REVENUE AND EXPENDITURE ASSUMPTIONS
INTRODUCTION
The City utilizes many techniques to forecast recurring revenues and expenditures. Revenue estimates are developed by the budget office with input from individual City departments using a variety of techniques, including trend analysis, judgmental forecasting, and expert opinion. Trend data includes historical fiscal performance and historical and projected data modified for known past, current and anticipated anomalies. We also take into consideration expert opinion from the Chapman Economic & Business Review, the UCLA Anderson Economic Outlook, the Los Angeles Economic Development Corporation (LAEDC), the City’s sales tax and property tax consultants, HdL Coren & Cone (HdL), and reports from various state and federal agencies. The forecasts presented are based on judgment incorporating information provided by various analytical methods; known and potential legislative and development impacts; and national, state, and local conditions expected to affect local revenue sources.
Local economic conditions remain positive. Overall, growth continues but at a subdued pace, hampered by potential impacts of federal policy decisions, the high cost of living, increased cost of healthcare, the volatility in the stock market, and other unknown economic effects. With upward pressure on different aspects of cost of living such as gas prices, increasing food and restaurant prices, labor rates, housing expenditures, and demands on spending on non-taxable life essentials, the availability of discretionary income declines and constrains future growth trends. Consumer spending continues to shift from brick and mortar locations to online merchants, which returns less revenue back to the City. During the past year, the City's largest sales tax sector, business and industry, has benefited from prior federal tax changes, however this is anticipated to be a one-time event. The City has had back-to-back years of accelerated growth, which is not likely to stay at this level, and there are long-term risks to the financial outlook. Current expectations are that the Federal Reserve will continue to gradually tighten the money supply by further increasing the federal funds rate. Continuing weakness in global economic growth and the strength of the dollar, rapid shifts in currency valuations, acts of terrorism, tariff or trade wars, or other unanticipated economic shocks may all impact the local economy. The City’s total General Fund revenues for FY 2019-20 and FY2020-21 are growing moderately and projected to increase by 4.5 and 2.3 percent, respectively, as described in the following pages. It is important to note that anticipated expenditures are outpacing revenues. The City continues to focus on key strategies to improve revenue growth, such as ensuring full cost recovery, evaluating service levels and delivery of services, and utilizing technology to manage growth and increasing demands.
FY 2019-21 Proposed Budget
51
Made with FlippingBook Learn more on our blog