To: Honorable Mayor and Members of City Council
From: Rajneil Prasad, Finance Director
Prepared By: Seth Anderson, Budget Officer
TITLE:
Title
2025 Long-Term Financial Forecast Update
LABEL
RECOMMENDED ACTION:
Recommendation
Receive and discuss updates to the 2025 Long-Term Financial Forecast.
Body
DISCUSSION:
The City of Napa prepares the Long-Term Financial Forecast (LTFF) on a biannual basis to report projected revenues and expenditures of the General Fund. The 2025 LTFF includes unaudited actuals for Fiscal Year 2023-24, projected updates to the Fiscal Year 2024-25 budget, and a five-year projection based on current service levels and economic trends.
Growth has been observed in most City revenue sources, however, based on the model the City’s expenditures are continuing to grow at a faster pace than revenues. While the City continues to have vacancies, the costs of positions has increased due to rising pays and benefit costs. In the model, projected expenditures are higher than revenues in each year of the forecast. The model uses historical growth rates to forecast expenditures as well as actuarial data. The forecast is based on the current staffing plan and does not include additional positions.
Additionally, on November 5, 2024, the electorate of the City of Napa passed Measure G approving a new one cent (1 cent) local transactions and use tax (TUT) until such time as it is ended by voters. The approval of Measure G increases the total of the state and local sales tax on purchases in the City from 7.75% to 8.75%. Measure G is anticipated to generate approximately $22 million annually. Consistent with ballot themes, the appropriation of Measure G will support streets, parks, recreation, senior/youth programs, public safety, encampment cleanups, and City facilities. Measure G also protects and maintains funding that cannot be taken by the State of California. Within the LTFF model, appropriations of Measure G are shown as a potential mechanism to balance the General Fund budget for core services consistent with the forementioned ballot themes.
The LTFF includes the following information:
• Current Economic Information
• Revenue and Expenditure Assumptions
• General Fund Financial Forecast
The LTFF is a model that looks at reasonable revenue growth assumptions and compares those potential revenues to expenditures grown at historical rates; it is a “what-if” of financial position if the City continues its current staffing, programs, and budget growth. The LTFF can be a useful tool in planning future spending, but is not a budget, a labor relations plan, or a set of promises. The model is based on current information and may be modified in the future in response to a variety of factors and trends.
The LTFF includes a revenue forecast which requires collaboration with staff, professionals and consultants to acquire the best available information at this given moment. As seen in recent years, a large portion of the City’s General Fund revenue is highly elastic and can be strongly impacted by changes to the local economy, particularly if the number of overnight visitors is reduced.
The LTFF also includes an expenditure forecast, which is based on growing the current budget at historical growth rates. Actual expenditures brought to Council in the next budget may vary from these amounts.
FINANCIAL IMPACTS:
There is no financial impact as the Long-Term Financial Forecast is presented for informational purposes only.
CEQA:
The Finance Director has determined that the recommended actions described in this agenda report are not subject to CEQA, pursuant to CEQA Guidelines Section 15060(c).
DOCUMENTS ATTACHED:
ATCH 1 - 2025 Long-Term Financial Forecast Update Presentation
NOTIFICATION:
None.