long range financial planning and forecasts
FY 2024 ANNUAL BUDGET
long range planning
The City’s long-range financial plan aligns the strategic goals of City Council with the financial resources needed to deliver programs and services to meet the needs of the community. A five-year forecast is a planning tool that helps with fiscal management and accountability by showing historical and projected revenue and expenditures, provides an opportunity to engage the community and anticipate and adapt to economic conditions that impact the budgeting process. The City’s financial forecast is based on City Council priorities; historical revenue performance; expenditure trends; maintaining competitive salaries and benefits; maintaining school funding; and following the City’s financial policies.
The City’s budget serves as a roadmap to implement the strategic plan and outline a vision for the community, identifying priorities and providing a means to measure success in achieving the desired outcomes. In addition to the City budget, the City utilizes an on-line platform Town Hall to gather public feedback on projects via surveys and public comment. This information is analyzed and is incorporated as appropriate in project and budget planning. The City’s FY 2024 budget projections for local revenues are based on the FY 2023 actual revenues and historical trends. The City is well position to deal with any negative impacts from the ongoing pandemic due to its strong management, healthy reserves and financial policies. During FY 2023, the City saw significant increases in sales, meals and lodging taxes due to the robust economic recovery from the COVID-19 pandemic. The FY 2024 is projecting a 11.2% increase in general property taxes, 12.4% increase in other local taxes, (including 21.1% increase in meals tax revenues). Overall, the FY 2024 budget is 12.8% higher than the FY 2023 budget. The City will continue to monitor revenues and expenditures and adjust as necessary to the changing environment.
The City values real property every two years. The last City real estate reassessment was effective January 1, 2023 and resulted in an average taxable property assessment value increase of 27.8%. The housing market has continued to be strong with increasing values; therefore, the City expects to see moderate growth in real estate taxes in FY 2024. The 2022 calendar year real property tax rate was $0.93 cents per $100 of assessed value. Due to the 2023 reassessment of real property the revenue neutral tax rate was $0.74 cents per $100 of assessed. City Council voted to increase the real property tax rate to $0.83 cents per $100 of assessed value a $0.09 cent increase projected to generate an additional $3.9 million in real estate tax revenue.
Factored into the financial planning model are anticipated future major capital projects and any ongoing associated operating costs. The City is excited to be partnering with a local Volunteer Fire Company and planning for it's first City owned fire station. And the City is in the process of entering a partnership agreement with a local organization leveraging City and private funds to renovate and improve soccer fields in the City's Park. The Five-Year Capital Improvement Plan also includes funding for several road improvements projects that will leverage State revenue sharing funds and general obligation bonds. In addition, Winchester Public Schools is planning for HVAC improvements at several of it's school facilities.
Going forward, City Council will need to carefully address tax rates and focus on diversifying the resources that the City currently has, such as increased redevelopment efforts throughout the City. City departments operationally will need to continue to find efficiencies and reduce departmental costs or find additional sources of revenue to mitigate any forecasted future revenue shortfall. These projections are based on past trends and anticipated future trends; however, it should be noted that these projections are not future commitments and are only presented for planning purposes and subject to change.
Projected Revenues and Expenditures FY 2024 - FY 2028
FY 2024 - FY 2028 Revenue Projections
These five revenue sources comprise approximately 79.2% of the General Fund’s operating budget, not including one-time fund balance usage in FY 2024:
Real Estate Tax: The total value of real taxable property, including new construction, increased by 27.8% in FY 2024. The City assesses real property every two years; the latest assessment was effective January 1, 2023. Residential assessments increased by 30.4% and multi-family assessments increased by 67.9%. The next reassessment will be effective January 1, 2025. Growth projections based on historical trends following a large increase are 2.0% in future years.
Personal Property Tax: In addition to changes in personal property tax assessments, this revenue may also grow as the burden is shifted from the State (frozen Car Tax Relief) to the taxpayer. State car tax relief percentages are adjusted and approved by City Council every year. Due to inflationary pressures and the demand for used cars we are projecting a significant increase of 7.0% for FY 2024. However, based on historical trends projections are 2% in future years.
Business License Taxes: Based on FY 2023 revenues we are projecting a significant increase of 19.4% for FY 2024. The City’s local economy remains strong and continues to grow due to the City’s location within the Shenandoah Valley and proximity to Washington D.C., therefore, growth projections are 1.5% in future years.
Sales Taxes: This revenue has shown consistent growth over the 5 years prior to COVID-19 and only saw a one-year dip in FY 2021 due to the pandemic. After an adjustment in FY 2022 for the pandemic, historical trends and state projections, the City anticipates the growth to continue at a modest 2.0% per year.
Meals Taxes: Historically, due to the City’s central location in the region its meals tax revenue has been strong, and we saw significant growth in this revenue during FY 2023. The FY 2024 revenue is projected to increase 21.2%. We anticipate future year revenues will return to historical trends, so growth projections are 2.0% in future years.
FY 2024 - FY 2028 Expenditure Projections
Local School Contribution: The City does not have a set funding formula for the Winchester Public Schools. The Winchester Public School Board adopts a proposed budget with the recommended local funding amount included. The City Manager then makes a recommendation for the School contribution to City Council based on the City’s projected revenues and expenditures.
Employee Salaries and Benefits: This represents the total amount needed to cover employee’s salaries and benefits. The future projected growth is 3.0% per year.
Debt Service: These funds are required to pay off the City’s long-term debt and are based on the Five-Year Capital Improvement Plan and Debt Service payment schedules.
NWRDC Regional Jail: These funds are required to pay for the City’s share of the Adult Regional Jail costs. It is difficult to project these costs as they are driven by inmate population and operational costs of the Jail.
Social Services/CSA: The City of Winchester is the fiscal agent for funds provided under the Comprehensive Services Act (CSA). The City of Winchester is responsible for the overall administration of these funds in accordance with state and local policy. The purpose of these funds is to preserve families and provide appropriate services while protecting the welfare of children and maintaining the safety of the public. With recent changes at the State level, there has been an increase in residential placements pushing the budget for the City of Winchester higher. There are also more children being served with these funds.