Minutes 03/29/2004 - Laserfiche WebLink

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March 29, 2004 raise the quality bar in Portsmouth, such as the Renaissance Hotel and the Ntelos Pavilion at Harbor Center. Council's strategy is now paying off, as $1.4 billion of private investments will attest. The recommended CIP budget includes funding for several economic development projects, including Maersk, the Ntelos Pavilion at Harbor Center canopy, Jeffry Wilson Hope VI development, and the Virginia Sports Hall of Fame and Museum. This is an exciting time to be in Portsmouth. These developments and achievements are clear and tangible examples that our renaissance is accelerating into its next phase. ADDRESSING THE CHALLENGES Despite the positive direction our future is taking, there is still a significant challenge in constructing a budget that is fair to the citizens while continuing to provide core services at the current level. Perhaps the largest of the issues facing the budget is the Commonwealth's budget impasse. Many of the Commonwealth funding issues remain unresolved, and the stakes are high for the City of Portsmouth. State funding comprises about 15% of total revenue for Portsmouth. However, a much larger portion of the Schools' budget, 61%, is made up of revenue from the Commonwealth. The Governor, House, and Senate have put various versions of the budget forward. Impacts of the different versions range from an additional $14 million for Schools to a nearly $200,000 reduction in Constitutional Officers' budgets. At this time it is difficult to determine the ultimate impact, making it even more difficult to estimate the state revenues. We have estimated the majority of state funding to remain the same as in previous years. We will return to Council to appropriate any additional revenues after the Governor signs the Commonwealth's budget. Much like the Schools, the City is faced with the challenge of maintaining a qualified workforce. In public safety we can expect to be fully staffed by the first part of FY 05. But the workforce is far more than public safety positions. To help keep pace with the growing salaries in the region, I am proposing a 2% pay increase for all employees effective on January 1, 2005. This increase will help maintain a skilled and experienced workforce. This increase is, however, contingent on the level of funding from the Commonwealth. If we incur drastic reductions in State funding, we will need to re- evaluate the proposed pay increases. Along with the compensation increases, we were able to minimize the cost of personnel by reducing the actual size of government by 18 vacant positions. Considering the compensation increase and the reduced positions, the General Fund cost of personnel salaries grew by only 1.1 % or a total of $494,000. Another significant issue that is plaguing all localities across the country is the rising costs of healthcare. While the General Fund budget (less the growth in the transfer to Schools) grew by only 1.8%, the cost of healthcare grew by more than $2.2 million, or about 26%. We will examine healthcare plans during the next six months to look for any possible savings opportunities before the January 1 plan year. The Portsmouth Supplemental Retirement System (PSRS) and the Fire and Police Retirement System (FPRS) are costing significantly more than in the past. Because these two systems are closed to new members (all new employees are members of the Virginia Retirement System), each year more and more active members retire and begin drawing their pension. The contribution rate for an employee in the PSRS program is just over 34% of salary, while the cost of the FPRS is just over 71% of salary. Beyond these levels, additional contribution of $372,000 is budgeted to bring funding to the actuarial level sufficient to ensure solvency for the next fifty years. These programs are budgeted for an additional $5.1 million over the previous year's budget. Included in this amount is the Virginia Retirement System's rate, which more than doubled from FY 04 to 05, going from 4% to 9%. This growth is equal to an additional cost of $2.6 million. The final challenge to the budget is generated by the Commonwealth. After several years of a VRS life insurance holiday, the VRS Board is recommending that localities contribute 1.1% of total salaries. This will cost the City $797,000 in FY 05.