City Council - Regular Meeting

Good morning, everyone. Welcome to our favorite time of the year. I'm going to call the meeting to order at 9.03. And Madam Clerk, will you please call the roll?

Mayor Williams. I'm here. Mayor Pro Tem Caballero.

Here.

Council Member Baker. Here. Council Member Burris. Council Member Cook. Here. Council Member Kopach. Here. Council Member Rist.

Here.

Thank you.

Thank you so much. Director Reardon, it's on you.

Good morning. Christina Reardon, Budget and Management Services Director. I want to welcome Mayor, Mayor Pro Tem, members of council, welcome you to our first day of budget work sessions. This is the first of two days, and we do have a third day possible, if that's something that you all are interested in. One thing I will just say about our agenda, as we put it up on the screen and it's in your packet, you will not see every single department here during the two days. We have brought forward the kind of topics that we heard from you that you wanted to talk about that are very impactful in this year's budget. We do hope that you'll have discussion and that these will be working sessions, so we invite you to ask questions. Today, I will be talking about our revenues and the outlook for that in this year's budget. We do have a guest from the Durham County Tax Office to talk about the appeals process this year. And then we will be talking with our HR team on pay and benefits. And finally, our CIP project. So I will turn it over to our city manager to get us started this morning.

Good morning. Thank you, Director Worden, and welcome to the City Council. You guys throughout the budget process have heard a number of introductions and presentations and framing discussions, so I'm going to spare you one this morning. I don't have significant comments you've heard my budget presented. You know the factors and environment in which this year's budget was proposed. I am excited, very legitimately, I am excited that we have this time set aside for this budget to go from being a proposal that you received from me to a document that reflects your values, your expectations for this budget. So We are excited to use these two days exclusively for your benefit, for you to get information that we think you've asked for, consider that information, and then tell us what modifications you'd like to see in this budget before it's adopted. We have tried to craft the agenda that you see today and tomorrow based on your feedback and based on our presumptions about what you wanted to talk about. But as Director Royden said in her introduction, That is entirely up to you. So we have the time at the end of each day to get feedback from you. That time can be used for additional discussions. The earlier you tell us you want something that you don't see on the agenda, the sooner we can be prepared for those conversations. But please understand that this agenda is flexible based on what you want to talk about. So obviously, we can't put the full budget in a digestible format in two days. This is an intentional effort to focus on those things that we thought you might need to or want to discuss and digest. So please take that opportunity as a sincere offer to you to tell us what you want to spend this time on. And the more direction and information you can give us, the more we can make sure this budget reflects your needs. With that, I don't have any additional comments. I appreciate your time this morning. One informational note, I did send Council a memorandum with some information about 30 minutes ago regarding some questions I have received about the proposed budget. So please do check your email sometime today. That could be grounds for a conversation you may want to have before We finalized the budget, so that is a discussion of outside funding and how staff reached some of the recommendations that we made on that. So with that one note, I will turn it back over to Director Worden to start us off in our presentations this morning. Thank you.

Okay, good morning. So as I said before, my name is Christina Reard, Director of Budget and Management Services, and I want to thank the Mayor, the Mayor Pro Tem, and the members of Council for the opportunity to present this revenues and kind of a general overview of our FY27 budget. So today I'm going to walk you through the fiscal context shaping this budget, give you a detailed look at our revenue streams, how we balanced the general fund budget, show you some of our strategic investments, our fund balance position, and then what we're watching for heading into FY27. Sorry. So here's the agenda for today. We're going to cover six areas, the fiscal context, a revenue overview, as I said, balancing the budget, some of our strategic investments, fund balance, and a look forward. And I do welcome your questions as I move through this presentation. So before we look at the numbers, I wanted to make sure we had a shared understanding of the environment in which this budget was built. Because as the manager stated in his proposed budget, this really was an unusual situation. Four factors converged this year in ways that we haven't seen before. First was a property tax decline. Following the countywide revaluation, property owners filed more than 10,000 successful appeals, and this reduced our assessed tax base and required us to issue over $9 million in refunds across funds. And so of course we're going to have our tax office come and talk to you in more detail about some of that. Second, slowing sales tax. Sales tax is our second largest revenue source, and it has grown slightly slower than in some of the post-pandemic years, and that's adding further pressure to the general fund. Third, rising personnel and operating costs. We have our HR department that will talk a little bit about some of the benefit costs that have been rising this year. Health insurance was up 8 percent. Dental, 3. Our state retirement contribution increased. And since 81 percent of our general fund is personnel, even modest benefit increases can have a significant budget impact. And then the fourth is inflationary pressures. Operating costs across departments continue to rise. And that is part of the reason that we asked each department to identify three to 5% reductions in this year's budget. So these factors altogether created a challenging budget environment and one that the city has really not faced in my time here or in recent memory. And so this will form the backdrop of what I talk about today. So before I get started on talking about FY27, I wanted to talk a little bit about FY26. And I know you were supposed to get a third quarter, or you have the third quarter financial report in your packets for the next last work session, the next council meeting. But I did want to kind of just give you a little bit of an overview. So on the general fund, expenditures are tracking well, and departments are expected to end the year $4.2 million under budget, which is a good sign. On the revenue side, we recorded a $5.3 million downward adjustment for the property tax assessment appeals. However, we also had a one-time $5.5 million sales and utility tax timing adjustment, which offsets that property tax appeal. And so for our revenue projections, we are showing a surplus of $1.4 million for FY26. For our enterprise funds, we have talked about the water and sewer. They came before you with a budget amendment for $3.5 million due to some personnel and operating costs. And just, of course, as we talk about property tax, we spend a lot of time talking about the general fund. But I do want to remind you that other funds, such as transit and solid waste, also absorbed about $1.4 million for property tax appeals. And then, of course, you can find the full report on our website and in your packets. So I want to talk about property tax because that is a big factor in this year's budget, and it's our most important revenue source. So the top message that I want to provide you is the tax rate is staying the same. So we're maintaining our 43.71 cents of assessed value. So there's no increase in property tax. But what I wanted to do in this chart is show you kind of where we project to end the year, where we thought when I came to you in February we were going to be with our property tax, and what our current projection is for FY27. So when you look at what happened to our assessed base, you can see at the end of FY26, our projected base was $67 billion. And so when I originally came to you in February, I estimated that $72 billion would be our assessed tax base for FY27. But because of successful appeals, which you've talked about, our current projection is $69 billion. That's $3 billion lower than our original estimate. The $3 billion translates into roughly $13 million across all the funds that we had originally projected. And the value of the penny is now at $6.89 million. And so that is a pretty meaningful gap we have to absorb. The general fund property tax projection for FY27 is $174 million, which was down from the original $179 million that I had brought to you in February. So the point that I want to make is that we have the same property tax rate, a smaller base, and less revenue than we originally planned. And that was the core challenge that we had for this year's budget process. So this chart is kind of telling you the historic story of our tax base. And Durham has seen really consistent growth in assessed value over many years. And this is a function of our growing and thriving community. The dip you see for FY27 is the appeal correction. And it's important to understand that this is a one-time correction and not a reversal. our trajectory as the city manager has stated before these corrections you know as this correction works the system we expect revenue growth to resume in coming years and that's important for when I talk about the multi-year later on in the presentation So this slide is breaking down the proposed tax rate of 43.71 cents, and it's allocating it across all the funds. As you can see, which shouldn't be a surprise, the largest share is for the general fund at 25.15 cents, and the general fund supports most of our core city services. The debt service fund receives 9.38 cents, and there is a portion of that that covers our bond obligations. And then our environmental services, transit, and dedicated housing receive smaller allocations to support those specific programs. One number worth emphasizing is the value of the penny. So every time we raise taxes a penny, we get $6.89 million, and that's just important context I wanted to give you. So council often asks how we're doing compared to other cities. And so we took a look at some of our peer cities and about what their proposed tax rates will be for next year. So Durham's tax rate of 43.71 cents is in the middle of this peer group. And our actual tax bill for a medium-priced home is $1,853, and it's competitive with some of our peers. Chapel Hill and Cary are higher than Durham. But the story here that I really wanted to say is that, you know, we are one of the few cities that is not raising taxes this coming year. So several of our peers will have property tax increases in the coming FY27 proposed budgets.

Can I make one other comment before you leave this slide? And I don't have the information in front of me, but there's an important asterisk at the bottom about the fact that that also does not take into account fee structures in those communities. We know that there's a variety of different approaches in local governments. Durham, for instance, does not have a solid waste fee. You pay for your solid waste services in taxes. Other communities do charge a separate fee for that. So this comparative information is useful, but it is not always apples to apples. And if you ever wanted more of a deep dive into sort of total cost for service for a typical resident, I would encourage you to include a look at basic fees and what Durham includes in our property tax.

Thank you. That was a point I was going to make, but I'm glad you highlighted it for us. It's true. This is just tax bill, and that is all. It's just looking at tax rate and tax bill, not all the fees that someone might have to pay. That's okay.

And I know this is getting ahead, too, but I'm just curious if you just know at a high level what these peer cities have done in recent years and how that compares, one, in terms of reval, and two, in terms of changes to the tax rate that may compare with ours.

Yeah, I do not have that. You know, it's something that we could probably get for you. So, yeah. Okay.

Is that a typo with Carrie's proposed tax increase?

No, I do.

Wow.

Nope. It is not? Sorry.

Okay.

All right. All right. So property tax rate allocation. So the bar chart here just kind of reinforces what I've covered previously, which is that the general fund receives the majority of our tax rate allocation. I think the message I also want to put here is that property tax supports a wide variety of city functions, and it's not just one fund. So when a tax base declines, it also has an impact or a ripple effect on some of the other funds that we have throughout the city. So this slide gives you a high-level overview of the general fund revenue. Property tax accounts for 54%, and sales tax is 33%. All other revenues, fees, permits, charges for services, intergovernmental revenue, make up only about 13%. The concentration in property tax and sales tax is important. It means that our revenue base is less diversified. And when either of these sources changes, as they have this year, the impact is amplified. So this chart is providing you a year-over-year budget comparison. And so it allows councils to see FY20 proposed revenue budget compared to what it was for the adopted budget in FY26 and the two years previous. And as you can see, the overall general fund is smaller in revenue than it was last year. The property tax assessment decline, as we talked about, and the modest growth in sales tax and some of our other revenue sources is why the budget, you know, why we had to make some really difficult decisions in this year's budget. So because our revenues, usually I show you a chart that has growth in it, but this year I'm showing you a negative revenue picture for the general fund compared to last year's adopted budget, which is very unusual. These are the three largest revenue sources in the general fund. Property tax was adopted at $175.2 million. The end-of-the-year projection is $169.9 million due to appeals. And for FY27, we're budgeting $175.2 million, which is essentially flat over the FY26 adopted budget. For our sales tax, we're proposing $107.3 million. That's a 3.1 million or 3% increase over FY26 adopted. And it also reflects a renewed ILA with Durham County, which I'll talk a little bit about when we talk about sales tax. Our occupancy tax is dropping from $2.2 million to $1.1 million. This is something that we expected as it's reflecting the current legislation that we have that will eliminate tax revenue in the general fund and transfer it to Durham Next. The Powell bill is a fund which funds street maintenance through a state gas tax. It's essentially flat for FY27. And I just want to point out that this can be impacted by when the state passes a state budget as well, too. That can have an impact on this revenue source. And it's not one that we necessarily control. It's based on a formula. This chart shows the history of property tax collections relative to budget. I think what I want to illustrate is that over time, Durham has generally collected either close to or over budget on property tax. So the FY27 situation is really notable, and as you can see, the gap between the original estimate and our current projection. It's driven by the appeals rather than collection performance, so I want to make sure that I stress that our collection rate remains really strong, and we expect the situation to correct in future years. So moving on to sales tax. Our sales tax, as I've talked about before, is our second-largest revenue source in the general fund. For FY26, the end-of-year projection is $104.6 million, and that's about a 0.4 percent increase above our adopted budget of $104.2 million, and it's a 3.1 percent increase above our FY25 actuals. So for FY26, we're performing relatively well with sales tax. For FY27, we're proposing $107.3 million. That's a 3% or $3 million increase over the FY26 adopted budget. And this is assuming continued moderate growth. It also incorporates a half percent increase in our distribution split with the renewal of the ILA with Durham County. Sorry. So this chart shows the relationship between our sales tax budget and actuals, and the trend has been positive. I've shown you this chart before. And the actuals have been tracking at or above budget in recent years. What we're seeing is more of a slowing of growth in FY26. And I just want to also point out that Our FY27 budget assumes continued modernist growth, not a return to kind of post-pandemic growth, which was very unusual for us, but I think it's a good story. And it's also one that I like to point out with sales tax. This is a very volatile form of revenue. So this is one that we will be looking at very closely throughout the year and monitoring as things in the economy can change. So this slide provides a more current view of the gross sales tax through the first eight months, which is what we've collected so far. I really just want to kind of show you a trend here. The data is really kind of showing us our confidence in our FY27 projection. The collections have been steady, and their support are, you know, conservative but reasonable assumption of 3% growth. So moving on to our other general fund revenue sources. So beyond property and sales tax, the city collects about $28 million in other general revenue. And there's a few things to note about the FY27 outlook. So utility sales tax and occupancy tax are declining, which is consistent with what we've seen in the other summary table that I showed you the Powell bill is essentially flat licenses permits and charges for services are increasing and that's really reflective of the growth in planning and development activity as Durham continues to grow we're adding positions in those areas and that's funded in part by the growth in these revenue sources these revenue sources I want to point out don't move the needle as much as property and sales tax but they can be kind of a litmus test for how the city is doing So balancing the general fund budget. So how did we close the gap and arrive at a balanced budget with no tax increase? I think there are four primary levers that we used and that I wanted to talk about here. So the first is department reductions. We asked every department to find 3% to 5% reductions, and they delivered. We had about $3.6 million in cuts focused on items with no direct service impacts for residents. And I want to say that this was really due to the creativity and discipline of all department directors throughout the city.

And I think I say something. Just want to make one quick clarification, and of course I apologize if this is one you were about to make. So I've heard in conversations with different council members, I've heard questions about this, so I just want to be crystal clear. We asked for departments to propose cuts that totaled 3% to 5% in each department. We did not require that each department... uh... absorb the same amount of cuts so these were proposals generated for the executive team in the budget staff to analyze uh... we then accepted uh... many of those cuts but i i'd want to be clear that this was not a mandatory cut exercise not every department absorbed cuts in the three to five percent range uh... so eyes want to be clear that this was not something that was Across the board, the 3% to 5% targets were used to essentially force the departments to identify options, but whether or not those options were included was more of a deliberative exercise.

Thank you. And the second thing that we did, we looked at outside agency reductions and we reduced or eliminated funding for some of our community partner organizations, which generated about $927,000. I want to be clear that these were very painful cuts and some of the hardest decisions in the budget process. The next is our most significant and difficult decision, which was we eliminated pay for performance. And so this alone accounted for $6 million in its place for providing a 2% structure pay adjustment. And we did not make this decision lightly. I want to be clear that not providing step increases is extraordinary, and it's only taken because the alternative, which would have been raising taxes or cutting core services, would have been, Burden on the community Just for clarity is the six million saved I'm pretty sure it's it is That includes the two percent so if we did if we did yes if we didn't do we did pay for performance as opposed to a two percent structure adjustment if we only did pay for performance we saved six million dollars That is the difference fourth is our vacancy rate savings we're holding a six point seven percent vacancy rate across all departments so that is something that you've seen in the past previous budget we had seven percent we know that our vacancy rate is as we've talked about declining slightly so we've made an adjustment for that but still that is something that we are taking into account that there may be positions that are vacant this year and not budgeting for them

Can you say that again about the vacancies?

So the vacancies. So we always take a vacancy rate. We assume that there will be a certain percentage of authorized positions that don't get filled throughout the year or that kind of people rotate out of. And so that in the past we look at based on what our – we work with our HR department to kind of see what the trend is. And so for this year, upcoming year, it will be 6.5% of our personnel budget we'll be reserving back and not budgeting for. so that we're not over budgeting personnel.

So when you say absorb, that means that those dollars of the vacancies that we've sort of like, we're not now budgeting for that. Right, exactly, yes.

If we were to fully fund every position as if it were going to be filled all year, we would not take that 6.5% off the top. So in order to balance the budget, one of the things we know you don't want us to do is to put money away to pay salaries that the data tells us we're not going to pay. So we estimate... how much that's going to look like. And instead of just putting those in departments and it not getting spent, we allocate it elsewhere in the budget. So that's both good and bad. That means it helped us balance. The bad part is when you hear us reporting vacancies and you wonder if we can spend that money somewhere else, the answer is no, we already used it to balance the budget.

Does that mean positions are being frozen in a sense or simply that we're just, we just know the sort of, we know historically what patterns are?

Historically, yes. And so if our vacancy rate was to get significantly, you know, if we filled every position, then we would need to look at that vacancy rate again. You know, if that starts to change, that's when we need to look at it. So that's why we pay close attention to it. So the results of all of these efforts were that we came up with a balanced budget. We have a zero gap at the moment. There's no tax increase. And we tried to maintain as few cuts to core services as possible.

Is it fair to say, you go back to the last slide. Sure. So the department's proposed a 3% to 5% reduction, right? But if you look at the total reductions of 3.6 million, And a general fund roughly 326 million for next year. It's essentially an effect a 1% Reduction is that correct?

It's yeah, it probably be a little bit less because the 3.6 across all funds So there's you know, so it may not all they're not all in the general fund, but they're Another that may fall differently for us part, but across all the general fund. It's essentially a 1% and 1% Yeah All right general fund

Director, one moment.

I have one more question.

So when we're talking about – this is going to be a big question, sorry. But when we're talking about service impacts, is there – how do I want to phrase this? Are we able to get sort of an idea about what departments cut and what the types of things that they cut? I know that service – Yeah, there's things that will impact our staff that might not be service-related, and I am curious to know what... what departments are losing and what that might look like over the next year?

Sure. And so that was provided in the packet, the budget briefing document that you received as part of your – is a document that we provide council. And so in that, there is a list of all the cuts. Oh, in the briefing. Yes, the briefing document has the list. And so it gives you a sense of, you know, some of them were cuts, things that – I know that one. An example from our budget and management services, we are cutting our funding for our community conversations. That was part of the reorg, was we decided to bring that service in-house. We are now able to do it more efficiently. We are still going to be doing community conversations. We have staff who are able to do that. We are not paying an outside consultant. We felt like that was not something that was going to impact services. So that was the type of cuts we tried to take first before taking anything else. General fund expenditures. So I want to give Council a clear picture of where the money goes. So the proposed general fund is $326 million for FY27. And personnel services, that's benefits, retirement, insurance, consume about 81.5% of the budget. So that's about $265.7 million. And that's pretty consistent with what we've seen in prior years. Our operating expenditures, you know, those are our contracts, our supplies, our services, they account for about 14.4% or $46.9 million. And then transfers and capital are kind of the remainder. So what you can see from this slide is that also that the change in the general fund budget is relatively flat or down about 0.1%. So what that means is we're trying to deliver virtually the same level of services for essentially the same cost in the year because of our declining revenues. So I do want to talk about positions, and these are some of the positions that we added across all funds. So despite some constrained environment, we are adding 59 positions. And I want to be really clear about why. So the majority of the positions are fee-supported, and they're in our water management, planning, development, and inspections departments. And these positions are driven by growth and service. demand, and they are funded by fees. And so they're not impacted by tax dollars. Of the tax supported positions that we are funding next year, the majority, 16, are in FIRE to staff ladder company number eight. Community Safety is another department that is receiving several positions and they will be here tomorrow to talk a little bit about the positions they received in their department and what they'll be doing next year's budget. But the positions are largely one-time or repurposed from elsewhere in the budget. And so we also do want to point out that we did eliminate 10 positions, and so that was not an easy or that was a very difficult decision, but that is part of also how we balance the budget for next year.

One moment. Question? I was going to let her finish this. Oh, okay. Go ahead.

So I did want to, since we had been talking a lot about the strategic plan throughout this budget process, I did want to connect to Council's four strategic priorities. And this is something that we looked at as we were working through the budget. And so we'll be returning to you later in the fall with the work we've done on departments on the strategic plan. And we'll also be kind of hoping that we'll be able to adopt that at that time. But, you know, even in a constrained environment, I want to make sure that you understand that we made targeted investments in new funding in the areas that Council identified as important. So for a safe community, we have 16 new fire positions for Ladder Company 8 and continued support for the strategic framework to end homelessness, which was a $4.5 million city investment. For inclusive economic prosperity, this is another department that will be coming before you tomorrow to talk about some of the work that they're doing on their economic development plan. But we did add a new position for the Durham Youth Works program. For a vibrant and sustainable natural and built environment, we're going to be continuing fare-free transit. And we also have a 10-year CIP model that you'll be hearing about later today. And then our transportation department will be here tomorrow to talk a little bit about that transit model. And then for a high-performing organization, the Dura minimum livable wage is funded at $25.09 per hour. Our HR team is going to talk to you a little bit about that. That was over a 14 percent increase. We were able to do 2 percent structure adjustments, which is, I know, not pay for performance, but it was something that will be able to benefit our staff. And then we're also funding a class and compensation study for next year so that we can remain competitive in the market. I always want to talk to you about fund balance and where we kind of... One moment. Oh, sorry.

Now, before you get onto that, I wanted to stick with the employment piece. So I know over many years the size of our organization has grown, and I think in many ways because strategic plans have changed, things have changed, and that's fine. But I remember last year, I think what would be helpful at some point, and I think it's too late, is to see... There have been prior initiatives that aren't the priority of this council, that aren't necessarily tied to the strategic plan. And so I think what would be helpful at some point is for a council, whether it's this one or not, to see that shift over time. And when I say over time, I mean like over a decade. Because I think that there's stuff in our budget that still could get cut, but we don't have insight to that. And as we get, you know, we know what there's a there's a an amendment on people's ballots coming in November, most likely future councils may have way more hands tied. And so I think I raised this last year during our budget that it would be helpful to have a better kind of more insight into that totality. Right. We're I can name initiatives that were under three mayors ago, right? That's no longer a priority. What were those positions associated with those initiatives? Did they get repurposed? Have those folks retired? Have they quit and moved out of the organization? And so I think that would be helpful. I think, obviously, it's too late for this budget cycle. But at some point, I think that that's the level of depth that we're going to have to get into. And that's not historically how it's been done. And so I know that that's a transition. But it's becoming... And I think staff is in the same predicament. At some point, we're going to have to make some real strategic decisions on what is in there that just doesn't align with either the shifts in the organization, the shifts of the community, and the shifts of current councils. So I just want to share that so that we don't miss another round of this next year.

Thank you, Mayor Partem. And I'll just say, you know, I think I'll choose different language and we can work out the details later. You frame it in terms of sort of new initiatives that have been added. I would frame anything that's not getting discussed this year as a presumption of core service. And that presumption is based on the fact that it is something we have been doing that we have not been told not to do. And I think so what I... would frame the exercise you're describing as more of a core program review that would not just look at 10 years of what was added, but would really look at everything. And if that is an interest of the council, that's something I'm happy to discuss with our budget management services staff and look at other communities who have done that. I know there are different structures for doing that. It is an intensive... It is an intensive exercise for you and certainly for the organization. And if the council feels like that is an initiative that we need to undertake to really get to a more streamlined budget, then we'd be happy to bring you options to do that.

Thank you. I'm one of seven, so I have no idea where my colleagues are. I can see the trends. I've been on this council since 2018, and I am anxious about those trends and those pressures from inflation and cost of things, and the money isn't growing the way it was five years ago. I think we are in a much more constrained world, and so the decisions that a council could make five years ago are ultimately going to be very different decisions than the next few councils, and I want to give those councils those tools.

No, that's noted. I will support more data, of course.

Yes, and you know that I will also support more data. But yes, I think this is kind of the thing that has been striking to me, which is that we've received these cuts in non-service items through departments. And I appreciate that list. I did not realize that that document was so dense when I received it. Yeah, it's kind of like, well, I don't know what the services are in that department that were maintained. And so then I can't decide if that feels like a priority or if the percentage of like money that's going towards services within departments feels like the right distribution, right? So it does feel very intensive. And I appreciate the manager saying that because we can't see the whole budget appear. I mean, there's just no way that we can do that. And we rely on staff in order to present to us these budget items. And so I want to appreciate the work that y'all have done. And I think that this is Y'all heard me say this already, but I'm going to say it again, which is incredible, especially given the timing of these massive cuts, that we have a balanced budget in front of us that meets a lot of our really high-level goals. And also, I would support Mayor Pro Tem's request that we sort of get to see what's going on more so in these departments. And if it requires us to be here for more days during budget season at the beginning, like, so be it. This is our job to do and I do wanna make sure that we're not continuing things that have just been rolling just for the sake of them continuing and that we look really closely at all of those, balancing all of that, thanks.

That being said, I do wanna make sure that we're protecting the integrity of the operations of the city I don't want to have eight city managers. That's going to make it really tough for the city to be able to function. So, you know, just keeping in our lane of policy than operations. I think it'll be great to see, but I want to be very careful about how deep we go into determining what a director does in their department. Not saying anyone explicitly said that. I just feel like that's the next lane over. Yeah, go ahead.

Yeah, thanks, Mr. Mayor. I think you're right. We don't want eight city managers. And it's a complicated process, right? We are putting a lot of faith in the city manager and staff, right? I think we do want to have, like, we want to have... Maximum visibility, whatever it looks like, but also, again, not eight city managers. I will say that I know we gave directions to the manager at our first budget retreat, and I think the budget that came out, to me, reflected those priorities we gave the manager. I know, for example, from serving on the Recreation Advisory Committee, which did go into great detail into their budget at Parks and Rec., and how they thought through the 3% to 5% cuts. I know at least at Parks and Rec, very strategic process they went through in giving those 3% to 5% cuts to the manager who then made some tough choices in that department. So at least in that one department, incredibly strategic work that was being done that the manager then used and his staff to manage the budget. So it's complicated, and I think there's a balance there.

I'm having nightmares over the phrase sacred cows, but, you know, I get it. Thank you. Bye.

Moving on, I wanted to talk about fund balance, which, as we've talked about a lot, I often show you this slide to kind of give you a sense of where we're going to be with our fund balance. Fund balance, as you are aware, is very important. It's also very important for our bond agency ratings. And so in FY27, we project a use of fund balance of $2.2 million in one time. And so this will bring our total of fund balance at the end of FY27 down to $5 million. This is, I want to just say that this is significantly smaller than in previous years. And, you know, part, sorry, did you want to?

Is that we bring down the surplus above fund balance to $5 million?

Yeah, so let me walk you through this. So the FY26 is where we think, after the Q3, where we think we're going to be is we think we're going to have $59 million in available fund balance. We have a fund balance policy that says we must reserve $16.7 million. which would bring us down to 52 point, which means we would have to reserve $52.6 million in fund balance, which means that the surplus above 6.7, which would be available for any other one-time uses, which we often do in the budget, would be $7.2 million. That's 2.3% above our target 6.7. So that means that we are taking that 7.2% We plan to use 2.2. Now, if we do better, if departments save, our revenues come in better than we think, we hope that we won't have to use it. But if we had to use it at the end of FY27, we would have $5 million in fund balance above our target of 16.7.

So you're saying right now, I got lost in the mix a little bit. What is it right now, and you're projecting, is it 2.2 million now, and it'll be five next year?

No, we're projecting to use 2.2 in the FY27 budget. So those are for things like one-time costs of equipment and things like that that are not reoccurring.

26, 27 fiscal year.

In our proposed budget in FY27. We expect at the end of this fiscal year, we will have $7.2 million available for use.

Okay.

Thank you, and I know this is what you said earlier, but anyone, any department other than maybe some in the, I know like water has its own fund balance because it's fee supported, but I guess anything in the general fund.

This is general fund.

Anything that is funded in the general fund that comes in under budget goes back to fund balance. That's the policy for all departments.

Yes, so when I talk about the Q3 and I say we're coming in under budget, yes, if we have essentially savings, if we come in less than our budget, that will roll to fund balance.

Okay, so from parks and rec to fire and police, anyone who has any leftover goes into that. No one gets to hold on to their things. Because there's a misperception that certain departments basically don't, like if they have positions allocated and they don't meet that target for vacancy rates that comes in under, that that doesn't necessarily get over to fund balance. And I just want to make sure that that is, in fact, not true. I mean, I've heard it from residents, right? All departments that are in the general fund, if they don't meet their budget, that money goes into our savings account, regardless of the department.

Yes, and we try to be as close to budget as possible. So that's why we take vacancy rates and things like that, so that we don't want to have a lot of stuff rolling into fund balance. We're trying not to do that. But invariably, we have their money.

Yes, but 9-1-1 positions have been We often struggle with vacancies there, right? So I'm just naming that certain departments, even if we try really hard, we haven't really been able to hit our targets on hiring necessarily. We've gotten better, but we haven't hit them. And so I just want to make sure that all of that's going back into the fund balance.

If there is any, yes, we do. Council Member Cook? I'm sorry, Ritz and then Cook.

Thanks, Ms. Green. Can you remind me the statutory or the legal kind of basis for the fund balance policy? Because I understand the 12% minimum is like a state policy, right?

Yes, but...

Right, but this is from the Treasury, local government commission or whatever.

Yeah, and ideally, when you think about fund, the best way to describe it, too, when you think about our general fund is our main source is property tax. We don't receive property tax until January. So we have to have about, when you think about that, it's about 16.7 is about three or four months you know, expenses. So in order to be able to pay our bills, you know, which I'm not saying that we would have any trouble with, but we do want to have some cushion there. So to be able to have the cash flow.

But I just want to be clear. So the 12% is like local government commission. And then the 60, the extra of like 4.7%, that's local?

It's a policy adopted by council. Yes, it's one of our policies. To guard the 12%? Yes, 16.7.

It's like a resolution or a...

It's a policy, yeah. We can provide you with that policy.

So it was voted on by council at some point?

Yes, it was.

It was.

I know you just said this, but can you do it with me one more time? So we've got the 7.2. This is for our current fiscal year. And then we have the projected use of $2.2 million would bring the one-time fund balance total to $5 million at the end of fiscal year 2027.

Yeah, so I'm projecting what I would have. So I'm telling you what I think is going to happen at the end of this fiscal year, which is I'd have $7.2 million above. the target. And then if I use the 2.2 that I'm projecting to use in the FY27 budget, I would have $5 million at the end above the target.

So the idea is that we're rolling over the $2.2 million into the next budget, and you're calculating that from the difference from the surplus that's in our current budget.

Is that what we're looking at? It's kind of like if your savings account had $7.2 million and then you expect to spend $2.2 million, then at the end you would have $5 million.

Right. I understand that. I guess I'm confused as to why we wouldn't have, at the end of fiscal year 26, $5 million. Because I'm not going to spend...

The plan is to not expend it until the next fiscal budget. Right, because it's in the proposed budget for FY27. It's not in the FY26 budget.

Okay. And we still have... Oh, we don't have that many months left.

Right. We're at the end. Okay. Thank you. And none of the numbers I show you are final until Tim conducts the – our finance department conducts the audit. Right. And so that brings us our –

official numbers but yes these are these are our projection for now and and that when you we say the percent above target two point three percent is that the percent above target that we're gonna be able to utilize for next year's budget or is that the percent above target that we're above our sixteen point seven percent target level that's above our sixteen point seven okay so how much have we generally been able to have we ever done this before where we're like

Yes, we do this every year. How much do we normally? So last year we did a little over $6 million. So you can tell that this is a much more restrained use of fund balance. Thanks. Because we do not want that number to get below 16.7.

Thank you. I know it's probably in here, but what are the, just let me know where they are. You don't have to state them, but I forgot what our one time, what we're using in our projected budget for FY27. I know we're using 2.2, and I just can't remember what the items were, so if you could just point me to where that is.

I don't know I think that there is there is a information in your budget briefing there's a fund balance section but there are things like vehicles things that we would not be spending over and over again so things that we know we're only going to use once because you do not want to use a recurring revenue we can't use we can't pay for salaries in other words with fund balance because that's a revenue source that happens all the time this is only going to happen once this one-time funding and then it's gone Okay, so I did want to talk about kind of our future projection over multiple years. You've seen this multi-year financial plan before, but I think it's important to look forward. And I think that the key message for this is that there are some revenue challenges in FY27, but we do think that those are temporary. So I do want to stress that this multi-year financial plan is very conservative. you know, basis on very conservative revenue estimates, and also we are also taking into account what we think are future appropriations. But this, we are expecting our property tax to be a one-time adjustment, and the corrections will work through the system, and we do expect that it will grow in the future. And also, I do want to say that, you know, although there are some negative numbers in this, which we often show you, they are lower than some of the years that we have shown you in the past. So that, I think, reflects a good trend for us, but also something that we will be kind of refining and working on. We'll bring it again to you when we come back in February and when we'll have much better information.

This is assuming zero property tax increase each year?

This is this. So for the FY27, it's our balanced budget. This assumes a zero property tax increase, but just natural growth. Yes, I did not assume that we would increase property tax.

One penny is, you said, 6.9.

Almost $7 million. Yeah, 6.89. So yeah.

Can, Ms. Reardon, can you, for the, I'm just trying to do the math real quick, but if you look at the growth of general property taxes over those five years, looks like it's a two point something percent increase between 27 to 28.

I mean, what kind of- It's about a 3% increase.

You're budgeting about a 3% increase every year.

3% increase, which is historically, yes. Yeah.

Okay.

So as I close, I want to highlight some of the priorities that will guide our work over the next fiscal year. So first, I want to say that as a budget department and as a city, we'll be monitoring property and sales tax throughout the year and, you know, making sure that we're looking at what those trends are and being able to respond if we need to. Second, we're going to complete the class and compensation study, which our HR department is going to talk a little bit about. And this is essential for positioning us for a competitive, fair, and sustainable pay plan in FY28. Third, we're going to continue to develop long-term funding strategies for the parking and transit fund, which face, as you are well aware, structural deficits or challenges. Fourth, we'll work with partners to develop the full funding strategy for the strategic framework to end homelessness and our upcoming affordable housing plan. Fifth, we want to advance the violence intervention strategy in partnership with our partners at the county. And sixth, we will complete the strategic plan refresh and bring it to you for adoption. And those are all the slides I have for this morning, but I would welcome any questions you may have.

I just have a quick question, Mr. Manager. When would be the appropriate time to, well, first of all, thank you for this presentation. It gives a bit more insight. When would be the appropriate time for us to talk about maybe adjustments or ask questions on where there's flexibility to make changes?

So you have an agenda for the next two days of specific topics that are going to be talked about. And if your questions fall within one of those areas during that presentation or at the end of that presentation would be a good time for council to give us direction on those items. If you don't see a specific discussion about that anywhere in the closing city council remarks at the end of each of those two days would be a good time. And as Director Royden stated at the beginning, we also have an optional third day if needed. So basically anytime you see something on the screen that you want to give us a little bit of feedback on, now that is the time to do it. If there's a large topic that's not on here that we need to add, that direction is welcome anytime.

Thank you, Council Member Goldbeck. Thank you, Director Riordan. Just trying to think a little bit about the decision to seek to maintain property taxes flat for this year, but then the impact of fees. I know that for water, I think we saw in a prior presentation that there's going to be an increase over time, I think 12%, 14% difference based on different tiers, right? But how do we think through the decision about And I understand there's a different fund that we're trying to support through fees, but there are transfers that happen at times. But how do we think about that balance, particularly when property taxes tend to be more progressive and fees can be less so, can be more regressive in terms of the impact on residents? And perhaps historically, you could add in there too, or maybe my council members know, was there a decision of the past when we ended having the solid waste fee and decided to have that funded by property taxes? And I think it was based on trying to have a more progressive approach to taxes and fees. So yeah, I would love some reflections on that. Because at the end of the day, I think it hits our residents in their pocketbooks, whether it's a tax or a fee. And how do we think about that?

Well, each year as part of the budget process, one of the things that departments look at besides their expenses is also their revenue sources. So some certain departments bring in revenue sources. And so what you'll see is obviously what you think about is the water fund and the stormwater because they have a great presentation that they bring before you. But also our other departments like our solid waste department has some other fees that are not like a solid waste fee, but for commercial purposes. garbage collection at the transfer station and things. And so they are looking at that on a regular basis each year and making adjustments based on the market that they're in. For this fiscal year, I do know some two Two departments that came forward with some fee increases was our planning and development department, which was reflective of kind of the market that they're in. And also part of that was also to enhance some services that they wanted to do, some positions that we added. And so we used some of that fee increase for that. And then our parks and rec department, which is also came forward with some fees on some things that are related to rentals. And that is something where there is a market that they can kind of look at and see what other folks are doing. They are a department also that is very conscious of the equity component of that and do not want to price residents out. So they specifically maintain very low fees for a lot of the services that they do. But as part of the budget process, every department is asked to look at that and kind of That's part of what we work on with the manager about whether that is something that we would need to accept and bring forward to council.

And if I can just add on to that. So, I mean, the underlying philosophy is certainly that where there is a differentiation in how residents or, in some cases, customers of the city receive services, it's more appropriate to have fees so that the person who is enjoying the service is paying for the service and that someone who isn't doesn't. So planning and development has fees for people who are going through the planning and development process process to put a burden on the general fund to have to help support that when a taxpayer isn't going through that process. The general philosophy is the fee makes that happen. That said, those philosophies are all undergirded by the values of the council and the direction of the council. has said, hey, you know, everybody gets solid waste service, so let's not try and parse that out. Let's just do it as part of the solid waste. Let's do it as part of the general fund, or I'm sorry, the property tax. But within solid waste, some people get yard waste and some don't. So we're going to charge extra for yard waste because not everybody gets it. The general philosophy behind fees is to try and differentiate between people who use the service and people who don't. But as Director Reardon clearly pointed out with DPR, there can be compromises within there. We do subsidize DPR with property taxes, and that is because this council has said, you know, we want the taxpayers to help provide these services, even if not all the taxpayers are using them. So that's a very high level. You can spend hours talking about those philosophies, but that's the general thought.

In terms of water specifically, there's a conservation motive too. Particularly, we talked about people heavily irrigating lawns. But we're also kind of raising that base level as well for all households in the fee. And so it's just something to reflect on that, yes, we are keeping property tax flat, but we are still seeing an increase in fees, which for a lot of households is essentially the same thing. BUT, YOU KNOW, WE'VE LAID OUT WHAT WE WANT THOSE INVESTMENTS TO GO TOWARDS. SO THOSE ARE HELPFUL COMMENTS. SO THANK YOU, DIRECTOR RIORDAN AND MR. MANAGER.

Thanks, Mr. Mayor. I just want to pick up on that topic. Yeah, and I appreciate the mayor's comments. I'm sorry, the manager's comments that we don't charge fees for solid waste like many other communities do, right? And that's, as I think you're alluding to, that's not an accident in Durham. I recall when Mayor Bell was the mayor, there was a very much a process. The community advocated very effectively for making sure those services were on the property tax base, not fees. because of the regressive nature of fees. Those groups like the People's Alliance have worked hard on that issue. So very much a reflection of the progressive values in Durham and how we see tax justice being a part of what we're about here on the council. I just had a couple questions about the budget, Ms. Reardon. So on the multi-year financial plan, I think one of the last slides you showed, so it shows the sort of red numbers in the out years, right? And so I was looking at the property tax line, trying to figure out what the, sorry, you said about 3% increase. Is the red there because of increases mainly in personnel services? And so that is growing faster than 3%. So what's the projection behind those? And I know there's just out years, and we always see budgets look like that, but I'm just kind of curious what the projections are behind those.

Well, so I'll say that this is probably a more difficult multi-year to, or there might be more uncertainty in this multi-year because we're about to do a pay or a class and compensation study. So this is kind of assuming just return to pay for performance. But as we have done it in the past, I don't know, and it's not taken into any consideration what that pay study might show us as well, too. So that could change this. But personnel is a main driver in our budget, as I've talked about before.

Those numbers also reflect that we've talked about this kind of gap in the it's like in the in the in the fare free buses Right that we've got a sort of gap Structural gap. There's that also reflected similar to the parking fund.

It's all okay.

Yeah, those are different funds, but similar So those reasons that the manager said those are things that are the priorities for next year to begin to address. So Thank you for that. Can you also want to go back to like the one of the early slides there slide number four or five? where you were showing the property tax key facts for FY27. Yes, okay. So I just want to be clear, because there's also been conversation among residents about, like, how come our property tax base isn't going up? We've seen all this kind of growth. So what this shows is that before that, the refunds, we were expecting the assessed base to grow by $5 billion, right, between 26 and 27, is that accurate, from 67 to 72. And that's like about a 7% growth rate, if I get my math right.

Yeah, and I'd say that that projection is where we think we're going to end this year. So the growth rate would have been a little bit smaller just because where I had budgeted was higher than where I project I will be, because it takes into account the refunds.

But again, before the refunds, it would have gone up to $72 billion.

Yes, yes, that was my projection.

And that would have been about a 6% or 7% growth in the property tax base year over year. Is that not correct?

It probably would have been closer to about 3% or 4%, but yes.

But if you do the math, that's 72...

I guess because the EOY projection is not where... So in other words, what happened was when the appeals come in, that lowered the base that I was starting from.

Oh, so it's not like apples to apples.

Yes, that's what I'm trying to say. It's not apples to apples. This is the lowered versus... I could...

But the assessment, so I'm still trying to understand. So we lost about five, we lost about $3 billion.

Yeah.

And that's reflected in the $72 billion versus $69 billion. So that's accounted for there. Yeah. So how do we get from the $67 to $72? In the $67... That's before we take out the $5 billion, right?

That was after the assessed value came back. That's where I think I'm going to end the year. That's my projection for this end of the year. But I can get you the number for where I thought I was going to be as far as budget. That is probably the number that you're looking for to be able to make that comparison.

Director, what was your estimate for natural growth in the tax rate this year? I think that's three percent.

That's around three to four percent is around what I'm seeing, what historically what we have seen in property tax.

Right, historically, but I'm just trying to assess year over year. Because if the $3 billion reduction is between the estimate for FY27 and the current projection, that's where the $3 billion reduction shows up, right? Because of the refunds or the appeals. So then isn't apples to apples $67 to $72 billion then?

Well, when I was making the 72, that was an estimate based on a higher FY26, ending FY26 with a higher assessed tax value. So the growth rate would have been smaller. I think the number you're missing is what my budgeted number for assessed tax was, as opposed to my projection. And I think we can provide that in a follow-up and show you that. And that, I think, is the number that you need to make your calculation, and we can provide you with that.

I want residents to be clear, because, again, people see all this growth, and they're like, how come the tax base isn't growing? So I want to be clear what are, not just sort of trends historically, but what are we seeing in real growth in the tax base year over year before the sort of appeals?

And I think that I probably have the perfect person for you here as well, too, since we have our tax office. So Kiar Doyle is going to be up here, and he can talk a little bit more, probably a little bit better than I can, about trends in our tax base. He's going to talk a little bit about the appeals, but also kind of what is the trend and what he's seeing as far as property tax in the city and the county. So I will pause in case there are more questions on my presentation, but I also want to respect that he might be the expert on that.

Well, thank you. I'm looking forward to the next presentation and how the bomb was just dropped and blew the tax base out. All right.

Well, I want to thank you. And I'm going to introduce Kiara Doyle, who is the Durham County Tax Assessor. And I want to thank him for being here and taking his time to kind of walk you through some of the appeals that kind of took place and had an impact on our budget.

Thank you, Director Reardon. I have a greater appreciation for the way your brain works, you and your staff. very complex. Mr. Doyle, welcome to the Ring of Fire.

Thank you for having me. Do I need to plug up or am I already in the system?

Okay.

Okay. Good morning. Mayor, council members, and the entire collective, city manager, thank you all for having me. Keyar Doyle, Durham County Tax Administrator with the Durham County Tax Administration. I am going to go through this presentation specific to what's taken place over the last six months, but I'ma start with the general overview in regards to the reappraisal itself. I will try to touch on the points that I think are pertinent, but I will make sure that I am as brief as possible on these slides so that you have time to ask questions. I want to make sure that I answer any questions that are needed that may not be covered in this particular presentation. So I'm going to jump right in. Okay, there we go. All right, so general overview Durham County Department of Tax Administration conducted a 2025 reappraisal that led to a historical increase in real property value That increase led to a record number of residential and commercial appeals Those appeals led to a record number of hearings scheduled before the Board of equalization and review and the property tax commission on a state level These are things that were in a general nature expected due to the amount of increase that the County of Durham experienced over a six year period. So the last reappraisal was in 2019. Between 2019 and 2025, we experienced an explosion in real estate sales, and we also experienced a pandemic, all right? So there are two things happening during that time period. Growth, high sales, a pandemic. Those are three things to keep in mind during this presentation. All right, the reappraisal process. Local real estate market data is collected and analyzed during two years preceding the reappraisal date. In this case, that was January 1, 2025. This particular part of the process makes up the first year. Land and improvement pricing begins by February of the second year and the final year of that particular cycle. It's a four-year cycle. Last two years leading up to the reappraisal date is where the work is taking place in regards to the market being measured. Building the Schedule of Values takes place. That property data used for modeling, specification modeling, model calibrating, and establishing the Schedule of Values, which is eventually turned into the Board of County Commissioners to be adopted. And we are shooting for an October date with that submission to that particular Board of County Commissioners. So the work that's being done, I'm going to illustrate on the very next slide. This is a very important slide. Two-year process. I started this slide to show February 23, and unfortunately the caption is covering it, but that February 23 value is roughly $383,000. for the county of Durham and about 385 for the city of Durham. All right? That's February of 23. That's the beginning of the reappraisal cycle. That's when the data is being measured. If you notice, through the two-year period, values went up, peaked at 460, and then they started to decline. Unfortunately, the work we've done is being turned in. So we see the market going the other way, but the work we've done for the first year and about six months or so is already done and is being turned in to the Board of County Commissioners for the adoption of the Schedule of Values. So we're looking at a market that was still rising and had been rising for the past six years, and we're starting to see it tinker off towards middle of 24 all right going into January 1 2025 this is the market all right appeals During a typical year, the Department of Tax Administration receives anywhere between 75 to 200 appeals. That's a typical year. Regular year has nothing to do with anything. You have a right to appeal every year. It doesn't matter if you appealed last year. It doesn't matter if you appealed the year before. You have a right to appeal property value. That's personal, residential, that's commercial. Have a right to appeal every year. So an appeal itself is not looked at as a measure because it's not based on anything other than your right to appeal and your desire to do so. All right? But in a typical year, the tax office receives anywhere between 75 to 200 appeals. During a reappraisal year, traditionally, the county of Durham has received anywhere between 4,500 and 7,500. January 1, 2025 reappraisal, we received 10,533 appeals. Appeal impacts. The appeal deadline was set for June 16th. Now, typically, the appeal deadline is somewhere around the first week of May. All right, due to what we were expecting with this particular reappraisal, because of the amount of increase we saw in the actual real estate market, we decided it would be fair to the citizenry to extend this first year of the reappraisal. So we went an extra month. That is very important because it impacts other things. It's good for the taxpayer and the property owners, but it impacts budget processes. budget figures were needed from the Department of Tax Administration about a month or so earlier than June 16th. So we had to do some estimating, projecting, and kind of project exactly where we thought we might be in regards to the appeals we would receive by June 16th. And they're asking for numbers in early May. Require estimates to be made regarding how many appeals will be received. Total received appeals are used to assist in projecting holdbacks. Very important process in regards to budgeting. Has nothing to do with the reappraisal process and establishing values. This is a budget process. 7,500 were estimated on May 19th of 2024. There were a total of 5,436 appeals received two weeks before that June 16th deadline. We ended up receiving 10,533. So there were roughly 3,000 appeals unaccounted for in our budgeting process. Holdbacks. Holdbacks for potential appeals, exemptions, et cetera, is essential for real property valuation. A safe number but not too conservative is the goal. Holding back too much reduces budgeted revenue and overestimates potential loss due to appeals. Hold back too little and it puts a significant risk on meeting budgeted revenue and underestimates potential loss due to appeals. Impacts of this past reappraisals appeal cycle. The impacts of residential versus commercial. Very important slide. Typical issues found during mass appraisal. Typical. You're going to come across some things that are brought to the office's attention because you have appeals. Appeals are a good thing. It's a good part of the process. And it actually is something that staff uses to make sure that the accuracy of our data is improved with every cycle. But these are typical types of issues. I'm using this to show the difference between commercial and residential. So typical issues found during a mass appraisal. Properties identified with incorrect year built based on properties being moved in the mid-'80s. This is a real issue that was discovered this particular past year. Parcels of homes where the original construction took place in the 1950s. Structures were moved to the Crest Street community. Year built was changed over 40 years ago. All right? So these properties were built in the 1950s, and they were moved in the 80s. And when that took place, their year built was changed. So it went from 1950 to 1985. All right? So during this particular process, this being brought to our attention, these properties needing to be corrected, 96 parcels total were impacted. 40 parcels ended up receiving an adjustment. All right? This reduction in value amounted to $1,460,000. 40 properties, 40 residential properties were impacted. To make the correction to those properties impacted $1,460,000 in value. All right? Properties that needed condition adjustments that could only be observed internally. Commercial sales challenged based on income values impacted by dramatic vacancy issues. This is gonna show you the difference between residential and commercial. 40 properties, $1 million, 1.4. Apartments and office buildings DRASTIC VALUE CHANGES. VALUE CHANGE. TOTAL COMMERCIAL PROPERTIES APPEAL WAS 1,165. TOTAL RESIDENTIAL PROPERTIES APPEAL WAS 9,235. THE APPEAL REDUCTIONS TO BUDGETED TOTAL, 3.1 BILLION IN VALUE. THE TOTAL APPEAL REDUCTIONS TO TOTAL VALUE PRIOR TO HOLDBACKS WAS 4.3 BILLION. TOTAL TAX EXEMPTIONS LOSS INCLUDING 320 MILLION. YES.

While we're on this slide, can you just slow down just a little bit and break some of this down for us? So do we know then, I mean, you've got here residential properties appealed 9,000. Do we know... the percentage of those appeals that were successful and also how it broke down between the total reduction between these residential versus the commercial properties?

Yes. So in short, residential properties accounted for less than $1 billion worth of value change. Closer to $500 million than $1 billion. So the bulk of the adjustment you see is commercial property.

And they were only...

They were only 1,165. And they accounted for... Which goes back to the slide I just showed you, and I'm going to elaborate on the coming slides. But 40 properties being adjusted only impacted us $1 million. 40 properties. Those are residential homes. And I'm going to show you the difference between residential and commercial.

Okay.

Okay. Thanks. But that was a good question. Thank you.

Yeah. And then are you going to get to success rate of those appeals?

We can talk about that right now. So that's a layered question. If you have a $400,000 appeal and you appeal your property value and you receive a $6,000 adjustment, it went from $400,000 to $394,000, it's an adjustment. Do you consider that a success or just an adjustment?

Well, I would like to know how many went down.

But that's what I would be asking. So total adjusted properties, that is the total adjusted properties for each property. Each one of those properties got either a no change or a change that might have been $1,000 or it could have been $20,000 or it could have been millions of dollars. To give you actual no changes versus a change, I would have to make sure that we give you that accurately. I can tell you that there is a- Okay.

I would like to see that, and I would particularly like to see it between the residential and the commercial properties.

Okay. I will definitely give you the numbers in regards to no change versus a change. Right. Because I think it's a little misleading.

Yes, I hear what you're saying.

In regards to what's the change versus what's not the change.

We're going to be able to compare that with the data that you're getting to about the very few properties that were sort of the bulk of the actual dollar amount valuation issue.

Yes.

Like a few appeals that were the bulk.

Yes. Any more questions about this particular slide? Yes.

The fourth bullet, total appeal reductions to total value prior to holdbacks was $4.3 billion. Yes.

So explain that. So if I go back a couple of slides, what did I just do? OK. Because of this decline that we were seeing, we knew that we were going to end up on the high end of things because we're turning in our work. while the market is going down. Now, how much is going to go down, we don't know. All right? So, because of that, it's too late to make adjustments to value. So, we assume there are going to be some losses due to, I have $400,000 value, but because the last four months of this cycle, I can probably find some 350 sales to support my appraisal. or to support my appeal about my appraisal, all right? So we took some value off saying we're expecting some losses here, all right? We were also expecting losses on the commercial side, but to what extent, all right? So that's what holdbacks, and holdbacks are not specific to a reappraisal. Holdbacks happen every year. We're holding back for appeals. We're holding back for tax relief, tax exemptions, exclusions, things that are unforeseen, things that you have no control over. Somebody has $50 million property. They file a tax exclusion or exemption application, and they receive a 75% discount. So that's value that we have on the books that comes off the books, and you can't project it. So holdbacks happen every year. During a reappraisal year, you try to increase the holdbacks because you're expecting more appeals and you still have those uncertainties to take place. All right. All right. So get back to the slide we were headed to. All right. One more time back to this slide. The last bullet represents tax exemption losses. That kind of goes back to what we were just— The question was on the fourth one.

So, like, appeal reduction to total value prior to holdback's total 4.3.

So you were— It's including the 3.1, but yes. So on top of the 3.1, whatever did not make it to the budgeted amount was held back. Nobody ever saw those numbers. budget holds back value that they're not using for budgeting because they don't know if this is going to stick. That's every year. That's what you're seeing. So what was budgeted, what you can see online, what's publicized, what was used for the budget last year, that number is what we were tracking in regards to where are we, where are we with regards to budget. Holdbacks is not necessarily a number that anybody sees, but it's already being considered in regards to what we might lose with appeals, with exemptions, with any type of uncertainties that happen from year to year. Of course, during a reappraisal year, you expect the appeals to be more because there are more appeals. But holdbacks in general are not specific to appeals.

So the 4.3 billion was before the 3.1 billion in the holdbacks? Or is that included in the 3.1?

3.1 is inside that 4.3. Okay. Yes, yes.

Just a related question to make sure I understand. I guess, like, how much was a surprise? Like, how much did we not budget?

You know, you did the holdbacks. All of it is a surprise.

So you did the holdbacks and then the 4.3 billion. Yes.

We did the holdbacks, and I believe the holdbacks equated to somewhere around 1.5, 1.6, somewhere in that ballpark. But the amount of losses that we received were not expected. We knew they were possible, but not to that extent. But I'll get into those losses very next couple of slides. But if there are any questions specific to this slide, please...

No, I'm just going to ask if you can finish. I know we had quite a bit of back and forth. You were going to start off on something about the tax exemption laws included, and then you kind of...

Right. Well, I just wanted to make sure that that's... Appeals... Appeals can be... There's math in place to help us try to contain or understand what types of appeal losses may exist. All right. Based on what I was explaining previously, the difference between this particular season or cycle was the actual appeal deadline being after things needed to be done. a little more concrete for budgeting purposes. So to be able to say we have 10,533 appeals, we can base some thoughts and math around holdbacks of 10,533 appeals. All right? We were using 7,500. Because we were at 5,000 when the questions were being asked, we projected 7,500. We ended up getting 3,000 in the very last weekend. So we ended up with 10,533. So budgeting processes were based on 7,500, never 10,533. Couple that with what I'm going to show you on the next couple of slides, you'll understand exactly the impacts to projecting versus knowing how many appeals we have and what takes place.

I'll wait. I'm just interested in what drew this last-minute surge, but you may get to it, so I'll just wait. Okay.

All right, so the commercial market, this is what's taken place in those last six months to even now, still going on. Durham office buildings raised for new apartments. This is just commercial market information. Former IBM building sees price drop nearly $20 million. What our office does during the valuing process and what we're doing during all of this two-year cycle of putting the values together, reading the market, establishing value, this is a perfect example of the way these things calculate in the system. So what you're looking at here is a sale price of $35 million. You see a cost value approach and you see an income value. So in this particular case, just showing you a screenshot of how these things shake out. Here we go, 35 million. Have an income approach value of 35,957. and a cost approach of 42 million. So we have a sale for 35 million, we have a cost approach showing 42 million, and we have an income value of 35. And then we have these types of scenarios, have $81 million sale, have a cost approach of $103 million, then I have an income approach of $71 million. Here I have another sale, $85 million. Cost approach, very close, $85. And then income at $77. Now, these are not drastic. Seen a lot worse, a lot worse in regards to the difference between that sale price and the income value.

Yes. Do you want to finish any point you're making?

Well, I'm just running through these slides, and then we're pretty much at the end, so you have free fire. Cool.

I'm just curious about how does the income-based approach work, and then do they just get to choose between cost or income?

They don't get to choose, no. But as appraisers, we have to honor all three approaches to value. So we have to consider all three approaches. Okay. but I can definitely dig into that in just a second. All right, so this is just showing the trend. $84 million sale, $75 million cost approach, income value came in at 68. All right, so what we plan to do is to actually communicate with the actual owners of these commercial properties. What we've done in the past is we have their data, but it can be dated. And then we buy data from vendors to provide us market information, all right? That market information, unfortunately, was purchased in 2024 around January. So our data is consistent with when we purchased it. All right. Now, what I'm going to do as an owner of a business is I'm going to go to the bank. I'm going to show $85 million in value. But when it's time to pay taxes, income taxes, I'm going to show as little as possible. It's the same game that we all play as personal individuals. We show high when we want a loan. We show low when we want to pay less. Businesses do the same thing. So if their income value can support a lower value and they can prove it, they bring it in. But they don't have it. It's not in that same data that we bought, because that data that we bought is bank information. It's the type of information that they use to get loans. And we use vendors, and those vendors provide us that information. How recent, how timely that information can be is very, very, very critical in this particular market. It won't always matter. But we're in a market that the last six months of it started heading in a different direction. What we spent a year and a half doing was in a higher base. And we paid for data that showed a higher base. Everyone didn't get to capitalize off of lower rents and coming into our office and going to the Board of Equalization and Review and showing drastic differences, but a lot did, all right? So what we plan to do is make sure that we get that information throughout the year, not just during a reappraisal, but every year throughout the year, and we're keeping that information from them current as possible. Attaining the most recent property characteristics from owners, residential and commercial, through multiple communications should improve timely data collection. Continuously collecting collected market data supplemented by direct owner data will decrease information gaps. In general, the number of appeals and resulting valuation changes were higher than prior years. They reflect the operation of a statutory process responding to rapid shifts in market conditions following a significant reappraisal. Appeals are inherent. part of the property tax system and serve to ensure the property assessments remain fair, equitable, and align with current market realities. This re-evaluation reflects growth in our community. Real property valuations increased close to 70% from the prior re-evaluation, six years, with values rising from $43 billion to more than $72 billion. That's just real property. We're not talking about business personal property. We're not talking about registered motor vehicles. We aren't including the public utility that grew tremendously. So across the board, still strong. Value adjustments resulting from appeal process is better understood not as a sign of economic weakness, but as a recalibration within an otherwise strong market. I am ready for the questions and the discussion.

First of all, I just want to say thank you for coming in. I know you're very busy and have a lot of work to do, so thank you for coming in to City Hall to present to us and have this conversation. I'm curious, I want to come back to the income versus cost. So they can, some of them, the more sophisticated ones especially, can hire... I assume, hire a law firm or something like that who has a lot of experience and maybe some of these have very good track records of winning cases and can present favorable information to the BOER. What discretion does the BOER have? Can they, if there's a cost-based approach that's showing one number and an income-based approach that's showing another number, does the BOER have to, I mean it looked like in the examples that we were looking at here, the BOER was accepting the lower one, but do they have to do that?

Good question. Typically, appraisers have to acknowledge all three values. They have to see all three values, and they have to consider all three values. Typically, in a strong market, those three values are very close. In a market that we are coming out of, hopefully, and not going to stay in too much longer, if you are driving through Durham right now, you see spaces for lease. You see vacancies. All right. So somebody purchased that building for $100 million, $50 million. They purchased that building for $50 million, and they did that with an expectation on return on investment. All right. So now we're looking at the sale. sales comparison method, and we're also looking at income, because return on investment is all about income. So that's where those two approaches are going to be considered. The cost approach is what our system is based on. That is the schedule of values. So everything that we have measured from the market, we have put into that system, it is going to produce a cost approach value. So when people appeal and when we are analyzing our data, we are analyzing our data based off of we have the cost approach in the system, it's built in, and then we are checking those values with the income approach and the sales comparison approach. All right, so to answer your question specifically, if a property owner appeals their value to They are going to appeal their value, and they're going to lean towards whichever value is more beneficial to them. Now, the Board of Equalization and Review has a job to do. They are a neutral party. They don't work for Durham County. They represent the Board of County Commissioners in regards to the role that they play in mediating and establishing value. but they don't represent the tax officer. They're not working with us. But they're not necessarily working against us either. So in a lot of cases, we have the commercial entities who have the ability to appeal and appeal control the continuances, control kind of how and when they are ready to present, things of that nature take place. So this goes into the timing that the mayor was bringing up. How did it happen so fast? All right, so by January, February, there was already a realized loss from the whole back figure. We're already close to the budgeted amount, all right? But we still have an abundance of commercial appeals left. Residential's been steady. No playing around. They aren't holding appeals. They are pretty steady throughout from March to January 5. We are always shooting for January 5 delinquency. We want all appeals done by January 5. But they have a right to be heard. And with 10,500 appeals, we kind of didn't have any control over getting that done in a timely fashion that we would have preferred. The board worked with us. They increased their meetings. They went from one meeting a week to three meetings a week. So they did the best they could to get these hearings heard. At the end, we ended up with commercial being the bulk of the last two months of appeals. All right? And what they're doing is they are waiting and they are gathering their information. And in some cases, they had good information. Had we had that information a year and a half prior, we would have used their information and we wouldn't be here with the value that they ended up receiving. Now, did that value, did that information exist a year and a half earlier? That's debatable. We had sales to show what they paid for the property, but that property was vacant or had vacancies going into January 1, 2025. So I paid a good price 2023, 2022, but I'm not getting a return on investment that I paid for or that I was projecting. And I have data that supports a lower value. What's right or wrong, what should be honored, that's another debate. But if you have data that supports that value, we have to consider it. So it's not all the Board of Equalization and Review. If that data is presented to an appraiser, that appraiser would consider it.

The BOER can reject a request for...

They can reject, they can no change it, they can raise it, and they can lower it. Okay.

Yes. They have that discretion. They'll consider the evidence that's presented by... what we call the applicant and make it the appellant and and make a make a determination and so can you can you coming back to the mayor's question earlier so you talked about a massive influx and in the last couple weeks or months it was mostly if not and vastly the majority was commercial and So did they have more time? It was like an extension of time. Did they have more time to appeal?

They had a lot of continuances, and they had a lot of last-minute appeals. So a lot of those appeals came in at the last minute. Appraisers have to contact them, just like they contact residential appeals, and they actually try to get as much information as they can during this process before going to the board. Is there any new information? Is there anything we don't have? So those conversations take place. The amount of information being exchanged between a property owner such as myself and a commercial entity is drastically different. So as a property owner, I might have an appeal, and I might have an appraisal from a bank or a mortgage lender to support my appeal. I might also have some data that I pulled myself. versus commercial entities, they might appeal a thousand, they might put in a thousand appeals at one time, for one. Then on top of that, one case brief could be 800 pages. So it's just a difference in regards to the amount of detail and nuance that goes into a commercial appeal versus a residential appeal. We take them all the same. We evaluate them all the same. They're all just as important, but it's a different amount of work. So if there are any issues, then we're going back and forth. Those aren't just appellant turns in an appeal. We just take it. Our staff reviews it and says, yeah or nay. Sometimes the staff want more information or they have questions. So these things can be ongoing. A lot of those appeals, the board ruled with a value. and because of the way commercial entities work they're still going to the property tax commission for another for future decreases or further fight so it's just the nature of commercial versus residential can you break down thank you for that can you break down within the commercial category

Roughly, I mean, do you have any sense of roughly the proportion that is multifamily versus office versus industrial?

No, I don't have those percentages for you offhand. I will tell you that the overwhelming majority of these particular appeals, the value changes came from apartments and office buildings.

Okay, so grouping those together, apartments and office buildings.

Yes, and apartments in our world would be anything over a quadruplex. So any type of unit that has five or more units, we're looking at that and classifying that towards an apartment. But for the most part, apartments and office buildings were the number one vacancy units

So the vacancy here really matters and plays a huge role.

Vacancy matters, yes. Okay, okay.

And so they're showing the vacancies in their appeals when they're saying, hey, don't just look at the cost-based approach, look at the income-based approach, look at all the vacancies I have in my building, and that's used to justify...

Well, it's a challenge. If we have market data, which we paid for again, we purchased market data, and that market data we were using going into this reappraisal. So we thought we had market data from the market. So we have data that is supported, we've used, and then Mr. Baker says, ìNo, my property has more vacancy than what you're showing, and here's my data to support that.î We can't ignore that data once we have it. Now, if we don't have it and you don't appeal, you have a market data value. All right, but once you have shown us actuals, we have to replace that. Just as a residential homeowner, They have market data for their value, and then they challenge that value and say, no, I don't have a brand new kitchen. I don't have upgraded bathrooms. I don't have hardwood floors. I still have carpet. We make that change to that property because they were being considered with a property that has some upgrades that they should not have been given themselves. So it's the same concept. residential and commercial treated the same in that regard if you have data that Contradicts what we have that's the point of your appeal to submit an appeal and challenge that particular difference Thank you.

I think I'll have a few more questions, but I don't want to hog it turn it over to colleagues.

Yeah, I I want to just add in a quick comment and This is such a nuance reality here. I'm really interested in and I understand that the the BER is a quasi-judicial board. But I'm really interested in considering we're in 2026. Is there any possibility in regards to safeguards where real-time data could be digitally put in and assessed rather than waiting? I'm just saying, this is 2026, and we literally have a dysfunctional system here. That is, it appears to be dysfunctional, considering that one can, not even saying intentionally, but it appears that it could be easily manipulated based on the capacity of us being able to value. I mean, we're talking about balancing a city budget here, but we're doing it on stilts. We're very unstable considering when information can be inserted, when information can be assessed. And it kind of caught you guys off guard. So I'm thinking about what safeguards could be put in place, what resources does the Board of ER Evaluation and Review have, Equalization and Review have? What could they use? I mean, when you say there is an applicant to have one briefing of 800 pages and thousands of appeals I don't know any department in the city or county that can handle that amount of information in a timely manner.

So, I do not know the answer to that. That's a brilliant question. I do not know the answer to that. I think that real-time data submission would be wonderful. I don't know the capabilities. Give me a software engineer. We need to get Richard. Yeah, that is a brilliant thought, and I think it would change the capabilities across the board. The thing that's very important to understand here is Durham County has a good... good, strong market. What we do have is a vacancy issue. It appears to be getting better. I don't see as many police signs. There appears to be a resurgence of the things we need to see. But during the time that mattered, we had high sales and we had vacancies. And there are two particular property types that actually, whether you want to say benefited from it or were impacted by it, because I don't think they think they benefited. They think that they bought something with the intentions of making a certain type of return on investment, and they cannot realize that. So I think it's two different perspectives in regards to how you want to look at value. I think that the intention to purchase a property is based on your return on investment. So if I've purchased a property with the expectation that I'm going to receive a certain type of income from this particular property and its function, That value is completely tied to, from my perspective as a business person, as somebody who purchased the property, that value is connected. It can't just be my sale price and then my return on investment is unrealized and it doesn't matter in regards to what the complete value is for this property. So, as an appraiser, appraisers have to consider that. And I want to make sure that I'm very clear. I do not look at this as the Board of Equalization and Review, because I think in regards to our particular Board of Equalization and Review, I can't speak for all Board of Equalization and Reviews. I think we have a very experienced, and I respect the fact that they are real estate people. Some board of equalization and reviews are no disrespect to other boards, but sometimes they're passing people that might not have real estate experience. So they're making decisions without having a real estate background. I don't agree with all of their decisions, but I'm glad to have people who understand real estate.

Right, and I do know, I was looking it up, I do know some of them, and I know they're well-experienced folks. I'm not even questioning their intent, more so questioning their capacity or what they have. I also want to add a little context to this conversation because I sense a road that we may be going down for potential political argument. When you say there is a vacancy issue, I think we need to provide for context to that. We have apartments that have vacancies in them, And then there is a need for housing and how those two things balance one another. And I think in any case, there's going to be some type of, whether wittingly or unwittingly, market manipulation. And that is something I think we have to be very honest about. But I want to be very careful of projecting that, you know what, this is full market manipulation and we don't need any more housing. That's going to hurt a lot of people because we're specifically talking about apartments and office buildings here. Not everyone is going to live in an apartment, and not everyone is going to be in that same geographic of the locality. So I just wanted to provide some context there as we were going with these comments.

I agree. I think that this is a bigger issue. It's not about Durham. There are multiple things impacting Durham. office sector. I benefit, my office benefits from remote work. That's a real thing. It impacts the actual ability for these businesses to rent out space in these office buildings. So there are numerous things that are not Durham specific, but these things did impact us. This is the first reappraisal since the pandemic. So there are things within this particular market that we've never had to account for before.

Thank you. I have more comments, but I'll pass it over to my colleagues and come back. Yeah, go ahead.

Sorry. A couple of questions. State statute is we have to reevaluate every eight years?

Yes.

Okay. So that's one question. And then the Board of Equalization and Review, who appoints them?

County commissioners.

Is there any, and some of these may be not for you, Mr. Doyle. It could be questions that just need to be answered. Are there any examples with that board that are multi-jurisdictionally appointed, so not just county commissioners?

Not that I'm aware of.

Are you aware of any legal limitations as to why that's, are they the only entity that is allowed to appoint to that board?

To my knowledge, yes. And they must be residents of Durham County.

Thank you. So some of these things, I think, either if the city attorney's office could follow up with the county attorney, I would like to understand the legal limitations on if only, you know, some boards are both city and county appointed. I would like to know if there is an opportunity, if that's state statute or if there's flexibility on that. And I hear the Durham resident component. That's how most of our boards are you have to Some of them you can work here and not live here, but most of them are required residency, so that's one question was there an understanding because At some point I believe the county maybe that's the policy now county commissioners have moved that they're going to do every four-year reevaluation Because the volatility in the market is Do you know if that's going to be their policy moving forward?

My expectation is that they chose a four-year reappraisal cycle back in 2019. The only reason it went six years was because of the pandemic. So I believe that the four-year cycle was their expectation and is their continued expectation.

But that's a policy on their side, not like an ordinance?

Correct. The state only requires a reappraisal be done at least once every eight years.

I mean a local ordinance, not a state ordinance.

Right.

Because a policy, it's easier or harder as a board to go against your own policy than I would say an ordinance, right? So that's a different level of different burden.

Right. The commissioner said that four-year cycle, and they, to my knowledge, would like to stick to it.

Okay. And then the other question I have... When y'all decided to kick off the reevaluation process, was there ever any analysis done? Because North Carolina generally It makes sense why we are here in some ways, and in some ways it doesn't. And I will say that it's not anything to do with the work of your office. I think your office has done what it could do with the data it had, as you've noted. And I think you all were in a challenging moment in a very volatile market. Residential was skyrocketing. Offices were vacant. That was a national trend. I'm just curious, as you all are embarking in this process, we know that these We know North Carolina, for lack of a better word, is hot market-wise across the state. Was there any conversations with other counties on their re-evaluations? Kind of some best practices gleaned or an understanding because they had maybe gone through a re-evaluation in a rocky market, and maybe there were some things that we could have implemented here had we known about it. So just wondering if you all had done any outreach to other offices.

Constant, and it's still ongoing. Because we are gearing up for 29 in about four or five months. So we'll be getting started on 29.

I remember when you presented at Joint City County, I think maybe early in 2025. I would like, at some point, and this is for city staff, another kind of conversation with your office at a Joint City County meeting, specifically on, since you are gearing up for 2029, You know you're gonna do a you know an analysis of what went wrong and what didn't I as City Council would like to have that information and I would like to have Opportunity as a council member because at the end of the day we share this we have no say and but we share the same burden And so I think that there needs to be opportunity for the city to have insight in a way that was not provided or implemented this round and I know that there may be some statutory requirements on that and there may not be and that's what we need to investigate and so as we were getting up for 2029 that's just something that I want to be really mindful of because it's having a huge impact on our revenue and by default so the county thank you that's all

Mr. Rist.

Thank you, Mr. Mayor. Thanks, Mr. Doyle, for the presentation. One more question about the folks who serve on the board. Is that like how long is their term? Is that a two-year term? What's the length?

Two years and three years.

And how many folks are on that board?

I believe right now we have six. We just lost one and we replaced them, so I believe it's six now.

Okay. I'll come back to that in a second. So I appreciate what you're saying about the difference between how appraisers value commercial and residential properties, right? Because in my personal home, if I build a new home and it costs me $100,000 and it's valued at like $500,000 or valued at less than that, it doesn't matter. For a home, it's the market value. There's no cost equation for a home, right?

There is a cost approach for the home. There's a cost and a sale. There's an income if you rent it.

So all three for residential as well?

If they rent the property, there is an income value, yes.

So for a rental property, it could be income, could be cost, could be market. Those are all looked at. So are those, using those different formulas, is that just kind of a practice in the sort of property appraisal community? Or is that, and this is a question for maybe Madam City Attorney, is that... By statute, must a board of equalization review look at income, cost, and market data, or is that simply a sort of a kind of a convention in the industry?

I don't know.

I would have to research that. I haven't done that in a long, long time.

Okay. That is appraisal. Appraisal has to honor all three approaches to value.

Is that by statute, or is that sort of the sort of practice in that field? That's my question.

It's actually both. It's statute and it is the practice in the field. So if you get an appraisal, if you go to a mortgage lender or a bank and get an appraisal, if you pay attention, you have three values. They give you an income approach on your home appraisal. You get all three approaches to value. Appraisers have to give all three approaches to value. Now, whether it's used or not is a different story.

My question is whether that's by statute. And I appreciate the city attorney looking into that just to know what the legal basis for that is. My next question is, so I understand these late appeals came in, and I think this is what the mayor is suggesting. And all these questions, we're getting questions from folks in the community. They want to make sure that our process is fair, as you know, right? And so I guess the question is, how can we assure residents that those appeals that came in late in the process and some of these are like 800-page briefing books, right? How can we assure residents that that didn't overwhelm the Board of Equalization Review? So many at one time that kind of had to process so quickly. How can we assure residents that?

I don't know how to assure residents of anything. The actual amount of appeals was more than they have ever received. Durham County has never received 10,533 appeals. When you say late, only 233 of those appeals were received after the deadline. So 10,300 were received on time by June 16th. All right?

Right. But there were 2,500 that also you were expecting about 7,500, and we got it like... And that was, again, towards the end of the process were another 2,500 that we didn't expect, right?

We got 3,000 on the last weekend before the deadline. I mean, it's legally acceptable. They didn't do anything wrong. They just waited until the last minute to appeal. So we would have preferred they appeal steady throughout the time period. We were tracking, and at the time we were asked, where were we? And where do we think we will be? We're at 5,300. So we estimated we should probably get around 7,500 over the next two weeks. We figured we would reach 7,500, which was the most we'd ever received before, 7,500. We were trending in that direction. Now, if you asked our office four months prior to that, I'm pretty sure most of them would have thought we were going to get 15,000 appeals because we just had a 70% increase. So we were thinking the worst because we were already doing the worst. Durham County never saw that type of value change. I went from 200,000 to 400,000. So I was expecting most people to appeal. 130,000 people, 130,000 parcels. So I was expecting a drastic number of appeals. As things went on, we were only 5,000 with two weeks left. So to end up at 10,533 was a big deal, and that's the start of where things went wrong. Right. Because we accounted for 7,500, not 10,000. Right.

And I totally understand that the folks were following the process. We allowed the late appeals, but a bunch came in, as you said, that last weekend, right? And so, again, my question is, like, how do residents know that these appeals were all – were all reviewed with the proper, that had enough time and sort of like the capacity to review them all or did it just get rushed into the very end? That's the question folks have.

Completely understand. I do not know how to make people feel comfortable with that, but I will say that our goal was to be done by January 5th. The fact that we did not finish by January 5th shows that we did take the time to handle each and every appeal. We did not finish until the month of April. I don't know any other way to make people feel comfortable with that particular fact. But the fact is, as of March 1st, when those letters went out and the appeals could start, our goal from that day forward was January 5th. You always want to make sure you're done by delinquency.

I understand. Again, these are the questions folks have. I also want to ask about the...

I don't mean to butt in, but I think I might have a little follow-up question to yours about accountability.

Do you mind?

I'll just ask one question.

Okay, go for it.

I think it's getting at your question, so I just wanted to ask. I noticed I was just looking at the BOER website, and the last time that minutes were published was 2024. I was just curious if there's a timeline for publishing the minutes from these meetings. Maybe that's kind of getting to your question of accountability. people being able to see the minutes from these meetings?

I did not know that that date was the last time they were published, so I will check, yes. Okay.

So, and my final set of questions around, so you said that the properties that tended to be the ones appealing were office properties with vacancies and multifamily with more than four units.

Those are the biggest changes. A lot of companies appealed, didn't see changes. The biggest changes, yeah. The biggest changes.

With the office and the sort of multifamily with more than four units. So my question is, do you have data? Because as the mayor said, this becomes political. We talk about housing all the time, right? So from my perspective, short-term vacancies in the housing market could signal to owners of property, hey, I need to drop my price. And we've seen across the region rents have kind of stabilized the last couple of years. But there's also the potential there that at this peak of the market where there may have been vacancies as we're building more to accommodate people coming here, that there were some vacancies, right? So can you give data on those multifamily residential properties that appealed with the highest value? with an appeals of the highest value. Can you tell us where those are located? Is this downtown, different parts of the city? Can you tell me if that's newer buildings, older buildings, age of the building? Do you have data on that?

I do not have that data on hand, but we can definitely look into that. I do not believe that we saw as a county dramatic changes in value to... duplexes and quads and triplexes amongst the city. These are apartments like complexes.

But are they new complexes, old? Are they located?

They're all over Durham, but I'll definitely get you that data. I don't think it was focused in one particular general area. This is scattered throughout the county.

Age of building would be really helpful. The other question is, so then if you appeal at a point where if there's a short-term spike in vacancies because we're building more to accommodate residents, Does that mean that that value then gets locked in until the next reval or is that sort of something that's – if your vacancy is high one year, then it kind of goes down as the market – as we sort of fill in as people move in. If vacancy is then lower over the course of the next four or five years before the next reval, does that mean that valuation is still locked in for that property or does it – it's going to be locked in, isn't it?

Their value is locked into the next reappraisal. Unless something happens to the property, they add something to the property. There's some reason to change value based off of characteristic changes. But we cannot change a value just because market changing conditions. That's the point of the reappraisal.

And the biggest is going down, but it's once it's set there. Up or down. Yep. Okay, thank you.

All right, colleagues, you have a question? Okay, one second. I am going to request that we kind of close this up, but I'm also going to request, I think when we first, when we were approaching the property evaluation You did a lot of presentations. I don't even know how you humanly did it. I know I had you at least 12 during the financial playbook tour, and then all the others that you did. But now we have more information, more context. We also see the impact of our budgets based on this tax information. I think it would be really helpful to do a deep dive information session on this. So I'm going to allow a few more questions, and we're going to move on. I want the manager to address and process things if needed. But I am going to request at a later date that we do a deep dive on understanding fully. Because I think what's happening here is a lot of discovery. We're finding some vulnerabilities in the systems and the massive impact on a governing body, partially, that has such significant impact that we we're not really appreciating to its fullest extent. And then how we need to really hash out this conversation more. It is going to get political. There is a lot of things that even you said today in explaining it that could be interpreted one way or the other. And I can only imagine our next zoning case, well, the tax office said, and I think that we need more context around that to have a fuller conversation. So I'll go here to...

Councilmember Cook, and then we'll... Can I just say I support that deeper dive.

Sounds good. Thank you for that. Councilmember Cook?

I'll be brief. I just want to clarify, I think I understand, but when you say that there are 3,000 appeals that were unaccounted for in the budget, what you're saying is because those were received so close to the deadline that that was not calculated in the holdback amount? Okay, just wanted to make sure. And you said that there were 233 that were done after that 6-16 deadline? We received 2,300 or so. We ended up at 10,533. So it was about 200 or more, slightly, that were admitted after June 16.

And is there discretion in accepting those late? Or was everyone, within a certain amount of time, all appeals accepted? I cannot answer that question. The Board of Equalization and Review and the Property Tax Commission both have the authority to admit an untimely appeal.

OK. So I would love some more information to hopefully facilitate a deeper discussion. The information that I would like is that information about the late appeals. To build off of what Councilmember Rist was saying and I said earlier, about success rates of these properties, and I would like to see them broken down, not only by location and potentially age of the building, but also by I mean, I would love to see just as much detail as y'all can provide, if y'all have broken it down by age, race for residential properties, size and income for commercial properties. As much information as we can see and have that be in comparison to the percentage that was shifted in the reappraisal value reduction.

We do have addresses. We do not have demographic information. Like, we don't have age and race. We can probably figure out a way to get that information, but we just have parcels and addresses in our system. We don't have an actual age and race...

Okay, I thought, for some reason I'm remembering back when you brought this to us originally that we had a conversation about equity and particularly about race justice among valuations of property, and I thought that we did record that in Durham.

Somebody did do that. That wasn't Durham County. We gave data to support that project, but that wasn't... And I'm not saying we can't find that debt. I'm telling you that the tax administration, our system doesn't have fields that address or specify age or race. We have addresses. We have the year built of the home. But it's characteristics of property, not people.

Okay. So I guess what I would like to know is in this appeals process, I mean, I am curious to know if, back to Council Member Baker's question, if the Board of Election, or the Board of Adjustment, the Board of, thank you, BOER, sorry, acronyms this morning, If there was a general trend of going with the lowest of the three valuations, I would be curious to know that. I would also be curious to know what valuations were submitted by folks who did appeals. And then particularly, I'm interested in understanding the shortfall that's made up by commercial appeals. I know you gave us a rough estimate. I would like to know. more details in that number, and I think you said that there were about 40 properties that had a big bulk of, and more detail would be better there for us to understand sort of the proportionality of the shortfall that's made up by specific types of properties.

That specific example about the 40 properties was just an example.

Okay, just an example. I'm not going to take that.

It was real. It took place. But I'm saying that was to show the difference between value between residential properties and commercial values. That was 40 properties with a million-dollar value together versus the commercial properties that I tried to show how much the impacts were per property.

Okay. Well, as much information as we can get about that would be helpful for us moving forward. Thank you so much, and thank you for your time and the presentation.

We're going to go to Councilmember Burr, the DNR, Manager Ferguson.

Just following up on the conversation in regards to 200 or so that received late. I mean, I think that it would be helpful. I'm not going to harp on it, but like to let the method of submission, because I'm thinking like snail mail. And so possibly someone received it through the USPS. So it may be a rob. So could you include that method of delivery for those late appraisal as well? Just kind of set context for it.

Thank you. So I just wanted to thank the tax administrator, Mr. Doyle, for an excellent presentation in a very challenging year and appreciate him coming, giving time to the council. Our staff, as well as Mr. Doyle, I know have been taking copious notes during this conversation. It's clear several of you have expressed an interest in a follow-up conversation in the deep dive process. Primarily today, we wanted to get you the opportunity to understand the appeals, since we've indicated how much the appeals are a factor in this year's budget process, and I feel like there's been a full discussion of that, but I just wanted to acknowledge for counsel that we will convey your interest to the your partners at the county in a fuller conversation about the process, and we appreciate all the feedback. If you have additional questions that weren't covered today, if you could get those to me, we'll create sort of a summary for our partners at the county, and we can all collaborate on the best way to have that conversation. Thank you, and again, I want to thank Administrator Doyle for his time today.

Thank you. Thank you for your service. Colleagues, do we need to take a three minute break? All right, let's take a three plus two minute break and come back at 11 plus one, 11.20. All right, recess.

Colleagues, the mayor is going to be a couple more minutes, but all right. I hate that um hey y'all colleagues I think I might get us started so that we can keep us moving where we have enough folks here I'm trying to start us off I'm gonna use a gavel here in a second okay thank you I'm gonna go ahead and start us off so we can keep our our agenda as close to one as possible I know several of us have to leave pretty much right at one so Director Reardon, back to you. Thank you.

Okay, well, we'll move on to our next presentation, which is from our Human Resources Department. So I want to introduce Aaron Miley, who is our Department Director for Human Resources.

Thank you. Good morning, Mayor, Mayor Pro Tem, Council Members. I'm Aaron Miley, HR Director. This morning, we are going to walk you through the pay and benefits portion of the proposed budget. We have worked with the City Manager's Office and Budget Management Services to ensure we balance fiscal sustainability and our goals in retention and recruitment of employees. That said, we believe the proposal before you is both reasonable and responsible under the circumstances. The recommended budget also includes the compensation and classification study, which has been mentioned a couple of times. We're going to go into greater detail in that. The study provides us an opportunity to refine the city's pay philosophy, strengthen equity and market alignment, and build a more sustainable long-term compensation plan for the city. This work will help us continue positioning the City of Durham as an employer of choice. I WOULD LIKE TO WELCOME OUR ASSISTANT DIRECTOR, JIM REINGRUBER, UP TO WALK US THROUGH THE PAY AND BENEFITS PORTION.

THANK YOU. GOOD MORNING, MAYOR, MAYOR PROTEM, MEMBERS OF COUNCIL. I'M JIM REINGRUBER, ASSISTANT DIRECTOR IN HUMAN RESOURCES. TODAY WE'LL GO THROUGH, LET'S SEE, THERE WE GO. Today we'll go through recommendations for pay and benefits for the upcoming fiscal year. And we'll start by setting context by showing where we stand with pay currently, how we got here, and some considerations moving forward. Then we'll walk through the actual pay recommendation. Next, I'll provide some information relevant to pay for performance issues. And finally, we'll walk through benefits. All right, so hopefully this slide looks familiar. You saw it at the budget retreat a few months ago. This is just a refresher on our four full-time pay plans, and we'll talk about them more throughout the presentation. The actual plans are also contained in the appendix of this presentation. Okay, so we have three step plans, as you all probably know. There's the general step plan, there's the sworn fire plan, and then the sworn police plan. Each of them have seven pay grades, and each have the steps 5% apart. That was a change to the general step plan a couple years ago when we implemented the last pay study. So when somebody moves a step, it's a 5% pay increase is what that means. So each pay grade has between 10 and 12 steps on it. You can see the various salary ranges for each of the pay plans. And then we have the open range plan. So this is not a step plan. This plan has a minimum and maximum pay amount for each pay grade. There are 15 total pay grades in this plan, and this is the plan that includes executives as well. So I have a couple of charts to help provide some context as well. Here, this chart shows a couple things. Here you can see that generally the longer that you stay with the city, the higher you can expect your salary to be. So that makes sense, right? It does level off once you get past that 25-year area or so, and that also makes sense because Even if you've been here that long, you've been promoted a couple times, maybe you're still probably around the top of your pay band by then. The bubble sizes on here represent the number of employees that are contained in each of the tenure groups. And as of last week, the median salary for all full-time employees was $76,685, and the average was $82,829. All right, I know this chart looks a little crazy, but what it's showing is, so basically all the blue dots that are above the orange line are employees that are currently being paid above midpoint or market. All of the blue dots below have not yet made it up to the market or midpoint of their range. So as of right now, 64% of current full-time city employees have currently made it to at least that market midpoint. So that was a snapshot of where we are right now. Yep. Just to make sure I understand those terminologies, if you can go back real quick.

You said market or midpoint of their pay grade. And so does it mean in some cases, based on our last comp study, we have folks who aren't at market? Or that's not what that's saying?

No. So market is a specific point that's chosen and part of the you can define market in a number of different ways. So, for example, on the general step plan, market was purposefully set at step four of the step plan. So if you're on step one, two, or three, yes, you're below market, but there's, you know, there's reasons that people can be below market. Is that what you're asking? I'm not sure.

Yes, that's part of it. And then midpoint

Of their pay grade, can you just explain that for me? So the open range, for example, you'll have a minimum, maximum, and midpoint. So that midpoint is generally considered the market in the open range. I could get into more details about that, too, because the market we purposefully set also at the 60th percentile of the market. So there's the market, and then there's what we pay. But just for comparative purposes, this kind of illustrates generally where people are in relationship to the market for their pay grade. All right, so let's see. Okay, so yeah, so that was a snapshot of where we are right now. Let's look at some of the relatively recent history to see how we got here. So between structure adjustments and merit increases, overall pay increases over the years have been pretty healthy. The column on the far right shows the approximate percent increase in pay for each year from the combination of receiving structure adjustments and merit increases for those particular years. And as we're going to go into shortly, the proposal for the coming year, as you all already know, is an across-the-board 2% increase. So including the proposed FY27 increase, the annualized increase for an employee that has been here and been eligible for merit over the past five years or so has been between 7% and 13%. So now we're going to look at a couple of, these are actual real life examples, no names, but the first one here is an actual maintenance assistant. This person was hired on step one in January 2020, which was FY20. Back then the salary on step one was $35,131 a year. So not great timing for this employee, actually. We didn't have increases in FY21, and they wouldn't have been eligible for merit that year anyway because they started after December. So this employee saw their first increase in FY22 with that 2% structure adjustment. You can see the series of increases that employee got over the years, including the big one with the FY25 pay study. So now this employee sits on step five, and that's the step, which I'll show you in a minute, is set to become the new DMLW. So good news and bad news with that. The good news is that over the past six and a half years, this person's salary will have increased 48 and a half percent. The bad news with that is that now every new employee that gets hired for that same job will now be on the same step as this person who has been here for six and a half years. This is a great time to remind everyone, and I'll say this a few times during the presentation, that steps do not equal years of service. Steps are in place for merit increases when merit increases can be funded. However, this does illustrate compression.

Quick question. Yep. Is it... So when we're doing the minimum living wage, are we putting ourselves in a situation to say if we want to ensure there is a set minimum wage at 2509, whatever rate it may be, that we're also having to inevitably accept compression?

Well, no, you could increase the entire pay structure by the amount of the minimum livable wage increase, and that's, you know, $44 or $45 million a year. But it has to be paid for. Right, exactly.

We would have to potentially raise taxes or make cuts elsewhere to find the money.

Correct. All right. All right, so now let's switch gears a bit and talk about a fire driver. This driver was hired in October 2020, so that's FY21, as a recruit. And back then, recruits were paid $34,382 annually. FY22 was a really eventful year for this employee. First, there was a 3.5% structure adjustment. with the adopted budget. And then this person was promoted to firefighters, so I received an increase for that. Mid-year back in FY22, there were significant additional structure adjustments approved for fire and police pay plans. So as a firefighter, this person received an additional 15% structure adjustment that year. And then in FY25, as part of the pay study, one of the other things that we did that probably got missed in the mix a little bit was standardizing the merit increase timing for sworn personnel. So it had been anniversary dates, and we moved that to be July 1st like the rest of the city. So this person got the 17.65% structure adjustment that year, which all firefighters got. They got their 5% anniversary date merit and their regular merit increase. So this year has been another big year for this employee. They got the structure adjustment and merit, of course, but they were also promoted to driver. ALL IN ALL, WITH 2% ADJUSTMENT THIS COMING FISCAL YEAR PROPOSED, THIS EMPLOYEE'S SALARY WILL HAVE INCREASED 98% UNDER SIX YEARS.

THANK YOU. YOU KNOW, WHEN WE TALK TO SOME OF OUR CITY WORKERS, THEY'LL STILL NAME, LIKE, OH, WELL, I DIDN'T GET MY STEP, YOU KNOW, AND THEY MEAN THEIR MERIT. They've been here for a number of years.

Sure.

It still comes up as a conversation, like an FY20 and 22, right, where you see there's no merit. And they'll still say to you, well, I didn't get my step. And I know a number of years ago, there was analysis. I think it was the year that we did the big jump, so FY25. Staff provided in that time a chart that even if they had been given their step for those two years, they were still coming out ahead with that market adjustment. And so I think it would be helpful if that could get highlighted again, daylighted again.

Okay.

I think people just keep forgetting, and it's a consistent... talking point from some of our city workers. Well, I didn't get my step. And I've been very candid with them. Like, you're raising things that happened six years ago at this point, number one. And number two, I remember, because I was on council, actually, you're still ahead. Even if we'd given you your step, you're still making more money today than had, you know, and I remember that slide because that was analysis done during the big market adjustment. And I think it's helpful for city workers to see Even if you've been quote given your step that year you would be making less money right now Had we given that to you than if we'd done what we did And I think yeah Which is the market adjustment and I think that that's important for the 3,000 employees almost that we with you know That we employ that that is broadly understood in the organization Because I don't I don't think it is so that's one and then if If there could be some kind of... Because what we're also hearing is, well, we don't want the 2% to structure. We want it to our step. And so, again, what is that analysis and what does that mean? Does that make sense, what I'm saying? So there's some asks right now to council, which is, well, we don't want the structure to plan. We want it to our step. That is what we are being asked. And so it would be helpful for staff to, again... When folks are saying that to us, do they understand what they're asking? Yes or no? And then what are the dollars associated with that ask or that differentiation?

And I'm not sure I see the differentiation there because the structure changes the value of the step.

I get that. But that's, again, that's what we were being asked in some of our conversations with some of our workers. And so since this is the opportunity, I would like that brought with a table with actual dollars. So when folks are advocating for things or they're being told by others advocate for this, they're aware of what is it that they're actually advocating for. Okay.

Thank you.

And just for additional context, I've heard, can you just mention a little, categorize all the types of merit pay per anniversary merit and all those. Can you just break down those different, and then also the eligibility, because I think you did provide exclusion. I know we're not doing it this year, but just like the exclusionary factor of like, oh, this person didn't join by December, so they didn't qualify. Sure.

Sure. So the easy answer with anniversary is it's no longer a thing. So we changed that in FY25. The eligibility criteria for merit generally is you would be eligible for merit if you started before January 1st of a given year. And of course, your performance rating has to be adequate so it's a little different with some of the like if you're a recruit and police or fire it's a little different there are different parameters around that but generally that's that's the case for for most employees in the city I guess I'll do somebody else have their hand up no okay All right, so those are some of the issues. So what do we do about this? Well, we've mentioned it a couple times, but cue a classification and compensation study that's proposed for this coming fiscal year. So we have three primary goals for the study. That'll be to address sustainability, equity, which we illustrated those issues on the previous slides. And of course, competitiveness to be able to continue to successfully recruit and retain great employees for the city. So, of course, this is going to involve a good bit of engagement with our employees. We do that every time we do one of these studies. That's an essential component of doing these. But I also want to highlight that we are including a robust engagement with city council and executive leadership as part of this to really establish the more granular goals and parameters for the study and discuss the city's compensation philosophy that will ultimately shape the study. So more to come on this as the contractor is chosen.

Yes, I'm sorry. If you could make the previous slide about those three points about sustainability, right? So can you explain that the last bullet under sustainability that the system needs a defined maintenance plan to avoid large periodic corrections? What does that mean?

Certainly. So what we're talking about is creating a plan that can weather some of the ups and downs that we see in the economy and the city's cadence with how revenues operate. This is an exceptional year, of course, with Director Reardon laid out some exceptional circumstances. But we want a plan that we're able to, when we do structure adjustments, when we build in the mechanism for merit increases, that it's flexible enough to be to be useful over time and that we're not, so FY25 we had a big, we had a large periodic correction. Part of that was not having done a study for a few years, longer than we should have waited. But part of that also was just the structure, the way we had the plan set up and what we had done in the meantime. So it really is just about longer term planning around it and making sure we have plans that work for us.

So that includes like regular compa class studies?

Studies and also, you know, ways to keep pace with the market, with the ranges and all that.

And also potentially ways to address some of the – and number two, the merit increases, more flexibility on merit increases, right? So it sounds like there's a number of things that you and the manager are considering.

I think really the point that Jim is making is, you know, We don't want to have to consider new pay philosophies every two or three years. I don't think our employees want that. I don't think the council wants that. I think we saw in the dynamics that came to a head this year that some of the fundamental principles that our current pay system is tied to appear to not be sustainable in our economy. order to give our employees the most reliable information about what they can use to plan their future with the city and to give the council the most reliable information we can we want to make sure that we set up a system that keeps us commensurate with the market but that doesn't involve redoing the system every three or four years we'd like to calibrate an existing system and you know every five or ten years if there are major changes in how the world pays employees and people's expectations change then sure we need to revisit the system itself but I think right now I have a concern that you know having to go back and re-examine all the fundamentals of our system having done so fairly recently it is a pretty big warning sign that the system we have perhaps is based on some assumptions that are not viable and sustainable and so trying to get all those inputs into the system and to give you all the best information we can to help you give us direction on what kind of pay plan you want for your employees, I think, is a critical goal that I have this coming year. And I think that's really what the table that Jim is setting.

Thank you. Just to follow up, because I don't know. What's the industry standard on the frequency in which the pay study should be conducted, like just a normal?

Sure. So the last study that we had recommended a three-year cadence with possibly, I'm trying to remember exactly, but they hedged a little bit on the public safety part because that market can move faster than the other ones, at least in the current climate.

I don't know if this is the right point in time to ask this, but just thinking about just our different classes of workers, when we think about the DMLW, how do we look at that in terms of our fire personnel, in terms of the shifts that they work? Is that factored in how we calculate what it means to earn the minimum livable wage? with the kind of 24-hour shifts that are worked by members of the fire department?

Sure. I'm glad you brought that up. This has been a topic of discussion at different times in the past. The way the ordinance is written and the way that the minimum livable wage is calculated is on an annual basis. So regardless of the number of hours worked as part of a shift, that annual amount is the Durham minimum livable wage. Now for ease of understanding for a regular, you know, full-time employees, we break it down into a hourly amount, but that's, the ordinance is the annual amount.

So when you look at over the course of a year and what someone is making, based on the hours that they've worked, they should be earning the minimum livable wage?

Yes, on an annual basis, yes. Correct. All right, so right now the RFP is actually on the street. Our responses are due on Monday, actually. Some of the highlights of the scope that we asked potential bidders to offer are shown here, and I'm not going to go through them all, but I do want to highlight that we have included part-time in this study, which we've had discussions about the past couple of years. We've also included a look at the minimum livable wage methodology and asked that other total compensation components, like benefits and other things are factored in. So those are some of the highlights of the scope. Okay, so now let's move into the recommendations. There were three goals for the proposed adjustments and, of course, within the overall goal of making a recommendation that fit the budget. We want to implement the DMLW, keep pace with the market, and do both of those in a way that still maintains our pay system, just meaning that the structures still have logic and make some sense. So here are the recommendations summarized. We are recommending a 2% across the board structure adjustment for all full-time and part-time plans. There are a few minor caveats to that, which I'll go into, but that have to do with the minimum livable wage. We are not recommending a pay for performance increase, budget reasons, and I'll show you why later in the presentation. Finally, we're implementing the DMLW per ordinance, $25.09 an hour, $52,190 a year. And as part of those adjustments, fire recruits will be getting a 13.4% increase to bring them up to DMLW. And we're also doing slightly higher adjustments to the first two pay grades of the general step plan. And that's just in order to be able to start the step plan at DMLW and have the grades, the progressions flow properly for the grades. And I'll show that later. You're gonna you're gonna show it I do have a question when we get to that sure All right, well this is this is the obligatory DMLW slide I think you all have seen this we showed it at the retreat if the if I'll just point out if the ordinance remains the same we'll be standing here next year talking about a $27 and 30 38 cent DMLW All right, so let's get into discussing the effects of the recommendations. And we'll start with the general step plan since that's been the one that's been most affected over time by this. This chart shows the current step plan. If we ended up doing no structure adjustments, the orange highlighted steps and the The light blue highlighted steps are no longer in play. So that would move the total number of inactive steps from the three currently that are dark up there and to 15 total. And as a reminder, steps 11 and 12 are frozen as they're over market. Getting into the recommendations specifically for the General Step Plan, most employees will see a 2% increase. But remember when I just said that the first two pay grades would be adjusted more than 2%? So here's that explanation. Let me go back. So that's that grade A12, that very top one, increased by three point nine five percent and what that accomplishes is making the value of step five twenty five dollars and ninety cents so that would be the that her twenty five and i'm sorry that dml w uh... the uh... Grade A13 would then be proposed to increase by 2.6%, and that just accomplishes not having a situation where we've got the blue highlighted steps that kind of don't make sense with the progression of the plan. So that would be the reason for those two slightly varied adjustments. All the other five grades in the step plan would then increase by 2%. Steps 11 and 12 wouldn't move other than that step 11 on grade a 12 which if it didn't move would be bypassed by step 10, so we are Moving that to equal step 10.

Yes, you just talk about I mean I see I see how the structure ends up but can you talk about how you came up with those percentages and Which steps at the bottom you obviously are looking at the compression, but which ones you targeted specifically I?

Which ones we targeted?

With the more than 2% increase. Oh, gotcha.

Yeah. So if you look at grade A12, the very top pay grade on here, that whole pay grade, steps 1 through 10, would get that 3.95% increase. Grade A13, every step on there, would get the... the 2.6% increase. I'm sorry, every active step on there. So you see the orange highlighted steps, those are steps that would be inactive now because they are below the new minimum livable wage. The percentage, 3.95% was used on grade A12 because that's the math to get to that $25.09 an hour for step five and save that step. So we don't have to move employees off of that step. And in order to save step four, that would have been a... quite another sizable increase to be able to save more steps. So that was the amount needed to save that step and sort of create that nice clean progression that you see down in that second chart there. And if we had just raised A13 by 2%, then that $25.11 an hour is below $25.09 if we just did that. So that step would be lost at that point. So those two different adjustments were made to save steps.

So we took the totals and went backwards to get the percentage. Correct. Just out of curiosity, do we have an idea about how much the average increase is for 2% across all steps?

Averaging I could get that I don't have it right off the top of my head I'd be curious to know if we could see that things sure Let's see so yeah this this The bottom chart there shows we were able to save five steps by making those those adjustments and it does keep the smooth flow throughout the pay plan, so We don't have any any light blue fields in the in the proposed chart

Can you explain again, so steps 11 and 12 are frozen because they're above market? Correct. So why are they frozen? Why they're there was like what is the value of having there?

There are people on those steps so we the when we implemented the pay study in FY 25 The steps were frozen after all of the adjustments were made as part of the pay plan So if you were on step 10 you move to step 11 and then step 11 was frozen. So So there are there are people on those steps and All right, so, well, saving steps is great, but what does that mean for our employees? And here's the before and after for DMLW moves. There are 121 employees that would need to be moved, and you can see the compression that this creates. So back when I showed the maintenance assistant example from earlier, our employee is on that step five of grade A12, so the first active step in grade A12. And they currently have 19 other people on that step with them, so a total of 20 people on that step currently. And after moving others who are below DMLW, after it becomes 2509, they'll have 63 total people on that step. And also, nobody new that will be hired will be below that step, so that continues to add to that compression. So that was the general step plan. The next most impacted plan is the fire plan. And this, I'm sorry, that kind of all ran together on the slide. I'm not sure what happened there, but hopefully you get the idea. So the chart on top is a little deceiving because there's only one orange highlight. So that doesn't look like a big deal. But the issue is that currently fire recruits are going to need a 13.4% adjustment to get to DMLW. which moves them up very close to the firefighter entry level. So what does that mean for the plan after the proposed 2% structure adjustments? So in the bottom chart, now the firefighter starting salary is only 2.2% above recruit salary. And currently, when an employee is promoted, they receive at least a 5% increase. So if future recruits are promoted according to that policy, they promoted to step one of the firefighter grade and would bypass anyone on step zero. and effectively inactivate Step 0 for the future. One option to avoid that would be to change it so that recruits promote with a 2.2% increase and also end up on Step 0. And the chart got off a little bit here too, but that red circle is supposed to be around the step zero of fire recruit and firefighter. But this shows the effects of the people on the plan. So this is the current census of the fire plan. And this captures an additional issue, which is related to pay for performance and also impactful to police as well, but in kind of a less way. So what this is showing is we're catching a snapshot here right after a couple dozen recruits were promoted to firefighter a few weeks ago. Several weeks ago, I guess now. In a year when pay for performance can be funded, the firefighters who are already on step zero would move to step one July 1st. And those recruits who were just promoted would stay on step zero. So with no pay for performance, those two academies are now compressed together on the same step. So that's one issue. The other, as mentioned on the previous slide, is that if the five recruits and any additional that join them in the coming weeks are promoted to firefighter after July 1st, according to the at least 5% policy, they would promote to step one, bypassing those on step zero, unless, again, that policy was changed for promoting Recruits in which case they would still compress on step zero So police has some somewhat similar issues to fire but certainly not as impactful recruits are currently below the new DMLW but only by $66 so the proposed 2% structure adjustment more than more than takes care of that and And with no pay for performance, police has the same issue as fire with academies potentially compressed. However, at least when recruits are promoted to officer, the at least 5% policy still puts them at step zero because those grades are still more than 5% apart. So there wouldn't be any potential bypassing there. Part-time adjustments are simple. They would also get the 2%, and those eligible would... Oh, yes.

Before we go off of fire and police, I just want to follow back up on Councilmember Kopach's question, because that was one that I had and one that we hear a lot, which is that by hour than breakdown, we're not seeing a minimum living wage. Can you just speak? I know you said that it equals out annually, but it does seem that there are more hours worked by those employees, and therefore they're not compensated at the same hourly rate. So can you just talk about that and why it's done that way?

Correct. So, again, see, this is the first presentation I've done in front of you guys in a while that I haven't put the ordinance in here, and that would have been helpful to go back to at this point.

Jim, do you mind if I do it at a high level, and then we'll go deeper if we need to. So, high level. The purpose of the minimum livable wage is to make sure an employee makes enough money to live in Durham. We calculate how much money you need to live in Durham based on Durham rents, and we say that you need to make X in a year to achieve that minimum livable wage. What we ensure is that all of our employees make that variable, make that X and get over that line in a year. That is how the ordinance tells us to calculate it. How much money do you need in a year to get there? If you get there by working 20, 80 hours, which I believe is the calculation for a 40-hour week, or for some higher hours, you still get there. So when the question is, what is the requirement of the ordinance, the requirement of the ordinance and the philosophy of the ordinance is to make a certain amount of money annually, and that is what we have asserted repeatedly in the conversation that we are achieving. If the council or the ordinance intended for that to be translated into a minimum hourly wage, it would need to be written differently to do that. And that is certainly something that we could show math to the council for. But the philosophy is you need X to live in Durham, and everybody in Durham is going to make X. And right now, we verify for the council that that is the case for all of our full-time employees covered by the ordinance.

Yeah, that's helpful. It just is confusing, and so it bears repeating since we talk about it in terms of an hourly wage, the 2509, the 27 that we're looking at. We always talk about it in terms of an hourly, and so that's where the inconsistency comes from, or seeming inconsistency comes from.

Not inconsistency, but confusion, absolutely. Confusion, okay.

And so, like, if a, well, go ahead.

Just to follow up, can we actually get the, like, the actual formula for a living wage? And I think I mentioned this as well for just the formulas that Charlotte is using as well in other municipalities that are similar in size around the state.

Sure. We'd be happy to do that, and we'd be happy to bring you a conversation about that formula. Some council members have indicated an interest in revisiting it.

So we're using terminology of hourly for salaried employees.

It eases the messaging.

Yeah. And the ordinance requires us, I believe, to calculate an hourly rate based on a full-time employee. Between 80 hours, right? Yeah, on an 80-hour employee.

Government speak. Thank you.

Thank you. All right. Yeah, again, the part-time adjustments are simple. They would also get that 2% and then eligible folks will be brought up to DMLW as well. Again, just going to point out here that we're going to include part-time in the study coming up. All right, breaking down the cost for the recommendations, the total general fund impact would be just under 5.3 million, and all other funds would be just under 2 million, so about $7.2 million total. The structure adjustments themselves account for about 6.4 million of that, and then moving employees to comply with the DMLW adds about 750,000 to that. The timing of this would be that employees would see the 2% adjustments reflected on their July 10th paychecks. For anyone who needed to be moved for DMLW purposes, that would be reflected on their July 24th paycheck, but we would make that pay retroactive back to July 1st. All right, so with a recommendation for no pay for performance, I want to take a slide to just kind of explain that. And we do say it every year, the pay for performance is subject to budget capacity. But, you know, the city's been able to do it for several years in a row now. So many employees either weren't here the last time we couldn't fund pay for performance or have kind of forgotten about that. I mentioned it earlier, but our step plans don't leave any flexibility when it comes to pay for performance. It's 5% or it's nothing. I also noted earlier that the general, or just a slide ago, the general fund cost to implement the 2% recommendation is about $5.3 million. The general fund cost for pay for performance would total about $10.9 million. So that's why it's not being recommended. That's a tax increase if that happens. So let's talk about benefits. I will say the city offers a really competitive benefits package. We really distinguish ourselves in this area. I'll say outright, we're continuing to offer employees the zero dollar option for employee only medical coverage and they get free generic prescriptions. So those are not small things. Here's a glance at a sample of some of the primary benefits offered by the city. and sort of how they work. So I won't go through each of these, but I think it's helpful to have it in this presentation just to give some context for what all we offer. I will talk about a couple of these because we have some new offerings for the coming plan year. We're including this new comprehensive on-site ultrasound cancer screening for our firefighters. I'll talk about that in a minute. We also have a new Roth option for the 457 plan that employees can choose to participate in with Lincoln Financial. One benefit that's often overlooked is the opportunity to develop your career. We will be rolling out significantly enhanced learning options for employees soon. We've been working really hard on this. We're excited to share it with employees and can't wait to kind of roll that out. People are going to see a big difference in our learning options.

Can we get a heads up before you all put that out so that we can help elevate it?

Sure. Great. We'd love that. I've also listed a few of the many benefits the city continues to offer its employees that are quite popular.

Thank you. When we do our analysis for next year, I think it would be helpful, because a lot of times we do it against government. It would be helpful to see what's actually happening in the private sector right now, which I think is not that. I don't think most private sector employees are getting anywhere close to those kinds of benefits. Right. And that's, at the end of the day, the vast majority of our residents work in the private sector. And so I think sometimes folks forget when they're working I often tell people the best insurance I've ever had, since my dad was a South Carolina state employee, has been City of Durham Health Insurance. And that's a huge cost savings to folks. Sometimes I think that there's a little bit of a missed understanding of what most workers are actually dealing with out in the broader economy.

Sure, absolutely. And one other place I'll mention that since you brought it up is in retirement. You know, people don't see this immediately when they're employed with the city, but having a pension, a state pension, and having a 5% no-strings-attached 401k contribution, that's pretty sweet when you're starting to look at your retirement and go, oh, okay, I actually have some money here. So it's not a small thing. And you're right, the private sector, the pensions are far fewer than they used to be, if at all now. Yeah.

I'm moving backwards. Sorry. But we just did the benefits. I know that we're still going to be subsidizing that for employees. And then even if folks want to bring on dependents, we're subsidizing part of that too. Can you just talk about the cost associated with both of those things?

I actually have a slide for that coming up. Oh, do you? I'm sorry.

No, you're good. You're good.

You're good. So it's one of the last ones we get to. All right, so I mentioned the new fire cancer screenings. We're excited about this, offering this to support our firefighters and their unique needs based on the hazards of their job. We know from talking to the fire department, they've already proactively implemented some procedures that make their employees safer in the jobs that they do. So these screenings are just an added tool to help create better health outcomes for these specific employees. Some of the big cost drivers for benefits include the mandatory contribution to the state pension fund, which I just mentioned. It's going up again this year, so that's a state mandated contribution that the city has to pay. The health insurance cost, Director Reardon mentioned these already, but for the city's self-funded health insurance is projected to increase by 8%, and then dental costs are increasing for the city by 3%. Again, the city contributes that 5% to employee 401 s, no strings attached.

Is that a match or is that a base?

Contribution, correct. Employees can choose to also contribute their 401Ks or a 457B plan. They can choose to contribute as well, but that is not a match. It's just a contribution. Lump sum.

Yep. Thank you.

Okay, so as I mentioned a few times in this, Council Member Cook will get to your questions, there's still a no-cost option for employees to have health insurance for themselves, and otherwise the city continues to pay between 80% to 92.5% of premium costs, depending on what plan and what tier of coverage the employee selects. So for employees on the enhanced health plan, the plus plan, they're going to have monthly premium increases that range between $8.51 to $43.17 a month. And again, that's our higher health plan. Employees on the base plan with employee only, of course, have no premium of share. So that stays at zero. But those who do have a spouse, child, or children, or their whole family on the plan will see monthly premium increases between $10.76 and $19.42. So this slide breaks down the different costs that that the city pays for each level of coverage. And you can see the costs are quite significant for the amount that we pay for employees that even have their families and a spouse or children on the plan. So I think this answers your question, Council Member Cook. Thank you. All right. And finally, our wellness requirements to get the wellness rate for premiums are not changing this year. So employees still have the opportunity to complete these three requirements and get the wellness discount. So no big changes there. And I'm ready for any questions. Any other questions? Thanks for that. Council Member Burris.

Just to revisit, so for the part-time employees that pay study, well, can you initially tell me the logic for not including part-time employees in the Durham Living Wage Ordinance?

So some part-time employees are included in the minimum livable wage ordinance. Those that have a part-time job that is commensurate with a full-time position. So if you have a maintenance assistant, for example, that works part-time, they are subject to the same minimum livable wage. If you have a lifeguard where there's no, you know, full-time equivalent of that, or you have a gatekeeper, somebody who goes and opens the gate in the morning at the parks, school crossing guards, that type of thing that don't have a full-time equivalent, then those are not subject to the minimum livable wage.

Thank you. And I'm sorry, just to follow up. And so when we do revisit this, we want to look at them in a different formula because they're hourly employees, and so it won't be the same formula utilized for those who are

Correct. That's a good point. Yes, that's correct. In that case, we would use the hourly one just as a matter of practice.

Colleagues? All right. Thank you. Thank you all. All right. Next up, we have our capital improvement plan. JJ, there you go.

right good afternoon mr mayor it's mayor pro tem members of council my name is jj scott assistant director for budget and cip in budget and management services uh here to speak with you for a little bit about the FY27 CIP recommendations. Before I dive in here, I do want to recognize that the BMS plays a convening role in this process, especially the annual process. This is a real team event. We really rely on our friends in finance for helping us to do a lot of the modeling, especially the long-term modeling that we got involved with to a deeper extent this year. And then, of course, all of our project delivery departments, many of who are represented here, Today to answer questions that may arise So with that we can dig in So gonna give you a quick rundown of the process some of the changes that we implemented this year some project highlights Go through the some of the details on our proposed appropriations and some of these planned Potential future appropriations gonna put a few asterisks on that and then talk through the next steps of course as with any of these Presentations if you have any questions please stop So first, the process. So we have sort of two concurrent processes going on here. So we have the annual process. That's what's laid out here in front of you. So this really kicks off December, January, where we take in all of our submissions from departments. These are projects that they are proposing for additional funding in the upcoming year. The big change that we made with this year, and I want to really emphasize this, is that we asked them for any project that was going to have any funding needs over the next 10 years that's a lot more information than we had previously requested and so that was a lot of work for them it was a lot for us to go through that but that's what we asked for and that's what we needed to yes Okay, that's what we needed to start to really fill out this 10-year funding model that we've been trying to develop. Question?

I didn't know what was the, what was it before? I can't remember.

So we would ask for the, the real focus was on the next year, the current year appropriation, and then projects that they had a real firm grasp on what additional needs would be, we would take those, but we did not firmly account for those like we are

Okay, that's helpful. Thank you.

Yeah. You can see the other steps in there. So there's a lot of back and forth. We do some scoring. I'm going to give you a little bit more detail on that in just a second. We work on several funding scenarios. And so this is where we're able to put everything in. see where it comes out, and then have discussions about what we might need to move up, move out. We do have information coming in throughout this whole process, so we might make adjustments based on that. With the city manager, we make further adjustments on the proposals, and then we get here. where we get to lay it out for you. And in June, we will adopt the 2027 appropriations. I'll say this a few times. We are only adopting the 2027 appropriations. Everything else I'm showing you is a plan. It is a potential thing that we could do, but it's only the 2027 appropriations that we'll adopt. So that's sort of the annual process. And then what we're also in the midst of is this kind of three-year process of really formalizing and developing a much more sophisticated and detailed 10-year general capital plan. And so last year, at about this time, was the first time that we were able to load that plan up. But we loaded it up with the information that we had. So that was the projects that we had, which did not include that full 10-year solicitation of additional projects. So we started this year with that plan, with what we knew. And this is where we asked for all the additional out-year detail. again first year going through that uh and putting those in um we have created this fundable recommendation and again this is it's not a commitment but it is something that we can do we are confident um the numbers that you in front of us with what we know with the projections that we're making it is something that we could fund over the course of the next 10 years next year we will begin with whatever plan we end up ending this process with, which will be a much more solid plan than what we began this year with. And so from then on out, every year, it should be a process of refinement. Of course, new things will come in, but it should help us avoid the re-litigation of every single project, every single amount, every year, and instead being able to start from a place where we generally agree, okay, this is where we ended last year, what changed, what adjustments do we need to make, and then move forward from there.

Just real quick, appreciate all the thought, the plan that goes in, the 10-year plan. I know we've talked a lot about developing that. As you said last year, we started developing it. This year we're sort of adding data there. It seems like the last time we went on the website, that information is not available yet for residents. So when will that 10-year CIP be actually available for residents to look at and sort of see what's all there?

I'm hoping that the conclusion of this process, when we feel confident that this is something that we can stand behind, and again, with the understanding that this is a plan and not a commitment, then we can start rolling that information out in a more detailed way.

At the end of this sort of budget process, like by June this year, or is it by the end of year three? Is that...

So we'll speak with the manager and with staff, like what level of detail is appropriate. I mean, the material that we've shared with you is now public, and at least that would be able to – that will be up on our website, actually. Is there additional information?

No, I guess, again, because I think if you go on the budget site, you can see that the proposed manager's budget, you still can't see the CIP. I'm just wondering, residents are asking, when can we see the 10-year plan? So when will that –

Yeah, I'd be happy to ask staff to make that publicly available as soon as possible. Anything in this process is public information now. The 10-year plan is public information. So to the extent that it would be useful, I know I didn't want to speak on behalf of JJ because I know they've been doing a lot of work to update. the cip stoplight report and a lot of the publicly accessible pieces so i don't want to commit them publicly other than to say i don't have any objections to us going public with that information as soon as it's in a readable digestible format thank you yes and just to reiterate this this is this will be on our website uh shortly so this this will be it will be there yes

All right, so I mentioned the project scoring criteria earlier. So these are the criteria that we ask our committee to review each and every project against. I did want to clarify, so there's a little note down there. Projects with different funding sources don't compete directly. We score every project. But if you have something in the water sewer fund, that is not going to compete against some of the general capital projects. So you can see those criteria off to the side. Moving on. So while we do assign a score, that's not the only thing that we consider. I mean, these projects are complex. They're multi-year. There's a lot of things that we need to understand before making a firm recommendation. And so these were kind of the three guiding overarching ideas that we were really focusing on in this process. And so you're gonna see it when you look at the funding list, when you look at the highlights, existing projects that needed additional funding to complete, that was our top priority. We want to wrap these projects up, give them the resources that they need, make that commitment, and be able to finish those projects. Maintenance and replacement of existing infrastructure. Again, these are investments that the city has already made. And as we do our evaluation and understand that this is still Infrastructure that that we need that serve that can serve its need we want to maintain that and or replace that as needed and then of course imminent health or safety concerns so anything that is a threat either to Employees or the public we want to address that as quickly as possible So some of the challenges I mean more requests on projected capacity. That's not a new. I think where some of those requests or some of those inflated costs came from were a little bit surprising. But again, having gone through this process, Everything is more expensive, and when it's a multimillion dollar project, a few percentage points on that is significantly more expensive. So we had some of that increase that we had to deal with. I guess that's actually the second bullet that I was getting to. And then looking at this 10-year plan, again, in a new light, new detail with additional information, trying to strike that balance between How much should we appropriate now? And how does that affect our potential future capacity? So there are a lot of discussions around, what do we do in FY27? What do we have? So maybe we have some available balance on a certain project. And so we don't need to commit additional funding this year. And so we could push it out, keep it in the plan, but push it out. And then some that we did not put additional funding into right now. And then, of course, the recognition 10 years is a long time, and there will be things we are not currently planning for that we will need to consider, and so we do want to keep some capacity for that. So there are also some other needs, some needs that we do know that are not currently in a multi-year funding plan. And so just in the general capital, which is really the focus here, we talked about this a couple of weeks ago. supplemental funding the through the bond for street and sidewalk maintenance this is the last year that that's included in the amount and so the plan does have that go back down to our previous appropriations it's 15 15 for street and 5 for sidewalk the bike then that goes back to then after 27 goes back to like How much for streets? So 27 is the 25 and 10 that we've been doing. 28 and few, so the planned amount goes back down to the 15 and five.

So 15 for?

Streets, I'm sorry. And five for sidewalk maintenance. Yep, sorry. Good clarification. We have several plans. I called out the bike walk plan, but there are several plans that are either out or in development. Those, any costs that could be associated with those are not included in this plan. We have several facility assessment studies that are ongoing. There's one for Fire in particular, and then we have a series of assessments for the rest of the city buildings. There's not currently an accounting in here for specific big needs that come out of that beyond our regular maintenance. And then some of the other funds dedicated housing funds. We have some homelessness capital needs. We have some future affordable housing needs. Those are not accounted for right now. Transit fund, parking funds, just some examples of the costs that could come out of that. Again, we do not have existing long-term multi-year plans. Many of those are in development, but they were not part of this annual process. So some of the project highlights. Parks, trails, and recreation, so you're familiar with many of these. As I said, these are, for the most part, existing projects that needed additional funding to get them over the finish line. And then I did want to call out, I put it on this slide, but it goes for many of the other projects. We're only talking about projects that needed either an FY27 appropriation or have a planned potential appropriation in the future. There are many, many projects are on the ordinance that are funded that to the best of our knowledge have the resources they need those are content we're continuing work on those that's what's included in that quarterly stop right stoplight reports why there's 300 and something projects on there there are many more projects than what we are just talking about here today transportation projects are some of the more visible projects here. Again, many continuations. So these are projects that we can contribute to each year and the departments find the best way to apply those resources. Some of the big facility maintenance costs that we see coming up, again, a mix of city facilities. So we'll finish off Fire Station 19. We'll begin 21 in a few years. Have some additional resources going towards fire station security. some of our frontline workers that environmental and street services building we're gonna do some upgrades there finish off the emergency operations center and then we do have some other facilities around the city that we contribute to like the Carolina Theatre so we're planning to fix an elevator over there our enterprise funds again this is the stuff that you don't often hear about but is a tremendous portion of our actual resources, again, funded by fees. So these are part of their multi-year rate models. You've had specific presentations on those, but just a few examples there. And again, you know, I know I'm really harping on it, but just some of the terminology that I'm using when we refer to this. So on these lists, I'm listing a department. It's sort of for convenience that is the department that it might be associated with, but we often have different departments either assisting with that delivery or managing that delivery. So I just wanted to clarify that. I simplified the funding sources, so you're going to see a lot of like debt listed there there's actually multiple things that's what our team back there is figuring out which type of debt or you know some of it might be paid by cash but the big point is the ones that I differentiated those are projects that are not competing directly against each other so we might have moved up a project that's eligible for impact fees because That's what we need to use impact fees for FY 27 appropriation again. That is what you will formally approve this year the future planned appropriation So that amount is something that we can do and I think every year we can get closer to saying this is something that we can plan on that we can bank on and right now i'm comfortable saying that this is something that you know with what we know about the city's finances um future growth all that stuff this is something we think we could fund over the next 10 years there's no formal commitment with these so these are all the projects um Again, our big ones up at the top there, pavement maintenance, finishing up the EOC, south campus renovation. I'm not going to read through the whole thing. You have the list there. Second to last column is that FY27 appropriation. That's what will go on our ordinance. And then the total future planned appropriation, so it ends up being nine years, is on the right there.

Mr. Member Cook, you had a question?

I didn't want to interrupt you. Do you want to keep going? OK. I'm just curious how much the big ones up here, we've got a lot of sidewalk projects and things that are, I know that the bond money is ending and we don't really have supplemental outside of what we would normally have in our CIP. Are we talking about bond scheduling as a sort of more regular debt servicing? And what does that look like with this 10-year plan that's ongoing?

So that would be one way to supplement the funding for either additional funding for these projects or other projects that you want to accomplish. So yes, there are general discussions around the bond. I think we would take direction to explore that further.

Yeah, that was kind of my question. So if we wanted to explore that further, y'all would want sort of a council discussion about that? Or will it be presented by staff, I guess, is sort of the question here? Because we've talked about being on a bond schedule previously. So just want to know what y'all need from us. I don't know. I saw a general sort of wave of the managers.

I think the mayor pro tem has a comment that helps answer your question. So I was going to defer to the mayor pro tem.

Thank you. That has come up for us. For many years, there was not appetite at the staff level. And I think that's changed, that kind of philosophy of bond versus not bond. And my understanding here as a conversation is we need to have a conversation with our county colleagues, because we know that they also need to be putting bonds in front of the voters, especially around school improvement, building facilities. And so I think maybe having that as an agenda item at our June meeting would be prudent. Yeah, we made a decision to run a bond on a even year last year, and I never want to compete with them. Like, we never want to have a city and a county bond competing against each other on a ballot. So their sequencing matters as well. I think initially, at some point, they were going to put a bond this year in front of the voters, and that didn't happen. So we do need to have a, I think, at least, we need to have a conversation with our county counterparts as to what they're thinking their schedule is going to be so that... we have a better understanding on our side.

Then I'll close out the conversation. I do think, especially as council turns over, or we've had different folks in these chairs, it's worth revisiting the conversations about what are bonds good for? What is the CIP good for? What is it good to have standing capacity to do versus what do you want to go to the voters and ask them to do? completely concur that i think there have been different philosophies that have informed prior bonds and bonds have not been a major part of our program uh that is absolutely the council's discretion and decision so at this time the the staff is not immediately developing the next bond program And I would concur, and I think the presentation captures this, that this presentation should leave you with the understanding that there are a number of projects or needs that have been talked about that we currently do not have funding for. So conversation about increased funding to the CIP or a bond or a combination of those two things I think very much should be in our future if you want to deliver more projects because this is definitely a plan that, while I am proud of, is definitely constrained.

All right, I'm gonna click through a few tables here, but please stop me if you have questions. Sorry, I couldn't even tell that that had changed. So here's the second slide, some of the smaller projects. Again, General Capital, FY27 appropriations. On this slide, we're showing some of the projects for which there is not an FY27 appropriation, but for which we are reserving capacity for future needs. And then these are projects. So all the previous projects that I showed you were existing projects. So those are projects that had been added to the ordinance previously. These are considered new projects. You'll see the majority of these are one-time maintenance projects. So something broke and we got to fix it. The one one of the big exceptions up at the top is some additional funding for a new curb ramp and curb And gutter repair and so this is a new program that ESS is going to roll out. It's to support our Repaving efforts, so this will allow us to be much more efficient in that area There And then again, some of our enterprise fund projects. Water sewer first. You can see it's an order of magnitude difference, but clean water. And our stone water projects. Finally, we are working on a multi-year model for fleet funding. This is something that should have some predictability to it. And so they are hard at work developing that. For now, these are the FY27 appropriations that we are planning on. and recommending. So next steps. So capital has gotten a lot of attention, rightfully so, the last year or two. And so this will be one of the big initiatives, one of the big focus points in our strategic plan update. So we are actively developing several initiatives around this. We're of course always looking to improve our forecasts, so that's working with our project managers to understand what they need to help communicate needs better and progress, monitoring that performance, so we know that we need to improve our communication to the public and to ourselves on how a project is actually doing, again will allow us to improve our recommendations to the manager and to y'all and then you know it's it's the plumbing but the we have some major systems that are going to be coming online over the next couple of years that well they should open up fantastic new opportunities for us to better understand our projects and keep track of them financially, it is work in and of itself. And so, in fact, they are capital projects on their own. And so with that, I will take any questions that you all may have.

Thank you. Thanks for the presentation. I'll just jump out there first and say, This is one of the most promising but also frustrating parts of government because these are the things that people see on a daily basis that they participate in. We drive on the roads. The infrastructure is what we use to facilitate our daily lives. We play on the tennis courts. We ride our bikes on the bike lanes. And yet it also seems to be some of the most expensive things to cover. So I just want to put out there to our city staff and to Mr. Manager, you always challenge the status quo of doing this work. For some reason, when... Projects come before the government. It's like a slice of cake could be $3, unless it's at a wedding where it's $20 per slice. Government can be really expensive. I don't understand the depth of why that is, but I would please, please, please, please press upon our city staff, our leaders, our directors, to always seek the most innovative ways of doing what it is that we do. I'm going to say this again. I don't know why we don't have our own cement yard. We have enough city-owned streets, not even state-owned, but city-owned streets to stretch from Durham, North Carolina to Dallas, Texas. That is enough asphalt and cement to where we could have our own facility to manage, and yet we still outsource it. So we don't control that cost. And I don't accept how difficult the formula is to make it. I don't accept that or why we don't have it. But I do hope that we'll continue to look at creative ways of bringing down the cost of meeting some of the direct needs that our residents have an expectation for. Not having to wait 20 years for something and not having to break the bank to do it. I'll just leave that out there. Mayor Pro Tem.

Thank you. I appreciate this. And in general, I think as you all develop those systems that you shared on that, I guess, the next step slide, it would be great to have regular updates to council. As council members, this is probably one of the things that we hear the most, the loudest from residents because they see the beginning of a project or they see something broken and they're like, when's this going to get fixed? And rightfully so. So I think that's one. Finally, when I'm looking at the table, so the water and stormwater, that's its own contained universe. It's always seemed pretty straightforward to me. When we're looking at the general capital projects and we look at the appropriations for, I guess it's I can't tell what slide it is, but it's where it says athletic courts. And it seems it might be one of the only ones where there's a future appropriation. And it is slightly over a million. It's not insignificant. What is the philosophy for not just going ahead and putting the full $4 million and clearing the slate from that? That's, I think, something I continuously I guess frustrates me is that there's these little projects to just clear the slate and get it out of the way so that we have more capacity in the future instead of, because I feel like there's this kind of, mentality of trickling things. And then ultimately, it actually costs more because every year, construction's more, materials are more, or there's a new tariff. There's volatility in the market. Gas got more expensive. There's all of these variables that, at the local level, we don't control. And so I think that when we're getting into those spaces where it's just not that much money ultimately, not that for you and me, yes, a million dollars is a lot. For the city, it is not. What is, why are we doing it that way? Why don't we just fund it and clear it?

Sure. So one of the things that we're trying to do and that we now have a better capability of doing is balancing the appropriation with – so funding is not the only limitation. We also have project delivery limitation. There's only so many projects that we can deliver. And so we're trying to work with departments to match up the funding and appropriation as best we can with when those projects could be delivered. That's the shortest answer, I guess. That being said, your overall point is something that we are trying to do. And you'll see FY27 is a significant portion of the total planned appropriations. We are trying to, any of those projects where having the funding available now provides any benefit to either contracting or getting these things out, we are doing that if we can.

Thank you. And then I know that there's a group of residents, I think mostly started by DOST members, Durham Open Spaces and Trails, that want to start kind of this, they're obviously very interested in trails. I guess there's a trail summit here next spring. And they had their tour a couple weeks, you know, their annual DOST tour a couple weeks ago. And Deep frustration with the three projects. I think that have been funded since 2018 That aren't completed and so I think there was a desire to create kind of this working group around Capital improvement projects, and so I just want to say that as a as one council member I hope that that work launches and continues and we can really delve into is it that project managers need to live in the department like whatever it is I think think when we had our affordable housing bond, we were very clear as council saying, you know, if there needs to be added capacity at the time, it would have been community development to make what we said possible to the voters, then please ask for that capacity, right? And that that's staff, right? Like, it goes back to that earlier conversation. Is this a moment where we really need to right-size the organization? Because there's things in there that are old that just, we don't do it anymore. It doesn't matter. And we can reallocate those resources, whether it's staff or whatever, to something to make our capital improvement program. And I know staff is brilliant and does it, but we're at the end of the day the decision makers who have to hear, A, the complaints and the kudos and make the decisions for 300,000 people.

I'll take a swing at just sort of responding. So first and foremost, the working group on trails was actually our suggestion in conversation with that group. And I'm really looking forward to it. I think it has been extremely well received by that group because I think one of the things, you know, I'll hold up the working group we created on 505 West Chapel Hill as an example. I think when we are at the table with people who have expressed similar concerns about we're not sure we understand what your constraints are, we're not sure we understand what the dynamics are, I think we learned from that that we can have really productive and constructive conversations by kind of inviting people into our process, looking at things, and then working constructively to figure out better opportunities for moving projects forward. So I'm looking forward to that. I think the potential to expand that to broader community involvement and transparency around the CIP is definitely something we will look at. I know DCM Wimbush under the city has some ideas. We have had some history with that with the Citizens CIP Committee. Those are all things I'd like to explore. I don't want to overpromise, but I do want to say that we have heard counsel loud and clear over the last nine to 12 months as different projects and different issues have come up with similar themes around why does it take this long? Where do these things happen? get gummed up. Are these decisions we made that we didn't really know what the consequences were? Is it a capacity issue? Is it some other part of our process, how we purchase, how we contract? And so I don't want to diagnose, but I do want to say loud and clear that we have a number of initiatives and explorations underway to try to get better answers for Council about why it takes so long to do projects and what it could, what What would it look like to deliver those projects more quickly? We are in the final stages of selecting our new general services director. That is a new position that will be deeply involved with project delivery and is one of the chief things that we prioritized in the selection process. But across the board, I think we have strong commitment from staff to explore and expand. I know and appreciate and accept council's understanding that this is not just a staff performance issue. Nonetheless, it's still our responsibility to bring back to council, if it is not performance, a little bit more visibility on what's driving those factors. So just holistically, as we talk about the CIP and knowing that this is a frustration that the community feels and that the council feels, I wanted to give voice to the fact that we've heard you loud and clear, and we've got a number of things moving in that space. Thank you.

Thanks, Ms. Mayor. And thanks, Mr. Scott, for the presentation, as always. I'm glad the tennis courts came up. I've been a frequent advocate for increasing funding for both the tennis and basketball courts, the athletic courts we talked about. I'm glad that it appeared on your initial slide as one of the highlights of the CIP. I will say that the, and this gets back to maybe Mayor Patem's comments about sort of like clearing things out. I know the request from the department was like $8 million, right? Yes. And I think that was the sort of like, that was the cost that they estimated is really what it takes to, I think, repair courts across like five or six parks. And so I'm glad there's three million in the CIP. It's more than we've done in past years. But the request is for eight, and it shows future plan appropriations of only one million. I think we have like 57 tennis courts across about 12 parks. And so I think part of the plan for athletic courts is to have like regular maintenance of those courts as they over time are used. So when the time comes, Mr. Mayor, I would like to talk about that particular item and the CIP and sort of see if we can increase the amount of funding this year, but also think about, you know, for out years also additional plan investments because those courts will continue to be used and we'll need more money to keep resurfacing them.

more to come on that I would say the the staff are in the room who have that information and you know now would be as appropriate times then I acknowledge the mayor's concerns that that's a long conversation but that's what these conversations are for so yeah my point is is do we have all the is this what is tomorrow's agenda because I don't want to have any I don't want to have a conversation without incomplete information

Once we start talking about allocations or reallocation, then we are going to be prepared for a pretty extensive conversation. And I know I want all council members here. I have been informed that some have to leave shortly. Sure.

Just one question. caveat, I guess, to putting stuff in and out of the CIP. It is a little different than the annual operating budget in that it's not necessarily a one-for-one. And so that is why we have the model. And so depending on the scope of proposed changes it may be something that we would need to bring back and run back through the model um you know i will say that the model as proposed is pretty darn close to at capacity with what our financial team is is comfortable with um and so we would be most likely looking at swapping things out, moving things around, doing less of something to do more of something else.

And that question, Mayor, and to JJ, that's why we could do this right now, because this doesn't impact the operating budget. You've seen a list of projects that are funded this year. If you would like one project to receive more funding, the simpler math, which is not 100% you know exactly how it works but the simple math is finding that amount of money in a different project and saying this is a higher priority is is really the exercise that's the exercise that we ultimately do before we propose it to you so if there's another project that you'd like to propose I think that's we're ready to have those conversations

So it sounds like two conversations, a conversation of in and outs on the capital improvement plan and then in and outs on the operating budget. Since we're on CIP now, I don't think it's a lot of projects, but we can delve into it if you guys wish.

I never want an extra meeting, but we do have that additional time. And so I know historically that's kind of been where we've done like parking lot issues. So something like this where I'm not prepared at this point, you know, whatever, to say, oh, let's swap this for this. I know that the athletic courts is something that both Council Member Wrist has raised and has come from community pretty loudly. And so if there's the opportunity to have that conversation, my general thought is maybe that additional meeting is where we would have them.

Can you address the agenda for tomorrow?

Sure.

We have three departments tomorrow, transportation, community safety, and OEWD. I will say that we do have our experts, our CIP experts in the room, so we do have project managers here. So if that is helpful as part of the CIP discussion, as JJ said, the model is... full you know we have we have given you a model at capacity based on what our finance team has said that we can afford as far as debt funding so hearing from you even if we don't make final decisions about kind of what you would want to take out or what you would want to swap would be helpful so that we could kind of come back with some proposals if that's that's what council wants to do

Gotcha. I'll be right to you, Council Member Cook. Well, go ahead, Council Member Cook.

Well, I just want to say that the other piece that I don't feel like we have in front of us is the actual scoring that went into the projects. And so to me, it feels like a bit overwhelming to be making decisions. I know I saw, I see all the experts in the room and thank you, by the way, staff for hanging out all day for us. But yeah, without the scoring that, and like the long-term projections, this feels a little bit complicated to make decisions about in real time.

Can we have folks tomorrow come? Well... June 4th is also the third day. Yeah. So... It's there if we need it.

I think one of the things that would be helpful is if council members in the next few hours have ideas about the trade-offs. So this is really... So... The staff that are here are here for a wide variety of projects, and I don't think all of those staff would need to return to discuss the pros and cons of moving money from one project to another. So really what it comes down to, and I understand the discomfort in this conversation, it really comes down to naming the lower priority project that you would be willing to move money out of, because that's really what we will be discussing with you. The math is going to be pretty simple. If you're looking to add a few million dollars to tennis courts, we will need to find a few million dollars in another project. And so if you can tell us if anyone would like to say, these are four or five projects I might consider lower funding at, we can bring the project managers who can speak to those projects. We can talk about those trade-offs. That's really what a follow-up conversation, I think that's how we would support a follow-up conversation. So rather than invite the whole room back, I know we have a number of people here for projects that probably are not on your radar screen.

Let me just put this out there. I want to sort of set the scene for All right, we as elected officials represent the public's interest. And all of these things are, you know, in some form or fashion, they have to be addressed. But I guess when it comes to this 10-year plan, right, you know, that's the 10-year plan for capital improvements. But what happens when you have something that is high use? and it has an immediate need. I'll use an example. While on a state-owned road, there was a huge community dialogue on Facebook about a shopping cart that's in the middle of a giant pothole, and residents put a shopping cart in the pothole to prevent cars from driving in it until it was addressed. And it was unfortunate, but the only way we got it fixed was it had to be a really loud outcry. Council members, including myself, had to go out there and... I mean, we had to create public pressure to get it addressed. And yes, it was on a state-owned road, but how are we responding to things that are an immediate need versus things that are long-term? And how are we addressing needs that are very high use not so let's say there's a bridge if there's another way around a bridge can that bridge have some things taken away from it to address something that is used every day in high numbers so I I'm just trying to find the fundamentals of this sure and so we you know again I can I can run you through the process right we solicit

me so set all the needs we do go through that scoring process and that's that's kind of where it starts but then from there it's a lot of conversations and prioritizations to balance those urgent needs versus long-term needs being responsible for those long-term long-term items. And I mean, you know, the fact is there's some judgment and some recommendations that we're making. Sorry, I'm looking for some numbers that I had written down here. So we do prioritize the urgent needs. So what's represented on those tables, I don't have the totals there, but just from our debt service fund, which is where I believe this project would be paid from, we have $105 million scheduled to be appropriated in FY27 and $286 million for the entire rest of the nine years. So we are front-loading the plan. That being said, We can change it, you know? I mean, it's not scientific. We tried to make it as scientific as we can, but, you know, ultimately, this has to be the community's priorities. And if you decide the priorities are different than what we came up with, then...

Thank you. Council Member Kopach.

So I understand there's a cascading effect, and thank you very much for this presentation and this work, Mr. Scott. But I understand there's a cascading effect that if we do more of something in the earlier year, then there's something that could get pushed off or not get done at all. And so those are trade-offs we have to weigh. To make sure I understand correctly, is it slides 115 to 121 in the presentation you showed us? Is it like anything that has a fiscal year 27 appropriation, that that is something that... we would weigh as a trade-off if we wanted to move something up or increase a figure. It's like anything in that column that has a fiscal year 27 in those six slides.

That is as close as we can get to a one-to-one trade-off.

And I think, you know, as we weigh potential trade-offs, I think one thing to consider that's helpful for me to know is, like, what's the implication of pushing something back a year? Like, knowing which things, and maybe you just need us to ask, like, you know, if we waited one year on the City Hall upfit, which is $690,000, you know, what's the implication? What are the potential consequences of waiting a year on that? Obviously, one is something else doesn't get done in a future year, but that could potentially free up that much as a starting point for fiscal year 27. So is that the right way to think about it? And I guess in that particular one, like, you know, is that problematic to wait a year on something like that?

Those are the right questions. So, yes. So getting those questions and, you know, so I'd propose that if you get a chance to review the list and you have questions that amount, you know, that just like that, that we will have the right staff in the room to answer those questions. And that's how I recommend getting to resolution on the proposed CIP. Those are exactly the types of questions. conversations we'd be prepared to have on any project as to what would be the impact of sliding funding, reducing funding, eliminating funding. We'd be prepared to share all that.

So sounds like a little potential homework by, let's say, 5 o'clock today. Just going to arbitrarily throw a timeout there, but colleagues, as soon as we're done, just start looking through this list and sending those items then to the manager, and we'll try to have that prepared to be responded to tomorrow. Reston, then Cook.

Yeah, I appreciate the discussion. I think this is really helpful. And ultimately, again, it's up to us. We're the policymakers, right? We set the policy. We direct, as we did with the budget, we direct the manager and staff to address key items of the budget. I would say, I'm not sure, I think, so what you're asking, Mayor, is for us to identify things we'd like to see increase in the budget. Because I think, as Council Member Cook said, we don't have visibility, and this goes back to the earlier discussion about, like, are there eight city managers or one? We don't have the direct visibility. We don't have the scoring on these projects, for example. We also don't know, like, what we hear from residents is, like, we want more sidewalks and streets and courts paved and so forth. And that's what they see. They don't see, you know, the environmental and street services building on MLK and, like, whatever it is. 13, 17 million for that. So there's definitely, we want to be investing in city services to support the work we're doing. But those are also big numbers. Residents aren't seeing those kind of investments. And so, you know, I don't think we have visibility on the sort of scoring of those things for the city itself, internal stuff, versus things like sidewalks and streets and parks and so forth. So to me, to me, the conversation or the sort of the, I think the, task would be to identify where we want to increase things in the CIP, trying to figure out which ones to come off. I think that's not what we did in the budget. So I'd say, like, if we have consensus on the council about things we want to see more of, then we let you know those priorities, and then we let the staff figure out how do we do that. The CIP is about $700 million total, right? So there's a big number in there. And so if we said, hey, within that CIP, we'd like to see a little more for this or for that, and then have staff figure out how do we do that, again, given the scores we don't see and all the other sort of details that we're not privy to.

I would reply that I think the answer is a little bit of both. That yes, we have information you don't have, and I think that's obviously the push-pull in these sessions is trying to make that information available, but also understanding how limited the amount of time is for discussion. be happy to try, you know, and again, all of these conversations are helpful for us to understand what the Council needs going forward in terms of making these decisions. Yes, if you just told us to find it and you said, Bo, I want you, I'm not giving you any direction and I want you to come up with a recommendation, but what I will be doing when I come up with that recommendation is is trying to channel what I have already heard from you guys, as opposed to Bo's list of things he likes or doesn't want in the CIP. So one of the things we scored is sort of internal, you know, keep the lights on type work. So we keep talking about the Environmental and Street Services building. That is a building that is falling down. And so, yeah, it's going to continue to score well. And I understand fully that the council doesn't have a lot of visibility into that, and you all are kind of taking our word for it. But to the extent that you want to test us on that, like why have you decided this is the year for that project? We better have good answers for that. So I don't want you to feel like you can't ask about those projects or that those are off limits. I don't want you to feel like you only get to choose between sort of community enhancement projects. Left to our own devices. Could I find recommendations? I'll go back to the scores. I'll go back to the top of the list. Um, but to save you some time if you already have some preferences or ideas. Uh, rather than find that out after I come up with a recommendation that may be completely contrary to what the Council wants. I'd encourage you to share as much feedback with me as possible. So you can do that confidentially. If you want to ask me a question but don't really want to be heard asking the question, that's okay. I don't mind doing that because I know it's uncomfortable to sit publicly and say, here's a project I might not fund. But to the extent that you guys can share your feedback with me, that will help me bring you better options for your consideration.

And colleagues, what I will do is, if you will, just dig into that document today. Mr. Manager will get you as much information as possible. If we have not come to a resolution, then we will utilize the June 4th date, I do think. And I don't want to use... bureaucracy on the reason why we can't have a full-fledged discussion on a budget, which is our most important role here. So we're going to utilize the resources and time that we do have allocated. So we need to use that June 4th date, colleagues, and we're going to use it if we can't get to, you know, to a resolution on what we're looking for in this and the other operating budget as well. Council Member Cook.

Thank you. Is that scoring easily able to be sent out or is it? Is it yes, like it's consolidated, you could send it out? You could look at it? OK. That would be helpful. And then also, in the funding source, Are all of these projects completely funded by the funding source that's listed, or is that like the primary funding source? Is there overlap? Should we be looking at anything particular about that?

You'll see that we broke up. So some projects have multiple entries. So that should show you. Like the paving right at the very top has multiple funding entries.

Oh, it's just listed twice. Yeah. I see. I see. I understand. So everything that's listed, the full amount is coming from there. So if we were looking to move things around, we would have to move it around within the same fund, I'm assuming.

Yeah. And again, I simplified the funding sources. So finance might be freaking out back there. I don't know. But there are different types of debt. There are different ways that they fund these projects, and I can't confidently say it's a one-to-one.

That's my concern in reading this, because it seems too simple to... Yeah, for something that I know is very complicated. The only other question that I have is, in the prioritization and the scoring mechanism, there was staff and also community. Can you just talk a little bit about who did that scoring?

Yeah, sure. So this year, we solicited our community members from, they had previous experience with the PV program. So they had been delegates, so they were Comfortable working with the city knew how it worked they attended our Four meetings throughout February so they were there again along with representatives from financial departments and project management or project delivery departments and so Representatives from each of those three kind of groups scored the projects and Those scores were averaged and became, again, sort of the starting point for this process. Yes, every project has a score, but that is a too simple way to look at it. It's where we start from. I think we do our best to make sure that that score does represent the city's priorities. But it is very hard to encompass everything and so there are some projects that We bring up and that could be because of those other three criteria that we pointed out and so that's an existing project that needs additional funding and That is urgent health and safety. And that's maintenance of existing facilities. So maintenance projects just don't score that well. But if we don't do it, then we have real problems. And so you will see it is not just, we don't just go down the list and just fund everything. Yeah, I appreciate that. There's months of discussion that go into that.

And I appreciate the time and effort that y'all have put into it. I do think, for me, the community input piece is also important because I think we talk about a lot that when we get resident feedback, we want to show residents that we're actually listening and digesting the information that they give us and not that we... wasting their time taking in there and then there's like one very loud advocacy group and that overrides like all the work that community of advocates have done so I just want to be careful about that but I do appreciate that it's just a starting point so thank you for all that information and mr. manager if we come back with our commendations and also to staff I think it would be helpful to know if there are projects listed that

already broken up over multiple fiscal years you know what the what the implications are of shifting additional dollars to the out years you know or projects that are slated to be fully funded in fiscal year 27 can some of those be broken apart across two fiscal years in order to give us more flexibility and kind of the urgency of now so that'll be you know I think interesting as you hear requests from council to think about are there ones you could split or split more?

Sure. And I'll echo the manager's request. As much as we can narrow down which projects we're talking about, that will really help us. We have a lot of project managers. To get to that level of detail, we will need a lot of resources in the room. And so any guidance that we can get in advance will be very helpful to be able to inform that conversation.

All right, we'll bring that in. So again, what's our task here on the council?

So if you have any specific items that you want to prioritize, I don't think it's enough information to deprioritize something, but if you have something you want to prioritize, then just go ahead and send that to the manager so that he can provide staff with that information. The only thing I think that's a little fuzzy is based on what you hear from council, Mr. Manager, I don't know how we're going to be able to address that without having the full apparatus of support here from city leaders. So that would be on you all to figure out. But at least you have the priorities from the council to then make a recommendation if there is enough support for that. Yes, sir.

I just want to say that I think I'm mostly hearing from the manager a request, even if it's difficult. I'm looking at the manager for us to suggest what to deprioritize and then for staff to be able to come back and tell us, you know, what the impact of that is.

I am, and I'm also accepting that not all council members feel prepared to do that. So I understand our task. It's certainly important that you tell me dollar amounts of things you'd like to add so that I can estimate dollar amounts of things that I would propose cutting. The more you tell me, the more likely those options will sound good to you. The less you tell me, the more I'm going to take a wild guess. So the more information you give me, the better.

And again, this is the work of government. This is us trying to respond to our residents in the time. And this is a longitudinal approach of listening and trying to act on it. So not, you know, looking back in our past years and saying to the council members of residents saying it's not important, it's just that, you know, it's really hard to respond when something deteriorates now versus a project that we're trying to build up over time. You know, that's just the reality of local government. Thank you for your presentation. We're going to go ahead and move to council remarks and close out the day. All right, any closing remarks? All right, well, thank you all. We're going to be in here tomorrow. I hope folks are paying attention. This is a really, really, really good meeting to go back and watch if you really want to learn local government 101. I think the questions that were asked today were really good. Colleagues, thank you all so much. I'll see you in the morning.

Thank you.