Credit PresentationCity of Richmond, VA

September 30 – October 1, 2010

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Objectives of Presentation

Highlight City’s Accomplishments Since a Year Ago

Build Upon Our Reputation as a Well-Managed Government that is Fast Becoming a Tier One City

Demonstrate a Stable Economy and Exceeded Budget Expectations during a Difficult Economic Climate

Articulate our Roadmap for 2011 and Beyond

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AttendeesDwight C. Jones, Mayor

Elected Mayor of the City of Richmond in November 2008 and has been an active public servant in the City for over 35 yearsFirst elected to the Virginia House of Delegates in 1993 and has an impressive legislative record that focuses on health services, strong finances, and Richmond’s neighborhoods and most fragile citizensReceived a Bachelor of Arts Degree from Virginia Union University and a Doctorate from United Theological Seminary

Kathy C. Graziano, President of Council & Representative of 4th DistrictElected to Council in 2004 and chosen to serve as President of City Council in 2009 Chair of the Land Use, Housing and Transportation Committee and member of the Organizational Development and Finance & Economic Development CommitteesReceived a Bachelor of Arts Degree from the State University of New York-Cortland.

Ellen F. Robertson, Vice President of Council & Representative of 6th DistrictElected to Council in 2003 and chosen to serve as Vice President of City Council in 2009 Chair of the Finance & Economic Development Committee and Vice Chair of the Land Use, Housing and Transportation Committee and member of the Organizational Development and Governmental Operations CommitteesReceived an Associate Degree from J. Sargeant Reynolds Community College and a Bachelor of Science Degree from Virginia Commonwealth University

Byron C. Marshall, Chief Administrative OfficerAppointed in July 2009 and has 30+ years of experience in local governmentExtensive background in Finance and Administration from serving as Deputy CAO, Deputy City Manager, & Deputy Comptroller in three major U.S. Cities – Austin, Houston and Washington D.C.Served as Atlanta’s COO and helped prepare the City to host the 1996 Olympic GamesMost recently served as President and CEO of the Austin Revitalization Authority in Austin, Texas

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AttendeesSuzette P. Denslow, Chief of Staff to the Mayor

Appointed in January 2009 and has 28+ years of Finance and Policy experience in state and local governmentServed under three governors in various roles including: Deputy Secretary of Education, Legislative Director and Deputy Directorof PolicyServed as executive and deputy director of municipal leagues in two states

Peter H. Chapman, Deputy Chief Administrative Officer (Economic & Community Development)Appointed in July 2009 and has 20+ years of urban development experienceReceived a Bachelor’s Degree in English literature from Wesleyan University and a Master's Degree in Public Policy from Tufts UniversityOversees Economic and Community Development, Minority Business Enterprise, and Real Estate functions

Marcus D. Jones, Deputy Chief Administrative Officer (Finance & Administration)Appointed in August 2009, has 16+ years of experience in local and state government, and served as Deputy Secretary of Finance under two governorsReceived a Bachelor’s Degree in Public Administration from James Madison University and has a Master's Degree in Public Administration from Virginia Commonwealth UniversityOversees Finance and Administrative functions including Finance, Budget & Strategic Planning, Information Technology, Procurement, and Human Resources departments

Barbara W. Reese, Director of FinanceAppointed September 2010, has 20+ years of financial management, tax policy, and public-private partnership experience in state governmentServed as first CFO of the Department of Transportation, Deputy Secretary of Transportation, and Deputy Director of PolicyReceived a Bachelor’s Degree in American Studies from the University of Mary Washington and a Masters of Public Administration from Virginia Commonwealth University

James P. Duval, Jr., Investment & Debt Portfolio ManagerJoined the City in 2001 and previously worked 21 years in commercial banking with SunTrust BankOversees the debt portfolio of the City as well as the cash investment and management

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Presentation Outline

Becoming a Tier One City

Well Managed Government

Prosperous Economic Development

Richmond’s Financial Profile

Structurally Balanced Budget

Capital Improvement Plan and Plan of Finance, including the Broad Street Community Development Authority (CDA)

Debt Management Polices Governing Limitation on Debt

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Becoming a Tier One City

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Become a “Tier One” City through building a better Richmond with excellence and efficiency.

Grow by design with a balanced economic development approach that enhances the vitality of the City and the Greater Richmond region.

Increase the strength of the City’s economy through growth of the tax base and stability of the local economy.

Earn and build the City’s reputation as a well-managed government by being structurally balanced, maintaining core services, and protecting the City’s fiscal integrity.

The Goal: Become a Tier One City

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Becoming a Tier One CityPromoting a world class education

100% of schools accredited for the first timeIncreasing financial investment in K-12 education fundingExpanding access to early learning opportunities for childrenConstruction of two new elementary schools, one middle school and one high school

Ensuring fiscal accountability and fiscal responsibilityStructurally balanced budget generating a preliminary $6.7 million budget surplus in FY 2010Creation of a structurally sound FY 2011 budget with no interruption of core City services, no tax increases, and by proactively addressing a $34 million budget gapNo furloughs, layoffs, or hiring freeze

Sustaining Richmond's reputation as being a good place to work and to do businessNo major closings or layoffsOne of the nation’s 50 best places for business and careers (Forbes.com, April 2010)Rated the 14th best metro center for business (Dow Jones Marketwatch.com, December 2009)

Serving all neighborhoods in the cityHolistic approach to making sure neighborhoods are safe and secureRedeveloping public housing and working to de-concentrate povertyImplementing the Neighbor to Neighbor Program and Summer Youth Initiative to develop Richmond’s future workforce

Ensuring that every child has an equal chance at life and equal access to quality health careEstablishment of Mayor’s Blue Ribbon Commission on Health Policy

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Awards and HonorsThe City has a tradition of awards and honors. Some of the most recent include:

2010Richmond ranked 9th by The Brookings Institute’s MetroMonitor for Gross Metropolitan Growth from the 4th quarter of 2009 to the 1st quarter of 2010Richmond ranked 12th on a ForbesWoman list of America’s Top 50 U.S. cities for working mothers, Forbes.comRichmond ranked 1st on Parenting.com’s “The Best Cities for Families & 10 Healthiest Cities” listRichmond ranked 12th on “The 20 Healthiest Housing Markets for 2010” by Builderonline.comRichmond recognized as 3rd “Best Tennis Town in America” by the United States Tennis AssociationRichmond named “one of the nation's 50 best places for business and careers” by Forbes.com

2009Richmond ranked 6th on Business Week’s “Best Places to Start Over” list, citing employment prospects in diverse industriesRichmond ranked 14th on Marketwatch.com’s “Best Metro Centers for Business”Richmond ranked 19th on Next Generation Consulting’s “Next Cities: Mighty Micros” list of best small cities for young professionals for life and workRichmond ranked 39th on Forbes’s “Best Places for Business Careers”Carytown ranked 9th on Southern Living’s “Top 10 Neighborhoods for Shopping in the South”

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Well Managed Government

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Characteristics of a Tier One CityThe City has identified seven characteristics of a Tier One city as its priorities:

Well Managed GovernmentProsperous Economic DevelopmentCommunity Safety & Well Being TransportationSustainability and the Natural EnvironmentUnique and Inclusive Communities and NeighborhoodsEducation and Workforce Development

Well Managed Government is the foundation upon which the other six characteristics are built.

While future budgets will incorporate all seven characteristics, the FY 2011 budget places an emphasis on the Well Managed Government and Prosperous Economy characteristics.

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Well Managed Government: FY 2010 & FY 2011Actions in FY 2010 deliver the commitment to Well Managed Government:

Implemented a five-year revenue & expenditure forecastImplemented quarterly financial reporting, including an economic outlookCompleted a top-down and bottom-up detailed budget reviewImplemented a revenue administration system for real estate and personal propertyReleased RFP for Enterprise Resource Planning (ERP) System ProjectAggressive use of low-cost debt financing, including ARRA debt programs

The City’s FY 2011 budget builds on these deliverables to continue the City on the path to becoming a Tier One City, including:

Implementing semi-annual real estate tax billing, eliminating the annual $70 million revenue anticipation noteImplementing the comprehensive tax compliance plan, generating additional revenue with no tax increaseCompleting of the revenue system implementation and execution of the ERP contract, gaining business process improvements and efficienciesJointly purchasing of health benefits with Richmond Public Schools, lowering costsRestructuring of the Broad Street Community Development Authority (CDA), lowering costsUpdating the City’s debt management and financial management policiesDeveloping detailed, project level cash flow model for CIP projectsIncorporating pay-as-you-go funding into the CIP and other fixed assetsAdopting administrative budget policies that allow for adjustments during a fiscal year to quickly respond to a changing fiscal environment and one-time economic opportunitiesDeveloping a revenue stabilization fund to abate short-term fiscal issues

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FY 2010 RAN of $70,000,000 was paid off on 6/24/2010.

The City will not borrow in FY 2011 for this purpose.

Beginning in January 2011, the city will implement semi-annual real estate tax collection in January and June of each fiscal year.

Freezing FY 2011 assessments at FY 2010 levels with a one-time switch to a biennial assessment.

Beginning with FY 2012, set the real estate tax rate forward to coincide with the budget under consideration.

Elimination of Revenue Anticipation NoteFiscal RAN % ofYear ($ Amount) Revenues

2001 $65,000,000 13.6%2002 $50,000,000 10.1%2003 $45,000,000 9.0%2004 $45,000,000 8.5%2005 $45,000,000 8.2%2006 $55,000,000 9.9%2007 $65,000,000 10.3%2008 $65,000,000 10.0%2009 $75,000,000 11.5%2010 $70,000,000 11.1%2011 $0 0%

Enables the City to fix its cash flow issue by spreading the largest component of local revenues over two approximately equal installments.

Modifications are being proposed to Tax Relief for Elderly and Disabled Programs to mitigate any impact on vulnerable citizens.

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Prosperous Economic Development

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Growing a Prosperous Economy By Design - The Goals

Long-term growth and development of Richmond’s job base and labor force

A sustainable local economy that:Affords access to opportunity for Richmond residentsFosters viable mixed-income residential neighborhoodsDevelops and supports Richmond’s tax revenue baseMaximizes the city’s assets and advantages without compromising the health of local communities and residentsWorks with our public and private partners to enhance our interconnected communities

Focus areas:Business retention & expansionBusiness attractionBusiness technical assistanceNeighborhood revitalizationWorkforce developmentEconomic & community development finance

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Recent Economic Development SuccessesMeadWestvaco (Fortune 500 Company)

In March 2010, opened new headquarters tower on the riverfront; in May 2010 announced its Center for Packaging Innovation (CPI) will be relocated from Raleigh, NC to Richmond.Employment: 400 Jobs (Headquarters)

128 (CPI)Investment: $100 Million (Headquarters)

$10 Million (CPI)

Williams Mullen Tower (Law Firm)15-story tower opened in June 2010Employment: 350 Jobs RetainedInvestment: $60 Million

Pfizer Consumer Health Research & Development(Fortune 500 Company)

Pfizer acquired Wyeth in October 2009. Wyeth’s Sherwood Avenue facility had been in operation since 1963. After evaluating locations to identify opportunities for consolidation, Pfizer decided to maintain the operations currently located in Richmond.Employment: 300+ Jobs Retained

MeadWestvaco Headquarters

Williams Mullen Tower

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Key Characteristics of RichmondCenter of Government ActivityRichmond is the Capital of the Commonwealth of Virginia. Richmond is also home to the Fifth District Federal Reserve and Fourth Circuit U.S. Court of Appeals.

Cultural Hub of the Region Richmond has14 museums, diverse entertainment venues, and is the only city with Class IV white water in its downtown.

Transportation CrossroadsRichmond is strategically located at the mid-point of the East Coast: 110 Miles South of Washington, DC and 85 Miles Northwest of Hampton Roads Area, both I-95 and I-64 interchange in the City.

Vitality and VibrancyAt the heart of the metropolitan area, Richmond’s diverse economy includes two Fortune 500 headquarters with ten Fortune 1000 companies in the region.

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A Center of Government ActivityCapital of the Commonwealth

State agencies provide 25,700+ jobs and are a significant part of the economy

United States Court of Appeals for the Fourth Circuit300+ employees

Federal Reserve System Banking HeadquartersHeadquarters for the Fifth Federal Reserve District, which includes Maryland, Washington D.C., Virginia, North Carolina, South Carolina, and most of West Virginia.1,700+ employees

Virginia State Capitol U.S. Court of Appeals for the 4th Circuit Fifth Federal Reserve District Headquarters

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Perfectly Balanced for business on the East Coast.Major Interchange of Interstates I-95 and I-64.Proximity to the Nation’s Capital –110 Miles to Washington, DC – 2 Hours by car/train.Port of Richmond – Furthest inland deepwater port in the Commonwealth.85 Miles Northwest of Hampton Roads – Near one of the world’s largest natural deepwater ports.1 Hour Flight to New York City –Financial Capital of the World.Richmond International Airport –One of the most modern and well-equipped airports in the eastern United States is located only 7 miles southeast of Richmond’s business district.

Central Location in Virginia - Transportation

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Museums & Cultural AssetsVirginia Museum of Fine Arts

A public-private partnership, the museum is the nation’s first and largest state art museum$150 Million expansion project completed in 2010 increased gallery space to 134,000 square feet

American Civil War CenterHost of Richmond Folk Festival with 175,000+ visitors; seven stages and 30+ performing groupsHome to National Park Service Richmond National Battlefield Park$13.6 Million invested since 2006

Other museums include:Black History Museum & Cultural CenterChildren’s Museum of RichmondEdgar Allen Poe MuseumLewis Ginter Botanical GardenMaggie L. Walker National Historic SiteScience Museum of Virginia

Valentine Richmond History CenterVirginia Aviation MuseumVirginia Historical SocietyVirginia Holocaust MuseumVisual Arts Center of RichmondWhite House & Museum of the Confederacy

VMFA American Civil War Center at Historic Tredegar

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Performing Arts & VenuesRichmond CenterStage

$77 Million renovation and expansion of the Carpenter Center and former Thalhimer’s Department Store opened in September 2009Site includes three performing venues and one showcase gallery

Greater Richmond Convention Center700,000 square foot facility on 5½ city blocks. Interior accommodations include 178,159 s.f. of exhibit space, 32 meeting rooms and the 30,550 s.f. Grand Ballroom

Other venues include:Landmark Theater Empire Theater Richmond ColiseumDiamond Baseball Stadium

Performing groups include:Richmond Ballet Richmond Symphony Theater IV The Children’s Theater of Virginia

Greater Richmond Convention Center

Richmond CenterStage

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Higher Education InstitutionsVirginia Commonwealth University

Largest university in Virginia with 32,000+ students in 208 certificate and degree programs in the arts, sciences and humanities.One of the nation’s leading academic medical centers – comprised of MCV Hospitals and the Health Sciences Schools of Virginia Commonwealth University.Since 2006, $665 Million of direct investment in the City of Richmond’s downtown area.

University of RichmondFounded in 1830, a private, highly selective liberal arts university with 7,000+ undergraduate and graduate Students.Five schools offer Undergraduate, Master’s and Law Degrees.350 acre suburban campus in the City located six miles from Downtown Richmond.Since 2006, $150 Million of direct investment.

Virginia Union UniversityFounded in 1865, a private, historically African-American Baptist university with approximately 1,600 undergraduate and graduate students.Samuel DeWitt Proctor School of Theology – Graduate School Offering Theological Studies.Located in Downtown Richmond.Since 2006, $3.8 Million of direct investment.

Community Colleges and Private Colleges

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Richmond’s Financial Profile

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Per Capita Income Population

Richmond’s per capita income level is now for the third year straight above the Commonwealth and U.S. averages.

The City’s population has grown every year since 2004 and is now above 200,000. The population has grown 3.4% over the last 5 years.

Economic development successes led to results that exceeded expectations.

Richmond’s Economic Outlook is Strong

Source: Bureau of Economic Analysis

Year Richmond Virginia U.S. Virginia U.S.2003 34,550 34,979 32,271 99% 107%2004 37,481 36,842 33,881 102% 111%2005 38,553 38,892 35,424 99% 109%2006 42,261 41,267 37,698 102% 112%2007 44,180 43,158 39,392 102% 112%2008 44,801 44,075 40,166 102% 112%

Per Capita Income Richmond as a % ofLast 5 Years

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

2003 2004 2005 2006 2007 2008

RichmondU.S.

Virginia

190,000

192,000

194,000

196,000

198,000

200,000

202,000

204,000

206,000

2004 2005 2006 2007 2008 2009

Source: U.S. Census Bureau

Year Population % Change2004 197,432 -0.34%2005 197,915 0.24%2006 198,992 0.54%2007 200,655 0.84%2008 202,867 1.10%2009 204,451 0.78%

Last 5 Years

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Per Capita Income (CY 2008) Total Valuation per Capita (FY 2008)

Richmond’s per capita income is the highest of its peer group, well exceeding the average of Virginia “AA” peers.

Richmond’s $110,00 total valuation per capita (real and personal property) is among the highest “AA” rated Virginia cities and exceeds the average.

Source: 2009 CAFRs.Source: Bureau of Economic Analysis.

Comparatively, Richmond Exceeds Our Peers

Per Capita Income (CY 2008) Total Valuation per Capita (FY 2008)

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Diversity of the Tax Base

Richmond has a well diversified tax base with no significant concentration in any one taxpayer.

The real estate assessed valuation of the top 25 tax payers represents less than 12% of the total real estate tax base in FY 2010.

The top 10 taxpayers represent 8.8% of the total.

Philip Morris companies are the largest taxpayers at 3.4% of the total.

Top 25 Taxpayers – Assessed Valuation

12%

88%

Taxpayer DistributionTop 25 Taxpayers FY 2010

Real Estate Assessment % of Total

1 Philip Morris, Inc & Philip Morris USA 710,722,000$ 3.4%2 Hines Riverfront Plaza LP 247,500,000 1.2%3 James Center Property LLC 187,998,000 0.9%4 Dominion Resources, Inc 144,411,000 0.7%5 Chippenham Hospital, Inc 105,605,000 0.5%6 Federal Reserve Bank of Richmond 103,928,000 0.5%7 Foundry Park I LLC 89,060,000 0.4%8 Parmenter 919 Main St LP 83,574,000 0.4%9 Riverside Owner LLC 78,151,000 0.4%

10 Gambles Hill LLC 74,921,000 0.4%11 American Retirement Corp 70,000,000 0.3%12 First States Invest 3500 LLC 69,571,000 0.3%13 SunTrust Bank 63,519,000 0.3%14 Stony Point Fashion Pk Assoc LLC 54,132,000 0.3%15 Robins A H Co, Inc 48,212,000 0.2%16 Media General, Inc 46,067,000 0.2%17 Miller & Rhoads Building LLC 42,010,000 0.2%18 Apple Seven SPE Richmond 39,575,000 0.2%19 Eck Enterprises 38,029,000 0.2%20 Alleghany Warehouse Co, Inc 36,004,000 0.2%21 S J W Limited Partnership 35,000,000 0.2%22 Historic Hotels LLC 34,448,000 0.2%23 Saul Subsidairy I Limited 32,581,000 0.2%24 Overnite Transportation Co 32,284,000 0.2%25 CRIT-VA Inc 31,805,000 0.2%

Subtotal 2,499,107,000$ 11.8%

All Other Taxable Properties 18,594,931,672$ 88.2%

Total Taxable Assessment 21,094,038,672$ 100.0%

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Employment by Industry

As the capital of Virginia, state government presence represents the largest employment sector by industry.Richmond’s employment distribution is well diversified with the health care sector comprising the largest component after state government.

*Non-Disclosable Data.

Source: Virginia Employment Commission,Quarterly Census of Employment and Wages, 4th Quarter 2009.

Employment Distribution by IndustryEmployment Distribution by Industry

Employment is Improving

80,000

85,000

90,000

95,000

100,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Richmond residential employment at highest level since August 2009.Employment has increased 1.8% since January

Since January, the Richmond region has added 6,400 jobs.

Employment showing improvement throughout 2010 since reaching its trough in 2009.

-500

2,300

-400

700

-1,900

4,900

-3,200

1,400

1,400

1,700

-4,000 -2,000 0 2,000 4,000 6,000

Other Services

Government

Leisure & Hospitality

Educational & Health Services

Professional & Business Services

Finance

Information

Trade, Transportation & Utilities

Manufacturing

Construction

Richmond Residential Employment Current Employment Statistics – Richmond MSA

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Real Estate Tax Collections

Steady tax rate of $1.20 per $100 of assessed value since 2008

Each $0.01 per $100 of assessed value represents $1.84 million.In Richmond, unlike surrounding localities, assessed values stayed steady in 2010.

Real Estate Tax Rate Trends

Even with no tax rate increase and a struggling national economy, the City has had stability in real estate tax revenues.

With improved tax compliance efforts, real estate collections are projected to grow even with stable assessments.

Real Estate Tax Rates Are Steady

$1.05

$1.10

$1.15

$1.20

$1.25

$1.30

$1.35

$1.40

$1.45

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $0

$50

$100

$150

$200

$250

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Mill

ions

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Richmond’s diversified housing market has been relatively stable throughout the housing market decline.

The average sales price of homes sold in Richmond was $268,125 for August 2010.

Foreclosures have been relatively low:Foreclosures comprised approximately 0.20% of the total housing units in the City as of August 2010 – well below the national rate

Average Sales Price

The Housing Market is Stable

$0

$50

$100

$150

$200

$250

$300

Feb-09

Mar-09

Apr-09 May-09

J un-09 J ul-09 Aug-09

Sep-09

Oct-09 No v-09

Dec-09

J an-10 Feb-10 Mar-10 Apr-10 May-10

J un-10 J ul-10 Aug-10

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Taxable Sales

Taxable Sales Have Fared Better than Other Localities

Recession Impact – Comparative 2 Year Decline

Taxable sales reflect a cumulative growth of 16.5% since the beginning of the decade.

Although Richmond’s taxable sales have been affected by the national economic recession, their strength is a testament to the economic development activities within the City.

In comparison to Richmond’s stability in taxable sales, Richmond’s comparable peer group has experienced larger average decline in taxable sales.

Taxable sales in Richmond have declined 5.9% over the past two years (2008-2009) versus the 7.8% average of the City’s peers.

Surrounding counties have larger declines:

Chesterfield 7.0%

Hanover 14.7%

Henrico 8.9%

Richmond

Average

Roanoke

Chesapeake

Hampton

Lynchburg

Newport News

Suffolk

Norfolk

-12.00% -10.00% -8.00% -6.00% -4.00% -2.00% 0.00%

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Structurally Balanced Budget

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The City’s FY 2010 top financial priority was to proactively address changes in the revenue forecast and implement a structurally balanced budget. The budget was amended during FY 2010 in order to make it so.

The FY 2011 budget is structurally balanced.

The City’s budgetary surplus preliminary estimate totals $6.7 million - $3.5 million in revenue surplus and $3.2 million in expenditure savings

Revenue

Unlike FY 2009 when revenues were far below the forecast, the FY 2010 forecast was closely monitored and refined to ensure that forecast and collections were in alignment – ending within 99.4% of the forecast.

General property tax collections greater than expected.Increased collections in Machinery & Tools and Bank Franchise taxes Increased collections related to delinquent accounts due to improved practices.Partially offsetting improvements in revenue were declines in sales tax, intergovernmental payments and declines in revenue related to charges for goods and services.

Richmond’s Structurally Balanced Budget

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FY 2010 Preliminary Year End Revenue Estimate (Budgetary Basis)

SourceFY2009 Actual

FinalFY2010

Preliminary FY2010

Variance from Final Budget

Amount %

Taxes 427,338,579 408,991,117 425,647,104 16,655,987 4.1%

Licenses, Permits & Fees 36,190,386 36,851,317 35,114,702 (1,736,615) (4.7%)

Intergovernmental Revenue 116,625,327 120,619,716 111,801,030 (8,818,686) (7.3%)

Fines and Forfeits 9,246,562 9,297,296 9,756,280 458,984 4.9%

Payments to the General Fund 20,768,927 23,317,280 23,745,546 428,266 1.8%

Other Utility Payments 6,651,796 7,317,056 7,342,183 25,127 0.3%

Charges for Goods & Services 21,468,315 23,074,181 20,409,422 (2,664,759) (11.5%)

Other Sources of Revenue 1,954,254 4,684,831 3,848,912 (835,919) (17.8%)

Total General Fund Revenue 640,244,146 634,152,794 637,665,179 3,512,385 0.6%

* Does not Include obligations from previous FY2009 amounts that were later accrued ($1.55 million).

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ExpendituresThe FY 2010 budget was amended to adjust spending authority across departments and appropriately brought the Risk Management internal service fund into the FY 2010 General Fund Budget, increasing the total appropriation to $635.7 million.

Spending ended 98.9% of the final budget, with required reservations consuming a portion of the resulting budget surplus.

FY 2010 Preliminary Year End Estimate (Budgetary Basis)

Expenditures

BudgetFinal

BudgetPreliminary

EstimateVariance from Final Budget

Amount %

Total General Fund Expenditures 629,987,963 635,702,579 628,695,910 7,006,669 1.1%

Expenditure Savings are Reduced by Required Designations and Reservations

FY 2010 Preliminary Year-End Expenditure Estimate (Budgetary Basis)

Source

FY 2010 Amended

BudgetFY 2010 Year-End Estimate

Variance Amount %

Expenditures Prior to Reservations 635,702,580 628,695,910 7,006,669 1.1%Port of Richmond - 1,000,000 (1,000,000)

Encumbrance Roll - 1,000,000 (1,000,000)

Reserve for Schools (sales tax) - 501,300 (501,300)

Notes Receivable - 543,100 (543,100)

Litigation - 750,000 (750,000)

Total General Fund Budget 635,702,580 632,490,310 3,212,269 0.5%

The City’s budgetary surplus preliminary estimate totals $6.7 million, comprised of:Revenue Surplus - $3.5 millionExpenditure savings - $3.2 million

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The City Balanced its Budget Without Tapping the Undesignated Fund Balance

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The City will use the FY 2010 budget surplus on one-time needs that support well managed government, structural soundness, and economic prosperity.The City is committed to growing its undesignated fund balance and other reserves.In FY 2010 the City took the first steps toward addressing necessary changes in fund balance related to GASB 54.The preliminary estimate for the FY 2010 undesignated fund balance is 9.38% of the adopted budget. Without further additions, the FY 2011 fund balance is estimated to be 9.35%.

Undesignated Fund Balance Undesignated Fund Balance - % of Expenditures

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1997 1999 2001 2003 2005 2007 2009 2011

% of BudgetPolicy Target

$0

$10

$20

$30

$40

$50

$60

Millions

1997 1999 2001 2003 2005 2007 2009 2011

FY 2011 Budget is Structurally SoundThe FY 2011 budget totals $637.2 million– No tax increases– Increases funding for K-12 education– Funds retirement– Contains costs including health care

The budget – based on the principles of well managed government – serves the community, runs the business, manages resources, and develops employees.

The Administration has set an internal objective of achieving $3million in additional operating savings by January 31, 2011

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The City offers both a Defined Contribution and a Defined Benefit Plan.With respect to the Defined Benefit Plan:

The City has taken significant steps to enhance the plan’s funded status. These steps include:

Directing all new hires into a Defined Contribution Plan (July 1, 2006).Eliminating COLAs in 2006 and 2007, and providing a less than one percent COLA in 2008 (No COLA is provided in FY 2011).Providing additional City contributions of $8.3 million in FY 2011

The funded status exceeded 54.4% in 2009.The FY 2010 funded status is projected to exceed FY 2009 but not reach 60%.

The City will continue to take measures to increase the funded status with a goal of reaching a funded status of at least 80%.

Richmond Pension Plans

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The City engaged Wachovia Retirement Services to provide a cost evaluation study to determine the City’s actuarial OPEB contribution in 2008.

The City initiated changes to its health benefits plan in 2008 which have greatly reduced the liability. These steps included:

Eliminating coverage for individuals eligible for Medicare (65+ years old).Freezing the Defined Benefit Health Care Plan to include only employees hired prior to January 1, 1997.

June 30, 2009 OPEB unfundedactuarial liability (UAAL) was$76.2 million.

Annual required contribution(ARC) in FY 2009 was $4.6 million.

GASB 45 – Other Post Employment Benefits

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Capital Improvement Plan :Addressing Key Infrastructure Needs

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Plan of finance incorporates:1. Commercial Paper/BAN approach followed by “take-out” funding from long-term

G.O. Bonds to minimize interest expense and impact on debt burden on the City

2. November 2010 G.O. Bonds financing of Broad Street CDA asset purchase

Capital Improvement Plan (CIP) Priorities

Major Project Area ($Million)Public Schools $126.9

New City Jail Project $117.6

Other City Facilities $58.4

Infrastructure $33.7

Economic & Neighborhood Development $14.0

Broad Street CDA $67.1

TOTAL $417.5

4343434343

The 5-Year CIP continues focus on Schools and the Jail

General Fund Tax supported projects only, excluding Utilities CIP needs

Adopted Planning Years 5-Year

CIP Categories FY 2011 FY2012 FY2013 FY2014 FY2015 Total

Schools Projects $ 35,850,070 $ 37,482,419 $ 22,059,181 $ 20,800,000 $ 10,676,261 $ 126,867,931

City Jail $ 15,600,000 $ 30,000,000 $ 45,000,000 $ 22,000,000 $ 5,000,000 $ 117,600,000

Other City Facilities $ 22,732,643 $ 14,942,479 $ 10,321,852 $ 6,350,553 $ 4,023,739 $ 58,371,266

Infrastructure $ 11,711,243 $ 7,100,000 $ 6,870,000 $ 4,420,000 $ 3,550,000 $ 33,651,243

Economic & Neighborhood Development $ 3,350,000 $ 6,150,000 $ 2,716,978 $ 900,000 $ 850,000 $ 13,966,978

Acquire Broad Street CDA (1) $ 67,100,000 $ - $ - $ - $ - $ 67,100,000

Total $ 156,343,956 $ 95,674,898 $ 86,968,011 $ 54,470,553 $ 24,100,000 $ 417,557,418

Funding Sources

Commercial Paper/GO Bonds (2) $ 111,811,838 $ 95,474,898 $ 86,968,011 $ 54,470,553 $ 24,100,000 $ 372,825,300

GO Recovery Economic Dev Bonds (ARRA) $ 22,482,875 $ - $ - $ - $ - $ 22,482,875

GO Qualified School Construction Bonds (ARRA) $ 14,983,000 $ - $ - $ - $ - $ 14,983,000

Other Funding $ 7,066,243 $ 200,000 $ - $ - $ - $ 7,266,243

Total $ 156,343,956 $ 95,674,898 $ 86,968,011 $ 54,470,553 $ 24,100,000 $ 417,557,418

1. Estimated amount required to payoff existing CDA bonds

2. Includes Prior Year Appropriations of $4,050,370

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Series 2010 Debt IssuancesA General Obligation Bond financing is planned to accomplish the following:

1) $113.9 Million: To refund certain maturities of three existing G.O. bond issues of the City (Series 2000A, 2002A and 2004A) at lower interest rates to achieve debt service savings

2) $14.98 Million: Qualified School Construction Bonds (QSCB) –Allocation of 0% subsidized funding directly to Richmond made pursuant to the American Reinvestment and Recovery Act

3) $67.1 Million: To payoff and refinance the remaining $65.7 million of high interest Broad Street CDA debt

Total Transactions: Approximately $196 MillionTargeted Sale Date: November 3, 2010Targeted Closing Date: November 16, 2010

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Series 2010 Debt Issuances – G.O. RefinancingSeries 2000A Bonds – Current refunding of the 2012-2018 maturities totaling $67.5 Million.

Utility System allocated debt (Gas, Water and Wastewater). Final FY 2018 maturity will not be extendedEstimated cash flow debt service savings (as of Sept 15) of $10.4 million will be structured on an approximately annual level basis.

Remainder of the $113.9 million will be used for advanced refunding of callable Series 2002A ($21.5 Million) and 2004A Bonds ($17.4 Million) – if the City’s NPV 3% savings target is achieved. City will refund all, some, or none of this debt based on market conditions in November.

General Fund allocated debtFinal 2023 maturity will not be extendedEstimated cash flow debt service savings (as of Sept 15) of $3.1 million will be structured on an approximately annual level basisPotential savings not factored in to the FY2011 budget.

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Series 2010 Debt Issuances – QSCB AllocationThe City was one of two localities in the Commonwealth to receive a direct allocation of Qualified School Construction Bonds (QSCB) in the amount of $14,983,000.

The QSCB is available as a result of the American Reinvestment and Recovery ActFederal Interest Subsidy is anticipated to cover 100% of interest costs

The QSCB will not be an additional borrowing authorization; rather, it will replace the current tax-exempt authorization at 0% interest.

Replaces approximately $15 Million of market rate tax-exempt funding

Preliminary structure assumes the following:Bullet maturity of 17 yearsEstimated level sinking fund payments

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Broad Street CDA Overview

The CDA was created by City Council Ordinance on July 2, 2002.

The CDA owns three parking garages and two surface parking lots located in the 31.5 acres that constitute the CDA District.

In 2003, the CDA issued $66.7 million of 30-Year Revenue Bond debt with $65.7 million outstanding today.

This CDA bond debt carries interest rates of 7.10% - 7.500%.The City can issue GO bond debt today at rates of 3.50% - 4.00%

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City Obligations Under the Current CDA Structure

City’s $3.0 Million Moral Obligation

$250,000 – annual payments for Special Parking Rights

$400,000 – annual payments for Richmond Coliseum

From 2004-2008, $3.25 Million in payments, not including principal payments

Debt was sold as unrated (junk) bonds at high interest rates

Adverse impact on the City’s bond ratings in the event of a CDA default

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Restructuring of CDA Debt

Replacing high interest rate CDA debt with lower interest rate City issued GO Bonds is projected to reduce the annual debt service outlay on the $65.7 million of debt by approximately $1.3 million per year. (From $6.1 million to $4.8 million annually).

New restructured debt would begin repayment in FY 2012 (No FY2011 payment) with final maturity in FY2032 (Same final maturity as existing CDA bonds).

City would better control the management of public parking in downtown Richmond. Other parking assets could be folded in at later dates. Recent parking study strongly recommends that City consolidate CDA, RRHA, RMA, and City owned parking assets under one parking entity.

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Notes:Total Tax Supported Debt – Excludes Moral Obligation Debt.(1)Excludes Commercial Paper of $26 Million.(2)Principal shown above differs by $637,971, which represents the amount of the 2004 QZABs and the actual payments to redeem the 2004 QZABs.

Existing Debt Service and Payout Ratio Existing Outstanding Debt

Existing Debt as of June 30, 2010

Notes:Includes Commercial Paper of $26 Million.

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Existing and Proposed Debt Service – Includes anticipated FY 2010 G.O. bonds and projected issuance for all CIP; Does not include potential refunding.

Debt Management Policy – Governing StructureGeneral Fund supported debt will be structured in a manner such that not less than 60% of the outstanding debt will be retired within 10 years.

All proposed debt shown above meets or exceeds the City’s 60% 10-year payout ratio.

Existing and Projected Debt Service

Existing & Projected Debt Service

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Debt Management Policies Governing Limitation on Debt

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The City’s General Fund debt will not exceed 7.5% of the City’s total taxable real estate value. This policy will be reset this year.

Notes:Assessed Value Growth Rate assumptions: 2011 - 1.2%, 2012 - 1.3%, 2013 - 1.9%, 2014 - 2.8%, 2015 - 3.2%; thereafter, 2.5%.

Debt to Assessed Valuation of Real Estate

The City is well below the 7.5% total taxable real estate policy

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Per Capita general fund supported debt will not exceed 7% of per capita personal income.

Notes:Projected Income Growth Rate = 2.0%.Population Growth = 0%.

Debt vs. Income

The City is well below the 7% of per capital income policy

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The amount required to pay general fund supported debt service will not exceed 10% of the total general fund budget.

Former CDA debt service is now included in new debt and is within policy.Policy excludes moral obligation indebtedness and intergovernmental (Commonwealth) funded School Board budget.

Notes:Total General Fund Budget Growth Rates = 2011 - 1.2%, 2012 - 1.3%, 2013 - 1.9%, 2014 - 2.8%, 2015 - 3.2%; thereafter, 2.5%.

Debt Service vs. Revenues

The City is below the 10% of total GF budget limit

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Includes 100% of Richmond Public Schools intergovernmental revenues and moral obligation debt, which does not have offsetting revenues.Former CDA debt now included in new G.O. debt service beginning in FY 2011.

Notes:Includes 100% of Richmond Public School Operating Budget (Commonwealth

Intergovernmental Revenues).General Fund Budget Growth Rates = 2011 - 1.2%, 2012 - 1.3%, 2013 – 1.9%, 2014 - 2.8%.Schools Budget Growth Rates = 2011 - (10%), 2012 - 0.5%, 2013 - 1.0%, 2014 - 2.5%.

Total Debt Service vs. Total Expenditures FY 2009 Comparative

Source: 2009 CAFRs.

Including all tax supported obligations, the City’s total debt service is less than 10% of expenditures.

Debt Ratio – Total Debt Service vs. Total Expenditures

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Full valuation includes Real Estate and Personal Property; debt includes all tax-supported G.O. Bonds and M.O. Bonds.

Former CDA debt now included in new G.O. debt service beginning in FY 2011.

Notes:Total A.V. Growth Rate = 2011 - 1.1%, 2012 - 1.4%, 2013 - 1.9%, 2014 - 2.3%.

Total Debt vs. Full Valuation

Source: 2009 CAFRs.

FY 2009 Comparative

Including all tax supported obligations, the City’s total debt burden is less than the average of the comparable “AA” cities.

Debt Ratio – Total Debt vs. Total Valuation

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In Summary -Richmond’s Financial and Economic Performance are Strong – Exceeding our Peers

We have Built Upon Our Reputation as a Well-Managed Government that is Fast Becoming a Tier One City

Our 2010 Debt Financings Improve Our Debt Position and Take Advantage of Low Interest Rates