Page 44 - City of Bedford FY21 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.

The General Fund’s major revenue sources include property taxes and sales taxes. Each of these revenue
sources are driven by the growth of the local economy and the City’s population. This is also true of a
number of the City’s other revenue sources including fees and charges for service, franchise taxes, and
licenses and permits. The revenue projections presented in the forecast use line item summary of City
revenue. These projections are based on an analysis of at least 5 years of historical trends for each revenue
line item, as well as the effects of current economic conditions and projected economic activity.

Property taxes, the City’s largest revenue source, are based on the tax rate adopted annually by City
Council as applied to the certified property rolls prepared by the Tarrant Count Appraisal District. The
rate is composed of two parts; the first to support general City operations through the General Fund and
the second part to pay principal and interest on tax supported bonds through the Debt Service Fund.

Property values are projected to increase an average of 0.75% from FY 2021 – FY 2025. This will drive
the actual property tax rates that will be proposed in the next five years.
Sales tax projections are flat for FY 2021 but are projected to increase 1% during FY 2022 and FY 2023,
0.75% during FY 20204 and only 0.5% during FY 2025.

The overall expenditures in the model are reflective of the increase in the municipal cost index on an
annual basis. The average municipal cost index is adjusted and applied to all expenditure line items to
present forecasted results. The average of all expense line items, excluding payroll-related expenditures,
are forecasted to increase 0.5% per year.

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. The model includes a 2% step adjustment for Public Safety Sworn employees
and a 2% cost of living adjustment for all eligible general employees.

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