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• WS -6 WORK SESSION STAFF REPORT Work Session Item 6 To: Mayor and Council Members From: Al Rolek Date: December 3, 2012 Re: 2013 -2017 5 -year Financial Forecast —1st Draft CC: Background Attached is the 1st draft of the 2013 -2017 5 -year Financial Forecast for discussion at this evening's work session meeting. The forecast was developed following the process approved by the City Council, with the underlying values of meeting our obligations to the citizens of Lino Lakes and maintaining service levels. The first draft is a compilation of projected needs over the coming five -year period submitted by the department directors for their respective areas of responsibility. It anticipates an overall increase in expenditures of 15.41% for the five -year period. While the real estate market is still relatively weak, there has been some improvement over the last year. Anticipated change in the tax base was revised from the previous plan, ranging from a 7% decrease in 2013 to a 2.0% increase in each of the last 3 forecast years. The forecast includes both market adjustments and new construction. The net result is a tax base contraction of 2.23% over the five -year period. Given this rate of contraction in the tax base, the city tax rate in the plan is projected to go from 42.893% in 2012 to 54.024% in 2017. The primary reason for the increasing tax rate is the reduction in the tax base forecast. Following the year 2013, a factor of 0 - 2 % per year was used throughout the plan for most expenditure projections. A number of areas, such as energy, fuels, health insurance, etc., were increased at a greater rate in accordance with anticipated market adjustments. 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. Planning for long -term capital outlay is continued throughout the term of the plan. Greater efforts in funding future street