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<br /> 7A <br /> Page 1 <br />REPORT <br /> To the Honorable Ma~()rafid ~i~~o;Ufi'$U <br /> Prom the Oity' Manager <br />May 22, 2006 <br />Subject <br />Financial Update <br />Recommendation <br />No action is required at this time. <br />Background <br />At the May 5, 2006 Finance Committee meeting, the committee requested that staff <br />present the Council with an update of the FY 2006/07 and FY 2007/08 general fund <br />projections along with a summary of four items that may have adverse effects on the <br />general fund. <br />FY 2006/07 and FY 2007/08 General Fund Projections <br /> (in OOO's) <br /> FY 2006/07 FY 2007/08 <br />Revenues and transfers-in 72,786 76,729 <br />Expenditures and transfers-out (72,361 ) (76,068) <br />Project operating surplus 425 661 <br />Since the February 6, 2006 Council priority setting session, projected FY 2006/07 revenues <br />have increased by $1.3 million while projected FY 2007/08 revenues have increased by <br />$2.6 million. <br />The primary reasons for the higher revenues are property taxes and charges for services <br />are now higher than previously expected. In February we estimated that property taxes <br />would increase 4.5% in FY 2006/07 (over FY 2005/06) while, based on information <br />received from the county assessor, property taxes should increase close to 7.5%. This <br />accounts for about $600,000 of additional projected secured property tax revenues. <br />A combination of more robust development activity and the higher planning fees should <br />add about $600,000 more to revenues than initially forecast. <br />Expenditures, as is consistent with Council direction for a "status quo" budget, have <br />remained relatively close to the amounts presented at the February meeting. <br />Utility Users' Tax <br />As a result of several federal court decisions and an anticipated decision from the Internal <br />Revenue Service (IRS) to abandon efforts to collect the federal excise tax on <br />telecommunications charges (Attachment I), the City is at risk of losing approximately $2 <br />million per year of utility users' tax (UUT) revenue. By Council policy, the City's UUT <br />revenue may only be used for financing capital projects and related expenditures. The <br />UUT is expected to produce about $7.8 million of revenue in FY 2005/06 so the IRS' <br />potential action places about 25% of the total UUT at risk. <br /> ... -, '" ..--,....... .,....-....,....------ ,....."."". -~_.,."'..._.~_._.~_..,-~~."".~._~-,_.__..".. ......_-_."."..__..._._-"..._.~....._..,...._..._-~ <br />