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FY 2011/12 Budget Assumptions REVENUES: AD VALOREM TAXES For the fiscal year 2011 the adopted property tax rate is 5.4500 and is maintained throughout the forecast period. Since FY 2007/08, three major factors have impacted ad valorem revenue, implementation of property tax reform by the 2007 legislature, voter approved Amendment 1 exemptions effective January 1, 2008; and declining property values resulting from the recession and housing market crisis. For year ended 2010/11 property taxable values, impacted greatly by declines in commercial valuations and home foreclosures, were decreased by 13.23%. For this period budgeted ad valorem revenue decreased $1,023,814 for the General Fund from the prior year. Given the loss in taxable values, the FY 2010/11 aggregate tax rate of 5.4500 is below the aggregate roll back rate of 6.3010 mills for FY 2010. The aggregate roll back rate is the tax rate, exclusive of new construction, that will generate the same ad valorem tax revenue as received in the prior fiscal year. The levy is also allowed to grow freely with the rate per capita income (PCI) income for Florida Citizens. The roll forward rate is constructively capped at 6.1539 mills. It is noteworthy to indicate that the Office of Economic & Demographic Research has forecasted Florida PCI Increase of 2.78% for 2012. Decreased Ad valorem revenues for FY 2010/11 resulting from property tax reform and declining property values have been offset for the most part by salary and hiring freezes, reductions in overall staff, budget cuts. AD VALOREM TAXES (cont.) For FY 2011/12 the Property Appraiser is expecting an additional decline in citywide property values of 7-9% due to increased foreclosures stemming from the housing crisis and high unemployment. The County wide 2010 Foreclosure Lis Pindens was at 5,320 and County wide unemployment at 10.9. If the adopted tax rates are maintained as forecast, FY 2011/12 will mark the third year of property tax revenue decreases. In accordance with the Property Appraiser and assuming no economic recovery, property values are expected to further decline 3% in 2012/13, no growth in FY 2013/14 and return to a moderate 2% increase in FY 2014/15 and FY 2015/16. The annual losses in ad valorem tax revenue from declining property tax values greatly impact the long-range forecast. Ad valorem revenue is an ongoing income source that when not replaced, compounds annually; the potential result is that economic stabilization reserves will need to be utilized. TELECOMMUNICATIONS TAX A 5.42% tax collected on retail sales of communication services. The definition of communication services encompasses voice, data, audio, video or any other information or signals, including cable services that are transmitted by any medium. Rapid technological change in the communications industries complicates forecasting of this revenue. The industry is subject to much price competition, consolidation and technological convergence which may materially restrain growth in this revenue. City of Casselberry Page 2