May 14th , 2008
County of Henrico, Virginia
Henrico County, Virginia
Financial Issues Facing Henrico County
• Economic Overview• Current Local Government Issues• Keeping Up With Growth
Henrico County, VA
Economic Overview• Uncertainty in National Economy• Real Estate – National• Real Estate – State and Regional
Economic Overview
Uncertainty in the National Economy
• News from the first few months of 2008:– Consumer confidence at lowest point
since 2003.– Home foreclosures soar to an all-time high
in the final quarter of 2007. • Delinquency rate for all mortgages nationwide
climbed to nearly 6.0 percent in the quarter.
– Employers slashed 63,000 jobs in February 2008, the most in five years
– Dollar slides to record lows in March 2008.– Oil prices at record levels
Economic Overview
INFLATION– 4.3%*
increase marks highest jump in CPI-U since 1991
– Core up 2.5%* (minus food & energy)
– Gasoline index up 30.4%*
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
99
00
01
02
03
04
05
06
07
08
CPI-U (Jan. v. Jan.)
*Note: Current year increases are measured from January 07 to January 08
Economic Overview
UNEMPLOYMENT– After three years of steady decline,
2007 average national unemployment showed no improvement.
– Virginia and Henrico County remained steady year over year.
0.0
2.0
4.0
6.0
8.0
CY94 CY95 CY96 CY97 CY98 CY99 CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07
United States Virginia Henrico
Economic Overview
CONSUMER CONFIDENCE– Has dipped significantly since July 2007.– February 2008 level lowest since 2003.
50
60
70
80
90
100
110
120
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Economic Overview
Real Estate – National News• Home foreclosures at an all-time high in
the final quarter of 2007.• Construction spending experienced the
largest decrease in 14 years from December 2007 to January 2008, and it continues to fall.
• Median price of a single-family home fell 5.1 percent from Jan. 2007 to Jan. 2008.
• Single-family home sales fell 22.4 percent from Jan. 2007 to Jan. 2008.
Economic Overview
Real Estate – State and Regional News
• In 2007, the number of houses sold fell:– 15 percent in Virginia.– 12 percent for the Richmond region.
• Virginia saw a slight increase in home prices – median price increased 1.2 percent.
• Home prices in the Richmond area increased by an average of 5.8 percent in 2007.
• Richmond Metro Area ranks 95th in the top 100 metro areas in the nation in number of foreclosures.
Henrico County, VA
Current Local Government Issues• Overview• State Budget Shortfall
Current Local Government Budget Issues
• Every locality in Virginia has different local issues that are typically confronted each year in the budget process.
• No “one size fits all” summary.• There are some overall similarities and
concerns that local governments share.• Henrico County’s recent experience is likely
indicative of some of these overall concerns.
Current Local Government Budget Issues
• In the past five years, Henrico County’s fixed costs have increased significantly.
– Personnel cost increases including health care, Virginia Retirement System and Retirement and Group Life benefits
– Increases in fuel – gasoline, diesel
– Heating cost increases – natural gas and electricity
Current Local Government Budget Issues
• Construction costs have exploded between 2003 and 2007, due to costs of energy and raw materials.
• Operational costs of new facilities continue to increase.
• Cost of providing critical public services – Education and Public Safety far exceeds any factor that considers population growth and inflation.
Current Local Government Budget Issues
• At the same time, the Virginia General Assembly continues to “examine” appropriate levels of local government taxation while mandates on local services continue.– Capping of PPTRA reimbursements - 2006.– Some State funding reduced in recent years has
yet to be restored.– Continued concern within the legislature
regarding the local taxation of Real Estate.– State mandates continue on local services – most
recently in the form of additional local match requirements (CSA, Victim Witness Program).
Current Local Government Budget Issues
• And finally…GASB –45 and its implications for local government.
– For Henrico County - $6.4 million in the FY2007-08 budget.
– FY2008-09 - $6.73 million
Current Local Government Budget Issues
• On February 12, 2008, Governor Kaine revised revenue forecasts for the second time.
• The revised revenue projection impacted the current FY2008 budget as well as the 2008-10 Biennial Budget.
• In FY2008, the State projects a budget shortfall totaling $980 million.
• For FY2009 & FY2010, the State projects a budget shortfall totaling $1.05 billion.
State Budget Shortfall
• The shortfall in FY2008 is largely due to the over-estimation of revenues by the State (Recordation Tax, Interest on Investments, and Corporate Income Tax).
• The State anticipated a continued boom in real estate and the economy, which were reflected in their revenue estimates.
Current Local Government Budget Issues
State Budget Shortfall (cont’d)
State Budget Shortfall (cont’d)
• With the original revenue forecast, the Governor announced that State agencies would face a funding reduction of approximately 5.0 percent in the current fiscal year.
• In his revised revenue forecast, the Governor asked many agencies to absorb an additional 3.5 percent reduction.
• These reductions will likely impact localities as State agency funding and local funding is intertwined in many cases.
Current Local Government Budget Issues
State Budget Shortfall (cont’d)
• FY2008-09 Adopted Budget - 37.2% of Henrico’s General Fund revenues are State revenues.
• Emphasis on conservative posture continues.
Current Local Government Budget Issues
Financial Issues Facing Henrico County
Keeping Up With Growth• Henrico County Statistics• Fixed Costs Increases• Infrastructure Costs
Summary of Henrico County’s General Information
• Henrico County’s population has grown by approximately 2.0 percent a year since the 1970’s.
• In the past 20 years, the school age population has grown by about 2.5 percent per annum.
• The County has kept pace with infrastructure needs and service level demands by developing and adhering to multi-year financial plans.
• By adhering to these multi-year plans and maintaining strict expenditure controls, the County has been able to reduce its Real Estate Tax rates over time.
Population versus Average Daily Membership (ADM) 1970-2008
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Population
0
10,000
20,000
30,000
40,000
50,000
60,000
ADM
Population ADM
Note: FY2008 is estimated.
Henrico County Statistics
0200400600800
1,0001,2001,4001,600
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Annual Increases in Student Population
Henrico County Statistics
-500
250
1,000
1,750
2,500
3,250
4,000
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
Em
plo
yee
s
0
2
4
6
8
10
12
14
Po
siti
on
s p
er 1
,00
0 R
esid
ents
Number of Henrico PositionsPositions per 1,000 Residents
General Government Employees Number per 1,000 residents FY85-FY08
Henrico County Statistics
Schools by Type1970-2008
30 31 33 33 34 37 42 44 45
4 5 6 6 68
10 12 13
6 78 8 8
88
9 9
0
10
20
30
40
50
60
70
80
1970 1975 1980 1985 1990 1995 2000 2005 2008
Elementary Middle High
Current statistics do not include 3 Specialty centers.
Henrico County Statistics
Number of Fire Stations1970-2008
1012 12 13
17 17 1720
02468101214161820
1970 1975 1980 1985 1990 1995 2000 2005-2008
Henrico County Statistics
Library Facilities1970-2008
12
6 67
9 910
012345678910
1970 1975 1980 1985 1990 1995 2000 2005-2008
Henrico County Statistics
Recreation Facilities1970-2008
8 1019 25
3240
50 55
78
0
10
20
30
40
50
60
70
80
1970 1975 1980 1985 1990 1995 2000 2005 2008
* 2008 Figure includes 17 recreation & community centers, and 61 shelters
Henrico County Statistics
County of Henrico Real Estate Tax Rate
Real Estate Tax Rate: Per $100 of Assessed Valuation.
$0.98$0.96
$0.94$0.92
$0.90
$0.87
$1.03
$0.80
$0.85
$0.90
$0.95
$1.00
$1.05
CY78-CY79
CY80-CY95
CY96 CY97-CY04
CY05 CY06 CY07-CY08
Henrico County Statistics
Counties in the United States with AAA/AAA/Aaa GO Bond Ratings• Arlington County, VA
• Baltimore County, MD
• Chesterfield, County, VA
• Cobb County, GA
• DuPage County, Ill.
• Fairfax County, VA
• Forsyth County, NC
• Greenville County, SC
• Gwinnet County, GA
• Hennepin County, MN
• Henrico County, VA• Howard County, MD• Kent County, MI• Mecklenburg County,
NC• Monmouth County, NJ• Montgomery County,
MD• New Castle County, DE• Palm Beach County, FL• Salt Lake County, UT• St. Louis County, MO• Wake County, NC
Millions
The FY2008-09 budget amounts reflect current estimates.
Health Care Cost to County
FY2001-02 to FY2008-09
$18.1
$27.5$31.5
$35.6
$41.9$47.0
$52.5 $54.2
10
20
30
40
50
60
Am
oun
t ($
mil
lion
s)
2002 2003 2004 2005 2006 2007 2008 2009
Fiscal Year
Fixed Cost Increases
Millions
VRS Costs FY2001-02 to FY2008-09
$35.5 $36.4 $38.3
$47.8$53.0
$63.0$68.6
$75.3
20
30
40
50
60
70
80
VR
S A
mo
un
t ($
mil
lio
ns)
2002 2003 2004 2005 2006 2007 2008 2009Fiscal Year
Fixed Cost Increases
Millions
Gasoline and Diesel Costs: All Funds
FY2001-02 to FY2008-09
$4.4 $5.0 $5.7$8.1
$14.5$12.3 $12.9
$2.9
$13.3
$0$2$4$6$8
$10$12$14$16$18
2002 2003 2004 2005 2006 2007 2008 2009Prop.
Fiscal Year
Fixed Cost Increases
• “Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions”.
• Became effective with FY2007-08 budget – Bond Rating implications.
• Will require annual payments to a Fiduciary Fund (Trust Fund) of approximately 2 pennies of our tax rate.
• Henrico County has fully funded GASB 45 requirements in the budget, although this new cost will have a continual impact on budgetary flexibility.
GASB 45GASB 45
Infrastructure Costs
• As noted, in the past 20 years, the number of students in Henrico’s school system has increased by about 2.5% per year. – Over the past 5 years, average yearly increase in students
has been approximately 700.
• Maintaining adequate public infrastructure (schools, fire stations, roads, parks and libraries) is a continuing issue for the County of Henrico.
• The Five Year CIP is the tool used to plan for these facilities.
Infrastructure Costs
• In the past five years, the County has had two major General Obligation Bond Referenda that have been approved by the voters.
– November, 2000: $237.0 million
– March, 2005: $349.3 million
Infrastructure Cost Summary
• Maintaining current levels of service (schools, fire stations, EMS, roads, etc) will continue to require new capital infrastructure.
• Cost of land.• Costs of construction have increased
significantly in past 24 months.• Uncertainty in the municipal bond market
Infrastructure Cost Summary
• Virginia localities – limited revenue generation tools.
• Effective multi-year planning is paramount.• Lately, developing and adhering to multi-year
financial plans has been made more difficult due to State funding reductions, alterations of local revenue sources, and the lack of a State budget having been adopted.
• State = 37.2% of Henrico’s General Fund revenues.
• Thank you
County of Henrico, Virginia
May 14th , 2008