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Agenda <br />June 21, 1999 <br />Page 7 <br /> <br />Projecting revenue growth is an inexact science. Without listing numerous assumptions and <br />basing future performance on historical indicators, about 40% of total property tax revenue <br />growth has been the result of tax rate adjustments and about 60% of property tax base revenue <br />growth has been a result of true growth in the tax base. These percentages are somewhat skewed <br />because of the timing of Philip Morris tax settlements and their application to prior years. <br /> <br />Sales tax revenues have averaged about 5.63% annual growth. However, the sales tax revenue <br />distribution formula changes annually and is subject to significant impacts fi.om changes to <br />property tax revenues. <br /> <br />Also when projecting revenue growth forward, it is important to note significant growth since <br />1996 in property tax revenues and since 1999 in sales tax revenues will be partially offset by the <br />incentives incurred to spur that growth. Actual revenues available are impacted by the incentives <br />awarded until the end of the applicable grant award periods. <br /> <br />Summarizing, if the Board maintained level tax rates, property tax revenues might be expected to <br />grow at an annual rate approaching five percent (5%) if all relevant factors remained stable. <br />Once the Mills project is stabilized and incentives cease, sales tax revenues could continue to <br />grow at an adjusted rate exceeding five percent (5%). Sales tax revenues will be dramatically <br />impacted by shifts in the distribution formula between the cities and County. All tax issues <br />having been resolved with Philip Morris, no further large settlement revenue fluctuations should <br />be expected. <br /> <br />· Undesignated Fund Balance <br /> <br />Exhibit C, "Undesignated Fund Balance as Pementage of Expenditures" was developed by the <br />County's Finance Department for presentations to the bond rating agencies seeking to achieve an <br />upgrade (successfully) of the County's bond rating. This is a historical picture of the County's <br />"undesignated" funds balance as of June 30th each fiscal year. <br /> <br />Established County policy (Board action) seeks to achieve a 15% optimal fund balance. <br />Amounts above that level have been used toward a variety of projects. In FY 2000, some of that <br />amount (funds above the estimated 15% level) are used to fund new school site purchases, <br />establish a Capital Improvements Program reserve fund (for the larger projects), and funding of <br />the approved school system building maintenance program. <br /> <br />7 <br /> <br /> <br />