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March 30, 1999 It is quite fitting that fiscal strength is one of City Council's spheres of success. We have identified several key indicators of financial soundness, and with Council's concurrence and support, have worked for the last few years to buttress these indicators. Our financial goals include: · increasing revenues through growth in the tax base rather than additional burden on the real estate tax; · aligning expenditures with priorities and within overall financial capacity; · maintaining operating reserves at a minimum of 10 percent of operating revenues; · maintaining affordable debt limits, with debt service not to exceed 10 percent of operating revenues; and · achieving an upgrade in the City's bond rating. I am pleased to report that we have made substantial progress on these financial goals, although in some cases we have not achieved the goal. As our financial picture slowly improves, we need to turn our attention to the backlog mentioned earlier and to setting priorities in a budgetary process where needs still continue to outstrip resources. Fl..r~3: Th~,,.cl.,Act In last year's budget message, I stressed the need for us to balance three often competing objectives in budgeting ........ our limited resources: we must spend responsibly, save ...... prudently and invest wisely. [Figure 3] Investing in the ,..~',:;,,g future is particularly important, because that is how we Responsible ......... can build capacity for future generations. The hotel and conference center for which we recently broke ground is a good example. By investing city resources in our partnership with a private developer, the city is able to create 300 permanent jobs, over $1.5 million in annual tax revenues, a new community meeting center, continued downtown revitalization, and an economic generator producing $20 million in annual spending by hotel and conference center guests. Other such examples were covered by the Mayor in his State of the City address, including the conversion of the once notorious River Edge Apartment site into the new neighborhood of Lake Shores; the development of a major new corporate center on the site of blighted Fairwood Homes; new retail, assisted living and housing facilities on the site of the old Churchland High School; the Hope VI revitalization of Ida Barbour public housing; a new conservation and redevelopment plan for Midtown; and a successful joint application with Norfolk for designation as a federal Empowerment Zone. All of these activities build our capacity for the future. Thus, in many ways, Portsmouth is addressing its situation and is seeking long-term solutions, with creative partnerships and financing methods. At the same time, we are working to build new systems of customer service delivery as our departments create their long-term strategic plans. The Mayor summarized our status quite well in the conclusion of his State of the City message, and I quote: "1 think it is clear that Portsmouth has a plan and is well on the way to executing that plan, with the community acting in partnership to achieve our goals. We will continue to stress neighborhood quality, economic development and fiscal strength as our spheres of success. We will continue to build partnerships all over the city. We will continue to strengthen our financial base. And we will work on many fronts to build capacity for the future. I am convinced that, working together, we can build the Portsmouth that we want in the 21st century, the city of choice for people to live, work, play and visit." FY 2000 OPERATING BUDGET OVERVIEW Many of the themes covered in this message are echoed from the pages of our operating budget for fiscal year 1998-99, which is quite proper because of the continuous nature of the journey that we are undertaking. Many things have changed since last year, but the principles remain the same. We must continue to work toward our financial goals, and we must continue to spend responsibly, save prudently and invest wisely.