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Page 11 of 13 <br />• The forecast does not reflect budget balance strategies such as cost reductions. <br /> <br />Below is a summary of the baseline scenario. <br /> <br /> <br />Note: In FY 2022/23, the Council approved an update to the City’s General Fund Reserve <br />Policy to align with the Government Finance Officers Association’s best practice to maintain at <br />least two months (16.7 percent) of operating expenditures in unrestricted fund balance. The <br />City’s reserve target is 20.0 percent. Resources were retained in the General Fund in FY <br />2022/23 to meet the reserve target. <br /> <br />Recession Scenario <br />The second scenario assumes a recession starting in FY 2027/28. Assumptions include the <br />following: <br />• Property tax revenue will increase by 1.0 percent less than the baseline at 2.7 percent <br />in FY 2028/29 and FY 2029/30 before returning to the baseline level for the remaining <br />years. <br />• Sales tax will decrease by 5.0 percent in FY 2027/28, decrease by another 2.0 percent <br />in FY 2028/29, increase by 1.0 percent in FY 2029/30, and resume increasing at the <br />baseline level for the remaining years. <br />• Business license tax will increase by 1.0 percent less than the baseline at 2.0 percent in <br />FY 2027/28, remain flat in FY 2028/29, increase by 1.0 percent in FY 2029/30, and <br />resume increasing at the baseline level for the remaining years. <br />• Recreation revenue will increase by 1.0 percent less than the baseline at 2.0 percent in <br />FY 2027/28, increase by 1.0 percent annually in FY 2028/29 and FY 2029/30, and <br />resume increasing at the baseline level for the remaining years. <br /> <br />Based on these revenue changes, below are the projected ten-year numbers. <br /> <br /> <br />Transient Occupancy Tax Scenario <br />The third scenario assumes an increase in transient occupancy tax rates starting in FY <br />2027/28. Assumptions include the following: <br />• The transient occupancy tax rate will increase from 8.0 percent to 10.0 percent in FY <br />2027/28 and increase by another 2.0 percent to 12.0 percent in FY 2028/29. <br /> <br />Based on increased revenues from the transient occupancy tax, below are the projected ten- <br />year numbers. <br />Page 80 of 144