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 March of 2024 is 2% lower than March of 2023 YTD. Completion of the major expansion project at the Ardagh facility resulted in less income tax withholdings from various contractors on site. The City budgeted a 2% to 3% increase in income tax revenue for 2024. 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.

FUND BALANCE SUMMARY

Below is the City's Statement of Cash Position, or Fund Balance Report, at March 2024, 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 over $1.6 million, or 24% of estimated total annual expenditures.
• The Property Maintenance Fund (Fund 202) has a negative unencumbered fund balance due to the demolition of a home on Berlin Rd. Funds will be transferred from the General Fund to the Property Maintenance Fund to front cash for the demolition. The City will place a lien on the property to attempt to recover a portion or all of the cost.
• The Capital Improvement Fund (Fund 401) has a negative unencumbered balance due to the paving project in Chaska and Old Homestead. The City will be issuing bonds of $2.1 million to pay for this project in the coming months.
• The Water Capital Fund (Fund 603) has a negative unencumbered balance due to the waterline project on S. Main St. The City will secure a low-interest loan through OWDA to finance the project in the coming months.

The below chart provides a breakdown of YTD expenditures through March by department. As of March 2024, approximately 33% of the City's expenditures relate to the Electric utility; 11% for the Water Department costs and projects; 3% from capital projects, 16% from public safety services and 5% for healthcare costs. 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