FINANCIAL UPDATEMay 16, 2013

Financial Update will Cover Four Main Topics

1. Review of local economic indicators

2. Review of financial results for year ended December 31, 2012

3. Review of 2013 financial results based on four months ended April 30th

4. Projected Impact of new LOST certificate

City of Savannah Financial Update May 2013 2

Review of Local Economic Indicators- Local economy in recovery

1. Leading and coincident indexes

2. Unemployment rate

3. Initial jobless claims

4. Home foreclosure trend

5. Retail sales/sales tax revenue trend

6. Hotel/motel tax revenue trend

7. Building inspection fees

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Source: Armstrong Atlantic University Center for Regional Analysis

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Source: Georgia Department of Labor

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Source: Georgia Department of Labor

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Source: RealtyTrac, Inc.

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City of Savannah Financial Update May 2013

Source: City of Savannah

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City of Savannah Financial Update May 2013

Source: City of Savannah

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City of Savannah Financial Update May 2013

Source: City of Savannah

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Economic Indicator Take-aways... • Unemployment rates remain high but have been improving for last

12 months• Initial Jobless Claims are higher than normal, but have been

declining for past 24 months• Number of mortgage foreclosures has dropped significantly in last

6 months• Hotel/Motel tax revenues exceed pre-recession levels• Building activity permit fees have been inching up in last six

months but still well below pre-recession highs• Most recent “leading indicators” suggest growth for next 9 months• Taxable sales are projected to decline – due to change on law.

City LOST revenue forecasted to decline – LOST formula change• Most prudent course is to remain conservative in financial

decisions

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Review of financial results for year ended December 31, 2012

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How did the City do Financially in 2012?

1. General Fund revenues were $3.23 million over final budget (1.9% variance)

2. General Fund expenses were $195,000 under final budget (0.1% variance)

3. Net revenue was $322,000

4. General Fund unreserved fund balance at $31.3 million; 17.8% of expenditures

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City of Savannah Financial Update May 2013

General Fund turned in favorable variancesfor Year Ended December 31, 2012*

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Final 2012 Budget 2012 Actual VarianceRevenues 172,836,855$ 176,063,800$ 3,226,945$ Expenditures 175,936,855 175,741,695 195,160 Net revenue (3,100,000)$ 322,105 3,422,104$ Beginning total fund balance 33,179,551 Open purchase orders and commitments at 12/31 (2,217,293) Ending unassigned fund balance 31,284,363$

Fund Balance as % of Expenditures 17.8%

*Reflects General Fund Only

Savannah General Fund fund balance is below many comparable Cities…

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Unassigned General Fund fund balance

General Fund expenditures and

transfers-out

Fund Balance as %

of expenditures

Albany, GA 20,869,545$ 58,657,570$ 35.6%Columbus, GA 46,519,805 180,561,388 25.8%Augusta, GA 29,900,645 128,341,711 23.3%Macon, GA 8,873,685 78,602,424 11.3%Atlanta, GA 80,235,000 491,242,000 16.3%Rome, GA 10,660,903 26,809,279 39.8%Athens, GA 18,334,782 100,767,817 18.2%Charleston, SC 20,445,250 130,790,485 15.6%Greenville, SC 14,683,133 70,983,908 20.7%Columbia, SC 14,972,196 115,488,214 13.0%Charlotte, NC 150,102,000 533,042,000 28.2%Savannah, GA 31,284,363 175,741,695 17.8%

Average 22.1%

General Fund fund balances as % of Expenditures for several southeastern US Cities

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Average

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Combined Sales Tax Stabilization Fund and General Fund fund balance

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Unreserved GF Fund Balance 31,284,363$ Sales Tax Stabilization Fund 5,501,000 Total 36,785,363$

Total as % of Expenditures and Transfers-out 20.9%

The Revenue Variance is due mainly to five broad categories

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Final 2012 Budget 2012 Actual VarianceRevenues 172,836,855$ 176,063,800$ 3,226,945$ Expenditures 175,936,855 175,741,695 195,160 Net revenue (3,100,000)$ 322,105 3,422,104$ Beginning total fund balance 33,179,551 Open purchase orders and commitments at 12/31 (2,217,293) Ending unassigned fund balance 31,284,363$

Fund Balance as % of Expenditures 17.8%

*Reflects General Fund Only

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Total Property Tax Levy

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In summary, favorable revenue result attributable to five revenue categories*

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Category Final Budget 2012 Actual VarianceVariance Percent

Current property taxes 50,555,900$ 51,476,583$ 920,683$ 1.8%Sales tax (LOST) 42,065,740 42,623,357 557,617 1.3%Permit Fees 1,550,380 2,197,337 646,957 41.7%Hotel-Motel tax 6,640,000 6,916,273 276,273 4.2%Insurance Premium Tax 6,400,000 6,789,783 389,783 6.1%All Other 65,624,835 66,060,458 435,623 0.7% Total 172,836,855$ 176,063,790$ 3,226,935$ 1.9%

*Reflects General Fund Only

Expenditures less than Final Budget by $195k or 0.1%

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*Reflects General Fund Only

Final 2012 Budget 2012 Actual VarianceRevenues 172,836,855$ 176,063,800$ 3,226,945$ Expenditures 175,936,855 175,741,695 195,160 Net revenue (3,100,000)$ 322,105 3,422,104$ Beginning total fund balance 33,179,551 Open purchase orders and commitments at 12/31 (2,217,293) Ending unassigned fund balance 31,284,363$

Fund Balance as % of Expenditures 17.8%

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City Self-funded medical program costs compare favorably to Mercer norm

City of Savannah Financial Update May 2013 33

2010 2011 2012City 15,923,728$ 15,618,813$ 17,532,975$ City Employees/Retirees 5,100,011 5,365,232 5,501,081 Other Employers 1,703,106 1,928,270 1,347,125 Other 17,253 7,628 4,720 Total contributions 22,744,098 22,919,943 24,385,901

Self insured claims 19,978,665 19,753,182 22,795,157 Stop-loss/Medicare Advantage Insurance 1,755,518 1,866,010 1,722,435 Administration 1,298,087 1,414,800 1,022,480 Total costs 23,032,270 23,033,992 25,540,073

Net income (loss) (288,173) (114,049) (1,154,172) Beginning equity 5,371,933 5,083,761 4,969,712 Ending Equity 5,083,761$ 4,969,712$ 3,815,539$

$ Cost per participant (Non-medicare) 7,094$ 6,968$ 8,192$ Mercer norm ($/Participant) 10,003$ 10,786$ 11,351$ City below Mercer Norm -29% -35% -28%

Actual

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In summary, expenditures under final budget by 0.1%

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Category Final Budget 2012 Actual VarianceVariance Percent

Base Salaries 68,655,424$ 68,585,001$ 70,423$ 0.1%Group Medical Benefit 10,493,965 11,667,860 (1,173,895) -11.2%Social Security 5,669,239 5,323,604 345,635 6.1%Overtime 3,465,669 3,888,453 (422,784) -12.2%Electricity 6,272,831 6,170,068 102,763 1.6%Contractual Services 10,977,909 9,951,378 1,026,532 9.4%Capital Projects 8,460,323 9,336,464 (876,141) -10.4%Fund Transfers-San/E911/CC 10,250,431 9,344,223 906,208 8.8%All Other Categories 51,691,062 51,474,640 216,422 0.4% Total 175,936,855$ 175,741,691$ 195,164$ 0.1%

*Reflects General Fund Only

How are we doing so far in 2013?Based on Four Months ended April 30th

We will look at:– Revenues, and– Expenditures

for the first four months of the year

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General Fund 2013 Revenues 4.84% behind 2012 as of April 30th

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Actual as of April 30th

2012 General Fund Revenue 44,944,249$ 2013 General Fund Revenue 42,769,322 Difference 2012 v 2013 (2,174,926)$

Percentage change -4.84%

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In summary 2013 General Fund Revenues…

• Are behind 2012 as of April 30th– This due mainly to reduction in LOST revenue

• Formula change

• HB 386 Impact

– Lower Real Property Tax revenue due to billing timing– Lower H/M tax due to timing of payments

• Detailed forecast for the year based on first quarter projects a $4.1 million unfavorable variance– This is due to reduced share of LOST. Projected Net of all other

categories is on target.

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General Fund 2013 Expenditures 3.61% above 2012 as of April 30th

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Actual as of April 30th

2012 General Fund Expenditures 51,828,200$ 2013 General Fund Expenditures 53,699,515 Difference 2012 v 2013 1,871,316$

Percentage change 3.61%

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Overall Vacancy Rate down to 6% from 8% last year

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  Full-time Permanent Positions*

  April 2011   April 2012 

May 2013

Bureau Budgeted Filled Vacant   Budgeted Filled Vacant

 

Budgeted Filled Vacant

General Administration 41 35 6   42 35 7   47 40 7

Management Services 275 221 54   272 250 22   271 244 27

Public Development 119 102 17   125 114 11   129 116 13

Public Facilities, Events & Services 231 194 37   222 206 16   222 213 9

Police 841 742 99   842 801 41   842 818 24

Fire & Emergency Services 331 293 38   330 305 25   329 319 10

Public Works 142 121 21   141 128 13   142 127 15

Sanitation 221 202 19   226 213 13   225 212 13

Water and Sewer 285 233 52   281 241 40   282 260 22

Total 2,484 2,143 341   2,481 2,293 188  

2,489 2,349 140

Overall Vacancy Rate     14%       8%     

6%

* Includes full-time trainee positions       

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In summary 2013 General Fund Expenditures…

• Are ahead of 2012 as of April 30th

• This is due to higher expenses for base wages, medical contribution, pension contribution, and overtime

• A detailed expenditure forecast based on actual at April 30th is $1.1 million under budget

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Updated revenue and expense projections for the General Fund show a 2013 deficit

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Adopted Budget Updated Projection Variance2013 Revenue 172,702,520$ 168,537,050$ (4,165,470)$ 2013 Expenses 172,702,520 171,603,391 1,099,129 Net Income (loss) -$ (3,066,341)$ (3,066,341)$

Challenges and Bright Spots on the Horizon…

Challenges-

• Immediate imbalance for 2013– HB386 Impact– LOST revenue reduction

• Capital improvement needs

• Medical benefit cost

• Funding City drug squad

• Funding fire staffing for new station

• Intergovernmental Issues

• CDBG future federal reductions

• Capital Markets impact on Pension Cost

Bright Spots-

• Effective cost controls • Property digest stable• Tourism strength• Short term 2013 local

economy outlook favorable• Medical benefit cost• Jail cost savings• Capital market turn-around

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THANK YOU

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Turning now to Projection of Tax Reform – HB 386 Impact

The HB 386 - Tax Reform Measure impacts local revenues in several ways

Major changes are:• Vehicle taxation

– Eliminate vehicle ad valorem tax– Eliminate sales taxes on vehicle sales– Institute new “Title Fee” on all title transfers

• Eliminate sales taxes on energy sold to manufacturers

• Sales tax holidays for back-to-school and energy-efficiency products in 2012 and 2013

• E-Fairness measures

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HB 386 changes are phased-in so the impact varies from year to year

(fully implemented in 2016)

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Thousands of Dollars

2012 2013 2014 2015 2016

Change in taxation of vehicles $ - $ 370 $ 116 $ (498) $ (859)

Elimination of sales tax on energy to mfg - (141) (433) (741) (1,048)

Sales tax holidays (507) (538) - - -

E- Fairness sales tax on internet sales - 173 243 254 265

Other provisions (film, ag, and constrcn mtl exemptions) (135) (235) (198) (57) (52)

Total Net Savannah Impact $ (642) $ (372) $ (271) $ (1,042) $ (1,694)