City Council - Regular Meeting

We've got a nasty one. Call this meeting to order City Council quarterly financial review session on Thursday, July 30, 2026 at 6.13 p.m. We have one item on the agenda. It's finance, second quarter, 2026 finance review. So I'll turn it over to Mr. Marsh.

So what I wanna do is first let you know that it's commonly misreferred to as a budget study session is not a budget study session. We're not studying any one particular department's budget. You do have the ability though to challenge anything or ask some for more exploratory response to some of the line items if you so choose. But I'm gonna give you the overall state of the city financial presentation so that there are things that you need to be aware of things that you probably would be of interest to you as far as the finances of the city as a whole the first thing in your tablets or in your packet is i presented to you the consolidated actual to budget line item revenue and expense it does look similar to this report and this report

That's weird how that starts like that and just moves.

This report shows all the revenue line items within the city and it shows the dollar amounts that have been that have been collected by those line items against the budget as a whole for the city and where we are as a city for each of those individual line items. Now, a lot of those line items presented are unique to a specific department, similar to the animal registration is for animal services. The accident reports are obviously police. So you know they are pertinent to a specific department's ledgers. But there are some of the revenue streams that you look at in here that are unique. For instance, this rental income senior center, there's no budget for it because that just was a revenue source that started as the senior center became rentable for events after the senior center was used for its stated initial purpose. You have other revenues that have not yet to come in. You have some revenues that are just projected still. There is an insurance settlement item that came in. Usually when that's the case, you will see a line item for the expense that that is offsetting, and that will be down in the expense lines. So you can go through each one of these, and if you have any questions on them, one of the things I do want to point out is franchise tax. Anytime you look over on the far right of this report during the revenue side and see a number below 50%, that means we're ahead of budget on that item. That means the revenues are ahead of where we anticipated them to be for the first six months. So one of the items is franchise taxes. Right now it's 49. It's just slightly ahead, meaning the franchise taxes collected so far in the first six months are ahead of what we anticipated them to be. Overall, we budgeted $560,000. The city sales and use tax, you're seeing both of those, city and county, are ahead of schedule. There are 48% left to collect of what we budgeted. So that's how you would look at that. The A&P is the same way, the A&P tax receipts. I will point out that there is a new line item that we are doing. I will get more into this in the detail that I will be presenting in the PowerPoint. But the A&P tax discount is something that we are tracking now on the A&P side. This will be of interest to you, Roger, because I believe you're now gonna be on the A&P commission. So the A&P tax discount we're offering if they pay within the first 20 days of the tax collection period for the previous month. If they do, they take the 2% and we're counting We're doing that as a contra revenue account to show you how much money would have been paid if we didn't have the discount, but we have to honor the ordinance that we have which says that if they pay early, they have the option of taking a 2% hold back. And we're gonna show you how much that money was. We're also showing in a line item the penalties for not paying on time. So there will be an AMP penalty. Whenever they pay the penalty, that penalty is being isolated as a revenue line. So penalties started in July, so we don't have any in June. I'll go down and we do the same thing for the expenses. This is the city's expense lines as a whole. The reverse is true. In this case, in the expense side, if this number is greater than 50%, that means the You're doing good as far as the budget is concerned. It's opposite of what the revenue would be. So in the fuels, we anticipate that by now you would be 50%, half of what we budgeted in the first six months. But right now we're... We have 60% or 60.5% more to spend in that budgeted account. So the fuel vehicles, while it impacts some departments more radically than others, one that's more car labor intensive would be the police department, who's not here. He's very concerned about that budget. He's doing steps to try to mitigate the cost as well as the fuel for equipment to other departments. They're looking at making sure they... realize that that cost of fuel is high and they're doing things to mitigate the need or the spend. So I do want to point out that when you see this, this is the city as a whole for your benefit, Rod, when you just came in, you have this in your book. This is the entire city's spend for each of the line items for revenue and expenditures. So you can see where we are as far as that's concerned. And I do on the bottom of this, Taxes was interesting. This 3,105 versus the 2,900, 99% of that is taxes for the fire department's building out there. Now, we under-budgeted that because the taxes came in higher than anticipated. And so we did pay those. As far as the insurances is concerned, I have just received the renewals and I will get into that as far as what that's gonna be. The reason you don't see anything there except for the 769, that's an insurance on some addition to the water department's building that we just started to insure. So that's for the period for the policy which lapses, which will be renewed in August. I do have the renewal and I'll get into what those are. As far as the maintenance on the senior center, that's a line item I'll get into. There's a positive note on that and I'll show it to you when I show you actuals in a five year comparison. The playground equipment, very close. The ones in orangish color are kind of, a little bit of a yield, kind of a yellow light versus a red, meaning we're over budget in those areas. But just wanted to give that to you. Capital improvements, this is the biggest We have in a total city 11 million for capital improvement projects, 271,000 for capital expenditures. So in that area, we have an $8 million left to spend on the capital improvement projects. So if you were to look at the city as a whole, taking out all transfers. Transfers in and out are merely a shifting of expense that's reimbursable from one department back to another. The offset to that is in the revenue that's been removed from this just to get down to what is the actual revenues and the actual line item expenditures. We have a surplus so far for the first six months of our revenues, our eight, well, Our revenues are $343,000 more than the eight million four that we have spent so far in six months. We are budgeted to be a deficit of five million one, largely due to the capital improvement projects, largely due to the water sewer department, and I'll get into that as well. So this is favorable, this is very good, as far as where you're sitting, where the city's sitting in six months, financially. Now, if you have any specific individual questions later, you can give me a call, send me a text. I'll give you the detail of what makes that up. I'll forward it to you. Or you can ask, if you review these between now and Monday, I'll be more than happy to get back and present that answer at the Monday City Council meeting. So I just wanted you to know that was in there. And now we go into what's the results for the first six months. So what I want to start with is how the funds are, what the funds are doing by each of these departments. And all you need to know is that this is cash is king for us. We are a modified cash-based accounting system. So we don't book revenue when it's accrued. We don't accrue it. We book it when we actually receive the cash. These bank accounts, there are eight of them within the city, eight physical bank accounts. We have a number of bank accounts that are only established on our accounting records that are sub-accounts of actual accounts. They are in green. Anything with a V, they're called virtual accounts. So this is how we look at, and these are restricted funds. These are how we look at how to account for monies that were earmarked for a council-approved fund. a state-approved spend, a state-required spend, or something that had to do with a restriction due to some kind of a grant, or parks where they want to isolate monies for a specific project, such as the splash pad and the inclusive park. The Michael LeJean Lakes Trail sign, money was collected for that and it hasn't been spent. It's still sitting there because there hasn't been a decision on what they're gonna be doing with the money that was collected from donations. But those donations were for that specific purpose. So that's why we've isolated those. The first column that is the six month revenue from what we've collected in those accounts, the six month expenses in the third column over, the six month deficit or surplus for each of those departments for just these two together, take the revenue, less the expenditures. This column compares to, you need to look at what the 2026 budget is, that's for the whole year. So when you looked at, for instance, the CSUT fire, right now they're sitting at $44,741 surplus this year, and that gives them a new balance of $1.3 million. That is exactly what's on our books as of 6-30 in the actual checking account identified as a virtual balance. the amount that we budgeted them to have is a surplus of 30 for the total year. So they're sitting very well right now. They're positioned to meet that and or exceed that surplus. Parks has a $149,000 deficit right now. They're supposed to end up with a deficit in CSUT of 43,000. That's the money that was used from the City Sales and Use Tax specifically for parks purposes. The reason the $149,000 is a deficit right now is because they've made the transfers that were budgeted for the CSUT, I mean not the CSUT, the Parks Inclusive Park Fund of the 150,000 that comes out of there as well as two capital expenditure items from CSUT that were also diverted to the inclusive park. So that's why there's such a big drain right now there. Now there's gonna be a catch up of that for the next six months because those big ticket items have already been sent over to the other virtual account. So while that looks ominous right now, there's six months of revenue that's gonna help offset that. I think I did a cash flow for them, a projected cash flow to present to the Parks Commission. And it looks like if everything goes the way we kind of anticipate our projections of revenues and our projections of the expenses for roll forward for the next six months, they might be at about 50,000 instead of the 43. They might be a little short. But it's the money that's earmarked for parks. It's not devastating to them. They probably will come in at or just slightly below $200,000 in their account to roll forward. Still sitting in a very good, favorable position. We are managing that, so they hear it every month. DTF control fund still has 21,000. We don't budget a surplus or a deficit because the thought is that whatever comes in from the DTF control fund is like grant money and they use the money in the police department and so what comes in is used or it's carried over to be used for the purposes that the DTF control fund requires them to use the money for. You can see every department, one of the ones in here for the Lopfe Police, they were sitting at a beginning of the year with 63,000, part of our contingency fund thing that we decided to do in order to establish the contingency fund and to get the budget that we had into a more reasonable position is that we decided to, rather than hit the police and fire department up with what their lot fee retirement expense was gonna be based on salaries, is that we would help offset that by reducing the 63,000 in that, in that hold back, if you will, down to about $28,500 by pulling out another $34,000 to offset the need of the expenditures for 2026 on the police and fire side. So, yes, it looks bad right here, but unfortunately that deficit is caused by the fact that we... The state aid that comes in to help offset the LOPFI kicks in July through November or October-ish. And so we have little to no LOPFI contribution because of that offset. And it won't start picking up again until November and December. So this number, it looks bad in June, but I'm not worried about it. This 615 negative is in a virtual account. We've already covered it in the month of July. So those sit really pretty. Advertising and promotion, they have a deficit of 7,900 in their spend. They're sitting at 35,000. They're looking to have a budget number of 43,000 because we're saying every year when we do a budget for A&P, whatever they get in, they usually like to grant out. So that's why we don't ever budget them with a surplus or deficit. We let the The chips fall where they may, or the dollars fall where they may, and they are, whenever we give a financial report to the A&P Commission, they know how much money they have to spend, as you two well know. Let's go to the street department. The street department has three virtual accounts in it, but there is really only one street account. It's called the Street Operations Account, Street O&M. The street does have an operations department. They do have monies that come in for revenues. The revenues and expenditures right now, we brought in 922,000 for six months in the street, all accounts all in. We do isolate turn back funds now. As you know, from the beginning of the year, we've pulled that into a separate virtual account so we can account for all the revenues that come in and all the spend from that. Same for city sales and use tax, the tax dollars that come in and the tax spend, and the sidewalk department. We get monies from permits, for instance. There has been no outlay of money from the sidewalk department. Right now, the sidewalk department is sitting with, the sidewalk fund is sitting with $254,000 in it as of June 30th. There's 350,000 in the O&M because they have already overspent or have a deficit spend of 242, but that's not a bad situation because the approved budget is for them to spend down 495,000. So they will end the year right at about just under $100,000. That's what the approved budget says. As far as the approved budget is for the street city sales and use tax, 488,000 should be their spend down. That'll give them about a half a million left in there to roll over. The 748 will be after a $71,000 spend down of their turn back funds. Those projects are in the budget and earmarked. so they're they're not doing too bad the only thing that we have to watch is this o m because that's their salaries and their normal operating supplies that don't meet the criteria for any of the turn back or street their vehicle and their maintenance on the vehicles their fuel for the vehicles all of that this we're going to have to look at whether this is a sufficient on the budgets for o m for next year for street i'd be Given their run rate. That's probably not going to be enough with the revenue stream that they have to see how that cash flows But that's my crystal ball through now on those let's look at the sewer and the water departments This is the sewer fund. They have one account called total sewer operations sewer O&M revenues were 1 million for the sewer collection and sewer plants spent 1 million a little over a million So there is a $482,000 surplus. Right now their ending balance is 1,000,005 and I'm gonna show you the historical on the sewer department where they were losing, they were in a loss situation for several years and they were being held up or propped up by the water revenues that had come in and we were cash managing them. One of the biggest reasons that there was this rate increase that affected sewer was the fact that there was a lot of need to cover the sewer deficits due to our bond covenant that we weren't meeting. One of the things that I wanted to point out though is that while they have a half a million here in the surplus for the first six months and water department has a little bit of a budgeted surplus, their numbers are very healthy. I'm going to show you why that's a little bit misleading because of what we did when we did the cash flow analysis that went into the rate increases. A lot of people don't understand why and how that happened, but I'm just going to hold this up. This is the cash flow statement that I did with the Meg from Hawkins and Weir to be able to show that the rates would cash flow the debt service, the funded depreciation, the reserves are for contingency. All of that was built into this cash flow statement and that's how that rate was based. You guys were given that presentation and you approved that on the onset when that rate increase went into effect. in 24 and we decided to split the rates between the variable and the fixed portion of the rate. One year was one and the other year was now the full impact and we gave them a year off on the fixed cost. I will let you know though that the water sewer consolidated operations is very healthy. Right now they have a surplus of one million one. and a budgeted amount that they're supposed to end up with, but about a half a million, they're going to exceed that. I just want you to know that. The city sales and use tax though, this is a different story. This is where the monies are earmarked for the capital expenditures and that's significant because the capital monies that are being brought in are not sufficient enough to cover what they presented as a five year capital plan of what they, meaning Greg and Tim, put together the list of what projects they had on the books currently and that were already funded and what was yet to have to happen in the next five years and what that estimated cost was. And there was about a seven to $8 million shortfall in that. So that's the shortfall even with the $2 million that they're getting in revenue for each of the years going forward for five years. So just to show you, this year alone, they budgeted to have $6,488,000 as a deficit spend, even with their capital spend that they had budgeted. So Water Sewer was looking at somewhere in the neighborhood of about an $8 million deficit. You had almost $6 million in the bank. And at the time that we did this, so we were looking at a significant amount of financing that was gonna have to be done. And I think we were looking at about seven million over maybe 20 to 30 year bond. Now the bond would be collateralized by the water rates, by the water systems revenue, meaning the people that have utilized the service, the rates that they are being charged and they pay, pays the bond debt service off first. So what you're looking at here is they would be needing at the end of the year, if they did, every project that they budgeted this year, they're looking at $3 million shortfall that we would have to be looking at doing some kind of funding or financing on. well i'll show you a little bit more about that in the as i go through the water sewer side and i'll give you some more detail on that but right now i don't think financing this year is necessary because of where their spend is and where their projected spend will be for the remaining six months so there's going to be a lot of items that are either going to be scrapped not done change of plans and or pushed off As far as the general fund is concerned, this is the one that generated the contingency fund look. The general fund started the year with just under a million dollars in the fund. They have generated two million two in revenues and two million one 98 in expense, so they're up $46,000 for a surplus in the first six months. That brings their fund balance to one million four, one million four thousand dollars. and 189,000 is what we budgeted as a deficit, and that says that that would bring our fund balance to $764,000. That is above what the contingency was, the contingency fund you set. I will point out that the revenues and the expenditures come from these six departments. And each one of these six departments has an operating budget that has no cash unto themselves. It goes into the general fund as unrestricted. So these were the surplus generating departments. Planning has generated a, right now, 7,552 deficit for the first six months, but they are making strides to make that up. There was some movement in the month of July that's not reflected there. They're still shooting for a $23,947 surplus if all goes the way as it's planned. Police Department is way under where their deficit would be right now for the first six months. They're only showing $173,000 in their dollar amount versus the $670,000 that they were budgeted to have. And I don't know of any large major things other than their normal operations that would make us even believe that they would go anywhere close to this amount or go over that amount as their deficit for the year. Realize that police does not have any city sales and use tax to offset their capital spends. We do sort of earmark franchise taxes for that because the franchise taxes are included up in here in the unrestricted. I guess the bottom line for as far as the general fund is concerned is the general and admin department has generated right now for the first six months $119,000 in surplus and that's well on their way to their 342. So everything looks good, all indicators are go for the remaining six months. Something, a hiccup would have to happen, it can, but right now it's looking positive. The city consolidated just for what you see. There's one account that's not listed here, it's payroll. The payroll fund is an actual fund at the bank and the reason it's not up there is it's normally a, it's called a funded account. We don't keep money in there other than the amounts that are there to clear checks. We fund that account with every department for the payroll and if we don't, trust me, we get a call immediately. You plan on writing a check to cover this money? So we put the money in the bank to cover the payroll that we do. It's usually immaterial amount residual in the account. So it's included in this other cash fund down here along with CDs, along with other funds that we have that is quickly convertible to cash. So when you look at the total city as a whole, We have a budget to reduce the total all in funds by seven million two and bring us down to an all in city fund of six million. We're sitting right now at six months at 11 million, only down a half a million dollars. And mostly that's due to capital projects that are being done. Any questions on the funds? Okay, so what I'm gonna show you is the same thing again. I don't know why I have two of those in there, but I do. Okay, so this is the contingency calculation, and this does go through the June 30th date. You saw that in your July. I do wanna point out that the contingency fund is $71,000 over the ceiling of $932,000. and you realize that the floor is $746,000. So if it goes below 671, which is a 10% reduction from the 746, automatic triggers happen in order to try to bring that back up and then the control shifts to you guys in order to make what steps necessary to bring it back up to at least the floor. But right now, we're sitting 71,000 over the ceiling, which was established by your 15%. target for the contingency fund. This money, if today were December 31st, would be put into a virtual restricted account for contingencies. That is how every year you're building that contingency fund. You then could say at some point you've got enough in there to meet your needs and you could do away with contributing to it and just use the monies in your normal operating budget. But one year is not a trend to count on and I really think that we're gonna be looking at a couple years more in order to build that to any kind of a substantial balance again. I'd like to keep it, get it built to about a million and leave it there. This will help us in our bond ratings. It helps us in our financing structures for any kind of a loan. They always want to know what are you doing for your rainy day fund or your contingency fund. And the fact that we have these trigger points and we have a policy that resides in now ordinance fashion that says this is what you have edicted for the city to ensure that we don't go below what would be necessary for us to continue operations in a crisis. Alright, so here's what I wanted to show you regarding the water sewer. This is a little historical, you probably can't read these numbers, that's why I have the graph there, but I do wanna show that this is from 2011 all the way to 2022 when we started the process of the 605, the state law that says that we had to do a rate review and we had to make a rate change. So one of the things that I'm gonna show right here is the water sewer cash basis of accounting. These are audited numbers now. These are not my unaudited. These are the live reported numbers. I wanna point out that the top number is the water and you see they're all very healthy except for the year 2022 when their net income was only $84,000. And then you'll see in the sewer department, the sewer department started in 2018, the first year that I had official rains here. They were in the red, and they continued in the red, gaining momentum, if you will, of how much their loss was. And it got to the point where the water department could not cover the loss of the sewer department enough to be able to meet the bond covenant. So one of the things we did is we decided that we wanted to pay off the bond for the sewer department, which would help the covenant situation, and we couldn't because there was a restriction placed on that bond, if you recall, that said we could not pay it off early. So what we did is we did a technical defeasance, and doing so, we took the money and reserved it, restricted it, to hold it there as a placeholder to pay off the bond so they could not say... well, the reason that you have this covenant is in case you default and then you would have that money aside that we would be able to go get. Well, by our technical defeasance, isolating that money, we were able to not have any issues with the bond and it kind of headed off at the pass. But this right here is where the big reason why it's a good thing we did the 605 mandated us to do the rate increases for all municipalities in the state. because our operating expense line exceeded our revenues. And that happened in 2022. In 2023, we did the rate study, and the rest is history. But there hadn't been an increase in the sewer department side since 2011. So that's a long time for people not to have any rate increases in water sewers. And you're starting to see it catch up right here. And this is every year, that historical trend. The only reason this is a blip is because that was COVID. COVID year where we stopped all projects and stopped unnecessary spends because we didn't know what was going to happen to the revenue stream. So don't think this was put together haphazardly. This rate was well thought out. So what I wanted to show you is a little bit about what is misleading about those numbers that are sitting in the O&M saying, well, look, you're sitting on a million dollars right now just in the first six months. Well, there's things that are accounted for in that rate that are not isolated off yet. And I will show you the gross revenues. This was the 2023 year where we first determined what the next five years rates were gonna be. And this is after the implementation of the rate increase, what the rates were anticipated to go to. So the revenue, Revenues over the expense for operations led us to $1.4 million, but we still had a loan because we anticipated some sort of financing necessary in order to be able to go after those projects that were five-year projects and get them done. 80 to 85% of those projects were all infrastructure of current, well, it's maintenance and repair of current infrastructure in the ground. They weren't growth-oriented. They weren't adding lines in order to spur on future growth. So that's where you would be more likely to go after bond financing or some kind of financing would be in that kind of a project because you can recover that over time with the new commercial developments or the new residential developments and the tax basis that would come in would help increase the revenue streams on the permanent 1% city sales and use tax for water sewer. Anything you're doing to pipes in the ground doesn't really gain you a real quick turnaround or recovery period. And I do understand that, but sometimes you have to go to the well in order to finance projects due to not really thinking ahead back several years ago. As far as the loan is concerned, the debt service was factored into this, and the rate finance capital costs are $167,800 all the way up to $183,500 in the fifth year. Those are factored into then, say, what would the net income be when you take the debt service, the loan debt that comes out of your operating monies, and the amount of the financing costs that are built into the rate. And you'll see that it brings your $1.4 million down to a total net income of $465,000. But one of the things we also didn't factor in were the reserves. So some of the things that we built into the rate was the annual contribution, which is the contingency monies. So 86,000 and 87 and 89 and 8,007 and 9,000, they were all factored in to come to at least a quarter of a million dollars worth of contingency fund for them. it's a little less concerning to us in the fact that they have a permanent, they're unique, they have a permanent 1% city sales and use tax for capital. So they're not having to rely on their operations for the capital as much as some other municipality that doesn't have that. The refurbishment or replacement reserved for the annual contribution, that's funded depreciation. So the first thing you saw in the first year was we accounted for to fund the year that we don't have. In other words, it's a catch up of the assets that are already fully depreciated. There's gonna be some need to go purchase them and so we were reserving a dollar amount and therefore every year after that, for whatever assets you buy, we initially start funding that depreciation so that we can turn around and use that money to buy the asset rather than having to hope we have enough left over to buy whatever tractor or whatever they need. Mm-hmm.

Mm-hmm.

No, I think what we did is we looked at a cap on that for about $250 or whatever, I don't know, $1,000. You will look at that every year if you think that dollar amount, which should equate to two months of their operating expense, we just got there quicker for the, we're just building it. Because right now they don't have it. They are using their O&M as their reserve. We want to tuck that away as their reserve so they don't use it and it's there in case they need it. So it's not a build to forever, ever, ever. And what do you have in there now? Well, we have more in there than we have in our tax account. It's like $7 billion in there. That's not how that works. You do get to a point, like when you do a HUD loan, a HUD loan does a replacement reserve. If you don't say anything, they will let that go. You pay $40,000 a month to them on a major million dollar project. You'll keep doing that until you go approach them and say, what's your minimum residual in there? And then they'll tell you a number. And as long as you're over that, they will allow you to amend the agreement, your loan, and stop it until such time as you fall below their reserve requirement. So we don't do that. We'll build it to a requirement. The next thing we have you don't see in here is the CPI, the inflation rate. We allowed the... governing body and the commission to recommend and actually ask for a CPI increase every year if they wanted to. And we do discuss that with, I do discuss it with the commission. At the end of the year, we talk about should they be looking at raising a rate for this coverage of the rate inflation. Right now, because you have no debt, that you're still collecting through the rate structure, there's no real need to go after any inflationary rate right now. So that's why they're holding the line. And they can consider that next year or the year after, I think, is when we have to look at the next five-year rate because it's every five years they have to do the rate study. And that doesn't mean they have to raise the rates when they do the rate study. So just keep that in mind. One of the things down at the very bottom you see here is the, if you were looking at what the net income would be after, you're looking at it's more reasonable, it's refurbishment and replacement reserve balance year end, again, is about $125,000 to 210 catch up all the way through. That's your funded depreciation amount that we're booking. I did a note on an operating ratio right here down at the bottom. Doing that, it's the operating revenues over the operating expenses and financing costs, anything you have an outlay of cash on. The total operating cost of $3.2 million versus your operating revenues, remember, This number, usually a lot of people like to see it being high, but as a percentage on operating ratios, optimum efficient operating ratio would be in standard practice 85% or lower, but not to be below, let's say, 50%, because the lower you go, the more... the more hoarding you are and you're not spending your money wisely or having it reinvest. But anything over 85%, you're inefficient. You're closing the gap between your operating costs and your operating revenue. So these numbers that we planned were in the 74, 75 range. So we're right optimum. Optimum, they say, is 70, but we're right there. So that's why the rates came out the way they did because of everything that you don't see in this long sheet of what we projected the budgeted expenditures and budgeted revenues to be in this form. So I just wanted to give you that. At every city commissioner meeting for, you know more than any of them here, the Water Commission gets these statistics. I don't know if they've ever done that before, but 2018 all the way to 2026 since I started, this is the actual amount of gallons of water sold by month for each of the periods 2018 to 2026. The dotted line you see below that is the trend line of your water sales. It's virtually flat. So I went down, oops, I go down at the bottom and I show each January, each February's numbers. This is what generates your revenue. That's the product that they sell in order to meet the water department's O&M operation cost. Remember, the capital comes from your CSUT. So when you look down here, I gave an eight year average. The eight year average is in blue. And then I give them the 2026 actual, and I compare the 2026 actual to 2025 sales, and then I also compare the 2026 actual to the average for the first six months of the year. We're 8.4% below average, 17 versus 19, and we're 3.5% below last year's sales. Now I expect that July will be a lot of sales, I'm hoping, but your biggest month seems to be in the October period, I mean August period, excuse me. July and August are rather healthy sales, usually during hot months where there's no rain. A lot of people will water their lawns and fill pools and do things like that, and they'll generate revenue. We are, however, when you look at where we stand in 2026, you see a lot of red down here on the bottom about where we are below 2025. There's only one month that we actually exceeded our sales in 2025. We're 2.51% below the actual eight-year average. in sale of water. They see this every single month. I even give them the water accounts growth, annual growth. This is since 2018. This looks very impressive. This is net growth, by the way, because it's ins and outs. It's the net of who leaves and who comes in establishing new services at residential properties. It's also a good indicator as to, or a fairly... good indicator of what your census will be looking at and how it's tracking. Because if you take these as households, if you look at the number, that's really only 300 new customers since 2018. That looks like a huge gap because I could have made it look flat. But I wanted to give you the show that 300, that equates to... somewhere, it equates to 37.5 new accounts per year, rather, and or 94, right at 94 residents. So if you're, I think that's, it's 37 new, divide that by eight, 300. And then you take it by two and a half people per household. And that gives you a rough estimate of what your census growth would be. And again, that's not stellar growth, but it's growth. And same with the sewer count. So if you have the growth, why is that happening when your sale of water is actually down? So it could be a lot of things. It could be, like I said, rain. It could be a lot of rain, snow, and wet, and people aren't using the water the way you would normally sell the water for. And the other would be energy efficient or water conserving efficient appliances that people are buying nowadays. They don't use as much or consume as much water.

Just being in washing, clothes washing machines from the last decade. Ten years.

Absolutely. So here they also get the current customer shutoffs. Now, these are system-generated cutoffs. It's not the actual because the day before they can go. The day of cutoff, they produce the report, and they send the work orders out. But if somebody pays before the work order goes out, they don't necessarily have them go run out there, shut it off, and then run back out there and shut it on. They just tell them, okay, don't actually shut that one off. They came in today and paid, and they... They have an actual number of shutoffs that they do. But this shows you the trend of shutoffs. They get that. They see what that trend is. And then they also get the new thing that they did. They decided that starting with May of 2025, they now, instead of trying to chase down the accounts and writing off a lot of money, they turned it over to a collection agency to try to collect. And this is showing them the statistical history of how many accounts did you turn over by year and how much recovery did you have on what you turned over. And so the blue number down here on the bottom is the cumulative total. So through June, actually this, yes, through June, 189 accounts have been turned over, $33,000 worth. And here are the categories of what was in those bills that were turned over. And one of the things that strikes them, commissions higher, if you will, is this category here called sanitation because you realize that that's on our bill and if they don't pay it we still paid for that sanitation two cards and they're eating that and that's not part of the agreement and so they're they they've got a bone to pick with how are they getting that recovered now they do have an admin fee And they do get recovery for some of the accounts, but there's, I think, at least a 30% amount that goes back to the collection agency on what they collect. Now, remember, the collection agency does not bill us for their services. They bill us only for what they recover. So we've recovered amount of $2,964.43. So all in all, since the inception of this, just under 9% of what we turned over, we recovered. I don't know if that's a good thing. If not, it's 9% we wouldn't have gotten anyway. And remember, these accounts that are being turned over are already a year old. So a year from when they left and services were cut off. So... These are not accounts that currently have service and we just want to turn them over because they didn't pay last month. That's not what this is. These are accounts that have stopped. We have shut them off and these are people that did not pay their final bill or had a balance due and they skipped. I think it's a year. It might be less, but the bottom line is there is a little bit of an agreement. If they come back and try to get service back on, that sits in our system and they have to pay that in order to get it back on. And there's also an agreement that we have with other cities where if they go and try to get water service at Fort Smith, if it's on our books, There's a reciprocal agreement with other communities, other cities that say you have a bill outstanding in Greenwood. You settle that and we'll set up your service. You can't go to a local city because they know you still have a water issue that's unsettled.

How long have we been doing that?

Doing what?

The reciprocal agreement.

I've only heard about that for the last few years. I don't know how long that's been in existence. It's spotty. So it's been seven years. I think it's more electronic now in communications. So where they know there's a data pool of that. But That's statistics that they get. That's a service. They see it. This is their... writing it all right and you you there's no they can collect that as aggressive as they want to be that number could go skyrocketing I mean you're as you see we turned over we get 200 200 the biggest we had a big month last month 668 but I mean 12 accounts were turned were turned over You see the percentages, most of the write-offs deal with the water and sewer side, but the 18.34% for sanitation is just nonsense. That should be borne by the sanitation department. All we are is the billing arm. I guess in that contract it says, and you bear all losses.

So we're the ones making the agreement, and they're the ones bearing the cost loss.

By there, you're meaning the water office. Right. We're bearing the water department. You would think. So if it comes back, I think we have a three-year agreement, so the contract's not up for renewal for another year or so. But when it is, we need to be having a look at that agreement and make sure there's some stipulation in there to recover this. Because they have no business risk.

Maybe we can use the same company and turn them over to them.

It says Rod Powell. All right. The water sewer fund, they get a fund report, and they see what their dollar amounts are doing, and I do cash manage them, especially this is a restricted actual fund. It is a checking account. You cannot operate that account in the red. They will bounce so many checks, it's not even funny. so their change in their fund went from they had 3.4 million they're down to 1.3 million in june but i will tell you good news the good news is this is a as of right now Their actual fund balance is 2.7 because most of the reason they depleted it so fast was they had a lot of utilities to move for the road, and we bore the cost to do it, but the part that RDOT was to reimburse us for came to $1.6 million. We got the check. Matter of fact, Monday, came in Monday. and it's been deposited and that's why you see only a $677,000 reduction in their fund. I will show you that the amount of capital improvement projects that they have done so far this year from January to June is 2,676,000. That's even with the capital expenditures. And you look at 30%, where I'm gonna get excited is by watching this, if I believe that they will get to or reach 70% completion by the end of the year, that's my financial decision point. 70% we're looking at getting a loan. or supplementing it from what's already in the O&M back to City Sales and Use Tax to cover some of their projects, because that's where it ultimately will be paid out from. So we do watch it. City sales and use tax, this is your first look. You'll see this again Monday night, so here you go. 5.26% was our actual cumulative growth for the month. That's what we're down, not for the month, but through the first seven months. So while that looks like, well, we're going in the wrong direction, no, that's typical for what we see as far as the biggest growth. period pickup comes in the first three months and then we start seeing it drop off. But what I look at to see if we're still maintaining our turnaround is these numbers here, the last year to this year, we flipped it. So we're keeping path or keeping pace with where we were in the previous year, as far as flipping the script. And if that had been, um, anywhere near what the previous month would have been, we would have been at about 5%. We're still looking at a growth, a little bit of a growth. So budgeting zero, 5.26% is good in the city sales side. The county sales tax, we're 3.64%. We're way above flipping the script. We flipped the script and then some. A lot of that has to do with the fact that a lot of good things happened in two cities specifically because we share and share alike. in the distribution on per capita. And that was that Bass Pro Shop opened up and there's a discussion about that by Fort Smith as far as their numbers going up. And as their numbers go up, our county distributions will go up too. And then there was also Barling had Yeagers open up and now they're fully operative and they had a couple new businesses come in as well. So Barling's numbers are up as well. So their good news, It gives us good news on the county side. I did point this out to you last city council meeting. This is the local distributions for the industries. I do wanna show that first that these are the categories within the actual sectors. The sectors are denoted by the 44, 45, and the first two numbers there. I do wanna point out that This is the year to date average for 2026 for the seven months. And you're still looking at July. It was the ones, the top 15 categories that I picked out are 72% of our tax collection. So as that goes, we go. The general merchandising store was down from the change from average of 2.7 by 2.7%. But if you'll notice, it was up from June. Matter of fact, electronics mail order call-ins, which is online, that dropped. It's also 11% below, and that usually happens because a lot of people are gone for the summer, and they're on their vacations, and they don't order as much online. Now, one of the things that did happen, though, was they, what is it, Prime Days? Prime Days are estimated to be a 9.3% increase. That's a national increase average. That will happen to us if we see any pickup. It's going to be in the August distribution because that happened in June. So two months later, we're looking to see whether that really came to fruition, and I'll be watching this line. Prepared food sales were up. significantly, that was one of the sectors that really spurred my interest. They were up 14.4% from the average, and we were up 35,000 versus 30,000 in actual tax collection for July over June. So regardless of what you may be reading, prepared food sales is not hurting. And I can tell you for a fact, because I know all the details on that, there was a little bit of a pickup from one entity that opened recently, and now they're more levelized off. But the other ones are starting to rebound back as the newness wore off. So the gaps are closing, and now they're doing very well. Even though there's a negative trend line for the top 15, We had a pickup, so the trend line was actually reduced a little bit. in the month of July. This is the all merchant codes from 2024, 25, and 26. There's July's numbers for what we collected. I do want to point out that the 359,960, which is the all merchant codes collections for July, is higher than the year of 24, but not higher than what we got in 25. 25 July was a little bit higher. That's interesting to note. Here are the sectors. I do want you to know that I told you that all the municipalities usually pick out these top four to talk about, because they're usually the ones that account for more than 75% of their collected tax. Everything else is minor. When you talk about it, manufacturing was down between July of 25 to July of 26 by 27%, 21% increase in wholesale, 2%. excuse me, 2.25% between July's of 25's collections and July of 26's collection in the retail sector. Retail is not faring as well right now in that regard. But food service from 25 to 26 years is up 24, almost 25%. And that Depends on how much comes in on tax-exempt day, how much purchases are there. That will have some impact, and that would be October's numbers. So we'll see what happens in October, but if there's usually a little dip there, it has a lot to do with the fact that everybody shops on tax-free day.

But a negative 2% in the retail, though, is still pretty big compared to the other ones because it's such a,

large amount, $10 million worth of taxable sales there. And that is the actual sales. Food service, 1.7 million. Wholesale trade, now remember this 10 million does include online. That's in that number. I will tell you, when you compare 26's and 25's first seven months by each of these sectors, you're looking at, and all of them are increased in 26 versus 25's seven-month totals. So when you look at the manufacturing, they're up 18.68% this year versus last for same period, 21% up in wholesale, 0.38% up in retail. That did drop, by the way, from June's numbers, as you know. 10.3% up for a comparative seven month periods, 25 over 26. When you look at all four combined, 26 over 25, just for these four sectors, we're up 3.4% in 26. Everything looks positive on those categories. Absolutely. It's not they're buying more, they're paying more. It's true. So now what I want to do is get into real quickly just some citywide five-year comparisons on what I consider to be some of the hot topic items so that you can see where we're trending this year for the first six months versus the first six months of 22, 23, 24, and 25. This is not a year annual comparison to here. These are the same periods for each of these years and what we did in those previous years. So everybody's hot topic is citywide fuel expense. Our actual citywide fuel expense is down. This is a, even though you may look at this as a positive trend, you gotta look at it backwards because we're going 22, 23, as you see down at the bottom, to current. So this is positive. because it's lowering expense, and that's always positive. There was an excellent job of recognizing that there was a need to monitor your fuel because fuel costs were getting to be outrageously high again, as it was back in 24 when that dollar amounts were high there too. And I applaud them for the first six months. They're really managing those costs. And for citywide, there may be some pocket departments that have some issues, but citywide, the numbers are very good. for six months. I say that and tomorrow, oh, you know what's gonna break loose. Premium gas for everybody.

How are they managing this? I mean, how's that trend?

I know that police put out a thing about how to idle less, sit more. They're doing some things internally that would use less fuel. And Park's doing the same, yeah.

Well, they're doing a good job. Mm-hmm.

As far as that is concerned, yes.

So, I mean, those are the real numbers. Those are actual numbers. Now, realize that 43, we are up from last year, but the costs are way up at the pump. I would have expected this to be more of this kind of a trajectory than that kind of trajectory. And now I'm gonna go to show you salaries. This is the salary line from where we are just January through June. And a lot of things were paid out that are normal payouts a little early could influence this. Remember, this has nothing to do with budget right now. These are the actual dollars for the first six months of the year, for each of those years. So you see that there is an increase there, but that's expected, and that is something that, you're only paying what's in your budget. What could influence that would be turnover. It takes three months to get somebody new, or you don't hire somebody when you needed to. But you see the breakout by the category. You see the elected official costs as they were budgeted. You see the labor costs. You see the, what's not in here then is, this includes, by the way, you guys, all of you. The code enforcement is the stop gap salary that's being paid for the notes and the code enforcement work that's being done until the code enforcement comes. But the code enforcement will still utilize this new salary code. It will be now added into that and it will fall under the planning department. At least that's where it's destined to fall. This is falling under the general department. And now I go to Come on, turn. Chemical expense. You always hear the chemicals went skyrocketing a couple of years ago, especially after COVID. And then there was a shortage. There was some problems with some chlorine factories and the dollar amounts went way up. But for the first six months of this year, due to a lot of things that the water sewer department has told their commission they have been doing, it's been being controlled. They're the largest user of that, by the way. As far as to some extent now, Parkes is using it because Parkes has the splash pad, and so they're incurring chemical costs. But they're buying it differently now. I think Tanya is buying more in bulk, and they're doing it at much lower prices because there's economies of scale when you buy in bulk and buy lots. They're doing it from different suppliers. They've done some changes to where it's obviously benefited them. So for the first six months, it's under control. and it's not as previous years. These are some of the key items. Health insurance. This is a nice favorable one to talk about. You'll notice the big drop in our health insurance costs have been, and this does include even with the fire department added in, they're in these numbers. Just so you know, right here, the reason there's this big drop is AML. Going over to the AML side. Good decision a couple years ago. That was 24, was the last year before AML, and then we went to AML in 25. Yeah, say that louder. You're welcome. There you go. I let it in to you.

Does 25 account for what we added in for the fire department? Yes. So even with that, we're still dropping it.

Good news. And that's an obvious large expense to the city. It's a half a million dollars a year. So it's why I'm showing you that's six months right there. This is the income statement for what's known as municipal court distribution and jail fees. In the past, well, around 23, that was a huge discussion going on because there was this thing about the cooperative thing that we had with the, take them over to this if they have mental illness to that and we were going to pay for, well, that never came to fruition. This is also a very favorable trend. You do see that they are not zeroed out here. Their court distributions for the fines, fees, and everything that comes through the court is much greater than what our jail fees cost are, which means we're not arresting people and taking them to jail. No, he's not even here. But then again, it doesn't mean they're not given tickets. But the jail fees are from the housing costs that we have to bear whenever one of our prisoners go to the jail. Maintenance and repairs, this is a huge item because there's so many different subcategories of maintenance and repairs, and you can look at this because it is in your tablet and you can peruse it. One of the things that I will get to in maintenance and repairs has to do with the senior center building, but I'm going to break that out a little differently. Primarily, I think I might have another slide on that. primarily because if you look down at not-for-profits, where is that? nonprofit. Back down here on nonprofits, this was the maintenance and repairs that we were doing for the other building. Utilities is also included in a review, and I'll show you that in a minute. But you'll see that even though it's a negative trend line over the last few periods, it's mostly influenced by this 2024 361,000, which came from two line items, one being the pumps and one being the plant shop. And instead of repair, repair, repair to pumps, there was a lot of capital spent by Tanya and or Dalton beforehand to buy new pumps, stop trying to repair and put Band-Aids on a dilapidated system. And they've done that.

Pardon?

One right after another. Mm-hmm. I'm just telling you what I know. So that's a favorite one. Materials and supplies, while it took a little bit of a downturn, we're back on the upside. Most of that materials and supplies comes just from that one category. Materials and supplies, spends, I can departmentalize that a little better because there are certain departments that that's more applicable to. The sign is the actual making of street signs. That's what that comes from. And then the materials and supplies from plant, that's for the plant operations, anybody that has a plant category, which is water sewer. They both have plants. but this one would be a cautionary one, a little high on the materials and supplies expense for the first six months. I don't know what they plan. Maybe they spent some and it's gonna ride out for the rest. I don't know. We'll have to see what happens in the next quarter. As far as the retirement benefits for Lafayette, that's also another very heavy, this is a $600,000 deal here. This is a six month number. You think about it being, it's over a half a million dollars in the retirement benefits. But you look at the benefits paid right here at the top so far, that's for the seven and a half percent for what we have for the non-uniformed personnel. Retirement benefits for fire, this is your retirements for the retired council and city attorneys, not council, city clerk and attorney. And then this is the LOPFI, which includes the LOPFI side. So right now there's a little bit of a downturn to it for six months, which is good, on the good side, considering that we will probably end up a little bit less, even though the cost went up. As far as utilities is concerned, this is an interesting one, primarily because if you look at the bottom number here for streetlights, streetlights is, if any citizen says I need a streetlight or I want a streetlight on this road or there needs to be one here, it's not free. The city pays for that, the taxpayers pay for that through this expense right here. This is half a year. I told you last year, I think the last meeting, that last year's expense is right at $100,000. We're now looking at it being about $110,000 just on the streetlights.

This is in the neighborhoods, on the poles?

Anywhere there's a streetlight.

This is the billing from Swebco in Arkansas Valley. Do they charge the same rate?

It's not a metered charge. A streetlight costs X amount per month.

That's not going to change that rate.

We don't pay, it's not metered.

It helps them. Yes. If it's

So if a street light's not burning, that's to our detriment because we're paying for it to burn during the night.

Right. But if it's burning during the day...

If it's burning during the day, we don't pay more for it burning during the day. But they still would like to know if it's burning during the day because it hurts them, the electric company.

Do those figures take into account what we, so we also have some that are independent that have a meter, like over coming down Denver Street. There's a meter that we're supplying power and does.

You're supplying power for them?

Where?

The decorative ones or the decorative ones? Decorative.

Yeah, that's a different.

That's not.

So that is not wrapped up in that. That is purely the unmetered ones. Right. Okay. Okay.

We get a separate bill from Swebco and AVEC for the lights that Swebco and AVEC provide and it's a flat rate. They're not ours.

Do we know how much they're charging us for each one?

About he's managing it very well.

Keep on keeping on.

Motion to adjourn.

You learned more than you ever wanted to.

I'm trying. I'm trying. Thank you. Thank you.