Fairfax County: Financial Outlook and Capital Challenges in 2012 Board of Supervisor's Retreat February 7, 2012

1. Fairfax County:
Financial Outlook and Capital Challenges
BOARD OF SUPERVISOR’S RETREAT
FEBRUARY 7, 2012

2. Where Have We Been:
General Fund Revenue Growth Rates
Annual Percent Change – FY 1992 – FY 2012
15.00%
10.00%
5.00%
0.00% Real Estate
Non-Real Estate
-5.00%
Total GF
Fiscal Year
*Projected
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3. Where Have We Been: General Fund Revenue
Average Annual Growth Rates FY 1992 – FY 2012
0.08
0.07
0.06 7.2%
0.05 5.8%
0.04
Forecast
3%
0.03 growth
1.9%
0.02
0.7%
0.01
0
Fiscal Year
*Projected
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4. Where Have We Been:
Real Estate Tax Base
1992 1993 1994 1995 1996 1997 1998
Equalization (2.75)% (6.48)% (2.46)% (1.29)% 0.36% 0.57% 0.80%
- Residential (1.90) (3.74) (0.52) 0.01 0.49 (0.23) (0.50)
- Nonresidential (4.80) (13.22) (7.86) (5.28) (0.09) 3.27 5.05
Growth 1.79 0.40 1.08 1.97 2.16 2.13 1.93
TOTAL (0.96)% (6.08)% (1.38)% 0.68% 2.52% 2.70% 2.73%
1999 2000 2001 2002 2003 2004 2005
Equalization 1.77% 2.96% 5.13% 9.70% 11.72% 9.94% 9.54%
- Residential 0.04 0.77 5.13 11.26 16.27 14.55 11.29
- Nonresidential 7.12 9.24 5.15 5.92 0.52 (2.94) 3.74
Growth 2.19 3.37 3.81 3.94 3.42 2.54 2.50
TOTAL 3.96% 6.33% 8.94% 13.64% 15.14% 12.48% 12.04%
2006 2007 2008 2009 2010 2011 2012
Equalization 20.80% 19.76% 2.47% (1.02)% (10.52)% (8.98)% 2.67%
- Residential 23.09 20.57 (0.33) (3.38) (12.55) (5.56) 2.34
- Nonresidential 12.74 16.64 13.57 7.00 (4.51) (18.29) 3.73
Growth 2.69 2.94 1.68 1.53 0.57 (0.22) 0.60
TOTAL 23.49% 22.70% 4.15% 0.51% (9.95)% (9.20)% 3.27%
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5. Where Have We Been: General Fund Revenue
Historical Perspective - FY 1992 to FY 1999
 FY 1992 – FY 1995, 1.9% Average Annual General Fund Growth
 Total Real Estate revenue decreased 0.5% per year
 Residential values either declined or were essentially flat
 Nonresidential values declined each year
 All other revenues rose at an average annual rate of 5.1%
 Personal Property Taxes rose an average of 5.2%
 Sales Tax increased 6.7%, on average
 BPOL rose an average of 5.6%
 FY 1996 – FY 1999, 5.8% Average Annual General Fund Growth
 Total Real Estate revenue increased 4.7% per year
 Residential values declined or were flat
 Non-residential values fell in FY96 then rose 3.3% to 7.1% in FY97 – FY99
 Value of new construction exceeded the increase in total equalization each year
 All other revenues rose at an average annual rate of 6.9%
 Personal Property Taxes rose an average of 7.8%
 Sales Tax increased 6.5%, on average
 BPOL rose an average of 7.3%
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6. Where Have We Been: General Fund Revenue
Historical Perspective - FY 2000 to FY 2007
 Revenue grew 74%, an average annual increase of 7%
 Of this increase:
• 69% from Real Estate tax revenues which grew at an average annual
rate of 9%
• 31% from all other categories which grew at an average annual rate
of 5%
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7. Where Have We Been: General Fund Revenue
Historical Perspective - FY 2008 to FY 2012
 Revenue grew 3.4%, an average annual increase of 0.7%
 Of this increase:
• 132% came from Real Estate taxes which grew at an average annual
rate of 1.5%
• All other categories combined decreased 0.5% per on average
 The value of Real Estate in FY 2012 is still 11.6% below that of
FY 2007
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8. Looking Ahead: Modest Revenue Growth
 The County economy (measured by Gross County Product) is expected to
rise, on average, 3% from 2011 to 2015*
 From 2000 to 2006, the County’s economy grew at an average rate of 5.8%
 Including the recession (2000 to 2010) average annual growth was 4.0%
 Northern Virginia is expected to gain 16,000 jobs per year from 2011 to
2015**
 Average Annual Change from 1990 – 2010 was 36,000
 Federal Spending in the Washington Metro area is expected to remain
relatively flat from 2011 to 2015**
 Federal Contract spending in Fairfax County rose at an annual rate of nearly 14% from
FY 2000 to FY 2010
*Moody’s Analytics
**Center for Regional Analysis, GMU
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9. Looking Ahead: Residential Real Estate
 Fairfax County
 The number of homes sold in 2011 fell to 12,077 or 13% compared to
the 13,894 sold in 2010
 Average price of homes sold in 2011 rose 3.3% from $457,174 to
$472,241
 Weakness in the 4th quarter 2011, average home price fell 0.2% from the same
period in 2010
 Case-Shiller Housing Index for the Washington Metro Area indicates
home prices falling slightly in 2012 and then experiencing average
increases of 2.5% from 2013 through 2015*
 Mortgage interest rates are projected to remain under 5% through 2013
and then rise slowly to 6.4% by 2017**
 This is likely to restrict home sales
*Moody’s Analytics
**Blue Chip Financial Forecasts
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10. Looking Ahead: Nonresidential Real Estate
 Office Vacancy Rates at Mid-year 2011
 Direct – 12.8% down from 13.3%
 Including sublet space – 14.7% down from 15.3%
 Total 113.4 million square feet of office space in the County
 4 buildings totaling 870,000 square feet are under construction
 Office Leasing activity is on track to meet or exceed the average, 10.8
million sq. ft., of the last 5 years
 Through the 3rd quarter of 2011, leased 9.2 million square feet
 Multi-family rental market is strong
 Low vacancy rates, rising rents
 New construction and renovations of older buildings will help to meet
demand
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11. Where Does That Leave Us?
• If Revenues (with no real estate tax rate adjustment) are
estimated to increase ~ 3% annually
• Then assume County Disbursements also increase 3% ~
$100 m annually
• The challenge is that $100 m/year will not go very far to
meet existing requirements and Board priorities
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12. Where Does That Leave Us? (continued)
• As examples, in the following categories, annual expenditure growth for both
County and Schools would cost:
• 2% COLA $ 60 m
• Restoration of remainder of compensation increases $ 70 m
• 2% increase in FCPs enrollment $ 40 m
• Fringe Benefits (health, retirement, OPEB) $ 35 m
• Inflation (contracts, utilities) $ 10 m
• Required Debt Service increase to support current CIP $ 7m
• County Metro/Transit $ 3m
• TOTAL $ 225 M
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13. What’s Left to Be Addressed:
Further Progress on Board Priorities
 Quality Education System
 Student Achievement, Capital Program
 Safe Streets and Neighborhoods
 Public Safety Staffing, Public safety resources (infrastructure
and equipment)
 Clean, Sustainable Environment
 Environmental CIP, Stormwater Requirements
 Livable, Caring and Affordable Community
 Housing Blueprint/Ending Homelessness, Maintaining Safety
Net
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14. What’s Left to Be Addressed:
Further Progress on Board Priorities
 Vibrant Economy
 Economic Development, Revitalization
 Recreational/Cultural Opportunities
 Athletic Fields, Sustainable Library Services
 Taxes that Are Affordable
 Economic Diversification, Preservation of Intergovernmental
Revenue
 Efficient Transportation Network
 Transit, Roadway Network
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15. What’s Left to be Addressed:
Capital Requirements
 Near Term Capital Requirements beyond basic CIP
 Includes Baseline GO Bond Program of $233 m per year
and funding for 3 additional requirements
 Other projects outstanding include Tysons
Redevelopment, Transportation and Schools
 Two Questions Related to Capital Program
 Affordability?
 Ratios?
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16. $233 m Annual Bond Sales FY 2018 to FY 2030
as included in Forecast and Ratios
Human Services Public Safety
Parks - NVRPA 10,000,000 10,000,000
3,000,000 4% 4%
1%
Parks - FCPA
9,500,000
4%
Metro
23,500,000
10%
Transportation
(Roads)
20,000,000 Schools
9% 155,000,000
67%
Library
2,000,000
1%
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17. Capital Requirements: 3 additional requirements
Mid-County
Public Safety Tysons
Mental Health
Description Headquarters Road
Center
* Improvements
(Woodburn)*
Total Project $80-90 million $149 million $45 million
Estimate (prelim.) annually
Annual Debt Service $6 million $11 million $4.5 million
(approx.)
Debt Service begins FY 2016 FY 2017 FY 2019
Amortization Period 30 years 30 years 20 years
Type of Bond Sale EDA Lease Revenue EDA Lease General
Revenue Obligation
Start of Spring / Summer Spring / TBD
Construction 2012 Summer 2013
*Projects have received Board approval and are included in the Adopted CIP
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18. Other Capital on the Horizon
 Dulles Rail Shortfall $200m
 Represents portion not covered by Phase I & Phase II
Transportation Improvement Districts
 Debt Service in C & I Fund
 Tysons Redevelopment
 Funding formula under discussion by Planning Commission
 Transportation Plan
 To be discussed
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19. Debt Service Payments / Affordability
430,000,000
380,000,000
330,000,000
280,000,000
2021
2020
2022
2012
2028
2017
2027
2015
2030
2016
2018
2019
2023
2025
2013
2024
2026
2029
2014
Baseline
Mid-County (Woodburn) & PSHQ
Tysons $45m annually
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20. Debt Services Payments / Debt Ratios
Not to exceed 10% of Annual Revenues
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
2021
2020
2027
2022
2023
2024
2012
2028
2015
2018
2019
2025
2030
2016
2017
2026
2029
2013
2014
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