City Council - Regular Meeting

And am. >> Microphones on. All right. Well happy Saturday morning to everyone. This is the city of Iowa City. a budget work session for January 24th, 2026. so welcome back, councilors, and welcome to all of our staff and to the public that is joining us here today. We're just going to dive right into budget discussions. I'm going to turn it over to our city manager, Geoff Fruin.

All right. Good morning. Council staff. Public I appreciate you taking some more time with us this week. It's been a busy week. We've already done a little bit of the budget with the CIP, but today we're going to do a deep dive into the operating budget. a couple of things before we get started. one, it is a really long day. we cannot probably dive deep into every topic that you want to, so just urge you to kind of consider that, especially in the early stages, we can absolutely talk about any topic that you want to. You'll have an opportunity to interact with department heads. but you may want to park a few things that need further discussion, and we'll have time in your work sessions going forward to discuss those. Or we can schedule additional budget work sessions if needed to discuss those. So, keep that in mind. I do want to start with a few thank yous. So especially with this morning's presentation, the city manager's office is going to do 99% of the talking, but 99% of the budget work is the staff right here. The finance staff, Angie, Nicole and Jacqueline. Michelle Cook is not here, but she also plays a big role in getting that final document ready. So, make no mistake, the brains behind the operation are down there. We are the mouthpieces here for today's budget work session. I also want to thank Chris and Kirk, who round out the budget Committee and then all the department heads and staff that put together the budgets. It's no easy task for those departments to submit budgets. We know they're all stressed and they have to balance their requests with the reality of the budget position that we're in. So with that, I think I'll ask for the lights to be dimmed and we will get started Yeah. Go ahead. We're going to Kirk

and I are going to have to, be making some eye contact on the slides here, but we'd like to start with the budget review schedule. we are on this third one, the January 24th operating budget review. We did the capital review. And back in September, we talked about some of your priorities for this budget, which hopefully you'll see reflected in our presentation. the timeline moves fast beginning at your next meeting, we have to start the process for our geo bonding. so you'll see that on your agenda. By February 17th, we have to have the max property tax levy, so you can come down with your levy. From that point, you just won't be able to go back up. And that's going to be important. So the county can get their state required mailings out to our residents. On March 10th, we will set the hearing for the property tax levy. And then on April 7th, we will have that hearing and set the hearing for budget adoption. Ultimately, we'll ask for your adoption of this budget on April 21st, and that gets us, in line with the filing deadline with the county of April 30th. So keep that in mind. most of our budget deliberations will have to take place in the next 30 days to get to get us to that April adoption. The budgetary funds. I won't spend a lot of time on this. But, a quick overview of a few of them. The general fund is where we'll spend quite a bit of time today. That is your discretionary, largely discretionary property tax supported fund that does general government operations, public safety, parks and rec culture, leisure, those types of things. your special revenue funds are going to be funds that have some spending limitations on them. So for example, the road use tax that we get from the state has to be used on roads. So if there's some sort of spending limitations, we keep those separate. you'll notice a few of those, including the Affordable Housing Fund and our new local

option sales tax fund, which has restrictions based on the voter approval. The enterprise funds are largely utility accounts, but those are operations that we run like a business without any profit motive, of course. but the fees that we charge support those services. And those fees do not leave to support other services unless they're utilizing them as part of those operations. just a quick review of the 26 budget before we jump into this year's budget. So, as you'll see in some slides from Kirk here, last year, we did not see our taxable value grow at the same rate as inflation. And that's been a trend for the last several years. Thankfully, this year looks a little better. last year we told you that the rollback, was at a historically low rate of 47.4, a little bit of a teaser. It gets worse, not better. this is important because over 80% of our properties are subject to that rollback. we've maintained our property tax rate at 1563, which was the third year of no change. We did pass a budget that had the general fund unassigned balance decreasing 2.9 million. So we often refer to that as a deficit. But a planned deficit of that budget, as you know, we plan we hope to finish the year in a much better position than that. We made continued progression towards strategic plan operations. We had some fees and rate increases, including the new 1% franchise fee to support the fair free operations and largely status quo budgets. There were There were five and a half positions added. Three of those were supported wholly with federal funds, and the Housing Authority, and the remaining two and a half were split between the general fund and enterprise funds. So with that, we're going to jump into the 2027 budget, and

Kirk's going to get us started. >> Thank you. Kirk Lehman, assistant city manager just want to start by talking about the environment that we find ourselves in. Budgetarily a couple headwinds that we're facing, including residential rollback rate that Jeff briefly foreshadowed for you, as well as slower taxable property valuation growth. and then always the specter of state property tax reform. And we have seen some volatility in key revenues and some key expense lines as well. So I'll dig into each of those in a bit. So starting with the residential rollback, this is the percentage of residential property value that's subject to property tax. In general. The lower that percentage, the less of that property valuation is subject to the tax. this is a factor that's calculated by the state and applied by the state. Uses statewide formulas. So it's not something that we really know in advance or can effectively plan for in many cases and it has become increasingly important to us, especially after 2013. at that time, there is a property tax reform that moved multifamily, phased that in over ten years to get it down to the residential rollback rate. We have also had additional property tax reform since then. That's moved some portion of commercial property taxes that also subject to the rate. So it's really essential. Like Jeff said, it's more than 80% of our property valuation is subject to to this volatility which which proves some challenges. what we've seen this year is a drop of about 2.5%, down to 44.5%. So that is the second lowest rate in the history of the rollback rate. The rollback has been here since 1978, with every 1% drop in revenue being about 1.3 million. So it does have a significant impact on us. And if you look at the chart over time, it does tend to jump around. So because this was an assessment year we did expect some

decrease, but it was bigger than we expected. you know, you can't really have a crystal ball and look at the future, but it might jump next year, but it does have a lot of volatility to it, which proves challenging for us. Now, within that we also have our building permit trends, which is how we look ahead and try to estimate what valuation is coming online. In other words, it's a good indicator of our taxable growth. So this includes both new construction as well as rehabilitation of existing properties. And what we've seen historically is that we have had enough growth that as that 2013 property tax reform went into effect, we've been able to grow out of it. So we did not feel those impacts as negatively as many of our peer communities. However since about 2019, since the pandemic, we've seen pretty muted property, taxable valuation growth. you'll see on the screen that we averaged about 125 million from 2020 to 2022. We did see a good year in 2023, but looking ahead, we're still below our average overall, which poses some challenges now. This year, 2025 looks okay, but the numbers do shield some of what's actually happening here because a lot of that property valuation, is public property valuation. So it's not subject to property taxes. So even as we had construction activity not all of it's going to be reflected in our property valuation growths. So that is something that that poses a challenge. Looking ahead now, one other thing that I want to note with this is that we have a great need for housing. We're obviously in a housing affordability crisis in Iowa City. and what we did see this year is that our single family building permits are pretty low. And overall, our housing construction, number of units constructed is relatively low, and it's not enough to meet that demand. So so that's another factor that comes into play here. Doesn't affect our budget discussion today as much.

or not directly but but it's something that I did want to highlight with with these development numbers. This is inclusive of Iowa City schools, but exclusive of University of Iowa and VA is that. It excludes the university. It includes the school and city construction projects. >> Okay. So about 50 million of that is public or nontaxable valuation. >> So and the.

Schools one third. Yeah so how those things interact then is just how the taxable valuation increases or decreases as you all know assessments happen every two years. So it is a cycle on this slide you'll see the taxable valuation in red. And at the bottom is the two year valuation growth. So that's really the number that we look at. Because every other year we do expect a jump in property values as that taxable valuation is brought into our our revenue. So traditionally we've seen some increase You'll see in FY 19 or FY 18 and 19 and FY 20 to 21 that growth is pretty good. Generally what we want to see is, you know, 4% growth means that we have enough growth that's going to be able to bring in revenue to support our core services without too much issue. What we've seen since about FY 22 is pretty muted valuation growth. So in those cases, you're seeing 2.7, you're seeing 23.2. And that's over two year periods. So that's only about 1% growth in those years. Now for FY 27 we're looking better. We have a 4.9% growth which is positive. It's a positive trend. it bucks some of these really muted property valuation growths that we see. But if we're looking at the long term trend from from COVID, we had a bunch of costs that have gone up and our property valuation has not kept pace. So that does put pressure on our ability to maintain service levels over time. And that's something that that we have to to continue to consider. Looking ahead. And as we zoom out a little bit the whole property taxable valuation system has been changing over

time, which has impacted our ability to, to provide services and capture revenues to do so. So I had already mentioned the 2013 reform that has been fully phased in since FY 24. That was the reform that brought multifamily property. the the rollback rate to align with the residential rollback rate. Prior to that reform, they were taxed at 100% of their valuation. since then, in 2023, we had another significant round of of property tax reform at the state level. and this one really is looking at phasing out the library and emergency levies. So the emergency levy is what we use to to fund climate action. And the library is obviously what helped fund library operations. So overall, that's a loss of about 2.1 million, when it's fully implemented. those got added on to the general tax rate and has to be brought down to the 8.1 level. by FY 29. So the way that that happens, it's not just voluntary. The state does impose penalties if you grow, your taxable valuation grows by certain percentages. So the more you grow the larger the penalty. so we have had some of our valuation or our tax levy ratcheted down already to date, about $0.33 of the $0.47 combined to the library and emergency levies are already reduced. I'll go into levies a little bit more detail later to but that does still leave another $0.14 that has to be brought down by FY 29. so we are still anticipating additional losses. This isn't something that's phased in, and there's a chance that we'll go below the 810 levy. if our valuation grows enough that it forces us to go below that. So unless reductions in service are desired, we want to

be sure that we incorporate those into the general fund. We do have some other opportunities to incorporate these activities. Now with lost. but but that's something that we're keeping in mind as we're looking at this, and this legislative session. More importantly additional property tax reform seems basically inevitable. And the unifying theme of that seems to be some sort of cap on the amount of revenue that we can collect. the number that's been thrown out in a couple of different proposals is about 2%. So that's not really enough to keep up to that growth that we would need to for, for status quo operation. So so that is a challenge that we're looking ahead. Obviously that also creates a high level of uncertainty. So we want to be able to react to that as that comes into effect so that we can appropriately respond with our budget. So some caution with that coming up And then also just uncertainty in some key revenue lines beyond that, property tax reform obviously federal revenues have been the federal landscape has shifted this year. And with, with awards that were made potentially being pulled away with future appropriations at risk or potentially reduced. those are things that will affect us and will affect our local partners. and it's something that we're doing our best to plan around. But it could really impact especially those services that we provide that are very dependent on federal funds. You think of things like transit, you think of things like our housing authority. Those are very subject to federal allocations. Now, some other ones that we have that are affecting us are we have some hotels that have recently closed in Iowa City. I'll talk about our hotel motel tax in a bit, but it does impact our revenues to a much smaller extent than federal revenues. But it is important, and we're not quite sure how that will impact us at this time. It's unclear, but that's something that we're keeping our eye on. And then finally, as I mentioned, inflationary

pressures. So over the last year or two, those have started to come down. but we have seen significant increases in expenses, especially since the pandemic. I'll point to things like insurance premiums and deductibles over the past five years, those have been well, well above, the rate of revenue growth that we've had. So that that creates some challenges for us. we do see some potential threat in the future as well, with tariffs, increasing costs. those impacts are yet to be seen. But even the threat of tariffs does often have folks increasing their costs. to be cautious. So that does still have an impact on us, whether or not that goes into effect. So all that to say, there are challenges in the environment that we're facing, that we're trying to respond to with this budget. but we think that the budget is well positioned to help deal with that. So with that background, I do want to start to get into the revenue sources that we have at the city. So this pie chart, is all sources of revenue that the city has. So that includes both the general fund as well as all of our enterprise funds. And what you'll see is that property taxes is about 30% of the revenue that we bring in. So in total, we bring in about $245 million. The property taxes is about $73 million. So significant portion of our revenue comes from that. a lot of that goes into the general fund. Another big piece you'll see is charges for services. That's about 20% of our revenue. A lot of that is what drives our enterprise funds. So you'll think of your water, the water department where revenue comes in that funds the water services. and that's how those funds operate. another large piece that you'll notice is that 25% is intergovernmental. A lot of that is federal funding. So that's a piece where that federal volatility can really have an impact. That's about $61 million. And though it does vary

year to year depending on large grants that we have, it always remains a large part of our revenue. now one other thing that has changed this year is you'll see other city taxes. That's where the local option sales tax is. So in the past that had been 3 or 4% of our total revenue, with the additional 14 million of lost. That brings that to 9%. But what you'll notice is that, you know, it's not a silver bullet. It still is a relatively small piece of our revenue pie, but it does provide some opportunities that did not exist before. So all that to say, it's not a silver bullet. but it helps. But that's generally how we're structured across the entire city. >> Kirk, do you do you know you were saying the trend of the property tax reform bills at the state is a tax on growth in general around like 2%? Does that only include taxes, or does that include any type of way that we collect money? So it's. >> It's strictly tied to property taxes. Okay. And basically what that says is it in the past if valuation grows you have a levy rate. The levy rate is applied to it. The rollback is intended to to make sure that you don't have increases that are too large when assessed valuation grows too much. what this says is that you can't capture all that growth. The rollback isn't enough. Instead, we're going to force you to ratchet down your growth to only 2%, regardless of how much you grow. Now with these bills, they do get rid of the growth penalty when it comes to new construction. So that's something that's not included in the 2023 bill. What that means is that if you have a new development that's built, you know, that gets added on top of that. So it would still allow growth above 2%, but it really makes you reliant on new development. and so in the case of Iowa City, we're better positioned than

some cities because we are a growing community. In the case of especially your rural communities, they're going to get caught in a very hard place if they're not having new development that's occurring. Okay. So yeah, yeah, in a nutshell, it's the growth of existing valuation that gets capped at 2%. But that still poses a challenge and makes you dependent on growth. >> So if we just somehow found out a way to without taxes, get a bunch of revenue, we would still be able to grow over that 2%. Mark. Yeah, you still could use other sources of revenue without the 2%. Yes. Okay. That's just that's a property tax reform. proposal. >> Okay. Thank you.

But when it comes to property taxes, one of the reasons we are very focused on it is the general fund. So great transition. I appreciate that. the general fund is what funds a lot of basic government services. So, it funds, you know, your internal services, things like finance. it also funds a lot of the public facing services that that I would characterize as core services that the city provides. So that includes public safety. It includes parks. And now with the the reduction of the library and emergency levy, it also includes those services as well. So it's a significant amount of what we do. and as you'll see on this slide, property taxes is about two thirds of that general fund. So, what we have seen over time is that property taxes remain important. It's about 44 million. We have seen an increase this year of about 2.8% over FY 26. But again, if you look at it, since COVID essentially over the last five years, we've only averaged just shy of 2% growth in our general fund, which does cause pressures. As a lot of these are very personnel intensive services that we provide Some other things to highlight on here. The other city taxes includes our hotel motel tax and utility. Excuse me, utility franchise tax. That's about 4 million. that one decreased this last year, partially because of our anticipated hotel motel, fluctuations. You also see licenses and permits on here. That's about 2.5 million. That one also decreased because we've had less development recently. And then you'll also see some smaller slices, which are use of money and property. So that's a lot of our our interest income and rents. That's about a million. We have about 4 million. That's property tax refill. and then charges for fees are charges. That one's also decreased. And then finally

miscellaneous includes things like fines fees, charges, chargebacks to enterprise funds. So that's about 9 million. in our general fund. But all that said, we have seen an overall increase in our general fund, but it is not quite enough to keep up with some of the expenses. So it does squeeze what we can do. Try to use the mouse wheel. And that was a mistake that brings us to zooming in on property taxes. So this is where I'm talking about the levy rate. this is what is applied to property valuation. In addition to the rollback. And that's how you end up determining what it is paid. for property taxes. last year we kept our rates steady at 15.63, as you'll see in the FY 26. again, about one third of our total revenue, two thirds of general fund revenue. what we're anticipating is about a 3.4% increase from FY 26. but how that's split among our different levies is important because that affects how we can use those services. So we are proposing a a modest decrease of about 1.3%. So reducing our rate down to 15.43. but part of that is due to a forced ratcheting down of our general fund. So you'll notice that the general fund levy is decreasing from 8.4 to 8.2. we're making up for that in some other places by raising our employment benefits levy from 3.3 to a higher 3.3, 3.34. and also increasing our debt service levy as well. Now, that doesn't quite square, does it? Because we're decreasing our levy. So how does that come into play? What we're proposing is that lost is used to decrease the debt service levy by $0.20. And so we'll talk

about the lost the full lost, proposal later. but with that it does end up resulting in a decrease of the debt service levy of $0.20. But if you do that math, it's because some of that's going up to make up for the general fund drawdown. But we also do have increased demands on our debt service levy with our capital improvements project and increasing costs in general. So overall, we're proposing a modest decrease. But the largest portion of that is coming out of the general fund, a smaller amount out of the debt, and then make up for that somewhat in the employee benefits levy So property tax, rent trait over time has been pretty positive. We've been able to have approximately 11 years of decreasing our levy rate, through FY 23. most of that was due to prudent debt strategies where we're able to to reduce the amount of interest that we're paying on debt. you'll see again, with that blue line that we are proposing that decrease again after having it steady for three years in light of some of these property tax legislation reforms that have been happening. it is a modest drop. but it really is possible only because of that lost lost dollars coming in. And when it comes to the property taxes, we are not the only property tax entity.

I just ask a quick question. that the 810 levy that's currently at 840, and we're proposing to ratchet it down, is that because there's a like a backfill that was allowed when the library and emergency levies were. Yeah. So so the way that that worked is they took that $0.47 that we had in library and emergency, and they just put it on top of the 810. And they said by FY 29, this has to be back at 810. Got it. >> And then yeah.

And then they had that forced reduction. And so for this year and last year we didn't have to do it. But the year before we had to do it again. This is the forced reduction that we have. Thank you. So. Sorry. Any other questions on property taxes I get that that's complicated. And I'm trying to fly through for the sake of brevity. So with property taxes, another complicating factor is that we're not the only taxing jurisdiction. we're not even the largest taxing jurisdiction. The school district actually has the largest, piece of the property tax puzzle at 40%. We're at about 39%. Johnson County is the other a large part of the property tax bill. so they're at about 17% if you include, in things like the city assessor, which is run out of their offices and a couple things like that. So we've been able to decrease our share of the pie over time. but, we're only one piece of the pie. And when it comes to comparing our property tax rates against other cities what we've seen is that we are middle of the pack. We used to be towards the top. since FY 12, especially when we started focusing on trying to lower our levy rates somewhat to make us competitive with other communities. We've seen our rate drop below that of Davenport, Des Moines, and Cedar Rapids. again, you'll see that at 15.63, this is last year's even with that 20 cent reduction, we're probably not going to drop any further. And we don't really anticipate dropping any further. but but we're pretty, pretty happy with being a middle of the pack So that's property taxes. Big topic. we do have other revenue sources that I'd like to go over. as I noted earlier, it's a much smaller piece of our pie, but

they are still significant contributors, contributors to our revenue. So first is the hotel motel tax. That's a 7% tax that's levied on hotel motel receipts. about 25% of this goes to think Iowa City. And then the rest goes to general funded activities. what we've seen recently is relatively steady growth over the last couple of years. You'll see that there was a significant decrease during COVID, but at least since FY 22, we've had some modest increases. note that this is actual receipts, so it doesn't get into receipts since the closure of the some of the properties, including Hotel Vitro and the Chauncey, as well as we know that the Highlander is currently in bankruptcy. So all of those call into question how these revenues are going to look over the next year or so. but we've seen relatively stable growth in this over time, which has been positive.

Do you anticipate. >> Any of the legislation statewide would change this? I'm assuming it wouldn't really affect our 2027 budget, but maybe future budgets. For hotel motel? No, but state legislation has been mostly focused on property taxes. there has been some talk about local option sales tax in the past, but that hasn't been a major discussion recently at the state House. And we are currently, maxed out on our, our rate that we are allowed to correct. Okay.

And is it maybe ten years ago, there was discussion at the state level about collecting motel hotel tax for Airbnbs, but I've not heard anything for a long while. Is there anything in plans for that or have you heard anything? Not that we've heard about. >> Okay. So those are just lost revenue options. >> We don't collect. Depends on the length of stay. I think it's, 30, 30 days or more. They have to collect, but they. do collect. >> Airbnb does collect. Okay. Depending on the length of stay. Yeah, okay.

another source of. And I'll mention this is about 2 million. As you see another source is the utility franchise fee that we have. We collect about a million in this in the past. so this is a tax that gets levied on utility or gas and electric bills. Excuse me. you can increase that up to 5% with simple council approval. You will notice if you look at our comparison with other communities that Des Moines has 7.5%. That's because of a law last year that allowed them to increase to 7.5 to help fund their regional transit. so that's unique. 5% is the cap for basically everyone else. right now we are at 2%. So that was initiated last year to support fair free transit. we first adopted a 1% fee for public safety and infrastructure in 2010. we are not the only entity that increased our our utility franchise fee this last year. we're not the only community struggling with property tax reform. And so we've seen other communities that have leaned on this to help make up for some of that property tax reform that they've seen. especially or more recently, West Des Moines, Coralville, Cedar Rapids, Des Moines, they all increased it. again, these are actuals. So roughly double of this is what we expect to be collecting this year. But again, we have that kind of allocated that for fare free transit to support that that essential service. and so we don't anticipate, you know, this being a particularly lucrative source. One other thing with the utility franchise fee is that it is relatively stable over time. So over time, we've seen buildings get more energy efficient, and we just really haven't seen the growth here that we have in other revenue sources. So that's important to keep in mind

as well a larger source of revenue for us is the road use tax. So that's used for street and storm sewer operations, repair and maintenance of our roads, et cetera. It's kind of in the name. so that is based on the gas sales over time. And what we have seen is that, well, it has somewhat steadily increased with lower gas prices and higher fuel efficiency over the last years. It's somewhat stagnated. And that is a real concern because the cost of building roads and maintaining roads has not stayed the same. So in this last year, it's basically status quo road use tax, which is something that's concerning for us. So. That orange line is where you can see the percentage increase. So it's almost 0% increase this year. and like I said, when it comes to inflation and the cost of building roads, this chart shows that price trends of highway construction. We've seen costs go up approximately 50% since 2016. So that's in ten years of 50% inflation. That's not the increase that we've seen in our road use tax. And so we've seen, the amount that we've been able to do decrease year over year, which which has proved a challenge for us. one thing that we are proposing this year that you'll see in our last proposal is using a portion of this to essentially double the amount that we provide for street projects. again, we'll go into this in a bit more detail as we get into lost, but that is a really critical investment in our street infrastructure. That will help make up for this. Not completely, but but it'll it'll help expand what we're able to do. >> whose jurisdiction is the

road use tax rate under. Is it federal or state or state? Okay.

And they did increase it in a couple years back. but it's not a popular thing to increase. And then finally, I'm just going to do an introduction of lost which should sound familiar to many of you. so the local option sales tax is a 1% tax on taxable sales that that will go into effect July 1st, 2026, that will go into effect with our FY 27 fiscal year. we're anticipating about 14 million in lost revenue. in some estimates I had provided earlier when we were looking at lost, I had we had talked about 8 to 10 million. That's what we were anticipating. The 14 million is really because we had other communities come in with us. So the local option sales tax is determined at a county level. It's aggregated and distributed based on a formula with these other with Coralville and North Liberty also doing a sales tax. We're getting more than we initially anticipated. So that's a positive thing for Iowa City. Now, with that approval that was approved by voters in November of, of 2025, with that approval, it does include ballot language that guides or places boundaries around what we can use that for. 50% of that is for property tax relief. So that's an amount that's dictated by the state, which could be property tax reduction, which is proposed, as well as property tax avoidance. So both of those are incorporated in our proposal for lost. We also have 25% that's allocated for affordable housing, approximately 1,515% for community partnerships and then 10% for public facilities and infrastructure. So we'll dive into what each of those mean a little later. But with that, I will turn it over to Chris to talk about expenditures

So I'm. >> Kind of sandwiched in between Jeff, who's going to talk about some of the lost items, which would have been a part of this. And Kirk, who who touched on several. So I'm going to kind of put some context to a lot of the things that they talked about. with some actual, I guess, dollars. as much as I wanted to sit here like the professor and Ferris Bueller and ask you guys a bunch of questions about if you knew what a enterprise fund was, I think we'll just kind of skip that and kind of cruise through. So, so you can tell we kind of talked about it. And I think the second slide that we saw the different funds that we have so the general fund being the largest and keeping in mind that the total budgetary expenditures that we have are just over $250 million for the entire entire amount of expenditures that we have. What you're seeing is while the general fund is the largest, the enterprise funds creep really, really close to that as well, sitting at about just almost 72 million. I think obviously, a couple things that Kirk touched on, and I'm sure that others will touch on as well, is that of the general fund, heavily dependent on property tax. And we'll get into that a little bit more in a slide later on. Whereas your enterprise funds are going to be and I think Jeff touched on this as well. You're more your business type operations where user fees, user charges, things like that are what are contributing to those funds to cover the costs that we have within them. your special revenues. once again, loss being a big component of that, that you'll see this year, that is something that you haven't seen in prior years. and then obviously a large capital project budget, which we we touched on that earlier in the week. one of the main drivers of that this year will be the The Streets Fund, which you're seeing projects like Dodge Street at 15.8 million, Taft at 8 million. And then you have a couple bridge projects. And I'm going to say Burlington at 4 million. It's a very early on in that process. That's going to be a much bigger project as we go on year to year. and then the Benton Street Bridge at about

2.8. So a lot of those types of projects, big infrastructure projects that we're doing that are contributing to that $62.6 million piece. There. this slide, a lot of you, Oliver, I think you might be the only one who hasn't seen this slide. This slide is one that we like to show just as a comparison of other communities. and while some of you have have seen this, it's still important, I think, to to point out a couple of things is that on average, if you look at all Iowa cities, they spend roughly 44% of their general fund on public safety and about 20% more on the culture and recreation piece. You start looking at things more similarly sized to Iowa City, so they have their full time fire departments are larger police forces. They're spending closer to 50% on public safety and more like 16% on on culture and recreation. I think Iowa City and the study was back in 24. But I think right now we're still consistent with that. We're right around that 39% for general fund expenditures into public safety. And I think we're slightly higher than this. But in 24, it was 23%. On culture and recreation. I think we're slightly higher than that at this point. But but once again, I think, you know, I think we pointed it out last year, Plco study that we did really talked about the Parks and Rec and culture. And I think the Strat plan that we have also, talked talks about several of those items. And I think our budgets represent both what we see from the community and what we see from your strategic plan so, as I promised, another pie, another pie chart that shows, kind of the breakdown of just general fund expenditures. I think the thing that we always want to highlight, 76% percent of that is personnel. and I think the other reason that that's important to point out is that typically we see about a 4% increase in that every year. And as Kirk talked about when we were talking about property tax reform, we're looking at what's been proposed as they're

hovering, all the all of them are hovering at about a 2% cap. So while there is additional growth, growth in that, you have a 2% guaranteed growth on the property tax side, you have potentially about a 4% increase in your personnel costs, which make up 76% of your general fund. You can see why things keep getting a little bit tighter as we go year to year through this process. Obviously, services we've seen some increases in the cost of services as well based on inflation. the consultants and contractors that we're using having additional pressures on them for inflation, tariffs, things like that. we do have a 1% contingency that that number is you'll see when we get to a little bit more detailed breakdown, took quite a drop this year as we removed the fire contingency from, from that budget last year. and moving forward and then supplies and capital outlay make up small portions of the general fund budget.

Another property tax question really quick is if, during this legislative session, they do pass some type of 2% revenue growth limitation, does that mean that that would most likely go into effect for 28? >> I think it'd be in July of following the legislative session, I believe is when they started it, if I'm correct. So July of 26 is when that would start. >> Yeah, I thought it was FY 27 is when it goes into effect. >> So it would be for this budget, correct? Okay. >> Yeah. That's part of the challenge is they we have a certain set of numbers. We have a deadline that we have to make decisions on this. and then they can change the rules on us after we make our decisions.

I don't think that's correct. I think it's actually FY 28. Oh, it is FY 28. >> Yeah. Because everything has to be filed by April. All of the levies are set like yes, they won't, they won't. That's the one thing they won't change it on us after all of that has to be done. So it'd be FY 28. It is not this budget that this legislative session would, would impact. >> That's one. Of the sorry about that. >> We don't have all the information what they're planning on doing at this point. Still is a challenge. >> It's still a challenge.

So general fund expenditures, as you can see from FY 26, which was our adopted budget, FY 27, which is our proposed very modest 2% increase in that budget. and you can see kind of what the drivers were. And while the contingency looks like a -28%, if you look at the actual, we're talking $300,000 ish. but it's just a large percentage. Obviously the main drivers, the change in personnel only going up 3.4%, but about a $1.8 million increase in personnel expenditures. and that's just your the main driver for that is going to be just your annual wage increases. kind of the main driver for that services have gone up slightly. supplies dipped a little bit as capital outlay has as well. So a lot of those balance out. But once again, personnel is always usually the main driver for what we have in the in the general fund budget. >> Chris, you mentioned consultants and contractors as services. Is that really what we're looking at, or are there other expenditures that we should be thinking about? >> Yeah. So like your services, for example, like we have for like IT services is a big is a big amount. let me see what some of the I had some of them listed. yeah. Equipment risk management. Central Services and it are sort of some of the main drivers for those. >> Thank you.

In the personnel bucket, with the wage increases and whatnot. I know that, Kirk, you mentioned it as well, that insurance has gone crazy. is there another big jump? I know it, we'll get to it, but is there another big jump in insurance? So as far as the insurance on the personnel side, we've got a they've kind of thrown a number at us. It's a expected and I believe that was five ish percent. I think some of the big insurance we see is more on what we'd see on city insuring itself in other ways. So. >> Okay. Yeah, I think that's where we see those double digit increases. >> Again.

yeah. >> We don't we don't know that yet. We'll start hearing about renewal in the next few months, but we really don't get rates until June. So it's really kind of a guess for FY 27. I mean, the insurance market hasn't settled down. So I'm I'm not anticipating that it will be a great renewal. but it it did kind of stabilize for FY 26. So I'm hoping FY 27 will be relatively small increases to what we've seen the last prior years before that. And then just to circle back to the personnel part and thank you, because I was somewhat conflating the two. But within the will, staff see their insurance, their personal, their contributions go up significantly. I mean.

So we usually base that off of it's there's an agreed upon percentage that they pay. So as hours go, as the overall goes up, right, theirs goes up as well. And I think we're at 13% I think is what they pay of the premium cost. So 13% of a 5% increase is what you would be. >> Okay. Thank you.

So debt service we can go on to the next one. once again these are these are sort of rules that we live by as it goes by debt service. the first ones put on us by the state. and that says that the state of Iowa limits debt service to no more than 5% of total assessed property value. The second one is an Iowa City policy stating that we can't exceed 30% of our total city levy. And the third is more of a goal that we want to try to be AAA bond rated. and hold our direct debt outstanding of 0.75% of the city's total. So kind of going back to the first one Iowa City currently we we're projected to be at 14.8% of what our allowed debt is. So we're not exceeding the 5%. So 5% is this number. We're at 14, 8.8% of that is what our debt comes into. So substantially below what our debt could be. our projected debt levy is approximately 16.5% of the total, well below the 30% that's allowable by city policy. And then as far as we are, once again, and we'll see in the slide coming up, AAA bond rated and last year I believe we're at 0.77. And we have dropped down to now we're at 0.74 of those total valuations. So we kind of hover in that same area sometimes go a little above, sometimes a little below. But we've been pretty consistent around that .75 for some time. so as promised this, these were fresh off the presses as of earlier this month. from Moody's, that's where we, we rank among all cities in the US. We are one of 276 so of 11, basically top 12% of of those. and as you everybody's familiar that the better bond rating, the better the rates you get. Which means the more you can spend actually on what you're trying to do, rather than paying interest payments. So I understand that's a, that's a

balance that you're trying to go through of trying to to work through what you want to do versus the interest rate that you have. But as of right now you know, we're in that top 12% of all cities in the US. When you get into Iowa, we're one of three, which we're obviously in the top 4% at that point, the other two being West Des Moines and Cedar Falls. I believe. so one of three and as you can see you kind of nice little bell curve for Iowa. But once again that's been a goal of, of the city for, for as far as I can remember back. and granted, I was gone for a while, but I was here for quite a while before that. And AAA has always been sort of that thing hanging out there as far as a rating for the city. this is some some fun here with numbers. So enterprise fund balances. So, I think one thing I'll highlight before is, as you look at the bottom for fund health, those are things that we do that is not there's no outside firm coming in and stating you're a AAA or AA, and coming right off the slide. I know that can that can at times be a little confusing. But, in this case, AAA is good, AA is adequate, and A equals need monitoring. So just to kind of cover the why we have some of these that needs monitoring. For example you look at parking at a $2.4 million unassigned balance, 28% of their revenues. You know why. Why is that a needs monitoring? Well, if you look at the parking fund over the last several years since COVID, it's been pretty stagnant on the revenue side. And there's a lot of things, I think that have played that continue to play into that. I think you you had COVID, you've had, immense and great changes on the transit side of things to try to pull people out of out of that. And you've had rate increases that have also played in to try to to make sure that we, we have capacity in different areas. So while it's not extremely concerning, it's something that we're keeping an eye on as, as you know, those facilities

need continual maintenance. And I think if you remember from CIP a couple years out, we're starting to ratchet that up a little bit to the tune of a couple hundred thousand dollars a year. starting in, I believe, two more years, we go from 1 million to 1 million to five, I think. How much is that impacted by the fact that we use parking fees to pay for transportation? And I guess the follow up question is, why do we have two separate enterprise funds when they overlap so much at this point?

so Transportation Services is obviously housed under the, under the same. And I think you start getting I think it's easier from the standpoint of when you start talking through the federal transit and trying to keep those things separate. I think some of the funds you see from parking and transit that overlap are from the while the Court Street Transportation Center does provide parking, that is a federally funded transit asset. So those funds go from parking to transit. and I think the fact that they coincide so well is why you see us kind of shift funds between from parking to transit to, to to sort of help fund that fair free transit. As far as why they're not just one. I think that keeping that separation between parking and transit from the Federal Transit Administration side of things makes things a lot cleaner when you're working through your processes. And I, I'm sure both Ron and Darian would tell you that what we've experienced in working through this facility project of trying to just cohabitate maintenance has led to led to some challenges in trying to distinguish between the two. They want hard, fast lines between those. >> So that you're not borrowing from So that's a bus fund to pay for a parking garage. But we're obviously doing the exact opposite. >> Correct. And then I think you see that at the university as well. You'll see the university uses a lot of their revenues to fund some of their transit operations, because they I mean, they are a complementary service to some extent for most people. >> So I'm interested in the health of both funds. It just feels like it's they're so overlapping. It feels like it's not the most instructive.

Yeah. And I think the funding mechanisms are there's just a lot of things I think that play differently. And we'll get into it when we get into the transit, which the reason that we want to monitor it is we're there's a lot of challenges right now in the federal environment as far as the funding. Yeah. and so we're you know, I think I would say about every day we're checking on, on different funding sources that that darien's trying to make sure stay solid as we're moving forward. And so I think we're keeping an eye on that. I'm sure we'll touch on that later during her presentation. But from the wastewater perspective, I think this is one that's a really interesting. So they're at 90% of their they have 90% unassigned balance. they just have so many capital projects, including that digester project that's coming up that it's just something I think the debt service is moving forward as well as operational impacts are something that we want to keep an eye on. Same with water. while we have that as a AA, we're still kind of keeping an eye on that because they do have quite a few capital projects coming up. questions on that slide. I know there's a lot you start throwing a lot of numbers out there. It gets a little.

It's fair to say it's more of an art than a science. Like it's not just the obviously not just the percentage of unassigned balance. >> Correct. Because you're thinking you're thinking out five years, ten years. Because I think the last thing any of us want is we're we're keeping an eye on these is when do you start bumping up some of those, some of the actual fees that you have in order to try to stay ahead and avoid the big hit? Right. And I think we'll touch a little bit on that when we get to proposed rate changes later on. But I think some of those really play into, Yeah. Looking into the future.

Trying to forecast what you're going to be doing year to year. So speaking of sorry, next slide. Told you it was coming up. I so for this year's budget, utility rate and tax changes, there is a proposed 3% water rate increase. and once again, I think what we're trying to do, especially with water, is the amount of infrastructure. I think when you're looking at water mains, you're looking at age of facilities, trying to trying to do moderate increases so that you can avoid the 15% hit later on, I think is a smart way to approach it. And while I know it's it's it's always painful when you're doing a rate increase, I think seeing that rather than having that big one later on, and I think doing gradual increases make it make it more palatable moving forward. Same with the wastewater rate 5%. They have a large debt service coming, and I think getting that 5% wastewater rate. And I think there's a slide that will show later that kind of shows a cumulative effect of between that and the property tax changes that we proposed. What the overall, what the overall impact to the, to the residents could be? we'll touch on that. And then obviously we have the, the 1% sales tax. I'm, I'm going to stay away from that one because Kurt covered it. Give you the preview. Jeff's going to give you sort of the meat of it. I'm sort of the, the somebody's asking if you want water in between while you're sitting in your meal. So, we'll skip that. But that's also something we have coming up.

And I just have a question about the 3% water increase. Is that like when you say 1.16 amount per home, that based on how much the average of the bill. Yes, it's based on the average water Usage. >> I believe. Yeah. And with using the average, what is the average? >> I think it's 800. 800. >> 800 cubic feet. Okay. >> Which I think our average is actually less than that. I believe that's kind of like the standard industry average. And okay. Like 800 gallons of water. >> , like. Cubic feet. Yeah, I know we do cubic feet, but I think.

That's significantly. >> More significantly more gallons. Like it's 25 gallons a day of water. Okay Sorry. Keeps coming up.

So this slide once again we've showed this one year to year. I think and once again I know that we're showing a $100,000 property that in the I understand that it's not realistic but it's, it's an easy way to look at the math. And I think that's what we're trying to do. if you want to extrapolate it out that's something you can easily do. But going from FY 26, you know, I think Kirk covered what the rollback impacts have been and that that decrease in the rollback as well as our proposed decrease in the, in the property tax levy have resulted in a, a decrease in the property taxes. now, one thing to consider is that that was not taken into account any valuation increases that occurred. This is just a straight up 100,000 to 100,000 year to year. For simplicity's sake, to just kind of get a feel for what those numbers look like and then lastly, here's that slide I was discussing where we show decrease in property taxes increases to sewer and water. and that overall we end up with a roughly a about a percent decrease in the overall impact to the property owner. and that did not include the 1% sales tax. Just to clarify.

Maybe for the future, could we map this with the assessment, like the valuation change? Because that would give us more like the actual impact. You know, if you have a property that the valuation increases by 20%, this is lovely. And you will actually be paying. >> Yeah, we'd have to make some assumptions. And we I mean, we could look at a median home sales and and not use the 100. we could do an average residential assessment piece, but not all properties are not all valuations increase consistent. So your home may go up 5% and my home may go up 10% in a given year. So and I don't want to get rid of this, I'm just for the clarity of what the picture.

Is. >> Almost like. A third column. Yeah, like 100 hundred. And then average property tax increase. Thank you. >> Or just an added slide. I have one question. two slides back. the estimated property tax impact. So when we go from the property tax of 742 to 687. Is that captured in our, in our loss where we have to have the 50% of, you know, go towards taxes, property taxes. A portion of this is, through the decrease in our debt service from lost. So a 20 cent. levy in.

Levy decrease down to 15.4. >> So the 15.63 to 15.43, that's because of lost. >> Okay. Great. Thank you. >> And I just want to go also to three slides back to the water again. When I calculated I don't know maybe I'm mistaken. This is based on the basic use not the average which you said $8 because I think one one 3% of 3%, which is $1.16, is out of 38.66, which is I don't think 38 is average.

So so that's water. if you're talking about our utility bills, our utility bills include water. Yeah. Include water, wastewater. So so I'll just use myself as an example. in in my former house, I had a bill that was about $60 that came from the city for city services. Now, that $60 included water, wastewater, garbage, recycling, compost, stormwater. Yes. But I'm talking about the usage of the water. The basic it's something dollar 3638.

Yeah. We back when we last had the discount discussion, I think we broke down all of those water charges, the average one. We're happy to get that back out to you and tell you how we calculated this. it's been consistent with every budget that we've presented. >> I know, but I guess I just want to mention that because I've been following this closely and I just believe that this is not the average. This is the basic. >> We're happy to provide those bills and show you where our math is, and we can adjust these slides however you want in the future years to show them differently. >> Yeah

Okay. we're going to get into loss now. go do a deeper dive here. So, to start, just a reminder that the exploration of lost was, was actually in your original strategic plan adopted in 22 and then updated in 24. You could see the specific language there, which was action number 7.9, to explore local option sales tax or franchise fees to help with strategic plan goals, fund infrastructure and facility needs, and reduce reliance on property tax. And when we started to work on lost after the voters graciously gave us this opportunity, we really had three goals in mind. One is to first look at your strategic plan objectives and which one needed lost to to either be sustained or to be achieved. We wanted to reflect on Arpa and other pilot projects that we have done in past years, and figure out which of those we should prioritize for continuation. We couldn't continue everything we did with Arpa, and then look how we can provide critical relief for those core services. And the community's infrastructure needs. So this is a summary slide. I won't spend any time on this because we're going to do a deep dive into each section. But I do want to let you know that all of the action items. I'm sorry. the action items do tie back to strategic plan. Your strategic plan. We have 20 strategic plan items that guided our recommended uses of lost. And you'll see those as we go through the next several slides. So we're going to take a slice of the pie, at a time. We'll start with the property tax relief. and as Kirk mentioned before, there's two ways to accomplish this. One is a property tax rate reduction and the other is property tax. avoidance, meaning that we'd otherwise have to increase the rate. So this is a hybrid approach. And we're

suggesting that we use 1 million of the 7 million of property tax relief for that 20 cent rate reduction that Kirk has covered. 2 million would go to our annual pavement rehabilitation program. That 2 million is funded completely. The the existing 2 million that we use for pavement rehabilitation is through the road use tax. As Kirk mentioned, the purchasing power of that 2 million has not increased, in fact has gone gone down over time. So we'll be able to double the budget and get back to the level of productivity that we were at several years ago with our pavement rehab program. We have a couple of capital projects that we'd also like to use lost funds for. This avoids us having to borrow for these funds. And, relieves pressure off that debt service rate. That's the highway six trail extension and the furnishing and flooring replacement at the library. and then the last two would be conceptual designs for fire stations one and three, and the 300,000 for the seating replacement at Riverside Festival stage. And we covered those projects with you on Wednesday. Public infrastructure and facilities. At this point, we don't plan to recommend spending the first year's allocation of 1.4 million. we see these funds as critical for larger projects going forward. So we anticipate banking these dollars and using them for larger needs such as potentially the Burlington Street Bridge or larger facility projects that we might have coming up in the in the coming years. Okay. we have the affordable housing piece here. I want to mention just a couple things before I dive into this. One is remember that lost, lost collections really don't begin until July. So when you think of the budget and the general fund, we tend to think of those

dollars being available on day one. So July 1st lost is different. We're not going to see our first loss check until probably September. If we fast forward a year from now and we're talking to you about the fiscal year 28 budget, we may only have four months of loss collected at that time. So a lot of these expenditures will not be able to be made until calendar year 2027. Right. So it's just a little bit different than other parts of the budget. The affordable housing piece. What we're showing you is two years here. we're not you still maintain flexibility in fiscal year 28 as well. We wanted to show you that some line items may fluctuate from year to year. So we just want to give you a picture of what that could look like. and then I also want to mention in this slide and in the partnership slide, we are recommending that we don't budget for the Or we don't plan for the full expenditure of those dollars. And that's again, not knowing what those actual collections will be and knowing that a lot of these, expenditure lines are with third party partners. we don't want to over commit and see those revenues come in early. If there are dollars that are unexpended, they stay within the category. So in this case, we're not recommending spending 10% of the dollars. And if that's the case and we have that 350 that you see at the bottom left over, those would be available for expenditure in the following year. They don't get kind of flushed out into any other type of fund. So I'm going to walk through this with you. I want to make sure you have a good understanding. So feel free to ask questions. the first line is support for winter shelter and street outreach. and this is a $200,000 expenditure. This would, shift $100,000 that currently

funding the winter shelter. It's about 110,000 out of the affordable housing fund and put it into the lost fund. It's really important to note I'm going to underscore this a couple of times. The Affordable Housing Fund does not lose those dollars. They actually just get reallocated to other affordable housing needs. so it shifts it shifts this to lost. It also shifts our street outreach expenditures to lost. those are currently in the budget and then provide some extra dollars for us to either support street outreach in a different way, which is, you know, could be providing extra resources for them that may be needed. Also would allow us to add weeks to the winter shelter. Should that be a desire going forward as well. >> The affordable housing fund that you're talking about, not going down with these reallocations is what amount? >> 1 million.

Thank you. >> do you know, do you have a maybe like a per a percentage or. It's okay if you don't have this number at the top of your head, but what affordable housing money is going towards existing versus new projects I existing versus new. Are you talking which of the 3.5 is going to existing or new.

Yes. >> I will cover that in a in a slide. Okay. Give me a couple of slides okay. Thank you. Those exact numbers the permanent supportive housing I'll try to mention as I go along too. So the first line, the 200,150, roughly thousand of that is existing programs and 50 is new. I do want to underscore, though, that the the 150 of existing opens up possibilities to reallocate those dollars to new programs or expanded programs to. So I don't consider that full relief, permanent supportive housing and operation. And I'll mention this with a few of these some of these line items need conversation with service providers, and we haven't done that in advance. We have again, these dollars aren't available to be expended for many months. and this is one of those line items that we know permanent supportive housing is a priority for this council. We want to provide some resources, but I can't tell you the exact expenditure plan. I'd want to have some time to talk with experts in that field to to make sure that we can deploy those in the best way possible. >> Excuse me. Jeff. and then if because for that exact reason, if it takes a little bit longer to get all of those things hammered out, let's just say it takes, until, well, a year from now to get those things figured out. anything of that 500,000, what would happen to that money then at the end of fiscal year 27. >> It just rolls over into into 28. >> So the plan presented here is the permanent supportive housing, even if that takes a little bit longer, that that money will stay in that bucket. It will just go out the door A year later. >> The voters have put strong constraints, legal constraints on the use of these funds. So, you know, from year to year you can shift those priorities. And you could you could shift the exact programs that are funded.

But if we don't expend $3.5 million, let's say we expend $3 million in this first year, that extra 500 stays in the affordable housing piece. It doesn't just stay in the lost bucket, it stays in that sub affordable housing bucket. In the general fund or anything. It can be transferred to the next year, right? Correct. Especially the first year, I think we're going to have only six months to spend this money on the first year, right?

Possibly. Yes. Yeah. Housing stability program. We talked about Arpa and one of the programs that was funded with Arpa dollars is our housing Stability Program. And while we cannot probably sustain that at the Arpa levels, we do see a lot of value in that housing stability program and would like to see some funding support that going forward. We see that kicking in. And that second year of lost again would need some more conversation with the folks actually providing that program. Is that like eviction prevention?

It includes that, yes. neighborhood home ownership program. This is a strategic plan, action item that you have. You indicated that you wanted to see that university and South District home ownership model expand in the community. So this would allow us to do it at a very minimal level. The $300,000 in the first year would be used to purchase and rehabilitate a home for home ownership. And then going forward, we would take the sale proceeds of that home that we sell and then just have rehab dollars going forward. And we would continue to advance that program on a kind of one by one basis. The contracted emergency rehab program would be a new service. we currently have, nonprofit entities that provide this service. We see a need to expand that. And again, we would need to talk to some of these nonprofit providers to better understand. But this would be able to assist low income individuals with emergency repairs to their home. While the city does rehab programs. we often cannot move as fast as some of these repairs need to take place, and we have nonprofit organizations that are filling that need right now. And we'd like to use some of the loss to, hopefully bolster those efforts. The grit program is an existing city program. It's not funded out of the Affordable housing Fund. It's funded out of the general fund. And we would like to move that out of the general fund into lost. this assists with the rehabilitation of homes, helps people age in place in their homes. And I think is critical to preserving the existing affordable housing stock in our community. The down payment assistance program is a existing program that we fund out of CDBG. there is high demand for that program. And we know barriers to

home ownership are only increasing. So we would like to add $100,000 per year to that program to help more individuals and families into a state of home ownership, nonprofit housing provider capacity building. This is one that needs more conversation with those nonprofit housing providers, but they play a critical role in our housing ecosystem and would like to support them in different ways. This could be anything from land acquisition, rehab retiring commercial debt many things that those nonprofits have talked to us about, providing some funding to, to assist that. Again, exact expenditure plan would need some consultation with those those, those experts. The largest chunk is the Summit Street affordable housing project that you're very familiar with. We covered that at the CIP. this would be a two year total $2.5 million expenditure. as part of our effort to develop up to 36 housing units on Summit Street property that we acquired with Arpa dollars And then the last line item here is the annual student build project. This has been a very popular project that checks a number of boxes for us, including affordable housing, but also workforce development partnerships with both the private and the public sector. while this program is continuing this year, it's really on a year to year basis and could use some stable funding to to help ensure that it does continue in this community. So we would see ultimately scaling up to about a $250,000 contribution for the student build project. And this would really aim to support, the various nonprofit entities. So Housing Fellowship did the

projects on Ronalds this year. There's a partnership with habitat Next year. That partnership could be a different nonprofit, but really supporting those nonprofits and all the people working hard behind the scenes to keep the student build project going. >> How much does the district contribute to this school district? I believe I'm not I'm not an expert. I believe the the district is contributing the faculty and staff that support the project. >> I'm curious.

About the process for borrowing against future years of lost. So I mean for programing that doesn't make any sense. But for some of the construction projects like the Summit Street project, what does it look like for the city to borrow against future years of loss so that we can get the thing now? what's the cost of that and what's the process? might ask for Nicole's help if she if she sees something I'm missing here. But it's such a small amount. 3.5 million is such a small amount that I think we would have a hard time borrowing against that dollar amount. We'd be better off looking at general obligation bonds and maybe using loss to retire these. But if you're thinking of like a revenue bond, I'm not sure that this would be a great fit

Yeah. I mean, I think in the future we probably will look at, like Jeff said, using, you know, using our geo issue, but using the loss to pay off some of that. So it could happen with bigger projects. And I think it'll absolutely have to with some of our facility projects. Right. Like if we need to use it for the Burlington Street Bridge, we're not going to have 50 million to pay for the bridge, right? It's going to have to be funding the loan. The only problem with that then, is it locks that in for however long that loan is right. If we have to use 1.25 for ten years, then that 1.25 is not available for anything else for ten years. So I think we'll be very particular about what projects we use to fund any kind of loan.

Okay. And if we use geo bonds to retire some of this debt, then do we we still honor the voters will by spending lost on something, even though we're shuffling, as long as we're still being honest to what we promised to do. Okay. >> Any concerns about the legislature addressing the like reduction versus avoidance definition? >> no, I don't believe so. I mean, we can articulate and you can we can show you in the budget document that if if we didn't do that property tax relief, right, if we put all those back on the Geo, we can show what our levy rate would be. And that's actually in the budget document. So, I think we're very clear in saying that this is this is reducing that, that levy rate from where it would otherwise be.

Thank you. >> a little bit more of a general overall question. Maybe a future conversation, but some of these programs, including home ownership has there been any thought about how. Because when I look at home ownership, I think the vast majority of people look at homeownership right now, especially people with low income. It's just completely off the table. Right. And so how much? just 100%. And so in the majority of Iowa citizens are renters. so how much do we think programs that go into home ownership might not be getting as much bang for its buck just because of how unattainable it is?

Yeah. I mean, I think a lot of people that we've assisted into home ownership probably never thought they would get there. Right. And so that's part of the, the, the power of these programs. We've seen people who are renting move into home ownership and have lower monthly payments, in large part because of our efforts. So you're right. It is it is a very kind of individualized transaction. We're helping one individual, one family. but it's impactful and it can be generationally impactful going forward, too. So I think I think from our standpoint, there's a balance 100,000 out of 3.5 million is not very much. But for those three, four, five families that it could help. It's very impactful.

Yeah. And I've heard testimony from these, you know, it's absolutely impactful. generational. Like you say, that's just something I can't stop thinking about when I look at how much everything costs now and how it's going up. So, yeah. >> So I guess I want to say, like we spending $3.5 million to do this, and we said 25, 25% of the loss will go to affordable housing. All this, amazing programs, no doubt. But I would love to see like how what this means like how many people are we going to house by using this? 25% by using the 35 million or how many like affordable housing. We being like, we will have, when we unit I mean, when we spend this money. yes. That will give you like a sense of like, okay, I know it's going here and going there, but with the outcome. >> Sure.

You can absolutely put metrics along. I think there's metrics that the council, prioritizes. Those would be good to hear. And we could we can always adjust these these are just recommendations. So you know for example to maximize number of people impacted you might put a lot into rental assistance. Right. And where you can a little can be spread across a broad group. and then you have to weigh that versus kind of what we just talked about with homeownership, which is a more expensive and more expensive expenditure, but can have more of a impactful long term impact on that. that recipient. So we can we can as these get approved and you guys discuss more, we can put metrics to these. And if there's third parties that are providing the services here, we can ask them to, help track those for us. >> Yes. Because maybe like this year we make it like this, and next year maybe we need to change it a little bit. >> So and I do think a work session on prioritizing metrics would be really good. As we're getting into being a housing developer, especially.

Yeah. >> And one of my, just talk about at this moment is that it seems to me there's a lot of questions coming up surrounding the loss and the percentages and how the staff is making the recommendations. What I'm going to ask the council to do at this point is maybe allow staff to make their recommendations, and then we'll come back to a work session. So try to write down whatever questions you have, because I think there's a lot of good conversation. But due to time we know we're going to have more dialog related to loss. So I'll ask staff to continue at this time.

All right. Community partnerships. we are recommending a a greater kind of, let's say, withholding. But portion of the 2.1 million that we wouldn't spend. And that's the bottom 5.525 thousand. So I'll circle back to that. there is more general fund relief in this one, and we'll touch on that in a couple slides. The first one is the human rights grants. So this, this effort would shift those human rights grants. We formerly referred to those as the social justice racial equity grants into lost. And then we would fund those completely with a combination of lost and your Black Lives Matter funds the arts and culture nonprofit support. This is something I'll dive deeper into in a subsequent slide. So we'll park that. The Climate action grants. as Kirk mentioned, we used to have climate action grants funded out of the emergency levy. We had to bring those into the general fund as part of that 23 property tax reform. Now we're looking to get a portion of those climate action grants back out into lost. And in general, the more we can move some of these grants into lost, I think the more stable those programs are going to be, because as that property tax squeeze hits cities over the next several years there's going to be greater competition for those dollars. So some of this moving into lost, I think, gives them more security going forward. The community Mental Health Liaison Program, you're familiar with that? That's in our police department. We have two community employees that are mental health liaisons that work with our officers and members of the public. We would like to move that out of the police department budget and put it into lost, and also expand that program to a third mental health liaison. that could be a co-responder, in our department your strategic plan calls for continuing to bolster that program. The next $75,000. I've got a couple of

different programs on there. The Chrysler crisis counselor at Jack. We've talked about that quite a bit for several years, about putting a crisis counselor on the floor of Jack and helping with dispatch decisions. Jack is a regional entity, and we can't unilaterally make that happen. So, if the will of our partners isn't to make that happen then we can shift those funds to other things like the field mediation program that's getting started here, or potential partnerships with Johnson County. Paramedicine program. but hopefully, you see kind of that theme with that $75,000. Another Arpa program that has been very successful was the Child Care Wage Enhancement Program. So we budgeted 75,000 in the first year. We would anticipate that growing that to 100,000 in the second year, to continue that program, it cannot probably is not enough to continue it at the Arpa levels. But I think is high enough to be able to to sustain that at a meaningful level to help with the child care. crisis that we have. We're going to park Aid to Agencies grant program as well. But that's the single largest expenditure here in this category. And I'll get back to the aid agencies program. the next one is the paratransit services with Johnson County seats. this is really looking at that transit fund that Chris told you that we were watching closely. we continue to see a need for relief to that transit fund. And utilizing a little over $200,000 in this first year to help us fund that partnership with Johnson County seats just provides additional stability to that Transit Enterprise Fund, another Arpa program that we have celebrated is the UI Labor Center partnership with the pre-apprenticeship program. This expenditure would ideally get up to about 50,000 per year in the

second year, and be able to sustain that program. $50,000 isn't going to cover nearly all of their expenses. This would force them to probably go out and get additional sponsors and program contributors. but I think that is, possible based on the success that we helped prove through our early contributions, Schmid. Placemaking is something that is in the general fund now. We contribute to different placemaking efforts, and we like to be able to partner with our our schmids. We did this with Arpa dollars. You recall $250,000 were allocated to each of the two schmids, and, these dollars would help us at a much smaller level, continue to support the Schmids as they move forward. And then the build the partnership opportunity, Capital Reserve you can see a smaller expenditure line there at 45,000, but we would plan to take these unspent dollars if they materialize of 525,000 and put them in that category. And this would allow us every few years, this wouldn't be an annual expense, but every few years we would allocate enough money to do some sort of capital grant, for, for the community. And this is really inspired by the success that we saw with our contributions to Dream City. the free medical clinic, neighborhood centers of Johnson County, all of those significant capital investments we made with those partners have had a huge impact on this community. So being able to do that every few years, by intentionally building some reserves, I think would would be wise. And that's what that recommendation is. >> Jeff, can you explain quickly the difference between what would be direct general fund relief versus what kind of would just be a repositioning of the funds? do you understand my point?

Yeah. So I've got a general fund relief slide coming up. I think it's probably easiest to do that. sorry. That's okay. aid to agencies. There's a lot of numbers here. I'm going to kind of try to share some on the screen. here. So this this is the snapshot of the Aid to Agencies grant program for our social service agencies beginning in 2016, all the way down to the 27 and 28 levels. Here. It shows the different funding sources that we've used over time. But I'm going to just draw your attention to that far. Right. column, which is the year over year change. I want to point out a couple things. One, back in fiscal year 2020, the council at that time made a decision to increase this budget line 57%. So it went from just under $400,000 program to a $614,000 program over the next few years. That that increased another 20% or so. and then last year, you will recall, you increased it 41%. So this program has grown grown significantly in the last decade as have the needs that these agencies are trying to to meet in, in the field. what we're suggesting is that another 461 go in for lost, but there is some replacement here. And that's what I want to make sure everybody understands. So with that increase you did last year, the general fund contribution went from 646 to this 965. up here on that far left column, that was an unplanned expenditure. It was an unbudgeted expenditure decision that you all made. So what we are recommending is that we use lost to go back to where we would have been. We were kind of banking on just a smaller percent increase year over year. So you could could see that this budget recommends that the

general fund contribution to aid to agencies drops back to where we would have anticipated we would have been without your expenditure decision last year, but then lost comes in and not only makes up for that, but adds another 13% to the to the overall pool. And really what we're looking at is a two year. We'd like to stair step this up, but a two year, 25% increase. So building on that 41% increase you did adding another 25 over the next two years The arts and culture funding goals here. arts and culture organizations that we support haven't seen an increase in many years. And they've presented to you on that and talked about the hardships. So we're looking at how do we not only support them with with an increase, but more or less set them up to be strong and more independent going forward? So I've listed the goals here. I won't go through them for the sake of time, but I do want to explain what we're looking at here, because this is probably the more complicated. and creative way of approaching this something I'm very excited about. I'll just kind of try to walk you through this the fiscal year 26 is our current year. So you can see we provide $249,000 to our arts and culture organizations. Now that gets split up between many organizations. And then I'll stay on this table here. You can see that this 249 grows to 625 to 750. And then it starts to come back down. So we're we're injecting a lot of dollars into this, as part of a long term strategy. But initially there's only a a $25,000 increase and then followed by another $35,000 increase. There. in that second year. And then then it holds steady. What the what we're trying to accomplish

here is shifting, our general fund contributions, getting those completely out of the budget and replacing those with a community endowment. So partnering with the Johnson County, Community Foundation, we would start an endowment. So while there's some large expenditures, these arts and culture organizations wouldn't realize those expenditures right away. We'd be creating an endowment that could get to a little bit over 2 million, over this six year period. And then eventually you can see we'd stop contributing to that endowment. The community could continue to contribute to that endowment if they were compelled to. But essentially, the draw of that endowment would allow them to not only get another organizational bump here. but but more than make up for that, that amount that used to be in the general fund. So we've also listed on here the Arts Alliance. I wouldn't get too caught up into the the split here. we don't know where that arts alliance is going. That's something that's under kind of a study and consideration right now. But if there is an arts alliance, some of these dollars could support that effort. And if there decides that there's not going to be an arts alliance, if that's the direction that these arts organizations go, then these can roll back into that organizational support line. So again, more conversations needed to fully flesh this out. on the on the far right side, you can more clearly see where lost dollars are going. So lost kind of ratchets up to that half a million. And then over time that lost contribution can shrink again. And those lost dollars would be reallocated to other partnerships. The general fund you can see stair steps down. And then once we're done contributing to that endowment, you can see that we can start to pull off that endowment and fund those arts organizations through that. So, again, a long term strategy to make them a little bit more independent. What we really love about this is it also gives the

community a chance to contribute to this and this. This endowment draw could indeed be significantly higher. if if there is community support for for contributions, that long term general fund relief is not only good for us, but I think it's really good for those arts organizations to be out of that competition with those core services, with social services and will provide a predictable, more predictable stream of revenue for them. This is a Councilor Weilein which you were asking about. So where is loss providing budget relief and how much budget relief is is happening? So in the transit fund here at the top, that partnership with Johnson County seats, there's $213,000 of relief, meaning that would otherwise be paid by the transit fund. So that is not a new service. That's not a new expenditure line. There's no new services provided by seats. It's simply helping relieve the transit fund. we've also include kind of the percent. So you can get an idea of the overall picture there. In terms of other general fund relief, as we move into most of it take place in that partnerships category. There's a few in the affordable housing category. And we'll again mention one more time that the million dollar transfer from the general fund to the Affordable Housing Fund stays in place. So these two programs, this would be the street outreach program would move from general fund to lost. that's not new. the grit program moves from general fund to lost. That would not be new. That 150 either. On the partnership side, the human rights grants moved to lost. That provides $75,000 worth of savings to the general fund. The Climate Action 150 community mental Health. We're currently paying 131 for that. The aid to agencies again, this that 358 is that increase you provided last year. and then the Schmid Placemaking

is currently in our general fund budget. So total general fund relief is that 934,000 and total budget relief is just over a million. So, that 1.1 million is about 8.2% of lost is providing that relief. And you see that in the overall budget numbers. We told you with the fiscal year 26 budget, we had a deficit of 2.9 million. This budget shows a deficit of 1.5 million. So in large part due to some of these relief strategies that that staff is recommending to you. >> I.

Get your questions. >> Yeah. earlier you were explaining how when we do the general fund relief for the affordable housing pieces, for instance, the money doesn't come out of affordable housing. This is still a stacked it is an addition to affordable housing funding, not a replacement. >> Correct?

Yeah. So these we think of a lot of times we think of the affordable housing work that we do is coming from that million dollars that we transfer. We do housing work outside of that too. And these are two examples. So that million dollars is still there, still gets that formulaic distribution that you look at every year. and these are, these are over, over and above that, that we're out of the budget in both of these cases. >> Yeah. Because I think, you know, especially with our priorities as a council with affordable housing, I think we just want to be able to communicate clearly with the public that we're not doing some tricky bait and switch thing where we are pretending to allocate more to affordable housing. Correct? Okay.

But also we are not like replacing it 100%, just percentage of, for example, the winter shelter and outreach, not the fall like only 40 from the laws we are.

Yes. >> So the this would represent the 40 would represent the street outreach portion, the winter shelter portion of 110 that we fund right now is out of the affordable housing fund that's funded by that million dollars per year. Yeah, but the million dollars number stays there. So if if you're the, trust fund or community that also get dollars from that a million, you would see your piece of that pie increase. Yes. Because we no longer are funding the winter shelter as part of that formula. It goes to lost. >> Yeah. As if we take it from us and funding again, affordable housing.

Yeah. Correct. >> When is the back to the slide on on the endowment for the Arts, which I'm really interested in. I think it's a really creative and interesting solution, but there's obviously some pretty serious details to iron out, like how that money gets distributed and what the council's role would be on any kind of distribution. When's the appropriate time to talk about that? We're establishing a budget that. >> Says that. >> Recession. Yes. Please circle. >> Back then. Yeah. No, I mean, it's it's to me, it's really creative. I'm excited about it. But I also imagine it being a really big.

It is. >> It's a big one. There's no. doubt. All right. I'm going to zip through these because we're already well over time the, Not that fast, Kurt. A couple things I want to point out on housing and neighborhoods. We've covered a lot of it. But that second bullet point, there are funds in this budget to transition from comp plan to zoning code reform, which is the the ultimate goal. So those dollars are in this budget. Also in this budget are dollars to implement a riverfront master plan and a new climate action plan, both of which are in your strategic plan. That's not out of the lost bucket. We're kind of moving on from loss now. Those are out of the general fund allocations, fare free transit. you know, we're really proud of this. I know you're really proud of this. this is going to take a lot of work to keep up. and we're going to continue to talk about it, but, the the funding streams that we have coming in at least our long term projections are showing that they're not going to keep up with the expenditures on transit. So we're going to have to really look closely at this every year and consider things like we're recommending with lost, like help with the seats partnership. Really excited about the work that we're doing in public facilities. And the longer that I'm in this position, the more I realize how much work we have to do with our public facilities and how much impact that has on our staff and on the services that we provide. So here's a list of ongoing work, work that we plan to to, start with on planning. And then some of the construction work. And we're going to continue to be as aggressive as we can with these public facilities. we covered a lot of the road improvements with CIP. Kind of use this as a reference. These are just some of the major road work that's that's going to be happening. same with parks. We continue to

be very aggressive. And in addressing needs throughout the entire park system, from a core operations standpoint, with the continued talk of property tax reform, we can't really afford to to do too much. But one of the things that we wanted to, put forward was a new fire department administrative coordinator position. I, the fire department had an award ceremony earlier this week, and recognized 13 people that were promoted into new leadership positions. last year at the same time between, I think the most recent, crop of new firefighters and another group that's of five that are coming in, we have about 12 or 13 new firefighters joining our ranks. It's really important that our fire leadership can be hands on in guiding the development of not only our newer supervisors, but our newer staff. And right now, they are trying to find the time to do that, along with all of the administrative work that goes along with managing a department of that size. So by providing an administrative coordinator position, I think we are going to be investing in that leadership to allow them to be a little bit more hands on with the operations. And I think it's a critical time to do that. The mental Health Liaison Program is a lost funded initiative. We have three enterprise fund positions, one in the water treatment plant and two in our resource management operations that we're excited about. We've talked a lot about the pressures, so I'm going to skip through that to I want to spend a minute talking about the emergency reserve and facilities reserve, because these are both mentioned in your strategic plan as well as a desire to increase

these reserves for the first time in a few years, we're increasing. We're seeing the emergency reserve increase a little over $160,000 to 5.58 million. and you can see the bullet point uses for those dollars. Those are council policy adoption that guides how we use those dollars. The facilities reserve for the first time in several years, is able to take a transfer of $5 million in fiscal year 26. that's largely because of the end position of fiscal year 25. as we closed out that budget. however, with the list of facility projects, we show that reserve being drawn down to zero by the end of fiscal year 27, so that $5 million is allocated to projects. And you see that in the last line there, city Park, pool, senior center, interior, exterior, interior and exterior fire station design work and police station acquisition and design all would utilize, all remaining dollars in the facilities reserve. The general fund does end in a position that's a little bit lower. We go from about a 34% unrestricted balance to 33%. Our policy says that we should be, I think, between 25 and 35. So we're still at the higher end of that policy. But this is the second year that we're projecting that to, to drop. And we just need to watch that carefully going forward. some final thoughts. again, we've been able to kind of cut that deficit from last year to this year and half in large part to lost. but the fact that we're still budgeting a deficit with, with the property tax reform coming shows that there's going to be some long, long term, constraints in the general fund. I know that we want to maximize

lost for that value, add as much as possible, but I think you also have to be cognizant that some of that for relief is going to provide some, some needed relief to your staff who's out there on a day to day basis providing service to this community. enterprise funds, I think while the general fund picture looks a little bit better than last year, I would say the enterprise fund probably picture looks a little bit worse. Just the continued impact of that inflation. along with some of the, longer term capital picture coming into view with needs in, water and wastewater are starting to to show that those increases are going to be probably more necessary going forward to not just this year, but we're probably going to need to see increases in those enterprise rates in the future years. And then looking ahead, we're all going to going to be waiting to see what is handed to us from from Des Moines. And we're going to have to, to, to adjust accordingly. obviously, lost will need a lot of time. I think it's going to need some time for you to reflect on that. And it's going to you're going to need time to hear from the community. It's the first time the community's hearing about these recommendations to keep in mind what I said earlier, we're not going to receive our first loss check until September, and even then, it's going to be about a month worth of of of dollars. So you do have time and don't need to rush your decision when it comes to this budget. You need to be certain where you want to provide that general fund relief. Otherwise, we're going to have to. If you don't want to do the relief that staff's recommended, we're going to have to find other ways to fund those Before that. April adoption. But the vast majority of lost is not relief. and you've got time to work on that. So you're not going to necessarily lock in 100% to those recommendations. So when I tell you that we need

time to talk to providers to see what building capacity for them means, we've got that time and we can do that in whatever way you see fit, and we'll end there. Thank you. We're about 15, 20 minutes over, but, I appreciate your your time and attention. >> Well, thank you to the city manager office and also to our finance department for leading us through that overview in the highlights. I think what we're going to do at this point, we're going to ask the city attorney to come up and do, their budget presentation. We're going to keep going until ten around ten ish. Then we're going to take a