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DISCUSSION Preliminary General Fund Budget The General Fund achieved a balanced two-year budget. Attachment 1 provides the Preliminary General Fund Summary for FY 2023/24 and FY 2024/25. FY 2023/24 General Fund revenues are projected at $150.2 million, including $3.7 million in transfers from other funds. Program reserves/revenue of $760,000 will also be used to support services. FY 2023/24 General Fund expenditures are projected at $150.9 million, including $3.3 million in contributions to other funds. FY 2024/25 General Fund revenues are projected at $155.2 million, including $3.8 million in transfers from other funds. Program reserves/revenue of$30,000 will be used to support services. FY 2024/25 General Fund expenditures are projected at $155.2 million, including $3.3 million in contributions to other funds. The preliminary General Fund budget reflects limited service enhancements to bridge service gaps and increase operational efficiencies. The proposed department requests will be presented to the City Council at the May 16, 2023, meeting as staff refines the projections for the May proposed budget presentation. Modest revenue growth is expected in the next two years. Highlights of General Fund revenues and expenditures are presented below. Revenues • One-time American Rescue Plan Act (ARPA) stimulus funds budgeted in FY 2021/22 and FY 2022/23 ($8.6 million over two fiscal years) will not be available for the 2023-25 budget cycle. • Property tax is projected to increase at an annual average rate of about 4.5%. FY 2023/24 and FY 2024/25 property tax revenues are projected at $88.4 million and $91.5 million, increasing from $83.8 million in FY 2022/23. Property tax is the City's largest revenue source. • Sales tax increase is expected to be modest, excluding the anticipated revenue from the new Costco, which is expected to open during FY 2023/24. With this anticipated revenue, the annual average increase is projected to be about 5.0% over the next two years. However, based on the sharing agreement with Costco, 40.0% of the revenue will be paid back to Costco for costs associated with traffic and street improvements in the Johnson Drive Economic Development Zone until the City's share of the cost is paid off. Partial sales tax revenues are reflected in the FY 2023/24 budget, and the full year of revenue is reflected in the FY 2024/25 budget. FY 2023/24 and FY 2024/25 sales tax revenues are projected at $25.4 million and $27.8 million, increasing from $25.1 million in FY 2023/24. Sales tax is the City's second largest revenue source. Page 3 of 9