Economic Outlook - Mecklenburg County

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Economic Outlook Long Range Financial Planning Long Range Financial Planning  Last year discussed LRP as a necessary tool for strategic forecasting and maintaining fiscal discipline  Demonstrated a 6 year prototype model – Now upgraded to Quantrix – 10 year forecast

 Hired an Economist – Brandon Simmons  Independent revenue forecasting models (partnered with UNCC) M e c k l e n b u r g C o u n t y N C . g o v

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Economic Outlook Leveraging Financial Resources Long Range Financial Planning

Balance Strategic Resource Needs

Legislative Mandates

Capital/ Maintenance Economy/ Fiscal Policy

County Services

Education

M e c k l e n b u r g C o u n t y N C . g o v

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Economic Outlook Long Range Financial Planning

Leveraging Financial Resources Need to Anticipate Economic Cycles

M e c k l e n b u r g C o u n t y N C . g o v

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Economic Outlook Long Range Financial Planning

Leveraging Financial Resources How the business cycle really looks Real GDP Growth (Quarterly data)

M e c k l e n b u r g C o u n t y N C . g o v

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Economic Outlook Leveraging Financial Resources Long Range Financial Planning Economic Forecast – Brandon Simmons  Quarterly Economic Report  Economic Outlook – 2017 and beyond  Development of Long Range Plan Revenue Forecasting Models  Property Tax Values  Sales Tax

M e c k l e n b u r g C o u n t y N C . g o v

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Economic Outlook - National Summary National economic trends decide monetary policy The market is connected both domestically and internationally.

Slow but steady growth Core inflation below the feds 2% target Gas prices are still low Consumer confidence at post recession high

M e c k l e n b u r g C o u n t y N C . g o v

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Economic Outlook - Local Summary Mecklenburg’s economy is performing at a better pace than that of the US or North Carolina economy. With exception of population and poverty series the data for Mecklenburg is provided by the Charlotte Chamber of Commerce Mecklenburg County’s economy is tied to National trends Generally performing better than the national average

M e c k l e n b u r g C o u n t y N C . g o v

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Gross Domestic Product Measure of all goods and services produced in the economy. Current forecast models from the federal reserve and leading fed watchers show a 2% annual growth for the next few years.

M e c k l e n b u r g C o u n t y N C . g o v

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Unemployment Rate Unemployment is back to pre recession levels Mecklenburg currently has lower unemployment rate than the US and state

Other signals point to the economy reaching “full employment” such as Job openings outpacing hires

M e c k l e n b u r g C o u n t y N C . g o v

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Recession Outlook Use Leading index as well as other pertinent economic data to predict future retractions in the economy.

M e c k l e n b u r g C o u n t y N C . g o v

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Economic Outlook - Summary • Election results …. • National leading indicators … little chance of recession near term but some forecasting beginning signs of downturn in 12 months

• Federal interest rate hikes likely to continue starting with December’s ¼ % • County population growth and economic performance slightly above national trends – Now into 93rd consecutive month of growth M e c k l e n b u r g C o u n t y N C . g o v

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Revenue Forecasting Models

• Approach – Collaboration with UNCC (Dr. John Connaughton)

• Property Tax Model – Ordinary Least Squares (“OLS”) • Sales Tax Model – Ordinary Least Squares (“OLS”) - Seasonal and Moving Average Trends • Predicted Outcomes – Short Term; Longer Term

M e c k l e n b u r g C o u n t y N C . g o v

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Property Tax Base Forecast (Are the estimates reliable)



Residential Property tax is estimated below using Ordinary Least Squares (OLS).



Important statistics •

Statistically significant P-values



High R squared



DW statistic near 2



Significant F statistic

M e c k l e n b u r g C o u n t y N C . g o v

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Property Tax Revenue Forecast Output

M e c k l e n b u r g C o u n t y N C . g o v

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Residential Property Tax Base Forecast

M e c k l e n b u r g C o u n t y N C . g o v

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Commercial Property Tax Base Forecast

M e c k l e n b u r g C o u n t y N C . g o v

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Vehicle Property Tax Base Forecast

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Personal Property Tax Base Forecast

M e c k l e n b u r g C o u n t y N C . g o v

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Sales Tax Revenue Forecast Output Article by Month

M e c k l e n b u r g C o u n t y N C . g o v

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Sales Tax Revenue Forecast (Accuracy) 100,000 80,000 60,000 40,000 20,000 0

8,000

-20,000 4,000 0 -4,000 -8,000 2010

2011

2012 Residual

2013 Actual

2014

2015

2016

Fitted

M e c k l e n b u r g C o u n t y N C . g o v

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Long Range Plan Forecast LRFP Forecast – Conservative Fixed Growth vs. Statistical Models Fixed Growth Assumptions General Fund Percentage Revenue Growth

CY T axes Sales T axes Intergovernmental Fees / Other Rev T otal Revenue

2018 2% 3% 1% 1% 2%

2019 2% 3% 1% 1% 2%

2020 2% 3% 1% 1% 2%

2021 2% 3% 1% 1% 2%

2022 2% 3% 1% 1% 2%

2023 2% 3% 1% 1% 2%

2024 2% 3% 1% 1% 2%

2025 2% 3% 1% 1% 2%

2018

2019

2020

2021

2022

2023

2024

2025

$30.0M $20.0M $10.0M

$0.0M

CY Taxes

Sales Taxes

Intergovernmental

Fees / Other Rev

Total Revenue

General Fund Incremental Revenue Growth

CY Taxes T axes Sales axes Sales T Taxes Intergovernmental Intergovernmental Fees / Other Rev Fees Other Rev T otal /Revenue

Total Revenue

2018 2019 2020 2021 2022 2022 20232023 2024 20242025 2018 2019 2020 2021 $13.4 M$15.0M $15 M$15.3M $15.3 M $15.6$16.0M M $16 M $16.3 M $16.6 M $13.4M $15.6M $16.3M $16.6M $16.9M $5.2M $5.4M $5.6M $5.7M $5.9M $6.1M $6.3M $6.4M $5.2 M $5.4 M $5.6 M $5.7 M $5.9 M $6.1 M $6.3 M $1.6M $1.6M $1.7M $1.7M $1.7M $1.7M $1.7M $1.7M $1.6 M $1.6 M $1.7 M $1.7 M $1.7 M $1.7 M $1.7 M $1.0M $1.0M $1.1M $1.1M $1.1M $1.1M $1.1M $1.1M $1 M$23.2M $1 M$23.7M $1.1 M $1.1$24.7M M $1.1 M $1.1 M $1.1 M $19.1M $24.2M $25.2M $25.8M $26.3M $21.2 M

$23 M

$23.7 M

$24.1 M

$24.7 M

M e c k l e n b u r g C o u n t y N C . g o v

$25.2 M

$25.7 M

2025 $16.9 M $6.4 M $1.7 M $1.1 M $26.1 M

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Long Range Plan Forecast LRFP Forecast – Conservative Fixed Growth vs. Statistical Models Statistical Model Prediction General Fund Percentage Revenue Growth

CY T axes Sales T axes Intergovernmental Fees / Other Rev T otal Revenue

2018 3.1% 3.8% 1% 1% 1.7%

2019 9.6% 3.6% 1% 1% 2.9%

2020 2.3% 3.5% 1% 1% 6.0%

2021 2.7% 3.2% 1% 1% 2.3%

2022 2% 3.1% 1% 1% 2.4%

2023 2% 2.9% 1% 1% 2.0%

2024 2% 2.9% 1% 1% 1.9%

2025 2% 2.9% 1% 1% 1.9%

2018

2019

2020

2021

2022

2023

2024

2025

$80.0M $60.0M $40.0M $20.0M $0.0M

CY Taxes

Sales Taxes

Intergovernmental

Fees / Other Rev

Total Revenue

General Fund Incremental Revenue Growth

CY Taxes T axes CY Sales T axes Sales Taxes Intergovernmental Intergovernmental Fees / Other Rev Fees Other Rev T otal/Revenue Total Revenue

2018 2019 2020 2021 2022 2023 2024 2025 2018 2019 2020 2021 2022 2023 2024 2025 $13.4M $18.5M $13.4 M $25.8M $25.8 M $66.3M $66.3 M $21.4M $21.4 M$24.0M $24 M$18.5M $18.5 M$18.2M $18.2 M $18.5 M $6.6M $6.5M $6.5M $6.3M $6.1M $6.0M $6.1M $6.2M $6.6 M $6.5 M $6.5 M $6.3 M $6.1 M $6 M $6.1 M $6.2 M $1.6M $1.6 M $1.6M $1.6 M $1.7M $1.7 M $1.7M $1.7 M $1.7M $1.7 M $1.7M $1.7 M $1.7M $1.7 M$1.7M $1.7 M $1.0M $1.0M $1.1M $1.1M $1.1M $1.1M $1.1M $1.1M $1 M $35.1M $1 M $75.7M $1.1 M $30.8M $1.1 M$33.0M $1.1 M$27.4M $1.1 M$27.1M $1.1 M $1.1 M $20.5M $27.7M $22.6 M $34.9 M $75.6 M $30.5 M $32.9 M $27.3 M $27.1 M $27.5 M

M e c k l e n b u r g C o u n t y N C . g o v

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Long Range Plan Forecast LRFP Forecast – Conservative Fixed Growth vs. Statistical Models Incremental Difference General Fund Percentage Revenue Growth

CY T axes Sales T axes Intergovernmental Fees / Other Rev T otal Revenue

2018 0.3% 0.8% 0.0% 0.0% -0.3%

2019 1.1% 0.6% 0.0% 0.0% 0.9%

2020 7.6% 0.5% 0.0% 0.0% 4.0%

2021 0.3% 0.2% 0.0% 0.0% 0.3%

2022 0.7% 0.1% 0.0% 0.0% 0.4%

2023 0.0% -0.1% 0.0% 0.0% 0.0%

2024 0.0% -0.2% 0.0% 0.0% -0.1%

2025 0.0% -0.2% 0.0% 0.0% -0.1%

2018 2018

2019 2019

2020 2020

2021 2021

2022 2022

2023 2023

2024 2024

2025 2025

$60.0M $30.0M

$40.0M $20.0M $20.0M $10.0M $0.0M $0.0M -$20.0M

CY Taxes

Sales Taxes

Intergovernmental

Fees / Other Rev

Total Revenue

General Fund Incremental Revenue Growth

CY T axes Sales T axes Intergovernmental Fees / Other Rev T otal Revenue

2018 $0.0M $1.4M $0.0M $0.0M $1.4M

2019 $10.8M $1.1M $0.0M $0.0M $11.9M

2020 $51.0M $1.0M $0.0M $0.0M $52.0M

2021 $5.8M $0.5M $0.0M $0.0M $6.6M

2022 $8.1M $0.2M $0.0M $0.0M $8.3M

M e c k l e n b u r g C o u n t y N C . g o v

2023 $2.2M -$0.1M $0.0M $0.0M $2.2M

2024 $1.6M -$0.2M $0.0M $0.0M $1.4M

2025 $1.6M -$0.2M $0.0M $0.0M $1.4M

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Long Range Plan Forecast LRFP – Uses (examples) • New CIP Capacity - $1.3 - $1.5 Billion • Continues conservative debt policy and use of PAYGO • Reduces GF/DSF fund balance % from 44% to 36% (vs target of 28%) • Reduces debt service as % expenditures from 15% to 12.5% • What if scenarios (example: sales tax redistribution impact, expense reallocations, strategic initiative funding including refinement of PAYGO / debt strategy

M e c k l e n b u r g C o u n t y N C . g o v

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Leveraging Financial Resources

M e c k l e n b u r g C o u n t y N C . g o v

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Leveraging Financial Resources Necessary Tool – Long Range Planning Model

M e c k l e n b u r g C o u n t y N C . g o v

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Economic Outlook - Mecklenburg County

Economic Outlook Long Range Financial Planning Long Range Financial Planning  Last year discussed LRP as a necessary tool for strategic forecasting ...

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