Minutes 04/02/2013 - Laserfiche WebLink

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April 2, 2013 • Invests in Civic Organizations and the Arts • Promotes sustainability, livability, education, human capital, economic development and fiscal stability The overall proposed budget for the City of Portsmouth is $446.3 million for Fiscal Year 2013-2014. This amount does not include the Schools' total budget for we have yet to receive that amount from the School System. The size of the budget is indicative of the breadth, depth, and diversity of services, projects, and activities that the City of Portsmouth undertakes for public safety, education, quality of life, economic development, infrastructure maintenance and transportation. The two largest components of the budget are the General Fund and Utility Fund. The proposed General Fund operating budget is $231.4 million, and the proposed Utility Operating Fund is $43.7 million. The General Fund, Utility, and Parking components of the proposed CIP Budget total $58.8 million. One can find a comprehensive list of the funds included in this budget on pages 3-9 through 3-11 of this document. Significant Budget Initiatives The City's overall budget strategy centers on actions to strengthen Portsmouth's financial position, to support a healthy environment, to invest in our employees, schools, critical systems and infrastructure. These actions include: • Issuing pension obligation bonds to immediately restore the City's pension plans to financial health and to eliminate the Social Security Offset for retirees • Instituting curbside recycling to our residents • Providing raises for our employees and retirees • Filling positions that have long been vacant • Continuing the City's support for education • Identifying strategies to reduce subsidies for enterprise funds • Investing in capital infrastructure Pension Obligation Bonds The City has two closed Pension Plans: Portsmouth Supplemental Retirement System (PSRS) and Fire & Police Retirement System (F&P). All pension plans have two basic components: assets, which is essentially the available cash in the plan, and liabilities, which consist of the retirement benefits that we pay. These two components must be in equilibrium for current and future benefit payments. For every one dollar in liability, we should have one dollar of assets. Instead, the City's two closed pension plans have 28 cents and 32 cents of assets per dollar of liability. This is a critically precarious ratio. The City has been funding the Annual Required Contribution (ARC), but unfortunately that has not been sufficient to increase the funding levels of the plans. There are essentially two problems affecting the fiscal viability of these two plans: insufficient cash flow and assets that have deteriorated to the point where one bad year of investment losses could jeopardize their solvency. It will take $150 million just to get the plans to 80 cents of assets per dollar of liability, but that would be a significant improvement and would bring the funded status of the plans to an acceptable level. The quickest way to get us to that 80 cent level is through the issuance of Pension Obligation Bonds. City Staff and the City's Financial Advisor presented to City Council