Assignment

Erewhons City Administrator needs revenue forecasts for the upcoming budget. The attached Excel file supplies actual historical data. Additionally, it provides an estimate for the current fiscal year based on year to date actuals. Other factors that are likely to influence the upcoming fiscal year listed below.

(1) study the background provided here and provide estimates for next fiscal year in the spreadsheet provided, and (2) briefly summarize the key calculations and assumptions you made in the space provided on the spreadsheet.

Supporting Information

• Over the past 20 years, actual property taxes have increased by an average of 8% per year except for 2019, 2020 and the 2021 estimate. During 2019 and 2020 major industrial development and higher than usual housing construction were added to the tax base.
• The State in which Erewhon City is located forecasts a statewide sales tax increase of 4.7% for 2022. However, the City typically trails the State by about 0.5%.
• Transient occupancy taxes have averaged a modest 4% increase over the past 20 years with the exception of 2015 and 2016. In early 2015 there was a large flood that took out three hotels and spoiled two summer recreations seasons. The hotels have been rebuilt.
• Business license fees have grown at the rate of 2.1% over the last 20 years. However, the City Council increased the fee by 17.5% in 2018 to capture the cost of personnel associated with regulating and monitoring businesses.
• Building permit revenue fluctuates with the economy but historically averages an increase of 3.9% per year.
• The City installed parking meters in the central business district for the first time in 2019.
• The City maintains various reserves and cash balance accounts totaling an average of about $30 million. These funds are invested in money market accounts and 30-90-day secure investments. Over the last 20 years returns have averaged 3.2%.
• The Citys first beer garden was established in 2020 and generated $3,500 in net concession revenue. The City Council has authorized the establishment of a second beer garden in 2022 near Erewhon University.
• State shared revenue has grown by an average of 2.5% per year over the past twenty years with the exception of 2017 when the State legislature reduced it by 50% in response to budgetary pressures.
• Dante Village is small, but rapidly growing community adjacent to Erewhon City and began contracting for fire protection with the City in 2020. Dante Village would like to increase service levels by 50% in 2022.

Explanation of Key Calculations and Assumptions 570 Table 1: City of Erewhon Revenue Forecast Revenue Source 2014 Actual 2015 Actual 2016 Actual 2017 Actual 2018 Actual 2019 Actual 2020 Actual 2021 Est. 2022 Budget Taxes Property 249,958 275,512 296,989 311,838 340,215 396,350 464,126 534,209 Sales 219,009 229,951 243,747 253,741 266,428 282,947 294,254 306,035 Occupancy 17,448 13,125 13,900 17,513 18,214 19,015 19,947 20,725 Licenses & Permits Buisiness Licenses 1,171 1,203 1,226 1,253 1,503 1,530 1,560 1,590 Building Permits 2,997 3,087 3,317 3,358 3,419 3,549 3,687 3,831 Use of Money & Property Parking Fees 572 575 Interest 1,170 1,386 1,490 1,319 1,460 1,570 1,769 1,730 Concession Payments 3,500 3,500 Intergovernmental Shared Revenue 20,155 20,658 21,175 10,852 11,123 11,401 11,687 11,977 Charges for Services Fire Protection Fees 4,100 4,490 Park and Rec Fees 3,997 4,517 4,013 4,229 4,957 5,101 4,758 4,815 Total 515,905 549,439 585,857 604,103 647,319 722,035 809,963 893,472 NOTES: All financial data is presented in $000's Exercise is adapted from "Governmental Budgeting Workbook;" Baker, Fudge & Roman Explanation of Key Calculations and Assumptions 570 Table 1: City of Erewhon Revenue Forecast Revenue Source 2014 Actual 2015 Actual 2016 Actual 2017 Actual 2018 Actual 2019 Actual 2020 Actual 2021 Est. 2022 Budget Taxes Property 249,958 275,512 296,989 311,838 340,215 396,350 464,126 534,209 Sales 219,009 229,951 243,747 253,741 266,428 282,947 294,254 306,035 Occupancy 17,448 13,125 13,900 17,513 18,214 19,015 19,947 20,725 Licenses & Permits Buisiness Licenses 1,171 1,203 1,226 1,253 1,503 1,530 1,560 1,590 Building Permits 2,997 3,087 3,317 3,358 3,419 3,549 3,687 3,831 Use of Money & Property Parking Fees 572 575 Interest 1,170 1,386 1,490 1,319 1,460 1,570 1,769 1,730 Concession Payments 3,500 3,500 Intergovernmental Shared Revenue 20,155 20,658 21,175 10,852 11,123 11,401 11,687 11,977 Charges for Services Fire Protection Fees 4,100 4,490 Park and Rec Fees 3,997 4,517 4,013 4,229 4,957 5,101 4,758 4,815 Total 515,905 549,439 585,857 604,103 647,319 722,035 809,963 893,472 NOTES: All financial data is presented in $000's Exercise is adapted from "Governmental Budgeting Workbook;" Baker, Fudge & Roman