Overview Fiscal Year 2015 Recommended Operating Budget City Council Work Session March 25, 2014 City Manager and the Department of Budget & Evaluation

Major Revenue Impacts Slight decrease in Real Estate Assessments Signs of economic recovery in local revenues Stable revenues from State Major Expense Considerations Increased Pension and Healthcare costs Salary adjustments and employee training/development Cash funding for capital projects Maintenance of programs and services Continued investment in infrastructure Forming the FY 2015 Operating Budget Impacts: Revenue and Expenses 2

Cash Capital Debt Service Total Operating Budget $810,882,256 Capital Improvements Plan $76,284,429 General Fund Supported Projects $46,451,775 General Fund Supported Projects $46,451,775 Cash Capital Debt Service General Fund $446,649,000 General Fund $446,649,000 Separate Funds $98,625,390 Waterworks Vehicle Services CDBG Funds Separate Funds $98,625,390 Waterworks Vehicle Services CDBG Funds User-fee Supported Projects $29,832,654 User-fee Supported Projects $29,832,654 Special Revenue Funds $260,587, Funds Special Revenue Funds $260,587, Funds City of Newport News FY 2015 Financial Plan $887 million Inter and intra fund transfers total $289,348,523 School Operating Fund $294,369,201 School Operating Fund $294,369,201 3

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FY 2015 Operating Budget Composition 10

FY 2015 Operating Budget Composition 11

Real Estate Assessed Values Real Estate Assessed Values down ($1.69 billion) since FY 2010 Budget Estimate ($253m) ($587m) ($154m) ($96m) 12 $13.90

State Revenue General Fund State Reimbursement for Mandated Programs Budget State Revenue down ($8.4m) since FY Manager Rec

State Support for Newport News Public Schools State support for NNPS down ($22m) or -11% since FY Manager Rec City Support Budget

General Fund Revenue

Change in General Fund Revenues 16

Change in General Fund Revenues 17

Change in General Fund Revenues 18

Change in General Fund Revenues 19

General Fund Revenues 20

General Fund Revenue FY 2015 Recommended Budget - $446 million 21

General Fund Revenue FY 2015 Recommended Budget - $446 million 22 78% or $345.4 m comes from 2 revenue categories

Real Estate Tax Rate 23

24 Budget Manager Rec Tax Rate Increased to $1.22 Real Estate Tax Revenue

General Fund Operating Budget 25 Manager Rec Tax Rate Increased to $1.22

General Fund Expenses

Pension increase Health Insurance Premium increase Salary Adjustment, Merit-based Compression Adjustment Employee Investment – Training & Development Increase in Cash Capital funding Support Strategic Priorities Continued funding for street paving, vehicles and IT equipment Corrective actions General Fund Expenditure Increases 27

General Fund Expenditures 28

General Fund Expenditures FY 2015 Recommended Budget - $446m 29 Community, Regional Support $9.5m Vehicle and IT Replacement $2.5m Utilities, Vehicle Fuel $9.3m Contractual Services $15.8m

General Fund Expenditures FY 2015 Recommended Budget - $446m 30 68% or $304.8 m of General Fund expense in 2 categories

General Fund Expenditure Categories FY 2015 Recommended Budget - $446m 31

General Fund Expenditure Categories FY 2015 Recommended Budget - $446m 32

Pension Costs – All Funds $18.8m increase from FY Budget Manager Rec

Healthcare Costs – General Fund Budget 34 Manager Rec

General Fund Positions Since FY 2009: Gross reduction of 253 positions Net reduction of 179 GF positions Since FY 2009: Gross reduction of 253 positions Net reduction of 179 GF positions 35

FY 2015 General Fund Position Changes 36

37 FY 2015 Citywide (all funds) - -Eliminated 28 positions -Added or transferred 5 -Net decrease of 23 positions FY 2015 Citywide (all funds) - -Eliminated 28 positions -Added or transferred 5 -Net decrease of 23 positions FY 2015 General Fund Position Changes

FY 2015 Major Adjustments 38 Unfunded Requests = $11.9m IncreaseDecrease Average 3% Salary Adjustment$3,866,000 Salary Compression950,000 Retirement Increases – NNERF and VRS3,230,000 Cash Capital Increase4,151,000 Debt Service Increase813,000 COPS Grant Local Match193,000 Hampton Roads Regional Jail308,400 Peninsula Regional Animal Shelter112,290 Adult Dental Services – Health Department294,600 Tourism Zone Savings($167,900) Department Efficiencies & Cost Saving Efforts(1,791,300) Position Adjustments(1,019,000)

FY 2015 Major Adjustments - REVISED! VRS Rate Reduction (Revised rate 9.13% down to 6.01%) $900,000 HR Regional Jail Per Diem Reserve$366,825 Special Event Fund Restored Funding$250,000 HRT Operating Increase Reserve$136,080 Wellness Program – Health Assessment$100,000 IT Technology Equipment$47,095 Final FY 2015 Reassessment Levy$1,000,000 Vehicle Replacement Fund$1,000,000 39

FY 2015 Support for Strategic Priorities 40 Community Maintenance and Renewal Increased funding for demolitions Level funding for street paving Economic Development and Redevelopment Increased support for Museums, continued Cultural Attractions Fund Maximum Emphasis on Public Safety Continued funding for Youth and Gang Violence Initiative Support for COPS Grant Sustainable Local Governmental Policies Reorganization of Environmental Services Division Fiscal Management and Efficient Operations Commitment to Pension Obligations and Cash Contribution in CIP Reorganization of Human Services staff to provide increased services

Other Funds

Local Funding for Schools $115,300,000 Level local funding from the current fiscal year State revenue is estimated to increase by $9m Level local funding from the current fiscal year State revenue is estimated to increase by $9m 42

Waterworks $83,950,000 Increased Retirement and Health Insurance costs, Salary Adjustment Need for maintenance and system improvements Demand for water becoming stable No change in Water Rate - $3.08/$3.55 per HCF Proposed increase in service fee $1 per month for typical single-family residential connection Proposed fee adjustments to cover cost of providing services Operating increase of $2.75m or 3.4% from the current fiscal year 43

Waterworks $83,950, FY 2014 CurrentFY 2015 Recommended Meter Size (Inches) Monthly Charge Bi-Monthly Charge Monthly Charge Bi-Monthly Charge 5/8$14.70$22.00$16.00$ /4$17.60$27.90$19.20$ $23.50$39.60$25.60$ /2$38.00$69.00$41.60$ $57.00$106.00$62.40$ $122.00$235.00$133.00$ $176.00$345.00$192.00$ $324.00$641.00$354.00$ $502.00$996.00$547.00$1, $704.00$1,402.00$768.00$1,529.00

Solid Waste $14,554,000 Operating increase of $950,000 or 7% from the current fiscal year Increased Retirement and Health Insurance costs, Salary Adjustment Household Hazardous Waste program to expand to all residents Operating expenses associated with new trailer at Recovery Operations Center Fund to pay maintenance costs previously in CIP Fund to pay full indirect costs to General Fund 45

Solid Waste $14,554,000 Medium Container Increase of $0.40 per week, $20.80 per year Large Container Increase of $0.50 per week, $26.00 per year 46

Wastewater $21,084,000 Operating increase of $2.4m or 12.8% from the current fiscal year Increased Retirement and Health Insurance costs, Salary Adjustment Federally-mandated Regional Consent order continues to drive costs Fund to pay full indirect costs to General Fund No Change in Sewer User Fee - $3.21 per HCF Recommended new monthly service fee to provide stable revenue source 47

Wastewater $21,084,000 No increase in Sewer User Fee Proposed Monthly Service Fee of $4 48

Stormwater $16,800,000 Operating increase of $2.39m or 16.6% from the current fiscal year Impact of Federal and State Stormwater Regulation 2 major components MS4 – Municipal Separate Storm Sewer System TMDL – Total Maximum Daily Load; Chesapeake Bay Preservation Act Increased Retirement and Health Insurance costs, Salary Adjustment Fund to pay full indirect costs to General Fund Fund to pay maintenance costs previously in CIP 49

Stormwater $16,800,000 Stormwater Management Fee Increase of $1.75 per Equivalent Residential Unit (ERU) per month; $21 per year 50

Impact on Typical Household 51

Next Steps

City Council adopts Public Hearing Schedule Topic-specific presentations during April Work Sessions Position Papers distributed by April 4 th Budget available on City’s webpage at Hard copies available at each public library and in the Budget and Evaluation Department FY 2015 Budget Advertisement for Public Hearings will be in the Daily Press on March 30 th and April 8 th Contact Department of Budget and Evaluation at

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Appendix

Personal Property Taxes Budget Rate increase from $4.25 to $4.50 for FY 2013 Rate increase from $4.25 to $4.50 for FY Manager Rec

Machinery and Tools Taxes Budget 57 Manager Rec

Sales Tax Budget 58 Manager Rec

Meal Tax Budget Rate increase from 6.5% to 7.5% for FY 2013 Rate increase from 6.5% to 7.5% for FY Manager Rec

Business, Professional and Occupational License Taxes Budget 60 Manager Rec

General Fund Expenditure Categories FY 2015 Budget - $446m 61

Staffing reductions – more than 253 positions (net decrease in General Fund of 179 positions) Adjustments to service levels Delayed vehicle and equipment replacement Increased use of technology Reductions to Community Support Grant program Use of cash capital in lieu of debt for capital projects Delay/defer street maintenance work Converted Tax Relief program from abatement to deferral Cost Saving Efforts Already Implemented 62