Fiscal Plan & Projection
2022 Proposed Budget
Introduction
The Fiscal Plan and Projection provided with the Proposed 2022 Budget reflects revised revenue and expenditure projections necessitated by the economic impacts of the COVID-19 pandemic, while recognizing the challenges of optimizing service delivery during a period of economic uncertainty and scare resources.
Key financial assumptions and targets have been superimposed on baseline financial data.
Revenue and Expenditure Assumptions
2021 Summary
Revenue and expenditures forecasts for fiscal year 2021 are based on analysis of prior year and year-to-date performance (through September 2021) and incorporate the projected negative impacts of Ohio House Bill 110's remote work provision, which affect projected income tax collections. Current General Fund projections estimate General Fund income tax collections totaling $185,930,000 for fiscal year 2021. These projections account for income tax refunds projected as a result of taxpayers working remotely during the pandemic. Overall General Fund revenues are projected to total approximately $257.4 million for fiscal year 2021.
2022-2024 Summary
Revenues and expenditures have been forecasted based on prior year and year-to-date analysis, while also reflecting the 0.25% income tax dedicated to roadway improvements.
Income Tax revenue levels for fiscal year 2022 are expected to increase by 2.3% over current year end revenue projections for fiscal year 2021. These projections exclude the 0.25% income tax reserved for street improvements. In addition, the 2022 income tax projections have been adjusted to account for estimated changes in withholding tax collections due to remote work. Factoring in the 0.25% income tax total income tax collections in 2022 are projected to exceed current estimated 2021 collections by 2.2%.
Through 2024 income tax revenue is projected to grow by an average of approximately 3%. The Finance Department’s Division of Taxation is reorganizing in order to more effectively utilize federal income data to identify income for which taxes have not yet been paid. It is estimated that a structural increase of 1% or more can be realized from a more effective approach.
Other revenues are expected to grow approximately 3% over the 2022-2024 period which reflects a continued rebounds in revenues from the levels experienced during the COVID-19 pandemic in spring and early summer 2020.
Operating Transfer revenues projected for 2022-2024 include an annual transfer in from the Capital Improvement Fund of $18.0 million to provide sufficient resources to maintain City operations, including essential public safety services.
Salary and fringe expenses account for the continued use of American Rescue Plan Act (ARPA) funds to support public safety expenditures in the General Fund. The Plan includes $33.3 million in projected ARPA reimbursements in 2022 and anticipates an additional $40 million through 2024.
Supplies and services expenses, increased in the proposed 2022 budget compared to the prior year, are expected to be held flat through 2024
Financial Targets and Other Criteria
Several key indicators establish the overarching fiscal goals that serve as a foundation for the Plan. The targets identified below are consistent with those commonly practiced by municipal enterprise funds, and reflect the entrepreneurial nature of the Plan. Each is designed to address specific objectives to ensure the fiscal health of the organization.
Fund Balance
The City’s long-term goal is to achieve an unreserved fund balance of $40 million in the General Fund. This fund balance is designed to address short-term operating fluctuations and provide liquidity when receipts are lagging targets or when unanticipated expenditures occur. The targeted metric is equivalent to approximately 1½ months of operating expense, consistent with sound financial planning for many entities. Although current projections for 2020 indicate a year-ending fund balance in excess of the target, a spend-down in reserves is expected through 2025.
CIP Funding
It is necessary that the City ensure adequate replacement of its infrastructure, which is vital to the long-term needs of its constituents. The goal for CIP funding will result in a level of annual investment (as measured by actual revenue financed capital and principal paid on debt) that is at least equal to the depreciation expense of our infrastructure. In this manner we are ensuring that the City’s equity in its assets is not depleted.
Annual New Road & Bridge Matches & Planning Projects: the City’s major road and bridge system is vital to sustaining major industrial activity, as well as the access of our residents to major employers, shopping, and other commercial opportunities, as well as to regional and interstate highway and transportation systems. The City has access to federal and state funding to maintain these systems as long as the City commits a certain amount of matching funding. The Plan reflects currently expected Matches & Planning funds for 2022-2026.
Annual New Buildings, Machinery and Equipment Projects: the cost-effective delivery of City services relies on the maintenance of facilities, fleet and major equipment, including buildings, heating and cooling systems, police patrol cars and tactical units, fire trucks and ambulances, heavy duty trucks for snow plowing, public works, utility system maintenance, and light-duty staff vehicles, which support various City departmental needs.
Annual New Residential Road Projects: the City’s Residential Road system is currently declining due to a lack of adequate repair and replacement. The passage of an additional ¼% income tax in November 2020 provided over $19.0 million for roadway improvements. The Plan assumes renewal of the temporary ¼% in future years in order to continue critical investments in road infrastructure.
Debt Financing for Capital Improvements
This target refers to creating mechanisms to address the capital needs of the City in the most responsible and efficient manner possible. It includes establishing the optimal balance of debt and revenue to balance the current and long-term financing responsibility. This approach is designed to assure that the City’s equity position in its infrastructure is sound, to provide a stable source of funds for routine replacement capital expenses. The goal would be to achieve investment targets for CIP, while maintaining outstanding debt at levels that are acceptable. The City would not exceed the 5.5% limit for non-voted General Obligation debt as imposed by State Law.
Bond Ratings
One of the overarching principles embedded within The Plan is to achieve and maintain excellent bond ratings. The reserve fund and capital financing strategies identified above are intended to directly impact this metric. In addition to the direct impact of lower borrowing costs on future debt issuances, improved bond ratings have the indirect impact of enhancing community pride and the marketability to new commerce.