BCC-Budget Workshop 2

>> It's a good morning. Welcome to the 5/23/2023. Meeting of the Board of County commissioners budget workshop. If you will please stand MISTER Smith will lead us in the pledge. Thank you our first agenda item this morning's open to the public I do not have any cards was there anybody here speak. >> Seeing no one will go ahead and move to item number 2 administration and we will begin. >> With our County administrator opening. >> Thank you commissioners this morning. We have a jam-packed morning. Will go to doctor Sean snaith than a second to give it the economic update. Rob look Lewis will come out and do a presentation on the legislative update and then Jay Glover will come in and do a presentation on. Our debt and with that picture looks like going forward we have some general fund other updates before we get to your capital improvement in a couple of other issues, including the utility rate discussion and environmentally sensitive lands. So as the board Budget is a year round process for staff it never ends. The board is already now in 3rd a official budget workshop but that doesn't include all the times that you have to work on budget as items come before you and your regular agenda that shes as we get prepared for our actual budget adoption. You've got a lot of meetings left. The one in AUGUST is still set as if needed. If if we need it in AUGUST that I think that means Stephen I have probably done something wrong. Because we should be wrapped up before we get to that point and then very important hearings and this year both of the public hearings will be in this building just to point that out. With that chair I'd like to ask doctor Sean snaith to come forward. >> They built My my comments today from last year because I think I. And you've got tape on this don't just so you can you can just I don't I don't like when I get. >> Recorded. But I think I said MISTER Chair, the one next to and said I think that the us economy is in are on the brink of a recession. Turns out we haven't had the ruling on this ship that we did see in the first 2 quarters of last year. Real gdp contract. Recessions are not a you know it's not like a a. Test for strep throat or something like that where you can just got to submit some labs get get a result one way or another it's a it's a small group of economics professors get together in the think tank and make these proclamations but. With 2 consecutive quarters of gdp. This is a sort of a rule of thumb definition of over session. But it's not truly how recession is defined as determined by the committee. But typically and you have to go back to 1940 secs. To find an example this if you do have 2 consecutive quarters were gdp is contract in real gdp. A recession is typically declared. So the last time that happened and there was an recession was 1946 o it would be unusual if that recession was not clear, but certainly isn't out of the possibility and so here we go with the groundhog day part of the presentation. I think we're in are on the cusp of a recession. Right now and there's a lot indicators here I coming coming on to talk about this for a minute everything we've gone through over the past 3 years really can be rooted in 2 rooted in is rooted in our policy response to call the time team. Speak to people as it well you know what was the economy like this to you think back to. Of 2020. And what was the National com Lycos floors economy. And the answer was in pretty good shape. Florida had very little unemployment, not quite as low as we see today but around 3%. Some labor market issues. Shortages of nurses. I'm told we don't have enough accountants I still can't wrap my head around that one, but. You know we didn't have all these other issues inflation was less than 2%. The Fed is struggling for a long time to try to get it up up to. 2%. Supply chain. You know what your logistics are dealing with supply chain. Average Joe like me I just want to the storm the stuff was there. It's the same to work, but you know all of these issues that we ran into over the past 3 years starting of course with the touch with the the shutdown of the economy. Said the shutdown of nonessential love to know who decide that. You know as a probably also on tape o. The decision to shut down my Barber led ultimately to me having shoulder-length hair. But my goldendoodle well quaffed throughout. So somewhere someone decided professor grooming is not essential that dog grooming is. So you know that we do these decisions happened and why and I MAY have spoken in the past about why that it became tunnel vision and everything we did was call that 19 centric without really any consideration of anything else so we shut down the economy. We plunged into the worst recession since the Great Depression, this is a record that has been broken several times during my career I hope it stands this time. But gdp contracted in the 2nd quarter of 2022. 32%. 2 weeks to flatten the curve became 2 months largely that bulldoze the economy then the decision to open back up for the most part happened the economy roared back to life. So we started off with kind of a Recession but then the policies we did in response to that shut down the Fed went back to the 2008 2009 monetary policy when they were fighting that global financial crisis, the cut interest rates to 0. It started quantitative easing again their balance sheet grew to $9 trillion starting with the cares act. The federal government started spending. And I uh I don't know where we're at now but I believe it's 8 or $9 of deficit spending has occurred. Since that time so we open up the economy roared back to life and then we just pour gasoline on that fire. Government spending and monetary policy and this really sparked all these things. The supply chain all that demand. Just in time supply chain is not equipped to handle the surge demand that that we polls shutdown. Oil and gasoline prices of course started their rights because prices have plummeted when nobody was going to work cut or going to school people weren't Robin demand for oil jet Gasoline collapsed and you know one of the interesting sort of if you're an economist against kind of trippy things that that happened was that the spot price of oil in MARCH of 2020. Live on the 28th MARCH. The price of a barrel of oil that it was-38 dollars and $0.50 it was a slight on ever study that economics negative price. But this was a you know producers just wanting to get the oil off of the supertankers and into their finery and they're willing to pay to do that because they would lose less money. But that that that was just to kind of a a curio some what happened was oil prices fell and when oil was 25 or $30 barrel. There's no new well has been drilled. There's no money been spent on exploration. And in fact. Breakthrough been shut down. So we saw the North American rig count fall down into the 200 range. So supply was severely constrained to then we open things back up people started travel and driving again. The man was was exploding. And so the price started to climb. And so we're on that path to $100 barrel You know long before russia-ukraine long before the election transpired because of these of these policies so I think we're still in. The aftershocks of what we did in 2020 and we're trying to get to the other side of this entire episode. And something closer to normal and I think that you know perhaps where we're headed is still a consequence. Of you know decisions that were made in 2020 regarding call that 19 so as I said last year in us and were either in recession or on the brink of one. Multiple or per pointing. Lope low personal noticed driving the other day and then on my dashboard all these lights started lighting up. I don't even know what half of them at some of the more planking in and as old as you know and the economic dashboard kind of looks like that right now. Hopefully it's not a transmission problem like mine turned out to be but we have a lot of kind of store indicators of recession. Suggesting that that's where we're headed and so these are a few of them. The Conference Board is is a private group they have a a set of indices they used to kind of track them the movement of the business cycle and what I said the business cycle. The movement of real gdp in the economy so. Expansion we reached peak, we go into recession, we reach the trough and so on and so forth so they have in this is to try to track that can currently they have an industry that sort of leads. The the economic cycle and they also have one that lags it so you know you can try to triangulate where we are looking at these different in the season. This leading economic index has been in a contraction for over a year now. And so the graph on the screen there, the blue line is the year-over-year change and this leading economic index. The lighter color line your of your change in real gdp and the vertical gray bars with the past couple for sessions. In the us economy and you could see where Leading indexes right now it is at a level that is consistent with his previous 3. Recessions. So there's one dashboard. Indicator sort of boy King recession. The inversion of the yield curve. I want to get to 2 won't be here an inverted yield curve is when the interest rate on short term government bonds is higher than interest rates on long-term government bonds typically the opposite is true most of the time. And this is an this inversion of the yield curve has occurred. Prior to every recession in modern us history. So if if there's a recession. You know it was preceded by this inversion however every time the yield curve has inverted a recession is not necessarily follow so it's it's an indicator but not a perfect one. But again. You can look at different spreads some you know it's just like ice cream flavors some one spread over another, but basically of long-term interest rates are are lower than short term interest rates. It's a suggestion that the markets expecting in the future that the Fed's going to be lowering short-term interest rates. The Fed lower short-term interest rates when they're trying to pull the economy out of recession. The second dashboard light here. Philadelphia Federal Reserve Bank a has a service called the survey of professional forecasters in among other questions in that survey. They asked the respondents to predict or to assign a probability that real gdp will contract in each of the subsequent 4 quarters to win that surveys taken. So you get the survey, you know what's the probability next quarter gdp is neck and what's the problem the quarter of that gdp growth negative and so on the anxious index is it was coined by reporter from the New York Times. It's the average response of these forecasters to the question what's the probability next quarter that real due to real gdp will well as is approaching 50%. And this is a chart. And the great vertical bars again are all historical recessions and you can see where that index is now is consistent with each of those previous recessions, so there's a you know another flashing a light on the dashboard a suggesting that you know recession might. Might be coming and coming soon. And then finally a another survey, this conducted by the Wall Street asked a question in a little different way they they ask you know what is the probability that there will be a recession in the next 12 months. So the most recent puts that figure at 61%. These are little out of order in fact that's In APRIL that a percentage was 18% in JULY it 28 OCTOBER was 49 out 61% so over the course of of last year and into the beginning of this year. More and more of the economists to reply to the survey. I believe that there's a recession. Coming within the next year. Now. As is well known economist of have 12 of the past 7 recessions. I don't know whether to be queasy about this or you comforted by it. >> But there is a I think. Agreement among economists about the possibility of recession in the us economy. That I've seen. It's you know it's hard to get. For economists to agree on pizza for pizza let alone. 60% plus and there's going to be a session. In the us economy. So there's a lot of flashing lights. Here it's an unusual time that it's still you know 20 20 and the aftermath has a economic the phenomenon that we've never seen before and you know we talked about negative oil prices is just one of those but just very. I mean that's the only way I could describe that the policy was so dramatic. And it such a large swings in activity and disturbances. Throughout the economy that we're still trying to get our you know our equilibrium back if you will and back to something close to normal. So I would say that we are in are on the brink of and this is Deja vu of a mild recession. I think that this recession as I believe that 20 to 22 recession. And we'll see if it's officially declared or not. Will be a mild one. This is not going to be 2020 where we are just plunge into this horrific down turn talk of the 2008 2009. It's going to be a very slow. A decline in output in the economy and then the very gradual climb out the other side. So this is not yet and MAY not even feel like a recession. For a lot of reasons so. Part of the story here big part of the story is the labor market. We've not seen a labor market like You know just a year year and a half ago there were some 12.4 million job openings in the economy that that. That number has fallen to about 9 million. So there is some. Tightening in the labor market, but this is a different kind of tightening because when you cut a job opening. Nobody loses a paycheck. Which is different than you know historically that the tightening labor market starts in layoffs pick up and the unemployment rate rise. So I think the I think the labor market had this cushion. As as these recessions, the servings if you will of of the possible recession of come our way that really has cushioned the blow and I you know in many ways that's a good thing. Especially with of what the Fed's doing. As they try to bring inflation back down to their 2% average. Target level. The slowing economy and you know part of the reason. I think there will be a slow down here at some point 2023. It keeps kind of slipping into the future. Like the Steve Miller song. What we have seen over the past 2 years that I think is like a slower Rouge, an leading into this next recession is that. Real wages that is people have seen their wages and salaries rise. But the cost of living over the 2 year period has has risen more quickly. And so yeah I got a 5% raise last year all I did that that was the average increase. But the cost of living went up by 9%. So even though the more money in my my my wallet, it's not going as far and we've seen some some persistence in oh you know food inflation of course, a housing costs. I have gone up significantly. Electricity costs a lot of big ticket items for for families for for consumers. Still have a pretty high year over year rate of inflation and so it. Is starting to wear on consumers. It's not evident, everywhere. You know tourism continues to thrive. You know every number that comes out of the state or the regions around the state seems to be you know breaking the previous record. Consumers are still spending on experiences and services now. Where we are seeing weaknesses in interest rate sensitive. Type activity mortgage rates have gone up substantially so worse in transactions housing market go down. Things like furniture. People right now are running out and buying new living room sets or dining room set so we're seeing contraction in that kind of spending but not across the board and part of it I've also been watching. Consumer credit card debt. Which has been rising in breaking you know new record levels and at the same flashing back to several periods in my life where I got to the end of the month then. I pay bills that pay and there wasn't anything left. For groceries. And you know charging hungry man and a credit card to 21% interest. I think some of that is happening in that consumers of patch things together by on using their credit cards but that's something that can't go on. Indefinitely so I think that's I'm still in the belief that we will see a mild slowdown just because of the erosion of purchasing power. The consumers have have faced the past 2 years. Talking about the Fed you know that we've The fastest hike in interest rates since the 1980's. Interest are interred pollution hit a hit over 9%. Last summer and the Fed acted very quickly in and pretty dramatically. 2 raise interest rates some more around 5 and a Percent on on the federal funds rate. That will probably I think the possibility certainly of another quarter percentage point hike is still on the table. Markets curiously futures The sheer have been betting that the Fed will start lowering. The federal funds rate by the by the end of the year. I don't think that's going to be the case. I think they're not going to have to go as high as the economy is is is slowing. So I think 5 and a quarter 5 and a half, but I think they're going have to sit there. For a while and you know they don't want to report a room repeat, the mistakes of of late 70's and the 80's were they didn't get the job done in terms of getting inflation and that kind of pull back and then had to come in even harder to put it out and you know it's it reminds me of a. The situation Smokey the bear. His advice on how to put out a campfire. And author still teach kids Smokey the bear Obey you throw water on it and you put the flames out. They're not done yet you've got the embers so you got a pro smarter on those embers and stir the embers as for some more water on there to make sure all those numbers are out the Fed is throwing water on inflation. But the those flames are out. But the embers I think a lot of areas are still still blowing. And that means that the Fed is not going to be able to you know backtrack and start cutting rates until these numbers are out. And because of the nature of something things like you rent hikes for example, you know of during all inflation, your rent went up $2030400 month. That's not going to come down. Until the lease is up for for renewals so there's a lot of pressure. Still And so I will see the Fed to hold interest at that terminal rates through the end of 2023 certainly in and for much of the 2024. To make sure that the you know that the inflation is out completely and that they don't want to revisit the 70's 80's. We talk a little bit about the job market You know I think you're going to start to see some softening nationally, I mean what we've seen thus far at in the You seeing layoffs. But there concentrated, you know sort of in the companies that broad because of the covert 19 a pandemic so technology companies. You know the amazons and and streaming services and facebook now people nothing to do they're sitting at home and became you know those companies did very well. A horrible recession. And so now you're seeing sort of a the retrenchment there they MAY be over. Overreached a bit in terms of the expansion plans. But I think this will spread a little bit beyond just technology is the rest of 2023 a place on but again we're not going to see the kind of labor market pain that we would if the economy was growing at a much faster pace in the Fed was the same battle against inflation. I think that this will help the slowing economy is going to help some of those problems that we laid out earlier it's going to help certainly was inflation. We're already Gasoline prices have come down. Significantly from you know $5 Pete. Per gallon. I think the supply chain will have some time to heal as Is is pulling back these the severity of the labor market shortages, I will continue continue to ease is as this plays itself out. >> I will say this you know inflation is coming down we are seeing you know commodity prices come down. Wages and salaries will not come down. That kind of inflation is permit if you will not flourish and those kind of increases are permanent and in economics would say the wages are sticky. You know the people who were hired uh huh when these for $13 an hour at age, 16. They're not going to take a pay cut down 10 once the labor market. Loosens up a little bit so those those kind of games are permanent but prices elsewhere we are seeing. You know significant declines from the peak inflation experience last year. So your outlook Again is a short ish. A quarter 2 quarters still 5 months 6 months. >> So slow growth for the year overall the kind of bleeding into next year. Because of the consumer and the pressures that we described earlier of of uh falling real wages. What you're Still an issue so the bottom row there were you know we're anticipating. Up pretty significant deceleration of consumer spending and so. Consumers are 72% of the economy. So when we still slower spending. The economy will follow suit. Some inflation data as I said you know 20 22 was the You know we're seeing things come down. From there. The progress has been has been gradual which is again. Another reason I think the Fed has to stand up stand firm and keep interest At their terminal level for a longer time than and some in the market same to believe. Narrowing the view here down to Florida and it seems like a you can't really talk about Florida's economy without talking about housing market and certainly the housing went through some. Some pretty unprecedented swings here over the past 3 years as well and so this is data from the Florida Realtors existing single family homes monthly and blue the red is a 12 month moving average in. You can see that there's been a significant drop in sales. And monthly sales and a 12 month moving average has been pulled down. As well. One part of that of course is a mortgage Went up significantly. But not historically high. You know if you look I don't over 30 year average or something mortgages are about 7 and a half percent. So we're not we're not even at that kind of average yet but. Not too long ago mortgage, some 3%. And so it's I think it. The perception is that they're high. Even though historically that's not a necessarily fact. Prices that has You know the past 2 There were 2 years not the past. Most recent too but experience 2 years year-over-year price appreciation Florida, greater than 20%. So a sharp, you know that a couple months torn a lockdown I think people are trying to figure out. What was happening and you know maybe the housing market, you know quivered a little there. But shortly thereafter. Things took off and prices started to rise and so you know this combination of really high. Prices with now higher interest rates means monthly payments are out of the reach of the of increasingly. More potential buyers. And course we've got property insurance issue to that it's to the cost of buying a home and so. As a result. 2 transactions of have slowed dramatically. Price is not as much but but I want to talk a little bit about this because that you know a lot people will ask me is this another housing bubble that Florida has gotten itself into. And certainly you know that kind of prices appreciation is the evocative of all happened in o 4 o 5, 6, But these are fundamentally different. Time periods even if the rise in prices look similar across them. What we don't have. And this most recent housing up to so that we did have and oh 4 oh 5 oh 6. Is easy mortgage lending. In fact just the opposite has been the case over the past several years. This this is index for Mortgage Bankers Association of America that built bill from a survey of of mortgage lenders and. Kind of the still their responses to the questions down into the single number. And the base for this index is MARCH of 32 so thinking back Mar., 22 well that was pretty pretty close to the housing market's Mortgage lenders were given out mortgages that easily. So you could see the recent several years >> As we approach the pandemic the index got up to about one 85. DECEMBER 39 was 85% easier to get a mortgage that was back in MARCH of 32, not make sense the more time that passed a new regulations were implemented it cetera but then called in and then you could see you know what happened there. >> Lender started to tighten. During the pandemic and have continued to do so in the most recent. Index value for For APRIL is actually less than 100. So it's tougher now to get a mortgage than it was. Back in March of 32. As lending standards tightened over that entire period is when we saw price appreciation at its fastest so this is a this is a different animal. Them what was happening back then and then you know I always like to show this index with the historical perspective of housing bubble. >> It was near 900 back in 2006. You know more than 9 times easier to get a mortgage then than it is today. So. Don't expect a repeat of what we went In 2008 2009 with regards to the housing market because you know these are these are completely different. Episodes. >> The MARCH show report to for the state. >> You can see sales down. >> 15% year over year. >> a median >> up still year over year, but that a 2.1% and so that you know meeting median home cost $405,000. >> In in Florida. We did see just for a few months month to month prices actually go down a little bit. But that is in the past a couple of months kind of reversed itself, so you know we're not going to see a 50% falling home prices as we did and no 8 oh 9. We don't have that easy ending but we still lending but we still have the problem. We have prepared them act in and really that you know with that I would say since 36 or so and that's the bottom. The bottom line and the bottom rose there's not enough supply. 2.7 months of inventory that means that at the levels of demand that were present in MARCH this year. The number of homes for sale would 2.7 months. And a balanced You know should have at least 6 months. Some would argue 6 to 9 months. So anything less than that. You know Realtors say this is a seller's market. Your economics professor would say there's a shortage and this market. And in markets where there are shortages. There's upward pressure on price. So that that has not changed. It's harder to get a mortgage. There's not enough housing out there. Mortgage rates are significantly higher. I think these higher mortgage rates to are also weighing down on the inventories. >> Because you take a. >> Somebody bought home their that's their starter home and you know now that you know, and they have one kid now they've got to one dog now they've got the dog and 2 cats and a normally they would look to kind of move up the chain and then they would sell that house that they ran I think there's some hesitancy here because the House of there and now they refinanced a 2.8%. Mortgage in this house that they would move up into this larger one 100 different circumstances. They're going to have to finance that 6 and a half so that starter House doesn't get back on the market I think on there so I think that you know in the court building. New units is a big part of that equation as well. You know here in Sarasota. Little bit of a of the decline year-over-year certainly not as big as what we saw statewide in terms of closed sales. Prices rising faster, I'm still. Significantly faster than the state year over year 4 times faster almost a little more time on the market. An inventory has gone up to but it's still below that 6. So they're still shortage here, and that means they're still going to be upward pressure on prices and you know at 4 to 520,000 plus. You know that that issue that it's been a been lingering here is not going away any time soon unfortunately condo kind of little little different store. They're they're you know we are seeing the year-over-year contraction in sales but prices still rise double digits. The year-over-year MAY meant. Maybe the mix certainly what selling things like a, but they're selling quickly and in the tora still depleted a and up section of the housing market as well so. These these problems uh you know I think are going to be fairly persistent. As I said they've been around for a pandemic and the certainly didn't result many alleviation of those issues. A statewide you know I. I think Florida is in the best possible position and and I'm not sure I believe this was forecast right now I 10 change my mind as I look at it. >> Which uh you know. Forecast more frequently a month month or quarter to quarter and a lot can happen but I will say this I think Florida's and in the best position week possibly could be to whether any sort of national recession. You know, especially something that that is anticipated to be a mild downturn. You know if this were you hurricanes that of recession. I mean we've got all the shutters up all the sandbags down. To absorb this and I and I think you know we're we're and in a pretty strong position. I'm going forward labor market, you know we're what 2.6%. Unemployment right now, I'm so you know some of this MAY be a a little too looking at it now in terms of how Florida might fare, but I feel pretty pretty optimistic that we're in a good position to handle. You know whatever comes out at the national level. >> And really the same is true for you know I think growth here continues. I think the strength of the economy strength housing market. The problems. >> Here are not. >> Going to be manifested by slow down in the economy the problems here the pain here is really going to be growth bans. How do you accommodate this growth, you know we do about housing and course transportation is the intersection of those 2 things the venn diagram there significant overlap and this is happening in different parts of the state as well. You know you have to find. You know when you have a growing metro area. You know you tend to sort of grow out work because housing is less expensive further from. You know the heart of the economy and so the problem becomes you know you have to be able to get people from where they can afford housing to where they're working and you know this is you know a public transit certainly part of the first road systems. You know that that's the these are the things I think that you know you'll continue to to grapple. Was here for significant a period of time but. Don't think you're strong and people are still spending on experience and travel. You know tourism. 2020 that was horrific. The housing market. In terms of him valuations and tax I mean I think the budget situation I I'm and maybe the professionals will contradict me but that for for someone that's not super budget was I got to think that you're going to be in pretty decent shape just by looking at the macro view of the of the housing market the region's economy so. I will say this you know if this recession. The second recession. Manifests itself I think that. >> The layoffs are the job losses will be more white collar. This time we're already seeing that in the tech space. You know in 2020 the that was a blue collar recession. You know most of us were fortunate to zoom our way through that, but the people who work with their hands that to go to a site. To do that work retail restaurants. Those are the folks that lost their jobs. This time around I don't know but I don't hear anybody laying servers. Cooks. >> Or you know other than the. >> Retail workers for example, not associated with the just the mention app it again I think relatively mild I'm nothing like the past 2 recessions that that the Florida in Sarasota a has gone through. You could see it a little bit of a slow slowing. I'm the Metro gdp or gross Metro product. But you know it's. >> Come a long way know we're we're we're looking over $38 billion here by 2026. >> From our last forecast. Personal income growth. Still solid I'm going for maybe a little slow as this recession, plays itself out none of these wild swings. That we went through with a you know stimulus checks and all that and the severe recessions that we experienced in 2020 and 2008 2009. Jen. Loss of jobs in the probably be in terms of thousands could probably be counted on one or 2 hands. If if In fact happened so I don't see it as a issue if this happens here as the year goes forward. I think inflation is coming down. I think you know the prognosis is quite good. Got the usual antics a Washington dc universe eye on the But. Here locally in here in the state of Florida. A pretty strong position and I think you know this is a of a budget workshop. You know I I think the as far as the economy's impact on it should. The fairly in significant. Thank you so much. Thank you questions for doctor say. >> Commissioner fascinated by the labor market since. Cole specifically the commercial real estate like I can't imagine owning a commercial Connecticut for example when you have Manhattan Connecticut, Chicago, Detroit l a these folks now are all working from their homes. Yes. Which surprised me and you're the second last slide is that these folks are having northern wages. Well if I don't have to work in. The snow. I moved to Sarasota Florida and they bring the income along with it that was the only one of the and it seemed a little off and just common sense think and know your presentations are always fabulous they were really do get they don't always in the loop common sense though you make the point. >> Know I as I said the eye that looked a little more. >> a bearish. Generally speaking, but you did bring up a topic that's been a lot of time talking about residential real estate, I'm talking about commercial. You're right you know this is this is part of said the violence of covert 19 policy just Sun. Shockwaves through the economy of course, one of them. Was labor force and a lot of people. Got a taste of that forbidden fruit. Call work from home. And you know once you know what that's like it's kind of hard to go back to that cute 5 days week right. Sarasota County employees excluded, I mean I know you were talking about Connecticut time jobs. So yeah, I don't know that we've arrived at what the final solution I will point this out and you the academic literature, it might. Delving into this but in the first 2 quarters of last year. Labor productivity declined at the largest 2 quarter consecutive rate since the data has been collected and I thought well why and people as productive. Over those 2 quarters and then I took a nap. I'm working from So yeah in so that the commercial commercial I think is has a little bit of a rocky road here maybe not so much because the economy is contracting but because you're grappling with that these office spaces that are you know him been filled. The Associated retail. In some of these spaces when you don't have workers coming in each and every day. Silicon Valley bank to undo commercial real any favors that. Horrific mismanagement as kind of scent. Shock waves and shrapnel to regional banks who are very big players and in commercial real estate, so you know they're seeing and ice you know, I said this repeatedly. Yeah you can have the best managed most well capitalized bank. It can not sustain a run of deposit withdrawals and so these banks right, Balli says it is a case study of mismanagement, I mean the most egregious type of mismanagement backing. You know they failed because they didn't account for interest rate risk. I mean. It's like being a pediatrician and not being able to diagnose an ear infection. I mean it's as basic as you get these other banks are kind of feel on that the after effect in because of the role did you play in commercial real estate they're going to be. And so we've got a situation where e as you noted the labor markets still trying to adjust with the post co the world is. Banks are going to get tighter in terms of commercial lending and interest rates by the way. Are higher for those that that might qualify for that so. Sheriff and just follow up on that for one 2nd it. We're walking into a budget hearing over the next few months here, I'm already in debt. >> But in that discussion. I don't see anything that would impact us and I'm not just in case, anybody's grave, but that could only be a positive thing for Sarasota County people are looking if they're if they're going to leave these. Snowy areas out one of them is you're not you're going to go to very specific places, Carolinas. Florida Texas, maybe California and now prone the family, but you know it definitely effort County it's for climate. The but in going door hearings you could see that is nothing but a positive for Sarasota County I would hope. The positive how just me not negative in the sense that we are not heavily we're not downtown Manhattan with a low, I think those are not not know happ's right absolutely I mean now when the benefit of that family coming down. >> Right keep know, yeah, I mean I don't know office space and Sarasota scum going to be completely unscathed put when you have you know these countervailing forces of growing population. That's a nice south to put on any you know any out you might have otherwise but that that's you again. I think. >> Florida and Sarasota and several others around the state are very well positioned to handle, you know much of this fall. Thank you for always a pleasure listen to investment percent of an inch. Got a couple thoughts questions. Yeah, we're you know you're the chair. Does it trouble you, I mean I've seen him. >> My career when everyone is aligned. And what we have right now is everyone aligned everybody says you know this is across the board every economist I listened to every pun All the news channels everybody's talking about the coming recession. And frankly is compelling case for I mean facts look like that, but does that give you pause when a is not a contrary indicator when everybody saying the same thing little bit. >> And then the by little bit of a lot of I prefer to be kind of the ot personnel I feel better Yost was known as a contrarian and a lot of ways put. You know, you said you see this many dashboard indicators Arkansas close my eyes and pretend that they're not there. Now what I'd be If we somehow avoided a recession. Probably not terribly shocked because of this I mean these are sort what's nearby. My kids watch the show stranger things. There's some like upside down world or somebody that it was I think uh you know a time for that. But it we are in this upside down kind of world here as far as the economy is concerned you know we're still. Come out from under the covert 19 spell here and the thing that really it's the labor market to me that that you know might be the life raft that gets us you know. Through this without you know an actual recession, happening. I mean when you have that up. Many people working and if inflation keeps coming down. So that you know real wages don't continue to fall. There's yeah I the there's an on and certainly is a non probability that they're will not hear sessions a double negative on a someone will write me a letter. >> It was but. >> I got that I is there's a dissonance for me what I see the sales numbers dropping in yet prices going up I mean just doesn't come together for me and I'm wondering some of things you talked about where you've got the family that decided well we'd like to move up, but we're not going or you know the average age of cars like over 12 years old and all these they even talked to a a. You know just just folks who are. We are waiting for a little opportunity to jump in right and and I'm wondering if that's something that's really going to change the dynamic where you've got a lot of people who have been holding off and bought a new car and moved up or whatever and if we see a pullback they're going to jump on it's going to keep things for what will certainly you know if you watch the. >> The national housing market, you know. Little swings in mortgage rates for a month to month seem to generate exactly what you're saying on the mortgage rate You know this month but quarter of a percentage point and boom. You know sales took to people like let's go now. Yeah, I mean I. >> Is there still some pent-up demand to war. The supply chain issue. If you talk about automobiles which is think still somewhat that. You know interest rates are higher for for cars and used cars now so you know the significantly higher than that we're and so. >> Cars are older that they do last longer really we have to kind of fact I mean I I can remember a time of year, someone had a car that 30,000 miles on it you are just waiting for it to like you know collapse in the middle Road and all the wheels come off. And now they run for hundreds of thousands of miles o. >> That's q that that age a little bit but some of it is you can't get the car. >> Those vehicles weren't because of a the code 19 policies, but. People are pulling back the said it's mainly on the good side of things I'm not on the service side of things. You're getting inflation under control without having interest rates have to go much higher than they are. It is a positive economic development that that that the sort of boost. The economy ah in many ways and you know knock on wood that looks like that might be the case here if we continue on this the trajectory. Yeah you got as I said the political theater with the debt ceiling and all that you know running again. To to to your point. Yes, you know that word people are working by and large. And if you want a job by large you can get one if you want a second job by and large you can get one. So it's not as if you know consumers don't have any disposable income it's just that it's been eroded by this inflation that seems to be kind of coming back down in line with wage growth. >> So let's hear it talked to both a large commercial developer and a residential developer are both holding off on some major building projects waiting for this kind of pull back rich get a lower little bit lower and costs also just you know the building the construction, materials and costs and they're holding off on some major projects is that wise right now I mean would you where we are looking a lot of projects John just think about the impact for us. How does this affect our decision. >> Well I think you have to look at the longer longer game or the big picture You know these cycles. Are truly transitory. You know every recession comes to an end but what's the and serves on the county, you know for the past 10 years past 20 years, you know that that I think has to be the guiding principle for you know kind of these more futuristic decision-making is not a the budget year to budget year yet the cycle can can come and throw a wrench into things but you know the big picture is this growth is going to continue. And those projects to the people you a conversations with. It's just a matter of. You know when they perceive it to be you know the right time, but I mean the demand that driving that you know you sort of mentioned other considerations like borrowing costs and materials costs. You know they're not holding back because the demand is in question I would say you know they seem to be holding back for these other things that affect profits of course, but that's less concerning to me that if it was like oh no one's going to move to Sarasota more. >> We haven't talked about this I'd be interested in your take on the long-term effects of Hurricane recovery. Every morning and write about 75 minutes ii masses of construction vehicles and supply trucks and things like that I mean this is a long-term recovery is at has that impact our economy here special. You know we >> I think was in the wake of Hurricane at the institute my my students a 9 to a research project basically we said looks and everyone wants to know what the hurricane mean what's the economic So we went back to I go how far back we have the data but every hurricane that made landfall in Florida we tracked its path. We looked at what counties were impact of course the severity of the storm Wade into that analysis. But the pattern was remarkably similar in terms of how the economy is affected by hurricanes. There is a significant short term impact on employment, especially when you have a large one like we've experienced. But over time. You know that. Affected industries things real estate and tourism tend to stay down a longer time than other industries construction, very quickly explodes in the wake and that is of you know repairs and rebuilding and you know more damage that's done the longer that process is going to take. So the fact that you're you know still seeing and they might not all being you know deal with hurricane stuff that might be doing population growth and working on those other projects, but. You're more damage stun more repairs. Have to take place and you know in terms of long term are people going to say well there was a hurricane last year in Florida, I'm not coming to Florida. I don't think so you know because I'm in we've had a couple of rough years here we also won 10 years you know without one making landfall. So you know I think it's unknown. Our life here in Florida and and I take you know we not to deal with and you know in the process of getting getting back. The headline that doctors need predicts no Hurricanes for 10 years. But that well you know I. Yeah I've been in the prediction business a long time and you you you lot lot of these predictions are made you know with models which are just mathematical and statistical equations and and um but first econometrics professor in college set on the first day of class the true model, whatever it is you're trying to protect is known only to GOD. And so that was a warning that whatever you do it's wrong. And I would say you know take a look at the spaghetti charts the next to a hurricane season. See how widely dispersed they are and how much they change over just of course of a few weeks so I won't say that, but I will hope for. We should have a new this morning a always my pleasure thank you. Oakley good eye for traffic. The chair we're going to move in Rob going through a. >> What we think happened in the legislative session was still happening in and we've asked the jury to come up because she's been working alongside Rob This past 18 months or and helping him with some issues over this past very very busy legislative session. >> And MISTER Lewis yes, it is a very busy legislative session. It is still going on up until the time it came up to the diocese. The budget has not yet been transmitted to the governor. Nor has the tax package or some other legislation that could happen before I get back to my teacher. Once it goes to the governor has 15 days to act on it. Within those 15 days. What if anything was vetoed the regular session ended on MAY 5th. We had I think a very successful year. With the board's help the administration's help and our delegation, sponsoring very good year getting appropriations request and it all go through those very quickly. I I think that kept the work pretty well briefs other should be very fun. Right now in the budget we have million for frugal road expansion. We have $8 million for Laurel road week have $1 million for the health of the Bay midnight asked which is a key. We have $1 million for an alligator Creek air real pipeline. And then we strongly supported to other requests that are also in there. But we did not submit the application one of which was for a shelter indoor sports facility design work that million and Nathan benderson Park and school board partner with us this year and some ended a 1 million Dir. A high-tech regional fire Academy classroom that then will be. In addition to that I also want to. He has asked for $10 million for from the road as well. We still discerning whether the large package of transportation dollars that the governor requested that included the from Bill road intersection isn't there and to what degree it's in there. We are hopeful that it is but there are literally still sifting through some of that. All that said is that I want to communicate to the board that has a major objective on the board. I think a perch at from a lot of different angles in terms of seeking supplementary funding and Ben successful. The other one that I would be remiss if I didn't note because it was one of the last things that senator gainer was working on is the love land appropriation and that's it's in the budget right now at $15 million. There are some other key legislation, the tax package that I won't go into great detail on isn't there. It will prepare for tax holidays and so on. There is a timing issue on that one because like some the tax holidays even relate to this coming weekend. So don't be surprised if I let you know during the day the budgets gone to the governor and he's acted quickly. It's clear to me at least that the governors staff have been working on a budget. As we've even put it together. Frs Florida tart system as we all know in the legislative process is very dynamic. We have hours of tedious work interrupted only by moments of sheer terror. We got moments of sheer terror. With 2 weeks or less in the session. We had an amendment dropped on there that would have and a 27 $28 million impact on your fiscal year budget for next year. But more importantly would have had an immediate $8 million impact on this fiscal year because of the state budget. Dates starting on JULY first that Cole, a provision that cost of living increase provision was taken out. Extension of dropped to 96 months and rate increases. Those rate increases out for us. To about million so in the context of your budget workshop in the context of the administrators proposed budget, you'll hear more talk about that and more detail. There's some other up fiscally related legislation Senate bill one 70 that allows up to $50,000 in attorney fees. Should someone That number one way down as we move through the session. As you heard earlier of there is a this is a yearlong process the next legislative session. We're already working on. I've already got a draft policy that will be sharing with. And bring you back to the board for your consideration later in AUGUST when you return and the interim committee meetings this year will start on some of the week of SEPTEMBER. And then session regular session begins on Jan. 9th. This upcoming session will be my 44 session I told the board last year that the 43th session moved very quickly I would expect with the current legislative leadership. We will see early legislation acting on often we will see tweaks on existing legislation that that could see some more tweaks in the condo safety bill could see some more tweaks and frs certainly more tweaks in. A general tendency to always guard against a fiscal impact of local government and preemption of our authority our best day is when we can pull herself revenue neutral. So with that MISTER CHAIRMAN take any questions. >> Thank you Rob. Any questions comments discussion. Very successful year. Hopefully the uh this will as you mention he'll sign this quickly and not line out any of our items. >> I will know almost immediately and then I will let you know almost immediately. >> Commission and like the trends transition over to. Our our financial advisor for Sarasota County. He comes in every year at this time to tell you the latest and greatest of how we're looking in our overall financial picture well doctor Snape is projecting with things MAY or MAY not happen, he's telling you the reality of where our finances are at least our debt portfolio. >> CHAIRMAN Commission members Jake lever from pfm the county's financial advisor and yes we are involved in the county to access to capital markets to fund a projects the a debt and each year we prepare. This link the book that summarizes a your outstanding debt portfolio talks about what we did in 2022, looks forward to 2023 and also provide some commentary on where the market was. Last year so we excerpt a few pages from that book to go over with you all during the budget process every year and that's what we're here to do today so just in terms of starting doctor snake talk a lot about the overall will focus on the municipal bond market on a for a few slides here and what is shown here is what we call them in the triple h e a cur on the that stuff. Interest rates were the highest rated aaa issuers can borrow and that accident market this was as of MAY 5th of of this year. So you can see the solid blue line is where we are currently in terms of rates from really the one year maturity through the 30 year maturity and then the dotted line show historically where we were a week ago a month ago on a year ago, so you can see in particular the shape of the yield curve has changed dramatically over the last year so we're at a point now where one year rates are almost as high as 30 year rates we have a very and revealed person that's Perry. A unique and generally means that as was mentioned before the recession might be on me so. You know quite frankly this curve is actually changed even since MAY With all the issues going on in dc right now if the debt ceiling, we've actually seen that up a relief from the one to say 13 year Mark move up. So we've really seen short term interest rates exomoon about 20 or 30 basis points in the last 2 weeks so there's some I think some real concern in the marketplace with short term rates really rising. Transitioning over to the Treasury current we focus on this a lot as well and as I mentioned and then days a tax exempt yield curve Treasuries are obviously a taxable yield curve and here again you can see a severe and personal yield curve really with event 0 to 3 month interest rates being much higher than even 30 year Treasury rates and the graphic to the right you can really see how that's changed over the last year. The 2 year rate has gone up a 121 basis points us what those yellow bars are suggesting, whereas rights and the 5, 7, in 10 year range have only been up about you know 30 to 40 basis points and on the long end of the yield curve 61 basis Again a steep inversion of the yield curve whereby actually you can borrow out 30 years at cheaper rates and you can actually borrow for 3 months ago again very odd in terms of the shape of the yield curve. I'm also we are always like to look historically where interest rates are now compare that with where they've been in the past so I know there's a lot going on in this craft, but again we're on the left side looking at tax exempt rates and on the right side looking at taxable Treasury rates so that the shaded bar shows over the last 10 years the lowest rates have been as well as the highest rates have been so really if you're looking at the 30 our rates have been as low as simply about one percent and they've been as high as almost 5% and you can see now there are around that 3% raise so we were all very much spoiled also in the last 3 or 4 years with really Alterra low interest rates where the county could go out and borrow for 20 or 30 years and be well below the 3% interest rate level. Were not as levels right now, but I think if you look back historically. Pretty much around the average as we've seen in the last 10 years so there's a perception out there which was mentioned that rates are well above where they've been historically if you look back over the last several years that is indeed the case but if you take a longer perspective. You know, they're still around historical average for the last 10 years maybe a little bit higher depending on where in the yield curve you are in particular on the short of the yield curve again we're near our historic averages. And that's particularly true on the Treasury yield curve on the right hand side you can see short term rates are essentially as high as they've been over the last 10 years. But if you get out to 30 years there, you know probably between the average for the high in on the taxable yield curve. This shows treasure is folks. >> Credit spreads so we talk a lot about credit ratings were talking about the county and you all obviously maintain the highest credit rating possible as the county. >> Your aaa rated which we'll talk about some and why that's important as you can see this is the spread that you would actually price after that index we mentioned before so the blue bars at the bottom show if you're Triple a rated you're spreads to Mon. Or generally below 20 basis points and have been historically and as you move down the credit spectrum to double a and single a your credit spreads widened significantly we like to point that out because we all strive and you all make decisions that allow you to maintain that Triple a rating and what that will do is always allow you to access to capital market to the lowest cost possible. So if you look at something even below a triple beat you would see in this market the credit spreads are extremely wide. So you know in particular in a volatile market having a strong credit rating is a very important and really has kept those spreads pretty constant over the last year as you can see if you're in the a category there's been significant change and spreads its different a market conditions have persisted. And then the final slide here related to interest rates. This is short term interest rates and their doctors snake talked about the Federal Reserve acting very swiftly to account for inflation and this just shows and this graph I mean short term rates were essentially 0 at this point last year. And the Federal Reserve has raise rates to over 5% again shown here in this crash short term rates have risen dramatically and you can see these bar step up which is really just in line with the Federal Reserve's action. I think most economists would have thought the last interest rate increase that happened. I think it was maybe 2 or 3 weeks ago at this point was going to be the last one, but I think there's some sentiment out there that inflation still persist and I think as was mentioned there's a 25 basis point interest rate hike still on the table and I think at this point the idea of short term rates are federal fund rates coming down this year. I think most economists will say they believe that likely won't happen until 20 20 for the earliest because inflation is still a major issue I mean the Federal Reserve is balancing inflation with some of these bank to false and fangs and they really have a tricky job trying to do this and not cause a recession. Many people say that might be impossible to do, but again short term rates had risen dramatically over the last year. So with that that's just a bit of a interest rate market update, which is obviously important to you all because we do have some projects that will talk about that the county will be entering the markets far this year and we'll talk throughout this presentation as well. This slide just shows a brief overview of the different leans of death that the county has outstanding as well as the total pardon on a beach that. So you can see a significant amount of your debt which will show on the following pages really within utility system. And then you have a series of general fund credits as well that are outstanding again we mentioned this before the county's general obligation credit rating, what is your full faith and credit that's really the overall credit rating in the county his triple 8 the highest credit rating possible. You all have maintained that from number of years to economic cycles and we'll talk a little bit about the key metrics that the rating inches look at when rating your debt. I'm not only is your Geo rating very strong all of your other credits have very strong ratings as well so most of