Presented by Maria Villagómez,

Budget Director

Impact of Federal Sequestration on City of

San Antonio Budget

City Council “B” Session

March 6, 2013

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Agenda

1. Sequestration Overview2. Effect of Sequestration on City Of

San Antonio – Impact on Federally-Funded City

Grant Programs– Impact on Airport Operations– Impact on Build America Bonds (BABs)

3. Potential Federal Tax Legislation changes impacting Municipal Bonds

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Sequestration Overview

• Sequestration is a series of automatic cuts that reduces the budgets of most federal agencies and programs

• Budget Control Act of 2011 mandated sequestration effective January 2, 2013 if Congress could not reduce federal deficit by $1.2 Trillion over 10 years

4

Sequestration Overview

• January 2, 2013: American Taxpayer Relief Act of 2012 - Congress authorized two-month delay of Sequestration deadline

• March 1, 2013: Sequestration signed into law– $85 Billion annually in

Federal cuts over 10 years

1$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

March 1st Sequestration Cuts

$42.5 Billion: Discretionary Defense Funding

$42.5 Billion: Discretionary Non-Defense Spending

$85 Billion annually in Federal cuts over 10 years

$ 26.4 Billion in cuts to Domestic Programs through which local governments receive much of their federal funding including San Antonio

5

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March 1st Sequestration Cuts

• City of San Antonio could be negatively impacted through–loss of funding in Federal grants–Operational impact to International and Stinson Airports

–Less Federal subsidy for Build America Bonds (BABs)

• City currently receives approximately $150 Million in Federal Grants annually

• Of the $150 Million, 16 grants totaling $140 Million could be affected by sequestration

• Majority of impact would not be realized until the City’s FY 2014 Budget

• City funding could be reduced:– $1.7 Million in FY 2013 and – $7 to $11 Million in FY 2014

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Impact to City of San Antonio Grants

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Impact to City of San Antonio Grants

• Most discretionary domestic (non-defense) programs would face a 5.1% to 8.2% reduction

• No available guidance from federal government on what specific discretionary programs would be reduced by 5.1%

• Amounts presented today are projections based on City’s current allocation and known percentage reductions

• Final amounts determined by Federal and/or State Agencies and may result in higher or lower amounts

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City Grant Program Summary

($ in Millions)

FY 2013 Estimated Reduction

FY 2014EstimatedReduction

Human Services Programs

$1.7 $5.7 to $8.8

Health Services Programs

$0 $0.5 to $0.9

Neighborhood Services Programs

$0 $0.8 to $1.3

Public Safety Programs $0 $0.2 to $0.3

Total Estimated Reduction

$1.7 $7 to $11

Impact to City of San Antonio Grants

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Key Program Funding Level($ in Millions)

FY 2013 Budget

Projected FY 2013

ReductionAmount

Child Care & Development Block Grant

$46.05 $1.6

Community Services Development Block Grant (CSBG)

$1.86 $0.1

• Human Services Programs – $1.7 Million

San Antonio FY 2013 City Budget Impact

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Key Program Funding Level($ in Millions)

FY 2013 Budget

Projected FY 2014

ReductionAmount

Head Start *2014 school year begins July 1, 2013

$56.89 $2.90 to $4.44

Child Care & Development Block Grant

$46.05 $2.35 to $3.78

Community Services Development Block Grant (CSBG)

$1.86 $0.09 to $0.14

• Human Services Programs - $5.7 to $8.8 Million

San Antonio FY 2014 City Budget Impact

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San Antonio FY 2014 City Budget Impact

Key Program Funding Level($ in Millions)

FY 2013 Budget

Projected FY 2014

ReductionAmount

Comprehensive Nutrition & Transportation Programs for Seniors

$2.04 $0.10 to $0.16

Emergency Solutions Grant (ESG)

$1.15 $0.06 to $0.09

Housing Opportunities for Persons with AIDS (HOPWA) $1.19 $0.06 to $0.10

• Human Services Programs - $5.7 to $8.8 Million

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San Antonio FY 2014 City Budget Impact

Key Program Funding Level($ in Millions)

FY 2013 Budget

Projected FY 2014

ReductionAmount

Women, Infants and Children’s (WIC) Supplemental Nutrition

$6.38 $0.33 to $0.52

Health Grants:• Immunization Program• Healthy Start Initiative• TB Prevention & Control• STD Program

$3.98 $0.20 to $0.33

• Health Services Programs - $0.5 to $0.9 Million

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Key Program Funding Level

($ in Millions)

FY 2013 Budget

Projected FY 2014

ReductionAmount

Community Development Block Grant (CDBG)

$11.56 $0.59 to $0.95

HOME Investment Partnership Grant (HOME) $3.87 $0.20 to $0.32

• Neighborhood Services Programs - $0.8 to $1.3 Million

San Antonio FY 2014 City Budget Impact

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Key Program Funding Level

($ in Millions)

FY 2013 Budget

Projected FY 2014

ReductionAmount

Homeland Security State and Local Programs

$1.82 $0.09 to $0.15

Department of Justice Enforcement Grants $0.48 $0.02 to $0.04

Public Health Emergency Preparedness $1.71 $0.09 to $0.14

• Public Safety Programs - $0.2 to $0.3 Million

San Antonio FY 2014 City Budget Impact

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Impact on San Antonio Airports

• Federal Aviation Administration (FAA) plans to reduce $600 million through September 2013

• Cuts could lead to full-time and nighttime closures of traffic control towers and furloughs of FAA staff including security screeners and custom officers

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• Sequestration would cut funding for air traffic control contract at Stinson Municipal Airport and require full utilization of Universal Communication System (UNICOM)

• Today, air traffic control tower is operated from 7 A.M to 10 P.M. daily by federal contract. During non-staffed hours, pilots use UNICOM system to monitor and make announcements at airport (i.e. landing on certain runway)

• Reduction could potentially be implemented April 1, 2013

Stinson Municipal Airport

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• Effective March 1, 2013 subsidy payments to issuers of Build America Bonds would be reduced by 8.7%

• Potential impact to San Antonio of $166,000 in less federal subsidy in FY 2013• FY 2013 Expected Subsidy before cut:

$1.9 Million• Sequestration reduction rate applies to

current FY 2013 only

Build America Bonds

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• Not part of Sequestration, upcoming deficit reduction and tax reform discussions may impact tax exempt status of Municipal Bonds Interest

• Municipal bond interest currently exempt from federaltaxation

• Reduction or elimination of taxexemption caps would result inhigher interest rates and borrowing costs to City

Tax Exempt Status of Municipal Bonds

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• City of San Antonio could be negatively impact through– Less funding in Federal Grants– Operational Impact at International

and Stinson Airports– Less Federal Subsidy for Build

America Bonds (BABs)

Summary

Presented by

Maria Villagómez, Budget Director

City Council “B” SessionMarch 6, 2013

Impact of Federal Sequestration on City of

San Antonio Budget