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Presented by Maria Villagómez,
Budget Director
Impact of Federal Sequestration on City of
San Antonio Budget
City Council “B” Session
March 6, 2013
22
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
33
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
6
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 $11
Impact to City of San Antonio Grants
10
Key Program Funding Level($ 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 – $1.7 Million
San Antonio FY 2013 City Budget Impact
1111
Key Program Funding Level($ 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 $8.8 Million
San Antonio FY 2014 City Budget Impact
12
San Antonio FY 2014 City Budget Impact
Key Program Funding Level($ 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 $8.8 Million
13
San Antonio FY 2014 City Budget Impact
Key Program Funding Level($ 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 $0.9 Million
14
Key Program Funding Level
($ 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 $1.3 Million
San Antonio FY 2014 City Budget Impact
1515
Key Program Funding Level
($ 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
1616
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
18
• 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
20
• 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