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TIME CAPSULE : FY 2009 ADOPTED BUDGET: FIVE YEAR FISCAL PLAN: FY 2014 (CREATED BEFORE IMPACTS OF GREAT RECESSION)

HOW TIMES HAVE CHANGED 17% DROP IN GENERAL FUND PURCHASING POWER PROJECTED FOR FY 2014 (FROM 2009 TO 2012 FISCAL PLANS). TIME CAPSULE : FY 2009 ADOPTED BUDGET: FIVE YEAR FISCAL PLAN: FY 2014 (CREATED BEFORE IMPACTS OF GREAT RECESSION). UPDATE : FY 2012 PROPOSED BUDGET:

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TIME CAPSULE : FY 2009 ADOPTED BUDGET: FIVE YEAR FISCAL PLAN: FY 2014 (CREATED BEFORE IMPACTS OF GREAT RECESSION)

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  1. HOW TIMES HAVE CHANGED 17% DROP IN GENERAL FUND PURCHASING POWER PROJECTED FOR FY 2014 (FROM 2009 TO 2012 FISCAL PLANS) TIME CAPSULE: FY 2009 ADOPTED BUDGET: FIVE YEAR FISCAL PLAN: FY 2014 (CREATED BEFORE IMPACTS OF GREAT RECESSION) UPDATE: FY 2012 PROPOSED BUDGET: FIVE YEAR FISCAL PLAN: FY 2014

  2. EVOLUTION OF THE GENERAL FUND PROBLEM In 2009 for the 2010 Budget: projected $5.0 Million Shortfall for FY2012 and FY2013 In 2010 for the 2011 Budget: projected $4.0 Million Shortfall for FY2012 and FY2013 In 2011 for the 2012 and 2013 Budgets: projected $6.0 Million Shortfall for FY2012 and FY2013

  3. EVOLUTION OF THE GENERAL FUND PROBLEM: 2011 A $1.7 Million loss in PROPERTY TAX REVENUE due to decreased property values A $620 Thousand loss in STATE REVENUE SHARING Budget Stabilization Funds and other Fund Reserves above the required minimums have been exhausted

  4. TACTICS FOR RESOLVING THE $6 MILLION GENERAL FUND PROBLEM 10% Budget Reduction Contingency Plan: July 2010, Department Directors were asked to prepare reduction plans. Plans were revised in 2011. 7 vacant positions were eliminated as mid-year budget amendments in FY 2011 (8/29/2011) Proposals have been included in the Departmental Budgets and approved by the CMO involving the elimination of 11 additional positions in the FY 2012 Budget Review of user fee structures and research of new and alternative revenue sources

  5. TACTICS FOR RESOLVING THE $6 MILLION GENERAL FUND PROBLEM (cont.) Two-tier wage and benefit system for new hires – Compliance with State’s EVIP. Continued to make progressive changes in employee health care and Collective Bargaining Agreements. Cost avoidance of at least $1 million in benefits have been realized already. Retiree Health Care system closed to new hires. Design and Implement Early Retirement program.

  6. TACTICS FOR RESOLVING THE $6 MILLION GENERAL FUND PROBLEM (cont.) • 2011/2012: $2.5M Recurring • Mid Year 2011: $0.4M • Position Eliminations: $0.6M • Public Safety OT: $0.4M • Non-Personnel: $1.1M • 2013: $4.0M Recurring • Revenue Enhancements: $1.5M • Early Retirement: $2.5M • Total: $6.5M Recurring • Personnel: $1.4M

  7. FISCAL PLAN ASSUMPTIONS This 2.5% anticipated drop in Property Tax Revenue in FY 2013 would create an additional $700k structural problem beyond the $6 million beginning in FY 2013

  8. FISCAL PLAN: 2012 - 2017

  9. POTENTIAL NEW STRUCTURAL PROBLEMS DUE TO STATE LEGISLATION UNDER CONSIDERATION • Personal Property Tax elimination and replacement ($4.5 million) – probable phase-out over 5/10 years, Governor committed to partial replacement. • Fire Reimbursement revenue ($1 million). • Act 51 Gas/Weight tax revenue ($4.8 million) – Governor looking to re-task some existing money towards high-speed communication infrastructure, Special Message coming soon. • Total at risk: roughly $10 million/year, realistically could represent a $2 - $5 million/year additional resource elimination as early as FY 2012 and/or FY 2013.

  10. EARLY RETIREMENT EVOLUTION • 2009: Not seen as feasible given the deteriorated state of the Pension System. • 2010: A modest program similar to one offered by Western Michigan University (cash incentives for those already eligible for retirement) was evaluated and found to be of marginal value. • 2011: In April, when the 1st Quarter Report revealed that the projected structural deficit had grown from $4 million to $6 million, a more robust version of ERI began to be studied that would help to close the larger gap, and to avoid mass layoffs. This was based on early retirement offerings by the City of Lansing and the State of Michigan. Eligibility was progressively enhanced until the program was scaled appropriately for the need.

  11. THE “BUSINESS DEAL” FOR EARLY RETIREMENT • Costs (Net Present Value): • Pension System: -$8.3M Liability • Operating Funds: -$4.4M • Total: -$12.7M • Benefits (Net Present Value): • Pension System: +$8.3M Normal Cost • Operating Funds: +$60M • Net Present Value Results: • Pension System: No Change • Operating Funds: +$55M The actuaries (Gabriel Roeder Smith) prepared the study of the financial impacts on the Pension System based on assumptions developed by City Staff. Key representatives of the City’s Retirement Investment Committee (RIC) have reviewed the City’s proposed Early Retirement program and have indicated that it appears to be a prudent design.

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