Maricopa County Office of Management and Budget February 21, 2012

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1 Maricopa County Office of Management and Budget February 21, 2012

2 "When the mind is in a state of uncertainty the smallest impulse directs it to either side." ~ Terence 2

3 Cautious optimism may be the best phrase for policymakers this January. 3

4 The weak but positive economic news from this past summer has developed into positive short term trends, and upward adjustments to the forecast are warranted. However, there remains a level of economic uncertainty that is well above normal. Thus, one may be upbeat with the data interpretation but still cautious when considering any major spending changes. It is recommended that the County consider raising the sales and VLT forecasts, but still remain cautious and budget below the developing revenue trends. This allows for some limited shocks to occur in the second half of the fiscal year that could dampen consumer spending such as the potential for a real estate collapse in China, continued financial problems in Europe, and US consumers incurring additional debt prior to fully reconciling their financial problems and pulling back by spring. The full recovery date for the County continues to be 2015 or later for most economic statistics. Elliott D. Pollack and Company, County at a Glance January

5 Data shows that recovery has begun, but the pace is painfully slow. 5

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7 Bernanke maintained the Fed's position: the economy is improving at a frustratingly slow pace Bernanke urged senators to resolve debates over tax cuts that expire this month and at the end of the year, saying uncertainty around both could slow the economy. Bernanke told senators that he agrees with an analysis by the Congressional Budget Office that growth would slow to 1.1 percent next year Martin Crutsinger - Feb. 7, 2012 Associated Press 7

8 Compound the decline in valuation Lengthen the time for rebound Limit growth Shrink base by reducing or eliminating classes of personal property or by impacting property classification Shift to Residential 8

9 State Income Tax (41%) Increasing Foreclosures positively impact due to less deductions Forecasting 6% growth in FY 2013 Sales Tax (50%) Slowly and steadily increasing for all sectors $.01 additional sales tax Forecasting 4% growth in FY 2013 County Property Tax (45%) Declining Foreclosures negatively impact by lowering property values Forecasting $52 million (11%) less in FY 2013 Sales Tax (35%) Slow and steady increase, slightly lagging the base (base at 7.5% YTD; Maricopa County 6.1% YTD) Forecasting 4% growth in FY

10 Growth/Limits SCR Limits increase in valuations (ATRA) Prop 13 Limits tax and limits increase in valuation Personal Property SCR 1012/HCR Exemption of business personal property of $2.4 million SB 1367 Personal Property exemption Classification/Valuation SB Computer Software SB 1416 Property Tax Agricultural HB 2226 Property Tax Algaculture 10

11 Millions $41.0 $39.0 $37.0 $35.0 $33.0 $33.9 $32.2 $32.0 $32.0 $32.3 $31.0 $29.0 $30.4 $30.8 $27.0 $25.0 FY 11 Actual FY 12 Budget FY 12 Actual 11

12 Millions $11.5 $11.0 $10.5 $10.0 $10.7 $10.2 $9.5 $9.0 $9.6 $8.5 $8.0 $7.5 $7.0 $8.8 $8.7 $8.6 $8.8 FY 11 Actual FY 12 Budget FY 12 Actual 12

13 Millions $11.5 $11.0 $10.5 $10.0 $9.5 $9.0 $8.5 $9.8 $9.6 $9.0 $9.7 $9.6 $9.1 $9.5 $8.0 $7.5 $7.0 FY 11 Actual FY 12 Budget FY 12 Actual 13

14 Millions $9.0 $8.5 $8.0 $8.0 $7.5 $7.0 $6.5 $6.0 $6.0 $6.0 $6.0 $6.3 $5.5 $5.0 $5.8 $5.9 $4.5 $4.0 FY 11 Actual FY 12 Budget FY 12 Actual 14

15 Millions $500.0 $480.0 $480.4 $476.0 $460.0 $457.8 $461.0 $462.1 $440.0 $444.3 $420.0 $425.2 $400.0 $397.7 $394.9 $405.7 $380.0 $385.5 $390.1 $360.0 $340.0 $357.5 $366.3 January 2012 pessimistic forecasted growth rate Elliott D. Pollack and Co. 15

16 Millions $160.0 $150.0 $144.0 $144.2 $140.0 $138.0 $130.0 $122.6 $120.0 $116.1 $110.0 $143.5 $137.9 $139.3 $126.1 $126.0 $118.1 $118.4 $116.3 $113.4 $111.5 $111.1 $109.0 $113.7 $109.2 $109.2 $124.4 $120.2 $115.4 $129.4 $100.0 Vehicle License Vehicle License Tax Budget ; January 2012 pessimistic forecast, Elliott D. Pollack and Co. 16

17 Millions $150.0 $145.0 $140.0 $137.9 $145.4 $138.2 $138.1 $142.2 $135.0 $132.5 $130.0 $127.0 $125.0 $121.5 $120.0 $119.1 $115.0 $116.9 $117.0 $110.0 $105.0 $107.4 $107.1 $112.5 $100.0 January 2012 pessimistic forecast, Elliott D. Pollack and Co. 17

18 Millions $115.0 $110.0 $108 $106 $105.0 $103 $100.0 $95.0 $90.0 $85.0 $80.0 $75.0 $87 $91 $97 $103 $96 $90 $91 $85 $94 $92 $92 $86 $77 $78 $95 $80 $98 $83 $100 $85 $88 $91 HURF HURF with out State Diversion January 2012 pessimistic forecast, Elliott D. Pollack and Co. 18

19 Millions $520.0 $490.0 $492.2 $492.2 $484.0 $460.0 $463.5 $477.6 $452.7 $430.0 $430.0 $425.1 $411.6 $400.0 $398.7 $370.0 $371.2 $387.3 $372.2 $380.1 January 2012 pessimistic forecast NAV Growth rates, Elliott D. Pollack and Co. 19

20 Primary Net Assessed Valuation FY 2012 Budget FY 2013 with Flat Tax Rate Variance $ 38,492,098,635 $ 34,263,842,274 $ (4,228,256,361) Tax Rate $ $ $ - Tax Levy $ 477,571,468 $ 425,111,491 $ (52,459,977) Levy based on November estimated NAV and flat rate was $45.0 Million less than FY 2012 Levy based on February 10 th NAV and flat rate is $52.5 Million less than FY 2012 (an additional $7.5 million ) 20

21 Governor s Budget and JLBC Baseline budget removes County contribution to State Legislation introduced to reverse Inmate Shift Court Decision and Proposed Legislation to Change to ASRS Cost Share back to 50%/50% (from 53%/47%)

22 Operating Revenue Reductions Operating Expenditures Increases* General Fund $ 13,900,000 $ 1,600,000 Detention Fund Operating Requests $ 14,000,000 $ 5,350,000 Total Operating $ 29,500,000 $ 5,350,000 Non Recurring Expenditure Increases* Non Recurring Requests** $ 11,525,000 $ 65,655,000 $15,500,000 Total Non Recurring $ 77,180,000 $15,500,000 TOTAL $106,680,000 $20,850,000 * Mandated/Necessary **Does not include new CIP or major maintenance 22

23 No call for reductions, but be prepared to submit up to 5% of operating budget to retain structural balance 23

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