Finance Committee - Regular Meeting

04:30 on February 23, which means it's time for the finance committee to do this. It's 04:30. It's the February 23, and it's time for the finance committee of the Olympia City Council. Call the meeting to order at 04:30, and a roll call, We have council member Kelly Greene, myself, Clark Gilman, and council member Robert Vanderpool is excused and hoping to get out of his conflicting meeting in time to join us for the latter part of this meeting. Have you had a chance to consider the agenda proposed for tonight?

I've considered it so much that it

would be my honor to move to approve it.

Great. And I will second that. All in favor? Aye. Alright. We have an agenda, and that brings us to public comment. We we have at least one public commenter in person. Do we have any online public commenters this evening? No one online. Alright. So, Michelle, if you'd like to come up by the either the lectern or the table's fine.

That's Okay.

There you go.

So does that mean I have, like, a half an hour from my public comment since no one else is here? I'm joking. I got two minutes.

Yes. That'd be great.

Hello. My name is Michelle Ryder, and I'm a weed inspector. No. Not that kind of weed. I inspect Pierce County for noxious plants like poison hemlock to keep our community safe. And I am here to support city council adopting an ethical investment policy. I live in our wonderful city, and I value human life and the planet. I know you do too. Considering the state of our world and the direction our country is headed, there is no better time than now to align public funds with human rights in protecting our planet. Socially conscious investing and spending is not just a growing trend, but a moral imperative.

I don't want our money damaging the planet, driving severe human rights abuses, harming workers, and deepening injustice at home and abroad. I want to see our city be part of the solution by being socially and environmentally conscious about where we put our money. I would love to see Olympia join cities and counties across The US from Portland, Maine to Alameda County to St. Louis who have all committed to ethical investment. I'm excited to be up here, optimistic even, knowing that Olympia has the potential to take positive, life affirming action by declining to favor investments in harmful industries such as fossil fuels, tobacco, immigrant detention, mass incarceration, and weaponry of all kind, thus moving American dollars away from collective harm and returning power to us ordinary people.

If we change the way we do things, the world that we worry about every day will also change. Change brings opportunities, and opportunities and alternatives rooted in concern for others are what will pull us out of today's moral morass and help us keep our promise to younger generations that they can look forward to a sustainable, equitable, and flourishing future. We can do this. Thank you.

Thank you for your comment, Michelle. Is there anybody else who'd like to make public comment this evening? I'm looking at Bill Dole who just arrived, and he said no. Okay. Alright. And and nobody online? Okay. Well, then we have two sets of minutes to consider from the November 19 and the January 26 finance committee meetings.

Do I need to make two separate motions?

Yes, please.

Okay. Then I would move to approve the 11/19/2025 finance committee special meeting minutes. All

in favor, say aye. Aye. Aye. Alright.

Now may I follow it with motion to approve the 01/26/2026 finance committee meeting minutes?

Absolutely. And I'll second that. All in favor, say aye. Aye. Aye. Alright. We've approved the minutes, and that brings us to our first committee business item this evening, which is Olympia Fire Department capital facilities plan funding discussion. And, Jay, are you gonna kick this off for us?

Yeah. I'll kick this off. So Thank you. I appreciate both chiefs being here being here tonight to talk about this item. So as you know, this last year when we presented the capital facilities plan to the council, you noticed a pretty robust new section of fire capital. And one of

the things that's been on my mind, that's been on

the Chief's mind for some time, is not just new apparatus, because those come about from time to time. And when they do come about, they're millions of dollars, and we need to continue to try to find ways to set money aside. But we've also got four stations, three of which are aging at a pretty good clip. One of them newer than the others, but needs its own work. And we need to really start taking a serious look at how we set money aside and how we address long term facility needs within the fire department and other capital needs.

And so chiefs are here to kinda talk about what's the state of things and what's that look like. And I'd like to treat this just as a starting conversation. We're not here tonight looking to make firm commitments to anything or ask you for any commitments around funding, but really just to put it out there for an initial conversation and then work our way through it in the future. So with that

Thank you, Jay. Thank you, mister chair, members of the committee. I appreciate the opportunity for us to come in tonight and just, like Jay said, just kinda I guess my hope is to just kinda give you a a good insight as to what our current state is, some of the mandatory refreshment schedule items, some of the future anticipated needs, as well as some of the high priority needs that, we should be aware of, you know, coming at us pretty fast. And then we can talk about kind of the planning of all those things. And so go ahead.

And so we've done a a tremendous amount of work in the last couple of years around our strategic planning and including our capital assets and capital needs, for the fire department. And what we're where we're currently at is a big part of what we've done. In this last year, we completed our standard of cover, which I shared with most of you. And in that standard of cover, we do a really comprehensive deep dive into the community and the risk assessment in the community. And so that's identifying some needs and some future planning that I think as a city we should be talking about when it comes to the ability for the fire department to provide services at a performance level, I think that would be acceptable.

And so as we talk about capital planning tonight, we really bump it into three main groups, apparatus, facilities, and then equipment. And when it's equipment, it's the it's the high dollar equipment that we know that we're gonna have to replace. Not not hand tools, but more like air pack systems, radio systems, things like that would be in the in the equipment realm. I think apparatus is the the low hanging fruit for us to talk about tonight. So I'll get you caught up a little bit on on kind of where we're at a couple of things.

I'm gonna let I'm gonna ask Adam to kind of give you an overview of of our of our current fleet status. We do have two fire engines on order. We placed that those two engines on order two years ago. We expect to see them maybe by the '28, I think, would be the idea. So that it will be every bit of four and a half to five years before they are received and in service, which is about the typical delivery time on new apparatus.

Currently, those apparatus are being funded with an annual payment towards them with what we know it will be a final payment that will be due on their delivery. We can expect that cost to change as the spec of those apparatus will have to change because of the delay. So by the time they go to build them, what the way we spec them won't be available anymore, and so then we'll have to pay the difference. And so we know that that's covered at us. When we purchased those two and ordered those two, I should say, we knew at that point that we needed to order a third for our fleet.

We just simply didn't have the funding available to do so. Fast forward two years, and we still had not ordered that third. And so now that third is becoming a a much greater significant risk to the to the community and to the organization as a whole and the reliability of that apparatus. And that and now that fourth apparatus is becoming on the radar. Right? So we two years ago, should have been the third. Now that fourth one's in the in the next two years. And so what we're looking at is two fire engines within the next couple of years, one sooner than later. So I'll go ahead and ask Adam to kinda give us this overview of of our current fleet status and kind of, his role to keeping them on the streets running for us.

Okay.

Alright. Thank you, guys. So currently, we're running eight engines and two ladder trucks. Our oldest of the fleet is, right at 30 years old. We have one at twenty eight, and then, actually, we have two at twenty eight, one at eighteen, two at sixteen, one at ten, and one at four. So NFPA Thank you. Yeah. Yeah. NFPA, their minimum recommendation is twenty five years. We've kind of adopted, you know, we'd like to go '24, a 12 and a 12.

And so we most of our frontline units are beyond that twelve. We have one that's still at ten years, but by the time by the time it gets replaced, it'll be beyond that. And we've been calculating the mileage and kind of the engine hours off of it. You know, fire trucks, they don't they don't just drive up and down the road all day. They they have some pretty hard miles, cold starts, full throttle, stop, idle.

So real world mileage on, on a lot of our vehicles are almost pushing a million miles for frontline for for frontline vehicles. And, you know, that that may only equate to about a 150 to a 180,000 miles, actually, travel time, but the you know, they they average about 10 miles to 10 miles an hour is the average speed with all the idle time. So, we're we're starting to see some pretty heavy repairs. Usually, about one engine a year requires a significant amount of amount of repairs, like, I don't know, over a $100,000 worth of work, because they're starting to wear out and kinda age out. And then some of our other vehicles, like our aid units, you know, we have two on order.

They'll be replaced, but the current aid units that we have are, twenty five years and twenty three years old. And we're seeing issues with them to where we're having to actually buy parts off from other sources like Wrecking Yards or eBay because the manufacturers don't make parts for them anymore. So just a couple of months ago, I had to buy an entire, engine assembly to get one part off of it because the the part that they make, they they don't make it anymore, and there's none around. So we've we've struggled with the age of the vehicles and the amount of usage they get and kinda keeping them on the road. A lot of a lot of our frontline rigs, if they come in for service instead of kind of a turn and burn in three, you know, three days to do an annual service, they're there for weeks because, you know, we're either waiting for parts or there's, the the parts take research to find, or there's just so much worn out on them.

So we've we've you know, we we keep them, maintained and safe, but they do require a significant amount of work to

Questions on any of that at at this point?

Adam, since you also maintain other departments' fleets, How do how does the age and mileage of our vehicles compare to the the other departments that you're maintaining? If as a you know, honestly, besides a few outliers, ours are significantly older.

So if I could add a couple points to this and then, through through through the course of the conversation, please interrupt, ask questions. I wanna you know, if we can just answer your questions as they come up. Couple of key points to to acknowledge when we talk about apparatus is one is a replacement schedule. So currently, if we we have our our calendar, our schedule set up around the twenty four year replacement. And so, that would be the idea would be twelve years frontline, twelve years reserve.

The intent in that is to maintain reliability. And so fire engines have to start every time we get in them. They we can never accept or be accepting of a fire engine that doesn't start or that we lose our ability to respond to an emergency because of a of a mechanical failure. And so there's a lot of preventative maintenance that goes into fire engines. And so when they come in, although the hose doesn't look like it needs to be replaced at certain mileage or certain hours, they get replaced because we don't want them to break down on us.

Right? And so that the the problem with this current or the challenge we have with our current state of of the fleet is that we are currently running our front end engines in into their reserve years. So they're past the twelve years. They should be in a reserve status at their frontline status because of the the of the age. And it's you know, a process of deferrals will cause that to happen. Right? And so the challenge we'll run into is getting caught up. Right? If if we were all caught up at eight eight engines, four frontline, four reserves on a twenty four twenty four year replacement schedule, we should be buying a new fire engine every three years. That would be the ideal replacement process.

And then in addition, that you'd you'd be replacing your ladder trucks about every six years. Right? And aid units would probably be in about the eight to ten year mark. We have two aid units on order as part of the BLS program. The challenge a lot of theirs is when they go come in, they'll go frontline. Our reserves will not even be meet standards for a reserve apparatus at that point. So we'll have no backup eight units. So those are some of the gaps in the apparatus inventory or program that we have. In the last few years, we've had two major repairs, two engines that we've had to replace the engines and the entire front suspensions well under the 6 figure repairs just because of maintenance. So

Chief, is there so I know, you know, we've talked about, and we've heard you talk about that there's essentially one company now that makes the engines, which leads to substantial delays even when folks are purchasing them. Does I'm not really clear on how to best ask this question, but like is that same concept coming into play with like the parts replacement piece? I mean if only one company is making the trucks, is there only one company that can make replacement parts and their ideal would be rather than make you a part to repair your existing truck, would rather you order a new truck that you can see in a year and a half?

So the manufacturer that makes our trucks, any part that was manufactured from them, like, I can I can call them up and get a part that's that's, you know, for a truck that's that Pierce Pierce part that's 30 years old? You know, I did it the other day. We had one that was damaged for another department and they sent me all the parts for it. But the power plant, the brakes, the transmissions, that Detroit Diesel, a lot of our front lines have, they are not going to make parts for thirty years from them for where the over the road vehicles have already been retired long ago. So they are not continuing to make the parts for the power plants, for some of the one off like subsystems that the manufacturer makes.

And then also comes into play on the smaller like the eight units, Ford or Chevy or GM will not make a part. You know, they have no interest in making a part for a van that's that's 30 years old. You know, so so where where I fear that we see, you know, a lot of where we're gonna have a failure of being able to get a part and it it all it's kind of odd, but it's the seat belts. So anything, you know, 2,000 or newer, the seat belts got an air you know, a pretensioner, a pyrotechnic charge in it to tighten the seat belt if you get an accident. Well, that charge degrades and goes bad.

Well, nobody makes an aftermarket seat belt that includes that. So we've been kind of having ground for seat belts and, like, airbag parts, you know, to keep them in service.

And and so the the challenge that I think that we face, of course, is the cost of apparatuses, Right? Excessive. I mean, and to your point, the delays in manufacturing, the costing of apparatuses made it all the way to the federal level, with some concerns from the IFF, the International Association of Fire Chiefs are concerned about the process in the industry that's allowed this to occur. Right? And that the some federal regulation or oversight might be necessary to bring the industry back in line.

You know, the majority of my career was you would order a FireEngine, you'd have it within a year. Just in the last six or seven years, it hasn't changed. And so it it it is frustrating for all of us. Right? Because we need those fire engines since yesterday. Right? So

Well, just to give you a sense of scale, so for the two that we have on order so right now, we're setting aside Jonas, it's just just shy of half $1,000,000 a year that we're setting aside to make kinda make payments. And as Matt said, eventually, then we'll have a a larger payment that due at 2028 when they come due. But so we've got about half $1,000,000 a year right now ongoing in your budget that's helping to pay the cost of two engines. If we needed to go and order the other two, the number three and the number four right now, it's another half $1,000,000 a year we'd need to get into the budget just to get us on a path. So you're probably somewhere in $1,000,000 or more a year or just on apparatus now, we haven't got to facilities yet that we probably need to be setting aside on an ongoing basis to set us up the best position possible to be on the schedules that the chief is talking about here.

So part of why and I should have said this upfront part of why we're really digging into this conversation with you now ahead of 2027 budget is, as we talk about a long term sustainable budget, this is part of it. So as we've worked really hard as a council and with staff to have a more sustainable budget, we're still falling short in things like facility repair and apparatus and other things. So we've still got more work to do to close additional gaps.

The the other thing too is the safety advances in the last couple of years of, you know, fire engines were kind of forgotten about for a long time. So, you know, like, our twenty sixteen engine is the only engine that we have that has passenger airbag, you know, occupancy airbags in it. So any of the new engines we're getting, they also have airbags, but they also have side roll and, you know, stability control built into them. Our oldest engines, they don't meet the NFPA spec for the, grip for where you step. So there's an actual specification on how much grip something has.

So any of the walking surfaces actually don't meet the required grip amount for a firefighter boot to step on it and not slide off. So there's there's a million other little things, but those are kind of the big the big keys. And and also with that, that does drive the price up to more, you know, safety safety, you know, options you've you know, that are required.

One of the last points I'll make on apparatus is that so we're we're talking about an an an intentional replacement schedule of twenty four years. Most urban fire departments that are utilizing their apparatus to the level that we are, operating ours are typically on a sixteen year replacement schedule. And so three of our four fire stations will run over 5,000 responses in a in a year. And so there's 27,000 responses in the city of Olympia in a in a given year that cover about 17,000 emergencies. And so the twenty four year calendar is really set up around the fire department that we were pre 2015 when we were running 6,000 calls a year as a department, not 18,000 calls years as a department.

Right? And so with the same basic resources. And so the while '24, I think, is the absolute maximum that I would encourage us to consider, I think as we look to the future as a city, we should be preparing ourselves to retract that '24 back to a 16 for our fire engines and not a thirty year on our ladder trucks, but a twenty four year on our ladder trucks. Our ladder truck, our ladder one, because of our resource allocation and deployment, is the second op resource out of downtown. So it gets run on medical calls because the engine's on a call typically.

And so we're rolling the ladder truck on routine medical calls, you know, several times a day, which is just wear and tear, and that's fine. But it just means you're gonna have to replace it sooner. You're just gonna wear it out faster. That's all. Right? And and that's an expensive apparatus to utilize that way. So questions on apparatus. And so the the the capital, facilities plan that we submitted for the city budget has the the replacement of apparatus on the calendar. One in '27, another one in '28. That's number three and number four that we talked about.

And then that would get us with those two and the and the two we have on order, we'll get your front lines managed, and then our reserves would be, you know, a bit behind still. But that would get us to where we have modern emission systems, modern safety systems, and reliable apparatus in our frontline position. Questions on any of that? Alright. We'll jump into the next piece. So yeah. Fine. So the the next piece, of course, is facilities. As Jay mentioned, we have four fire stations. Station 4 is was built in 2015, so it's relatively or 2010, I'm sorry.

So it's relatively new for for a building. It's doing doing well. This year, we did have to replace the water heater in that station, normal wear and tear maintenance issue. Of course, because it's a commercial facility that's staffed twenty four seven, it has to be you have to have hot water. You can't because people live in it. It had to be repaired quickly. It was an it was an expensive repair. Right? But that was just part of your normal maintenance. The challenges in that we have in our facilities is Station 2 and Station 3. So both of those stations are older stations. They were both built in the late eighties, early nineties. Station 3 is basically a residential build. It's not a commercial spec of a building. It doesn't need earthquake protections.

It's on a 200 amp residential feed power feed. The kitchen is a a residential domestic level kitchen. It's not a commercial kitchen. So every time if they're cooking and we get a and a call comes in, it the alarm system cuts the power off to the stoves, right, so that we don't leave something on the stove as a safety measure. Because of the way that the power is on that building, because it's such an old building, that is we're going through a stove about once a year because it burns because we can't put a commercial stove in.

It doesn't have the power supply to support the commercial grade stuff. So so to point out, both of those stations are just in in need of significant upgrade, right, just in this quality of the facility. Station 2, of course, is on the West Side. It's the only station on the on the West Side for a large area. And the standard cover is is identified that in in our service delivery, the West Side is is nearly eight square miles covered by one fire station, which kind of exceeds the WSRB standards.

And that that station was built with two bays built for a single engine to run out of it. It's running three apparatus out of that station on engine, the paramedic unit, as well as an aid unit. We converted the classroom into living space and bedrooms for to to get more people. So we have seven people running out of the station. It was really designed for three or four people to live in and run out of.

Both of them, the bathrooms are still gender specific. They're they're not equitable, as far as the the facilities go, and they have very limited space. The kitchen at Station 2, they the the crews have removed most of the doors off the cabinet doors because they're they've fallen off. So they've just taken them all off at this point. And so that begs of an investment into for some repair.

Now Station 3 is one conversation. Station two, the the conversation is the the standard of cover would identify that we need to move that station. That when it was built, it was in a good location. But since that time now and with the Capital Mall Triangle proposal development, that station's really not in the best of locations currently or into the future. And so rather than invest a tremendous amount of money into that existing facility, the conversation really should be about relocating that fire engine and and opening a second station and making that district more tenable, from a long term perspective.

Obviously, that's we're talking about significant investment. But that's what the service delivery model would show you, for best coverage. Station Two's area is large. It's the busiest fire station of the four. So their call volume demand for service and their service area is large, which results in poor poor response time performance. They're they're the slowest response times, in the city for those reasons. So, station three is the only fire station that we have that does not have fire suppression sprinklers. We have a sprinkler ordinance in the city Of Olympia, but our fire stations don't comply with. So some concerns. Martin O'Brien training center is a phenomenal facility.

The challenge is that when it was built, we there was a couple things that that, from a design perspective, probably if we knew then what we knew now, it doesn't have a a large decontamination area that doesn't have the ability for people to shower and cleaned up at the facility. And in today's world with the contamination and cancer prevention, they need to be able to bag and and shower and clean there rather than get in their vehicles or apparatus or cars and take it with them. We we unfortunately don't have that ability there. So when it was built, that wasn't the industry standard. Now that is.

The the props, the facility is doing well. The classroom's a little on the undersized piece. And so there's some upgrades and improvements, you know, I think just from growth that could be talked about. And then there's some ongoing maintenance issues that need to be addressed. It's a metal building. The doors and windows are metal, and they're rusting away. And there's there's not a fund to to address that. All of this is identified. And so, you know, our public works folks and our facilities folks are fantastic, and they do these facility assessments, all the city buildings and facilities they did. They just completed a recent one.

So all of this is documented in there. We know that we have, at Station 2 and Station 3, both both the HVAC systems are well over 20 years old at this point, so we can anticipate that those need to be replaced. One of them did get replaced on Station 2 a couple years ago. They're not cheap. Right?

And so those are items that we know are coming that we don't have a fund established to cover. That's kind of the bigger facility piece. And I think upgrading current facilities as well as investing in future facilities are the two big items here. Now we know that facility cost is the biggest ticket when we start talking about this. My experience in '22 '21 and '22, we built a couple fire stations, and they were a thousand dollars per square foot total project cost four years ago. Normal station's about 20,000 square feet, so it's a $20,000,000 investment to build a fire station four years ago. I don't know what it would cost today more than that. So questions on facilities at all? Matt, Jay?

Well, I'll just add there's really there's really two pieces to this discussion that I wanna talk about. One is to start, again, to put away more dollars in an ongoing facility fund to to benefit our fire stations is something that we're gonna need to work towards. And two is, as you as you listen to chief talk about even in with station two needing long term, a bigger station and probably in a different location, that's probably a future bond measure of some some sort. Probably go out to our community and and asking them for support to to build another fire station, which we did with station four. That may be a time to then talk about a bigger mod measure that's about a new station two and some level of repair and upkeep to the other stations as well.

So we're not far enough along in that conversation to to throw numbers at you, but, I mean, the chief threw a little bit of numbers at you. But I wanna set that conversation up because I do think it's the way we're gonna get there in the future.

But the the West Side question is Station 2. Right? And maybe it's just too early to even know. But is there other property we already own on the West Side that might be at least in a zone? Or would it potentially involve also having to purchase property?

I don't think so. I think we're we'll be looking to purchase property somewhere.

The the, the issue of facilities and and funding for ongoing maintenance isn't unique to the fire department. So you have No. These specific concerns, but it's also more broadly Correct. Something that, you know, if if you ask the the public works and maintenance folks Right. They'll they'll share they'll share your concerns.

So I I I both you know, I understand that an ongoing facilities fund would make sense. And I also think that broadly, we we need to consider capital facilities. It's it's just like everywhere in the world, it's easier to to save up for something new and shiny and and harder to put money away for taking care of what we have. Sure. You speak for just a minute to Southeast? You've done a lot of thinking over these last few years about Sure. The needs in Southeast.

Specifically, Station 3 and and down that so that is a large jurisdiction as well. It's not as quite as big as the West Side, but it's still the biggest the next biggest, response area. The service demand doesn't come close to what station the service amount out there is about sixteen, seventeen hundred emergencies in their first two area. And so where that station's located is actually not in a bad place. Right?

It's in the it's in the general middle of that of that Southeast area of of that response area. And when we meet on the tenth as a council as a whole, March, I'll I'll we'll go over the standard cover. You'll kinda get a a feel for what I'm I'm talking about. The the challenge we have with station three is it's such a big area that when it does get a response, it has the potential for a long response. And then the other thing is we're we as an organization, we use engine three to cover other jurisdictions that are tied up on calls for a long time.

And so if if engine four, engine one are on a a fire, anything that obligates them for more than forty five minutes to an hour, the battalion chief will have engine three come out of their station and kinda drift towards the middle of the city because statistically, the next call will be in four's area, one's area, or two's area before it comes to three. And so we're we're kinda hedging it and playing the risk management game there to try to make sure that we meet the performance. And so we're missing about 10% of the calls that we're supposed to get in three's area. Three doesn't get because we're shading them out of the area, which, you it adds up to about a 150, 160 calls a year. And a two's area, if we were to do that, you would lose 700 calls a year.

Right? And so that's the nature of where we're at is because of the system gets busy at the busiest time of the day, it's not uncommon for us to be out of resources. We'll pull three into the main part of the city to be prepared to respond into other jurisdictions rather than from station, which hurts the performance in three's area. So

Thank you, chief. I I appreciate that. And I and I do understand that council will have a a bigger Sure. Briefing on the standards of cover, but I but I I think that's important to also bring in the coverage in the Southeast. And I wanna acknowledge that council member Robert Vanderpool has joined us. Please go ahead.

Thank you. Thank you. And so as as we kinda wrap up the conversation about facilities, I think that one of the things that we recognize is that as as of as the ability for a fire department to provide services, at a service level that we're comfortable with and that a performance that we're that would meet the intent of the of the of the outcomes that we're trying to achieve. In order to do that, we distribute our resources that we have allocated, right, that that we've been awarded by our taxpayers to provide to them. And so we distribute them in fire stations.

Those fire stations, especially the older fire stations, have a tendency to not be where they should be anymore or they need to be updated. Buildings have a lifespan just like fire engines do and just like we all do as human beings. Right? And so in Station Two's area or on the West Side, that's a great example of an aging station that's no longer in its best location just because of to no, you know, no fault of anyone's. It's just the evolution of things. And Threes is actually remains in a good area. It's just an aging station that needs some attention. And so facilities are you know, a a piece of that is the ongoing maintenance, like Jay said, and then the piece of that is is the bigger ticket item of of the ability to build a new distribution system, for your fire department, which is a big investment. So

Just sort of an analogous situation as intercity transit has been reconsidering the the whole web of their runs because both where people live and where they work has changed over the last thirty years and the the the patterns of of movement. So it's I know it's it's really challenging because we figured we built the best system to be on the the gridded road. And Sure. So I I think it's the same the same issue across the city that our our destinations and our population centers have just evolved over decades. Right.

We're three times the population we were when I was a young guy. So that's right. Thanks. Yeah.

So when we talk about equipment and that picture there is a picture of the fire of an actual fire we had at Georgia Pacific. Do a blank there for a second. Georgia Pacific. And so that was what the crews had when they entered. I use that picture because it really speaks to the need for good equipment in the our most important equipment is our safety equipment.

Right? And so this last budget process, we were able to add funding to the fire department budget to help support the need to purchase PPE, which we consider a capital investment because it it's a significant cost, and it has replacement schedule. It's ten it has a ten year replacement schedule whether you ever wear them or not. The moment you buy them, if you put them on a shelf and let them sit for ten years, you have to throw them away. And so there's no gray area in that at all, which is an interesting concept.

Other pieces to our kind of our our standard industry standards for safety for our firefighters is about protecting them from cancer, right, and exposures, which is about their air packs, which is about, the exhaust extraction. And so we have each station has an exhaust extraction system that hooks up to the apparatus of the diesel exhaust is, pulled out of the the base. That entire system is no longer it's it's hitting the same point as what Adam talks about parts. We can't get parts for it anymore because it's getting to the age where the system's no longer well supported. And so we've discovered that this last year when we had to add an additional one to station two for the third, and we had to buy try to find pieces and parts to add a third, connection.

Really difficult. And so when it breaks, it takes a long time to find parts. And so if it breaks and we can't run apparatus out of that station, it really makes it hard for us to provide services. Right? And so the reliability of the system is becoming a challenge and the ability to get it repaired. This is no one's fault again. This is just an evolution aging of a system. Right? But the replacement of that system is a cost. Right?

It will be an investment. Station alerting. Station two has its original alerting system that we know because it's not a digital alerting system. It's not a modern alerting system that it has delays in the notification to the station. From the time the dispatch center hits the button to the time the tones go off in the station that there's there's about a fifteen to twenty second delay in that process and not getting there because of its analog system.

The newer stations that have digital systems, it's only a couple of seconds to click through. And so that's a part of your overall response time performance if if they don't get notifications. And so the crews there now will get notified on their phones before their station alerts will go off if they're awake. Right? And so it's a it's a cost that we'll have to talk about, especially when you, look at replacing and modernizing that.

Radios. We have to have the radios that they tell us to have. It's TCOM driven. It's it's an industry standard. It's a business model that says that those radios at some point will time out, and they won't be supported enough to buy new radios. We're on new radios. It came through the t CERN grant process. We're on the hook to buy the replacements. Right? They they issued those to us as part of the bigger, initiative in the county, but the next generation of that is on us to purchase, which is a probably about a ten year wait away.

It's gonna be a a 7 figure purchase. Our air pack system is a twelve to fifteen year system. All the bottles, all the air packs, the compressors, all the all the supporting pieces to that, they're about a twelve to fifteen year system. We're on year nine going into ten. We're within two to five years of having to replace our SCBA system. That will be a 7 figure purchase. So those are some pretty significant things coming at us pretty fast. And then, of course, the thermal imaging, firefighter wellness. There's some pieces to that that we'll talk about, you know, in the future. So questions on equipment?

I will share a couple success stories on the equipment side. We, prior to last year, we did not have the what they're called extractors for or, we have them for our turnouts. They're like washing machines that do all the removal of all the carcinogen and all the products of combustion that are dangerous to our folks, for our clothing, for the the PPE, we but didn't have them for our equipment or tools and our air packs. And so those were having to be hand washed, imagine. And so, this last eighteen months, we were able to to, defer some money in our budget and purchase one, and then we purchased a second on a grant from l and I.

They paid for half of that. Each of those were about $50,000 apiece. So we have two of those now, and then one located at Station 1 and one located at Station 4 where we can walk wash our air packs or our tools or hand tools and things like that after a fire, and it will pull all of the products of combustion off of them and prevent the cross contamination in carcinogens. And so but those will need to be replaced at some point, that they need to get put on some sort of replacement calendar.

Is there any I assume, like, anything, like, equipment needs to also just change over time. Right? There's equipment that you always have to have and then replace. And I'm thinking specifically around, like, the increased use of of chargers for electric vehicles and battery, like all of the things now that Sure. How does that play in? How

Well, you go to the next one. And so and that's a great question. So one of the a great there's a couple pieces that that I would examples I would give. One is our extrication equipment. Like, the the tools that we use, the jaws of life, if you will. Right? They used to be hydraulically powered by a a gas powered power plant. Now they're all electric, battery powered, which, of course, now that creates a replacement process for those. Right? Then they need to be put on some sort of a replacement because they're not cheap either.

Example would be the two sets of turnouts are required now by LNI and by the national standards and NFPA. We didn't used to have to require that right now. So I remember it has two sets where so when you dirty one at the at the fire, what the firefighter does at the fire is they do a gross decontamination where they get hosed off, and then they bag those right there. And they seal up the bag, and then they change into their other set, the clean set. And then that bag gets laundered and cleaned before they use them again. So that's that prevention. And so the the dirty turnouts never make it inside the cab. They never make it inside the station. They never make it inside the sleeping areas or anything like that. Right?

And so they we we try to contain those carcinogens to prevent the cancer's, risk. And so those are a couple examples. The next piece of that on the turnouts will be the PFAS free turnouts. Right? And so we all I think we're familiar with the the PFAS in in the world and the forever chemicals. Well, they've they've been part of turnouts forever, and the risk of that, of course, is those turnouts are worn when and then hyperheated, and you're sweating in hot turnouts that are PFAS, and so it's exposing our members to PFAS. The industry is moving towards PFAS free turnouts. And at some point, that will be a requirement. Departments are beginning to purchase those. It's a bit on the early end.

But at some point, that will be a requirement. I think it's an ex expectation we should have as an agency and anticipate that. I think we should expect it to cost a lot more. So that's, I think, an example of what you're talking about. So that kinda speaks to some of those prior yes, Jay. Please.

I just wanna add for those listen behind us and those watching at home too is I wanna make sure the community knows when it comes to things like bunker gear and SCBAs, we are replacing them. Like, we're replacing them now. But the way we're replacing them is, hey. There's a check that's come due. We need $100,000 right now, right, versus setting money aside year over year.

SCBA is the same thing. We are going to make sure that our firefighters have the safety equipment they need to be safe. That's always going to happen. What we're talking about right now is changing the way we budget for them so that I don't hit the council with a big, hey, by the way, this year, I need an extra half $1,000,000 for the fire department versus putting money aside year over year so that doesn't happen that way. So as Matt finishes this up, where the end game with this is today is really about awareness for all of you so that and I appreciate the work that the chief has done around standards of cover and helping me get here.

Because one of the things I asked the chief to do when he when he took the job was help me get a better sense of what our ongoing needs are around on the capital side so that I can start to work with the council to better address our long term needs. And so that's what this is really all about, is studying that first level awareness. So every budget, probably from starting in 2027 forward, I wanna try to work with the council to start to pick away at some of these and start to set more money aside. If we are blessed at any point in time with a fund balance that's well above our reserves, we should start talking about setting some money aside and establishing a reserve that we can start to put money in. So there's a lot more conversations that need to happen around all this.

But, again, that why you're getting it tonight is because I really wanna set up the awareness so that I could start to work with you on a plan moving forward.

We like to call it the no surprise rule. I don't wanna surprise my boss with, like, oh, by the way, I need $2,000,000. Right? That that doesn't work well. So

I guess to that point, it's like you'll you know, thinking ahead about modernizing a station versus replacing a station. Right? Station 2 needs a lot of modernizations. That's what I just heard. But it's also has a capacity that it's at right now. And to me, it's like it's also location problems. And so we

have to

think of a tipping point at one point, I would say.

Yeah. Thank you. We mentioned this, I think, right before you came in. I said there's kinda two pieces to this. There's one is what we need ongoing to take care of kinda day to day. The other is Station 2 is a good example. We have a station or two, probably two and three, that are reaching a critical point of of modernization is is is is more than what is not enough. Like, we need to replace Station 2 as a whole. We need a a pretty large modernization of Station 3. At that level, we're probably talking about going to the voters and asking for a bond or finding a different way to get there. That's a bond is one idea. Another idea is just figuring out another way we're gonna we're gonna free up the resources to pay for debt long term. So we're probably approaching that tipping point rather soon on Station 2 and Station 3.

I just wanna recognize that over the last decade, we have made this when there is a a fund balance above reserves, we've put something into fire app the way it's been it's been a combination of, the fortune of having money to redirect after we close out a year and making emergency expenditures. And and so I'm I'm really grateful for the strategic plan from the fire department, the standards of cover study, and the capital facilities proposal that that all try to bring us to something we've been aspiring for for years, but it's we just we haven't made it yet to actually well, we I I shouldn't say that because we do have the half 1,000,000 a year towards apparatus now that that's actually incorporated in the in the budget. But this is it's this has been an ongoing challenge, and I know we had to wait until council member Cooper retired to actually act on this. He's from a three generation firefighter family, so he was anxious for us to do this. But now we can report on it as we move forward.

So I I appreciate the commentary. I and and, Jay, I appreciate your comments because I think the intent is exactly that, right, is to put on the radar long term, medium term, and short term. Right? And the things that are right around the corner, no surprises. I don't want I don't want counsel. I don't want the community in in a I definitely don't want our organization to, you know, find ourselves in a in a difficult position and having to choose between things because we're not prepared for it. And so the further out we can plan, the further out we can analyze and anticipate, the better off we all are. Right? And so, that's the the the intent today, right, is is to to begin the conversation towards that. I I do think that we have some things that we need to try to figure out sooner than later.

You know, the the West Side fire stations and locations and things like that is is a is a good conversation, a good study to be had that needs to be done. I think that the standard cover was a good first step towards that. I do think that the current state of our apparatus and our fleet is being addressed with the two that we have on order. We know we need to do more. And so we're working towards that. I think one of the the challenges in all of that is is just the the industry standards and the timelines that we're up against. You know? Because we order it today. It doesn't show up for five years. Right?

And so and and you heard Adam's report on the current state of the of the, you know, the the fleet. Our average age of our of our fleet is twenty one years old. So, you know, if we ordered them today, it's five years before we you know? So it's it's we're also having to balance the industry's restrictions, right, and and kind of outside influences that we don't have a lot of control over. And then I I guess I'll close out a couple pieces that that I would offer is is our our response system requires the response of our battalion chief, which is our in on scene incident commanders, our shifts supervisor, one on every shift.

When we have a major incident like an apartment fire we had a couple weekends ago over off of Lily, when there's a longer prolonged incident like that that we know we're gonna have resources on for several hours, then we will staff up a second battalion chief. Right? Typically, one of our assistant chiefs will come in off duty. We'll pull somebody in on overtime. We'll somehow get a second in in the event we have another incident or somebody to manage this shift, which means we need a second battalion chief apparatus that has all the communication and and IT and and and all of the radios and things like that, which we have, unless one of those is broken and then we don't have.

Right? Which if it goes down for an oil change, then we're we're changing our operational response system changes because we have to get an oil change. And so what we've done to address that is we have a Tahoe, a Chevy Tahoe that's in the training that's a ninety Ninety nine. A 99. And so and it's falling apart, honestly. And so we need to address our battalion chief apparatus so that we can have the first do, a second do, and then a third, the oldest one, and third in training as the as the backup. And so that would be an a a a need that we have. That's nowhere near the cost of a fire engine, obviously. Right? It's a it's a pickup, that's outfitted.

And so those are kind of the things that we're up against to to meet the service demand in the community. You know, the the system our system, our city has changed a lot in the last ten years and the the demands on the fire service and the types of calls we go on as well as the volume of calls that we go on, and our ability to kinda meet the community where they're at and what they're asking for from us. And, you know, it's it's an investment. Right? And and we all know that.

And so anything I can do to provide you the information as the policymakers and the leaders of the city to be able to be well informed, to to be able to make your decisions as we move forward, that that's all I'm trying to do and and not to be surprising, right, to you. And so when you when when you hear about it, it should be the thirtieth time you've heard about it. Right? And so, with that, I'll I'll close that out and and offer any answers, any questions anyone may have, or other thoughts.

It might have been answered before. No. So, you know, a couple of thoughts that came to my mind as we're going through was, you mentioned, like, the l and I grant, other things like that. Is there is there anything that we're tracking that the state is trying to look at the legislature grants, anything to help with any of this modernization?

To answer that, from a state level, I'm not aware of anything. I think at the federal level, there is a couple of different there's one primary grant at the federal level. It's the AFG grant. America's firefighter grant or I believe that's what it is. And it's an equipment based grant. Right? It's a one time money type of grant. Typically, they come with, at least a 50% match. So there's always a pretty significant obligation that you have to be able to meet the match on the grant. And then the granting of apparatus, the granting of facilities are almost always required to be a regional, asset.

And so, like, a regional hazmat team or a regional technical rescue apparatus or something like that, is typically what you see. And so to my knowledge, we have not, a as a city or as a department, submitted any AFG grants.

Okay. And that and I guess, addition to that, you know, the I also think about how how other fire departments across the state are dealing with this, ones that aren't regionalized particularly, how they're handling this. Mhmm. Or has there been any communication just about, I don't know, buying together or working on ways to replace things together? Because if we're going through it, then certainly someone else is going through it. Sure.

Absolutely. Absolutely. Yeah. I so we're already purchasing apparatus on what's it called? HVAC. It's a cooperative grant

Yeah.

Or cooperative purchasing agreement at the federal level, and so it helps drive the prices down. We already purchased regional equipment types. Radios, for example, were all in the same radio system. And so some of that helps minimize the price. Right?

You know, the what we have seen is an extraordinary growth in cost over the last ten years, in the industry. And so municipal fire departments in the state of Washington do have similar struggles when it comes to the ability for those municipalities to fund the needs of all of their departments, not just their fire department. Right? Police departments, public works, all of those things are a challenge for municipalities in this in the structure for revenue that we we are all operating under. I think it really comes down to those abilities.

How far out have they been able to plan for it and start to allocate towards it, and how well have they maintained the discipline to do so? That, I couldn't answer, but I would say that that would be the key to it is get yourself on the savings plan and stick yourself to it. Right? And how many cities have been able to do that? I don't know.

Mhmm. So Thank you. Just a thought. Our March study session is is is OFD. It's standards of cover, and the chief will be there to talk to the whole council about standards of cover. But I'm wondering also if we should wrap this conversation into that conversation with the full council when when the chief's in front of them in March. So I wanna put that out to finance committee and get your thoughts on that.

Yeah. I think a summary of a lot of this. I don't know if we're going to see that facilities report as part of that, but I certainly think it's all going to be very relevant. I mean, I know the topic standards have covered, but I can't imagine you can meet those without proper equipment and facilities.

Right. Yeah. Absolutely. It'll be it'll be interwoven in the conversation for sure. Because it'll talk about, you know, what our current ability to provide services that are what our current performance is and and how do we make that better, and what will it take to make that better, which will speak to a lot of the things that we talked about today.

I can just vouch that, informally, in conversations with chief Morris, he has tied together the standards of cover and the need for more money and more resources in order to better serve the community. So I yeah. I'm I'm confident that those those two discussions about what's a a reasonable standard for us to provide service and what does it cost and what do we need to do that. Just go go together. Thank you very much for coming in, and thank you, deputy chief Flowers and chief mechanic Cummings. Appreciate you taking some time in the afternoon to come be with us.

Thank you. I appreciate the time. Next

on the agenda. This is not a touch screen, I'm noticing, as

I am.

Nothing's happening. Joan Lutz is going to give us a budget snapshot. And, Jay, I don't know if you wanna say a word about your is that okay, Joan? If so we we got in we we we were inspired by Jay thinking about the reports that he asks for and receives and whether Joan could sort of explain that to us, but maybe you could tee it up

for us. Yeah. Thank you. And we we talked about this last month at finance committees. We talked about how we monitor ongoing budget. And I think it's easy to think, okay. We we know we have revenues coming in. We have sales tax. We have b and o. We have property tax. And, of course, we are monitoring those on a regular basis because those are our significant revenue streams. But we also have some other revenues of significance. One is BLS, which is new to us. We also have some significant things on the expense side, like we've seen a rise in jail costs. We have a new court contract with Thurston County that's that's significant, and we'll need to monitor over time.

We know that our development fee fund peaks and valleys, and all that has an impact on the general fund. So quarterly, I get together with the finance team, and they present to me a list kind of a a series of things that I'm I'd like to track so that if any one of them starts to go sideways, we might be okay. But if I start to see like, last year is a good example. We started to see sales tax dip about April. And at the same point in time, we were seeing rising jail costs.

I was watching CP and D development fee revenues not meet targets. And when I started to add two or three of those together, I became concerned that we could end the year with a million dollar or more hole in our budget if we didn't take action. So in April, I put into effect a spending freeze, with all staff. And these are the kinds of things that Joan's gonna show you that I'm tracking that lead me to make decisions like that or not make decisions like that. So I thought it'd be good for you guys to see kind of the things that I track with the finance team, see what questions you have, about it. So we'll we'll go with that.

Okay. So for the record, Jill Knud, senior budget and finance manager. Here to talk about the quarterly, but, report items that we do with Jay. And just as Jay mentioned, we monitor funds, fund totals monthly. And if we see something, we say something.

So he's not waiting till the quarterly report to make decisions. If if we note something, we are we are saying something. However, there are things that are more volatile and, also maybe some things that are more unknown. And so, these are just ways for Jay and department directors to keep that in mind and for us to deal with emergent issues as they come up. Okay. So the purpose of the quarterly report

I just saw that in the first time.

Is a early, financial early warning system providing the real time data to the city manager and directors, also identifying trends before they become unmanageable. A lot of people don't realize that there really are only three options that we have. We can raise or increase revenues, we can decrease expenditures, or we can use fund balance. Those are our three choices. No matter no matter what your question is, one of those is the answer.

Mhmm. And so our job is to understand, what's going on and which lever is appropriate to pull and when to act on on that. So, I I we have three kinda high volatile focus areas. Jail contract costs, that was first started in 2024. So when we did the 2025 budget, we'd only had a couple months in to to build that budget.

Now when we did '26 budget, we had a free almost a full year, and so we realized we weren't budgeting adequately. So that did get increased for 2026, 900,000. And so, we're gonna keep an eye on that again and make sure that we are budgeting appropriately for 2027. I think we are. And so you know?

But we're gonna keep an eye on it, and then we'll report on it quarterly. But that might be something that in 2027 comes off of our our list if we realize that we're budgeting appropriately. Municipal court costs. This is our inaugural year. And so we'll keep that probably on the list for a couple years to make sure that, what we're, contracted for and budgeting is really what we're, expending.

And and then there's overtime. And, those are, you know, caused by staffing shortages, injury rates, staffing minimums, and training requirements. And some of those are in police and fire, and there some of those, you know, we don't have a lot of control over. But we can, track the reasons, and then we can we can look at, you know, maybe maybe hiring additional staff is the solution to reducing some of those overtimes or maybe, you know, some other answer. But, again, we only have the three choices, increase revenues, decrease expenditures, or use fund balance.

So just to jump in on on the overtime in particular, Joan's right. The majority of this really is public safety. We have minimum staffing requirements on shifts both in police and fire. We we've gotta have the right people in place to be able to do the work. And when someone's sick and we are behind on hiring and we're short on staff, overtime is how we fill it, how we fill the gap.

And so both chiefs are on quite a push to get their hiring rates not by inattention on their part. These are very highly competitive jobs, and we're competing across the state for police officers and firefighters. So we're trying a lot of different things to to get them hired. But because of that, I'm gonna continue to monitor this until at least a point in time where we feel like we've got our staffing levels where we want them to be. And then, hopefully, we start to see overtime costs come down.

As council, remembers, you funded one additional firefighter this last budget with the idea that it could help bring over we could be offset by bringing overtime cost down. So we're we got there by tracking this and saying, hey. How do we get at this? I asked the question of chief Morris, and he said, well, if we did this, it might do it might do this. And so this is just just a really good example of something that we tracked.

And then as Joan mentioned, because we tracked jail costs last year, we're able to be more nimble in this current budget, and we've addressed the increase in jail in jail costs in the 2026 budget. Hopefully, we start to see jail costs come back down again. You know, as we as we move forward with our contract with the county and we start to we start to work with them and the adjudication of our cases, my hope is that we continue to see jail jail costs come down because that is not the solution any of us want.

If I'm if I may well, I'm I'm I'm both glad, and I know we've been working for years on the public safety over time and and trying to balance that out. Other local agencies have been talking about having a much higher rate of people taking medical leave over the last twelve months or so, anxiety related. And I'm wondering if we are seeing a difference either in overtime or just increased absenteeism.

I can tell you that particularly in the fire department, we have we have seen more medical claims, both in police and fire. There's I'm not gonna call it a new it's not new. It's just that it's just that firefighters and police officers are finally stepping forward to talk about PTSD, post traumatic stress disorder. And so we're trying to make sure we're looking out for the health of our employees when it comes to PTSD claims as well. So we have new tools in place to do that, but we are seeing a rise.

Those are those are also two jobs where individuals can get hurt at a much faster pace than other occupations in the city of Olympia. So, yeah, we have seen claim costs go up. We have seen absenteeism go up due to medical issues. And what's creating the overtime, it's compounded by the fact that we have a staffing shortage. And so when you layer on folks needing to call out with lack of staffing, you're asking people to come in on overtime to cover those shifts. The other thing that happens in particular is we start to get high cases of burnout. Because when you've been mandatory multiple times to come in on shifts, it starts to weigh on you. Right? And so those are two things that I'm talking with the Chiefs about. I know they're highly concerned about.

And again, it's part of our push to get hiring done as quickly as we can get it done. So a great question.

And and it's actually I had a different question, although I think that's all really important. Yeah. My my question is about broadly across our employees is is the intersection of a lot of anxiety this year and increased state mandated possibilities for leave. Just other agencies are talking about working shorthanded because a lot of people are off. And are we experiencing that?

Yeah. I don't I mean, outside of police and fire, I don't I don't think we're experiencing that to a broad level. Now I do know that the changes to paid family medical leave, right, is something that I think all agencies are trying to address and figure out what that looks like and impacts. And I don't think it's I'm speaking out of turn when I say that people utilizing that, that's up since the change in the paid family medical leave. I'm not saying that's good or bad or otherwise, but it is the data holds out. But I don't know. Stacy, Manny's not here, but I've not been hearing from Manny that outside of police and fire, we're seeing any kind of impacts with sick leave across the organization.

Not that I'm aware of, but I can inquire with him and see.

I was just wondering whether it was something that actually rose to the level of this dashboard, and it sounds like it doesn't. That it's still pretty much public safety, the the overtime that we're tracking.

Yeah. Mostly public safety because there is a a staffing minimum. And so, you know, if if finance is overworked and you have somebody else sick, it's a loss of productivity. Somebody else has to cover, but it's not as critical. We can push things off and, you know, make work around it. And I think it's the same for pretty much just about everybody. You know, maybe public works might have a little different, but they don't have a minimum.

Yeah. I I think, actually, Joan hit it right on the head. So, that's a great example. So if Joan stays home sick, Mike isn't mandated to bring someone in to replace Joan for the day and create overtime that's associated with that. Now all his staff are working there. He doesn't have reserve staff anyway, but it's a good example. Outside of public safety, we don't have that. So what happens when one of us calls in sick, the work just stops, and then we try to make up for it another another place, another time. But it's a good example.

And I just had probably a little over an hour briefing on an analysis that we're doing on overtime in the two public safety departments to present to the city manager on really a broad look at what are the reasons for the overtime related to this. So, hopefully, we'll be able to roll more of that out to you. But it's a it's a pretty deep dive into this that has a lot of, reasons and data behind it. So I'm excited to take that to him to to Jay because I think it'll be pretty telling when you can really put some facts and our analysis behind it.

Okay. And now we're gonna move on to revenue integrity. So we we do have sales tax performance that we track. We really have no control over how much people spend. And so we do keep a a pretty good, eye on that and make sure that it's hitting what we have estimated and forecasted.

And then we also have the new, public safety sales tax, h b twenty fifteen, and that is pending eligibility from the CJTC. We do have to give seventy five days notice to Department of Revenue that we are gonna collect that. So once we get the okay from CJTC, we can send off that notification. But there are specific dates for DOR that we can actually start collecting. And so the last one would be be July 1.

And then they start the businesses would start collecting the tax July 1. We wouldn't see that revenue for two months. And so we did budget six months. So that that's a little bit of a volatility. We also have b and o sales tax that we did increase for most of the categories, all except for one.

And but we also increased the threshold. We gave you some numbers. Those were projections based on the information that we have that we're gonna be tracking to make sure that that is something that occurs and that we are able to reach and attain. And then, as Jay meant mentioned, the BLS and the, GEMT, both of those are new revenues for us. You know?

And we weren't billing for BLS prior. We do have, some private inter insurance billing that we've done for a year now, and so we have some numbers to base off of that for projections. And then, the GEMT, we have submitted to the federal government for, reimbursement. But from what we're hearing from the contract is that we probably won't hear anything until, like, September as to whether we get any or all or some. So, we did bake in some money for that for twenty twenty six's budget, so that is something that we'll be keeping an eye on.

And all of those items are general fund. So now we move to non general fund. And so, the development, fee revenue fund, you know, we have to make sure that, it meets the policy that council set forth, which is an 85% cost recovery. And, you know, some trends downward could say that we're having a slowdown in construction or there's some other, you know, costs have risen, and so, therefore, they're they're waiting on on their plans. And so for that, we either have to reevaluate our fee structure or reduce expenditures.

Like, yeah, again, you know, it's, one of three options, or you utilize general fund support to make them hold to for coverage for some time. But, again, you have to have all those other things going right to be able to do that.

And as counts as as the committee is also aware, we, allocate an additional $1,300,000 worth of general fund to support the development fee fund in this budget. So my hope is that that is not the the dollar value that we're gonna have to put into this fund long term. Right? That this is a short term fix. So my hope is that we have an additional million dollars worth of capacity in our budget as we move into 2027, 2028, in the out years.

As you know, building permit fees and development does have its peaks and valleys. We do account for that in how we budget on an annual basis within community planning and economic development. But right now, at this moment in time, are not seeing development happen to the level that we hoped. I'm hoping that's gonna pick up this year and that we have a different conversation about this next year. But I'm gonna be monitoring all throughout this year even with the additional money that the council has allocated to it. I wanna know how we're performing. And I'm gonna be asking lots of questions of Tim throughout the year about kinda where we are with things so that by the time we get to 2027, we have a good story to tell.

Okay. And then we'll move on to the home fund and regional housing. Community has is paying sales tax to support that. Again, we have no control over what people spend, so they that could go down, could go up. We, as a city, decided to do a thirty five sixty five split when the RCW is sixty forty.

So we did constrain ourselves a little more than the state does. And so 65% for the capital purpose, we have an ILA with the regional housing council. And so those just, you know, move right through the city. So we don't really have any control over that. But we do have a 35% for operations purposes, and we are hitting that 35% window or ceiling, whatever you want, roof.

It's it's we're going through it, with the, operations of the mitigation sites and also cleanups and that sort of thing. And with the reduction in grants from the state, you know, those we're feeling those a little bit more. So that would also require general fund support.

And as you know, this is a larger conversation than just us. So as we as we continue to pool our money at the regional housing council and look to fund all the mitigation sites, our permanent supportive housing sites, you know, we're working really hard in this session to get funding restored for Quin Street Village as an example. We face a a funding shortfall starting July 1, depending on what happens in this session. So we're working that actively this session. And then we've also asked the Regional Housing Council to develop a contingency plan should funding continue to shrink through the Encampment Resolution Program, Should funding continue to get to shrink through commerce and those funds for how we're going to continue to pay for all these sites?

Because all that is at risk over the in the coming years. We already saw the state funds dwindle from about 8,000,000 down to about 5,000,000, so we've had to make some strategic decisions. That's why we have a funding hole in QuinStreet starting July 1. So we're gonna talk more regional housing council about contingency plans for funding because we're we may need that contingency may be here July 1, maybe a a point in time where we need to we need to hit it. So but I know you're all tracking this, but that's why this is here.

Okay. And then the last one that we really do keep an eye on is our workers' comp fund. And we did move to the state program for l and I and workers' compensation, but the claims that were made prior to that are city legacy, and we do have to fund them and make sure that we have adequate funding available to support them until they are resolved and off off the books. And so some of the problems with that, are that we just don't know what the cost is gonna be. You know, we have, I think, couple firefighters on there and, you know, things like that that are long term claims, and we just don't know.

And so that means we're paying the state plan, and we're also paying the legacy plan. So it's a little bit of a double, but that will be general fund support too if if we're underfunding and we're not not careful.

Joan, since we have limited experience there's the word experience the the experience rating for labor and industries, are we paying a higher rate initially as an organization joining in and and that might change as we have more experience?

It will change as we have more experience because it's gonna go up. You come in at the base you come in at the baseline for your level, and then they get your experience rating, and then they they increase the rate.

They have an industry sort of category they Yeah. They put us into.

So Yeah. We have four categories that we pay into, and they'll they'll take our numbers and run them and increase the rates appropriately.

Sure. Okay. And we'll be in the legacy claim category for some a long time. Like, we're gonna live in two systems for a long time. So that number will start to get lower over time. That's for sure, but we'll live in those two systems for a while. So

the summary of good news is, you know, we're we're just here to provide some data so that we can be nimble and respond appropriately and, hopefully, stay out of any, you know, potholes or dips or anything like that or I don't know. I've just went. No.

You're good. I again, I think we wanted to make sure that, you just had a a good look at at what we're looking at. And, if there's any questions or maybe there's something that you're wondering, how can we not look in at this? Maybe that if you have those questions, we're happy to answer those as well. We are look we are probably looking at it, but just not on a quarterly the the way they look at it with me.

And I'll just add. I'm you know, along with the other finance managers and finance team, we're looking at this daily. I mean, I'm running a pooled cash report every day looking at this into more depth. I meet with Jay weekly. So if there is some kind of change, even though it might be really small at first, we're talking about it long before even the quarterly comes up. So I think our eyes are on this in so many ways to make sure that we're really paying attention to what matters for the budget.

Questions or comments? Go ahead, Robert.

I guess this is a this may be affected by it, may not be. When we're talking about the developer fee revenue fund potential, I guess, not decline, but where it is. I'm curious about if there's any effect at all of the affordable housing emergency fund, because there's money in that, but there's also a staff person that's tied to that. And so I'm very curious if is that at and I don't think that's at risk because it's separate thing, but I'm very curious.

Yeah. It's it's not at it's not at risk. Yeah. We've we've put some some funding in place to the utility rates, for example, to help offset some utility costs. We pulled some additional funds out of the economic development reserves to seed it. Right now, we haven't seen enough activity that's depleted that at this moment in time, but I hope we do. I hope that I'm having a different conversation with you soon that says, hey. Our emergency fund has been depleted because of development, and we need to figure out a way to reseed it. So I'll be I'm that's not something that's on this list, but it's a great question. I am monitoring that as well with Tim getting updates about kinda what we're seeing with development activity and the use of those funds.

Thank you. I do know that Habitat is is is gonna be grabbing some of it pretty soon. Do tell. Well, just that they're getting ready to break ground, and so their the availability of some of those funds to them are gonna start coming coming clear.

Thank you, Joan. I I this is helpful for me in our sort of our trustee hat because that's, I think, another function that the finance committee serves. And that is a perfect segue to say that we're very lucky to have Mitch Henke here. Please come join us at the table, and Mike Gibbons is going to introduce our making some recommended policy updates to the Citi investment policy.

Yes. Thank you, and thank you to Mitch for joining us from government portfolio advisers. We work very closely with them, and I'm pleased to bring you an update to the Citi investment policy. Just I I mentioned this to the chair the other day when we were meeting, but we hold over a 125,000,000 of city funds in investment, and that's no, small matter. And we're very proud of the, adherence to the, investment policy that we follow.

Also, on the return that we've gotten lately, that's been, a great benefit to the revenue side of the budget. And so with this, we've made, a couple of really pretty significant updates to this. One, we've included the ethical investment statement in the policy that we're gonna talk about, And then, also, I'll ask Mitch to talk a bit about the weighted average maturity that we're increasing. So thank you again for being here, Mitch.

Thank you for having me. Yes. So as Michael mentioned, there's really two changes to the investment policy that we're recommending for this year. This is a process that we go through each year with the city. And part of that process is going through really thorough due diligence, evaluation of taking the city's investment policy and comparing it first and foremost to any changes in RCW, making sure that we're compliant with the state statutes, but also looking at national organization best practices from organizations such as the Government Finance Officers Association and the Government Investment Officers Association.

And at GPA, we've got a very long history of experience in working with public entities like the city. Our founding partner has been working with public entities providing investment advisory services for over forty years. We've been working with the city since 2015 after we won a competitive bid through your RFP process. And so, really, we we've gotten the policy to a really great spot, we feel, in terms of the structure, the alignment to those national best practices. And so there are two edits for this year.

The first, as Michael had mentioned, is including an ethical investment statement that is really taking the policy and elevating, especially the corporate investment aspects. So corporate bonds to have, you know, a much more stringent level of standard for investment. And that's something that we help out many different organizations. So this is no, something that we do very often. Right?

There's especially with the trends over the last probably ten years in the industry, we have a lot of clients that are opting for environmental, social, and governance based strategies for corporate bonds. And so that's really what we're going to be advancing the city's policy to with the statement that's been added. The second piece is increasing the weighted average maturity constraint over the total portfolio. And so one one way to think about the investment policy is it's really the guiding light of discipline for us as your investment advisers and for the city investment of funds. And so the one change with that weighted average maturity is moving it out to two and a half years, which really allows us to, as we look at the two key components of the city's operating pooled portfolio being, the liquidity component, which is, you know, your funds that you need on a day to day basis.

We we set a range for those. We set a target for those. You're right on target with where you're at right now. But those balances will fluctuate as the city's finances fluctuate with kind of the cyclicality of your income relative to your expenses. And so being able to move that weighted average maturity out to two and a half years simply allows us with the kind of longer term investment component piece to stay aligned and disciplined to the benchmark that we've selected, which is the zero to five year U.

S. Treasury benchmark. So that when the balances of the city are kind of in that lower cyclical area, we can continue to invest that investment core piece, which becomes a bigger part of the total portfolio while staying really aligned to that benchmark. Because the key there is with that investment core, as we call it, we want to make sure that we've chosen that benchmark to really align with the city's risk and return profile. And deviating from that introduces risk so that over changes to the investment interest rate cycles, we want to just stay aligned to that benchmark as best we can to make sure that we can kind of weather those changes in rate cycles and weather the balance changes for the city.

So those are really the two key aspects, and I'm here to answer any questions that you all may have about this.

Thanks so much. With the ethical investment statement, can you where our portfolio is right now, how much of our portfolio is in securities, or what is potentially the actual impact of this?

Very minimal. At this point, the city only holds two corporate bonds in the portfolio. One is Apple, one is Walmart. They each are a million dollars par, and so they make up just over 1% of the portfolio. And so constricting, again, the corporate world a bit tighter is going to have very minimal impact to the overall earnings of the portfolio.

So it's not a concern to introduce this. It simply means that as we move forward, we'll just be working with Michael very closely on any future corporate investments and making sure that, you know, as we propose them, it is a nondiscretionary advisory relationship we have. So we do not get to make decisions and just, you know, make investment choices. We actually send them to the finance team and Michael for approval before we execute. And so it'll just simply be an additional level of communication if we do see a good opportunity. We're going to constrict those investments already to our ESG criteria, which again just is a higher quality for those investments, but Mike will also have say before we make any of those purchases.

Can I ask if if you could one of the things I've been learning about is the constraints that a a lot of kinds of private securities our city's not I don't I don't know? I I'm not you use the right terms of art, but we don't invest in stocks. Correct. And that the the corporate investments this was this was new for us a few years ago. This was our first foray, and I think we had three of those notes at one point. And they were essentially capital facilities or construction notes for these companies, more like a bond than than actually investing in the corporation. Is that accurate?

Bonds. Yes. So the city is restricted to invest in all bonds. And the key there is making sure that you're not making speculative investments, but instead, you are going to get your return on capital and earn the interest along the way. So it is all corporate bonds. Again, it's they're all gonna be constrained to five years or less. So it is all shorter term corporate bonds that we're talking about with this asset ethical investment statement. And then

I just I also wanted to highlight the third paragraph, which is a call for Michael as as finance director to also explore across this year opportunities for us to make investments that might be more prosocial or have more community benefit. I know it's it's an aspiration that's come up often. I'm sure you hear it from many finance committees and local governments. And I know it's it's there's limited opportunities, but it it it it feels like that's sort of a corollary to saying there are certain investments we'd rather not make is are there are there investments that would be either more beneficial to our community or to these values that that we might emphasize?

And, Mitch, one of those corporate investments we're currently in comes due this year. Correct?

Yes. I believe, actually, both of them come due relatively soon. So I know one is most certainly this year. The other one is likely within the one to two year range. So that's part of the evaluation is going to be when we look at any maturity, whether it's a treasury position or a corporate position, the first thing that we look at is we call the spread, which is just going be the difference in yield between investing in a treasury as the baseline versus what additional yield we could pick up by diversifying outside of treasuries.

And so in the last couple of years, that risk return trade off has not been favorable. And so that's why you have seen the corporate allocation decrease. But as those positions come due and any others come due, we will be looking to see if there are good positive opportunities within that environmental, social, governance list, which right now comprises only about 55 companies that can meet that criteria for ESG, but also the criteria for the ratings and the quality that the city requires.

That answered my question, actually, because I was I was curious about the the the Walmart and Apple and when those when those will expire when we'll have the opportunity to be out of them. And it just sounds like fairly soon, And I'll be interested in hearing, even if it's an email, just an update on what other what those 50 or so other ones are and as we look into them, just hearing back about what they are.

Well because Mike has a 12/31/2026, you know, deadline to align, we'll be back to talk about just that and kinda what our plans are moving forward, how we're gonna make sure that we're living to this ethical investment policy. And then as those bonds mature and become due, then we'll we'll be back again to talk about kinda what we're what our plans are for how we reinvest. And I did just look. And so we have Apple maturing in July and Walmart maturing in August.

And I think this we'd all agree. Especially for this committee, this policy is imperative, and so we'll be refreshing it and revisiting it with you regularly. I mentioned that we've had a good rate of return in bringing you this policy. We're convinced, and I've spoken at length with Mitch, that we'll continue that. I mean, we can't certainly guarantee any kind of return, but this policy and the changes to it aren't in any way going to cause that to go down dramatically.

So we're confident that this is a good change, that it reflects our values and the values of the community. So with that, we're certainly here to answer any questions, but I'm looking for your recommendation to refer this to the council as a whole for consideration.

And if I could just say one more thing is I I wanna thank the chair. Councilmember Gillman, since you've taken over as chair, this is one of things you've dug in on. And, we've had our investment advisers come before the finance committee year over year and give reports. This is not at you. You guys do a great job.

But I think we haven't touched on how our policies work. And this this advent of an ethical investment policy to help make sure it's guiding our investments the right way is something that you talked to me about, I think, long before it came here. So I just wanna express my appreciation to you for digging in here and for asking us to consider these things and for asking us to figure out how we monitor our impacts in terms of how we invest our money. So just thank you. I appreciate

that. And, also, to what Mike was saying, we had slipped a little bit in whether the broader council was briefed as some policy changes were made. We've continued to have finance committee get an update, But the this sort of daylighting the policy, bringing it back to council is also what I hope is reestablishing a pattern where at least periodically or when there's a more substantive change made in the policy, even though it's a policy and not an ordinance, I I I think it it deserves to be in front of the entire city council. So so I'm I'm glad for that.

This is a question for Mike or Mitch or both of you. The the portfolio weighted average maturity is just not a concept I'm fully understanding. Can you try to explain that to me again in the most simple terms?

To. Yes. So the best way to think about it is just, what is the average time that it will take to return all the capital to the city? And so when we look at the portfolio, you have, you know, investments that get laddered out in that investment component out to five years. You've also got the amount that you hold in kind of the LGIP and kind of the banking balances. It's that weighted average of all those positions in terms of when that capital will be returned.

And the benefit of lengthening it from two to two and a half?

Yeah. It really this isn't necessarily a measure in order to try to increase return. It really is just simply a ability to remain disciplined when balances of the city become in the lower cyclical periods. So that basically means your liquidity component maybe is towards the lower end of the range that we set while your investment core component has stayed the same size. It just enables us to ensure that when we go reinvest any of those maturities in that investment piece that we can still remain aligned to that benchmark in terms of that duration, which is again almost the same thing as the weighted average maturity, just a little bit different way to measure it.

That allows us to ensure that we can remain disciplined to kind of meeting the strategy and keeping that portfolio aligned to what we expect is going to be in the best interest of the city.

Okay. So the the extension from two to two and a half makes it a little bit more conservative in how we

I wouldn't say conservative in how you invest it because, again, it just it's you're given the ability to invest longer, which you might think of you know, typically, when you think of how long you invest out, you introduce a bit more risk in that just because the longer you invest, the more volatile the price changes are going to be of the positions you purchase. So typically, you'd think longer introduces a bit more risk. But again it's not the intention to do that with this change. The intention is simply to ensure that said differently if you're at a lower period and the maturity comes due if you have to keep it shorter than you'd like to then the portfolio's duration or the portfolio's maturity is going to drift lower than the benchmark. And that's just going to mean you introduce different types of price change risk.

So typically, the relationship between interest rates and price return is inverse. So if the interest rates are going down, if you're invested at a higher interest rate than the market's paying, your value of your positions goes up. And so if you're shorter than the market and you see, again, price changes, you're just not necessarily gonna be like the benchmark over that time. So you just wanna try to stay aligned to what that benchmark's duration of maturity is so that you know the way it's going to perform over those different changes in interest rate cycles. Oh, thank you.

Is it really about stability over conservative? Yes. Right. I mean, that's how that's how I interpret the change. It's more about long term stability than it is about being more conservative. And I I think that's what I heard you just say.

It's a great way to put it. Thank you. We

I don't think I've gone a week without talking with Mitch or somebody at, GPA simply because this is, a lot of responsibility, and it takes a lot of work. You know, we're kind of at that point right now where one of our bigger pieces of the revenue pie were kind of in between that collection of property taxes, so we won't see a big push of that until the May. So that's where we're really monitoring this carefully because we've got to make sure that we have the liquidity, the availability of our cash to meet semimonthly payrolls, all of the other things that are associated with accounts payable. And I might mention that 125,000,000 that I told you about. That doesn't count the bonds that we sold last year.

Those we're monitoring separately from that. That's an additional amount. Those are on a schedule that we're, maturing into cash when those come forward with a plan scheduled to release on those two projects. So there's a lot going on with this, and we rely on them a great deal. So thank you for your work on this, Mitch.

You're welcome. And just to give maybe a little more context too, currently, the total portfolio for the city, the current par amount as of the January is at a 162 point 800,000.0, and the average years to maturity is at one point seven seven years. So our intention is not hopefully to have to go above that two year weighted average maturity mark. It's just having the flexibility to do so. Again, should that liquidity kinda component, which stands at about 25,000,000 of the $1.63 drop maybe closer to 15 because of just cyclical outflows and things like that.

Mitch, I wanna ask, and you're welcome to say, I don't know. But I'm I'm wondering in this time of more volatility in the federal government, we're very heavily invested in in federal notes. And I'm wondering if there's any move within your industry to going to emphasizing other local and regional governments and utilities over investments in the federal agencies. Is that is that an issue that's under discussion in your world?

A lot of discussion in the bond markets. And and I think that's probably why you see demand for other types of assets outside US treasuries really at an all time high right now. I think part of that is just chasing you know, trying to chase additional return that you're seeing. And so I mentioned a little bit earlier that kind of concept of spread, which is the difference in a municipal bond or an agency bond relative to the yield of a treasury, those are at historical low periods still right now, kind of across the board. And so that just means we haven't seen a lot of, again, good risk return opportunity.

But I think the important thing to think about is still even though we've seen a lot of volatility within the administration and government increase, it still has the strongest stability of any investment that we can make. And so you're not seeing any concern on our end or others' ends of investing and kind of having a higher level of US treasury investments relative to other types of asset classes. That being said, we are still looking for those opportunities. It's just we do need to acknowledge that by diversifying outside of treasuries, we do take additional risk. And so whether that is a municipality, whether it is a corporate bond, that additional risk is also something that we need to be compensated for.

And so that compensation we're not seeing right now. And so we do feel still very confident that the US Treasury market is very robust. We're still seeing good subscriptions to new issuance. It is still the best game in town to put it, but that is something that we are monitoring as well.

Thank you. I I appreciate your candor, and I appreciate you driving up this evening to be in person. We've had you in Zoom. Absolutely. Person, and and I really appreciate you being in person. Of course. Yeah. Happy to be here. Good. Well, if there's no other discussion, I would welcome a motion.

I move to approve the draft city investment policy update recommendation and forward to the full council for for

consideration. Second.

Is there any other discussion on the matter? Seeing none, all in favor of approving the draft city investment policy update recommendation and forwarding it to the full city council say aye. Aye. Wonderful. It's passed. Thank you.

And live for a chair.

Aye. Alright. I thought I only voted in a tiebreaker. Well, thank you so much. I I appreciate the report and and and the combination of the hearing more about the dashboard that you monitor together quarterly and reassurance about our investments is is all welcome information, you know, at at this point.

The the that's the end of our business items, but we have reports. I'm wondering, do we do we have reports? No report from the city manager this evening? No.

No. I think everything I reported on last month, we're just moving forward with the budget book. I guess one thing I can tell you, we had as you know, we're annually audit audited by the state auditor's office. We had a department of revenue audit, that came through just to look at both how we're classifying the revenues we receive as where we owe tax, and then are we appropriately applying tax to the purchases we made. There were some areas where they found some corrections.

Some were in favor to us. Some we owe some more money. Most importantly, the finance team got some good guidance on, really, going forward, on how to appropriately classify those. When we made the move to Workday, some of our, reporting changed just because of the new software, so we were able to clean that up. Some new taxes were implemented by the legislature for all citizens that were effective in October. There was some confusion over that. We were able to get some good guidance. So, as audits go, it was a good one where we learned some things. But, otherwise, we're just moving along through the first quarter and keeping busy in finance. Anything

for the good of the order? Seeing none, we will adjourn at 06:16 until we meet next month at the same time. Thank you.