Page 42 - City of Bedford FY20 Approved Budget

Long Range Forecasting

PROCEDURE

As part of the budget process, staff presents the City Council with a long-range forecast model to
provide a better understanding of the impact of budget decisions in the upcoming fiscal year. The
forecast model serves as a tool for sound decisions, accurate projections and financial management
of the City’s General Fund. The model calculates, predicts, and offers a visual snapshot of the
City’s General Fund financial position for the next five years. It is dynamic and staff can adjust
as new revenue and expense data becomes available. More importantly, the model is used to
evaluate the future impact of hypothetical changes that can cause short or long-term problems. The
model enables informed decision making by showing both short-term and long-term affordability
of those decisions.

METHODOLOGY

The model highlights historical revenue and expenditure trends from the previous five years to
form predictive behavior of certain budgetary line-items. Therefore, based on certain trends, the
model includes many assumptions. One assumption estimates moderate revenue growth for the
next three years, ranging from one to three percent among the various tax categories, before
reaching a plateau of zero growth thereafter. The model accounts for the new roll-back rate limit
of 3.5% effective in FY 2021. Another assumption accounts for spiked growth in recreation
program revenues beginning in year-3 over the next five years, primarily due to the proposed
completion of a new multi-purpose event center, as well as new outdoor facilities, by Fiscal Year
2021-2022. The model includes a continuation of taxable value growth beginning at 10.235% in
year-1, before declining to two percent by year-5. It also accounts for an increase of 14.234% per
year in tax ceiling property values that are deducted from the tax rate calculation process and
declining to nine percent in year-5.

The overall expenditures in the model are reflective of the increase in the municipal cost index on
an annual basis. The model identifies a certain percentage of the expenditure categories that are
dedicated to personnel and factors annual compensation increases towards personnel costs in order
to project what the total cost would be over the next five years.

PROJECTIONS

The chart on the following page shows the revenue and expense projections by major category for
the next five years. It also includes the previous year budget and projection for comparison. This
chart was finalized based upon the final decision of the City Council regarding the tax rate for the
current fiscal year.

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