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Presentation - Economic Update & Summary of 2010 Ballot Initiatives City of Boulder 2010 City Council Retreat January 22-23, 2010 Economic Update & Summary of 2010 Ballot Initiatives Sales/Use Tax Revenue Forecasts 2008 2009 2010 Actual Projected Projected City of Boulder 0.23% -1.93% 2.07% Sales/Use Tax Denver-Boulder- 3.90% -1.10% 1.10% Greeley CPI Retail Trade Sales (1.) -0.80% -11.20% 3.00% Personal Income 3.30% -2.10% 1.50% Growth (1.) Average of Dec 2010 projections from the Colorado Office of State Planning and Budgeting (OSPB) and the Colorado Legislative Council 2 Headwinds • Bank lending remains tight • Impacting commercial investment most • Job growth continues to be of concern • A recovery without job growth or slow growth • Retail sales tax flags are saying "caution" • Mid 2000s recovery driven by the consumer; not this time • Decrease in wealth (home equity decline and pensions) • Lack of access to credit • Employment uncertainty Tallwinds • Real estate has remained more stable in Boulder • Diversification of types of revenues • Sales Tax 70% versus 45% $100 million decline of 8% = $2M in services • Unemployment in Boulder is lower than state or nation • U.S. - 9.7% Colorado 6.7% Boulder County 5.4% • Upward sloping yield curve continues to indicate expectations of economic growth in the future ("when"?) • Retail sales tax November with late remittances positive • A new trend? Unknown at this time •ii Retail Sales Tax • Month to Month comparisons (Jan 2009 to Dec 2009) Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec 2.00% 0.60% 0.00°i° ` -2.00% -2.19% I -2.42% -2.60% -4.00% - - - i -3.95% -6.00% -5.35% -4.76% - - - -5.48% -6.50°/q ~ -8.00% -7.a8°/u -7.96% -8.73% -10.00% 5 *•i 0•A Total Sales/Use Tax YTD Percent Change from Previous Year 15.00% 2008 Actual s 2009 Actual 2009 Revised Proj 10.00% 5.00% 1 0.00% - 1, r . -'1.93% -5.00% -10.00% Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 6 0 0 0 Retail Sales Tax YTD Percent Change from Previous Year ♦ 2008 Actual 2009 Proj ■ 2009 Actual 8.00% 6.00% ♦ - 4.00% - 2.00% 0.00°x° ~ -2.00% -1.06% -4.00% _ -6.00% - - - ■ -8.00% - -10.00% Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 7 000 Do We Need to Revisit 90' BRC I Projections? • Structural Trends transcend the recession BRC projections are trends not a budget • Trends take into account highs and lows • City Budget 2010 and beyond • Ongoing expenditures were decreased equal to revenue projections so relative relationships have been maintained . It is still 3% revenue and 4% expenditure trends . Major update after five years 8 00* Conclusions ' Re: Economy • Recessions end and this one will too • When and to what degree -are unknown The latest sales and use tax report indicates • The reductions made in the 2010 budget were necessary • Retail sales tax trend is not clear at this time • Continue the rigorous review for filling positions . Restrain spending until the revenue picture is more clear • Current projections for 2010 are in the process of being reviewed. • In the wings -next slide 9 000 00* • Statewide: Proposition 101 . Cuts annual vehicle registration fee to $10 • Cuts specific ownership tax to $2 for new cars and $1 for all others . Exempts first $10,000 of vehicle purchase from sales tax • Eliminates state and local telecommunications charges. Allows 911 rates from 2009 but no increases permitted • Lowers the state income tax rate from 4.63 to 3.5% COB impact 2011- $5.8 million estimate 10 000 0000 0000 00* Constitutional Amendment 60 • Sunsets all property tax de-Brucings • Future de-Brucings must be re-voted every four years • Property tax increases limited to 10 years . Enterprises and authorities must pay property taxes • Allows use of petitions to reduce property taxes in all taxing districts • Cuts school district mill levies in half (while this does not directly impact cities it could have an impact on passing property taxes in cities). COB impact in 2011 - $4.9 million estimate 00* • • Constitutional Amendment 61 • Prohibits any borrowing by state government Local government borrowing (including bonds and leases) or refunding (including enterprise funds) only with voter approval . After borrowings repayment, tax rates must decline by an equal amount (even not repaid with a tax increase) . Maximum limit on borrowing is ten years • Per $10MM = $445,000 add'I cost per year Impact: COB impact is a "what if" calculation: Based on current debt and refundings - $11.1 million estimate and tax reductions 12 Preliminary Analysis of Impact BALLOT ITEM 2011 2014 ESTIMATE * ESTIMATE (Full Phase-in) Proposition 101 $ 5.8 million $ 7.5 million Amendment 60 $ 4.9 million $ 7.9 million Subtotal $10.7 million $15.4 million Amendment 61 "What if' i (increased borrowing costs and loss of savings based on 2009 refundings $1 1.1 million $11.1 million and other existing debt) 13 0*0 900 • • • Does City Council have any questions regarding the economic update or summary of the state initiatives? 14