Board of Aldermen - Regular Meeting

I'm pleased to present a summary of the city's proposed budget for the fiscal year ending March 31st, 2027. This budget focuses on delivering reliable everyday services, maintaining the infrastructure our community depends on and on keeping Carney safe. It also reflects thoughtful and deliberate decisions in a year where we expect revenue growth to be slower based on what we're seeing today. The framework for this budget comes directly from the priorities and fiscal year 2027 initiatives set by the mayor and board during their priority setting work last summer. Those priorities were formally adopted by resolution in October 2025. Those initiatives fall into the city's five priorities. Basic services, infrastructure, housing, commercial and retail, and quality of life. These priorities guide every recommendation you'll see in the proposed budget. The budget process doesn't begin with last year's numbers, but instead with the city's priorities. Each department is asked to carefully evaluate its operations, identify essential needs, and tie their requests directly to the city's adopted initiatives. From there, staff identifies the resources available to the city. Essential services and existing debt are always funded first. Then we work through the remaining requests to determine what makes sense and what the city can realistically afford. This approach forces difficult but necessary decisions and ensures public dollars are used intentionally and responsibly. The fiscal year 2027 proposed budget is balanced as is required by state law. We begin the fiscal year with approximately $19.9 million in unencumbered cash. That includes funds intentionally set aside

for capital projects as well as reserves for emergencies. Total current year operating revenues are projected at about $30.7 million, including $8.1 million in federal grant awards. In addition, the budget includes $5.8 8 million in debt proceeds for capital investments and $15.6 million in inter fund transfers. When you include those sources, total revenues and sources for the year equal $52.1 million. Planned expenditures total $63.1 million. That number is driven primarily by capital investments which are funded through a combination of federal grants, debt proceeds, and funds that were intentionally built over time for these projects. Total operating expenditures budgeted for fiscal year 2027 are $15.6 million. We end the year with approximately $8.9 million in unencumbered cash, which preserves financial flexibility for emergencies and future infrastructure needs. Importantly, we are not using savings to support everyday operating costs. That is a key principle of long-term financial stability. A major component of the fiscal year 2027 budget is the comprehensive water and sewer utility rate study completed by HDR. The study evaluated the true cost of operating and maintaining our water and wastewater systems that includes operating expenses, capital needs, debt obligations, regulatory requirements, and projected system demands. The study confirmed that future rate adjustments are necessary to keep these systems financially sustainable and compliant with regulations.

Because water and sewer operate as enterprise funds, they rely on user fees, not tax dollars to cover their costs. Aligning rates with the actual cost of service will help avoid larger, more disruptive increases in the future. A public open house will be held at city hall on Tuesday, February 3rd from 4:00 to 6:00 p.m. Residents will have the opportunity to learn more about the rate study, find out about the winter water average option of sewer billing, and ask questions. This year's budget was especially challenging due to slower and declining revenues. Retail sales tax is projected to be approximately 2.2% lower than fiscal year 2025 actuals. That reflects a slowdown in brickandmortar retail activity. Marijuana sales tax is also projected to decline by about 3.4%. In addition, the senior property tax credit is expected to reduce property tax revenues by approximately $11,000. Because of these trends, departments work to reduce supplies and outside contractual services wherever possible while still protecting core services and continuing to invest in employees. City employees are the backbone of the services our community relies on every day. Attracting and retaining skilled employees remains a priority for the city. The fiscal year 2027 budget includes a 1% cost of living adjustment effective April 1st along with a one-step merit increase on anniversary dates for eligible employees. The budget also includes a $227,460 investment in professional training and development. That funding supports both outside training opportunities and expanded in-house programs focused on

customer service, employee safety, and leadership development. In addition, a change is proposed to allow all full-time employees to acrew four weeks of vacation annually. This supports work life balance and strengthens recruitment and retention efforts in a practical and sustainable way. Several organizational and accounting changes are included in the fiscal year 2027 budget to improve transparency and better reflect how city resources are actually used. Shared administrative costs such as IT, HR, legal, finance, communications, and engineering support are now being charged directly to the funds and departments that benefit from those services. This change avoids counting the same dollars twice and provides a clearer picture of the true cost of city operations. Related operational changes include moving solid waste into its own enterprise fund and consolidating part-time hours for cemetery, recycling center, and custodian services within public works to improve flexibility, efficiency, and day-to-day service delivery. The fiscal year 2027 budget continues the city's focus on taking care of what we have while planning responsibly for the future. Capital investments include maintaining and improving water, wastewater, and street systems. They also include improving sidewalks, crossings, and trails, reinvesting in city facilities and parks, and planning for future equipment and technology replacement. Use tax funds, grants, and dedicated revenue sources support public safety investments such as police radios, tasers, kennel improvements, and network upgrades. The budget also includes funds for continued long-term planning for

wastewater treatment facility and collection system improvements. These improvements are needed to meet regulatory standards, reduce risk, and support future growth. This proposed budget reflects months of collaboration, careful evaluation, and difficult decisions. I want to thank city staff and Mayor Pug for their contribution throughout this process, especially in a year of softer revenues and rising costs. Their work helps ensure we continue delivering reliable services our community expects. The February 2nd meeting will be dedicated to diving deeper into the fiscical year 2027 proposed budget and will begin at 6:30 p.m. Thank you.