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2 <br />3 <br />4 <br />5 <br />6 <br />7 <br />8 <br />9 <br />10 <br />11 <br />12 <br />13 <br />14 <br />15 <br />16 <br />17 <br />18 <br />19 <br />20 <br />21 <br />22 <br />23 <br />24 <br />25 <br />26 <br />27 <br />28 <br />29 <br />30 <br />31 <br />32 <br />33 <br />34 <br />35 <br />36 <br />37 <br />38 <br />39 <br />40 <br />41 <br />42 <br />43 <br />44 <br />45 <br />46 <br />47 <br />48 <br />49 <br />50 <br />Construct a 10 -year financial forecast model for the County <br />• Provide an impartial third -party projection of the County's finances <br />• Work with staff to develop consensus on assumptions <br />• Forecasting is a "best practice" <br />Present areas for consideration in building budget strategies to address structural deficit <br />• Interview the County's senior management team <br />• Topics included wide range of both financial and operational areas including matters such as <br />revenue enhancement, expenditure controls and cost shifts, service delivery changes, service <br />reductions /elimination <br />General Basis for Forecast Projections <br />Management Partners has created a 10 -year budget model <br />• History for revenues and expenditures back to FY 2002 -03 <br />• Balances based on CAFR actuals through FY 2016 -17 <br />• Staff estimates used for FY 2017 -18 in lieu of Revised Budget <br />• Basis for future projections is 95% of FY 2017 -18 Revised Budget <br />Applies to all department/programs except Transfers, Retiree Medical, Debt Service (where <br />there are specific amounts), or Education (100% of budget) <br />• Growth rates for FY 2018 -19 and thereafter set by department /program <br />• Debt Service based on Davenport & Co. debt affordability analysis (1/9/18) <br />Major Assumptions <br />Operating cost drivers: <br />• Health costs average 7.5% growth <br />• Salaries /benefits average 3.1 % growth <br />• Education costs average 3.0% growth <br />• Non - personnel costs average 2.0% growth <br />• Debt service costs rise from current $26.7M to $39.2M in FY 2022 -23 <br />f Declines thereafter under Davenport analysis, but forecast assumes debt service remains at <br />`$35M, to meet future capital financing needs <br />• CIP- related operating costs included (costs rise to $3.2M by FY 2027 -28) <br />• Loss of impact fee revenues ($3.3M in FY 2017 -18 budget) <br />Conclusions <br />If property tax rate remains at current level, operating cost trends, together with loss of impact <br />fees and higher debt service, would create an average $11 M annual structural imbalance that <br />would require higher property tax rates and /or expenditure reductions to resolve <br />Revenues <br />Recessions have occurred on an average every 6.8 years since 1927 <br />• Budget impacts often lag official recessions <br />• Forecast assumes minor recessions in FY 2019 -20 (starting mid -2019) and FY 2026 -27 <br />• Key is timing and magnitude; model allows range of assumptions to be tested <br />County Funding Primarily Supported by Property Taxes <br />-graph <br />-graph <br />Property Tax Rates Assuming Constant Tax Rate <br />