Town Finance Director Stacey Lemos presented a 5-year financial forecast of revenue and expenditures will be for Oro Valley to town council on May 7. Council Meeting. |
| 5-Year Operating Fund Forecast |
Let's use the operating fund as an example.
The operating fund forecast shows major change in 2014-15. This is because of the tremendous increase in spending as will likely be approved by council on May 21. After that, spending and expenditure change modestly.
Lemos made a number of revenue and expenditure assumptions in making this forecast. Regarding the General Fund receipts, "The forecast reflects continued economic growth," according to Lemos. Specifically:
- Local sales tax revenues will grow from between 3% and 4%
- State shared revenues will grow from 1% to 5%.
- Residential contraction will be from 200-300 permits per year, peaking in 2015-16;
- Construction permit revenues will be stable at $350,000; and
- There will be no annexations.
- Salary increases will be 4%-5% per year
- Minimal growth in new positions
- Pension increases growing to up to 2% per year
- No change in health benefit costs
- Operating and maintenance costs to remain flat
- Some spending for capital improvements, up to $2.5 million per year
Still, risk and uncertainty are central to forecasting and prediction. It is generally considered good practice to indicate the degree of uncertainty attaching to forecasts. This is referred to as forecast error.
We did not hear any discussion of forecast error in the 5 year projections. Forecast error is the difference between the actual or real and the predicted or forecast value. Regardless of the underlying supporting assumptions the forecast will always be wrong. Only time will tell. No one accurately predicted the national recession we have been going through for the last 6 years.
Could it be that the 5 year financial forecast was an attempt to support increased baseline spending in the Town Manager's Recommended Budget for every future year, because it certainly does include extremely high levels of salary increases.
Even Oro Valley resident Bill Adler, who frequently advocates for a property tax, stated at the meeting: "It is clear from the graphs that the future is tenuous. We're not going to achieve any significant surpluses. It is clear from the projections. So, I don't know where the money is going to come from to continue improving the town."
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3 comments:
What business gives 4-5% salary increase every year? I felt lucky to get 3%.
That's right. Most businesses give their employees only a 2-3% salary increase per year and those employees also have to contribute to their health and dental plans. OV town employees get their health insurance paid 100% by the town (taxpayers.) Apparently the OVPD aren't the only prima donnas in this town.
I wonder what percent salary increase Hiremath gives to his dental office employees every year. If he believes that the appropriate rate for this economy is 4-5%, then that's what he should be giving HIS staff every year for the next 5 years.
Please help me understand why the obsession regarding the 5 year forecast? You act like the forecast is fixed in stone when the reality is that as every year goes by, the five year forecast is revised the very next budget cycle. As an example if using years 1-5 representing the five year forecast, the following year the forecast would be 2-6 then the following year would be 3-7, etc. therefore in the first example years 2,3,4 and 5 would change and the following year, years 3,4, and 5 would change and so on. It appears to me that the forecast is a very fluid document. Am I missing something?
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