General Fund Long-Range Forecast Introduction and Assumptions


General Fund

Long-Range Financial Forecast

FY 2023-24 through FY 2042-43



INTRODUCTION


The City of Concord has been using a long-range general fund financial forecast since 1995. The use of the Forecast has been instrumental in helping the Council, staff, and community understand the future impacts of current decisions and spot fiscal trends. Beginning in 2018, the City developed a long-range financial forecast that projects out 20 years in order to provide a longer-term view of the City’s fiscal condition.

The long-range financial forecast for Concord’s General Fund provides a long-term view of revenues and expenditures to assist in evaluating the impact of policy choices on the City’s long-term fiscal health. The General Fund accounts for the majority of City services that residents and businesses rely on each day. These include everything from police services to recreation programs as well as internal services, such as financial management and information technology that keep the City and its programs running. The restrictions imposed by the State that limit local governments’ ability to raise revenues adds to the importance of understanding the long-term fiscal impact of current policy decisions.


A long-range financial forecast projects the future impact from continuing the City’s current service levels and policies, and helps to illustrate what the City’s financial future will look like as a result of the historic trends and decisions made in the recent past. A long-range financial forecast is also useful in identifying potential issues that may arise in the future, which require financial modeling and fiscal planning.


The projected revenues and expenditures in future years of the long-range financial forecast should be viewed differently from the projected revenues and expenditures included in the proposed biennial budget due to the increasing uncertainty attached to projections beyond the immediate budget cycle. The financial forecast is a valuable planning and decision-making tool; however, it is not a financial plan. It sets the stage for the budgeting process and provides context to aid the City Council in establishing priorities and allocating City resources.


On May 22, 2018, the Council amended the General Fund reserve policy to set a minimum 17% reserve with a goal of 30% of General Fund Expenditures. Staff projects that the City will have a reserve level of 30% for FYs 2023-24 and FY 2024-25, 29% for FYs 2025-26 and 2026-27, and reaches Council’s goal policy level of 30% in FY 2027-28.


MAJOR ASSUMPTIONS


Below is a list of the major general fund revenue and expenditure assumptions in the long-range financial forecast. Many of these assumptions are explained in greater detail in the City Manager’s Budget Message (dated May 16, 2023). Other general fund expenditure and revenue categories not listed below are projected to increase by 2.0% annually to reflect the 20-year average annual change in the Consumer Price Index for the West Urban Area, as defined by the U.S. Bureau of Labor Statistics. Debt payments, rental income, and other contractual commitments are projected as per the agreements. The following table provides an index for the abbreviation of each of the twenty fiscal years included in the long-range financial forecast.


Fiscal Year and Abbreviation Table

Major General Fund Revenue Assumptions

  • Property Tax: Average annual increase of 3.2%
  • All other revenues: Average annual increases of 2%

General Fund Expenditure Assumptions

  • Salaries are assumed to increase as follows:
    • Annual increases of 3% in Y1 and Y2 for Miscellaneous employees.
    • Annual increases of 5% in Y1 and Y2, and 6% in Y3 for Police Officer Association (POA) employees .
    • Annual increases of 5% in Y1 and Y2, and 4% in Y3 for Police Management Association (PMA) employees .
    • Annual increases of 2% for Miscellaneous employees from Y3 to Y20.
    • Annual increases of 2% for POA/PMA employees from Y4 to Y20.

  • Healthcare Premiums : Average annual increase of 3.5%.
  • Pension Costs: Pension costs fluctuate from year to year based on annual actuarial valuations as determined by independent actuarial reports.
  • Operating Expenses: Most operating expenditures are adjusted annually by 2% to reflect the 20-year average in the Consumer Price Index.

Footnotes