2013 Economic Outlook, Revenue Overview, & Budget

IssuesPrepared for the Salt Lake County Council and Mayor

Darrin CasperDoug MacdonaldLance Brown

2013 Economic Outlook & Revenue Overview

• Economic Outlook – Doug Macdonald

• Revenue Overview - Lance Brown

• Budget Issues – Darrin Casper

Economic Outlook

October2012

Forecast Review

Utah Economy Improving Relative to U.S. in 2012

First led by China and now Europe, world nominal GDP slowing down from 6% to 4.5%

Source: The Economist, October 5, 2012

The U.S. economy (real GDP) slowing down to just below 2%

Business Equipment & Software will increase 6.6% in 2012, slowing down

from 10%

Unemployment claims, leading indicator for jobs, now below 2001-02 recession levels

Salt Lake County employment growth shifting into 3rd gear

Utah Wages Shot up over 6%in the First Half of 2012

Utah Residential Construction up 15% through July, Salt Lake County up 8%

Source: Univ. of Utah, BEBR

Auto Sales Highest in 4 Years

Last three months up 7.3% Fiscal year-to-date up 7.5%

Utah 2nd Quarter 2012 Taxable Sales

Sales in Million $ % Change from 2011

Retail – Motor Vehicles

$ 1,180 13.3 %

Wholesale - durable goods

1,060 26.6

Services – Accommodations & Food

1,171 6.2

Retail – General merchandise

1,414 4.0

Retail – Food stores 899 6.8

Total Taxable Sales $12,068 8.0

Source: Utah State Tax Commission

Seven month year-to-date 7.5%

Fiscal Cliff and Europe Loom

Revenue Overview

Property Tax New Growth 2013

Or the lack thereof?

2013 Property Tax Revenue Projections

• Projected new growth for 2013

– Reviewed permit authorized construction trends for residential and non-residential properties.

– Reviewed personal property (business equipment) taxable values with the Assessor’s staff.

– Projection vetted with Revenue Committee

Countywide Real Property Growth2013 Projected

2012 2011 2010 2009

New Growth - Real Property ($000) 486,085

519,399

357,821

727,244

686,579

         

Permit Values ($000)          

Total New Residential Construction Value

474,502

467,192

489,764

655,552

594,237

Hypothetical Taxable Value          

55% of Residential Value 260,976

256,956

269,370

360,554

326,830

Total Nonresidential Construction Value

501,675

616,176

254,691

785,731

777,523

Taxable Value based on Permits 762,651

873,132

524,061

1,146,285

1,104,353

New Growth / Permit Value 63.7% 59.5% 68.3% 63.4% 62.2%

• Permit values have an apparent relationship to real property growth

• August 2011 to July 2012 less than prior year• Suggests slightly less growth than last year

Personal Property• Depreciates rather than appreciates

– Requires new investment by businesses just to stay even

• Was negative countywide in 2011 and 2012 rate setting process (2010 and 2011 values)

• New growth for rate setting based on prior year values– Reasonably good data available for predicting its effect in 2013 rate

setting

Countywide Library Municipal Svc

2011 4,665,453,468 2,732,788,609 284,393,955

2012 4,770,379,113 2,860,858,984 279,190,813

Growth 104,925,645 128,070,375 (5,203,142)

Centrally-Assessed Property

• A wildcard

• Mining the largest component– Somewhat driven by metals prices, but . . .– Higher metals prices in 2011 did not result in

higher value– 2013 metal prices mixed

• Other components – railroads, airlines, utilities, other

Metal Price % Change

Copper 8%

Gold 10%

Molybdenum -16%

RDA / CDRA

• Tax increment financing (TIF) by definition captures new growth and diverts it from the normal taxing entities

• TIF capture offset new growth by $366.4 million in 2012

• City Creek is in a redevelopment project area– Additional RDA capture highly likely

New Growth 2012

Real Property New Growth $519 Million

Personal Property ($156 Million)

CentrallyAssessed($188 Million)

Negative New Growth ($191 Mil-lion)

CDRA / RDA($366 Million)

2013 New Growth

• Positives– Some real property new growth– Some personal property new growth

• Unknown– Centrally assessed

• Likely offsets– CDRA / RDA

• Conclusion– Reasonable probability that modest new growth

will be offset again, as it has been the last 2 years – “net zero”

Property Tax Revenue Projections

Fund 2011 Actual

2012 Budget

2013 Projected

General $100,013,032

$102,484,267 $102,484,000

Flood Control $4,566,039 $4,618,118 $4,618,000

Health $8,678,431 $5,630,308 $5,630,000

Governmental Immunity $1,436,435 $1,455,024 $1,455,000

Bond Debt Service $39,727,999 $40,550,873 $40,551,000

Capital Improvements $978,605 $1,961,119 $1,961,000

Planetarium $2,609,971 $2,530,476 $2,530,000

Total- Countywide Funds

$158,010,512

$159,230,185

$159,229,000

Property Tax Revenue Projections

Fund 2011 Actual

2012 Budget

2013 Projected

Municipal Services $9,438,814 $0 $0

Muni. Svcs. Tort Liability Levy $818,387 $813,409 $813,000

Library $28,112,399 $28,013,208 $28,013,000

State Tax Admin $18,698,078 $17,460,283 $18,093,000

Total-Property Tax Revenue

$215,078,191

$205,517,085

$206,148,000

Inflation Effect on Countywide Property Tax Revenues

2001 2012$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$100,057,854

$74,279,069

PROPERTY TAX REVENUES (INFLATION-ADJUSTED)2001 BASE YEAR

(INFLATION INDEX: BLS WEST URBAN CONSUMER PRICE INDEX - ALL URBAN CONSUMERS)

Sales and Use Tax2013 Projected Tax Revenues

$23,500,000

$50,300,000

$13,300,000

$1,800,000

$11,000,000

$18,000,000

$19,900,000

Local OptionCounty OptionTransientTransient-SuppCar RentalRestaurantZAP

$137,800,000 Total Projected Sales and Use Tax Revenue

Tax Year to

Date 2012

Year to Date

Projection (June 2012)

Difference Difference %

Local Option$12,504,49

3$11,873,877 $630,616 5.3%

County Option$26,792,37

4$26,694,409 $97,965 0.4%

Transient Room $7,706,471 $7,999,745 ($293,274) -3.7%

Trans. Room Supp.

$1,066,639 $1,107,227 ($40,588) -3.7%

Car Rental $6,400,304 $6,328,410 $71,894 1.1%

Restaurant $9,991,167 $10,122,781 ($131,614) -1.3%

ZAP$10,583,10

6$10,543,282 $39,824 0.4%

TOTAL$75,044,5

55$74,669,731 $374,824 0.5%

Actual Sales Tax Receipts vs. Projected Year to Date through July 2012

Tax Year to

Date 2012

Year to Date 2011

Difference Difference %

Local Option $12,504,493 $10,919,195 $1,585,298 14.5%

County Option $26,792,374 $24,928,184 $1,864,189 7.5%

Transient Room $7,706,471 $7,228,776 $477,695 6.6%

Trans. Room Supp.

$1,066,639 $1,000,512 $66,127 6.6%

Car Rental $6,400,304 $6,407,598 ($7,294) -0.1%

Restaurant $9,991,167 $9,555,691 $435,476 4.6%

ZAP $10,583,106 $9,803,126 $779,980 8.0%

TOTAL$75,044,55

5$69,843,083 $5,201,472 7.4%

Sales Tax Receipts vs. Same Period Prior YearYear to Date through July 2012

Sales Tax Projections

Sales Tax 2012 June Budget

2012 Updated

Projection

2013 Projection

% Chang

e

Local Option $21,500,000 $22,200,000 $23,500,000 5.9%

County Option $47,000,000 $47,700,000 $50,300,000 5.4%

Transient Room $13,200,000 $12,800,000 $13,300,000 4.0%

Transient Room Supp. $1,800,000 $1,750,000 $1,800,000 4.0%

Car Rental $10,500,000 $10,500,000 $11,000,000 4.5%

Restaurant $17,000,000 $17,300,000 $18,000,000 4.3%

ZAP $18,500,000 $18,800,000 $19,900,000 5.8%

TOTAL $129,500,000

$130,400,000

$137,800,000 5.7%

Sales Tax Projections

Sales Tax 2012 June Budget

2012 Updated

Projection

2013 Projection

% Chang

e

Local Option $21,500,000 $22,200,000

$23,500,000 5.9%

County Option $47,000,000 $47,700,000 $50,300,000 5.4%

Transient Room $13,200,000 $12,800,000 $13,300,000 4.0%

Transient Room Supp. $1,800,000 $1,750,000 $1,800,000 4.0%

Car Rental $10,500,000 $10,500,000 $11,000,000 4.5%

Restaurant $17,000,000 $17,300,000 $18,000,000 4.3%

ZAP $18,500,000 $18,800,000 $19,900,000 5.8%

TOTAL $129,500,000

$130,400,000

$137,800,000 5.7%

Local Option Sales Tax

Sales Tax Projections

Sales Tax 2012 June Budget

2012 Updated

Projection

2013 Projection

% Chang

e

Local Option $21,500,000 $22,200,000 $23,500,000 5.9%

County Option $47,000,000 $47,700,000

$50,300,000 5.4%

Transient Room $13,200,000 $12,800,000 $13,300,000 4.0%

Transient Room Supp. $1,800,000 $1,750,000 $1,800,000 4.0%

Car Rental $10,500,000 $10,500,000 $11,000,000 4.5%

Restaurant $17,000,000 $17,300,000 $18,000,000 4.3%

ZAP $18,500,000 $18,800,000 $19,900,000 5.8%

TOTAL $129,500,000

$130,400,000

$137,800,000 5.7%

County Option Sales Tax

Sales Tax Projections

Sales Tax 2012 June Budget

2012 Updated

Projection

2013 Projection

% Chang

e

Local Option $21,500,000 $22,200,000 $23,500,000 5.9%

County Option $47,000,000 $47,700,000 $50,300,000 5.4%

Transient Room $13,200,000 $12,800,000

$13,300,000 4.0%

Transient Room Supp. $1,800,000 $1,750,000 $1,800,000 4.0%

Car Rental $10,500,000 $10,500,000 $11,000,000 4.5%

Restaurant $17,000,000 $17,300,000 $18,000,000 4.3%

ZAP $18,500,000 $18,800,000 $19,900,000 5.8%

TOTAL $129,500,000

$130,400,000

$137,800,000 5.7%

Transient Room Tax

Sales Tax Projections

Sales Tax 2012 June Budget

2012 Updated

Projection

2013 Projection

% Chang

e

Local Option $21,500,000 $22,200,000 $23,500,000 5.9%

County Option $47,000,000 $47,700,000 $50,300,000 5.4%

Transient Room $13,200,000 $12,800,000 $13,300,000 4.0%

Transient Room Supp. $1,800,000 $1,750,000 $1,800,000 4.0%

Car Rental $10,500,000 $10,500,000

$11,000,000 4.5%

Restaurant $17,000,000 $17,300,000 $18,000,000 4.3%

ZAP $18,500,000 $18,800,000 $19,900,000 5.8%

TOTAL $129,500,000

$130,400,000

$137,800,000 5.7%

Car Rental Tax

Sales Tax Projections

Sales Tax 2012 June Budget

2012 Updated

Projection

2013 Projection

% Chang

e

Local Option $21,500,000 $22,200,000 $23,500,000 5.9%

County Option $47,000,000 $47,700,000 $50,300,000 5.4%

Transient Room $13,200,000 $12,800,000 $13,300,000 4.0%

Transient Room Supp. $1,800,000 $1,750,000 $1,800,000 4.0%

Car Rental $10,500,000 $10,500,000 $11,000,000 4.5%

Restaurant $17,000,000 $17,300,000

$18,000,000 4.3%

ZAP $18,500,000 $18,800,000 $19,900,000 5.8%

TOTAL $129,500,000

$130,400,000

$137,800,000 5.7%

Restaurant Sales Tax

Sales Tax Projections

Sales Tax 2012 June Budget

2012 Updated

Projection

2013 Projection

% Chang

e

Local Option $21,500,000 $22,200,000 $23,500,000 5.9%

County Option $47,000,000 $47,700,000 $50,300,000 5.4%

Transient Room $13,200,000 $12,800,000 $13,300,000 4.0%

Transient Room Supp. $1,800,000 $1,750,000 $1,800,000 4.0%

Car Rental $10,500,000 $10,500,000 $11,000,000 4.5%

Restaurant $17,000,000 $17,300,000 $18,000,000 4.3%

ZAP $18,500,000 $18,800,000

$19,900,000 5.8%

TOTAL $129,500,000

$130,400,000

$137,800,000 5.7%

Zoo, Arts, & Parks Tax

Budget Issues

Mayor Peter Corroon

2013 Budget BriefingBy Darrin Casper

October 16, 2012

2013 Budget Direction

• Elected Officials and Department Directors were asked to illustrate impacts of a 10% cut to County funding

• Show/request pent up demand (ex. Government Center rent)

• Capital project funding at or above industry standard by fund

Where We’ve Been…2009 Interim Budget Measures: 1st Step

• Implemented Hiring Freezes:• Phase I Nov 2008• Phase II Apr 2009

• Provided Early Retirement from December 2008 – February 2009

• Suspension of 401k payments in April 2009

• Goal was to “buy” time, to allow a gradual reduction in expenditures without a material RIF

2010 Budget Measures: Second Step

• Additional county funding program cuts of $18.4 million in the General Fund

• 401k suspension carried forward

• 69 FTEs eliminated from budget

• 2.75% negative structural adjustment to employee pay

• Tax rate shifts, program revenue increase

2010 Early Retirement

• November 16, 2009 – March 31, 2010– Cash out accrued sick leave at 75% as cash, 401k, or 457k

• Provide $5,000 per year worked in excess of 30 years, not to exceed $25,000

• Reduction Goals– Rating Agencies

• 50 FTEs• $3,250,000

– Mayor/Council• 62 FTEs• $4,000,000

2012 Budget Measures: Third Step

• Additional county funding program cuts of $6.5 million in the General & Related Fund’s

• 32 FTEs eliminated from budget

Reductions SummaryMeasures Taken Since 2009

• 3 Hiring Freezes & 2 Early Retirements232 FTE’s

• Early Retirement Payback$4,000,000

• Pay and 401K Cuts$8,081,420

• 2009 mid-year budget resolution $12,617,041

• Additional budget cuts over past 4 years$24,875,184

Salt Lake County Employment PictureFTE Reductions

Year Budgeted FTEs

2008 4,200

2009 4,099

2010 3,572*

2011 3,632

2012 3,626

*Transferred 441 FTEs to UPD in 2010

Proposed Hiring Freeze

• Cap total FTE count in County at 3,566

• Sets number to include existing vacancies after those approved by Council

• Additional turnover would enable hiring, but only after vacancies are reviewed for priority, and as long as they do not exceed the FTE cap

• Effective immediately through budget process

Inflation Impact

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

100

200

300

400

500

Selected Consumer Price Index (CPI) Trends

All Items (29%) Energy (81%)Medical Care (53%)

CP

I In

dex V

alu

e

Source: U.S. Dept. of Labor, Bureau of Labor Statistics, Consumer Price Index, All Urban Consumers (CPI-U), U.S. City Average

Inflation is Real

2001 2012

Big Mac $2.79 $3.69

Gallon of gasoline $1.52 $3.79

Average County salary $37,896 $46,982

Health Insurance/employee(*) $4,312 $9,237

Retirement/employee $4,843 $7,397

*Health Insurance spending by Salt Lake County increased from $16.3 million in 2001 to $30.3 million in 2011.

*The number of enrollees has decreased from 3,788 to 3,279 over the same period.

*Sales tax revenue over this same period grew from $35.3 million to $44.5 million, or $9.2 million total.

The Demand for Service

• Most County programs have an inelastic demand for service. The demand is unaffected by a downturn in the economy.

• Many programs have seen significant increases in the demand for service– Visitation at Parks and Recreation facilities has increased by 640,000

annual visits since 2008– Human Resource job applications have gone from 13,152 in 2008 to

22,636 projected in 2012– Social Service referrals up 12% since 2008– Library circulation has gone for 14.2 million to 15.7 million (e-

collection up 876%)– Meals on Wheels have gone up 5% since 2008– County population has grown 14.7% since 2001

The County has Expanded to Meet Demand

Program Program Program Program

Libraries: Senior Centers: Recreation Centers: Oxbow Jail

Magna Riversbend Northwest Rec Center

Herriman Magna JL Sorensen Rec Center

East Millcreek Riverton Millcreek Comm. Center

West Jordan East Millcreek

Draper

119 TOTAL FTE’S ADDED

2013 Budget Challenges

• New Requests:– General Fund

• 46 FTE’s• $10,500,000

– Total County• 74 FTE’s• $29,300,000

• Inflation:– Health Insurance– Retirement– Pay Restoration– 401 Restoration

2013 Budget ChallengesDeferred Maintenance

• Best Practice – put aside $3 per square foot per year

• The goal will be a fund by fund solution to all deferred maintenance issues identified by Facilities Management.

• Solution will enable County to catch up and stay on top of all maintenance needs.

2013 Budget ChallengesDeferred Maintenance

Facilities Square FootageRecommend

Funding

County-Wide:

General Fund 1,503,984

Health 125,593

Planetarium 54,200

Government Center 720,771

2,404,548 $7,213,644

TRCC:

Parks and Rec. 1,066,907

Salt Palace 1,034,800

South Towne 250,000

Center for the Arts 263,604

2,615,311 $7,845,933

2013 Budget ChallengesDeferred Maintenance

Facilities Square Footage Recommend Funding

Library 338,414 $1,015,242

Golf Courses 59,256 $177,768

Solid Waste 8,370 $25,110

Municipal Services 17,900 $53,700

2013 Budget ChallengesOPEB

• OPEB– Fund Annual Retired Contribution - $2.9

million– Will lower OPEB liability– Smart Management

• Consider measures to turn benefits for future employees to defined contribution as opposed to defined benefit

Work-in-Progress

• Currently getting all numbers in BRASS

• Reviewing requests and possibly additional cuts

• Balanced budget will be proposed November 8th