City Council - Regular Meeting

I call to order this workshop meeting of the San Marcos City Council. Today is Thursday, June 25th of 2026. The time is 5.30 p.m. Mr. Vino, let's see who's here.

Mr. Rodriguez. Here. Mr. Veselk. Ms. Garza. Mayor Houston. I'm here. Mr. Scott.

Here.

Mr. Mendoza. Here. Mr. Gonzalez.

We have a quorum present. All right. And did you tell me that we have no citizen comment this evening? That's correct, Mayor. Alrighty, then we will move on to presentations. Would you read item one, please?

Yes, ma'am. Receive a staff presentation, hold discussion regarding the fiscal year 2025-2026 financial update and preliminary fiscal year 2026-2027 budget and provide direction to the city manager.

Ms. Reyes. Good afternoon, mayor and council. Today we are providing an update on the budget process and a timeline of next steps. This process began with city council and directors coming together at your visiting session in January to discuss our strategic plan. It continued with approval of the strategic plan of the budget policy workshop in February and council's approval of the budget policy in March. Over the past couple months, our team has met and collaborated to critically examine our needs and communicate the challenges that all departments are facing. Along the way, we have added new opportunities for the public to engage in the budget process, including three town halls prior to council visioning session, and three more held at the end of May and early June. Opportunities for additional community input include a neighborhood commission presentation, two budget public hearings, two tax rate public hearings, and public hearings for any potential fee increases. Our thoughtful deliberation throughout this year's budget process has allowed us to identify ways to develop a structurally balanced budget. Over the past year, the city has taken a hard look, at how we operate to ensure we are using resources as efficiently as possible. This has included managing staffing levels by holding over 20 positions vacant, offering a retirement incentive that resulted in 20 positions being eliminated and saving approximately $2 million, bringing recruitment services in-house to reduce executive search costs, and reviewing our motor pool and take-home vehicle policies. Across every department, we are evaluating processes to operate both effectively and efficiently. Even with these changes, community expectations for service delivery have remained the same. We are striving to provide the same level of service with a leaner workforce, and in some areas, such as EMS, we are taking on new services. We recognize that the same cost drivers and inflation affecting city operations are also affecting our residents. We appreciate City Council's consideration and thoughts related to tax rate scenarios that will be presented. The rate will be set the next time we meet in August. Before we begin the presentation, I'd like to thank Director of Finance, John Locke, and our budget team, headed by Tricia Patek, who have been diligently focused on preparing this information for your review. Without further ado, I will now turn it over to Mr. Locke for the presentation, thank you.

and Mayor and City Council. We'll begin by looking at the agenda for this evening. We're going to discuss the budget process and some of the community engagement that has occurred throughout the budget process, talk a little bit about recruiting, retaining top talent, how the city is responding to changing economy, and city council direction. And then we'll do an overview of all the funds, the general fund, two special revenue funds, and then our enterprise funds. So beginning with the budget process and community engagement, we are at the last budget workshop prior to the proposed budget being submitted to city council on August 18th. so this is the the last opportunity that city council has to provide direction before that proposed proposed budget is submitted to council after that is submitted city council can certainly still make changes but in terms of what that proposed budget looks like this budget workshop would be the last opportunity to provide that guidance after that budget is submitted to council On that same evening, actually, City Council will set the maximum proposed tax rate. That is just the ceiling for fiscal year 27. The actual tax rate can be lower than that. It just can't be any higher than that. The following day, we will present a summary of the budget to the Neighborhood Commission and get their feedback on the budget. And then, as Ms. Reyes pointed out, there will be multiple public hearings on September 1st and the 15th. I left that slide a little too soon. I did just wanna point out that we do receive our certified tax roll on July 25th. That's one of the reasons why we can't submit the budget until August 18th. Right now we're operating on preliminary numbers and with property tax being the largest revenue source in the general fund, we have to wait until we get the certified numbers. The budget document, all of the expenses, point back to one of City Council's five strategic goals. So we have this slide in here just as a reminder that the budget is built off of City Council's strategic goals. Again, it is staff's attention to submit a budget in August that reflects City Council's direction and priorities. As we touched on, budget workshop as the last workshop prior to that budget being submitted in August. The budget reflects council's strategic goals and it also has community input for multiple town halls that have been held. The city has implemented multiple cost, excuse me, cost reduction measures and efficiencies. We've started managing higher, a managed hiring program in April of 2024 that continues to today. And as of June 2026, there are 24 frozen positions. We also had a retirement incentive program that was a collaborative approach with departments. That incentive program, eliminated 28 different positions, saving $2.7 million a year, and that's $2.7 million that will continue every year, because that'll be positions that will not be filled. We've brought executive recruitment in-house. Lindsay Cox, our human resource director, has done a great job of bringing that in-house, and so now we're not spending the money on consultants to do the executive recruitment. With each vacancy, we're also looking to make sure that prior to filling it, there's not a better way to use that particular FTE or that position. An example of that is with the parking manager vacancy and public works. We have some parking and public works as well as the city marshal's office. So we moved that position to the city marshal's office to consolidate the parking related tasks that those two departments were doing. We're also reviewing motor pool and take home vehicle policies and there's an ongoing evaluation of operations across all departments. We will be operating with a leaner workforce in fiscal year 27 and we're also adding emergency medical services with the forecasted revenue capacity so it won't require an increase of the tax rate as we're forecasting to be able to stand up emergency medical services. The city is committed to remaining an employer of choice and supporting those employees that we still have that are providing those essential services to the community. This slide provides an overview of the community engagement throughout the budget process. It began with the community vision town halls. There were three community visioning town halls held and then there were three town halls on the budget that were held last month. We've also had some interactive tools at the city manager state of the city and the mayor's SMTX 2026. We've had some community events such as Love Where You Live and One Million Cups. We've interacted with the neighborhood commission once already and we'll have a second time. There have been tabling opportunities at the library, the activity center, and mobility hub. And there have been multiple social media outlets including KZSM, print, news hub, press releases, and newsletters. These next couple slides were shown at the budget workshops They draw some similarities between the household budget and the city's budget to try and explain how the city's budget worked to the attendees at the workshop. This slide on the left-hand side are revenues or incomes and on the right-hand side are expenses. And we touched on, for instance, a paycheck is recurring revenue and you can use the recurring revenue to cover recurring expenses on the right-hand side. And you also get some one-time revenues such as gifts or income tax return that can be used either to build up a savings or to cover one-time expenses. But you can't really use that to cover recurring expenses because it's not sustainable over the long term. We also touched on, on the right-hand side, on using food as an example. The $100 when you go to the grocery store won't buy the same amount of groceries that it did a year ago. And the same holds true for the city. The services we provide, $100 worth of services, won't buy the same level of service that we were getting a year ago. And then this is the slide that followed that just showed, this is an example of the city's budget. It's the same setup on the left-hand side are revenues and right-hand side expenses. We separated the residential and commercial property tax. Just to point out that commercial properties typically use less city resources and they tend to subsidize residential properties. For the fiscal year 2027 tax rule, the value of one commercial new property equaled the same as adding 15 residential properties. Um, on the revenue side, one other thing that we pointed out is the city has a lot of restricted revenue. So the utility bills that you see revenue on the left hand side has to be used for utility expenses on the right hand side. We can't use electric revenue for park maintenance. We also, We also asked some questions at the budget town halls. There were three different town halls. There was one virtual and two at different locations in the evening. We had a total of 51 different community members attend. And the two questions that were asked is, as you look at the city's budget, what is the most important thing to you and what should be prioritized if resources are limited? And this slide is not showing all the information that we would want it to.

Yeah, that's going to be super important to me.

So I'll see if this will work. It will, but I'm not going to be able to draw well enough. And it won't stay on there because this will disappear. He's going to run and see if he can pull it up. OK. So what the pie chart is going to show out of public safety, parks and recreation, neighborhood enhancement, engineering, sidewalks and streets, planning, library and social services, the attendees were asked to rank what is most important to them. And for social services, what was listed there was the $750,000 that is provided to the the Human Services Advisory Board. And that is, we'll see what the actual numbers are. Oh, here it's coming in. The numbers still aren't showing up. And I could speak a little to the numbers. I can try. So social services, it wants to move as I push on it. was 56% of it, and that was by far the highest ranked priority. The next highest was public safety. Oh, there it is, there it is coming in. Okay, good, because that's gonna look a lot better than my chickens.

So there, now it shows that social services

was the most, ranked the highest at 56%, and then you have public safety at 13%, I'm sorry, neighborhood enhancement was 16%, and we had the animal shelter listed as one of those services that neighborhood enhancement oversees, then public safety, and you have library and engineering at 6%, and parks and recreation at 13%.

Thanks Hayden.

Okay. I'm just not gonna touch that.

Okay, so the community participation, continuing with the community engagement was the participation with the participatory budgeting. In total, we had 103 different submissions from 87 individuals with 140 different ideas that were collected. There was a feasibility review on benches, existing crosswalks and sidewalks, and a project proposal for five different projects that were submitted. There were community voting that occurred online and in person. People could vote at City Hall, Public Library, or Utility Billing. And Grisel Perez-Carrie informed me that the voting closed on June 15th, and we received 120 votes. Right now they're going through the votes to decide which of the projects were ranked the highest. So with all the community feedback, That has been shared with departments and it was one of the factors that contributed to the decision making process in voting the fiscal year 2027 budget. Moving into the retaining talent and recruiting talent and retaining talent. The compensation philosophy speaks to the The city's commitment to current and future employees. As we mentioned earlier, we are running leaner and we are investing in the employees that we currently have. This is our current compensation philosophy that city council adopted a couple years ago. This slide shows the impact of inflation on salary. If you look on the left-hand side on 2022, that was the average salary in 2022. And the dark color is the actual salary amount. And the green color is the inflation target. And what the inflation target is, is if for that particular year, when you moved to 2023, the inflation was 7%. So in order for that employee to keep up with the cost of inflation, they would have needed to receive a 7% cost of living adjustment. In 2023, they actually received a 5%, so you can see that the green inflation target is higher than what the employee's salary is. As we move from 2024 through 2026, it's a little easier to follow in the chart to the right. You can see that we started to chip away at that. that $1,600 started to decrease all the way down to 2026. And in 2027, it's starting to creep back up because the proposed 3% cost of living adjustment is going to be lower than what the estimated inflation is going to be for this particular year. The reason that this is important is just that we stay competitive. with our with the especially within the region who we tend to lose employees to and You know stand competitive helps us attract a talent as well By making these smaller incremental adjustments to it prevents doing larger increases down the road. I This slide just provides some insight into what our peer cities are doing, at least those that were able to respond to us. We reached out and did a survey on what kind of COLA adjustment or merit pay that they may be doing. So you have the list of the peer cities that did respond. The next column over has what COLA adjustment that that city might be doing and the last column on the right hand side has if they're gonna do a merit pay. You have a low of 2% across these cities that responded of Kyle and a high of Round Rock who's doing merit pay of up to 4%. Across, you can see that the average is about 3%, so the 3% that is proposed in FY27 budget seems to be consistent with what our peer cities are doing. Now we're gonna transition into discussing, responding to the changing economy and city council direction. When we talk about responding to the economy, over the past couple years, As we've talked a lot about ourselves, tax have been decreasing. Um, you know, as we discussed, we, we know why that is one of our largest sales tax payer, the sales tax that we received from that sales tax payer decrease over a two year period by $3 million. At that same time, property tax values were self correcting from the post COVID timeframe where they were actually decreasing as well. Um, and to add more to that, we had federal funding that was expiring And so all of the expenses that were being funded by those federal dollars had to be absorbed by the operating funds. So management implemented a hiring freeze, as we discussed earlier, that started in April of 2024. We did the retirement incentive that eliminated 28 positions, saving $2.7 million a year. 24 of those positions are in the general fund. And the estimated annual savings on those 24 positions is $2.5 million a year. The departments have held the operating budgets flat. That's proposed to also be in fiscal year 2027. The general fund departments have held the operating budgets flat since fiscal year 25. In fiscal year 25 and 26, when you factor in what that inflation is, the total amount of collective budget cut that departments took those two years were $675,000. For fiscal year 27, where inflation is increasing, it's over $500,000. So now combined, it's over the past three fiscal years, it will be as if departments have took a collective cut of about a million dollars to their operating budgets. We're also finding efficiencies within contracts. We're bringing economic development in-house by reducing the Hayes-Caldwell Economic Development Partnerships contract. And the economic development is now economic and local business development, so we're focusing on local businesses as well. The departments were asked to describe how program services or their abilities to meet community expectations will change due to not increasing operational budgets again in fiscal year 2027 and not filling positions due to managed hiring. Those service level impacts were attached to this agenda item as a supplemental item. And I wanted to just go over a couple themes that are common across all of those. One is that staffing shortages and increased workload for existing staff is creating burnout, a decline in morale, and slower service delivery, as well as reduced program capacity. Another one was impaired ability to meet the rising service demands and how An example of how departments are responding to that, in the Parks and Recreation Department, they're reducing some program hours. The Rio Vista pool will be open fewer days and less hours per day. And there will be fewer community events, such as movies in your park. Budgets are also not keeping pace with the increase in operational costs, like we talked a lot about with inflation. So in addition to the reduced buying power, departments have had to cut their budgets for increases in expenses like software or elevator maintenance or chemicals for the pole. As these costs increase, departments have to find other expenses within their budget to decrease to hold that flat. We're also going to be looking at metrics differently. City Council expressed an interest in having more meaningful data and performance metrics. The departments have been asked to look at and rewrite their annual indicators for better performance, measures of performance within their department. These key performance indicators will be submitted with the proposed budget on August 19th. And below are just the steps and considerations that are involved in the implementation key performance indicators. They obviously need to be aligned with City Council's strategic plan and goals. There should be department collaboration between them. The key performance indicators, the data source for those should be something that is documented so that it can be year over year, there can be comparison with those indicators. The indicators are gonna be integrated into the budget and there needs to be ongoing monitoring so we can be measuring the progress that is being made towards the goals. Now we're gonna transition to start talking about the operating funds, beginning with the general fund. I wanted to pause just before I started on the funds to see if there were any questions up to that point.

I wish it was better news, but it is what it is.

So all of the operating funds, we'll begin with a slide that just has a highlight of what we heard from city council during budget policy as it related to that particular fund. So in the general fund, maintaining 25% of operating expenses, which it will, of a fund balance, I'm sorry. The debt component of property tax rate must be 30% or less. And we're estimating that that's could be around 22%. Um, the property tax rate should be kept at the current rate of 65.15. There is a decision point on using the higher of the current tax rate or the no new revenue rate, um, um, in the general fund section. And that's for city council's consideration. The estimated no new revenue rate is 65.60, which is higher than our current rate. Some more background information about the property tax rates is the tax rates are preliminary until we receive the certified role. We are supposed to receive the certified role by July 25th. and at that time we'll actually have what that final no new revenue tax rate and voter approval tax rate is. That is actually calculated by the tax assessor collector and staff internally confirms those calculations as well. Using the preliminary roles, as I just pointed out, the no new revenue rate is higher at 65.5, which would generate about $480,000 in additional revenue. Again, since the no new revenue rate is so close to our current tax rate, it's possible that the final rate may end up lower than our current rate. We won't know until we get that certified role. This slide shows the new to the general fund ongoing expenses that will be included in the fiscal year 2027 budget. The first one in green, is the emergency medical services. It's shown there it's 1.2 million, and what that reflects is the amount of additional city contribution to be able to stand up emergency medical services in fiscal year 2027. We currently contribute four and a half million, so we'll add 1.2 million to that, and with the patient revenue that'll come in, that'll be enough to fund EMS. The light blue is the staffing for Engine 7. That is on hold for the staffing study. So you'll see there's an X by included in FY27 budget because it is not being included. The gray is $200,000 for ongoing staffing that was previously approved. It's two different positions. That peach color is ongoing operations that were previously approved. The total of that are $600,000. And I should have mentioned it also shows whether or not that expense was federally funding and if it's an expense that is being added because of the federal funding expiring. And the purple are ongoing social services that aren't attributable to the Human Services Advisory Board. And those total $230,000. Getting in a little more detail with general fund revenues, the pie chart on the left has the same information as the chart on the right. The largest revenue source is the property tax and it makes up 36% of total revenues or $47 million. The second highest is sales tax at 31% or $40 million. Those two revenue sources make up two thirds of the total general fund revenue. And the next couple slides are gonna provide a little bit more detail on sales tax. This shows sales tax per capita, and all that is is it's taking the total sales tax and it is dividing it by the population, and this is the Census Bureau estimated population. So if we look at the blue line at the top, as of 2017, taking our total sales tax and divided it by the then population as of 2017, each resident, we generated $457 for each resident. And you can see how that increase and it hit a peak during the post COVID timeframe when all that federal stimulus money was being pumped into the system at $559. and then it cooled off to $497. Below that gets a little more granular and it breaks the total sales tax out between our base, which is everything except for the outlets and the outlets. So the green started at $310 and it ended at 382, so that's our base. The gray is the outlets, that's just the sales tax revenue generated at the outlets. It started at $146 and is now at $115, so it's actually declining, which is just showing that the city's sales tax base is diversifying and is growing and that we're less reliant on the outlets. The outlets are still important to the city, though, obviously, they make up over 20% of our total sales tax at about $9 million. but it's less than what it has been in the past. This slide has that same information, only it compares us to our peer cities. Not all cities have a 1.5% sales tax rate like we do, so this has been normalized across all those cities at 1%. So at 1% sales tax rate, the total amount of sales tax collected at that 1% divided by the population of that city and you can see at the high side, you'll have Buda at $551 and at the low side, you have the city of Kyle at $184. We have the city of San Marcos in green and we have it listed there twice. The one on the further to the left is the total that includes the outlets at $332 per capita and the one more in the center does not include the outlets, so you get a feel of how we would compare without the outlets, and that would be $255. The yellow or orange-ish color that is $295, that is the average across all of our pure cities. So when you include the outlets, we are performing better in terms of generating more sales tax per capita. When you remove the outlets, we're under what our pure cities are generating. The light gray that you see there, that's $248. That are just the cities throughout the state of Texas that are between 75,000 and 100,000 population. There's 12 different cities and it shows where they are and they're at $248. So compared to them, We are doing better without the outlets and with the outlets.

And what is happening in Buda?

That is a big number.

Yeah.

Twice as much as ours.

Yeah.

So this is the general fund expense. It's not on the same slide as the revenue. So as a reminder, the revenue is was 130 million, so we are budgeting or forecasting to spend more money than revenues coming in, which is just a planned use of fund balance. You can see on the far right-hand side where it says FY27 is structurally balanced, so recurring revenues are gonna cover recurring expenses. 67% of the budget is personnel. and the 30% is operating. And then you can see one time expenses are $3.8 million. All the other slides have a fund balance table and we inadvertently left that off of the general fund. The estimated ending fiscal year 2027 fund balance in the general fund is going to be $33.5 million. which is a 26% fund balance, so it's about $900,000 higher than what our fund balance policy is. These are the major cost drivers within the general fund. The increase to personnel is 2.6%, that 3% cost of living adjustment for the non-civil service is about a million dollars, and then civil service will have their um, increase according to the meet and confer agreements. That's $1.6 million. There's the, um, we already touched on the increase to stand up emergency medical services at $1.2 million. Um, in total there'll be 54 positions added to the general fund to support emergency medical services as part of that department. We had the expiring federal funding of $775,000. The increase for social services not included in the human services advisory board of 230,000 and an increase to the appraisal districts is 127,000 this year. The largest is Hayes central appraisal districts, 125,000. And the biggest part of that is a request of Hayes central appraisal district to purchase some land and build a new building. They've outgrown their current facility. The amount of that new facility that's estimated to be allocated to the city of San Marcos is about $75,000 a year. City Council will have an agenda item at their July 7th meeting to consider this. HaysCAD sent the city a memorandum letting us know that they need three-fourths of the governing bodies of the taxing jurisdictions within HaysCAD to support this measure. So that'll be on a future agenda for city council's consideration. There was a question at the last budget workshop about what it would take to fund some different items in terms of the tax rate. One penny in fiscal year 2027 will generate about $925,000 of revenue. So if you look at the 3% inflation for departments, it would take about $540, yeah, that would be nice, we'd be able to cover that. $540,000 to allow departments that their budgets to grow with inflation. that would take about a little over a half of a cent, about six tenths of a cent. To the right of that are just four different positions that were requested during the budget process. There's a library assistant, a traffic control and signal equipment operator, a street operator, a 911 telecommunicator. In general, when you look at the salaries and benefits and the new equipment that would be needed for that employee, on average it's around $90,000. So that would be about a tenth of a penny, which is, to generate that, $90,000. This is a revised look at the general funds forecast. In 2027, we are forecasting that we are going to be balanced, so we have a green check mark there. for it being balanced, and then you can see the out years in 2028 through 2030. There are two different scenarios here. There's a minimal scenario and moderate scenario, and both of these scenarios are more on the conservative side. They're both certainly attainable. On the minimal scenario, it's in blue. It assumes that sales tax will grow by 1.7%, and that property tax valuations will grow by 1% each year through 2030, and you can see under that scenario, in 2028, we would be short about six and a half million dollars, and that grows to about 12 and a half million dollars through 2030. On the moderate side, if we see sales tax grow at 2% a year and property tax grow at 5% a year, that is in green, and you see that significantly reduced what that shortfall is. we'd be around $2.5 million each year. And the 5% is certainly doable when you look at our three-year average is 3.5%, and our five-year average is 10%. And if it weren't for our current year, which was completely flat where we didn't have any growth at all, then it would be higher than that 3.5%. We also just included a break-even analysis to show what it would take to actually balance each one of those years. And on the sales tax side, we stayed at the 2% annually, and for property taxes, an average of 6%. It is front loaded, so in 2028, we would need about 9% growth in property tax in 2028, and then roughly 5% growth in 2029 and 2030, and that would, generate enough revenue to cover the forecasted expenses. Now we're gonna talk about the fund balance in excess of 25%. This number is a little bit higher than the one that we showed city council at the last meeting. That was $3 million. It's higher because we are including the $800,000 that was allocated for the purchase of land in fiscal year 26. That land was not purchased, so we're adding that on to the three million, so that makes $3.8 million available. Below are just some proposed uses for that. City Hall contributing $1.2 million to the $3.8 million. The health insurance fund balance, we spoke the last budget workshop that the health insurance fund has used fund balance the past couple years, so that would help build that fund balance back up. Capital outlay, there's a total of $1.5 million of request and this would allocate about $1.3 million to that. And then 200,000 to participatory budgeting. And this is another one of those items where there is a decision point on how to allocate this fund balance for the general fund. So now just a summary prior to getting to the decision points. The city is not the only municipality facing the financial challenges. There are many other cities as you go up and down the 35 corridor here from us as well as across the state that are in a similar challenging fiscal situation. In 2027, a new legislative session will begin and there have been numerous proposals already for property tax reform and city spending changes that may result in reduced revenues and expenditure caps on what the city can spend year over year. Fiscal year 2027 began with a $4 million shortfall. However, with stronger than expected preliminary figures and the implementation of the cost saving measures that we went over, The updated fiscal year 2027 forecast now reflects a balanced budget. The 2027 budget includes absorbing the federal funding and standing up emergency medical services. The estimated no new revenue rate is higher than the city's current rate, and the certified property tax rolls are expected by July 25th. So that brings us to the decision points for the general fund. Would you let me to read, go through the mayor?

Let me ask if there's any questions on anything first, and then we'll go through these, if that's okay with you.

Yes.

Questions, questions, questions. Then we'll proceed with this.

Okay. The first question is regarding the tax rate, and do we bring back a structurally balanced budget proposing a tax rate that's equal to the greater of our current tax rate, which is 6515, or the final no new revenue rate? We are estimating currently that that is around 65.5, and it won't be determined until the certified rolls are received. And just as a reminder, the no new revenue rate is the tax rate that will generate the same amount of revenue on properties that were taxed in fiscal year 26, the current fiscal year, and fiscal year 27 next year. That's what the no new revenue rate is.

Okay, council looking for input on these items. I'll be more excited when we have the numbers after July 25th, but I know you've got to get some direction.

Yes, ma'am, thank you. Thank you, Mr. Locke, thank you to all of the department heads, everybody who took part in preparing these things in our packet. For me personally, yes, Mayor, to your point, it's hard to give sort of a concrete answer to this first question, but I can tell you, while not attractive and while I'm gonna approach this comment very carefully, I understand you did mention, Mr. Locke, some of the things that we've attested to as a body in the past in terms of the struggles in which we as a municipality are being felt on a very individual level too by our people. You know, I think being newer on the council, I've kind of seen a trend over the years of sort of a reluctance and hesitancy to raise taxes, and I get it. That mimics pretty much every other municipality I'm familiar with. Um, but for me personally, I brought it up last time. Uh, we have this philosophy as a body for members of the public, um, when it comes to other rates and, and making sure that when we're approaching the potential of raising those rates, We are not doing so in a way that shocks people so significantly, right? And by doing so, the way we would address that is looking at it every three years for various things, right? Because we understand that things get more expensive, the cost of service continues to grow, inflation is felt by municipalities as much as it's felt by individuals. That philosophy is something that while not attractive and for most people, is something that I feel should be applied here. It is very clear that the compounded result of a reluctance to raise taxes is continuing to be felt across various aspects of this city. Our people are very much complaining about the services that they want not being made available. And so I have no problem going and having conversations that may be tough with certain people in terms of our tax rate, should we decide to raise it more than we do, which I know there's not energy for, but I'm just saying that's not something that I am struggling with right now. And so for me personally, just to get to the point of the question, when we talk about equal to or greater, if we find that greater may be something higher than 65.15, And it yields a significant benefit where we can sit here and look at the services in which we provide as a city and make them more holistic. That's something I'm willing to do. And if that were to impact my election, that's okay too. I think tough decisions have to be made in terms of budgets. And I know our people want things and I think there's ways in which we can do it that doesn't hurt the bake in such a way that's so significant.

So you're a yes? I am. All right. Thank you. And I would like to thank all the staff who've been making these cuts and they're working so hard. I read every word of the, I think it was called departmental impact, and I just kind of went, ooh, and just know that we appreciate y'all, and the town appreciates what you're doing to try to keep the service level at where it's been, and we understand that that's not necessarily possible with, is this the third, upcoming third year that it'll be flat or fourth? Third, third. And I think we all know what inflation's doing to all of us. So thank you, thank you directors and everyone who's having to make some hard choices for this year and have had to make hard choices over the last couple of years. I'm gonna be a yes on this one. Mr. Scott? Mr. Scott's a yes.

And I'm a yes as well.

And Mr. Mendoza's a yes. And so we will move on to the next item. Okay, thank you.

The next one has to do with our fund balance and excess of 25%, what was proposed on the slide is listed there and is city council comfortable with how it was proposed or would council like to make some changes?

Um, so the 800,000 great to hear, uh, cause these figures, you know, we're working with now do differ from the last time we had a discussion about these things. Um, one of the things I talked about at that time was the capital outlay line item, uh, given the tremendous sacrifice that departments have made, uh, over the last couple of years. But obviously we're looking at this within this fiscal year, I'm going to actually propose that we take $200,000 from the city hall. So bring that to 1 million. Um, and move that to actually fulfill the full request of the 1.531.57 for Capitoline. Hi, you beat me to it.

Well, yeah, that's my proposal. Checking, y'all are with us? Yeah, we're all good with that, those of us present. So thank you for kicking that one off for us. Are y'all good with the rest of it as shown on the screen? Okay.

In the last one, if there's anything else in the general fund, any direction that city council would like to provide staff as we prepare that proposed budget for fiscal year 27?

You know, in years when we've got lots of money, we can talk about how we're going to spend it. But right now, bless our hearts, the staff, they have just cut and cut. And at this point, I say let's do what we can do with what we have. So we don't have anything else at this point in time. Now that July 25th number.

Right.

Eh, you know, maybe. But anyway, we're good. OK. Those of us who are here.

Mayor, Amanda did her math wrong. That is a two, not a three. So the $200,000 wouldn't actually bring it to the $1531.57. It'd be $10,000 short. Yes. Yeah, but we're getting close. We are. Yeah. As close what I want. I think last year we opted out. Just for clarification, the last year we did opt out on the contribution to the city hall.

Yes. Yeah, that was what ultimately went towards the land.

That's right. Okay. Just for the record, it's not going to meet the full, but we're going to get close. I just didn't want to misspeak.

Okay. Yes.

We're good.

All right. Now we're going to transition to talk about two of the special revenue funds. The first one being the largest special revenue fund, the Hotel Occupancy Tax Fund. And this slide just provides what guidance council provided during budget policy, maintaining the 25% fund balance. We're going to continue to budget revenues ultra conservatively based on the impact that COVID-19 had on the hotel tourism industry and to allocate funding for historical restoration and preservation projects based on capacity up to $500,000. This is what fiscal year 2027 looks like for the hotel tax fund. On the left hand side, you have revenues that are 5.1 million. On the right-hand side, the total expenses is 7.3 million. Again, this is for one-time expenses, so you see the box in the upper right-hand corner that the 27 budget is structurally balanced. If you look at the expenses, you'll notice that there's an estimated carry forward that is a light blue color of about 1.1 million, And one-time expenses, that's around $1.2 million that combined is $2.3 million. So those one-time expenses is the reason why the budget is higher than the revenue budget. Looking at the revenue budget, the largest revenue source in the hotel tax fund is the 7%. component of hotel tax, it generates 71% of the total revenues. To the right of that is the venue tax, that's the 2% venue tax. That revenue has to be used to pay towards the construction cost of the conference center. Something that you'll notice that is on both the revenues and expenses is the estimated impact of the PAC-12. And there's a slide following that has a little bit more information on this. And this is just setting aside some money for the impacts that we may see with the Texas State joining the PAC-12. Before we go to that slide, though, looking at the fund balance within the hotel tax fund, the ending fund balance is estimated to be $3.8 million. That's an 80% fund balance. and the 25% requirement is $1.2 million. And so depending upon the impact of Texas State joining the PAC-12, there's limited capacity for new recurring expenses in the hotel tax fund. However, as you can see, there is capacity for one-time expenses because we're well above the $1.2 million fund balance requirement. Texas States moved to the PAC 12 is expected to increase visiting fan attendance, attendance across all sports, the hotel tax revenue and ongoing expenses are projected to remain flat. That's what's in the fiscal year. 27 budget is a 0% increase for both. What's being isolated as a 3% hotel tax revenue increase that could be attributed to the PAC 12. that's on the revenue side, and there's an offsetting amount for special projects on the expense side. Separating this PAC-12 related activity allows staff enough time to monitor monthly and quarterly revenue trends and to track city costs linked to the increase in visiting attendance. It also allows us to

Discuss with the city attorney and receive guidance on allowable uses of this Revenue coming in and how we can use it to cover some of the new expenses that the city may incur So the last bullet I should have asked us on the message board I love to hear that we're sitting there and trying to track the things listed specifically, you know city cost linked to increase visiting attendance and impact of infrastructure and so on and so forth. The last bullet point though, when we talk about recommendations to council, will there also be, I guess at what point are we gonna get some of the, I imagine it's not gonna be in that same timeframe, when will we get these, that activity that we're tracking, like a summary of it? I mean, I know it's gonna be in the distant future to get really a more comprehensive data from it, but I guess what does that look like? I did ask it on the message board.

Assistant City Manager Rodney Gonzalez. We're actually gonna begin early this summer. In fact, PAC-12 has begun, or will begin in July, and so a month later, we should begin receiving some hotel occupancy tax reports. Not every hotel reports monthly. Some of them report quarterly, and that's why we put in their monthly and quarterly. but it's still too late in our budget process to definitively say how much of the whole year will be attributed to PAC-12. And so that's why we wanted to allow ourselves some time to capture those revenue increases starting with July, of course going through October and December, and at the same time identify whether or not there are any city expenses related to increasing visiting fan attendance. And so both are unknown right now and this leaves in place placeholders, if you will, for potential revenue increases and also how council might want to allocate that revenue based on expenses that we might have.

Right. I guess the reason I asked these questions cause is this whole thought process behind this, and I don't want to be presumptuous, but I'm interested in it because I think one of the things that I've been trying to be, I guess a little bit more curious about is how to quantify some of the costs associated with Texas state's growth. We often talk about the cost associated with general growth that the city faces, but I would also like to quantify that as well. And so just given the nature of what it means to be a part of the PAC 12 for people who watch football, it's a big deal. And so that specific track city cost link to increase visiting attendance, the cost that you're talking about, I'm just very interested. And so I guess, yeah, understanding a timing, when that's going to come back, how frequently per year, I imagine they're going to be in the PAC 12 for a considerable time. And so like, is it an annual, are we talking like a quarterly update?

As soon as we have enough predictive analysis, that's when we're going to come back to council. So that's why we're allowing ourselves the December timeframe, which would put us in front of council January, February, something like that with enough information to at least show the revenue that we've received from July through the end of the year. And then as well, looking at those expenses, whether or not we've seen a significant increase or any increase, if you will, on those costs related to Pac-12, a visiting fan increase.

Okay. I'm glad to see staff doing this. I'd really be interested to see how we can use the data that comes from these types of studies, these types of analysis, when we're talking about, you know, when we talk to Texas State about sharing costs and having substantive data to cite in terms of impact to the city. So I'm glad to see staff is exploring this.

What I will say is I asked I had lunch with Mr. Algo from Texas State and asked him a little bit about what they're planning to do. And so what he mentioned is that I believe they have a contract for about $400,000 for Hays County Sheriff's Office to actually provide security inside the stadium and probably like the parking lot and stuff. He said they were also contracting with the traffic team, a consultant, to be able to help them with the traffic and actually doing the traffic. He said some of that will be on city streets, but I do wanna say the city's obviously gonna be involved and having to come up with how we do it for things that happen in our community. So if there's stuff that spills over into downtown, restaurants or things like that, then we get the benefits of revenue and things that come from that, but we also would get any kind of issues that could be our challenges that go with that. And so that's the reason why Mr. Anderson's been talking with our public safety and emergency crews just to kind of understand a little bit more about what we need for there. And so as long as we have the analytical data to help support that it really is attributed, if there's other needs that they have for overtime or things like that, that it is from visiting people that are coming here, then that would qualify for the hotel occupancy tax dollar use versus having to have general funds subsidize that. So that's the reason for us really trying to make sure that we're drilling down better. And so the Hays-Caldwell Economic Development Partnership and other cities have also partnered to come up with some of the software tools that are gonna be used to be able to track this.

Anything else on PAC-12? Whenever we're through with PAC-12, I have something.

This is the last slide about Pac-12, Mayor.

Okay. I thought there was one, oh, it's the subsequent slide that talks about, Mayor, the marketing. Oh, yes. Could you ask a question about that one as well? That's what I'm gonna bring up. Okay, because I was about to pull that one too, okay.

It's on this slide. These are just the major cost drivers in the hotel tax fund. You had the 3% increase to personnel, some one-time funding, that we saw on the previous slide. This is a breakout of what the one-time funding is, and it includes the VisitSanMarcos.com redesign of $70,000. And I'm sorry, the PAC-12 Texas state marketing, that's what we're talking about, Texas state, of $100,000.

Yes, I would just like to understand that more.

Hi, Rebecca Ibarra, Director of Destination Services. So the $100,000 is for a variety of different marketing tools. We are going to, in the fiscal year, excuse me, in the 2027 football season, we will be purchasing advertising in the markets that we'll be traveling here. It won't be 2026, this year we're going to evaluate how they travel, when they travel throughout the year, not only football, basketball, everything, but we will be, putting together just marketing initiatives with Texas State and then of course with our hotels. And so it'll be a variety of different things. One of the things we're doing now is that we will be creating Pac-12 welcome type initiatives with our hotels, whether it be banners, clings, elevator clings, lobby wraps, whatever that may be, and that's what we're working on now with Texas State marketing and the hotels.

So the working with Texas State Marketing, is there a matching amount that they're going to put in addition to the 100K?

Just to give you an idea, Council Member Rodriguez, this year they're spending, I believe it's $250,000 this year, Texas State is spending on targeting the, or welcoming, basically, it's welcoming the schools that are playing here. Ours will be focused on San Marcos. So it won't be a Texas state ad. It will be a welcome to San Marcos. This is what San Marcos has to offer. So it is not a co-op with Texas state. It will solely be San Marcos marketing.

So you asked a question on the message board or no? Not on this part, no. So this is presuming we're gonna bring in more than 100K in tourism dollars through San Marcos. Pac-12 activity. Yes, ma'am. New activity. Yes, ma'am. Okay.

Yeah, I just had questions because of the way it's rewarded Pac-12 Texas State marketing. You know, got a lot of respect for your work, but it was just a question on at face value without the context. Yes, ma'am. It was just to be candid, a question on is it our role to be paying for Texas State's marketing for their decision to enter into Pac-12? Yes. Like is it the best use of hotel occupancy dollars? But to hear that it's San Marcos centric, I'm fine with it. And I look forward to seeing the materials.

Us too. We're excited. Thank you. I look forward to seeing the numbers. Nothing else here on PAC 12 because I have a completely different question. Oh, tourism information center parking lot. Is that a, expanding or just resurfacing?

Resurfacing. Every time our facilities and Director of Public Works, Sabas Avila, comes into our parking lot for the last four years, he's like, Rebecca, we need to redo that parking lot. It's in really bad shape, and we finally said, let's just ask for the money, and so we're doing it now.

What about the Discovery Center side?

Is it the entire parking lot? The whole parking lot. Okay. Yes.

Cause I know y'all spill over into that as needed.

Yes, ma'am.

We do. Okay. So my next question, I'm going to address this one to Ms. Reyes, and this is what I put on the, um, the message board. We have our, we called it museum funding. It's kind of broadened the scope. I don't believe we have increased that and at least 10 years. And if we're talking about things for people to see and people to do, Um, I was wondering if we could increase those, but to increase them from the hotel tax as opposed to more burden on the, uh, on the general fund.

I think it depends on whether it meets the two-part test.

So currently, you cannot use Hotel Occupants Tax for operations. They use it for their operations. They use it for their power, their staff pay, for just general, everything is just general operations. We do, as a convention and visitor bureau, we have those grants where they do, several of the entities do apply for grants for their different programing. But for operations, it is not approved.

We pay for our operations with it, don't we?

Yes, but we're the convention and visitor bureau, and that's what we do is we market the entire city. They're not marketing. They're simply operating their attraction or museum or art facility.

I was trying to find another source because... They're part of the charm of San Marcos. They're part of what people come to see. And I think we have spent money that way in the past. So I thought it was a reasonable question. And that was my question.

And we can always ask Mr. City Attorney as well, just to see if there's anything that might be.

I'm looking at $5,000 or $10,000 each. I'm not looking at even $100,000.

So even if they were using it like for the marketing aspect of their?

If they were to market, yes. If they were to purchase advertising and market, yes, they could.

Then that could be the Hotaku. So it could be something where it's done with its $5,000 or something like you're talking about, Mayor, that maybe if it was used for marketing purposes of their facilities and that sounds like that would meet the test.

And in that program, and I mentioned this, in the proposal for the historic tourism program, tourism heritage grant program, when we do move forward with that, there are options for them to use it to improve their building and marketing and different programming. So we do have that in there. It's just not their general operations. It cannot be used for general operations.

Yeah, but we're not doing the historical yet until we get another project finished. Correct.

At your direction, yes, ma'am.

So that's... I don't know how much of the money that they receive now and totally how they're using it, so there may be some adjustment, because if you take, let's say they're spending 1,000 now, we give them another 1,000, then that clears up this 1,000 to be used in another way. So maybe it would take, I'm sure that because they receive funding from us, we have their budgets, and maybe we could look at and have some conversations to see totally how they're spending their money, because I don't know how, what each entity is totally spending their money on.

Yeah, I think it's a question of asking them in terms of what they are spending the city's portion on, and then asking if there could be something that they could utilize for marketing their actual facility that we could consider for HOT.

So I do receive, that's required within their grants, their quarterly reports. So we see every, how all the money is spent.

That's what I said, I'm sure that we get their budgets.

And they currently do not purchase advertising. So, and that's all in the packet.

Maybe we could look for some other things. Okay, let me find out, because this is just me talking right now. Let me see if my other council members would like us to look into that.

What is the question, Mayor?

Do we want to increase, there's really two questions, want to increase the funding that goes to the museum, it's Price Center, and it's Calaboose, and Centro, and Commemorative Air Force, and I think there's another one, to increase it, but what I was looking at was not to pull any more money from general fund, and to see if there's anything that we could do from hotel tax, since we seem to have some funding there? So I guess it's really two questions.

The first one, yes. And there is just I know one of the organizations just for the public. So there's not like a perception of

I'm not on Centro's board anymore, so there's not a conflict on that one. Just point of clarification.

Yes to that. In terms of... Yes to both? Well, the first one. Okay. In terms of exploring utilizing hot dollars, I mean, I'd have to see if it was a permissible use. That's the question. Yeah, I mean, if it's a permissible use, and you're saying it's what, for the sake of advertising so people know about them?

Well... Maybe since we haven't increased their dollars in quite a while, maybe they don't have any dollars that they've spent on advertising, but they would if they had more dollars. Maybe. So we'll see.

So like a supplant via the hot funds is what you're talking about. If it's permissible, I'm down to explore.

Okay. Mr. Scott? Yes. Mr. Mendoza?

Yes, yes.

All right. So we'll see if there's a path forward there. If there isn't, We'll see what else we can do.

And I did want to bring one point up about hotel tax. Is there, there isn't capacity currently, like for a recurring ongoing expense within the hotel tax fund, depending upon how the Texas State joining the PAC-12 impacts hotel taxes. If we see our hotel tax revenues increase more than what we forecasted, then there would be that capacity.

Maybe we'll see more in, sales tax and some other things that we could go back and look at the general fund next year if all this happens as people expect and hope that it will. And we'll see. So we'll see if this works out. Thank you. Anything else with the hotel occupancy tax?

No, I just I know we have there's a hot workshop coming up. Perhaps that's a question when I think we got an email about it. Monday. Monday, it's Yeah, I think we got an email about it. But perhaps that's a question that could be posed there in terms of permissibility.

At 530. Okay, just a flag for staff.

I was thinking there was something on Monday, but it's not been placed on our calendars. Not on mine. Okay. Okay, so if there's nothing else about hotel tax, we will move on to our next fund.

That is the Community Enhancement Fund.

Mm-hmm.

What we heard from City Council during budget policy in regards to this fund is to maintain 25% fund balance and to increase operating expenses for contracted services up to 250,000 annually for maintaining Highway 123 and I-35 plannings and to budget one-time uses of fund balance for improvements along I-35 at approximately 75,000 and fencing on Sunset Acres at approximately 250 to 300,000.

That's the one we talked about before, right?

Yes, ma'am. Okay. This is what the 2027 budget looks like currently for community enhancement. You have revenues of $1.3 million that almost all the revenues are coming from the community enhancement fee and expenses of $1.7 million. The reason, again, for the expenses being higher than revenues are some one-time expenses. This budget is structurally balanced. The total personnel in the FY27 budget makes up 22% and operating expenses make up 56%. You have some one-time expenses in there, just over $376,000 that is causing the expenses to be higher than the revenues. The estimated ending fund balance is 1.4 million, which is 108% fund balance. The fund balance policy requires 25%, which is 324,000. So there's certainly some capacity within this fund for some one-time expenses as well. The major cost drivers in this fund is the 3% increase in personnel cost, the increase in contracted services to take over, maintenance of Highway 123 and I-35 plannings. The council also approved 200,000 for unsafe structures during this current year. That money hasn't been spent, so it's being moved into fiscal year 27. And then those one-time projects, again, that are around 375,000 for those beautification projects. And that just brings us to the decision points for community enhancement. any direction for staff, there aren't actually any decision points at this time.

All I'll say is whatever plantings we're doing, we need some that are, I'm gonna say, easy maintenance and not, but we're talking about picking up what TxDOT's already planted and put out, right?

Yes, ma'am.

Oh, well. Council, any questions on Community Enhancement Fund? Thoughts, comments?

I know that when we passed the fee a couple of years ago that we had hesitation, but I'm glad to see that it's actually doing a good job. So thank you for y'all having the really great foresight on that. Thank you guys.

Okay. Council, it's almost 90 minutes. Do you want to take a break or press on? I don't think there's a lot. I'm good with that. But I had to ask. So, moving on.

Okay, we are going to move into the enterprise funds. Begin with the two largest enterprise funds, the electric and wastewater utility funds. And the first slide is what we heard from council during budget policy. And electric was maintaining 150 days fund balance, and worked towards 180 days, and water, wastewater, it was maintaining 150 days. On the debt management for the debt service coverage ratio, maintaining that legal minimum, which is at our bond covenants of 1.2, and working towards the 1.4, which is what was provided by Dan Wegmiller, our financial advisor, as a healthy, coverage ratio. So the rate modeling is underway in preparation for the first season utility advisory board meeting in July. So this is just a look at where those proposed rate adjustments might land. We're showing separately for water and wastewater, even though it is just combined one fund. So for water, it's looking like it would be an increase range of five to 8%, and you can see that that would actually put us a little short of where we wanna be at the 1.2. Since this fund is combined, it gets combined with wastewater, so if you go to the far right, you see what that combined debt service coverage is, and it is over the 1.2, so we'll be fine with the Water Wastewater Fund. In wastewater, it's looking like it'll be between two and 5%, Electric is between one and 2% and that would put us almost close to the healthy debt service coverage of 1.4. The Citizens Utility Advisory Board will make the rate recommendations to City Council as they have always done in the past. And this is the decision point slide. There aren't any decision points at this time.

Just if there's any direction for staff, questions, comments, moving on.

The next fund is the stormwater utility fund. Uh, what we heard from council for this fund is to maintain an 90 days of recurring operating expenses as a fund balance. and we are going to use a hybrid approach for funding the capital improvement plan by covering up to $5 million worth of stormwater and anything in excess of that by the general fund. There was a little bit of discussion about how much of an increase it would take to fund a stormwater capital project. A 1% increase to the stormwater rate would generate about $100,000 in revenues, which is enough to make debt service payments on just over a million dollars in capital projects. Stormwater projects are expensive. They tend to cost around $10 million. It would take an 8% increase in the rates to generate $800,000, which is the debt service requirement on a $10 million project. if we issued bonds for a major stormwater project. So below you see what a typical residential rate is, is $14.90 monthly. A 1% increase would be 15 cents. If we actually increase it by 8%, it would be $1.20 a month, and that 14.90 would increase to 16.09. That's what it would take to actually cover the cost significant stormwater project that cost $10 million. This is a look at the stormwater funds budget. It too is structurally balanced even though expenses are higher than revenues. There are some one-time expenses in this. On the revenue side, the stormwater utility fees make up nearly all of the revenues. On the expense side, personnel makes up 19%, operating makes up 32, and debt service makes up 45% of this fund. You see there's about 440,000 of one-time expenses. The ending fund balance is estimated to be just over $3 million, which is 112 days, so it's over the 90-day requirement. That requirement is $2.6 million. So we're estimating there'll be some funds here for one-time uses for the following fiscal year. These are the major cost drivers in the stormwater fund. The 3% increase to personnel cost $59,000, and we used an acronym there. The MS4 is Municipal Separate Storm Sewer System. That's what that stands for, MS4. The increase in compliance costs is $41,000, and the increase for the capital improvement projects debt that was issued during the current fiscal year is $233,000. There was one Supplemental request that was not funded. It was an increase for a mowing contract for just under $52,000. There aren't any decision points. It's just if there's any direction for staff as it relates to stormwater.

So no one or does QAB do stormwater?

I'm sorry?

Does QAB recommend on stormwater?

No, ma'am. Why not? QAB only recommends on electric and water wastewater.

I know, but that's the way it was written to begin with. It could be changed. Okay, on the stormwater then, we don't have someone else coming forward. Having to use general fund, and I know I have highly recommended it in order to get the projects done. But this is one of our smallest fees that we have, that and community enhancement. And I think stormwater is one of the things that people in our city understand is stormwater, flooding, et cetera. So to go from 14.90 to 15.05 a month, is that something that we could consider and what, I'm looking at this, what would it take to be able to cover it fully? I think we've talked about that before and that was more than what we were willing to do. But I would be interested and look at increasing storm water so that we can get the projects done and relieve the general fund of some of that. I would... be willing to look at that. How about y'all?

Absolutely. I did want to ask mayor, I am on the QA board. What will we need to do here in order to have, what would be the process for it to now be put under the purview?

On the agenda. Okay. You got it. Okay. Let me see about Mr. Scott and Mr. Gonzalez. If y'all would be interested in entertaining a race to the stormwater fees in order to, continue the good projects that we're doing, and maybe take a little less out of general fund, or maybe we get more stormwater projects done.

How many more of these good projects do we have left?

I think it's a pretty long list, Mr. Condor. I don't know. 12, 27.

Sean Condor, director of engineering and capital improvements. Uh, good question. We're actually about to wrap up our stormwater master plan, and I'm about to throw a whole bunch of more projects on. It's the list never ends. It's just a matter of, I need that constraint, how many I can do each year. And we'll program the CIP to fund what, uh, what the CIP can actually afford. So the list goes on forever though.

Thank you. Well, Mr. Condor's up there. Uh, if I may ask one of the reasons I'm interested in this is because I've been to many things where you've spoken about just in your time over the last couple of years. How a project, what it costs now versus maybe what it would have cost two, three, four years ago. Do you want to maybe, sorry about that. You want to maybe expand on that, some of the information and how you explain that to our residents?

Sure. The projects have just gone up and up and up. And the number I'm using these days is pre-COVID, they've doubled. And you can go around the room to any contractor and they don't know why it's doubled, but it's doubled. And so what we do on a project is we get the scope, we figure out what it is, and then I look to see what we can afford, and then I have to start breaking it up into smaller phases because, you know, Sunset Acres, for example, it's just too big. I can't afford it. They get frustrated that it takes so long. I say, but I'm limited by what the funds are that we can do. And so that's our first step is reduce the scope, cut it into smaller phases, smaller manageable chunks. And it does drag out the schedule. As you know, the longer you take something to get done, the more expensive it takes. So definitely by having more funds to play with, we get some of these projects done quicker, less phased, and hopefully keep them down at a lower cost. They don't want to be had. We continue to break them up.

and hopefully to the satisfaction of our people. Cause I've been to some of these meetings and I know the pressure that they put on y'all is intense.

Yes.

So I think this is a great idea.

It's a, it's a, it's a huge need. So let me ask, uh, Mr. Scott and Mr. Gonzalez here. Yes. For Mr. Scott, Mr. Gonzalez. Yeah. I'm wanting to look into it. Yeah. And come back with different options or whatever. Okay. So we'll look, look forward to that. Thank you, Mr. Condor. I think we're good on stormwater. Mr Locke will press on. Okay.

Our next fund is the resource recovery fund, uh, maintaining a 90 day fund balance of recurring operating expenses with leeway for the implementation due to the construction of a new resource recovery facility. is the guidance received for the resource recovery fund during budget policy. This is a look at the resource recovery fund. The fiscal year 27 revenues totaled $9.1 million in expenses, $9 million, so this fund is also balanced. The primary revenue sources for the resource recovery fund, the residential refuse collection is 66% of the total, about $6 million, and the recycling collection makes up another third of the total at 2.9 million. On the right hand side, the operating expenses are the largest part. That's $8 million and this is mostly the contracts with the refuse haulers is what makes up that amount. Personnel makes up 10%. The estimated ending fund balance for fiscal year 27 is $4 million which is 161 days well over the 90-day requirement of 2.2 million. So the difference there is the amount that has been set aside for a future resource recovery site. These are the budget considerations. That prior slide, the revenues do include a 1% rate adjustment. Each year, contractually, the refuse hauler and the recycling contract go up by 3%, so we need to continue to at least do an increase in this to prevent a larger increase down the road. On the cost driver side, the 3% to personnel cost is 15,000, and the 3% increase to the garbage and recycling contracts is $250,000. That brings us to our decision points, which is include a 1% rate increase in resource recovery to prevent a larger increase in future years.

Yep. I see a thumbs up down for Ms. Rodriguez. I'm a yes. I'm hearing yeses for Mr. Scott, Mr. Mendoza, Ms. Gonzalez. Okay, thank you. Moving on.

Okay, that brings us to our airport fund. maintaining a 60-day recurring operating expenses fund balance, and for revenues, identifying the appropriate time for utilizing property tax revenues generated at the airport for airport operations was moved to fiscal year 2028. The fiscal year 27 budget is balanced. You have total revenues of $1 million. revenue generator, over 90% is rentals from things like hangers and tie downs. You also have fuel cells that generate revenue at the airport. On the right hand side, 68% of the total budget is contractual services. That's with the operator, Texas Aviation Partners. And you have 300,000 in operating expenses and then some one time expenses of 31,000. The estimated ending fund balance is $185,000, which is 64 days, so it's over the fund balance requirement of 60 days, which would be $174,000. These are the major cost drivers. The annual 2% increase to the airport operational contract is $12,000. The increase for expiring federal funding, this was for a position that, We were using $90,000 of federal funding to cover. It expired, so that increased by $90,000. The increase to the indirect costs that the airport pays to the general fund and for information technology increased in total by $141,000. The primary reason for this increase was due to contracted services for maintenance and repair of city-owned facilities at the airport. The airport capacity within the operational fund can only absorb $6,000 of that amount, so the general fund is going to absorb the remaining $135,000. These are some supplemental requests for the airport that were not funded. There was one operating request. It was actually from Texas Aviation Partners contractual increase of $72,000 and there were two capital requests, one for a parking lot and one for repair and maintenance of some buildings and HVAC unit of $60,000. So combined it was $210,000. And the way that we've handled capital and project requests with the airport, if the airport fund doesn't have capacity, then they are considered along with the general funds request. and prioritize what the general funds request. And that brings us to the decision points for the airport. There are none, so it's just any direction for staff.

Questions, thoughts, council?

No, ma'am. Okay. And last but not least, that brings us to transit. What we heard from council during budget policy was to maintain 60 days of recurring operating expenses. This is what transit's operation budget looks like for fiscal year 27, revenues and expenses at $3 million. The revenue sources for transit, the largest is the general fund, now that the federal dollars are expiring, makes up 41% of the general fund contribution, 48%, is the general funds contribution, and then the federal dollars make up 41%. We received $275,000 from the state. On the right-hand side, the largest expense is the operating expense, which is our CARTS contract. That's the Capital Area Rural Transportation System. That is around two and a half million dollars. We're estimating to end with a fund balance of $896,000. That'll be 109 days cash on hand, which is above the 60-day requirement, which would be 491 days. Just some considerations with the transit fund. The loss of the CARES and ARPA federal funding caused the general fund's contribution to go up by $213,000 for fiscal year 27. And the 3% increase in personnel cost is $5,000 in this fund. For fiscal year 28, the general funds contribution is estimated to go up an additional $137,000, and that's when we use the remainder of the federal funding that's still there. We still have a little bit more to use. It will be gone after fiscal year 27. And there will be a $1.8 million of grant funds that will be carried forward into fiscal year 27. It was a grant that we received for seven vehicles that have not yet been purchased. And that brings us to the decision points for a transit fund. Okay, that brings us to our next steps. As we touched on at the beginning, the budget will be submitted to city council on August 18th. There's still multiple opportunities for community input. We have the Neighborhood Commission presentation the day after it's presented to City Council. It'll be presented to the Neighborhood Commission. We have multiple public hearings that'll occur on September 1st and 15th over the budget, the tax rate, and any proposed fee increase. And City Council will consider the budget and tax rate adoption on September 15th. And that concludes the presentation.

One last opportunity for questions or comments. I know. Yeah, that makes for a short discussion. Again, thanks to all of the staff that are doing the best you can with what you've got. That's what you do when funds are tight. Thanks to directors making some hard decisions, assistant city managers, Ms. Reyes. I know it's tough and thank you because y'all are figuring out ways to do what we need to do.

Thank you for saying that, Mayor, and acknowledging that. It's been rough, you know, but our team has been amazing at really rising to the occasion and it's not without cost and that's why it was important for y'all to see the impacts. You know, what the public sees is that it's a team that really does still want to provide services and there may be some things sometimes that may not be the same as they once were, but when I look and see around us, and as Mr. Locke said, even statewide, recently we went to a statewide conference for city management, and just hearing all the cities that are going through a lot of really tough challenges, I know we're not alone, but the fact that you have a team that manages the budget as well as we do in terms of really monitoring anecdotal information as well as economic indicators that we're seeing and I really just want to commend Mr. Locke and Ms. Patek and their teams for all the great things that they've done, Mr. Garcia as well. So just doing a lot to really ensure that they're monitoring every little thing and if there is something that looks out of whack that we respond immediately so that we're not finding ourselves in these huge budget deficits that other cities are struggling with right now. Just wanted to name that because it's really important and it doesn't come without sacrifice. And I'm very thankful that y'all have acknowledged the difficulty that we are in, the difficult place, but it's not as bad as some of the others. So I'm thankful for that.

Thanks to our budget balancers.

Thank you to the finance staff. And for the public, just so you know, if you download this packet and you want to see what these impacts are, it starts on page 92. Does this conclude our program, Ms. Rass? Thank you all. Mr. Vigneault, I don't have a list of anyone who signed up for Q&A because we didn't have any. So there being no further items on our agenda, we will adjourn at 7.13.