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02.24.26 Town Council Meeting Presentation Work SessionWelcome to the February 24, 2026, Prosper Town Council Work Session Call to Order/Roll Call. Agenda Item 1. Discussion regarding the Town’s multi-year financial projections and Budget Adoption Calendar. (CL) Draft Town Council Strategic Visioning Priorities PROVIDE EXCELLENT MUNICIPAL SERVICES •Strive to be a high-performing organization focused on continuous improvement, best practices, and benchmarking. •Develop a culture of excellence and efficiently provide resources necessary to support these goals. •Provide a professional environment for residents, visitors, and Town employees. ACCELERATE INFRASTRUCTURE DELIVERY •Work with the Capital improvement Subcommittee to identify gaps in the Town’s infrastructure and increase the number of shovel ready projects. •Identify and address infrastructure gaps that limit development. •Expedite the completion of projects focusing on concurrent activity when possible. DEVELOP DOWNTOWN PROSPER AS A DESTINATION •Collaborate with the Downtown Business Alliance, Community Engagement Committee, Downtown Advisory Committee, and direct Prosper EDC to implement the Downtown Master Plan. •Pursue a mix of public and private developments as catalysts for office, retail, restaurants, entertainment, housing, and outdoor events. ENSURE THE TOWN’S COMMERCIAL CORRIDORS ARE READY FOR DEVELOPMENT •Prioritize infrastructure investment to meet demand, using incentives when appropriate. •Implement a corridor overlay for the Dallas North Tollway. •Partner with Prosper EDC to develop and communicate a branding strategy to market the Dallas North Tollway corridor. GROW AND DIVERSIFY THE TAX BASE •Position Prosper as a center of excellence for healthcare, specifically as it relates to manufacturing, research and development. •Proactively recruit businesses to the Town through the Prosper EDC that will broaden the commercial tax base and support long-term economic stability. Purpose •Kick Off to the Budget Season •Ensures Council and Staff are in alignment •Council Strategic Vision (Previous Slide) •Revenue forecast assumptions •Tax Rate Guidance •Committed or requested (per five-year staffing requests) expenditures •Expenditure drivers •Needed Work sessions •Helps establish upcoming workplan for Budget Preparation •Population growth and capital project completions used for five-year staffing •A/V growth used for multi-year capital projects •Confirm Budget Calendar Upcoming Budget Calendar Key Dates •February 24 – Council Budget Workshop - Kickoff •Early April – Appraisal District Estimates •May 15 – Preliminary Appraisal Rolls Due •June 23 – Council Budget Workshop - Compensation •July 25 – Certified Appraisal Received by Staff •August 7 – Preliminary Budget Documents to Town Council •August 11 – Present Preliminary Budget to Town Council •August 27 – Budget Town Hall Meeting •September 8 – PH/Vote on Budget/Vote on Tax Rate Population Assumptions Fiscal Year Population Growth 2020 28,380 10.6% 2021 31,090 9.5% 2022 35,430 13.9% 2023 38,540 8.7% 2024 42,598 10.5% 2025 46,087 8.2% 2026 49,000 6% 2027 53,000 8% 2028 57,000 8% 2029 59,000 4% 2030 62,000 5% 2031 65,000 5% *Unofficial figures, estimates only Based on permit growth General Fund Assumptions •Projected Revenue increases for FY 2027 •Property Tax – 40% of revenue; 5% growth from previous year •Sales Tax – 20% of revenue; 5% growth from previous year •License, Permits & Fees is projected to decrease as the rate of development growth begins to slow •Projected Expenditures – (not yet reviewed or approved by Town Management) •Personnel - 68% of expenditures, 1.5% vacancy rate •3% merit for all employees •5% Increase to cost of Benefits •New Positions – includes all positions request by departments •Two -year catch-up on VERF Contributions Personnel Expenditures – 68% of GF Expenditures •Merit Adjustment – 3% •General Fund Impact - $1,662,328 •Water and Sewer Impact - $448,219 •Storm Drainage Utility Fund - $9,639 •Solid Waste Fund - $2,817 •Compensation and Classification Study •Year 2 Implementation Estimate - $1,100,000 •HR will work with Council to determine what is included in that amount •Health Benefits – 5% increase •Budget new positions at full year to avoid budget hangover •Personnel costs account for 68% of General Fund expenditures •40% of total expenditures are Public Safety personnel •28% of total expenditures are all other personnel General Fund Assumptions (continued) •Expenditures (continued) •Operations – 3% growth (inflation, contractual increases) •Known Project Completion •Fire Station 4 – Staffing in FY2027 (4 FTE), and FY2028 (6 FTE) •Public Works Facility – Late FY2027 •Streets and Median – Various street openings in all years •One-time/Capital Expenditures $1.7M (typically from new positions, programs or single year grant expenses) •Capital Dedicated Options: •Increased back to 10 cents (presented in model) •flat dollar amount ($10 million) •Recommended items for inclusion •VERF Contributions – catch-up contributions over multiple years to make up for no contributions in FY2025 (50% increase in FY2027 & FY2028) •21% Reserve Calculation – based on recurring operating expenses less revenue supported expenses. We will transition over multiple years to include the CIP and SPD transfers as these are recurring revenues supporting recurring expenses •Town Manager preliminary budget will balance with respect to recurring revenue and expenditures. The worst-case scenario is presented in long-range plans Property Value Assumptions •Estimating 1% growth in reappraisals, below 3.5% growth cap implemented by SB2 (2019). •Influenced by declining home values in market reports (January, -4.5%) •Receive more value from homestead cap coming back online •Properties become eligible for Tax Ceiling (Freeze) •New Property growth based on continued yet slowing rate of growth. •We anticipate more commercial as the DNT corridor begins to develop (later years) •We anticipate less single family as permits are showing slowdown •We anticipate new value from multi-family decreasing dramatically as current approved developments are finished Property Valuation (Reappraisal vs New) Fiscal Year Reappraisal Growth from Reappraisal New Property Growth from New Property Total Valuation Total Growth 2022 366,487,773 8.00%469,526,490 10.20%5,437,210,564 18.20% 2023 582,365,527 10.70%596,431,779 11.00%6,616,007,870 21.70% 2024 842,814,805 12.70%876,474,004 13.29%8,335,296,679 25.99% 2025 408,205,593 4.90%878,599,323 10.54%9,622,101,595 15.44% 2026 425,610,074 4.4%758,780,238 7.91%10,806,491,907 12.31% 2027 108,065,000 1.00%629,354,000 5.82%11,543,911,000 6.82% 2028 115,439,000 1.00%632,071,000 5.48%12,291,421,000 6.48% 2029 122,914,000 1.00%653,903,000 5.32%13,068,238,000 6.32% 2030 130,682,000 1.00%702,318,000 5.37%13,901,238,000 6.37% 2031 139,012,000 1.00%782,919,000 5.63%14,823,169,000 6.63% New Property Valuation Fiscal Year New Commercial New Single Family Single Family Permits New Multi-family Total New Property Valuation New Property Y.o.Y Growth 2022 146,247,781 323,278,709 700 469,526,490 - 2023 134,460,200 461,971,579 1225 596,431,779 27% 2024 188,002,668 654,248,828 904 34,222,508 876,474,004 47% 2025 216,099,749 572,465,566 900 76,216,381 864,781,696 -1% 2026 97,191,284 557,694,926 607 89,071,293 758,780,238 -12% 2027 138,012,000 428,992,000 600 62,350,000 629,354,000 -17% 2028 193,217,000 395,209,000 550 43,645,000 632,071,000 0% 2029 266,639,000 361,077,000 500 26,187,000 653,903,000 3% 2030 362,629,000 326,595,000 450 13,094,000 702,318,000 7% 2031 485,923,000 291,758,000 400 5,238,000 782,919,000 11% Estimates based on development projects currently approved Commercial mainly driven by tollway development Residential mainly driven by slowing of growth in permits Multi-family mainly driven by no additionally approved developments in out years Tax Rate Fiscal Year I&S (Debt Service)O&M (General Fund)Capital Dedicated Total Tax Rate 2022 0.182000 0.328000 0 0.510 2023 0.180170 0.217830 0.1120 0.510 2024 0.177258 0.230742 0.1020 0.510 2025 0.180392 0.224608 0.1000 0.505 2026 0.182946 0.224854 0.0972 0.505 2027 0.180000 0.225000 0.1000 0.505 Debt Service decrease by 0.002946 O&M increase by 0.000146 Capital Dedicated increased by 0.0028 Total Tax remains steady at 50.5 cents for current projection Benchmarking Proposed Fiscal Year 2025-2026 Tax Rates Entity Homestead Exemption Rate General Fund Capital Dedicated I&S Total Tax Rate Equivalent Tax Rate for Homestead Freeze Anna 5.0%0.356071 -0.169002 0.525073 0.498819 No Celina None 0.264928 -0.311473 0.576401 0.576401 Yes Coppell 5.0%0.376998 -0.067978 0.444976 0.422727 No Flower Mound 20.00%0.323876 -0.063402 0.387278 0.309822 No Frisco 20.00%0.292775 -0.132742 0.425517 0.340414 Yes Keller 20.00%0.245020 -0.041980 0.287000 0.229600 Yes Little Elm None 0.446653 -0.103247 0.549900 0.549900 Yes McKinney None 0.276012 -0.136272 0.412284 0.412284 No Southlake 20.00%0.240000 -0.055000 0.295000 0.236000 Yes Average of Comparison 10.00%0.313593 -0.120122 0.433714 0.397330 - Prosper (FY2025-2026)17.50%0.224854 0.0972 0.182946 0.505000 0.416625 Yes Prosper (FY2026-2027)17.50%0.225000 0.10 0.180000 0.505000 0.416625 Yes Tax Relief •Property Tax: Tax Rate vs. Homestead Exemption •1 cent on the Tax Rate is equal to $1,154,391 in revenue on our current projection •An increase of 1% on Homestead Exemption is equal to ~$469,000 loss in total property tax revenue, however this calculation is imperfect as HS exemption is per property therefore an estimate isn’t a good indicator of its true impact and can have a variable effect if raised by 1% or by the remaining 2.5% •Targeted Tax Relief (Homestead Exemption) Pros •Provides owner-occupied properties tax relief •Does not benefit rental properties •Preserves revenue from Commercial •Preserves repayment schedules for TIRZ and Economic Development •Shifts burden of property tax to commercial development •Targeted Tax Relief (Homestead Exemptions) Cons •Citizens may not always recognize the value of a homestead exemption because it is less visible and harder to understand than a straightforward tax rate cut, making it feel less immediately attractive even when the savings are comparable. •Must be adopted before July 1 deadline before final Certification on July 25 Sales Tax Projections – 30% Fiscal Year Sales Tax (TIRZ Adj.)Sales Tax Growth Mixed Beverage Mixed Beverage Growth 2022 9,464,641 15.25%122,298 20.70% 2023 10,160,615 7.35%202,909 65.91% 2024 11,150,961 9.75%163,725 -19.31% 2025 12,008,218 7.69%219,665 34.17% 2026 12,983,112 8.19%215,943 -1.69% 2027 13,825,000 5.00%237,000 9.75% 2028 14,515,000 5.00%249,000 5.00% 2029 15,241,000 5.00%261,000 5.00% 2030 15,851,000 4.00%272,000 4.00% 2031 16,326,000 3.00%280,000 3.00% Growth estimates based on current year growth trends and population growth with conservative decline in growth for future years Debt Capacity and Capital Dedicated Goal is to maintain stable I&S rate of 18 cent rate but no more than 20.2 cents per policy (If total tax rate of 50.5 cents is reduced the 20.2 max DS rate would decrease proportionally) •DS capacity above scheduled issuance can be used to: •Front load DS to pay off debt sooner and keep rate up •Issue same amount but plan on redeeming callable debt •Restructure callable debt •Shorten debt repayment schedule •Keeping Capital Dedicated at 10 cents means at projected growth, we will have about $11.5 million in capital dedicated funds, or could be set at a flat dollar amount Debt Service and Capital Dedicated Projects funding: Debt vs. Cap. Ded. Type Debt Cap. Ded.Debt Cap. Ded.Debt Cap. Ded.Debt Cap. Ded. Category Streets & Traffic Parks & Recreation Facilities Unallocated & Other FY 2023 $27,158,033 $7,780,485 $9,800,000 ----- FY 2024 $15,307,062 $5,779,003 $10,900,000 $2,073,000 $10,200,000 $650,000 -- FY 2025 $19,450,000 $5,767,062 ---$3,832,938 -- FY 2026 $23,297,062 $2,090,000 -$1,205,000 -$5,697,062 -$1,507,938 Total $85,212,157 $21,416,550 $20,700,000 $3,278,000 $10,200,000 $10,180,000 -$1,507,938 FY 2027 (Proposed)$41,150,000 $8,700,000 -----$2,800,000 New Personnel Requests FTE Count Current 2027 2028 2029 2030 2031 Total Ending Fire 85 4 6 3 0 3 16 101 Police 99 13 10 11 10 9 53 152 Other General Fund 171.75 12 15.5 8 9 12.5 57 228.75 Utility Fund 78 7 7 6 2 1 23 101 Total FTE 433.75 36 38.5 28 21 25.5 149 582.75 Population 49,000 53,000 57,000 59,000 62,000 65,000 FTE per 1,000 Population 8.85 8.86 8.92 9.09 8.99 8.97 Amount 2027 2028 2029 2030 2031 Fire 488,513 639,900 388,800 -319,950 Police 1,287,632 865,079 1,026,922 802,646 933,996 Other General Fund 1,050,923 1,049,077 608,244 663,075 812,765 Utility Fund 490,845 398,507 378,084 118,972 49,777 Total FTE 3,317,913 2,952,563 2,402,050 1,584,693 2,116,488 Utility Fund Assumptions •Work in Progress •Rate consultant will review rate structure and propose changes for consideration •Rate increases from suppliers •We are a Distribution and Collection Utility •50% of total expenditures service cost from regional providers •Do not have firm increases from providers •Plan to continue issuance of revenue bonds Work Sessions Next Steps •Budget Calendar •Tax Rate: Homestead Exemption vs. Rate Cut •Assumptions •Work sessions – Comp & Class – June 23, Other Topics? Executive Session •Section 551.087 – To discuss and consider economic development incentives and all matters incident and related thereto. •Section 551.072 – To discuss and consider the purchase, exchange, lease, or value of real property for municipal purposes and all matters incident and related thereto. •Section 551.074 – To discuss and consider personnel matters and all matters incident and related thereto. •Section 551.074 – To discus and consider personnel matters including the annual evaluation of the Town Manager, Town Attorney, and the Municipal Judge, and all matters incident and related thereto. •Section 551.071 – Consultation with the Town Attorney regarding pending or anticipated litigation. •Section 551.071 – Consultation with the Town Attorney to discuss legal issues associated with any agenda item. The Town Council will reconvene after Executive Session. Reconvene into Work Session Adjourn