The City of Oklahoma City
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THE CITY OF OKLAHOMA CITY FIVE-YEAR FORECAST FY 2019-2023 Abstract Triangle Mosaic background used throughout the document created by Davidzydd - Freepik.com FIVE-YEAR FORECAST FY 2019-2023 TABLE OF CONTENTS SECTION 1 EXECUTIVE SUMMARY .......................................................... 1 SECTION 2 INTRODUCTION ..................................................................... 5 SECTION 3 ECONOMIC OUTLOOK ........................................................... 9 SECTION 4 FINANCIAL TREND MONITORING SYSTEM .......................... 55 SECTION 5 SUCCESSFUL OUTCOMES AND FORECAST ISSUES .............. 83 SECTION 6 GENERAL FUND REVENUE TRENDS & FORECAST ............. 113 SECTION 7 GENERAL FUND EXPENDTIURE TRENDS & FORECASTS .... 123 SECTION 8 GENERAL FUND REVENUE/EXPENDITURE GAP ................. 131 1 FIVE-YEAR FORECAST FY 2019-2023 EXECUTIVE SUMMARY SECTION 1 EXECUTIVE SUMMARY FIVE-YEAR FORECAST l 1 SUCCESSFUL OUTCOMES 2017 GO BOND PACKAGE ONE CENT TEMPORARY TAX ¼ CENT SALES TAX PUBLIC SAFETY FLEET RADIO SYSTEM MUNICIPAL COURT BODY WORN CAMERAS BUS NIGHT SERVICE COURT RECORDS SYSTEM IMPACT FEES EMPLOYEE MEDICAL CLINIC OPEB LIABILITY PRIMARY DATA CENTER WATER CONSERVATION WATER RIGHTS SETTLEMENT 2 l FIVE-YEAR FORECAST EXECUTIVE SUMMARY EXECUTIVE SUMMARY Overall, the city is in a favorable financial position. Fiscal Year 2018 is proving to be a remarkable year with several achievements and trends pointing towards a strong and stable future. The city has again worked with Dr. Russell Evans, Executive Director of the Steven C. Agee Economic Research and Policy Institute at Oklahoma City University, to develop the economic outlook for the coming year. Dr. Evans’ baseline expectation is for City Sales Tax collections and local labor market conditions to improve through the Spring of 2018 and transition from recovery phase to a market fundamental phase with the turn of the fiscal year. Staff will continue to work with the City Manager to present Council with a proposed FY19 budget that balances operating needs with available resources. The Five-Year forecast that follows provides an evaluation of the city’s current financial condition and is designed to provide accurate, timely, and objective information about the City’s financial condition as well as a view of the economic and operational outlook for the city. CURRENT FISCAL YEAR In September, Citizen’s demonstrated their confidence in the City by passing a $967 million General Obligation (GO) Bond Package with almost half going towards building and rebuilding streets across Oklahoma City; a temporary 27- month sales tax to fund $240 million in street resurfacing, enhancements, sidewalks, trails and bike lanes; and a permanent one-quarter cent sales tax increase that will largely invest in public safety. The one-quarter cent sales tax increase that went into effect January 1st restored funding for 48 frozen police officer positions, 21 frozen fire fighter positions, added 81 police officer positions, and added 39 firefighter positions. In addition, five Public Works positions were added bringing budgeted positions to 4,767 for FY18, the most budgeted positions the City has ever had. Since FY12, Police has added 214 uniformed police officer positions and 19 civilian positions. General Fund revenue collections have been above year-to-date budget projections. Excluding the one-quarter cent sales tax increase, growth of 4% is expected at year-end compared to the original projection of 2% growth. FINANCIAL EVALUATION TOOLS Financial Trend Monitoring System (FTMS). The Financial Trend Monitoring System (FTMS) looks back at how multiple key indicators have performed over the last five and ten years and considers the trend of these indicators to assess Oklahoma City’s current financial condition. This system provides the city with a more comprehensive evaluation of financial condition rather than focusing on individual indicators, such as fund balance. With declining tax revenues, it was no surprise that Sales Tax Revenue and Hotel Tax revenue both moved from positive to neutral ratings in this forecast. While those two worsened, two others showed improvement. Active Drilling Rigs improved from negative to neutral as rig count continues to improve and Average Weekly Earnings (AWE) moved from negative to neutral; AWE did not advance to positive because even after 20 consecutive months of year-over-year growth the inflation adjusted weekly wage was only $3 more than what it was five years ago. The overall results of the FTMS indicator ratings were 10 positive, 9 neutral and 3 negative. Forecast Issues. Many financial issues are beyond the scope of the annual budget process and require other solutions. Fifteen successful outcomes, including those on the left, demonstrate how previously identified issues were resolved. Unfortunately, other issues still remain including the top 43 financial issues departments will be facing over the next five years. By identifying the significant issues now we are able to provide an early warning system so staff can develop a plan for the possible direction and next steps to be taken. GENERAL FUND OUTLOOK Over the next five years, General Fund revenues are expected to average 3.79% growth annually while expenditures are projected to average 4.69% growth annually. The imbalance in revenue and expenditure growth patterns means that there is a projected gap of $15.1 million in the General Fund in FY23. New revenue sources, an expanded sales tax base, and continued growth in the local economy may be needed to fund operations at a level desired by citizens. By laying out the many challenges identified, long-term strategies and priorities can be set to address the issues and projected General Fund Gap. FIVE-YEAR FORECAST l 3 EXECUTIVE SUMMARY FIVE-YEAR FORECAST FY 2019-2023 4 l FIVE-YEAR FORECAST INTRODUCTION SECTION 2 INTRODUCTION FIVE-YEAR FORECAST l 5 INTRODUCTION PURPOSE The purpose of the Five-Year Financial Forecast is to evaluate the City’s financial condition as it relates to programs and services. With accurate, timely, and objective information about the City’s financial condition, elected officials can help ensure the stability of Oklahoma City’s general and other municipal funds. With continued financial viability and service demand forecasting, the city can anticipate and meet community needs, enable additional economic diversification, and promote growth for years to come. This forecast focuses on revenues and expenditures associated with the General Fund, which finances a diverse spectrum of city programs to meet the community’s needs and will serve three functions: • COMPLIANCE. This forecast helps the City comply with city financial policies and practices designed to ensure the responsible utilization of public resources. This is governed by State law, through the Municipal Budget Act, and internal policies established by City Charter or Council ordinances and resolutions. Although a specific requirement for the preparation of a financial forecast does not appear in State law, 11 O. S. 2003, Article X, § 10 113 requires the City Manager to “keep the council advised of the financial condition and future needs of the city and make recommendations as he deems desirable.” The city has adopted the practice of developing a financial forecast that estimates future revenues and expenditures and identifies major financial issues that may arise for the ensuing five-year period. • STRATEGY. With such a broad scope of services and limited resources, the City has to be careful and strategic in allocating its resources. This forecast Compliance provides the Mayor and City Council with information to formulate long-term strategies to ensure city services are available at a level appropriate to the actual needs of the community. Annual budgeting alone can fail to serve the long-term public interest if short-term priorities reduce resources that may be required to meet imminent needs that fall beyond the one-year budget scope. Strategy By identifying long-term issues and assessing resources, the forecast is able to provide information and create continuity between annual budgets and the long-term needs of the city. The Accountability forecast is a valuable tool for identifying potential problems and for policy makers to incrementally address such problems with a seamless continuation of core services. • ACCOUNTABILITY. The forecast serves as a snapshot of the city’s current and projected financial well-being for the general citizenry and the business community by providing a. It provides citizens and business leaders with an overview of the city’s ability to meet community needs over time. This document also demonstrates the city’s financial planning process and strengthens local government’s accountability to the community. The Five-Year Financial Forecast is not intended to serve as a comprehensive source for all city-related financial activity, such as programs funded through city trusts and authorities. However, this forecast does include an assessment of unfunded capital and programmatic issues that may impact those entities. The city is developing and executing a number of significant plans that are laying the groundwork for an exciting future. This Five-Year Financial Forecast is intended to provide city leaders, citizens, and staff with the information necessary to help guide the future of The City of Oklahoma City. 6 l FIVE-YEAR FORECAST INTRODUCTION STRUCTURE OF THE REPORT This year’s Five-Year Forecast follows last year’s format. Dr. Russell