2023 - 2027 General Fund Forecast

General Fund Five Year Forecast Update Zachary Walker January 24, 2022

Agenda 1. Economic Outlook 2. Updated General Fund Five Year Forecast 3. Major Revenues 4. Expenditures 5. Fund Balance

Nationwide Job Postings • Job postings have reached record highs • Significant labor shortage in some sectors • Growing gap between openings and hires

• The available labor force remains at rates not seen since the mid 1970’s

National Unemployment Claims • Dipped in November 2021 to levels below pre-pandemic • The following week, claims increased about 8%

Moody’s November Forecast Risks: • Omicron variant • Supply chain issues worsen, and inflation increases • Labor supply • Increased inflation Upsides:

• Millennials begin buying homes • Large savings cushion is tapped to boost consumer spending, even without stimulus

Cost of Living Rising inflation is impacting the cost of living

KC Unemployment Update • Employment recovered more quickly than national average at first • Recently was flat until July increase of 17k jobs • Since then, modest growth • Overall, KC has regained 127k of the 142k jobs (90%) lost during the first few months of the pandemic

Economic Outlook Summary • Given depth of recession, recovery has exceeded expectations • Increased demand has created upward price pressures which should lessen in the next year • Shift in worker attitudes – what kind of job they want to come back to and what it will take to lure them back • Even achieving historically normal growth rates will be challenging in later years • Unlocking the untapped potential of existing work-age population is a key strategy to increase future growth, competitiveness, and inclusiveness of KC regional economy

General Fund Forecast Update for FY 2021-22 Major Sources of General Fund Revenues •

Top 3 revenue categories represent 65% of general fund revenue

•

Sales tax susceptible to economic cycles

•

Franchise fees • • •

• •

Uncertain long-term outlook Energy efficiency (gas, electric) Technological change and customer trends (telephone and cable)

Total General Fund projected revenues for FY 2021-22 are $77M This year included one-time APRA revenues of $3.1M

PILOTs

28.4%

Sales tax

25.7%

Franchise fees

11.0%

Property taxes

7.7%

Intergov't revenue

7.2%

Interfund Transfers

6.8%

Licenses & permits

6.5%

Other

1.0%

Fines & Court Fees

2.4%

Service Charges

2.4%

Use Tax

0.4%

Property tax

Property tax (in $millions) $7.97

•

$7.88

$7.79

City has experienced steady AV growth in reappraisal years

•

Growth in property value is limited to reevaluation of current property

•

Jackson County has streamlined assessed valuation procedures and expect smoother increases going forward

•

Revenue upside is limited by Hancock if more aggressive AV projection were to be assumed

$5.92

$5.73

$5.88

$6.02

$6.17

$6.33

$6.49

Actual

Budget Forecast Forecast Forecast Forecast Forecast Forecast

17-18

18-19

19-20

20-21

21-22

22-23

23-24

24-25

25-26

*The levy for Parks, Recreation, Health and Animal Services moved to separate funds beginning FY 20-21.

26-27

Sales tax (in $millions)

Sales Tax •

FY21 budgeted sales tax number projected during COVID lockdown

•

State DOR remits data to Finance with a twomonth lag

•

Monthly sales tax receipts have been resilient to date

•

Updated projection to incorporate actual experience YTD

$19.12

$19.98

$20.38

$20.68

$20.89

$21.10

$18.30

$18.62

Actual

Budget Forecast Forecast Forecast Forecast Forecast Forecast

19-20

20-21

21-22

$18.02

$17.53

$17.74

Actual

17-18

18-19

21-22

22-23

23-24

24-25

25-26

26-27

PILOTs Revenue (in $millions) Power & Light

Water Service

Sanitary Sewer

PILOTs •

Based on gross revenue

•

Expected trend is slightly upward 2.8

3.1 3.4

2.3

3.7

3.6

3.7

3.6

3.4

3.3

14.3

14.2

14.5

14.6

14.8

3.6

3.1

3.2

12.8

13.8

14.1

ACTUAL

BUDGET FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST

17-18

18-19

19-20

20-21

21-22

22-23

23-24

24-25

25-26

26-27

Use Tax Adjustment – Prop P Vote •

On track to trigger the waterfall provision this fiscal year

•

General Fund will receive less revenue due to recent Prop P changes

Franchise Fees (in $millions)

Utility franchise fees •

Water: Historically, volatile revenue source, but very small component of total

•

Gas: Performance dependent on weather

•

Telephone: Projected structural decline as citizens cut cord

•

Electricity: Performance dependent on weather; energy efficiency efforts

•

Cable: Projected structural decline as citizens cut cord and legislative reduction

•

Recent increase to fuel tax by State are included.

$8.77

$8.80

$8.65 $7.52

$7.38

$8.17

$8.88

$8.97

$9.06

$9.15

Actual

Budget

Forecast Forecast Forecast Forecast Forecast Forecast

17-18

18-19

19-20

20-21

21-22

22-23

23-24

24-25

25-26

26-27

Fines and Forfeitures and Charges for Services

Charges for Services (in $millions)

Fines and Forfeitures (in $millions)

$2.54 $2.43 $2.46

3.7 $2.01

$1.92

3.9

3.7 2.8

$1.82 $1.82 $1.83 $1.85 $1.87 $1.89

17-18 18-19 19-20 20-21 21-22 21-22 22-23 23-24 24-25 25-26 26-27

1.8

1.9

Forecast

Budget

Actual

Forecast

Budget

Actual

2.4

17-18 18-19 19-20 20-21 21-22 21-22 22-23 23-24 24-25 25-26 26-27

Projected FY 2021-22 Expenditures Category Salary Benefits Other Pays Worker's comp Retiree Health Overtime Operating Expenses Debt Service Equipment Total

$36,794,563 18,214,704 2,226,408 2,791,000 3,789,000 2,709,169 10,296,924 327,925 367,050 $77,516,743

Operating Expenses 13%

Debt Service 0.4%

Equipment 0.5%

Overtime 4% Retiree Health 5% Salary 47%

Worker's comp 4% Other Pays 3%

Benefits 24%

General Fund Expenditure and Revenue Growth Comparison $90,000,000

$10,000,000

$85,000,000

$5,000,000

$80,000,000

$-

$75,000,000

$(5,000,000)

$70,000,000

$(10,000,000)

$65,000,000

$(15,000,000) 17-18

18-19

19-20

20-21

21-22

Actual

Budget

Total Revenue ($)

21-22

22-23

23-24

24-25

25-26

26-27

Projected Forecast

Forecast

Total Expenditures ($)

Fund balance

Fund Balance Five Year Forecast •

Projected year end unassigned fund balance is $6.4M

•

The City’s reserve balance policy is 16% of annual revenues Fund Balance versus policy (16% of revenue)

$6,051,433

$6,591,442

$5,301,516

$6,414,970

$5,131,260 $1,714,391

$1,784,286 $6,660,103

17-18

18-19

19-20

20-21

21-22

22-23

23-24

24-25

25-26

$12,964,828 26-27

Actual

Budget

Projected

Forecast

Ending Unassigned Fund Balance

Reserve Target

General Fund Reserve Policy Independence

Blue Springs

Liberty

Raytown

KC MO

Lee's Summit

$78.0

$32.7

$22.0

$12.8

$500.4

$80.3

Reserve Policy

16% of GF revenue

25% GF expenditures

18-22% of GF revenues

17% of GF expenditures

Reserve Target

$12.4

$8.0

$4.0

$2.2

$85.1

$13.2

Actual Reserves

$6.4

$7.0

$4.8

$7.2

$69.7

$23.0

% of Reserve Policy

52%

88%

121%

331%

82%

174%

GF Expenditures (millions)

2 months of operating expenditures, about 17%

Budget Considerations and Next Steps •

Forecasted revenue and expenses are trending close to budget

•

ARPA money not available next year

•

Transit grants

•

Healthcare costs

•

Service level

•

Continue to monitor revenues and expenditures

•

Begin a fiscally conservative preparation of FY 2022-23 budget

Questions/Discussion

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