04 Capital Financial Plan - Laserfiche WebLink

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to the existing taxpayers. • Very Low Debt per Capita: The City enjoys a debt per capita ratio under$1,000. Many credit rating agencies would categorize City's debt level as"very low",which is likely one of the reasons the City has enjoyed a below average tax rate. Without regard to affordability,we believe the City is positioned well to take on additional debt for projects,without an adverse effect on its credit rating. • Water and Sewer Rates are competitive: Monthly utility bills(water and sewer combined)are slightly higher than the comparison group average. • Total cost of City services:When we consider the total cost of taxes and utilities on a typical home, Pequot Lakes is slightly above average(about$10 per month more than the average). • Pequot Lakes is efficient with its LGA and Levy dollars: One way to determine the efficient use of taxes and LGA is to look at how much the City spends on a per capita basis. We note that Pequot Lakes is in the more efficient half of the comparison group. Again,it's impressive,since many of the comparable cities receive significantly more LGA than Pequot Lakes. Comparative Analysis Conclusion The City of Pequot Lakes is currently financially sound. It has healthy cash reserves in the General Fund and a very low amount of debt. The City has proven to be very efficient of its use of tax dollars and as a result enjoys a competitive tax rate despite lower LGA funding and a smaller tax base. However,due to slightly higher utility bills the overall cost of living in Pequot Lakes is slightly above average. These strengths put Pequot Lakes in a good position to consider future projects(while keeping an eye on affordability). Capital Project Analysis Capital financial planning helps you balance two competing needs;the need to complete capital projects and the need to preserve or improve your financial condition. Many factors can affect project feasibility and impact;construction can be phased or delayed,debt payments can be stretched over a longer period of time,assessment burdens can be increased,etc. And when multiple projects are under consideration, the number of combinations and impacts quickly becomes quite complicated. To help you deal with the complexity,David Drown Associates uses a customized computer model to crunch the numbers and quickly show elected officials the financial impact of an approach to a series of projects. Baseline Assumptions The computer model can operate under an unlimited number of assumptions. However,for the purpose of future financial planning,the City decided to use the following assumptions: 1. Increases in operational spending will not outpace growth in tax base,both estimated at 2% per year. The Council should take great care in monitoring this each budget season. 2. Construction cost and purchases will suffer from an inflation rate of 5%per year. This may be conservatively high.