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City finance consultants present 5-year forecast; VAR would preserve fund balance, no-new-revenue would deplete it
Summary
Consultants updated a 5-year financial model showing that adopting the voter-approval rate (VAR) keeps the city closer to policy fund-balance targets while the no-new-revenue rate would reduce working capital; consultant recommended blending approaches and further scenario work.
Plano’s finance consultant presented an updated five-year financial forecast and recommended council consider the tradeoffs between adopting a no-new-revenue rate and the voter-approval rate (VAR). Matthew Garrett of NewGen Strategies told council that under the current assumptions the no-new-revenue rate would produce roughly 2.2% annual revenue growth and would leave appropriations above projected revenues, gradually drawing down fund balance and putting the city below its 60-day working-capital target. By contrast, the VAR — shown in the model as producing about 3.7% annual revenue growth in the modeled years — would add fiscal headroom and preserve days of working capital.
Garrett described the model inputs: a 5-year timeframe, expenditure growth assumptions (a 3.2% compounded average, with personnel and benefits accounting for the majority of cost growth), inflation assumptions (salaries at 3%, health benefits at 4%, general inflation modeled at 2.5% using professional forecaster percentiles), sales-tax modeling based on a three-year rolling average policy and property-value assumptions derived from housing-price indices and valuation growth correlation factors. He warned that senior-tax freezes (property exemptions) are growing and projected to represent a larger share of taxable value by 2030, which reduces the city’s ability to capture valuation growth tax increments.
Garrett summarized the policy results plainly: “no new revenue is not sufficient to meet plan. VAR is more than sufficient to meet plan.” He and staff recommended further scenario analysis and a blend between the two rates in future budget deliberations rather than committing to one extreme. Staff noted next steps in the budget calendar: public hearings on budget and tax rate in late August and final adoption in September.
Council members asked about the model’s sensitivity to property-value declines, timing lags in appraisal roll impacts (noting property-tax changes can be a lagging indicator by nearly two years), and how the model integrates capital transfers and bond-authorized CIP spending. Staff and consultants said they will continue phase-two work this fall to refine inputs, incorporate approved bond projects, and provide scenario runs for council review in the fall and next budget kickoff.
