Jennifer Kuhn, City Clerk PLACEHOLDER: Six year Financial Planning Model and Budget Issues

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1 CITY OF WOODINVILLE, WA REPORT TO THE CITY COUNCIL rd Avenue NE, Woodinville, WA WVVW.CI.WOODINVILLE.WA.US To: Honorable City Council Date: 08/14/2012 From: Subject: Jennifer Kuhn, City Clerk PLACEHOLDER: Six year Financial Planning Model and Budget Issues This is a placeholder for agenda item No. 10: Review and Discuss 6-Year Financial Planning Model and Budget Priorities as determined by the Council's meeting on 8/07/2012. I:\Council, Boards & Commissions \City Council \Staff Reports \2012\August\ \Placeholder 6 Year Financial Plan.doc 1

2 CITY OF WOODINVILLE, WA REPORT TO THE CITY COUNCIL rd Avenue NE, Woodinville, WA WWVV.CI.WOODINVILLE.WA.US To: Honorable City Council Date: August 7, 2012 From: Richard A. Leahy, City Manager By: Jim Katica, Finance Director Subject: Six year Financial Planning Model and Budget Issues ISSUE: Shall the City Council review and discuss the 6-year financial planning model to assist with preparation of the Budget? RECOMMENDATION: To review and discuss the model, and identify any budget priorities. BACKGROUND/DISCUSSION: The fiscal challenges that began in 2008 will carry forward for not only the next biennium, but for several years beyond. A fragile economy, coupled with legislation that moved sales taxes from point of sale to point of delivery, will impact Woodinville for years. General Fund revenue growth is expected to hover around 2% over the next six years, while inflation is expected to be in the 2.5% to 3% range for the short term. The uncertainty of the economy over the next few years and anticipated development of a number of multi-family housing units in the Downtown are expected to create a number of operational and financial challenges on an already constrained operating budget. To assist with some of the uncertainty, Council has approved using a portion of utility tax revenue for GF purposes, an action that alleviates some of the concerns associated with SST mitigation. SST mitigation, recently reduced to balance the State budget, will now be used for capital purposes, while 60% of utility taxes may be used for GF purposes. Revenues Woodinville has only three revenue sources that produce $1M or more per year: sales taxes, property taxes, and utility taxes. The surface water utility will approach $1 M in annual revenue, but these monies can only be used for surface water purposes. A few revenue sources are dependent on construction and sales of properties and both of these activities have been, and are expected to be, quite slow for a number of years. For major projects, we've assumed that grant revenues will be available. Expenditures The expenditure side of the model uses the 2011/2012 biennium as a starting point, and is adjusted annually for expected inflationary increases. The model projects future costs with no increases in staffing levels or programs, however, it is able to show the impacts of additional employees or programs. On Tuesday evening, we will present our projection of operating revenues and expenditures for the upcoming 6-year period, beginning January These projections are based upon revised projections for the 2012 period; and include known cost increases for specified items in future years; and projections of future conditions based upon identified assumptions. RECOMMENDED MOTIONS: The report is for informational and discussion purposes only. No motion is requested or needed. I:\Council, Boards & Commissions \City Council\Staff Reports \2012 \August\ \Placeholder 6 Year Financial Plan.doc 2

3 Six Year Forecast City of Woodinville

4 Revenue Assumptions Sales Tax increases of 3% Sales tax from major construction projects not included Two large construction projects spanning 4 years each on commencing in 2014 and the other in 2015 (increasing permitting revenue) Property tax increases from new construction only 60% Utility taxes reflected in operating revenue SST mitigation not included in operating revenue Gas Tax distributions decrease by 5% each year.

5 GF Operating Revenue (net of debt service) Debt service drops to $392K

6 Other Operating revenue

7 Admission Tax

8 Utility Tax Revenue

9 Development Services

10 All Operating Revenue

11 Expenditure Assumptions Staffing levels remain unchanged Cost increases tied to forecasted CPI Additional expenditures in for Comp Plan update

12 Operating Revenue/Expenditures

13 Operating Revenue/Expenditures

14 Worst Case Sales tax increase is 1% annually (not 3%) Projects are not permitted in 2014, 2015

15 Operating Revenue/Expenditures

16 Operating Revenue/Expenditures

17 Restricted Revenue

18 Surface Water Assessments

19 Annual REET Actual ; Forecast

20 Monthly REET Each ¼%

21 Park Impact Fees Actual; Forecast

22 Traffic Impact Fees Actual; Forecast

23 Questions?