Page 107 - FY 2023-24 ADOPTED BUDGET

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 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 using 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 experience to project future trends.

The opinions of the City's department heads are also factored into this approach before finalizing these projections.

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