Agenda - Council Work Session - 10/03/2006

Home

Forecast for the Future s Financial Assumptions The base financial information for the model was taken from the City's 2004 CAFR and the 2005 & 2006 Budgets. In most cases, a 3% inflator was used to project revenues and expenditures. However, no inflator was used for intergovernmental revenues, to better reflect their decreasing value. Additionally, a population growth impact factor was applied, which is used to reflect the increased costs resulting from additional population. For example: The cost of supplies and materials for police protection will increase annually by 3%, to account for inflation. This cost will also increase proportionately to the increase in population. Financial projections developed for the study are driven by growth assumptions. For that reason, the growth projections used are carefully detailed and analyzed. It should be understood, however, that modifications to growth assumptions, whether they are based upon new data or revised assumptions will change the financial model accordingly. One of the City's requests was to correlate housing growth projections with financial growth projections for the City. Presented below are charts which provide inputs to the financial model: estimated market value growth, estimated tax capacity growth, estimated general fund levy amounts, and estimated tax rates. Also provided are detailed descriptions of expenditures and revenues by source and department. One significant issue related to the financial projections which should be monitored on an ongoing basis is the projected tax rate and its projected trend. The model which illustrates this growth is expenditure based, meaning that it calculates and projects expenditures based on current conditions and ratios, and then increases expenditures as inflation and the City's population grows. Because the model is expenditure driven, revenues are projected in response to expenditure levels. For example, the model is structured to increase the general fund operating levy only in amounts necessary to cover the projected expenditures. The projected tax rate remains level through 2010, and then declines slightly between 2010 and 2030. This steady to slightly declining tax rate is specific to general fund expenditures as they are structured currently. Changes or additions outside of these areas, which are likely during the city's growth phase, will have an effect on the tax rate. As currently projected, the growth and subsequent financial gains should be enough to cover the increased staffing and related expenditures without raising tax rates for these purposes. However as mentioned, any additional costs associated with the growth not accounted for in this study will likely negate the gradual decline in tax rate shown. City of Ramsey — Organization Study and Review