CITY COUNCIL WORKSHOP AGENDA PACKET

Page 1 of 4 Item #3 CITY COUNCIL AGENDA REPORT February 20, 2025 Finance TITLE: RECEIVE PRESENTATION ON FISCAL YEARS 2025/26 AND 2026/27 GENERAL FUND BASELINE BUDGET AND PRELIMINARY TEN-YEAR FINANCIAL FORECAST SUMMARY At this February 20, 2025 workshop, the General Fund Baseline Budget projection for framing budget development for Fiscal Years 2025/26 and 2026/27 and the Ten-Year Financial Forecast for Fiscal Years 2025/26 through 2034/35, will be presented to the City Council. Notably, the General Fund Baseline Budget does not form the proposed City budget; rather, it represents the extension of the current year’s service levels and budget. The Baseline Budget will be further refined, considering input from the City Council, the Budget Advisory Committee, the community, and the final proposals submitted by City departments, to develop a proposed FY 2025-2027 City budget which, along with an updated long-term forecast, will be presented to the City Council in May 2025. RECOMMENDATION Receive a presentation providing an overview of the Fiscal Years 2025/26 and 2026/27 General Fund Baseline Budget and Preliminary Ten-Year Financial Forecast. BACKGROUND Forecasting the City’s expenditures involves analyzing future costs at the department level and by category. The expenditure forecast begins with the Baseline Budget that represents the cost of maintaining the current level of services while factoring in all unavoidable costs necessary to continue at that level. One example of unavoidable costs is negotiated memorandum of understanding (MOU) employee compensation costs. The General Fund ten-year forecast is the mechanism by which the long-term health of the General Fund is monitored. By tracking and trending the current and anticipated revenues and expenses, the forecast is a tool for City staff and the City Council to understand the impact of decisions to the City’s fiscal health. The forecast includes projections of current and future revenues and expenses. DISCUSSION Financial assumptions are used to develop the forecast model. The General Fund Baseline Budget and Preliminary 10-Year Financial Forecast rely significantly on the updated mid-year revenue and expenditure projections (presented to the City Council at its February 18, 2025 meeting). FY 2025/26 and FY 2026/27 revenues are projected based on current revenue trends and estimates provided by the City’s property and sales tax consultant; expenditures are projected based on the FY 2024/25 mid-year budget update, and consider salary adjustments in labor agreements, anticipated unfunded pension liability payments, and Page 28 of 33