives, then examine the fmancial impact of those
initiatives into the future, then develop a Long Range Financial Plan to achieve those goals and
objectives.
Excludes a one-time receipt of EXXON Settlement proceeds in 2009 of approximately$1.6 million.
Annual cost increases for the new library/museum are estimated at$120K for capital,and$261K for operations and
maintenance.
ill http://www2.goldmansachs.com/ideas/global-economic-outlook/second-half.htm I
'" Pay-as-you-go refers to paying for the cost of a repair or a purchase in the year the repair or purchase is made.
Capital financing could refer to borrowing money from a general obligation bond,for example.
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