HomeMy WebLinkAbout2-19-13 News Release - Financial Ratings Common 1
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NEWS RELEASE
Date: Tuesday, February 19, 2013, 9 aa.m.
From: Council Member Karen L. Whig; mittee of Whole Chairperson Contact: 235-5985
Council Vice-President Oliver J. Dav4s Contact: 876-6938
Council President Derek D. Dieter Contact: 532-2200
"South Bend's Strong Financial Ratings Sought and Maintained For Many Years"
At last Monday's Common Council meeting, the Mayor delivered the Annual Address to the City Council as
required by the City Code. The 12-slide power-point presentation summarized key financial information
which set forth the "statement of finances and a general condition of the City" as required.
As Officers of the Council, we believe that additional financial facts should be shared with the public:
1. The City of South Bend has been awarded the Certificate of Achievement for Excellence in Financial
Reporting by the Government Finance Officers Association of the United States and Canada (GFOA)
each year for the past twenty-second (22) consecutive years. This award recognizes that our city
government has published an "easily readable and efficiently organized comprehensive annual
finance report which satisfies generally accepted accounting principles and applicable legal
requirements". [See: Comprehensive Annual Financial Report Fiscal Year Ending December 31, 2010,p. 31 which
noted that it was the 201h year for this"prestigious award"being awarded to the City of South Bend]
2. In 2010, both Moody's and Fitch increased the City's bond rating, citing "prudent fiscal
management, sufficient cash reserves and spending reductions as well as diverse and stable revenue
sources" [Source: Comprehensive Annual Financial Report Fiscal Year Ending December 31, 2010,p. 15 attached]
As Council Officers, we acknowledge that the strong economic position which the City has worked hard to
achieve and maintain, reflects the collaborative efforts of many. Since 2007, the past City Council and past
City Administration worked together in anticipating the negative impact of the State of Indiana's proposed
property tax reforms. "Strategic cuts in expenditures" were made which "did not dilute essential
services". Many public hearings were held so that the taxpayers would have input. This resulted in the City
of South Bend reducing spending in the City's General Fund by $10.9 million or 15.5%. [See: Comprehensive
Annual Financial Report Fiscal Year Ending December 31, 2010,pp13-14 attached]
We appreciate that the Mayor, the Department of Administration and Finance, and other City departments
and bureaus have continued to work with the Common Council in order to maintain a strong financial status,
while continuing to deliver key City services. The dedication of our past and current City employees is
unmatched, especially during challenging fiscal times.
The South Bend Common Council is dedicated to continue to diligently carry out its state law duties to be
not only the legislative body of the City, but also the City's fiscal body. By working together, efficient and
transparent financial mechanism will be publicly shared and openly discussed.
Economic Position
The City has long maintained and
continues to maintain a healthy city General Fund and Parks&Recreation Fund Expenditures
economic philosophy, whereby, it is
incumbent upon the City to possess the $90,000,000
necessary financial resources to provide $80,000,000
essential services to taxpayers and $,0,000,000
stakeholders, at all times, regardless of $60,000,000
the economic climate existing in the $50,000,000 1
community.
$40,000,000 i
The City is financially strong, with strong $30,000,000
reserves that has assisted the City to $20,000,000
weather the economic recession and the °� of e� e &�
mP ,tP P P oP ■Parks&Recreation Fund
state enacted changes to the property tax l '1P ti'9 p General Fund
system. The strong economic position Year
enabled the City to weather the storm
and to reinvest in facilities and economic development initiatives that continues to set the stage for
economic growth and expansion.
Commencing in fiscal 2007, the City anticipated the negative impact of state proposed property tax
reform, later to be enacted, which would negatively impact upon the property tax revenues available to
the City for essential services, namely, public safety, parks & recreation, and general government. As
such, the City made strategic cuts in expenditures that did not dilute essential services. The City held
public hearings to better understand taxpayer and stakeholder priorities. As a result, the City increased
local income taxes, in co-operation with St. Joseph County, to replace a portion of the property tax
revenue projected to be lost due to the state enacted property tax reforms. The income tax increase was
intended to allow achievement of taxpayer and stakeholder priorities, namely, public safety staffing at full
levels, sustaining parks and recreation facility operations, and to enable continued investment in
economic development initiatives.
The following chart and graphic display above, identifies the expenditure reductions that were achieved
by the City in the General Fund and in the Parks and Recreation General Fund in response to the state
enacted property tax reform legislation which reduced property tax revenues available to fund City
services.
General Fund Expenditures and Park General Fund Expenditures
Year General Parks & Rec Total Change from % Change
$ Fund Fund Expenditure Prior Year
2006 actual 70,125,801 11,213,771 81,339,572
2007 actual 70,450,793 11,037,897 81,488,690 149,118 0.2%
2008 actual 66,503,546 12,424,641 78,928,187 (2,560,503) (3.1)%
2009 actual 61,324,718 10,709,907 72,034,625 (6,893,562) (8.7)%
2010 actual 59,241,185 11,034,333 70,275,518 (1,759,107) (2.4)%
2010 vs 2006 (10,884,616) (179,438) (11,064,054) (11,064,054) (13.6)%
% change (15.5)% (1.6)% (13.6)%
Data source:City of South Bend cash basis accounting records
The City reduced spending in the General Fund by $10.9 million or 15.5°/x, and in Parks and Recreation
General Fund by $.2 million or 1.6%, for a total decrease of$11.1 million or 13.6% versus the baseline in
fiscal 2006, a period prior to state enacted property tax reform.
13
General Fund Expenditures-2006 to 2011
$70,000,000 ---- _ - — - --- —- -----
$60,000,000
$50,000,000
$30.000.000
$30,000,000
$20,000,000
i
$10,000,000 � ❑GeuGoV+9lber
$0 ❑Code Eulaicemeut
2006 Actual 2007 Actual 2006 Actual 2009 Actual 2010 Actual ■Public Works
El Public Safety
At closer view of the General Fund, in the chart below, over that same period, expenditures have been
reduced by $1.6 million or 3.3% in Public Safety, by$2.3 million or 30.9% in Public Works, by $.1 million
or 4.3% in Code Enforcement and by$6.9 million or 60.0% in General Government.
General Fund Expenditures
Year Public Safety Public Works Code General Total
$ Enforcement Government Expenditure
2006 actual 49,218,274 7,279,856 2,065,877 11,561,794 70,125,801
2007 actual 51,917,024 6,917,302 2,111,768 9,504,699 70,450,793
2008 actual 48,989,091 8,143,257 2,070,656 7,300,542 66,503,546
2009 actual 47,175,713 6,262,335 1,808,268 6,078,402 61,324,718
2010 actual 47,608,301 5,027,819 1,976,119 4,628,946 59,241,185
2010 vs 2006 (1,609,973) (2,252,037) (89,758) (6,932,848) (10,884,616)
% change (3.3)% (30.9)% (4.3)% (60.0)% (15.5)%
Data source:City of South Bend cash basis accounting records
The expenditure reductions have been achieved without reduction is essential City provided services,
mainly through expenditure rationalization, cost based efficiency improvements in the delivery of services,
and in the transfer of certain essential service costs to local option income tax funding. The expenditure
control over the years exhibited by the City was predicated by the revenue reductions experienced over
the period.
The following chart demonstrates the revenue reductions experienced, mainly due to lower property tax
revenues due to state enacted property tax reform, partially offset by the increase in local option income
taxes, enacted to offset the property tax revenue loss.
General Fund, Parks& Recreation, Cumulative Capital Development, COIT and EDIT Revenue
Year Property Tax Income Tax Interest Income Business Total Revenue
$ Revenue
2006 actual 58,187,068 10,423,880 1,855,705 22,129,583 92,596,236
2007 actual 57,982,291 9,519,233 2,728,635 20,737,797 90,967,956
2008 actual 60,412,443 10,190,449 1,703,209 22,311,147 94,617,248
2009 actual 50,206,425 12,146,606 191,673 22,138,219 84,682,923
2010 actual 48,171,021 21,679,239 126,702 22,173,747 92,150,709
2011 estimate 46,000,000 19,053,071 99,000 22,569,217 87,721,288
2010 vs 2006 (10,016,047) 11,255,359 (1,729,003) 34,164 (445,527)
% Change (17.2)% 108.0% (93.2)% 0.2% (0.5)%
2011 vs 2006 (12,187,068) 8,629,191 (1,756,705) 439,634 (4,874,948)
% Change (20.9)% 823% (94.7)% 2.0% 5.3%
Data source:City of South Bend cash basis accounting records
14
The chart above demonstrates the property tax revenue reduction that occurred as a result of State of
Indiana enacted property tax reforms, which began to take effect commencing in fiscal 2009. The loss in
property tax revenue collected in 2010 was down by $10.0 versus the baseline period in 2006, and is
clown $12.2 million versus 2008, the year before the property tax reform legislation took effect.
As previously discussed, the City, in conjunction with St. Joseph County, enacted an increase in local
option income tax, effective in the fourth quarter of 2009, to partially offset the loss of property tax
revenues. This local option income tax increase included a new public safety local option income tax,
specifically enacted to fund public safety expenditures.
Key Revenue Trends -2006 to 2011
$90,0a0,a40
$80,000,000
$70,000,000
$sa,aaa,aaa
$30,000,000
$�o,aa0,ao0
$�o.0aa.a00
$20,000,000 �
$10,000,000 13 8thei Revenue
E
$0 ❑h4eie t Earniil[gs
2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Actual 2011 ■Income Taxes
Estimated ❑Pioperty Taxes
The City believes that the financial information previously discussed demonstrates that the City has met
the challenge of the property tax caps through hard work by staff to find efficiencies and cut costs, and
through responsible action by the South Bend and County councils to replace some of the revenue lost to
the caps with local income taxes; a new LOIT to provide property tax relief; a Public Safety LOIT to
support police and fire department budgets; and an additional EDIT which allows us to invest in capital
and economic development initiatives.
By taking these actions the City has been able to meet priorities for public safety, economic development
and parks. Cash reserves have been secured in accordance with established City reserve policies for
cash flow needs and to cover unforeseen extraordinary circumstances. The City has also established a
new baseline for the city budget that will support positive growth and investment in the future.
In 2010, two financial rating agencies (Moody's & Fitch) increased the city bond rating, citing prudent
fiscal management, sufficient cash reserves and spending reductions as well as diverse and stable
revenue sources. These high quality ratings (AA+ stable and Aa3) will not only save interest costs on
future bonds, but also reflect the fiscal strength of South Bend.
The Management Discussion & Analysis and accompanying financial statements, contained in section II
of this CAFR, presents in full the financial activities and condition of the City of South Bend.
15
B39096
�p C1 TIT 8� a
South Bend , IN �W ' . 1%
d
Mayor Stephen J. Luecke w, PEACP
F�
1865
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Comprehensive Annual Financial Report
Fiscal Year ending December 31, 2010
Prepared B
FILED
Department of Administration and Finance
08/22/2011 Gregg D. Zientara, City Controller