Minutes 03/31/2014 - Laserfiche WebLink

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March 31, 2014 Revenues As for the General Fund, one penny on the real estate tax rate generates $678,000. Again, this budget does not propose an increase in the real estate tax rate. It is very important to note the City did not equalize the tax rate in prior years when assessed valuations fell, so that total real estate tax revenue could have remained constant. Asa result, the City has not fully recovered financially from the impacts of the recession. In Fiscal Year 2010, the City's assessed valuation was almost $7.7 billion. In Fiscal Year 2014, it is $7.2 billion, a drop of 6.5%. In order for the real estate tax rate to produce the same revenue today as it did in Fiscal Year 2010, the rate would need to be equalized from its current rate of $1.27 to $1.34. The City will continue to face the challenge of limited revenue growth compared to expenditure demands. With the past two budgets, we have scrubbed costs and pared the expenditure budget down to the lowest level possible without reducing or eliminating services. Therefore, in order to maintain current operations, it is likely that the City will need to consider equalizing the tax rate infuture years. We project flat revenues for Fiscal Year 2014-2015, reflecting the continued slow economic recovery. As for the Utility Fund, one penny on the water rate generates $77,000 in revenues, and one penny on the sewer rate generates $33,000 in revenue. This budget does not propose any increases in utility rates. Our cash situation is such in the Utility Fund that we are able to cash fund some capital projects that we had previously planned to debt finance. Again, we are able to balance the Utility Fund budget without increasing the water and sewer rates as originally forecasted. Cigarette Tax Increase According to the United States Department of Health and Human Services Centers for Disease Control and Prevention (the "CDC"), tobacco use is the leading preventable cause of death nationally and worldwide. Tobacco use costs the United States more than $289 billion annually, including at least $133 billion in direct medical care for adults and more than $156 billion in lost productivity. An additional $5.6 billion a year (2006 data) is lost in productivity from exposure to secondhand smoke. Our healthy coalition partner, Healthy Portsmouth, is committed to making the City the "healthiest place in Hampton Roads," and this budget supports that goal with a 30¢ increase in the cigarette tax. The increase from 60¢ to 90¢ per pack is substantial enough to cause smokers to more carefully consider the personal financial loss of continuing the habit, which will eventually translate to reducing our taxpayers' share of the aforementioned costs cited by the CDC. The proposed new tax rate is only marginally higher than our neighboring cities, and so the projected tax revenue leakage to cities with a lower tax rate is minimized. The projected General Fund revenue increase is $1,083,000 for Fiscal Year 2014-2015. Healthy Portsmouth and Healthy Hampton Roads will continue to work with the region's cities to achieve consistent cigarette tax rates across jurisdictions. As of this writing, no other Hampton Roads city has stated its intent to increase the tax for Fiscal Year 2014- 2015. These healthy coalitions also strive to improve Virginia's national rank in cigarette tax rates: dead last at #50. Use of General Fund Balance This budget proposes to use $6,581,674 of the General Fund Balance to fund one- time expenditures during the Fiscal Year 2014-2015. This budget also sets aside an additional $6,415,772 of fund balance as a debt service "sinking fund" to cover the increased cost of debt service between now and Fiscal Year 2020.