Page 38 - CityofKennedaleFY26AdoptedBudget

LONG-RANGE FINANCIAL PLANNING

The primary goal of the City’s long-term financial planning process is to anticipate problems and
assess opportunities which may arise during future budget cycles. This exercise also allows the
involved parties to ensure future budgets are aligned with the long-term vision for the City.

Main points of focus are:

• Property Tax Revenue Projections: TAD has currently moved away from annual re-
appraisals. An analysis of existing accounts shows the current appraised value, for a
significant majority of tax accounts, is well under the market value. The most common
cause us due to market value increasing at a faster rate than the maximum allowable
taxable value increase (10%/year). Under this situation, the taxable value can still
increase without a re-appraisal. We are forecasting a 5% increase, which is a
conservative estimate based on the potential impact of new TAD policies. This situation
is being closely monitored.
• Sales Tax Revenue Projections: The largest source of sales tax receipts for the City is an
online marketplace. A stated goal of the City Council, and the EDC, is to increase
commercial sales activity in the City. While we have not forecasted for an increase of
physical retailers, an increased presence certainly would ease anxiety around potential
impacts of changes to property tax appraisals. To comply with our Policy of maintaining
a conservative approach, we are budgeting a modest 5% increase/year. This does not
consider the impact inflation could have on sales tax.
• Department Expense Projections: The City’s Police and Fire Departments have made
several vehicle purchases in recent years. We are forecasting for a decline in this activity
for FY26, which does pull those departments from our average expected increase of
2%/year.
• Utility Funds: Forecasting for all Utility Funds was addressed within a water rate study
that was presented to Council in July, 2024. The five-year rate plan within the study was
adopted by the City Council in FY24.
A forecast is only one component of a financial planning program. The financial forecast, as
presented, does not attempt to predict the future. Current economic and regulatory conditions
can be volatile, and the forecast is only as good as its underlying assumptions. However, the
forecast has the potential for accuracy, and the true benefit is the discussion and deliberation
resulting. The long-range forecast contains many underlying assumptions for each projection.

The City of Kennedale uses expert judgement, trend analysis, weighted average, and
incremental change as the four basic techniques to forecast revenue and expenditures. The
expert judgment, also known as the “best guess” approach, is used to provide weights to our
weighted average calculations. This method relies on a variety of experts on the staff as well as
outside sources.

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