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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 01/23/2007 - FINANCIAL FORECASTING MODEL FOR THE CITYS GENERAL DATE: January 23, 2007 WORK SESSION ITEM STAFF: Diane Jones FORT COLLINS CITY COUNCIL !i Chuck Seest SUBJECT FOR DISCUSSION Financial Forecasting Model for the City's General Fund. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Staff would appreciate Council feedback and comments regarding the financial forecasting model presented by Economic Planning Systems: 1. Is the financial forecasting model understandable? 2. Does the model provide more confidence in the accuracy of forecasting revenues that will serve as the foundation for budget development? 3. What other questions and/or suggestions does Council have regarding the methods for forecasting General Fund revenues? BACKGROUND The City has relied upon a statistical revenue forecasting model for budgeting and long-range financial planning purposes that was principally based upon the statewide growth in personal income as the leading indicator or local sales tax generation and growth. This model served the City well for over 15 years. However,things began to change in the late 1990's as communities around Fort Collins began to see their own local retail develop and Fort Collins saw little new major retail development, and Internet sales became more pervasive. The impact of these changes has significantly impacted the City's overall sales tax collections. As a result, even though the City continued to experience growth in personal income and expected to see corresponding increases in sales taxes as it had for a number of years, sales tax growth significantly slowed beginning in 2000—even though the model used at the time predicted growth. In order to improve the City's revenue forecasting techniques,City staff hosted an Open House with over forty finance and budget representatives from cities across the Front Range to learn how other governments forecast revenue. From these conversations,staff learned about other techniques being deployed and made a decision that it was time to update and revise the City's forecasting models and systems. Using the feedback gathered from the Open House,staff discussed the results with our financial and economic consultants, Economic Planning System (EPS) from Denver. The City then contracted with EPS to formulate a more comprehensive financial forecasting model to provide more accurate and timely forecasts for ongoing budgeting and financial planning purposes. January 23, 2007 Page 2 EPS's presentation will focus on highlighting the model that has been developed,the methodology used in the forecasting, and most importantly,present the financial forecast for the City for period of 2008 and 2009. ATTACHMENTS 1. PowerPoint presentation from EPS. Fort Revenue Forecasts presented by Dan Guimond & Josh Birks Economic & Planning Systems Denver, Berkeley, Sacramento Fort Collins • Outline • Historic Revenue Trend Summary — Summary — Sales — Property — Use — PILT • Revenue Projections — Sales Tax — Property Tax — PILT • General Fund Projection EconomicsEconomic & Planning Systems Public Finance Real Estate Fort Collins Revenue Forecast $45.0 11 • $25.0 1 1 1 1 '. 1 1 9 . 6 1997 19989 . 9 2000 2001 200211 114 2005 mm*� Sales Tax Economic & Planning Systems Public Finance Real Estate Economics Regional Economics Land Use Policy Fort CollinsForecast $25.0 $20.0 Aroo — $ 15.0 / O 00000 � � •� /� * ♦ ` ♦ I A I ♦ - . I Y I ♦ - 00 / ♦ ♦ I ♦ ♦ Aroo $5.0 $0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 —� — Property Tax - ♦ - Use Tax - Utility PILOT — Remaining Revenue Streams . Economic ♦ Planning Systems Public Finance Real Estate . . Fort CollinsForecast $50.0 Sales Tax Revenue 53% .4 52% $45.4 $45.0 $44.3 $43.6 $43.3 $43. 1 _ 51 % 0 .9% $ 50.7% $40.0 50. 3 0 50% LL 49.9% $37 . 7 O � O 0 49% $35.0 $34.4 48.8° 48.4 /o 0 48.4% 48.6% 48% $31 .1 $30.0 $29.0 47% $25.0 46% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Sales Tax % of GF . Economic ♦ Planning Systems Public Finance Real Estate . . Fort CollinsForecast $14 0 Property Tax 16% 13.9% 14.0% $13.0 13.6% 14% 13. 1 % $ $12.7 12. 1 % 12. 1 % $12.0 $12.1 11 .3% 11 .4% 11 .6% 12% 11 . 10 $11 .7 $11 .0 10% _ LL O 0 $10.0 8% y- $10.0 O $9.8 0 $9.0 6% $8.0 $8.2 4% $7.0 2% $6.0 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Property Tax % of GF Economic . Systems • EconomicsPublic Finance Real Estate . Use Policy Fort CollinsForecast $12 .0 14.9% Use Tax 16% $ 1 .0 $11 .0 $10.7 14 /o 0 13.8% 13.2% $10.0 12.6% 12.4 $9.6 12% 10.8% $9.4 $9. 1 $9.0 $8.7 $8.7 $8.5 10% 10.3% 10. 9.8% % $7.9 w $8.0 $7.7 $7.6 $7.7 $7.8 LL C O $7.4 8% .F $7.0 O 49. $7.0 $6.7 6% $6.0 $5.8 $6.2 4% $5.0 $4.9 $4.0 $4.0 2% $3.0 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Ong . Projection Use Tax % of GF Economic & Planning Systems Fort CollinsForecast $8.0 P I LT 8.0% 7 .5% 6.9% $7.5 7 .20%16 7.0% 7.0% 6. 5% 6.6% 6.6% 6.6% 6.4% 6.3% $7.0 6.0% $6.5 $G.6 5.0% c $6.0 LL C $6.0 4 . 0% $5.8 8 $6.7 $6.6 $5.5 3.0% $6.3 $5.0 $4.9 2.0% $4.7 $4.6 $4.5 . 1 .0% $4. 1 $4.0 0.0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 i Utility PILOT % of GF . Economic ♦ Planning Systems Fort CollinsForecast Sales Tax Regression • Hypothesis : The ratio of regional to local retail sales within and the growth of regional sales outside Fort Collins affect the City ' s overall sales tax revenue • Assumptions Fort Collins Regional & Local Retail Sales Growth Rate ( Input ) Loveland Regional Retail Sales Growth Rate ( Input ) Windsor Regional Retail Sales Growth Rate ( Input ) • Variables Fort Collins Population Ratio of Fort Collins Regional to Local Sales ( Derived ) Loveland Regional Retail Sales per Capita ( Derived ) Windsor Regional Retail Sales per Capita ( Derived ) Christmas Season Adjustment ( Factor ) EconomicsEconomic & Planning Systems Public Finance Real Estate Fort CollinsForecast $60.0 Sales Tax Projection 12.00% 10.76% $50.0 9. 58% 10.00% 8.87% $46. 1 $46 . 7 $47.4 $48.4 $44 . 3 $4 5.4 8.00% $40.0 7.0 /o $43 . 5 $43 . 3 $43 . 1 6.61 °io $41 . 1 $37 . 7 8G% s 6 . 00% 3 N $34 .4 c � $30. 0 =_ $31 . 1 $29 . 0 $27.2 4. 00% Q 0 2. 83% 2.51 % $20.0 2.01 1 .48% 1 . 36% 1 .42% ° 0 $ 10.0 -0 . 9% .0.4 /6 0. 00% $0.0 -2.00% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Historic Projection — *— % Inc. Economic ♦ Planning Systems Fort CollinsForecast Property Tax Regression • Hypothesis : Change in building permit activity and annual sales price growth affect the City Is property tax revenue • Assumptions Fort Collins Building Permit Growth Rate ( Input ) Annual Increase in Average Sales Price ( Input ) • Variables Delayed Fort Collins Building Permit Growth ( Derived ) Delayed Average Sales Price ( Derived ) — Annual Payment Due Date ( Factor ) No Payment Due Date ( Factor ) — Assessment Year ( Factor ) EconomicsEconomic & Planning Systems Public Finance Real Estate Fort CollinsForecast $16. 0 Property Tax Projection $ 15.0 $ 15.2 25.00% $ 14. 1 $ 14. 1 $14. 0 19.29% 19. 06% o00000 $ 13 . 3 20.00% $ 12 .9 $12 . 0 $ 12 . 3 9 $10.0 9 . 8 $ 10 . 0 15.00% 0 C12.38% (� - $8.0 $8 .2 3 $7 . 9 = $ Q $7 . 2 7 . 6 10.00% o $6 . 0 $6 .4 6.39% $4. 0 4 5.79% .61 /o 4. 0% 0 5. 10% 3. 8 % 5.00% 3 . 2% 21 % 01 /° $0.0 0.00% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Historic Projection — *— % Inc . Economic ♦ Planning Systems Foil Collins Revenue Forecast PILT Projection • Municipal utility user rates are revenue neutrality • Projected user rate revenues equal anticipated expenses • Rate increases result from expense increases • Expense projections are based on : — Inflation assumptions regarding capital and maintenance costs — Growth projections for residential and commercial development within the boundary • Utilities Finance & Budget Manager re - evaluates revenue projections several times annually Fort CollinsForecast $8.0 11 .04% PILT Projection 12.00% $7.0 $6 . 7 $6.8 $6 . 7 $6 . 7 MWOMM 10.00% $6 . 5 $6.0 8.48% $6 . 0 $ 5 . 8 $5. 5 $5. 7 8.00% $5.0 5. 3 6.71 % s $4. 7 $4. 9 3 0 $4. 6 , V $4.0 6 .00% 7R $4 1 3 c $3.9 5 4. 7% .51 % Q 0 $3.0 3. 5% 3.80 /° 4.00% 1 0% 2.8 % 2.89% $2.0 60% 2.00% $1 .0 0.94% 0.94% 0 31 % $0.0 0.00% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Historic Projection —*— % Inc . Economic & Planning Systems Foil Collins • Revenue Forecast Model Summary Budget Numbers Planning Level Numbers Revenue 2006 2007 2008 2009 Sales Tax ' $46 , 1127628 49 . 1 % $46 , 7397416 49 . 0 % $47 , 4007928 48 . 5 % $48 , 352 , 350 48 . 5 % Property Tax $ 1470585339 15 . 0 % $ 1470775559 14 . 8 % $ 14 , 9777656 15 . 3 % $ 155158 , 473 15 . 2 % Use Tax $ 850005000 8 . 5 % $ 872005000 8 . 6 % $ 8 , 4005000 8 . 6 % $ 85600 , 000 8 . 6 % PILT $ 656547026 7 . 1 % $ 636745731 7 . 0 % $ 657375334 6 . 9 % $ 658005667 6 . 8 % Other $ 19 , 118 , 260 20 . 4 % $ 19 , 6721690 20 . 6 % $ 20 , 243 , 198 20 . 7 % $ 205830 , 251 20 . 9 % Total $9339435252 100 . 0 % $ 9553645396 100 . 0 % $ 973759 , 116 100 . 0 % $ 9957415741 100 . 0 % % Inc . --- 1 . 51 % 2 . 51 % 2 . 03 % 2006 excludes the one-time revenue Source : City of Fort Collins ; Economic & Planning System Economic ♦ Planning Systems Public Finance Real Estate . . Fort CollinsForecast $ 120.0 General Fund Projection14.00% $ 100.0 1 4 0 $99 9 12.00% $94. 0 $95 .4 $97 .9 $89 . 5 $91 . 5 $93 . 1 1o.00°r° $89 . 0 $80.0 9.6 $86 .4 7.6 /o $81 . 0 8. 00% $73 . 8 3 0 L 0 $60.0 $65 . 7 6.64 6 6. 00% $61 . 0 ' $58 .2 / ` Q 4.91 % 4 . 00% $40.0 3.61 6 5% 2.54% 2. 00% 2.06% 1 .74% 1 . 54% $20.0 0.98% 0. 00% -0. 52% $0.0 -2. 00% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Historic Projection - *- % Inc. EconomicsEconomic & Planning Systems PublicFinance Real Estate