1. City of Sequim Long Range Financial Plan City Council Study Session June 27, 2011

2. Sequim City Council Study Session Long Range Financial Plan 2 Agenda  Executive Summary  Objectives and Questions  Economic Context  Key Assumptions  Financial Projections  Alternative Scenarios

3. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 3 Executive Summary  Economic recovery is proceeding at very slow pace  Forecast projects small deficits in 2012-2013 followed by small surpluses in 2014-2017  New capital expenses included  Actions taken to balance 2011 budget help balance 2012-2017  Caution : High level of uncertainty around economy and growth

4. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 4 Executive Summary Projected Surplus/(Deficit)

5. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 5 Objectives and Key Question Objectives  Project General Fund and Street Unrestricted Fund revenues and expenses for the period 2011-2017  A tool for financial planning – not a replacement for budget process  Forecast: Long term stabilized view  Budget: Specific short term funding

6. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 6 Objectives and Key Question Key Question  Given a set of assumptions about growth, development, the economy, service levels, workload and staffing:  What do we think our revenues, expenses and net revenue will be this year and over the next six years?

7. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 7 Objectives and Key Question Model Diagram

8. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 8 Economic Context State Economic Index  Growth in the state economy was 0% in September 2010 but has started to pick up again

9. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 9 Economic Context City of Sequim Building Permits  Permits increased in 2010 over 2009 but 2011 has started out slow

10. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 10 Economic Context Sequim Taxable Retail Sales  Retail sales were flat in 2010 v 2009: 35% decline in construction offset by 4.2% growth in other sectors

11. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 11 Economic Context Sequim Construction Sector Sales  Construction share of total retail sales continued to fall in 2010 and is at its lowest level in ten years

12. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 12 Economic Context Sales Tax Revenue by Month  2011 sales tax revenue through May is 4.7% below 2010; 2010 increased 4.2% over 2009

13. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 13 Key Assumptions: Development Population  Forecasted population growth increases over the seven years; annexations reflected in 2014 & 2016

14. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 14 Key Assumptions: Development Commercial Development: 2011-17  Known commercial development in 2011 is an anomaly in the near term with recovery in later years

15. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 15 Key Assumptions: Revenues Inflation  Inflation was near zero in 2009 and 2010 but has picked up in 2011

16. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 16 Key Assumptions: Revenues New Construction Assessed Value  New construction value added to property tax rolls is expected to be weak through 2014

17. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 17 Key Assumptions: Revenues Sales Tax  2011 based on 2010 – no increase  2011 base grows with inflation  Adjusted for new construction  New sales tax revenue estimate based on new construction and new commercial development

18. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 18 Key Assumptions: Revenues Sales Tax From Construction Sector  Construction sector sales expected to be significantly lower than recent history

19. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 19 Key Assumptions: Revenues Utility Tax  Tax base grows with growth in households and jobs  Known near term and periodic future rate increases (inflation) applied  2011 utility tax rates held constant

20. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 20 Key Assumptions: Revenues Other Revenue  Interfund Services based on 2011 budget increased by inflation for 2012-2017  Building Fees indexed to new construction with periodic fee increases

21. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 21 Key Assumptions: Expenses Staffing Levels  2011 staffing levels based adopted budget; Future staffing levels based on growth in demand

22. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 22 Key Assumptions: Expenses Staffing Levels  Future staffing increases based on projected demand and 2010 workload/service levels  Increased productivity assumed at 1% per year in most cases  Central management and administrative staff held constant at 2010 levels

23. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 23 Key Assumptions: Expenses Expense Growth  2011-2012 based on department specific cost increase estimates  New staffing  Projected salary adjustments  2013-2017 based on staffing levels and weighted average increase in cost per staff person

24. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 24 Key Assumptions: Expenses Expense Growth  Salary, retirement and medical insurance cost increases drive expense growth rates

25. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 25 Financial Projections: Revenues Total Revenue  A continued slow economy impacts 2012 revenue; faster growth and a recovery help in 2013-2014

26. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 26 Financial Projections: Revenues Revenue per Capita  Revenue per capita increased in 2011 with utility tax increase but remains below inflation adjusted levels

27. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 27 Financial Projections: Expenses Staffing Levels by Department  One new Patrol Officer in 2016 plus a portion of a Police support position  Portions of building inspector added as development increases  Note: General Fund & Street Fund Unrestricted only

28. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 28 Financial Projections: Expenses Staffing Levels per 1,000 Population

29. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 29 Financial Projections: Expenses Capital Expenses

30. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 30 Financial Projections: Expenses Total Expenses

31. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 31 Financial Projections: Expenses Expenses per Capita  Expense per capita increased in 2011 with increased staffing but remains below inflation adjusted levels

32. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 32 Financial Projections: Summary Annual Net Surplus/(Deficit)

33. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 33 Financial Projections: Summary Ending Cash Reserves

34. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 34 Financial Projections: Summary Ending Cash Reserves

35. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 35 Financial Projections: Summary Revenue and Expense Growth Rates

36. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 36 Alternative Scenarios Scenarios  Pessimistic  Decrease in 2011 sales tax (-2.5%)  Slower population growth (2% flat)  Slower recovery in new development  Optimistic  Small increase in 2011 sales tax (2.5%)  Faster recovery in new development

37. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 37 Alternative Scenarios Pessimistic Scenario

38. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 38 Alternative Scenarios Optimistic Scenario

39. June 27, 2011Sequim City Council Study Session Long Range Financial Plan 39 Thank You  Acknowledgements  Questions?