Plano staff and consultants present five-year financial forecast; model flags days-of-fund balance pressure

City budget staff and outside consultants on March 25 presented a five-year financial forecast that projects pressure on the general fund under a continuation-of-services scenario and recommends monitoring property-tax, sales-tax and fees as primary levers.

Karen Rudz Whitley, the city's budget director, said the city revised its cost-recovery and fee-study policy and identified revenue changes already approved in the consent agenda: updated ambulance fees are expected to yield about $650,000 in the current year and $1.6 million the following year. She said sales-tax receipts were trending above prior 3-year averages, with a roughly $5 million year-to-date gain compared with the three-year baseline.

Consultants from NewGen Strategies and Solutions led the presentation of a five-year forecast and a new budgeting tool. Matthew Garrett said the model starts with the fiscal 2025 budget as a base and applies inflation and revenue assumptions; it is intended to be updated frequently by staff. "This engagement wasn't because you were lacking. This engagement is to try to enhance the tool that's already in place, extend it a few years, and maybe make it a little easier for staff to update," Garrett said.

Garrett and Steve Duke described key assumptions used in the model: an average general inflation factor of roughly 2.8% per year in the base case (with salary growth assumptions of 3% and health-benefit assumptions near 4%), and a continuation-of-service approach that excludes additional program requests. The consultants said staff-provided inputs for enterprise funds were imported and that the model allows scenarios, including a voter-approval tax path (a truth-in-taxation-related rate that would yield additional resources) and contingent appropriation of sales-tax outperformance.

The forecast shows that under a "no new revenue" property-tax rate, general-fund days of working capital decline below the newly adopted 60-day policy (staff's projection for the current year was about 47 days). With a voter-approval property-tax path (3.5% yield) and a partial recognition of sales-tax outperformance, the model projects improving fund balances and returning toward or above the policy target by year five.

Consultants discussed the property-tax side in detail. Steve Duke said the forecasting method ties projected market-value growth to a house-price index for the Dallas/Plano/Irving area; the consultants said each 1% change in house prices historically correlated with roughly a 0.75% change in market values recorded by the Collin and Denton appraisal districts 10 months later. The model also includes projected new construction values (staff-provided figures: $750 million per year for the next three years, then $500 million per year thereafter) and a modeled impact from the Texas residential homestead protections (10% cap) and property-tax freezes for seniors and disabled residents.

Council members asked technical questions about inflation assumptions, the model's update frequency and whether the aging population and additional property-tax freezes were captured. Duke said the model does capture aging-related property-tax freeze projections by aging the appraisal-district data and that the consultants recommended quarterly updates to reflect rapidly changing economic assumptions.

Councilmember Riccadilly praised the approach and asked whether further revenue diversification and a stepped "PAYGO" (pay-as-you-go) policy could reduce debt service over time; consultants and staff said the model can be extended to test different capital and debt strategies but that detailed debt and I&S (interest and sinking) analyses were not yet incorporated.

Karen Rudz Whitley and Matthew Garrett said staff will continue the budget process, meet with the Collin County and Denton County appraisal districts (meetings scheduled for April 3 and April 30, respectively), and incorporate updated inputs during the formal budget cycle.

Ending

Staff and consultants characterized the work as an enhanced forecasting tool to support the FY 2025-26 budget process and recommended periodic updates; the council did not vote on the model itself during the meeting.