Friday, March 13, 2015

Mayor Dwight C. Jones Proposed Biennial Fiscal Plan for FY2016-FY2017


Mayor Dwight C. Jones
Prepared Remarks for Transmittal of FY2016 & FY2017 Biennial Fiscal Plan and CIP
March 13, 2015



Click here to view the Proposed Biennial Fiscal Plan for FY2016-FY2017.

Click here to view the Capital Improvement Program for Fiscal Years 2016 - 2020.

(Remarks as prepared for delivery)

President Mosby, Vice President Hilbert, Members of the City Council and School Board, City employees, ladies and gentlemen, good afternoon. Our city has changed so much since I presented the budget to you one year ago. Since that time, we’ve opened a new Huguenot High School, Richmond’s first new high school in 40 years. Construction has begun at the country's coolest craft brewery, coming to Richmond and bringing people and jobs to Fulton.  Today, we're finally building Bus Rapid Transit, and not just dreaming and hoping for an expanded public transportation system.
Over the past year, we’ve also seen significant leadership changes within the city government.

Last year, when it became clear that a wholesale turnaround was necessary, job one was to place experienced people into top leadership roles. We are doing just that. We now have in place a solid, experienced, professional team to turn around the city’s finances. I’d like to introduce them.

Since December, we now have a permanent Finance Director in Paul Jez, who joined the city after more than 20 years at VCU, where he served as treasurer and associate vice president for business services. In January, Leon Glaster joined the City as our Controller. He has longstanding experience working on financial turnarounds in cities with deep financial struggles, including Detroit and Oakland. Also in January, Sharon McDonald joined the City to lead revenue administration, after 16 years as the elected commissioner of the revenue in Norfolk.

This new team makes our IT Director, Doug McCullough look like an old veteran! He’s been here just over a year, and we can all have confidence in his ability to turnaround the transition problems that came with the rollout of RAPIDS.

On the Budget side, we now have a permanent Budget Director in Dr. Jay Brown, who has led the team effectively in preparing this year’s budget.  Under the leadership of Deputy CAO Norman Butts—who is an accountant, an attorney, and a former auditor himself—this is the team that will turn around finances in the City of Richmond.  They are working tirelessly to rebuild a finance system that previously was marked by high-level vacancies, turnover and inadequate training.  I have confidence in their skills and professional credentials, and I ask you to support them as they work to make sure Richmond gets the basics right.

Thanks to a new cooperative spirit in our Finance Department, I am pleased to present the Biennial Fiscal Plan for FY2016 and ’17, as well as our five-year Capital Improvement Plan through 2020.

Here are the highlights.

  1. This budget includes a pay raise for city employees, police officers, and firefighters.

  2. It provides new body cameras for Richmond Police Officers.
  3. My budget makes record new investments in Richmond Public Schools, to meet their school maintenance needs and invest in the academic improvement plan. We are proposing permanent cuts to City agencies to make these investments possible.
  4. And we are launching a new Richmond Promise Scholarship for public high school students, to provide more opportunities for graduating seniors and an extra tool to help mitigate poverty.
This budget also maintains our commitment to developing our Riverfront, transforming the East End, investing in public infrastructure, and maintaining fiscal discipline.  Additionally, this budget meets our obligation to implement multi-modal public transportation with Bus Rapid Transit.

This budget was developed to reflect the core principles that guide my Administration. These include rewarding our public safety officers, mitigating our 26% rate of people living in poverty, investing in our public schools, creating jobs and new economic opportunities, and delivering the public services that Richmonders expect and deserve.

To accomplish these goals, we have prepared a balanced budget, with all expenditures in line with current revenue projections. The budget provides full funding for legal requirements and mandates, as well as, strategic priorities.

The following are major expenditure and policy highlights in the Proposed Biennial Fiscal Plan for FY2016 and FY2017 as well as the Capital Improvement Plan for FY2016 - FY2020. 

Total General Fund revenues are projected at $689.2 million for FY16 and $700.1 million in FY17. This is a projected decrease of $2,704,664 or -0.4 percent below the FY2015 Adopted Budget of $691,965,597. The Proposed Biennial Fiscal Plan for FY2016 and FY2017 does not include the use of the City’s unassigned fund balance.

Total Capital Improvement Plan expenditures and revenues are projected at $80.7 million in FY16 and $41.6 million in FY17. The first year is much larger, in part because we are proposing to significantly front-load infrastructure investments for Richmond Public Schools, so they can address their facilities needs faster.

This fiscally prudent budget protects our citizens from major increases in the cost of services. It funds programs to provide for people in our City who are vulnerable. It invests in our neighborhoods, rewards our workforce, and reduces spending in other parts of the government, so that we can invest more in Richmond Public Schools.  

This fiscal plan reflects conservative financial principles, turning away from the past. In last year’s budget, several items that constitute ongoing expenses were funded with one-time funding sources. My budget today does not recommend continued funding in those instances.

Also in the last Biennial Fiscal Plan, for FY2014 and ‘15, we noted that some fiscal issues remain to be addressed over the next several years, even though the City is doing well and has improved its bond rating six times since I’ve been Mayor. These issues include the need to decrease pension liabilities, increase the unassigned fund balance, and provide more cash funding towards our capital budget.

Now, I’d like to turn to a few specific priorities, starting with the safety of our community.

Throughout my administration and in this budget, public safety remains a priority.   It’s time to show our police officers and firefighters that we value their work.  Last year, ONLY school employees got a pay raise in Richmond. No one else got a permanent raise. This year, we’re providing money to raise the salaries for police and fire.
  • In the operating budget, $2.1 million in FY16 and $5.2 million in FY17 is provided to raise the salaries of recruits from $36,500 to $41,000. For firefighters and police officers graduating from the academy, this funding will also increase their salaries from $38,500 to $41,500 in FY16 and then up to $42,000 in FY17.

  • Our plan also addresses compression issues within police and fire, and it provides career development advancement in FY16 AND a step increase in FY17. Taken together, this compensation package will make our force more competitive with the neighboring localities.
  • In FY16, we’re proposing $401,000 for body cameras and cloud-based storage. In FY17, we’re proposing another $561,000 for more body cameras, as well as $227,000 for new police body armor;
  • I’m proposing $354,000 in FY16 and $215,000 in FY17 to lease a new site for the Police Department’s Property and Evidence section, moving it out of the aging Public Safety Building downtown.
  • On the capital side, $46 million in city funds and $4.9 million in Public Utilities funding are recommended to fund major upgrades to the 800 Megahertz radio communications system replacement.  This will make it possible for first responders across the region to communicate in times of emergency.
  • For the fire department, we’re proposing $500,000 in capital funds in FY16 and $2.3 million over 5 years to renovate Fire Stations, as well as $280,000 in operating funds in both years for new self-contained breathing apparatus upgrades.
These investments will help our police and firefighters protect our communities, and I ask you to approve them quickly.

Turning to our economy, we have to acknowledge that poverty continues to hold back a disproportionately high number of Richmond citizens.  Let’s be honest about why that is. In the old Richmond, decisions were made to build massive housing projects—thereby concentrating thousands of poor people in places that trap them for generations. This is clearly a moral issue. It’s also a financial issue. Wall Street always asks the same question whenever we meet with them: “What are you doing to break up concentrated poverty in Richmond?”

My administration has made it a top priority to find ways for ALL Richmonders to join in our city’s resurgence—no matter where they live.

The Maggie L. Walker Initiative for Expanding Opportunity and Fighting Poverty has been hard at work implementing targeted anti-poverty strategies.

Highlights in this budget include $2.7 million to continue ongoing programs that you approved in the FY15 Adopted Budget. This includes continuing the City’s contribution of $975,000 to the affordable housing trust fund, $350,000 for the Middle School Renaissance program, and $436,000 for the Center for Workforce Innovation;

This budget also includes roughly $425,000 to help reduce water and wastewater costs for qualified low-income residents. When people experience financial crisis, the Metrocare program will help. It will help by providing loans to repair plumbing or replace existing products with EPA WaterSense labeled products. That’s good for families, and it’s also a great way to conserve water and reduce waste.

I strongly believe that a good education is the best tool to help people rise from poverty.

That’s why funding for Richmond Public Schools is the single largest expenditure in my budget. RPS spends more than a quarter of a billion dollars per year. They receive vastly more local taxpayer dollars than any other department. In fact, what I am proposing in operating funding for schools represents 23.4 percent of the entire city budget for FY16.

Here are some key specifics.

  • In FY16, we’re proposing $13.1 million in School Maintenance funding. This is a 162% increase, and it part of a $22.8 million five-year package. To go even further, we are working with RPS leadership to implement performance contracting. This is an energy efficiency plan to generate operational savings that can be turned back for even more school maintenance needs. This approach gives RPS the capability to increase their total resources by as much as another $20 million.
  • On the operating side, we are proposing $136.9 million in local funding to Richmond Public Schools to meet existing operating budget revenue needs. This is a $2.1 million increase to RPS over the current year budget. It will expand the RPS budget base and will continue into the future.
  • We have included $425,000 to launch a network of “Future Centers” to prepare for the launch of a Richmond Promise Scholarship program to benefit graduates of Richmond Public Schools. These Future Centers will serve as dedicated space within all City high schools to assist students and families secure the financial means for post-secondary educational and training opportunities. This is a key component of the City’s efforts to address poverty.
  • Capital funding remains in place for a new Dove elementary school in the amount of $18.3 million and is proposed in FY16. This funding will support the development of a high performing school that will serve pre-K through 5th graders in the Dove Street revitalization area.
  • In addition to these extensive investments, we continue to invest heavily in numerous other programs to help educate children. These include Communities in Schools, Middle School Renaissance, and many more.
It’s important to understand this context when considering the budget request the public schools made this year. An all-funds review will show that RPS is asking for an estimated total increase of about $60 million from the City. In FY16, we’re proposing to assist them in meeting roughly $47 million of this request. Because I share a commitment to academic improvement I am proposing to authorize a special one-time bridge funding of $10 million from our reserve funds to jump-start RPS’s academic improvement plan, starting in the next school year. We will earmark these reserves in a special Schools Acceleration Fund to be distributed incrementally based upon mutually-agreed performance measures and measureable progress in reducing the 9,300 empty seats we have in our public schools.

That number is surely surprising to most Richmonders, and I applaud Chairman Don Coleman for having the courage to raise this problem that Richmond has ignored for too long.  In a city with 21,000 students, we have 9,300 empty seats. For every two children, there’s another empty seat. This drives up the per-pupil costs, and forces Richmond to spend too much on buildings and not enough on students. I want to spend the money on children, not the empty seats. That’s why I’m proposing an evidence-based, accountability-driven approach in partnership with RPS based on the goals in their Academic Improvement Plan.  In short, we’re going to put this money in an escrow account—we will be sitting it aside—and make it available once the School Board, the City Council, and I all agree on a clear plan for reducing the 9,300 empty seats in our schools.

I want everyone to understand: This is neither a best practice nor our preferred budgeting approach. It is generally not fiscally prudent to take money out of reserves to pay for operating costs. But because our academic needs are real, I am proposing this one exception, provided that all of us make this decision together.

Now let’s be honest, I’m sure some will say that even with all of this investment, it’s still not enough. I’m sure that some will say, “We can do the job only if you give us $30 million more, and give it every year.” Others will ask, “Why can you find money for a new brewery, but not give the schools everything they want?”

Let’s take that on. You can build things by borrowing money and paying it off over time. But it’s a bad idea to pay your day-to-day bills with borrowed money. If you put your electric bill on your credit card, for example, you’re not actually paying it off. You’re simply putting it off. Eventually the credit card bill comes due, and you have to pay it. It’s just harder to do.

Let’s look at two ways to generate $30 million in operating money every year in Richmond.

  1. You could raise the real estate tax by 15 cents. That would take the highest tax rate in central Virginia, and send it through the roof. It would not only hurt us, it would cripple us.

    Our people would move away, slamming the brakes on the Richmond resurgence, and actually reducing the money available for schools.
  2. Another way to generate $30 million is to cut the budget.
But a modest trim won’t do it. To get $30 million, we would have to eliminate ALL the police & fire raises we’re proposing, ALL of the Police body cameras—and that would still leave us about $20 million short.

These are not serious options. It’s clear that growing our economy is the only way to generate more money for schools and other needs of a growing city. That’s why I’ve made economic and community development a cornerstone of my Administration. We’re working hard to attract new businesses like Stone Brewing, and to retain current employers, like the Martin Agency.  Across the city, we’re transforming neighborhoods and putting actionable plans in place to create jobs.

  • For FY16, we are proposing $2.5 million to transform public housing. Funds will be used to partner with the private sector to redevelop severely distressed public housing complexes – including Whitcomb Court, Mosby Court, Creighton Court and Fairfield Court.
  • Thanks to our partnership with Governor Terry McAuliffe, Senator Mark Warner, and Senator Tim Kaine, Richmond last fall secured a federal grant to move forward on Bus Rapid Transit along Broad Street. This year, we are proposing a local match of $3.8 million in FY16 and ’17, which will finally advance this important mobility project.
  • Along the East Riverfront, capital funds of $2.9 million over five years will help transform the community by advancing the Intermediate Terminal Riverfront Access project. We’re proposing to fund the Route 5 relocation with $300,000 in FY16 and $2 million in FY17. We’re proposing $7.9 million over 5 years for transportation improvements along the East Riverfront.
  • All of these projects have been in the pipeline for many years, and they’re consistent with the Riverfront Master Plan. They’re now moving forward thanks in large part to the $74 million Stone Brewing Company project. In FY 2018, we’re recommending an $8 million loan to the Economic Development Authority for the development of the Stone Brewing Phase 2 Bistro. Rental payments paid by Stone Brewing Company to the EDA will cover the debt and support expenses.
  • Across the City, we’re proposing $2.7 million over five years to renovate Neighborhood Park, as well as $990,000 to upgrade Kanawha Plaza Park downtown.
  • Residents have continually expressed concerns about the condition of our roadways.  That’s why we’re proposing $4.5 million for road paving projects in FY16.  An additional $4 million is anticipated in State revenue sharing funds for a total of $8.5 million. Over $9 million in City capital funds is recommended over five years.
  • To upgrade sidewalks, we’re proposing $850,000 in city capital funds in FY16.  We anticipate an additional $850,000 in State revenue sharing funds, for a total of $1.7 million. Approximately $2.3 million in City capital funds is recommended over five years.
Across the City, our infrastructure is getting older.  Many of the City’s buildings are well over 30 years old and will require funds for basic upkeep. That’s why we’re proposing $1 million in capital funding for major building renovations in FY16 and $4.8 million over five years to provide structural and system replacements and improvements in more than 100 City-owned buildings.

In the same way, we have aging utility infrastructure that requires expensive continual maintenance to maintain regulatory compliance. For this reason, this budget proposes a 6% increase in the Water Utility and a 4% increase for Wastewater and Gas, while keeping Stormwater Utility rates level. This means that the average monthly residential bill for a customer with gas, water and wastewater services will see a monthly increase of $5.95.

It’s important to remember that two years ago, City Council approved a new rate structure known as the Conservation Rate. It provides a substantially lower base service charge and looks at usage. Residents who use lower amounts of water have seen marked decreases in their water and wastewater bills. Those who use moderate amounts of water saw relatively flat water and wastewater charges.

Finally, I want to turn to our city workforce. This budget includes a 2% salary increase for all general fund employees. Sworn positions and Constitutional Officers will receive separate raises in FY16. The estimated cost of this increase is $2.1 million.  In addition, this will be the third year in a row that the City will absorb ALL health care premium increases on behalf of employees. This reflects a 6.8% rate increase, or a $1.1 million increase over FY15. Employees can see their costs remain steady by completing their health assessments and medical follow ups.

As elected officials, we need to acknowledge that it’s not easy to work in the public sector, and these are important ways for us to say thank you to our employees.

In conclusion, I want us all to remember that we have much to be proud of as Richmonders. Our city is alive and growing. It’s an exciting and vibrant place to live, and it’s attracting people from all over the world. That’s the spirit in which I propose this budget. It’s a plan to balance all of our priorities and propel our hometown forward, while maintaining strong fiscal health.

We are turning around our finances and aiming for a Triple-A bond rating. To get there will require a strong public school system, thriving neighborhoods, reducing poverty, and rewarding our employees for the contribution they make to running this organization. Together with all of you on the City Council and School Board, I look forward to keeping Richmond a great place to live, work and do business.