City Commission - Regular Meeting

Delray Beach Workshop this Tuesday, July 14th. If the clerk, please call the roll.

Deputy Vice Mayor Markert.

Here.

Commissioner Mollica. Here. Commissioner Casale. Here. Vice Mayor Burns. Here. Mayor Carney.

Here. We have a quorum. Great. The first part of this meeting is open for public comments. Any members of the public wishing to speak, please come to the lectern, give your name and zip code, and you will each have three minutes.

Good afternoon, Mayor, Commissioners. It's Paul Cannon, 33483. I just want to refer back to the resolution 10326 that was passed a couple of weeks ago to reinstate the Budget and Finance Review Board. Just conscious of the fundamental changes that are going to be coming in the municipal budgets in the coming year or two with the forthcoming referendum question in the election in November but I think it's really important that we get moving on this board because I think there's opportunities to review the budget question the structure of the budget offer some alternatives for different funding opportunities that there might be there's a lot at stake here so I'm simply saying please let's get this board set up quickly so that we have plenty of time to review the budget before it's approved thank you thank you very much

Are there any other members of the public wishing to speak? Seeing none, public comment is closed. We'll get into the agenda item number two, which is the fiscal year 2026-2027 proposed budget considerations. Mr. Dockowitz.

Actually, I will go first, Mr. Mayor, if I may, please. Thank you. Good evening, ladies and gentlemen, or good afternoon, followed by evening. So, the City of Delray Beach, of course, we've experienced numerous engagements, interactions with the City Commission in previous months regarding numerous scenarios and that likewise brings us to the prospect of offering considerations based on the expectations to maintain level of service throughout all departments and municipal operations. An approximate 13-page to 14-page PowerPoint presentation will actually be made available by myself, along with Chief Financial Officer Henry Dacus, to help underscore various econometrics associated with considerations that are being brought before you, to also culminate with a consideration with regards to a tentative millage rate, which you will take up soon as well, and we'll talk a little bit about that as part of the presentation. to highlight briefly various updates. Just waiting for the change to occur. So, general fund expenditure budget highlights. Personnel services. Again, this is macroeconomic in terms of aggregate overviews, in terms of why we are where we are, as well as an opportunity for city commission to offer its direction, and hopefully they will align with the recommendations that both the Office of the City Manager and the Chief Financial Officer are in position to offer. Personnel services, salaries and benefits increase 8.8% from $120.8 million to $131.4 million, including the recent allocation for cost of living adjustments, 1.3 million for general fund employees, or general employees that are not represented, as well as the $600,000 for retirees. And of course, this all underscores what's anticipated for fiscal year 2026, 2027, beginning October 1. We also take under consideration firefighter collective bargaining agreement negotiations, which are eminent, as well as increases in fire pension contributions of $589,000, similar contribution adjustment for police pension of $723,000. The anticipated proposed budget process also takes under consideration increase to public works street maintenance of $500,000, and this is to resume the asphalt application program. We've talked about this and this was a priority at length. It also takes under consideration increases to fleet, fuel, and lube costs of about $370,000. Transfers, decrease in transfers to neighborhood services of about $274,000. Others, an increase in payment of tax increment finance revenues to the community redevelopment agency of about $3.3 million. At this time, I'd like to provide an opportunity for Chief Financial Officer Henry Dakowitz to outline briefly, via the next few slides, historical and proposed operating millage rate considerations in terms of why we are where we are, as well as aggregate adjustments that are plausible. Mr. Dakowitz, if you would please.

It certainly is now. Should I welcome you again? So here's our first slide. We think it's a rather important one. We have three sets of data all on one slide. If you look at the green rectangles, that is our millage rate using the index on the left-hand margin. So we've had a millage rate. It's the bottom number within each green rectangle. So we went from 6.9611 mills in 2017 down to 5.9063 in 2025, with a bit of an increase last year and a proposed increase this year. From 2017 to 2025, the mills went down by 1.0548, or 15.2%, over an eight-year period. That's a compound annual growth rate of negative 2%. So we were lowering our millage rate 2% per year, which I'd love to highlight to the governor. The point is, as the legislative body here, as our taxable values kept increasing we lowered the millage rate to offset some of that increase so that the actual taxes paid by the citizens was less than just the increase in the real estate values and now we're working to try to catch up from where we have been over those eight years the top line light yellow Municipal Cost Index. American City and County is a legacy media publication and industry resource serving U.S. state and local government leaders since 1909. It operates under the Smart Cities Dive brand. The publication is widely recognized in municipal administration for creating the Municipal Cost Index, MCI, which tracks inflation and price trends for commodities to help local governments intelligently plan their budgets. So we went back and looked at this index over this time period. It went from 244 to 340 for the current year, 2026. So in those nine years, it went up On their metric, 96 points or 39.34%. And for that nine-year period, the compound annual growth rate was 3.75%. So based on this generic index, costs for government operations have been going up 3.75%.

Annually.

Annually, compounded for nine years. At the same time, our millage rate was going down by 2% a year. The third graph, the line graph in the middle, is our actual expenditures here in Delray Beach. And we've gone from $117 million to $200 million. So if you notice, the curves for the municipal cost index and our actual expenditures are pretty similarly shaped. We have increases like everyone else. A lot is driven by labor costs, and then we have contracts that are renewed. Inflation has been going up. So the reality is we've been managing our costs reasonably well compared to the indexes, and the millage rate, while helping the taxpayers for those eight years, we're now trying to catch up with all of the pressures on us. Okay? Next slide. A little busy, but stick with it. I'll walk you through it. So on the left-hand side, we start with a table which shows the first column is the adopted budget for the current year we're in, nine and a half months into the budget year, and the proposed budget and millage for this coming year. So we were looking at revenues of $201 million the current year, and it was $205.77 million and that includes the second line under revenues, property tax revenues from the taxable value. So we get these statistics from the Palm Beach County assessors, and that increase is $8.5 million, and that's baked into the 205 million. If you go to the upper right side, we go into the millage rate calculations in a little bit more detail. So this current year, the millage rate is 6.1611, and we are proposing a millage rate of 6.4371, which would be an increase of a little under 4.5%. Property tax revenues, the adopted budget is $118 million out of our total 201, so we're talking in the range of 55-60%. And with the increase of the millage rate, it would go up to $132 million. The amount of revenue from the increased taxable value is $8.5 million. I've mentioned that before. And the money from the millage increase is $5.67 million. What did I do?

Mr. Dakowitz, may I ask you a question before we move on from this page? Sure. Thank you. If the governor's tax bill gets voted in, we could potentially see it taking effect in January. That would be going into our second quarter of this current fiscal year that we're talking about budgeting, correct? Correct.

I am not sure. I thought that the impact, it might go in officially, but we get our tax revenues earlier in the year.

Right, I understand that. That's why I was going to ask, are they sending out two bills, depending, or is it all going to be in the next fiscal year?

It would be for the following fiscal year. And on due diligence and analysis, we had an opportunity to confirm that that's the case, working with the Palm Beach County authorities, state authorities, Department of Revenue, and that will take effect fiscal year October 1st, 2027.

So because- You're 100% sure on that? Okay, thank you. That's good.

Yes. So if I may, just to further clarify, as I've spoken to a couple of you all individually about this, the recommendations for fiscal year 2026 and 2027 are all based on the current state of affairs.

Got it.

A specific assurance is the fact that property tax bills are generated in January, the beginning of every calendar year. Correct. The coming fiscal year is based on January 2026. January 2027 will likewise be for October 1, 2027. And that was the confirmation that was facilitated. So these are fairly straightforward.

Perfect. Thank you for that answer. You're welcome. Thank you, Mr. Dakowitz.

So we were, there we go. So we have the dollars from millage is $5.67 million. And that's how we get the $14 million that increases the $118 million of property tax revenue the current year to $132 million the next year. Now when we have an increase in property tax revenues, we have The Community Redevelopment Association which has tax incremental financing and they have to get funded from us So this year we we show that as a negative to our revenues out of the 118 million we pay them 25 million out of the 132 million we would expect to pay them 28.6 million we broke that into the two components again of The increase for the CRA due to the increase in taxable values would be a little under 2.1 million. And the increased money for CRA from the millage would be 1.2. So they would be getting an increase of about 3.3 million, which offsets the increase that we would get originally. And that's how we go net property tax revenues from 92.7 million to 103.5 million. So that would be the impact and the calculations on the millage rate. We now can go down to the second aspect on the left-hand side, which also affects revenues, which is drawdowns of the fund balance. The projected fund balance drawdown for next year is $8.4 million, and we have some detail over here in the bottom right corner. The fiscal year 2025 audited ACFER, which was as of September 30, 2025, nine and a half months ago, our fund balance, unrestricted fund balance, sometimes known as a rainy day fund, that amount was $49.13 million. We anticipate and project that the drawdown on reserves for this fiscal year which ends September 30, 2026, in two and a half months, would be about $2 million. Looking at that, the projected fund balance at 930, or October 1, the beginning of next year, would be $47.131 million. Now, when we calculate the fund balance as a percent of expenditures, as you have directed us in the policy, we looked at total expenditures minus fund transfers. And on that calculation, the $47.1 million would be 21.9% of those expenditures less transfers. We currently have a fund balance policy which says we should keep our fund balance between 21% and 25%. We have checked with our financial advisor who explained and elaborated that the GFOA, the Government Finance Officers Association, recommends that a reserve for fund balance should be a minimum of two months' expenditures, which works out to 16.66% of these expenditures. We are proposing a drawdown of 8.4 million, which would take the 47.1 down by 8.4 to get us 38.7. The projected expenditures less transfers, 215.105. That's the 219 of total expenditures less the transfers. which gives us an 18% reserve. I'm a CFO. I love reserves. It's the only cushion I have. The rating agencies for bonds love reserves. However, this is a very tough budget. And so given the GFOA's best practice, we're on the low range, but we are in their expectation of best practices. So we would generate, if you would, Up here, 8 and 5, we're looking at $14 million generated by the increase of real estate revenues. Part of it is the increase of taxable value. Part of it is the millage rate. And down here, looking at a drawdown of $8.4 million. So that's how we got $22 million to help balance the revenues and expenses going forward. And we look at the original $216.5 million of expenditures, which includes the $3.3 million we will have to pay the CRA. And that's how we get, oh no, you add the CRA and you get the 219. Revenues up above 219.847. Expenses 219.847. so the city manager is proposing this balanced budget looking at the general fund revenues by category we're looking at taxes of 132.3 million it includes the real estate taxes okay but it also, we have a small negative variances. These are some inspection fees from developmental services, certainly not material. Looking at the other line items, permit fees and special assessments, intergovernmental grants, charges for services, judgment fines and forfeitures, they're all about flat. Miscellaneous revenues, an increase of 2.3 million. That is, Due to the funding that we get from the CRA contributions that come back to us, and we're looking at an increase of 2.3 million. Other sources, primarily this is the drawdown. And historically, we've budgeted drawdowns, but never drew down significant amounts compared to what we budgeted. The department managers should be saluted. They get their budgets and they make sure they come in at or below their budgets. And the budget drawdown, the reserve drawdown, is the last entry we make for the year. And historically, we have not needed to draw down the entire amount that has been budgeted. On this page, it looks like revenues are going down, but it's because of the drawdown which we do at the end of the year, the 197. Now you add property tax revenues from taxable value, property tax revenues from millage, the 8.4 that we're budgeting, and that's how we get to the 219.8. So this is blowing up the revenues from those line items. Now let's look at expenses by department. So we end up with the same $219.8 million of total. It's a balanced budget. Obviously, police and fire are the lion's share, probably 55% to 60% of our total expenditures, $59 million for police. The increase is only 4.1%. It's negative red because It's a higher expense. But when I think of police, I think the uniform salaries are going up 5% to 7%, non-uniform 3% to 5%. Plus, we have contracts that roll over with increases, I think 4.1%. for any department is pretty good and especially important when we have a large budget. Fire, going from 50 to 57, an increase of 7.3 to 14%. As you're aware, we're in the midst of negotiations with the union. We don't know what that's going to come in at, but we want to be conservative to make sure that we have a budget available to cover whatever ultimately we agree upon. Parks and Rec, up by 1.9 million, 8.2%. The 15% in public works, $1.7 million increase includes the $500,000 for street paving that you requested in your goals that was included in the budget. The other items, the percentages may be high, but they're off much smaller bases. Net bottom line, we're looking at expenditures that increased by 7.7%. When I go back to the increases for the municipal cost index, we're in the same ballpark. When we look at what our revenues are going up by, the taxable values, It's in the right ballpark, and then we add that with the CRA, we're increasing our expenditures to them, some of which comes back as revenue, 3.2, and that's how we get to 219 million, an increase of 18.74. Any questions so far? Okay.

Can I ask you a quick – sorry, I have laryngitis, so I don't sound like me today. Just a couple of quick questions. Do we derive interest income on the reserves? Of course. So it's professionally managed and we make –

Aspects. The first is preservation of capital.

Okay.

The second is liquidity and make sure we have availability when we need it. Okay. And then the third is return.

Okay.

We have short-term state funds. Yep. Which we use for the short term. six to nine to 12 months, and then we use our outside investment advisors for the longer term. With the inverted yield curve right now, we can keep it short and get higher interest rates and keep rolling it over. I am very concerned about interest rates and risks in the bond market, currencies, and another discussion another day. I've told the advisors I really want to keep it short because even if interest rates go up, you get the total notional amount of a bond paid back on maturity. So if it's two years or less, we have less risk. They have suggested that we go out to three years. They say the market is giving you enough of an increase in return to make it worthwhile. And again, it would be a percentage of what we have. They also, when they took over the holdings, they're starting to go through, they have lists of names that are approved based on credit risk, and they've been swapping out some of the names those are the basic changes we've made but all of our funds are invested we keep some cash in our major concentration account if you would but then we have short-term funding that we can manage and we do a cash flow forecast at least three months out and we update that every week so we use that cash flow forecast we have short-term available and we have intermediate to in my mind no nothing longer than three years invested by the professional investors.

Like you, I like those reserves. But one of the reasons I like them is that this is throwing off some cash for us. Absolutely. Which is great, ladies and gentlemen.

I just hope that the amount that we're getting offsets the inflation. Amen.

I have a question, please. And that is with drawing down the reserve, you were talking about interest rates. Does that affect our S&P rating and our ability, or like the cost of us borrowing money?

Yes. Yes. It does. I will tell you that having done this a couple of times and having issued over $2 billion of debt in my career, they like to see the reserves. And there are different parts of the countries where they have different percentages. So 18% isn't bad in New England. The numbers are smaller. Out West, they're bigger for some reason. They have 50%, 75% reserves. But they told me I'm judged based on where the location is. um they like to see it because if you think about what their role is they are protecting investors and bonds what is the probability that this issuer will pay interest and principal on time what is the risk that they will not and so when you have a reserve that's unaccounted for unreserved untagged that makes them feel more comfortable that's what it's there for federal government says we can pay all of our debts as they come due When we reduce the reserve, and especially when we reduce the reserve for operating expenses, they view that negatively. However, we're not the only ones going through this. I had long talks with our financial advisor about credits in Florida. We have this legislation for the whole thing. He said, it's not that bad. They understand you're facing a challenge. You're going to manage through it. It makes sense that you're increasing millage rates and decreasing reserves because you've got to get there. It's not as rainy as it was when COVID hit, but that's what a rainy day fund is for. So we're managing. It's a balancing act. We are trying to balance operations to make sure the department heads get what they need, and the zero-based budgeting process was very helpful in us really understanding, at another layer of understanding, what do you really need? What's a wish list? The second is the burden on current taxpayers. The third is reserves for the future. And so we are trying to balance, and there's no right answer. We are trying to balance not just for this year, but also looking forward. So consequently, this is the proposal the city manager has arrived at. It's balanced, it's fair, and it's not just for this current year to get through the year. It's also positioning us well in case the referendum passes. Does that answer your question?

Sadly, yes.

Well, it answers it. The answer is sadly, you know, but yes, I understand. Any other questions?

Well, while we're on that topic, I sat up here when we had a hearty reserve of well above 25, even I think at one point 35, and we changed our policy so that we didn't retain that much money and started utilizing that money. and putting it elsewhere. My concern is we keep on looking to reduce this number. And the last time we reduced it, we did it to balance the budget. We were in a range of 25%. We agreed to go down to 21% to 25%. And I just did look it up, because you're right, the GFOA says two months. They say that's your starting point. And from that, you build. There's so much criteria. And you know this, but for the public, if you have a lot of property tax that's in a good column, so your numbers can stay lower, if you're a coastal community prone to a potential storm or some kind of an environmental situation that's a bad column, you should have more now I do believe you asked mr. Moore because I meet with our auditor regularly you did ask her to do a report on what our reserves should be based on what a lot of coastal communities in the surrounding area are doing and the number came out to minimum of 21 21 to 25 was what the If you're looking at everybody else, and we're always looking at what everyone else is doing, that's the number. So I'm wondering why, in light of that information, are you recommending an 18%? Because I'm not.

Can I put in my two cents on this one? And I have a portion of the presentation.

I'd like him to answer, though, because he asked for that report and got it. Well, we have a whole slide. And now you have a report of information relevant to what we're discussing today, and none of us have actually received it from you. You didn't even tell us that you – I meet with the auditor, and I always ask her what she's doing to go through everything. And I just am wondering why, with that information that you have, you A, didn't share that with us, and B, are looking at a different number in the budget.

We just included that as part of this presentation. We just concluded it last week.

So this is not – Just included what specifically?

The information you're referring to, the benchmarking with regards to – Fund balance position and coastal communities.

It's not in this consideration. You're going below the benchmarking.

I would like to make the presentation. I do have portions I'd like to cover, and it does touch it. If I can, please.

Sure. We have a later slide that goes into it in more detail. Okay. And I will tell you, I really hate just looking at others to see what they're doing. If everyone's jumping off a roof, it doesn't mean I have to jump off a roof. When I was in Norwalk, 169 cities. I had the largest rainy day fund. We were managing conservatively, and when COVID hit, we were protected. This is very different circumstances. It's based on risk.

Right, but Mr. Dakowitz, we're kicking up our tax rate on our taxpayers to, what, 6.4371, and that's only to cover this current year. How are we covering the 21 million loss in the next fiscal year?

We were at 6.9611 10 years ago. I'm not disputing that this number isn't reasonable. No, no, no. You said you're looking at that big raise. Look at the context.

No, no, no. We are increasing what we're getting in taxes. And I totally understand what you're saying. And I don't disagree with you that we've created this problem reducing it down over time versus incrementally going up as we should have with the cost of living and the like. We are here. So now we have to try to figure out a good solution to this problem. And my point to you is I don't know that I feel

as though going into the reserves beyond 20 is the best solution and i would like to try to find another if possible that's what i'm saying to you i i hear what you're saying what i would say is this is the low point the 18 and if we are successful as we have been in the last number of years where we don't draw down the entire budgeted amount that surplus would increase our reserve okay so It's part of it is a budget is a projection. It's the best estimate we have now. The biggest danger I have is when we have less revenue coming in than we projected or more expenses, and then what are you supposed to do?

Right, but everything we have is almost 90% of our payouts are contractually obligated, so that's where we're going right now.

Well, I would say that 65% of our costs are people. And apparently statewide with this legislation, no one's allowed to touch police or fire, which is 60% of our expenses. And our residents don't want us to. Well, you know what? There's a reality gap here that says every other department, we go through and we question every single person, what's the staffing, what's the expenses, how does it work? Police and fire are viewed differently by the community, by the state, whatever. It's a handicap. So if you take that off the table, and we'll go into that when we talk about it.

There's not a lot of flexibility once you take that off the table. That's really the problem.

Well, but the point is the legislation, if it passes... That's reality to us. So all I'm saying is that I understand. Trust me. I'd love to have a 25% to 35% reserve. But there's also a time. You know, that's my CPA bean counter hat. The other side is the NBA big picture. We're running a $200 million, now it's $250 million a year organization, and when you include all the other funds, we're about $600 million. How do you keep it going?

Correct, but I'm more concerned about what next year looks like in light of what's happening, and I think we need to do a way more in-depth

If I may, Mr. Mayor, I'd like to continue the presentation because I'd like to touch on the fund balance policy piece because, of course, you offered the thought that this information was provided back way when. That just came together the last few days.

I didn't say way when. I just said you have the information.

And it's included in this presentation, which was provided to the commission as part of the presentation material this past Friday. So that was being provided for, and I do plan to talk a little bit about that, if I may be permitted, please. Okay. So, Mr. Dakowitz, let me just take it from there unless you have any further thoughts.

At this point, this is the revenue and the expenses and Mr. Moore was going to talk about the next few slides. Thank you.

Thank you. So, if I may please. So, the next item, we briefly highlight opportunities in terms of Vision 2035 key focus areas. So, a planning process such as goal setting does take under consideration key focus areas and any additional resource commitments or considerations would fall in line in that regard. So one of the key focus areas, of course, being economic development. You'll enjoy a presentation a week from today, by the way, from Business Flare as well as GRIP in terms of the next steps with respect to economic development synergy. So the consideration does involve the continuation of a relationship with GRIP for $65,000 because, of course, the next step is assertive marketing opportunities in that regard. does not adversely impact the general fund because that's coming from the city's economic development fund which is accounted separate and distinct from all other resources as far as the environment category the color nine group which is the federal lobbyist representatives followed by ballot partners which are our state representatives of which we are aligning resources to continue those relationships. As far as additional position considerations, we're looking at an additional lifeguard, an additional staff person, and special services manager for fire rescue to actually take the form of a reorganization of existing positions, and that's why the numbers are fairly small in comparison to a full or brand new position. And in historic preservation and strategic development categories of the key focus area process and development services, we are looking to tighten up resources in terms of the planning aspect of which only a portion of general fund dependency will be applied because of the level of building fund related activities that function in that regard as well. and the Department of Parks and Recreation, much of this is in response to the organizational structure for the Creative Arts School and our contributions working with the Department of Communications to take care of a resulting vacancy so that we can be whole to that extent that we possibly can. So a couple of different resource commitments being made available in that regard. Nevertheless, this is where we are. Yes, ma'am.

And we're hiring another individual in the fire department to carry out that program with relation to the mobile unit. Yeah.

Yes, ma'am.

And that's not in there, though. But we were assuming that wasn't going to be fully covered by the funding. So some money has to go into that, correct?

$110,000.

Yeah. So that should be up there as well.

Yes, ma'am. However, that's incorporated for the current fiscal year, so that's already accounted for in that regard, so it wasn't necessary to highlight here.

Okay. So we're hiring two people, one and two people and a third in the Historic Preservation Department?

Yes, ma'am. That's the consideration. And again, we touched this during the Vision 2035 exercise May 8th. Based on that criteria, based on expectations, we were able to strike a balance given the aggregate recommendations we're offering. So that's being included.

Could I ask you one more question? Just to clarify. Go ahead. Yes.

Those two people, so we're adding two people, but the General fund is only paying 65%. Yeah, that's fine.

I'm just trying to just clarify that.

I'm sorry.

So when we went through these, I mean, you had the staff do a lot of work to provide us those four sheets. Yes, ma'am. That included what was current level, lower level, good level, and best level. I don't know, aside from that $500,000 program that Missy talked about that we all agreed, the paving program that we should be doing, what other things from these sheets were put in or taken out? We don't have any sense of that.

Sure.

To get to this number where the budget is. What information that our directors gave us that they most wanted needed? Are we at level of service? I mean, I think we need those sheets to be bounced back to us with highlights of we're at this level in this department. This is happening and this isn't happening. Just looking at the number as a whole, I understand we have to look at it to get the millage and all that, but we really need to understand what are our residents getting? What is coming out? What are they not getting? Because one of the things that we've overlooked in the past is what they're not getting, and that hurts us, and it hurts them.

So if I may, Commissioner? Part of my contribution this evening was to offer exactly that after we get through this evening's process so that you'll have that information. So within the next day or two, we'll be able to generate that as we continue the proposed budget process for the upcoming fiscal year. I'm fairly comfortable in that regard, ladies and gentlemen, because the first and second hearings are not to take place until September 8th and September 21st. I believe we would have to execute that on the Monday this year because of the respective schedules. And so the primary focus in this regard is a... It's a macro econometric discussion in terms of why we are where we are so that we can have some direction with respect to a tentative millage rate so that we can go forward. But the process will continue. And so what my offer this evening was exactly along those lines after we get through this presentation so that you'll have that information and you'll be able to see clearly well in advance of the actual adoption process. So if we may be permitted to proceed in that regard, I think that might be helpful.

Thank you. You're welcome. Can I ask one favor, Mr. Dekwich? The spotlight thing is, like, making me hallucinate.

I don't know if anybody else, is this bothering them?

No, I don't know what you're talking about.

I mean, I don't want to, if it's helpful to anyone else, the spotter, it's like I'm trying to read it and then this thing is going on. No, it doesn't bother me at all. Okay, if you want it, go ahead.

I can hallucinate. Well, I'm next. Well, Commissioner Malika, you'll be happy to know that the next couple additional slides will feature me, and I have no spotlight at all. So I'm sitting right next door to you. So if I may continue.

Thank you.

So thank you. So in any event, ladies and gentlemen. As we talk about the proposed millage rate, 6.4371, again, maintaining level of services, striking the balances along the lines of what Mr. Dacus and I talked about during this afternoon's presentation, we were able to engage directly with the Palm Beach County Property Appraisers Office in terms of what the taxable value of an average residence specifically in Delray Beach, Florida. This is a metric we attempted to apply over the previous year or two, and there's been a little bit of debate back and forth in terms of what that looks like in this regard. Given the considerations being made available with respect to a millage rate adjustment to 6.4371, we are averaging a monthly increase of about $28.52. So just to provide perspective and context in terms of what that may look like, what that actually means, so that it's actually a fairly reasonable consideration. It's also important to highlight this, ladies and gentlemen, because as Mr. Dack was touched upon a little while ago, and Commissioner Cassell, I think you highlighted it quite nicely, the fact that the adjustments in millage rates haven't occurred over the last 10 years, not to mention the rollback position from two years ago, really placed us in a compromising position, and it did impact us in terms of fund balance positioning as well. I'll then talk about the term municipal rate of inflation. The index factor is a synonymous term you talked about in your presentation, Mr. Dacowicz. I'm sorry? The municipal cost index. Municipal cost index, thank you. Municipal cost index, somewhat synonymous with the municipal rate of inflation. And ladies and gentlemen, this is all cities. This is all cities in Florida, virtually all cities across America. The municipal rate of inflation is 99.9%. greater than any revenues offsets that may occur. In some instances in which revenues are extremely robust during times of economic prosperity, for example, it's appropriate to make adjustments downward in terms of the millage rate. But it's best for a municipality to position itself in terms of millage rate and maintain the millage rate to the extent that we possibly can. and whatever increases in property valuation and resulting revenues that can be experienced go towards fund balance increases, go towards the cost of the municipal rate of inflation piece we talked about a little while ago. And I thought a lot about this, ladies and gentlemen, not only because of the experiences in Derry Beach over the last few years, but I think about my four previous city manager positions, and that was exactly the experience. Maintain the millage rate. We were always able to proudly talk a little bit about there's no recommendation to increase the millage rate because we maintained the same position and enjoyed the revenue increases to help offset inflationary pressures and other commitments that municipalities have to make in order to get to the absolute best place possible. So although a millage rate adjustment is being proposed in this context, again, $28.52 for the average valuation on that basis, some more, some less, it does help us get us to where we need to be aggregately. I'd like to talk about fund balance considerations, and just to be clear, I recently had an opportunity to speak with City Auditor Yelena Georgiev about some work that she was contemplating when she first came on board, a commitment to take a look at municipalities in terms of coastal positions and what the millage rates are. So we provided similar information for South Florida municipalities because, of course, the fund balance policies vary from municipality to municipality. So in Delray Beach, we made it 21 to 25%, and that was going back a couple years to the point that Commissioner Casale outlined in that regard. Boynton Beach, they have some additional flexibilities, 10% unassigned, 10% emergency operations reserve, 5% budget stabilization reserve, which is actually a nice mix, good for them in that regard. However, some other issues and experiences are challenging in that regard. So therefore, I don't think we need to highlight that further. Deerfield Beach, Florida, two cities to the south, at least 10%. Jupiter, at least 25%, which is extremely healthy. Palm Beach Gardens, at least 17%. And in Riviera Beach, there is no formal policy commitment in that regard. In West Palm Beach, interestingly enough, they follow a similar structure as Boynton Beach at 3% unassigned and 10% in terms of emergency reserves. So one can argue, aggregately, that's about a 13% fund balance policy. However, visiting with Yelena Drogiv, she having the opportunity to interact with Chief Financial Officer Henry Dakowitz, her benchmarking information was just provided less than a week ago. And so we thought we included as part of this presentation to be open and transparent in that regard. And that's where it's always been, ladies and gentlemen. Annapolis, Maryland. Annapolis, Maryland is the capital city of Maryland on the Czechoslovak Bay, I believe, home of the United States Naval Academy. It is a target of 15%, but a minimum of 10%. You have Atlantic City, New Jersey. We're all familiar with that. I'm not a gambler. However, I do know how to count cards. Therefore, it's not the place for me to be. Not identified. It's not identified. Therefore, it's similar to Riviera Beach in that there's not a formal position in that regard. Myrtle Beach, South Carolina, 15% to 20%. There's a bit of a range, similar to what our previous position had been. Newport or Rhode Island. Very wealthy community, fairly well-off community, and they have large tax rates, etc., which enables them to be positioned at 30%. Sarasota, similar to the recommendations of the Government Finance Officers Association, between 17% as much as 25%, two to three months in that regard. Wilmington, North Carolina, which is a growth-oriented community, 20% to 25% minimum. So those benchmarks get us to where we need to be in this regard. In terms of specific recommendations for the upcoming fiscal year as it relates to projected unassigned fund balance, I'm actually proud of a presentation to be experienced next week, ladies and gentlemen. One of the agenda items, the core presentation item will be CPS, CPAs. your annual comprehensive financial report, they will be offering to the city commission confirmations of what Mr. Dakowitz talked about in terms of managing resources throughout the course of the fiscal year and doing well to position ourselves in terms of revenues and expenditures offsets and being in a good position overall. That likewise will feature what the anticipated or current estimated fund balance is and it actually exceeds or within the range if not touching it a little bit higher than that. So they'll talk a little bit about that before you a week from today in terms of their presentation as we will probably be able to showcase good financial health for the city of Derry Beach aggregately. So in the case of the analysis for unassigned fund balance general fund position consideration, We talked a little bit about the Government Finance Officers Association's recommended fund balance target. Two months, or in this case, 16.7% rounded off. So what does that look like if we take under consideration 15%, 16%, 17%, 18%, 19%, and 20%? So at 15%, we're looking at $32.2 million in change in terms of a fund balance position. At 16%, that would be at $34.4 million in change. At 17%, $36.5 million in change. The recommendation, given all considerations at this juncture, $38,722,118 for the city of Delray Beach. at a 19% of general fund expenditures, $40.8 million and change, and a 20% at $43 million and change. So again, the recommended fund balance target of 18% is fairly reasonable given the benchmarks, given the aggregate position in terms of where we are. But again, I reiterate, it's really important that the city of Delray Beach, like the vast majority of cities out there, stick to a military, get to a healthy military position, and maintain it. So to fluctuate in that regard offers a domino effect, and much of which is not in everybody's best interest, believe it or not. Mr. Daquist, I'd like for you to offer an overview of property tax and homestead exemptions as of June 2026, if you would please.

This information is coming from Palm Beach County property appraisers office, which we got about six weeks ago. First column market value. We compared residential with homestead and all other non homestead values. So we're talking $12.9 billion market value. 16.2 for all non-homestead for a total valuation of 29.124. And there is 44% homestead compared to all properties. We then go to assessed value, which in general is 80% of market value. So the residential with homestead is $7.7 million, all non-homestead $14.97, total $22.68. We then have exemptions. And we tend to have two types of exemptions. The first are homesteads, widows, veterans, and the other are nonprofits like hospitals and colleges from whom we would often get pilots, payments in lieu of taxes. When you take away the exemptions, we then get to the taxable value, which is what we use times the millage rate to get our real estate revenue. So we're looking at $6.8 million residential with homestead. 13.77 on non-homestead, 20.598 billion for all of our properties. And what we're looking at is homestead is about one third of our taxable value for the whole city. Taxable value to market value, well with homestead residential, it's only 52.9%, but obviously with non-homestead, it's 84.9 so we're capturing a lot more of the market value then we have a nice uh circle graph which shows how uh graphically how those percentages work and then we take the taxable value up above 20.598 billion and then we put it into different property types so residential with homestead stays at 6.8 billion Residential non-homestead is 9.5, commercial 3.4, industrial 700 million, and other 211 for the whole 20.598. And when you look at it on the total, you're looking at residential with homestead. If you look at all residential, residential with homestead is 42%, and non-homestead is 58%. The next slide, and we've gotten these numbers again from the property appraiser's office. So what we did is, you'll see that the columns are different. They're next year, not this coming year's budget, but the year subsequent. Fiscal year 27-28 and 28-29, and these are the two years We believe if the referendum passes in November, these are the two first years that will be impacted. So just as a ballpark, we said let's assume expenses increase by 5% each year. It should only happen. Total general fund expenditures, $230.8 million year after next and $242.4 the year after next. then part of the legislation says you may not cut budgets in police and fire and rescue in order to make up the revenue you lose because of the increase in homestead. So therefore, we have to take that off the table. 61.9, 60.2, fire and rescue, and then subsequently 65 and 63. So we're looking at 122 million out of a total budget of 230 is off the table. We're not allowed to touch that to try to gain efficiencies to fill the gap. which means 230 minus 122 is 108.7 million of expenditures from which we can try to gain efficiencies to bridge that gap and get a balanced budget. It is anticipated by the assessor's office that we would have 7.35 million less ad valorem revenue in real estate taxes because of the change in legislation And that gap will be 6.76% of the 108.7 million part of the budget which we are allowed to use to cut or gain efficiencies. Similarly, for the subsequent year, the total for police and fire is 128. 242 minus 128 gives you 114 sort of approachable for efficiencies. We need to get 12.77 that year because the legislation is increasing the amount of the homestead exemption year by year. And that would be 11.1% of what we're allowed to touch. So this is coming attractions if the legislation passes. So We all understand the challenges will be multiplying for us. I'll turn it back over to the city manager.

Thank you, Mr. Dakowitz. So revenue considerations and response to what may potentially become inevitable to mitigate potential revenue loss related to house joint bill, house joint resolution. 1F, the city of Derry Beach would likewise need to consider implementation of a fire and AMS fees. A number of the municipalities that we talked about in the benchmarking exercise have actually adopted that. Once upon a time before any of our times, many of our times, this was considered in the city of Derry Beach, Florida, because of course that's the function of the marketplace and there was a sense of advocacy to get to that place. And it's actually good in a way that the city of Delray Beach did not adopt it previously because many other municipalities send a similar predicament given what's anticipated potentially in November are more dependent on that particular resource. It would be a consideration we would have to make available given the analysis that Mr. Dakowicz talked about in terms of impacts for 2027, 2028, and 2028, and 2029. We would also have to be in position to consider review and evaluation of other fee-based revenue streams. Studies and analysis, fiscal impact analysis exercises will be forthcoming to help potentially showcase what options might be in that regard. And likewise, we will be in position to entertain considerations moving forward.

Excuse me, I went back too far.

Yes, Ms. Malika. Yeah, I'm sorry. Excuse me, I went back too far.

I just want to understand any kind of those fees. So the $20 million home would get the same fee as the $90,000 home, correct?

Yes, ma'am. That would be what's known in public finance realm as regressive, financially regressive. There's revenue positive, revenue neutral. Regressive.

Understood.

Yeah, not progressive, not based on affordability, wealth, or any of that. And so that's one of the downsides of this particular consideration. Municipalities are in dialogue around the state in terms of what they'll be able to do. And the only legal avenue above and beyond increase in the military to the extent that they possibly can would be to consider fee based revenue streams. And it is straight regressive and that's a bit of a downside. Nevertheless, municipalities don't have any other choice if there's an interest in maintaining level of service and covering operational expenses.

And what is the time frame that it takes to do those studies and implement something like that generally?

Yes, ma'am. So I will be initiating administratively consultancy services to get us to that place. And I'll be providing you all with an update in terms of what that looks like in the next couple of weeks that will likewise become part of our education endeavors over the next couple of months. And I do have a presentation in terms of what that looks like in a little while. separate and apart from the conclusion of this presentation, I'd like to talk to you all about that because that's something we don't have a choice. We have to get to that place, we have to proceed in that regard, and I anticipate offering a brief update in terms of trajectory along those lines via the July 24th information letter report, so a week from this Friday. I anticipate a summary at that time.

so we have till august 4th to determine what our cap is going to be you made your recommendation and you're going to get us back all that information that we already worked on on those levels of service and what we're providing our residents so we understand what exactly is going into this budget and what exactly we are not providing is coming out yes ma'am so what i'd like to do commissioner in response to that commitment and again the offer that i was

position to make available in that regard is by the close of this business week. So you have that in advance to the weekend. So by Thursday, Friday, we'll provide the updated information. So that's the next stick of the challenge for both the Office of the City Manager, the Department of Finance. It's just a matter of updating the figures in the formats we previously provided to you all. So in the next couple of days, we'll be able to get that to you. However, one of the agenda items for July 21st is the consideration of a tentative military adoption. And one of the reasons for this particular discussion today, so that we can thoroughly provide background and information for city commission engagement and feedback, such that we can get to that place.

Are you asking for our input then?

Yes, ma'am, but before I do that, I'd like to just go over the calendar briefly, if I may. Sure. Just to conclude this portion of the presentation.

Yeah, I just wanted to, I have just one question. First of all, I just want to thank you and Mr. Dakos for the work that you've done. One thing that I can appreciate about this presentation is that we're not just looking for next year. Yes, ma'am. Next year's budget, we're looking ahead. And in doing so, We're asking residents, based on this proposal, to pay approximately $342 more per year. What improvements can the residents expect as a result of paying more?

So all the level of service options we discussed in previous meetings, number one. Number two, the continuation of the major projects that are being implemented, quite frankly. And maintaining level of services without compromising any of the work for which we are involved.

So we're just maintaining what we have, keeping what we have without losing anything. However, we're not, there's no improvement on current services.

There's always improvement in career services, but I understand what you're getting at. Aggregately speaking.

What we get extra.

Right. So I talk a little bit about in the presentation.

I mean, you can get this for me later. I know that we discussed already this whole presentation, and I understand the means that we're going by to get other revenue instead of just the property taxes. But I just wanted to... If there is anything that as a result of the additional funds that the residents can expect that is over and above what they're getting now. The paving program.

The paving program is a hallmark example. The resumption of the paving program, for example.

Thank you.

That's notable. That's a half-million-dollar investment. I'll talk a little bit about the Vision 2035 key focus areas, for example.

I just think it's important that those things be pointed out. All these numbers are great, and it's a lot, but if people understand what they're getting in addition to what they're already owed, it helps.

So thank you. And quite frankly, it is to maintain level of service, take care of operations, cover ourselves without finding ourselves in a precarious financial position.

And preventing layoffs.

Yes, ma'am. Preventing layoffs, getting to that place because what I've heard from the vast majority of you all is an interest to not get to that place, maintain level of service, cover expenses, and do what we can to strike balances with respect to savings and have an aggregate trajectory so that none of this comes to pass. And of course, it's important to recognize some of the experience in other municipalities because quite frankly, they cannot say the same. So that's very important to highlight and underscore. So if I may, before entertaining any specific questions and guidance, because I would like to prepare for July 21st, I would also like to prepare for September, but again, the next commitment involves providing that additional background information, what's been updated to the point that Commissioner Casale and I discussed earlier here at the dais, so that we'll have that for you all within the next couple of days. Yes, ma'am. So just to wrap this up, so of course, budget workshop to review proposed tentative millage. So right now, we are planning to use next week's afternoon time wisely because we're preparing for fire rescue IFF negotiations, and so that will be the case in that regard. So what was accomplished in terms of the proposed budget and tentative millage rate we pretty much got accomplished today. So we are also planning for a town hall meeting. This is an annual exercise as part of the budget consideration process, providing an opportunity for residents and stakeholders to listen and learn and get more information so as to address some of the specific questions and thoughts that were raised. late July, provide to the Florida Department of Revenue estimates for state shared revenue sources. So we actually estimate it as part of the aggregate proposed budget process, what that might look like. However, it will be finalized that particular juncture. August 4th, the city of Derry Beach will submit a tentative millage rate and non-Avalorium information to the Florida Department of Revenue and the Palm Beach County property appraiser as all municipalities are required to do so. So the August 18th meeting, we'll talk a little bit about the Capital Improvement Program, annual presentation by the Director of Public Works. However, both Mr. Dacus and I will be in position to discuss with you what are the funding considerations, getting to the question that you talked about, Vice Mayor Burns, in terms of what additional outcomes are to be achieved. We've given a couple examples here at the dais, but there'll be a little bit more on the Capital Improvement Program side, because we'll be planning ahead in that regard. First public hearing, September 8th. September 22nd, or potentially September 21st, depending on how we are connecting with the county, the school district, et cetera. And of course, the new fiscal year will begin October 1, which is Thursday of this year. So before entertaining specific direction, I have one other brief PowerPoint presentation I'd like to share with the commission, if I might, in terms of what our efforts are as a municipality. regarding education and communication in response to the property tax referendum consideration in November, if I may be permitted. Ladies and gentlemen.

I'm going to have one remark, though, on the budget. Go ahead and finish that because we're running out of time. I can always do the other later.

Okay, thank you. I'll be brief. So this is simply an overview of what's being executed because a number of cities have taken the initiative, including now Derry Beach, to offer amendment communications for the community. So one, a dedicated property tax information webpage featuring clear factual information about how property taxes are assessed, distributed, and used to fund city services. Two, an easy to understand educational brochure explaining where property tax dollars go, how they are distributed among taxing authorities, and a city's role in delivering essential services. Three, a strategic social media education campaign highlighting the city's services funded through property taxes and showcasing measurable results that enhance public safety, infrastructure, parks, recreation, and quality of life. Four, a quote, myth versus fact, unquote, educational series addressing common misconceptions about property taxes, local government funding, and the responsibilities for various taxing authorities. And five, a short-term educational video series demonstrating how city departments use taxpayer dollars to deliver essential services, improve neighborhoods, protect public safety, maintain infrastructure, and enhance the overall quality of life in Derry Beach, Florida. So, Vice Mayor Angela Burns, this actually will continue to address the question you raised in terms of what residents can expect, what's to be appreciated, what's to be enjoyed as we move forward in that regard because it's a lot in which to consider so that we can get to the absolute best place possible. So the Department of Communications, working collaboratively with other involved departments, will be involved in this initiative beginning late July, mid-July, late July, where we are at this time, until the conclusion of the consideration in early November. So much work to come, and I would appreciate everyone having an opportunity to be supportive and looking forward to us doing as much as we possibly can for education, communication, and background as to why this is imperative.

Is there more or we just tell them where their taxes are going? Are you going to let them know how they could be impacted? How our city could be impacted by the referendum?

And we actually started that discussion tonight by way of talking about what the revenue impacts are. So going back to a previous slide in the presentation for fiscal year 2027, 2028, nearly $8 million in lost revenue the following year would be almost double that.

yep so we highlighted that here as part of today's presentation so that will be a continuation as we move forward in that regard to your point commissioner malika thank you thank you i want to point out one thing that the county is doing on this which i thought was a very good idea they've had all these signs made up and they're putting them in parks they're putting them in here and they say This park is paid for by property taxes. So they're letting everybody know where their property taxes are going. And I think that's, it's probably not a bad idea to, because people really don't know. I mean, we all know police and fire, but we also have property taxes are very valuable for a lot of our services. And so I just, I think the county's got it spot on in trying to advertise to let the people know exactly You know, you like this park? It's paid for by property tax. You like this beach? It's paid for by property tax. I mean, I just think we ought to consider doing some kind of that advertising and letting just people. We're not promoting one way or another. Correct, which we have to be careful about. Where their property taxes are going.

Education, and that is a function of what I just talked about. So those are great ideas, and we will work with everybody involved to incorporate that as part of the package.

I love the idea. We could wear signs.

We could wear signs, too. Are we good? I just wanted to touch on one point. And Commissioner Casale, we've gone on this issue a lot as it relates to reserve requirements. And she's absolutely correct that they give you this number, this two months, as a starting point, because you're not really supposed to measure how other cities are doing it. You've got to figure out how it works for you. And one of the things people seem to forget when they talk about, oh, we need all this money on hand, is you're not a pizza store. You know, people are continuing to pay their taxes, whether they get a hurricane, whether they don't. I mean, the tax revenues, the city's always going to get its tax revenues. And in the prior hurricanes, I had a conversation with one of our former city managers regarding did they use, you know, did they have to get into reserves? He says, no, we redeployed our assets. You know, the parks and rec people have trucks that get involved in cleanup. Public works gets involved in cleanup. So they're all, some of the other projects that are working will get delayed, but everyone is redeployed. All the assets are redeployed. The salaries are still being paid, but they're still doing works on all this other kind of stuff. And what I found interesting about when I met with the League of Cities on this is that they hate firm things. They hate this percent, that percent, because they really think every municipality is different. And they said that you look at three prongs. You look at, well, where are you in terms of your millage in terms of what you can charge people? And we're at 6.8. We can go to 10. Some municipalities in the past in Florida have gone to 10. So they say, you know, your ability to raise cash, if you really needed to raise cash, you have that ability. We haven't had to do that, but we have that ability. And they look at historical things, and they look at the fact that your taxes come in on time. And so they come up with different scenarios. I mean, I've always thought too much. I've always thought the guidelines have always worked for us because we have all these other pluses. One of the things that was interesting you said is, do you live in a market area which has generally increasing property values or decreasing property values? So we're leaving an area which is increasing property value. So he says, you're always going to have the ability to raise money if you need it. And so those are the kinds of things you take into consideration. I'm not picking a number tonight, but I'm just saying we have a lot of so many other positive economic things in our favor which would allow us to be more flexible in that area than maybe some other communities which don't. That's all I wanted to say. Anybody else have anything else? Yes.

I didn't get my chance. Sorry. I apologize. I have laryngitis. But I think what I'm going to say is going to make some sense. Henry, we talked about interest income. And I don't want to lose sight of that. Those balances throw off a fair amount of income for us every year. They're a really nice thing to our budget. So I get worried when we're trimming that one down. The second thing that you mentioned was bonds. And we've been very fortunate that we've had a favorable rating and we're able to attract bond money. And for those of you in the audience, you may say, well, what have we used bond money for? Well, our new water treatment plant is being paid through bonds. And our new golf course renovations are being paid through bonds. And those are big projects that our city wanted to do. And we were able to fund those through bonds. But you can't do that when you get below a certain level. So I'd urge us to be super-duper caution on that. And Mayor, the one area that I would disagree with you on with what you just said is with the work that I do with the FBI, I am in Washington a lot. And I don't think things are like they used to be right now. FEMA has been decimated. So you're right, in the past, we may not have had to dig into our own pockets because the feds came in with FEMA if there was a hurricane and rescued us. Guys, that may not be the future scenario. We may be very much on our own in that regard. I'm sorry to say that, but that's my intel from spending time in Washington. FEMA is a big unknown right now, and I would urge us to not be shortsighted and burn up that reserve that we had because, God forbid, we get a Cat 5. And FEMA can't come. We're going to be on our own. So I would definitely caution us to be thinking about the world a little bit differently. In the past, we could count on FEMA. We've seen that over and over again. I'm not so sure of that based on my intel right now. So I'd ask us to be cautious about that. So I don't disagree with what you said historically. I'm just concerned about the current situation that we're in right now.

I'd make a couple of comments if I could. In addition to those capital projects you mentioned, we have general obligation bonds, which require a referendum of our citizens, and we passed a $120 million referendum two years ago. It was $100 million for – I'm sorry?

Three years ago. Three years ago. Three years, four months.

That's why the costs are running away. So we passed that referendum, 100 million for public safety, 20 million for parks. We drew down 10 million for parks already. It goes back to Commissioner Burns when you say, what are we getting for our money? We've been able to borrow now, spread the cost over 30 years, and the citizens have that benefit when we finish the projects now. So that's another thing, not in the operating budget, but in the capital budget. The third thing I would say is hoping to get to the market, especially for that GO bond, quickly. Right now the markets are kind of okay. We just got our audited financials, which look good. Yes, the budget had changes that are tough, but I think I can make the case for the rating agencies, we're good, we're conservative, we're doing this for the betterment of the city, which helps attract people and increase the values. So it all integrates together. And that's part of what we look at when we look at the budget. The last piece would be when Missy presents the CIP on what we're doing with the capital projects.

Thank you. Great.

You're welcome.

Yes, we are adjourned.

Actually, may I just summarize before we adjourn, please?

We are nearly adjourned. Nearly. That was a test. That was a test run. I'm sorry. Throwing in a savings clause or something?

OK, good.

We are adjourned. See everybody back here at 5.