City of Oklahoma City Office of the City Manager
Table of Contents
Executive Summary ......................................................................................................................3
Section 1: Introduction and Economic Overview ..................................................................7
Section 2: Key Economic Indicators....................................................................................13
Section 3: City Comparisons................................................................................................23
Section 4: Operating Funds Revenue/Expenditure History .................................................31
Section 5: General Fund Revenue Trends and Forecasts.....................................................49
Section 6: General Fund Expenditure Trends and Forecasts ...............................................65
Section 7: Revenue/Expenditure Gap ..................................................................................77
Section 8: City-Wide Needs Assessment.............................................................................81
Section 9: Conclusion ..........................................................................................................87
Page 2 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
Executive Summary
Current Status
Starting in FY 1996, the City of Oklahoma City experienced a six-year period of sustained growth, when General
Fund revenues exceeded expenditures, leading to an annual increase in General Fund reserves. However, in FY
2002, due to a $5.2 million revenue shortfall, the City used some of this accumulated fund balance to meet
expenditures. Current projections for FY 2003 year-end show that expenditures are once again outpacing
revenues. Much of this is due to the continued slowdown in the national economy and its impact on the local
economy.
Through the first half of FY 2003, General Fund revenues are approximately $5.0 million under target and are
projected to be $8.6 million below target by year-end. Management has taken the necessary steps to address the
revenue shortfall to ensure that expenditures are reduced accordingly in an effort to balance revenues and
expenditures. The shortfall in revenues can be primarily attributed to a decline in sales tax revenue. Through
January 2003, Sales Tax is $5.7 million under target and is expected to finish the year between $8 and $10 million
under target. The shortfall is due to milder weather conditions in the summer months (lower sales tax on utility
payments) along with a large drop in the services and wholesale sales tax base. We are still seeing positive retail
growth in Oklahoma City, but at a much lower rate than in previous years. As of December, retail growth was
hovering around 1.5%, when it had seen rates of 5-6% growth during the late 1990’s. Use Tax is showing
positive growth in FY 2003 after a decline in FY 2002. Moderate growth was projected in FY 2003, and through
the first half of the year, Use Tax revenue is above last year by nearly 11%.
Franchise revenues are currently in a downward trend. Several factors have impacted this category including an
ONG customer repayment, lower energy prices and mild weather. These aspects have significantly impacted
franchise revenues, which are projected to finish FY 2003 $2.3 million under target. Fines and Forfeitures are
expected to be $565,000 under target by year-end. Much of the decline is due to a decrease in the number of
citations issued. The decrease in interest rates has had a significant impact on the City’s investment income over
the past two fiscal years. Interest income has declined $8.8 million since it reached a peak of $15.1 million in FY
2001. Investment revenue is again projected to decline further in FY 2004 to roughly $3.9 million as Federal
Reserve rates have declined and the City’s investments; purchased at those lower interest rates, mature. Some of
the smaller sources of revenue are faring well, but cannot make up the shortfall in sales tax and other larger
categories. For example, receipts from building-related permits are performing well and new revenue from the
alarm permit and fee program are expected to bring in additional revenue in the current fiscal year.
Expenditures for FY 2003 are expected to equal recurring revenues and the planned amount of budgeted fund
balance. Management has implemented measures to address a $7 million shortfall. These measures include
applying a hiring freeze, mid-year budget reductions from each City department and reductions in capital
spending, subsidies and benefits reserves. A contingency plan to address a possible $12 million year-end shortfall
has been developed as well.
Five Year Forecast
Contrary to most economic predictions, recessional factors have continued to plague the nation throughout 2002.
Though many economists expect the recession to end by the second, or even third, quarter of 2003, there are
several risks to recovery. The threat of additional terrorist attacks and the possibility of war are both acting as
weights on the economy because they add to feelings of uncertainty. Another threat is the possibility of further
declines in the financial markets in 2003. If this occurs, individual investors and businesses will be unlikely to
produce the investments necessary for recovery.
However, the threat of a return to negative growth and a second recession is unlikely, given the overall economic
picture. While this is promising, economists from Oklahoma State University are projecting very slow growth in
the Oklahoma City economy through 2003. Projected employment growth is positive, but just barely. Oklahoma
City is expected to realize 0.6% employment growth in 2002 and improve only slightly to 0.9% in 2003. Over the
five year forecast period, employment growth in Oklahoma City is expected to average 1.2%. Personal income in
Five Year Forecast – FY 2004-2008 Page 3
City of Oklahoma City Office of the City Manager
Oklahoma City is projected to increase over the next five years averaging 3.64% annually. Retail trade is
expected to average 2.88% growth during the forecast period.
Revenue & Expenditure Forecasts FY 2004-2008
Revenues are forecast to average close to 3.4% growth over the forecast period. Key categories and their
forecasted growth rates are noted below:
• Sales tax 3.6%
• Other taxes 2.6%
• Franchises Fees 2.9%
• Other Revenue 3.4%
Investment income is still fairly volatile at this time. The City Treasurer’s Office estimates that investment
income will bottom out in FY 2004 at $3.9 million, a $2.4 million decline from the FY 2003 estimated year-end
amount. The projected revenue for FY 2004 is a decline of more than $11 million less than was received in FY
2001 in this revenue category and a 73% decline in a three-year period.
Expenditures are expected to average 6.0% annual growth during the forecast period. Key categories and their
forecasted growth rates are noted below:
• Personal Services 5.5%
• Contractual Services 4.6%
• Supplies and Capital 4.4%
• Transfers 9.6%
Personal Services growth is led by an expected 10% annual increase in insurance costs and a 5.0% annual
increase in wages. Though insurance cost growth is fairly substantial, it is less than the national average growth
because of plan design changes. Contractual Services are anticipated to increase as annual operating subsidy
requirements for EMSA are increased and other expenditure amounts grow at the expected rate of inflation.
Supplies and Capital needs for the next five years are expected to grow at a significant rate although somewhat
erratically. Annual EMSA capital requirements are the primary driver in the supplies and capital category.
Supplies are expected to increase at approximately the rate of inflation. Transfers are expected to show the largest
growth over the forecast period as the retiree health insurance subsidy is expected to grow approximately 10%
annually. In addition, the street resurfacing and CIP funds that were reduced in order to meet FY 2002 and FY
2003 revenue shortfalls are incrementally increased throughout the period in order to get back to FY 2002
budgeted levels. Finally, the General Fund is borrowing funds from the Worker’s Compensation Reserves to pay
for its portion of the BOB financial and human resources system and will begin payments on that loan in FY 05.
Forecasted Budget Shortfalls
From the current fiscal year through FY 2008, General Fund revenues are forecast to average an approximate
annual growth of 3.4%. During this same period, General Fund expenditures are projected to grow at an average
rate of 6.0%. The difference between the two growth rates is cause for concern. While the City may be able to
overcome the disparity in the growth rates over a one to two-year period, a continued pattern could disrupt City
services. The projected gap for FY 2003 is $8.6 million and it is expected to grow to $55.12 million in FY 2008.
For FY 2004, management is anticipating the use of $5 million in fund balance and departments have been asked
to make the necessary budget reductions in order for anticipated revenues to equal anticipated expenditures. On
December 31, 2002, most departments were asked to make budget reductions for FY 2004 of 11% and the Police
and Fire departments were asked to make a reduction of 2% in the General Fund portion of their budgets.
Page 4 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
Issues
When forecasting five years into the future, there are many uncertainties. This report does, however, highlight
several issues which will certainly require careful attention. They are:
• Fire Public Safety Sales Tax Shortfall
• Security requirements for Police, Fire and Airport departments
• Impact of cuts in City staffing levels
• Funding of public safety equipment beyond 2006
• Technology changes and requirements
• Capital funding for facility improvements
• Legislative impacts on revenues and expenditures
Five Year Forecast – FY 2004-2008 Page 5
City of Oklahoma City Office of the City Manager
The City of
OKLAHOMA CITY
Page 6 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION ONE
INTRODUCTION AND
ECONOMIC OVERVIEW
Five Year Forecast – FY 2004-2008 Page 7
City of Oklahoma City Office of the City Manager
INTRODUCTION
The purpose of this Five-Year Financial Forecast is to evaluate the City's financial condition as it relates to
ongoing core and ancillary programs and services. This Forecast focuses predominantly on revenues and
expenditures associated with the General Fund, which finances a diverse spectrum of City programs in order to
meet the community's needs. In addition, this forecast will provide a brief look at other operating funds.
In the event sufficient operating revenue is not available to fund core City services or expanded programs, the
Mayor and City Council must determine the best use of available resources. This is one reason why, over time,
some City services may be discontinued or changed to be more efficient. City leaders, citizens and staff work
together during the annual budgeting process to identify and prioritize community needs and allocate resources to
realize objectives. Programs of sufficient importance to the community may be partially funded with special
dedicated taxes or fees. Such instances are evident in Oklahoma City's recent history, including the passage of
several dedicated sales taxes. Even when such revenue sources exist, however, the General Fund is often relied
upon to supplement dedicated purpose revenues, either directly or indirectly.
Armed with factually accurate, timely and objective information about the City's financial condition, elected
officials can help ensure the stability of Oklahoma City's general and other municipal funds. With continued
financial viability, the City can anticipate and meet community needs and enable additional economic
diversification and growth for many years to come. With this in mind, this Five-Year Financial Forecast will
serve three purposes.
1. To comply with City practices designed to ensure the responsible utilization of public resources.
The City adheres to specific financial policies and practices. Certain policies are specified by State law,
such as the Municipal Budget Act, while internal policies are established by City Charter or Council
ordinance or resolution. City financial practices are implemented by the City Manager.
Although a specific requirement for the preparation of a financial forecast does not appear in State law, 11
O. S. 1991, Article X, § 10-103.5 does require the City Manager to "keep the council advised of the
financial condition and future needs of the city and make recommendations as he deems desirable." The
City has adopted the practice of developing a financial forecast that estimates future revenues and
expenditures, and identifies major financial issues that may arise for the ensuing five-year period.
2. To provide the Mayor and City Council with the information necessary to formulate long-term
strategies to ensure the availability of City services at a level appropriate to the actual needs of the
community. Annual budgeting alone can fail to serve the long-term public interest if short-term priorities
reduce resources that may be required to meet imminent needs that fall beyond the one-year budget scope.
By identifying long-term issues and assessing resources in the Five-Year Financial Forecast, the Mayor
and City Council are provided with the necessary information to create continuity between annual budget
cycles and meet the long-term needs of the City. The forecast is a valuable means to identify potential
problems and for policy makers to incrementally address such problems in a manner that provides
seamless continuation of core services.
3. To serve as a resource for the general citizenry and the business community. This document
provides a snapshot of the City's current and projected financial well-being and provides citizens and
business leaders with an overview of the City’s ability to meet community needs over time. This
document also demonstrates the City's financial planning process and strengthens local government’s
accountability to the community.
The Five-Year Financial Forecast is not intended to serve as a comprehensive source for all City-related financial
activity, such as programs funded through City trusts and authorities. This forecast does, however, include an
assessment of unfunded capital and likely programmatic issues that may impact those entities.
The City has made great strides in recent years, both in improving the quality of day-to-day services and in
forging an exciting plan for the future. The City is experiencing some difficulties due to economic conditions on
Page 8 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
a national and local level, and it is hoped that this Five-Year Financial Forecast will provide City leaders, citizens
and staff with information necessary to guide the future of the City of Oklahoma City.
GENERAL INFORMATION
Oklahoma City was incorporated in 1890. The City is the capital and the largest city in Oklahoma with a
population of 506,132. The Oklahoma City Metropolitan Statistical Area (MSA) population is approximately
1.053 million and includes cities such as Bethany, Del City, Edmond, Midwest City, Moore, Mustang, Nichols
Hills, Norman, Village, Yukon and Warr Acres. Major highways, Interstates I-35, I-44 and I-40 link the city with
a large trade area. The nearest large cities are Tulsa to the northeast and the Dallas/Fort Worth metroplex to the
south. The City is governed by a council-manager form of government. Oklahoma City is the county seat of
Oklahoma County and the City limits encompass a land area of approximately 621 square miles.
ECONOMIC CONDITION
Oklahoma City's economy has followed the nation and state as its economy has slowed for a second consecutive
year. Job growth in Oklahoma City has remained positive through the national recession, but at 0.5% growth in
2001 and a projected growth of 0.6% for 2002, gains have been quite modest. According to economists at
Oklahoma State University, this marks the first time the Oklahoma City area has experienced consecutive years of
job growth below 1 percent since the last recession, when job gains reached 0.7% in 1991 and 0.9% in 1992.
Forecasters at Oklahoma State University and the University of Oklahoma predict job growth in Oklahoma City
to be modest again in 2003 with employment gains ranging from 0.9% to 1.6%.
Although the national economy affects Oklahoma City, the effects are usually less pronounced than in some areas
of the state. Through the national recession, the rate of hiring in the metro area exceeded the rate for the nation.
For the twelve months ending September 2002, Oklahoma City area job growth was 0.7%, well ahead of the 0.7%
decline nationwide. Most of the job losses occurred in four industry sectors: Manufacturing; Transportation,
Communication, and Public Utilities (TCPU); Wholesale Trade; and Government. Positive gains in hiring were
evident in the Services, Construction and Retail Trade sectors.
NATIONAL ECONOMY
The sharp economic slowdown at the national level in 2001 was expected to move into recovery in 2002.
However, while several indicators show that the nation has experienced gains in productivity, gross domestic
product and personal income, other indicators show that the economy is still languishing. The decline of the stock
market and lack of business investment and hiring continue to have a negative impact on the economy.
At this time, Global Insight (formerly DRI-WEFA), a national economic forecasting group, expects the US
economy to continue its slow recovery in 2003 and show a 3.2% growth rate in GDP by the end of the year.
Business investment in equipment and capital is expected to accelerate, while personal and residential investment
is forecast to decline. State and local government spending will be stagnant, though federal spending will remain
robust. Forecasted growth of consumption expenditures will decrease from 3.1% in 2002 to 2.9% in 2003. This
is due, in part, to a projected decline in consumer confidence. Current and forecasted weakness in consumer
confidence can signal a dampening of consumer spending growth, and this is expected in the first two quarters of
2003. Growth in GDP is projected to average 3% over the forecast period.
The Consumer Price Index (CPI) slowed to 1.6% growth in 2002 and is expected to increase in the latter half of
2003, to an average of 2.8%. A significant factor relating to CPI in 2003 is the price of energy. While energy
prices have been fairly low throughout 2002, there are several forces taking shape that are driving energy prices
higher into 2003. Political unrest in major production areas, like Venezuela and the Middle East, are having an
impact on energy prices worldwide. This change in energy prices and weather conditions during the winter could
significantly impact the CPI. Global Insight forecasts that the CPI will average 2.5% annual growth through the
forecast period.
Forecasters at Global Insight and Economy.com predict the Federal Reserve will hold steady on monetary policy
through at least the summer of 2003, when it may tighten policy as the economic recovery gains momentum.
Global Insight predicts that the housing market will weaken in 2003, while economists at Oklahoma State
Five Year Forecast – FY 2004-2008 Page 9
City of Oklahoma City Office of the City Manager
University point out that the housing sector has yet to show clear signs of weakening. However, continued
instability in the labor market is expected throughout 2003, with national unemployment rates to hover close to
6% and peak near 6.5% in the summer, which may prove to be a drain on the housing market.
The national economy still shows signs of weakness on other fronts as well. Losses in the financial markets have
impacted individuals, the private sector and governments that are reliant on revenue from income taxes. From its
peak in March 2001, the stock market has lost nearly $7 trillion in value. This has impacted the availability of
discretionary income for millions of individuals and has also diminished capital gains receipts and tax revenues
from options income for the federal government and state governments across the nation. The potential for a war
in the Middle East and any terrorist attacks at home, could cause significant disruption to the US economy.
Yet, in light of all these factors, forecasters believe that the characteristics that make the US economy strong
remain in place. Productivity growth has withstood the economic slowdown, due to previous investments in
technology and the willingness of employers to part with workers in the current recession. While this is
detrimental to the unemployment rate in the short term, as the unit cost for production decreases and profit
margins increase, firms will eventually be willing to increase capital spending and hiring. Many economists
believe that productivity growth is a key factor governing the rise of living standards over time.
STATE ECONOMY
The state economy fared better than the national economy in 2002 in terms of unemployment rates and job
growth. Economists at Oklahoma State University have noted that the current relationship between the Oklahoma
economy and the national economy closely resembles the relationship that occurred in the 1990-1991 recession.
Then, as now, when national job creation was negative, Oklahoma experienced moderate positive growth.
Similarly, as the nation began to recover from recession and job growth grew at a fairly rapid pace, job creation in
Oklahoma was moderate.
Oklahoma employment growth for 2002 is projected to be 0.65%, while the projected US employment growth
rate is expected to decline by 0.83%. For 2003, forecasted employment growth is expected to increase slightly to
0.73%. Oklahoma is one of fourteen states to show positive gains in employment in 2002. As compared to the
region, Oklahoma fared better than New Mexico, Kansas, Arkansas, Texas and Missouri in job growth. The
unemployment rate was also favorable in Oklahoma as compared to the nation. Oklahoma’s unemployment
increase of 0.2%, from 4.0% one year earlier to 4.2% in 2002, was ranked as the 17th lowest nationally.
Based on Bureau of Labor Statistics data and forecasts from Oklahoma State University forecasters, the favorable
relative employment growth in Oklahoma is broad-based. Except federal government employment, the Oklahoma
economy outperformed the US economy in all employment sectors in 2002. Of particular interest is the fact that
Oklahoma has shown a slight increase in the Nondurable Goods Manufacturing sector whereas US employment is
expected to have declined over 6% in this sector. According to the Oklahoma Alliance for Manufacturing
Excellence, this is because Oklahoma has more smaller and medium-sized manufacturers that can more easily
adapt to changing conditions.
Forecasters predict that the state economy will recover along with the national economy, though not as quickly.
Oklahoma is expected to end 2002 with 0.8% growth in Gross State Product and finish calendar year 2003 with
1.5% growth in the Gross State Product. Personal income growth is estimated to be 4.2% for 2002, and
experience slower growth at 3.5% for 2003. Although wage rates are not expected to contract, the slower growth
in personal income is attributable to income from other sources (ie: investments, interest, rent, etc.).
The outlook for Oklahoma's 2003 economy is tempered, with real expansion in the services sector and contraction
in many of the remaining sectors. Some key indicators for the Oklahoma economy are:
• Real Gross State Product (GSP) growth is forecast to be 0.8% in 2002, reaching $87.9 billion. For
2003, GSP is forecast to increase 1.5%. Over the forecast period, GSP is expected to average 1.36%
annual growth.
• Mining and construction employment are projected to decline while services are expected to grow
about 2%.
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Office of the City Manager City of Oklahoma City
• Statewide unemployment rates for 2002 are expected to remain below the national average at 4.2%.
OKLAHOMA CITY ECONOMY
The Oklahoma City Metropolitan Statistical Area (MSA) includes Logan, Canadian, Oklahoma, Cleveland,
McClain, and Pottawatomie Counties and contains more than 31% of the state population and 33% of the state
labor force. The Oklahoma City area has 35% of the State’s nonagricultural employment and generates 33% of
statewide personal income.
Oklahoma City’s diverse economy has traditionally spared it from the more cyclical downturns seen on a national
level. This has held true during the current downturn because Oklahoma City experienced positive job growth
when the nation realized negative growth in 2002. Nonagricultural employment grew 0.47% in 2001 and is
projected to finish 2002 with .56% growth. Employment growth is expected to increase slightly in 2003 at a
0.93% rate. However, employment growth is expected to average 1.18% over the forecast period.
Job losses in the manufacturing sector are expected to ease in 2003. Following manufacturing employment
declines of 2.2% in 2000, 6.3% in 2001 and an estimated 5.5% in 2002, Oklahoma State University forecasters
predict that metro manufacturing will only contract another 0.4% in 2003. This decline is similar to that in the
national economy. Forecasters believe that the metropolitan areas of the state are more closely tied to the national
economy than the rural areas of Oklahoma. Job gains are again expected in the Services sector, which has
provided the bulk of job formation in the Oklahoma City metro area. Of the nearly 75,000 metro area jobs
created since 1995, more than 45,000 are in the Services sector. Oklahoma State University projects a 2.2%
increase or 4,000 new jobs in the services sector in both 2002 and 2003. As the seat of State government and the
state’s largest metropolitan area, Oklahoma City will be affected by weak government hiring in the coming year.
Key economic forecasts for the Oklahoma City MSA during 2003 are summarized as follows.
• Total personal income is projected to finish 2002 with a growth rate of 4.9% and a 4.4% growth rate
is anticipated in 2003.
• Oklahoma City MSA population is expected to reach 1,095,500 in 2003 and is projected to be
1,144,500 by 2007.
• Per capita personal income for the Oklahoma City MSA is projected to reach $28,751 in 2003, or
89% of the expected national level of $32,362. Per capita personal income is expected to average
3.64% annual growth over the forecast period.
• Oklahoma City MSA retail trade growth for 2003 is forecast at 3.81%. Retail trade is expected to
average 2.88% annual growth over the forecast period.
CONCLUSION
The sharp economic slowdown at the national level has contributed to a slowing of nonagricultural job growth in
the Oklahoma City area to 0.56% in 2002 and is expected to continue having positive, but slow growth with a
limited growth rate of 0.93% in 2003. A common theme for 2003 among both state and national economic
forecasters is the exaggerated component of uncertainty that is affecting the economy right now. The threat of
war, along with sluggish consumer and business confidence is weighing heavily on predictions for growth in the
near term. However, it is encouraging that Oklahoma City, though expected to have slow employment growth in
2003, will most likely return to previous growth rates closer to 3% during the forecast period.
Sources - Information sources for this section include: Global Insight, Inc DRI-WEFA; the Bureau of Economic Analysis, an agency of
the U.S. Department of Commerce; the Bureau of Labor Statistics, an agency of the U.S. Department of Labor; the 2003 Oklahoma
Economic Outlook prepared by Oklahoma State University's College of Business Administration, The Dismal Scientist on Economy.com;
Adam Wilmoth, “Slow Economic Growth Expected,” The Daily Oklahoman, Dec. 5, 2002.
Five Year Forecast – FY 2004-2008 Page 11
City of Oklahoma City Office of the City Manager
The City of
OKLAHOMA CITY
Page 12 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION TWO
KEY ECONOMIC
INDICATORS
Five Year Forecast – FY 2004-2008 Page 13
City of Oklahoma City Office of the City Manager
POPULATION
Changes in population can directly affect City revenues. Many governmental revenues vary according to
population growth. Population levels are indirectly related to issues such as employment, income and property
value.
The population of Oklahoma City and the surrounding suburbs has grown steadily over the past three decades.
The City of Oklahoma City is expected to grow at an average annual rate of 1.0% through the year 2010. The
projection for 2003 is 1.0% growth for the Oklahoma City MSA. An increasing population trend is considered
favorable. However, as the population grows, demand for services is likely to follow.
Oklahoma City Population
Corporate and Metropolitan Area
1,200
1,000
800
Thousands
600
400
200
0
1995 1996 1997 1998 1999 2000 2005 2010
est. est.
OKC MSA
Source: U.S. Census Bureau, estimates are from
Oklahoma Department of Commerce
Page 14 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
POPULATION COMPOSITION
The composition of the City’s population is a determinant of which services are needed. The population of
Oklahoma City, the State of Oklahoma and the United States as a whole is growing older. The graph below
depicts the comparison of three age categories of the population: (1) persons 0-19, (2) persons 20–59 and (3)
persons 60+. As shown below, the age distribution of Oklahoma City closely mirrors the national distribution.
Therefore, things like health care and other social services needed on the national level could impact the City in the
same way.
2000 Population
Breakdown by Age Group
100%
15% 17% 16%
80%
60% 54%
57% 55%
40%
20%
28% 29% 29%
0%
OKC State U.S.
0-19 20-59 60+
Source: U.S. Census Bureau
Five Year Forecast – FY 2004-2008 Page 15
City of Oklahoma City Office of the City Manager
INFLATION
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban
consumers for a fixed market basket of consumer goods and services. The CPI provides a way for consumers to
compare what the market basket of goods and services costs this month with what the same market basket cost a
month or a year ago. The CPI reflects spending patterns for each of two population groups: All Urban Consumers
(CPI-U) and Urban Wage Earners and Clerical Workers (CPI-W). The CPI-U represents about 80% of the total
U.S. population.
Each month, the Bureau of Labor Statistics (BLS) surveys retail establishments throughout the U.S. and gathers
price information on thousands of items. These items are then put into one of the 200 expenditure categories and
weighted by their importance. Further aggregations are done until an overall CPI number is produced. The CPI is
comprised of eight different categories: food, housing, apparel, transportation, medical care, recreation, education
and miscellaneous. Stability in price level is generally beneficial and continued low rates of inflation indicate a
positive trend. Changes in CPI will typically be recognized by similar changes in retail sales.
Consumer Price Index
4.0%
3.4%
3.5%
2.8% 2.8%
Percent Change
3.0%
2.3% 2.2%
2.5%
2.0% 1.6% 1.6%
1.5%
1.0%
0.5%
0.0%
1997 1998 1999 2000 2001 2002 Est 2003
Proj
Calendar Year
Source: U.S. Bureau of Labor Statistics for All Urban Consumers
2002 Estimate and 2003 Projection: Global Insight
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Office of the City Manager City of Oklahoma City
PERSONAL INCOME
Personal income is one measure of a community’s ability to purchase goods and services; the higher the per capita
income, the more property taxes and sales taxes the City can potentially generate. If income is distributed evenly,
a higher per capita income will usually mean a lower dependency on government services. According to
economists, per capita income growth is a primary determinant in predicting retail sales growth. A decline in per
capita income results in loss of consumer purchasing power and can provide advance notice that businesses,
especially in the retail sector, will suffer a decline that can ripple through the rest of the City’s economy. Credit
rating firms use per capita income as an important measure of a City’s ability to meet its financial obligations.
Both personal income and population have increased over the measurement period, which is considered favorable.
This trend indicates Oklahoma City consumers’ purchasing power is improving.
Oklahoma City MSA
Per Capita Income
$26,000 $25,436
$25,000
$23,969
$24,000 $23,226
$23,000
$21,870
$22,000 $21,299
$20,789
$21,000
$20,000
$19,000
1995 1997 1998 1999
Source: U.S.1996 of Economic Analysis – OKC MSA
Bureau 2000
Calendar Year
Source: U.S. Bureau of Economic Analysis – OKC MSA
Five Year Forecast – FY 2004-2008 Page 17
City of Oklahoma City Office of the City Manager
HOTEL/MOTEL OCCUPANCY RATES
If the economy is sluggish or declining, the demand for hotel and motel rooms usually goes down and occupancy
rates decrease. Conversely, if the economy is growing, demand for hotel and motel room rentals are usually high
resulting in high occupancy. This indicator can provide early warning of more serious economic problems.
Contrary to the nationwide trend, the hotel/motel industry in Oklahoma City has seen significant growth over the
past five years. According to Convention and Visitors Bureau officials, the number of hotel rooms has increased
from 10,000 to over 13,000. Even with this growth, the occupancy rate has remained steady over time.
For 2002, Oklahoma City’s occupancy rate of 68.8% is above Tulsa’s 55.9% according to data through November
2002. The latest data available for the national occupancy rate shows an average close to 60%.
Hotel/Motel Occupancy Rate
69.9%
70.0%
66.3%
64.2% 64.1%
65.0%
62.5%
60.0%
57.9%
55.0%
50.0%
1997 1998 1999 2000 2001 2002
Calendar Year
National Average 2000 – 72%, 2001 60.3%
Source: Oklahoma City Convention and Visitor’s Bureau
Page 18 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
UNEMPLOYMENT
The unemployment rate provides a measuring tool to gauge the stability of the local economy. If businesses are
not profitable, they often lay workers off or close down all together. In addition, unemployment impacts per
capita personal income that in turn influences the community’s ability to support its local business sector. An
increase in the unemployment rate can be a warning sign that overall economic activity and governmental
revenues may be on the decline. According to some economists, the unemployment rate is a good predictor of
sales tax growth.
Unemployment rates have increased over the past year. However, Oklahoma City’s unemployment rate of 3.8%
in November 2002 remains significantly lower than the United States rate of 5.7%.
Unemployment Rate
OKC MSA, State of Oklahoma and U.S.
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1995 1996 1997 1998 1999 2000 2001 2002 2003
Est. Proj.
Calendar Year - Annual Average
OKC State US
Year 2002 amount through November 2002
Source: Bureau of Labor Statistics
Five Year Forecast – FY 2004-2008 Page 19
City of Oklahoma City Office of the City Manager
JOB GROWTH
New jobs to employ the community’s citizens measure the health of the local business sector. In addition, job
growth impacts the overall personal income of the City. A decline in job growth can be an early warning sign that
overall economic activity and governmental revenue may be on the decline. For the past five years, the State has
seen a total of 80,000 new jobs while the Oklahoma City MSA has seen 46,000 (57% of the total State
employment increase). This trend benefits the City as it impacts the retail sector sales tax base along with housing
development.
Job Growth
OKC & State of Oklahoma
50
45
40
OKC State
35
30
Thousands
25
20
15
10
5
0
1996 1997 1998 1999 2000 2001 2002 Est. 2003 Proj.
Calendar Year
Source: Bureau of Labor Statistics
Page 20 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
EMPLOYMENT COMPOSITION
The national trend is towards a greater level of service sector jobs, and Oklahoma City is following this trend.
Over the last twenty years, the percent of jobs within the mining sector, which includes the oil and gas industry
has decreased approximately 75%, while service sector positions have increased 120%. Oklahoma City has
become less reliant on oil and gas mining and more on services, therefore, less exposed to the boom and bust
cycles of the oil and gas sectors.
While the service industry growth is beneficial, on average, most service sector jobs commonly have a lower level
of pay. Low wages impact the City’s per capita income and can result in lower retail sales decreasing sales tax
revenues. However, is also includes some higher paying jobs in the legal, health care, and educational services
industries that can have the opposite effect.
OKC Employment Composition
Non-Farm Employment
35%
30%
25%
Percent of Total
20%
15%
10%
5%
0%
Mining Services Mfg. Govt. Trade Misc.
Employment Sector
1982 Total Employment 432,300
1992 Total Employment 437,700
2002 Total Employment 543,620
Source: Bureau of Labor Statistics, 2002 data based on monthly average through Sept. 2002
Five Year Forecast – FY 2004-2008 Page 21
City of Oklahoma City Office of the City Manager
The City of
OKLAHOMA CITY
Page 22 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION THREE
CITY COMPARISONS
Five Year Forecast – FY 2004-2008 Page 23
City of Oklahoma City Office of the City Manager
CITY COMPARISONS
For many years, the City of Oklahoma City has utilized data from other municipalities as a factor in determining
pay and benefit levels for employees. It is imperative that the City continues to review practices of other “peer”
cities in order to meet customer demands and provide the best services available at the most efficient cost. While
Oklahoma City utilizes this group of cities for employee benefits and salary comparisons, one must look at each
cities’ own economic environment in order to understand how the cities compare. The following graphs depict
where Oklahoma City stands compared to other cities. The cities in the comparisons include: Austin, Tucson,
Nashville, San Antonio, Kansas City, Omaha and Tulsa. Data from all of the cities, with the exception of San
Antonio, are used as a factor in determining cost of living adjustments for employees. One unique aspect to
consider is all of these cities, with the exception of Tulsa, use property taxes for operations. In addition, these
cities can increase property taxes (with some limitations) without an election. Oklahoma City does not use
property taxes for operating purposes, only for the retirement of debt and the payment of judgments.
POPULATION
The graph below shows that the Kansas City metropolitan area has the largest population with over 1.7 million
citizens, while Omaha has the lowest metropolitan area population with 717,000. Oklahoma City is below the
average of 1.1 million.
Metropolitan Area Population
2,500
2,000
1,776
1,592
1,500
Thousands
1,250 1,231
1,083
1,000 844 803
717
500
0
Austin Tuscon Nashville San Antonio Kansas City Omaha OKC Tulsa
City
Source: U.S. Census Bureau, 2000
Page 24 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
COST OF LIVING
The American Chamber of Commerce Research Association (ACCRA) has developed a cost-of-living index for
cities. The cost-of-living index is published on a quarterly basis, and the third quarter of 2002 is the most recent
data. The cost-of-living index includes various types of expenses such as: grocery, utilities, transportation,
housing and miscellaneous goods and services. The chart below provides the composite index. The Cost of
Living for Oklahoma City is below all the cities in this comparison except San Antonio and Omaha. In addition,
Oklahoma City’s cost of living is 10.7% below the national average. An index amount of 100 represents the
national average
Cost of Living
110.0
103.3
102.2
100.0
95.5
93.4
90.1
89.2 89.3
90.0
86.7
80.0
Austin Tuscon Nashville San Antonio Kansas City Omaha OKC Tulsa
City
Source: ACCRA 3rd Quarter 2002. Rank of 100 = National Average
Austin, Nashville and San Antonio are 2nd Quarter 2002.
Five Year Forecast – FY 2004-2008 Page 25
City of Oklahoma City Office of the City Manager
UNEMPLOYMENT
Unemployment is one key economic indicator that provides a measurement of jobs in the local economy.
Oklahoma City unemployment has predominantly been below the state and national levels. Oklahoma City
currently has unemployment of 3.8%, which is lower than most of our peer cities, the State of Oklahoma’s rate of
4.2%, and below the United States unadjusted rate of 5.7% for November 2002.
Unemployment
6.0%
5.5%
5.1% 5.1%
5.0%
5.0% 4.8%
Percent
4.5% 4.4%
4.0% 3.8%
3.5% 3.4%
3.3%
3.0%
Austin Tuscon Nashville San Antonio Kansas City Omaha OKC Tulsa
Source: Bureau of Labor Statistics, August 2001 City
Source: Bureau of Labor Statistics, Nov 2002
Page 26 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
PER CAPITA INCOME
Per Capita Income is one area in which Oklahoma City has typically faired poorly when compared with most
other peer cities. However, in recent years, Oklahoma City has gained some ground and no longer has the lowest
level of per capita income among peer cities. In this group, Austin has the highest per capita income with $32,039
approximately $6,603 or 25.7% more than Oklahoma City.
Per Capita Income
$35,000
$32,039 $31,765 $31,866
$30,962
$30,000
$28,775
Amount
$25,741 $25,436
$25,000
$23,705
$20,000
Austin Tuscon Nashville San Antonio Kansas City Omaha OKC Tulsa
City
Source: Bureau of Economic Analysis, 2000
Five Year Forecast – FY 2004-2008 Page 27
City of Oklahoma City Office of the City Manager
MEDIAN EFFECTIVE BUYING INCOME
Also known as disposable or after tax income, median effective buying income is the amount of money the
average household has after paying taxes. Money income is the aggregate of wages, salaries, net farm and
nonfarm self-employment income, interest dividends, net rental and royalty income, Social Security and any other
retirement or disability payments. The Median Effective Buying Income is one of the key economic indicators
that the bond rating agencies review as it is a good indicator of wealth in the local economy.
Median Effective Buying Income
50,000 49,077
45,000
43,142
42,221
41,216
Amount
40,000
36,919
36,161
35,000 34,352
33,344
30,000
Austin - San Tuscon Nashville San Antonio Kansas City Omaha OKC Tulsa
Marcos
City
Source: Sales and Marketing Management: Effective Buying Income, 2002
Page 28 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
RELIANCE ON SALES TAX
In Oklahoma, sales tax is the primary funding mechanism for day-to-day operations. This is evident in the graph
below. Tulsa and Oklahoma City rank first and second when it comes to reliance on sales tax to support the
General Fund budget. With the exception of Omaha, the remaining cities utilize a greater portion of property
taxes to fund daily operations. Tucson and Kansas City do not rely on sales tax to support their General Funds
and Kansas City also levies an income tax on those who live and/or work in their city.
Reliance on Sales Tax
70%
63.0%
60% 56.6%
50% 45.0%
40%
30% 25.9% 24.6%
20% Source: CAFR as of June 30, 1999
12.0%
10%
0.0% 0.0%
0%
Austin Tuscon Nashville San Antonio Kansas City Omaha OKC Tulsa
City
General Fund Data based on FY 2003 budgets
Five Year Forecast – FY 2004-2008 Page 29
City of Oklahoma City Office of the City Manager
SALES TAX PERFORMANCE
Sales tax on goods provides a large amount of revenues to municipalities. With the exception of Kansas City and
Nashville, all peer cities with sales taxes are showing growth in this revenue source. Oklahoma City and San
Antonio have the highest rates of sales tax growth from FY 2002 to budgeted FY 2003. The City of Nashville
and Davidson County are operated as a city-county government, while the other cities are municipal governments.
The growth below depicts budgeted and actual sales tax for each respective cities general fund.
Sales Tax Performance
175 FY 2001 FY 2002 FY 2003
150
125
100
Millions
75
50
25
0
Austin Nashville San Antonio Omaha OKC Tulsa
City
Data based on FY 2002-03 budget book. FY 01 is actual and FY 02 and 03 are budgeted amounts. Amounts reflect
General Fund portions only.
Page 30 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION FOUR
OPERATING FUNDS
REVENUE/EXPENDITURE
HISTORY & ISSUES
Five Year Forecast – FY 2004-2008 Page 31
City of Oklahoma City Office of the City Manager
CITY OPERATING BUDGET
Oklahoma City's Operating Budget consists of various revenue sources used to finance an extensive list of City
services. Most significant of these revenue sources is the General Sales Tax. More than 57% of the City's
projected $460 million in FY 2003 operating budget revenues will come from various types of tax collections.
Other major contributing revenue sources include fees and charges, franchises, municipal fines and internal
transfers.
The City's annual operating budget, excluding trusts, contains many unique funds. This chart demonstrates the
fund structure of the City's annual operating budget.
FEDERAL GRANT FUNDS INTERNAL SERVICE FUNDS
Emergency Shelter Information Technology
HOME Fleet Services
Enterprise Community Print Shop
CDBG Risk Management
Office of Workforce Development
Local Law Enforcement Block Grants
CITY
OPERATING
BUDGET
SPECIAL REVENUE FUNDS
Public Safety Sales Tax
Zoo Sales Tax ENTERPRISE FUNDS
Public Safety Equip.Sales Tax Airports
Public Safety Equip. Use Tax Water & Wastewater
Street & Alley Solid Waste
Court Administration & Training Drainage
Emergency (E-911) Parking & Transit
MAPS Operations Fund
OCMAPS Sales Tax
GENERAL FUND
General Sales Tax
Use Tax
Other Taxes
Franchises
Licenses, Permits & Fees
Other Services & Charges
Administrative Charges
Fines
Transfers
Page 32 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
WHAT DOES THE GENERAL FUND PAY FOR?
The General Fund provides services for which adequate fees and charges cannot be levied, or are better funded
through the general taxing authority of the City. Some of these core services and their other funding sources for
operations are summarized as follows:
Public Safety - 66% of operating funding for Police, Fire, E-911, Juvenile Justice and Courts is provided
through the General Fund. The majority of other funding for services is provided by a 3/4% limited
purpose sales tax earmarked for Police and Fire personnel and equipment. The Police and Fire Capital
Equipment Use Tax, E-911 fees and Court penalty assessments provide lesser amounts.
Public Services - 26% of operating funding for Public Works, Transit, Neighborhood Services and
Planning is provided through the General Fund. Other funding comes from Water/Wastewater,
Stormwater Drainage, Airport, Solid Waste and Transit fees. Water/Wastewater utility fees contribute the
largest portion.
Culture and Recreation - 43% of operating funding for Culture and Recreation is provided through the
General Fund. The Parks and Recreation Department, which also manages the Civic Center, is the main
recipient of General Fund revenue. Through a Chamber of Commerce contract, the Convention and
Visitors Bureau receives a portion to promote convention and tourism activity in the City. Other non-
General Fund funding sources include the permanent 1/8 cent Zoo limited purpose sales tax, the MAPS
Sales Tax Fund and the MAPS Operations Fund.
General Government Function - 72% of operating funding for the Office of the Mayor & City Council,
City Manager’s Office, Municipal Counselor’s Office, Personnel, City Clerk’s Office, Finance, City
Auditor’s Office and General Services is provided through the General Fund. Risk Management,
Information Technology and Equipment Services are funded through internal service charges. The
OCMAPS Sales Tax Fund provides funding for administration of the limited term, limited purpose,
OCMAPS Sales Tax.
Flexibility of the General Fund has proven to be a valuable asset to City leaders in creating and funding programs
and services, however; caution is required to ensure adequate resources remain available for the continuation of
these programs and services over the long-term.
The following subsections contain a discussion of each of the operating funds along with various trust funds. A
full examination of the General Fund can be found in Sections Five, Six, Seven and Eight. Fund balance fills the
gap where the charts indicate expenditures exceeding revenue. The charts are created on the basis of Generally
Accepted Accounting Principles (GAAP), which differs from the modified cash basis used for budgeting
purposes. This is to remain consistent with the City’s Comprehensive Annual Financial Report (CAFR).
Five Year Forecast – FY 2004-2008 Page 33
City of Oklahoma City Office of the City Manager
AIRPORTS
Funding for the operation of the Airports Enterprise comes from monthly transfers from the Oklahoma City
Airport Trust. The Trust was created as a Public Trust on April 1, 1956, pursuant to Title 60 of the Oklahoma
Statutes, Section 176, on behalf of the City of Oklahoma City. The purpose of the Trust is to provide a means of
financing and administering the construction of airports and air navigation facilities of the City. The provisions of
the trust agreement provide that the Trust will lease, or otherwise manage, the related property and improvements
financed by the Trust. The Trust receives all revenues generated from related properties to repay revenue bonds,
or other debt instruments incurred by the Trust, plus costs and expenses incidental to the management, operation,
maintenance and conservation of the Trust.
Airports Operating Revenue & Expenditure History
$55,000
$50,000
$45,000
Thousands
$40,000
$35,000
$30,000
$25,000
$20,000
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Includes combined Trust and Cash Fund data per CAFR. Accounting Basis-GAAP.
Chart contains operating revenues, expenditures and transfers to and from other funds for trend
analysis of those revenues only. Chart is not intended to be a complete analysis of revenues and
expenditures. Non-Operating revenues and expenditures such as investment income and debt
service expense are not included.
Page 34 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
COURT ADMINISTRATION AND TRAINING
The Court Administration and Training Fund was created in 1986 to fund law enforcement training through the
use of fines received by the Oklahoma City Municipal Court system. State laws require a $7.00 penalty
assessment ($3.00 for Automated Fingerprint Identification System support and $4.00 for CLEET) to be added to
any fine of $10.00 or more. Oklahoma City, because it has an approved basic law enforcement academy, retains
$2.00 of the penalty assessment and a 2% administration fee for handling the penalty assessment and collections.
Monies received in these funds are utilized by three separate departments in three sub funds. The Departments
are Police, Courts and Municipal Counselor. The Police Department utilizes the fund for police training. The
Courts Department utilizes the fund primarily as a pass through to receive and forward fees due to the state. The
Municipal Counselor receives a small portion of the fines for legal training.
Court Operating Revenue & Expenditure History
$1,600
$1,500
$1,400
$1,300
$1,200
Thousands
$1,100
$1,000
$900
$800
$700
$600
$500
$400
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Fund data per CAFR. Accounting Basis-GAAP.
Five Year Forecast – FY 2004-2008 Page 35
City of Oklahoma City Office of the City Manager
EMERGENCY MANAGEMENT
The Emergency Management Fund was established in FY 1990 to fund operations for the E-911 emergency
telephone and dispatch system, and for disaster preparedness and warning programs. The budget combines a
subsidy from the General Fund, projected revenues from a 3% tariff charged to households and businesses
accessing the system through their community phone service, fund balance and interest earned by the fund.
The rise in E-911 calls from wireless phones is expected to be an on-going issue for this fund. City staff is
currently collaborating with the Oklahoma Municipal League (OML), the Association of Central Oklahoma
Governments (ACOG) and the City of Tulsa to address the costs of implementation and operation of wireless E-
911 call enhancements.
Emergency Management Operating Revenue & Expenditure
History
$5,000
$4,500
$4,000
$3,500
Thousands
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures General Fund Subsidy
Accounting Basis-GAAP.
Page 36 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
FIREFIGHTING AND FIRE-RESCUE SERVICES, FACILITIES OR EQUIPMENT
The Fire-Fighting and Fire-Rescue Services, Facilities or Equipment Tax Fund was established in FY 1989-1990.
Funding is provided through a dedicated 3/4 cent sales tax approved by City voters for Fire and Police services,
thus; the Fund receives one-half of the revenues collected through the special sales tax. Personal Services
expenses include pay and benefits for a limited number of fire support personnel, and a proportionate share of all
firefighters’ pay and benefits. Other expenditures are used to support enhancement of existing programs and for
the implementation of new programs including new vehicles, facilities and equipment. In recent years, this fund
has not been able to add new projects. This is due to the high number of uniform employees who are supported
by this fund, and the issue of personnel costs growing faster than the revenues. Projected revenues for FY 2004
will not be sufficient to meet estimated expenditures. Section eight within this document addresses the projected
shortfall.
Firefighting Tax Operating Revenue & Expenditure
History
$28,000
$27,000
$26,000
Thousands
$25,000
$24,000
$23,000
$22,000
$21,000
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Accounting Basis-GAAP.
Five Year Forecast – FY 2004-2008 Page 37
City of Oklahoma City Office of the City Manager
GENERAL FUND
The General Fund is used to account for all funds received and disbursed for general municipal government
purposes including all assets, liabilities, reserves, fund balances, revenues and expenditures that are not accounted
for in any other fund. The General Fund is the largest source of day-to-day service delivery. Sales tax, at roughly
57% of revenue, is the primary funding source for the General Fund. Where expenditures have exceeded revenue,
the City has utilized fund balance. In FY 2002 revenues fell below expenditures for the first time in several years.
Approximately $5 million in fund balance was used to meet expenditures.
General Fund Operating Revenue & Expenditure History
$270
$260
$250
$240
MIllions
$230
$220
$210
$200
$190
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Accounting Basis-GAAP.
Page 38 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
GOLF COURSES
The City provides five municipal golf courses to the citizens. Costs of providing goods and services to the
general public is financed or recovered on a continuing basis primarily through user charges and
intergovernmental subsidies. On occasion, Golf Courses issue revenue bonds and utilize intergovernmental
subsidies to fund capital outlays such as renovation/refurbishment and to purchase golf carts.
Golf Course Operating Revenue & Expenditure History
$9,000
$8,000
$7,000
$6,000
Thousands
$5,000
$4,000
$3,000
$2,000
$1,000
$0
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures General Fund Subsidy
Accounting Basis-GAAP.
Chart contains operating revenues, expenditures and transfers to and from other funds for trend
analysis of those revenues only. Chart is not intended to be a complete analysis of revenues and
expenditures. Non-Operating revenues and expenditures such as investment income and debt
service expense are not included.
Five Year Forecast – FY 2004-2008 Page 39
City of Oklahoma City Office of the City Manager
MAPS OPERATIONS FUND
The MAPS Use Tax was a companion tax levy to the MAPS Sales Tax approved by City voters on December 14,
1993. The tax provided a levy of 1.0% on the sale of goods not subject to sales tax. The MAPS Use Tax went
into effect on January 1, 1994, and is in addition to the 2 7/8% General Use Tax. The tax expired on June 30,
1999. Funds collected from the additional levy are accounted for separately and are to be used for operating,
maintaining and replacing capital, as needed on any or all of the nine major MAPS projects. The MAPS
Operations Fund budget reflects only the funding for adopted expenditures. The MAPS Operations Fund is
primarily being utilized to maintain the Bricktown canal area, dredging on the North Canadian River, and to
establish capital replacement accounts for the other projects. The revenue shown in fiscal years 2000-2002 is
primarily interest income. The spike in expenditures in FY 2002 is due to costs associated with the river
development and the purchase the scoreboard system for the Ford Center Arena.
MAPS Operations Fund Operating Revenue & Expenditure
History
$6,000
$5,250
$4,500
$3,750
Thousands
$3,000
$2,250
$1,500
$750
$0
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Accounting Basis-GAAP.
Page 40 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
POLICE SERVICES, FACILITIES OR EQUIPMENT
The Police Services, Facilities or Equipment Tax Fund was established in FY 1990. Funding is provided through
a dedicated 3/4 cent sales tax approved by City voters in FY 1989. The Fund receives one-half of the revenues
collected through the special sales tax and additional revenue from security contracts. Personal Services expenses
include pay and benefits for some police support personnel and a proportionate share of all police officers’ pay
and benefits.
Police Tax Operating Revenue & Expenditure History
$28,000
$27,000
$26,000
$25,000
Thousands
$24,000
$23,000
$22,000
$21,000
$20,000
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Accounting Basis-GAAP.
Five Year Forecast – FY 2004-2008 Page 41
City of Oklahoma City Office of the City Manager
SOLID WASTE MANAGEMENT
The Solid Waste Management Division was moved from the Public Works Department to the Water Department
as part of the FY 1998 budget. The Division functions as an enterprise responsible for the supervision,
coordination and control of various work activities that contribute to the health, welfare and beautification of the
community through a high level of refuse collection services.
The Solid Waste Management Cash Fund, formerly the Sanitation Cash Fund, was established to track the
revenues and expenditures of refuse collection activities. In FY 1999, receipt of revenue was changed to simplify
operations. All revenues related to Solid Waste Management operations are deposited into the Oklahoma City
Environmental Assistance Trust (OCEAT). The Trust transfers a portion of the revenues to the Solid Waste cash
fund for operational costs. A rate increase was approved by City Council on July 23, 2002 and went into effect in
FY 2003.
Solid Waste Operating Revenue & Expenditure History
$34,000
$32,000
$30,000
Thousands
$28,000
$26,000
$24,000
$22,000
$20,000
$18,000
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Includes combined Trust and Cash Fund data per CAFR. Accounting Basis-GAAP.
Chart contains operating revenues, expenditures and transfers to and from other funds for trend
analysis of those revenues only. Chart is not intended to be a complete analysis of revenues and
expenditures. Non-Operating revenues and expenditures such as investment income and debt
service expense are not included.
Page 42 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
STORMWATER DRAINAGE
Council established the Stormwater Drainage Utility on June 13, 1995, to address federal mandates governing
National Pollution Discharge Elimination System (NPDES) programs. The utility is responsible for funding the
planning and implementation of strategies for improving the quality of storm and other runoff waters. The Utility
is an enterprise, with operating revenues generated from a drainage fee that is charged per household or business.
Charges for commercial entities are based on the estimated impact of runoff for new construction. Fees are billed
monthly along with water, wastewater and solid waste fees. The fund provides for maintenance of stormwater
drainage facilities and drainage capital improvements. In FY 2001 and FY 2002 fund balance was used for these
purposes. Staff is currently researching a possible rate adjustment to address this issue.
Stormwater Drainage Operating Revenue & Expenditure
History
$12,000
$11,000
$10,000
$9,000
Thousands
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Includes Cash Fund data per CAFR. Accounting Basis-GAAP.
Chart contains operating revenues, expenditures and transfers to and from other funds for trend
analysis of those revenues only. Chart is not intended to be a complete analysis of revenues and
expenditures. Non-Operating revenues and expenditures such as investment income and debt
service expense are not included.
Five Year Forecast – FY 2004-2008 Page 43
City of Oklahoma City Office of the City Manager
STREET AND ALLEY
The taxes that support the operating budget of the Street and Alley Cash Fund are levied by the State of
Oklahoma, and include the Motor Fuel Excise Tax and the Vehicle Tax. Oklahoma City receives a percentage of
those revenues from the State, based on population. In addition, the General Fund provides a subsidy to the Street
and Alley Cash Fund. These funds are used for street construction and maintenance.
Street and Alley Operating Revenue & Expenditure
History
$20,000
$17,500
$15,000
Thousands
$12,500
$10,000
$7,500
$5,000
$2,500
$0
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures General Fund Subsidy
Accounting Basis-GAAP.
Page 44 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
TRANSIT AND PARKING
The Central Oklahoma Transportation and Parking Authority (COTPA) was created in 1966 as a Public Trust
pursuant to Title 60 of the Oklahoma Statutes, Section 176. The purpose of the Authority is to provide a means of
financing municipal public transportation services and functions. The trust indenture provides that the Authority
will acquire and operate the transportation service and equipment, receive all revenue generated from those
services, pay the debt service requirements on revenue bonds issued by the Authority, pay all operating expenses
and finance future improvements. The Authority does not have the power to levy taxes.
COTPA was broken into two distinct functions by Council action in September 1989. The Transit and Parking
Cash Fund was established as a direct result of the reorganization of COTPA, in which administrative functions of
the Authority became part of the City organization. The reorganization also separated Parking and Transit
Services into two distinct programs identified separately in the cash fund. From FY 1994 through FY 1997, the
Parking portion of this fund was part of the General Fund. The Parking Fund was again recognized as a distinct
cash fund as part of the FY 1998 budget. On April 27, 2001, the COTPA Board of Trustees (Board) approved a
series of price increases for the COTPA parking system that took effect July 1, 2001 and July 1, 2002. Part of this
increase will be used to fund the construction of a new Galleria Parking Garage. Fare increases for the public
transportation system were approved by the Board and took effect in FY 2003.
Chart contains operating revenues, expenditures and transfers to and from other funds for trend
Transit and Parking Operating Revenue & analysis of revenues and
analysis of those revenues only. Chart is not intended to be a completeExpenditure
expenditures. Non-Operating revenues and expenditures such as investment income and debt
service expense are not included. History
$30,000
$25,000
$20,000
Thousands
$15,000
$10,000
$5,000
$0
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures General Fund Subsidy
Includes combined Trust and Cash Fund data per CAFR. Accounting Basis-GAAP.
Five Year Forecast – FY 2004-2008 Page 45
City of Oklahoma City Office of the City Manager
WATER AND WASTEWATER
The Water and Wastewater Cash Fund was established in 1988 by the City Council for the purpose of identifying
operating revenues and expenditures of the Water and Wastewater Utilities Department. The funds provide for
the treatment of water and wastewater, management of plant facilities, management of the water and wastewater
distribution systems and the maintenance of accurate billing records for water, sewer, refuse collection and
drainage. Operating revenues are first collected by the Oklahoma City Water Utilities Trust (OCWUT), and then,
on a monthly basis, transferred to the Water and Wastewater Cash Fund for operation of the Water and
Wastewater Department. OCWUT was established in 1960 to finance water and wastewater system projects. The
Trust's financial activities are blended into the Water and Wastewater Enterprise Funds in the graph below. The
2002 revenue increase is attributed to an increase of $5,885,000 in OCWUT water charges and an increase of
$3,284,000 in OCWUT wastewater charges.
Water and Wastewater Operating Revenue &
Expenditure History
$115,000
$110,000
$105,000
$100,000
Thousands
$95,000
$90,000
$85,000
$80,000
$75,000
$70,000
$65,000
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Includes combined Trust and Cash Fund data per CAFR. Accounting Basis-GAAP.
Chart contains operating revenues, expenditures and transfers to and from other funds for trend
analysis of those revenues only. Chart is not intended to be a complete analysis of revenues and
expenditures. Non-Operating revenues and expenditures such as investment income and debt
service expense are not included.
ZOO
The Oklahoma City Zoological Trust is a public trust of which the City of Oklahoma City is the sole beneficiary.
The Trust operates the Oklahoma City Zoo under a lease and operating agreement with the City. On July 17,
1990, City voters approved a one-eighth cent sales tax levy for the limited purpose of funding the Oklahoma City
Zoo. The Oklahoma City Zoo Tax Fund was created to collect all revenues pursuant to the Zoo tax levy. An
Page 46 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
ordinance provides that Zoo Sales Tax funds will only be used for funding the following: the establishment,
maintenance, replacement, and expansion of zoological parks, gardens, and entertainment facilities; the
acquisition, maintenance, and replacement of real property, personal property, and buildings; the operational
expenses, education research and program expenses, conservation program expenses, and all other expenses
deemed necessary or advisable by the Oklahoma City Zoological Trust in connection with the operation of the
Oklahoma City Zoo.
Zoo Tax Operating Revenue & Expenditure History
$14,000
$13,000
$12,000
Thousands
$11,000
$10,000
Includes combined Trust and Cash Fund data per CAFR. Accounting Basis-GAAP.
$9,000
1997 1998 1999 2000 2001 2002
Fiscal Year
Revenues Expenditures
Five Year Forecast – FY 2004-2008 Page 47
City of Oklahoma City Office of the City Manager
The City of
OKLAHOMA CITY
Page 48 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION FIVE
GENERAL FUND REVENUES
TRENDS & FORECAST
Five Year Forecast – FY 2004-2008 Page 49
City of Oklahoma City Office of the City Manager
FACTORS INFLUENCING GENERAL FUND REVENUES
Many factors influence City revenue collections and, consequently, the quality and extent of services provided to
citizens. Some of these factors are directly within City government's ability to control. Examples of such internal
factors include actions taken by citizens and City leaders to establish, abolish, increase, or decrease local taxes,
charges or fines.
Although such actions may positively or adversely affect general and special revenue funds, various complex
external factors also influence City revenue collections. Variables considered external, beyond City government's
direct ability to control, include population growth and the general condition of the national, state and local
economies. Important among such external factors are federal and state actions that have regulated municipal
revenue sources and reduced or eliminated certain grants to municipalities.
INTERNAL FACTORS
The citizens, City Council and City Manager of Oklahoma City are, in varying capacities, legally empowered to
regulate most general and special fund revenue sources. Specific legal procedures are required to establish or
abolish revenue sources and raise or lower applicable rates.
The following narratives summarize major factors that affect City revenues that are internally controlled by City
government and its citizens.
Citizen Authority Over Taxes: Perhaps the most highly visible revenue sources that can be controlled by City
leaders and citizens are local taxes. With the consent of the Mayor and City Council by ordinance and with voter
approval, City taxes can be established to meet targeted or general community needs. Prominent examples
include the establishment of the Zoo, Public Safety, Public Safety Equipment, and Oklahoma City Metropolitan
Area Schools limited-purpose sales taxes. Approval of the City Council and citizenry is also required for the
establishment of most public utility franchises, such as those currently granted to Oklahoma Gas & Electric,
Oklahoma Natural Gas and Cox Cable.
City Council Authority Over Other Revenue Sources: The Mayor and City Council are empowered with direct
and exclusive control over many City revenue sources including certain other taxes, fines and charges associated
with permits, licenses and services. Ordinances may be enacted granting nonexclusive franchises, establishing
new or modifying existing fines or charges, such as the establishment of vending stamps to regulate coin operated
machines or the recent increase in the fines for certain misdemeanor crimes. The City Council may pass
ordinances to impose charges for regulatory functions of the City, such as occupational licenses, animal shelter
fees or building permits.
Rates for core City services are frequently established by the City Council, or by proxy as members of a City
trust, as part of the City's annual budget process. Examples of such actions include: the implementation of new
services and the establishment of rates for municipal solid waste collection and disposal; drainage fees paid by
residential and commercial property owners; and rate adjustments to enhance water quality and wastewater
treatment. The City Council may perceive the need to establish such fees to upgrade operational standards or to
support an existing service that the General Fund can no longer sustain.
Although such service issues can legally be addressed independent of the budget cycle, concurrent development
of the annual operating budget with new or expanded programs creates an opportunity for City leaders to better
define community priorities and redirect funds as needed to attain City goals.
City Manager Authority: For a limited number of revenue sources, the City Manager is solely authorized by
position to establish and enforce charges. It is rare, however, that such action is taken without the expressed
consent of City Council.
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Office of the City Manager City of Oklahoma City
EXTERNAL FACTORS
Many factors affect local government revenues that are simply beyond the City's direct ability to control.
Examples of such factors are population, the general state of the economy and trends in public policy and private
industry.
City leaders and officials, through careful management and analysis, can influence many external factors and
therefore encourage private development. Such actions have an indirect, yet valuable, effect on municipal
revenue growth. For example, a city's population may be increased or decreased dramatically through annexation
or de-annexation, or special incentives may be established that attract targeted new industries to a city.
Ultimately, however, City government's role is to provide an adequate and attractive foundation for community
growth by preserving the peace, maintaining a sound infrastructure and by improving the overall quality of life.
It is the exception when significant population growth or concentrated private development can be credited to any
one direct local government action. Conversely, it is illogical to blame an erratic or recessed economy on a single
local government action.
Fortunately, the outlook for external factors affecting City revenues is generally good over the forecast period, as
compared to the economic difficulties experienced in recent years. During the past few years, Oklahoma City's
population has grown at a slow but steady pace, the local economy in general, has become more diversified and
employment rates have increased. All of these factors contribute favorably to potential revenue collections for the
City, however; given the structure of our tax system, these areas of growth do not directly translate into greater
revenue growth.
The following section briefly touches on several external factors that significantly affect City revenues.
Population: Population is a basic external factor that directly impacts City revenues. Population growth in the
City's Metropolitan Statistical Area, and beyond, results in increased retail trade and elevated sales and use tax
collections. Oklahoma City is the major retail trade center in the State with an estimated MSA population of 1.1
million people.
Growth within Oklahoma City's corporate limits increases municipal franchise collections as new utility
customers are added to the consumer base. Other key revenue sources, such as building permits, are also
contingent upon continued population growth within corporate Oklahoma City.
Local Economy: Oklahoma City's local economy has recently enjoyed greater economic diversification than at
any previous time, and it is this diversification that has helped it weather the recent economic downturn.
Oklahoma City serves as the seat of state government and has several significant federal installations including
Tinker Air Force Base and the Mike Monroney Aeronautical Center. Key factors that contribute to the health of
Oklahoma City's economy are summarized below.
• While national employment growth was negative in 2002, total non-agricultural employment in the MSA
is expected to have reached 545,900 during the fourth quarter of 2002, an increase of .56% over the prior
year.
• The fourth quarter 2002 unemployment rate for the Oklahoma City MSA is estimated at 3.8%. This
compares favorably to estimates of 6.0% for the nation.
• For the metropolitan area, growth in retail and wholesale trade during 2002 is estimated at 5.05%. Retail
trade is forecasted to increase by 3.99% by the latter half of 2003. Retail trade over the forecast period is
expected to average 4% growth annually.
• The 3rd quarter 2002 cost-of-living index for the Oklahoma City MSA remained attractive at
approximately 10.7% less than the national average. Grocery and housing costs have consistently
been well below regional and national levels.
Five Year Forecast – FY 2004-2008 Page 51
City of Oklahoma City Office of the City Manager
Favorable local economic indicators, however, do not necessarily translate into significant increases in City
revenues. Oklahoma City’s economy, for example, is becoming increasingly reliant on services and less on
manufacturing and retail. Since most services are generally exempt from sales tax, general economic health may
not generate significant, or even average, levels of sales tax growth.
Regional and National External Factors: A number of regional and national issues are currently pending that may
have serious impacts on City revenues. These factors include trends in private industry, as well as a large number
of legislative issues at the state and federal level. Examples of these issues are cited below.
Tax Reform – There is a new administration coming into the state government in 2003, and the state is
facing serious financial challenges, cutting nearly $600 million from its FY 2004 budget. The state
legislature will undoubtedly be looking at revenue options that could affect cities. There are also several
proposals addressing the way taxable sales are sourced, and the definition of point of sale. The City
continues to closely monitors these proposals to determine how they will affect Oklahoma City’s tax
base.
Deregulating Public Utilities - Along with many other state governments, the State of Oklahoma has
been examining deregulation of natural gas and electricity providers. What happened nationally in the
communications industry fifteen years ago may be analogous to the deregulation of these utilities locally.
The likely outcome will be increased competition, lower rates and dramatic shifts in the way utilities are
provided to end-users. Such changes may have radical effects on City franchise and sales tax revenues.
Reduced Federal & State Support to Cities - Federal grant monies have been drastically reduced and,
in some instances, eliminated altogether. Oklahoma City has experienced an increase in un-funded
federal and state mandates, and yet has seen grant revenues from these entities decrease for services such
as transit and job training programs. Tight budgets at these levels of government, combined with the
prevailing trend to push program services from the federal to the state and local levels, suggest further
reductions in City grant revenues while community expectations for the same level of service remain.
Page 52 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
REVENUE OVERVIEW
The General Fund has greater flexibility and diversity than other City funds since it consists of many various
sources. The City Council has the authority to determine there is a need to increase or decrease General Fund
service fees or fines, and can respond to changing economic or social conditions by establishing or abolishing
specific General Fund revenue sources.
As demonstrated on the graph below, City taxes generate the majority of all General Fund Revenues. Significant
revenue sources for the General Fund include Taxes, Franchises, Interest and Fines.
FY 2002-2003 GENERAL FUND REVENUE
BY REVENUE SOURCE
Use Tax 5.8% Other Taxes 2.1%
Franchise Fees 9.6%
Lic., Permits, Fees
Sales Tax 56.6% 2.5%
Fines 4.8%
Interest 2.4%
Service Charges
Other .5%
Administrative
Charges 4.7%
Transfers 5.2%
Fund Balance 3.3%
TOTAL GENERAL FUND REVENUE BUDGET
$265,577,122
With the City’s current revenue mix, continued stability of the General Fund is significantly contingent upon
growth in tax revenues, and sales taxes in particular. Sales tax growth has been positive, but the growth rate
slowed significantly in FY 2002. The historical average of sales tax growth for the City has been close to 4.5%
for both the eight year and five year averages. In FY 02, sales tax grew only 2.4% and current projections
through the remainder of FY 2003 show sales tax growth nearly flat at roughly 0.7% growth. The expectation for
FY 2004 is to return to 3% growth in sales tax revenue, which is a reasonable rate of growth, given that it is more
conservative than our historical average but greater than the growth we are currently experiencing. It should be
noted that the risks to economic recovery outlined in the Economic Overview section of this report could have a
direct negative impact on sales tax revenue. While the City should do all that it can to reduce its dependency on
sales tax revenues, it is expected that overall General Fund revenue performance in the forecasted future will
closely correspond to the anticipated growth rate of the sales tax.
Considering all revenue sources, it is likely that overall General Fund recurring revenue growth will average
approximately 3.4% over the five-year forecast period. While this growth rate may be substantial enough to
Five Year Forecast – FY 2004-2008 Page 53
City of Oklahoma City Office of the City Manager
remain consistent with the anticipated rate of inflation, it may not suffice to meet growth rates in City
expenditures if they continue to accelerate at current rates.
The following graph denotes actual, budgeted and anticipated General Fund revenue collections through the
forecast period. Budgeted fund balance is excluded from this illustration as it does not represent a recurring
source of City revenue.
All General Fund Recurring Revenues
Actual & Projected Revenues
$300
$290
$280
$270
Millions
$260
$250
$240
$230
$220
$210
$200
Actual Actual Actual Projected Projected Projected Projected Projected Projected
FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY08
The various sources of General Fund revenue are summarized in the remainder of this section, with historic trends
and projected performance. Due to its significant contributions to the revenue base, additional information is
included regarding the sales tax. Other General Fund revenue sources such as the Use Tax, Other Taxes and
Franchises will follow.
SALES TAX REVENUES
City sales taxes are the largest single source of revenue for Oklahoma City. Sales taxes are applied to most retail
transactions as provided by State law and collected by local vendors, who then remit the revenues to the
Oklahoma Tax Commission. The City maintains agreements with the Oklahoma Tax Commission for
administration and enforcement services associated with Sales and Use Taxes. The City receives revenues one
month after receipt by the Oklahoma Tax Commission, that is two months following the date of the taxable
transaction for smaller sales tax remitters. In FY 2002, the Tax Commission implemented SB 984, which requires
vendors over a certain dollar amount to submit tax receipts 15 days earlier, and allows them to submit an estimate
that can later be adjusted. Thus, the City receives some revenue approximately 45 days after the transaction and
some revenue 60 days after the transaction.
The City levies a total of 3.875% in sales tax. Combined with the State levy of 4.5%, the total state and municipal
sales tax rate charged within corporate Oklahoma City limits is 8.375%. Canadian County assesses an additional
levy of 0.35% for purchases made within their jurisdiction. Pottawatomie County assesses an additional 1.00%
sales tax levy.
The 2% General Sales Tax accounts for 56.6% of the City's General Fund. During recent years, however,
specific community needs have been targeted with critical new programs. As the General Fund was clearly
incapable of fully funding these programs, new revenue sources were needed. On four separate occasions voters
approved additional sales taxes to fund specific municipal services and programs. These sales taxes are
summarized as follows.
The 0.50% Police/Fire Equipment Tax is a limited-term levy (expiring February 28, 2003) that
finances Police and Fire mobile equipment, a new City-wide trunked radio system, computer aided
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Office of the City Manager City of Oklahoma City
dispatch systems, new records management systems, police helicopter, new mobile data terminals and
upgrades of the emergency warning system.
The 0.50% Oklahoma City Metropolitan Area Public Schools (OCMAPS) Sales Tax is a
limited-term levy (effective January 1, 2002 and expiring March 31, 2003) that finances the
construction and improvements to 24 school districts located within the Oklahoma City limits. In
April 2003, the rate for the OCMAPS tax increases to 1.00%, which expires in 2009.
• The 0.75% Public Safety Sales Tax is a permanent levy, ratified on June 20, 1989, dedicated to fund
Police and Fire services, facilities and equipment.
• The 0.125% Zoo Sales Tax is a permanent levy, ratified on July 17, 1990, that funds capital and other
expenses relating to the Oklahoma City Zoo.
Revenue Trends: Substantial increases in total sales tax revenues have mostly resulted from the addition of the
dedicated-purpose levies. Additionally, the City has historically benefited from the general stability of the
economy and modest growth in population and industry. Currently, the sales tax average annual growth over an
eight-year period ending with FY 2002 is 4.48%. While the Sales tax growth historically is good, in recent years
the growth has been slower than the average.
Staff works closely with the Oklahoma Tax Commission and the Revenue Enforcement Unit in the City
Treasurer’s Office to determine potential causes of any slow growth in sales tax collections. Key areas under
review by staff include:
• Monitoring the possible erosion of the City’s sales tax base to other central Oklahoma municipalities.
• Evaluating outlying suburban addresses or COPO (City Operating Postal Code) codes that could
undermine various home-related bills that are located in the Oklahoma City limits but are listed as
suburban addresses.
• Evaluating procedures for tax administration and enforcement, including taxpayer compliance issues.
• Determining the impacts of new tax reform initiatives on sales tax collections.
• Assessing the adequacy of controls established by City management and the Oklahoma Tax Commission
to ensure the accuracy and completeness of sales tax revenues.
• Exploring other factors that may substantially impact sales tax collections, such as the impacts of unusual
weather conditions on taxable utilities and the effect of internet purchases on local retail sales. Staff is
currently working with the Oklahoma Tax Commission to study the possible effects of the Streamlined
Sales Tax Agreement that is expected to be proposed in the state legislature in 2003.
While these studies have helped the further understanding of sales tax dynamics and perhaps marginally improve
collections, a number of important issues have surfaced pertaining to the long-term future stability of City
revenues. Such issues include the need to encourage retail development in the City and to explore additional,
more diverse, sources of revenue. Identified as one of five key issues by City Council, a committee of civic
leaders from the City and the business community was identified and is exploring issues related to Strengthening
the Revenue Base for the City.
Sales Tax Revenues by Standardized Industrial Code (SIC): The Standardized Industrial Code classifies business
establishments by type of activity to monitor and analyze related statistics. It provides uniformity in data
collection and reporting through the standardization of business establishments throughout the country.
Five Year Forecast – FY 2004-2008 Page 55
City of Oklahoma City Office of the City Manager
The following pie chart illustrates the most significant sectors of Oklahoma City’s FY 2002 sales tax base. As
shown, the household retail sector represents 62.17% of all sales tax collections through June 30, 2002.
Sales Tax Economic Base
Through June 30, 2002
Services
11.45%
Wholesale Trade
8.99%
Utilities
6.77%
Transportation &
Retail Trade Communications
62.17% 6.15%
Manufacturing
2.87%
Miscellaneous
1.60%
Total $7.7 Billion in Gross Sales
Graph based on unaudited SIC data provided by the Oklahoma Tax Commission.
This chart depicts a breakdown of the growth in sub-categories that comprise the household retail sector.
FY 2001-2002 Household Retail Sales Growth
Thru June 30, 2002
15%
11.94%
11.32%
10%
5% 4.23%
1.55% 1.98% 1.71%
0.88%
0%
Building General Food Automotive Apparel Furniture Eating and Miscellaneous
materials Merchandise Drinking
-5% -4.86%
Page 56 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
Household retail tax collections grew 4.45% for FY 2002. Most of this growth occurred in the general
merchandise category (11.94% growth). However, the large increase in general merchandise is diminished by
negative growth from the sale of food for at-home consumption (groceries, etc.) as it decreased 4.86%. Staff
believes much of this has to do with the proliferation of supercenters, such as Wal-Mart that are categorized as a
general merchandise store. This shows that more people are probably buying groceries at supercenters instead of
conventional grocery stores, which is consistent with nationwide trends. Eating and drinking establishments also
fared well, finishing FY 2002 with 11.32% growth.
SUBURBAN COMPARISON
As demonstrated in the following table, Oklahoma City did not fare as well as its suburban neighbors in FY 2002
sales tax growth. Part of the reason may be because the recent recession hit manufacturing industries harder than
Comparison of Sales Tax Growth
FY 2001 to FY 2002
15.0%
12.5%
12.5%
Annual Growth Rate
10.0%
7.5%
4.9%
5.0%
3.0%
2.5%
2.5%
0.0%
Oklahoma City City
Edmond Norman Moore
other industries, and Oklahoma City has a greater reliance on sales tax revenues from industries other than retail
than the comparison cities. Thus, retail expansion has an exaggerated effect on sales tax receipts for those cities
as compared to Oklahoma City. Moore added two significant retail establishments in FY 2002, and is expected to
experience a leveling of growth. While Norman has had a recent retail boom along the I-35 corridor, it typically
sees growth rates closer to 6% and 8%. Edmond also has historically seen growth rates closer to 6% to 9%, and
may be seeing the same trend in slower retail growth that Oklahoma City is experiencing.
Erosion Of “Main Street” Sales - The loss of revenue to Internet sales has been discussed by the legislature in
Oklahoma for the past two sessions, and it is anticipated to be a popular topic in the 2003 session. Two separate
bills have been discussed, both of which intend to capture lost revenue from Internet sales. One bill would require
Oklahoma’s Internet sellers to compute sales tax based on the company’s location rather than the buyers’. The
tax receipts would then be pooled and divided among all Oklahoma counties and towns proportionally.
Another bill expected this legislative session is in line with the Streamlined Sales Tax Agreement that was drafted
in 2002 by a consortium of states. The purpose of the agreement is to make it easier for retailers to work with the
states to collect sales tax on items sold over the Internet, catalogs or other means. Thirty-four states have agreed
to work toward meeting the streamlined requirements, which would affect the point of sale definition and provide
for greater uniformity among state tax systems. Throughout the country, states are losing $13.3 billion annually
on untaxed online sales, according to a University of Tennessee study conducted for the Institute for State
Studies. The same study projects that by 2006, the loss will reach $45.2 billion. Here in Oklahoma, the
Five Year Forecast – FY 2004-2008 Page 57
City of Oklahoma City Office of the City Manager
Oklahoma Tax Commission (OTC) estimates that in 2000, Oklahoma and its counties, cities and towns lost $200
million in revenue on Internet sales alone.
However, according to the Oklahoma Tax Commission, certain sales which take place over the Internet are
subject to State and local sales taxes. Such sales may be subject to taxation if: a) the business entity has
established nexus within the State of Oklahoma; and b) the consumer of the product or service resides within the
State of Oklahoma. Sales between an Oklahoma-based Internet vendor and an out-of-state consumer are not
subject to Oklahoma sales tax. Such transactions may be subject to taxation in the state in which the product or
service is received. Sales between an out-of-state vendor and an in-state consumer are legally subject to tax.
Such taxation may be accomplished through several possible means, similar to the procedures applied to mail
order or catalog sales. An out-of-state vendor may, at its discretion, register with the OTC. In this event, the
vendor reports and remits sales taxes directly to the OTC. If the vendor is not registered with the OTC, it is the
responsibility of the in-state consumer to remit appropriate tax on the transaction. Until uniform national or state
laws on collection of sales taxes on transactions conducted on the Internet or through catalogs are passed, this will
continue to be a legitimate source of revenue that will be virtually unreachable/uncollected.
In addition, the OTC estimates that taxpayer compliance with existing sales and use tax laws is low. Part of the
problem appears to be due to a lack of adequate information to consumers and taxpayers. The problem may be
exacerbated by the fact that many companies that do remit may do so using the customer’s zip code as a primary
identifier to determine which City should receive the tax. Many of Oklahoma City’s zip codes are shared with
other municipalities, raising the possibility that tax revenues may be misdirected.
Personal Income in Oklahoma - Oklahoma per capita personal income was more than 19% below the national
average during 2000. Of the seven states that border Oklahoma, only Arkansas and New Mexico had lower per
capita personal incomes. Kansas, Texas, Missouri and Colorado had per capita personal incomes well in excess
of Oklahoma’s. According to the Oklahoma State University College of Business Administration, personal
income for the Oklahoma City MSA is expected to increase 4.4% in 2003. Per capita personal income should
reach $28,751 in 2003, or 89% of the national average, while statewide per-capita income is expected to increase
3.5% in 2003.
Other Factors - A multitude of other factors impact the City’s sales tax growth. Some of the factors have had
adverse impacts. Among them was the mild weather during the summers of 1999 and 2002 and in the winter of
1998 that sharply reduced taxable consumption of utilities for home heating.
Factors Affecting Revenue Projections: Given its historical instability, it is difficult to predict future sales tax
performance with reasonable certainty. Sales tax growth for the current fiscal year as of January 2003 is 0.17%
below the same period last year, however, economists at Oklahoma State University believe we have seen the
bottom of negative growth in our sales tax and should return to normal growth patterns in the coming year. Yet,
there are additional factors that may hinder this growth, including the continuation of low population growth and
low inflation in Oklahoma City. Additional concerns that may adversely impact City sales tax collections during
the forecast period are not strictly tied to local economic performance. Specifically, these issues are driven by the
national and state political environment as well as by the court system.
Economic Factors - Economic assumptions for the immediate future include:
• Continued low population growth of approximately 1.0%;
• A marginal increase in the overall rate of inflation, projected at approximately 2.5%;
• A return to a normal rate of sales tax growth of approximately 3.5%.
New Sales Tax Exemptions - Beyond the local economy, sales tax exemptions on purchases made during the
manufacturing process have had an immediate and dramatic impact on City sales tax revenues, and have lowered
our overall sales tax base for the immediate future.
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The State of Oklahoma routinely provides certain sales and use tax exemptions for materials, supplies and
equipment used in the manufacturing process. In a State Supreme Court ruling, the application of these
exemptions was significantly broadened to include purchases made during the initial design phase of a product
and production of a product catalog.
The Oklahoma Tax Commission notified approximately 6,000 manufacturers across the state of these new
interpretations of the manufacturing sales and use tax exemptions in 2001. As a result, many of these taxpayers:
1) may remit fewer sales taxes in the future as more of their manufacturing purchases are now considered exempt;
and, 2) may file for refunds of sales taxes paid to the state, counties and municipalities during the past three years.
Several local manufacturers received refunds totaling more than $1,654,274 in City sales tax during FY 2001 as a
result of these expanded exemptions. In spite of the impact of manufacturers’ sales tax refunds on collections,
annual adjusted sales tax growth of 4.67% was sustained during FY 2001, but was again impacted in FY 2002 as
the January 2002 sales tax receipts were credited approximately $734,000 as a result of an exemption. The three-
year deadline for back credits has passed, so management does not anticipate further exemption payments in FY
2004. However, it must be noted that these payments are now factored out of our sales tax revenue base and will
not be replaced.
Sales Tax Revenue Forecast: Based on the economic projections presented and on recent trends, future sales tax
growth is estimated at 3.04% for FY 2004, and an average of 3.63% annually for the remainder of the forecast
term. This translates to an average increase of more than $5.6 million in General Fund revenue each year.
General Fund Sales Tax
Actual & Projected Revenues
$180
$170
$160
$150
Millions
$140
$130
$120
$110
$100
$90
$80
Actual Actual FY Actual FY Projected Projected Projected Projected Projected Projected
FY 00 01 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
Five Year Forecast – FY 2004-2008 Page 59
City of Oklahoma City Office of the City Manager
OTHER TAX REVENUES
The City receives tax revenue from a variety of other sources. Aside from the Sales Tax, the largest single tax
source for Oklahoma City is the Use Tax, which is levied on goods and equipment imported for internal use and
not for resale. Examples of items subject to Use Tax are shopping carts, shelving and building materials used for
the operations of a retail outlet, distributorship or manufacturing facility. Three use taxes are currently levied in
the City, one for the General Fund, one for the Public Safety Capital Equipment Use Tax fund and one for the
MAPS for Kids Use Tax Fund. The General Fund Use Tax rate of 2.875% generated $15.2 million in FY 2002
and is expected to bring in $15.6 million for FY 2003. The Use Tax typically accounts for roughly 6% of all
recurring General Fund revenues.
Other taxes levied by the City include the Hotel/Motel Tax, the Alcoholic Beverage Tax and the Remington Park
Admissions Tax. Revenues from the 2% Hotel/Motel Tax are currently dedicated by contract to the Oklahoma
City Chamber of Commerce Convention and Visitors Bureau. Revenues received from the Alcoholic Beverage
Tax and Remington Park Admissions Tax supplement the General Fund.
Other Taxes
Actual & Projected Revenues
$28
$26
$24
$22
Millions
$20
$18
$16
$14
$12
$10
Actual Actual Actual FY Estimated Projected Projected Projected Projected Projected
FY 00 FY 01 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
Note: Other taxes includes audit revenue
The City’s Water/Wastewater and Solid Waste Management enterprises operate as regulated monopolies using
City rights-of-way. Accordingly, these entities make payments to the General Fund, which are considered Other
Tax revenues. The City receives 2% of gross receipts, which is the maximum allowed by State law.
Revenue Trends: Use Tax rates are tied to the local sales tax rate. The local sales tax rate gradually rose from 2%
in 1988 to the current 2.875% from the implementation of the Public Safety and Zoo sales taxes. The Public
Safety Capital Use Tax is being used for operation of a project office to oversee implementation of the programs
and supplement sales tax funding if needed. The OCMAPS Use Tax collections are being dedicated to capital
project-related expenses. Use Tax collections have fluctuated widely in the past few years. Increased commercial
development in FY 2001 created a 22% increase in Use Tax revenues. In FY 2002, Use Tax experienced a
subsequent contraction, falling nearly $2 million or 11% below the prior year’s collections. In comparison, Use
Tax has performed well in FY 2003, mostly due to a ruling by the Oklahoma Tax Commission regarding the use
of parts from inventory for car repairs covered by warranty.
Hotel/Motel Taxes have consistently experienced moderate growth, though are seeing a decline in actual revenue
in FY 2003 at 3.2% below prior year collections in the first half of the year. Trends in convention attendance and
rate cutting by hoteliers to increase occupancy levels are believed to be the major factors in the current downturn
in hotel/motel tax collections. Alcohol Beverage tax has remained fairly constant while proceeds from the
Remington Park Admissions tax have declined in recent years. Revenues from the City’s Water, Wastewater and
Page 60 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
Solid Waste utilities have fluctuated during the past several years due to unusual weather conditions and a phased-
in rate increase.
Revenue Projections: It is anticipated that Use Tax revenues will hold steady in the current fiscal year and return
to a more moderate level of growth (3%) during the forecast period. As the economy begins to expand, Use Tax
could return to its previous pattern, which netted double-digit growth.
Revenues from the Water/Wastewater and Solid Waste Management utilities are expected to increase with
increases in population, rates and development. Hotel/Motel Tax revenues should experience healthy growth over
the forecast term as a result of MAPS spin-off development, which is evident in the two hotels currently under
construction in downtown Oklahoma City. Overall, Other Tax revenues are expected to grow at the rate of
approximately 2.6% annually during the forecast period.
Five Year Forecast – FY 2004-2008 Page 61
City of Oklahoma City Office of the City Manager
FRANCHISE REVENUES
Franchise revenues are derived, generally, from a levy on the gross receipts from utilities for the privilege of
accessing public streets and right-of-ways and to reimburse the City for the cost of administering and enforcing
the franchise. Four companies (Oklahoma Gas & Electric, Oklahoma Natural Gas, Southwestern Bell Telephone
and Cox Cable) remit fees to the City that typically comprises 95% of all franchise revenues.
Revenue Trends: Revenues are based on the franchise levy, population, pricing and weather conditions. During
the past three fiscal years, revenues from the City’s largest franchise, Oklahoma Gas & Electric have shown the
volatility associated with the weather and energy prices. In FY 2001, OG&E saw unprecedented growth as
revenues grew by 17%, which can be attributed to the unusual weather conditions during the summer of 2000 and
winter of 2001. In FY 2002, receipts dropped back to their normal trend, as conditions were more typical. Then,
in early FY 2003, an unusually cool summer caused these revenues to come in 14% below the prior year for the
first three months of the fiscal year.
Revenues from the Cox Cable franchise have increased substantially as the result of general expansion, price
increases and implementation of a higher franchise rate in January of 1998. For the past five fiscal years, cable
franchise revenue growth has exceeded 10%. However, in March 2002, the FCC issued a Notice of Rulemaking
that exempted digital Internet service provided by cable companies from local franchise fees. It is unclear what
the long-term effect of this will be, but in the short term, $400,000 in revenue was subtracted from the revenue
base and the growth rate is expected to slow.
Revenue Projections: Given the significant amount of volatility in energy prices, and the current uncertainty in the
telecommunications market, the forecast for these revenues reflects the long-term trend. Both the gas and electric
franchises average a long-term growth rate of 2.5%. Other franchise growth rates are either flat or show an
increase in the 1.0%–1.5% range. Franchise revenues are estimated to grow an average of 2.92% throughout the
forecast period.
Franchises
Actual & Projected Revenues
$28
$26
Millions
$24
$22
$20
$18
Actual Actual Actual Estimated Projected Projected Projected Projected Projected
FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
Page 62 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
OTHER GENERAL FUND REVENUES
Many other sources contribute to the General Fund revenue base. These sources are summarized as follows.
Licenses, Permits & Fees - Building permits and various business and occupational licenses are among
the sources contained in this revenue category. These charges are designed to recover costs of the
enforcement and administration of City codes. Since growth is largely contingent upon property
development and general business activity, observation of revenue trends can provide a reasonable
indicator of the City's vitality.
Services & Administrative Charges -Animal Shelter, Engineering, Planning, Recreation and Police fees
are some of the sources included in this category. Parking Meters, and Myriad Garden revenues, as well
as inter-agency charges for services such as accounting and legal are included.
Investment Income - Investable bond funds and operating reserves are pooled to earn interest for the
General Fund.
Fines - This revenue category includes all fines imposed for municipal traffic and parking violations, and
fines imposed by the Court of Record and Criminal Court.
Other Revenues - This category includes a variety of miscellaneous sources such as revenues from the
sale of City property, rental income and grant reimbursements.
Interfund Transfers - This revenue source includes transfers from the Public Safety Sales Tax Fund as
reimbursements for Police and Fire wage adjustments.
Revenue Trends: License and permit revenues have slowed from previous years’ growth patterns largely due to a
decline in commercial development and related activity. The May 1999 tornado had a significant impact on
building and other construction-related permits in FY 2000. These revenues subsequently declined, but have seen
significant growth in the first half of FY 2003. As on a national level, the construction industry has benefited
from the current low interest rates and residential construction has increased while commercial construction is
flat.
In line with the same trend, the City’s investment income has seen significant declines in the last two fiscal years.
Low interest rates combined with a lower level of fund balance have affected the General Fund as well as other
City funds that collect interest earnings.
Revenues from traffic fines waned in recent years as a result of the shift in public policy to increased
neighborhood patrolling by the Police Department. The RAAID program, initiated during FY 1998, is designed
to reduce traffic accidents by targeting aggressive and inconsiderate drivers. The introduction of this successful
program has had favorable impacts on traffic fine revenues. However, such success has been diminished by a
decline in normal traffic fines. The elimination of the state safety inspection sticker has impacted fines an
estimated $600,000 per year. Changes in the application of court fees and changes in fine rates will be submitted
to Council for consideration in the upcoming months. These changes have been factored in and would have a
positive impact on revenues in this area.
Transfers associated with the Public Safety Sales tax continue to increase at one-half the rate of recurring sales tax
growth. With sales tax projected to end FY 2003 at a 0.7% increase, the corresponding transfers will increase
0.35% in FY 2004 and 1.75% annually in the remaining fiscal years of the forecast.
Revenue Projections: Future Service and Administrative Charge revenues will be partially determined by internal
charges made by the Public Works Department for engineering services relating to G. O. Bond programs, MAPS
and MAPS for Kids. Revenue from the new alarm permit program is having a positive effect on revenue
projections for FY 2003 in this category and revenues from Fines are expected to increase in FY 2004 with a rate
Five Year Forecast – FY 2004-2008 Page 63
City of Oklahoma City Office of the City Manager
adjustment and grow very slowly after that. Interest revenue is closely tied to the Fed discount rate, which was
reduced over 450 basis points in 2001 and 2002. As the Fed eases its monetary policy, an increase in interest
earnings is expected. Such an increase is projected for FY 2005.
For the five-year forecast period, all other revenue sources will average 3.37% growth with FY 2004 coming in
highest with a growth of 8.11% due to changes in fines and FY 2005 through FY 2008 showing an average of
2.19% growth.
All Other General Fund Revenue Sources
Actual & Projected Revenues
$75
$70
Millions
$65
$60
$55
$50
Actual Actual Actual FY Estimated Projected Projected Projected Projected Projected
FY 00 FY 01 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
Note: Includes Licenses, Permits and Fees, Service and Administrative Charges, Investment Income, Other
Revenues and Interfund Transfers
Page 64 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION SIX
GENERAL FUND
EXPENDITURES TRENDS &
FORECASTS
Five Year Forecast – FY 2004-2008 Page 65
City of Oklahoma City Office of the City Manager
EXPENDITURE OVERVIEW
For the first time in the past seven years, the City reduced its fund balance in FY 2002 as total expenditures
exceeded recurring revenues. This was due to the downturn in the economy that resulted in lower than anticipated
revenues. Expenditure controls such as a hiring freeze, reductions in capital spending and deferral of
contributions to reserves served to keep expenditures below budget. While the downturn was not projected in the
adopted FY 2002 budget, having an unbudgeted fund balance available helped to cushion the impact of the
downturn. Just as City financial policies had directed, Fund Balance grew during times of economic growth and
contracted during more challenging times.
General Fund Growth Rates
Compared to Prior Fiscal Year
9%
8%
7%
6%
5%
Growth Rate
4%
3%
2%
1%
0%
-1%
-2%
-3%
1998 1999 2000 2001 2002 2003*
Recurring Revenue Expenditure
*2003 Figures are estimated
The above graph shows the growth rates for the past five years for recurring revenues and expenditures. The
graph shows that in most years the growth rates are close, but diverged in FY 2002. The City used Fund Balance
after making a number of expenditure cuts to help offset lower than projected revenue. Again in FY 2003 the
projected growth rates are a concern. The adopted FY 2003 budget projected expenditure growth of 3.93% over
actual FY 2002 expenditures. Currently, however, it is projected that recurring revenues will grow by only 0.7%
while expenditures will increase by 0.79%. The 0.79% increase in expenditures is in contrast to the 3.93%
increase budgeted. The marginal growth in expenditures is being achieved because departments took mid-year
budget reductions of less than one percent, funding for capital projects within the General Fund is being reduced,
a hiring freeze has once again been implemented, and a number of other miscellaneous reductions are being made.
This year the City will use approximately $1.5 million in fund balance in addition to the $8.65 million already
budgeted for FY 2003. In total these mid-year changes are projected to offset an estimated $8.6 million deficit in
recurring revenues by the end of FY 2003.
The trend of expenditure growth exceeding revenue growth results from factors such as the City’s over reliance
on Sales Tax revenue, the expansion of City services and policy decisions pertaining to employee compensation
and benefits. Cost control measures implemented within the past five years have helped to reduce the potentially
adverse long-term impacts that may be caused by continuation of this trend. While costs are continuing to grow,
the City is mandated by State law to maintain a balanced budget. In each year the City Council and staff make the
decisions necessary to keep the budget balanced.
Page 66 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
It is anticipated that general operating costs will continue to grow at a rate higher than inflation due primarily to
salary and benefit growth. Therefore, consideration of the implementation of new or enhanced City programs
should include conservative financial assumptions to maintain the financial stability of the City.
Expenditure Projections
State law mandates that the City budget according to five general categories: Personal Services, Other Services,
Supplies, Capital, and Transfers. These categories also provide a convenient way to divide City expenditures in
order to more closely examine the trends that are occurring and for making projections.
PERSONAL SERVICE EXPENDITURES
The significance of the Personal Service category to the City is clearly shown in the graph below. In the FY 2003
budget Personal Services are expected to make up 68%, or $180.7 million, of all General Fund expenditures.
Personal Services include salaries, insurance, retirement contributions, and professional services. Personal
Services expenditures clearly require special attention in order to effectively achieve cost containment while
maintaining service levels. The remaining 32% of General Fund expenditures include Transfers to other City
funds, Contractual Services, Supplies, and Capital.
FY 2002-2003
General Fund Budget
Capital Transfers By Category
0.5% 15.4%
Supplies
1.7%
Other Services
14.4%
Personal Services
68.0%
Total Expenditures of $265 6 Million
With 4,448 full-time positions and hundreds of part-time workers used throughout the year, the logistics of
acquiring, training, retaining and setting appropriate compensation for qualified employees are complex. The
broad scope of services provided by the City requires professionals in nearly every discipline.
One would expect to pay more for products and services purchased today than in 1999. Growth in Personal
Service costs, however, has generally been out of proportion with both General Fund revenue growth and the rate
of inflation.
Actual Personal Service expenditures grew 6.83% in FY 2002, while recurring revenues grew 0.41%. In FY
2002, the vacancy rate in the General Fund averaged 4.76% based on the number of budgeted positions. That
means that on average, 152 General Fund positions were vacant at any one time. The hiring freeze contributed to
this higher than normal vacancy rate. Using both growth in Personal Services and the vacancy rate shows how
Five Year Forecast – FY 2004-2008 Page 67
City of Oklahoma City Office of the City Manager
Personal Services costs would have grown significantly faster without the higher than normal number of vacant
positions. Salaries and employee benefit costs alone represent 97% of all Personal Service expenditures in the FY
2003 budget.
Dynamics of the City Work Force: One of the driving cost factors in the Personal Services expenditure category is
the number of City employees. The dynamics of the City’s work force have changed significantly during the past
ten years, reflecting changes in community priorities as well as varying levels of available financial resources.
While the total number of positions has only changed slightly during the last ten years, the distribution of those
positions has changed over time as the chart below demonstrates.
Workforce Size by Function
FY 1993 FY 2003 Change Change
City Function Employees Employees # %
Public Safety 2,281 2,403 122 5.35%
Public Services 1,347 1,383 36 2.67%
Culture & Recreation 250 200 -50 -20.00%
General Government 548 462 -86 -15.69%
Total Workforce 4,426 4,448 22 0.50%
Changes in City priorities and objectives over time, such as increased Police and Fire services resulting from the
earmarked sales tax, have altered the work force of city government in Oklahoma City. During the past ten years,
the composition of the City work force has changed dramatically, with a 5.35% increase in Public Safety
employees, and low or negative growth in other employee categories. The significant decrease in Culture and
Recreation employees can primarily be attributed to the privatization of the Cox Convention Center that resulted
in the deletion of 47 positions in FY 2000.
City Employees by Function
FY 2003
General Government
10.4%
Public Safety
Culture & 54.0%
Recreation
4.5%
Public Services
31.1%
Total Employees 4,448
In the current year, the importance of Public Safety is once again demonstrated by the fact that 54.0% of City
positions work in Fire, Police, or Courts functions.
Salaries & Benefits: The City of Oklahoma City is committed to attracting and retaining a highly skilled work
force by offering competitive salaries. The growth rate of the salary and benefit package, however, affects total
Personal Service costs more significantly than any factor other than the size of the work force.
Page 68 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
The City addresses employee wages in both general and specific ways. The City Council may unilaterally grant
general wage increases to members of one of the three collective bargaining units or to management employees.
Such actions may be taken to more closely align compensation with peer cities or to adjust for increases in the
cost of living. Several elements are contained within each employee group’s pay plans that can cause
expenditures to rise, including market raises, merit raises (based on satisfactory performance evaluations) and
longevity (a defined hourly rate paid to IAFF & FOP employees only based on tenure with the City).
The chart above demonstrates that the growing cost for employee salaries is due not only to market raises (which
adjust the pay plan), but also to merit and longevity increases. The chart shows the average percentage increases
Employee Wage Growth
Total Growth FY 98 through FY 03
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Consumer Price General Fund FOP (Police) IAFF (Firefighters) AFSCME Management
Index Recurring Revenue Pay Plan Pay Plan Pay Plan Pay Plan
Pay Plan Merit Longevity
that two hypothetical employees in each pay plan would have received over the period of FY 1998-FY 2003.
The model used to develop the information assumes a 5-year employee at the lower end of the pay plan and a 10-
year employee at the upper end of the pay plan for all four groups. In addition, it is assumed that a merit increase
is earned each year. One conclusion from this study is that market or pay plan increases have been sufficient to
keep up with inflation and that merit and longevity increases allow employee wages to grow at a rate greater than
inflation.
While salaries or wages are the major component of employee costs other costs include such things as:
retirement/pension contributions, uniform allowances, incentive pays, and employee parking. These benefits add
to the cost of the City’s workforce, but also help the City attract qualified employees and help keep employee
turnover low.
Overtime: Overtime costs are closely related to employee salary because overtime rates are based on base pay.
Overtime costs, however, are also dependent on the workload of the various City departments and on the rules
established through collective bargaining for calculating overtime pay. Over the last five years General Fund
overtime costs have risen by over 74% driven by higher Police and Fire Department overtime. In the Police
Department, the higher costs are often connected with grant programs that fund Police overtime to provide
additional Police services. In the Fire Department the primary difference is a change in the Collective Bargaining
Agreement made in FY 2001 that allows firefighters to count vacation time as hours worked for purposes of
calculating overtime. This change has increased overtime expenses to both the General Fund and the Fire Sales
Tax Fund by 30%.
Five Year Forecast – FY 2004-2008 Page 69
City of Oklahoma City Office of the City Manager
General Fund Overtime
$8
$6
Millions
$4
$2
$0
1998 1999 2000 2001 2002 2003*
Fiscal Year
*Budgeted
Fire Police Other
Insurance Costs: The following chart shows the sizeable increases in City insurance costs since FY 1999. The
trend, however, appears to be abating as we compare the FY 2004 budget to FY 2003 projections. This is due to
several factors including: a smaller employee base, plan design changes in the indemnity plan, increased
employee premium contributions and co-payments, and the fact that the International Association of Fire Fighters
has formed their own Voluntary Employee Benefits Association to provide insurance benefits to their membership
and that has set contribution levels from the City for firefighters.
City-Wide Insurance Transfers
to the MFA Operating Funds By Fiscal Year
$60
$50
$40
Millions
$30
$20
$10
$0
1999 2000 2001 2002 2003* 2004*
Fiscal Year
Employee Insurance Retiree Subsidy
* Estimated
Other Personal Service Costs: Several additional items add to Personal Services costs. These other expenditures
are expected to total more than $4.95 million in FY 2003. Expenditures included in this classification are such
items as part-time and temporary labor, travel and training and professional services. In total these other costs
make up 2.74% of Personal Service costs.
Cost Containment Efforts: For the past five years, numerous programs have been implemented to slow escalating
personnel costs. The following highlights some of these efforts.
Page 70 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
• Hiring Freezes - FY 2002 personnel costs were reduced through a hiring freeze in the second half of the year
and the City is currently under a hiring freeze that began in October 2002.
• Hiring Delays - Various 90-day and 120-day hiring delays have been imposed for non-emergency vacant
positions during the past five fiscal years.
• Longevity Freeze – During FY 1999, management longevity was frozen. Since then, new management
employees are not eligible for longevity. In FY 2001, longevity was eliminated for AFSCME employees. In
FY 2002 longevity was eliminated for management employees and rolled into their base salary.
• Longevity Escalation – The FOP and IAFF contracts in the past included a clause that increased the longevity
rates for the unit based on a percentage of a particular rank’s base rate of pay. The FY 2000 and FY 2001
agreements froze longevity escalation. However, as a result of arbitration, the FY 2002 IAFF contract
activated the longevity escalation clause and it continues in effect in FY 2003. The FOP longevity rate
remains frozen.
• Retiree Health Insurance – Through 2001, retiree health insurance premiums were based on 1997 actual costs.
From 1998 to 2001, the rate of increase in retiree premiums was 1% annually, which was far below the actual
rate of increase in costs. Current retiree premiums are based on factors which include age and number of
dependents. The City is incrementally increasing the retirees contribution percentage approximately 5%
annually until retirees are contributing 30% of the indemnity premium and 25% of HMO premiums. In FY
2003, retiree contribution rates are 15% for HMO plans and approximately 20% for the indemnity plan.
• Health Insurance – Along with increased premium sharing on the part of the employee, changes in plan
design, co-payments and/or deductibles further contain insurance costs. In FY 2001, an increase in
prescription drug co-pays was approved by all of the bargaining units. In calendar year 2002, indemnity
rates were based on 15% of the premium equivalent while HMO rates were based on 8.5% of the overall
premium. Several indemnity plan design changes were implemented in 2002 that are helping to contain cost
growth. In calendar year 2003, employees are paying 12.5% of the cost for HMO plans and 17.5% of the
indemnity plan premium equivalent. Also, in 2003, HMO plan design changes have been implemented that
include higher co-pays and higher drug costs that were implemented to keep costs from rising faster.
• Reduced Positions – In the FY 2003 budget 104 positions were eliminated due to the imbalance between
revenues and expenditures. Due to vacancies created by the hiring freeze, no employees were involuntarily
separated from City service. It is expected that more positions will be eliminated in the FY 2004 budget.
• Merit Raise Limits – Since FY 1998 through the current fiscal year, multiple merit step increases have been
prohibited. Merit increases are limited to one-step with a rating of at least “fully-competent” on an
employee’s performance evaluation.
Expenditure Projections: Assuming that COLA increases in employee salaries can be maintained at approximately
the anticipated rate of inflation and that the size of the work force does not increase substantially, the sharpest
increase in Personal Service costs during the forecast period will be in the area of employee benefits. This is due
to the expected return of double-digit inflation for health care services, along with the realization that savings
achieved through managed care have played out and that medical inflation will drive the costs of insurance. The
forecast includes an annual increase of insurance costs to the General Fund to be approximately 10%. Overall
growth in Personal Services is forecast to average 5.52% annual growth for the five-year period.
Five Year Forecast – FY 2004-2008 Page 71
City of Oklahoma City Office of the City Manager
General Fund Personal Services
Actual & Projected Expenditures
$240
$220
$200
Millions
$180
$160
$140
$120
Actual FY Actual FY Projected FY Projected FY Projected FY Projected FY Projected FY Projecetd FY
01 02 03 04 05 06 07 08
OTHER SERVICES
Other Services includes expenditures for costs such as contracts, utilities, printing and vehicle maintenance.
Additionally, all other operating expenses not included in any of the other expenditure classifications fall under
Other Services.
FY 2003 Other Service obligations are budgeted at $38.1 million or 14.4% of all General Fund expenditures. The
majority of costs are for external services such as utilities, contracts, leases, and economic development efforts.
Chargebacks are also included in Other Services and include charges between internal City agencies for vehicle
maintenance, printing services, computer support, and workers compensation and property and liability insurance.
Cost Containment Efforts: Efforts to reduce workers’ compensation costs have been implemented as the City has
attained status as a Certified Workplace as defined by State law. Educational programs and safety inspections are
an ongoing function of the Risk Management Division to minimize such costs. The renewed effort to update the
City’s vehicle fleet is also expected to result in lower per-vehicle maintenance costs, although that effort may be
hampered by the reductions in capital funding in FY 2002 and FY 2003. An Energy Manager was added in FY
2002 in Water and Wastewater Utilities and the Energy Manager is also providing assistance to the General Fund
in ways that can save on energy expenses.
Expenditure Projections: Costs for Other Services during the forecast period are expected to average 4.62%
growth. While most expenses are expected to closely mirror the rate of inflation, the primary exception is the
operating subsidy for EMSA. The City provides both an operating and capital subsidy to EMSA’s Western
Division. The operating subsidy is budgeted in Other Services. During the forecast period it is anticipated that
the operating subsidy will grow from $1.5 million in FY 04 to $3.0 million in FY 08. This large change is due to
the continuing decline in the rates paid by Medicare for emergency transport.
The overall growth rate in Other Services could change significantly if more City services are contracted out to
the private sector. While this is not projected in the model, continued high rates of growth in employee salaries
could result in more types of services being contracted out.
Page 72 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
General Fund Other Services
Actual & Projected Expenditures
$52
$48
$44
Millions
$40
$36
$32
$28
$24
$20
Actual FY Actual FY Estimated Projected Projected Projected Projected Projected
01 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
SUPPLIES AND CAPITAL
For purposes of this report only, expenditures for the Supplies and Capital (operating) categories have been
combined as each consistently represents only a small fraction of City operating costs.
Expenditures falling in the Supplies category include purchases of materials needed to effect repairs and routine
maintenance on City equipment and facilities, petroleum products such as fuel, and various other non-durable
goods such as office and cleaning supplies. Costs to the City for supplies are affected by the public's demand for
services, the needs of line departments for internal City services, and by various market variables.
Purchases for supplies are contracted by the City and awarded to the vendor that provides the lowest and best bid.
Many of these contracts are City-wide, providing savings through economies of scale. Annual increases are
generally in line with increases in the rate of inflation. The one exception is in the current year when supply costs
are expected drop by 4.5%. This reduction is due to departments reducing service levels in the adopted budget in
various areas and thereby reduced supply costs. In addition, many departments chose to reduce supply accounts
further to meet the requirements of the mid-year budget reductions as a way to temporarily achieve savings.
Supplies are budgeted at $4.4 million or 1.66% of all General Fund expenditures in FY 2003, but with the mid-
year budget reductions taken, the costs for supplies are expected to total about $3.96 million.
Expenditures for supplies are extremely diversified in nature, comprised of literally thousands of relatively small
transactions, reducing the City's ability to impose broad cost reduction measures to attain long-term expenditure
control. Additionally, most of the larger subcomponents of the Supplies category are essential items such as parts
for routine maintenance and repairs, and non-durable office supplies. Such costs are demand driven and
necessary for the fulfillment of City objectives.
Capital costs (replacement of office equipment, etc.) have generally been minimal in the General Fund. Most
capital projects not funded by dedicated sources, such as bonds or dedicated sales taxes, are handled in the Capital
Improvement Fund. Capital expenditures total only $1.4 million and are 0.53% of the FY 2003 General Fund
budget.
The one significant area of capital expenditures is the capital subsidy the City is providing to EMSA. The City
provides both an operating subsidy and a capital subsidy. Through the capital subsidy, the City is buying assets
for the Western Division of EMSA and then leasing those assets back to EMSA for a nominal fee. The five-year
Five Year Forecast – FY 2004-2008 Page 73
City of Oklahoma City Office of the City Manager
projections for EMSA show a significant increase in FY 2005 because the City is currently planning to under fund
EMSA’s capital needs to due to the projected budget imbalance in FY 2004 and will need to begin “catching up.”
Funding for Street Resurfacing and the Capital Improvement Program are included as Transfer expenditures to
other City funds.
Cost Containment Efforts: For both Capital and Supplies, little promise exists for substantial cost reduction
during future years. These expenditures provide the equipment and raw materials required for the City to perform
its basic functions, and are generally costs that are driven by uncontrollable market factors and play a relatively
small role in overall General Fund costs. By working with EMSA the City may be able to keep capital costs from
increasing too rapidly, although providing ambulance service requires continued capital investment.
Expenditure Projections: Capital expenditures will be driven by EMSA’s capital requirements which vary from
year to year. Costs for Supplies should increase pursuant to the annual rate of inflation and the City’s demand for
materials used in existing, new or expanding programs and services.
General Fund Supplies & Capital
Actual & Projected Expenditures
$8
$7
$6
Millions
$5
$4
$3
$2
$1
$0
Actual Actual Estimated Projected FY Projected FY Projected FY Projected FY Projected FY
FY 01 FY 02 FY 03 04 05 06 07 08
TRANSFERS
General Fund Transfer costs reflect the General Fund's direct financial support of a multitude of services whose
own dedicated funding sources are insufficient to meet City objectives. In total, the FY 2003 General Fund
budget includes $40.9 million in transfer . This represents 15.4% of the General Fund budget. Major transfers
and their FY 2003 budget amounts include:
Retiree Health Insurance $16.8 million
COTPA transit operations $6.4 million
Street Resurfacing Capital $5.0 million
Street and Alley Fund operations $4.9 million
Capital Improvement Fund $3.5 million
E-911 $2.4 million
Expenditure Projections: Barring the identification of new funding sources, subsidies for Transit, E-911, Retiree
Health Insurance and other programs are expected to rise during the forecast period, reflecting both increased
costs for service and diminishing alternative funding sources. Overall, Transfer expenditures are projected to
Page 74 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
increase an average of 9.63% over the forecast period. Much of the increase is attributed to a projected 10%
annual increase in the retiree health insurance subsidy from $17.6 million in FY 04 to $25.7 million in FY 2008.
Beginning in FY 05, the General Fund will begin paying back a $4 million loan from the Worker’s Compensation
fund that will fund part of the General Fund’s $7 million portion of the BOB financial and human resources
system currently being implemented. The other significant increase is due to a commitment to increase funding
for general City capital and street resurfacing to return those amounts to FY 2001 levels. The FY 2004 budget
currently contains $8.5 million for general City capital and street resurfacing. By FY 2005, the total is expected
to grow to $16 million.
General Fund Transfers
Actual & Projected Expenditures
$65
$60
$55
$50
Millions
$45
$40
$35
$30
$25
$20
$15
Actual Actual Estimated FY Projected FY Projected FY Projected FY Projected FY Projected FY
FY 01 FY 02 03 04 05 06 07 08
Five Year Forecast – FY 2004-2008 Page 75
City of Oklahoma City Office of the City Manager
The City of
OKLAHOMA CITY
Page 76 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION SEVEN
REVENUE/EXPENDITURE GAP
Five Year Forecast – FY 2004-2008 Page 77
City of Oklahoma City Office of the City Manager
THE REVENUE/EXPENDITURE GAP
Historically, financial forecasts project a revenue/expenditure gap. A financial gap appears when projected
General Fund expenses exceed anticipated revenue collections. This gap poses a real, but manageable, threat to
the City's continued financial stability. In forecasts prior to FY 2003, revenue/expenditure gaps ranged from $7.9
million to $34.0 million. Economic conditions in FY 2002 and FY 2003 have affected both revenues and
expenditures, and have recently made the gap larger than previous years.
Current operating and capital issues facing the City will require careful planning to ensure a sound financial
environment for the future. Cyclical economic conditions have forced the City to rely upon accumulated fund
balance for the past two years, but this is a finite resource that will quickly become unavailable.
PROJECTED FINANCIAL GAP
From the current fiscal year through FY 2008, General Fund revenues are forecast to average approximate annual
growth of 3.4%. During this same period, General Fund expenditures are projected to grow at an average rate of
5.9%. The difference between the two growth rates provides great concern. While the City may be able to
overcome the disparity in the growth rates over a one to two-year period, a continued pattern could become
devastating to City services. As illustrated below, the projected gap by FY 2008 is approximately $55.12 million.
General Fund Revenues & Expenditures
Actual & Projected
$360
Gap totals $55.12 Million in 2008
$340
$320
Gap totals $17.2 Million in 2004
$300
Millions
$280
$260
$240
$220
$200
$180
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Revenues Expenditures
Graph Notes: Actual revenues and expenditures are shown for FY 1997 through FY 2002. Estimated year-end revenues
and expenditures are shown for FY 2003. Projected revenues and expenditures are shown for FY 2004 through FY 2008.
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Office of the City Manager City of Oklahoma City
HOW TO CLOSE THE GAP?
Oklahoma City is obligated by State law to have a balanced budget. So, we must close the gap. Steps can be
taken to ensure that future financial deficits are avoided while meeting the changing needs of the City. As
funding and expenditure issues and community needs are identified, priorities regarding municipal services will
shift so that City resources may be best applied to meet defined objectives.
Future funding gaps can be avoided through continued expenditure control, re-prioritizing City services, addition
of new revenue sources and the use of fund balance.
Expenditure Control: The City must maintain control of escalating expenditures where possible and work to
diversify the General Fund revenue base. Earlier in this financial forecast the powers of City leaders to raise
revenues and control costs were summarized. Cost control provides these leaders with the greatest diversity of
options and most significant potential to ensure a sound financial future for the organization. The single greatest
factor that may cause City operating costs to rise are Personal Service costs. As previously noted, employee
salaries and benefits comprise the greatest share of these costs.
Employee wages have been routinely adjusted to equate to those offered for equivalent positions in other cities.
The City of Oklahoma City now offers salary and benefit packages that are generally unequaled by Oklahoma
municipalities. However, the City has outlined plans to control employee costs through efforts such as greater
employee participation in health care costs, position cuts, and the elimination of longevity for AFSCME and
Management employee groups. The most effective means to achieve a balance between controlling personnel
costs while maintaining competitive salary and benefit packages for employees during future years will be to limit
salary and benefit growth to within the approximate growth rates of City revenues. The City continues to work
with the collective bargaining units to determine ways to maintain employee wage growth within the City's ability
to afford it.
Re-Prioritizing of City Services: Over time, City needs and priorities change. Programs and services may be
added or reduced based on community needs. The City must continue to assess the need for specific services,
evaluate operational efficiencies and consider the potential benefits and consequences of discontinuing some
programs. This is particularly important in times of economic downturn, when the emphasis must be primarily on
continuation of core services.
New Revenue Sources: Significant progress has been made during the past four years in understanding the
dynamics of the City’s largest revenue source, the sales tax. While many adverse issues face this revenue source
such as erosion of the tax base, new exemptions and increasing untaxed Internet sales, the general outlook for the
next few years is for moderate growth due to anticipated increases in development and higher per capita income.
It will, nonetheless, be prudent for the City to explore alternate sources of funding to provide revenue for new or
expanded programs and to generally reduce dependence on the sales tax. The City has worked closely with the
Oklahoma Municipal League to study alternative sources of funding, and has examined ways to diversify revenue
sources through legislative or policy changes.
There is a potential for capturing the revenue currently lost through Internet and remote sales that take place in
Oklahoma City, but the proposals addressing this issue are being closely monitored at this point. Any change in
the definition of point of sale could have a detrimental impact on the City’s revenue in the short term and will be
monitored closely.
The City’s most successful efforts to expand revenues has been through dedicated sales taxes including the
OCMAPS sales and use tax, MAPS sales and use tax, the Public Safety and Zoo taxes and the 1995 and 2000
G.O. Bond Program. Similar funding alternatives may be considered to meet specific future needs.
Five Year Forecast – FY 2004-2008 Page 79
City of Oklahoma City Office of the City Manager
Fund Balance: In the past two fiscal years, fund balance has been used to close the financial gap between
expenditures and revenues. Fortunately, in the six years prior to that time period, the fund balance grew to a point
where it could help sustain City functions. As part of the FY 2003 budget, $8.6 million was budgeted in fund
balance, and there is a possibility that additional use of fund balance will be necessary to meet the projected
budget shortfall. In FY 2004, $5 million in fund balance is included as part of the budget, which still meets the
City’s policy for use of fund balance. However, we anticipate that less fund balance will be available each year,
unless revenues exceed expenditures for a sustained period of time.
Continued use of fund balance to fill the revenue/expenditure gap is not desirable. Depletion of fund balances
below recommended levels can adversely affect long-term financial stability. The City has, therefore, adopted
financial policies that limit the use of fund balance to non-recurring expenses such as capital purchases. The
policy also established a goal of maintaining an unreserved fund balance of 6-10% of budgeted expenditures.
SUMMARY
As City leaders prioritize services to meet the community's future needs, the nature of municipal government in
Oklahoma City will invariably change. Not every situation can be anticipated, but cyclical economic changes are
to be expected over a long period of time. The City must continue to monitor legislation that can affect either
revenues or expenditures and work to diversify Oklahoma City’s revenue base. Through calculated, combined,
efforts, the City’s projected General Fund financial gap can be avoided. Continued sound financial management
will be the key to ensure that the City will be able to live within its means during the next few years.
Page 80 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION EIGHT
CITY-WIDE
NEEDS ASSESSMENT
Five Year Forecast – FY 2004-2008 Page 81
City of Oklahoma City Office of the City Manager
CITY-WIDE NEEDS ASSESSMENT
The Mayor and City Council deal with many problematic issues each year through the budget process. Some of
these issues can be resolved in a single budget year, while others necessitate long-term planning and incremental
adjustments that may span several consecutive annual budgets. For example, the passage of the 32-month ½ cent
sales tax that will end in February 2003 was the culmination of several months of consideration and discussion
about funding public safety capital needs for police and fire capital requirements. The MAPS for Kids initiative
grew out of a recognized need for capital investment in Oklahoma City’s educational system. This seven-year
temporary tax was approved by voters on November 13, 2001 and will raise close to $512 million to be split
between the Oklahoma City School District (70%) and surrounding suburban districts (30%) that have Oklahoma
City residents attending their schools.
The following are significant issues that may require action at the policy level. The costs associated with these
issues are preliminary estimates, provided for informational purposes only. Where amounts are not provided,
estimates were not available or not required. Factors such as economic conditions, changing program needs,
timing and many other elements may radically affect these estimates. More accurate cost estimates will be
available as many of these needs become further defined. Many of the issues provided below apply broadly to
various departments throughout the City.
PUBLIC SAFETY SALES TAX FUND SHORTFALL
In 1989, the citizens of Oklahoma City approved a referendum that enabled the City to assess an additional ¾ cent
sales tax to fund public safety services, facilities and equipment. For the past five years, staff has become
concerned because the Firefighter benefits funded through the sales tax were growing at a faster rate than
recurring revenues. As sales tax revenues have begun to contract during the first half of FY 2003, the point when
the Fire Sales Tax Fund will be unable to support personnel related expenditures could pose a problem in the
current fiscal year and will definitely be an issue to address in FY 2004. Preliminary budget projections for FY
2004 are as follows:
Recurring Revenues $27,744,612
Expenditures $29,541,393
Variance ($1,796,781)
The Fire Department is attempting to make the necessary reductions to balance expenditures with revenues. For
future years, the City must either identify a new source of funding for the shortfall or reduce costs that the Fire
Sales Tax Fund supports. The Police portion of the public safety sales tax will be facing similar issues in the near
future. As early as FY 2005, the Police Sales Tax Fund may be unable to meet its personnel-related expenditures.
Homeland Security – Total Costs Unknown
Homeland security continues to be an important issue in the current political environment and impacts several
departments. Immediately after terrorist attacks on September 11, 2001, the Police Department reallocated field
officers to provide additional security at the Will Rogers World Airport (WRWA). Starting in FY 2003, the
Airports Director requested two additional lieutenants and three officer positions for the WRWA to be reimbursed
by the Airport Trust. This program will continue into the foreseeable future. Heightened security requirements
for baggage and security checkpoints were partially covered by the Department of Transportation, but there are
required facility modifications that must be covered by the City. The current plan is to accommodate these
modifications in the current terminal expansion/renovation project. However, if more funding is required,
additional revenue bonds will be issued.
The Water and Wastewater Utilities Department is also addressing homeland security issues as it relates to the
City’s water supply. In January 2003, a federally mandated vulnerability assessment will be conducted. It is
anticipated that additional security measures may require capital funds of $1 to 2 million. However, this
investment may allay current operating costs for security, which total roughly $400,000 a year.
Technology - approximately $25 million
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Office of the City Manager City of Oklahoma City
A wide array of technology and communications needs have been identified by City departments. These needs
are significant, particularly since funding for many of these projects has not yet been identified.
Business Application Systems & Personal Computer Replacement: The City began the process of replacing
mainframe computer applications in the mid to late 1980's and must continue to upgrade technology systems as
necessary. Many of the systems that were implemented at that time need to be replaced due to technical
obsolescence, increasing maintenance costs and absence of desired functionality.
Business application systems under review for replacement in the next five years include: the development center
system; utility billing system; courts system; permits tracking and inspection system; weeds and housing system;
action center system; and the one-stop cash register system. In addition, the City will need to replace a significant
number of personal computers and upgrade existing, or acquire new software systems in many areas. In addition,
changing technology with personal computers and increased demand for efficiency requires the City to
continuously replace or upgrade existing computers.
In FY 2002, the City initiated a project team to develop the requirements for the City’s new financial and
personnel systems. Project BOB (Better Organized Business) has selected both a new personnel/time management
system and a new financial system. The implementation of the Kronos system for time keeping and payroll and
the PeopleSoft financial system has begun, and is expected to be fully operational in FY 2004. The PeopleSoft
Enterprise Resource Planning System includes modules that will provide basic human resources, payroll,
financial, purchasing, asset management, accounts payable and accounts receivable functionality. Enhanced
functionality will also be implemented including eProcurement, eRecruitment, employee and vendor self-service
and inventory management. These enhancements will provide the City with the ability to respond to the needs of
our employees, vendors, managers, and citizens with an appropriate level of technology. At the same time, the
system is utilizing infrastructure design that will provide enhanced security features and less opportunity for
system down time. The cost to purchase and implement these systems is estimated at $13 million, with the
General Fund paying for roughly $7 million of the total. While security and system performance will improve,
and greater functionality will result, the operating costs of an up-to-date system will be higher than the previous
technology. These costs include software licensing and maintenance fees as well as staffing requirements. All of
those variables are unknown at this time.
800 MHz and Telecommunications: The new 800 MHz Digital Trunked Radio Communication System will be
purchased through the special Public Safety Capital Sales Tax that will expire in February 2003. This new
system, in addition to the Emergency Warning System that was already implemented, requires technicians to
maintain and operate the system. In lieu of, or as part of a maintenance agreement, five new radio
installer/repairer positions would enable the City to support both systems. The cost of adding these new positions
would be roughly $250,000 annually. Testing equipment and funding for the additional training required to meet
the technical challenges of the new system would cost another $450,000. Staff is assessing the requirements and
funding for the on-going operation of the radio system.
In addition to computer technology needs, many departments are in need of new telecommunications (telephone)
systems. Advances in telecommunication technology, convergence of voice and data systems and open
competition are all factors that will lead to new options and opportunities for telephone access. The City is
currently assessing the system as a whole and plans to migrate from the current Centrex platform to an internally
supported technology that provides improved return on investment.
Facilities - approximately $40 million
Oklahoma City voters approved a major bond authorization in 2000 to fund improvements to existing facilities or
to build new facilities for Parks, Police, Fire, Libraries and Animal Welfare. Other City facilities were not
addressed in the 2000 Bond authorization.
Examples of these unfunded or partially funded facility improvements include some immediate needs, such as
roofing needs, other repair and maintenance of existing facilities and furniture and fixtures for the central
maintenance facility. The Myriad Botanical Gardens requires an upgrade, which would cost approximately $1.13
Five Year Forecast – FY 2004-2008 Page 83
City of Oklahoma City Office of the City Manager
million in capital expenditures. Other new parks facilities need roughly $1.8 million in operating costs necessary
to develop, maintain and operate the facilities scheduled to come on-line in the next five years.
The Department of Airports is currently in the midst of a major terminal expansion/renovation project at Will
Rogers World Airport. When completed, the terminal will nearly double in size to 583,000 square feet, which
will relieve current overcrowding and provide for projected growth through 2015 and beyond. Phase I
commenced in March of 2001 and will be completed shortly. Phase II of the project began in January 2002, and
is projected to be complete in late summer of 2005. Phase III will be constructed when there is a demand for
additional capacity. The total cost of Phases I and II is approximately $110 million and has been financed with
federal grants and revenue bonds. Phase III will be financed at a later date utilizing the same revenue sources at a
cost of approximately $30 million.
The Oklahoma City Zoo has also undertaken some major capital projects, funded with their dedicated 1/8 cent
sales tax and revenue bonds. They have completed new Ape and Cat exhibits, and are starting on the first phase
of a $31.5 million master plan that will bring grizzly and black bears to the Zoo.
Impacts of Federal & State Legislation - costs unknown
Municipal operations are affected by federal and state legislation in two ways. First, federal allocations are a
major source of funding for the City. Second, federal and state mandates such as the Clean Air Act and Safe
Drinking Water Act, the National Pollutant Discharge Elimination Systems Act and the Americans with
Disabilities Act require the City to expend funds and develop programs in order to be in compliance.
Federal and state grant funding to Oklahoma cities is on a general decline, predominantly due to the efforts of
these governmental bodies to deal with their own budgetary problems. In many ways, legislative trends have
mirrored those of the private sector's efforts to "flatten" organizational structure. At the federal level in particular,
responsibility for administration of entitlement and other programs is being delegated to the state and local levels.
More and more frequently the General Fund is relied upon to replace declining federal and state grant monies for
municipal programs. Significant among the programs that have received cutbacks in federal funding are the
Community Development Block Grant, the Rental Rehabilitation Grant, the Emergency Shelter Grant, the HOME
Grant, and funding associated with the Workforce Development Act. If the trend continues for reduced funding
and increased mandates, sizable new revenue sources will be needed in order to maintain these and other City
programs or these services will need to be discontinued.
Other Operational Issues - cost evaluation ongoing
Other issues, which require significant advanced planning, include costs for maintenance and operations of the
1995 and 2000 G. O. Bond and MAPS facilities. General Fund expenditures for personal services and contractual
services will likely increase as personnel will be required to manage and care for the facilities. Costs for supplies
and utilities are also likely to increase.
In FY 2003, the City eliminated 104 positions from the organization, the largest reduction in staffing in at least 5
years. Given the financial outlook for FY 2004, additional position cuts are expected in order for the City to meet
budgetary constraints. These position deletions will most likely begin to affect City services in the coming fiscal
year and beyond. Difficult choices will have to be made concerning which services are considered core and
which services can be eliminated or performed by other entities.
Some City initiatives, such as community appearance and neighborhood revitalization programs, may also require
additional funding. Funding options for some of these programs may include opportunities for private sector
participation through business improvement districts, privatization and other cooperative efforts.
On February 28, 2003, the Public Safety Equipment Sales Tax will expire. For the past two years, the Public
Safety Equipment Sales Tax Fund has funded the various capital needs for the police and fire departments.
Preliminary reports show that planned funding for police and fire fleets will be exhausted by the end of FY 06.
Based on the existing fleet replacement plan, approximately $10.2 million will be needed through FY 2008 to
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Office of the City Manager City of Oklahoma City
meet those needs. The City also maintains a fleet of vehicles for other departments throughout the organization.
It is estimated that $4 million is needed each year to maintain the General Fleet replacement program for a total of
$20 million through FY 2008.
ECONOMIC DEVELOPMENT INITIATIVES
For many years, the City has tried to lure various types of industry to relocate to Oklahoma City. Much of the
economic development initiatives are done in cooperation with the Oklahoma City Chamber of Commerce.
Recent initiatives include:
• QuadGraphics: In its first company location west of the Mississippi River, QuadGraphics is constructing
a 170,000 sq. ft. production facility in Oklahoma City. QuadGraphics’ Oklahoma City facility could
expand to one million square feet with as many as 1,000 employees. Reasons for QuadGraphics’
decision to locate in Oklahoma City included low business costs, a superior labor force, geographic
location, accessible rail service and interstate shipping points. It is expected to become operational in
2004.
• Bass Pro Shops: The City Council passed a resolution on June 18, 2002 to bring a Bass Pro Shop to
Oklahoma City’s Bricktown entertainment district. The development proposal includes increased sales
tax revenues, new jobs, and spin-off development from the arrival of the popular destination retailer.
The City and Bass Pro Outdoor World, L.L.C., entered into an agreement whereby the City will build a
facility and Bass Pro will be the tenant. Use tax investment funds are being used to build the facility and
it will be repaid by lease payments and increased sales tax revenue from the new store.
• Downtown Hotel Development: Two new hotels are under construction in downtown Oklahoma City
and the City is seeking plans to rebuild and refurbish a classic downtown landmark. Adjacent to the
Ford Center Arena, a new 225-room Courtyard by Marriot hotel is under construction. In January 2003,
construction is set to begin on a $15 million Bricktown Holiday Inn and Suites. The opening of this
hotel is expected to coincide with the completion of the Bass Pro Shops store and Sonic corporate
headquarters, which are also along the canal. In July 2002, the City purchased the historic Skirvin Hotel.
The Skirvin Property Review Board will receive bids to develop the property in March 2003.
• Empowerment Zone Designation: In January 2002, the US Department of Housing and Urban
Development announced that Oklahoma City was one of seven cities to receive an empowerment zone
designation. The empowerment zone encompasses some of the City’s poorest areas and offers nearly
$17 billion in tax incentives for companies who locate in the area. Some companies have already taken
advantage of the tax incentives offered, and the City is working to promote the program to as many
businesses as possible. The Planning Department has been charged with administering the
Empowerment Zone program and estimates that to be effective, they will need an additional four
positions that will cost $1.2 million over a five-year period to implement the program.
• Galleria Parking Garage: Construction of a $24.5 million expansion of the Galleria Parking Garage has
been approved, and will move forward in the coming year. This is an important addition for future
downtown development, because it is in a strategic location for office space to expand. The project will
create another 1,040 spaces in the garage and is the first garage built by the Central Oklahoma
Transportation and Parking Authority (COTPA) in nearly 20 years.
Five Year Forecast – FY 2004-2008 Page 85
City of Oklahoma City Office of the City Manager
The City of
OKLAHOMA CITY
Page 86 Five Year Forecast – FY 2004-2008
Office of the City Manager City of Oklahoma City
SECTION NINE
CONCLUSION
Five Year Forecast – FY 2004-2008 Page 87
City of Oklahoma City Office of the City Manager
CONCLUSION
The focus of this financial forecast is to identify known issues and anticipated future financial resources to meet
these needs. Above all else, the forecast is a planning tool to ensure the continued sound management of City
finances. Through this exercise, many benefits may be realized for the community, including the strengthening of
the City's overall financial position, keeping citizens informed about community issues, and increasing the City’s
flexibility to improve existing programs, and create new initiatives as required to meet identified objectives.
The broad goals of the City will not change with the issuance of this forecast. If anything, City objectives may be
better defined through this process. Over the coming five years, it is expected that the City will continue to meet
the fundamental objectives of maintaining core services such as police and fire protection, streets, solid waste
collection, water and wastewater, parks and recreation, airports, and transit. Additional efforts will be undertaken
to promote economic development, invest in the City work force, streamline service delivery and improve
productivity. While the City is limited legally in expanding revenue sources, economic development efforts serve
to strengthen the existing revenue base. Economic development can increase the number of jobs and quality of
jobs in the City, and is currently being pursued as a priority issue for City Council.
The coming five years will be full of tremendous challenges for the City. Municipal funding authority is being
challenged on many fronts at the same time that demand for City services is escalating. Continued efforts to
diversify the City revenue base and control cost growth to reasonable levels will be key factors in the future
success of Oklahoma City.
Oklahoma City is facing what is perhaps the most exciting period in its history. With continued planning and
hard work, the City can overcome current challenges and be prepared to move forward with renewed confidence
and stability.
Page 88 Five Year Forecast – FY 2004-2008