Page 92 - Benbrook FY2021

PREPARATION OF THE CURRENT FORECAST

A forecast is only one of the many components in a financial planning system. The financial forecast does not attempt to replace any of the
other financial monitoring systems. The forecast also does not provide precise expenditure and revenue projections over the term of the forecast.
Due to the nature of economic and political systems, and the inability of local or national officials to significantly influence the global economic
and political system, the raw numbers this forecast generates may easily become inaccurate even during the course of the next few days. The
importance of the forecast lies not in the mass of numbers produced but, in the discussion, it encourages and stimulates of both current and future
policies and practices.

This long-range financial forecast, as any other, contains many underlying assumptions. Each projection contains a series of assumptions that
may or may not hold true during the tenure of the forecast period. Each section details the assumptions used in projecting revenues and
expenditures and in some cases identifies policy changes that may cause the assumptions to be incorrect.

FORECASTING METHODOLOGY

A wide variety of basic techniques are used by cities to forecast revenues and expenditures. The City of Benbrook uses three basic techniques
to forecast revenues: (1) expert judgment, (2) trend analysis, and (3) application of per capita data to projected future increases. Expenditure
forecasts are derived through the use of the same techniques and methodologies.

REVENUE METHODOLOGY

The expert judgment of revenue forecasting, also known as the "best guess" approach, is used to project some revenue sources. This method
relies on a variety of experts on the City Staff as well as outside sources. The Staff considers different viewpoints to provide a "middle of the
road" approach in projecting most of the City's revenue sources. A variety of opinions are solicited to lessen the possibility of skewing or slanting
the approach toward either overly optimistic or pessimistic conclusions.

Trend analysis assumes that revenues are a function of time. Once revenues are separated into line item accounts, the City's future collections
can be projected based upon trends experienced over past years. Data collection over the past ten years is used to make revenue forecasts.
Since there are obvious drawbacks in relying on past trends to predict future patterns, the projections also include adjustments based upon the
opinions of several department heads.

The per capita method of forecasting revenues involves the development of long-range population projections for the City. The current year's
revenue is divided by the current population to get a per capita revenue amount. Per capita revenue amounts are then applied to the projected
rate of inflation and the projected population to compute the estimated revenue in each of the future years. Again, this method uses past

92 | P a g e