OMB director presents long-range financial plan; report flags reserve risk in late 2020s

Sharon McGuire, director of the Office of Management and Budget, presented the city's 27th update to the long-range financial plan at the May 13 workshop and said the forecast shows expenditures outpacing revenues over the planning horizon, leaving the city to consider options to preserve reserves.

"This is the 27th update to the long range financial plan," McGuire said, framing the document as a planning tool rather than an immediate budget. She said the plan uses a baseline assumption of about 5% average growth in property assessments over the forecast period and roughly 2% growth for other revenues, while projecting higher growth in public-safety personnel costs and a substantial near-term increase in pension contributions for police and fire.

Why it matters: the plan shows the city's general-fund balance declining under current assumptions and could fall below the 10% fund-balance threshold bond-rating agencies look for in the late 2020s if no changes are made. McGuire said the city entered the year with a general-fund balance of about $88,700,000 and emphasized conservative budgeting, but warned that structural choices will be required to maintain long-term fiscal stability.

Details from the presentation: McGuire and Financial Services Director Jim Zervis outlined the assumptions that drive the forecast: 5% average property-assessment growth; 2% on other revenue lines; a 7.7% average growth assumption for public-safety personnel costs; and incremental increases in pension contributions. McGuire highlighted that pension contributions for police and fire represent a large, fixed expenditure projected to add roughly $5 million to costs in the coming budget cycle.

Zervis said the revenue assumptions were intentionally conservative. "Looking back over the past seven years, we've seen valuation grow ... about 10.58% on average," he told the council, arguing the forecast errs on the cautious side but still exposes a structural pressure in the out years.

Council questions focused on timing and revenue sensitivity. Council Member Richter pressed whether the 10% threshold might be breached by 2027; McGuire and staff said the modeled shortfall becomes more acute by 2028 under the current assumptions but that small changes to assumptions or one-time decisions could affect timing. Council members also asked about franchise fees and the potential long-term decline of gas-tax revenue as vehicle use changes; staff noted franchise revenues have grown in recent years but flagged the national trend of declining gas-tax receipts as a policy issue that may require state-level solutions.

Staff also explained the end of certain CRA (community redevelopment area) repayment streams. The presentation noted that repayments to the general fund that previously supported services will not continue at the same level, creating another structural gap the city will need to address in long-range planning.

What the council did: the workshop was informational. No budget actions or votes were taken; staff said the LRFP is a planning document to inform upcoming strategic-planning sessions and future budget choices.

What's next: council members and staff said they will use the LRFP to inform strategic planning and budget deliberations this year. City Manager Brown noted the administration will continue to refine assumptions with more precise county assessment data and return to the council with options to address projected gaps.

(Reporting note: direct quotes and figures are taken from staff presentation and council discussion at the May 13 workshop.)