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Council reviews five‑year financial plan; staff to refine tax-rate scenarios and drainage funding options
Summary
Staff presented a five‑year financial model showing that baseline revenues at the no‑new‑revenue rate would deplete reserves in later years; council asked staff to model balanced scenarios that preserve reserves while identifying tax‑rate impacts and options to fund drainage projects.
Fair Oaks Ranch staff presented a five‑year financial plan for fiscal years 2026–2030 at a May 1 workshop, showing that under the baseline assumptions the city’s unallocated fund balance would be exhausted by 2027 and the operating reserve would decline well below the council’s 50% policy unless revenues or assumptions change.
Summer Fleming, director of finance, said the baseline assumes a 5% annual increase in taxable values, 3% annual growth in sales tax, a 4.5% annual personnel cost growth and that the city would cash‑fund the drainage CIP. Under that baseline — which keeps the property tax rate at the estimated no‑new‑revenue rate — the plan projects the operating reserve could fall to about 5% by 2030.
Staff presented two alternate scenarios: one that issues certificates of obligation to fund drainage projects and adjusts the tax rate to maintain a 50% operating reserve, and a second that targets a 30% reserve. Under the scenario that holds a 50% reserve, staff modeled certificate issuances and spread the general obligation bond impact to manage rate effects; the five‑year impact would raise the average tax bill about $215 by 2030. Targeting a 30% reserve would limit that five‑year tax‑bill increase to about $19 but reduce the city’s cushion and make it more vulnerable to shocks.
Council members asked staff to return with additional modeling that: keeps core revenue and expense assumptions the same; shows the tax‑rate adjustments required to keep revenues and expenses in structural balance through 2030; and models the option of maintaining a 50% reserve while using unallocated funds selectively to cash‑fund short‑term drainage projects rather than using the reserve to offset recurring operations. Staff said state legislation under consideration could affect the city’s ability to repay COs with interest-and‑sinking (I&S) rate adjustments and that the council should act on notice‑of‑intent timing for debt authorization by the June 5 meeting if it wants to preserve certain options.
The workshop concluded with staff agreeing to rework scenarios, show tax‑rate impacts, and return for council direction at the May 15 workshop and a potential June 5 resolution on intent to issue certificates of obligation for drainage.
