INCOME TAX ANALYSIS

The City's income tax revenue accounts for over 65% of General Fund income. Staff closely monitors income tax collections on a weekly basis to determine if budgetary modifications are necessary due to the City's reliance on this revenue source. City income tax revenue is collected by the Regional Income Tax Agency (RITA) and distributed to the City on the 1st and 15th day of the following month. Income tax revenue is categorized as followed:

1. Withholding (60%) - Employers withholding 1% of City residents' wages and remitting the withholdings to RITA on a monthly basis.
2. Individual (30%) - City residents filing individual tax returns or making estimated tax payments to RITA.
3. Net Profit (10%) - Employers within City limits filing and remitting 1% of company net profit.

The following tables summarize income tax revenue comparisons year over year. Income tax revenue through January of 2025 is 24% higher than January of 2024 YTD and 6% higher than budget. The total income tax collection in 2025 YTD is approx. $72,000 higher than 2024's numbers.  The City budgeted a 2% to 3% increase in income tax revenue for 2025. The City relies mostly on the state minimum income tax to maintain day-to-day operations and minor capital expenses. It is critical the City income tax maintains steady growth year over year to keep up with economic pressures. The City is facing economic challenges and unpredictable inflationary fluctuations in operating and capital expenses, such as maintenance of facilities/equipment and purchasing major capital equipment. With the lower collections, City staff is being encouraged to spend their budget dollars cautiously.

FUND BALANCE SUMMARY

Below is the City's Statement of Cash Position, or Fund Balance Report, at the end of January 2025, for all funds. The fund balance report is used to monitor the availability of funds (or cash) in each City fund. The report is regularly reviewed to assist in budgetary discussions and future needs. The fund balance report also includes outstanding encumbrances, or purchase orders. The ending balance is calculated by reducing the unexpended balance by outstanding encumbrances. Staff also utilizes this report to track the General Fund reserve in which staff uses $1.3 million as a general baseline for the General Fund reserve, or 20% of total annual expenditures.

The City's General Fund balance remains steady compared to prior years at the end of the month. The following should be noted from the monthly fund balance report:

• The General Fund unencumbered balance is about $1.15 million, or almost 19% of estimated total annual expenditures. This drop is a result of budgeted quarterly cash transfers and opening annual purchase orders.
• The Garbage Fund has a negative unencumbered balance due to the timing of property tax receipts which are expected in March.
• The Capital Improvement Fund (Fund 401) negative unencumbered balance will be offset by short-term notes to cover the Conagra Seawall purchase order opened for design and engineering in 2024. 
• The Sawmill Creek Improvement TIF Fund (Fund 421) has negative unencumbered due to a Purchase Order for the March debt service payment. The service payment from Sawmill Creek Resort will offset this payment in March.   
• The Water Capital Fund (Fund 603) has a negative unencumbered balance due to the waterline project on S. Main St. The City has secured a low-interest loan through OWDA to finance the project in the coming months.
• The Electric Operating Fund (Fund 654) has a negative unencumbered balance due to the normal timing issue on pay AMP Electric invoices vs the timing of payments receipt from customers.

The below chart provides a breakdown of YTD expenditures through January by department. As of January 2025, approximately 42% of the City's expenditures relate to the Electric utility; 20% for the Water Department costs and projects; 12% for healthcare costs and 10% for public safety services. Other notable departments/functions under the "more" category in the chart below include the following (click-through on chart to see more details):

• Street Department
• Parks and Recreation
• Municipal Court
• Building and Zoning

Garbage Revenue (Fees) vs Republic Services Contract Costs

(Revenue is recieved twice a year via County property tax assessment)

HPP Electric Sales vs Power Costs