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----1.)1s4-1„,.(01AL_,„(_ Wic- cerctv... WS - Item 10 WORK SESSION STAFF REPORT Work Session Item Date: February 6, 2012 To: City Council From: Al Rolek Re: Revised Draft - 2012 -2016 5 -year Financial Plan Background A draft of the 2012 -2016 5 -year Financial Plan was reviewed by the City Council in January. Staff has revised the assumptions related to changes in the tax base, development and permit revenues, and health insurance renewal rates to reflect a more optimistic approach as directed by the City Council at the last work session. Service levels remain unchanged from the original draft. We have revised the impact on the city's future levies and recalculated projected rates during the term of the plan. The revised plan reflects an overall increase in expenditures of 16.10% for the five -year period, down from the original 17.93 %. The tax base assumptions are revised ranging from a 5.0% decrease in 2012 to a 3.0% increase in 2016, reflecting an anticipated market stabilization and recovery. The forecast includes both market adjustments and new construction. The net result is a slight tax base increase over the five -year period. Over this period the city tax rate projected in the plan will go from 42.778% in 2012 to 50.547% in 2016, down from the original 57.445 %. Because of the new amendments proposed by the Charter Commission to restrict the city's levy authority, a comparison has been included on the levy page to show the impact of a proposed levy cap. Most assumptions for expenditures remain the same as in the original draft. A few, such as projections for employee health insurance renewals, were revised downward to reflect a more optimistic approach to the forecast. Again, staffing levels were assumed to remain constant over the plan term. The primary drivers for increases within the draft plan are personnel costs, pavement management, capital equipment replacement planning, and energy costs. Revenue projections related to development and construction over the period were increased to reflect more optimism in the real estate markets. While we acknowledge Council's awareness of the fact, we must reiterate that this is a financial plan, not a budget, and it does not constitute authorization for future spending, nor does it commit the Council or the City to any provisions of this plan. The city budget will continue to be prepared annually, and current appropriations will continue to be presented to and approved by the City Council on an annual basis. While it is the Council's and staffs intention to be fiscally responsible, it is possible and, in fact, likely that future budgetary needs will differ from what is outlined in this draft. Likewise, the five -year plan will be updated each year and city needs reassessed at the time of renewal. Staff will review the revised draft plan on Monday night.