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3 <br /> <br /> <br /> <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 /> <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 /> <br />Major Assumptions <br /> <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 /> 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 /> <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 $11M annual structural imbalance that <br />would require higher property tax rates and/or expenditure reductions to resolve <br /> <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 /> <br />County Funding Primarily Supported by Property Taxes <br />-graph <br />-graph <br /> <br />Property Tax Rates Assuming Constant Tax Rate