Municipal Reserve Forecast

Methodology

This simplified scenario starts from entered annual totals. Year 0 supplies starting reserves and base-year revenue and expenditures. Growth is applied before Year 1 and compounded annually thereafter. Each scenario starts from the same amounts with its own visibly editable revenue and expenditure growth assumptions.

Formulas

• Projected revenue = prior-year revenue × (1 + revenue growth ÷ 100).
• Projected expenditures = prior-year expenditures × (1 + expenditure growth ÷ 100).
• Annual operating result = revenue − expenditures.
• Ending reserves = beginning reserves + annual operating result.
• Coverage percentage = ending reserves ÷ projected expenditures × 100.
• Coverage months = ending reserves ÷ (projected expenditures ÷ 12).
• Policy floor amount = projected expenditures × floor percentage ÷ 100, or projected expenditures ÷ 12 × floor months.

Each year is assessed against its scenario’s projected expenditures. The first-breach summary identifies the first projected year at or below the selected floor, including equality at half-cent display precision with a small floating point allowance. Starting pressure against the base-year floor is identified separately. No selected floor means no breach assessment.

Worked example

The sample starts with USD 6,000,000 in available reserves, USD 14,700,000 in recurring revenue, and USD 14,400,000 in recurring expenditures. Baseline annual growth is 2% revenue and 4% expenditures. Year 1 revenue is USD 14,994,000, expenditures USD 14,976,000, operating surplus USD 18,000, and ending reserves USD 6,018,000.

The default horizon is ten projected years. The illustrative policy floor is 16.7% of each year’s expenditures, equivalent to 2.004 months. Optimistic growth assumptions are 3% revenue and 3% expenditures; conservative assumptions are 1% revenue and 5% expenditures. These labels describe example scenarios and do not enforce an ordering of results. Every assumption is editable. Reset and Load sample restore all amounts, rates, floor values, and selections exactly.

Scenario interpretation and provenance

A scenario answers “what happens under these assumptions?” It is not a prediction, statistical confidence interval, probability range, or guaranteed outcome. Alternative cases use explicit growth assumptions rather than a hidden fixed spread. The chart plots starting reserves and each year’s ending reserves. Its dash-dot policy floor uses baseline expenditures; the annual tables give each scenario’s own floor and coverage.

The pure calculation engine applies the formulas above directly. The authenticated sensitivity module also compounds revenue and expenditure drivers, but it incorporates multiple revenue drivers, tenant fund balances, a Year 0-inclusive horizon, and a fixed combined safety target. This public tool uses an independent simplified definition and does not access that workflow or tenant data.

Supported inputs and precision

Starting reserves may range from −1 trillion to 1 trillion; negative starting and ending balances remain visible. Base-year revenue ranges from zero to 1 trillion and expenditures must be positive and at most 1 trillion. Revenue growth ranges from −100% to 100%; expenditure growth must be greater than −100% and at most 100% to keep projected expenditures positive. Floors range from zero to 1200 in their selected units. Undefined or nonfinite coverage is rejected. USD amounts and coverage display two decimal places; calculations use unrounded values.

Source

GFOA: Financial Forecasting in the Budget Preparation Process provides context for revenue and expenditure forecasts and explicit assumptions. This calculator’s annual reserve-flow and floor conventions are defined above.

Limitations

This model assumes all recurring operating surpluses or deficits flow directly into available reserves. It omits capital outlays, debt proceeds, transfers, investment returns, one-time events, restrictions, encumbrances, seasonal cash flow, and statutory or accounting constraints. Fund balance is not necessarily cash available to spend. Select a consistent fund and accounting basis and a locally appropriate available measure.

The selected floor is an interpretive planning comparison, not a universal reserve requirement or legal determination. Negative reserves indicate a modeled deficit under the entered assumptions; the model does not silently fund it, clamp it to zero, or assume borrowing. Review local risks, policy, and responsible finance officials’ guidance before making decisions.