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