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Economic Financial outlookPurposePurpose Discuss economic outlook both nationally Discuss economic outlook both nationally and locally:and locally: 2010 Economic Outlook2010 Economic Outlook ––Identify existing or emerging financial Identify existing or emerging financial concernsconcerns ––Identify potential solutions and develop Identify potential solutions and develop June 23, 2009June 23, 2009 budget strategies to remedy concernsbudget strategies to remedy concerns HousingHousing Economic Indicators Labor & Employment Interest Rates Wages GDP Growth Unemployment Fuel Costs Health Care Costs U.S.U.S. ––In April, median home price fell 15.4%In April, median home price fell 15.4% ––Existing home sales increased 2.9%Existing home sales increased 2.9% ––High inventory of homesHigh inventory of homes Consumer Spending Housing & Commercial Retail Sales Growth Projections Building Permits Home Values Top Taxpayer Meetings HousingHousingU.S. Home SalesU.S. Home Sales Southlake*Southlake* ––Early 2000s Southlake had a slower Early 2000s Southlake had a slower housing market than the U.S housing housing market than the U.S housing marketmarket ––2006 average sales price were up2006 average sales price were up ––2007 both sales and average sales price 2007 both sales and average sales price are upare up ––2008 and 2009 2008 and 2009 ––buyer’s marketbuyer’s market *According to North Texas Real Estate Information Systems 1 Southlake Home ValuesSouthlake Home ValuesRetail SalesRetail Sales U.S.U.S. Southlake Average Home Values ––Retail sales rose by 0.5% in the month of Retail sales rose by 0.5% in the month of 600000 May:May: 500000 ••Gasoline sales increased 3.6%Gasoline sales increased 3.6% 400000 ••Auto parts rose 0.5%Auto parts rose 0.5% ••Other sales increased 1.0%Other sales increased 1.0% 300000 200000 100000 0 2000200120022003200420052006200720082009 Tax Year Retail SalesRetail Sales Southlake Sales Tax CollectionsSouthlake Sales Tax Collections Sales Tax Collections SouthlakeSouthlake ––YearYear--toto--date sales tax collections are 4.5% date sales tax collections are 4.5% 700,000 600,000 below budget below budget 500,000 ••Sales tax collections for 4 out of 7 months were Sales tax collections for 4 out of 7 months were 400,000 300,000 below budgetbelow budget 200,000 November, December, January and MarchNovember, December, January and March –– 100,000 ••Amended budget to reduce projectionsAmended budget to reduce projections - NovemberDecemberJanuaryFebruary OctoberMarchJuneAugustSeptember July AprilMay ••Administrative budget reductionsAdministrative budget reductions ••Top taxpayer meetingsTop taxpayer meetings ••Budget monitoringBudget monitoring Montly collections 2009 Budget2008 Actual2007 Actual2009 Actual Unemployment Unemployment ––USUS Unemployment Unemployment ––SouthlakeSouthlake Unemployment Rate-Comparison 10 9 Employment Rate8 7 6 5 4 3 2 1 0 Feb 08Nov 08Feb 09 Jan 08Jan 09 April 08May 08June 08Aug 08Dec 08 July 08Sept 08Oct 08 March 08March 09 SouthlakeTarrant CountyNational 2 2010 Budget Impacts?2010 Budget Impacts?2010 Budget Impacts?2010 Budget Impacts? ••Purchase of goodsPurchase of goods Sources of Revenue ––Capital projects Capital projects ––favorable biddingfavorable bidding 4% Permits/Fees ––Increases in other cost driversIncreases in other cost drivers 3% Charges for Fuel Fuel •• Services InsuranceInsurance •• 2% 2% 3% 49% Property Tax LaborLabor ••8% ••Revenue ReductionsRevenue Reductions 28% ––Sales taxSales tax Sales Tax ––Charges for servicesCharges for services ––Development revenueDevelopment revenue Property TaxSales TaxFranchise FeesFines Charges for ServicesPermits/FeesMiscellaneousInterest Income Budget StrategyBudget StrategyWorkforce Costs Workforce Costs ––BenefitsBenefits •Insurance Benefits Continue to monitor economic trendsContinue to monitor economic trends •• –Health/dental: ––HousingHousing $64,000 •5% rate increase ––Retail (consumer spending)Retail (consumer spending) –Life, LTD, FSA: ––UnemploymentUnemployment •No change in rates Conservatively budget volatile revenue Conservatively budget volatile revenue •• •TMRS itemsitems –Rate incr. 0.78%$130,000 Control budget expendituresControl budget expenditures •• –Reviewing plan options Workforce Costs Workforce Costs ––Pay PlanPay PlanIn summary…In summary… •Annual 3% steps •Southlake is feeling the effects of the recession, –Under review but is faring better than many areas; •Market Adjustments •Budget preparation reflects our strong –Non-exempt, Exempt, Executive understanding of the Southlake economy; •No changes recommended –Public Safety •As a service-oriented organization, labor costs •Goal 103%; Market shows 7% lag constitute a large part of the budget. We must •7% market adjustment:$463,233 balance our desire to be an employer of choice •4% market adjustment:$264,708 with budgetary constraints. •0% market adjustment:$0 3 Council Council DiscussionDiscussion Questions:Questions: •Southlake economy •Cost drivers •Labor costs 4