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Financial Update
September 2015
The City of Norfolk is a vibrant, historic port city where diverse citizens, military, and businesses are
building the economy, neighborhoods, and culture into the most livable urban waterfront in America.
Norfolk offers a truly authentic urban experience. At more than
4,500 people per square mile, Norfolk has by far the highest
population density in the Hampton Roads region. Walkable
communities, The Tide—Virginia’s first light rail system, a
comprehensive public transit service, the Norfolk International
Airport, a new Amtrak station, Virginia’s only cruise terminal, and
a network of bike‐friendly roads make Norfolk the most multi‐
modal city in Hampton Roads.
Norfolk is unquestionably the center for commerce in the region. Norfolk has more jobs per square mile
and the highest paying jobs in the region. Norfolk is home to the world’s largest naval base, one of the
busiest ports on the east coast, five institutions of higher learning, and six general, acute care, and
specialized hospitals. As a result of recent economic development ini a ves the city expects to add
approximately 5,000 new jobs by 2017.
Norfolk is also the arts and cultural hub of the region. The Chrysler
Museum of Art, Attucks Theatre, Harrison Opera House, Chrysler Hall,
Norfolk Botanical Garden, and the Virginia Zoo, are among the many
venues that entertain residents and millions of visitors each year.
The Authen c Urban Experience: Our Compe ve Advantages
Norfolk is a military city
Naval Sta on Norfolk is the world’s largest
naval base and home to:
United States Fleet Forces Command
The Second Fleet
The Allied Command Transforma on
(NATO)
United States Joint Forces Command Naval
Sta on Norfolk employs:
43,200 ac ve duty personnel
14,600 civilians
Defense spending accounted for $19.5
billion in direct spending in 2014, over 42
percent of the Gross Regional Product
Norfolk is a port city
Norfolk is home to the Port of Virginia, the
deepest harbor on the United States East
Coast
50‐foot channels, inbound and outbound
Six terminals
1,864 acres
19,885 linear feet of berth
30 miles of on‐dock rail
Nearly 30 interna onal shipping lines
Connec ons to more than 200 countries
More than 40 interna onal container,
breakbulk, and roll‐on/roll‐off vessels are
serviced in an average week
Page 2
Page 3
Norfolk is the second largest city in Virginia. The city’s popula on is increasing and has grown by 3,591 since 2010
The median age of Norfolk residents is nearly five years younger than in the surrounding six ci es
Millennials now comprise the greatest share of residents at 33 percent of the total popula on
Norfolk is the second highest in the region for the number of residents who speak a language other than English at home
Average residen al home sale prices rose 9.8 percent from 2014 to 2015 through July
Norfolk has the largest share of families living below the poverty level in the region; however, this dropped nearly 9 percent from 2013 to 2014
The current unemployment rate has declined from a peak rate of 9.0 percent in 2011 to 6.0 percent as of July 2015
Worldwide, people are migra ng to ci es from rural areas. By 2050, about 70 percent of the popula on
will be living in ci es. Norfolk’s recent growth mirrors that trend. Understanding the demographic and
economic changes shaping the city can help us be er prepare for the evolving needs of our growing
popula on. As popula on density and diversity increase, we can capitalize on those advantages to
create walkable, dynamic neighborhoods, and business districts which allow us to focus on the most
pressing needs while improving the quality of life for residents today and in the future.
Demographic and Economic Sta s cs
Second Largest City In Virginia
Norfolk’s Recogni ons
A Top 10 Emerging City for Global Trade (Global Trade
Magazine), 2013
#1 in U.S.—Let’s Move Ci es, Towns and Coun es
Campaign (Na onal League of Ci es), 2015
Named to Rockefeller Founda on 100 Resilient Ci es
Program, 2013
#15 Top 20 Ci es for College Grads to Find Jobs
(Nerd Wallet), 2015
West Freemason named 2013 Great Neighborhood
(American Planning Associa on)
Voice of the People Award for Transforma on in
Natural Environment, 2015
2013 All‐America City (Na onal Civic League) #66—100 Best Fleets in North America (100 Best
Fleets), 2015
#13 Millennial Magnet (USA Today), 2014 Top 5 City for Entrepreneurs (Entrepreneur
Magazine), 2015
Among Best Places to Re re (CNN Money), 2014
Note: not seasonally adjusted rates
While Norfolk is the core of a
military region, it is also
home to an economy with
diverse corporate strength.
The graph on the right shows
the city’s employment by
sector and highlights this
strength. With the exception
of government, no one
sector comprises more than
15 percent of total
employment.
A diversified economy is important to protect against a downturn in any one sector. The region’s
reliance on military and federal spending makes this diversity especially important for the city.
Our diverse corporate strength
Page 4
Capitalizing On Corporate Diversity
Source: Virginia Employment Commission, Quarterly Census of Employment and Wages, 4th Quarter 2014
Norfolk con nues inves ng for the future and adding jobs
that diversify the local economy. Despite the financial
challenges brought on by the great recession, the city
con nues to grow its tax base.
Significant redevelopment and private sector investment
con nue with exci ng new projects that are currently
in progress or have recently opened:
Slover Memorial Library
The Main
Simon Premier Outlets
Waterside District
Since 2008, the city has announced $1.5 billion in new
development, business, and pending public / private
projects. Norfolk is also becoming a favored loca on
for interna onal companies as evidenced by a
partnership with the Export Import Bank, the crea on
of the Global Ini a ves Fund, and the Export Tech
Program.
Norfolk is home to the highest
paying, and has the second most
jobs in the region. While Norfolk
makes up about two percent of the
land mass of Hampton Roads, it is
home to approximately 19 percent
of the jobs.
The unemployment rate has
declined by three percentage points
since 2011 to fall in line with the
na onal average of 5.6 percent.
2013 Regional Employment
Source: Bureau of Economic Analysis (2013)
Norfolk: Home to the highest paying jobs in the region
Leveraging private partnerships—Growing our tax base
Page 5
Growing Our Tax Base
Growing the city’s economy is one of the most important
ways to raise local revenue. Norfolk recently embraced
a new comprehensive economic and neighborhood
development initiative, Norfolk First. This model
signals a dramatic shift in how the city promotes comprehensive urban revitalization, fosters job growth,
and expands economic opportunity for all residents. The pillars of the Norfolk First initiative are
presented in the graphic below. This initiative is based on national best practices and is designed to
capitalize on Norfolk’s competitive advantage as the urban center of Hampton Roads. The Norfolk First
Initiative will further expand our tax revenue base and strengthen overall quality of life.
Norfolk First: Comprehensive economic development and urban revitaliza on
Priority Target Areas
Broad Creek Central Business Park Church Street Triangle Downtown East Ocean View Fort Norfolk Hampton Boulevard Li le Creek Military Circle Newtown Rd./ Kempsville Rd. Saint Paul’s Southside Tidewater Drive South Wards Corner
Priority Development Areas
Priority Target Areas are
redevelopment areas that
spotlight opportunity sites
for large scale development.
Priority Neighborhood
Commercial Districts are areas iden fied as choice
loca ons for a new breed of retail, ar sanal manufacturing,
crea ve services, or unique gathering spaces.
Priority Neighborhood
Commercial Districts
Berkley/ South Main Street
Chelsea Downtown Arts District Five Points Ocean View Avenue Park Place/ 35th Street
Page 6
Developing Our Economy, Revitalizing Neighborhoods
During the great recession, 8.7 million jobs were lost na onwide from January 2008 to February
2010. It wasn’t un l April 2014 that the jobs lost were recovered. While the state has also recovered,
the jobs lost in Hampton Roads have not yet been fully restored.
Virginia’s Gross Domes c Product (GDP) has increased slower than in other states. In 2013 GDP growth
in Virginia was among the lowest in the na on. This lack of growth is partly due to the slowdown in
federal spending as a result of sequestra on and other federal spending cuts. The Hampton Roads
economy is specifically sensi ve to federal spending. Norfolk’s reliance on military and federal spending
makes diversifying our tax base and economy especially important.
Recently, the city’s economy has shown signs of rebounding from the great recession. We have begun
to realize growth in most local taxes. Sales tax, meals tax and admissions tax collec ons are rising as a
result of more people buying retail goods, ea ng out, and a ending shows or concerts in Norfolk. The
graphs below show the upward trend of these local taxes:
Increasing economic ac vity spurs a growth in local taxes
Page 7
FY 2015 is projected
Rebounding Revenue
Norfolk: A city of firsts
First Marine hospital in America, 1787 First cruise terminal in Virginia, 2007
First airplane take‐off from a naval ship , 1910 U.S.S. Wisconsin—First ba leship open to the Public
in Virginia, 2010
First black police officers in Virginia to be sworn into
the police force, 1945
The Tide—Virginia’s first light rail line, 2011
First city in the na on to apply for Federal Housing
funds under the 1949 Federal Housing Act
City employee Gloria Peek—first female boxing coach
to coach men at the Olympics, 2012
Children’s Hospital of the King’s Daughters—First free‐
standing pediatric hospital in Virginia, 1961
First Urban Winery in Virginia, Mermaid Winery,
2014
Home to the first in‐vitro fer liza on clinic in the U.S.,
1980
Home to the first Kroc Center in Virginia, 2014
In 2011, city stakeholders identified six priorities to move the city forward. The priorities identified are:
Economic Vitality and Workforce Development
Environmental Sustainability
Safe, Healthy, and Inclusive Communities
Accessibility, Mobility, and Connectivity
Lifelong Learning
Well‐Managed Government
In order to become a well‐managed
government, City Council approved
financial policies to strengthen the
city’s long‐term financial
sustainability. These policies guide
the city’s financial decision‐making
and lay the groundwork for
improving the city’s financial
posi on.
The first tenet of the financial policies
was to achieve a structurally
balanced budget within five years. A structurally balanced budget is when
on‐going expenditures do not exceed on‐going revenues. Structural
balance is crucial for the city’s financial health and for long‐term planning.
Because of conservative budgeting practices, we achieved structural
balance in FY 2015, four years ahead of
schedule. Continuing our good fiscal practices
we maintained structural balance in FY 2016.
Well‐Managed Government is the founda on
Financial Policies (City Council adopted July 2013)
Structurally balanced budget
four years ahead of schedule
Page 8
Building A Resilient City
Established, September 2011
Shown in the graph to the right, the budget
gaps we now face are significantly less than in
prior years. The FY 2017 ini al es mate of the
budget gap was $5.5 million, down from $32
million in FY 2012. This decline is a result of
achieving structural balance for two years in a
row. In the past, gaps recurred because
budgets were not structurally balanced. This
means one‐ me revenue was used to address
on‐going costs, causing the budget gap to
con nue in the following year. For example,
use of money only available for one year to
support an on‐going salary increase meant the
city had to find funds to support the same increase the next year.
After achieving structural balance the city’s financial policies direct the full funding of reserves. As
most households have a savings account, similarly the city sets aside a Risk Management Reserve and
an Economic Downturn Reserve. In addition to
those funds the city maintains a General Fund
unassigned reserve of five percent of the
budget, that also helps mitigate unforeseen
emergency or catastrophic needs. Reserve
funds enable the city to be financially resilient
to shocks and stresses. In uncertain economic
times reserve funds can be used to mitigate
the need to reduce services or raise taxes. A
healthy reserve balance is also looked upon
favorably by credit rating agencies and investors.
Norfolk has seen only a very modest
increase in real estate tax rate since
assessments began to decline.
Since FY 2010, other ci es in the
region have implemented
substan al real estate tax rate
increases. Norfolk’s increase of four
cents, of which two cents is
dedicated to Norfolk Public Schools
for school construc on, technology,
and infrastructure, is the lowest in
the region.
Budget gaps are shrinking
Reserves are growing
Norfolk’s recent real estate tax increases:
The lowest in the region
Page 9
Source: Office of Budget and Strategic Planning, as of September, 2015
Measuring Our Improvement
Source: Office of Budget and Strategic Planning, 2015
The Commission on Local Government (CLG) produces a fiscal stress index of Virginia’s coun es and
ci es. The index measures a city or county’s overall fiscal well‐being and ability to generate addi onal
revenue rela ve to other locali es in Virginia. In the most recent report Norfolk is the 12th most fiscally
stressed city in Virginia and the most fiscally stressed city in Hampton Roads. Even though Norfolk is
ranked in the high fiscal stress category, we strive to provide a high level of quality service and create
more economic opportuni es. Our commitment to providing services that advance the future of the
city is evidenced through our 70 community and neighborhood parks, 12 dog parks, 20 community
centers, six public pools, 12 libraries, seven entertainment venues, and a mul tude of other municipal
services.
Our ability to raise revenue is limited
Page 10
Norfolk’s tax rate is the lowest among the ci es below that have high fiscal stress
Real Estate Tax Rates and Fiscal Stress
Providing A High Level Of Service Despite Fiscal Stress
Source: Commission on Local Government FY 2013 Report on Compara ve Revenue Capacity, Revenue Effort, and Fiscal Stress of Virginia’s Ci es and Coun es (January 2015).
While the great recession ended in 2009, the city has s ll not seen a full recovery of its financial
resources. Real estate tax is the city’s largest locally generated revenue. While real estate
assessments overall will
increase for the third
straight year in FY 2016 (it
is only the second year for
residen al growth), it is
important to note, the
growth during these three
years has been well below
the historical average. For
example, over the past 20
years, the average annual
increase has been five
percent. In spite of three
years of growth, overall assessments remain below the peak reached in FY 2010. Residen al
assessed values, which make up the majority of the city’s overall assessments, have only begun
to rise a er an unprecedented decline for four straight years. As a result of the decline in
assessments, the average resident will pay $230 a year less now than in 2010.
Nearly 38 percent of the Norfolk’s real estate is tax exempt. This means that 38 percent of our
property is not subject to real estate taxes. As men oned earlier, a city’s fiscal stress is a
measure of its ability to raise addi onal local revenue. The high percentage of tax exempt real
estate in Norfolk contributes to that stress.
Norfolk has the second highest percentage of tax exempt real estate in the seven ci es
Page 11
Overall Assessments Annual Change
Three
straight years
of growth
Tax Exempt Real Estate and Fiscal Stress
Effec vely Managing Our Finances
Source: Office of Budget and Strategic Planning
Norfolk has been aggressively reducing
expenditures and focusing on efficiency
initiatives. In fact, the General Fund budget in
FY 2016 is smaller than in FY 2010. The budget
is smaller, but the city has maintained or
increased services to residents.
Once the city collects taxes and
other revenues, the funds are
spent efficiently to provide
services for the residents and
businesses of the city. The
graphic to the left details how
each General Fund dollar is
spent.
FY 2016 General Fund Budget is less than it was six years ago but the city
has increased or maintained service levels to residents
How does the city spend each dollar?
Page 12
Preliminary FY 2015 General Fund year‐end
Es mated General Fund surplus is $8.5 million
Spending Wisely, Spending Less
39 Cents of Every Dollar goes to Norfolk Public Schools
Through mindful spend‐
ing and conserva ve
revenue projec ons, an
$8.5 million surplus is
es mated for FY 2015
Employee retirement and healthcare are substantial operating costs for any municipality, including
Norfolk. The city has taken great care to manage both programs effectively. In 2014 the city, along with
Norfolk Public Schools and the Norfolk Redevelopment and Housing Authority, transitioned to a self‐
administered healthcare model resulting in avoiding over $6.0 million in costs.
The city’s employee re rement system has a very strong funded ra o. The funded ra o is a comparison
of the value of the system’s assets vs. liabili es. The be er the funded ra o, the less the city has to pay
into it each year. The chart below shows how Norfolk’s re rement system’s funded ra o compares with
the funded ra o of the other re rement systems in Virginia. It also shows the fiscal stress level, as
determined by CLG’s Fiscal Stress Index (see page 10 for defini on), of each locality. Norfolk also has a
be er funded ra o than the Virginia Re rement System for state employees, which is funded at 74.3
percent. Even though Norfolk is in the highest fiscal stress category our commitment to have a well
funded re rement system has resulted in a more stable and reliable resource for our employees.
Employer of Choice
As is evidenced by the status of the city’s re rement system, Norfolk has commi ed to inves ng in its
employees. FY 2015 saw the first phase of the city’s A rac ng, Retaining, Mo va ng, and Developing
(ARMD) Ini a ve. FY 2016 implements the second phase of the ini a ve. Over the course of the last
two fiscal years, the city has:
Provided at least a two percent pay increase each year
Ensured that all full‐ me employees are earning at least as much as
the federal poverty limit for a family of four
Provided a supplement to eligible re rees each year
Adjusted the salary ranges for numerous posi ons earning less than
their regional peers
(data shown as of most recent actuarial valua on)
Norfolk’s re rement system: strong funded status
Page 13
Inves ng In Our Employees
Most fiscally
stressed among
those with inde‐
pendent re rement
Norfolk primarily uses debt, in the form of bond financing, to pay for large capital and infrastructure
projects. Debt is the total amount of principal owed on all bonds sold to investors, called bondholders.
Governments need to pay close attention to debt. The city has the same obligation to adhere to sound
financial management
that a home or business
does. The repayment
of these general capital
bonds is paid from the
General Fund. For
general capital debt,
the city adheres to
adopted financial policies that promote effec ve financial management. The city has two measures of
debt affordability:
General Fund Debt as a percentage of taxable property may not exceed 3.5 percent
Debt service as a percentage of the General Fund budget cannot exceed 10 percent
As illustrated in the table above the city is in compliance with all adopted debt affordability measures,
and is expected to be in compliance in FY 2017. It is an cipated that debt service costs will increase in
future years as the city manages the funding of several large projects, including school projects, and
previously authorized capital projects.
Credit ra ng agencies rate the ability of the city to repay our debt. Ra ngs
are based on financial posi on, current and future debt burden, financial
management and the economy. The higher the ra ng the less it costs to
borrow money. Norfolk is one notch away from a AAA ra ng.
Strong credit ra ngs
In 2013 Standard and Poor’s (S&P)
upgraded the city’s bond ra ng
from AA to AA+. This was the first
S&P bond upgrade in 50 years.
Moody’s and Fitch also recently
reaffirmed Norfolk’s bond ra ng,
no ng the city benefits from
conserva ve budge ng and realis c
revenue forecas ng.
As an ongoing effort to manage our financing the city
has refinanced exis ng debt and saved over $19
million since 2011.
Page 14
Ins lling Investor Confidence
Norfolk saves taxpayer dollars by using more innova ve financing
techniques than any other city in the Commonwealth
Norfolk’s innova ve approach to bond financing leads to:
Substan ally reduced interest expense
Access to a larger taxable investor community
Encouraging a sustainable environment
Increased debt capacity
Be er management of cash flows
Locked in favorable
rates for exis ng debt
to be refinanced at a
later date saving
$1.77 million
Page 15
Pioneering Innova ve Bond Financing
Norfolk has begun to emerge from the great recession. Real estate assessments
have begun to grow, albeit slowly. Local tax revenue is con nuing to recover.
The city’s financial opera ons are sound and benefit from well‐conceived fiscal
policies. Norfolk is posi oned to capitalize on its compe ve advantage as the
authen c urban experience in Hampton Roads.
Even though we face na onal, state, and regional
uncertainty, Norfolk’s innova ve approaches to
addressing fiscal challenges have enabled us to
manage increasing costs associated with providing
quality services.
As we move forward we will con nue to use the
same mul ‐faceted strategies used in the past five years: raising revenue, reducing expenditures,
becoming more efficient and resilient, growing the economy, and sharing services.
Five pronged approach to fiscal resilience
“Timelyexpenditurereductionsandrealisticrevenueforecastinghaveresultinginfavorableoperationsandhealthyreservelevels”
September, 2015
Page 16
“Verystrongmanagementconditionswithstrongandwell‐embedded inancialmanagementpoliciesandprocedures”
September, 2013
“Largeanddiversetaxbasewithinstitutionalpresence”
September, 2014
The credit ra ng agencies agree—Norfolk is worth inves ng in
Managing For The Future
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