5A Public Hearings 2019 0603 - Laserfiche WebLink

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MULTI-YEAR FORECAST ASSUMPTIONS – ALL FUNDS INTRODUCTION Completing a multi-year forecast for key operating funds is a critical budgetary tool that provides a multi-year view of revenues and expenditures to help the City Council evaluate the impact of policy choices on the long-term fiscal health of the City. The General Fund (a ten-year forecast), Special Revenue, and Enterprise/Internal Service funds sections of this book include detailed discussions of six-year forecasts for key operating funds supported by special taxes, assessments and fees. The forecasting model enables the City Council to act more strategically and to understand the future impact of its decisions. Given the legal restrictions on raising new revenues f or all new or increased taxes (Proposition 218), it is particularly important to understand the long and short-term fiscal impact of policy decisions.  What are the long-term fiscal consequences of employee pay and benefit policies?  What are the long-term impacts of continuing to defer maintenance?  Should the voters be asked to approve a tax increase to support Storm Water infrastructure improvements? The multi-year forecast also serves to identify potential future issues that require fiscal planning. Early planning for changes in baseline expenditures is critical to ensuring continued financial stability for the organization. A variety of assumptions and facto rs drive the forecast, such as labor costs, inflation, potential recession, federal and state regulatory requirements, statewide initiatives, short-term tax shortfalls, and unforeseen emergencies. These assumptions impact revenue and expenditure projectio ns and variations can cause wide swings in budget balancing strategies. INFLATION Inflation is an important factor, directly impacting City revenues and expenditures. Inflation-sensitive revenue, such as sales and business license taxes, make up a significant portion of the General Fund budget (45%). 41 63