2014 Annual Comprehensive Financial Report

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Limitations on Debt The state limits the amount of general obligation debt the City can issue to 3 percent of the actual value of all taxable property within the City's corporate limits. The current debt limit is $109.8 million. In contrast, the City currently has only $3.1 million in outstanding debt applicable to the debt limit. Economic Factors and Next Year's Budgets and Rates After reaching over $10.4 million in 2005, sales tax revenue declined by 12% in 2006, increased by 3.3% in 2007, and remained relatively steady through 2008. Due to the national and regional recessions, sales tax revenue for 2009, excluding the new Historical Preservation Sales Tax of 0.125%, declined by 7.0%. Due to the continued recession and the closing of Sam's Club and Safeway, sales tax revenue declined an additional 2.8% in 2010. However, since 2011, sales tax revenue has increased each year - 3.7% in 2011, 7.3% in 2012, 7.2% in 2013, and 8.7% in 2014. Staff projects sales tax to continue increasing at an average annual rate of approximately 3.5% for 2015 through 2019. After a flat year in 2010, the City experienced its first decline in assessed valuation in many years in 2011. Assessed valuation for 2011, which determined the property tax revenue for 2012, declined by 2.2% from 2010. The 2012 assessed valuation increased by 1.3%, 2013 assessed valuation increased by 2.5%, and the 2014 assessed valuation increased by 2.2%. Staff expects the assessed valuation for years 2015 through 2019 to increase at an average rate of 3.4% per year. The projected increase is partially due to the new residential development at Steel Ranch, North End, commercial development in the Colorado Technology Center and the Centennial Valley Business Park and redevelopment activity throughout the City. The City conducted a comprehensive utility system and rate study in late 2013 and early 2014. This study identified infrastructure replacements and improvements needed to enable the City's water, wastewater and storm water utilities to comply with new State and Federal regulations and to continue to provide safe and reliable water, and wastewater and storm water treatment. To fund these improvements, the City increased water, wastewater, and storm water utility rates on May 1, 2014 by 2%, 27%, and 30%, respectively. The study recommended additional increases. Based on staff's additional analysis this year of the most recent projected costs and revenues, the City Council approved increases in water, wastewater and storm water rates of 32.4%, 6.3%, and 0.0% respectively going into effect on May 1, 2015. Staff projects the average annual increases from 2016 through 2019 at 5.5% for water, 6.1% for wastewater, and 3.2% for storm water for a residential customer's average monthly bill. After increasing by 5.4% in 2012 and 3.1% in 2013, total employee wages (including full- time, part-time, and overtime) increased by 5.3% in 2014. Due to new City staffing of the Coal Creek Golf Course, staff expects total city-wide wages to increase by 10.7% in 2015. Staff projects an average annual increase of 4.5% from 2016 through 2019. Due to an overall reduction in health care benefits, total health care benefit costs declined in 2010. However, from 2011 through 2013 health care costs increased an average of 7.1% per year for the same level of benefits. Total employee benefit costs (including FICA, retirement, health care, and workers compensation) increased by 7.9% in 2014 and staff 20