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The use of surplus funding to help balance an operational budget must be done with great care. The City is not a finite entity; instead it will continue to exist and therefore will have routine expenses year after year (ex: payroll, insurance, chemicals, fuel, etc.). These repeating expenses must be supported year after year with dedicated annual revenue streams, in other words, revenue that is reliably raised and available each year. To use surplus money in this instance would be inappropriate because it is a finite source of money and would eventually end. Should a repeating expenditure be supported by a finite revenue stream, a time would come when necessary revenue would not be available to continue that service. Therefore, the City of Paris does not support any of its routine expenditures with surplus funds. On the other end of the spectrum, we have one-time sizable expenses that are not routine year after year (ex: certain equipment, studies, etc.). We commonly refer to these as capital purchases (note: our annual ambulance and police car replacement programs are both capital purchases, but are routinely done each year and therefore excluded from consideration of surplus funds). While we routinely have capital purchases each year, the purpose, number, size, amount, dollar requirement, etc. is quite dynamic and difficult to predict. When surplus funds are not available, reoccurring and/or new revenue must be reallocated and/or raised to fund non -reoccurring capital purchases. This is not always possible and the City must make difficult decisions on what services it will be able to provide year after year. However, when surplus funds are available and assuming the reserve is healthy without the addition of these surplus funds, then opportunities to expand our reach within our capital purchase list become possible. This will not always be the case for the City of Paris, but as with last year, this opportunity is available to us this year. The City of Paris had an approximate amount in excess of $3 million in surplus revenue upon the close of FY21/22. This is predominately because of excellent sales tax receipts beyond what was budgeted in the balancing of the FY21/22 budget. To be in excess by this much is indeed rare and cannot be expected each year. However, it presents us with an opportunity to 1) pursue some significant one-time capital expenses not normally possible, and 2) has given the City Manager and Finance Director a different perspective towards budgeting its revenue in FY23/24. While we enjoy seeing excess revenue upon the close of a FY, it may be more appropriate to adjust our budgets to take advantage of this growing reoccurring revenue stream, thus tightening down the amount of excess we will see upon close of a FY, in order to provide more services to our citizens. The thought is simple, so long as a healthy reserve exists, citizens would prefer to see their tax dollars put to use rather than stored away. We have therefore attempted to loosen up our conservative approach towards budgeting the FY23/24 revenue so as to give us opportunity towards more reoccurring expenditure needs (ex: pursuing a Public Information Officer). This will be a work in progress this year and the next few. This does not come without risk. Given the primary cause of our excess is the sales tax, and given how dynamic the sales tax can be, we will have to monitor the budget more closely each month to make sure our budgetary predictions remain doable as the revenue comes in. With this said, we believe we have still budgeted our various revenue streams fairly conservatively for the Proposed FY23/24 Budget. The City Airport Fund has a minimal amount of reserve that we are planning on making available for capital expenses within the Airport Fund in FY23/24 for a TxDOT project. The Water and Sewer Fund (Fund 10) and Landfill Fund (Fund 45) do not have excess reserve available for capital purchases, therefore all expenses within these funds are supported with reoccurring revenue streams raised in FY23/24. In addition to the operating funds, the City still has some remaining ARPA (Fund 04) and CARES (Fund 05) funding. Through our past efforts, we have de -obligated this funding under the lost revenue category authorized by the Federal government, thus opening it up to other purposes as needed. This funding has an expiration date in the upcoming years, but we plan to have it spent before these deadlines hit. The items supported with this funding will be shown later in this memorandum and have been selected primarily based on their long term impacts to our operations and service to the community. One final helpful key, the City's accounting system is structured based on account numbers. We utilize consistent numbering for each of the departments, but it first takes some training to learn how to read the system. The following is an example of a typical account number: "01-0101-12-00". To assist you in reading this, please take the following example: Page 4 of 23