CITY COUNCIL WORKSHOP AGENDA PACKET

CITY OF PLEASANTON, CALIFORNIA 5 | eidebailly.com step. The inputs are critical, and the City is to be commended for its recent efforts to refine the inputs to make the forecast more thoughtful, thorough, and accurate. These efforts include: • Employing industry experts who are relied on by numerous California cities to accurately forecast property tax and sales tax trends in the short-term. • Updating the City’s cost allocation plan to provide data regarding appropriate levels of interfund cost recovery and highlighting existing interfund subsidies. • Undertaking a comprehensive analysis of the resources that will be required to implement a program of regular infrastructure, facilities, vehicles, and equipment replacement. • Highlighting deficit funding for the City’s insurance reserves, pension trust, and OPEB trust. • Conducting scenario analyses for the ultimate utilization of the City’s pension and OPEB trust funds to present decisionmakers with alternatives. • Modifying the City’s reserve policy to clarify that restricted fund balance in the General Fund should not be included in budgetary reserves available for other purposes, which is consistent with industry best practices. This information is critical to creating a financial forecast that incorporates all known information regarding revenues and expenditures and then proposes solutions to any identified gaps. Although the City’s work is not yet complete to prepare a comprehensive financial forecast, based on the information available, we believe that the additional work to be completed in the near-term will only further illustrate that the City’s resources are constrained and that its long-term funding needs are significant. Our assessment also indicates that adjustments can be made to the forecast to enhance its detail, particularly in the years beyond, for example, when existing consultant revenue forecasts or collective bargaining agreement information is available. This enhanced detail may or may not change the results of the forecast in those outyears, but it will facilitate an additional understanding of how the assumptions in the forecast are determined and why the selected growth assumptions for individual categories of revenues and expenditures are utilized. It should also be noted that the City’s existing short-term property tax and sales tax forecasts are prepared by the most widely recognized consultants providing these services in California, and absent any additional information not previously considered by the consultants we have not observed any reason to deviate from their recommendations relative to property tax and sales tax growth rates. At the same time, we also believe that the City can work toward a refined and targeted communication strategy regarding the forecast and related financial management activities that will improve clarity regarding the forecast and related assumptions and reduce confusion regarding its purpose, content, and limitations. In the near-term, our assessment does not indicate that further adjustments to the forecast are likely to provide new information that would substantively change the course of the City’s two-year budget process that is currently underway. However, we do propose that the recommendations contained in this report be considered once the budget is adopted, with the City’s Finance Director refining and revising the forecast following the completion of related work such as the infrastructure funding plan. At that time, a refined and revised forecast can be presented to the City Council and the community for further discussion. Page 14 of 33